Exhibit 4.1


    
      

    

     

    
      Exhibit
        4.1

      


      REGISTRATION
        RIGHTS AGREEMENT

      


      This
        REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
        dated
        as of July __, 2006, is entered into by and between LEVEL 8 SYSTEMS, INC.,
        a
        Delaware corporation (the “Company”),
        and                       
 (the “Purchaser”).

      


      W
        I T N E S S E T H
        :

      


      This
        Agreement is made pursuant to that certain Purchase Agreement, dated as of
        the
        date hereof, by and between the Company and the Purchaser (the “Purchase
        Agreement”),
        and
        pursuant to that certain Commitment Agreement, dated as of the date hereof,
        by
        and between the Company and the Purchaser (the “Commitment
        Agreement”).

      


      The
        Company and the Purchaser hereby agree as follows:

      


      1.    
Definitions.
        Unless
        otherwise defined herein, terms defined in the Purchase Agreement and the
        Commitment Agreement are used herein as therein defined, and the following
        shall
        have (unless otherwise provided elsewhere in this Agreement) the following
        respective meanings (such meanings being equally applicable to both the singular
        and plural form of the terms defined):

      


      “Affiliate”
means,
        with respect to any Person, any other Person that directly or indirectly
        controls or is controlled by or under common control with such Person. For
        the
        purposes of this definition, “control,”
when
        used with respect to any Person, means the possession, direct or indirect,
        of
        the power to direct or cause the direction of the management and policies
        of
        such Person, whether through the ownership of voting securities, by contract
        or
        otherwise, and the terms “affiliated,”
        “controlling”
and
        “controlled”
have
        meanings correlative to the foregoing.

      


      “Agreement”
shall
        mean this Registration Rights Agreement, including all amendments, modifications
        and supplements and any exhibits or schedules to any of the foregoing, and
        shall
        refer to the Agreement as the same may be in effect at the time such reference
        becomes operative.

      


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

      


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

      


      “Holder
        or
Holders”
means
        the holder or holders, as the case may be, from time to time of the Registrable
        Securities.

      


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


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      “Registrable
        Securities”
shall
        mean the shares of Common Stock issuable upon conversion of the Convertible
        Bridge Notes and the purchase of common stock.

      


      2.    
Registration.
        As soon
        as practicable following the Closing Date and within ninety (90) days of
        the
        such date, the Company shall prepare and file with the Commission a Registration
        Statement (the “Registration
        Statement”)
        which
        shall cover all of the Registrable Securities. The Registration Statement
        shall
        be on Form S-1 or any successor form. The Company shall use its best efforts
        to
        cause the Registration Statement to be declared effective under the Securities
        Act within one hundred eighty (180) days of the Closing Date.

      


      3.    
Registration
        Procedures.
        Subject
        to the provisions of Section 2, the Company will:

      


      (a)    prepare
        and file with the Commission a Registration Statement with respect to such
        securities and use its best efforts to cause such Registration Statement
        to
        become and remain effective for a period of time required for the disposition
        of
        such securities by the Holder thereof, but not to exceed two (2)
        years;

      


      (b)    prepare
        and file with the Commission such amendments and supplements to such
        Registration Statement and the prospectus used in connection therewith as
        may be
        necessary to keep such Registration Statement effective and to comply with
        the
        provisions of the Securities Act with respect to the sale or other disposition
        of all securities covered by such Registration Statement until the earlier
        of
        such time as all of such securities have been disposed of in a public offering
        or the expiration of two (2) years;

      


      (c)    furnish
        to each Holder such number of copies of a summary prospectus or other
        prospectus, including a preliminary prospectus, in conformity with the
        requirements of the Securities Act, and such other documents, as such Holder
        may
        reasonably request;

      


      (d)    use
        its
        best efforts to register or qualify the securities covered by such Registration
        Statement under such other securities or blue sky laws of such jurisdictions
        within the United States as each Holder shall reasonably request to the extent
        such registration or qualification is required in such jurisdictions
        (provided,
        however,
        that
        the Company shall not be obligated to qualify as a foreign corporation to
        do
        business under the laws of any jurisdiction in which it is not then qualified
        or
        to file any general consent to service of process), and do such other reasonable
        acts and things as may be required of it to enable such Holder to consummate
        the
        disposition in such jurisdiction of the securities covered by such Registration
        Statement;

      


      (e)    enter
        into customary agreements (including an underwriting agreement in customary
        form) and take such other actions as are reasonably required in order to
        expedite or facilitate the disposition of such Registrable
        Securities;

      


      (f)    notify
        each Holder as promptly as practicable upon the occurrence of any event as
        a
        result of which the prospectus included in a Registration Statement, as then
        in
        effect, contains an untrue statement of material fact or omits to state a
        material fact required to be stated therein or necessary to make the statements
        therein not misleading in light of the circumstances then 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      existing,
        and as promptly as possible, prepare, file and furnish to such Holder a
        reasonable number of copies of a supplement or an amendment to such prospectus
        as may be necessary so that such prospectus does not contain an untrue statement
        of material fact or omits to state a material fact required to be stated
        therein
        or necessary to make the statements therein not misleading in light of the
        circumstances then existing;

       

      (g)    provide
        each Holder and its representatives the opportunity to conduct reasonable
        inquiry of the Company’s financial and other records during normal business
        hours and make available its officers, directors and employees for questions
        regarding information which such Holder may reasonably request in order to
        conduct any due diligence; and

      


      (h)    otherwise
        use its best efforts to comply with all applicable rules and regulations
        of the
        Commission, and make available to the Holders, as soon as reasonably
        practicable, but not later than eighteen (18) months after the effective
        date of
        the Registration Statement, an earnings statement covering the period of
        at
        least twelve (12) months beginning with the first full month after the effective
        date of such Registration Statement, which earnings statement shall satisfy
        the
        provisions of Section 11(a) of the Securities Act.

      


      4.    
Expenses.
        All
        expenses incident to the Company’s compliance with the terms of this Agreement,
        including, without limitation, all registration and filing fees, printing
        expenses, fees and disbursements of counsel for the Company, expenses of
        any
        special audits incident to or required by any such registration and expenses
        of
        complying with the securities or blue sky laws of any jurisdiction pursuant
        to
        Section 3(d), shall be paid by the Company, except that:

      


      (a)    all
        such
        expenses in connection with any amendment or supplement to the Registration
        Statement or prospectus filed more than two (2) years after the effective
        date
        of such Registration Statement because any Holder has not effected the
        disposition of the securities requested to be registered shall be paid by
        such
        Holder;

      


      (b)    the
        Company shall not be liable for any fees, discounts or commissions to any
        underwriter or any fees or disbursements of counsel for any underwriter in
        respect of the securities sold by such Holder; and

      


      (c)    any
        incremental expenses incurred by the Company as a result of the inclusion
        of a
        Holder’s Registrable Securities in an underwritten offering where the Holder or
        any of its Affiliates is an underwriter of the Registrable Securities which
        inclusion of such Holder’s Registrable Securities requires a “qualified
        independent underwriter” under the applicable rules of the NASD shall be paid by
        such Holder.

      


      5.    
Indemnification
        and Contribution.
        (a) In
        the event of any registration of any Registrable Securities under the Securities
        Act pursuant to this Agreement, the Company shall indemnify and hold harmless
        the Holder of such Registrable Securities, such Holder’s directors and officers,
        and each other person (including each underwriter) who participated in the
        offering of such Registrable Securities and each other person, if any, who
        controls such Holder or such participating person within the meaning of the
        Securities Act, against any losses, claims, damages or liabilities, joint
        or
        several, to which such Holder or any such director or officer or



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      participating
        person or controlling person may become subject under the Securities Act
        or any
        other statute or at common law, insofar as such losses, claims, damages or
        liabilities (or actions in respect thereof) arise out of or are based upon
        (i) any alleged untrue statement of any material fact contained, on the
        effective date thereof, in any Registration Statement under which such
        securities were registered under the Securities Act, any preliminary prospectus
        or final prospectus contained therein, or any amendment or supplement thereto,
        or (ii) any alleged omission to state therein a material fact required to
        be stated therein or necessary to make the statements therein not misleading,
        and shall reimburse such Holder or such director, officer or participating
        person or controlling person for any legal or any other expenses reasonably
        incurred by such Holder or such director, officer or participating person
        or
        controlling person in connection with investigating or defending any such
        loss,
        claim, damage, liability or action. Notwithstanding anything to the contrary
        set
        forth in this Section 5(a), the Company shall not be liable to indemnify
        any
        person in any such case to the extent that any such loss, claim, damage or
        liability arises out of or is based upon (1) any actual or alleged untrue
        statement or actual or alleged omission either (x) made in such Registration
        Statement, preliminary prospectus, prospectus or amendment or supplement
        in
        reliance upon and in conformity with written information furnished to the
        Company by such Holder specifically for use therein or so furnished for such
        purposes by any underwriter or (y) that had been corrected in a preliminary
        prospectus, prospectus supplement or amendment which had been furnished to
        such
        Holder prior to any distribution of the document alleged to contain the untrue
        statement or omission to offerees or purchasers, (2) any offer or sale of
        Registrable Securities after receipt by such Holder of a Standstill Notice
        under
        Section 3(g) and prior to the delivery of the prospectus supplement or amendment
        contemplated by Section 3(g), or (3) the Holder’s failure to comply with the
        prospectus delivery requirements under the Securities Act or failure to
        distribute its Registrable Securities in a manner consistent with its intended
        plan of distribution as provided to the Company and disclosed in the
        Registration Statement. Notwithstanding the foregoing, the Company shall
        not be
        required to indemnify any person for amounts paid in settlement of any claim
        without the prior written consent of the Company, which consent shall not
        be
        unreasonably withheld. Such indemnity shall remain in full force and effect
        regardless of any investigation made by or on behalf of such Holder or such
        director, officer or participating person or controlling person, and shall
        survive the transfer of such securities by such Holder.

      


      (b)    Each
        Holder, by acceptance hereof, agrees to indemnify and hold harmless the Company,
        its directors and officers and each person who participated in such offering
        and
        each other person, if any, who controls the Company within the meaning of
        the
        Securities Act against any losses, claims, damages or liabilities, joint
        or
        several, to which the Company or any such director or officer or any such
        person
        may become subject under the Securities Act or any other statute or at common
        law, insofar as such losses, claims, damages or liabilities (or actions in
        respect thereof) arise out of or are based upon (i) information in writing
        provided to the Company by the Holder specifically for use in the following
        documents and contained, on the effective date thereof, in any Registration
        Statement under which securities were registered under the Securities Act
        at the
        request of the Holder, any preliminary prospectus or final prospectus contained
        therein, or any amendment or supplement thereto, (ii) Holder’s offer or sale of
        Registrable Securities after receipt by such Holder of a Standstill Notice
        under
        Section 3(g) and prior to the delivery of the prospectus supplement or amendment
        contemplated by Section 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      3(g),
        (iii) Holder’s failure to comply with the prospectus delivery requirements under
        the Securities Act or failure to distribute its Registrable Securities in
        a
        manner consistent with its intended plan of distribution as provided to the
        Company and disclosed in the Registration Statement, (iv) Holder’s failure to
        comply with Regulation M under the Exchange Act, or (v) Holder’s failure to
        comply with any rules and regulations applicable because the Holder is, or
        is an
        Affiliate of, a registered broker-dealer. Notwithstanding the provisions
        of this
        paragraph (b) or paragraph (c) below, no Holder shall be required to indemnify
        any person pursuant to this Section 5 or to contribute pursuant to paragraph
        (c)
        below in an amount in excess of the amount of the aggregate net proceeds
        received by such Holder in connection with any such registration under the
        Securities Act.

      


      (c)    If
        the
        indemnification provided for in this Section 5 from the indemnifying party
        is
        unavailable to an indemnified party hereunder in respect of any losses, claims,
        damages, liabilities or expenses referred to therein, then the indemnifying
        party, in lieu of indemnifying such indemnified party, shall contribute to
        the
        amount paid or payable by such indemnified party as a result of such losses,
        claims, damages, liabilities or expenses in such proportion as is appropriate
        to
        reflect the relative fault of the indemnifying party and indemnified parties
        in
        connection with the actions which resulted in such losses, claims, damages,
        liabilities or expenses, as well as any other relevant equitable considerations.
        The relative fault of such indemnifying party and indemnified parties shall
        be
        determined by reference to, among other things, whether any action in question,
        including any untrue or alleged untrue statement of a material fact or omission
        or alleged omission to state a material fact, has been made by, or relates
        to
        information supplied by, such indemnifying party or indemnified parties,
        and the
        parties’ relative intent, knowledge, access to information and opportunity to
        correct or prevent such action. The amount paid or payable by a party as
        a
        result of the losses, claims, damages, liabilities and expenses referred
        to
        above shall be deemed to include any legal or other fees or expenses reasonably
        incurred by such party in connection with any investigation or
        proceeding.

      


      The
        parties hereto agree that it would not be just and equitable if contribution
        pursuant to this Section 5(c) were determined by pro rata allocation or by
        any
        other method of allocation which does not take account of the equitable
        considerations referred to in the immediately preceding paragraph. No Person
        guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
        of
        the Securities Act) shall be entitled to contribution from any Person who
        was
        not guilty of such fraudulent misrepresentation.

      


      6.    
Certain
        Limitations on Registration Rights.
        Notwithstanding the other provisions of this Agreement:

      


      (a)    the
        Company shall not be obligated to register the Registrable Securities of
        Holders
        if, in the opinion of counsel to the Company reasonably satisfactory to the
        Holder and its counsel (or, if the Holder has engaged an investment banking
        firm, to such investment banking firm and its counsel), the sale or other
        disposition of such Holder’s Registrable Securities, in the manner proposed by
        such Holder (or by such investment banking firm), may be effected without
        registering such Registrable Securities under the Securities
        Act;


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      (b)    the
        Company shall not be obligated to register the Registrable Securities of
        any
        Holder pursuant to Section 2 if the Company has had a registration statement,
        under which the Holder had a right to have its Registrable Securities included
        pursuant to Section 2, declared effective within one hundred and twenty (120)
        days prior to the date of the request pursuant to Section 2; and

      


      (c)    the
        Company shall have the right to delay the filing or effectiveness of the
        registration statement required pursuant to Section 2 hereof during one or
        more
        periods aggregating not more than forty five (45) days in any twelve-month
        period in the event that (i) the Company would, in accordance with the advice
        of
        its counsel, be required to disclose in the prospectus information not otherwise
        then required by law to be publicly disclosed and (ii) in the judgment of
        the
        Company’s Board of Directors, there is a reasonable likelihood that such
        disclosure would materially and adversely affect any existing or prospective
        material business situation, transaction or negotiation or otherwise materially
        and adversely affect the Company.

      


      7. 

      


      8.    
Holder
        Agreements.
        (a) No
        Holder may participate in an underwritten offering provided for hereunder
        unless
        such Holder (i) agrees to sell the Holder’s Registrable Securities on the basis
        provided in the underwriting arrangements contemplated for such offering
        as
        reasonably requested by the managing underwriter, (ii) completes and executes
        all questionnaires, powers of attorney, indemnities, underwriting agreements
        and
        other documents reasonably required under the terms of such underwriting
        arrangements as reasonably requested by the managing underwriter, and (iii)
        agrees to bear the Holder’s pro rata portion of all underwriting discounts and
        commissions.

      


      (b) Each
        Holder agrees to comply with Regulation M under the Exchange Act in connection
        with its offer and sale of Registrable Securities.

      


      (c)    Each
        Holder agrees that it will not sell any Registrable Securities registered
        under
        the Securities Act pursuant to the terms of this Agreement until a Registration
        Statement (and any associated post-effective amendment) relating thereto
        has
        been declared effective and the Holder has been provided copies of the related
        prospectus, as amended or supplemented to date.

       

      (d)    Each
        Holder agrees to comply with the prospectus delivery requirements of the
        Securities Act as applicable in connection with the sale of Registrable
        Securities registered under the Securities Act pursuant to a Registration
        Statement.

       

      (e)    Each
        Holder agrees that upon receipt of a Standstill Notice pursuant to Section
        3(g),
        the Holder shall immediately discontinue offers and sales of Registrable
        Securities registered under the Securities Act pursuant to any Registration
        Statements covering such Registrable Securities until such Holder receives
        copies of the supplemented or amended prospectus contemplated by Section
        3(g) or
        notice from the Company that no such supplement or amendment is
        required.

      


      9.    
Miscellaneous.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      (a)    No
        Inconsistent Agreements.
        The
        Company will not hereafter enter into any agreement with respect to its
        securities which conflicts with the rights granted to the Holders in this
        Agreement.

      


      (b)    Remedies.
        Each
        Holder, 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 Agreement. 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 Agreement and hereby agrees to waive the defense in
        any
        action for specific performance that a remedy at law would be adequate. In
        any
        action or proceeding brought to enforce any provision of this Agreement or
        where
        any provision hereof is validly asserted as a defense, the successful party
        shall be entitled to recover reasonable attorneys’ fees in addition to any other
        available remedy.

      


      (c)    Amendments
        and Waivers.
        Except
        as otherwise provided herein, the provisions of this Agreement may not be
        amended, modified or supplemented, and waivers or consents to departure from
        the
        provisions hereof may not be given unless the Company has obtained the written
        consent of the Holder.

