CUSIP NO. 005018 10 6 Page 1 of 41 Pages
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. )1
Level 8 Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.01 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
005018 10 6
- --------------------------------------------------------------------------------
(CUSIP Number)
Welsh, Carson, Anderson Robert A. Schwed, Esq.
& Stowe Reboul, MacMurray, Hewitt,
320 Park Avenue, Suite 2500 Maynard & Kristol
New York, New York 10022 45 Rockefeller Plaza
Attention: Laura VanBuren New York, New York 10111
Tel. (212) 893-9500 Tel. (212) 841-5700
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 31, 1998
- --------------------------------------------------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
- --------
1 The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page. The information required on the
remainder of this cover page shall not be deemed to be "filed" for the purpose
of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that section of the Act but shall be subject to all other
provisions of the Act.
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CUSIP NO. 005018 10 6 Page 2 of 41 Pages
1) Name of Reporting Person Welsh, Carson, Ander-
S.S. or I.R.S. Identification son & Stowe VI, L.P.
No. of Above Person
- --------------------------------------------------------------------------------
2) Check the Appropriate Box (a) [X]
if a Member of a Group (b) [ ]
- --------------------------------------------------------------------------------
3) SEC Use Only
- --------------------------------------------------------------------------------
4) Source of Funds OO
- --------------------------------------------------------------------------------
5) Check if Disclosure of
Legal Proceedings Is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
- --------------------------------------------------------------------------------
6) Citizenship or Place
of Organization Delaware
- --------------------------------------------------------------------------------
Number of 7) Sole Voting 1,181,053 shares of
Shares Beneficially Power Common Stock
Owned by Each (including shares
Reporting Person: issuable upon
exercise of
warrants)
--------------------------------------------
8) Shared Voting
Power -0-
--------------------------------------------
9) Sole Disposi- 1,181,053 shares of
tive Power Common Stock
(including shares
issuable upon
exercise of
warrants)
--------------------------------------------
10) Shared Dis-
positive Power -0-
--------------------------------------------
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CUSIP NO. 005018 10 6 Page 3 of 41 Pages
11) Aggregate Amount Beneficially 1,181,053 shares of
Owned by Each Reporting Person Common Stock
(including shares
issuable upon
exercise of
warrants)
- --------------------------------------------------------------------------------
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
- --------------------------------------------------------------------------------
13) Percent of Class
Represented by 13.3%
Amount in Row (11)
- --------------------------------------------------------------------------------
14) Type of Reporting
Person PN
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CUSIP NO. 005018 10 6 Page 4 of 41 Pages
1) Name of Reporting Person WCAS Information
S.S. or I.R.S. Identification Partners, L.P.
No. of Above Person
- --------------------------------------------------------------------------------
2) Check the Appropriate Box (a) [X]
if a Member of a Group (b) [ ]
3) SEC Use Only
- --------------------------------------------------------------------------------
4) Source of Funds OO
- --------------------------------------------------------------------------------
5) Check if Disclosure of
Legal Proceedings Is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
- --------------------------------------------------------------------------------
6) Citizenship or Place
of Organization Delaware
- --------------------------------------------------------------------------------
Number of 7) Sole Voting 14,113 shares of
Shares Beneficially Power Common Stock
Owned by Each (including shares
Reporting Person: issuable upon
exercise of
warrants)
--------------------------------------------
8) Shared Voting
Power -0-
--------------------------------------------
9) Sole Disposi- 14,113 shares of
tive Power Common Stock
(including shares
issuable upon
exercise of
warrants)
--------------------------------------------
10) Shared Dis-
positive Power -0-
--------------------------------------------
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CUSIP NO. 005018 10 6 Page 5 of 41 Pages
11) Aggregate Amount Beneficially 14,113 shares of
Owned by Each Reporting Person Common Stock
(including shares
issuable upon
exercise of
warrants)
- --------------------------------------------------------------------------------
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
- --------------------------------------------------------------------------------
13) Percent of Class
Represented by 0.2%
Amount in Row (11)
- --------------------------------------------------------------------------------
14) Type of Reporting
Person PN
- --------------------------------------------------------------------------------
<PAGE>
CUSIP NO. 005018 10 6 Page 6 of 41 Pages
Schedule 13D
------------
Item 1. Security and Issuer.
-------------------
This statement relates to the Common Stock, $.01 par value (the
"Common Stock"), of Level 8 Systems, Inc., a New York corporation ("Level 8" or
the "Issuer"). The principal executive offices of the Issuer are located at 1250
Broadway, 35th Floor, New York, New York 10001.
Item 2. Identity and Background.
-----------------------
(a) Pursuant to Rule 13d-1(k)(1)-(2) of Regulation 13D-G of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Act"), the undersigned hereby file this statement on Schedule 13D
on behalf of Welsh, Carson, Anderson & Stowe VI, L.P., a Delaware limited
partnership ("WCAS VI") and WCAS Information Partners, L.P., a Delaware limited
partnership ("WCAS IP"). WCAS VI and WCAS IP are sometimes hereinafter referred
to as the "Reporting Persons". The Reporting Persons are making this single,
joint filing because they may be deemed to constitute a "group" within the
meaning of Section 13(d)(3) of the Act. The Agreement between the Reporting
Persons to file as a group (the "Group Agreement") is attached hereto as Exhibit
A.
WCAS VI
-------
(b)-(c) WCAS VI is a Delaware limited partnership. The principal
business of WCAS VI is that of a private investment partnership. The sole
general partner of WCAS VI is WCAS VI Partners, L.P., a Delaware limited
partnership ("VI Partners"). The principal business of VI Partners is that of
acting as the general partner of WCAS VI. The principal business and principal
office address of WCAS VI, VI Partners and the general partners of VI Partners
is 320 Park Avenue, Suite 2500, New York, New York 10022. The general partners
of VI Partners are citizens of the United States, and their respective principal
occupations are set forth below.
WCAS IP
-------
(b)-(c) WCAS IP is a Delaware limited partnership. The principal
business of WCAS IP is that of a private investment partnership. The sole
general partner of WCAS IP is WCAS INFO Partners, a Delaware general partnership
("INFO Partners"). The principal business of INFO Partners is that of acting as
the general partner of WCAS IP. The principal business and principal
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CUSIP NO. 005018 10 6 Page 7 of 41 Pages
office address of WCAS IP, INFO Partners and the general partners of INFO
Partners is 320 Park Avenue, Suite 2500, New York, New York 10022. The general
partners of INFO Partners are citizens of the United States, and their
respective principal occupations are set forth below.
General Partners Occupation
- ---------------- ----------
Patrick J. Welsh General Partner, VI Partners
Russell L. Carson General Partner, VI Partners
Bruce K. Anderson General Partner, VI Partners and INFO
Partners
Thomas E. McInerney General Partner, VI Partners and INFO
Partners
Andrew M. Paul General Partner, VI Partners
Laura VanBuren General Partner, VI Partners
Robert A. Minicucci General Partner, VI Partners
Anthony J. deNicola General Partner, VI Partners
Paul B. Queally General Partner, VI Partners
(d) None of the entities or persons identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2 has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds and Other Consideration.
--------------------------------------------------
On December 31, 1998 Level 8 issued to WCAS VI and WCAS IP (i) an
aggregate 956,134 shares of Common Stock and (ii) warrants to purchase an
aggregate of up to 239,032 shares of Common Stock for $12.00 per share pursuant
to an Agreement dated November 23, 1998 between Level 8 and the parties named
therein
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CUSIP NO. 005018 10 6 Page 8 of 41 Pages
(the "WCAS Parties"), including WCAS VI and WCAS IP (the "Agreement"). A copy of
the Agreement is attached hereto as Exhibit B, and any description thereof is
qualified in its entirety by reference thereto. As further described in the
Agreement, the Common Stock and warrants were issued to the Reporting Persons in
connection with the proposed acquisition by Level 8 of Seer Technologies, Inc.,
a Delaware corporation ("Seer"), as consideration for the assignment and
transfer to Level 8 of all of the shares of capital stock, and rights to acquire
shares of capital stock, of Seer that were owned by the Reporting Persons. The
individual general partners of the respective general partners of the Reporting
Persons also received Common Stock and warrants as WCAS Parties.
Item 4. Purpose of Transaction.
----------------------
The purpose of the transaction described in Item 3 was to provide for
the acquisition by Level 8 of all of the shares of capital stock, and rights to
acquire shares of capital stock, of Seer that were owned by the Reporting
Persons. The Reporting Persons acquired the Common Stock and warrants of Level 8
for investment purposes.
Item 5. Interest in Securities of the Issuer.
------------------------------------
The following information is based on a total of 8,658,231 shares of
Common Stock outstanding as of January 7, 1999, and gives effect to the exercise
of all presently-exercisable warrants held by the persons named below:
(a)
WCAS VI and VI Partners
-----------------------
WCAS VI owns 1,181,053 shares of Common Stock, or approximately 13.3%
of the Common Stock outstanding. VI Partners, as the general partner of
WCAS VI, may be deemed to beneficially own the securities owned by WCAS VI.
WCAS IP and INFO Partners
-------------------------
WCAS IP owns 14,113 shares of Common Stock, or approximately 0.2% of
the Common Stock outstanding. INFO Partners, as the general partner of WCAS
IP, may be deemed to beneficially own the securities owned by WCAS IP.
General Partners of VI Partners and INFO Partners
-------------------------------------------------
(i) Patrick J. Welsh owns directly 7,056 shares of
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CUSIP NO. 005018 10 6 Page 9 of 41 Pages
Common Stock and indirectly, in three trusts for the benefit of his minor
children, 3,024 shares of Common Stock, or, in the aggregate, approximately
0.1% of the Common Stock outstanding.
(ii) Russell L. Carson owns 10,080 shares of Common Stock, or
approximately 0.1% of the Common Stock outstanding.
(iii) Bruce K. Anderson owns 10,080 shares of Common Stock, or
approximately 0.1% of the Common Stock outstanding.
(iv) Andrew M. Paul owns 2,419 shares of Common Stock, or less than
0.1% of the Common Stock outstanding.
(v) Thomas E. McInerney owns 2,016 shares of Common Stock, or less
than 0.1% of the Common Stock outstanding.
(vi) Laura VanBuren owns 403 shares of Common Stock, or less than 0.1%
of the Common Stock outstanding.
(vii) Robert A. Minicucci owns 5,040 shares of Common Stock, or less
than 0.1% of the Common Stock outstanding.
(vii) Anthony J. deNicola owns 605 shares of Common Stock, or less
than 0.1% of the Common Stock outstanding.
(b) The general partners of each of VI Partners and INFO Partners may
be deemed to share the power to vote or direct the voting of and to dispose or
direct the disposition of the securities of the Issuer owned by WCAS VI and WCAS
IP, respectively. Each of the general partners of VI Partners and INFO Partners
disclaims beneficial ownership of all securities other than the shares he or she
owns directly or by virtue of his or her indirect pro rata interest, as a
partner of VI Partners and/or INFO Partners, as the case may be, in the shares
owned by WCAS VI and/or WCAS IP.
(c) Except as described in this statement, none of the entities or
persons named in Item 2 has effected any transaction in the Issuer's securities
in the past 60 days.
(d) Except as described in this statement, no person has the power to
direct the receipt of dividends on or the proceeds of sales of the shares owned
by WCAS VI or WCAS IP.
(e) Not Applicable.
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CUSIP NO. 005018 10 6 Page 10 of 41 Pages
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities
of the Issuer.
------------------------------------------
Pursuant to the Agreement, prior to January 1, 2001, at any meeting of
shareholders of Level 8, each WCAS Party shall grant a proxy to one or more
individuals named by Level 8 to vote all of that WCAS Party's shares of Common
Stock acquired under the Agreement. Also pursuant to the Agreement, prior to
January 1, 2001, no WCAS Party may sell, exchange or otherwise assign any of its
shares of Common Stock acquired under the Agreement without the prior written
consent of Level 8, except for the transfer to a partner or affiliate of a WCAS
Party who agrees to be bound by the provisions of the Agreement.
Item 7. Material to Be Filed as Exhibits.
--------------------------------
Exhibit A - Group Agreement (Appears at Page 12)
Exhibit B - Agreement (Appears at Page 13)
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CUSIP NO. 005018 10 6 Page 11 of 41 Pages
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: January 11, 1999
WELSH, CARSON, ANDERSON & STOWE VI, L.P.
By: WCAS VI Partners, L.P., General Partner
By: /s/ Laura Van Buren
----------------------
General Partner
WCAS INFORMATION PARTNERS, L.P.
By: WCAS INFO Partners, General Partner
By: /s/ Laura VanBuren
---------------------
Attorney-in-Fact
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CUSIP NO. 005018 10 6 Page 12 of 41 Pages
EXHIBIT A
---------
AGREEMENT
OF
WELSH, CARSON, ANDERSON & STOWE VI, L.P.,
AND WCAS INFORMATION PARTNERS, L.P.
Pursuant to Rule 13d-1(k)
-------------------------
The undersigned hereby agree that the Statement on Schedule 13D to
which this Agreement is annexed as Exhibit A is filed on behalf of each of them
in accordance with the provisions of Rule 13d-1(k) under the Securities Exchange
Act of 1934, as amended.
Dated: January 11, 1999
WELSH, CARSON, ANDERSON & STOWE VI, L.P.
By: WCAS VI Partners, L.P., General Partner
By: /s/ Laura Van Buren
----------------------
General Partner
WCAS INFORMATION PARTNERS, L.P.
By: WCAS INFO Partners, General Partner
By: /s/ Laura VanBuren
---------------------
Attorney-in-Fact
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CUSIP NO. 005018 10 6 Page 13 of 41 Pages
EXHIBIT B
---------
AGREEMENT
Dated November 23, 1998
-----------------------
The parties to this agreement are Level 8 Systems, Inc., a New York
corporation ("Level 8"), and the parties listed under "WCAS Parties" at the end
of this agreement (each, a "WCAS Party" and, collectively, the "WCAS Parties").
The parties wish to provide for the acquisition by Level 8 of all the
shares of capital stock of Seer Technologies, Inc., a Delaware corporation (the
"Company"), the WCAS Parties own, and all the rights the WCAS Parties have to
acquire shares of capital stock of the Company (collectively, the "WCAS
Securities") on the terms set forth in this agreement.
Accordingly, the parties agree as follows:
1. Exchange. At the Closing (as defined in section 2), (a) each WCAS
Party shall (i) assign and transfer to Level 8 or a subsidiary of Level 8 all
the WCAS Securities now owned or acquired by it prior to the Closing, free and
clear of any adverse claim, and (ii) contribute to the capital of the Company,
or cause to be contributed to the capital of the Company, the percentage of the
amount referred to in section 7.1(d) set forth beside its name on schedule
7.1(g), and, in consideration therefor, (b) Level 8 shall issue to the WCAS
Parties an aggregate of 1,000,000 shares of common stock of Level 8 (the "Level
8 Shares") and warrants (the "Level 8 Warrants") to purchase an aggregate of up
to 250,000 Level 8 Shares for $12.00 a share (which may be paid in cash or by
reducing the number of Level 8 Warrants as provided in clause (ii)(B) of the
first sentence of paragraph 1(b) of exhibit 8.2(a)) at any time before 5:00
p.m., New York time, on the fourth anniversary of the Closing, free and clear of
any adverse claim.
