EXHIBIT 10.49

 
Execution Version

 

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AMENDMENT NO. 2
TO CREDIT AGREEMENT

 
dated as of May 4, 2010
 

 
by and among
 
COMMUNICATION INTELLIGENCE CORPORATION,
 
as Borrower,
 

LENDERS AND ADDITIONAL LENDERS PARTIES HERETO,
 
and
 
SG PHOENIX LLC,
as Collateral Agent
 

 

500520939v4
 
 

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EXHIBIT 10.49

This AMENDMENT NO. 2 TO CREDIT AGREEMENT in entered into as of May 4, 2010 (this
“Amendment No. 2”) by and among COMMUNICATION INTELLIGENCE CORPORATION, a
Delaware corporation having an address at 275 Shoreline Drive, Suite 500,
Redwood Shores, California 94065 (together with its successors, the “Borrower”),
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”),
Michael Engmann, an individual having an address at 38 San Fernando Way, San
Francisco, California 94127 (“Engmann,” collectively with Phoenix, the “Majority
Lenders”), and SG PHOENIX LLC, as collateral agent (the “Collateral
Agent”).  The Majority Lenders, Additional Lenders, the Existing Lenders and
those lenders providing loans to the Borrower pursuant to this Amendment No. 2
are herein collectively referred to as the “Lenders”.  Phoenix and such other
persons designated by Phoenix to provide Bridge Loans (as defined below) to the
Borrower under this Amendment No. 2 are hereby referred to as the “Bridge
Lenders”.
 
R E C I T A L S:
 
WHEREAS, the Borrower, Phoenix, Engmann and Ronald Goodman, an individual having
an address at 31 Tierra Verde Court, Walnut Creek, California 94598 (“Goodman”,
and Phoenix, Engmann and Goodman, collectively, the “Existing Lenders”), and the
Collateral Agent are parties to, among other documents, (a) the Credit
Agreement, dated as of June 5, 2008 (the “Closing Date”), pursuant to which the
Existing Lenders extended loans to the Borrower in the aggregate principal
amount of $3,637,500, and Amendment No.1 to Credit Agreement (“Amendment No.
1”), dated as of May 29, 2009 (the “Additional Closing Date”), pursuant to which
Phoenix, Engmann and the additional lenders listed on the signature pages
thereto (such additional lenders, collectively, the “Additional Lenders”)
extended loans to the Borrower in the aggregate principal amount of $1,100,000
(collectively, as the same may be further amended, modified, supplemented or
amended and restated from time to time, the “Credit Agreement”), and (b) the
Pledge and Security Agreement, dated as of June 5, 2008 (the “Pledge and
Security Agreement”), pursuant to which the Borrower secured all of its
Obligations under the Loan Documents by granting to the Collateral Agent, for
the benefit of the Existing Lenders, a first-priority Security Interest in and
Lien upon the Collateral, including the Pledged Stock (as defined in the Pledge
and Security Agreement);
 
WHEREAS, the Borrower, Phoenix and the Collateral Agent desire to amend the
Credit Agreement to, among other things, allow for bridge loans in the sole and
absolute discretion of Phoenix in the aggregate principal amount of up to
$1,000,000 (the “Bridge Loans”) to be extended to the Borrower by the Bridge
Lenders;
 
WHEREAS, Section 8.8 of the Credit Agreement provides that amendments to the
Loan Documents, including the Credit Agreement, may only become effective with
the written concurrence of the Majority Lenders, and, that, upon execution by
the Majority Lenders and the Borrower of such amendments, such amendments shall
be binding on the Borrower and all Lenders;
 
 
 

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EXHIBIT 10.49
 
WHEREAS, Phoenix and Engmann constitute the “Majority Lenders” under the Credit
Agreement by holding Obligations that exceed 50% of the Obligations outstanding
under the Credit Agreement; and
 
WHEREAS, the Bridge Lenders desire to become parties to the Credit Agreement, as
amended by this Amendment No. 2.
 
NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties do hereby
agree, as follows:
 
SECTION 1.                     DEFINITIONS IN THIS AMENDMENT NO. 2
 
Except as otherwise defined in this Amendment No. 2 (including the preamble and
the recitals hereof), capitalized terms are used herein with the meanings
ascribed to such terms in the Credit Agreement.
 
SECTION 2.                    CONSENT OF MAJORITY LENDERS TO AMENDMENTS TO
CREDIT AGREEMENT
 
Phoenix and Engmann, as the Majority Lenders, hereby consent to the amendments
to the Credit Agreement contained in this Amendment No. 2, such consent to be
evidenced by the execution of this Amendment No. 2 by Phoenix and Engmann.
 
SECTION 3.                    AMENDMENTS TO CREDIT AGREEMENT
 
3.1.           Amendments to, and Addition of, Certain Definitions in Credit
Agreement.
 
(a)           Amendment to Definition of “Lenders” in Credit Agreement.  The
definition of “Lenders” in the Credit Agreement shall be deemed to include the
Bridge Lender(s).
 
(b)           Addition of Certain Definitions to Credit Agreement.  The
following definitions are hereby added to Section 10.1 of the Credit Agreement:
 
““Amendment No. 2” means that certain Amendment No. 2 to the Credit Agreement,
dated as of May 4, 2010, among the Borrower, the Majority Lenders and the
Collateral Agent.”
 
““Availability Period” means the period from and including the Initial Bridge
Closing Date to but excluding the earlier of August 31, 2010.”
 
““Initial Bridge Closing Date” means the date of Amendment No. 2.”
 
 
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EXHIBIT 10.49
 
““Subsequent Bridge Closing Date” means the closing date of any subsequent Loans
pursuant to Amendment No. 2.”
 
3.2.           Amendments to Section 1.1 of Credit Agreement.
 
(a)           Amendment to Section 1.1(a) of Credit Agreement. Section 1.1(a) of
the Credit Agreement is hereby amended to add the following to the end of
Section 1.1(a):
 
“Phoenix, and/or its designees, agrees to lend to the Borrower from time to time
during the Availability Period in its sole and absolute discretion an aggregate
principal amount not to exceed $1,000,000 and Phoenix agrees to lend the amount
set forth on Schedule 1.1(a) opposite its name with respect to the Initial
Bridge Closing Date and such other amounts as determined by Phoenix in its sole
and absolute discretion with respect to Subsequent Bridge Closing Dates;
provided that all conditions precedent set forth in Section 5 of Amendment No. 2
are satisfied or waived.  For purposes of clarification, the definition of
“Loan” or “Loans” shall include such Bridge Loans made on the Initial Bridge
Closing Date and any Subsequent Bridge Closing Date together with Loans
previously made on the Closing Date and the Additional Closing Date.  Amounts
borrowed under this Section 1.1(a) that are repaid or prepaid may not be
reborrowed.  The Bridge Loans made by the Bridge Lenders hereunder may be made
in multiple drawdowns during the Availability Period; provided, however, that
each drawdown shall be in an amount not less than $50,000.  The Borrower
expressly acknowledges and agrees that Phoenix has the right to accept or reject
any or all future requests for Bridge Loans under this Agreement in its sole and
absolute discretion, and no course of conduct or prior course of dealing shall
establish any obligation or agreement to make future Bridge Loans.  The Borrower
shall execute and deliver to each Bridge Lender a Note in the amount of each of
such Bridge Lender's Bridge Loans in the form attached to this Agreement as
Exhibit 1.1(a) (together with any Notes issued pursuant to Section 1.2(b)),
dated as of the Initial Bridge Closing Date or any Subsequent Bridge Closing
Date, as the case may be.”
 
(b)           Amendment to Section 1.1(b)(i) of Credit Agreement. Section
1.1(b)(i) of the Credit Agreement is hereby amended and restated in its entirety
to read as follows:
 
“(i) with respect to the Loans made by Phoenix on the Closing Date, the Loans
made on the Additional Closing Date, the Bridge Loans made on the Initial Bridge
Closing Date and the Bridge Loans made on any Subsequent Bridge Closing Date, if
any, by wire transfer of immediately available funds to such account or accounts
as may be authorized by the Borrower, less the aggregate amount of all fees and
expenses due to the Lenders hereunder.”
 
(c)           Amendment to Section 1.1 of Credit Agreement. Section 1.1 of the
Credit Agreement is hereby amended by the addition of Section 1.1(c) at the end
of such Section 1.1, such added Section 1.1(c) to read in its entirety as
follows:
 
 
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EXHIBIT 10.49
 
“(c)           Bridge Loan Requests.  During the Availability Period, to request
a Bridge Loan, the Borrower shall notify Phoenix of such request (a “Bridge Loan
Request”) by facsimile transmission, not later than 11:00 a.m., New York City
time, five (5) Business Days before the date of the proposed Bridge Loan in the
form attached hereto as Exhibit A; provided, however, that the Bridge Loan
Request for the initial Bridge Loan may be provided to Phoenix one (1) Business
Day before the date of the proposed Bridge Loan. Each Bridge Loan Request shall
specify, among other things, the following information:
 
(1)           the aggregate amount of the requested Bridge Loan;
 
(2)           the date of such Bridge Loan, which shall be a Business Day;
 
(3)           the location and number of the Borrower's account to which funds
are to be disbursed; and
 
(4)           a financial report as of the date of the Bridge Loan Request
setting forth the following: the current amount of cash the Borrower has in all
of its bank accounts, detailed accounts receivable and accounts payable ageing
for the current period and for 1-30 days, 31-60 days, 61-90 days and over 90
days past due periods in reasonable detail and a detailed listing of the use of
proceeds of the Bridge Loan through a reconciliation of actual cash flow for the
three-month period to projected cash flow for the same period.”
 
3.3.           Amendments to Section 1.2 of Credit Agreement.
 
(a)           Amendment to Section 1.2(a) of Credit Agreement. Section 1.2(a) of
the Credit Agreement is hereby amended and restated in its entirety to read as
follows:
 
“(a)           Interest.  (i) Commencing as of the Closing Date, the Loans made
on such date shall accrue interest on a monthly basis at a rate equal to eight
percent (8%) per annum until the Maturity Date. (ii) Commencing on the
Additional Closing Date, the Loans made on such date shall accrue interest on a
monthly basis at a rate equal to eight percent (8%) per annum until the Maturity
Date. (iii) Commencing on the Initial Bridge Closing Date, the Loans made on
such date shall accrue interest on a monthly basis at a rate equal to eight
percent (8%) per annum until the Maturity Date. (iv) Commencing on each
Subsequent Bridge Closing Date, the Loans made on such date shall accrue
interest on a monthly basis at a rate equal to eight percent (8%) per annum
until the Maturity Date.”
 
(b)           Amendment to Section 1.2(b) of Credit Agreement. The third
sentence of Section 1.2(b) of the Credit Agreement is hereby amended to delete
the words “commencing on June 30, 2008” from clause (i).
 
3.4.           Amendment to Section 1.3 of Credit Agreement. Section 1.3 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
 
 
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EXHIBIT 10.49
 
“1.3           Use of Proceeds.  The Borrower agrees that (a) the proceeds of
the Loans made on the Closing Date shall be used only in accordance with the
following: (1) to refinance the loans due and payable on May 15, 2008 to certain
of the Lenders as set forth on Schedule 1.3 hereto pursuant to the Debt
Refinancing, (2) for working capital and general corporate purposes, in each
case in the ordinary course of business, and (3) to pay fees and expenses in
connection with the Debt Refinancing, including the fees and expenses hereunder;
(b) the proceeds of the Loans made on the Additional Closing Date shall be used
only (1) for working capital and general corporate purposes, in each case in the
ordinary course of business, and (2) to pay fees and expenses relating to or in
connection with Amendment No. 1; and (c) the proceeds of the Loans made on the
Initial Bridge Closing Date and any Subsequent Bridge Closing Date shall be used
only (1) for working capital and general corporate purposes, in each case in the
ordinary course of business consistent with past practice, and (2) to pay fees
and expenses relating to or in connection with Amendment No. 2. In no event
shall the proceeds of the Loans be used to (i) make distributions or (ii) make a
contribution to the capital of any Subsidiary of the Borrower.”
 
