AGREEMENT Dated November , 2005
AGREEMENT
Dated
November , 2005
The
parties to this agreement are Level 8 Systems, Inc. (the “Company”) and Liraz
Systems Ltd. (“Liraz”).
Pursuant
to a guaranty agreement between Liraz and Bank Hapoalim B.M. (the “Bank”), Liraz
has guaranteed certain obligations of the Company under the Company’s promissory
note (the “Note”) dated September 28, 2001, in favor of the Bank, which is due
and payable on or about November 03, 2005 (the “Guaranty”). The outstanding
principal amount of the Note is $1,971,000.
The
parties wish to enter into an agreement with respect to, among other things,
(a)
the extension of the maturity of the Note, by amendment, renewal, replacement,
or otherwise, from November 03, 2005 to November 15, 2006, and the related
extension of the Guaranty, (b) the loan by Liraz to the Company of $43,000
pursuant to a promissory note in the form of exhibit A (the “$43,000 Note”), and
(c) the agreement by the Company to repay $100,000 aggregate principal amount
of
the Note pursuant to the irrevocable instruction letter in the form of exhibit
B
(the “Irrevocable Instruction Letter”).
Accordingly,
the parties agree as follows:
1.
Extension of Maturity, Issuance and Registration of Shares
(a) The
Company and Liraz shall cooperate with each other with a view to causing the
Bank, as promptly as practicable, to extend the maturity of the Note from
November 03, 2005 to November 15, 2006. In that connection, Liraz shall take
such action, and execute and deliver to the Bank such documents, as the Bank
may
reasonably require to insure that the Guaranty remain in effect through November
15, 2006. As long as Liraz has any liability or obligation to the Bank under
the
Guaranty, and, except for the extension of the maturity of the Note contemplated
by this section, the Company shall not, directly or indirectly, modify, amend,
or otherwise change the terms of the Note or the Company’s or its subsidiaries’
liabilities or obligations to the Bank, without the prior written consent of
Liraz.
(b) As
promptly as practicable after the execution and delivery of this agreement
(but
in no event later than, and as a condition of, the execution and delivery of
all
the documents necessary to extend the maturity of the Note and cause the
Guaranty to remain in effect through November 15, 2006), the Company shall
issue
to Liraz (i) 2,400,000fully paid and nonassessable shares of the Company’s
common stock, free and clear of any adverse claim (the date on which the Company
is required to issue such shares to Liraz, the “Guaranty Extension Date”), and
(ii) a warrant to purchase shares of the Company’s common stock in the form of
exhibit C.
1
2. Loan
of $43,000; Use of Proceeds; Letter of Instruction.
Simultaneously
with the execution and delivery of this agreement, (a) Liraz is transferring
to
the Company $43,000, (b) the Company is issuing to Liraz the $43,000 Note,
(c)
the Company is transferring $43,000 to the Bank in full satisfaction of all
interest currently due and payable under the Note, and (d) the Company is
executing and delivering to Bank of America, N.A. (the “Depository”) the Letter
of Instruction. The Company shall maintain deposits at the Depository sufficient
to perform all its obligations under the $43,000 Note and to enable the
Depository to carry out all the instructions in the Letter of Instruction.
The
Company acknowledges that Liraz is an intended beneficiary of the Letter of
Instruction. The Company represents and warrants to Liraz that the Depository
is
the primary bank or other financial institution at which the Company maintains
a
checking account or holds deposits. Until $100,000 shall have been paid to
the
Bank pursuant to the Letter of Instruction, the Company shall not amend,
withdraw, or terminate, or otherwise permit to become ineffective, the Letter
of
Instruction, and shall not maintain a checking, deposit, or similar account
in
any bank or other financial institution (other than the Depository) unless
it so
notifies Liraz at least two weeks in advance of any change in financial
institution, and enters into a Letter of Instruction substantially the same
as
the Letter of Instruction referred to above, which Letter of Instruction is
reasonably satisfactory to Liraz.
3.
Repayment
Obligations. The
Company hereby acknowledges and confirms to Liraz that (i) it is required to
prepay the indebtedness under the Note immediately upon the consummation of
a
financing by it or any of its direct or indirect subsidiaries, to the extent
of
10% of any net proceeds of any such financing in accordance with exhibit 6.1.1
of the asset purchase agreement dated August 8, 2001 between the Company and
BluePhoenix Solutions Ltd. (“BluePhoenix”) (the “APA”), (ii) it shall not, and
it shall not permit any of its direct or indirect subsidiaries to, consummate
any such financing, if the related prepayment of the indebtedness under the
Note
in accordance with the immediately preceding sentence does not occur
simultaneously with the consummation of the financing, and (iii) the liabilities
and obligations referred to in (i) and (ii) above are in addition to the
liabilities and obligations of the Company under the Irrevocable Instruction
Letter (for the avoidance of doubt, it is understood and agreed that (A) the
satisfaction or discharge of any liability or obligation under the Irrevocable
Instruction Letter shall not satisfy or discharge any liability or obligation
referred to in (i) or (ii) above, and (B) the discharge or satisfaction of
any
liability or obligation under (i) or (ii) above shall not satisfy or discharge
any liability or obligation under the Irrevocable Instruction Letter.
4.
Registration. The
Company shall cause all shares required to be issued pursuant to section 1
and
issuable pursuant to the warrant referred to in section 1 to be registered
under
a registration statement on Form S-4/A to be filed with the Securities and
Exchange Commission as promptly as practicable, but in no event later than
December 31, 2005, and shall use its best efforts to cause such registration
statement to become effective as soon as practicable, and to remain effective
and current, until (a) all the certificates evidencing the unsold shares covered
by the registration statement cease to bear any restrictive legends, (b) no
such
shares are subject to any stop transfer orders, and (c) all the unsold shares
covered by the registration statement may be sold publicly without registration
under the Securities Act of 1933 (without limitation as to
2
volume
in
any period) (such date, the “Termination Date”). Except as otherwise provided in
this section 4, the provisions of the registration rights agreement among the
Company and the Purchasers named therein dated October 15, 2003 shall be
applicable to the shares required to be registered pursuant to this section
4,
mutatis
mutandis.
Notwithstanding
anything to the contrary in this section 4, if the Company is or becomes a
party
to any agreement with any other person or entity respecting registration of
shares under Securities Act of 1933, which agreement contains provisions
entitling such other person or entity to rights not otherwise provided to Liraz
under this section 4, this section 4 shall be deemed amended to the extent
necessary to provide Liraz such additional rights (but without adversely
affecting the rights otherwise provided under this section 4.
5. Co-Lender
Agreement and Intellectual Property Security Agreement.
The
Company acknowledges and confirms to Liraz that (a) in connection with the
execution and delivery of the 2004 Extension Agreement, the Company orally
undertook to cause all the holders of the New Securities (as defined in the
2004
Extension Agreement) to execute and deliver a co-lender agreement in the form
of
exhibit [D] to replace the co-lender agreement that had been executed and
delivered by all such holders (other than Liraz), and (b) the Company did not
perform that undertaking. The Company hereby agrees that, prior to the Guarantee
Extension Date, it shall perform that undertaking and provide Liraz copies
of
documents evidencing the performance of that undertaking.
6.
Release.
The
Company, on its own behalf and on behalf of each of its subsidiaries and
controlled affiliates, hereby releases, acquits, and forever discharges Liraz
and its affiliates, agents, representatives, officers, directors, and employees,
whether in their individual or representative capacities, and their successors
and assigns from, and acknowledge the full accord and satisfaction of, any
and
all claims, accounts, debts, obligations, demands, damages, actions, or suits
of
whatever nature, whether in contract, tort, or otherwise, now accrued known
or
unknown, arising out of any and all transactions and occurrences up to and
including the execution and delivery of this agreement; provided,
however,
that
this release shall not release Liraz [or any of its affiliates] from any
obligations [not in default immediately before the execution and delivery of
this agreement and required to be performed by any of them on or after the
date
of this agreement] pursuant to [the APA, the xxxx of sale and assignment and
assumption agreement dated October 1, 2001 among the Company, Xxxxx 0
Technologies, Inc. and BluePhoenix, the sublease dated October 1, 2001 between
the Company and BluePhoenix, insofar as it relates to the premises in Cary,
North Carolina, or] this agreement.
