EXHIBIT 10.20C
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAW, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE OR
FOREIGN SECURITIES LAWS, OR THE HOLDER RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH SALE, OFFER, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER
APPLICABLE STATE OR FOREIGN SECURITIES LAW.
LEVEL 8 SYSTEMS, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
------------------------------------------
LEVEL 8 SYSTEMS, INC., a Delaware Corporation (the "Company"), hereby grants to
Tarshish Hahzakot VeHashkaot Hapoalim LTD (the "Holder"), the right to purchase
from the Company the number of shares of Common Stock of the Company, par value
$0.001 (the "Common Shares") specified below, subject to the terms and
conditions set forth below, effective as of December 28, 2000 (the "Effective
Date").
1. Number of Common Shares Available for Purchase and Exercise Price
-----------------------------------------------------------------
This Warrant may be exercised to purchase that number of the Company's
Common Shares having an aggregate exercise price in an amount equivalent to
seven hundred and fifty thousand United States dollars (US$750,000), at an
exercise price per each Common Share which shall be equal to the mean of
the closing or last sale prices of the Common Shares over the period
beginning on the first U.S. business day following the Effective Date and
ending on the fourteenth (14/th/) U.S. business day following the Effective
Date, as quoted on NASDAQ/NMS, subject to adjustments under Section 8 of
this Warrant (the "Warrant Shares").
2. Intentionally Omitted.
---------------------
3. Term
----
This Warrant may be exercised, in whole, or in part, during the period
beginning one day after the fourteenth (14/th/) U.S. business day following
the Effective Date and ending on the date which is four (4) years following
the Effective Date.
-2-
4. Exercise of Warrant
-------------------
This Warrant may be exercised in whole or in part on one or more occasions
during its term. The Warrant may be exercised by the surrender of the
Warrant to the Company at its principal office together with the Notice of
Exercise annexed hereto duly completed and executed on behalf of the
Holder.
a. Exercise for Cash
-----------------
To exercise for cash, the Notice of Exercise must be accompanied by
payment in full of the amount of the aggregate purchase price of the
Warrant Shares being purchased upon such exercise in immediately
available funds.
b. Net Exercise
------------
In lieu of the payment method set forth in Section 4(a) above, the
Holder may elect to exchange the Warrant for a number of Warrant
Shares equal to the increase in value of the Warrant Shares otherwise
purchasable hereunder on the date of exchange. If the Holder elects to
exchange this Warrant as provided in this Section 4(b), the Holder
shall tender to the Company the Warrant along with the Notice of
Exercise, and the Company shall issue to the Holder the number of
Warrant Shares computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Warrant Shares to be issued to the Holder.
Y = the number of shares of Warrant Shares purchasable under the
Warrant (as adjusted to the date of such calculation, but excluding
those shares already issued under this Warrant).
A = the Fair Market Value (as defined below) of one share of the
Company's Common Shares.
B = Exercise Price (as adjusted to the date of such calculation).
"Fair Market Value" of an Common Share shall mean:
(i) If the Company's Common Shares are listed on a national
securities exchange or is quoted on the National Association of
Securities Dealers, Inc. Automated Quotation/National Market
System (NASDAQ/NMS), then the closing or last sale price,
respectively, reported for the exercise date.
-3-
(ii) If the Company's Common Shares are not listed on a national
securities exchange or quoted on NASDAQ/NMS, but are traded in
the over-the-counter market, then the mean of the closing bid
and asked prices as reported for the exercise date.
(iii) If the Company's Common Shares are not publicly traded, then as
determined by the Company's Board of Directors in good faith.
In the event of a net exercise, the entire Warrant must be
surrendered, and no new Warrant shall be issued.
c. Issuance of Shares on Exercise
------------------------------
The Company agrees that the Warrant Shares so purchased shall be
issued as soon as practicable thereafter, and that the Holder shall be
deemed the record owner of such Warrant Shares as of and from the
close of business on the date on which this Warrant shall be
surrendered, together with payment in full as required above. In the
event of a partial exercise, the Company shall concurrently issue to
the Holder a replacement Warrant on the same terms and conditions as
this Warrant, but representing the number of Warrant Shares remaining
after such partial exercise
5. Fractional Interest
-------------------
No fractional shares will be issued in connection with any exercise
hereunder, but in lieu of such fractional shares the Company shall make a
cash payment therefor upon the basis of the current market price of such
shares then in effect as determined in good faith by the Company's Board of
Directors.
