EXHIBIT 10.24
EMPLOYMENT AGREEMENT dated as of December 12, 1998, between NETWORK-1
SECURITY SOLUTIONS, INC., a Delaware corporation with its principal office
located at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ 02481(the
"Company"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ residing at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Executive").
The Company desires to enter into this Agreement in order to assure itself
of the service of Executive, and Executive desires to accept employment with the
Company, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties agree as follows:
SECTION 1. EMPLOYMENT. The Company hereby employs Executive, and Executive
hereby accepts employment by the Company, upon the terms and conditions
hereinafter set forth.
SECTION 2. TERM. The employment of Executive hereunder shall be for a
period commencing on the date hereof (the "Commencement Date") and ending on the
third anniversary of the Commencement Date (the "Term") or such earlier date
upon which the employment of the Executive shall terminate in accordance with
the provisions hereof. The period commencing on the Commencement Date and ending
on the date of termination of the Executive's employment hereunder shall be
called the "Term of Employment" for Executive, and the date on which the
Executive's employment hereunder shall terminate shall be called the
"Termination Date.".
SECTION 3. DUTIES. During the Term of Employment, Executive shall be
employed as the Vice President of North American Sales of the Company and shall
perform such duties as are consistent therewith as the Board of Directors of the
Company (the "Board") shall designate. Executive shall use his best efforts to
perform well and faithfully the foregoing duties and responsibilities.
SECTION 4. TIME TO BE DEVOTED TO EMPLOYMENT. During the Term of
Employment, Executive shall devote all of his business time, attention and
energies to the business of the Company (except for vacations to which he is
entitled pursuant to Section 6(b) and periods of illness or incapacity). During
the Term of Employment, Executive shall not engage in any business activity
which, in the reasonable judgment of the Board, conflicts with the duties of
Executive hereunder, whether or not such activity is pursued for gain, profit or
other pecuniary advantage.
SECTION 5. COMPENSATION.
(a) The Company shall pay to Executive an annual base salary (the
"Base Salary") during the Term of Employment of not less than $120,000 per
annum, payable in such installments (but not less often than monthly) as is
generally the policy of the Company with respect to its executive officers,
which Base Salary shall be subject to such increases as the Board, in its sole
discretion, may from time to time determine. Executive's Base Salary and
performance shall be reviewed at least annually by the Board.
(b) In addition, to the Base Salary set forth in Section 5(a) above,
during the term of employment, Executive shall be eligible to receive incentive
compensation, based upon the Company's attainment of certain goals to be
established by the Board and the Company's Chief Executive Officer in
consultation with Executive.
(c) On November 1, 1998 the Company granted to Executive an incentive
stock option (the "Option") of ten (10) years duration for the purchase of
65,000 shares (the "Shares") of the Company's Common Stock at an exercise price
of $6.00 per share. The Option vested as to 25% of the Shares covered thereby on
the date of issuance (November 1, 1998), and an additional 25% of the Shares
covered thereby on each anniversary thereof over a three year period,
conditioned only on the Executive's continued employment by the Company. A copy
of the Option is attached as Exhibit A.
SECTION 6. BUSINESS EXPENSES; BENEFITS.
(a) The Company shall reimburse Executive, in accordance with the
practice from time to time for executive officers of the Company, for all
reasonable and necessary expenses and other disbursements incurred by Executive
for or on behalf of the Company in the performance of Executive's duties
hereunder. Executive shall provide such appropriate documentation of expenses
and disbursements as may from time to time be required by the Company.
(b) During the Term of Employment, Executive shall be entitled to four
(4) weeks vacation per year.
(c) During the Term of Employment, Executive shall be entitled to
participate in the group health, life and disability insurance benefits, and
retirement plan benefits made available from time to time for its employees
generally.
SECTION 7. INVOLUNTARY TERMINATION.
(a) If Executive is incapacitated or disabled (such condition being
hereinafter referred to as a "Disability") in a manner that would qualify
Executive for benefits under the disability policy of the Company (the
"Disability Policy"), the Term of Employment and employment of the Executive
under this Agreement shall cease (such termination, as well as a termination
under Section 7(b), being hereinafter referred to as an "Involuntary
Termination") and Executive shall be entitled to receive the benefits payable
under the Disability Policy and in accordance with Section 9 hereof.
(b) If Executive dies during the Term of Employment, the Term of
Employment and Executive's employment hereunder shall cease as of the date of
the Executive's death and Executive shall be entitled to receive the benefits
payable in accordance with Section 9 hereof.
SECTION 8. TERMINATION BY THE COMPANY.
(a) TERMINATION FOR CAUSE. The Company may terminate the Term of
Employment and the employment of the Executive hereunder at any time for Cause
(as hereinafter defined) (such termination being referred to herein as a
"Termination For Cause") by giving Executive written notice of such termination,
effective immediately upon the giving of such notice to the Executive. As used
in this Agreement, "Cause" means the Executive's (a) commission of an act (i)
constituting a felony or (ii) involving fraud, moral turpitude, theft or
dishonesty which is not a felony and which materially adversely affects the
Company or could reasonably be expected to materially adversely affect the
Company, (b) repeated failure to be reasonably available to perform his duties,
which, if curable, shall not have been cured within 10 business days of written
notice thereof from the Company, (c) repeated failure to follow the lawful
directions of the CEO, which, if curable, shall not have been cured within 30
business days of written notice thereof from the Company, (d) material breach of
any agreement with the Company (including any provisions of this or any
agreement between Executive and the Company) which, if curable, shall not have
been cured within 30 business days of written notice thereof from the Company or
(e) voluntary resignation (except as set forth in paragraph 9(d) hereof).
(b) TERMINATION OTHER THAN FOR CAUSE. The Company may terminate this
Agreement and the employment of Executive other than for cause as defined in
Section 8(a) above (such termination shall be defined as a "Termination Other
Than for Cause") by giving Executive written notice of such termination, which
notice shall be effective upon the giving of such notice or such later date set
forth therein.
SECTION 9. EFFECT OF TERMINATION.
(a) Upon the termination of the Term of Employment and Executive's
employment hereunder due to Termination for Cause (as defined in Section 8(a)
above), neither Executive nor his beneficiary or estate shall have any further
rights or claims against the Company under this Agreement, except to receive (i)
the unpaid portion, if any, of the Base Salary provided for in Section 5(a),
computed on a PRO RATA basis to the Termination Date (based on the actual number
of days elapsed over the actual number of days elapsed over the year in which
such termination occurs), (ii) unpaid portion of any incentive compensation due
to Executive pursuant to Section 5(b) hereof, (iii) any unpaid accrued benefits
of Executive, (iv) reimbursement for any expenses for which Executive shall not
have been reimbursed as provided in Section 6(a), and (v) Executive's rights
under the vested portion of the Option.
(b) Upon the termination of Executive's employment hereunder due to an
Involuntary Termination, neither Executive nor his beneficiary or estate shall
have any further rights or claims against the Company under this Agreement
except the right to receive (i) the amounts set forth in Section 9(a), and
(ii)the vesting of all of the Options that would have vested in the year of
Involuntary Termination and one-half of the Options that would have vested in
the year following the year of Involuntary Termination.
(c) Upon the termination of Executive's employment upon a Termination
Other Than for Cause (as defined in Section 8(b) above), neither Executive nor
his beneficiary nor his estate shall have any rights or claims against the
Company except to receive (i) the amounts set forth in 9(b) (including Options),
and (ii) the lesser of (A) one year's Base Salary as in effect at the time of
the Termination Other Than for Cause or (B) Executive's Base Salary for the
balance of the term of this Agreement.
(d) For purposes of this Section 9, if Executive is asked to assume
any duties or the material reduction of duties, either of which is substantially
inconsistent with the position of Vice President of North American Sales of the
Company, Executive, upon 30 days notice to the Board of Directors setting forth
in reasonable detail the respects in which Executive believes such assignment or
duties are substantially inconsistent with the level of Executive's position,
may resign from the Company and such resignation will be treated as a
Termination Other Than For Cause pursuant to this Section 9.
SECTION 10. INSURANCE. The Company may, for its own benefit, in its sole
discretion, maintain "key-man" life and disability insurance policies covering
Executive. Executive will cooperate with the Company and provide such
information or other assistance as the Company may reasonably request in
connection with the Company's obtaining and maintaining such policies.
