[S8edgar.doc]
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As filed with the Securities and Exchange Commission on July 31,
1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
EMERITUS CORPORATION
(Exact name of Registrant as specified in its charter)
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Washington 91-1605464
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
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3131 Elliott Avenue, Suite 500
Seattle, Washington 98121
(Address of principal executive offices, including zip code)
EMERITUS CORPORATION
AMENDED AND RESTATED 1995 STOCK INCENTIVE PLAN
1998 EMPLOYEE STOCK OPTION PLAN
(Full title of the plans)
RAYMOND R. BRANDSTROM
President and Chief Operating Officer
3131 Elliott Avenue, Suite 500
Seattle, Washington 98121
(206) 298-2909
(Name, address and telephone number, including area code, of
agent for service)
______________________
Copy to:
MICHAEL E. STANSBURY
PERKINS COIE LLP
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
______________________
CALCULATION OF REGISTRATION FEE
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Proposed
Title of Securities Number to Be Proposed Maximum Amount of
to Be Registered Registered(1) Maximum Aggregate Registration
Offering Offering Fee
Price Per Price(2)
Share(2)
Common Stock, $.0001
par value per share
Amended and Restated 350,000 $11.38 $3,983,000 $1175
1995 Stock Incentive
Plan
1998 Employee Stock 200,000 $11.38 $2,276,000 $671
Purchase Plan
TOTAL: 550,000 $1846
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(1) Together with an indeterminate number of additional shares which
may be necessary to adjust the number of shares reserved for
issuance pursuant to such employee benefit plans as the result of
any future stock split, stock dividend or similar adjustment of
the Registrant's outstanding Common Stock.
(2) Estimated pursuant to Rule 457(c) solely for the purpose of
calculating the registration fee. The price per share is
estimated to be $11.38 based on the average of the high ($11.38)
and low ($11.38) sales prices for the Common Stock on July 29,
1998 as reported by the American Stock Exchange.
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PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission (the "Commission") are hereby incorporated by reference in
this Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997, filed on March 30, 1998, which contains
audited financial statements for the most recent fiscal year for which
such statements have been filed;
(b) All other reports filed by the Registrant pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), since the end of the fiscal year covered
by the Annual Report on Form 10-K referred to in (a) above; and
(c) The description of the Registrant's Common Stock
contained in the Registration Statement on Form 8-A filed on
October 17, 1995 under Section 12(g) of the Exchange Act, including
any amendments or reports filed for the purpose of updating such
description.
All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date hereof and
prior to the filing of a post-effective amendment, which indicate that
the securities offered hereby have been sold or which deregister the
securities covered hereby then remaining unsold, shall also be deemed
to be incorporated by reference into this Registration Statement and
to be a part hereof commencing on the respective dates on which such
documents are filed.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board
of directors to grant, indemnification to directors and officers on
terms sufficiently broad to permit indemnification under certain
circumstances for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act"). Section 10 of the
Registrant's Restated Bylaws provides for indemnification of the
Registrant's directors, officers, employees and agents to the maximum
extent permitted by Washington law.
Section 23B.08.320 of the Washington Business Corporation Act
authorizes a corporation to limit a director's liability to the
corporation or its shareholders for monetary damages for acts or
omissions as a director, except in certain circumstances involving
intentional misconduct, self-dealing or illegal corporate loans or
distributions, or any transactions from which the director personally
receives a benefit in money, property or services to which the
director is not entitled. Article 8 of the Registrant's Restated
Articles of Incorporation contains provisions implementing, to the
fullest extent permitted by Washington law, such limitations on a
director's liability to the Registrant and its shareholders.
Officers and directors of the Registrant are covered by insurance
(with certain exceptions and certain limitations) that indemnifies
them against losses and liabilities arising from certain alleged
"wrongful acts," including alleged errors or misstatements, or certain
other alleged wrongful acts or omissions constituting neglect or
breach of duty.
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Item 8. EXHIBITS
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Exhibit
Number Description
5.1 Opinion of Perkins Coie LLP regarding
legality of the Common Stock being
registered
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Perkins Coie LLP (included in
opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Emeritus Corporation Amended and Restated
1995 Stock Incentive Plan
99.2 Emeritus Corporation 1998 Employee Stock
Purchase Plan
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Item 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or 15(d) of
the Exchange Act (and, where applicable, each filing of an employee
benefits plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
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C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Seattle, State
of Washington, on the 29th day of July, 1998.
EMERITUS CORPORATION
/s/ Raymond R. Brandstrom
By: Raymond R. Brandstrom
President and Chief Operating
Officer
Each person whose individual signature appears below hereby
authorizes Raymond R. Brandstrom and Kelly J. Price, or either of
them, as attorneys-in-fact with full power of substitution, to execute
in the name and on the behalf of each person, individually and in each
capacity stated below, and to file, any and all post-effective
amendments to this Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 29th day of July, 1998.
Signature Title
/s/ Daniel R. Baty Chief Executive Officer and
Daniel R. Baty Chairman of the Board (Principal
Executive Officer)
/s/ Raymond R. Brandstrom President, Chief Operating Officer
Raymond R. Brandstrom and Director
/s/ Kelly J. Price Vice President Finance and Chief
Kelly J. Price Financial Officer (Principal
Financial and Accounting Officer)
Tom A. Alberg Director
Patrick R. Carter Director
William E. Colson Director
/s/ David T. Hamamoto Director
David T. Hamamoto
/s/ Motoharu Iue Director
Motoharu Iue
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INDEX TO EXHIBITS
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Exhibit
Number Description
5.1 Opinion of Perkins Coie LLP regarding
legality of the Common Stock being
registered
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Perkins Coie LLP (included in
opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Emeritus Corporation Amended and Restated
1995 Stock Incentive Plan
99.2 Emeritus Corporation 1998 Employee Stock
Purchase Plan
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EXHIBIT 5.1
Perkins Coie LLP
1201 Third Avenue, 40th Floor, Seattle, Washington 98101-3099
Telephone: 206 583-8888 Facsimile: 206 583-8500
July 28, 1998
Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to you in connection with the
preparation of a Registration Statement on Form S-8 (the
"Registration Statement") under the Securities Act of 1933, as
amended ("the Act"), which you are filing with the Securities
and Exchange Commission with respect to 550,000 shares of
Common Stock, $.0001 par value (the "Shares"), which may be
issued as follows: 350,000 shares pursuant to the Emeritus
Corporation Amended and Restated 1995 Stock Incentive Plan and
200,000 shares pursuant to the Emeritus Corporation 1998
Employee Stock Option Plan. We have examined the Registration
Statement and such documents and records of the Company and
other documents as we have deemed necessary for the purpose of
this opinion.
Based upon and subject to the foregoing, we are of the
opinion that any original issuance Shares that may be issued
pursuant to the Plans have been duly authorized and that, upon
the due execution by the Company and the registration by its
registrar of such Shares and the sale thereof by the Company
in accordance with the terms of the Plans, and the receipt of
consideration therefor in accordance with the terms of the
Plans, such Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement. In giving such
consent, we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ PERKINS COIE LLP
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Emeritus Corporation:
We consent to incorporation by reference in this registration
statement on Form S-8 of Emeritus Corporation of our reports
dated February 27, 1998, except for Note 10 as to which date
is March 13, 1998, relating to the consolidated balance sheets
of Emeritus Corporation and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of
operations, shareholders' equity (deficit) and cash flows for
each of the years in the three-year period ended December 31,
1997, and related schedule, which reports appear in the
December 31, 1997 annual report on Form 10-K of Emeritus
Corporation.
/s/ KPMG PEAT MARWICK LLP
Seattle, WA
July 31, 1998
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EXHIBIT 99.1
EMERITUS CORPORATION
AMENDED AND RESTATED 1995 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Emeritus Corporation 1995 Stock
Incentive Plan (the "Plan") is to enhance the long-term
profitability and shareholder value of Emeritus Corporation, a
Washington corporation (the "Company"), by offering incentives
and rewards to those employees, directors, officers,
consultants, agents, advisors and independent contractors of
the Company and its Subsidiaries (as defined in Section 2
below) who are key to the Company's growth and success, and to
encourage them to remain in the service of the Company and its
Subsidiaries and to acquire and maintain stock ownership in
the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be
defined as set forth below:
2.1 Award
"Award" means an award or grant made to a Participant
pursuant to the Plan, including, without limitation, awards or
grants of Options, Stock Appreciation Rights, Stock Awards,
Other Stock-Based Awards or any combination of the foregoing
(including any Dividend Equivalent Rights granted in
connection with such Awards).
2.2 Board
"Board" means the Board of Directors of the Company.
2.3 Cause
"Cause" means dishonesty, fraud, misconduct, unauthorized
use or disclosure of confidential information or trade
secrets, or conviction or confession of a crime punishable by
law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be
conclusive and binding.
2.4 Code
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.5 Common Stock
"Common Stock" means the common stock, par value $.01 per
share, of the Company.
2.6 Corporate Transaction
"Corporate Transaction" means any of the following
events:
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(a) Approval by the holders of the Common Stock of
any merger or consolidation of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which shares of the Common Stock are converted
into cash, securities or other property, other than a merger
of the Company in which the holders of the Common Stock
immediately prior to the merger have substantially the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger;
(b) Approval by the holders of the Common Stock of
any sale, lease, exchange or other transfer in one transaction
or a series of related transactions of all or substantially
all of the Company's assets other than a transfer of the
Company's assets to a majority-owned subsidiary (as the term
"subsidiary" is defined in Section 8.3 of the Plan) of the
Company; or
(c) Approval by the holders of the Common Stock of
any plan or proposal for the liquidation or dissolution of the
Company.
2.7 Disability
"Disability" means "disability" as that term is defined
for purposes of the Company's Group Life, Disability Income,
Medical and Dental Plan or other similar successor plan
applicable to salaried employees.
2.8 Dividend Equivalent Right
"Dividend Equivalent Right" means an Award granted under
Section 12 of the Plan.
2.9 Early Retirement
"Early Retirement" means retirement as that term is
defined by the Plan Administrator from time to time for
purposes of the Plan.
2.10 Exchange Act
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
2.11 Fair Market Value
"Fair Market Value" means the closing price, or if there
is no closing price, the mean between the high and low sale
price of shares of Common Stock on the American Stock Exchange
on the day the option is granted or, if no Common Stock was
traded on such date, on the next succeeding day on which
Common Stock is so traded.
2.12 Good Reason
"Good Reason" means the occurrence of any of the
following events or conditions:
(a) a change in the Holder's status, title,
position or responsibilities (including reporting
responsibilities) that, in the Holder's reasonable judgment,
represents a substantial reduction of the status, title,
position or responsibilities as in effect immediately prior
thereto; the assignment to the Holder of any duties or
responsibilities that, in the Holder's reasonable judgment,
are inconsistent with such status, title, position or
responsibilities; or any removal of the Holder from or failure
to reappoint or reelect the Holder to any of such positions,
except in connection with the termination of the Holder's
employment for Cause, for Disability or as a result of his or
her death, or by the Holder other than for Good Reason;
(b) a reduction in the Holder's annual base salary;
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(c) the Company's requiring the Holder (without the
Holder's consent) to be based at any place outside a 35-mile
radius of his or her place of employment prior to a Corporate
Transaction, except for reasonably required travel on the
Company's business that is not materially greater than such
travel requirements prior to the Corporate Transaction;
(d) the Company's failure to (i) continue in effect
any material compensation or benefit plan (or the substantial
equivalent thereof) in which the Holder was participating at
the time of a Corporate Transaction, including, but not
limited to, the Plan, or (ii) provide the Holder with
compensation and benefits at least equal (in terms of benefit
levels and/or reward opportunities) to those provided for
under each employee benefit plan, program and practice as in
effect immediately prior to the Corporate Transaction (or as
in effect following the Corporate Transaction, if greater);
(e) any material breach by the Company of any
provision of the Plan; or
(f) any purported termination of the Holder's
employment or services for Cause by the Company that does not
comply with the terms of the Plan.
2.13 Grant Date
"Grant Date" means the date designated in a resolution of
the Plan Administrator as the date an Award is granted. If
the Plan Administrator does not designate a Grant Date in the
resolution, the Grant Date shall be the date the Plan
Administrator adopted the resolution.
2.14 Holder
"Holder" means: (a) the Participant to whom an Award is
granted; (b) for a Holder who has died, the personal
representative of the Holder's estate, the person(s) to whom
the Holder's rights under the Award have passed by will or by
the applicable laws of descent and distribution, or the
beneficiary designated in accordance with Section 14; or
(c) the person(s) to whom an Award has been transferred in
accordance with Section 14.
2.15 Incentive Stock Option
"Incentive Stock Option" means an Option to purchase
Common Stock granted under Section 7 of the Plan with the
intention that it qualify as an "incentive stock option" as
that term is defined in Section 422 of the Code.
2.16 Nonqualified Stock Option
"Nonqualified Stock Option" means an Option to purchase
Common Stock granted under Section 7 of the Plan other than an
Incentive Stock Option.
2.17 Option
"Option" means the right to purchase Common Stock granted
under Section 7 of the Plan.
2.18 Other Stock-Based Award
"Other Stock-Based Award" means an Award granted under
Section 11 of the Plan.
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2.19 Participant
"Participant" means an individual who is a Holder of an
Award or, as the context may require, any employee, director,
officer, consultant, agent, advisor or independent contractor
of the Company or a Subsidiary who has been designated by the
Plan Administrator as eligible to participate in the Plan.
2.20 Plan Administrator
"Plan Administrator" means any committee of the Board
designated to administer the Plan under Section 3.1 of the
Plan.
2.21 Restricted Stock
"Restricted Stock" means shares of Common Stock granted
under Section 10 of the Plan the rights of ownership of which
are subject to restrictions prescribed by the Plan
Administrator.
2.22 Retirement
"Retirement" means retirement as of the individual's
normal retirement date under a company's profit sharing ,
savings or other similar plan applicable to salaried
employees, or as otherwise established by the Plan
Administrator.
2.23 Stock Appreciation Right
"Stock Appreciation Right" means an Award granted under
Section 9 of the Plan.
2.24 Stock Award
"Stock Award" means an Award granted under Section 10 of
the Plan.
2.25 Subsidiary
"Subsidiary," except as provided in Section 8.3 in
connection with Incentive Stock Options, means any entity that
is directly or indirectly controlled by the Company or in
which the Company has a significant ownership interest, as
determined by the Plan Administrator, and any entity that may
become a direct or indirect parent of the Company.
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by a committee or
committees (which term includes subcommittees) appointed by,
and consisting of two or more members of, the Board (the "Plan
Administrator"). If and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act,
the Board shall consider in selecting the Plan Administrator
and the membership of any committee acting as Plan
Administrator, with respect to any persons subject or likely
to become subject to Section 16 of the Exchange Act, the
provisions regarding (a) "outside directors" as contemplated
by Section 162(m) of the Code and (b) "nonemployee directors"
as contemplated by Rule 16b-3 under the Exchange Act. The
Board may delegate the responsibility for administering the
Plan with respect to designated classes of eligible
Participants to different committees, subject to such
limitations as the Board deems appropriate. Committee members
shall serve for such term as the Board may determine, subject
to removal by the Board at any time.
