SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C.
------------------------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) June 27, 1996
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COMMUNICATION INTELLIGENCE CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-19301
94-2790442
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(Commission File Number) IRS Employer
Identification Number
275 Shoreline Drive, Suite 520, Redwood Shores, CA 94065
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(Address of Principal Executive Offices)
(415) 802-7888
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, If Changed Since Last Report)
<PAGE>
ITEM 5. Other Events
On June 27, 1996, the Company completed a private placement (the
"Placement") of 600,000 shares (the "Shares") of its Common Stock (the "Common
Stock") at a purchase price of $4.50 per Share with aggregate gross proceeds of
$2,700,000. In addition, the Company agreed to issue additional shares of
Common Stock (the "Extra Shares") to the purchasers (the "Purchasers") in the
Placement if the average sale price of the Common Stock is less than $4.50 per
share for a specified period prior to the effectiveness of a registration
statement to be filed by the Company covering the Shares.
The Common Stock has been approved for quotation on the NASDAQ SmallCap
Market, subject to the consummation of the Placement. The Company expects
trading of the Common Stock on that market to commence on July 1, 1996.
In connection with the Placement, the Purchasers were given certain
registration rights to have the Shares (and the Extra Shares, if any) registered
under the Securities Act of 1933, as amended. The Company agreed to file a
registration statement covering the Shares (and Extra Shares, if any) within 30
days after the closing of the Placement. Libra Investments, Inc. ("Libra")
acted as placement agent for the Company in connection with the Placement. As
compensation for its role as placement agent, Libra's designee received
five-year warrants to purchase 30,000 shares of Common Stock at an initial
exercise price of $4.50, and received certain registration rights with
respect to the Shares purchasable upon exercise of these warrants. In addition,
the Company paid Libra a $135,000 cash payment in connection with the Placement.
Set forth below is an unaudited balance sheet of the Company at March 31,
1996, actual and as adjusted to give pro forma effect to the Placement.
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<PAGE>
Unaudited
(In Thousands)
March 31, March 31,
Assets 1996 1996
Actual Pro Forma
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Current assets:
Cash and cash equivalents $2,400 $2,400
Short-term investments 2,502 5,013
Accounts receivable, net 192 192
Inventories 323 323
Other current assets 333 333
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Total current assets 5,750 8,261
Note receivable from officer 210 210
Property and equipment, net 371 371
Capitalized software development costs, net 66 66
Other assets 690 690
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Total assets $7,087 $9,598
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Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 93 $ 93
Pre-petition liabilities - current 882 882
Accrued compensation 377 377
Other accrued liabilities 592 592
Deferred revenue 2,474 2,474
Obligations under capital leases - current 25 25
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Total current liabilities 4,443 4,443
Obligations under capital leases - noncurrent 8 8
Commitments
Stockholders' equity:
Common stock 403 409
Additional paid-in capital 51,804 54,309
Accumulated deficit (49,439) (49,439)
Cumulative foreign currency translation adjustment (132) (132)
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Total stockholders' equity 2,636 5,147
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Total liabilities and stockholders' equity $7,087 $9,598
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<PAGE>
ITEM 7. Exhibits
(c) The following documents are filed herewith as exhibits to this Form
8-K:
1. Engagement Letter between the Company and Libra Investments, Inc.
dated May 28, 1996.
2. Form of Subscription Agreement between the Company and the
Purchasers, dated as of June 13, 1996.
3. Form of Registration Rights Agreement between the Company and the
Purchasers, dated as of June 13, 1996.
4. Form of Warrant of the Company issued to Libra's designee on
June 27, 1996.
5. Form of Registration Rights Agreement between the Company and
Libra dated June 27, 1996.
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<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 27, 1996
COMMUNICATION INTELLIGENCE CORPORATION
By: /s/ Philip S. Sassower
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Philip S. Sassower
Chairman of Finance Committee
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<PAGE>
EXHIBIT INDEX
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EXHIBITS DESCRIPTION
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1. Engagement Letter between the Company and Libra Investments, Inc.
dated May 28, 1996.
2. Form of Subscription Agreement between the Company and the
Purchasers, dated as of June 13, 1996.
3. Form of Registration Rights Agreement between the Company and the
Purchasers, dated as of June 13, 1996.
4. Form of Warrant of the Company issued to Libra's designee on
June 27, 1996.
5. Form of Registration Rights Agreement between the Company and
Libra dated June 27, 1996.
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Libra Investments, Inc. Main: (310) 312-5600
Fax: (310) 312-5666
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11766 Wilshire Boulevard, Suite 870, Los Angeles, CA 90025
EXHIBIT 1
May 29, 1996
Mr. James Dao
Chairman and Chief Executive Officer
and
Mr. Philip S. Sassower
Chairman, Finance Committee
Communication Intelligence Corporation
275 Shoreline Drive
Redwood Shores, CA 94065
Gentlemen:
Pursuant to the engagement letter dated May 28, 1996 between
Communication Intelligence Corporation (the "Company") and Libra Investments,
Inc. ("Libra"), this will confirm our understanding that Libra will place as
placement agent for the Company with no more than 10 accredited investors (the
"Buyers"), and the Company will sell, not less than 550,000 shares and up to
600,000 shares of Common Stock at a price of $4.50 per share (the "Placement"),
provided that the purchase and sale closes no later than the earlier of (i) the
date five (5) business days after the Company's Common Stock is approved for
listing, subject to notification of the consummation of the Placement, on the
NASDAQ/Small Cap market and (ii) July 31, 1996. Libra and the Company agree to
use their reasonable best efforts to cause such closing to occur by such date.
The purchase price of $4.50 per share relates to the market price of the Common
Stock on May 28, 1996 when we began discussions with Buyers.
As we discussed, the Buyers will receive registration rights from the
Company to effect the public resale of these shares, and the Company agrees to
provide a "make-whole" right to the Buyers so that in the event the average
closing public trading price of the Common Stock for the twenty (20) business
days immediately preceding the date the resale registration statement is
declared effective (the "Average Price") is less than the purchase price paid by
the Buyers, the Company will issue additional shares of Common Stock without
further payment by the Buyers as follows (assumes the Placement consists of
550,000 shares at $4.50 per share): Additional shares to be issued shall total
(a) $2,475,000 divided by the Average Price less (b) 550,000. The purchases and
sales contemplated hereby are subject to execution and delivery of mutually
acceptable documentation between the Company and each Buyer. Subscription
documents are expected to be executed the week of June 3, 1996. Funding will be
contingent upon the Common Stock being approved for listing, subject to
notification of the consummation of the Placement, on the NASDAQ/Small Cap
market.
<PAGE>
Libra Investments, Inc.
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Mr. James Dao
Mr. Philip S. Sassower
May 29, 1996
Page Two
The Company acknowledges that Libra may confirm the foregoing
transaction with the Buyers on the terms set forth herein; provided that such
confirmations shall not diminish the obligations of Libra hereunder.
This letter may be executed in counterparts, each of which shall be an
original, but all of which shall constitute one instrument.
Please confirm the foregoing by signing this letter in the place
indicated below and returning it to me by facsimile.
Very truly yours,
LIBRA INVESTMENTS, INC.
By:/s/ Jess M. Ravich, Chairman
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Jess M. Ravich, Chairman
Confirm and agreed:
COMMUNICATION INTELLIGENCE CORPORATION
By: /s/ James Dao
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James Dao, Chairman and Chief Executive Officer
By:
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Philip S. Sassower, Chairman of the Finance Committee
<PAGE>
Libra Investments, Inc. Main: (310) 312-5600
Fax: (310) 312-5666
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11766 Wilshire Boulevard, Suite 870, Los Angeles, CA 90025
May 28, 1995
Strictly Confidential
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Communication Intelligence Corporation
275 Shoreline Drive
Redwood Shores, CA 94065
Gentlemen:
This letter will confirm our understanding that Communications
Intelligence Corporation, a Delaware corporation (the "Issuer"), has engaged
Libra Investments, Inc. (the "Advisor") to act on a non-exclusive basis as the
Issuer's placement agent in connection with the issuance and sale by the Issuer
of Common Stock (the "Securities") in a private placement to raise aggregate
gross proceeds of up to $2,500,000 (the "Private Placement").
Section 1. Services to be Rendered. In connection with this
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engagement, the Advisor shall act as placement agent for the Issuer in
connection with the Private Placement, which duties will include:
(a) developing a list of potential purchasers of the
Securities;
(b) consulting with the Issuer from time to time as to
such potential purchasers;
(c) if requested, assisting the Issuer in the preparation
and distribution of appropriate offering materials in consultation
with the Issuer's counsel; and
(d) attempting to arrange the Private Placement of the
Securities at a price and on terms acceptable to the Issuer, it being
understood and agreed that the aggregate offering price for the
Securities is currently expected to be approximately $2,500,000.
<PAGE>
Libra Investments, Inc.
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Nothing contained herein constitutes a commitment on the part of the Advisor to
purchase any of the Securities, a commitment on the part of the Issuer to sell
any such Securities or an assurance that the Private Placement will be
completed, and the Advisor shall not have the power or authority to bind the
Issuer to any sale of the Securities without the Issuer's written consent. The
Advisor acknowledges that it is retained on a non-exclusive basis and that the
Issuer may retain other financial advisors and placement agents in connection
with the Private Placement; provided, that any such engagement shall not limit
the Issuer's obligations to the Advisor hereunder.
Section 2. Compensation. In consideration of the Advisor's
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agreements hereunder, the Advisor shall be paid an advisory fee of 5.0% of the
aggregate gross proceeds from the Securities placed by the Advisor and sold by
the Issuer, payable in immediately available funds at the closing of the Private
Placement. In addition, as further consideration for Advisor's agreements
hereunder, the Issuer shall issue to the Advisor warrants to purchase that
number of shares of the Issuer's Common Stock equal to 5.0% of the number of
shares of Common Stock placed by the Advisor and sold by the Issuer in the
Private Placement (the "Warrants"). The Warrants shall have an exercise price
per share equal to the price per share paid by the purchasers of the Securities
at the closing and a five year term and shall be in a form reasonably acceptable
to both the Issuer and the Advisor. In addition, the Advisor shall be granted
certain demand and "piggyback" registration rights with respect to the Common
Stock issuable upon exercise of the Warrants on terms mutually acceptable to the
Issuer and the Advisor pursuant to a registration rights agreement in form
reasonably acceptable to both the Issuer and the Advisor.
No fee payable to any other financial advisor either by the
Issuer or any other entity shall reduce or otherwise affect the fees payable
hereunder to the Advisor. If the Advisor enters into any agreement or
understanding with any broker, finder or other similar person to assist it in
placing the Securities hereunder, any fee or other compensation due such person
shall be payable by the Advisor.
Section 3. The Advisor's Expenses. In addition to the
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compensation payable pursuant to Section 2 of this Agreement, the Issuer shall
reimburse the Advisor for all reasonable costs and expenses (including without
limitation reasonable fees and disbursements of its legal counsel) incurred in
connection with this engagement; provided the maximum amount of costs and
expenses reimbursable by the Issuer hereunder shall not exceed $6,250; and
provided further, that the foregoing limitation shall not apply with respect to
cost and expenses payable pursuant to Section 5 hereof.
Section 4. Term of Engagement. Any party to this Agreement may
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terminate this Agreement at any time after July 31, 1996, with or without cause,
by giving 10 days'
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<PAGE>
Libra Investments, Inc.
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written notice to the other parties; provided, however, that Section 3, the
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second paragraph of this Section 4 and Sections 5 and 6 hereof shall survive
termination of this Agreement.
The Advisor shall be entitled to receive its full compensation
under Section 2 hereof if at any time prior to the date twelve months after the
termination of this Agreement a transaction is agreed to or consummated by the
Issuer involving the sale or issuance of securities to a person or entity
contacted by the Advisor with respect to the Private Placement (except to the
extent previously contacted by or on behalf of the Issuer) and identified in
writing to the Issuer promptly after termination of this Agreement.
Section 5. Indemnification. The Company agrees to the
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indemnification, contribution and expense reimbursement obligations set forth in
Exhibit A hereto, the provisions of which are incorporated herein in their
entirety.
Section 6. Cooperation. The issuer shall furnish the Advisor
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with all information, data or documents that the Advisor shall reasonably deem
appropriate in connection with its activities hereunder and shall provide the
Advisor access to the Issuer's officers, employees and professional advisors at
such times and dates as the Advisor may reasonably request. Issuer represents
and warrants that all such information, data and documents shall be complete and
correct in all material respects and shall not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading. The Issuer agrees to advise the Advisor in
writing if any such information, data or documents becomes inaccurate,
misleading or incomplete in any respect during the term of this engagement.
Unless so advised, the Advisor shall be entitled to rely on the accuracy and
completeness of such information, data and documents, and the Advisor shall not
be required to make an independent verification thereof. If requested by the
Advisor, the Issuer shall provide to the Advisor a certificate signed by two of
its executive officers as to the accuracy of the second sentence of this
paragraph at each closing of a sale of the Securities.
It is further understood that the Issuer shall involve the
Advisor in all discussions between the Issuer and potential purchasers located
by the Advisor and shall make available to the Advisor all information regarding
such potential purchasers that it shall receive from any source whatsoever. The
Issuer recognizes and confirms that the Advisor in acting pursuant to this
authorization will be using information provided by the Issuer and that the
Advisor does not assume responsibility for the accuracy or completeness of any
information so provided by the Issuer.
Section 7. Outside Advisors and Conflicts. The Issuer
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acknowledges that the Advisor and its affiliates may have and may continue to
have investment banking, broker-dealer and other relationships with parties
other than the Issuer pursuant to which the Advisor
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<PAGE>
Libra Investments, Inc.
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may acquire information of interest to the Issuer. The Advisor shall have no
obligation to disclose such information to the Issuer (except to the extent such
information relates directly to the Issuer or the Securities), or to use such
information in connection with its efforts hereunder.
The Issuer acknowledges that certain employees of the Advisor own
shares of Common Stock of the Issuer, either directly or indirectly through
indirect ownership of interests in CIC Standby Ventures, L.P., a shareholder of
the Issuer and through LB-CIC Investors, L.P.
Section 8. Notices. All notices and other communications
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provided for in this Agreement shall be made by first class mail or telecopier.
All notices to the Issuer shall be delivered at the address shown on the first
page of this agreement or to telecopier number (415) 802-7777. All notices to
the Advisor shall be delivered as follows:
Libra Investments, Inc.
11766 Wilshire Boulevard
Suite 870
Los Angeles, CA 90025
Attn: Mr. Jess M. Ravich
Telecopier: (310) 312-5640
Either party hereto may amend such addresses or telecopier
information by written notice to the other party delivered as provided in this
Section 8.
Section 9. Third Party Beneficiaries. This Agreement is
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intended solely for the benefit of the parties hereto and, with the exception of
the rights and benefits conferred upon the Indemnified Parties by Section 5 of
this Agreement, shall not be deemed or interpreted to confer any rights upon any
third parties.
Section 10. Governing Law. This Agreement shall be governed and
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construed in accordance with the laws of the State of California without giving
effect to the choice of law or conflict of law principles thereof.
Section 11. Counterparts. This Agreement may be executed in any
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number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement.
Section 12. Complete Agreement; Amendments; Assignment. This
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Agreement sets forth the entire understanding of the parties relating to the
subject matter hereof and supersedes and cancels any prior communications,
understandings and agreements between the
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<PAGE>
Libra Investments, Inc.
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parties. This Agreement may not be amended or modified except in writing. This
Agreement shall apply to, inure to the benefit of and be binding upon and
enforceable against the Advisor and its successors and assigns; provided,
--------
however, that the Advisor shall not assign this Agreement to any party that is
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not an affiliate of the Advisor.
If the foregoing terms meet with your approval, please indicate
your acceptance by signing and returning the attached copy of this letter to us.
Very truly yours,
LIBRA INVESTMENTS, INC.
By:/s/ Jess M. Ravich
------------------------
Jess M. Ravich
Chairman
AGREED TO AND ACCEPTED:
COMMUNICATIONS INTELLIGENCE
CORPORATION
By:/s/ James Dao
------------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
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The Issuer agrees to indemnify and hold harmless Libra
Investments, Inc. ("Libra"), its affiliates, and each person, if any, who
controls Libra, or any of its affiliates, within the meaning of either the
Securities Act of 1933, as amended (the "Act") or the Securities Exchange Act of
1934, as amended (a "Controlling Person"), and the respective agents, employees,
officers and directors of Libra, its affiliates, and any such Controlling Person
(each an "Indemnified Party" and collectively, the "Indemnified Parties" or the
"Libra Group"), from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation and as incurred,
reasonable costs of investigating, preparing or defending any such claim or
action, whether or not an Indemnified Party is a party thereto, provided that
the Issuer shall not be obligated to advance such costs to any Indemnified Party
unless it has received from such Indemnified Party an undertaking to repay to
the Issuer the costs so advanced if it should be determined by final judgment of
a court of competent jurisdiction that such Indemnified Person was not entitled
to indemnification hereunder with respect to such costs) arising out of, or in
connection with any activities contemplated by the letter to which this Exhibit
A is attached or any other services rendered in connection therewith, including,
but not limited to, losses, claims, damages, liabilities or expenses arising out
of or based upon (i) any untrue statement or any alleged untrue statement of a
material fact or any omission or any alleged omission to state a material fact
in any of the disclosure or offering or confidential information documents,
including any documents publicly filed by the Issuer with the Securities and
Exchange Commission and delivered to purchasers of the Issuer's securities in
connection with the transaction contemplated by the letter to which this Exhibit
A is attached (the "Disclosure Documents") pertaining to any of the transactions
or proposed transactions contemplated by such letter (collectively, the
"Transaction"), or (ii) any engagement or retention by the Issuer of any other
person, corporation or entity that has acted or is acting as a finder, agent,
broker, dealer, consultant or advisor to or on behalf of the Issuer. The Issuer
will not, however, be responsible for any claims, liabilities, losses, damages
or expenses that are determined by final judgment of a court of competent
jurisdiction to result from such Indemnified Party's gross negligence, willful
misconduct or bad faith or from information provided by Libra to the Issuer for
inclusion in the Disclosure Documents. The Issuer also agrees that (i) no
Indemnified Party shall have liability to the Issuer or any other person in
connection with the services rendered pursuant to the agreement except for
claims, liabilities, damages, losses or expenses, including reasonable legal
fees, incurred by the Issuer that are determined by final judgment of a court
of competent jurisdiction, not subject to appeal, to have resulted from such
Indemnified Person's gross negligence, willful misconduct or had faith or from
information provided by Libra to the Issuer for inclusion in the Disclosure
Documents and (ii) in no event shall the Indemnified Parties be liable, in the
aggregate, to the Issuer for an
<PAGE>
amount greater than the fee actually received by Libra pursuant to the letter to
which this Exhibit A is attached.
In case any action shall be brought against an Indemnified Party
with respect to which indemnity may be sought against the Issuer under this
agreement, Libra or another Indemnified Party shall promptly notify the Issuer
in writing and the Issuer shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to Libra and payment
of all reasonable fees and expenses; provided, however, in the event the Issuer
assumed the defense of any such action, an Indemnified Person may,
notwithstanding such assumption by the Issuer of such defense, retain separate
counsel the cost of which shall be borne by Issuer if (i) the Issuer has failed
to provide counsel reasonably satisfactory to such Indemnified Person in a
timely manner, (ii) counsel which will be provided by the Issuer reasonably
determines that its representation of such Indemnified Person would present it
with a conflict of interest or (iii) the Indemnified Person based upon an
opinion of reputable counsel reasonably determines that there may be legal
defenses to it which are materially different from or in addition to those
available to the Issuer. The failure to so notify the Issuer on a prompt basis
shall not affect any obligations the Issuer may have to the Indemnified Parties
under this letter agreement or otherwise unless the Issuer is materially
adversely affected by such failure.
The Issuer shall not be liable for any settlement of any such
action effected without the written consent of the Issuer (which shall not be
unreasonably withheld) and the Issuer agrees to indemnify and hold harmless the
Indemnified Parties from and against any loss or liability by reason of
settlement of any action effected with the consent of the Issuer. In addition,
the Issuer will not, without the prior written consent of Libra, settle or
compromise or consent to the entry of any judgment in or otherwise seek to
terminate any pending or threatened action, claim, suit or proceeding in respect
to which indemnification or contribution may be sought hereunder (whether or not
Libra is a party thereto) unless such settlement, compromise, consent or
termination includes an express unconditional release of Libra and the other
Indemnified Parties, satisfactory in form and substance to Libra, from all
liability arising out of such action, claim, suit or proceeding.
If for any reason the foregoing indemnity is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party harmless, then in
lieu of indemnifying such Indemnified Party, the Issuer shall contribute to the
amount paid or payable by such Indemnified Party as a result of such claims,
liabilities, losses, damages, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuer on the one
hand and by Libra on the other from the Transaction or (ii) if the allocation
provided by clause (i) is not permitted under applicable law, in such proportion
as is appropriate to reflect not only the relative benefits received by the
Issuer on the one hand and Libra on the other, but also the
<PAGE>
relative fault of the Issuer and Libra as well as any other relevant equitable
considerations. Notwithstanding the provisions of this Exhibit A, the aggregate
contribution of all Indemnified Parties shall not exceed the amount of fees
actually received by Libra pursuant to the letter to which this Exhibit A is
attached. It is hereby further agreed that the relative benefits to the Issuer
on the one hand and Libra on the other with respect to any Transaction shall be
deemed to be in the same proportion as (i) the total value of the Transaction
bears to (ii) the fees paid to Libra with respect to such Transaction. The
relative fault of the Issuer on the one hand and Libra on the other with respect
to the Transaction shall be determined by reference to, among other things,
whether any untrue or alleged untrue statement of material fact or the omission
or alleged omission to state a material fact related to information supplied by
the Issuer or by Libra and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act), or of gross negligence, willful misconduct or bad faith shall
be entitled to contribution from any person who was not guilty of such
fraudulent representation, gross negligence, willful misconduct or bad faith.
The indemnity, contribution and expense reimbursement obligations
set forth herein (i) shall be in addition to any equitable remedies the
Indemnified Parties may have at common law or otherwise, (ii) shall survive the
conclusion of Libra's services in connection with the Transaction and (iii)
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of Libra or any other Indemnified Party.
EXHIBIT 2
SUBSCRIPTION AGREEMENT
OF
COMMUNICATION INTELLIGENCE CORPORATION
Communication Intelligence Corporation
275 Shoreline Drive
Redwood Shores, CA 94065
Gentlemen:
1. Subscription. (a) The undersigned ("Subscriber") hereby agrees to
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purchase from Communication Intelligence Corporation, a Delaware Corporation
(the "Company"), the number of shares of common stock, par value $0.01 per
share, of the Company (the "Common Stock") set forth opposite the Subscriber's
name on the signature page hereto (the "Shares"), for a purchase price of $4.50
per Share, the aggregate purchase price for the Shares being purchased by
Subscriber being the "Purchase Price."
(b) Subscriber hereby acknowledges (i) that this subscription shall
not be deemed to have been accepted by the Company until the Company indicates
its acceptance by returning to Subscriber an executed copy of this subscription,
and (ii) that acceptance by the Company of this subscription is conditioned upon
the information and representations of Subscriber hereunder being complete, true
and correct as of the date of this subscription and as of the date of the
Closing (as hereinafter defined).
2. Extra Shares. (a) The Company agrees that, if the Average Sales
------------
Price (as hereinafter defined) is less than $4.50 per Share, the Company will
issue that number of additional shares of Common Stock to the Subscriber (the
"Extra Shares") equal to: the Purchase Price divided by the Average Sales Price,
less the number of Shares purchased by the Subscriber pursuant to Section 1
hereof. For purposes hereof, the Average Sales Price shall mean the average of
the daily closing prices of the Common Stock for the twenty business days prior
to two business days before the effective date of the Registration Statement
filed by the Company pursuant to its obligations under Section 2 of that certain
Registration Rights Agreement dated as of June 13, 1996 by and among the Company
and, among others, the Subscriber (the "Registration Rights Agreement") (such
period being referred to as the "Pricing Period"). For purposes of this Section
2, the daily closing price shall mean (i) if the Common Stock is listed or
admitted to trading on a national securities exchange, the NASDAQ National
Market System or the NASDAQ SmallCap Market System, the average of the highest
and lowest reported sales price of the Common Stock or, (ii) if the sales price
of the Common Stock as provided in clause (i) is not available, the average of
the reported closing bid and asked price of the Common Stock.
<PAGE>
(b) In case the Company shall at any time after the date hereof and
prior to the date on which it issues Extra Shares hereunder (i) declare a
dividend on the outstanding Common Stock payable in shares of its capital stock,
(ii) subdivide the outstanding Common Stock, (iii) combine the outstanding
Common Stock into a smaller number of shares, or (iv) issue any shares of its
capital stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then, in each case, proportionate
adjustments shall be made in the calculation of the number of Extra Shares
issuable to the Subscriber pursuant to Section 2(a) so that the Subscriber shall
receive the aggregate number and kind of Extra Shares which the Subscriber would
be entitled to receive had the Extra Shares issuable to the Subscriber pursuant
to the formula set forth in Section 2(a) been held by the Subscriber prior to
any such dividend, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur during such period.
(c) (i) The Company shall give written notice to the Subscriber of
the filing date of the Registration Statement referred to in Section 2(a)
hereof. Subscriber covenants and agrees that commencing fourteen (14) days
prior to such filing date until the last day of the Pricing Period (the "Covered
Period"), Subscriber will not engage in any short sales, loan any Shares or
other shares of Common Stock to another person, acquire a put option or grant a
call option with respect to the Shares or any other shares of Common Stock owned
by such Subscriber or its affiliates, or engage in any other sales activity that
could have any impact on the market price of the Common Stock of the Company (a
"Prohibited Transaction"); provided that any sale of Shares by the Subscriber in
a privately negotiated transaction made in accordance with the terms of this
Subscription Agreement shall not be deemed to be a Prohibited Transaction, so
long as the acquirer of the Shares in any such transaction agrees in writing
with the Company to be bound by the provisions of this Subscription Agreement.
In addition, Subscriber will not encourage or assist any other person to enter
into a Prohibited Transaction with respect to the Common Stock during the
Covered Period. To the extent applicable, all Extra Shares, if any, issued by
the Company pursuant to this Section shall be subject to the same terms and
conditions as the Shares, and all provisions or representations and agreements
contained in this Subscription Agreement or the Registration Rights Agreement
shall be deemed to apply equally to all Extra Shares, if any, received by the
Subscriber. The Company agrees that, during the Covered Period, neither it nor
its officers, directors, or persons or entities which it or they control within
the meaning of Section 15 of the Securities Act of 1933, as amended (the "Act")
or Section 20 of the Securities Exchange Act of 1934, as amended, shall
repurchase, redeem or otherwise acquire, any securities of the Company or agree
to do any of the foregoing.
(ii) Notwithstanding anything contained in Section 2(c)(i), the
Covered Period shall terminate 270 days after the filing date of any
Registration Statement filed pursuant to Section 2(a) hereof if such
Registration Statement has not been declared effective prior thereto.
(d) The Company shall at all times reserve shares of Common Stock out
of its authorized but unissued shares of Common Stock to the extent of the Board
of Directors'
- 2 -
<PAGE>
good faith estimate of the Company's obligation to issue Extra Shares, up to the
aggregate amount of such shares. The Company will take all such further actions
as may be necessary to perform its obligations pursuant to this Section 2,
including, without limitation, using its best efforts to obtain the consent of
stockholders to an increase in the number of authorized shares of Common Stock.
(e) Subscriber may assign its rights to receive Extra Shares under
this Agreement to any transferee or assignee of Shares (to the extent the Extra
Shares relate to the transferred or assigned Shares), provided that the transfer
or assignment of such Shares has been made in compliance with the Act and
applicable state securities laws.
(f) On the effective date of the Registration Statement filed by the
Company pursuant to Section 2 of the Registration Rights Agreement, the Company
shall deliver to the Subscriber (i) a certificate registered in Subscriber's
name and representing the Extra Shares, which certificate shall bear the legend
set forth in Section 5(f)(iv) hereof; (ii) an opinion of Baer Marks & Upham LLP,
substantially in the form of Exhibit B hereto, as to the Extra Shares; and (iii)
a certificate of the Company substantially in the Form of Exhibit C hereto.
Subscriber's right to receive Extra Shares shall be conditioned upon
Subscriber's delivery to the Company of a certificate, substantially in the form
of Exhibit D hereto, which shall be true, correct and complete as of the date on
which any Extra Shares are issued to Subscriber by the Company. The Company
shall pay any documentary, stamp or similar issue or transfer taxes due on the
issue of the Extra Shares.
3. Closing. (a) The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall be held at the offices of Baer Marks & Upham
LLP, 805 Third Avenue, New York, New York 10022, at 10:00 A.M. New York time on
a date agreed upon by the Company and Libra Investments, Inc., placement agent
for the Shares, which date shall be no later than the earlier of (i) the date
five (5) business days after the Common Stock is approved for listing on the
NASDAQ SmallCap Market, subject to notification of the consummation of the sale
of the Shares, and (ii) July 31, 1996 (the "Closing Date"). Notwithstanding any
provision of this Agreement, the obligation of the Subscriber to purchase the
Shares on the Closing Date shall be conditioned upon the Subscriber's receipt of
evidence, reasonably acceptable to it, of such approval for such listing.
(b) At the Closing, against receipt of the Purchase Price from
Subscriber, (i) the Company shall deliver to the Subscriber, a share certificate
registered in the Subscriber's name and representing the Shares, which
certificate shall bear the legend set forth in Section 5(f)(iv) hereof, together
with any legends required under applicable state securities laws, and
(ii) counsel to the Company shall deliver to the Company an opinion,
substantially in the Form of Exhibit B hereto, on which the Subscriber shall be
permitted to rely.
(c) At the Closing, the Subscriber shall pay the Purchase Price by
means of a bank wire transfer of immediately available Federal Funds to the
account of Baer Marks &
- 3 -
<PAGE>
Upham LLP, Chemical Bank, Account Number 967-111188-Primary Account, ABA
Routing #021000128.
4. Acceptance of Subscription. The Subscriber understands and agrees
--------------------------
that the Company in its sole discretion reserves the right to accept or reject
this subscription in whole or in part at any time prior to the Closing Date,
notwithstanding prior receipt by the Subscriber of oral or written notice of
acceptance, if the Subscriber has not confirmed to the Company that the
representations, warranties and agreements contained in Section 5 hereof remain
true and correct as of the Closing Date. If the subscription is rejected, this
Subscription Agreement shall thereafter be of no further force or effect.
5. Representations, Warranties and Agreements of Subscriber. The
--------------------------------------------------------
Subscriber hereby acknowledges, represents and warrants to, and agrees with, the
Company, on the date hereof and on the Closing Date, as follows:
(a) The Subscriber understands that the offering and sale of the
Shares is intended to be exempt from registration under the Act by virtue of
Section 4(2) of the Act and the provisions of Regulation D promulgated
thereunder, and in accordance therewith and in furtherance thereof, the
Subscriber represents and warrants and agrees as follows:
(i) The Subscriber and/or the Subscriber's adviser(s)
has/have received and carefully reviewed the Company's (A) Annual Report on Form
10-K for the year ended December 31, 1995 and; (B) Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1996, (collectively, the "Company
Reports"), and understands the information contained therein. Subscriber
acknowledges that the Company Reports show substantial operating losses since
the Company's inception.
(ii) The Subscriber acknowledges that the Subscriber, the
Subscriber's attorney, accountant, or adviser(s) has/have had a reasonable
opportunity to inspect all documents, records and books pertaining to this
investment (including, without limitation, the Company Reports).
(iii) The Subscriber and/or the Subscriber's adviser(s)
has/have had a reasonable opportunity to ask questions and receive answers from
a person or persons acting on behalf of the Company concerning the offering of
the Shares and all such questions have been answered to the full satisfaction of
the Subscriber.
(iv) In making a decision to invest in the Shares, the
Subscriber has not relied on any information other than information contained in
the Company Reports and in this Agreement.
(v) The Subscriber is not subscribing for the Shares as a
result of or subsequent to any advertisement, article, notice or other
communication published in any
- 4 -
<PAGE>
newspaper, magazine, or similar media or broadcast over television or radio, or
presented at any seminar or meeting, or any solicitation of a subscription by a
person other than a representative of the Company.
(vi) If the Subscriber is a natural person, the Subscriber
has reached the age of majority in the jurisdiction in which the Subscriber
resides; the Subscriber has adequate means of providing for the Subscriber's
current financial needs and contingencies, is able to bear the substantial
economic risks of an investment in the Shares for an indefinite period of time,
has no need for liquidity in such investment, and, at the present time, could
afford a complete loss of such investment.
(vii) The Subscriber has such knowledge and experience in
financial, tax and business matters so as to enable the Subscriber to utilize
the information made available to the Subscriber in connection with the offering
of the Shares to evaluate the merits and risks of an investment in the Shares,
and to make an informed investment decision with respect thereto.
(viii) The Subscriber is not relying on the Company or any
agent of the Company with respect to the tax and other economic considerations
of an investment in the Shares.
(ix) The Subscriber will not sell or otherwise transfer the
Shares without registration under the Act and applicable state securities laws,
or pursuant to an exemption therefrom. The Shares have not been registered
under the Act or under the securities laws of any state and, other than as
provided in the Registration Rights Agreement, the Company will be under no
obligation to so register the Shares. The Subscriber represents that the
Subscriber is purchasing the Shares for the Subscriber's own account, for
investment and not with a view to resale or distribution except in compliance
with the Act and applicable state securities laws.
(x) The Subscriber recognizes that investment in the Shares
involves substantial risks, including the risk of loss of the entire amount of
such investment, and has taken full cognizance of and understands all of the
risks related to the purchase of the Shares.
(xi) The Subscriber's overall commitment to investments
which are not readily marketable is reasonable in relation to the Subscriber's
net worth.
(b) The Subscriber is an "accredited investor" as that term is
defined in Regulation D under the Act inasmuch as the Subscriber meets the
requirements of one or more of the subparagraphs listed in Exhibit A hereto as
of the date of this Subscription Agreement, and if there is any material change
in such status prior to the sale of the Shares, the Subscriber will immediately
notify the Company in writing.
- 5 -
<PAGE>
(c) The Subscriber hereby agrees to provide such information and to
execute and deliver such documents as the Company may deem reasonably
appropriate with regard to the Subscriber's suitability.
(d) The execution, delivery and performance of this Agreement by the
Subscriber (i) will not constitute a default under or conflict with any
agreement or instrument to which the Subscriber is a party or by which it or its
assets are bound, (ii) will not conflict with or violate any order, judgment,
decree, statute, ordinance or regulation applicable to the Subscriber
(including, without limitation, any applicable laws relating to permissible
legal investments) and (iii) do not require the consent of any person or entity,
other than those that will have been obtained prior to the Closing Date. This
Agreement has been duly authorized, executed and delivered by the Subscriber and
constitutes the valid and binding agreement of the Subscriber enforceable
against it in accordance with its terms.
(e) The Subscriber has not retained, or otherwise entered into any
agreement or understanding with, any broker or finder in connection with the
purchase of Shares by the Subscriber, and the Company will not incur any
liability for any fee, commission or other compensation on account of any such
retention, agreement or understanding by the Subscriber. The Subscriber
acknowledges that the Company has retained Libra Investments, Inc. ("Libra") as
placement agent in connection with the transactions contemplated hereby and by
each other Subscription Agreement of the Company dated the date hereof (the
"Private Placement"), and has agreed to pay Libra a placement fee equal to 5% of
the gross proceeds received by the Company in the Private Placement from the
Shares placed by Libra, and will issue Libra 5-year warrants to purchase a
number of shares of Common Stock of the Company equal to 5% of the number of
shares of Common Stock placed by Libra and issued and sold by the Company in the
Private Placement at an initial exercise price of $4.50 per share.
(f) The Subscriber acknowledges that:
(i) In making an investment decision, the Subscriber has
relied on the Subscriber's own examination of the Company and the disclosure in
the Company Reports, including the merits and risks involved. The Shares have
not been recommended by any federal or state securities commission or regulatory
authority. Furthermore, the foregoing authorities have not confirmed the
accuracy or determined the adequacy of the Company Reports or this Agreement.
(ii) The Subscriber, if executing this Agreement in a
representative or fiduciary capacity, has all requisite power and authority to
execute and deliver this Agreement in such capacity and on behalf of the
subscribing individual, ward, partnership, trust, estate, corporation, or other
entity for whom the Subscriber is executing this Agreement, and such individual,
ward, partnership, trust, estate, corporation, or other entity has all requisite
right and power to enter into this Agreement and make an investment in the
Shares.
- 6 -
<PAGE>
(iii) The representations, warranties, and agreements of the
Subscriber contained herein shall be true and correct in all material respects
on and as of the Closing Date of the sale of the Shares as if made on and as of
such date and shall survive the execution and delivery of this Agreement and the
purchase of the Shares.
(iv) For as long as is required by applicable laws, the
certificate representing the Shares shall bear a legend in substantially the
following form, together with any legend required by applicable state securities
law, and the Subscriber shall not transfer any or all of the Shares or any
interest therein, except in accordance with the terms of such legends:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended
(the "Act") or applicable state securities laws, and may be
offered, sold or otherwise transferred only if so registered
under the Act and applicable state securities laws or if the
holder has delivered to the Company an opinion of counsel,
which counsel and opinion shall be reasonably satisfactory
to the Company, that an exemption from such registration is
available."
6. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Subscriber as follows:
(a) The Company has been duly organized, is validly existing as a
corporation and is in good standing under the laws of its jurisdiction of
organization. The Company is duly qualified and in good standing in each
jurisdiction in which the character or location of its properties or the nature
or conduct of its business makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, in the aggregate, have
a material adverse effect on the financial condition of the Company. The
Company has all requisite power and authority, and all material consents,
approvals, authorizations, orders, registrations, qualifications, licenses and
permits of and from all public, regulatory or governmental agencies and bodies,
to own, lease and operate its properties and conduct its business as now being
conducted.
(b) All of the outstanding shares of Common Stock have been duly
authorized, are validly issued and outstanding and are fully paid and non-
assessable, free of preemptive rights. At May 31, 1996, the capital stock of
the Company was as follows: (i) 80,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock authorized, (ii) 41,314,417 shares of
Common Stock issued and outstanding and no shares of Preferred Stock issued and
outstanding and (iii) 9,496,796 shares of Common Stock reserved for issuance
upon exercise of outstanding options and warrants. Except as set forth above,
there are no outstanding (i) shares of capital stock of the Company, securities
of the Company convertible into or exchangeable for shares of capital stock or
voting or other securities of the Company, or (ii) except for rights to acquire
Extra Shares (as such term is defined in the subscription agreements executed in
- 7 -
<PAGE>
connection with the Company's November 28, 1995 private placement of 5,500,000
shares of Common Stock), options, warrants or other rights to acquire from the
Company, and no obligation of the Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company. There are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any securities of the
Company. The Shares, when issued, delivered and paid for in accordance with the
terms hereof, will be duly and validly issued, fully paid and non-assessable and
shall be free and clear of all liens, claims and encumbrances.
(c) There is no action, suit or proceeding before or by any court or
governmental agency now pending, or to the knowledge of the Company threatened,
against the Company that would result in a material adverse change in the
condition (financial or otherwise), results of operations or business prospects
of the Company or that would adversely affect the consummation of the
transactions contemplated by this Agreement.
(d) The Company has full corporate power and authority to enter into
this Agreement and the Registration Rights Agreement and to issue and sell the
Shares on the terms and conditions set forth herein. The execution and delivery
of this Agreement and the Registration Rights Agreement and the consummation of
the transactions contemplated hereby (i) have been duly and validly authorized
and approved by all necessary corporate action on the part of the Company;
(ii) will not constitute a default under or conflict with the Company's charter
or bylaws or any agreement or other instrument to which the Company is a party
or by which the Company is bound; (iii) will not conflict with or violate any
order, judgment, decree, statute, ordinance or regulation applicable to the
Company; and (iv) do not require the consent of any person or entity, other than
those that will have been obtained prior to the Closing Date.
(e) The Company has previously furnished the Subscriber with true and
complete copies of the Company Reports. As of their respective dates, the
Company Reports did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading. Subsequent to March 31, 1996, and except
as disclosed in the Company Reports, there has not occurred any material adverse
change in the condition (financial or otherwise), results of operations or busi-
ness prospects of the Company, other than a continuation of the previously
reported losses, which losses have been at substantially the same rate as those
reported for the three month period ended March 31, 1996 in the financial
statements of the Company included in the Company's Quarterly Report on Form 10-
Q for the fiscal quarter ended March 31, 1996. The financial statements of the
Company included in the Company Reports have been prepared in accordance with
generally accepted accounting principles (except that such financial statements
included in the Quarterly Report on Form 10-Q does not contain footnotes).
(f) This Agreement and the Registration Rights Agreement have been
duly authorized, executed and delivered by the Company and constitutes the valid
and binding obligation of the Company enforceable against it in accordance with
its terms.
- 8 -
<PAGE>
(g) The Company has retained Libra as placement agent in the Private
Placement upon the terms described in Section 5(e) hereof. Except for the
foregoing, the Company has not retained, or otherwise entered into any agreement
or understanding with, any broker or finder in connection with the purchase of
Shares by the Subscriber, and the Subscriber will not incur any liability for
any fee, commission or other compensation on account of any such retention,
agreement or understanding by the Company.
The representations, warranties and agreements of the Company
contained herein shall be true and correct in all material respects on and as of
the Closing Date of the sale of the Shares as if made on and as of such date and
shall survive the execution and delivery of this Agreement and the sale of the
Shares.
7. Specific Performance. The parties hereto agree that irreparable harm
--------------------
would occur to the Subscriber in the event that the provisions of Section 2 of
this Agreement were not performed by the Company, and that money damages are an
inadequate remedy for breach of such Section 2 of this Agreement because of the
difficulty of ascertaining the amount of damage that would be suffered by the
Subscriber in the event that such Section 2 is not performed in accordance with
its terms or conditions or is otherwise breached. It is accordingly agreed that
the Subscriber shall be entitled to an injunction or injunctions to prevent
breaches of Section 2 of this Agreement by the Company and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which the Subscriber is entitled at law or in equity or otherwise; provided,
however, that the Subscriber shall have complied with the provisions of
Section 2 hereof.
8. Miscellaneous
-------------
(a) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law applied in such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof. This Agreement may be
executed in counterparts, each of which shall be an original, but all of which
shall constitute one instrument.
(b) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing executed by the Company and the Subscriber.
- 9 -
<PAGE>
(c) Subscriber recognizes it is important under the Securities Act
and state securities law that the Company determine if potential investors are
"accredited investors," as defined in Exhibit A attached hereto. Please
---------
indicate below the category from Exhibit A by reason of which Subscriber is an
"accredited investor":
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Subscriber further represents that he/she is a citizen of ______________(State)
or is organized under the laws of the State of_____. Subscriber is not a
resident of any other jurisdiction.
- 10 -
<PAGE>
IN WITNESS WHEREOF, Subscriber has executed this Subscription Agreement as
of the 13th day of June, 1996.
SUBSCRIPTION FOR INDIVIDUAL
---------------------------
Number of Shares
Aggregate Purchase Price
--------------------------------------------------
- -------------------------
(Address)
- -------------------- --------------------------------------------------
Social Security Number Signature of Joint Owner (if any)
IRS Identification Number
Form of Ownership:
___ Joint Tenants
___ Tenants in Common
The foregoing Subscription Agreement is accepted as of the 13th day of
June, 1996.
