AGREEMENT AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of December 30, 2004, is entered into between Level 8 Systems, Inc., a public
company incorporated in the State of Delaware (the "Company") and
Cicero, Inc., a Delaware corporation ("Cicero").
RECITALS
WHEREAS,
the board of directors of each of the Company and Cicero deems it advisable,
upon the terms and subject to the conditions herein stated, that the Company be
merged with and into Cicero, and that Cicero be the surviving corporation (the
"Merger"); and
WHEREAS,
the Company will submit this Agreement for approval by a vote of the holders of
shares of the Company’s common stock, par value $0.001 per share (the
“Company
Common Stock”), and
for approval by a vote by class of each currently issued and outstanding series
of preferred stock of the Company.
NOW,
THEREFORE, in consideration of the premises and of the agreements of the parties
hereto contained herein, the parties hereto agrees as follows:
ARTICLE I
THE
MERGER; EFFECTIVE TIME
1.1. The
Merger. Upon
the terms and subject to the conditions set forth in this Agreement, at the
Effective Time (as defined in Section 1.2), the Company shall be merged
with and into Cicero whereupon the separate existence of the Company shall
cease. Cicero shall be the surviving corporation (sometimes hereinafter referred
to as the "Surviving
Corporation") in the
Merger and shall continue to be governed by the laws of the State of Delaware.
The Merger shall have the effects specified in the General Corporation Law of
the State of Delaware, as amended (the "DGCL") and
the Surviving Corporation shall succeed, without other transfer, to all of the
assets and property (whether real, personal or mixed), rights, privileges,
franchises, immunities and powers of the Company, and shall assume and be
subject to all of the duties, liabilities, obligations and restrictions of every
kind and description of the Company, including, without limitation, all
outstanding indebtedness of the Company.
1.2. Effective
Time. Provided
that the condition set forth in Section 5.1 has been fulfilled or waived in
accordance with this Agreement and that this Agreement has not been terminated
or abandoned pursuant to Section 6.1, on the date of the closing of the
Merger, the Company and Cicero shall cause a Certificate of Merger to be
executed and filed with the Secretary of State of Delaware (the "Delaware
Certificate of Merger"). The
Merger shall become effective upon the date and time specified in the Delaware
Certificate of Merger (the "Effective
Time").
ARTICLE
II
CHARTER
AND BYLAWS OF THE SURVIVING CORPORATION
2.1. The
Certificate of Incorporation. The
certificate of incorporation of Cicero in effect at the Effective Time shall be
the certificate of incorporation of the Surviving Corporation, until amended in
accordance with the provisions provided therein or applicable law.
2.2. The
Bylaws. The
bylaws of Cicero in effect at the Effective Time shall be the bylaws of the
Surviving Corporation, until amended in accordance with the provisions provided
therein or applicable law.
ARTICLE
III
OFFICERS,
DIRECTORS AND EMPLOYEES OF THE SURVIVING CORPORATION
3.1. Officers. The
officers of the Company at the Effective Time shall, from and after the
Effective Time, be the officers of the Surviving Corporation, until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal.
3.2. Directors. The
directors and the members of the various committees of the board of directors of
the Company at the Effective Time shall, from and after the Effective Time, be
the directors and members of such committees of the Surviving Corporation, until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal.
3.3.
Employees. The
employees of the Company at the Effective Time shall, from and after the
Effective Time, be employees of the Surviving Corporation, under the same terms
and conditions as their employment with the Company at the Effective Time. All
employee benefit plans applicable to any Company employee at the Effective Time
shall, from and after the Effective Time, be applicable to such employee as an
employee of the Surviving Corporation. The Surviving Corporation shall assume
all liabilities of the Company existing at the Effective Time with respect to
any employee benefit plans.
ARTICLE
IV
EFFECT OF
MERGER ON CAPITAL STOCK
4.1. Effect
of Merger on Capital Stock. At
the Effective Time, as a result of the Merger and without any action on the part
of the Company, Cicero or the shareholders of the Company:
| a. |
Each
share of Company Common Stock issued and outstanding immediately prior to
the Effective Time shall be converted (without the surrender of stock
certificates or any other action) into one-twentieth (.05) of a share of
fully paid and non-assessable share of common stock, par value $0.001, of
Cicero (“Cicero
Common Stock"),
with the same rights, powers and privileges as the shares so converted and
all shares of Company Common Stock shall be cancelled and retired and
shall cease to exist. |
| b. |
Notwithstanding
any other provision of this Agreement, no fraction of a share of Cicero
Common Stock will be issued. Instead, Cicero shall pay to each holder of
Company Common Stock who would otherwise be entitled to a fraction of a
share of Cicero Common Stock an amount in cash equal to (i) the fraction
of a share of Cicero Common Stock to which such holder would otherwise be
entitled, multiplied by (ii) the actual market value of Cicero Common
Stock, which shall be deemed to be the average of the closing bid prices
of the Company’s Common Stock as reported to OTCBB during each of the five
(5) trading days preceding the Effective Date of the Merger.
Following consummation of the Merger, no holder of Company Common Stock
shall be entitled to dividends or any other rights in respect of any such
fraction. |
| c. |
Each
share of the Company’s Series A3 Preferred Stock, par value $0.001 per
share (the “Series A3 Preferred Stock”), issued and outstanding
immediately prior to the Effective Time shall be converted (without the
surrender of stock certificates or any other action) into .0142857 shares
of fully paid and non-assessable shares of Series A-1 Preferred Stock, par
value $0.001, of Cicero ("Cicero
A-1 Preferred Stock").
Each share of Cicero A-1 Preferred Stock will convert into 1,000 shares of
the Company Common Stock with the rights, powers and privileges, set forth
in the Cicero A-1 Preferred Stock certificate of designation and all
shares of the Company’s Series A3 Preferred Stock shall be cancelled and
retired and shall cease to exist. |
| d. |
Each
share of the Company’s Series B3 Preferred Stock, par value $0.001 per
share (the “Series B3 Preferred Stock”), issued and outstanding
immediately prior to the Effective Time shall be converted (without the
surrender of stock certificates or any other action) into .0125 shares of
fully paid and non-assessable shares of Cicero A-1 Preferred Stock, Each
share of Cicero A-1 Preferred Stock will convert into 1,000 shares of the
Company Common Stock with the rights, powers and privileges, set forth in
the Cicero A-1 Preferred Stock certificate of designation and all shares
of the Company’s Series B3 Preferred Stock shall be cancelled and retired
and shall cease to exist. |
| e. |
Each
share of the Company’s Series C Preferred Stock, par value $0.001 per
share (the “Series C Preferred Stock”), issued and outstanding immediately
prior to the Effective Time shall be converted (without the surrender of
stock certificates or any other action) into .20 shares of fully paid and
non-assessable shares of Cicero A-1 Preferred Stock, Each share of Cicero
A-1 Preferred Stock will convert into 1,000 shares of the Company Common
Stock with the rights, powers and privileges, set forth in the Cicero A-1
Preferred Stock certificate of designation and all shares of the Company’s
Series C Preferred Stock shall be cancelled and retired and shall cease to
exist. |
| f. |
Each
share of the Company’s Series D Preferred Stock, par value $0.001 per
share (the “Series D Preferred Stock”), issued and outstanding immediately
prior to the Effective Time shall be converted (without the surrender of
stock certificates or any other action) into .25 shares of fully paid and
non-assessable shares of Cicero A-1 Preferred Stock, Each share of Cicero
A-1 Preferred Stock will convert into 1,000 shares of the Company Common
Stock with the rights, powers and privileges, set forth in the Cicero A-1
Preferred Stock certificate of designation and all shares of the Company’s
Series D Preferred Stock shall be cancelled and retired and shall cease to
exist. |
| g. |
Certain
Convertible Notes of the Company (the “Convertible Notes”) shall be
converted into such number of fully paid and non-assessable shares of
Cicero A-1 Preferred Stock that would convert into the same number of
shares of the Company Common Stock that the Convertible Notes would
convert into immediately prior to the Effective Time, at conversion prices
ranging from $0.026 to $0.007 and all of the Company’s Convertible Notes,
if so elected by the Note holders, shall be cancelled and retired and
shall cease to exist. |
| h. |
Each
option, warrant, purchase right, unit or other security of the Company
issued and outstanding immediately prior to the Effective Time,
not
including
the Convertible Notes, the Series A3 Preferred Stock, the Series B3
Preferred Stock, the Series C Preferred Stock and the Series D Preferred
Stock (the “Convertible Securities”) shall be (i) converted into and
shall be an identical security of Cicero, however the number of shares of
Cicero Common Stock underlying such Convertible Securities shall be
one-twentieth (.05) of the number of shares Company Common Stock into
which the Convertible Securities were convertible into immediately prior
to the Effective Time. Cicero shall cause to be reserved for purposes of
the exercise of such options, warrants, purchase rights, units or other
securities, such number of shares of Cicero Common Stock as is sufficient
to underly such Convertible Securities. |
| i. |
Each
share of Cicero Common Stock owned by the Company or any other person
immediately prior to the Effective Time shall no longer be outstanding and
shall be cancelled and retired and shall cease to exist.
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4.2. Certificates. At
and after the Effective Time, all of the outstanding certificates which
immediately prior thereto represented shares of Company Common Stock, Series A3
Preferred Stock, Series B3 Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, the Convertible Notes, or the Convertible Securities of the
Company shall be deemed for all purposes to evidence ownership of and to
represent the shares of the respective Cicero Common Stock, Cicero A-1 Preferred
Stock, or options, warrants, purchase rights, units or other securities of
Cicero, as the case may be, into which the shares of Company Common Stock,
Series A3 Preferred Stock, Series B3 Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, the Convertible Notes, or options, warrants, purchase
rights, units or other securities of the Company represented by such
certificates have been converted as herein provided and shall be so registered
on the books and records of the Surviving Corporation or its transfer agent. The
registered owner of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted for
to the Surviving Corporation or its transfer agent, have and be entitled to
exercise any voting and other rights with respect to, and to receive any
dividends and other distributions upon, the shares of Cicero Common Stock,
Cicero A-1 Preferred Stock or options, warrants, purchase rights, units or other
securities of Cicero, as the case may be, evidenced by such outstanding
certificate, as above provided.
ARTICLE V
CONDITION
5.1. Condition
to Each Party's Obligation to Effect the Merger. The
respective obligation of each party hereto to effect the Merger is subject to
receipt prior to the Effective Time of the requisite approval of this Agreement
and the transactions contemplated hereby by a majority of the holders of Company
Common Stock, and by at least 66% of the holders of Series A3 Preferred Stock,
Series B3 Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
and by a majority of the holders of the Convertible Notes pursuant to the DGCL
and the Certificate of Incorporation of the Company.
ARTICLE
VI
TERMINATION
6.1. Termination. This
Agreement may be terminated, and the Merger may be abandoned, at any time prior
to the Effective Time, whether before or after approval of this Agreement by the
shareholders of the Company, if the board of directors of the Company determines
for any reason, in its sole judgment and discretion, that the consummation of
the Merger would be inadvisable or not in the best interests of the Company and
its shareholders. In the event of the termination and abandonment of this
Agreement, this Agreement shall become null and void and have no effect, without
any liability on the part of either the Company or Cicero, or any of their
respective shareholders, directors or officers.
ARTICLE
VII
MISCELLANEOUS
AND GENERAL
7.1. Modification
or Amendment. Subject
to the provisions of applicable law, at any time prior to the Effective Time,
the parties hereto may modify or amend this Agreement; provided, however, that
an amendment made subsequent to the approval of this Agreement by the holders of
Company Common Stock, Series A3 Preferred Stock, Series B3 Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and holders of Convertible
Notes, shall not (i) alter or change the amount or kind of shares and/or
rights to be received in exchange for or on conversion of all or any of the
shares or any class or series thereof of such corporation, (ii) alter or
change any provision of the certificate of incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of
the terms or conditions of this Agreement it such alteration or change would
adversely affect the holders of any class or series of capital stock of any of
the parties hereto.
7.2. Counterparts. This
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
7.3. GOVERNING
LAW. THIS
AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
7.4. Entire
Agreement. This
Agreement constitutes the entire agreement and supercedes all other prior
agreements, understandings, representations and warranties both written and
oral, among the parties, with respect to the subject matter hereof.
7.5. No
Third Party Beneficiaries. This
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
7.6. Severability. The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any person or any circumstance, is
determined by any court or other authority of competent jurisdiction to be
invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
7.7. Headings. The
headings therein are for convenience of reference only, do not constitute part
of this Agreement and shall not be deemed to limit or otherwise affect any of
the provisions hereof.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly
authorized officers of the parties hereto as of the date first written above.
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LEVEL
8 SYSTEMS, INC.
a
Delaware corporation | |
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By |
/s/
Xxxxxxx X. Xxxx |
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Name:
Xxxxxxx X. Xxxx |
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Title:
President and Chief Executive Officer |
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CICERO,
INC.
a
Delaware corporation | |
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By |
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Name:
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Title:
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