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Exhibit 10.4.2

 
EMERITUS CORPORATION
AMENDED AND RESTATED 2006 EQUITY INCENTIVE PLAN
 
RESTRICTED STOCK AWARD NOTICE
 
Emeritus Corporation (the "Company") hereby grants to you a Restricted Stock
Award (the "Award") for shares of the Company's Common Stock under the Company's
Amended and Restated 2006 Equity Incentive Plan (the "Plan").  The Award is
subject to all the terms and conditions set forth in this Restricted Stock Award
Notice (the "Award Notice") and in the Restricted Stock Award Agreement and the
Plan, which are incorporated into this Award Notice in its entirety.

 
 
Participant:
______________
 
Grant Date:
______________
 
Number of Restricted Shares Subject to the Award (the "Shares"):
 
______________
Fair Market Value Per Share on Grant Date (Informational, for tax purposes):
 
$_____________
Performance Period:
 
Plan Year:
January 1 – December 31
Purchase Price (per Share):
$0.00

Vesting Schedule (subject to continued employment or service as set forth in the
Restricted Stock Award Agreement):

 
Following the end of each Plan Year in the Performance Period, Shares will vest
based on the percentage of annual increase in the Company's adjusted Cash From
Facility Operations ("CFFO") per share for such Plan Year ("Annual Adjusted CFFO
Growth") and, as applicable, average compounded cumulative annual growth in
adjusted CFFO per share during the elapsed portion of the Performance Period
("Average Adjusted CFFO Growth"), each as described below.

(a)           Annual Adjusted CFFO Growth.  Shares will vest and no longer be
subject to forfeiture after each Plan Year in an amount equal to the product of
(i) 25% of the total number of Shares subject to the Award and (ii) the
percentage below that corresponds to the Annual Adjusted CFFO Growth percentage
for the Plan Year (this percentage is labeled below as "Vesting
Percentage," with straight-line interpolation for percentages that fall between
the Annual Adjusted CFFO Growth percentages set forth below):
 

 
Annual Adjusted CFFO Growth
             
Vesting Percentage
             

 

 
91004-2315/LEGAL22350498.3 

 

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No Shares will vest for a Plan Year pursuant to this section (a) in which Annual
Adjusted CFFO Growth is not at least __%, but Shares may vest for such Plan Year
pursuant to section (b) below.
 
(b)           Average Adjusted CFFO Growth.  In addition, for Plan Years 2, 3
and 4 in the Performance Period, any Shares that were eligible to vest during
one or more prior Plan Years that did not vest during such year(s) may vest in a
future Plan Year based on Average Adjusted CFFO Growth; provided, however, that
Average Adjusted CFFO Growth must be at least 10% as calculated at the end of
such Plan Year.  In such event, Shares will vest for a Plan Year based on
Average Adjusted CFFO Growth according to the following formula:
 
 
Step 1:

(
__% + (Average Adjusted CFFO Growth % – __%) x 10
)
*
x
(
Applicable Plan Year
)
(
Number of Restricted Shares Subject to Award
)
 
4

*  Maximum of 100%

 
OR, if greater, the number of Shares cumulatively vested as of the end of the
immediately prior Plan Year
 
Step 2: Minus
 
(i) the number of Shares that vested during the Plan Year as a result of Annual
Adjusted CFFO Growth and (ii) the number of Shares cumulatively vested as of the
end of the immediately completed prior Plan Year.  This result will be "0" where
no Shares are eligible to vest during a Plan Year by reason of Average Adjusted
CFFO Growth.
 
For purposes of the foregoing "Applicable Plan Year" means the applicable Plan
Year in the Performance Period—expressed in terms of 1, 2, 3 or 4, with 1 being
the first such Plan Year in the Performance Period and 4 being the last.
 
(c)           Plan Year Vesting.  The sum of (a) and (b) above equals the total
number of Shares that will be vested for a single Plan Year.  Any Shares that
are not vested after completion of the Performance Period will automatically be
forfeited to the Company.
 
Additional Terms/Acknowledgement:  You acknowledge receipt of, and understand
and agree to, the Award Notice and the attached Restricted Stock Award
Agreement.  You further acknowledge that as of the Grant Date, the Award Notice,
the Restricted Stock Award Agreement and the Plan set forth the entire
understanding between you and the Company regarding the Award and supersede all
prior oral and written agreements on the subject, except as may be set forth in
a separate written agreement approved by the Committee (as defined in the Plan).

 
EMERITUS CORPORATION
 
PARTICIPANT
                     
By:
   
Taxpayer ID:
 
Title:
   
Address:
           
Attachment:
     
1.  Restricted Stock Award Agreement
     

 
91004-2315/LEGAL22350498.3 

 
 

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EMERITUS CORPORATION
AMENDED AND RESTATED 2006 EQUITY INCENTIVE PLAN
 
RESTRICTED STOCK AWARD AGREEMENT

 
Pursuant to your Restricted Stock Award Award Notice, (the "Award Notice") and
this Restricted Stock Award Agreement (this "Agreement"),  Emeritus Corporation
(the "Company") has granted you a Restricted Stock Award (the "Award") under its
Amended and Restated 2006 Equity Incentive Plan  (the "Plan") for the number of
shares of the Company's Common Stock indicated in your Award Notice.  The Award
Notice, this Agreement and the Plan govern the terms of the Award.  Capitalized
terms not explicitly defined in this Agreement or the Award Notice but defined
in the Plan shall have the same definitions as in the Plan.

 
1.           Vesting

 
Shares that have vested and are no longer subject to forfeiture according to the
vesting schedule set forth in the Award Notice are referred to herein as "Vested
Shares."  Shares that are not vested and remain subject to forfeiture under the
preceding schedule are referred to herein as "Unvested Shares."  The Unvested
Shares will vest (and to the extent so vested cease to be Unvested Shares
remaining subject to forfeiture) in accordance with the vesting schedule set
forth in the Award Notice.  Collectively, the Unvested Shares and the Vested
Shares are referred to herein as the "Shares."
 
The determination of achievement of the performance goals applicable to the
Shares, the number of Shares vested as a result thereof and any other matters
with respect to the Award will be made by the Committee in its sole and
absolution discretion and its determination will be final and binding.  The
determination of vesting of Shares will be made by the Committee as soon as
practicable after the applicable Plan Year.  Any resulting fractional shares
will be rounded up to the nearest whole number of Shares (with 0.5 rounded up),
provided that Vested Shares may not exceed the total number of Shares subject to
the Award.

 
2.           Transfer Restrictions

 
Any sale, transfer, assignment, encumbrance, pledge, hypothecation, conveyance
in trust, gift, transfer by bequest, devise or descent, or other transfer or
disposition of any kind, whether voluntary or by operation of law, directly or
indirectly, of Unvested Shares is strictly prohibited and void, except by will
or the laws of descent and distribution.

 
3.           Status of Participant

 
You will be recorded as a shareholder of the Company with respect to the Shares.

 

 
91004-2315/LEGAL22350498.3 

 
 

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4.           Securities Law Compliance
 
4.1           You represent and warrant that a copy of the Plan, the Plan
Summary for the Plan, and all information that you deem necessary to evaluate
the merits and risks of the acquisition of the Shares has been made available to
you.
 
4.2           You hereby agree that you will in no event sell or distribute all
or any part of the Shares unless (a) there is an effective registration
statement under the Securities Act and any applicable state securities laws
covering any transaction involving the Shares or (b) the Company receives an
opinion of your legal counsel (concurred in by legal counsel for the Company)
stating that such transaction is exempt from registration or the Company
otherwise satisfies itself that such transaction is exempt from
registration.  You also hereby confirm that you have been informed that although
the Shares acquired pursuant to this Agreement have been registered under the
Securities Act, if and so long as you are an affiliate of the Company for
purposes of Rule 144 of the Securities Act, any subsequent sale of such Shares
by you must either be registered under the Securities Act or must satisfy the
requirements of Rule 144 or another applicable exemption from such registration
requirements.

