Document:

stock_compensationplan.htm

    EXHIBIT
4.1

     

    COMMUNICATION
INTELLIGENCE CORPORATION

     

    2009
STOCK COMPENSATION PLAN

     

    ARTICLE
I

     

    EFFECTIVE
DATE AND PURPOSE

     

    1.1 Effective Date. The
Board approved the Plan effective as of July 1, 2009.

     

    ARTICLE
II

     

    DEFINITIONS

     

    2.1 Capitalized Terms.
Capitalized terms used herein have the meanings set forth in Exhibit
A.

     

    ARTICLE
III

     

    ADMINISTRATION

     

    3.1 The Committee. The
Plan shall be administered by the Board or a committee appointed by the
Board.

     

    3.2 Authority and Action of the
Committee. It shall be the duty of the Committee to administer the Plan
in accordance with the Plan’s provisions. The Committee shall have all powers
and discretion necessary or appropriate to administer the Plan and to control
its operation, including, but not limited to, the power to (a) determine
which Employees, Independent Contractors and Members of the Board shall be
eligible to receive Awards and to grant Awards, (b) prescribe the form,
amount, timing and other terms and conditions of each Award, (c) interpret
the Plan and the Award Agreements, (d) adopt such procedures as it deems
necessary or appropriate to permit participation in the Plan by eligible
Employees, Independent Contractors and Members of the Board, (e) adopt such
rules as it deems necessary or appropriate for the administration,
interpretation and application of the Plan, (f) interpret, amend or revoke
any such procedures or rules, (g) correct any technical defect(s) or
technical omission(s), or reconcile any technical inconsistency(ies), in the
Plan and/or any Award Agreement, (h) accelerate the vesting or payment of
any award, (i) extend the period during which an Option may be exercisable,
and (j) make all other decisions and determinations that may be required
pursuant to the Plan and/or any Award Agreement or as the Committee deems
necessary or advisable to administer the Plan.

     

    The acts
of the Committee shall be either (i) acts of a majority of the members of
the Committee present at any meeting at which a quorum is present or
(ii) acts approved in writing by all of the members of the Committee
without a meeting. A majority of the Committee shall constitute a quorum. The
Committee’s determinations under the Plan need not be uniform and may be made
selectively among Participants, whether or not such Participants are similarly
situated. Each member of the Committee is entitled to, in good faith, rely or
act upon any report or other information furnished to that member by any
Employee of the Company or any of its Subsidiaries or Affiliates, the Company’s
independent certified public accountants or any executive compensation
consultant or other professional retained by the Company to assist in the
administration of the Plan.

     

    The
Company shall effect the granting of Awards under the Plan, in accordance with
the determinations made by the Committee, by execution of written agreements
and/or other instruments in such form as is approved by the
Committee.

     

    
      
        
        

      

      
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    3.3 Delegation by the
Committee. The Committee in its sole discretion and on such terms and
conditions as it may provide may delegate all or any part of its authority and
powers under the Plan to one or more Members of the Board of the Company and/or
officers of the Company; provided, however, that the Committee may not delegate
its authority or power with respect to the selection for participation in this
Plan of an officer or other person subject to Section 16 of the 1934 Act or
decisions concerning the timing, pricing or amount of an Award to such an
officer or person.

     

    3.4 Decisions Binding.
All determinations, decisions and interpretations of the Committee, the Board,
and any delegate of the Committee pursuant to the provisions of the Plan or any
Award Agreement shall be final, conclusive, and binding on all persons, and
shall be given the maximum deference permitted by law.

     

    ARTICLE
IV

     

    SHARES
SUBJECT TO THE PLAN

     

    4.1 Number of Shares. Subject to
adjustment as provided in Section 7.10, the
number of Shares available for grants of Awards under the Plan shall
be 7,000,000 Shares. Shares awarded under the Plan may be either authorized
but unissued Shares, authorized and issued Shares reacquired and held as
treasury Shares or a combination thereof. Unless prohibited by applicable law or
exchange rules, Shares issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the
Company or any Subsidiary or Affiliate shall not reduce the Shares available for
grants of Awards under this Section 4.1.

     

    4.2 Lapsed Awards. To the extent that
Shares subject to an outstanding Option are not issued or delivered by reason of
(i) the expiration, cancellation, forfeiture or other termination of such
Award, (ii) the withholding of such Shares in satisfaction of applicable
federal, state or local taxes or (iii) of the settlement of all or a
portion of such Award in cash, then such Shares shall again be available under
this Plan.

     

    ARTICLE
V

     

    STOCK
OPTIONS

     

    5.1 Grant of Options.
Subject to the provisions of the Plan, Options may be granted to Participants at
such times, and subject to such terms and conditions, as determined by the
Committee in its sole discretion.  An Award of Options may include
Incentive Stock Options, Nonqualified Stock Options, or a combination thereof;
provided, however, that an Incentive Stock Option may only be granted to an
Employee of the Company or a Subsidiary and no Incentive Stock Option shall be
granted more than ten years after the earlier of (i) the date this Plan is
adopted by the Board or (ii) the date this Plan is approved by the Company's
shareholders.

     

    5.2 Award Agreement. Each
Option shall be evidenced by an Award Agreement that shall specify the Exercise
Price, the expiration date of the Option, the number of Shares to which the
Option pertains, any conditions to the exercise of all or a portion of the
Option, and such other terms and conditions as the Committee, in its discretion,
shall determine.  The Award Agreement pertaining to an Option shall
designate such Option as an Incentive Stock Option or a Nonqualified Stock
Option. Notwithstanding any such designation, to the extent that the aggregate
Fair Market Value (determined as of 

     

     

    
      
        
        

      

      
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      EXHIBIT 4.1

       

      the Grant
Date) of Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by a Participant during any calendar
year (under this Plan or any other plan of the Company, or any parent or
subsidiary as defined in Section 424 of the Code) exceeds $100,000, such Options
shall constitute Nonqualified Stock Options. For purposes of the preceding
sentence, Incentive Stock Options shall be taken into account in the order in
which they are granted.

    

     

    5.3 Exercise Price. Subject to
the other provisions of this Section, the Exercise Price with respect to Shares
subject to an Option shall be determined by the Committee in its sole
discretion; provided, however, that the Exercise Price shall be not less than
one hundred percent (100%) of the Fair Market Value of a Share on the Grant
Date; and provided further, that the Exercise Price with respect to an
Incentive Stock Option granted to a Ten Percent Holder shall not be less
than one hundred ten percent (110%) of the Fair Market Value of a Share on the
Grant Date.

     

    5.4 Expiration Dates.
Each Option shall terminate not later than the expiration date specified in the
Award Agreement pertaining to such Option; provided, however, that the
expiration date with respect to an Option shall not be later than the tenth
anniversary of its Grant Date and the expiration date with respect to an
Incentive Stock Option granted to a Ten Percent Holder shall not be later than
the fifth anniversary of its Grant Date.

     

    5.5 Exercisability of
Options. Subject to Section 5.4,
Options granted under the Plan shall be exercisable at such times, and shall be
subject to such restrictions and conditions, as the Committee shall determine in
its sole discretion. The exercise of an Option is contingent upon payment by the
Optionee of the amount sufficient to pay all taxes required to be withheld by
any governmental agency. Such payment may be in any form approved by the
Committee.

     

    5.6 Method of Exercise.
Options shall be exercised by the Participant’s delivery of a written notice of
exercise to the Chief Financial Officer of the Company (or his or her designee),
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment of the Exercise Price with respect to
each such Share and an amount sufficient to pay all taxes required to be
withheld by any governmental agency. The Exercise Price shall be payable to the
Company in full in cash or its equivalent. The Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired
Shares which have been held by the Optionee for at least six months having an
aggregate Fair Market Value at the time of exercise equal to the aggregate
Exercise Price of the Shares with respect to which the Option is to be
exercised, or (b) by any other means which the Committee, in its sole
discretion, determines to both provide legal consideration for the Shares, and
to be consistent with the purposes of the Plan, including, without limitation,
through a registered broker-dealer pursuant to such cashless exercise procedures
which are, from time to time, deemed acceptable by the Committee. As soon as
practicable after receipt of a written notification of exercise and full payment
for the Shares with respect to which the Option is exercised, the Company shall
deliver to the Participant Share certificates (which may be in book entry form)
for such Shares with respect to which the Option is exercised.

     

    5.7 Restrictions on Share
Transferability. Options are personal to the Optionee during his or her
lifetime and may not be transferred, assigned, pledged, attached or otherwise
disposed of in any manner, except by will or the laws of descent and
distribution.  Any attempt to transfer, assign, pledge, attach or
otherwise dispose of any Option contrary to this Section 5.7 will be null and
void.  The Committee may impose additional restrictions on any Shares
acquired pursuant to the exercise of an Option as it may deem advisable,
including, but not limited to, restrictions related to applicable federal
securities laws, the requirements of any national securities exchange or system
upon which Shares are then listed or traded, or any blue sky or state securities
laws.

     

    
      
        
        

      

      
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    ARTICLE
VI

     

    RESTRICTED
STOCK

     

    6.1 Grant of Restricted Stock. Subject to the
provisions of the Plan, Restricted Stock may be granted to such Participants at
such times, and subject to such terms and conditions, as determined by the
Committee in its sole discretion.

     

    6.2 Award
Agreement. Each grant of Restricted Stock shall be evidenced by an
Award Agreement that shall specify the number of Shares granted, the price, if
any, to be paid for the Shares and the Period of Restriction applicable to the
Award and such other terms and conditions as the Committee, in its sole
discretion, shall determine.

     

    6.3 Transferability/Share
Certificates. Shares subject to an Award of Restricted Stock may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
during a Period of Restriction. During the Period of Restriction, Shares of
Restricted Stock may be registered in the holder’s name or a nominee’s name at
the discretion of the Company and may bear a legend as described in
Section 6.4.2. Unless the Committee determines
otherwise, Shares of Restricted Stock shall be held by the Company as escrow
agent during the applicable Period of Restriction, together with stock powers or
other instruments of assignment (including a power of attorney), each endorsed
in blank with a guarantee of signature if deemed necessary or appropriate by the
Company, which would permit transfer to the Company of all or a portion of the
Shares subject to the Restricted Stock Award in the event such Award is
forfeited in whole or part.

     

    6.4 Other Restrictions.
The Committee, in its sole discretion, may impose such other restrictions on
Shares subject to an Award of Restricted Stock as it may deem advisable or
appropriate.

     

    6.4.1 General Restrictions.
The Committee may set restrictions based upon applicable federal or state
securities laws, or any other basis determined by the Committee in its
discretion.

     

    6.4.2 Legend on
Certificates. The Committee, in its sole discretion, may legend the
certificates representing Restricted Stock during the Period of Restriction to
give appropriate notice of such restrictions. For example, the Committee may
determine that some or all certificates representing Shares of Restricted Stock
shall bear the following legend: “The sale or other transfer of the shares of
stock represented by this certificate, whether voluntary, involuntary, or by
operation of law, is subject to certain restrictions on transfer as set forth in
the Communication Intelligence Corporation 2009 Stock Compensation Plan (the
“Plan”), and in an Award Agreement (as defined by the Plan). A copy of the Plan
and such Award Agreement may be obtained from the Chief Financial Officer of
Communication Intelligence Corporation.”

     

    6.5 Removal of
Restrictions. Shares of Restricted Stock granted under the Plan shall be
released from escrow as soon as practicable after the termination of the Period
of Restriction and, subject to the Company’s right to require payment of any
taxes, a certificate or certificates evidencing ownership of the requisite
number of Shares shall be delivered to the Participant.

     

    
      
        
        

      

      
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    6.6 Voting Rights. During
the Period of Restriction, Participants holding Shares of Restricted Stock
granted hereunder may exercise full voting rights with respect to those Shares,
unless otherwise provided in the Award Agreement.

     

    6.7 Dividends and Other
Distributions. During the Period of Restriction, Participants holding
Shares of Restricted Stock shall be entitled to receive all dividends and other
distributions paid with respect to such Shares unless otherwise provided in the
Award Agreement. Unless otherwise provided in the Award Agreement, any such
dividends or distributions shall be deposited with the Company and shall be
subject to the same restrictions on transferability and forfeitability as the
Shares of Restricted Stock with respect to which they were paid.

     

    ARTICLE
VII

     

    MISCELLANEOUS

     

    7.1 No Effect on Employment or
Service. Nothing in the
Plan shall interfere with or limit in any way the right of the Company to
terminate any Participant’s service relationship at any time, for any reason and
with or without cause.

     

    7.2 Participation. No
person shall have the right to be selected to receive an Award under this Plan,
or, having been so selected, to be selected to receive a future
Award.

     

    7.3 Indemnification. Each
person who is or shall have been a member of the Committee, or of the Board,
shall be indemnified and held harmless by the Company against and from
(a) any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any good faith action taken or good faith
failure to act under the Plan or any Award Agreement, and (b) from any and
all amounts paid by him or her in settlement thereof, with the Company’s
approval, or paid by him or her in satisfaction of any judgment in any such
claim, action, suit, or proceeding against him or her, provided he or she shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company’s Certificate of Incorporation or By-Laws, by contract, as a matter of
law, or otherwise, or under any power that the Company may have to indemnify
them or hold them harmless.

     

    7.4 Successors. All obligations of
the Company under the Plan, with respect to Awards granted hereunder, shall be
binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation or
otherwise, of all or substantially all of the business or assets of the
Company.

     

    7.5 No Rights as
Stockholder. Except to the limited extent provided in
Sections 6.6 and 6.7, No Participant (nor any beneficiary) shall have
any of the rights or privileges of a stockholder of the Company with respect to
any Shares issuable pursuant to an Option, unless and until certificates
representing such Shares shall have been issued, recorded on the records of the
Company or its transfer agents or registrars, and delivered to the Participant
(or beneficiary).

     

    
      
        
        

      

      
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    7.6 Withholding
Requirements. Prior to the delivery of any Shares or cash pursuant to an
Award (or exercise thereof), the Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy any federal, state, local and foreign taxes of any kind
(including, but not limited to, the Participant’s FICA and SDI obligations)
which the Committee, in its sole discretion, deems necessary to be withheld or
remitted to comply with the Code and/or any other applicable law, rule or
regulation with respect to such Award (or exercise thereof).

     

    7.7 Withholding
Arrangements. The Committee, in its sole discretion and pursuant to such
procedures as it may specify from time to time, may permit or require a
Participant to satisfy all or part of the tax withholding obligations in
connection with an Award by (a) having the Company withhold otherwise
deliverable Shares, or (b) delivering to the Company already-owned Shares
having a Fair Market Value equal to the amount required to be withheld, provided
such Shares have been held by the Participant for at least six
months.

     

    7.8 No Corporate Action
Restriction. The existence of the Plan, any Award Agreement and/or the
Awards granted hereunder shall not limit, affect or restrict in any way the
right or power of the Board or the shareholders of the Company to make or
authorize (a) any adjustment, recapitalization, reorganization or other
change in the Company’s or any Subsidiary’s or Affiliate’s capital structure or
business, (b) any merger, consolidation or change in the ownership of the
Company or any Subsidiary or Affiliate, (c) any issue of bonds, debentures,
capital, preferred or prior preference stocks ahead of or affecting the
Company’s or any Subsidiary’s or Affiliate’s capital stock or the rights
thereof, (d) any dissolution or liquidation of the Company or any
Subsidiary or Affiliate, (e) any sale or transfer of all or any part of the
Company’s or any Subsidiary’s or Affiliate’s assets or business, or (f) any
other corporate act or proceeding by the Company or any Subsidiary or Affiliate.
No Participant, beneficiary or any other person shall have any claim against any
Member of the Board or the Committee, the Company or any Subsidiary or
Affiliate, or any employees, officers, shareholders or agents of the Company or
any Subsidiary or Affiliate, as a result of any such action.

     

    7.9 Restrictions on
Shares. Each Award made hereunder shall be subject to the requirement
that if at any time the Company determines that the listing, registration or
qualification of the Shares subject to such Award upon any securities exchange
or under any law, or the consent or approval of any governmental body, or the
taking of any other action is necessary or desirable as a condition of, or in
connection with, the exercise or settlement of such Award or the delivery of
Shares thereunder, such Award shall not be exercised or settled and such Shares
shall not be delivered unless such listing, registration, qualification,
consent, approval or other action shall have been effected or obtained, free of
any conditions not acceptable to the Company. The Company may require that
certificates evidencing Shares delivered pursuant to any Award made hereunder
bear a legend indicating that the sale, transfer or other disposition thereof by
the holder is prohibited except in compliance with the Securities Act of 1933,
as amended, and the rules and regulations thereunder.

     

    7.10 Changes in Capital
Structure. In the event that any extraordinary dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, change of
control or exchange of Shares or other securities of the Company, or other
corporate transaction or event (each a “Corporate 

     

    
      
        
        

      

      
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Event”) affects
the Shares, the Board shall, in such manner as it in good faith deems equitable,
adjust any or all of (i) the number of Shares or other securities of the
Company (or number and kind of other securities or property) with respect
to which Awards may be granted, (ii) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding Awards, and (iii) the Exercise Price with respect to
any Award, or make provision for an immediate cash payment to the holder of an
outstanding Award in consideration for the cancellation of such
Award.

    

     

    If the
Company enters into or is or may become involved in any Corporate Event or a
Change in Control, the Board shall, prior to such Corporate Event and effective
upon such Corporate Event, take such action as it deems appropriate, including,
but not limited to, replacing Awards with substitute awards in respect of the
Shares, other securities or other property of the surviving corporation or any
affiliate of the surviving corporation on such terms and conditions, as to the
number of shares, pricing and otherwise, which shall substantially preserve the
value, rights and benefits of any affected Awards granted hereunder as of the
date of the consummation of the Corporate Event or a Change in Control.
Notwithstanding anything to the contrary in the Plan, if any Corporate Event or
Change in Control occurs, the Company shall have the right, but not the
obligation, to cancel each Participant’s Awards immediately prior to such
Corporate Event and to pay to each affected Participant in connection with the
cancellation of such Participant’s Awards, an amount equal that the Committee,
in its sole discretion, in good faith determines to be the equivalent value of
such Award (e.g., in the case of an Option, the amount of the
spread).

     

    Upon
receipt by any affected Participant of any such substitute awards (or payment)
as a result of any such Corporate Event, such Participant’s affected Awards for
which such substitute awards (or payment) were received shall be thereupon
cancelled without the need for obtaining the consent of any such affected
Participant. Any actions or determinations of the Committee under this
Section 7.10 need not be uniform as to all
outstanding Awards, nor treat all Participants identically.

     

    ARTICLE
VIII

     

    AMENDMENT,
TERMINATION AND DURATION

     

    8.1 Amendment, Suspension or
Termination. The Board, in its sole discretion, may amend, suspend or
terminate the Plan, or any part thereof, at any time and for any reason, subject
to any requirement of stockholder approval required by applicable law, rule or
regulation, including, without limitation, Section 162(m) of the Code and
the rules of any stock exchange, if any, on which Shares are primarily traded;
provided, however, the Board may amend the Plan and any Award Agreement,
including without limitation retroactive amendments, without shareholder
approval as necessary to avoid the imposition of any taxes under
Section 409A of the Code. Subject to the preceding sentence, the amendment,
suspension or termination of the Plan or any Award Agreement shall not, without
the consent of the Participant, materially adversely alter or impair any rights
or obligations under any Award theretofore granted to such Participant. No Award
may be granted during any period of suspension or after termination of the
Plan.

     

    8.2 Duration of the Plan.
The Plan shall, subject to Section 8.1,
terminate ten years after adoption by the Board, unless earlier terminated by
the Board and no further Awards shall be granted under the Plan. The termination
of the Plan shall not affect any Awards granted prior to the termination of the
Plan.

     

    
      
        
        

      

      
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    ARTICLE
IX

     

    LEGAL
CONSTRUCTION

     

    9.1 Gender and Number.
Except where otherwise indicated by the context, any masculine term used herein
also shall include the feminine; the plural shall include the singular and the
singular shall include the plural.

     

    9.2 Severability. In the
event any provision of the Plan or of any Award Agreement shall be held illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan or the Award Agreement, and the Plan and/or the
Award Agreement shall be construed and enforced as if the illegal or invalid
provision had not been included.

     

    9.3 Requirements of Law.
The granting of Awards and the issuance of Shares under the Plan shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be
required.

     

    9.4 Governing Law. The
Plan and all Award Agreements shall be construed In accordance with and governed
by the laws of the State of Delaware, but without regard to
its conflict of law provisions.

     

    9.5 Captions. Captions
are provided herein for convenience only, and shall not serve as a basis for
interpretation or construction of the Plan.

     

    9.6 Incentive Stock
Options. Should any Option granted under this Plan be designated an
“Incentive Stock Option,” but fail, for any reason, to meet the requirements of
the Code for such a designation, then such Option shall be deemed to be a
Non-Qualified Stock Option and shall be valid as such according to its
terms.

     

    
      
        
        

      

      
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    EXHIBIT
A

     

    DEFINITIONS

     

    The
following words and phrases shall have the following meanings unless a different
meaning is plainly required by the context:

     

    “1934
Act” means the Securities Exchange Act of 1934, as amended. Reference to a
specific section of the 1934 Act or regulation thereunder shall include such
section or regulation, any valid regulation or interpretation promulgated under
such section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or
regulation.

     

    “Affiliate”
means any entity, directly or indirectly, controlled by, controlling or under
common control with the Company or any corporation or other entity acquiring,
directly or indirectly, all or substantially all the assets and business of the
Company, whether by operation of law or otherwise.

     

    “Award”
means, individually or collectively, a grant under the Plan of Nonqualified
Stock Options, Incentive Stock Options or Restricted Stock.

     

    “Award
Agreement” means the written agreement setting forth the terms and conditions
applicable to an Award or series of Awards.

     

    “Board”
means the Company’s Board of Directors, as constituted from time to
time.

     

    “Change
in Control” means the occurrence of any of the following:

     

    (a)           An
acquisition (other than directly from the Company) of any voting securities of
the Company (the “Voting Securities”) by any “Person” (as the term “person” is
used for purposes of Section 13(d) or l4(d) of the Exchange Act), immediately
after which such Person has “Beneficial Ownership” (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of
the then-outstanding Shares or the combined voting power of the Company’s
then-outstanding Voting Securities; PROVIDED, HOWEVER, that the following
acquisitions of Shares or Voting Securities shall not constitute a Change in
Control under clause (a):  acquisitions by (i) an employee benefit
plan (or a trust forming a part thereof) maintained by (A) the Company or (B)
any corporation or other Person the majority of the voting power, voting equity
securities or equity interest of which is owned, directly or indirectly, by the
Company (for purposes of this definition, a “Related Entity”), (ii) the Company
or any Related Entity, or (iii) any Person in connection with a “Non-Control
Transaction” (as hereinafter defined);

     

    (b)           The
individuals who, as of immediately following the completion of the Effective
Date, are members of the Board (the “Incumbent Board”), cease for any reason to
constitute at least a majority of the members of the Board; PROVIDED, HOWEVER,
that, if the election, or nomination for election by the Company’s common
stockholders, of any new director was approved by a vote of at least two-thirds
of the Incumbent Board, such new director shall, for purposes of the Plan, be
considered a member of the Incumbent Board; and PROVIDED, FURTHER, HOWEVER, that
no individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a “Proxy Contest”), including by reason of any agreement intended to
avoid or settle any Proxy Contest; or

     

    
      
        
        

      

      
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    (c)           The
consummation of:

     

    (i)           A
merger, consolidation or reorganization (1) with or into the Company or a direct
or indirect subsidiary of the Company or (2) in which securities of the Company
are issued (a “Merger”), unless such Merger is a “Non-Control Transaction.” A
“Non-Control Transaction” shall mean a Merger in which:

     

    (A)           the
stockholders of the Company immediately before such Merger own directly or
indirectly immediately following such Merger at least fifty percent (50%) of the
combined voting power of the outstanding voting securities of (x) the surviving
corporation, if there is no parent corporation of the surviving corporation or
(y) if there is one or more than one parent corporation, the ultimate parent
corporation; and

     

    (B)           the
individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for such Merger constitute at least a
majority of the members of the board of directors of (x) the surviving
corporation, if there is no parent corporation of the surviving corporation, or
(y) if there is one or more than one parent corporation, the ultimate parent
corporation;

     

    (ii)           A
complete liquidation or dissolution of the Company; or

     

    (iii)           The
sale or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole to any Person (other than (x) a
transfer to a Related Entity, (y) a transfer under conditions that would
constitute a Non-Control Transaction, with the disposition of assets being
regarded as a Merger for this purpose or (z) the distribution to the Company’s
stockholders of the stock of a Related Entity or any other assets).

     

    Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any Person (the “Subject Person”) acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Shares or Voting Securities as a result
of the acquisition of Shares or Voting Securities by the Company which, by
reducing the number of Shares or Voting Securities then outstanding, increases
the proportional number of shares Beneficially Owned by the Subject
Persons;  PROVIDED that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Shares or
Voting Securities by the Company and, after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Shares or Voting Securities and such Beneficial Ownership increases the
percentage of the then outstanding Shares or Voting Securities Beneficially
Owned by the Subject Person, then a Change in Control shall occur.

     

    “Code”
means the Internal Revenue Code of 1986, as amended. Reference to a specific
section of the Code or regulation thereunder shall include such section or
regulation, any valid regulation or other guidance promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.

     

    “Committee”
means the Board or a committee of the Board described in Article
III.

     

    
      
        
        

      

      
        - 10
-

        
          

        

      

      
        
          EXHIBIT
4.1

           

        

      

    

    “Employee”
means an employee of the Company, a Related Company, a Subsidiary or an
Affiliate (each an “Employer”) designated by the Committee. Notwithstanding
anything to the contrary contained herein, the Committee may grant Awards to an
individual who has been extended an offer of employment by the Company, a
Related Company, a Subsidiary or an Affiliate; provided that any such Award
shall be subject to forfeiture if such individual does not commence employment
by a date established by the Committee.

     

    “Exercise
Price” means the price at which a Share subject to an Option may be purchased
upon the exercise of the Option.

     

    “Fair
Market Value” on any date means (a) the closing price in the primary trading
session for a Share on such date on the stock exchange, if any, on which Shares
are primarily traded (or if no Shares were traded on such date, then on the most
recent previous date on which any Shares were so traded), (b) if clause (a) is
not applicable, the closing price of the Shares on such date on The Nasdaq
Global Market at the close of the primary trading session (or if no Shares were
traded on such date, then on the most recent previous date on which any Shares
were so traded) or (c) if neither clause (a) nor clause (b) is applicable, the
value of a Share for such date as established by the Committee, using any
reasonable method of valuation.

     

    “Grant
Date” means the date that the Award is granted.

     

    “Incentive
Stock Option” means an Option that is designated as an Incentive Stock Option
and is intended by the Committee to meet the requirements of Section 422 of the
Code.

     

    “Independent
Contractor” means a person, employed by the Company for a specific task, study
or project who is not an Employee, including an advisor or consultant who (i) is
a natural person and (ii) provides bona fide services to the Company, its
parents, its majority-owned subsidiaries or majority-owned subsidiaries of the
Company’s parent; provided such services are not in connection with the offer or
sale of securities in a capital-raising transaction, and do not directly or
indirectly promote or maintain a market for the Company’s
securities.

     

    “Member
of the Board” means an individual who is a member of the Board or of the board
of directors of a Subsidiary or an Affiliate.

     

    “Nonqualified
Stock Option” means an Option that is not an Incentive Stock
Option.

     

    “Option”
means an option to purchase Shares granted pursuant to Article V.

     

    “Optionee”
means a person to whom an Option has been granted under the Plan.

     

    “Participant”
means an Employee, Independent Contractor or Member of the Board with respect to
whom an Award has been granted and remains outstanding.

     

    “Period
of Restriction” means the period during which Restricted Stock is subject to
forfeiture and/or restrictions on transferability.

     

    “Plan”
means this Communication Intelligence Corporation 2009 Stock Compensation Plan,
as set forth in this instrument and as hereafter amended from time to
time.

     

    
      
        
        

      

      
        - 11
-

        
          

        

      

      
        
          EXHIBIT
4.1

           

        

      

    

    “Related
Company” means any person or entity that would be considered a single employer
with the Company under Section 4l4(b) or (c) of the Code, provided that the
language “at least 80 percent” as used in connection with the application of
these provisions were replaced by “at least 50%.”

     

    “Restricted
Stock” means a grant pursuant to Article VI of one or more Shares subject to
forfeiture upon such terms and conditions as specified in the relevant Award
Agreement.

     

    “Share”
means the Company’s common stock, par value $0.01 per share, or any security
issued by the Company or any successor in exchange or in substitution
therefor.

     

    “Subsidiary(ies)”
means any corporation (other than the Company) in an unbroken chain of
corporations, including and beginning with the Company, if each of such
corporations, other than the last corporation in the unbroken chain, owns,
directly or indirectly, more than fifty percent (50%) of the voting stock in one
of the other corporations in such chain.

     

    “Ten
Percent Holder” means an Employee (together with persons whose stock ownership
is attributed to the Employee pursuant to Section 424(d) of the Code) who, at
the time an Option is granted, owns stock representing more than ten percent of
the voting power of all classes of stock of the Company.

     

     

     

     

    - 12 -frm_stockoptionagrmt.htm

    EXHIBIT
4.2

     

    STOCK
OPTION AGREEMENT

    COMMUNICATION
INTELLIGENCE CORPORATION

    2009
STOCK COMPENSATION PLAN

    

    

    THIS STOCK OPTION AGREEMENT (this
"Agreement"),
dated as _______________, (the “Effective Date”) is entered into by and between
Communication Intelligence Corporation, a company organized in the State of
Delaware (the
"Company"), and
______________ (the "Optionee"), pursuant
to the Communication Intelligence Corporation 2009 Stock Compensation Plan, as
in effect and as amended from time to time (the "Plan").

    

    WHEREAS, the Company has determined
under the Plan to make one or more grants to the Optionee of options to purchase
Company common stock, pursuant to the terms and in the amounts set forth on
Exhibit A, which shall be amended by the Company from time to time to reflect
additional grants;

    

    NOW, THEREFORE, in consideration of the
mutual covenants and promises hereinafter set forth and for other good and
valuable consideration, the parties hereto hereby mutually covenant and agree as
follows:

    

    1. Incorporation By Reference;
Plan Document Receipt.  This Agreement is subject in all
respects to the terms and provisions of the Plan (including, without limitation,
any amendments thereto adopted at any time and from time to time unless such
amendments are expressly intended not to apply to the grant of the option
hereunder), all of which terms and provisions are made a part of and
incorporated in this Agreement as if they were each expressly set forth
herein.  The Optionee hereby acknowledges receipt of a true copy of
the Plan and that the Optionee has read the Plan carefully and fully understands
its content.  In the event of any conflict between the terms of this
Agreement and the terms of the Plan, the terms of the Plan shall
control.  Capitalized terms not defined herein have the meaning set
forth in the Plan.

    

    2. Grant of
Option.  The Company hereby grants to the Optionee the stock
option(s) set forth on Exhibit A, as amended from time to time, (each a "Stock Option") to
acquire from the Company the aggregate number of Option Shares set forth on
Exhibit A (the "Option
Shares").  The type of stock option (incentive or
nonqualified), Grant Date, Vesting Date, Expiration Date and Per Share Exercise
Price for each Stock Option shall be as set forth on Exhibit A.  The
Company shall deliver an amended Exhibit A to the Optionee for each additional
Stock Option grant after the Effective Date.

    

    3.           No Dividend
Equivalents.  The Optionee shall not be entitled to receive a
cash payment in respect of the Option Shares underlying the Stock Options on any
dividend payment date for the Shares.

    

    4.           Exercisability of Each Stock
Option.

    

    4.1           Each Stock Option is or
shall become exercisable as to 100% of the applicable Option Shares on
its Vesting Date, provided the Optionee is then employed by or performing
services for the Company and/or one of its Subsidiaries or
Affiliates.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
          EXHIBIT
4.2

        

      

    

     

               4.2           Unless
earlier terminated in accordance with the terms and provisions of the Plan
and/or this Agreement, each Stock Option shall expire and shall no longer be
exercisable following its Expiration Date (as set forth in Exhibit A), with the
period from the Vesting Date to the Expiration Date known as the "Option
Period".

    

    4.3           The
Committee may, in its sole discretion, accelerate the exercisability of any
portion of the unexercisable portion of a Stock Option at any time, including,
but not limited to, upon a Participant's death or Disability (as defined in
Sections 4.4 and 4.5 below).  In no event shall any Stock Option be
exercisable for a fractional Share.

    

    4.4           For
purposes of this Agreement, "Disability," if the
Participant is a party to an employment agreement, shall have the same meaning
as in such employment agreement, otherwise, "Disability" means
disability as determined by the Committee in accordance with the standards and
procedures similar to those under the Company's or the relevant Affiliate's
long-term disability plan, if any.  Subject to the first sentence of
this Section 4.4, at any time that the Company or the relevant Affiliate does
not maintain a long-term disability plan, "Disability" shall
mean any physical or mental disability which is determined to be total and
permanent by a doctor selected in good faith by the Company or the relevant
Affiliate.

    

    5.           Method of Exercise and
Payment.  Each Stock Option
shall be exercised by the Optionee by delivering to the Chief Financial Officer
of the Company or his/her designated agent on any business day a written notice,
in such manner and form as may be required by the Company, specifying the number
of Option Shares the Optionee then desires to acquire (the "Exercise
Notice").  The Exercise Notice shall be accompanied by payment
of the aggregate Per Share Exercise Price set forth on Exhibit A for such number
of the Option Shares to be acquired upon such exercise plus an amount sufficient
to pay all taxes required to be withheld by any governmental
agency.  Such payment shall be made in the manner set forth in Section
5.6 of the Plan.

    

    6.           Termination of Service
Relationship.

    

    6.1           If
the Optionee's Service Relationship with the Company and its Subsidiaries
terminates for any reason, any then unexercisable portion of the Stock Options
shall be forfeited by the Optionee and cancelled by the Company.

    

    6.2           If
the Optionee's Service Relationship with the Company and its Subsidiaries
terminates for any reason other than due to the Optionee's death or Disability,
the Optionee's rights, if any, to exercise any then exercisable portion of the
Stock Options shall terminate ninety (90) days after the date of such
termination, but not beyond the expiration of the Option Period, and thereafter
the Stock Options shall be forfeited by the Optionee and cancelled by the
Company.

    

    6.3           If
the Optionee's Service Relationship with the Company and its Subsidiaries is
terminated due to the Optionee's death, or Disability, the Optionee (or, in the
case of the Optionee's death, the Optionee's estate, designated beneficiary or
other legal representative, as the case may be, as determined by the Committee)
shall have the right, to the extent exercisable immediately prior to any such
termination, to exercise the Stock Options at any time within the one (1) year
period following such termination, but not beyond the expiration of the Option
Period, and thereafter the Stock Options shall be forfeited by the Optionee and
cancelled by the Company.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        EXHIBIT
4.2

      

    

               

     

     

               6.4           The
Committee may, in its sole discretion, determine that all or any portion of the
Stock Options, to the extent exercisable immediately prior to
the  termination of  the Optionee’s Service Relationship
with the Company and/or one of its Subsidiaries for any reason, may remain
exercisable for an additional specified time period after the relevant period
specified above in this Section 6 expires (subject to any other applicable terms
and provisions of the Plan and this Agreement), but not beyond the expiration of
the Option Period.

    

    6.5           If
the Affiliate of the Company engaging the Optionee ceases to be an Affiliate of
the Company, that event shall be deemed to constitute a termination of the
Optionee’s Service Relationship described in Section 6.2 above (in connection
with such termination of employment, the provisions in Section 6.1 would also be
applicable).

    

    7.           Non-transferability.  The Stock Option
is not transferable, except by will or by the applicable laws of descent and
distribution.  Following the Optionee’s death, the Stock Option may be
exercised by the Optionee’s heirs or the personal representative of his or her
estate.

    

    8.           Entire Agreement;
Amendment.  This Agreement, together with the Plan contains the
entire agreement between the parties hereto with respect to the subject matter
contained herein, and supersedes all prior agreements or prior understandings,
whether written or oral, between the parties relating to such subject
matter.  The Committee shall have the right, in its sole discretion,
to modify or amend this Agreement from time to time in accordance with and as
provided in the Plan; provided, however, that no such
modification or amendment shall materially adversely affect the rights of the
Optionee under any Stock Option without the consent of the
Optionee.  This Agreement may also be modified or amended by a writing
signed by both the Company and the Optionee.  The Company shall give
written notice to the Optionee of any such modification or amendment of this
Agreement as soon as practicable after the adoption thereof.

    

    9.           Notices.  Any
Exercise Notice or other notice which may be required or permitted under this
Agreement shall be in writing, and shall be delivered in person or via facsimile
transmission, overnight courier service or certified mail, return receipt
requested, postage prepaid, properly addressed as follows:

    

    
      	
               
      

            	
              (i)  If
      such notice is to the Company, to the attention of Chief Financial Officer
      or at such other address as the Company, by notice to the Optionee, shall
      designate in writing from time to
time.

            

    

    

    
      	
               
      

            	
              (ii)  If
      such notice is to the Optionee, at his or her address as shown on the
      Company's records, or at such other address as the Optionee, by notice to
      the Company, shall designate in writing from time to
  time.

            

    

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
          EXHIBIT
4.2

        

      

    

     

            10.           Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.

    

    11.           Compliance with
Laws.  The issuance of this Stock Option (and the Option Shares
upon exercise of this Stock Option) pursuant to this Agreement shall be subject
to, and shall comply with, any applicable requirements of any foreign and U.S.
federal and state securities laws, rules and regulations (including, without
limitation, the provisions of the Securities Act of 1933, the Securities
Exchange Act of 1934 and the respective rules and regulations promulgated
thereunder) and any other law or regulation applicable thereto.  The
Company shall not be obligated to issue any Stock Option or any of the Option
Shares pursuant to this Agreement if any such issuance would violate any such
requirements.  The Company reserves the right to further modify this
Agreement to the extent necessary to conform to applicable law.

    

    12.           Binding Agreement;
Assignment.  This Agreement shall inure to the benefit of, be
binding upon, and be enforceable by the Company and its successors and
assigns.  The Optionee shall not assign (except as provided by Section
7 hereof) any part of this Agreement without the prior express written consent
of the Company.

    

    13.           Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one and the same
instrument.

    

    14.           Headings.  The
titles and headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be a part of this
Agreement.

    

    15.           Further
Assurances.  Each party hereto shall do and perform (or shall
cause to be done and performed) all such further acts and shall execute and
deliver all such other agreements, certificates, instruments and documents as
either party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the Plan and the consummation of
the transactions contemplated thereunder.

    

    16.           Severability.  The
invalidity or unenforceability of any provisions of this Agreement in any
jurisdiction shall not affect the validity, legality or enforceability of the
remainder of this Agreement in such jurisdiction or the validity, legality or
enforceability of any provision of this Agreement in any other jurisdiction, it
being intended that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
          EXHIBIT
4.2

        

      

    

     

     

               IN WITNESS WHEREOF,
the Company has caused this Agreement to be executed by its duly authorized
officer, and the Optionee has hereunto set his hand, all as of the Grant Date
specified above.

    

    
      	
               
      

            	
              COMMUNICATION
      INTELLIGENCE CORPORATION

            

    

    

    

    By:__________________________________

    

    

    _____________________________________

    Printed Name & Title

    

    _____________________________________

    Optionee

    

                                                                              

    Printed Name

    

    

    Required
only in Community Property States: By his or her signature below, the spouse of
the Optionee, if such Optionee is legally married as of the date of this
Agreement, acknowledges that having read this Agreement and the Plan, and being
familiar with the terms and provisions thereof, agrees to be bound by all the
terms and conditions of this Agreement and the Plan.

     

    

    

    
      	
              Dated:  ________________________

            	
              _____________________________

              Spouse’s
      Signature

               

              ____________________________

              Printed
      Name

               

               

            

    

    

    

    By his or
her signature below, the Optionee represents that he or she is not legally
married as of the date of this Agreement.

     

    

    
      	
              Dated:  _________________________

            	
              ____________________________

              Signature
      of Optionee

            

    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
          EXHIBIT
4.2

        

      

    

     

     

    EXHIBIT
A

    STOCK
OPTION GRANTS

    

    

    
      	
              Type
      of 

              Option
      (ISO

               or
      NQSO)

            	
              Option

               Grant
      Date:

            	
              Vesting
      

              Date:

            	
              Expiration
      

              Date:

            	
              Per
      Share

               Exercise
      

              Price:

            	
              Number
      of 

              Option

               Shares:

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