Code of Conduct

Code of Conduct

1. GENERAL STATEMENT OF POLICY

   This Code of Conduct ("Code") has been adopted by Emeritus Corporation ("the Company") to provide ethical standards and policies by which officers, directors and employees of the Company will conduct themselves in order to promote integrity and sound business practices. These standards are linked closely to our corporate vision, strategies and values and are intended to provide guidance to persons functioning in managerial or administrative capacities, as well as to all employees.

   The integrity, reputation and profitability of the Company ultimately depend upon the individual actions of our employees, representatives, officers, directors, agents and consultants. It is the policy of the Company and its subsidiaries to comply with all applicable laws and to adhere to ethical standards in the conduct of our business. Each employee is expected to read and understand this Code of Conduct, uphold these standards in daily activities and take personal responsibility for compliance with all applicable policies and procedures. Because the principles described in the Code are general in nature, you should also review applicable Company policies and procedures for more specific guidance pertaining to particular topics discussed in the Code.

   In furtherance of the Company's commitment to ethical standards, we are committed to regularly reviewing and updating our policies and procedures. Therefore, this Code is subject to modification. The Code supersedes all other such codes, policies, procedures, instructions, practices, rules or written or verbal representations to the extent that they are inconsistent with the Code. While the Company will generally attempt to communicate changes concurrent with or prior to the implementation of such changes, the Company reserves the right to modify, amend or alter the Code without notice to any employee.

   The guidelines in this Code are neither exclusive nor comprehensive. Because the business and legal environment in which the Company operates is complex, it would be impossible to formulate a single policy that would govern all possible situations. Employees are expected and required to comply with the letter and the spirit of all applicable laws and policies, whether or not specifically addressed within this Code. If questions arise regarding the interpretation, application, or existence of any law, they should be directed to the Company's Chief Financial Officer.

2. BUSINESS PRACTICES AND LEGAL COMPLIANCE

   1. Compliance With Laws and Regulations

      All Company officers, directors and employees must comply with all applicable laws, regulations, rules and regulatory orders applicable in the country, state and local jurisdictions where business is conducted, including securities laws, antitrust laws and other fair competition laws. Each officer, director and employee is expected to acquire appropriate knowledge of the requirements relating to his or her duties sufficient to enable him or her to recognize potential issues or violations and to know when to seek advice from the Company's Chief Financial Officer on specific Company policies and procedures. Violations of laws, regulations, rules and orders may subject the employee to individual criminal or civil liability, as well as to disciplinary action by the Company. Because such individual violations may also subject the Company to civil or criminal liability or the loss of business, the Company takes legal compliance measures seriously and works diligently to enforce them.

   2. Conflicts of Interest

      Each officer, director and employee has a responsibility to the Company, its shareholders and each other to perform job duties in pursuit of the Company's best interests and to refrain from letting personal interests influence, or appear to influence, business activities. Employees are responsible for recognizing and avoiding any situation involving a conflict of interest. A conflict of interest exists when an employee's duty to give undivided business loyalty to the Company may be prejudiced by actual or potential personal benefit from another source. Employees should always strive to avoid even the appearance of a conflict of interest by avoiding any association or investment interest that interferes, might interfere, or might appear to interfere, with the independent exercise of judgment in the Company's best interests. An officer, director or employee may, however, avoid a potential conflict of interest or the appearance of a conflict of interest by fully disclosing the personal benefits or other facts giving rise to a potential conflict or the appearance of a conflict to a supervisor or, in the case of an officer or director, to the Board of Directors and following the determinations of such supervisor or the Board.

      Some scenarios that may pose potential conflict of interest problems include, but are not limited to, the following:

      1. Investing in any company that sells products or services similar to the Company’s, or any company doing or seeking to do business with the Company, other than relatively small investments in securities widely held by the general public;
      2. Working for, or on behalf of, any such company;
      3. Placing Company business with relatives or friends, or working on a Company project that will have a direct impact on the financial interests of relatives or friends;
      4. Encouraging companies dealing with the Company to buy supplies or services from relatives or friends;
      5. Borrowing money from companies doing or seeking to do business with the Company other than on generally available terms;
      6. Participating in the regulatory or other activities of a community or governmental body that have a direct impact on the business of the Company or its affiliates;
      7. Hiring or supervising a relative or friend;
      8. Engaging in a personal relationship with another employee or vendor that affects one’s ability to do one’s job or disrupts the workplace;
      9. Serving as a director of any company that competes with the Company; and
      10. Accepting gifts or gratuities valued in excess of one hundred dollars ($100) from any customer, vendor, supplier, or other person doing business with the Company or its affiliates.

      Each employee is responsible for recognizing situations in which a conflict of interest or the appearance of a conflict of interest is present or might arise and for taking appropriate action to eliminate or prevent such conflict or appearance of a conflict, including reporting the situation to the appropriate level of management. Where an employee believes it is not possible to avoid any of these situations, or to avoid any other potential conflict of interest, the employee must inform his or her supervisor and make full written disclosure (in advance whenever possible) to the Company's Chief Financial Officer. Any transaction between an officer or a director and the Company must be fully disclosed in writing in advance to the Company's Board of Director, or committee of independent directors designated by the Board, and must be approved by the Board or such committee.

   3. Corporate Opportunities

      Officers, directors and employees may not exploit for their own personal gain opportunities that are discovered through the use of corporate property, information or position unless the opportunity is disclosed fully in writing to the Company's Board of Directors, or a committee of independent directors designated by the Board, and the Board or such committee explicitly declines to pursue such opportunity. The fact that a particular business opportunity is closely related to an existing line of business of the Company or represents a desirable avenue of expansion of Company activities is a strong indication that the Company might be interested in the opportunity. Officers, directors and employees owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises.

   4. Confidential Information

      The Company's confidential information is a valuable asset, and protecting that information is one of the most important obligations you have as an officer, director or employee of the Company. Under this agreement, the employee may not disclose the Company's confidential information to anyone or use it to benefit anyone other than the Company without the prior written consent of an authorized Company officer. Also, the employee may not disclose confidential or proprietary information or trade secrets to other employees of the Company or its affiliates except on a "need to know" basis.

   5. Financial Statements and Public Disclosures

      The Company is committed to fairly presenting its financial information in conformity with generally accepted accounting principles (GAAP). This financial information serves as the basis for managing the Company's business, measuring and fulfilling Company obligations, and complying with tax and financial reporting requirements. Financial reports, accounting records, research reports, expense accounts, time sheets and other documents must represent the relevant facts or the nature of the relevant transactions. Accounting and financial reporting practices must be fair and proper, in accordance with GAAP where necessary, and use management’s best judgments where necessary.

      The Company endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the Company. Clear, open and frequent communication among all management levels and personnel on all significant financial and operating matters substantially reduces the risk of problems in the accounting and financial reporting areas and helps achieve these goals. All management-level employees are expected to be aware of these risks and to communicate accordingly. Internal controls will be adopted from time to time by management as needed to further assist in preventing and detecting errors and fraud, promoting accuracy and completeness in financial records and providing full, fair, accurate, timely and understandable disclosure in periodic reports and other public communications.

   6. Securities Laws and Insider Trading

      It is against Company policy for any individual to profit from material undisclosed information relating to the Company or any company with which the Company does business. If an officer, director or employee is in possession of material inside information that the Company has not yet disclosed to the public, he or she may not purchase or sell any of the securities of the Company or “tip” others to trade in Company stock. Material inside information is defined as facts that have not been disclosed to the public that would influence a reasonable investor's decision to buy or sell a company's stock or other securities. Also, if an officer, director or employee has inside or unpublished knowledge about any of the Company's public-company suppliers, customers or any other public company that the Company does business with, he or she may not purchase or sell securities of those companies or tip others to do so.

      Insider trading is a crime, subject to fines of up to $5,000,000 and 20 years in jail for individuals. In addition, the SEC may seek the imposition of a civil penalty of up to three times the profits made or losses avoided from the trading. Insider traders must also disgorge any profits made and are often subjected to an injunction against future violations. Insider traders may further be subjected to civil liability in private law suits.

