Exhibit 10.4(b)


    
      
        

      


      AGREEMENT

      


      Dated
        September 29, 2004

      


      The
        parties to this agreement are Level 8 Systems, Inc. (the "Company") and Liraz
        Systems Ltd. ("Liraz").

      


      Pursuant
        to a guaranty agreement between Liraz and Bank Hapoalim B.M. (the "Bank"),
        Liraz
        has guaranteed certain obligations of the Company under the Company's promissory
        note (the "Note") dated September 28, 2001, in favor of the Bank, which is
        due
        and payable on or about November 15, 2004 (the "Guaranty"). The outstanding
        principal amount of the Note is $1,971,000.

      


      Prior
        to
        or simultaneously with the execution and delivery of this agreement, the
        Company
        has issued and sold or is issuing and selling secured promissory notes in
        the
        form of exhibit A (the "New Securities"), which are subject to an intellectual
        property security agreement in the form of exhibit B (exhibits A and B,
        collectively, the "New Securities Agreements")).

      


      The
        parties wish to enter into an agreement with respect to, among other things,
        (a)
        the contemplated extension of the maturity of the Note, by amendment, renewal,
        replacement, or otherwise, from November 15, 2004 to November 15, 2005, and
        the
        related extension of the Guaranty, (b) the waiver of the Company's obligation
        to
        apply to the repayment of the Note 10% of the net proceeds from the sale
        of
        securities pursuant to the securities purchase agreement dated October 15,
        2003
        among the Company and the Purchasers named therein (the "October 2003 SPA")
        and
        the sale of the New Securities, and (c) the release of certain claims against
        Liraz and its affiliates by the Company and its subsidiaries and controlled
        affiliates.

      


      The
        parties acknowledge and agree that nothing in this agreement shall constitute
        a
        waiver by Liraz of the Company's obligations under section 2 of the
        reimbursement and subrogation agreement dated October 1, 2001 between the
        Company and Liraz with respect to the issuance and sale of the New Securities
        or
        otherwise.

      


      Accordingly,
        the parties agree as follows:

      


      1.    Extension
        of Maturity; Issuance and Registration of Shares.

      


      (a)     The
        Company and Liraz shall cooperate with each other with a view to causing
        the
        Bank, as promptly as practicable, to extend the maturity of the Note from
        November 15, 2004 to November 15, 2005. In that connection, Liraz shall take
        such action, and execute and deliver to the Bank such documents, as the Bank
        may
        reasonably require to insure that the Guaranty remain in effect through November
        15, 2005. As long as Liraz has any liability or obligation to the Bank under
        the
        Guaranty, and, except for the extension of the maturity of the Note contemplated
        by this section, the Company shall not, directly or indirectly, modify, amend,
        or otherwise change the terms of the Note or the Company's or its subsidiaries'
        liabilities or obligations to the Bank, without the prior written consent
        of
        Liraz.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b)     As
        promptly
        as practicable after the execution and delivery by the parties of the documents
        necessary to extend the maturity of the Note and cause the Guaranty to remain
        in
        effect through November 15, 2005 (but in no event later than the earlier
        of
        November 15, 2004 and execution and delivery of all such documents), the
        Company
        shall issue to Liraz 3,942,000 fully paid and nonassessable shares of the
        Company's common stock, free and clear of any adverse claim (the date on
        which
        the Company is required to issue such shares to Liraz, the"Guaranty Extension
        Date").

      


      2.    Repayment
        Obligations

      


      (a)     The
        Company hereby acknowledges and confirms to Liraz that (i) it is required
        to
        prepay the indebtedness under the Note immediately upon the consummation
        of a
        financing by it or any of its direct or indirect subsidiaries, to the extent
        of
        10% of any net proceeds of any such financing in accordance with exhibit
        6.1.1
        of the asset purchase agreement dated August 8, 2001 between the Company
        and
        BluePhoenix Solutions Ltd. ("BluePhoenix") (the "APA"), (ii) it shall not,
        and
        it shall not permit any of its direct or indirect subsidiaries to, consummate
        any such financing, if the related prepayment of the indebtedness under the
        Note
        in accordance with the immediately preceding sentence does not occur
        simultaneously with the consummation of the financing. Notwithstanding the
        foregoing acknowledgment and confirmation, Liraz hereby waives such obligation
        to prepay the indebtedness under the Note as a consequence of the issuances
        of
        securities pursuant to the October 2003 SPA and the sale of the New Securities.
        Nothing in the immediately preceding sentence shall be deemed to constitute
        a
        waiver of any obligation referred to in the first sentence of this section
        2,
        except to the limited extent specifically set forth in the immediately preceding
        sentence.

      


      (b)     As
        soon
        as practicable, but in no event later than the Guaranty Extension Date, the
        Company shall issue to Liraz a number of fully paid and nonassessable shares
        of
        the Company's common stock, free and clear of any adverse claim, equal to
        twice
        the number of dollars of aggregate principal amount of New Securities issued
        on
        or before the Guaranty Extension Date.

