Exhibit 10.3
EMPLOYMENT AGREEMENT dated as of May 19, 1998, between NETWORK-1
SECURITY SOLUTIONS, INC., a Delaware corporation with its principal office
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"Company"), and ▇▇▇▇▇▇ ▇. Fish 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 Chief Financial Officer of the Company and shall
perform such duties as are consistent therewith as the Chief Executive
Officer ("CEO") and 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 paragraph
5(a) above, during the term of employment, Executive shall be eligible to
receive incentive compensation of up to $30,000 per annum (to be distributed
as directed by the Board of Directors) based upon the Company's attainment of
certain goals to be established by the Board and the CEO.
(c) On the Commencement Date the Company shall grant to the
Executive an incentive stock option (the "Option") of ten (10) years'
duration for the purchase of 94,234 shares (the "Shares") of the Company's
Common Stock at an exercise price of $3.47 per share. The Option shall vest
as to 34% of the Shares covered thereby on the Commencement Date and an
additional 22% of the Shares covered thereby on each anniversary of the
Commencement Date, conditioned only on the Executive's continued employment
by the Company. The form of Option is attached as Exhibit A hereto.
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.
(a) 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.
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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 30
business days of written notice thereof from the Company, (c) repeated
failure to follow the lawful directions of the CEO or the Board, 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
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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) any unpaid
accrued benefits of Executive, (iii) reimbursement for any expenses for which
Executive shall not have been reimbursed as provided in Section 6(a), and
(iv) 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) six month'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 Chief Financial Officer,
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
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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.
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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
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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
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with copies to: ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
if to Executive, to: ▇▇▇▇▇▇ ▇. Fish
▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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.
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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 ▇. ▇▇▇▇▇
----------------------------------
Avi ▇. ▇▇▇▇▇, President and
Chief Executive Officer
/s/ ▇▇▇▇▇▇ ▇. Fish
----------------------------------
▇▇▇▇▇▇ ▇. Fish
INCENTIVE STOCK OPTION
To: ▇▇▇▇▇▇ ▇. Fish
--------------------------------------------------------------
Address
Date of Grant: May 19, 1997
You are hereby granted an option (the "Option"), effective as of the
date hereof, to purchase 94,234 shares of Common Stock, par value $.01 per
share ("Common Stock"), of Network-1 Security Solutions, Inc. (the "Company")
at a price of $3.47 per share pursuant to the Company's 1996 Stock Option
Plan (the "Plan") adopted by the Company's Board of Directors and approved by
the stockholders of the Company on March 7, 1996. 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 34% of the shares
underlying the Option on the date of this Option;(ii) as to the balance of
66% of the shares underlying the Option, 22% 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.
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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.
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 haveany 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.
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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 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
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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 the State of New York 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: ____________________________
I hereby acknowledge receipt of a copy of the foregoing Stock Option and
the Network-1 Security Solutions, Inc. 1996 Stock Option
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Plan, and having read such documents, hereby signify my understanding of, and
my agreement with, their terms and conditions.
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(Signature) (Date)
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