SECTION 11. DISCLOSURE OF INFORMATION. Executive will not, either during
the Term of Employment or at any time thereafter, divulge, publish, communicate,
furnish or make accessible to anyone any knowledge or information with respect
to the Company's confidential, secret or proprietary products, technology,
methods, plans, materials and processes, or with respect to any other
confidential, secret or proprietary aspects of the business, activities or
products of the Company including, without limitation, (a) software programs,
source code, object code, product development information, research and
development projects or other technical data pertaining to the Company's
products (whether or not subject to patent, trademark or copyright protection)
or (b) any customer or client lists, telephone leads, prospects lists, sales
figures and forecasts, purchase costs, financial projections, advertising and
marketing plans and business strategies and plans; except as such items set
forth in clauses (a) and (b) above may already be in the public domain through
no fault of Employee (all of the foregoing items set forth in clauses (a) and
(b) being referred to herein collectively as "Confidential Property"). Upon the
termination of the Term of Employment, Executive shall return to the Company all
property (including Confidential Property) of the Company (or any subsidiary or
affiliate thereof) then in the possession of Executive and all books, records,
computer tapes or discs and all other material containing non-public information
concerning the business, clients or affairs of the Company or any subsidiary or
affiliate thereof.
SECTION 12. RIGHT TO INVENTIONS. Executive shall promptly disclose, grant
and assign to the Company for its sole use and benefit any and all marks,
designs, logos, inventions, improvements, technical information and suggestions
relating in any way to the business conducted by the Company, which he may
develop or which may be acquired by Executive during the Term of Employment
(whether or not during usual working hours), together with all trademarks,
patent applications, letters, patent, copyrights and reissues thereof that may
at any time be granted for or upon any such ▇▇▇▇, design, logo, invention,
improvement or technical information (collectively, "Inventions"). In connection
therewith, Executive shall (at the Company's sole cost and expense) take all
actions reasonably necessary or desirable to assign and/or confirm the
assignment of any Invention to the Company.
SECTION 13. RESTRICTIVE COVENANT.
(a) The Company is in the business of developing, marketing, licensing
and supporting network software security products and also provides consulting
in network security, network design, troubleshooting and engineering (the
"Business"). Executive acknowledges and recognizes that the Business has been
conducted, and sales of its products have been made, throughout the United
States, and Executive further acknowledges and recognizes the highly competitive
nature of the industry in which the Business is involved. Accordingly, in
consideration of the premises contained herein, the consideration to be received
hereunder, stock options to be granted Executive, Executive shall not, during
the Non-Competition Period (as defined below): (i) directly or indirectly
engage, whether or not such engagement shall be as a partner, stockholder,
affiliate or other participant, in any Competitive Business (as defined below),
or represent in any way any Competitive Business, whether or not such engagement
or representation shall be for profit, (ii) interfere with, disrupt or attempt
to disrupt the relationship, contractual or otherwise, between the Company and
any other person or entity, including, without limitation, any customer,
supplier, employee or consultant of the Company, (iii) induce any employee of
the Company to terminate his employment with the Company or to engage in any
Competitive Business in any manner described in the foregoing clause (i) (as
well as an officer or director of any Competitive Business), or (iv)
affirmatively assist or induce any other person or entity to engage in any
Competitive Business in any manner described in the foregoing clause (i) (as
well as an officer or director of any Competitive Business). Anything contained
in this Section 13 to the contrary notwithstanding, an investment by Executive
in any publicly traded company in which Executive and his affiliates exercise no
operational or strategic control and which constitutes less than 5% of the
capital of such entity shall not constitute a breach of this Section 13.
(b) As used herein, "Non-Competition Period" shall mean the period
commencing on the date hereof and terminating on the Termination Date; PROVIDED,
HOWEVER, that if the Term of Employment shall have been terminated pursuant to
Section 8 (a), then "Non-Competition Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the Termination Date.
"Competitive Business" shall mean any business in any State of the United States
engaged in the development, marketing and licensing of network software security
products, or in any other line of business in which the Company was engaged or
had a formal plan to enter as of the Termination Date.
(c) Executive understands that the foregoing restrictions may limit
his ability to earn a livelihood in a business similar to the business of the
Company, but he nevertheless believes that he has received and will receive
sufficient consideration and other benefits as an employee of the Company and as
otherwise provided hereunder and pursuant to other agreements between the
Company and Executive to justify clearly such restrictions which, in any event
(given his education, skills and ability), Executive does not believe would
prevent him from earning a living.
SECTION 14. ENFORCEMENT; SEVERABILITY; ETC. It is the desire and intent of
the parties that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to (a) delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made or (b) otherwise to render it enforceable in
such jurisdiction.
SECTION 15. REMEDIES. Executive acknowledges and understands that the
provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
that the breach or threatened breach of the provisions of this Agreement would
cause the Company irreparable harm. In the event of a breach or threatened
breach by Executive of the provisions of this Agreement, the Company shall be
entitled to an injunction restraining him from such breach. Nothing contained in
this Agreement shall be construed as prohibiting the Company from or limiting
the Company in pursuing any other remedies available for any breach or
threatened breach of this Agreement.
SECTION 16. NOTICES. All notices, claims, certificates, requests, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given and delivered if personally delivered or if sent by a
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, to: Network-1 Security Solutions, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇, President
and Chief Executive Officer
with copies to: ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇, LLP
1350 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
if to Executive, to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day following that on which the piece
of mail containing such communication is posted.
SECTION 17. BINDING AGREEMENT; BENEFIT. The provisions of this Agreement
will be binding upon, and will inure to the benefit of, the respective heirs,
legal representatives, successors and assigns of the parties.
SECTION 18. GOVERNING LAW. This Agreement will be governed by, construed
and enforced in accordance with, the laws of the State of Massachusetts (without
giving effect to principles of conflicts of laws).
SECTION 19. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement must be in writing and shall not operate or be
construed as a waiver of any other breach.
SECTION 20. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements or understandings between the parties with
respect thereto. This Agreement may be amended only by an agreement in writing
signed by the parties.
SECTION 21. HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 22. ASSIGNMENT. This Agreement is personal in its nature and the
parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; PROVIDED, HOWEVER, that the
Company may assign this Agreement to any of its subsidiaries and affiliates.
SECTION 23. GENDER. Any reference to the masculine gender shall be deemed
to include the feminine and neuter genders unless the context otherwise
requires.
SECTION 24. COUNTERPARTS. This Agreement may be executed in counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Employment Agreement as of the date first written above.
NETWORK-1 SECURITY SOLUTIONS, INC.
By:/S/AVI ▇. ▇▇▇▇▇
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Avi ▇. ▇▇▇▇▇, President and
Chief Executive Officer
/S/▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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EXHIBIT A
EXHIBIT 10.24
INCENTIVE STOCK OPTION
To: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------
Address
Date of Grant: November 1, 1998
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You are hereby granted an option (the "Option"), effective as of the date
hereof, to purchase 65,000 shares of Common Stock, par value $.01 per share
("Common Stock"), of Network-1 Security Solutions, Inc. (the "Company") at a
price of $6.00 per share pursuant to the Company's Stock Option Plan (the
"Plan"), as amended. Your option price is intended to equal at least the fair
market value of the Company's Common Stock as of the date hereof; provided,
however, that if, at the time this option is granted, you own stock possessing
more than 10% of the total combined voting power of all shares of stock of the
Company or any parent or subsidiary (an "Affiliate") of the Company (a "10%
Shareholder"), your option price is intended to be at least 110% of the fair
market value of the Company's Common Stock as of the date hereof.
This Option shall vest as follows: (i) as to 25% of the shares underlying
the Option on the date of this Option;(ii) as to the balance of 75% of the
shares underlying the Option, 25% of such shares on each of the first three
anniversary dates of the date of this Option, provided the Optionee is then an
employee of the Company; (iii) as to 50% of the remaining shares underlying the
Option if a Change in Control (as hereinafter defined) occurs within one year of
the date of this Option, provided the Optionee is then an employee of the
Company; (iv) as to all of the unvested portion of this Option if a Change of
Control (as hereinafter defined) occurs more than one year after the date of
this Option, provided the Optionee is then an employee of the Company.
The shares subject to this Option shall be adjusted for any change in the
outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar circumstances.
No fractional shares shall be issued or delivered.
This Option shall terminate and is not exercisable after the expiration of
ten years from the date of its grant (five years from the date of grant if, at
the time of the grant, you are a 10% Shareholder) (the "Scheduled Termination
Date"), except if terminated earlier as hereinafter provided (the "Termination
Date").
A "change of control" shall be deemed to have occurred upon the happening
of any of the following events:
(i) the acquisition by any person, entity or "group", within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended(the "Exchange Act"), of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of forty (40%) percent or
more of the combined voting power of the then outstanding
securities entitled to vote generally in the election of
directors where such person, entity or group owned less than 5%
of such voting power on the date of this Option; or
(ii) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets (other than to a subsidiary or
subsidiaries).
(iii) Any other event deemed to constitute a "change in control" by
the Compensation Committee.
You may exercise your option as set forth in Section 7 of the Plan.
If the Company's Common Stock has not been registered under Section 12 of
the Securities Exchange Act of 1934, the exercise of your option will not be
effective unless and until you execute and deliver to the Company a Stock
Restriction Agreement, in the form on file in the office of the Secretary of the
Company.
Your Option will, to the extent not previously exercised by you, terminate
thirty (30) days after the date on which your employment by the Company or
Affiliate of the Company is terminated, whether such termination is voluntary or
not, other than by reason of disability as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder, or death, in which case your Option will terminate six (6) months
from the date of termination of employment due to disability or death (but in no
event later than the Scheduled Termination Date). After the date your employment
is terminated, as aforesaid, you may exercise this Option only for the number of
shares which you had a right to purchase and did not purchase on the date your
employment terminated. If you are employed by an Affiliate of the Company, your
employment shall be deemed to have terminated on the date your employer ceases
to be an Affiliate of the Company, unless you are on that date transferred to
the Company or another Affiliate of the Company. Your employment shall not be
deemed to have terminated if you are transferred from the Company to an
Affiliate, or vice versa, or from one Affiliate to another Affiliate.
If you die while employed by the Company or an Affiliate of the Company,
your legatee(s), distributee(s), executor(s) or administrator(s), as the case
may be, may, at any time within six (6) months after the date of your death (but
in no event later than the Scheduled Termination Date), exercise the Option as
to any shares which you had a right to purchase and did not purchase during your
lifetime. If your employment with the Company, or an Affiliate is terminated by
reason of your becoming disabled (within the meaning of Section 22(e)(3) of the
Code and the regulations thereunder), you or your legal guardian or custodian
may at any time within six (6) months after the date of such termination (but in
no event later than the Scheduled Termination Date), exercise the Option as to
any shares which you had a right to purchase and did not purchase prior to such
termination. Your legatee, distributee, executor, administrator, guardian or
custodian must present proof of his authority satisfactory to the Company prior
to being allowed to exercise this Option.
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This Option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the Option price has been paid in full pursuant to due
exercise of this Option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this Option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this Option is
not exercisable until all of the following events occur and during the following
periods of time:
(a) Until this Option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as the Company may deem necessary or desirable; or
(b) During any period of time in which the Company deems that the
exercisability of this Option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Company to be legally obligated to
issue or sell more shares than the Company is legally entitled to issue or sell.
The following two paragraphs shall be applicable if, on the date of
exercise of this Option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
the Company
4
may, in its sole discretion, deem advisable to avoid any violation of federal,
state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under applicable
state securities laws. The shares have been acquired for investment
and may not be offered, sold, transferred, pledged or otherwise
disposed of without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to the Company
that the proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to the Company that
said registration is no longer required.
The sole purpose of the agreements, warranties, representations and legend
set forth in the two immediately preceding paragraphs is to prevent violations
of the Securities Act of 1933, as amended, and any applicable state securities
laws.
It is the intention of the Company and you that this option shall, if
possible, be an "Incentive Stock Option" as that term is used in Section 422 of
the Code and the regulations thereunder. In the event this Option is in any way
inconsistent with the legal requirements of the Code or the regulations
thereunder for an "Incentive Stock Option" this Option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
This Option shall be subject to the terms of the Plan in effect on the date
this Option is granted, which terms are hereby incorporated herein by reference
and made a part hereof. In the event of any conflict between the terms of this
Option and the terms of the Plan in effect on the date of this Option, the terms
of the Plan shall govern. This Option constitutes the entire understanding
between the Company and you with respect to the subject matter hereof and no
amendment, modification or waiver of this Option, in whole or in part, shall be
binding upon the Company unless in writing and signed by an appropriate officer
of the Company. This Option and the performances of the parties hereunder shall
be construed in accordance with and governed by the laws of
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the State of Massachusetts without regard to principles of conflict of law.
Please sign the copy of this Option and return it to the Company, thereby
indicating your understanding of and agreement with its terms and conditions.
NETWORK-1 SECURITY SOLUTIONS, INC.
By:
-------------------------------
President & CEO
I hereby acknowledge receipt of a copy of the foregoing Stock Option and
the Network-1 Security Solutions, Inc. Stock Option Plan, and having read such
documents, hereby signify my understanding of, and my agreement with, their
terms and conditions.
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