<PAGE>
=======================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or 14a-12
EMERITUS CORPORATION
-----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
CALCULATION OF FILING FEE
====================================================================
Per unit price
or other
underlying
Title of each Aggregate value of
class of number of transaction Proposed
securities to securities to computed maximum
which which pursuant to aggregate
transaction transaction Exchange value of Total fee
applies applies Act Rule 0-11 transaction paid
=============== ============= ============== ========== =========
=============== ============= ============== ========== =========
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
Amount Previously Paid:______________ Filing Party:_________________
Form, Schedule or
Registration Statement No.:_________ Date Filed:___________________
========================================================================
<PAGE>
April 11, 1997
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders of Emeritus Corporation to be held on Thursday, May 22,
1997, at 9:00 a.m. at the Washington Athletic Club, Noble Room, 1325
Sixth Avenue, Seattle, Washington 98101.
The business matters to be acted on at the meeting are described
in the accompanying Notice of Annual Meeting of Shareholders and
Proxy Statement.
Your vote is very important. Whether or not you attend the
meeting, your shares should be represented and voted at the meeting.
Therefore, I urge you to mark, sign, date and promptly return the
enclosed proxy. If you decide to attend the meeting and wish to vote
in person, you will still have the opportunity to do so.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the
Company.
Sincerely,
/s/ Daniel R. Baty
-------------------------
Daniel R. Baty
Chairman of the Board and
Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 22, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of Emeritus Corporation, a Washington corporation (the "Company"),
will be held on Thursday, May 22, 1997, at 9:00 a.m. at the
Washington Athletic Club, Noble Room, 1325 Sixth Avenue, Seattle,
Washington 98101, for the following purposes:
(1) To elect two directors into the Class I of the Company's
Board of Directors.
(2) To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent public accountants for fiscal year 1997.
(3) To transact such other business as may come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on
March 28, 1997 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in
person.
To ensure representation at the Annual Meeting, shareholders are
urged to mark, sign, date and return the enclosed proxy as promptly
as possible, even if they plan to attend the Annual Meeting. A
return envelope, which requires no postage if mailed in the United
States, is enclosed for this purpose. Any shareholder attending the
Annual Meeting may vote in person even if such shareholder has
returned a proxy if the proxy is revoked in the manner set forth in
the accompanying Proxy Statement.
By order of the Board of Directors
/s/ Daniel R. Baty
-------------------------
Daniel R. Baty
Chairman of the Board and
Chief Executive Officer
Seattle, Washington
April 11, 1997
WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON, PLEASE MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE. This
will ensure the presence of a quorum at the meeting. Promptly
marking, signing, dating and returning your proxy will save the
Company the expense of additional solicitation. Sending in your
proxy will not prevent you from voting your stock at the meeting if
you desire to do so, as your proxy is revocable at your option.
<PAGE>
EMERITUS CORPORATION
--------------------------------
PROXY STATEMENT
--------------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Emeritus Corporation (the
"Company") of proxies for use at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held on Thursday, May 22, 1997, at 9:00
a.m. at the Washington Athletic Club, Noble Room, 1325 Sixth Avenue,
Seattle, Washington 98101, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The principal
executive offices of the Company are located at 3131 Elliott Avenue,
Suite 500, Seattle, Washington 98121. It is expected that this
Proxy Statement and accompanying form of proxy will be mailed to
shareholders on or about April 14, 1997.
RECORD DATE AND OUTSTANDING SHARES
Holders of record of the Company's common stock (the "Common
Stock") at the close of business on March 28, 1997 are entitled to
notice of and to vote at the Annual Meeting. On that date there were
11,000,000 shares of Common Stock outstanding.
REVOCABILITY OF PROXIES
Shares represented at the Annual Meeting by properly executed
proxies in the accompanying form will be voted at the Annual Meeting
and, where the shareholder giving the proxy specifies a choice, the
proxy will be voted in accordance with the specification so made. A
proxy given for use at the Annual Meeting may be revoked by the
shareholder giving the proxy at any time prior to the exercise of the
powers conferred thereby. A proxy may be revoked either by
(i) filing with the Secretary of the Company prior to the Annual
Meeting, at the Company's principal executive offices, either a
written revocation or a duly executed proxy bearing a later date or
(ii) attending the Annual Meeting and voting in person, regardless of
whether a proxy has previously been given. Presence at the Annual
Meeting will not revoke the shareholder's proxy unless such
shareholder votes in person.
