Document:

Exhibit 10.3

    EXHIBIT
      10.3

    

    Terms
      of
      December 2007 Amendment to Employment Agreement

    between
      Bay National Bank and Hugh W. Mohler

    

    

    On
      December 18, 2006, the Compensation Committee of the Board of Directors of
      Bay
      National Bank increased, effective January 1, 2007, Hugh Mohler’s annual base
      compensation from $225,000 to $240,000.

    

    Also,
      the
      Compensation Committee of the Board of Directors of the Bank approved a
      discretionary bonus to Mr. Mohler of $100,000 in December 2006 (the agreement
      is
      silent with respect to the payment of bonuses to Mr. Mohler). This bonus was
      paid in February 2007.Exhibit 10.3.1

    EXHIBIT
      10.3.1

    

    Terms
      of
      Employment Arrangement

    between
      Bay National Bank 

    and
      Richard J. Oppitz

    

    Mr.
      Oppitz is employed on an at will basis at a rate of pay of $154,000 as of
      January 1, 2007. Mr. Oppitz is also eligible for incentive bonuses at the
      discretion of the Compensation Committee of the Board of Directors, and is
      entitled to all benefits available to full time employees of Bay National Bank.
      

    

    The
      Compensation Committee of the Board of Directors of the Bank approved
      discretionary bonuses to Mr. Oppitz
      of
      $56,000 in December 2006. This bonus was paid in the subsequent calendar
      year.Exhibit 10.3.2

    EXHIBIT
      10.3.2

    

    Terms
      of
      Employment Arrangement

    between
      Bay National Bank 

    and
      Mark
      A. Semanie

    

    Mr.
      Semanie is employed on an at will basis at a rate of pay of $185,000 as of
      January 1, 2007. Mr. Semanie is also eligible for incentive bonuses at the
      discretion of the Compensation Committee of the Board of Directors, and is
      entitled to all benefits available to full time employees of Bay National Bank.
      

    

    The
      Compensation Committee of the Board of Directors of the Bank approved
      discretionary
      bonuses to Mr. Semanie of $40,000 in December 2004, $60,000 in December 2005
      and
      $72,000 in December 2006, respectively. These bonuses were paid in the
      subsequent calendar year.Exhibit 10.3.3

    EXHIBIT
      10.3.3

    

    Terms
      of
      December 2007 Amendment to Employment Agreement

    between
      Bay National Bank and Richard C. Springer

    

    

    On
      December 18, 2006, the Compensation Committee of the Board of Directors of
      Bay
      National Bank increased, effective January 1, 2007, Richard Springer’s annual
      base compensation from $200,000 to $206,000.

    

    Also,
      the
      Compensation Committee of the Board of Directors of the Bank approved a
      discretionary bonus to Mr. Springer of $40,000 in December. This bonus was
      paid
      in February 2007.ex10_1.htm

     

    Exhibit
      10.1

    
 

    AMENDMENT
      TO EMPLOYMENT
      AGREEMENT

    

    This
      Amendment to Employment Agreement
      (“Amendment”) amends that certain Employment Agreement dated as of March 6, 2006
      among KRISPY KREME DOUGHNUT CORPORATION, a North Carolina corporation, KRISPY
      KREME DOUGHNUTS, INC., a North Carolina corporation and DARYL G. BREWSTER
      (“Employment Agreement”).

    

    1.           All
      terms used in this Amendment shall have the same definition and meaning as
      in
      the Employment Agreement.

    

    2.           Section
      4.05 of the Employment Agreement is hereby amended in its entirety as
      follows:

    

    SECTION
      4.05.  Stock
      Options.  The Company shall grant to the Executive options to
      purchase 500,000 shares of its common stock (the “Option
      Shares”) at an exercise price per share equal to the fair market value
      per share on the date of grant which is expected to be March 6,
      2006.  The options will vest and become exercisable in three equal
      installments, the first two of which shall be on the first and second
      anniversaries of the Effective Date, and the third shall be on February 1,
      2009,
      so long as, except as otherwise set forth herein, the Executive’s employment
      continues through such vesting dates.  The term of the options will be
      ten years from the date of grant, subject to earlier termination in the event
      the Executive’s employment terminates.  To the extent the options are,
      or become, vested at the time of termination of his employment, if such
      termination of employment is (i) by the Executive without Good Reason, the
      vested portion of the option will remain exercisable for 90 days following
      such
      termination (but not beyond the ten-year option term); (ii) by the Executive
      for
      Good Reason or by the Companies not for Cause, the vested portion of the option
      will remain exercisable for three years following such termination (but not
      beyond the ten-year option term); (iii) due to the death or Permanent Disability
      of the Executive or at the end of the Employment Period due to notice of
      nonrenewal given by the Companies (after the sixth anniversary of the Effective
      Date) or the Executive pursuant to Section 5.01, the vested portion of the
      option will remain exercisable for two years following such termination (but
      not
      beyond the ten-year option term), or (iv) by the Companies for Cause, the option
      (whether or not vested) shall be immediately forfeited.  The Option
      Shares will be registered as soon as practicable on Form S-8 under the
      Securities Act.  The Executive agrees that he will comply with the
      Stock Ownership Guidelines adopted by the Board and will retain shares in
      accordance with such Guidelines.

    

    3.           Section
      4.06 of the Employment Agreement is hereby amended in its entirety as
      follows:

    

    SECTION
      4.06.  Restricted
      Shares.  The Company shall grant to the Executive 300,000
      restricted shares of the Company’s common stock (the “Restricted
      Shares”); provided, however, that the grant of Restricted
      Shares

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    hereunder
      is based on his representation to the Companies that the awards from his prior
      employer which he is irrevocably forfeiting have a value that is at least $2
      million.  Except as otherwise provided below, the Restricted Shares
      will vest, provided that the Executive’s employment continues through the
      applicable vesting dates, in twelve equal installments, beginning three months
      following the Effective Date and continuing on each of the following ten
      three-month anniversaries of the Effective Date, with the final installment
      vesting on February 1, 2009.   The Executive hereby agrees to
      appropriate legends and transfer restrictions on the Restricted Shares in order
      to reflect such vesting provisions.  The Restricted Shares will be
      registered as soon as practicable on Form S-8 under the Securities
      Act.  The Executive agrees he will comply with the Stock Ownership
      Guidelines adopted by the Board and will retain shares in accordance with such
      Guidelines.

    

    4.           All
      other terms and conditions of the Employment Agreement remain in full force
      and
      effect.

    

    IN
      WITNESS WHEREOF, the parties hereto
      have executed this Amendment this 30th day of March, 2007.

     

    

    
      
        
          	
                  KRISPY
                    KREME DOUGHNUTS, INC.

                
	 
	
                  BY:           /s/
                    James H. Morgan        

                
	
                                   James
                    H. Morgan

                
	
                                  
                    Chairman of the Board

                
	 
	 
	
                  KRISPY
                    KREME DOUGHNUT CORPORATION

                
	 
	
                  BY:          /s/
                    Michael C. Phalen        

                
	
                                  Michael
                    C. Phalen

                
	
                                 
                    Chief Financial Officer

                
	 
	 
	
                               /s/
                    Daryl G. Brewster          

                
	
                              Daryl
                    G. Brewster

                
	 

        

      

    

    
 

     

     

    2EX 10.1 Shareholder Agreement Summerville Merger March 2007

    AMENDED
      AND RESTATED SHAREHOLDERS AGREEMENT

    

    THIS
      AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
      (“Agreement”), by and among EMERITUS
      CORPORATION, a
      Washington corporation (the “Company”),
      AP
      SUMMERVILLE, LLC, a
      Delaware limited liability company (“AP
      Summerville”),
      AP
      SUMMERVILLE II, LLC,
      a
      Delaware limited liability company (“AP
      Summerville II”),
      APOLLO
      REAL ESTATE INVESTMENT FUND III, L.P.,
      a
      Delaware limited partnership (“AREIF
      III”),
      and
APOLLO
      REAL ESTATE INVESTMENT FUND IV, L.P.,
      a
      Delaware limited partnership (“AREIF
      IV”,
      and
      together with AP Summerville, AP Summerville II and AREIF III, the “Apollo
      Shareholders”)
      and
DANIEL
      R. BATY,
      an
      individual (“Baty”),
      CATALINA
      GENERAL PARTNERSHIP L.P.,
      a
      Washington limited partnership (“Catalina”),
      COLUMBIA
      SELECT, L.P.,
      a
      Washington limited partnership (“Columbia”),
      and
B.F.
      LIMITED PARTNERSHIP,
      a
      Washington limited partnership (“B.F.,
      and
      collectively with Baty, Catalina and Columbia, the “Baty
      Shareholders”)
      and
SARATOGA
      PARTNERS IV, L.P.
      a
      Delaware limited partnership (“Saratoga”),
      SARATOGA
      COINVESTMENT IV, LLC, a
      Delaware limited liability company (“Saratoga
      IV”),
      and
SARATOGA
      MANAGEMENT COMPANY, LLC, a
      Delaware limited liability company (“Saratoga
      Management”
and,
      collectively with Saratoga, and Saratoga IV the “Saratoga
      Shareholders”)
      is
      entered into as of March 29, 2007, to be effective as of the Effective Time
      (as
      defined in the Merger Agreement) (the “Effective Date”). The Apollo
      Shareholders, the Baty Shareholders and the Saratoga Shareholders are
      collectively referred to herein as the “Shareholders”.
      This
      Agreement amends and restates the Shareholders’ Agreement dated December 30,
      1999 between the Company, Baty, B.F. and Saratoga. 

     

    R
      E C I T A L S

     

    A.
       The
      Company, the Apollo Shareholders, Baty and Saratoga have entered into that
      certain Agreement and Plan of Merger dated of even date herewith (the "Merger
      Agreement") under which the Apollo Shareholders will acquire shares of the
      capital stock of the Company at the Effective Time.

     

    B. The
      execution of this Agreement is a condition precedent to the execution of the
      Merger Agreement.

     

    C. The
      Company and the Shareholders now desire to enter into this Agreement to set
      forth certain agreements regarding the Shareholders’ ownership of the Company’s
      Capital Stock. 

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the mutual covenants and agreements contained
      in
      this Agreement, and for other good and valuable consideration, the receipt
      and
      sufficiency of which is hereby acknowledged, and intending to be legally bound,
      the parties agree as follows:

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    ARTICLE
      1  

     

    DEFINITIONS

     

    1.1  Definitions.
      The
      following terms used in this Agreement shall have the following meanings (unless
      otherwise expressly provided herein):

     

    “Affiliate,”
      with
      respect to any Person or Shareholder, shall mean any other Person or Shareholder
      directly or indirectly controlling, controlled by or under common control with,
      such Person or Shareholder. For purposes of this Agreement, “control” (including
      with correlative meanings, the terms “controlling,” “controlled by” or “under
      common control with”) as used with respect to any Person or Shareholder, shall
      mean the possession, directly or indirectly, of the power to direct or cause
      the
      direction of the management and policies of such Person or Shareholder, whether
      through the ownership of voting securities, by contract or
      otherwise.

     

    “Agreement”
      shall
      mean this Shareholders Agreement, as it may be amended, restated, modified
      or
      supplemented from time to time in accordance with its terms.

     

    “Apollo
      Limited Partners” shall
      mean the limited partners of AREIF III and AREIF IV, respectively. 

     

    “Board
      of Directors”
      shall
      mean the Board of Directors of the Company.

     

    “Bylaws”
      shall
      mean the Bylaws of the Company in effect as of the Effective Date, as the same
      may hereafter be amended from time to time.

     

    “Capital
      Stock”
      shall
      mean, with respect to any Person, any and all shares, interests, participations
      or other equivalents (however designated, whether voting or non-voting) of
      such
      Person’s capital stock or other equity interests, including, without limitation,
      common stock, preferred stock, partnership interests and limited liability
      company interests, whether now outstanding or issued after the Effective
      Date.

     

    “Common
      Stock”
      shall
      mean the common stock of the Company, par value $.0001 per share.

     

    “Common
      Stock Equivalents”
      shall
      mean shares of Common Stock issued or issuable upon exercise of vested (but
      not
      unvested) options, warrants and other rights to purchase shares of Common Stock
      and/or conversion and exchange of securities convertible into or exchangeable
      for shares of Common Stock.

     

    “Company
      Confidential Information”
      shall
      mean any Intellectual Property and any and all other trade secrets and other
      confidential proprietary information, data or know-how of the Company or any
      direct or indirect subsidiary of the Company, or of other Persons (including,
      without limitation, any Shareholder) that is in the possession of the Company,
      including, without limitation, any Intellectual Property, software, system,
      technology, tools, list of customers, list of advertisers and/or advertising
      pricing, business plans, marketing plans, financial information, source codes,
      programs, inventions, techniques, budgets, projections, licenses, prices, costs,
      or compilations of 

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    information
      or databases used in the Company’s or any subsidiary’s business or operations or
      any other information of the Company or any subsidiary or concerning their
      respective business and operations that is not publicly available.

     

    “Entity”
      shall
      mean any corporation (including any non-profit corporation), general
      partnership, limited partnership, limited liability partnership, joint venture,
      estate, trust, cooperative, foundation, society, political party, union, company
      (including any limited liability company or joint stock company), firm or other
      enterprise, association, organization or entity.

     

    “Exchange
      Act”
      shall
      mean the Securities Exchange Act of 1934, as amended.

     

    “Governmental
      Body”
      shall
      mean any: (a) nation, principality, state, commonwealth, province,
      territory, county, municipality, district or other jurisdiction;
      (b) federal, state, local, municipal or foreign government (including any
      agency, department, bureau, division, or other administrative body thereof);
      or
      (c) governmental or quasi-governmental authority of any
      nature.

     

    “Intellectual
      Property”
      shall
      mean any and all worldwide (a) rights associated with works of authorship,
      including copyrights, moral rights, and mask works; (b) trademark and trade
      name rights and similar rights; (c) trade secret rights; (d) patents
      and patent rights; (e) other proprietary rights in know-how, inventions,
      ideas, algorithms, formula, methods, processes, techniques, proprietary
      information, software, semiconductor devices, and other types of technology;
      and
      (f) all registrations, applications, renewals, extensions, combinations,
      divisions, or reissues of the foregoing.

     

    “Legal
      Requirement”
      shall
      mean any federal, state, foreign, local or municipal law, statute, legislation,
      constitution, ordinance, code, edict, rule, regulation, ruling, directive,
      pronouncement, or interpretation issued, enacted, adopted, passed, approved,
      promulgated, made, implemented or otherwise put into effect by or under the
      authority of any Governmental Body.

     

    “Percentage
      Interest”
      shall
      mean, as to a Shareholder, the percentage determined based on the ratio that
      the
      then outstanding Common Stock Equivalents held by such Shareholder bears
to
      the
      total number of outstanding Common Stock Equivalents.

     

    “Person”
      shall
      mean any individual, Entity or Governmental Body.

     

    “Requisite
      Ownership Amount”
      shall
      mean ownership of either (i) a Percentage Interest of 5%, or (ii) one half
      (1/2)
      the number of Common Stock Equivalents owned by the relevant Shareholder
      immediately following the Closing, as defined in the Merger
      Agreement.

     

    “Securities
      Act”
      shall
      mean the Securities Act of 1933 as amended.

     

    “Shares”
      shall
      mean the shares of Common Stock held by any Shareholder.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    “Shareholder”
      shall
      mean each of (i) the Apollo Shareholders (considered as a single Shareholder
      for
      purposes of this Agreement), (ii) the Baty Shareholders (considered as a single
      Shareholder for purposes of this Agreement), (iii) the Saratoga Shareholders
      (considered as a single Shareholder for purposes of this Agreement), and (iv)
      each other Person who may hereafter become a holder of Capital Stock of the
      Company and a party to this Agreement in accordance with the terms
      hereof.

     

    “Shareholder
      Representatives”
      shall
      mean those natural Persons designated to serve as a member of the Board of
      Directors by the Apollo Shareholders, the Saratoga Shareholders and the Baty
      Shareholders.

     

    “Transfer”
      shall
      mean a sale, exchange, transfer, assignment, lease, encumbrance, hypothecation,
      pledge or other transfer or disposition of any kind, with or without
      consideration, including, but not limited to, transfers to receivers, levying
      creditors, trustees or receivers in bankruptcy proceedings or general assignees
      for the benefit of creditors, whether voluntary or by operation of law, directly
      or indirectly, of all or any portion of a Shareholder’s Shares.

     

    ARTICLE
      2  

     

    BOARD
      OF DIRECTORS REPRESENTATION

     

    2.1  Appointment
      to the Board of Directors. 

     

    2.1.1  From
      and
      after the Effective Date, and until the provisions of this Section 2 cease
      to be
      effective, each Shareholder shall vote all Shares held by such Shareholder,
      and
      take all such steps as may be necessary, including through the exercise of
      their
      respective voting power, so that the following persons shall be elected to
      the
      Board of Directors of the Company:

     

    (a)  So
      long
      as the Apollo Shareholders collectively are the beneficial owners of at least
      the Requisite Ownership Amount, one individual designated by the Apollo
      Shareholders (the “Apollo Director”), who initially shall be Stuart Koenig, and
      who shall initially have a three (3) year term; 

     

    (b)  So
      long
      as the Saratoga Shareholders collectively are the beneficial owners of at least
      the Requisite Ownership Amount, one individual designated by the Saratoga
      Shareholders (the “Saratoga Director”), who initially shall be Charles P.
      Durkin, Jr.; 

     

    (c)  So
      long
      as the Baty Shareholders collectively are the beneficial owners of at least
      the
      Requisite Ownership Amount, one individual designated by the Baty Shareholders
      (the “Baty Director”), who shall initially be Stan Baty. 

     

    2.1.2  From
      and
      after the Effective Date, and until the provisions of this Article 2 cease
      to be
      effective, each of the Company, the Baty Shareholders, the 

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    Saratoga
      Shareholders and the Apollo Shareholders shall take all necessary and desirable
      actions within its control as may be required under applicable law:

     

    (a)  to
      include the Apollo Director, the Saratoga Director and the Baty Director in
      the
      slate of nominees recommended by the Board of Directors for election by the
      shareholders of the Company at its Annual Meeting of Shareholders;
      and

     

    (b)  to
      use
      its best efforts to cause the election of the Apollo Director, the Saratoga
      Director and the Baty Director, and the Chief Executive Officer or each co-Chief
      Executive Officer of the Company, to the Company’s Board of Directors, including
      nominating such individuals to be elected as a Director. As co-Chief Executive
      Officer, Granger Cobb shall initially have a term of one (1) year.

     

    2.2  Removal.

     

    2.2.1  From
      and
      after the Effective Date, and until the provisions of this Article 2 cease
      to be
      effective, each of the Company, the Baty Shareholders, the Saratoga Shareholders
      and the Apollo Shareholders shall use its best efforts to take all necessary
      and
      desirable actions within its control as may be required under applicable law
      to
      cause the removal (with or without cause) of (a) the Saratoga Director if the
      Saratoga Shareholders request such director’s removal for any reason, (b) the
      Apollo Director if the Apollo Shareholders request such director’s removal for
      any reason, and (c) the Baty Director if the Baty Shareholders request such
      director’s removal for any reason. The resulting vacancy on the Board of
      Directors shall be filled by a representative designated by the person or
      persons entitled to designate such director pursuant to
      Section 2.1
      above,
      and the Company, the Baty Shareholders, the Saratoga Shareholders and the Apollo
      Shareholders hereby agree to take, or cause to be taken, at any time and from
      time to time, all actions necessary to accomplish the same.

     

    2.2.2  Except
      as
      provided in this Section 2.2,
      each
      party hereto agrees that, at any time that it is then entitled to vote for
      the
      election or removal of directors, it will not vote in favor of the removal
      of
      the Saratoga Director, the Apollo Director or the Baty Director unless
      (a) such removal shall be at the request of the party who designated such
      director pursuant to the provisions of Section 2.1
      above or
      (b) the right of the party who nominated such director to do so has
      terminated in accordance with Section 2.1.

     

    2.2.3  The
      Company shall not, without the consent of holders of a majority of the Shares
      held by the Baty Shareholders, the Saratoga Shareholders or the Apollo
      Shareholders, as the case may be, take any action that requires the approval
      of
      the Saratoga Director, the Apollo Director or the Baty Director, if the Saratoga
      Director, the Apollo Director or the Baty Director is a Person whose removal
      from the Board of Directors has been requested at or prior to the time of such
      action by the Shareholder who designated such director pursuant to Section
      2.1
      above.
      Each party hereto shall use reasonable efforts to prevent any action from being
      taken by the Board of Directors, during the pendency of any vacancy due to
      death, resignation or removal of a director, 

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    unless
      the Person entitled to designate a director to fill such vacancy shall have
      failed, for a period of ten (10) days after notice of such vacancy, to designate
      a replacement.

     

    2.3  Vacancies.
      In the
      event that a vacancy is created on the Company’s Board of Directors at any time
      by the death, disability, retirement, resignation or removal (with or without
      cause) of any Shareholder Representative the resulting vacancy on the Board
      of
      Directors shall be filled by a representative designated by the person or
      persons entitled to designate such director pursuant to Section 2.1 above,
      and
      the Company, the Baty Shareholders, the Saratoga Shareholders and the Apollo
      Shareholders hereby agree to take, or cause to be taken, at any time and from
      time to time, all actions necessary to accomplish the same. 

     

    2.4  Nomination
      Process.
      The
      Apollo Shareholders, the Saratoga Shareholders and the Baty Shareholders shall
      each nominate their designated Shareholder Representative by providing written
      notice to the Company of the name of its designated Shareholder Representative
      as required by Section 3.3 of the Company’s Bylaws, and by providing to the
      Company the information about each Shareholder Representative as is required
      by
      Section 3.3 of the Company’s Bylaws. 

     

    2.5  Confidentiality.
      Each
      Shareholder shall cause its designated Shareholder Representative to use Company
      Confidential Information disclosed to him or her at Board of Directors meetings
      or otherwise only in a manner and solely for purposes that are consistent in
      all
      respects with such Shareholder Representative’s fiduciary duties to the Company
      and its shareholders.

     

    2.6  Director
      Fees.
      The
      Company shall reimburse each Apollo Director, Saratoga Director and Baty
      Director that is a non-employee director for his or her reasonable out-of-pocket
      expenses incurred for the purpose of attending meetings of the Company Board
      of
      Directors or committees thereof. Each Apollo Director, Saratoga Director and
      Baty Director shall also be entitled to the same benefits (including coverage
      under insurance policies) as other Directors of the Company. 

     

    ARTICLE
      3  

     

    RESTRICTION
      ON DISPOSITION

     

    3.1  Disposition
      Prohibited. A
      Shareholder shall not Transfer any of his, her or its Shares except as permitted
      by this Agreement, and any such attempted disposition shall be void and shall
      not be recognized or registered upon the books of the Company. 

     

    3.2  Notice
      of Involuntary Transfer.
      The
      Shareholder, or his or her personal representative, shall notify the Company
      immediately upon the occurrence of an involuntary Transfer of his or her Shares.
      The Company shall notify the other Shareholders of any such involuntary
      Transfer. 

     

    3.3  Permitted
      Transfers.
      Notwithstanding the foregoing restrictions in this Article 3, the Shareholders
      may Transfer, from time to time, any of their Shares:

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    3.3.1  if
      there
      is then in effect a registration statement under the Securities Act covering
      such proposed Transfer and such Transfer is made in accordance with such
      registration statement;

     

    3.3.2  pursuant
      to the safe harbor provided by Rule 144 of the Securities Act, provided,
      however, that such a sale shall be subject to the co-sale rights provided for
      in
      Section 3.5; 

     

    3.3.3  as
      distributions to the Apollo Limited Partners; provided, however, that (i) the
      Apollo Shareholders shall have notified the Company of the proposed Transfer
      and
      shall have furnished the Company with a statement describing in reasonable
      detail the circumstances surrounding the proposed Transfer, and (ii) if
      requested by the Company, the Apollo Shareholders shall have furnished the
      Company with an opinion of counsel, reasonably satisfactory to the Company,
      that
      such Transfer is either exempt from the registration requirements of the
      Securities Act and the applicable securities laws of any state or that such
      registration requirements have been complied with; 

     

    3.3.4  as
      distributions to the Saratoga Shareholders’ partners and/or members; provided,
      however, that (i) the Saratoga Shareholders shall have notified the Company
      of
      the proposed Transfer and shall have furnished the Company with a statement
      describing in reasonable detail the circumstances surrounding the proposed
      Transfer, and (ii) if requested by the Company, the Saratoga Shareholders shall
      have furnished the Company with an opinion of counsel, reasonably satisfactory
      to the Company, that such Transfer is either exempt from the registration
      requirements of the Securities Act and the applicable securities laws of any
      state or that such registration requirements have been complied with;

     

    3.3.5  to
      that
      Shareholder's spouse, parents, or children or other members of the Shareholder's
      family (including relatives by marriage), or to a custodian, trustee or other
      fiduciary for the account of the Shareholder or members of his or her family
      or
      to a family limited partnership, limited liability company or other Person
      in
      connection with a bona fide estate planning transaction;

     

    3.3.6  by
      way of
      bequest or inheritance upon death;

     

    3.3.7  to
      the
      Company or to any other Shareholder; 

     

    3.3.8  by
      way of
      a bona fide gift; or

     

    3.3.9  by
      way of
      any pledge of Shares made by the Shareholder pursuant to a bona fide loan
      transaction with an established financial institution that creates a mere
      security interest; 

     

    provided,
      that in Sections 3.3.5 - 3.3.8 above such transferee holds such transferring
      Shareholder's Shares subject to the terms of this Agreement and executes an
      supplemental agreement hereto in form and substance reasonably satisfactory
      to
      the Company evidencing his or her consent to become a party to, and be bound
      by
      the 

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    terms
      of,
      this Agreement, and provided further, that in Section 3.3.9, any pledge shall
      be
      made pursuant to a pledge agreement that requires the pledgee to be bound by
      all
      terms and conditions of this Agreement.

     

    3.4  Legends.
      Each
      certificate representing Shares shall (unless otherwise permitted by the
      provisions of the Agreement) be stamped or otherwise imprinted with legends
      substantially similar to the following (in addition to any legend required
      under
      applicable state securities laws):

     

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
      ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
      OR
      UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE
      COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

     

    THE
      SALE,
      PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
      CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN AMENDED
      AND
      RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF MARCH 29, 2007, BY AND AMONG THE
      SHAREHOLDER, THE COMPANY AND CERTAIN HOLDERS OF SHARES OF THE COMPANY. COPIES
      OF
      SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
      COMPANY.

     

    The
      Company shall be obligated to issue promptly certificates without the first
      legend listed above at the request of any holder thereof if the holder shall
      have obtained an opinion of counsel (which counsel may be counsel to the
      Company) reasonably acceptable to the Company, to the effect that the securities
      proposed to be Transferred may lawfully be so Transferred without registration,
      qualification or such legend. Any legend endorsed on an instrument pursuant
      to
      applicable state securities laws and the stop-transfer instructions with respect
      to such securities shall be removed upon receipt by the Company of an order
      of
      the appropriate blue sky authority authorizing such removal. The Company shall
      be obligated to issue promptly certificates without the second legend listed
      above at the request of any holder who received such shares pursuant to Sections
      3.3.1, 3.3.2, 3.3.3 or 3.3.4.

     

    3.5  Co-Sale
      Rights.

     

    3.5.1  If,
      at
      any time, a Shareholder (the “Selling Shareholder”) desires to Transfer, other
      than a Transfer in accordance with Sections 3.3.1 or 3.3.3 through 3.3.8, in
      a
      single or series of related transactions, in excess of thirty percent (30%)
      of

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    his,
      her
      or its Shares and obtains an offer to purchase such Shares (a “Third Party
      Offer”) from a proposed transferee (a “Third Party”) which the Selling
      Shareholder desires to accept, the Selling Shareholder shall send a copy of
      the
      Third Party Offer (or, to the extent some or all of such Third Party Offer
      is
      unwritten, a detailed summary thereof) which shall include the identity of
      the
      Third Party and a summary of the terms of such Third Party Offer to the other
      Shareholders and to the Company.

     

    3.5.2  If
      a
      Third Party Offer is delivered to the other Shareholders, each Shareholder
      other
      than the Selling Shareholder shall have the right, exercisable upon written
      notice to the Selling Shareholder (with a copy to the Company), within twenty
      (20) days after receipt of the Third Party Offer to participate in such sale
      of
      Shares (the “Sale”) along with the Selling Shareholder on the same terms and
      conditions as set forth in the Third Party Offer, but only to the extent that
      the number of Shares to be sold pursuant to the Third Party Offer is in excess
      of thirty percent (30%) of the Common Stock Equivalents held by the Selling
      Shareholder. Such notice shall indicate the number of Shares such Shareholder
      wishes to sell (up to that number of Shares determined under Section 3.5.2
      below) under its right to participate. To the extent one or more of the
      Shareholders exercise such right of participation in accordance with the terms
      and conditions set forth below, the number of Shares that such Selling
      Shareholder may sell in the Sale transaction shall be correspondingly
      reduced.

     

    3.5.3  Each
      Shareholder may sell all or any part of that number of Shares equal to the
      product obtained by multiplying (i) the aggregate number of Shares covered
      by the Third Party Offer in excess of thirty percent (30%) of the Common Stock
      Equivalents held by the Selling Shareholder, by (ii) a fraction, the
      numerator of which is the number of Common Stock Equivalents owned by such
      Shareholder at the time of the Sale, and the denominator of which is the total
      number of Common Stock Equivalents owned by the Selling Shareholder and all
      other Shareholders at the time of the Sale.

     

    3.5.4  Each
      Shareholder who elects to participate in the Sale pursuant to this Section
      3.5
      (a “Participant”) shall effect its participation in the Sale by promptly
      delivering to the Selling Shareholder for transfer to the prospective purchaser
      one or more certificates, properly endorsed for transfer, which represent the
      number of Shares which such Participant elects to sell. The stock certificate
      or
      certificates that the Participant delivers to the Selling Shareholder pursuant
      to this Section shall be transferred to the prospective purchaser in
      consummation of the sale of the Shares pursuant to the terms and conditions
      specified in the Third Party Offer and the Selling Shareholder shall
      concurrently therewith remit to such Participant that portion of the sale
      proceeds to which such Participant is entitled by reason of its participation
      in
      such Sale. To the extent that any prospective purchaser or purchasers prohibits
      such assignment or otherwise refuses to purchase shares or other securities
      from
      a Participant exercising its rights of co-sale hereunder, the Selling
      Shareholder shall not sell to such prospective purchaser or purchasers any
      Shares unless and until, simultaneously with such Sale, the Selling Shareholder
      shall purchase such Shares from such Participant on the same terms and
      conditions specified in the Third Party Offer.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    3.5.5  The
      exercise or non-exercise of the rights of any Shareholder hereunder to
      participate in one or more sales of Shares made by any Selling Shareholder
      shall
      not adversely affect its right to participate in subsequent sales of
      Shares.

     

    3.6  Transfer
      by Shareholders.
      To the
      extent the Shareholders do not elect to participate in the sale of Shares
      pursuant to Section 3.5 above, the Selling Shareholder shall have the right
      for
      a period of ninety (90) days after the expiration of the election period in
      Section 3.5 to sell all but not less than all of the offered Shares to the
      Third
      Party for a price not more favorable to the transferee than that set forth
      in
      the Third Party Offer. Any proposed transfer for a price more favorable to
      the
      transferee than described in the Third Party Offer and any subsequent proposed
      transfer of any of the offered Shares shall again be subject to the co-sale
      rights of the Shareholders, and shall require compliance by a Selling
      Shareholder with the procedures described in Section 3.5, to the extent
      applicable.

     

    3.7  Company
      Repurchase Rights.
      This
      Agreement is subject to, and shall in no manner limit, the right that the
      Company may have to repurchase securities from a former employee or consultant
      pursuant to a stock restriction agreement or other agreement between the Company
      and such employee or consultant.

     

    3.8  Additional
      Shareholders.
      Except
      as set forth in Section 3.3.3 and 3.3.4, the Shareholders shall not sell or
      transfer any Shares to any Affiliate, unless such Affiliate executes a
      counterpart copy of this Agreement, as amended to the date thereof, and agrees
      to become a party hereto and will be deemed a Shareholder
      hereunder.

     

    3.9  Exempt
      Transfers.
      Notwithstanding anything herein to the contrary, the co-sale rights of the
      Shareholders set forth in Section 3.5 shall not apply to any Transfer permitted
      under Section 3.3
      other
      than a Transfer permitted by Section 3.3.2.

     

    3.10  Transfers
      to Comply with Laws.
      Notwithstanding any contrary provision herein, no Shareholder may Transfer
      or
      offer to Transfer any shares of Capital Stock (or solicit any offers to Transfer
      any shares of Capital Stock) except in compliance with the Securities Act,
      and
      the rules and regulations promulgated thereunder and in compliance with any
      applicable state securities laws and rules and regulations promulgated
      thereunder. 

     

    ARTICLE
      4  

     

    EFFECTIVE
      DATE AND TERMINATION

     

    4.1  Effective
      Date.
      This
      Agreement shall be effective as of the Effective Time, as defined in the Merger
      Agreement.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    4.2  Termination. 

     

    4.2.1  Notwithstanding
      anything to the contrary contained in this Agreement, this Agreement shall
      be
      terminated
      by
      unanimous written consent of the Shareholders. 

     

    4.2.2  This
      Agreement shall be null and void ab initio and of no further force and effect
      if
      Closing, as defined in the Merger Agreement, does not occur.

     

    4.3  Termination
      as to Particular Shareholder. If
      at any
      time, a Shareholder does not hold at least the Requisite Ownership Amount,
      such
      Shareholder shall automatically cease to be a party to this Agreement. In
      addition, if at any time, a Shareholder permanently waives, in writing, its
      right to appoint a Shareholder Representative under Section 2.1 of this
      Agreement, such Shareholder shall automatically cease to be a party to this
      Agreement for all purposes other than the co-sale rights contained in Section
      3.5 and the provisions of Article 6.

     

    4.4  Effect
      of Termination.
      If this
      Agreement is terminated pursuant to Section 4.2.1 all further obligations of
      the
      parties under this Agreement shall terminate; provided, however, that: (a)
      no
      party shall be relieved of any obligation or other liability arising from any
      breach by such party of any provision of this Agreement; and (b) the parties
      shall, in all events, remain bound by and continue to be subject to the
      provisions set forth in Section 5.3.
      If this
      Agreement is terminated as to a particular Shareholder pursuant to Section
      4.3
      all further obligations of the parties under this Agreement to that Shareholder
      shall terminate and all obligations of that Shareholder to the other parties
      under this Agreement shall terminate; provided, however, that: (a) no party
      shall be relieved of any obligation or other liability arising from any breach
      by such party of any provision of this Agreement; and (b) the parties shall,
      in
      all events, remain bound by and continue to be subject to the provisions set
      forth in Section 5.3.

     

    ARTICLE
      5  

     

    CERTAIN
      ADDITIONAL REPRESENTATIONS,

     

    WARRANTIES
      AND COVENANTS OF THE SHAREHOLDERS

     

    5.1  Mutual
      Representations, Warranties and Covenants of the
      Shareholders.
      As of
      the date hereof, each Shareholder hereby represents, warrants and covenants
      to
      the Company and to the other Shareholders that:

     

    (a)  Organization.
      Except
      as to Baty, the Shareholder is duly organized, validly existing and in good
      standing under the laws of its jurisdiction of formation with all requisite
      power and authority to enter into this Agreement and to perform its obligations
      hereunder.

     

    (b)  Enforceability.
      This
      Agreement constitutes the legal, valid and binding obligation of the Shareholder
      enforceable against such Shareholder in accordance with its terms.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (c)  Consents.
      No
      consents or approvals are required from any Governmental Body or other Person
      for the Shareholder to enter into this Agreement and to acquire such
      Shareholder’s Shares. Except as to Baty, all corporate, limited liability
      company, or limited partnership action, as applicable, on the part of such
      Shareholder necessary for the authorization, execution and delivery of this
      Agreement and the consummation of the transactions contemplated hereby by the
      Shareholder, have been duly taken.

     

    (d)  No
      Conflict.
      The
      execution and delivery of this Agreement by the Shareholder and the consummation
      of the transactions contemplated hereby by the Shareholder do not conflict
      with
      or contravene the provisions of its organizational documents or any material
      agreement or instrument by which such Shareholder, or such Shareholder’s
      properties, are bound or any Legal Requirement to which such Shareholder, or
      such Shareholder’s properties, are subject.

     

    (e)  No
      Litigation.
      There
      are no actions, suits or proceedings pending or, to the Shareholder’s knowledge,
      threatened, against the Shareholder before any court or governmental agency
      that
      question the Shareholder’s right to enter into or perform this Agreement, or
      that question the validity of this Agreement.

     

    (f)  Accredited
      Investor.
      Shareholder is an “accredited investor” within the meaning of Regulation D under
      the Securities Act.

     

    5.2  No
      Other Representations and Warranties.
      Except
      as expressly set forth in this Agreement or in the Merger Agreement (to the
      extent the Shareholder is a party), the Shareholder makes no representations
      or
      warranties, express or implied, to the other parties to this Agreement or to
      the
      Company, and no such representations or warranties shall be deemed to arise
      hereafter except as expressly set forth in this Agreement or in the Merger
      Agreement (to the extent such Shareholder is a party.)

     

    5.3  Confidentiality.

     

    5.3.1  Each
      Shareholder agrees that except as may be required to be disclosed pursuant
      to
      the Exchange Act or the Securities Act, such Shareholder will not, and will
      not
      permit its Shareholder Representative to, during the term of this Agreement
      or
      thereafter, (i) disclose, directly or indirectly, to any Person (other than
      to its Affiliates, subsidiaries, employees and/or agents in connection with
      such
      Shareholder’s proper performance of its obligations hereunder or under the
      Merger Agreement), (ii) copy or otherwise reproduce, or (iii) use
      (other than in connection with such Shareholder’s proper performance of its
      obligations hereunder or under the Merger Agreement), any Company Confidential
      Information or any other information belonging to or in the possession of the
      Company and treated as confidential by the Company.

     

    5.3.2  Each
      Shareholder agrees to protect, and to cause its Shareholder Representative
      to
      protect, Company Confidential Information in such Shareholder’s possession
      subject to Section 5.3.1 to a degree and in a manner consistent with protection
      that it gives to its own confidential or proprietary information, and to take
      any 

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    and
      all
      actions reasonably necessary or appropriate to insure the continued
      confidentiality and protection of such information. In the event that any
      Shareholder is requested or required (by oral questions, interrogatories,
      requests for information or documents, subpoena, civil investigative demand
      or
      similar process) to disclose any of the Confidential Information that it has
      agreed to keep confidential hereunder, it will provide the Company and each
      other Shareholder with prompt notice of such request so that the Company and/or
      any other Shareholder may seek an appropriate protective order or waive its
      compliance with the provisions of this Section 5.3. In the event that such
      protective order or other remedy is not obtained, or the Company or the other
      Shareholders waive compliance with the provisions of this Section 5.3, such
      Shareholder agrees that it will furnish only that portion of any Confidential
      Information that is legally required and will exercise its reasonable efforts
      to
      obtain reliable assurance that confidential treatment will be accorded to that
      portion of any Confidential Information being disclosed. Nothing in this Section
      shall prevent any Shareholder from disclosing such information to a
      representative or investor of such Shareholder, or as reasonably necessary
      to
      any third party in connection with a possible sale of any Shareholder’s
      interests in the Company, provided that such third party has entered into a
      nondisclosure agreement with such Shareholder prohibiting further disclosure
      of
      such information or use of any such information for any purpose other than
      in
      connection with such transaction.

     

    ARTICLE
      6  

     

    MISCELLANEOUS
      PROVISIONS

     

    6.1  Dispute
      Resolution; Arbitration. 

     

    6.1.1  The
      parties hereto will act in good faith and use commercially reasonable efforts
      to
      promptly resolve any claim, dispute, controversy or disagreement arising out
      of
      or relating to or in connection with this Agreement or the breach, termination
      or validity thereof (each a “Dispute”)
      between the parties or any of their respective subsidiaries, Affiliates,
      successors or assigns under or related to this Agreement or any of the
      transactions contemplated hereby. Upon the written request of any party, the
      relevant parties shall commence good faith negotiations with the goal of
      resolving the Dispute on a mutually satisfactory basis. If the Dispute has
      not
      been resolved to the satisfaction of all relevant parties within fifteen (15)
      days after the date on which the request is delivered, the Dispute shall
      immediately be referred to senior officers of each relevant party. The senior
      officers of each party (e.g., chief executive officer and/or chief financial
      officer or senior or executive vice president) shall meet immediately, and
      in no
      case later than thirty (30) days after the date on which the request is
      delivered, for a minimum of four (4) days with a mutually selected mediator
      and
      attempt in good faith to negotiate a resolution of the Dispute. If the relevant
      parties are unable to resolve the Dispute within thirty-five (35) days after
      the
      date on which the request is delivered, then any relevant party may submit
      the
      Dispute to arbitration as the exclusive means of resolving it in accordance
      with
      the procedures set forth in this Section 6.1.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    6.1.2  Any
      Dispute not resolved through the procedure set forth in Section 6.1.1 above
      shall be finally settled by arbitration as set forth in this Section 6.1.2.
      Each party, however, will have full access to the courts to compel compliance
      with these arbitration provisions, to enforce an arbitration award or to seek
      injunctive relief, whether or not arbitration is available or under way. The
      arbitration will take place as follows:

     

    (a)  The
      party
      or parties demanding arbitration (collectively the "Demanding Party") must
      give
      the other party or parties (collectively the “Responding Party") a notice. The
      notice must contain, in addition to the demand for arbitration, a clear
      statement of the issue or issues to be resolved by arbitration, an appropriate
      reference to the provision of the Agreement which is involved, the relief the
      party requests through arbitration, and the names and addresses of at least
      three individuals whom the Demanding Party would consider acceptable as an
      arbitrator.

     

    (b)  The
      Responding Party shall provide a response to the Demanding Party within fifteen
      (15) days following receipt of the notice. The response shall contain a clear
      statement of the Responding Party's position concerning the issue or issues
      in
      dispute and the names and addresses of at least three individuals whom the
      Responding Party would consider acceptable as an arbitrator. If the Responding
      Party fails to provide a timely response, the Demanding Party may apply to
      the
      presiding department of the Superior Court for King County, State of Washington,
      to designate an arbitrator.

     

    (c)  Within
      fourteen (14) days following receipt of the response, the parties shall agree
      on
      a single arbitrator to settle the dispute. If the parties are unable to do
      so,
      then either party may apply to the presiding department of the Superior Court
      for King County, State of Washington, to designate an arbitrator.

     

    (d)  The
      arbitration will be conducted in Seattle, Washington within thirty (30) days
      after the selection of the arbitrator. The arbitrator will allow each party
      an
      opportunity to submit oral and written evidence and argument concerning the
      issue or issues in dispute. The arbitrator may resolve only the issue or issues
      submitted to arbitration and must include as part of his or her consideration
      a
      full review of the Agreement and all material incorporated in the Agreement
      by
      reference. The decision of the arbitrator will be final and will bind the
      parties.

     

    (e)  Except
      to
      the extent inconsistent with the terms of this Agreement, the terms and
      provisions of Chapter 7.04 RCW are incorporated in and made a part of this
      Agreement

     

    6.2  Notices.
      All
      notices, requests, demands, claims, waivers and other communications required
      or
      permitted under this Agreement will be in writing and will be deemed to have
      been delivered (a) the next business day when sent overnight by a recognized
      courier service, (b) upon delivery when personally delivered to the recipient,
      or (c) when receipt is electronically confirmed, if sent by facsimile; provided,
      however, that if electronic receipt is confirmed after normal business hours
      of
      the recipient, notice 

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    shall
      be
      deemed to have been given on the next business day. All such notices and
      communications will be mailed, sent or delivered as set forth below or to such
      other person(s), facsimile number(s) or address(es) as the applicable recipient
      may have designated by written notice to the other signatories to this
      Agreement: 

     

    
      	
              If
                to Company: 

               

               

              Emeritus
                Corporation

              3131
                Elliott Avenue, Suite 500

              Seattle,
                WA 98121

              Attn:
                Eric Mendelsohn

              Tel:
                (206) 301-4493

              Fax:
                (206) 357-7388

            	
              Copy
                to (which shall not constitute notice):
                

               

              Riddell
                Williams P.S.

              1001
                Fourth Avenue Plaza, Suite 4500

              Seattle,
                WA 98154

              Attn:
                David D. Buck, Esq.

              Tel:
                (206) 389-1581

              Fax:
                (206) 389-1708

            
	
              If
                to the Apollo Shareholders:

               

               

              AP
                Summerville, LLC

              AP
                Summerville II, LLC

              Apollo
                Real Estate Investment Fund III, L.P.

              Apollo
                Real Estate Investment Fund IV, L.P.

              c/o
                Apollo Real Estate Advisors

              60
                Columbus Circle, 20th Floor

              New
                York, NY 10023

              Attn:
                Stuart Koenig

              Phone:
                (212) 515-3200

              Fax:
                (212) 515-3280 

            	
              Copy
                to (which shall not constitute notice):

               

              Morgan,
                Lewis & Bockius LLP

              300
                South Grand Avenue, Suite 2200

              Los
                Angeles, CA 90071

              Attn:
                Steven M. Ruskin, Esq.

              Phone:
                (213) 612-2500

              Fax:
                (213) 612-2501

            
	
              If
                to the Baty Shareholders:

               

              Dan
                Baty

              Catalina
                General Partnership L.P.

              Columbia
                Select, L.P.

              B.F.
                Limited Partnership

              3131
                Elliott Avenue, Suite 500

              Seattle,
                WA 98121

              Tel:
                (206) 298-2909

            	 

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    
      	
               

               If
                to the Saratoga Shareholders:

               

              Saratoga
                Partners IV, L.P.

              Saratoga
                Coinvestment IV, LLC

              Saratoga
                Management Company LLC

              535
                Madison Avenue, 4th
                Floor

              New
                York, NY 10022

              Attn:
                David Niemiec

              Phone:
                (212) 906-7044

            	 
	
               

            	
               

            

    

    

    

    6.3  Governing
      Law. 
      This
      Agreement shall be governed by and construed under the laws of the State of
      Washington without regard to principles of conflict of laws. The parties
      irrevocably consent to the jurisdiction and venue of the state and federal
      courts located in King County, Washington in connection with any action relating
      to this Agreement.

     

    6.4  Waiver.

     

    6.4.1  No
      failure on the part of any Person to exercise any power, right, privilege or
      remedy under this Agreement, and no delay on the part of any Person in
      exercising any power, right, privilege or remedy under this Agreement, shall
      operate as a waiver of such power, right, privilege or remedy; and no single
      or
      partial exercise of any such power, right, privilege or remedy shall preclude
      any other or further exercise thereof or of any other power, right, privilege
      or
      remedy.

     

    6.4.2  No
      Person
      shall be deemed to have waived any claim arising out of this Agreement, or
      any
      power, right, privilege or remedy under this Agreement, unless the waiver of
      such claim, power, right, privilege or remedy is expressly set forth in a
      written instrument duly executed and delivered on behalf of such Person; and
      any
      such waiver shall not be applicable or have any effect except in the specific
      instance in which it is given.

     

    6.5  Amendments.

     

    6.5.1  This
      Agreement may be amended, modified, altered or supplemented only by means of
      a
      written instrument duly executed and delivered on behalf of the Shareholders
      that are a party hereto, including any subsequent transferee of the Shares
      that
      has become a Shareholder and a party to this Agreement in accordance with the
      terms hereof.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    6.5.2  Additional
      persons may become parties to this Agreement, as provided for herein, by
      executing a counterpart signature page hereto which sets forth the address
      of
      such person and pursuant to which such person agrees to be bound by this
      Agreement, and upon execution thereof, such person shall be deemed a Shareholder
      for all purposes hereunder. The Company expressly agrees, by the signature
      of
      its authorized representative on the signature page hereof, that no amendment
      shall require the consent or signature of the Company. Notwithstanding the
      foregoing, this Agreement may be amended at any time without the consent of
      any
      Person who becomes a Shareholder pursuant to Section 3.6.

     

    6.6  Remedies
      Cumulative; Specific Performance.
      The
      rights and remedies of the parties hereto shall be cumulative (and not
      alternative). The parties hereto agree that: (a) in the event of any breach
      or threatened breach by any party of any covenant, obligation or other provision
      set forth in this Agreement, the other parties shall be entitled (in addition
      to
      any other remedy that may be available to it) to (i) a decree or order of
      specific performance or mandamus to enforce the observance and performance
      of
      such covenant, obligation or other provision, and (ii) an injunction
      restraining such breach or threatened breach; and (b) such other parties
      shall not be required to provide any bond or other security in connection with
      any such decree, order or injunction or in connection with any related action
      or
      proceeding.

     

    6.7  Severability.
      In the
      event that any provision of this Agreement, or the application of any such
      provision to any Person or set of circumstances, shall be determined to be
      invalid, unlawful, void or unenforceable to any extent, the remainder of this
      Agreement, and the application of such provision to Persons or circumstances
      other than those as to which it is determined to be invalid, unlawful, void
      or
      unenforceable, shall not be impaired or otherwise affected and shall continue
      to
      be valid and enforceable to the fullest extent permitted by law.

     

    6.8  Successors,
      and Assigns.
      Each and
      all of the covenants, terms, provisions, and agreements contained in this
      Agreement shall be binding upon and inure to the benefit of the parties hereto
      and, to the extent permitted by this Agreement, their respective successors
      and
      assigns. Neither the Company nor any Shareholder may assign their respective
      rights or obligations under this Agreement (by operation of law or otherwise)
      to
      any Person (other than an Affiliate) without the prior written consent of the
      Company and the Shareholders, except (i) in connection with a Transfer of
      Shares held by such first party in accordance with the terms hereof and,
      (ii) in connection with a sale of all or substantially all of such first
      party’s business.

     

    6.9  Counterparts
      and Facsimile Signature.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original but all of which together shall constitute one and the same
      instrument. This Agreement may be executed by facsimile signature.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    6.10  Construction.

     

    6.10.1  For
      purposes of this Agreement, whenever the context requires: the singular number
      shall include the plural, and vice versa; the masculine gender shall include
      the
      feminine and neuter genders; the feminine gender shall include the masculine
      and
      neuter genders; and the neuter gender shall include the masculine and feminine
      genders.

     

    6.10.2  The
      language used in this Agreement shall be deemed to be the language chosen by
      the
      Parties to express their mutual intent, and no rule of strict construction
      shall
      be applied against any party.

     

    6.10.3  Any
      reference to any federal, state, local or foreign statute or law shall be deemed
      also to refer to all rules and regulations promulgated thereunder, unless the
      context requires otherwise.

     

    6.10.4  Any
      reference herein to “including” shall be interpreted as “including without
      limitation.”

     

    6.10.5  Any
      reference to any Article, Section or paragraph shall be deemed to refer to
      an
      Article, Section or paragraph of this Agreement, unless the context clearly
      indicates otherwise.

     

    6.10.6  The
      parties have participated jointly in the negotiation and drafting of this
      Agreement. In the event an ambiguity or question of intent or interpretation
      arises, this Agreement shall be construed as if drafted jointly by the parties
      and no presumption or burden of proof shall arise favoring or disfavoring any
      party by virtue of the authorship of any of the provisions of this Agreement.
      

     

    (REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)

     

    

     

    
      
         

      

      
        18

        
          

        

      

      
         

        
          

          

        

      

    

    IN
      WITNESS WHEREOF,
      the
      undersigned have executed this
      SHAREHOLDER AGREEMENT
      as of
      the date first above written.

     

    
      	
              EMERITUS
                CORPORATION

               

               

              By:
                /s/
                Daniel
                R. Baty 

              Name:
                Daniel R. Baty

              Title:
                CEO

            	 
	
              AP
                SUMMERVILLE, LLC

              By:
                KRONUS PROPERTY III, INC., its Manager

               

              By:
                /s/
                Stuart Koenig 

              Name:
                Stuart
                Koenig 

              Title:
                 Vice
                President, Chief Financial Officer

            	 
	
              AP
                SUMMERVILLE II, LLC

              By:
                KRONUS PROPERTY IV, INC., its Manager

               

              By:
                /s/
                Stuart Koenig 

              Name:
                Stuart
                Koenig  

              Title:
                 Vice
                President, Chief Financial Officer 

            	 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              APOLLO
                REAL ESTATE INVESTMENT FUND III, L.P.

              By: Apollo
                Real Estate Advisors III, L.P.,

              its
                General Partner

              By: Apollo
                Real Estate Capital    Advisors III,
                Inc., 

              its
                General Partner

               

              By:
                /s/
                Stuart Koenig  

              Name:
                Stuart
                Koenig  

              Title:
                Vice
                President, Chief Financial Officer

            	 
	
              APOLLO
                REAL ESTATE INVESTMENT FUND IV, L.P.

              By: Apollo
                Real Estate Advisors IV, L.P.,

              its
                General Partner

              By: Apollo
                Real Estate Capital    Advisors IV,
                Inc., 

              its
                General Partner

               

              By:
                /s/
                Stuart Koenig

              Name:
                Stuart
                Koenig 

              Title:
                Vice
                President, Chief Financial Officer 

            	 
	
               

               

               

              /s/
                Daniel R. Baty ________________

              Daniel
                R. Baty, an individual

            	 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              CATALINA
                GENERAL PARTNERSHIP L.P.

              By:
                B.F. Limited Partnership, its General Partner

              By:
                Columbia Pacific Group, Inc., its General Partner

               

              By:
                /s/ Daniel R. Baty 

              Name:
                Daniel R. Baty

              Title:
                President

            	 
	
              COLUMBIA
                SELECT, L.P.

              By:
                B.F. Limited Partnership, its General Partner

              By:
                Columbia Pacific Group, Inc., its General Partner

               

               

              By:
                /s/ Daniel R. Baty 

              Name:
                Daniel R. Baty

              Title:
                President

            	 
	
              B.F.
                LIMITED PARTNERSHIP

              By: Columbia
                Pacific Group, Inc.

              its
                General Partner

               

               

              By:
                /s/ Daniel R. Baty 

              Name:
                Daniel R. Baty

              Title:
                President

            	 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              SARATOGA
                PARTNERS IV, L.P.

              By:
                Saratoga Associates IV LLC, its General Partner

              By:
                Saratoga Management Company LLC, its Manager

               

              By:
                /s/ Charles P. Durkin, Jr. 

              Name:
                Charles P. Durkin, Jr.

              Title:
                Member

            	 
	
              SARATOGA
                COINVESTMENT IV, LLC

              By:
                Saratoga Management Company, its managing member

               

               

              By:
                /s/ Charles P. Durkin, Jr.

              Name:
                Charles P. Durkin, Jr.

              Title:
                Member

            	 
	
              SARATOGA
                MANAGEMENT COMPANY, LLC

               

               

              By:
                /s/ Charles P. Durkin, Jr.  

              Name:
                Charles P. Durkin, Jr.

              Title:
                Member

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