Document:

ex10-2.htm

    
      

      
Exhibit
      10.2

    WORLDS.COM,
      INC.

    

    2007
      Stock Option Plan

    

    1.     Purpose.
      The purpose of this 2007 Stock Option Plan (the “Plan”) is to aid
      Worlds.com, Inc., a New Jersey corporation (the “Company”), in attracting,
      retaining, motivating and rewarding employees (including executive officers
      and
      employee directors) and non-employee directors and consultants who provide
      substantial services to the Company or its subsidiaries or affiliates, to
      provide for equitable and competitive compensation opportunities, to recognize
      individual contributions and reward achievement of Company goals, and promote
      the creation of long-term value for stockholders by closely aligning the
      interests of Participants with those of stockholders.  The Plan
      authorizes stock-based incentives for Participants.

    

    2.     Definitions.
      In addition to the terms defined in Section 1 above and elsewhere in
      the Plan, the following capitalized terms used in the Plan have the respective
      meanings set forth in this Section:

    
      	
               

            	
               

            
	
               

            	
              (a) “Award”
                means an Incentive Stock Option, together with any related right
                or
                interest, granted to a Participant under the Plan.

            
	
               

            	 
	
               

            	
              (b) “Beneficiary”
                means the legal representatives of the Participant’s estate entitled by
                will or the laws of descent and distribution to receive the benefits
                under
                a Participant’s Award upon a Participant’s death, provided that, if and to
                the extent authorized by the Committee, a Participant may be permitted
                to
                designate a Beneficiary, in which case the “Beneficiary” instead will be
                the person, persons, trust or trusts (if any are then surviving)
                which
                have been designated by the Participant in his or her most recent
                written
                beneficiary designation filed with the Committee to receive the benefits
                specified under the Participant’s Award upon such Participant’s death,
                provided such person, if an individual, is such Participant’s parent,
                grand-parent, parent-in-law, child, sibling, grandchild or other
                lineal
                descendant or the current spouse of each of the foregoing, and if
                an
                entity, is a family partnership or a trust or estate of which the
                primary
                beneficiary is the Participant or any of the aforementioned individuals.
                Unless otherwise determined by the Committee, the designation of
                a
                Beneficiary other than a Participant’s spouse shall be subject to the
                written consent of such spouse.

            
	
               

            	 
	
               

            	
              (c) “Board”
                means the Company’s Board of Directors.

            
	
               

            	 
	
               

            	
              (d) “Change
                of Control” means (i) the sale of all of the Company’s outstanding capital
                stock to a person(s) or entity(ies) not previously a 5% owner (directly
                or
                indirectly) of any class of the Company’s equity (on a fully diluted
                basis) and is not controlling, controlled by or under common control
                with
                such a 5% owner, nor the spouse or descendant (by birth or adoption)
                of
                such a 5% owner, nor a trust for the beneficiary of such a 5% owner
                or
                (ii) a transaction that qualifies as a “Deemed Liquidation Event” as
                defined in the Company’s Restated Certificate of
                Incorporation.

            
	 	 
	
               

            	
              (e) “Code”
                means the Internal Revenue Code of 1986, as amended. References to
                any
                provision of the Code or regulation (including a proposed regulation)
                thereunder shall include any successor provisions and
                regulations.

            
	
               

            	 
	
               

            	
              (f) “Committee”
                means (i) the Company’s Compensation Committee or (ii) a committee of two
                or more directors designated by the Board to administer the
                Plan.  In appointing members of the Committee, the Board will
                consider whether a member is or will be a Qualified Member, but such
                members are not required to be Qualified Members at the time of
                appointment or during their term of service on the
                Committee.

            

    

    

    
      	
               

            	
              (g) “Effective
                Date” means the effective date specified in Section
                8(o).

            

    

    

    
      	
               

            	
              (h) “Eligible
                Person” has the meaning specified in Section 5.

            
	
               

            	 
	
               

            	
              (i) “Exchange
                Act” means the Securities Exchange Act of 1934, as amended. References
                to
                any provision of the Exchange Act or rule (including a proposed rule)
                thereunder shall include any successor provisions and
                rules.

            
	
               

            	 
	
               

            	
              (j) “Fair
                Market Value” shall mean the amount determined by the Committee, except
                that if the Stock is listed on a national securities exchange (or
                traded
                on the over-the-counter market), the fair market value shall be the
                closing price of the Stock on such exchange (or market as reported
                by the
                National Quotation Bureau) on the day on which an Award is granted
                hereby
                (or with respect to another event requiring the valuation of the
                Stock,
                the closing price on the appropriate date as determined by the Committee),
                or, if there is no trading or closing price on that day, the closing
                price
                on the most recent day preceding the day for which such prices are
                available.

            
	
               

            	 
	
               

            	
              (k) “Incentive
                Stock Option” or “ISO” means any Option designated as an incentive stock
                option within the meaning of Code Section 422 or any successor
                provision thereto and qualifying thereunder.

            
	
               

            	 
	
               

            	
              (l) “Option”
                means a right, granted to a Participant under Section 6(b), to purchase
                Stock at a specified price during specified time
                periods.

            
	
               

            	 
	
               

            	
              (m) “Qualified
                Member” means a member of the Committee who is a “Non-Employee Director”
                within the meaning of Rule 16b-3(b)(3) and an “outside director”
                within the meaning of Regulation 1.162-27 under Code
                Section 162(m).

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              (n) “Rule 16b-3”
                means Rule 16b-3, as from time to time in effect and applicable to
                Participants, promulgated by the Securities and Exchange Commission
                under
                Section 16 of the Exchange Act.

            
	 	 
	
               

            	
              (o)
                “Section 16(b)” means Section 16(b) of the Exchange
                Act.

            
	 	 
	
               

            	
              (p) “Stock”
                means the Company’s Common Stock, par value $.001 per share, and any other
                equity securities of the Company that may be substituted or resubstituted
                for Stock pursuant to
                Section 8(c).

            

    

     

                    3.     Administration.

         

               (a)    Authority
      of the Committee.  The Plan shall be administered by the
      Committee (subject to the Board’s authority to restrict the Committee), which
      shall have full and final authority, in each case subject to and consistent
      with
      the provisions of the Plan, to select Eligible Persons to become Participants;
      to grant Awards; to determine the type and number of Awards, the dates on which
      Awards may be exercised and on which the risk of forfeiture or deferral period
      relating to Awards shall lapse or terminate, the acceleration of any such dates,
      the expiration date of any Award, whether, to what extent, and under what
      circumstances an Award may be settled, or the exercise price of an Award may
      be
      paid, in cash, Stock, or other property, and other terms and conditions of,
      and
      all other matters relating to, Awards; to prescribe documents evidencing or
      setting terms of Awards (such Award documents need not be identical for each
      Participant), amendments thereto, and rules and regulations for the
      administration of the Plan and amendments thereto; to construe and interpret
      the
      Plan and Award documents and correct defects, supply omissions or reconcile
      inconsistencies therein; and to make all other decisions and determinations
      as
      the Committee may deem necessary or advisable for the administration of the
      Plan.  Decisions of the Committee with respect to the administration
      and interpretation of the Plan shall be final, conclusive, and binding upon
      all
      persons interested in the Plan, including Participants, Beneficiaries,
      transferees under Section 8(b) and other persons claiming rights from or
      through a Participant, and stockholders.  The foregoing
      notwithstanding, the Board shall perform the functions of the Committee if
      the
      Committee is not established.

         

               (b)            Manner
      of Exercise of Committee Authority.  At any time that a member of
      the Committee is not a Qualified Member, (i) any action of the Committee
      relating to an Award intended by the Committee to qualify as “performance-based
      compensation” within the meaning of Code Section 162(m) and regulations
      thereunder may be taken by a subcommittee, designated by the Committee or the
      Board, composed solely of two or more Qualified Members, and (ii) any
      action relating to an Award granted or to be granted to a Participant who is
      then subject to Section 16 of the Exchange Act in respect of the Company
      may be taken either by such a subcommittee or by the Committee but with each
      such member who is not a Qualified Member abstaining or recusing himself or
      herself from such action, provided that, upon such abstention or recusal, the
      Committee remains composed solely of two or more Qualified Members. Such action,
      authorized by such a subcommittee or by the Committee upon the abstention or
      recusal of such non-Qualified Member(s), shall be the action of the Committee
      for purposes of the Plan.  The express grant of any specific power to
      the Committee, and the taking of any action by the Committee, shall not be
      construed as limiting any power or authority of the Committee.  The
      Committee may delegate to officers or managers of the Company or any subsidiary
      or affiliate, or committees thereof, the authority, subject to such terms as
      the
      Committee shall determine, to perform such functions, including administrative
      functions, as the Committee may determine.  Notwithstanding the
      foregoing, no action may be taken pursuant to this Section 3(b) if such
      action would result in the loss of an exemption under Rule 16b-3(d) for
      Awards granted to Participants subject to Section 16 of the Exchange Act in
      respect of the Company and would cause Awards intended to qualify as
“performance-based compensation” under Code Section 162(m) to fail to so
      qualify.

