Dated October 30, 2007
The parties to this agreement are Cicero Inc. (the “Company”) and BluePhoenix Solutions Ltd.
Pursuant to a guaranty agreement between BluePhoenix and Bank Hapoalim B.M. (the “Bank”),
BluePhoenix has guaranteed certain obligations of the Company under the Company’s promissory note (the
“Bank Note”) dated September 28, 2001, in favor of the Bank, which is due and payable on or about October
30, 2007 (the “Guaranty”). The outstanding principal amount of the Bank Note is $1,971,000.
The parties wish to enter into an agreement with respect to, among other things, (a) the repayment in full
of the Bank Note, and (b) the issuance by the Company to BluePhoenix of (i) a senior note in the principal
amount of $1,021,000 in the form of exhibit A (the “New Note”) and (ii) 2,546,149 fully-paid and nonassessable
shares of the Company’s common stock, free and clear of any adverse claim (the “Shares”).
Accordingly, the parties agree as follows:
1. Repayment of the Bank Note . Simultaneously with the execution and delivery of this
agreement, (a) the Company is repaying $300,000 principal amount of the Bank Note and all accrued interest on
the Bank Note to the date of this agreement, (b) BluePhoenix is repaying $1,671,000 principal amount of the
Bank Note, (c) the Bank is discharging the Company and BluePhoenix from all liabilities and obligations in
respect of the Bank Note and the Guaranty, and (d) the Company is issuing to BluePhoenix the Note and the
Shares. Accordingly, the Company has no further liabilities or obligations arising from (y) the agreement
pursuant to exhibit 6.1.1 of the asset purchase agreement dated August 8, 2001 between the Company and
BluePhoenix, which required that the Company repay the indebtedness under the Bank Note immediately upon
the consummation of a financing by the Company or any of its direct or indirect subsidiaries to the extent of 10%
of any net proceeds of any