SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 1)*
EMERITUS CORPORATION
____________________________
(Name of Issuer)
Common Stock, Par Value $0.0001 Per Share
__________________________________________________
(Title of Class of Securities)
291005106
______________
(CUSIP Number)
Adam Anhang
NorthStar Partnership, L.P.
527 Madison Avenue, 16th Floor
New York, New York 10022
(212) 319-3400
_____________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Patrick J. Dooley, Esq. Howard L. Ellin, Esq.
Akin, Gump, Strauss, Hauer & Feld, LLP Skadden, Arps, Slate,
590 Madison Avenue Meagher & Flom LLP
New York, NY 10022 919 Third Avenue
(212) 872-1000 New York, New York 10022
(212) 735-3000
_____________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 28, 1999
__________________________________________
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
[ ].
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Continued on following page(s)
Page 1 of 21 Pages
Exhibit Index: Page 8
<PAGE>
Page 2 of 21 Pages
SCHEDULE 13D
CUSIP No. 291005106
1 Name of Reporting Person
I.R.S. Identification No. of Above Persons (Entities Only)
MERIT PARTNERS, LLC
2 Check the Appropriate Box If a Member of a Group*
a. [ ]
b. [x]
3 SEC Use Only
4 Source of Funds*
Not Applicable
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
New York
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 1,373,626
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
1,373,626
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,373,626
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
13 Percent of Class Represented By Amount in Row (11)
11.58%
14 Type of Reporting Person*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 3 of 21 Pages
SCHEDULE 13D
CUSIP No. 291005106
1 Name of Reporting Person
I.R.S. Identification No. of Above Persons (Entities Only)
GEORGE SOROS (in the capacity described herein)
2 Check the Appropriate Box If a Member of a Group*
a. [ ]
b. [x]
3 SEC Use Only
4 Source of Funds*
Not Applicable
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
0
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
13 Percent of Class Represented By Amount in Row (11)
0%
14 Type of Reporting Person*
IN; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 4 of 21 Pages
SCHEDULE 13D
CUSIP No. 291005106
1 Name of Reporting Person
I.R.S. Identification No. of Above Persons (Entities Only)
SOROS FAMILY PARTNERS, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. [ ]
b. [x]
3 SEC Use Only
4 Source of Funds*
Not Applicable
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
0
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
13 Percent of Class Represented By Amount in Row (11)
0%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 5 of 21 Pages
This Amendment No. 1 to Schedule 13D relates to Common Shares, par
value $0.0001 per share (the "Shares"), of Emeritus Corporation (the "Issuer").
This Amendment No. 1 supplementally amends the initial statement on Schedule 13D
dated November 3, 1997 (the "Initial Statement") filed by the Reporting Persons
(the "Initial Statement") and is being filed to report that, as a result of the
transfer described in Item 2 hereof, certain of the Reporting Persons have
ceased to be Reporting Persons. Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Initial Statement. The Initial
Statement is supplementally amended as follows.
Item 2. Identity and Background.
On July 14, 1998 and August 12, 1998, NCP and Northstar, respectively,
transferred their membership interests in MI to NorthStar Partnership, L.P., a
Delaware limited partnership ("NP").
On May 28, 1999, each of SFP and Mr. George Soros entered into an
agreement pursuant to which all of their membership interests in ME would be
transferred to NP in exchange for limited partnership units in NP. As a result,
SFP and Mr. George Soros will no longer have any rights with respect to the
Shares.
Item 5. Interest in Securities of the Issuer.
(a) MP may be deemed the beneficial owner of the 1,373,626
Shares held for its account (approximately 11.58% of the total number of Shares
outstanding).
(b) MP has the sole power to direct the voting and disposition
of the Shares that are held for its account.
(c) Not applicable.
(d) Persons other than the Reporting Person have the right to
receive dividends from the securities reported herein. ME is a 90% participant
in MP, and would have the right to receive proceeds from the liquidation of the
Shares if sold by MP. In addition, NP has agreed to deliver to one of its
lenders the proceeds received upon the sale or liquidation of all or part of the
Shares held by MP.
(e) Not applicable.
