Exhibit 4
COMMUNICATION INTELLIGENCE CORPORATION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
December 31, 1996, is made by and between Communication Intelligence
Corporation, a Delaware corporation (the "Company") and Libra Investments, Inc.
(the "Advisor").
R E C I T A L S
WHEREAS, the Advisor is acting as placement agent for a private
placement of 450,000 shares (the "Shares") of 5% Cumulative Convertible
Preferred Stock of the Company (the "Preferred Shares") (the "Private
Placement"); and
WHEREAS, in partial consideration for the Advisor acting as
placement agent for the Preferred Shares, the Company is issuing Warrants to
purchase common stock, par value $0.01 per share (the "Common Stock") of the
Company to the Advisor (the "Designee"); and
WHEREAS, as further inducement for the Advisor to act as placement
agent for the Preferred Shares, the Company desires to undertake to register the
Warrant Shares (as hereinafter defined) under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), in
accordance with, and subject to, the terms hereof.
NOW, THEREFORE, the Advisor and the Company covenant and agree,
upon the terms and subject to the conditions set forth herein, as follows:
1. DEFINITIONS. For the purposes of this Agreement, the
following capitalized terms shall have the following meanings:
(a) "Holder" means, initially, the Designee, and
thereafter, any person or entity (a "person") who at a given time is the
holder of record of any Registrable Securities or Warrants, so long as such
transfers or assignments were made in compliance with Section 8 hereof or,
with respect to the Warrants, in compliance with the terms thereof.
(b) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act.
(c) "Registration Statement" means any registration
statement or comparable document of the Company under the Securities Act
through which a public sale or disposition of the Company's securities may be
registered (except a form used exclusively
for the sale or distribution of securities in connection with an employee stock
option plan or in connection with a business combination), the prospectus
contained therein and all amendments and supplements to such Registration
Statement, including post-effective amendments, and all material incorporated by
reference in such Registration Statement.
(d) "Registrable Securities" means (i) the Warrant Shares (as
defined below); and (ii) any other security of the Company issued as a dividend
or other distribution with respect to, or in exchange for or in replacement of
the Warrant Shares, excluding in all cases, however, any Registrable Securities
disposed of by a Holder in a transaction in which its registration rights under
this Agreement are not assigned pursuant to Section 8 of this Agreement.
(e) "SEC" means the United States Securities and Exchange
Commission or any similar agency then having the authority to enforce the
Securities Act.
(f) "Warrant Shares" means the shares of Common Stock
issuable upon exercise of the Warrants pursuant to the terms of the Warrants.
(g) "Warrants" means the 337,500 Warrants of the Company
being issued by the Company to the Designees on the date hereof.
2. ADVISOR'S REGISTRATION.
(a) PIGGYBACK REGISTRATION. If at any time during the
five year period from the date hereof the Company proposes to register any of
its securities under the Securities Act, either for its own account or for
the account of others, in connection with the public offering of such
securities solely for cash, pursuant to a Registration Statement that would
also permit the registration of the Registrable Securities, the Company
shall, in each such time, promptly give the Holder written notice of such
proposal and the Holder may, within fifteen days after the Company provides
such notice, request the inclusion of Registrable Securities in such
Registration Statement; provided, however, that it shall be a condition
precedent to the Company's obligations under this Section 2(a) that the
underwriter(s) of such offering, if any, consent to the inclusion of the
Holder's Registrable Securities in any such offering. In such event the
Company shall include the Registrable Securities in such registration;
provided that the Holder (i) agrees to sell the Registrable Securities on the
basis provided in any underwriting agreements relating to such offering, and
otherwise complies with the provisions of Section 4 hereof, (ii) completes
and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up agreements and other documents required
under the terms of such underwriting arrangements, and (iii) agrees to pay
the Holder's pro rata portion of all underwriting discounts and commissions.
(b) DEMAND REGISTRATION. Subject to Section 2(c) hereof,
at any one time during the period commencing ninety (90) days from the
closing date of the Private
-2-
Placement (the "Closing Date") and terminating five years from the Closing Date,
the Holder may deliver to the Company a written request that the Company
register the Registrable Securities (but no less than all of the Registrable
Securities) under the Securities Act and, upon receipt of such request, the
Company shall prepare and file a Registration Statement with the SEC covering
the Registrable Securities provided that if at the time of such written request,
(i) the Company has filed an application to list its Common Stock on the NASDAQ
SmallCap Market, (ii) the Company has met all of the NASDAQ SmallCap Market
listing requirements, and (iii) the Company has no reason to believe that the
Common Stock will not be so listed, the Company may extend the filing date of
the Registration Statement for not more than 90 days after the date of the
Holder's written request. The Company shall use its best efforts to keep such
Registration Statement continually effective for the earlier to occur of the
following: (i) all of the Registrable Securities covered by such Registration
Statement have been sold, and (ii) nine months from the effective date of any
such Registration Statement. The Holder shall notify the Company in writing
within five (5) days after the sale of all of the Registrable Securities to
enable the Company to determine when its obligation to continue effectiveness of
such Registration Statement terminates.
(c) Notwithstanding anything contained in Section 2(b) to the
contrary, the Holder shall have no rights under Section 2(b), and Section 2(b)
shall be deemed null and void, if the Holder elects to exercise the Warrants
pursuant to and in accordance with Section 2.6 of the Warrant Certificate
evidencing the Warrants.
(d) SUSPENSION OF SALES BY HOLDERS. If at any time when a
Registration Statement is effective with respect to Registrable Securities
pursuant to Section 2(b) hereof, the Company intends to file a registration
statement for an underwritten public offering of securities to be issued by the
Company (a "Company Registration Statement"), the Company shall promptly give
written notice thereof to the Holder, which notice shall include the anticipated
filing date of the Company Registration Statement, and the Holder shall suspend
offers and sales of its Registrable Securities covered by such Registration
Statement for a period commencing fourteen days prior to the anticipated filing
date of the Company Registration Statement and terminating not later than
150 days from the effective date of the Company Registration Statement (a
"Suspension Period"); provided, however, that the Holder shall only be required
to suspend such offers and sales of its Registrable Securities (i) if so
requested by the underwriter of any such offering, and (ii) if and to the extent
that any other securityholders of the Company whose securities have been
registered by the Company pursuant to registration rights also agree to
suspension of their sales. The Holder agrees that, during any such Suspension
Period, the Holder shall not sell, make any short sale of, pledge, grant any
option for the purchase of or otherwise dispose of any Registrable Securities
without the prior written consent of such underwriter(s), and shall enter into
such agreements with such underwriter(s) with respect to the foregoing as is
reasonably requested by such underwriter(s).
-3-
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities pursuant to Section 2 of this
Agreement, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Registration Statement
with respect to all Registrable Securities included therein, and use its best
efforts to cause the Registration Statement to become effective as soon as
reasonably possible after such filing, and to keep the Registration Statement
effective for the period specified in Section 2 hereof, which Registration
Statement shall not contain during such period any untrue statement of a
material fact or omit to state during such period a material fact required to
be stated therein or necessary to make the statements therein not misleading.
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective for the period specified
in Section 2 hereof and as may be required by the Securities Act, and during
such periods to comply with the provisions of the Securities Act with respect to
the Registration Statement.
(c) Furnish promptly to each Holder whose Registrable
Securities are included in the Registration Statement such number of copies
of a prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Holder may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by such Holder.
(d) Use its best efforts to register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders and prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements and to take
such other actions as may be necessary to maintain such registration and
qualification in effect at all times during which it has agreed to use its
best efforts to keep a Registration Statement effective under the Securities
Act pursuant to the terms of this Agreement, and to take all other actions
necessary or advisable to enable the disposition of such securities in such
jurisdictions, PROVIDED that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business, to file a
general consent to service of process, to subject itself to general taxation
in any such states or jurisdictions or to make any change in its charter or
bylaws which the Board of Directors determines to be contrary to the best
interest of the Company and its shareholders.
(e) Notify the Holders who hold Registrable Securities being
sold of the happening of any event as a result of which the prospectus included
in the Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
-4-
misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statement or omission.
(f) Notify the Holders who hold Registrable Securities being
sold of the issuance by the SEC or any state securities commission or agency of
any stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company will use its best
efforts to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible time.
(g) Permit a single firm of counsel to review the
Registration Statement and all amendments and supplements thereto within a
reasonable period of time prior to each filing, and shall not file any
document in a form to which such counsel reasonably objects.
(h) Furnish to the Holders on the effective date of the
Registration Statement, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given in such an offering, addressed to the Company;
and (ii) a "cold comfort" letter, dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to securityholders
in such an offering, so addressed.
(i) Make available for inspection by representatives of the
Holders and any counsel, accountants or other agents retained by any thereof,
all pertinent financial and other records, corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such party in connection with the
Registration Statement.
(j) Use its best efforts to cause the Registrable Securities
being sold to be listed on the NASDAQ SmallCap Market.
(k) Take all actions reasonably necessary to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be sold pursuant to the
Registration Statement and to enable such certificates to be in such
denominations and registered in such names as the Holders of the Registrable
Securities being sold.
(l) Take all other actions reasonably necessary to
expedite and facilitate disposition by the Holders of the Registrable
Securities being sold pursuant to the Registration Statement.
4. OBLIGATIONS OF THE HOLDERS. In connection with the
registration of the Registrable Securities, the Holders shall have the
following obligations:
-5-
(a) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Agreement with respect to
each Holder that such Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended
methods of disposition of such securities as shall be reasonably required to
effect the registration of the Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request. At least ten days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Holder of the
information the Company requires from each such Holder if it elects to have
any of his Registrable Securities included in the Registration Statement.
(b) Each Holder agrees to cooperate with the Company in
connection with the preparation and filing of any Registration Statement
hereunder.
(c) No Holder may participate in any underwritten
registration hereunder unless such Holder (i) agrees to enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations; (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements; (iii)
agrees to pay such Holder's pro rata portion of all underwriting discounts
and commissions; and (iv) agrees to take such other actions as are reasonably
required in order to expedite or facilitate the disposition of the
Registrable Securities being sold.
(d) Each Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 2(c) or Section 3(e), such Holder will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Holder's receipt of (i)
confirmation from the Company that such sales may resume under the terms of
Section 2(c) or (ii) the copies of the supplemented or amended prospectus
contemplated by Section 3(e) and, if so requested in writing by the Company,
such Holder shall deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of such destruction) all
copies, other than the permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities at the
time of receipt of such notice.
5. EXPENSES OF REGISTRATION. All expenses incurred in
connection with registration, filings or qualifications pursuant to Section
2, including, without limitation, all registration, listing, filing and
qualification fees, printers and accounting fees, the fees and disbursements
of counsel for the Company and the reasonable fees and disbursements of one
firm of counsel for the Holders, shall be borne by the Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
-6-
(a) To the fullest extent permitted by law, the Company will
indemnify and hold each Holder, it partners and their respective directors,
officers, employees and representatives, and each person who controls any such
Holder within the meaning of Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act of 1934 (the "1934 Act") (each such person being
referred to as an "Indemnified Person") harmless from and against any and all
losses, claims, damages, liabilities and expenses arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
a Registration Statement, or in any amendment or supplement thereto, or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or allegation thereof
based upon information furnished in writing to the Company by such Indemnified
Person expressly for use therein. Notwithstanding the foregoing, the Company
shall not be obligated to so indemnify any such Holder, officer, director or
controlling person with respect to any loss, claim, damage, liability or expense
arising out of the failure by such person to comply with the prospectus delivery
requirements under the Securities Act and the rules and regulations thereunder.
(b) If any action or proceeding (including any governmental
investigation) shall be brought, threatened or asserted against any Indemnified
Person in respect of which indemnity may be sought from the Company, such
Indemnified Person shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including employment of counsel and the
payment of all expenses related thereto. Any such Indemnified Person shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Company has agreed to pay
such fees and expenses; or (ii) the Company shall have failed to assume the
defense of such action or proceeding and employ counsel in such action or
proceeding; or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Person and the
Company, and such Indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to such Indemnified Person
which are different from or additional to those available to the Company (in
which case, if such Indemnified Person notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company, the Company
will not have the right to assume the defense of such action or proceeding on
behalf of such Indemnified Person); provided, however, that the Company will
not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys at any time for
all such Indemnified Persons, which firm shall be designated in writing by a
majority in interest of such Indemnified Persons. The Company shall not be
liable for any default judgment caused by any Indemnified Person or settlement
of any such action or proceeding or confession of judgment without its prior
written consent, but if settled with its written consent (which consent shall
not be unreasonably
-7-
withheld), or if there be a final judgment (other than such default judgment)
for the plaintiff in any such action or proceeding, the Company agrees to
indemnify and hold harmless such Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Subject to the following
sentence, if the Company agrees to a settlement of an action or proceeding
against an Indemnified Person which does not involve any finding or admission of
liability or wrongdoing on the part of the Indemnified Person and stands ready,
willing and able to pay such settlement and the Indemnified Person refuses to
settle, then the Indemnified Person shall continue the defense at its own
expense and the Company shall be responsible to indemnify only the lesser of the
amount of the settlement accepted by the Company or the cost of the final
disposition of the claim. The Company will not, without the prior written
consent of any Indemnified Person, settle or compromise or consent to the entry
of any judgment in or otherwise seek to terminate any pending or threatened
action, claim, suit or proceeding in respect to which indemnification or
contribution may be sought hereunder unless such settlement, compromise, consent
or termination includes an express unconditional release of all Indemnified
Persons from all liability arising out of such action, claim, suit or
proceeding.
(c) Each Holder, severally and not jointly, agrees to
indemnify and hold harmless the Company, its directors and officers, and each
person, if any, who controls the Company within the meaning of either Section
15 of the Securities Act or Section 20 of the 1934 Act, to the same extent as
the indemnity from the Company to each Indemnified Person set forth in
Section 6(a), but only (i) with respect to untrue statements, alleged untrue
statements, omissions or alleged omissions relating to such Holder or an
Indemnified Person who is such by reason of such person's relationship to
such Holder, furnished in writing by such Holder or such person to the
Company expressly for use in the Registration Statement or the Prospectus, or
any amendment or supplement thereto; and (ii) with respect to any failure by
such Holder to comply with the prospectus delivery requirements under the
Securities Act and the rules and regulations thereunder. In case any action
or proceeding shall be brought against the Company or its officers or
directors or any such controlling person in respect of which indemnity may be
sought against a Holder under the provisions of this Section 6(c), such
Holder shall have the rights and duties given to the Company and each of the
Company or its directors or its officers or its controlling persons shall
have the rights and duties given to each Holder and other Indemnified
Persons, under the terms of Section 6(b) above. Notwithstanding anything
contained herein, no Holder shall be liable for an amount which is greater
than the proceeds received by such Holder from the sale of Registrable
Securities.
(d) If the indemnification provided for under Section 6(a) or
Section 6(c) hereof is unavailable to an indemnified party thereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and of the applicable Holders on the other in
connection with the statements or
-8-
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the applicable Holders on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the Company or information supplied by
the applicable Holder in writing for use in the Registration Statement and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Subsection 11(f) of the Securities Act)
or of gross negligence, willful misconduct or bad faith shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation, gross negligence, willful, misconduct or bad faith.
Notwithstanding anything contained herein, no Holder shall be liable for an
amount which is greater than the proceeds received by such Holder from the sale
of Registrable Securities.
7. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Holders the benefits of SEC Rule 144
promulgated under the Securities Act and any other rule or regulation of the
SEC that may at any time permit the Holders to sell securities of the Company
to the public without registration, the Company agrees to file with the SEC
all reports and documents required to be filed by it under the Securities Act
and the 1934 Act and the rules and regulations promulgated thereunder, and to
furnish to each Holder, so long as such Holder owns any Registrable
Securities, a copy of the most recent annual or quarterly report of the
Company, such other reports and documents filed by the Company with the SEC,
and such other information as may be reasonably requested in availing the
Holders of any rule or regulation of the SEC which permits the selling of any
such securities without registration.
8. ASSIGNMENTS OF REGISTRATION RIGHTS. The rights of a
Holder under this Agreement may be assigned by a Holder to permitted
transferees or assignees of Registrable Securities or Warrants provided that
(i) the Company is furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (ii) the transfer or assignment of
such Registrable Securities or Warrants has been made in compliance with the
Securities Act and applicable state securities law and, immediately following
such transfer or assignment the further disposition of such Registrable
Securities or Warrants is restricted under the Securities Act; and (iii) the
notice provided in this Section 8 contains a written agreement by the
transferee or assignee to be bound by the terms and provisions of this
Agreement.
9. MISCELLANEOUS.
(a) Notices required or permitted to be given hereunder
shall be in writing and shall be deemed to be sufficiently given when
personally delivered or sent by registered mail, return receipt requested,
addressed (i) if to the Company, at 275 Shoreline Drive, Redwood Shores,
California 94065, with a copy to Donald J. Bezahler, Esq., Baer Marks & Upham
LLP, 805 Third Avenue, New York, New York 10022; (ii) if to the
-9-
Advisor, at 11766 Wilshire Boulevard, Suite 870, Los Angeles, CA 90025; or at
such other address as any such party furnishes by notice given in accordance
with this Section 9.
(b) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, will not operate as a waiver thereof.
(c) This Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New
York, without giving effect to principles of conflicts of law applied in such
State. In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule
of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other
provision hereof.
(d) This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. Any
provision of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively
or prospectively), only by a writing executed by the Company and each of the
Holders. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon the Holders and the Company.
(e) Any person or entity is deemed to be a Holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall be entitled to act upon the
basis of instructions, notice or election received from the registered owner
of such Registrable Securities.
(f) This Agreement may be executed in counterparts, each of
which shall be an original, but all of which shall constitute one instrument.
[Remainder of page intentionally left blank]
-10-
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed on its behalf as of the date first set forth above.
COMMUNICATION INTELLIGENCE
CORPORATION
By: /s/James Dao
--------------------------------
Name: James Dao
Title: Chief Executive Officer
LIBRA INVESTMENTS, INC.
By:
--------------------------------
Name:
Title:
-11-