         

                (c)            Limitation
      of Liability.  The Committee and each member thereof, and any
      person acting pursuant to authority delegated by the Committee, shall be
      entitled, in good faith, to rely or act upon any report or other information
      furnished by any executive officer, other officer or employee of the Company
      or
      a subsidiary or affiliate, the Company’s independent auditors, consultants or
      any other agents assisting in the administration of the Plan.  Members
      of the Committee, any person acting pursuant to authority delegated by the
      Committee, and any officer or employee of the Company or a subsidiary or
      affiliate acting at the direction or on behalf of the Committee or a delegee
      shall not be personally liable for any action or determination taken or made
      in
      good faith with respect to the Plan, and shall, to the extent permitted by
      law,
      be fully indemnified and protected by the Company with respect to any such
      action or determination.

    

    4.     Stock
      Subject to Plan.

    

               (a)            Overall
      Number of Shares Available for Delivery.  Subject to adjustment
      as provided in Section 11(c), the total number of shares of Stock reserved
      and available for delivery in connection with Awards under the Plan shall be
      25,000,000, of which 22,000,000 will be ISOs and the balance will be
      non-qualified or non-incentive stock options pursuant to Code section
      423.  Any shares of Stock delivered under the Plan shall consist of
      authorized and unissued shares or treasury shares.

         

                              
      (b)            Share
      Counting Rules.  The Committee may adopt reasonable counting
      procedures to ensure appropriate counting, avoid double counting (as, for
      example, in the case of tandem or substitute awards) and make adjustments if
      the
      number of shares of Stock actually delivered differs from the number of shares
      previously counted in connection with an Award.  Shares subject to an
      Award that is canceled, expired, forfeited, settled in cash or otherwise
      terminated without a delivery of shares to the Participant will again be
      available for Awards, and shares withheld in payment of the exercise price
      or
      taxes relating to an Award and shares equal to the number surrendered in payment
      of any exercise price or taxes relating to an Award shall be deemed to
      constitute shares not delivered to the Participant and shall be deemed to again
      be available for Awards under the Plan.  In addition, in the case of
      any Award granted in substitution for an award of a company or business acquired
      by the Company or a subsidiary or affiliate, shares issued or issuable in
      connection with such substitute Award shall not be counted against the number
      of
      shares reserved under the Plan, but shall be available under the Plan by virtue
      of the Company’s assumption of the plan or arrangement of the acquired company
      or business. This Section 4(b) shall apply to the number of shares reserved
      and available for ISOs only to the extent consistent with applicable regulations
      relating to ISOs under the Code.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5.     Eligibility.
      Awards may be granted under the Plan only to Eligible Persons. For purposes
      of
      the Plan, an “Eligible Person” means an employee of the Company or any
      subsidiary or affiliate, including any executive officer and an employee
      director of the Company or a subsidiary or affiliate, and any person who has
      been offered employment by the Company or a subsidiary or affiliate, provided
      that such prospective employee may not receive any payment or exercise any
      right
      relating to an Award until such person has commenced employment with the Company
      or a subsidiary or affiliate. An employee on leave of absence may be considered
      as still in the employ of the Company or a subsidiary or affiliate for purposes
      of eligibility for participation in the Plan.  For purposes of the
      Plan, a joint venture in which the Company or a subsidiary has a substantial
      direct or indirect equity investment shall be deemed an affiliate, if so
      determined by the Committee.

         

    6.     Specific
      Terms of Awards.

    

               (a)           General.  Awards
      may be granted on the terms and conditions set forth in this
      Section 6.  In addition, the Committee may impose on any Award or
      the exercise thereof, at the date of grant or thereafter (subject to
      Section 8(e)), such additional terms and conditions, not inconsistent with
      the provisions of the Plan, as the Committee shall determine, including terms
      requiring total or partial forfeiture of Awards (at no cost to the Company)
      in
      the event of termination of employment or service by the Participant and terms
      permitting a Participant to make elections relating to his or her
      Award.  The Committee shall retain full power and discretion with
      respect to any term or condition of an Award that is not mandatory under the
      Plan.  The Committee shall require the payment of lawful consideration
      for an Award to the extent necessary to satisfy the requirements of the New
      York
      Business Corporation Law, and may otherwise require payment of consideration
      for
      an Award except as limited by the Plan.