      


      3.    Registration   The
        Company shall cause all
        shares required to be issued pursuant to sections 1 and 2 to be registered
        under
        a registration statement on Form S-l to be filed with the Securities and
        Exchange Commission as promptly as practicable, but in no event later than
        December 31, 2004, and shall use its best efforts to cause such registration
        statement to become effective as soon as practicable, and to remain effective
        and current, until (a) all the certificates evidencing the unsold shares
        covered
        by the registration statement cease to bear any restrictive legends, (b)
        no such
        shares are subject to any stop transfer orders, and (c) all the unsold shares
        covered by the registration statement may be sold publicly without registration
        under the Securities Act of 1933 (without limitation as to volume in any
        period)
        (such date, the "Termination Date"). If, on any day after February 15, 2005
        and
        prior to the Termination Date, such registration statement is not effective
        and
        current, the Company shall pay Liraz, upon demand, an amount equal to $250
        for
        each such day. Liraz's entitlement in the preceding sentence is in addition
        to,
        and not in lieu of, any remedy otherwise available to Liraz for breach of
        any
        provision of this agreement. Except as otherwise provided in this section
        3, the
        provisions of the registration rights agreement among the Company and the
        Purchasers named therein dated October 15, 2003 shall be applicable to the
        shares issued pursuant to sections 1 and 2, mutatis
        mutandis.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      4.     Release.  
The
        Company, on its own behalf
        and on behalf of each of its subsidiaries and controlled affiliates, hereby
        releases, acquits, and forever discharges Liraz and its affiliates, agents,
        representatives, officers, directors, and employees, whether in their individual
        or representative capacities, and their successors and assigns from, and
        acknowledge the full accord and satisfaction of, any and all claims, accounts,
        debts, obligations, demands, damages, actions, or suits of whatever nature,
        whether in contract, tort, or otherwise, now accrued or hereafter accruing,
        known or unknown, arising out of any and all transactions and occurrences
        up to
        and including the execution and delivery of this agreement; provided, however,
        that this release shall not release Liraz or any of its affiliates from any
        obligations not in default immediately before the execution and delivery
        of this
        agreement and required to be performed by any of them on or after the date
        of
        this agreement pursuant to the APA, the bill of sale and assignment and
        assumption agreement dated October 1, 2001 among the Company, Level 8
        Technologies, Inc. and BluePhoenix, the sublease dated October 1, 2001 between
        the Company and BluePhoenix, insofar as it relates to the premises in Cary,
        North Carolina, or this agreement.

      


      5.     Representations
        and Agreements.   The Company hereby represents and warrants to
        Liraz that (a) prior to or simultaneously with the execution and delivery
        of
        this agreement, the Company has issued and sold or is issuing and selling
        $782,526.89 aggregate principal amount of New Securities, and has received
        or
        simultaneously with the execution and delivery of this agreement is receiving
        aggregate cash proceeds from such sales equal to such aggregate principal
        amount, (b) the terms and provisions of each of the New Securities (including,
        without limitation, terms relating to maturity, acceleration, and security)
        are
        and shall be identical to the terms and provisions of each of the other New
        Securities, and (c) exhibits A and B are true and complete copies of the
        forms
        of the New Securities Agreements. The Company hereby agrees that (x) it will
        not
        issue or sell New Securities (including the New Securities issued or sold
        on or
        before the execution and delivery of this agreement) in an aggregate principal
        amount greater than $1,796,575.41, (y) the terms and provisions of any New
        Securities issued or sold hereafter shall be the same as those issued and
        sold
        on or before the execution and delivery of this agreement, and (z) the Company
        will not amend or modify any of the New Securities Agreements without the
        prior
        written consent of Liraz.

      


      6.      Remedy.   If
        the Company or any of its subsidiaries fails to perform any of its obligations
        under this agreement or any representation or warranty in section 6 is false
        or
        misleading in any respect on the date of this agreement, and Liraz gives
        the
        Company notice thereof, Liraz may, at its option, by notice given to the
        Company, terminate any or all of its obligations to perform further under
        this
        agreement, without any liability therefor.

      


      7.     Miscellaneous

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (a)      Further
        Assurances.    Each party shall, without further
        consideration, take such action and execute and deliver such documents as
        any
        other party reasonably requests to carry out this agreement.

      


      (b)      Expenses.   
        Each party shall bear its own expenses in connection with the negotiation
        and
        preparation of this agreement and all duties and obligations required to
        be
        performed by it under this agreement; provided, however, that, notwithstanding
        the foregoing, (i) the Company shall reimburse Liraz for its out-of-pocket
        legal
        expenses in connection with the enforcement of its rights under this agreement,
        and (ii) simultaneously with the execution and delivery of this agreement,
        the
        Company is reimbursing Liraz for its out-of-pocket legal expenses in connection
        with the negotiation and preparation of this agreement.

