EXHIBIT 2
SUBSCRIPTION AGREEMENT
OF
COMMUNICATION INTELLIGENCE CORPORATION
Communication Intelligence Corporation
275 Shoreline Drive
Redwood Shores, CA 94065
Gentlemen:
1. Subscription. (a) The undersigned ("Subscriber") hereby agrees to
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purchase from Communication Intelligence Corporation, a Delaware Corporation
(the "Company"), the number of shares of common stock, par value $0.01 per
share, of the Company (the "Common Stock") set forth opposite the Subscriber's
name on the signature page hereto (the "Shares"), for a purchase price of $4.50
per Share, the aggregate purchase price for the Shares being purchased by
Subscriber being the "Purchase Price."
(b) Subscriber hereby acknowledges (i) that this subscription shall
not be deemed to have been accepted by the Company until the Company indicates
its acceptance by returning to Subscriber an executed copy of this subscription,
and (ii) that acceptance by the Company of this subscription is conditioned upon
the information and representations of Subscriber hereunder being complete, true
and correct as of the date of this subscription and as of the date of the
Closing (as hereinafter defined).
2. Extra Shares. (a) The Company agrees that, if the Average Sales
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Price (as hereinafter defined) is less than $4.50 per Share, the Company will
issue that number of additional shares of Common Stock to the Subscriber (the
"Extra Shares") equal to: the Purchase Price divided by the Average Sales Price,
less the number of Shares purchased by the Subscriber pursuant to Section 1
hereof. For purposes hereof, the Average Sales Price shall mean the average of
the daily closing prices of the Common Stock for the twenty business days prior
to two business days before the effective date of the Registration Statement
filed by the Company pursuant to its obligations under Section 2 of that certain
Registration Rights Agreement dated as of June 13, 1996 by and among the Company
and, among others, the Subscriber (the "Registration Rights Agreement") (such
period being referred to as the "Pricing Period"). For purposes of this Section
2, the daily closing price shall mean (i) if the Common Stock is listed or
admitted to trading on a national securities exchange, the NASDAQ National
Market System or the NASDAQ SmallCap Market System, the average of the highest
and lowest reported sales price of the Common Stock or, (ii) if the sales price
of the Common Stock as provided in clause (i) is not available, the average of
the reported closing bid and asked price of the Common Stock.
(b) In case the Company shall at any time after the date hereof and
prior to the date on which it issues Extra Shares hereunder (i) declare a
dividend on the outstanding Common Stock payable in shares of its capital stock,
(ii) subdivide the outstanding Common Stock, (iii) combine the outstanding
Common Stock into a smaller number of shares, or (iv) issue any shares of its
capital stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then, in each case, proportionate
adjustments shall be made in the calculation of the number of Extra Shares
issuable to the Subscriber pursuant to Section 2(a) so that the Subscriber shall
receive the aggregate number and kind of Extra Shares which the Subscriber would
be entitled to receive had the Extra Shares issuable to the Subscriber pursuant
to the formula set forth in Section 2(a) been held by the Subscriber prior to
any such dividend, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur during such period.
(c) (i) The Company shall give written notice to the Subscriber of
the filing date of the Registration Statement referred to in Section 2(a)
hereof. Subscriber covenants and agrees that commencing fourteen (14) days
prior to such filing date until the last day of the Pricing Period (the "Covered
Period"), Subscriber will not engage in any short sales, loan any Shares or
other shares of Common Stock to another person, acquire a put option or grant a
call option with respect to the Shares or any other shares of Common Stock owned
by such Subscriber or its affiliates, or engage in any other sales activity that
could have any impact on the market price of the Common Stock of the Company (a
"Prohibited Transaction"); provided that any sale of Shares by the Subscriber in
a privately negotiated transaction made in accordance with the terms of this
Subscription Agreement shall not be deemed to be a Prohibited Transaction, so
long as the acquirer of the Shares in any such transaction agrees in writing
with the Company to be bound by the provisions of this Subscription Agreement.
In addition, Subscriber will not encourage or assist any other person to enter
into a Prohibited Transaction with respect to the Common Stock during the
Covered Period. To the extent applicable, all Extra Shares, if any, issued by
the Company pursuant to this Section shall be subject to the same terms and
conditions as the Shares, and all provisions or representations and agreements
contained in this Subscription Agreement or the Registration Rights Agreement
shall be deemed to apply equally to all Extra Shares, if any, received by the
Subscriber. The Company agrees that, during the Covered Period, neither it nor
its officers, directors, or persons or entities which it or they control within
the meaning of Section 15 of the Securities Act of 1933, as amended (the "Act")
or Section 20 of the Securities Exchange Act of 1934, as amended, shall
repurchase, redeem or otherwise acquire, any securities of the Company or agree
to do any of the foregoing.
(ii) Notwithstanding anything contained in Section 2(c)(i), the
Covered Period shall terminate 270 days after the filing date of any
Registration Statement filed pursuant to Section 2(a) hereof if such
Registration Statement has not been declared effective prior thereto.
(d) The Company shall at all times reserve shares of Common Stock out
of its authorized but unissued shares of Common Stock to the extent of the Board
of Directors'
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good faith estimate of the Company's obligation to issue Extra Shares, up to the
aggregate amount of such shares. The Company will take all such further actions
as may be necessary to perform its obligations pursuant to this Section 2,
including, without limitation, using its best efforts to obtain the consent of
stockholders to an increase in the number of authorized shares of Common Stock.
(e) Subscriber may assign its rights to receive Extra Shares under
this Agreement to any transferee or assignee of Shares (to the extent the Extra
Shares relate to the transferred or assigned Shares), provided that the transfer
or assignment of such Shares has been made in compliance with the Act and
applicable state securities laws.
(f) On the effective date of the Registration Statement filed by the
Company pursuant to Section 2 of the Registration Rights Agreement, the Company
shall deliver to the Subscriber (i) a certificate registered in Subscriber's
name and representing the Extra Shares, which certificate shall bear the legend
set forth in Section 5(f)(iv) hereof; (ii) an opinion of Baer Marks & Upham LLP,
substantially in the form of Exhibit B hereto, as to the Extra Shares; and (iii)
a certificate of the Company substantially in the Form of Exhibit C hereto.
Subscriber's right to receive Extra Shares shall be conditioned upon
Subscriber's delivery to the Company of a certificate, substantially in the form
of Exhibit D hereto, which shall be true, correct and complete as of the date on
which any Extra Shares are issued to Subscriber by the Company. The Company
shall pay any documentary, stamp or similar issue or transfer taxes due on the
issue of the Extra Shares.
3. Closing. (a) The closing of the transactions contemplated by this
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Agreement (the "Closing") shall be held at the offices of Baer Marks & Upham
LLP, 805 Third Avenue, New York, New York 10022, at 10:00 A.M. New York time on
a date agreed upon by the Company and Libra Investments, Inc., placement agent
for the Shares, which date shall be no later than the earlier of (i) the date
five (5) business days after the Common Stock is approved for listing on the
NASDAQ SmallCap Market, subject to notification of the consummation of the sale
of the Shares, and (ii) July 31, 1996 (the "Closing Date"). Notwithstanding any
provision of this Agreement, the obligation of the Subscriber to purchase the
Shares on the Closing Date shall be conditioned upon the Subscriber's receipt of
evidence, reasonably acceptable to it, of such approval for such listing.
(b) At the Closing, against receipt of the Purchase Price from
Subscriber, (i) the Company shall deliver to the Subscriber, a share certificate
registered in the Subscriber's name and representing the Shares, which
certificate shall bear the legend set forth in Section 5(f)(iv) hereof, together
with any legends required under applicable state securities laws, and
(ii) counsel to the Company shall deliver to the Company an opinion,
substantially in the Form of Exhibit B hereto, on which the Subscriber shall be
permitted to rely.
(c) At the Closing, the Subscriber shall pay the Purchase Price by
means of a bank wire transfer of immediately available Federal Funds to the
account of Baer Marks &
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Upham LLP, Chemical Bank, Account Number 967-111188-Primary Account, ABA
Routing #021000128.
4. Acceptance of Subscription. The Subscriber understands and agrees
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that the Company in its sole discretion reserves the right to accept or reject
this subscription in whole or in part at any time prior to the Closing Date,
notwithstanding prior receipt by the Subscriber of oral or written notice of
acceptance, if the Subscriber has not confirmed to the Company that the
representations, warranties and agreements contained in Section 5 hereof remain
true and correct as of the Closing Date. If the subscription is rejected, this
Subscription Agreement shall thereafter be of no further force or effect.
5. Representations, Warranties and Agreements of Subscriber. The
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Subscriber hereby acknowledges, represents and warrants to, and agrees with, the
Company, on the date hereof and on the Closing Date, as follows:
(a) The Subscriber understands that the offering and sale of the
Shares is intended to be exempt from registration under the Act by virtue of
Section 4(2) of the Act and the provisions of Regulation D promulgated
thereunder, and in accordance therewith and in furtherance thereof, the
Subscriber represents and warrants and agrees as follows:
(i) The Subscriber and/or the Subscriber's adviser(s)
has/have received and carefully reviewed the Company's (A) Annual Report on Form
10-K for the year ended December 31, 1995 and; (B) Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1996, (collectively, the "Company
Reports"), and understands the information contained therein. Subscriber
acknowledges that the Company Reports show substantial operating losses since
the Company's inception.
(ii) The Subscriber acknowledges that the Subscriber, the
Subscriber's attorney, accountant, or adviser(s) has/have had a reasonable
opportunity to inspect all documents, records and books pertaining to this
investment (including, without limitation, the Company Reports).
(iii) The Subscriber and/or the Subscriber's adviser(s)
has/have had a reasonable opportunity to ask questions and receive answers from
a person or persons acting on behalf of the Company concerning the offering of
the Shares and all such questions have been answered to the full satisfaction of
the Subscriber.
(iv) In making a decision to invest in the Shares, the
Subscriber has not relied on any information other than information contained in
the Company Reports and in this Agreement.
(v) The Subscriber is not subscribing for the Shares as a
result of or subsequent to any advertisement, article, notice or other
communication published in any
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newspaper, magazine, or similar media or broadcast over television or radio, or
presented at any seminar or meeting, or any solicitation of a subscription by a
person other than a representative of the Company.
(vi) If the Subscriber is a natural person, the Subscriber
has reached the age of majority in the jurisdiction in which the Subscriber
resides; the Subscriber has adequate means of providing for the Subscriber's
current financial needs and contingencies, is able to bear the substantial
economic risks of an investment in the Shares for an indefinite period of time,
has no need for liquidity in such investment, and, at the present time, could
afford a complete loss of such investment.
(vii) The Subscriber has such knowledge and experience in
financial, tax and business matters so as to enable the Subscriber to utilize
the information made available to the Subscriber in connection with the offering
of the Shares to evaluate the merits and risks of an investment in the Shares,
and to make an informed investment decision with respect thereto.
(viii) The Subscriber is not relying on the Company or any
agent of the Company with respect to the tax and other economic considerations
of an investment in the Shares.
(ix) The Subscriber will not sell or otherwise transfer the
Shares without registration under the Act and applicable state securities laws,
or pursuant to an exemption therefrom. The Shares have not been registered
under the Act or under the securities laws of any state and, other than as
provided in the Registration Rights Agreement, the Company will be under no
obligation to so register the Shares. The Subscriber represents that the
Subscriber is purchasing the Shares for the Subscriber's own account, for
investment and not with a view to resale or distribution except in compliance
with the Act and applicable state securities laws.
(x) The Subscriber recognizes that investment in the Shares
involves substantial risks, including the risk of loss of the entire amount of
such investment, and has taken full cognizance of and understands all of the
risks related to the purchase of the Shares.
(xi) The Subscriber's overall commitment to investments
which are not readily marketable is reasonable in relation to the Subscriber's
net worth.
(b) The Subscriber is an "accredited investor" as that term is
defined in Regulation D under the Act inasmuch as the Subscriber meets the
requirements of one or more of the subparagraphs listed in Exhibit A hereto as
of the date of this Subscription Agreement, and if there is any material change
in such status prior to the sale of the Shares, the Subscriber will immediately
notify the Company in writing.
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(c) The Subscriber hereby agrees to provide such information and to
execute and deliver such documents as the Company may deem reasonably
appropriate with regard to the Subscriber's suitability.
(d) The execution, delivery and performance of this Agreement by the
Subscriber (i) will not constitute a default under or conflict with any
agreement or instrument to which the Subscriber is a party or by which it or its
assets are bound, (ii) will not conflict with or violate any order, judgment,
decree, statute, ordinance or regulation applicable to the Subscriber
(including, without limitation, any applicable laws relating to permissible
legal investments) and (iii) do not require the consent of any person or entity,
other than those that will have been obtained prior to the Closing Date. This
Agreement has been duly authorized, executed and delivered by the Subscriber and
constitutes the valid and binding agreement of the Subscriber enforceable
against it in accordance with its terms.
(e) The Subscriber has not retained, or otherwise entered into any
agreement or understanding with, any broker or finder in connection with the
purchase of Shares by the Subscriber, and the Company will not incur any
liability for any fee, commission or other compensation on account of any such
retention, agreement or understanding by the Subscriber. The Subscriber
acknowledges that the Company has retained Libra Investments, Inc. ("Libra") as
placement agent in connection with the transactions contemplated hereby and by
each other Subscription Agreement of the Company dated the date hereof (the
"Private Placement"), and has agreed to pay Libra a placement fee equal to 5% of
the gross proceeds received by the Company in the Private Placement from the
Shares placed by Libra, and will issue Libra 5-year warrants to purchase a
number of shares of Common Stock of the Company equal to 5% of the number of
shares of Common Stock placed by Libra and issued and sold by the Company in the
Private Placement at an initial exercise price of $4.50 per share.
(f) The Subscriber acknowledges that:
(i) In making an investment decision, the Subscriber has
relied on the Subscriber's own examination of the Company and the disclosure in
the Company Reports, including the merits and risks involved. The Shares have
not been recommended by any federal or state securities commission or regulatory
authority. Furthermore, the foregoing authorities have not confirmed the
accuracy or determined the adequacy of the Company Reports or this Agreement.
(ii) The Subscriber, if executing this Agreement in a
representative or fiduciary capacity, has all requisite power and authority to
execute and deliver this Agreement in such capacity and on behalf of the
subscribing individual, ward, partnership, trust, estate, corporation, or other
entity for whom the Subscriber is executing this Agreement, and such individual,
ward, partnership, trust, estate, corporation, or other entity has all requisite
right and power to enter into this Agreement and make an investment in the
Shares.
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(iii) The representations, warranties, and agreements of the
Subscriber contained herein shall be true and correct in all material respects
on and as of the Closing Date of the sale of the Shares as if made on and as of
such date and shall survive the execution and delivery of this Agreement and the
purchase of the Shares.
(iv) For as long as is required by applicable laws, the
certificate representing the Shares shall bear a legend in substantially the
following form, together with any legend required by applicable state securities
law, and the Subscriber shall not transfer any or all of the Shares or any
interest therein, except in accordance with the terms of such legends:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended
(the "Act") or applicable state securities laws, and may be
offered, sold or otherwise transferred only if so registered
under the Act and applicable state securities laws or if the
holder has delivered to the Company an opinion of counsel,
which counsel and opinion shall be reasonably satisfactory
to the Company, that an exemption from such registration is
available."
6. Representations and Warranties of the Company. The Company represents
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and warrants to the Subscriber as follows:
(a) The Company has been duly organized, is validly existing as a
corporation and is in good standing under the laws of its jurisdiction of
organization. The Company is duly qualified and in good standing in each
jurisdiction in which the character or location of its properties or the nature
or conduct of its business makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, in the aggregate, have
a material adverse effect on the financial condition of the Company. The
Company has all requisite power and authority, and all material consents,
approvals, authorizations, orders, registrations, qualifications, licenses and
permits of and from all public, regulatory or governmental agencies and bodies,
to own, lease and operate its properties and conduct its business as now being
conducted.
(b) All of the outstanding shares of Common Stock have been duly
authorized, are validly issued and outstanding and are fully paid and non-
assessable, free of preemptive rights. At May 31, 1996, the capital stock of
the Company was as follows: (i) 80,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock authorized, (ii) 41,314,417 shares of
Common Stock issued and outstanding and no shares of Preferred Stock issued and
outstanding and (iii) 9,496,796 shares of Common Stock reserved for issuance
upon exercise of outstanding options and warrants. Except as set forth above,
there are no outstanding (i) shares of capital stock of the Company, securities
of the Company convertible into or exchangeable for shares of capital stock or
voting or other securities of the Company, or (ii) except for rights to acquire
Extra Shares (as such term is defined in the subscription agreements executed in
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connection with the Company's November 28, 1995 private placement of 5,500,000
shares of Common Stock), options, warrants or other rights to acquire from the
Company, and no obligation of the Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company. There are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any securities of the
Company. The Shares, when issued, delivered and paid for in accordance with the
terms hereof, will be duly and validly issued, fully paid and non-assessable and
shall be free and clear of all liens, claims and encumbrances.
(c) There is no action, suit or proceeding before or by any court or
governmental agency now pending, or to the knowledge of the Company threatened,
against the Company that would result in a material adverse change in the
condition (financial or otherwise), results of operations or business prospects
of the Company or that would adversely affect the consummation of the
transactions contemplated by this Agreement.
(d) The Company has full corporate power and authority to enter into
this Agreement and the Registration Rights Agreement and to issue and sell the
Shares on the terms and conditions set forth herein. The execution and delivery
of this Agreement and the Registration Rights Agreement and the consummation of
the transactions contemplated hereby (i) have been duly and validly authorized
and approved by all necessary corporate action on the part of the Company;
(ii) will not constitute a default under or conflict with the Company's charter
or bylaws or any agreement or other instrument to which the Company is a party
or by which the Company is bound; (iii) will not conflict with or violate any
order, judgment, decree, statute, ordinance or regulation applicable to the
Company; and (iv) do not require the consent of any person or entity, other than
those that will have been obtained prior to the Closing Date.
(e) The Company has previously furnished the Subscriber with true and
complete copies of the Company Reports. As of their respective dates, the
Company Reports did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading. Subsequent to March 31, 1996, and except
as disclosed in the Company Reports, there has not occurred any material adverse
change in the condition (financial or otherwise), results of operations or busi-
ness prospects of the Company, other than a continuation of the previously
reported losses, which losses have been at substantially the same rate as those
reported for the three month period ended March 31, 1996 in the financial
statements of the Company included in the Company's Quarterly Report on Form 10-
Q for the fiscal quarter ended March 31, 1996. The financial statements of the
Company included in the Company Reports have been prepared in accordance with
generally accepted accounting principles (except that such financial statements
included in the Quarterly Report on Form 10-Q does not contain footnotes).
(f) This Agreement and the Registration Rights Agreement have been
duly authorized, executed and delivered by the Company and constitutes the valid
and binding obligation of the Company enforceable against it in accordance with
its terms.
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(g) The Company has retained Libra as placement agent in the Private
Placement upon the terms described in Section 5(e) hereof. Except for the
foregoing, the Company has not retained, or otherwise entered into any agreement
or understanding with, any broker or finder in connection with the purchase of
Shares by the Subscriber, and the Subscriber will not incur any liability for
any fee, commission or other compensation on account of any such retention,
agreement or understanding by the Company.
The representations, warranties and agreements of the Company
contained herein shall be true and correct in all material respects on and as of
the Closing Date of the sale of the Shares as if made on and as of such date and
shall survive the execution and delivery of this Agreement and the sale of the
Shares.
7. Specific Performance. The parties hereto agree that irreparable harm
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would occur to the Subscriber in the event that the provisions of Section 2 of
this Agreement were not performed by the Company, and that money damages are an
inadequate remedy for breach of such Section 2 of this Agreement because of the
difficulty of ascertaining the amount of damage that would be suffered by the
Subscriber in the event that such Section 2 is not performed in accordance with
its terms or conditions or is otherwise breached. It is accordingly agreed that
the Subscriber shall be entitled to an injunction or injunctions to prevent
breaches of Section 2 of this Agreement by the Company and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which the Subscriber is entitled at law or in equity or otherwise; provided,
however, that the Subscriber shall have complied with the provisions of
Section 2 hereof.
8. Miscellaneous
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(a) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law applied in such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof. This Agreement may be
executed in counterparts, each of which shall be an original, but all of which
shall constitute one instrument.
(b) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing executed by the Company and the Subscriber.
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(c) Subscriber recognizes it is important under the Securities Act
and state securities law that the Company determine if potential investors are
"accredited investors," as defined in Exhibit A attached hereto. Please
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indicate below the category from Exhibit A by reason of which Subscriber is an
"accredited investor":
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Subscriber further represents that he/she is a citizen of ______________(State)
or is organized under the laws of the State of_____. Subscriber is not a
resident of any other jurisdiction.
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IN WITNESS WHEREOF, Subscriber has executed this Subscription Agreement as
of the 13th day of June, 1996.
SUBSCRIPTION FOR INDIVIDUAL
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Number of Shares
Aggregate Purchase Price
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(Address)
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Social Security Number Signature of Joint Owner (if any)
IRS Identification Number
Form of Ownership:
___ Joint Tenants
___ Tenants in Common
The foregoing Subscription Agreement is accepted as of the 13th day of
June, 1996.
COMMUNICATION INTELLIGENCE CORPORATION
By:
----------------------------------------------------
Philip S. Sassower
Chairman of the Finance Committee
IN WITNESS WHEREOF, Subscriber has executed this Subscription Agreement as
of the 13th day of June, 1996.
SUBSCRIPTION FOR CORPORATION PARTNERSHIP OR OTHER ENTITY
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Number of Shares
Aggregate Purchase Price
By:
----------------------------------------------------
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(Address)
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Social Security Number
IRS Identification Number
ACCEPTANCE
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The foregoing Subscription Agreement is accepted as of the 13th day of
June, 1996.
COMMUNICATION INTELLIGENCE CORPORATION
By:
----------------------------------------------------
Philip S. Sassower
Chairman of the Finance Committee
EXHIBIT A
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Under Regulation D promulgated under the Securities Act of .1933, as
amended, an "accredited investor" is:
(a) A natural person who had individual income of more than
$200,000 in each of the most recent two years, or joint
income with that person's spouse in excess of $300,000 in
each of the most recent two years and who reasonably expects
to reach that same income level for the current year. For
this purpose, "individual income" means adjusted gross
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income, as reported for federal income tax purposes, less
any income attributable to a spouse or to property owned by
a spouse, (A) increased by the individuals share (and not a
spouse's share) of: (i) the amount of any tax exempt
interest income received, (ii) amounts contributed to an IRA
or Keogh retirement plan, (iii) alimony paid, and (iv) the
excluded portion of any long-term capital gains, and (B)
adjusted, plus or minus, for any non-cash loss or gain,
respectively, reported for federal income;
(b) A natural person whose individual net worth is in excess of
$1,000,000. For this purpose, "net worth" means the excess
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of total assets at fair market value, including home and
personal property, over total liabilities, provided,
however, for the purpose of determining a person's net
worth, the principal residence owned by an individual shall
be valued at cost, including the cost of improvements, net
of current encumbrances upon the property or valued on the
basis of a written appraisal used by an institutional lender
making a loan secured by the property. For the purposes of
this provision, "institutional lender" means a bank, savings
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and loan association, industrial loan company, credit union,
personal property broker or a company whose principal
business is as a lender upon loans secured by real property
and which has such loans receivable in the amount of
$2,000,000 or more. Any person relying on the appraisal
value of a principal residence must deliver to the Company,
at or prior to the date of execution hereof, a copy of such
appraisal;
(c) A trust, with total assets in excess of $5,000,000, which is
not formed for the purpose of acquiring the Shares and whose
purchase is directed by a person who has such knowledge and
experience in financial business matters that such person is
capable of evaluating the risks and merits of an investment in the
Shares;
(d) A corporation, a partnership, an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended, or a Massachusetts or similar business trust, not
formed for the specific purpose of acquiring the Shares,
with total assets in excess of $5,000,000;
(e) A bank as defined in Section 3(a)(2) of the Act or a savings
and loan association or other institution as defined in Sec-
tion 3(a)(5)(A) of the Act, whether acting in its individual
or fiduciary capacity; a broker or dealer registered
pursuant to Section 15 of the Securities Exchange Act of
1934; an insurance company as defined in Section 2(13) of
the Act; an investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of the Investment
Company Act of 1940; a small business investment company
licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act
of 1958; a plan established and maintained by a state, its
political subdivisions, or an agency or instrumentality of a
state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000; or an employee benefit plan within the meaning
of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of the Employee
Retirement Income Security Act of 1974, which is either a
bank, savings and loan association, insurance company, or
registered adviser, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if the employee
benefit plan is a self-directed plan, the invested decision
is made solely by persons who are accredited investors;
(f) A private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940; or
(g) An entity in which all of the equity owners meet the
requirements of at least one of the above subparagraphs for
accredited investors.
EXHIBIT B
June 27, 1996
Communication Intelligence Corporation
275 Shoreline Drive
Redwood Shores, CA 94065
Ladies and Gentlemen:
We have acted as special counsel to Communication Intelligence
Corporation, a Delaware corporation (the "Company"), in connection with its
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private placement (the "Private Placement") of 600,000 shares of common stock,
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par value $.01 per share, of the Company (the "Shares"). As special counsel, we
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are not generally familiar with the business or affairs of the Company and no
inference to the contrary should be drawn hereby. This opinion is being
rendered pursuant to Section 3(b) of the Subscription Agreements dated June ,
1996 (the "Subscription Agreements") between the Company and each of the
-----------------------
subscribers in the Private Placement (the "Subscribers"). The terms used herein
-----------
without definition shall have the meanings set forth in the Subscription
Agreements.
In order to render this opinion, we have examined originals or copies
identified to our satisfaction of the following:
1. The Subscription Agreements;
2. The Registration Rights Agreement dated as of June , 1996 by
and among the Company and the Subscribers (the "Registration Rights Agreement");
-----------------------------
and
3. The certificates representing the Shares.
For purposes of rendering this opinion:
(a) We have assumed the authenticity of all documents and instruments
submitted to us as originals, the genuineness of all signatures and the
Communication Intelligence Corporation
June 27, 1996
Page 2
conformity to original documents and instruments of all documents and
instruments submitted to us as certified or photostatic copies;
(b) We have assumed the power and authority of each signatory of a
document or instrument to execute said document or instrument and that the
Subscription Agreements and the Registration Rights Agreement (collectively, the
"Transaction Documents"), have been duly authorized and executed by the parties
---------------------
thereto; and
(c) Except as otherwise expressly indicated herein, we have relied,
as to matters of fact, solely upon written statements from or representations or
warranties of the Company contained in the Subscription Agreements or in
certificates delivered pursuant thereto or in connection therewith, as well as
upon certificates and other written statements from public authorities. The
phrase "to our knowledge," "known to us" or similar expressions, when used
herein, mean that with respect to the factual matters covered thereby we have
relied, without independent investigation, upon the foregoing statements,
representations, warranties and certificates; provided, however, that nothing
has come to the attention of those attorneys in our office who directly
participated in this engagement which would lead us to believe that such
statements, representations, warranties or certificates are incorrect in any
material respect.
Based upon the foregoing, and subject to the limitations,
qualifications and exceptions contained herein, we are of the opinion that:
(a) Based solely upon a good standing certificate issued by the
Delaware Secretary of State and the Company's corporate minute book as presented
to us, the Company has been duly organized, is validly existing as a corporation
and is in good standing under the laws of its jurisdiction of organization. To
our knowledge, the Company is duly qualified and in good standing in each
jurisdiction in which the character or location of its properties or the nature
or conduct of its business makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, in the aggregate, have
a material adverse effect on the financial condition of the Company, taken as a
whole.
(b) To our knowledge, all of the outstanding shares of Common Stock
have been duly authorized, are validly issued and outstanding and are fully paid
and non-assessable, free of preemptive rights. The Shares, when issued,
delivered and paid for in accordance with the terms of the Subscription
Agreements, will be
Communication Intelligence Corporation
June 27, 1996
Page 3
duly and validly issued, fully paid and non-assessable and shall be free and
clear of all liens, claims and encumbrances.
(c) To our knowledge, there is no action, suit or proceeding before
or by any court or governmental agency now pending or threatened against the
Company that would materially and adversely affect the consummation of the
transactions contemplated by the Transaction Documents.
(d) The Company has full corporate power and authority to enter into
the Transaction Documents and to issue and sell the Shares on the terms and
conditions set forth in the Subscription Agreements. The execution and delivery
of the Transaction Documents and the consummation of the transactions
contemplated thereby (i) have been duly and validly authorized and approved by
all necessary corporate action on the part of the Company; (ii) will not, to our
knowledge, constitute a default under or conflict with the Company's charter or
bylaws and (iii) will not conflict with or violate any order, judgment, decree,
statute, ordinance or regulation applicable to the Company of which we have
knowledge, relating to transactions of this kind.
(e) Assuming the due authorization, execution and delivery of the
Transaction Documents by each of the parties thereto, the Transaction Documents
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as (i)
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles relating to the availability of remedies (regardless of whether such
enforceability is considered in a proceeding in equity or at law), including but
not limited to the remedy of specific performance, and (ii) rights to indemnity
and contribution may be limited by United States federal or state securities
laws and the public policy underlying such laws.
We are members of the bar of the State of New York and do not purport
to be experts in, or to express any opinion concerning, any law other than the
laws of the State of New York and the United States. No opinion is expressed as
to the laws of any other jurisdiction or the effect which the laws of any other
jurisdiction might have on the subject matter of the opinions expressed herein
under conflict of laws, principles or otherwise.
This opinion is being furnished by us for your benefit in connection
with the Transaction Documents. In addition, this opinion may be relied upon by
the
Communication Intelligence Corporation
June 27, 1996
Page 4
Subscribers as if addressed to them. Except as provided above, this opinion may
not be relied upon by any other person or entity or published, quoted or
otherwise used for any other purpose without our prior written consent. This
opinion is based on the law (and interpretations thereof) and facts existing as
of the date hereof. We disclaim any obligation to advise you of any facts,
circumstances, events or changes therein that may be brought to our attention
after the date hereof that may alter, affect or modify the opinions expressed
herein.
Very truly yours,
DJB/ABM/LJL
EXHIBIT C
Reference is hereby made to the Subscription Agreements by and between
Communication Intelligence Corporation (the "Company") and each of the
subscribers named therein (the "Subscribers") each dated as of June 13, 1996
(the "Subscription Agreements"). The Company hereby represents and warrants to
each Subscriber that the representations and warranties of the Company contained
in Section 6 of the Subscription Agreements are true, correct and complete on
the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this certificate on
this ___ day of June, 1996.
COMMUNICATION INTELLIGENCE
CORPORATION
By:
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Philip S. Sassower
Chairman of the Financial Committee
C - 1