<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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 Rule 14a-12
Sunrise Assisted Living, Inc.
- --------------------------------------------------------------------------------
(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee 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.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SUNRISE ASSISTED LIVING, INC.
7902 WESTPARK DRIVE
MCLEAN, VA 22102
(703) 273-7500
April 14, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 annual meeting of stockholders
of Sunrise Assisted Living, Inc. to be held on Friday, May 12, 2000, at 9:00
a.m., at The Ritz-Carlton -- Tysons Corner, 1700 Tysons Boulevard, McLean,
Virginia.
The annual meeting has been called for the following purposes:
- to elect two directors for terms of three years each;
- to approve the 2000 stock option plan; and
- to transact such other business as may properly come before the
annual meeting or any adjournments or postponements.
It is important that your shares be represented at the annual meeting.
Whether or not you plan to attend the annual meeting, you are requested to
complete, date, sign and return the enclosed proxy card in the enclosed
postage-paid envelope.
Very truly yours,
/s/ PAUL J. KLAASSEN
Paul J. Klaassen
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
SUNRISE ASSISTED LIVING, INC.
7902 WESTPARK DRIVE
MCLEAN, VA 22102
(703) 273-7500
----------------
NOTICE TO ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 2000
----------------
NOTICE IS HEREBY GIVEN that the 2000 annual meeting of stockholders of
Sunrise Assisted Living, Inc. will be held at The Ritz-Carlton -- Tysons Corner,
1700 Tysons Boulevard, McLean, Virginia on Friday, May 12, 2000 at 9:00 a.m.,
for the following purposes:
(1) To elect two directors of Sunrise for three-year terms and until their
successors shall have been elected and qualified;
(2) To approve the 2000 stock option plan; and
(3) To transact such other business as may properly come before the
meeting or any adjournments or postponements.
The board of directors has fixed March 13, 2000 as the record date for the
determination of stockholders entitled to notice of and to vote at the annual
meeting and any adjournments or postponements. Only stockholders of record at
the close of business on that date are entitled to notice and to vote at the
annual meeting. All stockholders are cordially invited to attend the annual
meeting.
In the event that there are not sufficient votes to approve any one or more
of the foregoing proposals at the time of the annual meeting, the annual meeting
may be adjourned or postponed to permit further solicitation of proxies by
Sunrise.
By order of the board of directors
/s/ PAUL J. KLAASSEN
Paul J. Klaassen
Chairman of the Board
and Chief Executive Officer
McLean, Virginia
April 14, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING PRE-ADDRESSED,
POSTAGE-PAID ENVELOPE. YOUR PROXY MAY BE REVOKED PRIOR TO THE VOTING BY FILING
WITH THE SECRETARY OF SUNRISE A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE OR BY ATTENDING THE ANNUAL MEETING AND VOTING IN PERSON.
<PAGE> 4
SUNRISE ASSISTED LIVING, INC.
7902 WESTPARK DRIVE
MCLEAN, VA 22102
(703) 273-7500
----------------
PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 2000
----------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This proxy statement is furnished to stockholders of Sunrise Assisted
Living, Inc. in connection with the solicitation by the board of directors of
Sunrise of proxies to be used at the 2000 annual meeting of stockholders, to be
held at The Ritz-Carlton -- Tysons Corner, 1700 Tysons Boulevard, McLean,
Virginia on Friday, May 12, 2000 at 9:00 a.m., and at any adjournments or
postponements.
If the enclosed form of proxy is properly executed and returned to Sunrise
in time to be voted at the annual meeting, the shares represented by the proxy
will be voted consistent with the instructions marked on the proxy. EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED (a) FOR THE ELECTION OF THE BOARD OF DIRECTORS'
TWO NOMINEES AS DIRECTORS AND (b) FOR APPROVAL OF THE 2000 STOCK OPTION PLAN. If
any other matters are properly brought before the annual meeting, the persons
named in the accompanying proxy will vote the shares represented by the proxies
on the other matters as determined by a majority of Sunrise's board of
directors. The presence of a stockholder at the annual meeting will not
automatically revoke a stockholder's proxy. Stockholders may, however, revoke a
proxy at any time prior to its exercise by filing with the secretary of Sunrise
a written revocation or a duly executed proxy bearing a later date or by
attending the annual meeting and voting in person.
Sunrise will pay for the cost of soliciting proxies. In addition to
soliciting proxies by mail, Sunrise, through its directors, officers and regular
employees, may also solicit proxies personally or by telephone or telegraph.
Sunrise also will request persons, firms and corporations holding shares in
their names, or in the name of their nominees, to send proxy materials to and
obtain proxies from beneficial owners and will reimburse these holders for their
reasonable expenses in so doing. Sunrise also has retained Corporate Investor
Communications, Inc., a proxy soliciting firm, to assist in soliciting proxies.
Sunrise will pay Corporate Investor Communications a fee of $3,000, plus
<PAGE> 5
reimbursement of out-of-pocket expenses. It is anticipated that this proxy
statement will be mailed to stockholders on or about April 14, 2000.
The securities which can be voted at the annual meeting consist of shares
of common stock of Sunrise, par value $.01 per share. Each share entitles its
owner to one vote on all matters. Sunrise's certificate of incorporation does
not provide for cumulative voting in the election of directors. The close of
business on March 13, 2000 has been fixed by the board of directors as the
record date for determination of stockholders entitled to vote at the annual
meeting. The number of shares of common stock outstanding on that date was
21,938,894.
The presence, in person or by proxy, of at least a majority of the
outstanding shares of common stock is necessary to constitute a quorum at the
annual meeting. Stockholders' votes will be tabulated by the persons appointed
by the board of directors to act as inspectors of election for the annual
meeting. Abstentions and broker non-votes will be treated as shares that are
present, in person or by proxy, and entitled to vote for purposes of determining
the presence of a quorum at the annual meeting. Broker non-votes will not be
counted as a vote cast or entitled to vote on any matter presented at the annual
meeting. Abstentions will have the same effect as a negative vote on Proposal 2.
A copy of Sunrise's annual report to stockholders for the year ended
December 31, 1999 accompanies this proxy statement. SUNRISE IS REQUIRED TO FILE
AN ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 WITH THE SEC.
STOCKHOLDERS MAY OBTAIN, FREE OF CHARGE, A COPY OF SUNRISE'S 1999 ANNUAL REPORT
ON FORM 10-K, WITHOUT EXHIBITS, BY WRITING TO SUNRISE ASSISTED LIVING, INC.,
7902 WESTPARK DRIVE, MCLEAN, VA 22102, ATTENTION: CORPORATE SECRETARY. SUNRISE
WILL PROVIDE COPIES OF THE EXHIBITS TO THE FORM 10-K UPON PAYMENT OF A
REASONABLE FEE.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Sunrise's certificate of incorporation provides for a minimum of two
directors and a maximum of 11 directors. The board of directors of Sunrise
currently consists of eight members. The directors are divided into three
classes, each consisting of approximately one-third of the total number of
directors. In general, the term of office of only one class expires in each year
and their successors are elected for terms of three years and until their
successors are elected and qualified. At the annual meeting, two directors will
be elected, each for a three-year term. As described below, the board of
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<PAGE> 6
directors' nominees are Thomas J. Donohue and David W. Faeder. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE BOARD OF DIRECTORS' TWO NOMINEES FOR
ELECTION AS DIRECTORS.
Unless otherwise specified on the proxy, it is the intention of the
persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as directors of Messrs. Donohue and Faeder for
three-year terms. The board of directors believes that these nominees will stand
for election and will serve if elected as directors. However, if any person
nominated by the board of directors fails to stand for election or is unable to
accept election, the proxies will be voted for the election of another person or
persons as a majority of Sunrise's board of directors may recommend. Under
Sunrise's bylaws, directors are elected by plurality vote.
INFORMATION AS TO NOMINEES AND OTHER DIRECTORS
The following table sets forth certain information regarding the board of
directors' two nominees for election as directors and those directors who will
continue to serve as directors after the annual meeting.
<TABLE>
<CAPTION>
AGE AT
MARCH 13, DIRECTOR FOR TERM POSITION(s) HELD
2000 SINCE (1) TO EXPIRE WITH SUNRISE
--------- --------- --------- -------------------------
<S> <C> <C> <C> <C>
NOMINEES:
Thomas J. Donohue 61 1995 2003 Director
David W. Faeder 43 1993 2003 Vice Chairman of the
Board and Director
TERM
EXPIRES
-------
CONTINUING DIRECTORS:
Ronald V. Aprahamian 53 1995 2002 Director
David G. Bradley 47 1997 2002 Director
Teresa M. Klaassen (2) 44 1981 2002 Executive Vice President,
Secretary and Director
Craig R. Callen 44 1999 2001 Director
Paul J. Klaassen (2) 42 1981 2001 Chairman of the Board
and Chief Executive
Officer
Richard R. Slager 46 1999 2001 Director
</TABLE>
3
<PAGE> 7
- ----------
(1) The dates shown reflect the year in which these persons were first elected
as directors of Sunrise or its predecessors.
(2) Paul J. Klaassen and Teresa M. Klaassen are related as husband and wife.
The principal occupations for the past five years of each of the two
nominees for director and the six directors whose terms of office will continue
after the annual meeting are set forth below.
THOMAS J. DONOHUE is president and chief executive officer of the U.S.
Chamber of Commerce. From 1984 to September 1997 he was president and chief
executive officer of the American Trucking Association, the national trade
organization of the trucking industry. Mr. Donohue is a director of: Marymount
University; the National Football League Alumni Association; IPAC, an
international consulting firm; Newmyer Associates, a Washington, D.C. firm that
tracks and analyzes public policy; and The Hudson Institute. In addition, Mr.
Donohue served on the President's Commission on Intermodal Transportation.
DAVID W. FAEDER served as executive vice president and chief financial
officer of Sunrise and its predecessor entities from 1993 to 1997. He was named
president of Sunrise in July 1997, and served in that position until April 2000.
Mr. Faeder was elected vice chairman of the Sunrise board, effective April 2000.
From 1991 to 1993, Mr. Faeder was a vice president of CS First Boston
Corporation, serving in both the investment banking and fixed income
departments. From 1984 to 1991, Mr. Faeder served as a vice president of Morgan
Stanley, where he worked in the Real Estate Capital Markets Group. Mr. Faeder is
a director of IBS Interactive, Inc., a technology company.
RONALD V. APRAHAMIAN served as chairman of the board and chief executive
officer of The Compucare Company, a health care information technology company,
from 1988 until October 1996. From May 1997 to September 1998, he was a
consultant to Sunrise. Mr. Aprahamian also is a director of Metrocall, Inc., a
paging company.
DAVID G. BRADLEY is chairman and owner of the Advisory Board Company, a
750-person think tank and for-profit membership association in Washington, D.C.,
and owner of the National Journal, a Washington, D.C.-based public policy
magazine. He also serves on the boards of directors of Georgetown University, MD
Anderson Cancer Center, City of Hope National Medical Center and The Wolf Trap
Foundation. Mr. Bradley previously worked
4
<PAGE> 8
at the White House, the White House Conference on Children and Youth and the
Wall Street law firm of Cravath, Swaine & Moore.
TERESA M. KLAASSEN, a co-founder of Sunrise, has served as executive vice
president and secretary of Sunrise and its predecessor entities since 1981. Ms.
Klaassen is a founding member of the Assisted Living Federation of America, the
largest assisted living trade association, and currently serves on the boards of
directors of several long-term care organizations.
CRAIG R. CALLEN has been a managing director and co-head of Health Care
Investment Banking at Donaldson, Lufkin & Jenrette Securities Corporation, a
subsidiary of Donaldson Lufkin & Jenrette, Inc., since 1994. Mr. Callen began
his career with Donaldson, Lufkin & Jenrette Securities Corporation in 1984 and
has advised health care companies exclusively since 1989. Mr. Callen is a
graduate of Boston University and the Harvard University Graduate School of
Business Administration.