      Moreover, U.S. securities laws provide for penalties not only for those who engage in insider trading, but also for those controlling persons who fail to take appropriate action when they either knew or should have known that persons within their control were violating these rules. Controlling persons, including supervisory personnel, may face penalties of the greater of $5,000,000 or three times the profits made or losses avoided by the trader if they recklessly fail to take preventive steps to control insider trading. Therefore, it is essential that employees be alert to those situations where others within the Company (particularly those over whom the employee has some supervisory authority) may not be observing the rules of insider trading. We urge you to contact the Company's Chief Financial Officer, as well as the Company's Stock Plan Administrator, if you are unsure as to whether or not you are free to trade under a particular set of circumstances.

      For further details and guidance, please consult the Company's Insider Trading Policy.

   7. Antitrust Laws

      The Company is committed to obeying both the letter and the spirit of the many laws designed to encourage and protect free and fair competition. The United States antitrust laws prohibit agreements or actions in “restraint of trade,” defined as restrictive practices that may reduce or hinder competition. These laws require that decisions be made and activities undertaken without any agreement or coordination with competitors. Among those agreements and activities constituting clear violations are agreements and understandings to fix or control prices and other terms of sale, to allocate products, territories or markets, or to limit the production or sale of products. Accordingly, employees must take great care to avoid any communications with the Company’s competitors with respect to these types of matters.

      The antitrust laws also regulate conduct with suppliers. For example, resale price agreements are prohibited, and the Robinson-Patman Act prohibits price discrimination by suppliers and knowingly inducing or receiving discriminatory pricing by buyers. Individuals involved in pricing discussions with suppliers must be knowledgeable with respect to the price discrimination rules and must consult with the Company's Chief Financial Officer as issues arise.

      No employee, agent or contractor of the Company may enter into an agreement or understanding, written or oral, express or implied, with any competitor concerning prices, discounts, other terms or conditions of sale, profits or profit margins, costs, allocation of product or geographic markets, allocation of customers, limitations of production, boycotts of customers or suppliers, bids or the intent to bid or even discuss or exchange information on these subjects. In some cases, legitimate joint ventures with competitors may permit exceptions to these rules, as may bona fide purchases from or sales to competitors of non-competitive products, but the Company's Chief Executive Officer must review all such proposed ventures or arrangements in advance. Collusion among competitors is illegal, and the consequences of a violation are severe and include disciplinary action up to termination and possible criminal prosecution.

      Although the spirit of antitrust laws is straightforward, their application to particular situations can be quite complex. To ensure that the Company complies with these laws, each officer, director and employee of the Company should consult with the Company's Chief Financial Officer early on when questionable situations arise.

   8. Political Activity

      The Company reserves the right to communicate its position on important issues to elected representatives and other government officials. It is the Company’s policy to comply with all local, state, federal, foreign and other applicable laws, rules and regulations regarding political contributions. The Company’s funds or assets must not be used for, or be contributed to, political campaigns or political practices under any circumstances without the prior written approval of the Company’s Chief Financial Officer and, if required, the Board of Directors. If employees engage in personal political activity on their own time, they must take particular care not to imply that they are acting on behalf of the Company.

   9. Record Keeping

      The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. For example, on the true and actual number of hours worked should be reported.

      Many employees regularly use business expense accounts, which must be documented and recorded accurately. If you are not sure whether a certain expense is legitimate, ask your supervisor or your controller.

      All of the Company's books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company's transactions and must conform both to applicable legal requirements and to the Company's in internal controls. Unrecorded or "off the books" funds or assets should not be maintained unless permitted by applicable law or regulation.

   10. Discrimination and Sexual Harassment

       The Company believes the fair and equitable treatment of employees is critical in fulfilling its vision and goals. It is the policy of the Company to treat each employee, supplier and customer without regard to the sex, race, ethnicity, sexual orientation, physical or mental disability, age, religion, veteran status or national origin of such person, or any other classification prohibited by law. The Company's policy is to recruit, hire, train, promote, assign, transfer, lay off and terminate employees based on their own abilities, achievements, experience and conduct without regard to any illegal or unethical classifications.

       No form of harassment or unlawful discrimination against anyone on the basis of sex, race, ethnicity, sexual orientation, physical or mental disability, age, pregnancy, religion, veteran status, national origin or any other legally protected status will be tolerated. This includes any demeaning, insulting, embarrassing or intimidating behavior directed at an individual on the basis of any of the foregoing.