      


      (d)    Notice
        Generally.
        Any
        notice, demand, request, consent, approval, declaration, delivery or other
        communication hereunder to be made pursuant to the provisions of this Agreement
        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,
        North Carolina 27511

      Attn:
        John P. Broderick

      


      
        	 	
                With
                  a Copy to:

              	
                Golenbock
                  Eiseman Assor Bell & Peskoe LLP

              


      

      437
        Madison Avenue

      New
        York,
        New York 10022

      Attn: Lawrence
        Bell, Esq.

      


      If
        to
        the Holders:

      


      With
        a Copy to:

      


      


      Attn:

      


      


      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, delivery or other 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      communication
        hereunder shall be deemed to have been duly given or served on the date on
        which
        personally delivered, with receipt acknowledged, telecopied and confirmed
        by
        telecopy answerback or three (3) Business Days after the same shall have
        been
        deposited in the United States mail.

      


      (e)    Rule
        144.
        With a
        view to making available to the Holders the benefits of Rule 144 under the
        Securities Act (“Rule
        144”)
        and
        any other rule or regulation of the Commission that may at any time permit
        the
        Holder to sell securities of the Company to the public without registration,
        the
        Company agrees that it will:

      


      (i)    make
        and
        keep public information available, as those terms are understood and defined
        in
        Rule 144;

      


      (ii)    file
        with
        the Commission in a timely manner all reports and other documents required
        of
        the Company under the Exchange Act; and

      


      (iii)    furnish
        to a Holder, so long as such Holder owns any Registrable Securities, forthwith
        upon request (A) a written statement by the Company, if true, that it has
        complied with the reporting requirements of Rule 144, the Securities Act
        and the
        Exchange Act, (B) a copy of the most recent annual or quarterly report of
        the
        Company and such other reports and documents so filed by the Company, and
        (C)
        such other information as may be reasonably requested in availing such Holder
        of
        any rule or regulation of the Commission which permits the selling of any
        such
        securities without registration.

      


      (f)    Successors
        and Assigns.
        This
        Agreement shall inure to the benefit of and be binding upon the successors
        and
        assigns of each of the parties hereto including any person to whom Registrable
        Securities are transferred.

      


      (g)    Headings.
        The
        headings in this Agreement are for convenience of reference only and shall
        not
        limit or otherwise affect the meaning hereof.

      


      (h)    Governing
        Law; Jurisdiction.
        This
        Agreement shall be governed by, construed and enforced in accordance with
        the
        laws of the State of Delaware without giving effect to the conflict of laws
        provisions thereof. Service of process on the parties in any action arising
        out
        of or relating to this Agreement shall be effective if mailed to the parties
        in
        accordance with Section 9(d) hereof. The
        parties hereto waive all right to trial by jury in any action or proceeding
        to
        enforce or defend any rights hereunder. 

      


      (i)    
Severability.
        Wherever possible, each provision of this Agreement shall be interpreted
        in such
        manner as to be effective and valid under applicable law, but if any provision
        of this Agreement 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 Agreement.

      


      (j)    
Entire
        Agreement.
        This
        Agreement, together with the License Agreement and the Subscription Agreement,
        represents the complete agreement and understanding of the parties



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      hereto
        in
        respect of the subject matter contained herein and therein. This Agreement
        supersedes all prior agreements and understandings between the parties with
        respect to the subject matter hereof.

      


      (k)    Counterparts.
        This
        Agreement may be executed in any number of counterparts, all of which taken
        together shall be considered one and the same agreement and shall become
        effective when counterparts have been signed by each party and delivered
        to the
        other party, it being understood that both parties need not sign the same
        counterpart. In the event that any signature is delivered by facsimile
        transmission, such signature shall create a valid and binding obligation
        of the
        party executing (or on whose behalf such signature is executed) with the
        same
        force and effect as if such facsimile signature page were an original
        thereof.

      


      


      [SIGNATURE
        PAGES ATTACHED HERETO]


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      IN
        WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
        date
        first above written.

      


      


      
        	 	LEVEL
                8 SYSTEMS, INC.
	 	 
	 	 
	 	
                By:

              	 
	 	 	
                John
                  P. Broderick

              
	 	 	
                Chief
                  Executive and Financial Officer

              
	 	 	 
	 	PURCHASER:
	 	 	 
	 	 	 
	 	
                By:

              	 
	 	
                Name:

              	 
	 	
                Title: