Document:

<PAGE>

                                                                   EXHIBIT 4.12

                         REGISTRATION RIGHTS AGREEMENT
                         -----------------------------

          REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
                                               ---------
_______________, 2000, by and among Level 8 Systems, Inc., a Delaware
corporation ("Company"), and the parties who have executed this Agreement and
              -------
whose names appear on Schedule I hereto (each party listed on Schedule I hereto
is sometimes referred to herein as "Holder" and all such persons are sometimes
                                    ------
collectively referred to as the "Holders.")
                                 -------

                             W I T N E S S E T H:
                             -------------------

          WHEREAS, pursuant to the terms of that certain Exchange and Release
Agreement dated as of even date herewith (the "Exchange Agreement"), by and
                                               ------------------
among the Company and the Holder, certain debt of the Holder will be converted
into shares of Common Stock of Company, $0.001 par value per share (the
"Registrable Securities"); and
 ----------------------

          WHEREAS, the Company has agreed to grant to the Holders certain
registration rights; and

          WHEREAS, the Company and the Holders desire to define such
registration rights on the terms and subject to the conditions herein set forth.

          NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:

     1.   Definitions. Unless otherwise defined herein, the following terms
          -----------
shall have the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):

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

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

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

          "Effective Time" shall mean the time an agreement of merger is filed
           --------------
with the California Secretary of State pursuant to the terms of that certain
Agreement and Plan of Merger dated October 2, 2000, entered into by and among
the Company, Level 8 Technologies Acquisition Corp. and StarQuest Software,
Inc.;
<PAGE>

          "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.

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

          "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 from time to time.

          2.   Required Registration. As soon as practicable following the
               ---------------------
Effective Time, the Company shall prepare and file with the Commission a
Registration Statement (the "Registration Statement") which shall cover all
                             ----------------------
Registrable Securities for an offering to be made on a continuous basis pursuant
to a "Shelf" registration statement under Rule 415. The Registration Statement
shall be on Form S-3 or any successor form (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith). The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act on or prior to the
90/th/ day following the Effective Time.

          3.   Incidental Registration. If Company at any time after the
               -----------------------
Effective Time proposes to file on its behalf and/or on behalf of any of its
security holders (the "demanding security holders") a registration statement
                       --------------------------
under the Securities Act on any form (other than a registration statement on
Form S-4 or S-8 or any successor form for securities to be offered in a
transaction of the type referred to in Rule 145 under the Securities Act or to
employees of Company pursuant to any employee benefit plan, respectively) for
the general registration of securities (a "Registration Statement"), it will
                                           ----------------------
give written notice to all Holders at least twenty (20) Business Days prior to
the initial filing with the Commission of such Registration Statement, which
notice shall set forth the intended method of disposition of the securities
proposed to be registered by Company. The notice shall offer to include in such
filing the aggregate number of shares of Registrable Securities as such Holders
may request.

          Each Holder desiring to have Registrable Securities registered under
this Section 3 shall advise Company in writing within ten (10) Business Days
after the date of receipt of such offer from Company, setting forth the amount
of such Registrable Securities for which registration is requested. Company
shall thereupon include in such filing the number of shares of Registrable
Securities for which registration is so requested, subject to the next sentence,
and shall use its best efforts to effect registration under the Securities Act
of such shares. If the managing underwriter of a proposed public offering shall
advise Company in writing that, in its opinion, the distribution of the
Registrable Securities requested to be included in the registration concurrently
with the securities being registered by Company or such demanding security
holder would materially and adversely affect the distribution of such securities
by Company or such demanding security holder, then all selling security holders
(including the demanding

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security holder who initially requested such registration, but not the Company)
shall reduce the amount of securities each intended to be distributed through
such offering on a pro rata basis (which reduced amount may be zero). Except as
otherwise provided in Section 5, all expenses of such registration shall be
borne by Company.

     4.   Registration Procedures. If Company is required by the provisions
          -----------------------
of Section 2 or 3 to use its best efforts to effect the registration of any of
its securities under the Securities Act, Company will, as expeditiously as
possible:

            (a) prepare and file with the Commission a Registration Statement
with respect to such securities and use its best efforts to cause such
Registration Statement to become and remain effective for a period of time
required for the disposition of such securities by the Holders thereof, but not
to exceed one hundred and eighty (180) days;

            (b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such Registration Statement until
the earlier of such time as all of such securities have been disposed of in a
public offering or the expiration of one hundred and eighty (180) days;

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

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

            (e) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to Section 2, on the date that such shares of
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration or, if such Registrable Securities are not being sold through
underwriters, on the date that the Registration Statement with respect to such
shares of Registrable Securities becomes effective, (i) an opinion, dated such
date, of the independent counsel representing Company for the purposes of such
registration, addressed to the underwriters, if any, and if such Registrable
Securities are not being sold through underwriters, then to the Holders

                                       3
<PAGE>

making such request, in customary form and covering matters of the type
customarily covered in such legal opinions; and (ii) a comfort letter dated such
date, from the independent certified public accountants of Company, addressed to
the underwriters, if any, and if such Registrable Securities are not being sold
through underwriters, then to the Holder making such request and, if such
accountants refuse to deliver such letter to such Holder, then to Company, in a
customary form and covering matters of the type customarily covered by such
comfort letters and as the underwriters or such Holder shall reasonably request;

