EXHIBIT 10-41

--------------------------------------------------------------------------------

 
 
 

Portions of this document have been redacted and filed separately with the
Securities and Exchange Commission.  Redacted sections marked with “*****.”

 
 
 
 
 
 
 
CREDIT AGREEMENT

Dated as of June 5, 2008,
 
By And Among

COMMUNICATION INTELLIGENCE CORPORATION
as Borrower,

THE LENDERS PARTY HERETO

AND

SG PHOENIX LLC
As Collateral Agent
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

--------------------------------------------------------------------------------

 
TABLE OF CONTENTS 
                                                                                                                                               EXHIBIT
10-41  
 
                                                                                                                                                Page
SECTION 1.
AMOUNTS AND TERMS OF
LOANS                                                                            
1
1.1
Loans  
2
1.2
Interest. 
3
1.3
Use of Proceeds
3
1.4
Fees and Expenses 
4
1.5
Payments 
4
1.6
Repayments of Loans
5
1.7
Loan Accounts
7
1.8
Taxes
7
1.9
Warrants
8
1.1
Term of This Agreement 
8
SECTION 2.
AFFIRMATIVE COVENANTS 
8
2.1
Compliance With Laws 
8
2.2
Maintenance of Books and Records; Properties; Insurance.
9
2.3
Inspection; Lenders’ Meeting
9
2.4
Legal Existence, Etc
10
2.5
Use of Proceeds
10
2.6
Authorized Common Stock 
10
2.7
Further Assurances; Notices of Acquisition of Property
10
2.8
Taxes and other Government Charges
10
SECTION 3.
NEGATIVE COVENANTS
11
3.1
Indebtedness
11
3.2
Liens and Related Matters
11
3.3
Investments 
12
3.4
Contingent Obligations
12
3.5
Restricted Junior Payments
12
3.6
Restriction on Fundamental Changes
12
3.7
Disposal of Assets or Subsidiary Stock
12
3.8
Transactions with Affiliates
12
3.9
Management Fees
13
3.10
Conduct of Business
13
3.11
Fiscal Year 
13
3.12
Subsidiaries; Partnerships
13
3.13
Modification of Agreements
13
3.14
Board of Directors 
13
3.15
Management of Borrower
13
3.16
Investment Company Act; Public Utility Holding Act
13
SECTION 4.
FINANCIAL COVENANTS AND REPORTING
14
4.1
Reports and Covenants
14
4.2
Accounting Terms; Utilization of GAAP 
16
SECTION 5.
REPRESENTATIONS AND WARRANTIES
16
5.1
Disclosure
16
5.2
No Material Adverse Effect 
17

 
-i-

--------------------------------------------------------------------------------

EXHIBIT 10-41
TABLE OF CONTENTS 
                                                                                                                                                                                                                                       
Page
5.3
Organization, Powers, Authorization and Good Standing 
17
5.4
Compliance with Applicable Law
17
5.5
Tax Returns and Payments
18
5.6
Environmental Matters
18
5.7
Financial Statements
18
5.8
Intellectual Property 
19
5.9
Litigation, Investigations, Audits, Etc. 
19
5.10
Employee Labor Matters
20
5.11
Employee Benefit Plans
20
5.12
Perfection and Priority
20
5.13
Solvency
20
5.14
Investment Company Act; Federal Regulations
20
5.15
Material Contracts
21
5.16
Title to Properties
21
5.17
Subsidiaries and Affiliates
21
5.18
Filings
21
5.19
Insurance
22

5.20
Approvals
22
5.21
Internal Accounting Controls
22
5.22
Foreign Corrupt Practices
22
5.23
Representations and Covenants Made to the Investors
23
SECTION 6.
EVENTS OF DEFAULT AND RIGHTS AND REMEDIES
23
6.1
Events of Default
23
6.2
Acceleration
26
6.3
Rights of Collection
26
6.4
Consents
26
6.5
Performance by Lenders or Collateral Agent
27
6.6
Set Off and Sharing of Payments
27
6.7
Application of Payments
27
6.8
Rescission
27
SECTION 7.
CONDITIONS TO LOANS
28
7.1
Executed Loan Documents
28
7.2
Executed Debt Refinancing Documents
28
7.3
Certificate of Designations
28
7.4
Cancelled Notes
28
7.5
Representations and Warranties
28
7.6
Covenants
28
7.7
No Default
29
7.8
Lien Priority
29
7.9
No Litigation
29
7.10
Fees and Expenses
29
7.11
Closing Certificates; Opinions
29
7.12
Collateral
30
7.13
Insurance
30
7.14
Consents
30
7.15
No Injunction, Etc.
30

 
-ii-

--------------------------------------------------------------------------------

EXHIBIT 10-41
TABLE OF CONTENTS 
                                                                                                                                                                                                                                       
Page
7.16
Fees, Expenses, Taxes, Etc.
31
7.17
Proceedings and Documents
31
7.18
Other Deliveries
31
7.19
Post-Closing Deliveries
31
SECTION 8.
INTERCREDITOR PROVISIONS
32
8.1
Appointment, Powers and Immunities of Agents
32
8.2
Reliance
33
8.3
Non-Reliance
33
8.4
Defaults; Material Adverse Effect
33
8.5
Successor Agent
34
8.6
Authorization
34
8.7
Other Roles
34
8.8
Amendments and Waivers
35
SECTION 9.
MISCELLANEOUS
35
9.1
Indemnities
35
9.2
Notices
36
9.3
Failure or Indulgence Not Waiver; Remedies Cumulative
37
9.4
Marshaling; Payments Set Aside
37
9.5
Severability
37
9.6
Headings
37
9.7
Applicable Law
37
9.8
Successors and Assigns
38
9.9
Participations
38
9.10
No Fiduciary Relationship
38
9.11
Construction
38
9.12
Confidentiality
39
9.13
Consent to Jurisdiction and Service of Process
39
9.14
Waiver of Jury Trial
40
9.15
Survival of Warranties and Certain Agreements
40
9.16
Entire Agreement
40
9.17
Counterparts; Effectiveness
40
SECTION 10.
DEFINITIONS
41
10.1
Certain Defined Terms
41
10.2
Other Definitional Provisions
49

 
-iii- 

--------------------------------------------------------------------------------

EXHIBIT 10-41 

SCHEDULES
 
Schedule 1.1(a)                           Loans
Schedule 1.3                                Repayment of Outstanding Debt
Schedule 2.2(b)                           Insurance
Schedule 3.1                                Indebtedness/Liens
Schedule 5.3(a)                           Organization and Powers
Schedule 5.3(c)                           Qualification to Transact Business
Schedule 5.4                                Compliance with Applicable Law
Schedule 5.6                                Environmental Matters
Schedule 5.8                                Intellectual Property
Schedule 5.9                                Litigation, Investigations, Audits,
Etc.
Schedule 5.10                              Employee Labor Matters
Schedule 5.15                              Material Contracts
Schedule 5.16                              Owned and Leased Property
Schedule 5.17(a)                         Subsidiaries and Affiliates
Schedule 5.17(b)                         Inventory and Equipment
Schedule 5.18                              Filings

EXHIBITS
 
Exhibit 1.1(a)                                Form of Note
Exhibit 1.2(b)-1                            Form of Additional Note
Exhibit 1.2(b)-2                            Form of Additional Warrant
Exhibit 1.9                                    Form of Warrant
Exhibit 4.1(b)                               Form of Compliance Certificate
Exhibit 10.1(ccc)                          Form of Pledge and Security Agreement

 - iv -
 
 

--------------------------------------------------------------------------------

 
EXHIBIT 10-41

INDEX OF DEFINED TERMS
 
Defined Term
Defined in Section
1933 Act
§5.18
1934 Act
§2.3
1940 Act
§3.16
Accounting Changes
§4.2
Additional Note
§1.2(b)
Additional Warrant
§1.2(b)
Affiliate
§10.1
Agreement
§10.1
Applicable Law
§10.1
Asset Disposition
§10.1
Bankruptcy Code
§10.1
Borrower
Preamble
Business Day
§10.1
Capital Lease
§10.1
Cash Equivalents
§10.1
Change of Control
§6.1(s)
Closing Date
§10.1
Collateral
§10.1
Collateral Agent
§8.1(a)
Common Stock
§10.1
Compliance Certificate
§4.1(b)
Contingent Obligation
§10.1
Control
§10.1
Debt Refinancing
§10.1
Debt Refinancing Documents
§10.1
Default
§10.1
Engmann
Preamble
Environmental Laws
§10.1
Evaluation Date
§5.21
Event of Default
§6.1
GAAP
§10.1
Goodman
Preamble
Governmental Authority
§10.1
Indebtedness
§10.1
Indemnitees
§9.1
Initial Warrants
§1.9
Intellectual Property Rights
§5.8
Investment
§10.1
Investors
§10.1
IRC
§10.1
Lender(s)
Preamble
Lien
§10.1
Loan(s)
§1.1(a)

 
-v-

--------------------------------------------------------------------------------

EXHIBIT 10-41

   
Loan Documents
§10.1
Majority Lenders
§10.1
Material Adverse Effect
§10.1
Material Contracts
§10.1
Maturity Date
§10.1
Net Proceeds
§10.1
Note(s)
§1.1(a)
Obligation(s)
§10.1
Permitted Encumbrances
§10.1
Person
§10.1
Phoenix
Preamble
Pledge and Security Agreement
§10.1
Purchase Agreement
§10.1
Real Property
§5.6
Registration Rights Agreement
§10.1
Restricted Junior Payment
§10.1
SEC
§10.1
Secured Party or Secured Parties
§10.1
Security Documents
§10.1
Security Interest
§10.1
Series A Preferred Stock
§10.1
Subsidiary
§10.1
Warrant(s)
§10.1

 

- vi -
 
 

--------------------------------------------------------------------------------

EXHIBIT 10-41 

 
CREDIT AGREEMENT
 
This CREDIT AGREEMENT is entered into as of June 5, 2008, by and among
COMMUNICATION INTELLIGENCE CORPORATION, a Delaware corporation having an address
at 275 Shoreline Drive, Suite 500, Redwood Shores, California 94065 (“Borrower”)
and PHOENIX VENTURE FUND LLC, a Delaware limited liability company having an
address at 110 East 59th Street, Suite 1901, New York, New York 10022
(“Phoenix”), Michael Engmann, an individual having an address at 38 San Fernando
Way, San Francisco, California 94127 (“Engmann”) and Ronald Goodman, an
individual having an address at 31 Tierra Verde Court, Walnut Creek, California
94598 (“Goodman”) (each of Phoenix, Engmann and Goodman individually, a
“Lender,” and collectively, the “Lenders”).  Capitalized terms shall have the
meanings given to them in Section 10.1 below.
 
R E C I T A L S:
 
WHEREAS, Lenders have agreed to finance the Loans to the Borrower upon the
terms  and for the uses as provided in the Loan Documents; and
 
WHEREAS, Borrower will have access to additional working capital as a result of
the Loans; and
 
WHEREAS, certain proceeds of the Loans will be used to refinance loans due and
payable on May 15, 2008 to certain of the Lenders as set forth on Schedule 1.3
pursuant to the Debt Refinancing; and
 
WHEREAS, Lenders are prepared to make the Loans available to the Borrower only
upon consummation of the Debt Refinancing by the Investors; and
 
WHEREAS, Borrower intends to secure all of its Obligations under the Loan
Documents by granting to Lenders a first priority Security Interest in and Lien
upon the Collateral; and
 
WHEREAS, Borrower intends to further secure all of its Obligations under the
Loan Documents by granting to Lenders a pledge of all of its shares of capital
stock,
 
NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties do hereby
agree, as follows:
 
SECTION 1. AMOUNTS AND TERMS OF LOANS
 
1.1 Loans
.  Subject to the terms and conditions of this Agreement and in reliance upon
the representations, warranties and covenants of Borrower contained herein and
in the other Loan Documents:
 
(a) Loans to Borrower.  Lenders agree to lend to Borrower, on the Closing Date,
an aggregate of Three Million Six Hundred Thirty-Seven Thousand Five Hundred
Dollars ($3,637,500), each Lender to lend the amount set forth opposite its name
on Schedule
 

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
 1.1(a) (individually, each a “Loan,” collectively, the “Loans”); provided all
conditions precedent set forth in Section 7 are satisfied or waived.  Amounts
borrowed under this Section 1.1(a) that are repaid or prepaid may not be
reborrowed.  Borrower shall execute and deliver to each Lender a Note in the
amount of such Lender’s Loan in the form attached to this Agreement as Exhibit
1.1(a) (together with any Notes issued pursuant to Section 1.2(b)), dated as of
the Closing Date.
 
(b) Advances
 
.  The Loans will be made available (i) with respect to the Loans by Phoenix, by
wire transfer of immediately available funds to such account or accounts as may
be authorized by Borrower, less amounts for fees, and (ii) with respect to the
Loans by Engmann and Goodman, by termination of Borrower’s obligations under
such Lenders’ respective loans, as evidenced by the related promissory notes due
May 15, 2008, including the accrued and unpaid interest thereon through May 31,
2008, as set forth on Schedule 1.3.  Each of Engmann and Goodman, by accepting
his respective Note hereunder, acknowledges and agrees that such Note has been
tendered by Borrower, and accepted by him, as full payment and satisfaction for
Borrower’s obligations under his respective promissory note due May 15, 2008 as
set forth on Schedule 1.3 hereto, including accrued and unpaid interest through
May 31, 2008, and, upon the occurrence of the Closing and the delivery to each
such Lender of his respective Note hereunder, plus payment of an amount equal to
interest on such promissory note from (and including) June 1, 2008 to (but
excluding) the Closing Date, each of Engmann and Goodman acknowledge and agree
that all obligations, liabilities, covenants and agreements of Borrower under
his respective promissory note due May 15, 2008 described on Schedule 1.3, and
Borrower’s related obligations under that certain Note and Warrant Purchase
Agreement, dated as of August 10, 2006, pursuant to which such promissory notes
were issued, are terminated and cancelled and are of no further force or effect.
 
1.2 Interest.
 
(a) Interest
 
.  Commencing as of the Closing Date, the Loans shall accrue interest on a
monthly basis at a rate equal to (i) eight percent (8%) per annum until the
Maturity Date.
 
(b) Calculation and Payment
 
.  Interest on the Loans shall be calculated on the basis of a three hundred
sixty-five (365) day year for the actual number of days elapsed.  The date of
payment of any Loan or interest on any Loan shall be excluded from the
calculation of interest.  Interest accruing on each Loan is payable in arrears
on each of the following dates or events: (i) the last day of each calendar
quarter commencing on June 30, 2008; (ii) the prepayment of such Loan (or a
portion thereof); and (iii) the Maturity Date.  Such interest may be paid in
cash or, at the option of Borrower, interest may be paid in kind by adding the
amount of such interest to the principal amount of each Loan (each Lender’s Loan
to be ratably increased) on the applicable interest payment date, which will
accrue interest pursuant to Section 1.2(a) or Section 1.2(c), as applicable, and
issuing to each Lender (i) an additional note in the amount of the ratable
increase of such Lender’s Loan in substantially the form attached as Exhibit
1.2(b)-1 (each, an “Additional Note”) and (ii) an additional warrant
substantially in the form attached as Exhibit 1.2(b)-2 to purchase up to the
number of shares of Common Stock obtained by dividing the amount of the ratable
increase in such Lender’s
 
-2-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
Loan by 0.14 (each, an “Additional Warrant”).  In the event that interest is not
timely paid pursuant to this Section 1.2(b) on the applicable interest payment
date, such interest payment shall be paid in kind and shall be added to the
principal amount of each respective Lender’s Loan no later than the Business Day
following the applicable interest payment date, and the Borrower shall issue the
applicable Additional Notes and Additional Warrants as provided
herein.  Borrower shall, in connection with the issuance of Additional Warrants
pursuant hereto, take all actions (including the reservation of shares of Common
Stock) required pursuant to the terms of such Additional
Warrants.  Notwithstanding the foregoing, Borrower shall not have an option to
pay interest in kind in the event that Borrower does not have sufficient
authorized, unissued and unreserved Common Stock to fully reserve shares of
Common Stock for issuance upon exercise of the Additional Warrants or is
otherwise unable to comply with the terms of the Additional Warrants.
 
(c) Default Rate of Interest
 
.  At the election of the Majority Lenders, upon the occurrence of an Event of
Default and for so long as it continues, all Loans and other Obligations shall
bear interest at the highest rate permitted by Applicable Law.
 
(d) Excess Interest
 
.  Notwithstanding anything to the contrary set forth herein, the aggregate
interest, fees and other amounts required to be paid by Borrower to Lenders is
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason of acceleration of maturity of the Obligations or otherwise, shall the
amount paid or agreed to be paid to Lenders for the use or the forbearance of
the Obligations evidenced hereby exceed the maximum permissible under Applicable
Law.  If under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the other Loan Documents at the time performance
of such provision shall be due, shall involve exceeding the limit permitted by
Applicable Law then the Obligation to be fulfilled shall automatically be
reduced to the limit permitted, and if under or from any circumstances
whatsoever, Lenders should ever receive as interest any amount which would
exceed the highest lawful rate, the amount of such interest that is excessive
shall be applied to the reduction of the principal balance of the Obligations
and not to the payment of interest.  In the event of a conflict, this provision
shall control every other provision of this Agreement and all provisions of
every other Loan Document.
 
1.3 Use of Proceeds
 
.  Borrower agrees that the proceeds of the Loans shall be used only in
accordance with the following: (1) to refinance the loans due and payable on May
15, 2008 to certain of the Lenders as set forth on Schedule 1.3 hereto pursuant
to the Debt Refinancing, (2) for working capital and general corporate purposes,
in each case in the ordinary course of business and (3) to pay fees and expenses
in connection with the Debt Refinancing, including the fees and expenses
hereunder.  In no event shall the proceeds of working capital Loans be used to
(i) make distributions, or (ii) make a contribution to the capital of any
Subsidiary of the Borrower.
 
1.4 Fees and Expenses.
 
(a) Borrower agrees to pay promptly all fees, costs and expenses (including
legal fees, due diligence costs, expenses of attorneys and costs of advisers,
counsel, accountants and other experts, if any) incurred by Lenders, Investors,
Collateral Agent and/or any Affiliate, member or related party of any Lender,
Investor or Collateral Agent in connection with (i) the Debt Refinancing, (ii)
any matters contemplated by or arising out of the Loan Documents and the
Purchase Agreement, (iii) the examination, review, due diligence investigation,
documentation, negotiation and closing of the transactions contemplated herein
or otherwise in connection with the Debt Refinancing; (iv) the continued
administration of the Loan Documents, including any such fees, costs and
expenses incurred in perfecting, maintaining, determining the priority of and
releasing any security, any tax (of the type discussed in Section 7.16) payable
in connection with
 
-3-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
any Loan Document or other Debt Refinancing Document and any amendments,
modifications and waivers thereof; (v) any amendment, supplement, waiver or
modification of any of the Loan Documents or other Debt Refinancing Documents,
unless both (1) such amendment, supplement, waiver or modification is made at
the request and for the sole benefit of any Lender and (2) no Event of Default
has occurred and is continuing, in which case each Lender shall be responsible
for its related fees, costs and expenses; and (vi) any Default and any
enforcement or collection proceeding resulting therefrom or any workout or
restructuring of any of the transactions hereunder or under any other Debt
Refinancing Document or contemplated hereby or thereby or any action to enforce
any Loan Document or other Debt Refinancing Document or to collect any payments
due from Borrower hereunder or thereunder.
 
(b) The Borrower shall pay at Closing to or at the direction of Phoenix a
restructuring fee of one hundred thousand dollars ($100,000).
 
(c) The aggregate amount of fees and expenses accrued under Section 1.4(a) as of
the Closing Date shall be paid by Borrower at Closing.  All post-Closing fees,
costs and expenses for which Borrower is responsible shall be immediately due
and payable and deemed part of the Obligations when incurred and shall be
secured by the Collateral.  Following an Event of Default, any fees, costs and
expenses which are not paid within thirty (30) days of presentment may be
debited and added to the principal amount of the applicable Loans without
notice.
 
1.5 Payments.
 
(a) Funds.  All payments by Borrower of the Obligations shall be made in same
day funds and delivered to each Lender by wire transfer to the following account
or such other place as such Lender may from time to time designate:
 
-4-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
If to Phoenix:

 
Citibank N.A.
666 Fifth Avenue, 6th Floor
New York, New York 10103
Attn: H. Alex Trejo at Citi Private Bank
 
ABA *****
 
for account ***** for the account of SG Phoenix LLC
 
If to Engmann:

Bank of the West
180 Montgomery St. 3rd Floor
San Francisco, California 94104
Attn: Daniel Tondeau or Jennifer Avi
ABA *****
for account ***** for the account of Michael W. Engmann

If to Goodman:
 
Wells Fargo Bank
 
1499 North Main Street
 
ABA *****
 
for account ***** for the account of Ronald Goodman or Janet Goodman
 

(b) Credit.  Borrower shall receive credit on the day of receipt for funds
received by Lender by 1:00 p.m., New York, New York time, on any Business
Day.  Funds received after 1:00 p.m., New York, New York time, on any Business
Day shall be deemed to have been paid on the next Business Day.  Whenever any
payment to be made hereunder shall be stated to be due on a day that is not a
Business Day, the payment shall be due on the next succeeding Business Day and
such extension of time shall be included in the computation of the amount of
interest and fees due hereunder.
 
(c) Payment Set Aside.  To the extent Borrower, or any other Person on behalf of
Borrower, makes a payment or payments to a Lender in order to satisfy any amount
of Borrower’s Obligations, which payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, or any combination of the
foregoing (whether by demand, litigation, settlement or otherwise), then, to the
extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be reinstated and continued in full force and
effect as if such payment or proceeds had not been received by such Lender.
 
1.6 Repayments of Loans.
 
-5-

--------------------------------------------------------------------------------

EXHIBIT 10-41
(a) Scheduled Repayments of Loans.  Borrower shall repay the aggregate
outstanding principal balance of the Loans on and by the Maturity Date.  All
repayments of the Loans shall be applied in accordance with Section 1.6(f), and
shall be accompanied by accrued interest on the amount repaid.
 
(b) Voluntary Prepayment of Loans.  Upon three (3) Business Day’s prior notice,
Borrower may prepay the Loans, in whole or in part.  All prepayments shall be in
a minimum amount of at least One Hundred Thousand Dollars ($100,000) or such
other lesser amount as may equal the then outstanding aggregate principal amount
of the Loans.  All prepayment notices shall be irrevocable.  All prepayments
shall be applied pro rata to each Loan and shall be remitted to each respective
Lender.  All prepayments shall be accompanied by accrued interest on the amount
prepaid plus any applicable breakage fees, and any amount so repaid may not be
reborrowed.
 
(c) Repayments from Insurance Proceeds.  Immediately upon their receipt,
Borrower shall repay the Loans in an amount equal to all Net Proceeds
constituting insurance proceeds from any Asset Disposition received by Borrower
or any of its Subsidiaries; provided, however, that Borrower shall not be
required to so apply an amount of such Net Proceeds up to One Hundred Thousand
Dollars ($100,000) in any calendar year if the following requirements are
satisfied: (i) such proceeds are pledged to Lender, (ii) no Event of Default has
occurred and is continuing, and (iii) Borrower or such Subsidiary has taken
steps in good faith and customary in its industry to replace the damaged
Collateral and in any event such replacement or restoration has occurred within
two hundred and seventy (270) days of receipt by Borrower or such Subsidiary of
such proceeds.  All such repayments (other than prepayments under Section 1.6(b)
as contemplated in this Section 1.6) shall be applied in accordance with Section
1.6(f).
 
(d) Repayments from Certain Asset Dispositions.  Immediately upon receipt by
Borrower or any of its Subsidiaries of Net Proceeds (other than insurance
proceeds) from any Asset Disposition, Borrower shall repay the Loans in an
amount equal to such Net Proceeds.  All such repayments shall be applied in
accordance with Section 1.6(f).
 
(e) Repayments from Debt or Equity Issuances.  Immediately upon receipt by
Borrower or any of its Subsidiaries of Net Proceeds relating to the issuance or
incurrence by Borrower or any of its Subsidiaries of any public or private
Indebtedness (other than pursuant to Section 3.1) or any equity (but other than
issuance of equity upon conversion or exercise of (i) any security outstanding
prior to the date hereof, (ii) the Series A Preferred Stock, (iii) the Warrants
or (iv) any option for Common Stock issued on or after the date hereof to an
employee or member of the Board of Directors of Borrower pursuant to an equity
compensation plan), Borrower shall repay the Loans in an amount equal to such
Net Proceeds.  All such repayments shall be applied in accordance with Section
1.6(f).
 
(f) Application of Repayments.  All repayments of a Loan shall be applied first
to fees and expenses due under the Loan Documents, then to accrued and unpaid
interest, and then to the outstanding principal balance of the Loans.  All
repayments, after application to payment of fees and expenses, shall be applied
pro rata to each Loan including accrued and unpaid interest thereon, and shall
be remitted to each respective Lender.
 
-6-

--------------------------------------------------------------------------------

EXHIBIT 10-41
(g) Payment Upon Sale or Change of Control.  Borrower shall repay immediately
upon the occurrence of such event, in full in cash in same day funds the
aggregate outstanding principal balance on the applicable Notes and all accrued
interest in the event of a sale of all or substantially all of the assets of
Borrower, or upon the occurrence of a Change of Control of Borrower, whether in
a single transaction or a series of related transactions.
 
(h) Breakage Costs.  If Borrower makes any payment of principal with respect to
a Loan on any day other than (i) the last day of a calendar quarter after
Closing or (ii) the Maturity Date, or fails to make a prepayment after giving
notice thereof, Borrower shall reimburse each Lender within 10 days after demand
for any resulting loss or expense incurred by it (or by an existing or
prospective Participant in a Loan who has signed an agreement relating to such
prospective participation and has incurred actual breakage costs), including
without limitation any loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin for the period after
any such payment or failure to prepay, provided that such Lender or Participant,
as the case may be, shall have delivered to Borrower a certificate describing
the amount of such loss or expense in reasonable detail, which certificate shall
be conclusive in the absence of manifest error.
 
1.7 Loan Accounts.  Lenders will maintain Loan account records for (i) all
Loans, interest charges and payments thereof, (ii) the charging and payment of
all fees, costs and expenses, and (iii) all other debits and credits pursuant to
this Agreement.  The balance in the Loan accounts shall be presumptive evidence
of the amounts due and owing to Lenders, absent manifest error; provided that
any failure by Lenders to maintain such records shall not limit or affect
Borrower’s obligation to pay.
 
1.8 Taxes.
 
(a) No Deductions.  Any and all payments or reimbursements made under the Loan
Documents shall be made free and clear of, and without deduction for, any and
all taxes, levies, deductions, charges or withholdings, and all liabilities with
respect thereto (including all such taxes, deductions, charges or withholdings
and all liabilities with respect thereto, excluding such taxes imposed on net
income).  If Borrower shall be required by Applicable Law to deduct any such
amounts from or in respect of any sum payable hereunder to Lenders then, except
as provided in Section 1.8(b), Borrower shall pay such amounts to the
appropriate Governmental Authority and provide Lenders with satisfactory
documentary evidence of such payment within ten (10) days after such payment and
the sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, Lenders receive an amount equal to the sum they
would have received had no such deductions been made.
 
(b) Changes in Tax Laws.  In the event that, subsequent to the Closing Date, (i)
any changes in any existing law, regulation, treaty or directive or in the
interpretation or application thereof, (ii) any new law, regulation, treaty or
directive enacted or any interpretation or application thereof, or (iii)
compliance by Lenders with any request or directive (whether or not having the
force of law) from any Governmental Authority (x) does or shall subject Lenders
to any tax of any kind whatsoever with respect to this Agreement, the other Loan
 
-7-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
Documents or any Loans made hereunder, or change the basis of taxation of
payments to Lenders of principal, fees, interest or any other amount payable
hereunder (except for net income taxes or franchise taxes imposed in lieu of net
income taxes, or changes in the rate of such taxes); or (y) does or shall impose
on Lenders any other condition or increased cost in connection with the
transactions contemplated hereby; and the result of any of the foregoing is to
increase the cost to Lenders of making or continuing any Loan hereunder, or to
reduce any amount receivable hereunder, as the case may be, then, in any such
case, the Borrower shall promptly pay to Lenders, upon its demand, any
additional amounts necessary to compensate Lenders, on an after-tax basis, for
such additional cost or reduced amount receivable, as determined by Lenders with
respect to this Agreement or the other Loan Documents.  If Lenders become
entitled to claim any additional amounts pursuant to this Section 1.8(b), it
shall promptly notify Borrower of the event by reason of which Lenders have
become so entitled.  A certificate as to any additional amounts payable pursuant
to the foregoing sentence submitted by Lenders to Borrower shall, absent
manifest error, be final, conclusive and binding for all purposes.  There is no
limitation on the number of times such a certificate may be submitted.
 
1.9 Warrants.  In partial consideration for the Lenders’ respective Loans made
pursuant to this Agreement, Borrower shall issue warrants (the “Initial
Warrants”), in substantially the form of Exhibit 1.9 hereto, each Lender to
purchase up to the number of shares obtained by dividing the amount of such
Lender’s Loan by 0.14.  Additional Warrants may be issued in the event of
Borrower’s election to make payments in kind in accordance with the terms of
this Agreement.
 
1.10 Term of This Agreement.  All of the Obligations shall become due and
payable as otherwise set forth herein, but in any event, all of the remaining
Obligations shall become due and payable on the Maturity Date.  This Agreement
shall remain in effect through and including, and (except with respect to
provisions hereof expressly stated herein to survive any such termination) shall
terminate immediately after, the date on which all Obligations shall have been
irrevocably paid and satisfied in full.
 
SECTION 2. AFFIRMATIVE COVENANTS
 
Borrower hereby covenants and agrees that until payment in full of all
Obligations, unless the Majority Lenders give their prior written consent,
Borrower shall perform and comply, and shall cause each of its Subsidiaries to
perform and comply, with all covenants in this Section 2.
 
2.1 Compliance With Laws.  Borrower will in all material respects comply with
and will cause its Subsidiaries to comply with the requirements of all
Applicable Laws (including laws, rules, regulations and orders relating to
taxes, employer and employee contributions, securities, and employee retirement
and welfare benefits) as in effect in all jurisdictions in which Borrower and
any Subsidiary of Borrower are now or hereafter doing business.  This Section
2.1 shall not preclude Borrower or any Subsidiary of Borrower from contesting
any taxes or other payments, if such taxes and other payments are being
diligently contested in good faith and if adequate reserves (if required by
Applicable Law) therefore are maintained in conformity with GAAP.
 
-8-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
2.2 Maintenance of Books and Records; Properties; Insurance.
 
(a) Books and Records.  Borrower will keep and will cause each of its
Subsidiaries to keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied.  Borrower
will maintain or cause to be maintained and will cause each of its Subsidiaries
to maintain or cause to be maintained in good repair, working order and
condition all Collateral used in its business and the business of its
Subsidiaries, and will make or cause to be made all appropriate repairs,
renewals and replacements thereof.  Borrower will and will cause each of its
Subsidiaries to maintain complete, accurate and up-to-date books, records,
accounts and other information relating to all Collateral in such form and in
such detail as may be reasonably satisfactory to Lenders.
 
(b) Insurance.  Borrower will maintain or cause to be maintained and will cause
each of its Subsidiaries to maintain or cause to be maintained, with financially
sound and reputable insurers, commercial general liability, property loss and
damage and business interruption insurance with respect to its business and
properties and the business and properties of its Subsidiaries against loss and
damage of the kinds customarily carried or maintained by similarly situated
corporations engaged in businesses similar to the Borrower’s and of such types,
with such insurers, in such amounts, with such limits and deductibles and
otherwise on such terms and conditions as shall be acceptable to Lenders in
their reasonable discretion and will deliver evidence thereof to Lenders on or
prior to the Closing Date, and thereafter at least thirty (30) days prior to any
expiration thereof, evidence of renewal of such insurance.  All property loss
and damage insurance shall be on an all-risk basis and shall insure property for
the full replacement cost thereof and contain an agreed amount endorsement
waiving any coinsurance penalty.  Other than Borrower’s directors and officers
policy set forth on Schedule 2.2(b) hereto, Borrower will cause each insurance
policy to be subject to such endorsements and assignments as shall be
satisfactory to Lenders, including but not limited to naming Lenders (or
Collateral Agent on behalf of Lenders) as lender loss payee in the case of
property loss and damage insurance, as assignee in the case of all business
interruption insurance, and as an additional insured in the case of all
liability insurance.  Liability for premiums shall be solely a liability of
Borrower.
 
2.3 Inspection; Lenders’ Meeting.  Upon reasonable prior notice (which shall not
be less than one Business Day), Borrower will permit and will cause each of its
Subsidiaries to permit Lenders and any authorized representatives of Lenders to
visit and inspect any of its properties and the properties of its Subsidiaries,
including their financial and accounting records, and to make copies and take
extracts therefrom, for the purpose of determining or monitoring the value of
the Collateral and to discuss the Borrower’s and its Subsidiaries’ affairs,
finances and business with its and their officers, employees and public
accountants, upon reasonable prior notice at such times during normal business
hours and as often as may be reasonably requested; provided that if there is no
Event of Default that has occurred and is continuing, Borrower and its
Subsidiaries may, but shall not be required, to permit the foregoing more than
two (2) times each calendar quarter.  Notwithstanding the preceding sentence,
this Section 2.3 shall not require Borrower to disclose material non-public
information within the meaning of Regulation FD under the Securities Exchange
Act of 1934, as amended (the “1934 Act”), to any Person unless such Person has
expressly agreed to maintain such information in confidence in accordance with
the confidentiality provisions of Section 9.12 hereof.
 
