Document:

Exhibit 4.3

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.

                                _____________, 2004

[_____________  SHARES]                                     Warrant No. _______

                              LEVEL 8 SYSTEMS, INC.
                             STOCK PURCHASE WARRANT

         THIS IS TO CERTIFY THAT  _____________________  (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"),  [____________]
shares of Common  Stock (as  hereinafter  defined and subject to  adjustment  as
provided  herein),  in whole or in part, at a purchase  price of $0.37 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

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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,  $0.37 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 ________________, 2007.

         "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.

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

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         "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).

         "Purchase Agreement" shall mean the Securities Purchase Agreement dated
as of the date hereof by and between the Company and the Holder.

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

         "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.

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

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2. EXERCISE OF WARRANT

         2.1. Manner of Exercise.  (a) From and after the Closing Date and until
6:30 P.M., New York time, on the  Expiration  Date, the Holder may exercise this
Warrant, for all or any part of the number of shares of Common Stock purchasable
hereunder.

         (b) In order to exercise this Warrant,  in whole or in part, the Holder
shall deliver to the Company at its office at 8000 Regency Parkway,  Cary, North
Carolina 27511, or at the office or agency designated by the Company pursuant to
Section 13, (i) a written  notice of the  Holder's  election  to  exercise  this
Warrant,  which notice shall  specify the number of shares of Common Stock to be
purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such notice
shall be substantially in the form of the subscription form appearing at the end
of this  Warrant  as  Exhibit  A, duly  executed  by the  Holder or its agent or
attorney.  Upon receipt thereof,  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,  together  with cash in lieu of any fraction of a
share,  as  hereinafter  provided.  The stock  certificate  or  certificates  so
delivered  shall  be,  to  the  extent   possible,   in  such   denomination  or
denominations as such Holder shall request in the 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
date the notice,  together with the cash or check or checks and this Warrant, is
received by the Company as described  above and all taxes required to be paid by
the Holder, if any, pursuant to Section 2.2 prior to the issuance of such shares
have been paid (such date, the "Date of  Exercise").  If this Warrant shall have
been  exercised  in part,  the  Company  shall,  at the time of  delivery of the
certificate or certificates  representing Warrant Stock, deliver to the Holder a
new  Warrant  evidencing  the rights of the Holder to purchase  the  unpurchased
shares of Common Stock called for by this  Warrant,  which new Warrant  shall in
all other  respects be identical  with this  Warrant,  or, at the request of the
Holder,  appropriate  notation may be made on this Warrant and the same returned
to the Holder. Notwithstanding any provision herein to the contrary, the Company
shall not be required to register  shares in the name of any Person who acquired
this Warrant (or part hereof) or any Warrant Stock  otherwise than in accordance
with this  Warrant.  If the Company  fails to deliver to the Holder the required
Warrant  Stock in  accordance  with and  pursuant  to this  Section by the third
Trading Day after the Date of  Exercise,  then the Holder will have the right to
rescind such exercise.

         (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.

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         (d)  Payment of the  Warrant  Price  shall be made at the option of the
Holder by (i) wire  transfer  to an  account  designated  by the  Company,  (ii)
certified or official bank check,  and/or (iii) by the Holder's surrender to the
Company of that number of shares of Warrant  Stock (or the right to receive such
number of shares) or shares of Common Stock having an aggregate  Current  Market
Price  equal to or greater  than the Current  Warrant  Price for all shares then
being purchased  (including  those being  surrendered),  or (iv) any combination
thereof, duly endorsed by or accompanied by appropriate  instruments of transfer
duly  executed by the Holder or by the  Holder's  attorney  duly  authorized  in
writing.

         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,  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.

         2.3.  Fractional  Shares.  The Company shall not be required to issue a
fractional  share of  Common  Stock  upon  exercise  of any  Warrant.  As to any
fraction of a share which the Holder of one or more  Warrants,  the rights under
which are  exercised  in the same  transaction,  would  otherwise be entitled to
purchase upon such exercise,  the Company shall pay a cash adjustment in respect
of such  final  fraction  in an  amount  equal to the same  fraction  of (x) the
Current Market Price per share of Common Stock on the date of exercise,  so long
as there  continues to be a public  market for the Common  Stock,  or (y) in the
event there is no public  market for the Common  Stock,  the fair  market  value
thereof as reasonably determined by the Board of Directors of the Company.