2. Closing. The closing of the transactions contemplated by section 1 (the
"Closing") shall take place at 10:00 a.m., New York time, at the offices of
Proskauer Rose LLP, 1585 Broadway, New York, New York 10036, on the third
business day following the fulfillment of all the conditions specified in
sections 7.1(h) and (k) and 7.2(d) and (f). At the Closing, the parties shall
execute and deliver, or use all reasonable efforts to cause to be executed and
delivered, the documents and other items referred to in section 8.
3. Termination. If the Closing shall not have occurred on or before
January 31, 1999, Level 8 or the WCAS Parties may terminate this
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CUSIP NO. 005018 10 6 Page 14 of 41 Pages
agreement by notice given to the others. However, the termination of this
agreement pursuant to the preceding sentence shall not relieve a party of
liability for any breach of warranty or agreement, or misrepresentation, prior
to such termination.
4. Representation and Warranties of the WCAS Parties. Each WCAS Party,
severally and not jointly, represents and warrants to Level 8 with respect to
itself as follows:
4.1. Authority. Each WCAS Party has the full authority to execute, deliver
and perform this agreement, and this agreement constitutes the valid and binding
obligation of that WCAS Party, enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
4.2. Consents of Third Parties. The execution, delivery and performance of
this agreement by each WCAS Party will not: (a) violate or conflict with that
WCAS Party's partnership agreement; (b) conflict with, or result in the breach
of, or constitute a default under, any lease, agreement, commitment or other
instrument to which that WCAS Party is a party or by which that WCAS Party or
its properties are bound; or (c) constitute a violation of any law, regulation,
order, writ, judgment, injunction or decree applicable to that WCAS Party or any
of that WCAS Party's properties or require any governmental consent or approval.
4.3. WCAS Securities. Each WCAS Party owns all the WCAS Securities to be
assigned and transferred by it to Level 8 under section 1. The shares of capital
stock of the Company included in the WCAS Securities to be assigned and
transferred to Level 8 under section 1 are duly authorized, validly issued,
fully paid and non-assessable, and free and clear of any adverse claim.
4.4. Litigation. To the best of the knowledge of each WCAS Party, there is
no judicial or administrative action, proceeding or investigation pending or
threatened against it or the Company that questions the validity of this
agreement or any action taken or to be taken by it in connection with this
agreement.
4.5. Investment. Each WCAS Party will be acquiring the Level 8 Shares and
Level 8 Warrants, and any Level 8 Share issuable upon exercise of the Level 8
Warrants, for investment purposes and not with a view to resale or distribution
in violation of applicable securities laws.
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CUSIP NO. 005018 10 6 Page 15 of 41 Pages
4.6. Related Party Transactions. Except as set forth in the Company's proxy
statement for the Company's last annual meeting or in the Company's reports
filed with the Securities and Exchange Commission (the "SEC") pursuant to
section 13(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and
except as provided in section 6.6, neither the Company nor any of its
subsidiaries has engaged in any transaction with any WCAS Party or any affiliate
of any WCAS Party since September 30, 1995.
5. Representations and Warranties of Level 8. Level 8 represents and
warrants to the WCAS Parties as follows:
5.1. Authorization. The execution, delivery and performance of this
agreement and the Level 8 Warrants by Level 8 have been duly authorized by all
necessary corporate action of Level 8, and this agreement constitutes, and, upon
execution and delivery of the Level 8 Warrants, the Level 8 Warrants will
constitute, the valid and binding obligations of Level 8, enforceable against it
in accordance with their respective terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
5.2. Consents of Third Parties. The execution, delivery and performance of
this agreement and the Level 8 Warrants by Level 8 will not: (a) violate or
conflict with the certificate of incorporation or by-laws of Level 8; (b)
conflict with, or result in the breach of, or constitute a default under, any
lease, agreement, commitment or other instrument to which Level 8 or any of its
subsidiaries is a party or by which Level 8's or such subsidiaries' properties
are bound; or (c) constitute a violation of any law, regulation, order, writ,
judgment, injunction or decree applicable to Level 8 or any of its subsidiaries
or Level 8's or such subsidiaries' properties or require any governmental
consent or approval.
5.3. Litigation. To the best of the knowledge of Level 8, there is no
judicial or administrative action, proceeding or investigation pending or
threatened that questions the validity of this agreement or the Level 8 Warrants
or any action taken or to be taken by Level 8 in connection with this agreement
or the Level 8 Warrants.
5.4. Investment. Level 8 will be acquiring the WCAS Securities for
investment purposes and not with a view to resale or distribution in violation
of applicable securities laws.
6. Certain Agreements.
6.1. Access to Information. Prior to the Closing, each WCAS Party
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CUSIP NO. 005018 10 6 Page 16 of 41 Pages
shall use reasonable efforts to enable Level 8 to make such additional
investigation of the business and properties of the Company and its subsidiaries
as Level 8 may wish, and, upon reasonable notice, to cause the Company to give
Level 8 and its counsel, accountants and other representatives reasonable
access, during normal business hours throughout the period prior to the Closing,
to the property, books, agreements, records, files and personnel of the Company
and its subsidiaries and to cause the Company to furnish Level 8 during that
period copies of documents and information concerning the Company and its
subsidiaries as Level 8 may reasonably request. Level 8 shall, and shall cause
its counsel, accountants and other agents and representatives to, hold all such
information and documents in accordance with and subject to the terms of the
confidentiality agreement previously executed by Level 8 with respect to this
transaction.
6.2. Conduct of the Business Pending the Closing. Prior to the Closing,
each WCAS Party shall use reasonable efforts to cause the Company and its
subsidiaries to comply with the following provisions:
6.2.1. The Company and its subsidiaries shall operate their businesses in
the ordinary course consistent with past practice, and shall not take any
extraordinary action or make any extraordinary commitment (including the
adoption of any material employee benefit plan or benefit arrangement or the
acquisition, disposition or winding-up of a business) without the prior approval
of Level 8.
6.2.2. The Company shall promptly notify Level 8 of, and furnish Level 8
any information Level 8 may reasonably request with respect to the occurrence
of, any event or the existence of any facts that would result in the information
in the Company's filings with the SEC since September 30, 1997, taken as a whole
(the "SEC Information"), containing any misstatement of a material fact, or
omitting to state a material fact, about the Company and its subsidiaries, as if
the filings were made at any time on or after the date of this agreement.
6.2.3. The Company shall not declare, set aside or pay any dividends or
other distributions in respect of its shares of capital stock, redeem, purchase
or otherwise acquire any shares of its capital stock or issue, sell or encumber
any shares of its capital stock or forgive any of its indebtedness.
6.2.4. The Company shall not amend its certificate of incorporation or
by-laws or enter into any merger or consolidation agreement.
6.2.5. Except as contemplated by this agreement, neither the Company nor
its subsidiaries shall amend any of their loan agreements or incur any
indebtedness for borrowed money (other than under their
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CUSIP NO. 005018 10 6 Page 17 of 41 Pages
existing loan agreements).
6.3. Governmental Filings. Prior to the Closing, as promptly as
practicable, each party shall make, or cause to be made, and shall cooperate
with each other party in making, all required governmental filings, including,
without limitation, all appropriate filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), in order to carry out this
agreement, and shall take, or cause to be taken, such further action as may
reasonably be required in connection therewith.
6.4. Acquisition of Minority.
6.4.1. Immediately after the Closing, Level 8 shall, or shall cause a
subsidiary (the "Sub") to, commence (within the meaning of Rule 14d-2 under the
Exchange Act) an offer to purchase all the outstanding shares of common stock of
the Company (other than the WCAS Securities) at a price of $0.35 a share, net to
the seller in cash (the "Offer"), and, subject to the conditions of the Offer,
shall use all reasonable efforts to make and consummate the Offer as promptly as
permitted by law. The obligation of Level 8 or the Sub to consummate the Offer
and accept for payment and pay for any shares tendered pursuant to the Offer
shall be subject to the conditions set forth in schedule 6.4.1.
