EXHIBIT 4.1
COMMUNICATION
INTELLIGENCE CORPORATION
1999
STOCK OPTION PLAN
The
purpose of this plan (the "Plan") is to secure for COMMUNICATION INTELLIGENCE
CORPORATION (the "Company") and its stockholders the benefits arising from
capital stock ownership by employees, officers, directors, consultants and other
service providers of the Company or an Affiliate (as that term is defined in the
Plan) who are expected to contribute to the Company's future growth and
success. The Plan is also designed to attract and retain other
persons who will provide services to the Company. Those provisions of
the Plan which make express reference to Section 422 of the Internal
Revenue Code of 1986, as amended or replaced from time to time (the "Code"),
shall apply only to Incentive Stock Options (as that term is defined in the
Plan).
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2.
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Type of Options and
Administration
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(a)
Types of
Options
. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors (the "Board") of the Company (or
the committee appointed by the Board in accordance with Section 2(b) below)
and may be either incentive stock options ("Incentive Stock Options") intended
to meet the requirements of Section 422 of the Code or non-statutory
options which are not intended to meet the requirements of Section 422 of
the Code ("Non-Qualified Options").
(b)
Administration
. The
Plan will be administered by the Board or by a committee consisting of two or
more directors each of whom shall be a "non-employee director," within the
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any successor Rule
("Rule 16b-3"), and an "outside director", within the meaning of Treasury
Regulation Section 1.162-27(e)(3) promulgated under Section 162(m) of
the Code, (the "Committee") appointed by the Board, in each case whose
construction and interpretation of the terms and provisions of the Plan shall be
final, conclusive and binding upon the optionee and all other persons interested
or claiming interests under the Plan. If the Board determines to
create a Committee to administer the Plan, the delegation of powers to the
Committee shall be consistent with applicable laws or regulations (including,
without limitation, applicable state law and Rule 16b-3). The
Board or the Committee may in its sole discretion grant options to purchase
shares of the Company's Common Stock, $0.01 par value per share ("Common
Stock"), and issue shares upon exercise of such options as provided in the
Plan. The Board or the Committee shall have authority, subject to the
express provisions of the Plan, to construe the respective option agreements and
the Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the respective option agreements,
which need not be identical; and to make all other determinations in the
judgment of the Board or the Committee necessary or desirable for the
administration of the Plan. The Board or the Committee may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any option agreement
in the
manner and to the extent it shall deem expedient to carry the Plan into effect
and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board shall be
liable for any action or determination under the Plan made in good
faith.
Options
may be granted to persons who are, at the time of grant, employees, officers,
directors, consultants or other service providers of the Company or any parent
or subsidiary of the Company as defined in Sections 424(e) and 424(f) of
the Code ("Affiliate"), provided that Incentive Stock Options may only be
granted to individuals who are employees (within the meaning of
Section 3401(c) of the Code) of the Company or any
Affiliate. Options may also be granted to other persons, provided
that such options shall be Non-Qualified Options. A person who has
been granted an option may, if he or she is otherwise eligible, be granted
additional options if the Board or the Committee shall so
determine. Notwithstanding anything in the Plan to the contrary, no
employee of the Company or an Affiliate shall be granted options with respect to
more than 2,000,000 shares of Common Stock during any calendar
year.
The stock
subject to options granted under the Plan shall be shares of authorized but
unissued or reacquired Common Stock. Subject to adjustment as
provided in Section 15 below, the maximum number of shares of Common Stock
of the Company which may be issued and sold under the Plan is
4,000,000. If an option granted under the Plan shall expire,
terminate or is cancelled for any reason without having been exercised in full,
the unpurchased shares subject to such option shall again be available for
subsequent option grants under the Plan.
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5.
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Forms of Option
Agreements
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As a
condition to the grant of an option under the Plan, each recipient of an option
shall execute an option agreement in such form not inconsistent with the Plan
and as may be approved by the Board or the Committee. The terms of
such option agreements may differ among recipients.
