Exhibit 10.1


    
      

      

    

     

     

    SECURITIES
      PURCHASE AGREEMENT

    


    BY
      AND AMONG

    


    CICERO,
      INC.,

    


    AND

    


    THE
      PURCHASERS LISTED ON SCHEDULE I 

    


    


    DATED
      AS OF FEBRUARY 26, 2007

     

     

    
      

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECURITIES
      PURCHASE AGREEMENT

     

    THIS
      SECURITIES PURCHASE AGREEMENT (this “Agreement”)
      is
      dated as of February 26, 2007, by and among CICERO, INC., a Delaware corporation
      (the “Company”),
      and
      the various purchasers listed on Schedule I hereto (each referred to herein
      as a
“Purchaser”
and,
      collectively, the "Purchasers").

     

    WHEREAS,
      the Company and the Purchasers are executing and delivering this Agreement
      in
      reliance upon the exemption from securities registration afforded by Rule 506
      under Regulation D as promulgated by the United States Securities and Exchange
      Commission (the “Commission”)
      under
      Section 4(2) of the Securities Act of 1933, as amended (the “Securities
      Act”);
      

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement, the Company
      desires to issue and sell to the Purchasers, and the Purchasers desire to
      acquire from the Company, shares
      of
      common stock of the Company, par value $.001 per share (the “Common
      Stock”);
      and

     

    WHEREAS,
      contemporaneously with the execution and delivery of this Agreement, the parties
      hereto are executing and delivering a Registration Rights Agreement
      substantially in the form of Exhibit
      B
      attached
      hereto (the “Registration
      Rights Agreement”)
      pursuant to which the Company has agreed to provide certain registration rights
      under the Securities Act and the rules and regulations promulgated thereunder,
      and applicable state securities laws.

     

    NOW,
      THEREFORE, in consideration of the promises and mutual covenants and agreements
      hereinafter, the Company and the Purchasers hereby agree as follows:



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    ARTICLE
      I.

     

    PURCHASE
      AND SALE

     

    1.1    Purchase
      and Sale.

     

    On
      the
      Closing Date (as defined below), subject to the terms and conditions set forth
      herein, the Company shall issue and sell to each Purchaser and each Purchaser,
      severally and not jointly, shall purchase from the Company the shares
      of
      Common Stock as set forth on Schedule
      I
      (the
      "Shares").
      The
      aggregate purchase price for the Shares purchased by the Purchasers shall be
      $500,000. 

    


    1.2    Closing.

     

    a.    The
      Closing.
      The
      closing (the “Closing”)
      of the
      purchase and sale of the Common Stock shall take place at the offices of the
      Company, 8000 Regency Parkway, Suite 542, Cary, North Carolina 27518,
      immediately following the execution hereof or such later date or different
      location as the parties shall agree, but in no event prior to the date that
      the
      conditions set forth in Section 4.1 have been satisfied or waived by the
      appropriate party (such date of the Closing, the “Closing
      Date”).
      At
      the Closing:

    


    (i)    Each
      Purchaser shall deliver to the Company (1) this Agreement, duly executed by
      such
      Purchaser, (2) the Registration Rights Agreement, duly executed by such
      Purchaser and (3) its portion of the purchase price as set forth next to its
      name on Schedule
      I
      in
      United States dollars in immediately available funds to an account or accounts
      designated in writing by the Company; and

     

    (ii)   The
      Company shall deliver to each Purchaser (1) this Agreement, duly executed by
      the
      Company, (2) the Registration Rights Agreement, duly executed by the Company,
      and (3) a certificate evidencing the number of shares of Common Stock purchased
      by such Purchaser as set forth on Schedule
      I
      hereto,
      registered in the name of such Purchaser.

     

    ARTICLE
      II.

     

    REPRESENTATIONS
      AND WARRANTIES

     

    2.1    Representations
      and Warranties of the Company.
      The
      Company represents and warrants to each of the Purchasers that the statements
      contained in this Section 2.1 are true, correct and complete as of the date
      hereof, and will be true correct and complete as of the Closing Date (unless
      specifically made as of another date), except as specified to the contrary
      in
      the corresponding paragraph of the disclosure schedule prepared by the Company
      accompanying this Agreement (the "Company
      Disclosure Schedules"):
      

     

    a.    Organization
      and Qualification.
      The
      Company duly incorporated, validly existing and in good standing under the
      laws
      of Delaware, with the requisite corporate power and 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    authority
      to own and use its properties and assets and to carry on its business as
      currently conducted. The Company is duly qualified as a foreign corporation
      to
      do business and is in good standing as a foreign corporation in each
      jurisdiction in which the nature of the business conducted or property owned
      by
      it makes such qualification necessary, except where the failure to be so
      qualified or in good standing, as the case may be, would not, individually
      or in
      the aggregate, (x) adversely affect the legality, validity or enforceability
      of
      any of this Agreement or the Transaction Documents (as defined in Section
      2.1(b)) or any of the transactions contemplated hereby or thereby, (y) have
      or
      result in a material adverse effect on the results of operations, assets, or
      financial condition of the Company, taken as a whole or (z) impair the Company’s
      ability to perform fully on a timely basis its obligations under any Transaction
      Document (any of (x), (y) or (z), being a “Material
      Adverse Effect”).
      The
      Company has made available to the Purchaser true and correct copies of the
      Company's Certificate of Incorporation, as amended and as in effect on the
      date
      hereof (the “Certificate
      of Incorporation”),
      and
      the Company's Bylaws, as in effect on the date hereof (the “Bylaws”).

     

    b.    Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by this Agreement and the Registration
      Rights Agreement (collectively, the “Transaction
      Documents”),
      and
      otherwise to carry out its obligations hereunder and thereunder. The execution
      and delivery of each of this Agreement and the Transaction Documents by the
      Company and the consummation by it of the transactions contemplated hereby
      and
      thereby have been duly authorized by all necessary corporate action by the
      Company. Each of this Agreement and the Transaction Documents has been duly
      executed by the Company and when delivered in accordance with the terms hereof
      will constitute the valid and binding obligation of the Company enforceable
      against the Company in accordance with its terms, except as such enforceability
      may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
      liquidation or similar laws relating to, or affecting generally the enforcement
      of, creditors’ rights and remedies or by other equitable principles of general
      application and except that rights to indemnification and contribution may
      be
      limited by Federal or state securities laws or public policy relating
      thereto.

     

    c.    Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company is as set forth
      in
Schedule
      2.1(c).
      All of
      such outstanding shares of capital stock have been, or upon issuance will be,
      validly authorized and issued, fully paid and nonassessable. No securities
      of
      the Company are entitled to preemptive or similar rights, and no Person (as
      hereinafter defined) has any right of first refusal, preemptive right, right
      of
      participation, or any similar right to participate in the transactions
      contemplated by the Transaction Documents. Except as a result of the purchase
      and sale of the Shares and those outstanding warrants as identified in Schedule
      2.1(c), there are no outstanding options, warrants, script rights to subscribe
      to, calls or commitments of any character whatsoever relating to, or securities,
      rights or obligations convertible into or exchangeable for, or giving any Person
      any right to subscribe for or acquire, any shares of Common Stock, or contracts,
      commitments, understandings or arrangements by which the Company or any
      subsidiary is or may become bound to issue additional shares of Common Stock,
      or
      securities or rights convertible or exchangeable into shares of Common Stock.
      The issue and sale of the Shares will not obligate the Company to issue shares
      of Common Stock or other securities to any Person (other than the Purchasers)
      and 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    will
      not
      result in a right of any holder of Company securities to adjust the exercise,
      conversion, exchange or reset price under such securities.

     

    d.    Authorization
      and Validity; Issuance of Shares.
      The
      Shares are and will at all times hereafter continue to be duly authorized and
      reserved for issuance and, when issued and paid for in accordance with this
      Agreement and the Transaction Documents, will be validly issued, fully paid
      and
      non-assessable, free and clear of all liens.

     

    e.    No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and each of the
      Transaction Documents by the Company and the consummation by the Company of
      the
      transactions contemplated hereby and thereby do not and will not (i) conflict
      with or violate any provision of the Certificate of Incorporation, Bylaws or
      other organizational documents of the Company, (ii) subject
      to obtaining the consents referred to in Section 2.1(f), conflict with, or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture, patent,
      patent license or instrument (evidencing a Company debt or otherwise) to which
      the Company is a party or by which any property or asset of the Company is
      bound
      or affected, except where such conflict or violation has not resulted or would
      not reasonably be expected to result, individually or in the aggregate, in
      a
      Material Adverse Effect, or (iii) result in a violation of any law, rule,
      regulation, order, judgment, injunction, decree or other restriction of any
      court or governmental authority to which the Company is subject (including
      Federal and state securities laws and regulations and the rules and regulations
      of the principal market or exchange on which the Common Stock is traded or
      listed), or by which any material property or asset of the Company is bound,
      except where such conflict has not resulted or would not reasonably be expected
      to result, individually or in the aggregate, in a Material Adverse
      Effect.

