Document:

pledge_securityagremt.htm

    EXHIBIT
10-42

      
        

      

      
        

      

      
        

         

        

      

      
        PLEDGE
AND SECURITY AGREEMENT

         

        

         

        made
by

         

        

         

        COMMUNICATION
INTELLIGENCE CORPORATION

         

        

         

        and
certain of its Subsidiaries

         

        

         

        in favor
of

         

        

         

        SG
PHOENIX LLC,

         

        as
Collateral Agent

         

        for the
ratable benefit of the Secured Parties

         

        

         

        

      

      
        Dated as
of June 5, 2008

         

        

      

      
        

         

        

      

      
        
          
            

            
              	 
      	 
      	 
      

            

             

          

           

        

        
           

          
            

          

        

        
           

        
EXHIBIT 10-42

      Table of Contents

       

      Page

       

      
        
          	
                  SECTION
      1.

                	
                  Defined
      Terms

                	
                  1

                
	
                  1.1

                	
                  Definitions.

                	
                  1

                
	
                  1.2

                	
                  Other
      Definitional Provisions

                	
                  5

                
	
                  SECTION
      2.

                	
                  Grant
      of Security Interest

                	
                  5

                
	
                  SECTION
      3.

                	
                  Representations
      and Warranties

                	
                  6

                
	
                  3.1

                	
                  Title;
      No Other Liens

                	
                  6

                
	
                  3.2

                	
                  Perfected
      First Priority Liens

                	
                  7

                
	
                  3.3

                	
                  Jurisdiction
      of Organization; Chief Executive Office

                	
                  7

                
	
                  3.4

                	
                  Farm
      Products

                	
                  7

                
	
                  3.5

                	
                  Investment
      Property

                	
                  7

                
	
                  3.6

                	
                  Receivables.

                	
                  8

                
	
                  3.7

                	
                  Intellectual
      Property.

                	
                  8

                
	
                  3.8

                	
                  Commercial
      Tort Claims.

                	
                  8

                
	
                  SECTION
      4.

                	
                  Covenants.

                	
                  9

                
	
                  4.1

                	
                  Delivery
      of Instruments, Certificated Securities and Chattel Paper

                	
                  9

                
	
                  4.2

                	
                  Maintenance
      of Insurance.

                	
                  9

                
	
                  4.3

                	
                  Maintenance
      of Perfected Security Interest; Further Documentation.

                	
                  9

                
	
                  4.4

                	
                  Changes
      in Name, etc.

                	
                  10

                
	
                  4.5

                	
                  Notices

                	
                  10

                
	
                  4.6

                	
                  Investment
      Property.

                	
                  10

                
	
                  4.7

                	
                  Intellectual
      Property.

                	
                  12

                
	
                  4.8

                	
                  Commercial
      Tort Claims

                	
                  13

                
	
                  SECTION
      5.

                	
                  Remedial
      Provisions.

                	
                  13

                
	
                  5.1

                	
                  Certain
      Matters Relating to Receivables.

                	
                  13

                
	
                  5.2

                	
                  Communications
      with Obligors; Grantors Remain Liable.

                	
                  14

                
	
                  5.3

                	
                  Pledged
      Stock.

                	
                  15

                
	
                  5.4

                	
                  Proceeds
      to be Turned Over to Collateral Agent

                	
                  16

                
	
                  5.5

                	
                  Application
      of Proceeds

                	
                  16

                
	
                  5.6

                	
                  Code
      and Other Remedies

                	
                  16

                
	
                  5.7

                	
                  Registration
      Rights

                	
                  17

                
	
                  5.8

                	
                  Subordination

                	
                  18

                
	
                  5.9

                	
                  Deficiency

                	
                  18

                
	
                  SECTION
      6.

                	
                  The
      Collateral Agent.

                	
                  18

                
	
                  6.1

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

                	
                  18

                
	
                  6.2

                	
                  Undertaking
      of the Collateral Agent.

                	
                  20

                
	
                  6.6

                	
                  Duty
      of Collateral Agent

                	
                  24

                

        

         

        
          
            
            

          

          
            (i)

            
              

            

          

          
            EXHIBIT
10-42

          

        

        
           

          Table
of Contents

          (continued)

          Page

           

        

        
          	
                  6.7

                	
                  Execution
      of Financing Statements

                	
                  24

                
	
                  6.8

                	
                  Authority
      of Collateral Agent

                	
                  24

                
	
                  6.9

                	
                  Intercreditor
      Arrangements

                	
                  24

                
	
                  SECTION
      7.

                	
                  Miscellaneous.

                	
                  25

                
	
                  7.1

                	
                  Amendments.

                	
                  25

                
	
                  7.2

                	
                  Notices

                	
                  25

                
	
                  7.3

                	
                  No
      Waiver by Course of Conduct; Cumulative Remedies

                	
                  25

                
	
                  7.4

                	
                  Enforcement
      Expenses; Indemnification.

                	
                  26

                
	
                  7.5

                	
                  Security
      Interest Absolute

                	
                  26

                
	
                  7.6

                	
                  Successors
      and Assigns

                	
                  26

                
	
                  7.7

                	
                  Set-Off;
      Limitation on Individual Actions.

                	
                  26

                
	
                  7.8

                	
                  Counterparts

                	
                  27

                
	
                  7.9

                	
                  Severability

                	
                  28

                
	
                  7.10

                	
                  Section
      Headings

                	
                  28

                
	
                  7.11

                	
                  Integration

                	
                  28

                
	
                  7.12

                	
                  GOVERNING
      LAW

                	
                  28

                
	
                  7.13

                	
                  Submission
      To Jurisdiction; Waivers

                	
                  28

                
	
                  7.14

                	
                  Acknowledgements

                	
                  29

                
	
                  7.15

                	
                  Additional
      Grantors.

                	
                  30

                
	
                  7.16

                	
                  Continuing
      Security Interest; Releases of Collateral.

                	
                  30

                
	
                  7.17

                	
                  WAIVER
      OF JURY TRIAL

                	
                  30

                

        

      SCHEDULES

       

      Schedule
1                           —                 Notice
Address

      Schedule
2                           —                 Investment
Property

      Schedule
3                           —                 Perfection
Matters

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

      Schedule
5                           —                 Intellectual
Property

      

      ANNEXES

      

      Annex
1                   —         Form
of Assignment and Assumption Agreement

      

      
        
          
            

            
              	 
      	
                      (ii)

                    	 
      

            

             

          

           

        

        
           

          
            

          

        

        
           

        
EXHIBIT 10-42

      PLEDGE AND SECURITY
AGREEMENT

       

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

       

      W I T N E S S E T H :

       

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

       

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

       

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

       

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

       

       

      SECTION
1.                                Defined
Terms

       

      1.1           Definitions.

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          EXHIBIT
10-42

        

      

       

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
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          EXHIBIT
10-42

        

      

       

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
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          EXHIBIT
10-42

        

      

       

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

      1.2           Other Definitional
Provisions

       

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

       

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

       

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

       

       

      SECTION
2.                                Grant of Security
Interest

       

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

       

      (a)           all
Accounts;

       

      (b)           all
Chattel Paper;

       

      (c)           all
Contracts;

       

      (d)           all
Deposit Accounts and cash;

       

      (e)           all
Documents;

       

      (f)           all
Equipment;

       

      (g)           all
Fixtures;

       

      (h)           all
General Intangibles;

       

      
        
          
          

        

        
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          EXHIBIT
10-42

        

      

       

       

      (i)           all
Instruments;

       

      (j)           all
Intellectual Property;

       

      (k)           all
Inventory;

       

      (l)           all
Goods;

       

      (m)           all
Investment Property;

       

      (n)           all
Letter-of-Credit Rights;

       

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

       

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

       

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

       

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

       

       

      SECTION
3.                                Representations and
Warranties

       

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

       

      3.1           Title; No Other
Liens

       

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

       

      
        
          
          

        

        
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      3.2           Perfected First Priority
Liens

       

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

       

      3.3           Jurisdiction of
Organization; Chief Executive Office

       

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

       

      3.4           Farm
Products

       

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

       

      3.5           Investment
Property

       

      .

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
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      3.6           Receivables.

       

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

       

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

       

      3.7           Intellectual
Property.

       

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

       

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

       

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

       

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

       

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

       

      3.8           Commercial Tort
Claims.

       

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

       

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

       

                            SECTION
4.                                Covenants.

       

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

       

      4.1           Delivery of Instruments,
Certificated Securities and Chattel Paper

       

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

       

      4.2           Maintenance of
Insurance.

       

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

       

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

       

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

       

      4.3           Maintenance of Perfected
Security Interest; Further Documentation.

       

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

       

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

       

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

       

      4.4           Changes in Name,
etc.

       

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

       

      4.5           Notices

       

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

       

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

       

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

       

      4.6           Investment
Property.

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
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      4.7           Intellectual
Property.

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

      4.8           Commercial Tort
Claims

       

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

       

      4.9           Subsidiaries.

       

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

       

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

       

       

      SECTION
5.                                Remedial
Provisions.

       

      5.1           Certain Matters Relating to
Receivables.

       

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

       

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

       

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

       

      5.2           Communications with
Obligors; Grantors Remain Liable.

       

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

       

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

       

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

       

      5.3           Pledged
Stock.

       

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

       

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

       

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

       

      
        
          
          

        

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

       

      5.4           Proceeds to be Turned Over
to Collateral Agent

       

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

       

      5.5           Application of
Proceeds

       

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

       

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

       

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

       

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

       

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

       

      5.6           Code and Other
Remedies

       

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

       

      5.7           Registration
Rights

       

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

       

      
        
          
          

        

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

       

      5.8           Subordination

       

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

       

      5.9           Deficiency

       

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

       

       

      SECTION
6.                                The Collateral
Agent.

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

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

       

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

       

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

       

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

       

      6.2           Undertaking of the
Collateral Agent.

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

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

       

      6.3           Immunities of the Collateral
Agent.

       

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

       

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

       

      (c)           Solicitations of
Instructions.

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      (a)           as
permitted by Section
7.16; or

       

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

       

      6.5           Enforcement of
Liens

       

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

       

      6.6           Duty of Collateral
Agent

       

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

       

      6.7           Execution of Financing
Statements

       

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

       

      6.8           Authority of Collateral
Agent

       

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

       

      6.9           Intercreditor Arrangements

       

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

       

       

      SECTION
7.                                Miscellaneous.

       

      7.1           Amendments.

       

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

       

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

       

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

       

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

       

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

       

      7.2           Notices

       

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

       

      7.3           No Waiver by Course of
Conduct; Cumulative Remedies

       

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

       

      7.4           Enforcement Expenses;
Indemnification.

       

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

       

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

       

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

       

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

       

      7.5           Security Interest
Absolute

       

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

       

      7.6           Successors and
Assigns

       

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

       

      7.7           Set-Off; Limitation on
Individual Actions.

       

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

       

      
        
          
          

        

        
          26

          
            

          

        

        
          EXHIBIT
10-42

        

      

       

       

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

       

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

       

      7.8           Counterparts

       

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

       

      
        
          
          

        

        
          27

          
            

          

        

        
          EXHIBIT
10-42

        

      

       

       

      7.9           Severability

       

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

       

      7.10           Section
Headings

       

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

       

      7.11           Integration

       

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

       

      7.12           GOVERNING
LAW

       

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

       

      7.13           Submission To Jurisdiction;
Waivers

       

      .  Each
Grantor hereby irrevocably and unconditionally:

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          28

          
            

          

        

        
          EXHIBIT
10-42

        

      

       

       

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

       

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

       

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

       

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

       

      7.14           Acknowledgements

       

      .  Each
Grantor hereby acknowledges that:

       

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

       

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

       

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

       

      
        
          
          

        

        
          29

          
            

          

        

        
          EXHIBIT
10-42

        

      

       

       

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

       

      7.15           Additional
Grantors.

       

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

       

      7.16           Continuing Security
Interest; Releases of Collateral.

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          30

          
            

          

        

        
          EXHIBIT
10-42

        

      

       

       

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

       

      [remainder
of page intentionally left blank]

       

      
        
          
            

            
              	 
      	 
      	 
      

            

             

          

           

        

        
          31 

          
            

          

        

        
           

        
EXHIBIT 10-42

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

       

       

      
        	
                 
      

              	
                COMMUNICATION
      INTELLIGENCE CORPORATION,

              

      

       

       

      
        	
                 
      

              	
                as
      Borrower and as a Grantor

              

      

       

       

      
        	
                 
      

              	
                By:
      /s/ Francis V.
      Dane

              

      

       

      
        	
                 
      

              	
                Name:
      Francis V. Dane

              

      

       

      
        	
                 
      

              	
                Title: 
      Chief Financial Officer

              

      

       

       

      
        	
                 
      

              	
                CIC
      ACQUISITION CORP.,

              

      

      
        	
                 
      

              	
                as
      Grantor

              

      

       

      
        	                           
      By: /s/ Francis V. Dane 
      	 

      

                               

      
        	
                 
      

              	
                Name:
      Francis V. Dane

              

      

       

      
        	
                 
      

              	
                Title:

              

      

       

       

      
        	
                 
      

              	
                SG
      PHOENIX LLC,

              

      

      
        	
                 
      

              	
                   as
      Collateral Agent

              

      

       

       

      
        	
                 
      

              	
                By: 
      /s/ Andrea
      Goren

              

      

       

      
        	
                 
      

              	
                Name:
      Andrea Goren

              

      

       

      
        	
                 
      

              	
                Title:Member

              

      

       

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        
EXHIBIT 10-42

       

      
        	
                 
      

              	
                Acknowledged
      and Agreed to:

              

      

       

       

      
        	
                 
      

              	
                PHOENIX
      VENTURE FUND LLC,

              

      

      
        	
                 
      

              	
                   as
      a Secured Party

              

      

       

       

      
        	
                 
      

              	
                       By:
      SG Phoenix Ventures LLC,

              

      

       its
Managing Member

       

            

         

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

        

         

      

       

       

                                                                                                                     
/s/   Micheal
Engmann

       

      MICHAEL ENGMANN, as a Secured
Party

       

       

      

                                                                                                             
/s/  Ronald
Goodman         

       

      RONALD
GOODMAN, as a Secured Partysecurities_purchaseagmt.htm

    EXHIBIT
10-43

    

    

    

    

    

    

    

    

    

    SECURITIES
PURCHASE AGREEMENT

     

    Dated
as of June 5, 2008,

     

    By
And Among

    

    COMMUNICATION
INTELLIGENCE CORPORATION

    

    AND

    

    THE
INVESTORS SIGNATORY HERETO

    
       

      

    

    
      
         

      

      
         

        
          

        

      

      
        
          EXHIBIT
10-43 

        

      

    

    

      
        	
                TABLE OF CONTENTS

              
	 
      	 
      	
                Page

              
	
                ARTICLE
      1.

              	
                DEFINITIONS

              	
                1

              
	 
      	
                1.1    Definitions

              	
                1

              
	
                ARTICLE
      2.

              	
                PURCHASE
      AND SALE

              	
                6

              
	 
      	
                2.1    Closing

              	
                6

              
	 
      	
                2.2    Purchase
      Price

              	
                6

              
	 
      	
                2.3    Closing
      Deliveries

              	
                7

              
	
                ARTICLE
      3.

              	
                REPRESENTATIONS
      AND WARRANTIES

              	
                8

              
	 
      	
                3.1    Representations
      and Warranties of the Company

              	
                8

              
	 
      	
                3.2    Representations
      and Warranties of the Investors

              	
                18

              
	
                ARTICLE
      4.

              	
                OTHER
      AGREEMENTS OF THE PARTIES

              	
                20

              
	 
      	
                4.1    Transfer
      Restrictions; Legends

              	
                20

              
	 
      	
                4.2    Furnishing
      of Information

              	
                22

              
	 
      	
                4.3    Integration

              	
                22

              
	 
      	
                4.4    Reservation
      of Securities

              	
                22

              
	 
      	
                4.5    Securities
      Laws Disclosure; Publicity

              	
                22

              
	 
      	
                4.6    Use
      of Proceeds

              	
                23

              
	 
      	
                4.7    Indemnification
      of Investors

              	
                23

              
	 
      	
                4.8    Listing
      of Securities

              	
                24

              
	 
      	
                4.9    Stockholder
      Approval

              	
                24

              
	 
      	
                4.10   Ranking

              	
                25

              
	 
      	
                4.11  Cancellation
      of Notes

              	
                25

              
	
                ARTICLE
      5.

              	
                CONDITIONS
      PRECEDENT TO CLOSING

              	
                25

              
	 
      	
                5.1    Conditions
      Precedent to the Obligations of the Investors

              	
                25

              
	 
      	
                5.2    Conditions
      Precedent to the Obligations of the Company

              	
                25

              
	
                ARTICLE
      6.  MISCELLANEOUS

              	
                26

              
	 
      	
                6.1    Rescission

              	
                26

              
	 
      	
                6.2    Fees
      and Expenses

              	
                27

              
	 
      	
                6.3    Entire
      Agreement

              	
                27

              
	 
      	
                6.4    Notices

              	
                27

              
	 
      	
                6.5    Amendments;
      Waivers

              	
                27

              
	 
      	
                6.6    Construction

              	
                28

              
	 
      	
                6.7    Successors
      and Assigns

              	
                28

              
	 
      	
                6.8    No
      Third-Party Beneficiaries

              	
                28

              
	 
      	
                6.9    Governing
      Law; Venue; Waiver of Jury Trial

              	
                28

              
	 
      	
                6.10   Survival

              	
                29

              
	 
      	
                6.11   Execution

              	
                29

              
	 
      	
                6.12   Severability

              	
                29

              
	 
      	
                6.13   Rescission
      and Withdrawal Right

              	
                29

              
	 
      	
                6.14   Replacement
      of Securities

              	
                29

              
	 
      	
                6.15   Remedies

              	
                30

              
	 
      	
                6.16   Payment
      Set Aside

              	
                30

              
	 
      	
                6.17   Further
      Assurances

              	
                30

              
	 
      	
                6.18   Adjustments
      in Share Numbers and Prices

              	
                30

              
	 
      	
                6.19   Independent
      Nature of Investors’ Obligations and Rights

              	
                30

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

        EXHIBIT
10-43

      

    Exhibit
A                      Schedule
of Investors

    Exhibit
B                      Instruction
Sheet For Investor

    Exhibit
B-1                                                                                                                                Communication
Intelligence Corporation –Stock Certificate Questionnaire

    Exhibit
B-2                                                                                                                                Communication
Intelligence Corporation – Registration Statement Questionnaire

    
      	
              Exhibit
      B-3

            	
              Communication
      Intelligence Corporation – Certificate For Corporate, Partnership, Limited
      Liability Company, Trust Foundation, Joint and Individual Investors -
      Certificate

            

    

    
      	
              Exhibit
      C

            	
              Form
      of Registration Rights Agreement

            

    

    
      	
              Exhibit
      D

            	
              Form
      of Certificate of Designations

            

    

    

    
      
        
           

          

        

         

      

      
        - 2
-  

        
          

        

      

      
         

      

      EXHIBIT
10-43

    

    

     

    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated as of
June 5, 2008, by and among Communication Intelligence Corporation, a Delaware
corporation, and all predecessors thereto (the “Company”) and the investors
identified on the signature pages hereto (each, an “Investor” and collectively,
the “Investors”).

     

    WHEREAS,
the Investors have extended loans to the Company as evidenced by certain
promissory notes (each a “Promissory Note” and,
collectively, the “Promissory
Notes”), in such amounts and with such maturities as are set forth on
Exhibit A
hereto; and

     

    WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
thereunder, the Company shall issue and sell to each Investor, and each
Investor, severally and not jointly, shall purchase from the Company the number
of shares of Series A Cumulative Convertible Preferred Stock of the Company (the
“Series A Preferred
Stock”) set forth on Exhibit A, as more
fully described in this Agreement; and

     

    WHEREAS,
each Investor, in consideration and payment for the shares of Series A Preferred
Stock purchased by such Investor, shall return to the Company for cancellation
the Promissory Note issued by the Company to such Investor;

     

    NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investors agree as
follows:

     

    ARTICLE
1.

     

    DEFINITIONS

     

    1.1. Definitions

     

    .  In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms shall have the meanings indicated in this
Section
1.1:

     

    “8-K Filing” has the meaning
set forth in Section
4.5.

     

    “Agreement” has the meaning
set forth in the preamble.

     

    “Affiliate” means any Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144 under the Securities Act.

     

    “Best Efforts” means the
reasonable efforts that a prudent person desirous of achieving a result would
use in similar circumstances to ensure that such result is achieved as
expeditiously as practical; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Company to dispose
of or make any change to its business.

