Form of Term Sheet


    PRIVATE
      CONSORTIUM OF QUALIFIED INVESTORS

    


    A
      M E N D E D C O N F I D E N T I A L T E R M S H E E T

     

    


    December
      15, 2005

     

    


     

    This
      Term Sheet is an expression of intention only and, except as expressly set
      forth
      below, is not to be construed as a binding agreement.

    


    
      	
              Promissory
                Note with Conversion Feature

            
	 	 
	
              Issuer:

            	
              Level
                8 Systems, Inc., a Delaware corporation (the “Company”)

            
	
              Investors:

            	
              Private
                Consortium of Qualified Investors

            
	
              Investment
                Amount:

            	
              Up
                to $2,000,000

            
	
              Securities
                Offered:

            	
              $450,000
                minimum principal amount of Senior Notes (the “Notes”) to be issued in
                integral amounts of $1,000. 

               

              Each
                holder of these Senior Promissory Notes upon the approval of the
                Plan of
                Merger defined below will be subject to a mandatory conversion of
                the
                principal amount of the note into shares of Cicero, Inc. common stock
                at a
                conversion rate of $0.037. (Equivalent of $0.00185 for Level 8 stock)
                Based upon a $1,000,000 investment, holders of these Senior Notes
                will own
                approximately 40% ownership of Cicero, Inc. post
                merger.

            
	
              Coupon:

            	
              10%
                per annum on the principal amount, payable in arrears in cash on
                the
                maturity date.

            
	
              Maturity
                Date:

            	
              Consummation
                of the Merger (as defined below), but no later than January
                15, 2006

               

              At
                maturity, the principal balance of the Notes, together with all accrued
                and unpaid interest, will become due and payable, subject to the
                Optional
                Exchange described below. 

            
	
              Events
                of Default:

            	
              Standard
                events of default for debt instruments will be included in the
                Notes.

            
	
              Ranking:

            	
              The
                Notes will constitute senior obligations of the Company. While the
                Notes
                are outstanding, the Company will not be permitted to incur indebtedness
                ranking senior with the Notes, except for such senior indebtedness
                of the
                Company, if any, as is outstanding on the initial closing date of
                the sale
                of the Notes, including Notes from the initial Note and Warrant offering
                in the amount of $2,580,000.

            
	
              Protective
                Provisions:

            	
              The
                Notes will contain customary affirmative and negative covenants of
                the
                Company.

            
	
              Allocation
                and Closings:

            	
              The
                Notes will be offered to the Investors for purchase at one or more
                closings. 

               

              The
                initial closing of the sale of the Notes will occur not earlier than
                10
                days after the commencement of the offering.

            
	
              Mandatory
                Exchange:

            	
              Upon
                consummation of the Merger and simultaneously therewith, all of the
                Notes
                held by each Investor will be automatically exchanged for and in
                consideration of (without the payment of additional consideration)
                the
                shares issuable upon exercise of the conversion right of each investor’s
                promissory note to the extent of the principal and accrued but unpaid
                interest then due and owing on the Notes.


            


    


    
      
        
        

      

      
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              Use
                of Proceeds:

            	
              The
                Company will use the proceeds from this offering to finance its
                operations. The proceeds would not
                be
                used to repay any short-term or long term debt
                instruments.

            
	
              Other
                Conditions 

            	
              1.
                The Company will work with the Consortium to effect the proposed
                merger no
                later than September 15, 2005. To that end, the Company agrees to
                place as
                a retainer the sum of $50,000 with a selected legal firm of its choice
                to
                facilitate the remaining filings and approvals necessary to conclude
                the
                merger.

               

              2.
                The Company will cause a change in management including the
                following:

               

              a)
                the immediate resignation as Chairman, and Chief Executive Officer
                (CEO)
                by Anthony Pizi, who will retain the role of Chief Information Officer
                (CIO). Mr. Pizi agrees that his resignation will not be as a result
                of a
                change in control of the Company.

               

              b)
                the appointment by John Broderick as “Acting CEO”, in addition to his
                current duties as Chief Financial Officer (CFO) and Chief Operating
                Officer (COO).

               

              c)
                as soon as reasonably practicable, the Company will launch a search
                for a
                highly qualified software executive with extensive sales and marketing
                experience to assume the permanent position of CEO.

               

              3.
                The Consortium will have the immediate right to elect a majority
                of the
                Board of Directors. The Consortium will also obtain the resignations
                of
                Nicholas Hatalski and Ken Nielsen and the appointment of Bruce Miller,
                Fredric Mack, John Broderick and Mark Landis to the Board of Directors,
                leaving a total of eight directors.

               

              4.
                The Consortium will have the immediate right to create an Advisory
                Board
                to assist in the development of policy and strategy of the Company
                for
                implementation by the Board of Directors and management.

               

              5.
                The Company will develop a program for reducing cash flow and/or
                operating
                expenses by approximately twenty percent (20%) from current
                levels.

               

              6.
                The Consortium will create an equity set-aside for incenting management
                of
                no less than 10% of the total shares outstanding on a fully diluted
                basis
                after completion of this contemplated financing and the subsequent
                merger.

               

              7.
                The Company and the Consortium agree that any future financings that
                may
                be required prior to the effectiveness of the proposed merger must
                be
                approved by a majority of those investors that participate in this
                current
                round. Investors voting percentages will be equal to their percentage
                of
                investment in the total offering.

               

              8.
                Should the proposed merger not be declared effective by October 31,
                2005,
                the Company agrees that the pre money valuation of Level 8 Systems
                of
                $1,500,000 be lowered to $1,250,000. Holders of Senior Promissory
                Notes
                from this offering would then convert into shares of Cicero, Inc.
                common
                stock at a conversion rate of $0.0314.

               

              9.
                Should the proposed merger not be declared effective by December
                31, 2005,
                the Company agrees that the pre money valuation of Level 8 Systems
                of
                $1,250,000 (as adjusted above) be lowered to $1,000,000. Holders
                of Senior
                Promissory Notes from this offering would then convert into shares
                of
                Cicero, Inc. common stock at a conversion rate of
                $0.025.

            
	
              Deposit

            	
              Upon
                acceptance of this term sheet by the Company, Consortium will immediately
                deposit a minimum of $45,000, representing 10% of the minimum pledged
                to
                be made immediately available for working capital
                purposes.

            
	
              Expiration
                of Offer

            	
              This
                offer expires on January 15, 2006

            


    

    



    
      
        
        

      

      
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    AGREED
      TO
      AND ACCEPTED THIS _________ DAY OF JULY 2005.

     

    


    LEVEL
      8 SYSTEMS, INC.

     

    


     

    By:
       _________________________________

     

    Name:
      John Broderick

     

    Title:
      Chief Financial Officer

     

    


     

    


    PRIVATE
      CONSORTIUM

    


    


     

    By:
      ________________________________

    Bruce
      Miller

    


    


    


    By:
      ________________________________

    Fredric
      Mack

    


    


    


    By:
      ________________________________

    Mark
      & Carolyn Landis


    
      
        
        

      

      
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    A
      T T A C H M E N T

    


    


    EXTENSION
      OF TERM SHEET

    


    FEBRUARY
      27, 2006

    


    


    On
      today’s date, the Board of Directors unanimously agreed to extend terms of the
      foregoing Term Sheet to March 31, 2006 and increase the investment amount of
      same to $2,250,000.00.

    


    LEVEL
      8 SYSTEMS, INC.

    By:
      ________________________________

    Name: John
      Broderick

    Title: Chief
      Financial Officer