       For further details and guidance, please consult the Company's policy on harassment and descrimination contained in the Company's Employee Handbook.

   11. No Contractual Rights

       All statements contained in this Code are intended to reflect general policies, principles, and procedures, do not represent contractual commitments on the part of the Company and may be changed at any time. Without limiting the generality of the foregoing, nothing in this Code should be construed as providing any additional employment rights, employment contracts or terms of employment to any person.

3. ENFORCEMENT OF THE CODE

   1. Individual Responsibility

      Compliance with the Code is, first and foremost, the individual responsibility of every employee. The Company seeks to foster an environment in which ethical issues and concerns may be raised and discussed with supervisors or others without fear of retribution. Managers and supervisors have key roles in assuring employee compliance with the Code and remaining accessible and open to discuss employee ethical concerns. All management-level employees are expected to demonstrate their personal commitment to the Company's standards of conduct and to manage their employees accordingly.

   2. Reporting of Illegal and Unethical Behavior

      You have the right and the responsibility to question or challenge situations in which you suspect that something improper, unethical or illegal is occurring. Employees are expected to report what they believe in good faith to be a violation of law or Company policy, whether accidental or deliberate, to their immediate supervisor. If the reporting individual is not satisfied with the supervisor's response or requires an alternative means of reporting a violation, he or she may report the matter directly to the Company's Chief Financial Officer. We encourage you to err on the side of reporting rather than letting a possible violation go uncorrected. A knowing failure to report a violation may itself be a violation of the Code. Upon learning of a credible suspected violation of law or Company policy, supervisors must communicate the employee's report to more senior management and, where appropriate, to the Company's Chief Financial Officer, so that the substance of the report may be investigated.

      You may confront an ethical issue that this Code or other Company policies do not expressly address. Employees should feel comfortable contacting a member of management, a supervisor or the Company's Chief Financial officer for guidance in such situations. Any employee who in good faith raises an issue regarding a possible violation of law or Company policy will not be subject to retaliation, and their confidentiality will be protected to the extent possible, consistent with law, corporate policy and the requirements necessary to conduct an effective investigation. Allegations will be investigated promptly by the Company's Chief Financial Officer and, if appropriate, reported to authorities. In order to facilitate implementation of this Code, officers, directors and employees have a duty to cooperate with the investigation process and to maintain the confidentiality of investigative information unless specifically authorized to disclose such information. For further details and guidance on complaints or concerns regarding accounting or auditing matters, please consult the Company's Ethics First Compliance Program (www.EmeritusEthicsFirst.com) Procedures for Complaints regarding Accounting, Internal Accounting Controls or Auditing Matters.

   3. Waivers

      Any waiver of any provision of this Code for a director or an executive officer of the Company must be approved in writing by the Board of Directors and promptly disclosed to shareholders. Any waiver of any provision of this Code with respect to any other employee, agent or contractor must be approved in writing by the Company's Chief Financial Officer.

   4. Penalties for Violations of the Code

      The matters covered in this Code are important to the Company, its shareholders and its business partners. We expect all of our officers, directors and employees to adhere to these policies in carrying out their duties for the Company. Appropriate action will be taken against anyone whose actions are found to violate these policies. No improper or illegal behavior will be justified by a claim that it was ordered by someone of higher authority. No one, regardless of position, is authorized to direct an employee to commit a wrongful act. Any officer, manager or supervisor who directs, approves or condones infractions, or has knowledge of them and does not act promptly to report and correct them in accordance with this Code, will also be subject to disciplinary action. It is each employee’s responsibility to resolve with the Company's Chief Financial Officer any potential conflicts with this Code.

      Upon receiving reports of alleged violations of the Code, the Company will weigh relevant facts and circumstances, including but not limited to the extent to which the behavior was contrary to the express language or general intent of this Code or other Company policies, the egregiousness of the behavior, the employee's history with the Company and other factors which the Company deems relevant. Disciplinary actions may range from censure to revocation of privileges to re-assignment, demotion, suspension or termination of employment or business relationship at the Company's sole discretion. Where the Company has suffered a loss, it may pursue legal remedies against the persons or entities responsible. Where laws have been violated, the Company will cooperate with the appropriate authorities. In some cases, the Company may have a legal or ethical obligation to call violations to the attention of external enforcement authorities.