-9-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
2.4 Legal Existence, Etc.  Except as otherwise permitted by Section 3.6,
Borrower will, and will cause each of its Subsidiaries to, at all times preserve
and keep in full force and effect its legal existence and good standing and all
rights and franchises material to its or their business.
 
2.5 Use of Proceeds.  Borrower will use the proceeds of the Loans, and will
cause any of its Subsidiaries who receive (directly or indirectly) proceeds of
the Loans to use such proceeds, solely for the purposes described in Section 1.3
of this Agreement.  No part of any Loan will be used (directly or indirectly) to
purchase any margin securities or otherwise in violation of the regulations of
the Federal Reserve System.
 
2.6 Authorized Common Stock.  By no later than June 30, 2008, Borrower shall
have obtained stockholder approval of, and shall have taken all requisite
actions (including filing an amendment to its Certificate of Incorporation with
the Delaware Secretary of State) to increase the Borrower’s authorized Common
Stock by a sufficient amount to fully reserve shares of Common Stock for
issuance upon exercise of the Warrants and otherwise in accordance with the
terms of the Warrants and conversion of the Series A Preferred Stock issued
pursuant to the Purchase Agreement (including any Additional Warrants or Series
A Preferred Stock that may be issued in the event of Borrower’s election to make
payments in kind in accordance with the terms of this Agreement and the Series A
Preferred Stock, as applicable).
 
2.7 Further Assurances; Notices of Acquisition of Property.
 
(a) Borrower will, and will cause each of its Subsidiaries to, do, execute and
deliver, as applicable, all such additional and further acts, documents and
instruments as the Lenders request to consummate the transactions contemplated
hereby and to vest completely in and assure Lenders of their respective rights
under this Agreement and the other Loan Documents, including such financing
statements, documents, security agreements and reports to evidence, perfect or
otherwise implement the security for repayment of the Obligations contemplated
by the Loan Documents.
 
(b) Borrower will notify Lenders in each Compliance Certificate delivered
pursuant to Section 4.1(b) of the acquisition (including by way of lease) by
Borrower (or any of its Subsidiaries) of any property or any interest therein,
and will, in a timely manner, execute and deliver all such additional documents
and instruments in connection with the acquisition of such property as Lenders
may reasonably require.
 
2.8 Taxes and other Government Charges. Subject to the second sentence of this
Section 2.8, Borrower shall timely tile, or cause to be filed, all material tax
returns and pay, or cause to be paid as and when due and prior to any
delinquency, all material taxes, assessments and governmental charges of any
kind that may at any time be lawfully assessed or levied against or with respect
to Borrower or its Subsidiaries.  Borrower may contest in good faith any such
taxes, assessments and other charges and, in such event, may permit the taxes,
assessments or other charges so contested to remain unpaid during any period,
including appeals, when Borrower is in good faith contesting the same, so long
as (a) reserves to the extent required by GAAP have been established in an
amount sufficient to pay any such taxes, assessments or other charges, accrued
interest
 
-10-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
thereon and potential penalties or other costs relating thereto, or other
adequate provision for the payment thereof shall have been made and maintained
at all times during such contest, (b) enforcement of the contested tax,
assessment or other charge is stayed for the entire duration of such contest,
and (c) any tax, assessment or other charge determined to be due, together with
any interest or penalties thereon, is promptly paid after resolution of such
contest.
 
SECTION 3. NEGATIVE COVENANTS
 
Borrower hereby covenants and agrees that until payment in full of all
Obligations, unless the Majority Lenders give their prior written consent,
Borrower shall perform and comply, and shall cause each of its Subsidiaries to
perform and comply, with all covenants in this Section 3.
 
3.1 Indebtedness.  Except as set forth on Schedule 3.1, Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume, issue, guaranty or otherwise become or remain liable with respect
to any Indebtedness other than: (a) the Obligations (including any renewals,
extensions or refinancings thereof, in whole or in part); (b) the Contingent
Obligations permitted by Section 3.4; (c) Indebtedness under purchase money
security agreements, Capital Leases and equipment leases, the aggregate amount
of which for the Borrower and Subsidiaries on a consolidated basis shall not at
any time exceed $50,000 from the Closing Date through the first anniversary of
the Closing Date, plus an additional $50,000 through each anniversary of the
Closing Date thereafter; (d) renewals, extensions, refinancings and refundings
of Indebtedness permitted by this Section 3.1, provided that any such renewal,
extension, refinancing or refunding is on terms satisfactory to the Lenders in
their sole discretion (as evidenced by the written consent of the Majority
Lenders); and (e) other unsecured Indebtedness ranking junior to the Security
Interests of Lenders that, without the prior written consent thereto of the
Majority Lenders, shall not exceed $100,000 individually or $250,000 in the
aggregate at any time outstanding.
 
3.2 Liens and Related Matters.
 
(a) No Liens.  Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or permit to exist any Lien on
or with respect to any property or asset (including, but not limited to, any
document or instrument with respect to accounts receivable) of Borrower or any
of its Subsidiaries, whether now owned or hereafter acquired, or any income or
profits therefrom, except Permitted Encumbrances, Liens, if any, in effect as of
the Closing Date securing Indebtedness described on Schedule 3.1, and any Lien
securing the extension, renewal, refinancing or refunding of any Indebtedness
secured by any Lien permitted by this Section 3.2(a); provided there is (i) no
change in the assets subject to such Lien and (ii) no increase in the amount of
Indebtedness secured by the assets subject to such Lien.
 
(b) No Negative Pledges.  Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or assume any agreement
(other than the Loan Documents or instruments entered into in connection with
Permitted Encumbrances) prohibiting the creation or assumption of any Lien
created or required pursuant to any of the Loan Documents upon its or their
respective properties or assets, whether now owned or hereafter acquired.
 
-11-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
3.3 Investments.  Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, make or own any Investment in any Person except that
Borrower and its Subsidiaries may make and own (a) Investments in Cash
Equivalents; provided that such Cash Equivalents are not subject to set-off
rights; (b) any Investment in any note constituting Indebtedness under Section
3.1 above.
 
3.4 Contingent Obligations.  Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or become or be liable with
respect to any Contingent Obligation except those resulting from endorsement of
negotiable instruments for collection in the ordinary course of business.
 
3.5 Restricted Junior Payments.  Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, declare, order, pay, make or set
apart any sum for any Restricted Junior Payment.
 
3.6 Restriction on Fundamental Changes.  Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly: (a) unless and only to the
extent required by Applicable Law, amend, modify or waive any term or provision
of its articles of incorporation or bylaws other than an amendment, modification
or waiver that is solely ministerial or administrative in nature and that could
not reasonably likely have an adverse effect on the interests of Lenders;
provided that notice of such ministerial or administrative amendment,
modification or waiver is given to Lenders prior to such act; (b) enter into any
transaction of merger or consolidation except that any Subsidiary of Borrower
may be merged with or into Borrower (provided that Borrower is the surviving
entity); (c) liquidate, recapitalize, reorganize, wind-up or dissolve itself (or
suffer any liquidation or dissolution); (d) acquire all or substantially all of
the assets of another Person other than in the ordinary course of the Borrower’s
business; or (e) commence a voluntary case under the Bankruptcy Code, file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of debts of
Borrower or any of its Subsidiaries, or consent to, or fail to contest in a
timely and appropriate manner, the entry of an order for relief in an
involuntary case.
 
3.7 Disposal of Assets or Subsidiary Stock.  Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, convey, sell, issue,
lease, sublease, transfer or otherwise dispose of, or grant to any Person an
option to acquire, in one transaction or a series of transactions, any of its
property, business or assets, or the capital stock of or other equity interests
in it or in any of its Subsidiaries, except for (a) bona fide sales of product
or inventory to customers in the ordinary course of business and dispositions of
obsolete equipment not used or useful in the business and de minimis asset
sales; (b) leasing or subleasing of its property in the ordinary course of
business; and (c) all other Asset Dispositions, the Net Proceeds of which are
applied in accordance with Section 1.6 above.
 
3.8 Transactions with Affiliates.  Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate or with any director, officer
or employee of Borrower or any Affiliate, except (a) transactions in the
ordinary course of and pursuant to the reasonable
 
 
-12-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
requirements of the business of Borrower or such Subsidiary and upon fair and
reasonable terms that are no less favorable to Borrower or such Subsidiary than
would be obtained in a comparable arm’s length transaction with a Person that is
not an Affiliate; provided that such transactions are subject to approval of a
majority of the disinterested directors on the Board of Directors of the
Borrower and that Borrower shall forthwith notify Lenders in writing of each
such transaction; or (b) payment of compensation to directors, officers and
employees in the ordinary course of business for services actually rendered in
their capacities as directors, officers and employees; provided (i) such
compensation is reasonable and comparable with compensation paid by companies of
like nature and similarly situated; and (ii) any increase in compensation of
officers and directors (other than in accordance with the employment agreements
of such officers and directors in effect on the Closing Date) is subject to the
prior written consent of the Majority Lenders.
 
3.9 Management Fees.  Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay any management or other similar
fees to any Person, except as provided under Section 1.4.
 
3.10 Conduct of Business.  Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, effect any material change in the
nature of its business, or engage in any business other than, as carried on as
of the date hereof and described in Section 5.3.
 
3.11 Fiscal Year.  Borrower will not, and will not permit any of its
Subsidiaries to, change its fiscal year.
 
3.12 Subsidiaries; Partnerships.  Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, establish, create or acquire any
Subsidiary, become a general or limited partner in any partnership or a joint
venturer in any joint venture.
 
3.13 Modification of Agreements.  Borrower will not amend, modify or change, or
consent or agree to any amendment, modification or change to, any of the terms
of any Material Contracts, except to the extent such change, amendment,
modification or consent is not materially adverse to Lenders and would not
otherwise have a Material Adverse Effect.
 
3.14 Board of Directors.  Borrower will not expand or decrease the number of
members on its Board of Directors.
 
3.15 Management of Borrower.  Borrower will not elect, appoint or remove any
executive officer, including the chief executive officer, chief financial
officer, president, chief operating officer, chief accounting officer or
controller.
 
3.16 Investment Company Act; Public Utility Holding Act.  Neither Borrower nor
any of its Subsidiaries shall be or become an “investment company” as that term
is defined in and is not otherwise subject to regulation under, the Investment
Company Act of 1940, as amended (the “1940 Act”).
 
-13-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
SECTION 4. FINANCIAL COVENANTS AND REPORTING
 
4.1 Reports and Covenants.  Borrower hereby covenants and agrees that until
payment in full of all Obligations, unless the Majority Lenders shall otherwise
give their prior written consent, Borrower (where indicated) shall perform and
comply with, and shall cause each of its Subsidiaries (where indicated) to
perform and comply with, all covenants in this Section 4.  For the purposes of
this Section 4, all covenants calculated for Borrower shall be calculated on a
consolidated basis for Borrower and its Subsidiaries.
 
(a) Financial Statements and Other Reports.  Borrower will maintain, and cause
each of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in conformity with GAAP (it being understood that
quarterly financial statements are not required to have footnote
disclosures).  Borrower will deliver or cause to be delivered each of the
financial statements and other reports described below to Lender.
 
(i) Quarterly and Annual Reports.  Whether or not required by the rules and
regulations of the SEC, so long as any Obligations are outstanding, Borrower
shall furnish to Lenders, within the time periods specified in the SEC’s rules
and regulations, all quarterly and annual reports that would be required to be
filed with the SEC on Forms 10-Q and 10-K if Borrower were required to file such
reports.  All such reports shall be prepared in all material respects in
accordance with all of the rules and regulations applicable to such
reports.  Each annual report on Form 10-K shall include a report on Borrower’s
consolidated financial statements by Borrower’s certified independent
accountants and certifications by Borrower’s principal executive officer and
principal financial officer in the forms required by Item 601(b)(31) and (32) of
Regulation S-K under the 1934 Act.  In addition, the Borrower shall file a copy
of each of the reports with the SEC for public availability within the time
periods specified in the rules and regulations applicable to such reports
(unless the SEC shall not accept such a filing).  Borrower’s obligation to
furnish such reports to the Lenders hereunder may be satisfied by filing such
reports with the SEC for so long as the SEC accepts such filings.  If, at any
time, Borrower is no longer subject to the periodic reporting requirements of
the 1934 Act for any reason, Borrower shall nevertheless continue filing the
reports specified in this Section 4.1(a) with the SEC within the time periods
specified above unless the SEC shall not accept such a filing.  Borrower agrees
that it shall not take any action for the purpose of causing the SEC not to
accept any such filings.  If, notwithstanding the foregoing, the SEC shall not
accept Borrower’s filings for any reason, Borrower shall, within the time
periods that would apply if Borrower were required to file those reports with
the SEC, post the reports referred to in Section 4.1(a) on its website and
provide Lenders copies thereof.
 
(ii) Monthly Financials.  If, and for so long as Collateral Agent shall request,
as soon as available and in any event within forty-five (45) days after the end
of each January, February, April, May, July, August, October and November,
Borrower will deliver or cause to be delivered to Collateral Agent consolidated
and consolidating balance sheets of Borrower and its Subsidiaries, as at the end
of such month, and the related consolidated and consolidating statements of
income and operating cash flow for such month, and for the period from the
beginning of the then current fiscal year of Borrower to the end of such month.
 
-14-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
(iii) Monthly Budgets.  If, and for so long as Collateral Agent shall request,
as soon as available and in any event within forty-five (45) days after the end
of each January, February, April, May, July, August, October and November,
Borrower will deliver or cause to be delivered to Collateral Agent any budgets,
forecasts, projections or similar documents prepared by the Borrower prior to
the end of such month that have not previously been so delivered.
 
(iv) Other Reports.  Promptly following receipt thereof, Borrower shall deliver
to Lenders copies of any management letter or report by independent public
accountants with respect to the financial condition, operations or business of
the Borrower and its Subsidiaries.
 

(b) Compliance Certificates.  Together with each delivery of financial
statements of Borrower and its Subsidiaries, as applicable, Borrower will
deliver or cause to be delivered (i) a fully and properly completed compliance
certificate in substantially the same form as Exhibit 4.1(b) (each, a
“Compliance Certificate”) signed by the chief executive officer or chief
financial officer of Borrower.
 
(c) Press Releases.  Promptly upon their becoming available, the Borrower will
deliver or cause to be delivered copies of all press releases and other
statements made available by Borrower or any of its Subsidiaries to the public
concerning developments in the business of any such Person.
 
(d) Events of Default, Etc.  Promptly upon any executive officer of Borrower
obtaining knowledge of any of the following events or conditions, Borrower shall
deliver copies of all notices given or received by Borrower or any of its
Subsidiaries with respect to any such event or condition and a certificate of
the chief executive officer or chief operating officer of Borrower specifying
the nature and period of existence of such event or condition and what action
Borrower or such Subsidiary has taken, is taking and proposes to take with
respect thereto: (i) any condition or event that constitutes an Event of Default
or Default; (ii) any notice that any Person has given to Borrower or any of its
Subsidiaries or any other action taken with respect to a claimed default or
event or condition of the type referred to in Section 6.1(b); or (iii) any event
or condition that could reasonably be expected to have a Material Adverse
Effect.
 
(e) Litigation.  Promptly upon any executive officer of Borrower obtaining
knowledge of (i) the commencement of any action, suit, proceeding, governmental
investigation or arbitration against or affecting Borrower or any of its
Subsidiaries not previously disclosed by Borrower to Lenders; or (ii) any
material development in any action, suit, proceeding, governmental investigation
or arbitration at any time pending against or affecting Borrower or any of its
Subsidiaries which, in each case or in the aggregate, is expected by counsel to
Borrower to have a Material Adverse Effect, Borrower will promptly give notice
thereof to Lenders and provide such other information as may be reasonably
available to Borrower to enable Lenders and their counsel to evaluate such
matter.
 
(f) Supplemented Schedules; Corporate Changes.  From time to time, and
concurrently with the delivery by Borrower of the Compliance Certificates
required by Section 4.1(b), Borrower shall, if necessary to prevent the same
from becoming materially
 
-15-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
misleading, supplement in writing and deliver revisions of the Schedules annexed
to this Agreement to the extent necessary to disclose material new or changed
facts or circumstances after the Closing Date; provided, that (i) subsequent
disclosures shall not constitute a cure or waiver of any Default or Event of
Default resulting from the matters disclosed; and (ii) any revised Schedule
shall not in and of itself be deemed a breach of any representation of the other
Loan Documents so long as such Schedules are delivered within thirty (30) days
of Borrower becoming aware of the new information set forth therein.
 
(g) Regulatory and Other Notices.  Within thirty (30) days after filing, receipt
or becoming aware thereof, Borrower will deliver or cause to be delivered copies
of any filings or communications sent to or notices and other communications
received by Borrower, or any of its Subsidiaries from any Governmental Authority
relating to any noncompliance by Borrower or any of its Subsidiaries with any
law or with respect to any matter or proceeding the effect of which could
reasonably be expected to have a Material Adverse Effect.
 
(h) Other Information.  Promptly upon request, Borrower will deliver such other
information and data with respect to Borrower and any of its Subsidiaries as
from time to time may be reasonably requested by Lenders.
 
4.2 Accounting Terms; Utilization of GAAP.  For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to such terms in conformity with GAAP.  Except as otherwise expressly provided,
financial statements furnished to Lenders pursuant to Section 4.1(a) shall be
prepared in accordance with GAAP as in effect at the time of such
preparation.  No Accounting Changes (as defined below) shall affect financial
covenants, standards or terms in this Agreement.  “Accounting Changes” means:
(a) changes in accounting principles required by GAAP and implemented by
Borrower or any of its Subsidiaries; (b) changes in accounting principles
recommended by Borrower’s certified public accountants and implemented by
Borrower or any of its Subsidiaries; and (c) changes in the method of
determining carrying value of Borrower’s, or any of its Subsidiaries’ assets,
liabilities or equity accounts.  All such adjustments resulting from
expenditures made subsequent to the Closing Date (including, but not limited to,
capitalization of costs and expenses or payment of pre-Closing Date liabilities)
shall be treated as expenses in the period the expenditures are made.
 
SECTION 5. REPRESENTATIONS AND WARRANTIES
 
In order to induce Lenders to enter into this Agreement and make the Loans,
Borrower hereby represents and warrants to Lenders that the following statements
are true, correct and complete:
 
5.1 Disclosure.  No information furnished by or on behalf of Borrower or any of
its Subsidiaries contained in this Agreement, the financial statements referred
to in Section 5.7 or any other document, certificate, opinion or written
statement furnished to Lenders pursuant to this Agreement contains any untrue
statement of a material fact or omitted, omits or will omit to state a material
fact necessary, when taken as a whole with all information so furnished, in
order to make the statements contained herein or therein not misleading in light
of the circumstances in which the same were made.
 
-16-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
5.2 No Material Adverse Effect.  Since March 31, 2007, there has been no event
or change in facts or circumstances affecting Borrower or any of its
Subsidiaries which individually or in the aggregate have had or could reasonably
be expected to have a Material Adverse Effect and that have not been disclosed
herein or in the attached Schedules.
 
5.3 Organization, Powers, Authorization and Good Standing.
 
(a) Organization and Powers.  Except as disclosed on Schedule 5.3(a), Borrower
and each of its Subsidiaries is a limited liability company, corporation or
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware.  Borrower and each of its Subsidiaries has all
requisite legal power and authority to own and operate its properties, to carry
on its business as now conducted and proposed to be conducted, to enter into
each Debt Refinancing Document to which it is a party and to carry out its
respective obligations with respect thereto.
 
(b) Authorization; Binding Obligation.  Borrower and each of its Subsidiaries
has taken all necessary corporate, limited liability company, partnership, and
other action to authorize the execution, delivery and performance of this
Agreement and each of the other Debt Refinancing Documents to which it is a
party.  This Agreement is, and the other Debt Refinancing Documents when
executed and delivered will be, the legally valid and binding obligations of the
applicable parties thereto (other than Lenders and Investors), each enforceable
against each of such parties, as applicable, in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar state or federal debt or relief laws from
time to time in effect which affect the enforcement of creditors’ rights in
general and general principles of equity.
 
(c) Qualification.  Borrower and each of its Subsidiaries is duly qualified and
authorized to do business and in good standing in each jurisdiction where the
nature of its business and operations requires such qualification and
authorization, except where the failure to be so qualified, authorized and in
good standing could not reasonably be expected to have a Material Adverse
Effect.  All jurisdictions in which each such Person is qualified and authorized
to do business are set forth on Schedule 5.3(c).
 
5.4 Compliance with Applicable Law.  Neither the Borrower nor any of its
Subsidiaries is in violation of any Applicable Law, or in default with respect
to any judgment, writ, injunction or decree of any Governmental Authority, the
violation of which, or a default with respect to which, could reasonably be
expected to have a Material Adverse Effect.  The execution, delivery and
performance by Borrower and its Subsidiaries of the Debt Refinancing Documents
to which each such Person is a party, the borrowings hereunder and the
transactions contemplated hereby and thereby do not and will not, by the passage
of time, the giving of notice or otherwise, (i) require any Governmental
Approval or violate any Applicable Law relating to Borrower or any of its
Subsidiaries in any material respect, (ii) except as set forth on Schedule 5.4,
conflict with, result in a breach of or constitute a default under the articles
of incorporation, bylaws or other organizational documents of Borrower or its
Subsidiaries or any Material Contract to which such Person is a party or by
which any of its properties may be bound or any Governmental
 
-17

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
Approval relating to such Person or (iii) except as required or permitted under
the Debt Refinancing Documents, result in or require the creation or imposition
of any Lien upon or with respect to any property now owned or hereafter acquired
by such Person.
 
5.5 Tax Returns and Payments.  Borrower and each of its Subsidiaries has duly
filed or caused to be filed all federal, state, local and other tax returns
required by Applicable Law to be filed, and has paid, or made adequate provision
for the payment of, all federal, state, local and other taxes, assessments and
governmental charges or levies upon it and its property, income, profits and
assets which are due and payable, except where the payment of such tax is being
diligently contested in good faith and adequate reserves therefore have been
established in compliance with GAAP.  The charges, accruals and reserves on the
books of the Borrower and its Subsidiaries in respect of federal, state, local
and other taxes for all fiscal years and portions thereof are, in the judgment
of Borrower, adequate, and Borrower and each of its Subsidiaries do not
anticipate any additional material taxes or assessments for any of such years.
 
5.6 Environmental Matters.  Borrower and each of its Subsidiaries is in
compliance in all material respects with all applicable Environmental Laws, and
there is no contamination at, under or about any of the real property owned or
leased by the Borrower or any of its Subsidiaries (the “Real Property”) or such
operations which interfere in any material respect with the continued operation
of such Real Property or impair in any material respect the fair saleable value
thereof or in amounts or concentrations or under circumstances that constitute a
violation of, or could give rise to liability under, any Environmental Laws.  No
claim, notice or investigation based on any Environmental Laws relating to the
Real Property or any operations or activities on or about the Real Property (i)
has been asserted or conducted in the past or is currently pending against or
with respect to Borrower or its Subsidiaries, or (ii) to the knowledge of
Borrower, is threatened or contemplated, nor does Borrower have knowledge or
reason to believe that any such claim, notice or investigation could reasonably
be expected to be received.  There are no consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect to
the Real Property or the business of Borrower and its Subsidiaries.  Neither
Borrower nor any of its Subsidiaries has directly, nor has it caused any third
party (i) to manufacture, process, distribute, use, treat, store or dispose of
any substance, material or waste upon, at or under the Real Property in
violation of, or in a manner that would reasonably be expected to give rise to
liability under, any Environmental Laws or to transport or otherwise dispose of
any substance, material or waste in violation of, or in a manner or to a
location that would reasonably be expected to give rise to liability under, any
Environmental Laws, or (ii) to take any other action or conduct or to fail to
take to any action or conduct upon, at or under the Real Property in violation
of, or in a manner that would reasonably be expected to give rise to liability
under, any Environmental Laws.  There has been no release or threat of release
of any substance, material or waste at or from any Real Property, or arising
from or related to the operations of the Borrower or its Subsidiaries, in
violation of or in amounts or in a manner that could give rise to liability
under Environmental Laws.  Neither Borrower nor any of its Subsidiaries has
contractually assumed or, to the knowledge of the Borrower, assumed by operation
of law any liability of any other Person under Environmental Laws.  No
underground storage tanks are currently, or have been, located on any of the
Real Property.  Except as set forth on Schedule 5.6, there is no building or
structure on the Real Property containing asbestos.
 
5.7 Financial Statements.
 
-18-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
(a) All financial statements of Borrower and its Subsidiaries which have been
furnished to Lenders or Collateral Agent pursuant to this Agreement have been
prepared in accordance with GAAP consistently applied (except as disclosed
therein) and present fairly the financial condition of the Persons covered
thereby as of the date thereof and the results of their operations for the
periods covered thereby and disclose all material liabilities and Contingent
Obligations of Borrower or its Subsidiaries as at the dates thereof.  Borrower
and its Subsidiaries do not have outstanding, as of the Closing Date, and after
giving effect to the Loans on the Closing Date, any Indebtedness for borrowed
money or Contingent Obligations other than the Loans and the Indebtedness
permitted under Section 3.1.
 
(b) All projections concerning Borrower and its Subsidiaries which have been
furnished to Lenders were prepared and presented in good faith by or on behalf
of Borrower and such Subsidiaries.  No fact is known to Borrower which is
reasonably likely (so far as Borrower can reasonably foresee) to have a Material
Adverse Effect which has not been set forth in the financial statements referred
to in Section 5.7(a) hereof or in such information, reports, papers and data or
otherwise disclosed in writing to Lenders prior to the date hereof.
 
5.8 Intellectual Property.  Borrower and each of its Subsidiaries owns, or
possesses through valid licensing arrangements, the right to use all patents,
copyrights, trademarks, trade names, service marks, technology know-how and
processes used in or necessary for the conduct of its business as currently
conducted or anticipated to be conducted (collectively, the “Intellectual
Property Rights”) without infringing upon the rights of any other Person in any
material respect.  No event has occurred which permits, or after notice or lapse
of time or both would permit, the revocation or termination of any such
Intellectual Property Rights.  No material claim has been asserted or is pending
by any Person challenging or questioning any Intellectual Property Rights or
Borrower or any of its Subsidiaries, or the validity or effectiveness of any
Intellectual Property Rights, nor does Borrower know of any valid basis for any
such claim.  Except as set forth on Schedule 5.8, Borrower does not have
knowledge of any infringement by others of Intellectual Property Rights of the
Borrower or its Subsidiaries.  Except as provided on Schedule 5.8, there is no
claim, action or proceeding being made or brought, or to the knowledge of the
Borrower, being threatened, against the Borrower or its Subsidiaries regarding
Intellectual Property Rights.  Except as provided on Schedule 5.8, the Borrower
and its Subsidiaries have good and marketable title in all Intellectual Property
Rights owned by them, in each case free and clear of all Liens.
 
5.9 Litigation, Investigations, Audits, Etc.
 
(a) Except as set forth on Schedule 5.9, there is no action, suit, proceeding or
investigation pending against, or, to the knowledge of Borrower, threatened
against or in any other manner relating adversely to the Borrower or its
Subsidiaries or any of their respective properties in any court or before any
arbitrator of any kind or before or by any Governmental Authority, which could
reasonably be expected to have a Material Adverse Effect, nor does Borrower know
of any valid basis therefor.  None of the actions, suits, proceedings or
investigations disclosed on Schedule 5.9 calls into question the validity of
this Agreement or any other Debt Refinancing Document.
 
-19-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
(b) To Borrower’s knowledge, none of the Borrower and its Subsidiaries are the
subject of any review or audit by the Internal Revenue Service or any
investigation by any Governmental Authority concerning the violation or possible
violation of any law which, individually or collectively, if determined
adversely to Borrower or any of its Subsidiaries, would reasonably be expected
to have a Material Adverse Effect, nor does Borrower know of any valid basis
therefor.
 
5.10 Employee Labor Matters.  Except as set forth on Schedule 5.10, (a) None of
Borrower, its Subsidiaries and any of their respective employees is subject to
any collective bargaining agreement, (b) no petition for certification or union
election is pending with respect to the employees of any such Person and no
union or collective bargaining unit has sought such certification or recognition
with respect to the employees of any such Person and (c) there are no strikes,
slowdowns, unfair labor practice complaints, work stoppages or controversies
pending or, to the knowledge of Borrower after due inquiry, threatened between
any such Person and its respective employees, other than employee grievances
arising in the ordinary course of business which could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.
 
5.11 Employee Benefit Plans.  Borrower and each of its Subsidiaries is in
compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
and published interpretations thereunder, the failure to comply with which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
 
5.12 Perfection and Priority.  Except for Permitted Encumbrances, the Security
Interest is a valid and perfected first priority lien security interest in the
Collateral in favor of Lenders, securing, in accordance with the terms of the
Security Documents, the Obligations, and the Collateral is subject to no Lien
other than permitted pursuant to Section 3.2.
 
5.13 Solvency.  Borrower: (a) owns and will own assets the present fair saleable
value of which are (i) greater than the total amount of liabilities (including
contingent liabilities) of Borrower, and (ii) greater than the amount that will
be required to pay the probable liabilities of Borrower’s then existing debts
and liabilities as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to Borrower; (b) has
capital that is not unreasonably small in relation to its business as presently
conducted or after giving effect to any contemplated transaction; and (c) does
not intend to incur and does not believe that it will incur debts and
liabilities beyond its ability to pay such debts and liabilities as they become
due.
 
5.14 Investment Company Act; Federal Regulations
 
.  Neither Borrower nor any of its Subsidiaries is an “investment company” or a
company “controlled” by an “investment company” as such terms are defined in,
and is not otherwise subject to regulation under, the 1940 Act.  No part of the
proceeds of any Loans will be used for “buying” or “carrying” any “margin stock”
within the respective meanings of each of the quoted terms under Regulation U as
now and from time to time hereafter in effect or for any purpose that violates
the provisions of the Regulations of the Board of Governors.  If
 
-20-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
requested by any Lender, Borrower will furnish to each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U
1, as applicable, referred to in Regulation U.
 
5.15 Material Contracts.  Schedule 5.15 sets forth a complete and accurate list
of all Material Contracts of the Borrower and its Subsidiaries.  Borrower and
each of its Subsidiaries has performed all of its material obligations under
such Material Contracts and, to the knowledge of Borrower, each other party
thereto is in material compliance with each such Material Contract and no
defaults, events of default, acceleration event or similar events have occurred
or are continuing under any Material Contract.  Each Material Contract is in
full force and effect in accordance with the terms thereof.  Borrower and its
Subsidiaries have made available a true and complete copy of each Material
Contract listed on Schedule 5.15 for inspection by Lenders.
 
5.16 Title to Properties.  Borrower and each of its Subsidiaries has such title
or leasehold interest in and to the Real Property owned or leased by it as is
necessary or desirable to the conduct of its business and valid and legal title
or leasehold interest in and to all of its personal property, including those
reflected on the balance sheets of Borrower and each of its Subsidiaries
delivered pursuant to Section 5.7, except those which have been disposed of by
Borrower subsequent to such date which dispositions have been in the ordinary
course of business or as otherwise expressly permitted hereunder.  Set forth on
Schedule 5.16 is a true and complete list of all Real Property owned, and all
Real Property or personal property leased or subleased by or to each of Borrower
and its Subsidiaries (other than leases of personal property as to which either
Borrower is lessee or sublessee for which the value of such personal property in
the aggregate is less than $100,000).
 
5.17 Subsidiaries and Affiliates.  Schedule 5.17(a) sets forth a complete and
accurate list of all direct or indirect Subsidiaries and Affiliates of Borrower,
including for each such Subsidiary whether such Subsidiary is wholly-owned by
Borrower, and if not, the percentage ownership of Borrower or its Subsidiary in
such Subsidiary.  Except as disclosed to the Lenders by the Borrower in writing
from time to time after the Closing Date, (a) Schedule 5.17(b) sets forth the
name, location of chief executive office, location of Inventory and Equipment
(as each such term is defined in the New York UCC) and jurisdiction of
incorporation of Borrower and each of its Subsidiaries and (b) there are no
outstanding subscriptions, options, warrants, calls, rights or other agreements
or commitments (other than stock options or restricted stock granted to
employees or directors and directors’ qualifying shares) of any nature relating
to any equity of Borrower or any of its Subsidiaries, except as created or
permitted by the Debt Refinancing Documents.
 
5.18 Filings.  Except as set forth on Schedule 5.18, since March 31, 2007,
Borrower has timely filed with the SEC all the annual and periodic reports, and
has submitted to the SEC such other documents and reports, as it is required
under the Securities Act of 1933, as amended (the “1933 Act”), the 1934 Act, the
1940 Act, and any other federal statute applicable to Borrower and administered
by the SEC; (ii) each such filing or submission, when it became effective or was
filed with the SEC, as the case may be, conformed in all material respects to
the requirements of the 1933 Act, the 1934 Act or the 1940 Act, as applicable,
and the rules and regulations thereunder, and none
 
-21-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
of such annual and periodic reports or other documents or reports contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
 
5.19 Insurance.  All policies of insurance of any kind or nature owned by or
issued to Borrower and its Subsidiaries, including without limitation, policies
of life, fire, theft, product liability, public liability, property damage,
other casualty, employee fidelity, workers’ compensation, employee health and
welfare, title, property and liability insurance, are in full force and effect
except to the extent commercially reasonably determined by the Borrower not to
be necessary pursuant to the immediately succeeding clause or which is not
material to the overall coverage and are of a nature and provide such coverage
as in the reasonable opinion of the Borrower, is sufficient and as is
customarily carried by companies of the size and character of Borrower.
 
5.20 Approvals.  No authorizations of any Governmental Authority, or any
applicable securities exchange, are necessary for the execution, delivery or
performance by Borrower of the Debt Refinancing Documents to which it is a
party, or for the legality, validity or enforceability hereof or thereof.
 
5.21 Internal Accounting Controls.  Borrower and its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  Borrower has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Borrower and designed
such disclosure controls and procedures to ensure that material information
relating to Borrower, including its Subsidiaries, is made known to the
certifying officers by others within those entities.  Borrower’s certifying
officers have evaluated the effectiveness of Borrower’s controls and procedures
in accordance with Item 307 of Regulation S-K under the Exchange Act for
Borrower’s most recently ended fiscal quarter or fiscal year-end (such date, the
“Evaluation Date”).  Borrower presented in its most recently filed Form 10-K or
Form 10-Q the conclusions of the certifying officers about the effectiveness of
the disclosure controls and procedures based on their evaluations as of the
Evaluation Date.  Since the Evaluation Date, there have been no significant
changes in Borrower’s internal controls (as such term is defined in Item 308(c)
of Regulation S-K under the Exchange Act) or, to Borrower’s knowledge, in other
factors that could significantly affect Borrower’s internal controls.
 
5.22 Foreign Corrupt Practices.  Neither Borrower nor any of its Subsidiaries
nor, to the knowledge of Borrower, any director, officer, agent, employee or
other Person acting on behalf of Borrower or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, Borrower (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate
 
-22-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
funds; (iii) violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
 
5.23 Representations and Covenants Made to the Investors.  Subject to any and
all representations, warranties, covenants and agreements made by Borrower to
and for the benefit of the Investors that survive the consummation of the
transactions contemplated by the Purchase Agreement shall be deemed to have also
been made to and for the benefit of Lenders.
 
SECTION 6. EVENTS OF DEFAULT AND RIGHTS AND REMEDIES
 
6.1 Events of Default.  “Event of Default” shall mean the occurrence or
existence of any one or more of the following:
 
(a) Payment.  Failure of the Borrower to repay any principal amount of the Loans
when due in accordance with the terms of this Agreement or any Note, or to pay
any interest on the Loans in accordance with the terms of this Agreement or any
Note, or any other amounts payable under this Agreement or any other Loan
Document with three (3) Business Days after any such interest or other amount
becomes due in accordance with the terms hereof or thereof; or
 
(b) Default in Other Agreements.  (i) Failure of Borrower or any of its
Subsidiaries to pay when due, subject to any applicable grace period, any
principal or interest on Indebtedness (other than the Loans) or any Contingent
Obligation; any dividend or other payment due in respect of the Series A
Preferred Stock, or any other payment due under any Debt Refinancing Document
(other than as provided in Section 6.1(a)); (ii) any other breach or default of
Borrower or any of its Subsidiaries with respect to any Indebtedness (other than
the Loans) or any Contingent Obligation if the effect of such breach or default
is to cause or to permit the holder or holders then to cause such Indebtedness
or Contingent Obligation to become or be declared due prior to its stated
maturity; or (iii) the continuation of any breach or default of Borrower or any
of its Subsidiaries under any Material Contract beyond any applicable grace
period which has a Material Adverse Effect; or
 
(c) Breach of Certain Provisions.  (i) Failure of Borrower or any of its
Subsidiaries to perform or comply with any term or condition contained in that
portion of Section 2.2 relating to the obligation of Borrower and each
Subsidiary of Borrower, to maintain insurance, Section 2.4, Section 2.6, Section
3, Section 4 or Section 7.19 except that, with respect to a failure of Borrower
to perform or comply with any term or condition contained in Section 4.1(a),
such failure shall not be deemed to be an Event of Default unless it shall
remain uncured for a period of five (5) days or more; or
 
(d) Breach of Warranty.  Any material representation, warranty, certification or
other statement made by Borrower or any of its Subsidiaries, in any Debt
Refinancing Document or in any statement or certificate at any time given by
Borrower or any of its Subsidiaries in writing pursuant to any Loan Document is
false in any material respect on the date made or deemed made; or
 
(e) Other Defaults Under Loan Documents.  Borrower or any of its Subsidiaries
breaches or defaults in the performance of or compliance with (x) any other term
contained in this Agreement or the other Loan Documents and such breach or
default is
 
-23

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
not remedied or waived within twenty (20) days (other than occurrences described
in other provisions of this Section 6.1 for which a different grace or cure
period is specified or which constitute immediate Events of Default) or (y) any
term contained in any other Debt Refinancing Document (subject to any applicable
grace period); or
 
(f) Involuntary Bankruptcy; Appointment of Receiver; Etc.  (i) A court enters a
decree or order for relief with respect to Borrower or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code, which decree or order is not
stayed or other similar relief is not granted under any applicable federal or
state law within thirty (30) days; or (ii) the continuance of any of the
following events for thirty (30) days unless dismissed, bonded or discharged:
(A) an involuntary case is commenced against Borrower or any of its Subsidiaries
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect; or (B) a decree or order of a court for the appointment of
a receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Borrower or any of its Subsidiaries, or over all or a
substantial part of its property, is entered; or (C) an interim receiver,
trustee or other custodian is appointed without the consent of Borrower or any
of its Subsidiaries for all or a substantial part of the property of Borrower or
any such Subsidiary; or
 
(g) Voluntary Bankruptcy; Appointment of Receiver; Etc.  Borrower or any of its
Subsidiaries (i) commences a voluntary case under the Bankruptcy Code, files a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of debts of
Borrower or any of its Subsidiaries, or consents to, or fails to contest in a
timely and appropriate manner, the entry of an order for relief in an
involuntary case, the conversion of an involuntary case to a voluntary case
under any such law, or the appointment of or taking possession by a receiver,
trustee or other custodian of all or a substantial part of the property of
Borrower or any of its Subsidiaries; or (ii) makes any assignment for the
benefit of creditors; or (iii) the Board of Directors of Borrower or any of its
Subsidiaries adopts any resolution or otherwise authorizes action to approve any
of the actions referred to in this Section 6.1(g); or
 
(h) Governmental Liens.  Any Lien, levy or assessment (other than Permitted
Encumbrances) is filed or recorded with respect to or otherwise imposed upon all
or any part of the Collateral or the other assets of Borrower or any of its
Subsidiaries by the United States or any department or instrumentality thereof
or by any state, county, municipality or other Governmental Authority and
remains undischarged, unvacated, unbonded or unstayed for a period of thirty
(30) days or in any event later than five (5) Business Days prior to the date of
any proposed sale thereunder and such Liens secures an amount individually or in
the aggregate in excess of $50,000; or
 
(i) Judgment and Attachments.  Any money judgment, writ or warrant of attachment
or similar process (other than those described in Section 6.1(h)) involving an
amount in any individual case or in the aggregate for or against Borrower and/or
its Subsidiaries at any time in excess of $50,000 (in either case not adequately
covered by insurance as to which the insurance company has not disclaimed
coverage subject to customary reservations of rights) is entered or filed
against Borrower or any of its Subsidiaries and/or any of
 
-24-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
their respective assets and remains undischarged, unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later than five (5)
Business Days prior to the date of any proposed sale thereunder; or
 
(j) Dissolution.  Any order, judgment or decree is entered against Borrower, or
any of its Subsidiaries decreeing the dissolution or split up of Borrower or
such Subsidiary; or
 
(k) Solvency.  Borrower or any of its Subsidiaries ceases to be solvent or
Borrower or any of its Subsidiaries admits in writing its present or prospective
inability to pay its debts as they become due; or
 
(l) Injunction.  Borrower or any of its Subsidiaries is enjoined, restrained or
in any way prevented by the order of any court or any Governmental Authority
from conducting all or any material part of its business and such order
continues for more than fifteen (15) days; or
 
(m) ERISA; Pension Plans.  (i) Borrower or any of its Subsidiaries fails to make
full payment when due of all amounts which, under the provisions of any employee
benefit plans or any applicable provisions of the IRC, any such Person is
required to pay as contributions thereto and such failure results in or could
reasonably be expected to have a Material Adverse Effect; or (ii) a material
accumulated funding deficiency occurs or exists, whether or not waived, with
respect to any such employee benefit plans; or (iii) any employee benefit plan
of Borrower or any of its Subsidiaries loses its status as a qualified plan
under the IRC and such loss results in or could reasonably be expected to have a
Material Adverse Effect; or
 
(n) Environmental Matters.  Borrower or any of its Subsidiaries fails to: (i)
obtain or maintain any operating licenses or permits required by any
Environmental Laws or environmental authorities; (ii) begin, continue or
complete any remediation activities as required by any environmental
authorities; (iii) store or dispose of any hazardous materials in accordance
with applicable Environmental Laws; or (iv) comply with any other Environmental
Laws, if in any such case such failure could reasonably be expected to have a
Material Adverse Effect; or
 
(o) Invalidity of Debt Refinancing Documents.  Any of the Debt Refinancing
Documents for any reason, other than a partial or full release in accordance
with the terms thereof, ceases to be in full force and effect or is declared to
be null and void and Borrower or any of its Subsidiaries fails to promptly
correct such cessation or declaration, or Borrower or any of its Subsidiaries
denies that it has any further liability under any Debt Refinancing Documents to
which it is party, or gives notice to such effect; or
 
(p) Damage; Strike; Casualty.  Any material damage to, or loss, theft or
destruction of a major portion of the Collateral, whether or not insured, or any
strike, lockout, labor dispute, embargo, condemnation, act of God or public
enemy, or other casualty which causes, for more than fifteen (15) consecutive
days, the cessation or substantial curtailment of revenue producing activities
of Borrower or any of its Subsidiaries; or
 
-25-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
(q) Licenses, Permits and Contracts.  (i) The loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter acquired or
utilized by Borrower, or any of its Subsidiaries, if such loss, suspension,
revocation or failure to renew could reasonably be expected to have a Material
Adverse Effect and (ii) any breach, default or termination shall have occurred
under any Material Contract by any of the parties thereto, or any Material
Contract shall fail to be renewed or otherwise have ceased to be in full force
and effect, if such breach, default, failure to renew, cessation or termination
could reasonably be expected to have a Material Adverse Effect; or
 
(r) Failure of Security.  Lenders do not have or cease to have a valid and
perfected first priority security interest or second priority security interest,
as the case may be (subject to Permitted Encumbrances), in the Collateral or any
substantial portion thereof, in each case, except to the extent that such
failure to have a valid and perfected first priority security interest or second
priority security interest is caused solely by the failure of Lenders to take
any action reasonably within its control after obtaining knowledge thereof or
being notified by Borrower in writing to take such action; or
 
(s) Change in Control.  A Change of Control shall have occurred.  For purposes
of this Section 6.1(s), a “Change of Control” shall be deemed to have occurred
upon (i) the acquisition of ownership, directly or indirectly, beneficially or
of record, by any Person or group (within the meaning of the1934 Act and the
rules of the SEC thereunder as in effect on the date hereof) of shares
representing more than 30% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Borrower and (ii) the occupation
of a majority of seats (other than vacant seats) on the Board of Directors of
the Borrower by Persons who were neither nominated by the Board of Directors of
the Borrower on the Closing Date nor appointed or nominated by directors so
nominated.
 
6.2 AccelerationUpon the occurrence of an Event of Default (and after the
expiration of any applicable cure period), as well as a breach by Borrower of
Section 5.13, the unpaid principal amount of and accrued interest and fees on
all Loans and all other Obligations shall automatically become immediately due
and payable, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other requirements of any kind, all of
which are hereby expressly waived by Borrower.
 
6.3 Rights of Collection.  Without limiting the rights and remedies of Lenders
set forth in Section 6.1 above and notwithstanding anything to the contrary
contained in any other Loan Document, upon the occurrence and during the
continuation of any Event of Default, unless and until such Event of Default is
cured or waived by the Majority Lenders, Majority Lenders may, upon five (5)
Business Days’ prior written notice by the Majority Lenders, (i) exercise all of
their rights and remedies under this Agreement, the other Loan Documents and
Applicable Law and (ii) assume control of Borrower and direct the management and
operations of Borrower, in order to satisfy all of the Borrower’s Obligations
under the Loan Documents
 
6.4 Consents.  Borrower acknowledges that certain transactions contemplated by
this Agreement and the other Loan Documents and certain actions which may be
taken by Lenders or Collateral Agent in the exercise of their rights under this
Agreement and the other Loan Documents may require the consent of a third
party.  If counsel to any of the Lenders or Collateral Agent reasonably
determines that the consent of a third party including a Governmental Authority
is required in connection with the execution, delivery and performance of any of
 
-26-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
the aforesaid Loan Documents or any Loan Documents delivered to Lenders or
Collateral Agent in connection therewith or as a result of any action which may
be taken pursuant thereto, then Borrower, at Borrower’s cost and expense, agrees
to use its commercially reasonable efforts, and to cause its Subsidiaries to use
their commercially reasonable efforts, to secure such consent and to cooperate
in any action commenced by any Lender or Collateral Agent to secure such
consent.
 
6.5 Performance by Lenders or Collateral Agent.  If Borrower shall fail to
perform any covenant, duty or agreement contained in any of the Loan Documents,
Lenders, or Collateral Agent upon the request of the Majority Lenders, may
perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower after the expiration of any cure or grace periods set forth herein.  In
such event, Borrower shall be obligated, at the request of Lenders or Collateral
Agent, to promptly pay any amount reasonably expended by Lenders or Collateral
Agent in such performance or attempted performance, to Lenders or Collateral
Agent, together with interest thereon at the highest rate of interest in effect
upon the occurrence of an Event of Default as specified in Section 1.2(c) from
the date of such expenditure until paid.  Notwithstanding the foregoing, it is
expressly agreed that neither Lenders nor Collateral Agent shall have any
liability or responsibility for the performance of any obligation of Borrower
under this Agreement or any other Loan Document.
 
6.6 Set Off and Sharing of Payments.  In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
during the continuance of any Event of Default, Lenders and Collateral Agent are
hereby authorized by Borrower at any time or from time to time, with reasonably
prompt subsequent notice to Borrower (any prior or contemporaneous notice being
hereby expressly waived) to set off and to appropriate and to apply any and all
(i) balances held by Lenders or Collateral Agent for the account of Borrower or
any Subsidiaries, and (ii) other property at any time held or owing by Lenders
or Collateral Agent to or for the credit or for the account of Borrower or any
of its Subsidiaries, against and on account of any of the Obligations.
 
6.7 Application of Payments.  Subsequent to the acceleration of the Loans
pursuant to Section 6.2, all payments received by Lenders (or Collateral Agent
on behalf of Lenders) on the Obligations and on the proceeds from the
enforcement of the Obligations shall be applied as follows: First, to all fees
and expenses of the Collateral Agent then due and payable, then to all fees and
expenses of the Lenders then due and payable, then to all other expenses then
due and payable by Borrower under any Loan Document, then to all indemnitee
obligations then due and payable by Borrower under any Loan Document, then to
all other fees and expenses then due and payable by Borrower under any Loan
Document, then to accrued and unpaid interest on the Loans (pro rata in
accordance with all such amounts due on the Loans), and then to the principal
amount of the Loans (pro rata among all Loans), in that order.  Any remaining
monies not applied as provided in this Section 6.7 shall be paid equally to
Borrower or to any Person lawfully entitled thereto.
 
6.8 Rescission.  In the event that Borrower or any of its Subsidiaries fails to
perform or comply with any term or condition contained in Section 2.6, this
Agreement shall become null and void and of no further force and effect, except
as provided in Section 9.15.
 
-27-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
In the event of rescission under this Section 6.8, Borrower shall immediately
repay the Loans and any interest or fees related thereto.  The remedy provided
under this Section 6.8 is in addition to, at the option of the Lenders, not in
place of, the other rights and remedies afforded to Lenders in the Event of
Default.
 
SECTION 7. CONDITIONS TO LOANS
 
The obligations of Lenders to make Loans are subject to satisfaction of all of
the applicable conditions set forth below.
 
7.1 Executed Loan Documents.  The Loan Documents including but not limited to
(a) this Agreement, (b) the Notes, (c) the Pledge and Security Agreement and (d)
the Warrants, and all other documents and instruments contemplated by such
agreements, shall have been duly authorized and executed by each of the parties
thereto in form and substance reasonably satisfactory to Lenders, and Borrower
shall have delivered sufficient original counterparts thereof to Lenders.
 
7.2 Executed Debt Refinancing Documents.  All other Debt Refinancing Documents
including but not limited to (a) the Purchase Agreement, (b) the Certificate of
Designations of the Series A Preferred Stock, and (c)  all other documents and
instruments contemplated by such agreements, shall have been duly authorized and
executed by each of the parties thereto in form and substance reasonably
satisfactory to Lenders, and Borrower shall have delivered sufficient original
counterparts thereof to Lenders.
 
7.3 Certificate of Designations.  The Certificate of Designations of the Series
A Preferred Stock shall have been filed with the Secretary of State of the State
of Delaware.
 
7.4 Cancelled Notes. Each note holder listed on Schedule 1.3 hereto shall have
delivered its respective note referenced therein to be cancelled upon Closing
pursuant to the Debt Refinancing Documents.  With respect to each note holder
listed on Schedule 1.3 hereto, all obligations, liabilities, covenants and
agreements of the Borrower to the holders of such notes under or in connection
with each of the Note and Warrant Purchase Agreements, dated as of August 10,
2006, February 5, 2007 and June 15, 2007, respectively, and each related note
set forth on Schedule 1.3 hereto, shall, with respect to each note holder,
hereby be terminated and cancelled and of no further force or effect upon
Closing and the satisfaction of each of the following: (i) with respect to the
notes due and payable on May 15, 2008, to Engmann and Goodman, in accordance
with Section 1.1(b)(ii), and (ii) with respect to each other holder of such
notes listed on Schedule 1.3 in accordance with Section 4.11 of the Purchase
Agreement.
 
7.5 Representations and Warranties.  Each of the representations and warranties
of Borrower contained in this Agreement or any other Debt Refinancing Document
shall be true and correct in all respects at and as of the Closing.
 
7.6 Covenants.  Borrower shall have performed and complied in all respects with
each of the covenants and agreements required to be performed or complied with
by it in this Agreement and each other Debt Refinancing Document on or before
the Closing Date.
 
-28-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
7.7 No Default.  There shall not be any Default or Event of Default both
immediately before and immediately after the Closing.
 
7.8 Lien Priority.  The Security Interests in favor of the Lenders pursuant to
the Loan Documents shall be valid and perfected first priority Liens on the
Collateral, subject to no Liens other than Permitted Encumbrances.
 
7.9 No Litigation.  No action, suit, proceeding, claim or dispute shall have
been brought or otherwise have arisen at law, in equity, in arbitration or by or
before any Governmental Authority or arbitrator against Borrower or any of its
Subsidiaries or any of their respective Assets.
 
7.10 Fees and Expenses.  All fees and expenses payable at Closing pursuant to
Section 1.4 hereof shall have been paid in full.
 
7.11 Closing Certificates; Opinions.
 
(a) Officer’s Certificate.  Lenders shall have received a certificate from the
chief executive officer or chief financial officer of Borrower in form and
substance reasonably satisfactory to Lenders, to the effect that all
representations and warranties of the Borrower contained in this Agreement and
the other Debt Refinancing Documents are true, correct and complete; that
neither Borrower nor any of its Subsidiaries is in violation of any of the
covenants contained in this Agreement and the other Debt Refinancing Documents;
that, after giving effect to the transactions contemplated by this Agreement, no
Default or Event of Default has occurred and is continuing; that Borrower has
satisfied each of the closing conditions to be satisfied hereby; that Borrower
and its Subsidiaries have filed all required tax returns and owe no delinquent
taxes.
 
(b) Certificate of Secretary of Borrower.  Lenders shall have received a
certificate of the secretary or assistant secretary of Borrower certifying as to
the incumbency and genuineness of the signature of each officer of Borrower
executing any Debt Refinancing Document and certifying that attached thereto is
(i) a true and complete copy of the certificate of incorporation of the
Borrower, and all amendments thereto including the Certificate of Designations
of the Series A Preferred Stock, certified by the appropriate Governmental
Authority in its jurisdiction of incorporation; (ii) a true and complete copy of
the certificate of incorporation of each of CIC Acquisition Corp., a Delaware
corporation, and all amendments thereto, certified by the appropriate
Governmental Authority in its jurisdiction of incorporation and a true and
complete copy of the articles of association of Communication Intelligence
Computer Corporation, Ltd., and all amendments thereto, as on file as of the
date hereof in the People’s Republic of China and which is in full force and
effect on the date hereof; (iii) a true and complete copy of the bylaws of
Borrower as in effect on the date of such certification; (iv) a true and
complete copy of resolutions duly adopted by the Board of Directors of Borrower
authorizing the borrowings contemplated hereunder, the execution, delivery and
performance of this Agreement and the other Debt Refinancing Documents; (v) a
true and complete copy of each of Borrower’s
 
-29-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
insurance policies, as in effect on the date of such certification; and (vi)
true, complete and correct copies of certificates of insurance for each of
Borrower’s insurance policies, except for its directors and officers insurance
policy, each showing Collateral Agent as an additional insured.
 
(c) Certificates of Good Standing.  Lenders shall have received certificates as
of a recent date of the good standing of Borrower under the laws of its
respective jurisdictions of incorporation and such other jurisdictions as are
requested by Lenders.
 
(d) Opinions of Counsel.  Lenders shall have received favorable opinions of
counsel to Borrower addressed to Lenders with respect to Borrower covering such
matters as requested by Lenders, including, without limitation, the Loan
Documents, the Security Interest, due authorization and other corporate matters,
local laws and choice of laws issues and which are reasonably satisfactory in
form and substance to Lenders.
 
7.12 Collateral.
 
(a) Filings and Recordings.  All filings and recordings that are necessary to
perfect the Security Interest in the Collateral described in the Security
Documents shall have been filed or recorded in all appropriate locations (or
delivered to Lenders for filing), and Lenders shall have received evidence
satisfactory to Lenders that such Security Interest constitutes a valid and
perfected first priority or second priority Lien, as the case may be, therein
subject to Permitted Encumbrances.
 
(b) Lien Searches.  Borrower shall have delivered to Lenders the results of Lien
searches of all filings made against each of the Borrower and its Subsidiaries
under the Uniform Commercial Code (and local tax and judgment filing offices) as
in effect in any jurisdiction in which any of its respective assets are located,
indicating, among other things, that the assets of Borrower and its Subsidiaries
and the stock of Borrower and its Subsidiaries are free and clear of any Lien,
except for Permitted Encumbrances.
 
(c) Stock Certificates.  All certificates evidencing capital stock of any
pledged entity, accompanied by duly executed instruments of transfer or
assignment in blank, shall have been delivered to Collateral Agent.
 
7.13 Insurance.  Other than as set forth on Schedule 2.2(b), Lenders shall have
received certificates of insurance and certified copies of insurance policies in
the form required under Section 2.2(b), and the Security Documents and otherwise
in form and substance reasonably satisfactory to Lenders.
 
7.14 Consents.  Other than any consent that may be required to be obtained  from
Basso Multi-Strategy Holding Fund Ltd., Borrower shall have delivered to Lenders
all necessary approvals, authorizations and consents, if any, of all Persons,
Governmental Authorities, and courts having jurisdiction with respect to the
execution and delivery of this Agreement and the other Loan Documents, the
granting of the Security Interest and all such approvals shall be in form and
substance satisfactory to Lenders.
 
7.15 No Injunction, Etc.  No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any
Governmental Authority or arbitrator challenging or seeking to enjoin, restrain
or prohibit, or to obtain substantial damages in respect of, or which is related
to or arises out of this Agreement or the other Debt Refinancing Documents or
the
 
-30-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
consummation of the transactions contemplated hereby or thereby, or which, as
determined by Lenders in their reasonable discretion, would make it inadvisable
to consummate the transactions contemplated by this Agreement and such other
Loan Documents. No order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any Governmental Authority or
arbitrator preventing the transactions contemplated by this Agreement or any
other Debt Refinancing Document shall be in effect.  The making of the Loans and
the consummation of the transactions contemplated by this Agreement and the
other Debt Refinancing Documents shall not be prohibited by any Applicable Law
or other legal requirement and shall not subject any Lender to any penalty or,
in its reasonable judgment, any other liability or onerous condition under any
Applicable Law.
 
7.16 Fees, Expenses, Taxes, Etc. Borrower shall have paid to Lenders the fees
set forth or referenced in Section 1.4 and any other accrued and unpaid fees or
commissions due hereunder (including legal fees and expenses), and to any other
Person such amount as may be due thereto in connection with the transactions
contemplated hereby, including all taxes, fees and other charges in connection
with the execution, delivery, recording, filing and registration of any of the
Loan Documents.
 
7.17 Proceedings and Documents.  All opinions, certificates and other
instruments and all proceedings in connection with the transactions contemplated
by this Agreement shall be reasonably satisfactory in form and substance to
Lenders.  Lenders shall have received copies of all other instruments and other
evidence as Lenders may reasonably request, in form and substance reasonably
satisfactory to Lenders, with respect to the transactions contemplated by this
Agreement and the taking of all actions in connection therewith.
 
7.18 Other Deliveries.  Such other agreements, instruments, approvals, opinions,
certificates and other documents as the Lenders may reasonably request in
connection with the transactions contemplated by the Debt Refinancing Documents,
all in form an substance satisfactory to the Lenders, in their sole discretion.
 
7.19 Post-Closing Deliveries.  Borrower shall deliver to Lenders, and Lenders
shall have received, as soon as reasonably practicable after the Closing Date,
but in no event later than July 4, 2008, the following:
 
(a) depositary account control agreements with respect to any accounts of
Borrower or its subsidiaries open at the Closing Date, including the Borrower’s
accounts at (i) Wells Fargo Bank, checking account ***** and money market
account *****, and (ii) Silicon Valley Bank, checking account *****:
 

           (b) favorable opinions of counsel to Borrower addressed to Lenders
with respect to Borrower covering such matters as requested by Lenders,
including, without limitation, as to the Common Stock underlying the Warrants
and Series A Preferred Stock and perfection of the security interest in the
foregoing accounts, which are reasonably satisfactory in form and substance to
Lenders;
 
-31-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
(c) such evidence satisfactory to the Lenders, in their sole discretion, that
Borrower shall have obtained stockholder approval of, and shall have taken all
requisite actions (including filing an amendment to its Certificate of
Incorporation with the Delaware Secretary of State) to increase the Borrower’s
authorized Common Stock in accordance with Section 2.6, and to reserve a
sufficient number of shares of Common Stock for issuance upon exercise of the
Warrants and conversion of the Series A Preferred Stock; and
 
(d) such other agreements, instruments, approvals, opinions, certificates and
other documents as the Lenders may reasonably request, all in form and substance
satisfactory to the Lenders, in their sole discretion.
 

SECTION 8. INTERCREDITOR PROVISIONS
 
8.1 Appointment, Powers and Immunities of Agents.
 
(a) Each Lender hereby appoints and authorizes SG Phoenix LLC to act as its
collateral agent (“Collateral Agent”) hereunder and under the other Loan
Documents, in each case with such powers as are expressly delegated to
Collateral Agent by the terms of this Agreement and the other Loan Documents,
together with such other powers as are reasonably incidental
thereto.  Collateral Agent shall not have any duties or responsibilities except
those expressly set forth in this Agreement or in any other Loan Document, or be
a trustee or a fiduciary for Borrower or any Lender or Secured
Party.  Notwithstanding anything to the contrary contained herein or in any
other Loan Document, Collateral Agent shall not be required to take any action
that is contrary to this Agreement or any other Loan Document or any Applicable
Law, or that exposes Collateral Agent to any liability.  Each of Collateral
Agent, the Lenders and their respective Affiliates shall not be responsible to
Borrower or to any other Secured Party for (i) any recitals, statements,
representations or warranties made by Borrower or its Affiliates contained in
this Agreement, the other Loan Documents or in any certificate or other document
referred to or provided for in, or received by Collateral Agent or any Secured
Party under this Agreement or any other Loan Document, (ii) the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
other Loan Documents, any Notes or any other document referred to or provided
for herein or therein, or (iii) any failure by Borrower or its Affiliates to
perform their respective obligations hereunder or thereunder.  Collateral Agent
may employ agents and attorneys-in-fact, and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care.
 
(b) None of Collateral Agent or its respective directors, officers, employees or
agents shall be responsible for any action taken or omitted to be taken by it or
them hereunder or under any other Loan Document or in connection herewith or
therewith, except for its or their own gross negligence or willful
misconduct.  Without limiting the generality of the foregoing, (a) Collateral
Agent may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (b) Collateral Agent makes no warranty or representation
to Borrower or any Lender or Secured Party for any statements, warranties or
representations made in or in connection with any Debt Refinancing Document; (c)
Collateral Agent shall have no duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Debt Refinancing Document on the part of any party thereto, to inspect the
property
 
-32-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
(including the books and records) of Borrower or any other Person or to
ascertain or determine whether a Material Adverse Effect exists or is
continuing; and (d) Collateral Agent shall not be responsible to Borrower or any
Lender or Secured Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Debt Refinancing
Document or any other instrument or document furnished pursuant hereto.  Except
as otherwise provided under this Agreement and the other Loan Documents,
Collateral Agent shall take such action with respect to the Loan Documents as
shall be directed by the Majority Lenders.
 
8.2 Reliance.  Collateral Agent shall be entitled to rely upon any certificate,
notice or other document (including any cable, telegram, facsimile, electronic
mail or telex) believed by it to be genuine and correct and to have been signed
or sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by it.  As to any other matters not expressly provided for by this Agreement or
the other Loan Documents, Collateral Agent shall not be required to take any
action or exercise any discretion, but shall be required to act or to refrain
from acting upon instructions of the Majority Lenders (except that Collateral
Agent shall not be required to take any action which exposes it to personal
liability or which is contrary to this Agreement, any other Loan Document or any
Applicable Law).  Collateral Agent shall in all cases (including when any action
by Collateral Agent alone is authorized hereunder or under any other Loan
Document, if Collateral Agent elects in its sole discretion to obtain
instructions from the Majority Lenders) be fully protected in acting, or in
refraining from acting, hereunder or under any other Loan Document in accordance
with the instructions of the Majority Lenders, and such instructions of the
Majority Lenders and any action taken or failure to act pursuant thereto shall
be binding on all of the Secured Parties.
 
8.3 Non-Reliance.  Each Lender represents that it has, independently and without
reliance on Collateral Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of the
financial condition and affairs of the Borrower and its own decision to enter
into this Agreement and agrees that it will, independently and without reliance
upon Collateral Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisals and decisions in taking or not taking action under this
Agreement.  Neither Collateral Agent nor any Lender shall be required to keep
informed as to the performance or observance by the Borrower or its Affiliates
under this Agreement or any other document referred to or provided for herein or
to make inquiry of, or to inspect the properties or books of, the Borrower or
its Affiliates.
 
8.4 Defaults; Material Adverse Effect.  Neither Collateral Agent nor any Lender
shall be deemed to have knowledge or notice of the occurrence of any Default,
Event of Default or Material Adverse Effect, unless such Person has received a
notice from a Lender or Borrower, referring to this Agreement, describing such
Default, Event of Default or Material Adverse Effect and indicating that such
notice is a notice of the occurrence of such Default, Event of Default or
Material Adverse Effect (as the case may be). Collateral Agent shall take
 
-33-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
such action with respect to such Default, Event of Default or Material Adverse
Effect as is provided in the Pledge and Security Agreement, or if not provided
for therein, as Collateral Agent shall be reasonably directed by the Majority
Lenders; provided, however, that unless and until Collateral Agent shall have
received such directions, Collateral Agent may (but shall not be obligated to)
take such action, or refrain from king such action, with respect to such
Default, Event of Default or Material Adverse Effect as it shall deem advisable
in the best interest of the Lenders.
 
8.5 Successor Agent.  Collateral Agent may resign at any time by giving fifteen
days’ written notice thereof to the Secured Parties and Borrower.  Collateral
Agent may be removed involuntarily only for a material breach of its duties and
obligations hereunder and under the other Loan Documents or for gross negligence
or willful misconduct in connection with the performance of its respective
duties hereunder or under the other Loan Documents and then only upon the
affirmative vote of the Majority Lenders.  Upon any such resignation or removal,
the Majority Lenders shall have the right, upon notice to Borrower, to appoint a
successor Collateral Agent under this Agreement.  If no successor Collateral
Agent shall have been so appointed and shall have accepted such appointment,
within 30 days after such resignation or removal (as the case may be), the
retiring or removed Collateral Agent may, on behalf of the Secured Parties,
appoint a successor Collateral Agent hereunder upon notice to the Secured
Parties and the Borrower.  Such successor Collateral Agent shall be a Lender or
an Affiliate of a Lender, if any Lender or Affiliate shall be willing to serve,
and otherwise shall be a commercial bank having a combined capital and surplus
of at least $10,000,000.  Upon the acceptance of any appointment as Collateral
Agent, such successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent, and the retiring Collateral Agent shall be discharged from its
duties and obligations as Collateral Agent under the Loan Documents.  After any
Collateral Agent’s resignation or removal hereunder, the provisions of this
Section 8 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Collateral Agent under the Loan Documents.

8.6 Authorization.  Collateral Agent is hereby authorized by the Lenders and
Secured Parties to execute, deliver and perform each of the Loan Documents to
which Collateral Agent is or is intended to be a party, and each Lender and
Secured Party agrees to be bound by all of the agreements of Collateral Agent
contained in the Loan Documents.  Collateral Agent is further authorized by the
Lenders and Secured Parties to (a) release Liens on property that Borrower is
permitted to sell, transfer or otherwise release pursuant to the terms of this
Agreement or the other Loan Documents, (b) perform all of its obligations under
this Section 8 and (c) enter into agreements supplemental hereto for the purpose
of curing any formal defect, inconsistency, omission or ambiguity in this
Agreement or any Loan Document to which it is a party.
 
8.7 Other Roles.  With respect to any Loans made by it or any of its Affiliates
and any Note issued to it or any of its Affiliates, Collateral Agent (or any
such Affiliates of Collateral Agent) in its individual capacity shall have the
same rights and powers under the Loan Documents and any other Debt Refinancing
Documents as any other Lender or Secured Party and may exercise the same as
though it were not Collateral Agent or an Affiliate of Collateral
Agent.  Collateral Agent and its Affiliates may accept deposits from, lend money
to, act as trustee under indentures of, and generally engage in any kind of
business with Borrower or any other Person, without any duty to
 
-34-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
account therefor to the Lenders or Secured Parties.  For the avoidance of doubt,
SG Phoenix LLC or any of its Affiliates (or any permitted successor or assign)
may act as Collateral Agent notwithstanding any potential or actual conflict of
interest presented by the foregoing and Borrower and each of the Lenders and
Secured Parties hereby waives any claim against Collateral Agent and any of its
Affiliates based upon any conflict of interest that such Person may have with
regard to acting as a Lender or Collateral Agent hereunder and acting in such
other roles.

8.8 Amendments and Waivers.
 
(a) Majority Lenders’ Consent.  No amendment, modification, termination or
waiver of any provision of the Loan Documents, or consent to any departure by
the Borrower therefrom, shall in any event be effective without the written
concurrence of the Majority Lenders and any additional consents required by this
Section 8.8.
 
(b) Other Consents.  No amendment, modification, termination or waiver of any
provision of the Loan Documents, or consent to any departure by Borrower
therefrom, shall amend, modify, terminate or waive any provision of this Section
8 as the same applies to Collateral Agent, or any other provision hereof as the
same applies to the rights or obligations of Collateral Agent, in each case
without the consent of Collateral Agent.
 
(c) Execution of Amendments, etc.  Any amendment, modification, waiver or
consent under the Debt Refinancing Documents requiring consent or approval of
Lenders shall be binding on all Lenders upon execution by the Majority Lenders
on the date thereof and, if applicable, Borrower.  Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given.  No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.  Any amendment, modification, termination, waiver or
consent effected in accordance with this Section 8.8 shall be binding upon each
Lender at the time outstanding, each future Lender and, if signed by the
Borrower, on the Borrower.
 
SECTION 9. MISCELLANEOUS
 
9.1 Indemnities
 
.  Borrower agrees to indemnify, pay, and hold Lenders and Collateral Agent and
their respective Affiliates and the officers, directors, employees, agents, and
attorneys (individually, “Indemnitee”, and collectively, “Indemnitees”) harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims of any kind or nature whatsoever
that may be imposed on, incurred by, or asserted against the Indemnitee as a
result of Lenders or Collateral Agent being a party to this Agreement with
Borrower, or otherwise in connection with this Agreement and Borrower, any of
the other Loan Documents or any of the transactions contemplated hereby or
thereby with respect to Borrower; provided, that Borrower shall not have an
obligation to an Indemnitee hereunder with respect to liabilities arising from
the gross negligence or willful misconduct of that Indemnitee or as a result of
an Indemnitee’s failure to perform its obligations hereunder, in each such case
as determined by a final non appealable judgment of a court of competent
jurisdiction.  This Section 9.1 and all indemnification provisions contained
within any other Loan Document shall survive the termination of this Agreement.
 
-35-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
9.2 Notices.  Any required notice or other communication shall be in writing
addressed to the respective party as set forth below and may be personally
delivered, facsimiled, sent by overnight courier service or U.S. mail and shall
be deemed to have been given: (a) if delivered in person, when delivered; (b) if
delivered by facsimile, on the date of transmission if transmitted on a Business
Day before 2:00 p.m. (New York, New York time) and otherwise on the Business Day
next succeeding the date of transmission; (c) if delivered by overnight courier,
two (2) Business Days after delivery to the courier properly addressed; or (d)
if delivered by U.S. mail, four (4) Business Days after deposit with postage
prepaid and proper address.  The addresses for such notices and communications
shall be as follows:
 
 
If to the Borrower:
Communication Intelligence Corporation

275 Shorewood Drive, Suite #500
Redwood Shores, California 94065
Attn:  Frank Dane
Facsimile:  (650) 802-7777

 
With a copy (which shall not constitute notice) to:

 
 
Davis Wright Tremaine LLP

 
23rd Floor

 
1300 S.W. Fifth Ave.

 
Portland, Oregon 97201

 
Attn:  Michael C. Phillips

 
Facsimile:  (503) 778-5299

 
If to Phoenix:
Phoenix Venture Fund LLC

 
110 East 59th Street, Suite 1901

 
New York, New York  10022

 
Attn:  Andrea Goren

 
Facsimile:  (212) 202-7565

 
With a copy (which shall not constitute notice) to:

 
Thelen Reid Brown Raysman & Steiner LLP

 
875 Third Avenue

 
New York, New York 10022

 
Attn:  Herman Sassower, Esq.

 
Facsimile:  (212) 603-2001

 

 

   If to Engmann:    Michael W. Engmann    38 San Fernando Way    San Francisco,
California 94127    Facsimile:  (415) 781-4641

 
-36-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 

If to Goodman:    Ronald Goodman    31 Tierra Verde Court   Walnut Creek,
California 94598    Facsimile: (925) 933-7548

                                                    

 If to Collateral Agent:  SG Phoenix LLC
 
110 East 59th Street, Suite 1901

 
New York, New York  10022

 
Attn:  Andrea Goren

 
Facsimile:  (212) 202-7565

 
With a copy (which shall not constitute notice) to:
 

 
Thelen Reid Brown Raysman & Steiner LLP

 
875 Third Avenue

 
New York, New York 10022

 
Attn:  Herman Sassower, Esq.

 
Facsimile:  (212) 603-2001

9.3 Failure or Indulgence Not Waiver; Remedies Cumulative.  No failure or delay
on the part of Lenders or Collateral Agent to exercise, nor any partial exercise
of, any power, right or privilege hereunder or under any other Loan Documents
shall impair such power, right, or privilege or be construed to be a waiver of
any Default or Event of Default.  All rights and remedies existing hereunder or
under any other Loan Document are cumulative to and not exclusive of any rights
or remedies otherwise available.
 
9.4 Marshaling; Payments Set Aside.  Lenders shall not be under any obligation
to marshal any assets in payment of any or all of the Obligations.  To the
extent that Borrower or any other Person makes payment(s) or Lenders enforce
their Liens or exercises their right of set-off, and such payment(s) or the
proceeds of such enforcement or set-off is subsequently invalidated, declared to
be fraudulent or preferential, set aside, or required to be repaid by anyone
(whether by demand, litigation, settlement or otherwise), then to the extent of
such recovery, the Obligations or part thereof originally intended to be
satisfied, and all Liens, rights and remedies therefore, shall be reinstated and
continued in full force and effect as if such payment had not been made or such
enforcement or set off had not occurred.
 
9.5 Severability.  The invalidity, illegality, or unenforceability in any
jurisdiction of any provision under the Loan Documents shall not affect or
impair the remaining provisions in the Loan Documents or any such invalid,
unenforceable or illegal provision in any jurisdiction in which it is not
invalid, unenforceable or illegal.
 
9.6 Headings.  Sections and Section headings are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purposes or be given substantive effect.
 
9.7 Applicable Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE
 
-37-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES THAT REQUIRE OR PERMIT APPLICATION OF THE LAWS OF ANY OTHER STATE OR
JURISDICTION.
 
9.8 Successors and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns.  Borrower may not assign its rights or Obligations hereunder without
the written consent of the Majority Lenders.
 
9.9 Participations.
 
              (a) Participations.  Each Lender may sell to one or more
commercial banks, commercial finance lenders, other financial institutions or
any other Person, participations in the Loans and other extensions of credit
made and to be made by it to the Borrower hereunder.  Borrower acknowledges that
in selling such participations, such Lender may grant to its participants
certain rights to consent to waivers, amendments and other actions with respect
to this Credit Agreement, provided that the consent of any participant shall be
limited solely to matters as to which Lenders may be requested to consent under
Section 3 and Section 4 hereof.  Except for such consent rights, if any, granted
by such Lender to any of its participants, no participant shall have any rights
as a Lender hereunder, and notwithstanding the sale of any participation by a
Lender, such Lender shall remain solely responsible to the other parties hereto
for the performance of its obligations hereunder, and the Borrower and the other
Lenders may continue to deal solely with such Lender with respect to all matters
relating to this Agreement and the transactions contemplated hereby.  In
addition, all amounts payable under this Agreement to such Lender shall continue
to be paid directly to, or at the direction of, such Lender.
 
(b) Cooperation of Borrower.  If necessary, Borrower agrees to (i) execute any
documents (including Additional Notes) reasonably required to effectuate and
acknowledge each participation effected pursuant to Section 9.9(a); (ii) make
Borrower’s management available to meet with prospective participants; and (iii)
assist Lenders in the preparation of information relating to the financial
affairs of the Borrower as any prospective participant reasonably may request.
Subject to Section 9.12, Borrower authorizes each Lender to disclose to any
prospective participant any and all information in its possession concerning
Borrower and its financial affairs which has been delivered to such Lender by or
on behalf of Borrower pursuant to this Agreement, or which has been delivered to
such Lender by or on behalf of Borrower in connection with its credit evaluation
of Borrower prior to entering into this Agreement.
 
9.10 No Fiduciary Relationship.  No provision in the Loan Documents and no
course of dealing between the parties shall be deemed to create any fiduciary
duty owing to Borrower or its Subsidiaries by Lenders.
 
9.11 Construction.  Lenders and Borrower acknowledge that each of them has had
the benefit of legal counsel of its own choice and has been afforded an
opportunity to review the Loan Documents with its legal counsel and that the
Loan Documents shall be constructed as if jointly drafted by Lenders and
Borrower.
 
-38-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
9.12 Confidentiality.  Each Lender agrees to hold in confidence any confidential
information that it may receive from Borrower and its Subsidiaries pursuant to
this Agreement that is identified as being confidential or proprietary, except
for disclosure: (a) on a confidential need-to-know basis to its Affiliates and
legal counsel, independent public accountants and other professional advisors;
(b) to regulatory officials having jurisdiction over it; (c) as required or
requested by Applicable Law or legal process; (d) in connection with any legal
proceeding between or among any Lender and Borrower and/or their respective
Subsidiaries or Affiliates (provided that, in the event such Lender is so
required to disclose such confidential information pursuant to clause (c) of
this Section 9.12, such Lender shall promptly notify Borrower (unless legally
prohibited from so doing), so that Borrower or its Subsidiaries, as applicable,
may seek, at their sole cost and expense, a protective order or other
appropriate remedy); and (e) subject to Section 9.9, to another Person in
connection with a disposition or proposed disposition to that Person of all or
part of that Lenders’ interests hereunder; provided that such agrees to comply
with the terms of this Section 9.12.  For purposes of the foregoing,
“confidential information” shall mean all information respecting Borrower or its
Subsidiaries, other than (i) information previously filed by Borrower or its
Subsidiaries with any Governmental Authority and available to the public or
otherwise made available to third parties on a non-confidential basis, (ii)
information previously published in any public medium from a source other than,
directly or indirectly, a Lender in violation of this Section 9.12 and (iii)
information obtained by a Lender from a source independent of Borrower or its
Subsidiaries.

9.13 Consent to Jurisdiction and Service of Process.
 
(a) BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL COURT OR STATE COURT IN THE STATE OF NEW YORK, COUNTY OF
NEW YORK, HAVING SUBJECT MATTER JURISDICTION OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS.  BORROWER HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT, PERSONAL JURISDICTION OF ANY SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF LENDERS TO BRING
PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
 
(b) BORROWER HEREBY AGREES THAT SERVICE OF THE SUMMONS AND COMPLAINT AND ALL
OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE
EFFECTED BY MAILING BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, A COPY OF SUCH
PROCESS TO BORROWER AT THE ADDRESS TO WHICH NOTICES TO BORROWER ARE THEN TO BE
SENT PURSUANT TO SECTION 9.2 AND THAT PERSONAL SERVICE OF PROCESS SHALL NOT BE
REQUIRED.  NOTHING HEREIN SHALL BE CONSTRUED TO PROHIBIT SERVICE OF PROCESS BY
ANY OTHER METHOD PERMITTED BY LAW.
 
-39-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
9.14 Waiver of Jury Trial.  LENDERS AND BORROWER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN OR
AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND ANY
RELATIONSHIP THAT IS BEING ESTABLISHED AMONG ANY OF THEM.  THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  LENDER AND BORROWER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS.  LENDERS AND BORROWER FURTHER WARRANT AND REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.  THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE LOAN
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS.  IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.  LENDERS AND BORROWER ALSO WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF
LENDERS.
 
9.15 Survival of Warranties and Certain Agreements.  All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement, the making of the Loans, and the execution and
delivery of the Notes.  Notwithstanding anything in this Agreement or implied by
law to the contrary, the agreements of Borrower set forth in Sections 1.4, 9.1,
9.13, 9.14 and 9.15 (together with any other Sections stated herein to so
survive) shall survive the payment of the Loans and the termination of this
Agreement.
 
9.16 Entire Agreement.  This Agreement, the Notes and the other Loan Documents
referred to herein embody the final, entire agreement among the parties hereto
and supersede any and all prior commitments, agreements, representations,
understandings, whether oral or written, relating to the subject matter hereof
and may not be contradicted or varied by evidence of prior, contemporaneous or
subsequent oral agreements or discussions of the parties hereto.
 
9.17 Counterparts; Effectiveness.  This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and
 
-40-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
delivered shall be deemed an original, but all of which counterparts together
shall constitute but one and the same instrument.  This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.
 
SECTION 10. DEFINITIONS
 
10.1 Certain Defined Terms
 
.  The terms defined below are used in this Agreement as so defined.  Terms
defined in the preamble, recitals and elsewhere in this Agreement are used in
this Agreement as so defined.
 
(a) “1933 Act” has the meaning set forth in Section 5.18.
 
(b) “1934 Act” has the meaning set forth in Section 2.3.
 
(c) “1940 Act” has the meaning set forth in Section 3.16.
 
(d) “Additional Note” has the meaning set forth in Section 1.2(b).
 
(e) “Additional Warrants” has the meaning set forth in Section 1.2(b).
 
(f) “Accounting Changes” has the meaning set forth in Section 4.2.
 
(g) “Affiliate” means (i) with respect to Borrower or any of its Subsidiaries,
any Person: (A) directly or indirectly controlling, controlled by, or under
common control with such Person or (B) directly or indirectly owning or holding
five percent (5%) or more of any equity interest in Borrower or any of its
Subsidiaries; and (ii) with respect to Lenders, any Person which controls or is
controlled by or is under common control with such Person.  For purposes of this
definition, “control” (including with correlative meanings, the terms
“controlling,” “controlled by” and “under common control with”) means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
voting securities or by contract or otherwise.
 
(h) “Agreement” means this Credit Agreement (including all Schedules and
Exhibits hereto), as amended, modified and supplemented from time to time as
permitted herein.
 
(i) “Applicable Law” means, in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person, and all orders, decisions,
judgments and decrees of all courts and arbitrators in proceedings or actions to
which the Person in question is a party or by which it is bound.
 
(j) “Asset Disposition” means the disposition, whether by sale, lease, transfer,
loss, damage, destruction, condemnation or otherwise, by Borrower or any of its
Subsidiaries, of any of the following: (i) any of the capital stock of Borrower
or any of its Subsidiaries; or (ii) any or all of the operating assets of
Borrower or any of its Subsidiaries, other than bona fide sales of product or
 
-41-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
inventory to customers in the ordinary course of business, dispositions of
obsolete equipment not used or useful in the business of Borrower or any of its
Subsidiaries and de minimis asset sales, or (iii) sales of Cash Equivalents for
fair value.
 
(k) “Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as amended from time to time, or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect and all rules and
regulations promulgated thereunder.
 
(l) “Borrower” has the meaning set forth in the Preamble.
 
(m) “Business Day” means any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of New York, or is a day on which
banking institutions located in such state are closed or which the Federal
Reserve Banks are closed.
 
(n) “Capital Lease” means any lease of real or personal property which is
required to be capitalized under GAAP.
 
(o) “Cash Equivalents” means: (i) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the date of acquisition thereof;
(ii) commercial paper maturing no more than one (1) year from the date issued
and, at the time of acquisition, having a rating of at least A 1 from Standard &
Poor’s Rating Service or at least P 1 from Moody’s Investors Service, Inc.;
(iii) certificates of deposit or bankers’ acceptances maturing within one (1)
year from the date of issuance thereof issued by, or overnight reverse
repurchase agreements from, any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000; and (iv) time
deposits maturing no more than thirty (30) days from the date of creation
thereof with commercial banks having membership in the Federal Deposit Insurance
Corporation in amounts at any one such institution not exceeding the lesser of
$100,000 or the maximum amount of insurance applicable to the aggregate amount
of Borrower’s deposits at such institution.
 
(p) “Change of Control” has the meaning set forth in Section 6.1(s).
 
(q) “Closing Date” means June 5, 2008.
 
(r) “Collateral” has the meaning set forth in Section 2 of the Security
Agreement, and includes the Pledged Stock as such term is defined in the
recitals of the Pledge and Security Agreement.
 
(s) “Collateral Agent” has the meaning set forth in Section 8.1(a).
 
(t) “Common Stock” means the common stock of the Borrower, par value $0.01 per
share, and any securities into which such common stock may hereafter be
reclassified or for which it may be exchanged as a class.
 
-42-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
(u) “Compliance Certificate” has the meaning set forth in Section 4.1(b).
 
(v) “Contingent Obligation” means, as applied to any Person, any direct or
indirect contingent liability of that Person: (i) with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; or (ii) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings.  Contingent
Obligations shall also include (A) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of the
obligation of another, (B) the obligation to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties
to an agreement, other than pursuant to routine agreements entered into in the
ordinary course of business, and (C) any liability of such Person for the
obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefore, to provide funds for the payment or discharge of such obligation or
to maintain the solvency, financial condition or any balance sheet item or level
of income of another.  The amount of any Contingent Obligation shall be equal to
the amount of the obligation so guaranteed or otherwise supported or, if not a
fixed and determined amount, the maximum amount so guaranteed.
 
(w) “Control” or “control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management, policies or activities
of such Person, whether through ownership of voting securities, by contract or
otherwise.
 
(x) “Debt Refinancing” means, collectively, the following: (i) the conversion of
the outstanding debt set forth on Schedule 1.3 of this Agreement into Loans
under this Agreement and the tender of the promissory notes evidencing such debt
to the Borrower for cancellation; (ii) the tender of certain Promissory Notes
(as defined under the Purchase Agreement) to the Borrower for cancellation in
full payment for shares of Series A Preferred Stock as set forth in the Purchase
Agreement and (iii) each of the other transactions contemplated hereby and by
the other Debt Refinancing Documents..
 
(y) “Debt Refinancing Documents” means the Loan Documents and the Share Lending
Agreement, dated as of the date hereof, by and among Phoenix, Engmann and
Goodman and all other instruments, documents and agreements executed by or on
behalf of Borrower or any of its Subsidiaries, and delivered concurrently
herewith or at any time hereafter to or for the benefit of any Lender in
connection with the Loans and other transactions contemplated by this Agreement,
all as amended, supplemented or modified from time to time.
 
(z) “Default” means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default if that condition or event were not
cured or removed within any applicable grace or cure period.
 
-43-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
(aa) “Engmann” has the meaning set forth in the preamble.
 
(bb) “Environmental Laws” means all applicable federal, state or local laws,
statutes, rules, regulations or ordinances, codes, common law, consent
agreements, orders, decrees, judgments or injunctions issued, promulgated,
approved or entered thereunder relating to public health, safety or the
pollution or protection of the environment, including those relating to
releases, discharges, emissions, spills, leaching, or disposals of hazardous
substances (including petroleum, crude oil or any fraction or derivative
thereof, or other hydrocarbons) to air, water, land or ground water, to the
withdrawal or use of ground water, to the use, handling or disposal of
polychlorinated biphenyls, asbestos or urea formaldehyde, to the treatment,
storage, disposal or management of hazardous substances (including petroleum,
crude oil or any fraction or derivative thereof, or other hydrocarbons),
pollutants or contaminants, to exposure to toxic, hazardous or other controlled,
prohibited, or regulated substances, including, without limitation, any such
provisions under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. § 9601, et seq.), and the Resource
Conservation and Recovery Act of 1976, as amended (42 U.S.C. § 6901, et seq.).
 
(cc) “Evaluation Date” has the meaning set forth in Section 5.21.
 
(dd) “Event of Default” has the meaning set forth in Section 6.1.
 
(ee) “GAAP” means generally accepted accounting principles as set forth in
statements from Auditing Standards No. 69 entitled “The Meaning of Present
Fairly in Conformance with Generally Accepted Accounting Principles in the
Independent Auditors Reports’” issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
 
(ff) “Goodman” has the meaning set forth in the preamble.
 
(gg) “Governmental Authority” means any nation, province, or state or any
political subdivision of any of the foregoing, and any government or any Person
exercising executive, legislative, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity exercising such
functions owned or controlled, through stock or capital ownership or otherwise,
by any of the foregoing.
 
(hh) “Indebtedness” means, as applied to any Person, without duplication: (i)
all indebtedness for borrowed money including but not limited to, the
Obligations; (ii) that portion of obligations with respect to Capital Leases or
other capitalized agreements that is properly classified as a liability on a
balance sheet in conformity with GAAP; (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money; (iv) any obligation owed for all or any part of the deferred
purchase price of property or services except trade payables arising in the
ordinary course of business not more than ninety (90) days past due; (v) all
indebtedness secured by any Lien on any property or asset owned or held by that
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person, but only
to the extent of
 
-44-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
the fair value of such property or asset; (vi) fixed rate hedging obligations
that are due (after giving effect to any period of grace or notice requirement
applicable thereto) and remain unpaid; (vii) obligations with respect to
principal under Contingent Obligations for the repayment of money or the
deferred purchase price of property, whether or not then due and payable
(calculated as the amount of such principal); and (viii) obligations under
partnership, organizational or other agreements to fund capital contributions or
other equity calls with respect to any Person or Investment, or to redeem,
repurchase or otherwise make payments in respect to capital stock or other
securities of such Person.
 
(ii) “Indemnitee” or “Indemnitees” has the meaning set forth in Section 9.1.
 
(jj) “Initial Warrant” or “Initial Warrants” has the meaning set forth in
Section 1.9.
 
(kk) “Intellectual Property Rights” has the meaning set forth in Section 5.8.
 
(ll) “Investment” means (i) any direct or indirect purchase or other acquisition
by Borrower or any of its Subsidiaries of any beneficial interest in, including
stock, partnership interest or other equity securities of, any other Person; and
(ii) any direct or indirect loan, advance, transfer, guarantee, assumption of
liability or other obligation or liability, or capital contribution by Borrower
or any of its Subsidiaries to any other Person, including all Indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of
business.  The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
 
(mm) “Investors” means the purchasers of the Series A Preferred Stock under the
Purchase Agreement.
 
(nn) “IRC” means the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations promulgated thereunder.
 
(oo) “Lender” or “Lenders” has the meaning set forth in the Preamble.
 
(pp) “Lien” means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary (including any
conditional sale or other title retention agreement and any lease in the nature
thereof), and any agreement to give any lien, mortgage, pledge, security
interest, charge or encumbrance.
 
(qq) “Loan” or “Loans” has the meaning set forth in Section 1.1(a).
 
(rr) “Loan Documents” means this Agreement, the Notes, the Security Documents,
the Warrants, the Purchase Agreement, the Registration Rights Agreement and all
other instruments, documents and agreements executed by or on behalf of Borrower
or
 
-45-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
any of its Subsidiaries, and delivered concurrently herewith or at any time
hereafter to or for the benefit of any Lender in connection with the Loans and
other transactions contemplated by this Agreement, all as amended, supplemented
or modified from time to time.
 
(ss) “Majority Lenders” means, at any time, any Lender or Lenders holding pro
rata Obligations which in the aggregate exceed 50%.
 
(tt) “Material Adverse Effect” means (i) a material adverse effect upon the
business, operations, properties or assets, or condition (financial or
otherwise) or prospects or upon Borrower or any of its Subsidiaries taken as a
whole, or (ii) the impairment of the ability of Borrower, or any of its
Subsidiaries to perform its material Obligations under any Loan Document to
which it is a party or of Lenders to enforce any Loan Document or collect any of
the Obligations.  In determining whether any individual event could reasonably
be expected to have a Material Adverse Effect, notwithstanding that such event
does not of itself have such effect, a Material Adverse Effect shall be deemed
to have occurred if the cumulative effect of such event and all other then
existing events could reasonably be expected to have a Material Adverse Effect.
 
(uu) “Material Contracts” means (i) the Material Contracts listed on Schedule
5.15, (ii) any contract or any other agreement, written or oral, of Borrower or
any of its Subsidiaries involving monetary liability of or to any such Person in
an aggregate amount in excess of One Hundred Thousand Dollars ($100,000) per
annum and (iii) any other contract or agreement, written or oral, of Borrower or
any of its Subsidiaries the failure to comply with which could reasonably be
expected to have a Material Adverse Effect.
 
(vv) “Maturity Date” means the earlier of (i) the date payment is due under the
Notes as a result of acceleration or otherwise; and (ii) June 5, 2010.
 
(ww) “Net Proceeds” means cash proceeds received by Borrower or any of its
Subsidiaries from any Asset Disposition, or debt or equity issuance including
insurance proceeds, awards of condemnation, and payments under notes or other
debt securities received in connection with any Asset Disposition, net of (i)
the reasonable costs incurred or accrued in connection with such sale, lease,
transfer, issuance or other disposition (including taxes attributable to such
sale, lease, transfer or issuance, including, if the disposing Person is a
limited liability company, S corporation or a partnership, taxes attributable to
its members, shareholders or partners with respect to such disposition) and (ii)
amounts applied to repayment of Indebtedness (other than the Obligations)
secured by a Lien on the asset or property disposed.
 
(xx) “Note” or “Notes” means any promissory note contemplated by Section 1.1(a),
substantially in the form attached hereto as Exhibit 1.1(a), or any combination
thereof, and any replacements, restatements, renewals or extensions of any such
notes, in whole or in part.
 
(yy) “Obligation” or “Obligations” means all obligations, liabilities and
Indebtedness of every nature of Borrower from time to time owed to Lenders under
the Loan Documents, including the unpaid principal amount of all debts, claims
and indebtedness,
 
-46-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
accrued and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now or from time
to time hereafter owing, due or payable, or any combination thereof, whether
before or after the filing of a proceeding under the Bankruptcy Code by or
against Borrower.
 
(zz) “Permitted Encumbrances” means the following:
 
(i) Liens for taxes, assessments or other governmental charges not yet due and
payable or Liens for taxes, assessment or other governmental charges due and
payable if the same are being diligently contested in good faith and by
appropriate proceedings and then only if and to the extent that adequate
reserves therefore are maintained on the books of Borrower and its Subsidiaries,
as applicable, in accordance with GAAP;
 
(ii) Liens of landlords, carriers, warehousemen, mechanics, materialmen and
other similar Liens imposed by Applicable Law, which are incurred in the
ordinary course of business for sums not more than ninety (90) days delinquent
or which are being diligently contested in good faith; provided that a reserve
or other appropriate provision shall have been made therefore and the aggregate
amount of liabilities secured by such Liens is less than $100,000;
 
(iii) Liens incurred or deposits made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types of
social security (other than any Lien imposed by the Employee Retirement Income
Security Act of 1974 or any rule or regulation promulgated thereunder), or to
secure the performance of tenders, statutory obligations, surety, stay, customs
and appeal bonds, bids, leases, government contracts, trade contracts,
performance and return of money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
 
(iv) deposits, in an aggregate amount not to exceed $50,000, made in the
ordinary course of business to secure liability to insurance carriers;
 
(v) any attachment or judgment Lien which, individually or when aggregated, does
not constitute an Event of Default under Section 6.1(i) (whether individually or
when aggregated with other such Liens);
 
(vi) Liens in favor of Lenders;
 
(vii) Liens securing purchase money security agreements and Capital Leases
permitted under Section 3.1(d); provided that such Liens do not encumber any
property other than the items purchased with the proceeds of such Indebtedness
or leased pursuant to such Indebtedness and such Liens do not secure any amounts
other than amounts necessary to purchase or lease such items; and
 
(viii) Liens permitted pursuant to this Agreement which secure refinanced or
replaced Indebtedness which had been secured by a Lien.
 
(aaa) “Person” means and includes natural persons, corporations, limited
liability companies, limited partnerships, limited liability partnerships,
general partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political
 
-47-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
subdivisions thereof and their respective permitted successors and assigns (or
in the case of a governmental person, the successor functional equivalent of
such Person).
 
(bbb) “Phoenix” has the meaning set forth in the Preamble.
 
(ccc) “Pledge and Security Agreement” means the pledge and security agreement,
dated as of even date herewith, substantially in the form of Exhibit 10.1(ccc)
annexed hereto, executed by Borrower in favor of Lenders.
 
(ddd) “Purchase Agreement” means the securities purchase agreement, dated as of
the date hereof, by and among Borrower and the purchasers of the Series A
Preferred Stock listed therein.
 
(eee) “Real Property” has the meaning set forth in Section 5.6.
 
(fff) “Registration Rights Agreement” means the registration rights agreement,
dated as of the date hereof, by and among Borrower and investors signatory
thereto.
 
(ggg) “Restricted Junior Payment” means, except as contemplated in the Purchase
Agreement: (i) any dividend or other distribution, direct or indirect, on
account of any equity interest in Borrower or any of its Subsidiaries, including
any shares of any class of stock of Borrower or any of its Subsidiaries now or
hereafter outstanding, except a dividend payable solely in shares of a class of
stock to the holders of that class; (ii) any redemption, repurchase, conversion,
exchange, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, prior to its stated maturity, of any
equity interest in Borrower or any of its Subsidiaries, including any shares of
any class of stock of Borrower or any of its Subsidiaries now or hereafter
outstanding (except repurchases of shares of common stock held by an employee
upon termination of employment); (iii) any payment or prepayment of interest on,
principal of, premium, if any, redemption, conversion, exchange, purchase,
retirement, defeasance, sinking fund or similar payment with respect to, any
Indebtedness prior to its stated maturity or payment date, or in contravention
of any subordination provisions for the benefit of Lenders; and (iv) any payment
made prior to its stated maturity, to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire any equity interest in
Borrower or any of its Subsidiaries, including any shares of any class of stock
of Borrower or any of its Subsidiaries now or hereafter outstanding.
 
(hhh) “SEC” means the U.S. Securities and Exchange Commission.
 
(iii) “Secured Party” or “Secured Parties” means Collateral Agent, or any
Lender, or any of their respective Affiliates, and each of their respective
successors, transferees and assigns.
 
(jjj) “Security Documents” means, collectively, all instruments, documents and
agreements executed by or on behalf of Borrower to provide collateral security
with respect to the Obligations, including, without limitation, the Pledge and
Security
 
-48-

--------------------------------------------------------------------------------

EXHIBIT 10-41
 
 
Agreement, depositary account control agreements and all instruments, documents
and agreements executed pursuant to the terms of the foregoing, in such case, as
amended, modified and supplemented from time to time.
 
(kkk) “Security Interest” means all Liens in favor of Lenders, created hereunder
or under any of the Security Documents to secure the Obligations.
 
(lll) “Series A Preferred Stock” means shares designated Series A Cumulative
Convertible Preferred Stock issued by the Borrower, par value $0.01 per share.
 
(mmm) “Subsidiary” means, with respect to any Person, any corporation,
partnership, association or other business entity of which more than fifty
percent (50%) of the total voting power of shares of stock (or equivalent
ownership or controlling interest) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
 
(nnn) “Warrants” means the Initial Warrants and the Additional Warrants.
 
10.2 Other Definitional Provisions
 
.  References to “Sections,” “Exhibits” and “Schedules” shall be to Sections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided.  Any of the terms defined in Section 10.1 may, unless the
context otherwise requires, be used in the singular or the plural depending on
the reference.  In this Agreement, “hereof,” “herein,” “hereto,” “hereunder” and
the like mean and refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word appears;
words importing any gender include the other gender; references to “writing”
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words “including,” “includes” and “include” shall be
deemed to be followed by the words “without limitation”; references to
agreements and other contractual instruments shall be deemed to include
subsequent amendments, assignments, and other modifications thereto, but only to
the extent such amendments, assignments and other modifications are not
prohibited by the terms of this Agreement or any other Loan Document; references
to Persons include their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such Persons; and all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.
 
[Remainder of page intentionally left blank]

 
  -49-
 

--------------------------------------------------------------------------------

 
EXHIBIT 10-41

WITNESS the due execution hereof by the respective duly authorized officers of
the undersigned as of the date first written above.
 
LENDERS:

PHOENIX VENTURE FUND LLC,
as Lender

      By: SG Phoenix Ventures LLC,
             its Managing Member

             By: /s/ Andrea
Goren                                                               
 
            Name: Andrea Goren          
 
            Title:  Member                     
 
 
 

                                     
                                                                                                                  
/s/ Michael Engmann
                                                                                                          
      MICHAEL ENGMANN, as Lender
 
                                                                          

                                      

                                     /s/ Ronald Goodman
RONALD GOODMAN, as Lender
 
 
 
BORROWER:

COMMUNICATION INTELLIGENCE
 CORPORATION, as Borrower

By: /S/ Guido D. Digregorio
Name: Guido D. DiGregorio
Title: Chief Executive Officer and
                President
 

 - 50 -
 
 

--------------------------------------------------------------------------------

 
EXHIBIT 10-41

COLLATERAL AGENT:
 
SG PHOENIX LLC,
as Collateral Agent

By:   /s/Andrea Goren                                       
 
Name:  Andrea Goren                                   
 
Title:  Member                                          
 
 
 
 
 
 
 
 
 
 
 
-51-