Exhibit 10.2
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of
OCTOBER 15, 2003, by and between LEVEL 8 SYSTEMS, INC., a Delaware corporation
(the "Company"), and the various purchasers listed on Schedule I hereto (each
referred to herein as a "Purchaser" and, collectively, the "Purchasers").
WHEREAS, the Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D as promulgated by the United States Securities
and Exchange Commission (the "Commission") under Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act");
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers, and the Purchasers
desire to acquire from the Company, shares of common stock of the Company, par
value $.001 per share (the "Common Stock"), and a stock purchase warrant (each a
"Warrant", and, collectively, the "Warrants"), in the form of Exhibit A annexed
hereto to purchase shares of the Company's Common Stock; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form of Exhibit B attached hereto (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements hereinafter, the Company and the Purchasers hereby agree as follows:
Article I.
PURCHASE AND SALE
1.1 Purchase and Sale. On the Closing Date (as defined below), subject to the
terms and conditions set forth herein, the Company shall issue and sell to
each Purchaser and each Purchaser, severally and not jointly, shall
purchase from the Company the shares of Common Stock as set forth on
Schedule I (the "Shares") and a Warrant exercisable for the amount of
Common Stock as set forth on Schedule I for such Purchaser. The aggregate
purchase price for the Shares and Warrant purchased by the Purchasers
shall be $852,500.
1.2 Closing. The closing (the "Closing") of the purchase and sale of the
Common Stock and the Warrants shall take place at the offices of Powell,
Goldstein, Frazer & Murphy LLP, 191 Peachtree Street, N.E., Suite 1600,
Atlanta, Georgia 30303, immediately following the execution hereof or such
later date or different location as the parties shall agree, but in no
event prior to the date that the conditions set forth in Section 4.1 have
been satisfied or waived by the appropriate party (such date of the
Closing, the "Closing Date"). At the Closing:
a. Each Purchaser shall deliver to the Company (1) this Agreement,
duly executed by such Purchaser, (2) the Registration Rights Agreement, duly
executed by such Purchaser and (3) its portion of the purchase price as set
forth next to its name on Schedule I in United States dollars in immediately
available funds to an account or accounts designated in writing by the Company;
and
b. The Company shall deliver to each Purchaser (1) this Agreement,
duly executed by the Company, (2) the Registration Rights Agreement, duly
executed by the Company, (3) a Warrant representing the Purchaser's right to
acquire the number of shares of Common Stock as set forth on Schedule I hereto
registered in the name of such Purchaser, and (4) a certificate evidencing the
number of shares of Common Stock purchased by such Purchaser as set forth on
Schedule I hereto, registered in the name of such Purchaser.
Article II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company represents and
warrants to each of the Purchasers that the statements contained in this
Section 2.1 are true, correct and complete as of the date hereof, and will
be true correct and complete as of the Closing Date (unless specifically
made as of another date), except as specified to the contrary in the
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Exhibit 10.2
corresponding paragraph of the disclosure schedule prepared by the Company
accompanying this Agreement (the "Company Disclosure Schedules"):
a. Organization and Qualification. The Company duly incorporated, validly
existing and in good standing under the laws of Delaware, with the requisite
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Except as set forth on Schedule
2.1(a), the Company is duly qualified as a foreign corporation to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any of this
Agreement or the Transaction Documents (as defined in Section 2.1(b)) or any of
the transactions contemplated hereby or thereby, (y) have or result in a
material adverse effect on the results of operations, assets, or financial
condition of the Company, taken as a whole or (z) impair the Company's ability
to perform fully on a timely basis its obligations under any Transaction
Document (any of (x), (y) or (z), being a "Material Adverse Effect"). The
Company has made available to the Purchaser true and correct copies of the
Company's Certificate of Incorporation, as amended and as in effect on the date
hereof (the "Certificate of Incorporation"), and the Company's Bylaws, as in
effect on the date hereof (the "Bylaws").
b. Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Registration Rights Agreement and the
Warrants (collectively, the "Transaction Documents"), and otherwise to carry out
its obligations hereunder and thereunder. The execution and delivery of each of
this Agreement and the Transaction Documents by the Company and the consummation
by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action by the Company. Each of this
Agreement and the Transaction Documents has been duly executed by the Company
and when delivered in accordance with the terms hereof will constitute the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application and
except that rights to indemnification and contribution may be limited by Federal
or state securities laws or public policy relating thereto.
c. Capitalization. As of the date hereof, the authorized capital stock of
the Company is as set forth in Schedule 2.1(c). All of such outstanding shares
of capital stock have been, or upon issuance will be, validly authorized and
issued, fully paid and nonassessable. No securities of the Company are entitled
to preemptive or similar rights, and no Person (as hereinafter defined) has any
right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Shares and
Warrant, there are no outstanding options, warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Shares and Warrants will not obligate the Company to
issue shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.
d. Authorization and Validity; Issuance of Shares. The Shares and the
shares of Common Stock issuable upon exercise of the Warrants (the "Warrant
Shares") are and will at all times hereafter continue to be duly authorized and
reserved for issuance and, when issued and paid for in accordance with this
Agreement and the Transaction Documents, will be validly issued, fully paid and
non-assessable, free and clear of all liens.
e. No Conflicts. The execution, delivery and performance of this Agreement
and each of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including the
issuance of the Warrant Shares) do not and will not (i) conflict with or violate
any provision of the Certificate of Incorporation, Bylaws or other
organizational documents of the Company, (ii) subject to obtaining the consents
referred to in Section 2.1(f), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
(evidencing a Company debt or otherwise) to which the Company is a party or by
which any property or asset of the Company is bound or affected, except where
such conflict or violation has not resulted or would not reasonably be expected
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Exhibit 10.2
to result, individually or in the aggregate, in a Material Adverse Effect, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including Federal and state securities laws and
regulations and the rules and regulations of the principal market or exchange on
which the Common Stock is traded or listed), or by which any material property
or asset of the Company is bound, except where such conflict has not resulted or
would not reasonably be expected to result, individually or in the aggregate, in
a Material Adverse Effect.
f. Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement or the Transaction Documents, other than (i) the filing of a
registration statement with the Commission, which shall be filed in accordance
with and in the time periods set forth in the Registration Rights Agreement and
(ii) any filings, notices or registrations under applicable Federal or state
securities laws (together with the consents, waivers, authorizations, orders,
notices and filings referred to on Schedule 2.1(f), the "Required Approvals"),
except where failure to do so has not resulted or would not reasonably result,
individually, or in the aggregate, in a Material Adverse Effect. "Person" means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
g. Litigation; Proceedings. Except as specifically set forth on Schedule
2.1(h) or in the SEC Documents (as hereinafter defined), there is no action,
suit, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, state,
county, local or foreign) (collectively, an "Action") which (i) adversely
affects or challenges the legality, validity or enforceability of any of this
Agreement or the Transaction Documents or (ii) would reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect. Neither the
Company nor any subsidiary, nor, to the knowledge of the Company, any officer
thereof, is or has been, nor, to the knowledge of the Company, any director
thereof is or has been for the last three years, the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty. There has not been, and, to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director that was a director of the Company at any time during the last three
years or officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by
the Company or any subsidiary under the Exchange Act or the Securities Act.
h. No Default or Violation. The Company (i) is not in default under or in
violation of any indenture, loan or other credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound and which is required to be included as an exhibit to any
SEC Document (as defined in Section 2.1(j)) or will be required to be included
as an exhibit to the Company's next filing under either the Securities Act or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) is in
violation of any order of any court, arbitrator or governmental body applicable
to it, (iii) is in violation of any statute, rule or regulation of any
governmental authority to which it is subject, (iv) is in default under or in
violation of its Certificate of Incorporation, Bylaws or other organizational
documents, respectively in the case of (i), (ii) and (iii), except where such
violations have not resulted or would not reasonably result, individually or in
the aggregate, in a Material Adverse Effect.
i. Private Offering. The Company and all Persons acting on its behalf have
not made, directly or indirectly, and will not make, offers or sales of any
securities or solicited any offers to buy any security under circumstances that
would require registration of the Common Stock or the Warrants or the issuance
of such securities under the Securities Act. Subject to the accuracy and
completeness of the representations and warranties of the Purchasers contained
in Section 2.2, the offer, sale and issuance by the Company to the Purchasers of
each of the Common Stock and the Warrants and the issuance of the Warrant Shares
is exempt from the registration requirements of the Securities Act.
j. SEC Documents; Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(g) of the Exchange Act. Since December 31,
2001, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it, with the Commission, pursuant to Section
13, 14 or 15(d) of the Exchange Act (the foregoing materials and all exhibits
included therein and financial statements and schedules thereto and documents
(other than exhibits to such documents) incorporated by reference therein being
collectively referred to herein as the "SEC Documents"), on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
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Exhibit 10.2
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
k. Material Changes. Since the date of the latest audited financial
statements included within the SEC Documents, except as specifically disclosed
in the SEC Documents, (i) there has been no event, occurrence or development
that has had or that could result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not altered
its method of accounting or the identity of its auditors, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock, and (v) the Company has not issued any
equity securities to any officer, director or affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending before
the Commission any request for confidential treatment of information.
l. Patents and Trademarks. The Company and its subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Documents and which the failure to
so have could have, or reasonably be expected to result in, a Material Adverse
Effect (collectively, the "Intellectual Property Rights"). Neither the Company
nor any subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any subsidiary violates or infringes upon the
rights of any Person which if determined adversely to the Company would,
individually or in the aggregate have a Material Adverse Effect. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.
m. Transactions With Affiliates and Employees. Except as set forth in SEC
Documents, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
n. Eligibility to Register Shares. The Company is eligible to register the
resale of its Common Stock and the Warrant Shares for resale by the Purchasers
under Form S-1 promulgated under the Securities Act.
o. Registration Rights. The Company has not granted or agreed to grant to
any Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
p. Broker's Fees. No fees or commissions or similar payments with respect
to the transactions contemplated by this Agreement or the Transaction Documents
have been paid or will be payable by the Company to any third party broker,
financial advisor, finder, investment banker, or bank. The Purchaser shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section
2.1(p) that may be due in connection with the transactions contemplated by this
Agreement and the Transaction Documents.
q. Disclosure. Except for information regarding the transaction
contemplated by this Agreement and the Transaction Documents and the terms and
conditions hereof and thereof, the Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information the Company believes constitutes
material, non-public information. The Company understands and confirms that the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
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Exhibit 10.2
including the Schedules to this Agreement, furnished by or on behalf of the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
2.2 Representations and Warranties of the Purchasers. Each of the Purchasers,
severally and not jointly, hereby represents and warrants to the Company
as follows:
a. Organization; Authority. Such Purchaser, as applicable, is a
corporation or a limited liability company or limited partnership duly formed,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation with the requisite power and authority, corporate or
otherwise, to enter into and to consummate the transactions contemplated hereby
and by this Agreement and the Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The purchase by such Purchaser, as
applicable, of the shares of Common Stock and the Warrant hereunder has been
duly authorized by all necessary action on the part of such Purchaser. Each of
this Agreement and the Transaction Documents has been duly executed and
delivered by each Purchaser and constitutes the valid and legally binding
obligation of each Purchaser, enforceable against such Purchaser in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity and
except that rights to indemnification and contribution may be limited by Federal
or state securities laws or public policy relating thereto.
b. Investment Intent. Such Purchaser is acquiring the shares of Common
Stock and the Warrant for its own account and not with a present view to or for
distributing or reselling the shares of Common Stock, the Warrant or the Warrant
Shares or any part thereof or interest therein in violation of the Securities
Act. Nothing contained herein shall be deemed a representation or warranty by
such Purchaser to hold the Shares or Warrant or Warrant Shares for any period of
time. Such Purchaser is acquiring the Shares or Warrant or Warrant Shares
hereunder in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Shares.
c. Purchaser Status. At the time such Purchaser was offered the Common
Stock and the Warrant, and at the Closing Date and each date such Purchaser
exercises the Warrant, (i) it was and will be an "accredited investor" as
defined in Rule 501 under the Securities Act and (ii) such Purchaser, either
alone or together with its representatives, had and will have such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Common Stock, the Warrant and the Warrant Shares. Such Purchaser is not a
registered broker-dealer under Section 15 of the Exchange Act.