3.5.           Amendment to Section 1.4(a) of Credit Agreement.   Section 1.4(a)
of the Credit Agreement is hereby amended and restated in its entirety to read
as follows:
 
“(vii) any registration or filing (or the like) with, or report or notice (or
the like) to, any Governmental Authority, including, without limitation, the
SEC, by any of the Lenders or their Affiliates relating to or in connection with
the transactions contemplated by Amendment No. 1, Amendment No. 2 or the Loan
Documents.”
 
3.6.           Amendment to Section 2 of Credit Agreement.  Section 2 of the
Credit Agreement is hereby amended by the addition of Section 2.13 at the end of
such Section 2, such added Section 2.13 to read in its entirety as follows:
 
“2.13           Periodic Management Calls.  From the Initial Bridge Closing Date
until the Maturity Date, the Borrower agrees to cause its chief executive
officer and chief financial officer to be available for periodic management
teleconference calls at least once per week with the Collateral Agent to provide
the Collateral Agent and its members, representatives and advisors with any and
all material or other relevant information regarding the Borrower and its
assets, liabilities, condition (financial and otherwise), operations and
prospects.”
 
3.7.           Amendment to Section 4.1(a)(ii) of Credit Agreement.  Section
4.1(a)(ii) of the Credit Agreement is hereby amended to add at the end of such
Section 4.1(a)(ii) the following:
 
“In addition to the foregoing, commencing on the Initial Bridge Closing Date and
continuing throughout the duration of the Availability Period, the Borrower will
deliver or cause to be delivered to the Collateral Agent bi-weekly cash flow
projections covering the following three-month period along with a
reconciliation of budget-to-actual cash flow for the 2-week period then ending
prepared and presented in good faith.”
 
 
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EXHIBIT 10.49
 
3.8.           Amendment to Section 5.2 of Credit Agreement.  Section 5.2 of the
Credit Agreement is hereby amended and restated in its entirety as follows:
 
“5.2           No Material Adverse Effect. Since December 31, 2009, there has
been no event or change in facts or circumstances affecting Borrower or any of
its Subsidiaries which individually or in the aggregate have had or could
reasonably be expected to have a Material Adverse Effect and that have not been
disclosed herein or in the attached Schedules.”
 
3.9.           Amendment to Section 6.1(c) of Credit Agreement.  Section 6.1(c)
of the Credit Agreement is hereby amended by the addition of the reference to
“Section 2.13” after the reference to “Section 2.12” and before the reference to
“Section 3” in Section 6.1(c) of the Credit Agreement.
 
SECTION 4.                    REPRESENTATIONS AND WARRANTIES
 
The Borrower represents and warrants to the Lenders and the Collateral Agent
that, except as set forth on the Bring-Down Disclosure Schedule attached hereto
as Annex A (the “Bring-Down Disclosure Schedule”), all representations and
warranties contained in the Credit Agreement and in the Pledge and Security
Agreement are true and correct in all respects at and as of the date hereof as
if made on the date hereof and on the date of any Subsequent Bridge Closing as
if made on such date; provided, however, that, for the purpose of the
representations and warranties made by the Borrower under this Section 4, the
references in the Credit Agreement to the schedules in the Disclosure Schedule
attached to the Credit Agreement shall be deemed to be the references to the
schedules in the Bring-Down Disclosure Schedule. The Borrower further represents
and warrants to the Lenders and the Collateral Agent that (a) no Default has
occurred, or will occur, before and after giving effect to the transactions
contemplated by this Amendment No. 2, (b) the Borrower and its Subsidiaries do
not have outstanding, as of the date hereof, and will not have after giving
effect to the Bridge Loans made on the date hereof, any Indebtedness for
borrowed money or Contingent Obligations except as set forth in Schedule 4(b)
hereto, (c) the Grantors (under and as defined in the Pledge and Security
Agreement) did not have on the Closing Date, and do not have on the date hereof,
(i) any property in which the grant of the security interest contemplated by
Section 2 of the Pledge and Security Agreement is prohibited by any Requirements
of Law (as defined in the Pledge and Security Agreement) of a Governmental
Authority or requires a consent not obtained of any Governmental Authority
pursuant to such Requirement of Law or (ii) any property that is evidenced or
constituted by any contract, license, agreement, instrument or other document
prohibiting the grant of the security interest contemplated by Section 2 of the
Pledge and Security Agreement or providing that such grant constitutes a breach
or default under, or results in the termination of or requires any consent not
obtained under, such contract, license, agreement, instrument or other document
(or, in the case of any Investment Property, Pledged Stock or Pledged Note, any
applicable shareholder or similar agreement prohibiting the grant of such
security interest or providing that such grant constitutes a breach or default
under, or results in the termination of or requires any consent not obtained
under, such 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, with respect to any Investment Property, Pledged Stock or
Pledged Note, such shareholder or similar agreement) providing for such
prohibition, breach, default or termination or requiring such consent is
ineffective under Applicable Law, and except as set forth in Schedule 4(c)
hereto and (d) the Borrower maintains the same insurance coverage (including
scope and amounts) with the same carriers as Borrower had on the Closing Date.
 
 
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EXHIBIT 10.49
 
SECTION 5.                    CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS
AMENDMENT NO. 2 AND MAKING OF BRIDGE LOANS UNDER THIS AMENDMENT NO. 2
 
The effectiveness of this Amendment No. 2 and the obligations of Phoenix to make
the Bridge Loans on the date of this Amendment No. 2 and from time to time in
its sole and absolute discretion, and in all events are subject to satisfaction,
in sole determination by the Collateral Agent, of all of the conditions set
forth below.
 
5.1.            Amendment to Registration Rights Agreement. 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, shall have been amended
to encompass the Warrants issued under Amendment No. 2, such amendment to be in
form and substance satisfactory to the Collateral Agent (the “Registration
Rights Agreement Amendment”).
 
5.2.            Executed Documents. This Amendment No. 2, the Registration
Rights Agreement Amendment, and all other documents and instruments contemplated
hereby and thereby shall have been duly authorized and executed by each of the
parties thereto in form and substance satisfactory to the Collateral Agent, and
the Borrower shall have delivered sufficient original counterparts thereof to
the Collateral Agent.
 
5.3.           Lien Priority.  The Security Interests in favor of the Collateral
Agent and the Lenders pursuant to the Loan Documents shall be valid and
perfected first priority Liens on the Collateral, subject to no Liens other than
Permitted Encumbrances.
 
5.4.           No Litigation.  No action, suit, proceeding, claim or dispute
shall have been brought or otherwise have arisen at law, in equity, in
arbitration or by or before any Governmental Authority or arbitrator against the
Borrower or any of its Subsidiaries or any of their respective assets.
 
5.5.           Fees and Expenses.  All fees and expenses due and payable
pursuant to Section 1.4 of the Credit Agreement and that certain Fee Letter,
dated as of April 26, 2010, by and between the Borrower, Phoenix and the
Collateral Agent shall have been paid in full.  The Borrower expressly
acknowledges and agrees that Phoenix may deduct from the Bridge Loan made on the
Initial Bridge Closing Date the $20,000 initial arrangement fee due to the
Collateral Agent under the Fee Letter.
 