 
5.           Termination of Employment or Service

 
Unless the Committee determines otherwise, all Unvested Shares will immediately
be forfeited to the Company upon your Termination of Service without payment of
any consideration to you; provided, however, that if your Termination of Service
occurs after a Plan Year in which you were participating but prior to the
Committee's determination of achievement of applicable performance goals and/or
issuance of any Vested Shares for such completed Plan Year, you will remain
eligible to receive any Vested Shares for such Plan Year.

 
6.           Section 83(b) Election for Restricted Stock Award

 
You understand that under Section 83(a) of the Internal Revenue Code of 1986
(the "Code"), the fair market value of the Unvested Shares on the date the
forfeiture restrictions lapse will be taxed, on the date such forfeiture
restrictions lapse, as ordinary income subject to payroll and withholding tax
and tax reporting, as applicable.  For this purpose, the term "forfeiture
restrictions" means the right of the Company to receive back such Unvested
Shares upon your Termination of Service. You understand that you may elect under
Section 83(b) of the Code to be taxed at ordinary income rates on the fair
market value of the Unvested Shares at the time they are acquired, rather than
when and as the Unvested Shares cease to be subject to the forfeiture
restrictions.  Such election (an "83(b) Election") must be filed with the
Internal Revenue Service within 30 days from the grant date of the Restricted
Stock Award.
 
You understand that there are significant risks associated with the decision to
make an 83(b) Election.  If you make an 83(b) Election and the Unvested Shares
are subsequently forfeited to the Company, you will not be entitled to a
deduction for any ordinary income previously recognized as a result of the 83(b)
Election.  If you make an 83(b) Election and the
 

 
 

 
91004-2315/LEGAL22350498.3 

 
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value of the Unvested Shares subsequently declines, the 83(b) Election may cause
you to recognize more compensation income than you would have otherwise
recognized.  On the other hand, if the value of the Unvested Shares increases
and you have not made an 83(b) Election, you may recognize more compensation
income than you would have if you had made the election.
 
THE FORM FOR MAKING AN 83(b) ELECTION IS ATTACHED TO THIS AGREEMENT AS EXHIBIT
B.  YOU UNDERSTAND THAT, IF YOU DECIDE TO MAKE AN 83(b) ELECTION, IT IS YOUR
RESPONSIBILITY TO FILE SUCH AN ELECTION WITH THE INTERNAL REVENUE SERVICE AND
THAT FAILURE TO FILE SUCH AN ELECTION WITHIN THE 30-DAY PERIOD MAY RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY YOU AS THE FORFEITURE RESTRICTIONS LAPSE. You
further understand that an additional copy of such election form should be filed
with your federal income tax return for the calendar year in which the date of
this Agreement falls.  You acknowledge that the foregoing is only a summary of
the federal income tax laws that apply to the Award of the Shares under this
Agreement and does not purport to be complete.  YOU FURTHER ACKNOWLEDGE THAT THE
COMPANY HAS DIRECTED YOU TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE
PROVISIONS OF THE CODE AND THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH YOU MAY RESIDE.
 
You agree to execute and deliver to the Company with this Agreement a copy of
the Acknowledgment and Statement of Decision Regarding Section 83(b) Election
(the "Acknowledgment") attached hereto as Exhibit A.  You further agree that if
you choose to make an 83(b) Election with the Internal Revenue Service, you will
also deliver to the Company with the signed Award Notice a signed copy of the
83(b) Election.

 
7.           Independent Tax Advice

 
You acknowledge that determining the actual tax consequences to you of receiving
or disposing of the Shares may be complicated.  These tax consequences will
depend, in part, on your specific situation and may also depend on the
resolution of currently uncertain tax law and other variables not within the
control of the Company.  You are aware that you should consult a competent and
independent tax advisor for a full understanding of the specific tax
consequences to you of receiving or disposing of the Shares.  Prior to executing
this Agreement, you either have consulted with a competent tax advisor
independent of the Company to obtain tax advice concerning the Shares in light
of your specific situation or have had the opportunity to consult with such a
tax advisor but have chosen not to do so.

