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EXHIBIT 10.4
AWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The 1996 Aware, Inc. Employee Stock Purchase Plan (the "Plan")
is intended to provide a method whereby employees of Aware, Inc. (the
"Company") will have an opportunity to acquire an ownership interest (or
increase an existing ownership interest) in the Company through the purchase of
shares of the Common Stock of the Company. It is the intention of the Company
that the Plan qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. DEFINITIONS
(a) "Board" means the Board of Directors of the Company.
(b) "Code" shall have the meaning set forth in Paragraph 1.
(c) "Committee" means the Compensation Committee of the
Board.
(d) "Common Stock" means the common stock, par value $.01 per
share, of the Company.
(e) "Company" shall also include any Subsidiary (as
hereinafter defined) of Aware, Inc. designated as a participant in the Plan by
the Board, unless the context otherwise requires.
(f) "Compensation" means, for the purpose of any Offering
pursuant to this Plan, base pay in effect as of the Offering Commencement Date
(as hereinafter defined). Compensation shall not include any deferred
compensation other than contributions by an individual through a salary
reduction agreement to a cash or deferred plan pursuant to Section 401(k) of
the Code or to a cafeteria plan pursuant to Section 125 of the Code.
(g) "Employee" means any person who is customarily employed
by the Company for more than 20 hours per week and more than five months in any
calendar year.
(h) "Offering" shall have the meaning set forth in Paragraph
4.
(i) "Offering Commencement Date" shall have the meaning set
forth in Paragraph 4.
(j) "Offering Termination Date" shall have the meaning set
forth in Paragraph 4.
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(k) "Plan" shall have the meaning set forth in Paragraph 1.
(l) "Subsidiary" shall mean any present or future corporation
which is or would constitute a "subsidiary corporation" as that term is defined
in Section 425 of the Code.
3. ELIGIBILITY
(a) Participation in the Plan is completely voluntary.
Participation in any one or more of the Offerings under the Plan shall neither
limit, nor require, participation in any other Offering (as hereinafter
defined).
(b) Each employee of the Company shall be eligible to
participate in the Plan on the first Offering Commencement Date, as hereinafter
defined, following the completion of six months of continuous service with the
Company. Notwithstanding the foregoing, no employee shall be granted an option
under the Plan:
(i) if, immediately after the grant, such employee
would own stock, and/or hold outstanding options to purchase stock, possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company or any Subsidiary; for purposes of this Paragraph, the rules of
Section 424(d) of the Code shall apply in determining the stock ownership of
any employee;
(ii) which permits his rights to purchase stock
under all Section 423 employee stock purchase plans of the Company and its
Subsidiaries to exceed $25,000 of the fair market value of the stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding; for purposes of this Paragraph, the rules of
Section 423(b)(8) of the Code shall apply; or
(iii) if such employee is an officer of the Company,
but only if such employee is a "highly compensated employee" within the meaning
of Section 414(q) of the Code.
4. OFFERING DATES
The right to purchase stock hereunder shall be made available
by a series of six-month offerings (the "Offering" or "Offerings") to employees
eligible in accordance with Paragraph 3 hereof. The Committee will, in its
discretion, determine the applicable date of commencement ("Offering
Commencement Date") and termination date ("Offering Termination Date") for each
Offering. Participation in any one or more of the Offerings under the Plan
shall neither limit, nor require, participation in any other Offering.
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5. PARTICIPATION
Any eligible employee may become a participant by completing a
payroll deduction authorization form provided by the Company and filing it with
the Company's Treasurer 20 days prior to each applicable Offering Commencement
Date, as determined by the Committee pursuant to Paragraph 4.
6. PAYROLL DEDUCTIONS
(a) At the time a participant files an authorization for a
payroll deduction, the participant shall elect to have deductions made from his
or her pay on each payday during any Offering in which he or she is a
participant, at a specified percentage of his or her Compensation as determined
on the applicable Offering Commencement Date; said percentage shall be in
increments of one percent up to a maximum percentage of six percent.
