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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
PRISM SOLUTIONS, INC.,
CUSTOMER FOCUS INTERNATIONAL, INC.,
C ACQUISITION CORP.
AND
SHAREHOLDERS OF CUSTOMER FOCUS INTERNATIONAL, INC.
JANUARY 26, 1998
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TABLE OF CONTENTS
Page
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1. PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Securities Law Issues . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. REPRESENTATIONS AND WARRANTIES OF CFI AND
THE CFI SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . 4
2.2 Power, Authorization and Validity . . . . . . . . . . . . . . . . . . . 4
2.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 No Violation of Articles or Existing Agreements . . . . . . . . . . . . 5
2.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 CFI Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . 7
2.11 Agreements and Commitments . . . . . . . . . . . . . . . . . . . . . . . 8
2.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.14 Certain Transactions and Agreements . . . . . . . . . . . . . . . . . . 10
2.15 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.16 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.17 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.19 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.22 Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.24 CFI Shareholders' Representations . . . . . . . . . . . . . . . . . . . 14
3. REPRESENTATIONS AND WARRANTIES OF PRISM . . . . . . . . . . . . . . . . . . . . 17
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . 17
3.2 Power, Authorization and Validity . . . . . . . . . . . . . . . . . . . 17
3.3 No Violation of Certificate, Existing Agreements or Laws . . . . . . . . 17
3.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . 18
3.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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4. CFI PRECLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Advice of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Maintenance of Business . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6 Necessary Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.8 No Other Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.9 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.10 Satisfaction of Conditions Precedent . . . . . . . . . . . . . . . . . . 21
4.11 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.12 Notification of Employee Problems . . . . . . . . . . . . . . . . . . . 21
4.13 CFI Affiliates Agreements . . . . . . . . . . . . . . . . . . . . . . . 21
5. PRISM PRECLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 Satisfaction of Conditions Precedent.... . . . . . . . . . . . . . . . . 22
5.3 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Advice of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 Prism Affiliates Agreements . . . . . . . . . . . . . . . . . . . . . . 22
6. CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . 23
7. CONDITIONS TO OBLIGATIONS OF CFI . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . 24
7.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Government Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Opinion of Prism's Counsel . . . . . . . . . . . . . . . . . . . . . . . 24
7.8 Satisfactory Form of Legal and Accounting Measures . . . . . . . . . . . 25
7.9 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . 25
8. CONDITIONS TO OBLIGATIONS OF PRISM . . . . . . . . . . . . . . . . . . . . . . 25
8.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . 25
8.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.3 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . 25
8.4 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.5 Government Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.6 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.7 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.8 Opinion of CFI's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 26
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8.9 Requisite Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.10 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.11 Employment and Noncompetition Agreements . . . . . . . . . . . . . . . . 26
8.12 Termination of Rights . . . . . . . . . . . . . . . . . . . . . . . 26
8.13 Resignation of Directors . . . . . . . . . . . . . . . . . . . . . . . 26
8.14 Satisfactory Form of Legal and Accounting Matters . . . . . . . . . . . 26
9. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Certain Continuing Obligations . . . . . . . . . . . . . . . . . . . . . 27
10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND
REMEDIES, CONTINUING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 27
10.1 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . 27
10.2 CFI Agreement to Indemnify . . . . . . . . . . . . . . . . . . . . . . . 28
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.1 Governing Law; Dispute Resolution . . . . . . . . . . . . . . . . . . . 30
11.2 Assignment; Binding upon Successors and Assigns . . . . . . . . . . . . 31
11.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.5 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.6 Amendment and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.10 Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . 33
11.11 No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.13 Absence of Third Party Beneficiary Rights . . . . . . . . . . . . . . . 33
11.14 Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.16 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.17 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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Exhibits:
Exhibit A-1 Form of Certificate of Merger
Exhibit A-2 Form of Agreement of Merger
Exhibit B-1 Form of Xxxxx X. Xxxx Employment Agreement
Exhibit B-2 Form of Xxxx Xxx Employment Agreement
Exhibit B-3 Form of Xxxxx Xxx Employment Agreement
Exhibit B-4 Form of Xxx Xx Xxxxxxx Employment Agreement
Exhibit B-5 Form of Xxxxx X. Xxxx Noncompetition Agreement
Exhibit B-6 Form of Xxxx Xxx Noncompetition Agreement
Exhibit C Form of CFI Escrow Agreement
Exhibit 1.4A and B Form of Articles and Bylaws
Exhibit 1.7A and B Form of Officer Certificates
Exhibit 4.4 Form of CFI Intellectual Property Agreement
Exhibit 4.13 Form of CFI Affiliates Agreement
Exhibit 5.6 Form of Prism Affiliates Agreement
Exhibit 7.7 Form of Fenwick & West LLP Opinion
Exhibit 7.9 Registration Rights Agreement
Exhibit 8.8 Form of Xxxxx, Xxx & Xxxxxxx LLP Opinion
Except for Exhibit X-0, Xxxxxxx X-0 and Exhibit B-5, the exhibits on the
above list are not material and have been omitted. The registrant agrees
to furnish supplementally a copy of any omitted exhibits or schedules to
the Commission upon request.
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
entered into as of January 26, 1998, by and among Prism Solutions, Inc., a
Delaware corporation ("Prism "), C Acquisition Corp., a Delaware corporation
and the wholly-owned subsidiary of Prism ("Newco"), Customer Focus
International, Inc., a California corporation ("CFI"), and, with respect to the
provisions of Articles 2, 10 and 11 only, Xxxxx X. Xxxx, Xxxx Xxx and Xxxxxxx
Xxxxxx, the shareholders of CFI (collectively "CFI Shareholders").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Newco will merge with and into CFI in a reverse
triangular merger (the "Merger"), with CFI to be the surviving corporation of
the Merger, all pursuant to the terms and conditions of this Agreement, a
Certificate of Merger substantially in the form of Exhibit A-1 (the
"Certificate of Merger"), an Agreement of Merger substantially in the form of
Exhibit A-2 (the "Agreement of Merger") and the applicable provisions of the
laws of the states of Delaware and California. Upon the effectiveness of the
Merger, all the outstanding Common Stock of CFI will be converted into Common
Stock of Prism in the manner and on the basis determined herein and as provided
in the Certificate of Merger and the Agreement of Merger.
B. It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), by virtue of the
provisions of Section 368(a)(2)(E) of the Code.
C. At the Closing of this Agreement:
1. Xxxxx X. Xxxx, Xxxx Xxx, Xxxxx Xxx and Xxx Xx Xxxxxxx
are entering into with Prism Employment Agreements and Noncompetition
Agreements substantially in the form of Exhibit B-1 through B-6;
2. Each of the CFI Shareholders are entering into an
Escrow Agreement in substantially the form of Exhibit C hereto (the "Escrow
Agreement").
NOW, THEREFORE, the parties hereto agree as follows:
1. PLAN OF REORGANIZATION
1.1 The Merger. The Certificate of Merger and the
Agreement of Merger will be filed with the Secretaries of State of the States
of Delaware and California, respectively, as soon as practicable after the
Closing (as defined in Section 6.1 below). The effective time of the Merger as
specified in the Certificate of Merger and the Agreement of Merger (the
"Effective Time") will occur on or before January 26, 1998, or on such other
date as the parties hereto may mutually agree upon. Subject to the terms and
conditions of this Agreement, the Certificate of Merger and the Agreement of
Merger, Newco will be merged with and into CFI in a statutory
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merger pursuant to the Certificate of Merger and the Agreement of Merger and in
accordance with applicable provisions of Delaware and California laws as
follows:
1.1.1 Conversion of CFI Shares. Each share of CFI
Common Stock, no par value (the "CFI Common Stock"), that is issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and at the Effective Time, and without further action on the part of any
holder thereof, be converted into the Applicable Number (determined in
accordance with Section 1.1.2 hereof) of fully paid and nonassessable shares of
Prism Common Stock, $0.001 par value ("Prism Common Stock).
1.1.2 Definitions. Unless there is an adjustment
to the shares to be issued in the Merger pursuant to Section 1.1.3 below, the
"Applicable Number" for the conversion of the CFI Common Stock will be
determined by dividing (a) 2,877,500 by (b) the sum of the total number of
issued and outstanding shares of CFI Common Stock at the Effective Time.
1.1.3 Adjustments for Capital Changes. If prior to
the Merger, Prism recapitalizes either through a split-up of its outstanding
shares into a greater number, or through a combination of its outstanding
shares into a lesser number, or reorganizes, reclassifies or otherwise changes
its outstanding shares into the same or a different number of shares of other
classes (other than through a split-up or combination of shares provided for in
the previous clause), or declares a dividend on its outstanding shares payable
in shares or securities convertible into shares, the calculation of the
Applicable Number governing the conversion of CFI Common Stock will be adjusted
appropriately.
1.1.4 Conversion of Newco Shares. Each share of
Newco Common Stock, $0.01 par value ("Newco Common Stock"), that is issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without further action on the part of the sole stockholder of Newco,
be converted into and become one (1) share of CFI Common Stock that is issued
and outstanding immediately after the Effective Time, and the shares of CFI
Common Stock into which the shares of Newco Common Stock are so converted shall
be the only shares of CFI Stock that are issued and outstanding immediately
after the Effective Time.
1.2 Fractional Shares. No fractional shares of Prism
Common Stock will be issued in connection with the Merger, but in lieu thereof,
the holder of any shares of CFI Common Stock who would otherwise be entitled to
receive a fraction of a share of Prism Common Stock will receive from Prism,
promptly after the Effective Time, an amount of cash equal to $4.375 per,
multiplied by the fraction of a share of Prism Common Stock to which such
holder would otherwise be entitled.
1.3 Escrow Agreement. Pursuant to the Escrow Agreement,
on the Closing Date, Prism will (i) withhold, pro rata, from the shares of
Prism Common Stock that would otherwise be delivered to the CFI Shareholders,
10% of the total number of shares of Prism Common Stock issued to them in the
Merger and (ii) deposit or cause to be deposited in escrow certificates
representing the shares thus withheld. The shares of Prism Common Stock
withheld pursuant to this Section 1.3 at the Closing (the "Escrow Shares") will
be held as collateral for the indemnification obligations of the CFI
Shareholders under Section 10.2 below and pursuant to the Escrow Agreement,
pending their release from escrow pursuant to the Escrow Agreement.
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1.4 Effects of the Merger. At the Effective Time: (a)
the separate existence of Newco will cease and Newco will be merged with and
into CFI and CFI will be the surviving corporation pursuant to the terms of the
Certificate of Merger and the Agreement of Merger; (b) the Articles of
Incorporation and Bylaws of CFI will be amended to read as set forth in Exhibit
1.4A and B as the Articles of Incorporation and Bylaws of the surviving
corporation; (c) each share of CFI Common Stock outstanding immediately prior
to the Effective Time will be converted as provided in this Section 1; (d) each
share of Newco Common Stock outstanding immediately prior to the Effective Time
will be converted into one (1) outstanding share of CFI Common Stock and each
share of CFI Common Stock will be converted as provided in Sections 1.1 and
1.2; (e) Xxxxx X. Xxxx will be appointed Vice President - Managing Director,
Financial Applications Business Unit of Prism and will be appointed to the
Board of Directors of Prism, with the Board of Directors and executive officers
of Prism otherwise remaining unchanged and the sole director of Newco
immediately prior to the Effective Time will become the sole director of the
surviving corporation and the officers of Newco will become the officers of the
surviving corporation, except that Xxxxx X. Xxxx will be appointed President of
the surviving corporation; and (f) the Merger will, at and after the Effective
Time, have all of the effects provided by applicable law.
1.5 Further Assurances. CFI agrees that if, at any time
after the Effective Time, Prism considers or is advised that any further deeds,
assignments or assurances are reasonably necessary or desirable to vest,
perfect or confirm in Prism title to any property or rights of CFI as provided
herein, Prism and any of its officers are hereby authorized by CFI to execute
and deliver all such proper deeds, assignments and assurances and do all other
things necessary or desirable to vest, perfect or confirm title to such
property or rights in Prism and otherwise to carry out the purposes of this
Agreement, in the name of CFI or otherwise.
1.6 Securities Law Issues. Based in part on the
representations of the CFI Shareholders made in Section 2.24 below, the Prism
Common Stock to be issued in the Merger will be issued pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and/or Regulation D promulgated under the Securities Act
and applicable state securities laws.
1.7 Tax-Free Reorganization. It is intended by the
parties hereto that the Merger shall constitute a reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"), by virtue of the provisions of Section 368(a)(2)(E) of
the Code. At the Closing (as defined in Section 6.1 hereof), officers of Prism
and officers of CFI will execute and deliver officers' certificates in the
forms of Exhibits 1.7A-B, and the representations and other statements set
forth therein are incorporated in this Agreement by this reference to the same
extent as if Prism or CFI, respectively, had made such statements herein.
1.8 Pooling of Interests. The parties intend that the
Merger be treated as a "pooling of interests" for accounting purposes.
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2. REPRESENTATIONS AND WARRANTIES OF CFI AND THE CFI SHAREHOLDERS
CFI and the CFI Shareholders, severally, hereby represent and
warrant that, except as set forth in the CFI disclosure letter (the "CFI
Disclosure Letter") delivered by CFI to Prism herewith, including items in the
CFI Disclosure Letter referred to as "Items" below:
2.1 Organization and Good Standing. CFI is a corporation
duly organized, validly existing and in good standing under the laws of the
state of California, has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted and is
qualified as a foreign corporation in each jurisdiction listed on Item 2.1.
Except as listed on Item 2.1, CFI does not own or lease any real property, has
no employees and does not maintain a place of business in any foreign country
or in any state of the United States other than California.
2.2 Power, Authorization and Validity.
2.2.1 CFI has the corporate right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement and all agreements to which CFI is or will be a party that are
required to be executed pursuant to this Agreement (the "CFI Ancillary
Agreements"). This Agreement and the CFI Ancillary Agreements have been duly
and validly approved by the CFI Board of Directors and shareholders, as
required by applicable law.
2.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable CFI to enter into, and to
perform its obligations under, this Agreement and the CFI Ancillary Agreements,
except for (a) the filing of the Certificate of Merger and the Agreement of
Merger with the Secretaries of State of the States of Delaware and California,
respectively, the filing of such officers' certificates and other documents as
are required to effectuate the Merger under Delaware and California law and the
filing of appropriate documents with the relevant authorities of the states
other than California in which CFI is qualified to do business, if any, (b)
such filings as may be required to comply with federal and state securities
laws, (c) consents required under contracts disclosed in Item 2.5 as exceptions
to the representation made in the last sentence of Section 2.5 below and (d)
the approval of the CFI Shareholders.
2.2.3 This Agreement and the CFI Ancillary
Agreements are, or when executed and delivered by CFI and the other parties
thereto will be, valid and binding obligations of CFI enforceable against CFI
and the CFI Shareholders (as applicable) in accordance with their respective
terms, except as to the effect, if any, of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (b) rules of law
governing specific performance, injunctive relief and other equitable remedies;
provided, however, that the CFI Ancillary Agreements will not be effective
until the earlier of the Effective Time or the date provided for therein.
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2.3 Capitalization.
(a) Authorized/Outstanding Capital Stock. The
authorized capital stock of CFI consists of 15,000,000 shares of CFI Common
Stock, no par value. 10,250,000 shares of CFI Common Stock are issued and
outstanding as of this date and as of the Closing Date, of which Xxxxx X. Xxxx,
Xxxx Xxx and Xxxxxxx Xxxxxx hold of record and beneficially 8,800,000,
1,200,000 and 250,000 shares, respectively. Each of the CFI Shareholders holds
good and marketable title to such CFI shares, free and clear of all liens,
agreements, voting trusts, proxies and other arrangements or restrictions of
any kind whatsoever. No shares of Preferred Stock are authorized, issued or
outstanding. All issued and outstanding shares of CFI Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable, are not
subject to any right of rescission and have been offered, issued, sold and
delivered by CFI in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of applicable federal and
state securities laws.
(b) Options/Rights. There are no stock
appreciation rights, options, warrants, calls, rights, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
or otherwise acquire any of CFI's authorized but unissued capital stock or any
securities or debt convertible into or exchangeable for shares of CFI Common
Stock or obligating CFI to grant, extend or enter into such option, warrant,
call, commitment, conversion privileges or preemptive or other right or
agreement. There is no liability for dividends accrued but unpaid. There are
no voting agreements, registration rights, rights of first refusal or other
restrictions (other than normal restrictions on transfer under applicable
federal and state securities laws) applicable to any of CFI's outstanding
securities.
2.4 Subsidiaries. CFI does not have any subsidiaries or
any equity interest, direct or indirect, in any corporation, partnership, joint
venture or other business entity.
2.5 No Violation of Articles or Existing Agreements.
Neither the execution and delivery of this Agreement or any CFI Ancillary
Agreement, nor the consummation of the transactions provided for herein or
therein, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of, (a) any
provision of the Articles of Incorporation or Bylaws of CFI, as currently in
effect, (b) any material instrument or contract to which CFI is a party or by
which CFI or its assets is bound or (c) any federal, state, local or foreign
judgment, writ, decree, order, statute, rule or regulation applicable to CFI or
its assets or properties. Except as disclosed in Item 2.5, the consummation of
the Merger and succession by Prism to all rights, licenses, franchises, leases
and agreements of CFI will not require the consent of any third party and will
not have any material adverse effect upon any such rights, licenses,
franchises, leases or agreements pursuant to the terms of those agreements.
2.6 Litigation. There is no action, proceeding or
investigation pending or, to CFI's actual knowledge, threatened against CFI
before any court or administrative agency that, if determined adversely to CFI,
may reasonably be expected to have a material adverse effect on the present or
future operations or financial condition of CFI or in which the adverse party
or parties seek to recover in excess of $10,000 against CFI. There is no basis
for any person, firm, corporation or entity to assert a claim against CFI or
Prism as successor in interest to CFI based upon: (a) ownership or rights to
ownership of any shares of CFI Common Stock, (b) any rights
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as a CFI securities holder, including, without limitation, any option or other
right to acquire any CFI securities, any preemptive rights or any rights to
notice or to vote, or (c) any rights under any agreement between CFI and any
CFI securities holder or former CFI securities holder in such holder's capacity
as such.
2.7 CFI Financial Statements. CFI has delivered to Prism
as Item 2.7 CFI's unaudited balance sheet as of December 31, 1997 (the "Balance
Sheet Date") and CFI's unaudited income statement and cash flows for the year
then ended and CFI's unaudited balance sheet as of December 31, 1996 and CFI's
unaudited income statement and cash flows for the year then ended
(collectively, the "CFI Financial Statements"). The CFI Financial Statements
(a) are in accordance with the books and records of CFI and (b) fairly and
accurately represent the financial condition of CFI at the respective dates
specified therein and the results of operations for the respective periods
specified therein in conformity with generally accepted accounting principles
applied on a consistent basis (subject to normal year end adjustments). Since
the Balance Sheet Date, CFI has not incurred any debt, liability or obligation
of any nature, whether accrued, absolute, contingent or otherwise, and whether
due or to become due, except for those incurred in the ordinary course of CFI's
business, consistent with past practice that are not material in amount either
individually or collectively.
2.8 Taxes. To CFI's knowledge, CFI has filed all
federal, state, local and foreign tax and material information returns required
to be filed prior to the date hereof, has paid all taxes required to be paid in
respect of all periods prior to the date hereof for which returns have been
filed, has made all necessary estimated tax payments, and has no liability for
taxes in excess of the amount so paid, except to the extent adequate reserves
have been established in the CFI Financial Statements. True, correct and
complete copies of all such tax and information returns have been provided or
made available by CFI to Prism. To CFI's knowledge, CFI is not delinquent in
the payment of any tax or in the filing of any tax returns, and no deficiencies
for any tax have been threatened, claimed, proposed or assessed which have not
been settled or paid. No tax return of CFI has ever been audited by the
Internal Revenue Service or any state taxing agency or authority. For the
purposes of this Section 2.8, the terms "tax" and "taxes" include all federal,
state, local and foreign income, gains, franchise, excise, property, sales,
use, employment, license, payroll, occupation, recording, value added or
transfer taxes, governmental charges, fees, levies or assessments (whether
payable directly or by withholding), and, with respect to such taxes, any
estimated tax, interest and penalties or additions to tax and interest on such
penalties and additions to tax. Since its inception, CFI has made an election
under the Code and state income tax laws to be treated as an S Corporation.
Such election will remain valid through the Closing Date. All taxes arising by
reason of such election (including, but not limited to, the corporate level
built in gain and capital gain taxes described in Section 1374 of the Code or a
predecessor section of the Code) have been or will be paid by the CFI
Shareholders no matter when assessed. CFI has no current or deferred federal
income tax liabilities and will not as a result of the merger become liable for
any income tax not adequately reserved against on the Financial Statements.
CFI has not filed a consent pursuant to Section 341(f) of the Code. If CFI
were to become subject to an audit by the Internal Revenue Service or any state
taxing agency or authority for tax years or periods prior to the Effective Time
(including, but not limited to, any short tax year resulting from the Merger),
the CFI Shareholders will use all reasonable efforts to resolve all such audits
in a manner consistent with the intentions of CFI and Prism as expressed in
this Agreement.
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2.9 Title to Properties. CFI has good title to all of
its assets as shown on the balance sheet as of the Balance Sheet Date included
in the CFI Financial Statements, free and clear of all liens, charges,
encumbrances or restrictions (other than for taxes not yet due and payable and
Permitted Liens as defined below), other than such assets, set forth on Item
2.9, as were sold by CFI in the ordinary course of business since the Balance
Sheet Date or which are subject to capitalized leases. "Permitted Liens" means
any lien, mortgage, encumbrance or restriction which is reflected in the CFI
Financial Statements and is not in excess of $10,000 and which does not
materially detract from the value or materially interfere with the use, as
currently utilized, of the properties subject thereto or affected thereby or
otherwise materially impair the business operations being conducted thereon.
Except as set forth in Item 2.9, there are no UCC financing statements of
record with the state of California naming CFI as debtor and CFI owns no
property in any other state. All machinery and equipment included in such
assets are in all material respects in good condition and repair, normal wear
and tear excepted, and all leases of real or personal property to which CFI is
a party are fully effective and afford CFI peaceful and undisturbed possession
of the subject matter of the lease. CFI is not in violation of any material
zoning, building, safety or environmental ordinance, regulation or requirement
or other law or regulation applicable to the operation of owned or leased
properties, and CFI has not received any notice of such violation with which it
has not complied.