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3.2 Administration and Interpretation by the Plan
Administrator
Except for the terms and conditions explicitly set forth
in the Plan, the Plan Administrator shall have exclusive
authority, in its discretion, to determine all matters
relating to Awards under the Plan, including the selection of
individuals to be granted Awards, the type of Awards, the
number of shares of Common Stock subject to an Award, all
terms, conditions, restrictions and limitations, if any, of an
Award and the terms of any instrument that evidences the
Award. The Plan Administrator shall also have exclusive
authority to interpret the Plan and may from time to time
adopt, and change, rules and regulations of general
application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and
regulations, and all actions taken and determinations made by
the Plan Administrator pursuant to the Plan, shall be
conclusive and binding on all parties involved or affected.
The Plan Administrator may delegate administrative duties to
such of the Company's officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in
Section 15.1 of the Plan, a maximum of 1,450,000 shares of
Common Stock shall be available for issuance under the Plan.
Shares issued under the Plan shall be drawn from authorized
and unissued shares or shares now held or subsequently
acquired by the Company as treasury shares.
4.2 Individual Award Limit
Subject to adjustment from time to time as provided in
Section 15.1, not more than 300,000 shares of Common Stock may
be made subject to Awards of Options or Stock Appreciation
Rights under the Plan to any individual Participant in any one
fiscal year of the Company, such limitation to be applied in a
manner consistent with the requirements of, and only to the
extent required for compliance with, the exclusion from the
limitation on deductibility of compensation under
Section 162(m) of the Code.
4.3 Reuse of Shares
Any shares of Common Stock that have been made subject to
an Award that cease to be subject to the Award (other than by
reason of exercise or payment of the Award to the extent it is
exercised for or settled in shares) shall again be available
for issuance in connection with future grants of Awards under
the Plan. Shares that are subject to tandem Awards shall be
counted only once.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers
and key employees (including directors who are also employees)
of the Company and its Subsidiaries as the Plan Administrator
from time to time selects. Awards may also be made to
consultants and agents who provide services to the Company and
its Subsidiaries.
SECTION 6. AWARDS
6.1 Form and Grant of Awards
The Plan Administrator shall have the authority, in its
sole discretion, to determine the type or types of Awards to
be made under the Plan. Such Awards may include, but are not
limited to, Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Stock Awards, Other Stock-
Based Awards and Dividend Equivalent Rights. Awards may be
made singly, in combination or in tandem so that the
settlement or payment of one automatically reduces or cancels
the other. Awards may also be made in combination or in
tandem with, as alternatives to, or as the payment form for,
grants or rights under any other employee or compensation plan
of the Company.
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6.2 Acquired Company Awards
Notwithstanding anything in the Plan to the contrary, the
Plan Administrator may grant Awards under the Plan in
substitution for awards issued under other plans, or assume
under the Plan awards issued under other plans, if the other
plans are or were plans of other entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new
Award is substituted, or the old award is assumed, by reason
of a merger, consolidation, acquisition of property or of
stock, reorganization or liquidation (the "Acquisition
Transaction"). In the event that a written agreement pursuant
to which the Acquisition Transaction is completed is approved
by the Board and said agreement sets forth the terms and
conditions of the substitution for or assumption of
outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan
Administrator, except as may be required for compliance with
Rule 16b-3 under the Exchange Act, and the persons holding
such Awards shall be deemed to be Participants and Holders.
SECTION 7. AWARDS OF OPTIONS
7.1 Grant of Options
The Plan Administrator is authorized under the Plan, in
its sole discretion, to issue Options as Incentive Stock
Options or as Nonqualified Stock Options, which shall be
appropriately designated.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option
shall be as determined by the Plan Administrator, but shall
not be less than 100% of the Fair Market Value of the Common
Stock on the Grant Date with respect to Incentive Stock
Options and not less than 85% of the Fair Market Value of the
Common Stock on the date such Option is granted with respect
to Nonqualified Stock Options.
7.3 Term of Options
The term of each Option shall be as established by the
Plan Administrator or, if not so established, shall be 10
years from the Grant Date.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in
each instrument that evidences an Option the time at which or
the installments in which the Option shall become exercisable,
which provisions may be waived or modified by the Plan
Administrator at any time. If not so established in the
instrument evidencing the Option, the Option shall vest and
become exercisable according to the following schedule, which
may be waived or modified by the Plan Administrator at any
time:
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Period of Holder's Continuous
Employment or Service With the Percent of Total Option That Is
Company or Its Subsidiaries Vested
From the Option Grant Date and Exercisable
After 1 year 33 1/3%
After 2 years 33 1/3%
After 3 years 33 1/3%
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To the extent that the right to purchase shares has
accrued thereunder, an Option may be exercised from time to
time by written notice to the Company, in accordance with
procedures established by the Plan Administrator, setting
forth the number of shares with respect to which the Option is
being exercised and accompanied by payment in full as
described in Section 7.5 of the Plan. The Plan Administrator
may determine at any time that an Option may not be exercised
as to less than 100 shares at any one time (or the lesser
number of remaining shares covered by the Option).
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option
shall be paid in full to the Company by delivery of
consideration equal to the product of the Option exercise
price and the number of shares purchased. Such consideration
must be paid in cash or by check, or, unless the Plan
Administrator in its sole discretion determines otherwise,
either at the time the Option is granted or at any time before
it is exercised, a combination of cash and/or check (if any)
and one or both of the following alternative forms:
(a) tendering (either actually or, if and so long as the
Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, by attestation) Common Stock already owned by
the Holder for at least six months (or any shorter period
necessary to avoid a charge to the Company's earnings for
financial reporting purposes) having a Fair Market Value on
the day prior to the exercise date equal to the aggregate
Option exercise price or (b) if and so long as the Common
Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, delivery of a properly executed exercise notice,
together with irrevocable instructions, to (i) a brokerage
firm designated by the Company to deliver promptly to the
Company the aggregate amount of sale or loan proceeds to pay
the Option exercise price and any withholding tax obligations
that may arise in connection with the exercise and (ii) the
Company to deliver the certificates for such purchased shares
directly to such brokerage firm, all in accordance with the
regulations of the Federal Reserve Board. In addition, to the
extent permitted by the Plan Administrator in its sole
discretion, the exercise price for shares purchased under an
Option may be paid, either singly or in combination with one
or more of the alternative forms of payment authorized by this
Section 7.5, by (y) a full-recourse promissory note delivered
pursuant to Section 16 or (z) such other consideration as the
Plan Administrator may permit.
7.6 Post-Termination Exercises
The Plan Administrator shall establish and set forth in
each instrument that evidences an Option whether the Option
will continue to be exercisable, and the terms and conditions
of such exercise, if a Holder ceases to be employed by, or to
provide services to, the Company or its Subsidiaries, which
provisions may be waived or modified by the Plan Administrator
at any time. If not so established in the instrument
evidencing the Option, the Option will be exercisable
according to the following terms and conditions, which may be
waived or modified by the Plan Administrator at any time.
In case of termination of the Holder's employment or
services other than by reason of death or Cause, the Option
shall be exercisable, to the extent of the number of shares
purchasable by the Holder at the date of such termination,
only: (a) within three years after the date of termination of
the Holder's employment or services if such termination is
coincident with Retirement, Early Retirement at the Company's
request or Disability or (b) within three months after the
date of termination of the Holder's employment or services if
such termination is for any reason other than Retirement,
Early Retirement at the Company's request or Disability, but
in no event later than the remaining term of the Option. Any
Option exercisable at the time of the Holder's death may be
exercised, to the extent of the number of shares purchasable
by the Holder at the date of the Holder's death, by the
personal representative of the Holder's estate entitled
thereto at any time or from time to time within three years
after the date of death, but in no event later than the
remaining term of the Option.In case of termination of the
Holder's employment or services for Cause, the Option shall
automatically terminate upon first notification to the Holder
of such termination, unless the Plan Administrator determines
otherwise. If a Holder's employment or services with the
Company are suspended pending an investigation of whether the
Holder shall be terminated for Cause, all the Holder's rights
under any Option likewise shall be suspended during the period
of investigation. Any portion of an Option that is not
exercisable on the date of termination of the Holder's
employment or services shall terminate on such date, unless
the Plan Administrator determines otherwise.
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A transfer of employment or services between or among the
Company and its Subsidiaries shall not be considered a
termination of employment or services. Unless the Plan
Administrator determines otherwise, a leave of absence
approved in accordance with Company procedures shall not be
considered a termination of employment or services, except
that with respect to Incentive Stock Options such leave of
absence shall be subject to any requirements of Section 422 of
the Code.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code,
Incentive Stock Options shall be subject to the following
additional terms and conditions:
8.1 Dollar Limitation
To the extent the aggregate Fair Market Value (determined
as of the Grant Date) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time
during any calendar year (under the Plan and all other stock
option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock
Option. In the event the Participant holds two or more such
Options that become exercisable for the first time in the same
calendar year, such limitation shall be applied on the basis
of the order in which such Options are granted.
8.2 10% Shareholders
If a Participant owns 10% or more of the total voting
power of all classes of the Company's stock, then the exercise
price per share of an Incentive Stock Option shall not be less
than 110% of the Fair Market Value of the Common Stock on the
Grant Date and the Option term shall not exceed five years.
8.3 Eligible Employees
Individuals who are not employees of the Company or one
of its parent corporations or subsidiary corporations may not
be granted Incentive Stock Options. For purposes of this
Section 8.3 of the Plan, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms
for purposes of Section 422 of the Code.
8.4 Term
The term of an Incentive Stock Option shall not exceed 10
years.
8.5 Exercisability
An Option designated as an Incentive Stock Option must be
exercised within three months after termination of employment
for reasons other than death to qualify for Incentive Stock
Option tax treatment, except that in the case of termination
of employment due to Disability, such Option must be exercised
within one year after such termination.
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SECTION 9. STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights
The Plan Administrator may grant a Stock Appreciation
Right separately or in tandem with a related Option.
9.2 Tandem Stock Appreciation Rights
A Stock Appreciation Right granted in tandem with a
related Option will give the Holder the right to surrender to
the Company all or a portion of the related Option and to
receive an appreciation distribution (in shares of Common
Stock or cash or any combination of shares and cash, as the
Plan Administrator shall determine at any time) in an amount
equal to Fair Market Value for the date the Stock Appreciation
Right is exercised over the exercise price per share of the
right, which shall be the same as the exercise price of the
related Option. A tandem Stock Appreciation Right will have
the same other terms and provisions as the related Option.
Upon and to the extent a tandem Stock Appreciation Right is
exercised, the related Option will terminate.
9.3 Stand-Alone Stock Appreciation Rights
A Stock Appreciation Right granted separately and not in
tandem with an Option will give the Holder the right to
receive an appreciation distribution in an amount equal to the
excess of the Fair Market Value for the date the Stock
Appreciation Right is exercised over the per share exercise
price of the right. A stand-alone Stock Appreciation Right
will have such terms as the Plan Administrator may determine,
except that the per share exercise price of the right must be
at least equal to 85% of the Fair Market Value on the Grant
Date and the term of the right, if not otherwise established
by the Plan Administrator, shall be 10 years from the Grant
Date.
9.4 Exercise of Stock Appreciation Rights
Unless otherwise provided by the Plan Administrator in
the instrument that evidences the Stock Appreciation Right,
the provisions of Section 7.6 of the Plan relating to the
termination of a Holder's employment or services shall apply
equally, to the extent applicable, to the Holder of a Stock
Appreciation Right.
SECTION 10. STOCK AWARDS
10.1 Grant of Stock Awards
The Plan Administrator is authorized to make Awards of
Common Stock to Participants on such terms and conditions and
subject to such restrictions, if any (whether based on
performance standards, periods of service or otherwise), as
the Plan Administrator shall determine, which terms,
conditions and restrictions shall be set forth in the
instrument evidencing the Award. The terms, conditions and
restrictions that the Plan Administrator shall have the power
to determine shall include, without limitation, the manner in
which shares subject to Stock Awards are held during the
periods they are subject to restrictions and the circumstances
under which forfeiture of Restricted Stock shall occur by
reason of termination of the Holder's services.
10.2 Issuance of Shares
Upon the satisfaction of any terms, conditions and
restrictions prescribed in respect to a Stock Award, or upon
the Holder's release from any terms, conditions and
restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall release, as soon as
practicable, to the Holder or, in the case of the Holder's
death, to the personal representative of the Holder's estate
or as the appropriate court directs, the appropriate number of
shares of Common Stock.
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10.3 Waiver of Restrictions
Notwithstanding any other provisions of the Plan, the
Plan Administrator may, in its sole discretion, waive the
forfeiture period and any other terms, conditions or
restrictions on any Restricted Stock under such circumstances
and subject to such terms and conditions as the Plan
Administrator shall deem appropriate.
SECTION 11. OTHER STOCK-BASED AWARDS
The Plan Administrator may grant other Awards under the
Plan pursuant to which shares of Common Stock (which may, but
need not, be shares of Restricted Stock pursuant to Section 10
of the Plan) are or may in the future be acquired, or Awards
denominated in stock units, including ones valued using
measures other than market value. Such Other Stock-Based
Awards may be granted alone or in addition to or in tandem
with any Award of any type granted under the Plan and must be
consistent with the Plan's purpose.
SECTION 12. DIVIDEND EQUIVALENT RIGHTS
Any Awards under the Plan may, in the Plan
Administrator's discretion, earn Dividend Equivalent Rights.
In respect of any Award that is outstanding on the dividend
record date for Common Stock, the Participant may be credited
with an amount equal to the cash or stock dividends or other
distributions that would have been paid on the shares of
Common Stock covered by such Award had such covered shares
been issued and outstanding on such dividend record date. The
Plan Administrator shall establish such rules and procedures
governing the crediting of Dividend Equivalent Rights,
including the timing, form of payment and payment
contingencies of such Dividend Equivalent Rights, as it deems
are appropriate or necessary.
SECTION 13. LOANS, LOAN GUARANTEES AND
INSTALLMENT PAYMENTS
To assist a Holder (including a Holder who is an officer
or director of the Company) in acquiring shares of Common
Stock pursuant to an Award granted under the Plan, the Plan
Administrator may authorize, either at the Grant Date or at
any time before the acquisition of Common Stock pursuant to
the Award, (a) the extension of a loan to the Holder by the
Company, (b) the payment by the Holder of the purchase price,
if any, of the Common Stock in installments, or (c) the
guarantee by the Company of a loan obtained by the grantee
from a third party. The terms of any loans, installment
payments or guarantees, including the interest rate and terms
of repayment, will be subject to the Plan Administrator's
discretion. Loans, installment payments and guarantees may be
granted with or without security. The maximum credit
available is the purchase price, if any, of the Common Stock
acquired plus the maximum federal and state income and
employment tax liability that may be incurred in connection
with the acquisition.
SECTION 14. ASSIGNABILITY
No Option, Stock Appreciation Right, Other Stock-Based
Award or Dividend Equivalent Right granted under the Plan may
be assigned, pledged or transferred by the Holder other than
by will or by the laws of descent and distribution, and during
the Holder's lifetime, such Awards may be exercised only by
the Holder or a permitted assignee or transferee of the Holder
(as provided below). Notwithstanding the foregoing, and to
the extent permitted by Section 422 of the Code, the Plan
Administrator, in its sole discretion, may permit such
assignment, transfer and exercisability and may permit a
Holder of such Awards to designate a beneficiary who may
exercise the Award or receive compensation under the Award
after the Holder's death; provided, however than any Award so
assigned or transferred shall be subject to all the same terms
and conditions contained in the instrument evidencing the
Award.
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SECTION 15. ADJUSTMENTS
15.1 Adjustment of Shares
In the event that at any time or from time to time a
stock dividend, stock split, spin-off, combination or exchange
of shares, recapitalization, merger, consolidation,
distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or
capital structure results in (a) the outstanding shares, or
any securities exchanged therefor or received in their place,
being exchanged for a different number or class of securities
of the Company or of any other corporation or (b) new,
different or additional securities of the Company or of any
other corporation being received by the holders of shares of
Common Stock of the Company, then the Plan Administrator, in
its sole discretion, shall make such equitable adjustments as
it shall deem appropriate in the circumstances in (i) the
maximum number of and kind of securities subject to the Plan
as set forth in Section 4.1 of the Plan, (ii) the maximum
number and class of securities that may be made subject to
Awards to any individual Participant as set forth in
Section 4.2 of the Plan, and (iii) the number and kind of
securities that are subject to any outstanding Award and the
per share price of such securities, without any change in the
aggregate price to be paid therefor. The determination by the
Plan Administrator as to the terms of any of the foregoing
adjustments shall be conclusive and binding. Notwithstanding
the foregoing, a Corporate Transaction shall not be governed
by this Section 15.1 but shall be governed by Section 15.2.
15.2 Corporate Transaction
Except as otherwise provided in the instrument that
evidences the Award, in the event of any Corporate
Transaction, each Option, Stock Appreciation Right or Stock
Award that is at the time outstanding shall automatically
accelerate so that each such Award shall, immediately prior to
the specified effective date for the Corporate Transaction,
become 100% vested, except that such acceleration will not
occur if in the opinion of the Company's accountants it would
render unavailable "pooling of interest" accounting for a
Corporate Transaction that would otherwise qualify for such
accounting treatment. All such Awards shall terminate and
cease to remain outstanding immediately following the
consummation of the Corporate Transaction, except to the
extent assumed by the successor corporation or its parent
corporation. Any such Awards that are assumed or replaced in
the Corporate Transaction and do not otherwise accelerate at
that time shall be accelerated in the event the Holder's
employment or services should subsequently terminate within
two years following such Corporate Transaction, unless such
employment or services are terminated by the Company for Cause
or by the Holder voluntarily without Good Reason.
Notwithstanding the foregoing, no Incentive Stock Option shall
become exercisable pursuant to this Section 15.2 without the
Holder's consent, if the result would be to cause such Option
not to be treated as an Incentive Stock Option (whether by
reason of the annual limitation described in Section 8.1 of
the Plan or otherwise).
15.3 Further Adjustment of Awards
Subject to Section 15.2 the Plan Administrator shall have
the discretion, exercisable at any time before a sale, merger,
consolidation, reorganization, liquidation or change in
control of the Company, as defined by the Plan Administrator,
to take such further action as it determines to be necessary
or advisable, and fair and equitable to Participants, with
respect to Awards. Such authorized action may include (but
shall not be limited to) establishing, amending or waiving the
type, terms, conditions or duration of, or restrictions on,
Awards so as to provide for earlier, later, extended or
additional time for exercise, payment or settlement or lifting
restrictions, differing methods for calculating payments or
settlements, alternate forms and amounts of payments and
settlements, and other modifications, and the Plan
Administrator may take such actions with respect to all
Participants, to certain categories of Participants or only to
individual Participants. The Plan Administrator may take such
action before or after granting Awards to which the action
relates and before or after any public announcement with
respect to such sale, merger, consolidation, reorganization,
liquidation or change in control that is the reason for such
action.
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15.4 Limitations
The grant of Awards will in no way affect the Company's
right to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its
business or assets.
SECTION 16. WITHHOLDING OF TAXES
The Company may require the Holder to pay to the Company
the amount of any withholding taxes that the Company is
required to withhold with respect to the grant, exercise,
payment or settlement of any Award. In such instances, the
Plan Administrator may, in its discretion and subject to the
Plan and applicable law, permit the Holder to satisfy
withholding obligations, in whole or in part, by paying cash,
by electing to have the Company withhold shares of Common
Stock or by transferring shares of Common Stock to the
Company, in such amounts as are equivalent to the Fair Market
Value of the withholding obligation.
SECTION 17. AMENDMENT AND TERMINATION OF PLAN
17.1 Amendment of Plan
The Plan may be amended by the shareholders of the
Company. The Board may also amend the Plan in such respects
as it shall deem advisable; however, to the extent required
for compliance with Section 422 of the Code or any applicable
law or regulation, shareholder approval will be required for
any amendment that will (a) increase the total number of
shares as to which Options may be granted or that may be used
in payment of Stock Appreciation Rights, Other Stock-Based
Awards or Dividend Equivalent Rights under the Plan or that
may be issued as Restricted Stock, (b) materially modify the
class of persons eligible to receive Awards, (c) materially
increase the benefits accruing to Participants under the Plan,
or (d) otherwise require shareholder approval under any
applicable law or regulation.
17.2 Termination of Plan
The shareholders or the Board may suspend or terminate
the Plan at any time. The Plan will have no fixed expiration
date; provided, however, that no Incentive Stock Options may
be granted more than 10 years after the Plan's effective date.
17.3 Consent of Holder
The amendment or termination of the Plan shall not,
without the consent of the Holder of any Award under the Plan,
alter or impair any rights or obligations under any Award
theretofore granted under the Plan.
SECTION 18. GENERAL
18.1 Notification
The Plan Administrator shall promptly notify a
Participant of an Award, and a written grant shall promptly be
executed and delivered by or on behalf of the Company.
18.2 Continued Employment or Services; Rights in Awards
Neither the Plan, participation in the Plan as a
Participant nor any action of the Plan Administrator taken
under the Plan shall be construed as giving any Participant or
employee of the Company any right to be retained in the employ
of the Company or limit the Company's right to terminate the
employment or services of the Participant or employee.
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18.3 Registration
The Company shall be under no obligation to any
Participant to register for offering or resale under the
Securities Act of 1933, as amended, or register or qualify
under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or
created by, the Plan. The Company may issue certificates for
shares with such legends and subject to such restrictions on
transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the
Company with federal and state securities laws.
18.4 No Rights as a Shareholder
No Option, Stock Appreciation Right or Other Stock-Based
Award shall entitle the Holder to any dividend (except to the
extent provided in an Award of Dividend Equivalent Rights),
voting or other right of a shareholder unless and until the
date of issuance under the Plan of the shares that are the
subject of such Awards, free of all applicable restrictions.
18.5 Compliance With Laws and Regulations
It is the Company's intention that, so long as any of the
Company's equity securities are registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, the Plan shall
comply in all respects with Rule 16b-3 under the Exchange Act,
and, if any Plan provision is later found not to be in
compliance with such Rule, the provision shall be deemed null
and void, and in all events the Plan shall be construed in
favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in the Plan to the contrary, the
Board, in its sole discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the
Plan to Participants who are officers or directors subject to
Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other
Participants. Additionally, in interpreting and applying the
provisions of the Plan, any Option granted as an Incentive
Stock Option pursuant to the Plan shall, to the extent
permitted by law, be construed as an "incentive stock option"
within the meaning of Section 422 of the Code.
18.6 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan.
Nothing contained herein shall require the Company to
segregate any monies or other property, or shares of Common
Stock, or to create any trusts, or to make any special
deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are
greater than those of a general unsecured creditor of the
Company.
18.7 Severability
If any provision of the Plan or any Award is determined
to be invalid, illegal or unenforceable in any jurisdiction,
or as to any person, or would disqualify the Plan or any Award
under any law deemed applicable by the Plan Administrator,
such provision shall be construed or deemed amended to conform
to applicable laws, or, if it cannot be so construed or deemed
amended without, in the Plan Administrator's determination,
materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, person or
Award, and the remainder of the Plan and any such Award shall
remain in full force and effect.
SECTION 19. EFFECTIVE DATE
The Plan's effective date is the date on which it is
adopted by the Board, so long as it is approved by the
Company's shareholders at any time within 12 months of such
adoption.
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Adopted by the Board on September 26, 1995 and approved
by the Company's shareholders on September 28, 1995.
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EXHIBIT 99.2
EMERITUS CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE
The purposes of the Emeritus Corporation 1998 Employee
Stock Purchase Plan (the "Plan") are to (a) assist qualified
employees of Emeritus Corporation, a Washington corporation
(the "Company"), and its designated subsidiary corporations in
acquiring a stock ownership interest in the Company pursuant
to a plan that is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (b) help employees
provide for their future security and encourage them to remain
in the employ of the Company and its subsidiary corporations.
Stock purchased under the Plan may be paid for by regular
payroll deductions. Only employees of the Company and its
designated subsidiary corporations are eligible to participate
in the Plan, and participation is voluntary.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be
defined as set forth below.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Committee" means the Company's Compensation Committee or
another committee appointed by the Board and given authority
by the Board to administer the Plan.
"Company" means Emeritus Corporation, a Washington
corporation.
"Designated Subsidiary" includes all domestic Subsidiary
Corporations and such other Subsidiary Corporations as may be
designated from time to time by the Board or the Committee as
eligible to participate in the Plan.
"Eligible Compensation" means all regular cash
compensation, including overtime, cash bonuses and
commissions. Regular cash compensation does not include
severance pay, hiring and relocation bonuses, pay in lieu of
vacation or sick leave, or any other special payments, or any
gain from stock option exercises.
"Eligible Employee" means any employee of the Company or
any Designated Subsidiary who is in the employ of the Company
or a Designated Subsidiary on one or more Offering Dates and
who meets the following criteria:
(a) the employee does not, immediately after the Option
is granted, own stock (as defined by the Code) possessing 5%
or more of the total combined voting power or value of all
classes of stock of the Company or of its Parent or Subsidiary
Corporations;
(b) the employee has been employed for at least six months;
provided, however, that the Plan Administrator, in its sole
discretion, may reduce or increase (to up to two years) this
minimum requirement for future Offering Periods;
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(c) the employee's customary employment is for more than
20 hours per week; provided, however, that the Plan
Administrator, in its sole discretion, may reduce this minimum
hourly requirement for future Offering Periods; and
(d) the employee's customary employment is for more than
five months in any calendar year; provided, however, that the
Plan Administrator, in its sole discretion, may reduce this
minimum requirement for future Offering Periods.
If the Company permits any employee of a Designated
Subsidiary to participate in the Plan, then all employees of
that Designated Subsidiary who meet the requirements of this
paragraph shall also be considered Eligible Employees.
"Enrollment Period" has the meaning set forth in Section
6.1.
"ESPP Broker" has the meaning set forth in Section 10.
"Offering" has the meaning set forth in Section 5.1.
"Offering Date" means the first day of an Offering.
"Offering Period" has the meaning set forth in Section
5.1.
"Option" means an option granted under the Plan to an
Eligible Employee to purchase shares of Stock.
"Parent Corporation" means any corporation, other than
the Company, in an unbroken chain of corporations ending with
the Company if, at the time of the granting of the Option,
each of the corporations, other than the Company, owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain.
"Participant" means any Eligible Employee who has elected
to participate in an Offering in accordance with the
procedures set forth in Section 6.1 and who has not withdrawn
from the Plan or whose participation in the Plan is not
terminated.
"Plan" means the Emeritus Corporation 1998 Employee Stock
Purchase Plan, as it may be amended from time to time.
"Plan Administrator" has the meaning set forth in Section
3.1.
"Purchase Date" means the last day of each Purchase
Period.
"Purchase Period" has the meaning set forth in Section
5.2.
"Purchase Price" has the meaning set forth in Section 8.
"Stock" means the Common Stock, $.01 par value per share,
of the Company.
"Subscription" has the meaning set forth in Section 6.1.
"Subsidiary Corporation" means any corporation, other
than the Company, in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of
the Option, each of the corporations, other than the last
corporation in the unbroken chain, owns stock possessing 50%
or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
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SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Company's Office of
Compensation and Benefits or any other Company group or
executive officer designated by the Board or the Committee,
except for those items expressly reserved to the Board or the
Committee under the Plan. Any decisions made by the Board,
the Committee or the Plan Administrator shall be applicable
equally to all Eligible Employees.
3.2 Administration and Interpretation by the Plan
Administrator
Subject to the provisions of the Plan, the Plan
Administrator shall have the authority, in its sole
discretion, to determine all matters relating to Options
granted under the Plan, including all terms, conditions,
restrictions and limitations of Options; provided, however,
that all Participants granted Options pursuant to the Plan
shall have the same rights and privileges within the meaning
of Code Section 423. The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to
time adopt, and change, rules and regulations of general
application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and
regulations, and all actions taken and determinations made by
the Plan. Administrator pursuant to the Plan, unless reserved
to the Board or the Committee, shall be conclusive and binding
on all parties involved or affected. The Plan Administrator
may delegate administrative duties to such of the Company's
other officers or employees as the Plan Administrator so
determines.
SECTION 4. STOCK SUBJECT TO PLAN
Subject to adjustment from time to time as provided in
Section 19, a maximum of 200,000 shares of Stock may be sold
under the Plan. Shares sold under the Plan shall be drawn
from authorized and unissued shares or shall be shares
acquired by the Company. Any shares of Stock subject to an
Option that cease to be subject to the Option (other than by
reason of exercise of the Option), including, without
limitation, in connection with the cancellation or termination
of the Option, shall again be available for sale in connection
with future grants of Options under the Plan.
SECTION 5. OFFERING DATES
5.1 Offering Periods
The Plan shall be implemented by a series of offerings
(each, an "Offering"). Except as otherwise set forth below,
each Offering shall commence on the first day of the month and
end on the last day of such month. The first offering period
(the "Offering Period") shall begin on July 1, 1998 and end on
July 31, 1998. Successive Offering Periods shall likewise
begin on the first day of the month and end on the last day of
such month. Notwithstanding the foregoing, the Board or the
Committee may establish (a) a different term for one or more
future Offerings and (b) different commencing and ending dates
for such Offerings; provided, however, that an Offering Period
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may not exceed five years; and provided, further, that if the
Purchase Price may be less than 85% of the fair market value
of the Stock on the Purchase Date, the Offering Period may not
exceed 27 months. In the event the first or the last day of
an Offering Period is not a regular business day, then the
first day of the Offering Period shall be deemed to be the
next regular business day and the last day of the Offering
Period shall be deemed to be the last preceding regular
business day. An employee who becomes eligible to participate
in the Plan after an Offering Period has commenced shall not
be eligible to participate in such Offering but may
participate in any subsequent Offering, provided that such
Eligible Employee is still an Eligible Employee as of the
commencement of any such subsequent Offering. Eligible
Employees may not participate in more than one Offering at a
time.
5.2 Purchase Periods
Each Offering Period shall consist of consecutive
purchase periods (each, a "Purchase Period"). Except as
otherwise set forth below, each Purchase Period shall continue
for one calendar month and shall be coterminous with an
Offering Period. The Purchase Period for the first Offering
shall commence on July 1, 1998 and end on July 31, 1998.
Successive Purchase Periods shall likewise commence on the
first day of the month and end on the last day of such month.
Notwithstanding the foregoing, the Board or the Committee may
establish for any future Offering (a) different terms for one
or more Purchase Periods within the Offering Period and (b)
different commencing dates and Purchase Dates for any such
Purchase Periods. The last day of each Purchase Period shall
be the Purchase Date for such Purchase Period. In the event
the first or last day of a Purchase Period is not a regular
business day, then the first day of the Purchase Period shall
be deemed to be the next regular business day and the last day
of the Purchase Period shall be deemed to be the last
preceding regular business day.
SECTION 6. PARTICIPATION IN THE PLAN
6.1 Initial Participation
An Eligible Employee shall become a Participant on the
first Offering Date after satisfying the eligibility
requirements and delivering to the Plan Administrator during
the enrollment period established by the Plan Administrator
(the "Enrollment Period") a subscription (the "Subscription"):
(a) indicating the Eligible Employee's election to
participate in the Plan;
(b) authorizing payroll deductions and stating the
amount to be deducted regularly from the Participant's pay;
and
(c) authorizing the purchase of Stock for the
Participant in each Purchase Period.
An Eligible Employee who does not deliver a Subscription
to the Plan Administrator during the Enrollment Period shall
not participate in the Plan for that Offering Period or any
subsequent Offering Period unless such Eligible Employee
subsequently enrolls in the Plan by delivering a Subscription
to the Plan Administrator during the Enrollment Period for
such subsequent Offering Period. The Plan Administrator may,
from time to time, change the Enrollment Period for any future
Offering as deemed advisable by the Plan Administrator in its
sole discretion for the proper administration of the Plan.
6.2 Continued Participation
Unless the Plan Administrator determines otherwise for
any future Offering, a Participant shall automatically
participate in the next Offering Period until such time as the
Participant withdraws from the Plan pursuant to Section 11.2
or terminates employment as provided in Section 12.
SECTION 7. LIMITATIONS ON RIGHT TO PURCHASE SHARES
7.1 $25,000 Limitation
No Participant shall be entitled to purchase Stock under
the Plan (or any other employee stock purchase plan that is
intended to meet the requirements of Code Section 423
sponsored by the Company, any Parent Corporation or any
Subsidiary Corporation) at a rate that exceeds $25,000 in fair
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market value, determined as of the Offering Date for each
Offering Period (or such other limit as may be imposed by the
Code), for each calendar year in which a Participant
participates in the Plan (or any other employee stock purchase
plan described in this Section 7.1).
7.2 Pro Rata Allocation
In the event the number of shares of Stock that might be
purchased by all Participants in the Plan exceeds the number
of shares of Stock available in the Plan, the Plan
Administrator shall make a pro rata allocation of the
remaining shares of Stock in as uniform a manner as shall be
practicable and as the Plan Administrator shall determine to
be equitable. Fractional shares may be issued under the Plan
unless the Board or the Committee determines otherwise.
SECTION 8. PURCHASE PRICE
The purchase price (the "Purchase Price") at which Stock
may be acquired in an Offering pursuant to the exercise of all
or any portion of an Option granted under the Plan shall be
the fair market value of the Stock on the Purchase Date.
Notwithstanding the foregoing, the Board or the Committee may
establish a different Purchase Price for any future Offering,
which shall not be less than 85% of the lesser of (a) the fair
market value of the Stock on the Offering Date of such
Offering and (b) the fair market value of the Stock on the
Purchase Date. The fair market value of the Stock on the
Offering Date or on the Purchase Date shall be the closing
price for the Stock as reported for such day by the American
Stock Exchange. If no sales of the Stock were made on the
American Stock Exchange on the transaction date, fair market
value shall mean the closing price for the Stock as reported
for the next preceding day on which sales of the Stock were
made on the American Stock Exchange.
SECTION 9. PAYMENT OF PURCHASE PRICE
9.1 General Rules
Subject to Section 9.12, stock that is acquired pursuant
to the exercise of all or any portion of an Option may be paid
for only by means of payroll deductions from the Participant's
Eligible Compensation. Except as set forth in this Section 9,
the amount of compensation to be withheld from a Participant's
Eligible Compensation during each pay period shall be
determined by the Participant's Subscription.
9.2 Change Notices
Except as set forth in Section 11.1 and unless the Plan
Administrator determines otherwise for an Offering, a
Participant may not elect during an Offering Period to
increase or decrease the amount withheld from his or her
compensation for future pay periods within such Offering
Period. Unless otherwise determined by the Plan Administrator
for a future Offering, a Participant may elect to increase or
decrease the amount to be withheld from his or her
compensation for future Offerings; provided, however, that
notice of such election must be delivered to the Plan
Administrator in such form and in accordance with such terms
as the Plan Administrator may establish for an Offering.
9.3 Percent Withheld
The amount of payroll withholding with respect to the
Plan for any Participant during any pay period shall be at
least 1% of the Participant's Eligible Compensation for such
pay period, but shall not exceed 15% of the Participant's
Eligible Compensation for such pay period. Amounts shall be
withheld only in whole percentages.
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9.4 Payroll Deductions
Payroll deductions shall commence on the first payday
following the Offering Date and shall continue through the
last payday of the Offering Period unless sooner altered or
terminated as provided in the Plan.
9.5 Memorandum Accounts
Individual accounts shall be maintained for each
Participant for memorandum purposes only. All payroll
deductions from a Participant's compensation shall be credited
to such account but shall be deposited with the general funds
of the Company. All payroll deductions received or held by
the Company may be used by the Company for any corporate
purpose.
9.6 No Interest
No interest shall be paid on payroll deductions received
or held by the Company.
9.7 Acquisition of Stock
On each Purchase Date of an Offering Period, each
Participant shall automatically acquire, pursuant to the
exercise of the Participant's Option, the number of shares of
Stock arrived at by dividing the total amount of the
Participant's accumulated payroll deductions for the Purchase
Period by the Purchase Price; provided, however, that the
number of shares of Stock purchased by the Participant shall
not exceed the number of whole shares of Stock so determined,
if the Board or the Committee has determined for any future
Offering that fractional shares may not be issued under the
Plan.
9.8 Carryover of Account
Any cash balance remaining in the Participant's account
at the termination of each Offering shall be refunded to the
Participant as soon as practical after the Purchase Date
without the payment of any interest; provided, however, that
if the Participant participates in the next Offering, any cash
balance remaining in the Participant's account shall be
applied to the purchase of Stock in the new Offering, provided
such purchase complies with Section 7.1.
9.9 Withholding Obligations
At the time the Option is exercised, in whole or in part,
or at the time some or all of the Stock is disposed of, the
Participant shall make adequate provision for federal and
state withholding obligations of the Company, if any, that
arise upon exercise of the Option or upon disposition of the
Stock. The Company may withhold from the Participant's
compensation the amount necessary to meet such withholding
obligations.
9.10 Termination of Participation
No Stock shall be purchased on behalf of a Participant on
a Purchase Date if his or her participation in the Plan has
terminated prior to such Purchase Date.
9.11 Procedural Matters
The Plan Administrator may, from time to time, establish
(a) limitations on the frequency and/or number of any
permitted changes in the amount withheld during an Offering,
(b) an exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, (c) payroll withholding in
excess of the amount designated by a Participant in order to
adjust for delays or mistakes in the Company's processing of
properly completed withholding elections, and (d) such other
limitations or procedures as deemed advisable by the Plan
Administrator, in its sole discretion, that are consistent
with the Plan and in accordance with the requirements of Code
Section 423.
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9.12 Leaves of Absence
During leaves of absence approved by the Company and
meeting the requirements of the applicable Treasury
Regulations promulgated under the Code, a Participant may
continue participation in the Plan by delivering cash payments
to the Plan Administrator on the Participant's normal paydays
equal to the amount of his or her payroll deduction under the
Plan had the Participant not taken a leave of absence.
SECTION 10. STOCK PURCHASED UNDER THE PLAN
10.1 ESPP Broker
If the Plan Administrator designates or approves a stock
brokerage or other financial services firm (the "ESPP Broker")
to hold shares purchased under the Plan for the accounts of
Participants, the following procedures shall apply. Promptly
following each Purchase Date, the number of shares of Stock
purchased by each Participant shall be deposited into an
account established in the Participant's name with the ESPP
Broker. A Participant shall be free to undertake a
disposition of the shares of Stock in his or her account at
any time, but, in the absence of such a disposition, the
shares of Stock must remain in the Participant's account at
the ESPP Broker until the holding period set forth in Code
Section 423 has been satisfied. With respect to shares of
Stock for which the Code Section 423 holding periods have been
satisfied, the Participant may move those shares of Stock to
another brokerage account of the Participant' s choosing or
request that a stock certificate be issued and delivered to
him or her. A Participant who is not subject to payment of
U.S. income taxes may move his or her shares of Stock to
another brokerage account of his or her choosing or request
that a stock certificate be delivered to him or her at any
time, without regard to the Code Section 423 holding period.
10.2 Notice of Disposition
By entering the Plan, each Participant agrees to promptly
give the Company notice of any Stock disposed of within the
later of one year from the Purchase Date and two years from
the Offering Date for such Stock, showing the number of such
shares disposed of and the Purchase Date and Offering Date for
such Stock. This notice shall not be required if and so long
as the Company has a designated ESPP Broker.
SECTION 11. VOLUNTARY WITHDRAWAL
11.1 Withdrawal From an Offering
A Participant may withdraw from an Offering by delivering
to the Plan Administrator a notice of withdrawal in the form
required by the Plan Administrator for such purpose. Such
withdrawal must be elected at least ten days prior to the end
of the Purchase Period for which such withdrawal is to be
effective or by any other date specified by the Plan
Administrator for any future Offering. If a Participant
withdraws after the Purchase Date for a Purchase Period of an
Offering, the withdrawal shall not affect Stock acquired by
the Participant in that Purchase Period and any earlier
Purchase Periods. Unless the Plan Administrator establishes a
different rule for any future Offering, withdrawal from an
Offering shall not result in withdrawal from the Plan and any
succeeding Offering therein. A Participant is prohibited from
again participating in the same Offering at any time upon
withdrawal from such Offering.
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11.2 Withdrawal From the Plan
A Participant may withdraw from the Plan by delivering to
the Plan Administrator a notice of withdrawal in the form
required by the Plan Administrator for such purpose. Such
notice must be delivered at least ten days prior to the end of
the Purchase Period for which such withdrawal is to be
effective or by any other date specified by the Plan
Administrator for any future Offering. If a Participant
withdraws after the Purchase Date for a Purchase Period of an
Offering, the withdrawal shall not affect Stock acquired by
the Participant in that Purchase Period and any earlier
Purchase Periods. In the event a Participant voluntarily
elects to withdraw from the Plan, the withdrawing Participant
may not resume participation in the Plan during the same
Offering Period but may participate in any subsequent Offering
under the Plan by again satisfying the definition of a
Participant.
11.3 Return of Payroll Deductions
Upon withdrawal from an Offering pursuant to Section 11.1
or withdrawal from the Plan pursuant to Section 11.2, the
withdrawing Participant's accumulated payroll deductions that
have not been applied to the purchase of Stock shall be
returned as soon as practical after the withdrawal, without
the payment of any interest, to the Participant and the
Participant's interest in the Offering shall terminate. Such
accumulated payroll deductions may not be applied to any other
Offering and the Plan under the Plan.
SECTION 12. TERMINATION OF EMPLOYMENT
Termination of a Participant's employment with the
Company for any reason, including retirement, disability or
death, or the failure of a Participant to remain an Eligible
Employee, shall immediately terminate the Participant's
participation in the Plan. The payroll deductions credited to
the Participant's account since the last Purchase Date shall,
as soon as practical, be returned to the Participant or, in
the case of a Participant's death, to the Participant's legal
representative, and all the Participant's rights under the
Plan shall terminate. Interest shall not be paid on sums
returned to a Participant pursuant to this Section 12.
SECTION 13. RESTRICTIONS UPON ASSIGNMENT
An Option granted under the Plan shall not be
transferable otherwise than by will or by the applicable laws
of descent and distribution and shall be exercisable during
the Participant's lifetime only by the Participant. The Plan
Administrator will not recognize, and shall be under no duty
to recognize, any assignment or purported assignment by a
Participant, other than by will or by the applicable laws of
descent and distribution, of the Participant's interest in the
Plan, of his or her Option, or of any rights under his or her
Option.
SECTION 14. NO RIGHTS OF SHAREHOLDER UNTIL SHARES
ISSUED
With respect to shares of Stock subject to an Option, a
Participant shall not be deemed to be a shareholder of the
Company, and he or she shall not have any of the rights or
privileges of a shareholder. A Participant shall have the
rights and privileges of a shareholder of the Company when,
but not until, the shares have been issued following exercise
of the Participant's Option.
SECTION 15. AMENDMENT OF THE PLAN
The Board or the Committee may amend the Plan in such
respects as it shall deem advisable; provided, however, that,
to the extent required for compliance with Code Section 423 or
any applicable law or regulation, shareholder approval will be
required for any amendment that will (a) increase the total
number of shares as to which Options may be granted under the
Plan, (b) modify the class of employees eligible to receive
Options, or (c) otherwise require shareholder approval under
any applicable law or regulation.
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SECTION 16. TERMINATION OF THE PLAN
The Board may suspend or terminate the Plan at any time.
Unless the Plan shall theretofore have been terminated by the
Board, the Plan shall terminate on, and no Options shall be
granted after May 20, 2008, except that such termination shall
have no effect on Options granted prior thereto. No Options
shall be granted during any period of suspension of the Plan.
SECTION 17. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person
(including any Eligible Employee or Participant) the right to
remain in the employ of the Company or a Subsidiary
Corporation or to affect the right of the Company and the
Subsidiary Corporations to terminate the employment of any
person (including any Eligible Employee or Participant) at any
time with or without cause.
SECTION 18. EFFECT UPON OTHER PLANS
The adoption of the Plan shall not affect any other
compensation or incentive plans in effect for the Company or
any Subsidiary Corporation. Nothing in the Plan shall be
construed to limit the right of the Company or any Subsidiary
Corporation to (a) establish any other forms of incentives or
compensation for employees of the Company or any Subsidiary
Corporation or (b) grant or assume options otherwise than
under the Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or
association.
SECTION 19. ADJUSTMENTS
19.1 Adjustment of Shares
In the event that, at any time or from time to time, a
stock dividend, stock split, spin-off, combination or exchange
of shares, recapitalization, merger, consolidation,
distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or
capital structure results in (a) the outstanding shares, or
any securities exchanged therefor or received in their place,
being exchanged for a different number or class of securities
of the Company or of any other corporation or (b) new,
different or additional securities of the Company or of any
other corporation being received by the holders of shares of
Stock, then (subject to any required action by the Company's
shareholders), the Board or the Committee, in its sole
discretion, shall make such equitable adjustments as it shall
deem appropriate in the circumstances in (i) the maximum
number and kind of securities subject to the Plan as set forth
in Section 4 and (ii) the number and kind of securities that
are subject to any outstanding Option and the per share price
of such securities. The determination by the Board or the
Committee as to the terms of any of the foregoing adjustments
shall be conclusive and binding.
19.2 Merger, Acquisition or Liquidation of the Company
In the event of the merger or consolidation of the
Company into another corporation, the acquisition by another
corporation of all or substantially all of the Company's
assets, or the liquidation or dissolution of the Company, the
Purchase Date with respect to outstanding Options shall be the
business day immediately preceding the effective date of such
merger, consolidation, acquisition, liquidation or dissolution
unless the Board or the Committee shall, in its sole
discretion, provide for the assumption or substitution of such
Options in a manner complying with Code Section 424(a).
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19.3 Limitations
The grant of Options will in no way affect the Company's
right to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its
business or assets.
SECTION 20. REGISTRATION
The Company shall be under no obligation to any
Participant to register for offering or resale under the
Securities Act of 1933, as amended, or register or qualify
under state securities laws, any shares of Stock. The Company
may issue certificates for shares with such legends and
subject to such restrictions on transfer and stoptransfer
instructions as counsel for the Company deems necessary or
desirable for compliance by the Company with federal and state
securities laws.
SECTION 21. EFFECTIVE DATE
The Plan's effective date is the date on which it is
approved by the Company's shareholders.
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