EXHIBIT A
SUNRISE ASSISTED LIVING, INC. 1997 STOCK OPTION PLAN
SUNRISE ASSISTED LIVING, INC., a Delaware corporation (the "Corporation"), sets forth
herein the terms of this 1997 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
(with the term "person" as used in such Rule 405 being defined as in Section 2(2) of such 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 win
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 (1) 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 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, one million eight hundred
thousand (1,800,000) shares. If any Option expires, 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.
4. ELIGIBILITY
(a) Designated Recipients
Subject to the next sentence, Options may be granted under the Plan to (1) any employee of the
Corporation or any Subsidiary (including any such individual who is an officer or director 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.
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
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 500,000 shares during the first ten years after the effective date of the
Plan and 200,000 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 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 AGREEMENTSAll 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 the Stock subject to an Option (the "Option Price") shall be
fixed by the Board and stated in each Option Agreement. In the case of an Option intended to
constitute an ISO, 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 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. In the case of an Option that is an NSO, the Option Price shall not be less than par value.
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 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 Securities
Exchange Act of 1934 (as now in effect or as hereafter amended) 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 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 fun 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
incompetency, 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).
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 which 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 of 1933
(as now in effect or as hereafter amended), upon the exercise of any Option, unless a registration
statement under such 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 such 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 of 1933 (as now in effect
or as hereafter amended). The Corporation shall not be obligated to take any affirmative action in
order to cause the exercisability or 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 Shan, 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 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 immediate ly
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, or (10 upon a merger, consolidation, or reorganization of the
Corporation with one or more other corporations in which the Corporation is not the surviving
corporation, or (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 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 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 TAXESThe 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 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).
Sunrise Assisted Living, Inc. 3/31/97
