EMERITUS CORPORATION AGREEMENT REGARDING 6.25% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
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 "Xxxx
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
Xxxx
Entities own an aggregate of $15,790,179 principal amount of the Debentures
as
set forth on Exhibit A to this Agreement (the "Xxxx
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 Xxxx Entities or otherwise, in a formal Exchange Offer (as defined
below).
E. The
Saratoga Entities and Xxxx 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
Xxxx
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 Xxxx 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 Xxxx 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 Xxxx Entities, as a group, shall purchase 76% of the
Additional New Debentures, unless the Saratoga Entities and the Xxxx Entities
agree on a different allocation of purchase. The Saratoga Entities and the
Xxxx
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 Xxxx 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 accordance with this Section 3
shall be closed and the New Debentures paid for on December 30,
2005.
If
any of
the Saratoga Entities or Xxxx Entities continue to own Debentures following
the
expiration of the Exchange Offer, such Saratoga Entity or Xxxx Entity shall
on
December 30,
2
2005,
in
addition to any other purchase requirements contained in this Section 2,
purchase a principal amount of New Debentures equal to the principal amount
of
Debentures so retained and such entity shall, at its election, pay for such
principal amount of New Debentures in cash or by surrender of such retained
Debentures.
3. General
Provisions
(a) Amendment
and Waiver.
No
waiver of or consent to any departure by any of the parties from any provision
of this Agreement shall be effective unless in writing and signed by the party
entitled to the benefit thereof. No amendment, modification or termination
of
any provision of this Agreement shall be effective unless in writing and signed
by or on behalf of the parties.
(b) Notices.
All
notices and demands provided for hereunder shall be in writing, and shall be
given by registered or certified mail, return receipt requested, telecopy,
courier service or personal delivery, and, if to one of the Saratoga Entities,
addressed to Saratoga Management Company LLC at:
Saratoga
Management Company LLC
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxxx
Telephone:
(000) 000-0000
Fax:
(000) 000-0000
or
to
such other address as a Saratoga Entity may designate in writing and, if to
a
Xxxx Entity, addressed to Columbia Pacific Management, Inc. at:
Columbia
Pacific Management, Inc.
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxxxx 00000
Attention: Xxxxxx
X.
Xxxx
Telephone: (000)
000-0000
Fax: (000)
000-0000
or
to
such other address as a Xxxx Entity may designate in writing and, if to the
Company, addressed to the Company at:
Emeritus
Corporation
0000
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxxxx 00000
Attention: Xxxxxxx
X. Xxxxxxxxxx
Telephone: (000)
000-0000
Fax: (000)
000-0000
3
With
a
copy to:
Xxxxxxx
Coie
0000
Xxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxxxx 00000
Attention: Xxxxxxx
X. Xxxxxxxxx, Esq.
Telephone: (000)
000-0000
Fax: (000)
000-0000
or
to
such other address as the Company may designate in writing. All such notices
and
demands shall be deemed given when received.
(c) Execution
in Counterparts. This
Agreement may be executed in any number of counterparts and by different parties
hereto on separate counterparts, each of which counterparts, when so executed
and delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
(d) Binding
Effect; Assignment.
The
rights of the Saratoga Entities, the Xxxx Entities or the Company under this
Agreement may not be assigned to any other Person except with the prior written
consent of the other parties hereto. This Agreement shall not be construed
so as
to confer any right or benefit upon any Person other than the parties to this
Agreement, and their respective successors and permitted assigns. This Agreement
shall be binding upon the Company, the Saratoga Entities and the Xxxx Entities,
and their respective successors and permitted assigns.
(e) Governing
Law.
This
Agreement shall be deemed to be a contract made under the laws of the state
of
Washington, and for all purposes shall be construed in accordance with the
laws
of said state, without regard to principles of conflicts of laws.
(f) Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(g) Headings.
The
Article and Section headings used or contained in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(h) No
Reliance.
Each
party hereto acknowledges that it has obtained separate advice with respect
to
the legal, tax and accounting consequences of the transactions contemplated
by
this Agreement, and that it has neither sought nor relied upon any such advice
from any other party hereto.
4
(i) Entire
Agreement.
This
Agreement constitutes the entire agreement among the parties with respect to
the
subject matter hereof, and, as of the date hereof, there are no promises or
undertakings with respect thereto relative to the subject matter hereof not
expressly set forth or referred to herein or therein.
5
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date first above written.
COMPANY
EMERITUS CORPORATION
By
/s/
Xxxxxxx X. Xxxxxxxxxx
Xxxxxxx
X. Xxxxxxxxxx
SARATOGA
ENTITIES
SARATOGA PARTNERS IV, LP
By: SARATOGA
ASSOCIATES IV LLC
By: SARATOGA MANAGEMENT
COMPANY
LLC,
its Manager
By /s/Xxxxxxx
X. Xxxxxx, Xx.
Xxxxxxx
X. Xxxxxx, Xx.
SARATOGA
COINVESTMENT IV LLC
By: SARATOGA
MANAGEMENT
COMPANY
LLC,
its Manager
By
/s/Xxxxxxx
X. Xxxxxx, Xx.
Xxxxxxx
X. Xxxxxx, Xx.
SARATOGA
MANAGEMENT COMPANY LLC
By
/s/Xxxxxxx
X. Xxxxxx, Xx.
Xxxxxxx
X. Xxxxxx, Xx.
6
XXXX
ENTITIES
COLUMBIA
SELECT, L.P.
By: B.F.,
LIMITED PARTNERSHIP,
General
Partner
By: COLUMBIA-PACIFIC GROUP,
INC.,
General
Partner
By
/s/
Xxxxxx X. Xxxx
Xxxxxx
X. Xxxx, President
CATALINA
GENERAL, L.P.
By: B.F.,
LIMITED PARTNERSHIP,
General
Partner
By: COLUMBIA-PACIFIC GROUP,
INC.,
General
Partner
By
/s/
Xxxxxx X. Xxxx
Xxxxxx
X. Xxxx, President
7
EXHIBIT A
OWNERSHIP
OF DEBENTURES
|
Holder
|
Principal
Amount
|
|||
|
Saratoga
Partners IV, LP
|
$
|
4,710,000
|
||
|
Saratoga
Coinvestment IV LLC
|
100,000
|
|||
|
Saratoga
Management Company LLC
|
190,000
|
|||
|
Columbia
Select, L.P.
|
8,940,179
|
|||
|
Catalina
General, L.P.
|
6,850,000
|
|||
|
Total
|
$
|
20,790,179
|
||
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