EXHIBIT 10.56

 

 

 

 

 
INVESTOR RIGHTS AGREEMENT
 
 
BY AND BETWEEN
 
 
COMMUNICATION INTELLIGENCE CORPORATION
 
 
AND
 
 
PHOENIX VENTURE FUND LLC,
 
SG PHOENIX LLC,
 
MICHAEL ENGMANN,
 
RONALD GOODMAN,
 
KENDU PARTNERS COMPANY AND
 
MDNH PARTNERS L.P.
 
DATED AS OF AUGUST 5, 2010

 
 

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EXHIBIT 10.56

TABLE OF CONTENTS
 
 
ARTICLE I
 
 
DEFINITIONS
 
Section 1.1
Definitions 
1

Section 1.2
Interpretation and Rules of Construction 
4

 
ARTICLE II
 
 
VOTING OF SHARES; ELECTION OF DIRECTORS;
 
 
BOARD REPRESENTATION; PERIODIC REPORTING OBLIGATIONS
 
Section 2.1
Voting of Shares; Election of Directors 
5

Section 2.2
Irrevocable Proxy 
5

Section 2.3
Board Representation 
6

Section 2.4
Board Committees 
7

Section 2.5
Reporting Obligations 
7

Section 2.6
Necessary Acts; Further Assurances 
7

Section 2.7
Director and Officer Indemnification 
7

 
ARTICLE III
 
 
TRANSFER
 
Section 3.1
Transfer of Subject Shares 
7

Section 3.2
Right of First Offer 
9

Section 3.3
Termination of Article III 
10

 
ARTICLE IV
 
 
MISCELLANEOUS
 
Section 4.1
Severability 
10

Section 4.2
Entire Agreement 
10

Section 4.3
Notices 
10

Section 4.4
Assignment 
12

Section 4.5
Compliance 
12

Section 4.6
Amendment 
12

Section 4.7
Waiver 
12

Section 4.8
No Third-Party Beneficiaries 
12

Section 4.9
Governing Law; Jurisdiction; Waiver of Jury Trial 
12

Section 4.10
Specific Performance 
13

Section 4.11
Nature of Agreement 
13

Section 4.12
Currency 
13

Section 4.13
Counterparts 
13

i
 
 

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EXHIBIT 10.56

INVESTOR RIGHTS AGREEMENT
 
This INVESTOR RIGHTS AGREEMENT, dated as of August 5, 2010 (this “Agreement”),
is by and between Communication Intelligence Corporation, a Delaware corporation
having an address at 275 Shoreline Drive, Suite 500, Redwood Shores, California
94065 (the “Company”), and Phoenix Venture Fund LLC, a Delaware limited
liability company having an address at 110 East 59th Street, Suite 1901, New
York, New York 10022 (“Phoenix”), SG Phoenix LLC, a Delaware limited liability
company having an address at 110 East 59th Street, Suite 1901, New York, New
York 10022 (“SG Phoenix”), Michael Engmann, an individual having an address at
38 San Fernando Way, San Francisco, California 94127 (“Engmann”), Ronald
Goodman, an individual having an address at 31 Tierra Verde Court, Walnut Creek,
California 94598 (“Goodman”), Kendu Partners Company, a California limited
partnership having an address at 220 Bush Street, Suite 950, San Francisco,
California 94104 (“Kendu”) and MDNH Partners L.P., a California limited
partnership having an address at 220 Bush Street, Suite 950, San Francisco,
California 94104 (“MDNH” and collectively, with Phoenix, SG Phoenix, Engmann,
Goodman and Kendu, the “Investors” and each, an “Investor”).
 
W I T N E S S E T H:
 
WHEREAS, the Company and the Investors have entered into one or both of the
Series B Preferred Stock Purchase Agreement, dated as of June 21, 2010 (as it
may be amended from time to time) (the “Purchase Agreement”), pursuant to which
the purchasers are purchasing and acquiring from the Company, and the Company is
selling and issuing to the purchasers, up to 2,000,000 shares of its Series B
Preferred Stock; and/or the Exchange Agreement, dated as of June 21, 2010 (the
“Exchange Agreement”), by and between the Company, Phoenix, Engmann and the
other entities and individuals signatories thereto, pursuant to which the
Company and the holders of all of the Company’s senior secured indebtedness
under the Credit Agreement, dated as of June 5, 2008, among the Company, Phoenix
and the other lenders signatory thereto, as amended by Amendment No. 1 to the
Credit Agreement, dated as of May 28, 2009 and Amendment No. 2 to the Credit
Agreement, dated as of May 4, 2010 (collectively, as the same may be further
amended, restated, supplemented or amended and restated from time to time, the
“Credit Agreement”), have agreed to exchange all of the Company’s indebtedness
outstanding on the date hereof under the Credit Agreement, including accrued
interest, into shares of Series B Preferred Stock upon the terms and subject to
the conditions thereof; and
 
WHEREAS, the Company and the Investors desire to set forth their respective
obligations in connection with the Investors’ ownership of the Subject Shares.
 
NOW, THEREFORE, in consideration of the mutual promises set forth herein and
intending to be legally bound, the parties hereto, hereby agree as follows:
 
 
ARTICLE I                                
 
 
DEFINITIONS
 
Section 1.1 Definitions
 
.  The following terms, as used herein, have the following meanings:
 
 
 

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EXHIBIT 10.56
 
“Affiliate” means, with respect to any Person or group of Persons, a Person that
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such Person or group of Persons.
 
“Agreement” or “this Agreement” shall have the meaning set forth in the
Preamble, and shall include all amendments hereto made in accordance with the
provisions hereof.
 
“Beneficially Own” means, with respect to any securities, having “beneficial
ownership” of such securities for purposes of Rule 13d-3 or 13d-5 under the
Exchange Act as in effect on the date hereof, and “Beneficial Ownership” shall
have the corresponding meaning.
 
“Board” means the Board of Directors of the Company.
 
“Certificate of Designation” means the certificate of designation of the Series
B Preferred Stock, dated as of August 5, 2010 and filed with the Secretary of
State of the State of Delaware.
 
“Certificate of Incorporation” means the Amended and Restated Certificate of
Incorporation of the Company.
 
“Change of Control” shall have the meaning set forth in Section 3.1(d).
 
“Common Stock” means the Company’s common stock having a par value of $0.01 per
share.
 
“Company” shall have the meaning set forth in the Preamble.
 
“Company Stockholders’ Meeting” shall have the meaning set forth in Section
2.1(b).
 
“Credit Agreement” shall have the meaning set forth in the Recitals.
 
“DGCL” shall have the meaning set forth in Section 2.2(a).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Exchange Agreement” shall have the meaning set forth in the Recitals.
 
“Governmental Authority” means any supranational, national, federal, state,
municipal or local governmental or quasi-governmental or regulatory authority
(including a national securities exchange or other self-regulatory body),
agency, governmental department, court, commission, board, bureau or other
similar entity, domestic or foreign or any arbitrator or arbitral body.
 
“Group” shall have the meaning set forth in Section 3.1(b)(ii).
 
“Investor Rights Termination Event” shall be the earlier of (i) the tenth (10th)
anniversary of the date hereof; (ii) the first date on which the Investors in
the aggregate own an aggregate of less than (a) twenty percent (20%) of the
Voting Securities owned on the date hereof (including, for the avoidance of
doubt, Voting Securities issued to Investors under the Purchase Agreement and
the Exchange Agreement) or (b) twenty percent (20%) of the outstanding Series B
Preferred Stock issued under the Purchase Agreement and the Exchange Agreement
on the date hereof; (iii) the adjudication of the Company as bankrupt, the
execution by the Company of an assignment for the benefit of creditors or the
appointment of a receiver of the Company; (iv) the voluntary or involuntary
dissolution of the Company; (v) when there is otherwise only one surviving
Investor as a party to this Agreement; or (vi) the written agreement of the
Investors owning an aggregate of at least sixty-six percent (66%) of the Subject
Shares to terminate this Agreement.
 
 
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EXHIBIT 10.56
“Investors” shall have the meaning set forth in the Preamble.
 
“Law” means any federal, national, supranational, state, provincial, local or
similar statute, law, ordinance, regulation, rule, code, order or rule of law
(including common law) of any Governmental Authority, and any judicial or
administrative interpretation thereof, including any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
 
“Offer Shares” shall have the meaning set forth in Section 3.2(a).
 
“Person” means any individual, partnership, firm, corporation, limited liability
company, association, trust, unincorporated organization or other entity, as
well as any syndicate or group that would be deemed to be a Person under
Section 13(d)(3) of the Exchange Act.
 
“Prohibited Person” means any Person that appears on any list issued by an
applicable Governmental Authority or the United Nations with respect to money
laundering, terrorism financing, drug trafficking or economic or arms embargoes.
 
“Purchase Agreement” shall have the meaning set forth in the Recitals.
 
“Remaining Directors” shall have the meaning set forth in Section 2.3(b).
 
“Required Holders” means holders representing a majority of the then outstanding
shares of Series B Preferred Stock.
 
“ROFO Option Period” shall have the meaning set forth in Section 3.2(b).
 
“ROFO Price” shall have the meaning set forth in Section 3.2(a).
 
“SEC” means the Securities and Exchange Commission.
 
“Series A-1 Preferred Stock” means the Series A-1 Cumulative Convertible
Preferred Stock of the Company, with a par value $0.01 per share, provided for
pursuant to that certain Amended and Restated Certificate of Designation filed
with the Secretary of State of the State of Delaware on August 5, 2010.
 
“Series B Preferred Directors” shall have the meaning set forth in Section
2.3(a).
 
 
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EXHIBIT 10.56
 
“Series B Preferred Stock” means the 14,000,000 shares of Series B Participating
Convertible Preferred Stock of the Company, with a par value of $0.01 per share,
provided for pursuant to that certain Certificate of Designation filed with the
Secretary of State of the State of Delaware on August 5, 2010.
 
“Subject Shares” means, at any given time, such Voting Securities as the
Investors may directly or indirectly Beneficially Own at such time, including,
for the avoidance of doubt, the Company’s Series A-1 Preferred Stock, Series B
Preferred Stock and Common Stock.
 
“Transfer” means to, directly or indirectly, transfer, sell, hedge, assign,
gift, pledge, encumber, hypothecate, mortgage, exchange or otherwise dispose of
(including through the sale or purchase of options or other derivative
instruments with respect to the Common Stock or otherwise) by operation of Law
or otherwise.
 
“Voting Securities” means securities of the Company having the power generally
to vote on the election of directors and other matters submitted to a vote of
stockholders of the Company, including, for the avoidance of doubt, shares of
Series A-1 Preferred Stock, Series B Preferred Stock and Common Stock.
 
Section 1.2 Interpretation and Rules of Construction
 
.  In this Agreement, except to the extent otherwise provided or that the
context otherwise requires:
 
(a) when a reference is made in this Agreement to a Preamble, Article, Recital
or Section, such reference is to a Preamble, Article, Recital or Section of this
Agreement, unless otherwise indicated;
 
(b) the table of contents and headings for this Agreement are for reference
purposes only and do not affect in any way the meaning or interpretation of this
Agreement;
 
(c) whenever the words “include,” “includes” or “including” are used in this
Agreement, they are deemed to be followed by the words “without limitation;”
 
(d) the words “hereof,” “herein” and “hereunder” and words of similar import,
when used in this Agreement, refer to this Agreement as a whole and not to any
particular provision of this Agreement;
 
(e) the definitions of terms contained in this Agreement are applicable to the
singular as well as the plural forms of such terms;
 
(f) any Law defined or referred to herein or in any agreement or instrument that
is referred to herein means such Law or statute as from time to time amended,
modified or supplemented, including by succession of comparable successor Laws;
 
(g) references to a Person are also to its successors and permitted assigns; and
 
(h) the use of “or” is not intended to be exclusive unless expressly indicated
otherwise.
 
 
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EXHIBIT 10.56
 
ARTICLE II                                
 
VOTING OF SHARES; ELECTION OF DIRECTORS;
 
BOARD REPRESENTATION; PERIODIC REPORTING OBLIGATIONS
 
Section 2.1 Voting of Shares; Election of Directors
 
.
 
(a) Subject to Section 2.1(b), the Investors shall have full voting rights with
respect to the Subject Shares pursuant to the Company’s Certificate of
Incorporation and by-laws and applicable Law.
 
(b) The Company and the Investors hereby agree that, until such time as an
Investor Rights Termination Event has occurred, at any meeting of the
stockholders of the Company, however called, or at any adjournment or
postponement thereof (a “Company Stockholders’ Meeting”), or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) is sought by or from the stockholders of the Company:
 
(i) the Investors shall appear at such Company Stockholders’ Meeting or
otherwise cause all Subject Shares to be counted as present thereat for the
purpose of establishing a quorum; and
 
(ii) with respect to any matter upon which a vote, consent or other approval
(including by written consent) is sought by or from the stockholders of the
Company in connection with the election or removal of directors or otherwise
relating to procedures applicable to the election or removal of directors, the
Investors shall vote and cause to be voted all Subject Shares to elect and
otherwise retain as directors the two (2) individual directors or director
nominees (as the case may be) designated by Phoenix pursuant to Section 2 of the
Certificate of Designation, who shall initially be Philip S. Sassower and Andrea
Goren, and the one (1) individual director or director nominee (as the case may
be) designated by the Required Holders pursuant to Section 2 of the Certificate
of Designation, in each case, to serve on the Board, as provided in the
Certificate of Designation; it being acknowledged and agreed that each of the
Investors may vote or cause to be voted (or withhold its vote in respect of) all
Subject Shares on all other matters (other than those described in the foregoing
clause) in such manner as it determines in its sole and absolute discretion.
 
Section 2.2 Irrevocable Proxy
 
.
 
(a) As security for the Investors’ obligations under Section 2.1, each of the
Investors hereby irrevocably constitutes and appoints Phoenix as its attorney
and proxy in accordance with the Delaware General Corporation Law (“DGCL”), with
full power of substitution and re-substitution, to cause all Subject Shares to
be counted as present at any Company Stockholders’ Meeting, to vote all Subject
Shares at any Company Stockholders’ Meeting and to execute consents in respect
of all Subject Shares in the manner provided by Section 2.1(b)(ii); and the
Company shall take all reasonable acts within its control necessary to cause all
of the Series B Preferred Directors to be elected as directors to the Board.
Each of the Investors hereby revokes all other proxies and powers of attorney
with respect to the Subject Shares that such Investor may have heretofore
appointed or granted and represents that any proxies heretofore given in respect
of such shares, if any, are revocable.
 
 
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EXHIBIT 10.56
(b) Each of the Investors hereby affirms that the irrevocable proxy set forth in
this Section 2.2 is coupled with an interest and shall remain in effect for the
duration of this Agreement and is intended to be irrevocable in accordance with
the provisions of Section 212 of the DGCL. If for any reason the proxy granted
herein is not irrevocable, then such Investor agrees to vote all Subject Shares
in accordance with Section 2.1 above.
 
(c) This irrevocable proxy shall not be terminated by any act of any Investor or
by operation of Law, except that this irrevocable proxy shall terminate upon the
occurrence of an Investor Rights Termination Event.
 
Section 2.3 Board Representation
 
.
 
(a) Until the occurrence of an Investor Rights Termination Event, (i) there
shall be five (5) directors of the Company, except as otherwise agreed to by
Phoenix and the Required Holders or as provided in the Certificate of
Designation; and (ii) Phoenix shall be entitled to nominate two (2) individual
directors or director nominees to serve as directors and the Required Holders
shall be entitled to nominate one (1) individual director or director nominee,
who shall be independent under applicable Nasdaq and SEC rules, to serve as a
director, as provided in the Certificate of Designation (collectively, the
“Series B Preferred Directors”).
 
(b) Until the occurrence of an Investor Rights Termination Event, at each
Company Stockholders’ Meeting, or upon the taking of a written consent of
stockholders for such purpose: (a) the holders of the Series B Preferred Stock
shall have the right, voting separately as a class (to the exclusion of all
other classes or series of the Company’s capital stock), to elect the Series B
Preferred Directors, as provided in the Certificate of Designation, and (b) the
remaining two (2) directors of the Company, each of whom shall be independent
under applicable Nasdaq and SEC rules, shall be elected by the holders of Voting
Securities, voting together as a single class on an as-converted to Common Stock
basis (the “Remaining Directors”).
 
(c) Any Series B Preferred Director elected pursuant to Section 2 of the
Certificate of Designation may be removed at any time, with or without cause by,
and only by, the affirmative vote, given at a meeting or by written consent, of
the holder(s) who designated or nominated such director.  The Remaining
Directors may be removed at any time, with or without cause by the affirmative
vote, given at a meeting or by written consent, of the holders of the Voting
Securities, voting together as a single class on an as-converted to Common Stock
basis.
 
(d) The Series B Preferred Directors shall be entitled to reimbursement from the
Company for all costs and expenses in attending any meetings of the Board or any
committee thereof, as provided in the Certificate of Designation.  The Company
shall notify the Series B Preferred Directors of all regular and special
meetings of the Board and any committee of the Board of which any of the Series
B Preferred Directors is a member. The Company shall provide the Series B
Preferred Directors with copies of all notices, minutes, consents and other
materials provided to all other members of the Board concurrently as such
materials are provided to the other members.
 
 
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EXHIBIT 10.56
 
Section 2.4 Board Committees
 
.  The Company covenants and agrees that at all times at least (a) one (1) of
the Series B Preferred Directors shall be a member of each of the Audit
Committee and the Best Practices Committee and (b) the two (2) directors of the
Board designated by Phoenix under the Certificate of Designation shall be
members of each of the Finance Committee, Compensation Committee and Nominating
Committee. Until the occurrence of an Investor Rights Termination Event, each
committee of the Board shall be comprised of not more than three (3) directors,
except as otherwise agreed to in a writing signed by Phoenix.
 
Section 2.5 Reporting Obligations
 
.  Each of the Investors hereby agrees to cooperate affirmatively with one
another, to the extent reasonably requested, to cause to be filed, on a timely
basis, with the SEC, all reports and documents required to be filed therewith
under the Exchange Act and to comply with all provisions of other applicable
laws, including, but not limited to, the reporting requirements under Section 13
of the Exchange Act. The Company hereby agrees to cause to be filed, on a timely
basis, with the SEC, all reports and documents required to be filed therewith
under the Exchange Act and to comply with all provisions of other applicable
laws.
 
Section 2.6 Necessary Acts; Further Assurances
 
.  Each of the Investors shall, at its own cost and expense, execute and deliver
such further documents and instruments and shall take such other actions as may
be reasonably required or appropriate to evidence or carry out the intent and
purposes of this Agreement or to show the ability to carry out the intent and
purposes of this Agreement.
 
Section 2.7 Director and Officer Indemnification
 
.  All rights to indemnification, expense advancement and exculpation existing
in favor of each director and officer of the Company, as provided in the
Company’s Certificate of Incorporation and bylaws, as in effect on the date
hereof, shall continue in full force and effect, for a period of at least six
(6) years from the date the director or officer last served as director or
officer of the Company.
 
ARTICLE III                                
                                                   TRANSFER
 
Section 3.1 Transfer of Subject Shares
 
.
 
(a) Subject to Section 3.1(c), each of the Investors shall not, and shall cause
their Affiliates not to, Transfer all or any portion of the Subject Shares,
except (i) pursuant to its registration rights set forth in the Registration
Rights Agreement dated as of June 5, 2008, as amended by Amendment No. 1 to the
Registration Rights Agreement, dated as of May 28, 2009 and Amendment No. 2 to
the Registration Rights Agreement, dated as of May 4, 2010 in a
widely-distributed public offering, (ii) pursuant to its registration rights set
forth in the Registration Rights Agreement dated as of August 5, 2010 in a
widely-distributed public offering, (iii) pursuant to Rule 144 of the Securities
Act, (iv) to the Company pursuant to Section 3.2 or (v) pursuant to any other
exemption from registration under the Securities Act after compliance with
Section 3.2.
 
 
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EXHIBIT 10.56
 
(b) Any Transfer pursuant to Section 3.1(a) shall be subject to the following
limitations:
 
(i) Without limiting the other provisions of this Article III, the Investors
shall not, without the prior written consent of Phoenix, knowingly dispose or
agree to dispose (directly or indirectly, or pursuant to any series of related
transactions intentionally structured to circumvent the provisions of this
Article III) of all or any portion of the Subject Shares, in one or a series of
transactions (other than as described in Section 3.1(a)(i), Section 3.1(a)(ii)
or Section 3.1(a)(iii)), to any Person that at the time of the disposition is a
Prohibited Person.
 
(ii) The Investors shall not dispose of or agree to dispose of five percent (5%)
or more of the Subject Shares to a single Person or “group” (as defined in
Section 13(d)(3) of the Exchange Act) (a “Group”), directly or indirectly, in a
single transaction or a series of related transactions, unless such Person or
Persons execute a joinder agreement, agreeing to abide by Section 2.1 and this
Article III (other than as described in Section 3.1(a)(i), Section 3.1(a)(ii) or
Section 3.1(a)(iii)); provided, however that an underwriter, broker-dealer or
registered agent shall not be considered as a Person or a member of a Group for
purposes of this Section 3.1(b)(ii).
 
(c) Notwithstanding the foregoing, the Investors may at any time:
 
(i) Transfer all or any portion of the Subject Shares to an Affiliate; provided,
that prior to any Transfer pursuant to this Section 3.1(c)(i), such transferee
shall have agreed in writing to be bound by the terms of this Agreement pursuant
to documentation reasonably satisfactory to the parties hereto; and provided,
further, that no Transfer pursuant to this Section 3.1(c)(i) shall relieve any
transferor from any liability for damages incurred or suffered by the Company as
a result of any breach of this Agreement by such transferor;
 
(ii) Transfer a maximum aggregate number of Subject Shares during the term of
this Agreement constituting not more than one percent (1%) in the aggregate of
Voting Securities at any given time; provided, that such Transfers are made in
the open market pursuant to ordinary brokerage transactions;
 
(iii) tender their Subject Shares pursuant to a tender offer for the Common
Stock that has been affirmatively recommended by a majority of the Board; or
 
(iv) Transfer their Subject Shares pursuant to a merger that has been
affirmatively recommended or approved by a majority of the Board.
 
(d) Notwithstanding anything to the contrary herein, the restrictions on
Transfer set forth in this Section 3.1 shall terminate upon a Change of Control.
For purposes of this Agreement, a “Change of Control” shall mean (i) the
acquisition by any Person or any Group of Beneficial Ownership of at least a
majority of all outstanding Voting Securities of the Company (calculated on a
fully-diluted basis) or (ii) the reorganization, merger or consolidation of the
Company with respect to which all of the Persons who were the respective
Beneficial Owners of the Company’s securities immediately prior to such
reorganization, merger or consolidation do not, following such reorganization,
merger or consolidation, Beneficially Own, directly or indirectly, more than
fifty percent (50%) of the aggregate outstanding securities of the Company
resulting from such reorganization, merger or consolidation. For the avoidance
of doubt, the transactions contemplated by the Purchase Agreement and the
Exchange Agreement do not constitute a Change of Control.
 
 
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EXHIBIT 10.56
 
Section 3.2 Right of First Offer
 
.
 
(a) In the event that any of the Investors or their Affiliates desire to sell
Subject Shares pursuant to Section 3.1(a) (other than Section 3.1(a)(i), Section
3.1(a)(ii) or Section 3.1(a)(iii)) in an amount constituting more than five
percent (5%) of the issued and outstanding shares of Voting Securities in a
single or series of related transactions, such Investor shall first offer such
Subject Shares for purchase to Phoenix by promptly notifying Phoenix in writing
of such offer, setting forth the number of Subject Shares proposed to be sold
(the “Offer Shares”), the terms and conditions of sale and the price or method
of determining such price (the “ROFO Price”).
 
(b) Phoenix shall have up to a period of twenty (20) days (the “ROFO Option
Period”) after the receipt of such notice within which to notify such Investor
in writing that it wishes to purchase the Offer Shares at the ROFO Price and
upon the terms and conditions set forth in the Investor’s notice. If Phoenix
gives such written notice within the ROFO Option Period, then it shall have
thirty (30) days after it gives such notice to do all things necessary to
consummate such acquisition of the Offer Shares, including entering into
agreements relating to such acquisition. Such Investor shall cooperate with
Phoenix in obtaining all consents and approvals necessary to consummate the
acquisition and shall execute and deliver such customary agreements as may be
reasonably requested by Phoenix. If Phoenix receives such consents and approvals
and enters into such agreements as are necessary to consummate such acquisition
of the Offer Shares, then such Investor and its Affiliates, as applicable, shall
be obligated to sell to Phoenix, and Phoenix shall be obligated to purchase from
such Investor and its Affiliates, as applicable, the Offer Shares at the price
and on the terms and conditions set forth in the Investor’s notice.
 
(c) If Phoenix does not give written notice to such Investor within the ROFO
Option Period or notifies such Investor in writing that it does not wish to
purchase the Offer Shares, such Investor shall be free to secure a bona fide
offer for the Offer Shares from a third-party and sell the Offer Shares to such
third-party at a price equal to or greater than the ROFO Price; provided, that
(i) such sale to the bona fide third-party is consummated within ninety
(90) days after the expiration of the ROFO Option Period at a price and upon the
same terms and conditions, no more favorable to the third-party than were set
forth in such Investor’s notice to Phoenix (it being agreed by the Investors
that if such sale is not consummated within such ninety (90) day period, such
Investor must re-commence the procedures provided in this Section 3.2 if they
wish to sell the Subject Shares), (ii) such Investor notifies Phoenix in writing
of the name, address, telephone number and facsimile number of the transferee,
along with the names and/or title of a “contact person” at such transferee and
(iii) the transferee of such Investor and its Affiliates executes a counterpart
copy of this Agreement and thereby agrees prior to the sale, to be bound by all
of the terms and provisions of this Agreement, as though it were an Investor.
 
 
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EXHIBIT 10.56
 
Section 3.3 Termination of Article III.  Notwithstanding anything to the
contrary contained herein, this Article III shall terminate upon an Investor
Rights Termination Event.
 
 
ARTICLE IV                                
                                                                                                                                                                               
MISCELLANEOUS
Section 4.1 Severability
 
.  If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any Law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
for so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party hereto.
Upon a determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an enforceable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to the greatest
extent possible.
 
Section 4.2 Entire Agreement
 
.  This Agreement constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the Investors with respect to the
subject matter hereof.
 
Section 4.3 Notices
 
.  All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given or made (and shall be deemed to have been
duly given or made upon receipt) by delivery in person, by an internationally
recognized overnight courier service, or by facsimile to the respective parties
hereto at the following addresses (or at such other address for a party as shall
be specified in a notice given in accordance with this Section 3.3):
 
If to the Company:
 
Communication Intelligence Corporation
275 Shoreline Drive, Suite 500
Redwood Shores, California 94065
Attention:  Francis V. Dane
Facsimile:  (650) 802-7777
 
With a copy (which shall not constitute notice) to:
 
Davis Wright Tremaine LLP
1300 SW Fifth Avenue, Suite 2300
Portland, Oregon 97201
Attention:  Michael C. Phillips, Esq.
Facsimile:  (503) 778-5299
 

 
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EXHIBIT 10.56 

If to Phoenix:
 
Phoenix Venture Fund LLC
110 East 59th Street, Suite 1901
New York, New York 10022
Attention:  Andrea Goren
Facsimile:  (212) 202-7565
 
With a copy (which shall not constitute notice) to:
 
Pillsbury Winthrop Shaw Pittman LLP
1540 Broadway
New York, New York 10036
Attention:  Jonathan J. Russo, Esq.
Facsimile:  (212) 858-1500
 
If to SG Phoenix:
 
SG Phoenix LLC
110 East 59th Street, Suite 1901
New York, New York 10022
Attention:  Andrea Goren
Facsimile:  (212) 202-7565
 
If to Engmann:
 
Michael Engmann
38 San Fernando Way
San Francisco, California 94127
Facsimile:  (415) 781-4641
 
If to Goodman:
 
Ronald Goodman
31 Tierra Verde Court
Walnut Creek, California 94598
Facsimile:  (925) 933-7548
 
If to Kendu:
 
Kendu Partners Company
c/o Engmann Options
220 Bush Street, Suite 950
San Francisco, California 94104
Facsimile:  (415) 781-4641
 
 
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EXHIBIT 10.56
 
If to MDNH:
 
MDNH Partners L.P.
c/o Engmann Options
220 Bush Street, Suite 950
San Francisco, California 94104
Facsimile:  (415) 781-4641
 
Section 4.4 Assignment
 
.  This Agreement may not be assigned (by operation of law or otherwise) without
the express written consent of the other parties (not to be unreasonably
withheld, delayed or conditioned) and any such assignment or attempted
assignment without such consent shall be void, subject to the terms and
conditions contained in Article III hereof.
 
Section 4.5 Compliance
 
.  In connection with this Agreement and the transactions contemplated hereby,
each of the parties hereto agrees to comply with, and conduct its business in
conformity with, in all material respects all applicable Law.
 
Section 4.6 Amendment
 
.  This Agreement may not be amended or modified except (i) by an instrument in
writing signed by, or on behalf of, the Investors holding at least a
majority-in-interest of the Subject Shares then outstanding or (ii) by a waiver
in accordance with Section 4.7.
 
Section 4.7 Waiver
 
.  The parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of any other party or (ii)  waive compliance with any
of the agreements of any other party or conditions to such party’s obligations
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party that is giving the waiver. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition or a
waiver of any other term or condition of this Agreement. The failure of any
party hereto to assert any of its rights hereunder shall not constitute a waiver
of any of such rights. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
 
Section 4.8 No Third-Party Beneficiaries
 
.  This Agreement shall be binding upon and inure solely to the benefit of the
parties hereto and their respective successors and permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other Person
any legal or equitable right, benefit or remedy of any nature whatsoever, under
or by reason of this Agreement.
 
Section 4.9 Governing Law; Jurisdiction; Waiver of Jury Trial
 
.
 
(a) This Agreement shall be governed by, and construed in accordance with, the
Law of the State of Delaware applicable to contracts executed in and to be
performed in that State, without regard to principles of the conflict of Law.
 
(b) The parties hereto irrevocably submit to the exclusive jurisdiction of any
state or federal court located in the State of Delaware or the State of New York
and waive objection to the venue of any proceeding in such court or that such
court provides an inconvenient forum.
 
 
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EXHIBIT 10.56
 
(c) EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
 
Section 4.10 Specific Performance
 
.  The parties hereto agree that irreparable damage would occur if any provision
of this Agreement were not performed in accordance with the terms hereof and
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement or to enforce specifically the performance of the
terms and provisions hereof, in addition to any other remedy to which they are
entitled at Law or in equity.
 
Section 4.11 Nature of Agreement
 
.  With respect to the contractual liability of the Investors to perform their
respective obligations under this Agreement, with respect to itself or its
property, the Investors each agree that the execution, delivery and performance
by it of this Agreement constitute private and commercial acts done for private
and commercial purposes.
 
Section 4.12 Currency
 
.  Unless otherwise specified in this Agreement, all references to currency,
monetary values and dollars set forth herein means United States (U.S.) dollars
and all payments hereunder shall be made in United States dollars.
 
Section 4.13 Counterparts
 
.  This Agreement may be executed and delivered (including by facsimile
transmission or portable document format (“.pdf”)) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
 
 
[SIGNATURE PAGE FOLLOWS]

 

 
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EXHIBIT 10.56 

IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
executed by its respective duly authorized representative as of the date first
written above.

THE COMPANY
 
COMMUNICATION INTELLIGENCE CORPORATION
 
By:/s/ Guido DiGregorio      
     Name: Guido DiGregorio
     Title:   Chief Executive Officer

THE INVESTORS
 
PHOENIX VENTURE FUND LLC
 
By: SG Phoenix Ventures LLC,
      its Managing Member

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

 
SG PHOENIX LLC
 
By:/s/ Andrea Goren        
     Name:  Andrea Goren
     Title:     Member

 
/s/ Michael Engmann        
MICHAEL ENGMANN

 
/s/ Ronald Goodman        
RONALD GOODMAN

 

Signature Page to Investor Rights Agreement

 

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EXHIBIT 10.56
 
KENDU PARTNERS COMPANY
 
By:/s/ Michael Engmann      
     Name: Michael Engmann
     Title:   General Partner

 
MDNH PARTNERS L.P.
 
By:/s/ Michael Engmann      
     Name: Michael Engmann
     Title:   General Partner
 
 
 
 
 
 
 
 
 
Signature Page to Investor Rights Agreement