EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LIQUID AUDIO, INC.
APRIL ACQUISITION CORP.
AND
ALLIANCE ENTERTAINMENT CORP.
Dated as of June 12, 2002
TABLE OF CONTENTS
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ARTICLE I THE MERGER................................................................... 1
1.1 The Merger.................................................................. 1
1.2 Effective Time; Closing..................................................... 2
1.3 Effect of the Merger........................................................ 2
1.4 Articles of Incorporation and Bylaws; Directors and Officers................ 2
1.5 Effect on Capital Stock..................................................... 2
1.6 Dissenting Shares........................................................... 4
1.7 Treatment of Derivative Securities;......................................... 4
1.8 Surrender of Certificates................................................... 5
1.9 No Further Ownership Rights in Alliance Stock............................... 7
1.10 Lost, Stolen or Destroyed Certificates...................................... 8
1.11 Tax Consequences............................................................ 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ALLIANCE.................................. 8
2.1 Organization; Standing and Power; Charter Documents; Subsidiaries........... 8
2.2 Alliance Capital Structure.................................................. 9
2.3 Authority; Non-Contravention; Necessary Consents............................ 10
2.4 Alliance Financial Statements; Undisclosed Liabilities...................... 12
2.5 Absence of Certain Changes or Events........................................ 12
2.6 Taxes....................................................................... 13
2.7 Intellectual Property....................................................... 14
2.8 Compliance; Permits......................................................... 17
2.9 Litigation.................................................................. 18
2.10 Brokers' and Finders' Fees.................................................. 18
2.11 Contracts................................................................... 18
2.12 Employee Matters and Benefit Plans.......................................... 19
2.13 Real Property............................................................... 23
2.14 Sale of Businesses.......................................................... 23
2.15 Interested Party Transactions............................................... 24
2.16 Title to Properties......................................................... 24
2.17 Environmental Matters....................................................... 24
2.18 Disclosure.................................................................. 24
2.19 Board Approval.............................................................. 25
2.20 Voting Agreement............................................................ 25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LIQUID................................... 25
3.1 Organization; Standing and Power; Charter Documents; Subsidiaries........... 25
3.2 Liquid Capital Structure.................................................... 26
3.3 Authority; Non-Contravention; Necessary Consents............................ 27
3.4 Liquid SEC Filings; Liquid Financial Statements; Undisclosed Liabilities.... 28
3.5 Absence of Certain Changes or Events........................................ 29
3.6 Taxes....................................................................... 30
3.7 Intellectual Property....................................................... 31
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TABLE OF CONTENTS
(Continued)
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3.8 Compliance; Permits......................................................... 34
3.9 Litigation.................................................................. 34
3.10 Brokers' and Finders' Fees.................................................. 34
3.11 Contracts................................................................... 34
3.12 Employee Matters and Benefit Plans.......................................... 35
3.13 Real Property............................................................... 38
3.14 Interested Party Transactions............................................... 38
3.15 Title to Properties......................................................... 39
3.16 Environmental Matters....................................................... 39
3.17 Disclosure.................................................................. 39
3.18 Board Approval.............................................................. 40
3.19 Interim Operations of Merger Sub............................................ 40
3.20 Fairness Opinion............................................................ 40
3.21 Rights Agreement............................................................ 40
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME......................................... 40
4.1 Conduct of Business by Liquid............................................... 40
4.2 Conduct of Business by Alliance............................................. 43
ARTICLE V ADDITIONAL AGREEMENTS........................................................ 45
5.1 Prospectus/Proxy Statement; Registration Statement.......................... 45
5.2 Meetings of Stockholders.................................................... 46
5.3 Acquisition Proposals....................................................... 47
5.4 Confidentiality; Access to Information; No Modification of Representations,
Warranties or Covenants..................................................... 49
5.5 Public Disclosure........................................................... 50
5.6 Regulatory Filings; Reasonable Efforts...................................... 50
5.7 Notification of Certain Matters............................................. 51
5.8 Third-Party Consents........................................................ 52
5.9 Indemnification of Officers and Directors................................... 52
5.10 Directors and Officers of Liquid After the Effective Time................... 52
5.11 Nasdaq Listing.............................................................. 53
5.12 Alliance Affiliates; Restrictive Legend..................................... 53
5.13 Tax Matters................................................................. 53
5.14 Conversion of Alliance Preferred Stock...................................... 53
5.15 401(k) Pension Plan......................................................... 53
5.16 Section 16 Exemption........................................................ 54
5.17 Registration Rights......................................................... 54
ARTICLE VI CONDITIONS TO THE MERGER.................................................... 54
6.1 Conditions to Obligations of Each Party to Effect the Merger................ 54
6.2 Additional Conditions to Obligations of Alliance............................ 55
6.3 Additional Conditions to the Obligations of Liquid.......................... 56
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TABLE OF CONTENTS
(Continued)
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ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.......................................... 57
7.1 Termination................................................................. 57
7.2 Notice of Termination; Effect of Termination................................ 58
7.3 Fees and Expenses........................................................... 59
7.4 Amendment................................................................... 59
7.5 Extension; Waiver........................................................... 60
ARTICLE VIII........................................................................... 60
8.1 Non-Survival of Representations and Warranties.............................. 60
8.2 Notices..................................................................... 60
8.3 Interpretation.............................................................. 61
8.4 Counterparts................................................................ 62
8.5 Entire Agreement; Third-Party Beneficiaries................................. 62
8.6 Severability................................................................ 62
8.7 Other Remedies; Specific Performance........................................ 63
8.8 Governing Law............................................................... 63
8.9 Rules of Construction....................................................... 63
8.10 Assignment.................................................................. 63
8.11 Waiver of Jury Trial........................................................ 63
8.12 Computation of Time......................................................... 63
Exhibit A: Severance
Exhibit B: Registration Rights
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is made and entered into as of June 12,
2002, by and among Liquid Audio, Inc., a Delaware corporation ("Liquid"), April
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Liquid
(the "Merger Sub"), and Alliance Entertainment Corp., a Delaware corporation
("Alliance").
RECITALS
A. The Boards of Directors of each of Liquid, Merger Sub and Alliance
have approved, and deem it advisable and in the best interests of their
respective corporations and stockholders to consummate, the business combination
transaction provided for herein in which Merger Sub would merge with and into
Alliance.
B. The Boards of Directors of Liquid, Merger Sub and Alliance have each
determined that the Merger (as defined in Section 1.1) and the other
transactions contemplated hereby are consistent with, and in furtherance of,
their respective business strategies and goals.
C. Liquid and Alliance desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to the parties' willingness to enter into this Agreement, AEC
Associates, LLC, a Delaware limited liability company (the "Principal
Stockholder"), is entering into a Voting Agreement (the "Voting Agreement").
E. For Federal income tax purposes, the parties intend that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the parties intend,
by executing this Agreement, to adopt a plan of reorganization within the
meaning of Section 354(a) of the Code.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporate Law ("DGCL"), Merger Sub
shall be merged with and into Alliance (the "Merger"), and the separate
corporate existence of Merger Sub shall cease. Alliance shall continue its
corporate existence under the laws of the State of Delaware under the name
"Alliance Entertainment Corp." and shall be a wholly-owned subsidiary of Liquid
after the Merger. The Merger shall have the effect set forth in the DGCL.
Alliance, as the surviving
corporation after the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of the DGCL (the "Certificate of
Merger") (the time of such filing (or such later time as may be agreed in
writing by Alliance and Liquid and specified in the Certificate of Merger) being
the "Effective Time") on or as soon as practicable after the Closing Date (as
herein defined). The closing of the Merger (the "Closing") shall take place at
the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, at a
time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI, or at such other time, date and location as the parties hereto
agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of Alliance and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Alliance and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation and Bylaws; Directors and Officers.
(a) At the Effective Time, the Certificate of Incorporation of
Alliance, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended. The Bylaws of Alliance, as in effect immediately prior to the Effective
Time, shall be, at the Effective Time, the Bylaws of the Surviving Corporation
until thereafter amended.
(b) At the Effective Time, the directors and officers of Alliance
immediately prior to the Effective Time will become the directors and officers
of the Surviving Corporation and will hold office from the Effective Time until
their respective successors are duly elected and qualified.
(c) Prior to the Effective Time, Liquid will file Liquid's Second
Amended and Restated Certificate of Incorporation ("Liquid's Restated
Certificate") with the Secretary of State of the State of Delaware. Liquid's
Restated Certificate will (i) reflect that the total number of shares Liquid is
authorized to issue is 205,000,000, (ii) reflect that Liquid expressly elects
not to be governed by Section 203 of the DGCL and (iii) reflect that Liquid's
corporate name shall be as agreed upon by the parties (the amendment in clause
(i) of this section is referred to as the (c) "Capitalization Amendment", and
the amendments in clauses (i), (ii) and (iii) of this section are collectively
referred to as the "Charter Amendments").
1.5 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Alliance or any shares of capital stock of Alliance, the
following shall occur:
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(a) Alliance Preferred Stock. Immediately prior to the Effective
Time, each issued and outstanding share of preferred stock, $0.01 par value per
share, of Alliance (the "Alliance Preferred Stock") shall be converted into
shares of common stock, $0.0001 par value per share, of Alliance (the "Alliance
Common Stock").
(b) Alliance Common Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof, each share of
Alliance Common Stock issued and outstanding immediately prior to the Effective
Time (including the shares of Alliance Common Stock issuable upon conversion of
all outstanding shares of Alliance Preferred Stock), but excluding Dissenting
Shares (as defined in Section 1.6) and any shares of Alliance Common Stock to be
canceled pursuant to Section 1.5(d), will be automatically converted into the
right to receive 0.404975 (the "Exchange Ratio") shares of common stock, par
value $0.001 per share, of Liquid ("Liquid Common Stock"), subject to any
adjustments pursuant to Section 1.5(f), and cash in lieu of fractional shares
pursuant to Section 1.5(e).
(c) Merger Sub Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof, each share of
common stock, $0.001 par value per share, of Merger Sub that is issued and
outstanding immediately prior to the Effective Time will be converted into one
validly issued, fully paid and non-assessable share of common stock of the
Surviving Corporation.
(d) Cancellation of Treasury and Liquid Owned Stock. Each share of
Alliance Common Stock held by Alliance or Liquid or any direct or indirect
wholly-owned subsidiary of Alliance or Liquid immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof.
(e) No Fractional Shares. No fractional shares of Liquid Common Stock
shall be issued in connection with the Merger, and no certificates or scrip for
any such fractional shares shall be issued. Any holder of Alliance Common Stock
who would otherwise be entitled to receive a fraction of a share of Liquid
Common Stock (after aggregating all fractional shares of Liquid Common Stock
issuable to such holder) shall, in lieu of such fraction of a share and, upon
surrender of such holders' Certificate(s) (as defined in Section 1.8(c)), be
paid in cash the dollar amount (rounded to the nearest whole cent), without
interest, determined by multiplying such fraction by the closing price of Liquid
Common Stock on The Nasdaq National Market on the last trading day immediately
prior to the Effective Time.
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
automatically adjusted to take into account:
(i) any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Liquid
Common Stock, Alliance Common Stock or Alliance Preferred Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Liquid Common Stock, Alliance Common Stock or Alliance Preferred
Stock having a record date on or after the date hereof and prior to the
Effective Time; or
(ii) any changes in the number of outstanding shares set forth
in the representations and warranties in Section 2.2(a) or Section 3.2(a)
(including but not limited to
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outstanding shares which should have been disclosed pursuant to such
representations and warranties but were omitted from such disclosure); in order
to insure that after any such automatic adjustment of the Exchange Ratio, (i)
the holders of shares of outstanding Alliance Common Stock immediately prior to
the Effective Time (including the shares of Alliance Common Stock issuable upon
conversion of all outstanding shares of Alliance Preferred Stock) will own 67%
of the outstanding shares of Liquid Common Stock immediately after the Effective
Time and (ii) the holders of shares of outstanding Liquid Common Stock
immediately prior to the Effective Time will own 33% of the outstanding shares
of Liquid Common Stock immediately after the Effective Time. The percentages in
this Section 1.5(f) are subject to change only to the extent applicable due to
rounding to accommodate the elimination of fractional shares pursuant to Section
1.5(e).
1.6 Dissenting Shares. Shares of capital stock of Alliance that have not
been voted for adoption of the Merger and with respect to which appraisal rights
have been properly perfected in accordance with Section 262 of the DGCL
("Dissenting Shares"), shall not be converted into the right to receive the
applicable shares of Liquid Common Stock pursuant to the Exchange Ratio at or
after the Effective Time, unless and until the holder of such shares withdraws
such holder's demand for appraisal rights or becomes ineligible for appraisal
rights. If a holder of Dissenting Shares withdraws such holder's demand for
appraisal rights or becomes ineligible for appraisal rights, then, as of the
Effective Time or the occurrence of such event, whichever later occurs, such
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be
converted into and represent the right to receive Liquid Common Stock pursuant
to the Exchange Ratio.
1.7 Treatment of Derivative Securities; Assumption of Stock Options. As of
the Effective Time, by operation of law and by virtue of the Merger and without
any action on the part of any holder of any Alliance Options (as defined in
Section 2.2(b)):
(a) Liquid shall assume, subject to paragraph (b) below, Alliance's
obligations under each of (i) the Amended and Restated 1998 General Stock
Incentive Plan of Digital On-Demand, Inc., (ii) the 1998 Executive Stock Plan of
Digital On-Demand, Inc. (iii) the Alliance Entertainment Corp. 1999 Equity
Participation and Incentive Plan and (iv) the Alliance Entertainment Corp. 1999
Equity Participation Plan (collectively the "Alliance Option Plans"); and
(b) each Alliance Option which, prior to the Effective Time,
represented the right to acquire shares of Alliance Common Stock, whether or not
exercisable at the Effective Time and regardless of the respective exercise
prices thereof, will be assumed by Liquid. Each Alliance Option so assumed by
Liquid under this Agreement will continue to have, and be subject to, the same
terms and conditions set forth in the Alliance Option Plans (and any applicable
stock option agreement for such Alliance Options) immediately prior to the
Effective Time (including any repurchase rights or vesting provisions), except
that (i) each Alliance Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Liquid Common
Stock equal to the product of the number of shares of Alliance Common Stock that
were issuable upon exercise of such Alliance Option
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immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded to the nearest whole number of shares of Liquid Common Stock and (ii)
the per share exercise price for the shares of Liquid Common Stock issuable upon
exercise of each such assumed Alliance Option will be equal to the quotient
determined by dividing the exercise price per share of Alliance Common Stock at
which such Alliance Option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded to the nearest whole cent. Each assumed
Alliance Option shall be vested immediately following the Effective Time as to
the same percentage of the total number of shares subject thereto as it was
vested as to immediately prior to the Effective Time. As soon as reasonably
practicable, Liquid will issue to each person who holds an assumed Alliance
Option a document evidencing the foregoing assumption of such Alliance Option by
Liquid. Without limitation, Liquid shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Liquid Common Stock for
delivery upon exercise of Alliance Options assumed in accordance with Sections
1.7(a) and 1.7(b).
(c) Further Option Provisions. Liquid will take all such actions as
may be necessary or advisable in order to implement the intent and effect of the
arrangements set forth in Sections 1.7(a) and 1.7(b). In addition, within no
more than 120 days of the Effective Time, Liquid will register on Form S-8 under
the Securities Act of 1933, as amended (the "Securities Act"), that number of
shares of Liquid Common Stock equal to the number of shares of Liquid Common
Stock issuable upon the exercise of the assumed Alliance Options.
(d) Warrants. As of the Effective Time, by operation of law and by
virtue of the Merger and without any action on the part of any holder thereof,
all Alliance Warrants (as defined in Section 2.2(b)) that are then outstanding,
if any, shall be assumed by Liquid in accordance with the terms of the
instrument by which such Alliance Warrant is evidenced. All rights with respect
to Alliance Common Stock (including rights to Alliance Common Stock issuable
upon conversion of all outstanding shares of Alliance Preferred Stock) subject
to outstanding Alliance Warrants shall thereupon be converted into rights with
respect to Liquid Common Stock. Accordingly, from and after the Effective Time,
each Alliance Warrant assumed by Liquid may be exercised solely for shares of
Liquid Common Stock. Without limitation, Liquid shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Liquid Common
Stock for delivery upon exercise of all Alliance Warrants in accordance with
this Section 1.7(d).
1.8 Surrender of Certificates.
(a) Exchange Agent. Liquid shall select an institution reasonably
satisfactory to Alliance to act as the exchange agent (the "Exchange Agent") in
the Merger.
(b) Liquid to Provide Common Stock. At, or as soon as practicable
after, the Effective Time, Liquid shall deposit in trust with the Exchange Agent
for exchange in accordance with this Article I, the shares of Liquid Common
Stock issuable and cash payable pursuant to Section 1.5 in exchange for
outstanding shares of Alliance Common Stock. In addition, Liquid shall make
available as necessary from time to time after the Effective Time as needed,
cash in an amount sufficient for any dividends or distributions which holders of
shares of Alliance Common Stock may be entitled pursuant to Section 1.8(d). Any
cash and Liquid
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Common Stock deposited with the Exchange Agent shall hereinafter be referred to
as the "Exchange Fund."
(c) Exchange Procedures. At, or as soon as practicable after, the
Effective Time, Liquid shall cause the Exchange Agent to mail to each holder of
record (as of the Effective Time) of a certificate or certificates (the
"Certificates") which immediately prior to the Effective Time represented
outstanding shares of Alliance Common Stock (including shares of Alliance Common
Stock issuable upon the conversion of Alliance Preferred Stock immediately prior
to the Effective Time) whose shares were converted into the right to receive
shares of Liquid Common Stock pursuant to Section 1.5(a) and any dividends or
other distributions pursuant to Section 1.8(d), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Liquid may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Liquid Common Stock and any dividends or other distributions pursuant to
Section 1.8(d). Upon surrender of Certificates for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Liquid, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificates
shall be entitled to receive in exchange therefor the number of shares of Liquid
Common Stock and cash in lieu of fractional shares (after taking into account
all Certificates surrendered by such holder) to which such holder is entitled
pursuant to Section 1.5(b) (which shall be in uncertificated book entry form
unless a physical certificate is requested or is otherwise required by
applicable law or regulation) and any dividends or distributions payable
pursuant to Section 1.8(d), and the Certificates so surrendered shall forthwith
be canceled. Until so surrendered, outstanding Certificates will be deemed from
and after the Effective Time, for all corporate purposes, to evidence the
ownership of the number of shares of Liquid Common Stock and cash in lieu of
fractional shares into which such shares of Alliance Common Stock (including
shares of Alliance Common Stock issuable upon conversion of Alliance Preferred
Stock immediately prior to the Effective Time) shall have been so converted and
the right to receive any dividends or distributions payable pursuant to Section
1.8(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date hereof with respect to
Liquid Common Stock with a record date after the Effective Time will be paid to
the holders of any unsurrendered Certificates with respect to the shares of
Alliance Common Stock represented by such unsurrendered Certificates until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holders thereof, without interest,
(i) promptly after such surrender, the number of shares of Liquid Common Stock
issued in exchange therefor and the amount of any such dividends or other
distributions with a record date after the Effective Time and theretofore paid
with respect to such shares of Liquid Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time and a payment date subsequent to such surrender payable
with respect to such shares of Liquid Common Stock.
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(e) Transfers of Ownership. If shares of Liquid Common Stock are to
be issued in a name other than that in which the Certificates surrendered in
exchange therefor are registered, it will be a condition of the issuance thereof
that the Certificates so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the Persons (as defined in Section 8.3(c))
requesting such exchange will have paid to Liquid or any agent designated by it
any transfer or other Taxes (as defined in Section 2.6) required by reason of
the issuance of shares of Liquid Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Liquid or any agent designated by it that such Tax has been paid
or is not payable.
(f) Required Withholding. Each of the Exchange Agent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Alliance Common Stock or Alliance Preferred Stock
such amounts as may be required to be deducted or withheld therefrom under the
Code or under any provision of state, local or foreign Tax law or under any
other applicable Legal Requirement (as defined in Section 2.2(c)). To the extent
such amounts are so deducted or withheld, the amount of such consideration shall
be treated for all purposes under this Agreement as having been paid to the
Person to whom such consideration would otherwise have been paid.
(g) No Liability. Notwithstanding anything to the contrary in this
Section 1.8, neither the Exchange Agent, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Liquid Common Stock or Alliance
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Liquid on a daily basis;
provided that no such investment or loss thereon shall affect the amounts
payable to Alliance stockholders pursuant to this Article I. Any interest and
other income resulting from such investment shall become a part of the Exchange
Fund, and any amounts in excess of the amounts payable to Alliance stockholders
pursuant to this Article I shall promptly be paid to Liquid.
(i) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates six (6) months after
the Effective Time shall, at Liquid's request, be delivered to Liquid and any
holders of the Certificates who have not surrendered such Certificates in
compliance with this Section 1.8 shall after such delivery to Liquid look only
to Liquid for the shares of Liquid Common Stock pursuant to Section 1.5 and any
dividends or other distributions pursuant to Section 1.8(d) with respect to the
shares of Alliance Common Stock formerly represented thereby. Any such portion
of the Exchange Fund remaining unclaimed by holders of shares of Alliance Common
Stock immediately prior to such time as such amounts would otherwise escheat to
or become property of any Governmental Entity (as defined in Section 2.3(c))
shall, to the extent permitted by law, become the property of Liquid free and
clear of any claims or interest of any Person previously entitled thereto.
1.9 No Further Ownership Rights in Alliance Stock. All shares of Liquid
Common Stock issued upon the surrender for exchange of shares of Alliance Common
Stock in
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accordance with the terms hereof (including any cash paid in respect thereof
pursuant to Section 1.8(d)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Alliance Common Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Alliance Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Liquid Common Stock
and any dividends or distributions payable pursuant to Section 1.8(d); provided,
however, that Liquid may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to indemnify Liquid and/or post a bond in favor of Liquid against
any claim that may be made against Liquid, Alliance or the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or destroyed.
1.11 Tax Consequences. It is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of Section 368(a) of the
Code. The parties hereto adopt this Agreement as a plan of reorganization within
the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
Alliance represents and warrants to Liquid, subject to the exceptions
disclosed in writing in the disclosure schedules supplied by Alliance to Liquid
dated as of the date hereof and certified by a duly authorized officer of
Alliance (the "Alliance Schedules"), as follows:
2.1 Organization; Standing and Power; Charter Documents; Subsidiaries.
(a) Organization; Standing and Power. Alliance is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each Subsidiary (as defined in Section 2.1(c)) is either a corporation
or limited liability company, as applicable, duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization, as applicable. Alliance and each of its Subsidiaries has the
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing and in good standing would not reasonably be expected to
have a Material Adverse Effect (as defined in Section 8.3(b)) on Alliance and
its Subsidiaries taken as a whole, and is duly qualified and in good standing to
do business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary other
than in such jurisdictions where the failure to so qualify or to be good
standing, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Alliance and its Subsidiaries taken as a
whole.
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(b) Charter Documents. Alliance has delivered to Liquid (i) true and
correct copy of the Certificate of Incorporation and Bylaws of Alliance, each as
amended to date (collectively, the "Alliance Charter Documents") and (ii) the
organizational documents of each of its Subsidiaries, and each such instrument
is in full force and effect. Alliance is not in violation of any of the
provisions of the Alliance Charter Documents and no Subsidiary is in violation
of its respective organizational documents.
(c) Subsidiaries. Schedule 2.1(c) of the Alliance Schedules sets
forth: (i) the name of each Subsidiary (as defined below) of Alliance, (ii) the
jurisdiction of organization for each Subsidiary of Alliance and (iii) the
number, type and percentage interests of Alliance in each Subsidiary. Except for
the Subsidiaries of Alliance which are set forth in Schedule 2.1(c) of the
Alliance Schedules, Alliance does not directly or indirectly have more than a
nominal interest in any other corporation, partnership, joint venture or other
entity nor any interest in a third party commitment to fund convertible debt.
All the outstanding shares of capital stock of, or other equity interests in,
each such Subsidiary have been validly issued and are fully paid and
nonassessable and are, except as set forth in Schedule 2.1 (c) of the Alliance
Schedules, owned directly or indirectly by Alliance, free and clear of all
Liens, including any restriction on the right to vote, sell or otherwise dispose
of such capital stock or other ownership interests, except for restrictions
imposed by applicable securities laws. For purposes of this Agreement,
"Subsidiary," when used with respect to any party, shall mean any corporation or
other organization, whether incorporated or unincorporated, at least a majority
of the securities or other interests of which having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries.
2.2 Alliance Capital Structure.
(a) Capital Stock. The authorized capital stock of Alliance consists
of: (i) 150,000,000 shares of Alliance Common Stock, $0.0001 par value per
share, of which 71,738,845 shares are issued and outstanding as of the date
hereof, and (ii) 10,000,000 shares of Alliance Preferred Stock, $0.01 par value
per share, of which (A) 65,000 shares are designated Series A Preferred Stock of
which (1) 20,000 shares are designated Series A1 Preferred Stock, and (2) 45,000
shares are designated Series A2 Preferred Stock, and (B) 9,700,000 shares are
designated Series B Preferred Stock. 20,000 shares of Series A1 Preferred Stock,
40,968 shares of Series A2 Preferred Stock and 4,540,070 shares of Series B
Preferred Stock are issued and outstanding as of the date hereof, excluding
accrued and unpaid dividends. Assuming the payment of all accrued and unpaid
dividends on the Series A1 Preferred Stock, the Series A2 Preferred Stock and
the Series B Preferred Stock as of the date hereof and then the subsequent
conversion of such Series A1 Preferred Stock, Series A2 Preferred Stock and
Series B Preferred Stock into shares of April Common Stock, 114,053,171 shares
of April Common Stock would be issued and outstanding, as of the date hereof.
Except as set forth in Schedule 2.2(b) of the Alliance Schedules, all of the
outstanding shares of capital stock of Alliance have been duly authorized and
validly issued, and are fully paid and nonassessable and free of any preemptive
rights. As of the date hereof, there are no shares of Alliance Common Stock held
in treasury by Alliance.
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(b) Stock Options and Warrants. As of the date hereof: (i) 7,909,752
shares of Alliance Common Stock and 1,056 shares of Alliance Series A2 Preferred
Stock are subject to issuance pursuant to outstanding options to purchase
Alliance Common and Series A2 Preferred Stock under the Alliance Stock Option
Plans (the "Alliance Options") and (ii) 2,184,521 shares of Alliance Common
Stock and 1,885 shares of Alliance Series A2 Preferred Stock are reserved for
issuance pursuant to outstanding warrants to purchase Alliance Common and Series
A2 Preferred Stock (the "Alliance Warrants"). All shares of Alliance Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable. Schedule
2.2(b) of the Alliance Schedules sets forth each holder of an Alliance Option
and an Alliance Warrant, the number and type of securities issuable thereunder,
the exercise price therefor, the exercise period and vesting schedule thereof
(including a description of the circumstances under which such vesting schedule
can be accelerated).
(c) Other Securities. Except as otherwise set forth above in this
Section 2.2 or in Schedule 2.2(c) of the Alliance Schedules, as of the date
hereof, there are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Alliance or any of
its Subsidiaries is a party or by which it is bound obligating Alliance or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other voting securities of
Alliance or any of its Subsidiaries, or obligating Alliance or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. Except
for the Voting Agreement and except as set forth in Schedule 2.2(c) of the
Alliance Schedules, Alliance is not a party to, and to the knowledge of
Alliance, there are no other stockholders rights agreements, voting trusts,
proxies or other agreements or understandings with (c) respect to the voting
interests of Alliance. All outstanding shares of Alliance Common Stock, Alliance
Preferred Stock and all outstanding options and warrants to acquire Alliance
capital stock have been issued and granted in compliance with (i) all applicable
securities laws and all other applicable Legal Requirements (as defined below)
and (ii) all material requirements set forth in applicable Contracts (as defined
below). For purposes of this Agreement, "Legal Requirements" shall mean any
federal, state, local, municipal, or other law, statute, constitution, principle
of common law, resolution, ordinance, code, order, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Entity (as defined in Section 2.3(c)). For purposes of this
Agreement, "Contract" shall mean any written, contract, subcontract, lease,
instrument, note, option, warranty, purchase order, license, sublicense,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature, as in effect as of the date hereof or as may hereinafter be in
effect.
2.3 Authority; Non-Contravention; Necessary Consents.
(a) Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly authorized by
all necessary corporate action on the part of Alliance and no other corporate
proceedings on the part of Alliance are necessary to authorize the execution and
delivery of this Agreement or to consummate the Merger and the other
transactions contemplated hereby, other than the approval
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and adoption of this Agreement and the approval of the Merger by Alliance's
stockholders and the filing of the Certificate of Merger pursuant to the DGCL.
The affirmative vote of the holders of a majority of the outstanding shares of
Alliance Common Stock and each outstanding series of Alliance Preferred Stock
voting as separate classes to approve and adopt this Agreement and approve the
Merger is the only vote of the holders of any class or series of Alliance
capital stock necessary to approve and adopt this Agreement, approve the Merger
and consummate the Merger and the other transactions contemplated hereby. This
Agreement has been duly executed and delivered by Alliance and, assuming due
execution and delivery by Liquid and Merger Sub, constitutes the valid and
binding obligation of Alliance, enforceable against Alliance in accordance with
its terms subject to the effect of applicable bankruptcy, fraudulent conveyance,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies.
(b) Non-Contravention. The execution and delivery of this Agreement
by Alliance does not, and, subject to obtaining the approval and adoption of
this Agreement and the approval of the Merger by Alliance's stockholders as
contemplated in Section 5.2 and compliance with the requirements set forth in
Section 2.3(c), performance of this Agreement by Alliance will not, (i) conflict
with or violate the Alliance Charter Documents, (ii) conflict with or violate
any Legal Requirement applicable to Alliance or by which Alliance or any of its
respective properties is bound or affected or (iii) result in any material
breach of or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or impair
Alliance's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a material Lien (as defined below)
on any of the material properties or assets of Alliance pursuant to, any
Alliance Material Contract (as defined in Section 2.11). Schedule 2.3(b) of the
Alliance Schedules lists all consents, waivers and approvals under the Alliance
Material Contracts required to be obtained in connection with the consummation
of the transactions contemplated hereby, which, if individually or in the
aggregate not obtained, would result in a Material Adverse Effect on Alliance
and its Subsidiaries taken as a whole or the Surviving Corporation. For purposes
of this Agreement, "Lien" shall mean any lien, encumbrance, mortgage, pledge,
security interest, claim, charge, option or other defect in ownership or title.
(c) Necessary Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with any United States federal, state
or local government, any instrumentality, subdivision, court, administrative
agency or commission or other governmental authority or instrumentality
exercising any regulatory, taxing or other governmental authority (a
"Governmental Entity") or any other Person is required to be obtained or made by
Alliance in connection with the execution and delivery of this Agreement or the
consummation of the Merger and other transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware and appropriate documents with the relevant authorities of
other states in which Alliance and/or Liquid are qualified to do business, (ii)
the filing of the Prospectus/Proxy Statement (as defined in Section 2.18) with
the United States Security and Exchange Commission (the "SEC") in accordance
with the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the effectiveness of the Registration Statement (as defined in Section 2.18) in
accordance with the Securities Act,
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(iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal, foreign
and state securities (or "blue sky") laws and the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and (iv) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not have a Material Adverse Effect to Alliance or Liquid
or materially delay the ability of the parties hereto to consummate the Merger
within the time frame in which the Merger would otherwise be consummated in the
absence of the need for such consent, approval, order, authorization,
registration, declaration or filings. The consents, approvals, orders,
authorizations, registrations, declarations and filings set forth in (i) through
(iii) are referred to herein as the "Necessary Consents."
2.4 Alliance Financial Statements; Undisclosed Liabilities.
(a) Alliance Financial Statements. Schedule 2.4(a) of the Alliance
Schedules sets forth (a) the audited balance sheet of Alliance as of each of
December 31, 1999, December 31, 2000 and December 31, 2001, together with the
related audited statement of operations, stockholders' equity and cash flow for
each of the years ended December 31, 1999, December 31, 2000 and December 31,
2001, and the notes thereto, and (b) the unaudited balance sheet of Alliance as
of March 31, 2002, together with the related unaudited statement of operations,
stockholders' equity and cash flow for the three month period ended March 31,
2002, and the notes thereto (collectively, the "Alliance Financials"). The
Alliance Financials were (a) (i) prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto) and (ii) fairly presented in all material respects the consolidated
financial position of Alliance and its Subsidiaries as at the respective dates
thereof and the consolidated results of operations and cash flows of Alliance
and its Subsidiaries for the periods indicated (subject to normal and recurring
year-end adjustments). The balance sheet dated as of March 31, 2002 is
hereinafter referred to as the "Alliance Balance Sheet."
(b) Since the date of the Alliance Balance Sheet and except as set
forth in Schedule 2.4(b) of the Alliance Schedules, Alliance has not incurred
any liabilities of any kind whatsoever (whether absolute, accrued, contingent or
otherwise) except for (i) liabilities disclosed or provided for in the Alliance
Balance Sheet, (ii) incurred since the date of the Alliance Balance Sheet in the
ordinary course of business consistent with past practices which would not
reasonably be expected to have a Material Adverse Effect on Alliance or its
Subsidiaries taken as a whole, and (iii) liabilities incurred pursuant to this
Agreement.
(c) The audited financial statements of Alliance set forth on
Schedule 2.4(a) were prepared by PricewaterhouseCoopers LLP, independent
auditors.
2.5 Absence of Certain Changes or Events. Except as set forth on Schedule
2.5 of the Alliance Schedules, since the date of the Alliance Balance Sheet
there has not been: (i) any Material Adverse Effect on Alliance, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of Alliance's capital
stock, or any purchase, redemption or other acquisition by Alliance of any of
Alliance's capital stock or any other securities of Alliance or any options,
warrants, calls or
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rights to acquire any such shares or other securities except for repurchases
from employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassification of any of Alliance's capital stock, or (iv) any agreement or
transaction between Alliance or any of its Subsidiaries, on the one hand, and an
Alliance Interested Party (as defined in Section 2.15) on the other hand.
2.6 Taxes.
(a) Definition. For the purposes of this Agreement, the term "Tax"
or, collectively, "Taxes," shall mean any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts, and any obligations with respect to such amounts
arising as a result of being a member of an affiliated, consolidated, combined
or unitary group for any period or under any agreements or arrangements with any
other person and including any liability for taxes of a predecessor entity.
(b) Representations. Except where failure of any of the following
representations to be true would not create a Material Adverse Effect on
Alliance and its Subsidiaries taken as a whole:
(i) All federal, state, local and foreign returns, estimates,
information statements and reports relating to Taxes ("Tax Returns") required to
be filed by or on behalf of Alliance or any Subsidiary with any Governmental
Entity with respect to any taxable period ending on or before the Closing Date
(the "Alliance Returns") (i) have been or will be filed on or before the
applicable due date (including any extensions of such due date), and (ii) have
been, or will be when filed, accurately and completely prepared in material
compliance with all applicable Legal Requirements. Except as reserved on
Alliance Financials, all amounts required to be paid in respect of Alliance and
its Subsidiaries (whether or not shown on any Tax Returns) due on or before the
Closing Date have been or will be paid on or before the Closing Date. Alliance
and its Subsidiaries have delivered to Liquid accurate and complete copies of
all Alliance Returns filed by or on behalf of Alliance and its Subsidiaries
since their date of incorporation.
(ii) Alliance and each of its Subsidiaries has withheld with
respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld and has paid all such withheld taxes to the
proper governmental agencies.
(iii) The Alliance Financials fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with GAAP. All Taxes incurred since the date of the
Alliance Balance Sheet have been incurred in the ordinary course of business.
(iv) No Alliance Return has ever been examined or audited by
any Governmental Entity. No extension or waiver of the limitation period
applicable to any Alliance
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Returns has been granted (by Alliance or any Alliance Subsidiary or any other
Person), and no such extension or waiver has been requested from Alliance or any
Alliance Subsidiary.
(v) No claim or proceeding is pending or has been threatened
against or with respect to Alliance or any Alliance Subsidiary in respect of any
Tax. There are no unsatisfied liabilities for Taxes with respect to any notice
of deficiency or similar document received by Alliance or its Subsidiaries with
respect to any Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document that are being contested in good faith
by Alliance or its Subsidiaries and with respect to which adequate reserves for
payment have been established). There are no liens for Taxes upon any of the
assets of Alliance or its Subsidiaries except liens for current Taxes not yet
due and payable. Neither Alliance nor any of its Subsidiaries has entered into
or become bound by any agreement or consent pursuant to Section 341(f) of the
Code. Neither Alliance nor any of its Subsidiaries has been, and will be,
required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(vi) There is no agreement, plan, arrangement or other
Contract covering any employee or independent contractor or former employee or
independent contractor of Alliance or its Subsidiaries that, considered
individually or considered collectively with any other such Contracts, will, or
could reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G of the Code.
(vii) Neither Alliance nor its Subsidiaries is, or has been, a
party to or bound by any tax indemnity agreement, tax-sharing agreement, tax
allocation agreement or similar Contract.
(viii) Neither Alliance nor its Subsidiaries has ever been a
member of an affiliated group (as defined in Section 1504 of the Code) filing a
consolidated federal income Tax Return (or member of any analogous group under
applicable local, state or foreign law) other than a group of which Alliance was
the common parent. Neither Alliance nor its Subsidiaries has liability for any
Tax pursuant to Treasury Regulations Section 1.1502-6 or any analogous state,
local or foreign law or regulation or by reason of having been a member of any
consolidated, combined or unitary group on or before the Closing Date.
(ix) Neither Alliance nor its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying under Section 355 of the Code (x) in the two
years prior to the date of this Agreement or (y) in a distribution that could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
2.7 Intellectual Property.
(a) General. Except as set forth on Schedule 2.7 to the Alliance
Schedules, Alliance owns or is licensed to use the Intellectual Property that is
material to conduct its business as now conducted. For purposes of this
Agreement, "Intellectual Property" shall
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mean all trade secrets, industrial models, designs, methodologies, customer
lists, vendor lists, computer programs, software and related documentation,
technical information, manufacturing, engineering and technical drawings,
know-how, specifications, source code, object code, databases, data
compilations, graphics, devices, techniques, algorithms, methods, processes,
procedures, formulae, designs, improvements, discoveries, concepts, user
interfaces, hardware, development tools, inventions (whether or not patentable
or copyrightable and whether or not reduced to practice), concepts and other
technology and content with respect to all of the foregoing, developed,
produced, used, marketed, acquired or sold and all intellectual property and
other proprietary rights in the items above, including, without limitation, all
trade names, trademarks, domain names, service names, service marks, logos,
brand names and other identifiers, trade secrets, trade dress, copyrights, and
domestic and foreign patents, and the registrations, applications, renewals,
extensions and continuations (in whole or in part) thereof, all goodwill
associated therewith, and all rights and causes of action for infringement,
misappropriation, misuse, dilution or unfair trade practices associated
therewith.
(b) Technology. Schedule 2.7(b) of the Alliance Schedules sets forth
a list of all databases and software owned by Alliance and developed, produced,
used, marketed or sold by Alliance and material to the business thereof during
the two (2) years prior to the date of this Agreement, together with all prior
versions of such databases and software produced, used, marketed or sold by
Alliance and material to the business thereof during the two years prior to the
date of this Agreement (collectively, the "Alliance Products"). Except for the
Alliance Third Party Technologies (as defined in Section 2.7(c)), Alliance owns
all right, title and interest in and to the following (collectively, the
"Alliance Technology"), free and clear of all encumbrances: (i) the Alliance
Products, together with any and all object code, source code, techniques,
software tools, formats, designs, user interfaces, and content related thereto;
(ii) any and all updates, enhancements, corrections, modifications, improvements
and new releases related to the items set forth in clause (i) above; (iii) any
and all technology and work in progress related to the items set forth in
clauses (i) and (ii) above, and (iv) all inventions, discoveries, processes,
designs, trade secrets, know-how and other confidential or proprietary
information related to the items set forth in clauses (i), (ii) and (iii) above.
(c) Third Party Technology. Schedule 2.7(c) of the Alliance Schedules
sets forth a list of all material software and databases used by Alliance or for
which Alliance does not own all right, title and interest (collectively, the
"Alliance Third Party Technologies"), and all license agreements or other
contracts pertaining thereto (the "Alliance Third Party Licenses"), indicating,
with respect to each of the Alliance Third Party Technologies listed therein,
the owner thereof and the Alliance Third Party License applicable thereto.
Alliance has the lawful right to use (free of any material restriction not
expressly set forth in the Alliance Third Party Licenses) (a) all Alliance Third
Party Technology that is incorporated in or used in the development or
production of Alliance Technology, and (b) all other Alliance Third Party
Technology necessary for the conduct of the business of Alliance as now
conducted. To the knowledge of Alliance, all Alliance Third Party Licenses are
valid, binding and in full force and effect subject to the effect of applicable
bankruptcy, insolvency and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies. Each other party thereto has performed in
all material respects their obligations thereunder, and neither Alliance nor, to
Alliance's knowledge, any other party thereto is in default under any of the
Alliance Third Party Licenses, nor, to Alliance's knowledge, has there occurred
any event or circumstance which with notice or lapse of time or both would
constitute a default or event of default on the part of Alliance or, to
Alliance's knowledge, any
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other party thereto or give to any other party thereto, to the knowledge of
Alliance, the right to terminate or modify any Alliance Third Party License.
Alliance has not received notice that any party to any Alliance Third Party
License intends to cancel, terminate or refuse to renew (if renewable) such
Alliance Third Party License or to exercise or decline to exercise any option or
right thereunder.
(d) Trademarks. Schedule 2.7(d) of the Alliance Schedules sets forth
a list of all material common law trademarks, trade names, brand names, service
marks, logos or other identifiers for the Alliance Products currently used by
Alliance in its business (the "Alliance Marks").
(e) Intellectual Property Rights. Schedule 2.7(e) of the Alliance
Schedules sets forth all patents, patent applications, copyright registrations
(and applications therefor) and trademark or service xxxx registrations (and
applications therefor) owned by Alliance (unless otherwise disclosed thereon)
(collectively, the "Alliance IP Registrations"). Except as set forth on Schedule
2.7(e) of the Alliance Schedules, Alliance owns all right, title and interest,
free and clear of any encumbrances, in and to the Alliance IP Registrations,
together with, to the knowledge of Alliance, any other material rights,
currently used in the operation of the business, in or to the Alliance IP
Registrations, any material unregistered copyrights, rights in the Alliance
Marks, trade secret rights and other intellectual property rights (including,
without limitation, rights of enforcement) contained or embodied in Alliance
Technology (collectively, the "Alliance IP Rights").
(f) Maintenance of Rights. Except as set forth on Schedule 2.7(f) of
the Alliance Schedules, (i) to the knowledge of Alliance, Alliance has not
conducted its business, in a manner that would result in the abandonment,
cancellation or unenforceability of any item of the Alliance IP Registrations,
and (ii) Alliance has not taken (or to Alliance's knowledge failed to take) any
action that would result in the forfeiture or relinquishment of any Alliance IP
Registrations, in each case where such abandonment, cancellation,
unenforceability, forfeiture or relinquishment would have a Material Adverse
Effect on Alliance and its Subsidiaries taken as a whole. Except as set forth in
Schedule 2.7(f), Alliance has not granted to any third party any rights or
permissions to use any of the Alliance Technology or the Alliance IP
Registrations. Except as set forth in Schedule 2.7(f) of the Alliance Schedules
or except pursuant to reasonably prudent safeguards or as required by any
applicable law, order or regulation of a Governmental Entity, or by order or
decree of any court of competent jurisdiction, (a) Alliance has not disclosed
any confidential information relating to Alliance Technology, and (b) Alliance
is not under any contractual or other obligation to disclose to any third party
any confidential information relating to Alliance Technology.
(g) Challenges to Alliance's Rights. Except as set forth on Schedule
2.7(g) of the Alliance Schedules, (i) Alliance has not received any written
notice or claim, nor is any executive officer of Alliance aware of any notice or
claim (whether written, oral or otherwise), challenging Alliance's ownership or
rights in the Alliance Technology, the Alliance IP Rights,
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the Alliance IP Registrations or Alliance Domain Names alleging any conflict or
infringement of any third party property rights; and (ii) to the knowledge of
Alliance, no other person or entity is infringing or misappropriating or
otherwise making any unauthorized use of Alliance Technology, the Alliance IP
Rights or the Alliance IP Registrations.
(h) Infringement By Alliance. Except as set forth on Schedule 2.7(h)
of the Alliance Schedules (i) to the knowledge of Alliance, the use of any of
Alliance Technology, Alliance IP Rights and Alliance IP Registrations in the
business of Alliance does not infringe or constitute an appropriation of any
right, title or interest (including, without limitation, any patent, copyright
or trade secret right) held by any other person or entity, and (ii) Alliance has
not received any written notice or claim, nor is any executive officer of
Alliance aware of any notice or claim (whether written, oral or otherwise), made
with respect thereto.
(i) Confidentiality. Except as set forth on Schedule 2.7(i) of the
Alliance Schedules (i) Alliance has not disclosed any source code regarding the
Alliance Technology to any person or entity other than an employee or
independent contractor of Alliance and, with respect to independent contractors,
under a written nondisclosure agreement or a work-for-hire agreement, (ii)
Alliance has at all times maintained and diligently enforced commercially
reasonable procedures to protect all confidential information relating to the
Alliance Technology; (iii) neither Alliance nor any escrow agent is under any
contractual or other obligation to disclose the source code or any other
proprietary information included in or relating to the Alliance Technology; and
(iv) Alliance has not deposited any source code relating to the Alliance
Technology into any source code escrows. If, so disclosed on Schedule 2.7(i) of
the Alliance Schedules, and for which Alliance has deposited any source code to
the Alliance Technology into source code escrows, no event has occurred that has
or could reasonably form the basis for a release of such source code from such
escrows or arrangements.
(j) Warranty Against Defects. Except as set forth in Schedule 2.7(j)
of the Alliance Schedules, the Alliance Technology is free from known material
defects.
(k) Domain Names. Schedule 2.7(k) of the Alliance Schedules sets
forth a list of all Internet domain name registrations owned by Alliance (the
"Alliance Domain Names"), which Alliance Domain Names include all the names that
Alliance uses to directly conduct its business on the Internet but excludes
domain names maintained by third parties who provide services supplied by
Alliance.
2.8 Compliance; Permits.
(a) Compliance. Alliance is not in conflict with, or in default or in
violation of, any Legal Requirement applicable to Alliance or by which Alliance
or any of its businesses or properties is, or Alliance believes is reasonably
likely to be, bound or affected, except, in each case, or in the aggregate, for
conflicts, violations and defaults that would not have a Material Adverse Effect
on Alliance. No material investigation or review by any Governmental Entity
against Alliance is pending or, to Alliance's knowledge, has been threatened in
a writing delivered to Alliance. There is no material judgment, injunction,
order or decree binding upon Alliance which has or would reasonably be expected
to have the effect of prohibiting or materially impairing any material business
practice of Alliance or any of its Subsidiaries, any
acquisition of material property by Alliance or any of its Subsidiaries or the
conduct of business by Alliance and its Subsidiaries as currently conducted.
(b) Permits. Alliance and its Subsidiaries hold, to the extent
legally required, all permits, licenses, variances, exemptions, orders and
approvals from Governmental Entities ("Permits") that are material to and
required for the operation of the business of Alliance, as currently conducted
(collectively, the "Alliance Permits"). No suspension or cancellation of any of
the Alliance Permits is pending or, to the knowledge of Alliance, threatened.
Alliance is in compliance in all material respects with the terms of the
Alliance Permits.
2.9 Litigation. Except as set forth in Schedule 2.9 of the Alliance
Schedules, there are no claims, suits, actions or proceedings pending or, to the
knowledge of Alliance, threatened in writing against Alliance or any of its
Subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated hereby or which would
reasonably be expected, either singularly or in the aggregate with all such
claims, actions or proceedings, to have a Material Adverse Effect on Alliance,
and Alliance does not know or have reason to be aware of any basis for the same.
2.10 Brokers' and Finders' Fees. Except for fees payable to Credit Suisse
First Boston pursuant to an engagement letter dated November 10, 2000, a copy of
which has been provided to Liquid, Alliance has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.11 Contracts.
(a) Alliance Material Contracts. Except as otherwise set forth in
Schedule 2.11 of the Alliance Schedules, as of the date hereof neither Alliance
nor any of its Subsidiaries is a party to or is bound by any of the following
(each, an "Alliance Material Contract"):
(i) any "material contracts" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) with respect to Alliance and its
Subsidiaries;
(ii) any Contract containing any covenant materially limiting
the right of Alliance or its Subsidiaries to engage in any line of business or
to compete with any Person (as defined in Section 8.3(c)) or granting any
exclusive distribution rights; or
(iii) any Contract, or group of Contracts with a Person (or
group of affiliated Persons), the termination of which would be reasonably
expected to have a have a Material Adverse Effect on Alliance or the Surviving
Corporation.
(b) No Breach. All Alliance Material Contracts are valid and in full
force and effect except to the extent they have previously expired in accordance
with their terms or if the failure to be in full force and effect, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Alliance. Neither Alliance nor any of its Subsidiaries has violated
any provision of, or committed or failed to perform any act which with
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or without notice, lapse of time or both would constitute a default under the
provisions of, any Alliance Material Contract, except in each case for those
violations and defaults which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Alliance.
(c) Credit Facility. As of the date hereof, Alliance has received the
consent (the "Lender Consent") of General Electric Capital Corporation ("GECC")
and the Required Lenders (as that term is defined in the Alliance Credit
Agreement), to enter into this Agreement and that the execution, delivery and,
subject to the satisfaction of the conditions precedent of such Lender Consent,
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement by Alliance will not result in a breach or
default under that certain Amended and Restated Credit Agreement, dated as of
May 24, 2001, as amended, among GECC, Alliance and the other parties thereto
(the "Alliance Credit Agreement"). Alliance has made available to Liquid a true
and correct copy of the Alliance Credit Agreement, as amended to date.
2.12 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of "Affiliate"
set forth in Section 2.12(a)(i) below (which definition shall apply only to this
Section 2.12 and Section 3.12), for purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with a party within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "Alliance Employee Plan" shall mean any Employee Plan as
it pertains to Alliance or any of its Affiliates.
(iii) "Alliance Employment Agreement" shall mean any
Employment Agreement as it pertains to Alliance or any of its Affiliates.
(iv) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(v) "Code" shall mean the Internal Revenue Code of 1986, as
amended;
(vi) "DOL" shall mean the Department of Labor;
(vii) "Employee" shall mean any current or former or retired
employee, consultant or director of a party or an Affiliate of such party;
(viii) "Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits
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or other employee benefits or remuneration of any kind, whether written or
unwritten or otherwise, funded or unfunded, including without limitation, each
"employee benefit plan," within the meaning of Section 3(3) of ERISA which is or
has been maintained, contributed to, or required to be contributed to, by a
party or any Affiliate of such party for the benefit of any Employee, or with
respect to which a party or any Affiliate of such party has or may have any
liability or obligation;
(ix) "Employment Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between a party
or the Affiliate of such party and any Employee of such party;
(x) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(xi) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(xii) "International Employee Plan" shall mean each Employee
Plan that has been adopted or maintained by a party or any Affiliate of such
party, whether informally or formally, or with respect to which a party or any
Affiliate of such Party will or may have any liability, for the benefit of
Employees who perform services outside the United States;
(xiii) "IRS" shall mean the Internal Revenue Service;
(xiv) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xv) "Pension Plan" shall mean each Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 2.12(b) of the Alliance Schedules contains an
accurate and complete list of each Alliance Employee Plan and each Alliance
Employment Agreement. Alliance does not have any plan or commitment to establish
any new Alliance Employee Plan, International Employee Plan (as it pertains to
Alliance or its Affiliates) or Alliance Employment Agreement or to modify any
Alliance Employee Plan or Alliance Employment Agreement (except to the extent
required by law or to conform any such Alliance Employee Plan or Alliance
Employment Agreement to the requirements of any applicable law, in each case as
previously disclosed to Alliance in writing, or as required by this Agreement).
(c) Documents. To the extent such item pertains to Alliance, Alliance
has provided to Liquid correct and complete copies of: (i) all documents
embodying each Alliance Employee Plan, and each Alliance Employment Agreement
including (without limitation) all amendments thereto and all related trust
documents, administrative service agreements, group annuity contracts, group
insurance contracts, and policies pertaining to fiduciary liability insurance
covering the fiduciaries for each plan; (ii) the most recent annual actuarial
valuations, if any, prepared for each Alliance Employee Plan; (iii) the three
(3) most recent annual reports
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(Form Series 5500 and all schedules and financial statements attached thereto),
if any, required under ERISA or the Code in connection with each Alliance
Employee Plan; (iv) if the Alliance Employee Plan is funded, the most recent
annual and periodic accounting of Alliance Employee Plan assets; (v) the most
recent summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each
Alliance Employee Plan; (vi) all IRS determination, opinion, notification and
advisory letters, and all applications and correspondence to or from the IRS or
the DOL with respect to any such application or letter; (vii) all communications
material to any Employee or Employees relating to any Alliance Employee Plan and
any proposed Alliance Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to Alliance; (viii) all correspondence to or from any
governmental agency relating to any Alliance Employee Plan; (ix) all COBRA forms
and related notices (or such forms and notices as required under comparable
law); (x) the three (3) most recent plan years discrimination tests for each
Alliance Employee Plan; and (xi) all registration statements, annual reports
(Form 11-K and all attachments thereto) and prospectuses prepared in connection
with each Alliance Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule 2.12(d)
of the Alliance Schedules, (i) Alliance has performed in all material respects
all obligations required to be performed by it under, is not in default or
violation of, and has no knowledge of any default or violation by any other
party to each Alliance Employee Plan, and each Alliance Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) each Alliance
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has either received a
favorable determination, opinion, notification or advisory letter from the IRS
with respect to each such Alliance Employee Plan as to its qualified status
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code or Section 408 of ERISA (or any administrative class exemption issued
thereunder), has occurred with respect to any Alliance Employee Plan; (iv) there
are no actions, suits or claims pending, or, to the knowledge of Alliance,
threatened or reasonably anticipated (other than routine claims for benefits)
against any Alliance Employee Plan or against the assets of any Alliance
Employee Plan; (v) each Alliance Employee Plan (other than any stock option
plan) can be amended, terminated or otherwise discontinued after the Effective
Time, without material liability to Alliance, or any Affiliate of Alliance
(other than ordinary administration expenses); (vi) there are no audits,
inquiries or proceedings pending or, to the knowledge of Alliance or any
Affiliate of Alliance, threatened by the IRS or DOL with respect to any Alliance
Employee Plan; and (vii) neither Alliance nor any Affiliate of Alliance is
subject to any penalty or tax with respect to any Alliance Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
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(e) Pension Plan. Neither Alliance nor any Affiliate of Alliance has
ever maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Collectively Bargained, Multiemployer and Multiple Employer
Plans. At no time has Alliance or any Affiliate of Alliance contributed to or
been obligated to contribute to any Multiemployer Plan. Neither Alliance nor any
Affiliate of Alliance has at any time ever maintained, established, sponsored,
participated in, or contributed to any multiple employer plan, or to any plan
described in Section 413 of the Code.
(g) No Post-Employment Obligations. Except as set forth in Schedule
2.12(g) of the Alliance Schedules, no Alliance Employee Plan provides, or
reflects or represents any liability to provide retiree health to any person for
any reason, except as may be required by COBRA or other applicable statute, and
Alliance has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
or any other person that such Employee(s) or other person would be provided with
retiree health, except to the extent required by statute.
(h) Health Care Compliance. Neither Alliance nor any Affiliate of
Alliance has, prior to the Effective Time and in any material respect, violated
any of the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of the Health Insurance Portability and Accountability
Act of 1996, the requirements of the Women's Health and Cancer Rights Act of
1998, the requirements of the Newborns' and Mothers' Health Protection Act of
1996, or any amendment to each such act, or any similar provisions of state law
applicable to its Employees.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 2.12(i) of the Alliance
Schedules, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Alliance
Employee Plan, Alliance Employment Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.12(i) of the Alliance
Schedules, no payment or benefit which will or may be made by Alliance or its
Affiliates with respect to any Employee or any other "disqualified individual"
(as defined in Code Section 280G and the regulations thereunder) will be
characterized as a "parachute payment," within the meaning of Section 280G(b)(2)
of the Code.
(j) Employment Matters. Alliance: (i) is in compliance in all
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
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Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any governmental authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending, threatened or reasonably anticipated
claims or actions against Alliance under any worker's compensation policy or
long-term disability policy other than those disclosed in Schedule 2.4(b) of the
Alliance Schedules.
(k) Labor. No work stoppage or labor strike against Alliance is
pending, threatened or reasonably anticipated. Alliance does not know of any
activities or proceedings of any labor union to organize any Employees. Except
as set forth in Schedule 2.12(k) of the Alliance Schedules, there are no
actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of Alliance, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to Alliance. Neither Alliance nor
any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. Except as set forth in Schedule
2.11(k) of the Alliance Schedules, Alliance is not presently, nor has it been in
the past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
being negotiated by Alliance.
(l) International Employee Plan. Alliance does not now, nor has it
ever had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
2.13 Real Property. Except as set forth in Schedule 2.13, neither Alliance
nor its Subsidiaries owns any real property. Schedule 2.13 of the Alliance
Schedules set forth a list of all properties leased or otherwise occupied by
Alliance and its Subsidiaries for the operation of its business, including the
address, the name of the landlord, and the current base rent ("Alliance
Facilities"). Schedule 2.13 of the Alliance Schedules identifies all of the
leases or other occupancy agreements with respect to the Alliance Facilities
("Alliance Leases") and any amendments or modifications to the Alliance Leases.
No party other than Alliance has the right to occupy any of the Alliance
Facilities. The Alliance Facilities are in good condition and repair, reasonable
wear and tear excepted. Neither Alliance nor any of its Subsidiaries have any
current and unperformed obligations under the Alliance Leases for repair,
maintenance or replacement at any Alliance Facilities or for the installation of
improvements at any Alliance Facilities. Each Alliance Lease is in full force
and effect, and no breach or default exists by Alliance or any of its
Subsidiaries (or, to the knowledge of Alliance or its Subsidiaries, by any other
party thereto), nor to the knowledge of Alliance or any of its Subsidiaries has
any event or condition occurred which could (with the giving of notice or the
passage of time or both) constitute a breach or default, under any Alliance
Lease.
2.14 Sale of Businesses. As of the date hereof, Alliance, and its
wholly-owned Subsidiary All Media Guide, LLC, a Delaware limited liability
company, have entered into a
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definitive agreement for the sale of the All Media Guide and Digital On-Demand
businesses, a true and correct copy of which, as amended to date, has been
delivered and made available to Liquid (the "Media Agreements").
2.15 Interested Party Transactions. During the last two (2) years, no
executive officer, director or, holder of more than five percent (5%) of the
outstanding shares of any class of Alliance capital stock (nor any member of the
immediate family of the foregoing) (each an "Alliance Interested Party"), (i)
has or has had, directly or indirectly, an economic interest in any entity which
furnished or sold, or furnishes or sells, services, products or technology that
Alliance furnishes or sells, or proposes to furnish or sell, or (ii) has or has
had, directly or indirectly, any economic interest in any entity that purchases
from or sells or furnishes to Alliance, any services, products or technology, or
(iii) is or has been a party to, or has or has had a beneficial interest in, any
Contract to which Alliance or any of its Subsidiaries is a party; provided,
however, that ownership of no more one percent (1%) of the outstanding voting
stock of a publicly traded corporation, shall not be deemed to be an "interest
in any entity" for purposes of this Section 2.15. Except as set forth in
Schedule 2.15 of the Alliance Schedules, to the best of Alliance's knowledge,
none of the Alliance Interested Parties have been subject to any fees, penalty,
fines, notice of violation or other sanction by the SEC, any state securities
commission or any self regulated organization.
2.16 Title to Properties. Alliance and its Subsidiaries have good and
valid title to all properties and assets reflected in the Alliance Balance Sheet
as being owned by Alliance or its Subsidiaries as of the date of the Alliance
Balance Sheet. Such properties and assets are subject to no Liens except for (a)
Liens reflected in the Alliance Balance Sheet, (b) Liens for current taxes,
assessments or governmental charges or levies on property not yet due and
delinquent, (c) zoning, building and land use laws imposed by any Governmental
Entity, (d) mechanics', carriers', workmen's, repairmen's, statutory or common
law liens being contested in good faith, and (e) other title defects,
encumbrances, covenants, rights of way, building or use restrictions, easements,
exceptions, variances, reservations and other matters or limitations of any
kind, if any, which do not and would not reasonably be expected to have a
Material Adverse Effect on the use of such property by Alliance or any of its
Subsidiaries or otherwise have a Material Adverse Effect on Alliance and its
Subsidiaries taken as a whole. All of the tangible property assets owned by
Alliance and its Subsidiaries and used in their respective businesses is in good
operating condition and repair, ordinary wear and tear excepted.
2.17 Environmental Matters. Except as set forth in Schedule 2.17 of the
Alliance Schedules, neither Alliance nor any of its Subsidiaries has disposed
of, released, discharged or emitted any Hazardous Materials (as defined below)
into the soil or groundwater at any properties currently or formerly owned or
leased by Alliance or any of its Subsidiaries. For purposes of this Agreement,
"Hazardous Materials" means any chemical, pollutant, contaminant, waste or toxic
or hazardous substance or material regulated under any Legal Requirement with
respect to environmental matters.
2.18 Disclosure. None of the information supplied or to be supplied by or
on behalf of Alliance for inclusion or incorporation by reference in the
registration statement on Form S-4 (or similar successor form) to be filed with
the SEC by Liquid in connection with the issuance of
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Liquid Common Stock in the Merger (including amendments or supplements thereto)
(the "Registration Statement") will, at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the information
supplied or to be supplied by or on behalf of Alliance for inclusion or
incorporation by reference in the Prospectus/Proxy Statement to be filed with
the SEC as part of the Registration Statement (the "Prospectus/Proxy
Statement"), will, at the time the Prospectus/Proxy Statement is mailed to the
stockholders of Liquid, at the time of the Liquid stockholders' meeting or
Alliance stockholders' meeting or as of the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made by Alliance
with respect to statements made or incorporated by reference therein about
Liquid supplied by Liquid for inclusion or incorporation by reference in the
Registration Statement or the Prospectus/Proxy Statement.
2.19 Board Approval. The Board of Directors of Alliance has, by
resolutions duly adopted by majority vote at a meeting of all Directors duly
called and held (and not subsequently rescinded or modified in any way), (i)
determined that the Merger is fair to, and in the best interests of, Alliance
and its stockholders and declared the Merger to be advisable, (ii) approved this
Agreement and (iii) recommended that the stockholders of Alliance approve and
adopt this Agreement and approve the Merger and directed that such matter be
submitted to Alliance's stockholders at the Alliance stockholders' meeting. The
Board of Directors of Alliance has approved the Merger and the other
transactions contemplated by this Agreement within the meaning of Section
203(b)(6) of the DGCL.
2.20 Voting Agreement. The Principal Stockholder is the record and
beneficial owner of a sufficient amount of shares of Alliance Common Stock and
Alliance Preferred Stock (a) to cause the conversion of all outstanding shares
of Alliance Preferred Stock into Alliance Common Stock immediately prior to the
Effective Time and (b) to approve and adopt this Agreement and approve the
Merger by the stockholders of Alliance, all in accordance with the DGCL and the
Alliance Charter Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LIQUID
Each of Liquid and the Merger Sub jointly and severally represent and
warrant to Alliance, subject to the exceptions disclosed in writing in the
disclosure schedules supplied by Liquid to Alliance dated as of the date hereof
and certified by a duly authorized officer of Liquid (the "Liquid Schedules"),
as follows:
3.1 Organization; Standing and Power; Charter Documents; Subsidiaries.
(a) Organization; Standing and Power. Liquid and each of its
Subsidiaries is a corporation or other organization duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, has the requisite power and authority
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to own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized, existing and in
good standing would not reasonably be expected to have a Material Adverse Effect
on Liquid and its Subsidiaries taken as a whole, and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary other than in such jurisdictions where the failure to so qualify or to
be good standing, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Liquid and its Subsidiaries taken
as a whole.
(b) Charter Documents. Liquid has delivered to Alliance (i) a true
and correct copy of the Certificate of Incorporation and Bylaws of Liquid, each
as amended to date (collectively, the "Liquid Charter Documents") and (ii) the
organizational documents of each of its Subsidiaries, and each such instrument
is in full force and effect. Liquid is not in violation of any of the provisions
of the Liquid Charter Documents and each Subsidiary is not in violation of its
respective organizational documents.
(c) Subsidiaries. Schedule 3.1(c) of the Liquid Schedules sets forth:
(i) the name of each Subsidiary of Liquid, (ii) the jurisdiction of organization
for each Subsidiary of Liquid and (iii) the number, type and percentage
interests of Liquid in each Subsidiary. Except for the Subsidiaries of Liquid
which are set forth in Schedule 3.1(c) of the Liquid Schedules and except as set
forth in the Liquid SEC Reports (as defined in Section 3.4), Liquid does not
directly or indirectly have any interests in any other corporation, partnership,
joint venture or other entity nor any interest in a third party commitment to
fund convertible debt. All the outstanding shares of capital stock of, or other
equity interests in, each such Subsidiary have been validly issued and are fully
paid and nonassessable and are, except as set forth in Schedule 3.1 (c) of the
Liquid Schedules, owned directly or indirectly by Liquid, free and clear of all
Liens, including any restriction on the right to vote, sell or otherwise dispose
of such capital stock or other ownership interests, except for restrictions
imposed by applicable securities laws.
3.2 Liquid Capital Structure.
(a) Capital Stock. The authorized capital stock of Liquid consists
of: (i) 50,000,000 shares of Liquid Common Stock, par value $0.001 per share, of
which 22,749,626 shares had been issued and were outstanding as of the date
hereof and (ii) 5,000,000 shares of preferred stock, par value $0.001 per share,
of which no shares are outstanding as of the date (a) hereof. All of the
outstanding shares of capital stock of Liquid have been duly authorized and
validly issued, and are fully paid and nonassessable and free of any preemptive
rights. As of the date hereof, there are no shares of Liquid Common Stock held
in treasury by Liquid.
(b) Stock Options. As of the date hereof: (i) 2,640,854 shares of
Liquid Common Stock are subject to issuance pursuant to outstanding options to
purchase Liquid Common Stock under the stock option plans of Liquid and (ii)
2,172,961 shares of Liquid Common Stock are reserved for future issuance under
the employee stock purchase plans of Liquid. All shares of Liquid Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, would be duly
authorized, validly issued, fully paid and nonassessable. Schedule 3.2(b) of the
Liquid
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Schedules sets forth each holder of a Liquid Option, the number and type of
securities issuable thereunder, the exercise price therefor, the exercise period
and vesting schedule thereof (including a description of the circumstances under
which such vesting schedule can be accelerated).
(c) Other Securities. Except as otherwise set forth above in this
Section 3.2 or in Schedule 3.2(c) of the Liquid Schedules, as of the date
hereof, there are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Liquid or any of
its Subsidiaries is a party or by which it is bound obligating Liquid or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of Liquid or
any of its Subsidiaries, or obligating Liquid or any of its Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. Except as set forth in
Section 3.2(c) of the Liquid Schedules, Liquid is not a party to, and to the
knowledge of Liquid, there are no other stockholders rights agreements, voting
trusts, proxies or other agreements or understandings with respect to the voting
interests of Liquid. All outstanding shares of Liquid Common Stock and all
outstanding options and warrants to acquire Liquid capital stock have been
issued and granted in compliance with (i) all applicable securities laws and all
other applicable Legal Requirements and (ii) all material requirements set forth
in applicable Contracts.
3.3 Authority; Non-Contravention; Necessary Consents.
(a) Authority.
(i) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly authorized by
all necessary corporate action on the part of Liquid and no other corporate
proceedings on the part of Liquid are necessary to authorize the execution and
delivery of this Agreement or to consummate the Merger and the other
transactions contemplated hereby, other than the approval and adoption of this
Agreement and the approval of the Merger by Liquid's stockholders, the approval
of the Charter Amendments by Liquid's stockholders and the filing of the
Certificate of Merger pursuant to the DGCL. The affirmative vote of (i) the
holders of a majority of the outstanding shares of Liquid Common Stock present
at a meeting of Liquid's stockholders to approve and (i) adopt this Agreement
and approve the Merger and (ii) the holders of a majority of the outstanding
shares of Liquid Common Stock entitled to vote to approve the Charter Amendments
are the only votes of the holders of any class or series of Liquid capital stock
necessary to approve and adopt this Agreement, approve the Merger and consummate
the Merger and the other transactions contemplated hereby. This Agreement has
been duly executed and delivered by Liquid and, assuming due execution and
delivery by Alliance, constitutes the valid and binding obligation of Liquid,
enforceable against Liquid in accordance with its terms subject to the effect of
applicable bankruptcy, fraudulent conveyance, insolvency and other similar laws
affecting the enforceability of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies.
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(ii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly authorized by
all necessary corporate action on the part of Merger Sub and no other corporate
proceedings on the part of Merger Sub are necessary to authorize the execution
and delivery of this Agreement or to consummate the Merger and the other
transactions contemplated hereby, other than the filing of the Certificate of
Merger pursuant to the DGCL. This Agreement has been duly executed and delivered
by Merger Sub and, assuming due execution and delivery by Alliance and Liquid,
constitutes the valid and binding obligation of Merger Sub, enforceable against
Merger Sub in accordance with its terms subject to the effect of applicable
bankruptcy, fraudulent conveyance, insolvency and other similar laws affecting
the enforceability of creditors' rights generally, general equitable principles
and the discretion of courts in granting equitable remedies.
(b) Non-Contravention. The execution and delivery of this Agreement
by Liquid does not, and, subject to obtaining the approval and adoption of this
Agreement and the approval of the Merger by Liquid's stockholders as
contemplated in Section 5.2 and compliance with the requirements set forth in
Section 3.3(c), performance of this Agreement by Liquid will not, (i) conflict
with or violate the Liquid Charter Documents or any Subsidiary Charter Documents
of any Subsidiary of Liquid, (ii) conflict with or violate any Legal Requirement
applicable to Liquid or any of its Subsidiaries or by which Liquid or any of its
Subsidiaries or any of their respective properties is bound or affected or (iii)
result in any material breach of or constitute a material default (or an event
that with notice or lapse of time or both would become a material default)
under, or impair Liquid's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a material Lien on
any of the material properties or assets of Liquid or any of its Subsidiaries
pursuant to, any Liquid Material Contract (as defined in Section 3.11). Schedule
3.3(b) of the Liquid Schedules lists all consents, waivers and approvals under
any Liquid Material Contract required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually or
in the aggregate not obtained, would result in a Material Adverse Effect on
Liquid or the Surviving Corporation.
(c) Necessary Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Entity or any
other Person is required to be obtained or made by Liquid in connection with the
execution and delivery of this Agreement or the consummation of the Merger and
other transactions contemplated hereby, except for (i) the Necessary Consents
and (ii) such other consents, authorizations, filings, approvals and
(c) registrations which if not obtained or made would not have a Material
Adverse Effect to Liquid or Alliance or materially delay the ability of the
parties hereto to consummate the Merger within the time frame in which the
Merger would otherwise be consummated in the absence of the need for such
consent, approval, order, authorization, registration, declaration or filings.
3.4 Liquid SEC Filings; Liquid Financial Statements; Undisclosed
Liabilities.
(a) Liquid SEC Filings. Liquid has filed all Liquid SEC Reports (as
defined below) required to be filed by it with the SEC since March 31, 2000.
Liquid has made available to Alliance all such Liquid SEC Reports in the form
filed with the SEC. As of their respective dates, the Liquid SEC Reports (i)
were prepared in accordance and complied in all material
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respects with the requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Liquid SEC Reports and (ii) did not at the time they were filed contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except to the extent corrected prior to the date hereof by a
subsequently filed Liquid SEC Report. None of Liquid's Subsidiaries is required
to file any forms, reports or other documents with the SEC. For purposes of this
Agreement, "Liquid SEC Reports" shall mean all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
(including exhibits, schedules and all other information incorporated therein by
reference) and any other documents that Liquid may file with the SEC subsequent
to the date hereof.
(b) Liquid Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Liquid SEC Reports (the "Liquid Financials") (i) complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q, 8-K or any successor form under the
Exchange Act) and (iii) fairly presented in all material respects the
consolidated financial position of Liquid and its consolidated Subsidiaries as
at the respective dates thereof and the consolidated results of Liquid's
operations and cash flows for the periods indicated (subject to normal and
recurring year-end adjustments). The balance sheet of Liquid contained in the
Liquid SEC Reports as of March 31, 2002 is hereinafter referred to as the
"Liquid Balance Sheet."
(c) Since the date of the Liquid Balance Sheet and except as set
forth in Schedule 3.4(c) of the Liquid Schedules, Liquid has not incurred any
liabilities of any kind whatsoever (whether absolute, accrued, contingent or
otherwise) except for (i) liabilities disclosed or provided for in the Liquid
Balance Sheet, (ii) incurred since the date of the Liquid Balance Sheet in the
ordinary course of business consistent with past practices which would not
reasonably be expected to have a Material Adverse Effect on Liquid or its
Subsidiaries taken as a whole, and (iii) liabilities incurred pursuant to this
Agreement.
(d) The Liquid Financials, to the extent such Liquid Financials were
audited, were prepared by PricewaterhouseCoopers LLP, independent auditors.
(e) As of the date hereof, Liquid has a cash balance equal to or
greater than $82.3 million.
3.5 Absence of Certain Changes or Events. Since the date of the
Liquid Balance Sheet there has not been: (i) any Material Adverse Effect on
Liquid, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
Liquid's or any of its Subsidiaries' capital stock, or any purchase, redemption
or other acquisition by Liquid or any of its Subsidiaries of any of Liquid's
capital stock or any other securities of Liquid or its Subsidiaries or any
options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees following their
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termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of Liquid's
or any of its Subsidiaries' capital stock, or (iv) any agreement or transaction
between Liquid or any of its Subsidiaries, on the one hand, and a Liquid
Interested Party (as defined in Section 3.14), on the other hand.
3.6 Taxes. Except where failure of any of the following representations to
be true would not create a Material Adverse Effect on Liquid or its Subsidiaries
taken as a whole:
(a) All Tax Returns required to be filed by or on behalf of Liquid or
any Subsidiary with any Governmental Entity with respect to any taxable period
ending on or before the Closing Date (the "Liquid Returns") (i) have been or
will be filed on or before the applicable due date (including any extensions of
such due date), and (ii) have been, or will be when filed, accurately and
completely prepared in material compliance with all applicable Legal
Requirements. Except as reserved on Liquid Financials, all amounts required to
be paid in respect of Liquid and its Subsidiaries (whether or not shown on any
Tax Returns) on or before the Closing Date have been or will be paid on or
before the Closing Date. Liquid and its Subsidiaries have delivered to Alliance
accurate and complete copies of all Liquid Returns filed by or on behalf of
Liquid and its Subsidiaries since their date of incorporation.
(b) Liquid and each of its Subsidiaries has withheld with respect to
its employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld and has paid all such withheld taxes to the proper
governmental agencies.
(c) The Liquid Financials fully accrue all actual and contingent
liabilities for Taxes of the Liquid with respect to all periods through the
dates thereof in accordance with GAAP. All Taxes incurred since the date of the
Liquid Balance Sheet have been incurred in the ordinary course of business.
(d) No Liquid Return has ever been examined or audited by any
Governmental Entity. No extension or waiver of the limitation period applicable
to any Liquid Returns has been granted (by Liquid or any Liquid Subsidiary or
any other Person), and no such extension or waiver has been requested from
Liquid or any Liquid Subsidiary.
(e) No claim or proceeding is pending or has been threatened against
or with respect to Liquid or any Liquid Subsidiary in respect of any Tax. There
are no unsatisfied liabilities for Taxes with respect to any notice of
deficiency or similar document received by Liquid or its Subsidiaries with
respect to any Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document that are being contested in good faith
by Liquid or its Subsidiaries and with respect to which adequate reserves for
payment have been established). There are no liens for Taxes upon any of the
assets of Liquid or its Subsidiaries except liens for current Taxes not yet due
and payable. Neither Liquid nor any of its Subsidiaries (x) has entered into or
become bound by any agreement or consent pursuant to Section 341(f) of the Code
or (y) has been, or will be, required to include any adjustment in taxable
income for any tax period (or portion thereof) pursuant to Section 481 or 263A
of the Code or any comparable provision under state or foreign Tax laws as a
result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
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(f) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of Liquid or its Subsidiaries that, considered
individually or considered collectively with any other such Contracts, will, or
could reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G of the Code.
(g) Neither Liquid nor its Subsidiaries is, or has been, a party to or
bound by any tax indemnity agreement, tax-sharing agreement, tax allocation
agreement or similar Contract.
(h) Neither Liquid nor its Subsidiaries has ever been a member of an
affiliated group (as defined in Section 1504 of the Code) filing a consolidated
federal income Tax Return (or member of any analogous group under applicable
local, state or foreign law) other than a group of which Liquid was the common
parent. Neither Liquid nor its Subsidiaries has liability for any Tax pursuant
to Treasury Regulations Section 1.1502-6 or any analogous state, local or
foreign law or regulation or by reason of having been a member of any
consolidated, combined or unitary group on or before the Closing Date.
(i) Neither Liquid nor any of its Subsidiaries has not constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying under Section 355 of the Code (x) in the two
years prior to the date of this Agreement or (y) in a distribution that could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
3.7 Intellectual Property.
(a) General. Except as set forth on Schedule 3.7 to the Liquid
Schedules, Liquid owns or is licensed to use the Intellectual Property that is
material to conduct its business as now conducted.
(b) Technology. Schedule 3.7(b) of the Liquid Schedules sets forth a
list of all databases and software owned by Liquid and developed, produced,
used, marketed or sold by Liquid and material to the business thereof during the
two (2) years prior to the date of this Agreement, together with all prior
versions of such databases and software produced, used, marketed or sold by
Liquid and material to the business thereof during the two years prior to the
date of this Agreement (collectively, the "Liquid Products"). Except for the
Liquid Third Party Technologies (as defined in Section 3.7(c)), Liquid owns all
right, title and interest in and to the following (collectively, the "Liquid
Technology"), free and clear of all encumbrances: (i) the Liquid Products,
together with any and all object code, source code, techniques, software tools,
formats, designs, user interfaces, and content related thereto; (ii) any and all
updates, enhancements, corrections, modifications, improvements and new releases
related to the items set forth in clause (i) above; (iii) any and all technology
and work in progress related to the items set forth in clauses (i) and (ii)
above, and (iv) all inventions, discoveries, processes, designs, trade secrets,
know-how and other confidential or proprietary information related to the items
set forth in clauses (i), (ii) and (iii) above.
(c) Third Party Technology. Schedule 3.7(c) of the Liquid Schedules
sets forth a list of all material software and databases used by Liquid or for
which Liquid does not own all
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right, title and interest (collectively, the "Liquid Third Party Technologies"),
and all license agreements or other contracts pertaining thereto (the "Liquid
Third Party Licenses"), indicating, with respect to each of the Liquid Third
Party Technologies listed therein, the owner thereof and the Liquid Third Party
License applicable thereto. Liquid has the lawful right to use (free of any
material restriction not expressly set forth in the Liquid Third Party Licenses)
(a) all Liquid Third Party Technology that is incorporated in or used in the
development or production of Liquid Technology, and (b) all other Liquid Third
Party Technology necessary for the conduct of the business of Liquid as now
conducted. All Liquid Third Party Licenses are valid, binding and in full force
and effect subject to the effect of applicable bankruptcy, insolvency and other
similar laws affecting the enforceability of creditors' rights generally,
general equitable principles and the discretion of courts in granting equitable
remedies. To the knowledge of Liquid, each other party thereto has performed in
all material respects their obligations thereunder, and neither Liquid nor, to
Liquid's knowledge, any other party thereto is in default under any of the
Liquid Third Party Licenses, nor, to Liquid's knowledge, has there occurred any
event or circumstance which with notice or lapse of time or both would
constitute a default or event of default on the part of Liquid or, to Liquid's
knowledge, any other party thereto or give to any other party thereto, to the
knowledge of Liquid, the right to terminate or modify any Liquid Third Party
License. Liquid has not received notice that any party to any Liquid Third Party
License intends to cancel, terminate or refuse to renew (if renewable) such
Liquid Third Party License or to exercise or decline to exercise any option or
right thereunder.
(d) Trademarks. Schedule 3.7(d) of the Liquid Schedules sets forth a
list of all material common law trademarks, trade names, brand names, service
marks, logos or other identifiers for the Liquid Products currently used by
Liquid in its business (the "Liquid Marks").
(e) Intellectual Property Rights. Schedule 3.7(e) of the Liquid
Schedules sets forth all patents, patent applications, copyright registrations
(and applications therefor) and trademark or service xxxx registrations (and
applications therefor) owned by Liquid (unless otherwise disclosed thereon)
(collectively, the "Liquid IP Registrations"). Except as set forth on Schedule
3.7(e) of the Liquid Schedules, Liquid owns all right, title and interest, free
and clear of any encumbrances, in and to the Liquid IP Registrations, together
with, to the knowledge of Liquid, any other material rights, currently used in
the operation of the business, in or to the Liquid IP Registrations, any
material unregistered copyrights, rights in the Liquid Marks, trade secret
rights and other intellectual property rights (including, without limitation,
rights of enforcement) contained or embodied in Liquid Technology (collectively,
the "Liquid IP Rights").
(f) Maintenance of Rights. Except as set forth on Schedule 3.7(f) of
the Liquid Schedules, (i) to the knowledge of Liquid, Liquid has not conducted
its business, in a manner that would result in the abandonment, cancellation or
unenforceability of any item of the Liquid IP Registrations, and (ii) Liquid has
not taken (or, to the knowledge of Liquid, failed to take) any action that would
result in the forfeiture or relinquishment of any Liquid IP Registrations, in
each case where such abandonment, cancellation, unenforceability, forfeiture or
relinquishment would have a Material Adverse Effect on Liquid and its
Subsidiaries taken as a whole. Except as set forth in Schedule 3.7(f) of the
Liquid Schedules, Liquid has not granted to any third party any
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rights or permissions to use any of the Liquid Technology or the Liquid IP
Registrations. Except as set forth in Schedule 3.7(f) of the Liquid Schedules or
except pursuant to reasonably prudent safeguards or as required by any
applicable law, order or regulation of a Governmental Entity, or by order or
decree of any court of competent jurisdiction, (a) Liquid has not disclosed any
confidential information relating to Liquid Technology, and (b) Liquid is not
under any contractual or other obligation to disclose to any third party any
confidential information relating to Liquid Technology.
(g) Challenges to Liquid's Rights. Except as set forth on Schedule
3.7(g) of the Liquid Schedules, (i) Liquid has not received any written notice
or claim, nor is any executive officer of Liquid aware of any notice or claim
(whether written, oral or otherwise), challenging Liquid's ownership or rights
in the Liquid Technology, the Liquid IP Rights, the Liquid IP Registrations or
Liquid Domain Names alleging any conflict or infringement of any third party
property rights; and (ii) to the knowledge of Liquid, no other person or entity
is infringing or misappropriating or otherwise making any unauthorized use of
Liquid Technology, the Liquid IP Rights or the Liquid IP Registrations.
(h) Infringement By Liquid. Except as set forth on Schedule 3.7(h) of
the Liquid Disclosure Schedules (i) to the knowledge of Liquid, the use of any
of Liquid Technology, Liquid IP Rights and Liquid IP Registrations in the
business of Liquid does not infringe or constitute an appropriation of any
right, title or interest (including, without limitation, any patent, copyright
or trade secret right) held by any other person or entity, and (ii) Liquid has
not received any written notice or claim, nor is any executive officer of Liquid
aware of any notice or claim (whether written, oral or otherwise), made with
respect thereto.
(i) Confidentiality. Except as set forth on Schedule 3.7(i) of the
Liquid Schedules (i) Liquid has not disclosed any source code regarding the
Liquid Technology to any person or entity other than an employee or independent
contractor of Liquid and, with respect to independent contractors, under a
written nondisclosure agreement or a work-for-hire agreement, (ii) Liquid has at
all times maintained and diligently enforced commercially reasonable procedures
to protect all confidential information relating to the Liquid Technology; (iii)
neither Liquid nor any escrow agent is under any contractual or other obligation
to disclose the source code or any other proprietary information included in or
relating to the Liquid Technology; and (iv) Liquid has not deposited any source
code relating to the Liquid Technology into any source code escrows. If, so
disclosed on Schedule 3.7(i) of the Liquid Schedules, and for which Liquid has
deposited any source code to the Liquid Technology into source code escrows, no
event has occurred that has or could reasonably form the basis for a release of
such source code from such escrows or arrangements.
(j) Warranty Against Defects. Except as set forth in Schedule 3.7(j) of
the Liquid Schedules, the Liquid Technology is free from known material defects.
(k) Domain Names. Schedule 3.7(k) of the Liquid Schedules sets forth a
list of all Internet domain name registrations owned by Liquid (the "Liquid
Domain Names"), which Liquid Domain Names include all the names that Liquid uses
to directly conduct its
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business on the Internet but excludes domain names maintained by third parties
who provide services supplied by Liquid.
3.8 Compliance; Permits.
(a) Compliance. Neither Liquid nor any of its Subsidiaries is in
conflict with, or in default or in violation of any Legal Requirement applicable
to Liquid or any of its Subsidiaries or by which Liquid or any of its
Subsidiaries or any of their respective businesses or properties is, or Liquid
believes is reasonably likely to be, bound or affected, except, in each case, or
in the aggregate, for conflicts, violations and defaults that would not have a
Material Adverse Effect on Liquid. No material investigation or review by any
Governmental Entity is pending or, to Liquid's knowledge, has been threatened in
a writing delivered to Liquid or any of its Subsidiaries, against Liquid or any
of its Subsidiaries. There is no material judgment, injunction, order or decree
binding upon Liquid or any of its Subsidiaries which has or would reasonably be
expected to have the effect of prohibiting or materially impairing any material
business practice of Liquid or any of its Subsidiaries, any acquisition of
material property by Liquid or any of its Subsidiaries or the conduct of
business by Liquid and its Subsidiaries as currently conducted.
(b) Permits. Liquid and its Subsidiaries hold, to the extent legally
required, all Permits that are material to and required for the operation of the
business of Liquid, as currently conducted (collectively, the "Liquid Permits").
No suspension or cancellation of any of the Liquid Permits is pending or, to the
knowledge of Liquid, threatened. Liquid and its Subsidiaries are in compliance
in all material respects with the terms of the Liquid Permits.
3.9 Litigation. Except as set forth in Schedule 3.9 of the Liquid
Schedules, there are no claims, suits, actions or proceedings pending or, to the
knowledge of Liquid, threatened in writing against Liquid or any of its
Subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated hereby or which would
reasonably be expected, either singularly or in the aggregate with all such
claims, actions or proceedings, to have a Material Adverse Effect to Liquid, and
Liquid does not know or have reason to be aware of any basis for the same.
3.10 Brokers' and Finders' Fees. Except for fees payable to Broadview
International LLC ("Broadview") pursuant to an engagement letter dated February
7, 2002, a copy of which has been provided to Alliance, Liquid has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
3.11 Contracts.
(a) Liquid Material Contracts. Except as otherwise set forth in
Schedule 3.11 of the Liquid Schedules, as of the date hereof neither Liquid nor
any of its Subsidiaries is a party to or is bound by any of the following (each,
an "Liquid Material Contract"):
(i) any "material contracts" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) with respect to Liquid and its
Subsidiaries;
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(ii) any Contract containing any covenant materially limiting
the right of Liquid or its Subsidiaries to engage in any line of business or to
compete with any Person or granting any exclusive distribution rights;
(iii) any Contract, or group of Contracts with a Person (or
group of affiliated Persons), the termination of which would be reasonably
expected to have a have a Material Adverse Effect on Liquid or the Surviving
Corporation;
(b) No Breach. All Liquid Material Contracts are valid and in full
force and effect except to the extent they have previously expired in accordance
with their terms or if the failure to be in full force and effect, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Liquid. Neither Liquid nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which with or without
notice, lapse of time or both would constitute a default under the provisions
of, any Liquid Material Contract, except in each case for those violations and
defaults which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Liquid.
3.12 Employee Matters and Benefit Plans.
(a) Definitions. The terms set forth in Section 2.12(a) shall also
apply to this Section 3.12. In addition:
(i) "Liquid Employee Plan" shall mean any Employee Plan as it
pertains to Liquid and its Affiliates; and
(ii) "Liquid Employment Agreement" shall mean any Employment
Agreement as it pertains to Liquid and its Affiliates.
(b) Schedule. Schedule 3.12(b) of the Liquid Schedules contains an
accurate and complete list of each Liquid Employee Plan and each Liquid
Employment Agreement. Liquid does not have any plan or commitment to establish
any new Liquid Employee Plan, International Employee Plan (as its pertains to
Liquid or its Affiliates), or Liquid Employment Agreement, or to modify any
Liquid Employee Plan or Liquid Employment Agreement (except to the extent
required by law or to conform any such Liquid Employee Plan or Liquid Employment
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Alliance in writing, or as required by this Agreement).
(c) Documents. Liquid has provided to Alliance correct and complete
copies of: (i) all documents embodying each Liquid Employee Plan and each Liquid
Employment Agreement including (without limitation) all amendments thereto and
all related trust documents, administrative service agreements, group annuity
contracts, group insurance contracts, and policies pertaining to fiduciary
liability insurance covering the fiduciaries for each plan; (ii) the most recent
annual actuarial valuations, if any, prepared for each Liquid Employee Plan;
(iii) the three (3) most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Liquid Employee Plan; (iv) if the
Liquid Employee Plan is funded, the most recent annual and periodic accounting
of Liquid Employee Plan assets; (v) the most recent summary plan description
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together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Liquid Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and all applications
and correspondence to or from the IRS or the DOL with respect to any such
application or letter; (vii) all communications material to any Employee or
Employees relating to any Liquid Employee Plan and any proposed Liquid Employee
Plans, in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to the
Liquid; (viii) all correspondence to or from any governmental agency relating to
any Liquid Employee Plan; (ix) all COBRA forms and related notices (or such
forms and notices as required under comparable law); (x) the three (3) most
recent plan years discrimination tests for each Liquid Employee Plan; and (xi)
all registration statements, annual reports (Form 11-K and all attachments
thereto) and prospectuses prepared in connection with each Liquid Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule 3.12(d)
of the Liquid Schedules, (i) Liquid has performed in all material respects all
obligations required to be performed by it under, is not in default or violation
of, and has no knowledge of any default or violation by any other party to each
Liquid Employee Plan, and each Liquid Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Liquid Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination, opinion, notification or advisory letter from the IRS with
respect to each such Liquid Employee Plan as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Liquid Employee Plan; (iii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code or Section 408 of ERISA (or any administrative class exemption issued
thereunder), has occurred with respect to any Liquid Employee Plan; (iv) there
are no actions, suits or claims pending, or, to the knowledge of Liquid,
threatened or reasonably anticipated (other than routine claims for benefits)
against any Liquid Employee Plan or against the assets of any Liquid Employee
Plan; (v) each Liquid Employee Plan (other than any stock option plan) can be
amended, terminated or otherwise discontinued after the Effective Time, without
material liability to the Liquid or any of its Affiliates (other than ordinary
administration expenses); (vi) there are no audits, inquiries or proceedings
pending or, to the knowledge of Liquid or any Affiliates, threatened by the IRS
or DOL with respect to any Liquid Employee Plan; and (vii) neither Liquid nor
any Affiliate is subject to any penalty or tax with respect to any Liquid
Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the
Code.
(e) Pension Plan. Neither Liquid nor any Affiliate has ever maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code.
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(f) Collectively Bargained, Multiemployer and Multiple Employer Plans.
At no time has Liquid or any Affiliate contributed to or been obligated to
contribute to any Multiemployer Plan. Neither Liquid, nor any Affiliate has at
any time ever maintained, established, sponsored, participated in, or
contributed to any multiple employer plan, or to any plan described in Section
413 of the Code.
(g) No Post-Employment Obligations. Except as set forth in Schedule
3.12(g) of the Liquid Schedules, no Liquid Employee Plan provides, or reflects
or represents any liability to provide retiree health to any person for any
reason, except as may be required by COBRA or other applicable statute, and
Liquid has never represented, promised or contracted (whether in oral or written
form) to any Employee (either individually or to Employees as a group) or any
other person that such Employee(s) or other person would be provided with
retiree health, except to the extent required by statute.
(h) Health Care Compliance. Neither Liquid nor any Affiliate has, prior
to the Effective Time and in any material respect, violated any of the health
care continuation requirements of COBRA, the requirements of FMLA, the
requirements of the Health Insurance Portability and Accountability Act of 1996,
the requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law applicable to
its Employees.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 3.12(i) of the Liquid
Schedules, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Liquid
Employee Plan, Liquid Employment Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 3.12(i) of the Liquid
Schedules, no payment or benefit which will or may be made by Liquid or its
Affiliates with respect to any Employee or any other "disqualified individual"
(as defined in Code Section 280G and the regulations thereunder) will be
characterized as a "parachute payment," within the meaning of Section 280G(b)(2)
of the Code.
(j) Employment Matters. Liquid: (i) is in compliance in all respects
with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any governmental authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for
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Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, threatened or
reasonably anticipated claims or actions against Liquid under any worker's
compensation policy or long-term disability policy.
(k) Labor. No work stoppage or labor strike against Liquid is pending,
threatened or reasonably anticipated. Liquid does not know of any activities or
proceedings of any labor union to organize any Employees. Except as set forth in
Schedule 3.12(k) of the Liquid Schedules, there are no actions, suits, claims,
labor disputes or grievances pending, or, to the knowledge of Liquid, threatened
or reasonably anticipated relating to any labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in any material liability to
Liquid. Neither Liquid nor any of its subsidiaries has engaged in any unfair
labor practices within the meaning of the National Labor Relations Act. Except
as set forth in Schedule 3.12(k) of the Liquid Schedules, Liquid is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by Liquid.
(l) International Employee Plan. Liquid does not now, nor has it ever
had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
3.13 Real Property. Neither Liquid nor its Subsidiaries owns any real
property. Schedule 3.13 of the Liquid Schedules sets forth a list of all
properties leased or otherwise occupied by Liquid and its Subsidiaries for the
operation of its business, including the address, the name of the landlord, and
the current base rent ("Liquid Facilities"). Schedule 3.13 of the Liquid
Schedules identifies all of the leases or other occupancy agreements with
respect to the Liquid Facilities ("Liquid Leases") and any amendments or
modifications to the Liquid Leases. No party other than Liquid has the right to
occupy any of the Liquid Facilities. The Liquid Facilities are in good condition
and repair, reasonable wear and tear excepted. Neither Liquid nor any of its
Subsidiaries have any current and unperformed obligations under the Liquid
Leases for repair, maintenance or replacement at any Liquid Facilities or for
the installation of improvements at any Liquid Facilities. Each Liquid Lease is
in full force and effect, and no breach or default exists by Liquid or any of
its Subsidiaries (or, to the knowledge of Liquid or its Subsidiaries, by any
other party thereto), nor to the knowledge of Liquid or any of its Subsidiaries
has any event or condition occurred which could (with the giving of notice or
the passage of time or both) constitute a breach or default, under any Liquid
Lease.
3.14 Interested Party Transactions. Except as set forth in the Liquid SEC
Reports, during the last two (2) years, no executive officer, director or,
holder of more than five percent (5%) of the outstanding shares of Liquid Common
Stock (nor any member of the immediate family of any of the foregoing), (i) has
or has had, directly or indirectly, an economic interest in any entity which
furnished or sold, or furnishes or sells, services, products or technology that
Liquid furnishes or sells, or proposes to furnish or sell, or (ii) has or has
had, directly or indirectly, any economic interest in any entity that purchases
from or sells or furnishes to Liquid, any services, products or technology, or
(iii) is or has been a party to, or has or has had
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a beneficial interest in, any Contract to which Liquid or any of its
Subsidiaries is a party; provided, however, that ownership of no more one
percent (1%) of the outstanding voting stock of a publicly traded corporation,
shall not be deemed to be an "interest in any entity" for purposes of this
Section 3.14. Except as set forth in Schedule 3.14 of the Liquid Schedules, to
the best of Liquid's knowledge, none of the Liquid Interested Parties have been
subject to any fees, penalty, fines, notice of violation or other sanction by
the SEC, any state securities commission or any self regulated organization.
3.15 Title to Properties. Liquid and its Subsidiaries have good and valid
title to all properties and assets reflected in the Liquid Balance Sheet as
being owned by Liquid or its Subsidiaries as of the date of the Liquid Balance
Sheet. Such properties and assets are subject to no Liens except for (a) Liens
reflected in the Liquid Balance Sheet, (b) Liens for current taxes, assessments
or governmental charges or levies on property not yet due and delinquent, (c)
zoning, building and land use laws imposed by any Governmental Entity (d)
mechanics', carriers', workmen's, repairmen's, statutory or common law liens
being contested in good faith and (e) other title defects, encumbrances,
covenants, rights of way, building or use restrictions, easements, exceptions,
variances, reservations and other matters or limitations of any kind, if any,
which do not and would not reasonably be expected to have a Material Adverse
Effect on the use of such property by Liquid or any of its Subsidiaries or
otherwise have a Material Adverse Effect on Liquid and its Subsidiaries taken as
a whole. All of the tangible property assets owned by Liquid and its
Subsidiaries used in their businesses are in good operating condition and
repair, ordinary wear and tear excepted.
3.16 Environmental Matters. Except as set forth in Schedule 3.16 of the
Liquid Schedules, neither Liquid nor any of its Subsidiaries has disposed of,
released, discharged or emitted any Hazardous Materials into the soil or
groundwater at any properties currently or formerly owned or leased by Liquid or
any of its Subsidiaries.
3.17 Disclosure. None of the information supplied or to be supplied by or
on behalf of Liquid for inclusion or incorporation by reference in the
Registration Statement will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the information
supplied or to be supplied by or on behalf of Liquid for inclusion or
incorporation by reference in the Prospectus/Proxy Statement, will, at the time
the Prospectus/Proxy Statement is mailed to the stockholders of Liquid at the
time of the Liquid stockholder's meeting or Alliance stockholder's meeting or as
of the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Prospectus/Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated by the SEC thereunder. Notwithstanding the
foregoing, no representation or warranty is made by Liquid with respect to
statements made or incorporated by reference therein about Alliance supplied by
Alliance for inclusion or incorporation by reference in the Registration
Statement or the Prospectus/Proxy Statement.
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3.18 Board Approval. The Board of Directors of Liquid has, by resolutions
duly adopted by vote at a meeting of all Directors duly called and held and not
subsequently rescinded or modified in any way, (i) determined that the Merger is
fair to, and in the best interests of, Liquid and its stockholders and declared
the Merger to be advisable, (ii) approved this Agreement and (iii) recommended
that the stockholders of Liquid approve and adopt this Agreement and approve the
Merger and directed that such matter be submitted to Liquid's stockholders at
the Liquid stockholders' meeting. Liquid, as the sole stockholder of Merger Sub,
has adopted this Agreement and approved the Merger. The Board of Directors of
Liquid and Merger Sub each have approved the Merger and the other transactions
contemplated by this Agreement within the meaning of Section 203(b)(6) of the
DGCL.
3.19 Interim Operations of Merger Sub. The Merger Sub was formed on June
12, 2002 solely for the purposes of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
3.20 Fairness Opinion. Liquid's Board of Directors has received a written
opinion from Broadview, dated as of June 12, 2002, to the effect that, as of
such date, the consideration for the Merger is fair to the stockholders of
Liquid from a financial point of view.
3.21 Rights Agreement. Liquid has taken all action so that (i) Alliance
shall not be an "Acquiring Person" pursuant to the Preferred Stock Rights
Agreement, dated August 7, 2001 (the "Rights Agreement") and (ii) the entering
into of this Agreement and the Merger and the other transactions contemplated
hereby will not result in the grant of any rights to any Person under the Rights
Agreement or enable or require the Rights (as defined in the Rights Agreement)
to be exercised, distributed or triggered.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Liquid.
(a) During the period from the date hereof and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Liquid, and each of its respective Subsidiaries shall, except to
the extent that Alliance shall otherwise consent in writing, carry on its
business, in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted, and use all reasonable efforts to (i) preserve
intact its present business organization and (ii) keep available the services of
its present executive officers and key employees.
(b) Notwithstanding Section 4.1(a) above, except as provided in
Exhibit A to this Agreement, without the prior written consent of Alliance,
during the period from the date hereof and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time,
Liquid shall not do any of the following and shall not permit its Subsidiaries
to do any of the following:
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(i) enter into any new line of business;
(ii) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock;
(iii) purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of it or its Subsidiaries, except
repurchases of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or purchase
agreements in effect on the date hereof;
(iv) issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, any shares of capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than the issuance of shares of
Liquid Common Stock pursuant to the exercise of options or warrants outstanding
as of the date hereof;
(v) make any changes (by split-up, combination,
reorganization or otherwise) in the capital structure of Liquid;
(vi) cause, permit or propose any amendments to its Charter
Documents or any of the organizational documents of its Subsidiaries, except for
the Charter Amendments and to the extent necessary to comply with its
obligations under Section 5.10;
(vii) acquire or enter into an agreement to acquire by merger,
consolidation, or purchase of the stock or assets of, any business or entity or
any Person or division thereof, or otherwise acquire or agree to acquire any
assets;
(viii) enter into any joint ventures, strategic partnerships or
alliances, other than licensing agreements in the ordinary course of business
consistent with past practice;
(ix) except as previously disclosed in the Liquid SEC
Reports, sell, lease or otherwise dispose of any property or asset, or permit
any lien or other encumbrance to be imposed on any property or asset of Liquid,
in each case other than in the ordinary course of business consistent with past
practice;
(x) make any loans, advances or capital contributions to, or
investments in, any other Person, other than advances for business related
travel expenses made in the ordinary course of business;
(xi) engage in any transaction with any officer, director or
stockholder of Liquid, or any person with whom, to the knowledge of Liquid, any
such stockholder, officer or director has any direct or indirect relation by
blood, marriage or adoption, or any entity in which any of such persons owns any
beneficial interest (other than a publicly-held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
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less than 1% of the stock of which is beneficially owned by such persons) except
for compensation and benefits received in the ordinary course of business as an
employee or director of Liquid;
(xii) enter into, modify or extend in any manner the terms of
any employment, severance, consulting, or similar agreements with officers,
directors or employees (except for employees terminated by Liquid in accordance
with the severance policies set forth on Exhibit A) nor grant any increase in
the compensation of officers, directors or employees, whether now or hereafter
payable (except, with respect to employees other than officers and directors,
for compensation increases in the ordinary course of business and consistent
with past practice), including any such increase pursuant to any option, bonus,
stock purchase, pension, profit-sharing, deferred compensation, retirement or
other plan, arrangement, contract or commitment;
(xiii) terminate an employee of Liquid, other than terminations
for cause and terminations meeting the criteria set forth in Exhibit A;
(xiv) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of it,
guarantee any debt securities of another Person, enter into any "keep well" or
other agreement to maintain any financial statement condition of any other
Person (other than any wholly-owned Subsidiary of it) or enter into any
arrangement having the economic effect of any of the foregoing;
(xv) permit a change in its methods of maintaining its books,
accounts or business records except as required by GAAP or the SEC, change its
fiscal year, any of its accounting principles or methods by which such
principles are applied for tax or financial reporting purposes;
(xvi) enter into, terminate, fail to renew, or accelerate any
license, distributorship, dealer, sales representative, joint venture, credit or
other agreement if such action could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(xvii) license any Liquid Technology or Liquid IP Rights, other
than in the ordinary course of business;
(xviii) make or change any material Tax election, settle any
audit relating to Taxes pending as of the date hereof or arising on or after the
date hereof, or amend any Tax Return in any material respect;
(xix) enter into, modify or amend in a manner adverse in any
material respect to Liquid, or terminate any Liquid Material Contract or waive,
release or assign any material rights or claims thereunder, other than the
expiration of any Liquid Material Contract in accordance with the terms and
conditions thereof;
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(xx) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction of such claims, liabilities or obligations (i) in the ordinary
course of business consistent with past practice or (ii) in accordance with the
terms of liabilities reflected or reserved against in the Liquid Balance Sheet;
provided that the foregoing shall not prohibit Liquid from paying any legal,
accounting, financial advisor or financial printer fees and expenses or SEC and
other regulatory filing fees incurred in connection with the Merger;
(xxi) pay or make any accrual or arrangement for payment of
any pension, retirement allowance or other employee benefit pursuant to any
Liquid Employee Plan, to any officer, director, employee, consultant or any
Affiliate of Liquid or any amount relating to unused vacation days, other than
as required under applicable law; adopt or pay, grant, issue, accelerate or
accrue salary or other payments or benefits pursuant to any Liquid Employee Plan
with or for the benefit of any director, officer, employee, agent or consultant,
whether past or present, other than as required under applicable law or the
current terms of any Liquid Benefit Plan; or amend in any respect any Liquid
Employee Plan in an manner inconsistent with the foregoing;
(xxii) except as required by law, enter into any collective
bargaining agreement;
(xxiii) terminate, amend or waive any of the confidentiality
and noncompetition agreements entered into by its employees and consultants with
Liquid or any of its Subsidiaries prior to the Effective Time. Such agreements
shall continue to be in full force and effect immediately after the Effective
Time, except for those agreements that, pursuant to their terms, terminate at or
prior to the Effective Time;
(xxiv) change or modify its policies, procedures and practices
as relating to Liquid's payment of accounts payables and other liabilities
incurred in the ordinary course of business; or
(xxv) agree in writing or otherwise to take any of the
actions described in (i) through (xxiv) above.
4.2 Conduct of Business by Alliance.
(a) During the period from the date hereof and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Alliance, and each of its respective Subsidiaries shall, except
to the extent that Liquid shall otherwise consent in writing, carry on its
business, in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted, and use all reasonable efforts consistent with
past practices and policies to (i) preserve intact its present business
organization and (ii) keep available the services of its present executive
officers and key employees.
(b) Notwithstanding Section 4.2(a) above, except as provided in
Schedule 4.2 of the Alliance Schedules, without the prior written consent of
Liquid, during the period from the
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date hereof and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Alliance shall not do any
of the following and shall not permit its Subsidiaries to do any of the
following:
(i) enter into any new line of business material to Alliance
and its Subsidiaries taken as a whole;
(ii) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock, except (a) as required by the
Media Agreements or (b) in connection with a spin-off, sale or other disposition
by Alliance of its "All Media Guide" and "Digital On-Demand" businesses (subject
to the restrictions set forth in Section 4.2(b)(vii));
(iii) purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of it or its Subsidiaries, except
repurchases of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or purchase
agreements in effect on the date hereof or entered into the ordinary course of
business consistent with past practice after the date hereof;
(iv) issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, any shares of capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than the issuance of shares of its
common stock pursuant to the conversion of outstanding shares of Alliance
Preferred Stock and the exercise of options or warrants outstanding as of the
date hereof;
(v) cause, permit or propose any amendments to its Charter
Documents or any of the organizational documents of its Subsidiaries;
(vi) acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a portion of the assets of, or
by any other manner, any business or any Person or division thereof which are
material, individually or in the aggregate, to the business of Alliance and its
Subsidiaries taken as a whole, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
Alliance and its Subsidiaries taken as a whole;
(vii) sell, lease, license, encumber or otherwise dispose of
any properties or assets which are material, individually or in the aggregate,
to its business, except (a) in the ordinary course of business consistent with
past practice (b) the sale by Alliance of its "All Media Guide" and "Digital
On-Demand" businesses pursuant to the Media Agreements or (c) any spin-off, sale
or other disposition by Alliance of the "All Media Guide" or "Digital On-Demand"
businesses; provided, however, in the event of any such spin-off, sale or other
disposition permitted by clause (c) of this Section 4.2(b)(vii) Alliance shall
not without the express written consent of Liquid, which consent shall not be
unreasonably withheld, enter into any agreement that (A) significantly limits
the ability of Liquid, Alliance or their respective
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subsidiaries to compete, including restrictions on any such company's ability to
offer competitive products or services or (B) includes exclusivity provisions
preventing Liquid, Alliance or their respective subsidiaries the combined
company or any subsidiary of such companies from engaging in any transaction
with any third party;
(viii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than (i) loans or investments by it or a
Subsidiary of it to or in it or any Subsidiary of it, (ii) employee loans or
advances made in the ordinary course of business or loans in the ordinary course
of business consistent with past practice which are not, individually or in the
aggregate, material to it and its Subsidiaries taken as a whole and (iii) as
permitted pursuant to the Alliance Credit Agreement;
(ix) enter into, modify or extend in any manner the terms of
any employment, severance, consulting, or similar agreements with directors and
holders of more than 5% of the outstanding shares of any class of Alliance
Capital Stock nor grant any increase in the compensation of directors or holders
of more than 5% of the outstanding share of any class of Alliance Capital Stock,
whether now or hereafter payable;
(x) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of it,
guarantee any debt securities of another Person, enter into any "keep well" or
other agreement to maintain any financial statement condition of any other
Person (other than any wholly-owned Subsidiary of it) or enter into any
arrangement having the economic effect of any of the foregoing, except (i) for
borrowings pursuant to the Alliance Credit Agreement in the ordinary course of
business and (ii) as permitted pursuant to the Alliance Credit Agreement;
(xi) permit a change in its methods of maintaining its books,
accounts or business records except as required by GAAP, change its fiscal year,
any of its accounting principles or methods by which such principles are applied
for tax or financial reporting purposes;
(xii) agree in writing or otherwise to take any of the
actions described in (i) through (xii) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Prospectus/Proxy Statement; Registration Statement. As promptly as
practicable after the execution of this Agreement, Liquid will prepare and file
with the SEC the Prospectus/Proxy Statement, and Liquid will prepare and file
with the SEC the Registration Statement in which the Prospectus/Proxy Statement
is to be included as a prospectus. Alliance will provide Liquid with any
information which may be required in order to effectuate the preparation and
filing of the Prospectus/Proxy Statement and the Registration Statement pursuant
to this Section 5.1. Liquid and Alliance will respond to any comments from the
SEC, will use all reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as practicable after
such filing and to keep the Registration Statement
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effective as long as is necessary to consummate the Merger and the transactions
contemplated hereby. Liquid will notify Alliance promptly upon the receipt of
any comments from the SEC or its staff in connection with the filing of, or
amendments or supplements to, the Registration Statement and/or the
Prospectus/Proxy Statement. Whenever any event occurs which is required to be
set forth in an amendment or supplement to the Prospectus/Proxy Statement or the
Registration Statement, Liquid or Alliance, as the case may be, will promptly
inform the other of such occurrence and cooperate in filing with the SEC, and/or
mailing to stockholders of such amendment or supplement. Liquid shall provide
Alliance with a reasonable opportunity to review and comment on any amendment or
supplement to the Registration Statement and Prospect/Proxy Statement prior to
filing such with the SEC, and will provide each other with a copy of all such
filings made with the SEC. Liquid will cause the Prospectus/Proxy Statement to
be mailed to its stockholders at the earliest practicable time after the
Registration Statement is declared effective by the SEC.
5.2 Meetings of Stockholders.
(a) Meeting of Liquid Stockholders. Subject to Section 5.3(c), Liquid
will take all action necessary in accordance with the DGCL and the Liquid
Charter Documents to call, hold and convene a meeting of its stockholders to
consider adoption and approval of this Agreement, approval of the Merger and
approval of the Charter Amendments (a "Stockholders' Meeting") to be held as
promptly as practicable, and in any event (to the extent permissible under
applicable law) within thirty (30) days after the declaration of effectiveness
of the Registration Statement by the SEC. Subject to Section 5.3(c), Liquid will
use all reasonable efforts to solicit from its stockholders proxies in favor of
the adoption and approval of this Agreement, approval of the Merger and approval
of the Charter Amendments and will take all other action necessary or advisable
to secure the vote or consent of their respective stockholders required by the
rules of the DGCL and The Nasdaq National Market to obtain such approvals.
Notwithstanding anything to the contrary contained in this Agreement, Liquid may
adjourn or postpone its Stockholders' Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Prospectus/Proxy Statement is
provided to its respective stockholders in advance of a vote on the Merger and
this Agreement or, if as of the time for which the Stockholders' Meeting is
originally scheduled (as set forth in the Prospectus/Proxy Statement) there are
insufficient shares of Liquid Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of such
Stockholders' Meeting. Liquid shall ensure that its Stockholders' Meeting is
called, noticed, convened, held and conducted, and that all proxies solicited by
it in connection with the Stockholders' Meeting are solicited in compliance with
the DGCL, its Certificate of Incorporation and Bylaws, the rules of The Nasdaq
National Market and all other applicable Legal Requirements. The Board of
Directors of Liquid shall recommend by vote that the stockholders of Liquid vote
in favor of the approval and adoption of this Agreement and the approval of the
Merger.
(b) Approval of Alliance Stockholders. Alliance will take all action
reasonably necessary in accordance with the DGCL to obtain the adoption and
approval of this Agreement and the approval of the Merger by its stockholders.
The Board of Directors of Alliance shall recommend by vote that the stockholders
of Alliance vote in favor of the approval and adoption of this Agreement and the
approval of the Merger.
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5.3 Acquisition Proposals.
(a) No Solicitation. Except as provided in Section 5.3(c), Liquid
agrees that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall use all reasonable
efforts to cause its and its Subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its Subsidiaries) not to (and shall not authorize any of them to) directly or
indirectly, (i) solicit, initiate, encourage or knowingly facilitate or induce
any inquiry with respect to, or the making, submission or announcement of, any
Acquisition Proposal (as defined in Section 5.3(e)), (ii) participate in any
discussions or negotiations regarding, or furnish to any Person any nonpublic
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to, any Acquisition Proposal, (iii) engage in discussions with
any Person with respect to any Acquisition Proposal, except as to the existence
of these provisions, (iv) approve, endorse or recommend any Acquisition Proposal
(except to the extent specifically permitted pursuant to Section 5.3(c) below),
or (v) enter into any letter of intent or similar document or any contract
agreement or commitment contemplating or otherwise relating to any Acquisition
Proposal or transaction contemplated thereby. Liquid and its respective
Subsidiaries will each immediately cease any and all existing activities,
discussions or negotiations with any third parties conducted heretofore with
respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in this Section
5.3(a) by any director, officer, affiliate or agent of Liquid or any of its
Subsidiaries or a knowing violation of the restrictions set forth in this
Section 5.3(a) by an employee (other than a director or officer) of Liquid or
any of its Subsidiaries (each a "Covered Person"), whether or not such Covered
Person purports to act on behalf of Liquid or any of its Subsidiaries or
otherwise, shall be deemed to be a breach of this Section 5.3(a) by Liquid.
(b) Notification of Unsolicited Acquisition Proposals.
(i) As promptly as practicable after receipt of any
Acquisition Proposal or any request for nonpublic information or inquiry which
it reasonably believes would lead to an Acquisition Proposal, Liquid shall
provide Alliance with written notice of the material terms and conditions of
such Acquisition Proposal, request or inquiry, and the identity of the Person or
group making any such Acquisition Proposal, request or inquiry and a copy of all
written materials provided in connection with such Acquisition Proposal, request
or inquiry. Liquid shall keep Alliance informed as promptly as practicable in
all material respects of the status and details (including material amendments
or proposed material amendments) of any such Acquisition Proposal, request or
inquiry and shall promptly provide Alliance a copy of all written materials
subsequently provided in connection with such Acquisition Proposal, request or
inquiry.
(ii) Liquid shall provide Alliance with twenty-four (24) hours
prior notice of any meeting of its Board of Directors at which its Board of
Directors is reasonably expected to consider any Acquisition Proposal.
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(c) Superior Offers. Notwithstanding anything to the contrary
contained in this Agreement, in the event that Liquid receives a Superior Offer
(as defined in Section 5.3(e)) before the date of the Liquid Stockholders'
Meeting, it may then take any or all of the following actions (but only if and
to the extent that Liquid's Board of Directors concludes in good faith, after
consultation with its outside legal counsel, that the failure to do so would be
inconsistent with the proper discharge of its fiduciary duties):
(i) furnish nonpublic information to the third party
making such Acquisition Proposal, provided that (A) concurrently with furnishing
any such nonpublic information to such party, its gives Alliance written notice
of its intention to furnish nonpublic information; (B) it receives from the
third party an executed confidentiality agreement containing customary
limitations on the use and disclosure of all nonpublic written and oral
information furnished to such third party on its behalf, the terms of which are
at least as restrictive as the terms contained in the Confidentiality Agreement
(as defined in Section 5.4) and customary standstill provisions, and (C)
contemporaneously with furnishing any such nonpublic information to such third
party, it furnishes such nonpublic information to Alliance (to the extent such
nonpublic information has not been previously so furnished); and
(ii) withhold, withdraw, amend or modify its recommendation
in favor of the Merger, and, in the case of a Superior Offer that is a tender or
exchange offer made directly to its stockholders, may recommend that its
stockholders accept the tender or exchange offer (any of the foregoing actions,
whether by a Board of Directors or a committee thereof, a "Change of
Recommendation") or terminate this Agreement to accept such Superior Offer as
provided in Section 7.1(g), if all of the following are met:
(A) the Superior Offer has not been withdrawn;
(B) its Stockholders' Meeting has not occurred;
(C) it shall have provided to Alliance (i) written
notice which shall state expressly that it has received a Superior Offer, the
material terms and conditions of the Superior Offer and the identity of the
Person or group making the Superior Offer and that it intends to effect a Change
of Recommendation or termination of this Agreement to accept such Superior Offer
as provided in Section 7.1(g), and (ii) a copy of all written materials provided
in connection with the Superior Offer (such notice and materials to be delivered
to Alliance at least five (5) business days prior to taking such action which
constitutes a Change of Recommendation or termination of this Agreement to
accept such Superior Offer as provided in Section 7.1(g)); and
(D) it shall not have breached any of the provisions
set forth in Section 5.2 or Section 5.3.
(d) Compliance with Tender Offer Rules. Nothing contained in this
Agreement shall prohibit Liquid or its Board of Directors from taking and
disclosing to its stockholders a position contemplated by Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act; provided that the content of any
such disclosure thereunder shall be governed by the terms of this Agreement.
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(e) Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "Acquisition", with respect to Liquid, shall mean any
transaction or series of related transactions involving: (i) any purchase from
Liquid or acquisition by any Person or "group" (as defined under Section 13(d)
of the Exchange Act and the rules and regulations thereunder) of more than a ten
percent (10%) interest of any class of equity securities of Liquid or any of its
Subsidiaries or any tender offer or exchange offer that if consummated would
result in any Person or group beneficially owning ten percent (10%) or more of
any class of equity securities of Liquid or any of its Subsidiaries or any
merger, consolidation, conversion, share exchange, recapitalization, business
combination or similar transaction involving Liquid or any of its Subsidiaries,
(ii) any sale, lease (other than in the ordinary course of business), exchange,
transfer, license (other than in the ordinary course of business), acquisition
or disposition of more than ten percent (10%), by value, of the assets of Liquid
(including its Subsidiaries taken as a whole) or (iii) any liquidation or
dissolution of Liquid.
(ii) "Acquisition Proposal," with respect to Liquid, shall
mean any bona fide written offer or proposal made after the date hereof,
relating to an Acquisition.
(iii) "Superior Offer," with respect to Liquid, shall mean
an unsolicited, bona fide written offer made by a third party after the date
hereof to acquire, directly or indirectly, pursuant to a tender offer, exchange
offer, merger, consolidation or other business combination, a majority of the
total outstanding assets or voting securities of Liquid on terms that the Board
of Directors of Liquid by a majority vote has in good faith determined, if
consummated in accordance with its terms and after consultation with outside
legal counsel and its financial adviser, (A) is superior to the Merger from a
financial point of view, (B) is reasonably capable of being consummated and (C)
is not subject to any financing contingency. For purposes of this Agreement, any
Superior Offer is an Acquisition Proposal.
5.4 Confidentiality; Access to Information; No Modification of
Representations, Warranties or Covenants.
(a) Confidentiality. The parties acknowledge that Alliance and Liquid
have previously executed a Confidentiality Agreement in October 2000, as amended
in March 2002 (the "Confidentiality Agreement"), which Confidentiality Agreement
will continue in full force and effect in accordance with its terms.
(b) Access to Information. Each of Alliance and Liquid will afford the
other and the other's accountants, counsel and other representatives reasonable
access during normal business hours to its properties, books, records and
personnel during the period prior to the Effective Time to obtain all
information concerning its business, including the status of product development
efforts, properties, results of operations and personnel, as such other party
may reasonably request; provided, however, that any party may restrict the
foregoing access to the extent that any law, treaty, rule or regulation of any
Governmental Entity applicable to such party requires such party or its
Subsidiaries to restrict or prohibit access to any such properties or
information.
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(c) No Modification of Representations and Warranties or Covenants. No
information or knowledge obtained in any investigation or notification pursuant
to this Section 5.4, Section 5.6 or Section 5.7 shall affect or be deemed to
modify any representation or warranty contained herein, the covenants or
agreements of the parties hereto or the conditions to the obligations of the
parties hereto under this Agreement.
5.5 Public Disclosure. Without limiting any other provision of this
Agreement, Liquid and Alliance will consult with each other and agree, before
issuing any press release or otherwise making any public statement with respect
to the Merger, this Agreement or any Acquisition Proposal and will not issue any
such press release or make any such public statement prior to such consultation
and agreement, except as may be required by law or any listing agreement with
The Nasdaq National Market or any other applicable national securities exchange.
5.6 Regulatory Filings; Reasonable Efforts.
(a) Regulatory Filings. Each of Liquid and Alliance shall coordinate
and cooperate with one another and shall each use all reasonable efforts to
comply with, and shall each refrain from taking any action that would impede
compliance with, all Legal Requirements, and as promptly as practicable after
the date hereof, each of Liquid and Alliance shall make all filings required by
any Governmental Entity in connection with the Merger and the transactions
contemplated hereby, including, without limitation, (i) Notification and Report
Forms with the United States Federal Trade Commission and the Antitrust Division
of the United States Department of Justice as required by the HSR Act, (ii) any
other filing necessary to obtain any Necessary Consent, (iii) filings under any
other comparable pre-merger notification forms required by the merger
notification or control laws of any applicable jurisdiction, as agreed by the
parties hereto and (iv) any filings required under the Securities Act, the
Exchange Act, any applicable state or securities or "blue sky" laws and the
securities laws of any foreign country, or any other Legal Requirement relating
to the Merger. Each of Liquid and Alliance will cause all documents that it is
responsible for filing with any Governmental Entity under this Section 5.6(a) to
comply in all material respects with all applicable Legal Requirements.
(b) Exchange of Information. Liquid and Alliance each shall promptly
supply the other with any information which may be required in order to
effectuate any filings or application pursuant to Section 5.6(a). Except where
prohibited by applicable Legal Requirements, and subject to the Confidentiality
Agreement, each of Alliance and Liquid shall consult with the other prior to
taking a position with respect to any such filing, shall consider in good faith
the views of one another in connection with any analyses, appearances,
presentations, memoranda, briefs, white papers, arguments, opinions and
proposals before making or submitting any of the foregoing to any Governmental
Entity by or on behalf of any party hereto in connection with any investigations
or proceedings in connection with this Agreement or the transactions
contemplated hereby (including under any antitrust or fair trade Legal
Requirement), coordinate with the other in preparing and exchanging such
information and promptly provide the other with copies of all filings,
presentations or submissions (and a summary of any oral presentations) made by
such party with any Governmental Entity in connection with this Agreement or the
transactions contemplated hereby, provided that with respect to any such
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filing, presentation or submission, each of Liquid and Alliance need not supply
the other with copies (or in case of oral presentations, a summary) to the
extent that any law, treaty, rule or regulation of any Governmental Entity
applicable to such party requires such party or its Subsidiaries to restrict or
prohibit access to any such properties or information.
(c) Notification. Each of Liquid and Alliance will notify the other
promptly upon the receipt of (i) any comments from any officials of any
Governmental Entity in connection with any filings made pursuant hereto and (ii)
any request by any officials of any Governmental Entity for amendments or
supplements to any filings made pursuant to, or information provided to comply
in all material respects with, any Legal Requirements. Whenever any event occurs
that is required to be set forth in an amendment or supplement to any filing
made pursuant to Section 5.6(a), Liquid or Alliance, as the case may be, will
promptly inform the other of such occurrence and cooperate in filing with the
applicable Governmental Entity such amendment or supplement.
(d) Reasonable Efforts. Subject to the express provisions of Section
5.2 and Section 5.3 hereof and upon the terms and subject to the conditions set
forth herein, each of the parties agrees to use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using all reasonable efforts to accomplish the following:
(i) the taking of all reasonable acts necessary to cause the conditions
precedent set forth in Article VI to be satisfied, (ii) the obtaining of all
necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations, declarations
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the obtaining of all necessary
consents, approvals or waivers from third parties, including all Necessary
Consents, and (iv) the execution or delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. In connection with and without limiting the
foregoing, Liquid and its Board of Directors shall, if any takeover statute or
similar Legal Requirement is or becomes applicable to the Merger, this Agreement
or any of the transactions contemplated by this Agreement, use all reasonable
efforts to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
Legal Requirement on the Merger, this Agreement and the transactions
contemplated hereby.
5.7 Notification of Certain Matters.
(a) By Alliance. Alliance shall give prompt notice to Liquid of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of Alliance to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3(a) or 6.3(b) would not be satisfied.
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(b) By Liquid. Liquid shall give prompt notice to Alliance of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of Liquid to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.2(a) or 6.2(b) would not be satisfied.
5.8 Third-Party Consents. As soon as practicable following the date
hereof, Liquid and Alliance will each use all reasonable efforts to obtain any
material consents, waivers and approvals under any of its or its Subsidiaries'
respective Contracts required to be obtained in connection with the consummation
of the transactions contemplated hereby.
5.9 Indemnification of Officers and Directors. All rights to
indemnification existing in favor of those Persons who are officers and
directors of Liquid, Alliance and their respective Subsidiaries as of the date
of this Agreement for their acts and omissions occurring prior to the Effective
Time, whether provided in Liquid's or Alliance's Charter Documents (as in effect
as of the date of this Agreement) or as provided in indemnification agreements
between Liquid and said officers and directors (as in effect as of the date of
this Agreement) shall survive the Merger and shall be observed by Liquid to the
fullest extent permitted by The DGCL until not earlier than the sixth
anniversary of the Effective Time.
(a) Liquid agrees that until six (6) years from the Effective Time,
Liquid shall (i) indemnify, defend and hold harmless the present and former
officers, directors and stockholders of Alliance and its Subsidiaries and the
present and former officers and directors of Liquid (collectively, the
"Indemnified Parties") against all losses, expenses (including reasonable
attorneys' fees and other expenses of investigation or litigation, including on
appeal), claims, damages or liabilities arising out of actions or omissions
occurring at or prior to the Effective Time and (ii) advance expenses as
incurred.
(b) From the Effective Time until the sixth anniversary of the
Effective Time, Liquid shall maintain in effect, for the benefit of the
Indemnified Persons with respect to claims arising from or related to facts or
events which occurred at or before the Effective Time in an amount, on terms,
and with scope of coverage comparable to those applicable to, the current
directors' and officers' of each of Liquid and Alliance.
(c) The provisions of this Section 5.9 are intended to be in addition
to the rights otherwise available to the Liquid Indemnified Persons by law,
charter, statute, bylaw or agreement, and shall operate for the benefit of, and
shall be enforceable by, each of the Liquid Indemnified Persons, and their
respective heirs and representatives.
5.10 Directors and Officers of Liquid After the Effective Time. Liquid
shall use commercially reasonable efforts to obtain from those officers and
directors, who are not designated as a director or officer of Liquid after the
Effective Time, a voluntary resignation from such position(s) effective
immediately after the Effective Time, provided that prior to the Effective Time,
Liquid shall designate such number of individuals to remain as members of the
board of directors of Liquid after the Effective Time (the "Liquid Designees")
so that the Liquid Designees will constitute one-third (1/3) of the members of
the board of directors of Liquid. The Liquid Designees (a) shall be entitled to
serve on the board of directors of Liquid until at
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least the first anniversary of the Effective Time and (b) shall appoint, on the
Closing Date and immediately prior to the Effective Time, pursuant to the Bylaws
of Liquid, that number of individuals designated by Alliance as directors of
Liquid (the "Alliance Designees") so that the Alliance Designees will constitute
two-thirds (2/3) of the members of the board of directors of Liquid. Liquid and
Alliance shall select designees so that the directors of Liquid after the
Effective Time satisfy the Qualitative Listing Requirements of The Nasdaq
National Market.
5.11 Nasdaq Listing. Prior to the Effective Time, Liquid shall file with
The Nasdaq National Market a Notification Form: Listing of Additional Shares
with respect to the Liquid Common Stock issuable, and those required to be
reserved for issuance, in connection with the Merger. Liquid and Alliance shall
mutually cooperate to fulfill the requirements of maintaining Liquid's listing
on The Nasdaq National Market after the Effective Time.
5.12 Alliance Affiliates; Restrictive Legend. Alliance will use all
reasonable efforts to deliver or cause to be delivered to Liquid, prior to the
Effective Time, from each person who may reasonably be deemed to be an affiliate
of Alliance for purposes of Rule 145 promulgated under the Securities Act an
executed affiliate agreement pursuant to which such affiliate shall agree to be
bound by the provision of Rule 145 promulgated under the Securities Act. Liquid
will give stop transfer instructions to its transfer agent with respect to any
Liquid Common Stock received pursuant to the Merger by any stockholder of
Alliance who may reasonably be deemed to be an affiliate of Alliance for
purposes of Rule 145 promulgated under the Securities Act and there will be
placed on the certificates representing such Liquid Common Stock, or any
substitutions therefor, a legend stating in substance that the shares were
issued in a transaction to which Rule 145 promulgated under the Securities Act
applies and may only be transferred (i) in conformity with Rule 145 or (ii) in
accordance with a written opinion of counsel, reasonably acceptable to the
Surviving Corporation, in form and substance that such transfer is exempt from
registration under the Securities Act.
5.13 Tax Matters. Neither Liquid or Alliance will, nor will they permit any
of their respective Subsidiaries to, take any action (or fail to take any
action) prior to or following the Closing that would reasonably be expected to
cause the Merger to fail to qualify as a reorganization with the meaning of
Section 368(a) of the Code.
5.14 Conversion of Alliance Preferred Stock. Alliance shall effect a
conversion of all outstanding Alliance Preferred Stock into Alliance Common
Stock immediately prior to the Effective Time.
5.15 401(k) Pension Plan. If it is determined by agreement of Alliance and
Liquid after mutual diligence that the Alliance Employee Plan(s) intended to
include a Code Section 401(k) arrangement should be terminated, effective as of
the day immediately preceding the Closing Date, Alliance and its Affiliates, as
applicable, shall each terminate any Alliance Employee Plan(s) intended to
include a Code Section 401(k) arrangement (the "Alliance 401(k) Plan(s)"). If
Alliance and Liquid agree to terminate the Alliance 401(k) Plans, Alliance shall
provide Liquid with evidence that such Alliance 401(k) Plan(s) have been
terminated (effective as of the day immediately preceding the Closing Date)
pursuant to resolutions of Alliance's Board of Directors. The form and substance
of such resolutions shall be subject to reasonable
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review and approval of Liquid. Alliance also shall take such other actions in
furtherance of terminating such Alliance 401(k) plan(s) as Liquid may reasonably
require.
5.16 Section 16 Exemption. Prior to the Effective Time, the board of
directors of Liquid shall adopt resolutions approving the issuance of shares of
Liquid Common Stock to the officers and directors of Alliance who will become
officers and directors of Liquid immediately after the Effective Time in
accordance with SEC Rule 16b-3, as promulgated under the Exchange Act.
5.17 Registration Rights. Liquid and the Principal Stockholder shall
negotiate in good faith mutually acceptable terms concerning registration rights
applicable to the shares of Liquid Common Stock issued to the Principal
Stockholder in connection with the Merger on the principal terms set forth on
Exhibit B.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Stockholder Approvals.
(i) This Agreement shall have been approved and adopted, and
the Merger shall have been duly approved, by the requisite vote under applicable
law, by the respective stockholders of Alliance, Liquid and Merger Sub.
(ii) The Capitalization Amendment shall have been duly
approved by the requisite vote under applicable law by the stockholders of
Liquid.
(b) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(c) Registration Statement Effective; Prospectus/Proxy Statement.
The SEC shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Prospectus/Proxy Statement, shall have been
initiated or threatened in writing by the SEC.
(d) HSR Act; Other Antitrust Filings. All waiting periods (and any
extension thereof) under the HSR Act relating to the transactions contemplated
hereby will have expired or terminated early. All other material foreign
antitrust approvals required to be obtained prior to the Merger in connection
with the transactions contemplated hereby shall have been obtained.
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(e) Tax Opinions. Alliance and Liquid shall have each received
written opinions from their tax counsel, Xxxxxx, Xxxxxx & Xxxxx, LLP and Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, respectively, in form and
substance reasonably satisfactory to them to the effect that the Merger will
constitute a tax-free reorganization within the meaning of Section 368(a) of the
Code and such opinions shall not have been withdrawn; provided, however, that if
the counsel of either Liquid or Alliance does not render such opinion, this
condition shall nonetheless be satisfied with respect to such party if counsel
to the other party renders such opinion to such party. The parties to this
Agreement agree to make such reasonable representations as requested by such
counsel for the purpose of rendering such opinions.
(f) Lender Consent. All of the conditions precedent in the Lender
Consent shall have been satisfied.
6.2 Additional Conditions to Obligations of Alliance. The obligation of
Alliance to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Alliance:
(a) Representations and Warranties. The representations and
warranties of Liquid set forth in Article III shall have been accurate on the
date hereof and shall be accurate as of the Effective Time as if made as of the
Effective Time, except (i) for those representations and warranties that address
matters only as of a particular date (which shall be accurate as of such date)
and (ii) where the failure of the representations and warranties to be accurate
would not reasonably be expected to have a Material Adverse Effect on Liquid
taken as a whole (it being agreed that for purposes of this clause (ii), all
Material Adverse Effect and materiality terms in the representations and
warranties in Article III shall be inapplicable).
(b) Agreements and Covenants. Liquid shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date, and Alliance shall have received a certificate to such effect signed on
behalf of Liquid by an executive officer of Liquid.
(c) Nasdaq Listing. Effective as of the Closing Date the Liquid
Common Stock issued in connection with the merger shall be listed on The Nasdaq
National Market.
(d) Certificate. Liquid shall furnish Alliance with a certificate of
its appropriate officers as to compliance with the conditions set forth in
Sections 6.2(a) and 6.2(b).
(e) Alliance Board Representation. The Alliance Designees shall have
been appointed to terms of service on the Board of Directors of Liquid, such
service to become effective as of the Effective Time.
(f) Liquid's Restated Certificate. Liquid's Restated Certificate
shall have been accepted for filing by the Secretary of State of the State of
Delaware at least one (1) business day prior to the Closing Date.
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(g) Liquid Pre-Effective Time Capitalization. Liquid shall furnish
Alliance with a certificate from its appropriate officers setting forth the
capitalization of Liquid immediately prior to the Effective Time setting forth
(i) the number of shares of Liquid Common Stock issued and outstanding as of
such time and (ii) the number of issued and outstanding options to acquire
Liquid Common Stock under the Liquid Option Plans as of such time.
(h) Cash Balance. At the Effective Time Liquid shall have a cash
balance equal to or greater than $82,300,000 minus (x) the product of (i)
$1,750,000 multiplied by (ii) the number of whole calendar months and in the
case of any partial calendar month, the applicable fractional portion of such
calendar month, for the period between the date hereof and the Effective Time
plus (y) any costs, expenses or fees incurred by Liquid in connection with (i)
reductions in Liquid's workforce after the date hereof to the extent such
reductions meet the criteria set forth in Exhibit A hereto, (ii) legal and
accounting fees in connection with the Agreement and the Merger, in an amount
not to exceed $1,250,000, (iii) financial advisor fees payable to Broadview in
connection with the Agreement and the Merger, (iv) financial printer fees in
connection with the Agreement and the Merger, (v) SEC and other regulatory
filing fees in connection with the Agreement and the Merger, and (vi)
maintaining Liquid's existing policy for directors' and officers' liability
insurance in effect as of the date of this Agreement.
(i) Material Adverse Effect. There shall not have occurred a Material
Adverse Effect on Liquid and its Subsidiaries taken as a whole.
(j) Undisclosed Liabilities. Other than liabilities (i) disclosed
Schedule 3.9 of the Liquid Schedules, (ii) disclosed or provided for in the
Liquid Balance Sheet, (iii) incurred since the date of the Liquid Balance Sheet
in the ordinary course of business consistent with past practices, and (iv)
liabilities incurred pursuant to this Agreement; Liquid shall not have incurred
any liabilities of any kind whatsoever (whether absolute, accrued, contingent or
otherwise) in an aggregate amount greater than $1,500,000.
6.3 Additional Conditions to the Obligations of Liquid. The obligations of
Liquid to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Liquid:
(a) Representations and Warranties. The representations and
warranties of Alliance set forth in Article II shall have been accurate on the
date hereof and shall be accurate as of the Effective Time as if made as of the
Effective Time, except (i) for those representations and warranties that address
matters only as of a particular date (which shall be accurate as of such date)
and (ii) where the failure of the representations and warranties to be accurate
would not reasonably be expected to have a Material Adverse Effect on Alliance,
taken as a whole (it being agreed that for purposes of this clause (ii), all
Material Adverse Effect and materiality terms in the representations and
warranties in Article II shall be inapplicable).
(b) Agreements and Covenants. Alliance shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Liquid shall have received a certificate to such effect signed on
behalf of Alliance by an authorized senior executive officer of Alliance.
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(c) Alliance Pre-Effective Capitalization. Alliance shall furnish
Liquid with a certificate from its appropriate officers setting forth the
capitalization of Alliance immediately prior to the Effective Time, after giving
effect to the conversions of Alliance Preferred Stock, setting forth (i) the
number of shares of Alliance Common Stock issued and outstanding as of such time
and (ii) the number of issued and outstanding options and warrants to acquire
Alliance Common Stock pursuant to Alliance Options and Alliance Warrants as of
such time.
(d) Material Adverse Effect. There shall not have occurred a Material
Adverse Effect on Alliance and its Subsidiaries taken as a whole.
(e) Conversion of Preferred Stock. All shares of Alliance Preferred
Stock shall have been converted into Alliance Common Stock prior to the
Effective Time.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, and except as provided below, whether before or
after the requisite approvals of the stockholders of Alliance or Liquid:
(a) by mutual written consent of Liquid and Alliance;
(b) by either Alliance or Liquid if the Merger shall not have been
consummated by December 31, 2002; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a material breach of this Agreement;
(c) by either Alliance or Liquid if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by either Alliance or Liquid if the approval of the stockholders
of Liquid for the Merger or the Capitalization Amendment shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
Liquid stockholders duly convened therefor or at any adjournment thereof;
(e) by either Alliance or Liquid if the approval of the stockholders
of Alliance for the Merger shall not have been obtained by reason of the failure
to obtain the required vote at a meeting of the Alliance stockholders duly
convened therefore or at any adjournment thereof;
(f) by Alliance (at any time prior to the adoption and approval of
this Agreement and the Merger by the required vote of the stockholders of
Liquid) if a Triggering Event (as defined below) has occurred;
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(g) by Liquid in connection with simultaneously entering into
definitive agreements related to a Superior Offer in accordance with Section
5.3(c); provided, Liquid has complied with all provisions hereof, including the
notice provisions of Section 5.3(c), and that Liquid simultaneously makes
payment to Alliance of the Termination Fee;
(h) by Alliance, upon a breach of any representation, warranty,
covenant or agreement on the part of Liquid set forth in this Agreement, or if
any representation or warranty of Liquid shall be or have become untrue, in
either case such that the conditions set forth in Section 6.2(a) or Section
6.2(b) would not be satisfied and such breach is not cured within 20 days
following delivery by Alliance to Liquid of written notice of such breach
(except in the case of a breach that is not curable or efforts to cure such
breach have ceased); and
(i) by Liquid, upon a breach of any representation, warranty,
covenant or agreement on the part of Alliance set forth in this Agreement, or if
any representation or warranty of Alliance shall be or have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b) would not be satisfied and such breach is not cured within 20 days
following delivery by Liquid to Alliance of written notice of such breach
(except in the case of a breach that is not curable or efforts to cure such
breach have ceased).
For the purposes of this Agreement, a "Triggering Event," with respect to
Liquid, shall be deemed to have occurred if: (i) its Board of Directors or any
committee thereof by a majority vote shall for any reason have withdrawn or
shall have amended or modified, in a manner adverse to Alliance, its
recommendation in favor of, the adoption and approval of the Agreement or the
approval of the Merger, (ii) it shall have failed to include in the
Prospectus/Proxy Statement the recommendation of its Board of Directors in favor
of the adoption and approval of the Agreement and the approval of the Merger,
(iii) its Board of Directors or any committee thereof by a majority vote shall
have approved or recommended any Acquisition Proposal, (iv) a tender or exchange
offer relating to its securities shall have been commenced by a Person
unaffiliated with the other party hereto and Liquid shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Securities Act,
within ten (10) business days after such tender or exchange offer is first
published, sent or given, a statement disclosing that the Board of Directors of
Liquid recommends rejection of such tender or exchange offer or (v) Liquid
enters into agreements related to a Superior Offer.
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of a written notice of the terminating party to the other party hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in Section 5.4(a), this Section 7.2, Section 7.3 and Article VIII, each of which
shall survive the termination of this Agreement and (ii) nothing herein shall
relieve any party from liability for any willful or intentional breach of this
Agreement or relieve Alliance or the Principal Stockholder from any liability
for a breach of the Voting Agreement. No termination of this Agreement shall
affect the obligations of the parties contained in the Confidentiality
Agreement, all of which obligations shall survive termination of this Agreement
in accordance with their terms.
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7.3 Fees and Expenses.
(a) General. Except as set forth in Section 7.3(b) below, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated, provided that the fees and expenses (i) of the
financial printer incurred in connection with the preparation and mailing of the
Registration Statement and Prospectus/Proxy Statement and (ii) relating to
compliance with the HSR Act shall be shared equally by Alliance and Liquid.
(b) Payment by Liquid.
(i) In the event that (A) this Agreement is terminated by
Liquid or Alliance pursuant to Section 7.1(b), (B) this Agreement is terminated
by Alliance, pursuant to Section 7.1(f), or (C) this Agreement is terminated by
Liquid pursuant to Section 7.1(g), Liquid shall promptly, but in no event later
than one (1) day after the date of such termination, pay Alliance a termination
fee equal to $3,000,000 payable by wire transfer of same day funds, provided
that in the case of termination pursuant to Section 7.1(b) such payment shall be
made only if within twelve (12) months following the termination of this
Agreement Liquid enters into a definitive agreement with respect to, or
consummates, any Acquisition Proposal (for purposes of this sentence, the term
"Acquisition Proposal" shall have the meaning assigned to such term in Section
5.3(e) except that references to "10%" in the definition of "Acquisition" shall
be deemed to be references to "50%" and a liquidation or dissolution of Liquid
shall not be deemed an Acquisition Proposal) and such payment shall be made
promptly, but in no event later than two (2) business days after entering into
such Acquisition Proposal.
(ii) In the event that this Agreement is terminated by Alliance
or Liquid pursuant to Section 7.1(d), (A) Liquid shall promptly, but in no event
later than one (1) day after the date of such termination, pay Alliance a
termination fee equal to $1,000,000 and (B) in the event that within twelve (12)
months after such termination, Liquid enters into a definitive agreement with
respect to, or consummates, any Acquisition Proposal (for purposes of this
sentence, the term "Acquisition Proposal" shall have the meaning assigned to
such term in Section 5.3(e) except that references to "10%" in the definition of
"Acquisition" shall be deemed to be references to "50%" and a liquidation or
dissolution of Liquid shall not be deemed an Acquisition Proposal), Liquid shall
pay, as of the date Liquid enters into such definitive agreement with respect to
or consummates such Acquisition Proposal, whichever is earlier, a fee equal to
$750,000 or (C) in the event that within six (6) months after such termination,
Liquid completes a liquidation or dissolution, a fee equal to $750,000.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of Liquid and Alliance, provided,
after any such approval, no amendment shall be made which by law or in
accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further stockholder approval. This
Agreement may be not amended except by execution of an instrument in writing
signed on behalf of each of Liquid and Alliance.
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7.5 Extension; Waiver. At any time prior to the Effective Time either
party hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of Alliance and Liquid contained in this Agreement, or any
instrument delivered pursuant to this Agreement, shall terminate at the
Effective Time, and only the covenants that by their terms survive the Effective
Time and this Article VIII shall survive the Effective Time.
8.2 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received (a) upon receipt when delivered by
hand, or (b) two business days after sent by registered mail or by courier or
express delivery service or by facsimile, provided that in each case the notice
or other communication is sent to the address or facsimile telephone number set
forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
(a) if to Alliance, to:
Alliance Entertainment Corp.
0000 Xxxxx Xxxxx Xxxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
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(b) if to Liquid, to:
Liquid Audio, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
and:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
Xxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
8.3 Interpretation.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a section of this Agreement unless otherwise indicated. For purposes of this
Agreement, the words "include," "includes" and "including," when used herein,
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "the business of" an entity,
such reference shall be deemed to include the business of all such entity and
its Subsidiaries, taken as a whole. An exception or disclosure made in Alliance
Schedules with regard to a representation of Alliance, or in the Liquid
Schedules with regard to a representation of Liquid, shall be deemed made with
respect to any other representation by such party to which such exception or
disclosure is readily apparent.
(b) For purposes of this Agreement, the term "Material Adverse
Effect," when used in connection with an entity, means any change, event,
violation, inaccuracy, circumstance or effect (any such item, an "Effect"),
individually or when taken together with all other Effects that have occurred
prior to the date of determination of the occurrence of the Material Adverse
Effect, that is or is reasonably likely to (i) be materially adverse to the
business, assets (including
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intangible assets), capitalization, financial condition or results of operations
of such entity taken as a whole with its Subsidiaries or (ii) materially impede
the ability or authority of such entity to consummate the transactions
contemplated by this Agreement in accordance with the terms hereof and
applicable Legal Requirements; provided, however, that, for purposes of clause
(i) above, in no event shall any of the following, alone or in combination, be
deemed to constitute, nor shall any of the following be taken into account in
determining whether there has been or will be, a Material Adverse Effect on any
entity: (A) any Effect resulting from compliance with the terms and conditions
of this Agreement, (B) in the case of Liquid, any change in such entity's stock
price or trading volume, in and of itself, (C) any Effect that results from
changes affecting any of the industries in which such entity operates generally
or the United States economy generally (which changes in each case do not
disproportionately affect such entity in any material respect), (D) any Effect
that results from changes affecting general worldwide economic or capital market
conditions (which changes in each case do not disproportionately affect such
entity in any material respect) or (E) in the case of Liquid, (i) the failure to
meet published or internal earnings, revenue estimates or projections or (ii)
the continuing loss of money resulting from the business operations of Liquid.
(c) For purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third-Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Alliance Schedules and the
Liquid Schedules, (i) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall
survive any termination of this Agreement and (ii) are not intended to confer
upon any other Person any rights or remedies hereunder except for those
individuals referenced in Section 5.9.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, business and
other purposes of such void or unenforceable provision.
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8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Any purported assignment in violation of this Section 8.10
shall be void. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 Waiver of Jury Trial. EACH OF LIQUID AND ALLIANCE HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF LIQUID OR ALLIANCE IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
8.12 Computation of Time. Whenever the last day for the exercise of any
privilege or the discharge of any duty hereunder shall fall upon a Saturday,
Sunday, or any date banks in the State of California are closed, the party
having such privilege or duty may exercise such privilege or discharge such duty
on the next succeeding day which is a regular business day.
*****
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
LIQUID AUDIO, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxx
-----------------------------------------
Title: Chief Executive Officer
----------------------------------------
APRIL ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxx
-----------------------------------------
Title: Chief Executive Officer
----------------------------------------
ALLIANCE ENTERTAINMENT CORP.
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxx X. Xxxxxxx
-----------------------------------------
Title: President & Chief Executive Officer
----------------------------------------
[SIGNATURE PAGE TO MERGER AGREEMENT]
EXHIBIT A
Severance
A. Basis for Termination: (i) the employment position held by the Liquid
employee is being eliminated; (ii) two or more employment positions are being
consolidated into one position due to the elimination of projects; (iii)
redundancy in the employment position upon completion of the Merger; or (iv)
reduction of work to be done as a result of the Merger.
X. Xxxxxxxxx Payments: For Liquid employees, other than executive officers,
the amount of severance is between four to six weeks worth of salary. For
executive officers as of the date hereof, the severance is between three and six
months salary.
C. Capitalized terms in this Exhibit A shall have the same meaning as set
forth in the Agreement and Plan of Merger dated June 12, 2002, among Liquid, the
Merger Sub and Alliance.
EXHIBIT B
Registration Rights
A. Demand Registration Rights. Three demand registration rights, with the
first such right exercisable no earlier than three months after the Closing
Date.
B. Piggyback Registration Rights. Unlimited.
C. Term. Five (5) years.
D. Other. Other customary terms and conditions to be negotiated in good faith
by the parties.