6.4.2. Neither Level 8 nor the Sub shall, without the prior written consent
of the WCAS Parties, decrease the amount or change the form of consideration
payable in the Offer or decrease the number of shares sought pursuant to the
Offer, change the conditions of the Offer or impose any additional conditions of
the Offer. The conditions of the Offer are for the sole benefit of Level 8 or
the Sub and may be asserted by Level 8 or the Sub regardless of the
circumstances giving rise to the non-fulfillment of any such conditions or may
be waived by Level 8 or the Sub in whole or in part.
6.4.3. As soon as practicable on the date of commencement of the Offer,
Level 8 or the Sub shall file with the SEC (i) a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer, which will contain the offer to
purchase and form of the related letter of transmittal (which, together with any
supplements or amendments to those documents, are collectively referred to as
the "Offer Documents"), and (ii) Rule 13E-3 Transaction Statement on Schedule
13E-3 (which, as amended or supplemented, is referred to as the "Schedule
13E-3") with respect to the Offer. Level 8 or the Sub shall cause the Offer
Documents and the Schedule 13E-3 to comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with the
SEC and on the date first published, sent or given to the Company's
shareholders, not to contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make
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CUSIP NO. 005018 10 6 Page 18 of 41 Pages
the statements therein, in light of the circumstances under which they are made,
not misleading (except that neither shall be responsible with respect to
information supplied by the Company or any WCAS Party in writing specifically
for inclusion in the Offer Documents). Level 8 shall promptly correct any
information provided by it for use in the Offer Documents and the Schedule
13E-3, if and to the extent such information shall have become false or
misleading in any material respect, and Level 8 or the Sub shall take all steps
necessary to cause the Offer Documents and the Schedule 13E-3 as so corrected to
be filed with the SEC and to be disseminated to holders of shares, in each case
as and to the extent required by applicable federal securities laws.
6.4.4. Level 8 shall, or shall cause the Sub to, use its best efforts to
acquire as promptly as practicable after the completion of the Offer, through a
merger, all the outstanding shares of common stock of the Company it shall not
have acquired at the Closing or in the Offer for $0.35 a share, in cash.
6.4.5. The Company and its shareholders are intended beneficiaries of this
section 6.4.
6.5. Other Pre-Closing Action. Each party shall use reasonable efforts to
cause the fulfillment as soon as practicable of all the conditions to its
obligation to consummate the transactions under section 1.
6.6. Expenses. Each party shall bear its own expenses in connection with
this agreement and all obligations to be performed by it under this agreement,
except that it is understood and agreed that the Company shall bear up to
$75,000 of the expenses of the WCAS Parties in connection with this agreement
and their obligations to be performed under this agreement.
6.7. Publicity. Without otherwise limiting any party's rights under this
agreement or otherwise, prior to the Closing (or, if earlier, the termination of
this agreement), each party shall consult with and obtain the consent of the
other parties before issuing any press release or making any similar public
disclosure concerning this agreement or the transactions referred to in this
agreement, unless, in the reasonable judgment of the party issuing the release
or making the disclosure, the release or disclosure is required as a matter of
law (in which case it shall consult as set forth above before issuing the
release or making the disclosure).
6.8. Transfer Taxes. Each party shall pay all sales, stock transfer and
other similar taxes and fees in respect of the transfer of securities by it
under this agreement.
6.9. Other Transactions. Each WCAS Party agrees that, prior to
<PAGE>
CUSIP NO. 005018 10 6 Page 19 of 41 Pages
the Closing (or, if earlier, the termination of this agreement), it shall not,
and shall use reasonable efforts not to permit its officers, directors or other
agents (collectively, the "Agents"), directly or indirectly, to (a) take any
action to solicit, initiate, encourage, accept or agree to any Acquisition
Proposal (as defined below), (b) engage in negotiations with any person or
entity that, to the best of its, his or her knowledge, may be considering
making, or has made, an Acquisition Proposal or (c) except in accordance with
section 6.7, disclose any non-public information relating to the Company or
afford access to the assets, books or records of the Company to any person or
entity that, to the best of its, his or her knowledge, may be considering
making, or has made, an Acquisition Proposal. As used in this section 6.9, the
term "Acquisition Proposal" means any offer or proposal for, or any indication
of interest in, any merger or other business combination involving the Company,
or the acquisition of any equity interest in, or any material portion of the
assets of, the Company, other than the transactions contemplated by this
agreement.
7. Conditions to Closing.
7.1. Conditions to Obligation of Level 8. The obligation of Level 8 to
consummate the transactions under section 1 is subject to the fulfillment, prior
to or at the Closing, of each of the following conditions (any or all of which
may be waived by Level 8):
(a) the representations and warranties of each WCAS Party to Level 8
shall be true and correct in all material respects at and as of the time of the
Closing with the same effect as though made again at and as of that time;
(b) the agreements to be performed or complied with by each WCAS Party
and the Company prior to or at the Closing shall have been performed and
complied with by them;
(c) each WCAS Party shall have furnished Level 8 with a certificate
(dated the date of the Closing) with respect to itself to the effect set forth
in clauses (a) and (b) above;
(d) the WCAS Parties shall have contributed to the capital of the
Company, or caused to be contributed to the capital of the Company, an aggregate
amount equal to the lesser of $17,000,000 or the amount of the Company's
outstanding liabilities and obligations to NationsBank, N.A. (the "Bank") at the
Closing (which amount shall not be less than the amount outstanding at the close
of business on November 18, 1998), which the Company shall use at the Closing to
pay all such liabilities and obligations to the Bank;
(e) each WCAS Party shall have executed and delivered to the Company a
release of all claims arising out of the contributions and
<PAGE>
CUSIP NO. 005018 10 6 Page 20 of 41 Pages
payment referred to in clause (d) above in form and substance satisfactory to
Level 8;
(f) the Company and Greyrock Capital shall have executed and delivered
documents and instruments that reflect the terms set forth in schedule 7.1(f) in
form and substance satisfactory to Level 8;
(g) the Company's authorized capital stock shall be comprised of
30,000,000 shares of common stock, 11,980,633 of which shall be outstanding, and
10,000,000 shares of preferred stock, of which 2,094,143 shares of Series A
Preferred Stock and 1,762,115 shares of Series B Preferred Stock shall be
outstanding. The WCAS Parties shall own the numbers of each class and series of
capital stock of the Company set forth on schedule 7.1(g). There shall be no
other outstanding shares or options or rights of any kind to acquire any shares
of any class of securities or any securities convertible into any shares of any
class of securities of the Company, nor shall there be any obligations to issue
any such options, rights or securities;
(h) Level 8 shall have received not less than $12,000,000 from Liraz
Systems Ltd. ("Liraz") to fund the obligations under section 9.1;
(i) there shall not be in effect any injunction or restraining order
issued by a court of competent jurisdiction in any action or proceeding against
the consummation of the transactions under this agreement;
(j) the SEC Information shall not contain any misstatement of a
material fact, or omit to state a material fact, about the Company and its
subsidiaries, as if the SEC Information were stated again as of the Closing, and
there shall have been no material adverse change in the business of the Company
and its subsidiaries taken as a whole since September 30, 1998; and
(k) the waiting period under the HSR Act shall have expired or
terminated.
