SECURITIES
AND EXCHANGE COMMISSION
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
February
5, 2007
Date
of
Report (Date of earliest event reported)
COMMUNICATION
INTELLIGENCE CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
(State
or
other jurisdiction of incorporation)
0-19301
94-2790442
---------------------------------------
------------------------------------
(Commission file
number)
(IRS employer identification
number)
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275
Shoreline Drive, Suite 500, Redwood Shores, CA 94065
(Address
of principal executive offices)
(650)
802-7888
(Registrant's
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
[Missing
Graphic Reference]
Item1.01.
Entry
into a Material Definitive Agreement;
Item
2.03
Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant
;
Item
3.02 Unregistered Sales of Equity Securities
.
On
February 5, 2007, Communication Intelligence Corporation (the “Company”) entered
into a Note and Warrant Purchase Agreement (the “Purchase Agreement”) and a
Registration Rights Agreement (the “Registration Rights Agreement”), each dated
as of February 5, 2007. The Company secured the right to borrow up to six
hundred thousand dollars ($600,000). The Company expects to use the proceeds
of
the financing for additional working capital.
Under
the
Purchase Agreement, the Company may borrow, on demand through March 31, 2007,
an
aggregate principal amount of up to six hundred thousand dollars ($600,000).
Amounts borrowed will be due within eighteen (18) months of such borrowing.
Upon
each draw, the Company will be required to issue warrants to purchase a pro
rata
number of shares of its common stock, with a maximum number of three million
one
hundred eleven thousand (3,111,000) to be issued if the entire six hundred
thousand dollars ($600,000) is borrowed. The notes will bear interest at the
rate of fifteen percent (15%) per annum payable quarterly in cash. The warrants
will have a term of three (3) years and an exercise price of fifty-one cents
($0.51). In the event the full amount available under the credit facility is
not
borrowed, the Company will be required to issue, as a standby commitment fee,
a
pro rata portion of two hundred fifty thousand (250,000) shares of the Company’s
common stock, based upon the difference between six hundred thousand dollars
($600,000) and the actual amount borrowed under the credit facility. The
warrants will include piggyback registration rights for the underlying shares
to
participate in certain future registrations of the Company’s common
stock.
Incorporated
herein by reference are the following: Purchase Agreement (Exhibit 10.34),
Registration Rights Agreement (Exhibit 10.35), form of the note (Exhibit 10.36),
and form of investor warrant (Exhibit 10.37). The respective description of
the
Purchase Agreement, the Registration Rights Agreement, the form of note and
the
form of investor warrant contained herein is qualified in its entirety by the
respective terms of each agreement incorporated herein by
reference.
2
Item
7.01. Regulation FD Disclosure.
On
February 9, 2007, the Company issued a press release relating to the second
credit facility. A copy of the press release is attached hereto as Exhibit
99.1.
In
accordance with General Instruction B.2. of Form 8-K, the information contained
in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished
and shall not be deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section.
Item
9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
10.34
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Note
and Warrant Purchase Agreement dated February 5,2007 among Communication
Intelligence Corporation and the Purchaser.
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Exhibit
10.35
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Registration
Rights Agreement dated February 5,2007 among Communication Intelligence
Corporation and the Purchaser
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Exhibit
10.36
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Form
of Promissory Note to be issued by Communication Intelligence
Corporation
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Exhibit
10.37
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Form
of Warrant to be issued by Communication Intelligence
Corporation
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Exhibit
99.1
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Press
Release announcing Second Credit
Facility
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SIGNATURES
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.
Date:
February 9, 2007
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Communication
Intelligence Corporation
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By:
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/s/
Frank Dane
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Frank
Dane
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Chief
Financial and Legal Officer
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3
Exhibit
Index
Exhibit
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Description
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Exhibit 10.34
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Note
and Warrant Purchase Agreement dated February 5, 2007 among Communication
Intelligence Corporation and the Purchaser
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Exhibit
10.35
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Registration
Rights Agreement dated February 5, 2007 among Communication Intelligence
Corporation and the Purchaser
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Exhibit
10.36
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Form
of Promissory Note to be issued by Communication Intelligence
Corporation
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Exhibit
10.37
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Form
of Warrant to be issued by Communication Intelligence
Corporation
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Exhibit
99.1
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Press
Release announcing Second Credit
Facility
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4
EXHIBIT
10.34
NOTE
AND
WARRANT PURCHASE
AGREEMENT
Dated
as
of February 5, 2007
by
and
among
COMMUNICATION
INTELLIGENCE CORPORATION
and
THE
PURCHASERS LISTED ON EXHIBIT A
ARTICLE
I PURCHASE AND SALE OF NOTES AND WARRANTS
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Section
1.1
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Purchase
and Sale of Notes and Warrants.
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1
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Section
1.2
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Execution
and Borrowing
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1
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Section
1.3
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Warrant
Shares
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2
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ARTICLE
II REPRESENTATIONS AND WARRANTIES
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Section
2.1
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Representations
and Warranties of the Company
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2
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Section
2.2
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Representations
and Warranties of the Purchasers
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12
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ARTICLE
III COVENANTS
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Section
3.1
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Securities
Compliance
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14
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Section
3.2
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Registration
and Listing
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14
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Section
3.3
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Compliance
with Laws
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14
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Section
3.4
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Keeping
of Records and Books of Account
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14
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Section
3.5
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Reporting
Requirements
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15
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Section
3.6
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Other
Agreements
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15
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Section
3.7
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Use
of Proceeds
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15
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Section
3.8
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Reporting
Status
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15
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Section
3.9
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Disclosure
of Transaction
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15
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Section
3.10
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Disclosure
of Material Information
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16
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Section
3.11
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Amendments
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16
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Section
3.12
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Reservation
of Shares
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16
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Section
3.13
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Disposition
of Assets
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16
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Section
3.14
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Non-Shorting
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16
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ARTICLE
IV CONDITIONS
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Section
4.1
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Conditions
Precedent to the Obligation of the Company to Close
and
to Sell the Securities
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16
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Section
4.2
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Conditions
Precedent to the Obligation of the Purchasers to Close
and
to Purchase the Securities
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17
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ARTICLE
V CERTIFICATE LEGEND
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Section
5.1
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Legend
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18
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ARTICLE
VI INDEMNIFICATION
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Section
6.1
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General
Indemnity
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19
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Section
6.2
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Indemnification
Procedure
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19
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ARTICLE
VII MISCELLANEOUS
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Section
7.1
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Fees
and Expenses
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20
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Section
7.2
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Specific
Performance; Consent to Jurisdiction; Venue
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21
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Section
7.3
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Entire
Agreement; Amendment
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21
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Section
7.4
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Notices
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21
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Section
7.5
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Waivers
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22
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Section
7.6
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Headings
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22
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Section
7.7
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Successors
and Assigns
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22
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Section
7.8
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No
Third Party Beneficiaries
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22
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Section
7.9
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Governing
Law
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22
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Section
7.10
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Survival
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23
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Section
7.11
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Counterparts
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23
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Section
7.12
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Publicity
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23
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Section
7.13
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Severability
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23
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Section
7.14
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Further
Assurances
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23
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NOTE
AND
WARRANT PURCHASE AGREEMENT
This
NOTE
AND WARRANT PURCHASE AGREEMENT dated as of February 5, 2007 (this “
Agreement
”)
by and
between Communication Intelligence Corporation, a Delaware corporation (the
“
Company
”),
and
each of the purchasers of the promissory notes of the Company whose names are
set forth on
Exhibit
A
attached
hereto (each a “
Purchaser
”
and
collectively, the “
Purchasers
”).
The
parties hereto agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF NOTES AND WARRANTS
Section
1.1
Purchase
and Sale of Notes and Warrants
.
(a)
Upon
the
following terms and conditions, the Company shall issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, promissory
notes
in the aggregate principal amount of up to Six Hundred Thousand Dollars
($600,000) bearing interest at the rate of fifteen percent (15%) per annum,
in
substantially the form attached hereto as Exhibit B (the “Notes”). The Company
and the Purchasers are executing and delivering this Agreement in accordance
with and in reliance upon the exemption from securities registration afforded
by
Section 4(2) of the U.S. Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the “Securities Act”), including Regulation
D (“Regulation D”), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any
or
all of the investments to be made hereunder.
(b)
Upon
the
following terms and conditions, the Purchasers shall be issued (i) Warrants,
in
substantially the form attached hereto as
Exhibit
C
(the
“
Warrants
”),
to
purchase the number of shares of Common Stock set forth opposite such
Purchaser’s name on
Exhibit
A
attached
hereto. The Warrants shall have an exercise price equal to the Warrant Price
(as
defined in the respective Warrant) and shall be exercisable as stated therein.
Each Warrant shall have a term of three (3) years from the later of i) the
date
it is issued (the “Issuance Date”) or ii) June 30, 2007.
Section
1.2
Execution
and Borrowing
(a)
The
execution of this Agreement shall take place at the offices of Davis Wright
Tremaine LLP, 1300 S.W. Fifth Avenue, 23
rd
Floor,
Portland, Oregon 97201 (the “Execution”) at 10:00 a.m., Pacific Daylight Time
(i) on or before February 5, 2007; provided, that all of the conditions set
forth in Article IV hereof and applicable to the Closing shall have been
fulfilled or waived in accordance herewith, or (ii) at such other time and
place
or on such date as the Purchasers and the Company may agree upon (the “Execution
Date”).
(b)
During
the period commencing on the Execution Date and terminating on March 31, 2007
(the Borrowing Period) and subject to the terms and conditions of this
Agreement, the Company may issue and sell the Notes and Warrants to the
Purchasers in an amount not to exceed $600,000 (such amount, the “Purchase
Price”) by giving notice thereof to each Purchaser. Within seven (7) business
days of receipt of such notice, the Company shall deliver or cause to be
delivered to each Purchaser (x) its Note for the amount of the Purchase Price
being drawn upon and (y) a Warrant to purchase the pro rata number of shares
of
Common Stock corresponding to the Purchase Price (the maximum number of shares
to be issued pursuant to such warrants shall be 3,111,000 if the full $600,000
in notes are issued) and each Purchaser shall deliver its Purchase Price by
wire
transfer to an account designated by the Company. Each Note issued under this
Section 1.2 shall be due and payable eighteen months after the date of issuance.
If the Company has not requested the full amount available, by March 31, 2007,
the Purchasers shall be entitled to receive, based upon the amount not drawn
to
the amount available, a pro rata portion of 250,000 shares of Common Stock
as a
standby commitment fee not later than April 30, 2007.
Section
1.3
Warrant
Shares
.
If at
any time any Warrant is exercised and the number of the shares available is
insufficient to effect the exercise, the Company shall seek authorization at
the
next scheduled annual meeting of its shareholders to increase the number of
the
shares available to effect the exercise of the Warrants and shall reserve such
number of shares for that purpose. Any shares of Common Stock issuable upon
exercise of the Warrants (and such shares when issued) are herein referred
to as
the “Warrant Shares.” The Notes, the Warrants and the Warrant Shares are
sometimes collectively referred to herein as the “Securities”.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES
Section
2.1
Representations
and Warranties of the Company
.
The
Company hereby represents and warrants to the Purchasers, as of the date hereof
and the Closing Date (except as set forth on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein),
as follows:
(a)
Organization,
Good Standing and Power
.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to own, lease and operate its properties and assets and to conduct its
business as it is now being conducted. The Company does not have any
Subsidiaries (as defined in Section 2.1(g)) or own securities of any kind in
any
other entity except as set forth on
Schedule
2.1(g)
hereto.
The Company and each such Subsidiary (as defined in Section 2.1(g)) is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect. For the purposes of this Agreement,
“
Material
Adverse Effect
”
means
any effect on the business (including a material change in management), results
of operations, prospects, properties, assets or condition (financial or
otherwise) of the Company that is material and adverse to the Company and its
subsidiaries, taken as a whole, and/or any condition, circumstance, factor
or
situation (including, without limitation, an investigation by the Securities
and
Exchange Commission (the “
Commission
”))
that
would prohibit or otherwise materially interfere with the ability of the Company
from entering into and performing any of its obligations under the Transaction
Documents (as defined below) in any material respect.
(b)
Authorization;
Enforcement
.
The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Notes, the Warrants, the Registration Rights
Agreement by and among the Company and the Purchasers, dated as of the date
hereof, substantially in the form of
Exhibit
E
attached
hereto (the “
Registration
Rights Agreement
”)
(collectively, the “
Transaction
Documents
”)
and to
issue and sell the Securities in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate action, and, except
as
set forth on
Schedule
2.1(b)
,
no
further consent or authorization of the Company, its Board of Directors or
stockholders is required. When executed and delivered by the Company and each
Purchaser, each of the Transaction Documents shall constitute a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general
application.
(c)
Capitalization
.
The
authorized capital stock of the Company as of December 31, 2006 is set forth
on
Schedule
2.1(c)
hereto.
All of the outstanding shares of the Common Stock and any other outstanding
security of the Company have been duly and validly authorized. Except as set
forth in this Agreement and as set forth on
Schedule
2.1(c)
hereto,
no shares of Common Stock or any other security of the Company are entitled
to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of
capital stock of the Company. Furthermore, except as set forth in this Agreement
and as set forth on
Schedule
2.1(c)
hereto,
there are no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of the capital
stock of the Company or options, securities or rights convertible into shares
of
capital stock of the Company. Except for customary transfer restrictions
contained in agreements entered into by the Company in order to sell restricted
securities or as provided on
Schedule
2.1(c)
hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to
any
of its equity or debt securities. Except as set forth on
Schedule
2.1(c)
,
the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
(d)
Issuance
of Securities
.
The
Notes and the Warrants to be issued have been duly authorized by all necessary
corporate action and, when paid for or issued in accordance with the terms
hereof, the Notes shall be validly issued and outstanding, free and clear of
all
liens, encumbrances and rights of refusal of any kind. When the Warrant Shares
are issued and paid for in accordance with the terms of this Agreement and
as
set forth in the Warrants, such shares will be duly authorized by all necessary
corporate action and validly issued and outstanding, fully paid and
non-assessable, free and clear of all liens, encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a holder
of Common Stock.
(e)
No
Conflicts
.
The
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Notes and the
consummation by the Company of the transactions contemplated hereby and thereby,
and the issuance of the Securities as contemplated hereby, do not and will
not
(i) violate or conflict with any provision of the Company’s Certificate of
Incorporation (the “
Certificate
”)
or
Bylaws (the “
Bylaws
”),
each
as amended to date, or any Subsidiary’s comparable charter documents, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights
of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company or any of its Subsidiaries is
a
party or by which the Company or any of its Subsidiaries’ respective properties
or assets are bound, or (iii) result in a violation of any federal, state,
local
or foreign statute, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Company
or
any of its Subsidiaries or by which any property or asset of the Company or
any
of its Subsidiaries are bound or affected, except, in all cases, for such
conflicts, defaults, terminations, amendments, acceleration, cancellations
and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect (other than violations pursuant to clauses (i) or (iii) (with
respect to federal and state securities laws)). Neither the Company nor any
of
its Subsidiaries is required under federal, state, foreign or local law, rule
or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents or issue and sell the Securities in accordance with the terms hereof
(other than any filings, consents and approvals which may be required to be
made
by the Company under applicable state and federal securities laws, rules or
regulations or any registration provisions provided in the Registration Rights
Agreement).
(f)
Commission
Documents, Financial Statements
.
The
Common Stock of the Company is registered pursuant to Section 12(b) or 12(g)
of
the Securities Exchange Act of 1934, as amended (the “
Exchange
Act
”),
and
the Company has timely filed all reports, schedules, forms, statements and
other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
“
Commission
Documents
”).
At
the times of their respective filings, the Form 10-Q for the fiscal quarters
ended March 31, 2006, June 30, 2006 and September 30, 2006 (collectively the
“
Form
10-Q
”)
and
the Form 10-K for the fiscal year ended December 31, 2005 as filed on March
30,
2006, as amended on Form 10-K/A as filed on March 31, 2006 (collectively, the
“
Form
10-K
”)
complied in all material respects with the requirements of the Exchange Act
and
the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
documents, and the Form 10-Q and Form 10-K did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of the Company included in the Commission
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto.
Such
financial statements have been prepared in accordance with generally accepted
accounting principles (“
GAAP
”)
applied on a consistent basis during the periods involved (except (i) as may
be
otherwise indicated in such financial statements or the Notes thereto or (ii)
in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in
all
material respects the financial position of the Company and its Subsidiaries
as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g)
Subsidiaries
.
Schedule
2.1(g)
hereto
sets forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person’s
ownership of the outstanding stock or other interests of such Subsidiary. For
the purposes of this Agreement, “
Subsidiary
”
shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued, and
are
fully paid and non-assessable. There are no outstanding preemptive, conversion
or other rights, options, warrants or agreements granted or issued by or binding
upon any Subsidiary for the purchase or acquisition of any shares of capital
stock of any Subsidiary or any other securities convertible into, exchangeable
for or evidencing the rights to subscribe for any shares of such capital stock.
Neither the Company nor any Subsidiary is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence except as set forth
on
Schedule
2.1(g)
hereto.
Neither the Company nor any Subsidiary is party to, nor has any knowledge of,
any agreement restricting the voting or transfer of any shares of the capital
stock of any Subsidiary.
(h)
No
Material Adverse Change
.
Since
September 30, 2006, the Company has not experienced or suffered any Material
Adverse Effect, except as disclosed on
Schedule
2.1(h)
hereto.
(i)
No
Undisclosed Liabilities
.
Except
as disclosed on
Schedule
2.1(i)
hereto,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured
or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred
in the ordinary course of the Company’s or its Subsidiaries respective
businesses or which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.
(j)
No
Undisclosed Events or Circumstances
.
Since
September 30, 2006, except as disclosed on
Schedule
2.1(j)
hereto,
no event or circumstance has occurred or exists with respect to the Company
or
its Subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.
(k)
Indebtedness
.
Schedule
2.1(k)
hereto
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or
any
Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
shall mean (a) any liabilities for borrowed money or amounts owed in excess
of
$300,000 (other than trade accounts payable incurred in the ordinary course
of
business), (b) all guaranties, endorsements and other contingent obligations
in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection
or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $25,000 due under leases required
to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary
is
in default with respect to any Indebtedness.
(l)
Title
to Assets
.
Each of
the Company and the Subsidiaries has good and valid title to all of its real
and
personal property reflected in the Commission Documents, free and clear of
any
mortgages, pledges, charges, liens, security interests or other encumbrances,
except for those indicated on
Schedule
2.1(l)
hereto
or such that, individually or in the aggregate, do not cause a Material Adverse
Effect. All said leases of the Company and each of its Subsidiaries are valid
and subsisting and in full force and effect.
(m)
Actions
Pending
.
There
is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary which questions the
validity of this Agreement or any of the other Transaction Documents or any
of
the transactions contemplated hereby or thereby or any action taken or to be
taken pursuant hereto or thereto. Except as set forth on
Schedule
2.1(m)
hereto,
there is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against or involving the Company, any Subsidiary or any
of
their respective properties or assets, which individually or in the aggregate,
would reasonably be expected, if adversely determined, to have a Material
Adverse Effect. There are no outstanding orders, judgments, injunctions, awards
or decrees of any court, arbitrator or governmental or regulatory body against
the Company or any Subsidiary or any officers or directors of the Company or
Subsidiary in their capacities as such, which individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(n)
Compliance
with Law
.
The
business of the Company and the Subsidiaries has been and is presently being
conducted in accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except as set forth in
the
Commission Documents or on
Schedule
2.1(n)
hereto
or such that, individually or in the aggregate, the noncompliance therewith
could not reasonably be expected to have a Material Adverse Effect. The Company
and each of its Subsidiaries have all franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals necessary
for
the conduct of its business as now being conducted by it unless the failure
to
possess such franchises, permits, licenses, consents and other governmental
or
regulatory authorizations and approvals, individually or in the aggregate,
could
not reasonably be expected to have a Material Adverse Effect.
(o)
Taxes
.
The
Company and each of the Subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has
paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected
in
the financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. Except as disclosed on
Schedule
2.1(o)
hereto,
none of the federal income tax returns of the Company or any Subsidiary have
been audited by the Internal Revenue Service. The Company has no knowledge
of
any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any Subsidiary for any period, nor of any basis for
any
such assessment, adjustment or contingency.
(p)
Certain
Fees
.
Except
as set forth on
Schedule
2.1(p)
hereto,
the Company has not employed any broker or finder or incurred any liability
for
any brokerage or investment banking fees, commissions, finders’ structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents.
(q)
Disclosure
.
To the
best of the Company’s knowledge, neither this Agreement or the Schedules hereto
nor any other documents, certificates or instruments furnished to the Purchasers
by or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated by this Agreement contain any untrue statement of
a
material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under
which
they were made herein or therein, not misleading.
(r)
Operation
of Business
.
Except
as set forth on
Schedule
2.1(r)
hereto,
the Company and each of the Subsidiaries owns or possesses the rights to all
patents, trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct
of
its business as now conducted without any conflict with the rights of
others.
(s)
Environmental
Compliance
.
The
Company and each of its Subsidiaries have obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws. “Environmental Laws”
shall mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. To the best
of
the Company’s knowledge, the Company has all necessary governmental approvals
required under all Environmental Laws as necessary for the Company’s business or
the business of any of its subsidiaries. To the best of the Company’s knowledge,
the Company and each of its subsidiaries are also in compliance with all other
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its subsidiaries that violate or may violate any Environmental Law after
the
Closing Date or that may give rise to any environmental liability, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, study
or
investigation (i) under any Environmental Law, or (ii) based on or related
to
the manufacture, processing, distribution, use, treatment, storage (including
without limitation underground storage tanks), disposal, transport or handling,
or the emission, discharge, release or threatened release of any hazardous
substance.
(t)
Books
and Records; Internal Accounting Controls
.
The
records and documents of the Company and its Subsidiaries accurately reflect
in
all material respects the information relating to the business of the Company
and the Subsidiaries, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or accounts receivable
of the Company or any Subsidiary. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment
of
the Company’s board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions are taken
with respect to any differences.
(u)
Material
Agreements
.
Except
for the Transaction Documents (with respect to clause (i) only), as disclosed
in
the Commission Documents or as set forth on
Schedule
2.1(u)
hereto,
or as would not be reasonably likely to have a Material Adverse Effect, (i)
the
Company and each of its Subsidiaries have performed all obligations required
to
be performed by them to date under any written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement, filed or required to
be
filed with the Commission (the “
Material
Agreements
”),
(ii)
neither the Company nor any of its Subsidiaries has received any notice of
default under any Material Agreement and, (iii) to the best of the Company’s
knowledge, neither the Company nor any of its Subsidiaries is in default under
any Material Agreement now in effect.
(v)
Transactions
with Affiliates
.
Except
as set forth on
Schedule
2.1(v)
hereto
and in the Commission Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Subsidiary or any of their
respective customers or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any of its
Subsidiaries, or any person owning at least 5% of the outstanding capital stock
of the Company or any Subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder which, in each case, is required to be
disclosed in the Commission Documents or in the Company’s most recently filed
definitive proxy statement on Schedule 14A, that is not so disclosed in the
Commission Documents or in such proxy statement.
(w)
Securities
Act of 1933
.
Based
in material part upon the representations herein of the Purchasers, the Company
has complied and will comply with all applicable federal and state securities
laws in connection with the offer, issuance and sale of the Securities
hereunder. Neither the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy any of
the
Securities or similar securities to, or solicit offers with respect thereto
from, or enter into any negotiations relating thereto with, any person, or
has
taken or will take any action so as to bring the issuance and sale of any of
the
Securities under the registration provisions of the Securities Act and
applicable state securities laws, and neither the Company nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale
of
any of the Securities.
(x)
Employees
.
Neither
the Company nor any Subsidiary has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth on
Schedule
2.1(x)
hereto.
Except as set forth on
Schedule
2.1(x)
hereto,
neither the Company nor any Subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary required
to be disclosed in the Commission Documents that is not so disclosed. No
officer, consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, would be reasonably likely
to have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any Subsidiary.
(y)
Absence
of Certain Developments
.
Except
as provided on
Schedule
2.1(y)
hereto,
since September 30, 2006, neither the Company nor any Subsidiary
has:
(i)
issued
any stock, bonds or other corporate securities or any right, options or warrants
with respect thereto;
(ii)
borrowed
any amount in excess of $300,000 or incurred or become subject to any other
liabilities in excess of $100,000 (absolute or contingent) except current
liabilities incurred in the ordinary course of business which are comparable
in
nature and amount to the current liabilities incurred in the ordinary course
of
business during the comparable portion of its prior fiscal year, as adjusted
to
reflect the current nature and volume of the business of the Company and its
Subsidiaries;
(iii)
discharged
or satisfied any lien or encumbrance in excess of $250,000 or paid any
obligation or liability (absolute or contingent) in excess of $250,000, other
than current liabilities paid in the ordinary course of business;
(iv)
declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements
so
to purchase or redeem, any shares of its capital stock, in each case in excess
of $50,000 individually or $100,000 in the aggregate;
(v)
sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, in each case in excess of $250,000, except in the ordinary course of
business;
(vi)
sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights in
excess of $250,000, or disclosed any proprietary confidential information to
any
person except to customers in the ordinary course of business or to the
Purchasers or their representatives;
(vii)
suffered
any material losses or waived any rights of material value, whether or not
in
the ordinary course of business, or suffered the loss of any material amount
of
prospective business;
(viii)
made
any
changes in employee compensation except in the ordinary course of business
and
consistent with past practices;
(ix)
made
capital expenditures or commitments therefor that aggregate in excess of
$500,000;
(x)
entered
into any material transaction, whether or not in the ordinary course of
business;
(xi)
made
charitable contributions or pledges in excess of $25,000;
(xii)
suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;
(xiii)
experienced
any material problems with labor or management in connection with the terms
and
conditions of their employment; or
(xiv)
entered
into an agreement, written or otherwise, to take any of the foregoing
actions.
(z)
Public
Utility Holding Company Act and Investment Company Act Status
.
The
Company is not a “holding company” or a “public utility company” as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended.
The
Company is not, and as a result of and immediately upon the Closing will not
be,
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
(aa)
ERISA
.
No
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan by the Company or any of its Subsidiaries which is or would
be materially adverse to the Company and its Subsidiaries. The execution and
delivery of this Agreement and the issuance and sale of the Securities will
not
involve any transaction which is subject to the prohibitions of Section 406
of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if any of the
Purchasers, or any person or entity that owns a beneficial interest in any
of
the Purchasers, is an “employee pension benefit plan” (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a “party in
interest” (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in
this
Section 2.1(aa), the term “Plan” shall mean an “employee pension benefit plan”
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company
or
any Subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any Subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(bb)
Independent
Nature of Purchasers
.
The
Company acknowledges that the obligations of each Purchaser under the
Transaction Documents are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under the Transaction
Documents. The Company acknowledges that the decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other purchase and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any Purchaser (or any other person) relating to or arising from
any
such information, materials, statements or opinions. The Company acknowledges
that nothing contained herein, or in any Transaction Document, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that it has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it
was
required or requested to do so by the Purchasers. The Company acknowledges
that
such procedure with respect to the Transaction Documents in no way creates
a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.
(cc)
No
Integrated Offering
.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would cause
the offering of the Securities pursuant to this Agreement to be integrated
with
prior offerings by the Company for purposes of the Securities Act which would
prevent the Company from selling the Securities pursuant to Regulation D and
Rule 506 thereof under the Securities Act, or any applicable exchange-related
stockholder approval provisions, nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings. Except as set forth on
Schedule
2.1(cc),
the
Company does not have any registration statement pending before the Commission
or currently under the Commission’s review and, except as set forth on
Schedule
2.1(cc),
since
March 31, 2006, the Company has not offered or sold any of its equity securities
or debt securities convertible into shares of Common Stock.
(dd)
Sarbanes-Oxley
Act
.
The
Company is in substantial compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002 (the “
Sarbanes-Oxley
Act
”),
and
the rules and regulations promulgated thereunder, that are effective and intends
to comply substantially with other applicable provisions of the Sarbanes-Oxley
Act, and the rules and regulations promulgated thereunder, upon the
effectiveness of such provisions.
Section
2.2
Representations
and Warranties of the Purchasers
.
Each of
the Purchasers hereby represents and warrants to the Company with respect solely
to itself and not with respect to any other Purchaser as follows as of the
date
hereof and as of the Closing Date:
(a)
Organization
and Standing of the Purchasers
.
If the
Purchaser is an entity, such Purchaser is a corporation, limited liability
company or partnership duly incorporated or organized, validly existing and
in
good standing under the laws of the jurisdiction of its incorporation or
organization.
(b)
Authorization
and Power
.
Each
Purchaser has the requisite power and authority to enter into and perform the
Transaction Documents and to purchase the Securities being sold to it hereunder.
The execution, delivery and performance of the Transaction Documents by each
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate or partnership action,
and
no further consent or authorization of such Purchaser or its Board of Directors,
stockholders, or partners, as the case may be, is required. When executed and
delivered by the Purchasers and the Company, the other Transaction Documents
shall constitute valid and binding obligations of each Purchaser enforceable
against such Purchaser in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general
application.
(c)
No
Conflict
.
The
execution, delivery and performance of the Transaction Documents by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
thereby and hereby do not and will not (i) violate any provision of the
Purchaser’s charter or organizational documents, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Purchaser is a party or by which the Purchaser’s respective
properties or assets are bound, or (iii) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to
the
Purchaser or by which any property or asset of the Purchaser are bound or
affected, except, in all cases, other than violations pursuant to clauses (i)
or
(iii) (with respect to federal and state securities laws) above, except, for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, materially and
adversely affect the Purchaser’s ability to perform its obligations under the
Transaction Documents.
(d)
Acquisition
for Investment
.
Each
Purchaser is purchasing the Securities solely for its own account for the
purpose of investment and not with a view to or for sale in connection with
distribution. Each Purchaser does not have a present intention to sell any
of
the Securities, nor a present arrangement (whether or not legally binding)
or
intention to effect any distribution of any of the Securities to or through
any
person or entity;
provided
,
however
,
that by
making the representations herein, such Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with Federal and state
securities laws applicable to such disposition. Each Purchaser acknowledges
that
it (i) has such knowledge and experience in financial and business matters
such
that Purchaser is capable of evaluating the merits and risks of Purchaser’s
investment in the Company, (ii) is able to bear the financial risks associated
with an investment in the Securities and (iii) has been given full access to
such records of the Company and the Subsidiaries and to the officers of the
Company and the Subsidiaries as it has deemed necessary or appropriate to
conduct its due diligence investigation.
(e)
Rule
144
.
Each
Purchaser understands that the Securities must be held indefinitely unless
such
Securities are registered under the Securities Act or an exemption from
registration is available. Each Purchaser acknowledges that such person is
familiar with Rule 144 of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act (“
Rule
144
”),
and
that such Purchaser has been advised that Rule144 permits resales only under
certain circumstances. Each Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f)
General
.
Each
Purchaser understands that the Securities are being offered and sold in reliance
on a transactional exemption from the registration requirements of federal
and
state securities laws and the Company is relying upon the truth and accuracy
of
the representations, warranties, agreements, acknowledgments and understandings
of such Purchaser set forth herein in order to determine the applicability
of
such exemptions and the suitability of such Purchaser to acquire the Securities.
Each Purchaser understands that no United States federal or state agency or
any
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Securities. None of the Purchasers has engaged in any short
sale of the Company’s Common Stock prior to the consummation of the transaction
contemplated by this Agreement.
(g)
No
General Solicitation
.
Each
Purchaser acknowledges that the Securities were not offered to such Purchaser
by
means of any form of general or public solicitation or general advertising,
or
publicly disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio,
or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications. Each Purchaser, in making the decision to
purchase the Securities, has relied upon independent investigation made by
it
and has not relied on any information or representations made by third
parties.
(h)
Accredited
Investor
.
Each
Purchaser is an “accredited investor” (as defined in Rule 501 of Regulation D),
and such Purchaser has such experience in business and financial matters that
it
is capable of evaluating the merits and risks of an investment in the
Securities. Such Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer.
Each Purchaser acknowledges that an investment in the Securities is speculative
and involves a high degree of risk.
(i)
Certain
Fees
.
The
Purchasers have not employed any broker or finder or incurred any liability
for
any brokerage or investment banking fees, commissions, finders’ structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents.
(j)
Independent
Investment
.
No
Purchaser has agreed to act with any other Purchaser for the purpose of
acquiring, holding, voting or disposing of the Securities purchased hereunder
for purposes of Section 13(d) under the Exchange Act, and each Purchaser is
acting independently with respect to its investment in the
Securities.
ARTICLE
III
COVENANTS
The
Company covenants with each Purchaser as follows, which covenants are for the
benefit of each Purchaser and their respective permitted assignees.
Section
3.1
Securities
Compliance
.
The
Company shall notify the Commission in accordance with its rules and
regulations, of the transactions contemplated by any of the Transaction
Documents and shall take all other necessary action and proceedings as may
be
required and permitted by applicable law, rule and regulation, for the legal
and
valid issuance of the Securities to the Purchasers, or their respective
subsequent holders.
Section
3.2
Registration
and Listing
.
The
Company shall use its reasonable best efforts to cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange Act,
to
comply in all respects with its reporting and filing obligations under the
Exchange Act, to comply with all requirements related to any registration
statement filed pursuant to this Agreement, and to not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange
Act
or Securities Act, except as permitted herein. The Company shall use its
reasonable best efforts to continue the listing or trading of its Common Stock
on the OTC Bulletin Board or any successor market.
Section
3.3
Compliance
with Laws
.
The
Company shall comply, and cause each Subsidiary to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which would be
reasonably likely to have a Material Adverse Effect.
Section
3.4
Keeping
of Records and Books of Account
.
The
Company shall keep and cause each Subsidiary to keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company
and
its Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section
3.5
Reporting
Requirements
.
If the
Company ceases to file its periodic reports with the Commission, or if the
Commission ceases making these periodic reports available via the Internet
without charge, then the Company shall furnish the following to each Purchaser
so long as such Purchaser shall be obligated hereunder to purchase the
Securities or shall beneficially own Warrant Shares:
(a)
Quarterly
Reports filed with the Commission on Form 10-Q as soon as available, and in
any
event within forty-five (45) days after the end of each of the first three
fiscal quarters of the Company;
(b)
Annual
Reports filed with the Commission on Form 10-K as soon as available, and in
any
event within ninety (90) days after the end of each fiscal year of the Company;
and
(c)
Copies
of
all notices, information and proxy statements in connection with any meetings,
that are, in each case, provided to holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
holders of Common Stock.
Section
3.6
Other
Agreements
.
The
Company shall not enter into any agreement in which the terms of such agreement
would restrict or impair the right or ability to perform of the Company or
any
Subsidiary under any Transaction Document.
Section
3.7
Use
of
Proceeds
.
The
proceeds from the sale of the Securities will be used by the Company for working
capital and general corporate purposes.
Section
3.8
Reporting
Status
.
So
long
as a Purchaser beneficially owns any of the Securities, the Company shall timely
file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or
the
rules and regulations thereunder would permit such termination.
Section
3.9
Disclosure
of Transaction
.
The
Company shall issue a press release describing the material terms of the
transactions contemplated hereby (the “Press Release”) on the day of the
Closing; provided, however, that if Closing occurs after 4:00 P.M. Eastern
Time
on any Trading Day but in no event later than one hour after the Closing, the
Company shall issue the Press Release no later than 9:00 A.M. Eastern Time
on
the first Trading Day following the Closing Date. The Company shall also file
with the Commission a Current Report on Form 8-K (the “Form 8-K”) describing the
material terms of the transactions contemplated hereby (and attaching as
exhibits thereto this Agreement, the Note, the Registration Rights Agreement
and
the form of Warrant) as soon as practicable following the date of execution
of
this Agreement but in no event more than two (2) Trading Days following the
date
of execution of this Agreement. “Trading Day” means any day during which the
principal exchange on which the Common Stock is traded shall be open for
trading.
Section
3.10
Disclosure
of Material Information
.
The
Company covenants and agrees that neither it nor any other person acting on
its
behalf has provided or will provide any Purchaser or its agents or counsel
with
any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The
Company understands and confirms that each Purchaser shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.
Section
3.11
Amendments
.
The
Company shall not amend or waive any provision of the Certificate or Bylaws
of
the Company in any way that would adversely affect exercise rights, voting
rights, conversion rights, prepayment rights or redemption rights of the holder
of the Notes.
Section
3.12
Reservation
of Shares
.
So long
as any of the Notes or Warrants remain outstanding, the Company shall take
all
action necessary to seek authorization at the next scheduled annual meeting
of
its shareholders to increase the aggregate number of shares of Common Stock
needed to provide for the issuance of the Warrant Shares.
Section
3.13
Disposition
of Assets
.
So long
as the Notes remain outstanding, neither the Company nor any subsidiary shall
sell, transfer or otherwise dispose of any of its properties, assets and rights
including, without limitation, its software and intellectual property, to any
person except for sales to customers in the ordinary course of business or
with
the prior written consent of the holders of a majority of the Notes then
outstanding.
Section
3.14
Non-Shorting
.
So long
as the Notes or Warrants remain outstanding, each Purchaser covenants and agrees
that it will not engage in any short sales of the Company’s Common
Stock.
ARTICLE
IV
CONDITIONS
Section
4.1
Conditions
Precedent to the Obligation of the Company to Close and to Sell the
Securities
.
The
obligation hereunder of the Company to close and issue and sell the Securities
to the Purchasers at the Closing is subject to the satisfaction or waiver,
at or
before the Closing of the conditions set forth below. These conditions are
for
the Company’s sole benefit and may be waived by the Company at any time in its
sole discretion.
(a)
Accuracy
of the Purchasers’ Representations and Warranties
.
The
representations and warranties of each Purchaser shall be true and correct
in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in
all
material respects as of such date.
(b)
Performance
by the Purchasers
.
Each
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Purchasers at or prior to the
Closing Date.
(c)
No
Injunction
.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(d)
Delivery
of Transaction Documents
.
The
Transaction Documents shall have been duly executed and delivered by the
Purchasers to the Company.
Section
4.2
Conditions
Precedent to the Obligation of the Purchasers to Close and to Purchase the
Securities
.
The
obligation hereunder of the Purchasers to purchase the Securities and consummate
the transactions contemplated by this Agreement is subject to the satisfaction
or waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for the Purchasers’ sole benefit and may be waived by the
Purchasers at any time in their sole discretion.
(a)
Accuracy
of the Company’s Representations and Warranties
.
Each of
the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all material respects
as of the Closing Date, except for representations and warranties that speak
as
of a particular date, which shall be true and correct in all material respects
as of such date.
(b)
Performance
by the Company
.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.
(c)
No
Injunction
.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(d)
No
Proceedings or Litigation
.
No
action, suit or proceeding before any arbitrator or any governmental authority
shall have been commenced, and no investigation by any governmental authority
shall have been threatened, against the Company or any Subsidiary, or any of
the
officers, directors or affiliates of the Company or any Subsidiary seeking
to
restrain, prevent or change the transactions contemplated by this Agreement,
or
seeking damages in connection with such transactions.
(e)
Secretary’s
Certificate
.
The
Company shall have delivered to the Purchasers a secretary’s certificate, dated
as of the Closing Date, as to (i) the resolutions adopted by the Board of
Directors approving the transactions contemplated hereby, (ii) the Certificate,
(iii) the Bylaws, each as in effect at the Closing, and (iv) the authority
and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.
(f)
Officer’s
Certificate
.
On the
Closing Date, the Company shall have delivered to the Purchasers a certificate
signed by an executive officer on behalf of the Company, dated as of the Closing
Date, confirming the accuracy of the Company’s representations, warranties and
covenants as of the Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in paragraphs (b)-(d) of this Section
4.2 as of the Closing Date (provided that, with respect to the matters in
paragraph (d) of this Section 4.2, such confirmation shall be based on the
knowledge of the executive officer after due inquiry).
(g)
Registration
Rights Agreement
.
As of
the Closing Date, the parties shall have entered into the Registration Rights
Agreement.
(h)
Material
Adverse Effect
.
No
Material Adverse Effect shall have occurred at or before the Closing
Date.
ARTICLE
V
CERTIFICATE
LEGEND
Section
5.1
Legend
.
Each
certificate representing the Securities shall be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend
required by applicable state securities or “blue sky” laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR COMMUNICATION INTELLIGENCE CORPORATION SHALL HAVE
RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS
NOT REQUIRED.
The
Company agrees to reissue certificates representing any of the Warrant Shares,
without the legend set forth above if at such time, prior to making any transfer
of any such Warrant Shares, such holder thereof shall give written notice to
the
Company describing the manner and terms of such transfer and removal as the
Company may reasonably request. Such proposed transfer and removal will not
be
effected until: (a) either (i) the Company has received an opinion of counsel
reasonably satisfactory to the Company, to the effect that the registration
of
the Warrant Shares under the Securities Act is not required in connection with
such proposed transfer, (ii) a registration statement under the Securities
Act
covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act, (iii) the Company
has received other evidence reasonably satisfactory to the Company that such
registration and qualification under the Securities Act and state securities
laws are not required, or (iv) the holder provides the Company with reasonable
assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Company has received an opinion of
counsel reasonably satisfactory to the Company, to the effect that registration
or qualification under the securities or “blue sky” laws of any state is not
required in connection with such proposed disposition, (ii) compliance with
applicable state securities or “blue sky” laws has been effected, or (iii) the
holder provides the Company with reasonable assurances that a valid exemption
exists with respect thereto. The Company will respond to any such notice from
a
holder within five (5) business days. In the case of any proposed transfer
under
this Section 5.1, the Company will use reasonable efforts to comply with any
such applicable state securities or “blue sky” laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or “blue sky” laws of any state for which registration by
coordination is unavailable to the Company. The restrictions on transfer
contained in this Section 5.1 shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement. W
henever
a
certificate representing the Warrant Shares is required to be issued to a
Purchaser without a legend, in lieu of delivering physical certificates
representing the Warrant Shares, provided the Company’s transfer agent is
participating in the Depository Trust Company (
“
DTC
”)
Fast
Automated Securities Transfer program, the Company shall use its reasonable
best
efforts to cause its transfer agent to electronically transmit the Warrant
Shares to a Purchaser by crediting the account of such Purchaser’s Prime Broker
with DTC through its Deposit Withdrawal Agent Commission (“
DWAC
”)
system
(to the extent not inconsistent with any provisions of this
Agreement).
ARTICLE
VI
INDEMNIFICATION
Section
6.1
General
Indemnity
.
The
Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, affiliates, agents, successors and assigns)
from
and against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Purchasers as a result of any inaccuracy in
or
breach of the representations, warranties or covenants made by the Company
herein. Each Purchaser severally but not jointly agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys’ fees, charges and disbursements) incurred by the Company as result of
any inaccuracy in or breach of the representations, warranties or covenants
made
by such Purchaser herein. The maximum aggregate liability of each Purchaser
pursuant to its indemnification obligations under this Article VI shall not
exceed the portion of the Purchase Price paid by such Purchaser hereunder.
The
maximum aggregate liability of the Company pursuant to its indemnification
obligations under this Article VI shall not exceed the aggregate Purchase Price,
including any actual moneys paid by the Purchasers for the Warrant
Shares.
Section
6.2
Indemnification
Procedure
.
Any
party entitled to indemnification under this Article VI (an “indemnified party”)
will give written notice to the indemnifying party of any matter giving rise
to
a claim for indemnification; provided, that the failure of any party entitled
to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action, proceeding or claim is brought against
an
indemnified party in respect of which indemnification is sought hereunder,
the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnifying party a conflict of interest between
it
and the indemnified party exists with respect to such action, proceeding or
claim (in which case the indemnifying party shall be responsible for the
reasonable fees and expenses of one separate counsel for the indemnified
parties), to assume the defense thereof with counsel reasonably satisfactory
to
the indemnified party. In the event that the indemnifying party advises an
indemnified party that it will not contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle
or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then
the
indemnified party may, at its option, defend, settle or otherwise compromise
or
pay such action or claim. In any event, unless and until
the
indemnifying party elects in writing to assume and does so assume the defense
of
any such claim, proceeding or action, the indemnified party’s costs and expenses
arising out of the defense, settlement or compromise of any such action,
claim
or proceeding shall be losses subject to indemnification hereunder. The
indemnified party shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by
the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the indemnified party which relates to such action
or
claim. The indemnifying party shall keep the indemnified party fully apprised
at
all times as to the status of the defense or any settlement negotiations
with
respect thereto. If the indemnifying party elects to defend any such action
or
claim, then the indemnified party shall be entitled to participate in such
defense with counsel of its choice at its sole cost and expense. The
indemnifying party shall not be liable for any settlement of any action,
claim
or proceeding effected without its prior written consent. Notwithstanding
anything in this Article VI to the contrary, the indemnifying party shall
not,
without the indemnified party’s prior written consent, settle or compromise any
claim or consent to entry of any judgment in respect thereof which imposes
any
future obligation on the indemnified party or which does not include, as
an
unconditional term thereof, the giving by the claimant or the plaintiff to
the
indemnified party of a release from all liability in respect of such claim.
The
indemnification obligations to defend the indemnified party required by this
Article VI shall be made by periodic payments of the amount thereof during
the
course of investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred, so long as the indemnified party shall
refund such moneys if it is ultimately determined by a court of competent
jurisdiction that such party was not entitled to indemnification. The indemnity
agreements contained herein shall be in addition to (a) any cause of action
or
similar rights of the indemnified party against the indemnifying party or
others, and (b) any liabilities the indemnifying party may be subject to
pursuant to the law. No indemnifying party will be liable to the indemnified
party under this Agreement to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to the indemnified party’s breach of
any of the representations, warranties or covenants made by such party in
this
Agreement or in the other Transaction Documents.
ARTICLE
VII
MISCELLANEOUS
Section
7.1
Fees
and Expenses
.
Each
party shall pay the fees and expenses of its advisors, counsel, accountants
and
other experts, if any, and all other expenses, incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this
Agreement.
Section
7.2
Specific
Performance; Consent to Jurisdiction; Venue.
(a)
The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific
terms
or were otherwise breached. It is accordingly agreed that the parties shall
be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement or the other Transaction Documents and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.
(b)
The
parties agree that venue for any dispute arising under this Agreement will
lie
exclusively in the state or federal courts located in California and the parties
irrevocably waive any right to raise
forum
non conveniens
or any
other argument that California is not the proper venue. The parties irrevocably
consent to personal jurisdiction in the state and federal courts of the state
of
California. The Company and each Purchaser consent to process being served
in
any such suit, action or proceeding by mailing a copy thereof to such party
at
the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7.2 shall affect or limit any right to serve
process in any other manner permitted by law. The Company and the Purchasers
hereby agree that the prevailing party in any suit, action or proceeding arising
out of or relating to the Securities, this Agreement or the Registration Rights
Agreement, shall be entitled to reimbursement for reasonable legal fees from
the
non-prevailing party.
Section
7.3
Entire
Agreement; Amendment
.
This
Agreement and the Transaction Documents contain the entire understanding and
agreement of the parties with respect to the matters covered hereby and, except
as specifically set forth herein or in the other Transaction Documents, neither
the Company nor any Purchaser make any representation, warranty, covenant or
undertaking with respect to such matters, and they supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein. No provision of this Agreement may be waived or amended
other
than by a written instrument signed by the Company and the Purchasers holding
at
least a majority of the principal amount of the Notes then held by the
Purchasers. Any amendment or waiver effected in accordance with this Section
7.3
shall be binding upon each Purchaser (and their permitted assigns) and the
Company.
Section
7.4
Notices
.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telecopy or facsimile at the address or number designated below
(if
delivered on a business day during normal business hours where such notice
is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice
is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses
for
such communications shall be:
If
to the
Company:
Communication
Intelligence Corporation
275
Shoreline Drive, Suite 500
Redwood
Shores, California 94065
Attention:
Frank Dane
Tel.
No.:
(650) 802-7888
Fax
No.:
(650) 802-7777
with
copies (which copies
shall
not
constitute notice
to
the
Company) to:
Davis
Wright Tremaine LLP
1300
S.W.
Fifth Ave., 23
rd
Floor
Portland,
Oregon 97201
Attention:
Michael C. Phillips, Esq.
Tel.
No.
(503) 241-2300
Fax
No.:
(503) 778-5299
If
to any
Purchaser:
At
the
address of such Purchaser set forth on
Exhibit
A
to this
Agreement, with copies to Purchaser’s counsel as set forth on
Exhibit
A.
Any
party
hereto may from time to time change its address for notices by giving written
notice of such changed address to the other party hereto.
Section
7.5
Waivers
.
No
waiver by either party of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver
in
the future or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder
in
any manner impair the exercise of any such right accruing to it
thereafter.
Section
7.6
Headings
.
The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose
and
shall not be deemed to limit or affect any of the provisions
hereof.
Section
7.7
Successors
and Assigns
.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. After the Closing, the assignment by a party
to
this Agreement of any rights hereunder shall not affect the obligations of
such
party under this Agreement. Subject to Section 5.1 hereof, the Purchasers may
assign the Securities and its rights under this Agreement and the other
Transaction Documents and any other rights hereto and thereto without the
consent of the Company.
Section
7.8
No
Third Party Beneficiaries
.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
Section
7.9
Governing
Law
.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of California, without giving effect to any of the conflicts
of law principles which would result in the application of the substantive
law
of another jurisdiction. This Agreement shall not be interpreted or construed
with any presumption against the party causing this Agreement to be
drafted.
Section
7.10
Survival
.
The
representations and warranties of the Company and the Purchasers shall survive
the execution and delivery hereof and the Closing until the first anniversary
of
the Closing Date, except the agreements and covenants set forth in Articles
I,
III, V, VI and VII of this Agreement shall survive the execution and delivery
hereof and the Closing hereunder.
Section
7.11
Counterparts
.
This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same
counterpart.
Section
7.12
Publicity
.
The
Company agrees that it will not disclose, and will not include in any public
announcement, the names of the Purchasers without the consent of the Purchasers,
which consent shall not be unreasonably withheld or delayed, or unless and
until
such disclosure is required by law, rule or applicable regulation, including
without limitation any disclosure pursuant to a registration statement
registering the Warrant Shares, and then only to the extent of such
requirement.
Section
7.13
Severability
.
The
provisions of this Agreement are severable and, in the event that any court
of
competent jurisdiction shall determine that any one or more of the provisions
or
part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part
of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.
Section
7.14
Further
Assurances
.
From
and after the date of this Agreement, upon the request of the Purchasers or
the
Company, the Company and each Purchaser shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the other transaction Documents.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Note and Warrant Purchase
Agreement to be duly executed by their respective authorized officers as of
the
date first above written.
COMMUNICATION
INTELLIGENCE CORPORATION
By:___________________________
Name:
Frank Dane
Title:
Chief Financial and Legal Officer
PURCHASER:
By:_____________________________________
Name:
Title:
EXHIBIT
A
LIST
OF
PURCHASERS
Names
and
Addresses
Investment
Amount and Number of
of
Purchasers
Warrants
Purchased
EXHIBIT
B
FORM
OF
NOTE
EXHIBIT
C
FORM
OF
WARRANT
EXHIBIT
D
FORM
OF
REGISTRATION RIGHTS AGREEMENT
SCHEDULE
2.1(b)
None.
SCHEDULE
2.1(c)
CAPITALIZATION
Preferred
Shares Authorized: 10,000,000
Common
Shares Authorized: 125,000,000
No
exceptions from public filings
SCHEDULE
2.1(g)
SUBSIDIARIES
CICI
Limited, Incorporated in Bermuda, 100% owned by CIC
Communication
Intelligence Computer Corporation, Ltd., Joint Venture in China, 90% owned
by
CIC, 10% owned by Jiangsu Hongtu Electronics Company, Ltd.
SCHEDULE
2.1(h)
None.
SCHEDULE
2.1(i)
None.
SCHEDULE
2.1(j)
None.
SCHEDULE
2.1(k)
$1,382,692
in Convertible debt to nine (9) investors. If not converted the debt is payable
in October 2007.
SCHEDULE
2.1(l)
None.
SCHEDULE
2.1(m)
None.
SCHEDULE
2.1(n)
None.
SCHEDULE
2.1(o)
None.
SCHEDULE
2.1(p)
None.
SCHEDULE
2.1(r)
None.
SCHEDULE
2.1(u)
None.
SCHEDULE
2.1(v)
None.
SCHEDULE
2.1(x)
None.
SCHEDULE
2.1(y)
A
total
of 495,000 options were issued to two employees subsequent to September 30,
2006.
None.
EXHIBIT
10.35
REGISTRATION
RIGHTS AGREEMENT
This
Registration Rights Agreement (this "
Agreement
")
is
made and entered into as of ____________, 2007, by and among Communication
Intelligence Corporation, a Delaware corporation (the "
Company
"),
and
the purchasers listed on
Schedule
I
hereto
(the "
Purchasers
").
This
Agreement is being entered into pursuant to the Note and Warrant Purchase
Agreement dated February 5, 2007 between and among the Company and the
Purchasers (the "
Purchase
Agreement
").
The
Company and the Purchasers hereby agree as follows:
1.
Definitions
.
Capitalized
terms used and not otherwise defined herein shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"
Business
Day
"
means
any day except Saturday, Sunday and any day which shall be a legal holiday
or a
day on which banking institutions in the state of California generally are
authorized or required by law or other government actions to close.
"
Commission
"
means
the Securities and Exchange Commission.
"
Common
Stock
"
means
the Company's Common Stock, par value $0.01 per share.
"
Exchange
Act
"
means
the Securities Exchange Act of 1934, as amended.
"
Holder
"
or
"
Holders
"
means
the holder or holders, as the case may be, from time to time of Registrable
Securities.
"
Indemnified
Party
"
shall
have the meaning set forth in Section 4(c).
"
Indemnifying
Party
"
shall
have the meaning set forth in Section 4(c).
"
Losses
"
shall
have the meaning set forth in Section
4(a).
"
Person
"
means
an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.
"
Proceeding
"
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
"
Prospectus
"
means
the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such
Prospectus.
"
Registrable
Securities
"
means
the shares of Common Stock issuable upon exercise of the Warrants.
"
Registration
Statement
"
means
the registration statements and any additional registration statements
contemplated by Section 2, including (in each case) the Prospectus, amendments
and supplements to such registration statement or Prospectus, including pre-
and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference in such registration statement.
"
Rule
144
"
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“
Rule
145
”
means
Rule 145 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
"
Securities
Act
"
means
the Securities Act of 1933, as amended.
2.
Company
Registration
.
(a)
Notice
of
Registration
.
If at
any time or from time to time the Company shall determine to register any of
its
equity securities (including as a result of any demand registration) other
than
(i) a registration relating solely to employee benefit plans or (ii) a
registration relating solely to a Rule 145 transaction, the Company
will:
(i)
promptly
give to each Purchaser written notice thereof but not less than fifteen (15)
days prior to filing of such registration statement; and
(ii)
include
in such registration (and any related qualifications including compliance with
applicable state securities laws), and in any underwriting involved therein,
all
the Registrable Securities specified in a written request or requests, made
within twenty (20) days after the date of such written notice from the Company,
by any Purchaser. If a Purchaser decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company, such
Purchaser shall nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration statement or registration
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.
(b)
Underwriting
.
If the
registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Purchasers
as a part of the written notice given pursuant to Section 2(a)(i). In such
event, the right of any Purchaser to registration pursuant to Section 2 shall
be
conditioned upon such Purchaser’s participation in such underwriting, and the
inclusion of Registrable Securities in the underwriting shall be limited to
the
extent provided herein.
All
Purchasers proposing to distribute their securities through such underwriting
shall (together with the Company and the other Purchasers distributing their
securities through such underwriting) enter into an underwriting agreement
in
customary form with the managing underwriter selected for such underwriting
by
the Company. Notwithstanding any other provision of this Section 2, if the
managing underwriter determines that marketing factors require a limitation
of
the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to the Company; second,
to those holders of registration rights under agreements relating thereto in
existence immediately prior to the date hereof; third, to Purchasers of
Registrable Securities who possess registration rights pursuant to this
Agreement; and third, to any stockholder of the Company (other than a Purchaser
and other than a stockholder holding registration rights under agreements
relating thereto in existence immediately prior to the date hereof). The Company
shall so advise all Purchasers requesting to be included in the registration
and
underwriting, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
the
Purchasers requesting to be included in the registration and underwriting in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities sought to be included by them. To facilitate the allocation of shares
in accordance with the above provisions, the Company or the underwriters may
round the number of shares allocated to any Purchaser to the nearest 100 shares.
If any Purchaser disapproves of the terms of any such underwriting, such person
may elect to withdraw therefrom by written notice to the Company. For any
Purchaser which is a partnership or corporation, the partners, retired partners
and shareholders of such Purchaser, or the estates and family members of any
such partners and retired partners and any trusts for the benefit of any of
the
foregoing persons, shall be deemed to be a single “Purchasers,” and any pro rata
reduction with respect to such “Purchasers” shall be based upon the aggregate
amount of shares carrying registration rights owned by all entities and
individuals included in such “Purchasers,” as defined in this sentence.
(c)
Right
to
Terminate Registration
.
The
Company shall have the right to terminate or withdraw any registration initiated
by it under this Section 2 prior to the effectiveness of such registration
whether or not any Purchaser has elected to include securities in such
registration. The registration expenses of such withdrawn registration shall
be
borne by the Company in accordance with Section 3 hereof.
(d)
Agreement
Not to Sell.
Each
Purchaser covenants and agrees that (i) it will not sell any Registrable
Securities under the Registration Statement until it has received copies of
the
Prospectus as then amended or supplemented and notice from the Company that
such
Registration Statement and any post-effective amendments thereto have become
effective and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
3.
Registration
Expenses
.
All
fees
and expenses incident to the performance of or compliance with this Agreement
by
the Company, except as and to the extent specified in this Section 3, shall
be
borne by the Company whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in
the
foregoing sentence shall include, without limitation, (i) all registration
and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with the OTC Bulletin Board and each other
securities exchange or market on which Registrable Securities are required
hereunder to be listed, (B) with respect to filing fees required to be paid
to
the National Association of Securities Dealers, Inc. and the NASD Regulation,
Inc. and (C) in compliance with state securities or Blue Sky laws (including,
without limitation, fees and disbursements in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of
such
jurisdictions), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing
prospectuses, if any, (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement, including, without
limitation, the Company's independent public accountants (including the expenses
of any comfort letters or costs associated with the delivery by independent
public accountants of a comfort letter or comfort letters). In addition, the
Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense
of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange as required
hereunder.
4.
Indemnification
.
(a)
Indemnification
by the Company
.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless each Purchaser, the officers, directors, agents, brokers
(including brokers who offer and sell Registrable Securities as principal as
a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Purchaser (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents
and
employees of each such controlling Person, to the fullest extent permitted
by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "
Losses
"),
as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus
or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus
or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements or omissions are based solely upon information regarding
such Purchaser or such other Indemnified Party furnished in writing to the
Company by such Purchaser expressly for use therein and (ii) that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates
to
any untrue statement, allegedly untrue statement, omission or alleged omission
made in any preliminary prospectus but eliminated or remedied in the final
prospectus (filed pursuant to Rule 424 of the Securities Act), such indemnity
agreement shall not inure to the benefit of any Purchaser, underwriter, broker
or other Person acting on behalf of holders of the Registrable Securities,
from
whom the Person asserting any loss, claim, damage, liability or expense
purchased the Registrable Securities which are the subject thereof, if a copy
of
such final prospectus had been made available to such Person and such Purchaser,
underwriter, broker or other Person acting on behalf of holders of the
Registrable Securities and such final prospectus was not delivered to such
Person with or prior to the written confirmation of the sale of such Registrable
Securities to such Person. The Company shall notify the Purchasers promptly
of
the institution, threat or assertion of any Proceeding of which the Company
is
aware in connection with the transactions contemplated by this
Agreement.
(b)
Indemnification
by Purchasers
.
Each
Purchaser shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents and employees
of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses (as determined by a court of competent jurisdiction
in a final judgment not subject to appeal or review), as incurred, arising
solely out of or based solely upon any untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in the light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that such untrue statement
or
omission is contained in any information so furnished in writing by such
Purchasers or other Indemnifying Party to the Company specifically for inclusion
in the Registration Statement or such Prospectus. Notwithstanding anything
to
the contrary contained herein, each Purchaser shall be liable under this Section
4(b) for only that amount as does not exceed the net proceeds to such Purchaser
as a result of the sale of Registrable Securities pursuant to such Registration
Statement.
(c)
Conduct
of Indemnification Proceedings
.
If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an "
Indemnified
Party
"),
such
Indemnified Party promptly shall notify the Person from whom indemnity is sought
(the "
Indemnifying
Party
)
in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party
and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination
is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying
Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume
the
defense of such Proceeding and to employ counsel reasonably satisfactory to
such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel (which shall be reasonably acceptable to the Indemnifying Party)
that
a conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld or delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from
all
liability on claims that are the subject matter of such Proceeding.
All
fees
and expenses of the Indemnified Party (including reasonable fees and expenses
to
the extent incurred in connection with investigating or preparing to defend
such
Proceeding in a manner not inconsistent with this Section) shall be paid to
the
Indemnified Party, as incurred, within ten (10) Business Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder;
provided,
that the Indemnifying Party may require such Indemnified Party to undertake
to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d)
Contribution
.
If a
claim for indemnification under Section 4(a) or 4(b) is unavailable to an
Indemnified Party because of a failure or refusal of a governmental authority
to
enforce such indemnification in accordance with its terms (by reason of public
policy or otherwise), then each 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, in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and the Indemnified Party on the other from the offering of
the
Notes and Warrants. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution
shall be made in such proportion as is appropriate to reflect not only the
relative benefits referred to in the foregoing sentence but also the relative
fault, as applicable, of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined
by
reference to, among other things, whether any action in question, including
any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and
the
parties'
relative intent, knowledge, access to information and opportunity to correct
or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 4(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees
or
expenses if the indemnification provided for in this Section was available
to
such party in accordance with its terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4(d) were determined by pro rata allocation or by
any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties. Notwithstanding anything to the contrary contained herein, the
Purchasers shall be liable under this Section 4(d) for only that amount as
does
not exceed the net proceeds to such Purchasers as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
5.
Rule
144
.
As
long
as any Purchaser owns any Warrant Shares, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any Purchaser
owns any Warrant Shares, if the Company is not required to file reports pursuant
to Section 13(a) or 15(d) of the Exchange Act, it will prepare and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company further
covenants that it will take such further action as any Purchaser may reasonably
request in writing, all to the extent required from time to time to enable
such
Person to sell the Warrant Shares without registration under the Securities
Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including providing any legal opinions relating to such
sale
pursuant to Rule 144.
6.
Miscellaneous
.
(a)
Remedies
.
In the
event of a breach by the Company or by a Purchaser, of any of their obligations
under this Agreement, each Purchaser or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under
this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this
Agreement.
The Company and each Purchaser agree that monetary damages would not
provide
adequate
compensation for any losses incurred by reason of a breach by it of any of
the
provisions of this Agreement and hereby further agrees that, in the event of
any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b)
No
Inconsistent Agreements
.
Neither
the Company nor any of its subsidiaries has, as of the date hereof entered
into
and currently in effect, nor shall the Company or any of its subsidiaries,
on or
after the date of this Agreement, enter into any agreement with respect to
its
securities that is inconsistent with the rights granted to the Purchasers in
this Agreement or otherwise conflicts with the provisions hereof.
(c)
No
Piggyback on Registrations
.
Neither
the Company nor any of its security holders (other than the Purchasers in such
capacity pursuant hereto or as disclosed on
Schedule
2.1(c)
of the
Purchase Agreement) may include securities of the Company in the Registration
Statement, and the Company shall not after the date hereof enter into any
agreement providing such right to any of its securityholders, unless the right
so granted is subject in all respects to the prior rights in full of the
Purchasers set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.
(d)
Amendments
and Waivers
.
The
provisions of this Agreement, including the provisions of this sentence, may
not
be amended, modified or supplemented, and waivers or consents to departures
from
the provisions hereof may not be given, unless the same shall be in writing
and
signed by the Company and the Purchasers of a majority of the Registrable
Securities outstanding.
(e)
Notices
.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earlier of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified for
notice prior to 5:00 p.m., Pacific Standard Time on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or communication
is
delivered via facsimile at the facsimile telephone number specified for notice
later than 5:00 p.m., Pacific Time, on any date and earlier than 11:59 p.m.,
Pacific Time, on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service or (iv)
actual receipt by the party to whom such notice is required to be given. The
addresses for such communications shall be with respect to each Purchaser at
its
address set forth under its name on
Schedule
I
attached
hereto, or with respect to the Company, addressed to:
Communication
Intelligence Corporation
275
Shoreline Drive, Suite 500
Redwood
Shores, California 94065
Attention:
Frank Dane
Tel.
No.:
(650) 802-7888
Fax
No.:
(650) 802-7777
with
copies (which copies
shall
not
constitute notice
to
the
Company) to:
Davis
Wright Tremaine LLP
1300
S.W.
Fifth Ave., 23
rd
Floor
Portland,
Oregon 97201
Attention:
Michael C. Phillips, Esq.
Tel.
No.:
(503) 241-2300
Fax
No.:
(503) 778-5299
or
to
such other address or addresses or facsimile number or numbers as any such
party
may most recently have designated in writing to the other parties hereto by
such
notice. Copies of notices to Purchasers shall be sent to their respective street
or email addresses indicated in the attached Schedule I.
(f)
Successors
and Assigns
.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns and shall inure to the benefit of each
Purchaser and its successors and assigns.
(g)
Counterparts
.
This
Agreement may be executed in any 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. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(h)
Governing
Law
.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of California, without giving effect to any of the conflicts
of law principles which would result in the application of the substantive
law
of another jurisdiction. This Agreement shall not be interpreted or construed
with any presumption against the party causing this Agreement to be
drafted.
(i)
Cumulative
Remedies
.
The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
(j)
Severability
.
If any
term, provision, covenant or restriction of this Agreement is held to be
invalid, illegal, void or unenforceable in any respect, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain
in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ
an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared
to
be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
(h)
Headings
.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
[SIGNATURE
PAGE FOLLOWS]
-
-
2007.02.05
Form of Registration Rights Agr
IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of
the
date first indicated above.
COMMUNICATION
INTELLIGENCE CORPORATION
By:_
_____________
____________________
Name:
Frank Dane
Title:
Chief Financial and Legal Officer
PURCHASER:
By:___________________________________
Name:
Title:
-
-
2007.02.05
Form of Registration Rights Agr
Schedule
I
List
of Purchasers
EXHIBIT
10.36
THIS
NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED,
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY
THE
MAKER OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE
SECURITIES LAWS.
COMMUNICATION
INTELLIGENCE CORPORATION
Non-Negotiable
Promissory Note
due
_____, 200x
Dated:
____________, 2007
$XXX
For
value
received, Communication Intelligence Corporation, a Delaware corporation (the
"
Maker
"),
hereby promises to pay to the order of __________ (together with its successors,
representatives, and permitted assigns, the "
Holder
"),
in
accordance with the terms hereinafter provided, the principal amount of up
to
_____________ Dollars ($_______), together with interest thereon.
1.
Payments
.
All
payments under or pursuant to this Note shall be made in United States Dollars
in immediately available funds to the Holder
at
such
address as the Holder may designate from time to time in writing to the Maker
(which shall initially be the address set forth for Maker in
Section
10
)
or by
wire transfer of funds to the Holder's account, instructions for which are
to be
provided by Holder.
The
outstanding principal balance of this Note, plus all accrued but unpaid
interest, shall be due and payable on ____________, 200X (the "Maturity Date")
or at such earlier time as provided herein.
2.
Note
and Warrant Purchase Agreement
.
This
Note has been executed and delivered pursuant to the Note and Warrant Purchase
Agreement dated as of February 5, 2007 (the "
Purchase
Agreement
”)
by and
between the
Maker
and the
Holder. Capitalized terms used and not otherwise defined herein shall have
the
meanings set forth for such terms in the Purchase Agreement.
3.
-Interest;
Payment of Interest. Beginning on the issuance date of this Note (the “Issuance
Date”), the outstanding principal balance of this Note shall bear interest, in
arrears, at a rate per annum equal to Fifteen Percent (15%). Interest shall
be
computed on the basis of a 360-day year of twelve (12) 30-day months and shall
accrue commencing on the Issuance Date.
Accrued
interest shall be payable quarterly in arrears.
4.
Transfer.
This Note may not be transferred, sold, pledged, hypothecated or otherwise
granted as security by the Holder.
5.
-Replacement.
Upon receipt of a duly executed, notarized and unsecured written statement
from
the Holder with respect to the loss, theft or destruction of this Note (or
any
replacement hereof), and without requiring an indemnity bond or other security,
or, in the case of a mutilation of this Note, upon surrender and cancellation
of
such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu
of such lost, stolen, destroyed or mutilated Note.
6.
-Events
of Default; Remedies. The occurrence of any of the following events shall be
an
"Event of Default" under this Note:
6.1.
the
Maker
shall fail to make the payment of any amount of principal outstanding on the
Maturity Date hereunder; or
6.2.
the
Maker
shall fail to make any payment of accrued interest when due hereunder;
or
6.3.
default
shall be made in the performance or observance of any material covenant,
condition or agreement contained in this Note or the Purchase Agreement and
such
default is not fully cured within ten (10) days after the occurrence thereof;
or
6.4.
any
material representation or warranty made by the Maker herein or in the Purchase
Agreement shall prove to have been false or incorrect or breached in a material
respect on the date as of which made; or
6.5.
the
Maker
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of
all
or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition
seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors'
rights generally, (v) acquiesce in writing to any petition filed against it
in
an involuntary case under United States Bankruptcy Code (as now or hereafter
in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue
a
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or
6.6.
a
proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i)
the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of
its
assets in connection with the liquidation or dissolution of the Maker or (iii)
similar relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case described in clause (i), (ii) or (iii)
shall continue undismissed, or unstayed and in effect, for a period of sixty
(60) days or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker
or
action under the laws of any jurisdiction (foreign or domestic) analogous to
any
of the foregoing shall be taken with respect to the Maker and shall continue
undismissed, or unstayed and in effect for a period of sixty (60)
days.
7.
-Remedies
Upon an Event of Default
.
If an
Event of Default shall have occurred and shall be continuing, the Holder of
this
Note may at any time at its option declare the entire unpaid principal balance
of this Note, together with all interest accrued thereon, due and payable,
and
thereupon, the same shall be accelerated and so due and payable, without
presentment, demand, protest, or notice, all of which are hereby waived by
the
Maker. No course of delay on the part of the Holder shall operate as a waiver
thereof or otherwise prejudice the right of the Holder. No remedy conferred
hereby shall be exclusive of any other remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.
8.
Prepayment.
Notwithstanding anything to the contrary contained herein, the Maker shall
have
the right, at such Maker's option, to prepay any amounts due hereunder,
including the entire unpaid principal or any partial amount thereof and any
accrued but unpaid interest, at any time prior to the Maturity Date, with no
prepayment penalties.
9.
No
Rights as Shareholder
.
Nothing
contained in this Note shall be construed as conferring upon the Holder the
right to vote or to receive dividends or to consent or to receive notice as
a
shareholder in respect of any meeting of shareholders for the election of
directors of the Maker or of any other matter, or any other rights as a
shareholder of the Maker.
10.
Notices
.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the business day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service, or (ii) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If
to the
Maker:
Communication
Intelligence Corporation
275
Shoreline Drive, Suite 500
Redwood
Shores, California 94065
Attention:
Frank Dane
Tel.
No.:
(650) 802-7888
Fax
No.:
(650) 802-7777
with
copies (which copies
shall
not
constitute notice
to
Maker)
to:
Davis
Wright Tremaine LLP
1300
S.W.
Fifth Ave., 23
rd
Floor
Portland,
Oregon 97201
Attention:
Michael C. Phillips, Esq.
Tel.
No.
(503) 241-2300
Fax
No.:
(503) 778-5299
-
-
2007.02.05
Form of Note
If
to the
Holder:
[Insert
name, address, phone and fax number.
With
a
copy to:
[Insert
name, address, phone and fax number]
11.
Governing
Law
.
This
Note shall be governed by and construed in accordance with the internal laws
of
the State of California, without giving effect to any of the conflicts of law
principles which would result in the application of the substantive law of
another jurisdiction. This Note shall not be interpreted or construed with
any
presumption against the party causing this Note to be drafted.
12.
-Headings.
Article and section headings in this Note are included herein for purposes
of
convenience of reference only and shall not constitute a part of this Note
for
any other purpose.
13.
Remedies.
The remedies provided in this Note shall be cumulative and in addition to all
other remedies available under this Note, at law or in equity, and no remedy
contained herein shall be deemed a waiver of compliance with the provisions
giving rise to such remedy.
14.
-Assignment.
Holder may not assign any of its rights or obligations under this Note without
obtaining the prior written consent of Maker.
15.
Amendments.
This Note may not be modified or amended in any manner except in writing
executed by the Maker and the Holder.
16.
-Compliance
with Securities Laws. The Holder of this Note acknowledges that this Note is
being acquired solely for the Holder's own account and not as a nominee for
any
other party, and for investment, and that the Holder shall not offer, sell
or
otherwise dispose of this Note. This Note and any Note issued in substitution
or
replacement therefor shall be stamped or imprinted with a legend in
substantially the following form:
"
THIS
NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF
COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER
THAT THIS NOTE MAY BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED
OF,
UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
LAWS.
"
17.
Attorneys’
Fees and Expenses
.
Each of
the Maker and the Holder hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to this Note shall be entitled
to reimbursement for reasonable legal fees (including reasonably incurred
attorneys’ fees) and costs from the non-prevailing party.
18.
-Parties
in Interest. This Note shall be binding upon, inure to the benefit of, and
be
enforceable by the Maker, the Holder and their respective successors and
permitted assigns.
19.
-Failure
or Indulgence Not Waiver. No failure or delay on the part of the Holder in
the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right
or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
This
Note
has been delivered as of the date set forth at the top of the first page
hereof.
MAKER:
COMMUNICATION
INTELLIGENCE CORPORATION
By:
______________________________
Name:
Frank Dane
Its:
Chief Financial and Legal Officer
EXHIBIT
10.37
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR COMMUNICATION INTELLIGENCE CORPORATION SHALL HAVE
RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS
NOT REQUIRED.
WARRANT
TO PURCHASE
SHARES
OF
COMMON STOCK
OF
COMMUNICATION
INTELLIGENCE CORPORATION
Expires:
______________, 200X
No.:
W2007- __
Number
of
Shares: ___________
Date
of
Issuance: ___________, 200X
FOR
VALUE
RECEIVED, subject to the provisions hereinafter set forth, the undersigned,
Communication Intelligence Corporation, a Delaware corporation (together with
its successors and assigns, the "
Issuer
"),
hereby certifies that _______________________________ or its registered assigns
is entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________________________________ (_____________) shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however,
to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 8 hereof.
1.
Term
.
The
term of this Warrant shall commence on _______, 200X [
date
of
issuance, but no earlier than June 30, 2007
]
and
shall expire at 5:00 p.m., eastern time, on _________, 200X [
3
years
after commencing date
]
(such
period being the "
Term
").
2.
|
Method
of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange
.
|
(a)
Time
of Exercise
.
The
purchase rights represented by this Warrant may be exercised in whole or in
part
at any time during the Term.
(b)
Method
of Exercise
.
The
Holder hereof may exercise this Warrant, in whole or in part, by the surrender
of this Warrant (with the exercise form attached hereto duly executed) at the
principal office of the Issuer, and by the payment to the Issuer of an amount
of
consideration therefor equal to the Warrant Price in effect on the date of
such
exercise multiplied by the number of shares of Warrant Stock with respect to
which this Warrant is then being exercised, payable at such Holder's election
by
certified or official bank check or
by
wire
transfer to an account designated by the Issuer.
(c)
Issuance
of Stock Certificates
.
In the
event of any exercise of the rights represented by this Warrant in accordance
with and subject to the terms and conditions hereof, (i) certificates for the
shares of Warrant Stock so purchased shall be dated the date of such exercise
and delivered to the Holder hereof within a reasonable time after such exercise,
and the Holder hereof shall be deemed for all purposes to be the holder of
the
shares of Warrant Stock so purchased as of the date of such exercise and (ii)
unless this Warrant has expired, a new Warrant representing the number of shares
of Warrant Stock, if any, with respect to which this Warrant shall not then
have
been exercised (less any amount thereof which shall have been canceled in
payment or partial payment of the Warrant Price as hereinabove provided) shall
also be issued to the Holder hereof at the Issuer's expense within such
time.
(d)
Transferability
of Warrant
.
Subject
to Section 2(e), this Warrant may be transferred by a Holder without the consent
of the Issuer. If transferred pursuant to this paragraph and subject to the
provisions of Section 2(e), this Warrant may be transferred on the books of
the
Issuer by the Holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant at the principal office of the Issuer, properly
endorsed (by the Holder executing an assignment in the form attached hereto)
and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. This Warrant is exchangeable at the principal office of
the
Issuer for Warrants to purchase the same aggregate number of shares of Warrant
Stock, each new Warrant to represent the right to purchase such number of shares
of Warrant Stock as the Holder hereof shall designate at the time of such
exchange. All Warrants issued upon a transfer or exchange shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant hereto.
(e)
Compliance
with Securities Laws.
(i)
The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
or
the shares of Warrant Stock to be issued upon exercise hereof, as applicable,
are being acquired for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof, except pursuant to an effective registration statement,
or
an exemption from registration, under the Securities Act and any applicable
state securities laws.
(ii)
Except
as
provided in Section 2(e)(iii), this Warrant and all certificates representing
shares of Warrant Stock issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form:
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR COMMUNICATION INTELLIGENCE CORPORATION
SHALL
HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
(iii)
The
Issuer agrees to reissue this Warrant or certificates representing any of the
Warrant Stock, without the legend set forth above if at such time, prior to
making any transfer of any such securities, the Holder shall give written notice
to the Issuer describing the manner and terms of such transfer and removal
as
the Issuer may reasonably request. Such proposed transfer and removal will
not
be effected until: (a) either (i) the Issuer has received an opinion of counsel
reasonably satisfactory to the Issuer, to the effect that the registration
of
such securities under the Securities Act is not required in connection with
such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Issuer with the
Securities and Exchange Commission and has become effective under the Securities
Act, (iii) the Issuer has received other evidence reasonably satisfactory to
the
Issuer that such registration and qualification under the Securities Act and
state securities laws are not required, or (iv) the Holder provides the Issuer
with reasonable assurances that such security can be sold pursuant to Rule
144
under the Securities Act; and (b) either (i) the Issuer has received an opinion
of counsel reasonably satisfactory to the Issuer, to the effect that
registration or qualification under the securities or "blue sky" laws of any
state is not required in connection with such proposed disposition, or (ii)
compliance with applicable state securities or "blue sky" laws has been effected
or a valid exemption exists with respect thereto. The Issuer will respond to
any
such notice from the Holder within five (5) business days. In the case of any
proposed transfer under this Section 2(e), the Issuer will use reasonable best
efforts to comply with any such applicable state securities or "blue sky" laws,
but shall in no event be required, (x) to qualify to do business in any state
where it is not then qualified, or (y) to take any action that would subject
it
to tax or to the general service of process in any state where it is not then
subject. The restrictions on transfer contained in this Section 2(e) shall
be in
addition to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant. W
henever
a
certificate representing the Warrant Stock is required to be issued to a the
Holder without a legend, in lieu of delivering physical certificates
representing the Warrant Stock, provided the Issuer’s transfer agent is
participating in the DTC Fast Automated Securities Transfer program, the Issuer
shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the Warrant Stock to the Holder by crediting the account
of the Holder's Prime Broker with DTC through DWAC (to the extent not
inconsistent with any provisions of this Warrant or the Purchase
Agreement).
3.
Stock
Fully Paid; Reservation and Listing of Shares; Covenants
.
(a)
Stock
Fully Paid
.
The
Issuer represents, and warrants to the Holder, and covenants and agrees for
the
benefit of the Holder that all shares of Warrant Stock which may be issued
upon
the exercise of this Warrant or otherwise hereunder will, upon issuance, be
duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes, liens, charges or other encumbrances of any nature whatsoever created
by
or through the Issuer. The Issuer further covenants and agrees that during
the
period within which this Warrant may be exercised, the Issuer will at all times
have authorized and reserved for the purpose of the issue upon exercise of
this
Warrant a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.
(b)
Reservation
.
If any
shares of Common Stock required to be reserved for issuance upon exercise of
this Warrant or as otherwise provided hereunder require registration or
qualification with any governmental authority under any federal or state law
before such shares may be so issued, the Issuer will in good faith use its
best
efforts at its expense to cause such shares to be duly registered or qualified.
If the Issuer shall list any shares of Common Stock on any securities exchange
or market it will, at its expense, list thereon, maintain and increase when
necessary such listing, of, all shares of Warrant Stock from time to time issued
upon exercise of this Warrant or as otherwise provided hereunder (provided
that
such Warrant Stock has been registered pursuant to a registration statement
under the Securities Act then in effect), and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange
or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
(c)
Covenants
.
The
Issuer shall not by any action including, without limitation, amending the
Certificate of Incorporation or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other action, avoid or seek to avoid the observance
or
performance of any of the terms or provisions of this Warrant, but will at
all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder hereof against dilution (to the extent specifically
provided herein) or impairment. Without limiting the generality of the
foregoing, the Issuer will (i) not permit the par value, if any, of its Common
Stock to exceed the then effective Warrant Price, (ii) not amend or modify
any
provision of the Certificate of Incorporation or by-laws of the Issuer in any
manner that would adversely affect the rights of the Holder of this Warrant,
(iii) take all such action as may be reasonably necessary in order that the
Issuer may validly and legally issue fully paid and nonassessable shares of
Common Stock, free and clear of any liens, claims, encumbrances and restrictions
(other than as provided herein) upon the exercise of this Warrant, and (iv)
use
its best efforts to obtain all such authorizations, exemptions or consents
from
any public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this
Warrant.
(d)
Loss,
Theft, Destruction of Warrants
.
Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss,
theft, destruction or mutilation of any Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security reasonably
satisfactory to the Issuer or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant, the Issuer will make and deliver,
in
lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of
like
tenor and representing the right to purchase the same number of shares of Common
Stock.
4.
Adjustment
of Warrant Price and Warrant Share Number
.
The
number of shares of Common Stock for which this Warrant is exercisable, and
the
price at which such shares may be purchased upon exercise of this Warrant,
shall
be subject to adjustment from time to time as set forth in this Section 4.
The
Issuer shall give the Holder notice of any event described below which requires
an adjustment pursuant to this Section 4 in accordance with Section 5.
(a)
Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale
.
(i)
In
case the Issuer after the Original Issue Date shall do any of the following
(each, a "
Triggering
Event
"):
(a)
consolidate with or merge into any other Person and the Issuer shall not be
the
continuing or surviving corporation of such consolidation or merger, or (b)
permit any other Person to consolidate with or merge into the Issuer and the
Issuer shall be the continuing or surviving Person but, in connection with
such
consolidation or merger, any Capital Stock of the Issuer shall be changed into
or exchanged for Securities of any other Person or cash or any other property,
or (c) transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or reclassification of
its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder of this Warrant shall be entitled upon
the
exercise hereof at any time after the consummation of such Triggering Event,
to
the extent this Warrant is not exercised prior to such Triggering Event, to
receive at the Warrant Price in effect at the time immediately prior to the
consummation of such Triggering Event in lieu of the Common Stock issuable
upon
such exercise of this Warrant prior to such Triggering Event, the Securities,
cash and property to which such Holder would have been entitled upon the
consummation of such Triggering Event if such Holder had exercised the rights
represented by this Warrant immediately prior thereto, subject to adjustments
(subsequent to such corporate action) as nearly equivalent as possible to the
adjustments provided for elsewhere in this Section 4.
(ii)
Notwithstanding
anything contained in this Warrant to the contrary, a Triggering Event shall
not
be deemed to have occurred if, prior to the consummation thereof, each Person
(other than the Issuer) which may be required to deliver any Securities, cash
or
property upon the exercise of this Warrant as provided herein shall assume,
by
written instrument delivered to, and reasonably satisfactory to, the Holder
of
this Warrant, (A) the obligations of the Issuer under this Warrant (and if
the
Issuer shall survive the consummation of such Triggering Event, such assumption
shall be in addition to, and shall not release the Issuer from, any continuing
obligations of the Issuer under this Warrant) and (B) the obligation to deliver
to such Holder such Securities, cash or property as, in accordance with the
foregoing provisions of this subsection (a), such Holder shall be entitled
to
receive, and such Person shall have similarly delivered to such Holder an
opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such Holder, or in the alternative, a written acknowledgement
executed by the President or Chief Financial Officer of the Issuer, stating
that
this Warrant shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this subsection
(a)) shall be applicable to the Securities, cash or property which such Person
may be required to deliver upon any exercise of this Warrant or the exercise
of
any rights pursuant hereto.
(b)
Stock
Dividends, Subdivisions and Combinations
.
If at
any time the Issuer shall:
(i)
take
a
record of the holders of its Common Stock for the purpose of entitling them
to
receive a dividend payable in, or other distribution of, shares of Common Stock,
(ii)
subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock, or
(iii)
combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock,
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the occurrence of such event would own or be entitled to receive after the
happening of such event, and (2) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Common Stock
for
which this Warrant is exercisable immediately after such
adjustment.
(c)
Certain
Other Distributions
.
If at
any time the Issuer shall take a record of the holders of its Common Stock
for
the purpose of entitling them to receive any divi-dend or other distribution
of:
(i)
cash
(other than a cash dividend payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the jurisdiction of
incorporation of the Issuer),
(ii)
any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common Stock
Equivalents or Additional Shares of Common Stock), or
(iii)
any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents
or
Additional Shares of Common Stock),
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
shall
be adjusted to equal the product of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Per Share
Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and
of
the fair value (as determined in good faith by the Board of Directors of the
Issuer and supported by an opinion from an investment banking firm of recognized
national standing acceptable to (but not affiliated with) the Holder) of any
and
all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (2) the Warrant Price then in effect shall be adjusted to equal (A) the
Warrant Price then in effect multiplied by the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares of Common Stock for which this Warrant
is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value
or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Issuer to the holders
of its Common Stock of such shares of such other class of stock within the
meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock
as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
(d)
Fractional
Interests
.
In
computing ad-justments under this Section 4, fractional interests in Common
Stock shall be taken into account to the near-est one one-hundredth
(1/100
th
)
of a
share.
(e)
When
Adjustment Not Required
.
If the
Issuer shall take a record of the holders of its Common Stock for the purpose
of
entitling them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(f)
Form
of Warrant after Adjustments
.
The
form of this Warrant need not be changed because of any adjustments in the
Warrant Price or the number and kind of Securities purchasable upon the exercise
of this Warrant.
(g)
Escrow
of Warrant Stock
.
If
after any property becomes distributable pursuant to this Section 4 by reason
of
the taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, and the Holder
exer-cises this Warrant, any shares of Common Stock issuable upon exercise
by
reason of such adjustment shall be deemed the last shares of Common Stock for
which this Warrant is exercised (notwithstanding any other provision to the
contrary herein) and such shares or other property shall be held in escrow
for
the Holder by the Issuer to be issued to the Holder upon and to the extent
that
the event actually takes place, upon payment of the current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Issuer and escrowed property
returned.
5.
Notice
of Adjustments
.
Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
to
Section 4 hereof (for purposes of this Section 5, each an "adjustment"), the
Issuer shall cause its Chief Financial Officer to prepare and execute a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made
any
determination hereunder), and the Warrant Price and Warrant Share Number after
giving effect to such adjustment, and shall cause copies of such certificate
to
be delivered to the Holder of this Warrant promptly after each adjustment.
Any
dispute between the Issuer and the Holder of this Warrant with respect to the
matters set forth in such certificate may at the option of the Holder of this
Warrant be submitted to one of the national accounting firms currently known
as
the "big four" selected by the Holder;
provided
that the
Issuer shall have ten (10) days after receipt of notice from such Holder of
its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection. The
firm
selected by the Holder of this Warrant as provided in the preceding sentence
shall be instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within thirty (30) days after submission to it of such
dispute. Such opinion shall be final and binding on the parties hereto.
6.
Fractional
Shares
.
No
fractional shares of Warrant Stock will be issued in connection with any
exercise hereof, but in lieu of such fractional shares, the Issuer shall make
a
cash payment therefor equal in amount to the product of the applicable fraction
multiplied by the Per Share Market Value then in effect.
7.
Definitions
.
For the
purposes of this Warrant, the following terms have the following
meanings:
"
Additional
Shares of Common Stock
"
means
all shares of Common Stock issued by the Issuer after the Original Issue Date,
and all shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except for Permitted Financings (as defined in the Purchase
Agreement) and the Other Warrants.
"
Certificate
of Incorporation
"
means
the Certificate of Incorporation of the Issuer as in effect on the Original
Issue Date, and as hereafter from time to time amended, modified, supplemented
or restated in accordance with the terms hereof and thereof and pursuant to
applicable law.
"
Board
"
shall
mean the Board of Directors of the Issuer.
"
Capital
Stock
"
means
and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including,
without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"
Common
Stock
"
means
the Common Stock, par value $0.01 per share, of the Issuer and any other Capital
Stock into which such stock may hereafter be changed.
"
Convertible
Securities
"
means
evidences of Indebtedness, shares of Capital Stock or other Securities which
are
or may be at any time convertible into or exchangeable for Additional Shares
of
Common Stock. The term "Convertible Security" means one of the Convertible
Securities.
"
Governmental
Authority
"
means
any governmental, regulatory or self-regulatory entity, department, body,
official, authority, commission, board, agency or instrumentality, whether
federal, state or local, and whether domestic or foreign.
"
Holder
"
means
the Person who holds this Warrant. The term "Holders" means one of the Persons
who shall from time to time hold this Warrant.
"
Independent
Appraiser
"
means a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may
be
the firm that regularly examines the financial statements of the Issuer) that
is
regularly engaged in the business of appraising the Capital Stock or assets
of
corporations or other entities as going concerns, and which is not affiliated
with either the Issuer or the Holder of any Warrant.
"
Issuer
"
means
Communication Intelligence Corporation, a Delaware corporation, and its
successors and assigns.
"
Majority
Holders
"
means
at any time the Holders of Warrants exercisable for a majority of the shares
of
Warrant Stock issuable under the Warrants at the time outstanding.
"
Original
Issue Date
"
means
_______, 200X.
"
OTC
Bulletin Board
"
means
the over-the-counter electronic bulletin board.
"
Other
Common
"
means
any other Capital Stock of the Issuer of any class which shall be authorized
at
any time after the date of this Warrant (other than Common Stock) and which
shall have the right to participate in the distribution of earnings and assets
of the Issuer without limitation as to amount.
"
Other
Warrants
"
means
the warrants to purchase shares of Common Stock issued to the other Purchasers
pursuant to the Purchase Agreement.
“
Outstanding
Common Stock
”
means,
at any given time, the aggregate amount of outstanding shares of Common Stock,
assuming full exercise, conversion or exchange (as applicable) of all options,
warrants and other Securities which are convertible into or exercisable or
exchangeable for, and any right to subscribe for, shares of Common Stock that
are outstanding at such time.
"
Person
"
means
an individual, corporation, limited liability company, partnership, joint stock
company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.
"
Per
Share Market Value
"
means
on any particular date (a) the closing bid price for a share of Common Stock
in
the over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (b) if the Common Stock is not then reported by the OTC Bulletin
Board or the National Quotation Bureau Incorporated (or similar organization
or
agency succeeding to its functions of reporting prices), then the average of
the
"Pink Sheet" quotes for the relevant conversion period, as determined in good
faith by the Holder, or (c) if the Common Stock is not then publicly traded
the
fair market value of a share of Common Stock as determined by the Board in
good
faith;
provided
,
however
,
that
the Majority Holders, after receipt of the determination by the Board, shall
have the right to select, jointly with the Issuer, an Independent Appraiser,
in
which case, the fair market value shall be the determination by such Independent
Appraiser; and
provided
,
further
that all
determinations of the Per Share Market Value shall be appropriately adjusted
for
any stock dividends, stock splits or other similar transactions during such
period. The determination of fair market value shall be based upon the fair
market value of the Issuer determined on a going concern basis as between a
willing buyer and a willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties. In
determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the Common
Stock
imposed by agreement or by federal or state securities laws, or to the existence
or absence of, or any limitations on, voting rights.
"
Purchase
Agreement
"
means
the Note and Warrant Purchase Agreement dated as of February 5, 2007, among
the
Issuer and the Purchasers.
"
Purchasers
"
means
the purchasers of the Notes and Warrants issued by the Issuer pursuant to the
Purchase Agreement.
"
Securities
"
means
any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities
or a
Security, and any option, warrant or other right to purchase or acquire any
Security. "Security" means one of the Securities.
"
Securities
Act
"
means
the Securities Act of 1933, as amended, or any similar federal statute then
in
effect.
"
Subsidiary
"
means
any corporation at least 50% of whose outstanding Voting Stock shall at the
time
be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.
"
Term
"
has the
meaning specified in Section 1 hereof.
"
Trading
Day
"
means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board, or
(b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which
the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices);
provided
,
however
,
that in
the event that the Common Stock is not listed or quoted as set forth in (a)
or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any
day which shall be a legal holiday or a day on which banking institutions in
the
State of New York are authorized or required by law or other government action
to close.
"
Voting
Stock
"
means,
as applied to the Capital Stock of any corporation, Capital Stock of any class
or classes (however designated) having ordinary voting power for the election
of
a majority of the members of the Board of Directors (or other governing body)
of
such corporation, other than Capital Stock having such power only by reason
of
the happening of a contingency.
"
Warrants
"
means
the Warrants issued and sold pursuant to the Purchase Agreement, including,
without limitation, this Warrant, and any other warrants of like tenor issued
in
substitution or exchange for any thereof pursuant to the provisions of Section
2(c) or 2(d) hereof or of any of such other Warrants.
"
Warrant
Price
"
initially means $0.51 per share as such price may be adjusted from time to
time
as shall result from the adjustments specified in this Warrant, including
Section 4 hereto.
"
Warrant
Share Number
"
means
at any time the aggregate number of shares of Warrant Stock which may at such
time be purchased upon exercise of this Warrant, after giving effect to all
prior adjustments and increases to such number made or required to be made
under
the terms hereof.
"
Warrant
Stock
"
means
Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
issuable pursuant to any Warrant or Warrants.
9.
Other
Notices
.
In case
at any time:
|
(A)
|
the
Issuer shall make any distributions to the holders of Common Stock;
or
|
|
(B)
|
the
Issuer shall authorize the granting to all holders of its Common
Stock of
rights to subscribe for or purchase any shares of Capital Stock of
any
class or other rights; or
|
|
(C)
|
there
shall be any reclassification of the Capital Stock of the Issuer;
or
|
|
(D)
|
there
shall be any capital reorganization by the Issuer;
or
|
|
(E)
|
there
shall be any (i) consolidation or merger involving the Issuer or
(ii)
sale, transfer or other disposition of all or substantially all of
the
Issuer's property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation
and
its shares of Capital Stock shall continue to be outstanding and
unchanged
and except a consolidation, merger, sale, transfer or other disposition
involving a wholly-owned Subsidiary);
or
|
|
(F)
|
there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Issuer or any partial liquidation of the Issuer or distribution
to
holders of Common Stock;
|
then,
in
each of such cases, the Issuer shall give written notice to the Holder of the
date on which (i) the books of the Issuer shall close or a record shall be
taken
for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock
for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days prior
to the record date or the date on which the Issuer's transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to
the
holders of the Common Stock.
10.
Amendment
and Waiver
.
Any
term, covenant, agreement or condition in this Warrant may be amended, or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by a written instrument or written
instruments executed by the Issuer and the Majority Holders;
provided
,
however
,
that no
such amendment or waiver shall reduce the Warrant Share Number, increase the
Warrant Price, shorten the period during which this Warrant may be exercised
or
modify any provision of this Section 10 without the consent of the Holder of
this Warrant.
11.
Governing
Law
.
THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY OF ITS PRINCIPLES OF CONFLICTS
OF LAW WHICH WOULD RESULT IN THE APPLICATION OF THE SUBSTANTIVE LAW OF ANOTHER
JURISDICTION.
12.
Notices
.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earlier of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified for
notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii) the Trading
Day
after the date of transmission, if such notice or communication is delivered
via
facsimile at the facsimile telephone number specified for notice later than
5:00
p.m., eastern time, on any date and earlier than 11:59 p.m., eastern time,
on
such date, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to the Holder of this Warrant or of Warrant
Stock issued pursuant hereto, addressed to such Holder at its last known address
or facsimile number appearing on the books of the Issuer maintained for such
purposes, or with respect to the Issuer, addressed to:
Communication
Intelligence Corporation
275
Shoreline Drive, Suite 500
Redwood
Shores, California 94065
Attention:
Frank Dane
Tel.
No.:
(650) 802-7888
Fax
No.:
(650) 802-7777
with
copies (which copies
shall
not
constitute notice
to
the
Issuer) to:
Davis
Wright Tremaine LLP
1300
S.W.
Fifth Ave., 23
rd
Floor
Portland,
Oregon 97201
Attention:
Michael C. Phillips, Esq.
Tel.
No.:
(503) 241-2300
Fax
No.:
(503) 778-5299
Copies
of
notices to the Holder shall be sent to
[Insert
name, address, phone and fax number].
Any
party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other party
hereto.
13.
Remedies
.
The
Issuer stipulates that the remedies at law of the Holder of this Warrant in
the
event of any breach or threatened breach by the Issuer in the performance of
or
compliance with any of the terms or provisions of this Warrant are not and
will
not be adequate and that, to the fullest extent permitted by law, such terms
or
provisions may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of
any
of the terms or provisions hereof or otherwise.
14.
Successors
and Assigns
.
This
Warrant and the rights evidenced hereby shall inure to the benefit of and be
binding upon the successors and assigns of the Issuer, the Holder hereof and
(to
the extent provided herein) the Holders of Warrant Stock issued pursuant hereto,
and shall be enforceable by any such Holder or Holders of Warrant
Stock.
15.
Severability
.
If, in
any action before any court or agency legally empowered to enforce any provision
contained herein, any provision hereof is found to be unenforceable, then such
provision shall be deemed modified to the extent necessary to make it
enforceable by such court or agency. If any such provision is not enforceable
as
set forth in the preceding sentence, the unenforceability of such provision
shall not affect the other provisions of this Warrant, but this Warrant shall
be
construed as if such unenforceable provision had never been contained
herein.
16.
Headings
.
The
headings of the Sections of this Warrant are for convenience of reference only
and shall not, for any purpose, be deemed a part of this Warrant and shall
not
influence the construction or interpretation of this Warrant.
[SIGNATURE
PAGE FOLLOWS]
2007.02.05
Form of Warrant
-
-
1010832
IN
WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year
first above written.
COMMUNICATION
INTELLIGENCE CORPORATION
By:
Name:
Frank Dane
Title:
Chief Financial and Legal Officer
2007.02.05
Form of Warrant
-
-
1010832
EXERCISE
FORM
WARRANT
COMMUNICATION
INTELLIGENCE CORPORATION
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of ____________ covered
by the within Warrant.
Dated:
_________________
Signature
___________________________
Address
_____________________
_____________________
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
Dated:
_________________
Signature
___________________________
Address
_____________________
_____________________
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
Dated:
_________________
Signature
___________________________
Address
_____________________
_____________________
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W2007-___ canceled (or transferred or exchanged) this _____ day
of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. 2007 W-_____ issued for ____ shares of Common
Stock
in the name of _______________.
EXHIBIT
99.1
FOR
IMMEDIATE RELEASE
CIC
Announces Second Credit Facility
Redwood
Shores, CA, February 9, 2007
-
Communication Intelligence Corporation (“CIC” or the “Company”) (OTC BB: CICI),
a leading supplier of electronic signature solutions for business process
automation in the Financial Industry and the recognized leader in biometric
signature verification announced today that it has established a second credit
facility with the same shareholder that provided the credit facility it
announced on August 14, 2006.
The
new
facility, as with the prior one, was established pursuant to a note and warrant
purchase agreement. The terms of the agreement allow the Company to borrow,
on
demand, through March 31 2007, an aggregate principal amount of up to six
hundred thousand dollars ($600,000). Upon each draw, the Company will be
required to issue warrants to purchase a pro rata number of shares of its
common
stock, with a maximum number of 3,111,000 to be issued if the entire $600,000
is
drawn. The notes will bear interest at the rate of fifteen percent (15%)
per
annum payable quarterly in cash. The warrants will have a three year life
and an
exercise price of $0.51. In the event the facility is not fully drawn, the
Company shall issue to the investor, as a standby commitment fee, a pro rata
portion of 250,000 shares of the Company’s common stock, based upon the amount
not drawn relative to the maximum amount available under the facility. The
warrants will include piggyback registration rights, for the underlying shares,
to participate in certain future registrations of the Company’s common stock.
The Company also announced that it has fully drawn the $600,000 available
on the
first credit facility.
“We
decided to draw on the first facility prior to its expiration and to establish
a
new facility in order to ensure a stable transition to market take-off and
self-funding operations,” stated Guido DiGregorio, CIC’s Chairman & CEO.
“
I
anticipate that 2007 is the year that the eSignature market will transition
from
a developing market to a market in take-off. I believe orders and commitments
in
late November and December of 2006 represent breakthrough milestones that
will
ultimately lead to accelerating and sustained sales growth. Although
virtually none of these yearend wins were revenue recognizable in the fourth
quarter, they appear to indicate that the market take-off we have been pursuing
for the past two years, ever since our record setting financial performance
in
2004, has begun. We fully recognized, and have now fully experienced, that
the
process of getting into market take-off demands maintaining product leadership
as the market evolves through second and then third generation products. I
believe we have maintained our product leadership and competitive positioning
throughout 2006 by responding rapidly and effectively to the need for
multi-modal and web based offerings and then, late last year, to a further
demand for a server side signing product that pit us against competitors
whose
total focus is server side solutions. We responded with, and won with a fourth
generation product that I believe stabilizes the product evolution issues
and
opens the door to sustained sales growth. We continue working with our top-tier
insurance and banking early adopters, having delivered a proof of concept
late
last year from which we anticipate follow-on orders we have been pursuing.
In
addition, we have strengthened our sales growth potential by leveraging
agreements with large enterprise software solution providers. For instance,
we
have established and significantly enhanced our relationship and selling
efforts
with Adobe and its channel partners. Our partnership with Adobe, as reported
in
three press releases since April of 2006, that includes joint participation
at
trade shows and online seminars, has significantly accelerated the awareness
of
the benefits of our eSignature technology while leveraging joint selling
efforts. And, as previously announced in June of 2006, we won a license
agreement with IntegraSys, a business unit of Fiserv, the $4 billion financial
services solution provider that is taking credit unions paperless with our
eSignature technology and we more recently announced an agreement licensing
our
entire suite of eSignature products to Oracle. As the largest enterprise
software company in the world, we are excited about the revenue potential
Oracle
can provide through this relationship and possible integration of our solutions
within several high volume financial services applications. In addition,
we
recently signed a strategic partnership agreement with Cognizant, a leading
provider of global IT software solutions with revenues of $1.4 billion, to
provide complete workflow solutions for the financial services industry.
We are
delighted to be partnering with the #1 IT services company as ranked by Business
Week.” Mr. DiGregorio also stated, “I believe, that this credit facility
achieves our objective of keeping shareholder dilution to a minimum while
having
sufficient cash available to
ensure a
stable transition to market take-off and self-funding operations.
”
About
CIC
Communication
Intelligence Corporation (“CIC”) is a leading supplier of electronic signature
solutions for business process automation in the Financial Industry and the
recognized leader in biometric signature verification. CIC’s products enable
companies to achieve truly paperless work flow in their eBusiness processes
by
enabling them with “The Power to Sign Online®” with multiple signature
technologies across virtually all applications. Industry leaders such as
AIG, Charles Schwab, Prudential, Nationwide (UK) and Wells Fargo chose CIC’s
products to meet their needs. CIC sells directly to enterprises and through
system integrators, channel partners and OEMs. CIC is headquartered in Redwood
Shores, California and has a joint venture, CICC, in Nanjing, China. For
more
information, please visit our website at
http://www.cic.com
.
Forward
Looking Statement
Certain
statements contained in this press release, including without limitation,
statements containing the words “believes”, “anticipates”, “hopes”, “intends”,
“expects”, and other words of similar import, constitute “forward looking”
statements within the meaning of the Private Litigation Reform Act of 1995.
Such
statements involve known and unknown risks, uncertainties and other factors
which may cause actual events to differ materially from expectations. Such
factors include the following (1) technological, engineering, quality control
or
other circumstances which could delay the sale or shipment of products
containing the Company’s technology; (2) economic, business, market and
competitive conditions in the software industry and technological innovations
which could affect the Company’s business; (3) the Company’s inability to
protect its trade secrets or other proprietary rights, operate without
infringing upon the proprietary rights of others or prevent others from
infringing on the proprietary rights of the Company; and (4) general economic
and business conditions and the availability of sufficient financing.
CIC,
its
logo
and
the
Power to Sign Online are registered trademarks. All other trademarks and
registered trademarks are the property of their respective holders.
Contact
Information
CIC
Investor
Relations Inquiries:
Chantal
Eshghipour
Phone:
650-802-7740
Email:
investorrelations@cic.com
###
PR#478Final