         

               (b)            Options.
      The Committee is authorized to grant Options to Eligible Persons on the
      following terms and conditions:

    
      	 	 
	
               

            	
              (i) Exercise
                Price.  The exercise price per share of Stock purchasable
                under an Option shall be determined by the Committee, provided that
                such
                exercise price shall be not less than the Fair Market Value of a
                share of
                Stock on the date of grant of such Option (or 110% of the Fair Market
                Value with respect to an Award to a 10% shareholder).

            
	
               

            	 
	
               

            	
              (ii) 
                Option Term; Time and Method of Exercise.  The
                Committee shall determine the term of each Option, provided that
                in no
                event shall the term of any ISO exceed a period of ten years from
                the date
                of grant (or five years for a person owning 10% or more of the Company’s
                outstanding Stock.  The Committee shall determine the time or
                times at which or the circumstances under which an Option may be
                exercised
                in whole or in part (including based on achievement of performance
                goals
                and/or future service requirements), the methods by which such exercise
                price may be paid or deemed to be paid and the form of such payment
                (subject to Section 8(k)), including, without limitation, cash, stock
                or awards granted under other plans of the Company or any subsidiary
                or
                affiliate, or other property (including notes and other contractual
                obligations of Participants to make payment on a deferred basis,
                such as
                through “cashless exercise” arrangements, to the extent permitted by
                applicable law), and the methods by or forms in which Stock will
                be
                delivered or deemed to be delivered in satisfaction of Options to
                Participants (including deferred delivery of shares representing
                the
                Option “profit,” at the election of the Participant or as mandated by the
                Committee, with such deferred shares subject to any vesting, forfeiture
                or
                other terms as the Committee may specify), provided that no arrangement
                shall be valid if it shall have the effect of causing the Award to
                lose
                its status as an ISO under Code Section 422.

            
	
               

            	 
	
               

            	
              (iii)
                 ISOs.  The terms of any ISO granted under the
                Plan shall comply in all respects with the provisions of Code
                Section 422, including but not limited to the requirements that (i)
                no ISO shall be granted more than ten years after the Effective Date,
                (ii)
                no Participant may have more than $100,000 of stock underlying ISOs
                vest
                in any calendar year, based upon the value of the underlying stock
                on the
                date of grant and (iii) upon the termination of a Participant’s employment
                with the Company for any reason other than death, the ISO will expire
                at
                the earlier of (x) the ISO’s Expiration Date or (y) three months from the
                date of the Participant’s termination or twelve months if the termination
                was for a permanent disability.

            

    

         

    7.      Certain
      Provisions Applicable to Awards.

    

               (a)            Stand-Alone,
      Additional, Tandem, and Substitute Awards. Awards granted under the Plan
      may, in the discretion of the Committee, be granted either alone or in addition
      to, in tandem with, or in substitution or exchange for, any other Award or
      any
      award granted under another plan of the Company, any subsidiary or affiliate,
      or
      any business entity to be acquired by the Company or a subsidiary or affiliate,
      or any other right of a Participant to receive payment from the Company or
      any
      subsidiary or affiliate.  Awards granted in addition to or in tandem
      with other Awards or awards may be granted either as of the same time as or
      a
      different time from the grant of such other Awards or awards.  Subject
      to Section 8(k), the Committee may determine that, in granting a new Award,
      the in-the-money value of any surrendered Award or Award may be applied to
      reduce the exercise price of any Option.

       

               (b)            Exemptions
      from Section 16(b) Liability.  With respect to a Participant
      who is then subject to the reporting requirements of Section 16(a) of the
      Exchange Act in respect of the Company, the Committee shall implement
      transactions under the Plan and administer the Plan in a manner that will
      attempt to ensure that each transaction with respect to such a Participant
      is
      exempt from liability under Rule 16b-3 (or otherwise not subject to
      liability under Section 16(b)), except that this provision shall not limit
      sales by such a Participant, and such a Participant may engage in other
      non-exempt transactions under the Plan.  The Committee may authorize
      the Company to repurchase any Award or shares of Stock deliverable or delivered
      in connection with any Award (subject to Section 8(k)) to avoid a
      Participant who is subject to Section 16 of the Exchange Act incurring
      liability under Section 16(b).  Unless otherwise specified by the
      Participant, equity securities or derivative securities acquired under the
      Plan
      which are disposed of by a Participant shall be deemed to be disposed of in
      the
      order acquired by the Participant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

