Exhibit 10-21
EMPLOYMENT AGREEMENT dated as of August 24, 1998, between NETWORK-1
SECURITY SOLUTIONS, INC., a Delaware corporation with its principal office
located at 00 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Company"), and
XXXXXX XXXXXX residing at 00000 Xxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 (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 International Sales of the Company
and shall perform such duties as are consistent therewith as the Chief Executive
Officer and 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 $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 Compensation Committee of 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 $30,000 per annum (to be distributed as
directed by the Board of Directors) based upon achieving certain annual sales
goals subject to the discretion of the Compensation Committee of the Board.
(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 40,000 shares (the "Shares") of the Company's
Common Stock at an exercise price of $8.00 per share. The Option shall vest as
to 25% of the Shares covered thereby on the Commencement Date and an additional
25% 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 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 as a result of Executive's
Disability, 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; provided, that, in the event of
Executive's death, his beneficiaries and estate shall, in addition to the
benefits provided in this Section 9(b), have the additional right to the
benefits set forth in Section 9(c)(ii) below.
(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 months 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
International 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
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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 Executive (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 xxxx, 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
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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 (a) any company not engaged in a
Competitive Business or (ii) any company engaged in a Competitive Business
provided Executive or his affiliates exercise no operational or strategic
control and such investment constitutes less than 5% of the equity 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
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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:
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if to the Company, to: Network-1 Security Solutions, Inc.
00 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxx Xxxxx, President
and Chief Executive Officer
with copies to: Xxxxx Xxxxxx & Xxxx, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier:(000) 000-0000
Telephone: (000) 000-0000
Attention: Xxx Xxxxxxxx, Esq.
if to Executive, to: Xxxxxx Xxxxxx
00000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
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.
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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 X. Xxxxx
------------------------------------
Avi X. Xxxxx, President and
Chief Executive Officer
/s/ Xxxxxx Xxxxxx
------------------------------------
Xxxxxx Xxxxxx
INCENTIVE STOCK OPTION
To: Xxxxxx Xxxxxx
00000 Xxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000
------------------------------------------------
Address
Date of Grant: August , 1998
You are hereby granted an option (the "Option"), effective as of the
date hereof, to purchase 40,000 shares of Common Stock, par value $.01 per share
("Common Stock"), of Network-1 Security Solutions, Inc. (the "Company") at a
price of $8.00 per share pursuant to the Company's 1996 Stock Option Plan (the
"Plan") adopted by the Company's Board of Directors effective March 7, 1996, as
amended, and approved by the stockholders of the Company. 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 25% of the shares underlying
this Option on the date of this Option;(ii) as to the balance of 75% of the
shares underlying this Option, 25% of such shares on each of the first three
anniversary dates of the date of this Option, provided you are then an employee
of the Company; (iii) as to 50% of the remaining shares underlying this Option
if a Change in Control (as hereinafter defined) occurs within one year of the
date of this Option, provided you are 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 you are 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 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
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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 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,
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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 the State of New York without regard to principles of conflict of law.
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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 Plan, as amended,
and having read such documents, hereby signify my understanding of, and my
agreement with, their terms and
conditions.
----------------------------- ----------------------------------
(Signature) (Date)
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