<PAGE>
Page 6 of 21 Pages
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
On May 28, 1999, MP pledged all of the Shares of the Issuer held by it
to a lender under an amendment and restatement of an existing subordinated loan
agreement under which NP is the borrower and MP is the guarantor. In addition,
MP has granted a second priority lien on the Shares to NP's senior lenders.
Item 7. Material to be Filed as Exhibits.
5. Pledge Agreement dated as of May 28, 1999 between Merit
Partners, LLC and Credit Suisse First Boston Mortgage Capital LLC.
<PAGE>
Page 7 of 21 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this Statement is
true, complete and correct.
Date: June 4, 1999
MERIT PARTNERS, LLC
By: MERIT OPERATING, LLC
By: NORTHSTAR PARTNERSHIP, L.P.
By: /S/ RICHARD J. McCREADY
--------------------------
Richard J. McCready
Authorized Signatory
GEORGE SOROS
By: /S/ SEAN C. WARREN
----------------------------------------
Sean C. Warren
Attorney-in-Fact
SOROS FAMILY PARTNERS, L.P.
By: /S/ GARY GLADSTEIN
----------------------------------------
Gary Gladstein
General Partner
<PAGE>
Page 8 of 21 Pages
Page No.
--------
EXHIBIT INDEX
5. Page No. Pledge Agreement dated as of May 28, 1999
between Merit Partners, LLC and Credit Suisse First
Boston Mortgage Capital LLC............................. 9
Page 9 of 21 Pages
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of May 28, 1999 (as amended,
supplemented or otherwise modified from time to time, this "Pledge Agreement"),
is made by MERIT PARTNERS, LLC, a New York limited liability company (the
"Pledgor"), in favor of CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a
Delaware limited liability company (the "Secured Party").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, NorthStar Partnership, L.P. (the "Borrower"),
NorthStar Capital Investment Corp., a Maryland corporation, the Pledgor and the
Secured Party have entered into an Amended and Restated Subordinated Loan
Agreement, dated as of even date herewith (as amended, supplemented or otherwise
modified from time to time, the "Loan Agreement");
WHEREAS, pursuant to the Loan Agreement, the Secured Party has
agreed to restructure the terms of the Loan (the "Restructuring") to the
Borrower upon the terms and subject to the conditions set forth therein;
WHEREAS, the Pledgor is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by Emeritus Corporation,
a Washington corporation (the "Issuer"); and
WHEREAS, it is a condition precedent to the obligation of the
Secured Party to enter into the Restructuring under the Loan Agreement that the
Pledgor shall have executed and delivered this Pledge Agreement to the Secured
Party.
NOW, THEREFORE, in consideration of the premises and to induce
the Secured Party to enter into the Loan Agreement, the Pledgor hereby agrees
with the Secured Party as follows:
1. Defined Terms. Unless otherwise defined herein, terms
-------------
which are defined in the Loan Agreement and used herein are so used as so
defined, and the following terms shall have the following meanings:
"Collateral" means the Pledged Stock and all Proceeds.
"Pledge Agreement" means this Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
<PAGE>
Page 10 of 21 Pages
"Pledged Stock" means the shares of capital stock of the
Issuer listed on Schedule I hereto, together with all stock
certificates, options or rights of any nature whatsoever that may be
issued or granted by the Issuer to the Pledgor in respect of such
shares of capital stock while this Pledge Agreement is in effect.
"Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the UCC on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from the
Pledged Stock, collections thereon or distributions with respect
thereto.
"Special Secured Obligations" means all obligations and
liabilities of the Pledgor to the Secured Party, now existing or
hereafter incurred, arising under or in connection with the Loan
Agreement; provided, that such obligations and liabilities shall in no
--------
event be greater than $25,000,000 plus any costs or expenses required
to be paid by Pledgor under this Pledge Agreement; provided, further,
-------- -------
the maximum amount of such obligations and liabilities shall be reduced
by any amortization or other payments received by the Secured Party
pursuant to Sections 2.1(d) and 2.2(b) of the Loan Agreement.
"UCC" means the Uniform Commercial Code from time to time in
effect in the State of New York.