     

    f.    Consents
      and Approvals.
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority, regulatory or
      self
      regulatory agency, or other Person in connection with the execution, delivery
      and performance by the Company of this Agreement or the Transaction Documents,
      other than (i) the filing of a registration statement with the Commission,
      which shall be filed in accordance with and in the time periods set forth in
      the
      Registration Rights Agreement, (ii) the application(s) or any letter(s)
      acceptable to the Nasdaq National Market (“Nasdaq”)
      for
      the listing of the Common Stock with Nasdaq (and with any other national
      securities exchange or market on which the Common Stock is then listed), and
      (iii) any filings, notices or registrations under applicable Federal or state
      securities laws (together with the consents, waivers, authorizations, orders,
      notices and filings referred to on Schedule
      2.1(f),
      the
“Required
      Approvals”),
      except where failure to do so has not resulted or would not reasonably result,
      individually, or in the aggregate, in a Material Adverse Effect. “Person”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    g.   Litigation;
      Proceedings.
      Except
      as specifically set forth on Schedule
      2.1(g)
      or in
      the SEC Documents (as hereinafter defined), there is no action, suit, notice
      of
      violation, proceeding or investigation pending or, to the knowledge of the
      Company, threatened against or 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    affecting
      the Company or any of its subsidiaries or any of their respective properties
      before or by any court, governmental or administrative agency or regulatory
      authority (Federal, state, county, local or foreign) (collectively, an
“Action”)
      which
      (i) adversely affects or challenges the legality, validity or enforceability
      of
      any of this Agreement or the Transaction Documents or (ii) would reasonably
      be
      expected to, individually or in the aggregate, have a Material Adverse Effect.
      Neither the Company nor any subsidiary, nor, to the knowledge of the Company,
      any officer thereof, is or has been, nor, to the knowledge of the Company,
      any
      director thereof is or has been for the last three years, the subject of any
      Action involving a claim of violation of or liability under federal or state
      securities laws or a claim of breach of fiduciary duty. There has not been,
      and,
      to the knowledge of the Company, there is not pending or contemplated, any
      investigation by the Commission involving the Company or any current or former
      director that was a director of the Company at any time during the last three
      years or officer of the Company. The Commission has not issued any stop order
      or
      other order suspending the effectiveness of any registration statement filed
      by
      the Company or any subsidiary under the Exchange Act or the Securities
      Act.

     

    h.    No
      Default or Violation.
      The
      Company (i) is not in default under or in violation of any indenture, loan
      or
      other credit agreement or any other agreement or instrument to which it is
      a
      party or by which it or any of its properties is bound and which is required
      to
      be included as an exhibit to any SEC Document (as defined in Section 2.1(j))
      or
      will be required to be included as an exhibit to the Company’s next filing under
      either the Securities Act or the Securities Exchange Act of 1934, as amended
      (the “Exchange
      Act”),
      (ii)
      is not in violation of any order of any court, arbitrator or governmental body
      applicable to it, (iii) is not in violation of any statute, rule or regulation
      of any governmental authority to which it is subject, (iv) is not in default
      under or in violation of its Certificate of Incorporation, Bylaws or other
      organizational documents, respectively in the case of (i), (ii) and (iii),
      except where such violations have not resulted or would not reasonably result,
      individually or in the aggregate, in a Material Adverse Effect. 

     

    i.    
Private
      Offering.
      The
      Company and all Persons acting on its behalf have not made, directly or
      indirectly, and will not make, offers or sales of any securities or solicited
      any offers to buy any security under circumstances that would require
      registration of the Common Stock or the issuance of such securities under the
      Securities Act. Subject to the accuracy and completeness of the representations
      and warranties of the Purchasers contained in Section 2.2, the offer, sale
      and
      issuance by the Company to the Purchasers of the Common Stock and is exempt
      from
      the registration requirements of the Securities Act.

     

    j.    
SEC
      Documents; Financial Statements.
      The
      Common Stock of the Company is registered pursuant to Section 12(g) of the
      Exchange Act. Since December 31, 2000, the Company has filed all reports,
      schedules, forms, statements and other documents required to be filed by it,
      with the Commission, pursuant to Section 13, 14 or 15(d) of the Exchange Act
      (the foregoing materials and all exhibits included therein and financial
      statements and schedules thereto and documents (other than exhibits to such
      documents) incorporated by reference therein being collectively referred to
      herein as the “SEC
      Documents”),
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Documents prior to the expiration of any such extension.
      As
      of their respective dates, the SEC Documents complied in all material respects
      with the requirements of the Securities Act and the Exchange Act and the rules
      and regulations of the Commission promulgated thereunder, and 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    none
      of
      the SEC Documents, when filed, contained any untrue statement of a material
      fact
      or omitted to state a material fact required to be stated therein or necessary
      in order to make the statements therein, in light of the circumstances under
      which they were made, not misleading. The financial statements of the Company
      included in the SEC Documents comply in all material respects with applicable
      accounting requirements and the rules and regulations of the Commission with
      respect thereto as in effect at the time of filing. Such financial statements
      have been prepared in accordance with generally accepted accounting principles
      applied on a consistent basis during the periods involved ("GAAP"),
      except as may be otherwise specified in such financial statements or the notes
      thereto, and fairly present in all material respects the financial position
      of
      the Company and its consolidated subsidiaries as of and for the dates thereof
      and the results of operations and cash flows for the periods then ended,
      subject, in the case of unaudited statements, to normal, immaterial, year-end
      audit adjustments.

     

    k.    Material
      Changes.
      Since
      the date of the latest audited financial statements included within the SEC
      Documents, except as specifically disclosed in the SEC Documents, (i) there
      has
      been no event, occurrence or development that has had or that could result
      in a
      Material Adverse Effect, (ii) the Company has not incurred any liabilities
      (contingent or otherwise) other than (A) trade payables and accrued expenses
      incurred in the ordinary course of business consistent with past practice and
      (B) liabilities not required to be reflected in the Company's financial
      statements pursuant to GAAP or required to be disclosed in filings made with
      the
      Commission, (iii) the Company has not altered its method of accounting or the
      identity of its auditors, (iv) the Company has not declared or made any dividend
      or distribution of cash or other property to its stockholders or purchased,
      redeemed or made any agreements to purchase or redeem any shares of its capital
      stock, and (v) the Company has not issued any equity securities to any officer,
      director or affiliate, except pursuant to existing Company stock option plans.
      The Company does not have pending before the Commission any request for
      confidential treatment of information.

     

    l.    Patents
      and Trademarks.
      The
      Company and its subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      copyrights, licenses and other similar rights that are necessary or material
      for
      use in connection with their respective businesses as described in the SEC
      Documents and which the failure to so have could have, or reasonably be expected
      to result in, a Material Adverse Effect (collectively, the "Intellectual
      Property Rights").
      Neither the Company nor any subsidiary has received a written notice that the
      Intellectual Property Rights used by the Company or any subsidiary violates
      or
      infringes upon the rights of any Person which if determined adversely to the
      Company would, individually or in the aggregate have a Material Adverse Effect.
      To the knowledge of the Company, all such Intellectual Property Rights are
      enforceable and there is no existing infringement by another Person of any
      of
      the Intellectual Property Rights.

     

    m.   Transactions
      With Affiliates and Employees.
      Except
      as set forth in SEC Documents, none of the officers or directors of the Company
      and, to the knowledge of the Company, none of the employees of the Company
      is
      presently a party to any transaction with the Company or any subsidiary (other
      than for services as employees, officers and directors), including any contract,
      agreement or other arrangement providing for the furnishing of services to
      or
      by, providing for rental of real or personal property to or from, or otherwise
      requiring 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    payments
      to or from any officer, director or such employee or, to the knowledge of the
      Company, any entity in which any officer, director, or any such employee has
      a
      substantial interest or is an officer, director, trustee or
      partner.

     

    n.    Solvency.
      Except
      as set forth in the SEC Documents, based on the financial condition of the
      Company as of the Closing Date, (i) the Company's fair saleable value of its
      assets exceeds the amount that will be required to be paid on or in respect
      of
      the Company's existing debts and other liabilities (including known contingent
      liabilities) as they mature; (ii) the Company's assets do not constitute
      unreasonably small capital to carry on its business for the current fiscal
      year
      as now conducted and as proposed to be conducted including its capital needs
      taking into account the particular capital requirements of the business
      conducted by the Company, and projected capital requirements and capital
      availability thereof; and (iii) the current cash flow of the Company, together
      with the proceeds the Company would receive, were it to liquidate all of its
      assets, after taking into account all anticipated uses of the cash, would be
      sufficient to pay all amounts on or in respect of its debt when such amounts
      are
      required to be paid. The Company does not intend to incur debts beyond its
      ability to pay such debts as they mature (taking into account the timing and
      amounts of cash to be payable on or in respect of its debt).

     

    o.    Listing
      and Maintenance Requirements.
      The
      Company has not, in the two years preceding the date hereof, received notice
      (written or oral) from any exchange or market on which the Common Stock is
      or
      has been listed or quoted to the effect that the Company is not in compliance
      with the listing or maintenance requirements of such exchange or market. The
      Company is, and has no reason to believe that it will not in the foreseeable
      future continue to be, in compliance with all such listing and maintenance
      requirements. The issuance and sale of the Shares hereunder does not contravene
      the rules and regulations of the Nasdaq OTC Market and no approval of the
      shareholders of the Company is required for the Company to issue and deliver
      to
      the Purchasers the number of Shares contemplated by this Agreement.

     

    p.    Registration
      Rights.
      The
      Company has not granted or agreed to grant to any Person any rights (including
      "piggy-back" registration rights) to have any securities of the Company
      registered with the Commission or any other governmental authority that have
      not
      been satisfied except as noted on the Disclosure Schedules.

     

    q.    Broker’s
      Fees.
      No fees
      or commissions or similar payments with respect to the transactions contemplated
      by this Agreement or the Transaction Documents have been paid or will be payable
      by the Company to any third party broker, financial advisor, finder, investment
      banker, or bank. The Purchaser shall have no obligation with respect to any
      fees
      or with respect to any claims made by or on behalf of other Persons for fees
      of
      a type contemplated in this Section 2.1(q) that may be due in connection
      with the transactions contemplated by this Agreement and the Transaction
      Documents. 

