pledge_securityagremt.htm


    EXHIBIT
10-42


      
        

      


      
        


      

      
        


         

        


      

      
        PLEDGE
AND SECURITY AGREEMENT

         

        


         

        made
by

         

        


         

        COMMUNICATION
INTELLIGENCE CORPORATION

         

        


         

        and
certain of its Subsidiaries

         

        


         

        in favor
of

         

        


         

        SG
PHOENIX LLC,

         

        as
Collateral Agent

         

        for the
ratable benefit of the Secured Parties

         

        


         

        


      

      
        Dated as
of June 5, 2008

         

        


      

      
        


         

        


      


      
        
          
            


            
              	 
      	 
      	 
      


            

             

          

           


        

        
           


          
            

          

        

        
           


        
EXHIBIT 10-42


      Table of Contents

       

      Page

       

      
        
          	
                  SECTION
      1.

                	
                  Defined
      Terms

                	
                  1

                
	
                  1.1

                	
                  Definitions.

                	
                  1

                
	
                  1.2

                	
                  Other
      Definitional Provisions

                	
                  5

                
	
                  SECTION
      2.

                	
                  Grant
      of Security Interest

                	
                  5

                
	
                  SECTION
      3.

                	
                  Representations
      and Warranties

                	
                  6

                
	
                  3.1

                	
                  Title;
      No Other Liens

                	
                  6

                
	
                  3.2

                	
                  Perfected
      First Priority Liens

                	
                  7

                
	
                  3.3

                	
                  Jurisdiction
      of Organization; Chief Executive Office

                	
                  7

                
	
                  3.4

                	
                  Farm
      Products

                	
                  7

                
	
                  3.5

                	
                  Investment
      Property

                	
                  7

                
	
                  3.6

                	
                  Receivables.

                	
                  8

                
	
                  3.7

                	
                  Intellectual
      Property.

                	
                  8

                
	
                  3.8

                	
                  Commercial
      Tort Claims.

                	
                  8

                
	
                  SECTION
      4.

                	
                  Covenants.

                	
                  9

                
	
                  4.1

                	
                  Delivery
      of Instruments, Certificated Securities and Chattel Paper

                	
                  9

                
	
                  4.2

                	
                  Maintenance
      of Insurance.

                	
                  9

                
	
                  4.3

                	
                  Maintenance
      of Perfected Security Interest; Further Documentation.

                	
                  9

                
	
                  4.4

                	
                  Changes
      in Name, etc.

                	
                  10

                
	
                  4.5

                	
                  Notices

                	
                  10

                
	
                  4.6

                	
                  Investment
      Property.

                	
                  10

                
	
                  4.7

                	
                  Intellectual
      Property.

                	
                  12

                
	
                  4.8

                	
                  Commercial
      Tort Claims

                	
                  13

                
	
                  SECTION
      5.

                	
                  Remedial
      Provisions.

                	
                  13

                
	
                  5.1

                	
                  Certain
      Matters Relating to Receivables.

                	
                  13

                
	
                  5.2

                	
                  Communications
      with Obligors; Grantors Remain Liable.

                	
                  14

                
	
                  5.3

                	
                  Pledged
      Stock.

                	
                  15

                
	
                  5.4

                	
                  Proceeds
      to be Turned Over to Collateral Agent

                	
                  16

                
	
                  5.5

                	
                  Application
      of Proceeds

                	
                  16

                
	
                  5.6

                	
                  Code
      and Other Remedies

                	
                  16

                
	
                  5.7

                	
                  Registration
      Rights

                	
                  17

                
	
                  5.8

                	
                  Subordination

                	
                  18

                
	
                  5.9

                	
                  Deficiency

                	
                  18

                
	
                  SECTION
      6.

                	
                  The
      Collateral Agent.

                	
                  18

                
	
                  6.1

                	
                  Collateral
      Agent’s Appointment as Attorney-in-Fact, etc.

                	
                  18

                
	
                  6.2

                	
                  Undertaking
      of the Collateral Agent.

                	
                  20

                
	
                  6.6

                	
                  Duty
      of Collateral Agent

                	
                  24

                


        

         

        
          
            
            

          

          
            (i)

            
              

            

          

          
            EXHIBIT
10-42

          

        

        
           

          Table
of Contents

          (continued)

          Page

           

        

        
          	
                  6.7

                	
                  Execution
      of Financing Statements

                	
                  24

                
	
                  6.8

                	
                  Authority
      of Collateral Agent

                	
                  24

                
	
                  6.9

                	
                  Intercreditor
      Arrangements

                	
                  24

                
	
                  SECTION
      7.

                	
                  Miscellaneous.

                	
                  25

                
	
                  7.1

                	
                  Amendments.

                	
                  25

                
	
                  7.2

                	
                  Notices

                	
                  25

                
	
                  7.3

                	
                  No
      Waiver by Course of Conduct; Cumulative Remedies

                	
                  25

                
	
                  7.4

                	
                  Enforcement
      Expenses; Indemnification.

                	
                  26

                
	
                  7.5

                	
                  Security
      Interest Absolute

                	
                  26

                
	
                  7.6

                	
                  Successors
      and Assigns

                	
                  26

                
	
                  7.7

                	
                  Set-Off;
      Limitation on Individual Actions.

                	
                  26

                
	
                  7.8

                	
                  Counterparts

                	
                  27

                
	
                  7.9

                	
                  Severability

                	
                  28

                
	
                  7.10

                	
                  Section
      Headings

                	
                  28

                
	
                  7.11

                	
                  Integration

                	
                  28

                
	
                  7.12

                	
                  GOVERNING
      LAW

                	
                  28

                
	
                  7.13

                	
                  Submission
      To Jurisdiction; Waivers

                	
                  28

                
	
                  7.14

                	
                  Acknowledgements

                	
                  29

                
	
                  7.15

                	
                  Additional
      Grantors.

                	
                  30

                
	
                  7.16

                	
                  Continuing
      Security Interest; Releases of Collateral.

                	
                  30

                
	
                  7.17

                	
                  WAIVER
      OF JURY TRIAL

                	
                  30

                


        




      SCHEDULES

       

      Schedule
1                           —                 Notice
Address

      Schedule
2                           —                 Investment
Property

      Schedule
3                           —                 Perfection
Matters

      Schedule
4                           —                 Location
of Jurisdiction of Organization and Chief Executive Offices

      Schedule
5                           —                 Intellectual
Property

      


      ANNEXES

      


      Annex
1                   —         Form
of Assignment and Assumption Agreement

      



      
        
          
            


            
              	 
      	
                      (ii)

                    	 
      


            

             

          

           


        

        
           


          
            

          

        

        
           


        
EXHIBIT 10-42


      PLEDGE AND SECURITY
AGREEMENT

       

      PLEDGE
AND SECURITY AGREEMENT, dated as of June 5, 2008, made by each of the
signatories hereto (together with any other entity that may become a party
hereto as provided herein, the “Grantors”), in favor of SG
PHOENIX LLC (“Phoenix”),
as Collateral Agent (in such capacity, the “Collateral Agent”) for (i) the
lenders (the “Lenders”)
party to the Credit Agreement, dated as of June 5, 2008 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”), among
COMMUNICATION INTELLIGENCE CORPORATION (the “Borrower”) and the
Lenders.

       

      W I T N E S S E T H :

       

      WHEREAS,
pursuant to the Credit Agreement, the Lenders have severally agreed to make
Loans to the Borrower upon the terms and subject to the conditions set forth
therein;

       

      WHEREAS,
the Borrower and the other Grantors are engaged in related businesses, and each
Grantor will derive substantial direct and indirect benefit from the making of
the Loans under the Credit Agreement;

       

      WHEREAS,
it is a condition precedent to the obligation of the Lenders to make their
respective Loans to the Borrower under the Credit Agreement that the Grantors
shall have executed and delivered this Agreement to the Collateral Agent for the
ratable benefit of the Secured Parties;

       

      NOW,
THEREFORE, in consideration of the premises and to induce the Collateral Agent
and the Lenders to enter into the Credit Agreement, to induce the Lenders to
make their respective Loans to the Borrower under the Credit Agreement, each
Grantor hereby agrees with the Collateral Agent, for the ratable benefit of the
Secured Parties, as follows:

       

       

      SECTION
1.                                Defined
Terms

       

      1.1           Definitions.

       

      (a)           Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement, and the following
terms are used herein as defined in the New York UCC:  Accounts,
Certificated Security, Chattel Paper, Commercial Tort Claims, Contract,
Documents, Equipment, Farm Products, Fixture, General Intangibles, Goods,
Instruments, Inventory, Letter-of-Credit Rights and Supporting
Obligations.

       

      (b)           The
following terms shall have the following meanings:

       

      “Act of Required Lenders”
means, as to any matter at any time, a direction in writing delivered to the
Collateral Agent by or with the written consent of the Required
Lenders.

       

      “Agreement” means this Pledge
and Security Agreement, as the same may be amended, supplemented or otherwise
modified from time to time.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          EXHIBIT
10-42

        

      

       

       

      “Capital Stock” means any and
all shares, interests, participations or other equivalents (however designated)
of capital stock of a corporation, any and all equivalent ownership interests in
a Person (other than a corporation) and any and all warrants, rights or options
to purchase any of the foregoing.

       

      “Collateral” has the meaning
set forth in Section
2.

       

      “Collateral Account” means any
collateral account established by the Collateral Agent as provided in Section 5.1 or Section
5.4.

       

      “Copyrights”
means  (i) all copyrights arising under the laws of the United States,
any other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished (including, without
limitation, those listed in Schedule 5), all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to obtain
all renewals thereof.

       

      “Copyright Licenses” means any
written agreement naming any Grantor as licensor or licensee (including, without
limitation, those listed in Schedule 5), granting
any right under any Copyright, including, without limitation, the grant of
rights to manufacture, distribute, exploit and sell materials derived from any
Copyright.

       

      “Default” means any “Default”
under, and as defined in, any Loan Document.

       

      “Deposit Account” has the
meaning defined in the Uniform Commercial Code of any applicable jurisdiction
and, in any event, including, without limitation, any demand, time, savings,
passbook or like account maintained with a depositary institution.

       

      “Discharge of Obligations”
means the occurrence of all of the following:

       

      (a)           termination
or expiration of all commitments of the Lenders to extend credit that would
constitute Obligations;

       

      (b)           payment
in full in cash and discharge of the principal of and interest and premium (if
any) on all Obligations; and

       

      (c)           without
duplication, payment in full in cash and discharge of all other Obligations,
other than any inchoate indemnity obligations that expressly survive the
termination of the underlying Loan Documents.

       

      “Grantors” has the meaning set
forth in the preamble, together with any other entity that may become a party
hereto (and is identified as a Grantor) as provided herein.

       

      “Intellectual Property” means,
collectively, all rights, priorities and privileges relating to intellectual
property, whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the Copyright
Licenses, 

       

      
        
          
          

        

        
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          EXHIBIT
10-42

        

      

       

       

      the
Patents, the Patent Licenses, the Trademarks and the Trademark Licenses, and any
transferable rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and damages
therefrom.

       

      “Intercompany Note” means any
promissory note evidencing loans made by any Grantor to the Borrower or any of
its Subsidiaries.

       

      “Investment Property” means,
collectively, (i) all “investment property” as such term is defined in Section
9-102(a)(49) of the New York UCC and (ii) whether or not constituting
“investment property” as so defined, all Pledged Notes and all Pledged
Stock.

       

      “Issuers” means, collectively,
each issuer of any Investment Property.

       

      “New York UCC” means the
Uniform Commercial Code as from time to time in effect in the State of New
York.

       

      “Obligations” means the
collective reference to the unpaid principal of and interest on the Loans and
Notes and all other obligations and liabilities of the Borrower (including,
without limitation, interest accruing at the then applicable rate provided in
the Credit Agreement after the maturity of the Loans and interest accruing at
the then applicable rate provided in the Credit Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
to the Collateral Agent or any Lender, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, this
Agreement, the other Loan Documents or any other document made, delivered or
given in connection with any of the foregoing, in each case whether on account
of principal, interest, premiums (if any), reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the Collateral Agent or to the Lenders that
are required to be paid by the Borrower pursuant to the terms of any of the
foregoing agreements).

       

      “Officer’s Certificate” means a
certificate of a Responsible Officer of the Borrower.

       

      “Patents” means (i) all letters
patent of the United States, any other country or any political subdivision
thereof, all reissues and extensions thereof and all goodwill associated
therewith, including, without limitation, any of the foregoing referred to in
Schedule 5,
(ii) all applications for letters patent of the United States or any other
country and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in Schedule 5, and (iii)
all rights to obtain any reissues or extensions of the foregoing.

       

      “Patent License” means all
agreements, whether written or oral, providing for the grant by or to any
Grantor of any right to manufacture, use or sell any invention covered in whole
or in part by a Patent, including, without limitation, any of the foregoing
referred to in Schedule
5.

       

      
        
          
          

        

        
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          EXHIBIT
10-42

        

      

       

       

      “Pledged Notes” means all
promissory notes listed on Schedule 2, all
Intercompany Notes at any time issued to any Grantor and all other promissory
notes in principal amounts in excess of $10,000 issued to or held by any Grantor
(other than promissory notes issued in connection with extensions of trade
credit by any Grantor in the ordinary course of business).

       

      “Pledged Stock” means the
shares of Capital Stock listed on Schedule 2, together
with any other shares, stock certificates, options, interests or rights of any
nature whatsoever in respect of the Capital Stock of any Person that may be
issued or granted to, or held by, any Grantor while this Agreement is in
effect.

       

      “Proceeds” means all “proceeds”
as such term is defined in Section 9-102(a)(64) of the New York UCC and, in any
event, shall include, without limitation, all dividends or other income from the
Investment Property, collections thereon or distributions or payments with
respect thereto.

       

      “Receivable” means any right to
payment for goods sold or leased or for services rendered, whether or not such
right is evidenced by an Instrument or Chattel Paper and whether or not it has
been earned by performance (including, without limitation, any
Account).

       

      “Required Lenders” means
Lenders representing a majority in principal amount of the then outstanding
Loans.

       

      “Requirement of Law” means, as
to any Person, the certificate of incorporation and by laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

       

      “Responsible Officer” means the
chief executive officer, president, any executive vice president or the chief
financial officer of the Borrower.

       

      “Secured Parties” means,
collectively, the Collateral Agent and the Lenders.

       

      “Securities Act” means the
Securities Act of 1933, as amended.

       

      “Security Documents” means this
Agreement and all security agreements, pledge agreements, collateral
assignments, mortgages, depositary agreements, collateral agency agreements,
control agreements, deeds of trust or other grants or transfers for security
executed and delivered by the Borrower or any other Grantor creating (or
purporting to create) a Lien upon Collateral in favor of the Collateral Agent,
for the benefit of the Secured Parties, in each case, as amended, modified,
renewed, restated or replaced, in whole or in part, from time to time, in
accordance with its terms and Section
7.1.

       

      “Trademarks” means (i) all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos and other source
or business identifiers, and all goodwill associated therewith, all
registrations and recordings thereof, and all applications in connection
therewith (other than “intent to use” applications), whether in the

       

      
        
          
          

        

        
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          EXHIBIT
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      United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related thereto,
including, without limitation, any of the foregoing referred to in Schedule 5, and (ii)
the right to obtain all renewals thereof.

       

      “Trademark License” means any
agreement, whether written or oral, providing for the grant by or to any Grantor
of any right to use any Trademark, including, without limitation, any of the
foregoing referred to in Schedule
5.

       

      1.2           Other Definitional
Provisions

       

      (a)           The
words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Section and Schedule references
are to this Agreement unless otherwise specified.

       

      (b)           The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

       

      (c)           Where
the context requires, terms relating to the Collateral or any part thereof, when
used in relation to a Grantor, shall refer to such Grantor’s Collateral or the
relevant part thereof.

       

       

      SECTION
2.                                Grant of Security
Interest

       

      Each
Grantor hereby assigns and transfers to the Collateral Agent, and hereby grants
to the Collateral Agent, for the ratable benefit of the Secured Parties, a
security interest in, all of the following property now owned or at any time
hereafter acquired by such Grantor or in which such Grantor now has or at any
time in the future may acquire any right, title or interest (collectively, the
“Collateral”), as
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations:

       

      (a)           all
Accounts;

       

      (b)           all
Chattel Paper;

       

      (c)           all
Contracts;

       

      (d)           all
Deposit Accounts and cash;

       

      (e)           all
Documents;

       

      (f)           all
Equipment;

       

      (g)           all
Fixtures;

       

      (h)           all
General Intangibles;

       

      
        
          
          

        

        
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          EXHIBIT
10-42

        

      

       

       

      (i)           all
Instruments;

       

      (j)           all
Intellectual Property;

       

      (k)           all
Inventory;

       

      (l)           all
Goods;

       

      (m)           all
Investment Property;

       

      (n)           all
Letter-of-Credit Rights;

       

      (o)           all
Commercial Tort Claims described in Section 4.8
hereof;

       

      (p)           all
books and records pertaining to the Collateral; and

       

      (q)           to
the extent not otherwise included, all Proceeds, Supporting Obligations and
products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the
foregoing;

       

      provided, however, that notwithstanding
any of the other provisions set forth in this Section 2, this
Agreement shall not constitute a grant of a security interest in any property to
the extent that such grant of a security interest is prohibited by any
Requirements of Law of a Governmental Authority, requires a consent not obtained
of any Governmental Authority pursuant to such Requirement of Law or is
prohibited by, or constitutes a breach or default under or results in the
termination of or requires any consent not obtained under, any contract,
license, agreement, instrument or other document evidencing or giving rise to
such property or, in the case of any Investment Property, Pledged Stock or
Pledged Note, any applicable shareholder or similar agreement, except to the
extent that such Requirement of Law or the term in such contract, license,
agreement, instrument or other document or shareholder or similar agreement
providing for such prohibition, breach, default or termination or requiring such
consent is ineffective under applicable law.

       

       

      SECTION
3.                                Representations and
Warranties

       

      To induce
the Collateral Agent and the Lenders to enter into the Credit Agreement, to
induce the Lenders to make their Loans to the Borrower under the Credit
Agreement, each Grantor hereby represents and warrants to the Collateral Agent
and each Secured Party that:

       

      3.1           Title; No Other
Liens

       

      .  Except
for the security interest granted to the Collateral Agent for the ratable
benefit of the Secured Parties pursuant to this Agreement and the other Liens
permitted to exist on the Collateral under each then outstanding Loan Document,
such Grantor owns, or has rights in, each item of the Collateral free and clear
of any and all Liens or claims of others.  No effective financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as have
been filed in favor of the Collateral Agent, for the ratable benefit of the
Secured Parties, pursuant to this Agreement or as are permitted by the Credit
Agreement.

       

      
        
          
          

        

        
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      3.2           Perfected First Priority
Liens

       

      .  The
security interests granted pursuant to this Agreement (a) upon completion of the
filings and other actions specified on Schedule 3 (which, in
the case of all filings and other documents referred to on said Schedule, have
been delivered to the Collateral Agent in completed and duly executed form) will
constitute valid perfected security interests in all of the Collateral for which
such filings and actions are effective to perfect such security interests in
favor of the Collateral Agent, for the ratable benefit of the Secured Parties,
as collateral security for the Obligations, enforceable in accordance with the
terms hereof against all creditors of such Grantor and any Persons purporting to
purchase any Collateral from such Grantor, except such Persons who are good
faith purchasers to the extent set forth in the New York UCC and (b) are prior
to all other Liens on the Collateral in existence on the date hereof except for
unrecorded Liens permitted by the Credit Agreement which have priority over the
Liens on the Collateral by operation of law or as otherwise permitted to have
priority over the Liens on the Collateral under Section 3.2 of the Credit
Agreement.

       

      3.3           Jurisdiction of
Organization; Chief Executive Office

       

      .  On
the date hereof, such Grantor’s jurisdiction of organization, identification
number from the jurisdiction of organization (if any), and the location of such
Grantor’s chief executive office or sole place of business, as the case may be,
are specified on Schedule
4.  Such Grantor has furnished to the Collateral Agent a
certified charter, certificate of incorporation or other organization document
and long-form good standing certificate as of a date which is recent to the date
hereof.

       

      3.4           Farm
Products

       

      .  None
of the Collateral constitutes, or is the Proceeds of, Farm
Products.

       

      3.5           Investment
Property

       

      .

       

      (a)           The
shares of Pledged Stock pledged by such Grantor hereunder constitute all the
issued and outstanding shares of all classes of the Capital Stock of each Issuer
owned by such Grantor.

       

      (b)           All
the shares of the Pledged Stock issued by an Issuer which is a Subsidiary of
such Grantor have been duly and validly issued and are, if such shares are
shares of stock in a domestic corporation, fully paid and
nonassessable.

       

      (c)           Each
of the Pledged Notes issued by an Issuer which is a Subsidiary of such Grantor
constitutes the legal, valid and binding obligation of the obligor with respect
thereto, enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors’ rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.

       

      (d)           Such
Grantor is the owner of, and has good title to, the Investment Property pledged
by it hereunder, free of any and all Liens or options in favor of, or claims of,
any other Person, except the security interest created by this Agreement or as
otherwise permitted under Section 3.2 of the Credit Agreement.

       

      
        
          
          

        

        
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      3.6           Receivables.

       

      (a)           No
amount in excess of $50,000 payable to such Grantor under or in connection with
any Receivable is evidenced by any Instrument or Chattel Paper which has not
been delivered to the Collateral Agent.

       

      (b)           The
amounts represented by such Grantor to the Lenders from time to time as owing to
such Grantor in respect of the Receivables will at such times be accurate in all
material respects.

       

      3.7           Intellectual
Property.

       

      (a)           Schedule 5 lists all
Intellectual Property owned by such Grantor in its own name on the date hereof
and which is registered with the United States Copyright Office or the United
States Patent and Trademark Office or any similar office or agency in any other
country or any political subdivision thereof.

       

      (b)           On
the date hereof, all material scheduled Intellectual Property owned, used or
held by such Grantor is valid, subsisting, unexpired and in full force and
effect, has not been abandoned and does not infringe the intellectual property
rights of any other Person.

       

      (c)           No
holding, decision or judgment has been rendered by any Governmental Authority
which would limit, cancel or question the validity of, or such Grantor’s rights
in, any Intellectual Property owned, used or held by such Grantor in any
respect.

       

      (d)           No
action or proceeding is pending, or, to the knowledge of such Grantor,
threatened, on the date hereof seeking to limit, cancel or question the validity
of any Intellectual Property owned, used or held by such Grantor or such
Grantor’s ownership interest therein.

       

      (e)           No
action or proceeding is pending, or, to the knowledge of Grantor, threatened, on
the date hereof asserting infringement by Grantor of any intellectual property
rights owned by another entity.

       

      3.8           Commercial Tort
Claims.

       

      (a)           On
the date hereof, except to the extent listed in Section 2.1 above, no
Grantor has rights in any Commercial Tort Claim with a reasonably expected value
in excess of $50,000.

       

      (b)           Upon
the filing of a financing statement specifically describing any Commercial Tort
Claim referred to in Section 4.8 hereof
against such Grantor in the jurisdiction specified in Schedule 3 hereto,
the security interest granted in such Commercial Tort Claim will constitute a
valid perfected security interest in favor of the Collateral Agent, for the
ratable benefit of the Secured Parties, as collateral security for such
Grantor’s Obligations, enforceable in accordance with the terms hereof against
all creditors of such Grantor and any Persons purporting to purchase such
Collateral from Grantor except such Persons who are good faith purchasers to the
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      York UCC,
which security interest shall be prior to all other Liens on such Collateral
except for unrecorded Liens permitted by the Credit Agreement which have
priority over the Liens on such Collateral by operation of law or as otherwise
permitted to have priority over the Liens on the Collateral under the relevant
provisions of the then effective Loan Documents.

       

                            SECTION
4.                                Covenants.

       

      Each
Grantor covenants and agrees with the Collateral Agent and the Secured Parties
that, from and after the date of this Agreement and until the Discharge of
Obligations:

       

      4.1           Delivery of Instruments,
Certificated Securities and Chattel Paper

       

      .  If
any amount in excess of $50,000 payable to a Grantor under or in connection with
any of the Collateral shall be or become evidenced by any Instrument,
Certificated Security or Chattel Paper, such Instrument, Certificated Security
or Chattel Paper shall be immediately delivered to the Collateral Agent, duly
indorsed in a manner satisfactory to the Collateral Agent, to be held as
Collateral pursuant to this Agreement.

       

      4.2           Maintenance of
Insurance.

       

      (a)           Such
Grantor will maintain, with financially sound and reputable companies, insurance
policies insuring such Grantor and the Collateral Agent against liability for
personal injury and property damage relating to Inventory and Equipment, such
policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Collateral Agent.

       

      (b)           All
such insurance shall (i) name the Collateral Agent as an additional insured
party or loss payee and (ii) be reasonably satisfactory in all other respects to
the Collateral Agent.

       

      (c)           The
Borrower shall deliver to the Collateral Agent a report of a reputable insurance
broker with respect to such insurance substantially concurrently with each
delivery of the Borrower’s audited annual financial statements and such
supplemental reports with respect thereto as the Collateral Agent may from time
to time reasonably request.

       

      4.3           Maintenance of Perfected
Security Interest; Further Documentation.

       

      (a)           Such
Grantor shall maintain the security interest created by this Agreement as a
perfected security interest having at least the priority described in Section 3.2 and shall
defend such security interest against the claims and demands of all Persons
whomsoever, subject to the rights of such Grantor under the Loan Documents to
dispose of the Collateral.

       

      (b)           Such
Grantor will furnish to the Collateral Agent and the Lenders from time to time
statements and schedules further identifying and describing the assets and
property of such Grantor and such other reports in connection therewith as the
Collateral Agent may reasonably request, all in reasonable detail.

       

      (c)           At
any time and from time to time, upon the written request of the Collateral
Agent, and at the sole expense of such Grantor, such Grantor will promptly and
duly execute and deliver, and have recorded, such further instruments and
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      further
actions as the Collateral Agent may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, (i) filing any
financing or continuation statements under the Uniform Commercial Code (or other
similar laws) in effect in any jurisdiction with respect to the security
interests created hereby and (ii) in the case of Investment Property, Deposit
Accounts, Letter-of-Credit Rights and any other relevant Collateral, taking any
actions necessary to enable the Collateral Agent to obtain “control” (within the
meaning of the applicable Uniform Commercial Code) with respect
thereto.

       

      4.4           Changes in Name,
etc.

       

        Such
Grantor will not, except upon 15 days’ prior written notice to the Collateral
Agent and delivery to the Collateral Agent of all additional financing
statements and other executed documents reasonably requested by the Collateral
Agent to maintain the validity, perfection and priority of the security
interests provided for herein, (i) change its jurisdiction of organization
or the location of its chief executive office or sole place of business from
that referred to in Section 3.3 or (ii)
change its name.

       

      4.5           Notices

       

      .  Such
Grantor will advise the Collateral Agent and the Lenders promptly, in reasonable
detail, of:

       

      (a)           any
Lien (other than security interests created hereby or Liens permitted under the
Loan Documents) on any of the Collateral which would adversely affect the
ability of the Collateral Agent to exercise any of its remedies hereunder;
and

       

      (b)           of
the occurrence of any other event which could reasonably be expected to have a
material adverse effect on the aggregate value of the Collateral or on the
security interests created hereby.

       

      4.6           Investment
Property.

       

      (a)           If
such Grantor shall become entitled to receive or shall receive any certificate
(including, without limitation, any certificate representing a dividend or a
distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of the Capital Stock (constituting Collateral hereunder) of
any Issuer, whether in addition to, in substitution of, as a conversion of, or
in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Grantor shall accept the same as the agent of the Collateral Agent
and the Secured Parties, hold the same in trust for the Collateral Agent and the
Secured Parties and deliver the same forthwith to the Collateral Agent in the
exact form received, duly indorsed by such Grantor to the Collateral Agent, if
required, together with an undated stock power covering such certificate duly
executed in blank by such Grantor and with, if the Collateral Agent so requests,
signature guaranteed, to be held by the Collateral Agent, subject to the terms
hereof, as additional collateral security for the Obligations.  Any
sums paid upon or in respect of the Investment Property constituting Collateral
hereunder upon the liquidation or dissolution of any Issuer shall be paid over
to the Collateral Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
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      Property
or any property shall be distributed upon or with respect to such Investment
Property pursuant to the recapitalization or reclassification of the capital of
any Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the Collateral Agent, be delivered to the Collateral Agent to be held
by it hereunder as additional collateral security for the
Obligations.  If any sums of money or property so paid or distributed
in respect of such Investment Property shall be received by such Grantor, such
Grantor shall, until such money or property is paid or delivered to the
Collateral Agent, hold such money or property in trust for the Collateral Agent
and the Secured Parties, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.

       

      (b)           Without
the prior written consent of the Collateral Agent or except as permitted under
the Credit Agreement, such Grantor will not (i) vote to enable, or take any
other action to permit, any Issuer to issue any Capital Stock of any nature or
to issue any other securities convertible into or granting the right to purchase
or exchange for any Capital Stock of any nature of any Issuer, unless all such
Capital Stock is pledged by such Grantor to the Collateral Agent, for the
ratable benefit of the Secured Parties, to the extent such pledge is required
under this Agreement or any other Loan Document, (ii) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Investment Property or Proceeds thereof constituting Collateral hereunder
(except pursuant to a transaction that is permitted by the Loan Documents),
(iii) create, incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Investment Property or Proceeds
thereof constituting Collateral hereunder, or any interest therein, except for
the security interests created by this Agreement or (iv) enter into any
agreement or undertaking restricting the right or ability of such Grantor or the
Collateral Agent to sell, assign or transfer any of the Investment Property or
Proceeds thereof.

       

      (c)           In
the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will
be bound by the terms of this Agreement relating to the Investment Property
issued by it and will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify the Collateral Agent promptly in writing
of the occurrence of any of the events described in Section 4.6(a)
with respect to the Investment Property issued by it and (iii) the terms of
Sections 5.3(c)
and 5.7 shall
apply to it, mutatis
mutandis, with respect
to all actions that may be required of it pursuant to Section 5.3(c) or
5.7 with
respect to the Investment Property issued by it.

       

      (d)           With
respect to any Pledged Stock in the form of uncertificated securities as defined
in Section 8-102(18) of the New York UCC, the Grantor shall promptly instruct
the Issuer thereof to indicate (and each Issuer who is a Grantor hereunder shall
promptly so indicate) clearly in writing in its stock book or other comparable
books and records that the Pledged Stock is subject to the security interest of
the Collateral Agent under this Agreement.  Each Grantor that is an
Issuer of Pledged Stock in the form of uncertificated securities as defined in
Section 8-102(18) of the New York UCC further agrees to comply with instructions
originated by the Collateral Agent with respect to such Pledged Stock without
further consent by the Grantor that is the registered owner of such Pledged
Stock.

       

      
        
          
          

        

        
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      4.7           Intellectual
Property.

       

      (a)           Except
in such Grantor’s reasonable business judgment, each Grantor will not knowingly
do any act or knowingly omit to do any act whereby any Trademark constituting
Collateral hereunder may become invalidated or impaired in any way.

       

      (b)           Each
Grantor will not knowingly do any act, or knowingly omit to do any act, that
could reasonably be expected cause any Patent owned, used or held by such
Grantor to become forfeited, abandoned or dedicated to the public.

       

      (c)           Except
in such Grantor’s reasonable business judgment, each Grantor will not knowingly
do any act or knowingly omit to do any act whereby any portion of the Copyrights
owned, used or held by such Grantor may become invalidated or otherwise impaired
nor knowingly do any act whereby any portion of the Copyrights owned, used or
held by such Grantor may fall into the public domain.

       

      (d)           Such
Grantor will not do any act that knowingly uses any Intellectual Property owned
by such Grantor to infringe the intellectual property rights of any other
Person.

       

      (e)           Such
Grantor will notify the Collateral Agent promptly if it knows, or has reason to
know, that any application or registration relating to any Intellectual Property
owned by such Grantor has become forfeited, abandoned or dedicated to the
public, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal in any country) regarding such
Grantor’s ownership of, or the validity of, any Intellectual Property
constituting Collateral hereunder or such Grantor’s right to register the same
or to own and maintain the same.

       

      (f)           Whenever
such Grantor, either by itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Intellectual
Property with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in any other country or any
political subdivision thereof, such Grantor shall report such filing to the
Collateral Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs.  Upon request of the Collateral
Agent, such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Collateral Agent may
request to evidence the Collateral Agent’s and the Secured Parties’ security
interest in such Copyright, Patent or Trademark and the goodwill and general
intangibles of such Grantor relating thereto or represented
thereby.

       

      (g)           Each
Grantor will take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
any other country or any political subdivision thereof, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain each
registration of the material Intellectual Property constituting Collateral
hereunder, including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.

       

      
        
          
          

        

        
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      (h)           In
the event that any Intellectual Property constituting Collateral hereunder is
infringed, misappropriated or diluted by a third party, such Grantor shall take
such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property including, without
limitation, suing for infringement, misappropriation or dilution, to seek
injunctive relief and seeking to recover any and all damages for such
infringement, misappropriation or dilution.

       

      (i)           Grantor
will notify the Collateral Agent and Secured Parties promptly if it knows, or
has reason to know, that any action or proceeding becomes pending, or, to the
knowledge of Grantor, threatened, which asserts infringement by Grantor of any
intellectual property rights owned by another entity.

       

      4.8           Commercial Tort
Claims

       

      .  If
such Grantor shall obtain an interest in any Commercial Tort Claim with a
reasonably expected value in excess of $50,000, such Grantor shall within 45
days of obtaining such interest advise the Collateral Agent thereof and, if
requested by the Collateral Agent in writing, within 30 days after such request
sign and deliver documentation acceptable to the Collateral Agent granting a
security interest under the terms and provisions of this Agreement in and to
such Commercial Tort Claim.

       

      4.9           Subsidiaries.

       

      (a)           Such
Grantor will not, except upon 15 days’ prior written notice to the Collateral
Agent and delivery to the Collateral Agent of all financing statements and other
documents and information reasonably requested by the Collateral Agent to
acquire or maintain the validity, perfection and priority of the security
interests provided for herein, and solely to the extent permitted under the
Credit Agreement, (i) sell, assign, pledge, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, as the case may be,
any Collateral to any Subsidiary or (ii) make any contribution, distribution or
other payment to any Subsidiary unless, in each case, such Subsidiary is a
Grantor under this Agreement and the Capital Stock of such Subsidiary
constitutes Pledged Shares hereunder.

       

      (b)           In
the event that any non-Grantor Subsidiary of such Grantor has or acquires more
than de minimus
property or assets constituting Collateral, such non-Grantor Subsidiary shall
promptly, but in no even more than five Business Days thereafter, become a
Grantor under this Agreement, and Grantor or Grantors holding the Capital Stock
of such Subsidiary shall take all necessary actions to ensure that such Capital
Stock constitutes Pledged Shares hereunder.

       

       

      SECTION
5.                                Remedial
Provisions.

       

      5.1           Certain Matters Relating to
Receivables.

       

      (a)           The
Collateral Agent shall have the right at reasonable times and with reasonable
notice to make test verifications of the Receivables constituting Collateral
hereunder in any manner and through any medium that it reasonably considers
advisable, and each Grantor shall furnish all such assistance and information as
the Collateral Agent may reasonably require in connection with such test
verifications.  At any time (but no more frequently than once per
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      continuing,
in which case there shall be no limits), upon the Collateral Agent’s request and
at the expense of the relevant Grantor, such Grantor shall use commercially
reasonable efforts to cause independent public accountants or others
satisfactory to the Collateral Agent to furnish to the Collateral Agent reports
showing reconciliations, aging and test verifications of, and trial balances
for, the Receivables constituting Collateral hereunder.

       

      (b)           The
Collateral Agent hereby authorizes each Grantor to collect such Grantor’s
Receivables, subject to the Collateral Agent’s direction and control, and the
Collateral Agent may curtail or terminate said authority at any time after the
occurrence and during the continuance of an Event of Default.  If
required by the Collateral Agent at any time after the occurrence and during the
continuance of an Event of Default, any payments of Receivables, when collected
by any Grantor, (i) shall be forthwith (and, in any event, within three Business
Days) deposited by such Grantor in the exact form received, duly indorsed by
such Grantor to the Collateral Agent if required, in a Collateral Account
maintained under the sole dominion and control of the Collateral Agent, subject
to withdrawal by the Collateral Agent for the account of the Secured Parties
only as provided in Section 5.5, and (ii)
until so turned over, shall be held by such Grantor in trust for the Collateral
Agent and the Secured Parties, segregated from other funds of such
Grantor.  Each such deposit of Proceeds of Receivables shall be
accompanied by a report identifying in reasonable detail the nature and source
of the payments included in the deposit.

       

      (c)           At
the Collateral Agent’s request after the occurrence and during the continuance
of an Event of Default, each Grantor shall deliver to the Collateral Agent all
original and other documents evidencing, and relating to, the agreements and
transactions which gave rise to the Receivables constituting Collateral
hereunder, including, without limitation, all original orders, invoices and
shipping receipts.

       

      5.2           Communications with
Obligors; Grantors Remain Liable.

       

      (a)           The
Collateral Agent in its own name or in the name of others may at any time after
the occurrence and during the continuance of an Event of Default communicate
with obligors under the Receivables constituting Collateral hereunder and
parties to the Contracts constituting Collateral hereunder to verify with them
to the Collateral Agent’s satisfaction the existence, amount and terms of any
such Receivables or Contracts.

       

      (b)           Upon
the request of the Collateral Agent at any time after the occurrence and during
the continuance of an Event of Default, each Grantor shall notify obligors on
the Receivables constituting Collateral hereunder and parties to the Contracts
constituting Collateral hereunder that such Receivables and the Contracts have
been assigned to the Collateral Agent for the ratable benefit of the Secured
Parties and that payments in respect thereof shall be made directly to the
Collateral Agent.

       

      (c)           Anything
herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Receivables and Contracts to observe and perform all the conditions
and obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise thereto.  Neither the
Collateral Agent nor any Secured Party shall have any obligation or liability
under any Receivable (or any agreement giving rise thereto) or Contract by
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      Collateral
Agent or any Secured Party of any payment relating thereto, nor shall the
Collateral Agent or any Secured Party be obligated in any manner to perform any
of the obligations of any Grantor under or pursuant to any Receivable (or any
agreement giving rise thereto) or Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.

       

      5.3           Pledged
Stock.

       

      (a)           Unless
an Event of Default shall have occurred and be continuing and the Collateral
Agent shall have given written notice to the relevant Grantor of the Collateral
Agent’s intent to exercise its corresponding rights pursuant to Section 5.3(b), each
Grantor shall be permitted to receive all cash dividends paid in respect of the
Pledged Stock and all payments made in respect of the Pledged Notes, in each
case paid in the normal course of business of the relevant Issuer and consistent
with past practice, to the extent permitted in the Credit Agreement, and to
exercise all voting and corporate or other organizational rights with respect to
the Investment Property; provided that no vote shall
be cast or corporate or other organizational right exercised or other action
taken which, in the Collateral Agent’s reasonable judgment, would materially
impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, this Agreement or any other
Loan Document.

       

      (b)           If
an Event of Default shall occur and be continuing and the Collateral Agent shall
give written notice of its intent to exercise such rights to the relevant
Grantor or Grantors, (i) the Collateral Agent shall have the right to receive
any and all cash dividends, payments or other Proceeds paid in respect of the
Investment Property constituting Collateral hereunder and make application
thereof to the Obligations in such order as the Collateral Agent may determine,
and (ii) any or all of the Investment Property shall be registered in the name
of the Collateral Agent or its nominee, and the Collateral Agent or its nominee
may thereafter exercise (x) all voting, corporate and other rights pertaining to
such Investment Property at any meeting of shareholders of the relevant Issuer
or Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Investment Property as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the
Investment Property constituting Collateral hereunder upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate or other organizational structure of any Issuer, or upon the
exercise by any Grantor or the Collateral Agent of any right, privilege or
option pertaining to such Investment Property, and in connection therewith, the
right to deposit and deliver any and all of such Investment Property with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Collateral Agent may determine), all without
liability except to account for property actually received by it, but the
Collateral Agent shall have no duty to any Grantor to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or
delay in so doing.

       

      (c)           Each
Grantor hereby authorizes and instructs each Issuer of any Investment Property
pledged by such Grantor hereunder to (i) comply with any instruction received by
it from the Collateral Agent in writing that (x) states that an Event of Default
has

       

      
        
          
          

        

        
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      occurred
and is continuing and (y) is otherwise in accordance with the terms of this
Agreement, without any other or further instructions from such Grantor, and each
Grantor agrees that each Issuer shall be fully protected in so complying, and
(ii) unless otherwise expressly permitted hereby, pay any dividends or other
payments with respect to the Investment Property directly to the Collateral
Agent.

       

      5.4           Proceeds to be Turned Over
to Collateral Agent

       

      .  In
addition to the rights of the Collateral Agent and the Secured Parties specified
in Section 5.1
with respect to payments of Receivables, if an Event of Default shall occur and
be continuing, all Proceeds received by any Grantor consisting of cash, checks
and other near-cash items shall be held by such Grantor in trust for the
Collateral Agent and the Secured Parties, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Collateral Agent in the exact form received by such Grantor (duly indorsed
by such Grantor to the Collateral Agent, if required).  All Proceeds
constituting Collateral hereunder received by the Collateral Agent hereunder
shall be held by the Collateral Agent in a Collateral Account maintained under
its sole dominion and control.  All Proceeds constituting Collateral
hereunder while held by the Collateral Agent in a Collateral Account (or by such
Grantor in trust for the Collateral Agent and the Secured Parties) shall
continue to be held as collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in Section
5.5.

       

      5.5           Application of
Proceeds

       

      .  At
such intervals as may be agreed upon by the Borrower and the Collateral Agent,
or, if an Event of Default shall have occurred and be continuing, at any time at
the Collateral Agent’s election, the Collateral Agent may apply all or any part
of Proceeds constituting Collateral, whether or not held in any Collateral
Account, in payment of the Obligations in the following order:

       

      First, to pay
incurred and unpaid fees and expenses of the Collateral Agent under the Loan
Documents;

       

      Second, to the
Collateral Agent, for application by it towards payment of amounts then due and
owing and remaining unpaid in respect of the Obligations, pro rata among the
Secured Parties according to the amounts of the Obligations then due and owing
and remaining unpaid to the Secured Parties;

       

      Third, to the
Collateral Agent, for application by it towards prepayment of the Obligations,
pro rata among the Secured Parties according to the amounts of the Obligations
then held by the Secured Parties; and

       

      Fourth, any balance
remaining after the Discharge of Obligations shall be paid over to the Borrower
or to whomsoever may be lawfully entitled to receive the same.

       

      5.6           Code and Other
Remedies

       

      .  If
an Event of Default shall occur and be continuing, the Collateral Agent, on
behalf of the Secured Parties, may exercise, in addition to all other rights and
remedies granted to them in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the New York UCC or any other applicable
law.  Without limiting the generality of the foregoing, the Collateral
Agent, without demand of performance or other demand, presentment, protest,
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      kind
(except any notice required by law referred to below) to or upon any Grantor or
any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may, subject to the requirements of applicable law,
in such circumstances forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, lease, assign,
give option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker’s
board or office of the Collateral Agent or any Secured Party or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk.  The Collateral Agent or any Secured Party shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in any
Grantor, which right or equity is hereby waived and released.  Each
Grantor further agrees, at the Collateral Agent’s request, to assemble the
Collateral and make it available to the Collateral Agent at places which the
Collateral Agent shall reasonably select, whether at such Grantor’s premises or
elsewhere.  The Collateral Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 5.6, after
deducting all reasonable costs and expenses of every kind incurred in connection
therewith or incidental to the care or safekeeping of any of the Collateral or
in any way relating to the Collateral or the rights of the Collateral Agent and
the Secured Parties hereunder, including, without limitation, reasonable
attorneys’ fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Collateral Agent may elect, and only after
such application and after the payment by the Collateral Agent of any other
amount required by any provision of law, including, without limitation, Section
9-615(a)(3) of the New York UCC, need the Collateral Agent account for the
surplus, if any, to any Grantor.  To the extent permitted by
applicable law, each Grantor waives all claims, damages and demands it may
acquire against the Collateral Agent or any Secured Party arising out of the
exercise by them of any rights hereunder.  If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.

       

      5.7           Registration
Rights

       

      (a)           Each
Grantor recognizes that the Collateral Agent may be unable to effect a public
sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof.  Each Grantor
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner.  The
Collateral Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do
so.

       

      
        
          
          

        

        
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      (b)           Each
Grantor agrees to use its commercially reasonable efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 5.7 valid and
binding and in compliance with any and all other applicable Requirements of
Law.  Each Grantor further agrees that a breach of any of the
covenants contained in this Section 5.7 will
cause irreparable injury to the Collateral Agent and the Secured Parties, that
the Collateral Agent and the Secured Parties have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 5.7 shall be
specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has
occurred.

       

      5.8           Subordination

       

      .  Each
Grantor hereby agrees that, upon the occurrence and during the continuance of an
Event of Default, unless otherwise agreed by the Collateral Agent, all
Indebtedness owing by it to any Subsidiary of the Borrower shall be fully
subordinated to the indefeasible payment in full in cash of the
Obligations.

       

      5.9           Deficiency

       

      .  The
Borrower shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Obligations and
the fees and disbursements of any attorneys employed by the Collateral Agent or
any Secured Party to collect such deficiency.

       

       

      SECTION
6.                                The Collateral
Agent.

       

      6.1           Collateral Agent’s
Appointment as Attorney-in-Fact, etc.

       

      (a)           Each
Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this
Agreement.  At any time when an Event of Default has occurred and is
continuing and without limiting the generality of the foregoing, each Grantor
hereby gives the Collateral Agent the power and right, on behalf of such
Grantor, without notice to or assent by such Grantor, to do any or all of the
following:

       

      (i)           in
the name of such Grantor or its own name, or otherwise, take possession of and
indorse and collect any checks, drafts, notes, acceptances or other instruments
for the payment of moneys due under any Receivable or Contract or with respect
to any other Collateral and file any claim or take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate by the
Collateral Agent for the purpose of collecting any and all such moneys due under
any Receivable or Contract or with respect to any other Collateral whenever
payable;

       

      (ii)           in
the case of any Intellectual Property, execute and deliver, and have recorded,
any and all agreements, instruments, documents and papers as the Collateral
Agent may reasonably request to evidence the Collateral Agent’s and the Secured
Parties’ security interest in such Intellectual Property and the goodwill and
general intangibles of such Grantor relating thereto or represented
thereby;

       

      (iii)           pay
or discharge taxes and Liens levied or placed on or threatened against the
Collateral, effect any repairs or any insurance called for by the terms of this
Agreement and pay all or any part of the premiums therefor and the costs
thereof;

       

      
        
          
          

        

        
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      (iv)           execute,
in connection with any sale provided for in Section 5.6 or 5.7, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral; and

       

      (v)           (1)  direct
any party liable for any payment under any of the Collateral to make payment of
any and all moneys due or to become due thereunder directly to the Collateral
Agent or as the Collateral Agent shall direct; (2) ask or demand for, collect,
and receive payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out of any
Collateral; (3) sign and indorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (4) commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect the Collateral or
any portion thereof and to enforce any other right in respect of any Collateral;
(5) defend any suit, action or proceeding brought against such Grantor with
respect to any Collateral; (6) settle, compromise or adjust any such suit,
action or proceeding and, in connection therewith, give such discharges or
releases as the Collateral Agent may deem appropriate; (7) assign any Copyright,
Patent or Trademark (along with the goodwill of the business to which any such
Copyright, Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Collateral Agent shall in
its sole discretion determine; and (8) generally, sell, transfer, pledge
and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Collateral Agent were the
absolute owner thereof for all purposes, and do, at the Collateral Agent’s
option and such Grantor’s expense, at any time, or from time to time, all acts
and things which the Collateral Agent deems necessary to protect, preserve or
realize upon the Collateral and the Collateral Agent’s and the Secured Parties’
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.

       

      Notwithstanding
anything to the contrary in this Section 6.1(a), the
Collateral Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 6.1(a) unless
an Event of Default shall have occurred and be continuing.

       

      (b)           If
any Grantor fails to perform or comply with any of its agreements contained
herein, the Collateral Agent, at its option, but without any obligation so to
do, may perform or comply, or otherwise cause performance or compliance, with
such agreement.

       

      (c)           The
reasonable expenses of the Collateral Agent incurred in connection with actions
undertaken as provided in this Section 6.1, together
with interest thereon at a rate per annum equal to the highest rate per annum at
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      payable
on any category of past due Loans under the Credit Agreement, from the date of
payment by the Collateral Agent to the date reimbursed by the relevant Grantor,
shall be payable by such Grantor to the Collateral Agent on demand.

       

      (d)           Each
Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be
done by virtue hereof.  All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.

       

      6.2           Undertaking of the
Collateral Agent.

       

      (a)           Subject
to, and in accordance with the terms of the Credit Agreement, this Agreement and
the other Security Documents, the Collateral Agent will, for the benefit solely
and exclusively of the Secured Parties:

       

      (i)           accept,
enter into, hold, maintain, administer and enforce all Security Documents,
including all Collateral subject thereto, and all Liens created thereunder,
perform its obligations under the Security Documents and protect, exercise and
enforce the interests, rights, powers and remedies granted or available to it
under, pursuant to or in connection with the Security Documents;

       

      (ii)           take
all lawful and commercially reasonable actions permitted under the Security
Documents that it may deem necessary or advisable to protect or preserve its
interest in the Collateral subject thereto and such interests, rights, powers
and remedies;

       

      (iii)           deliver
and receive notices pursuant to the Security Documents;

       

      (iv)           sell,
assign, collect, assemble, foreclose on, institute legal proceedings with
respect to, or otherwise exercise or enforce the rights and remedies of a
secured party (including a mortgagee, trust deed beneficiary and insurance
beneficiary or loss payee) with respect to the Collateral under the Security
Documents and its other interests, rights, powers and remedies;

       

      (v)           remit
as provided in Section
5.5 all cash proceeds, cash equivalents and other distributions of or in
respect of Collateral received by it from the collection, foreclosure or
enforcement of its interest in the Collateral under the Security Documents or
any of its other interests, rights, powers or remedies;

       

      (vi)           execute
and deliver amendments to this Agreement as from time to time authorized
pursuant to Section
7.1; and

       

      (vii)           release
any Lien granted to it by any Security Document upon any Collateral if and as
required by Section
7.16.

       

      (b)           Each
party to this Agreement acknowledges and consents to the undertaking of the
Collateral Agent set forth in this Section 6.2 and
agrees to each of the other provisions of this Agreement applicable to the
Collateral Agent.

       

      
        
          
          

        

        
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      (c)           Notwithstanding
anything to the contrary contained in this Agreement or any other Security
Document or Loan Document, the Collateral Agent may commence, or consent to or
otherwise sustain any exercise of remedies or any foreclosure actions or
otherwise take any action or proceeding against any of the Collateral (including
actions as necessary to prove, protect or preserve the Liens securing the
Obligations); provided
that it shall not be required to do so unless and until it shall have been
directed by an Act of Required Lenders and then only in accordance with the
provisions of this Agreement and the other Security Documents and Loan
Documents.

       

      6.3           Immunities of the Collateral
Agent.

       

      (a)           No Implied
Duty.  The Collateral Agent will not have any fiduciary duties
nor will it have responsibilities or obligations other than those expressly
assumed or taken by it in this Agreement and the other Security Documents and
Loan Documents.  The Collateral Agent will not be required to take any
action that is contrary to Applicable Law or any provision of this Agreement or
the other Security Documents or Loan Documents.

       

      (b)           Appointment of Agents and
Advisors.  The Collateral Agent may execute any of the powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys, accountants, appraisers or other experts or advisors selected
by it in good faith as it may reasonably require.

       

      (c)           Solicitations of
Instructions.

       

      (i)           The
Collateral Agent may at any time solicit written confirmatory instructions from
the Lenders in the form of an Act of Required Lenders or otherwise, or in the
form of an Officer’s Certificate or an order of a court of competent
jurisdiction, as to any action that it may be requested or required to take, or
that it may propose to take, in the performance of any of its obligations under
this Agreement or the other Security Documents or Loan Documents.

       

      (ii)           No
written direction given to the Collateral Agent by an Act of Required Lenders
that in the sole judgment of the Collateral Agent imposes, purports to impose or
might reasonably be expected to impose upon the Collateral Agent any obligation
or liability not set forth in or arising under this Agreement and the other
Security Documents or Loan Documents will be binding upon the Collateral Agent
unless the Collateral Agent elects, at its sole option, to accept such
direction.

       

      (e)           Exculpation.  Neither
the Collateral Agent nor any of its respective directors, officers, employees or
agents shall be liable to any Secured Party or Grantor for any action taken or
omitted to be taken by it under this Agreement or any other Security Document or
Loan Document, or in connection herewith or therewith, except as provided herein
and except for its own willful misconduct or gross negligence as determined in
the final judgment of a court of competent jurisdiction, nor responsible for any
recitals or warranties herein or therein, nor for the effectiveness,
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      other
Security Document or Loan Document, nor to make any inquiry respecting the
performance by any Grantor of its Obligations.  Any such inquiry which
may be made by the Collateral Agent shall not obligate it to make any further
inquiry or to take any action.

       

      (f)           Documents in Satisfactory
Form.  The Collateral Agent will be entitled to require that
all agreements, certificates, opinions, instruments and other documents at any
time submitted to it, including those expressly provided for in this Agreement,
be delivered to it in a form and with substantive provisions reasonably
satisfactory to it and not inconsistent with the terms of this Agreement, the
other Security Documents and the Loan Documents.

       

      (g)           Entitled to
Rely.  The Collateral Agent may seek and rely upon, and shall
be fully protected in relying upon, any judicial order or judgment, upon any
advice, opinion or statement of legal counsel, independent consultants and other
experts selected by it in good faith and upon any certification, instruction,
notice or other writing delivered to it by the Borrower or any other Grantor in
compliance with the provisions of this Agreement or delivered to it by any
Lender or Secured Party, without being required to determine the authenticity
thereof or the correctness of any fact stated therein or the propriety or
validity of service thereof.  The Collateral Agent may act in reliance
upon any instrument comporting with the provisions of this Agreement or any
signature reasonably believed by it to be genuine and may assume that any Person
purporting to give notice or receipt or advice or make any statement or execute
any document in connection with the provisions hereof or the other Security
Documents or Loan Documents has been duly authorized to do so (including for
purposes of releasing any Collateral in accordance with the provisions of the
applicable Loan Documents or Security Documents).  To the extent an
Officer’s Certificate or opinion of counsel is required or permitted under this
Agreement to be delivered to the Collateral Agent in respect of any matter, the
Collateral Agent may reasonably rely conclusively on such Officer’s Certificate
or opinion of counsel as to such matter and such Officer’s Certificate or
opinion of counsel shall be a full warranty and protection to the Collateral
Agent for any action taken, suffered or omitted by it under the provisions of
this Agreement and the other Security Documents.

       

      (h)           Default.  The
Collateral Agent will not be required to inquire as to the occurrence or absence
of any Default or Event of Default and will not be affected by or required to
act upon any notice or knowledge as to the occurrence of any Default or Event of
Default unless and until it is directed by an Act of Required
Lenders.

       

      (i)           Actions by Collateral
Agent.  As to any matter not expressly provided for by this
Agreement or the other Security Documents or Loan Documents, the Collateral
Agent will act or refrain from acting as directed by an Act of Required Lenders
and will be fully protected if it does so, and any action taken, suffered or
omitted pursuant to hereto or thereto shall be binding on the holders of
Obligations.

       

      (j)           Security or Indemnity in
favor of the Collateral Agent.  The Collateral Agent will not
be required to advance or expend any funds or otherwise incur any financial
liability in the performance of its duties or the exercise of its powers or
rights 

       

      
        
          
          

        

        
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      hereunder
unless it has been provided with security or indemnity reasonably satisfactory
to it against any and all liability or expense which may be incurred by it by
reason of taking or continuing to take such action.

       

      (k)           Rights of the Collateral
Agent.  In the event there is any bona fide, good faith
disagreement between the other parties to this Agreement or any of the other
Security Documents or Loan Documents resulting in adverse claims being made in
connection with Collateral held by the Collateral Agent and the terms of this
Agreement or any of the other Security Documents or Loan Documents do not
unambiguously mandate the action the Collateral Agent is to take or not to take
in connection therewith under the circumstances then existing, or the Collateral
Agent is in doubt as to what action it is required to take or not to take
hereunder or under the other Security Documents, it will be entitled to refrain
from taking any action (and will incur no liability for doing so) until directed
otherwise in writing by a request signed jointly by the parties hereto entitled
to give such direction or by order of a court of competent
jurisdiction.

       

      6.4           Release of
Liens.  The Collateral Agent will not release any Lien of the
Collateral Agent or consent to the release of any Lien of the Collateral Agent,
except:

       

      (a)           as
permitted by Section
7.16; or

       

      (b)           as
ordered pursuant to applicable law under a final order or judgment of a court of
competent jurisdiction.

       

      6.5           Enforcement of
Liens

       

      .  Each
Secured Party hereby agrees to promptly notify the Collateral Agent in writing
of any Default or Event of Default arising under the Loan
Documents.  If the Collateral Agent at any time receives written
notice that any Default or Event of Default has occurred, the Collateral Agent
will promptly deliver written notice thereof to the Borrower and each Secured
Party.  In the event any Secured Party, following the delivery of (and
with reference to) any such notice, requests in writing that the Collateral
Agent pursue any lawful action described in the immediately succeeding sentence,
the Collateral Agent shall notify the Borrower and each other Secured Party
thereof in writing and seek the consent of the Required Lenders to pursue such
action (it being understood that the Collateral Agent shall not be required to
advise the Required Lenders to pursue such action).  Following receipt
of any notice that a Default or Event of Default has occurred and until such
time as it receives a notice by such Secured Party rescinding such Default or
Event of Default, the Collateral Agent may await direction by an Act of Required
Lenders and will act, or decline to act, as directed by an Act of Required
Lenders, in the exercise and enforcement of the Collateral Agent’s interests,
rights, powers and remedies in respect of the Collateral or under the Security
Documents or applicable law and, following the initiation of such exercise of
remedies, the Collateral Agent will act, or decline to act, with respect to the
manner of such exercise of remedies as directed by an Act of Required
Lenders.  Subsequent to the Collateral Agent delivering written notice
to the Borrower and each Secured Party that any Default or Event of Default has
occurred entitling the Collateral Agent to foreclose upon, collect or otherwise
enforce its Liens thereunder, then, unless it has been directed to the contrary
by an Act of Required Lenders, the Collateral Agent in any event may (but will
not be obligated to) take all lawful and commercially reasonable actions
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      necessary
or advisable to protect or preserve its interest in the Collateral subject
thereto and the interests, rights, powers and remedies granted or available to
it under, pursuant to or in connection with the Security Documents.

       

      6.6           Duty of Collateral
Agent

       

      .  To
the full extent permitted by applicable law, the Collateral Agent’s sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account.  Neither the
Collateral Agent, any Secured Party nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof, except as provided
herein.  The powers conferred on the Collateral Agent and the Secured
Parties hereunder are solely to protect the Collateral Agent’s and the Secured
Parties’ interests in the Collateral and shall not impose any duty upon the
Collateral Agent or any Secured Party to exercise any such
powers.  The Collateral Agent and the Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful
misconduct.

       

      6.7           Execution of Financing
Statements

       

      .  Pursuant
to any applicable law, each Grantor authorizes the Collateral Agent to file or
record financing statements and other filing or recording documents or
instruments with respect to the Collateral without the signature of such Grantor
in such form and in such offices as the Collateral Agent determines appropriate
to perfect the security interests of the Collateral Agent under this
Agreement.  Each Grantor authorizes the Collateral Agent to use the
collateral description “all personal property” in any such financing
statements.  Each Grantor hereby ratifies and authorizes the filing by
the Collateral Agent of any financing statement with respect to the Collateral
made prior to the date hereof.

       

      6.8           Authority of Collateral
Agent

       

      .  Each
Grantor acknowledges that the rights and responsibilities of the Collateral
Agent under this Agreement with respect to any action taken by the Collateral
Agent or the exercise or non-exercise by the Collateral Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Collateral
Agent and the Secured Parties, be governed by the relevant Loan Documents, and
by such other agreements with respect thereto as may exist from time to time
among any of them, but, as between the Collateral Agent and the Grantors, the
Collateral Agent shall be conclusively presumed to be acting as agent for the
Secured Parties with full and valid authority so to act or refrain from acting,
and no Grantor shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.

       

      6.9           Intercreditor Arrangements

       

      .  Each
party hereto (and each Secured Party) acknowledges and agrees that the
Collateral Agent may act in accordance with, and shall be required to take
certain actions as required by, the terms of Section 8 of the
Credit Agreement.  Each of the parties hereto (and each Secured Party)
acknowledges and agrees that any such actions shall be permitted, and further
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      provisions
of this Agreement, including Section 5 and Section 6.1 hereof,
and the Credit Agreement, the relevant provisions of the Credit Agreement shall
control.  The parties hereto (and each Secured Party) also acknowledge
and agree that the Collateral Agent shall have the benefit of the provisions
contained in the Credit Agreement.

       

       

      SECTION
7.                                Miscellaneous.

       

      7.1           Amendments.

       

      (a)           No
amendment, supplement or other modification to the provisions of any Security
Document will be effective without the approval of the Collateral Agent and the
Required Lenders, except that:

       

      (i)           any
amendment, supplement or other modification that has the effect solely of adding
or maintaining Collateral, securing additional Obligations that are otherwise
permitted by the terms of the Loan Documents to be secured by the Collateral or
preserving, perfecting or establishing the Liens thereon or the rights of the
Collateral Agent therein will become effective when executed and delivered by
the Borrower or any other applicable Grantor party thereto and the Collateral
Agent; and

       

      (ii)           no
amendment or supplement that imposes any obligation upon the Collateral Agent or
adversely affects the rights of the Collateral Agent in its capacity as such
will become effective without the consent of the Collateral Agent.

       

      (b)           Notwithstanding
paragraph (a) above, the Collateral Agent and the Borrower (and/or each other
applicable Grantor) may, without the consent of any Secured Party, enter into
any amendment, supplement or other modification of a Security Document to cure
any ambiguity or to correct or supplement any provision in such document that
may be inconsistent with any other provision of a Security Document or to
further the intended purposes thereof.

       

      (c)           The
Collateral Agent will deliver a copy of each amendment, supplement or other
modification to the Security Documents to each Secured Party upon
request.  Each Secured Party understands and agrees that it will be
bound by any such amendment.

       

      7.2           Notices

       

      .  All
notices, requests and demands to or upon the Collateral Agent or any Grantor
hereunder shall be effected in the manner provided for in Section 9.3 of the
Credit Agreement, to the Borrower, the Collateral Agent and each Lender or
Secured Party at its address as provided in the Credit Agreement, and each
Grantor (other than the Borrower) at its address set forth on Schedule 1
hereto.

       

      7.3           No Waiver by Course of
Conduct; Cumulative Remedies

       

      .  Neither
the Collateral Agent nor any Secured Party shall by any act (except by a written
instrument pursuant to Section 7.1), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of
Default.  No failure to exercise, nor any delay in exercising, on the
part of the Collateral Agent or any Secured Party any right, power or privilege
hereunder shall operate as a waiver thereof.  No single or partial
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      any other
or further exercise thereof or the exercise of any other right, power or
privilege.  A waiver by the Collateral Agent or any Secured Party of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Collateral Agent or such Secured Party
would otherwise have on any future occasion.  The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law.

       

      7.4           Enforcement Expenses;
Indemnification.

       

      (a)           Each
Grantor agrees to pay or reimburse each Secured Party and the Collateral Agent
for all its costs and expenses incurred in collecting against such Grantor or
otherwise enforcing or preserving any rights under this Agreement and the other
Loan Documents to which such Grantor is a party, including, without limitation,
the fees and disbursements of counsel (including the allocated fees and expenses
of in-house counsel) to each Secured Party and of counsel to the Collateral
Agent.

       

      (b)           Each
Grantor agrees to pay, and to save the Collateral Agent and the Secured Parties
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this
Agreement.

       

      (c)           Each
Grantor agrees to pay, and to save the Collateral Agent and the Secured Parties
harmless from, any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Borrower
would be required to do so pursuant to Section 8.1 of the Credit Agreement or
the relevant provisions of any other Loan Document.

       

      (d)           The
agreements in this Section 7.4 shall
survive repayment of the Obligations and all other amounts payable under the
Loan Documents.

       

      7.5           Security Interest
Absolute

       

      .  All
rights of the Collateral Agent and security interests hereunder, and all
obligations of each of the Grantors hereunder, shall be absolute and
unconditional, irrespective of any circumstance which might constitute a defense
available to, or a discharge of, any Grantor or other obligor in respect of the
Obligations other than the Discharge of Obligations.

       

      7.6           Successors and
Assigns

       

      .  This
Agreement shall be binding upon the successors and assigns of each Grantor and
shall inure to the benefit of the Collateral Agent and the Secured Parties and
their successors and assigns; provided that no Grantor may
assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Collateral
Agent.

       

      7.7           Set-Off; Limitation on
Individual Actions.

       

      (a)           In
addition to any rights and remedies of the Secured Parties provided by law, each
Secured Party shall have the right, without notice to any Grantor, any such
notice being expressly waived by each Grantor to the extent permitted by
applicable law, upon any Obligations becoming due and payable (whether at the
stated maturity, by acceleration or otherwise), to apply to the payment of
such

       

      
        
          
          

        

        
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10-42

        

      

       

       

      Obligations,
by setoff or otherwise, any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Secured Party, any affiliate thereof or any of their respective
branches or agencies to or for the credit or the account of such
Grantor.  Each Secured Party agrees promptly to notify in writing the
relevant Grantor and the Collateral Agent after any such application made by
such Secured Party, provided that the failure to
give such notice shall not affect the validity of such application.

       

      (b)           NOTWITHSTANDING
THE FOREGOING SUBSECTION (a) OR ANY CONTRARY PROVISION CONTAINED IN ANY LOAN
DOCUMENT, AT ANY TIME THAT ANY OBLIGATION SHALL BE SECURED BY ANY INTEREST IN
ANY REAL PROPERTY LOCATED IN CALIFORNIA, NO SECURED PARTY (OTHER THAN THE
COLLATERAL AGENT) SHALL EXERCISE ANY REMEDIES AGAINST ANY LOAN PARTY OR ANY
PROPERTY THEREOF, INCLUDING WITHOUT LIMITATION, A RIGHT OF SETOFF, LIEN OR
COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY
PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY LOAN DOCUMENT
(ALTHOUGH A SECURED PARTY CAN ACCELERATE THE MATURITY OF ANY LOAN OR OTHER
OBLIGATION IN ACCORDANCE WITH THE TERMS OF THE LOAN DOCUMENTS) UNLESS IT IS
TAKEN PURSUANT TO AN ACT OF REQUIRED LENDERS) OR APPROVED IN WRITING BY THE
COLLATERAL AGENT; PROVIDED THAT IF REPUTABLE OUTSIDE CALIFORNIA COUNSEL TO SUCH
SECURED PARTY PROVIDES ITS WRITTEN LEGAL OPINION (WITHOUT ANY MATERIAL
QUALIFICATION OR EXCEPTION) TO THE EFFECT THAT SUCH SETOFF OR ACTION OR
PROCEEDING WOULD NOT (PURSUANT TO APPLICABLE CALIFORNIA STATE LAW, INCLUDING,
WITHOUT LIMITATION, SECTIONS 580a, 580b, 580d AND 726 OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE OR SECTION 2924 OF THE CALIFORNIA CIVIL CODE, IF APPLICABLE)
ADVERSELY AFFECT OR IMPAIR THE VALIDITY, PRIORITY OR ENFORCEABILITY OF THE LIENS
GRANTED TO THE COLLATERAL AGENT PURSUANT TO THE LOAN DOCUMENTS OR THE
ENFORCEABILITY OF THE OBLIGATIONS UNDER THE LOAN DOCUMENTS, THEN SUCH ACTION MAY
BE TAKEN OR COMMENCED SO LONG AS THE RESPECTIVE SECURED PARTY PROVIDES AT LEAST
FIVE BUSINESS DAYS’ ADVANCE WRITTEN NOTICE THEREOF TO THE COLLATERAL AGENT
(TOGETHER WITH A COPY OF THE RESPECTIVE OPINION OF CALIFORNIA
COUNSEL).  ANY ATTEMPTED EXERCISE BY ANY SECURED PARTY OF ANY SUCH
RIGHT IN CONTRAVENTION OF THE FOREGOING PROVISIONS SHALL BE NULL AND
VOID.  THIS SUBSECTION (b) SHALL BE SOLELY FOR THE BENEFIT OF EACH OF
THE SECURED PARTIES AND THE COLLATERAL AGENT, AND MAY BE AMENDED BY AN ACT OF
REQUIRED LENDERS.

       

      7.8           Counterparts

       

      .  This
Agreement may be executed by one or more of the parties to this Agreement on any
number of separate counterparts (including by electronic transmission or
facsimile), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.

       

      
        
          
          

        

        
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10-42

        

      

       

       

      7.9           Severability

       

      .  Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

       

      7.10           Section
Headings

       

      .  The
Section headings used in this Agreement are for convenience of reference only
and are not to affect the construction hereof or be taken into consideration in
the interpretation hereof.

       

      7.11           Integration

       

      .  This
Agreement, the Credit Agreement and the other Loan Documents represent the
entire agreement of the Grantors, the Collateral Agent and the Secured Parties
with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Collateral Agent or
any Secured Party relative to subject matter hereof and thereof not expressly
set forth or referred to herein or therein.

       

      7.12           GOVERNING
LAW

       

      .  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.

       

      7.13           Submission To Jurisdiction;
Waivers

       

      .  Each
Grantor hereby irrevocably and unconditionally:

       

      (a)           submits
for itself and its property in any legal action or proceeding relating to this
Agreement, the Credit Agreement and the other Loan Documents to which it is a
party, or for recognition and enforcement of any judgment in respect thereof, to
the non exclusive general jurisdiction of the courts of the State of New York,
the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;

       

      (b)           consents
that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;

       

      (c)           agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such Grantor at its address referred
to in Section
7.2 or at such other address of which the Collateral Agent shall have
been notified pursuant thereto;

       

      (d)           agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction;

       

      (e)           waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages;

       

      
        
          
          

        

        
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10-42

        

      

       

       

      (f)           acknowledges
and affirms that it understands that to the extent the Obligations are secured
by real property located in the State of California, such Grantor shall be
liable for the full amount of the liability hereunder notwithstanding
foreclosure on such real property by trustee sale or any other reason impairing
such Grantor’s or any Secured Parties’ right to proceed against the Borrower or
any other Grantor;

       

      (g)           waives
(to the fullest extent permitted by applicable law) all rights and defenses
under Section 580a, 580b, 580d and 726 of the California Code of Civil
Procedure;

       

      (h)           waives
(to the fullest extent permitted by applicable law), without limiting the
generality of the foregoing or any other provision hereof, all rights and
defenses which might otherwise be available to such Grantor under Sections 2809,
2810, 2815, 2819, 2821, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 of the
California Civil Code; and

       

      (i)           waives,
until the Obligations have been paid in full in cash, its rights of subrogation
and reimbursement and any other rights and defenses, in each case available to
such Grantor by reason of Sections 2787 to 2855, inclusive, of the California
Civil Code because the Obligations are secured by real property, including,
without limitation, (1) any defenses such Grantor may have to the guarantee
provided under this Agreement by reason of an election of remedies by the
Secured Parties and (2) any rights or defenses such Grantor may have by reason
of protection afforded to the Borrower or any other Grantor pursuant to the
antideficiency or other laws of California limiting or discharging the
Borrower’s or such Grantor’s indebtedness, including, without limitation,
Section 580a, 580b, 580d or 726 of the California Code of Civil
Procedure.  In furtherance of such provisions, each Grantor hereby
waives all rights and defenses arising out of an election of remedies by the
Secured Parties, even though that election of remedies, such as a nonjudicial
foreclosure, destroys such Grantor’s rights of subrogation and reimbursement
against the Borrower or any other Grantor by the operation of Section 580d of
the California Code of Civil Procedure or otherwise.

       

      7.14           Acknowledgements

       

      .  Each
Grantor hereby acknowledges that:

       

      (a)           it
has been advised by counsel in the negotiation, execution and delivery of this
Agreement, the Credit Agreement and the other Loan Documents to which it is a
party;

       

      (b)           neither
the Collateral Agent nor any Secured Party has any fiduciary relationship with
or duty to any Grantor arising out of or in connection with this Agreement, the
Credit Agreement or any other Loan Documents, and the relationship between the
Grantors, on the one hand, and the Collateral Agent and the Secured Parties, on
the other hand, in connection herewith or therewith is solely that of debtor and
creditor; and

       

      (c)           no
joint venture is created hereby, by this Agreement, the Credit Agreement or the
other Loan Documents or 

       

      
        
          
          

        

        
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          EXHIBIT
10-42

        

      

       

       

      otherwise
exists by virtue of the transactions contemplated hereby among the Secured
Parties or among the Grantors and the Secured Parties.

       

      7.15           Additional
Grantors.

       

      (a)           Each
Subsidiary of a Grantor that is required to become a party to or a Grantor under
this Agreement pursuant to any relevant provision of this Agreement or any other
Loan Document shall execute and deliver to Collateral Agent an Assumption
Agreement in the form of Annex 1 hereto, and
shall become a Grantor for all purposes of this Agreement upon such execution
and delivery.

       

      7.16           Continuing Security
Interest; Releases of Collateral.

       

      (a)           This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the Discharge of Obligations,
(ii) be binding upon each of the Grantors, their successors and assigns and
(iii) inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent and each of the Secured
Parties and their respective permitted successors, transferees and
assigns.

       

      (b)           Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the
Collateral Agent is hereby irrevocably authorized by each Secured Party to take
any action requested by the Borrower having the effect of releasing any
Collateral or guarantee obligations (i) to the extent necessary to permit
consummation of any transaction permitted under the Credit Agreement or
otherwise consented to as provided therein, or (ii) under the circumstances
described in Section
7.16(d) below.

       

      (c)           Upon
the Discharge of Obligations, the Collateral shall be released from the Liens
created by the Security Documents, and the Security Documents and all
obligations (other than those expressly stated to survive such termination) of
the Collateral Agent and each Grantor under the Security Documents shall
terminate, all without delivery of any instrument or performance of any act by
any Person.

       

      (d)           For
avoidance of doubt, (i) upon (x) any sale, assignment, disposition or other
transfer by any of the Grantors of any Collateral that is permitted under the
Credit Agreement or (y) the effectiveness of any written consent to the release
of the security interest granted pursuant to the Credit Agreement or hereby in
any Collateral, the security interest in such Collateral (but not any proceeds
thereof) shall be automatically released.

       

      (e)           Upon
any termination described above, the Collateral Agent will, at the Grantor’s
expense, execute and deliver to the Grantors such documents as the Grantors
shall reasonably request to evidence such termination, and the Collateral Agent
shall be entitled to rely conclusively on, without independent investigation, a
certificate of the applicable Grantor certifying that any specific sale,
assignment, disposition or other transfer of any Collateral is permitted under
the Credit Agreement.

       

      7.17           WAIVER OF JURY
TRIAL.  EACH
GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR 

       

      
        
          
          

        

        
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      PROCEEDING
RELATING TO THIS AGREEMENT, THE CREDIT AGREEMENT OR ANY OTHER FIRST LIEN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

       

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          31 


          
            

          

        

        
           


        
EXHIBIT 10-42


      IN
WITNESS WHEREOF, each of the undersigned has caused this Pledge and Security
Agreement to be duly executed and delivered as of the date first above
written.

       

       

      
        	
                 
      

              	
                COMMUNICATION
      INTELLIGENCE CORPORATION,

              


      

       

       

      
        	
                 
      

              	
                as
      Borrower and as a Grantor

              


      

       

       

      
        	
                 
      

              	
                By:
      /s/ Francis V.
      Dane

              


      

       

      
        	
                 
      

              	
                Name:
      Francis V. Dane

              


      

       

      
        	
                 
      

              	
                Title: 
      Chief Financial Officer

              


      

       

       

      
        	
                 
      

              	
                CIC
      ACQUISITION CORP.,

              


      

      
        	
                 
      

              	
                as
      Grantor

              


      

       

      
        	                           
      By: /s/ Francis V. Dane 
      	 


      

                               

      
        	
                 
      

              	
                Name:
      Francis V. Dane

              


      

       

      
        	
                 
      

              	
                Title:

              


      

       

       

      
        	
                 
      

              	
                SG
      PHOENIX LLC,

              


      

      
        	
                 
      

              	
                   as
      Collateral Agent

              


      

       

       

      
        	
                 
      

              	
                By: 
      /s/ Andrea
      Goren

              


      

       

      
        	
                 
      

              	
                Name:
      Andrea Goren

              


      

       

      
        	
                 
      

              	
                Title:Member

              


      

       


      
        
          
             

          

           


        

        
           


          
            

          

        

        
           


        
EXHIBIT 10-42


       

      
        	
                 
      

              	
                Acknowledged
      and Agreed to:

              


      

       

       

      
        	
                 
      

              	
                PHOENIX
      VENTURE FUND LLC,

              


      

      
        	
                 
      

              	
                   as
      a Secured Party

              


      

       

       

      
        	
                 
      

              	
                       By:
      SG Phoenix Ventures LLC,

              


      

       its
Managing Member

       

            

         

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


        

         

      

       

       

                                                                                                                     
/s/   Micheal
Engmann

       

      MICHAEL ENGMANN, as a Secured
Party

       

       

      


                                                                                                             
/s/  Ronald
Goodman         

       

      RONALD
GOODMAN, as a Secured Party