(a)
General
. The
purchase price per share of Common Stock issuable upon the exercise of an option
shall be determined by the Board or the Committee at the time of grant of such
option, provided, however, that such exercise price (i) in the case of
Incentive Stock Options, shall not be less than 100% of the Fair Market Value
(as hereinafter defined) of such Common Stock at the time of grant of such
option, and for Incentive Stock Options granted to a "10% Shareholder" (as
defined in Section 11(b)), shall not be less than 110% of such Fair Market
Value, and (ii) in the case of Non-Qualified Options, shall not be less
than 85% of such Fair Market Value. "Fair Market Value" of a share of
Common Stock of the Company as of a specified date for purposes of the Plan
shall mean the closing price of a share of the Common Stock on the principal
securities exchange (including but not limited to the Nasdaq
SmallCap
Market or the Nasdaq National Market) on which such shares are traded on the day
immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such shares are traded if no
shares were traded on such immediately preceding day, or if the shares are not
traded on a securities exchange, Fair Market Value shall be deemed to be the
average of the high bid and low asked prices of the shares in the
over-the-counter market on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded. If the shares are
not publicly traded, Fair Market Value of a share of Common Stock (including, in
the case of any repurchase of shares, any distributions with respect thereto
which would be repurchased with the shares) shall be determined in good faith by
the Board. In no case shall Fair Market Value be determined with
regard to restrictions other than restrictions which, by their terms, will never
lapse.
(b)
Payment of Purchase
Price
. Options granted under the Plan may provide for the
payment of the exercise price by delivery of cash or a check to the order of the
Company in an amount equal to the exercise price of such options, or by any
other means which the Board determines are consistent with the purpose of the
Plan and with applicable laws and regulations (including, without limitation,
the provisions of Rule 16b-3).
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7.
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Exercise Option
Period
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Subject
to earlier termination as provided in the Plan, each option and all rights
thereunder shall expire on such date as determined by the Board or the Committee
and set forth in the applicable option agreement, provided that such date shall
not be later than ten (10) years after the date on which the option is granted,
or as prescribed by Section 11(b) hereinbelow.
Each
option granted under the Plan shall be exercisable either in full or in
installments at such time or times and during such period as shall be set forth
in the option agreement evidencing such option, subject to the provisions of the
Plan. Subject to the requirements in the immediately preceding
sentence, if an option is not at the time of grant immediately exercisable, the
Board or the Committee may (i) in the agreement evidencing such option,
provide for the acceleration of the exercise date or dates of the subject option
upon the occurrence of specified events and/or (ii) at any time prior to
the complete termination of an option, accelerate the exercise date or dates of
such option.
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9.
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Nontransferability of
Options
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No option
granted under this Plan shall be assignable or otherwise transferable by the
optionee, except by will or by the laws of descent and
distribution. An option may be exercised during the lifetime of the
optionee only by the optionee.
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10.
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Effect of Termination
of Employment or Other
Relationship
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(a)
Except as
provided in Section 11(d) with respect to Incentive Stock Options and
except as may otherwise be determined by the Board or the Committee at the date
of grant of an option, and subject to the provisions of the Plan, an optionee
may exercise an option at any time within three (3) months following the
termination of the optionee's employment or other relationship with the Company
and its Affiliates or within one (1) year if such
termination
was due to the death or disability (within the meaning of Section 22(e)(3)
of the Code or any successor provisions thereto) of the optionee (to the extent
such option is otherwise exercisable at the time of such termination) but in no
event later than the expiration date of the option.
(b)
Notwithstanding
the foregoing and except as may otherwise be determined by the Board or the
Committee, if the termination of the optionee's employment or other relationship
with the Company and/or its Affiliate is for cause, the option shall expire
immediately upon such termination. The Board or the Committee shall
have the power to determine, in its sole discretion, what constitutes a
termination for cause, whether an optionee has been terminated for cause, and
the date upon which such termination for cause occurs. Any such
determinations shall be final and conclusive and binding upon the optionee and
all other persons interested or claiming interests under the Plan.
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11.
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Incentive Stock
Options
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Options
granted under the Plan which are intended to be Incentive Stock Options shall be
subject to the following additional terms and conditions:
(a)
Express
Designation
. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b)
10%
Shareholder
. If any employee to whom an Incentive Stock Option
is to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i)
the
purchase price per share of the Common Stock subject to such Incentive Stock
Option shall not be less than 110% of the Fair Market Value of one share of
Common Stock at the time of grant; and
(ii)
the
option exercise period shall not exceed five (5) years from the date of
grant.
(c)
Dollar
Limitation
. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate Fair Market Value, as of the
respective date or dates of grant, of more than $100,000.
(d)
Termination of Employment,
Death or Disability
. No Incentive Stock Option may be
exercised unless, at the time of such exercise, the optionee is, and has been
continuously since the date of grant of his or her option, employed by the
Company or an Affiliate, except that:
(i)
an
Incentive Stock Option may be exercised within the period of three (3) months
after the date the optionee ceases to be an employee of the Company or an
Affiliate (or within such lesser period as may be specified in the applicable
option agreement), to the extent it is otherwise exercisable at the time of such
cessation,
(ii)
if the
optionee dies while in the employ of the Company or an Affiliate, or within
three (3) months after the optionee ceases to be such an employee, the Incentive
Stock Option may be exercised by the person to whom it is transferred by will or
the laws of descent and distribution within the period of one (1) year after the
date of death (or within such lesser period as may be specified in the
applicable option agreement), to the extent it is otherwise exercisable at the
time of the optionee's death, and
(iii)
if the
optionee becomes disabled (within the meaning of Section 22(e)(3) of the
Code or any successor provisions thereto) while in the employ of the Company or
an Affiliate, the Incentive Stock Option may be exercised within the period of
one (1) year after the date the optionee ceases to be such an employee because
of such disability (or within such lesser period as may be specified in the
applicable option agreement), to the extent it is otherwise exercisable at the
time of such cessation.
For all
purposes of the Plan and any option granted hereunder, "employment" shall be
defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor
regulations). Notwithstanding the foregoing provisions, no Incentive
Stock Option may be exercised after its expiration date.
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12.
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Additional
Provisions
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(a)
Additional Option
Provisions
. The Board or the Committee may, in its sole
discretion, include additional provisions in option agreements covering options
granted under the Plan, including without limitation, restrictions on transfer,
repurchase rights, rights of first refusal, commitments to pay cash bonuses or
to make, arrange for or guaranty loans or to transfer other property to
optionees upon exercise of options, or such other provisions as shall be
determined by the Board or the Committee, provided that such additional
provisions shall not be inconsistent with the requirements of applicable law and
such additional provisions shall not cause any Incentive Stock Option granted
under the Plan to fail to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Code.
(b)
Acceleration, Extension,
Etc
. The Board or the Committee may, in its sole discretion
(i) accelerate the date or dates on which all or any particular option or
options granted under the Plan may be exercised, or (ii) extend the dates
during which all, or any particular, option or options granted under the Plan
may be exercised, provided, however, that no such acceleration or extension
shall be permitted if it would (i) cause any Incentive Stock Option granted
under the Plan to fail to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Code, or (ii) cause the Plan or any
option granted under the Plan to fail to comply with Rule 16b-3 (if
applicable to the Plan or such option).
(a)
Investment
Representations
. The Board or the Committee may require any
person to whom an option is granted, as a condition of exercising such option or
award, to give written assurances in substance and form satisfactory to the
Board or the Committee to the effect that such person is acquiring the Common
Stock subject to the option or award for his or her own account for investment
and not with any present intention of selling or otherwise distributing the
same, and to such other effects as the Board or the Committee deems necessary or
appropriate in order to comply with applicable federal and state securities
laws, or with covenants or representations made by the Company in connection
with any public offering of its Common Stock, including any "lock-up" or other
restriction on transferability.
(b)
Compliance With Securities
Law
. Each option shall be subject to the requirement that if,
at any time, counsel to the Company shall determine that the listing,
registration or qualification of the shares subject to such option or award upon
any securities exchange or automated quotation system or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
or that the disclosure of non-public information or the satisfaction of any
other condition, is necessary as a condition of, or in connection with the
issuance or purchase of shares thereunder, except to the extent expressly
permitted by the Board, such option or award may not be exercised, in whole or
in part, unless such listing, registration, qualification, consent or
approval
or satisfaction of such condition shall have been effected or obtained on
conditions acceptable to the Board or the Committee. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration, qualification, consent or approval, or to satisfy such
condition. In addition, Common Stock issued upon the exercise of
options may bear such legends as the Company may deem advisable to reflect
restrictions which may be imposed by law, including, without limitation, the
Securities Act of 1933, as amended, any state "blue sky" or other applicable
federal or state securities law.
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14.
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Rights as a
Stockholder
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The
holder of an option shall have no rights as a stockholder with respect to any
shares covered by the option (including, without limitation, any right to vote
or to receive dividends or non-cash distributions with respect to such shares)
until the effective date of exercise of such option and then only to the extent
of the shares of Common Stock so purchased. No adjustment shall be
made for dividends or other rights for which the record date is prior to the
date of exercise.
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15.
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Adjustment
Provisions for Recapitalizations,
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Reorganizations and
Related Transactions
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(a)
Recapitalizations and
Related Transactions
. If, through or as a result of any
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction (i) the outstanding shares of Common
Stock are increased, decreased or exchanged for a different number or kind of
shares or
other securities of the Company, or (ii) additional shares or new or
different shares or other non-cash assets are distributed with respect to such
shares of Common Stock or other securities, an appropriate and proportionate
adjustment shall be made in (x) the maximum number and kind of shares
reserved for issuance under or otherwise referred to in the Plan, (y) the
number and kind of shares or other securities subject to any then-outstanding
options under the Plan, and (z) the price for each share subject to any
then-outstanding options under the Plan, without changing the aggregate purchase
price as to which such options remain exercisable. Notwithstanding
the foregoing, no adjustment shall be made pursuant to this Section 15 if
such adjustment (A) would cause any Incentive Stock Option granted under
the Plan to fail to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code, (B) would cause the Plan or any option
granted under the Plan to fail to comply with Rule 16b-3 (if applicable to
the Plan or such option), or (C) would be considered as the adoption of a
new plan requiring stockholder approval.
(b)
Board Authority to Make
Adjustments
. Any adjustments under this Section 15 will
be made by the Board or the Committee, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
Nothing
contained in the Plan or in any option agreement shall confer upon any optionee
any right with respect to the continuation of his or her employment or other
relationship with the Company or an Affiliate or interfere in any way with the
right of the Company or an Affiliate at any time to terminate such employment or
relationship or to increase or decrease the compensation of the
optionee.
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17.
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Amendment,
Modification or Termination of the
Plan
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(a)
The Board
may at any time modify, amend or terminate the Plan, provided that to the extent
required by applicable law, any such modification, amendment or termination
shall be subject to the approval of the stockholders of the
Company.
(b)
The
modification, amendment or termination of the Plan shall not, without the
consent of an optionee, affect his or her rights under an option previously
granted to him or her. With the consent of the optionee affected, the
Board or the Committee may amend or modify outstanding option agreements in a
manner not inconsistent with the Plan. Notwithstanding the foregoing,
the Board shall have the right (but not the obligation), without the consent of
the optionee affected, to amend or modify (i) the terms and provisions of
the Plan and of any outstanding Incentive Stock Option agreements to the extent
necessary to qualify any or all such options for such favorable federal income
tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, (ii) the terms
and provisions of the Plan and the option agreements entered into in connection
with any outstanding options to the extent necessary to ensure the qualification
of the Plan and such options under Rule 16b-3 (if applicable to
the Plan
and such options), and (iii) the terms and provisions of the Plan and the
option agreements entered into in connection with any outstanding options to the
extent that the Board determines necessary to preserve the deduction of
compensation paid to certain optionees who are "covered employees," within the
meaning of Treasury Regulation Section 1.162-27(c)(2), as a result of the
grant or exercise of options under the Plan.
(a)
The
Company shall have the right to deduct and withhold from payments or
distributions of any kind otherwise due to the optionee any federal, state or
local taxes of any kind required by law to be so deducted and withheld with
respect to any shares issued upon exercise of options under the
Plan. Subject to the prior approval of the Company, which may be
withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part by (i) causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option, (ii) delivering to the Company shares of Common Stock already
owned by the optionee, or (iii) delivering to the Company cash or a check
to the order of the Company in an amount equal to the amount required to be so
deducted and withheld. The shares delivered in accordance with method
(ii) above or withheld in accordance with method (i) above shall have a Fair
Market Value equal to such withholding obligation as of the date that the amount
of tax to be withheld is to be determined. An optionee who has made
(with the Company's approval) an election pursuant to method (i) or (ii) of this
Section 18(a) may only satisfy his or her withholding obligation with
shares of Common Stock which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.
(b)
The
acceptance of shares of Common Stock upon exercise of an Incentive Stock Option
shall constitute an agreement by the optionee (i) to notify the Company if
any or all of such shares are disposed of by the optionee within two (2) years
from the date the option was granted or within one (1) year from the date the
shares were issued to the optionee pursuant to the exercise of the option, and
(ii) if required by law, to remit to the Company, at the time of and in the
case of any such disposition, an amount sufficient to satisfy the Company's
federal, state and local withholding tax obligations with respect to such
disposition, whether or not, as to both (i) and (ii), the optionee is in the
employ of the Company or an Affiliate at the time of such
disposition.
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19.
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Cancellation and New
Grant of Options, etc.
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The Board
or the Committee shall have the authority to effect, at any time and from time
to time, with the consent of the affected optionee(s) the (i) cancellation
of any or all outstanding options under the Plan and the grant in substitution
therefor of new options under the Plan (or any successor stock option plan of
the Company) covering the same or different numbers of shares of Common Stock
and having an option exercise price per share which may be lower or higher than
the exercise price per share of the cancelled options, or (ii) amendment of
the terms of the option agreements entered into in connection with any and all
outstanding options under the Plan to provide an option exercise price per share
which is higher or lower than the then-current exercise price per share of such
outstanding options.
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20.
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Effective Date and
Duration of the Plan
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(a)
Effective
Date
. The Plan shall become effective when adopted by the
Board, but no Incentive Stock Option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
stockholders. If such stockholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, no
options previously granted under the Plan shall be deemed to be Incentive Stock
Options and no Incentive Stock Options shall be granted
thereafter. Amendments to the Plan shall become effective as of the
latest of (i) the date of adoption by the Board, (ii) the date set
forth in the amendments or (iii) in the case of any amendment requiring
stockholder approval (as set forth in Section 17), the date such amendment
is approved by the Company's stockholders. Notwithstanding the
foregoing, no Incentive Stock Option granted on or after the effective date of
such amendment shall become exercisable unless and until such amendment shall
have been approved by the Company's stockholders. If such stockholder
approval is not obtained within twelve (12) months of the Board's adoption of
such amendment, no options granted on or after the effective date of such
amendment shall be deemed Incentive Stock Options and no Incentive Stock Options
shall be granted thereafter. Subject to above limitations, options
may be granted under the Plan at any time after the effective date of the Plan
and before the date fixed for termination of the Plan.
(b)
Termination
. Unless
sooner terminated by the Board, the Plan shall terminate upon the close of
business on the day next preceding the tenth anniversary of the date of its
adoption by the Board. After termination of the Plan, no further
options may be granted under the Plan; provided, however, that such termination
will not affect any options granted prior to termination of the
Plan.
The
provisions of this Plan shall be governed and construed in accordance with the
laws of the State of California without regard to the principles thereof
relating to the conflicts of laws.
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22.
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Provision of
Information to Award
Recipients
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The
Company shall annually provide each holder of an Award with the information
required by Section 260.140.46 of the Regulations of the
California Commissioner of Corporations.
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