2. Pledge; Grant of Security Interest. The Pledgor
--------------------------------------
hereby delivers to the Secured Party all the Pledged Stock and hereby grants to
the Secured Party a first security interest in the Collateral, as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Special Secured
Obligations.
3. Stock Powers. Concurrently with the delivery to the
------------
Secured Party of each certificate representing one or more shares of Pledged
Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor.
4. Representations and Warranties. The Pledgor
-----------------------------------
represents and warrants that:
(a) the Pledgor has the power and
authority and the legal right to execute and deliver, to perform its
obligations under, and to grant the Lien on the Collateral pursuant to,
this Pledge Agreement and has taken all necessary action to authorize
its execution, delivery and performance of, and grant of the Lien on
the Collateral pursuant to, this Pledge Agreement;
(b) this Pledge Agreement constitutes a
legal, valid and binding obligation of the Pledgor enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally;
<PAGE>
Page 11 of 21 Pages
(c) the execution, delivery and
performance of this Pledge Agreement will not violate any provision of
any Requirement of Law or Contractual Obligation of the Pledgor and
will not result in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any Requirement of
Law or Contractual Obligation, except as contemplated hereby;
(d) no consent or authorization of,
filing with, or other act by or in respect of, any arbitrator or
Governmental Authority and no consent of any other Person (including,
without limitation, any stockholder or creditor of the Pledgor or the
Issuer), is required in connection with the execution, delivery,
performance, validity or enforceability of this Pledge Agreement;
(e) no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is
pending or, to the knowledge of the Pledgor, threatened by or against
the Pledgor or against any of its properties or revenues with respect
to this Pledge Agreement or any of the transactions contemplated
hereby;
(f) the shares of Pledged Stock listed
on Schedule I constitute all the issued and outstanding shares of all
classes of the capital stock of the Issuer owned by the Pledgor or any
direct or indirect parent entity or Subsidiary of the Pledgor;
(g) all the shares of the Pledged Stock
have been duly and validly issued and are fully paid and
non-assessable;
(h) the Pledgor is the record and
beneficial owner of, and has good and marketable title to, the Pledged
Stock, free of any and all Liens or options in favor of, or claims of,
any other Person, except the Lien created by this Pledge Agreement and
the subordinate Lien granted to the Lenders under the NationsBank
Agreement; and
(i) upon delivery to the Secured Party
of the stock certificates evidencing the Pledged Stock, the Lien
granted pursuant to this Pledge Agreement will constitute a valid,
perfected first priority security interest on the Collateral,
enforceable as such against all creditors of the Pledgor and any
Persons purporting to purchase any Collateral from the Pledgor.
5. Covenants. The Pledgor covenants and agrees with the
---------
Secured Party that from and after the date of this Pledge Agreement until the
Special Secured Obligations are paid in full:
(a) If the Pledgor shall, as a result of
its ownership of the Pledged Stock, become entitled to receive or shall
receive any stock certificate (including, without limitation, any
<PAGE>
Page 12 of 21 Pages
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital
or any certificate issued in connection with any reorganization),
option or rights, whether in addition to, in substitution of, as a
conversion of, or in exchange for any shares of the Pledged Stock, or
otherwise in respect thereof, the Pledgor shall accept the same as the
agent of the Secured Party, hold the same in trust for the Secured
Party and deliver the same forthwith to the Secured Party in the exact
form received, duly endorsed by the Pledgor to the Secured Party, if
required, together with an undated stock power covering such
certificate duly executed in blank by the Pledgor, to be held by the
Secured Party, subject to the terms hereof, as additional collateral
security for the Special Secured Obligations. Any sums paid upon or in
respect of the Pledged Stock upon the liquidation or dissolution of the
Issuer shall be paid over to the Secured Party to be held by it
hereunder as additional collateral security for the Special Secured
Obligations, and in case any distribution of capital shall be made on
or in respect of the Pledged Stock or any property shall be distributed
upon or with respect to the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of the Issuer or
pursuant to the reorganization thereof, the property so distributed
shall be delivered to the Secured Party to be held by it hereunder as
additional collateral security for the Special Secured Obligations. If
any sums of money or property so paid or distributed in respect of the
Pledged Stock shall be received by the Pledgor, the Pledgor shall,
until such money or property is paid or delivered to the Secured Party,
hold such money or property in trust for the Secured Party, segregated
from other funds of the Pledgor, as additional collateral security for
the Special Secured Obligations.
