Document:

Exhibit 10.3

 

[FORM OF CEO THREE YEAR
CLIFF VESTING]

HCP, INC.

2006 PERFORMANCE INCENTIVE PLAN

PERFORMANCE RESTRICTED STOCK UNIT
AGREEMENT

 

James F. Flaherty III[                            ],
Grantee:

 

As of
the [            ] day of [              
20    ] (the “Grant
Date”), HCP, Inc., a Maryland corporation (the “Company”),
pursuant to the HCP, Inc. 2006 Performance Incentive Plan, as amended
and/or restated from time to time (the “Plan”), has granted to you, the
Grantee named above, [              ] performance restricted stock units (the “Units”)
with respect to [            ] shares of Common Stock on the terms and conditions set
forth in this Performance Restricted Stock Unit Agreement (this “Agreement”)
and the Plan.  The Units are subject to
adjustment as provided in Section 7.1 of the Plan.  Capitalized terms not defined herein shall
have the meanings assigned to such terms in the Plan.  The Compensation Committee (the “Committee”)
of the Board of Directors of the Company (the “Board”) is the administrator
of the Plan for purposes of your Units.

 

I.                                         Forfeiture of Units.

 

(a)                                  Forfeiture Based Upon Company Performance. 
Your Units will be paid only to the extent your Units are not forfeited
pursuant to this Section I and only to the extent such non-forfeited
Units vest pursuant to this Section I or Section II below.  Your Units are subject to forfeiture if the
Company’s Funds From Operations Per Share for the [20    ] calendar year (the “Performance Period”) is less
than [$      ].  If the Company’s Funds From Operations Per
Share for the Performance Period is less than [$      ], the aggregate
percentage of Units that you will forfeit will be determined in accordance with
Exhibit A hereto.  For
purposes of this Agreement, “Funds From Operations Per Share” means the
Company’s funds from operations per share during the Performance Period, as
prescribed by the National Association of Real Estate Investment Trusts
(“NAREIT”) as in effect on the first day of the Performance Period, and shall
be calculated on a fully diluted basis using the weighted average of diluted
shares of Common Stock outstanding during the Performance Period.  Funds From Operations Per Share shall be
subject to adjustment as expressly provided by the Committee at the time it
approves the grant of the Units.  The
determination as to whether the Company has attained the performance goals with
respect to the Performance Period shall be made by the Committee acting in good
faith.  The Committee’s determination
regarding whether the Company has attained the performance goals (the “Committee
Determination”) shall be made no later than the March 15 following the
end of the Performance Period.  Your
Units shall not be deemed vested pursuant to any other provision of this
Agreement earlier than the date that the Committee makes such determination, as
required by Section 162(m) of the Code and the regulations
promulgated thereunder.  Any Units
forfeited pursuant to this Section I(a) shall be deemed to have been
forfeited as of the last day of the Performance Period.

 

(b)                                 Forfeiture of Units Upon Termination of
Employment.  Except as provided in Section I(c), if
at any time during the Performance Period your employment with the Company is
terminated, all of your Units shall be automatically forfeited and cancelled in
full effective as of such termination of employment and this Agreement shall be
null and void and of no further force and effect.

 

1

 

(c)                                  Certain Terminations during the
Performance Period.  This Section I(c) applies in the
event your employment with the Company is terminated as a result of (i) your
death, Disability or Retirement, (ii) a Termination Other Than For Cause, (iii) a
Termination For Good Reason, or (iv) a Termination Upon a Change in
Control (including a Covered Resignation). 
In the event of any such termination during the Performance Period, your
Units will remain outstanding during the remainder of the Performance Period
and will be subject to forfeiture in the manner set forth in subsection (a) upon
completion of the Performance Period.  In
such a case, any Units not so forfeited pursuant to subsection (a) shall
fully vest as of the date of the Committee Determination.  For purposes of this Agreement, the terms “Covered
Resignation,” “Disability,” “Termination Other Than For Cause,”
“Termination For Good Reason,” and “Termination Upon a Change in
Control” shall have the meanings ascribed to such terms in your Employment
Agreement with the Company dated October 26, 2005 (the “Employment
Agreement”).  Such meanings shall
continue to apply for purposes of this Agreement notwithstanding any
termination of the “Employment Period” (as such term is defined in the
Employment Agreement) in accordance with the Employment Agreement.  For purposes of this Agreement, “Retirement”
means a termination of your employment with the Company or any of its
Subsidiaries after you have either (i) attained age 65 and completed at
least five (5) years of service as an employee of the Company or any of
its Subsidiaries or as a member of the Board or (ii) attained age 60 and
completed at least fifteen (15) years of service as an employee of the Company
or any of its Subsidiaries or as a member of the Board.

 

II.                                     Vesting.

 

(a)                                  Vesting of Non-Forfeited Units.  You
will have no further rights with respect to any Units that are forfeited in
accordance with Section I.  Subject
to the terms and conditions of this Agreement, your Units that (i) are not
forfeited in accordance with Section I and (ii) do not otherwise vest
in accordance with Section I, if any, shall vest upon the third
anniversary of the Grant Date (the “Vesting Date”), subject to your
continuous service to the Company until the Vesting Date.

 

The vesting schedule requires continued employment
through the Vesting Date as a condition to vesting of the Units and the rights
and benefits under this Agreement. 
Unless otherwise expressly provided herein with respect to accelerated
vesting of the Units under certain circumstances, employment for only a portion
of the vesting period, even if a substantial portion, will not entitle you to
any proportionate vesting or avoid or mitigate a termination of rights and
benefits upon or following a termination of employment as provided in this
Agreement.

 

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

 

2

 

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

 

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

 

III.                                 Timing and Form of Payment.

 

(a)                                  Distribution Date. 
Except as otherwise provided in Section III(b), the distribution
date (the “Distribution Date”) for your Units that become vested
pursuant to this Agreement will be the Vesting Date; provided, however, that in
the event that the vesting of your Units is accelerated pursuant to Section I(c) or
II(b), the Distribution Date of such accelerated Units will be the earlier of (i) subject
to Section XIV, your Separation from Service and (ii) the Vesting
Date; and provided, further, that in no event shall the Distribution Date occur
earlier than the date of the Committee Determination.  Distribution of your vested Units will be
made by the Company in shares of Common Stock (on a one-to-one basis) on or as
soon as practicable after the Distribution Date with respect to such vested Units,
but in no event later than two and one-half (2 1⁄2) months after the Distribution
Date.  You will have no right to
distribution of any of your Units that do not vest in accordance with the
provisions hereof.  Once a vested Unit
has been paid pursuant to this Agreement, you will have no further rights with
respect to that Unit.  For purposes of
this Agreement, “Separation from Service” means a “separation from
service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1),
without regard to the optional alternative definitions available thereunder
(i.e. generally a termination of your employment with the Company or a
Subsidiary).

 

(b)                                 Distribution Elections. 
Notwithstanding Section III(a), you may, on or before the Grant
Date and in all cases at a time that complies with the initial deferral
election requirements of Section 409A of the Code, make an election (a “Distribution
Election”) to (A) defer your Distribution Date with respect to some or
all of your vested Units and/or (B) have your vested Units distributed to
you in annual installments as provided in Section III(c), provided that
such election complies with this Section III.  You may change your Distribution Election up
to three times without the approval of the Committee, provided such
Distribution Election is made in a timely manner.  Any changes to your Distribution Election in
addition to the three provided in the preceding sentence may only be made with
the approval of the Committee, in its sole discretion.  In order for a change to your Distribution
Election to be valid, it must be made at least one year prior to the
then-existing Distribution Date with respect to the Units subject to such
Distribution Election change, the new Distribution Date must be at least five
years after the 

 

3

 

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

 

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

 

(d)                                 Hardship Distribution. 
If you experience an Unforeseeable Emergency (as defined below) you may
elect to receive immediate distribution of some or all or your vested Units
upon such Unforeseeable Emergency. 
Distribution upon an Unforeseeable Emergency shall be made no later than
thirty (30) days following written notice to the Company care of its General
Counsel of the Unforeseeable Emergency. 
For purposes of this Agreement, an “Unforeseeable Emergency” shall mean
a severe financial hardship resulting from (i) an illness or accident of
you, your spouse, or your dependent (as defined in Section 152(a) of
the Code without regard to Sections 152(b)(1), (b)(2) and (d)(1)(B)), (ii) loss
of your property due to casualty, or (iii) any other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond your
control, all as reasonably determined by the Committee in good faith.  No distribution shall be made in respect of
an Unforeseeable Emergency unless such Unforeseeable Emergency is not otherwise
relievable by liquidation of your assets (to the extent such liquidation would
not itself cause a severe financial hardship) or through reimbursement or 

 

4

 

compensation by insurance or otherwise.  Any distribution of your vested Units as a
result of an Unforeseeable Emergency shall be limited to the amount reasonably
necessary to relieve the Unforeseeable Emergency (which may include amounts
necessary to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution).

 

(e)                                  Change in Control.  Notwithstanding the foregoing
provisions of this Section III, the Administrator may provide for payment
of your vested Units in accordance with the requirements of Treasury Regulation
1.409A-3(j)(4)(ix)(A), (B) or (C) promulgated under Section 409A
of the Code (or any similar successor provision), which regulation generally
provides that a deferred compensation arrangement may be terminated in limited
circumstances following a dissolution or change in control of the Company.

 

IV.                                 Dividend Equivalent Rights. 
During such time as each Unit remains outstanding and prior to the
distribution of such Unit in accordance with Section III, you will have
the right to receive, with respect to such Unit, an amount equal to the amount
of any cash dividend paid on a share of Common Stock (a “Dividend Equivalent
Right”); provided, however, that any Dividend Equivalent Right credited
with respect to an outstanding Unit (including, without limitation, any
dividend equivalent credited through and including the date of the Committee
Determination) that is subsequently forfeited pursuant to Section I(a) hereof
shall immediately terminate upon the forfeiture of such Unit, and you shall not
be entitled to any payment with respect thereto.  You will have a Dividend Equivalent Right
with respect to each Unit that is outstanding on the record date of such
dividend.  In the case of Dividend
Equivalent Rights credited with respect to an outstanding Unit that is subject
to the forfeiture provisions of Section I(a) hereof on the related
record date and that ultimately is not forfeited pursuant to Section I(a),
the Dividend Equivalent Rights will be paid to you in cash (without interest)
as soon as practicable after the Committee Determination (or, if earlier, as
soon as practicable after the date such Unit vests pursuant to Section II(b))
and in all events not later than March 15 of the year that follows the
Performance Period.  In the case of
Dividend Equivalent Rights credited with respect to an outstanding Unit that is
no longer subject to the forfeiture provisions of Section I(a) hereof
on the related record date, the Dividend Equivalent Rights will be paid to you
in cash (without interest) at the same time or within thirty (30) days after
the related dividend is paid to stockholders of the Company.  Dividend Equivalent Rights will not be paid
to you with respect to any Units that are forfeited pursuant to Sections I and
II, effective as of the date such Units are forfeited.  You will have no Dividend Equivalent Rights
as of the record date of any such cash dividend in respect of any Units that
have been paid in Common Stock; provided that you are the record holder of such
Common Stock on or before such record date.

 

V.                                     Transferability. 
No benefit payable under, or interest in, the Units or this Agreement
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge and any such attempted action shall
be void and no such benefit or interest shall be, in any manner, liable for, or
subject to, your or your beneficiary’s debts, contracts, liabilities or torts; provided, however, nothing in this Section V shall
prevent transfer of your Units by will or by applicable laws of descent and
distribution.  You may designate a
beneficiary to receive distribution of your vested Units upon your death by
submitting a written beneficiary designation to the Committee in the form
attached hereto as Exhibit B.  You
may revoke a beneficiary designation by submitting a new beneficiary
designation.

 

5

 

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

 

VII.                             No Contract for Employment. 
This Agreement is not an employment or service contract and nothing in
this Agreement shall be deemed to create in any way whatsoever any obligation
on your part to continue in the employ or service of the Company, or of the
Company to continue your employment or service with the Company.

 

VIII.                         Notices.  Any notices
provided for in this Agreement or the Plan, including a Distribution Election,
shall be given in writing and shall be deemed effectively given upon receipt if
delivered by hand or, in the case of notices delivered by United States mail,
five (5) days after deposit in the United States mail, postage prepaid,
addressed, as applicable, to the Company or if to you, at such address as is
currently maintained in the Company’s records or at such other address as you
hereafter designate by written notice to the Company.

 

IX.                                Plan.  The
provisions of the Plan are hereby made a part of this Agreement.  In the event of any conflict between the
provisions of this Agreement and those of the Plan, the provisions of this
Agreement shall control.

 

X.                                    Entire Agreement. 
This Agreement, together with the Employment Agreement, contains the
entire understanding of the parties in respect of the Units and supersedes upon
its effectiveness all other prior agreements and understandings between the
parties with respect to the Units.  In
the event of any discrepancy between this Agreement and the Employment Agreement,
the Employment Agreement shall control, except the definition of “Distribution
Date” in this Agreement shall always control.

 

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

 

XII.                            Governing Law. 
This Agreement shall be construed and interpreted, and the rights of the
parties shall be determined, in accordance with the laws of the State of
Maryland, without regard to conflicts of law provisions thereof.

 

6

 

XIII.                        Tax Consequences. 
You may be subject to adverse tax consequences as a result of the
issuance, vesting and/or distribution of your Units and the payment of your
Dividend Equivalent Rights.  YOU ARE
ENCOURAGED TO CONSULT A TAX ADVISOR AS TO THE TAX CONSEQUENCES OF YOUR UNITS
AND SUBSEQUENT DISTRIBUTION OF COMMON STOCK AND THE TAX CONSEQUENCES OF YOUR
DIVIDEND EQUIVALENT RIGHTS.

 

XIV.                        Construction. 
To the extent that this Agreement is subject to Section 409A of the
Code, you and the Company agree to cooperate and work together in good faith to
timely amend this Agreement to prevent application of the penalty and interest
provisions of Section 409A(a)(1)(B) of the Code.  In the event that you and the Company do not
agree as to the necessity, timing or nature of a particular amendment intended
to prevent application of the penalty and interest provisions of Section 409A(a)(1)(B) of
the Code, reasonable deference will be given to your reasonable interpretation
of such provisions.  Notwithstanding
anything to the contrary contained in this Agreement or the Plan, in the event
that (i) the Distribution Date (as determined under Section III) of
any of your vested Units is the date of your Separation from Service and (ii) you
are at the time of such Separation from Service a “specified employee” (within
the meaning of Section 409A of the Code), the Distribution Date of such
vested Units shall be the earlier of the date that is six (6) months after
your Separation from Service or the date of your death, provided that this
sentence shall only apply if and to the extent required to avoid the imputation
of any tax, penalty or interest under Section 409A.

 

[Remainder of page intentionally
left blank]

 

7

 

Very truly yours,

 

	
   

  	
  HCP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Accepted and Agreed,

effective as of the date first written above.

 

 

	
  By:

  	
   

  	
   

  
	
  Name: James F. Flaherty III

  	
   

  

 

S-1Exhibit 10.4

 

[FORM OF FIVE YEAR
INSTALLMENT VESTING]

HCP, INC.

2006 PERFORMANCE INCENTIVE PLAN

PERFORMANCE RESTRICTED STOCK UNIT
AGREEMENT

 

[                            ], Grantee:

 

As of
the [            ] day of [              
20    ] (the “Grant
Date”), HCP, Inc., a Maryland corporation (the “Company”),
pursuant to the HCP, Inc. 2006 Performance Incentive Plan, as amended
and/or restated from time to time (the “Plan”), has granted to you, the
Grantee named above, [              ] performance restricted stock units (the “Units”)
with respect to [            ] shares of Common Stock on the terms and conditions set
forth in this Performance Restricted Stock Unit Agreement (this “Agreement”)
and the Plan.  The Units are subject to
adjustment as provided in Section 7.1 of the Plan.  Capitalized terms not defined herein shall
have the meanings assigned to such terms in the Plan.  The Compensation Committee (the “Committee”)
of the Board of Directors of the Company (the “Board”) is the
administrator of the Plan for purposes of your Units.

 

I.                                         Forfeiture of Units.

 

(a)                                  Forfeiture Based Upon Company Performance. 
Your Units will be paid only to the extent your Units are not forfeited
pursuant to this Section I and only to the extent such
non-forfeited Units vest pursuant to this Section I or Section II
below.  Your Units are subject to
forfeiture if the Company’s Funds From Operations Per Share for the [20    ]
calendar year (the “Performance Period”) is less than [$      ].  If the Company’s Funds From Operations Per
Share for the Performance Period is less than [$      ], the aggregate
percentage of Units that you will forfeit will be determined in accordance with
Exhibit A hereto.  For
purposes of this Agreement, “Funds From Operations Per Share” means the
Company’s funds from operations per share during the Performance Period, as
prescribed by the National Association of Real Estate Investment Trusts
(“NAREIT”) as in effect on the first day of the Performance Period, and shall
be calculated on a fully diluted basis using the weighted average of diluted
shares of Common Stock outstanding during the Performance Period.  Funds From Operations Per Share shall be
subject to adjustment as expressly provided by the Committee at the time it
approves the grant of the Units.  The
determination as to whether the Company has attained the performance goals with
respect to the Performance Period shall be made by the Committee acting in good
faith.  The Committee’s determination
regarding whether the Company has attained the performance goals (the “Committee
Determination”) shall be made no later than the March 15 following the
end of the Performance Period.  Your
Units shall not be deemed vested pursuant to any other provision of this
Agreement earlier than the date that the Committee makes such determination, as
required by Section 162(m) of the Code and the regulations
promulgated thereunder.  Any Units
forfeited pursuant to this Section I(a) shall be deemed to have been
forfeited as of the last day of the Performance Period.

 

S-1

 

(b)           Termination due to Retirement
during the Performance Period.  Your
Units will remain outstanding during the remainder of the Performance Period
and will be subject to forfeiture in the manner set forth in subsection
(a) upon completion of the Performance Period if, prior to the completion
of the Performance Period, your employment with the Company is terminated as a
result of your Retirement.  In the event
of any such termination during the Performance Period, any Units not forfeited
pursuant to subsection (a) shall fully vest as of the date of the
Committee Determination.  As used in this
Agreement, “Retirement” means a termination of your employment with the
Company or any of its Subsidiaries after you have either (i) attained age
65 and completed at least five (5) years of service as an employee of the
Company or any of its Subsidiaries or as a member of the Board or
(ii) attained age 60 and completed at least fifteen (15) years of service
as an employee of the Company or any of its Subsidiaries or as a member of the
Board.

 

(c)                                  Change in Control Event during the
Performance Period.

 

(i)                                     Your Units will remain outstanding during
the remainder of the Performance Period and will be subject to forfeiture in
the manner set forth in subsection (a) in the event of a Change in Control
Event occurring during the Performance Period.  
In such event, any Units not forfeited pursuant to subsection (a) shall
fully vest as of the date of the Committee Determination; provided, however,
that except as otherwise provided in any change in control or other agreement
with the Company, your Units shall not be so vested if and to the extent the
Units are, in connection with the Change in Control Event, either to be assumed
by the successor or survivor corporation (or parent thereof) or to be replaced
with a comparable right with respect to shares of the capital stock of the
successor or survivor corporation (or parent thereof), in each case
appropriately adjusted.  The determination
of comparability of rights shall be made by the Committee in good faith.  The Committee may adopt provisions to ensure
that any such acceleration shall be conditioned upon the consummation of the
contemplated Change in Control Event.

 

(ii)                                  Notwithstanding the foregoing, the
Committee may, in its sole and absolute discretion, take action to fully vest
your Units immediately prior to, and subject to the consummation of, a Change
in Control Event occurring during the Performance Period.  Any Units that become vested in accordance
with this subsection (c)(ii) shall not be subject to forfeiture in the
manner set forth in subsection (a).

 

(d)                                 Forfeiture of Units Upon Certain
Terminations of Employment.  If at any
time during the Performance Period, your employment with the Company is
terminated (i) by the Company, or (ii) by you, excluding any
termination by reason of your Retirement, death or Disability, all of your
Units shall be automatically forfeited and cancelled in full effective as of
such termination of employment and this Agreement shall be null and void and of
no further force and effect.

 

II.                                     Vesting.

 

(a)                                  Vesting of Non-Forfeited Units. 
You will have no further rights with respect to any Units that are
forfeited in accordance with Section I. 
Subject to the terms and conditions of this Agreement, your Units that (i) are
not forfeited in accordance with Section I and (ii) do not otherwise
vest in accordance with Section I, if any, shall vest in accordance with
the following schedule, subject to your continuous service to the Company until
the applicable vesting date.  (Vesting
amounts pursuant to the following schedule are cumulative.)

 

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  Tranche

  	
   

  	
  Percentage of Non Forfeited

  Units that Vest

  	
   

  	
  Vesting Date

  
	
  1

  	
   

  	
  20%

  	
   

  	
  1st Anniversary of
  Grant Date

  
	
  2

  	
   

  	
  20%

  	
   

  	
  2nd Anniversary of
  Grant Date

  
	
  3

  	
   

  	
  20%

  	
   

  	
  3rd Anniversary of
  Grant Date

  
	
  4

  	
   

  	
  20%

  	
   

  	
  4th Anniversary of
  Grant Date

  
	
  5

  	
   

  	
  20%

  	
   

  	
  5th Anniversary of
  Grant Date

  

 

The vesting schedule requires continued employment
through each applicable Vesting Date as a condition to vesting of the
applicable Tranche and the corresponding rights and benefits under this
Agreement.  Unless otherwise expressly
provided herein with respect to accelerated vesting of the Units under certain
circumstances, employment for only a portion of a vesting period, even if a
substantial portion, will not entitle you to any proportionate vesting or avoid
or mitigate a termination of rights and benefits upon or following a
termination of employment as provided in this Agreement.

 

(b)                                 Termination for Death or Disability. 
If at any time during the Performance Period or following the completion
of the Performance Period, your employment with the Company is terminated as a
result of your death or Disability, your Units (to the extent not previously
forfeited and otherwise unvested) shall fully vest immediately upon such
termination of employment.  For the
avoidance of doubt, any Units that become vested in accordance with this
subsection (b) during the Performance Period shall not be subject to the
forfeiture provisions of Section I(a).

 

(c)                                  Termination by Reason of Retirement
Following the Performance Period.  If at any
time following the completion of the Performance Period, your employment with
the Company is terminated as a result of your Retirement, your Units (to the
extent not previously forfeited and otherwise unvested) shall fully vest
immediately upon such termination of employment.

 

(d)                                 No Acceleration or Vesting Upon Other
Terminations.  If at any time following the completion of
the Performance Period, your employment with the Company is terminated (i) by
the Company, or (ii) by you, excluding any termination by reason of your
Retirement, death or Disability, any of your Units that remain outstanding and
otherwise unvested at the time of such termination of employment shall be
automatically forfeited and cancelled in full effective as of such termination
of employment.

 

III.                                 Change in Control Event Following the
Performance Period.  In the event of a Change in Control Event at
any time following the completion of the Performance Period, your Units ( to
the extent not previously forfeited and otherwise unvested) shall vest
immediately prior to the effective date of the Change in Control Event; provided,
however, that except as 

 

3

 

otherwise provided in any change in control or other
agreement with the Company, your Units shall not be so vested if and to the
extent the Units are, in connection with the Change in Control Event, either to
be assumed by the successor or survivor corporation (or parent thereof) or to
be replaced with a comparable right with respect to shares of the capital stock
of the successor or survivor corporation (or parent thereof), in each case
appropriately adjusted.  The
determination of comparability of rights shall be made by the Committee in good
faith.  The Committee may adopt
provisions to ensure that any such acceleration shall be conditioned upon the
consummation of the contemplated Change in Control Event.

 

IV.                                 Timing and Form of Payment.

 

(a)                                  Distribution Date. 
Except as otherwise provided in Section IV(b), the distribution
date (the “Distribution Date”) for your Units that become vested
pursuant to this Agreement will be the scheduled Vesting Date of such Units as
set forth in Section II(a) hereof; provided, however, that in the
event that the vesting of your Units is accelerated in connection with your
Retirement, death or Disability, the Distribution Date of such accelerated
Units will be the earlier of (i) subject to Section XV, your
Separation from Service and (ii) the scheduled Vesting Date of such Units
as set forth in Section II(a) hereof; and provided, further, that in
no event shall the Distribution Date occur earlier than the date of the
Committee Determination.  Distribution of
your vested Units will be made by the Company in shares of Common Stock (on a
one-to-one basis) on or as soon as practicable after the Distribution Date with
respect to such vested Units, but in no event later than two and one-half (2 1⁄2)
months after the Distribution Date.  You
will have no right to distribution of any of your Units that do not vest in
accordance with the provisions hereof. 
Once a vested Unit has been paid pursuant to this Agreement, you will
have no further rights with respect to that Unit.  For purposes of this Agreement, “Separation
from Service” means a “separation from service” within the meaning of
Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional
alternative definitions available thereunder (i.e. generally a termination of
your employment with the Company or a Subsidiary).

 

(b)                                 Distribution Elections. 
Notwithstanding Section IV(a), you may, on or before the Grant Date
and in all cases at a time that complies with the initial deferral election
requirements of Section 409A of the Code, make an election (a “Distribution
Election”) to (A) defer your Distribution Date with respect to some or
all of your vested Units and/or (B) have your vested Units distributed to
you in annual installments as provided in Section IV(c), provided that
such election complies with this Section IV.  You may change your Distribution Election
with respect to each Tranche (set forth in Section II(a) above) up to
three times without the approval of the Committee, provided such Distribution
Election is made in a timely manner.  Any
changes to your Distribution Election with respect to a Tranche in addition to
the three provided in the preceding sentence may only be made with the approval
of the Committee, in its sole discretion. 
In order for a change in your existing Distribution Election to be
valid, it must be made at least one year prior to the then-existing
Distribution Date with respect to the Units subject to such Distribution
Election change, the new Distribution Date must be at least five years after
the then-existing Distribution Date with respect to such Units, and the
election must otherwise be consistent with the “subsequent election” rules of
Section 409A(a)(4)(C) of the Code so as to prevent application of the
penalty and interest provisions of Section 409A(a)(1)(B) of the
Code.  Your Distribution Date with
respect to any portion of your Units may not be prior to the earlier of the
Vesting Date for such vested Units or the date of the Committee Determination.  Distribution Elections may only be made by
delivering a written election to the Company care of its General Counsel in the
form attached as Exhibit B hereto.

 

4

 

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

 

(d)                                 Hardship Distribution. 
If you experience an Unforeseeable Emergency (as defined below) you may
elect to receive immediate distribution of some or all or your vested Units
upon such Unforeseeable Emergency. 
Distribution upon an Unforeseeable Emergency shall be made no later than
thirty (30) days following written notice to the Company care of its General
Counsel of the Unforeseeable Emergency. 
For purposes of this Agreement, an “Unforeseeable Emergency” shall mean
a severe financial hardship resulting from (i) an illness or accident of
you, your spouse, or your dependent (as defined in Section 152(a) of
the Code without regard to Sections 152(b)(1), (b)(2) and (d)(1)(B)), (ii) loss
of your property due to casualty, or (iii) any other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond your
control, all as reasonably determined by the Committee in good faith.  No distribution shall be made in respect of an
Unforeseeable Emergency unless such Unforeseeable Emergency is not otherwise
relievable by liquidation of your assets (to the extent such liquidation would
not itself cause a severe financial hardship) or through reimbursement or
compensation by insurance or otherwise. 
Any distribution of your vested Units as a result of an Unforeseeable
Emergency shall be limited to the amount reasonably necessary to relieve the Unforeseeable
Emergency (which may include amounts necessary to pay any federal, state or
local income taxes or penalties reasonably anticipated to result from the
distribution).

 

5

 

(e)                                  Change in Control.  Notwithstanding the foregoing
provisions of this Section IV, the Administrator may provide for payment
of your vested Units in accordance with the requirements of Treasury Regulation
1.409A-3(j)(4)(ix)(A), (B) or (C) promulgated under Section 409A
of the Code (or any similar successor provision), which regulation generally
provides that a deferred compensation arrangement may be terminated in limited
circumstances following a dissolution or change in control of the Company.

 

V.                                     Dividend Equivalent Rights. 
During such time as each Unit remains outstanding and prior to the
distribution of such Unit in accordance with Section IV, you will have the
right to receive, with respect to such Unit, an amount equal to the amount of
any cash dividend paid on a share of Common Stock (a “Dividend Equivalent
Right”); provided, however, that any Dividend Equivalent Right credited
with respect to an outstanding Unit (including, without limitation, any
dividend equivalent credited through and including the date of the Committee
Determination) that is subsequently forfeited pursuant to Section I(a) hereof
shall immediately terminate upon the forfeiture of such Unit, and you shall not
be entitled to any payment with respect thereto.  You will have a Dividend Equivalent Right
with respect to each Unit that is outstanding on the record date of such
dividend.  In the case of Dividend
Equivalent Rights credited with respect to an outstanding Unit that is subject
to the forfeiture provisions of Section I(a) hereof on the related
record date and that ultimately is not forfeited pursuant to Section I(a),
the Dividend Equivalent Rights will be paid to you in cash (without interest)
as soon as practicable after the Committee Determination (or, if earlier, as
soon as practicable after the date such Unit vests pursuant to Section II(b))
and in all events not later than March 15 of the year that follows the
Performance Period.  In the case of
Dividend Equivalent Rights credited with respect to an outstanding Unit that is
no longer subject to the forfeiture provisions of Section I(a) hereof
on the related record date, the Dividend Equivalent Rights will be paid to you
in cash (without interest) at the same time or within thirty (30) days after
the related dividend is paid to stockholders of the Company.  Dividend Equivalent Rights will not be paid
to you with respect to any Units that are forfeited pursuant to Sections I and
II, effective as of the date such Units are forfeited.  You will have no Dividend Equivalent Rights
as of the record date of any such cash dividend in respect of any Units that
have been paid in Common Stock; provided that you are the record holder of such
Common Stock on or before such record date.

 

VI.                                 Transferability. 
No benefit payable under, or interest in, the Units or this Agreement
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge and any such attempted action shall
be void and no such benefit or interest shall be, in any manner, liable for, or
subject to, your or your beneficiary’s debts, contracts, liabilities or torts; provided, however, nothing in this Section VI shall
prevent transfers of your Units to the Company or by will or by applicable laws
of descent and distribution.  You may
designate a beneficiary to receive distribution of your vested Units upon your
death by submitting a written beneficiary designation to the Committee in the
form attached hereto as Exhibit B. 
You may revoke a beneficiary designation by submitting a new beneficiary
designation.

 

6

 

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

 

VIII.                         No Contract for Employment. 
This Agreement is not an employment or service contract and nothing in
this Agreement shall be deemed to create in any way whatsoever any obligation
on your part to continue in the employ or service of the Company, or of the
Company to continue your employment or service with the Company.

 

IX.                                Notices.  Any notices
provided for in this Agreement or the Plan, including a Distribution Election,
shall be given in writing and shall be deemed effectively given upon receipt if
delivered by hand or, in the case of notices delivered by United States mail,
five (5) days after deposit in the United States mail, postage prepaid,
addressed, as applicable, to the Company or if to you, at such address as is
currently maintained in the Company’s records or at such other address as you
hereafter designate by written notice to the Company.

 

X.                                    Plan.  This
Agreement is subject to all the provisions of the Plan and their provisions are
hereby made a part of this Agreement.  In
the event of any conflict between the provisions of this Agreement and those of
the Plan, the provisions of the Plan shall control.

 

XI.                                Entire Agreement. 
This Agreement contains the entire understanding of the parties in
respect of the Units and supersedes upon its effectiveness all other prior
agreements and understandings between the parties with respect to the Units.

 

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

 

XIII.                        Governing Law. 
This Agreement shall be construed and interpreted, and the rights of the
parties shall be determined, in accordance with the laws of the State of
Maryland, without regard to conflicts of law provisions thereof.

 

XIV.                        Tax Consequences. 
You may be subject to adverse tax consequences as a result of the
issuance, vesting and/or distribution of your Units and the payment of your
Dividend Equivalent Rights.  YOU ARE
ENCOURAGED TO CONSULT A TAX ADVISOR AS TO THE TAX CONSEQUENCES OF YOUR UNITS
AND SUBSEQUENT DISTRIBUTION OF COMMON STOCK AND THE TAX CONSEQUENCES OF YOUR
DIVIDEND EQUIVALENT RIGHTS.

 

7

 

XV.                            Construction. 
It is intended that the terms of the grant of the Units will not result
in the imposition of any tax liability pursuant to Section 409A of the
Code, and this Agreement shall be construed and interpreted consistent with
that intent.  Notwithstanding anything to
the contrary contained in this Agreement or the Plan, in the event that (i) the
Distribution Date (as determined under Section IV) of any of your vested
Units is the date of your Separation from Service and (ii) you are at the
time of such Separation from Service a “specified employee” (within the meaning
of Section 409A of the Code), the Distribution Date of such vested Units
shall be the earlier of the date that is six (6) months after your
Separation from Service or the date of your death, provided that this sentence
shall only apply if and to the extent required to avoid the imputation of any
tax, penalty or interest under Section 409A.

 

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8

 

Very truly yours,

 

	
   

  	
  HCP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

Accepted and Agreed,

effective as of the date first written above.

 

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
  [                                ]

  	
   

  
				

 

S-1

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