               (c)           Loan
      Provisions.  With the Committee’s consent, and subject at all
      times to, and only to the extent, if any, permitted under and in accordance
      with, laws and regulations and other binding obligations or provisions
      applicable to the Company (including without limitation, [the applicable
      provisions] [Section 3.3(e)] of the Company’s Restated Certificate of
      Incorporation), the Company may make, guarantee, or arrange for a loan or loans
      to a Participant with respect to the exercise of any Option, including the
      payment by a Participant of any or all federal, state, or local income or other
      taxes due in connection with any Award.  Subject to such limitations,
      the Committee shall have full authority to decide whether to make a loan or
      loans hereunder and to determine the amount, terms, and provisions of any such
      loan or loans, including the interest rate, if any, to be charged in respect
      of
      any such loan or loans, whether the loan or loans are to be with or without
      recourse against the borrower, the terms on which the loan is to be repaid
      and
      conditions, if any, under which the loan or loans may be forgiven.

     

              
      (d)            Cash-Out
      of Awards.  Except as otherwise provided in the Plan or as
      otherwise provided by the Committee, in connection with a Change in
      Control in which holders of Stock will receive upon consummation a payment
      (whether cash, non-cash or a combination of the foregoing), the Committee may,
      in its discretion, provide for payment (a "cash-out") with respect to some
      or all Awards, equal in the case of each affected Award to the excess, if any,
      of (i) the Fair Market Value of one share of Stock (as determined by the
      Committee in its reasonable discretion)
multiplied by the number of shares of Stock subject to
      the Award, over (ii) the aggregate exercise price, if any, under the Award,
      in each case on such payment terms (which need not be the same as the terms
      of
      payment to holders of Stock) and other terms, and subject to such conditions,
      as
      the Committee determines.

    

    8.     General
      Provisions.

    

               (a)            Compliance
      with Legal and Other Requirements.  The Company may, to the
      extent deemed necessary or advisable by the Committee, postpone the issuance
      or
      delivery of Stock or payment of other benefits under any Award until completion
      of such registration or qualification of such Stock or other required action
      under any federal or state law, rule or regulation, listing or other required
      action with respect to any stock exchange or automated quotation system upon
      which the Stock or other securities of the Company are listed or quoted, or
      compliance with any other obligation of the Company, as the Committee may
      consider appropriate, and may require any Participant to make such
      representations, furnish such information and comply with or be subject to
      such
      other conditions as it may consider appropriate in connection with the issuance
      or delivery of Stock or payment of other benefits in compliance with applicable
      laws, rules, and regulations, listing requirements, or other
      obligations.

    

               (b)            Limits
      on Transferability; Beneficiaries.  No Award or other right or
      interest of a Participant under the Plan shall be pledged, hypothecated or
      otherwise encumbered or subject to any lien, obligation or liability of such
      Participant to any party (other than the Company or a subsidiary or affiliate
      thereof), or assigned or transferred by such Participant otherwise than by
      will
      or the laws of descent and distribution or to a Beneficiary upon the death
      of a
      Participant, and such Awards or rights that may be exercisable shall be
      exercised during the lifetime of the Participant only by the Participant or
      his
      or her guardian or legal representative.  A Beneficiary, transferee,
      or other person claiming any rights under the Plan from or through any
      Participant shall be subject to all terms and conditions of the Plan and any
      Award document applicable to such Participant, except as otherwise determined
      by
      the Committee, and to any additional terms and conditions deemed necessary
      or
      appropriate by the Committee.

    

               (c)            Adjustments.  In
      the event that any large, special and non-recurring dividend or other
      distribution (whether in the form of cash or property other than Stock),
      recapitalization, forward or reverse split, Stock dividend, reorganization,
      merger, consolidation, spin-off, combination, repurchase, share exchange,
      liquidation, dissolution or other similar corporate transaction or event affects
      the Stock such that an adjustment is determined by the Committee to be
      appropriate under the Plan, then the Committee shall, in such manner as it
      may
      deem equitable, adjust any or all of (i) the number and kind of shares of
      Stock which may be delivered in connection with Awards granted thereafter,
      (ii) the number and kind of shares of Stock subject to or deliverable in
      respect of outstanding Awards and (iii) the exercise price, grant price or
      purchase price relating to any Award or, if deemed appropriate, the Committee
      may make provision for a payment of cash or property to the holder of an
      outstanding Option (subject to Section 8(k)).

