EMERITUS
CORPORATION
AGREEMENT REGARDING 6.25%
CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
This Agreement entered into as of June 30,
2005 is between Emeritus Corporation (the "Company"), Saratoga
Partners IV, LP, Saratoga Management Company LLC, Saratoga
Coinvestment IV LLC (collectively, the "Saratoga Entities"),
Columbia Select, L.P. and Catalina General, L.P. (collectively, the
"Baty Entities").
RECITALS
A. The Company has outstanding $32 million
6.25% Convertible Subordinated Debentures due 2006 (the
"Debentures"). The Debentures are governed by an Indenture dated as
of February 15, 1996 between the Company and Fleet National
Bank, as Trustee (the "Indenture").
B. The Saratoga Entities own an aggregate of
$5,000,000 principal amount of the Debentures as set forth on
Exhibit A to this Agreement (the "Saratoga
Holdings").
C. The Baty Entities own an aggregate of
$15,790,179 principal amount of the Debentures as set forth on
Exhibit A to this Agreement (the "Baty Holdings").
D. The Company intends to offer to exchange New
Debentures (as defined below) for all of the outstanding
Debentures, whether they are owned by the Saratoga Entities or the
Baty Entities or otherwise, in a formal Exchange Offer (as defined
below).
E. The Saratoga Entities and Baty Entities are
prepared, on the terms and conditions of this Agreement, to
purchase New Debentures to the extent that Debentures are not
exchanged in the Exchange Offer.
AGREEMENT
As parties hereto, the Company, each of the
Saratoga Entities and each of the Baty Entities agree:
1.
Terms of the New Debentures
and the Exchange Offer
(a) The New Debentures.
The convertible subordinated
debentures that the Company intends to offer in the Exchange Offer
(as defined below) for the Debentures (the "New Debentures") shall
have the same terms as the Debentures and be governed by an
indenture (the "New Indenture") containing the same terms as the
Indenture, except for the following changes:
(i) the principal amount and all accrued interest
of New Debentures shall be paid on June 30, 2008, and all
other dates that are determined by or relate to the maturity date
of the Debentures shall be adjusted accordingly;
(ii) the Company shall have no right of redemption
as provided under Section 3 of the Indenture; and
(iii) the interest rate paid under the New Debentures
shall be 8.0%, commencing on the day following the issuance
thereof.
(b) Exchange Offer. The Company intends to exchange New Debentures
for Debentures (the "Exchange Offer") on the following terms and
conditions:
(i) the principal amount of New Debentures issued
in the Exchange Offer shall be the same as the principal amount of
Debentures exchanged;
(ii) the Exchange Offer shall be outstanding for a
minimum of 20 business days;
2.
Purchase of Additional New
Debentures
If, at the expiration of the Exchange Offer, any
Debentures have not been exchanged for New Debentures, then the
Saratoga Entities and the Baty Entities shall purchase a principal
amount of New Debentures equal to the principal amount of
Debentures that have not been exchanged, excluding any Debentures
that have not been exchanged by any of the Saratoga Entities or
Baty Entities, (the "Additional New Debentures") on the following
terms and conditions:
(i) The Saratoga Entities, as a group, shall
purchase 24.0% of the Additional New Debentures and the Baty
Entities, as a group, shall purchase 76% of the Additional New
Debentures, unless the Saratoga Entities and the Baty Entities
agree on a different allocation of purchase. The Saratoga Entities
and the Baty Entities may allocate such purchases among their
respective entities at their discretion.
(ii) As soon as the information is available, the
Company shall notify the Saratoga Entities and Baty Entities in
writing of the amount Debentures owned by holders that failed to
accept the Exchange Offer and the obligation of each to purchase
Additional New Debentures.
(iii) The purchase of the Additional New Debentures
in accor
