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EXHIBIT 99.2
CROSS OPTION AGREEMENT
NEITHER THIS CROSS OPTION AGREEMENT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE; THEREFORE, THIS CROSS
OPTION AGREEMENT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF, IF ANY, MAY
NOT BE SOLD OR TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON DELIVERY TO
TWISTER OR TANGO, AS THE CASE MAY BE, OF AN OPINION OF COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO TWISTER OR TANGO, AS THE CASE MAY BE, THAT REGISTRATION IS NOT
REQUIRED FOR SUCH SALE OR TRANSFER.
This CROSS OPTION AGREEMENT (the "Agreement") is entered into July 30,
1997, by and among Alternative Living Services, Inc., a Delaware corporation
("Tango"), and Sterling House Corporation, a Kansas corporation ("Twister").
W I T N E S S E T H:
WHEREAS, concurrently with the execution of this Agreement, Tango,
Merger Sub and Twister are entering into an Agreement and Plan of Merger of even
date herewith (the "Merger Agreement"; capitalized terms used but not defined
herein shall have the same meaning assigned to such terms in the Merger
Agreement), pursuant to which Tango proposes to combine with Twister by means of
a merger (the "Merger") of Merger Sub with and into Twister in which (a) each
issued and outstanding share of common stock, no par value, of Twister (the
"Twister Common Stock"), other than shares of Twister Common Stock that are
owned by Twister as treasury stock, shall automatically be converted into the
right to receive 1.0 shares (the "Exchange Ratio") of the common stock, $.01 par
value, of Tango; (b) the issued and outstanding shares of the common stock, $.01
par value, of Merger Sub shall be converted into one hundred (100) shares of
fully paid and nonassessable shares of common stock, no par value, of the
Surviving Corporation; and (c) each option to purchase Twister Common Stock
outstanding as of the Effective Time shall be assumed by Tango as provided in
Section 5.7 of the Merger Agreement; and
WHEREAS, as a condition to the willingness of the parties to enter into
the Merger Agreement and incur expenses and expend time and effort in connection
with the Merger Agreement and transactions contemplated thereby, Tango has
required that Twister agree, and Twister has agreed, among other things, to
grant to Tango the Twister Option (as hereinafter defined), and Twister has
required that Tango agree, and Tango has agreed, among other things, to grant to
Twister the Tango Option (as hereinafter defined), in each case in accordance
with the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and in the Merger Agreement and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
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ARTICLE I
THE TWISTER STOCK OPTION
1.1 Grant of Twister Stock Option. Twister hereby grants to Tango an
irrevocable option (the "Twister Stock Option") to purchase, subject to the
terms hereof 1,003,344 fully paid and non-assessable shares (the "Twister Option
Shares") of Twister Common Stock at a purchase price of $18.25 per Twister
Option Share (the "Twister Stock Purchase Price") in the manner set forth in
Sections 1.2, 1.3 and 1.4 hereof; provided, however, that in no event shall the
number of shares of Twister Common Stock for which the Twister Stock Option is
exercisable exceed 19.9% of the number of shares of Twister Common Stock
outstanding before the exercise of the Twister Stock Option. The number of
shares of Twister Common Stock that may be received upon the exercise of the
Twister Stock Option and the Twister Stock Purchase Price are subject to
adjustment as set forth herein.
1.2 Exercise of Twister Stock Option.
(a) The Twister Stock Option may be exercised by Tango, in
whole or in part, at any time or from time to time after the Merger Agreement
becomes terminable or is terminated by Tango or Twister under circumstances
which could entitle Tango to termination fees under Section 7.2(b) of the Merger
Agreement (regardless of whether the Merger Agreement is actually terminated or
whether there occurs a closing of any Third Party Transaction), any such event
by which the Twister Stock Option becomes exercisable being referred to herein
as a "Tango Triggering Event." In the event Tango wishes to exercise all or any
part of the Twister Stock Option, Tango shall deliver to Twister a written
notice (a "Tango Exercise Notice," with the date of the Twister Exercise Notice
being hereafter called the "Twister Notice Date") notifying Twister of its
exercise of the Twister Stock Option and specifying the number of Twister Option
Shares to be purchased. The closing of such exercise of the Twister Stock Option
(a "Twister Option Closing") shall occur at a place, and on a date (not earlier
than three nor later than 30 business days from the Twister Notice Date) and at
a time designated by Tango in the Tango Exercise Notice. The Twister Stock
Option shall terminate upon the earlier of: (i) the Effective Time; (ii) the
termination of the Merger Agreement in accordance with its terms (other than
upon or during the continuance of a Tango Triggering Event); or (iii) 365 days
following any termination of the Merger Agreement upon or during the
continuation of a Tango Triggering Event (or, if, at the expiration of such 365
day period the Twister Stock Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten business days after
such impediment to exercise shall have been removed or shall have become final
and not subject to appeal, but in no event under this clause (iii) later than
June 30, 1998). Notwithstanding the foregoing, the Twister Stock Option may not
be exercised if Tango is in (i) breach of any of its representations or
warranties in this Agreement or in the Merger Agreement which are qualified with
respect to a Material Adverse Effect on Tango or materiality, (ii) material
breach of any of its representations or warranties
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in this Agreement or the Merger Agreement that are not so qualified, or (iii)
material breach of any of its covenants or agreements contained in this
Agreement or in the Merger Agreement.
(b) Upon receipt of a Tango Exercise Notice, Twister shall be
obligated to deliver to Tango a certificate or certificates evidencing the
Twister Option Shares, in accordance with the terms of this Agreement, on the
later of (i) the date specified in the Tango Exercise Notice or (ii) the first
business day on which the conditions specified in Section 1.3 shall be
satisfied.
1.3 Conditions to Delivery of the Twister Option Shares. The right of
Tango to exercise the Twister Stock Option and the obligation of Twister to
deliver the Twister Option Shares upon any exercise of the Twister Stock Option
is subject to the following conditions:
(a) Such delivery would not in any material respect violate,
or otherwise cause the material violation of, any material law, including,
without limitation, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act") applicable to
such exercise of the Twister Stock Option and the delivery of the Twister Option
Shares; and
(b) There shall be no preliminary or permanent injunction or
other order by any court of competent jurisdiction preventing or prohibiting
such exercise of the Twister Stock Option or the delivery of the Twister Option
Shares in respect of such exercise (and no action or proceeding shall have been
commenced or threatened for purposes of obtaining the same).
1.4 Closings. At any Twister Option Closing, (i) Twister will deliver
to Tango a certificate or certificates evidencing the number of Twister Option
Shares being purchased in the denominations specified in the Tango Exercise
Notice, and, if the Twister Stock Option has been exercised in part, a new
Twister Stock Option evidencing the right of Tango to purchase the balance of
the Twister Option Shares; and (ii) Tango will pay to Twister the aggregate
purchase price for the Twister Option Shares to be purchased by Tango. All
payments made by Tango to Twister pursuant to this Section 1.4 shall be made, at
the option of Tango, either by wire transfer of immediately available funds or
by delivery to Twister of a certified or bank cashier's check or checks payable
to or on the order of Twister, in either case in the amount of the Twister Stock
Purchase Price multiplied by the number of shares to be purchased.
1.5 Adjustments Upon Share Issuances, Changes in Capitalization, etc.
In the event of any change in Twister Common Stock or in the number of
outstanding shares of Twister Common Stock by reason of a stock dividend,
split-up, recapitalization, combination, exchange of shares or similar
transaction or any other change in the corporate or capital structure of Twister
(including, without limitation, the declaration or payment of an extraordinary
dividend or cash, securities or other property), the type and number of shares
or securities to be issued by Twister upon exercise of the Twister Stock Option
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, so that Tango shall
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receive upon exercise of the Twister Stock Option the number, and class of
shares and voting power represented thereby or other securities or property that
Tango would have received in respect of Twister Common Stock if the Twister
Stock Option had been exercised immediately prior to such event, or the record
date therefor, as applicable, and elected to the fullest extent it would have
been permitted to elect, to receive such securities, cash or other property.
1.6 Legends. The certificate or certificates evidencing the Twister
Option Shares acquired upon exercise of the Twister Option Shares shall bear a
legend in substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT OR UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE ISSUER AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
It is understood and agreed that the above legend will be removed by
delivery of substitute certificate(s) without such legend if the holder shall
have delivered to Twister a copy of a letter from the staff of the Commission,
or an opinion of counsel in form and substance reasonably satisfactory to
Twister and its counsel, to the effect that such legend is not required for
purposes of the Securities Act.
ARTICLE II
THE TANGO STOCK OPTION
2.1 Grant of Tango Stock Option. Tango hereby grants to Twister an
irrevocable option (the "Tango Stock Option") to purchase, subject to the terms
hereof 2,586,303 fully paid and non-assessable shares (the "Tango Option
Shares") of Tango Common Stock at a purchase price of $21.625 per Tango Option
Share (the "Tango Stock Purchase Price") in the manner set forth in Sections
2.2, 2.3 and 2.4 hereof; provided, however, that in no event shall the number of
shares of Tango Common Stock for which the Tango Stock Option is exercisable
exceed 19.9% of the number of shares of Tango Common Stock outstanding
immediately before the exercise of the Tango Stock Option. The number of shares
of Tango Common Stock that may be received upon the exercise of the Tango Stock
Option and the Tango Stock Purchase Price are subject to adjustment as set forth
herein.
2.2 Exercise of Tango Stock Option.
(a) The Tango Stock Option may be exercised by Twister, in
whole or in part, at any time or from time to time after the Merger Agreement
becomes terminable or is
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terminated by Twister or Tango under circumstances which could entitle Twister
to termination fees under Section 7.2(a) of the Merger Agreement (regardless of
whether the Merger Agreement is actually terminated or whether there occurs a
closing of any Third Party Transaction), any such event by which the Tango Stock
Option becomes exercisable being referred to herein as a "Twister Triggering
Event." In the event Twister wishes to exercise all or any part of the Tango
Stock Option, Twister shall deliver to Tango a written notice (a "Twister
Exercise Notice," with the date of the Tango Exercise notice being hereafter
called the "Tango Notice Date") notifying Tango of its exercise of the Tango
Stock Option and specifying the number of Tango Option Shares to be purchased.
The closing of such exercise of the Tango Stock Option (a "Tango Option
Closing") shall occur at a place, and on a date (not earlier than three nor
later than 30 business days from the Tango Notice Date) and at a time designated
by Twister in the Twister Exercise Notice. The Tango Stock Option shall
terminate upon the earlier of: (i) the Effective Time; (ii) the termination of
the Merger Agreement in accordance with its terms (other than upon or during the
continuance of a Twister Triggering Event); or (iii) 365 days following any
termination of the Merger Agreement upon or during the continuation of a Twister
Triggering Event (or, if, at the expiration of such 365 day period the Tango
Stock Option cannot be exercised by reason of any applicable judgment, decree,
order, law or regulation, ten business days after such impediment to exercise
shall have been removed or shall have become final and not subject to appeal,
but in no event under this clause (iii) later than June 30, 1998).
Notwithstanding the foregoing, the Tango Stock Option may not be exercised if
Twister is in (i) breach of any of its representations or warranties in this
Agreement or in the Merger Agreement which are qualified with respect to a
Material Adverse Effect on Twister or materiality, (ii) material breach of any
of its representations or warranties in this Agreement or the Merger Agreement
that are not so qualified, or (iii) material breach of any of its covenants or
agreements contained in this Agreement or in the Merger Agreement.
(b) Upon receipt of a Twister Exercise Notice, Tango shall be
obligated to deliver to Twister a certificate or certificates evidencing the
Tango Option Shares, in accordance with the terms of this Agreement, on the
later of (i) the date specified in the Twister Exercise Notice or (ii) the first
business day on which the conditions specified in Section 1.3 shall be
satisfied.
2.3 Conditions to Delivery of the Tango Option Shares. The right of
Twister to exercise the Tango Stock Option and the obligation of Tango to
deliver the Tango Option Shares upon any exercise of the Tango Stock Option is
subject to the following conditions:
(a) Such delivery would not in any material respect violate,
or otherwise cause the material violation of, any material law, including,
without limitation, the HSR Act applicable to such exercise of the Tango Stock
Option and the delivery of the Tango Option Shares; and
(b) There shall be no preliminary or permanent injunction or
other order by any court of competent jurisdiction preventing or prohibiting
such exercise of the Tango Stock
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Option or the delivery of the Tango Option Shares in respect of such exercise
(and no action or proceeding shall have been commenced or threatened for
purposes of obtaining the same).
2.4 Closings. At any Tango Option Closing, (i) Tango will deliver to
Twister a certificate or certificates evidencing the number of Tango Option
Shares being purchased in the denominations specified in the Twister Exercise
Notice, and, if the Tango Stock Option has been exercised in part, a new Tango
Stock Option evidencing the right of Twister to purchase the balance of the
Tango Option Shares; and (ii) Twister will pay to Tango the aggregate purchase
price for the Tango Option Shares to be purchased by Twister. All payments made
by Twister to Tango pursuant to this Section 2.4 shall be made, at the option of
Twister, either by wire transfer of immediately available funds, or by delivery
to Tango of a certified or bank cashier's check or checks payable to or on the
order of Tango, in either case in the amount of the Tango Stock Purchase Price
multiplied by the number of shares to be purchased.
2.5 Adjustments Upon Share Issuances, Changes in Capitalization, etc.
In the event of any change in Tango Common Stock or in the number of outstanding
shares of Tango Common Stock by reason of a stock dividend, split-up,
recapitalization, combination, exchange of shares or similar transaction or any
other change in the corporate or capital structure of Tango (including, without
limitation, the declaration or payment of an extraordinary dividend or cash,
securities or other property), the type and number of shares or securities to be
issued by Tango upon exercise of the Tango Stock Option shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, so that Twister shall receive upon exercise of the Tango Stock
Option the number, and class of shares and voting power represented thereby or
other securities or property that Twister would have received in respect of
Tango Common Stock if the Tango Stock Option had been exercised immediately
prior to such event, or the record date therefor, as applicable, and elected to
the fullest extent it would have been permitted to elect, to receive such
securities, cash or other property.
2.6 Legends. The certificate or certificates evidencing the Tango
Option Shares acquired upon exercise of the Tango Option Shares shall bear a
legend in substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT OR UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE ISSUER AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
It is understood and agreed that the above legend will be removed by
delivery of substitute certificate(s) without such legend if the holder shall
have delivered to Tango a copy of a letter from the staff of the Commission, or
an opinion of counsel in form and substance
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reasonably satisfactory to Tango and its counsel, to the effect that such legend
is not required for purposes of the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TWISTER
Twister hereby represents and warrants to each of Tango as follows:
3.1 Authority Relative to This Agreement. Twister has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Twister and the consummation by
Twister of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Twister, and no other corporate
proceedings on the part of Twister are necessary to authorize this Agreement or
to consummate such transactions. This Agreement has been duly and validly
executed and delivered by Twister and, assuming the due authorization, execution
and delivery by Tango, constitutes a legal, valid and binding obligation of
Twister, enforceable against Twister in accordance with its terms.
3.2 Authority to Issue Shares. Twister has taken all necessary
corporate action to authorize and reserve and permit it to issue, and at all
times from the date hereof until the Twister Stock Option shall no longer be
exercisable, shall have reserved, all the Twister Option Shares issuable
pursuant to this Agreement, and Twister will take all necessary corporate action
to authorize and reserve and permit it to issue all additional shares of Twister
Common Stock or other securities which may be issued pursuant to Section 1.5,
all of which, upon their issuance and delivery in accordance with the terms of
this Agreement, shall be duly authorized, validly issued, fully paid and
nonassessable, shall be delivered free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Tango's voting rights, charges and other encumbrances of any
nature whatsoever (other than this Agreement) and shall not be subject to any
preemptive rights.
3.3 No Violation. The execution and delivery of this Agreement by
Twister do not, the performance of this Agreement by Twister will not, (i)
violate or conflict with any provision of any Laws in effect on the date of this
Agreement and applicable to Twister or any Twister Subsidiary or by which any of
their respective properties or assets is bound or subject, (ii) require Twister
or any Twister Subsidiary to obtain any consent, waiver, approval, license or
authorization or permit of, or make any filing with, or notification to, any
Governmental Entities, based on laws, rules, regulations and other requirements
of Governmental Entities in effect and of the date of this Agreement (other than
(a) the filing of a Pre-Merger Notification Report under the HSR Act and the
expiration of the applicable waiting period, (b) filings or authorizations
required in connection or in compliance with the provisions of the Exchange Act,
the Securities Act, the KGCC, the Bylaws of the AMEX or the "takeover" or "blue
sky" laws
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of various states or (c) any other filings and approvals expressly contemplated
by this Agreement), (iii) require the consent, waiver, approval, license or
authorization of any person (other than Governmental Entities), (iv) violate,
conflict with or result in a breach of or the acceleration of any obligation
under, or constitute a default (or an event which with notice or the lapse of
time or both would become a default) under, or give to others any right of, or
result in any, termination, amendment, acceleration or cancellation of, or loss
of any benefit or creation of a right of first refusal, or require any payment
under, or result in the creation of a lien or other encumbrance on any of the
properties or assets of Twister or any Twister Subsidiary pursuant to or under
any provision of any indenture, mortgage, note, bond, lien, lease, license,
agreement, contract, order, judgment, ordinance, Twister Permit (as defined
below) or other instrument or obligation to which Twister or Twister Subsidiary
is a party or by which Twister or any Twister Subsidiary or any of their
respective properties is bound or subject to, or (v) conflict with or violate
the Articles of Incorporation or Bylaws, or the equivalent organizational
documents, in each case as amended or restated, of Twister or any of the Twister
Subsidiaries, except for any such conflicts or violations described in clause
(i) or breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation, payment obligations or liens or encumbrances
described in clause (iv) that would not have a Material Adverse Effect on
Twister and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications would not,
either individually or in the aggregate, prevent Twister from performing any of
its obligations under this Agreement and would not have a Material Adverse
Effect on Twister. Neither Twister nor any of its affiliates or associates (as
each such term is defined in Section 203 of the DGCL) is, prior to the date
hereof, an "interested stockholder" (as such term is defined in Section 203 of
the DGCL) of Tango.
3.4 Investment Intent. Twister is acquiring the Tango Option, and the
Tango Option Shares issuable upon any exercise of the Tango Option, for
investment for its own account and not with a view to, or for resale in
connection with, any distribution within the meaning of the Securities Act.
ARTICLE IV
COVENANTS OF TWISTER
Twister hereby covenants and agrees as follows:
4.1 Listing; Other Action. (a) If Twister Common Stock or any other
securities to be acquired upon exercise of the Twister Option are then listed on
the AMEX, Twister, upon the request of Tango, shall, at its expense, promptly
file an application to list such shares or other securities on AMEX and will use
reasonable best efforts to obtain approval of such listing on the AMEX, subject
to notice of issuance, as promptly as practicable.
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(b) Twister shall use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereunder,
including, without limitation, using its reasonable best efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities. Without limiting the generality of the
foregoing, Twister shall, when required in order to effect the transactions
contemplated hereunder, make all filings and submissions under the HSR Act as
promptly as practicable.
4.2 Registration. Upon the request of Tango at any time and from time
to time within two (2) years of the first Twister Option Closing, Twister agrees
(i) to effect, as promptly as practicable, up to two registrations under the
Securities Act covering any part or all (as may be requested by Tango) of the
securities that have been acquired by or are issuable to Tango upon exercise of
the Twister Stock Option, and to use its best efforts to qualify such Twister
Option Shares or other securities under any applicable state securities laws and
(ii) to include any part or all of the Twister Option Shares or such other
securities in any registration statement for common stock filed by Twister under
the Securities Act in which such inclusion is permitted under applicable rules
and regulations and to use its reasonable best efforts to keep each such
registration described in clause (i) effective for a period of not in excess of
six (6) months, unless, in the written opinion of counsel to Twister, addressed
to Tango and reasonably satisfactory in form and substance to Tango, such
registration is not required for the sale and distribution of such securities in
the manner contemplated by Tango. If the managing underwriter of a proposed
offering of securities by Twister shall advise Twister in writing that, in the
reasonable opinion of the managing underwriter, the distribution of the Twister
Option Shares requested by Tango to be included in a registration statement
concurrently with securities being registered for sale by Twister would
adversely affect the distribution of such securities by Twister, then Twister
shall, at its option, either (i) include such Twister Option Shares in the
registration statement, but Tango shall agree to delay the offering and sale for
such period of time as the managing underwriter may reasonably request (provided
that Tango may at any time withdraw its request to include the Twister Option
Shares in such offering) or (ii) include such portion of the Twister Option
Shares in the registration statement as the managing underwriter advises may be
included for sale simultaneously with sales by Twister. The registrations
effected under this Section 4.2 shall be effected at Twister's expense except
for underwriting commissions and discounts and the fees and disbursements of
Tango's counsel. With respect to a registration statement which has become
effective pursuant to this Agreement, if the Board of Directors of Twister shall
determine, in its good faith reasonable judgment, that it is necessary to
suspend the availability of such registration statement in light of the
existence of any undisclosed acquisition or financing activity or other
undisclosed material event, circumstance or condition involving Twister or any
subsidiary of Twister, the disclosure of which in any such case could reasonably
be expected to materially disadvantage Twister, and the existence of which would
render such registration statement inadequate as failing to include material
information, then Twister may cause the right of Tango to make dispositions of
Twister Option Shares pursuant to such registration statement to be suspended
for one or more periods
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of time not exceeding 90 days in the aggregate as the Board of Directors of
Twister determines in its good faith reasonable judgment to be necessary. If
Twister determines to suspend the right of the holders pursuant to the
immediately preceding sentence, Twister shall deliver a notice to Tango which
indicates that such registration statement is no longer usable. Upon the receipt
of any such notice, Tango shall forthwith discontinue any sale of Twister Option
Shares pursuant to such registration statement and any use of the prospectus
contained therein. As soon as the circumstances which resulted in the delivery
of any such notice cease to exist, Twister shall promptly notify Tango of such
cessation, whereupon Tango may resume making dispositions of Twister Option
Shares pursuant to such registration statement. Tango shall provide all
information reasonably requested by Twister for inclusion in any registration
statement to be filed hereunder. In connection with any registration pursuant to
this Section 4.2, Twister and Tango shall provide each other and any underwriter
of the offering with customary representations, warranties, covenants,
indemnification and contribution.
4.3 Distribution. Twister shall acquire the Tango Option Shares for
investment purposes only and not with a view to any distribution thereof in
violation of the Securities Act, and shall not sell any Tango Option Shares
purchased pursuant to this Agreement except in compliance with the Securities
Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TANGO
Tango hereby represents and warrants to each of Twister as follows:
5.1 Authority Relative to this Agreement. Tango has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Tango and the consummation by
Tango of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Tango, and no other corporate
proceedings on the part of Tango are necessary to authorize this Agreement or to
consummate such transactions. This Agreement has been duly and validly executed
and delivered by Tango and, assuming the due authorization, execution and
delivery by Twister, constitutes a legal, valid and binding obligation of Tango,
enforceable against Tango in accordance with its terms.
5.2 Authority to Issue Shares. Tango has taken all necessary corporate
action to authorize and reserve and permit it to issue, and at all times from
the date hereof until the Tango Stock Option shall no longer be exercisable,
shall have reserved, all the Tango Option Shares issuable pursuant to this
Agreement, and Tango will take all necessary corporate action to authorize and
reserve and permit it to issue all additional shares of Tango Common Stock or
other securities which may be issued pursuant to Section 2.5, all of which, upon
their issuance and delivery in accordance with the terms of this Agreement,
shall be duly authorized, validly issued, fully paid and nonassessable, shall be
delivered free and clear of all security interests,
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liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Twister's voting rights, charges and other encumbrances of any
nature whatsoever (other than this Agreement) and shall not be subject to any
preemptive rights.
5.3 No Violation. The execution and delivery of this Agreement by
Tango do not, the performance of this Agreement by Tango will not, (i) violate
or conflict with any provision of any Laws in effect on the date of this
Agreement and applicable to Tango or any Tango Subsidiary or by which any of
their respective properties or assets is bound or subject, (ii) require Tango or
any Tango Subsidiary to obtain any consent, waiver, approval, license or
authorization or permit of, or make any filing with, or notification to, any
Governmental Entities, based on laws, rules, regulations and other requirements
of Governmental Entities in effect and of the date of this Agreement (other than
(a) the filing of a Pre-Merger Notification Report under the HSR Act and the
expiration of the applicable waiting period, (b) filings or authorizations
required in connection or in compliance with the provisions of the Exchange Act,
the Securities Act, the DGCL, the Bylaws of the AMEX or the "takeover" or "blue
sky" laws of various states or (c) any other filings and approvals expressly
contemplated by this Agreement), (iii) require the consent, waiver, approval,
license or authorization of any person (other than Governmental Entities), (iv)
violate, conflict with or result in a breach of or the acceleration of any
obligation under, or constitute a default (or an event which with notice or the
lapse of time or both would become a default) under, or give to others any right
of, or result in any, termination, amendment, acceleration or cancellation of,
or loss of any benefit or creation of a right of first refusal, or require any
payment under, or result in the creation of a lien or other encumbrance on any
of the properties or assets of Tango or any Tango Subsidiary pursuant to or
under any provision of any indenture, mortgage, note, bond, lien, lease,
license, agreement, contract, order, judgment, ordinance, Tango Permit (as
defined below) or other instrument or obligation to which Tango or Tango
Subsidiary is a party or by which Tango or any Tango Subsidiary or any of their
respective properties is bound or subject to, or (v) conflict with or violate
the Certificate of Incorporation or Bylaws, or the equivalent organizational
documents, in each case as amended or restated, of Tango or any of the Tango
Subsidiaries, except for any such conflicts or violations described in clause
(i) or breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation, payment obligations or liens or encumbrances
described in clause (iv) that would not have a Material Adverse Effect on Tango
and except where the failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications would not, either
individually or in the aggregate, prevent Tango from performing any of its
obligations under this Agreement and would not have a Material Adverse Effect on
Tango. Neither Tango nor any of its affiliates or associates (as each such term
is defined in Section 17-1297 of the KGCC) is, prior to the date hereof, an
"interested shareholder" (as such term is defined in Section 17-12,100 of the
KGCC) of Twister.
5.4 Investment Intent. Tango is acquiring the Twister Option, and the
Twister Option Shares upon any exercise of the Twister Option, for investment
for its own account and not with a view to, or for resale in connection with,
any distribution within the meaning of the Securities Act.
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ARTICLE VI
COVENANTS OF TANGO
Tango hereby covenants and agrees as follows:
6.1 Listing; Other Action. (a) If Tango Common Stock or any other
securities to be acquired upon exercise of the Tango Option are then listed on
the AMEX, Tango, upon the request of Twister, shall, at its expense, promptly
file an application to list such shares or other securities on AMEX and will use
reasonable best efforts to obtain approval of such listing on the AMEX, subject
to notice of issuance, as promptly as practicable.
(b) Tango shall use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereunder,
including, without limitation, using its reasonable best efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities. Without limiting the generality of the
foregoing, Tango shall, when required in order to effect the transactions
contemplated hereunder, make all filings and submissions under the HSR Act as
promptly as practicable.
6.2 Registration. Upon the request of Twister at any time and from
time to time within two (2) years of the first Tango Option Closing, Tango
agrees (i) to effect, as promptly as practicable, up to two registrations under
the Securities Act covering any part or all (as may be requested by Twister) of
the securities that have been acquired by or are issuable to Twister upon
exercise of the Tango Stock Option, and to use its best efforts to qualify such
Tango Option Shares or other securities under any applicable state securities
laws and (ii) to include any part or all of the Tango Option Shares or such
other securities in any registration statement for common stock filed by Tango
under the Securities Act in which such inclusion is permitted under applicable
rules and regulations and to use its reasonable best efforts to keep each such
registration described in clause (i) effective for a period of not in excess of
six (6) months, unless, in the written opinion of counsel to Tango, addressed to
Twister and reasonably satisfactory in form and substance to Twister, such
registration is not required for the sale and distribution of such securities in
the manner contemplated by Twister. If the managing underwriter of a proposed
offering of securities by Tango shall advise Tango in writing that, in the
reasonable opinion of the managing underwriter, the distribution of the Tango
Option Shares requested by Twister to be included in a registration statement
concurrently with securities being registered for sale by Tango would adversely
affect the distribution of such securities by Tango, then Tango shall, at its
option, either (i) include such Tango Option Shares in the registration
statement, but Twister shall agree to delay the offering and sale for such
period of time as the managing underwriter may reasonably request (provided that
Twister may at any time withdraw its request to include the Tango Option Shares
in such offering) or (ii) include such portion of the Tango Option Shares in the
registration statement as the managing underwriter advises may
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be included for sale simultaneously with sales by Tango. The registrations
effected under this Section 4.2 shall be effected at Tango's expense except for
underwriting commissions and discounts and the fees and disbursements of
Twister's counsel. With respect to a registration statement which has become
effective pursuant to this Agreement, if the Board of Directors of Tango shall
determine, in its good faith reasonable judgment, that it is necessary to
suspend the availability of such registration statement in light of the
existence of any undisclosed acquisition or financing activity or other
undisclosed material event, circumstance or condition involving Tango or any
subsidiary of Tango, the disclosure of which in any such case could reasonably
be expected to materially disadvantage Tango, and the existence of which would
render such registration statement inadequate as failing to include material
information, then Tango may cause the right of Twister to make dispositions of
Tango Option Shares pursuant to such registration statement to be suspended for
one or more periods of time not exceeding 90 days in the aggregate as the Board
of Directors of Tango determines in its good faith reasonable judgment to be
necessary. If Tango determines to suspend the right of the holders pursuant to
the immediately preceding sentence, Tango shall deliver a notice to Twister
which indicates that such registration statement is no longer usable. Upon the
receipt of any such notice, Twister shall forthwith discontinue any sale of
Tango Option Shares pursuant to such registration statement and any use of the
prospectus contained therein. As soon as the circumstances which resulted in the
delivery of any such notice cease to exist, Tango shall promptly notify Twister
of such cessation, whereupon Twister may resume making dispositions of Tango
Option Shares pursuant to such registration statement. Twister shall provide all
information reasonably requested by Tango for inclusion in any registration
statement to be filed hereunder. In connection with any registration pursuant to
this Section 6.2, Tango and Twister shall provide each other and any underwriter
of the offering with customary representations, warranties, covenants,
indemnification and contribution.
6.3 Distribution. Tango shall acquire the Twister Option Shares for
investment purposes only and not with a view to any distribution thereof in
violation of the Securities Act, and shall not sell any Twister Option Shares
purchased pursuant to this Agreement except in compliance with the Securities
Act.
ARTICLE VII
MISCELLANEOUS
7.1 Expenses. Except as expressly provided herein to the contrary,
each party hereto will pay all of its expenses in connection with the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of its counsel and other advisors.
7.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person, by telecopy or
facsimile, by registered or certified mail (postage prepaid, return receipt
requested), or by a nationally recognized courier service to the parties at the
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following addresses (or at such other address for a party as shall be specified
by like changes of address) or, if sent by telecopy or facsimile, to the parties
at the telecopier numbers specified below:
If to Tango: Alternative Living Services, Inc.
000 X. Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telecopier: (000) 000-0000
With copies to: Xxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Telecopier: (000) 000-0000
If to Twister: Sterling House Corporation
000 X. Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopier: (000) 000-0000
With copies to: Stroock & Stroock & Xxxxx LLP
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
and Klenda, Mitchell, Austerman & Xxxxxxxx, L.L.C.
1600 Epic Center
000 X. Xxxx Xxxxxx
Xxxxxxx, Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
7.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
7.4 Assignment. This Agreement shall not be assigned by operation of
law or otherwise.
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7.5 Governing Law. This Agreement, and all matters relating hereto,
shall be governed by, and construed in accordance with the laws of the State of
Delaware without giving effect to the principles of the laws thereof.
7.6 Injunctive Relief. The parties agree that in the event of a breach
of any provision of this Agreement irreparable damage would occur, the aggrieved
party would be without an adequate remedy at law and damages would be difficult
to determine. The parties therefore agree that in the event of a breach of any
provision of this Agreement, the aggrieved party may elect to institute and
prosecute proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision. By seeking or
obtaining such relief, the aggrieved party will not be precluded from seeking or
obtaining any other relief to which it may be entitled at law or in equity.
7.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same document.
7.8 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
7.9 Further Assurances. Each party hereto will execute and deliver
all such further documents and instruments and take all such further action as
may be necessary in order to consummate the transactions contemplated by this
Agreement.
7.10 Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, shall be construed to give any person other than the parties hereto any
legal or equitable right, remedy or claim under or by reason of this Agreement
or any provision contained herein.
7.11 Amendment and Modification. This Agreement may be amended,
modified and supplemented only by a written document executed by Tango and
Twister.
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IN WITNESS WHEREOF, Tango and Twister have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
"TANGO"
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
"TWISTER"
STERLING HOUSE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Executive Officer
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