    

               (d)            Tax
      Provisions.

    

    (i) Withholding.  The
      Company and any subsidiary or affiliate is authorized to withhold from any
      Award
      granted, any payment relating to an Award under the Plan, including any payroll
      or other payment to a Participant, amounts of withholding and other taxes due
      or
      potentially payable in connection with any transaction involving an Award,
      and
      to take such other action as the Committee may deem advisable to enable the
      Company and Participants to satisfy obligations for the payment of withholding
      taxes and other tax obligations relating to any Award.  This authority
      shall include authority to withhold or receive Stock or other property and
      to
      make cash payments in respect thereof in satisfaction of a Participant’s
      withholding obligations, either on a mandatory or elective basis in the
      discretion of the Committee.  Other provisions of the Plan
      notwithstanding, only the minimum amount of Stock deliverable in connection
      with
      an Award necessary to satisfy statutory withholding requirements will be
      withheld.

    

    (ii)
       Requirement of Notification of Code Section 83(b)
      Election.  If any Participant shall make an election under
      Section 83(b) of the Code (to include in gross income in the year of
      transfer the amounts specified in Code Section 83(b)) or under a similar
      provision of the laws of a jurisdiction outside the United States, such
      Participant shall notify the Company of such election within ten days of filing
      notice of the election with the Internal Revenue Service or other governmental
      authority, in addition to any filing and notification required pursuant to
      regulations issued under Code Section 83(b) or other applicable
      provision.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iii) 
      Requirement of Notification Upon Disqualifying Disposition Under Code
      Section 421(b).  If any Participant shall make any
      disposition of shares of Stock delivered pursuant to the exercise of an
      Incentive Stock Option under the circumstances described in Code
      Section 421(b) (relating to certain disqualifying dispositions), such
      Participant shall notify the Company of such disposition within ten days
      thereof.

     

               
      (e)            Changes
      to the Plan.  The Board may amend, suspend or terminate the Plan
      or the Committee’s authority to grant Awards under the Plan without the consent
      of stockholders or Participants; provided, however, that any amendment to the
      Plan shall be submitted to the Company’s stockholders for approval not later
      than the earliest annual meeting for which the record date is after the date
      of
      such Board action if such stockholder approval is required by any federal or
      state law or regulation or the rules of any stock exchange or automated
      quotation system on which the Stock may then be listed or quoted, and the Board
      may otherwise, in its discretion, determine to submit other amendments to the
      Plan to stockholders for approval; and provided further, that, without the
      consent of an affected Participant, no such Board action may have a material
      adverse affect on the rights of such Participant under any outstanding
      Award.

     

               
      (f)            Right
      of Setoff.  The Company or any subsidiary or affiliate may, to
      the extent permitted by applicable law, deduct from and set off against any
      amounts the Company or a subsidiary or affiliate may owe to the Participant
      from
      time to time, including amounts payable in connection with any Award, owed
      as
      wages, fringe benefits, or other compensation owed to the Participant, such
      amounts as may be owed by the Participant to the Company, although the
      Participant shall remain liable for any part of the Participant’s payment
      obligation not satisfied through such deduction and setoff. By accepting any
      Award granted hereunder, the Participant agrees to any deduction or setoff
      under
      this Section 8(f).

    

               
      (g)            Unfunded
      Status of Awards; Creation of Trusts.  The Plan is intended to
      constitute an “unfunded” plan for incentive and deferred compensation. With
      respect to any payments not yet made to a Participant or obligation to deliver
      Stock pursuant to an Award, nothing contained in the Plan or any Award shall
      give any such Participant any rights that are greater than those of a general
      creditor of the Company; provided that the Committee may authorize the creation
      of trusts and deposit therein cash, Stock, or other property, or make other
      arrangements to meet the Company’s obligations under the Plan.  Such
      trusts or other arrangements shall be consistent with the “unfunded” status of
      the Plan unless the Committee otherwise determines with the consent of each
      affected Participant.

