AGREEMENT
December 31, 1998
The parties to this agreement are Liraz Systems Ltd., an Israel corporation
("Liraz"), and Level 8 Systems, Inc., a New York corporation ("Level 8").
Pursuant to an agreement dated November 23, 1998, Level 8 agreed to acquire
shares of capital stock of Seer Technologies, Inc., a Delaware corporation
("Seer"), and to provide $12,000,000 of funds to Seer at the closing of
that acquisition. In order to provide Level 8 with sufficient capital to
fulfill its obligation so to provide funds to Seer, the parties wish to
provide for a loan by Liraz to Level 8 on the terms set forth in this
agreement.
Accordingly, the parties agree as follows:
1. Loan. Simultaneously with the execution and delivery of this
agreement, Level 8 is borrowing $12,000,000 from Liraz, and Level 8 is
issuing to Liraz a promissory note in the form of exhibit 1.
2. Rights Offering
(a) As promptly as practicable, Level 8 shall distribute to
all record holders of its common shares, including Liraz and its
affiliates, non-transferable rights (the "Rights"), each of which shall
entitle its holder to purchase one share of preferred stock of Level 8 (the
"Series A Convertible Preferred Stock") containing the terms set forth in
exhibit 2 for an amount equal to the product of (i) four and (ii) the
conversion price determined in accordance with the footnote to Section 3(a)
of exhibit 2 (the "Subscription Price") (the "Rights Offering").
(b) In the Rights Offering, Level 8 shall distribute to
each record holder of its outstanding common shares, as of the close of
business on a record date determined by Level 8 (the "Record Date"), at no
cost to the record holder, a number of Rights determined by dividing the
product of (i) the aggregate number of Rights distributed to all such
record holders, and (ii) a fraction determined by dividing (A) the number
of common shares held of record by the particular record holder on the
Record Date, by (B) the aggregate number of common shares outstanding on
the Record Date (the "Basic Subscription Privilege").
(c) The Rights shall be evidenced by non-transferable
subscription certificates (the "Subscription Certificates").
(d) No fractional Rights or cash in lieu of fractional
Rights shall be issued or paid, and the number of Rights distributed to
each record holder of common shares shall be rounded up to the nearest
whole number. No Subscription Certificate may be divided in such a way as
to permit the record holders of common shares to receive a greater number
of Rights than the number to which such Subscription Certificate entitles
its holder, except that a depositary, bank, trust company or securities
broker or dealer holding common shares of record on the Record Date for
more than one beneficial owner may, upon proper showing to Level 8's
designated subscription agent (the "Subscription Agent"), exchange its
Subscription Certificate to obtain a Subscription Certificate for the
number of Rights to which all such beneficial owners in the aggregate would
have been entitled had each been a holder on the Record Date. Level 8 may
refuse to issue any such Subscription Certificate, if such issuance would,
in Level 8's sole and absolute discretion, be inconsistent with the
principles underlying the Rights Offering.
(e) The Rights shall expire at 5:00 p.m., New York time, on
a date determined by Level 8 (the "Expiration Date"), which shall not be
fewer than 30 days or more than 90 days after the Rights Offering
commences. After the Expiration Date, all unexercised Rights shall be null
and void. Level 8 shall not be obligated to honor any purported exercise
of Rights received by the Subscription Agent after the Expiration Date,
regardless of when the documents relating to such exercise were sent.
(f) (i) Each Right also shall entitle a holder who
exercises the Basic Subscription Privilege in full to subscribe, at the
Subscription Price, for an additional number of shares of Series A
Convertible Preferred Stock (the "Oversubscription Privilege").
(ii) Additional shares of Series A Convertible
Preferred Stock shall be available for subscription pursuant to the
Oversubscription Privilege only to the extent that any shares of Series A
Convertible Preferred Stock are not purchased pursuant to the Basic
Subscription Privilege. If the aggregate number of shares of Series A
Convertible Preferred Stock not purchased pursuant to the Basic
Subscription Privilege (the "Remaining Shares") is not sufficient to
satisfy all subscriptions pursuant to the Oversubscription Privilege, the
aggregate number of Remaining Shares shall be allocated pro rata among
those holders subscribing pursuant to the Oversubscription Privilege, in
proportion to the number of shares of Series A Convertible Preferred Stock
each such holder shall have purchased pursuant to the Basic Subscription
Privilege; provided that, if such pro rata allocation results in any such
holder being allocated a greater number of Remaining Shares than such
holder subscribed for pursuant to the Oversubscription Privilege, such
holder shall be allocated only such number of Remaining Shares as such
holder subscribed for; and further provided that, if such pro rata
allocation results in any such holder being allocated a number of Remaining
Shares less than such holder subscribed for pursuant to the
Oversubscription Privilege, the excess funds paid by such holder as the
Subscription Price for shares of Series A Convertible Preferred Stock not
issued shall be returned without interest or deduction.
(iii) Banks, brokers and other nominee holders of
Rights who exercise the Basic Subscription Privilege and subscribe pursuant
to the Oversubscription Privilege on behalf of beneficial owners of Rights
shall be required to certify to the Subscription Agent and Level 8, in
connection with the subscription pursuant to the Oversubscription
Privilege, as to the aggregate number of Rights that have been exercised
and the number of shares of Series A Convertible Preferred Stock being
subscribed for pursuant to the Oversubscription Privilege by each
beneficial owner of Rights on whose behalf such nominee holder is acting.
(g) Certificates representing the shares of Series A
Convertible Preferred Stock purchased pursuant to the Rights Offering shall
be delivered to subscribers as soon as practicable after the Expiration
Date.
(h) The Subscription Price shall be payable in full by
check or bank draft drawn upon a U.S. bank or postal, telegraphic or
express money order payable to the Subscription Agent. Liraz may, at its
option, in lieu of so paying all or any of the Subscription Price, so pay
all or any of the Subscription Price and pay the balance of the
Subscription Price by exchanging, on a dollar-for-dollar basis, any or all
of its right to receive accrued interest or principal on the promissory
note referred to in section 1 by delivering such promissory note to the
Subscription Agent, together with written instructions to cancel the right
ro receive a specified amount of accrued interest or principal.
(i) Rights may be exercised by delivering to the
Subscription Agent, on or prior to 5:00 p.m., New York time, on the
Expiration Date, the properly completed and executed Subscription
Certificate evidencing such Rights with any required signature guaranties,
together with payment in full of the Subscription Price for the number of
shares of Series A Convertible Preferred Stock purchased pursuant to the
Basic Subscription Privilege and subscribed for pursuant to the
Oversubscription Privilege. The Subscription Price shall be deemed to have
been received by the Subscription Agent only upon (i) clearance of any
uncertified check, (ii) receipt by the Subscription Agent of any certified
check or bank draft drawn upon a U.S. bank or of any postal, telegraphic or
express money order or (iii) receipt by the Subscription Agent of the
promissory note and written instructions referred to in the last sentence
of section 2(h).
(j) The Rights Offering shall contain such other terms as
Liraz and Level 8 shall mutually agree.
3. Further Assurances. From time to time, each party shall
take such action and execute and deliver such documents as the other may
reasonably request to carry out the transactions contemplated by this
agreement.
4. Miscellaneous
(a) This agreement shall be governed by and construed in
accordance with the law of the state of New York, without giving effect to
its conflicts of law principles.
(b) The section headings of this agreement are for
reference purposes only, and are to be given no effect in the construction
or interpretation of this agreement.
(c) All notices and other communications under this
agreement shall be in writing and may be given by any of the following
methods: (i) personal delivery; (ii) facsimile transmission; (iii)
registered or certified mail, postage prepaid, return receipt requested; or
(iv) overnight delivery service. Notices shall be sent to the appropriate
party at its address or facsimile number given below (or at such other
address or facsimile number for such party as shall be specified by notice
given under this section 4(c)):
(i) If to Liraz, to:
Liraz Systems Ltd.
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Fax No.: (▇)▇▇▇▇▇▇▇
Attention: Chief Financial Officer
With a copy to:
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Hashmonaim Tower, 100 Hashmonaim Street
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Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Adv.
(ii) if to ▇▇▇▇▇ ▇, to:
Level 8 Systems, Inc.
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Attention: Chief Financial Officer
With a copy to:
Proskauer Rose LLP
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
All such notices and communications shall be deemed received upon (i)
actual receipt by the addressee, (ii) actual delivery to the appropriate
address or (iii) in the case of a facsimile transmission, upon transmission
by the sender and issuance by the transmitting machine of a confirmation
slip confirming that the number of pages constituting the notice have been
transmitted without error. In the case of notice sent by facsimile
transmission, the sender shall contemporaneously mail a copy of the notice
to the address at the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
(d) The invalidity or unenforceability of any provision of
this agreement shall not affect the validity or enforceability of any other
provision of this agreement, which shall remain in full force and effect.
(e) Either party may waive compliance by the other party
with any provision of this agreement. No waiver of any provision shall be
construed as a waiver of any other provision. Any waiver must be in
writing and signed by the waiving party.
(f) This agreement may be executed in counterparts, each of
which shall be an original, but both of which together shall constitute one
and the same agreement.
(g) This agreement (with its exhibits) contains, and is
intended as, a complete statement of all the terms of the arrangements
between the parties with respect to the matters provided for, supersedes
all previous agreements and understandings between the parties with respect
to those matters, cannot be changed or terminated orally and any amendment or
modification must be in writing and signed by the party to be charged.
LIRAZ SYSTEMS LTD.
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Financial Officer
LEVEL 8 SYSTEMS, INC.
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer