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
Date of report (Date of earliest event reported) December 31, 1998
Level 8 Systems, Inc.
(Exact Name of Registrant as Specified in its Charter)
New York 0-26392 11-2920559
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1250 Broadway, 35th Floor
New York, New York 10001
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (212) 244-1234
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets
On December 31, 1998, Level 8 Systems, Inc. ("Level 8"), as the first
step in its pending acquisition of the entire equity interest in Seer
Technologies, Inc ("Seer"), acquired beneficial ownership of approximately 69%
of the outstanding and issuable common stock of Seer, which was held by
Welsh, Carson, Anderson and Stowe VI L.P. ("WCAS") and certain other parties
affiliated or associated with WCAS ("WCAS Parties") in exchange for
1,000,000 shares of Level 8 common stock and warrants to purchase an
additional 250,000 shares of Level 8 common stock at an exercise price of
$12.00 per share. Level 8 acquired 7,130,894 shares of Seer's common stock,
2,094,143 shares of Seer's Series A Convertible Preferred Stock,
and 1,762,115 shares of Seer's Series B Convertible Preferred Stock
from the WCAS Parties. As a consequence, Level 8 may be deemed
to control Seer.
In connection with the Level 8's purchase of Seer's capital stock
from the WCAS Parties, WCAS contributed approximately $17 million to Seer
and the Level 8 provided a $12 million subordinated loan to Seer to pay
down Seer's bank debt. The funds used by Level 8 to make the
subordinated loan to Seer were obtained from Liraz Systems Ltd. ("Liraz"),
a principal stockholder of Level 8, pursuant to the Liraz Agreement
described below. Level 8 also agreed to guarantee debt under Seer's
revolving credit facility (i) exceeding $20 million through December 31,
1999, (ii) exceeding $10 million from January 1, 2000 through December 31,
2000, and (iii) without limit thereafter. Level 8 has also agreed to
use its best efforts to acquire all the remaining shares of Seer's
outstanding common stock for $0.35 per share. Level 8 anticipates
that approximately $1.7 million will be required to purchase the remaining
shares of Seer's outstanding common stock. Level 8 expects to
obtain these funds from its working capital.
Under an agreement between Liraz and Level 8 dated December 31,
1998 (the "Liraz Agreement"), Liraz has made a $12 million loan to Level 8,
which bears simple interest at the rate of 12% a year and
matures on June 30, 2000. Under the Liraz Agreement, Level 8 has
agreed, as soon as practicable, to effect a pro rata offering to its
stockholders of shares of preferred stock intended to have an aggregate
liquidation preference initially equal to the principal and accrued
interest under the Liraz Agreement at the date of issuance and to be
convertible into an aggregate number of shares of Level 8's common
stock determined by dividing the aggregate liquidation preference (which
will accrete at the rate of 12% a year, compounded quarterly) by the
conversion price. The conversion price will be an amount equal to the
greater of $5.00 and two-thirds of the average closing price of a share of
Level 8's common stock during the 20 trading days ending on the
fifth trading day before the offering. Each share of preferred stock will
be entitled to two votes for each share of common stock into which it is
convertible. The preferred stock will be redeemable at Level 8's
option at any time after June 30, 2000, upon at least 30 days' notice, at a
redemption price equal to the preferred stock's accreted liquidation
preference. The purchase price for each share of preferred stock to be
offered to Level 8's stockholders will equal its initial liquidation
preference. The Liraz Agreement provides that Liraz may pay the purchase
price for any preferred stock it purchases in the offering with cash or by
reducing the amount payable to it under the Liraz Agreement. If the
offering is consummated before June 31, 1999, Level 8 is required to
use the net proceeds of the offering to prepay the unpaid balance under the
Liraz Agreement.
Seer is a Delaware corporation with its executive offices located at
8000 Regency Parkway, Cary, North Carolina. Seer is one of the software
industry's earliest pioneers and a long-time leader in software application
development tools. During fiscal year 1998, Seer updated its strategic
direction to capitalize on emerging market demand for extending the life
cycle of enterprise applications. When fully implemented, the updated
strategy is intended to transition Seer from a distributor of application
development tools to a provider of complete solutions for enterprise
application renewal. Enterprise application renewal entails extending the
life cycle of enterprise applications through re-engineering, modernizing
through web and e-commerce enablement, functionally integrating legacy and
new applications, and the incorporation of re-usable application assets and
components. Seer's enterprise application renewal solutions leverage its
suit of software products and its professional consulting services to help
Global 5000-sized companies extend the functionality and increase the
return on investment in the mission-critical enterprise applications needed
to efficiently run their businesses and maintain a competitive edge.
Under the agreement between Level 8 and the WCAS Parties, the WCAS
Parties agreed that, prior to January 1, 2001, at any meeting of
shareholders of Level 8, WCAS Parties shall grant a proxy to one or
more individuals named by Level 8 to vote all of the WCAS Parties'
shares of common stock acquired by the WCAS Parties in connection with the
transaction. Also, subject to limited exceptions, prior to January 1,
2001, the WCAS Parties may not sell, exchange or otherwise assign any of
its shares of Level 8 without the prior written consent of the
Level 8.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business Acquired. Seer's audited
financial statements for the fiscal year ended September 30,
1998 are incorporated by reference to Seer's Form 10-K for the
fiscal year ended September 30, 1998, filed with the Commission
on January 12, 1999, File No. 0-26194.
(b) Pro Forma Financial Information. Pursuant to Item 7(b)(2) of
Form 8-K, Level 8 undertakes to file an amendment to this
Form 8-K containing financial information relating to the Seer
transaction within 60 days of the filing of this Form 8-K.
(c) Exhibits.
2.1 Agreement dated November 23, 1998, among Level 8 Systems, Inc.
("Level 8") and WCAS relating to the acquisition of capital
stock of Seer Technologies, Inc. ("Seer") by Level 8 are
incorporated by reference to Exhibit 2.1 to Seer Form 10-K for
the fiscal year ended September 30, 1998.
4.1 Form of Warrant(s) representing the 250,000 Level 8 warrants
issued to the WCAS parties is incorporated by reference to
Exhibit 8.2(A) to Seer Form 10-K for the fiscal year ended
September 30, 1998.
10.1 Level 8 Guaranty Agreement dated December 31, 1998 (filed herewith).
10.2 Level 8 Promissory Note dated December 31, 1998, in favor of
Liraz Systems Ltd. in the principal amount of $12,000,000 (filed
herewith).
10.3 Seer Promissory Note dated December 31, 1998, in favor of Level
8 in the principal amount of $12,000,000 (filed herewith).
10.4 Liraz Agreement dated December 31, 1998 (filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, Level 8 has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
LEVEL 8 SYSTEMS, INC.
Date: January 15, 1999 By: /s/ Steven Dmiszewicki
Name: Steven Dmiszewicki
Title:Chief Operating Officer
[Greyrock Letterhead] Exhibit 10.1
Continuing Guaranty
Borrower: Seer Technologies, Inc.
Guarantor: Level 8 Systems, Inc., a New York corporation
Date: December 31, 1998
This Continuing Guaranty is executed by the above-named guarantor(s)
(jointly and severally, the Guarantor), as of the above date, in favor of
Greyrock Capital, a Division of NationsCredit Commercial Corporation
(formerly Greyrock Business Credit) (Greyrock), whose address is 10880
Wilshire Blvd. Suite 950, Los Angeles, CA 90024, with respect to the
Indebtedness of the above-named borrower (Borrower).
1. Continuing Guaranty. Guarantor hereby unconditionally guarantees
and promises to pay on demand to Greyrock, at the address indicated above,
or at such other address as Greyrock may direct, in lawful money of the
United States, all Indebtedness of Borrower now or hereafter owing to or
held by Greyrock. As used herein, the term Indebtedness is used in its
most comprehensive sense and shall mean and include without limitation:
(a) any and all debts, duties, obligations, liabilities, representations,
warranties and guaranties of Borrower or any one or more of them,
heretofore, now, or hereafter made, incurred, or created, whether voluntary
or involuntary, due or not due, absolute or contingent, liquidated or
unliquidated, certain or uncertain, determined or undetermined, monetary or
nonmonetary, written or oral, and whether Borrower may be liable
individually or jointly with others, and regardless of whether recovery
thereon may be or hereafter become barred by any statute of limitations,
discharged or uncollectible in any bankruptcy, insolvency or other
proceeding, or otherwise unenforceable; and (b) any and all amendments,
modifications, renewals and extensions of any or all of the foregoing,
including without limitation amendments, modifications, renewals and
extensions which are evidenced by any new or additional instrument,
document or agreement; and (c) any and all attorneys' fees, court costs,
and collection charges incurred in endeavoring to collect or enforce any of
the foregoing against Borrower, Guarantor, or any other person liable
thereon (whether or not suit be brought) and any other expenses of, for or
incidental to collection thereof. As used herein, the term Borrower shall
include any successor to the business and assets of Borrower, and shall
also include Borrower in its capacity as a debtor or debtor in possession
under the federal Bankruptcy Code, and any trustee, custodian or receiver
for Borrower or any of its assets, should Borrower hereafter become the subject
of any bankruptcy or insolvency proceeding, voluntary or
involuntary; and all indebtedness, liabilities and obligations incurred by
any such person shall be included in the Indebtedness guaranteed hereby.
This Guaranty is given in consideration for credit and other financial
accommodations which may, from time to time, be given by Greyrock to
Borrower in Greyrock's sole discretion, but Guarantor acknowledges and
agrees that acceptance by Greyrock of this Guaranty shall not constitute a
commitment of any kind by Greyrock to extend such credit or other financial
accommodation to Borrower or to permit Borrower to incur Indebtedness to
Greyrock. All sums due under this Guaranty shall bear interest from the
date due until the date paid at the highest rate charged with respect to
any of the Indebtedness. *
* 1A. Limitation of Liability. Notwithstanding anything to the contrary
herein, the total liability of Guarantor hereunder shall be limited to the
"Guaranty Limit" (as defined below). The "Guaranty Limit" shall be an
amount equal to the following (plus all interest thereon, plus all
reasonable costs and attorneys fees incurred in enforcing the obligations
of Guarantor under this Guaranty):
(a) During the period from the date hereof to December 31, 1999, the
Guaranty Limit shall be an amount equal to the amount of the
Indebtedness at the Determination Date (as defined below) in excess of
$20,000,000.