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

            (g) notify the Holders as promptly as practicable upon the
occurrence of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, contains an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and as promptly as possible, prepare, file and
furnish to each Holder a reasonable number of copies of a supplement or an
amendment to such prospectus as may be necessary so that such prospectus does
not contain an untrue statement of material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; provided, however,
                                                            --------  -------
that the Company may delay preparing, filing and distributing any such
supplement or amendment if the Board of Directors of the Company determines in
good faith that such supplement or amendment could, in its reasonable judgment,
(i) interfere with or adversely affect the negotiation or completion of a
transaction that is being contemplated by the Company or (ii) involve initial or
continuing disclosure obligations that are not in the best interests of the
Company's stockholders at the time; provided, further, that (w) the Company will
                                    --------  -------
give notice (a "Standstill Notice") of any such delay prior to such delay, (x)
                -----------------
such delay shall not extend for a period of more than thirty (30) days without
the written consent of the Holders, (y) the Company may utilize such delay no
more than two (2) times or for an aggregate of more than sixty (60) days in any
period of two hundred and forty (240) consecutive days and (z) the period of
effectiveness of the Registration Statement provided for herein shall be
extended by the number of days from and including the date of the giving of a
Standstill Notice to and including the date when the Company shall have
delivered to the Holders copies of such supplement or amendment pursuant to this
Section 4(g);

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

            (i) permit each Holder to review a Registration Statement covering
Registrable Securities and all amendments and supplements thereto a reasonable
period of time prior to the filing thereof with the Commission; and

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

        It shall be a condition precedent to the obligation of Company to take
any action pursuant to this Agreement in respect of the securities which are to
be registered at the request of any Holder that such Holder shall furnish to
Company such information regarding the securities held by such Holder and the
intended method of disposition thereof as Company shall reasonably request and
as shall be required in connection with the action taken by Company.

        5.  Expenses. All expenses incident to the Company's compliance with
            --------
the terms of this Agreement, including, without limitation, all registration and
filing fees (including all expenses incident to filing with the NASD), printing
expenses, fees and disbursements of counsel for Company, the reasonable fees and
expenses of one counsel for the selling security Holders (selected by those
holding a majority of the shares being registered), expenses of any special
audits incident to or required by any such registration and expenses of
complying with the securities or blue sky laws of any jurisdiction pursuant to
Section 4(d), shall be paid by Company, except that Company shall not be liable
for any fees, discounts or commissions to any underwriter or any fees or
disbursements of counsel for any underwriter in respect of the securities sold
by such Holder.

        6.  Indemnification and Contribution.
            ---------------------------------

               (a) In the event of any registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, Company shall
indemnify and hold harmless the Holder of such Registrable Securities, such
Holder's directors and officers, and each other person (including each
underwriter) who participated in the offering of such Registrable Securities and
each other person, if any, who controls such Holder or such participating person
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such Holder or any such director or
officer or participating person or controlling person may become subject under
the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any Registration Statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse such Holder or such director, officer or participating
person or controlling person for any legal or any other expenses reasonably
incurred by such Holder or such director, officer or participating person or
controlling person in

                                       5
<PAGE>

connection with investigating or defending any such loss, claim, damage,
liability or action. Notwithstanding anything to the contrary set forth in this
Section 6(a), Company shall not be liable to indemnify any person in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon (1) any actual or alleged untrue statement or actual or alleged
omission either (x) made in such Registration Statement, preliminary prospectus,
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to Company by such Holder specifically for use
therein or so furnished for such purposes by any underwriter or (y) that had
been corrected in a preliminary prospectus, prospectus supplement or amendment
which had been furnished to such Holder prior to any distribution of the
document alleged to contain the untrue statement or omission to offerees or
purchasers, (2) any offer or sale of Registrable Securities after receipt by
such Holder of a Standstill Notice under Section 4(g) and prior to the delivery
of the prospectus supplement or amendment contemplated by Section 4(g), or (3)
Holder's failure to comply with the prospectus delivery requirements under the
Securities Act or failure to distribute its Registrable Securities in a manner
consistent with its intended plan of distribution as provided to Company and
disclosed in the Registration Statement. Notwithstanding the foregoing, Company
shall not be required to indemnify any person for amounts paid in settlement of
any claim without the prior written consent of Company, which consent shall not
be unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Holder or such
director, officer or participating person or controlling person, and shall
survive the transfer of such securities by such Holder.

               (b) Each Holder, by acceptance hereof, agrees to indemnify and
hold harmless Company, its directors and officers and each person who
participated in such offering and each other person, if any, who controls
Company within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which Company or any such director
or officer or any such person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
information in writing provided to Company by such Holder specifically for use
in the following documents and contained, on the effective date thereof, in any
Registration Statement under which securities were registered under the
Securities Act at the request of such Holder, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto, (ii)
such Holder's offer or sale of Registrable Securities after receipt by such
Holder of a Standstill Notice under Section 4(g) and prior to the delivery of
the prospectus supplement or amendment contemplated by Section 4(g), (iii) such
Holder's failure to comply with the prospectus delivery requirements under the
Securities Act or failure to distribute its Registrable Securities in a manner
consistent with its intended plan of distribution as provided to Company and
disclosed in the Registration Statement, (iv) such Holder's failure to comply
with Regulation M under the Exchange Act, or (v) such Holder's failure to comply
with any rules and regulations applicable because such Holder is, or is an
Affiliate (as defined in Section 9.3(a) of the Agreement and Plan of Merger) of,
a registered broker-dealer. Notwithstanding the provisions of this paragraph (b)
or paragraph (c) below, no Holder shall be required to indemnify any person
pursuant to this Section 6 or to contribute pursuant to paragraph (c)

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<PAGE>

below in an amount in excess of the amount of the aggregate net proceeds
received by such Holder in connection with any such registration under the
Securities Act.

               (c) If the indemnification provided for in this Section 6 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.

        The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

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

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

               (b) Company shall not be obligated to register the Registrable
Securities of any Holder pursuant to Section 2 if Company has had a registration
statement, under which such Holder had a right to have its Registrable
Securities included pursuant to Section 3, declared effective; and

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<PAGE>

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

        8.  Holder Agreements
            -----------------

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

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

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

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

               (e) Each Holder agrees that upon receipt of a Standstill Notice
pursuant to Section 4(g), such Holder shall immediately discontinue offers and
sales of Registrable Securities registered under the Securities Act pursuant to
any Registration Statements covering such Registrable Securities until such
Holder receives copies of the supplemented or amended prospectus contemplated by
Section 4(g) or notice from the Company that no such supplement or amendment is
required.

        9.  Miscellaneous.
            -------------

               (a) No Inconsistent Agreements. Except as set forth on Schedule A
                   --------------------------                         ----------
hereto, Company has not previously entered into any agreement with respect to
any of its securities granting any registration rights to any person.

                                       8
<PAGE>

               (b) Remedies. A Holder, in addition to being entitled to exercise
                   --------
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
of this Agreement or where any provision hereof is validly asserted as a
defense, the successful party shall be entitled to recover reasonable attorneys'
fees in addition to any other available remedy.

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

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

               (i)  If to a Holder, at the last known address appearing on the
     books of Company maintained for such purpose.

               (ii) If to Company, at

                        Level 8 Systems, Inc.
                        8000 Regency Parkway
                        Cary, North Carolina  27511
                        Attention: Dennis McKinnie
                        Telecopy Number:(919) 461-2690

or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback or three (3) Business Days after the same shall have been deposited
in the United States mail.

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

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

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<PAGE>

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

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

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

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

               (h)  Governing Law; Jury Waiver.  This Agreement shall be
                    --------------------------
governed by, construed and enforced in accordance with the laws of the State of
California without giving effect to the conflict of laws provisions thereof. The
parties hereto waive all right to trial by jury in any action or proceeding to
enforce or defend any rights hereunder.

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

               (j)  Entire Agreement.  This Agreement, together with the
                    ----------------
Exchange Agreement and the other transaction documents, represents the complete
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       10
<PAGE>

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

                         LEVEL 8 SYSTEMS, INC.

                         By:_______________________________
                            Dennis McKinnie
                            Senior Vice President, Chief Legal and
                            Administrative Officer, Corporate Secretary

                         HOLDERS:

                         [COUNTERPART SIGNATURE PAGES FOLLOW]

                                       11
<PAGE>

                         HOLDERS:

                         WHITNEY PARTNERS, LP

                         By:_______________________________
                            Name:
                            Title:

                         SIERRA VENTURES IV, LP

                         By:_______________________________
                            Name:
                            Title:

                         SIERRA VENTURES IV INTERNATIONAL, LP

                         By:_______________________________
                            Name:
                            Title:

                         PAUL RAMPEL

                         By:_______________________________

                         BRYCO INVESTMENTS

                         By:_______________________________
                            Name:
                            Title:

                                       12
<PAGE>

                                  SCHEDULE I
                                  ----------

Holders:
-------

Whitney Partners, LP
c/o Global Capital
4 Maritime Plaza
San Francisco, California 94111
Attn: Greg Wettersten

Sierra Ventures IV, LP
3000 Sand Hill Road
Menlo Park, California 94025
Attn: Jeff Drazan

Sierra Ventures International IV, LP
3000 Sand Hill Road
Menlo Park, California 94025
Attn: Jeff Drazan

Paul Rampel
571 Woodmont Avenue
Berkeley, California 94708

Bryco Investments
c/o Global Capital
4 Maritime Plaza
San Francisco, California 94111
Attn: Greg Wettersten
<PAGE>

                                  SCHEDULE A
                                  ----------

Registration Rights.
-------------------

Agreement related to Agreement and Plan of Merger.
     In connection with the Agreement and Plan of Merger dated October 2, 2000,
     by and among the Company, Level 8 Technologies Acquisition Corp. and
     StarQuest Software, Inc. ("StarQuest"), the Company entered into a
     Registration Rights Agreement pursuant to which certain shareholders of
     StarQuest who received shares of Company Common Stock and warrants to
     purchase shares of Company Common Stock have the right to the registration
     of such shares.  This agreement requires the registration of 500,000 shares
     of common stock and 250,000 shares of common stock underlying the warrants.
     The Company is required to prepare and file a registration statement with
     the Commission on or prior to the 225/th/ day following the Effective Time.
     The Company is required to use its best efforts to cause the Registration
     Statement to be declared effective under the Securities Act as promptly as
     possible after the filing thereof.  The Agreement also provides the holders
     of such shares and warrants to participate in other registration statements
     filed by the Company with the exception of any registration statement filed
     by the Company pursuant to the terms of this Registration Rights Agreement.

Agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated.
     In connection with the sale of 1,000,000 shares of Level 8 Common Stock to
     Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
     pursuant to a Purchase Agreement dated July 31, 2000 (the "Merrill Lynch
     Purchase Agreement"), Level 8 and Merrill Lynch entered into a
     "Registration Rights Agreement."  Pursuant to that registration rights
     agreement, after October 30, 2000 the holders of at least 30% of the shares
     issued pursuant to the Merrill Lynch Purchase Agreement will have the right
     to request registration of those shares, and any of the other shares issued
     pursuant to the Merrill Lynch Purchase Agreement whose holders elect to
     participate.  Those requesting the registration may specify the intended
     method or methods of disposition.  The registration rights agreement also
     provides the holders of shares issued pursuant to the Merrill Lynch
     Purchase Agreement to participate in other registration statements filed by
     Level 8.

Agreement related to issuance of Series B Preferred Stock.
     In connection with the issuance of its Series B Preferred Stock and certain
     warrants in July of 2000, Level 8 entered into a "Registration Rights
     Agreement" dated July 19, 2000 among Level 8 and certain investors,
     including Brown Simpson Strategic Growth Funds, and Seneca Capital.  This
     agreement requires the registration of the 1,197,007 shares of Common Stock
     issuable upon conversion of the Series B Preferred Stock, and the 1,047,382
     shares of Common Stock issuable upon exercise of the warrants.

                                      A-1
<PAGE>

     Level 8 met its obligation to file a  "shelf" registration for sale on a
     delayed or continuous basis, with the S-1 Registration Statement,
     subsequent amendment and prospectus dated September 22, 2000. The
     registration rights further provide the Series B Preferred Stock holders
     with the right, on two occasions, to have the prospectus associated with
     the shelf registration amended to provide for underwritten offerings.

Agreement related to issuance of Series A Preferred Stock.
     In connection with the issuance of its Series A Preferred Stock and certain
     warrants in June of 1999, Level 8 entered into a "Registration Rights
     Agreement" dated June 28, 1999 among Level 8 and certain investors,
     including Brown Simpson Strategic Growth Funds, Advanced Systems Europe
     B.V. and Seneca Capital.  This Registration Rights Agreement was filed with
     the SEC as Exhibit 10.3 to Level 8's Current Report on Form 8-K filed July
     23, 1999.  The agreement required the registration of the 2,100,000 shares
     of Common Stock issuable upon conversion of the Series A Preferred Stock,
     and the 2,100,000 shares of Common Stock issuable upon exercise of the
     warrants.

     Level 8 met the registration obligations of this agreement when the
     registration statement on Form S-3, filed on August 8, 1999, became
     effective, registering resales of the 4,200,000 shares.  As long as that
     registration statement remains effective, the requirements of this
     registration rights agreement remain satisfied.

Agreement with Welsh, Carson, Anderson & Stowe related to the purchase of Seer.
     Level 8 purchased a majority interest in Seer Technologies, Inc. with an
     "Agreement" dated November 23, 1998.  The Agreement is filed with the SEC
     as Exhibit B to Level 8's Schedule on Form SC 13-D, filed January 11, 1999,
     and is also filed Exhibit 2.1 to Seer Technologies, Inc.'s Annual Report on
     Form 10-K405, filed January 12, 1999.  The agreement was among Level 8 and
     twenty parties, all of whom were related to the Welsh, Carson, Anderson &
     Stowe investment firm (the "WCAS Parties").  Under the agreement the WCAS
     Parties received 1,000,000 shares of Level 8 stock and warrants to purchase
     up to 250,000 additional shares at $12.00 per share.  The agreement
     incorporates a voting agreement binding the WCAS Parties.

     The Agreement provides the WCAS Parties with piggyback registration rights
     in any underwritten public offering which includes shares already
     outstanding (Agreement Section 9.3.4).  The rights apply "if, at any time
     before [January 1, 2001], Level 8 determines to file a registration
     statement."  Any cutbacks at the advice of the underwriter are to be pro
     rata equally among all participating shareholders.  This would appear to
     apply even in the event of another shareholder exercising a demand
     registration, as "[t]he rights with respect to such offering by any WCAS
     Party whose shares are included shall not be less, and the obligations with
     respect to such offering by any such WCAS Party shall not be

                                      A-2
<PAGE>

     greater, than those of any other shareholder whose shares are included in
     such offering."

Agreements related to Level 8's purchase of Momentum Software Corporation.
     Level 8 purchased Momentum Software Corporation in February of 1998,
     pursuant to an Agreement and Plan of Reorganization by and Among Level 8
     Systems, Inc., Middleware Acquisition Corporation, Momentum Software
     Corporation and Robert Brill, Bruns Grayson and Hubertus Vandervoort, as
     Trustees of the Momentum Liquidating Trust, on Behalf of the
     Securityholders of Momentum Software Corporation (the "Momentum Purchase
     Agreement"), filed with the SEC as Exhibit 10.42 to Level 8's Annual Report
     on Form 10-K, filed March 31, 1998.  The Momentum Purchase Agreement
     provides for two associated Registration Rights Agreements.

     One of the two agreements relates to 36,000 shares of Level 8 Common Stock
     issued to former Momentum employees in exchange for Momentum Series E
     Preferred Shares, and 50,000 shares of Level 8 Common Stock issued as
     consideration for some of the employees agreeing to continue on as
     employees of Level 8 (the "Momentum Employees' Registration Agreement")

     The other agreement relates to 575,000 shares of Level 8 Common Stock,
     200,000 additional shares underlying warrants and 250,000 further
     additional shares which could be issued in exchange for a $3,000,000
     promissory note, all issued to the stockholders and management of Momentum.
     (the "Momentum Stockholders' Registration Agreement")

     The Momentum Employees' Registration Agreement states that Level 8 will
     file a registration statement for the 86,000 shares by September 15, 1998.
     Section 2(d) states that the Holders of  a majority in interest may select
     the managing underwriters, if any, for any such registration, subject to
     the approval of the Company, which shall not be unreasonably withheld.  No
     such registration was ever filed. The registration rights are not
     transferable, and extinguish if the shares are sold, pursuant to Rule 144
     or otherwise. While there is no particular termination date for the
     agreement, the Company need only keep the demand registration effective
     until "the date on which all Holders can sell all Registrable Securities
     covered by such Demand Registration Statement pursuant to Rule 144 of the
     Securities Act without restriction under Rule 144(e) thereof."  Because the
     shares have been outstanding for two years, it is likely that all or most
     are eligible for transfer without registration pursuant to Rule 144.

     The Momentum Stockholders' Registration Agreement provides for one demand
     registration, to occur not earlier than March 2000 (two years from the date
     of the agreement).  The agreement provides that the Company is to file a
     registration statement within 60 days of the demand from Holders of a
     majority in interest of the "Registrable Securities."  The Holders have the
     right to select the managing

                                      A-3
<PAGE>

     underwriters, if any, for the demand registration, subject to the approval
     of the Company, not to be unreasonably withheld. All of the Registrable
     Securities (being 1,025,000 shares of Common Stock (which includes shares
     initially issued, underlying the warrant, and issuable in return for the
     promissory note)) are to be registered, unless a Holder opts out. The
     Company need only keep the demand registration effective until "the date on
     which all Holders can sell all Registrable Securities covered by such
     Demand Registration Statement pursuant to Rule 144 of the Securities Act
     without restriction under Rule 144(e) thereof." Because the shares have
     been outstanding for two years, it is likely that all or most are eligible
     for transfer without registration pursuant to Rule 144.

     Under the Momentum Stockholders' Registration Agreement, the Holders are
     also given piggyback registration rights.  These rights are explicitly
     secondary to earlier granted registration rights, but are to be apportioned
     pro rata among all other selling security Holders. The registration rights
     are not transferable, and extinguish if the shares are sold pursuant to
     Rule 144 or otherwise.

Hampshire Securities Warrants
     Hampshire Securities Corporation served as the lead underwriter for the
     Company's initial public offering in June of 1995 and for a subsequent
     public offering in December of 1996.  In the underwriting agreements for
     each of the two offerings Hampshire got a warrant to purchase Level 8's
     Common Stock.  Both of the warrants included registration rights.

     The first warrant (related to the IPO) was for 140,000 shares of Common
     Stock at $7.425 per share, exerciseable from July 28, 1996 to July 27,
     2000.  A preliminary form of the warrant was filed with the SEC as Exhibit
     10.27 to the Company's Registration Statement on Form S-1, filed June 14,
     1995.  The warrant provided for two demand registrations and piggyback
     registrations during the period July 1996 to July 2001.  The Company filed
     a registration statement on Form S-3, filed March 7, 1997 and assigned File
     No. 333-22979, registering the 140,000 underlying shares.

     The second warrant (related to the December 1996 public offering) was for
     100,000 shares of Common Stock (the final version may have been for
     110,000) at $14.85 per share, exercisable from December 17, 1997 to
     December 17, 2001.  (These terms are pursuant to the form of warrant filed
     as Exhibit 10.45 to the Company's Registration Statement on Form S-1, filed
     November 4, 1996.)  The warrant grants Hampshire a single demand
     registration and piggyback registration rights, both during the period from
     December 17, 1997 to December 17, 2002.  The rights are terminated once the
     warrants or underlying shares are sold pursuant to a registration statement
     or Rule 144, but there does not appear to be a provision that Rule 144
     eligibility (as opposed to sale) terminated or mooted the registration
     rights.  The agreement provides that the Company cannot grant any
     registration rights "prior to the rights of" Hampshire.   With regard to
     piggyback rights, the

                                      A-4
<PAGE>

     agreement more particularly provides that other piggy-back rights are only
     allowable if the [Hampshire securities] requested to be included in such
     registration are included on a pro rata basis as to such other persons.
     Thus, it appears that the Company could grant piggyback rights equal to
     Hampshire's, to be cut back on a pro rata basis if the underwriter advises
     a cut back.

     A prospectus Supplement, filed with the SEC on Form 424B3, filed December
     16, 1999, incorporated 246,473 shares into a previously filed Registration
     Statement on Form S-3.  Those shares were held by various warrant and
     Common Stock holders who had piggyback rights.  The shares included by the
     supplement are in the names of approximately 40 individuals and businesses.
     Most of these shares are shares which were underlying the warrants issued
     to Hampshire, including shares from the warrant associated with the initial
     public offering which had previously been registered.  There are only about
     400 shares underlying the warrants distributed to Hampshire which are not
     now registered.

Liraz Registration Rights Agreement
     The Registration Rights Agreement dated June 13, 1995 by and between Across
     Data Systems, Inc. (predecessor to Level 8) and Liraz Systems Ltd.
     ("Liraz"), filed with the SEC as Exhibit 10.24 to Level 8's Registration
     Statement on Form S-1 filed June 14, 1995, applies to all shares of Level 8
     Common Stock held by Liraz.  It grants to Liraz two demand registrations at
     any time after 18 months after the Company's initial public offering (that
     IPO being pursuant to the June 14, 1995 Registration Statement).  Liraz was
     also granted piggyback registration rights (with 30 days to respond to
     notice).  Liraz is subject to pro-rata reductions with all other
     stockholders.  The agreement contains the following stand-off provision:
     "During the duration of the period specified by the Company and an
     underwriter of Common Shares of other securities of the Company following
     the effective date of the registration statement", Liraz shall not directly
     or indirectly sell or transfer any securities of Level 8 except for any of
     its shares included in the offering.

                                      A-5<PAGE>

                                                                    Exhibit 10.6
                                                                    ------------

                             EMPLOYMENT AGREEMENT
                             --------------------

     This Employment Agreement (the "Agreement") is made and entered into this
____day of March, 2001, by and between LEVEL 8 SYSTEMS, INC., a Delaware
corporation (the "Company"), and Anthony Pizi, a resident of the State of New
Jersey (the "Employee").

     In consideration of the mutual covenants, promises and conditions set forth
in this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.   Employment. The Company hereby employs Employee and Employee hereby accepts
     ----------
     such employment upon the terms and conditions set forth in this Agreement.

2.   Duties of Employee. Employee's title will be Chief Executive Officer and
     ------------------
     Chief Technology Officer. Employee will be based in New Jersey. Employee
     agrees to perform and discharge such other duties as may be assigned to
     Employee from time to time by the Company to the reasonable satisfaction of
     the Company, and such duties will be consistent with those duties regularly
     and customarily assigned by the Company to the position of Chief Executive
     Officer and Chief Technology Officer. In addition, Employee shall serve as
     Chairman of the Board of Directors so long as he is elected to such post by
     the Board of Directors according to the By-Laws of the Company. Employee
     also agrees to comply with all of the Company's policies, standards and
     regulations and to follow the instructions and directives as promulgated by
     the Board of Directors of the Company. Employee will devote Employee's full
     professional and business-related time, skills and best efforts to such
     duties and will not, during the term of this Agreement, be engaged (whether
     or not during normal business hours) in any other business or professional
     activity, whether or not such activity is pursued for gain, profit or other
     pecuniary advantage, without the prior written consent of the Board of
     Directors. This Section will not be construed to prevent Employee from (a)
     investing personal assets in businesses which do not compete with the
     Company in such form or manner that will not require any services on the
     part of Employee in the operation or the affairs of the companies in which
     such investments are made and in which Employee's participation is solely
     that of an investor; (b) purchasing securities in any corporation whose
     securities are listed on a national securities exchange or regularly traded
     in the over-the-counter market, provided that Employee at no time owns,
     directly or indirectly, in excess of one percent (1%) of the outstanding
     stock of any class of any such corporation engaged in a business
     competitive with that of the Company; or (c) participating in conferences,
     preparing and publishing papers or books, teaching or joining or
     participating in any professional associations or trade group.
<PAGE>