QUORUM AND VOTING
Under Washington law and the Company's Articles of
Incorporation, if a quorum is present at the Annual Meeting, (a) the
two nominees for election as directors who receive the greatest
number of votes cast for the election of directors at the Annual
Meeting by the shares present in person or represented by proxy at
the Annual Meeting and entitled to vote shall be elected directors,
and (b) the proposal to ratify the appointment of the accountants
will be approved if the votes cast in favor of the proposal by the
shares present in person or represented by proxy at the Annual
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Meeting and entitled to vote exceed the votes cast against the
proposal. Abstention from voting will have no effect on the election
of directors or the appointment of the accountants since they will
not represent votes cast at the Annual Meeting for the purposes of
electing directors and ratifying the appointment of the accountants.
Because brokers have discretion to vote shares of Common Stock held
on behalf of beneficial owners if no instructions for voting such
shares are received as to the matters to be voted upon at the Annual
Meeting, there will be no "broker nonvotes".
SOLICITATION OF PROXIES
Proxies will be solicited by certain of the Company's directors,
officers and regular employees, without payment of any additional
compensation to them. Proxies will be solicited by personal
interview, mail and telephone. Any costs relating to such
solicitation of proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons
representing beneficial owners of Common Stock for their expenses in
forwarding solicitation materials to such beneficial owners.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes: Class I,
Class II and Class III. At the Annual Meeting, each of two Class I
directors are to be elected to hold office for a term of three years
until the Company's annual meeting of shareholders in 2000, and until
such director's successor shall be elected and qualified. The Board
of Directors has no reason to believe that either of the nominees
listed below will be unable to serve as a director. If, however,
either nominee becomes unavailable, the proxies will have
discretionary authority to vote for a substitute nominee.
UNLESS AUTHORITY TO DO SO IS WITHHELD, THE PERSONS NAMED AS
PROXIES IN THE ACCOMPANYING FORM OF PROXY WILL VOTE FOR THE ELECTION
OF THE NOMINEES LISTED BELOW.
NOMINEES FOR ELECTION
CLASS I DIRECTORS (TERM TO EXPIRE IN 2000)
Patrick Carter (age 51) has served as a director of the Company
since November 1995. Since 1985, Mr. Carter has been Chief Executive
Officer and Managing Director of Westminister Health Care Holdings,
Plc., a publicly held operator of skilled-nursing facilities in the
United Kingdom.
Motoharu Iue (age 60) has served as a director of the Company
since April 1995. Mr. Iue has served as Chairman of the Board of
Sanyo North America Corporation ("Sanyo") and President of Three
Oceans Inc. ("Three Oceans"), since October 1996. Mr. Iue previously
served as President of Sanyo and as Chairman of the Board of Three
Oceans, since 1992 and still serves as Chief Executive Officer of
Sanyo and Chief Executive Officer of Three Oceans. From 1989 until
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<PAGE>
1992, he was Executive Vice President of Tottori Sanyo Electric Co.,
Ltd. All three companies are affiliates of Sanyo Electric Co. Ltd.
("Sanyo"), and Three Oceans Inc. is a shareholder of the Company.
Mr. Iue has been a director of Sanyo since 1977.
CONTINUING DIRECTORS
CLASS II DIRECTORS (TERM TO EXPIRE IN 1998)
Tom A. Alberg (age 56) has served as a director of the Company
since November 1995. Since January 1996, Mr. Alberg has been
principal of Madrona Investment Group, L.L.C., a private merchant
banking firm. Mr. Alberg was President and a director of LIN
Broadcasting Corporation, a cellular telephone company, from April
1991 to October 1995, and Executive Vice President of AT&T Wireless
Services, formerly McCaw Cellular Communications, Inc., from July
1990 to October 1995. Prior to July 1990, Mr. Alberg was chairman of
the executive committee and a partner in the law firm of Perkins
Coie, Seattle, Washington. Mr. Alberg is also a director of Commerce
Bank, Active Voice Corporation, Digital Systems International,
Teledesic Corporation and Visio Corporation.
Raymond R. Brandstrom (age 43), one of the Company's founders,
has served as its President and Chief Operating Officer and as a
director since its inception in 1993. Since May 1992, Mr. Brandstrom
has served as President of Columbia-Pacific Group, Inc. ("Columbia")
and Columbia-Pacific Management, Inc. ("Columbia Management"). From
1982 to 1987, he was Director of Finance for The Hillhaven
Corporation ("Hillhaven"), and has been involved in long-term-care
and retirement housing for 15 years. Since May 1992, Mr. Brandstrom
has served as Vice President and Treasurer of Columbia Winery, a
company affiliated with Daniel R. Baty that is engaged in the
production and sale of still table wines.