    

               
      (h)            Nonexclusivity
      of the Plan.  Neither the adoption of the Plan by the Board nor
      its submission to the stockholders of the Company for approval shall be
      construed as creating any limitations on the power of the Board or a committee
      thereof to adopt such other incentive arrangements, apart from the Plan, as
      it
      may deem desirable, including incentive arrangements and awards which do not
      qualify under Code Section 162(m), and such other arrangements may be
      either applicable generally or only in specific cases.

    

               
      (i)            Payments
      in the Event of Forfeitures; Fractional Shares.  No fractional
      shares of Stock shall be issued or delivered pursuant to the Plan or any Award.
      The Committee shall determine whether cash, other Awards or other property
      shall
      be issued or paid in lieu of such fractional shares or whether such fractional
      shares or any rights thereto shall be forfeited or otherwise
      eliminated.

    

               
      (j)            [Intentionally
      Omitted]

    

               
      (k)            Certain
      Limitations Relating to Accounting Treatment of Awards. Other provisions of
      the Plan notwithstanding, the Committee’s authority under the Plan is limited to
      the extent necessary to ensure that any Option or other Award of a type that
      the
      Committee has intended to be subject to fixed accounting with a measurement
      date
      at the date of grant or the date performance conditions are satisfied under
      APB
      25 shall not become subject to “variable” accounting solely due to the existence
      of such authority, unless the Committee specifically determines that the Award
      shall remain outstanding despite such “variable” accounting.

    

               
      (l)            Governing
      Law.  The validity, construction, and effect of the Plan, any
      rules and regulations relating to the Plan and any Award document shall be
      determined in accordance with the laws of the State of New York, without giving
      effect to principles of conflicts of laws, and applicable provisions of federal
      law.

    

               (m)            Limitation
      on Rights Conferred under Plan.  Neither the Plan nor any action
      taken hereunder shall be construed as (i) giving any Eligible Person or
      Participant the right to continue as an Eligible Person or Participant or in
      the
      employ or service of the Company or a subsidiary or affiliate,
      (ii) interfering in any way with the right of the Company or a subsidiary
      or affiliate to terminate any Eligible Person’s or Participant’s employment or
      service at any time, (iii) giving an Eligible Person or Participant any
      claim to be granted any Award under the Plan or to be treated uniformly with
      other Participants and employees, or (iv) subject to the specific terms of
      the Award, conferring on a Participant any of the rights of a stockholder of
      the
      Company unless and until the Participant is duly issued or transferred shares
      of
      Stock in accordance with the terms of an Award or an Option is duly
      exercised.  Except as expressly provided in the Plan and an Award
      document, neither the Plan nor any Award document shall confer on any person
      other than the Company and the Participant any rights or remedies
      thereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

              
      (n)            Severability;
      Entire Agreement.  If any of the provisions of this Plan or any
      Award document is finally held to be invalid, illegal or unenforceable (whether
      in whole or in part), such provision shall be deemed modified to the extent,
      but
      only to the extent, of such invalidity, illegality or unenforceability, and
      the
      remaining provisions shall not be affected thereby; provided, that, if any
      of
      such provisions is finally held to be invalid, illegal, or unenforceable because
      it exceeds the maximum scope determined to be acceptable to permit such
      provision to be enforceable, such provision shall be deemed to be modified
      to
      the minimum extent necessary to modify such scope in order to make such
      provision enforceable hereunder.  The Plan and any Award documents
      contain the entire agreement of the parties with respect to the subject matter
      thereof and supersede all prior agreements, promises, covenants, arrangements,
      communications, representations and warranties between them, whether written
      or
      oral with respect to the subject matter thereof.

     

               (o)            Plan
      Effective Date and Termination.  The Plan shall become effective
      if, and at such time as, the stockholders of the Company have approved it by
      the
      affirmative votes of the holders of a majority of the voting securities of
      the
      Company present, or represented, and entitled to vote on the subject matter
      at a
      duly held meeting of stockholders.  Unless earlier terminated by
      action of the Board, the Plan will remain in effect until such time as no Stock
      remains available for delivery under the Plan and the Company has no further
      rights or obligations under the Plan with respect to outstanding Awards under
      the Plan.

         

               (p)            Repricing.  No
      award that could be characterized as a “repricing” shall be made pursuant to
      this Plan without shareholder approval.

     

              
      (q)           Waiver
      of Jury Trial.  AS A CONDITION OF RECEIVING AN AWARD, EACH
      PARTICIPANT SHALL BE DEEMED TO HAVE IRREVOCABLY WAIVED, TO THE MAXIMUM EXTENT
      NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
      OF
      ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR
      IN
      CONNECTION WITH ANY AWARD GRANTED UNDER THIS PLAN.