PAUL J. KLAASSEN, a co-founder of Sunrise, has served as chairman of the
board and chief executive officer of Sunrise and its predecessor entities since
1981. He also served as president of Sunrise and its predecessor entities from
1981 through July 1997. Mr. Klaassen is the founding chairman of the Assisted
Living Federation of America. He is a director of: ACSYS, Inc., an accounting
and staffing firm; the Advisory Board Company; the U.S. Chamber of Commerce; and
The National Chamber Foundation, an independent, nonprofit, public policy
research organization affiliated with the U.S. Chamber of Commerce. He also is
on the Board of Trustees of Marymount University and The Hudson Institute, a
public policy think tank, and the Advisory Committee for the Department of
Health Care Policy at Harvard University Medical School. Mr. Klaassen also
serves on the editorial advisory boards of Contemporary Long Term Care,
Retirement Housing Report, Assisted Living Today and Assisted Living Briefing
magazines.
RICHARD R. SLAGER, is an independent business consultant and entrepreneur
in the health and long-term care fields. He was a co-founder of Karrington
Health, Inc., a Midwest-based assisted living company operating 46 homes. Mr.
Slager served as the chief executive officer of Karrington Health, Inc. from its
formation in 1990, and as its chairman of the board from April 1996 until May
1999, when it was purchased by Sunrise. On May 14, 1999, Sunrise completed its
acquisition of Karrington Health, Inc. Pursuant to the merger agreement, Sunrise
appointed Mr. Slager to Sunrise's board of directors as the representative of
JMAC, Inc., Karrington's largest stockholder. As long as JMAC, Inc. continues to
beneficially own at least 500,000 shares of Sunrise common stock, Sunrise has
agreed to re-nominate Mr. Slager, or another nominee of JMAC, Inc. reasonably
acceptable to Sunrise's directors, and solicit
5
<PAGE> 9
proxies for his reelection as a director of Sunrise. Also in May 1999, Mr.
Slager was selected as the second chairman of the Assisted Living Federation of
America, having been the founding chairman of the Ohio Assisted Living
Association. He previously served as president and chief executive officer of
Intermed, Inc., an Ohio-based nursing home company after having practiced law
with the Columbus, Ohio-based law firm of Bricker & Eckler. Mr. Slager has
served on numerous local and national editorial advisory and long-term care
boards and panels.
OTHER EXECUTIVE OFFICERS
The principal occupation during the past five years of Sunrise's other
executive officers follows:
CHRISTIAN B.A. SLAVIN, 42, has served as an executive vice president of
Sunrise since May 1999, and served as chief financial officer from May 1999
until April 1, 2000. Effective April 1, 2000, he became president of Sunrise's
properties division. From 1994 to May 1999, Mr. Slavin was director of
Prudential Securities, Inc., working both in real estate investment banking and
mergers and acquisitions. Previously, he operated a mid-size fully integrated
industrial real estate concern and a third party warehousing and logistics
company.
THOMAS B. NEWELL, 42, served as general counsel of Sunrise and president of
Sunrise Development, Inc., Sunrise's development subsidiary, from January 1996
until April 1, 2000, and as an executive vice president of Sunrise from May 1996
until April 1, 2000. He was elected president of Sunrise, effective April 1,
2000. From 1989 to January 1996, Mr. Newell was a partner with the law firm of
Watt Tieder & Hoffar, where his practice concentrated on all aspects of
commercial and real estate development transactions and where he represented
Sunrise for more than five years.
BRIAN C. SWINTON, 54, has served as an executive vice president since May
1996. Effective April 1, 2000, he began serving as president of Sunrise's
ventures division. From January 1994 to April 1996, Mr. Swinton was a senior
vice president of Forum Group, Inc., a developer and operator of retirement
communities and assisted living facilities, where his responsibilities included
marketing, sales and product development. From 1986 to 1994, Mr. Swinton served
as vice president, sales, marketing and product development at Marriott
International, where he was responsible for designing, developing, marketing and
the initial operations of the Brighton Gardens assisted living concept.
TIFFANY L. TOMASSO, 37, has served as an executive vice president since
March 1998 and, effective April 1, 2000, she began serving as president of
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<PAGE> 10
Sunrise's management services division. She joined Sunrise in 1993 as regional
vice president in charge of developing assisted living facilities in New Jersey,
Pennsylvania and Delaware, and was promoted in 1994 to senior vice president.
Before 1993, Ms. Tomasso was vice president of operations for assisted living
and healthcare at Presbyterian Homes of New Jersey. She previously served in a
variety of long-term care administrator positions in facilities owned by HBA
Management, Inc.
Executive officers are elected annually and serve at the discretion of the
board of directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS AND NOMINATIONS BY
STOCKHOLDERS
During 1999, Sunrise's board of directors held five regular meetings and
three special meetings. For the 1999 period, no director attended less than 75
percent of (a) the total number of meetings held by the board of directors and
(b) the total number of meetings held by all committees of the board of
directors on which the director served. Sunrise has the following standing
committees of its board of directors:
Executive Committee. The members of the executive committee are Messrs.
Klaassen and Faeder and Ms. Klaassen. The executive committee has been delegated
all of the powers of the board of directors, when the board of directors is not
in session, to the extent permitted under the Delaware General Corporation Law.
The executive committee did not hold any meetings during 1999.
Audit Committee. The members of the audit committee are Messrs. Aprahamian,
Donohue and Callen, all of whom are non-employee directors. The audit committee
makes recommendations concerning the engagement of Sunrise's independent
auditors, reviews the results and scope of the annual audit and other services
provided by Sunrise's independent auditors and reviews the adequacy of Sunrise's
internal accounting controls. The audit committee held two meetings during 1999.
Compensation Committee. The members of the compensation committee are
Messrs. Aprahamian, Callen and Donohue, all of whom are non-employee directors.
The compensation committee makes recommendations to the full board of directors
concerning salary and bonus compensation and benefits for executive officers of
Sunrise. The compensation committee held five meetings during 1999.
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<PAGE> 11
Stock Option Committee. The members of the stock option committee are
Messrs. Bradley, Callen and Donohue, all of whom are non-employee directors. The
stock option committee has the power and authority to take all actions and make
all determinations under Sunrise's stock option plans, including the grant of
options. The stock option committee held six meetings during 1999.
The entire board of directors of Sunrise acts as a nominating committee for
selecting management's nominees for election as directors and has made its
nominations for the annual meeting. Sunrise's bylaws require that stockholder
nominations for directors be made by timely notice in writing to the secretary
of Sunrise. To be timely, notice must be delivered to, or mailed to and received
at, the principal executive offices of Sunrise not less than 60 days prior to
the meeting. However, if less than 75 days notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received no later than the close of business on
the 15th day following the day on which notice of the date or public disclosure
was made. Public notice of the expected date of the annual meeting was made on
March 8, 2000 by the issuance of a press release and on March 9, 2000 by the
filing of a current report on Form 8-K with the SEC. The annual meeting date
subsequently was rescheduled from April 28, 2000 to May 12, 2000 because of
delays in printing the annual report to stockholders due to revisions made to
reflect the Company's recent reorganization into three separate divisions and to
permit additional time for the solicitation of proxies for the annual meeting. A
stockholder's notice of nomination must set forth information specified in
Sunrise's bylaws concerning each person the stockholder proposes to nominate for
election and the nominating stockholder. No nominations by stockholders were
received at the time of mailing of this proxy statement. Sunrise's bylaws
provide that no person may be elected as a director unless nominated in
accordance with the procedures set forth in the bylaws.
COMPENSATION OF DIRECTORS
Non-employee directors are reimbursed for expenses incurred in attending
meetings of the board of directors. No fees are paid for attendance at board or
committee meetings.
In 1999, Messrs. Aprahamian, Bradley and Donohue each received grants of
ten-year non-qualified stock options for 5,000 shares of common stock at an
exercise price of $41.25 per share under Sunrise's 1996 directors' stock option
plan, as amended. Mr. Callen received an initial option grant in 1999 for 10,000
shares of common stock at an exercise price of $41.25 per share. Mr. Slager also
received an initial option grant in 1999 for 10,000 shares of common stock at an
exercise price of $36.50 per share. An aggregate of 75,000 shares of common
stock were reserved for issuance under the 1996
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<PAGE> 12
directors' stock option plan, as amended. As of December 31, 1999, no shares
remained available for grant under the plan. Directors also are eligible to
receive option grants under the 1999 stock option plan and will be eligible to
receive option grants under the 2000 stock option plan if the plan is approved
by the stockholders.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth, for the years ended December 31, 1999, 1998
and 1997, the cash compensation paid by Sunrise, as well as other compensation
paid or accrued during those years, to Sunrise's chief executive officer and
each of the other four most highly compensated executive officers whose total
annual salary and bonus exceeded $100,000 in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION/
AWARDS
SHARES OF
COMMON
ANNUAL COMPENSATION STOCK ALL OTHER
------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION(s)(1) YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(2)
- --------------------------------- ---- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Paul J. Klaassen 1999 $200,000 $75,000 N/A $-0-
Chairman of the Board 1998 200,000 -- N/A -0-
and Chief Executive Officer 1997 200,000 -- N/A 942
David W. Faeder(4) 1999 175,000 75,000 65,000 -0-
Vice Chairman of the Board 1998 175,000 -- 400,000(3) -0-
1997 175,000 -- 100,000 838
Thomas B. Newell (5) 1999 175,000 75,000 65,000 -0-
President 1998 175,000 -- 400,000(3) -0-
1997 175,000 -- 100,000 -0-
Brian C. Swinton(6) 1999 165,000 50,000 40,000 -0-
Executive Vice President and 1998 165,000 -- 200,000(3) -0-
President of Ventures Division 1997 165,000 -- 75,000 -0-
Tiffany L.Tomasso(7) 1999 165,000 50,000 65,000 -0-
Executive Vice President 1998 165,000 -- 430,000(3) -0-
and President of Management 1997 -- -- -- --
Services Division
</TABLE>
- ----------
(1) Reflects current positions held.
(2) Represents matching contributions made by Sunrise under its 401(k) plan in
1998 and 1997. Sunrise did not make matching contributions in 1999.
(3) Includes options repriced in 1998.
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<PAGE> 13
(4) Mr. Faeder was elected vice chairman of the Sunrise board effective April
2000.
(5) Mr. Newell was elected president of Sunrise, effective April 1, 2000.
(6) Mr. Swinton became president of Sunrise's ventures division, effective
April 1, 2000.
(7) Ms. Tomasso joined Sunrise in June 1993 and was promoted to executive vice
president, operations in March 1998. Ms. Tomasso became president of
Sunrise's management services division, effective April 1, 2000.
OPTION GRANTS
The following table contains certain information with respect to stock
options granted in 1999 to each of the named executive officers of Sunrise. All
options granted in 1999 were ten-year non-qualified options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF POTENTIAL REALIZABLE
SHARES OF TOTAL VALUE AT ASSUMED
COMMON OPTIONS ANNUAL RATES OF
STOCK GRANTED TO EXERCISE STOCK PRICE
UNDERLYING EMPLOYEES OR BASE APPRECIATION FOR
OPTION IN FISCAL PRICE EXPIRATION OPTION TERM
NAME GRANTED YEAR ($/SH) DATE 5% ($) 10% ($)
---- ----------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Paul J. Klaassen -0- -0-% $ -- -- $ -0- $ -0-
David W. Faeder 65,000(1) 4.1 12.75 11/08/09 527,814 1,331,351
Thomas B. Newell 65,000(1) 4.1 12.75 11/08/09 527,814 1,331,351
Brian C. Swinton 40,000(1) 2.5 12.75 11/08/09 324,808 819,293
Tiffany L. Tomasso 65,000(1) 4.1 12.75 11/08/09 527,814 1,331,351
</TABLE>
- ----------
(1) These options vest over a four-year period. Vesting is accelerated if the
options are not assumed in connection with any dissolution or liquidation
of Sunrise, the sale of substantially all of Sunrise's assets, a merger,
reorganization or consolidation in which Sunrise is not the surviving
corporation or any other transaction (including, without limitation, a
merger or reorganization in which Sunrise is the surviving corporation)
approved by the Board which results in any person or entity owning 80% or
more of the total combined voting power of all classes of stock of Sunrise.
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<PAGE> 14
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to each of the
named executive officers of Sunrise concerning the exercise of stock options
during 1999, the number of securities underlying unexercised options at the 1999
year-end and the 1999 year-end value of all unexercised in-the-money options
held by such individuals.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS(#) IN-THE-MONEY OPTIONS($)(1)
ACQUIRED ON VALUE ------------------------- ---------------------------
NAME EXERCISE (#) REALIZED($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ -------------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Paul J. -- $ -0- -0- -0- $ -0- $ -0-
Klaassen
David W. 21,918 794,528 234,167 382,500 54,168 147,500
Faeder
Thomas B. 16,666 624,975 222,086 376,250 210,849 147,500
Newell
Brian C. 30,000 1,132,500 138,750 226,250 -0- 101,875
Swinton
Tiffany L. 5,000 177,813 89,751 327,250 69,508 140,625
Tomasso
</TABLE>
- ----------
(1) Market values of underlying securities at exercise or year-end minus the
exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of entirely non-employee
directors. During 1999, Messrs. Aprahamian, Donohue and Callen, and Scott F.
Meadow (who served as a director and member of the Compensation Committee until
his resignation in November 1999), served on the Compensation Committee.
Craig R. Callen, a current Sunrise director, is a managing director of
Health Care Investment Banking at Donaldson, Lufkin & Jenrette Securities
Corporation. Donaldson, Lufkin & Jenrette Securities Corporation provided
financial advisory services to Sunrise during 1999.
Mr. Meadow, a Sunrise director until November 1999, is a general partner of
The Sprout Group, the venture capital division of DLJ Capital Corporation. DLJ
Capital Corporation is an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. In 1998 and 1999, Sunrise entered into joint ventures with several
affiliates of The Sprout Group, DLJ Capital Corporation and Donaldson, Lufkin &
Jenrette Securities Corporation in order to raise up
11
<PAGE> 15
to $70.8 million in equity capital for the development of up to 37 assisted
living projects in the United States, United Kingdom and Canada. Mr. Callen
holds a 1.1375% membership interest in two of the U.S. joint ventures.
The joint ventures have acquired or assumed purchase contracts for 24
properties, 15 in the United States, two in the United Kingdom and seven in
Canada. As of December 31, 1999, Sunrise had provided $1.0 million of equity
capital to the United Kingdom/Canadian joint venture with $12.5 million provided
by the other Sprout Group affiliates. Sunrise has also committed to provide a
revolving credit arrangement of up to approximately $3.4 million in principal to
a subsidiary of the United Kingdom/Canadian joint venture. Interest on advances
made under the credit arrangement accrues at a rate of 12% per annum. As of
December 31, 1999, the outstanding principal balance and unpaid accrued interest
under the credit arrangement totaled approximately $3.8 million.
In the United States, DLJ Capital Corporation affiliates have agreed to
provide $15.5 million in equity capital to various joint ventures jointly owned
and operated by Sunrise. Sunrise has agreed to provide up to $1.5 million of
equity capital in these joint ventures. As of December 31, 1999, Sunrise had
provided approximately $1.0 million, and the other investors have provided
approximately $10.0 million, of equity capital to the various U.S. joint
ventures. Sunrise has also entered into a revolving credit agreement with each
of the U.S. joint ventures with principal amounts of approximately $6 million to
$16 million. Interest on advances made under each of the credit arrangements
accrues at a rate of 10% per annum. As of December 31, 1999, the outstanding
principal balances and unpaid accrued interest under these credit arrangements
totaled approximately $30.5 million.
In addition to its equity capital investment, Sunrise provides management
and development services to all the joint ventures on a contract-fee basis with
rights to acquire assets in the future. Sunrise recognized development fees from
the above-referenced joint ventures of $12.7 million and $70,000, respectively,
in 1999 and 1998.
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<PAGE> 16
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
Sunrise's common stock from May 31, 1996, the date Sunrise's common stock began
trading on the Nasdaq National Market, through December 31, 1999, and through
February 29, 2000, with the cumulative total return of the Standard and Poor's
500 Stock Index and the Peer Group Index, as defined below*. The graph assumes
the investment of $100 in Sunrise's common stock on May 31, 1996. The initial
public offering price of Sunrise's common stock was $20.00 per share.
[CHART]
SUNRISE ASSISTED LIVING, INC.
<TABLE>
<CAPTION>
Cumulative Total Return
--------------------------------------------------------------------------------------------
5/96 9/96 12/96 3/97 6/97 9/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C>
SUNRISE ASSISTED LIVING, INC. 100.00 140.00 139.38 140.00 175.00 180.63 215.63
PEER GROUP 100.00 106.97 99.36 128.60 173.70 187.92 214.78
S & P 500 100.00 103.48 112.11 115.12 135.21 145.34 149.51
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return
---------------------------------------------------------------------------------------------------
3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUNRISE ASSISTED LIVING, INC. 223.75 171.88 171.56 259.38 227.81 174.38 132.81 68.75
PEER GROUP 236.73 195.43 176.09 209.42 127.09 92.15 59.05 46.72
S & P 500 170.37 175.99 158.49 192.24 201.82 216.04 202.56 232.69
</TABLE>
- ----------
* The peer group index is composed of selected assisted living companies whose
core business and size are comparable to Sunrise's. These companies are:
Alternative Living Services, Inc., American Retirement Corporation,
Assisted Living Concepts and CareMatrix Corporation.
** Cumulative Total Return assumes an initial investment of $100 on May 31, 1996
and the reinvestment of dividends. There were no dividends paid by Sunrise
during the periods presented.
13
<PAGE> 17
SUNRISE ASSISTED LIVING, INC.
<TABLE>
<CAPTION>
Cumulative Total Return
--------------------------------------------------------------------------------------------
5/96 9/96 12/96 3/97 6/97 9/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C>
SUNRISE ASSISTED LIVING, INC. 100.00 140.00 139.38 140.00 175.00 180.63 215.63
PEER GROUP 100.00 106.97 99.36 128.60 173.70 187.92 214.78
S & P 500 100.00 103.48 112.11 115.12 135.21 145.34 149.51
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return
---------------------------------------------------------------------------------------------------
3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUNRISE ASSISTED LIVING, INC. 223.75 171.88 171.56 259.38 227.81 174.38 132.81 68.75
PEER GROUP 236.73 195.43 176.09 209.42 127.09 92.15 59.05 46.72
S & P 500 170.37 175.99 158.49 192.24 201.82 216.04 202.56 232.69
</TABLE>
<PAGE> 18
REPORT ON EXECUTIVE COMPENSATION
The current members of the board of directors and the current members of
its compensation and stock option committees who participated in committee
deliberations during 1999 have prepared the following report on Sunrise's
policies with respect to the compensation of executive officers for 1999. Mr.
Callen, who joined the board of directors in October 1999 and who also serves as
a member of the compensation and stock option committees, did not participate in
compensation discussions for executive officers in 1999.
The board of directors makes all decisions on compensation of Sunrise's
executive officers, other than stock options, based upon the recommendation of
the compensation committee. The stock option committee makes decisions regarding
the grant of stock options.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation policies of Sunrise are designed to enable Sunrise to
attract, motivate and retain experienced and qualified executives. Sunrise seeks
to provide competitive compensation. Sunrise's policy has been to provide a
significant component of an executive officer's compensation through the grant
of stock options. Sunrise believes that grants of stock options to executives,
as well as to employees generally, help align the interests of these persons
with the interests of Company's stockholders.
The following describes in more specific terms the elements of compensation
of executive officers for 1999:
BASE SALARIES
Base salaries of executives are initially determined by evaluating the
responsibilities of the position, the experience and knowledge of the
individual, and the competitive marketplace for executive talent. Base salaries
for executive officers are reviewed annually by the compensation committee and
the board of directors based on various factors, including individual
performance and responsibilities. Base salaries for Sunrise's executive officers
were not increased in 1999 due to Sunrise's emphasis on stock option grants as a
primary compensation tool.
BONUSES
Prior to 1999, cash bonuses were not part of Sunrise's compensation
program. In 1999, bonuses were used to reward and compensate some employees for
achieving certain goals set by Sunrise's management. Sunrise
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<PAGE> 19
may use cash incentives from time to time to help motivate the attainment of
management objectives.
STOCK OPTIONS
Stock options are considered an effective long-term incentive because gains
are linked to increases in the stock value, which in turn provides stockholder
gains. Stock options are granted by the stock option committee at an exercise
price equal to the market price of the common stock at the date of the grant.
The options typically vest in equal portions over a four-year period, and are
exercisable within ten years from the date of grant. The full benefit of the
options is realized upon appreciation of the stock price in future periods, thus
providing an incentive to create value to Sunrise's stockholders through
appreciation of the stock price. Management of Sunrise believes that stock
options have been helpful in attracting and retaining skilled executive
personnel.
Reflecting Sunrise's belief in the value and desirability of all employees
having a proprietary interest in Sunrise, in 1999, Sunrise granted stock options
covering a total of 684,754 shares of common stock to approximately 413
employees. This number includes options covering an aggregate of 235,000 shares
of common stock granted to Messrs. Faeder, Newell and Swinton and Ms. Tomasso.
OTHER
Sunrise has adopted a 401(k) Plan for all of its employees, including
executive officers, age 21 and over with at least one year of service. The
401(k) Plan provides that each participant may contribute up to 16% of his or
her salary not to exceed the annual statutory limit. In general, Sunrise makes
matching contributions to each participant's account equal to 25% of the
participant's contribution up to 7% of the participant's annual compensation.
Sunrise makes matching contributions on a discretionary basis for participants
with annual compensation in excess of $40,000.
CEO'S COMPENSATION
Mr. Klaassen received a salary of $200,000 in 1999, 1998 and 1997 and
participated in Sunrise's 401(k) Plan. In 1999, Mr. Klaassen received a bonus of
$75,000. He and his wife, Teresa M. Klaassen, executive vice president and a
director of Sunrise, currently beneficially own 2,800,780 shares of Sunrise
common stock, or approximately 12.8% of the outstanding shares. In view of their
stock ownership, neither Mr. Klaassen nor Ms. Klaassen has received grants of
stock options. Sunrise reserves the right to make future grants of options to
Mr. Klaassen and/or Ms. Klaassen.
15
<PAGE> 20
COMPENSATION DEDUCTIBILITY POLICY
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, and
applicable Treasury regulations, no deduction is allowed for annual compensation
in excess of $1 million paid by a publicly traded corporation to its chief
executive officer and the four other most highly compensated officers. Under
those provisions, however, there is no limitation on the deductibility of
"qualified performance-based compensation." In general, Sunrise's policy is to
maximize the extent of tax deductibility of executive compensation under the
provisions of Section 162(m) so long as doing so is compatible with its
determinations as to the most appropriate methods and approaches for the design
and delivery of compensation to Sunrise's executive officers.