COMMUNICATION INTELLIGENCE CORPORATION
By:
----------------------------------------------------
Philip S. Sassower
Chairman of the Finance Committee
<PAGE>
IN WITNESS WHEREOF, Subscriber has executed this Subscription Agreement as
of the 13th day of June, 1996.
SUBSCRIPTION FOR CORPORATION PARTNERSHIP OR OTHER ENTITY
--------------------------------------------------------
Number of Shares
Aggregate Purchase Price
By:
----------------------------------------------------
- ------------------------------
(Address)
- --------------------
Social Security Number
IRS Identification Number
ACCEPTANCE
----------
The foregoing Subscription Agreement is accepted as of the 13th day of
June, 1996.
COMMUNICATION INTELLIGENCE CORPORATION
By:
----------------------------------------------------
Philip S. Sassower
Chairman of the Finance Committee
<PAGE>
EXHIBIT A
---------
Under Regulation D promulgated under the Securities Act of .1933, as
amended, an "accredited investor" is:
(a) A natural person who had individual income of more than
$200,000 in each of the most recent two years, or joint
income with that person's spouse in excess of $300,000 in
each of the most recent two years and who reasonably expects
to reach that same income level for the current year. For
this purpose, "individual income" means adjusted gross
-------------------
income, as reported for federal income tax purposes, less
any income attributable to a spouse or to property owned by
a spouse, (A) increased by the individuals share (and not a
spouse's share) of: (i) the amount of any tax exempt
interest income received, (ii) amounts contributed to an IRA
or Keogh retirement plan, (iii) alimony paid, and (iv) the
excluded portion of any long-term capital gains, and (B)
adjusted, plus or minus, for any non-cash loss or gain,
respectively, reported for federal income;
(b) A natural person whose individual net worth is in excess of
$1,000,000. For this purpose, "net worth" means the excess
-----------
of total assets at fair market value, including home and
personal property, over total liabilities, provided,
however, for the purpose of determining a person's net
worth, the principal residence owned by an individual shall
be valued at cost, including the cost of improvements, net
of current encumbrances upon the property or valued on the
basis of a written appraisal used by an institutional lender
making a loan secured by the property. For the purposes of
this provision, "institutional lender" means a bank, savings
----------------------
and loan association, industrial loan company, credit union,
personal property broker or a company whose principal
business is as a lender upon loans secured by real property
and which has such loans receivable in the amount of
$2,000,000 or more. Any person relying on the appraisal
value of a principal residence must deliver to the Company,
at or prior to the date of execution hereof, a copy of such
appraisal;
(c) A trust, with total assets in excess of $5,000,000, which is
not formed for the purpose of acquiring the Shares and whose
purchase is directed by a person who has such knowledge and
experience in financial business matters that such person is
<PAGE>
capable of evaluating the risks and merits of an investment in the
Shares;
(d) A corporation, a partnership, an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended, or a Massachusetts or similar business trust, not
formed for the specific purpose of acquiring the Shares,
with total assets in excess of $5,000,000;
(e) A bank as defined in Section 3(a)(2) of the Act or a savings
and loan association or other institution as defined in Sec-
tion 3(a)(5)(A) of the Act, whether acting in its individual
or fiduciary capacity; a broker or dealer registered
pursuant to Section 15 of the Securities Exchange Act of
1934; an insurance company as defined in Section 2(13) of
the Act; an investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of the Investment
Company Act of 1940; a small business investment company
licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act
of 1958; a plan established and maintained by a state, its
political subdivisions, or an agency or instrumentality of a
state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000; or an employee benefit plan within the meaning
of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of the Employee
Retirement Income Security Act of 1974, which is either a
bank, savings and loan association, insurance company, or
registered adviser, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if the employee
benefit plan is a self-directed plan, the invested decision
is made solely by persons who are accredited investors;
(f) A private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940; or
(g) An entity in which all of the equity owners meet the
requirements of at least one of the above subparagraphs for
accredited investors.
<PAGE>
EXHIBIT B
June 27, 1996
Communication Intelligence Corporation
275 Shoreline Drive
Redwood Shores, CA 94065
Ladies and Gentlemen:
We have acted as special counsel to Communication Intelligence
Corporation, a Delaware corporation (the "Company"), in connection with its
-------
private placement (the "Private Placement") of 600,000 shares of common stock,
-----------------
par value $.01 per share, of the Company (the "Shares"). As special counsel, we
------
are not generally familiar with the business or affairs of the Company and no
inference to the contrary should be drawn hereby. This opinion is being
rendered pursuant to Section 3(b) of the Subscription Agreements dated June ,
1996 (the "Subscription Agreements") between the Company and each of the
-----------------------
subscribers in the Private Placement (the "Subscribers"). The terms used herein
-----------
without definition shall have the meanings set forth in the Subscription
Agreements.
In order to render this opinion, we have examined originals or copies
identified to our satisfaction of the following:
1. The Subscription Agreements;
2. The Registration Rights Agreement dated as of June , 1996 by
and among the Company and the Subscribers (the "Registration Rights Agreement");
-----------------------------
and
3. The certificates representing the Shares.
For purposes of rendering this opinion:
(a) We have assumed the authenticity of all documents and instruments
submitted to us as originals, the genuineness of all signatures and the
<PAGE>
Communication Intelligence Corporation
June 27, 1996
Page 2
conformity to original documents and instruments of all documents and
instruments submitted to us as certified or photostatic copies;
(b) We have assumed the power and authority of each signatory of a
document or instrument to execute said document or instrument and that the
Subscription Agreements and the Registration Rights Agreement (collectively, the
"Transaction Documents"), have been duly authorized and executed by the parties
---------------------
thereto; and
(c) Except as otherwise expressly indicated herein, we have relied,
as to matters of fact, solely upon written statements from or representations or
warranties of the Company contained in the Subscription Agreements or in
certificates delivered pursuant thereto or in connection therewith, as well as
upon certificates and other written statements from public authorities. The
phrase "to our knowledge," "known to us" or similar expressions, when used
herein, mean that with respect to the factual matters covered thereby we have
relied, without independent investigation, upon the foregoing statements,
representations, warranties and certificates; provided, however, that nothing
has come to the attention of those attorneys in our office who directly
participated in this engagement which would lead us to believe that such
statements, representations, warranties or certificates are incorrect in any
material respect.
Based upon the foregoing, and subject to the limitations,
qualifications and exceptions contained herein, we are of the opinion that:
(a) Based solely upon a good standing certificate issued by the
Delaware Secretary of State and the Company's corporate minute book as presented
to us, the Company has been duly organized, is validly existing as a corporation
and is in good standing under the laws of its jurisdiction of organization. To
our knowledge, the Company is duly qualified and in good standing in each
jurisdiction in which the character or location of its properties or the nature
or conduct of its business makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, in the aggregate, have
a material adverse effect on the financial condition of the Company, taken as a
whole.
(b) To our knowledge, all of the outstanding shares of Common Stock
have been duly authorized, are validly issued and outstanding and are fully paid
and non-assessable, free of preemptive rights. The Shares, when issued,
delivered and paid for in accordance with the terms of the Subscription
Agreements, will be
<PAGE>
Communication Intelligence Corporation
June 27, 1996
Page 3
duly and validly issued, fully paid and non-assessable and shall be free and
clear of all liens, claims and encumbrances.
(c) To our knowledge, there is no action, suit or proceeding before
or by any court or governmental agency now pending or threatened against the
Company that would materially and adversely affect the consummation of the
transactions contemplated by the Transaction Documents.
(d) The Company has full corporate power and authority to enter into
the Transaction Documents and to issue and sell the Shares on the terms and
conditions set forth in the Subscription Agreements. The execution and delivery
of the Transaction Documents and the consummation of the transactions
contemplated thereby (i) have been duly and validly authorized and approved by
all necessary corporate action on the part of the Company; (ii) will not, to our
knowledge, constitute a default under or conflict with the Company's charter or
bylaws and (iii) will not conflict with or violate any order, judgment, decree,
statute, ordinance or regulation applicable to the Company of which we have
knowledge, relating to transactions of this kind.
(e) Assuming the due authorization, execution and delivery of the
Transaction Documents by each of the parties thereto, the Transaction Documents
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as (i)
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles relating to the availability of remedies (regardless of whether such
enforceability is considered in a proceeding in equity or at law), including but
not limited to the remedy of specific performance, and (ii) rights to indemnity
and contribution may be limited by United States federal or state securities
laws and the public policy underlying such laws.
We are members of the bar of the State of New York and do not purport
to be experts in, or to express any opinion concerning, any law other than the
laws of the State of New York and the United States. No opinion is expressed as
to the laws of any other jurisdiction or the effect which the laws of any other
jurisdiction might have on the subject matter of the opinions expressed herein
under conflict of laws, principles or otherwise.
This opinion is being furnished by us for your benefit in connection
with the Transaction Documents. In addition, this opinion may be relied upon by
the
<PAGE>
Communication Intelligence Corporation
June 27, 1996
Page 4
Subscribers as if addressed to them. Except as provided above, this opinion may
not be relied upon by any other person or entity or published, quoted or
otherwise used for any other purpose without our prior written consent. This
opinion is based on the law (and interpretations thereof) and facts existing as
of the date hereof. We disclaim any obligation to advise you of any facts,
circumstances, events or changes therein that may be brought to our attention
after the date hereof that may alter, affect or modify the opinions expressed
herein.
Very truly yours,
DJB/ABM/LJL
<PAGE>
EXHIBIT C
Reference is hereby made to the Subscription Agreements by and between
Communication Intelligence Corporation (the "Company") and each of the
subscribers named therein (the "Subscribers") each dated as of June 13, 1996
(the "Subscription Agreements"). The Company hereby represents and warrants to
each Subscriber that the representations and warranties of the Company contained
in Section 6 of the Subscription Agreements are true, correct and complete on
the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this certificate on
this ___ day of June, 1996.
COMMUNICATION INTELLIGENCE
CORPORATION
By:
-----------------------------------------------
-
Philip S. Sassower
Chairman of the Financial Committee
C - 1
EXHIBIT 3
COMMUNICATION INTELLIGENCE CORPORATION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of June
13, 1996, is made by and among Communication Intelligence Corporation, a
Delaware corporation (the "Company") and those parties listed on the signature
page hereto (the "Purchasers").
R E C I T A L S
- - - - - - - -
WHEREAS, pursuant to the terms of Subscription Agreements between the
Company and the Purchasers (the "Subscription Agreements"), the Purchasers are
purchasing from the Company shares of common stock, par value $0.01 per share,
of the Company (the "Common Stock") in such amounts as set forth on the
signature pages of the Subscription Agreements (collectively, the "Shares"); and
WHEREAS, as further inducement for the Purchasers to purchase the
Shares from the Company, the Company desires to undertake to register the
Shares, and the Extra Shares (as hereinafter defined), under the Securities Act
of 1933, as amended, and the rules and regulations thereunder (the "Securities
Act"), in accordance with, and subject to, the terms hereof.
NOW, THEREFORE, the Purchasers and the Company covenant and agree,
upon the terms and subject to the conditions set forth herein, as follows:
1. Definitions. For the purposes of this Agreement, the following
capitalized terms shall have the following meanings:
(a) "Extra Shares" shall mean that number of additional shares
of Common Stock which may be issued by the Company to a Holder pursuant to
Section 2 of the Subscription Agreements.
(b) "Holder" means, initially each Purchaser, and thereafter,
any person or entity (a "person") who at a given time is the holder of record of
any Registrable Securities, so long as such transfers or assignments were made
in compliance with Section 9 hereof.
(c) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act.
<PAGE>
(d) "Registration Statement" means any registration statement or
comparable document of the Company under the Securities Act through which a
public sale or disposition of the Company's securities may be registered (except
a form used exclusively for the sale or distribution of securities in connection
with an employee stock option plan or in connection with a business
combination), the prospectus contained therein and all amendments and
supplements to such Registration Statement, including post-effective amendments,
and all material incorporated by reference in such Registration Statement.
(e) "Registrable Securities" means (i) the Shares; (ii) the
Extra Shares; and (iii) any other security of the Company issued as a dividend
or other distribution with respect to, or in exchange for or in replacement of
the Shares or the Extra Shares, excluding in all cases, however, any Registrable
Securities disposed of by a Holder in a transaction in which its registration
rights under this Agreement are not assigned pursuant to Section 9 of this
Agreement.
(f) "SEC" means the United States Securities and Exchange
Commission or any similar agency then having the authority to enforce the
Securities Act.
2. Holders' Registration.
(a) Obligation For Registration. Within thirty (30) days from
---------------------------
the Closing Date (as defined in the Subscription Agreements), the Company shall
prepare and file a Registration Statement with the SEC to register the public
resale of the Registrable Securities by the Holders under the Securities Act.
The Company shall use its best efforts to (i) cause such Registration Statement,
when filed, to become effective under the Securities Act; and (ii) keep such
Registration Statement continuously effective until the earlier to occur of the
following: (x) the Registrable Securities covered by the Registration Statement
become eligible for resale without registration pursuant to Rule 144 under the
Securities Act (or a similar successor or additional exemption) and can be sold
by each Holder within the applicable volume restrictions of Rule 144 (except for
affiliates, as such term is defined in Rule 144); or (y) three years from the
effective date of such Registration Statement. Each Holder shall notify the
Company in writing within ten (10) days after the sale of the last of its
Registrable Securities to enable the Company to determine when its obligation to
continue effectiveness of the Registration Statement terminates.
(b) Notice of Registration. Within thirty (30) days prior to
----------------------
the proposed filing date of the Registration Statement referred to in
Section 2(a), the Company shall give written notice to the Holders of its
intention to file the Registration Statement, which notice shall state that the
Holders shall have ten days from the receipt of such notice to notify the
Company of an election NOT to have such Holder's Registrable Securities
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<PAGE>
included in the Registration Statement. Within ten days after the receipt of
such notice, each Holder shall notify the Company if it elects NOT to have its
Registrable Securities included in the Registration Statement. In such event,
the Company shall have no further obligations to such Holder under this
Agreement. The right of any Holder to have Registrable Securities included in
the Registration Statement pursuant to this Section 2 shall be conditioned upon
such Holder's compliance in all material respects with the provisions of
Section 5 hereof.
(c) Additional Registration. If the Holders become entitled,
-----------------------
pursuant to an event described in clause (iii) of the definition of Registrable
Securities, to receive any securities in respect of Registrable Securities that
were already included in a Registration Statement, subsequent to the date such
Registration Statement is declared effective, and the Company is unable under
the securities laws to add such securities to the then-effective Registration
Statement, the Company shall promptly file, in accordance with the procedures
more particularly set forth in this Section 2 and Section 4, an additional
Registration Statement with respect to any such new Registrable Securities. The
Company shall use its best efforts to (i) cause any such additional Registration
Statement, when filed, to become effective under the Securities Act; and (ii)
keep such additional Registration Statement effective during the period
described in clause (ii) of Section 2(a).
3. Suspension of Sales by Holders. If at any time when a
Registration Statement is effective with respect to Registrable Securities
pursuant to Section 2 hereof, the Company intends to file a registration
statement for an underwritten public offering of securities to be issued by the
Company, the Company shall promptly give written notice thereof to the Holders
(a "Company Notice"). Within twenty days after receipt of a Company Notice, any
Holder owning Registrable Securities covered by an effective Registration
Statement may notify the Company of such Holder's desire to have its Registrable
Securities included in the registration statement covering such underwritten
offering. Such Holders shall be permitted to include in such underwritten
offering (i) not less than that amount of Registrable Securities which equals
50% of the total number of securities to be registered in the registration
statement relating to the underwritten offering, pro rata based on the number of
Registrable Securities requested to be included in the registration statement
covering the underwritten offering by the Holders, and (ii) such additional
Registrable Securities as shall be consented to by any such underwriter.
Holders of any Registrable Securities covered by an effective Registration
Statement which have not been included in the registration statement covering
the underwritten offering shall suspend offers and sales of their Registrable
Securities covered by such Registration Statement for a period commencing
fourteen days prior to the anticipated filing of any such registration statement
and terminating not later than 150 days from the effective date of the
registration statement relating to such underwritten offering (a "Suspension
Period"); provided, however, that the Holders shall only be required to suspend
-----------------
such offers and sales of their Registrable Securities (i) if so requested, in
writing, by the underwriter of any such offering, (ii) if and to the extent that
any other securityholders of the Company whose securities have been registered
by the Company pursuant to registration rights also agree to suspension of their
sales. Notwithstanding the foregoing, Holders may sell Registrable Securities
during the Suspension Period in privately negotiated transactions made in
accordance with the terms of this Agreement, provided that such transfers are
made in compliance with the Securities Act and applicable state securities laws.
The Holders agree that, during any such Suspension Period, the Holders shall not
sell, make any short sale of, pledge, grant any option for the purchase of or
otherwise dispose of any Registrable Securities without the prior written
-3-
<PAGE>
consent of such underwriter(s), and shall enter into such agreements with such
underwriter(s) with respect to the foregoing as are reasonably requested by such
underwriter(s). Registrable Securities shall only be included in a registration
statement covering an underwritten offering upon such terms and conditions as
shall be established by such underwriter or underwriters for the securities to
be sold by the Company. Any future registration rights granted by the Company
shall contain the same restrictions as those imposed hereby.
4. Obligations of the Company. In connection with the registration
of the Registrable Securities pursuant to Section 2 of this Agreement, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Registration Statement with
respect to all Registrable Securities included therein, and use its best efforts
to cause the Registration Statement to become effective as soon as reasonably
possible after such filing, and to keep the Registration Statement effective for
the period specified in Section 2 hereof, which Registration Statement shall not
contain during such period any untrue statement of a material fact or omit to
state during such period a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective for the period specified
in Section 2 hereof and as may be required by the Securities Act, and during
such period to comply with the provisions of the Securities Act with respect to
the Registration Statement.
(c) Furnish promptly to each Holder whose Registrable Securities
are included in the Registration Statement such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Holder may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by such Holder.
(d) Use its best efforts to register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders and prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements and to take such other actions as may
be necessary to maintain such registration and qualification in effect at all
times during which it has agreed to use its best efforts to keep a Registration
Statement effective under the Securities Act pursuant to the terms of this
Agreement, and to take all other actions necessary or advisable to enable the
disposition of such securities in such jurisdictions, provided that the Company
--------
shall not be required in connection therewith or as a condition thereto to
qualify to do business, to file a general consent to service of process, to
subject itself to general taxation in any such states or jurisdictions or to
make any change in its charter or bylaws which the Board of Directors determines
to be contrary to the best interest of the Company and its shareholders.
-4-
<PAGE>
(e) Notify the Holders who hold Registrable Securities being
sold of the happening of any event as a result of which the prospectus included
in the Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Company
shall promptly amend or supplement the Registration Statement to correct any
such untrue statement or omission.
(f) Notify the Holders who hold Registrable Securities being
sold of the issuance by the SEC or any state securities commission or agency of
any stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company will use its best
efforts to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible time.
(g) Permit a single firm of counsel, designated as Holders'
counsel by the Holders of a majority of the Registrable Securities included in
such Registration Statement (the "Majority Holders"), to review the Registration
Statement and all amendments and supplements thereto within a reasonable period
of time prior to each filing, and shall not file any document in a form to which
such counsel reasonably objects.
(h) Furnish to the Holders, on the effective date of the
Registration Statement, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given in such an offering, addressed to the Company,
on which the Holders shall be permitted to rely (and a copy of which shall be
delivered to the Holders); and (ii) a "cold comfort" letter, dated such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
securityholders in such an offering, so addressed.
(i) Make available for inspection by representatives of the
Majority Holders and any counsel, accountants or other agents retained by any
thereof, all pertinent financial and other records, corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such party in
connection with the Registration Statement.
(j) Use its best efforts to cause the Registrable Securities
being sold to be listed on the NASDAQ SmallCap Market.
(k) Take all actions reasonably necessary to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be sold pursuant to the
Registration Statement and to enable such certificates to be in such
denominations and registered in such names as the Holders of the Registrable
Securities being sold.
-5-
<PAGE>
(l) Take all other actions reasonably necessary to expedite and
facilitate disposition by the Holders of the Registrable Securities being sold
pursuant to the Registration Statement.
5. Obligations of the Holders. In connection with the registration
of the Registrable Securities, the Holders shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to each
Holder that such Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended methods of
disposition of such securities as shall be reasonably required to effect the
registration of the Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. The
Company shall notify each Holder of the information the Company requires from
each such Holder if it elects to have any of his Registrable Securities included
in the Registration Statement.
(b) Each Holder by his acceptance of the Shares agrees to
cooperate with the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Holder has notified the Company in
writing of its election to exclude all of its Registrable Securities from the
Registration Statement.
(c) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3 or
Section 4(e), such Holder will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Holder's receipt of (i) confirmation from the
Company that such sales may resume under the terms of Section 3, or (ii) the
copies of the supplemented or amended prospectus contemplated by Section 4(e)
and, if so requested in writing by the Company, such Holder shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of such destruction) all copies, other than the permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities at the time of receipt of such notice.
6. Expenses of Registration. All expenses incurred in connection
with registration, filings or qualifications pursuant to Sections 2 and 4,
including, without limitation, all registration, listing, filing and
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one firm of
counsel for the Holders, shall be borne by the Company.
7. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
-6-
<PAGE>
(a) To the fullest extent permitted by law, the Company will
indemnify and hold each Holder, its partners and their respective directors,
officers, employees and representatives, and each person who controls any such
Holder within the meaning of Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act of 1934 (the "1934 Act") (each such person being
referred to as an "Indemnified Person") harmless from and against any and all
losses, claims, damages, liabilities and expenses arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
a Registration Statement, or in any amendment or supplement thereto, or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or allegation thereof
based upon information furnished in writing to the Company by such Indemnified
Person expressly for use therein. Notwithstanding the foregoing, the Company
shall not be obligated to so indemnify any such Holder, officer, director or
controlling person with respect to any loss, claim, damage, liability or expense
arising out of the failure by such person to comply with the prospectus delivery
requirements under the Securities Act and the rules and regulations thereunder.
(b) If any action or proceeding (including any governmental
investigation) shall be brought, threatened or asserted against any Indemnified
Person in respect of which indemnity may be sought from the Company, such
Indemnified Person shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including employment of counsel and the
payment of all expenses related thereto. Any such Indemnified Person shall have
the right to employ separate counsel in any such action and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (i) the Company has agreed to pay such
fees and expenses; or (ii) the Company shall have failed to assume the defense
of such action or proceeding and employ counsel in such action or proceeding; or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both such Indemnified Person and the Company, and
such Indemnified Person shall have been advised by counsel that there may be one
or more legal defenses available to such Indemnified Person which are different
from or additional to those available to the Company (in which case, if such
Indemnified Person notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company will not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Person); provided, however, that the Company will not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys at any time for all such Indemnified
Persons, which firm shall be designated in writing by a majority in interest of
such Indemnified Persons. The Company shall not be liable for any default
judgment caused by any Indemnified Person or settlement of any such action or
proceeding or confession of judgment without its prior written consent, but if
settled with its written consent (which consent shall not be unreasonably
withheld), or if there be a final judgment (other than such default judgment)
for the plaintiff in any such action or proceeding, the Company agrees to
indemnify and hold harmless such
-7-
<PAGE>
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Subject to the following sentence, if the Company
agrees to a settlement of an action or proceeding against an Indemnified Person
which does not involve any finding or admission of liability or wrongdoing on
the part of the Indemnified Person and stands ready, willing and able to pay
such settlement and the Indemnified Person refuses to settle, then the Indemni-
fied Person shall continue the defense at its own expense and the Company shall
be responsible to indemnify only the lesser of the amount of the settlement
accepted by the Company or the cost of the final disposition of the claim. The
Company will not, without the prior written consent of any Indemnified Person,
settle or compromise or consent to the entry of any judgment in or otherwise
seek to terminate any pending or threatened action, claim, suit or proceeding in
respect to which indemnification or contribution may be sought hereunder unless
such settlement, compromise, consent or termination includes an express
unconditional release of all Indemnified Persons from all liability arising out
of such action, claim, suit or proceeding.
(c) Each Holder, severally and not jointly, agrees to indemnify
and hold harmless the Company, its directors and officers, and each person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the 1934 Act, to the same extent as the
indemnity from the Company to each Indemnified Person set forth in Section 7(a),
but only (i) with respect to untrue statements, alleged untrue statements,
omissions or alleged omissions relating to such Holder or an Indemnified Person
who is such by reason of such person's relationship to such Holder, furnished in
writing by such Holder or such person to the Company expressly for use in the
Registration Statement or the Prospectus, or any amendment or supplement
thereto; and (ii) with respect to any failure by such Holder to comply with the
prospectus delivery requirements under the Securities Act and the rules and
regulations thereunder. In case any action or proceeding shall be brought
against the Company or its officers or directors or any such controlling person
in respect of which indemnity may be sought against a Holder under the
provisions of this Section 7(c), such Holder shall have the rights and duties
given to the Company and each of the Company or its directors or its officers or
its controlling persons shall have the rights and duties given to each Holder
and other Indemnified Persons, under the terms of Section 7(b) above.
Notwithstanding anything contained herein, no Holder shall be liable for an
amount which is greater than the proceeds received by such Holder from the sale
of Registrable Securities.
(d) If the indemnification provided for under Section 7(a) or
Section 7(c) hereof is unavailable to an indemnified party thereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and of the applicable Holders on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of the applicable Holders on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the
-8-
<PAGE>
omission to state a material fact relates to information supplied by the Company
or information supplied by the applicable Holder in writing for use in the
Registration Statement, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Subsection 11(f) of the Securities Act) or of gross negligence, willful
misconduct or bad faith shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation, gross negligence, willful,
misconduct or bad faith. Notwithstanding anything contained herein, no Holder
shall be liable for an amount which is greater than the proceeds received by
such Holder from the sale of Registrable Securities.
8. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of SEC Rule 144 promulgated under
the Securities Act and any other rule or regulation of the SEC that may at any
time permit the Holders to sell securities of the Company to the public without
registration, the Company agrees to timely file with the SEC all reports and
documents required to be filed by it under the Securities Act and the 1934 Act
and the rules and regulations promulgated thereunder, and to furnish to each
Holder, so long as such Holder owns any Registrable Securities, a copy of the
most recent annual or quarterly report of the Company, such other reports and
documents filed by the Company with the SEC, and such other information as may
be reasonably requested in availing the Holders of any rule or regulation of the
SEC which permits the selling of any such securities without registration.
9. Assignments of Registration Rights. The rights of a Holder
pursuant to this Agreement may be assigned by a Holder to transferees or
assignees of Registrable Securities provided that (i) the Company is furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; (ii) the transfer or assignment of such Registrable Securities has
been made in compliance with the Securities Act and applicable state securities
laws and, immediately following such transfer or assignment, the further
disposition of such Registrable Securities is restricted under the Securities
Act; and (iii) the notice provided in this Section 9 contains a written
agreement by the transferee or assignee to be bound by the terms and provisions
of this Agreement.
10. Miscellaneous.
(a) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed (i) if
to the Company, at 275 Shoreline Drive, Redwood Shores, California 94065 with a
copy to Donald J. Bezahler, Esq., Baer Marks & Upham LLP, 805 Third Avenue, New
York, New York 10022; or (ii) if to a Holder, at the address set forth on the
signature pages of the Subscription Agreements, or at
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<PAGE>
such other address as any such party furnishes by notice given in accordance
with this Section 10.
(b) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, will not operate as a waiver thereof.
(c) This Agreement shall be enforced, governed and construed in
all respects in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of law applied in such State. In the
event that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof.
(d) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing executed by the Company and each of the
Holders. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon the Holders and the Company.
(e) Any person or entity is deemed to be a Holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall be entitled to act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(f) This Agreement may be executed in counterparts, each of
which shall be an original, but all of which shall constitute one instrument.
(g) The parties hereto agree that irreparable harm would occur
to the Holders in the event that any of the provisions of this Agreement were
not performed by the Company, and that money damages are an inadequate remedy
for breach of this Agreement because of the difficulty of ascertaining the
amount of damage that would be suffered by the Holders in the event that this
Agreement is not performed in accordance with its terms or conditions or is
otherwise breached. It is accordingly agreed that the Holders shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement by the
Holders and to enforce specifically the terms and provisions hereof in any court
of the United States or any state having jurisdiction, this being in addition to
any other remedy to which the Holders are entitled at law or in equity or
otherwise.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed on its behalf as of the date first set forth above.
COMMUNICATION INTELLIGENCE
CORPORATION
By:
-----------------------------------------------
Philip S. Sassower
Chairman of the Finance Committee
--------------------------------------------------
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<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed on its behalf as of the date first set forth above.
COMMUNICATION INTELLIGENCE
CORPORATION
By:
-----------------------------------------------
Philip S. Sassower
Chairman of the Finance Committee
By:
-----------------------------------------------
Name:
Title:
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EXHIBIT 4
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THIS
WARRANT MAY ONLY BE EXERCISED AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED
UNDER SAID ACT OR IF THE HOLDER HAS DELIVERED TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
CERTIFICATE FOR WARRANTS
EXERCISABLE ON OR AFTER THE DATE OF ISSUANCE UNTIL 5:00 P.M., NEW YORK CITY
TIME, ON JUNE 13, 2001
COMMUNICATION INTELLIGENCE CORPORATION
COMMON STOCK PURCHASE WARRANT CERTIFICATE
30,000 Warrants
THIS CERTIFIES that: LIBRA INVESTMENTS, INC.
or registered assigns is the registered holder (the "Registered Holder") of the
number of Warrants set forth above, each of which, subject to the provisions of
Section 1.1 of Article hereof, represents the right to purchase one fully paid
and nonassessable share (the "Shares") of Common Stock, par value $.01 per share
("Common Stock") of Communication Intelligence Corporation, a corporation formed
under the laws of the state of Delaware (the "Company"), at the initial exercise
price of $4.50 per Share, at any time prior to the Exercise Deadline hereinafter
referred to, by surrendering this Warrant Certificate, with the form of election
to purchase set forth hereon duly executed, at the office of the Company, 275
Shoreline Drive, Redwood Shores, CA 94065, or such other address as to which the
Company shall have given written notice to the Registered Holder. Payment of
the exercise price shall be made in United States currency, by certified check
or money order payable to the order of the Company. This Warrant Certificate is
being issued in connection with the issuance of 30,000 Warrants (the
"Warrants").
<PAGE>
ARTICLE 1
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
-----------------------------------------------
1.1 Exercise Price; Number of Shares. This Warrant Certificate shall,
--------------------------------
when executed by the Company, entitle the Registered Holder hereof to purchase
from the Company one Share for each Warrant evidenced hereby, at the initial
Exercise Price of $4.50 per Share, or such adjusted number of Shares at such
adjusted purchase price as may be established from time to time pursuant to the
provisions of Articles 1 and 2 hereof, payable in full at the time of exercise
of this Warrant. The term "Exercise Price" as used in this Agreement shall mean
the purchase price of one Share upon the exercise of this Warrant, reflecting
all appropriate adjustments made in accordance with the provisions hereof.
1.2 Exercisability of Warrants. Each Warrant may be exercised at any time
--------------------------
on or after the date of its issuance until 5:00 P.M., New York City time, on
June 13, 2001 (the "Exercise Deadline").
1.3 Procedure for Exercise. Prior to the Exercise Deadline, Warrants may
----------------------
be exercised by surrendering this Warrant Certificate to the Company at the
address specified above, accompanied by payment in full of the Exercise Price as
provided in Section 1.1 in effect at the time of such exercise, together with
such taxes as are specified in Section 4.1 hereof, for each Share with respect
to which such Warrants are being exercised. Such Exercise Price and taxes shall
be paid in full by certified check, money order or wire transfer, payable in
United States currency to the order of the Company. The date on which Warrants
are exercised in accordance with this Section 1.3 is sometimes referred to
herein as the Date of Exercise.
1.4 Issuance of Shares. As soon as practicable after the Date of Exercise
------------------
of any Warrants, the Company shall issue, or cause the transfer agent for the
Common Stock, if any, to issue a certificate or certificates for the number of
full Shares to which the holder is entitled, registered in accordance with the
instructions set forth in the Form of Election to Purchase. All Shares shall be
validly authorized and issued, fully paid and nonassessable and free from all
liens and charges created by the Company in respect of the issue thereof. Each
person in whose name any such certificate for Shares is issued shall for all
purposes be deemed to have become the holder of record of the Shares represented
thereby on the Date of Exercise of the Warrants resulting in the issuance of
such shares, irrespective of the date of issuance or delivery of such
certificate for the Shares.
1.5 Certificates for Unexercised Warrants. In the event that less than
-------------------------------------
all of the Warrants represented by a Warrant Certificate are exercised, the
Company shall execute and mail, by first class mail, as soon as practicable but,
in any event, not later than 30 days after the Date of Exercise, to the
Registered Holder of such Warrant Certificate, or such other person as shall be
designated in the election to purchase, a new Warrant Certificate representing
the number of full Warrants not exercised. In no event shall a fraction of a
Warrant be exercised, and the Company shall distribute no Warrant Certificates
representing fractions of Warrants under this or any other section of this
Agreement. Fractions of Shares shall be treated as provided in Section 2.9.
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<PAGE>
1.6 Reservation of Shares. The Company shall at all times reserve and
---------------------
keep available for issuance upon the exercise of Warrants that number of its
authorized but unissued shares of Common Stock sufficient to permit the exercise
in full of all outstanding Warrants.
ARTICLE 2
ADJUSTMENTS AND NOTICE PROVISIONS
---------------------------------
2.1 Adjustment of Exercise Price. Subject to the provisions of this
----------------------------
Article 2, the Exercise Price in effect from time to time shall be subject to
adjustment, as follows:
(a) In case the Company shall at any time after the date hereof (i)
declare a dividend on the outstanding Common Stock payable in shares of its
capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Exercise
Price in effect, and the number of Shares issuable upon exercise of the Warrants
outstanding, at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, shall be
proportionately adjusted so that the holders of the Warrants after such time
shall be entitled to receive the aggregate number and kind of shares which, if
such Warrants had been exercised immediately prior to such time, such holders
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall distribute to all holders of shares of
Common Stock (including any such distribution made to the shareholders of the
Company in connection with a consolidation or merger in which the Company is the
continuing corporation but excluding the transaction referred to in Section
2.1(a)) evidences of its indebtedness, cash (other than cash dividends) or
assets (other than distributions and dividends payable in Common Stock), then,
in each case, the Registered Holder, upon the exercise hereof, shall be entitled
to receive the amount of evidence of indebtedness, cash or assets which such
Registered Holder would have been entitled to receive had such Registered Holder
exercised the Warrants immediately prior to the record date for such
distribution.
(c) In case the Company shall sell any shares of Common Stock (other
than in a transaction referred to in Section 2.1(a)-(b)) for a consideration per
share less than the Exercise Price per Share, then, in each case, the Exercise
----
Price in effect immediately prior to such sale shall be adjusted to a price
determined by multiplying the Exercise Price in effect immediately prior to such
sale by a fraction, the numerator of which shall be the sum of (i) the total
number of Shares outstanding immediately prior to such sale, and (ii) the
aggregate consideration, if any, received by the Company upon such sale divided
by the Exercise Price immediately prior to such sale, and the denominator of
which shall be the total number of Shares outstanding immediately after such
sale.
- 3 -
<PAGE>
(d) For the purposes of any adjustment to be made in accordance with
Section 2.1(c) the following provisions shall be applicable:
(i) In case of the sale of Common Stock for a consideration
part or all of which shall be cash, the amount of the cash portion of the
consideration therefor deemed to have been received by the Company shall be
without deduction for any expenses (including, without limitation, any
underwriting discount, selling concession or other compensation paid in
connection with such sale) incurred by the Company in connection with such
transaction. In case of the sale of Common Stock for consideration part or all
of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the board of directors of the Company,
whose determination shall be conclusive absent manifest error.
(ii) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(iii) Except as hereinafter provided, in case the Company shall
at any time after the date hereof issue options, rights or warrants to subscribe
for Common Stock, or issue any securities convertible into or exchangeable for
Common Stock, for a consideration (determined as provided in this Section
2.1(d)) less than the Exercise Price in effect immediately prior to the earlier
of the issuance of such options, rights or warrants, or such convertible or
exchangeable securities or the record date therefor, or without consideration
(including the issuance of any such securities by way of dividend or other
distribution), the Exercise Price for the Warrants in effect immediately prior
to the issuance of such options, rights or warrants, or such convertible or
exchangeable securities or the record date therefor, as the case may be, shall
be reduced to a price determined by making the computation in accordance with
the provisions of Section 2.1(c) hereof, provided that:
a. The aggregate maximum number of shares of Common Stock
issuable or that may become issuable under such options, rights or warrants
(assuming exercise in full even if not then currently exercisable or currently
exercisable in full) shall be deemed to be issued and outstanding at the time
such options, rights or warrants were issued, for a consideration equal to the
minimum purchase or exercise price per share provided for in such options,
rights or warrants at the time of issuance, plus the consideration, if any,
received by the Company upon the issuance of such options, rights or warrants
(without deduction for expenses incurred or amounts paid to any underwriter by
the Company in connection with such issuance); provided, however, that upon the
expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this Section 2.1(d) shall be
reduced by the number of shares as to which options, warrants and/or rights
shall have expired, and such number of shares shall no longer be deemed to be
issued and outstanding, and the Exercise Price then in effect shall forthwith be
readjusted and thereafter be the price that it would have been had the
adjustment been made on the basis of the issuance only of the shares actually
issued plus the shares remaining issuable upon the exercise of those options,
rights or warrants as to which the exercise rights shall not have expired or
terminated unexercised.
- 4 -
<PAGE>
b. The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company upon the
issuance of such securities (without deduction for expenses incurred or amounts
paid to any underwriter in connection with such issuance), plus the minimum
consideration, if any, receivable by the Company upon the conversion or exchange
thereof; provided, however, that upon the termination of the right to convert or
exchange such convertible or exchangeable securities (whether by reason of
redemption or otherwise), the number of shares of Common Stock deemed to be
issued and outstanding pursuant to this subsection 2.1(d) shall be reduced by
the number of shares as to which the conversion or exchange rights shall have
expired or terminated unexercised, and such number of shares shall no longer be
deemed to be issued and outstanding, and the Exercise Price then in effect shall
forthwith be readjusted and thereafter be the price that it would have been had
adjustment been made on the basis of the issuance only of the shares actually
issued plus the shares remaining issuable upon conversion or exchange of those
convertible or exchangeable securities as to which the conversion or exchange
rights shall not have expired or terminated unexercised.
c. If any change shall occur in the price per share
provided for in any of the options, rights or warrants referred to in this
Section 2.1(d), or in the price per share or ratio at which the securities
referred to in this Section 2.1(d) are convertible or exchangeable (in either
case, other than changes in such prices or ratios arising pursuant to
antidilution adjustments in such options, rights, warrants, convertible or
exchangeable securities or the instruments pursuant to which they were issued),
such options, rights or warrants or convertible or exchangeable securities, as
the case may be, to the extent not theretofore exercised, shall be deemed to
have expired or terminated on the date when such price change became effective
in respect of shares of Common Stock not theretofore issued pursuant to the
exercise or conversion or exchange thereof, and the Company shall be deemed to
have issued upon such date new options, rights or warrants or convertible or
exchangeable securities.
2.2 No Adjustments to Exercise Price. (a) No adjustment in the Exercise
--------------------------------
Price shall be required if such adjustment is less than $.01; provided, however,
that any adjustments which by reason of this Article 2 are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Article 2 shall be made to the nearest
cent or to the nearest one hundredth of a share, as the case may be.
(b) Notwithstanding any provision of this Warrant Certificate, no
adjustment of the Exercise Price or in the number of Shares shall be made as a
result of or in connection with the issuance or sale of shares of Common Stock
pursuant to options, warrants, stock purchase agreements, loan agreements and
convertible or exchangeable securities outstanding or in effect on the date
hereof.
2.3 Adjustment to Number of Shares. Upon each adjustment of the Exercise
------------------------------
Price as a result of the calculations made in Section 2.1(b), (c) and (d)
hereof, the Warrants shall thereafter evidence the right to purchase, at the
adjusted Exercise Price, that number of shares (calculated
- 5 -
<PAGE>
to the nearest hundredth) obtained by dividing (A) the product obtained by
multiplying the number of shares purchasable upon exercise of the Warrants prior
to such adjustment by the Exercise Price in effect prior to adjustment of the
Exercise Price by (B) the Exercise Price in effect after such adjustment of the
Exercise Price.
2.4 Reorganizations. In case of (x) any capital reorganization (other
---------------
than in the transactions referred to in Section 2.1 hereof) or (y) the
consolidation or merger of the Company with or into another corporation (other
than a merger or consolidation in which the Company is the surviving or
continuing corporation and which does not result in any reclassification of the
outstanding Common Stock or the conversion of such outstanding Common Stock into
shares of other stock or other securities or property), or in the case of any
sale, lease or conveyance to another corporation of the property and assets of
any nature of the Company as an entirety or substantially as an entirety (such
actions being hereinafter collectively referred to as "Reorganizations"), there
shall thereafter be deliverable upon exercise of any Warrant (in lieu of the
number of shares theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the number of shares which would
otherwise have been deliverable upon the exercise of such Warrant would have
been entitled upon such Reorganization if such Warrant had been exercised in
full immediately prior to such Reorganization on the record date therefor. In
case of any Reorganization, appropriate adjustment, as determined in good faith
by the board of directors of the Company, shall be made in the application of
the provisions herein set forth with respect to the rights and interests of
Warrant holders so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares or other property
thereafter deliverable upon exercise of Warrants. Any such adjustment shall be
made by and set forth in a supplemental agreement of the Company, or any
successor thereto, and shall for all purposes hereof conclusively be deemed to
be an appropriate adjustment. The Company shall not effect any such
Reorganization unless upon or prior to the consummation thereof the successor
corporation, or if the Company shall be the surviving corporation in any such
Reorganization and is not the issuer of the shares of stock or other securities
or property to be delivered to holders of the Common Stock outstanding at the
effective time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the Registered Holder of each Warrant Certificate such
shares of stock, securities, cash or other property as such holder shall be
entitled to purchase in accordance with the foregoing provisions. In the event
of sale, lease or conveyance or other transfer of all or substantially all of
the assets of the Company as part of a plan for liquidation of the Company, all
rights to exercise any Warrant shall terminate 30 days after the Company gives
written notice to each Registered Holder of each Warrant Certificate that such
sale or conveyance or other transfer has been consummated.
2.5 Reclassifications. In case of any reclassification or change of the
-----------------
Shares issuable upon exercise of the Warrants (other than a change in par value
or from no par value to a specified par value, or as a result of a transaction
referred to in Section 2.1 or 2.4, but including any change in the shares into
two or more classes or series of shares), or in case of any consolidation or
merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
Common Stock (other than a change in par value, or from no par value to a
specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares),
- 6 -
<PAGE>
the holders of the Warrants shall have the right thereafter to receive upon
exercise of the Warrants solely, the kind and amount of shares of stock and
other securities, property, cash, or any combination thereof receivable upon
such reclassification, change, consolidation or merger by a holder of the number
of Shares for which the Warrants might have been exercised immediately prior to
such reclassification, change, consolidation or merger on the record date
therefor. Thereafter, appropriate provision shall be made for adjustments which
shall be as nearly equivalent as practicable to the adjustments in Article 2.
The above provisions of this Section 2.5 shall similarly apply to successive
reclassifications and changes of the Shares.
2.6 Cashless Exercise. In lieu of exercising this Warrant by paying the
-----------------
Exercise Price in cash as provided herein, the Registered Holder may exercise
this Warrant by surrender of this Warrant at the principal office of the Company
together with the notice of election to purchase and the payment for such taxes
as specified in Section 4.1 hereof, in which event the Company shall issue to
the Registered Holder upon such exercise a number of shares of the Company's
Common Stock computed using the following formula:
X = Y(A-B)
------
A
Where X = The number of shares of Common Stock to be issued to the
Registered Holder.
Y = The number of shares of Common Stock purchasable under this
Warrant.
A = The fair market value of one share of the Common Stock.
B = Exercise Price per share.
For purposes of this Warrant, fair market value of the Common Stock shall
be determined as follows: (i) if the Common Stock is publicly traded, the fair
market value shall be the average of the highest and lowest reported sales price
of the Common Stock on the NASDAQ SmallCap market system, the NASDAQ National
Market system or on any securities exchange (or, if the sales price of the
Common Stock is unavailable, the average of the highest bid and lowest asked
price of the Common Stock) for the twenty trading days prior to the date of
determination of fair market value, or (ii) if the Common Stock is not publicly
traded, the fair market value shall be determined by the Board of Directors, in
their good faith judgement.
2.7 Verification of Computations. Whenever the Exercise Price is adjusted
----------------------------
as provided in this Article 2, the Company will promptly deliver to each
Registered Holder a certificate setting forth the Exercise Price as so adjusted
and a brief statement of the facts accounting for such adjustment, and will make
available a brief summary thereof to the holders of the Warrant, at their
addresses listed on the register maintained for that purpose by the Company.
2.8 Notice of Certain Actions. In case at any time the Company shall
-------------------------
propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends) to all holders of such shares; or
- 7 -
<PAGE>
(b) to issue any rights, warrants or other securities to all holders
of shares entitling them to purchase any additional shares of Common Stock or
any other rights, warrants, other securities or other property; or
(c) to effect any consolidation, merger, sale, lease, or conveyance of
property, described in Section 2.4, or any reclassification or change of
outstanding shares of Shares, described in Section 2.5; or
(d) to effect any liquidation, dissolution or winding-up of the
Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to each Registered Holder. Such notice shall specify the date on
which the books of the Company shall close, or a record shall be taken, for
determining holders of shares entitled to receive such stock dividend or other
distribution or such rights, warrants or property, or the date on which such
reclassification, change, consolidation, merger, sale, lease, other disposition,
liquidation, dissolution, winding up or exchange or other action shall take
place or commence, as the case may be, and the date as of which it is expected
that holders of record of shares shall be entitled to receive securities or
other property deliverable upon such action, if any such date has been fixed.
Such notice shall be mailed, in the case of any action covered by Subsection
2.8(a) or 2.8(b) above, at least 15 days prior to the record date for
determining holders of shares for purposes of receiving such payment or offer;
in the case of any action covered by Subsection 2.8(c) or 2.8(d) above, at least
15 days prior to the earlier of the date upon which such action is to take place
or any record date to determine holders of shares entitled to receive such
securities or other property.
2.9 Warrant Certificate Amendments. Irrespective of any adjustments
------------------------------
pursuant to this Article 2, Warrant Certificates theretofore or thereafter
issued need not be amended or replaced but certificates thereafter issued shall
bear an appropriate legend or other notice of any adjustments.
2.10 Fractional Shares. The Company shall not be required upon the
-----------------
exercise of any Warrant to issue fractional Shares which may result from
adjustments in the Exercise Price or number of shares purchasable under each
Warrant. If more than one Warrant is exercised at one time by the same
Registered Holder, the number of full shares of Shares which shall be
deliverable shall be computed based on the number of shares deliverable in
exchange for the aggregate number of Warrants exercised. With respect to any
fraction of a share called for upon the exercise of any Warrant or Warrants, the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the then fair market value per share.
2.11 Compliance with Securities Act. The Registered Holder, by
------------------------------
acceptance hereof, agrees that this Warrant, and the shares of Common Stock to
be issued upon exercise hereof, are being acquired for investment and that such
Registered Holder will not offer, sell or otherwise dispose of this Warrant, or
any shares of Common Stock to be issued upon exercise hereof except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Securities Act") or any applicable state securities laws.
Upon exercise of this Warrant, unless the shares of Common Stock being acquired
are registered under the Securities
- 8 -
<PAGE>
Act and any applicable state securities laws, the Registered Holder hereof shall
confirm in writing that the shares of Common Stock so purchased are being
acquired for investment and not with a view toward distribution or resale in
violation of the Securities Act and shall confirm such other matters related
thereto as may be reasonably requested by the Company. This Warrant and all
shares of Common Stock issued upon exercise of this Warrant (unless registered
under the Securities Act and any applicable state securities laws) shall be
stamped or imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
ARTICLE 3
OTHER PROVISIONS RELATING TO RIGHTS
OF REGISTERED HOLDERS OF WARRANT CERTIFICATES
---------------------------------------------
3.1 Rights of Warrant Holders. This Warrant Certificate shall not entitle
-------------------------
the Registered Holder thereof to any of the rights of a shareholder of the
Company, including, without limitation, the right to vote, to receive dividends
and other distributions, or to receive any notice of, or to attend, meetings of
shareholders or any other proceedings of the Company.
3.2 Lost, Stolen, Mutilated or Destroyed Warrant Certificates. If this
---------------------------------------------------------
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company
shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Warrant Certificate, or in lieu of or in
substitution for a lost, stolen or destroyed Warrant Certificate, a new Warrant
Certificate for the number of Warrants represented by the Warrant Certificate so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Warrant Certificate, and of the ownership
thereof, and indemnity, if requested, all reasonably satisfactory to the
Company. Applicants for such substitute Warrant Certificates shall also comply
with such other reasonable regulations and pay such other reasonable charges
incidental thereto as the Company may prescribe.
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<PAGE>
ARTICLE 4
SPLIT UP, COMBINATION, EXCHANGE, TRANSFER
AND CANCELLATION OF WARRANT CERTIFICATES
----------------------------------------
4.1 Split Up, Combination, Exchange and Transfer of Warrant Certificates.
--------------------------------------------------------------------
Prior to the Exercise Deadline, this Warrant Certificate, subject to the
provisions of Section 4.2, may be split up, combined or exchanged for other
Warrant Certificates representing a like aggregate number of Warrants. Any
holder desiring to split up, combine or exchange a Warrant Certificate or
Warrant Certificates shall make such request in writing delivered to the Company
at its principal office and shall surrender the Warrant Certificate or Warrant
Certificates so to be split up, combined or exchanged at said office. Upon any
such surrender for split up, combination or exchange, the Company shall execute
and deliver to the person entitled thereto a Warrant Certificate or Warrant
Certificates, as the case may be, as so requested, provided that, the Company
has received an opinion of counsel reasonably satisfactory to the Company that
said split up is in accordance with the provisions of the Securities Act of
1933, as amended. The Company may require the holder to pay a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
split up, combination, exchange or transfer of Warrant Certificates prior to the
issuance of any new Warrant Certificate.
4.2 Agreement of Warrant Certificate Holders. Every holder of a Warrant
----------------------------------------
Certificate by accepting the same, consents and agrees with the Company and with
every other holder of a Warrant Certificate that:
(a) transfer of the Warrant Certificates shall be registered on the
books of the Company maintained for that purpose by the Company only if
surrendered at the principal office of the Company, duly endorsed or accompanied
by a proper instrument of transfer and an opinion of counsel reasonably
satisfactory to the Company that such transfer is permitted under the Securities
Act of 1933, as amended; and
(b) prior to due presentment for registration of transfer, the Company
may deem and treat the person in whose name the Warrant Certificate is
registered as the absolute owner thereof and of the Warrants evidenced thereby
(notwithstanding any notations of ownership or writing on the Warrant
Certificates made by anyone other than the Company) for all purposes whatsoever,
and the Company shall not be affected by any notice to the contrary.
ARTICLE 5
MISCELLANEOUS
-------------
5.1 Changes to Agreement. The Company may, without the consent or
--------------------
concurrence of any Registered Holder of a Warrant Certificate, by supplemental
agreement, make any changes or corrections in this Certificate that it has been
advised by counsel (i) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or
- 10 -
<PAGE>
manifest error herein contained, (ii) add to the covenants and agreements of the
Company, (iii) reduce the Exercise Price or extend the Exercise Deadline or (iv)
result in the surrender of any right or power reserved to or conferred upon the
Company in this Certificate, which changes or corrections do not or will not
adversely affect, alter or change the rights, privileges or immunities of the
Registered Holders of Warrant Certificates. Other changes in this Agreement may
be made only with the prior written consent of a holder of a majority of the
Warrants affected thereby, provided that no such change shall increase the
Exercise Price or shorten the exercise period without the prior written consent
of each affected Registered Holder.
5.2 Assignment. All the covenants and provisions of this Agreement by or
----------
for the benefit of the Company shall bind and inure to the benefit of their
respective permitted successors and assigns.
5.3 Notices. Any notice or demand required by this Warrant Certificate to
-------
be given or made by the Registered Holder of any Warrant Certificate to or on
the Company shall be sufficiently given or made if sent by first-class or
registered mail, postage prepaid, addressed to the Company's principal offices
specified above (until another address is given in writing to the Registered
Holder by the Company).
Any notice or demand required by this Warrant Certificate to be given or
made by the Company to or on the Registered Holder of any Warrant Certificate
shall be sufficiently given or made, whether or not such holder receives the
notice, if sent by first-class or registered mail, postage prepaid, addressed to
such registered holder at his last address as shown on the books of the Company.
Otherwise such notice or demand shall be deemed given when received by the party
entitled thereto.
5.4 Defects in Notice. Failure to file any certificate or notice or to
-----------------
mail any notice, or any defect in any certificate or notice pursuant to this
Agreement, shall not affect in any way the rights of any Registered Holder of a
Warrant Certificate or the legality or validity of any adjustment made pursuant
to Article 2 hereof, or any transaction giving rise to any such adjustment, or
the legality or validity of any action taken or to be taken by the Company.
5.5 Governing Law. The laws of the State of New York shall govern this
-------------
Warrant Certificate.
5.6 Standing. Nothing in this Agreement expressed and nothing that may be
--------
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or corporation other than the Company, and
the Registered Holders of the Warrant Certificates any right, remedy or claim
under or by reason of this Warrant Certificate or of any covenant, condition,
stipulation, promise or agreement contained herein; and all covenants,
conditions, stipulations, promises and agreements contained in this Agreement
shall be for the sole and exclusive benefit of the Company and its successors
and assigns, and the Registered Holders of the Warrant Certificates.
- 11 -
<PAGE>
5.7 Headings. The descriptive headings of the articles and sections of
--------
this Warrant Certificate are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
5.8 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which shall constitute one instrument.
5.9 Registered Broker/Dealer. Libra Investments, Inc. hereby represents
------------------------
and warrants to the Company that it is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 12 -
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
Dated: June , 1996
COMMUNICATION INTELLIGENCE CORPORATION
By:
---------------------------------------
Philip S. Sassower
Chairman of the Finance Committee
AGREED AND ACCEPTED
LIBRA INVESTMENTS, INC.
By:
------------------------
Name:
Title:
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise _______________
of the Warrants represented by this Warrant Certificate and to purchase the
Shares issuable upon the exercise of said Warrants, and requests that
certificates for such shares be issued and delivered as follows:
ISSUE TO:
-------------------------------------------------
(NAME)
-------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
-------------------------------------------------
(SOCIAL SECURITY OR OTHER TAX IDENTIFYING
NUMBER)
DELIVER TO:
-------------------------------------------------
(NAME)
-------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of Warrants hereby exercised is less than all the
Warrants represented by this Warrant Certificate, the undersigned requests that
a new Warrant Certificate representing the number of full Warrants not exercised
be issued and delivered as set forth below.
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$______________ by certified check or money order payable to the order of the
Company in United States currency.
Dated: ________________
------------------ -----------------------------
(Insert Social (Signature of registered holder)
Security or other
identifying
number(s) of
holder(s))
--------------------------------
(Signature of registered holder,
if co-owned)
NOTE: Signature must
conform in all
respects to name of
holder as specified
on the face of the
Warrant Certificate.
EXHIBIT 5
COMMUNICATION INTELLIGENCE CORPORATION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of June
13, 1996, is made by and between Communication Intelligence Corporation, a
Delaware corporation (the "Company") and Libra Investments, Inc. (the
"Advisor").
R E C I T A L S
- - - - - - - -
WHEREAS, the Advisor is acting as placement agent for a $2,700,000
private placement of shares (the "Shares") of common stock, par value $0.01 per
share, of the Company (the "Common Stock") (the "Private Placement"); and
WHEREAS, in partial consideration for the Advisor acting as placement
agent for the Shares, the Company is issuing Warrants to purchase Common Stock
of the Company to the Advisor; and
WHEREAS, as further inducement for the Advisor to act as placement
agent for the Shares, the Company desires to undertake to register the Warrant
Shares (as hereinafter defined) under the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Securities Act"), in accordance
with, and subject to, the terms hereof.
NOW, THEREFORE, the Advisor and the Company covenant and agree, upon
the terms and subject to the conditions set forth herein, as follows:
1. Definitions. For the purposes of this Agreement, the following
capitalized terms shall have the following meanings:
(a) "Holder" means, initially, the Advisor, and thereafter, any
person or entity (a "person") who at a given time is the holder of record of any
Registrable Securities or Warrants, so long as such transfers or assignments
were made in compliance with Section 8 hereof or, with respect to the Warrants,
in compliance with the terms thereof.
(b) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act.
(c) "Registration Statement" means any registration statement or
comparable document of the Company under the Securities Act through which a
public sale or disposition of the Company's securities may be registered (except
a form used exclusively for the sale or distribution of securities in connection
with an employee stock option plan or
<PAGE>
in connection with a business combination), the prospectus contained therein and
all amendments and supplements to such Registration Statement, including post-
effective amendments, and all material incorporated by reference in such
Registration Statement.
(d) "Registrable Securities" means (i) the Warrant Shares (as
defined below); and (ii) any other security of the Company issued as a dividend
or other distribution with respect to, or in exchange for or in replacement of
the Warrant Shares, excluding in all cases, however, any Registrable Securities
disposed of by a Holder in a transaction in which its registration rights under
this Agreement are not assigned pursuant to Section 8 of this Agreement.
(e) "SEC" means the United States Securities and Exchange
Commission or any similar agency then having the authority to enforce the
Securities Act.
(f) "Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants pursuant to the terms of the Warrants.
(g) "Warrants" means the 30,000 Warrants of the Company being
issued by the Company to the Advisor on the date hereof.
2. Advisor's Registration.
(a) PiggyBack Registration. If at any time during the five year
----------------------
period from the date hereof the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of others, in connection with the public offering of such securities
solely for cash, pursuant to a Registration Statement that would also permit the
registration of the Registrable Securities, the Company shall, in each such
time, promptly give the Holder written notice of such proposal and the Holder
may, within fifteen days after the Company provides such notice, request the
inclusion of Registrable Securities in such Registration Statement; provided,
however, that it shall be a condition precedent to the Company's obligations
under this Section 2(a) that the underwriter(s) of such offering, if any,
consent to the inclusion of the Holder's Registrable Securities in any such
offering. In such event the Company shall include the Registrable Securities in
such registration; provided that the Holder (i) agrees to sell the Registrable
Securities on the basis provided in any underwriting agreements relating to such
offering, and otherwise complies with the provisions of Section 4 hereof, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up agreements and other documents required under
the terms of such underwriting arrangements, and (iii) agrees to pay the
Holder's pro rata portion of all underwriting discounts and commissions.
(b) Demand Registration. Subject to Section 2(c) hereof, at any
-------------------
one time during the period commencing ninety (90) days from the closing date of
the Private Placement (the "Closing Date") and terminating five years from the
Closing Date, the Holder
- 2 -
<PAGE>
may deliver to the Company a written request that the Company register the
Registrable Securities (but no less than all of the Registrable Securities)
under the Securities Act and, upon receipt of such request, the Company shall
prepare and file a Registration Statement with the SEC covering the Registrable
Securities provided that if at the time of such written request, (i) the Company
has filed an application to list its Common Stock on the NASDAQ SmallCap Market,
(ii) the Company has met all of the NASDAQ SmallCap Market listing requirements,
and (iii) the Company has no reason to believe that the Common Stock will not be
so listed, the Company may extend the filing date of the Registration Statement
for not more than 90 days after the date of the Holder's written request. The
Company shall use its best efforts to keep such Registration Statement
continually effective for the earlier to occur of the following: (i) all of the
Registrable Securities covered by such Registration Statement have been sold,
and (ii) nine months from the effective date of any such Registration Statement.
The Holder shall notify the Company in writing within five (5) days after the
sale of all of the Registrable Securities to enable the Company to determine
when its obligation to continue effectiveness of such Registration Statement
terminates.
(c) Notwithstanding anything contained in Section 2(b) to the
contrary, the Holder shall have no rights under Section 2(b), and Section 2(b)
shall be deemed null and void, if the Holder elects to exercise the Warrants
pursuant to and in accordance with Section 2.6 of the Warrant Certificate
evidencing the Warrants.
(d) Suspension of Sales by Holders. If at any time when a
------------------------------
Registration Statement is effective with respect to Registrable Securities
pursuant to Section 2(b) hereof, the Company intends to file a registration
statement for an underwritten public offering of securities to be issued by the
Company (a "Company Registration Statement"), the Company shall promptly give
written notice thereof to the Holder, which notice shall include the anticipated
filing date of the Company Registration Statement, and the Holder shall suspend
offers and sales of its Registrable Securities covered by such Registration
Statement for a period commencing fourteen days prior to the anticipated filing
date of the Company Registration Statement and terminating not later than
150 days from the effective date of the Company Registration Statement (a
"Suspension Period"); provided, however, that the Holder shall only be required
to suspend such offers and sales of its Registrable Securities (i) if so
requested by the underwriter of any such offering, and (ii) if and to the extent
that any other securityholders of the Company whose securities have been
registered by the Company pursuant to registration rights also agree to
suspension of their sales. The Holder agrees that, during any such Suspension
Period, the Holder shall not sell, make any short sale of, pledge, grant any
option for the purchase of or otherwise dispose of any Registrable Securities
without the prior written consent of such underwriter(s), and shall enter into
such agreements with such underwriter(s) with respect to the foregoing as is
reasonably requested by such underwriter(s).
3. Obligations of the Company. In connection with the registration
of the Registrable Securities pursuant to Section 2 of this Agreement, the
Company shall, as expeditiously as reasonably possible:
- 3 -
<PAGE>
(a) Prepare and file with the SEC a Registration Statement with
respect to all Registrable Securities included therein, and use its best efforts
to cause the Registration Statement to become effective as soon as reasonably
possible after such filing, and to keep the Registration Statement effective for
the period specified in Section 2 hereof, which Registration Statement shall not
contain during such period any untrue statement of a material fact or omit to
state during such period a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective for the period specified
in Section 2 hereof and as may be required by the Securities Act, and during
such periods to comply with the provisions of the Securities Act with respect to
the Registration Statement.
(c) Furnish promptly to each Holder whose Registrable Securities
are included in the Registration Statement such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Holder may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by such Holder.
(d) Use its best efforts to register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders and prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements and to take such other actions as may
be necessary to maintain such registration and qualification in effect at all
times during which it has agreed to use its best efforts to keep a Registration
Statement effective under the Securities Act pursuant to the terms of this
Agreement, and to take all other actions necessary or advisable to enable the
disposition of such securities in such jurisdictions, provided that the Company
--------
shall not be required in connection therewith or as a condition thereto to
qualify to do business, to file a general consent to service of process, to
subject itself to general taxation in any such states or jurisdictions or to
make any change in its charter or bylaws which the Board of Directors determines
to be contrary to the best interest of the Company and its shareholders.
(e) Notify the Holders who hold Registrable Securities being
sold of the happening of any event as a result of which the prospectus included
in the Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Company
shall promptly amend or supplement the Registration Statement to correct any
such untrue statement or omission.
(f) Notify the Holders who hold Registrable Securities being
sold of the issuance by the SEC or any state securities commission or agency of
any stop order
- 4 -
<PAGE>
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time.
(g) Permit a single firm of counsel to review the Registration
Statement and all amendments and supplements thereto within a reasonable period
of time prior to each filing, and shall not file any document in a form to which
such counsel reasonably objects.
(h) Furnish to the Holders on the effective date of the
Registration Statement, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given in such an offering, addressed to the Company;
and (ii) a "cold comfort" letter, dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to securityholders
in such an offering, so addressed.
(i) Make available for inspection by representatives of the
Holders and any counsel, accountants or other agents retained by any thereof,
all pertinent financial and other records, corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such party in connection with the
Registration Statement.
(j) Use its best efforts to cause the Registrable Securities
being sold to be listed on the NASDAQ SmallCap Market.
(k) Take all actions reasonably necessary to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be sold pursuant to the
Registration Statement and to enable such certificates to be in such
denominations and registered in such names as the Holders of the Registrable
Securities being sold.
(l) Take all other actions reasonably necessary to expedite and
facilitate disposition by the Holders of the Registrable Securities being sold
pursuant to the Registration Statement.
4. Obligations of the Holders. In connection with the registration
of the Registrable Securities, the Holders shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to each
Holder that such Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended methods of
disposition of such securities as shall be
- 5 -
<PAGE>
reasonably required to effect the registration of the Registrable Securities and
shall execute such documents in connection with such registration as the Company
may reasonably request. At least ten days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Holder of the
information the Company requires from each such Holder if it elects to have any
of his Registrable Securities included in the Registration Statement.
(b) Each Holder agrees to cooperate with the Company in
connection with the preparation and filing of any Registration Statement
hereunder.
(c) No Holder may participate in any underwritten registration
hereunder unless such Holder (i) agrees to enter into and perform its
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations; (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements; (iii) agrees to pay such
Holder's pro rata portion of all underwriting discounts and commissions; and
(iv) agrees to take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities being sold.
(d) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 2(c) or
Section 3(e), such Holder will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Holder's receipt of (i) confirmation from the
Company that such sales may resume under the terms of Section 2(c) or (ii) the
copies of the supplemented or amended prospectus contemplated by Section 3(e)
and, if so requested in writing by the Company, such Holder shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of such destruction) all copies, other than the permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities at the time of receipt of such notice.
5. Expenses of Registration. All expenses incurred in connection
with registration, filings or qualifications pursuant to Section 2, including,
without limitation, all registration, listing, filing and qualification fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one firm of counsel for the
Holders, shall be borne by the Company.
6. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will
indemnify and hold each Holder, it partners and their respective directors,
officers, employees and representatives, and each person who controls any such
Holder within the
- 6 -
<PAGE>
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934 (the "1934 Act") (each such person being referred to as an
"Indemnified Person") harmless from and against any and all losses, claims,
damages, liabilities and expenses arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement, or in any amendment or supplement thereto, or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or allegation thereof
based upon information furnished in writing to the Company by such Indemnified
Person expressly for use therein. Notwithstanding the foregoing, the Company
shall not be obligated to so indemnify any such Holder, officer, director or
controlling person with respect to any loss, claim, damage, liability or expense
arising out of the failure by such person to comply with the prospectus delivery
requirements under the Securities Act and the rules and regulations thereunder.
(b) If any action or proceeding (including any governmental
investigation) shall be brought, threatened or asserted against any Indemnified
Person in respect of which indemnity may be sought from the Company, such
Indemnified Person shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including employment of counsel and the
payment of all expenses related thereto. Any such Indemnified Person shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Company has agreed to pay
such fees and expenses; or (ii) the Company shall have failed to assume the
defense of such action or proceeding and employ counsel in such action or
proceeding; or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Person and the
Company, and such Indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to such Indemnified Person
which are different from or additional to those available to the Company (in
which case, if such Indemnified Person notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company, the Company
will not have the right to assume the defense of such action or proceeding on
behalf of such Indemnified Person); provided, however, that the Company will
not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys at any time for
all such Indemnified Persons, which firm shall be designated in writing by a
majority in interest of such Indemnified Persons. The Company shall not be
liable for any default judgment caused by any Indemnified Person or settlement
of any such action or proceeding or confession of judgment without its prior
written consent, but if settled with its written consent (which consent shall
not be unreasonably withheld), or if there be a final judgment (other than such
default judgment) for the plaintiff in any such action or proceeding, the
Company agrees to indemnify and hold harmless such Indemnified Person from and
against any loss or liability by reason of such settlement or
- 7 -
<PAGE>
judgment. Subject to the following sentence, if the Company agrees to a
settlement of an action or proceeding against an Indemnified Person which does
not involve any finding or admission of liability or wrongdoing on the part of
the Indemnified Person and stands ready, willing and able to pay such settlement
and the Indemnified Person refuses to settle, then the Indemnified Person shall
continue the defense at its own expense and the Company shall be responsible to
indemnify only the lesser of the amount of the settlement accepted by the
Company or the cost of the final disposition of the claim. The Company will
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in or otherwise seek to
terminate any pending or threatened action, claim, suit or proceeding in respect
to which indemnification or contribution may be sought hereunder unless such
settlement, compromise, consent or termination includes an express unconditional
release of all Indemnified Persons from all liability arising out of such
action, claim, suit or proceeding.
(c) Each Holder, severally and not jointly, agrees to indemnify
and hold harmless the Company, its directors and officers, and each person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the 1934 Act, to the same extent as the
indemnity from the Company to each Indemnified Person set forth in Section 6(a),
but only (i) with respect to untrue statements, alleged untrue statements,
omissions or alleged omissions relating to such Holder or an Indemnified Person
who is such by reason of such person's relationship to such Holder, furnished in
writing by such Holder or such person to the Company expressly for use in the
Registration Statement or the Prospectus, or any amendment or supplement
thereto; and (ii) with respect to any failure by such Holder to comply with the
prospectus delivery requirements under the Securities Act and the rules and
regulations thereunder. In case any action or proceeding shall be brought
against the Company or its officers or directors or any such controlling person
in respect of which indemnity may be sought against a Holder under the
provisions of this Section 6(c), such Holder shall have the rights and duties
given to the Company and each of the Company or its directors or its officers or
its controlling persons shall have the rights and duties given to each Holder
and other Indemnified Persons, under the terms of Section 6(b) above.
Notwithstanding anything contained herein, no Holder shall be liable for an
amount which is greater than the proceeds received by such Holder from the sale
of Registrable Securities.
(d) If the indemnification provided for under Section 6(a) or
Section 6(c) hereof is unavailable to an indemnified party thereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and of the applicable Holders on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of the applicable Holders on the other shall be determined by reference to,
among
- 8 -
<PAGE>
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Company or information supplied by the applicable Holder in writing for use in
the Registration Statement and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Subsection 11(f) of the Securities Act) or of gross negligence, willful
misconduct or bad faith shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation, gross negligence, willful,
misconduct or bad faith. Notwithstanding anything contained herein, no Holder
shall be liable for an amount which is greater than the proceeds received by
such Holder from the sale of Registrable Securities.
7. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of SEC Rule 144 promulgated under
the Securities Act and any other rule or regulation of the SEC that may at any
time permit the Holders to sell securities of the Company to the public without
registration, the Company agrees to file with the SEC all reports and documents
required to be filed by it under the Securities Act and the 1934 Act and the
rules and regulations promulgated thereunder, and to furnish to each Holder, so
long as such Holder owns any Registrable Securities, a copy of the most recent
annual or quarterly report of the Company, such other reports and documents
filed by the Company with the SEC, and such other information as may be
reasonably requested in availing the Holders of any rule or regulation of the
SEC which permits the selling of any such securities without registration.
8. Assignments of Registration Rights. The rights of a Holder under
this Agreement may be assigned by a Holder to permitted transferees or assignees
of Registrable Securities or Warrants provided that (i) the Company is furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; (ii) the transfer or assignment of such Registrable Securities or
Warrants has been made in compliance with the Securities Act and applicable
state securities law and, immediately following such transfer or assignment the
further disposition of such Registrable Securities or Warrants is restricted
under the Securities Act; and (iii) the notice provided in this Section 8
contains a written agreement by the transferee or assignee to be bound by the
terms and provisions of this Agreement.
9. Miscellaneous.
(a) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed (i) if
to the Company, at 275 Shoreline Drive, Redwood Shores, California 94065, with a
copy to Donald J. Bezahler, Esq., Baer Marks & Upham LLP, 805 Third Avenue, New
York, New York 10022; (ii) if to the Advisor, at 11766 Wilshire Boulevard,
Suite 870, Los Angeles, CA 90025; or at such other address as any such party
furnishes by notice given in accordance with this Section 9.
- 9 -
<PAGE>
(b) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, will not operate as a waiver thereof.
(c) This Agreement shall be enforced, governed and construed in
all respects in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of law applied in such State. In the
event that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof.
(d) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing executed by the Company and each of the
Holders. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon the Holders and the Company.
(e) Any person or entity is deemed to be a Holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall be entitled to act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(f) This Agreement may be executed in counterparts, each of
which shall be an original, but all of which shall constitute one instrument.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed on its behalf as of the date first set forth above.
COMMUNICATION INTELLIGENCE
CORPORATION
By:
-------------------------------
Philip S. Sassower
Chairman of the Finance
Committee
LIBRA INVESTMENTS, INC.
By:
-------------------------------
Name:
Title:
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