CLASS III DIRECTORS (TERM TO EXPIRE IN 1999)
Daniel R. Baty (age 52), one of the Company's founders, has
served as its Chief Executive Officer and as a director since its
inception in 1993 and became Chairman of the Board in April 1995.
Mr. Baty has served as Chairman of the Board of Holiday Retirement
Corp. ("Holiday") since 1987 and as its Chief Executive Officer since
1991. He was the Chief Executive Officer of Hillhaven from 1971 to
1986, when he left to pursue opportunities in the independent-living
market. Since 1984, Mr. Baty has served as Chairman of the Board of
Columbia and, since 1986, Chairman of the Board of Columbia
Management, both of which companies are wholly owned by Mr. Baty and
engaged in developing independent-living facilities and providing
consulting services regarding that market.
William E. Colson (age 54) has served as a director of the
Company since 1995. Mr. Colson is a founder of Holiday and, since
1987, has been its President and Chief Operating Officer.
3
<PAGE>
INFORMATION ON COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Company's Board of Directors has established a Compensation
Committee and an Audit Committee. The Company has no Nominating
Committee and the full Board of Directors selects nominees for
election as directors.
The Compensation Committee establishes salaries, incentives and
other forms of compensation for directors, officers and other key
employees of the Company, administers the 1995 Stock Incentive Plan
and recommends policies relating to benefit plans. The Compensation
Committee currently consists of Messrs. Alberg, Carter and Iue. The
Compensation Committee met three times in 1996.
The Audit Committee reviews the Company's accounting practices,
internal accounting controls and financial results and oversees the
engagement of the Company's independent auditors. The Audit
Committee currently consists of Messrs. Alberg and Carter. The Audit
Committee met twice in 1996.
During 1996, there were four meetings of the Board of Directors,
and all board members attended at least 75% of the meetings of the
Board of Directors and of each committee of which he was a member.
COMPENSATION OF DIRECTORS
Nonemployee directors currently receive $500 for each meeting of
the Board of Directors or committee of the Board of Directors that
they attend. In September 1995, the Company established the Stock
Option Plan for Nonemployee Directors (the "Directors Plan"), which
provides that each nonemployee director who is initially elected or
appointed to the Board of Directors will, upon such election or
appointment, be automatically granted a fully vested option to
purchase 2,500 shares of Common Stock. In addition, each nonemployee
director is automatically granted a fully vested option to purchase
2,000 shares of Common Stock immediately following each year's annual
meeting of shareholders.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect
to compensation paid by the Company in the fiscal years ended
December 31, 1994, 1995 and 1996 to the Company's Chief Executive
Officer and Chief Operating Officer (the "Named Executive Officers").
None of the Company's other executive officers earned salary and
bonus in excess of $100,000 during the fiscal year ended December 31,
1996.
4
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<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------- ------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Compensation Options Compensation (1)
- ----------------------- ---- --------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Daniel R. Baty (2)..... 1996 $ 0 $2,190(3) 50,000 $9,520
Chairman and Chief 1995 $ 0 $3,568(3) 50,000 -
Executive Officer 1994 $ 0 $1,396(3) - -
Raymond R. Brandstrom.. 1996 $100,000 $ 720(3) 50,000 $ 987
President and Chief 1995 $100,000 - 35,000 $ 330
Operating Officer 1994 $ 89,364 - - $ 110
</TABLE>
(1) Consists of life insurance premiums paid by the Company on
behalf of the Named Executive Officers.
(2) Mr. Baty is not currently compensated by the Company. On April
17, 1995, the Company purchased investment securities in The
Standish Care Company from a corporation wholly owned by Mr.
Baty. Such investment securities were purchased by the Company
at such corporation's original cost, which exceeded the then
current market value of such securities. The excess of the cost
to the Company over market value at the time of purchase was
$426,000 and has been treated for financial reporting purposes
as compensation to Mr. Baty.
(3) Consists of $1,000, $2,400 and $1,200 in parking fees and $396,
$1,168 and $990 in health club memberships for 1994, 1995 and
1996, respectively for Dan Baty and $720 in parking for 1996 for
Mr. Brandstrom.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding
options granted during the fiscal year ended December 31, 1996 to
the Named Executive Officers.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to Exercise for Option Term(4)
Options Employees in Price Expiration -----------------------------
Name Granted(#)(1) Fiscal Year(2) ($/Share)(3) Date 5% 10%
------------------ ------------ ------------ ----------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Daniel R. Baty 50,000 13.8% $10.50 11/21/06 $300,170 $836,715
Raymond R. Brandstrom 50,000 13.8% $10.50 11/21/06 $300,170 $836,715
</TABLE>
(1) Provided the holder remains employed by the Company, these options
vest 20% per year commencing one year from the date of grant and
become fully exercisable five years from the date of grant.
