Document:

EXHIBIT 4.1

 

	

 ®
 	
United Fire & Casualty Company
 2008 Stock Plan
 

(Amended and restated as of February 15, 2008)

	
1.
 	
Purpose of the Plan. The purposes of the United Fire & Casualty 2008 Stock Plan are to attract and retain the best available individuals for positions of substantial responsibility, to provide additional incentive to such individuals, and to promote the success, growth, and general prosperity of the Company’s business by aligning the financial interests of Employees with long-term shareholder value.  Awards granted hereunder may be Incentive Stock Options, Nonqualified Stock Options, Stock
Awards, or SARs, at the discretion of the Board and as reflected in the terms of the Award Agreement.  The Plan is not intended to defer any payments to the termination of Continuous Status as an Employee or to provide retirement income to employees. 
 

The Plan was formerly known as the United Fire & Casualty Company Nonqualified Employee Stock Option Plan.  The name of the Plan has been changed pursuant to this February 15, 2008 restatement.

	
2.
 	
Definitions. As used herein, the following definitions shall apply:
 

	
 
 	
a.
 	
“Award” means any award or benefits granted under the Plan, including Options, Stock Awards, and SARs.
 

	
 
 	
b.
 	
“Award Agreement” means a written or electronic agreement between the Company and the Awardee setting forth the terms of the Award.
 

	
 
 	
c.
 	
“Awardee” means the holder of an outstanding Award.
 

	
 
 	
d.
 	
“Board” means both the Board of Directors and the Committee.
 

	
 
 	
e.
 	
“Code” means the Internal Revenue Code of 1986, as amended.
 

	
 
 	
f.
 	
“Committee” means the Compensation Committee of the Board of Directors.
 

	
 
 	
g.
 	
“Company” means United Fire & Casualty Company, an Iowa corporation, and any successor thereto.
 

	
 
 	
h.
 	
“Continuous Status as an Employee” means the absence of any interruption or termination of service as an Employee.  Continuous Status as an Employee shall not be considered interrupted in the case of sick leave, maternity leave, infant care leave, medical emergency leave, military leave, or
any other leave of absence for which Continuous Status as an Employee is not considered interrupted in accordance with the Company’s policies on such matters.
 

	
 
 	
i.
 	
“Conversion Options” means the Options described in Section 6(c).
 

	
 
 	
j.
 	
“Employee” means any person, including an officer, who is a common law employee of, receives remuneration for personal services to, and is on the payroll of, the Company or any Parent or Subsidiary of the Company.
 

	
 
 	
k.
 	
“Incentive Stock Option” means any Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
 

	
 
 	
l.
 	
“Maximum Annual Employee Award” shall have the meaning set forth in Section 5(b).
 

	
 
 	
m.
 	
“Merger Ratio” shall have the meaning set forth in Section 6(c).
 

	
 
 	
n.
 	
“Nonqualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
 

	
 
 	
o.
 	
“Option” means a stock option granted pursuant to Section 6.
 

	
 
 	
p.
 	
“Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
 

	
 
 	
q.
 	
“Plan” means this United Fire & Casualty 2008 Stock Plan, formerly referred to as the United Fire & Casualty Company Nonqualified Employee Stock Option Plan, including any amendments thereto and restatements thereof.
 

	
 
 	
r.
 	
“Share” means a common share of United Fire & Casualty Company, as adjusted in accordance with Section 14.
 

	
 
 	
s.
 	
“SAR” means a stock appreciation right awarded pursuant to Section 8.
 

	
 
 	
t.
 	
“Stand-Alone SARs” shall have the meaning set forth in Section 8.
 

 

	
 
 	
u.
 	
“Stock Award” means a grant of Shares or of a right to receive Shares or their cash equivalent (or both) pursuant to Section 7.
 

	
 
 	
v.
 	
“Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.
 

	
 
 	
w.
 	
“Tandem SAR” shall have the meaning set forth in Section 8.
 

	
3.
 	
Shares Subject to the Plan.  Subject to the provisions of Sections 14 and 16, the maximum aggregate number of Shares (increased, proportionately, upon any stock split, stock dividend, or similar event with respect to the Shares) that may be awarded and delivered under the Plan is 1,900,000.  Subject to the provisions of the following sentence, if an Award should expire or become unexercisable for any reason without having been exercised in full, the undelivered Shares that were subject thereto shall,
unless the Plan shall have been terminated, become available for future Awards under the Plan.  Notwithstanding anything to the contrary contained herein, any Awards of Options that are transferred to a third party pursuant to a program under which the holder of certain Options may transfer such Options to such third party in exchange for cash or other consideration, shall be removed from the Plan and the Shares subject to such Awards shall not be available for re-grant under the Plan regardless of whether the transferred Options are exercised or expire without exercise.
 