         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 all
obligations,  to which it would have been entitled or obligated,  as applicable,
as the Holder under  Sections 8, 9 and 14 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

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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 10, 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 11, together with a written
assignment  of this Warrant  substantially  in the form of Exhibit B 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 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.

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         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;

                  (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

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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:

                  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.

                  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.

                  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.

                  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.

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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.  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
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

                                       31
<PAGE>

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 14.2. 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; or

                  (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.

                                       32
<PAGE>

6.       RESERVATION AND  AUTHORIZATION  OF COMMON STOCK;  REGISTRATION  WITH OR
         APPROVAL OF ANY GOVERNMENTAL AUTHORITY

         From and after the Closing Date, the Company shall at all times reserve
and keep  available  for issue upon the exercise of Warrants  such number of its
authorized  but unissued  shares of Common Stock as will be sufficient to permit
the  exercise in full of all  outstanding  Warrants.  All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable, and not subject to preemptive rights.

         Before  taking any action  which would result in an  adjustment  in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current  Warrant  Price,  the Company  shall obtain all such  authorizations  or
exemptions  thereof,  or consents  thereto,  as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.

         If any shares of Common Stock required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority  or other  governmental  approval or filing under any Federal or state
law  (otherwise  than as  provided  in Section 8) before  such  shares may be so
issued,  the Company will in good faith and as  expeditiously as possible and at
its expense endeavor to cause such shares to be duly registered.

7.       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.

8.       RESTRICTIONS ON TRANSFERRABILITY

         The Warrants and the Warrant Stock shall not be  transferred  except in
accordance with the terms and conditions of the Purchase Agreement.

9.       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.

                                       33
<PAGE>

10.      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;
provided,  in the case of  mutilation,  no  indemnity  shall be required if this
Warrant in identifiable form is surrendered to the Company for cancellation.

11.      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.

12.      FILINGS

         So long as the  Company  has a class of  equity  securities  registered
pursuant to Section 12 of the  Exchange  Act, the Company will 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.

13.      NO RIGHTS AS STOCKHOLDERS; LIMITATIONS OF LIABILITY

         Except as otherwise provided herein, 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.

14.      MISCELLANEOUS

         14.1.  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

                                       34
<PAGE>

any amounts due  pursuant  hereto or in otherwise  enforcing  any of its rights,
powers or remedies hereunder.

         14.2. 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.
                                            214 Carnegie Center, Suite 303
                                            Princeton, New Jersey 08540
                                            Attn:    John P. Broderick

                  With a Copy to:           Lemery Greisler LLC
                                            10 Railroad Place
                                            Saratoga Springs, New York 12866
                                            Attn:    Robert J. May, Jr., Esq.

                  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 6:30 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 6:30  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.

         14.3.  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.

                                       35
<PAGE>

         14.4. Successors and Assigns. Subject to the provisions of Sections 3.1
and 8, 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
Section 8 hereof, holders of Warrant Stock, and shall be enforceable by any such
Holder or holder of Warrant Stock.

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

         14.6 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.

         14.7  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.

         14.8  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.

                                       36
<PAGE>

         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 Financial and Operating Officer

                                      -37-
<PAGE>

                                    EXHIBIT A

                                SUBSCRIPTION FORM

[To be executed only upon exercise of Warrant]

The  undersigned  registered  owner of this Warrant  irrevocably  exercises this
Warrant for the  purchase of ______  Shares of Common  Stock of LEVEL 8 SYSTEMS,
INC., and herewith makes payment therefor, all at the price and on the terms and
conditions  specified  in this Warrant and requests  that  certificates  for the
shares of Common Stock hereby  purchased  (and any  securities or other property
issuable  upon  such  exercise)  be  issued  in the  name  of and  delivered  to
_____________ whose address is ________________________________________  and, if
such shares of Common  Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant,  that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.

                                -------------------------------
                                (Name of Registered Owner)

                                -------------------------------
                                (Signature of Registered Owner)

                                -------------------------------
                                (Street Address)

                                -------------------------------
                                (City) (State) (Zip Code)

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 or  enlargement or any change
                  whatsoever.

                                       38
<PAGE>

                                    EXHIBIT B

                                 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 or enlargement or any
                      change whatsoever.

                                      -39-Exhibit 4.4

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.

                          ______________________, 2004

[ ____________  SHARES ]                                  Warrant No. 2004CN-__

                              LEVEL 8 SYSTEMS, INC.
                             STOCK PURCHASE WARRANT

         THIS IS TO CERTIFY THAT ____________________________ (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"),
___________________  shares of Common Stock (as hereinafter  defined and subject
to adjustment as provided  herein),  in whole or in part, at a purchase price of
$0.37 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 Date, other than Warrant Stock, or
shares of Common Stock  issuable upon  conversion of the Notes dated the Closing
Date issued to the Holder and other  holders of  warrants  issued on the Closing
Date.

         "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.

                                       40
<PAGE>

         "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,  $0.37 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 May 15, 2007.

                                       41
<PAGE>

         "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.

         "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).

         "Purchase Agreement" shall mean the Securities Purchase Agreement dated
as of the date hereof by and between the Company and the Holder.

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

         "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.

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

                                       42
<PAGE>

2. EXERCISE OF WARRANT

         2.1. Manner of Exercise.  (a) From and after the Closing Date and until
6:30 P.M., New York time, on the  Expiration  Date, the Holder may exercise this
Warrant, for all or any part of the number of shares of Common Stock purchasable
hereunder.

         (b) In order to exercise this Warrant,  in whole or in part, the Holder
shall deliver to the Company at its office at 8000 Regency Parkway,  Cary, North
Carolina 27511, or at the office or agency designated by the Company pursuant to
Section 13, (i) a written  notice of the  Holder's  election  to  exercise  this
Warrant,  which notice shall  specify the number of shares of Common Stock to be
purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such notice
shall be substantially in the form of the subscription form appearing at the end
of this  Warrant  as  Exhibit  A, duly  executed  by the  Holder or its agent or
attorney.  Upon receipt thereof,  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,  together  with cash in lieu of any fraction of a
share,  as  hereinafter  provided.  The stock  certificate  or  certificates  so
delivered  shall  be,  to  the  extent   possible,   in  such   denomination  or
denominations as such Holder shall request in the 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
date the notice,  together with the cash or check or checks and this Warrant, is
received by the Company as described  above and all taxes required to be paid by
the Holder, if any, pursuant to Section 2.2 prior to the issuance of such shares
have been paid (such date, the "Date of  Exercise").  If this Warrant shall have
been  exercised  in part,  the  Company  shall,  at the time of  delivery of the
certificate or certificates  representing Warrant Stock, deliver to the Holder a
new  Warrant  evidencing  the rights of the Holder to purchase  the  unpurchased
shares of Common Stock called for by this  Warrant,  which new Warrant  shall in
all other  respects be identical  with this  Warrant,  or, at the request of the
Holder,  appropriate  notation may be made on this Warrant and the same returned
to the Holder. Notwithstanding any provision herein to the contrary, the Company
shall not be required to register  shares in the name of any Person who acquired
this Warrant (or part hereof) or any Warrant Stock  otherwise than in accordance
with this  Warrant.  If the Company  fails to deliver to the Holder the required
Warrant  Stock in  accordance  with and  pursuant  to this  Section by the third
Trading Day after the Date of  Exercise,  then the Holder will have the right to
rescind such exercise.

         (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.

                                       43
<PAGE>

         (d)  Payment of the  Warrant  Price  shall be made at the option of the
Holder by (i) wire  transfer  to an  account  designated  by the  Company,  (ii)
certified or official bank check,  and/or (iii) by the Holder's surrender to the
Company of that number of shares of Warrant  Stock (or the right to receive such
number of shares) or shares of Common Stock having an aggregate  Current  Market
Price  equal to or greater  than the Current  Warrant  Price for all shares then
being purchased  (including  those being  surrendered),  or (iv) any combination
thereof, duly endorsed by or accompanied by appropriate  instruments of transfer
duly  executed by the Holder or by the  Holder's  attorney  duly  authorized  in
writing.

         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,  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.

         2.3.  Fractional  Shares.  The Company shall not be required to issue a
fractional  share of  Common  Stock  upon  exercise  of any  Warrant.  As to any
fraction of a share which the Holder of one or more  Warrants,  the rights under
which are  exercised  in the same  transaction,  would  otherwise be entitled to
purchase upon such exercise,  the Company shall pay a cash adjustment in respect
of such  final  fraction  in an  amount  equal to the same  fraction  of (x) the
Current Market Price per share of Common Stock on the date of exercise,  so long
as there  continues to be a public  market for the Common  Stock,  or (y) in the
event there is no public  market for the Common  Stock,  the fair  market  value
thereof as reasonably determined by the Board of Directors of the Company.