6. Warrant Confers No Rights of Shareholder
----------------------------------------
The Holder shall not have any rights as a shareholder of the Company with
regard to the Warrant Shares prior to actual exercise resulting in the
purchase of any Warrant Shares
7. Investment Representation
-------------------------
Neither this Warrant nor the Warrant Shares issuable upon the exercise of
this Warrant have been registered under the Securities Act, or any other
securities laws. The Holder acknowledges by acceptance of the Warrant that
(a) it has acquired this Warrant for investment and not with a view to
distribution; (b) it has either a pre-existing personal or business
relationship with the Company, or its executive officers, or by reason of
its business or financial experience, it has the capacity to protect its
own interests in connection with the transaction; and (c) it is an
accredited investor as that term is defined in Regulation D promulgated
under the Securities Act. The Holder agrees that any Warrant Shares
issuable upon exercise of this Warrant will be acquired for investment
-4-
and not with a view to distribution and such Warrant Shares will not be
registered under the Securities Act and applicable state securities laws
and that such Warrant Shares may have to be held indefinitely unless they
are subsequently registered or qualified under the Securities Act and
applicable state securities laws, or based on an opinion of counsel
reasonably satisfactory to the Company, an exemption from such registration
and qualification is available. The Holder, by acceptance hereof, consents
to the placement of legend(s) on all securities hereunder as to the
applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company
such legend is not required in order to ensure compliance with the
Securities Act. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
8. Adjustment of Warrant Price and Number of Shares
------------------------------------------------
The number of securities purchasable initially upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to
time upon the occurrence of certain events, as follows:
a. Adjustment for Shares Splits and Combinations If the Company at any
---------------------------------------------
time or from time to time effects a subdivision of the outstanding
Common Shares, the number of Common Shares issuable upon exercise of
this Warrant immediately before the subdivision shall be
proportionately increased, and conversely, if the Company at any time
or from time to time combines the outstanding Common Shares, the
number of Common Shares issuable upon exercise of this Warrant
immediately before the combination shall be proportionately decreased.
Any adjustment under this Section 8(a) shall become effective at the
close of business on the date the subdivision or combination becomes
effective.
b. Adjustment for Certain Dividends and Distributions In the event the
--------------------------------------------------
Company at any time, or from time to time makes, or fixes a record
date for the determination of holders of Common Shares entitled to
receive a dividend or other distribution payable in additional shares
of Common Shares, then and in each such event the number of Common
Shares issuable upon exercise of this Warrant shall be increased as of
the time of such issuance or, in the event such a record date is
fixed, as of the close of business on such record date, by multiplying
the number of Common Shares issuable upon exercise of this Warrant by
a fraction: (i) the numerator of which shall be the total number of
Common Shares issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the
number of Common Shares issuable in payment of such dividend or
distribution, and (ii) the denominator of which is the total number of
shares of Common Shares issued and outstanding immediately prior to
the time of such issuance or the close of business on such record
date; provided, however, that if such record date is fixed and such
-----------------
dividend is not fully paid or if such distribution is not fully made
on the date fixed thereof, the number of Common Shares issuable upon
exercise of this Warrant shall be recomputed
-5-
accordingly as of the close of business on such record date and
thereafter the number of shares of Common Shares issuable upon
exercise of this Warrant shall be adjusted pursuant to this Section
8(b) as of the time of actual payment of such dividends or
distributions.
