www.eXFILE.com 888.775-4789.     NETWORK-1 SECURITY FORM 8K


    EXHIBIT 10.1

     

     

    EMPLOYMENT AGREEMENT dated
June 8, 2009, between NETWORK-1 SECURITY SOLUTIONS,
INC., a Delaware corporation with its principal office located at 445
Park Avenue, Suite 1018, New York, New York 10022 (the "Company"), and COREY M. HOROWITZ residing at
1085 Park Avenue, New York, New York 10128 (the “Executive").

     

    The
Company desires to enter into this Agreement in order to assure itself of the
continued services of Executive, and Executive desires to accept continued
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
June 8, 2009 (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 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 Chairman and Chief
Executive Officer of the Company and will act in accordance with, and be subject
to the policies and procedures as may be duly adopted by the Board of Directors
(the “Board”) from time
to time.  Executive shall perform such duties as are consistent
therewith as the Board shall designate. Executive will be responsible for the
management and operations of all aspects of the Company’s business, including
licensing of the Company’s patents, patent litigation oversight, patent
acquisitions, and finance and administration.  Executive will also
have direct responsibility, subject to Board of Directors policies and
resolutions as noted above, for all current and future budget and staff, and
profit and loss accountability for the Company in its entirety.  In
addition, Executive shall also render legal services to the Company with respect
to all patent litigation which services shall also include, among other things,
coordinating all such patent litigation matters with outside
counsel.  Executive shall use his best efforts to perform well and
faithfully the foregoing duties and responsibilities.  In addition,
Executive shall continue to serve as Chairman of the Board and shall be
nominated during the Term of Employment on an annual basis as a director
(subject to election by the stockholders of the Company).  On the
Termination Date, if Executive is no longer employed by the Company, he agrees
to submit his resignation as a Board member if requested by the
Company.  For purposes of this Agreement, so long as Executive shall
serve as a member of the Board, any references herein to decisions or
determinations to be made by the Board with respect to Executive (including,
without limitation, matters relating to compensation and termination) shall be
made by a majority of the then members of the Board excluding Executive, who
shall recuse himself and abstain from voting with respect to any such
matters.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECTION
4. Time to
be Devoted to Employment. During the Term of Employment, Executive shall
devote such time, attention and energies to the business of the Company as is
necessary in the Board’s reasonable judgment to perform his duties and
responsibilities as Chairman and Chief Executive Officer.  It is
understood that Executive is not required to devote his full time and attention
to the business of the Company during the Term of
Employment.  Executive shall be permitted to conduct other business
activities so long as such activities do not, in the reasonable judgment of the
Board, conflict or interfere with the duties of Executive
hereunder.

     

    SECTION
5. Compensation.

     

    (a) The
Company shall pay to Executive an initial annual base salary of $375,000 (the
"Base Salary")
retroactive to April 1, 2009 and continuing for a one year period
thereafter, payable in such installments (but not less often than monthly) as is
generally the policy of the Company with respect to its executive
officers.  The Base Salary shall be increased by 5% on each of
April 1, 2010 and April 1, 2011.

     

    (b) (i) In
addition to the Base Salary set forth in paragraph 5(a) above, the Company shall
pay to Executive, during the Term of Employment, a cash bonus on an annual
calendar year basis (beginning with the year ended December 31, 2009) no
later than January 15 following each calendar year in an amount no less than
$150,000 (the “Cash
Bonus”).

     

    (ii) In addition to the Base Salary set
forth in paragraph 5(a) above and the Cash Bonus set forth in paragraph 5(b)
above, during the Term of Employment, Executive shall receive incentive
compensation (“Additional Bonus Compensation”) in an
amount equal to 5% of the Company’s royalties or other payments (exclusive of
proceeds from the sale of the Company’s patents which is covered below) with
respect to the Company’s remote power patent (U.S. Patent No. 6,218,930 (the
“Remote Power Patent”))
and 12.5% of the Company’s royalties and other payments with respect to the
Company’s other patents besides the Remote Power Patent (the “Additional
Patents”) (all before deduction of payments to third parties including, but not
limited to, legal fees and expenses and third party license fees) actually
received from licensing its patented technologies (including patents owned as of
the date hereof and acquired or licensed on an exclusive basis during the period
in which Executive continues to serve as an executive officer of the Company)
whether payable to the Company in the form of cash or securities (the “Royalty Bonus
Compensation”).  The Royalty Bonus Compensation shall be paid
to Executive within ten (10) days of the Company’s actual receipt of the
royalties and other payments.  In addition, during the Term of
Employment, Executive shall also be entitled to Additional Bonus Compensation
equal to (i) 5% of the gross proceeds from the sale of the Company’s Remote
Power Patent and 12.5% of the gross proceeds from the sale of the Additional
Patents, and (ii) 5% of the gross proceeds from  the merger of the
Company with or into another corporation or entity with the result that the then
existing stockholders of the Company hold less than 50% of the combined voting
power of the then outstanding securities of the surviving entity in such
transaction (the “Merger”); provided, that, at the time of
the Merger substantially all of the assets of the Company (exclusive of cash)
shall consist of the Company’s patents and license agreements with respect to
the patents.  For purposes hereof, gross proceeds from a Merger shall
include the total proceeds and other consideration paid or received in
connection with the Merger including cash, securities or other
assets.  Such Additional Bonus Compensation shall be paid within ten
(10) days of the closing of any such transaction.