d. Reliance. Such Purchaser understands and acknowledges that (i) the
Common Stock, the Warrant and the Warrant Shares are being offered and sold to
the Purchaser without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
under Section 4(2) of the Securities Act or Regulation D promulgated thereunder
and (ii) the availability of such exemption depends in part on, and the Company
will rely upon the accuracy and truthfulness of, the representations set forth
in this Section 2.2 and such Purchaser hereby consents to such reliance.
e. Information. Such Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Common Stock
and the Warrant which have been requested by such Purchaser or its advisors.
Such Purchaser and its advisors, if any, have been afforded the opportunity to
ask questions of the Company. The Purchaser understands that its investment in
the Common Stock and Warrant involves a significant degree of risk. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of the
Company's representations and warranties contained in this Agreement or the
Transaction Documents.
f. Governmental Review. Such Purchaser understands that no United States
Federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Common Stock or
Warrants.
g. Residency. Such Purchaser is a resident of the jurisdiction set forth
immediately beside such Purchaser's name on Schedule I hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
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Exhibit 10.2
Article III
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If any Purchaser should decide to dispose of the Common Stock, the
Warrant, or the Warrant Shares held by it, such Purchaser understands and agrees
that it may do so (1) only pursuant to an effective registration statement under
the Securities Act, (2) pursuant to an available exemption from the registration
requirements of the Securities Act, (3) to an affiliate of the Purchaser, or (4)
pursuant to Rule 144 promulgated under the Securities Act ("Rule 144"). In
connection with any transfer of any Common Stock, the Warrant or Warrant Shares
other than pursuant to an effective registration statement, Rule 144, to the
Company or to an affiliate of the Purchasers, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be customary for
opinions of counsel in comparable transactions and reasonably acceptable to the
Company, to the effect that such transfer does not require registration of such
transferred securities under the Securities Act; provided, however, that if the
Common Stock, the Warrant, or Warrant Shares may be sold pursuant to Rule
144(k), no written opinion of counsel shall be required from any Purchaser if
such Purchaser provides reasonable assurances that such security can be sold
pursuant to Rule 144(k). Notwithstanding the foregoing, the Company hereby
consents to and agrees to register any transfer by any Purchaser to an affiliate
of such Purchaser, provided that the transferee certifies to the Company that it
is an "accredited investor" as defined in Rule 501(a) under the Securities Act.
Any such transferee shall agree in writing to be bound by the terms of this
Agreement and the Transaction Documents and shall have the rights of a Purchaser
under this Agreement and the Transaction Documents. The Company shall not
require an opinion of counsel in connection with the transfer of the shares of
Common Stock, the Warrant or the Warrant Shares to an affiliate of a Purchaser.
b. The Purchasers agree to the imprinting, so long as is required by this
Section 3.1(b), of the following legend on the Common Stock, the Warrant and the
Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SHARES.
The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement or grant a security interest in
some or all of the shares of Common Stock, the Warrant or the Warrant Shares
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured shares of Common Stock, Warrant or Warrant Shares to
the pledgees or secured parties. Such a pledge or transfer would not be subject
to approval of the Company and no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party reasonably request in connection with a pledge or transfer of the shares
of Common Stock, the Warrant or the Warrant Shares, including the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) of the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of selling stockholders thereunder.
The Company agrees that it will provide any Purchaser, upon request, with
a certificate or certificates representing shares of Common Stock, the Warrant
or the Warrant Shares, free from such legend at such time as such legend is no
longer required hereunder. If such certificate or certificates had previously
been issued with such a legend or any other legend, the Company shall, upon
request and upon the delivery of the legended certificate(s), reissue such
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Exhibit 10.2
certificate or certificates free of any legend. The Company agrees that
following the effective date of the registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale of the Shares and Warrant Shares by the Purchasers or at such time as
such legend is no longer required under this Section 3.1, it will, no later than
three Trading Days (as such term is defined in the Registration Rights
Agreement) following the delivery by a Purchaser to the Company or the Company's
transfer agent of a certificate representing Shares and Warrant Shares issued
with a restrictive legend, deliver or cause to be delivered to such Purchaser a
certificate representing such Shares and Warrant Shares that is free from all
restrictive and other legends.
3.2 Stop Transfer Instruction. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company which
enlarge the restrictions on transfer set forth in Section 3.1.
3.2 Reservation of Warrant Shares. The Company at all times shall reserve a
sufficient number of shares of its authorized but unissued Common Stock to
provide for the full conversion of the Warrant. If at any time the number
of shares of Common Stock authorized and reserved for issuance is
insufficient to cover the number of Warrant Shares issued and issuable
upon exercise of the Warrant (based on the Exercise Price (as defined in
the Warrant) of the Warrant in effect from time to time) without regard to
any limitation on exercises, the Company will promptly take all corporate
action necessary to authorize and reserve such shares including, without
limitation, calling a special meeting of stockholders to authorize
additional shares to meet the Company's obligations under this Section
3.3, in the case of an insufficient number of authorized shares, and using
best efforts to obtain stockholder approval of an increase in such
authorized number of shares.
3.4 Furnishing of Information. As long as any Purchaser owns shares of Common
Stock, the Warrant or the Warrant Shares, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to the Exchange Act. Upon the request of
any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied
with the preceding sentence. As long as any Purchaser owns shares of
Common Stock, the Warrant or the Warrant Shares, if the Company is not
required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) such information as is required for the Purchasers to sell the
Shares under Rule 144.
3.5 Integration. The Company shall not, and shall use its best efforts to
ensure that no affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated
with the offer or sale of the shares of Common Stock hereunder in a manner
that would require the registration under the Securities Act of the sale
of the shares Common Stock to the Purchasers, or that would be integrated
with the offer or sale of the Shares for purposes of the rules and
regulations of the Nasdaq National Market, if such integration would
result in a violation of any such rule or regulation.
3.6 Use of Proceeds. The Company shall use the net proceeds from the sale of
the shares of Common Stock hereunder for working capital purposes.
3.7 Best Efforts. Each of the parties hereto shall use its best efforts to
satisfy each of the conditions to be satisfied by it as provided in
Article IV of this Agreement.
ARTICLE IV
CONDITIONS
4.1 Closing.
a. Conditions Precedent to the Obligation of the Company to Sell the
Shares of Common Stock and the Warrants. The obligation of the Company to sell
the shares of Common Stock and the Warrants is subject to the satisfaction or
waiver by the Company, at or before the Closing Date, of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made and as of the
Closing Date;
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or before the Closing Date; and
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
E-26
Exhibit 10.2
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Transaction Documents.
b. Conditions Precedent to the Obligation of the Purchasers to Purchase
the Shares of Common Stock and Warrants at the Closing. The obligation of each
Purchaser hereunder to acquire and pay for the shares of Common Stock and the
Warrant at the Closing is subject to the satisfaction or waiver by Purchaser, at
or before the Closing Date, of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all respects as of the date when made and as of the
Closing Date;
(ii) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or before the Closing Date;
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement and the Transaction Documents;
(iv) Required Approvals. All Required Approvals shall have been
obtained; and
(v) Shares of Common Stock. The Company shall have duly reserved the
number of shares of Common Stock and the number or Warrant Shares issuable upon
the exercise of the Warrants acquired by the Purchasers on the Closing Date.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification. The Company will indemnify and hold the Purchasers and
their directors, officers, shareholders, partners, employees and agents
(each, a "Purchaser Party") harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including
all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party
may suffer or incur as a result of or relating to (a) any
misrepresentation, breach or inaccuracy, or any allegation by a third
party that, if true, would constitute a breach or inaccuracy, of any of
the representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents; or (b)
any cause of action, suit or claim brought or made against such Purchaser
Party and solely arising out of or solely resulting from the execution,
delivery, performance or enforcement of this Agreement or any of the other
Transaction Documents. The Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. Notwithstanding the
foregoing, the Company shall not be required to indemnify any the
Purchaser under the terms of this Article V with respect to any claim or
violation for which indemnification is expressly excluded under the
Registration Rights Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits and Schedules
hereto and the Transaction Documents contain the entire understanding of
the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral or written, with respect to such
matters.