3.   Term. The term of this Agreement will be at-will, and can be terminated by
     ----
     either party at any time, with or without cause, subject to the provisions
     of Section 4 of this Agreement.

4.   Termination.
     -----------

     (a)  Termination by Company for Cause. The Company may terminate this
          --------------------------------
          Agreement and all of its obligations hereunder immediately, including
          the obligation to pay Employee severance, vacation pay or any further
          benefits or remuneration, if any of the following events occur:

          (i)   Employee materially breaches any of the terms or conditions set
                forth in this Agreement and fails to cure such breach within ten
                (10) days after Employee's receipt from the Company of written
                notice of such breach (notwithstanding the foregoing, no cure
                period shall be applicable to breaches by Employee of Sections
                6, 7 or 8 of this Agreement);

          (ii)  Employee commits any other act materially detrimental to the
                business or reputation of the Company;

          (iii) Employee engages in dishonest or illegal activities or commits
                or is convicted of any crime involving fraud, deceit or moral
                turpitude; or

          (iv)  Employee dies or becomes mentally or physically incapacitated or
                disabled so as to be unable to perform Employee's duties under
                this Agreement even with a reasonable accommodation. Without
                limiting the generality of the foregoing, Employee's inability
                adequately to perform services under this Agreement for a period
                of sixty (60) consecutive days will be conclusive evidence of
                such mental or physical incapacity or disability, unless such
                inability adequately to perform services under this Agreement is
                pursuant to a mental or physical incapacity or disability
                covered by the Family Medical Leave Act, in which case such
                sixty (60)-day period shall be extended to a one hundred and
                twenty (120)-day period.

     b)   Termination by Company Without Cause. The Company may terminate
          ------------------------------------
          Employee's employment pursuant to this Agreement for reasons other
          than those stated in Section 4(a) upon at least thirty (30) days'
          prior written notice to Employee. In the event Employee's employment
          with the Company is terminated by the Company without cause, the
          Company shall be obligated to pay Employee a lump sum severance
          payment equal to one (1) year of Employee's then base salary payable
          within thirty (30) days of the date of termination. Other than the
          severance payment set forth in this Section 4(b), Employee will be
          entitled to receive no further cash remuneration and will not be
          entitled to participate in any Company benefit programs following his
          termination by the Company, whether such termination is with or
          without cause. Furthermore, should Employee's

                                       2
<PAGE>

          employment with the Company be terminated without cause, Employee
          shall be entitled to an award of 200,000 shares of the Company's
          Common Stock. Employee shall not be entitled to any further
          remuneration of any kind whatsoever for his termination without cause.

     c)   Termination by Employee for Cause. In the event there occurs a
          ---------------------------------
          substantial change in the Employee's job duties, there is a decrease
          in or a failure to provide the compensation or vested benefits under
          this Agreement or there is a change in control of the Company,
          Employee shall have the right to resign his employment and will be
          entitled to receive a severance payment equal to an award of 200,000
          shares of the Company's common stock. For avoidance of doubt, this
          award shall be in lieu of the 200,000 shares awarded Employee under
          section 4(b) above. Employee shall have thirty (30) days from the date
          written notice is given to Employee about either (a) the change in his
          duties or (b) the announcement and closing of a transaction resulting
          in a change in control of the Company to resign or this Section 4(c)
          shall not apply. In the event Employee resigns from the Company for
          any other reason, Employee will not be entitled to receive or accrue
          any further Company benefits or other remuneration under this
          Agreement, and Employee specifically agrees that he will not be
          entitled to receive any severance pay or any further stock awards.

          For purposes of this section, a change in control shall be deemed to
          have occurred if any of the following occur:

          i)   the merger or consolidation of the Company with or into another
               unaffiliated entity, or the merger of another unaffiliated entity
               into the Company or another subsidiary thereof with the effect
               that immediately after such transaction the stockholders of the
               Company immediately prior to such transaction hold less than
               fifty (50%) of the total voting power of all securities generally
               entitled to vote in the election of directors, managers or
               trustees of the entity surviving such merger or consolidation;

          ii)  the sale or transfer of more than 51% of the Company's then
               outstanding voting stock (other than a restructuring event which
               results in the continuation of the Company's business by an
               affiliated entity) to unaffiliated person or group (as such term
               is used in Section 13(d)(3) of the Securities Exchange Act of
               1934, as amended); or

          iii) the adoption by the stockholders of the Company of a plan
               relating to the liquidation or dissolution of the Company.

5.   Compensation and Benefits.
     -------------------------

     a)   Annual Salary. During the term of this Agreement and for all services
          -------------
          rendered by Employee under this Agreement, the Company will pay
          Employee a base salary of Six Hundred Thousand Dollars ($600,000.00)
          per annum in equal bi-

                                       3
<PAGE>

          weekly installments. Such annual salary will be subject to adjustments
          by any increases given in the normal course of business.

     b)   Incentive Compensation. Employee shall be eligible to receive
          ----------------------
          incentive compensation in the form of an annual bonus. Said bonus
          shall take the form of a grant of additional stock options and a cash
          payout. Employee shall be entitled to receive a grant of options to
          purchase up to 100,000 shares of the Company's common stock as part of
          his annual bonus. Employee shall also be entitled to receive a cash
          bonus to be determined in the sole discretion of the Compensation
          Committee of the Board of Directors. In determining the amount of this
          cash bonus the Committee shall take into consideration the attainment
          of certain goals by Employee as set by the Board of Directors.

6.   Vacation. Employee shall be eligible for four (4) weeks of paid vacation
     --------
     annually, provided that such vacation is scheduled at such times that do
     not interfere with the Company's legitimate business needs.

7.   Other Benefits. Employee will be entitled to such fringe benefits as may be
     --------------
     provided from time-to time by the Company to its employees, including, but
     not limited to, group health insurance, life and disability insurance, and
     any other fringe benefits now or hereafter provided by the Company to its
     employees, if and when Employee meets the eligibility requirements for any
     such benefit. The Company reserves the right to change or discontinue any
     employee benefit plans or programs now being offered to its employees;
     provided, however, that all benefits provided for employees of the same
     position and status as Employee will be provided to Employee on an equal
     basis.

8.   Business Expenses. Employee will be reimbursed for all reasonable expenses
     -----------------
     incurred in the discharge of Employee's duties under this Agreement
     pursuant to the Company's standard reimbursement policies.

9.   Withholding. The Company will deduct and withhold from the payments made to
     -----------
     Employee under this Agreement, state and federal income taxes, FICA and
     other amounts normally withheld from compensation due employees.

10.  Non-Disclosure of Proprietary Information. Employee recognizes and
     -----------------------------------------
     acknowledges that the Trade Secrets (as defined below) and Confidential
     Information (as defined below) of the Company and its affiliates and all
     physical embodiments thereof (as they may exist from time-to-time,
     collectively, the "Proprietary Information") are valuable, special and
     unique assets of the Company's and its affiliates' businesses. Employee
     further acknowledges that access to such Proprietary Information is
     essential to the performance of Employee's duties under this Agreement.
     Therefore, in order to obtain access to such Proprietary Information,
     Employee agrees that, except with respect to those duties assigned to him
     by the Company, Employee shall hold in confidence all Proprietary
     Information and will not reproduce, use, distribute, disclose, publish or
     otherwise disseminate any Proprietary Information, in whole or in part, and
     will take no action

                                       4
<PAGE>

     causing, or fail to take any action necessary to prevent causing, any
     Proprietary Information to lose its character as Proprietary Information,
     nor will Employee make use of any such information for Employee's own
     purposes or for the benefit of any person, firm, corporation, association
     or other entity (except the Company) under any circumstances.

     For purposes of this Agreement, the term "Trade Secrets" means information,
     including, but not limited to, any technical or nontechnical data, formula,
     pattern, compilation, program, device, method, technique, drawing, process,
     financial data, financial plan, product plan, list of actual or potential
     customers or suppliers, or other information similar to any of the
     foregoing, which derives economic value, actual or potential, from not
     being generally known to, and not being readily ascertainable by proper
     means by, other persons who can derive economic value from its disclosure
     or use. For purposes of this Agreement, the term "Trade Secrets" does not
     include information that Employee can show by competent proof (i) was known
     to Employee and reduced to writing prior to disclosure by the Company (but
     only if Employee promptly notifies the Company of Employee's prior
     knowledge); (ii) was generally known to the public at the time the Company
     disclosed the information to Employee; (iii) became generally known to the
     public after disclosure by the Company through no act or omission of
     Employee; or (iv) was disclosed to Employee by a third party having a bona
     fide right both to possess the information and to disclose the information
     to Employee. The term "Confidential Information" means any data or
     information of the Company, other than trade secrets, which is valuable to
     the Company and not generally known to competitors of the Company. The
     provisions of this Section 6 will apply to Trade Secrets for so long as
     such information remains a trade secret and to Confidential Information
     during Employee's employment with the Company and for a period of two (2)
     years following any termination of Employee's employment with the Company
     for whatever reason.

11.  Non-Solicitation Covenants. Employee agrees that during Employee's
     --------------------------
     employment by the Company and for a period of one (1) year following the
     termination of Employee's employment for whatever reason, Employee will
     not, directly or indirectly, on Employee's own behalf or in the service of
     or on behalf of any other individual or entity, divert, solicit or attempt
     to divert or solicit any individual or entity (i) who is a client of the
     Company at any time during the six (6)-month period prior to Employee's
     termination of employment with the Company ("Client"), or was actively
     sought by the Company as a prospective client, and (ii) with whom Employee
     had material contact while employed by the Company to provide similar
     services or products as such provided by Employee for the Company to such
     Clients or prospects. Employee further agrees and represents that during
     Employee's employment by the Company and for

                                       5
<PAGE>

     a period of one (1) year following any termination of Employee's employment
     for whatever reason, Employee will not, directly or indirectly, on
     Employee's own behalf or in the service of, or on behalf of any other
     individual or entity, divert, solicit or hire away, or attempt to divert,
     solicit or hire away, to or for any individual or entity which is engaged
     in providing similar services or products to that provided by the Company,
     any person employed by the Company for whom Employee had supervisory
     responsibility or with whom Employee had material contact while employed by
     the Company, whether or not such employee is a full-time employee or
     temporary employee of the Company, whether or not such employee is employed
     pursuant to written agreement and whether or not such employee is employed
     for a determined period or at-will. For purposes of this Agreement,
     "material contact" exists between Employee and a Client or potential Client
     when (1) Employee established and/or nurtured the Client or potential
     Client; (2) the Client or potential Client and Employee interacted to
     further a business relationship or contract with the Company; (3) Employee
     had access to confidential information and/or marketing strategies or
     programs regarding the Client or potential Client; and/or (4) Employee
     learned of the Client or potential Client through the efforts of the
     Company providing Employee with confidential Client information, including
     but not limited to the Client's identify, for purposes of furthering a
     business relationship.

12.  Existing Restrictive Covenants. Except as provided in Exhibit B, Employee
     ------------------------------
     has not entered into any agreement with any employer or former employer (a)
     to keep in confidence any confidential information or (b) to not compete
     with any former employer. Employee represents and warrants that Employee's
     employment with the Company does not and will not breach any agreement
     which Employee has with any former employer to keep in confidence
     confidential information or not to compete with any such former employer.
     Employee will not disclose to the Company or use on its behalf any
     confidential information of any other party required to be kept
     confidential by Employee.

13.  Return of Proprietary Information. Employee acknowledges that as a result
     ---------------------------------
     of Employee's employment with the Company, Employee may come into the
     possession and control of Proprietary Information, such as proprietary
     documents, drawings, specifications, manuals, notes, computer programs, or
     other proprietary material. Employee acknowledges, warrants and agrees that
     Employee will return to the Company all such items and any copies or
     excerpts thereof, and any other properties, files or documents obtained as
     a result of Employee's employment with the Company, immediately upon the
     termination of Employee's employment with the Company.

                                       6
<PAGE>

14.  Proprietary Rights. During the course of Employee's employment with the
     ------------------
     Company, Employee may make, develop or conceive of useful processes,
     machines, compositions of matter, computer software, algorithms, works of
     authorship expressing such algorithm, or any other discovery, idea,
     concept, document or improvement which relates to or is useful to the
     Company's Business (the "Inventions"), whether or not subject to copyright
     or patent protection, and which may or may not be considered Proprietary
     Information. Employee acknowledges that all such Inventions will be "works
     made for hire" under United States copyright law and will remain the sole
     and exclusive property of the Company. Employee also hereby assigns and
     agrees to assign to the Company, in perpetuity, all right, title and
     interest Employee may have in and to such Inventions, including without
     limitation, all copyrights, and the right to apply for any form of patent,
     utility model, industrial design or similar proprietary right recognized by
     any state, country or jurisdiction. Employee further agrees, at the
     Company's request and expense, to do all things and sign all documents or
     instruments necessary, in the opinion of the Company, to eliminate any
     ambiguity as to the ownership of, and rights of the Company to, such
     Inventions, including filing copyright and patent registrations and
     defending and enforcing in litigation or otherwise all such rights.

     Employee will not be obligated to assign to the Company any Invention made
     by Employee while in the Company's employ which does not relate to any
     business or activity in which the Company is or may reasonably be expected
     to become engaged, except that Employee is so obligated if the same relates
     to or is based on Proprietary Information to which Employee will have had
     access during and by virtue of Employee's employment or which arises out of
     work assigned to Employee by the Company. Employee will not be obligated to
     assign any Invention which may be wholly conceived by Employee after
     Employee leaves the employ of the Company, except that Employee is so
     obligated if such Invention involves the utilization of Proprietary
     Information obtained while in the employ of the Company. Employee is not
     obligated to assign any Invention that relates to or would be useful in any
     business or activities in which the Company is engaged if such Invention
     was conceived and reduced to practice by Employee prior to Employee's
     employment with the Company. Employee agrees that any such Invention is set
     forth on Exhibit "A" to this Agreement.

15.  Remedies. Employee agrees and acknowledges that the violation of any of the
     --------
     covenants or agreements contained in Sections 6, 7, and 10 of this
     Agreement would cause irreparable injury to the Company, that the remedy at
     law for any such violation or threatened violation thereof would be
     inadequate, and that the Company will be entitled, in addition to any other
     remedy, to temporary and permanent injunctive or other

                                       7
<PAGE>

     equitable relief without the necessity of proving actual damages or posting
     a bond.

16.  Severability. In case one or more of the provisions contained in this
     ------------
     Agreement is for any reason held to be invalid, illegal or unenforceable in
     any respect, the parties agree that it is their intent that the same will
     not affect any other provision in this Agreement, and this Agreement will
     be construed as if such invalid or illegal or unenforceable provision had
     never been contained herein. It is the intent of the parties that this
     Agreement be enforced to the maximum extent permitted by law.

17.  Entire Agreement. This Agreement embodies the entire agreement of the
     ----------------
     parties relating to the subject matter of this Agreement and supersedes all
     prior agreements, oral or written, regarding the subject matter hereof. No
     amendment or modification of this Agreement will be valid or binding upon
     the parties unless made in writing and signed by the parties.

18.  Governing Law. This Agreement is entered into and will be interpreted and
     -------------
     enforced pursuant to the laws of the State of New Jersey. The parties
     hereto hereby agree that the appropriate forum and venue for any disputes
     between any of the parties hereto arising out of this Agreement shall be
     any federal court in the state where the Employee has his principal place
     of residence and each of the parties hereto hereby submits to the personal
     jurisdiction of any such court. The foregoing shall not limit the rights of
     any party to obtain execution of judgment in any other jurisdiction. The
     parties further agree, to the extent permitted by law, that a final and
     unappealable judgment against either of them in any action or proceeding
     contemplated above shall be conclusive and may be enforced in any other
     jurisdiction within or outside the United States by suit on the judgment, a
     certified exemplified copy of which shall be conclusive evidence of the
     fact and amount of such judgment.

19.  Surviving Terms. Sections 4, 6, 7, 10, 11 and 14 of this Agreement shall
     ---------------
     survive termination of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

COMPANY:                                        EMPLOYEE:

LEVEL 8 SYSTEMS, INC.

By: ____________________________                _______________________________
                                                Anthony Pizi

Title: _________________________

                                       8
<PAGE>

                                   EXHIBIT A

                                  INVENTIONS

Employee represents that there are no Inventions.

                                               _________________
                                               Employee Initials

                                       9
<PAGE>

                                    EXHIBIT B

                         EXISTING RESTRICTIVE COVENANTS

                                       10

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