Exhibit 3
CERTIFICATE OF DESIGNATIONS
OF
5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
FOR
COMMUNICATION INTELLIGENCE CORPORATION
Communication Intelligence Corporation, a Delaware corporation (the
"Corporation"), pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, does hereby make this Certificate of
Designations and does hereby state and certify that pursuant to the authority
expressly vested in the Board of Directors of the Corporation by the Certificate
of Incorporation of the Corporation, the Board of Directors duly adopted the
following resolutions, which resolutions remain in full force and effect as of
the date hereof:
RESOLVED, that, pursuant to Article FOURTH of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby authorizes the
issuance of, and fixes the designation and preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of
600,000 shares, par value $0.01, to be designated "5% Cumulative Convertible
Preferred Stock" (the "Preferred Shares").
RESOLVED, that each of the Preferred Shares shall rank equally in all
respects and shall be subject to the following terms and provisions:
1. DIVIDENDS.
(a) CUMULATIVE. The holders of the Preferred Shares shall be
entitled to receive out of any assets legally available therefor cumulative
dividends at the rate of $1.25 per share per annum compounded semi-annually when
payable (whether or not declared), payable on the Conversion Commencement Date
(as defined below) and semi-annually every six (6) months thereafter (each a
"Dividend Payment Date"), when and as declared by the Board of Directors, in
preference and priority to any payment of any dividend on the Common Stock (as
defined below) or any other class or series of stock of the Corporation. Such
dividends shall accrue on any given share from the most recent date on which a
dividend has been paid with respect to such share, or if no dividends have been
paid, from the date of the original issuance of such share, and such dividends
shall accrue from day to day whether or not declared, based on the actual number
of days elapsed. If at any time dividends on the outstanding Preferred Shares
at the rate set forth above shall not have been paid or declared and set apart
for payment with respect to all preceding periods, the amount of the deficiency
shall be fully paid or declared and set apart for payment, but without interest,
before any distribution, whether by way of dividend or otherwise, shall be
declared or paid upon or set apart for the shares of any other class or series
of stock of the Corporation.
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(b) CASH OR PIK. Any dividend payable on the outstanding
Preferred Shares may be paid, at the option of the Corporation, either (i) in
cash or (ii) in additional Preferred Shares (with each new Preferred Share
valued at $25 per share); provided, however, that if the Corporation shall fail
to pay any dividend on a Dividend Payment Date, the amount of such dividend
shall be added to the Liquidation Preference (as defined below) for such
Preferred Shares.
2. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the Preferred Shares shall be entitled to receive, prior and in
preference to any distribution of any assets of the Corporation to the holders
of any other class or series of shares, the amount of $25 per share plus any
accrued but unpaid dividends (with dividends deemed accrued on a per diem basis
through the date of such event and thereafter even if such event or any
distribution is not on a Dividend Payment Date) (the "Liquidation Preference").
3. ISSUANCE OF PREFERRED SHARES. The Preferred Shares shall be
issued by the Corporation pursuant to a Preferred Stock Investment Agreement
("Investment Agreement") to be entered into between the Corporation and the
initial subscribers for the Preferred Shares, and holders of Preferred Shares
shall enjoy the benefits of the Registration Rights Agreement ("Registration
Rights Agreement") to be entered into between such parties in connection with
the Investment Agreement. The 150,000 Preferred Shares authorized and
designated hereunder which are not issued pursuant to the Investment Agreement
may only be issued to the initial subscribers for Preferred Shares under the
Investment Agreement or the holders of Preferred Shares for the sole purpose of
paying stock dividends hereunder or default payments under the Registration
Rights Agreement to the extent permitted hereunder and under the Registration
Rights Agreement.
4. CONVERSION. On and after the date ("Conversion Commencement
Date") which is six (6) months from the Closing Date (as defined in the
Investment Agreement), or such earlier date as may be permitted pursuant to
Section 4(i) below, each holder of the Preferred Shares shall have the right at
any time and from time to time, at the option of such holder, to convert any or
all Preferred Shares for such number of fully paid, validly issued and
nonassessable shares ("Common Shares") of common stock, par value $0.01, of the
Corporation ("Common Stock"), free and clear of any liens, claims or
encumbrances, as is determined by dividing (i) the sum of $25 times the number
of Preferred Shares being converted plus accrued and unpaid dividends thereon up
to and including the most recent Dividend Payment Date (or up to and including
the Conversion Date (as defined below) if the Conversion Date occurs on the
Conversion Commencement Date or another Dividend Payment Date) plus any default
payments owing to such holder on the Conversion Date pursuant to the
Registration Rights Agreement (the "Conversion Amount"), by (ii) the Conversion
Price determined as hereinafter provided in effect on the Conversion Date, on
the following terms and conditions.
(a) MECHANICS OF CONVERSION. To convert Preferred Shares into Common
Shares, the holder shall give written notice ("Conversion Notice") to the
Corporation in the form of page 1 of Exhibit A hereto (which Conversion Notice
may be given by facsimile transmission) stating that such holder elects to
convert the same and shall state therein the number of shares to be converted
and the name or names in which such holder wishes the certificate or
certificates
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for Common Shares to be issued (the date of such Conversion Notice
shall be referred to herein as the "Conversion Date"). Within one (1) trading
day after such conversion the holder shall deliver page 2 to Exhibit A hereto
indicating the computation of the number of Common Shares to be received and
shall surrender the certificate or certificates representing the shares being
converted, duly endorsed, at the office of the Corporation or of any transfer
agent for such shares, provided that the Corporation shall at all times maintain
an office or agency in New York City for such purposes. The Corporation shall,
immediately upon receipt of such Conversion Notice, issue and deliver to or upon
the order of such holder, against delivery of the certificates representing the
shares which have been converted, a certificate or certificates for the number
of Common Shares to which such holder shall be entitled (with the number of and
denomination of such certificates designated by such holder), and the
Corporation shall immediately issue and deliver to such holder a certificate or
certificates for the number of Preferred Shares which such holder has not yet
elected to convert hereunder but which are evidenced in part by the
certificate(s) delivered to the Corporation in connection with such Conversion
Notice; the Corporation shall effect such issuance within three (3) trading days
(as defined in Section 4(b)(iv) below) of the Conversion Date and shall transmit
the certificates by messenger or overnight delivery service to reach the address
designated by such holder within three (3) trading days after the receipt of
such Conversion Notice ("T+3"). In the alternative to physical delivery of
certificates for Common Shares, if delivery of the Common Shares pursuant to any
conversion hereunder may be effectuated by electronic book-entry through
Depository Trust Company ("DTC"), then delivery of Common Shares pursuant to
such conversion shall be closed and settled on T+3 by book-entry transfer
through DTC, and the Common Shares in connection with such conversion shall be
deemed delivered by such book-entry transfer. The parties agree to coordinate
with DTC to accomplish this objective. The conversion pursuant to this Section
4 shall be deemed to have been made immediately prior to the close of business
on the Conversion Date. The person or persons entitled to receive the Common
Shares issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Common Shares at the close of business on the
Conversion Date.
(b) DETERMINATION OF CONVERSION PRICE.
(i) At any date up to and including the date which is the
last day of the thirteenth fiscal month following the Closing Date, the
Conversion Price shall be equal to:
[1 - Applicable Percentage (as set forth below)] x Agreed Value (as
defined below).
The Agreed Value shall equal: (x) if the holder giving a Conversion Notice
shall have sold Common Shares, the weighted-average (based upon the number of
shares sold) of the actual selling prices at which such holder shall have sold
Common Shares (but not less than the lowest trading price on the date of such
trade as reported by the principal market on which the Common Stock is traded or
on Instinet), net of normal and customary commissions and underwriting or dealer
spreads; or (y) if the holder giving a Conversion Notice shall not have sold
Common Shares, the average of the daily means between the low trading price of
the Common Stock and the Closing Price of the Common Stock for the three (3)
consecutive trading days immediately preceding the Conversion Date.
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(ii) The Applicable Percentage shall be as follows:
14.375% during the 7th fiscal month following the Closing
Date
18.125% during the 8th fiscal month following the Closing
Date
19.875% during the 9th fiscal month following the Closing
Date
21.625% during the 10th fiscal month following the Closing
Date
23.250% during the 11th fiscal month following the Closing
Date
24.875% during the 12th fiscal month following the Closing
Date
25.000% during the 13th fiscal month following the Closing
Date
(iii) After the date which is the last day of the
thirteenth fiscal month following the Closing Date, the Conversion Price
shall be the lesser of: (x) 72.125% of the average of the daily means
between the low trading price of the Common Stock and the Closing Price of
the Common Stock for all the trading days during the 13th fiscal month
following the Closing Date; or (y) (1) if the holder giving a Conversion
Notice shall have sold Common Shares, 72.125% of the weighted-average
(based upon the number of shares sold) of the actual selling prices at
which the holder giving a Conversion Notice shall have sold Common Shares
(but not less than the lowest trading price on the date of such trade as
reported by the principal market on which the Common Stock is traded or on
Instinet), net of normal and customary commissions and underwriting or
dealer spreads, or (2) if the holder giving a Conversion Notice shall not
have sold Common Shares, 72.125% of the average of the daily means between
the low trading price of the Common Stock and the Closing Price of the
Common Stock during the three (3) consecutive trading days immediately
preceding the Conversion Date.
(iv) The "low trading price" and the "Closing Price",
respectively, of the Common Stock on any day, as indicated in the next
day's Wall Street Journal if so reported in the Wall Street Journal, shall
be (A) the lowest reported sale price and the reported Closing Price (last
sale price) of the Common Stock on the New York Stock Exchange or the
American Stock Exchange, or (B) if the Common Stock is not listed on the
New York Stock Exchange or the American Stock Exchange, the lowest reported
sale price and the reported Closing Price of the Common Stock on the
principal automated securities price quotation system on which sale prices
of the Common Stock are reported, or (C) if the Common Stock is not listed
on such stock exchanges and sale prices of the Common Stock are not
reported on an automated quotation system, the lowest bid price and the
mean of the final bid and asked prices for the Common Stock as reported by
National Quotation Bureau Incorporated if at least two securities dealers
have inserted both bid and asked quotations for the Common Stock on at
least five of the ten preceding trading days. If none of the foregoing
provisions are applicable, the "mean of the low trading price and the
Closing Price" of the Common Stock on a day will be the fair market value
of the Common Stock on that day as determined by a member firm of the New
York Stock Exchange, Inc., selected in good faith by the Board of Directors
of the Corporation and reasonably acceptable to the holders of Preferred
Shares. The term "trading day" means (x) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, a day on which
there is trading on such stock exchange, (y) if the Common Stock is not
listed on either of such stock exchanges but sale prices of the Common
Stock are reported on an automated quotation system, a day on which
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trading is reported on the principal automated quotation system on which
sales of the Common Stock are reported, or (z) if the foregoing provisions
are inapplicable, a day on which quotations are reported by National
Quotation Bureau Incorporated. Any "fiscal month following the Closing
Date" shall mean the period commencing on the same numerical date as the
Closing Date in the applicable month following the Closing Date and ending
on the date in the following calendar month which is one day prior to the
numerical date of the Closing Date. If the Closing Date occurs on a
numerical date of 29, 30 or 31, and any calendar month following the
Closing Date does not have a corresponding numerical date, then the ending
date for such fiscal month shall be the last day of such calendar month.
If the Closing Date occurs on the first day of a calendar month, then each
fiscal month shall be a calendar month.
(v) In the event that during any period of consecutive
trading days provided for above, the Corporation shall declare or pay any
dividend on the Common Stock payable in Common Stock or in rights to
acquire Common Stock, or shall effect a stock split or reverse stock split,
or a combination, consolidation or reclassification of the Common Stock,
then the Conversion Price shall be proportionately decreased or increased,
as appropriate, to give effect to such event.
(c) DISTRIBUTIONS. In the event the Corporation shall at any time or
from time to time make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation or any of its direct or indirect
subsidiaries other than additional Common Shares, then in each such event, in
addition to the number of shares of Common Stock receivable upon conversion,
provision shall be made so that the holders of Preferred Shares shall receive,
upon the conversion thereof, the securities of the Corporation or such
subsidiary which they would have received had they been the owners on the date
of such event of the number of Common Shares issuable to them upon conversion.
The Corporation shall, upon the written request at any time of any holder of
Preferred Shares, furnish or cause to be furnished to such holder a certificate
prepared by the Corporation setting forth the number of other securities and the
amount, if any, of other property which at the time would be received upon the
conversion of Preferred Shares with respect to each share of Common Stock
received upon such conversion.
(d) NOTICE OF RECORD DATE. In the event of any taking by the
Corporation of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive additional Common Shares, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, the
Corporation shall mail to each holder of Preferred Shares at least 10 days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution, security
or right and the amount and character of such dividend, distribution, security
or right.
(e) ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of Common Shares on conversion of
Preferred Shares pursuant hereto; provided,
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however, that the Corporation shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
conversion.
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
Common Shares, solely for the purpose of effecting the conversion of the
Preferred Shares, such number of its Common Shares as shall from time to time be
sufficient to effect the conversion of all outstanding Preferred Shares, and if
at any time the number of authorized but unissued Common Shares shall not be
sufficient to effect the conversion of all the then outstanding Preferred
Shares, the Corporation will take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued Common
Shares to such number of shares as shall be sufficient for such purpose,
including without limitation engaging in best efforts to obtain the requisite
shareholder approval. Without in any way limiting the foregoing, so long as any
Preferred Shares remain outstanding the Corporation agrees to reserve and at all
times keep available solely for purposes of conversion of Preferred Shares such
number of authorized but unissued Common Shares that is the greater of (A)
20,000,000 or (B) 1.5 times the number as shall from time to time be sufficient
to effect conversion of all outstanding Preferred Shares at the Conversion Price
as provided in Section 4(b) above, which 20,000,000 figure may be reduced by the
number of Common Shares actually delivered pursuant to conversion of Preferred
Shares hereunder and shall be appropriately and equitably adjusted for any stock
split, reverse split, stock dividend or reclassification of the Common Stock.
(g) FRACTIONAL SHARES. No fractional shares shall be issued upon the
conversion of any Preferred Shares. All Common Shares (including fractions
thereof) issuable upon conversion of more than one Preferred Share by a holder
thereof shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the Conversion Date
(as determined in good faith by the Board of Directors of the Corporation).
(h) REORGANIZATION OR MERGER. In case of any reorganization or any
reclassification of the capital stock of the Corporation or any consolidation or
merger of the Corporation with or into any other corporation or corporations or
a sale of all or substantially all of the assets of the Corporation to any other
person, then, as part of such reorganization, consolidation, merger or sale, if
the holders of Common Shares receive any publicly traded securities as part or
all of the consideration for such reorganization, consolidation, merger or sale,
then provision shall be made such that each Preferred Share shall thereafter be
convertible into such new securities at a conversion price which places the
holders of Preferred Shares in an economically equivalent position as they would
have been if not for such event. In addition to the foregoing, if the holders
of Common Shares receive any non-publicly traded securities or other property or
cash as part or all of the consideration for such reorganization, consolidation,
merger or sale, then such distribution shall be treated as a distribution under
Section 4(c) above and such Section shall govern such distribution. So long as
any Preferred Shares are outstanding, the Corporation agrees that there shall be
no such reorganization, consolidation, merger or sale unless an appropriate
adjustment of the conversion price and other provisions contained herein
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is agreed to in writing in advance by the Board of Directors of the Corporation
and a majority in interest of the holders of outstanding Preferred Shares (which
agreement will not be unreasonably withheld), provided that such consent shall
not be required if (i) such reorganization, consolidation, merger or sale places
such holders in the equivalent position as they would have been if not for such
event and (ii) the surviving entity and the entity into whose securities the
Preferred Shares are then convertible in connection with such reorganization,
consolidation, merger or sale are in compliance with all the material provisions
of this Designation, the Registration Rights Agreement and the Investment
Agreement as if such agreements and documents were applicable to such entities
and their securities (including without limitation that the applicable
securities into which the Preferred Shares are convertible are authorized and
available for conversion, registered, and listed and traded on the applicable
exchanges and/or markets).
(i) CHANGE IN CONTROL. If at any time (a) there occurs any
consolidation or merger of the Corporation with or into any other corporation or
other entity or person (whether or not the Corporation is the surviving
corporation), or any other corporate reorganization or transaction or series of
related transactions in which in excess of 50% of the Corporation's voting power
is transferred through a merger, consolidation, tender offer or similar
transaction, (b) in excess of 50% of the Corporation's Board of Directors
consists of directors not nominated by the prior Board of Directors of the
Corporation, or (c) any person (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), together with its
affiliates and associates (as such terms are defined in Rule 405 under the
Securities Act of 1933, as amended (the "Act")), beneficially owns or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act without
regard to the 60-day exercise period) in excess of 50% of the Corporation's
voting power (the events in the foregoing clauses (a), (b) and (c) collectively
referred to as a "Change in Control Transaction"), then notwithstanding the date
restriction contained in the first paragraph of this Section 4, each holder of
Preferred Shares shall have the right to convert any or all of its Preferred
Shares for Common Shares at any time prior to the Conversion Commencement Date
in accordance with the terms hereof at an Applicable Percentage equal to 14.375%
(which right shall be in addition to such holder's right to convert Preferred
Shares at any time on or after the Conversion Commencement Date in accordance
with the terms hereof). The Corporation shall provide all holders of Preferred
Shares with 30 days' prior notice of any such transaction. The Corporation
further agrees that it shall not agree or consent to or enter into any
transaction or series of transactions as a result of which the Common Shares
would cease to be publicly traded unless agreed to in writing in advance by the
Board of Directors of the Corporation and a majority in interest of the holders
of Preferred Shares.
(j) FORCED CONVERSION. Subject to the following sentence, each
holder of Preferred Shares shall convert any Preferred Shares held by such
holder on the date which is the third (3rd) anniversary of the Closing Date
("Forced Conversion Date"), provided that such Forced Conversion Date shall be
deferred for such number of days as is equal to 1.5 times the number of days
there is not Effective Registration or there is not a sufficient amount of
Common Shares available for conversion of all outstanding Preferred Shares at
any time on and after the Conversion Commencement Date. Notwithstanding the
preceding sentence, no holder of Preferred Shares shall be obligated to convert
any Preferred Shares held by such holder on the Forced Conversion Date unless
and until each of the following conditions has been satisfied or exists, each of
which shall be a condition precedent to any such forced conversion:
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(1) no material default or breach exists, and no event shall
have occurred which constitutes (or would constitute with notice or the
passage of time or both) a material default or breach of the Investment
Agreement, the Registration Rights Agreement or this Certificate of
Designations;
(2) none of the events described in clauses (i) through (iv) of
Section 2(b) of the Registration Rights Agreement shall have occurred and
be continuing;
(3) Effective Registration (as defined in the Investment
Agreement) has occurred and is continuing and has continuously existed for
the prior 30 consecutive trading days;
(4) the Corporation and its direct and indirect subsidiaries on
a consolidated basis has assets with a net realizable fair market value
exceeding its liabilities and is able to pay all its debts as they become
due in the ordinary course of business, and the Corporation is not and has
not been subject to any liquidation, dissolution or winding up of its
affairs; and
(5) each holder of Preferred Shares shall have received a
certificate from an appropriate executive officer of the Corporation
certifying that each of the foregoing conditions precedent exist or have
been satisfied.
Such forced conversion shall be subject to and governed by all the provisions
relating to voluntary exchange of the Preferred Shares contained herein, except
that the Conversion Amount for any forced conversion shall include accrued and
unpaid dividends on the Preferred Shares on a per diem basis through the date of
such forced conversion even if such date is not a Dividend Payment Date.
(k) LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.
(i) Notwithstanding anything to the contrary contained
herein, no Preferred Share may be converted by a holder to the extent that,
after giving effect to Common Shares to be issued pursuant to a Conversion
Notice, the total number of Common Shares deemed beneficially owned by such
holder, together with all Common Shares deemed beneficially owned by the
holder's "affiliates" as defined in Rule 144 of the Act, would exceed 4.9%
of the total issued and outstanding shares of the Corporation's Common
Stock, provided that each holder shall have the right to waive this
restriction, in whole or in part, immediately in the case of a pending
Change in Control Transaction and in any other case upon 61 days prior
notice to the Corporation. The delivery of a Conversion Notice by any
holder shall be deemed a representation by such holder that it is in
compliance with this paragraph. A transferee of the Preferred Shares shall
not be bound by this provision unless it expressly agrees to be so bound.
The term "deemed beneficially owned" as used in this Certificate of
Designations shall exclude shares that might otherwise be deemed
beneficially owned by reason of the convertibility of the Preferred Shares.
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(l) CERTIFICATE FOR CONVERSION PRICE ADJUSTMENT. The Corporation
shall, upon the written request at any time of any holder of Preferred Shares,
furnish or cause to be furnished to such holder a certificate prepared by the
Corporation setting forth any adjustments or readjustments of the Conversion
Price pursuant to this Section 4.
(m) SPECIFIC ENFORCEMENT. The Corporation agrees that irreparable
damage would occur in the event that any of the provisions of this Certificate
of Designations were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the holders of Preferred
Shares shall be entitled to specific performance, injunctive relief or other
equitable remedies to prevent or cure breaches of the provisions of this
Certificate of Designations and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any of them may be
entitled under agreement, at law or in equity.
5. VOTING RIGHTS.
(a) In addition to the voting rights provided in Section 5(b) below,
the holders of Preferred Shares shall have the right, together with the holders
of Common Stock, to vote in the election of directors and upon each other matter
coming before any meeting of the holders of Common Stock on the basis of one
vote for each Preferred Share held, and the holders of Preferred Shares and the
holders of Common Stock shall vote together as if they were one class on such
matters.
(b) The affirmative vote of seventy-five percent (75%) of the
Corporation's outstanding Preferred Shares shall be necessary for (i) any
amendment of this Certificate of Designations, (ii) any amendment to the
Certificate of Incorporation or by-laws of the Corporation that may amend or
change any of the rights, preferences, or privileges of the Preferred Shares,
(iii) any waiver of a default in payment of dividends on the Preferred Shares,
and (iv) any reorganization or reclassification of the capital stock of the
Corporation, any consolidation or merger of the Corporation with or into any
other corporation or corporations, or any sale of all or substantially all of
the assets of the Corporation, that would have an adverse effect on any of the
rights, preferences, or privileges of the Preferred Shares, provided, however,
that holders of Preferred Shares who are affiliates of the Corporation (and the
Corporation itself) shall not participate in such vote and the Preferred Shares
of such holders shall be disregarded and deemed not to be outstanding for
purposes of such vote.
6. NOTICES. The Corporation shall distribute to the holders of
Preferred Shares copies of all notices, materials, annual and quarterly reports,
proxy statements, information statements and any other documents distributed
generally to the holders of shares of Common Stock of the Corporation, at such
times and by such method as such documents are distributed to such holders of
such Common Stock.
7. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Preferred Shares held by any holder of Preferred Shares may be exchanged by such
holder at any time and from time to time for certificates with different
denominations representing an equal aggregate number of Preferred Shares, as
reasonably requested by such holder, upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.
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8. ATTORNEYS' FEES. Any holder of Preferred Shares shall be
entitled to recover from the Corporation the reasonable attorneys' fees and
expenses incurred by such holder in connection with enforcement by such holder
of any obligation of the Corporation hereunder.
Signed on December 27, 1996
/s/James Dao
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James Dao, Chief Executive Officer
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EXHIBIT A
(To be Executed by Holder
in order to Convert Preferred Shares)
CONVERSION NOTICE
FOR
5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
The undersigned, as a holder ("Holder") of shares of 5% Cumulative Convertible
Preferred Stock ("Preferred Shares") of Communication Intelligence Corporation
(the "Corporation"), hereby irrevocably elects to convert _____________
Preferred Shares for shares ("Common Shares") of common stock, par value $0.01
per share (the "Common Stock"), of the Corporation according to the terms and
conditions of the Certificate of Designations for the Preferred Shares as of the
date written below. The undersigned hereby requests that share certificates for
the Common Stock to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. No fee will be charged to the holder of Preferred
Shares for any conversion. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Certificate of
Designations.
Conversion Date:
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Conversion Information: NAME OF HOLDER:
----------------------------------
By:
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Print Name:
Print Title:
Print Address of Holder:
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Issue Common Stock to:
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at:
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IF COMMON STOCK IS TO BE ISSUED TO A PERSON OTHER THAN HOLDER,
HOLDER'S SIGNATURE MUST BE GUARANTEED BELOW:
SIGNATURE GUARANTEED BY:
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THE COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED IS SET FORTH ON THE
ATTACHED PAGE.
PAGE 1 OF CONVERSION NOTICE
PAGE 2 TO CONVERSION NOTICE DATED FOR:
--------------- -----------------
(CONVERSION DATE) (NAME OF HOLDER)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
Number of Preferred Shares converted: shares
-----------------
A. Number of Preferred Shares
converted x $25 $
---------
B. Number of Preferred Shares
converted x accrued and unpaid
dividends up to the most recent
Dividend Payment Date $
---------
C. Default payments due Holder $
---------
TOTAL DOLLAR AMOUNT CONVERTED
(TOTAL OF A + B + C) $
---------
Amount of Commissions $
---------
CONVERSION PRICE (with the
Agreed Value determined pursuant
to clause ____ of Section 4(b)(i) or
clause ____ of Section 4(b)(iii)
of the Certificate of Designations) $
---------
Number of Common Shares = $
---------
Total dollar amount converted = $
---------
Conversion Price = $
---------
NUMBER OF COMMON SHARES = $
---------
If the conversion is not being settled by DTC, please issue and deliver
certificate(s) for Common Shares in the following amount(s):
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If the Holder is receiving certificate(s) for Preferred Shares upon the
conversion, please issue and deliver certificate(s) for Preferred Shares
in the following amounts: -----
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- -------------------------------------------------------
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