 
8.           Book Entry Registration of the Shares

 
The Company will issue the Shares by registering the Shares in book entry form
with the Company's transfer agent in your name and the applicable restrictions
will be noted in the records of the Company's transfer agent and in the book
entry system.  No certificate(s) representing all or a part of the Shares will
be issued until the Shares become Vested Shares.

 
 

 
91004-2315/LEGAL22350498.3 

 
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9.           Stop-Transfer Notices
 
You understand and agree that, in order to ensure compliance with the
restrictions referred to in this Agreement, the Company may issue appropriate
"stop-transfer" instructions to its transfer agent, if any, and that, if the
Company transfers its own securities, it may make appropriate notations to the
same effect in its own records.  The Company will not be required to
(a) transfer on its books any Shares that have been sold or transferred in
violation of the provisions of this Agreement or (b) treat as the owner of the
Shares, or otherwise accord voting, dividend or liquidation rights to, any
transferee to whom the Shares have been transferred in contravention of this
Agreement.

 
10.           Clawback

 
The Shares will be subject to any clawback or recoupment policy adopted by the
Company pursuant to the requirements of the Dodd-Frank Wall Street Reform and
Consumer Protection Act or as required by other law or the listing requirements
of any national securities exchange on which the Common Stock is listed.

 
11.           Tax Withholding

 
As a condition to the removal of restrictions from your Vested Shares registered
in book entry form with the Company's transfer agent, you agree to make
arrangements satisfactory to the Company for the payment of any federal, state,
local or foreign withholding tax obligations that arise either upon receipt of
the Shares or as the forfeiture restrictions on any Shares
lapse.  Notwithstanding the previous sentence, you acknowledge and agree that
the Company and any Related Company has the right to deduct from payments of any
kind otherwise due to you any federal, state, local or foreign taxes of any kind
required by law to be withheld with respect to the Award.

 
12.           General Provisions
 
12.1           Notices

 
Whenever any notice is required or permitted hereunder, such notice must be in
writing and personally delivered or sent by mail.  Any notice required or
permitted to be delivered hereunder shall be deemed to be delivered on the date
on which it is personally delivered, or, whether actually received or not, on
the third business day after it is deposited in the United States mail,
certified or registered, postage prepaid, addressed to the person who is to
receive it at the address that such person has specified by written notice to
the other.  The Company or you may change, by written notice to the other, the
address previously specified for receiving notices.  Notices delivered to the
Company shall be addressed as follows:

    

 
Emeritus Corporation
 
Attn:  Compensation Department
 
3131 Elliott Avenue, Suite 500
 
Seattle, Washington 98121

 
 

 
91004-2315/LEGAL22350498.3 

 
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Notices to you shall be addressed at the address set forth on the Award Notice
(or any subsequent address provided to the Company by you in writing).
 

          
12.2           No Waiver

 
No waiver of any provision of the Award Notice or this Agreement will be valid
unless in writing and signed by the person against whom such waiver is sought to
be enforced, nor will failure to enforce any right hereunder constitute a
continuing waiver of the same or a waiver of any other right hereunder.

 
12.3           Undertaking

 
You hereby agree to take whatever additional action and execute whatever
additional documents the Company may deem necessary or advisable in order to
carry out or effect one or more of the obligations or restrictions imposed on
either you or the Shares pursuant to the express provisions of this Agreement.

 
12.4           Entire Contract

 
This Agreement, the Award Notice and the Plan constitute the entire contract
between the parties hereto with regard to the subject matter hereof and
supersede all prior oral or written agreements on the subject.  This Agreement
is made pursuant to the provisions of the Plan and will in all respects be
construed in conformity with the express terms and provisions of the Plan.

 
12.5           Successors and Assigns

 
The provisions of this Agreement will inure to the benefit of, and be binding
on, the Company and its successors and assigns and you and your legal
representatives, heirs, legatees, distributees, assigns and transferees by
operation of law, whether or not any such person will have become a party to
this Agreement and agreed in writing to join herein and be bound by the terms
and conditions hereof.

 
12.6           Counterparts

 
This Agreement may be executed in two or more counterparts, each of which will
be deemed an original, but which, upon execution, will constitute one and the
same instrument.

 
12.7           Governing Law

 
The provisions of the Award Notice and this Agreement will be governed by the
laws of the state of Washington, without giving effect to principles of
conflicts of law.

 
91004-2315/LEGAL22350498.3 

 
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EXHIBIT A
 
ACKNOWLEDGMENT AND STATEMENT OF DECISION REGARDING SECTION 83(b) ELECTION

 
The undersigned, a recipient of _______ shares of common stock of Emeritus
Corporation, a Washington corporation (the "Company"), pursuant to a restricted
stock award granted under the Company's Amended and Restated 2006 Equity
Incentive Plan (the "Plan"), hereby states as follows:
1.           The undersigned acknowledges receipt of a copy of the Restricted
Stock Award Notice and the Restricted Stock Award Agreement (collectively, the
"Restricted Stock Award Agreement") and the Plan relating to the offering of
such shares.  The undersigned has carefully reviewed the Plan and the Restricted
Stock Award Agreement pursuant to which the award was granted.
2.           The undersigned either (check and complete as applicable)

 
(a) has consulted, and has been fully advised by, the undersigned's own tax
advisor, ________________________, whose business address is
_________________________, regarding the federal, state and local tax
consequences of receiving shares under the Plan, and particularly regarding the
advisability of making an election pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and pursuant to the corresponding
provisions, if any, of applicable state law, or
(b) has knowingly chosen not to consult such a tax advisor.

 
3.           The undersigned hereby states that the undersigned has decided
(check as applicable)

 
(a) to make an election pursuant to Section 83(b) of the Code, and is submitting
to the Company, together with the undersigned's executed Restricted Stock Award
Notice, an executed form entitled "Election Under Section 83(b) of the Internal
Revenue Code of 1986", or
(b) not to make an election pursuant to Section 83(b) of the Code.

 
4.           Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned's acquisition of shares under the
Plan or of the making or failure to make an election pursuant to Section 83(b)
of the Code or the corresponding provisions, if any, of applicable state law.

Dated:  _______________
                                                                                                 
   
Recipient
   
                                                                                                 
   
Print Name

 

 
91004-2315/LEGAL22350498.3 

 
 

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EXHIBIT B
 
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
 

 
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:

 
1.    The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:

 
NAME OF TAXPAYER:
                                                                                       
           

 
ADDRESS:
                                                                                                                                                                                                   
 
  
 
                                                                                                                                                                                                

 
IDENTIFICATION NO. OF TAXPAYER:
                                                                           

 
TAXABLE YEAR:  ___________

 
2    .The property with respect to which the election is made is described as
follows:  _______________ shares of the Common Stock of Emeritus Corporation., a
Washington corporation (the "Company").
 
3.    The date on which the property was transferred
is:  __________________________  
 
4.    The property is subject to the following restrictions:

 
The property is subject to a forfeiture right pursuant to which the Company can
reacquire the Shares if certain performance goals are not met with respect to
the shares or if the taxpayer's services with the Company terminate prior to
vesting of the shares.  The Company's right to receive back the shares lapses in
annual installments over a four-year period.

 
5.    The aggregate fair market value at the time of transfer, determined
without regard to any restriction other than a restriction which by its terms
will never lapse, of such property is:  $____________
 
6.    The amount (if any) paid for such property is:  $___________

 
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property.  The undersigned is the person performing the services
in connection with the transfer of said property.
 
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner of Internal Revenue.

 
Dated:  _______________
 
                                                                                                            
   
Taxpayer

 
 
 

 
91004-2315/LEGAL22350498.3 

 
 

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DISTRIBUTION OF COPIES

 
1.File original with the Internal Revenue Service Center where the taxpayer's
income tax return will be filed.  Filing must be made by no later than 30 days
after the date of grant.
2.Attach one copy to the taxpayer's income tax return for the taxable year in
which the property was transferred.
3.Mail one copy to the Company at the following address:

 
Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, Washington 98121

 
91004-2315/LEGAL22350498.3 

 
 

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