    
      
        
        

      

      
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    (c) The
Royalty Bonus Compensation shall continue to be paid to Executive for the life
of each of the Company’s patents (including patents owned as of the date hereof
and acquired or licensed on an exclusive basis during the period in which
Executive continues to serve as an executive officer of the Company) with
respect to licenses entered into by the Company with third parties during the
Term of Employment or at anytime thereafter whether Executive is employed by the
Company or not, provided, that, Executive’s
employment has not been terminated by the Company for Cause as defined in
Section 9(a) hereof or terminated by Executive without Good Reason as defined in
Section 10 hereof.

     

    SECTION
6. Equity.  The Company
recognizes that equity participation in the Company through the grant of options
is essential to induce Executive to agree to continue to provide the services
pursuant to this Agreement.  Accordingly, on the Commencement Date,
the Company shall grant to Executive a ten (10) year stock option to
purchase 750,000 shares of the Company’s common stock which shares shall vest
over a three (3) year period in equal quarterly installments of 62,500 shares
beginning June 30, 2009 through March 31, 2012, subject to accelerated
vesting in the event of a change of control (as defined in the form of Option
attached hereto as Exhibit
A); provided, that, Executive shall
forfeit the balance of unvested shares (subject to the Option) if his employment
has been terminated by the Company for Cause as defined in Section 9(a) hereof
or terminated by Executive without Good Reason as defined in Section 10 hereof
(collectively, the “Options”).  The
exercise price per share of the Options shall equal the closing price of the
Company’s common stock on the date of grant of each Option (the Commencement
Date).  The Company agrees to file an amendment to its Registration
Statement on Form S-8, within 30 days as so directed by Executive, to register
the shares underlying the Options issued on the date hereof pursuant to this
Section 6(a) hereof.  In addition, the Company agrees to extend the
expiration dates of all options owned by Executive which expire in calendar year
2009 for a period of five years.

     

    SECTION
7. 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, dental and disability insurance benefits, and retirement plan
benefits made available from time to time for its executive officers and other
employees.

    
      
        
        

      

      
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    SECTION
8. Involuntary
Termination.

     

    (a) If
Executive is incapacitated or disabled to the extent he cannot perform his
duties under this Agreement for twelve (12) consecutive weeks, or for a
cumulative total of six (6) months in any calendar year (such condition being
hereinafter referred to as a "Disability"), the Term of
Employment and employment of the Executive under this Agreement shall cease
(such termination, as well as a termination under Section 8(b), being
hereinafter referred to as an "Involuntary Termination") and
Executive shall be entitled to receive the benefits payable under any disability
policy maintained by the Company on his behalf and in accordance with Section
11(b) 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 11(b) hereof.

     

    SECTION
9. 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 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 (other than as a result of illness or incapacity), which, if
curable, shall not have been cured within 30 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 days of written notice
thereof from the Company, or (d) material breach of the terms and provisions of
this Agreement or any agreement with the Company which, if curable, shall not
have been cured within 30 days of written notice thereof from the
Company.

     

    (b) Termination
Other Than for Cause.  The Company may terminate the Term of
Employment and the employment of Executive hereunder at any time other than for
Cause as defined in Section 9(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 thirty (30) days after the giving of such notice or
such later date set forth therein.

     

    SECTION
10. Termination
by Executive.  If at any time
during the Term of Employment, Executive elects to terminate Executive’s
employment with the Company (other than for "Good Reason", as defined
below), then the Company’s obligations to Executive under this Agreement shall
be as set forth in Section 11(e) hereof and such termination by Executive shall
constitute a breach of this Agreement.  If Executive elects to
terminate Executive’s employment with the Company for Good Reason, then the
Company shall pay Executive the amounts set forth in Section 11(d)
hereof.  For the purpose of this Section, "Good Reason" means (i) any
material diminution of duties inconsistent with Executive's title, authority,
duties and responsibilities as Chairman and Chief Executive Officer; (ii) any
reduction of or failure to pay Executive compensation provided for herein, which
non-payment continues for a period of thirty (30) days 

    
      
        
        

      

      
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    following
written notice to the Company by Executive of such non-payment, except to the
extent Executive consents in writing to any reduction, deferral or waiver of
compensation; (iii) any relocation of the principal location of Executive's
employment more than 75 miles from the Corporation's current headquarters in New
York, New York without Executive's prior written consent; or (iv) any material
breach by the Company of its obligations under this Agreement that is not cured
(if curable) within thirty (30) days after receipt of notice
thereof.

     

    SECTION
11. Effect of
Termination.

     

    (a) Upon the
termination of the Term of Employment and Executive's employment hereunder due
to a Termination for Cause (as defined in Section 9(a) above), Executive shall
not have any further rights or claims against the Company under this Agreement,
except the right to receive (i) the unpaid portion, if any, of (a) the Base
Salary provided for in Section 5(a), computed on a pro rata basis through
the Termination Date and (b) Cash Bonus only if Executive has been employed
through the calendar year and the minimum Cash Bonus as provided in Section 5(b)
hereof has not been paid as of the Termination Date, and Additional Bonus
Compensation (including the Royalty Bonus Compensation) provided for in Section
5(b) earned prior to the Termination Date, (ii) any unpaid accrued benefits of
Executive, (iii) reimbursement for any expenses for which Executive shall not
have been reimbursed as provided in Section 7(a), and (iv) Executive’s rights
under the vested portion of any options or warrants issued to Executive and CMH
by the Company including the Options issued in accordance with Section 6(a)
hereof, (collectively, the “Aggregate Derivative
Securities”).

     

    (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 11(a), (ii) the Cash Bonus
pro-rated for the calendar year (based on $150,000) through the date of the
Involuntary Termination and the Additional Bonus Compensation earned (as of the
date of the Involuntary Termination) in accordance with Section 5(c) hereof, and
(iii) the accelerated vesting of all of the Aggregate Derivative Securities that
would have vested twelve (12) months from the date of Involuntary
Termination.

     

    (c) Upon the
termination of Executive’s employment upon a Termination Other Than for Cause
(as defined in Section 9(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 11(b) except Executive shall receive the full
minimum annual bonus of $150,000 rather than a pro-rated portion, (ii) a
severance equal to twelve (12) months Base Salary as in effect at the time of
the Termination Other Than for Cause, such sum to be paid in a lump sum payment
upon termination and (iii) accelerated vesting of all of the Aggregate
Derivative Securities that would have vested for the balance of the exercise
period for all such Aggregate Derivative Securities.

     

    (d) Upon the
termination of Executive’s employment by Executive for Good Reason (as defined
in Section 10 above), 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 the amounts set forth in Section 11(c).

    
      
        
        

      

      
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    (e) Upon the
termination of Executive’s employment by Executive (other than for Good Reason),
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 the
amounts set forth in Section 11(a).

     

    SECTION
12. Insurance.
The Company may, for its own benefit, in its sole discretion, and at its sole
cost and expense, 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
13. 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 (other than in furtherance of the purposes of the Company)
any knowledge or information with respect to the Company’s confidential, secret
or proprietary information or assets,  or with respect to any other
confidential, secret or proprietary aspects of the business, activities or
intellectual property of the Company including, without limitation, (a) patents
and related intellectual property, terms of patent acquisition contracts or
licensing arrangements, or other technical data pertaining to the Company’s
patents and  intellectual property (whether or not subject to patent,
trademark or copyright protection) or (b) business strategies and plans
including, but not limited to, litigation strategies and potential patent
acquisitions; 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”) or except as otherwise required by law.  In the
event that Executive becomes legally compelled to disclose any Confidential
Property, Executive shall advise the Company as soon as practicable so that the
Company may seek a protective order or other appropriate remedy.  In
addition, Executive agrees to cooperate in the Company’s effort, at the
Company’s expense, to obtain a protective order or other appropriate
remedy.  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 or affairs of the
Company or any subsidiary or affiliate thereof.

     

    SECTION
14. Right to
Inventions.  (a) 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 mark, 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.

     

    (b) To the
extent any of the rights, title and interest in and to Inventions cannot be
assigned by Executive to the Company, Executive hereby grants to the Company an
exclusive, royalty-free, transferable, irrevocable, worldwide license (with
rights to sublicense through multiple 

    
      
        
        

      

      
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    tiers of
sublicensees) to practice such non-assignable rights, title and
interest.  To the extent any of the rights, title and interest in and
to Inventions can be neither assigned nor licensed by Executive to the Company,
Executive hereby irrevocably waives and agrees never to assert such
non-assignable and non-licensable rights, title and interest against the Company
or any of the Company’s successors in interest to such non-assignable and
non-licensable rights.  Executive hereby grants to the Company or the
Company’s designees a royalty free, irrevocable, worldwide license (with rights
to sublicense through multiple tiers of sublicensees) to practice all applicable
patent, copyright, moral right, mask work, trade secret and other intellectual
property rights relating to any prior inventions which Executive incorporates,
or permits to be incorporated, in any Inventions.  Notwithstanding the
foregoing, Executive agrees that he will not incorporate, or permit to be
incorporated, any prior inventions of Executive in any Inventions without the
Company’s prior written consent.

     

    SECTION
15. Future
Innovations.
Executive recognizes that Inventions or Confidential Property relating to
his activities while working for the Company and conceived, reduced to practice,
created, derived, developed, or made by Executive, alone or with others, within
three (3) months after termination of his employment may have been conceived,
reduced to practice, created, derived, developed, or made, as applicable, in
significant part while employed by the Company.  Accordingly,
Executive agrees that such Inventions or Confidential Property shall be presumed
to have been conceived, reduced to practice, created, derived, developed, or
made, as applicable, during his employment with the Company and are to be
promptly assigned to the Company unless and until Executive has established the
contrary by written evidence satisfying the clear and convincing standard of
proof.

     

    SECTION
16. Cooperation
in Perfecting Rights to Proprietary Information and
Innovations.

     

    (a) Executive
agrees to perform, during and after his employment, all acts deemed necessary or
desirable by the Company to permit and assist the Company (during any period
after Executive’s termination of employment with the Company, subject to
Executive’s obligations to his then employer, if any), at the Company’s expense,
in obtaining and enforcing the full benefits, enjoyment, rights and title
throughout the world in the Inventions or Confidential Property assigned or
licensed to, or whose rights are irrevocably waived and shall not be asserted
against, the Company under this Agreement. Such acts may include, but are not
limited to, execution of documents and assistance or cooperation (i) in the
filing, prosecution, registration, and memorialization of assignment of any
applicable patents, copyrights, mask work, or other applications, (ii) in the
enforcement of any applicable patents, copyrights, mask work, moral rights,
trade secrets, or other proprietary rights, and (iii) in other legal proceedings
related to the Inventions or Confidential Property.

     

    (b) In the
event that the Company is unable (after reasonable efforts) to secure
Executive’s signature to any document required to file, prosecute, register, or
memorialize the assignment of any patent, copyright, mask work or other
applications or to enforce any patent, copyright, mask work, moral right, trade
secret or other proprietary right under any Inventions (including derivative
works, improvements, renewals, extensions, continuations, divisionals,
continuations in part, continuing patent applications, reissues, and
reexaminations thereof), Executive hereby irrevocably designates and appoints
the Company and the Company’s duly authorized officers and agents as his agents
and attorneys-in-fact to act for and on his behalf and

    
      
        
        

      

      
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    instead
of him, (i) to execute, file, prosecute, register and memorialize the assignment
of any such application, (ii) to execute and file any documentation required for
such enforcement, and (iii) to do all other lawfully permitted acts to further
the filing, prosecution, registration, memorialization of assignment, issuance,
and enforcement of patents, copyrights, mask works, moral rights, trade secrets
or other rights under Inventions, all with the same legal force and effect as if
executed by Executive.

     

    SECTION
17. Restrictive
Covenant.

     

    (a) The
Company is in the business of pursuing licensing opportunities related to its
patented technologies with third parties who the Company believes are infringing
its patents and intellectual property or who may require a license for future
products, and which business strategy has required, and may require in the
future, the Company to commence patent infringement lawsuits against third
parties (the “Business”). Executive acknowledges and recognizes that the Business may be
conducted throughout the world, and Executive further acknowledges and
recognizes the highly competitive nature of the Company's
Business.  Accordingly, in consideration of the premises contained
herein, the consideration to be received hereunder and the Options granted, and
to be granted, to Executive in accordance with Section 6 hereof, 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, officer, director, 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 licensee, customer, supplier, employee or consultant of
the Company, (iii) induce any employee or consultant of the Company to terminate
his employment or consultancy with the Company or to engage in any Competitive
Business in any manner described in the foregoing clause (i), 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).
Anything contained in this Section 17 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 outstanding shares of such entity shall not
constitute a breach of this Section 17.

