cicn_ex41.htm


     

    Exhibit
4.1


     

     

    NEITHER
THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE OR AS
PAYMENTS DUE UNDER THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), AND NONE OF THEM MAY BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING THE NOTE OR SUCH SECURITIES, THE TRANSFER IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT.

    


    SHORT
TERM CONVERTIBLE PROMISSORY NOTE

    


                                                                                                              

       

      
        	 $525,000 	Cary, North
      Carolina
March 31, 2010


      

       

    

     

    For value
received, Cicero Inc., a Delaware corporation (the "Company"), HEREBY
UNCONDITIONALLY PROMISES TO PAY to SOAdesk, LLC, a Delaware limited liability
company (the "Holder"), or its
permitted assigns, the principal sum of Five Hundred Twenty-Five Thousand
Dollars ($525,000) (the “Original Principal
Amount”), together with interest from the date of this Note on the unpaid
principal balance at a rate equal to five percent (5%) simple interest per
annum, or the maximum amount permitted by law, whichever is less, in each case
payable through the issuance of shares of Series B Convertible Preferred Stock,
par value $0.001, of the Company (the “Series B Preferred
Stock”) valued at the then-applicable Conversion Price (as defined
below). The simple interest rate shall be computed on the basis of the actual
number of days elapsed and a year of 365 days.  All unpaid principal,
together with the balance of unpaid and accrued interest and other amounts
payable hereunder, if not converted by the Holder pursuant to the provisions of
Section 5 below or pre-paid in cash in accordance with Section 4 below, shall be
due and payable, and shall be paid through the issuance of shares of Series B
Preferred Stock valued at the then-applicable Conversion Price, on the earlier
of (i) June 30, 2010 (the "Maturity Date") or
(ii) upon the occurrence of an Event of Default (as defined
below).  The obligations of the Company owed to the Holder are
unsecured.

     

    The
following is a statement of the rights of the Holder and the conditions to which
this Note is subject, and to which the Holder hereof, by the acceptance of this
Note, agrees:

     

    1.                      Definitions.  As
used in this Note, the following capitalized terms have the following
meanings:

     

     

    (a)             “Conversion Price”
shall mean $150.00 per share, subject to adjustment in accordance with Section
6.

     

     

    (b)    “Conversion Shares”
shall mean those shares of Series B Preferred Stock issued to Holder upon
Holder’s conversion or as payment of all or part of the principal and interest
owed under this Note pursuant to Section 5 below.

     

    (c)           "Obligations" shall
mean all principal and accrued interest due hereunder.

     


    
      
        
          


                                                                  

          


        

         


      

      
        1

        
          

        

      

      
         


        
          Exhibit
4.1

          


        

      

    


     

     

     

    2.                      Issuance.  This
Note is the $525,000 Convertible Note issued pursuant to that certain Asset
Purchase Agreement, dated as of January 15, 2010 and amended on March 31, 2010,
between the Company, Holder and Vertical Thought Inc., a Georgia corporation,
and is subject to the provisions thereof with respect to indemnification and
set-off in respect thereof.

     

    3.                      Events of
Default.  The occurrence of any one or more of the following
events shall constitute an "Event of Default"
hereunder:

     

    (a)           Payments and Issuance of
Series B Preferred Stock.  The Company shall fail to pay (i)
when due all principal on the Maturity Date, or (ii) all interest or other
payment required under the terms of this Note on the Maturity Date, in each case
through the issuance of shares of Series B Preferred Stock valued at the
then-applicable Conversion Price.

     

    (b)           Failure to Make Mandatory
Prepayment.  The Company shall fail to make any mandatory
prepayment in accordance with Section 4.2 within fifteen (15) business days
after the same shall have become due and payable to the Holder.

     

    (c)           Insolvency.  (i)
The Company shall be dissolved, liquidated, wound up or cease its corporate
existence, except to the extent expressly permitted hereunder; or (ii) the
Company (A) shall make a general assignment for the benefit of creditors, or
shall generally fail to pay, or admit in writing its inability to pay, its debts
as they become due, subject to applicable grace periods, if any, whether at
stated maturity or otherwise; (B) shall voluntarily cease to conduct its
business in the ordinary course, except to the extent expressly permitted
hereby; (C) shall commence any Insolvency Proceeding with respect to itself; or
(D) shall take any action to effectuate or authorize any of the
foregoing.  As used herein, "Insolvency
Proceeding" means (i) any case, action or proceeding before any court or
other governmental agency or authority relating to Bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (ii) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors, in each case undertaken under U.S. federal, state or foreign law,
including the Bankruptcy Code; and "Bankruptcy Code"
means Title 11 of the United States Code entitled "Bankruptcy".

     

    (d)           Involuntary
Proceedings.  (i) Any involuntary Insolvency Proceeding is
commenced or filed against the Company or any writ, judgment, warrant of
attachment, execution or similar process, is issued or levied against a
substantial part of the Company's properties, and any such proceeding or
petition shall not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not be released, vacated or fully bonded
within thirty (30) days after commencement, filing or levy; (ii) the Company
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-U.S. law) is
ordered in any Insolvency Proceeding; or (iii) the Company

     


    
      
        
          


                                                                  

          


        

         


      

      
        2

        
          

        

      

      
         


        
          Exhibit
4.1

          


        

      

    


    (e)           acquiesces
in the appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefore), or other similar Person for itself
or a substantial portion of its property or business.

     

    If any
Event of Default shall occur and be continuing, the Holder may, by notice to the
Company, (i) (A) in the case of an Event of Default set forth in paragraphs
3(a), (c) or (d) above, declare the entire outstanding Obligations payable by
the Company hereunder to be forthwith due and payable through the issuance of
shares of Series B Preferred Stock valued at the then-applicable Conversion
Price or (B) in the case of an Event of Default set forth in paragraph 3(b)
above, declare the entire outstanding Obligations payable by the Company
hereunder to be forthwith due and payable in cash, whereupon the principal
hereof, all such accrued interest and all such other amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Company,
provided that if an event described in paragraph 3(d) above shall occur, the
result which would otherwise occur only upon giving of notice by the Holder to
the Company as specified above shall occur automatically, without the giving of
any such notice; and (ii) exercise all rights and remedies available to the
Holder under the Agreement and applicable law.  The rights and
remedies under the Agreement are cumulative and not exclusive of any rights,
remedies, powers and privileges that may otherwise be available to the
Holder.  No delay or omission on the part of the Holder in exercising
any right under the Agreement shall operate as a waiver of such right or any
other right hereunder.

     

    4.                      Prepayments.

     

    4.1           Voluntary
Prepayment.  The Company shall have the right, but not the
obligation, to prepay the Note in cash at any time or from time to time without
any premium or penalty.

     

    4.2           Mandatory
Prepayment.  The Company shall, to the extent it receives cash
proceeds from the sale of shares of Series B Preferred Stock to investors after
the date of this Note and prior to or on the Maturity Date, utilize fifty
percent (50%) of the gross proceeds from such sales of shares of Series B
Preferred Stock to prepay in cash the principal amount, and any interest accrued
on, the Note by wire transfer of funds to an account designated in writing to
the Company by the Holder.

    


    5.                      Conversion.

     

    5.1           Voluntary
Conversion.  At the sole discretion of the Holder, the Holder
shall have the right, but not the obligation, at any time to convert all or part
of the then outstanding Obligations into a number of shares of Series B
Preferred Stock equal to the quotient obtained by dividing (a) the then
outstanding Obligations to be converted by (b) the Conversion Price in effect at
the time of such conversion.  The Holder shall effect conversions by
delivering to the Company a Notice of Conversion, the form of which is attached
hereto as Annex A
(each, a “Notice of
Conversion”), specifying therein the amount of principal and interest
accrued under this Note to be converted and the date on which such conversion
shall be effected (such date, the “Conversion
Date”).  At the Maturity Date, in the event the Holder has not
converted the amount of the Obligations into Conversion Shares, the entire
amount of the then outstanding Obligations (as reduced by any prepayments in
accordance with Section 4) shall become due and payable, and such outstanding
Obligations shall be satisfied solely through the issuance of shares of Series B
Preferred Stock valued at the then-applicable Conversion Price.

     


    
      
        
          


                                                               

          


        

         


      

      
        3

        
          

        

      

      
         


        
          Exhibit
4.1

          


        

      

    

     

     

    5.2           
Reservation of
Shares. The Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, the number of shares of
Series B Preferred Stock issuable upon conversion or payment of the principal
and interest of the Note.  The Company covenants that all shares of
Series B Preferred Stock that shall be so issuable shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable.

     

    5.3           Fractional
Shares.  The Company shall not be required to issue fractions
of shares on the Maturity Date or upon the conversion or payment hereof or to
distribute certificates that evidence fractional shares nor shall the Company be
required to make any cash payments in lieu of fractional shares.  In
lieu of issuance any fractional shares or payment therefore, the Company will
round up to the nearest whole share.

     

    6.           Certain
Adjustments.

     

    6.1           Stock Dividends and Stock
Splits.  If the Company, at any time while this Note is
outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Series B Preferred Stock on shares of Series
B Preferred Stock or any Series B Preferred Stock equivalents (which, for
avoidance of doubt, shall not include any shares of Series B Preferred Stock
issued by the Company upon conversion of the Note), (ii) subdivides outstanding
shares of Series B Preferred Stock into a larger number of shares, (iii)
combines (including by way of a reverse stock split) outstanding shares of
Series B Preferred Stock into a smaller number of shares or (iv) issues, in the
event of a reclassification of shares of the Series B Preferred Stock, any
shares of capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Series B Preferred Stock (excluding any treasury shares of the Company)
outstanding immediately before such event and of which the denominator shall be
the number of shares of Series B Preferred Stock outstanding immediately after
such event.  Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.

     

    6.2           Reorganization,
Reclassification, Consolidation, Merger, Sale; Company Not
Survivor.  If any capital reorganization, reclassification of
the capital stock of the Company, consolidation or merger of the Company with
another corporation in which the Company is not the survivor, or sale, transfer
or other disposition of all or substantially all of the Company’s assets to
another corporation shall be effected, then, at the Company’s option, either (i)
the Holder of the Note shall be paid an amount equal to the outstanding
principal and accrued interest under the Note at the time of such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition, or (ii) as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and adequate
provision shall be made whereby each Holder shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions herein
specified and in lieu of the Conversion Shares immediately theretofore issuable
upon conversion of the Note, such shares of stock, securities or assets as would
have been issuable or payable with respect to or in exchange for a number of
Conversion Shares equal to the number of Conversion Shares immediately
theretofore issuable upon conversion of the Note, had such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of Holder to the end that the provisions
hereof (including, without limitation, provision for adjustment of the
Conversion Price) shall thereafter be applicable, as nearly equivalent as may be
practicable in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof.  In the case of clause (ii)
above, the Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing or
otherwise acquiring such assets or other appropriate corporation or entity shall
assume the obligation to deliver to the Holder, at the last address of the
Holder appearing on the books of the Company, such shares of stock, securities
or assets as, in accordance with the foregoing provisions, the Holder may be
entitled to purchase, and the other obligations under this Note.  The
provisions of this paragraph 6.2 shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers or
other dispositions.

     


    
      
        
          


                                                                 

          


        

         


      

      
        4

        
          

        

      

      
         


        
          Exhibit
4.1

          


        

      

    

     

    6.3           Calculations.  All
calculations under this Section 6 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be, provided however, that the
Company shall not be required to issue fractions of shares pursuant to Section
5.3 above.

     

    6.4           Notice of
Adjustment.  In each case of an adjustment or readjustment of
the Conversion Price or the number and kind of any securities issuable upon
conversion of the Note, the Company will promptly calculate such adjustment in
accordance with the terms of this Note and prepare a certificate setting forth
such adjustment, including a statement of the adjusted Conversion Price and
adjusted number of shares of Series B Preferred Stock or type of alternate
consideration issuable upon conversion of the Note (as applicable), describing
the transactions giving rise to such adjustments and showing in reasonable
detail the facts upon which such adjustment is based. Upon request, the Company
will promptly deliver a copy of each such certificate to the
Holder.