     

               
      (r)           Investor
      Rights Agreement.  As a condition of receiving an Award, the
      Participant shall be required to obligate itself to the provisions of the
      Investor Rights Agreement dated as of August 31, 2006 by and among the Company,
      LLR and each of the Company’s shareholders on such date
      addressing:  transfer restrictions, board composition, general
      representations and warranties (as applicable) and drag along
      rights.

     

               
      (s)        Compliance With Code
      Sections 409A and 422.  Notwithstanding any provision of this
      Plan to the contrary, the Committee shall be authorized to amend this Plan
      or
      any Award to bring the Plan and such Award into compliance with Code Sections
      409A and 422 and the acceptance by any Participant of an Award shall be deemed
      consent to any such change even if such change would have a material adverse
      effect on the Participant, provided, however, that any change required by law
      (or by the Code to maintain the status of an Award as an ISO) to be approved
      by
      the Company’s shareholders shall not be effective until such approval is
      obtained, unless the applicable Award provides otherwise.

         

    9.     Non-Incentive
      options.  The prior provisions of this Plan notwithstanding, the
      Committee is also authorized to issue non-qualified stock options to
      non-employee directors of the Company (or its subsidiaries) and to consultants
      who provide services to the Company (or its subsidiaries).  The
      persons to whom options under this Section 9 shall be issued to as well as
      the
      terms of any such grants shall be at the discretion of the
      Committee.<PAGE>
                                                                     Exhibit 4.1

                       AMENDMENT NO. 1 TO RIGHTS AGREEMENT

        In accordance with Section 26 of the Rights Agreement between
Computershare Trust Company N.A., formerly EquiServe Trust Company N.A., as
Rights Agent (the "Rights Agent") and Aware, Inc. ("Aware") dated October 2,
2001 (the "Rights Agreement"), the Rights Agent and Aware desire to amend the
Rights Agreement as set forth below. This Amendment No. 1 to Rights Agreement
(this "Amendment") shall be effective as of September 6, 2007 and all defined
terms and definitions in the Rights Agreement shall be the same in this
Amendment except as specifically revised by this Amendment.

        Section 1 of the Rights Agreement is hereby amended to delete the first
sentence of the definition of "Acquiring Person" in its entirety and to replace
it with the following:

                "ACQUIRING PERSON" shall mean any Person who or which, alone or
        together with all Affiliates and Associates of such Person, shall be the
        Beneficial Owner of Common Shares then outstanding that equals or
        exceeds such Person's Ownership Threshold, but shall not include (A) the
        Company, any Subsidiary of the Company, any employee benefit plan of the
        Company or of any of its Subsidiaries, or any Person holding Common
        Shares for or pursuant to the terms of any such employee benefit plan,
        (B) any such Person who or which has become such a Beneficial Owner
        solely because (i) of a change in the aggregate number of Common Shares
        outstanding since the last date on which such Person acquired Beneficial
        Ownership of any Common Shares or (ii) it acquired such Beneficial
        Ownership in the good faith belief that such acquisition would not cause
        such Beneficial Ownership to exceed such Person's Ownership Threshold,
        (C) any such Person for so long as such Person qualifies under Rule
        13d-1(b)(1) of the General Rules and Regulations under the Exchange Act
        (or any successor rule or regulation thereto) to report its Beneficial
        Ownership of Common Shares on Schedule 13G (or any successor schedule
        thereto) and otherwise satisfies the criteria of Rule 13d-1(b)(1) of the
        General Rules and Regulations under the Exchange Act (or any successor
        rule or regulation thereto), or (D) John S. Stafford, Jr., John S.
        Stafford, III, James M. Stafford and each of their respective Affiliates
        and Associates.

        Except as amended hereby, the Rights Agreement and all schedules or
exhibits thereto shall remain in full force and effect. This Amendment shall be
governed by, and construed and enforced in accordance with, the substantive laws
of the Commonwealth of Massachusetts, without regard to its conflicts of law
principles.

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be executed in their names and on their behalf by and through their duly
authorized officers.

                                              Aware, Inc.

                                              ---------------------------------
                                              By:
                                              Its:

                                              Computershare Trust Company N.A.

                                              ----------------------------------
                                              By:
                                              Its:

                                      -2-

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