2.10 Absence of Certain Changes. Since the Balance Sheet
Date, CFI has carried on its business in the ordinary course substantially in
accordance with the procedures and practices in effect on the Balance Sheet
Date, and except as set forth in Item 2.10, since the Balance Sheet Date there
has not been with respect to CFI:
(a) any change in the financial condition,
properties, assets, liabilities, business or results of operations of CFI,
which change by itself or in conjunction with all other such changes, whether
or not arising in the ordinary course of business, has had or can reasonably be
expected to have a material adverse effect on CFI or its ability to develop or
market the data quality management line of software products (including the
Customer Relationship Management System products);
(b) any contingent liability incurred by CFI as
guarantor or surety with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on
any of the properties of CFI;
(d) any material obligation or liability incurred
by CFI other than in the ordinary course of business;
(e) any purchase or sale or other disposition, or
any agreement or other arrangement for the purchase, sale or other disposition,
of any of the properties or assets of CFI other than in the ordinary course of
business;
(f) any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the properties,
assets or business of CFI;
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(g) any declaration, setting aside or payment of
any dividend on, or the making of any other distribution in respect of, the
capital stock of CFI, any split, stock dividend, combination or
recapitalization of the capital stock of CFI or any direct or indirect
redemption, purchase or other acquisition by CFI of the capital stock of CFI;
(h) any labor dispute or claim of material unfair
labor practices, any change in the compensation payable or to become payable to
any of CFI's officers, employees or agents earning compensation at an
anticipated annual rate in excess of $10,000, or any bonus payment or
arrangement made to or with any of such officers, employees or agents;
(i) any change with respect to the management,
supervisory, development or other employees of CFI (the management,
supervisory, development and other employees of CFI are listed on Item 2.10(i)
hereof);
(j) any payment or discharge of a material lien
or liability thereof, which lien or liability was not either (i) shown on the
balance sheet as of the Balance Sheet Date included in the CFI Financial
Statements or (ii) incurred in the ordinary course of business after the
Balance Sheet Date; or
(k) any obligation or liability incurred by CFI
to any of its officers, directors or shareholders, or any loans or advances
made to any of its officers, directors, shareholders or affiliates, except
normal compensation and expense allowances payable to officers.
2.11 Agreements and Commitments. Except as set forth in
Item 2.11 delivered by CFI to Prism herewith, CFI is not a party or subject to
any oral or written executory agreement, contract, obligation or commitment
that is material to CFI, its financial condition, business or prospects or
which is described below and is not terminable within 60 days without cost or
penalty to CFI, including but not limited to the following:
(a) Any contract, commitment, letter agreement,
quotation or purchase order providing for payments by or to CFI in an aggregate
amount of (i) $25,000 or more in the ordinary course of business or (ii)
$10,000 or more not in the ordinary course of business;
(b) Any license agreement under which CFI is
licensor (except for any nonexclusive software license granted by CFI to
end-user customers where the form of the license, excluding standard immaterial
deviations, has been provided to Prism 's counsel); or under which CFI is
licensee (except for standard "shrink wrap" licenses for off-the-shelf software
products);
(c) Any agreement by CFI to encumber, transfer or
sell rights in or with respect to any CFI Intellectual Property (as defined in
Section 2.12 hereof);
(d) Any agreement for the sale or lease of real
or personal property involving more than $10,000 per year;
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(e) Any dealer, distributor, sales
representative, original equipment manufacturer, value added reseller or other
agreement for the distribution of CFI's products;
(f) Any franchise agreement or financing
statement;
(g) Any stock redemption or purchase agreement;
(h) Any joint venture contract or arrangement or
any other agreement that involves a sharing of profits with other persons or
the payment of royalties to any other person;
(i) Any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise, except for trade
indebtedness or any advance to any employee of CFI incurred or made in the
ordinary course of business, and except as disclosed in the CFI Financial
Statements; or
(j) Any contract containing covenants purporting
to limit CFI's freedom to compete in any line of business in any geographic
area.
All agreements, contracts, obligations and
commitments listed in Item 2.11, Item 2.12, Item 2.15.3 or Item 2.15.6 as
required by Section 2.11, Section 2.12, Section 2.15.3 or Section 2.15.6, as
the case may be, are valid and in full force and effect, except as to the
effect, if any, of (a) applicable bankruptcy and other similar laws affecting
the rights of creditors generally and (b) rules of law governing specific
performance, injunctive relief and other equitable remedies; and except as
expressly noted, a true and complete copy of each has been delivered to Prism
or Prism 's counsel. Neither CFI nor, to the knowledge of CFI, any other party
is in breach of or default under any material term of any such agreement,
obligation or commitment.
2.12 Intellectual Property. CFI owns all right, title and
interest in, or has the right to use, sell or license all patent applications,
patents, trademark applications, trademarks, service marks, trade names,
copyright applications, copyrights, trade secrets, know- how, technology,
franchises, licenses, inventories, customer lists, proprietary processes and
formulae, all source and object code, algorithms, architecture, structure,
display screens, layouts, inventions, development tools and all documentation
and media constituting, describing or relating to the above, including, without
limitation, manuals, memoranda and records and other intellectual property and
proprietary rights used in or reasonably necessary or required for the conduct
of its business as presently conducted and the business of the development,
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production, marketing, licensing and sale of commercial products, including,
but not limited to, the Customer Relationship Management System line of
software products, using such intellectual property and proprietary rights
("CFI Intellectual Property"). CFI has taken all reasonable measures to
protect all CFI Intellectual Property, and CFI is not aware of any infringement
of any CFI Intellectual Property by any third party. Set forth on Item 2.12
delivered to Prism herewith is a true and complete list of all copyright, mask
work and trademark registrations and applications and all patents and patent
applications for CFI Intellectual Property owned by CFI. CFI is not aware of
any material loss, cancellation, termination or expiration of any such
registration or patent. The business of CFI as conducted as of the date hereof
does not, and the business of the development, production, marketing, licensing
and sale of commercial products using such intellectual property and
proprietary rights after the Effective Time will not cause CFI to, infringe or
violate any of the patents, trademarks, service marks, trade names, mask works,
copyrights, trade secrets, proprietary rights or other intellectual property of
any other person, and CFI has not received any written or oral claim or notice
of infringement or potential infringement of the intellectual property of any
other person. CFI has the unrestricted, worldwide right to reproduce,
manufacture, sell, license and distribute all of its products (such products
being set forth in Item 2.12) and the right to use all of its registered user
lists, and, to its knowledge, is not using any confidential information or
trade secrets of any former employer of any past or present employees. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not constitute a material breach of
any instrument or agreement governing any CFI Intellectual Property (the "CFI
IP Rights Agreements"), will not cause the forfeiture or termination or give
rise to a right of forfeiture or termination of any CFI Intellectual Property
or materially impair the right of CFI to use, sell or license any CFI
Intellectual Property or portion thereof. There are no royalties, honoraria,
fees or other payments payable by CFI to any person by reason of the ownership,
use, license, sale or disposition of the CFI Intellectual Property (other than
as set forth in the CFI IP Rights Agreements listed in Exhibit 2.12). Neither
the manufacture, marketing, license, sale or intended use of any product
currently licensed or sold by CFI or currently under development by CFI
violates any license or agreement between CFI and any third party. CFI has
taken reasonable and practicable steps designed to safeguard and maintain the
secrecy and confidentiality of, and its proprietary rights in, all material CFI
Intellectual Property. All officers, employees and consultants of CFI have
executed and delivered to CFI an agreement regarding the protection of
proprietary information and the assignment to CFI of all intellectual property
rights arising from the services performed for CFI by such persons.
2.13 Compliance with Laws. To its knowledge, CFI has
complied, or prior to the Closing Date (as defined in Section 6.1 hereof) will
have complied, and is or will be at the Closing Date (as defined in Section 6.1
hereof) in full compliance, in all respects material to CFI, with all
applicable laws, ordinances, regulations and rules, and all orders, writs,
injunctions, awards, judgments and decrees of which it is aware, applicable to
CFI or to the assets, properties and business of CFI, including, without
limitation: (a) all applicable federal and state securities laws and
regulations, (b) all applicable federal, state and local laws, ordinances and
regulations, and all orders, writs, injunctions, awards, judgments and decrees,
pertaining to (i) the sale, licensing, leasing, ownership or management of
CFI's owned, leased or licensed real or personal property, products or
technical data, (ii) employment or employment practices, terms and conditions
of employment, or wages and hours and (iii) safety, health, fire prevention,
environmental protection (including toxic waste disposal and related matters
described in Section 2.21 hereof), building standards, zoning or other similar
matters, (c) the Export Administration Act and regulations promulgated
thereunder or other laws, regulations, rules, orders, writs, injunctions,
judgments or decrees applicable to the export or re-export of controlled
commodities or technical data and (d) the Immigration Reform and Control Act.
To its knowledge, CFI has received all material permits and approvals from, and
has made all filings with, third parties, including government agencies and
authorities, that are necessary to the conduct of its business as presently
conducted.
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2.14 Certain Transactions and Agreements. No person who
is an officer, director or shareholder of CFI, or a member of any officer's,
director's or shareholder's immediate family, has any direct or indirect
ownership interest in or any employment or consulting agreement with any firm
or corporation that competes with CFI or Prism (except with respect to any
interest in less than 1% of the outstanding voting shares of any corporation
whose stock is publicly traded). No person who is an officer, director or
shareholder of CFI, or any member of any officer's, director's or shareholder's
immediate family, is directly or indirectly interested in any material contract
or informal arrangement with CFI, including, but not limited to, any loan
arrangements, except for compensation for services as an officer, director or
employee of CFI as listed in Item 2.15.3. None of such officers, directors,
shareholders or family members has any interest in any property, real or
personal, tangible or intangible, including, without limitation, inventions,
patents, copyrights, trademarks, trade names or trade secrets, used in the
business of CFI, except for the normal rights of a shareholder.
2.15 Employees.
2.15.1 Except as set forth in Item 2.15.1, (i) CFI
has no employment contract or consulting agreement currently in effect that is
not terminable at will without penalty or payment of compensation by CFI (other
than agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions) and (ii) all employees and
consultants of CFI have executed CFI's standard form of assignments of
copyright and other intellectual property rights to CFI, copies of which have
been delivered to Prism and Prism's counsel.
2.15.2 CFI (a) has never been and is not now subject
to a union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of its employees, (c) is not subject to any other
contract, written or oral, with any trade or labor union, employees'
association or similar organization, and (d) has no current labor dispute. CFI
has good labor relations, and CFI has no knowledge of any facts indicating that
the consummation of the transactions provided for herein (other than the
contemplated reductions in force associated therewith) will have a material
adverse effect on its labor relations, and has no knowledge that any of its key
employees (each of whom is listed on Item 2.10(i)) intends to leave its employ.
2.15.3 Item 2.15.3 delivered by CFI to Prism
herewith contains a list of all employment and consulting agreements, pension,
retirement, disability, medical, dental or other health plans, life insurance
or other death benefit plans, profit sharing, deferred compensation agreements,
stock, option, bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee benefit plans
maintained by CFI (the "Employee Plans"), including without limitation all
"employee benefit plans" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). CFI has delivered true and
complete copies or descriptions of all the Employee Plans to Prism and Prism 's
counsel. Each of the Employee Plans, and its operation and administration, is,
in all material respects, in compliance with all applicable, federal, state,
local and other governmental laws and ordinances, orders, rules and
regulations, including the requirements of ERISA and the Code. All such
Employee Plans that are "employee pension benefit plans" (as defined in Section
3(2) of ERISA) which are intended to qualify under Section
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401(a)(8) of the Code have received favorable determination letters that such
plans satisfy the qualification requirements of the Tax Equity and Fiscal
Responsibility Act of 1982, the Deficit Reduction Act of 1984 and the
Retirement Equity Act of 1984. In addition, CFI has never been a participant
in any "prohibited transaction," within the meaning of Section 406 of ERISA
with respect to any employee pension benefit plan (as defined in Section 3(2)
of ERISA) which CFI sponsors as employer or in which CFI participates as an
employer, which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a) of ERISA), or
which could result in an excise tax under the Code. The group health plans, as
defined in Section 4980B(g) of the Code, that benefit employees of CFI are in
material compliance with the continuation coverage requirements of subsection
4980B of the Code. There are no outstanding violations of Section 4980B of the
Code with respect to any Employee Plan, covered employees or qualified
beneficiaries. No employee of CFI and no person subject to any CFI health plan
has made medical claims through such health plan during the twelve months
preceding the date hereof for more than $10,000 in the aggregate, or has any
catastrophic illness.
2.15.4 To the knowledge of CFI, no employee of CFI
is in material violation of any term of any employment contract, patent
disclosure agreement or noncompetition agreement or any other contract or
agreement, or any restrictive covenant, relating to the right of any such
employee to be employed by CFI or to use trade secrets or proprietary
information of others, and the employment of any employee of CFI does not
subject CFI to any liability to any third party.
2.15.5 Except as set forth in the CFI Disclosure
Letter, CFI is not a party to any (a) agreement with any executive officer or
other key employee of CFI (i) the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving CFI in the nature of any of the transactions contemplated by this
Agreement. the Certificate of Merger and the Agreement of Merger, (ii)
providing any term of employment or compensation guarantee or (iii) providing
severance benefits or other benefits after the termination of employment of
such employee regardless of the reason for such termination of employment, or
(b) agreement or plan, including, without limitation, any stock option plan,
stock appreciation rights plan or stock purchase plan, any of the benefits of
which will be materially increased, or the vesting of benefits of which will be
materially accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, the Certificate of Merger and the Agreement of
Merger or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement, the
Certificate of Merger and the Agreement of Merger. CFI is not obligated to
make any excess parachute payment, as defined in Section 280G(b)(1) of the
Code, nor will any excess parachute payment be deemed to have occurred as a
result of or arising out of the Merger to the extent Section 280G of the Code
is applicable to CFI.
2.15.6 A list of all employees, officers and
development consultants of CFI and their current compensation and benefits as
of the date of this Agreement is set forth on Item 2.15.6, which CFI has
delivered to Prism.
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2.15.7 All contributions due from CFI with respect
to any of the Employee Plans have been made or accrued on CFI's financial
statements, and no further contributions will be due or will have accrued
thereunder as of the Closing Date.
2.16 Corporate Documents. CFI has made available to Prism
for examination all documents and information listed in Items 2.1 through 2.22
or other exhibits called for by this Agreement which have been requested by
Prism 's legal counsel, including, without limitation, the following: (a)
copies of CFI's Articles of Incorporation and Bylaws as currently in effect;
(b) CFI's minute book containing all records of all proceedings, consents,
actions and meetings of CFI's directors, committees of the board of directors
and shareholders; (c) CFI's stock ledger, journal and other records reflecting
all stock issuances and transfers; and (d) all permits, orders and consents
issued by any regulatory agency with respect to CFI, or any securities of CFI,
and all applications for such permits, orders and consents.
2.17 No Brokers. CFI is not obligated for the payment of
fees or expenses of any investment banker, broker or finder in connection with
the origin, negotiation or execution of this Agreement, the Certificate of
Merger or the Agreement of Merger or in connection with any transaction
provided for herein or therein.
2.18 Disclosure. This Agreement, its exhibits and
schedules, and any of the certificates or documents to be delivered by CFI to
Prism under this Agreement, taken together, do not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained herein and therein, in light of the circumstances
under which such statements were made, not misleading.
2.19 Books and Records. The books, records and accounts
of CFI (a) are in all material respects true and complete, (b) have been
maintained in accordance with reasonable business practices on a basis
consistent with prior years, (c) are stated in reasonable detail and accurately
and fairly reflect the transactions and dispositions of the assets of CFI and
(d) accurately and fairly reflect the basis for the CFI Financial Statements.
CFI has devised and maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are executed
in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with generally accepted accounting principles or any
other criteria applicable to such statements, and (ii) to maintain
accountability for assets, and (c) the amount recorded for assets on the books
and records of CFI is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
2.20 Insurance. CFI maintains fire and casualty, workers
compensation and general liability insurance as listed on Item 2.20 which it
believes to be reasonably prudent for similarly sized and similarly situated
businesses.
2.21 Environmental Matters.
2.21.1 During the period that CFI has leased the
premises currently occupied by it and those premises occupied by it since the
date of its incorporation, CFI has not made and to its knowledge, there have
been no disposals, releases or threatened releases of
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Hazardous Materials (as defined below) on, from or under any such premises that
would have a material adverse effect upon the business or financial statements
of CFI. CFI has no knowledge of any presence, disposals, releases or
threatened releases of Hazardous Materials on, from or under any of such
premises, which may have occurred prior to CFI having taken possession of any
of such premises that would have a material adverse effect upon the business or
financial statements of CFI. For purposes of this Agreement, the terms
"disposal," "release," and "threatened release" have the definitions assigned
thereto by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA"). For the
purposes of this Agreement, "Hazardous Materials" mean any hazardous or toxic
substance, material or waste which is or becomes prior to the Closing Date (as
defined in Section 6.1 hereof) regulated under, or defined as a "hazardous
substance," "pollutant," "contaminant," "toxic chemical," "hazardous material,"
"toxic substance" or "hazardous chemical" under (i) CERCLA; (ii) the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.;
(iii) the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq.; (iv) the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
(v) the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et
seq.; (vi) regulations promulgated under any of the above statutes; or (vii)
any applicable state or local statute, ordinance, rule or regulation that has a
scope or purpose similar to those identified above.
2.21.2 During the time that CFI has leased the
premises, to its knowledge, none of the premises currently leased by CFI or any
premises previously occupied by CFI is in violation of any federal, state or
local law, ordinance, regulation or order relating to industrial hygiene or to
the environmental conditions in such premises.
2.21.3 During the time that CFI has leased the
premises currently occupied by it or any premises previously occupied by CFI,
neither CFI nor, to CFI's knowledge, any third party, has used, generated,
manufactured or stored in such premises or transported to or from such premises
any Hazardous Materials that would have a material adverse effect upon the
business or financial statements of CFI.
2.21.4 During the time that CFI has leased the
premises currently occupied by it or any premises previously occupied by CFI,
there has been no litigation, proceeding or administrative action brought or
threatened in writing against CFI, or any settlement reached by CFI with, any
party or parties alleging the presence, disposal, release or threatened release
of any Hazardous Materials on, from or under any of such premises.
2.21.5 During the period that CFI has leased the
premises currently occupied by it or any premises previously occupied by CFI,
to its knowledge, no Hazardous Materials have been transported from such
premises to any site or facility now listed or proposed for listing on the
National Priorities List, at 40 C.F.R. Part 300, or any list with a similar
scope or purpose published by any state authority.
2.22 Government Contracts. All representations,
certifications and disclosures made by CFI to any Government Contract Party (as
defined below) have been in all material respects current, complete and
accurate at the times they were made. There have been no acts, omissions or
noncompliance with regard to any applicable public contracting statute,
regulation or contract requirement (whether express or incorporated by
reference) relating to any of CFI's
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contracts with any Government Contract Party (as defined below) in either case
that have led to or could lead to, either before or after the Closing Date (as
defined in Section 6.1 hereof), (a) any claim or dispute involving CFI and/or
Prism as successor in interest to CFI and any Government Contract Party or (b)
any suspension, debarment or contract termination, or proceeding related
thereto. There has been no act or omission that relates to the marketing,
licensing or selling to any Government Contract Party (as defined below) of any
of CFI technical data and computer software and that has led to or could lead
to, either before or after the Closing Date (as defined in Section 6.1 hereof),
any material cloud on any of CFI's rights in and to its technical data and
computer software. All of CFI's development of technical data and computer
software was developed exclusively at private expense. For purposes of this
Section 2.22, the term "Government Contract Party" means any independent or
executive agency, division, subdivision, audit group or procuring office of the
federal government, including any prime contractor of the federal government
and any higher level subcontractor of a prime contractor of the federal
government, and including any employees or agents thereof, in each case acting
in such capacity.
2.23 CFI Shareholders' Representations.
2.23.1 Information. Each of the CFI Shareholders
acknowledges that he has received, read and understands the Prism Disclosure
Package (as defined in Section 3.6 of this Agreement).
2.23.2 Access to Other Information. Each of the CFI
Shareholders recognizes that Prism has made available to such CFI Shareholder
the opportunity to examine such additional documents from Prism and to ask
questions of, and receive full answers from, Prism concerning, among other
things, Prism, its financial condition, its management, its prior activities
and any other information which the CFI Shareholder considers relevant or
appropriate in connection with entering into this Agreement. The CFI
Shareholder further represents that the oral information provided by Prism 's
management, if any, has been consistent with the information set forth in the
Prism Disclosure Package.
2.23.3 Risks of Investment. Each of the CFI
Shareholders acknowledges that the shares of Prism Common Stock issued in
connection with the Merger (the "Restricted Securities") are unregistered and
may not be resold publicly for a period of one year under Rule 144 unless the
shares are registered with the SEC. Each of the CFI Shareholders accepts the
risks of holding such shares indefinitely and the other risks set forth in the
Prism Disclosure Package. Each of the CFI Shareholders, together with his
advisors, is capable of assessing the risks of an investment in Prism Common
Stock and is fully aware of the economic risks thereof. Each of the CFI
Shareholders acknowledges that Prism 's operating results have in the past and
may in the current period and in future periods not meet the expectations of
securities analysts and that failure to meets such expectations would be likely
to have a material adverse effect on the trading price of Prism Common Stock.
2.23.4 Investment Intent. Each of the CFI
Shareholders is receiving the Restricted Securities in the Merger for
investment for such CFI Shareholder's own account only and not with a view to,
or for resale in connection with, any "distribution" thereof within the meaning
of the Securities Act of 1933, as amended (the "Securities Act").
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2.23.5 Restricted Securities. Each of the CFI
Shareholders acknowledges and understands that the terms of the Merger have not
been reviewed by the SEC or by any state securities authorities, that the Prism
Common Stock received by the CFI Shareholder pursuant to the Merger has not
been registered under the Securities Act and constitutes "restricted
securities" under Rule 144(d) of the Securities Act, and has been issued in
reliance on the exemptions for non-public offerings provided by Rule 506 and
Section 4(2) of the Securities Act, which exemptions depend upon, among other
things, the representations made and information furnished by the CFI
Shareholder, including the bona fide nature of the CFI Shareholder's investment
intent as expressed above.
2.23.6 Rule 144. Each of the CFI Shareholders
acknowledges that, the CFI Shareholder will not be able to publicly sell the
Restricted Securities until one year after the Effective Date of the Merger.
After that date, the CFI Shareholder may sell the Restricted Securities under
Rule 144. The CFI Shareholder is familiar with the provisions of Rule 144
promulgated under the Securities Act which permit limited public resale of
"restricted securities," subject to the satisfaction of certain conditions.
Each of the CFI Shareholders understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act or some other exemption from the registration requirements of
the Securities Act will be required in order to dispose of the Restricted
Securities, and that such stockholder may be required to hold his shares for a
significant period of time prior to reselling them.
2.23.7 Legends. Each of the CFI Shareholders also
understands and agrees that there will be placed on the certificates evidencing
the ownership of the Restricted Securities, the following legends, in addition
to any legends required by applicable state laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
DISTRIBUTION THEREOF. THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR
TRANSFERRED UNLESS THERE IS AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER
THAT (1) A REGISTRATION STATEMENT UNDER THE ACT (AND CURRENT PROSPECTUS) IS IN
EFFECT AS TO THE SECURITIES, (2) AN EXEMPTION THEREFROM IS AVAILABLE, OR (3)
THE SECURITIES ARE SOLD PURSUANT TO RULE 144 OF THE ACT.
2.23.8 Stop Transfer Instructions; No Requirement to
Transfer. Each of the CFI Shareholders agrees that, in order to ensure
compliance with the restrictions referred to herein, Prism may issue
appropriate "stop transfer" instructions to its transfer agent. Prism shall
not be required (i) to transfer or have transferred on its books any Prism
Common Stock that has been sold or otherwise transferred in violation of any of
the provisions of this Agreement or (ii) to treat as owner of such Prism Common
Stock or to accord the right to vote or pay dividends to any purchaser or other
transferee to whom such Prism Common Stock shall have been so transferred in
violation of any provision of this Agreement. Prism agrees that such stop
transfer instructions and legends will be promptly removed if the provisions of
the Securities Act are complied with.
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2.23.9 No Intention to Transfer. Each of the CFI
Shareholders has no current plan or intention to engage in a sale, exchange,
transfer, distribution, redemption or reduction in any way of the CFI
Shareholder's risk of ownership by short sale or otherwise, or other
disposition, directly or indirectly, of more than fifty percent of any of the
Prism Common Stock to be received by such CFI Shareholder in the Merger.
2.23.10 Accuracy of Information. All information
that each of the CFI Shareholders provides to Prism hereunder concerning such
CFI Shareholder's financial position and knowledge of financial and business
matters is correct and complete as of the date set forth above.
2.23.11 Ability to Bear Economic Risk. Whether or
not each of the CFI Shareholder is an "accredited" investor, each of the CFI
Shareholders represents that he (i) is able to bear the economic risk of the
CFI Shareholder's investment, (ii) is able to hold the Restricted Securities
for an indefinite period of time, (iii) can afford a complete loss of the CFI
Shareholder's investment in the Restricted Securities and (iv) has adequate
means of providing for the CFI Shareholder's current needs and possible
personal contingencies and has no need for liquidity in this investment.
2.23.12 No Public Solicitation. Each of the CFI
Shareholders represents that at no time was such CFI Shareholder presented with
or solicited by any general mailing, leaflet, public promotional meeting,
newspaper or magazine article, radio or television advertisement, or any other
form of general advertising or general solicitation in connection with the
Merger.
3. REPRESENTATIONS AND WARRANTIES OF PRISM
Prism hereby represents and warrants, that, except as set
forth on the Prism disclosure letter delivered to CFI herewith:
3.1 Organization and Good Standing. Prism is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to own,
operate and lease its properties and to carry on its business as now conducted
and as proposed to be conducted.
3.2 Power, Authorization and Validity.
3.2.1 Prism has the corporate right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement, and all agreements to which Prism is or will be a party that are
required to be executed pursuant to this Agreement (the "Prism Ancillary
Agreements"). The execution, delivery and performance of this Agreement and
the Prism Ancillary Agreements have been duly and validly approved and
authorized by Prism 's Board of Directors.
3.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable Prism to enter into, and to
perform its obligations under, this Agreement and the Prism Ancillary
Agreements, except for (a) the filing of the Certificate of Merger and the
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Agreement of Merger with the Delaware and California Secretaries of State,
respectively, the the filing of such officers' certificates and other documents
as are required to effectuate the Merger under Delaware and California law and
the filing of appropriate documents with the relevant authorities of other
states in which Prism is qualified to do business, if any, and (b) such
post-closing filings as may be required to comply with federal and state
securities laws.
3.2.3 This Agreement and the Prism Ancillary
Agreements are, or when executed by Prism will be, valid and binding
obligations of Prism, enforceable against Prism in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, and (b)
rules of law governing specific performance, injunctive relief and other
equitable remedies; provided, however, that the Certificate of Merger, the
Agreement of Merger and the Prism Ancillary Agreements will not be effective
until the earlier of the Effective Time or the date provided for therein.
3.3 No Violation of Certificate, Existing Agreements or
Laws. Neither the execution nor delivery of this Agreement or any Prism
Ancillary Agreement, nor the consummation of the transactions contemplated
hereby or thereby, will conflict with, or (with or without notice or lapse of
time, or both) result in a termination, breach, impairment or violation of (a)
any provision of the Certificate of Incorporation or Bylaws of Prism, as
currently in effect, or (b) in any material respect, any contract that is
material to Prism 's business or (c) any federal, state, local or foreign
judgment, writ, decree, order, statute or regulation applicable to and that
would have a material adverse effect on Prism or its assets or properties.
3.4 Litigation. Except as set forth in the Prism
Disclosure Package, there is no action, proceeding or investigation pending or,
to Prism's actual knowledge, threatened against Prism before any court or
administrative agency that, if determined adversely to Prism, may reasonably be
expected to have a material adverse effect on the present or future operations
or financial condition of Prism.
3.5 Absence of Certain Changes. Since September 30,
1997, except as set forth in Item 3.5 of the Prism Disclosure Letter, there has
not been any change in the financial condition, properties, assets,
liabilities, business or results of operations of Prism, which change by itself
or in conjunction with all other such changes, whether or not arising in the
ordinary course of business, has had or can reasonably be expected to have a
material adverse effect on Prism or its ability to develop or market the data
warehouse line of software products.
3.6 Disclosure. Prism has furnished CFI with its annual
report on Form 10-K for its fiscal year ended December 31, 1996, its proxy
statement for its annual stockholders meeting held on May 27, 1997, its
quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 and all other reports or documents
required to be filed by Prism pursuant to Section 13(a) or 15(d) of the 1934
Act since the filing of the most recent quarterly report on Form 10-Q (the
"Prism Disclosure Package"). The Prism Disclosure Package, this Agreement, the
exhibits and schedules hereto, and any certificates or documents to be
delivered to CFI pursuant to this Agreement, when taken together, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in
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order to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading.
4. CFI PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, CFI covenants to and agrees with Prism as follows:
4.1 Advice of Changes. CFI will promptly advise Prism in
writing, to the extent of the knowledge of CFI's President, Chief Executive
Officer or Chief Financial Officer, (a) of any event occurring subsequent to
the date of this Agreement that would render any representation or warranty of
CFI contained in this Agreement, if made on or as of the date of such event or
the Closing Date (as defined in Section 6.1 hereof), untrue or inaccurate in
any material respect and (b) of any material adverse change in CFI's financial
condition, properties, assets, liabilities, business, results of operations or
prospects.
4.2 Maintenance of Business. The parties hereto
understand and acknowledge that it is their intent to work closely together
during the period from the date hereof until the Closing Date (as defined in
Section 6.1 hereof). If CFI becomes aware of a material deterioration in the
relationship with any material customer, supplier or key employee, it will
promptly bring such information to the attention of Prism in writing and, if
requested by Prism, will exert all reasonable efforts to restore the
relationship.
4.3 Conduct of Business. CFI will not, without the prior
written consent of the President of Prism, not to be unreasonably withheld:
(a) borrow any money;
(b) enter into any transaction not in the
ordinary course of business or enter into any transaction or make any
commitment involving an expense of CFI or capital expenditure by CFI in excess
of $10,000;
(c) encumber or permit to be encumbered any of
its assets except in the ordinary course of its business consistent with past
practice and to an extent which is not material;
(d) dispose of any of its material assets except
in the ordinary course of business consistent with past practice;
(e) enter into any material lease or contract for
the purchase or sale of any property, real or personal, tangible or intangible,
except in the ordinary course of business consistent with past practice or
enter into any agreement of the types described in Section 2.11;
(f) fail to maintain its equipment and other
assets in good working condition and repair according to the standards it has
maintained to the date of this Agreement, subject only to ordinary wear and
tear;
(g) pay any bonus, royalty, increased salary or
special remuneration to any officer, employee or consultant (except pursuant to
existing arrangements heretofore disclosed in writing to Prism ) or enter into
any new employment or consulting agreement with any such person, or enter into
any new agreement or plan of the type described in Section 2.15.3;
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(h) change accounting methods;
(i) declare, set aside or pay any cash or stock
dividend or other distribution in respect of capital stock, or redeem or
otherwise acquire any of its capital stock, except as set forth on Item 4.3(i);
(j) amend or terminate any contract, agreement or
license to which it is a party except those amended or terminated in the
ordinary course of business, consistent with past practice, and which are not
material in amount or effect;
(k) lend any amount to any person or entity,
other than advances for travel and expenses which are incurred in the ordinary
course of business consistent with past practice, not material in amount, which
travel and expenses shall be documented by receipts for the claimed amounts;
(l) guarantee or act as a surety for any
obligation except for the endorsement of checks and other negotiable
instruments in the ordinary course of business, consistent with past practice
which are not material in amount;
(m) waive or release any material right or claim
except in the ordinary course of business, consistent with past practice;
(n) issue or sell any shares of its capital stock
of any class or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities, stock appreciation
rights or other commitments to issue shares of capital stock, or accelerate the
vesting of any outstanding option or other security;
(o) split or combine the outstanding shares of
its capital stock of any class or enter into any recapitalization affecting the
number of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(p) except for the Merger, merge, consolidate or
reorganize with, or acquire any entity;
(q) amend its Articles of Incorporation or
Bylaws;
(r) agree to any audit assessment by any tax
authority or file any federal or state income or franchise tax return unless
copies of such returns have been delivered to Prism for its review prior to
filing;
(s) license any of CFI's technology or any of the
CFI Intellectual Property, except in the ordinary course of business consistent
with past practice;
(t) change any insurance coverage or issue any
certificates of insurance;
(u) terminate the employment of any employee
listed in Item 2.10(i); or
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(v) agree to do any of the things described in
the preceding clauses 4.3(a) through 4.3(u).
4.4 Certain Agreements. CFI will cause all
present employees and consultants of CFI who have not previously executed CFI's
forms of assignments of copyright and other intellectual property rights to CFI
to execute such forms, copies of which are attached hereto as Exhibit 4.4.
4.5 Regulatory Approvals. CFI will execute and
file, or join in the execution and filing, of any application or other document
that may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign, which may be
reasonably required, or which Prism may reasonably request, in connection with
the consummation of the transactions provided for in this Agreement. CFI will
use all reasonable efforts to obtain or assist Prism in obtaining all such
authorizations, approvals and consents.
4.6 Necessary Consents. CFI will use its best
efforts to obtain such written consents and take such other actions as may be
necessary or appropriate for CFI, in addition to those set forth in Section
4.5, to facilitate and allow the consummation of the transactions provided for
herein and to facilitate and allow Prism to carry on CFI's business after the
Closing Date (as defined in Section 6.1 hereof).