Respectfully submitted,
Participating Members Participating Members
of the Board of Directors of the Compensation Committee
Paul J. Klaassen, Chairman Thomas J. Donohue, Chairman
Ronald A. Aprahamian Ronald A. Aprahamian
Thomas J. Donohue
David W. Faeder Participating Members
Teresa M. Klaassen of the Stock Option Committee
David G. Bradley
Richard R. Slager Thomas J. Donohue, Chairman
David G. Bradley
SENIOR EXECUTIVE SEVERANCE PLANS
Effective as of February 25, 2000, the Sunrise board of directors adopted
senior executive severance plans under which designated executive officers of
Sunrise are eligible to receive severance benefits if such executive officer's
employment with Sunrise is terminated by the executive officer within two years
after a "change in control" for "good reason" or if, following a change in
control, the executive officer's employment is terminated by Sunrise for any
reason other than for "cause." Each of the named executive officers is eligible
to participate under these plans. For purposes of the plans, a "change in
control" means, generally, the acquisition by a third party of more than 50% of
the outstanding common stock of Sunrise or of the combined voting power of all
voting securities of Sunrise entitled to vote generally in the election of
directors, a change in the composition of the board of directors of Sunrise
whereby the members of the Sunrise board on the effective date of the plans, or
any successor board member approved by a majority of the then-existing Sunrise
board members, cease to constitute at least a majority of the board of directors
16
<PAGE> 21
or a liquidation of dissolution of Sunrise approved by Sunrise' stockholders. A
change of control also will be deemed to occur upon the consummation of a
reorganization, merger, consolidation or sale or other disposition of
substantially all of the assets of Sunrise, unless, following the transaction,
the holders of the outstanding common stock and voting securities of Sunrise
immediately prior to the transaction beneficially own more than 50% of the
outstanding common stock and voting securities of the resulting entity, no
person or entity who did not previously beneficially own 35% or more of the
outstanding common stock or voting securities of Sunrise beneficially owns 35%
or more of the outstanding common stock or voting securities of the resulting
entity and at least a majority of the members of the Sunrise board prior to the
transaction continue to serve as members of the board of the resulting entity.
Under the plans, "good reason" means, generally, a reduction in the executive
officer's salary, benefits or bonus eligibility, other than reductions also
generally applicable to peer employees, a substantial reduction in the
employee's responsibilities or areas of supervision or an office relocation
outside the metropolitan area in which the office of the executive officer was
previously located. "Cause" is generally deemed to exist if the executive
officer is convicted of fraud or theft against Sunrise or a crime involving
moral turpitude, if the employee is found to have compromised trade secrets or
other valuable proprietary information of Sunrise, or if the employee has
engaged in gross or willful misconduct that causes and will continue to cause in
the future substantial and material harm to the business and operations of
Sunrise or any of its affiliates.
The amount of the severance benefit payable to a named executive officer
(other than the chief executive officer) under the plans generally equals the
sum of (a) the accrued obligations of Sunrise to the executive officer as of the
date of termination of the executive officer's employment, (b) three times the
sum of the executive officer's annual base salary, which is calculated as the
greater of the annual base salary payable to the executive officer at the time
of termination of employment or twelve times the employee's highest monthly base
salary paid or payable to the executive officer in respect of the twelve-month
period immediately preceding the month of termination, and the executive
officer's annual bonus, which is calculated as the highest amount paid to the
executive officer as bonus payments in a single year during the last three full
fiscal years prior to the date of termination of employment, and (c) an
additional amount based on a Black-Scholes value methodology for unexercised
options previously granted to the executive officer with exercise prices in
excess of $24.00. In the case of the chief executive officer, instead of any
amount under (c) above, the chief executive officer would be entitled to receive
an amount equal to 0.5% of the total enterprise value of the Company based upon
the value realized in the "change in control" transaction. If the
17
<PAGE> 22
payments to an executive officer, including the chief executive officer,
constituted a "parachute payment," as defined in Section 280G of the Internal
Revenue Code of 1986, as amended, and the executive officer would receive a
greater payment after taxes if the payments were capped at three times the
executive officer's annual compensation includible in the executive officer's
taxable income for federal income tax purposes during the preceding five years,
less $1.00, then the payment would be reduced to that amount. The severance
payments are payable in a lump sum within thirty days of the date of
termination.
Under the plans, the executive officer and the executive officer's family
also would be entitled to continued medical and other benefits for one year
after the date of termination of the executive officer's employment with Sunrise
unless they become otherwise eligible to receive similar benefits through
another employer. The senior executive severance plans also effectively amend
all stock option grants previously made to the executive officers covered by the
plans to make them vest immediately prior to a change in control. The executive
officers covered by the plans would not be obligated to seek further employment
in order to mitigate the amount of severance payments. The severance plans
terminate on February 25, 2005, but will be automatically extended if necessary
in the event of a change in control during the term of the plans so that the
plans will remain in full force and effect until two years after the change in
control and until all payments have been made. Notwithstanding the foregoing,
the board of directors may amend, suspend or terminate the plans at any time
prior to commencement of a change in control transaction.
CONSULTING AGREEMENT
Sunrise has entered into a consulting agreement with David W. Faeder
effective as of April 1, 2000. Under the consulting agreement, Mr. Faeder will
perform consulting services as and when reasonably requested by the chairman of
the board and chief executive officer or by the president of Sunrise. The
consulting agreement provides for Mr. Faeder to receive during the term of the
agreement annual compensation of $205,000 and reimbursement of reasonable
expenses incurred in connection with the performance of consulting services. The
consulting agreement expires on March 31, 2003, unless extended or earlier
terminated by the parties. Either party may terminate the consulting agreement
upon 30 days' prior notice. Under the terms of the consulting agreement, all of
Mr. Faeder's existing options continue to vest and be exercisable or available
as if his employment with Sunrise had continued through March 31, 2003. In
addition, the consulting agreement provides that Mr. Faeder is entitled to the
benefits under
18
<PAGE> 23
the senior executive severance plan, as described above, on the same basis as
the Company's president.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Sunrise's
directors, officers and beneficial owners of more than 10% of Sunrise's
outstanding equity securities to file with the SEC initial reports of ownership
of Sunrise's equity securities and to file subsequent reports when there are
changes in such ownership. Based on a review of reports submitted to Sunrise for
1999, Sunrise believes that all Section 16(a) filing requirements for that year
applicable to such persons were complied with on a timely basis, except that
each of Messrs. Bradley, Callen, Donohue, Faeder, Swinton, Slavin, and Mrs.
Tomasso, were late in filing a Form 5 to report one option grant made to each,
Mr. Aprahamian and Larry E. Hulse, Sunrise's Chief Accounting Officer, were late
in filing a Form 5 to report two option grants made to each, and Mr. Slager was
late in filing Form 4 to report one option grant made.
CERTAIN TRANSACTIONS
Sunrise leases the real property on which the Fairfax facility is located
from Teresa M. Klaassen and Paul J. Klaassen under a 99-year ground lease
entered into in June 1986. The ground lease provides for monthly rent of
$21,272, as adjusted annually based on the consumer price index. Annual rent
expense for 1999 was $262,000. Sunrise has subleased approximately 50% of the
property subject to the ground lease to Sunrise Foundation, Inc., a
not-for-profit organization operated by the Klaassens. Sunrise Foundation
operates a school and day care center on the property. The sublease terminates
upon expiration of the ground lease and provides for monthly rent equal to 50%
of all of the rent payable under the ground lease. Sunrise Foundation also
reimburses Sunrise for use of office facilities and support services.
Reimbursements for 1999 were $131,000. Sunrise believes that the terms of the
lease and sublease were no less favorable to Sunrise than those which it could
have obtained from an unaffiliated third party.
The Klaassens also lease real property located in Fairfax County, Virginia
from Sunrise for use as a residence under a 99-year ground lease entered into in
June 1994. The rent is $1.00 per month. This property is part of a parcel, which
includes Sunrise's Oakton facility, that was previously transferred by the
Klaassens to Sunrise in connection with a financing transaction. Rather than
attempting to subdivide the parcel, which would have caused a significant delay
in completing the financing transaction, Sunrise agreed to lease back the
residence to the Klaassens as a condition to the transfer of the property.
19
<PAGE> 24
A company owned by Paul J. Klaassen owns an airplane used by Mr. Klaassen
and, from time to time, other Sunrise employees for business travel. In April
2000, Sunrise reimbursed Potomac Pilots, the company that operates the airplane
for Mr. Klaassen, $76,433 for fuel and other costs of operating the airplane for
Sunrise business travel during 1999.
For a description of certain other transactions involving Sunrise and its
directors, see "Compensation Committee Interlocks and Insider Participation."
APPROVAL OF
2000 STOCK OPTION PLAN
(PROPOSAL 2)
On February 25, 2000, the board of directors adopted the 2000 stock option
plan, subject to approval of stockholders at the annual meeting. As of that
date, there were approximately 1,400 directors, officers and employees of
Sunrise and its subsidiaries who would be eligible to participate in the 2000
stock option plan.
The principal provisions of the 2000 stock option plan are summarized
below. This summary is not complete and is qualified in its entirety by the
terms of the 2000 stock option plan, a copy of which is attached to this proxy
statement as Exhibit A.
DESCRIPTION OF 2000 STOCK OPTION PLAN
The 2000 stock option plan will be administered by the stock option
committee. A total of 500,000 shares of common stock will be reserved for
issuance under the 2000 stock option plan. All directors, officers and employees
of Sunrise or any subsidiary, and any consultant or adviser providing bona fide
services to Sunrise or any subsidiary, whose participation in the 2000 stock
option plan is determined by the stock option committee to be in the best
interests of Sunrise will be eligible to receive option grants under the plan.
The 2000 stock option plan does not have a termination date, but the grant of a
qualified stock option within the meaning of Section 422 of the Internal Revenue
Code may not occur more than ten years after February 25, 2000, the effective
date of the plan. Only employees may be granted qualified stock options.
The option exercise price of options granted under the 2000 stock option
plan will be fixed by the stock option committee when the option is granted.
However, the per share option exercise price may not be less than the fair
market value of Sunrise common stock on the date of grant, as determined under
the plan. Options to purchase no more than 250,000 shares of common
20
<PAGE> 25
stock may be granted to any one eligible individual during the first ten years
after the effective date of the 2000 stock option plan and 100,000 shares per
year thereafter. The stock option committee may modify or waive any limitation
or condition imposed at the time of grant on the vesting or exercise of an
option, including to accelerate or extend the period during which an option may
be exercised.
No person may receive a qualified stock option if, at the time of grant,
the person owns directly or indirectly more than 10% of the total combined
voting power of Sunrise unless the option price is at least 110% of the fair
market value of the common stock and the exercise period of the qualified stock
option is by its terms limited to five years. There is also a $100,000 limit on
the value of common stock, determined at the time of grant, covered by qualified
stock options that first become exercisable by an optionee in any calendar year.
No option granted to a reporting person under Section 16 of the Securities
Exchange Act may be exercisable during the first six months after the date of
grant.
Payment for shares purchased under the 2000 stock option plan may be made:
(a) in cash; (b) if permitted by the option agreement, by exchanging shares of
common stock with a fair market value equal to or less than the total option
price plus cash for any difference; (c) if permitted by the option agreement, by
delivery of a promissory note of the person exercising the option; (d) if
permitted by the option agreement, by causing Sunrise to withhold shares of
common stock otherwise issuable upon the exercise of the option; or (e) by a
combination of the foregoing. Payment in full of the option price need not
accompany the written notice of exercise if the notice directs that the stock
certificate for the shares for which the option is exercised are to be delivered
to a licensed broker acceptable to Sunrise as the agent for the individual
exercising the option and, at the time the stock certificate is delivered, the
broker pays to Sunrise the option price.
