Form of Stock Purchase Warrant


     

    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. 

    


    


    _____________,
      2005

    3,600,000
      shares                                                                            Warrant
      No. 2005

    


    LEVEL
      8 SYSTEMS, INC.

    STOCK
      PURCHASE WARRANT

    


    THIS
      IS
      TO CERTIFY THAT LIRAZ
      SYSTEMS, LTD.
      (the
      "Holder”),
      or
      its registered assigns, is entitled, at any time prior to the Expiration Date
      (as hereinafter defined), to purchase from LEVEL 8 SYSTEMS, INC., a Delaware
      corporation (the “Company”)
      (the
      Company and the Holder are hereinafter referred to collectively as the
“Parties”
and
      individually as a “Party”),
      3,600,000
      shares
      of
      Common Stock (as hereinafter defined and subject to adjustment as provided
      herein), in whole or in part, at a purchase price of $0.002 per share (subject
      to adjustment as provided herein), on the terms and conditions and pursuant
      to
      the provisions hereinafter set forth.

     

    1. DEFINITIONS

     

    As
      used
      in this Warrant, the following terms have the respective meanings set forth
      below:

     

    “Additional
      Shares of Common Stock”
shall
      mean all shares of Common Stock issued by the Company after the Closing, other
      than Warrant Stock.

     

    “Business
      Day”
shall
      mean any day that is not a Saturday or Sunday or a day on which banks are
      required or permitted to be closed in the State of New York.

     

    “Closing
      Date”
shall
      have the meaning set forth in the Purchase Agreement.

     

    “Commission”
shall
      mean the Securities and Exchange Commission or any other Federal agency then
      administering the Securities Act and other Federal securities laws.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    “Common
      Stock”
shall
      mean (except where the context otherwise indicates) the common stock, $.001
      par
      value, of the Company as constituted on the Closing Date, and any capital stock
      into which such Common Stock may thereafter be changed, and shall also include
      (i) capital stock of the Company of any other class (regardless of how
      denominated) issued to the holders of shares of Common Stock upon any
      reclassification thereof which is also not preferred as to dividends or assets
      over any other class of stock of the Company and which is not subject to
      redemption and (ii) shares of common stock of any successor or acquiring
      corporation (as defined in Section 4.4) received by or distributed to the
      holders of Common Stock of the Company in the circumstances contemplated by
      Section 4.4.

     

    “Convertible
      Securities”
shall
      mean evidences of indebtedness, shares of stock or other securities which are
      convertible into or exchangeable, with or without payment of additional
      consideration in cash or property, for Additional Shares of Common Stock, either
      immediately or upon the occurrence of a specified date or a specified
      event.

     

    “Current
      Market Price”
shall
      mean, in respect of any share of Common Stock on any date herein specified
      (i)
      the closing sales price on such day on the NASDAQ National Market System
      (“NASDAQ”) or the principal stock exchange on which such Common Stock is listed
      or admitted to trading, (ii) if no sale takes place on such day on NASDAQ or
      any
      such exchange, the average of the last reported closing bid and asked prices
      on
      such day as officially quoted on NASDAQ or any such exchange, (iii) if the
      Common Stock is not then listed or admitted to trading on NASDAQ or any stock
      exchange, the average of the last reported closing bid and asked prices on
      such
      day in the over-the-counter market, as furnished by the National Association
      of
      Securities Dealers Automatic Quotation System or the National Quotation Bureau,
      Inc., (iv) if neither such corporation at the time is engaged in the business
      of
      reporting such prices, as furnished by any similar firm then engaged in such
      business, or (v) if there is no such firm, as furnished by any member of the
      NASD selected mutually by the Holder and the Company or, if they cannot agree
      upon such selection, as selected by two such members of the NASD, one of which
      shall be selected by the Holder and one of which shall be selected by the
      Company.

     

    “Current
      Warrant Price”
shall
      mean, in respect of a share of Common Stock at any date herein specified, $0.002
      per share of Common Stock as of the date hereof, subject to adjustment as
      provided herein.

     

    "Date
      of Exercise"
      shall
      have the meaning set forth in Section 2.1(b).

     

    “Exchange
      Act”
shall
      mean the Securities Exchange Act of 1934, as amended, or any similar Federal
      statute, and the rules and regulations of the Commission thereunder, all as
      the
      same shall be in effect from time to time.

     

    “Exercise
      Period”
shall
      mean the period during which this Warrant is exercisable pursuant to Section
      2.1.