c. Adjustments for Other Dividends and Distributions. In the event the
-------------------------------------------------
Company at any time or from time to time makes, or fixes a record date
for the determination of holders of Common Shares entitled to receive
a dividend or other distribution payable in securities of the Company
other than Common Shares, then in each such event provision shall be
made so that the Holder shall receive upon exercise of this Warrant,
in addition to the number of Common Shares receivable thereupon, the
amount of securities of the Company that the Holder would have
received had this Warrant been exercised for Common Shares immediately
prior to such event (or the record date for such event) and had the
Holder thereafter, during the period from the date of such event to
and including the date of exercise, retained such securities
receivable by it as aforesaid during such period, subject to all other
adjustments called for during such period under this Section and the
Company's Certificate of Incorporation or By-laws with respect to the
rights of the Holder.
d. Adjustment for Reclassification, Exchange and Substitution If the
----------------------------------------------------------
Common Shares issuable upon the exercise of this Warrant are changed
into the same or a different number of shares of any class or classes
of shares, whether by recapitalization, reclassification or otherwise
(other than a subdivision or combination of shares or shares dividend
or a reorganization, merger, consolidation or sale of assets, provided
for elsewhere in this Section), then and in any such event the Holder
shall have the right thereafter to exercise this Warrant into the kind
and amount of shares and other securities receivable upon such
recapitalization, reclassification or other change, by holders of the
number of shares of Common Shares for which this Warrant might have
been exercised immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as
provided herein and under the Company's Certificate of Incorporation
or By-laws.
e. Reorganization, Mergers, Consolidations or Sales of Assets If at any
----------------------------------------------------------
time from time to time there is a capital reorganization of the Common
Shares (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this
Subsection) or a merger or consolidation of the Company with or into
another corporation, or the sale of all or substantially all of the
Company's properties and assets to any other person, then, as a part
of such reorganization, merger, consolidation or sale, provision shall
be made so that the Holder shall thereafter be entitled to receive
upon exercise of this Warrant, the number of shares or other
securities or property of the Company, or of the successor corporation
resulting from such merger or consolidation or sale, to which a holder
of Common Shares deliverable upon conversion would have been
-6-
entitled on such capital reorganization, merger, consolidation or
sale. In any such case (except to the extent any cash or property is
received in such transaction), appropriate adjustment shall be made in
the application of the provisions of this Subsection and the Company's
Certificate of Incorporation with respect to the rights of the Holder
after the reorganization, merger, consolidation or sale to the end
that the provisions of this Subsection and the Company's Certificate
of Incorporation (including adjustment of the number of shares of
Common Shares issuable upon exercise of this Warrant) shall be
applicable after that event and be as nearly equivalent to the
provisions hereof as may be practicable.
f. Other Transactions. In the event that the Company shall issue shares
------------------
to its shareholders as a result of a split-off, spin-off or the like,
then the Company shall only complete such issuance or other action if,
as part thereof, allowance is made to protect the economic interest of
the Holder either by increasing the number of Warrant Shares or by
procuring that the Holder shall be entitled, on economically
proportionate terms, to acquire additional shares of the spun-off or
split-off entities.
g. General Protection. The Company will not, by amendment of its
------------------
Certificate of Incorporation or other charter document or through any
reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder, or impair
the economic interest of the Holder, but will at all times in good
faith assist in the carrying out of all the provisions hereof and in
taking of all such actions and making all such adjustments as may be
necessary or appropriate in order to protect the rights and the
economic interests of the Holder against impairment.
h. Notice of Capital Changes. If at any time the Company shall offer for
-------------------------
subscription pro rata to the holders of Common Shares any additional
--------
shares of any class, other rights or any equity security of any kind,
or there shall be any capital reorganization or reclassification of
the capital shares of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to
another company or there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company, or other
transaction described in this Section 8, then, in any one or more of
said cases, the Company shall give the Holder written notice, by
registered or certified mail, postage prepaid, of the date on which
(i) a record shall be taken for such subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up shall take place, as the case
may be. Such notice shall also specify the date as of which the
holders of record of Common Shares shall participate in such
subscription rights, or shall be entitled to exchange their Common
Shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given
-7-
at least fourteen (14) days prior to the action in question and not
less than fourteen (14) days prior to the record date in respect
thereto.
i. Adjustment of Warrant Price. Upon each adjustment in the number of
---------------------------
Common Shares purchasable hereunder, the Warrant Price shall be
proportionately increased or decreased, as the case may be, in a
manner that is the inverse of the manner in which the number of Common
Shares purchasable hereunder shall be adjusted.
j. Notice of Adjustments. Whenever the Warrant Price or the number of
---------------------
Common Shares purchasable hereunder shall be adjusted pursuant to
Section 8 hereof, the Company shall prepare a certificate signed by
the chief financial officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated,
and the Warrant Price and the number of Common Shares purchasable
hereunder after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (by first class mail, postage
prepaid) to the Holder.
9. Transfer of This Warrant or Securities Issuable on Exercise Hereof
------------------------------------------------------------------
1. With respect to any offer, sale or other disposition of this Warrant
or securities into which such Warrant may be exercised, the Holder
will give written notice to the Company prior thereto, describing
briefly the manner thereof, together with, if requested by the
Company, a written opinion of such Holder's counsel, to the effect
that such offer, sale or other distribution may be effected without
registration or qualification (under any federal or state law then in
effect). Such opinion letter and all such transferees must warrant and
represent that they are an "accredited" investor as that term is
defined under Regulation D of the Securities Act. Promptly, as
practicable, upon receiving such written notice and opinion and
warranties and representations, if so requested, the Company, as
promptly as practicable, shall deliver to the Holder one or more
replacement Warrant certificates on the same terms and conditions as
this Warrant for delivery to the transferees. Each Warrant thus
transferred and each certificate representing the securities thus
transferred shall bear legend(s) as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act,
unless in the opinion of counsel for the Company such legend is not
required in order to ensure compliance with the Securities Act. The
Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Any provision of this Warrant to
the contrary notwithstanding, the Holder may not offer, sell or
otherwise dispose of this Warrant to any third party, other than (i)
to a wholly owned subsidiary of Bank Hapoalim B.M., or (ii) to any
other transferee approved by the Company in writing with such approval
not to be unreasonably withheld.
2. In the event that the Company or its shareholders receive an offer to
transfer all or substantially all of the shares in the Company, or to
effect a merger or acquisition, or
-8-
sale of all or substantially all of the assets of the Company, then
the Company shall promptly inform the Holder in writing of such offer.
10. Registration Rights
-------------------
The Company covenants and agreed as follows:
a. Definitions For purposes of this Section 10:
-----------
"Registrable Shares" means (i) the Warrant Shares, and (ii) any
Common Shares of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security
that is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such Warrant Shares;
provided, however, that any exercise of this Warrant in
connection with an exercise of rights to registration under this
Section 10 may be made conditional upon the closing of the
offering contemplated by such registration.
"Register", "registered" and "registration" refer to a
------- ---------- ------------
registration effected by filing a registration statement in
compliance with the Securities Act and the declaration or
ordering by the Commission of effectiveness of such registration
statement, or the equivalent actions under the laws of another
jurisdiction.
b. Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its securities, it shall give notice to the Holder of
such intention. Upon the written request of the Holder given within
twenty (20) days after receipt of any such notice, the Company shall
include in such registration all of the Registrable Shares indicated
in such request, so as to permit the disposition of the shares so
registered, at the expense of the Company.
c. Assignment of Registration Rights. The rights to cause the Company to
---------------------------------
register Registrable Securities pursuant to the Registration Rights
may be assigned by a Holder to a transferee or assignee of such
securities to the same extent as permitted by Section 9 of this
Warrant.
d. No Conflicting Agreements. The Company represents and warrants to the
-------------------------
Holder that the Company is not a party to any agreement that conflicts
in any manner with the Holder's rights to cause the Company to
register Registrable Securities pursuant to the Registration Rights.
The Company covenants and agrees that it shall not, without the prior
written consent of the holders of a majority of the outstanding
Registrable Securities, amend, modify or restate the Registration
Rights if the Holder would be adversely affected by the amendment in a
different manner than other holders of "Registrable Shares" similarly
situated.
-9-
e. Rights and Obligations Survive Exercise and Expiration of Warrant The
-----------------------------------------------------------------
rights and obligations of the Company and the Holder set forth in this
Section 10 and in the Registration Rights shall survive the exercise,
conversion and expiration of this Warrant.
f. Stand-Off Period. Upon written request by the Company, for a period of
----------------
up to one-hundred-eighty (180) days commencing on the date of a public
registration of the Company's Common Shares (the "Stand-off Period")
other than a registration in which Warrant Shares are included, Holder
shall not sell, pledge or otherwise transfer any Warrant Shares (or
any other shares exchanged therefor), if this Warrant has been
exercised, to any person or entity. If the Company has requested the
Holder to adhere to a Stand-off Period, the Exercise Period of the
Warrant shall be extended for a period equal to the term of the Stand-
off Period requested by the Company.
11. Representations and Warranties.
------------------------------
The Company represents and warrants to the Holder as follows:
a. This Warrant has been duly authorized and executed by the Company and
is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization moratorium .and similar laws of
general applicability.
b. The Warrant Shares are duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will
be validly issued, fully paid and nonassessable and not subject to any
preemptive rights.
c. The execution and delivery of this Warrant are not, and the issuance
of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the Company's
Certificate of Incorporation or By-laws, to the Company's knowledge do
not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and, except for consents
that have already been obtained by the Company, do not and will not
conflict with or contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument of which
the Company is a party or by which it is bound or require the consent
or approval of, the giving of notice to, the registration with or the
taking of any action in respect of or by, any Federal, state or local
government authority or agency or other person.
12. Loss, Theft, Destruction or Mutilation of Warrant
-------------------------------------------------
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant or Shares
certificate, and in case of loss, theft or
-10-
destruction, of indemnity, or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of such Warrant or Shares
certificate, if mutilated, the Company will make and deliver a new Warrant
or Shares certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or Shares certificate.
13. Notices
-------
Any notice or other communication hereunder shall be in writing and shall
be deemed to have been given upon delivery, if personally delivered or
three business days after deposit if deposited in the mail for mailing by
certified mail, postage prepaid, and addressed as follows:
If to Holder: Bank Hapoalim B.M.
Electronics Group - Industrial Sector
41-45 Rothschild Blvd.
Tel Aviv, Israel
attn.: ______________
fax: 03-567-5699
If to Company: Level 8 Systems, Inc.
Dennis McKinnie
Senior Vice President
8000 Regency Parkway
Cary, N.C. 27511
Each of the above addressees may change its address for purposes of this by
giving to the other addressees notice of such new address in conformance
with this paragraph.
14. Applicable Law; Jurisdiction
----------------------------
This Warrant shall be governed by and construed in accordance with the laws
of the State of Delaware. Any dispute arising under or in relation to this
Warrant shall be resolved exclusively in the competent court in the State
of Delaware, and each of the parties hereby submits irrevocably to the
exclusive jurisdiction of such court.
-11-
15. Entire Agreement
----------------
This Warrant constitutes the entire agreement between the parties hereto
with regard to the subject matters hereof, and supercedes any prior
communications, agreements and/or understandings between the parties hereto
with regard to the subject matters hereof.
Dated: December 28, 2000
LEVEL 8 SYSTEMS, INC.
By: ________________________
Title: ________________________
-12-
NOTICE OF EXERCISE
To:
1. The undersigned hereby elects to purchase _________ shares of Common Shares
of ____________, pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price for such shares in full.
2. In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Shares are being acquired solely for
the account of the undersigned and not as a nominee for any other party, or
for investment, and that the undersigned will not offer, sell or otherwise
dispose of any such shares of Common Shares except under circumstances that
will not result in a violation of the Securities Act of 1933, as amended,
or any state securities laws.
3. Please issue a certificate representing said shares of Common Shares in the
name of the undersigned.
4. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
______________________ _________________________
(Date) (Print Name)
_________________________
(Signature)