EX 10.1 Amended Debenture Agrmnt Saratoga Baty


     

    EMERITUS
      CORPORATION

     

    


     

    AMENDED
      AND RESTATED AGREEMENT REGARDING 6.25% CONVERTIBLE SUBORDINATED DEBENTURES
      DUE
      2006

     

    


     

    This
      Agreement entered into as of October 14, 2005 is between Emeritus
      Corporation (the "Company"), Saratoga Partners IV, L.P., 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. This
      Agreement amends and restates in its entirety that Agreement Regarding 6.25%
      Convertible Subordinated Debentures due 2006 dated June 30,
      2005.

     

    F. The
      Saratoga Entities and Baty Entities are prepared, on the terms and conditions
      of
      this Agreement, to provide debt financing to the Company on the terms and
      conditions set forth herein to the extent that they do not participate 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
      July 1, 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.

     

    


     

    (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. Agreement
      to Lend

     

    If
      the
      Company completes the Exchange Offer and any of the Saratoga Entities or Baty
      Entities continue to own Debentures following the expiration of the Exchange
      Offer, such Saratoga Entity or Baty Entity shall on December 30, 2005
      lend
      to the Company an amount equal to the principal amount of Debentures so retained
      and such loan shall be on the terms contained in and shall be evidenced by
      a
      promissory note in the form of the Note attached hereto as
      Exhibit B.

     

    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

    535
      Madison Avenue

    New
      York,
      NY 10022


    
      
        
        

      

      
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    Attention:
      Charles P. Durkin, Jr.

    Telephone:
      (212) 906-7378

    Fax:
      (212) 750-3343

     

    or
      to
      such other address as a Saratoga Entity may designate in writing and, if to
      a
      Baty Entity, addressed to Columbia Pacific Management, Inc. at:

     

    Columbia
      Pacific Management, Inc.

    600
      University Street, Suite 2500

    Seattle,
      Washington 98101

    Attention: Daniel
      R.
      Baty

    Telephone: (206)
      728-9063

    Fax: (206)
      728-9327

     

    or
      to
      such other address as a Baty 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

     

    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, the Baty 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 


    
      
        
        

      

      
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    binding
      upon the Company, the Saratoga Entities and the Baty 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

     

    


     

    By 
      /s/ Raymond R. Brandstrom

     

        Raymond
      R. Brandstrom

     

    


     

    SARATOGA
      ENTITIES

     

    SARATOGA
      PARTNERS IV, L.P.

     

    By:     SARATOGA
      ASSOCIATES IV LLC

     

    By:     SARATOGA
      MANAGEMENT         

         
COMPANY
      LLC, its
      Manager

     

               By 
      /s/
      Charles P. Durkin Jr.                               
        Member

                   

     

    


     

    SARATOGA
      COINVESTMENT IV LLC

     

    By:     SARATOGA
      MANAGEMENT            

        COMPANY
      LLC,
      its Manager

     

    


     

               By  
      /s/
      Charles P. Durkin Jr.

                                        Member

                   

     

    


     

    SARATOGA
      MANAGEMENT COMPANY LLC

     

    


     

        By 
      /s/
      Charles P. Durkin Jr.

    
                                            Member

    

        

     

    


     

    



    
      
        
        

      

      
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    BATY
      ENTITIES

     

    COLUMBIA
      SELECT, L.P.

     

    By:     B.F.,
      LIMITED PARTNERSHIP,
                 General
      Partner

     

    By:     COLUMBIA-PACIFIC
      GROUP,            INC.,
      General Partner

     

    


     

               By  
      /s/
      Daniel R. Baty

     

                   Daniel
      R. Baty, President

     

    


     

    CATALINA
      GENERAL, L.P.

     

    By:     B.F.,
      LIMITED PARTNERSHIP,
                 General
      Partner

     

    By:     COLUMBIA-PACIFIC
      GROUP,            INC.,
      General Partner

     

    


     

               By  
      /s/
      Daniel R. Baty

     

                   Daniel
      R. Baty, President

     

    



    
      
        
        

      

      
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    EXHIBIT A

     

    


     

    OWNERSHIP
      OF DEBENTURES

     

    


    
      	
               

              Holder

            	 	
               

              Principal
                Amount

            	 
	
               

              Saratoga
                Partners IV, L.P.