     

    
      
        
          
 

        

         

      

      
        - 1
-  

        
          

        

      

      
         

EXHIBIT
10-43

    

    “Business Day” means any day
except Saturday, Sunday and any day which is 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.

     

    “Certificate of Designations”
shall mean a certificate of designations to be filed prior to the Closing
by the Company with the Secretary of State of the State of Delaware, setting
forth the rights, preferences and privileges of the Shares, in substantially the
form attached as Exhibit D
hereto.

     

    “CIC Acquisition Corp.” means
CIC Acquisition Corp., a Delaware corporation.

     

    “Closing” means the closing of
the purchase and sale of the Shares pursuant to Article II.

     

    “Closing Date” means the
Business Day on which all of the conditions set forth in Sections 5.1 and
5.2 hereof are
satisfied, or such other date as the parties may agree.

     

    “Collateral Agent” means SG
Phoenix LLC.

     

    “Commission” means the
Securities and Exchange Commission.

     

    “Common Stock” means the
common stock of the Company, par value $0.01 per share, and any securities into
which such common stock may hereafter be reclassified or for which it may be
exchanged as a class.

     

    “Common Stock Equivalents”
means any securities of the Company or any Subsidiary which entitle the holder
thereof to acquire Common Stock at any time, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.

     

    “Company” has the meaning set
forth in the preamble.

     

    “Company Counsel” means Davis
Wright Tremaine LLP.

     

    “Company Deliverables” has the
meaning set forth in Section
2.3(a).

     

    “Contingent Obligation” has
the meaning set forth in Section
3.1(bb).

     

    “Convertible Securities” means
any stock or securities (other than Options) convertible into or exercisable or
exchangeable for Common Stock..

     

    “Covering Shares” has the
meaning set forth in Section
4.1(b).

     

    “Credit Agreement” means that
certain credit agreement, dated as of the date of this Agreement, by and among
the Company and the lenders signatory thereto.

     

    
      
        
           

        

         

      

      
        - 2
-  

        
          

        

      

      
         

      

      EXHIBIT
10-43

    

    “Depositary Account Control
Agreement” means that certain depositary account control agreement, dated
as of the date of this Agreement, by and among the Collateral Agent, the Company
and the Depositary signatory thereto.

     

    “Disclosure Materials” has the
meaning set forth in Section
3.1(h).

     

    “Effective Date” means the
date that the Registration Statement required by Section 2(a) of the
Registration Rights Agreement is first declared effective by the
Commission.

     

    “Environmental Laws” has the
meaning set forth in Section
3.1(ff).

     

    “Evaluation Date” has the
meaning set forth in Section
3.1(s).

     

    “Exchange Act” means the
Securities Exchange Act of 1934, as amended.

     

    “GAAP” means U.S. generally
accepted accounting principles.

     

    “Governmental Authority” means
any nation, province, or state or any political subdivision of any of the
foregoing, and any government or any Person exercising executive, legislative,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity exercising such functions owned or controlled,
through stock or capital ownership or otherwise, by any of the
foregoing.

     

    “Hazardous Materials” has the
meaning set forth in Section
3.1(ff).

     

    “Indebtedness” has the meaning
set forth in Section
3.1(bb).

     

    “Insolvent” has the meaning
set forth in Section
3.1(j).

     

    “Intellectual Property Rights”
has the meaning set forth in Section
3.1(p).

     

    “Investment Amount” means,
with respect to each Investor, the Investment Amount indicated on such
Investor’s signature page to this Agreement.

     

    “Investor” has the meaning set
forth in the preamble.

     

    “Investor Deliverables” has
the meaning set forth in Section
2.3(b).

     

    “Investor Party” has the
meaning set forth in Section
4.7.

     

    “Lien” means any lien, charge,
encumbrance, security interest, right of first refusal, right of participation
or other restrictions of any kind.

     

    “Loan Documents” means this
Agreement, the Notes, the Security Documents, the Credit Agreement, the
Registration Rights Agreement, the Depositary Account Control Agreement and all
other instruments, documents and agreements executed by or on behalf of the
Company or any of its Subsidiaries, and delivered concurrently herewith or at
any time hereafter to or for the benefit of Phoenix, Michael Engmann and/or
Ronald Goodman in connection with

     

    
      
        
        

      

      
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    the loans
and other transactions contemplated by the Credit Agreement, all as amended,
supplemented or modified from time to time.

     

    “Losses” means any and all
losses, claims, damages, liabilities, settlement costs and expenses, including,
without limitation, reasonable attorney’s fees.

     

    “Material Adverse Effect”
means a material and adverse effect on (i) the legality, validity or
enforceability of any Transaction Document, (ii) the results of operations,
assets, prospects, business or condition (financial or otherwise) of the Company
and its Subsidiaries, taken as a whole, or (iii) the rights and remedies of the
Investors under the Transaction Documents taken as a whole.

     

    “New York Courts” means the
state and federal courts sitting in the City of New York, Borough of
Manhattan.

     

    “Note” or “Notes” means those certain
secured promissory notes, issued by the Company to Phoenix, Michael Engmann and
Ronald Goodman pursuant to the Credit Agreement, and any replacements,
restatements, renewals or extensions of such notes, in whole or in
part.

     

    “Notice of Acceptance” has the
meaning set forth in Section
6.1.

     

    “Options” means any
outstanding rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.

     

    “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.

     

    “Phoenix” means Phoenix
Venture Fund LLC.

     

    “Pledge and Security Agreement”
means that certain pledge and security agreement, dated as of the date
hereof, by and among the Company and its Subsidiaries, and the Collateral Agent,
Michael Engmann and Ronald Goodman.

     

    “Proceeding” means an action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened in writing.

     

    “Promissory Note” has the
meaning set forth in the recitals.

     

    “PCAOB” means the Public
Company Accounting Oversight Board.

     

    “Purchase Price” has the
meaning set forth in Section
2.2.

     

    “Registrable Securities” means
the Common Stock issued or issuable pursuant to the Transaction Documents,
together with any securities issued or issuable upon any stock

     

    
      
        
        

      

      
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    split,
dividend or other distribution, recapitalization, or similar event with respect
to the foregoing.

     

    “Registration Rights
Agreement” means that certain registration rights agreement, dated as of
the date of this Agreement, by and among the Company and the investors signatory
thereto, substantially in the form of Exhibit C
hereto.

     

    “Registration Statement” means
a registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Investors of the Underlying
Shares.

     

    “Regulation D” means Rule 506
of Regulation D as promulgated by the United States Securities and Exchange
Commission under the Securities Act.

     

    “Rescission Notice” has the
meaning set forth in Section
6.1.

     

    “Rescission Payment Date” has
the meaning set forth in Section
6.1.

     

    “Rescission Price” has the
meaning set forth in Section
6.1.

     

    “Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

     

    “SEC Reports” has the meaning
set forth in Section
3.1(h).

     

    “Securities” means the Shares
and the Underlying Shares.

     

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

     

    “Security Documents” means,
collectively, all instruments, documents and agreements executed by or on behalf
of the Company to provide collateral security with respect to all obligations,
liabilities and Indebtedness of every nature of the Company from time to time
owed to Phoenix, Michael Engmann and Ronald Goodman under the Loan Documents,
including the Pledge and Security Agreement and the Depositary Account Control
Agreement and all instruments, documents and agreements executed pursuant to the
terms of the foregoing, in such case, as amended, modified and supplemented from
time to time.

     

    “Selling Holder Questionnaire”
has the meaning set forth in Section
2.3(b)(iii).

     

    “Shares” or “Series A Preferred
Stock” means the shares of Series A Cumulative Convertible Preferred
Stock, par value $0.01 per share, issued or issuable to the Investors pursuant
to this Agreement.

     

    “Stockholder Approval” has the
meaning set forth in Section
4.9.

     

    “Subsidiary” means, with
respect to any Person, any corporation, partnership, association or other
business entity of which more than fifty percent (50%) of the total
voting

     

    
      
        
        

      

      
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    power of
shares of stock (or equivalent ownership or controlling interest) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof.

     

    “Trading Day” means (i) a day
on which the Common Stock is traded on a Trading Market (other than the OTC
Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market
(other than the OTC Bulletin Board), a day on which the Common Stock is quoted
in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii)
if the Common Stock is not quoted on any Trading Market, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the Pink
Sheets LLC (or any similar organization or agency succeeding to its functions of
reporting prices); provided, that in the event
that the Common Stock is not listed or quoted as set forth in (i), (ii) and
(iii) hereof, then Trading Day shall mean a Business Day.

     

    “Trading Market” means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.

     

    “Transaction Documents” means
this Agreement, the schedules and exhibits attached hereto, the Transfer Agent
Instructions, the Registration Rights Agreement, the Certificate of Designations
and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

     

    “Transfer Agent” means
American Stock Transfer and Trust Company, or any successor transfer agent for
the Company.

     

    “Transfer Agent Instructions”
means, with respect to the Company, the Irrevocable Transfer Agent Instructions,
executed by the Company and delivered to and acknowledged in writing by the
Transfer Agent.

     

    “Underlying Shares” means the
shares of Common Stock issuable upon conversion or exchange of the
Shares.

     

    ARTICLE
2.

     

    PURCHASE
AND SALE

     

    2.1. Closing

     

    .  Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, the Shares representing
such Investor’s Investment Amount.  The Closing shall take place at
the offices of Thelen Reid Brown Raysman & Steiner LLP, 875 Third Avenue,
New York, NY 10022 on the Closing Date or at such other location or time as the
parties may agree.

     

    2.2. Purchase
Price.  At the Closing, each Investor shall, in full payment
for its Shares, tender to the Company for cancellation its 

     

    
      
        
        

      

      
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    Promissory
Note in the amount set forth opposite suchInvestor’s
name on Exhibit
A hereto (the “Purchase
Price”), such that each Investor shall receive one Share for each one
dollar represented by its Promissory Note.

