EX 10.85 Agreemnt Series B Convertble betwn Saratoga and ESC Jun 30 05


     

    EMERITUS
      CORPORATION

     

    


     

    AGREEMENT
      REGARDING SERIES B CONVERTIBLE PREFERRED STOCK

     

    


     

    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"),
      


    
      
        
        

      

      
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    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:

     

    
      	 	
              (i)

            	
              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;

            


    

     

    
      	 	
              (ii)

            	
              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;

            


    

     

    
      	 	
              (iii)

            	
              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;

            


    

     

    
      	 	
              (iv)

            	
              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;

            


    

     

    
      	 	
              (v)

            	
              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 Tresser L.P.

     

    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

    535
      Madison Avenue

    New
      York,
      NY 10022

    Attention:
      Charles P. Durkin

    Telephone:
      (212) 906-7044

    Fax:
      (212) 750-3343

     

    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

    3131
      Elliot Avenue, Suite 500

    Seattle,
      Washington 98121

    Attention: Raymond
      R. Brandstrom

    Telephone: (206)
      298-2909

    Fax: (206)
      301-4500


    
      
        
        

      

      
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    With
      a
      copy to:

     

    Perkins
      Coie

    1201
      Third Avenue

    Seattle,
      Washington 98101

    Attention: Michael
      E. Stansbury, Esq.

    Telephone: (206)
      359-8771

    Fax: (206)
      359-9771

     

    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/
      Raymond R. Branstrom

    By: 
      Raymond
      R. Brandstrom

     

    


     

    SARATOGA
      ENTITIES

     

    SARATOGA
      PARTNERS IV, L.P.

     

    By:     SARATOGA
      ASSOCIATES IV LLC

     

    By:     SARATOGA
      MANAGEMENT
                 COMPANY
      LLC,
      its Manager

     

    


                                    /s/
      Charles P.
      Durkin

               By 
      Charles P. Durkin

     

                   

     

    


     

    SARATOGA
      COINVESTMENT IV LLC

     

    By:     SARATOGA
      MANAGEMENT
                 COMPANY
      LLC,
      its Manager

     

    


                                    /s/
      Charles P.
      Durkin
             By 
        Charles P. Durkin

    

              

                   

     

    


     

    SARATOGA
      MANAGEMENT COMPANY LLC

     

    


                               
  /s/
      Charles
      P. Durkin

                                      
       By  Charles P. Durkin

     

        

     

    


     

    



    
      
        
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    EXHIBIT A

     

    


     

    OWNERSHIP
      OF PREFERRED STOCK

     

    


    
      	
               

              Holder

            	
               

              Shares

            	
               

              Dividends

            
	
               

              Saratoga
                Partners IV, L.P.

            	
               

              34,659           

            	
               

              $ 10,098,554.02

            
	
               

              Saratoga
                Coinvestment IV LLC

            	
               

              925           

            	
               

              269,516.21

            
	
               

              Saratoga
                Management Company LLC

            	
               

                   1,386           

            	
               

                     403,837.27

            
	
               

                   Total

            	
               

              36,970           

            	
               

              $ 10,771,907.50

            


    

     

    


     

    


     

     

    
      
        
        

      

      
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