         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 all
obligations,  to which it would have been entitled or obligated,  as applicable,
as the Holder under  Sections 8, 9 and 14 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

                                       44
<PAGE>

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

3.5.  Transfer.  Subject to compliance with Section 10, 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 11, together with a written
assignment  of this Warrant  substantially  in the form of Exhibit B 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.

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

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

3.8.  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.

                                       45
<PAGE>

         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:

         (d) cash;

         (e) 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

         (f) 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

                                       46
<PAGE>

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.

         (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.

                                       47
<PAGE>

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.  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
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

         5.3.  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

                                       48
<PAGE>

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 14.2. 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.

5.4. 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; or

         (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.

                                       49
<PAGE>

6.       RESERVATION AND  AUTHORIZATION  OF COMMON STOCK;  REGISTRATION  WITH OR
         APPROVAL OF ANY GOVERNMENTAL AUTHORITY

         From and after the Closing Date, the Company shall at all times reserve
and keep  available  for issue upon the exercise of Warrants  such number of its
authorized  but unissued  shares of Common Stock as will be sufficient to permit
the  exercise in full of all  outstanding  Warrants.  All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable, and not subject to preemptive rights.

         Before  taking any action  which would result in an  adjustment  in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current  Warrant  Price,  the Company  shall obtain all such  authorizations  or
exemptions  thereof,  or consents  thereto,  as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.

         If any shares of Common Stock required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority  or other  governmental  approval or filing under any Federal or state
law  (otherwise  than as  provided  in Section 8) before  such  shares may be so
issued,  the Company will in good faith and as  expeditiously as possible and at
its expense endeavor to cause such shares to be duly registered.

7.       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.

8.       RESTRICTIONS ON TRANSFERRABILITY

         The Warrants and the Warrant Stock shall not be  transferred  except in
accordance with the terms and conditions of the Purchase Agreement.

9.       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.

                                       50
<PAGE>

10.      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;
provided,  in the case of  mutilation,  no  indemnity  shall be required if this
Warrant in identifiable form is surrendered to the Company for cancellation.

11.      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.

12.      FILINGS

         So long as the  Company  has a class of  equity  securities  registered
pursuant to Section 12 of the  Exchange  Act, the Company will 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.

13.      NO RIGHTS AS STOCKHOLDERS; LIMITATIONS OF LIABILITY

         Except as otherwise provided herein, 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.

14.      MISCELLANEOUS

         14.1.  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

                                       51
<PAGE>

any amounts due  pursuant  hereto or in otherwise  enforcing  any of its rights,
powers or remedies hereunder.

         14.2. 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.
                                            214 Carnegie Center, Suite 303
                                            Princeton, New Jersey 08540
                                            Attn:    John P. Broderick

                  With a Copy to:           Lemery Greisler LLC
                                            10 Railroad Place
                                            Saratoga Springs, New York 12866
                                            Attn:    Robert J. May, Jr., Esq.

                  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 6:30 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 6:30  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.

         14.3.  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.

                                       52
<PAGE>

         14.4. Successors and Assigns. Subject to the provisions of Sections 3.1
and 8, 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
Section 8 hereof, holders of Warrant Stock, and shall be enforceable by any such
Holder or holder of Warrant Stock.

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

         14.6 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.

         14.7  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.

         14.8  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.

                                       53
<PAGE>

      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 Financial and Operating Officer

                                      -54-
<PAGE>

                                    EXHIBIT A

                                SUBSCRIPTION FORM

[To be executed only upon exercise of Warrant]

The  undersigned  registered  owner of this Warrant  irrevocably  exercises this
Warrant for the  purchase of ______  Shares of Common  Stock of LEVEL 8 SYSTEMS,
INC., and herewith makes payment therefor, all at the price and on the terms and
conditions  specified  in this Warrant and requests  that  certificates  for the
shares of Common Stock hereby  purchased  (and any  securities or other property
issuable  upon  such  exercise)  be  issued  in the  name  of and  delivered  to
_____________ whose address is ________________________________________  and, if
such shares of Common  Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant,  that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.

                           -------------------------------
                           (Name of Registered Owner)

                           -------------------------------
                           (Signature of Registered Owner)

                           -------------------------------
                           (Street Address)

                           -------------------------------
                           (City) (State) (Zip Code)

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 or  enlargement or any change
                  whatsoever.

                                      -55-
<PAGE>

                                    EXHIBIT B

                                 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 or enlargement or any
                      change whatsoever.

                                      -56-

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