(2) Based on an aggregate of 363,500 shares subject to options granted
to employees in the fiscal year ended December 31, 1996.
(3) The option exercise price is equal to the closing price of the
Common Stock on the American Stock Exchange, Inc. on the date of
grant.
(4) Future value of current-year grants assuming appreciation of 5% and
10% per year over the 10-year option period. The actual value
realized may be greater or less than the potential realizable values
set forth in the table. The assumed rates of growth are prescribed
by the Securities and Exchange Commission (the "Commission") for
illustrative purposes only and are not intended to predict or forecast
future stock prices.
6
<PAGE>
FISCAL YEAR-END OPTION VALUES
None of the Named Executive Officers exercised options during the fiscal
year ended December 31, 1996. The following table sets forth certain
information regarding options held as of the end of such fiscal year by each of
the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1996 December 31, 1996(1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Daniel R. Baty 10,000 90,000 0 $150,000
Raymond R. Brandstrom 6,950 78,050 0 $150,000
</TABLE>
(1) Options to purchase 50,000 shares held by each of the Named Executive
Officers were in-the-money at the fiscal year-end based on the $13.50
closing price of the Common Stock on the American Stock Exchange, Inc.
on December 31, 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board (the "Committee") consists of three
nonemployee directors. The Committee is responsible for establishing and
administering the Company's executive compensation programs. The objectives of
these programs are to pay competitively in order to attract qualified executive
personnel who best meet the Company's needs; retain and motivate these
executives to achieve superior performance; link individual compensation to
individual and company performance; and align executives' financial interests
with those of the Company's shareholders.
Executive compensation generally consists of two components: base salary
and long-term incentive awards. The Committee has established each executive's
compensation package by considering (i) the salaries of executive officers in
similar positions in companies in the same industry as the Company and in
related industries, (ii) the experience and contribution levels of the
individual executive officer, and (iii) the Company's financial performance.
Companies used as a reference for considering compensation levels include some
but not all of the companies constituting the peer group in the Stock
Performance Graph. The Company also relies on the recommendations of the Chief
Executive Officer in matters related to the individual performance of the
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<PAGE>
other executive officers, because the Committee believes that the Chief
Executive Officer is the most qualified to make this assessment.
The Named Executive Officers, the Company's two senior executives, were
founders of the Company have significant equity positions in the Company. As of
the record date, Mr. Baty and Mr. Brandstrom owned shares and options
representing 27.4% and 3.2%, respectively, of the Company's Common Stock. Mr.
Baty receives no base salary or bonus; Mr. Brandstrom receives a base salary of
$100,000, which the Committee believes is below the base salary of comparable
positions with competitors. This compensation pattern was established prior to
the Company's initial public offering and the Committee has continued it,
recognizing that the principal compensation of both executives will be the
increased value of their equity stake in the Company.
Recently, the Company has been aggressively recruiting other senior
executives who have substantial experience in the long-term care industry. As a
result, the Committee intends to develop more systematic policies regarding the
compensation of the Company's executive officers in 1997.
BASE SALARIES. In 1996, base salaries were established as described above.
STOCK OPTIONS. Stock options are granted to provide a long-term incentive
opportunity that is directly linked to shareholder value. They are granted with
an exercise price equal to the market value of the Common Stock on the date of
grant, and become exercisable in 20% annual increments beginning one year after
the date of grant. To encourage stock retention, all options are granted as
incentive stock options to the maximum extent possible under the Internal
Revenue Code of 1986, as amended (the "Code"). Each of Messrs. Baty and
Brandstrom received options to purchase 50,000 shares during 1996 in view of
their limited compensation.
In 1996, stock options were granted to a total of 56 employees of the
Company in recognition of their dedication, commitment and hard work. After
considering the performance of each executive, the Committee determined
judgmentally the number of options to be granted to each executive officer.
ANNUAL INCENTIVES. To date, the Committee has not established an annual
incentive or bonus plan for the Company's executive officers. None of the
Company's executive officers were awarded a bonus in 1996.
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Section 162(m) of the Code includes potential limitations on the
deductibility for federal income tax purposes of compensation in excess of $1
million paid or accrued with respect to any of the executive officers whose
compensation is required to be reported in the Company's Proxy Statement.
Certain performance-based compensation that has been approved by shareholders is
not subject to the deduction limit. The Company's stock option plans are
structured to qualify options granted thereunder as performance-based
compensation under Section 162(m). For 1997, the Committee does not contemplate
that there will be any such nondeductible compensation.
Compensation Committee
Tom A. Alberg, Chair
Patrick Carter
Motoharu Iue
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Commission.
Officers, directors and greater than 10% shareholders are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no forms were
required for those persons, the Company believes that during the 1996 fiscal
year all filing requirements applicable to its officers, directors and greater
than 10% beneficial owners were complied with by such persons.
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<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on shares of the
Company's Common Stock with the cumulative total return of the AMEX Market Value
Index and a peer group selected by the Company for the period beginning on
November 21, 1995, the first day of trading for the Company's Common Stock, and
ending on December 31, 1996, the end of the Company's last fiscal year.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
EMERITUS CORPORATION, THE AMEX MARKET VALUE INDEX AND THE PEER GROUP
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
Emeritus Peer AMEX
Corporation Group Market
----------- --------- ---------
<S> <C> <C> <C>
November 21, 1995 100 100 100
December 31, 1995 78 101 105
December 31, 1996 90 84 112
</TABLE>
Assumes $100 invested in Emeritus Corporation Common Stock, the AMEX Market
Value Index and the peer group, with all dividends reinvested. Stock price
shown above for the Common Stock is historical and not necessarily indicative of
future price performance.
The peer group consists of seven companies primarily involved in the
provision of assisted-living services: ARV Assisted Living, Inc., Assisted
Living Concepts Inc., Carematrix Corp. (formerly The Standish Care Company),
Greenbriar Corp., Just Like Home Inc., Regent Assisted Living Inc. and Sterling
House Corp.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 14, 1997, certain information
with respect to the beneficial ownership of Common Stock by (a) each person
known by the Company to beneficially own more than 5% of the Common Stock,
(b) each director and director nominee of the Company, (c) each of the Named
Executive Officers, and (d) all directors and executive officers of the Company
as a group. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole voting and investment power with respect to
such shares.
<TABLE>
<CAPTION>
Common Stock
-------------------------------
Amount and Nature of Percent of
Name and Address Beneficial Ownership Class
------------------------------------- -------------------- ----------
<S> <C> <C>
Daniel R. Baty(1) (5)............. 3,020,695 27.4%
c/o Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
Raymond R. Brandstrom(6).......... 350,930 3.2%
Motoharu Iue(2)(7)................ 387,500 3.5%
Tom A. Alberg(7).................. 15,500 *
Patrick Carter(7)................. 2,500 *
William E. Colson(7).............. 2,500 *
Nicholas Company, Inc.(3)......... 1,619,500 14.7%
700 North Water Street
Milwaukee, WI 53202
Sirach Capital Management.(4)..... 580,700 5.3%
3323 One Union Square
600 University Street
Seattle, WA 98101
All directors and executive
officers as a group (12
persons)(1)(2)(8) 4,103,305 37.2%
</TABLE>
* Less than 1%.
(1) Includes 2,479,400 shares held by B.F.P., L.L.C., of which Mr. Baty is the
manager.
(2) Includes 385,000 shares held by Three Oceans Inc., a U.S. affiliate of
Sanyo, a publicly traded Japanese company. Mr. Iue is an executive of U.S.
affiliates of Sanyo. Mr. Iue disclaims beneficial ownership of shares of
Common Stock held by Three Oceans Inc.
11
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(3) Includes 621,000 shares held by Nicholas II, Inc., a Maryland
corporation. Albert O. Nicholas, president, director and majority
shareholder of Nicholas Company, Inc., may be deemed to have
indirect beneficial ownership over the shares, based upon publicly
available information reported as of December 31, 1996.
(4) Sirach Capital Management may be deemed to have voting and
dispositive power over the shares, based upon publicly
available information reported as of December 31, 1996.
(5) Includes options exercisable within 60 days for the purchase of
10,000 shares.
(6) Includes options exercisable within 60 days for the purchase of
6,950 shares.
(7) Includes options exercisable within 60 days for the purchase of
2,500 shares.
(8) Includes options exercisable within 60 days for the purchase of
34,700 shares.
CERTAIN TRANSACTIONS
BATY TRANSACTIONS
In September 1995, the Company obtained a line of credit from Mr. Baty with
up to a $7.0 million principal amount (the "Baty Line of Credit"), which it may
draw upon for working capital and other general corporate purposes. Amounts
advanced under the Baty Line of Credit bear interest at the greater of (a) 1.0%
over the prime rate and (b) 10.0% per annum, and are due on or before December
31, 1997. The Company did not draw upon the Baty Line of Credit in 1996 and
there is currently no outstanding balance thereunder.
In April 1995, the Company agreed to purchase a development site in
Hutchinson, Kansas from Columbia Management. The aggregate purchase price was
$377,600, which the Company paid. Upon completion of the permitting process the
Company was entitled to the transfer of the property, which it assigned to the
institution financing the project for the purchase price originally paid by the
Company. The purchase price represents Columbia Management's cost, including
the purchase price paid by Columbia Management, interest paid to the original
seller, real estate taxes and other expenses of holding and maintaining the
property, plus interest on such amounts at prime plus 1% per annum.
In July 1995, the Company entered into an agreement to purchase the
Victorian Manor community from a mortgage pool established by Daiwa Mortgage
Acceptance Corporation that had acquired the property by foreclosure. The
purchase price of $3.9 million consisted of the principal balance of the
mortgage debt, accrued and unpaid interest, penalties and foreclosure costs.
Messrs. Baty, Brandstrom and Ruffo indirectly hold a 25.0%, 0.18% and 0.36%
residual interest, respectively, in the mortgage pool. Because the Company's
purchase price for the community represents the mortgage pool's cost, holders
12
<PAGE>
of residual interests in the mortgage pool avoided losses that they would
otherwise have sustained if the price had been lower. The acquisition, however,
raised concerns due to the conflict of interest created by management's
ownership of the residual interest in the mortgage pool, the difficulty of
determining whether the current value of the community is equal to the mortgage
pool's cost and the deteriorated operating condition of the community.
Therefore, in September 1995, the Company assigned its purchase agreement for
the Victorian Manor community to Mr. Baty, subject to a three-year option to
repurchase the property, exercisable at a price that represents the sum of the
property's purchase price, the expenses of its reconstruction and any losses
incurred in its operation. From November 1995 through February 1996, the
Company operated the community pursuant to a management agreement. In
February 1996, the Board of Directors (including all independent directors)
approved the purchase of this community for a price of $3 million, which is less
than the mortgage pool's debt and related costs. However, the Company declined
to purchase the Victorian Manor community and it was ultimately sold to a third
party by the mortgage pool.
On September 28, 1995, Park Place-Casper, L.L.C. ("Park Place"), a Delaware
limited liability company owned by Columbia and Columbia Management, purchased a
60-unit independent-living community in Casper, Wyoming for $2.3 million and
concurrently entered into a five-year management agreement with the Company
whereby the Company agreed to manage the property for a fee equal to 5.0% of
gross revenue. In February 1996, the Board of Directors (including all
independent directors) approved the purchase of this community for a price of
$2.3 million, Park Place's cost. The Company believes that the terms of
purchase are not less favorable than those that would be available from an
independent third party.
In February 1996, the Board of Directors (including all independent
directors) approved the purchase of an 88-unit independent-living facility
located in Grand Terrace, California from Holiday for a price of $3.1 million.
The facility was purchased by Holiday in November 1995 and the purchase price
represents Holiday's original purchase price and related costs. The Company
believes that the terms of purchase are no less favorable than those that would
be available from an independent third party.
In November 1996, the Company entered into an agreement with Columbia House
LLC ("Columbia House"), a limited liability company wholly owned by Mr. Baty.
Under this agreement, the Company will provide certain administrative support,
due diligence and financial support services to Columbia House with respect to
the acquisition, development and administration of Columbia House communities.
During 1996, Columbia House paid the Company $10,700 in service fees. Columbia
House develops, owns and leases low-income senior housing projects. Currently
the Company provides services to Columbia House with respect to one community
located in Coeur d' Alene, Idaho.
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Prior to the Company's initial public offering in November 1995, Mr. Baty
had personally guaranteed much of the Company's third-party financing, including
mortgage debt and rental payments under leases. Certain of those guarantees
terminated when the underlying properties met certain loan-to-value standards or
debt-service coverage ratios and others terminated when properties were
refinanced. Since the Company's initial public offering, Mr. Baty has
guaranteed $6.6 million of the Company's mortgage financing.
PAINTED POST PARTNERS TRANSACTIONS
Painted Post Partners (the "Partnership"), an affiliated partnership of
which Messrs. Baty and Brandstrom are the sole partners, was formed in October
1995 for the purpose of obtaining licensure in the state of New York to operate
assisted-living communities; New York state regulations prohibit corporations
from acting as licensed operators of regulated healthcare facilities. In August
1996, the Partnership obtained its license to operate communities in New York.
In October 1995, the Company began operating the Green Meadows-Painted Post
community under a two-year administrative services agreement with two
individuals who were the then-licensed operators of the community and lessees
under the lease with a REIT. Upon issuance of a license to the Partnership, all
rights and obligations under the lease and the administrative services agreement
were assigned to the Partnership. In November 1996, the Partnership acquired
through lease financing, nine assisted-living communities ("Wegman Communities")
located throughout the state of New York. The Company has an agreement with the
Partnership to provide services to the communities over the life of the leases
and has guaranteed the leases. The Company believes that a license is not
required under New York state law for it to provide the services set forth in
the administrative services agreements but that it nonetheless effectively
controls the operations of Green Meadows-Painted Post and the Wegman
Communities.
ALERT TRANSACTIONS
In November 1996, the Company agreed to purchase up to 6,888,466 shares of
convertible preferred stock of Alert Care Corporation ("Alert"), an Ontario,
Canada based owner and operator of 17 assisted-living communities, at prices
ranging from $0.67 to $0.74 (Cdn) and acquired an option to purchase an
additional 4,000,000 shares of convertible preferred stock at an exercise price
of $1.00 per share (Cdn), as well as an option to purchase from Eclipse Capital
Management ("Eclipse"), the majority shareholder of Alert, and certain other
shareholders of Alert, 9,050,000 currently issued and outstanding shares of
common stock of Alert and 950,000 currently issued and outstanding shares of
Class A non-voting stock (the "Class A Stock") of Alert both at an exercise
price of $3.25 per share (Cdn). The shares of preferred stock are convertible
into shares of class A non voting stock at any time. At March 20, 1997, the
Company owns 3,655,384 shares of preferred stock for a total investment of $2.6
million (Cdn) which is equivalent to $1.9 million (US). Pursuant to agreements
with Alert, Mr. Baty serves as a director of Alert.
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The Company would own approximately 41% of the outstanding shares of Class
A Stock if it converted all preferred stock it can purchase into Class A Stock
or approximately 20% of the outstanding common stock if it converted its
preferred stock into common stock and all other convertible securities were
likewise converted into common stock (the preferred stock is convertible into
common stock when the Company exercises its option to purchase an aggregate of
10 million common and Class A shares of Alert). If the Company exercises its
option to acquire 4,000,000 additional shares of preferred stock, then such
percentages would be 52% and 31%, respectively. And if the Company exercises it
option to purchase outstanding common stock and Class A Stock from existing
shareholders, then such percentages would be 57% and 67%, respectively.
Eclipse, through its wholly owned subsidiary, Eclipse Construction Inc.,
develops and constructs retirement homes for Alert on a contract basis. Alert
has entered into an exclusive management agreement to manage the Company's
future assisted-living communities in Ontario and Eclipse has entered into an
exclusive development agreement with the Company and Alert to develop their
construction projects in Ontario.
NONCOMPETITION AGREEMENTS
The Company has entered into noncompetition agreements with Messrs. Baty,
Brandstrom and Ruffo which provide that each of such persons will not compete,
directly or indirectly, with the Company in the ownership, operation or
management of assisted-living communities anywhere in the United States and
Canada during the term of such individual's employment and for a period of two
years following his termination of employment with the Company. The agreements
do provide, however, that such persons may hold (a) up to a 10% limited
partnership interest in a partnership engaged in such business, (b) less than 5%
of the outstanding equity securities of a public company engaged in such
business, and (c) interests in the Green Meadows-Painted Post community
described under "-Painted Post Partners Transactions." Such agreements do not
limit Mr. Baty's current role with Holiday and Messrs. Brandstrom and Ruffo in
their capacities as officers of Columbia, which is wholly owned by Mr. Baty, and
its subsidiary, Columbia Management, which is a general partner of partnerships
that own or lease properties currently operated by Holiday. Mr. Baty has agreed
that if Holiday operates or manages assisted-living communities, other than as a
limited component of independent-living communities consistent with its current
operations, he will not personally be active in the management, operation or
financing of such facilities nor will he hold any ownership or other interest
therein. In the event that Holiday operates or manages assisted-living
communities, Messrs. Brandstrom and Ruffo have agreed that they will not
participate in Columbia Management's activities with respect to such facilities.
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PROPOSAL FOR RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
public accountants, to continue as independent auditor of the Company for the
fiscal year ending December 31, 1997. KPMG Peat Marwick LLP has been auditor of
the Company since July 28, 1995. The Board of Directors is submitting its
selection of KPMG Peat Marwick LLP to the shareholders for ratification.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting, with the opportunity to make a statement, if the representative
so desires, and is expected to be available to respond to appropriate questions
from shareholders.
On July 28, 1995 the Company's Board of Directors approved the dismissal of
Coopers & Lybrand L.L.P. as the Company's independent certified public
accountants. The report of Coopers & Lybrand L.L.P. on the consolidated
financial statements of the Company as of December 31, 1994 and for the year
then ended did not contain an adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principle. Such report was the only report issued by Coopers & Lybrand L.L.P.
with respect to the Company. During the year ended December 31, 1994 and the
period between December 31, 1994 and the date on which Coopers & Lybrand L.L.P.
was dismissed, there were no disagreements between the Company and Coopers &
Lybrand L.L.P. on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Coopers & Lybrand L.L.P., would have caused
Coopers & Lybrand L.L.P. to make reference to the subject matter of such
disagreement in connection with its report.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF KPMG PEAT
MARWICK LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER BUSINESS
The Board of Directors does not intend to present any business at the
Annual Meeting other than as set forth in the accompanying Notice of Annual
Meeting of Shareholders, and has no present knowledge that any others intend to
present business at the Annual Meeting. If, however, other matters requiring
the vote of the shareholders properly come before the Annual Meeting or any
adjournment or postponement thereof, the persons named in the accompanying form
of proxy will have discretionary authority to vote the proxies held by them in
accordance with their judgment as to such matters.
SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in the proxy materials for the
Company's 1998 Annual Meeting of Shareholders must be received in writing by the
Company not later than December 12, 1997.
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Such proposals should be directed to the Corporate Secretary, Emeritus
Corporation, 3131 Elliott Avenue, Suite 500, Seattle, Washington 98121.
ANNUAL REPORT
A copy of the Company's 1996 Annual Report, which includes the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
accompanies this Proxy Statement.
By Order of the Board of Directors
/s/ Daniel R. Baty
----------------------------
Daniel R. Baty
Chairman of the Board and
Chief Executive Officer
Seattle, Washington
April 11, 1997
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[PROXY CARD]
EMERITUS CORPORATION
PROXY FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 1997
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoint(s) Daniel R. Baty and Raymond R.
Brandstrom, and each of them, as Proxies with full power of substitution and
hereby authorizes them to represent and to vote as designated below all the
shares of Common Stock of Emeritus Corporation held of record by the undersigned
on March 28, 1997 at the 1997 Annual Meeting of Shareholders to be held at the
Washington Athletic Club, 1325 Sixth Avenue, Seattle, Washington, 98101 at 9:00
a.m. on Thursday May 22, 1997, with authority to vote upon the following matters
and with discretionary authority as to any other matters that may properly come
before the meeting or any adjournment or postponement thereof:
The undersigned acknowledges receipt from the Company prior to the execution
of this Proxy of a Notice of Annual Meeting of Shareholders and a Proxy
Statement dated April 14, 1997.
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY CARD
WILL HELP SAVE THE EXPENSE OF ADDITIONAL SOLICITATION EFFORTS.
IMPORTANT--Please Date and Sign on the Other Side
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
In their discretion, the Proxies are authorized to vote upon such other business
as may properly be brought before the meeting or any adjournment or postponement
thereof. This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR BOTH NOMINEES" IN ITEM 1 AND "FOR" ITEM 2
FOR WITHHOLD AUTHORITY
both nominees to vote for both nominees
1. ELECTION OF DIRECTORS ( ) ( )
Election of the following nominees
to serve as directors in the class
indicated and for the term
indicated until their successors
are elected and qualified:
Class 1 (term expiring 2000): Patrick Carter, Motoharu Iue
WITHOLD AUTHORITY to vote for the following: _____________________
Unless otherwise directed, all votes will be apportioned equally between
those persons for whom authority is given to vote.
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE
APPOINTMENT OF KPMG ( ) ( ) ( )
PEAT MARWICK LLP AS
THE COMPANY'S
INDEPENDENT PUBLIC
ACCOUNTANTS FOR
FISCAL YEAR 1997.
Please sign below exactly as
your name appears on your stock
certificate. When shares are held
jointly, each person must sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. An
authorized person should sign on
behalf of corporations, partnerships
and associations and give his or her
title.
I plan to attend the Annual Meeting ( )
Signature(s)___________________________________________ Date ________, 1997