     

    (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 (i) if
the Term of Employment shall have been Terminated Other Than For Cause by the
Company pursuant to Section 9(b) hereof, then the “Non-Competition Period” shall
mean the period commencing on the date hereof and ending twelve (12) months
thereafter; provided Executive is paid the severance equal to twelve (12) months
Base Salary as provided in Section 11(c) hereof and (ii) if the Term of
Employment shall have been terminated for Cause by the Company pursuant to
Section 9(a) hereof or without Good Reason pursuant to Section 10 hereof, then
the "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 entity throughout the
world (i) utilizing or pursuing licensing opportunities related to patented
technologies competitive with the Company's patents, (ii) any entity in which
the Company has acquired patents from and/or entered into a license agreement or
similar arrangement relating to the Company's patented technologies and (iii)
any entity engaged in a business competitive with any business then engaged in
by the Company; provided, that, Executive may
render services for (either as an employee or independent consultant)


    
      
        
        

      

      
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    for any
entity under (i), (ii), or (iii) above in this Section 17(b) so long as his
duties and responsibilities for such entities have nothing to do with any
business directly or indirectly related to the Company’s patents.

     

    (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
18. 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
19. 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
20. 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.

                  445
      Park Avenue, Suite 1018

                  New
      York, New York 10022

                  Telecopier:
      917-322-2105

                  Telephone:  (212)
      829-5770
 
	 	 
	
                  with
      copies to:

                	
                  Eiseman
      Levine Lehrhaupt & Kakoyiannis, P.C.

                  805
      Third Avenue

                  New
      York, New York 10022

                  Telecopier:
      (212) 355-4608

                  Telephone:
      (212) 752-1000

                  Attention: Sam
      Schwartz, Esq.

                


        

      

    

    


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
      
        	
                if
      to Executive, to:

              	
                Corey
      M. Horowitz 

                  1085
      Park Avenue 

                    New
      York, New York 

                      Telephone:
      (212) 831-9333

                    

                  

                

                 

              


      

    

    
      
      

    

     

    
      
      

    

    


    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
21. 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
22. Governing
Law.  This Agreement will be governed by, construed and
enforced in accordance with, the laws of the State of New York without giving
effect to principles of conflicts of laws.

     

    SECTION
23. 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
24. 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, whether written or oral, between the parties
with respect thereto.  This Agreement may be amended only by an
agreement in writing signed by the parties.

     

    SECTION
25. Survival
of Provisions.  Neither the termination of this Agreement, nor
of Executive’s employment hereunder, shall terminate or affect in any manner any
provisions of this Agreement that is intended by its terms to survive such
termination, including, without limitation, the provisions of Sections 11, 13,
14, 15, 16 and 17.

     

    SECTION
26. 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
27. 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.

     

    SECTION
28. Gender.
Any reference to the masculine gender shall be deemed to include the feminine
and neuter genders unless the context otherwise requires.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    SECTION
29.  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/ David
      C. Kahn	 
	 	 	David
      C. Kahn, Chief Financial Officer	 
	 	 	 	 
	 	 	 	 
	 	 	

                              EXECUTIVE 

                            	 
	 	 	 	 
	 	/s/
      Corey M. Horowitz 	 
	 	Corey
      M. Horowitz 	 


                    

                  

                

              

            

          

        

      

    

    


     

    


    


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    


    Exhibit
A

     

    STOCK
OPTION AGREEMENT

     

    STOCK
OPTION AGREEMENT, dated as of June __, (this " Stock Option
Agreement") by and between Network-1 Security Solutions, Inc., a Delaware
corporation with principal executive offices a 445 Park Avenue, Suite 1018, New
York, New York 10022 ("Network-1"), and
Corey M. Horowitz, residing at 1085 Park Avenue, New York, New York 10128
(“Horowitz”).

     

    WHEREAS,
in accordance with Section 6(a) of the Employment Agreement, dated June __,
2009 between the Company and Horowitz (the “Employment Agreement”), the Company
agreed, to issue to Horowitz an option to purchase 750,000 shares of the
Company’s Common Stock, upon the terms and conditions set forth herein;
and

     

    NOW
THEREFORE, in consideration of the premises and of the mutual covenants,
representations, warranties and agreements contained herein and in the
Employment Agreement, and intending to be legally bound hereby, the parties
hereto agree as follows:

     

    SECTION
1. Grant of
Option.

     

    Network-1
hereby grants to Horowitz an option (the "Option") to purchase,
out of its authorized but unissued shares of Common Stock, 750,000 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”).  Horowitz and/or his transferees or assigns are hereinafter
referred to as “Holder”.

     

    SECTION
2. Term and Exercise of
Option.

     

    (a) The
Option granted hereby shall vest on a calendar quarterly basis in equal shares
of 62,500 beginning
June 30, 2009 through March 31, 2012.  This Option may be
exercised in whole or in part as to vested shares at any time through
June __, 2019 (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.

     

    (b) In the
event of (i) a “change of control” (as hereinafter defined) of Network-1 at any
time prior to the Expiration Date, this Option may, from and after such date,
and notwithstanding paragraph 2(a) hereof, be exercised for up to 100% of the
total number of shares then subject to the Option minus the number of shares
previously purchased upon exercise of the Option (as adjusted for any changes in
the outstanding Common Stock by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion or what the Board of Directors deems in its
sole discretion to be similar circumstances).

     

    (c) A “Change
of Control” shall be deemed to have occurred upon the happening of any of the
following events: (i) the shareholders of Network-1 approve a merger of
consolidation of Network-1 with any other entity, other than a merger or
consolidation which would result in the 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    voting
securities of Network-1 outstanding immediately prior thereto continuing to
represent more than fifty percent (50%) of the total voting power represented by
the voting securities of Network-1 or such surviving entity outstanding
immediately after such merger or consolidation, or the shareholders of Network-1
approve a plan of complete liquidation of Network-1 or consummate the sale or
disposition by Network-1 of all or substantially all of Network-1’s assets
(other than to a subsidiary or subsidiaries) or (ii) any other event deemed to
constitute a “Change of Control” by the Compensation Committee or the Board of
Directors of Network-1.

     

    SECTION
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.

     

    SECTION
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.

     

    SECTION
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.

     

    SECTION
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.

     

    SECTION
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 this Option Agreement with respect to the shares of
Common Stock shall apply, to the extent applicable, on like terms to any such
other shares of capital stock, options or warrants or other
securities.

     

    (e) Upon each
adjustment of the Exercise Price as a result of calculations made in this
Section 7, the Option outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of Option Shares (calculated to the nearest
hundredth), obtained by (i) multiplying the number of Option Shares purchasable
upon exercise of the Option immediately prior to such adjustment of the Exercise
Price by the Exercise Price in effect immediately prior to such adjustment and
(ii) dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment of the Exercise Price.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (f) In case
of any capital reorganization of Network-1 or of any reclassification of shares
of Common Stock (other than as a result of subdivision or combination) or in
case of the consolidation of Network-1 with, or the merger of Network-1 into,
any other corporation (other than a consolidation or merger in which Network-1
is the continuing corporation) or of the sale of the properties and assets of
Network-1 as, or substantially as, an entirety, the Option shall, after such
reorganization, reclassification, consolidation, merger or sale, be exercisable,
upon the terms and conditions specified herein, for the number of shares of
Common Stock or other capital stock, options or warrants or other securities or
property to which a Holder (at the time of such reorganization,
reclassification, consolidation, merger or sale) upon exercise of such Option
would have been entitled upon such reorganization, reclassification,
consolidation, merger or sale; and in any such case, if necessary, the
provisions set forth in this Section 7(f) with respect to the rights and
interests thereafter of the Holder shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of Common Stock or
other capital stock or options, warrants or other securities or property
thereafter deliverable upon the exercise of the Option.  The
subdivision, reverse split or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares shall not be deemed to be
a reclassification of the Common Stock for the purposes of this Section
7(f).

     

    (g) In any
case in which this Section 7 shall require that an adjustment in the Exercise
Price be made effective as of a record date for a specified event, Network-1 may
elect to defer until the occurrence of such event issuing to the Holder, if such
Holder exercised any portion of this Option after such record date, shares of
capital stock or other securities of Network-1, if any, issuable upon such
exercise over and above the shares of Common Stock or other securities issuable,
on the basis of the Exercise Price in effect prior to such adjustment; provided,
however, that Network-1 shall deliver to the holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such shares of
Common Stock or other securities upon the occurrence of the event requiring such
adjustment.

     

    SECTION
8. Fractional
Shares

     

    Upon
exercise of the Option, Network-1 shall not be required to issue fractional
shares of Common Stock or other capital stock.  In lieu of such
fractional shares, the Holder shall receive an amount in cash equal to the same
fraction of the (i) current Market Price of one whole share of Common Stock if
clause (i), (ii) or (iii) in the definition of Market Price in Section 3(c)
hereof is applicable or (ii) book value of one whole shares of Common Stock as
reported in Network-1's most recent audited financial statements if clause (iv)
in the definition of Market Price in Section 3 above is
applicable.  All calculations under Section 7 shall be made to the
nearest cent.

     

    SECTION
9. Securities
Act Legend

     

    The
Holder shall not be entitled to any rights of a stockholder of Network-1 with
respect to any Option Shares purchasable upon the exercise of this Option,
including voting, dividend or dissolution rights, until such Option Shares have
been paid for in full.  As soon as practicable after such exercise,
Network-1 shall deliver a certificate or certificates for the securities
issuable upon such exercise, all of which shall be fully paid and nonassessable,
to the person or persons entitled to receive the same; provided, however, that,
if the Option Shares are not registered under the Securities Act, such
certificate or certificates delivered to the Holder of the surrendered Option
shall bear a legend reading substantially as follows:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    "These
securities have not been registered under the Securities Act of 1933, as
amended, or the securities laws of any state and may not be sold or transferred
in the absence of such registration or any exemption therefrom under such Act
and laws, if applicable.  Network-1, prior to permitting a transfer of
these securities, may require an opinion of counsel or other assurances
satisfactory to it as to compliance with or exemption from such Act and
laws."

     

    SECTION
10. Transfer

     

    All or a
portion of this Option may be transferred, sold or assigned by Holder without
the consent of Network-1 provided, that, Holder provides Network-1 with evidence
reasonably satisfactory to it that such transfer is not in violation of the
Securities Act of 1933, as amended (the “Act”).  With respect to any
such transfer, sale or assignment, Holder shall execute and deliver to Network-1
the Form of Assignment attached hereto.

     

    SECTION
11. Taxes;
Expenses

     

    Network-1
shall pay all taxes and expenses that may be payable in connection with the
preparation, issuance and delivery of Options Shares under this Stock Option
Agreement.

     

    SECTION
12. Notice of
Adjustment

     

    (a) Upon any
adjustment of the Exercise Price pursuant to Section 7 hereof, Network-1, within
30 calendar days thereafter, shall have on file for inspection by the Holder a
certificate of the Board of Directors of Network-1 setting forth the Exercise
Price after such adjustment, the method of calculation thereof in reasonable
detail, the facts upon which such calculations were based and the number of
Option Shares issuable upon exercise of the Option after such adjustment in the
Exercise Price, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein.

     

    (b) In
case:

     

    (i) Network-1
shall authorize the issuance to all holders of shares of Common Stock of rights,
options, warrants or other securities to subscribe for or purchase capital stock
of Network-1 or of any other subscription rights, options, warrants or other
securities; or

     

    (ii) Network-1
shall authorize the distribution to all holders of shares of Common Stock of
evidences of its indebtedness or assets; or

     

    (iii) of any
consolidation or merger to which Network-1 is a party and for which approval of
any stockholders of Network-1 is required, of the conveyance or transfer of the
properties and assets of Network-1 substantially as an entirety or of any
capital reorganization or any reclassification of the shares of Common Stock (;
or

     

    (iv) of the
voluntary or involuntary dissolution, liquidation or winding up of Network-1;
or

     

    (v) Network-1
proposes to take any other action which would require an adjustment of the
Exercise Price pursuant to Section 7 above;

     

    then, in
each such case, Network-1 shall give to the Holder at its address appearing
below at least 20 calendar days prior to the applicable record date hereinafter
specified in (A), (B), or (C) below, by 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    first
class mail, postage prepaid, a written notice stating (A) the date as of which
the holders of record of shares of Common Stock entitled to receive any such
rights, options, warrants or distribution are to be determined or (B) the date
on which any such consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up or (C) the date of such action which would require an adjustment
of the Exercise Price.  The failure to give the notice required by
this Section 12 or any defect therein shall not affect the legality or validity
of any such issuance, distribution, consolidation, merger, conveyance, transfer,
reorganization, reclassification, dissolution, liquidation, winding up or other
action or the vote upon any such action.

     

    Except as
provided herein, nothing contained herein shall be construed as conferring upon
Holder the right to vote on any matter submitted to the stockholders of
Network-1 for their vote or to receive notice of meetings of stockholders or the
election of directors of Network-1 or any other proceedings of Network-1, or any
rights whatsoever as a stockholder of Network-1.

     

    SECTION
13. Notices

     

    Any
notice, request, demand or other communication pursuant to the terms of this
Stock Option Agreement shall be in writing and shall be sufficiently given or
made when delivered or mailed by first class or registered mail,
postage-prepaid, to the following addresses:

     

     

    If to
Network-1:

     

    
      	
              Network-1
      Security Solutions, Inc.

              445
      Park Avenue, Suite 1018

              New
      York, New York 10022

            


    

    


     

    with a
copy to:

     

    
      
        
          
            	
                    Eiseman
      Levine Lehrhaupt & Kakoyiannis, P.C.

                    
                      805
      Third Avenue, 10th
      Floor

                      
                        New
      York, NY 10022

                        
                          Attn:  Sam
      Schwartz,
Esq.

                        

                      

                    

                  


          

        

      

    

    


     

    If to
Holder:

     

    
      
        
          	
                  Corey
      M. Horowitz.

                  
                    1085
      Park Avenue

                    
                      New
      York, New
York 10128

                    

                  

                


        

      

    

    


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SECTION
14. Miscellaneous

     

    (a) Waiver.  At
any time the parties hereto may (a) extend the time for the performance of any
of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein by the other
party or (c) waive compliance with any of the agreements or conditions contained
herein.  No failure on the part of any party to exercise any power,
right, privilege or remedy under this Stock Option Agreement, and no delay on
the part of any party in exercising any power, right, privilege or remedy under
this Stock Option Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy. No party shall be deemed to have
waived any claim arising out of this Stock Option Agreement, or any power,
right, privilege or remedy under this Stock Option Agreement, unless the waiver
of such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such party; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.

     

    (b) Entire
Agreement.  Except as otherwise set forth in this Stock Option
Agreement and the other documents referred to herein, collectively contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and supersede all prior agreements and understandings, oral and
written, with respect thereto.

     

    (c) Binding Effect;
Benefit.  This Stock Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and nothing in this Stock
Option Agreement, expressed or implied, is intended to confer on any person or
entity other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Stock Option Agreement.

     

    (d) Amendment and
Modification.  Subject to applicable law, this Stock Option
Agreement may only be amended, modified and supplemented by a written agreement
duly executed the parties hereto.

     

    (e) Further
Actions.  Network-1 shall use its best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereunder and to
carry out the interest and purposes of this Stock Option Agreement, including,
without limitation, using its reasonable best efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental entities.

     

    (f) Applicable
Law.  This Stock Option Agreement and the legal relations
between the parties hereto shall be governed by, and construed in accordance
with, the laws of the State of New York, without regard to the conflicts of laws
rules thereof.

     

    (g)  Dispute
Resolution.  The parties hereto will use their best efforts to
resolve by mutual agreement any disputes, controversies or differences that may
arise from, under, out of or in connection with this Agreement.  If
any such disputes, controversies or differences cannot be settled between the
parties hereto, they will be finally settled by final and binding arbitration to
be conducted by an arbitration tribunal in New York City, New York, pursuant to
the rules of the American Arbitration Association.  The arbitration
tribunal will consist of three arbitrators.  The decision or award of
the arbitration tribunal will be final, and judgment upon such decision or
award

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    may be
entered in any competent court or application may be made to any competent court
for judicial acceptance of such decision or award and an order of
enforcement.  In the event of any procedural matter not covered by the
aforesaid rules, the procedural law of New York will govern.  The
prevailing party in arbitration shall be entitled to receive a reasonable sum
for its attorneys' fees and all other reasonable costs and expenses incurred in
such action or suit.

     

    (h) Severability.  Any
term or provision of this Stock Option Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.  If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making the determination
of invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Stock
Option Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.

     

    (i) Non-exclusivity.  The
rights and remedies of Network-1 and Holder under this Stock Option Agreement
are not exclusive of or limited by any other rights or remedies which either of
them may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative and not alternative.

     

    IN WITNESS WHEREOF, an
authorized officer of Network-1 has signed and delivered this Option as of the
date first written above.

     

     

    NETWORK-1
SECURITY SOLUTIONS, INC.

    


     

    By:          /s/ David C.
Kahn                                  

    David C. Kahn, Chief Financial
Officer

    


    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ELECTION
TO EXERCISE

     

    (To be
executed by the registered holder if such holder desires to exercise the within
Option)

     

    To:          NETWORK-1
SECURITY SOLUTIONS, INC.

    445 Park
Avenue, Suite 1018

    New York,
New York 10022

     

    


     

    The
undersigned hereby (1) irrevocably elects to exercise its right to exercise
_____ shares of Common Stock covered by the within Option, (2) makes payment in
full of the Exercise Price by enclosure of a certified check or (3) elects a
cashless exercise, (4) requests that certificates for such shares be issued in
the name of:

     

    Please
print name, address and Social Security or Tax Identification
Number:

     

    ________________________________________________

     

    ________________________________________________

     

    ________________________________________________

     

    and (5)
if said number of shares shall not be all the shares evidenced by the within
Option, requests that a new Option Agreement for the balance of the shares
covered by the within Option be registered in the name of, and delivered
to:

     

    Please
print name and address:

     

    ________________________________________________

     

    ________________________________________________

     

    ________________________________________________

     

    In lieu
of receipt of a fractional share of Common Stock, the undersigned will receive a
check representing payment therefor.

     

    Dated:  _____________________

     

    By:   _________________________________

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    FORM OF
ASSIGNMENT

     

     

    FOR VALUE RECEIVED
                             ,
hereby sells, assigns and transfers to
                        
(Social Security or I.D. No.
                       
) the within Option, or that portion of this Option purchasable for ________
shares of Common Stock together with all rights, title and interest therein, and
does hereby irrevocably constitute and appoint ______________ attorney to
transfer such Option on the register of Network-1 Security Solutions, Inc., with
full power and substitution.

     

    _____________________

    (Signature)

    


     

    Dated:
___________, 20__

     

    Signature
Guaranteed:

     

    


     

    ____________________