In the event of stock splits, stock dividends, recapitalizations,
combinations of shares and similar events, the 2000 stock option plan provides
for adjustment of the number of shares available for grant, including the
limitation on the number of shares subject to options that may be granted to
eligible individuals, and the number of shares and the per share exercise price
for shares subject to unexercised options. Upon any dissolution or liquidation
of Sunrise, the sale of substantially all of Sunrise's assets, a merger,
reorganization or consolidation in which Sunrise is not the surviving
corporation or any other transaction approved by the board of directors which
results in any person or entity owning 80% or more of the total combined voting
power of all classes of stock of Sunrise, the 2000 stock option plan and
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<PAGE> 26
the options granted under the plan will terminate, unless provision is made for
the continuation of the plan, the assumption of outstanding options or the
substitution of new options of the successor corporation or a parent or
subsidiary.
Options granted under the 2000 stock option plan generally are
non-transferable except by will or by the laws of descent and distribution upon
the death of the option holder.
The board of directors may terminate or amend the 2000 stock option plan at
any time. However, any plan amendment, which, if not approved by Sunrise's
stockholders, would cause the plan not to comply with Sections 162(m) or 422 of
the Internal Revenue Code must be approved by stockholders by the affirmative
vote of stockholders who hold more than 50% of the combined voting power of the
outstanding shares of voting stock of Sunrise present or represented, and
entitled to vote thereon, at a duly constituted stockholders' meeting.
Based on the closing price of $14.56 per share on March 13, 2000, the
aggregate market value of the 500,000 shares of common stock reserved for
issuance under the 2000 stock option plan is $7.3 million. In addition to the
2000 stock option plan, Sunrise has several other stock options plans adopted in
prior years. A total of 6,898,900 shares are reserved for issuance under these
plans, of which 5,814,373 shares have been granted, net of forfeitures, as of
March 13, 2000. In January 1995, Sunrise also made a non-plan option grant to
Mr. Faeder for 450,000 shares of common stock. As of December 31, 1999, all of
these options had been exercised.
FEDERAL INCOME TAX CONSEQUENCES
The grant of an option will not be a taxable event for the optionee or
Sunrise.
Qualified Stock Options. An optionee will not recognize taxable income upon
exercise of a qualified stock option, except that the alternative minimum tax
may apply and any gain realized upon a disposition of shares of stock received
upon the exercise of a qualified stock option will be taxed as long-term capital
gain if the optionee holds the shares for at least two years after the date of
grant and for one year after the date of exercise. Sunrise will not be entitled
to any business expense deduction with respect to the exercise of a qualified
stock option, except as discussed below.
For the exercise of an option to qualify for the foregoing tax treatment,
the optionee generally must be an employee of Sunrise or a subsidiary from the
22
<PAGE> 27
date the option is granted through a date within three months before the date of
exercise of the option. In the case of an optionee who is disabled, the
three-month period for exercise following termination of employment is extended
to one year. In the case of an employee who dies, both the time for exercising
qualified stock options after termination of employment and the holding period
for stock received through the exercise of the option are waived.
If all of the foregoing requirements are met except the holding period
requirement mentioned above, the optionee will recognize ordinary income upon
the disposition of the stock in an amount generally equal to the excess of the
fair market value of the stock at the time the option was exercised over the
option exercise price but not in excess of the gain realized on the sale. The
balance of the realized gain, if any, will be capital gain. The employer
corporation will be allowed a business expense deduction to the extent the
optionee recognizes ordinary income subject to Section 162(m) of the Internal
Revenue Code summarized below.
If an optionee exercises a qualified stock option by tendering shares of
common stock with a fair market value equal to part or all of the option
exercise price, the exchange of shares will be treated as a nontaxable exchange,
except that this treatment would not apply if the optionee had acquired the
shares being transferred upon the exercise of a qualified stock option and had
not satisfied the holding period requirement summarized above. If the exercise
is treated as a tax free exchange, the optionee would have no taxable income
from the exchange and exercise, other than minimum taxable income as discussed
above, and the tax basis of the shares exchanged would be treated as the
substituted basis for the shares received. If the optionee used shares received
upon the exercise of a qualified stock option or another statutory option as to
which the optionee had not satisfied the applicable holding period requirement,
the exchange would be treated as a taxable disqualifying disposition of the
exchanged shares.
If, as required under an option agreement, Sunrise withholds shares in
payment of the option price for qualified options, the transaction should
generally be treated as if the withheld shares had been sold in a disqualifying
disposition after exercise of the option, so that the optionee will realize
ordinary income with respect to such shares. The shares paid for by the withheld
shares should be treated as having been received upon exercise of a qualified
stock option, with the tax consequences described above. However, the Internal
Revenue Service has not ruled on the tax treatment of shares received on
exercise of a qualified stock option where the option exercise price is paid
with withheld shares.
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<PAGE> 28
Non-Qualified Options. Upon exercising a non-qualified stock option, an
optionee will recognize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the stock on the date of
exercise, except that, if the optionee is subject to certain restrictions
imposed by the securities laws, the measurement date will be deferred, unless
the optionee makes a special tax election within 30 days after exercise. Upon a
subsequent sale or exchange of shares acquired upon the exercise of a
non-qualified stock option, the optionee will have taxable gain or loss,
measured by the difference between the amount realized on the disposition and
the tax basis of the shares. The tax basis of the shares generally would equal
the amount paid for the shares plus the amount treated as ordinary income at the
time the option was exercised.
If the employer corporation complies with applicable reporting requirements
and with the restrictions of Section 162(m) of the Internal Revenue Code, it
will be entitled to a business expense deduction in the same amount and
generally at the same time as the optionee recognizes ordinary income. Under
Section 162(m) of the Internal Revenue Code, if the optionee is the chief
executive officer or one of the four other most highly compensated officers,
then, unless specified exceptions apply, the employer is not entitled to deduct
compensation with respect to the optionee, including compensation related to the
exercise of stock options, to the extent the compensation in the aggregate
exceeds $1.0 million for the taxable year. The options are intended to comply
with the exception to Section 162(m) for "performance-based" compensation.
If the optionee surrenders shares of common stock in payment of part or all
of the exercise price for non-qualified options, no gain or loss will be
recognized with respect to the shares surrendered regardless of whether the
shares were acquired upon the exercise of a qualified option, and the optionee
will be treated as receiving an equivalent number of shares upon the exercise of
the option in a nontaxable exchange. The basis of the shares surrendered will be
treated as the substituted tax basis for an equivalent number of option shares
received and the new shares will be treated as having been held for the same
holding period as had expired with respect to the transferred shares. The
difference between the aggregate option exercise price and the aggregate fair
market value of the shares received following the exercise of the option will be
taxed as ordinary income. The optionee's basis in the additional shares will be
equal to the amount included in the optionee's income.
If, as required by an option agreement, Sunrise withholds shares in payment
of the option price for non-qualified options or in payment of tax withholding,
the transaction should generally be treated as if the withheld
24
<PAGE> 29
shares had been sold for an amount equal to the exercise price after exercise of
the option.
REASONS FOR OBTAINING STOCKHOLDER APPROVAL
The board of directors has approved the 2000 stock option plan subject to
stockholder approval at the annual meeting. Sunrise is submitting the 2000 stock
option plan for stockholder approval at the annual meeting because stockholder
approval is required to (a) qualify the 2000 stock option plan under Section 422
of the Internal Revenue Code relating to the grant of qualified stock options
and (b) obtain a federal income tax deduction under Section 162(m) of the
Internal Revenue Code for compensation recognized by optionees in connection
with the exercise of options granted under the 2000 stock option plan.
Section 422 of the Internal Revenue Code and applicable Treasury
regulations condition qualified stock option treatment for option grants on
stockholder approval of the stock option plan under which the qualified stock
options are granted. Under Section 162(m) of the Internal Revenue Code and
applicable Treasury regulations, no deduction is allowed for annual compensation
in excess of $1 million paid by a publicly traded corporation to its chief
executive officer and the four other most highly compensated officers. Under
those provisions, however, there is no limitation on the deductibility of
"qualified performance-based compensation." To satisfy this definition: (a) the
compensation must be paid solely on account of the attainment of one or more
pre-established, objective performance goals; (b) the performance goals under
which compensation is paid must be established by a compensation committee
having the authority to establish and administer performance goals and comprised
solely of two or more directors who qualify as "outside directors" for purposes
of the exception; (c) the material terms under which the compensation is to be
paid must be disclosed to and subsequently approved by stockholders of the
corporation before payment is made in a separate vote; and (d) the compensation
committee must certify in writing before payment of the compensation that the
performance goals and any other material terms were in fact satisfied. Under
applicable Treasury regulations, in the case of compensation attributable to
stock options, the performance goal requirement, summarized in (a) above, and
the stockholder approval requirement, summarized in (c) above, are deemed
satisfied, and the certification requirement, summarized in (d) above, is
inapplicable, if: (a) the grant or award is made by a compensation committee
satisfying the above requirements; (b) the plan under which the option is
granted states the maximum number of shares with respect to which options may be
granted during a specified time period to an employee; (c) the option exercise
price
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<PAGE> 30
equals or exceeds the fair market value of the stock on the date of grant; and
(d) the stock option plan is approved by stockholders.
Sunrise has in the past used stock options as an important device to
motivate and reward its employees and employees of its subsidiaries, and
believes that equity incentives represented by stock options enhance its ability
to attract and retain key personnel.
REQUIRED VOTE
The approval by the affirmative vote of the holders of a majority of the
shares of common stock present or represented and entitled to vote at the Annual
Meeting is required to approve the 2000 stock option plan. Abstentions will have
the same effect as a negative vote. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE 2000 STOCK OPTION PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP to act as Sunrise's
independent public accountants for 2000. Representatives of Ernst & Young LLP
will be present at the annual meeting. They will be given an opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate questions. Ernst & Young LLP was first appointed to act as Sunrise's
independent public accountants in November 1994.
26
<PAGE> 31
STOCK OWNED BY MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of March 13, 2000 by (a) each
director and nominee for director of Sunrise; (b) each named executive officer
of Sunrise; and (c) all executive officers and directors of Sunrise as a group.
<TABLE>
<CAPTION>
NAME AND POSITION(s) AMOUNT AND NATURE OF PERCENT OF COMMON
WITH SUNRISE BENEFICIAL OWNERSHIP(1) STOCK OUTSTANDING
- ------------ ----------------------- -----------------
<S> <C> <C>
Paul J. Klaassen(2) 2,800,780 12.8%
Chairman of the Board and Chief
Executive Officer
Teresa M. Klaassen(2) 2,800,780 12.8
Executive Vice President and Secretary
David W. Faeder(3) 234,167 1.1
Vice Chairman of the Board
Thomas B. Newell(4) 222,086 1.0
President
Brian C. Swinton(5) 138,750 *
Executive Vice President and President of
Ventures Division
Tiffany L. Tomasso(6) 89,751 *
Executive Vice President and President of
Management Services Division
Thomas J. Donohue(7) 111,800 *
Director
Richard R. Slager(8) 230,991 1.1
Director
Ronald V. Aprahamian(9) 181,000 *
Director
David G. Bradley(10) 22,000 *
Director
Craig R. Callen(11) 18,000 *
Director
Executive officers and directors as a group 4,049,325 17.7%
(12 persons)(12)
</TABLE>
- ----------
* Less than one percent.
(1) Under Rule 13d-3 under the Securities Exchange Act, a person has beneficial
ownership of any securities as to which such person, directly or
indirectly, through any contract, arrangement, undertaking, relationship or
otherwise has or shares voting power and/or investment power and as to
which such person has the right to acquire such voting and/or investment
power within 60 days. Percentage of beneficial ownership as to any person
as of a particular date is calculated by dividing the number of shares
beneficially
27
<PAGE> 32
owned by such person by the sum of the number of shares outstanding as of
such date and the number of shares as to which such person has the right to
acquire voting and/or investment power within 60 days.
(2) Represents 2,800,780 shares held jointly by the Klaassens, as tenants by
the entireties. See "Principal Holders of Voting Securities."