      


      (c)      Governing
        Law.    This agreement shall be governed by and construed in
        accordance with the law of the state of New York, without giving effect to
        its
        conflict of law principles.

      


      (d)     Headings.  
         The section headings of this agreement are for reference purposes only,
        and are to be given no effect in the construction or interpretation of this
        agreement.

      


      (e) 
        Notices.
        All notices and other communications under this agreement shall be in writing
        and may be given by any of the following methods: (i) personal delivery;
        (ii)
        facsimile transmission; (iii) registered or certified mail, postage prepaid,
        return receipt requested; or (iv) overnight delivery service. Notices shall
        be
        sent to the appropriate party at its address or facsimile number given below
        (or
        at such other address or facsimile number for that party as shall be specified
        by notice given under this section 7(e)):

      


      
        	 	
                (y)

              	
                if
                  to the Company, to it at:

              
	 	 	 
	 	 	
                8000
                  Regency Parkway

              
	 	 	
                Cary,
                  North Carolina 27511

              
	 	 	
                Attention:
                  Mr. John Broderick

              
	 	 	 
	 	 	
                With
                  a copy to:

              
	 	 	 
	 	 	
                Brown
                  Simpson partners I, Ltd.

              
	 	 	
                c/o
                  Lowenstein Sandier PC

              
	 	 	
                65
                  Livington Avenue

              
	 	 	
                Roseland,
                  New Jersey 07068

              
	 	 	
                Attention:
                  Steven E. Siesser, Esq.

              
	 	 	 
	 	
                (z)

              	
                if
                  to Liraz, to it at:

              
	 	 	 
	 	 	
                8
                  Maskit Street

              
	 	 	
                P.O.
                  Box 2062

              
	 	 	
                Herzlia
                  46120 Israel

              
	 	 	 
	 	 	
                Attention:
                  Chief Financial Officer

              
	 	 	 
	 	 	
                with
                  a copy to:

              
	 	 	 
	 	 	
                Rabinowitz
                  & Kerson LLP

              
	 	 	
                161
                  Avenue of the Americas

              
	 	 	
                New
                  York, New York 10013

              
	 	 	
                Attention:
                  Edward W. Kerson, Esq.

              


      

      

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

All
        such
        notices and communications shall be deemed received upon (v) actual receipt
        by
        the addressee, (vi) actual delivery to the appropriate address, or (vii)
        in the
        case of a facsimile transmission, upon transmission by the sender and issuance
        by the transmitting machine of a confirmation slip confirming that the number
        of
        pages constituting the notice have been transmitted without error. In the
        case
        of notices sent by facsimile transmission, the sender shall contemporaneously
        mail a copy of the notice to the addressee at the address provided for above.
        However, such mailing shall in no way alter the time at which the facsimile
        notice is deemed received.

      


      (f)     Separability.   
        The invalidity of unenforceability of any provision of this agreement shall
        not
        affect the validity or enforceability of any other provision of this agreement,
        which shall remain in full force and effect.

      


      (g)     Waiver.   
        Any party may waive compliance by the others with any provision of this
        agreement. No waiver of any provision shall be construed as a waiver of any
        other provision. Any waiver must be in writing and signed by the waiving
        party.

      


      (h)      Counterparts.   
        This agreement may be executed in counterparts, each of which shall be deemed
        an
        original, but all of which together shall constitute one and the same
        instrument.

      


      (i)      Arbitration.  Any
        dispute or controversy
        arising under or in connection with this agreement shall be settled exclusively
        by arbitration to be held in the City of New York before a single arbitrator
        in
        accordance with the rules of the American Arbitration Association then in
        effect. As part of his award, the arbitrator shall make a fair allocation
        between the parties of the fee and expenses of the American Arbitration
        Association and the cost of any transcript, taking into account the merits
        of
        the parties' claims and defenses. Judgment may be entered on the arbitrator's
        award in any court having jurisdiction, and the parties irrevocably consent
        to
        the jurisdiction of the New York courts for that purpose. The parties waive
        personal service in connection with any such arbitration; any process or
        other
        papers under this provision may be served outside the state of New York by
        at
        least 10 days' written notice given in accordance with section 5(e). The
        arbitrator may grant injunctive or other relief.

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (j)     Entire
        Agreement.  This
        agreement is a complete statement of all the terms of the arrangements between
        the parties with respect to the matters provided for, supersedes all previous
        agreements and understandings between the parties with respect to those matters,
        and cannot be changed or terminated orally.

      


      


      


      
        	 	
                LEVEL
                  8 SYSTEMS, INC.

                 

                 

              	 
	 	By: 
                	
                /s/
                  John P. Broderick

              	 


      

       

       

       

       

      
        	 	
                LIRAZ
                  SYSTEMS LTD

                 

                 

              	 
	 	By: