EMERITUS CORPORATION AGREEMENT REGARDING SERIES B CONVERTIBLE PREFERRED STOCK
EMERITUS
CORPORATION
This
Agreement entered into as of May __, 2005 is between Emeritus Corporation
(the "Company"), Saratoga Partners IV, L.P., Saratoga Management Company LLC
and
Saratoga Coinvestment IV LLC (collectively, the "Saratoga
Entities").
RECITALS
A. The
Company has outstanding 36,970 shares of Series B Convertible Preferred
Stock (the "Preferred Stock"), which is governed by the Designation of Rights
and Preferences of Series B Convertible Preferred Stock filed with the Secretary
of State of Washington on December 29 1999 (the
"Designations").
B. The
Saratoga Entities own all of the outstanding Preferred Stock as set forth on
Exhibit A to this Agreement.
C. The
outstanding Preferred Stock has accrued and unpaid cash dividends in the
aggregate amount of $10,771,907.50 as set forth in Exhibit A (the "Unpaid
Dividends").
D. The
Company intends to declare and pay the Unpaid Dividends and simultaneously
with
such payment the Saratoga Entities have agreed to convert all of the outstanding
Preferred Stock into shares of the Company's Common Stock (the "Common Stock")
in accordance with the terms and conditions of the Declaration.
AGREEMENT
As
parties hereto, the Company and each of the Saratoga Entities
agree:
1. Conversion
Price of Preferred Stock
The
Company and the Saratoga Entities (subject to the accuracy of the information
provided by the Company) agree and confirm that the Series B Conversion
Price (as defined in 6(b) of the Declaration) is $6.89 after taking into account
adjustments contemplated by Section 7 of the Declaration.
2. Agreement
to Convert
Each
of
the Saratoga Entities shall convert all of its Preferred Stock into Common
Stock
on the following terms and conditions:
(a) The
Company shall give the Saratoga Entities written notice that it intends to
pay
the Unpaid Dividends and setting the date of payment (the "Payment Date"),
1
which
shall be not less than five business days after the date of the notice. Payment
shall be wire transfered in immediately available funds.
(b) Simultaneously
with the payment of the Unpaid Dividends, each of the Saratoga Entities shall
deliver to the Company (i) stock certificates representing all of the Preferred
Stock owned by such entity and (ii) a notice of conversion in the form attached
to this Agreement as Exhibit B.
(c) The
Company will treat shares of Common Stock received by any of the Saratoga
Entities upon conversion of the Preferred Stock and distributed by such Saratoga
Entity to its partners or members as transferable by each such partner or member
under Rule 144(k) under the Securities Act of 1933, as amended, (the
"1933
Act") and the Company shall instruct its transfer agent to issue and deliver
to
such partner or member stock certificates representing such shares of Common
Stock free of any legend or notation relating to restrictions under the 1933
Act, subject to the following terms and conditions:
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(i)
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in
such distribution of Common Stock to partners or members of the Saratoga
Entities, such partner or member shall have received only its portion
of
the Common Stock so distributed, determined in accordance with the
provisions of governing instrument of the relevant Saratoga Entity,
and
such partner or member shall not have furnished any consideration
in
return for such distribution;
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(ii)
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such
partner or member is not acting in concert with any other partner
or
member in connection with the sale of such shares of Common
Stock;
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(iii)
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at
the time of such distribution or during the 90 days prior thereto,
such
partner or member shall not have been an "affiliate" of the Company
as
that term is defined in the rules and regulations under the
Act;
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(iv)
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such
partner or member shall have furnished to the Company a certificate
to the
effect that the statements contained in subparagraphs (i), (ii) and
(iii)
above are true and correct;
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(v)
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if,
in the opinion of the Company, the legal standards governing the
resale of
securities received in a distribution by a partnership or limited
liability company have changed from those currently applicable or
if the
Company's transfer agent independently requires a legal opinion to
issue
stock certificates free of a restrictive legend, the Company shall
have
received an opinion of its legal counsel to the effect that such
shares
may be sold by such partner or member without
restriction.
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(d) The
Company hereby waives the application of Sections 2.1 and 4.1(c) of
the
Shareholders Agreement dated December 30, 1999 as to the distribution
of
shares by Saratoga Partners IV, L.P. to Xxxxxxx X.X.
3. Termination
If
payment of the Unpaid Dividends does not occur on or before June 30,
2005,
then this Agreement and the Saratoga Entities obligations to convert shall
terminate.
4. 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
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
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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 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 and the Saratoga 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.
(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.
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date first above written.
COMPANY
EMERITUS
CORPORATION
/s/
Xxxxxxx X. Xxxxxxxxx
By:
Xxxxxxx
X. Xxxxxxxxxx
SARATOGA
ENTITIES
SARATOGA
PARTNERS IV, L.P.
By: SARATOGA
ASSOCIATES IV LLC
By: SARATOGA
MANAGEMENT
COMPANY
LLC,
its Manager
/s/
Xxxxxxx X.
Xxxxxx
By
Xxxxxxx X. Xxxxxx
SARATOGA
COINVESTMENT IV LLC
By: SARATOGA
MANAGEMENT
COMPANY
LLC,
its Manager
/s/
Xxxxxxx X.
Xxxxxx
By
Xxxxxxx X. Xxxxxx
SARATOGA
MANAGEMENT COMPANY LLC
/s/
Xxxxxxx
X. Xxxxxx
By Xxxxxxx X. Xxxxxx
[
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EXHIBIT A
OWNERSHIP
OF PREFERRED STOCK
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Holder
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Shares
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Dividends
|
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Saratoga
Partners IV, L.P.
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34,659
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$ 10,098,554.02
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Saratoga
Coinvestment IV LLC
|
925
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269,516.21
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Saratoga
Management Company LLC
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1,386
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403,837.27
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Total
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36,970
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$ 10,771,907.50
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