7. Remedy. If
the
Company fails to perform any of its obligations under this agreement, Liraz
may,
at its option, by notice given to the Company, terminate any or all of its
obligations to perform further under this agreement, without any liability
therefor.
3
8. Miscellaneous
(a) Further
Assurances.
Each
party shall, without further consideration, take such action and execute and
deliver such documents as any other party reasonably requests to carry out
this
agreement.
(b)
Expenses.
Each
party shall bear its own expenses in connection with the negotiation and
preparation of this agreement and all duties and obligations required to be
performed by it under this agreement.
(c) Governing
Law.
This
agreement shall be governed by and construed in accordance with the law of
the
state of New York, without giving effect to its conflict of law
principles.
(d) Headings.
The
section headings of this agreement are for reference purposes only, and are
to
be given no effect in the construction or interpretation of this
agreement.
(e) Notices.
All
notices and other communications under this agreement shall be in writing and
may be given by any of the following methods: (i) personal delivery; (ii)
facsimile transmission; (iii) registered or certified mail, postage prepaid,
return receipt requested; or (iv) overnight delivery service. Notices shall
be
sent to the appropriate party at its address or facsimile number given below
(or
at such other address or facsimile number for that party as shall be specified
by notice given under this section 8(e)):
(y)
if to the
Company, to it at:
0000
Xxxxxxx
Xxxxxxx
Xxxx,
Xxxxx Xxxxxxxx
00000
Attention:
Mr. Xxxx
Xxxxxxxxx
With
a copy
to:
Golenbock,
Eiseman, Assor, Xxxx and Xxxxxx, LLP
000
Xxxxxxx
Xxxxxx
Xxx
Xxxx, XX
00000
Attention:
Xxxxxxxx
Xxxx, Esq.
4
(z)
if to Liraz, to
it at:
8
Maskit Xxxxxx
X.X.
Xxx 0000
Xxxxxxx
00000
Xxxxxx
Attention:
Chief Financial
Officer
with
a copy to:
Law
Office of Xxxxxx X.
Xxxxxx
00
Xxxxxxxxxx Xxxxx, Xxxxx
Xxxxx
Xxx
Xxxx, Xxx Xxxx
00000-0000
All
such
notices and communications shall be deemed received upon (v) actual receipt
by
the addressee, (vi) actual delivery to the appropriate address, or (vii) in
the
case of a facsimile transmission, upon transmission by the sender and issuance
by the transmitting machine of a confirmation slip confirming that the number
of
pages constituting the notice have been transmitted without error. In the case
of notices sent by facsimile transmission, the sender shall contemporaneously
mail a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
(f) Separability.
The
invalidity of unenforceability of any provision of this agreement shall not
affect the validity or enforceability of any other provision of this agreement,
which shall remain in full force and effect.
(g) Waiver.
Any
party may waive compliance by the others with any provision of this agreement.
No waiver of any provision shall be construed as a waiver of any other
provision. Any waiver must be in writing and signed by the waiving party.
(h) Counterparts.
This
agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(i) Arbitration.
Any
dispute or controversy arising under or in connection with this agreement shall
be settled exclusively by arbitration to be held in the City of New York before
a single arbitrator in accordance with the rules of the American Arbitration
Association then in effect. As part of his award, the arbitrator shall make
a
fair allocation between the parties of the fee and expenses of the American
Arbitration Association and the cost of any transcript, taking into account
the
merits of the parties’ claims and defenses. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction, and the parties irrevocably
consent to the jurisdiction of the New York courts for that purpose. The parties
waive personal service in connection with any such arbitration; any process
or
other papers under this provision may be served outside the state of New York
by
at least 10 days’ written notice given in accordance with section 8(e). The
arbitrator may grant injunctive or other relief.
5
| (j) |
Entire
Agreement.
This agreement is a complete statement of all the terms of the
|
arrangements
between the parties with respect to the matters provided for, supersedes all
previous agreements and understandings between the parties with respect to
those
matters, and cannot be changed or terminated orally.
XXXXX
0 SYSTEMS,
INC.
By:_____________________________
LIRAZ
SYSTEMS LTD.
By:_____________________________
6
EXHIBIT
A
PROMISSORY
NOTE
$43,000.00
FOR
VALUE
RECEIVED, the undersigned, Level 8 Systems, Inc., a Delaware corporation (the
"Maker"), hereby promises to pay, in lawful money of the United States of
America, to the order of Liraz Systems Ltd. (the "Payee"), the principal sum
of
$43,000.00, at such address as the holder of this promissory note and security
agreement (this “Note”) may specify from time to time by notice given to the
Maker at 0000 Xxxxxxx Xxxxxxx, Xxxx, Xxxxx Xxxxxxxx 00000, Attention: Mr. Xxxx
Xxxxxxxxx (the “Maker’s Address”). The Maker agrees to pay interest (computed on
the basis of a 360-day year of twelve 30-day months) on the outstanding
principal amount of this Note at a rate of 10% per annum until the principal
shall have become due and payable, and thereafter to pay interest (so computed)
at a rate 2% per annum greater than said rate on any overdue principal and,
to
the extent permitted by applicable law, on any overdue interest, until the
same
shall be paid. The Maker agrees to pay $10,000 of principal on December 15,
2005, and $10,000 of principal on each of January 3, 2006 and February 1, 2006,
and a final payment of $13,000 on March 1, 2006 (each such date, a “Required
Payment Date”). Accrued and unpaid interest on the unpaid principal amount
hereof shall be payable on each Required Payment Date.
Notwithstanding
any provision to the contrary in this Note, the principal and accrued and unpaid
interest on the unpaid principal amount hereunder shall be prepaid to the extent
of the proceeds (net of reasonable transaction expenses and related taxes,
and
net of any other amounts payable pursuant to the agreement dated the date of
this Note between the Maker and the Payee (the “Guaranty Extension Agreement”)
and any amounts payable in accordance with section 3 of the Guaranty Extension
Agreement) from any and all financings and the sale of any and all assets by
the
Maker after the date of this Note, other than sales of assets in the ordinary
course of business and other than any monies received under Convertible Bridge
Financing prior to December 31, 2005 and consistent with past practice (any
such
financing or sale, a “Mandatory Prepayment Event”). Principal, or any portion
thereof, may be prepaid at any time without penalty, but with accrued and unpaid
interest to the date of prepayment. All payments shall be applied first to
accrued and unpaid interest and thereafter to principal.
Notwithstanding
any provision to the contrary in this Note, the entire principal sum of this
Note, and all accrued and unpaid interest, shall immediately become due and
payable (without demand for payment, notice of non-payment, presentment, notice
of dishonor, protest, notice of protest, or any other notice, all of which
are
hereby expressly waived by the Maker) upon the occurrence of any of the
following (any such occurrence, a “Default”):
A
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| (a) |
the
default by the Maker of any payment or other obligation under this
Note;
or
|
| (b) |
the
failure by the Maker to furnish the Payee written notice that a Mandatory
Prepayment Event has occurred, which failure continues uncured for
a
period of two business days; or
|
| (c) |
the
breach by the Maker, after the date of this Note, of any covenant in
the
Guaranty Extension Agreement, which breach is not cured within two
business days after the Maker first has actual knowledge of the breach;
or
|
(d)
the
entry
of an order, judgment, or decree by a court of competent jurisdiction for relief
in respect of the Maker under any applicable federal or state bankruptcy or
reorganization law or other similar law, and the continuance of any such order,
judgment, or decree unstayed, unbonded, and in effect for a period of 30
consecutive days, or (ii) the Maker shall file a petition or an answer or
consent seeking relief under any applicable federal or state bankruptcy or
reorganization law or other similar law, or the consent by the Maker to the
filing of any such petition or to the appointment of or taking possession by
a
trustee, custodian, or other similar official of the Maker or any substantial
part of its assets, or the failure of the Maker generally to pay its debts
as
such debts become due, or the taking of action by the Maker in furtherance
of
any such action.
If
the
Maker fails to make any payment of principal of, or interest on, this Note
in
accordance with the preceding provisions of this Note, the Company shall issue
to the Payee, as promptly as practicable, a number of shares of the Company’s
fully paid and nonassessable shares of common stock equal to the product of
100
and the then unpaid balance under this Note. Nothing in this paragraph is
intended to, or shall, affect the Maker’s obligations, or the Payee’s rights,
under this Note, including, without limitation, the obligation of the Maker
to
pay principal of, and interest on, this Note in accordance with the preceding
provisions of this Note.
Failure
or delay of the Payee to assert any right or remedy herein shall not be deemed
a
waiver of such right or remedy or of any other right hereunder. A waiver on
one
occasion shall not operate as a bar to or waiver of any such right or remedy
on
any future occasion. No single, partial, or other exercise of any right or
remedy by the Payee shall preclude any other or future exercise thereof. No
waiver by the Payee will be effective, unless it is in writing and signed by
the
Payee.
This
Note
may not be changed or terminated orally, nor may any of its provisions be
waived, except by an agreement in writing signed by the party against whom
enforcement of such change or termination is sought.
If
at any
time this transaction would be usurious under applicable law, then, regardless
of any provision in this Note to the contrary, it is agreed that the total
of
all consideration that
A
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constitutes
interest under applicable law that is contracted for, charged, or received
upon
this Note shall under no circumstances exceed the maximum rate of interest
allowed by applicable law now or hereafter in effect, and any excess theretofore
paid shall be credited on this Note by the holder hereof or refunded to the
Maker, if this Note has been paid.
The
remedies provided for herein shall be in addition to all other remedies
existing, in the Payee's favor, under the applicable law (including equity)
of
any jurisdiction.
This
Note
and the legality, validity, and performance of the terms hereof shall be
governed by and enforced, determined, and construed in accordance with the
internal laws of the State of New York applicable to commercial contracts,
transactions, and obligations entered into, and to be performed in, New York,
and without giving effect to the conflict of laws principles
thereof.
The
Maker
hereby irrevocably submits to the jurisdiction of the Supreme Court of the
State
of New York, New York County, in connection with any claim or controversy under
this Note.
The
Maker
hereby agrees to be bound by any expedited process or procedure in effect from
time to time under New York law for the enforcement by the Payee of his rights
under this Note.
This
Note
shall be binding upon the Maker and the Maker's successors, and
assigns.
The
Maker
shall pay all costs of collection (including reasonable counsel fees and
disbursements), if default is made in payment of this Note, and, in addition,
shall reimburse the Payee
for
all costs and expenses in connection with the preparation and negotiation of
this Note.
Any
notice under this Note shall be in writing and shall be considered given when
mailed by registered mail, return receipt requested, as follows: if to the
Maker, to it at the Maker’s Address (or at such other address as the Maker may
specify by notice given to the Payee from time to time); and, if to the Payee,
to it at 8 Xxxxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxx 00000, Xxxxxx, Attention:
Chief
Financial Officer..
The
Maker
acknowledges that, except as set forth in this Note, neither the Maker nor
the
Payee has entered into any agreement with the other with respect to the subject
matter of this Note.
XXXXX
0 SYSTEMS, INC.
By:
_______________________________
A
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EXHIBIT
B
Standing
Instructions
Bank
of
America
000
Xxxxx
Xxxxx Xxxxxx
Xxxxxxxxx,
XX 00000
Re:
Account No. 000691520436
Gentlemen:
The
undersigned hereby instructs you to pay $10,000.00 on the first business day
of
each of the next 10 calendar months, commencing on April 1, 2006, to Bank
Hapoalim B.M., by wire transfer as follows:
Bank
Hapoalim B.M
Plaza
Branch
1177
Ave
of the Americas
Xxx
Xxxx,
XX 00000
ABA:
000000000
Bank
Account: 01-057827
These
instructions shall remain in effect, until rescinded by a joint written
instruction from the undersigned and Liraz Systems Ltd.
The
undersigned agrees that Bank of America, N.A. (the “Bank”) shall not be liable
for any action taken or omitted in good faith by any of its employees or agents
with regard to these instructions. The undersigned also agrees to indemnify
and
hold the Bank harmless from and against all claims, liabilities, losses,
damages, costs and expenses, including attorneys’ fees, arising out of or
relating to actions or omissions in good faith of the Bank, its employees,
or
agents with regard to these instructions.
Xxxxx
0
Systems, Inc.
By:
___________________________
Date:
December 1 , 0000
Xxxx
xx
Xxxxxxx
By:
___________________________
Date:
December , 2005
A
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