 
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EXHIBIT 10.49
 
5.6.           Closing Certificates.
 
(a) Officer's Certificate.  The Collateral Agent shall have received a
certificate from the chief executive officer or chief financial officer of the
Borrower in form and substance reasonably satisfactory to the Collateral Agent,
to the effect that, except as set forth in the Bring-Down Disclosure Schedule,
all representations and warranties of the Borrower contained in this Amendment
No. 2 and the Credit Agreement are true, correct and complete; that neither the
Borrower nor any of its Subsidiaries is in violation of any of the covenants
contained in the Credit Agreement; that, before and after giving effect to the
transactions contemplated by this Amendment No. 2, no Default or Event of
Default has occurred and is continuing; that the Borrower has satisfied each of
the closing conditions to be satisfied hereby; that the Borrower and its
Subsidiaries have filed all required tax returns and owe no taxes.
 
(b) Certificate of Secretary of Borrower.  On the Initial Bridge Closing Date,
the Collateral Agent shall have received a certificate of the secretary or
assistant secretary of the Borrower certifying as to the incumbency and
genuineness of the signature of each officer of the Borrower executing any
document in connection with the transactions contemplated hereby and certifying
that attached thereto is (i) a true and complete copy of the certificate of
incorporation of the Borrower, and all amendments thereto including the
Certificate of Designations of the Series A Preferred Stock, certified by the
appropriate Governmental Authority in its jurisdiction of incorporation; (ii) a
true and complete copy of the certificate of incorporation of CIC Acquisition
Corp., a Delaware corporation, and all amendments thereto, certified by the
appropriate Governmental Authority in its jurisdiction of incorporation, and a
true and complete copy of the articles of association of Communication
Intelligence Computer Corporation, Ltd., and all amendments thereto, as on file
as of the date hereof in the People's Republic of China and which is in full
force and effect on the date hereof; (iii) a true and complete copy of the
bylaws of the Borrower as in effect on the date of such certification; (iv) a
true and complete copy of resolutions duly adopted by the Board of Directors of
the Borrower authorizing borrowing of the Bridge Loans made on the date hereof,
the execution, delivery and performance of this Amendment No. 2, the
Registration Rights Agreement Amendment, and the other documents relating hereto
or thereto; (v) a true and complete copy of each of the Borrower's insurance
policies, as in effect on the date of such certification; and (vi) true,
complete and correct copies of certificates of insurance for each of the
Borrower's insurance policies each showing the Collateral Agent as an additional
insured and/or loss payee, other than its directors and officers insurance
policy.  On each Subsequent Bridge Closing Date, the Collateral Agent shall have
received a certificate of the secretary or assistant secretary of the Borrower
certifying that since the Initial Bridge Closing Date (i) the certificate of
incorporation of the Borrower, and all amendments thereto including the
Certificate of Designations of the Series A Preferred Stock has not been
amended, modified or cancelled and is in full force and effect; (ii) the
certificate of incorporation of CIC Acquisition Corp., and all amendments
thereto, and the articles of association of Communication Intelligence Computer
Corporation, Ltd., and all amendments thereto, have not been amended, modified
or cancelled and are in full force and effect; (iii) the bylaws of the Borrower
have not been amended, modified or cancelled and are in full force and effect;
(iv) the resolutions duly adopted by the Board of Directors of the Borrower
authorizing borrowing of the Bridge Loans made on the date hereof, the
execution, delivery and performance of this Amendment No. 2, the Registration
Rights Agreement Amendment, and the other documents relating hereto or thereto
have not been amended or modified and remain in full force and effect; (v) the
Borrower's insurance policies have not been amended, modified or cancelled and
are in full force and effect; and (vi) certificates of insurance for each of the
Borrower's insurance policies each showing the Collateral Agent as an additional
insured and/or loss payee, other than its directors and officers insurance
policy, have not been amended, modified or cancelled and are in full force and
effect.
 
 
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EXHIBIT 10.49
 
(c) Certificates of Good Standing.  On or before the Initial Bridge Closing
Date, the Collateral Agent shall have received certificates as of a recent date
of the good standing of the Borrower under the laws of its jurisdiction of
incorporation and the State of California.
 
5.7.           Collateral.  The Collateral Agent shall have received within ten
(10) Business Days of the Initial Bridge Closing Date the results of Lien
searches of all filings made against each of the Borrower and its Subsidiaries
under the Uniform Commercial Code (and local tax and judgment filing offices) as
in effect in any jurisdiction in which any of its respective assets are located,
indicating, among other things, that the assets of the Borrower and its
Subsidiaries and the stock of the Borrower and its Subsidiaries are free and
clear of any Liens, except for Permitted Encumbrances.
 
5.8.           Insurance.  The Collateral Agent shall have received within ten
(10) Business Days of the Initial Bridge Closing Date certificates of insurance
in the form required under Section 2.2(b) of the Credit Agreement and the
Security Documents and otherwise in form and substance reasonably satisfactory
to the Collateral Agent.
 
5.9.           Consents.  The Borrower shall have delivered to the Collateral
Agent all necessary approvals, authorizations and consents, if any, of all
Persons, Governmental Authorities, and courts having jurisdiction with respect
to the execution and delivery of this Amendment No. 2, the Registration Rights
Agreement Amendment, and the other documents relating hereto or thereto, the
granting of the Security Interest and all such approvals shall be in form and
substance satisfactory to the Collateral Agent.
 
5.10.            No Injunction, Etc.  No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority or arbitrator challenging or seeking to
enjoin, restrain or prohibit, or to obtain substantial damages in respect of, or
which is related to or arises out of this Amendment No. 2, the Registration
Rights Agreement Amendment, and the other documents relating hereto or thereto,
or the consummation of the transactions contemplated hereby or thereby, or
which, as determined by the Collateral Agent in its sole discretion, would make
it inadvisable to consummate such transactions.  No order, decree, temporary
restraining order, preliminary or permanent injunction or other order issued by
any Governmental Authority or arbitrator preventing such transactions shall be
in effect.  The making of the Bridge Loans on the date hereof or any Subsequent
Bridge Closing Date and the consummation of such transactions shall not be
prohibited by any Applicable Law or other legal requirement and shall not
subject any Bridge Lender to any penalty or, in the sole judgment of Phoenix,
any other liability or onerous condition under any Applicable Law.
 
 
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EXHIBIT 10.49
 
5.11.           Proceedings and Documents.  All opinions, certificates and other
instruments and all proceedings in connection with the transactions contemplated
by this Amendment No. 2, the Registration Rights Agreement Amendment, and the
other documents relating hereto or thereto shall be reasonably satisfactory in
form and substance to the Collateral Agent.  The Collateral Agent shall have
received copies of all other instruments and other evidence as the Lenders may
reasonably request, in form and substance reasonably satisfactory to the
Collateral Agent, with respect to the transactions contemplated by this
Amendment No. 2, the Registration Rights Agreement Amendment, and the other
documents relating hereto or thereto and the taking of all actions in connection
herewith or therewith.  The Collateral Agent shall have received such other
agreements (including, without limitation, deposit account control agreements),
instruments, approvals, opinions, certificates and other documents as the
Collateral Agent may reasonably request in connection with such transactions and
actions, all in form and substance satisfactory to the Collateral Agent, in its
sole discretion.
 
5.12.           Warrants.  The Borrower shall issue Initial Warrants to the
Bridge Lender(s) in accordance with Section 1.9 of the Credit Agreement on the
Initial Bridge Closing Date and each Subsequent Bridge Closing Date.
 
SECTION 6.                    EFFECTIVENESS OF AMENDMENTS
 
The amendments to the Credit Agreement contained in this Amendment No. 2 shall
become effective on and as of the date of the satisfaction of the conditions
precedent set forth in Section 5 hereof other than in the case of Sections 5.9
and 5.10. From and after such date, each reference in the Credit Agreement
(including the schedules and exhibits thereto) to the “Agreement”, or any like
expression referring to the Credit Agreement, shall be deemed to refer to the
Credit Agreement as amended by this Amendment No. 2. The Credit Agreement, other
than as amended hereby, shall remain unchanged and in full force and effect.
 
SECTION 7.                    MISCELLANEOUS
 
7.1.           Severability.   The invalidity, illegality, or unenforceability
in any jurisdiction of any provision of this Amendment No. 2 shall not affect or
impair the remaining provisions in this Amendment No. 2 or any such invalid,
unenforceable or illegal provision in any jurisdiction in which it is not
invalid, unenforceable or illegal.
 
7.2.           Headings.   Sections and Section headings in this Amendment No. 2
are included herein for convenience of reference only and shall not constitute a
part of this Amendment No. 2 for any other purposes or be given substantive
effect.
 
 
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EXHIBIT 10.49
 
7.3.           Applicable Law.  THIS AMENDMENT NO. 2 SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT REQUIRE OR
PERMIT APPLICATION OF THE LAWS OF ANY OTHER STATE OR JURISDICTION (OTHER THAN
SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
 
7.4.           Consent to Jurisdiction and Service of Process.
 
(a) THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
ANY UNITED STATES FEDERAL COURT OR STATE COURT IN THE STATE OF NEW YORK, COUNTY
OF NEW YORK, HAVING SUBJECT MATTER JURISDICTION OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AMENDMENT NO. 2. THE BORROWER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT, PERSONAL JURISDICTION OF ANY SUCH COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT
OF THE LENDERS TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY
OTHER JURISDICTION.
 
(b)           THE BORROWER HEREBY AGREES THAT SERVICE OF THE SUMMONS AND
COMPLAINT AND ALL OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING BY REGISTERED MAIL, RETURN RECEIPT
REQUESTED, A COPY OF SUCH PROCESS TO THE BORROWER AT THE ADDRESS TO WHICH
NOTICES TO THE BORROWER ARE THEN TO BE SENT PURSUANT TO SECTION 9.2 OF THE
CREDIT AGREEMENT AND THAT PERSONAL SERVICE OF PROCESS SHALL NOT BE REQUIRED.
NOTHING HEREIN SHALL BE CONSTRUED TO PROHIBIT SERVICE OF PROCESS BY ANY OTHER
METHOD PERMITTED BY LAW.
 
 
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EXHIBIT 10.49
 
7.5.            Waiver of Jury Trial.  THE LENDERS, THE BORROWER AND THE
COLLATERAL AGENT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AMENDMENT NO. 2 OR
ANY DEALINGS BETWEEN OR AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS
AMENDMENT NO. 2 AND ANY RELATIONSHIP THAT IS BEING ESTABLISHED AMONG ANY OF
THEM. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF
THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE
LENDERS, THE BORROWER AND THE COLLATERAL AGENT ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AMENDMENT NO. 2 AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE LENDERS,
THE BORROWER AND THE COLLATERAL AGENT FURTHER WARRANT AND REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE LOAN
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE
EVENT OF LITIGATION, THIS AMENDMENT NO. 2 MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
 
7.6.            Counterparts. This Amendment No. 2 may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute but one and the same instrument.
 

[Signatures follow.]
 

500520939v4
 
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EXHIBIT 10.49

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be
duly executed by their respective officers as of the day and year first above
written.
 
BORROWER:
COMMUNICATION INTELLIGENCE CORPORATION
 
By:    /s/ Francis V. Dane                       
    Name:  Francis. V. Dane
    Title:     CFO
 
MAJORITY LENDERS:
PHOENIX VENTURE FUND LLC
 
By: SG Phoenix Ventures LLC,
       its Managing Member
By:     /S/ Andrea Goren                                                      
             Name:   Andrea Goren
             Title:      Member
 
 
 
 
 
 
     /s/  Michael Engmann                      
             MICHAEL ENGMANN
 
 
 
 
 
 
COLLATERAL AGENT:
SG PHOENIX LLC
 
By:  /s/ Andrea Goren                          
    Name:    Andrea Goren
    Title:      Member
 
 
 

500520939v4
 
 

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EXHIBIT 10.49

ACKNOWLEDGED AND AGREED TO:

BRIDGE LENDER:
PHOENIX VENTURE FUND LLC
 
By: SG Phoenix Ventures LLC,
       its Managing Member
By:   /s/ Andrea Goren                                                          
             Name:   Andrea Goren
             Title:     Member