     

    2.2    Representations
      and Warranties of the Purchasers.
      Each of
      the Purchasers, severally and not jointly, hereby represents and warrants to
      the
      Company as follows: 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    a.    Organization;
      Authority.
      Such
      Purchaser, as applicable, is a corporation or a limited liability company or
      limited partnership duly formed, validly existing and in good standing under
      the
      laws of the jurisdiction of its incorporation or formation with the requisite
      power and authority, corporate or otherwise, to enter into and to consummate
      the
      transactions contemplated hereby and by this Agreement and the Transaction
      Documents and otherwise to carry out its obligations hereunder and thereunder.
      The purchase by such Purchaser, as applicable, of the shares of Common Stock
      hereunder has been duly authorized by all necessary action on the part of such
      Purchaser. Each of this Agreement and the Transaction Documents has been duly
      executed and delivered by each Purchaser and constitutes the valid and legally
      binding obligation of each Purchaser, enforceable against such Purchaser in
      accordance with its terms, subject to bankruptcy, insolvency, fraudulent
      transfer, reorganization, moratorium and similar laws of general applicability
      relating to or affecting creditors’ rights generally and to general principles
      of equity and except that rights to indemnification and contribution may be
      limited by Federal or state securities laws or public policy relating thereto.
      

     

    b.    Investment
      Intent.
      Such
      Purchaser is acquiring the shares of Common Stock for its own account and not
      with a present view to or for distributing or reselling the shares of Common
      Stock or any part thereof or interest therein in violation of the Securities
      Act. Nothing contained herein shall be deemed a representation or warranty
      by
      such Purchaser to hold the Shares for any period of time. Such Purchaser is
      acquiring the Shares hereunder in the ordinary course of its business. Such
      Purchaser does not have any agreement or understanding, directly or indirectly,
      with any Person to distribute any of the Shares.

     

    c.    Purchaser
      Status.
      At the
      time such Purchaser was offered the Common Stock, and at the Closing Date,
      (i)
      it was and will be an “accredited investor” as defined in Rule 501 under the
      Securities Act and (ii) such Purchaser, either alone or together with its
      representatives, had and will have such knowledge, sophistication and experience
      in business and financial matters so as to be capable of evaluating the merits
      and risks of the prospective investment in the Common Stock. Such Purchaser
      is
      not a registered broker-dealer under Section 15 of the Exchange
      Act.

     

    d.    Reliance.
      Such
      Purchaser understands and acknowledges that (i) the shares of Common Stock
      are
      being offered and sold to the Purchaser without registration under the
      Securities Act in a private placement that is exempt from the registration
      provisions of the Securities Act under Section 4(2) of the Securities Act or
      Regulation D promulgated thereunder and (ii) the availability of such exemption
      depends in part on, and the Company will rely upon the accuracy and truthfulness
      of, the representations set forth in this Section 2.2 and such Purchaser hereby
      consents to such reliance. 

     

    e.    Information.
      Such
      Purchaser and its advisors, if any, have been furnished with all materials
      relating to the business, finances and operations of the Company and materials
      relating to the offer and sale of the Common Stock which have been requested
      by
      such Purchaser or its advisors. Such Purchaser and its advisors, if any, have
      been afforded the opportunity to ask questions of the Company. The Purchaser
      understands that its investment in the Common Stock involves a significant
      degree of risk. Neither such inquiries nor any other investigation conducted
      by
      or on behalf of such Purchaser or its representatives or counsel shall modify,
      amend or affect such Purchaser's right to rely on the truth, accuracy and
      completeness of 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    the
      Company's representations and warranties contained in this Agreement or the
      Transaction Documents.

     

    f.    
Governmental
      Review.
      Such
      Purchaser understands that no United States Federal or state agency or any
      other
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Common Stock.

     

    g.    Residency.
      Such
      Purchaser is a resident of the jurisdiction set forth immediately beside such
      Purchaser’s name on Schedule
      I
      hereto.

     

    The
      Company acknowledges and agrees that the Purchasers make no representations
      or
      warranties with respect to the transactions contemplated hereby other than
      those
      specifically set forth in this Section 2.2.

    


    ARTICLE
      III.


     

    OTHER
      AGREEMENTS 

     

    3.1    Transfer
      Restrictions.

     

    a.    If
      any
      Purchaser should decide to dispose of the Common Stock held by it, such
      Purchaser understands and agrees that it may do so (1) only pursuant to an
      effective registration statement under the Securities Act, (2) pursuant to
      an
      available exemption from the registration requirements of the Securities Act,
      (3) to an affiliate of the Purchaser, or (4) pursuant to Rule 144 promulgated
      under the Securities Act (“Rule 144”). In connection with any transfer of any
      Common Stock other than pursuant to an effective registration statement, Rule
      144, to the Company or to an affiliate of the Purchasers, the Company may
      require the transferor thereof to provide to the Company a written opinion
      of
      counsel experienced in the area of United States securities laws selected by
      the
      transferor, the form and substance of which opinion shall be customary for
      opinions of counsel in comparable transactions and reasonably acceptable to
      the
      Company, to the effect that such transfer does not require registration of
      such
      transferred securities under the Securities Act; provided, however, that if
      the
      Common Stock may be sold pursuant to Rule 144(k), no written opinion of counsel
      shall be required from any Purchaser if such Purchaser provides reasonable
      assurances that such security can be sold pursuant to Rule 144(k).
      Notwithstanding the foregoing, the Company hereby consents to and agrees to
      register any transfer by any Purchaser to an affiliate of such Purchaser,
      provided that the transferee certifies to the Company that it is an “accredited
      investor” as defined in Rule 501(a) under the Securities Act. Any such
      transferee shall agree in writing to be bound by the terms of this Agreement
      and
      the Transaction Documents and
      shall
      have the rights of a Purchaser under this Agreement and the Transaction
      Documents. The Company shall not require an opinion of counsel in connection
      with the transfer of the shares of Common Stock to an affiliate of a Purchaser.
      

     

    b.    The
      Purchasers agree to the imprinting, so long as is required by this Section
      3.1(b), of the following
      legend
      on the Common Stock: 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      THE
        SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
        AND
        EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
        UPON
        AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
        (THE
        "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
        TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
        TO
        AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
        REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
        APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
        TO
        THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
        ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION
        WITH A
        BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SHARES.

       

    

    The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement or grant a security interest in some
      or
      all of the shares of Common Stock and if required under the terms of such
      arrangement, such Purchaser may transfer pledged or secured shares of Common
      Stock to the pledgees or secured parties. Such a pledge or transfer would not
      be
      subject to approval of the Company and no legal opinion of the pledgee, secured
      party or pledgor shall be required in connection therewith. Further, no notice
      shall be required of such pledge. At the appropriate Purchaser's expense, the
      Company will execute and deliver such reasonable documentation as a pledgee
      or
      secured party reasonably request in connection with a pledge or transfer of
      the
      shares of Common Stock, including the preparation and filing of any required
      prospectus supplement under Rule 424(b)(3) of the Securities Act or other
      applicable provision of the Securities Act to appropriately amend the list
      of
      selling stockholders thereunder.

     

    Neither
      the Common Stock shall contain the legend set forth above (or any other legend)
      (i) while a registration statement covering the resale of such security is
      effective under the Securities Act, (ii) if in the written opinion of counsel
      to
      the Company experienced in the area of United States securities laws such legend
      is not required under applicable requirements of the Securities Act (including
      judicial interpretations and pronouncements issued by the staff of the
      Commission) or (iii) if such Common Stock may be sold pursuant to Rule 144(k).
      The Company agrees that it will provide any Purchaser, upon request, with a
      certificate or certificates representing shares of Common Stock free from such
      legend at such time as such legend is no longer required hereunder. If such
      certificate or certificates had previously been issued with such a legend or
      any
      other legend, the Company shall, upon request and upon the delivery of the
      legended certificate(s), reissue such certificate or certificates free of any
      legend. The Company agrees that following the effective date of the registration
      statement meeting the requirements set forth in the Registration Rights
      Agreement and covering the resale of the Shares by the Purchasers or at such
      time as such legend is no longer required under this Section 3.1, it will,
      no
      later than three Trading Days (as such term is defined in the Registration
      Rights Agreement) 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    following
      the delivery by a Purchaser to the Company or the Company's transfer agent
      of a
      certificate representing Shares an issued with a restrictive legend, deliver
      or
      cause to be delivered to such Purchaser a certificate representing such Shares
      that is free from all restrictive and other legends. 

     

    When
      the
      Company is required to cause unlegended certificates to replace previously
      issued legended certificates, if unlegended certificates are not delivered
      to a
      Holder within three (3) Business Days of submission by that Holder of legended
      certificate(s) to the Company’s transfer agent together with a representation
      letter in customary form, the Company shall be liable to the Holder for
      liquidated damages in an amount equal to 1.5% of the aggregate purchase price
      of
      the securities evidenced by such certificate(s) for each thirty (30) day period
      (or portion thereof) beyond such three (3) Business Days that the unlegended
      certificates have not been so delivered

     

    3.2    Stop
      Transfer Instruction.
      The
      Company may not make any notation on its records or give instructions to any
      transfer agent of the Company which enlarge the restrictions on transfer set
      forth in Section 3.1.

     

    3.3    Not
      used.

    


    3.4    Furnishing
      of Information.
      As long
      as any Purchaser owns shares of Common Stock, the Company covenants to timely
      file (or obtain extensions in respect thereof and file within the applicable
      grace period) all reports required to be filed by the Company after the date
      hereof pursuant to the Exchange Act. Upon the request of any such Person, the
      Company shall deliver to such Person a written certification of a duly
      authorized officer as to whether it has complied with the preceding sentence.
      As
      long as any Purchaser owns shares of Common Stock if the Company is not required
      to file reports pursuant to such laws, it will prepare and furnish to the
      Purchasers and make publicly available in accordance with Rule 144(c) such
      information as is required for the Purchasers to sell the Shares under Rule
      144.


     

    3.5    Integration.
      The
      Company shall not, and shall use its best efforts to ensure that no affiliate
      of
      the Company shall, sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the shares of Common
      Stock hereunder in a manner that would require the registration under the
      Securities Act of the sale of the shares Common Stock to the Purchasers, or
      that
      would be integrated with the offer or sale of the Shares for purposes of the
      rules and regulations of the Nasdaq National Market, if such integration would
      result in a violation of any such rule or regulation.

     

    3.6    Non-Public
      Information.
      Except
      for information regarding the transaction contemplated by this Agreement and
      the
      Transaction Documents and the terms and conditions hereof and thereof, the
      Company covenants and agrees that neither it nor any other Person acting on
      its
      behalf will provide any Purchaser or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Purchaser shall have executed a written agreement regarding
      the confidentiality and use of such information. The Company understands and
      confirms that each Purchaser shall be relying on the foregoing representations
      in effecting transactions in securities of the Company. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Notwithstanding
      anything to the contrary herein, no Purchaser shall engage in any trading
      activity in the Company's securities in violation of Regulation M of the
      Exchange Act. 

     

    3.7    Use
      of
      Proceeds.
      The
      Company shall use the net proceeds from the sale of the shares of Common Stock
      hereunder for working capital purposes. The Company shall not use the net
      proceeds from the sale of the shares of Common Stock hereunder to repay any
      of
      its short-term or long-term debt instruments

     

    3.8    Best
      Efforts.
      Each of
      the parties hereto shall use its best efforts to satisfy each of the conditions
      to be satisfied by it as provided in Article IV of this Agreement.

     

    3.9    Subsequent
      Placements. 

     

    a.    From
      the
      date hereof until the Effective Date, the Company will not directly or
      indirectly, offer, sell or grant any option to purchase (or announce any offer,
      sale, grant or any option to purchase) any of its Common Stock or other
      securities which entitle the holder thereof to receive Common Stock, including
      without limitation any debt, preferred stock or other instrument or security
      that is, at any time during its life and under any circumstances, convertible
      into or exchangeable for Common Stock.

     

    b.    The
      restrictions contained in paragraph (a) of this Section shall not apply to:
      (i)
      the granting of options, restricted stock, stock appreciation rights or similar
      instruments to employees, officers, directors and consultants of the Company
      pursuant to any stock option or similar plan duly adopted by the Company or
      to
      the issuance of shares of Common Stock upon exercise of such options or other
      rights, (ii) issuances of shares of Common Stock pursuant to any acquisition
      by
      the Company of the assets or capital stock of a business pursuant to a merger,
      asset sale or other business combination; (iii) issuances of shares of Common
      Stock upon conversion of the Company’s Series A1 Convertible Redeemable
      Preferred Stock (the “Series
      A1 Preferred Stock”)
      (as
      described on Schedule 2.1(c)); 

    


    ARTICLE
      IV.


     

    CONDITIONS

    4.1    Closing.

     

    a.    Conditions
      Precedent to the Obligation of the Company to Sell the Shares of Common
      Stock.
      The
      obligation of the Company to sell the shares of Common Stock is subject to
      the
      satisfaction or waiver by the Company, at or before the Closing Date, of each
      of
      the following conditions: 

     

    (i)    Accuracy
      of the Purchasers’ Representations and Warranties.
      The
      representations and warranties of each Purchaser in this Agreement shall be
      true
      and correct in all material respects as of the date when made and as of the
      Closing Date; 

     

    (ii)   Performance
      by the Purchasers.
      Each
      Purchaser shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    conditions
      required by this Agreement to be performed, satisfied or complied with by such
      Purchaser at or before the Closing Date; and 

     

    (iii)   No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction which prohibits the consummation of any
      of
      the transactions contemplated by this Agreement or the Transaction
      Documents.

     

    b.    Conditions
      Precedent to the Obligation of the Purchasers to Purchase the Shares of Common
      Stock at the Closing.
      The
      obligation of each Purchaser hereunder to acquire and pay for the shares of
      Common Stock at the Closing is subject to the satisfaction or waiver by
      Purchaser, at or before the Closing Date, of each of the following conditions:
      

     

    (i)    
Accuracy
      of the Company’s Representations and Warranties.
      The
      representations and warranties of the Company set forth in this Agreement shall
      be true and correct in all respects as of the date when made and as of the
      Closing Date; 

     

    (ii)    Performance
      by the Company.
      The
      Company shall have performed, satisfied and complied in all respects with all
      covenants, agreements and conditions required by this Agreement to be performed,
      satisfied or complied with by the Company at or before the Closing Date;


     

    (iii)   No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction which prohibits the consummation of any
      of
      the transactions contemplated by this Agreement and the Transaction Documents;
      

     

    (iv)   Required
      Approvals.
      All
      Required Approvals shall have been obtained; and

     

    (v)    Shares
      of Common Stock.
      The
      Company shall have duly reserved the number of shares of Common Stock acquired
      by the Purchasers on the Closing Date.

     

    ARTICLE
      V.

     

    INDEMNIFICATION

     

    5.1    Indemnification.
      The
      Company will indemnify and hold the Purchasers and their directors, officers,
      shareholders, partners, employees and agents (each, a "Purchaser
      Party")
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys' fees and costs of
      investigation that any such Purchaser Party may suffer or incur as a result
      of
      or relating to (a) any misrepresentation, breach or inaccuracy, or any
      allegation by a third party that, if true, would constitute a breach or
      inaccuracy, of any of the representations, warranties, covenants or agreements
      made by the Company in this Agreement or in the other Transaction Documents;
      or
      (b) any cause of action, suit or claim brought or made against such Purchaser
      Party and solely arising out of or solely resulting from the execution,
      delivery, 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    performance
      or enforcement of this Agreement or any of the other Transaction Documents.
      The
      Company will reimburse such Purchaser for its reasonable legal and other
      expenses (including the cost of any investigation, preparation and travel in
      connection therewith) incurred in connection therewith, as such expenses are
      incurred. Notwithstanding the foregoing, the Company shall not be required
      to
      indemnify any the Purchaser under the terms of this Article V with respect
      to
      any claim or violation for which indemnification is expressly excluded under
      the
      Registration Rights Agreement.

     

    ARTICLE
      VI.


     

    MISCELLANEOUS

     

    6.1    Entire
      Agreement.
      This
      Agreement, together with the Exhibits and Schedules hereto and the Transaction
      Documents contain the entire understanding of the parties with respect to the
      subject matter hereof and supersede all prior agreements and understandings,
      oral or written, with respect to such matters.

     

    6.2    Notices.
      Whenever it is provided herein that any notice, demand, request, consent,
      approval, declaration or other communication shall or may be given to or served
      upon any of the parties by another, or whenever any of the parties desires
      to
      give or serve upon another any such communication with respect to this
      Agreement, each such notice, demand, request, consent, approval, declaration
      or
      other communication shall be in writing and either shall be delivered in person
      with receipt acknowledged or by registered or certified mail, return receipt
      requested, postage prepaid, or by telecopy and confirmed by telecopy answerback
      addressed as follows:

     

    If
      to
      the Company:  

    


    Cicero,
      Inc.

    8000
      Regency Parkway

    Cary,
      North Carolina 27518

    Attn: John
      P.
      Broderick

     

    With
      a Copy to: 

    


    Golenbock
      Eiseman, Assor Bell and Peskoe LLP

    437
      Madison Ave

    New
      York,
      NY 10022

    Attn: Lawrence
      Bell, Esq.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    If
      to
      the Purchasers:
      To the
      address set forth on the counterpart signature page of such Purchaser or at
      such
      other address as may be substituted by notice given as herein provided. The
      giving of any notice required hereunder may be waived in writing by the party
      entitled to receive such notice. Every notice, demand, request, consent,
      approval, declaration or other communication hereunder shall be deemed to have
      been duly given and effective on the earliest of (a) the date of transmission,
      if such notice or communication is delivered via facsimile at the facsimile
      number specified in this Section prior to 6:30 p.m. (New York City time) on
      a
      business day, (b) the next business day after the date of transmission, if
      such
      notice or communication is delivered via facsimile at the facsimile number
      specified in this Section on a day that is not a business day or later than
      6:30
      p.m. (New York City time) on any business day, (c) the business day following
      the date of mailing, if sent by U.S. nationally recognized overnight courier
      service, or (d) upon actual receipt by the party to whom such notice is required
      to be given. As used herein, a “business day” means any day except Saturday,
      Sunday and any day which shall be a federal legal holiday or a day on which
      banking institutions in the State of New York are authorized or required by
      law
      or other governmental action to close.

    


    6.3    Amendments;
      Waivers.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by both the Company and each
      of
      the Purchasers or, in the case of a waiver, by the party against whom
      enforcement of any such waiver is sought. No waiver of any default with respect
      to any provision, condition or requirement of this Agreement shall be deemed
      to
      be a continuing waiver in the future or a waiver of any other provision,
      condition or requirement hereof, nor shall any delay or omission of either
      party
      to exercise any right hereunder in any manner impair the exercise of any such
      right accruing to it thereafter. 

     

    6.4    Headings.
      The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof.

     

    6.5    References.
      References herein to Sections are to Sections of this Agreement, unless
      otherwise expressly provided.

     

    6.6    Successors
      and Assigns; Assignability.
      Neither
      this Agreement nor any right, remedy, obligation or liability arising hereunder
      or by reason hereof shall be assignable by either the Company or the Purchasers
      without the prior written consent of the other party. In the event that such
      prior written consent is obtained and this Agreement is assigned by either
      party, all covenants contained herein shall bind and inure to the benefit of
      the
      parties hereto and their respective successors and assigns.

     

    6.7    No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person. 

     

    6.8    Governing
      Law; Waiver of Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of Delaware, without regard to the
      principles of conflicts of law thereof. Each party agrees that all proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    any
      other
      Transaction Documents (whether brought against a party hereto or its respective
      affiliates, directors, officers, shareholders, employees or agents) (each a
      "Proceeding")
      shall
      be commenced exclusively in the state and federal courts sitting in the City
      of
      New York, Borough of Manhattan. Each party hereto hereby irrevocably submits
      to
      the exclusive jurisdiction of the state and federal courts sitting in the City
      of New York, Borough of Manhattan for the adjudication of any dispute hereunder
      or in connection herewith or with any transaction contemplated hereby or
      discussed herein (including with respect to the enforcement of the any of the
      Transaction Documents), and hereby irrevocably waives, and agrees not to assert
      in any Proceeding, any claim that it is not personally subject to the
      jurisdiction of any such court, that such Proceeding is improper. Each party
      hereto hereby irrevocably waives personal service of process and consents to
      process being served in any such Proceeding by mailing a copy thereof via
      registered or certified mail or overnight delivery (with evidence of delivery)
      to such party at the address in effect for notices to it under this Agreement
      and agrees that such service shall constitute good and sufficient service of
      process and notice thereof. Nothing contained herein shall be deemed to limit
      in
      any way any right to serve process in any manner permitted by law. Each party
      hereto hereby irrevocably waives, to the fullest extent permitted by applicable
      law, any and all right to trial by jury in any legal proceeding arising out
      of
      or relating to this Agreement or the transactions contemplated hereby. If either
      party shall commence a Proceeding to enforce any provisions of a Transaction
      Document, then the prevailing party in such Proceeding shall be reimbursed
      by
      the other party for its attorneys fees and other costs and expenses incurred
      with the investigation, preparation and prosecution of such
      Proceeding.

     

    6.9    Survival.
      The
      representations, warranties, agreements and covenants contained herein shall
      survive following the Closing.

     

    6.10         
      Execution.
      This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original
      thereof.

     

    6.11         
      Not
      used.

     

    6.12         
      Publicity.
      The
      Purchasers shall not issue any press release or make any public disclosure
      regarding the transactions contemplated hereby unless such press release or
      public disclosure is approved by the Company in advance. Notwithstanding the
      foregoing, each of the parties hereto may, in documents required to be filed
      by
      it with the SEC or other regulatory bodies, make such statements with respect
      to
      the transactions contemplated hereby as each may be advised by counsel is
      legally necessary or advisable, and may make such disclosure as it is advised
      by
      its counsel is required by law.

     

    6.13         
      Severability.
      In case
      any one or more of the provisions of this Agreement shall be invalid or
      unenforceable in any respect, the validity and enforceability of the remaining
      terms and provisions of this Agreement shall not in any way be affected or
      impaired thereby and the parties will attempt to agree upon a valid and
      enforceable provision which shall be a reasonable 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    substitute
      therefore, and upon so agreeing, shall incorporate such substitute provision
      in
      this Agreement. 

     

    6.14        
      Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    6.15         Replacement
      of Certificates.
      If any
      certificate or instrument evidencing any shares of Common Stock is mutilated,
      lost, stolen or destroyed, the Company shall issue or cause to be issued in
      exchange and substitution for and upon cancellation thereof, or in lieu of
      and
      substitution therefore, a new certificate or instrument, but only upon receipt
      of evidence reasonably satisfactory to the Company of such loss, theft or
      destruction and customary and reasonable indemnity, if requested. The applicants
      for a new certificate or instrument under such circumstances shall also pay
      any
      reasonable third-party costs associated with the issuance of such replacement
      shares.

     

    6.16         Remedies.
      In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each of the Purchasers and the Company
      will
      be entitled to specific performance under this Agreement or the Transaction
      Documents. The parties agree that monetary damages may not be adequate
      compensation for any loss incurred by reason of any breach of obligations
      described in the foregoing sentence and hereby agrees to waive in any action
      for
      specific performance of any such obligation the defense that a remedy at law
      would be adequate.

     

    6.17        
      Independent
      Nature of Purchasers' Obligations and Rights.
      The
      obligations of each Purchaser under this Agreement or any Transaction Document
      are several and not joint with the obligations of any other Purchaser, and
      no
      Purchaser shall be responsible in any way for the performance of the obligations
      of any other Purchaser under this Agreement or any Transaction Document. Nothing
      contained herein or in any Transaction Document, and no action taken by any
      Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as
      a
      partnership, an association, a joint venture or any other kind of entity, or
      create a presumption that the Purchasers are in any way acting in concert or
      as
      a group with respect to such obligations or the transactions contemplated by
      this Agreement or any the Transaction Document. Each Purchaser shall be entitled
      to independently protect and enforce its rights, including without limitation
      the rights arising out of this Agreement or out of the other Transaction
      Documents, and it shall not be necessary for any other Purchaser to be joined
      as
      an additional party in any proceeding for such purpose.

     

    6.18         
      Fees
      and Expenses.
      Except
      as set forth in the Registration Rights Agreement, and except as provided
      herein, each Party shall pay the fees and expenses of its advisers, accountants
      and other experts.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized persons as of
      the
      day and year first above written.

    


    
      	 	
              CICERO,
                INC.

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	   
	 
	 	 	
              John
                P. Broderick

            	 
	 	 	
              Chief
                Executive Officer

            	 
	 	 	 	 
	 	 	 	 
	 	
              PURCHASERS:

            	 
	 	 	 	 
	 	
              [COUNTERPART
                SIGNATURE PAGES FOLLOW]

            	 


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized persons as of
      the
      day and year first above written.

     

    
      	 	
              PURCHASER

            	 
	 	 	 	 
	 	  
	  
	 
	 	 	
              (Name
                of Purchaser)

            	 
	 	 	 	 
	 	
              By:
                

            	  
	 
	 	 	
              (Signature
                of Purchaser(s))

            	 
	 	 	 	 
	 	
              Name:
                

            	  
	 
	 	 	
              (Name
                of Signatory if Purchaser is an Entity)

            	 
	 	 	 	 
	 	
              Title:
                

            	  
	 
	 	 	
              (if
                Purchaser is an Entity)

            	 


    

    
      	 	
               

            	 	 	 
	 	
              Purchase
                Price:

            	
              $

            	   
	 


    

    


    
      	 	
              Address
                for Notice:

            	 
	 	  
	 
	 	  
	 
	 	  
	 
	 	 	 
	 	
              With
                a copy to:

            	 
	 	  
	 
	 	  
	 
	 	  
	 


    

     

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      I

    


    
      	
              Name
                and Address
                of Purchaser

            	 	
              Residence

            	 	 	
              Number
                of Shares of Common Stock at
                Closing Date

            	 	
              Purchase
                Price

            
	 	 	 	 	 	 	 	 	 	 
	
              C.
                Glen Dugdale

              Box
                4550

              Greenville,
                DE 19807

            	 	
              DE

            	 	 	
              111,690

            	 	 	
              $15,000.00

            	 
	 	 	 	 	 	
               

            	 	 	 	 
	
              Queequeg
                Partners, LP

              Jonathan
                Gallen

              299
                Park Avenue

              New
                York, NY 10171

            	 	
              NY

            	 	 	
              169,898

            	 	
               

            	
              $22,813.27

            	 
	 	 	 	 	 	 	 	 	
               

            	 
	
              Ahab
                Partners, LP

              Jonathan
                Gallen

              299
                Park Avenue

              New
                York, NY 10171

            	 	
              NY

            	 	 	
              880,000

            	 	 	
              $118,184.00

            	 
	 	 	 	 	 	 	 	 	
               

            	 
	
              Ahab
                International, Ltd.

              Jonathan
                Gallen

              299
                Park Avenue

              New
                York, NY 10171

            	 	
              NY

            	 	 	
              1,120,000

            	 	 	
              $150,416.00

            	 
	 	 	 	 	 	 	 	 	
               

            	 
	
              Maurice
                Wills

              27102
                Woodbrook Road

              Rancho
                Palos Verdes, CA 90275

            	 	
              CA

            	 	 	
              100,000

            	 	 	
              $13,430.00

            	 
	 	 	 	 	 	 	 	 	
               

            	 
	
              Mark
                & Carolyn Landis

              503
                Lake Drive

              Princeton,
                NJ 08540

            	 	
              NJ

            	 	 	
              74,460

            	 	 	
              $10,000.00

            	 
	 	 	 	 	 	
               

            	 	 	
               

            	 
	
              Scott
                Lustgarten

              418
                Hillbrook Road

              Bryn
                Mawr, PA 19010

            	 	
              PA

            	 	 	
              44,676

            	 	
               

            	
              $6,000.00

            	 
	 	 	 	 	 	 	 	 	
               

            	 
	
              Bruce
                D. Miller

              P.O.
                Box 2306

              Nantucket,
                MA 02584

            	 	
              MA

            	 	 	
              148,920

            	 	 	
              $20,000.00

            	 
	 	 	 	 	 	 	 	 	
               

            	 
	
              Richard
                Nager

              44
                Righters Mill Road

              Gladwyne,
                PA 19035

            	 	
              PA

            	 	 	
              29,784

            	 	 	
              $4,000.00

            	 


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              Jonathan
                P. Robinson

              205
                Exeter Road

              Devon,
                PA 19333

            	 	
              PA

            	 	 	
              37,230

            	 	 	
              $5,000.00

            	 
	 	 	 	 	 	 	 	 	
               

            	 
	
              John
                L. Steffens

              65
                East 55th
                Street, 33rd
                Floor

              New
                York, NY 10022

            	 	
              NY

            	 	 	
              1,006,379

            	 	 	
              $135,156.73

            	 


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A


    


    CICERO
      DISCLOSURE SCHEDULES

    


    These
      Disclosure Schedules are being furnished by Cicero, Inc. (the “Company”),
      dated
      as of February 22, 2007.

    


    No
      reference to or disclosure of any item or matter in these Disclosure Schedules
      shall be construed as an admission or indication that such item or other matter
      is material or that such item or other matter is required to be referred to
      or
      disclosed. The inclusion and discussion of any document, agreement, conflict
      or
      situation in these Disclosure Schedules is not an admission of the
      effectiveness, enforceability, or interpretation of the document, agreement,
      conflict or situation.

    


    Items
      identified on the following Schedules are deemed disclosed for purposes of
      all
      Schedules to which they relate.

    


    These
      Disclosure Schedules do not contain Material Non-Public
      Information.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Schedule
      2.1 (c) Capitalization

    


    Authorized
      and Outstanding Capital Stock

    


    The
      Company's Certificate of Incorporation, as amended on December 29, 2006,
      authorizes the Company to issue 215,000,000 shares of Common Stock, par value
      $0.001 per share, of which 35,150,832 were outstanding as of close of business
      on February 9, 2007 (confirmed with American Stock Transfer and Trust Company).
      An additional 1,763,476 shares of Common Stock are reserved for issuance upon
      the conversion of the Series A1 Preferred Stock. An additional 324,067
shares
      of
      Common Stock are reserved for issuance upon the exercise of the warrants
      described below. 

    


    The
      Company's Certificate of Incorporation authorizes it to issue 10,000,000 shares
      of Preferred Stock, par value $0.001 per share. Of the authorized Preferred
      Stock, the following series have been issued: 

    


    1,763
      shares have been designated Series A1 Convertible Redeemable Preferred Stock,
      all of which were issued January 2007, and all of which are currently
      outstanding; 

     

    Preemptive
      Rights

    


    None.
      

     

    Stock
      Options

    


    As
      of
      January 10, 2007, 110,200 options to purchase Common Stock were outstanding
      under the Company’s Employee and Outside Director Stock Option Plans. The
      Company’s 1997 Plan has approximately 320,000 shares available to grant and the
      Plan expires in 2007. The Company does plan to create a new Employee and Outside
      Director Stock Option Plan.

    


    Warrants

    


    324,067
      shares of Common Stock are reserved for issuance upon the exercise of warrants
      (all are subject to Registration Rights Agreements) as follows: 

    


    
      	
              Warrant
                Holders: 

            	 	
              Granted: 

            	 	
              Remaining:

            	 	
              Exercise
                Price:

            	 
	
              Early
                Adopter Warrants as part of the Senior Reorganization
                Notes

            	 	 	
              201,115

            	 	 	
              201,115

            	 	
              $

            	
              10.00

            	 
	
              Former
                Series D-1 Preferred Stock Purchasers

            	 	 	
              41,581

            	 	 	
              22,931

            	 	
              $

            	
              7.00

            	 
	
              Former
                Series D-2 Preferred Stock Purchasers

            	 	 	
              24,157

            	 	 	
              10,914

            	 	
              $

            	
              20.00

            	 


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	
              Warrant
                Holders: 

            	 	
              Granted: 

            	 	
              Remaining:

            	 	
              Exercise
                Price:

            	 
	
              Former
                Financing Warrants

            	 	 	
              55,3671
                

            	 	 	
              28,095
                

            	 	
              $

            	
              40.00

            	 
	
              Purchasers
                in January 2002 Private Placement

            	 	 	
              4,764

            	 	 	
              2,131
                

            	 	
              $

            	
              60.00

            	 
	
              Purchasers
                in October 2003 Private Placement

            	 	 	
              474

            	 	 	
              445
                

            	 	
              $

            	
              45.00

            	 
	
              Purchasers
                in January 2004 Private Placement

            	 	 	
              33,692
                

            	 	 	
              13,838
                

            	 	
              $

            	
              37.00

            	 
	
              Convertible
                notes

            	 	 	
              18,750
                

            	 	 	
              18,750
                

            	 	
              $

            	
              8.00

            	 
	
              Convertible
                notes

            	 	 	
              20,000

            	 	 	
              20,000
                

            	 	
              $

            	
              10.00

            	 
	
              Convertible
                notes

            	 	 	
              901

            	 	 	
              901

            	 	
              $

            	
              17.00

            	 
	
              Convertible
                notes

            	 	 	
              7,893

            	 	 	
              1,875

            	 	
              $

            	
              32.00

            	 
	
              Former
                Series C Preferred Stock Purchasers. 

            	 	 	
              11,461

            	 	 	
              3,072

            	 	
              $

            	
              38.00

            	 


    

     

    Rights
      to Subscribe

    


    None

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Registration
      Rights Agreements

    


    Registration
      Rights Agreement with Existing Preferred Stockholders.

    


    The
      Company has entered into an amended registration rights agreements to provide
      for the registration of the shares underlying the Series A1 Preferred Stock.
      Such agreement will also provide for the registration of the shares underlying
      warrants or shares of common stock issued in the future pursuant to the terms
      of
      the respective certificates of designation.

     

    Registration
      Rights Agreement with Participants in the January 2002 Private Placement of
      Common Stock and Warrants.

    


    The
      shares of common stock and the shares issuable upon exercise of the related
      warrants are subject to a Registration Rights Agreement and are currently
      registered. Such shares were issued in the Company’s January 2002 private
      placement of common stock and warrants.

    


    Registration
      Rights Agreement with Participants in the October 2003 Private Placement of
      Common Stock and Warrants.

    


    The
      shares of common stock and the shares issuable upon exercise of the related
      warrants are subject to a Registration Rights Agreement and are currently
      registered. Such shares were issued in the Company’s October 2003 private
      placement of common stock and warrants.

    


    Registration
      Rights Agreement with Participants in the January 2004 Private Placement of
      Common Stock and Warrants.

    


    The
      shares of common stock and the shares issuable upon exercise of the related
      warrants are subject to a Registration Rights Agreement and are currently
      registered. Such shares were issued in the Company’s January 2004 private
      placement of common stock and warrants.

    


    Registration
      Rights Agreement with MLBC.

    


    On
      January 3, 2002, the Company entered into a registration rights agreement with
      MLBC, Inc. (“MLBC”),
      an
      affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated
      (“Merrill
      Lynch”).
      This
      agreement grants registration rights to MLBC with respect to 1,250 shares of
      Common Stock of the Company ( as adjusted for the reverse stock split) and
      replaces the previous registration rights agreement with Merrill Lynch for
      1,000
      shares of Common Stock of the Company. The Company complied with Merrill Lynch's
      demand to register the original 1,000 shares upon effectiveness of its Form
      S-3
      registration statement, Reg. No. 333-61494 , effective as of June 14, 2001
      and
      as amended by Post-Effective Amendment No. 1, filed October 18, 2001
      (subsequently withdrawn). MLBC subsequently requested that it not be included
      on
      an updated registration statement and withdrew its request to be included.
      Accordingly, MLBC still retains “piggy-back” and demand rights with respect to a
      total of 1,229 shares of Common Stock. The additional 21 shares of Common Stock
      were distributed by MLBC and have been registered for resale in the names of
      the
      transferees.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Registration
      Rights Agreement as Part of the Note and Warrant Offering.

     

    In
      August
      2004, the Company entered into a registration rights agreement with the holders
      of the Senior Reorganization Note and Warrant Offering. The conversion of the
      Notes into Senior Debt and Warrants was contingent and dependent upon the
      Company’s shareholders approving the merger and reorganization
      (“Recapitalization”) of the Company which was completed on November 16, 2006.


     

    Registration
      Rights Agreement as Part of the Convertible Bridge Notes.

     

    As
      part
      of the Term Sheet for Convertible Bridge Note financing, the Company entered
      into a registration rights agreement with the holders of Convertible Bridge
      Notes within 90 days after consummation of the recapitalization.

     

    Registration
      Rights Agreement with Liraz Systems, Ltd.

    


    On
      November 30, 2006, the Company entered into a registration rights agreement
      with
      Liraz Systems, Ltd. (“Liraz”) pursuant to a guaranty agreement between Liraz and
      Bank Hapoalim B.M. This agreement grants registration rights to Liraz with
      respect to certain shares of Common Stock of the Company and a warrant to
      purchase 3,600,000 shares of the Company’s Common Stock issued as part of the
      guaranty extension agreement of the Company’s bank note to Bank Hapoalim NY.


      

    Schedule
      2.1 (f) Consents

     

    None

     

    Schedule
      2.1 (g) Litigation

    


    Various
      lawsuits and claims have been brought against us in the normal course of our
      business. In January 2003, an action was brought against us in the Circuit
      Court
      of Loudon County, Virginia, for a breach of a real estate lease. The case was
      settled in August 2003. Under the terms of the settlement agreement, we agreed
      to assign a note receivable with recourse equal to the unpaid portion of the
      note should the note obligor default on future payments. The unpaid balance
      of
      the note was $545,000, of which the current unpaid principal portion is
      approximately $216,000 and it matures in December 2007. We assessed the
      probability of liability under the recourse provisions using a weighted
      probability cash flow analysis and have recognized a long-term liability in
      the
      amount of $131,000. 

    


    In
      October 2003, we were served with a summons and complaint in Superior Court
      of
      North Carolina regarding unpaid invoices for services rendered by one of our
      subcontractors. The amount in dispute was approximately $200,000 and is included
      in accounts payable. Subsequent to March 31, 2004, we settled this litigation.
      Under the terms of the settlement agreement, we agreed to pay a total of
      $189,000 plus interest over a 19-month period ending November 15, 2005. The
      Company is in the process of negotiating a series of payments for the remaining
      liability of approximately $80,000.

    


    In
      March
      2004, we were served with a summons and complaint in Superior Court of North
      Carolina regarding a security deposit for a sublease in Virginia. The amount
      in
      dispute is approximately $247,000. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    In
      October 2004, we reached a settlement agreement wherein we agreed to pay
      $160,000 over a 36-month period ending October 2007.

    


    In
      August
      2004, we were notified that we were in default under an existing lease agreement
      for office facilities in Princeton, New Jersey. The amount of the default is
      approximately $65,000. Under the terms of the lease agreement, we may be liable
      for future rents should the space remain vacant. We have reached a settlement
      agreement with the landlord which calls for a total payment of $200,000 and
      is
      included in accounts payable, over a 31-month period ending October 2007.


    


    In
      April
      2005, we were notified that Critical Mass Mail, Inc. had filed a claim against
      us for failure to pay certain liabilities under an Asset Purchase Agreement
      dated January 9, 2004. We in turn filed that Critical Mass Mail, Inc. failed
      to
      deliver certain assets and other documents under the same Asset purchase
      agreement. We had already reserved the potential liability under the Agreement
      as part of the asset purchase accounting. On March 1, 2006, Critical Mass Mail
      amended their complaint and is seeking damages of approximately $600,000 for
      our
      failure to timely register the underlying securities issued in the Asset
      Purchase. In December 2006 we settled this litigation. Under the terms of the
      settlement agreement, the Company agreed to pay the sum of $45,000 in monthly
      installments over nine consecutive months beginning on December 1, 2006 and
      to
      issue Critical Mass Mail, Inc. $50,000 value of common shares of Cicero, Inc,
      based on the trailing three day average price for Cicero common stock after
      such
      stock initially trades on the OTC Bulletin Board.

    


    Under
      the
      indemnification clause of the Company’s standard reseller agreements and
      software license agreements, the Company agrees to defend the reseller/licensee
      against third party claims asserting infringement by the Company’s products of
      certain intellectual property rights, which may include patents, copyrights,
      trademarks or trade secrets, and to pay any judgments entered on such claims
      against the reseller/licensee.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
      B

    


    REGISTRATION
      RIGHTS AGREEMENT

    


    This
      REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
      dated
      as of February 26, 2007, is entered into by and between CICERO, INC., a Delaware
      corporation (the “Company”),
      and
      _____________________________ (the “Purchaser”).

    


    W
      I T N E S S E T H:

    


    This
      Agreement is made pursuant to that certain Purchase Agreement, dated as of
      the
      date hereof, by and between the Company and the Purchaser (the “Purchase
      Agreement”),
      and
      pursuant to that certain Commitment Agreement, dated as of the date hereof,
      by
      and between the Company and the Purchaser (the “Commitment
      Agreement”)

     

    The
      Company and the Purchaser hereby agree as follows:

    


    1.    
Definitions.
      Unless
      otherwise defined herein, terms defined in the Purchase Agreement and the
      Commitment Agreement are used herein as therein defined, and the following
      shall
      have (unless otherwise provided elsewhere in this Agreement) the following
      respective meanings (such meanings being equally applicable to both the singular
      and plural form of the terms defined):

     

    “Affiliate”
means,
      with respect to any Person, any other Person that directly or indirectly
      controls or is controlled by or under common control with such Person. For
      the
      purposes of this definition, “control,”
when
      used with respect to any Person, means the possession, direct or indirect,
      of
      the power to direct or cause the direction of the management and policies of
      such Person, whether through the ownership of voting securities, by contract
      or
      otherwise, and the terms “affiliated,”
      “controlling”
and
      “controlled”
have
      meanings correlative to the foregoing.

     

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

    


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

    


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

    


    “Holder
      or
Holders”
means
      the holder or holders, as the case may be, from time to time of the Registrable
      Securities.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


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

     

    “Registrable
      Securities”
shall
      mean the shares of Common Stock issuable upon conversion of the Convertible
      Bridge Notes and the purchase of common stock.

    


    2.    
Registration.
      As soon
      as practicable following the Closing Date and within ninety (90) days of the
      such date, the Company shall prepare and file with the Commission a Registration
      Statement (the “Registration
      Statement”)
      which
      shall cover all of the Registrable Securities. The Registration Statement shall
      be on Form S-1 or any successor form. The Company shall use its best efforts
      to
      cause the Registration Statement to be declared effective under the Securities
      Act within one hundred eighty (180) days of the Closing Date.

     

    3.     
      Registration
      Procedures.
      Subject
      to the provisions of Section 2, the Company will:

    


    (a)    prepare
      and file with the Commission a Registration Statement with respect to such
      securities and use its best efforts to cause such Registration Statement to
      become and remain effective for a period of time required for the disposition
      of
      such securities by the Holder thereof, but not to exceed two (2)
      years;

     

    (b)    prepare
      and file with the Commission such amendments and supplements to such
      Registration Statement and the prospectus used in connection therewith as may
      be
      necessary to keep such Registration Statement effective and to comply with
      the
      provisions of the Securities Act with respect to the sale or other disposition
      of all securities covered by such Registration Statement until the earlier
      of
      such time as all of such securities have been disposed of in a public offering
      or the expiration of two (2) years;

     

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

     

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

     

    (e)    furnish,
      at the request of any Holder during registration of Registrable Securities
      pursuant to Section 2, on the date that such shares of Registrable Securities
      are delivered to the underwriters for sale pursuant to such registration or,
      if
      such Registrable Securities are not being sold through underwriters, on the
      date
      that the Registration Statement with respect to such shares of Registrable
      Securities becomes effective, (1) an opinion, dated as of such date, of the


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    independent
      counsel representing the Company for the purposes of such registration,
      addressed to the underwriters, if any, and if such Registrable Securities are
      not being sold through underwriters, then to the Holder making such request,
      in
      customary form and covering matters of the type customarily covered in such
      legal opinions; and (2) a comfort letter dated such date, from the
      independent certified public accountants of the Company, addressed to the
      underwriters, if any, and if such Registrable Securities are not being sold
      through underwriters, then to the Holder making such request and, if such
      accountants refuse to deliver such letter to such Holder, then to the Company,
      in a customary form and covering matters of the type customarily covered by
      such
      comfort letters and as the underwriters or such Holder shall reasonably
      request;

     

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

     

    (g)    notify
      each Holder as promptly as practicable upon the occurrence of any event as
      a
      result of which the prospectus included in a Registration Statement, as then
      in
      effect, contains an untrue statement of material fact or omits to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading in light of the circumstances then existing, and as
      promptly as possible, prepare, file and furnish to such Holder a reasonable
      number of copies of a supplement or an amendment to such prospectus as may
      be
      necessary so that such prospectus does not contain an untrue statement of
      material fact or omits to state a material fact required to be stated therein
      or
      necessary to make the statements therein not misleading in light of the
      circumstances then existing;

     

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

     

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

     

    4.    
Expenses.
      All
      expenses incident to the Company’s compliance with the terms of this Agreement,
      including, without limitation, all registration and filing fees, printing
      expenses, fees and disbursements of counsel for the Company, expenses of any
      special audits incident to or required by any such registration and expenses
      of
      complying with the securities or blue sky laws of any jurisdiction pursuant
      to
      Section 3(d), shall be paid by the Company, except that:

     

    (a)    all
      such
      expenses in connection with any amendment or supplement to the Registration
      Statement or prospectus filed more than two (2) years after the effective date
      of 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    such
      Registration Statement because any Holder has not effected the disposition
      of
      the securities requested to be registered shall be paid by such
      Holder;

     

    (b)    the
      Company shall not be liable for any fees, discounts or commissions to any
      underwriter or any fees or disbursements of counsel for any underwriter in
      respect of the securities sold by such Holder; and

     

    (c)    any
      incremental expenses incurred by the Company as a result of the inclusion of
      a
      Holder’s Registrable Securities in an underwritten offering where the Holder or
      any of its Affiliates is an underwriter of the Registrable Securities which
      inclusion of such Holder’s Registrable Securities requires a “qualified
      independent underwriter” under the applicable rules of the NASD shall be paid by
      such Holder.

     

    5.    
Indemnification
      and Contribution.
      (a) In
      the event of any registration of any Registrable Securities under the Securities
      Act pursuant to this Agreement, the Company shall indemnify and hold harmless
      the Holder of such Registrable Securities, such Holder’s directors and officers,
      and each other person (including each underwriter) who participated in the
      offering of such Registrable Securities and each other person, if any, who
      controls such Holder or such participating person within the meaning of the
      Securities Act, against any losses, claims, damages or liabilities, joint or
      several, to which such Holder or any such director or officer or participating
      person or controlling person may become subject under the Securities Act or
      any
      other statute or at common law, insofar as such losses, claims, damages or
      liabilities (or actions in respect thereof) arise out of or are based upon
      (i) any alleged untrue statement of any material fact contained, on the
      effective date thereof, in any Registration Statement under which such
      securities were registered under the Securities Act, any preliminary prospectus
      or final prospectus contained therein, or any amendment or supplement thereto,
      or (ii) any alleged omission to state therein a material fact required to
      be stated therein or necessary to make the statements therein not misleading,
      and shall reimburse such Holder or such director, officer or participating
      person or controlling person for any legal or any other expenses reasonably
      incurred by such Holder or such director, officer or participating person or
      controlling person in connection with investigating or defending any such loss,
      claim, damage, liability or action. Notwithstanding anything to the contrary
      set
      forth in this Section 5(a), the Company shall not be liable to indemnify any
      person in any such case to the extent that any such loss, claim, damage or
      liability arises out of or is based upon (1) any actual or alleged untrue
      statement or actual or alleged omission either (x) made in such Registration
      Statement, preliminary prospectus, prospectus or amendment or supplement in
      reliance upon and in conformity with written information furnished to the
      Company by such Holder specifically for use therein or so furnished for such
      purposes by any underwriter or (y) that had been corrected in a preliminary
      prospectus, prospectus supplement or amendment which had been furnished to
      such
      Holder prior to any distribution of the document alleged to contain the untrue
      statement or omission to offerees or purchasers, (2) any offer or sale of
      Registrable Securities after receipt by such Holder of a Standstill Notice
      under
      Section 3(g) and prior to the delivery of the prospectus supplement or amendment
      contemplated by Section 3(g), or (3) the Holder’s failure to comply with the
      prospectus delivery requirements under the Securities Act or failure to
      distribute its Registrable Securities in a manner consistent with its intended
      plan of distribution as provided to the Company and disclosed in the
      Registration Statement. Notwithstanding the foregoing, the 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Company
      shall not be required to indemnify any person for amounts paid in settlement
      of
      any claim without the prior written consent of the Company, which consent shall
      not be unreasonably withheld. Such indemnity shall remain in full force and
      effect regardless of any investigation made by or on behalf of such Holder
      or
      such director, officer or participating person or controlling person, and shall
      survive the transfer of such securities by such Holder.

     

    (b)    Each
      Holder, by acceptance hereof, agrees to indemnify and hold harmless the Company,
      its directors and officers and each person who participated in such offering
      and
      each other person, if any, who controls the Company within the meaning of the
      Securities Act against any losses, claims, damages or liabilities, joint or
      several, to which the Company or any such director or officer or any such person
      may become subject under the Securities Act or any other statute or at common
      law, insofar as such losses, claims, damages or liabilities (or actions in
      respect thereof) arise out of or are based upon (i) information in writing
      provided to the Company by the Holder specifically for use in the following
      documents and contained, on the effective date thereof, in any Registration
      Statement under which securities were registered under the Securities Act at
      the
      request of the Holder, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereto, (ii) Holder’s offer or sale of
      Registrable Securities after receipt by such Holder of a Standstill Notice
      under
      Section 3(g) and prior to the delivery of the prospectus supplement or amendment
      contemplated by Section 3(g), (iii) Holder’s failure to comply with the
      prospectus delivery requirements under the Securities Act or failure to
      distribute its Registrable Securities in a manner consistent with its intended
      plan of distribution as provided to the Company and disclosed in the
      Registration Statement, (iv) Holder’s failure to comply with Regulation M under
      the Exchange Act, or (v) Holder’s failure to comply with any rules and
      regulations applicable because the Holder is, or is an Affiliate of, a
      registered broker-dealer. Notwithstanding the provisions of this paragraph
      (b)
      or paragraph (c) below, no Holder shall be required to indemnify any person
      pursuant to this Section 5 or to contribute pursuant to paragraph (c) below
      in
      an amount in excess of the amount of the aggregate net proceeds received by
      such
      Holder in connection with any such registration under the Securities
      Act.

     

    (c)    If
      the
      indemnification provided for in this Section 5 from the indemnifying party
      is
      unavailable to an indemnified party hereunder in respect of any losses, claims,
      damages, liabilities or expenses referred to therein, then the indemnifying
      party, in lieu of indemnifying such indemnified party, shall contribute to
      the
      amount paid or payable by such indemnified party as a result of such losses,
      claims, damages, liabilities or expenses in such proportion as is appropriate
      to
      reflect the relative fault of the indemnifying party and indemnified parties
      in
      connection with the actions which resulted in such losses, claims, damages,
      liabilities or expenses, as well as any other relevant equitable considerations.
      The relative fault of such indemnifying party and indemnified parties shall
      be
      determined by reference to, among other things, whether any action in question,
      including any untrue or alleged untrue statement of a material fact or omission
      or alleged omission to state a material fact, has been made by, or relates
      to
      information supplied by, such indemnifying party or indemnified parties, and
      the
      parties’ relative intent, knowledge, access to information and opportunity to
      correct or prevent such action. The amount paid or payable by a party as a
      result of the losses, claims, damages, 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    liabilities
      and expenses referred to above shall be deemed to include any legal or other
      fees or expenses reasonably incurred by such party in connection with any
      investigation or proceeding.

     

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 5(c) were determined by pro rata allocation or by
      any
      other method of allocation which does not take account of the equitable
      considerations referred to in the immediately preceding paragraph. No Person
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the Securities Act) shall be entitled to contribution from any Person who was
      not guilty of such fraudulent misrepresentation.

     

    6.     
      Certain
      Limitations on Registration Rights.
      Notwithstanding the other provisions of this Agreement:

     

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

     

    (b)    the
      Company shall not be obligated to register the Registrable Securities of any
      Holder pursuant to Section 2 if the Company has had a registration statement,
      under which the Holder had a right to have its Registrable Securities included
      pursuant to Section 2, declared effective within one hundred and twenty (120)
      days prior to the date of the request pursuant to Section 2; and

     

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

     

    7.     
      Selection
      of Managing Underwriters.
      The
      managing underwriter or underwriters for any offering of Registrable Securities
      to be registered pursuant to Section 2 shall be selected by the Holders of
      a
      majority of the shares being so registered and shall be reasonably acceptable
      to
      the Company.

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    by
      the
      managing underwriter, and (iii) agrees to bear the Holder’s pro rata portion of
      all underwriting discounts and commissions.

     

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

     

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

     

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

     

    (e)    Each
      Holder agrees that upon receipt of a Standstill Notice pursuant to Section
      3(g),
      the Holder shall immediately discontinue offers and sales of Registrable
      Securities registered under the Securities Act pursuant to any Registration
      Statements covering such Registrable Securities until such Holder receives
      copies of the supplemented or amended prospectus contemplated by Section 3(g)
      or
      notice from the Company that no such supplement or amendment is
      required.

     

    9.    
Miscellaneous.
      

     

    (a)    No
      Inconsistent Agreements.
      The
      Company will not hereafter enter into any agreement with respect to its
      securities which conflicts with the rights granted to the Holders in this
      Agreement. 

     

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

     

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

     

    (d)    Notice
      Generally.
      Any
      notice, demand, request, consent, approval, declaration, delivery or other
      communication hereunder to be made pursuant to the provisions of this Agreement
      shall be sufficiently given or made if in writing and either delivered in person
      with 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    receipt
      acknowledged or sent by registered or certified mail, return receipt requested,
      postage prepaid, or by telecopy and confirmed by telecopy answerback, addressed
      as follows:

     

    
      	 	
              If
                to the Company: 

            	
              Cicero,
                Inc.

            


    

    
      	 	 	
              8000
                Regency Parkway, Suite 542

            


    

    
      	 	 	
              Cary,
                North Carolina 27518

            


    

    
      	 	 	
              Attn:
                John P. Broderick

            


    

    
      	 	 	 


    

    
      	 	
              With
                a Copy to:

            	
              Golenbock
                Eiseman Assor Bell & Peskoe LLP

            


    

    
      	 	 	
              437
                Madison Avenue

            


    

    
      	 	 	
              New
                York, New York 10022

            


    

    
      	 	 	
              Attn:
                Lawrence Bell, Esq.

            


    

    


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

    


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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (h)    Governing
      Law; Jurisdiction.
      This
      Agreement shall be governed by, construed and enforced in accordance with the
      laws of the State of Delaware without giving effect to the conflict of laws
      provisions thereof. Service of process on the parties in any action arising
      out
      of or relating to this Agreement shall be effective if mailed to the parties
      in
      accordance with Section 9(d) hereof. The
      parties hereto waive all right to trial by jury in any action or proceeding
      to
      enforce or defend any rights hereunder. 

     

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

     

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

     

    (k)    Counterparts.
      This
      Agreement may be executed in any number of counterparts, all of which taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original
      thereof.

     

    [SIGNATURE
      PAGES ATTACHED HERETO]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

    


    
      	 	
              CICERO,
                INC.

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	  
	 
	 	 	
              John
                P. Broderick,

            	 
	 	 	
              Chief
                Executive and Financial Officer

            	 
	 	 	 	 
	 	 	 	 
	 	
              PURCHASER:

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:
                

            	 
	 
	 	
              Name:
                

            	 
	 
	 	
              Title: