SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DELAWARE 0-26392 11-2920559
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
8000 REGENCY PARKWAY, CARY, NC 27511
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(Address of Principal Executive Offices) (Zip Code)
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ITEM 5. OTHER EVENTS.
On August 23, 2000 Level 8 Systems, Inc. completed the transactions contemplated by the Purchase Agreement between Level 8 and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") dated July 31, 2000, pursuant to which Level 8 issued to Merrill Lynch 1,000,000 shares of Level 8 common stock. As consideration for the issuance of the shares, Merrill Lynch entered into a license agreement which grants Level 8 exclusive worldwide marketing, sales and development rights to Cicero(TM), a comprehensive integrated desktop computer environment developed by Merrill Lynch and used by more than 30,000 Merrill Lynch professionals worldwide. Level 8 intends to market Cicero(TM) as part of the Geneva eBusiness integration product line.
Level 8 and Merrill Lynch entered into a Registration Rights Agreement, in the form provided in the Purchase Agreement, granting Merrill Lynch certain rights to have the shares of Level 8 common stock it was issued under the Purchase Agreement registered under the Securities Act of 1933, as amended. Level 8, Merrill Lynch and certain Level 8 shareholders, including Liraz Systems Ltd. and certain of its affiliates, and Welsh, Carson, Anderson & Stowe VI, L.P. and certain of its affiliates, also entered into a Stockholders Agreement agreeing to vote their shares in favor of a designee of Merrill Lynch to the Level 8 Board of Directors. Anthony C. Pizi was appointed to the Level 8 Board of Directors as the Merrill Lynch designee.
In addition, Level 8 entered into an amendment to the Agreement dated November 23, 1998 with Welsh, Carson, Anderson & Stowe VI, L.P. and certain of its affiliates, and other individual stockholders relating to Level 8's acquisition of a controlling interest in Seer Technologies, Inc. This amendment terminated the transfer restrictions on shares held by those stockholders.
The foregoing summary description is qualified in its entirety by reference to the definitive transaction documents, copies of which are attached as exhibits to this Current Report on Form 8-K.
ITEM 7. EXHIBITS
(c) Exhibits
4.1 Registration Rights Agreement between Level 8
Systems, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
10.1 Purchase Agreement dated July 31, 2000 between Level
8 Systems, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated. (Incorporated by reference to
Exhibit 10.1 of Level 8's Current Report on Form 8K
filed August 11, 2000.)
10.2 PCA Shell License Agreement between Level 8 Systems,
Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
10.3 Stockholders Agreement among Level 8 Systems, Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Liraz Systems Ltd. and certain of its affiliates and
Welsh, Carson, Anderson & Stowe VI, L.P. and certain
of its affiliates.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
LEVEL 8 SYSTEMS, INC.
Date: September 8, 2000 By: /s/ Renee D. Fulk
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Renee D. Fulk
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Registration Rights Agreement between Level 8
Systems, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
10.1 Purchase Agreement dated July 31, 2000 between Level
8 Systems, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated. (Incorporated by reference to
Exhibit 10.1 of Level 8's Current Report on Form 8K
filed August 11, 2000.)
10.2 PCA Shell License Agreement between Level 8 Systems,
Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
10.3 Stockholders Agreement among Level 8 Systems, Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Liraz Systems Ltd. and certain of its affiliates and
Welsh, Carson, Anderson & Stowe VI, L.P. and certain
of its affiliates.
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EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August 23, 2000, by and among Level 8 Systems, Inc., a Delaware corporation ("Company"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, Company and Purchaser have entered into that certain Purchase Agreement, dated as of July 31, 2000 (the "Purchase Agreement"), pursuant to which Company has agreed to issue and sell to Purchaser, and Purchaser has agreed to purchase from Company, shares of common stock of the Company, $0.001 par value per share ("Common Stock"); and
WHEREAS, in order to induce Purchaser to (i) enter into the Purchase Agreement and purchase such shares of Common Stock and (ii) enter into the other agreements contemplated under the Purchase Agreement in connection with the issuance of the shares of Common Stock, Company has agreed to provide registration rights with respect to the shares of Common Stock issued to Purchaser pursuant to the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the Purchase Agreement are used herein as therein defined, and the following shall have (unless otherwise provided elsewhere in this Agreement) the following respective meanings (such meanings being equally applicable to both the singular and plural form of the terms defined):
"Agreement" shall mean this Registration Rights Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York.
"Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.
"Holder" shall mean each of Purchaser, any affiliates thereof or other permitted assigns holding shares of Common Stock issued pursuant to the Purchase Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto.
"Registrable Securities" shall mean the shares of Common Stock acquired by Purchaser pursuant to the terms of the Purchase Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.
2. Required Registration. (a) After receipt of a written
request from the Holders of Registrable Securities requesting that Company
effect a registration under the Securities Act covering at least thirty (30%)
percent of the Registrable Securities outstanding as of the date hereof, and
specifying the intended method or methods of disposition thereof, Company shall
promptly notify all Holders in writing of the receipt of such request and each
such Holder, in lieu of exercising its rights under Section 3 may elect (by
written notice sent to Company within ten (10) Business Days from the date of
such Holder's receipt of the aforementioned Company's notice) to have
Registrable Securities included in such registration thereof pursuant to this
Section 2. Thereupon Company shall, as expeditiously as is possible, use its
best efforts to effect the registration under the Securities Act of all shares
of Registrable Securities which Company has been so requested to register by
such Holders for sale, all to the extent required to permit the disposition (in
accordance with the intended method or methods thereof, as aforesaid) of the
Registrable Securities so registered; provided, however, that, subject to the
provisions of Section 2(b) hereof, Company shall not be required to effect more
than three (3) registrations of any Registrable Securities pursuant to this
Section 2. The rights of the Holders under this Section 2 shall not become
effective until ninety (90) days after the date hereof. Any such registration
effectuated pursuant to the terms of this Section 2 shall hereinafter be
referred to as a "Demand Registration."
(b) In the event a Demand Registration is (i) requested by the Holders in accordance with the terms of this Section 2 and (ii) any security holders of Company exercise any incidental registration rights to participate in such Demand Registration, such that the number of Registrable Securities included in such registration statement is reduced to less than seventy-five percent (75%) of the total number of Registrable Securities contained in the written request submitted by the Holders pursuant to a Demand Registration (the "Minimum Level"), then the Holders shall receive one (1) additional Demand Registration pursuant to Section 2(a), exercisable in the same manner as the other Demand Registration rights granted to the Holders pursuant thereto; provided, however, that the Holders shall only be entitled to one (1) additional Demand Registration under this Section 2, notwithstanding that the number of Registrable Securities of such Holders included in a registration statement filed pursuant to a Demand
Registration may be reduced below the Minimum Level in a subsequent Demand Registration.
3. Incidental Registration. If Company at any time proposes to file on its behalf and/or on behalf of any of its security holders (the "demanding security holders") a registration statement under the Securities Act on any form (other than a registration statement on Form S-4 or S-8 or any successor form for securities to be offered in a transaction of the type referred to in Rule 145 under the Securities Act or to employees of Company pursuant to any employee benefit plan, respectively) for the general registration of securities (a "Registration Statement"), it will give written notice to all Holders at least twenty (20) Business Days prior to the initial filing with the Commission of such Registration Statement, which notice shall set forth the intended method of disposition of the securities proposed to be registered by Company. The notice shall offer to include in such filing the aggregate number of shares of Registrable Securities as such Holders may request.
Each Holder desiring to have Registrable Securities registered
under this Section 3 shall advise Company in writing within ten (10) Business
Days after the date of receipt of such offer from Company, setting forth the
amount of such Registrable Securities for which registration is requested.
Company shall thereupon include in such filing the number of shares of
Registrable Securities for which registration is so requested, subject to the
next sentence, and shall use its best efforts to effect registration under the
Securities Act of such shares. If the managing underwriter of a proposed public
offering shall advise Company in writing that, in its opinion, the distribution
of the Registrable Securities requested to be included in the registration
concurrently with the securities being registered by Company or such demanding
security holder would materially and adversely affect the distribution of such
securities by Company or such demanding security holder, then all selling
security holders (including the demanding security holder who initially
requested such registration, but not the Company) shall reduce the amount of
securities each intended to be distributed through such offering on a pro rata
basis (which reduced amount may be zero). Except as otherwise provided in
Section 5, all expenses of such registration shall be borne by Company.
4. Registration Procedures. If Company is required by the provisions of Section 2 or 3 to use its best efforts to effect the registration of any of its securities under the Securities Act, Company will, as expeditiously as possible:
(a) prepare and file with the Commission a Registration Statement with respect to such securities and use its best efforts to cause such Registration Statement to become and remain effective for a period of time required for the disposition of such securities by the holders thereof, but not to exceed one hundred and eighty (180) days;
(b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to
comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such Registration Statement until the earlier of such time as all of such securities have been disposed of in a public offering or the expiration of one hundred and eighty (180) days;
(c) furnish to such selling security holders such number of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents, as such selling security holders may reasonably request;
(d) use its best efforts to register or qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions within the United States and Puerto Rico as each holder of such securities shall reasonably request to the extent such registration or qualification is required in such jurisdictions (provided, however, that Company shall not be obligated to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not then qualified or to file any general consent to service or process), and do such other reasonable acts and things as may be required of it to enable such holder to consummate the disposition in such jurisdiction of the securities covered by such Registration Statement;
(e) furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to Section 2, on the date that such shares of Registrable Securities are delivered to the underwriters for sale pursuant to such registration or, if such Registrable Securities are not being sold through underwriters, on the date that the Registration Statement with respect to such shares of Registrable Securities becomes effective, (1) an opinion, dated such date, of the independent counsel representing Company for the purposes of such registration, addressed to the underwriters, if any, and if such Registrable Securities are not being sold through underwriters, then to the Holders making such request, in customary form and covering matters of the type customarily covered in such legal opinions; and (2) a comfort letter dated such date, from the independent certified public accountants of Company, addressed to the underwriters, if any, and if such Registrable Securities are not being sold through underwriters, then to the Holder making such request and, if such accountants refuse to deliver such letter to such Holder, then to Company, in a customary form and covering matters of the type customarily covered by such comfort letters and as the underwriters or such Holder shall reasonably request;
(f) enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; and
(g) notify the Holders as promptly as practicable upon the occurrence of any event as a result of which the prospectus included in a Registration Statement, as then in effect, contains an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, and as promptly as
possible, prepare, file and furnish to each Holder a reasonable number of copies
of a supplement or an amendment to such prospectus as may be necessary so that
such prospectus does not contain an untrue statement of material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
provided, however, that the Company may delay preparing, filing and distributing
any such supplement or amendment if the Board of Directors of the Company
determines in good faith that such supplement or amendment could, in its
reasonable judgment, (i) interfere with or adversely affect the negotiation or
completion of a transaction that is being contemplated by the Company or (ii)
involve initial or continuing disclosure obligations that are not in the best
interests of the Company's stockholders at the time; provided, further, that (w)
the Company will give notice (a "Standstill Notice") of any such delay prior to
such delay, (x) such delay shall not extend for a period of more than thirty
(30) days without the written consent of the Holders, (y) the Company may
utilize such delay no more than two (2) times or for an aggregate of more than
sixty (60) days in any period of two hundred and seventy (270) consecutive days
and (z) the period of effectiveness of the Registration Statement provided for
herein shall be extended by the number of days from and including the date of
the giving of a Standstill Notice to and including the date when the Company
shall have delivered to the Holders copies of such supplement or amendment
pursuant to this Section 4(g).
(h) provide each Holder and its representatives the opportunity to conduct reasonable inquiry of the Company's financial and other records during normal business hours and make available its officers, directors and employees for questions regarding information which such Holder may reasonably request in order to conduct any due diligence.
(i) permit counsel for each Holder to review a registration Statement covering Registrable Securities and all amendments and supplements thereto a reasonable period of time prior to the filing thereof with the Commission.
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, but not later than eighteen
(18) months after the effective date of the Registration Statement, an earnings
statement covering the period of at least twelve (12) months beginning with the
first full month after the effective date of such Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
It shall be a condition precedent to the obligation of Company to take any action pursuant to this Agreement in respect of the securities which are to be registered at the request of any Holder that such Holder shall furnish to Company such information regarding the securities held by such Holder and the intended method of disposition thereof as Company shall reasonably request and as shall be required in connection with the action taken by Company.
5. Expenses. All expenses incident to the Company's compliance with the terms of this Agreement, including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), printing expenses, fees and disbursements of counsel for Company, the reasonable fees and expenses of one counsel for the selling security holders (selected by those holding a majority of the shares being registered), expenses of any special audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdiction pursuant to Section 4(d), shall be paid by Company, except that:
(a) all such expenses in connection with any amendment or supplement to the Registration Statement or prospectus filed more than one hundred and eighty (180) days after the effective date of such Registration Statement because any Holder has not effected the disposition of the securities requested to be registered shall be paid by such Holder; and
(b) Company shall not be liable for any fees, discounts or commissions to any underwriter or any fees or disbursements of counsel for any underwriter in respect of the securities sold by such Holder.
(c) any incremental expenses incurred by Company as a result of the inclusion of a Holder's Registrable Securities in an underwritten offering where the Holder or any of its Affiliates is an underwriter of the Registrable Securities which, inclusion of such Holder's Registrable Securities, requires a "qualified independent underwriter" under the applicable rules of the National Association of Securities Dealers, Inc. shall be paid by Holder.
6. Indemnification and Contribution.
(a) In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, Company shall indemnify and hold harmless the holder of such Registrable Securities, such holder's directors and officers, and each other person (including each underwriter) who participated in the offering of such Registrable Securities and each other person, if any, who controls such holder or such participating person within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or participating person or controlling person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any alleged untrue statement of any material fact contained, on the effective date thereof, in any Registration Statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such holder or such director, officer or participating person or controlling person for any legal or any other expenses reasonably incurred by such holder or such director, officer or participating person or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action. Notwithstanding anything to the contrary set forth in this
Section 6(a), Company shall not be liable to indemnify any person in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon (1) any actual or alleged untrue statement or actual or alleged
omission either (x) made in such Registration Statement, preliminary prospectus,
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to Company by such holder specifically for use
therein or (in the case of any registration pursuant to Section 2) so furnished
for such purposes by any underwriter or (y) that had been corrected in a
preliminary prospectus, prospectus supplement or amendment which had been
furnished to such Holder prior to any distribution of the document alleged to
contain the untrue statement or omission to offerees or purchasers, (2) any
offer or sale of Registrable Securities after receipt by such Holder of a
Standstill Notice under Section 4(g) and prior to the delivery of the prospectus
supplement or amendment contemplated by Section 4(g), or (3) Holder's failure to
comply with the prospectus delivery requirements under the Securities Act or
failure to distribute its Registrable Securities in a manner consistent with the
its intended plan of distribution as provided to Company and disclosed in the
Registration Statement. Notwithstanding the foregoing, Company shall not be
required to indemnify any person for amounts paid in settlement of any claim
without the prior written consent of Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or such
director, officer or participating person or controlling person, and shall
survive the transfer of such securities by such holder.
(b) Each Holder, by acceptance hereof, agrees to indemnify and hold harmless Company, its directors and officers and each person who participated in such offering and each other person, if any, who controls Company within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which Company or any such director or officer or any such person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) information in writing provided to Company by such Holder specifically for use in the following documents and contained, on the effective date thereof, in any Registration Statement under which securities were registered under the Securities Act at the request of such holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, (ii) such Holder's offer or sale of Registrable Securities after receipt by such Holder of a Standstill Notice under Section 4(g) and prior to the delivery of the prospectus supplement or amendment contemplated by Section 4(g), (iii) such Holder's failure to comply with the prospectus delivery requirements under the Securities Act or failure to distribute its Registrable Securities in a manner consistent with the its intended plan of distribution as provided to Company and disclosed in the registration statement, (iv) such Holder's failure to comply with Regulation M under the Exchange Act, or (v) such Holder's failure to comply with any rules and regulations applicable because such Holder is, or is an Affiliate of, a registered broker-dealer. Notwithstanding the provisions of this paragraph (b) or paragraph (c)
below, no Holder shall be required to indemnify any person pursuant to this
Section 6 or to contribute pursuant to paragraph (c) below in an amount in
excess of the amount of the aggregate net proceeds received by such Holder in
connection with any such registration under the Securities Act.
(c) If the indemnification provided for in this Section 6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
7. Certain Limitations on Registration Rights. Notwithstanding the other provisions of this Agreement:
(a) Company shall not be obligated to register the Registrable Securities of any Holder if, in the opinion of counsel to Company reasonably satisfactory to the Holder and its counsel (or, if the Holder has engaged an investment banking firm, to such investment banking firm and its counsel), the sale or other disposition of such Holder's Registrable Securities, in the manner proposed by such Holder (or by such investment banking firm), may be effected without registering such Registrable Securities under the Securities Act; and
(b) Company shall not be obligated to register the Registrable Securities of any Holder pursuant to Section 2 if Company has had a registration statement, under which such Holder had a right to have its Registrable Securities included
pursuant to Section 2 or 3, declared effective within one hundred and eighty
(180) days prior to the date of the request pursuant to Section 2; provided,
however, that if any Holder elected to have shares of its Registrable Securities
included under such registration statement but some or all of such shares were
excluded pursuant to the penultimate sentence of Section 3, then such one
hundred and eighty (180) day period shall be reduced to ninety (90) days.
(c) Company shall have the right to delay the filing or effectiveness of a registration statement required pursuant to Section 2 hereof during one or more periods aggregating not more than forty five (45) days in any twelve-month period in the event that (i) Company would, in accordance with the advice of its counsel, be required to disclose in the prospectus information not otherwise then required by law to be publicly disclosed and (ii) in the judgment of Company's Board of Directors, there is a reasonable likelihood that such disclosure, or any other action to be taken in connection with the prospectus, would materially and adversely affect any existing or prospective material business situation, transaction or negotiation or otherwise materially and adversely affect Company.
8. Selection of Managing Underwriters. The managing underwriter or underwriters for any offering of Registrable Securities to be registered pursuant to Section 2 shall be selected by the Holders of a majority of the shares being so registered and shall be reasonably acceptable to Company.
9. Holder Agreements
(a) No Holder may participate in an underwritten offering provided for hereunder unless such Holder (i) agrees to sell such Holder's Registrable Securities on the basis provided in the underwriting arrangements contemplated for such offering as reasonably requested by the managing underwriter, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements as reasonably requested by the managing underwriter, and (c) agrees to bear such Holder's pro rata portion of all underwriting discounts and commissions.
(b) Each Holder of Registrable Securities eligible for inclusion in a Registration Statement that is notified in writing pursuant to Section 3 hereof of a proposed registration of an underwritten public offering shall not effect any public sale or distribution (including sales under Rule 144) of any Registrable Securities that are similar to (or exchangeable or exercisable for or convertible into securities that are similar to) the securities proposed to be offered in such underwritten public offering, during the 10-day period prior to, and during the 90-day beginning on, the effective date of the applicable registration statement, except for offers and sales pursuant to such registration statement, and hereby agrees to execute a "lock-up" letter covering such 90-day period in form and substance customary for such transactions if so requested by the managing underwriter for such underwritten offering.
(c) Each Holder agrees to comply with Regulation M under the Exchange Act in connection with its offer and sale of Registrable Securities.
(d) Each Holder agrees that it will not sell any Registrable Securities registered under the Securities Act pursuant to the terms of this Agreement until it has been notified in accordance with the terms hereof that a Registration Statement (and any associated post-effective amendment) relating thereto has been declared effective and such Holder has been provided copies of the related prospectus, as amended or supplemented to date.
(e) Each Holder agrees to comply with the prospectus delivery requirements of the Securities Act as applicable in connection with the sale of Registrable Securities registered under the Securities Act pursuant to a Registration Statement.
(f) Each Holder agrees that upon receipt of a Standstill Notice pursuant to Section 4(g), such Holder shall immediately discontinue offers and sales of Registrable Securities registered under the Securities Act pursuant to any Registration Statements covering such Registrable Securities until such Holder receives copies of the supplemented or amended prospectus contemplated by Section 4(g) or notice from the Company that no such supplement or amendment is required.
10. Miscellaneous.
(a) No Inconsistent Agreements. Company will not hereafter enter into any agreement with respect to its securities which conflicts with the rights granted to the Holders in this Agreement. Except as set forth on Schedule A hereto, Company has not previously entered into any agreement with respect to any of its securities granting any registration rights to any person.
(b) Remedies. The Purchaser, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. In any action or proceeding brought to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy.
(c) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departure from the provisions hereof may not be given unless Company has obtained the written consent of the Purchaser.
(d) Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Agreement shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, or by telecopy and confirmed by telecopy answerback, addressed as follows:
(i) If to the Purchaser, at the last known address appearing on the books of Company maintained for such purpose.
(ii) If to Company, at
Level 8 Systems, Inc. 8000 Regency Parkway Cary, North Carolina 27511 Attention: Dennis McKinnie Telecopy Number: (919) 461-2690
or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback or three (3) Business Days after the same shall have been deposited in the United States mail.
(e) Rule 144. With a view to making available to the Purchaser the benefits of Rule 144 under the Securities Act ("Rule 144") and any other rule or regulation of the Commission that may at any time permit the Purchaser to sell securities of the Company to the public without registration, the Company agrees that it will:
(i) make and keep public information available, as those terms are understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act; and
(iii) furnish to each Holder, so long as
such Holder owns any Registrable Securities, forthwith upon request (i) a
written statement by the Company, if true, that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing the Holder of any rule or
regulation of the Commission which permits the selling of any such securities
without registration.
(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto including any person to whom Registrable Securities are transferred.
(g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law; Jurisdiction. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York without giving effect to the conflict of laws provisions thereof. Each of the parties hereby submits to personal jurisdiction and waives any objection as to venue in the County of New York, State of New York. Service of process on the parties in any action arising out of or relating to this Agreement shall be effective if mailed to the parties in accordance with Section 10(d) hereof. The parties hereto waive all right to trial by jury in any action or proceeding to enforce or defend any rights hereunder.
(i) Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
(j) Entire Agreement. This Agreement, together with the Purchase Agreement and the other Transaction Documents, represents the complete agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof.
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
LEVEL 8 SYSTEMS, INC.
By: /s/ Dennis McKinnie
-------------------------------
Name: Dennis McKinnie
Title: Senior Vice President,
Chief Legal and
Administrative Officer and
Corporate Secretary
|
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ E. Stanley O'Neal ------------------------------- Name: E. Stanley O'Neal Title: Executive Vice President |
EXHIBIT 10.2
PCA SHELL LICENSE AGREEMENT
dated as of August 23, 2000
by and between
LEVEL 8 SYSTEMS, INC.,
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
PCA SHELL LICENSE AGREEMENT
This agreement ("Agreement"), dated as of August 23, 2000 ("Effective Date"), is by and between Merrill, Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation having an office at Merrill Lynch World Headquarters North Tower, World Financial Center, 250 Vesey Street, New York, New York 10281 ("Merrill Lynch"), and Level 8 Systems, Inc., a Delaware corporation having an office at 8000 Regency Parkway, Cary, North Carolina 27511 ("Level 8").
WITNESSETH
WHEREAS, Merrill Lynch has developed and owns a software product comprising a Seamless Application Interface Manager ("PCA Shell");
WHEREAS, Level 8 desires to license from Merrill Lynch and Merrill Lynch desires to license to Level 8 upon the terms set out herein, the PCA Shell; and
WHEREAS, Merrill Lynch and Level 8 are entering into a Purchase Agreement of the same Effective Date as this Agreement relating to their overall relationship;
NOW, THEREFORE, in consideration of the premises and mutual covenants, agreements, representations and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows:
ARTICLE 1 - DEFINITIONS
When used in this Agreement, the capitalized terms listed in this Article 1 shall have the following meanings:
1.1 "Affiliates" means, with respect to Merrill Lynch, (i) each company that controls, is controlled by or is under common control with Merrill Lynch or any Affiliate of Merrill Lynch, (ii) each company that Merrill Lynch, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 30% or more of the equity having ordinary voting power either in the election of directors of such company or otherwise in the selection of the management of such company, or (iii) any trust or beneficiary of a trust of which Merrill Lynch is the sole trustee. For the purpose of this definition, "control" of a company shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise.
1.2 "DOCUMENTATION" means logic diagrams, flow charts, working papers, installation, instruction and operating manuals, and other written materials relating to the PCA Shell and any component thereof, to the extent reasonably required by each party to enable that party to perform its obligations hereunder.
1.3 "INTELLECTUAL PROPERTY" means any rights available with respect to the Technology under patent, copyright or trade secret law or any other statutory provision or common law doctrine.
1.4 "PCA SHELL" means the so-called "PCA Shell" user
interface/infrastructure software developed by Merrill Lynch which incorporates
the inventions claimed in the Patent (as such term is hereafter defined in
Section 2.3(b)).
1.5 "SOFTWARE" means any computer software, including, but not limited to, source code, object code, screens, user interfaces, report formats, templates, menus, buttons and icons, and all user materials and manuals related thereto.
1.6 "TECHNOLOGY" means, collectively, designs, formulas, processes, algorithms, methods, techniques, ideas, know-how, research, Software, programs, subroutines, tools, inventions, trade secrets, creations, improvements, works of authorship and other similar materials, and all recordings, graphs, drawings, reports, and other writings in any form whether or not specifically listed herein, and all related technology, that are used in, incorporated in, embodied in, or relate to the PCA Shell.
ARTICLE 2 - OWNERSHIP AND LICENSE
2.1 DELIVERY. Promptly after the Effective Date, Merrill Lynch shall deliver to Level 8 the PCA Shell Software and Documentation.
2.2 OWNERSHIP.
(a) Merrill Lynch shall own all right, title and interest in and to the Technology and Intellectual Property relating to the PCA Shell in the form delivered to Level 8, and any improvements, enhancements or modifications to the foregoing developed by Merrill Lynch. Merrill Lynch shall also own all right, title and interest in and to the Technology and Intellectual Property relating to the so-called "Distributed Computing Substrate" architecture currently under development by Merrill Lynch as described in that certain document referred to as the "Distributed Computing Substrate" ("Distributed Computing Substrate").
(b) Level 8 shall immediately and fully disclose to Merrill Lynch any and all Technology discovered or developed by it solely, or jointly with Merrill Lynch, and any modifications or enhancements made by Level 8 to the PCA Shell. Subject to Merrill
Lynch's ownership rights set out in Section 2.2(a), Level 8 shall own all right, title and interest in and to the Technology and Intellectual Property relating to the PCA Shell discovered or developed by it solely, and any modifications or enhancements made by Level 8 to the PCA Shell. Subject to Merrill Lynch's ownership rights set out in Section 2.2(a), Merrill Lynch and Level 8 shall each own an undivided one-half interest in and to the Technology and Intellectual Property relating to the Technology discovered or developed jointly by Level 8 and Merrill Lynch, except that any patent rights relating to the Technology that are jointly developed by Merrill Lynch and Level 8 shall be solely owned by Merrill Lynch and Level 8 shall execute any assignments needed to give effect to such ownership by Merrill Lynch.
2.3 MERRILL LYNCH LICENSES TO LEVEL 8. Merrill Lynch hereby grants to Level 8, and Level 8 hereby accepts, the following royalty-free, fully paid, nontransferable, worldwide, licenses, with the right to sublicense:
(a) a license to copy, display, use, modify and reproduce the PCA Shell, including any improvements, enhancements or modifications thereto developed during the term of this Agreement that Merrill Lynch, in its sole discretion, provides to Level 8, and to distribute the PCA Shell to the public pursuant to license agreements containing terms which are adequate to protect the rights of Merrill Lynch in the PCA Shell; and
(b) a license to make, use, sell and offer to sell products incorporating inventions claimed in U.S. Patent No. 5,878,258, entitled "Seamless Application Interface Manager" (the "Patent"); and
(c) a nonexclusive license to copy, display, use, modify and reproduce the Distributed Computing Substrate, including any improvements, enhancements or modifications thereto developed during the term of this Agreement that Merrill Lynch, in its sole discretion, provides to Level 8, and to distribute the Distributed Computing Substrate to the public pursuant to license agreements containing terms which are adequate to protect the rights of Merrill Lynch in the Distributed Computing Substrate.
2.4 LEVEL 8 LICENSE TO MERRILL LYNCH. Level 8 hereby grants to Merrill Lynch, and Merrill Lynch hereby accepts, a royalty-free, perpetual, worldwide license to copy, display, use, modify and reproduce any Technology developed by Level 8 and any modifications or enhancements made by Level 8 to the PCA Shell, including any improvements, enhancements or modifications thereto developed during or after the term of this Agreement, for any and all business uses of Merrill Lynch and its Affiliates and subsidiaries.
2.5 EXCLUSIVITY PERIOD. The foregoing licenses with respect to the PCA Shell, and the Patent granted by Merrill Lynch shall be exclusive, subject to Section 2.7, for two years from the Effective Date (the "Exclusivity Period"), after which such licenses shall be non-exclusive unless the average, split-adjusted closing price of the common stock of Level 8 over a period of 60 consecutive trading days during the Exclusivity Period is greater than or equal to $120 per share (the "Target Price").
Notwithstanding the aforementioned provision, if during the Exclusivity Period
(i) the Target Price is not achieved for the requisite time period but (ii) the
average closing price of the Dow Jones Industrial Average over a period of 60
consecutive trading days during the Exclusivity Period is less than 5,000, then
the Exclusivity Period shall be extended for one additional year, for a maximum
total Exclusivity Period of three years subject to further extensions as may be
agreed upon in writing by the parties. If Level 8 common stock achieves the
above mentioned Target Price, the PCA Shell and Patent licenses shall become
exclusive in perpetuity. For avoidance of doubt, the lapse of exclusivity shall
apply only to the PCA Shell as delivered pursuant to Section 2.1.
Notwithstanding the foregoing, Merrill Lynch shall have the rights: (i) to
continue development of the PCA Shell Software independently of Level 8's
development efforts after the Effective Date; (ii) to copy, display, use, modify
and reproduce the modifications and improvements that Merrill Lynch
independently develops; and (iii) subject to the exclusivity with respect to the
PCA Shell and the Patent granted pursuant to this Section 2.5, to distribute
such modifications and improvements to the public.
2.6 ENFORCEMENT DURING THE EXCLUSIVITY PERIOD. During the Exclusivity Period, Merrill Lynch shall have the initial right, but not the obligation, for a period of 60 days commencing upon the discovery of an alleged infringer of the Patent to enforce the Patent against the alleged infringer. The discovery of an alleged infringer of the Patent shall mean the receipt of a written legal opinion from counsel of Merrill Lynch's choice, in its sole discretion, that the Patent has been infringed. If Merrill Lynch decides, in its sole discretion, not to enforce the Patent against such alleged infringer, the right to enforce the patent against the alleged infringer shall be transferred to Level 8, except to the extent that the activities of the alleged infringer are on behalf of Merrill Lynch in support of its business activities relating to the PCA Shell.
2.7 RESERVATION OF RIGHTS. Notwithstanding any provision to the contrary, Merrill Lynch hereby reserves the right (i) to copy, display, use, modify and reproduce the PCA Shell, and (ii) to make, have made and use products incorporating inventions claimed in the Patent, for its own business uses and the business uses of its Affiliates and subsidiaries.
2.8 MARKING. Level 8 shall mark any product containing the PCA Shell or any inventions covered by the Patent with a notice containing reasonable text which shall be provided by Merrill Lynch.
ARTICLE 3 - PROPRIETARY INFORMATION
3.1 DURATION. The provisions of this Article 3 shall survive the termination of this Agreement for a period of five years thereafter.
3.2 APPLICATION OF MUTUAL NON-DISCLOSURE AGREEMENT. Except where expressly and specifically stated to the contrary in this Agreement or in the Master
License Agreement between Merrill Lynch and Seer Technologies, Inc., predecessor in interest to Level 8, dated October 24, 1996, the terms and conditions set forth in paragraphs 1, 2, 3, 4 (first paragraph only), 5 and 7 of the Mutual Non-Disclosure Agreement dated July 1, 1999 between Merrill Lynch and Level 8 shall apply to any and all information disclosed pursuant to the terms of this Agreement.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES. Each party hereby represents,
warrants and covenants to the other party that it has full corporate power and
authority to enter into this Agreement, and the execution by it of this
Agreement and the consummation by it of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions; the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated by this Agreement, do not conflict with or violate:
(i) its charter documents or by-laws; (ii) any contract or agreement to which it
is a party, by which it or any of its affiliates is bound, or to which any of
its assets are subject; or (iii) any applicable law or the order of any court or
governmental authority. Merrill Lynch hereby represents and warrants that it has
sufficient rights in the PCA Shell Software to grant the rights described herein
and has not previously and will not grant any rights in the PCA Shell Software
to any third party that are inconsistent with the rights granted to Level 8
herein. Merrill Lynch further represents and warrants that to its knowledge the
PCA Shell Software does not infringe any patents, copyrights, trade secret
rights, trademarks or other proprietary rights held by any third party.
4.2 LIMITATIONS; DISCLAIMER OF WARRANTIES. EXCEPT AS SET FORTH IN THE MASTER LICENSE AGREEMENT, THE FOLLOWING LIMITATIONS AND DISCLAIMERS SHALL APPLY:
(a) IN NO EVENT SHALL MERRILL LYNCH OR ITS AFFILIATES OR SUPPLIERS BE
LIABLE FOR PROSPECTIVE PROFITS, OR ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF (i) THE USE OR DISTRIBUTION OF ANY
PCA SHELL SOFTWARE, THE DISTRIBUTED COMPUTING SUBSTRATE OR
DOCUMENTATION PROVIDED BY MERRILL LYNCH, IN WHOLE OR IN PART, OR ANY
EXECUTABLE SOFTWARE OR LEVEL 8 SOFTWARE, BY LEVEL 8 OR ANY THIRD PARTY,
(ii) THE MANUFACTURING OF PRODUCTS BY LEVEL 8 WHICH INCLUDE THE PCA
SHELL SOFTWARE AND/OR THE DISTRIBUTED COMPUTING SUBSTRATE, IN WHOLE OR
IN PART, OR ANY OF THE INTELLECTUAL PROPERTY RIGHTS LICENSED UNDER THIS
AGREEMENT, OR (iii) THE USE OF SUCH PRODUCTS BY LEVEL 8 OR ANY END
USER, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE),
INDEMNITY, PRODUCT LIABILITY OR OTHERWISE. IN NO EVENT SHALL MERRILL
LYNCH'S LIABILITY
ARISING UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY LIABILITY FOR DIRECT DAMAGES, EXCEED THE FAIR MARKET VALUE ON THE EFFECTIVE DATE, OF THE SECURITIES RECEIVED BY MERRILL LYNCH PURSUANT TO SUCH PURCHASE AGREEMENT.
(b) NEITHER MERRILL LYNCH, NOR ANY AFFILIATE, NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, SHALL BEAR ANY RISK, OR HAVE ANY RESPONSIBILITY OR LIABILITY, OF ANY KIND TO LEVEL 8 OR TO ANY THIRD PARTIES WITH RESPECT TO (i) THE QUALITY AND/OR PERFORMANCE OF ANY PORTION OF THE PCA SHELL SOFTWARE, THE DISTRIBUTED COMPUTING SUBSTRATE AND DOCUMENTATION, (ii) THE INTELLECTUAL PROPERTIES RIGHTS LICENSED BY MERRILL LYNCH HEREUNDER, OR (iii) ANY PRODUCTS INCORPORATING ANY OF THE FOREGOING, IN WHOLE OR IN PART, INCLUDING, WITHOUT LIMITATION, THE OPERATION OR PERFORMANCE OF ANY OF SUCH PRODUCTS.
(c) NEITHER DOES MERRILL LYNCH NOR ITS AFFILIATES AND SUPPLIERS MAKE, NOR DOES LEVEL 8 RECEIVE, ANY WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED OR STATUTORY REGARDING THE PCA SHELL SOFTWARE, THE DISTRIBUTED COMPUTING SUBSTRATE AND/OR THE INTELLECTUAL PROPERTY RIGHTS LICENSED BY MERRILL LYNCH HEREUNDER EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MERRILL LYNCH AND ITS AFFILIATES AND SUPPLIERS EXPRESSLY DISCLAIM THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND THEIR EQUIVALENTS UNDER THE LAWS OF ANY JURISDICTION, REGARDING THE PCA SHELL SOFTWARE, THE DISTRIBUTED COMPUTING SUBSTRATE AND DOCUMENTATION. ANY WARRANTY AGAINST INFRINGEMENT THAT MAY BE PROVIDED IN SECTION 2-312(3) OF THE UNIFORM COMMERCIAL CODE AND/OR IN ANY OTHER COMPARABLE STATE STATUTE IS EXPRESSLY DISCLAIMED.
ARTICLE 5 - TERMINATION
5.1 TERMINATION BY EITHER PARTY. Either party may terminate this Agreement, effective immediately upon receipt of notice of termination by the other party, in the event that the other party defaults on the performance or observance of any of the material terms or material conditions of this Agreement (including without limitation, a breach of warranty or of an obligation with respect to the maintenance of
confidentiality), which default is not remedied within thirty (30) days after written notice specifying the nature of the default is received.
ARTICLE 6 - EFFECTS OF TERMINATION
6.1 LICENSES. Upon the termination of this Agreement, (i) all licenses granted by one party to the other (and permitted sublicenses granted to third parties) shall survive, but neither party shall have any further rights to grant sublicenses under the other party's Technology or Intellectual Property to third parties or to distribute the other party's Software to any third party, and (ii) notwithstanding any provision of this Agreement to the contrary, any exclusive licenses granted to Level 8 under this Agreement by Merrill Lynch shall immediately become non-exclusive.
6.2 SURVIVAL PROVISIONS OF AGREEMENT. In the event of any termination of this Agreement, the provisions of Articles 2 (OWNERSHIP AND LICENSE), 3 (PROPRIETARY INFORMATION AND RIGHTS), 4 (REPRESENTATIONS AND WARRANTIES), 6 (EFFECTS OF TERMINATION), 8 (INDEMNIFICATION BY MERRILL LYNCH) AND 9 (DISPUTE RESOLUTION) shall survive and continue in effect as set forth therein and shall inure to the benefit of and be binding upon the parties and their legal representatives, heirs, successors, and permitted assigns.
ARTICLE 7 - FORCE MAJEURE
7.1 LIMITATION ON LIABILITY. Neither party shall be liable to the other party for any failure or delay in performance under this Agreement, and such failure or delay shall not constitute a default under or breach of this Agreement, for any period and to the extent that the failure or delay is due in whole or in part to any cause beyond its reasonable control, including but not limited to, action or inaction of governmental, civil or military authority, changes in federal, state or local statutes, rules or regulations, delays in transportation, sources of supply, material shortages, third party labor difficulties, accidents, acts of God, fire, flood, war, riot, earthquake or any other force majeure.
ARTICLE 8 - INDEMNIFICATION BY MERRILL LYNCH
8.1 INDEMNIFICATION BY MERRILL LYNCH. Subject to Section 8.3, Merrill Lynch (the "Indemnifying Party") shall indemnify Level 8 (the "Indemnified Party") and its affiliates against, and hold them harmless from, any and all claims, losses, deficiencies, damages, liabilities, costs, and expenses (including without limitation reasonable attorneys' fees and all related costs and expenses) ("Losses") incurred by the
Indemnified Party as a result of any third party claim, judgment or adjudication against them arising from a breach by Merrill Lynch of its representations and warranties contained herein.
8.2 LIMITATION. The indemnities in Sections 8.1 shall not apply:
(a) if the Indemnified Party fails to give the Indemnifying Party prompt notice
of any claim it receives and such failure materially prejudices the Indemnifying
Party, (b) if the Indemnified Party fails to provide reasonable information and
cooperation to the Indemnifying Party in connection with the litigation or
settlement of a third party claim; or (c) unless the Indemnifying Party is given
the opportunity to approve any settlement, which approval shall not be
unreasonably withheld; provided, however, that if the Indemnifying Party
unreasonably withholds such approval, it shall, at the option of the Indemnified
Party, be required to assume the defense of such claim at its own expense.
8.3 LIMITATION ON DAMAGES. MERRILL LYNCH SHALL HAVE NO INDEMNIFICATION OBLIGATIONS RELATING TO THIS AGREEMENT OTHER THAN THOSE SET FORTH IN SECTION 8.1, AND IN NO EVENT SHALL MERRILL LYNCH BE LIABLE UNDER THIS AGREEMENT FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
ARTICLE 9 - DISPUTE RESOLUTION
9.1 The parties shall attempt to resolve in good faith any claim, controversy or other dispute arising out of or relating to this Agreement. Any such dispute which cannot be resolved informally shall be submitted in writing to the Merrill Lynch Project Manger (as of the Effective Date, Elizabeth Lerner) and the Level 8 Project Manager (as of the Effective Date, Ted Venema), who shall attempt to resolve the dispute within seven calendar days of such submission. Neither party may take any other action to resolve the dispute during such seven calendar days.
ARTICLE 10 - MISCELLANEOUS
10.1 NOTICES. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by another, or whenever any of the parties desires to give or serve upon another any such communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and either shall be delivered in person with receipt acknowledged or by registered or certified mail, return receipt requested, postage prepaid, or by telecopy and confirmed by telecopy answerback addressed as follows:
If to Level 8:
Level 8 Systems, Inc.
8000 Regency Parkway
Cary, North Carolina 27511
Attn: Dennis McKinnie Telecopy Number: (919) 380-5005
with a copy to:
Scott Smith
Powell Goldstein Frazer & Murphy
191 Peachtree Street, 16th Floor
Atlanta, Georgia 30303
Telecopy Number: (404) 572-6875
If to Merrill Lynch:
Merrill Lynch, Pierce, Fenner & Smith Incorporated
222 Broadway
17th Floor
New York, New York 10038
Attn: Patrick Romain
Telecopy Number: (212) 670-4517
with copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Howard Chatzinoff, Esq.
S. Wade Angus, Esq.
Telecopy Number: (212) 310-8007
or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback, or three (3) business days after the same shall have been deposited with the United States mail.
10.2 Binding Effect; Benefits. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
10.3 Complete Agreement; Amendment. This Agreement constitutes the complete agreement and understanding of the parties with respect to the subject matter hereof and thereof and supersedes any previous agreement or understanding between them relating thereto. No amendment or waiver of any provision of this Agreement nor consent to any departure by a party therefrom, shall in any event be effective unless the same shall be in writing and signed by a party hereto, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action, of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder.
10.4 Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by Level 8 without Merrill Lynch's prior written approval.
10.5 Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
10.6 Written Approval. All approvals and/or consents required by a party to this Agreement must be requested by such party in writing to the other party, and all approvals or consents shall not be effective unless in writing.
10.7 Severability. In the event that any one or more of the provisions contained in this Agreement shall be determined to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision or provisions in every other respect and the remaining provisions of this Agreement shall not be in any way impaired.
10.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.
10.9 Publicity. Neither party shall issue any press release or make any public disclosure regarding the transactions contemplated hereby unless such press release or public disclosure is approved by the other party in advance.
10.10 Governing Law; Waiver of Jury Trial. This Agreement shall be governed by, construed and enforced in accordance with, the laws of the State of New York without regard to the principles thereof relating to conflict of laws. Each of the parties hereby submits to personal jurisdiction and waives any objection as to venue in the federal or state courts located in the County of New York, State of New York. Service of process on the parties in any action arising out of or relating to this Agreement shall be effective if mailed to the parties in accordance with Section 10.1 hereof. The parties hereto waive all right to trial by jury in any action or proceeding to enforce or defend any rights under this Agreement.
10.11 No Partnership or Joint Venture. The relationship between Merrill Lynch and Level 8 is that of licensor and licensee. Level 8 is an independent contractor and is not the legal representative, agent, joint venturer, partner or employee of Merrill Lynch for any purpose whatsoever. Neither party has any right or authority to assume or create any obligations of any kind or to make any representation or warranty on behalf of the other party, whether express or implied, or to bind the other party in any respect whatsoever.
10.12 Construction. This Agreement shall be fairly interpreted in accordance with its terms and without any strict construction in favor of or against either of the parties.
IN WITNESS WHEREOF, Merrill Lynch and Level 8 have executed this Agreement as of the day and year first above written.
LEVEL 8 SYSTEMS, INC.
By: /s/ Dennis McKinnie
------------------------------------------
Name: Dennis McKinnie
Title: Senior Vice President, Chief Legal
and Administrative Officer and
Corporate Secretary
|
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ E. Stanley O'Neal ------------------------------------------ Name: E. Stanley O'Neal Title: Executive Vice President |
EXHIBIT 10.3
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of August 23, 2000 (this "Agreement"), by and among Level 8 Systems, Inc., a Delaware corporation having an office at 8000 Regency Parkway, Cary, North Carolina 27511 ("Company"), and those stockholders of Company set forth on Annex I hereto (individually, a "Stockholder" and collectively, the "Stockholders"). W I T N E S S E T H :
WHEREAS, Company and Merrill Lynch, Pierce Fenner & Smith Incorporated, a Delaware Corporation ("Purchaser"), have entered into that certain Purchase Agreement, dated as of July 31, 2000 (the "Purchase Agreement"), pursuant to which Company has agreed to sell, and Purchaser has agreed to purchase, on the terms and subject to the conditions set forth therein, 1,000,000 shares (the "Purchased Shares") of common stock of Company, $0.001 par value per share ("Common Stock");
WHEREAS, each of the Stockholders party hereto (other than Purchaser) are on the date hereof holders of the number of shares of Common Stock as is set forth on Annex I hereto (such Stockholders, other than Purchaser and its respective successors and assigns, the "Existing Stockholders"); and
WHEREAS, certain capitalized terms used in this Agreement and not otherwise defined herein are used as such terms are defined in the Purchase Agreement;
NOW, THEREFORE, in consideration of the agreements, premises and mutual covenants contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Board of Directors.
(a) On the date hereof, and at each annual meeting of stockholders or any special meeting called for the purpose of electing members to the board of directors of Company (the "Board") (or by consent of stockholders in lieu of any such meeting) or at such other time or times as the stockholders pursuant to Company's certificate of incorporation and by-laws may agree, so long as Purchaser owns shares of Common Stock equal to at least twenty percent (20%) of the Purchased Shares, the Purchaser shall have the right to nominate one (1) director (such nominee is hereinafter referred to as the "Purchaser Designee") to the Board. Each of the Existing Stockholders shall vote any and all of its shares of Common Stock entitled to vote in favor of the election of the Purchaser Designee.
(b) No Existing Stockholder shall vote any shares of Common Stock in favor of the removal of a director nominated by Purchaser hereunder unless (i) the right of Purchaser so to nominate such director shall no longer exist pursuant to Section 1(a) or
(ii) Purchaser has terminated this Agreement in accordance with Section 5 hereof; provided, however, that upon the request of Purchaser to remove a director previously designated for nomination by Purchaser, the Existing Stockholders shall vote all of their shares of Common Stock in favor of (A) the removal of such director and (B) the election of any replacement director as may be designated by Purchaser, subject to the provisions of Section 1(a); and, provided, further, that any such director may be removed by the Existing Stockholders for cause in accordance with applicable law, provided that the Purchaser shall be entitled to designate a successor to such director and the Existing Stockholders shall vote all of their shares of Common Stock in favor of the election of such replacement director, subject to the provisions of Section 1(a).
(c) So long as (i) Purchaser has the right to nominate a director pursuant to Section 1(a) and (ii) Purchaser has not terminated this Agreement in accordance with Section 5 hereof, each of the Stockholders agrees to take such action in accordance with the terms of this Agreement, including the voting of shares of Common Stock owned or controlled by such Stockholder, as may be necessary to cause Company to have a Board consisting of eight (8) directors. In no event shall there be more than eleven (11) directors constituting the Board.
(d) If any vacancy occurs on the Board because of death, incapacity, resignation, retirement or removal of the Purchaser Designee in accordance with this Agreement, the Purchaser shall designate a successor to such Purchaser Designee, and each Existing Stockholder shall vote its shares of Common Stock in favor of the election of such successor to the Board, subject to the provisions of Section 1(a).
(e) Neither Company nor any Existing Stockholder shall give any proxy or power of attorney to any Person that permits the holder thereof to vote in his discretion on any matter that may be submitted to Company's stockholders for their consideration and approval, unless such proxy or power of attorney is made subject to and is exercised in conformity with the provisions of this Agreement.
(f) In the event Purchaser determines not to exercise its rights under Section 1(a) to designate a member of the Board, Purchaser may designate one individual (the "Observer") to attend any and all meetings of the Board (and any committees thereof) in a non-voting observer capacity. The Observer shall be entitled to receive all reports, presentations and materials as if the Observer were a director on the Board.
(g) Company shall reimburse the Purchaser Designee or the Observer, as the case may be, for any reasonable out-of-pocket expenses incurred in connection with Purchaser Designee's or Observer's service on the Board and committees thereof, which shall include travel expenses for attending Board meetings and other travel expenses related to Company or the activities of the Board.
(h) Company shall furnish to Purchaser Designee or the Observer, as the case may be, the same information (in form and substance) that it furnishes from time to time to the directors comprising its existing Board as of the date hereof, including, but
not limited to: (i) all management letters of accountants relating to Company or any of its subsidiaries; (ii) budget information; and (iii) any notices relating to:
(1) the occurrence of any default or breach under any material agreement to which Company or any of its subsidiaries is a party;
(2) the commencement of any material legal or regulatory proceeding, action or investigation to which Company or any of its subsidiaries is a party; and
(3) copies of any material regulatory requests, documentation relating to governmental investigations, and governmental or regulatory orders, decisions and rulings and any filings with the SEC.
2. Stockholders' Representations and Warranties. Each Stockholder represents and warrants to each of the other Stockholders that there are no agreements to which such Stockholder is a party with respect to the voting or transfer of the capital stock of Company or with respect to any other aspect of Company's affairs, other than (i) this Agreement and (ii) the agreements set forth on Annex II attached hereto.
3. Stop Order; Transfer Agent Instructions. Except for any shares of Common Stock (i) sold to the public as part of a registered public offering in accordance with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), including any applicable rules and regulations promulgated thereunder, (ii) sold to the public in accordance with the applicable provisions of Rule 144 promulgated under the Securities Act, or (iii) distributed by any of Welsh, Carson, Anderson & Stowe VI, L.P., WCAS Information Partners, L.P. and WCAS Capital Partners II, L.P. (each, a "Welsh Carson Party") to any of such Welsh Carson Party's limited partners or any general partner thereof not involved in the management of such Welsh Carson Party (such limited or general partners, "Passive Investors") as part of an in-kind distribution of the shares of Common Stock to all of such Welsh Carson Party's Passive Investors, the Stockholders agree that their shares of Common Stock shall not be transferable during the term of this Agreement until such time as any transferee thereof executes and delivers to Company a counterpart signature page agreeing to be bound by the terms of this Agreement. Company shall provide its transfer agent with stop transfer orders in the form attached hereto as Exhibit A.
4. Equitable Relief. It is hereby acknowledged that irreparable harm would occur in the event that any of the provisions of this Agreement were not performed fully by the parties hereto in accordance with the terms specified herein, and that monetary damages are an inadequate remedy for breach of this Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties relying hereon in the event that the undertakings and provisions contained in this Agreement were breached or violated. Accordingly, each party hereto hereby agrees that each other party hereto shall be entitled to an injunction or injunctions to restrain, enjoin and prevent breaches of the undertakings and provisions hereof and to enforce
specifically the undertakings and provisions hereof in any court of the United States or any state having jurisdiction over the matter; it being understood that such remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.
5. Termination by Purchaser. Purchaser may, in its sole discretion, terminate this Agreement at any time by delivery of written notice to Company (which termination shall be effective as of the date specified in such written notice), whereupon all rights and obligations of Purchaser, the Existing Stockholders and any other party that may become a Stockholder under this Agreement shall terminate and be of no further force and effect.
6. Miscellaneous.
(a) Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by another, or whenever any of the parties desires to give or serve upon another any such communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and either shall be delivered in person with receipt acknowledged or by registered or certified mail, return receipt requested, postage prepaid, or by telecopy and confirmed by telecopy answerback addressed as follows:
If to Company:
Level 8 Systems, Inc.
8000 Regency Parkway
Cary, North Carolina 27511
Attn: Dennis McKinnie Telecopy Number: (919) 461-2690
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP 191 Peachtree Street N.E., 16th Floor Atlanta, Georgia 30303 Attn: Scott D. Smith, Esq.
Telecopy Number: (404) 572-6999
If to Purchaser:
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center New York, New York 10080 Attn: John A. McKinley Telecopy Number: (212) 449-8687
with copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Howard Chatzinoff, Esq.
S. Wade Angus, Esq.
Telecopy Number: (212) 310-8007
If to any Existing Stockholder
To the address of such party appearing under its or his name on Annex I hereto
or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback, or three (3) business days after the same shall have been deposited with the United States mail.
(b) Complete Agreement; Amendment. This Agreement constitutes the complete understanding of the parties with respect to its subject matter and supersedes any other agreement or understanding relating thereto. No amendment, change or modification of this Agreement shall be valid, binding or enforceable, unless the same shall be in writing and signed by Purchaser and the Company and the Existing Stockholders to the extent their rights and obligations under this Agreement would be affected thereby.
(c) Waiver. No failure or delay on the part of the Stockholders or Company or any of them in exercising any right, power or privilege hereunder, and no course of dealing between the Stockholders or Company, shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude the simultaneous or later exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights and remedies which the Stockholders or Company would otherwise have.
(d) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument.
(e) Governing Law; Jurisdiction; Waivers. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware without giving effect to the conflict of laws provisions thereof. Each of the parties hereby submits to personal jurisdiction and waives any objection as to venue in
the County of New York, State of New York. Service of process on the parties in any action arising out of or relating to this Agreement shall be effective if mailed to the parties in accordance with Section 6(a) hereof. The parties hereto waive all right to trial by jury in any action or proceeding to enforce or defend any rights hereunder.
(f) Benefit and Binding Effect. All of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns, including any permitted transferee of their Common Stock (other than as part of (i) a registered offering under the Securities Act, (ii) a sale to the public pursuant to Rule 144 promulgated under the Securities Act, or (iii) in the case of any Welsh Carson Party, a distribution by such Welsh Carson Party to any of its Passive Investors as an in-kind distribution of the shares of Common Stock to all of such Welsh Carson Party's Passive Investors). References herein to Purchaser shall include Purchaser and any of its successors and assigns.
(g) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
(h) After-Acquired Shares. All of the provisions of this Agreement shall apply to all of the shares of capital stock of Company now owned or which may be issued to or acquired by a Stockholder in consequence of any additional issuance (including, without limitation, by exercise of an option or any warrant), purchase, exchange, conversion or reclassification of stock, corporate reorganization, or any other form of recapitalization, consolidation, merger, stock split or stock dividend, or which are acquired by a Stockholder in any other manner.
(i) Approvals and Consents. The Stockholders hereby agree, for themselves, their successors, heirs and legal representatives, to vote at stockholders' and directors' meetings of Company, to prepare, execute and deliver or cause to be prepared, executed and delivered such further instruments and documents, to take such other actions and to adopt such by-laws and provisions of the certificate of incorporation as may be reasonably required to more effectively carry out the intent and purposes of this Agreement and the transactions contemplated hereby. They further agree to cause Company to do the same.
[STOCKHOLDERS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
COMPANY:
LEVEL 8 SYSTEMS, INC.
By: /s/ Dennis McKinnie
----------------------------------------
Name: Dennis McKinnie
Title: Senior Vice President, Chief Legal and
Administrative Officer and Corporate
Secretary
|
PURCHASER:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: /s/ E. Stanley O'Neal ---------------------------------------- Name: E. Stanley O'Neal Title: Executive Vice President |
EXISTING STOCKHOLDERS:
LIRAZ SYSTEMS LTD.
By: /s/ Arie Kilman ---------------------------------------- Name: Title: |
LIRAZ EXPORT (1990) LTD.
By: /s/ Arie Kilman ---------------------------------------- Name: Title: |
[STOCKHOLDERS AGREEMENT SIGNATURE PAGE]
ADVANCED SYSTEMS EUROPE B.V.
By: /s/ Arie Kilman ---------------------------------------- Name: Title: |
WELSH, CARSON, ANDERSON
& STOWE VI, L.P.
By: WCAS VI PARTNERS, L.P., General Partner
By: /s/ Robert A. Minicucci ---------------------------------------- Name: Robert A. Minicucci Title: General Partner |
WCAS INFORMATION PARTNERS, L.P.
By: WCAS INFO Partners, General Partner
By: /s/ Thomas E. McInerney ---------------------------------------- Name: Thomas E. McInerney Title: General Partner |
WCAS CAPITAL PARTNERS II, L.P.
By: /s/ Robert A. Minicucci ---------------------------------------- Name: Robert A. Minicucci Title: General Partner |
ANNEX I
Stockholders/Purchasers Class of Securities of Shares ----------------------- ------------------- --------- Merrill Lynch, Pierce, Fenner & Smith Common Stock 1,000,000 Incorporated Merrill Lynch World Headquarters North Tower World Financial Center 250 Vesey Street New York, New York 10281 Liraz Systems Ltd. Common Stock 2,921,863 5 Hatzoref Street Holon, 58856 Israel Telecopy No. 972 3 559 9073 Liraz Export (1990) Ltd. Common Stock 821,257 5 Hatzoref Street Holon, 58856 Israel Telecopy No. 972 3 559 9073 Advanced Systems Europe B.V. Common Stock 1,000,000 5 Hatzoref Street Holon, 58856 Preferred Stock 10,000 Israel Telecopy No. 972 3 559 9073 WCAS PARTIES: Welsh, Carson, Anderson & Stowe Common Stock 944,844 VI, L.P. c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue New York, New York 10022 Telecopy No. 212-893-9536 WCAS Information Partners, L.P. Common Stock 11,290 c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue New York, New York 10022 Telecopy No. 212-893-9536 WCAS Capital Partners II, L.P. Common Stock ________ c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue New York, New York 10022 Telecopy No. 212-893-9536 |
ANNEX II
AGREEMENT WITH WELSH, CARSON, ANDERSON & STOWE RELATED TO THE PURCHASE
OF SEER
Level 8 purchased a majority interest in Seer Technologies, Inc. pursuant to an "Agreement" dated November 23, 1998. The Agreement is filed as Exhibit 2.1 to Seer Technologies, Inc.'s Annual Report on Form 10-K405, filed January 12, 1999. The agreement was among Level 8 and twenty parties, all of whom were related to the Welsh, Carson, Anderson & Stowe investment firm (the "WCAS Parties"). The agreement obligates the WCAS Parties to grant proxies to Level 8 for all votes prior to January 1, 2001. (Agreement Section 9.3.1).
AGREEMENTS RELATED TO LEVEL 8'S PURCHASE OF MOMENTUM SOFTWARE
CORPORATION
Level 8 purchased Momentum Software Corporation in February of 1998, pursuant to an Agreement and Plan of Reorganization by and Among Level 8 Systems, Inc., Middleware Acquisition Corporation, Momentum Software Corporation and Robert Brill, Bruns Grayson and Hubertus Vandervoort, as Trustees of the Momentum Liquidating Trust, on Behalf of the Securityholders of Momentum Software Corporation (the "Momentum Purchase Agreement"), filed as Exhibit 10.42 to Level 8's Annual Report on Form 10-K, filed March 31, 1998.
Section 5.14 of the Momentum Purchase Agreement provides that the Board of Directors of Level 8 will take all actions necessary to maintain Robert Brill on the Board until December 1, 2000.
The Momentum Purchase Agreement also provides for a voting agreement in favor of Liraz. The form of that agreement shows that the Momentum Liquidating Trust (the "Trust") was to enter into a Voting and Rights Agreement with Liraz Systems, Ltd. as of March 26, 1998. The form requires the Trust to vote all of its shares in accordance with Liraz' instructions "to the extent necessary, pursuant to generally accepted accounting principles in Israel, to permit Liraz to file consolidated financial statements with Level 8."
LIRAZ - SOMECH VOTING COORDINATION AGREEMENT
In June of 1997 Liraz Systems, Inc. and Samuel Somech entered into a Voting Coordination Agreement which provided for voting to elect Mr. Somech and the candidates designated by Liraz to the Board, and otherwise provided for
coordinated voting to prevent any change in the structure of the Company without the consent of both parties.
AGREEMENT RELATED TO INVESTMENT BY CANDLE CORPORATION
The Investment Agreement dated July 26, 1996, among Across Data Systems, Inc. (predecessor to Level 8), Liraz Systems Ltd., and Candle Corporation, filed as Exhibit 10.41 to the Company's Registration Statement on Form S-1 filed November 4, 1996, allows Candle to designate to Liraz and Level 8 an individual nominee to the Board of Directors of Level 8 until the later of July 26, 1999 (three years from the date of the agreement), or the date on which, in the good faith judgment of Level 8's board, Candle and Level 8 cease to have substantial, ongoing business relationships, including but not limited to, the renewal or extension of:
1. The agency agreement for certain Candle products;
2. Candle's distribution rights and license of the Falcon External Gateway; or
3. Candle's license to incorporate Level 8's DOT/XM.
Level 8 and Liraz are obligated to use all reasonable efforts to cause the Candle designee to be elected to the Board. Despite the three year minimum on Candle's right to designate a director nominee, the agreement also provides that "[a]ny director so designated may be removed from the board of directors with or without cause at any time after the second anniversary of this agreement."
EXHIBIT A
_____________ __, 2000
VIA FACSIMILE AND CERTIFIED MAIL
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Attention: Isaac Kagen or Rosie Rosenbloom
Re: Level 8 Systems, Inc.
Transfer Restriction Related to Voting Agreement
Ladies and Gentlemen:
I am Senior Vice President, Chief Legal and Administrative Officer and Corporate Secretary of Level 8 Systems, Inc. (the "Company"). I am writing to you in such capacity to advise you that each of the stockholders listed on Schedule A attached hereto have entered into a stockholders agreement, dated as of __________ ___, 2000, with the Company (the "Stockholders Agreement"). The Stockholders Agreement applies to all of the shares of Level 8 Common Stock owned by each of the listed stockholders, whether the shares are currently owned or hereafter acquired, in accordance with the terms and conditions of the Stockholders Agreement.
You are hereby authorized and directed to stop the transfer of any shares of the Company's Common Stock held by any of the listed stockholders unless and until the Company confirms to you in writing that it has received from any transferee with respect to such shares a signed counterpart signature page to the Stockholders Agreement.
Very truly yours,
Dennis McKinnie Senior Vice President, Chief Legal and Administrative Officer and Corporate Secretary
Enclosures
PGF&M 388088
SCHEDULE A
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Liraz Systems Ltd.
Liraz Export (1990) Ltd.
Advanced Systems Europe B.V.
Welsh, Carson, Anderson & Stowe VI, L.P.
WCAS Information Partners, L.P.
WCAS Capital Partners II, L.P.