	
4.
 	
Administration of the Plan. 
 

	
 
 	
a.
 	
Procedure.  The Plan shall be administered by the Board of Directors. 
 

	
 
 	
b.
 	
Powers of the Board.  Subject to the provisions of the Plan, the Board shall have the authority, in its discretion: (i) to grant Incentive Stock Options, Nonqualified Stock Options, Stock Awards, and SARs; (ii) to determine, in accordance with Section 11(b), the fair market value of the Shares; (iii) to determine, in
accordance with Section 11(a), the exercise price per share of Awards to be granted; (iv) to determine the Employees to whom, and the time or times at which, Awards shall be granted and the number of Shares to be represented by each Award; (v) to interpret the Plan; (vi) to prescribe, amend, and rescind rules and regulations relating to the Plan; including the form of Award Agreement, and manner of acceptance of an Award, (vii) to determine the terms and provisions of each Award to be granted (which need not be identical) and, with the consent of the Awardee, modify or amend each Award; (viii) to authorize Conversion or substitution under the Plan of any or all Conversion Options; (ix) to accelerate or, with the consent of the Awardee, defer the exercise date of any Option; (x) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Award previously granted by the Board; and (xi) to make all other determinations deemed
necessary or advisable for the administration of the Plan. 
 

The Board may, but need not, determine that an Award shall vest or be granted subject to the satisfaction of one or more performance goals.  Performance goals for Awards will be determined by the Committee and will be designed to support the Company’s business strategy and align executives’ interests with customer and shareholder interests.  For Awards that are intended to qualify as performance-based compensation under Section 162(m) of the Code, performance goals will be based on one or more of the following business criteria: premium volume, revenues, customer satisfaction, expenses, organizational health/productivity, earnings (which includes similar measurements such as net profits, operating profits, and net income, and which may be calculated before or after taxes, interest, depreciation, amortization or taxes), margins, cash flow, shareholder return, return on equity,
return on assets, return on investments, working capital, and/or stock price.  These criteria may be measured: individually, alternatively or in any combination; with respect to the Company, a subsidiary, division, business unit, product line, product or any combination of the foregoing; on an absolute basis, or relative to a target, to a designated comparison group, to results in other periods or to other external measures; and including or excluding items that could affect the measurement, such as extraordinary or unusual and nonrecurring gains or losses, litigation or claim judgments or settlements, material changes in tax laws, acquisitions or divestitures, the cumulative effect of accounting changes, asset write-downs, restructuring charges, or the results of discontinued operations. 

	
 
 	
c.
 	
Effect of Board’s Decision.  All decisions, determinations, and interpretations of the Board shall be final and binding on all Employees and Awardees. 
 

	
5.
 	
Eligibility. 
 

	
 
 	
a.
 	
Awards may be granted to Employees and to persons to whom offers of employment as an Employee have been extended; provided that Incentive Stock Options may only be granted to Employees.  Directors are not eligible to participate in the Plan unless they are Employees. 
 

	
 
 	
b.
 	
The maximum number of Shares with respect to which an Award or Awards may be granted to any Employee in any one taxable year of the Company (the “Maximum Annual Employee Award”) shall not exceed 200,000 Shares for Options or SARs, or 100,000 Shares for Stock Awards (increased, in both cases proportionately, in the event of any stock
split, stock dividend or similar event with respect to the Shares).   If an Option is in tandem with an SAR, such 
 

 

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that the exercise of the Option or SAR with respect to a Share cancels the tandem SAR or Option right, respectively, with respect to each Share, the tandem Option and SAR rights with respect to each Share shall be counted as covering but one Share for purposes of the Maximum Annual Employee Award. 

	
6.
 	
Options. 
 

	
 
 	
a.
 	
Each Option shall be designated in the option agreement as either an Incentive Stock Option or a Nonqualified Stock Option.  Notwithstanding such designations, to the extent that the aggregate fair market value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Employee during
any calendar year (under all plans of the Company) exceeds $100,000, such Options shall be treated as Nonqualified Stock Options. 
 

	
 
 	
b.
 	
For purposes of Section 6(a), Options shall be taken into account in the order in which they were granted, and the fair market value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. 
 

	
 
 	
c.
 	
Options converted or substituted under the Plan for any or all outstanding stock options and stock appreciation rights held by employees or other option holders granted by entities subsequently acquired by the Company or a subsidiary or affiliate of the Company (“Conversion Options”) shall be effective as of the close of the respective
mergers and acquisitions of such entities by the Company.  The Conversion Options may be Incentive Stock Options or Nonqualified Stock Options, as determined by the Committee; provided, however, that stock appreciation rights in the acquired entity shall only be converted to or substituted with Nonqualified Stock Options.  The Conversion Options shall be options to purchase the number of Shares determined by multiplying the number of shares of the acquired entity’s common stock underlying each such stock option or stock appreciation right immediately prior to the closing of such merger or acquisition by the number specified in the applicable merger or acquisition agreement for Conversion of each share of such entity’s common stock to a Share (the “Merger Ratio”).  Such Conversion Options shall be exercisable at an exercise price per Share (increased to the nearest whole cent) equal to the exercise price per share of the acquired entity’s common stock under
each such stock option or stock appreciation right immediately prior to closing divided by the Merger Ratio.  No fractional Shares will be issued upon exercise of Conversion Options.  In lieu of such issuance, the Shares issued pursuant to each such exercise shall be rounded to the closest whole Share.  All other terms and conditions applicable to such stock options and stock appreciation rights prior to closing of the acquisition, including vesting, shall remain unchanged under the Conversion Options. 
 

	
7.
 	
Stock Awards. 
 

	
 
 	
a.
 	
Stock Awards may be granted either alone, in addition to, or in tandem with other Awards granted under the Plan.  After the Committee determines that it will offer a Stock Award, it will advise the Awardee in writing or electronically, by means of an Award Agreement, of the terms, conditions and restrictions, including
vesting, if any, related to the offer, including the number of Shares that the Awardee shall be entitled to receive or purchase, the price to be paid, if any, and, if applicable, the time within which the Awardee must accept the offer.  The offer shall be accepted by execution of an Award Agreement in the manner determined by the Committee. 
 

	
 
 	
b.
 	
Unless the Committee determines otherwise, the Award Agreement shall provide for the forfeiture of the non-vested Shares underlying such Stock Award upon the Awardee ceasing to be an Employee.  To the extent that the Awardee purchased the Shares granted under such Stock Award and any such Shares remain non-vested at the time the Awardee ceases to
be an Employee, the cessation of Employee status shall cause an immediate sale of such non-vested Shares to the Company at the original price per Share paid by the Awardee. 
 

	
8.
 	
SARs. 
 

	
 
 	
a.
 	
The Committee shall have the full power and authority, exercisable in its sole discretion, to grant SARs to selected Awardees.  The Committee is authorized to grant both tandem stock appreciation rights (“Tandem SARs”) and stand-alone stock appreciation rights (“Stand-Alone SARs”) as described below. 
 

	
 
 	
b.
 	
Tandem SARs. 
 

	
 
 	
(i)
 	
Awardees may be granted a Tandem SAR, exercisable upon such terms and conditions as the Committee shall establish, to elect between the exercise of the underlying Section 6 Option or the surrender of the Option in exchange for a distribution from the Company in an amount equal to the excess of (A) the fair market value (on the Option surrender
date) of the number of Shares in which the Awardee is at the time vested under the surrendered Option (or surrendered portion thereof) over (B) the aggregate exercise price payable for such vested Shares. 
 

	
 
 	
(ii)
 	
No such Option surrender shall be effective unless it is approved by the Committee, either at the time of the actual Option surrender or at any earlier time.  If the surrender is so approved, then the distributions to which the 
 

 

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Awardee shall become entitled under this Section 8(b) may be made in Shares valued at fair market value on the Option surrender date, in cash, or partly in Shares and partly in cash, as the Committee shall deem appropriate. 

	
 
 	
(iii)
 	
If the surrender of an Option is not approved by the Committee, then the Awardee shall retain whatever rights he or she had under the surrendered Option (or surrendered portion thereof) on the Option surrender date and may exercise such rights at any time prior to the later of (A) five (5) business days after the receipt of the rejection notice
or (B) the last day on which the Option is otherwise exercisable in accordance with the terms of the instrument evidencing such Option, but in no event may such rights be exercised more than ten (10) years after the date of the Option grant. 
 

	
 
 	
c.
 	
Stand-Alone SARs. 
 

	
 
 	
(i)
 	
An Awardee may be granted a Stand-Alone SAR not tied to any underlying Option under Section 6.  The Stand-Alone SAR shall cover a specified number of Shares and shall be exercisable upon such terms and conditions as the Committee shall establish.  Upon exercise of the Stand-Alone SAR, the holder shall be entitled to receive a distribution from the
Company in an amount equal to the excess of (A) the aggregate fair market value (on the exercise date) of the Shares underlying the exercised right over (B) the aggregate base price in effect for those Shares. 
 

	
 
 	
(ii)
 	
The number of Shares underlying each Stand-Alone SAR and the base price in effect for those Shares shall be determined by the Committee at the time the Stand-Alone SAR is granted.  In no event, however, may the base price per Share be less than the fair market value per underlying Share on the grant date. 
 

	
 
 	
(iii)
 	
The distribution with respect to an exercised Stand-Alone SAR may be made in Shares valued at fair market value on the exercise date, in cash, or partly in Shares and partly in cash, as the Committee shall deem appropriate. 
 

	
 
 	
d.
 	
The Shares underlying any SARs exercised under this Section 8 shall not be available for subsequent issuance under the Plan. 
 

	
9.
 	
Term of Plan. The Plan was effective August 21, 1998.  This restatement of the Plan is effective February 15, 2008, the date of its adoption by the Board of Directors, subject to approval by the shareholders of the Company, as provided in Section 21.  The Plan shall continue in effect until terminated under Section 17. 
 

	
10.
 	
Term of Award; Vesting; Repricing. 
 

	
 
 	
a.
 	
The term of each Award shall be no more than ten (10) years from the date of grant. However, in the case of an Incentive Stock Option granted to an Employee who, at the time the Option is granted, owns Shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the term of
the Option shall be no more than five (5) years from the date of grant. 
 

	
 
 	
b.
 	
Each Award shall vest over a period of not more than five (5) years from the date of grant, provided, however, Awards that vest subject to the satisfaction of one or more performance goals may vest over a longer period of time.
 

	
 
 	
c.
 	
No Award may be repriced, replaced, regranted through cancellation, or modified without approval of the shareholders of the Company (except in connection with an adjustment pursuant to Section 14) if the effect would be to reduce the exercise price for the Shares underlying such Award. 
 

	
11.
 	
Exercise Price and Consideration. 
 

	
 
 	
a.
 	
The per Share exercise price under each Award shall be such price as is determined by the Board, subject to the following: 
 

	
 
 	
(i)
 	
In the case of an Incentive Stock Option granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the fair market value
per Share on the date of grant.  In the case of an Incentive Stock Option granted to any other Employee, the per Share exercise price shall be no less than 100% of the fair market value per Share on the date of grant. 
 

	
 
 	
(ii)
 	
Except for Conversion Options under Section 6(c), the per Share exercise price under a Nonqualified Stock Option or SAR shall be the fair market value per Share on the date of grant. 
 

 

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b.
 	
The fair market value per Share shall be the closing price per share of the Share on the The NASDAQ Stock Market, LLC (“NASDAQ”) on the date of grant.  If the Shares cease to be listed on NASDAQ, the Board shall designate an alternative method of determining the fair market value of the Shares. 
 

	
 
 	
c.
 	
Payment or provision for payment of the consideration to be paid for the Shares to be issued upon exercise of an Award shall be made as follows:
 

	
 
 	
(i)
 	
The Awardee shall deliver to the Company at the Company’s principal office payment in United States currency in an amount equal to the exercise price; or 
 

	
 
 	
(ii)
 	
The Awardee shall tender to the Company, by either actual delivery of certificates or by attestation, Shares already owned by the Awardee that, together with any cash tendered therewith, have an aggregate fair market value (determined based on the Fair Market Value of a Share on the exercise date) equal to the exercise price; or
 

	
 
 	
(iii)
 	
The Awardee shall deliver to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale proceeds necessary to pay the exercise price and to sell the Shares (or a sufficient portion of the Shares) to be issued upon exercise of the Award to pay the
exercise price and any tax withholding resulting from such exercise and deliver the remaining cash proceeds, less commissions and brokerage fees, or the remaining Shares to the Awardee.
 

Notwithstanding the foregoing provisions, the Committee may limit the methods by which an Awardee may exercise an Award.

	
 
 	
d.
 	
Prior to issuance of the Shares upon exercise of an Award, the Awardee shall pay any federal, state, and local income and employment tax withholding obligations applicable to such Award.  If an Awardee is an officer of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934, he or she may elect to pay such withholding
tax obligations by having the Company withhold Shares having a value equal to the amount required to be withheld, and any Award under the Plan may permit or require that such withholding tax obligations be paid by having the Company withhold Shares having a value equal to the amount required to be withheld.  The value of the Shares to be withheld shall equal the fair market value of the Shares on the day the Award is exercised.  The right of an officer to dispose of Shares to the Company in satisfaction of withholding tax obligations shall be deemed to be approved as part of the initial grant of an Award, unless thereafter rescinded, and shall otherwise be made in compliance with Rule 16b-3 and other applicable regulations, and any Award under the Plan may permit or require that such withholding tax obligations be paid by having the Company withhold Shares having a value equal to the amount required to be withheld. 
 

	
 
 	
12.
 	
Exercise of Award.
 

	
 
 	
a.
 	
Procedure for Exercise; Rights as a Shareholder.  Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Board at the time of grant, and as shall be permissible under the terms of the Plan. 
 

An Award may not be exercised for fewer than the lesser of ten Shares or the amount of Shares subject to the Award.  An Award may not be exercised for a fraction of a Share. 

An Award shall be deemed to be exercised when written or electronic notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been received by the Company.  Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 11(c).  Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the share certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares subject to the Award, notwithstanding the exercise of the Award.  The Company shall issue (or cause to be issued) such share certificate promptly upon
exercise of the Award.  If the exercise of an Award is treated in part as the exercise of an Incentive Stock Option and in part as the exercise of a Nonqualified Stock Option pursuant to Section 6(a), the Company shall issue a share certificate evidencing the Shares treated as acquired upon the exercise of an Incentive Stock Option and a separate share certificate evidencing the Shares treated as acquired upon the exercise of a Nonqualified Stock Option, and shall identify each such certificate accordingly in its share transfer records.  No adjustment will be made for a dividend or other right for which the record date is prior to the date the share certificate is issued, except as provided in Section 14. 

Exercise of an Award in any manner and delivery of the Shares subject to such Award shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Award, by the number of Shares as to which the Award is exercised. 

 

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b.
 	
Termination of Status as an Employee.  Upon termination of an Awardee’s Continuous Status as an Employee, such Awardee may exercise his or her rights under any outstanding Awards to the extent exercisable on the date of termination (but in no event later than the date of expiration of the term of such Award as set
forth in the Award Agreement).  To the extent that the Awardee was not entitled to exercise his or her rights under such Awards at the date of such termination, or does not exercise such rights within the time specified in the individual Award Agreements, the Awards shall terminate. 
 

	
 
 	
c.
 	
Disability of Awardee.  Notwithstanding the provisions of Section 12(b), in the event of termination of an Awardee’s Continuous Status as an Employee as a result of total and permanent disability (i.e., the inability to engage in any substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of twelve (12) months), the Awardee will vest in the Award, but only to the extent of the vesting that would have occurred had the Awardee remained in Continuous Status as an Employee for a period of twelve (12) months after the date on which the Employee ceased performing services as a result of the total and permanent disability.  An Option or SAR that is vested pursuant to this Section 12(c) must be exercised within eighteen (18) months (or such shorter time as is specified in the grant) from the date on which the Employee ceased performing services as a result of the total and permanent disability (but in no event later than the date of expiration of the term of such Option or SAR as set forth in the Award Agreement).  To the extent that the Awardee was not entitled to exercise such Option or SAR within the time specified herein, the Award shall
terminate. 
 

	
 
 	
d.
 	
Death of Awardee.  Notwithstanding the provisions of Section 12(b), in the event of the death of an Awardee: 
 

	
 
 	
(i)
 	
who is at the time of death an Employee, the Award will vest, but only to the extent of the vesting that would have occurred had the Awardee continued living and remained in Continuous Status as an Employee twelve (12) months following the date of death.  An Option or SAR that is vested pursuant to this Section 12(d)(i) may be exercised at
any time within twelve (12) months following the date of death by the Awardee’s estate or by a person who acquired the right to exercise the Award by bequest or inheritance; or 
 

	
 
 	
(ii)
 	
whose Option or SAR has not yet expired but whose Continuous Status as an Employee terminated prior to the date of death, the Option or SAR may be exercised, at any time within twelve (12) months following the date of death, by the Awardee’s estate or by a person who acquired the right to exercise the Option or SAR by bequest or inheritance,
but only to the extent of the right to exercise that had vested at the date of termination.
 

	
 
 	
e.
 	
Notwithstanding subsections (b), (c), and (d) of this Section 12, the Board shall have the authority to extend the expiration date of any outstanding Option in circumstances in which it deems such action to be appropriate (provided that no such extension shall extend the term of an Award beyond the date on which the Award would have expired if no
termination of the Employee’s Continuous Status as an Employee had occurred).
 

	
13.
 	
Non-Transferability of Awards.  An Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Awardee, only by the Awardee; provided that the Board may permit further transferability, on a general or specific basis, and may impose conditions and limitations on any permitted transferability. 
 

	
14.
 	
Adjustments to Shares Subject to the Plan. 
 

The number of Shares covered by each outstanding Award, the Maximum Annual Employee Award and the number of Shares that have been authorized for issuance under the Plan but as to which no Awards have yet been granted or that have been returned to the Plan upon cancellation or expiration of an Award, as well as the price per Share covered by each such outstanding Award, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination, or reclassification of the Shares, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.”  Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding, and conclusive.  Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award. 

In the event of the proposed dissolution or liquidation of the Company, the Award will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board.  The Board may, in the exercise of its sole discretion in such instances, declare that any Award shall terminate as of a date fixed by the Board and give each Awardee the right to exercise an Award as to all or any part of the Shares subject to an Award, including Shares as to which the Award would not otherwise be exercisable.  In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each Award shall be assumed or an equivalent 

 

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Award shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless such successor corporation does not agree to assume the Award or to substitute an equivalent Award, in which case the Board shall, in lieu of such assumption or substitution, provide for the Awardee to have the right to exercise the Award as to all of the Shares subject to Awards, including Shares as to which the Award would not otherwise be exercisable.  If the Board makes an Award fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify the Awardee that the Award shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Award will terminate upon the expiration of such period. 

	
15.
 	
Time of Granting Awards.  The date of grant of an Award shall, for all purposes, be the date on which the Company completes the corporate action relating to the grant of such Award and all conditions to the grant have been satisfied, provided that conditions to the grant, exercise, or vesting of an Award shall not defer the date of grant.  Notice of a grant shall be given to each Employee to whom an Award is so granted within a reasonable time after the determination has been made. 
 

	
16.
 	
Substitutions and Assumptions.  The Board shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies, provided such substitutions and assumptions are permitted by Section 424 of the Code and the regulations promulgated thereunder.  The number of Shares reserved pursuant to Section 3 may be increased by the corresponding number of Awards assumed and, in the case of a substitution, by
the net increase in the number of Shares subject to Awards before and after the substitution. 
 

	
17.
 	
Amendment and Termination of the Plan. 
 

	
 
 	
a.
 	
Amendment and Termination. The Board may amend or terminate the Plan from time to time in such respects as the Board may deem advisable (including, but not limited to amendments that the Board deems appropriate to enhance the Company’s ability to claim deductions related to stock option exercises); provided that any
increase in the number of Shares subject to the Plan, other than in connection with an adjustment under Section 14, and any amendment described in Section 10(c), shall require approval of or ratification by the shareholders of the Company. 
 

	
 
 	
b.
 	
Effect of Amendment or Termination.  Any such amendment or termination of the Plan shall not affect Awards already granted and such Awards shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Awardee and the Board, which agreement must be in
writing and signed by the Awardee and the Company. 
 

	
18.
 	
Conditions Upon Issuance of Shares.  Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such compliance. 
 

	
19.
 	
Reservation of Shares.  The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 
 

	
20.
 	
No Employment/Service Rights. Nothing in the Plan shall confer upon any Employee the right to an Award or to continue in service as an Employee for any period of specific duration, or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining such person), or of any Employee or Awardee, which rights are hereby expressly reserved by each, to terminate such person’s services at any time for any reason, with or without cause.

 

	
21.
 	
Shareholder Approval. The Plan, as amended and restated, is subject to approval by the shareholders of the Company. 
 

 

 

 

 

Approved by shareholders May 21, 2008.

 

 

7consultcontract.htm

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              Address:4
      Nersesian Way

            

    

     

    
      	
               
      

            	
              City/State/Zip:Hampton,
      NH 03842

            

    

     

    
      	
               
      

            	
              Telephone:603-502-7978

            

    

     

    

     

    
      	
               
      

            	
              1.Communication
      Intelligence Corporation (the "Company" or “CIC”) wishes to obtain your
      services as a consultant on projects agreed by you and the Company in
      writing.  The initial project on which you are to work is
      described in Exhibit A attached hereto.  This letter shall
      constitute an agreement ("the Agreement") between you and the Company and
      contains all the terms and conditions relating to the services you are to
      provide.  All work shall be work made for
  hire.

            

    

     

    
      	
               
      

            	
              2.Either
      you or the Company may terminate this Agreement at any time by at least
      thirty (30) days prior written
notice.

            

    

     

    
      	
               
      

            	
              3.As
      consideration for your services and other obligations you will be paid at
      the rate set forth on Exhibit A attached hereto for work on the
      project.

            

    

     

    
      	
               
      

            	
              4.
      It is agreed that you will use your own office space, supplies, tools,
      materials and office supplies.

            

    

     

    
      	
               
      

            	
              5.You
      shall be reimbursed for reasonable travel and other out-of-pocket expenses
      incurred by you in connection with your services under this Agreement,
      provided that you provide receipts and obtain prior approval of the
      officer of the Company named on Exhibit A (the "Responsible Officer") for
      such expenses. Expenses including, but not limited to, professional
      association membership fees, education, compensation to subcontractors and
      the cost of appropriate business insurance are not reimbursable by the
      Company as they are considered expenses incurred in maintaining a
      consulting business.

            

    

     

    
      	
               
      

            	
              6.Your
      relationship with the Company shall be that of an independent contractor
      and not that of an employee.  You will not be eligible for any
      employee benefits, nor will the Company make deductions from your fees nor
      make payment for social security, state or federal income tax, state or
      federal unemployment insurance, or disability insurance, all of which
      shall be your responsibility. The Company will not obtain workers'
      compensation insurance for you. You shall have no authority to enter into
      contracts which bind the company or create obligations on the part of the
      Company without the express prior written authorization of the
      Company.

            

    

     

    
      	
               
      

            	
              7.All
      services to be performed by you will be as agreed between you and the
      Responsible Officer of the Company. There will be no supervision exercised
      over the details, means or process of your work and the Company does not
      retain the right to control these details. You shall report to the
      Responsible Officer concerning your services performed under this
      Agreement. The nature and frequency of these reports will be left to the
      discretion of the Responsible Officer. This Agreement will have no formal
      reporting requirements except as to the progress of the project, which may
      be subject to a deadline.

            

    

     

    
      
        
        

      

      
        - 1 -

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              8.Consultant
      acknowledges that in connection with this Agreement it will receive
      information confidential and proprietary to CIC.  Consultant
      agrees not to use such information except in the performance of this
      Agreement, and not to disclose such information to any other party except
      for the purposes hereof and only to a party bound by like obligations of
      confidentiality.

            

    

     

    
      	
               
      

            	
              9.Neither
      Consultant nor any of its Associates shall remove any CIC property from
      CIC's premises without the prior written consent of CIC.  All
      Deliverables, established by this agreement, shall be the sole property of
      CIC, and Consultant hereby assigns to CIC all right, titles and interest
      in and to the Deliverables, including but not limited to all patent
      rights, copyrights (including audio-visual copyrights), trade secret
      rights and copyrights to future projects.  During and after the
      term of this Agreement, Consultant shall assist CIC and its nominees in
      every reasonable way, at CIC's expense, to document, secure, maintain and
      defend for CIC's own benefit in any and all countries all copyrights
      (including audio-visual copyrights), patent rights, trade secret rights
      and other proprietary rights in and to the
      Deliverables.  Consultant at CIC's request will execute whatever
      documents are necessary to secure CIC's rights in proprietary information
      including copyrights.

            

    

     

    
      	
               
      

            	
              10.The
      Company understands that you do not presently perform or intend to
      perform, during the term of this Agreement, consulting or other services
      for any other companies where your service might represent a conflict of
      interest to CIC (except for the companies, if any, listed in Exhibit B
      attached hereto).  If, however, you decide to do so, you agree
      to notify the Company in writing in advance (specifying the organization
      with which you propose to consult) and provide information sufficient to
      allow the Company to determine if such consulting would conflict with
      areas of interest to the Company or further services which the Company
      might request of you pursuant to this
Agreement.

            

    

     

    
      	
               
      

            	
              11.Provided
      it does not materially interfere with your performance under this
      Agreement, and subject to the notice provision of paragraph 10, you may,
      during the term of this Agreement, render services on your own account or
      for any other person or entity as a
consultant.

            

    

     

    
      	
               
      

            	
              12.You
      shall obtain business liability insurance and workers' compensation
      insurance, if required by law, covering yourself and/or your employees
      during the term of this Agreement. You may select the carrier for these
      insurance policies. You shall pay the premiums for these insurance
      policies and these premiums shall not be reimbursable by the
      Company.

            

    

     

    
      	
               
      

            	
              13.You
      are advised to seek independent tax and legal advice concerning this
      Agreement and are not relying on any tax, legal or other advice concerning
      this Agreement from the Company or from any other firms providing
      professional services for the
Company.

            

    

     

    
      	
               
      

            	
              14.Any
      amendment to this Agreement must be in writing signed by you and the
      Company.

            

    

     

    
      	
               
      

            	
              15.All
      notices, requests and other communications called for by this Agreement
      shall be deemed to have been given if made in writing and mailed, postage
      prepaid if to you at the address set forth above and if to the Company to
      Communication Intelligence Corporation, 275 Shoreline Drive, Suite 500,
      Redwood Shores, CA 94065, or to such other addresses as either party shall
      specify to the other.

            

    

    

    
      	
               
      

            	
                 16.The
      validity, performance and construction of this Agreement shall be governed
      by the laws of the State of California, without regard to those provisions
      related to choice of laws.

            

    

    

    

    
      	
               
      

            	
              17.This
      Agreement supersedes any prior consulting or other agreements between you
      and the Company.

            

    

    
      
        
          

           

           

        

         

      

      
        - 2
-  

        
          

        

      

      
         

      

    

     

    If this
Agreement is satisfactory, you should execute two copies, return one to us, and
retain a copy for your file.

     

    

     Sincerely,                                                                                      
AGREED AND ACCEPTED:

     

    Communication
Intelligence
Corporation                                                                                                          
GSMeyer & Associates LLC

     

    

    
    

     

    
      	
               BY:                      /s/
      Frank V. Dane

               

            	 BY:                         /s/Ellen
      Meyer  
	 Print
      Name:             
      Frank V. Dane	
               Print
      Name:              
       Ellen Meyer

               

            
	
               Title:                        
      Chief Financial & Legal Officer

               

            	 Title:                          
      Managing Director
	
               Date:                        
      1/9/2008

               

            	 Date:                          
      1/3/2008

    

     

     

    

    

    

    

    
      
        
          

           

           

        

         

      

      
        - 3
-  

        
          

        

      

      
         

      

    

    

    EXHIBIT
A

    

    

    

    DESCRIPTION
OF INITIAL CONSULTING PROJECT:

    

    Licensing
of CIC’s products to the target accounts as specified below.  The list
of target accounts may be amended, in writing, from time to time by mutual
agreement between the parities:

    

    GE    
WaMu

    State
Street Bank    ING (Eastern Europe)

    The
Hartford

    

    

    COMPENSATION
FOR INITIAL PROJECT:

    

    Seven
percent (7%) of license fees, professional service fees and of first year
maintenance fees on sales closed with target accounts.

    

    Payment
shall be made to Consultant within ten business days of receipt by CIC of
payment from the applicable customer.

    

    

    RESPONSIBLE COMPANY
OFFICER:Guido DiGregorio

    

    

    

    
      
        
          

           

           

        

         

      

      
        - 4
-  

        
          

        

      

      
         

      

    

    

    EXHIBIT
B

    

    

    LIST
OF COMPANIES WHICH MAY BE COMPETITIVE TO CIC FOR WHICH CONSULTING SERVICES ARE
PRESENTLY BEING PERFORMED:

    

    

    

    

    

    

     

     

     

     

     

    - 5 -

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