(b) Without the prior written consent of
the Secured Party, the Pledgor will not (i) vote to enable, or take any
other action to permit, the Issuer to issue any stock or other equity
securities of any nature or to issue any other securities convertible
into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of the Issuer, (ii) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Collateral, unless the Net Proceeds of such sale or
other disposition shall be sufficient for the Pledgor to make a
prepayment of the Loan in an amount not less than $25,000,000 pursuant
to Section 2.2(b) of the Loan Agreement and the Secured Party actually
receives such amount, (iii) create, incur or permit to exist any Lien
or option in favor of, or any claim of any Person with respect to, any
of the Collateral, or any interest therein, except for the Lien
provided for by this Pledge Agreement and the subordinate lien granted
to the Lenders under the NationsBank Agreement, (iv) enter into any
agreement or undertaking restricting the right or ability of the
Pledgor or the Secured Party to sell, assign or transfer any of the
Collateral or (v) amend or modify the Designation or any of the
Transaction Documents (as each such term is defined in the Preferred
Stock Purchase Agreement, dated as of October 24, 1997, by and among
the Issuer, as seller and Merit Partners, LLC, as purchaser). The
Pledgor will defend the right, title and interest of the Secured Party
in and to the Collateral against the claims and demands of all Persons
whomsoever.
<PAGE>
Page 13 of 21 Pages
(c) The Pledgor shall maintain the
security interest created by this Pledge Agreement as a first,
perfected security interest and shall defend such security interest
against claims and demands of all Persons whomsoever. At any time and
from time to time, upon the written request of the Secured Party, and
at the sole expense of the Pledgor, the Pledgor will promptly and duly
execute and deliver such further instruments and documents and take
such further actions as the Secured Party may reasonably request for
the purposes of obtaining or preserving the full benefits of this
Pledge Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall
be or become evidenced by any promissory note, other instrument or
chattel paper (in each case as defined in the UCC), such note,
instrument or chattel paper shall be immediately delivered to the
Secured Party, duly endorsed in a manner satisfactory to the Secured
Party, to be held as Collateral pursuant to this Pledge Agreement.
(d) The Pledgor agrees to pay, and to
save the Secured Party harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamps,
excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral or in connection with any
of the transactions contemplated by this Pledge Agreement.
6. Cash Dividends; Voting Rights. Pledgor shall pay to
------------------------------
the Secured Party all cash dividends of the Issuer in respect of the Pledged
Stock which shall be applied to the Special Secured Obligations pursuant to
Section 2.2 (b) of the Loan Agreement. Unless an Event of Default shall have
occurred and be continuing and the Secured Party shall have given notice to the
Pledgor of the Secured Party's intent to exercise its corresponding rights
pursuant to Section 7, the Pledgor shall be permitted to exercise all voting and
corporate rights with respect to the Pledged Stock, provided, however, that no
--------- -------
vote shall be cast or corporate right exercised or other action taken which, in
the Secured Party's reasonable judgment, would impair the Collateral or which
would be inconsistent with or result in any violation of any provision of the
Loan Agreement, the Note or this Pledge Agreement.
7. Rights of the Secured Party.
---------------------------
(a) If an Event of Default shall occur
and be continuing, the Secured Party shall have the right to receive
any and all cash dividends paid in respect of the Pledged Stock and
make application thereof to the Special Secured Obligations in such
order as the Secured Party may determine. If an Event of Default shall
occur and be continuing and the Secured Party shall give notice of its
intent to exercise such rights to the Pledgor, all shares of the
Pledged Stock shall be registered in the name of the Secured Party or
its nominee, and the Secured Party or its nominee may thereafter
exercise (i) all voting, corporate and other rights pertaining to such
shares of the Pledged Stock at any meeting of shareholders of the
<PAGE>
Page 14 of 21 Pages
Issuer or otherwise and (ii) any and all rights of conversion,
exchange, subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock as if it were the
absolute owned thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Stock upon the
merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of the Issuer, or upon
the exercise by the Pledgor or the Secured Party of any right,
privilege or option pertaining to such shares of the Pledged Stock, and
in connection therewith, the right to deposit and deliver any and all
of the Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as
it may determine), all without liability except to account for property
actually received by it, but the Secured Party shall have no duty to
the Pledgor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.