     

    “Expiration
      Date”
shall
      mean November 1, 2008.

     

    “Holder”
shall
      mean the Person in whose name the Warrant set forth herein is registered on
      the
      books of the Company maintained for such purpose.

     


    
      
        
        

      

      
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    “NASD”
shall
      mean the National Association of Securities Dealers, Inc., or any successor
      corporation thereto.

     

    “Other
      Property”
shall
      have the meaning set forth in Section 4.4.

     

    “Outstanding”
shall
      mean, when used with reference to Common Stock, at any date as of which the
      number of shares thereof is to be determined, all issued shares of Common Stock,
      except shares then owned or held by or for the account of the Company or any
      subsidiary thereof, and shall include all shares issuable in respect of
      outstanding scrip or any certificates representing fractional interests in
      shares of Common Stock.

     

    “Person”
shall
      mean any individual, sole proprietorship, partnership, limited liability
      company, joint venture, trust, unincorporated organization, association,
      corporation, institution, public benefit corporation, entity or government
      (whether Federal, state, county, city, municipal or otherwise, including,
      without limitation, any instrumentality, division, agency, body or department
      thereof).

     

    "Proceeding"
      shall
      have the meaning set forth in Section 14.8.

     

    “Recapitalization
      Merger”
      shall
      mean the merger of Level 8 Systems, Inc. into its wholly owned subsidiary
      Cicero, Inc. substantially as filed with the Securities and Exchange Commission
      under Form S-4/A.

     

    “Restricted
      Common Stock”
shall
      mean shares of Common Stock which are, or which upon their issuance on the
      exercise of this Warrant would be, evidenced by a certificate bearing the
      restrictive legend set forth in the Purchase Agreement.

     

    “Securities
      Act”
shall
      mean the Securities Act of 1933, as amended, or any similar Federal statute,
      and
      the rules and regulations of the Commission thereunder, all as the same shall
      be
      in effect at the time.

     

    "Trading
      Day(s)"
      shall
      mean any day on which the primary market on which such shares of Common Stock
      are listed is open for trading.

     

    “Warrants”
shall
      mean this Warrant and all warrants issued upon transfer, division or combination
      of, or in substitution for, any thereof. All Warrants shall at all times be
      identical as to terms and conditions and date, except as to the number of shares
      of Common Stock for which they may be exercised.

     

    “Warrant
      Price”
shall
      mean an amount equal to (i) the number of shares of Common Stock being purchased
      upon exercise of this Warrant pursuant to Section 2.1, multiplied by (ii) the
      Current Warrant Price as of the date of such exercise unless the Company waives
      any such warrant price.

     

    “Warrant
      Stock”
shall
      mean the shares of Common Stock purchased by the holders of the Warrants upon
      the exercise thereof.

     

    2.
       EXERCISE
      OF WARRANT

     


    
      
        
        

      

      
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    2.1. Manner
      of Exercise.
      (a)
      Notwithstanding anything to the contrary in this Warrant, upon consummation
      of
      the Recapitalization Merger (or, if earlier, the date, if any, on which the
      Company’s certificate of incorporation is amended to provide for sufficient
      authorized shares to permit this Warrant to be exercised), this Warrant shall
      automatically be deemed to be exercised, without any action on the part of
      the
      Holder or the Company, and without the need to pay any exercise price..


     

    (b)
      The
      Company shall, as promptly as practicable, and in any event within three (3)
      Business Days thereafter, issue or cause to be issued and deliver or cause
      to be
      delivered to the Holder a certificate or certificates representing the aggregate
      number of full shares of Common Stock issuable upon such exercise, as
      hereinafter provided against delivery of this warrant to the Company at its
      principal office. The stock certificate or certificates so delivered shall
      be,
      to the extent possible, in such denomination or denominations as such Holder
      shall request in a separate notice and shall be registered in the name of the
      Holder or, subject to Section 8, such other name as shall be designated in
      the
      notice. This Warrant shall be deemed to have been exercised and such certificate
      or certificates shall be deemed to have been issued, and the Holder or any
      other
      Person so designated to be named therein shall be deemed to have become a holder
      of record of such shares for all purposes, as of the effective date of the
      Recapitalization Merger. 

     

    (c)
      The
      Company's obligations to issue and deliver Warrant Stock in accordance with
      the
      terms hereof are absolute and unconditional, irrespective of any action or
      inaction by the Holder to enforce the same, any waiver or consent with respect
      to any provision hereof, the recovery of any judgment against any Person or
      any
      action to enforce the same, or any setoff, counterclaim, recoupment, limitation
      or termination, or any breach or alleged breach by the Holder or any other
      Person of any obligation to the Company or any violation or alleged violation
      of
      law by the Holder or any other Person, and irrespective of any other
      circumstance which might otherwise limit such obligation of the Company to
      the
      Holder in connection with the issuance of Warrant Stock.

     

    (d) The
      Warrant shares are fully earned upon issuance of this Warrant. Should the
      Recapitalization Merger not occur on or before March 1, 2006, the Company shall
      use its best efforts to take all action necessary to cause this Warrant
      automatically to be exercised as promptly as practicable. . 

     

    2.2. Payment
      of Taxes.
      All
      shares of Common Stock issuable upon the exercise of this Warrant pursuant
      to
      the terms hereof shall be validly issued, fully paid and nonassessable and
      without any preemptive rights. The Company shall pay all expenses in connection
      with, and all taxes and other governmental charges that may be imposed with
      respect to, the issue or delivery thereof, unless such tax or charge is imposed
      by law upon the Holder or based on or measured by the income of the holder,
      in
      which case such taxes or charges shall be paid by the Holder.
      The
      Holder or its transferee shall pay any transfer tax due and payable in respect
      of a transfer of this Warrant or the Warrant Stock to a party other than the
      Holder.

     

    2.4. Continued
      Validity.
      A
      holder of shares of Common Stock issued upon the exercise of this Warrant,
      in
      whole or in part (other than a holder who acquires such shares after the same
      have been publicly sold pursuant to a Registration Statement under the
      Securities Act or sold pursuant to Rule 144 thereunder), shall continue to
      be
      entitled to all rights, and subject to

     


    
      
        
        

      

      
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    all
      obligations, to which it would have been entitled or obligated, as applicable,
      as the Holder under Sections 8, 9 and 10 of this Warrant. The Company will,
      at
      the time of each exercise of this Warrant, in whole or in part, upon the request
      of the holder of the shares of Common Stock issued upon such exercise hereof,
      acknowledge in writing, in form reasonably satisfactory to such holder, its
      continuing obligation to afford to such holder all such rights; provided,
      however,
      that if
      such holder shall fail to make any such request, such failure shall not affect
      the continuing obligation of the Company to afford to such holder all such
      rights.

     

    2.5
       Limitation
      on Exercise.
      Notwithstanding anything to the contrary contained herein, the number of shares
      of Common Stock that may be acquired by the Holder upon any exercise of this
      Warrant (or otherwise in respect hereof) shall be limited to the extent
      necessary to insure that, following such exercise (or other issuance), the
      total
      number of shares of Common Stock then beneficially owned by such Holder and
      its
      affiliates and any other Persons whose beneficial ownership of Common Stock
      would be aggregated with the Holder's for purposes of Section 13(d) of the
      Exchange Act, does not exceed 4.999% of the total number of issued and
      outstanding shares of Common Stock (including for such purpose the shares of
      Common Stock issuable upon such exercise). For such purposes, beneficial
      ownership shall be determined in accordance with Section 13(d) of the Exchange
      Act and the rules and regulations promulgated thereunder. Each delivery of
      a
      notice of exercise under Section 2.1 will constitute a representation by the
      Holder that it has evaluated the limitation set forth in this paragraph and
      determined that issuance of the full number of Warrant Shares requested in
      such
      notice of exercise is permitted under this paragraph. By written notice to
      the
      Company, the Holder may waive the provisions of this Section but (i) any such
      waiver will not be effective until the 61st day after such notice is delivered
      to the Company, and (ii) any such waiver will apply only to the Holder and
      not
      to any other holder of Warrants.

     

    3.
       TRANSFER;
      DIVISION AND COMBINATION

     

    3.1. Transfer.
      Subject
      to compliance with Section 11, transfer of this Warrant and all rights
      hereunder, in whole or in part, shall be registered on the books of the Company
      to be maintained for such purpose, upon surrender of this Warrant at the
      principal office of the Company specified in Section 2.1 or the office or agency
      designated by the Company pursuant to Section 9, together with a written
      assignment of this Warrant substantially in the form of Exhibit
      A
      hereto
      duly executed by the Holder or its agent or attorney. Upon such surrender,
      the
      Company shall, subject to Section 8, execute and deliver a new Warrant or
      Warrants in the name of the assignee or assignees and in the denomination
      specified in such instrument of assignment, and shall issue to the assignor
      a
      new Warrant evidencing the portion of this Warrant not so assigned, and this
      Warrant shall promptly be cancelled. A Warrant, if properly assigned in
      compliance with Section 8, may be exercised by a new Holder for the purchase
      of
      shares of Common Stock without having a new Warrant issued.

     

    3.2. Division
      and Combination.
      Subject
      to Section 8, this Warrant may be divided or combined with other Warrants upon
      presentation hereof at the aforesaid office or agency of the Company, together
      with a written notice specifying the names and denominations in which new
      Warrants are to be issued, signed by the Holder or its agent or attorney.
      Subject to compliance with Section 3.1 and with Section 8, as to any
      transfer which may be involved in such division or combination, the Company
      shall execute and deliver a new Warrant or Warrants

     


    
      
        
        

      

      
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    in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice.

     

    3.3. Expenses.
      The
      Company shall prepare, issue and deliver at its own expense the new Warrant
      or
      Warrants to be delivered under this Section 3.

     

    3.4. Maintenance
      of Books.
      The
      Company agrees to maintain, at its aforesaid office or agency, books for the
      registration and the registration of transfer of the Warrants.

     

    4.
       ADJUSTMENTS.

     

    The
      number of shares of Common Stock for which this Warrant is exercisable, or
      the
      price at which such shares may be purchased upon exercise of this Warrant,
      shall
      be subject to adjustment from time to time as set forth in this Section 4.
      The
      Company shall give each Holder notice of any event described below which
      requires an adjustment pursuant to this Section 4 at the time of such
      event.

     

    4.1. Stock
      Dividends, Subdivisions and Combinations.
      If at
      any time the Company shall:

     

    (a) take
      a
      record of the holders of its Common Stock for the purpose of entitling them
      to
      receive a dividend payable in, or other distribution of, Additional Shares
      of
      Common Stock;

     

    (b) subdivide
      its outstanding shares of Common Stock into a larger number of shares of Common
      Stock; or

     

    (c) combine
      its outstanding shares of Common Stock into a smaller number of shares of Common
      Stock;

     

    then
      (i) the
      number of shares of Common Stock for which this Warrant is exercisable
      immediately after the occurrence of any such event shall be adjusted to equal
      the number of shares of Common Stock which a record holder of the same number
      of
      shares of Common Stock for which this Warrant is exercisable immediately prior
      to the occurrence of such event would own or be entitled to receive after the
      happening of such event, and (ii) the Current Warrant Price shall be adjusted
      to
      equal (A) the Current Warrant Price multiplied by the number of shares of Common
      Stock for which this Warrant is exercisable immediately prior to the adjustment
      divided by (B) the number of shares for which this Warrant is exercisable
      immediately after such adjustment.

     

    4.2. Certain
      Other Distributions.
      If at
      any time the Company shall take a record of the holders of its Common Stock
      for
      the purpose of entitling them to receive any dividend or other distribution
      of:

     

    (a) cash;

     


    
      
        
        

      

      
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    (b) any
      evidences of its indebtedness, any shares of its stock or any other securities
      or property of any nature whatsoever (other than cash, Convertible Securities
      or
      Additional Shares of Common Stock); or

     

    (c) any
      warrants or other rights to subscribe for or purchase any evidences of its
      indebtedness, any shares of its stock or any other securities or property of
      any
      nature whatsoever (other than cash, Convertible Securities or Additional Shares
      of Common Stock), then (i) the number of shares of Common Stock for which this
      Warrant is exercisable shall be adjusted to equal the product of the number
      of
      shares of Common Stock for which this Warrant is exercisable immediately prior
      to such adjustment by a fraction (A) the numerator of which shall be the Current
      Market Price per share of Common Stock at the date of taking such record and
      (B)
      the denominator of which shall be such Current Market Price per share of Common
      Stock minus the amount allocable to one share of Common Stock of any such cash
      so distributable and of the fair value (as determined in good faith by the
      Board
      of Directors of the Company) of any and all such evidences of indebtedness,
      shares of stock, other securities or property or warrants or other subscription
      or purchase rights so distributable, and (ii) the Current Warrant Price shall
      be
      adjusted to equal (A) the Current Warrant Price multiplied by the number of
      shares of Common Stock for which this Warrant is exercisable immediately prior
      to the adjustment divided by (B) the number of shares for which this Warrant
      is
      exercisable immediately after such adjustment. A reclassification of the Common
      Stock (other than a change in par value, or from par value to no par value
      or
      from no par value to par value) into shares of Common Stock and shares of any
      other class of stock shall be deemed a distribution by the Company to the
      holders of its Common Stock of such shares of such other class of stock within
      the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
      shall be changed into a larger or smaller number of shares of Common Stock
      as a
      part of such reclassification, such change shall be deemed a subdivision or
      combination, as the case may be, of the outstanding shares of Common Stock
      within the meaning of Section 4.1.

     

    4.3. Other
      Provisions Applicable to Adjustments under this Section.
      The
      following provisions shall be applicable to the making of adjustments of the
      number of shares of Common Stock for which this Warrant is exercisable and
      the
      Current Warrant Price provided for in this Section 4:

     

    (a) When
      Adjustments to Be Made.
      The
      adjustments required by this Section 4 shall be made whenever and as often
      as
      any specified event requiring an adjustment shall occur, except that any
      adjustment of the number of shares of Common Stock for which this Warrant is
      exercisable that would otherwise be required may be postponed (except in the
      case of a subdivision or combination of shares of Common Stock, as provided
      for
      in Section 4.1) up to, but not beyond the date of exercise if such adjustment
      either by itself or with other adjustments not previously made adds or subtracts
      less than 1% of the shares of Common Stock for which this Warrant is exercisable
      immediately prior to the making of such adjustment. Any adjustment representing
      a change of less than such minimum amount (except as aforesaid) which is
      postponed shall be carried forward and made as soon as such adjustment, together
      with other adjustments required by this Section 4 and not previously made,
      would
      result in a minimum adjustment or on the date of exercise. For the purpose
      of
      any adjustment, any specified event shall be deemed to have occurred at the
      close of business on the date of its occurrence.

     


    
      
        
        

      

      
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    (b) Fractional
      Interests.
      In
      computing adjustments under this Section 4, fractional interests in Common
      Stock
      shall be taken into account to the nearest 1/10th of a share.

     

    (c) When
      Adjustment Not Required.
      If the
      Company shall take a record of the holders of its Common Stock for the purpose
      of entitling them to receive a dividend or distribution and shall, thereafter
      and before the distribution to stockholders thereof, legally abandon its plan
      to
      pay or deliver such dividend or distribution, then thereafter no adjustment
      shall be required by reason of the taking of such record and any such adjustment
      previously made in respect thereof shall be rescinded and annulled.

     

    (d) Escrow
      of Warrant Stock.
      If
      after any property becomes distributable pursuant to this Section 4 by reason
      of
      the taking of any record of the holders of Common Stock, but prior to the
      occurrence of the event for which such record is taken, and the Holder exercises
      this Warrant, any Additional Shares of Common Stock issuable upon exercise
      by
      reason of such adjustment shall be deemed the last shares of Common Stock for
      which this Warrant is exercised (notwithstanding any other provision to the
      contrary herein) and such shares or other property shall be held in escrow
      for
      the Holder by the Company to be issued to the Holder upon and to the extent
      that
      the event actually takes place, upon payment of the then Current Warrant Price.
      Notwithstanding any other provision to the contrary herein, if the event for
      which such record was taken fails to occur or is rescinded, then such escrowed
      shares shall be cancelled by the Company and escrowed property
      returned.

     

    4.4. Reorganization,
      Reclassification, Merger, Consolidation or Disposition of Assets.
      In case
      the Company shall reorganize its capital, reclassify its capital stock,
      consolidate or merge with or into another corporation or other business entity
      (where the Company is not the surviving corporation or where there is a change
      in or distribution with respect to the Common Stock of the Company), or sell,
      transfer or otherwise dispose of all or substantially all its property, assets
      or business to another corporation or other business entity and, pursuant to
      the
      terms of such reorganization, reclassification, merger, consolidation or
      disposition of assets, shares of common stock of the successor or acquiring
      corporation, or any cash, shares of stock or other securities or property of
      any
      nature whatsoever (including warrants or other subscription or purchase rights)
      in addition to or in lieu of common stock of the successor or acquiring
      corporation (“Other
      Property”),
      are
      to be received by or distributed to the holders of Common Stock of the Company,
      then each Holder shall have the right thereafter to receive, upon exercise
      of
      such Warrant, the number of shares of common stock of the successor or acquiring
      corporation or of the Company, if it is the surviving corporation, and Other
      Property receivable upon or as a result of such reorganization,
      reclassification, merger, consolidation or disposition of assets by a holder
      of
      the number of shares of Common Stock for which this Warrant is exercisable
      immediately prior to such event provided that in the case of the
      Recapitalization Merger, the provision of Section 2.1(a) shall be applicable.
      In
      case of any such reorganization, reclassification, merger, consolidation or
      disposition of assets, at the Holder's option and request, any successor to
      the
      Company or surviving entity shall expressly assume the due and punctual
      observance and performance of each and every covenant and condition of this
      Warrant to be performed and observed by the Company and all the obligations
      and
      liabilities hereunder in order to provide for adjustments of shares of Common
      Stock for which this Warrant is exercisable which shall be as nearly equivalent
      as practicable to the adjustments provided for in this Section 4 and issue
      to
      the Holder a new warrant substantially in the form of this Warrant and
      consistent with the foregoing


    
      
        
        

      

      
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    provisions
      and evidencing the Holder's right to purchase the Other Property for the
      aggregate Current Market Price upon exercise thereof. For purposes of this
      Section 4.4, “common stock of the successor or acquiring corporation” shall
      include stock of such corporation of any class which is not preferred as to
      dividends or assets over any other class of stock of such corporation and which
      is not subject to redemption and shall also include any evidences of
      indebtedness, shares of stock or other securities which
      are
      convertible into or exchangeable for any such stock, either immediately or
      upon
      the arrival of a specified date or the happening of a specified event and any
      warrants or other rights to subscribe for or purchase any such stock. The
      foregoing provisions of this Section 4.4 shall similarly apply to successive
      reorganizations, reclassifications, mergers, consolidations or disposition
      of
      assets.

    


    5. NOTICES
      TO WARRANT HOLDERS

     

    5.1. Notice
      of Adjustments.
      Whenever the number of shares of Common Stock for which this Warrant is
      exercisable, or whenever the price at which a share of such Common Stock may
      be
      purchased upon exercise of the Warrants, shall be adjusted pursuant to Section
      4, the Company shall forthwith prepare a certificate to be executed by the
      chief
      financial officer of the Company setting forth, in reasonable detail, the event
      requiring the adjustment and the method by which such adjustment was calculated
      (including a description of the basis on which the Board of Directors of the
      Company determined the fair value of any evidences of indebtedness, shares
      of
      stock, other securities or property or warrants or other subscription or
      purchase rights referred to in Section 4.2) specifying the number of shares
      of
      Common Stock for which this Warrant is exercisable and (if such adjustment
      was
      made pursuant to Section 4.4) describing the number and kind of any other shares
      of stock or Other Property for which this Warrant is exercisable, and any change
      in the purchase price or prices thereof, after giving effect to such adjustment
      or change. The Company shall promptly cause a signed copy of such certificate
      to
      be delivered to each Holder in accordance with Section 12.2. The Company shall
      keep at its office or agency designated pursuant to Section 11 copies of all
      such certificates and cause the same to be available for inspection at said
      office during normal business hours by any Holder or any prospective purchaser
      of a Warrant designated by a Holder thereof.

     

    5.2. Notice
      of Corporate Action.
      If at
      any time:

     

    (a) the
      Company shall take a record of the holders of its Common Stock for the purpose
      of entitling them to receive a dividend (other than a cash dividend payable
      out
      of earnings or earned surplus legally available for the payment of dividends
      under the laws of the jurisdiction of incorporation of the Company) or other
      distribution, or any right to subscribe for or purchase any evidences of its
      indebtedness, any shares of stock of any class or any other securities or
      property, or to receive any other right;

     

    (b) there
      shall be any capital reorganization of the Company, any reclassification or
      recapitalization of the capital stock of the Company or any consolidation or
      merger of the Company with, or any sale, transfer or other disposition of all
      or
      substantially all the property, assets or business of the Company to, another
      corporation (other than the Recapitalization Merger); or

     


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    (c) there
      shall be a voluntary or involuntary dissolution, liquidation or winding up
      of
      the Company;

     

    then,
      in
      any one or more of such cases, the Company shall give to the Holder (i) at
      least
      ten (10) days’ prior written notice of the date on which a record date shall be
      selected for such dividend, distribution or right or for determining rights
      to
      vote in respect of any such reorganization, reclassification, merger,
      consolidation, sale, transfer, disposition, dissolution, liquidation or winding
      up, and (ii) in the case of any such reorganization, reclassification, merger,
      consolidation, sale, transfer, disposition, dissolution, liquidation or winding
      up, at least ten (10) days’ prior written notice of the date when the same shall
      take place. Such notice in accordance with the foregoing clause also shall
      specify (A) the date on which any such record is to be taken for the purpose
      of
      such dividend, distribution or right, the date on which the holders of Common
      Stock shall be entitled to any such dividend, distribution or right, and the
      amount and character thereof, and (B) the date on which any such reorganization,
      reclassification, merger, consolidation, sale, transfer, disposition,
      dissolution, liquidation or winding up is to take place and the time, if any
      such time is to be fixed, as of which the holders of Common Stock shall be
      entitled to exchange their shares of Common Stock for securities or other
      property deliverable upon such reorganization, reclassification, merger,
      consolidation, sale, transfer, disposition, dissolution, liquidation or winding
      up. Each such written notice shall be sufficiently given if addressed to the
      Holder and delivered in accordance with Section 14.2.

     

     

    6.
      TAKING OF RECORD; STOCK AND WARRANT AND WARRANT TRANSFER
      BOOKS

     

    In
      the
      case of all dividends or other distributions by the Company to the holders
      of
      its Common Stock with respect to which any provision of Section 4 refers to
      the
      taking of a record of such holders, the Company will in each such case take
      such
      a record and will take such record as of the close of business on a Business
      Day. The Company will not at any time, except upon dissolution, liquidation
      or
      winding up of the Company, close its stock transfer books or Warrant transfer
      books so as to result in preventing or delaying the exercise or transfer of
      any
      Warrant.

     

    


    7. SUPPLYING
      INFORMATION

     

    The
      Company shall cooperate with each Holder of a Warrant and each holder of
      Restricted Common Stock in supplying such information as may be reasonably
      necessary for such holder to complete and file any information reporting forms
      presently or hereafter required by the Commission as a condition to the
      availability of an exemption from the Securities Act for the sale of any Warrant
      or Restricted Common Stock.

     

    8. LOSS
      OR MUTILATION

     

    Upon
      receipt by the Company from any Holder of evidence reasonably satisfactory
      to it
      of the ownership of and the loss, theft, destruction or mutilation of this
      Warrant and indemnity reasonably satisfactory to it, and in case of mutilation
      upon surrender and cancellation hereof, the Company will execute and deliver
      in
      lieu hereof a new Warrant of like tenor to such Holder;

     


    
      
        
        

      

      
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    provided,
      in the
      case of mutilation, no indemnity shall be required if this Warrant in
      identifiable form is surrendered to the Company for cancellation.

     

    9.
       OFFICE
      OF COMPANY

     

    As
      long
      as any of the Warrants remain outstanding, the Company shall maintain an office
      or agency (which may be the principal executive offices of the Company) where
      the Warrants may be presented for exercise, registration of transfer, division
      or combination as provided in this Warrant.

     

    10. FILINGS

    


    So
      long
      as the Company has a class of equity securities registered pursuant to Section
      12 of the Exchange Act, the Company will use reasonable commercial efforts
      to
      file on or before the required date all regular or periodic reports (pursuant
      to
      the Exchange Act) required to be filed with the Commission pursuant to the
      Exchange Act and will deliver to the Holder promptly upon their becoming
      available (unless such reports are available through the Commission’s EDGAR
      system) one copy of each report, notice or proxy statement sent by the Company
      to its stockholders generally, and of each regular or periodic report (pursuant
      to the Exchange Act) and any Registration Statement, prospectus or written
      communication (other than transmittal letters) (pursuant to the Securities
      Act),
      filed by the Company with (a) the Commission or (b) any securities exchange
      on
      which shares of Common Stock are listed.

     

    11. NO
      RIGHTS AS STOCKHOLDERS; LIMITATIONS OF LIABILITY

    


    This
      Warrant shall not entitle the Holder to any rights as a stockholder of the
      Company, including, without limitation, the right to vote, to receive dividends
      and other distributions or to receive notice of or attend meetings of
      stockholders or any other proceedings of the Company unless and to the extent
      exercised for shares of Common Stock in accordance with the terms hereof. No
      provision hereof, in the absence of affirmative action by the Holder to exercise
      its rights to purchase shares of Common Stock hereunder, and no enumeration
      herein of the rights or privileges of the Holder hereof, shall give rise to
      any
      liability of such Holder for the purchase price of any Common Stock or as a
      stockholder of the Company, whether such liability is asserted by the Company
      or
      by creditors of the Company.

    


    12.
       MISCELLANEOUS

     

    12.1. Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of the Holder shall operate as a waiver of such right or otherwise
      prejudice the Holder’s rights, powers or remedies. If the Company fails to make,
      when due, any payments provided for hereunder, or fails to comply with any
      other
      provision of this Warrant, the Company shall pay to the Holder such amounts
      as
      shall be sufficient to cover any costs and expenses including, but not limited
      to, reasonable attorneys’ fees, including those of appellate proceedings,
      incurred by the Holder in collecting any amounts due pursuant hereto or in
      otherwise enforcing any of its rights, powers or remedies
      hereunder.

     


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    12.2. Notice
      Generally.
      Any
      notice, demand, request, consent, approval, declaration, delivery or other
      communication hereunder to be made pursuant to the provisions of this Warrant
      shall be sufficiently given or made if in writing and either delivered in person
      with receipt acknowledged or sent by registered or certified mail, return
      receipt requested, postage prepaid, or by telecopy and confirmed by telecopy
      answerback, addressed as follows:

     

    


     

    If
      to
      the Company:    Level
      8
      Systems, Inc.

              8000
      Regency Parkway, Suite 542

              Cary,
      NC 27511

              Attn:
 John
      P.
      Broderick

     

    With
      a Copy to:      Goldenbock
      Eiseman Assor Bell & Peskoe LLP

              437
      Madison Avenue, 40th
      Floor

              New
      York, NY 10022

              Attn:
      Lawrence M. Bell

    


     

    If
      to
      the Holder: At
      its
      last known address appearing on the books and records of the Company maintained
      for such purpose
      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 5:00 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
      5:00
      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.

    


    12.3. Remedies.
      Each
      holder of Warrant and Warrant Stock, in addition to being entitled to exercise
      all rights granted by law, including recovery of damages, will be entitled
      to
      specific performance of its rights under this Warrant. The Company agrees that
      monetary damages would not be adequate compensation for any loss incurred by
      reason of a breach by it of the provisions of this Warrant and hereby agrees
      to
      waive the defense in any action for specific performance that a remedy at law
      would be adequate.

     

    12.4. Successors
      and Assigns.
      Subject
      to the provisions of Sections 3.1, this Warrant and the rights evidenced hereby
      shall inure to the benefit of and be binding upon the successors of the Company
      and the successors and assigns of the Holder. The provisions of this Warrant
      are
      intended to be for the benefit of all Holders from time to time of this Warrant
      and, with respect to

     


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    Section
      8
      hereof, holders of Warrant Stock, and shall be enforceable by any such Holder
      or
      holder of Warrant Stock.

     

    12.5. Amendment.
      This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    12.6 Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provision or the remaining provisions
      of this Warrant.

     

    12.7 Headings.
      The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

     

    12.8 Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant 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 Warrant (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 this Warrant),
      and hereby irrevocably waives, and agrees not to assert in any 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 Warrant 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 Warrant or
      the
      transactions contemplated hereby. If either party shall commence a Proceeding
      to
      enforce any provisions of this Warrant, 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.

     

    


     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and
      its
      corporate seal to be impressed hereon as of the day and year first above
      written.

    


    


    LEVEL
      8 SYSTEMS, INC.

     

     

    By:
           

    John
      P.
      Broderick,

    Chief
      Executive and Chief Financial Officer

     

    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    


    EXHIBIT
      A

    ASSIGNMENT
      FORM

    FOR
      VALUE
      RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns
      and transfers unto the Assignee named below all of the rights of the undersigned
      under this Warrant, with respect to the number of shares of Common Stock set
      forth below:

     

    Name
      and Address of Assignee                           No.
      of  Shares of 

                                                    Common
      Stock

    


    ___________________________________                   _______________

    


    ___________________________________

    


    ___________________________________

    


    ___________________________________

    


    


    and
      does
      hereby irrevocably constitute and appoint __________________________
      attorney-in-fact to register such transfer on the books of LEVEL 8 SYSTEMS,
      INC., maintained for the purpose, with full power of substitution in the
      premises.

     

    Dated:
      __________________                  Print
      Name: 

     

    Signature: 

     

    Witness: 

     

    NOTICE:        The
      signature on this subscription must correspond with the name as written upon
      the
      face of the within Warrant in every particular, without alteration of
      enlargement or any change whatsoever.