4.7 Litigation. CFI will notify Prism in writing
promptly after learning of any action, suit, proceeding or investigation by or
before any court, board or governmental agency, initiated by or against CFI or
threatened against it.
4.8 No Other Negotiations. From the date hereof
until the termination of this Agreement (provided such termination is not in
breach of this Agreement) or the consummation of the Merger, CFI will not, and
will not authorize any officer, director, employee or affiliate of CFI, or any
other person, on its behalf, directly or indirectly, to (a) solicit,
facilitate, discuss or encourage any offer, inquiry or proposal received from
any party other than Prism, concerning the possible disposition of all or any
substantial portion of CFI's business, assets or capital stock by merger, sale
or any other means or to otherwise solicit, facilitate, discuss or encourage
any such disposition (other than the Merger), or (b) provide any confidential
information to or negotiate with any third party other than Prism in connection
with any offer, inquiry or proposal concerning any such disposition. CFI will
immediately notify Prism of any such offer, inquiry or proposal.
4.9 Access to Information. Until the Closing
Date (as defined in Section 6.1 hereof) and subject to the terms and conditions
hereof relating to the confidentiality and use of confidential and proprietary
information, CFI will provide Prism and its agents with reasonable access to
the files, books, records and offices of CFI, including, without limitation,
any and all information relating to CFI taxes, commitments, contracts, leases,
licenses, real, personal and intangible property, and financial condition, and
specifically including, without limitation, access to CFI source code
reasonably necessary for Prism to complete its diligence review of the CFI
products and technology. CFI will cause its accountants to cooperate with
Prism and its agents in making available all financial information reasonably
requested, including without limitation
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the right to examine all working papers pertaining to all financial statements
prepared or audited by such accountants.
4.10 Satisfaction of Conditions Precedent. CFI
will use all reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 8, and CFI will use all
reasonable efforts to cause the transactions provided for in this Agreement to
be consummated, and, without limiting the generality of the foregoing, to
obtain all consents and authorizations of third parties and to make all filings
with, and give all notices to, third parties that may be necessary or
reasonably required on its part in order to effect the transactions provided
for herein.
4.11 Blue Sky Laws. CFI shall use its best
efforts to assist Prism to the extent necessary to comply with the securities
and Blue Sky laws of all jurisdictions applicable in connection with the
Merger.
4.12 Notification of Employee Problems. CFI will
promptly notify Prism if any of CFI's officers becomes aware that any of the
employees listed in Item 2.10(i) intends to leave its employ.
4.13 CFI Affiliates Agreements. To ensure that the
Merger will be accounted for as a "pooling of interests," CFI will cause its
affiliates to sign and deliver to Prism a written agreement (the "CFI
Affiliates Agreement"), substantially in the form of Exhibit 4.13 providing
that such person will make no disposition (a) of CFI Common Stock in the 30 day
period prior to the Effective Time or (b) of Prism Common Stock after the
Effective Time until Prism shall have publicly released a report including the
combined financial results of Prism, Sub and CFI for a period of at least 30
days of combined operations.
5. PRISM PRECLOSING COVENANTS
During the period from the date of this Agreement
until the Effective Time, Prism covenants to and agrees with CFI as follows:
5.1 Regulatory Approvals. Prism will execute and
file, or join in the execution and filing, of any application or other document
that may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign, which may be
reasonably required, or which CFI may reasonably request, in connection with
the consummation of the transactions provided for in this Agreement. Prism
will use all reasonable efforts to obtain all such authorizations, approvals
and consents.
5.2 Satisfaction of Conditions Precedent. Prism
will use all reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 7, and Prism will use all
reasonable efforts to cause the transactions provided for in this Agreement to
be consummated, and, without limiting the generality of the foregoing, to
obtain all consents and authorizations of third parties and to make all filings
with, and give all notices to, third parties that may be necessary or
reasonably required on its part in order to effect the transactions provided
for herein.
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5.3 Blue Sky Laws. Prism shall use its best
efforts to assist CFI to the extent necessary to comply with the securities and
Blue Sky laws of all jurisdictions applicable in connection with the Merger.
5.4 Advice of Changes. Prism will promptly
advise CFI in writing, to the extent of the knowledge of Prism's President,
Chief Executive Officer or Chief Financial Officer, (a) of any event occurring
subsequent to the date of this Agreement that would render any representation
or warranty of Prism contained in this Agreement, if made on or as of the date
of such event or the Closing Date (as defined in Section 6.1 hereof), untrue or
inaccurate in any material respect and (b) of any material adverse change in
Prism's financial condition, properties, assets, liabilities, business, results
of operations or prospects.
5.5 Litigation. Prism will notify CFI in writing
promptly after learning of any action, suit, proceeding or investigation by or
before any court, board or governmental agency, initiated by or against Prism
or threatened against it.
5.6 Prism Affiliates Agreements. To ensure that
the Merger will be accounted for as a "pooling of interests," Prism will cause
its affiliates to sign and deliver to Prism a written agreement (the "Prism
Affiliates Agreement"), substantially in the form of Exhibit 5.5 providing that
such person will make no disposition of Prism Common Stock (a) in the 30 day
period prior to the Effective Time or (b) after the Effective Time until Prism
shall have publicly released a report including the combined financial results
of Prism, Sub and CFI for a period of at least 30 days of combined operations.
6. CLOSING MATTERS
6.1 The Closing. Subject to termination of this
Agreement as provided in Section 9 below, the closing of the transactions
provided for herein (the "Closing") will take place at the offices of Fenwick &
West LLP, Two Xxxx Xxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 at 10:00 a.m.,
Pacific Time on or before January 26, 1998, or, if all conditions to Closing
have not been satisfied or waived by such date, such other place, time and date
as CFI and Prism may mutually select (the "Closing Date"). Prior to or
concurrently with the Closing, the Certificate of Merger, the Agreement of
Merger and such officers' certificates or other documents as may be required to
effectuate the Merger will be filed in the offices of the California and
Delaware Secretaries of State, as appropriate. Accordingly, the Merger will
become effective at the Effective Time.
6.2 Exchange of Certificates.
6.2.1 As of the Effective Time, all shares
of CFI Common Stock that are outstanding immediately prior thereto will, by
virtue of the Merger and without further action, cease to exist, and all such
shares will be converted into the right to receive from Prism the number of
shares of Prism Common Stock and cash determined as set forth in Section 1.1,
subject to Section 1.2 hereof.
6.2.2 At and after the Effective Time,
each certificate representing outstanding shares of CFI Common Stock will
represent the number of shares of Prism Common Stock into which such shares of
CFI Common Stock have been converted, and such shares of Prism Common Stock
will be deemed registered in the name of the holder of such certificate. As
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soon as practicable after the Effective Time, each holder of shares of CFI
Common Stock will surrender (a) the certificates for such shares (the "CFI
Certificates") to Prism for cancellation or (b) an affidavit of lost
certificate (or nonissued) and a bond in form reasonably satisfactory to Prism
(a "Bond"). Promptly following the Effective Time and receipt of the CFI
Certificates and/or the Bonds, Prism will cause its transfer agent to issue to
such surrendering holder certificate(s) for the number of shares of Prism
Common Stock to which such holder is entitled pursuant to Section 1.1, subject
to Section 1.2 hereof, less the Escrow Shares deposited into escrow pursuant to
Section 1.3 hereof, and Prism will distribute any cash payable under Section
1.2.
6.2.3 All shares of Prism Common Stock
(and, if applicable, cash in lieu of fractional shares) delivered upon the
surrender of CFI Certificates in accordance with the terms hereof will be
delivered to the registered holder or placed in escrow with the Escrow Agent,
as applicable. After the Effective Time, there will be no further registration
of transfers of the shares of CFI Common Stock on the stock transfer books of
CFI. If, after the Effective Time, CFI Certificates are presented for transfer
or for any other reason, they will be canceled and exchanged and certificates
therefor will be delivered or placed in escrow as provided in this Section 6.2.
Notwithstanding anything herein to the contrary, except to the extent waived by
Prism, any CFI Certificate that is not properly submitted to Prism for exchange
and cancellation within three years after the Effective Time shall no longer
evidence ownership of or any right to receive shares of Prism Common Stock and
all rights of the holder of such CFI Certificate, with respect to the shares
previously evidenced by such CFI Certificate, shall cease.
6.2.4 Until CFI Certificates representing
CFI Common Stock outstanding prior to the Merger are surrendered pursuant to
Section 6.2.2 above, such certificates will be deemed, for all purposes, to
evidence ownership of (a) the number of shares of Prism Common Stock into which
the shares of CFI Common Stock will have been converted, subject to the
obligation to place a portion thereof in escrow as required hereby, and (b) if
applicable, cash in lieu of fractional shares.
7. CONDITIONS TO OBLIGATIONS OF CFI
CFI's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions
(any one or more of which may be waived by CFI, but only in a writing signed on
behalf of CFI by its President or Chief Financial Officer):
7.1 Accuracy of Representations and Warranties.
The representations and warranties of Prism set forth in Section 3 shall be
true and accurate in every material respect on and as of the Closing Date with
the same force and effect as if they had been made at the Closing, and CFI
shall have received a certificate to such effect executed on behalf of Prism by
its Chief Financial Officer.
7.2 Covenants. Prism shall have performed and
complied in all material respects with all of its covenants contained in
Section 5 on or before the Closing Date, and CFI shall have received a
certificate to such effect executed on behalf of Prism by its Chief Financial
Officer.
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7.3 Compliance with Law. There shall be no
order, decree, or ruling by any court or governmental agency or threat thereof,
or any other fact or circumstance, which would prohibit or render illegal the
transactions contemplated by this Agreement.
7.4 Government Consents. There shall have been
obtained at or prior to the Closing Date such permits or authorizations, and
there shall have been taken such other actions, as may be required to
consummate the Merger by any regulatory authority having jurisdiction over the
parties and the actions herein proposed to be taken, including but not limited
to satisfaction of all requirements under applicable federal and state
securities laws.
7.5 Documents. CFI shall have received all
written consents, assignments, waivers, authorizations or other certificates
reasonably deemed necessary by CFI's legal counsel to consummate the
transactions provided for herein.
7.6 No Litigation. No litigation or proceeding
shall be pending which will have the probable effect of enjoining or preventing
the consummation of any of the transactions provided for in this Agreement. No
litigation or proceeding shall be pending which could reasonably be expected to
have a material adverse effect on the financial condition or results of
operations of Prism that has not been previously disclosed to CFI herein.
7.7 Opinion of Prism 's Counsel. CFI shall have
received from Fenwick & West LLP, counsel to Prism, an opinion substantially in
the form of Exhibit 7.7.
7.8 Satisfactory Form of Legal and Accounting
Matters. The form, scope and substance of all legal and accounting matters
contemplated hereby and all closing documents and other papers delivered
hereunder shall be acceptable to CFI's counsel.
7.9 Registration Rights Agreement. The CFI
Shareholders shall have received the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit 7.9, executed by the
Prism, which agreement provides for the Registration of the Prism Common Stock
on the terms and conditions of the Registration Rights Agreement.
8. CONDITIONS TO OBLIGATIONS OF PRISM
The obligations of Prism hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Prism, but only in a
writing signed on behalf of Prism by its President or Chief Financial Officer):
8.1 Accuracy of Representations and Warranties.
The representations and warranties of CFI set forth in Section 2 shall be true
and complete in all material respects as of the Closing with the same force and
effect as if they had been made at the Closing, and Prism shall have received a
certificate to such effect executed on behalf of CFI by its President.
8.2 Covenants. CFI shall have performed and
complied in all material respects with all of its covenants contained in
Section 4 on or before the Closing and Prism shall have received a certificate
to such effect signed on behalf of CFI by its President.
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8.3 Absence of Material Adverse Change. There
shall not have been, in the reasonable judgment of the Board of Directors of
Prism, any material adverse change in the business or financial condition of
CFI.
8.4 Compliance with Law. There shall be no
order, decree, or ruling by any court or governmental agency or threat thereof,
or any other fact or circumstance, which would prohibit or render illegal the
transactions provided for in this Agreement.
8.5 Government Consents. There shall have been
obtained at or prior to the Closing Date such permits or authorizations, and
there shall have been taken such other action, as may be required to consummate
the Merger by any regulatory authority having jurisdiction over the parties and
the actions herein proposed to be taken, including but not limited to
satisfaction of all requirements under applicable federal and state securities
laws.
8.6 Documents. Prism shall have received all
written consents, assignments, waivers, authorizations or other certificates
reasonably deemed necessary by Prism 's legal counsel to provide for the
continuation in full force and effect of any and all material contracts and
leases of CFI, except as disclosed in the CFI Disclosure Letter, and for Prism
to consummate the transactions contemplated hereby.
8.7 No Litigation. No litigation or proceeding
shall be pending which will have the probable effect of enjoining or preventing
the consummation of any of the transactions provided for in this Agreement. No
litigation or proceeding shall be pending which could reasonably be expected to
have a material adverse effect on the financial condition or results of
operations of CFI that has not been previously disclosed to Prism herein.
8.8 Opinion of CFI's Counsel. Prism shall have
received Xxxxx, Xxx & Xxxxxxx LLP, counsel to CFI, an opinion substantially in
the form of Exhibit 8.8, including, among other things, an opinion on the
capitalization of CFI._
8.9 Requisite Approvals. The principal terms of
this Agreement, the Certificate of Merger and the Agreement of Merger shall
have been unanimously approved and adopted by the written consent or vote of
all the CFI Shareholders.
8.10 Escrow. Prism shall have received the Escrow
Agreement, substantially in the form attached hereto as Exhibit C, executed by
the CFI Shareholders, which agreement provides for the escrow of the Escrow
Shares on the terms and conditions of the Escrow Agreement.
8.11 Employment and Noncompetition Agreements.
Xxxxx X. Xxxx, Xxxx Xxx, Xxxxx Xxx and Xxx Xx Xxxxxxx will each executed and
delivered to Prism Employment Agreements substantially in the form attached as
Exhibit B1-4, respectively, and Messrs. Xxxx and Pao have executed and
delivered to Prism Noncompetition Agreements substantially in the form attached
as Exhibit B5-6, respectively, which agreements will become effective upon the
Effective Time of the Merger.
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8.12 Termination of Rights. Any registration rights,
rights of refusal, rights to any liquidation preference, or redemption rights
of any CFI Shareholder shall have been terminated or waived as of the Closing.
8.13 Resignation of Directors. The directors of CFI in
office immediately prior to the Effective Time of the Merger shall have
resigned as directors of CFI effective as of the Effective Time of the Merger.
8.14 Satisfactory Form of Legal and Accounting Matters. The
form, scope and substance of all legal and accounting matters contemplated
hereby and all closing documents and other papers delivered hereunder shall be
acceptable to Prism's counsel.
9. TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated at any
time prior to the Closing, whether before or after approval of the Merger by
the shareholders of CFI:
(a) by the mutual written consent of Prism and
CFI;
(b) Unless otherwise specifically provided herein
or agreed in writing by Prism and CFI, upon notice by either party, this
Agreement will be terminated if all the conditions to Closing have not been
satisfied or waived on or before January 26, 1998 (the "Final Date") other than
as a result of a breach of this Agreement by the terminating party, or a breach
by any of the affiliates of the terminating party of the Affiliate Agreements.
(c) by CFI, if there has been a breach by Prism
of any representation, warranty, covenant or agreement set forth in this
Agreement on the part of Prism, or if any representation of Prism will have
become untrue, in either case which has or can reasonably be expected to have a
material adverse effect on Prism and which Prism fails to cure within a
reasonable time, not to exceed thirty (30) days, after written notice thereof
(except that no cure period will be provided for a breach by Prism which by its
nature cannot be cured);
(d) by Prism, if there has been a breach by CFI
of any representation, warranty, covenant or agreement set forth in this
Agreement on the part of CFI, or if any representation of CFI will have become
untrue, in either case which has or can reasonably be expected to have a
material adverse effect on CFI and which CFI fails to cure within a reasonable
time not to exceed thirty (30) days after written notice thereof (except that
no cure period will be provided for a breach by CFI which by its nature cannot
be cured); or
(e) by either party, if a permanent injunction or
other order by any Federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the Merger will have been issued and
will have become final and nonappealable.
Any termination of this Agreement under this Section 9.1 will
be effective by the delivery of written notice of the terminating party to the
other party hereto.
9.2 Certain Continuing Obligations. Following any
termination of this Agreement pursuant to this Section 9, the parties hereto
will continue to perform their respective
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obligations under Section 11 but will not be required to continue to perform
their other covenants under this Agreement.
10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES,
CONTINUING COVENANTS
10.1 Survival of Representations.
10.1.1 Representations of CFI and the CFI
Shareholders. All representations, warranties and covenants of CFI and the CFI
Shareholders contained in this Agreement will remain operative and in full
force and effect (but only as of the date they were made and as of the date of
Closing) after the Closing, regardless of any investigation made by or on
behalf of the parties to this Agreement; provided, however, that no claim for
violations of (i) representations and warranties and covenants contained in
Sections 2.3 and 2.12 shall be made unless Prism gives written notice to CFI on
or prior to twelve months after the Closing and (ii) representations and
warranties other than those in Sections 2.3 and 2.12 shall be made unless Prism
gives written notice to CFI on or prior to the fifth business day after the
issuance of Prism's press release regarding its audited financial results for
the fiscal year ending December 31, 1997. The applicable date after which
claims are barred under this Section 10.1.1 shall be referred to as the
"Applicable Expiration Date." Except for the obligations of CFI and the CFI
Shareholders under Section 11 below, the representations, warranties and
covenants of CFI and the CFI Shareholders contained in this Agreement will
terminate as of the termination of this Agreement in accordance with its terms.
10.1.2 Representations of Prism . Except for Prism
's obligations pursuant to Section 11 below, Prism 's representations,
warranties and covenants contained in this Agreement will terminate as of the
termination of this Agreement in accordance with its terms or upon the Closing.
10.2 CFI Agreement to Indemnify.
10.2.1 Indemnification by CFI Shareholders. Subject
to the limitations set forth in this Section 10.2, the CFI Shareholders will
indemnify and hold harmless Prism and its respective officers, directors,
agents and employees, and each person, if any, who controls or may control
Prism within the meaning of the Securities Act (hereinafter in this Section
10.2 referred to individually as an "Indemnified Person" and collectively as
"Indemnified Persons") from and against any and all claims, demands, actions,
causes of action, losses, costs, damages, liabilities and expenses including,
without limitation, reasonable legal fees (collectively, "Damages:
(a) Arising out of any misrepresentation or breach
of or default in connection with any of the representations, warranties or
covenants to be performed pre or post-closing given or made by CFI or the CFI
Shareholders in this Agreement or any document delivered by CFI or by one of
the CFI Shareholders pursuant hereto; or
(b) Resulting from any failure of any CFI
Shareholder to have good, valid and marketable title to the issued and
outstanding CFI capital stock held by such shareholders, free and clear of all
liens, claims, pledges, options, adverse claims, assessments or charges of any
nature whatsoever, or to have full right, capacity and authority to vote such
CFI capital stock in
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favor of the Merger and the other transactions contemplated by the Certificate
of Merger and the Agreement of Merger.
In seeking indemnification for Damages under this Section, the
Indemnified Persons shall make no claim for Damages unless and until such
Damages aggregate at least $50,000, in which event such Indemnified Person may
make claims for all Damages, at their option, and in their sole discretion, and
exercise their remedies first with respect to the Escrow Shares and any other
assets deposited in escrow pursuant to the Escrow Agreement. Each CFI
Shareholder shall be liable only for that portion of Damages as corresponds to
his pro-rata share of the consideration received in the Merger, with each share
of Prism Common Stock being received in the Merger being valued at $______ (the
closing price of the Prism common Stock on the Closing Date).
10.2.2 Survival of Claims. Notwithstanding anything
to the contrary, if, prior to the expiration of a particular representation or
warranty, an Indemnified Person makes a claim for indemnification under either
this Agreement or the Escrow Agreement with respect to a misrepresentation or
breach of such representation or warranty, then the Indemnified Person's rights
to indemnification under this Section 10.2 for such claim shall survive any
expiration of such representation or warranty
10.2.3 Indemnification Procedures. Xxxxx X. Xxxx
shall act as representative of the CFI Shareholders (the "Representative") for
purposes of the Escrow Agreement and the indemnification provisions of this
Section 10.2, is duly authorized to be such Representative and may bind the CFI
Shareholders. Promptly after the receipt by Prism of notice or discovery of
any claim, damage or legal action or proceeding giving rise to indemnification
rights under this Agreement, Prism will give the Representative and the Escrow
Agent written notice of such claim, damage, legal action or proceeding (a
"Claim") in accordance with Section 3 of the Escrow Agreement. Prism may
assert a claim at any time prior to the Applicable Expiration Date. Within ten
days of delivery of such written notice, the Representative may, at the expense
of the CFI Shareholders, elect to take all necessary steps properly to contest
any Claim involving third parties or to prosecute such Claim to conclusion or
settlement satisfactory to the Representative. If the Representative makes the
foregoing election, Prism will have the right to participate at its own expense
in all proceedings. If the Representative does not make such election, Prism
shall be free to handle the prosecution or defense of any such Claim, will take
all necessary steps to contest the Claim involving third parties or to
prosecute such Claim to conclusion or settlement satisfactory to Prism, and
will notify the Representative of the progress of any such Claim, will permit
the Representative, at the sole cost of the Representative, to participate in
such prosecution or defense and will provide the Representative with reasonable
access to all relevant information and documentation relating to the Claim and
Prism 's prosecution or defense thereof. In any case, the party not in control
of the Claim will cooperate with the other party in the conduct of the
prosecution or defense of such Claim. Neither party will compromise or settle
any such Claim without the written consent of either Prism (if the
Representative defends the Claim) or the Representative (if Prism defends the
Claim), such consent not to be unreasonably withheld.
(a) The Representative shall have the power to
act with respect to all transactions contemplated by this Agreement, and to act
for the CFI Shareholders in connection with any dispute, litigation or
arbitration involving this Agreement, and to do or refrain from
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doing all such further acts and things, and execute all such documents as the
Representative shall deem necessary or appropriate in connection with
transactions contemplated by this Agreement, including without limitation, the
power (i) to act for the CFI Shareholders with regard to matters pertaining to
the indemnification referred to in this Agreement, including the power to
compromise any claim on behalf of the CFI Shareholders and to transact matters
of litigation; (ii) to consummate any transactions contemplated by the Escrow
Agreement; (iii) to do or refrain from doing any further act or deed on behalf
of the CFI Shareholders which the Representative deems necessary or appropriate
in his sole discretion relating to the subject matter of this Agreement, as
fully and completely as each CFI Shareholder could do if personally present;
and (iv) to receive all notices and service of process on behalf of the CFI
Shareholders in connection with any claims or matters under this Agreement;
(b) The Representative or any successor
Representative shall have the power to substitute any other CFI Shareholder as
a successor Representative hereunder. In the event that the Representative is
unable to perform his duties hereunder and unable to substitute a successor
Representative by reason of the death or incapacity of the Representative and
no substitute Representative has previously been appointed, a substitute
Representative shall be appointed by CFI Shareholders holding a majority of the
voting power of the shares of CFI as of the date of this Agreement.