     

    7.           Company Optional Repurchase
Right.  Notwithstanding anything herein to the contrary, in the
event that any shares of Series B Preferred Stock are issued under the terms of
this Note, the Company shall have the right, exercisable in its sole discretion
at any time prior to the twelve (12) month anniversary of any such issuance, to
repurchase any such shares of Series B Preferred Stock so issued for a cash
payment in an amount per share equal to the Conversion Price, and the Company
shall be entitled to affix an appropriate legend on the certificates
representing any such shares of Series B Preferred Stock so issued evidencing
such optional repurchase right.

     

    8.           Representations of
Holder.

     

    8.1           Access.  The
Holder of this Note has conducted its own independent review and analysis of the
business, operations, technology, assets, liabilities, results of operations,
financial condition and prospects of the Company and its subsidiaries, and
acknowledges that the Company has provided the holder of this Note access to the
personnel, properties, premises and books and records of the Company and its
subsidiaries for this purpose, and the Holder of this Note has had an
opportunity to ask questions of and receive responses from management of the
Company, and has had an opportunity to review the Company’s public filings under
the federal securities laws at www.sec.gov.

     


    
      
        
          


                                                                 

          


        

         


      

      
        5

        
          

        

      

      
         


        
          Exhibit
4.1

          


        

      

    

     

    8.2           Investment
Intent.  The Holder of this Note is making the loan evidenced
by this Note solely for the purpose of investment and not with a view to, or for
resale in connection with, any distribution thereof in violation of the
Securities Act of 1933, as amended (the "Act").

    


    9.           Successors and
Assigns.  Subject to the restrictions on transfer described in
Section 11 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.

     

    10.           Waiver and
Amendment.  Any provision of this Note may be amended, waived
or modified upon the written consent of the Company and the Holder.

     

    11.           Transfer of this
Note.  Subject to the terms of the Agreement, this Note may not
be transferred in part or in violation of any restrictive legend set forth
hereon.  Subject to the terms of the Agreement, each new Note issued
upon transfer of this Note shall bear a legend as to the applicable restrictions
on transferability in order to ensure compliance with the Act, and any
applicable state securities laws, unless in the opinion of counsel for the
Company such legend is not required in order to ensure compliance with the Act
and any applicable state securities laws, and the Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions.  Prior to presentation of this Note for registration of
transfer, the Company shall treat the registered Holder hereof as the owner and
holder of this Note for the purpose of receiving all payments of principal and
interest hereon, in each case which are to be satisfied through the issuance of
shares of Series B Preferred Stock, and for all other purposes whatsoever, and
the Company shall not be affected by notice to the contrary.

     

    12.           Assignment by the
Company.  Neither this Note nor any of the rights, interests or
obligations hereunder may be assigned, by operation of law or otherwise, in
whole or in part, by the Company, without the prior written consent of the
Holder.

     

    13.           Treatment of
Note.  To the extent permitted by generally accepted accounting
principles, the Company will treat, account and report this Note as debt and not
equity for accounting purposes and with respect to any returns filed with
federal, state or local tax authorities.

     

    14.           No Rights as Member and/or
Shareholder.  This Note, as such, creates a lender/borrower
relationship and shall not entitle the Holder to any rights as a member,
shareholder, officer, director, manager, other employee or agent of the Company,
except as otherwise specified herein.  In no event shall any shares of
Series B Preferred Stock issuable to Holder hereunder be deemed to be
outstanding until such shares of Series B Preferred Stock are actually issued to
the Holder.

     


    
      
        
          


                                                               

          


        

         


      

      
        6

        
          

        

      

      
         


        
          Exhibit
4.1

          


        

      

    


    15.           Payment in Shares of Series
B Preferred Stock.  Except for any prepayments in cash pursuant
to Section 4, payment of any amounts due under this Note shall be made in shares
of Series B Preferred Stock valued at the then-applicable Conversion
Price.

     

    16.           Headings.  Headings
and numbers have been set forth herein for convenience only and shall be given
no substantive meaning whatsoever in construing the terms and conditions of this
Note.

     

    17.           Benefits of this
Note.  Nothing in this Note shall be construed to give to any
person, corporation or other entity other than the Company and any Holder of the
Note any legal or equitable right, remedy or claim under the Note, and the Note
shall be for the sole and exclusive benefit of the Company and any Holder of the
Note.

     

    18.           Governing
Law.  This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the conflicts of law provisions
thereof.

     

    19.           Usury.  The
terms of this Note are based upon all available usury exceptions.  If,
however, such exceptions are not available, all agreements between the Company
and the Holder, whether now existing or hereafter arising and whether written or
oral, are expressly limited so that in no contingency or event whatsoever shall
the amount paid, or agreed to be paid, to the Holder for the use, forbearance or
detention of the money to be loaned hereunder or otherwise, exceed the maximum
amount permissible under applicable law.  If from any circumstances
whatsoever fulfillment of any provision of this Note or of any other document
evidencing, securing or pertaining to the indebtedness evidenced hereby, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any such
circumstances the Holder shall ever receive anything of value as interest or
deemed interest by applicable law under this Note or any other document
evidencing, securing or pertaining to the indebtedness evidenced hereby or
otherwise an amount that would exceed the highest lawful rate, such amount that
would be excessive interest shall be applied to the reduction of the principal
amount owing under this Note or on account of any other amounts owed by the
Company to the Holder relating to this Note, and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal of this
Note and such other indebtedness, such excess shall be refunded to the
Company.  In determining whether or not the interest paid or payable
with respect to any indebtedness of the Company to the Holder, under any
specific contingency, exceeds the highest lawful rate, the Company and the
Holder shall, to the maximum extent permitted by applicable law: (i)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest; (ii) amortize, prorate, allocate and spread the total amount of
interest throughout the full term of such indebtedness so that the actual rate
of interest on account of such indebtedness is uniform throughout the term
thereof; and/or (iii) allocate interest between portions of such indebtedness,
to the end that no such portion shall bear interest at a rate greater than that
permitted by law.  The terms and provisions of this Section 18 shall
control and supersede every other conflicting provision of all agreements
between the Company and the Holder.

     


    
      
        
          


                                                                 

          


        

         


      

      
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          Exhibit
4.1

          


        

      

    


    IN
WITNESS WHEREOF, the Company has caused this Note to be issued as of the date
first written above.

     

     

    
      
        	 	CICERO
      INC.,
a Delaware corporation	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 


      

    

    


    


    
      
        
          


                                                                

          


        

         


      

      
        8

        
          

        

      

      
         


        
          Exhibit
4.1

          


        

      

    


    ANNEX
A

    NOTICE OF CONVERSION

    


        The undersigned hereby elects to convert
such currently outstanding principal and accrued interest as set forth below
under the Convertible Note due _________, 20__ of Cicero Inc., a Delaware
corporation (the “Company”), into
shares of Series B Convertible Preferred Stock (the “Series B Preferred
Stock”), of the Company according to the conditions hereof, as of the
date written below.  If shares of Series B Preferred Stock are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in
accordance therewith.  No fee will be charged to the holder for any
conversion, except for such transfer taxes, if any.

     

        The undersigned agrees to comply with the
prospectus delivery requirements under the applicable securities laws in
connection with any transfer of the aforesaid shares of Series B Preferred
Stock.

     

    
    

     

    
      	 Conversion
      calculations:	Date to Effect
      Conversion:	 	 
	 	Principal Amount of
      Note:	 	 
	 	Principal Amount of
      Note for Which Conversion Has Previously Been Elected (if any):	 	 
	 	Principal Amount of
      Note to be Converted:	 	 
	 	 	 	 
	 	 	 	 
	 	Number of Shares of
      Series B Preferred Stock to be Issued (Principal
      and Accrued
Interest to be Converted Divided by the Conversion Price on
      the Date of Conversion):	 	 
	 	 	 	 
	 	 	Signature:  ____________________________	 
	 	 	 	 
	 	 	Name:	 
	 	 	 	 
	 	 	Address
      for Delivery of Series B Preferred Stock
Certificates:	 
	 	 	 	 
	 	 	Or	 
	 	 	 	 
	 	 	DWAC
      Instructions:	 
	 	 	 	 
	 	 	Broker
      No:  ___________________________	 
	 	 	Account
      No: __________________________	 
	 	 	 	 
	 	 	 	 


    

     

    
 

    
      
        
        

      

      
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