            	 	
              
              

              $

            	
              
              

              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

            	 


    

     

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    This
      Note
      is one of a series of like notes (the "Notes") in the aggregate principal amount
      of $________ issued by the Company pursuant to Amended and Restated Agreement
      Regarding 6.25% Convertible Subordinated Debentures due 2006 among the holders
      of the Notes and the Company.

     

    EMERITUS
      CORPORATION

     

    


     

    PROMISSORY
      NOTE

     

    Due
      July 1, 2008

     

    $______________       Seattle,
      Washington

     

    October __,
      2005

     

    FOR
      VALUE
      RECEIVED, EMERITUS CORPORATION, a Washington corporation (the "Company"),
      promises to pay to the order of ______________________________ or assigns (the
      "Holder"), in the manner and at the place hereinafter provided, the principal
      sum of ______________________________________ Dollars, on July 1, 2008
      on
      the following terms and conditions:

     

    Interest.
      The
      Company promises to pay interest on the principal amount of this Note at a
      rate
      of 6.25% per annum semiannually on January 1 and July 1 of each
      year
      beginning July 1, 2006. 

     

    Method
      of Payment.
      The
      Company will pay principal and interest in money of the United States that
      at
      the time of payment is legal tender for payment of public and private debts
      at
      the following address:__________________________________________..

     

    Prepayment.
      This
      Note may be prepaid in whole or in part from time to time without premium or
      penalty.

     

    Subordination.
      This
      Note is on a parity as to payment with the Company's 6.25% Convertible
      Subordinated Debentures due 2008 (the "Debentures") and is subordinated to
      all
      Senior Indebtedness of the Company, as defined in the Indenture date
      October __, 2005 (the "Indenture") that governs the
      Debentures.

     

    Default
      and Remedies. If
      (i)
      the Company fails to pay any principal or interest under this Note when due,
      within five days after the date due, or (ii)an Event of Default, as defined
      in
      the Indenture, occurs and is continuing and the principal amount of the
      Debentures and all accrued interest has been declared immediately due and
      payable or has otherwise become immediately due and payable without any such
      declaration, and such acceleration has not been rescinded, then the holder
      of
      this Note may declare to be due and payable immediately the principal amount
      of
      this Note plus accrued interest to the date of acceleration. Such a default
      and
      the remedies available shall be subject to the following:


    
      
        
        

      

      
        
          

        

      

      
        
        

      

    


     

    


     

    (a) Upon
      such
      a default, the holder may pursue any available remedy by proceeding at law
      or in
      equity to collect the payment of principal, and premium, if any, or interest
      on
      this Note or to enforce the performance of any provision of this Promissory
      Note. 

     

    (b) A
      delay
      or omission by such holder in exercising any right or remedy accruing upon
      such
      a default shall not impair the right or remedy or constitute a waiver of or
      acquiescence in such default. No remedy is exclusive of any other remedy. All
      available remedies are cumulative.

     

    (c) The
      holder of this Note may waive a default with respect to this Promissory Note
      and
      its consequences. When such a default is waived, it is considered to be cured
      and ceases to exist; but no such waiver shall extend to any subsequent or other
      default or impair any right consequent thereon.

     

    (d) If
      the
      holder of this Note collects any money pursuant to the section "Default and
      Remedies" of this Note, it shall pay out the money in the following order:
      (i)
      to holders of any Senior Indebtedness as required under the section
      "Subordination" of this Note, (ii) to the holders of the Debentures and the
      Notes for amounts due and unpaid on the Debentures and the Notes for principal,
      premium, if any, and interest, ratably, without preference or priority of any
      kind, according to the amounts due and payable on the Debentures and the Notes
      for principal, premium, if any, and interest, respectively.

     

    General
      Provisions. 

     

    (a) To
      the
      extent permitted by law, the Company promises to pay all costs and expenses,
      including attorneys' fees, incurred in connection with the collection and
      enforcement of this Note whether or not suit is brought or judgment is
      rendered.

     

    (b) This
      Note
      and the rights and obligations of the parties hereunder shall be governed by,
      and construed and enforced in accordance with, the laws of the state of
      Washington without reference to conflicts of law principles.

     

    IN
      WITNESS WHEREOF, the Company has caused this Note to be executed and delivered
      by its duly authorized officer as of the day and year and at the place first
      above written.

     

    EMERITUS
      CORPORATION

     

    


     

    By:
      

     

          Its
      


    
       

      
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