Form of Promissory Note




PROMISSORY
NOTE

 

$____________                                             ____________,
2004







 

FOR VALUE
RECEIVED, Level
8 Systems, Inc., a
Delaware corporation (together with its successors and assigns, the
“Obligor”),
hereby promises to pay to the order of _____________________
(together with its successors and assigns, the “Holder”), the
principal sum of __________________________________________________________
($__________) (the “Note
Amount”) on
January 30, 2005 (the “Maturity
Date”),
together with interest on the outstanding principal sum at the rate of
10% per annum from the date hereof until such principal sum is paid in full.


 

This Note
is subject to all applicable terms of that certain Intellectual Property
Security Agreement, dated as of August 10, 2004, between Obligor and Holder (the
“Security
Agreement”), and
is and shall remain secured thereby. Terms used but not defined herein which are
defined in the Security Agreement shall have the respective meanings assigned
thereto in the Security Agreement.

 

The
payment of principal or interest shall be made by check to the Holder of this
Note on the Maturity Date at the address in the continental United States to
which such Holder has, by written notice delivered to Obligor, not less than
five business days prior to such payment date, directed Obligor to make such
payment or, if no such notice is timely received by Obligor, by check posted to
such Holder at its last known address of which the Obligor has
notice.

 

The
principal of and interest on this Note are payable in such coin or currency of
the United States of America as at the time of payment is legal tender for the
payment of public and private debts. All such interest shall be calculated based
upon a 360-day year and paid for the actual number of days elapsed including the
first day but excluding the last day. Notwithstanding anything herein to the
contrary, the interest or any amount deemed to be interest payable by Obligor
with respect to this Note shall not exceed the maximum amount permitted by
applicable law.

 

Obligor
may prepay this Note in whole at any time or in part from time to time without
premium or penalty at par plus accrued and unpaid interest.

 

In case
one or more of the following events (each an “Event
of Default”)
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be
continuing:

 

 

(i)  any
representation or warranty made by the Obligor in the Security Agreement or in
any certificate or other document delivered pursuant to the Security Agreement
shall prove to have been incorrect in any material respect when
made;

 






















 




 

 

(ii)  the
appointment of a custodian, receiver, or liquidator for Obligor or any of its
property which such appointment is not discharged or dismissed within 60
days;

 

(iii)  the
adjudication of the Obligor as insolvent;

 

(iv)  the
making by the Obligor of an assignment for the benefit of its
creditors;

 



(v)  an
admission by the Obligor of his inability to pay its debts as they become
due;

 



(vi)  the
commencement of any proceeding under any bankruptcy or similar law by or against
the Obligor which is not discharged or dismissed within 60 days; or

 

(vii)  failure
on the part of Obligor to duly observe or perform in any material respect any of
the covenants or agreements on the part of the Obligor contained herein and in
the Security Agreement for a period of 10 days after the date on which written
notice specifying such failure and demanding that Obligor remedy the same, shall
have been given to Obligor by the Holder of this Note,then, and
in each and every such case, the principal of and accrued interest on this Note
shall become immediately due and payable without any declaration or other act on
the part of the Holder of this Note.

 

In case
this Note shall become mutilated, defaced or be apparently destroyed, lost or
stolen, Obligor shall execute and deliver a replacement Note in exchange and in
substitution for the mutilated or defaced Note, or in lieu of and in
substitution for the Note so apparently destroyed, lost or stolen. In every case
the Holder of this Note shall furnish to Obligor such security or indemnity as
may be reasonably required by Obligor to indemnify and defend and to save
Obligor harmless and, in every case of destruction, loss or theft evidence to
Obligor’s reasonable satisfaction of the apparent destruction, loss or theft of
such Note and of the ownership thereof. 

 

No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive or any rights or remedies provided by
law.

 

The
Obligor hereby waives demand, presentment, notice of dishonor, diligence,
protest, notice of protest and all other notices or demands relating to this
Note. The Obligor also (a) acknowledges and agrees that, in any suit, action, or
proceeding under this Note, the courts of the State of New Jersey or the courts
of the United States District Court for the District of New Jersey shall have
exclusive jurisdiction, (b) consents to the jurisdiction of such courts and (c)
consents to and waives any objection which the Obligor now has or may hereafter
have to proper venue existing in any of such courts. This Note shall be governed
by, and construed in accordance with, the laws of the State of New Jersey,
without regard to conflict of laws principles thereof.








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This Note
and the indebtedness evidenced hereby are deemed obligations secured by the
Security Agreement previously executed and delivered by the Obligor to Holder.
The Obligor hereby warrants and agrees that the liens granted under the Security
Agreement are validly perfected, first priority liens securing all of the
existing and future obligations owing by the Obligor to Holder. The Obligor
acknowledges and agrees that the Security Agreement remains in full force and
effect and that Holder’s rights and remedies thereunder are not intended to be
limited by this Note or any other note or agreement executed in connection
herewith. 




THE
OBLIGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
NOW HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT TO ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS PROMISSORY
NOTE.







IN
WITNESS WHEREOF, Obligor has caused this Note to be executed on and as of this
__th day of ________, 2004.










LEVEL
8 SYSTEMS, INC.







By:
________________________________

Name:
John Broderick

Title:
Chief Financial Officer 









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