(3) Represents 234,167 shares issuable upon the exercise of stock options
that are exercisable within 60 days of March 13, 2000.
(4) Represents 222,086 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 13, 2000.
(8) Represents 138,750 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 13, 2000.
(9) Represents 89,751 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 13, 2000.
(10) Represents 66,000 shares issuable upon the exercise of stock options
that are exercisable within 60 days of March 13, 2000 and 45,800 shares of
common stock held directly.
(11) Represents 43,331 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 13, 2000 and 121,000 shares of
common stock held directly and 66,660 shares of common stock held directly
by Mr. Slager's wife, in which Mr. Slager has shared voting and investment
powers.
(12) Represents 101,000 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 13, 2000 and 80,000 shares of
common stock held directly.
(13) Represents 22,000 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 13, 2000.
(14) Represents 18,000 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 13, 2000.
(15) Includes 935,085 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 13, 2000, 80,000 shares of common
stock held directly by Mr. Aprahamian, 45,800 shares of common stock held
directly by Mr. Donohue, 121,000 shares of common stock held directly by
Mr. Slager, 66,660 shares of common stock held directly by Mr. Slager's
wife, in which Mr. Slager has shared voting and investment powers, and the
2,800,780 shares beneficially owned jointly by Paul J. and Teresa M.
Klaassen.
28
<PAGE> 33
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of March 13, 2000 with
respect to the ownership of shares of Sunrise common stock by each person
believed by management to be the beneficial owner of more than five percent of
Sunrise's outstanding common stock. The information is based on the most recent
Schedule 13D or 13G filed with the SEC on behalf of such persons or other
information made available to Sunrise. Except as otherwise indicated, the
reporting persons have stated that they possess sole voting and sole dispositive
power over the entire number of shares reported.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
- ---------------- -------------------- -----------------
<S> <C> <C>
Paul J. and Teresa M. Klaassen(1) 2,800,780 12.8%
7902 Westpark Drive
McLean, VA 22102
Morgan Stanley Dean Witter & Co.(2) 2,363,849 10.8%
1585 Broadway
New York, NY 10036
Putnam Investments, Inc.(3) 2,334,599 10.6%
One Post Office Square
Boston, MA 02109
Brown Investment Advisory & Trust 1,860,544 8.5%
Company, and its wholly owned
subsidiary, Brown Advisory
Incorporated(4)
19 South Street
Baltimore, MD 21202
RCW Holdings, S.A.R.L., LMR Global 1,579,900 7.2%
Holdings S.A.R.L. and FRR Investments
Limited
c/o Unsworth & Associates
Herengracht 483,
1017 BT, Amsterdam
</TABLE>
- ----------
(1) See "Stock Owned by Management."
(2) The Schedule 13G dated February 4, 2000 of Morgan Stanley Dean Witter & Co.
states that it has shared voting power to vote 1,565,082 shares and shared
power to dispose of 2,363,849 shares.
(3) The amended Schedule 13G dated April 8, 1999 of Putnam Investments, Inc., a
wholly-owned subsidiary of Marsh & McLennan Companies, Inc., states that it
wholly owns two registered investment advisers: Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc. The Schedule 13G
states that: (a) Putnam Investments has shared power to vote 190,250 shares
and shared power to dispose of 2,334,599 shares; (b) Putnam Investment
Management has shared power to dispose of 2,052,499 shares;
29
<PAGE> 34
and (c) Putnam Advisory Company has shared power to vote 190,250 shares and
shared power to dispose of 282,100 shares. Both Putnam Investments and
Marsh & McLennan state in the Schedule 13G that the filing of the Schedule
13G shall not be deemed an admission by either or both of them that they
are the beneficial owner of any securities covered by the Schedule 13G, and
that neither of them have any power to vote or dispose of, or direct the
voting or disposition of, any of the securities covered by the Schedule
13G.
(4) The Schedule 13G dated December 31, 1999 of Brown Investment Advisory &
Trust Company, and its wholly owned subsidiary, Brown Advisory
Incorporated, states that: (a) Brown Investment Advisory & Trust Company
has sole voting power to vote 763,773 shares and sole power to dispose of
815,523 shares; and (b) Brown Advisory Incorporated has sole voting power
to vote 1,045,021 shares and sole power to dispose of 1,045,021 shares.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2001 annual
meeting must be received by Sunrise no later than December 15, 2000 under the
proxy soliciting rules of the SEC in order to be considered for inclusion in
Sunrise's proxy statement and form of proxy relating to the 2000 annual meeting.
Nothing in this paragraph shall be deemed to require Sunrise to include in its
proxy statement and proxy relating to the 2001 annual meeting any stockholder
proposal which may be omitted from Sunrise's proxy materials under applicable
regulations of the SEC in effect at the time such proposal is received. Under
Sunrise's bylaws, any stockholder of Sunrise who intends to present a proposal
for action at the 2001 annual meeting also must file a copy of the proposal with
the secretary of Sunrise at least 60 days prior to the meeting. However, in the
event that less than 75 days notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be received no later than the close of business on the 15th day
following the day on which such notice of the date or public disclosure was
made.
30
<PAGE> 35
OTHER BUSINESS TO BE TRANSACTED
The board of directors does not know of any other matters to be presented
for action by the stockholders at the annual meeting. If, however, any other
matters not now known are properly brought before the meeting, the persons names
in the accompanying proxy will vote such proxy in the manner determined by a
majority of Sunrise's board of directors.
By order of the board of directors
/s/ PAUL J. KLAASSEN
Paul J. Klaassen
Chairman of the Board
and Chief Executive Officer
McLean, Virginia
April 14, 2000
31
<PAGE> 36
EXHIBIT A
SUNRISE ASSISTED LIVING, INC.
2000 STOCK OPTION PLAN
SUNRISE ASSISTED LIVING, INC., a Delaware corporation (the "Corporation"),
sets forth herein the terms of this 2000 Stock Option Plan (the "Plan") as
follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation and any
subsidiary thereof within the meaning of Rule 405 of Regulation C under the
Securities Act of 1933, as amended (the "Securities Act"), with the term
"person" as used in such Rule 405 being defined as in Section 2(2) of the
Securities Act (a "Subsidiary"), by providing eligible individuals (as
designated pursuant to SECTION 4 below) with incentives to improve business
results, by providing an opportunity to acquire or increase a proprietary
interest in the Corporation, which thereby will create a stronger incentive to
expend maximum effort for the growth and success of the Corporation and its
Subsidiaries, and will encourage such eligible individuals to continue to serve
the Corporation and its Subsidiaries, whether as an employee, as a director, as
a consultant or advisor or in some other capacity. To this end, the Plan
provides for the grant of stock options, as set out herein.
This Plan provides for the grant of stock options (each of which is an
"Option") in accordance with the terms of the Plan. An Option may be an
incentive stock option (an "ISO") intended to satisfy the applicable
requirements under Section 422 of the Internal Revenue Code of 1986, as amended
from time to time, or the corresponding provision of any subsequently-enacted
tax statute (the "Code"), or a nonqualified stock option (an "NSO"). An Option
is an NSO to the extent that the Option would exceed the limitations set forth
in SECTION 7 below. An Option is also an NSO if either (i) the Option is
specifically designated at the time of grant as an NSO or not being an ISO or
(ii) the Option does not otherwise satisfy the requirements of Code Section 422
at the time of grant. Each Option shall be evidenced by a written agreement
between the Corporation and the recipient individual that sets out the terms and
conditions of the grant as further described in SECTION 8.
2. ADMINISTRATION
(a) BOARD
The Plan shall be administered by the Board of Directors of the Corporation
(the "Board"), which shall have the full power and authority to take all actions
and to make all determinations required or provided for under the Plan or any
Option granted or Option Agreement (as defined in SECTION 8 below) entered into
hereunder and all such other actions and determinations not inconsistent with
the specific terms and provisions of the Plan deemed by the Board to be
necessary
<PAGE> 37
or appropriate to the administration of the Plan or any Option granted
or Option Agreement entered into hereunder. The interpretation and construction
by the Board of any provision of the Plan or of any Option granted or Option
Agreement entered into hereunder shall be final, binding and conclusive.
(b) ACTION BY COMMITTEE
The Board from time to time may appoint a Stock Option Committee consisting
of two or more members of the Board of Directors who, in the sole discretion of
the Board, may be the same Directors who serve on the Compensation Committee, or
may appoint the Compensation Committee to serve as the Stock Option Committee
(the "Committee"). The Board, in its sole discretion, may provide that the role
of the Committee shall be limited to making recommendations to the Board
concerning any determinations to be made and actions to be taken by the Board
pursuant to or with respect to the Plan, or the Board may delegate to the
Committee such powers and authorities related to the administration of the Plan,
as set forth in SECTION 2(a) above, as the Board shall determine, consistent
with the Restated Certificate of Incorporation and By-Laws of the Corporation
and applicable law. In the event that the Plan or any Option granted or Option
Agreement entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken by or such
determination may be made by the Committee if the power and authority to do so
has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final and conclusive.
(c) NO LIABILITY
No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted or Option Agreement entered into hereunder.
3. STOCK
The stock that may be issued pursuant to Options under the Plan shall be
shares of common stock, par value $.01 per share, of the Corporation (the
"Stock"), which shares may be treasury shares or authorized but unissued shares.
The number of shares of Stock that may be issued pursuant to Options under the
Plan shall not exceed, in the aggregate, five hundred thousand (500,000) shares.
If any Option expires or terminates, or is terminated or canceled, for any
reason prior to exercise, the shares of Stock that were subject to the
unexercised, forfeited, terminated or canceled portion of such Option shall be
available immediately for future grants of Options under the Plan.
A-2
<PAGE> 38
4. ELIGIBILITY
(a) DESIGNATED RECIPIENTS
Subject to the next sentence, Options may be granted under the Plan to (i)
any director, officer or employee of the Corporation or any Subsidiary as the
Board shall determine and designate from time to time or (ii) any consultant or
advisor providing bona fide services to the Corporation or any Subsidiary
(provided that such services must not be in connection with the offer or sale of
securities in a capital-raising transaction) whose participation in the Plan is
determined by the Board to be in the best interests of the Corporation and is so
designated by the Board. Options granted to a full-time employee of the
Corporation or a "subsidiary corporation" thereof within the meaning of Section
424(f) of the Code shall be either ISOs or NSOs, as determined in the sole
discretion of the Board, and Options granted to any other eligible individual
shall be NSOs.
(b) SUCCESSIVE GRANTS
An individual may hold more than one Option, subject to such restrictions
as are provided herein.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) EFFECTIVE DATE
The Plan shall be effective as of the date of adoption by the Board,
subject to approval of the Plan within one year of such effective date by the
affirmative vote of stockholders who hold more than fifty percent (50%) of the
combined voting power of the outstanding shares of voting stock of the
Corporation present or represented and entitled to vote thereon at a duly
constituted stockholders' meeting, or by consent as permitted by law. Upon
approval of the Plan by the stockholders of the Corporation as set forth above,
however, all Options granted under the Plan on or after the effective date shall
be fully effective as if the stockholders of the Corporation had approved the
Plan on the Plan's effective date. If the stockholders fail to approve the Plan
within one year of such effective date, any Options granted hereunder shall be
null and void and of no effect.
(b) TERM
The Plan shall have no termination date, but no grant of an ISO may occur
after the date that is ten years after the effective date.
A-3
<PAGE> 39
6. GRANT OF OPTIONS
(a) GENERAL
Subject to the terms and conditions of the Plan, the Board may, at any time
and from time to time, grant to such eligible individuals as the Board may
determine (each of the whom is an "Optionee"), Options to purchase such number
of shares of Stock on such terms and conditions as the Board may determine,
including any terms or conditions that may be necessary to qualify such Options
as ISOs under Section 422 of the Code. Such authority specifically includes the
authority, in order to effectuate the purposes of the Plan but without amending
the Plan, to modify grants to eligible individuals who are foreign nationals or
are individuals who are employed outside the United States to recognize
differences in local law, tax policy or custom.
(b) LIMITATION ON GRANTS OF OPTIONS
During any time when the Corporation has a class of equity security
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the maximum number of shares subject to Options that can
be granted under the Plan to any executive officer of the Company or a
Subsidiary, or to any other person eligible for a grant of an Option under
SECTION 4, is 250,000 shares during the first ten years after the effective date
of the Plan and 100,000 shares per year thereafter (in each case, subject to
adjustment as provided in SECTION 16(a) hereof).
7. LIMITATIONS ON INCENTIVE STOCK OPTIONS
(a) PRICE AND DOLLAR LIMITATIONS
An Option that is designated as being one that is intended to qualify as an
ISO shall qualify for treatment as an ISO only to the extent that the aggregate
fair market value (determined at the time the Option is granted) of the Stock
with respect to which all options that are intended to constitute "incentive
stock options," within the meaning of Code Section 422, are exercisable for the
first time by any Optionee during any calendar year (under the Plan and all
other plans of the Optionee's employer corporation and its parent and subsidiary
corporations within the meaning of Section 422(d) of the Code) does not exceed
$100,000.
(b) PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract or understanding heretofore or hereafter entered into by the Optionee
with the Corporation, except an agreement, contract or understanding hereafter
entered into that expressly modifies or excludes application of this paragraph
(an "Other Agreement"), and notwithstanding any formal or informal
A-4
<PAGE> 40
plan or other arrangement for the direct or indirect provision of compensation
to the Optionee (including groups or classes of participants or beneficiaries of
which the Optionee is a member), whether or not such compensation is deferred,
is in cash, or is in the form of a benefit to or for the Optionee (a "Benefit
Arrangement"), if the Optionee is a "disqualified individual," as defined in
Section 280G(c) of the Code, any Option held by that Optionee and any right to
receive any payment or other benefit under this Plan shall not become
exercisable or vested (i) to the extent that such right to exercise, vesting,
payment or benefit, taking into account all other rights, payments or benefits
to or for the Optionee under this Plan, all Other Agreements and all Benefit
Arrangements, would cause any payment or benefit to the Optionee under this Plan
to be considered a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code as then in effect (a "Parachute Payment") and (ii) if, as a result
of receiving a Parachute Payment, the aggregate after-tax amounts received by
the Optionee from the Corporation under this Plan, all Other Agreements and all
Benefit Arrangements would be less than the maximum after-tax amount that could
be received by him without causing any such payment or benefit to be considered
a Parachute Payment. In the event that the receipt of any such right to
exercise, vesting, payment or benefit under this Plan, in conjunction with all
other rights, payments or benefits to or for the Optionee under any Other
Agreement or any Benefit Arrangement would cause the Optionee to be considered
to have received a Parachute Payment under this Plan that would have the effect
of decreasing the after-tax amount received by the Optionee as described in
clause (ii) of the preceding sentence, then the Optionee shall have the right,
in the Optionee's sole discretion, to designate those rights, payments or
benefits under this Plan, any Other Agreements and any Benefit Arrangements that
should be reduced or eliminated so as to avoid having the payment or benefit to
the Optionee under this Plan be deemed to be a Parachute Payment.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by agreements
("Option Agreements"), to be executed by the Corporation and by the Optionee, in
such form or forms as the Board shall from time to time determine. Option
Agreements covering Options granted from time to time or at the same time need
not contain similar provisions; provided, however, that all such Option
Agreements shall comply with all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of Stock subject to an Option (the "Option
Price") shall be fixed by the Board and stated in each Option Agreement. The
Option Price shall be not less than the greater of par value or 100 percent of
the fair market value of a share of Stock on the date on which the Option is
granted (as determined in good faith by the Board); provided, however, that in
the event the Optionee would otherwise be ineligible to receive an ISO by reason
of the provisions
A-5
<PAGE> 41
of Sections 422(b)(6) and 424(d) of the Code (relating to stock ownership of
more than ten percent), the Option Price of an Option that is intended to be an
ISO shall not be less than the greater of par value or 110 percent of the fair
market value of a share of Stock at the time such Option is granted. In the
event that the Stock is listed on an established national or regional stock
exchange or The Nasdaq Stock Market, is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System, or is publicly
traded in an established securities market, in determining the fair market value
of the Stock, the Board shall use the closing price of the Stock on such
exchange or system or in such market (the highest such closing price if there is
more than one such exchange or market) on the trading date immediately before
the Option is granted (or, if there is no such closing price, then the Board
shall use the mean between the highest bid and lowest asked prices or between
the high and low prices on such date), or, if no sale of the Stock has been made
on such day, on the next preceding day on which any such sale shall have been
made.
10. TERM AND EXERCISE OF OPTIONS
(a) TERM
Upon the expiration of ten years from the date on which an ISO is granted
or on such date prior thereto as may be fixed by the Board and stated in the
Option Agreement relating to such Option, that ISO shall be ineligible for
treatment as an "incentive stock option," as defined in Section 422 of the Code,
and shall be exercisable only as an NSO. In the event the Optionee otherwise
would be ineligible to receive an "incentive stock option" by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to stock
ownership of more than 10 percent), such ten year restriction on exercisability
as an ISO shall be read to impose a five year restriction on such
exercisability. If an Optionee shall terminate employment prior to the ten-year
or five-year limitation described in the immediately preceding sentences, any
outstanding ISO shall be ineligible for treatment as an "incentive stock
option," as defined in Section 422 of the Code, and shall be exercisable only as
an NSO, unless exercised within three months after such termination or, in the
case of termination on account of "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code), within one year after such
termination.
(b) OPTION PERIOD AND LIMITATIONS ON EXERCISE
Each Option granted under the Plan shall be exercisable, in whole or in
part, at any time and from time to time, over a period commencing on or after
the date of grant and, to the extent that the Board determines and sets forth a
termination date for such Option in the Option Agreement (including any
amendment thereto), ending upon the stated expiration or termination date. The
Board in its sole discretion may specify events or circumstances, including the
A-6
<PAGE> 42
giving of notice, which will cause an Option to terminate as set forth in the
Option Agreement or in this Plan. No Option granted to a person who is required
to file reports under Section 16(a) of the Exchange Act shall be exercisable
during the first six months after the date of grant. Without limiting the
foregoing but subject to the terms and conditions of the Plan, the Board may in
its sole discretion provide that an Option may not be exercised in whole or in
part for any period or periods of time during which such Option is outstanding
and may condition exercisability (or vesting) of an Option upon the attainment
of performance objectives, upon continued service, upon certain events or
transactions, or a combination of one or more of such factors, or otherwise, as
set forth in the Option Agreement. Subject to the parachute payment restrictions
under SECTION 7(b), however, the Board, in its sole discretion, may rescind,
modify or waive any such limitation or condition on the exercise of an Option
contained in any Option Agreement, so as to accelerate the time at which the
Option may be exercised or extend the period during which the Option may be
exercised. Notwithstanding any other provisions of the Plan, no Option granted
to an Optionee under the Plan shall be exercisable in whole or in part prior to
the date on which the stockholders of the Corporation approve the Plan, as
provided in SECTION 5 above.
(c) METHOD OF EXERCISE
An Option that is exercisable hereunder may be exercised by delivery to the
Corporation on any business day, at the Corporation's principal office,
addressed to the attention of the President, of written notice of exercise,
which notice shall specify the number of shares with respect to which the Option
is being exercised and shall be accompanied by payment in full of the Option
Price of the shares for which the Option is being exercised. The minimum number
of shares of Stock with respect to which an Option may be exercised, in whole or
in part, at any time shall be the lesser of (i) 100 shares or such lesser number
set forth in the applicable Option Agreement and (ii) the maximum number of
shares available for purchase under the Option at the time of exercise. Payment
of the Option Price for the shares of Stock purchased pursuant to the exercise
of an Option shall be made (i) in cash or in cash equivalents; (ii) to the
extent permitted by applicable law and under the terms of the Option Agreement
with respect to such Option, through the tender to the Corporation of shares of
Stock, which shares shall be valued, for purposes of determining the extent to
which the Option Price has been paid thereby, at their fair market value
(determined in accordance with SECTION 9) on the date of exercise; (iii) to the
extent permitted by applicable law and under the terms of the Option Agreement
with respect to such Option, by the delivery of a promissory note of the person
exercising the Option to the Corporation on such terms as shall be set out in
such Option Agreement; (iv) to the extent permitted by applicable law and under
the terms of the Option Agreement with respect to such Option, by causing the
Corporation to withhold shares of Stock otherwise issuable pursuant to the
exercise of an Option equal in value to the Option Price or portion thereof to
be satisfied pursuant to this clause (iv); or (v) by a combination of the
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<PAGE> 43
methods described in (i), (ii), (iii) and (iv). An attempt to exercise any
Option granted hereunder other than as set forth above shall be invalid and of
no force and effect. Payment in full of the Option Price need not accompany the
written notice of exercise provided the notice directs that the Stock
certificate or certificates for the shares for which the Option is exercised be
delivered to a licensed broker acceptable to the Corporation as the agent for
the individual exercising the Option and, at the time such Stock certificate or
certificates are delivered, the broker tenders to the Corporation cash (or cash
equivalents acceptable to the Corporation) equal to the Option Price. Promptly
after the exercise of an Option and the payment in full of the Option Price of
the shares of Stock covered thereby, the individual exercising the Option shall
be entitled to the issuance of a Stock certificate or Stock certificates
evidencing his ownership of such shares. A separate Stock certificate or
separate Stock certificates shall be issued for any shares purchased pursuant to
the exercise of an Option that is an ISO, which certificate or certificates
shall not include any shares that were purchased pursuant to the exercise of an
Option that is an NSO. Unless otherwise stated in the applicable Option
Agreement, an individual holding or exercising an Option shall have none of the
rights of a stockholder (for example, the right to receive cash or stock
dividend payments attributable to the subject shares or to direct the voting of
the subject shares) until the shares of Stock covered thereby are fully paid and
issued to him. Except as provided in SECTION 16 below, no adjustment shall be
made for dividends or other rights for which the record date is prior to the
date of such issuance.
(d) DATE OF GRANT
The date of grant of an Option under this Plan shall be the date as of
which the Board approves the grant.
11. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee, only such Optionee (or, in the event of
legal incapacity or incompetence, the guardian or legal representative of the
Optionee) may exercise the Option, except as otherwise specifically permitted by
this SECTION 11. No Option shall be assignable or transferable other than by
will or in accordance with the laws of descent and distribution; provided,
however, subject to the terms of the applicable Option Agreement, and to the
extent the transfer is in compliance with any applicable restrictions on
transfers, an Optionee may transfer an NSO to a family member of the Optionee
(defined as an individual who is related to the Optionee by blood or adoption)
or to a trust established and maintained for the benefit of the Optionee or a
family member of the Optionee (as determined under applicable state law and the
Code).
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<PAGE> 44
12. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP OF OPTIONEE
In the Board's sole discretion, the Board may include language in an Option
Agreement providing for the termination of any unexercised Option in whole or in
part upon or at any time after the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary (whether as an
employee, a director, a consultant or advisor providing bona fide services to
the Corporation or a Subsidiary, or otherwise). Whether a leave of absence or
leave on military or government service shall constitute a termination of
employment or other relationship of the Optionee with the Corporation or a
Subsidiary for purposes of the Plan shall be determined by the Board, which
determination shall be final and conclusive.
13. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock pursuant to
the exercise of Options granted under the Plan shall constitute general funds of
the Corporation.
14. REQUIREMENTS OF LAW
The Corporation shall not be required to sell or issue any shares of Stock
under any Option if the sale or issuance of such shares would constitute a
violation by the Optionee, the individual exercising the Option or the
Corporation of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. If at any time the Corporation shall determine, in its discretion,
that the listing, registration or qualification of any shares subject to the
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory or self-regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares, the Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Corporation,
and any delay caused thereby shall in no way affect the date of termination of
the Option. Specifically in connection with the Securities Act, upon the
exercise of any Option, unless a registration statement under the Securities Act
is in effect with respect to the shares of Stock covered thereby, the
Corporation shall not be required to sell or issue such shares unless the Board
has received evidence satisfactory to it that the holder of such Option may
acquire such shares pursuant to an exemption from registration under the
Securities Act. Any determination in this connection by the Board shall be
final, binding and conclusive. The Corporation may, but shall in no event be
obligated to, register any securities covered hereby pursuant to the Securities
Act. The Corporation shall not be obligated to take any affirmative action in
order to cause the exercisability or
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<PAGE> 45
vesting of an Option or to cause the exercise of an Option or the issuance of
shares pursuant thereto to comply with any law or regulation of any governmental
authority. As to any jurisdiction that expressly imposes the requirement that an
Option shall not be exercisable unless and until the shares of Stock covered by
such Option are registered or are subject to an available exemption from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction apply) shall be deemed conditioned upon the effectiveness
of such registration or the availability of such an exemption.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted; provided, however, that any amendment by the Board which, if not
approved by the Corporation's stockholders, would cause the Plan to not comply
with Sections 162(m) or 422 of the Code shall not be effective unless approved
by the affirmative vote of stockholders who hold more than fifty percent (50%)
of the combined voting power of the outstanding shares of voting stock of the
Corporation present or represented and entitled to vote thereon at a duly
constituted stockholders' meeting, or by consent as permitted by law. The
Corporation, however, may retain the right in an Option Agreement to convert an
ISO into an NSO. The Corporation may also retain the right in an Option
Agreement to cause a forfeiture of the shares of Stock or gain realized by a
holder of an Option (a) if the holder violates any agreement covering
non-competition with the Corporation or any Subsidiary or nondisclosure of
confidential information of the Corporation or any Subsidiary, (b) if the
holder's employment is terminated for cause or (c) if the Board determines that
the holder committed acts or omissions which would have been the basis for a
termination of holder's employment for cause had such acts or omissions been
discovered prior to termination of holder's employment. Furthermore, the
Corporation may, in the Option Agreement, retain the right to annul the grant of
an Option, if the holder of such grant was an employee of the Corporation or a
Subsidiary and the holder's employment is terminated for cause, as defined in
the applicable Option Agreement. Except as permitted under this SECTION 15 or
SECTION 16 hereof, no amendment, suspension or termination of the Plan shall,
without the consent of the holder of the Option, alter or impair rights or
obligations under any Option theretofore granted under the Plan.
16. EFFECT OF CHANGES IN CAPITALIZATION
(a) CHANGES IN STOCK
If the number of outstanding shares of Stock is increased or decreased or
the shares of Stock are changed into or exchanged for a different number or kind
of shares or other securities of the Corporation on account of any
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock
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<PAGE> 46
dividend or other distribution payable in capital stock, or other increase or
decrease in such shares effected without receipt of consideration by the
Corporation, occurring after the effective date of the Plan, the number and kind
of shares for the acquisition of which Options may be granted under the Plan,
and the limitations on the maximum number of shares subject to Options that can
be granted to any individual under the Plan as set forth in SECTION 6(b) hereof,
shall be adjusted proportionately and accordingly by the Corporation. In
addition, the number and kind of shares for which Options are outstanding shall
be adjusted proportionately and accordingly so that the proportionate interest
of the holder of the Option immediately following such event shall, to the
extent practicable, be the same as immediately before such event. Any such
adjustment in outstanding Options shall not change the aggregate Option Price
payable with respect to shares that are subject to the unexercised portion of
the Option outstanding but shall include a corresponding proportionate
adjustment in the Option Price per share.
(b) REORGANIZATION IN WHICH THE CORPORATION IS
THE SURVIVING CORPORATION
Subject to SUBSECTION ((c))(IV) hereof, if the Corporation shall be the
surviving corporation in any reorganization, merger or consolidation of the
Corporation with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger or consolidation.
(c) DISSOLUTION, LIQUIDATION, SALE OF ASSETS,
REORGANIZATION IN WHICH THE CORPORATION IS NOT THE
SURVIVING CORPORATION, ETC.
The Plan and all Options outstanding hereunder shall terminate (i) upon the
dissolution or liquidation of the Corporation, (ii) upon a merger, consolidation
or reorganization of the Corporation with one or more other corporations in
which the Corporation is not the surviving corporation, (iii) upon a sale of
substantially all of the assets of the Corporation to another person or entity
or (iv) upon a merger, consolidation or reorganization (or other transaction if
so determined by the Board in its sole discretion) in which the Corporation is
the surviving corporation, that is approved by the Board and that results in any
person or entity (other than persons who are holders of Stock of the Corporation
at the time the Plan is approved by the stockholders and other than an
Affiliate) owning 80 percent or more of the combined voting power of all classes
of stock of the Corporation, except to the extent provision is made in writing
in connection with
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<PAGE> 47
any such transaction covered by clauses (i) through (iv) for the continuation of
the Plan or the assumption of such Options theretofore granted, or for the
substitution for such Options of new options covering the stock of a successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and exercise prices, in which event the Plan
and Options theretofore granted shall continue in the manner and under the terms
so provided. In the event of any such termination of the Plan, each individual
holding an Option shall have the right (subject to the general limitations on
exercise set forth in SECTION 10(b) above), during such period occurring before
such termination as the Board in its sole discretion shall determine and
designate, and in any event immediately before the occurrence of such
termination, to exercise such Option in whole or in part, to the extent that
such Option was otherwise exercisable at the time such termination occurs,
except that, by inclusion of appropriate language in an Option Agreement, the
Board may provide that the Option may be exercised before termination without
regard to any installment limitation or other condition on exercise imposed
pursuant to SECTION 10(b) above. The Corporation shall send written notice of a
transaction or event that will result in such a termination to all individuals
who hold Options not later than the time at which the Corporation gives notice
thereof to its stockholders.
(d) ADJUSTMENTS
Adjustments under this SECTION 16 related to stock or securities of the
Corporation shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares of Stock or units
of other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share or unit.
(e) NO LIMITATIONS ON CORPORATION
The grant of an Option pursuant to the Plan shall not affect or limit in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ or service of or to maintain a
relationship with the Corporation or any Subsidiary, or to interfere in any way
with any contractual or other right or authority of the Corporation or any
Subsidiary either to increase or decrease the compensation or other payments to
any individual at any time, or to terminate any employment or other relationship
between any
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<PAGE> 48
individual and the Corporation or any Subsidiary. The obligation of the
Corporation to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Corporation to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
participant or beneficiary under the terms of the Plan.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Corporation for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
19. CAPTIONS
The use of captions in this Plan or any Option Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Option Agreement.
20. DISQUALIFYING DISPOSITIONS
If Stock acquired by exercise of an ISO granted under this Plan is disposed
of within two years following the date of grant of the ISO or one year following
the transfer of the subject Stock to the Optionee (a "disqualifying
disposition"), the holder of the Stock shall, immediately prior to such
disqualifying disposition, notify the Corporation in writing of the date and
terms of such disposition and provide such other information regarding the
disposition as the Corporation may reasonably require.
21. WITHHOLDING TAXES
The Corporation shall have the right to deduct from payments of any kind
otherwise due to an Optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon the
exercise of an Option under the Plan or in connection with the purchase of an
Option by the Corporation. At the time of exercise, the Optionee shall pay to
the Corporation any amount that the Corporation may reasonably determine to be
necessary to satisfy such withholding obligation. The Board in its sole
discretion may provide in the Option Agreement that, subject to the prior
approval of the Corporation, which may be withheld by the Corporation in its
sole discretion, the Optionee may elect to
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<PAGE> 49
satisfy such obligations, in whole or in part, (i) by causing the Corporation to
withhold shares of Stock otherwise issuable pursuant to the exercise of an
Option or (ii) by delivering to the Corporation shares of Stock already owned by
the Optionee. The shares so delivered or withheld shall have a fair market value
equal to such withholding obligations. The fair market value of the shares used
to satisfy such withholding obligation shall be determined by the Corporation as
of the date that the amount of tax to be withheld is to be determined. An
Optionee who has made an election pursuant to this SECTION 21 may only satisfy
his or her withholding obligation with shares of Stock that are not subject to
any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
22. OTHER PROVISIONS
Each Option granted under the Plan may be subject to, and the Option
Agreement relating to such Option may contain, such other terms and conditions
not inconsistent with the Plan as may be determined by the Board, in its sole
discretion. Notwithstanding the foregoing, each ISO granted under the Plan shall
include those terms and conditions that are necessary to qualify the ISO as an
"incentive stock option" within the meaning of Section 422 of the Code or the
regulations thereunder and shall not include any terms or conditions that are
inconsistent therewith.
23. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
24. SEVERABILITY
If any provision of the Plan or any Option Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
25. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Options granted hereunder shall be governed by the laws of the State of
Delaware (excluding its choice of law rules).
* * *
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Solicitation, Voting and
Revocability of Proxies.......... 1
Election of Directors.............. 2
Executive Compensation and
Other Information................ 9
Approval of 2000 Stock
Option Plan...................... 20
Independent Public Accountants..... 26
Stock Owned by Management.......... 27
Principal Holders of
Voting Securities................ 29
Date for Submission of
Stockholder Proposals............ 30
Other Business to be Transacted.... 31
Exhibit A -- 2000 Stock
Option Plan...................... A-1
</TABLE>
================================================================================
================================================================================
PROXY STATEMENT
SUNRISE ASSISTED LIVING, INC.
APRIL 14, 2000
================================================================================
<PAGE> 51
SUNRISE ASSISTED LIVING, INC.
7902 WESTPARK DRIVE, MCLEAN, VIRGINIA 22102
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - MAY 12, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Sunrise Assisted Living, Inc. hereby appoints
Paul J. Klaassen and Thomas B. Newell, and each of them, with full power of
substitution, as proxies to cast all votes, as designated below, which the
undersigned stockholder is entitled to cast at the 2000 annual meeting of
stockholders to be held on May 12, 2000 at 9:00 a.m., local time, at the The
Ritz-Carlton - Tysons Corner, 1700 Tysons Boulevard, McLean, Virginia, and at
any adjournments or postponements, upon the following matters:
<TABLE>
<S> <C> <C>
1. To elect two directors each for a three-year term: Thomas J. Donohue
David W. Faeder
</TABLE>
<TABLE>
<S> <C>
[ ] FOR both nominees listed (except as marked to the
contrary below)
[ ] WITHHELD AUTHORITY
to vote for both nominees listed
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. To approve the 2000 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed and dated on reverse side.)
<PAGE> 52
(continued from reverse side)
This proxy will be voted as directed by the undersigned stockholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSAL 2 AND IN THE MANNER RECOMMENDED BY A
MAJORITY OF THE BOARD OF DIRECTORS AS TO OTHER MATTERS.
The undersigned stockholder hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement and hereby revokes any proxy or proxies heretofore
given. This proxy may be revoked at any time prior to its exercise.
If you receive more than one proxy card, please date, sign and return all cards
in the accompanying envelope.
DATED:
-----------------------------------------
-----------------------------------------
-----------------------------------------
(Please date and sign here exactly as
name appears at left. When signing as
attorney, administrator, trustee or
guardian, give full title as such; and
when stock has been issued in the name of
two or more persons, all should sign.)