(b) The rights of the Secured Party
hereunder shall not be conditioned or contingent upon the pursuit by
the Secured Party of any right or remedy against the Issuer or against
any other Person which may be or become liable in respect of all or any
part of the Special Secured Obligations or against any collateral
security therefor, guarantee therefor or right of offset with respect
thereto. The Secured Party shall not be liable for any failure to
demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so, and shall not be under any obligation to
sell or otherwise dispose of any Collateral upon the request of the
Pledgor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof.
8. Remedies. If an Event of Default shall occur and be
--------
continuing, the Secured Party may exercise, in addition to all other rights and
remedies granted in this Pledge Agreement and in any other instrument or
agreement securing, evidencing or relating to the Special Secured Obligations,
all rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, the Secured Party, without demand of performance or
other demand, presentment, protest, advertisement or notice of any kind (except
any notice required by law referred to below) to or upon the Pledgor, the Issuer
or any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, in the over-the-counter market, at any exchange, broker's board or office
of the Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Secured Party shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in the
Pledgor, which right or equity is hereby waived or released. The Secured Party
<PAGE>
Page 15 of 21 Pages
shall apply any Proceeds from time to time held by it and the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Secured
Party hereunder, including, without limitation, reasonable attorneys' fees and
disbursements of counsel to the Secured Party, to the payment in whole or in
part of the Special Secured Obligations, in such order as the Secured Party may
elect, and only after such application and after the payment by the Secured
Party of any other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the UCC, need the Secured Party account for
the surplus, if any, to the Pledgor. To the extent permitted by applicable law,
the Pledgor waives all claims, damages and demands it may acquire against the
Secured Party arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. The Pledgor shall remain
liable for any deficiency subject to any limitations set forth in the definition
of Special Secured Obligations if the proceeds of any sale or other disposition
of Collateral are insufficient to pay the Special Secured Obligations and the
fees and disbursements of any attorneys, employees by the Secured Party to
collect such deficiency. The Pledgor further waives and agrees not to assert any
rights or privileges which it may acquire under Section 9-112 of the UCC.
9. Registration Rights; Private Sales.
----------------------------------
(a) If the Secured Party shall determine
to exercise its rights to sell any or all of the Pledged Stock pursuant
to Section 8 hereof, and if in the opinion of the Secured Party it is
necessary or advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities
Act of 1933, as amended (the "Securities Act"), the Pledgor will use
its best efforts to cause the Issuer to (i) execute and deliver, and
cause the directors and officers of the Issuer to execute and deliver,
all such instruments and documents, and do or cause to be done all such
other acts as may be, in the opinion of the Secured Party, necessary or
advisable to register the Pledged Stock, or that portion thereof to be
sold, under the provisions of the Securities Act, (ii) to use its best
efforts to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the
date of the first public offering of the Pledged Stock, or that portion
thereof to be sold, and (iii) to make all amendments thereto and/or to
the related prospectus which, in the opinion of the Secured Party, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto. The Pledgor agrees to use its
best efforts to cause the Issuer to make available to its security
holders, as soon as practicable, an earnings statement (which need not
be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) The Pledgor recognizes that the
Secured Party may be unable to effect a public sale of any or all the
Pledged Stock, by reason of certain prohibitions contained in the
Securities Act or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which
will be obliged to agree, among other things, to acquire such
<PAGE>
Page 16 of 21 Pages
securities for their own account for investment and not with a view to
the distribution or resale thereof. The Pledgor acknowledges and agrees
that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding
such circumstances, agrees that any such private sale shall be deemed
to have been made in a commercially reasonable manner. The Secured
Party shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer to
register such securities for public sale under the Securities Act, even
if the Issuer would agree to do so.
(c) The Pledgor further agrees to use
its best efforts to do or cause to be done all such other acts as may
be necessary to make such sale or sales of all or any portion of the
Pledged Stock pursuant to this Section 9 valid and binding and in
compliance with any and all other applicable Requirements of Law. The
Pledgor further agrees that a breach of any of the covenants contained
in this Section 9 will cause irreparable injury to the Secured Party,
that the Secured Party has no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in
this Section 9 shall be specifically enforceable against the Pledgor,
and the Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred under the Loan
Agreement.
10. Secured Party Appointment as Attorney-in-Fact.
---------------------------------------------
(a) The Pledgor hereby irrevocably
constitutes and appoints the Secured Party and any officer or agent of
the Secured Party, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of the Pledgor and in the name of the Pledgor or in
the Secured Party's own name, from time to time in the Secured Party's
discretion, upon the occurrence and during the continuance of any Event
of Default for the purpose of carrying out the terms of this Pledge
Agreement, to take any and all appropriate action and to execute any
and all documents and instruments which may be necessary or desirable
to accomplish the purposes of this Pledge Agreement, including, without
limitation, any financing statements, endorsements, assignments or
other instruments of transfer.
(b) The Pledgor hereby ratifies all that
said attorneys shall lawfully do or cause to be done pursuant to the
power of attorney granted in paragraph 10(a). All powers,
authorizations and agencies contained in this Pledge Agreement are
coupled with an interest and are irrevocable until this Pledge
Agreement is terminated and the security interests created hereby are
released.
11. No Subrogation. Notwithstanding any payment or
---------------
payments made by the Pledgor hereunder, or any setoff or application of funds of
the Pledgor by the Secured Party, or the receipt of any amounts by the Secured
Party with respect to any of the Collateral, the Pledgor shall not be entitled
to be subrogated to any of the rights of the Secured Party against any other
collateral security held by the Secured Party for the payment of the Special
Secured Obligations until all amounts owing to the Secured Party on account of
<PAGE>
Page 17 of 21 Pages
the Special Secured Obligations are paid in full. If any amount shall be paid to
the Pledgor on account of such subrogation rights at any time when all of the
Special Secured Obligations shall not have been paid in full, such amount shall
be held by the Pledgor in trust for the Secured Party, segregated from other
funds of the Pledgor, and shall, forthwith upon receipt by the Pledgor, be
turned over to the Secured Party in the exact form received by the Pledgor (duly
endorsed by the Pledgor to the Secured Party, if required) to be applied against
the Special Secured Obligations, whether matured or unmatured, in such order as
the Secured Party may determine.
12. Amendments, etc. with respect to the Special Secured
-----------------------------------------------------
Obligations. The Pledgor shall remain obligated hereunder, and the Collateral
- ------------
shall remain subject to the Lien granted hereby, notwithstanding that, without
any reservation of rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of any of the Special Secured
Obligations made by the Secured Party may be rescinded by the Secured Party, and
any of the Special Secured Obligations continued, and the Special Secured
Obligations, or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered, or released by
the Secured Party, and the Loan Agreement, the Note and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or part, as the Secured Party may deem
advisable from time to time, and any guarantee, right of offset or other
collateral security at any time held by the Secured Party for the payment of the
Special Secured Obligations may be sold, exchanged, waived, surrendered or
released. The Secured Party shall not have any obligation to protect, secure,
perfect or insure this or any other Lien at any time held by it as security for
the Special Secured Obligations or any property subject thereto. The Pledgor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Special Secured Obligations and notice of or proof of reliance by the
Secured Party upon this Pledge Agreement; the Special Secured Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Pledge Agreement; and all dealings between the
Pledgor, on the one hand, and the Secured Party, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Pledge Agreement. The Pledgor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Issuer or the Pledgor
with respect to the Special Secured Obligations.
13. Limitation on Duties Regarding Collateral. The
----------------------------------------------
Secured Party's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Secured Party
deals with similar securities and property for its own account. Neither the
Secured Party nor any of its directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or otherwise.
<PAGE>
Page 18 of 21 Pages
14. Execution of Financing Statements. Pursuant to
-------------------------------------
Section 9-402 of the UCC, the Pledgor authorizes the Secured Party to file
financing statements with respect to the Collateral without the signature of the
Pledgor in such form and in such filing offices as the Secured Party reasonably
determines appropriate to perfect the security interest of the Secured Party
under this Pledge Agreement. A carbon, photographic or other reproduction of
this Pledge Agreement shall be sufficient as a financing statement for filing in
any jurisdiction.
15. Powers Coupled with an Interest. All authorizations
-------------------------------
and agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
16. Severability. Any provision of this Pledge Agreement
------------
which 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
17. Section Headings. The section headings used in this
-----------------
Pledge Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
18. No Waiver; Cumulative Remedies. The Secured Party
--------------------------------
shall not by any act (except by a written instrument pursuant to Section 19
hereof) be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Secured Party, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Secured Party
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.
19. Waivers and Amendments; Successors and Assigns;
-----------------------------------------------------
Governing Law. None of the terms or provisions of this Pledge Agreement may be
- --------------
amended, supplemented or otherwise modified except by a written instrument
executed by the Pledgor and the Secured Party, provided that any provision of
--------
this Pledge Agreement may be waived by the Secured Party in a letter or
agreement executed by the Secured Party or by telex or facsimile transmission
from the Secured Party. This Pledge Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of the
Secured Party and its respective successors and assigns. This Pledge Agreement
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of New York.
<PAGE>
Page 19 of 21 Pages
20. Termination; Release of Collateral. Upon the payment
-----------------------------------
in full of the principal of and all accrued interests on the Loan and all fees
in connection therewith, the security interest granted hereby and all of the
Pledgor's obligations hereunder shall terminate. Upon payment in full of the
Special Secured Obligations, the Secured Party shall release its security
interest in the Collateral and all rights to the Collateral shall revert, first
to the Lenders under the NationsBank Agreement for so long as any amounts owing
under the NationsBank Agreement remain outstanding and, thereafter, to the
Pledgor. Upon the release of the Collateral, the Secured Party shall execute and
deliver to the Pledgor such documents the Pledgor shall reasonably request to
evidence such release.
21. Notices. All notices, requests and demands to or upon
-------
the Secured Party or the Pledgor to be effective shall be in writing (or by
telex, fax or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made when delivered by hand, or one Domestic
Business Day if by recognized overnight courier service; or three Domestic
Business Days after being deposited in the mail postage prepaid, or if given by
telecopy, when received, addressed to the Secured Party or the Pledgor at its
address or transmission number for notices provided in Section 10.2 of the Loan
Agreement. The Secured Party and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided in this
Section.
22. Irrevocable Authorization and Instruction to Issuer.
-----------------------------------------------------
The Pledgor hereby irrevocably authorizes and instructs the Issuer to comply
with any instruction received by it from the Secured Party in writing that (a)
states that an Event of Default has occurred and (b) is otherwise in accordance
with the terms of this Pledge Agreement, without any other or further
instructions from the Pledgor, and the Pledgor agrees that the Issuer shall be
fully protected in so complying.
<PAGE>
Page 20 of 21 Pages
IN WITNESS WHEREOF, the undersigned has caused this Pledge
Agreement to be duly executed and delivered as of the date first above written.
MERIT PARTNERS, LLC
By: NorthStar Partnership, L.P.,
managing member
By: NorthStar Capital Investment Corp.,
its sole general partner
By:____________________
Name:
Title:
Address for Notices:
c/o NorthStar Capital Investment Corp.
527 Madison Avenue, 16th Floor
New York, New York 10022
Attention: Mr. Richard J. McCready
Telecopy: (212) 319-4557
<PAGE>
Page 21 of 21 Pages
SCHEDULE 1
to Pledge Agreement
-------------------
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Stock
Class of Certificate No. of
Issuer Stock No. Shares
- ------ ------ --- ------
<S> <C> <C> <C>
Emeritus Corporation Preferred 1 25,000
</TABLE>
