EXHIBIT 4.1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of
[ ],
(this " Stock Option Agreement ") by and between Network-1
Security Solutions, Inc., a Delaware corporation with principal
executive offices at 445 Park Avenue, Suite 1028, New York, New
York 10022 (" Network-1 "), and
[ ].
WHEREAS,
[ ];
and
NOW THEREFORE, in consideration of the premises
and of the mutual covenants, representations, warranties and
agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Grant of Option
.
Network-1 hereby grants to
[ ]
an option (the " Option ") to purchase, out of its
authorized but unissued shares of Common Stock,
shares of Common Stock (the shares of Common Stock purchased or
purchasable pursuant to the Option, subject to adjustment as set
forth herein, being referred to as the " Option Shares "),
at an exercise price per share equal to
(such
exercise price, subject to adjustment as set forth herein, being
referred to as the " Exercise Price ", or in the aggregate,
the "Aggregate Exercise Price").
[ ]
and/or his permitted transferees or assigns are hereinafter
referred to as " Holder ".
2. Vesting; Term and Exercise of
Option .
(a) The Option Shares shall vest
.
(b) The Option granted hereby may be
exercised in whole or in part as to any or all vested Option Shares
at any time from [
]
through
[ ]
(the " Expiration Date ") by Holder’s presentation of
this Option, with the Exercise Form attached hereto duly executed,
at Network-1’s office (or such office or agent of Network-1
as it may designate in writing to the Holder hereof by notice
pursuant to Section 13 hereof), specifying the number of Option
Shares as to which the Option is being exercised.
3. Issuance of Option Shares[;
Cashless Exercise]
(a) Upon surrender of the Option and
payment of the Exercise Price as provided herein, Network-1 shall
issue and deliver with all reasonable dispatch the certificate(s)
for the Option Shares to or upon the written order of the Holder
and in such name or names as the Holder may designate. Such
certificate(s) shall represent the number of Option Shares issuable
upon the exercise of the Option, together with a cash amount in
respect of any fraction of a share otherwise issuable upon such
exercise.
[(b) In lieu of paying the Aggregate
Exercise Price in cash and/or upon exercise of the Option, the
Holder may elect a “cashless exercise” in which event
the Holder will receive upon exercise a reduced number of Option
Shares equal to (i) the number of Option Shares that would be
issuable pursuant to the Option upon payment of the Aggregate
Exercise Price minus (ii) the number of Option Shares that have an
aggregate Market Price (as defined below) equal to the Aggregate
Exercise Price.]
(c) Unless otherwise provided herein,
for purposes of any computations made in this Stock Option
Agreement, "Market Price" per share of shares of Common Stock on
any date shall be: (i) if the shares of Common Stock are listed or
admitted for trading on any national securities exchange, the last
reported sales price as reported on such national securities
exchange; (ii) if the shares of Common Stock are not listed or
admitted for trading on any national securities exchange, the
average of the last reported closing bid and asked
quotation for
the shares of Common Stock as reported on the Nasdaq Stock
Market’s National Market ("NNM") or Nasdaq Stock
Market’s Small Cap Market ("NSM") or a comparable service if
NNM or NSM are not reporting such information; (iii) if the shares
of Common Stock are not listed or admitted for trading on any
national securities exchange, NNM or NSM or a comparable system,
the average of the last reported bid and asked quotation for the
shares of Common Stock as quoted by a market maker in the shares of
Common Stock (or if there is more than one market maker, the bid
and asked quotation shall be obtained from two market makers and
the average of the lowest bid and highest asked quotation shall be
the "Market Price"); or (iv) if the shares of Common Stock are not
listed or admitted for trading on any national securities exchange
or NNM or quoted by NSM and there is no market maker in the shares
of Common Stock, the fair market value of such shares as determined
in good faith by the Board of Directors of Network-1.
(d) Certificates representing the
Option Shares shall be deemed to have been issued and the person so
designated to be named therein shall be deemed to have become a
holder of record of such Option Shares as of the date of the
surrender of the Option and payment of the Aggregate Exercise Price
as provided herein; notwithstanding that the transfer books for the
Option Shares or other classes of stock purchasable upon the
exercise of the Option shall then be closed or the certificate(s)
for the Option Shares in respect of which the Option is then
exercised shall not then have been actually delivered to the
Holder. As soon as practicable after each such exercise of the
Option, Network-1 shall issue and deliver the certificate(s) for
the Option Shares issuable upon such exercise, registered as
requested. In the event that only a portion of the Option is
exercised at any time prior to the close of business on the
Expiration Date, a new option shall be issued to the Holder for the
remaining number of Option Shares purchasable pursuant hereto.
Network-1 shall cancel the Option when they are surrendered upon
exercise.
(e) Prior to due presentment for
registration of transfer of the Option, Network-1 shall deem and
treat the Holder as the absolute owner of the Option
(notwithstanding any notation of ownership or other writing on this
Option Agreement made by anyone other than Network-1) for the
purpose of any exercise hereof or any distribution to the Holder
and for all other purposes, and Network-1 shall not be affected by
any notice to the contrary.
4. Lost, Stolen, or Mutilated
Option
In case this Option shall be mutilated, lost,
stolen or destroyed, Network-1 shall issue and deliver, in exchange
and substitution for and upon cancellation of the mutilated Option,
or in lieu of and substitution for the Option lost, stolen or
destroyed, a new Option of like tenor and representing an
equivalent number of Option Shares purchasable upon exercise, but
only upon receipt of evidence reasonably satisfactory to Network-1
of such mutilation, loss, theft or destruction of such Option and
reasonable indemnity, if requested, also reasonably satisfactory to
Network-1. No bond or other security shall be required from Holder
in connection with the replacement by Network-1 of a lost, stolen
or mutilated warrant certificate.
5. Rights Upon
Expiration
Unless the Option is surrendered and payment
made for the Option Shares as herein provided before the close of
business on the Expiration Date, this Option will become wholly
void and all rights evidenced hereby will terminate after such
time.
6. Exchange of
Option
This Option may be exchanged for a number of
Options of the same tenor as this Option for the purchase in the
aggregate of the same number of Option Shares of Network-1 as are
purchasable upon the exercise of this Option, upon surrender hereof
at the office of Network-1 with written instructions as to the
denominations of the Options to be issued in exchange.
7. Adjustment for Certain
Events
(a) In case Network-1 shall at any
time after the date hereof (i) declare a dividend on its shares of
Common Stock payable in shares of Network-1's capital stock
(whether in shares of Common Stock or of capital stock of any other
class), (ii) subdivide its outstanding shares of Common Stock,
(iii) reverse split its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue any shares of Network-1's
capital stock in a reclassification of shares of Common Stock
(including any such reclassification in connection with a
consolidation or merger in which Network-1 is the continuing
corporation), then, in each case, the Exercise Price in effect at
the time of the record date for such dividend or of the effective
date of such subdivision, reverse split or reclassification, and/or
the number and kind of shares of capital stock issuable upon
exercise of the Option on such date, shall be proportionately
adjusted so that the holder of the Option exercised after such time
shall be entitled to receive the aggregate number and kind of
securities which, if such Option had been exercised immediately
prior to such date, such Holder would have owned upon such exercise
and been entitled to receive by virtue of such dividend,
subdivision, reverse split or reclassification. Such adjustment
shall be made successively whenever any event listed above shall
occur.
(b) In case Network-1 shall fix a
record date for the making of a distribution to all holders Common
Stock (including any such distribution made in connection with a
consolidation or merger in which Network-1 is the continuing
corporation) of evidences of indebtedness or assets (other than
cash dividends or cash distributions payable out of earnings,
consolidated earnings, if Network-1 shall have one or more
subsidiaries, or earned surplus, or dividends payable in Common
Stock) or rights, options or warrants to subscribe for or purchase
Common Stock, then, in each case, the Exercise Price to be in
effect after such record date shall be determined by multiplying
the Exercise Price in effect immediately prior to such record date
by a fraction, of which the numerator shall be the current Market
Price for one share of Common Stock on such record date less the
fair market value of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights,
options or warrants applicable to one share of Common Stock, and of
which the denominator shall be the current Market Price for one
share of Common Stock. In the event that Network-1 and the Holder
cannot agree as to such fair market value, such determination of
fair market value shall be made by an appraiser who shall be
mutually selected by Network-1 and the Holder, and the reasonable
costs of such appraiser shall be borne by Network-1. Such
adjustment shall be made successively whenever such a record date
is fixed, and in the event that such distribution is not so made,
the Exercise Price shall again be adjusted to be the Exercise Price
which would then be in effect if such record date had not been
fixed.
(c) No adjustment in the Exercise
Price shall be required unless such adjustment would require a
decrease of at least one cent ($0.01) in such price; provided,
however, that any adjustment which by reason of this Section 7(c)
is not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 7 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be, but in no event shall
Network-1 be obligated to issue fractional shares of Common Stock
or fractional portions of any securities issuable upon the exercise
of the Option.
(d) In the event that at any time, as
a result of an adjustment made pursuant to Section 7 hereof, the
Holder of the Option thereafter exercised shall become entitled to
receive any shares of capital stock, options, warrants or other
securities of Network-1 other than the shares of Common Stock,
thereafter the number of such other shares of capital stock,
options, warrants or other securities so receivable upon exercise
of this Option shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares of Common Stock contained in
this Section 7, and the provisions of th