(b) Payroll deductions for a participant shall commence on
the Offering Commencement Date when the applicable authorization for a payroll
deduction becomes effective and shall end on the Offering Termination Date of
the Offering to which such authorization is applicable, unless sooner
terminated by the participant as provided in Paragraph 9.
(c) All payroll deductions made for a participant shall be
credited to his or her account under the Plan. A participant may not make any
separate cash payment into such account.
(d) A participant may withdraw from the Plan at any time
during the applicable Offering period; provided, however, that a participant
who is an officer or director of the Company and who withdraws from the Plan
during any Offering period will not be eligible for the grant of any subsequent
option under the Plan for a period of six months.
7. GRANTING OF OPTION
(a) Except as set forth in Paragraph 7(c) hereof, on the
Offering Commencement Date of each Offering, a participating employee shall be
deemed to have been granted an option to purchase a maximum number of shares of
the Common Stock equal to an amount determined as follows: (i) 85% of the
market value per share of the Common Stock on the applicable Offering
Commencement Date shall be divided into an amount equal to the sum of (x) the
percentage of the employee's Compensation which he or she has elected to have
withheld (multiplied by the employee's Compensation over the Offering period)
plus (y) any amounts in the employee's account on the Offering Commencement
Date that have been carried forward from prior Offerings; multiplied by (ii)
two. Such market value per share of the Common Stock shall be determined as
provided in clause (i) of Paragraph 7(b).
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(b) The option price of the Common Stock purchased with
payroll deductions made during each such Offering for a participant therein
shall be the lower of:
(i) 85% of the average of the bid and the asked
prices as reported by the Nasdaq Stock Market in the Wall Street Journal, or,
if the Common Stock is designated as a national market security by the National
Association of Securities Dealers, Inc. ("NASD"), the last trading price of the
Common Stock as reported by the Nasdaq National Market System in the Wall
Street Journal, or, if the Common Stock is listed on an exchange, the closing
price of the Common Stock on the exchange on the Offering Commencement Date
applicable to such Offering (or on the next regular business date on which
shares of the Common Stock shall be traded, in the event that no shares of the
Common Stock have been traded on the Offering Commencement Date); or if the
Common Stock is not quoted on Nasdaq, not designated as a Nasdaq national
market security and not listed on an exchange, 85% of the fair market value on
the Offering Commencement Date as determined by the Committee; and
(ii) 85% of the average of the bid and the asked
prices as reported by Nasdaq in the Wall Street Journal, or, if the Common
Stock is designated as a national market security by the NASD, the last trading
price of the Common Stock as reported by the Nasdaq National Market System in
the Wall Street Journal, or, if the Common Stock is listed on an exchange, the
closing price of the Common Stock on the exchange on the Offering Termination
Date applicable to such Offering (or on the next regular business date on which
shares of the Common Stock shall be traded, in the event that no shares of the
Common Stock shall have been traded on the Offering Termination Date); or if
the Common Stock is not quoted on Nasdaq, not designated as a Nasdaq national
market security and not listed on an exchange, 85% of the fair market value on
the Offering Termination Date as determined by the Committee.
(c) A participant who is an officer or director of the
Company and who elects pursuant to Paragraph 8(a) with respect to any Offering
not to exercise an option deemed to have been granted pursuant to this
Paragraph 7, shall not be eligible for the grant of an option hereunder for a
period of six months.
8. EXERCISE OF OPTION
(a) Unless a participant gives written notice to the
Treasurer of the Company as hereinafter provided, his or her option for the
purchase of Common Stock with payroll deductions made during any Offering will
be deemed to have been exercised automatically on the Offering Termination Date
applicable to such Offering for the purchase of the number of full shares of
Common Stock which the accumulated payroll deductions in his or her account at
that time (plus any amounts in his or her account that have been carried
forward from prior Offerings) will purchase at the applicable option price (but
not in excess of the number of shares for which options have been granted to
the employee, pursuant to Paragraph 7(a)), and any excess in his account at
that time will be automatically carried forward to the next
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Offering unless the participant elects, by written notice to the Treasurer of
the Company, to have the excess returned to the participant.
(b) Fractional shares will not be issued under the Plan and
any accumulated payroll deductions which would have been used to purchase
fractional shares shall be automatically carried forward to the next Offering
unless the participant elects, by written notice to the Treasurer of the
Company, to have the excess cash returned to the participant.
9. WITHDRAWAL AND TERMINATION
(a) Prior to the Offering Termination Date for an Offering,
any participant may withdraw the payroll deductions credited to his or her
account under the Plan for such Offering by giving written notice to the
Treasurer of the Company. All of the participant's payroll deductions credited
to such account will be paid to the participant promptly after receipt of
notice of withdrawal, without interest, and no future payroll deductions will
be made from his or her pay during such Offering. The Company will treat any
attempt to borrow by a participant on the security of accumulated payroll
deductions as an election to withdraw such deductions.
(b) Except as set forth in Paragraphs 6(d) and 7(c), a
participant's election not to participate in, or withdrawal from, any Offering
will not have any effect upon his or her eligibility to participate in any
succeeding Offering or in any similar plan which may hereafter be adopted by
the Company.
(c) Upon termination of the participant's employment for any
reason, including retirement but excluding death, the payroll deductions
credited to his or her account will be returned to the participant, or, in the
case of his or her death, to the person or persons entitled thereto under
Paragraph 13.
(d) Upon termination of the participant's employment because
of death, his or her beneficiary (as defined in Paragraph 13) shall have the
right to elect, by written notice given to the Company's Treasurer prior to the
expiration of a period of 90 days commencing with the date of the death of the
participant, either:
(i) to withdraw all of the payroll deductions
credited to the participant's account under the Plan; or
(ii) to exercise the participant's option for the
purchase of stock on the Offering Termination Date next following the date of
the participant's death for the purchase of the number of full shares which the
accumulated payroll deductions in the participant's account at the date of the
participant's death will purchase at the applicable option price (subject to
the limitation contained in Paragraph 7(a)), and any excess in such account
will be returned to said beneficiary. In the event that no such written notice
of election shall be duly received by the office of the Company's Treasurer,
the beneficiary shall automatically be
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deemed to have elected to withdraw the payroll deductions credited to the
participant's account at the date of the participant's death and the same will
be paid promptly to said beneficiary.
10. INTEREST
No interest will be paid or allowed on any money paid into the
Plan or credited to the account of any participating employee.
11. STOCK
(a) The maximum number of shares of Common Stock available
for issuance and purchase by employees under the Plan, subject to adjustment
upon changes in capitalization of the Company as provided in Paragraph 16,
shall be 100,000 shares of Common Stock, $.01 par value per share, of the
Company. If the total number of shares for which options are exercised on any
Offering Termination Date in accordance with Paragraph 8 exceeds the number of
shares that remain available for issuance and purchase by employees under the
Plan, the Company shall make a pro rata allocation of the shares available for
delivery and distribution in an equitable manner, with the balances of payroll
deductions credited to the account of each participant under the Plan carried
forward to the next Offering or returned to the participant at his or her
discretion, by giving written notice to the Treasurer to this effect.
(b) The participant will have no interest in the stock
covered by his or her option until such option has been exercised.
(c) The shares of stock purchased by a participant who is
an officer or director of the Company, or a beneficiary of a participant who
was an officer or director of the Company pursuant to Paragraph 13 hereof, at
each Offering Termination Date may not be sold or transferred by such
participant or beneficiary for a period of six months following such Offering
Termination Date. The shares of stock purchased by any other employee
participant, or a beneficiary of any employee participant pursuant to Paragraph
13 hereof, at each Offering Termination Date may not be sold or transferred by
such participant or beneficiary for a period of three months following such
Offering Termination Date. Certificates representing said shares of stock
issued pursuant to this Plan may bear legends to that effect.
12. ADMINISTRATION
The Plan shall be administered by the Committee. The
interpretation and construction of any provision of the Plan and adoption of
rules and regulations for administering the Plan shall be made by the
Committee. Determinations made by the Committee with respect to any matter or
provision contained in the Plan shall be final, conclusive and binding upon the
Company and upon all participants, their heirs or legal representatives.
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Any rule or regulation adopted by the Committee shall remain in full force and
effect unless and until altered, amended, or repealed by the Committee.
13. DESIGNATION OF BENEFICIARY
A participant shall file with the Treasurer of the Company a
written designation of a beneficiary who is to receive any Common Stock and/or
cash under the Plan. Such designation of beneficiary may be changed by the
participant at any time by written notice. Upon the death of a participant and
upon receipt by the Company of proof of the identity and existence of a
beneficiary validly designated by the participant under the Plan, the Company
shall deliver such Common Stock and/or cash to such beneficiary. In the event
of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's
death, the Company shall deliver such Common Stock and/or cash to the executor
or administrator of the estate of the participant. No beneficiary shall, prior
to the death of the participant by whom he or she has been designated, acquire
any interest in the Common Stock and/or cash credited to the participant under
the Plan.
14. TRANSFERABILITY
Neither payroll deductions credited to a participant's account
nor any rights with regard to the exercise of an option or to receive Common
Stock under the Plan may be assigned, transferred, pledged, or otherwise
disposed of in any way by the participant other than by will or the laws of
descent and distribution. Any such attempted assignment, transfer, pledge, or
other disposition shall be without effect, except that the Company may treat
such act as an election to withdraw funds in accordance with Paragraph 8(b).
15. USE OF FUNDS
All payroll deductions received or held by the Company under
this Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such payroll deductions.
16. EFFECT OF CHANGES OF COMMON STOCK
If the Company shall subdivide or reclassify the Common Stock
which has been or may be optioned under this Plan, or shall declare thereon any
dividend payable in shares of such Common Stock, or shall take any other action
of a similar nature affecting such Common Stock, then the number and class of
shares of Common Stock which may thereafter be optioned (in the aggregate and
to any participant) shall be adjusted accordingly and in the case of each
option outstanding at the time of any such action, the number and class of
shares which may thereafter be purchased pursuant to such option and the option
price per share shall be adjusted to such extent as may be determined by the
Committee, following consultation with the Company's independent public
accountants and counsel, to be necessary to preserve the rights of the holder
of such option.
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17. AMENDMENT OR TERMINATION
The Board may at any time terminate or amend the Plan. No
such termination shall affect options previously granted, nor may an amendment
make any change in any option theretofore granted which would adversely affect
the rights of any participant holding options under the Plan.
18. NOTICES
All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received by the Treasurer of the Company.
19. MERGER OR CONSOLIDATION
If the Company shall at any time merge into or consolidate
with another corporation, the holder of each option then outstanding will
thereafter be entitled to receive at the next Offering Termination Date, upon
the exercise of such option and for each share as to which such option shall be
exercised, the securities or property which a holder of one share of the Common
Stock was entitled to upon and at the time of such merger or consolidation. In
accordance with this Paragraph and Paragraph 16, the Committee shall determine
the kind and amount of such securities or property which such holder of an
option shall be entitled to receive. A sale of all or substantially all of the
assets of the Company shall be deemed a merger or consolidation for the
foregoing purposes.
20. APPROVAL OF STOCKHOLDERS
The Plan is subject to the approval of the stockholders of the
Company by written consent or at their next annual meeting or at any special
meeting of the stockholders for which one of the purposes of such a special
meeting shall be to act upon the Plan.
21. GOVERNMENTAL AND OTHER REGULATIONS
The Plan, and the grant and exercise of the rights to purchase
shares hereunder, and the Company's obligation to sell and deliver shares upon
the exercise of rights to purchase shares, shall be subject to all applicable
federal, state and foreign laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may, in the opinion of counsel for
the Company, be required. The Plan shall be governed by, and construed and
enforced in accordance with, the provisions of Sections 421, 423 and 424 of the
Code and the substantive laws of the Commonwealth of Massachusetts. In the
event of any inconsistency between such provisions of the Code and any such
laws, said provisions of the Code shall govern to the extent necessary to
preserve the favorable federal income tax treatment afforded employee stock
purchase plans under Section 423 of the Code.
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