     

    2.3. Closing
Deliveries

     

    .  (a)  At
the Closing, the Company shall deliver or cause to be delivered to each Investor
the following (the “Company
Deliverables”):

     

     

    (i)           a
certificate executed by the Company’s chief executive officer and chief
financial officer, dated as of the Closing Date, confirming the truth and
correctness of the Company’s representations and warranties made in Article III
hereof as of the date when made and as of the Closing Date as if made at such
time (except for representations and warranties that speak as of a specific date
which shall be true and correct as of such specified date);

     

    (ii)           a
certificate, executed by the Company’s chief executive officer and chief
financial officer, dated as of the Closing Date, confirming that the Company has
performed, satisfied and complied in all respects with the covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Closing Date;

     

    (iii)           a
certificate of the secretary or an assistant secretary of the Company, attaching
a recent copy of the certificate of incorporation or formation, as amended, of
the Company and each Subsidiary of the Company, and a good standing certificate
of the Company dated as of a recent date, a certificate evidencing the Company’s
qualification as a foreign corporation and good standing issued by the Secretary
of State (or comparable office) of each jurisdiction in which the Company
conducts business and is required to so qualify, dated as of a recent date,
copies of the by-laws of the Company and resolutions of the Board of Directors
authorizing the transactions contemplated hereby, which the secretary or
assistant secretary of the Company has certified as true and correct copies in
full force and effect as of the Closing, the execution, delivery and performance
of this Agreement and the other Transaction Documents;

     

    (iv)           one
or more certificates evidencing the number of Shares set forth opposite such
Investor’s name on Exhibit A hereto
under the heading “Shares,” in such denominations and registered in such names
as such Investor requests;

     

    (v)           the
Transaction Documents, executed by the Company;

     

    (vi)           a
legal opinion of Company Counsel executed by such counsel and delivered to the
Investors in form and substance acceptable to the Investors;

     

    (vii)           duly
executed Transfer Agent Instructions acknowledged by the Company’s transfer
agent;

     

    (viii)                      approval
by each applicable Trading Market of an additional shares listing application
covering all of the Registrable Securities, if required by such Trading Market
(and, if applicable, evidence of conditional listing approval);

     

    (ix)           a
certificate from the Secretary of State for the State of
Delaware,  evidencing filing of the Certificate of
Designations;

    
      
        
           

        

         

      

      
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    (x)           any
consents or approvals of any Person listed on Schedule 3.1(bb) or
any other third-party required to effect the terms and conditions of this
Agreement; and

     

    (xi)           such
other documents relating to the transactions contemplated by this Agreement and
the other Transaction Documents as such Investor or its counsel may reasonably
request.

     

    (b) At the
Closing, each Investor shall deliver or cause to be delivered to the Company the
following (the “Investor
Deliverables”):

     

    (i) such
Investor’s Promissory Note in the amount set forth on Exhibit A hereto
constituting the Purchase Price;

     

    (ii) each of
the Transaction Documents to which it is a party, executed by such Investor;
and

     

    (iii) a
completed and executed Selling Stockholder Questionnaire in the form attached
hereto as Exhibit
B (the “Selling Holder
Questionnaire”).

     

    ARTICLE
3.

     

    REPRESENTATIONS
AND WARRANTIES

     

    3.1. Representations and
Warranties of the Company

     

    .  The
Company hereby makes the following representations and warranties to each
Investor:

     

    (a) Subsidiaries.  The
Company has no Subsidiaries other than those listed in Schedule 3.1(a)
hereto.  Except as disclosed in Schedule 3.1(a)
hereto, the Company owns, directly or indirectly, all of the capital stock or
comparable equity interests of each Subsidiary free and clear of any and all
Liens, and all the issued and outstanding shares of capital stock or comparable
equity interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.

     

    (b) Organization and
Qualification.  Each of the Company and its Subsidiaries is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization (as applicable), with the
requisite legal power and authority to own and use its properties and assets and
to carry on its business as currently conducted.  Neither the Company
nor any of its Subsidiaries is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents.  The Company and each of its
Subsidiaries are duly qualified to conduct their respective businesses and are
in good standing as a foreign corporation or other entity 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, could not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect.

     

    (c) Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
ofthe
Transaction Documents to which it is a party and otherwise to carry out its

     

    
      
        
        

      

      
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    obligations
thereunder.  The execution and delivery of each of the Transaction
Documents to which it is a party by the Company and the consummation by it of
the transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further consent or action is required
by the Company in connection therewith.  Each Transaction Document has
been (or upon delivery will be) 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 (i) applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies, and (ii) the effect of rules of law governing the availability of
specific performance and other equitable remedies.

     

    (d) No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) except as disclosed in Schedule 3.1(d)
hereto, conflict with, or constitute a default (or an event that 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 (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any of its Subsidiaries is a party or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, 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 or any of its Subsidiaries is subject (including,
assuming the accuracy of the representations and warranties of the Investors set
forth in Section
3.2 hereof, federal and state securities laws and regulations and the
rules and regulations of any self-regulatory organization to which the Company
or its securities are subject, including all applicable Trading Markets), or by
which any property or asset of the Company or a Subsidiary is bound or
affected.

     

    (e) Filings, Consents and
Approvals.  Except as set forth on Schedule 3.1(e), 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 or other third party
or Person in connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than (i) the filing with the
Commission of one or more Registration Statements in accordance with the
requirements of the Registration Rights Agreement, (ii) filings required by
state securities laws, (iii) the filing of a Notice of Sale of Securities on
Form D with the Commission under Regulation D of the Securities Act, (iv) the
filings required in accordance with Section 4.5 and (v)
those that have been made or obtained prior to the date of this
Agreement.

     

    (f) Issuance of the
Securities.  Upon the Stockholder Approval, the Securities will
be duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens and will not be subject to preemptive
or similar rights of stockholders.  Upon StockholderApproval,
the Company will reserve from its 

     

    
      
        
        

      

      
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    duly
authorized capital stock the shares of Common Stock issuable pursuant to this
Agreement in order to issue the Underlying Shares upon conversion of the
Shares.  Based, in part, on the representations and warranties of the
Investors set forth in Section 3.2 of this
Agreement, the offer, issuance and sale of the Shares and the Underlying Shares
to the Investors pursuant to this Agreement are exempt from the registration
requirements of the Securities Act.

     

    (g) Capitalization.  The
aggregate number of shares and type of all authorized, issued and outstanding
classes of capital stock, options and other securities of the Company (whether
or not presently convertible into or exercisable or exchangeable for shares of
capital stock of the Company) is set forth in Schedule 3.1(g)
hereto.  All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
in all materials respects with the applicable securities laws.  Except
as disclosed in Schedule 3.1(g)
hereto, the Company does not have at the date hereof any other Options, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable into shares of Common Stock.  Except as
set forth in Schedule
3.1(g) hereto, and except for customary adjustments as a result of stock
dividends, stock splits, combinations of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) and the
issuance 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 Investors) and
will not result in a right of any holder of securities to adjust the exercise,
conversion, exchange or reset price under such securities.  To the
knowledge of the Company, except as disclosed in the SEC Reports and any
Schedules 13D or 13G filed with the Commission pursuant to Rule 13d-1 of the
Exchange Act by reporting persons or in Schedule 3.1(g)
hereto, no Person or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by
agreement with or by obligation binding upon the Company, beneficial ownership
of 5% or more of the outstanding Common Stock.

     

    (h) SEC Reports; Financial
Statements.  The Company has filed all reports required to be
filed by it under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof
(the foregoing materials being collectively referred to herein as the “SEC Reports” and, together
with the Schedules to this Agreement, the “Disclosure Materials”) on a
timely basis or has timely filed a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports filed by the
Company 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 Reports, 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 Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission and the PCAOB with
respect thereto as in effect at the time of filing.  Such financial
statements have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved, except as may be otherwise 

     

    
      
        
        

      

      
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    specified
in such financial statements or the notes thereto,and
except that unaudited financial statements may not contain all footnotes
required by GAAP or may be condensed or summary statements, 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.  All material agreements to which the Company or any of
its Subsidiaries is a party or to which the property or assets of the Company or
any of its Subsidiaries are subject are included as part of or identified
pursuant to the rules and regulations of the Commission.

     

    (i) Press
Releases.  The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit 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 and
when made, not misleading.

     

    (j) Material
Changes.  Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or in Schedule 3.1(j)
hereto, (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any material liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses and other liabilities
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, except as disclosed in its SEC Reports, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders, in their capacities as such, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock (except for repurchases by the Company of shares of capital stock held by
employees, officers, directors or consultants pursuant to an option of the
Company to repurchase such shares upon the termination of employment or
services), and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock-based
plans. The Company has not taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do
so.  The Company is not as of the date hereof, and after giving effect
to the transactions contemplated hereby to occur at the applicable Closing, will
not be Insolvent (as defined immediately hereinafter).  For purposes
of this Section
3.1(j), “Insolvent” means (i) the
present fair saleable value of the Company’s assets is less than the amount
required to pay the Company’s total Indebtedness (as defined in Section 3.1(bb)),
(ii) the Company is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured, (iii) the Company intends to incur or believes that it will incur debts
that would be beyond its ability to pay as such debts mature or (iv) the Company
has unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be
conducted.

     

    (k) Absence of
Litigation.  Except as described in Schedule 3.1(k),
there is no action, suit claim or Proceeding, or, to the Company’s knowledge,
inquiry or investigation,before or
by any court, public board, government agency, self-regulatory organization or

     

    
      
        
        

      

      
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    body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries that could, individually or in the aggregate,
have a Material Adverse Effect.

     

    (l) Labor
Relations.  The Company and its Subsidiaries are in compliance
in all material respects with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours.

     

    (m) Compliance.  Except
as described in Schedule 3.1(m),
neither the Company nor any of its Subsidiaries, except in each case as would
not, individually or in the aggregate, reasonably be expected to have or result
in a Material Adverse Effect, (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or 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 (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any Governmental Authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters.  The Company is in compliance
with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended,
and the rules and regulations thereunder, that are applicable to it, except
where the failure to so comply would not have a Material Adverse
Effect.

     

    (n) Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any of its Subsidiaries has received any written notice of
proceedings relating to the revocation or modification of any such
permits.

     

    (o) Title to
Assets.  The Company and its Subsidiaries own no real property,
except as provided in Schedule
3.1(o)(i).  Except as provided in Schedule 3.1(o)(ii),
the Company and its Subsidiaries have good and marketable title in all personal
property owned by them, in each case free and clear of all Liens.  Any real
property and facilities held under lease by the Company and its Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the Company
and its Subsidiaries are in material compliance.

     

    (p) 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 Reports and which the failure to
so have could, individually or in 

     

    
      
        
        

      

      
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    the
aggregate, have or reasonably be expected to resultin a
Material Adverse Effect (collectively, the “Intellectual Property
Rights”).  Except as set forth in Schedule 3.1(p), none
of the Company’s Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement.  Neither the Company nor any of its Subsidiaries has any
knowledge that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of others.  Except as
set forth in Schedule
3.1(p), the Company does not have knowledge of any infringement by others
of Intellectual Property Rights of the Company or its
Subsidiaries.  Except as provided in Schedule 3.1(p),
there is no claim, action or proceeding being made or brought, or to the
knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding Intellectual Property Rights.  Except as
provided in Schedule
3.1(p), the Company and its Subsidiaries have good and marketable title
in all Intellectual Property Rights owned by them, in each case free and clear
of all Liens.

     

    (q) Insurance.  The
Company and its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and its Subsidiaries are
engaged.  The Company has no reason to believe that it will not be
able to renew its and its Subsidiaries’ existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its and its Subsidiaries’ business on terms consistent
with market for the Company’s and such Subsidiaries’ respective lines of
business.

     

    (r) Transactions With Affiliates
and Employees.  Except as set forth or incorporated by
reference in the Company’s SEC Reports, none of the officers, directors or
employees of the Company is presently a party to any transaction that would be
required to be reported on Form 10-K with the Company or any of its Subsidiaries
(other than for ordinary course 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 employee or, to the knowledge of the Company, any entity in which
any officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.

     

    (s) Internal Accounting
Controls.  The Company and its Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.  The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those
entities.  The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures in accordance with Item
307 of Regulation S-K under the Exchange Act for the Company’s most recently
ended fiscal quarter or fiscal year-end (such date, the “Evaluation Date”).  The Company
presented in its most recently filed Form 10-K or Form 10-Q the conclusions of
the certifying officers about the effectivenessof the
disclosure

     

    
      
        
        

      

      
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10-43

        

      

    

     

    controls
and procedures based on their evaluations as of the Evaluation
Date.  Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
308(c) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge,
in other factors that could significantly affect the Company’s internal
controls.

     

    (t) No General Solicitation;
Fees.  Neither
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Shares or the Underlying Shares.  The Company shall be responsible for
the payment of any placement agent’s fees, financial advisory fees, or brokers’
commission (other than for Persons engaged by any Investor or its investment
advisor) relating to or arising out of the issuance of the Shares pursuant to
this Agreement.  The Company shall pay, and hold each Investor
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorneys’ fees and out-of-pocket expenses) arising in connection
with any such claim for fees arising out of the issuance of the Shares pursuant
to this Agreement.  The Company has not engaged any placement agent or
other agent in connection with the sale of the Shares.

     

    (u) Registration
Rights.  Except as specified in Schedule 3.1(u), 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 except for
such rights that by their terms have expired or terminated and are no longer
effective as of the Closing Date or which are subject to currently effective
registration statements previously filed by the Company, as set forth on Schedule
3.1(u).

     

    (v) Listing and Maintenance
Requirements.  The Company has not, in the two years preceding
the date hereof, received notice (written or oral) from any Trading 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
thereof.  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
Securities under the Transaction Documents does not contravene the rules and
regulations of the Trading Market on which the Common Stock is currently listed
or quoted.

     

    (w) Investment
Company.  The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended.

     

    (x) Application of Takeover
Protections.  Except as described in Schedule 3.1(x),
there is no control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation or
formation, as amended (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to any of the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation, as a result of the Company’s issuance of the Shares and the
Investors’ ownership of the Shares.

     

    
      
        
           

        

         

      

      
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10-43  

        

      

    

    (y) No Additional
Agreements.  The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction
Documents.

     

    (z) Consultation with
Auditors.  The Company has consulted its independent auditors
concerning the accounting treatment of the transactions contemplated by the
Transaction Documents, and in connection therewith has furnished such auditors
complete copies of the Transaction Documents.

     

    (aa) Disclosure.  The
Company confirms that, except with respect to information, including
projections, disclosed to the Investors, or any of them, as a result of their
positions as members or observers of the Company’s Board of Directors, neither
it nor any Person acting on its behalf has provided any of the Investors or
their respective agents or counsel with any information that constitutes or
might constitute material, non-public information (other than the existence and
terms of the issuance of the Shares, as contemplated by this Agreement)
concerning the Company, any of its Subsidiaries or their respective
businesses.  The Company understands and confirms that each of the
Investors will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company.  Subject to the assumptions
and qualifications stated therein, all disclosure provided to the Investors
regarding the Company, its Subsidiaries or their respective businesses and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Schedules to this Agreement) are true and correct in all material
respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not
misleading.  To the Company’s knowledge, except for the transactions
contemplated by this Agreement, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or
disclosed.  The Company acknowledges and agrees that no Investor makes
or has made any representations or warranties with respect to the transactions
contemplated hereby other than those set forth in the Transaction
Documents.

     

     

    (bb) Indebtedness.  Except
as disclosed in Schedule 3.1(bb) or
in the Company’s SEC Reports, neither the Company nor any of its Subsidiaries
(i) has any outstanding Indebtedness (as defined below), (ii) is in violation of
any term of or in default under any contract, agreement or instrument relating
to any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect (provided that, if the effect
of such violation or default is to cause or to permit the holder or holders then
to cause any such Indebtedness to become or be declared due prior to its stated
maturity it shall be deemed to be a Material Adverse Effect), or (iii) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect.  Schedule 3.1(bb)
provides a detailed description of the material terms of any such outstanding
Indebtedness.  For purposes of this Agreement:  (x) “Indebtedness” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or paymentobligations

     

    
      
        
        

      

      
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    with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP, consistently
applied for the periods covered thereby, is classified as a capital lease,
(G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; and (y) “Contingent Obligation” means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto.

     

    (cc) Foreign Corrupt
Practices.  Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any director, officer, agent, employee or
other Person acting on behalf of the Company or any of its Subsidiaries has, in
the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.

     

    (dd) Acknowledgment Regarding
Investors’ Purchase of Securities.  Based upon the assumption
that the transactions contemplated by this Agreement are consummated in all
material respects in conformity with the Transaction Documents, the Company
acknowledges and agrees that each of the Investors is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby.  The Company
further acknowledges that no Investor is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by any
Investor or any of their respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Investors’ purchase of the
Securities.  The Company further represents to each Investor that the
Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.

    
      
        
           

        

         

      

      
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        EXHIBIT
10-43

      

    

     

    (ee) Employee
Relations.  Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining agreement or employs any member of a
union.  The Company believes that its relations with its employees are
as disclosed in the SEC Reports.  Except as disclosed in the SEC
Reports, during the period covered by the SEC Reports, no executive officer of
the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
Securities Act) has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such
Subsidiary.  To the knowledge of the Company or any such Subsidiary,
no executive officer of the Company or any of its Subsidiaries is in violation
of any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any such
Subsidiary to any liability with respect to any of the foregoing
matters.

     

    (ff) Environmental
Laws.  The Company and its Subsidiaries (i) are in compliance
in all material respects with any and all Environmental Laws (as hereinafter
defined), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses, and (iii) are in compliance in all material respects with all terms
and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.  The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.

     

    (gg) Subsidiary
Rights.  Except as set forth in Schedule 3.1(gg), the
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.

     

    (hh) Tax
Status.  The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, and (iii) has set
aside on its books provision reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply.  There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.

    
      
         

        
           

        

         

      

      
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      EXHIBIT
10-43

    

     

    (ii) Right of First
Offer.  Except as set forth on Schedule 3.1(ii), the
Company has not granted to any Person any rights of first offer or rights of
first refusal with respect to the provision or obtaining of any debt or equity
financing, including, but not limited to, any rights to provide additional
financing currently available under the credit facilities described on Schedule 3.1(bb)
hereto, except for such rights of first offer or rights of first refusal that by
their terms have expired or terminated and are no longer effective as of the
Closing Date.

    

    3.2. Representations and
Warranties of the Investors

     

    .  Each
Investor hereby, for itself and for no other Investor, represents and warrants
to the Company as follows, as of the date hereof and as of the
Closing:

     

    (a) Organization;
Authority.  Such Investor (other than Michael Engmann and
Ronald Goodman) is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with the
requisite corporate, partnership or other power and authority to enter into and
to consummate the transactions contemplated by the applicable Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by such Investor (other than Michael
Engmann and Ronald Goodman) of this Agreement and the other Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such
Investor.  Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with the terms hereof and thereof, will constitute the
valid and legally binding obligation of such Investor, enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies and (ii) other equitable principles of general
application.

     

    (b) No Public Sale or
Distribution.  Such Investor is acquiring the Shares in
the ordinary course of business, as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Shares or any part thereof, except pursuant to sales registered under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws, and such Investor does not
have a present arrangement to effect any distribution of the Shares to or
through any Person or entity; provided, however, that by making the
representations herein, such Investor does not agree to hold any of the Shares
for any minimum or other specific term and reserves the right to dispose of the
Shares at any time in accordance with or pursuant to a registration statement or
an exemption under the Securities Act.

     

    (c) Investor
Status.  At the time such Investor was offered the Shares, it
was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act or a “qualified institutional buyer” as defined
under Rule 144A(a) under the Securities Act.  Such Investor is not a
registered broker-dealer under Section 15 of the Exchange Act, or a member of
the NASD, Inc., or an entity engaged in the business of being a broker
dealer.  Except as otherwise disclosed in writing to the Company on
Exhibit B-2
(attached 

     

    
      
        
        

      

      
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10-43

        

      

    

     

    hereto)
on or prior to the date of this Agreement, such Investor is not affiliated with
any brokerdealer
registered under Section 15(a) of the Exchange Act, or a member of the NASD,
Inc., or an entity engaged in the business of being a broker
dealer.

     

    (d) Experience of Such
Investor.  Such Investor, either alone or together with its
representatives, has 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 Shares, and has so evaluated the merits and
risks of such investment.  Such investor understands that it must bear
the risk of this investment in the Shares indefinitely, and is able to bear such
risk and is able too afford a complete loss of such investment.

     

    (e) Access to
Information.  Such Investor acknowledges that it has reviewed
the Disclosure Materials and has been afforded: (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (provided, if any such
information constitutes material non-public information, the Company shall (I)
inform such Investor thereof at the time such information is provided and (II)
make such information publicly available by furnishing or filing a Form 8-K with
the Commission no later than the Closing Date; provided, however, the Company shall
not be required to make public, disclose or file information, including
projections, disclosed to the Investors, or any of them, as a result of their
positions as members or observers of the Company’s Board of Directors) about the
Company and its Subsidiaries and their respective financial condition, results
of operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment.  Neither such inquiries nor
any other investigation conducted by or on behalf of such Investor or its
representatives or counsel shall modify, amend or affect such Investor’s right
to rely on the truth, accuracy and completeness of the Disclosure Materials and
the Company’s representations and warranties contained in the Transaction
Documents.  Such Investor acknowledges receipt of copies of the SEC
Reports.

     

    (f) No Governmental
Review.  Such Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Shares or the
fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the
Shares.

     

    (g) No
Conflicts.  The execution, delivery and performance by such
Investor of this Agreement and the consummation by such Investor of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents, if any, of such Investor, or (ii) 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 or
instrument to which such Investor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to such Investor, except in the case of
clauses (ii) and (iii) above, for such that are not material and do not
otherwise affect the ability of such Investor to consummate the transactions
contemplated hereby.

     

    
      
        
           

        

         

      

      
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        EXHIBIT
10-43

      

    

    (h) Restricted
Securities.  The Investors understand that the Shares are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such Shares may be resold without registration under the Securities Act only in
certain limited circumstances.

     

    (i) Legends.  It
is understood that, except as set forth in Section 4.1(b) of
this Agreement, certificates evidencing such Shares may bear the legend set
forth in Section
4.1(b).

     

    (j) No Legal, Tax or Investment
Advice.   Such Investor understands that nothing in this
Agreement or any other materials presented by or on behalf of the Company to the
Investor in connection with the purchase of the Securities constitutes legal,
tax or investment advice.  Such Investor has consulted such legal, tax
and investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in con­nection with its purchase of the Securities.

     

    The
Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section
3.2.

     

    ARTICLE
4.

     

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1. Transfer Restrictions;
Legends.  (a)

     

    Shares may only be disposed of pursuant
to an effective registration statement under, and in compliance with the
requirements of, the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws.  In connection with any transfer of
the Securities other than pursuant to an effective registration statement, to
the Company, to an Affiliate of an Investor or in connection with a pledge as
contemplated in Section 4.1(b), the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to the Company,
the form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act.  Notwithstanding the
foregoing, the Company hereby consents to and agrees to register on the books of
the Company and with its Transfer Agent, without any such legal opinion, except
to the extent that the Transfer Agent requests such legal opinion, any transfer
of Shares by an Investor to an Affiliate of such Investor, provided that the transferee
certifies to the Company that it is an “accredited investor” as defined in Rule
501(a) under the Securities Act and provided that such Affiliate
does not request any removal of any existing legends on any certificate
evidencing the Shares and the Company reasonably believes such transfer is in
compliance with all applicable securities laws.

     

    (b) The
Investors agree to the imprinting, so long as is required by this Section 4.1(b), of
the following legend on any certificate evidencing any of the
Shares:

     

    THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION

     

    
      
        
        

      

      
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    FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS 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
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY
LAWS.  

    

    Certificates
evidencing Shares shall not be required to contain such legend or any other
legend (i) following any sale of such Shares pursuant to an effective
registration statement (including the Registration Statement) covering the
resale of the Shares, (ii) in connection with a sale, assignment or other
transfer, provided such
holder provides the Company with an opinion of counsel reasonably satisfactory
to the Company, in a generally acceptable form, to the effect that such sale,
assignment or transfer of the Securities may be made without registration under
the applicable requirements of the 1933 Act and that such legend is no longer
required, or (iii) upon such holder’s providing the Company with assurance
reasonably acceptable to the Company, including customary seller and broker
representation letters, that the Shares can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A under the Securities Act.  The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Transfer Agent on the Effective
Date.  Following the Effective Date or at such earlier time as a
legend is no longer required for certain Shares, the Company will, no later than
three Trading Days following the delivery by an Investor to the Company or the
Transfer Agent of (i) a legended certificate representing such Shares and (ii)
an opinion of counsel or such other information to the extent required by Section 4.1(a) or
Section 4.1(b),
deliver or cause to be delivered to such Investor a certificate representing
such Shares that is free from all restrictive and other legends.  The
Company may not make any notation on its records or give instructions to the
Transfer Agent that enlarge the restrictions on transfer set forth in this Section
4.1(b).

     

    If within
three Trading Days after the Company’s receipt of a legended certificate and the
other documents as specified in Clauses (i) and (ii) of the paragraph
immediately above, the Company shall fail to issue and deliver to such Investor
a certificate representing such Shares that is free from all restrictive and
other legends, and if on or after such Trading Day the Investor purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Investor of shares of Common Stock that the
Investor anticipated receiving from the Company without any restrictive legend
(the “Covering Shares”),
then the Company shall, within three Trading Days after the Investor’s request,
pay cash to the Investor in an amount equal to the excess (if any) of the
Investor’s total purchase price (including brokerage commissions, if any) for
the Covering Shares, over the product of (A) the number of Covering Shares,
times (B) the closing bid price on the date of delivery of such certificate and
the other documents as specified in Clauses (i) and (ii) of the paragraph
immediately above.

     

    (c) The
Company will not object to and shall permit (except as prohibited by law) an
Investor to pledge or grant a security interest in some or all of the Shares in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Shares, and if required under the terms of such
agreement, loan or arrangement, the Company will notobject to
and shall permit (except as prohibited by law) such Investor to transfer pledged
or secured Shares to the pledgees or secured parties.  Except as
required by law, such a 

     

    
      
        
        

      

      
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    pledge or
transfer shall not be subject to approval of the Company, no legal opinion of
the pledgee, secured party or pledgor shall be required in connection therewith,
and no notice shall be required of such pledge.  Each Investor
acknowledges that the Company shall not be responsible for any pledges relating
to, or the grant of any security interest in, any of the Shares or for any
agreement, understanding or arrangement between any Investor and its pledgee or
secured party.  At the appropriate Investor’s expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Shares may reasonably request in connection with a pledge or transfer
of the Shares, 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.  Provided that the Company is
in compliance with the terms of this Section 4.1(c), the
Company’s indemnification obligations pursuant to Section 4.7 shall not
extend to any Proceeding or Losses arising out of or related to this Section
4.1(c).

     

    4.2. Furnishing of
Information

     

    .  Until
the date that any Investor owning Shares may sell all of them under Rule 144 of
the Securities Act (or any successor provision), the Company covenants to use
its Best Efforts 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.  The
Company further covenants that it will take such further action as any holder of
Shares may reasonably request to satisfy the provisions of this Section
4.2.

     

    4.3. 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 in a manner
that would require the registration under the Securities Act of the sale of the
Shares to the Investors, or that would be integrated with the offer or sale of
the Shares for purposes of the rules and regulations of any Trading
Market.

     

    4.4. Reservation of
Securities.  The Company shall, at all times, maintain a
reserve from its duly authorized Shares of Shares for issuance pursuant to the
Transaction Documents.  In addition, the Company shall, as soon as
possible, but in no event later than June 30, 2008, maintain a reserve from its
duly authorized shares of Common Stock a sufficient number of shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as may
be required to fulfill its obligations to issue such shares of Common Stock upon
conversion of the Shares or otherwise under the Transaction
Documents.  In the event that at any time the then authorized Shares
of shares of Common Stock are insufficient for the Company to satisfy its
obligations to issue such Shares or shares of Common Stock under the Transaction
Documents, the Company shall promptly take such actions as may be required to
increase the number of authorized and reserved Shares and shares of Common
Stock, as applicable.

     

    4.5. Securities Laws Disclosure;
Publicity.  The
Company shall, promptly after the Closing, but in no event later than 5:30 p.m.,
New York time, on the Business Day following the Closing, issue a press release
reasonably acceptable to the Investors disclosing all material
terms

     

    
      
        
        

      

      
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    of the
transactions contemplated hereby and by the Credit Agreement.  The
Company shall, promptly after the Closing, but in no event later than the second
Business Day following the Closing Date, file a Current Report on Form 8-K with
the Commission (the “8-K
Filing”) describing the terms of the transactions contemplated by the
Transaction Documents and the Credit Agreement, in the form required by the
Exchange Act.  Thereafter, the Company shall timely file any filings
and notices required by the Commission or applicable law with respect to the
transactions contemplated hereby and by the other Transaction Documents and
shall provide copies thereof to the Investors promptly after
filing.  Except as herein provided, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
press release without the prior written consent of such Investor, unless
otherwise required by law.  The Company shall not, and shall cause
each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents not to, provide any Investor with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the issuance of the above referenced press release without the express
written consent of such Investor.

     

    4.6. Use of
Proceeds.  The Company does not anticipate receiving any
proceeds under the Transaction Documents.  To the extent that the
Company does receive any proceeds under the Transaction Documents or in
connection with the transactions contemplated thereby, the Company intends to
use such proceeds for the payment of fees and expenses related to the
transactions contemplated hereby and by the other Transaction Documents and then
to use any remaining proceeds for product development, working capital and
general corporate purposes.

     

    4.7. Indemnification of
Investors

     

    .  In
consideration of each Investor’s execution and delivery of the Transaction
Documents and acquisition of the Shares thereunder, and in addition to all of
the Company’s other obligations under the Transaction Documents, including the
indemnity provided in the Registration Rights Agreement, the Company will
defend, protect, indemnify and hold harmless each of the Investors, each other
holder of Shares, and their respective stockholders, directors, officers,
shareholders, partners, members, employees and agents or other representatives
(each, an “Investor
Party”) from any and all Losses that any such Investor Party may suffer
or incur as a result of, arising out of or relating to (a) any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document or any
other certificate, instrument or document contemplated hereby or thereby, (b)
any breach of any covenant, agreement or obligation of the Company contained in
the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Investor Party by a third party (including for these
purposes a derivative action brought on behalf of the Company) and arising out
of or resulting from (i) the execution, delivery, performance or enforcement of
the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Shares, or (iii) the status of such Investor or holder of the Shares or
the Underlying Shares as an investor in the Company, except, in each case,
solely to the extent arising out of the gross negligence, fraud or other
intentional misconduct by such Investor Party, any material misrepresentation or
material breach of any representation or warranty made by the Investor Party in
the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or material breach of any covenant, agreement or
obligation of

     

    
      
        
        

      

      
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    the
Investor Party contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby.  To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the indemnified Losses which is permissible under
applicable law.  In addition to the indemnity contained herein, the
Company will reimburse each Investor Party 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.  Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 4.7 shall be
the same as those set forth in Section 5 of the Registration Rights
Agreement.

     

    4.8. Listing of
Securities

     

    .  The
Company agrees, (i) if the Company applies to have the Common Stock traded on
any other Trading Market, it will include in such application the Underlying
Shares, and will take such other action as is necessary or desirable to cause
the Underlying Shares to be listed on such other Trading Market as promptly as
possible, and (ii) it will take all action reasonably necessary to continue the
listing and trading of its Common Stock on a Trading Market and will comply in
all material respects with the Company’s reporting, filing and other obligations
under the bylaws or rules of the Trading Market.

     

    4.9. Stockholder
Approval.

     

    (a) The
Company covenants and agrees to obtain the approval of its stockholders, and to
take all requisite actions in order to increase the number of authorized shares
of Common Stock by a number of shares as shall be sufficient to fully reserve
shares for issuance upon conversion of the Shares (collectively “Stockholder Approval”) which
Stockholder Approval shall occur as soon as possible, but in no event later than
June 30, 2008.

     

    (b) In
furtherance of obtaining the Stockholder Approval, (i) the Company shall adopt
proper resolutions authorizing the actions set forth in subsection (a) above,
(ii) the Board of Directors of the Company shall recommend and the Company shall
otherwise use its Best Efforts to promptly and duly obtain Stockholder Approval,
including, without limitation, soliciting proxies from its stockholders in
connection therewith in the same manner as all other management proposals in
such proxy statement and having all management-appointed proxy-holders vote
their proxies in favor of such proposals to carry out such resolutions, and
(iii) within three Business Days of obtaining such Stockholder Approval, take
all actions necessary to effectuate the actions set forth in subsections (b)(i)
and (b)(ii) above.

     

    4.10. Ranking.  The
Shares shall rank senior to any class of equity security of the
Company.

     

    4.11. Cancellation of
Notes.  With respect to each Investor that holds a Promissory
Note issued by the Company as set forth on Exhibit A hereto, all
obligations, liabilities, covenants and agreements of the Company under or in
connection with the Note and Warrant Purchase Agreement, dated as of February 5,
2007 and June 15, 2007, respectively, and each related Promissory Note issued
thereunder, are, as to each Investor, hereby terminated and cancelled and are of
no further force or effect upon Closing and receipt by each Investor of (i) a
certificate evidencing its respective Shares pursuant to Section 2.3(a)(iv),
(ii) in the case of AFSInvestments,
Inc., Rubicon Global Value Fund, 

     

    
      
        
        

      

      
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10-43

        

      

    

     

    L.P. and
Frederick Farrar, payment at Closing of accrued and unpaid interest in the
amounts set forth on Exhibit A and (iii)
payment to each Investor of interest accrued and unpaid for the period from (and
including) June 1, 2008 to (but excluding) the Closing Date, which certificates
and payments have been tendered by the Company and accepted by each Investor as
full payment and satisfaction for the Promissory Note(s) issued to such Investor
and the Company’s obligations thereunder and under the Note and Warrant Purchase
Agreement under which such Promissory Note was issued, except as may otherwise
be provided in connection with a rescission pursuant to Section 6.1.

     

    ARTICLE
5.

    CONDITIONS
PRECEDENT TO CLOSING

     

    5.1. Conditions Precedent to the
Obligations of the Investors

     

    .  The
obligation of each Investor to acquire Shares at the Closing is subject to the
satisfaction or waiver by such Investor, at or before the Closing, of each of
the following conditions:

     

    (a) Representations and
Warranties.  The representations and warranties of the Company
contained herein shall be true and correct as of the date when made and as of
the Closing as though made on and as of such date (except for representations
and warranties that speak as of a specific date which shall be true and correct
as of such specified date);

     

    (b) Performance.  The
Company and each Investor shall have performed, satisfied and complied with
all covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by it at or prior to the
Closing;

     

    (c) Company
Deliverables.  The Company shall have delivered each of the
Company Deliverables; and

     

    (d) Executed Loan
Documents.  The Loan Documents including but not limited to (a)
the Credit Agreement, (b) the Notes, (c) the Pledge and Security Agreement, and
(d) the Depositary Account Control Agreement, and all other documents and
instruments contemplated by such agreements, shall have been duly authorized and
executed by each of the parties thereto in form and substance reasonably
satisfactory to Phoenix, Michael Engmann and Ronald Goodman, and the Company
shall have delivered sufficient original counterparts thereof to Phoenix,
Michael Engmann and Ronald Goodman.

     

    5.2. Conditions Precedent to the
Obligations of the Company

     

    .  The
obligation of the Company to sell Shares at the Closing to each Investor is
subject to the satisfaction or waiver by the Company, at or before the Closing,
of each of the following conditions:

     

    (a) Representations and
Warranties.  The representations and warranties of such
Investor contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made
on and as of such date (except for representations and warranties that speak as
of a specific date which shall be true and correct as of such specified
date);

     

    (b) Performance.  Such
Investor shall have performed, satisfied and complied in all material respects
(except as to those

     

    
      
        
        

      

      
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    covenants,
agreements and conditions qualified bymateriality)
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing;

     

    (c) Promissory
Notes.  Not less than $945,000 in principal of the Promissory
Notes shall be tendered as payment for the Shares; and

     

    (d) Investor
Deliverables.  Such Investor shall have delivered each of the
Investor Deliverables to be delivered by such Investor at the
Closing.

     

    ARTICLE
6.

     

    MISCELLANEOUS

     

    6.1. Rescission.  In
the event that the Company fails to meet the requirements of Section 4.9 herein,
the Company shall make a rescission offer to the holders of the Shares by
sending to each holder, on or before July 7, 2008, a notice (the “Rescission Notice”) of such
rescission offer, which shall specify the rescission rights including the date
by which the rescission offer must be accepted, the method of acceptance, the
documents (including certificates for Shares) that are required for acceptance,
and the consideration to be received.  Each holder may accept such
rescission offer, in whole or in part, in its sole discretion, by sending a
notice of acceptance (“Notice of Acceptance”) of such
rescission offer on or prior to August 4, 2008 (or such later date as the
Company shall specify in the Rescission Notice), stating the number of Shares
such holder will rescind.  The Company shall make a payment to each
holder of Shares who accepts the rescission offer, promptly (and in no event
more than three (3) Business Days) (the “Rescission Payment Date”)
following such holder’s tendering certificate(s) for all or such portion of its
Shares as are specified in the Notice of Acceptance, consideration identical to
the consideration paid by such holder for such Shares by reissuing to such
holder its Promissory Note or issuing to such holder a new promissory note
identical in all respects to such holder’s Promissory Note, in a principal
amount equal to one dollar ($1.00) for each Share being rescinded, plus, at the
holder’s option: (i) an amount in cash equal to all accrued but unpaid dividends
on the Shares being rescinded to the Rescission Payment Date, or (ii) an amount
in cash equal to the accrued but unpaid interest on such holder’s Promissory
Note (or new promissory note, as the case may be) being reissued (or issued, as
the case may be) to such holder pursuant hereto, as would have accrued had it
been outstanding from the Closing Date to the Rescission Payment Date (in each
case, as adjusted to reflect forward or reverse stock splits, stock dividends,
recapitalizations or other similar capital reorganization or reclassification of
capital stock) (the “Rescission
Price”).  The Shares not rescinded shall remain outstanding and
entitled to all the rights and preferences provided herein other than those
rights set forth in this Section
6.1.  To the extent applicable, the Company shall issue
replacement certificates representing any Shares not rescinded to be delivered
to such holder with such holder’s Rescission Price.  Upon rescission,
all rights of the holders of Shares so rescinded shall cease with respect to
such Shares, and such Shares shall not thereafter be transferred on the books of
the Company or be deemed to be outstanding for any purpose and shall be
automatically and immediately canceled and shall not be reissued or sold, and
neither the Company nor any of its Subsidiaries shall be a 

     

    
      
        
        

      

      
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    holder
of, nor may any of them exercise any rights granted to holders of, such Shares
following rescission.  Upon return of all or any portion of such
holder’s PromissoryNote,
along with the Rescission Price and any other deliverables pursuant to this
Section 6.1,
interest shall accrue on such Promissory Note pursuant to the original terms set
forth therein.

     

    6.2. Fees and
Expenses.  The Company shall pay all fees, costs and expenses
(including legal fees, due diligence costs, expenses of attorneys and costs of
advisers, counsel, accountants and other experts, if any) incurred by any party
to this Agreement in connection with (a) any matters contemplated by or
arising out of this Agreement and the Transaction Documents, (b) the
examination, review, due diligence investigation, documentation, negotiation and
closing of the transactions contemplated herein; (c) the continued
administration of the Transaction Documents, including any such fees, costs and
expenses incurred in perfecting, maintaining, determining the priority of and
releasing any security, any tax payable in connection with any Transaction
Documents and any amendments, modifications and waivers thereof; (d) any
amendment, supplement, waiver or modification of any of the Transaction
Documents; and (e) any default and any enforcement of collection proceeding
resulting therefrom or any workout or restructuring of any of the transactions
hereunder or contemplated thereby or any action to enforce any Transaction
Document or to collect any payments due from the Company; provided, however, that the aggregate
amount of subsections (a) and (b) and the legal fees and expenses, due diligence
costs, costs of advisers, counsel, accountants and other experts, if any, and
all other expenses that occur pre-Closing shall be paid by the Company to
Phoenix or its designee at Closing.

     

    6.3. Entire
Agreement

     

    .  The
Transaction Documents, together with the Exhibits and Schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements, understandings, discussions and
representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.  At or after the Closing, and without further
consideration, the Company will execute and deliver to the Investors such
further documents as may be reasonably requested in order to give practical
effect to the intention of the parties under the Transaction
Documents.

     

    6.4. Notices

     

    .  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile or e-mail at the facsimile number or
e-mail address specified in this Section 6.4 prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after
the date of transmission, if such notice or communication is delivered via
facsimile or e-mail at the facsimile number or e-mail address specified in this
Section on a day that is not a Trading Day or later than 6:30 p.m. (New York
City time) on any Trading Day, (c) the Trading Day following the date of deposit
with a nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given.  The
addresses, facsimile numbers and e-mail addresses for such notices and
communications are those set forth on the signature pages hereof, or such other
address, facsimile number or e-mail address as may be designated hereafter, in
the same manner, by any such Person.

     

    6.5. 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 the Company

     

    
      
        
        

      

      
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    and each
of the Investors 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 subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.

     

    6.6. Construction

     

    .  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.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.

     

    6.7. Successors and
Assigns

     

    .  This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.  The Company may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Investors holding a majority of the Shares.  Any
Investor may assign its rights under this Agreement to any Person to whom such
Investor assigns or transfers (including by way of distribution to its members,
partners or stockholders) any Securities, provided (i) such
transferor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company after such
assignment, (ii) the Company is furnished with written notice of the name and
address of such transferee or assignee, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, (iv) such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions hereof that apply to the “Investors”,
and (v) such transfer shall have been made in accordance with the applicable
requirements of this Agreement and with all laws applicable
thereto.

     

    6.8. No Third-Party
Beneficiaries

     

    .  This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.

     

    6.9. Governing Law; Venue; Waiver
of Jury Trial

     

    .  THE
CORPORATE LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE
RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS.  ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.  THE COMPANY AND INVESTORS HEREBY IRREVOCABLY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING
IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY
DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH
OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH
RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT,

     

    
      
        
        

      

      
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    ACTION OR
PROCEEDING IS IMPROPER.  EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR 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.  THE
COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

     

    6.10. Survival

     

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

     

    6.11. 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 or e-mail attachment, 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.

     

    6.12. Severability

     

    .  If
any provision of this Agreement is held to 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 that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

     

    6.13. Rescission and Withdrawal
Right

     

    .  Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Investor exercises a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Investor may rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its future actions
and rights.

     

    6.14. Replacement of
Securities.

     

      If
any certificate or instrument evidencing any Securities 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 therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold
harmless the Company for any losses in connection therewith.  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 Securities.

     

    
      
        
           

        

         

      

      
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      EXHIBIT
10-43

    

     

    6.15. Remedies

     

    .  In
addition to being entitled to exercise all rights provided herein or in the
other Transaction Documents or granted by law or any other agreement or
contract, including recovery of damages, each Investor, each other holder of
Shares and the Company will be entitled to seek specific performance under 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 agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate. Furthermore, the Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations
under the Transaction Documents, any remedy at law may prove to be inadequate
relief to the Buyers.  The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond
or other security.

     

    6.16. Payment Set
Aside

     

    . To the
extent that the Company makes a payment or payments to any Investor pursuant to
any Transaction Document or an Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

     

    6.17. 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 any 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.

     

    6.18. Adjustments in Share Numbers
and Prices

     

    .  In
the event of any stock split, subdivision, dividend or distribution payable in
shares of Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event occurring after
the date hereof, each reference in any Transaction Document to a number of
shares or a price per share shall be amended to appropriately account for such
event.

     

    6.19. Independent Nature of
Investors’ Obligations and Rights

     

    .  The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Documents.  The decision of each
Investor to purchase Securities pursuant to this Agreement has been made by such
Investor independently of any other Investor and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of

     

    
      
        
        

      

      
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          EXHIBIT
10-43

        

      

    

     

    operations,
condition (financial or otherwise) or prospects of the Company which may have
been made or given by any other Investor or by any agent or employee of any
other Investor, and no Investor or any of its agents or employees shall have any
liability to any other Investor (or any other person) relating to or arising
from any such information, materials, statements or opinions.  Nothing
contained herein or in any Transaction Document, and no action taken by any
Investor pursuant thereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Document.  Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its
investment hereunder and that no other Investor will be acting as agent of such
Investor in connection with monitoring its investment hereunder.  Each
Investor 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
Investor to be joined as an additional party in any Proceeding for such
purpose.

     

     [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

     

    SIGNATURE
PAGES FOLLOW]

     

    
      
        
           

        

         

      

      
        - 31
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      EXHIBIT
10-43

    

    

     

    IN WITNESS WHEREOF, the parties hereto
have caused this Securities Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated
above.

     

    Communication
Intelligence Corporation

     

    

     

    By:       /s/  Guido
DiGregorio                                                         

    Name:  Guido
D. DiGregorio

    Title:
Chief Executive Officer and President

    

    Address
for Notice:

    275
Shoreline Drive, #500

    Redwood
Shores, California 94065

    

    Facsimile
No.:  (650) 802-7777

    Telephone
No.: (650) 802-7888

    Attn:  Frank
Dane

     

    With a
copy to:

     

    Davis
Wright Tremaine LLP

    1300 SW
Fifth Avenue, Suite 2300

    Portland,
Oregon 97201

    Facsimile:  (503)
778-5299

    Telephone:
(503) 778-5214

    Attn:
Michael C. Philips, Esq.

    

    

    COMPANY
SIGNATURE PAGE

    

     

    
      
        
           

        

         

      

      
          -
32 -

        
          

        

      

      
         

        EXHIBIT
10-43

      

    

     

    Investor Signature
Page

    

    By its execution and delivery of this
signature page, the undersigned Investor hereby joins in and agrees to be bound
by the terms and conditions of the Securities Purchase Agreement dated as
of June 5, 2008 (the “Purchase Agreement”) by and
among Communication Intelligence Corporation and the Investors (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.

     

    Name of
Investor:

    

     

    By:
Rubicon Global Value Fund, L.P.

     

    

     

    By:  
/s/  Steven
Shum                 

    Name:  Steven Shum

    Title: Managing Director

     

    

    Address: 
One SW Columbia St. Suite 900

                                                                                                                                      
Portland, OR 97258

     

    Telephone
No.:   503-548-4800

     

    Facsimile
No.:   503-548-4805

     

    Email
Address:  sshum@corefundmgmt.com

     

    Number of
Shares:   75,000

     

    Aggregate
Purchase Price:  $75,000

    

    
      
        
           

        

         

      

      
        - 33
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      EXHIBIT
10-43

    

     

    
      Investor Signature
Page

      

      By its execution and delivery of this
signature page, the undersigned Investor hereby joins in and agrees to be bound
by the terms and conditions of the Securities Purchase Agreement dated as
of June 5, 2008 (the “Purchase Agreement”) by and
among Communication Intelligence Corporation and the Investors (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.

       

      Name of
Investor:

      

       

      By: Kendu
Partners

      

       

      By:  
/s/  Michale W.
Engmann

      Name:  Michael W. Engmann

      Title: General Partner

       

      

      Address:    c/o Engmann Options                                                                                                                                  

                           220
Bush St. Suite
950 
                    
San Francisco, CA 94104

       

      Telephone
No.:   415-293-3818

       

      Facsimile
No.:   415-781-4641

       

      Email
Address:  Mike.Engmann@engmannoptions.com

       

      Number of
Shares:  320,000 

       

      Aggregate
Purchase Price:  $320,000

    

     

    
 

    
      
        
        

      

      
        -
33-

        
          

        

      

      
        
          EXHIBIT
10-43

        

      

    

     

    
      
        Investor Signature
Page

        

        By its execution and delivery of this
signature page, the undersigned Investor hereby joins in and agrees to be bound
by the terms and conditions of the Securities Purchase Agreement dated as
of June 5, 2008 (the “Purchase Agreement”) by and
among Communication Intelligence Corporation and the Investors (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.

         

        Name of
Investor:  Michael Engmann

        

         

        By:

        

         

        By:  
/s/ Michael W.
Engmann

        Name:  Michael
Engmann

        Title: 

         

        

        Address:   38
San Fernando Way   

                            San
Francisco, CA  94127

         

        Telephone
No.:   415-293-3818

         

        Facsimile
No.:   415-781-4641

         

        Email
Address:  MIKE.ENGMANN@ENGMANNOPTIONS.COM

                                                                                                                                                                         
(small letters)

         

        Number of
Shares:   250,000

         

        Aggregate
Purchase Price:  $250,000

      

    

     

     

     

     

    
      
        
        

      

      
        - 33
-

        
          

        

      

      
        
          EXHIBIT
10-43

        

      

    

     

    
      
        Investor
Signature Page

         

        By
its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of June 5, 2008 (the
“Purchase Agreement”)
by and among Communication Intelligence Corporation and the Investors (as
defined therein), as to the number of shares of Common Stock set forth below,
and authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.

         

        Name
of Investor:  MDNH Partners, L.P.

         

         

        By:  
MDNH Partners, L.P.

         

         

        By:  
/s/  Michael W.
Engmann

        Name:  Michael W.
Engmann

        Title:  General
Partner 

         

         

        Address:   MDNH Partners 

                           
220 Bush St., Suite 950

                           
San Francisco, CA 94104

                                                                                                                                                                                                                                                                          

        Telephone
No.:  415-293-3818 

         

        Facsimile
No.:   415-781-4641

         

        Email
Address:  MIKE.ENGMANN@ENGMANNOPTIONS.COM

         

        Number
of Shares:   150,000

         

        Aggregate
Purchase Price:  $150,000

      

    

     

     

    
      
        
        

      

      
        - 33
-

        
          

        

      

      
        
          EXHIBIT
10-43

        

      

    

     

    
      
        Investor
Signature Page

        

        By
its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of June 5, 2008 (the
“Purchase Agreement”)
by and among Communication Intelligence Corporation and the Investors (as
defined therein), as to the number of shares of Common Stock set forth below,
and authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.

         

        Name
of Investor:

        

         

        By:

        

         

        By:  
/s/ Frederich L.
Farrar

        Name: Frederich L.
Farrar 

        Title: 

         

         

        Address:
3502 Woodview Trace, Suite #200 

                                                                                                                                          Indianapolis, IN 46268

         

        Telephone
No.:   317 860 8216

         

        Facsimile
No.:   317 860 9190

         

        Email
Address:  fred.farrar@lclipsch.com

         

        Number
of Shares:   50,000

         

        Aggregate
Purchase Price:  $50,000.00

      

    

     

     

     

    
      
        
        

      

      
        - 33
-

        
          

        

      

      
        
          EXHIBIT
10-43

        

      

    

    
      
        Investor
Signature Page

        

        By
its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of June 5, 2008 (the
“Purchase Agreement”)
by and among Communication Intelligence Corporation and the Investors (as
defined therein), as to the number of shares of Common Stock set forth below,
and authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.

         

        Name
of Investor:

         

         

        By:  
AFS Investments, Inc.

         

         

        By:  
/s/  Fred J.
Merritt

        Name:  Fred J.
Merritt

        Title: President

         

         

        Address:
14510 Lima
Rd
                 
Ft. Wayne, IN 46818

         

        Telephone
No.:   317-506-1937

         

        Facsimile
No.:   260-637-4472

         

        Email
Address:  AFSINVESTMENTS@MSN.COM

         

        Number
of Shares:   

         

        Aggregate
Purchase Price:  

      

    

     

     

     

     

    -
33 -

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