(c) The Representative shall act for the CFI
Shareholders on all matters set forth in this Agreement in a manner the
Representative believes to be in the best interests of the CFI Shareholders and
consistent with his obligations under this Agreement, but the Representative
shall not be responsible to the CFI Shareholders for any loss or damages the
CFI Shareholders may suffer by reason of the performance by the Representative
of his duties under the Agreement, other than loss or damage arising from
willful violation of the law or gross negligence in the performance of his
duties under this Agreement. The CFI Shareholders agree, jointly and
severally, to indemnify and hold harmless the Representative for any loss or
damage arising from the performance of his duties as Representative hereunder,
including, without limitation, the cost of any accounting firm or legal counsel
retained by the Representative on behalf of the CFI Shareholders, but excluding
any loss or damage arising from willful violation of the law or gross
negligence in the performance of his duties under this Agreement.
(d) All actions, decisions and instructions of
the Representative taken, made or given pursuant to the authority granted to
the Representative hereunder shall be conclusive and binding upon all of the
CFI Shareholders and no CFI Shareholder shall have the right to object,
dissent, protest or otherwise contest the same. Prism hereby acknowledges that
the Representative may with respect to any particular action, decision or
instruction, solicit the consent of the CFI Shareholders before acting.
(e) The provisions of this Section are
independent and severable, shall constitute an irrevocable power of attorney
coupled with an interest and shall be binding upon the executors, heirs, legal
representatives, successors and assigns of each CFI Shareholder.
10.2.4 Subrogation. In the event that the CFI
Shareholders shall be obligated to indemnify any Indemnified Person pursuant to
this Agreement, the CFI Shareholders shall, upon payment of such indemnity in
full, be surrogated to all rights of such Indemnified Person with respect to
the claim to which such indemnification relates.
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11. MISCELLANEOUS
11.1 Governing Law; Dispute Resolution. The internal laws
of the State of California (irrespective of its choice of law principles) will
govern the validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
Any dispute hereunder ("Dispute") shall be settled by arbitration in San
Francisco, California, and, except as herein specifically stated, in accordance
with the commercial arbitration rules of the American Arbitration Association
("AAA Rules") then in effect. However, in all events, these arbitration
provisions shall govern over any conflicting rules which may now or hereafter
be contained in the AAA Rules. Any judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction over the subject
matter thereof. The arbitrator shall have the authority to grant any equitable
and legal remedies that would be available in any judicial proceeding
instituted to resolve a Dispute.
11.1.1 Compensation of Arbitrator. Any such
arbitration will be conducted before a single arbitrator who will be
compensated for his or her services at a rate to be determined by the parties
or by the American Arbitration Association, but based upon reasonable hourly or
daily consulting rates for the arbitrator in the event the parties are not able
to agree upon his or her rate of compensation.
11.1.2 Selection of Arbitrator. The American
Arbitration Association will have the authority to select an arbitrator from a
list of arbitrators who are lawyers familiar with California contract law;
provided, however, that such lawyers cannot work for a firm then performing
services for either party, that each party will have the opportunity to make
such reasonable objection to any of the arbitrators listed as such party may
wish and that the American Arbitration Association will select the arbitrator
from the list of arbitrators as to whom neither party makes any such objection.
In the event that the foregoing procedure is not followed, each party will
choose one person from the list of arbitrators provided by the American
Arbitration Association (provided that such person does not have a conflict of
interest), and the two persons so selected will select from the list provided
by the American Arbitration Association the person who will act as the
arbitrator.
11.1.3 Payment of Costs. Prism and CFI or the CFI
Shareholders after the Closing will bear the expense of deposits and advances
required by the arbitrator in equal proportions, but either party may advance
such amounts, subject to recovery as an addition or offset to any award. The
arbitrator will award to the prevailing party, as determined by the arbitrator,
all costs, fees and expenses related to the arbitration, including reasonable
fees and expenses of attorneys, accountants and other professionals incurred by
the prevailing party.
11.1.4 Burden of Proof. For any Dispute submitted
to arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
11.1.5 Award. Upon the conclusion of any
arbitration proceedings hereunder, the arbitrator will render findings of fact
and conclusions of law and a written opinion setting forth the basis and
reasons for any decision reached and will deliver such documents to each party
to this Agreement along with a signed copy of the award. The arbitrator may
not award punitive damages.
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11.1.6 Terms of Arbitration. The arbitrator chosen
in accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
11.1.7 Exclusive Remedy. Except as specifically
otherwise provided in this Agreement, arbitration will be the sole and
exclusive remedy of the parties for any Dispute arising out of this Agreement.
11.2 Assignment; Binding Upon Successors and Assigns.
Neither party hereto may assign any of its rights or obligations hereunder
without the prior written consent of the other party hereto. This Agreement will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
11.3 Severability. If any provision of this Agreement, or
the application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and 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
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
11.4 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of all parties
reflected hereon as signatories.
11.5 Other Remedies. 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
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
11.6 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof or default in the performance hereof
will not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto at any
time before or after approval of the CFI Shareholders.
11.7 No Waiver. The failure of any party to enforce any of
the provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of the
right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such party to enforce such provision on
any other occasion.
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11.8 Expenses. Each party will bear its respective
expenses and fees of its own accountants, attorneys, investment bankers and
other professionals incurred with respect to this Agreement and the transactions
contemplated hereby. If the Merger is consummated, the CFI Shareholders will pay
at or immediately before the Closing the accounting and attorneys' fees and
expenses and other fees and expenses incurred by CFI and the CFI Shareholders in
connection with the Merger, and neither Prism nor CFI will be responsible for
such fees and expenses.
11.9 Notices. Any notice or other communication required
or permitted to be given under this Agreement will be in writing, will be
delivered personally or by mail or express delivery, postage prepaid, and will
be deemed given upon actual delivery or, if mailed by registered or certified
mail, on the third business day following deposit in the mails, addressed as
follows:
(i) If to Prism :
Prism Solutions, Inc.
0000 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Chief Financial Officer
with a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxxxxx X. Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
(ii) If to CFI:
Customer Focus International, Inc.
000 Xxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxx
with a copy to:
Xxxxx, Xxx & Xxxxxxx LLP
00000 Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
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or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 11.9.
11.10 Construction of Agreement. The language hereof will
not be construed for or against either party. A reference to an article, section
or exhibit will mean an article or section in, or an exhibit to, this Agreement,
unless otherwise explicitly set forth. The titles and headings in this Agreement
are for reference purposes only and will not in any manner limit the
construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole.
11.11 No Joint Venture. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other, and the
parties' status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
11.12 Further Assurances. Each party agrees to cooperate
fully with the other party and to execute such further instruments, documents
and agreements and to give such further written assurances as may be reasonably
requested by the other party to evidence and reflect the transactions provided
for herein and to carry into effect the intent of this Agreement.
11.13 Absence of Third Party Beneficiary Rights. No
provisions of this Agreement are intended, nor will be interpreted, to provide
or create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, partner or employee of any party hereto or any
other person or entity, unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
11.14 Public Announcement. Prism and CFI will issue a press
release approved by both parties announcing the Merger as soon as practicable
following the execution of this Agreement. Thereafter, Prism may issue such
press releases, and make such other disclosures regarding the Merger, as it
determines to be required or appropriate under applicable securities laws or
NASD for Nasdaq Stock Market rules. CFI will not make any other public
announcement or disclosure of the transactions contemplated by this Agreement.
CFI will take all reasonable precautions to prevent any trading in the
securities of Prism by officers, directors, employees and agents of CFI having
knowledge of any material information regarding Prism provided hereunder until
the information in question has been publicly disclosed.
11.15 Confidentiality. Except as expressly authorized by
Prism in writing, CFI will not directly or indirectly divulge to any person or
entity or use any Prism Confidential Information, except as required for the
performance of its duties under this Agreement. Except as expressly authorized
by CFI in writing, Prism will not directly or indirectly divulge to any person
or entity or use any CFI Confidential Information, except as required for the
performance of its duties under this Agreement. As used herein, "Prism
Confidential Information" consists of (a) any information designated by Prism as
confidential whether developed by Prism or disclosed to Prism by a third party,
(b) the source code to any Prism software and any trade secrets relating
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to any of the foregoing, and (c) any information relating to Prism 's product
plans, product designs, product costs, product prices, product names, finances,
marketing plans, business opportunities, personnel, research development or
know-how. As used herein, "CFI Confidential Information" consists of (x) any
information designated by CFI as confidential whether developed by CFI or
disclosed to CFI by a third party, (y) the source code to any CFI software, and
any trade secrets related to any of the foregoing, and (z) any information
relating to CFI product plans, product designs, product costs, product prices,
product names, finances, marketing plan, business opportunities, personnel,
research, development or know-how. "Prism Confidential Information" and "CFI
Confidential Information" also include the terms and conditions of this
Agreement, except as disclosed in accordance with Section 11.14 above. The
foregoing restriction will apply to information about a party whether or not it
was obtained from such party's employees, acquired or developed by the other
party during such other party's performance under this Agreement, or otherwise
learned. The foregoing restrictions will not apply to information that (i) has
become publicly known through no wrongful act of the receiving party, (ii) has
been rightfully received from a third party authorized by the party which is
the owner, creator or compiler to make such disclosure without restriction,
(iii) has been approved or released by written authorization of the party which
is the owner, creator or compiler, or (iv) is being or has theretofore been
disclosed pursuant to a valid court order after a reasonable attempt has been
made to notify the party which is the owner, creator or compiler.
11.16 Time is of the Essence. The parties hereto acknowledge
and agree that time is of the essence in connection with the execution, delivery
and performance of this Agreement, and that they will each utilize their best
efforts to satisfy all the conditions to Closing on or before January 26, 1998.
11.17 Entire Agreement. This Agreement, the exhibits hereto
and the accompanying letter from Prism regarding CFI employees constitute the
entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect to the subject matter hereof. The express terms
hereof control and supersede any course of performance or usage of trade
inconsistent with any of the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PRISM SOLUTIONS, INC. CUSTOMER FOCUS INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxxxx By: /s/ Xxxxx X. Xxxx
------------------------------------- -------------------------------
Xxxx Xxxxxxx, Chief Financial Officer Xxxxx X. Xxxx, President and
Chief Executive Officer
C ACQUISITION CORP. SHAREHOLDERS OF CUSTOMER
FOCUS INTERNATIONAL, INC.
(with respect to Articles 2, 10
and 11 only)
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Xxxx Xxxxxxx, Chief Financial Officer /s/ Xxxxx X. Xxxx
-----------------------------------
Xxxxx X. Xxxx
/s/ Xxxx Xxx
-----------------------------------
Xxxx Xxx
/s/ Xxxxxxx Xxxxxx
-----------------------------------
Xxxxxxx Xxxxxx
SIGNATURE PAGE TO AGREEMENT AND
PLAN OF REORGANIZATION
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