7.2. Conditions to Obligations of the WCAS Parties. The obligations of the
WCAS Parties to consummate the transactions under section 1 are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by the WCAS Parties):
(a) the representations and warranties of Level 8 to the WCAS Parties
shall be true and correct in all material respects at and as of the time of the
Closing with the same effect as though made again at and as of that time;
<PAGE>
CUSIP NO. 005018 10 6 Page 21 of 41 Pages
(b) the agreements to be performed or complied with by Level 8 prior
to or at the Closing shall have been performed and complied with by Level 8;
(c) Level 8 shall have furnished each WCAS Party with a certificate
(dated the date of the Closing) to the effect set forth in clauses (a) and (b)
above;
(d) Level 8 shall have received not less than $12,000,000 from Liraz
to fund the obligations under section 9.1;
(e) there shall not be in effect any injunction or restraining order
issued by a court of competent jurisdiction in any action or proceeding against
the consummation of the transactions under this agreement;
(f) the waiting period under the HSR Act shall have expired or
terminated; and
(g) the WCAS Parties shall have received a release from the Bank from
all liabilities and obligations to the Bank in respect of the Company's and its
subsidiaries' liabilities and obligations to the Bank, which release shall be in
form and substance reasonably satisfactory to the WCAS Parties.
8. Documents and Items to be Delivered at the Closing.
8.1. Documents and Items to be Delivered by the WCAS Parties. At the
Closing, the respective WCAS Parties shall deliver, or cause to be delivered, to
Level 8 the following:
(a) stock certificates evidencing all their respective WCAS
Securities, duly endorsed in blank or accompanied by stock transfer powers, and
with all required stock transfer tax stamps attached;
(b) the respective certificates referred to in section 7.1(c);
(c) the respective releases referred to in section 7.1(e); and
(d) evidence of the payment referred to in section 7.1(d).
8.2. Documents and Items to be Delivered by Level 8. At the Closing, Level
8 shall deliver, or cause to be delivered, to the WCAS Parties, the following:
(a) stock certificates representing the Level 8 Shares and the Level 8
Warrants (in the form of exhibit 8.2(a)) referred to in
<PAGE>
CUSIP NO. 005018 10 6 Page 22 of 41 Pages
section 1 in the names and denominations set forth in schedule 8.2(a);
(b) the certificate referred to in section 7.2(c); and
(c) evidence of its receipt of the funds referred to in section
7.2(d).
9. Post-Closing Agreements.
9.1. Funding of the Company. Immediately after the Closing, Level 8 shall
provide the Company with $12,000,000 in the form of a capital contribution or a
long-term loan.
9.2. Transactions with the Company. Prior to the consummation of the merger
referred to in section 6.4.4, Level 8 shall not engage in any transaction with
the Company on terms less favorable to the Company than the terms on which an
unaffiliated third party would engage in such transaction.
9.3. Voting and Transfer Restrictions.
9.3.1. Prior to January 1, 2001 (the "Outside Date"), at any meeting of
shareholders of Level 8, each WCAS Party shall grant a proxy to one or more
individuals named by Level 8 from time to time to vote all that WCAS Party's
Level 8 Shares as Level 8 may from time to time request by notice given to that
WCAS Party not fewer than three business days before a particular meeting.
9.3.2. Prior to the Outside Date, no WCAS Party may sell, exchange or
otherwise assign or transfer any Level 8 Shares without the prior written
consent of Level 8. Nothing in the preceding sentence, however, shall be deemed
to prohibit any transfer of any Level 8 Shares to a partner or affiliate of a
WCAS Party, as long as that partner or affiliate agrees to be bound by the
provisions of this section 9.3.
9.3.3. All certificates evidencing Level 8 Shares issued under this
agreement or upon exercise of the Level 8 Warrants shall bear the following
legends:
"The shares evidenced by this certificate were issued in a
transaction exempt from the registration requirements of the
Securities Act of 1933, and such shares may not be transferred
in the absence of an opinion of counsel satisfactory to the
Company that such transfer may be effected without
registration under the Securities Act of 1933."
"The voting and transfer of the shares evidenced by
<PAGE>
CUSIP NO. 005018 10 6 Page 23 of 41 Pages
this certificate are subject to the provisions of an agreement
dated November 23, 1998, a copy of which is on file at the
office of the Company."
9.3.4. If, at any time before the Outside Date, Level 8 determines to file
a registration statement under the Securities Act of 1933 for an underwritten
sale to the public of shares of its common stock in whole or in part by any of
Level 8's shareholders, Level 8 shall, each such time, promptly give each WCAS
Party written notice of its intent to file a registration statement and shall
include all shares held by any WCAS Party with respect to which Level 8 has
received a written request within 15 days after Level 8 has given notice to the
WCAS Party as set forth above specifying the number of shares to be included.
Notwithstanding the foregoing, however, in connection with any such offering,
Level 8 shall not be required to include a WCAS Party's shares in the offering,
unless the WCAS Party shall have accepted the terms of the underwriting and then
only in such quantity as will not, in the written opinion of the underwriter,
exceed the maximum number of shares that can be marketed without materially and
adversely affecting the offering. If, as a consequence of the provisions of the
preceding sentence, the number of a WCAS Party's shares included in the offering
is reduced, such reduction shall be made pro rata among the shareholders to be
included in the offering on the basis of the percentage of shares of the
shareholders to be included, and the percentage of the reduction shall not be
more than the percentage of reduction applicable to any other selling
shareholder in the offering. The rights with respect to such offering by any
WCAS Party whose shares are included shall not be less, and the obligations with
respect to such offering by any such WCAS Party shall not be greater, than those
of any other shareholder whose shares are included in such offering.
9.4. Related Party Transactions. Until the earlier of the Outside Date or
the first date on which the WCAS Parties no longer beneficially own (as defined
in the rules under the Exchange Act) at least 50% of the shares of common stock
of Level 8 represented by the Level 8 Shares and the Level 8 Shares issuable
upon exercise of the Level 8 Warrants issued pursuant to section 1, Level 8
shall not, and shall not permit any of its subsidiaries to, engage in any
transaction with Liraz or any affiliate of Liraz on terms less favorable to
Level 8 or any such subsidiary than the terms on which an unaffiliated third
party would engage in such transaction.
9.5. Further Assurances. From time to time after the Closing, each party
shall take such action and execute and deliver such documents as the others may
reasonably request to carry out the transactions contemplated by this agreement.
9.6. D&O Matters.
<PAGE>
CUSIP NO. 005018 10 6 Page 24 of 41 Pages
9.6.1. Level 8 agrees that, for a period of six years after the Closing and
except to the extent otherwise required by law, it shall cause the certificate
of incorporation and by-laws of the Company to contain provisions with respect
to indemnification and exculpation from liability no less favorable to the
individuals who, on or prior to the Closing, were directors, officers, employees
or agents of the Company (collectively, the "Indemnified Parties") than those
set forth in the Company's certificate of incorporation and by-laws in effect
immediately before the Closing.
9.6.2. For a period of six years after the Closing, Level 8 shall use all
reasonable efforts to cause the Company to maintain directors' and officers'
liability insurance covering those Indemnified Parties who are currently covered
by the Company's directors' and officers' liability insurance policy on terms no
less favorable to those Indemnified Parties than the terms of the insurance
coverage in effect on the date of the Closing for Level 8's own directors and
officers.
9.6.3. The Indemnified Parties and the Company are intended beneficiaries
of this section 9.6.
10. Indemnification.
10.1. General.
10.1.1. Subject to the provisions of this section 10, each WCAS Party shall
indemnify and hold Level 8 harmless from and against all losses, liabilities,
damages and expenses (including reasonable attorneys' fees) resulting from any
breach of warranty or agreement, or any misrepresentation, by it under this
agreement.
10.1.2. Subject to the provisions of this section 10, Level 8 shall
indemnify and hold each WCAS Party harmless from and against all losses,
liabilities, damages and expenses (including reasonable attorneys' fees)
resulting from any breach of warranty or agreement, or any misrepresentation, by
it under this agreement.
10.2. Exclusivity. Except as specifically set forth in this agreement, no
party to this agreement has made, or shall have liability for, any
representation, warranty or agreement, express or implied, in connection with
the transactions contemplated by this agreement, including any representation or
warranty, express or implied, as to the accuracy or completeness of any
information regarding the Company or Level 8.
10.3. Survival; Manner of Claims. The representations and warranties in
this agreement shall survive the Closing. However, a party shall have no
liability under this agreement for breach of
<PAGE>
CUSIP NO. 005018 10 6 Page 25 of 41 Pages
warranty or misrepresentation, unless a claim therefor is asserted by another
party in a written notice setting forth the representations and warranties with
respect to which the claim is made, the facts giving rise to and the alleged
basis for the claim and the amount of liability asserted by reason of the claim.
10.4. Defense of Claims by Third Parties. If any claim is made against a
party that, if sustained, would give rise to a liability of another party under
this agreement, the party against whom the claim is made shall promptly cause
notice of the claim to be delivered to the other party or parties and shall
afford the other party or parties and its or their counsel, at its or their sole
expense, the opportunity to defend or settle the claim. The failure to provide
the notice referred to above shall not relieve the indemnifying party of
liability under this agreement, except to the extent the indemnifying party has
actually been prejudiced by such failure. If any claim is compromised or settled
without the consent of the indemnifying party, no liability shall be imposed
upon the indemnifying party by reason of the claim.
11. Miscellaneous.
11.1. Finders. Each party represents and warrants to the others that it has
not employed or utilized the services of any broker or finder in connection with
this agreement or the transactions contemplated by this agreement.
11.2. Governing Law. 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.
11.3. Headings. 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.
11.4. Notices. All notices and other communications under this agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) 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 11.4):
<PAGE>
CUSIP NO. 005018 10 6 Page 26 of 41 Pages
(a) if to a WCAS Party, to:
c/o Welsh, Carson, Anderson & Stowe
320 Park Avenue
New York, New York 10022-6815
Fax no.: (212) 893-9563
Attention: Robert A. Minicucci
with a copy to:
Reboul, MacMurray, Hewitt, Maynard &
Kristol
45 Rockefeller Plaza
New York, New York 10011
Fax no.: (212) 841-5725
Attention: Robert A. Schwed, Esq.
(b) if to Level 8, to:
Level 8 Systems, Inc.
1250 Broadway, 35th Floor
New York, New York 10001
Fax no.: (212) 760-2327
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Fax no.: (212) 969-2900
Attention: Edward W. Kerson, Esq.
All such notices and communications shall be deemed received upon (a) actual
receipt by the addressee, (b) actual delivery to the appropriate address or (c)
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 noticed sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to 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.
11.5. Separability. 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
<PAGE>
CUSIP NO. 005018 10 6 Page 27 of 41 Pages
remain in full force and effect.
11.6. Waiver. Any party may waive compliance by any 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.
11.7. Counterparts. This agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same agreement.
<PAGE>
CUSIP NO. 005018 10 6 Page 28 of 41 Pages
11.8. Entire Agreement. This agreement (with its schedules and exhibits)
contains, and is intended as, a complete statement of all the terms of the
arrangements among the parties with respect to the matters provided for,
supersedes all previous agreements and understandings among 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 parties to be
charged.
LEVEL 8 SYSTEMS, INC.
By:
------------------------------
WCAS PARTIES:
WELSH, CARSON, ANDERSON
& STOWE VI, L.P.
By: WCAS VI Partners, L.P., General
Partner
By:
------------------------------
General Partner
WCAS INFORMATION PARTNERS, L.P.
By: WCAS INFO Partners,
General Partner
By:
------------------------------
General Partner
WCAS CAPITAL PARTNERS II
By:
------------------------------
General Partner
---------------------------------
Patrick J. Welsh
<PAGE>
CUSIP NO. 005018 10 6 Page 29 of 41 Pages
---------------------------------
Russell L. Carson
---------------------------------
Bruce K. Anderson
---------------------------------
Richard H. Stowe
---------------------------------
Andrew M. Paul
---------------------------------
Thomas E. McInerney
---------------------------------
Laura Van Buren
---------------------------------
James B. Hoover
---------------------------------
DELAWARE CHARTER TRUST CO., as
Trustee for the Benefit of the
IRA Rollover of Richard H. Stowe
By:
------------------------------
---------------------------------
Anthony J. de Nicola
DELAWARE CHARTER TRUST CO., as
Trustee for the Benefit of the
IRA Rollover of James B. Hoover
By:
------------------------------
<PAGE>
CUSIP NO. 005018 10 6 Page 30 of 41 Pages
---------------------------------
Robert A. Minicucci
TRUST U/A DATED 11/26/84 for the
Benefit of Eric Welsh (Carol
Ann Welsh, Trustee)
By:
------------------------------
TRUST U/A DATED 11/26/84 for the
Benefit of Randall Welsh (Carol
Ann Welsh, Trustee)
By:
------------------------------
TRUST U/A DATED 11/26/84 for the
Benefit of Jennifer Welsh (Carol
Ann Welsh, Trustee)
By:
------------------------------
---------------------------------
David F. Bellet
REBOUL, MACMURRAY, HEWITT,
MAYNARD & KRISTOL
By:
------------------------------
<PAGE>
CUSIP NO. 005018 10 6 Page 31 of 41 Pages
Schedule 6.4.1
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Level 8's or the Sub's right to amend the Offer at any
time in its sole discretion, but subject to the provisions of section 6.4 of the
agreement to which this schedule 6.4.1 is attached (the "Agreement") (terms used
herein and not otherwise defined having the meanings ascribed to such terms in
the Agreement), neither Level 8 nor the Sub shall be required to accept for
payment, or pay for, and may delay the acceptance for payment, or the payment,
of, any tendered shares of common stock of the Company, if, at or before the
time of payment for any such shares (whether or not any shares have theretofore
been accepted for payment or paid for pursuant to the Offer), (a) the Closing
shall not have occurred or (b) there shall have been any action or position
taken, or threatened, or any statute, rule, regulation, judgment, order or
injunction promulgated, enacted, entered or enforced, by any state, federal or
foreign government or governmental authority or by any court, domestic or
foreign, that may reasonably be expected to (i) make the acceptance for payment
of, or the payment for, some or all of the shares illegal or otherwise
prohibited, or restrict or delay consummation of the Offer, (ii) impose
limitations on the ability of Level 8 or the Sub to acquire or hold or to
exercise effectively all rights of ownership of common stock of the Company,
including, without limitation, the right to vote any shares of common stock of
the Company purchased by either of them on all matters properly presented to the
shareholders of the Company or (iii) prohibit or impose any material limitation
on Level 8's or the Sub's ownership or operation of all or a material portion of
the assets or business of the Company or any of its subsidiaries or affiliates.
<PAGE>
CUSIP NO. 005018 10 6 Page 32 of 41 Pages
<TABLE>
<CAPTION>
Schedule 7.1(g)
<S> <C> <C> <C> <C>
Series A Series B
Preferred Preferred Common Percent-
Stock Stock Stock age
----- ----- ----- ---
Welsh, Carson, Anderson & Stowe 1,978,643 1,664,920 6,335,132 94.4842%
VI, L.P.
WCAS Information Partners, L.P. 23,643 19,895 74,446 1.1290%
WCAS Capital Partners II 0 0 446,189 --
Patrick J. Welsh 11,822 9,947 37,225 0.5645%
Trust U/A dated 11/26/84 for 1,688 1,421 5,317 0.0806%
the Benefit of Eric Welsh
Trust U/A dated 11/26/84 for 1,688 1,421 5,317 0.0806%
the Benefit of Randall Welsh
Trust U/A dated 11/26/84 for 1,688 1,421 5,317 0.0806%
the Benefit of Jennifer Welsh
Russell L. Carson 16,887 14,210 53,174 0.8064%
Bruce K. Anderson 16,887 14,210 58,174 0.8064%
Richard H. Stowe 6,753 5,683 12,761 0.3226%
Richard H. Stowe, as Trustee
for the Benefit of the IRA of 0 0 8,506 --
Richard H. Stowe
Andrew M. Paul 4,052 3,410 13,261 0.1935%
Thomas E. McInerney 3,377 2,842 11,635 0.1613%
Laura Van Buren 675 568 2,126 0.0322%
James B. Hoover 5,066 4,263 15,952 0.2419%
<PAGE>
CUSIP NO. 005018 10 6 Page 33 of 41 Pages
Delaware Charter Trust Co., as
Trustee for the Benefit of the 1,688 1,421 5,317 0.0806%
IRA Rollover of James B. Hoover
Robert A. Minicucci 8,443 7,105 26,587 0.4032%
Anthony J. deNicola 1,012 852 3,188 0.0484%
David F. Bellet 6,754 5,684 21,270 0.3227%
Reboul, MacMurray, Hewitt, 3,377 2,842 0.1613%
Maynard & Kristol 0
2,094,143 1,762,115 7,130,894 100.0000%
========= ========= ========= ========
</TABLE>
<PAGE>
CUSIP NO. 005018 10 6 Page 34 of 41 Pages
<TABLE>
<CAPTION>
Schedule 8.2(a)
<S> <C> <C>
Common
Stock Warrants
----- --------
Welsh, Carson, Anderson & Stowe VI, L.P. 944,844 236,209
WCAS Information Partners, L.P. 11,290 2,823
Patrick J. Welsh 5,645 1,411
Trust U/A dated 11/26/84 for the Benefit of Eric Welsh 806 202
Trust U/A dated 11/26/84 for the Benefit of Randall Welsh 806 202
Trust U/A dated 11/26/84 for the Benefit of Jennifer Welsh 806 202
Russell L. Carson 8,064 2,016
Bruce K. Anderson 8,064 2,016
Richard H. Stowe 3,225 806
Richard H. Stowe, as Trustee for the Benefit of the IRA of
Richard H. Stowe -- --
Andrew M. Paul 1,935 484
Thomas E. McInerney 1,613 403
Laura Van Buren 322 81
James B. Hoover 2,419 605
Delaware Charter Trust Co., as Trustee for the Benefit of the
IRA Rollover of James B. Hoover 806 202
Robert A. Minicucci 4,032 1,008
Anthony J. deNicola 484 121
David F. Bellet 3,226 806
Reboul, MacMurray, Hewitt, Maynard & Kristol 1,613 403
1,000,000 250,000
========= =======
</TABLE>
<PAGE>
CUSIP NO. 005018 10 6 Page 35 of 41 Pages
Exhibit 8.2(a)
NEITHER THIS WARRANT NOR ANY SHARES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE
SECURITIES LAWS. NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM SUCH REGISTRATION.
Warrant No. For the Purchase of Shares
-- -------
LEVEL 8 SYSTEMS, INC.
COMMON STOCK PURCHASE WARRANT
This certifies that, for value received,
----------------------------------
or its successors in interest, assigns or transferees (collectively, the
"Warrant Holder") is entitled to subscribe for and purchase from Level 8
Systems, Inc., a New York corporation (the "Company"), shares of the
------
Company's common stock (the "Warrant Shares") for $12.00 a share. The number of
Warrant Shares and the purchase price for each Warrant Share are subject to
adjustment from time to time as provided in this Warrant (such purchase price,
as so adjusted from time to time, the "Exercise Price").
12. Exercise.
12.1. This Warrant may be exercised at any time and from time to time,
in whole or in part, on or prior to 5:00 p.m., New York time, on December 31,
2002.
12.2. This Warrant may be exercised by the Warrant Holder, in whole or
in part, by (i) delivering to the Company a duly executed notice of exercise in
the form of annex A and (ii) at the Warrant Holder's option, either (A)
delivering a check payable to (or wire transfer to the account of) the Company
in an amount equal to the product of (1) the Exercise Price and (2) the number
of Warrant Shares as to which this Warrant is being exercised (such product, the
"Total Exercise Price") or (B) delivering to the Company a letter (the "Cashless
Exercise Letter") pursuant to which the Warrant Holder surrenders a portion of
the Warrant having a Deemed Value (as defined below) equal to the Total Exercise
Price. For these purposes, (i) the term "Deemed Value" means the product of (A)
an amount equal to (1) the Market Price (as defined below) of a share of the
Company's common stock, reduced by (2) the Exercise Price, and (B) the number of
Warrant Shares as to which the Warrant is then being surrendered pursuant to the
Cashless Exercise Letter, and (ii) the term "Market Price" means the average
market price of the Company's common stock on the 20 trading days preceding the
date of exercise; if the common stock at the time is listed on any national
securities exchange, the Market Price on any day shall be the last sale price of
the common stock on that day; if the common stock is not so listed but is traded
on NASDAQ, the Market Price on any day shall be the last reported sale price on
that day, or, if no sale price shall have been reported, the mean between the
bid and asked prices on that day, all as reported in the Wall Street Journal.
<PAGE>
CUSIP NO. 005018 10 6 Page 36 of 41 Pages
12.3. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of delivery of a duly executed notice
of exercise, together with the amount (in cash or by delivering the Cashless
Exercise Letter) payable or deliverable upon exercise of this Warrant.
Thereafter, the rights of the Warrant Holder, as such, with respect to the
number of Warrant Shares as to which this Warrant is being exercised (and, if
applicable, surrendered as payment pursuant to the Cashless Exercise Letter)
shall cease, and the Warrant Holder shall be deemed to be the record holder of
the shares of common stock issuable upon such exercise. As soon as practicable
after the exercise of this Warrant, the Company shall issue in the name of and
deliver to the Warrant Holder, or as the Warrant Holder (upon payment by the
Warrant Holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of common
stock to which the Warrant Holder shall be entitled upon such exercise. In the
event of partial exercise of this Warrant and, if applicable, partial surrender
of this Warrant pursuant to the Cashless Exercise Letter, this Warrant shall be
delivered to the Company, and the Company shall issue and deliver to the Warrant
Holder a new Warrant evidencing the rights to purchase the remaining Warrant
Shares, which new Warrant shall in all other respects be identical to this
Warrant.
13. Certain Adjustments. This Warrant shall be subject to adjustment as
follows:
13.1.(a) In case the Company shall (i) pay a stock dividend or make a
distribution to holders of common stock in shares of its common stock, (ii)
subdivide its outstanding shares of common stock, (iii) combine its
outstanding shares of common stock into a smaller number of shares or (iv)
issue by reclassification of its shares of common stock any shares of
capital stock of the Company, (v) the Exercise Price shall be increased or
decreased, as the case may be, to an amount that shall bear the same
relation to the Exercise Price in effect immediately prior to such action
as the total number of shares outstanding immediately prior to such action
shall bear to the total number of shares outstanding immediately after such
action and (vi) this Warrant automatically shall be adjusted so that it
shall thereafter evidence the right to purchase the kind and number of
Warrant Shares or other securities the Warrant Holder would have owned and
would have been entitled to receive after such action, if this Warrant had
been exercised immediately prior to such action or any record date with
respect thereto. An adjustment made pursuant to this subparagraph (a) shall
become effective retroactively immediately after the record date, in the
case of a dividend or distribution of common stock, and shall become
effective immediately after the effective date, in the case of a
subdivision, combination or reclassification.
13.2.(a) In case the Company shall fix a record date for the making of
a distribution to all holders of common stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of (i) assets (other than cash
dividends or cash distributions payable out of consolidated net income or
retained earnings or dividends payable in common stock), (ii) evidences of
indebtedness or other
<PAGE>
CUSIP NO. 005018 10 6 Page 37 of 41 Pages
debt or equity securities of the Company, or of any corporation other than
the Company (except for the common stock of the Company) or (iii)
subscription rights, options or warrants to purchase any of the foregoing
assets or securities, whether or not such rights, options or warrants are
immediately exercisable (hereinafter collectively called "Distributions on
Common stock"), the Company shall make provision for the Warrant Holder to
receive upon exercise of this Warrant, a proportional amount (depending
upon the extent to which this Warrant is exercised) of such assets,
evidences of indebtedness, securities or such other rights, as if such
Warrant Holder had exercised this Warrant on or before such record date.
13.3. In case of any consolidation or merger of the Company with or
into another corporation or the sale of all or substantially all the assets
of the Company to another corporation, this Warrant thereafter shall be
exercisable for the kind and amount of shares of stock or other securities
or property to which a holder of the number of shares of common stock of
the Company deliverable upon exercise of this Warrant would have been
entitled upon such consolidation, merger or sale; and, in such case,
appropriate adjustment shall be made in the application of the provisions
in this paragraph 2, to the end that the provisions set forth in this
paragraph 2 (including provisions with respect to changes in and
adjustments of the Exercise Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this
Warrant.
13.4. Upon the occurrence of each adjustment or readjustment of the
Exercise Price or any change in the number of Warrant Shares or in the
shares of stock or other securities or property deliverable upon exercise
of this Warrant pursuant to this paragraph 2, the Company at its expense
shall promptly compute such adjustment or readjustment and change in
accordance with the terms hereof and furnish to each Warrant Holder a
certificate signed by the chief financial officer of the Company, setting
forth such adjustment or readjustment and change and showing in detail the
facts upon which such adjustment or readjustment and change is based.
13.5.(a) The Company shall not be required upon the exercise of this
Warrant to issue any fraction of shares, but shall make any adjustment
therefor by rounding the number of shares obtainable upon exercise to the
next higher whole number of shares.
14. Notice to Warrant Holder. If at any time,
(a) the Company shall take any action which would require an
adjustment in the Exercise Price or in the number of Warrant Shares
pursuant to paragraph 2; or
(b) the Company shall authorize the granting to the holders of its
common stock of any Distributions on Common Stock as set forth in paragraph
2(b), and notice thereof shall be given to
<PAGE>
CUSIP NO. 005018 10 6 Page 38 of 41 Pages
holders of common stock; or
(c) the Company shall issue any additional shares of common stock or
declare any dividend (or any other distribution) on its common stock (other
than its regular quarterly dividends); or
(d) there shall be any capital reorganization or reclassification of
the common stock (other than a change in par value or from par value to no
par value or from no par value to par value of the common stock), or any
consolidation or merger to which the Company is a party, or any sale or
transfer of all or substantially all the assets of the Company; or
(e) there shall be a voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice to
the Warrant Holder, not fewer than 20 days before any record date or other date
set for definitive action, or of the date on which such reorganization,
reclassification, sale, consolidation, merger, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also set
forth such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the current Exercise Price
and the kind and amount of the Warrant Shares and other securities and property
deliverable upon exercise of this Warrant. Such notice shall also specify the
date as of which the holders of the Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be.
15. Transfer of Rights. This Warrant is transferable, in whole or in part,
at the option of the Warrant Holder upon delivery of the Warrant Assignment Form
annexed as annex B, duly executed. The Company shall execute and deliver a new
Warrant or Warrants in the form of this Warrant with appropriate changes to
reflect the issuance of subsequent Warrants, in the name of the assignee or
assignees named in such instrument of assignment and, if the Warrant Holder's
entire interest is not being transferred or assigned, in the name of the Warrant
Holder, and this Warrant shall promptly be cancelled. Any transfer or exchange
of this Warrant shall be without charge to the Warrant Holder and any new
Warrant or Warrants issued shall be dated the date hereof. The term "Warrant" as
used herein includes any Warrants into which this Warrant may be divided or for
which it may be exchanged.
16. Rights of Warrant Holder. The Warrant Holder shall not, by virtue
hereof, be entitled to any voting or other rights of a shareholder of the
Company, either at law or equity, and the rights of the Warrant Holder are
limited to those expressed in this Warrant.
17. Miscellaneous.
17.1. This Warrant shall be construed in accordance with and governed
by the law of the state of New York without regard to principles of
conflicts and choice of laws.
<PAGE>
CUSIP NO. 005018 10 6 Page 39 of 41 Pages
17.2. The caption headings used in this Warrant are for convenience of
reference only and shall not be construed in any way to affect the
interpretation of this Warrant.
17.3. Any notice pursuant to this Warrant shall be sufficiently given
if sent by first-class mail, postage prepaid, or delivered by facsimile
transmission, addressed as follows:
if to the Company, to it at:
1250 Broadway
35th Floor
New York, New York 10001
Attention: Chief Financial Officer
Facsimile No.: (212) 760-2327
(or to such other address as the Company may have furnished in writing to
the Warrant Holder for this purpose);
if to the Warrant Holder, to it at such address as the Warrant Holder may
have furnished in writing to the Company for this purpose.
Date:
------------------
LEVEL 8 SYSTEMS, INC.
By:
-----------------------------
Name:
Title:
<PAGE>
CUSIP NO. 005018 10 6 Page 40 of 41 Pages
ANNEX A
-------
COMMON STOCK PURCHASE WARRANT
-----------------------------
Notice of Exercise
, 19
--------------- --
To: LEVEL 8 SYSTEMS, INC.
The undersigned, pursuant to the provisions set forth in Warrant No. ,
--
hereby irrevocably elects and agrees to purchase shares of the Company's
------
common stock covered by such Warrant, and makes payment herewith in full
therefor of the Total Exercise Price of $ in cash.
-----------
The undersigned hereby represents that the undersigned is exercising such
Warrant for its own account or the account of an affiliate for investment
purposes and not with the view to any offering or distribution and that the
Warrant Holder will not sell or otherwise dispose of the underlying Warrant
Shares in violation of applicable securities laws. [When applicable: If said
number of shares is less than all the shares purchasable hereunder, the
undersigned requests that a new Warrant evidencing the rights to purchase the
remaining Warrant Shares (which new Warrant shall in all other respects be
identical to the Warrant exercised hereby) be registered in the name of
, whose address is
- -----------
-------------------------
-------------------------
-------------------------]
Signature:
---------------------------
Printed Name:
------------------------
Address:
------------------------------
------------------------------
------------------------------
<PAGE>
CUSIP NO. 005018 10 6 Page 41 of 41 Pages
ANNEX B
-------
ASSIGNMENT
FOR VALUE RECEIVED, ____________________ hereby sells, assigns and
--------------------
transfers all its rights as set forth in Warrant No. ___ with respect to the
shares of the Company's common stock covered thereby as set forth below unto:
Name of Assignee(s) Address(es) No. of Shares
- ------------------- ---------------- -------------
----------------
All notices to be given by the Company to the Warrant Holder pursuant to
paragraph 3 of Warrant No. shall be sent to the Assignee(s) at the above
---
listed address(es), and, if the number of shares being hereby assigned is fewer
than all the shares covered by Warrant No. , then also to the undersigned.
---
The undersigned requests that the Company execute and deliver, if
necessary to comply with the provisions of paragraph 4 of Warrant No. , a new
---
Warrant or, if the number of shares being hereby assigned is fewer than all the
shares covered by Warrant No. , new Warrants in the name of the undersigned,
---
the assignee and/or the assignees, as appropriate.
Dated: , 19
----------- --
Signature:
---------------------------
Printed Name:
------------------------
Address:
------------------------------
------------------------------
------------------------------