6.2 Notices. Whenever it is provided herein that any notice, demand, request,
consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of
the parties desires to give or serve upon another any such communication
with respect to this Agreement, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing
and either shall be delivered in person with receipt acknowledged or by
registered or certified mail, return receipt requested, postage prepaid,
or by telecopy and confirmed by telecopy answerback addressed as follows:
E-27
Exhibit 10.2
If to the Company:
Level 8 Systems, Inc.
214 Carnegie Center, Suite 303
Princeton, New Jersey 08540
Attn:John P. Broderick
With a Copy to:
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, 16th Floor
Atlanta, Georgia 30303
Attn:Scott D. Smith, Esq.
If to the Purchasers: To the address set forth on the counterpart
signature page of such Purchaser.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a business day, (b) the next business day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a business day
or later than 6:30 p.m. (New York City time) on any business day, (c) the
business day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given. As used herein, a "business day" means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to close.
6.3 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an
amendment, by both the Company and each of the Purchasers or, in the case
of a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver
in the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any
right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
6.4 Headings. The headings herein are for convenience only, do not constitute
a part of this Agreement and shall not be deemed to limit or affect any of
the provisions hereof.
6.5 References. References herein to Sections are to Sections of this
Agreement, unless otherwise expressly provided.
6.6. Successors and Assigns; Assignability. Neither this Agreement nor any
right, remedy, obligation or liability arising hereunder or by reason
hereof shall be assignable by either the Company or the Purchasers without
the prior written consent of the other party. In the event that such prior
written consent is obtained and this Agreement is assigned by either
party, all covenants contained herein shall bind and inure to the benefit
of the parties hereto and their respective successors and assigns.
6.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
6.8. Governing Law; Waiver of Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement
shall be governed by and construed and enforced in accordance with the
internal laws of the State of Delaware, without regard to the principles
of conflicts of law thereof. Each party agrees that all proceedings
concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) (each
a "Proceeding") shall be commenced exclusively in the state and federal
courts sitting in the City of New York, Borough of Manhattan. Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of
Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
E-28
Exhibit 10.2
Proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Proceeding is improper. Each
party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If
either party shall commence a Proceeding to enforce any provisions of a
Transaction Document, then the prevailing party in such Proceeding shall
be reimbursed by the other party for its attorneys fees and other costs
and expenses incurred with the investigation, preparation and prosecution
of such Proceeding.
6.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive following the Closing.
6.10 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if
such facsimile signature page were an original thereof.
6.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
6.12 Publicity. The Purchasers shall not issue any press release or make any
public disclosure regarding the transactions contemplated hereby unless
such press release or public disclosure is approved by the Company in
advance. Notwithstanding the foregoing, each of the parties hereto may, in
documents required to be filed by it with the SEC or other regulatory
bodies, make such statements with respect to the transactions contemplated
hereby as each may be advised by counsel is legally necessary or
advisable, and may make such disclosure as it is advised by its counsel is
required by law.
6.13 Severability. In case any one or more of the provisions of this Agreement
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement
shall not in any way be affected or impaired thereby and the parties will
attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Agreement.
6.14 Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
6.15 Replacement of Certificates. If any certificate or instrument evidencing
any shares of Common Stock is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction
and customary and reasonable indemnity, if requested. The applicants for a
new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such
replacement shares.
6.16 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under
this Agreement or the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence
and hereby agrees to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.
6.17 Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under this Agreement or any Transaction Document are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under this Agreement or any Transaction
Document. Nothing contained herein or in any TRANSACTION Document, and no
E-29
Exhibit 10.2
action taken by any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to
such obligations or the transactions contemplated by this Agreement or any
the Transaction Document. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation
the rights arising out of this Agreement or out of the other Transaction
Documents, and it shall not be necessary for any other Purchaser to be
joined as an additional party in any proceeding for such purpose.
6.18 Fees and Expenses. Except as set forth in the Registration Rights
Agreement, and except as provided herein, each Party shall pay the fees
and expenses of its advisers, accountants and other experts.
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized persons as of the
day and year first above written.
LEVEL 8 SYSTEMS, INC.
By:
--------------------------------------
John P. Broderick
Chief Operating and Financial Officer
PURCHASERS:
[COUNTERPART SIGNATURE PAGES FOLLOW]
E-30
Exhibit 10.2
NUMBER OF SHARES OF
NAME AND COMMON STOCK NUMBER OF
ADDRESS OF PURCHASER RESIDENCE AT CLOSING DATE WARRANT SHARES PURCHASE PRICE
- -------------------- --------- --------------- -------------- --------------
Advanced Systems Europe, B.V.
Azrieli Center 3, Triangle Bldg.
2nd Floor
Tel Aviv 67023 Israel Israel 444,444 111,111 200,000.00
Leonard J. Corwin, M.D.
90 Millburn Avenue
Millburn, NJ 07041 New Jersey 44,444 11,111 20,000.00
Delphi Partners, Ltd.
Bruce Miller
P.O. Box 246
Nantucket, MA 02554 Massachusetts 55,556 13,889 25,000.00
C. Glenn Dugdale, Trustee
Box 4550
Greenville, DE 19807 Delaware 111,111 27,778 50,000.00
Alice F. Emerson
39 New Street
P.O. Box 206
Siasconset, MA 02564 Massachusetts 55,556 13,889 25,000.00
Steven Grodko
596 South Forest Drive
Teaneck, NJ 07666 New Jersey 50,000 12,500 22,500.00
Joan B. Lemery
10 Railroad Place
Saratoga Spring, NY 12866 New York 33,333 8,333 15,000.00
Hailey Mack 7-99 Trust
Fred Mack, Trustee
2115 Linwood Ave.
Fort Lee, NJ 07024 New Jersey 16,667 4,167 7,500.00
Jason Mack 7-99 Trust
Fred Mack, Trustee
2115 Linwood Ave.
Fort Lee, NJ 07024 New Jersey 16,667 4,167 7,500.00
Fredric Mack
2115 Linwood Avenue
Fort Lee, NJ 07024 New Jersey 88,889 22,222 40,000.00
Earle I. Mack Charitable Trust A
2115 Linwood Avenue
Fort Lee, NJ 07024 New Jersey 166,667 41,667 75,000.00
Bruce D. Miller
P.O. Box 246
Nantucket, MA 02554 Massachusetts 111,111 27,778 50,000.00
E-31
Exhibit 10.2
NUMBER OF SHARES OF
NAME AND COMMON STOCK NUMBER OF
ADDRESS OF PURCHASER RESIDENCE AT CLOSING DATE WARRANT SHARES PURCHASE PRICE
- -------------------- --------- --------------- -------------- --------------
John Robinson
12 Great Wood Lane
Malvern, PA 19355 Pennsylvania 55,556 13,889 25,000.00
Silvergraph Studios LLC
James R. Simpson
455 Reservation Road, Suite G
Marina, CA 93933 California 66,667 16,667 30,000.00
Virginia Spivak
899 Worcester Lane
Lakeworth, FL 33467 Florida 44,444 11,111 20,000.00
James M. Stevens
8818 Ashridge Park Drive
Spring, TX 77379 Texas 111,111 27,778 50,000.00
Blackrock Turnpike Medical Group FBO -
Hervey Weitzman
68 North Park Avenue
Easton, CT 06612 Connecticut 55,556 13,889 25,000.00
Larry B. Whelden
Box 388
Nantucket, MA 02554 Massachusetts 111,111 27,778 50,000.00
James Wilkins, Ph.D.
21 Clark Road
Woodbridge, CT 06525 Connecticut 55,556 13,889 25,000.00
Roger A. Wittenbach
10 Woodward Lane
Lutherville, MD 21093 Maryland 55,556 13,889 25,000.00
Jack Wolfe
1212 Avenue of the Americas
New York, NY 10104 New York 33,333 8,333 15,000.00
C.G. & J.O. Dugdale CRT 1/17/90
Matthew Yaakovian, Trustee
P.O. Box 4550
Greenville, DE 19807 Delaware 111,111 27,778 50,000.00
E-32