(b) During the period from January 1, 2000 to December 31, 2000 the
Guaranty Limit shall be an amount equal to the amount of the
Indebtedness at the Determination Date (as defined below) in excess of
$10,000,000.
(c) From and after January 1, 2001 the liability of Guarantor under
this Guaranty shall not be limited.
"Determination Date" shall mean, at any date, the date a written notice of
acceleration of the Indebtedness is given by Greyrock to Borrower or
Guarantor, which notice of acceleration is not subsequently waived in
writing or rescinded in writing by Greyrock. In the event of any such
waiver or rescission of a written notice of acceleration, this Guaranty
shall continue in full force and effect thereafter.
Guarantor's liability hereunder shall not be reduced or affected by the
fact that the Indebtedness may exceed the Guaranty Limit or the fact that
the Indebtedness may be reduced below said amount and subsequently
increased.
The Guaranty Limit shall be in effect, and the Guarantor shall remain
liable up to such Guaranty Limit, even if the amount of the Indebtedness is
subsequently reduced, so that, by way of example and not by way of
limitation, if written notice of acceleration of the Indebtedness was given
by Greyrock to Borrower or Guarantor on September 1, 1999, and if the
outstanding Indebtedness on that date was $23,000,000, then the Guarantor
would be liable hereunder for $3,000,000 (plus interest and reasonable
costs as set forth above), and such liability would not be reduced by any
subsequent payment by the Borrower, recovery from collateral or other
reduction in the Indebtedness.
2. Waivers. Guarantor hereby waives: (a) presentment for payment,
notice of dishonor, demand, protest, and notice thereof as to any
instrument, and all other notices and demands to which Guarantor might be
entitled, including without limitation notice of all of the following: the
acceptance hereof; the creation, existence, or acquisition of any
Indebtedness; the amount of the Indebtedness from time to time outstanding;
any foreclosure sale or other disposition of any property which secures any
or all of the Indebtedness or which secures the obligations of any other
guarantor of any or all of the Indebtedness; any adverse change in
Borrower's financial position; any other fact which might increase
Guarantor's risk; any default, partial payment or non-payment of all or any
part of the Indebtedness; the occurrence of any other Event of Default (as
hereinafter defined); any and all agreements and arrangements between
Greyrock and Borrower and any changes, modifications, or extensions
thereof, and any revocation, modification or release of any guaranty of any
or all of the Indebtedness by any person (including without limitation any
other person signing this Guaranty); (b) any right to require Greyrock to
institute suit against, or to exhaust its rights and remedies against,
Borrower or any other person, or to proceed against any property of any
kind which secures all or any part of the Indebtedness, or to exercise any
right of offset or other right with respect to any reserves, credits or
deposit accounts held by or maintained with Greyrock or any indebtedness of
Greyrock to Borrower, or to exercise any other right or power, or pursue
any other remedy Greyrock may have; (c) any defense arising by reason of
any disability or other defense of Borrower or any other guarantor or any
endorser, co-maker or other person, or by reason of the cessation from any
cause whatsoever of any liability of Borrower or any other guarantor or any
endorser, co-maker or other person, with respect to all or any part of the
Indebtedness, or by reason of any act or omission of Greyrock or others
which directly or indirectly results in the discharge or release of
Borrower or any other guarantor or any other person or any Indebtedness or
any security therefor, whether by operation of law or otherwise; (d) any
defense arising by reason of any failure of Greyrock to obtain, perfect,
maintain or keep in force any security interest in, or lien or encumbrance
upon, any property of Borrower or any other person; (e) any defense based
upon any failure of Greyrock to give Guarantor notice of any sale or other
disposition of any property securing any or all of the Indebtedness, or any
defects in any such notice that may be given, or any failure of Greyrock to
comply with any provision of applicable law in enforcing any security
interest in or lien upon any property securing any or all of the
Indebtedness including, but not limited to, any failure by Greyrock to
dispose of any property securing any or all of the Indebtedness in a
commercially reasonable manner; (f) any defense based upon or arising out
of any bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, liquidation or dissolution proceeding commenced by or against
Borrower or any other guarantor or any endorser, co-maker or other person,
including without limitation any discharge of, or bar against collecting,
any of the Indebtedness (including without limitation any interest
thereon), in or as a result of any such proceeding; and (g) the benefit of
any and all statutes of limitation with respect to any action based upon,
arising out of or related to this Guaranty. Until all of the Indebtedness
has been paid, performed, and discharged in full, nothing shall discharge
or satisfy the liability of Guarantor hereunder except the full performance
and payment of all of the Indebtedness. If any claim is ever made upon
Greyrock for repayment or recovery of any amount or amounts received by
Greyrock in payment of or on account of any of the Indebtedness, because of
any claim that any such payment constituted a preferential transfer or
fraudulent conveyance, or for any other reason whatsoever, and Greyrock
repays all or part of said amount by reason of any judgment, decree or
order of any court or administrative body having jurisdiction over Greyrock
or any of its property, or by reason of any settlement or compromise of any
such claim effected by Greyrock with any such claimant (including without
limitation the Borrower), then and in any such event, Guarantor agrees that
any such judgment, decree, order, settlement and compromise shall be
binding upon Guarantor, notwithstanding any revocation or release of this
Guaranty or the cancellation of any note or other instrument evidencing any
of the Indebtedness, or any release of any of the Indebtedness, and the
Guarantor shall be and remain liable to Greyrock under this Guaranty for
the amount so repaid or recovered, to the same extent as if such amount had
never originally been received by Greyrock, and the provisions of this
sentence shall survive, and continue in effect, notwithstanding any
revocation or release of this Guaranty. Until all of the Indebtedness has
been irrevocably paid and performed in full, Guarantor hereby expressly and
unconditionally waives all rights of subrogation, reimbursement and
indemnity of every kind against Borrower, and all rights of recourse to any
assets or property of Borrower, and all rights to any collateral or
security held for the payment and performance of any Indebtedness,
including (but not limited to) any of the foregoing rights which Guarantor
may have under any present or future document or agreement with any
Borrower or other person, and including (but not limited to) any of the
foregoing rights which Guarantor may have under any equitable doctrine of
subrogation, implied contract, or unjust enrichment, or any other equitable
or legal doctrine. Neither Greyrock, nor any of its directors, officers,
employees, agents, attorneys or any other person affiliated with or
representing Greyrock shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by
Guarantor or any other party through the ordinary negligence of Greyrock,
or any of its directors, officers, employees, agents, attorneys or any
other person affiliated with or representing Greyrock.
3. Consents. Guarantor hereby consents and agrees that, without notice
to or by Guarantor and without affecting or impairing in any way the
obligations or liability of Guarantor hereunder, Greyrock may, from time
to time before or after revocation of this Guaranty, do any one or more
of the following in Greyrock's sole and absolute discretion: (a)
accelerate, accept partial payments of, compromise or settle, renew,
extend the time for the payment, discharge, or performance of, refuse to
enforce, and release all or any parties to, any or all of the
Indebtedness; (b) grant any other indulgence to Borrower or any other
person in respect of any or all of the Indebtedness or any other matter;
(c) accept, release, waive, surrender, enforce, exchange, modify,
impair, or extend the time for the performance, discharge, or payment
of, any and all property of any kind securing any or all of the
Indebtedness or any guaranty of any or all of the Indebtedness, or on
which Greyrock at any time may have a lien, or refuse to enforce its
rights or make any compromise or settlement or agreement therefor in
respect of any or all of such property; (d) substitute or add, or take
any action or omit to take any action which results in the release of,
any one or more endorsers or guarantors of all or any part of the
Indebtedness, including, without limitation one or more parties to this
Guaranty, regardless of any destruction or impairment of any right of
contribution or other right of Guarantor; (e) amend, alter or change in
any respect whatsoever any term or provision relating to any or all of
the Indebtedness, including the rate of interest thereon; (f) apply any
sums received from Borrower, any other guarantor, endorser, or co-
signer, or from the disposition of any collateral or security, to any
indebtedness whatsoever owing from such person or secured by such
collateral or security, in such manner and order as Greyrock determines
in its sole discretion, and regardless of whether such indebtedness is
part of the Indebtedness, is secured, or is due and payable; (g) apply
any sums received from Guarantor or from the disposition of any
collateral or security securing the obligations of Guarantor, to any of
the Indebtedness in such manner and order as Greyrock determines in its
sole discretion, regardless of whether or not such Indebtedness is
secured or is due and payable. Guarantor consents and agrees that
Greyrock shall be under no obligation to marshal any assets in favor of
Guarantor, or against or in payment of any or all of the Indebtedness.
Guarantor further consents and agrees that Greyrock shall have no duties
or responsibilities whatsoever with respect to any property securing any
or all of the Indebtedness. Without limiting the generality of the
foregoing, Greyrock shall have no obligation to monitor, verify, audit,
examine, or obtain or maintain any insurance with respect to, any
property securing any or all of the Indebtedness.
4. Exercise of Rights and Remedies; Foreclosure of Trust Deeds.
Guarantor hereby waives all rights of subrogation, reimbursement,
indemnification, and contribution and any other rights and defenses that
are or may become available to the Guarantor or other surety by reason of
California Civil Code Sections 2787 to 2855, inclusive. The Guarantor
waives all rights and defenses that the Guarantor may have because the
Borrower's Indebtedness is secured by real property. This means, among
other things: (1) Greyrock may collect from the Guarantor without first
foreclosing on any real or personal property collateral pledged by the
Borrower. (2) If Greyrock forecloses on any real property collateral
pledged by the Borrower: (A) The amount of the Indebtedness may be reduced
only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price. (B)
Greyrock may collect from the Guarantor even if Greyrock, by foreclosing on
the real property collateral, has destroyed any right the Guarantor may
have to collect from the Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses the Guarantor may have
because the Borrower's Indebtedness is secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.
The Guarantor waives all rights and defenses arising out of an election of
remedies by Greyrock, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the Guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the
Code of Civil Procedure or otherwise.
5. Acceleration. Notwithstanding the terms of all or any part of the
Indebtedness, the obligations of the Guarantor hereunder to pay and perform
all of the Indebtedness shall, at the option of Greyrock, immediately
become due and payable, without notice, and without regard to the expressed
maturity of any of the Indebtedness, in the event: (a) Borrower shall
fail to pay or perform when due all or any part of the Indebtedness; or (b)
there shall occur the dissolution, termination of existence, insolvency, or
business failure of Borrower or Guarantor, or the appointment of a
receiver, trustee or custodian for Borrower or Guarantor or all or any part
of the property of either of them, or the assignment for the benefit of
creditors by Borrower or Guarantor, or the commencement of any proceeding
by or against Borrower or Guarantor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, now or hereafter in effect; or (c) the
board of directors or shareholders of Borrower or Guarantor shall adopt any
resolution or plan for its dissolution or the liquidation of all or
substantially all of its assets; or (d) Guarantor shall revoke this
Guaranty or contest or deny liability under this Guaranty. All of the
foregoing are hereinafter referred to as Events of Default.
6. Revocation. This is a Continuing Guaranty relating to all of the
Indebtedness, including Indebtedness arising under successive transactions
which from time to time continue the Indebtedness or renew it after it has
been satisfied. Guarantor waives all benefits of California Civil Code
Section 2815, and agrees that the obligations of Guarantor hereunder may
not be terminated or revoked in any manner except by giving 90 days'
advance written notice of revocation to Greyrock at its address above by
registered first-class U.S. mail, postage prepaid, return receipt
requested, and only as to new loans made by Greyrock to Borrower more than
90 days after actual receipt of such written notice by Greyrock. No
termination or revocation of this Guaranty shall be effective until 90 days
following the date of actual receipt of said written notice of revocation
by Greyrock. Notwithstanding such written notice of revocation or any
other act of Guarantor or any other event or circumstance, Guarantor agrees
that this Guaranty and all consents, waivers and other provisions hereof
shall continue in full force and effect as to any and all Indebtedness
which is outstanding on or before the 90th day following actual receipt of
said written notice of revocation by Greyrock, and all extensions, renewals
and modifications of said Indebtedness (including without limitation
amendments, extensions, renewals and modifications which are evidenced by
new or additional instruments, documents or agreements executed before or
after expiration of said 90-day period), and all interest thereon, accruing
before or after expiration of said 90-day period, and all attorneys' fees,
court costs and collection charges, incurred before or after expiration of
said 90-day period, in endeavoring to collect or enforce any of the
foregoing against Borrower, Guarantor or any other person liable thereon
(whether or not suit be brought) and any other expenses of, for or
incidental to collection thereof.
7. Independent Liability. Guarantor hereby agrees that one or more
successive or concurrent actions may be brought hereon against Guarantor,
in the same action in which Borrower may be sued or in separate actions, as
often as deemed advisable by Greyrock. The liability of Guarantor
hereunder is exclusive and independent of any other guaranty of any or all
of the Indebtedness whether executed by Guarantor or by any other guarantor
(including without limitation any other persons signing this Guaranty).
The liability of Guarantor hereunder shall not be affected, revoked,
impaired, or reduced by any one or more of the following: (a) the fact
that the Indebtedness exceeds the maximum amount of Guarantor's liability,
if any, specified herein or elsewhere (and no agreement specifying a
maximum amount of Guarantor's liability shall be enforceable unless set
forth in a writing signed by Greyrock or set forth in this Guaranty); or
(b) any direction as to the application of payment by Borrower or by any
other party; or (c) any other continuing or restrictive guaranty or
undertaking or any limitation on the liability of any other guarantor
(whether under this Guaranty or under any other agreement); or (d) any
payment on or reduction of any such other guaranty or undertaking; or (e)
any revocation, amendment, modification or release of any such other
guaranty or undertaking; or (f) any dissolution or termination of, or
increase, decrease, or change in membership of any Guarantor which is a
partnership. Guarantor hereby expressly represents that he was not induced
to give this Guaranty by the fact that there are or may be other guarantors
either under this Guaranty or otherwise, and Guarantor agrees that any
release of any one or more of such other guarantors shall not release
Guarantor from his obligations hereunder either in full or to any lesser
extent.
8. Financial Condition of Borrower. Guarantor is fully aware of the
financial condition of Borrower and is executing and delivering this
Guaranty at Borrower's request and based solely upon his own independent
investigation of all matters pertinent hereto, and Guarantor is not relying
in any manner upon any representation or statement of Greyrock with respect
thereto. Guarantor represents and warrants that he is in a position to
obtain, and Guarantor hereby assumes full responsibility for obtaining, any
additional information concerning Borrower's financial condition and any
other matter pertinent hereto as Guarantor may desire, and Guarantor is not
relying upon or expecting Greyrock to furnish to him any information now or
hereafter in Greyrock's possession concerning the same or any other matter.
By executing this Guaranty, Guarantor knowingly accepts the full range of
risks encompassed within a contract of continuing guaranty, which risks
Guarantor acknowledges include without limitation the possibility that
Borrower will incur additional Indebtedness for which Guarantor will be
liable hereunder after Borrower's financial condition or ability to pay
such Indebtedness has deteriorated and/or after bankruptcy or insolvency
proceedings have been commenced by or against Borrower. Guarantor shall
have no right to require Greyrock to obtain or disclose any information
with respect to the Indebtedness, the financial condition or character of
Borrower, the existence of any collateral or security for any or all of the
Indebtedness, the filing by or against Borrower of any bankruptcy or
insolvency proceeding, the existence of any other guaranties of all or any
part of the Indebtedness, any action or non-action on the part of Greyrock,
Borrower, or any other person, or any other matter, fact, or occurrence.
9. Reports and Financial Statements of Guarantor. Guarantor shall, at
its sole cost and expense, at any time and from time to time, prepare or
cause to be prepared, and provide to Greyrock upon Greyrock's request (i)
such financial statements and reports concerning Guarantor for such periods
of time as Greyrock may designate, (ii) any other information concerning
Guarantor's business, financial condition or affairs as Greyrock may
request. Guarantor further agrees immediately to give written notice to
Greyrock of any adverse change in Guarantor's financial condition and of
any condition or event which constitutes an Event of Default under this
Guaranty. All reports and information furnished to Greyrock hereunder
shall be complete, accurate and correct in all material respects.
10. Representations and Warranties. Guarantor hereby represents and
warrants that (i) it is in Guarantor's direct interest to assist Borrower
in procuring credit, because Borrower is an affiliate of Guarantor,
furnishes goods or services to Guarantor, purchases or acquires goods or
services from Guarantor, and/or otherwise has a direct or indirect
corporate or business relationship with Guarantor, (ii) this Guaranty has
been duly and validly authorized, executed and delivered and constitutes
the valid and binding obligation of Guarantor, enforceable in accordance
with its terms, and (iii) the execution and delivery of this Guaranty does
not violate or constitute a default under (with or without the giving of
notice, the passage of time, or both) any order, judgment, decree,
instrument or agreement to which Guarantor is a party or by which it or its
assets are affected or bound.
11. Costs. Whether or not suit be instituted, Guarantor agrees to
reimburse Greyrock on demand for all reasonable attorneys' fees and all
other reasonable costs and expenses incurred by Greyrock in enforcing this
Guaranty, or arising out of or relating in any way to this Guaranty. In the
event either Greyrock or Guarantor files any lawsuit against the other
predicated on a breach of this Guaranty, the prevailing party in such
action shall be entitled to recover its attorneys' fees and costs of suit
from the non-prevailing party.
12. Notices. Any notice which a party shall be required or shall
desire to give to the other hereunder (except for notice of revocation,
which shall be governed by Section 6 of this Guaranty) shall be given by
personal delivery or by telecopier or by depositing the same in the United
States mail, first class postage pre-paid, addressed to Greyrock at its
address set forth in the heading of this Guaranty and to Guarantor at his
address set forth under his signature hereon, and such notices shall be
deemed duly given on the date of personal delivery or one day after the
date telecopied or 3 business days after the date of mailing as aforesaid.
Greyrock and Guarantor may change their address for purposes of receiving
notices hereunder by giving written notice thereof to the other party in
accordance herewith. Guarantor shall give Greyrock immediate written
notice of any change in his address.
13. Construction; Severability. If more than one person has executed
this Guaranty, the term Guarantor as used herein shall be deemed to refer
to all and any one or more such persons and their obligations hereunder
shall be joint and several. Without limiting the generality of the
foregoing, if more than one person has executed this Guaranty, this
Guaranty shall in all respects be interpreted as though each person signing
this Guaranty had signed a separate Guaranty, and references herein to
other guarantors or words of similar effect shall include without
limitation other persons signing this Guaranty. As used in this Guaranty,
the term property is used in its most comprehensive sense and shall mean
all property of every kind and nature whatsoever, including without
limitation real property, personal property, mixed property, tangible
property and intangible property. Words used herein in the masculine
gender shall include the neuter and feminine gender, words used herein in
the neuter gender shall include the masculine and feminine, words used
herein in the singular shall include the plural and words used in the
plural shall include the singular, wherever the context so reasonably
requires. If any provision of this Guaranty or the application thereof to
any party or circumstance is held invalid, void, inoperative or
unenforceable, the remainder of this Guaranty and the application of such
provision to other parties or circumstances shall not be affected thereby,
the provisions of this Guaranty being severable in any such instance.
14. General Provisions. Greyrock shall have the right to seek
recourse against Guarantor to the full extent provided for herein and in
any other instrument or agreement evidencing obligations of Guarantor to
Greyrock, and against Borrower to the full extent of the Indebtedness. No
election in one form of action or proceeding, or against any party, or on
any obligation, shall constitute a waiver of Greyrock's right to proceed in
any other form of action or proceeding or against any other party. The
failure of Greyrock to enforce any of the provisions of this Guaranty at
any time or for any period of time shall not be construed to be a waiver of
any such provision or the right thereafter to enforce the same. All
remedies hereunder shall be cumulative and shall be in addition to all
rights, powers and remedies given to Greyrock by law or under any other
instrument or agreement. Time is of the essence in the performance by
Guarantor of each and every obligation under this Guaranty. If Borrower is
a corporation, partnership or other entity, Guarantor hereby agrees that
Greyrock shall have no obligation to inquire into the power or authority of
Borrower or any of its officers, directors, partners, or agents acting or
purporting to act on its behalf, and any Indebtedness made or created in
reliance upon the professed exercise of any such power or authority shall
be included in the Indebtedness guaranteed hereby. This Guaranty is the
entire and only agreement between Guarantor and Greyrock with respect to
the guaranty of the Indebtedness of Borrower by Guarantor, and all
representations, warranties, agreements, or undertakings heretofore or
contemporaneously made, which are not set forth herein, are superseded
hereby. No course of dealings between the parties, no usage of the trade,
and no parol or extrinsic evidence of any nature shall be used or be relevant
to supplement or explain or modify any term or provision of this
Guaranty. There are no conditions to the full effectiveness of this
Guaranty. The terms and provisions hereof may not be waived, altered,
modified, or amended except in a writing executed by Guarantor and a duly
authorized officer of Greyrock. All rights, benefits and privileges
hereunder shall inure to the benefit of and be enforceable by Greyrock and
its successors and assigns and shall be binding upon Guarantor and his
heirs, executors, administrators, personal representatives, successors and
assigns. Neither the death of Guarantor nor notice thereof to Greyrock
shall terminate this Guaranty as to his estate, and, notwithstanding the
death of Guarantor or notice thereof to Greyrock, this Guaranty shall
continue in full force and effect with respect to all Indebtedness,
including without limitation Indebtedness incurred or created after the
death of Guarantor and notice thereof to Greyrock. Section headings are
used herein for convenience only. Guarantor acknowledges that the same may
not describe completely the subject matter of the applicable Section, and
the same shall not be used in any manner to construe, limit, define or
interpret any term or provision hereof.
15. Governing Law; Venue and Jurisdiction. This instrument and all
acts and transactions pursuant or relating hereto and all rights and
obligations of the parties hereto shall be governed, construed, and
interpreted in accordance with the internal laws of the State of
California. In order to induce Greyrock to accept this Guaranty, and as a
material part of the consideration therefor, Guarantor (i) agrees that all
actions or proceedings relating directly or indirectly hereto shall, at the
option of Greyrock, be litigated in courts located within Los Angeles
County, California, (ii) consents to the jurisdiction of any such court and
consents to the service of process in any such action or proceeding by
personal delivery or any other method permitted by law; and (iii) waives
any and all rights Guarantor may have to transfer or change the venue of
any such action or proceeding.
16. Mutual Waiver of Right to Jury Trial. GREYROCK AND GUARANTOR
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS
GUARANTEE OR ANY SUPPLEMENT OR AMENDMENT THERETO; OR (ii) ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN GREYROCK AND GUARANTOR ; OR (iii)
ANY BREACH, CONDUCT, ACTS OR OMISSIONS OF GREYROCK OR GUARANTOR OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY
OTHER PERSON AFFILIATED WITH OR REPRESENTING GREYROCK OR GUARANTOR; IN EACH
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
17. Receipt of Copy. Guarantor acknowledges receipt of a copy of this
Guaranty.
Guarantor Signature:
LEVEL 8 SYSTEMS, INC.
By /s/Yigal Baruch
Name Yigal Baruch
Title Chief Financial Officer
Address:1250 Broadway, 35th Floor
New York, New York 10001
<PAGE>
Certified Resolution - Guarantee
Guarantor: Level 8 Systems, Inc.,
a corporation organized under the
laws of the State of New York
Date: December 31, 1998
I, the undersigned, Secretary or Assistant Secretary of the above-
named corporation, a corporation organized under the laws of the state set
forth above, do hereby certify that the following is a full, true and
correct copy of resolutions duly and regularly adopted by the Board of
Directors of said corporation as required by law, and by the by-laws of
said corporation, and that said resolutions are still in full force and
effect and have not been in any way modified, repealed, rescinded, amended
or revoked.
WHEREAS, it is in the direct interest of this corporation to assist
the following person (the Borrower):
SEER TECHNOLOGIES, INC.
in procuring credit from Greyrock Capital, a Division of NationsCredit
Commercial Corporation (formerly Greyrock Business Credit) (Greyrock),
because Borrower is an affiliate of this corporation, furnishes goods or
services to this corporation, purchases or acquires goods or services from
this corporation, and/or otherwise has a direct or indirect corporate or
business relationship with this corporation;
RESOLVED, that any officer of this corporation is hereby authorized and
directed to: execute and deliver on behalf of this corporation a guarantee
with respect to all indebtedness, liabilities and obligations of Borrower
to Greyrock, whether now existing or hereafter arising or acquired; to
pledge or assign to Greyrock, and to grant to Greyrock a security interest
and lien in, any and all assets and property, real and personal, of this
corporation as security for all indebtedness, liabilities and obligations
of this corporation to Greyrock, now existing or hereafter arising,
including without limitation the obligations of this corporation under said
guarantee, and to execute and deliver in connection therewith, one or more
pledge agreements, assignments, security agreements Uniform Commercial Code
financing statements, deeds of trust and mortgages, in form and substance
satisfactory to Greyrock; to execute and deliver any and all amendments,
modifications, extensions, renewals, replacements and agreements,
documents, instruments relating to the foregoing or requested by Greyrock;
and to execute and deliver any and all instruments, papers and documents
and to do all other acts that said officers may deem convenient or proper
to effectuate the purpose and intent of these resolutions.
RESOLVED, all actions heretofore taken and all documentation heretofore
executed and delivered by any of said officers, or by any individual who
currently holds or has held any of said offices, in furtherance of the
foregoing is hereby ratified, adopted, approved and confirmed and declared
to be binding and enforceable obligations of this corporation in accordance
with the respective terms and provisions thereof; and that the
authorizations herein set forth shall remain in full force and effect until
written notice of any modification or discontinuance shall be given to and
actually received by Greyrock, but no such modification or discontinuance
shall effect the validity of the acts of any person, authorized to so act
with these resolutions, before the receipt of any such notice by Greyrock.
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or
Assistant Secretary on the date set forth above.
___________________________________
Secretary or Assistant Secretary
Subordination Agreement
Borrower: Seer Technologies, Inc.
Creditor: Level 8 Systems, Inc., a New York corporation
Date: December 31, 1998
This Subordination Agreement is executed by the above-named Creditor
("Creditor") in favor of Greyrock Capital, a Division of NationsCredit
Commercial Corporation ("Greyrock"), whose address is 10880 Wilshire Blvd.,
Suite 950, Los Angeles, CA 90024, with respect to the above-named Borrower
("Borrower"). In order to induce Greyrock to extend or continue to extend
financing to the Borrower (but without obligation on Greyrock's part to do
so), the Creditor hereby agrees as follows:
1. Subordination of Debt. Creditor hereby subordinates payment by the
Borrower of any and all indebtedness, liabilities, guarantees and other
obligations of the Borrower to Creditor, now existing or hereafter arising
* (collectively, the "Subordinated Debt"), to the payment to Greyrock, in
full in cash, of all indebtedness, liabilities, guarantees and other
obligations of the Borrower to Greyrock, now existing or hereafter arising,
including without limitation any interest accruing after the commencement
of any bankruptcy, arrangement, or reorganization proceeding with respect
to Borrower (whether or not such interest is recoverable from the Borrower
or allowable or provable in any such proceeding) (collectively, the
"Greyrock Debt"). Creditor represents and warrants that the Subordinated
Debt ** the following:
*Under the Promissory Note referred to below and all extensions, renewals
and modifications thereof
**consists of
That certain Promissory Note dated December 31, 1998 in the original
principal amount of $12,000,000, which has a present unpaid principal
balance of $12,000,000.
Creditor agrees not to ask for, demand, sue for, take or receive all or any
part of the Subordinated Debt nor any security therefor, unless and until
all of the Greyrock Debt has been paid and performed in full, in cash.
Creditor further agrees that upon any distribution of the assets or
readjustment of the indebtedness of the Borrower whether by reason of
liquidation, composition, bankruptcy, arrangement, receivership, assignment
for the benefit of creditors or any other action or proceeding involving
the readjustment of all or any of the Subordinated Debt, or the application
of the assets of the Borrower to the payment or liquidation thereof,
Greyrock shall be entitled to receive payment in full in cash of all of the
Greyrock Debt prior to the payment of all or any part of the Subordinated
Debt, and in order to enable Greyrock to enforce its rights hereunder in
any such action or proceeding, Greyrock is hereby irrevocably authorized
and empowered in its sole discretion (but without any obligation on its
part) to make and present for and on behalf of Creditor such proofs of
claim against the Borrower on account of the Subordinated Debt as Greyrock
may deem expedient or proper and to vote such proofs of claim in any such
proceeding and to receive and collect any and all dividends or other
payments or disbursements made thereon in whatever form the same may be
paid or issued and to apply same on account of the Greyrock Debt. Creditor
further agrees to execute and deliver to Greyrock such assignments or other
instruments as may be required by Greyrock in order to enable Greyrock to
enforce any and all such claims and to collect any and all dividends or
other payments or disbursements which may be made at any time on account of
all and any of the Subordinated Debt. Creditor shall endorse all notes and
other written evidence of the Subordinated Debt with a statement that they
are subordinated to the Greyrock Debt pursuant to the terms of this
agreement, in such form as Greyrock shall require, and Creditor will
exhibit the originals of such notes and other written evidence of the
Subordinated Debt to Greyrock so that Greyrock can confirm that such
endorsement has been made, but this Subordination Agreement shall be fully
effective, even if no such endorsement is made. Any amounts received by
Creditor contrary to the provisions of this Section shall be held in trust
by Creditor for the benefit of Greyrock and shall forthwith be paid over to
Greyrock to be applied to the Greyrock debt in such order as Greyrock in
its sole discretion shall determine, without limiting any other right of
Greyrock hereunder or otherwise and without otherwise affecting the
liability of Creditor.
2. Modifications to Greyrock Debt; Waivers. Until Greyrock has
received payment in full of all Greyrock Debt, the Creditor agrees that, in
addition to any other rights that Greyrock may have at law or in equity,
Greyrock may at any time, and from time to time, without the Creditor's
consent and without notice to the Creditor, renew, extend or increase any
of the Greyrock Debt or that of any other person at any time directly or
indirectly liable for the payment of any Greyrock Debt, accept partial
payments of the Greyrock Debt, settle, release (by operation of law or
otherwise), compound, compromise, collect or liquidate any of the Greyrock
Debt, make loans or advances to the Borrower secured in whole or in part by
collateral or unsecured or refrain from making any loans or advances to the
Borrower, change, waive, alter or vary the interest charge on, or any other
terms or provisions of the Greyrock Debt or any present or future
instrument, document or agreement between Greyrock and the Borrower,
release, exchange, fail to perfect, delay the perfection of, fail to resort
to, or realize upon any collateral, and take any other action or omit to
take any other action with respect to the Greyrock Debt or any collateral
as Greyrock deems necessary or advisable in Greyrock's sole discretion.
The Creditor waives any right to require Greyrock to marshal any assets in
favor of the Creditor or against or in payment of any or all of the
Greyrock Debt. Creditor further waives any defense arising by reason of
any claim or defense based upon an election of remedies by Greyrock which
in any manner impairs, affects, reduces, releases, destroys and/or
extinguishes the Creditor's subrogation rights, rights to proceed against
the Borrower for reimbursement, and/or any other rights of the Creditor.
3. Default. The Creditor shall promptly give Greyrock written notice
of any default or event of default under any document, instrument or
agreement evidencing, securing or relating to any of the Subordinated Debt.
Until the Greyrock Debt has been paid and performed in full, the Creditor
shall not enforce, or exercise any rights or remedies with respect to, the
Subordinated Debt, judicially or non-judicially (including without
limitation the commencement of any bankruptcy or insolvency proceeding
against the Borrower), or attempt to do any of the foregoing.
4. No Commitment; Bankruptcy Financing. It is understood and agreed
that this Agreement shall in no way be construed as a commitment or
agreement by Greyrock to continue financing arrangements with the Borrower
and that Greyrock may terminate such arrangements at any time, in
accordance with Greyrock's agreements with the Borrower. In the event of
any financing of the Borrower by Greyrock during a bankruptcy, arrangement,
or reorganization of Borrower, the Creditor agrees that the term "Greyrock
Debt" shall include without limitation all indebtedness, liabilities and
obligations incurred in any such proceeding, and the Creditor agrees to
take such actions and execute such documents in such proceedings as may be
reasonably necessary in order to effectuate the foregoing.
5. No Contest. Creditor agrees not to contest the validity,
perfection, priority or enforceability of the Greyrock Debt or Greyrock's
security interest in any collateral.
6. Financial Condition of Borrower. The Creditor is presently informed
of the financial condition of the Borrower and of all other circumstances
which a diligent inquiry would reveal and which bear upon the risk of non-
payment of the Greyrock Debt and the Subordinated Debt. The Creditor
covenants that it will continue to keep itself informed as to the
Borrower's financial condition and all other circumstances which bear upon
the risk of non-payment of the Greyrock Debt and the Subordinated Debt.
The Creditor waives any right to require Greyrock to disclose to it any
information which Greyrock may now or hereafter acquire concerning the
Borrower.
7. Revivor. If, after payment of the Greyrock Debt, the Borrower
thereafter becomes liable to Greyrock on account of the Greyrock Debt, or
any payment made on the Greyrock Debt shall for any reason be returned by
Greyrock, this Agreement shall thereupon in all respects become effective
with respect to such subsequent or reinstated Greyrock Debt, without the
necessity of any further act or agreement between Greyrock and the
Creditor.
8. General. The Creditor agrees, upon Greyrock's request, to execute
all such documents and instruments and take all such actions as Greyrock
shall deem necessary or advisable in order to carry out the purposes of
this Agreement (but this Agreement shall remain fully effective
notwithstanding any failure to execute any additional documents or
instruments). The word "indebtedness" is used in this agreement in its
most comprehensive sense and includes without limitation any and all
present and future loans, advances, credit, debts, obligations,
liabilities, representations, warranties, and guarantees, of any kind and
nature, absolute or contingent, liquidated or unliquidated, and individual
or joint. Creditor represents and warrants that it has not heretofore
transferred or assigned the Subordinated Debt or given any other
subordination agreement in respect of any Subordinated Debt, and that it
will not do so without prior written notice to Greyrock and without making
such transfer, assignment or subordination expressly subject to this
Agreement. This Agreement is solely for the benefit of Greyrock and
Greyrock's successors and assigns, and neither the Borrower nor any other
person shall have any right, benefit, priority or interest under, or
because of the existence of, this Agreement. All of Greyrock's rights and
remedies hereunder and under applicable law are cumulative and not
exclusive. This Agreement sets forth in full the terms of agreement
between the parties with respect to the subject matter hereof, and may not
be modified or amended, nor may any rights hereunder be waived, except in a
writing signed by Greyrock and the Creditor. The Creditor agrees to
reimburse Greyrock, upon demand, for all costs and expenses (including
reasonable attorneys' fees) incurred by Greyrock in enforcing this
Agreement against Creditor, whether or not suit be brought. In the event
of any litigation between the parties based upon or arising out of this
Agreement, the prevailing party shall be entitled to recover all of its
costs and expenses (including without limitation attorneys fees) from the
non-prevailing party. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of California. As a material
part of the consideration to the parties for entering into this Agreement,
each party (i) agrees that all actions and proceedings based upon, arising
out of or relating in any way directly or indirectly to, this Agreement
shall be litigated exclusively in courts located within Los Angeles County,
California, (ii) consents to the jurisdiction of any such court and
consents to the service of process in any such action or proceeding by
personal delivery, first-class mail, or any other method permitted by law,
and (iii) waives any and all rights to transfer or change the venue of any
such action or proceeding to any court located outside Los Angeles County,
California. This Agreement shall be binding upon the Creditor and its
successors and assigns and shall inure to the benefit of Greyrock and
Greyrock's successors and assigns.
9. Mutual Waiver of Jury Trial. CREDITOR AND GREYROCK EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY
OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN CREDITOR AND
GREYROCK; OR (III) ANY CONDUCT, ACTS OR OMISSIONS OF CREDITOR OR GREYROCK
OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY
OTHER PERSONS AFFILIATED WITH CREDITOR OR GREYROCK; IN EACH OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
"Creditor:"
LEVEL 8 SYSTEMS, INC.
By /s/Arik Kilman
Name Arik Kilman
Title President
Address:1250 Broadway, 35th Floor
New York, New York 10001
CONSENT AND AGREEMENT OF BORROWER
The undersigned Borrower hereby approves of, agrees to and consents to all
of the terms and provisions of the foregoing Subordination Agreement and
agrees to be bound thereby and further agrees that any default or event of
default by the Borrower under any present or future instrument or agreement
between the Borrower and the Creditor shall constitute an immediate default
and event of default under all present and future instruments and
agreements between the Borrower and Greyrock. Borrower further agrees
that, at any time and from time to time, the foregoing Agreement may be
altered, modified or amended by Greyrock and the Creditor without notice to
or the consent of Borrower.
Borrower:
SEER TECHNOLOGIES, INC.
By /s/Steven Dmiszewicki
Name Steven Dmiszewicki
Title Co-President and Chief Financial Officer
Accepted:
Greyrock:
GREYROCK CAPITAL, a Division of NationsCredit Commercial Corporation
By_______________________________
Title______________________________
EXHIBIT 10.2
PROMISSORY NOTE
$12,000,000.00 New York, New York
December 31, 1998
For value received, Level 8 Systems, Inc., a New York corporation (the
"Company"), hereby promises to pay to the order of Liraz Systems Ltd., an
Israel corporation, the aggregate principal amount of $12,000,000 on June
30, 2000. The principal amount of this note shall bear simple interest at
a rate per annum equal to 12%, payable at maturity. Interest on this note
shall be determined on the basis of a 365-day year and the actual number of
days elapsed.
This note may be prepaid, in whole or in part, at any time or from
time to time, at the holder's option. In addition, notwithstanding the
preceding paragraph, if the Company consummates the Rights Offering (as
defined in the agreement between Liraz Systems Ltd. and the Company dated
December 31, 1998 (the "Liraz-Level 8 Agreement")) before June 30, 1999,
the Company shall pay the holder of this note the amount of the net
proceeds of the Rights Offering, to the extent this note shall not have
been canceled in payment of the Subscription Price (as defined in the
Liraz-Level 8 Agreement). If less than all the outstanding principal and
accrued interests are being prepaid or less than all to principal and
accrued interest are being cancelled in payment of the Subscription Price,
all such prepayments or cancellations, as the case may be, shall be applied
first to accrued interest and then to principal.
Payments shall be made in lawful money of the United States of America
at such place as the holder of this note may designate. Any payment
required to be made under this note on a Saturday, Sunday or a day on which
banks in the state of New York are authorized by law to be closed shall be
made on the following business day.
The holder of this note may declare the unpaid principal and accrued
interest on this note due and payable immediately, if any of the following
events of default shall have occurred and be continuing:
A. there shall have been entered any order, judgment or decree by
a court of competent jurisdiction for relief in respect of the Company or
any of its subsidiaries under Title 11 of the United States Code, as now
constituted or hereafter amended and in effect, or any other applicable
federal or state bankruptcy law or other similar law, or appointing a
receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of the Company or any of its subsidiaries, or of all or a
substantial part of its property, assets or revenues or ordering the
winding-up or liquidation of the Company's or any of its subsidiaries'
affairs, and that order, judgment or decree remains unstayed, unbonded and
in effect for a period of 90 consecutive days: or
B. the Company or any of its subsidiaries shall have filed a
petition or an answer or consent seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended and in effect,
or any other applicable federal or state bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution, liquidation or other similar
law, or the Company or any of its subsidiaries shall have consented to the
institution of proceedings under any of those laws or to the filing of any
such petition or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian or sequestrator (or similar
official) of the Company or any of its subsidiaries, or of all or a
substantial part of its property, assets or revenues or the Company or any
of its subsidiaries shall have failed generally to pay its debts as they
become due, or the Company or any of its subsidiaries shall have taken
corporate action in furtherance of any such action.
If the holder of this note institutes any action to enforce collection
of this note, upon acceleration or otherwise, there shall become due and
payable from the Company, in addition to the unpaid principal of and
interest on this note, all reasonable costs and expenses of that action
(including, without limitation, reasonable attorneys' fees) and the holder
of this note shall be entitled to judgment for all such additional amounts.
No delay or failure on the part of the holder of this note to exercise
any right under his note, including, but not limited to, the right to
accelerate the amounts due, shall operate as a waiver of that or any other
right of the holder of this note, and no right or remedy of the holder of
this note shall be deemed abridged or modified by any course of conduct.
The Company waives presentment, demand for payment, notice of non-
payment and all other notices or demands in connection with the delivery,
acceptance, performance or default of this note, except as specifically
provided in this note.
The Company irrevocably consents to the non-exclusive jurisdiction of
the courts of the state of New York and of the United States District
Courts for the Southern District of New York in connection with any action
or proceeding arising out of or related to this note.
This note shall be governed by and construed in accordance with the
law of the state of New York applicable to agreements made and to be
performed in New York and cannot be changed or terminated orally.
LEVEL 8 SYSTEMS, INC.
By: /s/ Yigal Baruch
Name: Yigal Baruch
Title: Chief Financial Officer
Exhibit 10.3
PROMISSORY NOTE
$12,000,000.00 New York, New York
December 31, 1998
For value received, Seer Technologies, Inc., a Delaware corporation
(the "Company"), hereby promises to pay to the order of Level 8 Systems,
Inc., a New York corporation ("Level 8"), the aggregate principal amount of
$12,000,000 on June 30, 2002. The principal amount of this note shall bear
interest, compounded quarterly, at a rate per annum equal to the weighted
average interest rate from time to time on the Company's other indebtedness
for borrowed money. Interest shall be payable at maturity.
This note may be prepaid, in whole or in part, at any time or from
time to time, at the Company's option. If less than all the outstanding
principal and accrued interest are being prepaid, all such prepayments
shall be applied first to accrued interest and then to principal.
Payments shall be made in lawful money of the United States of America
at such place as the holder of this note may designate. Any payment
required to be made under this note on a Saturday, Sunday or a day on which
banks in the state of New York are authorized by law to be closed shall be
made on the following business day.
The holder of this note may declare the unpaid principal and accrued
interest on this note due and payable immediately, if any of the following
events of default shall have occurred and be continuing:
A. there shall have been entered any order, judgment or decree by
a court of competent jurisdiction for relief in respect of the
Company or any of its subsidiaries under Title 11 of the United
States Code, as now constituted or hereafter amended and in
effect, or any other applicable federal or state bankruptcy law
or other similar law, or appointing a receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of the
Company or any of its subsidiaries, or of all or a substantial
part of its property, assets or revenues or ordering the
winding-up or liquidation of the Company's or any of its
subsidiaries' affairs, and that order, judgment or decree
remains unstayed, unbonded and in effect for a period of 90
consecutive days: or
B. the Company or any of its subsidiaries shall have filed a
petition or an answer or consent seeking relief under Title 11
of the United States Code, as now constituted or hereafter
amended and in effect, or any other applicable federal or state
bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution, liquidation or other similar law, or the Company
or any of its subsidiaries shall have consented to the
institution of proceedings under any of those laws or to the
filing of any such petition or to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee,
custodian or sequestrator (or similar official) of the Company
or any of its subsidiaries, or of all or a substantial part of
its property, assets or revenues or the Company or any of its
subsidiaries shall have failed generally to pay its debts as
they become due, or the Company or any of its subsidiaries shall
have taken corporate action in furtherance of any such action.
If the holder of this note institutes any action to enforce collection
of this note, upon acceleration or otherwise, there shall become due and
payable from the Company, in addition to the unpaid principal of and
interest on this note, all reasonable costs and expenses of that action
(including, without limitation, reasonable attorneys' fees) and the holder
of this note shall be entitled to judgment for all such additional amounts.
No delay or failure on the part of the holder of this note to exercise
any right under his note, including, but not limited to, the right to
accelerate the amounts due, shall operate as a waiver of that or any other
right of the holder of this note, and no right or remedy of the holder of
this note shall be deemed abridged or modified by any course of conduct.
The Company waives presentment, demand for payment, notice of non-
payment and all other notices or demands in connection with the delivery,
acceptance, performance or default of this note, except as specifically
provided in this note.
The Company irrevocably consents to the non-exclusive jurisdiction of
the courts of the state of New York and of the United States District
Courts for the Southern District of New York in connection with any action
or proceeding arising out of or related to this note.
Notwithstanding anything to the contrary in this note, the rights of
Level 8 under this note are subordinated to the rights of Greyrock Capital,
a Division of NationsCredit Commercial Corporation (formerly Greyrock
Business Credit) ("Greyrock"), pursuant to the Loan and Security Agreement
between Greyrock and the Company, dated March 26, 1997, as amended, to the
extent set forth in the Subordination Agreement between Level 8 and
Greyrock, dated December 31, 1998.
This note shall be governed by and construed in accordance with the
law of the state of New York applicable to agreements made and to be
performed in New York and cannot be changed or terminated orally.
SEER TECHNOLOGIES, INC.
By: /s/Steven Dmiszewicki
Name: Steven Dmiszewicki
Title: Co-President and
Chief Operating Officer
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.
5 Hatzoref Street
Holon 58856, Israel
Fax No.: (3)5599073
Attention: Chief Financial Officer
With a copy to:
Gideon Freitag, Law Offfices & Notary
Hashmonaim Tower, 100 Hashmonaim Street
P.O. Box 20328, Tel-Aviv 61203, Israel
Fax No.: (3)5623338
Attention: Gideon Freitag, Adv.
(ii) if to Level 8, to:
Level 8 Systems, Inc.
1250 Broadway, 35th Floor
New York, New York 10001
Fax No.: (212) 760-2327
Attention: Chief Financial Officer
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 (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/Yossi Shemesh
Name: Yossi Shemesh
Title: Chief Financial Officer
LEVEL 8 SYSTEMS, INC.
By: /s/Yigal Baruch
Name: Yigal Baruch
Title: Chief Financial Officer
EXHIBIT 10.41
Certificate of Amendment
of the Certificate of Incorporation of
Level 8 Systems, Inc.
Under Section 805 of the Business Corporation Law
1. The name of the corporation is Level 8 Systems, Inc. (the "Company").
2. The name under which the Company was formed was Advanced Systems
U.S.A. (L.S.U.), Inc.
3. The date the Company's certificate of incorporation was filed by the
department of state was July 7, 1988.
4. The Company's board of directors adopted the following resolution as
an amendment to its certificate of incorporation to create a series of
preferred stock pursuant to Article Fourth of the Company's
certificate of incorporation.
5. This certificate of amendment was adopted by the Company's board of
directors at a meeting duly called and held and at which a quorum was
present on December 15, 1998.
RESOLVED, that the Company may issue a series of 600,000 shares of
convertible preferred stock, par value $.01 per share, with such voting powers
and such designations, preferences and relative, participating, optional and
other special rights, and qualifications, limitations and restrictions thereof,
as follows:
1. Designation. The series of preferred stock created by this resolution
shall be known as "Series A Convertible Preferred Stock" ("Series A
Convertible Preferred Stock"), which shall consist of 600,000 shares.
2. No Dividends
(a) The Series A Convertible Preferred Stock shall not be entitled to
any dividends.
(b) No dividend (other than a dividend payable solely in common shares)
shall be paid or declared, and no distribution shall be made, on
common shares or any other series of preferred stock, as long as any
shares of Series A Convertible Preferred Stock remain outstanding.
3. Conversion. The holder of each outstanding share of Series A Convertible
Preferred Stock shall have the right at any time, or from time to time, at
the holder's option to convert that share into common shares in accordance
with this section 3.
(a) Each share of Series A Convertible Preferred Stock shall be
convertible into a number of fully paid and nonassessable common
shares of the Company determined by dividing the Liquidation Value
(as defined in section 5) by the conversion price in effect at the
time of conversion. The conversion price initially shall be $___*
and shall be adjusted as provided in paragraph (d) below.
(b) In order to convert shares of Series A Convertible Preferred Stock
into common shares, the holder of such shares shall surrender the
certificate or certificates for such shares at the office maintained
by the Company for that purpose, duly endorsed to the Company or in
blank, and give written notice to the Company at that office that he
elects to convert such shares. Shares of Series A Convertible
Preferred Stock shall be deemed to have been converted immediately
prior to the close of business on the day of the surrender of such
shares for conversion, and the person or persons entitled to receive
the common shares issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such common shares
at such time. As promptly as practicable on or after the conversion
date, the Company shall issue and deliver at such office a
certificate or certificates for the number of whole common shares
issuable upon such conversion, together with a cash payment in lieu
of any fraction of any share, as provided in section 3(c), to the
person or persons entitled to receive such shares. In case shares
of Series A Convertible Preferred Stock are called for redemption,
the right to convert such shares shall terminate at the close of
business on the Redemption Date, unless default shall be made in
payment of the redemption price.
(c) No fractional common shares shall be issued upon conversion of
shares of Series A Convertible Preferred Stock. In lieu of issuing
a fraction of a common share that would otherwise be issuable in
respect of the aggregate number of shares of Series A Convertible
Preferred Stock surrendered for conversion at one time by the same
holder, the Company shall pay in cash an amount equal to the same
fraction of the Closing Price (as defined in section 3(k)) on the
date on which such shares were duly surrendered for conversion or,
if such date is not a Trading Date (as defined in section 3(k)),
on the next Trading Date.
(d) The conversion price shall be adjusted from time to time as follows:
(i) In case the Company (A) pays a dividend or makes a
distribution on its outstanding common shares stock in common
shares; (B) subdivides its outstanding common shares; (C)
combines its outstanding common shares into a smaller number
of common shares; or (D) issues any shares by reclassification
of its common shares, the conversion price in effect at the
time of the record date for such dividend or distribution or
effective date of such subdivision, combination or
reclassification shall be adjusted so that the holder of any
shares of Series A Convertible Preferred Stock surrendered for
conversion after such time shall be entitled to receive the
number of shares of capital stock of the Company he would have
owned or been entitled to receive had such shares been
converted immediately prior to such time.
(ii) In case the Company hereafter issues rights or warrants to
the holders of its common shares entitling them to subscribe
for or purchase common shares at a price per share less than
the current market price per share (as determined pursuant to
clause (iv) below) on the record date referred to below, the
conversion price shall be adjusted upon the exercise of such
warrants or rights (such adjustment to be computed as of the
close of business on the last Trading Date of each week) so
that the conversion price shall equal the price determined by
multiplying the conversion price then in effect by a fraction,
of which the numerator shall be the number of common shares
then outstanding plus the number of common shares the
aggregate exercise price of such warrants or rights exercised
would purchase at such current market price and of which the
denominator shall be the number of common shares then
outstanding plus the number of additional common shares issued
upon the exercise of such warrants or rights. Such adjustment
shall become effective at the opening of business on the next
business day following the computation of such adjustment.
(iii) In case the Company distributes to all holders of its common
shares evidences of its indebtedness or assets (excluding any
cash or stock dividends or distributions and dividends
referred to in clause (i) above), then in each such case the
conversion price shall be adjusted so that it shall equal
the price determined by multiplying the conversion price in
effect immediately prior to the date of such distribution by a
fraction, of which the numerator shall be the current market
price per common share (determined as provided in clause (iv)
below) on the record date mentioned below less the then fair
market value (as determined by the board of directors of the
Company, whose determination shall be conclusive) of the
portion of the assets or evidences of indebtedness so
distributed applicable to one common share, and the
denominator shall be such current market price per common
share. Such adjustment shall become effective on the
opening of business on the next business day following the
record date for the determination of shareholders entitled
to receive such distribution.
(iv) For the purpose of any computation under clause (i), (ii) or
(iii) above, the current market price per common share on any
date shall be deemed to be the average of the daily Closing
Prices for the 30 consecutive Trading Dates commencing not
more than 45 Trading Dates before the day in question, such 30
consecutive Trading Date period to be specified by the board
of directors of the Company prior to the commencement of 45
Trading Dates before the day in question or, in the event the
board of directors fails to specify such 30 consecutive
Trading Dates, such 30 consecutive Trading Dates shall be
deemed to have commenced on the 40th Trading Date before the
day in question.
(v) In any case in which this section 3 requires that an
adjustment as a result of any event become effective at the
opening of business on the business day next following a
record date, the Company may elect to defer until after the
occurrence of such
event (A) issuing to the holder of any shares of Series A
Convertible Preferred Stock converted after such record date
and before the occurrence of such event the additional common
shares issuable upon such conversion over and above the common
shares issuable upon such conversion on the basis of the
conversion price prior to adjustment and (B) paying such
holder any amount in cash in lieu of a fractional common share
pursuant to section 3(c); and, in lieu of the shares the
issuance of which is so deferred, the Company shall issue or
cause its transfer agents to issue due bills or other
appropriate evidence of the right to receive such shares.
(vi) No adjustment in the conversion price pursuant to this section
3(d) shall be required, unless (A) such adjustment would
require an increase or decrease of at least $0.05 in such
price; provided, that any adjustment that, by reason of this
paragraph (d)(vi), is not required to be made shall be carried
forward and taken into account in any subsequent adjustment;
provided, further, that, at the time of any adjustment, such
adjustment shall include all adjustments to the date of such
adjustment then being carried forward. All calculations under
this section 3(d) shall be made to the nearest 1/100 of a cent
or to the nearest 1/100 of a share, as the case may be.
(e) In case of any consolidation or merger of the Company with or into
another entity or in the case of any sale or conveyance to another
entity (other than a wholly-owned subsidiary of the Company) of all
or substantially all the property of the Company, the holder of a
share of Series A Convertible Preferred Stock shall have the right
thereafter, as long as the conversion right hereunder shall exist,
to convert such share into the kind and amount of shares of
stock and other securities and properties receivable upon such
consolidation, merger, sale or conveyance by a holder of the
number of common shares
into which such share of Series A Convertible Preferred Stock might
have been converted immediately prior to such consolidation, merger,
sale or conveyance and shall have no other conversion rights with
regard to such share. In the event of such a consolidation, merger,
sale or conveyance, effective provision shall be made in the
certificate of incorporation of the resulting or surviving entity or
otherwise for the protection of the conversion rights of the shares
of Series A Convertible Preferred Stock that shall be applicable, as
nearly as reasonably may be to any such other shares of stock and
other securities and property deliverable on conversion of shares of
Series A Convertible Preferred Stock. In case securities or
properties other than common shares shall be issuable or deliverable
upon conversion as aforesaid, then all reference in this section 3
shall be deemed to apply, as far as appropriate and as nearly as may
be, to such other securities or properties.
(f) Whenever the conversion price is adjusted as provided in this
section 3:
(i) the Company shall compute the adjusted conversion price in
accordance with this section 3 and shall prepare a certificate
signed by the chief financial officer of the Company setting
forth the adjusted conversion price, and such certificate shall
forthwith be filed with the transfer agent or agents for the
Series A Convertible Preferred Stock; and
(ii) a notice stating that the conversion price has been adjusted
and
setting forth the adjusted conversion price shall, as soon as
practicable, be mailed to the holders of record of the
outstanding shares of Series A Convertible Preferred Stock.
(g) In case:
(i) the Company declares a dividend (or any other distribution) on
its common shares; or
(ii) the Company authorizes the granting to the holders of its
common
shares of rights to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
(iii) of any reclassification of the capital stock of the Company
(other than a subdivision or combination of its outstanding
common shares), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders
of the company is required, or
of the sale or transfer of all or
substantially all the assets of the Company, or of the
voluntary
of involuntary dissolution, liquidation or winding-up of the
Company;
then the Company shall cause to be mailed to the transfer agent
or agents Series A Convertible Preferred Stock and to the
holders of record of the outstanding shares of Series A
Convertible Preferred Stock, at least 20 days (or 10 days, in
any case specified in clause (i) or (ii) above) prior to the
applicable record date specified below, a notice stating (A)
the
date on which a record is to be taken for the purpose of such
dividend, distribution or rights, or, if a record is not to be
taken, the date as of which the holders of common shares of
record entitled to such dividend, distribution or rights are to
be determined, or (B) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation
or winding-up is expected to become effective, and the date as
of which it is expected that holders of common shares of record
shall be entitled to exchange their common shares for
securities
or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation
or winding-up.
(h) The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued common shares,
for the purpose of effecting the conversion of the shares of
Series A
Convertible Preferred Stock, the full number of common shares then
deliverable upon the conversion of all shares of Series A
Convertible
Preferred Stock then outstanding.
(i) The Company shall pay any and all taxes payable in respect of the
issuance or delivery of common shares on conversion of shares of
Series A Convertible Preferred Stock. The Company shall not,
however, be required to pay any tax in respect of any transfer
involved in the issue and delivery of common shares in a name other
than that in which the shares of Series A Convertible Preferred
Stock
so converted were registered, and no such issue or delivery shall be
made, unless and until the person requesting such issue has paid the
Company the amount of any such tax, or has established, to the
satisfaction of the Company, that such tax has been paid.
(j) For the purpose of this section 3, the term "common shares" includes
any stock of any class of the Company that has no preference in
respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of
the Company, and is not subject to redemption by the Company.
However, shares issuable on conversion of shares of Series A
Convertible Preferred Stock shall include only shares of the class
designated as common shares of the Company as of the original
date of
issue of Series A Convertible Preferred Stock or shares of any class
or classes resulting from any reclassification or reclassifications
of such common shares and that have no preference in respect of
dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company
and
are not subject to redemption by the Company; provided that, if at
any time there is more than one such resulting class, the shares of
each such class then so issuable shall be substantially in the
proportion that the total number of shares of such class resulting
from all such reclassifications bear to the total number of shares
of all such classes resulting from all such reclassifications.
(k) As used in this section 3, the term "Closing Price" on any day means
the reported last sale price on such day or, in case no such sale is
reported to have taken place on such day, the average of the
reported
closing bid and asked prices, in each case on the New York Stock
Exchange Composite Tape, or, if the common shares are not listed or
admitted to trading on such Exchange, on the principal national
securities exchange on which the common shares are listed or
admitted
to trading, or, if not listed or admitted to trading on any national
securities exchange, on the NASDAQ National Market
System, or, if not
listed or admitted to trading on the NASDAQ National Market System,
the average of the closing bid and asked prices as furnished by any
New York Stock Exchange member firm selected from time to time by
the board of directors of the Company for that purpose; and the term
"Trading Date" means a date on which the New York Stock Exchange (or
any successor to such Exchange) is open for the transaction of
business.
4. Optional Redemption
(a) At any time after June 30, 2000, upon notice given by the Company
pursuant to section 4(b), the Company shall redeem all, but not
fewer
than all, the outstanding shares of Series A Convertible Preferred
Stock at a redemption price per share equal to the Liquidation Value
on the Redemption Date (as defined in section 4(b)).
(b) Each notice of any proposed redemption shall state: (i) the time and
date as of which the redemption shall occur (the "Redemption Date");
(ii) the total number of shares to be redeemed and, if fewer than all
the shares held by each holder are to be redeemed, the number of
shares to be redeemed from that holder; (iii) the redemption price;
(iv) that shares called for redemption may be converted at any time
during the 30 days prior to the Redemption Date (unless the Company
shall default in payment of the redemption price, in which case that
right shall not terminate at that time and date); (v) the conversion
price and the Liquidation Value; and (vi) the place or places where
certificates for the shares are to be surrendered for payment of the
redemption price.
(c) Notice of any proposed redemption under this section 4 shall be
given
by mailing a copy of the notice, postage prepaid, to the holders of
record of the shares to be redeemed at their respective addresses
then appearing on the books of the Company not more than 60 or fewer
than 30 days prior to the Redemption Date. On the Redemption Date,
the Company shall, and at any time not more than 30 days prior
to the
Redemption Date may, deposit the aggregate redemption price of all
the shares to be redeemed (except that no such deposit shall be
required with respect to any shares to be redeemed that,
prior to the
date of such deposit, shall have been converted into common shares)
with a bank or trust company (the "Depositary") designated in the
notice of redemption having a combined capital, surplus
and undivided
profits aggregating at least $100,000,000, in trust for payment to
the holders of the shares to be redeemed, and deliver irrevocable
written instructions authorizing the Depositary to apply the deposit
solely to the redemption of the shares to be
redeemed. Those written
instructions may provide that (i) any of the deposit remaining
unclaimed by the holder of any shares 180 days after the Redemption
Date be returned to the Company, after
which the holder shall have no
claim against the Depositary but shall have a claim as an unsecured
creditor against the Company for the redemption price (together with
any declared and unpaid dividends applicable to the shares), without
interest, and (ii) any portion of the deposit not required for the
redemption because of the conversion of those shares into the common
shares shall be released or repaid to the Company forthwith. If
notice of redemption shall have been so given, such shares shall not
be deemed to be outstanding after the
Redemption Date, and all rights
of the holders of those shares as shareholders
of the Company (except
the right to receive from the Company the redemption price without
interest, including the right to convert the shares into common
shares and the rights of registration of
transfer and exchange) shall
cease either (i) from and after the Redemption Date (unless the
Company defaults in the payment of the redemption price, in which
case those rights shall not terminate at that time and date) or (ii)
if the Company so elects and states in the
notice of redemption, from
and after the time and date (which date shall be the Redemption Date
or an earlier date not fewer than 15 days after the date of mailing
of the redemption notice) on which the Company irrevocably deposits
with the office of the paying agent, on the Redemption Date, the
redemption price. Upon surrender (in accordance with the notice of
redemption) of the certificate or certificates for any shares so to
be redeemed (properly endorsed or assigned for transfer, if the
Company shall so require and the notice of redemption shall so
state), those shares shall be redeemed by the Company at the
redemption price.
5. Liquidation. In the event of any liquidation,
dissolution or winding-up of
the Company, whether voluntary or involuntary, the holders of outstanding
shares of Series A Convertible Preferred
Stock shall be entitled to receive
for each such share payment in cash in an amount per share (the
"Liquidation Value") equal to (a) the product of (i) four and (ii) the
initial conversion price specified in section 3(a), plus (b) an amount in
the nature of interest thereon at the rate of 12% a year, compounded
quarterly, from the first date on which any shares of Series A Convertible
Preferred Stock are issued to the date of such liquidation, dissolution or
winding-up. Thereafter, holders of common shares and Series A Convertible
Preferred Stock shall be entitled to receive for each share (on an as
converted basis) payment in cash in the amount of the Liquidation Value.
As to distribution upon liquidation, dissolution or winding-up, the Series
A Convertible Preferred Stock shall rank senior to any other class or
series of preferred or common stock from time to time created. An amount
equal to the Liquidation Value shall be paid to the
holder of each share of
Series A Convertible Preferred Stock before any payment or distribution is
made to the holders of common shares or any other class or series of stock
of the Company. The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all the assets of the Company (unless, in
connection therewith, the liquidation, dissolution or winding-up of the
Company is specifically approved), or the merger or consolidation of the
Company into or with any other entity, or the merger of any other entity
into it, shall be deemed to be a liquidation, dissolution or winding-up of
the Company for purposes of this section 5. The purchase or redemption of
shares of stock of the Company of any class or series shall not be deemed
to be a liquidation, dissolution or winding-up of the Company for purposes
of this section 5. Nothing in this section 5 shall be deemed to limit in
any way the right of the holders of shares of Series A Convertible
Preferred Stock to convert any or all of
those shares at any time before or
simultaneously with the payment of the Liquidation Value in respect of
those shares.
6. Voting. The holders of shares of Series A Convertible Preferred Stock
shall vote as a series, to the extent required in this resolution or by
applicable law. Otherwise, the holders of shares of Series A Convertible
Preferred Stock shall vote with the holders of common shares as a single
class and shall be entitled to two votes for each common share into which
the shares of Series A Convertible Preferred Stock so held would be
convertible on the record date for
the vote of shareholders (and, for these
purposes and these purposes only, and notwithstanding section 3(c), to a
fraction of a vote for each fractional interest in a common share).
7. Consents Required of Holders of Series A Convertible Preferred Stock. As
long as any shares of Series A Preferred
Stock are outstanding, the Company
shall not, by amendment to the certificate of incorporation, by resolution
of the board of directors, by consolidation of the Company with, or merger
of the Company into, another entity or in any other manner, without the
consent of the holders of two-thirds of the outstanding shares of Series A
Convertible Preferred Stock, either given by vote in person or by proxy at
a meeting called for that purpose or given in writing:
(a) authorize, or increase the authorized amount of, any class or series
of stock having preference or priority over the Series A Convertible
Preferred Stock as to the distribution of assets upon liquidation or
having any right to dividends (other
than dividends payable solely in common shares);
(b) materially and adversely alter any provision of the Series A
Convertible Preferred Stock; or
(c) increase the then authorized number of
shares of Series A Convertible
Preferred Stock or authorize, or increase the authorized amount of,
any class or series of stock ranking
as to the distribution of assets
upon liquidation on a parity with the Series A Convertible Preferred
Stock.
Notwithstanding anything to the contrary in this resolution, the number of
shares constituting the Series A Convertible Preferred
Stock shall automatically and permanently decrease from
time to time after the 90th day after the initial
issuance of shares of Series A Convertible Preferred Stock to the number then
outstanding, and thereafter shall not be deemed authorized shares of Series A
Convertible Preferred Stock, but shall instead be authorized but unissued and
unclassified shares of preferred stock.
8. Retirement of Shares. Shares of Series A Convertible Preferred Stock
converted into common shares or otherwise acquired by the Company in any
manner shall be permanently retired and shall not under any circumstances
be reissued; and the Company shall from time to time reduce the authorized
Series A Convertible Preferred Stock accordingly.
9. Increase or Decrease in Shares of the Series.
Subject to sections 7 and 8,
the board of directors is authorized to adopt, from time to time, a
resolution or resolutions providing for an increase or decrease in the
number of shares constituting Series A Convertible Preferred Stock, but no
such decrease shall reduce at any time the number of shares of Series A
Convertible Preferred Stock at the time outstanding.
10. Transfer Agent, Conversion Agent and Registrar.
The Company shall, as long
as any shares of Series A Convertible Preferred Stock are outstanding,
maintain an office or agency (which may be the
Company's own offices) where
the shares may be presented for registration of transfer and exchange and
for conversion.
11. Governmental Approvals; Listing. If any common shares that would be
issuable upon conversion of shares of Series A Convertible Preferred
Stock require registration with or approval of any governmental authority
before the shares may be issued upon conversion, the Company shall use its
best efforts as expeditiously as possible to cause the shares to be duly
registered or approved, as the case may be. The Company shall endeavor to
list the common shares (or depository shares representing interests in
common shares) required to be delivered upon
conversion of shares of Series
A Convertible Preferred Stock prior to such delivery upon the principal
national securities exchange or upon the NASDAQ National Market System,
upon which the outstanding common shares are listed at the time of
delivery, if they are then so listed.
12. Action by Consent Without a Meeting; Waivers, Etc. Any action required or
permitted to be taken by holders of shares of Series A Convertible
Preferred Stock at any meeting of shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by holders of shares of
Series A Convertible Preferred Stock having not fewer than the minimum
number of votes that would be necessary to
authorize or take such action at
a meeting at which all outstanding shares of
Series A Convertible Preferred
Stock were present and voted. Holders of two-thirds of the outstanding
shares of Series A Convertible Preferred Stock may from time to time
consent to the waiver of any rights of all holders of shares of Series A
Convertible Preferred Stock under this resolution or otherwise.
We have executed this certificate on the date set forth below and affirm,
under the penalties of perjury, that the statements contained in it are true.
December 15, 1998
________________________________
Name:
Title: President
________________________________
Name:
Title: Secretary
*An amount equal to the greater of (a)$5.00 and (b)two-thirds of the average
closing price of a share of common stock on the 20 trading days ending
on the fifth trading day before the commencement of the rights offering.
