EXECUTION COPY
EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LIQUID AUDIO, INC.
APRIL ACQUISITION CORP.
AND
ALLIANCE ENTERTAINMENT CORP.
Dated as of June 12, 2002,
and as amended and restated as of July 14, 2002
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER ................................................................. 2
1.1. The Merger ............................................................. 2
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 ................................................ 3
1.6. Dissenting Shares ...................................................... 4
1.7. Treatment of Derivative Securities; Assumption of Stock Options ........ 4
1.8. Surrender of Certificates .............................................. 5
1.9. No Further Ownership Rights in Alliance Stock .......................... 7
1.10. Lost, Stolen or Destroyed Certificates ................................ 7
1.11. Tax Consequences ...................................................... 8
ARTICLE IA THE OFFER ................................................................. 8
1A.01 The Offer ............................................................ 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ALLIANCE ................................ 9
2.1. Organization; Standing and Power; Charter Documents; Subsidiaries ...... 9
2.2. Alliance Capital Structure ............................................. 10
2.3. Authority; Non-Contravention; Necessary Consents ....................... 11
2.4. Alliance Financial Statements; Undisclosed Liabilities ................. 13
2.5. Absence of Certain Changes or Events ................................... 13
2.6. Taxes .................................................................. 14
2.7. Intellectual Property .................................................. 15
2.8. Compliance; Permits .................................................... 18
2.9. Litigation ............................................................. 19
2.10. Brokers' and Finders' Fees ............................................ 19
2.11. Contracts ............................................................. 19
2.12. Employee Matters and Benefit Plans .................................... 20
2.13. Real Property ......................................................... 24
2.14. Sale of Businesses .................................................... 24
2.15. Interested Party Transactions ......................................... 24
2.16. Title to Properties ................................................... 25
2.17. Environmental Matters ................................................. 25
2.18. Disclosure ............................................................ 25
2.19. Board Approval ........................................................ 26
2.20. Voting Agreement ...................................................... 26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LIQUID ................................. 26
3.1. Organization; Standing and Power; Charter Documents; Subsidiaries ...... 26
3.2. Liquid Capital Structure ............................................... 27
3.3. Authority; Non-Contravention; Necessary Consents ....................... 28
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3.4. Liquid SEC Filings; Liquid Financial Statements; Undisclosed Liabilities 29
3.5. Absence of Certain Changes or Events ................................... 30
3.6. Taxes .................................................................. 30
3.7. Intellectual Property .................................................. 32
3.8. Compliance; Permits .................................................... 34
3.9. Litigation ............................................................. 35
3.10. Brokers' and Finders' Fees ............................................ 35
3.11. Contracts ............................................................. 35
3.12. Employee Matters and Benefit Plans .................................... 36
3.13. Real Property ......................................................... 39
3.14. Interested Party Transactions ......................................... 39
3.15. Title to Properties ................................................... 40
3.16. Environmental Matters ................................................. 40
3.17. Disclosure ............................................................ 40
3.18. Board Approval ........................................................ 40
3.19. Interim Operations of Merger Sub. ..................................... 41
3.20. Fairness Opinion ...................................................... 41
3.21. Rights Agreement ...................................................... 41
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME ....................................... 41
4.1. Conduct of Business by Liquid .......................................... 41
4.2. Conduct of Business by Alliance ........................................ 44
ARTICLE V ADDITIONAL AGREEMENTS ...................................................... 46
5.1. Prospectus/Proxy Statement; Registration Statement; Offer Documents .... 46
5.2. Meetings of Stockholders ............................................... 47
5.3. Acquisition Proposals .................................................. 47
5.4. Confidentiality; Access to Information; No Modification of
Representations, Warranties or Covenants ............................... 50
5.5. Public Disclosure ...................................................... 51
5.6. Regulatory Filings; Reasonable Efforts ................................. 51
5.7. Notification of Certain Matters ........................................ 52
5.8. Third-Party Consents ................................................... 53
5.9. Indemnification of Officers and Directors .............................. 53
5.10. Directors and Officers of Liquid After the Effective Time ............. 53
5.11. Nasdaq Listing ........................................................ 54
5.12. Alliance Affiliates; Restrictive Legend ............................... 54
5.13. Tax Matters ........................................................... 54
5.14. Conversion of Alliance Preferred Stock ................................ 54
5.15. 401(k) Pension Plan ................................................... 54
5.16. Section 16 Exemption .................................................. 55
5.17. Registration Rights ................................................... 55
5.18. Increasing Authorized Liquid Common Stock after Merger ................ 55
5.19. Alternative Arrangements .............................................. 55
ARTICLE VI CONDITIONS TO THE MERGER .................................................. 55
6.1. Conditions to Obligations of Each Party to Effect the Merger ........... 55
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6.2. Additional Conditions to Obligations of Alliance ....................... 56
6.3. Additional Conditions to the Obligations of Liquid ..................... 57
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER ........................................ 58
7.1. Termination ............................................................ 58
7.2. Notice of Termination; Effect of Termination ........................... 60
7.3. Fees and Expenses ...................................................... 60
7.4. Amendment .............................................................. 61
7.5. Extension; Waiver ...................................................... 61
ARTICLE VIII GENERAL PROVISIONS ...................................................... 61
8.1. Non-Survival of Representations and Warranties ......................... 61
8.2. Notices ................................................................ 61
8.3. Interpretation ......................................................... 62
8.4. Counterparts ........................................................... 63
8.5. Entire Agreement; Third-Party Beneficiaries ............................ 63
8.6. Severability ........................................................... 64
8.7. Other Remedies; Specific Performance ................................... 64
8.8. Governing Law .......................................................... 64
8.9. Rules of Construction .................................................. 64
8.10. Assignment ............................................................ 64
8.11. Waiver of Jury Trial .................................................. 64
8.12. Computation of Time ................................................... 64
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER dated as of June
12, 2002, and amended and restated as of July 14, 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. Liquid, Merger Sub and Alliance entered into an Agreement and Plan of
Merger dated as of June 12, 2002 (the "ORIGINAL AGREEMENT").
B. Liquid, Merger Sub and Alliance wish to amend and restate the Original
Agreement in its entirety, effective as of the date set forth in the forepart
hereof.
C. 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.
D. The Boards of Directors of Liquid and Merger Sub have each determined
that the Offer (as defined in Section 1A.01), is consistent with, and in
furtherance of, their respective business strategies and goals.
E. The Boards of Directors of Liquid, Merger Sub and Alliance have each
determined that the transactions contemplated hereby are consistent with, and in
furtherance of, their respective business strategies and goals.
F. Liquid and Alliance desire to make certain representations, warranties
and agreements in connection with the Offer and the Merger and also to prescribe
certain conditions to the Merger.
G. Concurrently with the execution of the Original Agreement, and as a
condition and inducement to the parties' willingness to enter into the Original
Agreement, AEC Associates, LLC, a Delaware limited liability company (the
"PRINCIPAL STOCKHOLDER"), entered into a Voting Agreement (the "VOTING
AGREEMENT"), which has been confirmed as of the date hereof.
H. 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 Los Angeles offices of Milbank, Tweed, Xxxxxx & XxXxxx LLP, 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.
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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:
(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 such number (the "EXCHANGE RATIO") of shares of common
stock, par value $0.001 per share, of Liquid ("LIQUID COMMON STOCK") as would
result in (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) owning 74% 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 owning 26% of the
outstanding shares of Liquid Common Stock immediately after the Effective Time.
The percentages in this Section 1.5(b) 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).
(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.
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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 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 as required by Section 5.18 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).
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(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
as required by Section 5.18 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(e) 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 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
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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.
(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
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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 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
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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 IA
THE OFFER
1A.01 The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 7.01 and none of the events set forth
in Exhibit C hereto shall have occurred and be continuing, Liquid shall, in
accordance with applicable law, commence (within the meaning of Rule 13e-4 under
the Exchange Act) an issuer tender offer (the "OFFER") as promptly as
practicable after the execution of this Agreement to acquire 10,000,000 issued
and outstanding shares of Liquid Common Stock (the "MAXIMUM AMOUNT") for $3.00
per share (such amount, or any greater amount per share paid pursuant to the
Offer, the "PER SHARE AMOUNT"), net to the seller in cash. The obligation of
Liquid to consummate the Offer and to accept for payment and to pay for shares
of Liquid Common Stock tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit C hereto. Liquid expressly reserves the right to
waive any such condition other than the Vote Condition (as defined in Exhibit C
hereto) and to make any other changes in the terms and conditions of the Offer.
Notwithstanding the foregoing, no change may be made which (i) changes the Per
Share Amount, (ii) changes the form of consideration to be paid in the Offer,
(iii) changes the number of shares of Liquid Common Stock sought to be purchased
in the Offer, or (iv) imposes conditions to the Offer in addition to those set
forth in Exhibit C hereto; provided, however, that the Offer may be extended (1)
for any period to the extent required by law or by any rule, regulation,
interpretation or position of the SEC or the staff thereof applicable to the
Offer, and (2) after the initially scheduled expiration date if upon any
expiration of the Offer any condition to the Offer shall not be satisfied and
there is a reasonable basis to believe that such condition could be satisfied.
Assuming the prior satisfaction or waiver of the conditions of the Offer and
subject to the foregoing right to extend the Offer, Liquid shall pay for shares
of Liquid Common Stock tendered pursuant to the Offer as soon as practicable
after termination thereof, provided, however, that, if, at the expiration of the
Offer, the number of shares of Liquid Common Stock that has been validly
tendered and not withdrawn exceeds the Maximum Amount, the number of shares of
Liquid Common Stock to be purchased by Liquid pursuant to the Offer shall be
prorated in accordance with Rule 13e-4(f)(3) promulgated under the Exchange Act,
so that the number of shares of Liquid Common Stock purchased by Liquid will
equal the Maximum Amount.
(b) As soon as practicable on the date of commencement of the Offer,
Liquid shall file with the SEC a Tender Offer Statement on Schedule TO
promulgated under the Exchange Act (together with all amendments and supplements
thereto, the "SCHEDULE TO") with respect to the Offer, and take such steps as
are reasonably necessary to cause the Offer to Purchase (as defined below) to be
disseminated to the holders of shares of Liquid Common
8
Stock as and to the extent required by applicable federal securities laws. The
Schedule TO shall contain an offer to purchase (the "OFFER TO PURCHASE") and
forms of the related letter of transmittal and any related summary advertisement
(the Schedule TO, the Offer to Purchase and such other documents, together with
all amendments and supplements thereto, the "OFFER DOCUMENTS"). Liquid shall
correct promptly any information in the Offer Documents which shall have become
false or misleading, and Liquid shall take all steps necessary to cause the
Schedule TO as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of shares of Liquid
Common Stock, in each case as and to the extent required by applicable federal
securities laws. Alliance shall cooperate with Liquid in such filings as
provided in Section 5.1. Alliance and its counsel shall be given an opportunity
to review and comment on the Offer Documents prior to their being filed with the
SEC, and Liquid will provide Alliance and its counsel in writing with any
comments that Liquid receives from the SEC or its staff with respect to the
Offer Documents promptly after receipt of any such comments and Alliance and its
counsel shall be given an opportunity to review and comment on any response to
such comments.
(c) Promptly after the date hereof, Liquid shall request an
exemption from the SEC from the requirements of Rule 102 of Regulation M in
connection with the Offer and the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
Alliance represents and warrants to Liquid as of June 12, 2002, subject to
the exceptions disclosed in writing in the disclosure schedules supplied by
Alliance to Liquid dated as of June 12, 2002 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.
(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,
9
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 June 12,
2002, 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 June 12, 2002, 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 June 12, 2002 and then the subsequent
conversion of such Series A1 Preferred Stock, Series A2 Preferred Stock and
Series B Preferred Stock into shares of Alliance Common Stock, 114,053,171
shares of Alliance Common Stock would be issued and outstanding, as of June 12,
2002. 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.
(b) Stock Options and Warrants. As of June 12, 2002: (i) 7,909,752
shares of Alliance Common Stock and 1,056 shares of Alliance Series A2 Preferred
Stock are subject to
10
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 June 12,
2002, 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 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
11
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, (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
12
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 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.
13
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 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
14
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 mean all trade secrets, industrial
models, designs, methodologies, customer lists, vendor lists,
15
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
16
both would constitute a default or event of default on the part of Alliance or,
to Alliance's knowledge, any 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, 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
17
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.
18
(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 June 12, 2002 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 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.
19
(c) Credit Facility. As of June 12, 2002, 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 the Original Agreement and that the execution,
delivery and, subject to the satisfaction of the conditions precedent of such
Lender Consent, performance of the Original Agreement and the consummation of
the transactions contemplated by the Original 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 shall have
received within fourteen (14) days of the date hereof a consent of GECC and the
Required Lenders with respect to this Agreement to the same effect as the Lender
Consent relating to the Original 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 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
20
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 (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
21
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.
(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
22
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
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
23
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 June 12, 2002, Alliance, and its
wholly-owned Subsidiary All Media Guide, LLC, a Delaware limited liability
company, have entered into a 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
24
"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 Liquid capital stock in the
Merger (including amendments or supplements thereto) (the "REGISTRATION
STATEMENT") or for inclusion in the Offering Documents will, at the respective
times the Registration Statement becomes effective under the Securities Act or
when the Schedule TO is filed with the SEC and first published, sent or given to
Liquid stockholders, 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
25
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, the Prospectus/Proxy Statement or
the Offer Documents.
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 as of June 12, 2002, subject to the exceptions disclosed in
writing in the disclosure schedules supplied by Liquid to Alliance dated as of
June 12, 2002 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 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,
26
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 June 12, 2002
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 June 12, 2002: (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 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 June 12, 2002,
there are no securities, options,
27
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 of the issuance of Liquid capital stock in the Merger by Liquid's
stockholders, the granting of exemptive relief by the SEC from the
requirements of Regulation M for the conduct of the Offer and the filing
of the Certificate of Merger pursuant to the DGCL. The affirmative vote of
at least a majority of the votes cast by the holders of Liquid Common
Stock at a meeting of Liquid's stockholders to approve the issuance of
Liquid capital stock in the Merger is the only vote of the holders of any
class or series of Liquid capital stock necessary to 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.
(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
28
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 of the issuance of
Liquid capital stock in 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,
(ii) the Schedule TO and the SEC exemption under Regulation M for the conduct of
the Offer and (iii) 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 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
29
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 June 12, 2002, 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 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
30
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.
(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.
31
(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 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
32
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 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
33
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 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
34
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.
(a) As of the date hereof, 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.
(b) 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 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 engagement letters dated February 7,
2002 and July 14, 2002, copies of which have 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 June 12, 2002 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;
(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;
35
(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
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
36
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.
(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.
37
(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 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
38
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 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.
39
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 or the Offering Documents will, at the respective times
the Registration Statement becomes effective under the Securities Act and the
Schedule TO is filed with the SEC and first published, sent or given to Liquid
stockholders, 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 and the Offering Documents 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 or any of its affiliates or representatives for
inclusion or incorporation by reference in the Registration Statement, the
Offering Documents or the Prospectus/Proxy Statement.
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 Offer and
the Merger, taken together, are fair to, and in the best interests of, Liquid
and its stockholders and declared the Offer and the Merger to be advisable, (ii)
approved this Agreement and (iii) recommended that the stockholders of Liquid
tender their shares pursuant to the Offer and approve the issuance of Liquid
capital stock in the
40
Merger and directed that the issuance of Liquid capital stock in the Merger 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 July 14, 2002, to the effect that, as of
such date, the aggregate consideration to be received and retained by the
stockholders of Liquid pursuant to the Offer and 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 June 12, 2002 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 did and 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 or Schedule 4.1(b) to this Agreement, without the prior written
consent of Alliance, during the period from June 12, 2002 and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Liquid has not and 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;
(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;
41
(iii) purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of it or its Subsidiaries, except pursuant to
the Offer or 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 June 12, 2002;
(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 June 12, 2002;
(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 the Liquid Charter
Documents or any of the organizational documents of its Subsidiaries,
except 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 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
42
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 June 12, 2002 or arising on or after June
12, 2002, 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;
(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;
43
(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 June 12, 2002 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 did and 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 June 12, 2002 and continuing until the earlier of
the termination of this Agreement pursuant to its terms or the Effective Time,
Alliance has not and 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
44
(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 June 12, 2002 or entered into the
ordinary course of business consistent with past practice after June 12,
2002;
(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 June 12, 2002;
(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 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
45
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; Offer Documents.
As promptly as practicable after the execution of this Agreement, Liquid will
prepare and file with the SEC the Prospectus/Proxy Statement, Liquid will
prepare and file with the SEC the Registration Statement in which the
Prospectus/Proxy Statement is to be included as a prospectus, and Liquid will
prepare and file with the SEC the Offer Documents. Alliance will provide Liquid
with any information which may be required in order to effectuate the
preparation and filing of the Prospectus/Proxy Statement, the Registration
Statement and the Offer Documents 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 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, the Prospectus/Proxy Statement and/or the Offer Documents. Whenever
any event occurs which is required to be set forth in an amendment or supplement
to the Prospectus/Proxy Statement, the Registration Statement or the Offer
Documents, 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
46
amendment or supplement. Liquid shall provide Alliance with a reasonable
opportunity to review and comment on any amendment or supplement to the
Registration Statement, Prospect/Proxy Statement and Offer Documents 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 approval of the issuance of Liquid capital stock in the Merger (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) and the last sentence of this Section 5.2(a), Liquid
will use all reasonable efforts to solicit from its stockholders proxies in
favor of the issuance of Liquid capital stock in the Merger 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 approval. Notwithstanding anything to the
contrary contained in this Agreement, Liquid may adjourn or postpone the
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 issuance of Liquid capital
stock in the Merger 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 the 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, the Liquid Charter Documents, 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
issuance of Liquid capital stock in 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.
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
47
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.
(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 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
48
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 Offer and 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.
(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
49
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 (it being understood that the acceptance
for payment and payment for shares of Liquid Common Stock pursuant to the
Offer shall not be deemed to cause or result in an Acquisition), (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 Offer and 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
50
(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) the Schedule TO
and the SEC exemption under Regulation M, (iv) 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
(v) 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 filing,
presentation or submission, each of Liquid and Alliance need not supply the
other with
51
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 Offer and 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 the SEC exemptive order under Regulation M, (iv) the filing of the
Offering Documents and (v) 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 Offer and
the Merger, this Agreement or any of the transactions contemplated by this
Agreement, use all reasonable efforts to ensure that the Offer and 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 Offer and 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.
52
(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 least
53
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 capital 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 review and
54
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.
5.18. Increasing Authorized Liquid Common Stock after Merger. As soon as
practicable following the Effective Time, 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 approval of an amendment to
Liquid's Certificate of Incorporation to increase the total number of shares of
Liquid Common Stock that Liquid is authorized to issue to at least 100,000,000.
Liquid will use all reasonable efforts to solicit from its stockholders proxies
in favor of the adoption and approval of such amendment and will take all other
action necessary or advisable to secure the vote or consent of its stockholders
required by the rules of the DGCL and The Nasdaq National Market to obtain such
approval. Liquid shall ensure that such stockholders' meeting is called,
noticed, convened, held and conducted, and that all proxies solicited by it in
connection with such stockholders' meeting are solicited in compliance with the
DGCL, the Liquid Charter Documents, 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 such amendment.
5.19. Alternative Arrangements. In the event that the Voting Condition is
satisfied but less than the Maximum Amount is validly tendered and not withdrawn
pursuant to the Offer, the parties shall negotiate in good faith to effect
alternative arrangements that would preserve for the parties (and their
respective stockholders) the economic, voting and other material benefits of the
transactions contemplated by this Agreement.
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 and Merger Sub.
55
(ii) The issuance of Liquid capital stock in the Merger shall have
been duly approved by the requisite vote under applicable law and the
rules of The Nasdaq National Market 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 Offer or the Merger
illegal or otherwise prohibiting consummation of the Offer or 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
(e) Tax Opinions. Alliance and Liquid shall have each received
written opinions from their tax counsel, Xxxxxx, Xxxxxx & Xxxxx, LLP and
Milbank, Tweed, Xxxxxx & XxXxxx LLP, 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 made 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).
56
(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 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.
(g) 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 June 12, 2002 and the Effective Time,
plus (y) any costs, expenses or fees incurred by Liquid in connection with (i)
reductions in Liquid's workforce after June 12, 2002 to the extent such
reductions meet the criteria set forth in Exhibit A hereto, (ii) legal and
accounting fees in connection with the Agreement, the Offer and the Merger in an
amount not to exceed $3,000,000, (iii) financial advisor fees payable to
Broadview in connection with the Agreement, the Offer and the Merger, (iv)
financial printer fees in connection with the Agreement, the Offer and the
Merger, (v) SEC and other regulatory filing fees in connection with the
Agreement, the Offer 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, plus (z) $30,000,000 to be used to pay for the purchase of
Liquid Common Stock in the Offer.
(h) Material Adverse Effect. There shall not have occurred a
Material Adverse Effect on Liquid and its Subsidiaries taken as a whole.
(i) 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
57
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 made 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.
(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;
58
(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
Offer and 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 issuance of Liquid capital stock in the Merger 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 approval of the issuance
of Liquid capital stock in the Merger by the required vote of the stockholders
of Liquid) if a Triggering Event (as defined below) has occurred;
(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);
(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); or
(j) by either Alliance or Liquid if the SEC shall have declined to
grant an exemption from the requirements of Rule 102 of Regulation M in
connection with the Offer and the Merger, unless counsel to Liquid advises
Liquid in writing that Liquid may proceed with the Offer and the Merger as
contemplated by this Agreement in the absence of such exemption.
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 approval of the issuance of Liquid capital stock
in the Merger or that the Liquid stockholders tender their shares pursuant to
the Offer, (ii) it shall have failed to include in the Prospectus/Proxy
Statement the recommendation
59
of its Board of Directors in favor of the approval of the issuance of Liquid
capital stock in the Merger or in the Offering Documents the recommendation of
its Board of Directors that the Liquid stockholders tender their shares pursuant
to the Offer, (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.
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
60
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) or Section 7.1(j), (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.
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
61
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
(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:
Milbank, Tweed, Xxxxxx & XxXxxx LLP
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxxx, 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
62
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 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.
63
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.
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.
64
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:_________________________________
Name:____________________________
Title:___________________________
APRIL ACQUISITION CORP.
By:_________________________________
Name:____________________________
Title:___________________________
ALLIANCE ENTERTAINMENT CORP.
By:_________________________________
Name:____________________________
Title:___________________________
[SIGNATURE PAGE TO MERGER AGREEMENT]
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:_________________________________
Name:____________________________
Title:___________________________
APRIL ACQUISITION CORP.
By:_________________________________
Name:____________________________
Title:___________________________
ALLIANCE ENTERTAINMENT CORP.
By:_________________________________
Name:____________________________
Title:___________________________
[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 June 12, 2002, 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 Amended and Restated Agreement and Plan of Merger dated June 12, 2002 and
as amended and restated as of July 14, 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.
EXHIBIT C
CONDITIONS TO THE OFFER
The capitalized terms used in this Exhibit C shall have the meanings
ascribed to them in the Amended and Restated Agreement and Plan of Merger to
which it is attached, except that the term "MERGER AGREEMENT" shall be deemed to
refer to such Amended and Restated Agreement and Plan of Merger.
Notwithstanding any other provision of the Offer, Liquid shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Liquid's obligation to pay for or return tendered shares of Liquid Common
Stock promptly after termination or withdrawal of the Offer), pay for, and may
(subject to any such rule or regulation) delay the acceptance for payment of any
tendered shares of Liquid Common Stock, and may (except as provided in the
Merger Agreement) amend or terminate the Offer as to any shares of Liquid Common
Stock not then paid for, if (i) the issuance of shares of Liquid capital stock
in the Merger shall not have been approved by the requisite vote of the
stockholders of Liquid (the "VOTE CONDITION") or (ii) at any time on or after
the date of the Merger Agreement and before the time of payment for any such
shares of Liquid Common Stock (whether or not any shares of Liquid Common Stock
have theretofore been accepted for payment or paid for pursuant to the Offer),
any of the following events shall have occurred and remain in effect:
(a) there shall have been any law or order promulgated, entered,
enforced, enacted, issued or deemed applicable to the Offer or the Merger
by any court of competent jurisdiction or other competent Governmental
Entity which, directly or indirectly, prohibits, restrains or makes
illegal the acceptance for payment, payment for or purchase of shares of
Liquid Common Stock pursuant to the Offer or the consummation of the
Merger;
(b) there shall be instituted or pending any action, suit or
proceeding brought by a Governmental Entity (1) seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or (2) that
could reasonably be expected to result, directly or indirectly, in any of
the consequences referred to in paragraph (a) above;
(c) the Merger Agreement shall have been terminated in accordance
with its terms; or
(d) Liquid and Alliance shall have agreed that Liquid shall amend
the Offer to terminate the Offer or postpone the payment for shares of
Liquid Common Stock thereunder;
which in the sole judgment of Liquid, in any such case, and regardless of the
circumstances (including any action or inaction by Liquid giving rise to such
condition) makes it inadvisable to proceed with the Offer or with such
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Liquid, may be asserted by
Liquid regardless of the circumstances (including any action or inaction by
Liquid or any of its Subsidiaries) giving rise to any such condition and,
subject to the terms and conditions of the Merger Agreement, may be waived by
Liquid, in whole or in part at any time and from time to time in the sole
discretion of Liquid. The failure by Liquid at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
