Document:

EXHIBIT 10.1
                                                                    ------------

                          SECURITIES PURCHASE AGREEMENT
                          -----------------------------

         AGREEMENT, dated as of April 16, 2007, by and between Network-1
Security Solutions, Inc., a Delaware corporation with principal offices at 445
Park Avenue, Suite 1028, New York, New York 10022 (the "Company"), and the
Investors signatory hereto (collectively, the "Investors").

         WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to each of the Investors and
each Investor severally and not jointly desires to purchase (i) up to an
aggregate of 3,333,333 shares of common stock, par value $.01 per share (the
"Common Stock") at a purchase price of $1.50 per share (the "Purchase Price"),
and five (5) year warrants to purchase up to an aggregate of 1,666,667 shares of
common stock, at an exercise price of $2.00 per share, on the terms and subject
to the conditions set forth herein. The shares of common stock issuable upon
exercise of the Warrants (as defined below) are collectively referred to herein
as the "Warrant Shares."

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

                                    ARTICLE I

                      Issuance of Common Stock and Warrants
                      -------------------------------------

         Section 1.1 Agreement to Purchase and Sell. At the closing provided for
in Section 1.2(a), the Company will issue and sell to each Investor and, subject
to the terms and conditions of this Agreement, each Investor will purchase from
the Company, severally and not jointly, (i) the Common Stock, and (ii) the
Warrants in the form of Exhibit A attached hereto, in the amounts opposite such
Investor's name and in consideration for payment by each Investor to the Company
of the Purchase Price as indicated on Schedule 1.1 hereto. The Investors will be
afforded registration rights with respect to the Common Stock and the Warrant
Shares in accordance with the Registration Rights Agreement in the form attached
hereto as Exhibit B.

         Section 1.2 The Closing. The closing of the issuance of the Common
Stock and Warrants (the "Closing") shall take place at the offices of Eiseman
Levine Lehrhaupt & Kakoyiannis, P.C., 805 Third Avenue, New York, New York
10022, on the date that this Agreement is executed by the parties hereto (the
time and date of the Closing being herein referred to as the "Closing Date"). On
the Closing Date the Company will instruct its transfer agent to deliver to each
of the Investors the certificates for the Common Stock and the Company will
deliver the Warrants to be purchased hereunder in accordance with Schedule 1.1
hereto and the other terms hereof against delivery by each such Investor of a
wire transfer to the Company in accordance with instructions provided by the
Company (or by certified check) in the full amount of the Purchase Price payable
by such Investor.

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                                   ARTICLE II

           Representations, Warranties, and Agreements of the Company
           ----------------------------------------------------------

         Except for the exceptions set forth on the Disclosure Schedule attached
hereto as Schedule 1.2 and furnished to Investors, the Company represents and
warrants to, and agrees with, the Investors as follows:

         Section 2.1 Corporate Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and is qualified to transact business and
is in good standing as a foreign corporation in every jurisdiction in which its
ownership, leasing, licensing or use of property or assets or the conduct of its
business makes such qualification necessary, except in such jurisdictions where
the failure to be so qualified or in good standing would not have a material
adverse effect on the business, results of operations, financial condition or
prospects of the Company. The Company has no subsidiaries except for Network-1
Acquisition Corp. (which does not conduct any business or own any material
assets) and has no investment, whether by way of ownership of stock or other
securities or by loan, advance or otherwise, in any corporation, partnership,
firm, association or other business entity. The Company has all required power
and authority to own its property and to carry on its business as now conducted
and proposed to be conducted.

         Section 2.2 Validity of Transaction. The Company has all requisite
power and authority to execute, deliver and perform this Agreement, the
Registration Rights Agreement and the Warrants, and to issue the Common Stock
and Warrants to the Investors. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Warrants and to authorize the issuance and sale of the Common Stock and
Warrants, and upon exercise of the Warrants, to authorize the issuance of the
Warrant Shares to the Investors. The Common Stock and Warrants, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid,
and non-assessable and will be free and clear of all pledges, liens,
encumbrances and restrictions, other than under applicable federal and state
securities laws. This Agreement, the Registration Rights Agreement and the
Warrants have been duly authorized, executed and delivered by the Company, are
the legal, valid and binding obligations of the Company, and are enforceable as
to the Company in accordance with their respective terms, except as may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws or by legal or equitable principles relating to or limiting
creditors' rights generally or as rights to indemnification may be limited by
applicable securities laws. Except as to filings which may be required under
applicable state securities regulations, no consent, authorization, approval,
order, license, certificate, or permit of or from, or declaration or filing
with, any Federal, state, local or other governmental authority or of any court
or other tribunal is required by the Company in connection with the transactions
contemplated hereby. No consent of any party to any contract, agreement,
instrument, lease, license, arrangement or understanding to which the Company is
a party, or by which any of its properties or assets is bound, is required for
the execution, delivery or performance by the Company of this Agreement, the
Registration Rights Agreement, the Warrants and the issuance of the Warrant
Shares. The execution, delivery, and performance of this Agreement, the
Registration Rights Agreement and the Warrants by the Company will not violate,
result in a breach

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of,  conflict  with or (with or without  the giving of notice or the  passage of
time or both)  entitle any party to terminate  or call a default  under any such
contract,  agreement,  instrument, lease, license, arrangement or understanding,
or violate or result in a breach of any term of the Certificate of Incorporation
or By-laws of the Company,  or violate,  result in a breach of, or conflict with
any law, rule,  regulation,  order, judgment or decree binding on the Company or
to which any of its operations,  business,  properties or assets is subject. The
registration   rights  granted  to  the  Investors,   in  accordance   with  the
Registration Rights Agreement, do not violate any of the terms and conditions of
the registration  rights  previously  granted by the Company to other holders of
the  Company's  securities  or any other  agreements  to which the  Company is a
party.  The Warrant  Shares  issuable  upon  exercise of the  Warrants  are duly
authorized, have been reserved for issuance and upon exercise of the Warrants in
accordance  with the terms  thereof,  will be validly  issued,  fully paid,  and
nonassessable, will not have been issued in violation of any preemptive right of
stockholders or rights of first refusal and the Investors,  upon exercise,  will
have good title to the  Warrant  Shares,  free and clear of all liens,  security
interests,  pledges, charges,  encumbrances,  stockholders agreements and voting
trusts.

         Section 2.3 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock and 10,000,000 shares of preferred
stock, par value $.01 per share. Immediately prior to the Closing, the Company
shall have 19,839,724 shares of Common Stock outstanding and no outstanding
shares of preferred stock. All issued and outstanding shares of Common Stock
have been validly issued and are fully paid and nonassessable and have not been
issued in violation of any Federal or state securities laws. Except for the
obligation of the Company to issue (a) the Warrant Shares upon exercise of the
Warrants, (b) upon the exercise of the options and warrants that are currently
outstanding to purchase an aggregate of 5,664,111 shares of Common Stock
(excluding the options issued under the Company's Stock Option Plan as set forth
in the following clause (c)), (c) upon the exercise of options to purchase
3,917,370 shares of Common Stock issued under the Company's 1996 Amended and
Restated Stock Option Plan (the "Stock Option Plan"), there are not, as of the
date hereof, any outstanding or authorized subscriptions, options, warrants,
calls, rights, commitments or any other agreements obligating the Company to
issue (i) any additional shares of its capital stock or (ii) any securities
convertible into, or exercisable or exchangeable for, or evidencing the right to
subscribe for, any shares of its capital stock except as set forth in the
Disclosure Schedule. Other than the Company's Stock Option Plan, the Company has
not adopted or authorized any plan for the benefit of its officers, employees,
or directors which requires or permits the issuance, sale, purchase, or grant of
any shares of the Company's capital stock, any securities convertible into, or
exercisable or exchangeable for, or evidencing the right to subscribe for any
shares of the Company's capital stock or any phantom shares or any stock
appreciation rights. The Company is under no obligation (contingent or
otherwise) to purchase or otherwise acquire or retire any shares of its capital
stock.

         Section 2.4 Financial Statements. The financial statements of the
Company, including the notes thereto, as they appear in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2006 (the "Financial
Statements"), fairly present, in all material respects, the financial position
and results of operations of the Company at the dates thereof and for the
periods covered thereby. The Financial Statements have been prepared in
conformity with generally accepted accounting principles ("GAAP"), consistently
applied throughout the periods involved. The Company has no material liabilities
or obligations, contingent, direct, indirect or otherwise except (i) as set
forth in the latest balance sheet included in the Financial Statements or the
notes thereto (the date of such balance sheet being referred to as the "Balance
Sheet Date"), and (ii) those incurred in the ordinary course of business since
the Balance Sheet Date.

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         Section 2.5 No Undisclosed Liabilities. The Company does not have any
liabilities or obligations of any nature required to be set forth in the
Financial Statements under GAAP, whether or not accrued, contingent or
otherwise, and there is no existing condition, situation or set of circumstances
which may result in such a liability or obligation, except (a) liabilities or
obligations of the Company reflected in its Securities and Exchange Commission
(the "SEC") filings and in the Financial Statements or incurred in the ordinary
course of the Company's business, or (b) liabilities and obligations which are
not, individually or in the aggregate, reasonably expected to have a material
adverse effect on the Company.

         Section 2.6 Legal Proceedings. Except as set forth in the Disclosure
Schedule annexed hereto as Schedule 1.2, there are no actions, suits,
proceedings, claims or hearings of any kind or nature existing or pending or, to
the knowledge of the Company, threatened and, to the knowledge of the Company,
no investigations or inquiries, before or by any court, or other governmental
authority, tribunal or instrumentality (or, to the Company's best knowledge, any
state of facts that would give rise thereto), pending or threatened against the
Company, or involving the properties of the Company, that, individually or in
the aggregate as to any matter covered by this Section 2.6, are reasonably
likely to result in any material adverse effect on the Company or that might
adversely affect the transactions or other acts contemplated by this Agreement
or the validity or enforceability of this Agreement.

         Section 2.7 SEC Filings. The Company has filed all forms, reports,
statements and other documents required to be filed with (i) the SEC including,
without limitation, (A) all Annual Reports on Form 10-KSB, (B) all Quarterly
Reports on Form 10-QSB, (C) all Reports on Form 8-K, (D) all other reports or
registration statements and (E) all amendments and supplements to all such
reports and registration statements (collectively referred to as the "SEC
Reports") and (ii) any other applicable state securities authorities (all such
forms, reports, statements and other documents in (i) and (ii) of this Section
2.7 being referred to herein, collectively, as the "Reports"). The Reports (i)
were prepared in all material respects in accordance with the requirements of
applicable law (including, with respect to the SEC Reports, the Securities Act
of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as the case may be, and the rules and
regulations of the SEC thereunder applicable to such SEC Reports) and (ii) did
not at the time they were filed contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. In addition, since the last annual report
of the Company on Form 10-KSB filed with the SEC on April 11, 2007, there have
been no material events that require disclosure under the Exchange Act.

         Section 2.8 Patents and Other Intellectual Property. The Company owns
all right, title and interest in all patents, trademarks or other intellectual
property necessary or material for use in connection with its business as
disclosed in the SEC Reports and which the failure to so have would reasonably
be expected to have a material adverse effect on the Company's assets, business
or financial condition.

         Section 2.9 Finder or Broker. Except as set forth in the Disclosure
Schedule, neither the Company nor anyone acting on behalf of the Company has
negotiated with any finder, broker or intermediary or similar person in
connection with the transactions contemplated herein.

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         Section 2.10 Taxes. The Company has filed all federal tax returns and
all state and municipal and local tax returns (whether relating to income,
sales, franchise, withholding, real or personal property or other types of
taxes) required to be filed under the laws of the United States and applicable
states, and has paid in full all taxes which have become due pursuant to such
returns or claimed to be due by any taxing authority or otherwise due and owing;
provided, however, that the Company has not paid any tax, assessment, charge,
levy or license fee that it is contesting in good faith and by proper
proceedings and adequate reserves for the accrual of same are maintained if
required by GAAP. The Company believes that each of the tax returns heretofore
filed by the Company correctly and accurately reflects the amount of its tax
liability thereunder. The Company has withheld, collected and paid all levies,
assessments, license fees and taxes to the extent required.

                                   ARTICLE III

          Representations, Warranties, and Agreements of the Investors
          ------------------------------------------------------------

         Each of the Investors, severally and not jointly, represents and
warrants to, and agrees with, the Company as follows:

         Section 3.1 Organization. Such Investor (if not an individual) is duly
organized under the laws of the state of its jurisdiction of organization and
has full power and authority to enter into this Agreement and to consummate the
transactions set forth herein. The address set forth on Schedule 1.1 hereof is
such Investor's true and correct business, residence or domicile address.

         Section 3.2 Accredited Investor, Experience, Access to Information,
etc.

         (a) Such Investor and, to the knowledge of such Investor, each limited
partner of such Investor in the case of an Investor which is a limited
partnership, and each partner of such Investor in the case of an Investor which
is a general partnership, is an "accredited investor," as that term is defined
in Rule 501 of Regulation D promulgated under the Securities Act;

         (b) Such Investor and, to the knowledge of such Investor, each of its
general partners, officers and other affiliates of such Investor and its general
partners, if any, have had substantial experience in investing in private
transactions like this one, are capable of evaluating the merits and risks of an
investment in the Company and understand that an investment in the Common Stock
and Warrants is speculative and involves a high degree of risk and should not be
purchased by anyone who cannot afford the loss of their entire investment. Such
Investor has also carefully considered the Risk Factors set forth in Exhibit C
hereof;

         (c) Such Investor acknowledges that it has had a full opportunity to
discuss the business, management and financial affairs of the Company with the
Company's management. Such Investor has reviewed the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2006 as well as additional SEC
Reports of the Company that it deemed appropriate, and any additional requested
documents from the Company and has had a full opportunity to ask questions of,
and receive answers from, the officers of the Company concerning the terms and
conditions of this Agreement, the purchase of the Common Stock and Warrants, the
business, operations, market potential, capitalization, financial condition and
prospects of the Company, and all other matters deemed relevant by the Investor.
Such Investor acknowledges that it has had an opportunity to evaluate all
information regarding the Company as it has deemed necessary or

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desirable in connection with the transactions contemplated by this Agreement,
has independently evaluated the transactions contemplated by this Agreement and
has reached its own decision to enter into this Agreement; and

         (d) Such Investor acknowledges that it fully understands the risks of
the Company's litigation with D-Link Corporation and D-Link Systems,
Incorporated pending in the United States District Court for the Eastern
District of Texas (the "D-Link Litigation"). Such Investor has had access to all
publicly available documents pertaining to the D-Link Litigation, a full
opportunity to ask questions of, and receive answers from, officers of the
Company concerning the litigation and such Investor understands and acknowledges
that an adverse outcome of the D-Link Litigation would have a material adverse
effect on the Company. Such Investor has carefully considered the Risk Factors
pertaining to the D-Link Litigation and related matters set forth in Exhibit C.

         Section 3.3 Investment Intent. Such Investor is acquiring the Common
Stock and Warrants and the Warrant Shares for its own account for investment and
not with a view to, or for sale in connection with, any public distribution
thereof in violation of the Securities Act. Such Investor understands that none
of the shares of Common Stock and Warrants or the Warrant Shares have been
registered for sale under the Securities Act or qualified under applicable state
securities laws and that the shares of Common Stock, the Warrants and the
Warrant Shares are being offered and sold to such Investor pursuant to one or
more exemptions. Such Investor understands that it must bear the economic risk
of its investment in the Company for an indefinite period of time, as the Common
Stock, the Warrants and the Warrant Shares cannot be sold unless subsequently
registered under the Securities Act and qualified under state securities laws,
unless an exemption from such registration and qualification is available. Such
Investor acknowledges that no public market for the Warrants of the Company
presently exists and none may develop in the future.

         Section 3.4 Transfer of Securities. Such Investor will not sell or
otherwise dispose of any shares of Common Stock, Warrants or Warrant Shares
unless (a) a registration statement with respect thereto has become effective
under the Securities Act and such Warrants and Warrant Shares have been
qualified under applicable state securities laws or (b) there is presented to
the Company notice of the proposed transfer and, if it so requests, a legal
opinion reasonably satisfactory to the Company that such registration and
qualification is not required; provided, however, that no such registration or
qualification or opinion of counsel shall be necessary for a transfer by such
Investor (i) to any entity controlled by, or under common control with, such
Investor, (ii) to a shareholder, partner or officer of such Investor, (iii) to a
shareholder, partner or officer of the general partner of such Investor, (iv) to
the spouse, lineal descendants, estate or a trust or for the benefit of any of
the foregoing or (v) by operation of law, provided the transferee agrees in
writing to be subject to the terms hereof to the same extent as if he were such
Investor. Such Investor consents that any transfer agent of the Company may be
instructed not to transfer any Common Stock, Warrants or Warrant Shares unless
it receives satisfactory evidence of compliance with the foregoing provisions,
and that there may be endorsed upon any certificate (or other instrument)
representing such securities (and any certificates issued in substitution
therefor) the following legend calling attention to the foregoing restrictions
on transferability of such shares, stating in substance:

                  "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

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                  REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SUCH ACT AND
                  LAWS, IF APPLICABLE. THE COMPANY, 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"

The Company shall, upon the request of any holder of Common Stock, Warrants or
Warrant Shares and the surrender of such securities, issue a new stock
certificate and Warrants without such legend if (A) the Warrants or stock
evidenced by such certificate has been effectively registered under the
Securities Act and qualified under any applicable state securities law and sold
by the holder thereof in accordance with such registration and qualification, or
(B) such holder shall have delivered to the Company a legal opinion reasonably
satisfactory to the Company to the effect that the restrictions set forth herein
are no longer required or necessary under the Securities Act or any applicable
state law.

         Section 3.5 Authorization. All actions on the part of such Investor
necessary for the authorization, execution, delivery and performance by such
Investor of this Agreement have been taken. This Agreement has been duly
authorized, executed and delivered by such Investor, is the legal, valid and
binding obligations of such Investor, and are enforceable as to such Investor in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws or by
legal or equitable principles relating to or limiting creditors' rights
generally or as rights to indemnification may be limited by applicable
securities laws.

         Section 3.6 Finder or Broker. Neither such Investor nor any person
acting on behalf of such Investor has negotiated with any finder, broker,
intermediary or similar person in connection with the transactions contemplated
herein.

                                   ARTICLE IV

                                 Indemnification
                                 ---------------

         Section 4.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless the Investors, their officers and directors,
employees, agents, representatives and affiliates and each other person, if any,
who controls any thereof, against any loss, liability, claim, damage and expense
whatsoever (including, but not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any untruth, inaccuracy, or breach of any of the representations,
warranties, covenants or agreements of the Company contained in this Agreement
or in any other document furnished by the Company to any of the foregoing in
connection with this transaction.

         Section 4.2 Indemnification by Investors. (a) Each Investor, severally
and not jointly, agrees to indemnify and hold harmless the Company, its officers
and directors, employees, agents and representatives and affiliates and each
other person, if any, who controls any thereof, against any loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any

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litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any untruth, inaccuracy, or breach of any of the representations,
warranties, covenants or agreements of such Investor contained in this Agreement
or in any other document furnished by such Investor to any of the foregoing in
connection with this transaction.

         Section 4.3 Notices of Claims. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in Section 4.1 and 4.2, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under Article
IV hereof, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if the indemnified party reasonably
believes it is advisable for it to be represented by separate counsel because
there exists a conflict of interest between its interests and those of the
indemnifying party with respect to such claim, or there exist defenses available
to such indemnified party which may not be available to the indemnifying party,
or if the indemnifying party shall fail to assume responsibility for such
defense, the indemnified party may retain counsel satisfactory to it and the
indemnifying party shall pay all fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld or delayed. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation or which requires action
other than the payment of money by the indemnifying party. Each indemnified
party shall furnish such information regarding itself or the claim in question
as an indemnifying party may reasonably request in writing and as shall be
reasonably requested in connection with the defense of such claim and litigation
resulting therefrom.

         Section 4.4 Contribution. If the indemnification provided for in
Section 4.1 and 4.2 shall for any reason be held by a court of competent
jurisdiction to be unavailable to an indemnified party in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Section 4.1 or 4.2 hereof, the indemnified
party and the indemnifying party shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating the same), (a) in such proportion as
is appropriate to reflect the relative fault of the Company and the Investors in
connection with the statement or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable consideration (the relative fault of the Company and such Investors to
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Investors
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission) or (b) if the
allocation provided by clause (a) above is not permitted by applicable law, in
such proportion as shall

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be appropriate to reflect the relative benefits received by the Company and the
Investors from the offering of the securities. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. In addition, no person shall be obligated to
contribute hereunder any amounts in payment of any settlement of any action or
claim effected without such person's consent, which consent shall not be
unreasonably withheld or delayed.

                                    ARTICLE V

                              Additional Provisions
                              ---------------------

         Section 5.1 Legal Opinion. Eiseman Levine Lehrhaupt & Kakoyiannis P.C.,
counsel to the Company, will deliver at the Closing a legal opinion covering the
matters set forth in Exhibit D.

         Section 5.2 Communications. All notices or other communications
hereunder shall be in writing and shall be given by registered or certified mail
(postage prepaid and return receipt requested), by an overnight courier service
which obtains a receipt to evidence delivery or by telex or facsimile
transmission (provided that written confirmation of receipt is provided),
addressed as set forth below:

         If to the Company:

                  Network-1 Security Solutions, Inc.
                  445 Park Avenue, Suite 1028
                  New York, New York 10022
                  Attention: Corey M. Horowitz, Chairman and Chief Executive
                  Officer

         With a copy to:

                  Eiseman Levine Lehrhaupt & Kakoyiannis P.C.
                  805 Third Avenue
                  New York, New York 10022
                  Attention:  Sam Schwartz, Esq.

         If to the Investors, at their respective addresses as set forth on
Schedule 1.1 hereto, or such other address as any party may designate to the
other in accordance with the aforesaid procedure. As to Hound Partners, L.P., a
copy of such notice shall be sent to its counsel, Akin Gump Strauss Hauer & Feld
LLP, Attention: Alfredo R. Gutierrez, Esq. All notices and other communications
sent by overnight courier service shall be deemed to have been given as of the
next business day after delivery thereof to such courier service, those given by
telex or facsimile transmission shall be deemed given when sent, and all notices
and other communications sent by mail shall be deemed given as of the third
business day after the date of deposit in the United States mail.

         Section 5.3 Successors and Assigns. The Company may not sell, assign,
transfer or otherwise convey any of its rights or delegate any of its duties
under this Agreement, except to a corporation which has succeeded to
substantially all of the business and assets of the Company and has assumed in
writing its obligations under this Agreement, and this Agreement shall be
binding on the Company and such successor. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the Investors and their
successors and assigns.

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<PAGE>

         Section 5.4 Amendments and Waivers. Neither this Agreement nor any term
hereof may be changed or waived (either generally or in a particular instance
and either retroactively or prospectively) absent the written consent of the
Investors owning a majority-in-interest of the securities purchased pursuant to
this Agreement.

         Section 5.5 Survival of Representations, etc. The representations,
warranties, covenants and agreements made herein or in any certificate or
document executed in connection herewith shall survive the Closing for a period
of 12 months and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.

         Section 5.6 Delays or Omissions; Waiver. No delay or omission to
exercise any right, power or remedy accruing to either the Company or the
Investors upon any breach or default by the other under this Agreement shall
impair any such right, power or remedy nor shall it be construed to be a waiver
of any such breach or default, or any acquiescence therein or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring.

         Section 5.7 Entire Agreement. This Agreement (together with the
exhibits and schedules attached hereto) contains the entire understanding of the
parties with respect to their respective subject matter and all prior
negotiations, discussions, commitments and understandings heretofore had between
them with respect thereto are merged herein and therein.

         Section 5.8 Expenses. Each party hereto shall pay its own expenses
(including legal fees) in connection with this Agreement and the transactions
contemplated hereby.

         Section 5.9 Counterparts; Governing Law. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York, without giving effect to conflict of laws.

         Section 5.10 Further Actions. At any time and from time to time, each
party agrees, without further consideration, to take such actions and to execute
and deliver such documents as may be reasonably necessary to effectuate the
purposes of this Agreement.

         Section 5.11 Gender. As the context so requires, terms herein in the
masculine form shall be construed to include the feminine form as well as
neuter.

                                       10
<PAGE>

                [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

         IN WITNESS WHEREOF, this Agreement has been duly executed on the date
herein above set forth.

                               NETWORK-1 SECURITY SOLUTIONS, INC.

                               By: /s/ Corey M. Horowitz
                                   -------------------------------------------
                                   Name: Corey M. Horowitz
                                   Title: Chairman and Chief Executive Officer

                               INVESTORS:

                               HOUND PARTNERS, L.P.

                               By: /s/ Jonathan Auerbach
                                   -------------------------------------------
                                   Name: Jonathan Auerbach
                                   Title: Managing Member of G.P.

                               GRAHAM PARTNERS, L.P.

                               By: /s/ Harold W. Berry
                                   -------------------------------------------
                                   Name: Harold W. Berry
                                   Title: General Partner

                               AURELIAN PARTNERS, L.P.

                               By: /s/ Brian T. Horey
                                   -------------------------------------------
                                   Name: Brian T. Horey
                                   Title: General Partner

                               BRIAN T. HOREY, SEP-IRA, CHARLES SCHWAB & CO.
                               CUSTODIAN

                               By: /s/ Brian T. Horey
                                   -------------------------------------------
                                   Brian T. Horey

                                       11
<PAGE>

                [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

                               /s/ Steven Heinemann
                               -----------------------------------------------
                               STEVEN HEINEMANN

                               ZAYKOWSKI LIMITED PARTNERS, L.P.

                               By:  /s/ Paul Zaykowski
                                   -------------------------------------------
                                   Name: Paul Zaykowski
                                   Title: Managing Member, PRZ Holdings LLC,
                                          General Partner

                               ZAYKOWSKI QUALIFIED PARTNERS, L.P.

                               By:  /s/ Paul Zaykowski
                                   -------------------------------------------
                                   Name: Paul Zaykowski
                                   Title: Managing Member PRZ Holdings LLC,
                                          General Partner

                               LEWIS OPPORTUNITY FUND, L.P.

                               By: /s/ W. Austin Lewis IV
                                   -------------------------------------------
                                   Name: W. Austin Lewis IV
                                   Title: General Partner

                               LAM FUND, LTD.

                               By: /s/ W. Austin Lewis IV
                                   -------------------------------------------
                                   Name: W. Austin Lewis IV
                                   Title: General Partner

                                       12
<PAGE>

                [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

         IN WITNESS WHEREOF, this Agreement has been duly executed on the date
herein above set forth.

                                HOUND PARTNERS OFFSHORE FUND, L.P.

                                By: /s/ Jonathan Auerbach
                                    -------------------------------------------
                                    Name: Jonathan Auerbach
                                    Title: General Partner of the Managing
                                           Member

                                       13
<PAGE>

                             SCHEDULES AND EXHIBITS
                             ----------------------

Schedule1.1    Investors, Number of Common Stock, Number of Warrants and
               Purchase Price
Schedule 1.2   Disclosure Schedule
Exhibit A:     Form of Warrant
Exhibit B:     Risk Factors
Exhibit C      Registration Rights Agreement

                                       14
<PAGE>

                                  SCHEDULE 1.1

                                         Number of
     Name and Address                    Shares of      Number of      Purchase
        of Investor                     Common Stock     Warrants       Price
        -----------                     ------------     --------       -----

Hound Partners, L.P.                     1,081,817        540,909     $1,622,725
101 Park Avenue, 47th Floor
New York, New York  10178

Hound Partners Offshore Fund, L.P.       1,084,850        542,425     $1,627,275
c/o Citco Fund Services (Cayman
Islands) Limited Regatta Office Park,
Windward One West Bay Road, P.O. Box
31106 SMB Grand Cayman, Cayman Islands

Graham Partners, L.P.                      333,333        166,667       $500,000
666 Fifth Avenue
New York, New York  10103

Aurelian Partners, L.P.                    333,333        166,667       $500,000
666 Fifth Avenue
New York, New York  10103

Brian T. Horey SEP-IRA,                     66,667         33,333       $100,000
Charles Schwab & Co. Custodian
666 Fifth Avenue
New York, New York  10101

Steven Heinemann                           133,333         66,667       $200,000
106 Goose Hill Road
Cold Spring Harbor, New York  11742

Zaykowski Limited Partners, L.P.            66,667         33,333       $100,000
24 Schermerhorn Street
Brooklyn, New York  11201

Zaykowski Qualified Partners, L.P.          66,667         33,333       $100,000
24 Schermerhorn Street
Brooklyn, New York  11201

Lewis Opportunity Fund, L.P.               141,666         70,833       $212,500
45 Rockefeller Plaza
New York, New York  10111

LAM Fund, Ltd.                              25,000         12,500       $ 37,500
45 Rockefeller Plaza
New York, New York  10111
                                        ----------      ---------     ----------
     Total                               3,333,333      1,666,667     $5,000,000

                                       15
<PAGE>

                                  SCHEDULE 1.2

                               DISCLOSURE SCHEDULE

This Disclosure Schedule (this "Schedule") is attached to and forms a part of
the Securities Purchase Agreement, dated as of April 16, 2007 (the "Securities
Purchase Agreement"), by and among Network-1 Security Solutions, Inc., a
Delaware corporation (the "Company"), and the investors named on Schedule 1.1
thereto. Section references contained in this Schedule are for reference
purposes only and correspond to the same numbered sections of the Securities
Purchase Agreement, and the disclosure of any matter in any such section of this
Schedule is deemed to be disclosed in response to or in connection with the
other provisions of the Securities Purchase Agreement to the extent that such
disclosure relates or is responsive to such other provisions of the Securities
Purchase Agreement. Capitalized terms used and not defined in this Schedule have
the meanings ascribed to them in the Securities Purchase Agreement.

2.3 Capitalization.

         o In accordance with Section 6(b) of the Employment Agreement, dated
February 28, 2007, between the Company and Corey M. Horowitz, Chairman and Chief
Executive Officer, Mr. Horowitz has certain limited anti-dilution rights which
provide that if at anytime during the period ended December 31, 2008, in the
event that the Company completes a financing (either a single transaction or
series of transactions) consisting of the issuance of common stock or any other
securities convertible or exercisable into common stock, Mr. Horowitz shall
receive (at the closing of such financing) from the Company, at the same price
as the securities issued in the financing, such number of additional options to
purchase Common Stock so that he maintains the same derivative ownership
percentage (21.47%) of the Company (based upon options and warrants owned by Mr.
Horowitz and CMH Capital Management Corp. ("CMH"), an affiliated entity, and
exclusive of shares of Common Stock owned by him or CMH) as he or CMH owned at
the time of execution of his employment agreement; provided, that, the
aforementioned anti-dilution protection shall be afforded to Mr. Horowitz up to
maximum future financing(s) of $2.5 million. Accordingly, in connection with the
Closing pursuant to the Securities Purchase Agreement, Mr. Horowitz will be
issued a 5 year option to purchase 732,709 shares of Common Stock at an exercise
price of $1.67 per share.

2.6. Legal Proceedings.

         D-LINK LITIGATION

         On August 10, 2005, the Company commenced patent litigation against
D-Link Corporation and D-Link Systems, Incorporated in the United States
District Court for the Eastern District of Texas, Tyler division (Civil Action
No. 6:05W291), for infringement of the Company's remote power patent (U.S.
Patent No. 6,218,930) (the "Remote Power Patent"). The complaint seeks, among
other things, a judgment that the Remote Power Patent is enforceable and has
been infringed by the defendants. The Company also seeks a permanent injunction
restraining the defendants from continued infringement, or active inducement of
infringement by others, of the

                                       16
<PAGE>

Company's Remote Power Patent. On February 27, 2006, the D-Link defendants filed
answers and asserted counterclaims. In their answers, the D-Link defendants
asserted that they did not infringe any valid claim of the Remote Power Patent,
and further asserted that the asserted patent claims are invalid and/or
unenforceable. In addition to these defenses, the D-Link defendants also
asserted counterclaims for, among other things, non-infringement, invalidity and
unenforceability of the Remote Power Patent. In February 2006, all outstanding
motions by the D-Link defendants to dismiss or transfer the case to the Eastern
District of Texas were denied. In March 2006, the D-Link defendants filed a writ
of mandamus to overturn the Court's decision to maintain the action in the
Eastern District of Texas. On June 2, 2006, the court issued an order denying
the D-Link defendants' request for a writ of mandamus.

         In November, 2006, the Court issued its ruling on the "Markman
hearing", a special proceeding under U.S. patent law, where both sides present
their arguments to the court as to how they believe certain claim terms
pertaining to the patent at issue in the lawsuit should be interpreted. In March
2007, the Company and the D-Link Defendants made motions for summary judgment. A
trial date is presently scheduled for May 2007. In the event the Court
determines that the Company's Remote Power Patent was not valid or enforceable
and/or that the defendants did not infringe, any such determination would have a
material adverse effect on the Company.

         POWERDSINE SETTLEMENT

         On November 16, 2005, the Company entered into a Settlement Agreement
with PowerDsine, Inc. (NASDAQ: PDSN) and PowerDsine Ltd. (collectively,
"PowerDsine") which dismissed, with prejudice, patent litigation brought by
PowerDsine against the Company in March 2004 in the United States District Court
for the Southern District of New York that sought a declaratory judgment that
the Remote Power Patent (U.S. Patent No. 6,218,930) was invalid and not
infringed by PowerDsine and/or its customers.

         Under the terms of the Settlement Agreement, the Company agreed that it
will not initiate litigation against PowerDsine for its sale of Power over
Ethernet (PoE) integrated circuits. In addition, the Company agreed that it will
not seek damages for infringement from customers that incorporate PowerDsine
integrated circuit products in PoE capable Ethernet switches manufactured on or
before April 30, 2006. PowerDsine has agreed that it will not initiate, assist
or cooperate in any legal action relating to the Remote Power Patent. The
Company also agreed that we will not initiate litigation against PowerDsine or
its customers for infringement of the Remote Power Patent arising from the
manufacture and sale of PowerDsine Midspan products for three years following
the dismissal date. Following such three year period, the Company may seek
damages for infringement of the Remote Power Patent from PowerDsine or its
customers with respect to the purchase and sale of Midspan products beginning 90
days following the dismissal date of the litigation. The benefits afforded to
PowerDsine under the Settlement Agreement will cease in the event PowerDsine
institutes, assists or cooperates in any legal proceeding related to the Remote
Power Patent adverse to us (unless otherwise required by law to do so) and
PowerDsine customers will also forfeit benefits under the Settlement Agreement
if they engage in similar action.

         No licenses to use the technologies covered by the Remote Power Patent
were granted to PowerDsine or its customers under the terms of the settlement.
The Settlement Agreement further provides that PowerDsine is obligated to
provide each of its customers with written notice of the

                                       17
<PAGE>

settlement which notice shall disclose that no license for the Remote Power
Patent has been provided to PowerDsine's customers and that in order to combine,
modify or integrate any PowerDsine product with or into any other device or
software, PowerDsine's customers may need to receive patent license(s) for such
third party patents which is the customer's responsibility. For the full text of
the Company's Settlement Agreement with PowerDsine, see Exhibit 10.1 of the
Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission on November 17, 2005.

2.8 Patents and Other Intellectual Property.

         On November 18, 2003, the Company entered into an agreement (the
"Agreement") with Merlot Communications, Inc. ("Merlot"), a broadband
communications solutions provider, pursuant to which the Company acquired six
patents (the "Patent Portfolio") relating to various telecommunications and data
networking technologies from Merlot, for a purchase price of $100,000 and
contingent future payments equal to 20% of the net income (as defined in the
Agreement) of the Company from the sale or licensing of the Patents after the
Company achieves $4.0 million of net income for each patent comprising the
Patent Portfolio ("Future Contingent Payments"). On January 18, 2005, the
Company and Merlot entered into an amendment to the Agreement (the "Amendment")
pursuant to which the Company paid $500,000 to Merlot in consideration for the
restructuring of the Future Contingent Payments to Merlot from the licensing or
sale of the Patent Portfolio. The Amendment provides for future contingent
payments by the Company to Merlot of $1.0 million upon achievement of $25
million of Net Royalties (as defined), an additional $1.0 million upon
achievement of $50 million of Net Royalties and an additional $500,000 upon
achievement of $62.5 million of Net Royalties from licensing or sale of the
patents acquired from Merlot.

2.9 Finder or Broker.

         In connection with the Closing, Pali Capital, Inc. and Brimberg & Co.,
L.P. will receive placement agent fees from the Company in the amount of 5.5% of
the gross proceeds of the securities sold at the Closing and 5 year common stock
purchase warrants to purchase an aggregate of 360,000 shares of the Company's
common stock (240,000 shares at an exercise price of $1.50 per share and 120,000
shares at an exercise price of $2.00 per share). The shares underlying the
placement agent warrants shall be registered for resale in the Registration
Statement filed with respect to the securities sold to the Investors at the
Closing.

                                       18
<PAGE>

                                    EXHIBIT A
                                 FORM OF WARRANT

         NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE
PROVISIONS

OF THIS WARRANT CERTIFICATE

                                                                  April __, 2007

               WARRANTS TO PURCHASE AN AGGREGATE OF ______ SHARES
                               OF COMMON STOCK OF
                       NETWORK-1 SECURITY SOLUTIONS, INC.
             (INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)

                                    ISSUED TO

                            -------------------------

                              DATED: April __, 2007

         THIS IS TO CERTIFY that, for value received, _________________ or its
registered assigns (herein collectively referred to as the "Warrantholder"), is
entitled to the number of Warrants (together with any subsequent Warrants issued
pursuant to the terms hereof, the "Warrants") set forth above, each of which
represents the right, upon the due exercise hereof, at any time commencing on
the date hereof (the "Commencement Date") and ending on the fifth anniversary of
the Commencement Date (the "Expiration Date"), to purchase from Network-1
Security Solutions, Inc., a Delaware corporation (the "Company"), one fully paid
and nonassessable share, free from tax liens and charges, of common stock, par
value $.01 per share (the "Common Stock"), of the Company upon surrender hereof,
with the form of election to purchase included herein (the "Election to
Purchase") completed and duly executed, at the office of the Company, and upon
simultaneous payment therefor of an exercise price per share equal to the
Purchase Price (as defined in Section 1 below) in cash payable to the order of
the Company. The number of shares of Common Stock issuable upon exercise of the
Warrants (individually, a "Share" and collectively, the "Shares") and the
Purchase Price therefor are subject to adjustment as provided herein.

                                        1
<PAGE>

         1. Purchase Price

         The purchase price for each of the Shares purchasable hereunder (the
"Purchase Price") shall be equal to $2.00 per Share, subject to adjustment as
hereinafter described.

         2. Definition of Market Price

         Unless otherwise provided herein, for purposes of any computations made
hereunder, "Market Price" per share of Common Stock on any date shall be: (i) if
the Common Stock is 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 Common Stock is not listed or admitted for trading on any
national securities exchange, the average of the last reported closing bid and
asked quotation for the Common Stock as reported on the Nasdaq Stock Market's
National Market ("NNM") or Nasdaq Stock Market's Small Cap Market ("NSM") or a
similar service if NNM or NSM are not reporting such information; (iii) if the
Common Stock is not listed or admitted for trading on any national securities
exchange, NNM or NSM or a similar service, the average of the last reported bid
and asked quotation for the Common Stock as quoted by a market maker in the
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
Common Stock is 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 Common
Stock, the fair market value of such shares as determined in good faith by the
Board of Directors of the Company.

         3. Transfer

         The Warrants may be transferred, sold or assigned in whole or in part,
subject to the provisions of the Securities Act of 1933, as amended. Concurrent
with any transfer of the Warrants, the Warrantholder shall notify the Company of
such transfer, indicating the circumstances of the transfer and, upon request,
furnish the Company with an opinion of its counsel, in form and substance
reasonably satisfactory to counsel for the Company, to the effect that the
proposed transfer may be made without registration under the Securities Act or
qualification under any applicable state securities laws; provided, however, no
legal opinion shall be required if the transferee is an affiliate, stockholder
or limited partner of the Warrantholder. Transfer of the Warrants shall be made
by delivery of the warrant certificate accompanied by a duly executed notice of
assignment, in the form annexed hereto. In the event of the transfer of less
than all of the Warrants, a new warrant certificate shall be issued to the
Warrantholder for the remaining number of Warrants not transferred.

         4. Issuance of Shares

         Subject to the restrictions set forth in Section 5 below, upon
surrender of the Warrants and payment of the Purchase Price as aforesaid, the
Company shall issue and deliver with all reasonable dispatch the certificate(s)
for the Shares to or upon the written order of the Warrantholder and in such
name or names as the Warrantholder may designate. Such certificate(s) shall
represent the number of Shares issuable upon the exercise of the Warrants so
surrendered, together with a cash amount in respect of any fraction of a Share
otherwise issuable upon such exercise.

                                        2
<PAGE>

         Certificates representing the 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 Shares as of the date of the surrender of the
Warrants and payment of the Purchase Price as aforesaid, notwithstanding that
the transfer books for the Shares or other classes of stock purchasable upon the
exercise of the Warrants shall then be closed or the certificate(s) for the
Shares in respect of which the Warrants is then exercised shall not then have
been actually delivered to the Warrantholder. As soon as practicable after each
such exercise of the Warrants, the Company shall issue and deliver the
certificate(s) for the Shares issuable upon such exercise, registered as
requested. The Warrants shall be exercisable, at the election of the registered
holder hereof, either as an entirety or from time to time for part of the number
of Shares specified herein, but in no event shall fractional Shares be issued
with regard to the exercise of the Warrants. In the event that only a portion of
the Warrants are exercised at any time prior to the close of business on the
Expiration Date, a new warrant certificate shall be issued to the Warrantholder
for the remaining number of Shares purchasable pursuant hereto.

         Prior to due presentment for registration of transfer of the Warrants,
the Company shall deem and treat the Warrantholder as the absolute owner of the
Warrants (notwithstanding any notation of ownership or other writing on this
warrant certificate made by anyone other than the Company) for the purpose of
any exercise hereof or any distribution to the Warrantholder and for all other
purposes, and the Company shall not be affected by any notice to the contrary.

         5. Payment of Expenses, Taxes, etc. upon Exercise

         The Company shall pay all documentary stamp taxes, if any, attributable
to the initial issuance of the Shares issuable upon the exercise of the
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any certificates for Shares in a name other than that of
the Warrantholder upon the exercise of the Warrants, and in such case the
Company shall not be required to issue or deliver any certificates for Shares
until or unless the person or persons requesting the issuance have paid to the
Company the amount of such tax or have established to the Company's satisfaction
that such tax has been paid or is not required to be paid.

         6. Lost, Stolen or Mutilated Warrant Certificate

         In case this warrant certificate shall be mutilated, lost, stolen or
destroyed, the Company shall issue and deliver, in exchange and substitution for
and upon cancellation of the mutilated warrant certificate, or in lieu of and
substitution for the warrant certificate lost, stolen or destroyed, a new
warrant certificate of like tenor and representing an equivalent number of
Shares purchasable upon exercise, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such warrant
certificate and reasonable indemnity, if requested, also reasonably satisfactory
to the Company. Upon providing an appropriate indemnification, no bond or other
security shall be required from the original Warrantholder in connection with
the replacement by the Company of a lost, stolen or mutilated warrant
certificate.

                                        3
<PAGE>

         7. Covenants of Company

         (a) The Company shall at all times through the Expiration Date reserve
and keep available, out of its aggregate authorized but unissued shares of
Common Stock, the number of Shares deliverable upon the exercise of the
Warrants.

         (b) Before taking any action which would cause an adjustment pursuant
to the terms set forth herein reducing the portion of the Purchase Price
attributable to the Shares below the then par value (if any) of such Shares, the
Company shall take any corporate action which may, in the opinion of its counsel
(which may be counsel regularly engaged by the Company), be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Shares at the Purchase Price as so adjusted.

         (c) The Company covenants that all Shares issued upon exercise of the
Warrants shall, upon issuance in accordance with the terms hereof, be fully paid
and nonassessable and free from all pre-emptive rights and taxes, liens,
encumbrances, charges and security interests created by the Company with respect
to the issuance and holding thereof.

         8. Rights Upon Expiration

         Unless the Warrants are surrendered and payment made for the Shares as
herein provided before the close of business on the Expiration Date, this
warrant certificate will become wholly void and all rights evidenced hereby will
terminate after such time.

         9. Exchange of Warrant Certificate

         Subject to the provisions of Section 3 above, this warrant certificate
may be exchanged for a number of warrant certificates of the same tenor as this
warrant certificate for the purchase in the aggregate of the same number of
Shares of the Company as are purchasable upon the exercise of this warrant
certificate, upon surrender hereof at the office of the Company with written
instructions as to the denominations of the warrant certificates to be issued in
exchange.

         10. Adjustment for Certain Events

         (a) In case the Company shall at any time after the date the Warrants
are first issued (i) declare a dividend on the Common Stock payable in shares of
the Company's capital stock (whether in shares of Common Stock or of capital
stock of any other class), (ii) subdivide the outstanding Common Stock, (iii)
reverse split the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of the Company's capital stock in a reclassification of
the Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Purchase 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 Warrants on such date, shall be proportionately adjusted so
that the holder of any Warrant exercised after such time shall be entitled to
receive the aggregate number and kind of securities which, if such Warrant had
been exercised immediately prior to such date, such holder would have owned upon

                                        4
<PAGE>

such exercise and been entitled to receive by virtue of such dividend,
subdivision, reverse split or reclassification. Any such adjustment shall become
effective immediately after the record date of such dividend or the effective
date of such subdivision, reverse split or reclassification made successively
whenever any event listed above shall occur.

         (b) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of earnings, consolidated earnings,
if the Company shall have one or more subsidiaries, or earned surplus, or
dividends payable in Common Stock for which adjustment is made under Section
10(a) above) or rights, options or warrants to subscribe for or purchase Common
Stock, then, in each case, the Purchase Price per Share to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, of which the numerator
shall be the current Market Price for a 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 a share of Common Stock. In the event that
the Company and the Warrantholder 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 the Company and the Warrantholder, and the reasonable
costs of such appraiser shall be borne by the Company. Any such adjustment shall
become effective immediately after the record date for such distribution and
shall be made successively whenever such a record date is fixed, and in the
event that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.

         (c) No adjustment in the Purchase 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 10(c) is
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 10 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 the Company be obligated to issue fractional shares of
Common Stock or fractional portions of any securities upon the exercise of the
Warrants.

         (d) In the event that at any time, as a result of an adjustment made
pursuant to Section 10 hereof, the holder of any Warrant thereafter exercised
shall become entitled to receive any shares of capital stock or warrants or
other securities of the Company other than the Shares, thereafter the number of
such other shares of capital stock or warrants or other securities so receivable
upon exercise of this Warrant 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 contained in this Section 10, and the provisions of
this warrant certificate with respect to the Shares shall apply, to the extent
applicable, on like terms to any such other shares of capital stock or warrants
or other securities.

         (e) Upon each adjustment of the Purchase Price as a result of
calculations made in this Section 10, each Warrant outstanding immediately prior
to the making of such adjustment shall

                                        5
<PAGE>

thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of Shares (calculated to the nearest hundredth), obtained by (i)
multiplying the number of Shares purchasable upon exercise of a Warrant
immediately prior to such adjustment of the Purchase Price by the Purchase Price
in effect immediately prior to such adjustment and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.

         (f) In case of any capital reorganization of the Company or of any
reclassification of the Common Stock (other than a change in par value or from a
specified par value to no par value or from no par value to a specified par
value or as a result of subdivision or combination) or in case of the
consolidation of the Company with, or the merger of the Company into, any other
corporation (other than a consolidation or merger in which the Company is the
continuing corporation) or of the sale of the properties and assets of the
Company as, or substantially as, an entirety, each Warrant 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 or warrants or other securities or property
to which a holder of the number of shares of Common Stock purchasable (at the
time of such reorganization, reclassification, consolidation, merger or sale)
upon exercise of such Warrant 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 10(f) with respect to the
rights and interests thereafter of the registered holders of all Warrants 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 warrants or other
securities or property thereafter deliverable on the exercise of the Warrants.
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
10(f).

         (g) In any case in which this Section 10 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event issuing to the Warrantholder, if such Warrantholder exercised any Warrant
after such record date, shares of capital stock or warrant or other securities
of the Company, if any, issuable upon such exercise over and above the Shares
issuable, on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to the holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
shares of capital stock or warrants or other securities upon the occurrence of
the event requiring such adjustment.

         (h) The Shares and any other shares of capital stock or warrants or
other securities now or hereafter receivable upon exercise of this Warrant shall
be entitled to registration under the Securities Act of 1933 pursuant to the
terms of the Registration Rights Agreement attached to the Purchase Agreement as
Exhibit C thereto.

         11. Fractional Shares

         Upon exercise of the Warrants the Company shall not be required to
issue fractional shares of Common Stock or other capital stock. In lieu of such
fractional shares, the Warrantholder shall receive an amount in cash equal to
the same fraction of the (i) current Market Price of one whole Share if clause
(i), (ii) or (iii) in the definition of Market Price in Section 2 above is
applicable

                                        6
<PAGE>

or (ii) book value of one whole Share as reported in the Company's most recent
audited financial statements if clause (iv) in the definition of Market Price in
Section 2 above is applicable. All calculations under this Section 11 shall be
made to the nearest cent.

         12. Securities Act Legend

         The Warrantholder shall not be entitled to any rights of a stockholder
of the Company with respect to any Shares purchasable upon the exercise hereof,
including voting, dividend or dissolution rights, until such Shares have been
paid for in full. As soon as practicable after such exercise, the Company 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 applicable,
such certificate or certificates delivered to the holder of the surrendered
Warrant 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. THE COMPANY, 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."

         13. Notice of Adjustment

         (a) Upon any adjustment of the Purchase Price, the number of Shares
issuable, or the securities or other property deliverable, upon exercise of this
Warrant, pursuant to Section 10 above, the Company, within 30 calendar days
thereafter, shall have on file for inspection by the Warrantholder a certificate
of the Board of Directors of the Company setting forth the Purchase Price after
such adjustment, the method of calculation thereof in reasonable detail, the
facts upon which such calculations were based and the number of Shares issuable,
or the securities or other property deliverable, upon exercise of the Warrants
after such adjustment in the Purchase Price, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein, and
(ii) send a copy of such certificate to the Warrantholder.

         (b) In case:

         (i) the Company shall authorize the issuance to any holders of Common
Stock of rights, options or warrants to subscribe for or purchase capital stock
of the Company or of any other subscription rights, options or warrants; or

         (ii) the Company shall authorize the payment of cash or stock dividends
to any holders of Common Stock, or other outstanding securities of the Company,
or the distribution to

                                        7
<PAGE>

any holders of Common Stock, or other outstanding securities of the Company, of
evidences of its indebtedness or assets; or

         (iii) of any consolidation or merger to which the Company is a party or
the conveyance or transfer of all or substantially all of the properties and
assets of the Company or any capital reorganization or any reclassification of
the Common Stock (other than a change in par value or from a specified par value
to no par value or from no par value to a specified par value or as a result of
a subdivision or combination); or

         (iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or

         (v) the Company proposes to take any other action, which would require
an adjustment of the Purchase Price pursuant to Section 10 above or require the
vote of any of the Company's stockholders;

then, in each such case, the Company shall give to the Warrantholder 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 Purchase Price or the vote of the Company's stockholders. The failure to
give the notice required by this Section 13(b) 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 the Warrantholder the right to vote on any matter submitted
to the stockholders of the Company for their vote or to receive notice of
meetings of stockholders or the election of directors of the Company or any
other proceedings of the Company, or any rights whatsoever as a stockholder of
the Company.

         14. Notices

         Any notice, request, demand or other communication pursuant to the
terms of the Warrants 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:

                                        8
<PAGE>

         If to the Company:

                  Network-1 Security Solutions, Inc.
                  445 Park Avenue, Suite 1028
                  New York, NY  10022
                  Attention: Corey M. Horowitz, Chairman and Chief Executive
                  Officer

         with a copy to:

                  Eiseman Levine Lehrhaupt & Kakoyiannis, P.C.
                  805 Third Avenue
                  New York, New York 10022
                  Attention:  Sam Schwartz, Esq.

         If to the Warrantholder, to the address of such Warrantholder provided
to the Company by such Warrantholder for the purpose of notices, or to such
other address or such other counsel as the Company or the Warrantholder may
designate by written notice to the other party.

         15. Amendment and Modification

         Unless otherwise provided herein, this warrant certificate may not be
amended, modified or supplemented in any respect unless by a written agreement
executed by the Company and a majority-in-interest of the Warrantholders issued
warrants pursuant to the Securities Purchase Agreement, dated April __, 2007
(based upon the aggregate number of Warrants held), provided that no such
amendment or modification shall unfairly discriminate against a particular
Warrantholder relative to other Warrantholders.

3Section 5.       16.      Miscellaneous

         (a) All the covenants and provisions herein by or for the benefit of
the Company shall bind and inure to the benefit of its successors or assigns and
all of the covenants and provisions herein for the benefit of the Warrantholder
hereof shall inure to the benefit of its successors or assigns.

                  (b) This warrant certificate shall be deemed to be a contract
made under the laws of the State of New York for all purposes and shall be
construed in accordance with the laws of such without regard to principles of
conflict of laws.

         (c) Nothing in this warrant certificate shall be construed to give any
person or corporation other than the Company and the Warrantholder and its
permitted transferees any legal or equitable right, remedy or claim under this
warrant certificate; but this warrant certificate shall be for the sole and
exclusive benefit of the Company and the Warrantholder and its permitted
transferees.

                                        9
<PAGE>

         IN WITNESS WHEREOF, an authorized office of the Company has signed and
delivered to the Warrantholder this warrant certificate as of the date first
written above.

                     NETWORK-1 SECURITY SOLUTIONS, INC.

                     By:
                         ---------------------------------------
                         Corey M. Horowitz, Chairman and Chief Executive Officer

                                       10
<PAGE>

                              ELECTION TO PURCHASE

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

To:      NETWORK-1 SECURITY SOLUTIONS, INC.
         445 Park Avenue, Suite 1028,
         New York, New York  10022
         Attention:  Corey M. Horowitz, Chairman and Chief Executive Officer

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

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

------------------------------------------------

------------------------------------------------

------------------------------------------------

and (4) if said number of shares shall not be all the shares evidenced by the
within Warrants, requests that a new warrant certificate for the balance of the
shares covered by the within Warrants 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: _____________________________

                                             _____________________________

                                       11
<PAGE>

                                   Assignment

FOR VALUE RECEIVED                          hereby sells, assigns and transfers
                   ------------------------
unto
     -----------------------------------------------------------------------
     [Please print or typewrite name, address and federal tax identification

-------------------
number of Assignee] the within Warrants representing the right to purchase
___________ shares of common stock of Network-1 Security Solutions, Inc. (the
"Company"), and does hereby irrevocably constitute and appoint its attorney to
transfer the within Warrants on the books of the within named Company with full
power of substitution in the premises. In the event that less than all of the
within Warrants are assigned hereby, the Company is directed to issue in the
name of the undersigned a certificate for the Warrants not so assigned.

Dated:
       -------------------------------------

In the Presence of:

-----------------------------------

                                       12
<PAGE>

                                    EXHIBIT B
                                  RISK FACTORS

         We operate in a highly competitive environment that involves a number
of risks, some of which are beyond our control. The following discussion
highlights the most material of the risks.

         WE HAVE A HISTORY OF LOSSES AND NO REVENUE FROM CURRENT OPERATIONS.

         We have incurred substantial operating losses since our inception,
which have resulted in an accumulated deficit of $(46,273,000) as of December
31, 2006. For the years ended December 31, 2006 and 2005, we incurred net losses
of $(1,952,000) and $(1,332,000), respectively. We have financed our operations
primarily by sales of equity securities. Since December 2002, when we
discontinued our security software products and following the commencement of
our patent technology licensing business in November 2003, we have had no
revenue from operations for the years ended December 31, 2005 and December 31,
2006. Our ability to achieve revenue and generate positive cash flow from
operations is dependent upon consummating licensing agreements with respect to
our patented technologies. We may not be successful in achieving licensing
agreements with third parties and our failure to do so would have a material
adverse effect on our business, financial condition and results of operations.
We may not be able to achieve revenue or generate positive cash flow from
operations from our licensing business.

         WE COULD BE REQUIRED TO STOP OPERATIONS IF WE ARE UNABLE TO DEVELOP OUR
TECHNOLOGY LICENSING BUSINESS OR RAISE CAPITAL WHEN NEEDED.

         We anticipate, based on our currently proposed plans and assumptions
relating to our operations (including the timetable of, costs and expenses
associated with our continued operations), that our cash position of $1,797,000
at December 31, 2006 will more likely than not be sufficient to satisfy our
operations and capital requirements until December 2007. However, we may expend
our funds prior thereto. In the event our plans change, or our assumptions
change or prove to be inaccurate (due to unanticipated expenses, difficulties,
delays or otherwise), we could have insufficient funds to support our operations
prior to December 2007. We are currently seeking additional financing to fund
our operations. Our inability to obtain additional financing when needed, absent
generating sufficient cash from licensing arrangements, would have a material
adverse effect on us, requiring us to curtail or possibly cease our operations.
In addition, any additional equity financing may involve substantial dilution to
the interests of our then existing stockholders.

         OUR LICENSING BUSINESS MAY NOT BE SUCCESSFUL.

         In November 2003, we entered the technology licensing business
following our acquisition of six patents relating to various telecommunications
and data networking technologies including, among others, patents covering the
delivery of remote power over Ethernet and the transmission of audio, video and
data over computer and telephony networks. Accordingly, we have a limited
history in the technology licensing business upon which an evaluation of our
prospects and future performance can be made. Our prospects must be considered
in light of the risks, expenses and difficulties frequently encountered in the
development, operation and expansion of a new business based on patented
technologies in a highly specialized and competitive market. We may not be able
to achieve revenue or profitable operations from our licensing business.

                                        1
<PAGE>

         OUR FUTURE SOURCE OF LICENSING REVENUE IS UNCERTAIN.

         In February 2004, we initiated our first licensing efforts relating to
the technologies in our remote power patent (U.S. Patent No. 6,218,930) (the
"Remote Power Patent"). To date, we have not entered into any licensing
agreements with third parties with respect to our Remote Power Patent or our
other patented technologies. Our inability to consummate licensing agreements
and achieve revenue from our patented technologies would have a material adverse
effect on our operations and our ability to continue our business. In addition,
in the event we consummate license arrangements with third parties, such
arrangements are not likely to produce a stable or predictable stream of revenue
in the foreseeable future. Furthermore, the success of our licensing efforts
depends upon the strength of our intellectual property rights.

         WE FACE UNCERTAINTY AS TO THE OUTCOME OF LITIGATION WITH D-LINK.

         On August 10, 2005, we commenced litigation against D-Link Corporation
and D-Link Systems, Incorporated in the United States District Court for the
Eastern District of Texas, Tyler division (Civil Action No. 6:05W291), for
infringement of our Remote Power Patent. Our complaint seeks, among other
things, a judgment that our Remote Power Patent is duly enforceable and has been
infringed by the defendants. We also seek a permanent injunction restraining
defendants from continued infringement, or active inducement of infringement by
others, of our Remote Power Patent. On February 27, 2006, the D-Link defendants
filed answers and asserted counterclaims. In their answers, the D-Link
defendants asserted that they did not infringe any valid claim of our Remote
Power Patent, and further asserted that our asserted patent claims are invalid
and/or unenforceable. In addition to these defenses, the D-Link defendants also
asserted counterclaims for, among other things, non-infringement, invalidity and
unenforceability of our Remote Power Patent. In November, 2006, the Court issued
its ruling on the "Markman hearing", a special proceeding under U.S. patent law,
where both sides present their arguments to the court as to how they believe
certain claim terms pertaining to the patent at issue in the lawsuit should be
interpreted. In the ruling, we believe that the Court's constructions on 5 of
the 6 claim terms at issue were consistent with the constructions sought by us
in our proposed constructions. With respect to the 6th claim term, the Court's
construction was consistent with agreed upon portions of the constructions
submitted by us and D-Link but was also modified by the Judge in a manner that
we believe is consistent with our overall position on the claim term. There is,
however, no assurance that our view of the Markman hearing claim constructions
will in fact be consistent with subsequent court rulings. In the event the Court
determines that our Remote Power Patent was not valid or enforceable, and/or
that the defendants do not infringe any such determination would have a material
adverse effect on us.

         WE ARE CURRENTLY RELYING UPON THE EFFORTS OF THINKFIRE TO CONSUMMATE
LICENSING AGREEMENTS FOR OUR REMOTE POWER PATENT WITH CERTAIN SELECT POTENTIAL
LICENSEES.

         On November 30, 2004, we entered into a Master Services Agreement (the
"Agreement") with ThinkFire Services USA, Ltd. ("ThinkFire") pursuant to which
we granted ThinkFire the exclusive (except for us and related companies)
worldwide rights to negotiate license agreements for our Remote Power Patent
with respect to certain potential licensees agreed to between the parties.
Either we or ThinkFire can terminate the Agreement upon 60 days notice for any
reason or upon 30 days notice in the event of a material breach. We have agreed
to pay ThinkFire a fee not to exceed 20% of the royalty

                                        2
<PAGE>

payments received from license agreements consummated by ThinkFire on our
behalf. ThinkFire may not be successful in consummating license agreements on
our behalf and even if such agreements are consummated they may not result in
significant royalty payments to us.

         OUR SUCCESS IS DEPENDENT UPON OUR ABILITY TO PROTECT OUR PROPRIETARY
TECHNOLOGIES.

         Our success is substantially dependent upon our proprietary
technologies and our ability to protect our intellectual property rights. We
currently hold 6 patents issued by the U.S. Patent Office that relate to various
telecommunications and data networking technologies and include among other
things, patents covering the transmission of audio, voice and data over computer
and telephony networks and the delivery of remote PoE networks. We rely upon our
patents and trade secret laws, non-disclosure agreements with our employees,
consultants and third parties to protect our intellectual property rights. The
complexity of patent and common law, combined with our limited resources, create
risk that our efforts to protect our proprietary technologies may not be
successful. We cannot assure you that our patents will be upheld or that third
parties will not invalidate our patent rights. In the event our intellectual
property rights are not upheld, such an event would have a material adverse
effect on us.

WE ARE CURRENTLY RELYING UPON OUR CONTINGENCY FEE AGREEMENT WITH BLANK ROME.

         In August 2005, we entered into an agreement with Blank Rome, LLP
("Blank Rome"), a national law firm, pursuant to which Blank Rome has been
engaged to represent us in connection with all litigation involving our Remote
Power Patent. Blank Rome has agreed to represent us with respect to each
litigation pertaining to our Remote Power Patent on a full contingency basis
(except for any proceeding before the International Trade Commission). As
compensation for its services on a full contingency basis, Blank Rome will
receive from us percentages of Net Consideration (as defined in the agreement)
ranging from 12.5% to 35% received by us by way of settlement or judgment in
connection with each litigation matter. We have also agreed to compensate Blank
Rome in an amount equal to 10% of the Net Consideration received by us from
certain designated parties mutually agreed upon by us and Blank Rome (the
"Designated Parties") in the event that prior to commencement of litigation such
Designated Parties enter into license agreements or similar agreements with us
during the period of Blank Rome's engagement.

         The agreement may be terminated by either Blank Rome or us upon 30 days
notice. If we elect to terminate the Agreement, we will compensate Blank Rome in
an amount equal to 5% of the Net Consideration received by us from the
Designated Parties with whom Blank Rome has not commenced litigation on our
behalf, provided that such parties had substantive licensing or settlement
discussions with us related to our Remote Power Patent during the term of the
agreement and entered into a license agreement or similar agreement with us
providing for Net Consideration within the 12 month period following
termination. In addition, in the event of termination, Blank Rome will receive
its pro-rata share of Net Consideration based upon its hourly time charges with
respect to parties against whom Blank Rome commenced litigation (or defended) on
our behalf. In the event our agreement with Blank Rome is terminated, depending
upon our financial resources at the time, we may need to enter into a contingent
fee agreement with a new law firm in order to enforce and/or defend our Remote
Power Patent and our inability to secure such an arrangement on satisfactory
terms and on a timely basis may have a material adverse effect on us.

                                        3
<PAGE>

         ANY LITIGATION TO PROTECT OUR INTELLECTUAL PROPERTY OR ANY THIRD PARTY
CLAIMS TO INVALIDATE OUR PATENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.

         Our success depends on our ability to protect our intellectual property
rights. In August 2005, we commenced patent litigation against D-Link
Corporation and D-Link Systems, Incorporated for infringement of our Remote
Power Patent (see below Risk Factors - "We face uncertainty of outcome of
litigation with D-Link"). In the future, it may be necessary for us to commence
patent litigation against additional third parties whom we believe require a
license to our patents. In addition, we may be subject to claims seeking to
invalidate our patents, as has been asserted by D-Link as a defense in the
pending litigation. These types of claims, with or without merit, may subject us
to costly litigation and diversion of management's focus. If we are unsuccessful
in enforcing and validating our patents and/or if third parties making claims
against us seeking to invalidate our patents are successful, they may be able to
obtain injunctive or other equitable relief, which effectively could block our
ability to license or otherwise capitalize on our proprietary technologies.
Successful litigation against us resulting in a determination that our patents
are invalid or that third parties do not infringe our patents would have a
material adverse effect on us.

         MATERIAL LICENSING REVENUES FROM OUR REMOTE POWER PATENT MAY BE
DEPENDENT UPON THE APPLICABILITY OF THE IEEE STANDARD.

         The Institute of Electrical and Electronic Engineers (IEEE) is a
non-profit, technical professional association of more than 360,000 individual
members in approximately 175 countries. The Standards Association of the IEEE is
responsible for the creation of global industry standards for a broad range of
technology industries. In 1999, the IEEE formed a task force to facilitate the
adoption of a standardized methodology for the delivery of remote power over
Ethernet networks which would insure interoperability among vendors of switches
and terminal devices. In June 2003, the IEEE Standards Association approved the
802.3af Power Over Ethernet standard (the "Standard"), which covers technologies
deployed in delivering power over Ethernet cables including whether deployed in
switches or as standalone midspan hubs both of which provide power to remote
devices including wireless access points, IP phones and network based cameras.
The technology is commonly referred to as Power Over Ethernet ("PoE"). We
believe our Remote Power Patent covers several of the key technologies covered
by the Standard. However, there is a risk that as a result of litigation a court
may determine otherwise and such a determination would have a material adverse
effect on our ability to enter into license agreements and achieve revenue and
profits from our Remote Power Patent.

         WE FACE INTENSE COMPETITION AND WE MAY NOT BE ABLE TO SUCCESSFULLY
COMPETE.

         The telecommunications and data networking market is characterized by
intense competition and rapidly changing business conditions, customer
requirements and technologies. Our current and potential competitors have longer
operating histories, greater name recognition and possess substantially greater
financial, technical, marketing and other competitive resources than us.
Although we believe that we have rights to enforceable patents relating to
telecommunications and data networking, there can be no assurance that third
parties will not invalidate any or all of our patents or that such parties may
not be deemed to infringe any or all of our patents. In addition, the
telecommunications and data networking industries may develop technologies that
may be more effective than our proprietary technologies or that render our
technologies less marketable or obsolete.

                                        4
<PAGE>

         OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND OUR
TECHNOLOGIES FACE POTENTIAL TECHNOLOGY OBSOLESCENCE.

         The telecommunications and data networking technology market including,
transmission of audio, video and data over computer and telephony networks and
the delivery of remote power over Ethernet markets, are characterized by rapid
technological changes, changing customer requirements, frequent new product
introductions and enhancements, and evolving industry standards. The
introduction of products embodying new technologies and the emergence of new
industry standards may render our technologies obsolete or less marketable. To
the extent we are able to achieve revenue in the future, such revenue will be
derived from licensing our technologies based on existing and evolving industry
standards.

         DEPENDENCE UPON CEO AND CHAIRMAN.

         Our success is largely dependent upon the personal efforts of Corey M.
Horowitz, our Chairman and Chief Executive Officer and Chairman of the Board of
Directors. The loss of the services of Mr. Horowitz would have a material
adverse effect on our business and prospects. In February 2007, we entered into
a new two (2) year employment agreement with Mr. Horowitz, pursuant to which he
has agreed to continue to serve as our Chairman and Chief Executive Officer.
(See our Form 8-K filed with the SEC on March 6, 2007). We do not maintain
key-man life insurance on the life of Mr. Horowitz.

         RISKS RELATED TO LOW PRICED STOCKS.

         Our common stock currently trades on the OTC Bulletin Board under the
symbol NSSI. Since the trading price of our common stock is below $5.00 per
share, our common stock is considered a penny stock. SEC regulations generally
define a penny stock to be an equity security that is not listed on Nasdaq or a
national securities exchange and that has a market value of less than $5.00 per
share, subject to certain exceptions. SEC regulations require broker-dealers to
deliver to a purchaser of our common stock a disclosure schedule explaining the
penny stock market and the risks associated with it. Various sales practice
requirements are also imposed on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors (generally
institutions). Broker-dealers must also provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and monthly account statements disclosing recent price information for the penny
stock held in the customer's account.

                                        5
<PAGE>

         THE SIGNIFICANT NUMBER OF OPTIONS AND WARRANTS OUTSTANDING MAY
ADVERSELY EFFECT THE MARKET PRICE FOR OUR COMMON STOCK.

         As of April 1, 2007, there are outstanding options and warrants to
purchase an aggregate of 9,581,481 shares of our common stock at exercise prices
ranging from $.13 to $10.00. To the extent that outstanding options and warrants
are exercised, stockholder percentage ownership will be diluted and any sales in
the public market of the common stock underlying such options may adversely
affect prevailing market prices for our common stock.

         WE HAVE A SIGNIFICANT AMOUNT OF AUTHORIZED BUT UNISSUED PREFERRED
STOCK, WHICH MAY AFFECT THE LIKELIHOOD OF A CHANGE OF CONTROL IN OUR COMPANY.

         Our Board of Directors has the authority, without further action by the
stockholders, to issue 10,000,000 shares of our preferred stock on such terms
and with such rights, preferences and designations as our Board of Directors may
determine. Such terms may include restricting dividends on our common stock,
dilution of the voting power of our common stock or impairing the liquidation
rights of the holders of our common stock. Issuance of such preferred stock,
depending on the rights, preferences and designations thereof, may have the
effect of delaying, deterring or preventing a change in control. In addition,
certain "anti-takeover" provisions in Delaware law may restrict the ability of
our stockholders to authorize a merger, business combination or change of
control.

         OUR STOCK PRICE MAY BE VOLATILE.

         The market price of our common stock is likely to be highly volatile
and could fluctuate widely in price in response to various factors, many of
which are beyond our control, including the following:

         o    our ability to successfully enforce and/or defend our Remote Power
              Patent;

         o    our ability to enter into favorable license agreements with third
              parties with respect to our Remote Power Patent;

         o    our ability to achieve revenues and profits;

         o    our ability to raise capital when needed;

         o    sales of our common stock;

         o    our ability to execute our business plan;

         o    technology changes;

         o    legislative, regulatory and competitive developments; and

         o    economic and other external factors.

         In addition, the securities markets have from time to time experienced
significant price and

                                        6
<PAGE>

volume fluctuations that are unrelated to the operating performance of
particular companies. These market fluctuations may also materially and
adversely affect the market price of our common stock.

         SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE
THE PRICE OF OUR COMMON STOCK TO DECLINE.

         As of April 1, 2007, we have registered for resale 22,453,987 shares of
common stock, including shares issuable upon exercise of outstanding options and
warrants that are not currently freely tradable. If our stockholders sell
substantial amounts of our common stock in the public market, including shares
issued upon the exercise of outstanding options and warrants, the market price
of our common stock could fall. These sales also may make it more difficult for
us to sell equity or equity-related securities in the future at a time and price
that we deem reasonable or appropriate.

         ADDITIONAL STOCK OFFERINGS MAY DILUTE CURRENT STOCKHOLDERS.

         We may need to issue additional shares of our capital stock or
securities convertible or exercisable for shares of our capital stock, including
preferred stock, options or warrants. The issuance of additional capital stock
may dilute the ownership of our current stockholders.

                                        7
<PAGE>

                                    EXHIBIT C
                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of April 16,
2007, among Network-1 Security Solutions, Inc., a Delaware corporation (the
"Company"), and the Persons (as hereinafter defined) identified on Schedule 1
hereto (the "Investors"). This Agreement is made pursuant to the Securities
Purchase Agreement dated April 16. 2007, by and among the Company and the
Investors (the "Securities Purchase Agreement"). The Company has agreed to
provide the Investors and any transferees and subsequent purchasers of
Registrable Securities (as hereinafter defined) that may be issued, from time to
time, the registration rights with respect to the Registrable Securities, as set
forth in this Agreement. Capitalized terms used herein without definition shall
have the meanings set forth in the Securities Purchase Agreement.

         The parties hereto agree as follows:

         1. Definitions.

         As used in this Agreement, the following capitalized terms shall have
the following meanings:

          "Common Stock" means the common stock, $.01 par value per share, of
the Company.

         "Effectiveness Date" means, with respect to the Registration Statement
required to be declared effective hereunder, 180 days following the earlier of
(i) the actual Filing Date or (ii) the required Filing Date.

         "Effectiveness Period" shall have the meaning ascribed thereto in
Section 3(a) hereof.

         "Fair Market Value" shall have the meaning as ascribed thereto in
Section 3(b) hereof.

         "Filing Date" means, with respect to the Registration Statement
required to be filed hereunder, June 16, 2007.

         "Holder" shall mean an Investor or its respective transferee, who is
the owner of Registrable Securities.

         "Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint state company trust, unincorporated
organization, joint venture, a government authority or other entity of whatever
nature.

         "Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any

                                        1
<PAGE>

portion of the Registrable Securities covered by such Registration Statement,
and all other amendments and supplements to the Prospectus, including
post-effective amendments to the Registration Statement of which such Prospectus
is a part, and all material incorporated by reference in such Prospectus.

         "Registrable Securities" shall mean (i) the Securities as defined in
this Section 1, or (ii) stock issued in respect of securities referred to in
clause (i) in any reorganization; or (iii) stock issued in respect of the
securities referred to in clauses (i) or (ii) as a result of a stock split,
stock dividend, recapitalization or combination.

         "Registration Expenses" shall have the meaning ascribed thereto in
Section 5 hereof.

         "Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits, and
all material incorporated by reference in such Registration Statement.

         "SEC" shall mean the Securities and Exchange Commission.

         "Securities" shall mean any and all shares of Common Stock, issued or
to be issued, to Investors pursuant to the Securities Purchase Agreement
including shares of Common Stock to be issued upon the exercise of Warrants.

         "Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

         2. Securities Subject to this Agreement. The Securities entitled to the
benefits of this Agreement are the Registrable Securities.

         3. Registration.

         (a) On or prior to the Filing Date, the Company shall prepare and file
with the SEC the Registration Statement covering the resale of all of the
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement required hereunder shall be on Form SB-2
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form SB-2, in which case the Registration shall be on
another appropriate form in accordance herewith). Subject to the terms of this
Agreement, the Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, and shall use its best efforts to keep the
Registration Statement continuously effective under the Securities Act until the
date when all Registrable Securities covered by the Registration Statement have
been sold or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion to such
effect, addressed and acceptable to the Company's transfer agent and the
affected Holders (the "Effectiveness Period").

         (b) If the Registration Statement is not (i) filed on or before 60 days
after the Filing Date or (ii) declared effective on or before 60 days after the
Effectiveness Date (the Filing

                                        2
<PAGE>

Date and the Effectiveness Date are each, a "Required Date"), the Company shall
issue, as liquidated damages and not as a penalty, to each Holder on or before
the fifth business day immediately following such date and at each 30 day period
thereafter in which Registration Statement is not filed or declared effective,
as the case may be (each such date, a "Payment Date"), such number of shares of
its common stock (the "Liquidated Damages Shares") having a Fair Market Value
(as defined below) equal to the percentage of the aggregate purchase price paid
by such Holder for the securities such Holder acquired from the Company pursuant
to the Securities Purchase Agreement as set forth below:

                                                  Percentage of Purchase Price
           Payment Date                         to be Paid as Liquidated Damages
           ------------                         --------------------------------
60 days after the Required Date                                1%
90 days after the Required Date                                1%
120 days after Required Date                                   1%
150 days after Required Date                                   2%
180 days after Required Date                                   2%
210 days after the Required Date                               2%
240 days after the Required Date                               3%
270 days after the Required Date and each 30 day               3%
period thereafter

In any case where the Liquidated Damages Shares are to be issued under this
Section 3(b), the Fair Market Value per share of common stock used to determine
the number of such shares issuable to any Holder on any date shall equal the
average closing price of the Company's common stock for the 30 trading days
immediately preceding such date. Notwithstanding anything to the contrary
contained in this Section 3(b), in the event the Company is unable to obtain
effectiveness of the Registration Statement by any Payment Date as a result of
comments from the SEC pertaining to Rule 415(a)(1)(i) of the Securities Act of
1933, as amended, or any comparable or successor rule or regulation, then the
Company shall not be required to pay any liquidated damages (or any other
damages) to any Holder in accordance with this Section 3(b) or otherwise under
this Agreement.

         4. Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:

         (a) In accordance with the Securities Act and the rules and regulations
of the SEC, prepare and file with the SEC a Registration Statement in the form
of an appropriate registration statement with respect to the Registrable
Securities and use its best efforts to cause such Registration Statement to
become and remain continuously effective for the Effectiveness Period;

         (b) Furnish to each Holder participating in such registration (each of
such Persons being referred to herein as a "Participant" in such registration)
such reasonable number of copies of

                                        3
<PAGE>

the Registration Statement and Prospectus and such other documents as such
Participant may reasonably request in order to facilitate the public offering of
the Registrable Securities;

         (c) Use its best efforts to register or qualify the Securities covered
by such Registration Statement under such state securities or blue sky laws of
such jurisdictions as such Participants may reasonably request; provided,
however, that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation in any jurisdiction in
which it is not so qualified or to subject itself to taxation in connection with
any such registration or qualification of such Securities;

         (d) Notify the Participants in such registration, promptly after it
shall receive notice thereof, of the date and time when such Registration
Statement and each post-effective amendment thereto has become effective or a
supplement to any Prospectus forming a part of such Registration Statement has
been filed;

         (e) Notify the Participants in such registration promptly of any
request by the SEC for the amending or supplementing of such Registration
Statement or Prospectus or for additional information;

         (f) Prepare and file with the SEC, promptly upon the request of any
Participant in such registration, the Registration Statement and any amendments
or supplements to such Registration Statement or Prospectus that, in the
reasonable opinion of counsel for such Participants, is required under the
Securities Act or the rules and regulations thereunder in connection with the
distribution of the Securities by such Participants or to otherwise comply with
the requirements of the Securities Act and such rules and regulations;

         (g) Prepare and promptly file with the SEC and promptly notify the
Participants in such registration of the filing of such amendments or
supplements to such Registration Statement or Prospectus as may be necessary to
correct any statements or omissions if, at the time when a Prospectus relating
to such Securities is required to be delivered under the Securities Act, any
event has occurred as the result of which any such Prospectus or any other
Prospectus then in effect may include an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading;

         (h) Advise the Participants in such registration, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such Registration Statement or
the initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;

         (i) Otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make generally available to the Company's
security holders earnings statements satisfying the provisions of Section 11(a)
of the Securities Act, no later than forty-five (45) days after the end of any
twelve (12) month period (or ninety (90) days, if such a period is a fiscal
year) beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of a Registration Statement;

                                        4
<PAGE>

         (j) Not file any amendment or supplement to such Registration Statement
or Prospectus to which a majority in interest of the Participants in such
registration has reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of the
Securities Act or the rules and regulations thereunder, after having been
furnished with a copy thereof at least three (3) business days prior to the
filing thereof unless the Company shall have been advised in writing by its
counsel that such amendment is required under the Securities Act or the rules or
regulations adopted thereunder in connection with the distribution of Securities
by the Company or the Participants.

         5. Expenses of Registration. Except as provided in the following
sentence, all expenses of the Company incident to the Company's performance of
or compliance with the provisions of Sections 3 and 4 of this Agreement shall be
borne by the Company including without limitation:

         (a) All registration and filing fees (exclusive of underwriting
discounts and commissions);

         (b) Fees and expenses of compliance with all securities or blue sky
laws (including fees and disbursements of counsel for the Company in connection
with blue sky qualifications of the Registrable Securities); provided, however,
that the Company shall not be obligated to file any general consent to service
of process or to qualify as a foreign corporation in any jurisdiction in which
it is not so qualified or to subject itself to taxation in connection with any
such registration or qualification of such Registrable Securities;

         (c) Printing, messenger, telephone and delivery expenses; and

         (d) Fees and disbursements of the Company's counsel and independent
auditors; and

         (e) All other expenses of registration, including fees and
disbursements of one counsel for the Holders of the Registrable Shares with
respect to each registration of such securities pursuant to this Agreement.

         Nothing in this Section 8 shall be deemed to require the Company to pay
or bear any expenses of more than one counsel for the Participants or
accountants for the Participants or any other personal expenses or any
underwriting discounts, selling commissions or similar fees of the Participants,
except as otherwise set forth herein.

         6. Indemnification and Contribution.

         (a) Indemnification by the Company. Whenever, pursuant to Section 3 a
Registration Statement relating to the Registrable Securities is filed under the
Securities Act, the Company will (except as to matters covered by Section 10(b)
hereof) indemnify and hold harmless each Participant in the registration, each
of their partners, members, shareholders, officers, directors and employees,
each underwriter of Registrable Securities, and each Person, if any, who
controls any such Person (collectively, the "Participant Indemnitees" and,
individually, a "Participant Indemnitee"), against any losses, claims, damages
or liabilities, joint or several, to which such Participant Indemnitees may
become subject under the Securities Act or otherwise, insofar as such

                                        5
<PAGE>

losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, or Prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
unless any such statement or omission is based on written information provided
by the Participant Indemnitee, or a representation of a Participant Indemnitee
made in writing, that such Participant Indemnitee has requested be included in
such Registration Statement or Prospectus, and will reimburse each Participant
Indemnitee for all legal or other expenses reasonably incurred by it in
connection with investigating or defending against such loss, claim, damage,
liability or action.

         (b) Indemnification by Participants. Each Participant in such
registration will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the Registration Statement and
each other Person, if any, who controls the Company, within the meaning of the
Securities Act, each underwriter of Registrable Securities and each Person, if
any, who controls any such underwriter within the meaning of the Securities Act
(collectively, the "Company Indemnitees" and, individually, a "Company
Indemnitee") and each other Participant Indemnitee against all losses, claims,
damages or liabilities, joint or several, to which any of the Company
Indemnitees or the other Participant Indemnitees may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Registration Statement, or Prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only if, and to the
extent that, such statement or omission was in reliance upon and in conformity
with written information furnished to the Company by such participant
specifically for use in the preparation thereof. Notwithstanding the foregoing,
the indemnification obligation of each Participant herein shall be limited to
the net proceeds received by such Participant in the offering of the Registrable
Securities effected by the Registration Statement.

         (c) Indemnification Procedures. Promptly after receipt by a Participant
Indemnitee or a Company Indemnitee (collectively, "Indemnitees" and,
individually, an "Indemnitee") under Section 6(a) or 6(b) hereof of notice of
the commencement of any action, such Indemnitee will, if a claim in respect
thereof is to be made against the indemnifying party under such clause, notify
the indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve the indemnifying party from
any liability that it may have to any Indemnitee except to the extent such
omission resulted in actual detriment to the indemnifying party, nor shall such
omission relieve the indemnifying party from any liability it may have to any
Indemnitee otherwise than under such clauses. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party a release from all liability in
respect of such claim or litigation. In case any such action shall be brought
against any Indemnitee, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such Indemnitee, and after notice

                                        6
<PAGE>

from the indemnifying party to such Indemnitee of its election to assume the
defense thereof, the indemnifying party shall not be liable to such Indemnitee
under such clause for any legal or other expenses subsequently incurred by such
Indemnitee in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the Indemnitee shall have the right to
employ one counsel to represent such Indemnitee if, in the reasonable judgment
of such Indemnitee, it is advisable for such party to be represented by separate
counsel because separate defenses are available, or because a conflict of
interest exists between such indemnified and indemnifying party in respect of
such claim, and in that event the fees and expenses of such separate counsel
shall be paid by the indemnifying party. Notwithstanding the foregoing, if the
Company is an Indemnitee, the Company shall designate the one counsel, and in
all other circumstances, the one counsel shall be designated by a majority in
interest based upon the aggregate amount of Registrable Securities of the
Indemnitees. For purposes of this Section 6 the terms "control," and
"controlling person" have the meanings that they have under the Securities Act.

         (d) Contribution. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an Indemnitee, then the
indemnifying party shall contribute to the amount paid or payable by the
Indemnitee as a result of such losses, claims, damages, liabilities or expenses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the Indemnitee on the
other from the registration or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, or provides a lesser sum to the
Indemnitee than the amount hereinafter calculated, in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the Indemnitee on the other but also the
relative fault of the indemnifying party and the Indemnitee as well as any other
relevant equitable considerations. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

         (e) Survival of Indemnification Obligations. The indemnification
provided by this Section 6 shall be a continuing right to indemnification and
shall survive the registration and sale of any Registrable Securities by any
person entitled to indemnification hereunder and the expiration or termination
of this Agreement.

         7. Amendment and Modification. This Agreement may be amended, modified
or supplemented in any respect only by written agreement by the Company and
Holders owning a majority of the issued and outstanding Registrable Securities
(provided that no such amendment shall unfairly discriminate against a
particular Holder relative to the other Holders).

         8. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York, without giving effect to the
choice of law principles thereof.

         9. Invalidity of Provision. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.

                                        7
<PAGE>

         10. Notices. All notices and other communications hereunder shall be in
writing and, unless otherwise provided herein, shall be deemed duly given if
delivered personally or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses or (at such other address
for the party as shall be specified by like notice):

         (a) If to the Company:

                  Network-1 Security Solutions, Inc.
                  445 Park Avenue, Suite 1028
                  New York, New York 10022
                  Attn: Corey M. Horowitz, Chairman and Chief Executive Officer

                  with a copy to:

                  Eiseman Levine Lehrhaupt & Kakoyiannis, P.C.
                  805 Third Avenue
                  New York, New York 10022
                  Attn: Sam Schwartz, Esq.

                  or as the Company shall designate to the Investors in writing,

         (b) If to a Holder, as listed on the signature pages attached hereto or
as such Holder shall designate to the Company in writing,

         11. Headings; Execution in Counterparts. The headings and captions
contained herein are for convenience of reference only and shall not control or
affect the meaning or construction of any provision hereof. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one and the same
instrument.

         12. Entire Agreement. This Agreement, including any exhibits hereto and
the documents and instruments referred to herein and therein, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

         13. Attorneys' Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover such reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled, as may be ordered in connection with such
proceeding.

                                        8
<PAGE>

         14. Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their successors and assigns.

                    [Signatures begin on the following page.]

                                        9
<PAGE>

                [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

         IN WITNESS WHEREOF, this Agreement has been duly executed on the date
herein above set forth.

                               NETWORK-1 SECURITY SOLUTIONS, INC.

                               By:
                                   ------------------------------------------
                               Name: Corey M. Horowitz
                               Title:   Chairman and Chief Executive Officer

                               INVESTORS:

                               HOUND PARTNERS, L.P.

                               By:
                                   ------------------------------------------
                               Name:
                               Title:

                               GRAHAM PARTNERS, L.P.

                               By:
                                   ------------------------------------------
                               Name:
                               Title:

                               AURELIAN PARTNERS, L.P.

                               By:
                                   ------------------------------------------
                               Name:
                               Title:

                               BRIAN T. HOREY, SEP-IRA, CHARLES SCHWAB & CO.
                               CUSTODIAN

                               By:
                                   ------------------------------------------
                                               Brian T. Horey

                                       10
<PAGE>

                [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

                               STEVEN HEINEMANN

                               ZAYKOWSKI LIMITED PARTNERS, L.P.

                               By:
                                   ------------------------------------------
                                   Name:
                                   Title:

                               ZAYKOWSKI QUALIFIED PARTNERS, L.P.

                               By:
                                   ------------------------------------------
                                   Name:
                                   Title:

                               LEWIS OPPORTUNITY FUND, L.P.

                               By:
                                   ------------------------------------------
                                   Name:
                                   Title:

                               LAM FUND, LTD.

                               By:
                                   ------------------------------------------
                                   Name:
                                   Title:

                                       11
<PAGE>

                [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

         IN WITNESS WHEREOF, this Agreement has been duly executed on the date
herein above set forth.

                               HOUND PARTNERS OFFSHORE FUND, L.P.

                               By:
                                   ------------------------------------------
                                   Name: Jonathan Auerbach
                                   Title: General Partner of the Managing Member

                                       12
<PAGE>

                                   SCHEDULE 1

    Name and Address of Investor
    ----------------------------

Aurelian Partners, L.P.
666 Fifth Avenue
New York, New York  10103

Graham Partners, L.P.
666 Fifth Avenue
New York, New York  10103

Hound Partners, L.P.
101 Park Avenue, 47th Floor
New York, New York  10178

Hound Partners Offshore Fund, L.P.
c/o Citco Fund Services (Cayman Islands) Limited
Regatta Office Park, Windward One,
West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands

Brian T. Horey SEP-IRA,
Charles Schwab & Co. Custodian
666 Fifth Avenue
New York, New York  10101

Steven Heinemann
106 Goose Hill Road
Cold Spring Harbor, New York  11742

Zaykowski Limited Partners, L.P.
24 Schermerhorn Street
Brooklyn, New York  11201

Zaykowski Qualified Partners, L.P
24 Schermerhorn Street
Brooklyn, New York  11201

Lewis Opportunity Fund, L.P.
45 Rockefeller Plaza
New York, New York  10111

LAM Fund, Ltd.
45 Rockefeller Plaza
New York, New York  10111

                                       13
<PAGE>

                                    EXHIBIT D
                              FORM OF LEGAL OPINION

Eiseman Levine Lehrhaupt & Kakoyiannis P.C., counsel to the Company, will
provide a legal opinion substantially covering the following matters:

         1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.

         2. The Common Stock has been duly authorized, and when issued and paid
for, will be validly issued, fully paid and non-assessable. The Warrants have
been duly authorized, and when issued and paid for, will be validly issued and
the Company has reserved the Warrant Shares for issuance upon exercise of the
Warrants. Upon issuance and delivery and payment therefor of the Warrant Shares
upon exercise of the Warrants, the Warrant Shares will be duly authorized,
validly issued, fully paid and non-assessable.

         3. The Company has the corporate power and authority to execute,
deliver and perform its obligations under the Transaction Documents. Each of the
Transaction Documents has been duly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their respective terms.

         The execution, delivery and performance of the Transaction Documents
and issuance of the Common Stock, Warrants and Warrant Shares by the Company
will not: (a) violate any federal or state law or regulation applicable to the
Company; (b) violate or be in conflict with the Certificate of Incorporation or
Bylaws of the Company; or (c) to counsel's knowledge, (i) violate any order of
any court or other agency of government binding on the Company, (ii) violate or
constitute (with or without due notice and/or lapse of time) a default under the
terms of any agreement, indenture, or other instrument to which the Company is a
party or by which it or its property is bound, or (iii) result in the creation
or imposition of any lien, charge or encumbrance of any nature upon any of the
property or assets of the Company.Revolving Credit and Security Agreement

    

       

      Exhibit
        10.1

      REVOLVING
        CREDIT AND SECURITY AGREEMENT

       

      Section
        1.   Introduction.

       

      THIS
        REVOLVING CREDIT AND SECURITY AGREEMENT
        (this
“Agreement”) is entered into this 17th
        day of
April,
        2007
        by and
        between PRESIDENTIAL
        HEALTHCARE CREDIT CORPORATION
        (“PHCC”)
        and PARK INFUSION CARE, LP, a Texas limited partnership, formerly known as
        PARK
        INFUSION SERVICES, LP, d/b/a PARK INFUSION CARE, PARK INFUSIONCARE OF DALLAS,
        LP, a Texas limited partnership, PARK INFUSIONCARE OF HOUSTON, LP, a Texas
        limited partnership and PARK INFUSIONCARE OF SAN ANTONIO, LP, a Texas limited
        partnership (together, jointly and severally, the “Provider”). Subject to the
        terms and conditions of this Agreement, the Provider wishes to obtain a
        revolving credit loan from PHCC and PHCC wishes to make a revolving credit
        loan
        to the Provider. Capitalized terms used herein, unless otherwise defined,
        shall
        have the meanings set forth in Appendix I to
        this
        Agreement.

      

      NOW,
        THEREFORE, in consideration of the premises and in order to induce PHCC to
        make
        the Loan, PHCC and the Provider agree as follows.

       

      Section
        2.   Amount
        and Payment of Loan.

       

      (a)  (i)PHCC
        agrees, on the terms and subject to the conditions hereinafter set forth,
        to
        review Advance Requests from the Provider, and to make Advances to the Provider
        during the period from the date hereof to, but not including, the earlier
        of (A)
        the date of termination in whole of this Agreement pursuant to Section 12;
        and
        (B) the Scheduled Maturity Date. Amounts borrowed hereunder may be repaid
        and
        borrowed again from time to time provided that no Event of Default shall
        have
        occurred. The principal amount of the Loan outstanding shall not exceed the
        Maximum Aggregate Loan Amount at any time.

       

      (ii)  Any
        determination as to whether there is availability for Advances shall be made
        by
        PHCC in its reasonable sole discretion and is final and binding upon the
        Provider. Subject to the provisions of this Agreement, the Provider may request
        Advances up to and including the value, in U.S. Dollars, of the “Availability
        Amount” which shall equal (A) eighty-five
        percent (85%)
        of the
        Net Value of Eligible Receivables minus, (B) if applicable, amounts reserved
        pursuant to this Agreement. In addition, if at any time Provider is not entitled
        to any advances by the terms of this Agreement, PHCC may, in its sole
        discretion, make requested advances upon the payment of an overadvance fee
        (an
“Overadvance Fee”) in the amount of one thousand dollars ($1,000.00); however,
        it is expressly acknowledged and agreed that, in such event, Provider shall
        have
        the right, in its sole discretion, to decline to make any requested advance
        and
        to require any payment required under the terms of the Agreement without
        prior
        notice to Provider and the making of any such advances shall not be construed
        as
        a waiver of such right by PHCC.

       

      
        
          
          

        

        
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      (iii)  If
        at any
        time the outstanding balance of the Loan exceeds the lesser of (A) the
        Availability Amount, or (B) the Maximum Aggregate Loan Amount, then Borrower
        shall not be entitled to any additional Advances under the Loan while such
        excess exists and shall immediately remit to PHCC immediately available funds
        sufficient to eliminate such excess and, if PHCC requests, deliver to PHCC
        additional collateral of a value and character satisfactory to
        PHCC.

       

      (iv)  In
        the
        event that the availability of the Loan hereunder expires by the terms of
        this
        Agreement, or by the terms of any agreement extending the Scheduled Maturity
        Date of the Loan, PHCC may, in its sole discretion, make requested Advances;
        however, it is expressly acknowledged and agreed that, in such event, PHCC
        shall
        have the right, in its sole discretion, to decline to make any requested
        Advance
        and may require payment in full of the Loan at any time without prior notice
        to
        Provider and the making of any such Advances shall not be construed as a
        waiver
        of such right by PHCC.

       

      (v)  PHCC,
        in
        its reasonable sole credit judgment, may further adjust the Availability
        Amount
        based upon the Provider’s actual, recent collection history for each payor class
        (i.e., Medicare, Medicaid, commercial insurance, etc.) in a manner consistent
        with PHCC’s underwriting practices and procedures, including, without
        limitation, PHCC’s review and analysis of, among other things, the Provider’s
        historical returns, rebates, discounts, credits and allowances. Also, PHCC
        shall
        have the right to establish from time to time, in its reasonable sole credit
        judgment, reserves against the Availability Amount, which reserves shall
        have
        the effect of reducing the amounts otherwise eligible to be disbursed to
        the
        Provider.

       

      (vi)  Advances
        may be made by PHCC without an Advance Request as hereinafter provided for
        the
        payment of interest due and payable on the Loan and Fees and Reimbursable
        Expenses and for the payment of fees due to the Servicer under the Servicing
        Agreement when such interest and/or fees are due to the extent other moneys
        have
        not been made available by Provider to PHCC (or, in the case of fees due
        Servicer, to Servicer) for such payments and there is sufficient Availability
        Amount for such Advances.

       

      (b)  (i)Advances
        made by PHCC shall be evidenced by, and repayable with interest in accordance
        with, a single Revolving Variable Rate Note of the Provider payable to the
        order
        of PHCC, dated of even date herewith, in the form of Exhibit B hereto (the
        “Note”). PHCC shall record the date and amount of each Advance made and the date
        and amount of each payment of principal thereof, and any such recordation
        shall
        constitute prima facie evidence of the accuracy of the information so recorded.
        PHCC shall, on behalf of the Provider, maintain a register (the “Register”) for
        the recordation of (i) the names and addresses of PHCC and any assignees
        of PHCC
        and (ii) the Commitment of, and the principal amount and interest of the
        Loans
        owing to, PHCC or any assignee from time to time. 

       

      
        
          
          

        

        
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      The
        entries in the Register shall be conclusive, in the absence of manifest error,
        and the Provider, PHCC, and each assignee of PHCC shall treat each Person
        whose
        name is recorded in the Register as the owner of the Loans for all purposes
        of
        this Agreement. The Note shall (A) be dated the date of issuance thereof,
        or,
        with respect to any amendment thereof, the date of such amendment, (B) mature
        on
        the Scheduled Maturity Date and (C) provide for the payment of interest in
        accordance with Section 2(c)(ii). The aggregate principal amount outstanding
        under the Note, together with accrued but unpaid interest thereon, Fees and
        Reimbursable Expenses shall be due and payable on the Scheduled Maturity
        Date.

       

      (ii)  The
        Provider may, in its discretion, prepay the Loan in whole or in part at any
        time
        by paying all or any part of the outstanding principal balance of the Note
        plus
        accrued interest and all other Fees and Reimbursable Expenses then due (the
        “Prepayment Amount”). The Provider shall prepay the Loan in full immediately
        upon demand of PHCC after the occurrence of an Event of Default by paying
        the
        Prepayment Amount.

       

      (c)  (i)Advances
        shall accrue interest at the rate and in the manner set forth in the Note.
        The
        Provider shall make payments of interest and principal as hereinafter described
        (the “Loan Payments”).

       

      (ii)  Accrued
        interest shall be due and payable on each Interest Payment Date.

       

      (iii)  Except
        as
        otherwise expressly provided by this Agreement, the obligations of the Provider
        to make the Loan Payments, to make payments of any Fees and Reimbursable
        Expenses, and to perform and observe the covenants and agreements contained
        herein shall be absolute and unconditional under all circumstances, without
        abatement, diminution, deduction, setoff or defense for any reason. Except
        as
        otherwise may be expressly provided by this Agreement, the Provider shall
        make
        all such payments when due and shall not withhold any Loan Payments or other
        payments due under the Provider Agreements pending final resolution of any
        dispute with PHCC, nor shall the Provider assert any right of setoff or
        counterclaim against its obligation to make any such payments required under
        the
        Provider Agreements.

       

      (iv) Regardless
        of any provision contained in any of the Loan Documents, in no contingency
        or
        event whatsoever shall the aggregate of all amounts that are contracted for,
        charged or received by PHCC pursuant to the terms of this Agreement or any
        of
        the other Loan Documents and that are deemed interest under applicable law
        exceed the highest rate permissible under applicable law. 

       

      
        
          
          

        

        
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      No
        agreements, conditions, provisions or stipulations contained in this Agreement
        or any of the other Loan Documents or the exercise by PHCC of the right to
        accelerate the payment or the maturity of all or any portion of the Obligations,
        or the exercise of any option whatsoever contained in any of the Loan Documents,
        or the prepayment by the Provider of any of the Obligations, or the occurrence
        of any contingency whatsoever, shall entitle PHCC to charge or receive in
        any
        event, interest or any charges, amounts, premiums or fees deemed interest
        by
        applicable law (such interest, charges, amounts, premiums and fees referred
        to
        herein collectively as “Interest”) in excess of the Maximum Rate and in no event
        shall the Provider be obligated to pay Interest exceeding such Maximum Rate,
        and
        all agreements, conditions or stipulations, if any, which may in any event
        or
        contingency whatsoever operate to bind, obligate or compel the Provider to
        pay
        Interest exceeding the Maximum Rate shall be without binding force or effect,
        at
        law or in equity, to the extent only of the excess of Interest over such
        Maximum
        Rate. If any Interest is charged or received in excess of the Maximum Rate
        (“Excess”), the Provider acknowledges and stipulates that any such charge or
        receipt shall be the result of an accident and bona fide error, and such
        Excess,
        to the extent received, shall be applied first to reduce the principal
        Obligations and the balance, if any, returned to the Provider, it being the
        intent of the parties hereto not to enter into a usurious or otherwise illegal
        relationship. The right to accelerate the maturity of any of the Obligations
        does not include the right to accelerate any Interest that has not otherwise
        accrued on the date of such acceleration, and PHCC does not intend to collect
        any unearned Interest in the event of any such acceleration. Provider recognizes
        that, with fluctuations in the rates of interest set forth in the Note and
        the
        Maximum Rate, such an unintentional result could inadvertently occur. All
        monies
        paid to PHCC hereunder or under any of the other Loan Documents, whether
        at
        maturity or by prepayment, shall be subject to any rebate of unearned Interest
        as and to the extent required by applicable law. By the execution of this
        Agreement, the Provider covenants that (i) the credit or return of any Excess
        shall constitute the acceptance by the Provider of such Excess, and (ii)
        the
        Provider shall not seek or pursue any other remedy, legal or equitable, against
        PHCC, based in whole or in part upon contracting for, charging or receiving
        any
        Interest in excess of the Maximum Rate. For the purpose of determining whether
        or not any Excess has been contracted for, charged or received by PHCC, all
        Interest at any time contracted for, charged or received from the Provider
        in
        connection with any of the Loan Documents shall, to the extent permitted
        by
        applicable law, be amortized, prorated, allocated and spread in equal parts
        throughout the full term of the Obligations. The Provider and PHCC shall,
        to the
        maximum extent permitted under applicable law, (i) characterize any
        non-principal payment as an expense, fee or premium rather than as Interest
        and
        (ii) exclude voluntary prepayments and the effects thereof. The provisions
        of
        this Section 2(c)(iv) shall be deemed to be incorporated into every Loan
        Document (whether or not any provision of this Section is referred to therein).
        All such Loan Documents and communications relating to any Interest owed
        by the
        Provider and all figures set forth therein shall, for the sole purpose of
        computing the extent of Obligations, be automatically recomputed by the
        Provider, and by any court considering the same, to give effect to the
        adjustments or credits required by this Section 2(c)(iv).

       

      
        
          
          

        

        
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      (d)  On
        or
        before the Closing Date, the Provider shall pay to PHCC a nonrefundable
        commitment fee in an amount equal to one
        percent (1%)
        of the
        Maximum Aggregate Loan Amount (“Initial Commitment Fee”). 

       

      (e)  All
        payments and reimbursements to PHCC made under any Provider Agreement shall
        be
        free and clear of, and without deduction for, all taxes, levies, imposts,
        deductions, assessments, charges or withholdings and all liabilities with
        respect thereto of any nature whatsoever, excluding taxes to the extent imposed
        on PHCC’s net income. If PHCC shall be required by law to deduct any such
        amounts from or in respect of any sum payable under any Provider Agreement
        to
        PHCC, then the sum payable to PHCC shall be increased as may be necessary
        so
        that, after making all required deductions, PHCC receives an amount equal
        to the
        sum it would have received had no such deductions been made. Notwithstanding
        any
        other provision of any Provider Agreement, if at any time after the Closing
        Date
        (i) any change in any existing law, regulation, treaty or directive or in
        the
        interpretation or application thereof, (ii) any new law, regulation, treaty
        or
        directive enacted or any interpretation or application thereof, or (iii)
        compliance by PHCC with any request or directive (whether or not having the
        force of law) from any governmental authority: (A) subjects PHCC to any tax,
        levy, impost, deduction, assessment, charge or withholding of any kind
        whatsoever with respect to any Provider Agreement, or changes the basis of
        taxation of payments to PHCC of any amount payable thereunder (except for
        net
        income taxes, or franchise taxes imposed in lieu of net income taxes, imposed
        generally by federal, state or local taxing authorities with respect to
        interest, Reimbursable Expenses and Fees payable hereunder or changes in
        the
        rate of tax on the overall net income of PHCC, or (B) imposes on PHCC any
        other
        condition or increased cost in connection with the transactions contemplated
        thereby or participations therein; and the result of any of the foregoing
        is to
        increase the cost to PHCC of making or continuing any Loan or Advance hereunder
        or to reduce any amount receivable hereunder, then, in any such case, the
        Provider shall promptly pay to PHCC any additional amounts necessary to
        compensate PHCC, on an after-tax basis, for such additional cost or reduced
        amount as determined by PHCC. If PHCC becomes entitled to claim any additional
        amounts pursuant to this Section it shall promptly notify the Provider of
        the
        event by reason of which PHCC has become so entitled, and each such notice
        of
        additional amounts payable pursuant to this Section submitted by PHCC to
        the
        Provider shall, absent manifest error, be final, conclusive and binding for
        all
        purposes and shall be payable on each Interest Payment Date.

       

      (f)  (i)The
        Servicer will prepare and deliver an Availability Certificate to the Provider
        by
        10:00 a.m. on the Business
        Day prior to each Advance Day. The Availability Certificate shall identify
        the
        aggregate Net Value of all Eligible Receivables pledged to PHCC as Collateral
        hereunder, the outstanding principal balance of the Loan, all Reimbursable
        Expenses and Fees then due, the Availability Amount and such other information
        regarding Eligible Receivables as is required by the Availability
        Certificate.

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

      

       

      (ii) Each
        Advance Request shall be made by the Provider prior to 12:00 p.m. (Central
        Standard/Daylight Time) on the Advance Day by an Authorized Person by delivery
        to PHCC with a copy to the Servicer. 

       

      (iii) Upon
        receipt of the Advance Request and satisfaction of all applicable conditions
        set
        forth in this Section 2, PHCC shall disburse the amount of the Advance on
        the
        Advance Day by crediting the same to the account of the Provider identified
        in
        Exhibit C or such other account as may be designated in writing by an Authorized
        Person of the Provider. 

       

      (iv) No
        Advance shall cause the aggregate principal balance outstanding on the Loan
        to
        exceed the Maximum Aggregate Loan Amount.

       

      (g)  The
        Provider shall use Advances for the purpose of supporting the Provider’s
        business operations and for any other general business needs.

       

      (h)  (A)As
        a
        condition precedent to the obligation of PHCC to disburse the initial Advance
        under this Agreement, the following shall have been received by PHCC and
        the
        following actions shall have been taken to the satisfaction of
        PHCC:

       

      (i)  the
        Provider Agreements, properly executed on behalf of the Provider; 

       

      (ii)  a
        certificate of an authorized officer, manager or managing member, as the
        case
        may be, of the Provider, certifying as to (i) the resolutions of the Provider’s
        board of directors, general partner(s) or managing member(s), as the case
        may
        be, authorizing the execution, delivery and performance of the Provider
        Agreements and any related documents and (ii) the signatures of each
        Authorized Person authorized to execute and deliver the Provider Agreements
        and
        other instruments, agreements and certificates on behalf of the Provider
        and to
        request Advances;

       

      (iii)  if
        applicable, a Certificate of Good Standing issued as to the Provider by the
        Secretary of the State of the Provider’s state of organization not more than 30
        days prior to the Closing Date;

       

      (iv)  payment
        of Reimbursable Expenses due on the Closing Date, the Initial Commitment
        Fee and
        such other fees, commissions and expenses required to be paid by the Provider
        pursuant to the Provider Agreements as of the Closing Date;

       

      (v)  acknowledgment
        copies of proper financing statements (Form UCC-1) naming the Provider as
        the
        debtor and naming PHCC as the secured party or other similar documents or
        instruments as may be necessary, or in the opinion of PHCC desirable, under
        the
        UCC, as amended from time to time, of all appropriate jurisdictions, or any
        comparable law, to perfect PHCC’s security interest in all Collateral which may
        be pledged by the Provider to PHCC hereunder;

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

      

       

      (vi)  certified
        copies (or copies otherwise satisfactory to PHCC) of Requests for Information
        or
        Copies (Form UCC-11) (or a similar search report certified by a Person
        acceptable to PHCC) listing all effective financing statements (including
        those
        referred to in subsection (v) above) which name the Provider (under its present
        name and any previous name) as debtor or seller and which are filed in the
        jurisdictions in which filings were made pursuant to subsection (v) above,
        together with copies of such financing statements and searches of applicable
        federal and state court and agency dockets and lien records showing all
        judgment, tax and ERISA liens affecting the Provider or the Collateral, none
        of
        which (except those filed pursuant to subsection (v) above) shall cover any
        of
        the Collateral to be pledged by the Provider to PHCC or any related Contracts
        unless the documents referred to in subsection (vii) below cover such financing
        statements;

       

      (vii)  releases
        and acknowledgment copies of proper Termination Statements, if any, necessary
        to
        evidence the release of all security interests, ownership and other rights
        of
        any Person in the Collateral previously granted by the Provider;

       

      (viii)  a
        copy of
        the Servicing Agreement and any Addendums thereto requested by PHCC, duly
        authorized, executed and delivered by the Provider and the Servicer, together
        with evidence satisfactory to PHCC that the Provider has established an account
        at an insured depositary institution into which all payments with respect
        to the
        Healthcare Receivables will be deposited;

       

      (ix)  as
        requested by PHCC from time to time, a copy of all of the Provider’s forms of
        patient consent to be signed by each patient for which a Healthcare Receivable
        is or was created which authorizes the demographic and medical information
        with
        respect to such patient to be disclosed to, and by, the Servicer;

       

      (x)  PHCC
        shall have completed examinations, the results of which shall be satisfactory
        in
        form and substance to PHCC, of the Collateral, the financial statements and
        the
        books, records, business, obligations, financial condition and operational
        state
        of the Provider, and the Provider shall have demonstrated to PHCC’s satisfaction
        that (A) its operations comply, in all respects deemed material by PHCC, in
        its sole reasonable judgment, with all applicable federal, state, foreign
        and
        local laws, statutes and regulations, (B) its operations are not the
        subject of any governmental investigation, evaluation or any remedial action
        which could result in any expenditure or liability deemed material by PHCC,
        in
        its sole judgment, and (C) it has no liability (whether contingent or
        otherwise) that is deemed material by PHCC, in its reasonable sole
        judgment;

       

      (xi)  the
        various mechanisms for creating and perfecting the security interests in
        the
        Collateral are in effect and can be utilized with respect to the
        Collateral;

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

      

       

      (xii)  all
        Collateral in which PHCC has been granted, or may demand, a security interest
        are owned outright by the Provider, are not subject to claim, assignment
        or
        setoff, and are in the physical or constructive possession or control of
        PHCC;

       

      (xiii)  the
        Provider has the unrestricted right to pledge the Collateral as contemplated
        herein; 

       

      (xiv)  such
        other documents, opinions or certificates as PHCC may reasonably request;
        and

       

      (xv)  an
        Availability Certificate and Advance Request in the form of Exhibit E duly
        executed by an Authorized Person.

       

      (B) As
        a
        condition precedent to the continuing obligation of PHCC to make each Advance,
        the following conditions (in addition to those enumerated under Section 2(h)(A)
        hereinabove) shall be satisfied by the Provider:

       

      (i)  all
        representations and warranties of the Provider contained herein and in each
        other Provider Agreement shall be true and complete in all material respects
        (determined for this purpose as if all qualifications to such representations
        and warranties based on knowledge or materiality were omitted) at all times
        during the term of this Agreement;

       

      (ii)  the
        Provider shall have performed and complied in all material respects with
        all
        obligations and agreements and all covenants and conditions contained in
        this
        Agreement and in each other Provider Agreement to which it is a party to
        be
        performed or complied with by it at all times (such performance or compliance
        to
        be determined for this purpose as if all qualifications to such obligations,
        agreements, covenants and conditions based on the use of diligent efforts
        or
        best efforts were omitted) and PHCC shall have received evidence, in form
        and
        substance reasonably satisfactory to it, of such performance and
        compliance;

       

      (iii)  all
        corporate actions necessary to authorize (A) the execution, delivery and
        continuing performance by the Provider of this Agreement and of each other
        Provider Agreement to which it is a party and (B) the consummation of the
        transactions contemplated hereby and thereby shall have been and shall continue
        to be duly and validly taken by the Provider and shall be in full force and
        effect. All such actions and all other actions, proceedings, instruments
        and
        documents required to carry out the transactions contemplated hereby or
        incidental hereto and all other related legal matters shall be reasonably
        satisfactory to and approved by counsel for PHCC and such counsel shall be
        furnished with such certified copies of such corporate actions and proceedings
        and such other instruments and documents as it shall have reasonably requested
        from time to time;

       

      
        
          
          

        

        
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      (iv)  no
        event
        has occurred and is continuing, or would result from such Advance, which
        constitutes an Event of Default; and

       

      (v)  the
        Provider shall provide with each Advance Request an Availability Certificate
        and
        Advance Request in the form of Exhibit E duly executed by an Authorized
        Person.

       

      Each
        Advance Request shall constitute a representation that the above is true
        and
        that the statements set forth in Sections 7 and 8 are correct.

       

      (i)  PHCC’s
        Commitment shall terminate on the Scheduled Maturity Date unless this Agreement
        is terminated prior thereto.

       

      Section
        3.   Servicing
        of Healthcare Receivables.
        Healthcare Receivables will be serviced by the Servicer pursuant to the terms
        and conditions of the Servicing Agreement. Under the terms of the Servicing
        Agreement, the Servicer shall act as the agent of the Provider, shall service
        the Healthcare Receivables in accordance with the directions of the Provider
        and
        shall, as agent of the Provider, disburse proceeds of the Healthcare Receivables
        as directed by the Provider under the Servicing Agreement.

       

      If
        the
        Provider determines, for any reason, to terminate or remove the Servicer,
        the
        Provider may do so only upon not less than thirty (30) days’ prior written
        notice to the Servicer, with a copy of such notice sent to PHCC, along with
        (i) a certified copy of the resolution unanimously adopted by the governing
        body of the Provider authorizing and directing that the Servicer be terminated
        as agent under the Servicing Agreement and (ii) a certificate signed by the
        Provider, evidencing termination of the Servicing Agreement, subject to
        appointment of a successor to the Servicer as provided below (provided, however,
        that the foregoing shall not impede the Provider’s ability to change a return
        address or instructions with respect to Governmental Obligors as contemplated
        by
        Section 4(b) or change an automatic transfer instruction as contemplated
        by
        Section 4(f)). In addition, if the Servicer is in default under the terms
        of the
        Servicing Agreement, PHCC shall have the right to obtain the removal or
        termination of the Servicer for cause and the right to have the Provider
        appoint
        a successor Servicer, subject to the last sentence of this Section. No
        termination or removal of a Servicer, whether by the Provider or at the
        direction of PHCC for cause as provided herein, shall be effective unless,
        prior
        to the date such termination or removal is to be effective, the Provider
        has
        selected a successor Servicer acceptable to PHCC and such successor Servicer
        has
        accepted its appointment by the Provider in writing.

       

      Section
        4.   Post
        Office Box and Provider Lockbox Account For Healthcare
        Receivables.

       

      (a)  On
        or
        prior to the date hereof, Provider, pursuant to the Servicing Agreement,
        shall
        have established in its own name (1) a post office box for the receipt of
        all
        items with respect to Healthcare Receivables (the “Lockbox”), and (2) an account
        at an insured depository institution approved by PHCC for the deposit of
        all
        Collections and payments on the Healthcare Receivables (the “Lockbox Account”)

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

      The
        Lockbox Account shall be subject at all times to a control agreement in form
        satisfactory to PHCC in PHCC’s reasonable sole discretion (the “Control
        Agreement”), said control agreement to be among PHCC, Provider and the financial
        institution at which the Lockbox Account is established.

       

      (b)  The
        Provider hereby covenants and agrees that, on and after the date hereof,
        all
        claims (including CMS 1500 or related insurance billing forms) to be sent
        to
        Obligors (and return envelopes, if provided by the Provider) shall set forth
        only the address of the Lockbox as a return address for payment of Healthcare
        Receivables and delivery of all EOB/ERAs and only the Lockbox Account as
        the
        account into which wire transfers for Collections and payment on Healthcare
        Receivables shall be deposited. The Provider hereby further covenants and
        agrees
        to instruct and notify each of the members of the Provider’s accounting and
        collections staff, and of the Servicer’s accounting and collection staff, to
        provide identical information in communications with Obligors with respect
        to
        collections, wire transfers and EOB/ERAs on Healthcare Receivables. With
        respect
        to Non-Governmental Obligors, the Provider shall not change such return address
        or the instructions in any Obligor Notice without the express prior written
        consent of PHCC. With respect to Governmental Obligors, Provider remains
        free to
        change such return address and the instructions in any Obligor Notice; provided,
        however, any such change undertaken by Provider without the express written
        permission of PHCC shall constitute a breach of this Agreement.

       

      (c)  Unless
        an
        Event of Default exists or a court order to the contrary is received, the
        Provider will retain the right to receipt of Collections and payment of the
        Healthcare Receivables and all rights to demand or make claims under the
        applicable Governmental program for any Governmental Receivable to the extent
        provided under the Servicing Agreement. The Provider shall remit daily to
        the
        Servicer all amounts which the Provider receives with respect to the Healthcare
        Receivables (whether received in the Lockbox, the Lockbox Account, or otherwise,
        and whether accomplished through the mechanism described in subsection (f)
        below
        or otherwise), and shall notify PHCC and the Servicer of all such amounts,
        including information as to the Healthcare Receivables to which such amounts
        relate and copies of any related EOB/ERAs. Provider hereby instructs the
        Servicer to pay all amounts so received on a daily basis to PHCC. PHCC will
        immediately credit to interest owing hereunder and to any outstanding line
        of
        credit balance all such amounts that were received from account debtors which
        are or were at one time account debtors on Eligible Receivables; provided,
        however, that in no case shall PHCC be required to credit Provider with the
        amount of any check or other instrument constituting provisional payment
        until
        PHCC has received final payment thereof at its office in the form of immediately
        available funds accepted by PHCC. Unless an Event of Default exists, PHCC
        (or
        Servicer on PHCC’s behalf) shall pay to Provider daily (i) all such amounts that
        were received from account debtors which are not and were never account debtors
        on Eligible Receivables, and (ii) any such amounts received on a day when
        the
        outstanding principal and interest balance on Provider’s line of credit under
        this Agreement is zero or less than zero.

       

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

      

       

      (d)  If
        an
        Obligor makes a payment on a Healthcare Receivable other than to the Lockbox
        or
        the Lockbox Account, with respect to wire transfers the Provider shall promptly
        give written notice thereof to PHCC and the Provider shall take all necessary
        steps to effect the collection of such payment from any other Person claiming
        an
        interest therein or having possession thereof and deliver such to the Servicer
        together with all necessary endorsements. If the Provider itself shall receive
        any amounts with respect to a Healthcare Receivable (other than receipts
        into
        the Lockbox or the Lockbox Account, which receipts are addressed elsewhere
        in
        this Agreement), the Provider shall so notify PHCC and the Servicer immediately
        and shall hold all checks and instruments received in trust for PHCC and
        shall
        deliver to Servicer such checks and other instruments duly endorsed to PHCC
        (or,
        at the direction of PHCC, the proceeds thereof) without delay or setoff,
        including information as to the Healthcare Receivable to which such amounts
        relate and copies of any related EOB/ERAs. The Provider shall cooperate with
        PHCC and the Servicer in the identification of items deposited in the Lockbox
        or
        the Lockbox Account.

       

      (e)  All
        deliveries and notifications referred to in this Section 4 shall be made
        promptly upon the Provider’s receipt of any such amount or information and
        delivery to PHCC and the Servicer thereof shall be no later than midnight
        Central Time within three (3) days of receipt by the Provider (except with
        respect to delivery of tangible items, which shall be no later than 5:00
        pm CST
        on the business day after receipt by the provider).

       

      (f)  Pursuant
        to the Servicing Agreement, the Provider shall instruct the financial
        institution holding the Lockbox and the Lockbox Account to transfer, or cause
        to
        be transferred, to the account described in the Servicing Agreement,
        automatically, at the end of each Business Day, all amounts on deposit in
        the
        Lockbox Account. No Person, other than the Provider, shall have the right
        to
        change or cancel the foregoing automatic transfer instruction; provided,
        however, that the Provider shall not make such change or cancellation other
        than
        pursuant to the Servicing Agreement and as provided in the Addendum to the
        Servicing Agreement.

       

      Section
        5.   Security
        Interest.

       

      (a)  This
        Agreement is intended to constitute a security agreement within the meaning
        of
        the UCC. As security for the Obligations, the Provider hereby assigns, pledges
        and grants to PHCC a first priority continuing security interest in all right,
        title and interest of the Provider in, to and under all of the following,
        whether now or hereafter owned, existing, created, arising or acquired
        (collectively, the “Collateral”): 

       

      
        
          
          

        

        
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      (i)  Healthcare
        Receivables, all related Contracts and all Collections with regard thereto,
        any
        and all amounts now or hereafter due to the Provider from the Lockbox, the
        Lockbox Account, all funds on deposit in each of the foregoing with regard
        thereto and all certificates and instruments, if any, from time to time
        evidencing the Lockbox and the Lockbox Account and such funds of the Provider
        on
        deposit therein, all claims thereunder or in connection therewith, all software
        and books and records relating to any of the foregoing, all general intangibles,
        accounts, payment intangibles, interest, dividends, moneys, instruments,
        securities and other property from time to time received, receivable or
        otherwise distributed in respect of or in exchange for any or all of the
        foregoing, and all proceeds and amounts received or receivable under any
        or all
        of the foregoing;

       

      (ii)  substitutions,
        accessions, additions, parts, accessories, attachments, replacements, Proceeds
        and products of, for and to any and all of the foregoing, including, without
        limitation, any and all insurance proceeds, and any and all such substitutions,
        accessions, additions, parts, accessories, attachments, replacements, Proceeds
        and products in the form of any of the property described or referenced in
        (i)
        above.

       

      All
        references in this Agreement to the UCC shall mean the Georgia Uniform
        Commercial Code (the “UCC”), as amended from time to time. All references in
        this Section 5 to general intangibles, accounts and payment intangibles shall
        mean those terms as defined in the UCC.

       

      

       

      Upon
        an
        Event of Default under this Agreement, to the fullest extent permitted by
        applicable law, PHCC’s rights with respect to the Collateral pledged hereunder
        include, but are not limited to, the right to: (i) settle and/or compromise
        any
        or all of such Collateral; (ii); and (iii)demand, receive and sue, in the
        Provider’s name at PHCC’s option, for any moneys due or which may become due
        under such Collateral, or for enforcement of any rights afforded the Provider
        with respect thereto. 

       

      Notwithstanding
        the foregoing provision, to the fullest extent permitted by applicable law,
        at
        any time PHCC’s rights with respect to the Collateral pledged hereunder include,
        but are not limited to, the right to: (i) do all acts necessary or advisable
        in
        furtherance of any rights of PHCC hereunder and 

       

      
        
          
          

        

        
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      (ii)
        sign
        and endorse on behalf of the Provider all checks and instruments received
        in
        connection with Collections on the Healthcare Receivables and the Provider
        hereby irrevocably appoints PHCC the attorney-in-fact of the Provider for
        such
        purpose; and the Provider hereby specifically authorizes, ratifies and confirms
        all that PHCC shall do by virtue hereof; provided, however, that notwithstanding
        anything to the contrary in this Agreement, the Provider, and not PHCC, shall
        retain, unless otherwise specified in a court order or an agreement of agency,
        all rights of collection and endorsement with respect to Governmental
        Receivables. 

       

      The
        Provider specifically agrees to execute and/or prepare, and file or publish,
        all
        at the request and direction of PHCC, and at the Provider’s expense, any and all
        documentation and/or notices of PHCC’s rights herein as may be necessary or
        advisable, in PHCC’s discretion, to effect the terms hereof or protect PHCC’s
        interest herein described. In no event shall PHCC be responsible, in whole
        or in
        part, for any duties, performance or obligations of the Provider with respect
        to
        the Collateral nor shall the Provider be relieved thereof by reason of this
        Agreement.

       

      (b)  This
        Agreement secures the payment and performance by the Provider of all
        indebtedness, liabilities and obligations now existing or hereafter created
        or
        arising under the Note and all renewals, extensions, restructurings and
        refinancings thereof and all other amounts owing under the Provider Agreements,
        including, without limitation, any additional indebtedness which may be extended
        to the Provider pursuant to any restructuring or refinancing of the Provider’s
        indebtedness thereunder, and including any post-petition interest accruing
        during any bankruptcy, reorganization or other similar proceeding (collectively,
        the “Obligations”).

       

      (c)  It
        is the
        intent of the parties hereto that the pledge of Collateral and any action
        taken
        with respect thereto pursuant to this Agreement shall be in a form and manner
        sufficient to create a first priority perfected security interest therein
        for
        the benefit of PHCC. If, at any time, PHCC’s counsel determines that the
        procedures necessary to create or perfect such security interest should be
        modified to enable PHCC’s counsel to deliver an opinion that PHCC’s security
        interest in the Collateral is a first priority perfected security interest,
        such
        procedures shall be modified to enable such opinion to be
        delivered.

       

      (d)  The
        Provider hereby authorizes PHCC to file financing statements, continuation
        statements, and amendments thereto, naming the Provider as debtor and
        describing, as collateral therein, all Collateral pledged by the Provider
        pursuant to this Agreement, including specific lists, sublists and types
        of
        collateral, and which contain any other information required or permitted
        by the
        Uniform Commercial Code, as in effect from time to time in any relevant
        jurisdiction.

       

      
        
          
          

        

        
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      Section
        6.   Representations
        and Warranties of the Provider.
        The
        Provider represents and warrants to PHCC that, as of the date hereof, and
        shall
        be deemed to represent and warrant to PHCC as of each Advance Request, as
        follows:

       

      (a)  if
        a
        corporation, limited liability company, or partnership, the Provider has
        been
        duly organized and is validly existing and in good standing as a corporation,
        limited liability company or partnership, as the case may be, under the laws
        of
        the jurisdiction of its organization and is duly qualified to conduct business
        in each State in which it conducts business;

       

      (b)  the
        Provider has full power and authority to own or lease its properties and
        to
        conduct its business as presently conducted and to execute, deliver and perform
        the Provider Agreements to which it is a party and to consummate the
        transactions contemplated hereby and thereby;

       

      (c)  the
        execution, delivery and performance by the Provider of the Provider Agreements
        and all other instruments and documents to be delivered hereunder and the
        consummation of the transactions contemplated hereby are within the Provider’s
        powers, have been duly and validly authorized by all requisite action and
        will
        not conflict with or result in a breach of any of the terms or provisions
        of, or
        constitute a default under, or result in the creation or imposition of any
        lien,
        charge or encumbrances upon any of its property or assets pursuant to the
        terms
        of, any indenture, mortgage, deed or trust, loan agreement or other agreement
        or
        instrument by which it is bound or to which any of its property or assets
        is
        subject (except the Provider Agreements) nor will such action result in any
        violation of the provisions of its organizational documents (including its
        articles of incorporation and bylaws, operating agreement or partnership
        agreement, as the case may be) or of any statute or any order, rule or
        regulation of any court or governmental agency or body of the
        United States, any state or any political subdivision of either having
        jurisdiction over it or any of its properties or assets, and no consent,
        approval, authorization, order, registration, filing, qualification, license
        or
        permit of or with any such court or any such regulatory authority or other
        such
        governmental agency or body is required to be obtained by or with respect
        to the
        Provider in connection with the execution, delivery and performance by the
        Provider of the Provider Agreements, all other instruments and documents
        to be
        delivered thereunder and the consummation of the transactions contemplated
        thereby, and no transaction contemplated thereby requires compliance with
        any
        bulk sales act or similar law;

       

      (d)  no
        authorization or approval or other action by, and no notice to or filing
        with,
        any governmental authority or regulatory body or other Person is required
        for
        the due execution, delivery and performance by the Provider of the Provider
        Agreements except for the filing of financing statements under the UCC or
        the
        Uniform Commercial Code in effect in any relevant jurisdiction and the giving
        of
        notices referred to in Section 2(h)(A), all of which, at the time required
        in Section 2(h)(A) shall have been duly made and shall be in full force and
        effect;

       

      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

        

      

      

       

      (e)  each
        of
        the Provider Agreements has been duly and validly authorized, executed and
        delivered by the Provider and constitutes a valid and legally binding obligation
        of the Provider, enforceable against the Provider in accordance with its
        terms,
        subject to applicable bankruptcy, reorganization, insolvency, moratorium
        or
        other similar laws affecting the enforcement of creditors’ rights generally and
        subject as to enforceability to general principles of equity (regardless
        of
        whether enforcement is sought in a proceeding in equity or at law);

       

      (f)  there
        are
        no actions, suits, proceedings or investigations pending or, to the knowledge
        of
        the Provider, threatened, before any court, administrative agency, arbitrator,
        governmental body or other tribunal, (i) which, if determined adversely to
        the Provider, could have a material adverse effect on the business, operations,
        properties, assets or financial condition of the Provider, (ii) asserting
        the invalidity of any of the Provider Agreements, (iii) questioning the
        consummation by the Provider of any of the transactions contemplated by any
        of
        the Provider Agreements or (iv) which, if determined adversely, could
        materially and adversely affect the ability of the Provider to perform its
        obligations under, or the validity or enforceability of any of the Provider
        Agreements, Contracts or the Healthcare Receivables;

       

      (g)  the
        Provider has all necessary permits, licenses, agreements, accreditation,
        certifications and Governmental Consents to operate and conduct its business,
        including the provision of all services reflected in and giving rise to each
        Healthcare Receivable, as it is presently being conducted, subject to minor
        exceptions and deficiencies which are not material and do not affect the
        conduct
        of its business and its ability to own, collect and grant a security interest
        in
        the Collateral;

       

      (h)  Exhibit
        C
        lists (i) the Provider’s exact legal name, (ii) the Provider’s address for
        notices, (iii) the address of the chief executive office of the Provider,
        (iv)
        the Provider’s State of organization, (v) the location of the office where the
        Provider keeps all of the tangible Collateral and Records related thereto
        and to
        all of the intangible Collateral and (vi) the location, account number and
        account officer responsible for the Provider’s demand account;

       

      (i)  Except
        as
        occurs within the normal course of business, each Contract of the Provider
        is in
        full force and effect and has not been amended or otherwise modified, rescinded
        or revoked or assigned, the Provider is in compliance with the material
        requirements of the Contracts and no condition exists or event has occurred
        which, in itself or with the giving of notice or lapse of time or both, would
        result in the suspension, revocation, impairment, forfeiture or nonrenewal
        of
        any Governmental Consent applicable to the Provider or any other health care
        facility owned or operated by the Provider or such facility’s participation in
        the Governmental Programs and there is no claim that any such Contract or
        Governmental Consent is not in full force and effect;

       

      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      

      

       

      (j)  there
        has
        been filed in proper form, or a filing extension from the appropriate
        governmental authority has been obtained with respect to, all federal, state,
        and local income, franchise, sales, use, property, excise, payroll and other
        tax
        returns and all other reports (whether or not relating to taxes) required
        by law
        to be filed by or on behalf of the Provider with any governmental authority.
        All
        taxes, fees, assessments and charges of whatsoever nature due or payable
        by the
        Provider on or before the date hereof pursuant to said returns or reports
        or
        otherwise (including, without limitation, payments of estimated taxes and
        deposits of taxes withheld by or on behalf of the Provider) have been paid.
        There is no unpaid interest, penalty or addition to tax due or claimed to
        be due
        from, nor any unpaid tax deficiency determination or assessment outstanding
        against the Provider, nor any basis therefore known to the Provider. No
        governmental audits or investigations with respect to taxes are, to the
        Provider’s knowledge, in progress with respect to the Provider, and no
        governmental authority has given notice that it will begin any such audit
        or
        investigation. All returns and reports required to be filed, and all taxes,
        fees, assessments and charges required to be paid, of whatsoever nature,
        have
        been so filed and paid. The Provider has complied in all material respects
        with
        all applicable laws relating to the employment of labor, including, without
        limitation, ERISA and those relating to wages, hours, collective bargaining,
        unemployment insurance, workers’ compensation, equal employment opportunity and
        the payment and withholding of taxes, including income and social security
        taxes, and has withheld (and duly segregated, deposited or paid over to the
        appropriate authorities) all amounts required by law or agreement to be withheld
        from the wages or salaries of its employees and is not liable for any arrears
        of
        wages or benefits or any taxes or penalties for the Provider’s failure to comply
        with any of the foregoing;

       

      (k)  the
        Medicare and Medicaid cost reports of each facility and of the home office
        of
        the Provider for all cost reporting periods ending on or before the date
        hereof
        have been filed with the appropriate governmental entity, if due, there are
        no
        pending or threatened Notice of Program Reimbursements outstanding, and
        all
        prior years’ cost reports have been examined and audited by (i) as to Medicaid,
        the applicable state agency or other CMS-designated agents or agents of such
        state agency charged with such responsibility or (ii) as to Medicare, the
        Medicare intermediary or other CMS-designated agents charged with such
        responsibility, and have been settled and there are no offsets pending,
        threatened or now owed by the Provider;

       

      (l)  the
        Provider has valid provider identification numbers and licenses to generate
        valid Healthcare Receivables payable by Eligible Obligors;

       

      (m)  the
        information furnished by or on behalf of the Provider to PHCC and to agents
        and
        employees of PHCC prior to the date of this Agreement and during the term
        of
        this Agreement or in connection with any transaction contemplated by the
        Provider Agreements is and will be true and correct in all material respects
        and
        does not and will not omit to state a material fact necessary to make the
        statements contained therein not misleading;

       

      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

      

       

      (n)  the
        Provider is solvent and will not become insolvent after giving effect to
        the
        transactions contemplated by the Provider Agreements; the Provider has not
        incurred debts or liabilities beyond its ability to pay; the Provider will,
        after giving effect to the transactions contemplated by the Provider Agreements,
        have an adequate amount of capital to conduct its business in the foreseeable
        future; and the pledge of the Collateral hereunder is made in good faith
        and
        without intent to hinder, delay or defraud present or future creditors of
        the
        Provider;

       

      (o)  the
        Lockbox Account established by the Provider is the only lockbox account into
        which the Healthcare Receivables are or will be deposited;

       

      (p)  the
        exact
        legal name of the Provider is as set forth in Exhibit C to this Agreement.
        Except as set forth in Exhibit C to this Agreement, the Provider has not
        changed
        its name in the last six years and, during such period, the Provider did
        not use, and the Provider does not now use, any trade names, fictitious names,
        assumed names or “doing business as” names;

       

      (q)  each
        pension plan or profit sharing plan to which the Provider is a party has
        been
        fully funded in accordance with the obligations of the Provider set forth
        in
        such plan;

       

      (r)  the
        Healthcare Receivables have been, and will continue to be, adjusted to reflect
        reimbursement policies of the Obligors with respect thereto and the amount
        thereof will not exceed amounts the Provider is entitled to receive under
        any
        capitation arrangement, fee schedule, discount formula, cost-based reimbursement
        or other adjustment or limitation to the usual charges of the
        Provider;

       

      (s)  Except
        within the normal course of business, the Provider is not a party to any
        unresolved disputes with any Obligor on a Healthcare Receivable, without
        regard
        to whether the dispute with an Obligor involves a Healthcare Receivable of
        the
        Provider which is pledged to PHCC under this Agreement, except as disclosed
        in
        writing to PHCC;

       

      (t)  there
        are
        no pending civil or criminal investigations involving the Provider or its
        officers and directors and neither the Provider nor any of its officers or
        directors has been involved in, or the subject of, any civil or criminal
        investigation within the past five years;

       

      (u)  the
        Provider has executed and delivered to each Obligor a notice showing the
        Lockbox
        and Lockbox Account as the only address to which Healthcare Receivable payments
        and information are to be remitted and has provided a copy of each such notice
        to PHCC;

       

      
        
          
          

        

        
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      (v)  other
        than, with respect to Governmental Receivables, pursuant to the terms of
        the CMS
        in the rules and regulations governing the prospective payment system for
        healthcare providers or similar governmental programs or regulations, neither
        the federal government nor any other Person has asserted any claim or right
        to
        offset any liability or debt against any Governmental Receivable. Other than,
        with respect to Governmental Receivables, pursuant to the terms of the CMS
        in
        the rules and regulations governing the prospective payment system for
        healthcare providers or similar governmental programs or regulations, the
        Provider has no overdue or delinquent liabilities or debt which could give
        rise
        to a right of the federal government, any state government or any other Person
        to offset such liabilities or debt against Governmental
        Receivables;

       

      (w)  the
        Provider has heretofore delivered to PHCC true and complete copies of the
        financial statements each of which fairly presents the financial position
        of the
        Provider as of the date thereof and the results of operations and changes
        in
        financial condition of the Provider for the period then ended and has been
        prepared in accordance with generally accepted accounting principles
        consistently applied.  The
        books
        of account and records of the Provider are true and complete in all material
        respects and fairly reflect all the material properties, assets, liabilities
        and
        transactions of the Provider in accordance with generally accepted accounting
        principles consistently applied. All fees, charges, costs and expenses of
        any
        nature whatsoever associated with the ownership, operation and management
        of the
        business and the assets have been in all material respects fully and properly
        charged and reflected in the books and records of the Provider and in the
        Provider’s financial statements, and such books and records and financial
        statements do not, because of the provision of services or the bearing of
        costs
        and expenses by any other person or for any other reason, understate in any
        material respect the true costs and expenses of conducting the Provider’s
        business; and

       

      (x)  all
        documents which have been or shall be delivered to PHCC or filed with any
        governmental authority by or on behalf of the Provider pursuant to this
        Agreement or any other Provider Agreement or in connection with the transactions
        contemplated hereby are, or when so delivered or filed shall be, correct
        and
        complete in all material respects and, if applicable, in full force and
        effect.

       

      Section
        7.   Representations
        and Warranties Concerning Healthcare Receivables Pledged to
        PHCC.
        The
        Provider represents and warrants to PHCC, as of the date hereof, and shall
        be
        deemed to represent and warrant to PHCC as of each Advance Request, as follows
        with respect to each Healthcare Receivable pledged to PHCC
        hereunder:

       

      (a)  the
        Net
        Value of such Healthcare Receivable is payable in full by an Eligible
        Obligor;

       

      
        
          
          

        

        
          -21-

          
            

          

        

        
          
          

        

      

      

       

      (b)  the
        Provider has submitted all necessary documentation and supplied all necessary
        information for payment of such Healthcare Receivable to the Obligor thereof
        (including, but not limited to, the COMN with respect to a DME Receivable)
        and
        has fulfilled all of its other obligations in respect thereof, including
        verification of the eligibility of the Healthcare Receivable for payment
        by such
        Obligor;

       

      (c)  the
        Net
        Value of such Healthcare Receivable is net of contractual allowances or other
        modifications;

       

      (d)  such
        Healthcare Receivable has not been paid in whole or in part;

       

      (e)  neither
        such Healthcare Receivable nor any related Contract has been compromised,
        adjusted, extended, satisfied, subordinated, rescinded, set off or modified
        by
        the Provider and is not subject to compromise, adjustment, extension,
        satisfaction, subordination, rescission, setoff, counterclaim, defense or
        modification, whether arising out of transactions concerning the Contract
        or
        otherwise;

       

      (f)  true
        and
        correct copies of all claims, agreements and other documents relating to
        the
        creation of such Healthcare Receivable have been delivered to PHCC or the
        Servicer;

       

      (g)  such
        Healthcare Receivable is owned by the Provider free and clear of any claim
        of
        ownership of any other Person and is not subject to any sale, lien, security
        interest, financing statement or other charge or encumbrance or other type
        of
        preferential arrangement having the effect of a lien or security interest,
        in
        favor of any Person other than as contemplated by this Agreement;

       

      (h)  no
        action, other than the execution and delivery of this Agreement, the filing
        of
        financing statements in the state where the Provider is “located” pursuant to
        the Uniform Commercial Code of the relevant jurisdiction, as amended from
        time
        to time, is required to perfect the interest of PHCC, as a secured party
        of and
        to such Healthcare Receivable, and all such actions have been or will be
        accomplished no later than the date of execution of this Agreement;

       

      (i)  such
        Healthcare Receivable complies with all material laws and regulations applicable
        thereto;

       

      (j)  such
        Healthcare Receivable is in full force and effect and represents and constitutes
        a legal, valid and binding obligation of the related Obligor enforceable
        against
        such Obligor in accordance with its terms and constitutes an “Account” under the
        Uniform Commercial Code in effect in any jurisdiction deemed to govern the
        creation, perfection, and effect of perfection or non-perfection of a security
        interest therein, as amended from time to time;

       

      
        
          
          

        

        
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      (k)  such
        Healthcare Receivable does not constitute or has not constituted an obligation
        of any subsidiary, parent or other Person which is an affiliate of the
        Provider;

       

      (l)  such
        Healthcare Receivable (i) is payable, in an amount equal to not less than
        its
        Net Value, by the Eligible Obligor identified by the Provider as being obligated
        to do so, and is recognized as such by the applicable Eligible Obligor (except
        to the extent limited for Governmental Receivables pursuant to the terms
        of the
        CMS in the rules and regulations governing the prospective payment system
        for
        healthcare providers or similar governmental programs or regulations), (ii)
        is
        based on an actual and bona fide rendition of services to, or the furnishing
        of
        goods or medical equipment provided to, a patient by the Provider in the
        ordinary course of its business, (iii) is denominated and payable only in
        lawful
        currency of the United States and (iv) is an account and is not evidenced
        by
“negotiable documents,” “instruments” or “tangible chattel paper” within the
        meaning of the Uniform Commercial Code of any relevant
        jurisdiction;

       

      (m)  other
        than, with respect to Governmental Receivables, pursuant to the terms of
        the CMS
        in the rules and regulations governing the prospective payment system for
        healthcare providers or similar governmental programs or regulations, such
        Healthcare Receivable (i) is not subject to any setoff, counterclaim, defense,
        abatement, suspension, deferment, deductible, reduction or termination by
        its
        Obligor and (ii) is not past, or less than 150 days prior to, the statutory
        limit for collection applicable to its Obligor;

       

      (n)  the
        goods
        and services provided and reflected in such Healthcare Receivable, or the
        medical equipment provided, were medically necessary, and the patient has
        received such goods, services or medical equipment;

       

      (o)  the
        fees
        charged for the services or goods constituting the basis for such Healthcare
        Receivable were the usual, customary and reasonable fees charged by other
        medical service providers in the Provider’s community for the same or similar
        services or goods or, if the fees for services or goods were subject to
        limitations imposed by contracts for reimbursement from the related Obligor,
        such fees did not exceed the limitations so imposed, and such Healthcare
        Receivable for which the fees are so restricted has been clearly identified
        to
        PHCC as being subject to such restriction;

       

      (p)  the
        Provider has identified and provided to the Servicer all Records, including
        all
        documents, contracts and other information necessary to identify each Obligor
        liable on such Healthcare Receivable, whether primarily, secondarily or
        otherwise, and the only Obligor(s) liable on such Healthcare Receivable is
        (are)
        the Obligor(s) identified in the applicable Records;

       

      
        
          
          

        

        
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      (q)  other
        than as may be limited with respect to Governmental Receivables pursuant
        to the
        CMS in the rules and regulations governing the prospective payment system
        for
        healthcare providers or similar governmental programs or regulations, the
        Provider has the right to pledge such Healthcare Receivable pursuant to this
        Agreement, no consent from the related Obligor or any other Person is required
        to effect the pledge of such Healthcare Receivable to PHCC and this Agreement,
        and such pledge of such Healthcare Receivable will constitute a valid security
        interest in such Healthcare Receivable in favor of PHCC enforceable against
        the
        Provider and all creditors of and purchasers from the Provider;

       

      (r)  other
        than, for Governmental Receivables, pursuant to the CMS in the rules and
        regulations governing the prospective payment system for healthcare providers
        or
        similar governmental programs or regulations, the Provider has made all payments
        to any Obligor necessary to prevent the Obligor from offsetting an earlier
        overpayment to the Provider against any amount the Obligor owes on such
        Healthcare Receivable;

       

      (s)  there
        are
        no procedures or investigations pending or threatened before any Governmental
        authority (i) asserting the invalidity of such Healthcare Receivable or any
        Contract related thereto, (ii) relating to the bankruptcy or insolvency of
        the
        related Obligor, (iii) seeking the payment of such Healthcare Receivable
        or
        payment and performance of such Contract or (iv) seeking any determination
        or
        ruling that might materially and adversely affect the validity or enforceability
        of such Healthcare Receivable or any Contract related thereto;

       

      (t)  neither
        such Healthcare Receivable nor Contract related thereto contravenes in any
        material respect any federal, state or local laws, rules or regulations
        applicable thereto (including, without limitation, the rules and regulations
        of
        CMS and laws, rules and regulations relating to usury, consumer protection,
        truth in lending, fair credit billing, fair credit reporting, equal credit
        opportunity, fair debt collection practices and privacy), and no party to
        such
        related Contract is in violation of any such law, rule or regulation in any
        material respect;

       

      (u)  the
        insurance policy or Contract obligating an Obligor to make payment (i) does
        not
        prohibit the transfer of the right to receive payment from the patient to
        the
        Provider and (ii) was in full force and effect and applicable to the patient
        at
        the time the services constituting the basis for such Healthcare Receivable
        were
        performed; and

       

      (v)  such
        Healthcare Receivable complies with such additional criteria and requirements
        as
        PHCC may from time to time specify to Provider other than as such criteria
        and
        requirements may be limited with respect to Governmental Receivables pursuant
        to
        the CMS in the rules and regulations governing the prospective payment system
        for healthcare providers or similar governmental programs or
        regulations.

       

      
        
          
          

        

        
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      Section
        8.   Covenants
        of the Provider.
        The
        Provider hereby agrees with and covenants to PHCC and its successors and
        assigns
        that during the term of this Agreement:

       

      (a)  if
        the
        Provider is a corporation, limited liability company or partnership, the
        Provider shall preserve and maintain its existence in good standing under
        the
        laws of the state of its organization and qualify and remain qualified in
        good
        standing as a foreign entity in each jurisdiction where the failure to preserve
        and maintain such existence, rights, franchises, privileges and qualification
        would materially adversely affect the interests of PHCC hereunder or in the
        Collateral, or the ability of PHCC or the Servicer to perform its respective
        obligations hereunder;

       

      (b)  the
        Provider shall do nothing to impair PHCC’s right in any Collateral or impede or
        interfere with the collection by PHCC or any of its agents of any Healthcare
        Receivable, or compromise, adjust, extend, satisfy, subordinate, rescind,
        set
        off or modify or otherwise permit or agree to any deviation from the terms
        or
        conditions of any Healthcare Receivable;

       

      (c)  the
        Provider shall comply, in all material respects, with its obligations under
        the
        Contracts relating to Healthcare Receivables, and with all material laws,
        acts,
        rules, regulations, orders, decrees and directions of any federal, state
        or
        local governmental authority (including, without limitation, the Social Security
        Act and the rules and regulations promulgated thereunder and the applicable
        State and federal Medicaid laws and rules and regulations promulgated thereunder
        and in accordance therewith) applicable to the Healthcare Receivables or
        any
        part thereof or any related Contracts and with respect to the Provider and
        its
        business and properties; provided, however, that the Provider may contest
        any
        act, law, rule, regulation, order, decree or direction in any reasonable
        manner
        which shall not, in the judgment of PHCC, materially and adversely affect
        the
        rights of PHCC in the Collateral;

       

      (d)  the
        Provider shall not create, permit or suffer to exist, and shall defend PHCC’s
        rights to and interest in the Collateral against, and take such other actions
        as
        are necessary to remove, any lien, claim or right in, to or on the Collateral,
        not contemplated or permitted hereunder, and shall defend the right, title
        and
        interest of PHCC in and to the Collateral against the claims and demands
        of all
        Persons whomsoever;

       

      (e)  the
        Provider shall keep its books and accounts in accordance with generally accepted
        accounting principles and shall make a notation on its computer files and
        other
        physical books and records to indicate which of its Healthcare Receivables
        have
        been pledged to PHCC. 

       

      
        
          
          

        

        
          -25-

          
            

          

        

        
          
          

        

      

      The
        Provider also shall maintain and implement administrative and operating
        procedures (including, without limitation, an ability to recreate Records
        evidencing the Collateral in the event of the destruction of the originals
        thereof), and keep and maintain all documents, books, records and other
        information reasonably necessary or advisable for collecting all Healthcare
        Receivables (including, without limitation, Records adequate to permit the
        daily
        identification of each Healthcare Receivable and all Collections of and
        adjustments to each existing Healthcare Receivable) and for providing the
        Healthcare Receivables files;

       

      (f)  the
        Provider shall advise PHCC immediately (and in no event later than three
        (3)
        Business Days following actual knowledge thereof), in reasonable detail,
        (i) of any lien asserted or claim made against any of the Collateral
        pledged to PHCC and (ii) of the occurrence of any other event which is a
        Material Adverse Event or reasonably could result in a Material Adverse
        Change;

       

      (g)  PHCC
        and
        its representatives shall at all times have full and free access during normal
        business hours to all the books, correspondence and records of the Provider
        and
        PHCC and its representatives may examine the same, take extracts therefrom
        and
        make photocopies thereof, and the Provider agrees to render to PHCC or its
        representatives, at the Provider’s cost and expense, such clerical and other
        assistance as may be reasonably requested with regard thereto; provided,
        however, that PHCC acknowledges that, in exercising the rights and privileges
        conferred in this Section 9, it or its representatives may, from time to
        time, obtain knowledge of information, practices, books, correspondence and
        records of a confidential nature and in which the Provider has a proprietary
        interest. PHCC agrees (and shall obtain a similar agreement from each of
        its
        representatives) that all such information, practices, books, correspondence
        and
        records are to be regarded as confidential information and that such information
        may be subject to laws, rules and regulations regarding patient confidentiality
        and agrees that (i) it shall retain in strict confidence and shall use its
        best
        efforts to ensure that its representatives retain in strict confidence and
        will
        not disclose without the prior written consent of the Provider any or all
        of
        such information, practices, books, correspondence and records furnished
        to them
        and (ii) that it will not, and will use its best efforts to ensure that its
        representatives will not, make any use whatsoever (other than for the purposes
        contemplated by this Agreement) of any of such information, practices, books,
        correspondence and records without the prior written consent of the Provider,
        unless such information is generally available to the public or is required
        by
        law to be disclosed. The Provider shall, from time to time during regular
        business hours, permit PHCC, or its agents or representatives, upon PHCC's
        request, to discuss matters relating to the Collateral or the Provider’s
        performance hereunder with any of the officers or employees of the Provider
        having knowledge of such matters. Unless an Event of Default under this
        Agreement has occurred , PHCC will provide three (3) days advance notice
        to
        Provider prior to exercising its right of access as set forth in this
        paragraph.

       

      
        
          
          

        

        
          -26-

          
            

          

        

        
          
          

        

      

      

       

      (h)  the
        Provider shall from time to time, at the Provider's expense, promptly execute
        and deliver all further instruments and documents, and take all further action
        that PHCC may reasonably request in order to perfect, protect or more fully
        evidence the pledge of the Collateral. Without limiting the generality of
        the
        foregoing, the Provider shall, at the Provider's expense, and upon the written
        request of PHCC, execute and file such financing or continuation statements,
        or
        amendments thereto or assignments thereof, and such other instruments or
        notices, as may be, in the reasonable opinion of PHCC, necessary or appropriate.
        The Provider hereby authorizes PHCC, without notice to the Provider, and
        at the
        Provider’s expense, to file one or more financing or continuation statements,
        and amendments thereto and assignments thereof, relative to all or any of
        the
        Collateral pledged to PHCC now existing or hereafter arising without the
        signature of the Provider where permitted by law;

       

      (i)  the
        Provider shall not: (i) without providing ten (10) days’ prior written notice to
        PHCC and without filing such amendments to any previously filed financing
        statements as PHCC may require, change the location of its chief executive
        office or the location of the offices where the records relating to the
        Healthcare Receivables are kept or (ii) without providing thirty (30) days’
prior written notice to PHCC and without filing such amendments to any
        previously filed financing statements as PHCC may require, change its name,
        identity or corporate structure in any manner which would, could or might
        make
        any financing statement or continuation statement filed by the Provider in
        accordance with this Agreement seriously misleading within the meaning of
        Section 9-506 of the UCC, as amended from time to time;

       

      (j)  except
        as
        otherwise mandated with respect to Governmental Receivables pursuant to the
        terms of the CMS in the rules and regulations governing the prospective payment
        system for healthcare providers or similar governmental programs or regulations,
        the Provider shall make all payments to an Obligor necessary to prevent such
        Obligor from offsetting an earlier overpayment to the Provider against any
        amount which such Obligor owes with respect to a Healthcare Receivable, and
        the
        Provider shall immediately notify PHCC in the event of any action, proceeding,
        dispute, offset, deduction, defense or counterclaim that is or may be asserted
        by an Obligor relating to a Healthcare Receivable, and the Provider shall
        take
        such action as is reasonably requested by PHCC to defend against such action,
        proceeding, dispute, offset, deduction, defense or counterclaim, and shall
        do so
        within the time period prescribed by applicable law or under an applicable
        contract, or if a time period is not prescribed by law or under a Contract,
        within a reasonable time, and if in PHCC’s judgment, the Provider is not or may
        not initiate such defense in a timely manner, the Provider hereby appoints
        PHCC
        as its attorney-in-fact to initiate and proceed with such defense on the
        Provider’s behalf, subject to, and to the extent permitted by, applicable law.

       

      
        
          
          

        

        
          -27-

          
            

          

        

        
          
          

        

      

      

       

      (k)  the
        Provider and its agents and representatives hereby irrevocably constitute
        and
        designate PHCC as the Provider’s attorney-in-fact, which irrevocable power of
        attorney is coupled with an interest: (i) to endorse or sign the Provider’s name
        to financing statements, remittances, invoices, assignments, checks (other
        than
        checks from Governmental Obligors), drafts or other instruments or documents
        in
        respect of the Healthcare Receivables, (ii) to notify Obligors to send payments
        on the Healthcare Receivables directly to the Lockbox or Lockbox
        Account, and
        (iii)
        upon an Event of Default under this Agreement, to bring suit in the Provider’s
        name and to settle or compromise such Healthcare Receivables (other than
        Governmental Receivables) as PHCC may, in its reasonable sole discretion,
        deem
        appropriate;

       

      (l)  the
        Provider shall not take any action to cause any Healthcare Receivable to
        be
        evidenced by a/an “negotiable document,” “instrument” or “tangible chattel
        paper” (each as defined in the UCC), except to the extent that (i) causing a
        Healthcare Receivable to be evidenced by such negotiable document, instrument
        or
        tangible chattel paper is required for the collection of such Healthcare
        Receivable or for the enforcement of any rights therein and (ii) the original
        copy of such negotiable document, instrument or tangible chattel paper has
        been
        delivered to PHCC for purposes of effecting a first-priority, perfected security
        interest therein;

       

      (m)  the
        Provider shall pay any taxes relating to the pledge and creation of the security
        interest in the Collateral in favor of PHCC;

       

      (n)  the
        Provider shall, at its expense, timely and fully perform and comply with
        all
        material provisions, covenants and other promises required to be observed
        by it
        under any Contracts related to the Healthcare Receivables;

       

      (o)  the
        Provider shall not, without the prior written consent of PHCC:

       

      (i)  except
        as
        otherwise provided herein, sell, assign (by operation of law or otherwise)
        or
        otherwise dispose of, or create or suffer to exist any adverse claim upon
        or
        with respect to, any Collateral (including a claim of CMS or any other Person
        with respect to a claim or offset against Governmental Receivables or a claim
        of
        the State Medicaid agency with respect to a claim or offset against Governmental
        Receivables), or upon or with respect to the Lockbox or Lockbox Account,
        or
        assign any right to receive income in respect thereof, or take any action
        that
        could give rise to, or omit to take any action that could preclude or limit,
        a
        right of CMS or any other Person to set off any amount against any Governmental
        Receivables;

       

      (ii)  outside
        the ordinary course of business, extend, amend or otherwise modify the terms
        of
        any Healthcare Receivable, or amend, modify or waive any term or condition
        of
        any Contract related thereto;

       

      
        
          
          

        

        
          -28-

          
            

          

        

        
          
          

        

      

      

       

      (iii)  make
        any
        change in the character of its business or in its credit and collection policy
        (except for changes required by state or federal statutes, rules or regulations
        or for continued participation in third-party payment programs in which event
        the Provider shall promptly provide PHCC notice thereof), which change would,
        in
        either case, (x) impair the timing of collection or ultimate collectibility
        of
        any Healthcare Receivable or (y) affect the ability of the Servicer to perform
        its duties with respect to the Healthcare Receivables;

       

      (iv)  withdraw,
        attempt to withdraw or cause the withdrawal of any amounts from the Lockbox
        or
        Lockbox Account or instruct any bank or any other Person to transfer any
        amounts
        in the Lockbox or Lockbox Account other than as set forth in this
        Agreement;

       

      (v)  (A)
        amend, modify, supplement or delete in any way or to any extent any provision
        for uncollectible accounts and free care applicable to any Healthcare Receivable
        or (B) amend, modify or supplement in any way or to any extent any financial
        class or change in any way or to any extent the manner in which any financial
        class is treated or reflected in the Provider’s records (including, but not
        limited to, the Healthcare Receivables files);

       

      (p)  the
        Provider shall not, without first providing written notice to PHCC and the
        Servicer:

       

      (i)  outside
        the ordinary course of business, extend, amend or otherwise modify the terms
        of
        any Healthcare Receivable or amend, modify or waive any term or condition
        of any
        Contract related thereto; or

       

      (ii)  withdraw,
        attempt to withdraw or cause the withdrawal of any amounts from the Lockbox
        or
        the Lockbox Account or instruct any bank or any other Person to transfer
        any
        amounts in the Lockbox or the Lockbox Account other than as set forth in
        the
        Servicing Agreement;

       

      (q)  the
        Provider agrees to indemnify, hold harmless and forever defend PHCC from
        any and
        all liability and expenses arising out of the sale of goods, wares, merchandise,
        or services evidenced by the Healthcare Receivables, whether asserted by
        the
        Provider, the Obligor on such Healthcare Receivables or by any other
        Person;

       

      (r)  in
        no
        event shall PHCC be obligated to pursue, on the Provider’s behalf, collection of
        the Healthcare Receivables through use of litigation or otherwise;

       

      
        
          
          

        

        
          -29-

          
            

          

        

        
          
          

        

      

      

       

      (s)  no
        provision hereof shall obligate PHCC in any manner or to any degree, to the
        Provider or to any third party whether such third party is with or without
        notice of this Agreement, to perform for the Provider in regard to the
        underlying Contract which gave rise to any Healthcare Receivable and the
        Provider covenants and agrees to indemnify and hold PHCC harmless for any
        and
        all performance, responsibility or duty owed by the Provider to any Obligor
        for
        a Healthcare Receivable or any third party; and

       

      (t)  
        the
        Provider covenants and agrees to fully comply, in an acceptable manner, with
        the
        terms of any and all agreements with Obligors for the Healthcare Receivables
        to
        the extent such might affect the Healthcare Receivables; and

       

      (u)  If
        an
        Event of Default exists, or such distribution would give rise to an Event
        of
        Default as relates to any covenant or representation herein, the Provide
        shall
        not make any distribution of assets to its stockholders as such whether in
        cash,
        assets or obligations of such Borrower.

       

      (v)  the
        Provider shall not fund or make distributions of any kind (including, but
        not
        limited to, advances, loans, payables, dividends, or investment in any form)
        to
        any non-Borrower Affiliate; provided however, in the normal course of business,
        Provider shall be permitted to: (1) repay short terms loans received from
        non-Borrower Affiliates and (2) pay existing management fees, in an amount
        not
        to exceed five percent (5%) of Provider’s annual revenue, to non-Borrower
        Affiliates. For purposes hereof, “Affiliate” means, with respect any entity,
        business or trade which is under common control or ownership with Borrower,
        (where the term “control” means the possession, direct or indirect, of the power
        to cause the direction of the management and policies of a person or entity,
        whether through the ownership of voting) and includes, but not limited to,
        a
        parent company, sister company, or subsidiary. 

       

      (x) the
        Provider agrees that as long as the Obligations hereunder remain outstanding
        and
        until the Commitment is terminated (unless the PHCC shall otherwise consent
        in
        writing), the Provider shall not incur, create, assume or permit to exist
        any
        indebtedness for borrowed money, howsoever evidenced, or its equivalent
        (including but not limited to leases required to be capitalized under Generally
        Accepted Accounting Principles, in excess of $100,000.00 in the aggregate.
        

       

      (y)
        the
        Provider shall furnish to PHCC on or before the forty fifth (45th) day after
        the
        end of each month, internally prepared consolidating financial statements
        in
        form and substance satisfactory to PHCC and certified by an appropriate officer
        or representative of Borrower, and furnish to PHCC annually on or before
        one
        hundred twenty (120) days after the end of Borrower's fiscal year, a
        consolidating financial statement in form and substance satisfactory to PHCC
        and
        certified after audit by an independent certified public accountant acceptable
        to PHCC, with all such reports to be prepared in accordance with Generally
        Accepted Accounting Principles, consistently applied

       

      
        
          
          

        

        
          -30-

          
            

          

        

        
          
          

        

      

      

       

      Section
        9.   Default
        by the Provider.

       

      (a)  Any
        of
        the following acts, omissions and/or events shall constitute an “Event of
        Default” by the Provider, in addition to any further events defined elsewhere as
        Events of Default by the Provider:

       

      (i)  breach
        by
        the Provider of its material agreements with any Obligor for a Healthcare
        Receivable;

       

      (ii)  breach
        by
        the Provider of any material obligation, covenant, representation or warranty
        of
        the Provider in any Provider Agreement (including this Agreement) including,
        but
        not limited to, its obligation to direct payment of the Healthcare Receivables
        to the Lockbox or Lockbox Account, to remit funds to PHCC or Servicer, pay
        Servicer fees when due, make a payment under this Agreement when due and/or
        to
        make payments under any Provider Agreement; 

       

      (iii)  any
        of
        the Provider Agreements ceases to be in full force and effect (including,
        without limitation, the termination or expiration of the Servicing
        Agreement);

       

      (iv)  any
        of
        the liens created under the Provider Agreements ceases to constitute a valid
        perfected first priority lien in favor of PHCC on the Collateral in accordance
        with the terms therefore;

       

      (v)  one
        or
        more judgments or decrees is rendered against the Provider in an amount in
        excess of $50,000.00 which is not satisfied, stayed, vacated or discharged
        of
        record within thirty (30) calendar days of being rendered; 

       

      (vi)  any
        Material Adverse Effect, or Material Adverse Change;

       

      (vii)  PHCC
        receives any indication or evidence that the Provider may have directly or
        indirectly been engaged in any type of activity which, in PHCC’s sole reasonable
        judgment, might result in the forfeiture of any property to any governmental
        authority.

       

      (viii)  the
        Provider or any of its respective directors, senior officers, general partners
        or managing members, as applicable, is criminally indicted or convicted under
        any law that could lead to a forfeiture of any Collateral;

       

      (ix)  the
        issuance of any process for levy, attachment or garnishment or execution
        upon or
        prior to any judgment against the Provider or any of its property or assets;
        or

       

      
        
          
          

        

        
          -31-

          
            

          

        

        
          
          

        

      

      

       

      (x)  the
        insolvency or business failure of the Provider or Provider’s assignment for the
        preference of certain creditors of the Collateral or placing the same in
        the
        custody of any court or the filing by or against the Provider of a petition
        for
        bankruptcy protection.

       

      (xi)  any
        default of the Provider in the payment or performance of any other liabilities,
        indebtedness or obligations of the Provider, to any other creditor, or any
        occurrence which would allow or permit any other liabilities, indebtedness
        or
        obligations to any other creditor to be accelerated; provided however, this
        provision shall not apply unless the aggregate amount of liabilities,
        indebtedness or other obligation subject to default or acceleration exceed
        $100,000.00.

       

      (xii)  Scott
        Holtmyer shall cease to be active in the management of the
        Provider;

       

      (b)  Upon
        the
        occurrence of an Event of Default, and at any time thereafter, PHCC may elect
        (i) to terminate its obligations to make Advances under any Provider
        Agreement, and such obligations shall immediately terminate, (ii) to
        declare all outstanding principal and accrued interest under the Loan, together
        with all outstanding Reimbursable Expenses, Fees, commissions and other expenses
        under the Provider Agreements, immediately due and payable, and/or (iii) to
        foreclose on the security interest granted by the Provider in Section 5 of
        this Agreement to secure amounts due and owing from the Provider, and in
        all
        events, the Provider hereby expressly waives notice, demand and presentment
        with
        regard thereto.

       

      Upon
        the
        occurrence of an Event of Default specified in Section 9(a)(xi) hereof, all
        of
        the Obligations shall become automatically due and payable without declaration,
        notice or demand by PHCC to or upon the Provider and the Provider’s right to
        request Advances shall automatically terminate as if terminated by PHCC pursuant
        to Section 9(b) hereof and with the effects of such a termination by PHCC;
        provided, however, that, if PHCC shall continue to make Advances or otherwise
        extend credit to the Provider pursuant to this Agreement after an automatic
        termination of the Provider’s right to request Advances by reason of the
        occurrence of an Event of Default specified in Section 9(a)(xi) hereof, the
        Provider acknowledges and agrees that such Advances and other credit shall
        nevertheless be governed by this Agreement and enforceable against and
        recoverable from the Provider as if such Event of Default had never
        occurred.

       

      (c)  Upon
        the
        occurrence of an Event of Default and action by PHCC (or automatic acceleration
        in the case of an occurrence of an Event of Default specified in Section
        9(a)(xi) hereof) pursuant to Section 10(b), PHCC shall have and may exercise
        all
        rights provided by the Uniform Commercial Code in any relevant jurisdiction,
        as
        amended from time to time, or by any other law of the state where the Provider
        is “located” as defined by the Uniform Commercial Code of the relevant
        jurisdiction, as amended from time to time, to the maximum extent provided
        thereby. 

       

      
        
          
          

        

        
          -32-

          
            

          

        

        
          
          

        

      

      PHCC
        shall be entitled to avail itself of any such rights and remedies as may
        now or
        hereafter exist at law or in equity for the enforcement of the covenants
        herein
        and the foreclosure of the security interest created hereby and to resort
        to any
        remedy provided hereunder or provided by the Uniform Commercial Code of any
        relevant jurisdiction, or by any other law of any relevant State, shall not
        prevent the concurrent or subsequent employment of any other appropriate
        remedy
        or remedies.

       

      (d)  PHCC
        may
        remedy any default, without waiving same, or may waive any default without
        waiving any prior or subsequent default.

       

      (e)  The
        security interest herein granted shall not be affected by nor affect any
        other
        security taken for the indebtedness hereby secured, or any part thereof;
        and any
        extensions may be made of PHCC’s rights and such security interest and any
        releases may be executed or herein conveyed without affecting the priority
        of
        such security interest or the validity thereof with reference to any third
        Person, and the holder of said rights shall not be limited by any election
        of
        remedies if he chooses to foreclose this security interest by suit.

       

      (f)  Any
        requirement of reasonable notice to the Provider of the time and place of
        any
        sale of the Collateral, or any other intended disposition thereof to be made,
        shall be met if such notice is mailed, postage prepaid, to the Provider at
        the
        last known business address of the Provider, as required by law.

       

      (g)  The
        Provider hereby expressly acknowledges that, the Provider’s breach of any of the
        other covenants, obligations, representations or warranties contained in
        any
        Provider Agreement or any Contract would cause irreparable injury and damage
        to
        PHCC in a manner that could not be adequately compensated by monetary damages
        alone. The parties specifically agree that the breach or threatened breach
        by
        the Provider of any Provider Agreement or any Contract could cause PHCC to
        suffer irreparable injury if injunctive relief is not granted and, therefore,
        PHCC shall have the right, at its election and in addition to any and all
        other
        remedies available to it, upon any such breach or threatened breach, to seek
        immediate injunctive relief from a court of competent jurisdiction, requesting
        such orders and restraining the Provider from all actions which such court
        deems
        necessary to adequately protect PHCC from further damage or injury. In any
        instance of a breach or threatened breach for which injunctive relief is
        deemed
        necessary by PHCC, the Provider hereby waives demand or notice of default
        and
        waives the requirements, if any, for posting bond in connection with the
        granting of injunctive relief.

       

      
        
          
          

        

        
          -33-

          
            

          

        

        
          
          

        

      

      

       

      Section
        10.   Indemnity;
        Payment of Expenses. In
        the
        event (a) any of the Provider’s warranties or representations shall prove to be
        false or misleading; (b) any Obligor in judicial proceedings shall assert
        against PHCC or any of its officers, employees, directors, managers or agents
        a
        claim or defense arising out of any transaction between the Obligor and the
        Provider; or (c) the Provider or any other person or entity shall assert
        against
        PHCC or any of its officers, employees, directors, managers or agents a claim
        or
        defense arising out of or relating to any of the Collateral, the Loan or
        any of
        the documents executed in connection with the Loan, the Provider agrees to
        indemnify and hold PHCC harmless from and against any liability, judgment,
        cost,
        attorneys’ fees or other expense whatsoever arising therefrom.

       

      The
        Provider agrees, on demand, to (a) pay or reimburse PHCC for all Reimbursable
        Expenses and (b) pay, indemnify, and hold PHCC harmless from and against
        any and
        all other liabilities, obligations, losses, damages, penalties, actions,
        judgments, suits, costs, expenses or disbursements of any kind or nature
        whatsoever (except with respect to taxes and other amounts governed by Section
        2(e) above), with respect to the execution, delivery, enforcement, performance
        and administration of this Agreement, the Note and the other Provider Agreements
        (all the foregoing, collectively, the “indemnified
        liabilities”),
        provided that the Provider has no obligation hereunder to PHCC with respect
        to
        indemnified liabilities arising from the gross negligence or willful misconduct
        of PHCC.

       

      Section
        11.   Term
        and Termination.
        Unless
        earlier terminated pursuant to the terms hereof, this Agreement shall continue
        in full force and effect until the Scheduled Maturity Date. Any party to
        this
        Agreement may, after the expiration of 180 days from the date of this Agreement,
        terminate this Agreement upon giving to the other at least thirty (30) days’
prior written notice of termination by registered or certified mail given
        as
        provided in Section 13(h);
        provided,
        however, that as a condition precedent to Provider’s termination of this
        Agreement prior to the expiration of the Term pursuant to the foregoing,
        Provider shall have paid to PHCC a Prepayment Fee in the following amount:
        (1)
        if the effective date of such termination occurs prior to the first anniversary
        of the effective date of this Agreement, two percent (2.0%) of the Maximum
        Aggregate Loan Amount in effect on the effective date of the termination;
        and
        (2) if the effective date of such termination occurs after the first anniversary
        of the effective date of this Agreement but prior to the Scheduled Maturity
        Date, one percent 1.0% of the Maximum Aggregate Loan Amount in effect on
        the
        effective date of the termination. .PHCC shall have the right to terminate
        this
        Agreement, by written notice to the Provider, at any time during which an
        Event
        of Default hereunder has occurred and is continuing. Termination, however,
        shall
        not relieve or discharge the Provider of its duties, obligations or covenants
        hereunder until all of the Provider’s obligations to PHCC have been satisfied or
        paid in full, and all of the terms, provisions and conditions of this Agreement
        and the Provider Agreements shall remain in effect. If, after receipt of
        any
        payment of all or any part of the Provider’s obligations hereunder, PHCC is for
        any reason compelled to surrender such payment to any Person because such
        payment is determined to be void or voidable as a preference, impermissible
        setoff or a diversion of trust funds, or for any other reason, this Agreement
        shall continue in full force and the Provider shall be liable to PHCC for,
        and
        shall indemnify and hold PHCC harmless for, the amount of such payment
        surrendered. 

       

      
        
          
          

        

        
          -34-

          
            

          

        

        
          
          

        

      

      The
        provisions of this Section 11 shall be and remain effective notwithstanding
        any
        contrary action which may have been taken by PHCC in reliance upon such payment,
        and any such contrary action so taken shall be without prejudice to PHCC’s
        rights under this Agreement and shall be deemed to have been conditioned
        upon
        such payment having become final and irrevocable. The provisions of this
        Section
        11 shall survive the termination of the Agreement.

       

      Section
        12.   Miscellaneous.

       

      (a)  THE
        NOTE,
        THIS AGREEMENT AND ALL OF THE OTHER LOAN DOCUMENTS, AND ALL RIGHTS AND
        OBLIGATIONS HEREUNDER AND THEREUNDER, INCLUDING MATTERS OF CONSTRUCTION,
        VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
        WITH
        THE INTERNAL LAWS OF THE STATE OF GEORGIA, EXCEPT THAT ANY CONFLICT OF LAWS
        RULE
        OF SUCH JURISDICTION THAT WOULD REQUIRE REFERENCE TO THE LAWS OF SOME OTHER
        JURISDICTION SHALL BE DISREGARDED. ANY SUITS, CLAIMS OR CAUSES OF ACTION
        ARISING
        DIRECTLY OR INDIRECTLY FROM THIS AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS
        OR ANY OTHER AGREEMENTS OR INSTRUMENTS BETWEEN PHCC AND PROVIDER RELATING
        TO
        SUCH DOCUMENTS (except for the enforcement of an equitable remedy by PHCC
        under
        the provisions of Section 10(g)) MAY BE BROUGHT IN A COURT OF APPROPRIATE
        JURISDICTION IN DEKALB COUNTY, GEORGIA, AND OBJECTIONS TO VENUE AND PERSONAL
        JURISDICTION IN SUCH FORUM ARE HEREBY EXPRESSLY WAIVED. THIS AGREEMENT HAS
        BEEN
        NEGOTIATED AND IS BEING EXECUTED AND DELIVERED IN THE STATE OF GEORGIA, OR
        IF
        EXECUTED BY PROVIDER ELSEWHERE, SHALL BECOME EFFECTIVE UPON PHCC’S RECEIPT AND
        EXECUTION OF THE ORIGINAL OF THIS AGREEMENT IN THE STATE OF GEORGIA; PROVIDED,
        HOWEVER, THAT PHCC SHALL HAVE NO OBLIGATION TO GIVE, NOR SHALL PROVIDER BE
        ENTITLED TO RECEIVE ANY NOTICE OF SUCH RECEIPT AND EXECUTION FOR THIS AGREEMENT
        TO BECOME A BINDING OBLIGATION OF PROVIDER. IT IS INTENDED, AND PROVIDER
        AND
        PHCC SPECIFICALLY AGREE, THAT THE LAWS OF THE STATE OF GEORGIA GOVERNING
        INTEREST SHALL APPLY TO THIS TRANSACTION. PROVIDER HEREBY ACKNOWLEDGES THAT
        PROVIDER UNDERSTANDS, ANTICIPATES, AND FORESEES THAT ANY ACTION FOR ENFORCEMENT
        OF PAYMENT OF THE LOAN OR THE LOAN DOCUMENTS MAY BE BROUGHT AGAINST IT IN
        THE
        STATE OF GEORGIA. TO THE EXTENT ALLOWED BY LAW, PROVIDER HEREBY SUBMITS TO
        JURISDICTION IN THE STATE OF GEORGIA FOR ANY ACTION OR CAUSE OF ACTION ARISING
        OUT OF OR IN CONNECTION WITH THE LOAN OR THE LOAN DOCUMENTS AND WAIVES ANY
        AND
        ALL RIGHTS UNDER THE LAWS OF ANY STATE OR JURISDICTION TO OBJECT TO JURISDICTION
        OR VENUE WITHIN DEKALB COUNTY, GEORGIA; 

       

      
        
          
          

        

        
          -35-

          
            

          

        

        
          
          

        

      

      NOTWITHSTANDING
        THE FOREGOING, NOTHING CONTAINED IN THIS PARAGRAPH SHALL PREVENT PHCC FROM
        BRINGING ANY ACTION OR EXERCISING ANY RIGHTS AGAINST PROVIDER, ANY GUARANTOR,
        ANY SECURITY FOR THE LOAN, OR ANY OF PROVIDER’S OR ANY GUARANTOR’S PROPERTIES IN
        ANY OTHER COUNTY, STATE, OR JURISDICTION. INITIATING SUCH ACTION OR PROCEEDING
        OR TAKING ANY SUCH ACTION IN ANY OTHER STATE OR JURISDICTION SHALL IN NO
        EVENT
        CONSTITUTE A WAIVER BY PHCC OF ANY OF THE FOREGOING. 

       

      To
        the
        extent that any rule of procedure or rule of substantive law or statute of
        any
        state or regulations of any political subdivision would permit Provider to
        assert a legal argument that insufficient contacts with the State of Georgia
        exist to apply the law of the State of Georgia or that the law of another
        State
        should apply, the Provider hereby, to the fullest extent permitted by law,
        waives such rights and agrees not to assert such claims. The failure of the
        Provider to qualify to do business in the State of Georgia shall not be basis
        for the Provider to assert that the law of another state, other than Georgia
        should apply to any dispute. Notwithstanding the above provision for the
        application of choice-of-law, the parties acknowledge that in regard to the
        proper application of the Uniform Commercial Code as amended from time to
        time
        that the law of the Uniform Commercial Code statutes of another state may
        be
        applicable to determine the rights of the parties relative to creditors of
        the
        Provider.

       

      (b)  The
        Provider shall be liable for attorneys’ fees and other costs incurred by PHCC in
        enforcing its rights hereunder and/or in taking any legal action to settle,
        collect or defend the Healthcare Receivables or any part thereof or security
        interest therein, together with interest on unpaid amounts at the maximum
        rate
        permitted by law. Attorneys’ fees relating to enforcement and collection by PHCC
        for which the Provider shall be responsible to reimburse PHCC shall be equal
        to
        the lesser of: (1) actual out-of-pocket attorneys’ fees or (2) fifteen percent
        (15%) (or the maximum rate permitted by law) of the principal and interest
        owed
        hereunder at the time of commencement of collection activities. This Agreement,
        and the Exhibits and Appendices attached hereto from time to time, set forth
        the
        complete and entire understanding between the Provider and PHCC as to the
        terms
        hereof. Such Agreement shall only be modified by a written instrument signed
        by
        all parties to be bound thereby.

       

      (c)  Failure
        or delay by PHCC in exercising any right hereunder shall not waive the later
        assertion of that right nor waive the Provider’s future
        performance.

       

      (d)  PHCC
        shall at all times have access to the Provider’s financial records to the extent
        necessary to protect PHCC’s position hereunder and/or its interest in the
        Collateral. The Provider shall furnish all financial data to PHCC, immediately
        upon request for such from PHCC, and from time to time; such financial data
        to
        include, but not be limited to, receipts for all required tax payments, proof
        of
        payment of all insurance including workers’ compensation payments, proof of
        payment of all current payables, Medicare cost reports, Medicare cost report
        settlement statements and applicable state compliance information.

       

      
        
          
          

        

        
          -36-

          
            

          

        

        
          
          

        

      

      

       

      (e)  All
        rights of PHCC against the Provider, in the event of the nonperformance or
        breach by the Provider shall survive the termination of this
        Agreement.

       

      (f)  This
        Agreement shall be binding on and inure to the benefit of the parties hereto
        and
        their legal representatives, heirs, executors, administrators, successors
        and
        permitted assigns.

       

      (g)  Any
        notice to be given hereunder shall be sufficient if in writing and personally
        delivered or mailed, postage prepaid, by U.S. registered or certified mail,
        return receipt requested, to the parties’ addresses as set forth below. Notice
        shall be deemed given two Business Days following dispatch as set forth
        above.

       

      (h)  The
        representations and warranties made by the Provider shall be true on the
        date of
        execution of this Agreement and the Provider shall reaffirm the truth of
        the
        representations and warranties on each day thereafter during the term of
        this
        Agreement. The representations and warranties made by the Provider shall
        survive
        the termination of this Agreement until the expiration of the statute of
        limitations period applicable to the claims that may be asserted against
        the
        Provider or the assets of the Provider.

       

      (i)  In
        no
        event shall this Agreement be interpreted or enforced to contract for, charge
        or
        authorize receipt of any interest in excess of the maximum nonusurious rate
        of
        interest chargeable under applicable law in regard to which no claim or defense
        of usury could successfully be asserted. Any amount determined by a court
        of
        proper jurisdiction as usurious interest shall be deemed a mistake and shall
        be
        refunded to the payor or credited to authorized amounts owed by such payor
        to
        PHCC. Provided that nothing hereinabove shall limit any fees or expenses
        payable
        to PHCC where such do not constitute “interest.”

       

      (j)  The
        Provider Agreements and the interest of the Provider in the Collateral may
        not
        be sold, assumed, assigned or encumbered (except as provided in this Agreement)
        by the Provider. Upon notice to Provider, this Agreement, the Note and any
        and
        all of the Loan Documents may be assigned in whole or in part by PHCC without
        the consent of the Provider. The Provider understands that, upon notice to
        Provider, PHCC may from time to time enter into a participation agreement
        or
        agreements with one or more participants pursuant to which each such participant
        shall be given a participation in the Loan and that any such participant
        may
        from time to time similarly grant to one or more sub-participants
        sub-participations in the Loan. The Provider agrees that, to the extent provided
        under the participation agreements, any participant or sub-participant may
        exercise any and all rights of banker's lien or set-off with respect to the
        Provider, as fully as if such participant or sub-participant had made the
        Loan
        directly to the Provider in the amount of the participation or sub-participation
        given to such participant or sub-participant in the Loan. 

       

      
        
          
          

        

        
          -37-

          
            

          

        

        
          
          

        

      

      For
        the
        purposes of this Section 12(k) only, the Provider shall be deemed to be directly
        obligated to each participant or sub-participant in the amount of its
        participating interest in the amount of the Loan and any other indebtedness
        arising under the Loan and the Loan Documents. PHCC may divulge to any
        participant or sub-participant all information, reports, financial statements,
        certificates and documents obtained by it from the Provider or any other
        person
        under any provision of this Agreement or otherwise.

       

      
        
          
          

        

        
          -38-

          
            

          

        

        
          
          

        

      

      Executed
        to be effective this 17th day
        of April, 2007.

       

       

      PRESIDENTIAL
        HEALTHCARE CREDIT CORPORATION

       

      By       
        /s/ Phil Hooker

      Name  
        Phil Hooker

      Title    
        President

       

      Address: 1979
        Lakeside Parkway   

                  
        Suite
        400

          
    Tucker,
        GA
        30084

      PROVIDER

      

       

      PARK
        INFUSIONCARE, LP

       

      By:
         
        Dougherty’s Operating GP, LLC

      Its
        General Partner

      By:
        /s/David
        E. Bowe

      Name:
        David E. Bowe

      Title:
         
        Managing
        Member, Chairman, President & CEO

      Address:
        16250 Dallas Parkway, Suite 100

      Dalllas,
        Texas 75248 

      

       

      THE
        STATE
        OF OKLAHOMA

       

      COUNTY
        OF
        BRYAN

       

      BEFORE
        ME, the undersigned authority, on this day personally appeared David
        E. Bowe,
        Managing
        Member,
        Chairman,
        President and CEO of Dougherty’s Operating GP, LLC,
        a Texas
        limited liability company, known to me to be the person whose name is subscribed
        to the foregoing instrument, and acknowledged to me that he/she signed the
        foregoing instrument and acknowledged to me that he/she executed the same
        for
        the purposes and consideration therein expressed, in the capacities therein
        stated and as the act and deed of said limited liability company.

      

      Given
        under my hand and seal of office on this 17th
        day of April,
        2007.

       

      /s/
Notary
        Public, State of Oklahoma

       

      
        
          
          

        

        
          -39-

          
            

          

        

        
          
          

        

      

      

       

      PARK
        INFUSIONCARE OF DALLAS, LP

      

      BY:
         
        Park
        Infusioncare Of Dallas, GP, LLC

         
        Its
        General Partner

      

      By:
        /s/
        David E. Bowe

      Name:
        David E. Bowe

      Title:
         
        Managing
        Member, Chairman, President & CEO

      Address:
        16250 Dallas Parkway, Suite 100

      Dalllas,
        Texas 75248 

      

       

       

      
        THE
          STATE
          OF OKLAHOMA

         

        COUNTY
          OF
          BRYAN

      

       

      BEFORE
        ME, the undersigned authority, on this day personally appeared David
        E. Bowe,
        Managing
        Member,
        Chairman,
        President and CEO of Park InfusionCare of Dallas GP, LLC,
        a Texas
        limited liability company, known to me to be the person whose name is subscribed
        to the foregoing instrument, and acknowledged to me that he/she signed the
        foregoing instrument and acknowledged to me that he/she executed the same
        for
        the purposes and consideration therein expressed, in the capacities therein
        stated and as the act and deed of said limited liability company.

       

      
        Given
          under my hand and seal of office on this 17th
          day of April,
          2007.

         

        /s/
Notary
          Public, State of Oklahoma

      

       

       

       

      
        
          
          

        

        
          -40-

          
            

          

        

        
          
          

        

      

      PARK
        INFUSIONCARE OF HOUSTON, LP

      

      By:
         Park
        Infusioncare Of Houston, GP, LLC

      Its
        General Partner

      

      By:
        /s/
        David E. Bowe

      Name:
        David E. Bowe

      Title:
         
        Managing
        Member, Chairman, President & CEO

      Address:
        16250 Dallas Parkway, Suite 100

      Dalllas,
        Texas 75248 

      

       

       

      
        THE
          STATE
          OF OKLAHOMA

         

        COUNTY
          OF
          BRYAN

      

      
 

      BEFORE
        ME, the undersigned authority, on this day personally appeared David
        E. Bowe,
        Managing
        Member, Chairman, President and CEO of Park InfusionCare of Houston, GP,
        LLC,
        a Texas
        limited liability company, known to me to be the person whose name is subscribed
        to the foregoing instrument, and acknowledged to me that he/she signed the
        foregoing instrument and acknowledged to me that he/she executed the same
        for
        the purposes and consideration therein expressed, in the capacities therein
        stated and as the act and deed of said limited liability company.

      

      
        
          Given
            under my hand and seal of office on this 17th
            day of April,
            2007.

           

          /s/
Notary
            Public, State of Oklahoma

        

      

      

       

       

      

      
        
          
          

        

        
          -41-

          
            

          

        

        
          
          

        

      

      

      

      PARK
        INFUSIONCARE OF SAN ANTONIO LP

      

      By:
         
        Park
        Infusioncare Of San Antonio, GP, LLC

      Its
        General Partner

      By:
        /s/
        David E. Bowe

      Name: 
        David E.
        Bowe

      Title:
         
        Managing
        Member, Chairman, President & CEO

      Address:
        16250 Dallas Parkway, Suite 100

      Dalllas,
        Texas 75248\ 

      

                  

        
          THE
            STATE
            OF OKLAHOMA

           

          COUNTY
            OF
            BRYAN

        

      

       

      BEFORE
        ME, the undersigned authority, on this day personally appeared David
        E. Bowe,
        Managing
        Member, Chairman, President and CEO of Park InfusionCare of San Antonio,
        GP,
        LLC,
        a Texas
        limited liability company, known to me to be the person whose name is subscribed
        to the foregoing instrument, and acknowledged to me that he/she signed the
        foregoing instrument and acknowledged to me that he/she executed the same
        for
        the purposes and consideration therein expressed, in the capacities therein
        stated and as the act and deed of said limited liability company.

      

      Given
        under my hand and seal of office on this 17th 
        day of
April,
        2007.

       

      /s/
Notary
        Public, State of Oklahoma

      

      

      
        
          
          

        

        
          -42-

          
            

          

        

        
          
          

        

      

      

       

      

      APPENDIX
        I

       

      

       

      DEFINITIONS

       

      Except
        as
        otherwise specified or as the context of this Agreement may otherwise require,
        the following terms have the respective meanings set forth below for all
        purposes of this Agreement and the definitions of such terms are applicable
        to
        the singular as well as the plural forms of such terms and to the masculine
        as
        well as to the feminine and neuter genders of such terms. Terms which are
        defined in the UCC and used in this Agreement without definition shall have
        the
        meanings assigned thereto in the UCC.

       

      “Accounts”
        means all of the Provider’s (or other entities’, as applicable) accounts (as
        defined in the UCC).

       

      “Advance”
means
        a
        borrowing by the Provider pursuant to the Note and subject to the terms of
        this
        Agreement. Any amounts paid by PHCC on the Provider’s behalf under any Provider
        Agreement shall be an Advance for purposes of this Agreement.

       

      “Advance
        Day”
        means
        the day of each week agreed upon by the Provider and PHCC on which Advances
        are
        to be made or if such day is not a Business Day the next succeeding Business
        Day.

       

      “Advance
        Request”
means
        the form of advance request set forth in Exhibit E.

       

      “Agreement”
has
        the
        meaning set forth in Section 1 of this Agreement.

       

      “Authorized
        Person”
means
        each officer, general partner or managing member, as the case may be, of
        the
        Provider specifically authorized by the Provider to make Advance Requests
        on the
        Note and whose name is included on a written list of names previously provided
        to PHCC by the Provider, which list is certified by the Provider.

       

      “Availability
        Amount”
has
        the
        meaning set forth in Section 2(a)(ii) of this Agreement.

       

      “Availability
        Certificate”
means
        the form of certificate set forth in Exhibit E.

       

      “Blue
        Cross/Blue Shield Contract”
means
        any and all agreements between the Provider and any Blue Cross/Blue Shield
        plan.

       

      “Business
        Day”
means
        each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
        which
        banking institutions in the State of Georgia generally and the City of Tucker,
        Georgia, are authorized or obligated by law or executive order to
        close.

       

      “Closing
        Date”
means
        the date upon which all of the conditions precedent to the consummation of
        the
        transactions contemplated by this Agreement are satisfied or PHCC has given
        to
        the Provider a written waiver thereof.

       

      
        
          
          

        

        
          -43-

          
            

          

        

        
          
          

        

      

      

       

      “CMS”
means
        the U.S. Center for Medicare and Medicaid Services.

       

      “Collateral”
has
        the
        meaning set forth in Section 5(a) of this Agreement.

       

      “Collections”
means
        the amounts received or deemed received by the Servicer or PHCC with respect
        to
        a Healthcare Receivable.

       

      “Commitment”
means
        the obligation of PHCC to make Advances pursuant to the terms of this Agreement
        up to the amount set forth on Exhibit A hereto.

       

      “COMN”
means,
        with respect to a DME Receivable, the certificate of medical necessity for
        the
        medical equipment sold, rented or leased by Provider.

       

      “Contract”
means
        an agreement pursuant to or under which an Obligor is obligated to pay for
        services rendered or medical equipment or goods sold, leased or rented to
        patients of the Provider from time to time.

       

      “Control
        Agreement”
has
        the
        meaning set forth in Section 4(a) of this Agreement.

       

      “Eligible
        Obligor”
means
        an Insurer or a Governmental Entity.

       

      “Eligible
        Receivables”
means
        each Healthcare Receivable existing on the Closing Date and arising during
        the
        term of this Agreement, unless (or to the extent):

       

      (a)  such
        Healthcare Receivable is not payable by an Eligible Obligor;

       

      (b)  the
        amount stated on the claim sent to the Obligor is not payable in full by
        such
        Obligor (in which case only the Net Value of such Healthcare Receivable shall
        be
        an Eligible Receivable);

       

      (c)  such
        Healthcare Receivable or any related Contract has been compromised, adjusted,
        extended, satisfied, subordinated, rescinded, set off or modified by the
        Provider or is subject to compromise, adjustment, extension, satisfaction,
        subordination, rescission, setoff, counterclaim, defense or modification,
        whether arising out of transactions concerning the Contract or
        otherwise;

       

      (d)  on
        the
        date of determining whether such Healthcare Receivable is an Eligible Receivable
        the Provider has not delivered to PHCC or the Servicer true and correct copies
        of all claims, agreements and other documents relating to the creation of
        such
        Healthcare Receivable, as required pursuant to this Agreement;

       

      (e)  such
        Healthcare Receivable is not owned by the Provider free and clear of any
        claim
        of ownership of any other Person or is subject to any sale, lien, security
        interest, financing statement or other charge or encumbrance or other type
        of
        preferential arrangement having the effect of a lien or security interest,
        in
        favor of any Person other than as contemplated by this Agreement;

       

      
        
          
          

        

        
          -44-

          
            

          

        

        
          
          

        

      

      

       

      (f)  such
        Healthcare Receivable is not subject to a valid, perfected, first-priority
        security interest in favor of PHCC;

       

      (g)  such
        Healthcare Receivable does not comply with all laws and regulations applicable
        thereto;

       

      (h)  such
        Healthcare Receivable does not constitute an “Account” under the Uniform
        Commercial Code in effect in any jurisdiction deemed to govern the creation,
        perfection, and effect of perfection or non-perfection of a security interest
        therein;

       

      (i)  such
        Healthcare Receivable is evidenced by “negotiable documents,” “instruments” or
“tangible chattel paper” within the meaning of the Uniform Commercial Code in
        any jurisdiction deemed to govern the creation, perfection, and effect of
        perfection or non-perfection of a security interest therein;

       

      (j)  such
        Healthcare Receivable does not represent and constitute a legal, valid and
        binding obligation of the related Obligor enforceable against such Obligor
        in
        accordance with its terms;

       

      (k)  such
        Healthcare Receivable constitutes or has constituted an obligation of any
        subsidiary, parent or other Person which is an affiliate of the
        Provider;

       

      (l)  such
        Healthcare Receivable is not based on a prospective (with respect to
        Governmental Receivables, solely as contemplated by the CMS in the rules
        and
        regulations governing the prospective payment system for healthcare providers
        or
        similar governmental programs or regulations), or an actual and bona fide
        rendition of services to, or the furnishing of goods or medical equipment
        provided to, a patient by the Provider in the ordinary course of its
        business;

       

      (m)  such
        Healthcare Receivable is not denominated and payable only in lawful currency
        of
        the United States; 

       

      (n)  the
        goods
        and services provided and reflected in such Healthcare Receivable, or the
        medical equipment provided, were not medically necessary, or the patient
        did not
        receive such goods, services or medical equipment;

       

      (o)  the
        fees
        for services or goods constituting the basis for such Healthcare Receivable
        are
        subject to limitations imposed by contracts for reimbursement from the related
        Obligor, and such fees exceed the limitations so imposed (in which case only
        such portion of such Healthcare Receivable meeting the requirements of such
        limitations, as determined by PHCC, shall be an Eligible
        Receivable);

       

      
        
          
          

        

        
          -45-

          
            

          

        

        
          
          

        

      

      

       

      (p)  
        there
        are procedures or investigations pending or threatened before a Governmental
        authority (i) asserting the invalidity of such Healthcare Receivable or any
        Contract related thereto, (ii) seeking the repayment of such Healthcare
        Receivable or payment and performance of such Contract or (iii) seeking any
        determination or ruling that might materially and adversely affect the validity
        or enforceability of such Healthcare Receivable or any Contract related
        thereto;

       

      (q)  such
        Healthcare Receivable or Contract related thereto contravenes in any material
        respect any federal, state or local laws, rules or regulations applicable
        thereto (including, without limitation, the rules and regulations of CMS
        and
        laws, rules and regulations relating to usury, consumer protection, truth
        in
        lending, fair credit billing, fair credit reporting, equal credit opportunity,
        fair debt collection practices and privacy), or a party to such related Contract
        is in violation of any such law, rule or regulation in any material respect;
        

       

      (r)  the
        related Obligor for such Healthcare Receivable has commenced a voluntary
        case
        under any bankruptcy or reorganization law, has made an assignment for the
        benefit of creditors, has entered against it a decree or order for relief
        in an
        involuntary case under any bankruptcy or reorganization law by a court having
        jurisdiction in respect of such Obligor, or has failed, suspended business,
        ceased to be solvent, called a meeting of its creditors, or has consented
        to or
        suffered a receiver, trustee, liquidator or custodian to be appoint for it
        or
        for all or a significant portion of its assets or affairs, or the Provider,
        in
        the ordinary course of business, should have known of any of the foregoing;
        

       

      (s) such
        Healthcare Receivable fails to comply with such additional criteria and
        requirements which may, from time to time, be established by PHCC pursuant
        to
        this Agreement or is not otherwise satisfactory to PHCC, as determined in
        PHCC’s
        reasonable sole discretion;

       

      (t) such
        Healthcare Receivable has been outstanding and unpaid for more than the lessor
        of one hundred-twenty (120) days from the date
        of billing or one hundred fifty (150) days from the ending date of service;
        

       

      (u) such
        Healthcare Receivable is otherwise unacceptable to PHCC in its sole reasonable
        discretion.

       

      “EOB/ERA”
means
        the explanation of benefits that is provided by an Obligor explaining how
        it
        determined the amount it will or will not pay with respect to a Healthcare
        Receivable of which it is the Obligor.

       

      “Event
        of Default”
means
        any one of the events described in Section 10 of this Agreement.

       

      “Excess”
has
        the
        meaning set forth in Section 2(c)(iv) of this Agreement.

       

      
        
          
          

        

        
          -46-

          
            

          

        

        
          
          

        

      

      

       

      “Fees”
means
        all fees payable by the Provider pursuant to the Provider Agreements, including
        without limitation, the Initial Commitment Fee, the Unused Line Fee, the
        Prepayment Fee and the Overadvance Fee.

       

      “Governmental
        Agreement”
means
        an agreement entered into between a state agency or other Person administering
        a
        Governmental Program, including the Medicaid program, and the Provider under
        which the Provider agrees to provide services or merchandise for patients
        participating in that Governmental Program in accordance with the terms of
        that
        agreement and regulations applicable to that Governmental Program.

       

      “Governmental
        Certification”
means
        the certification of a facility by CMS or a state agency or entity under
        contract with CMS that the facility fully complies with all the conditions
        set
        forth in Medicaid regulations, Medicare regulations or a combination thereof,
        as
        applicable to such facility.

       

      “Governmental
        Consents”
means
        all licenses issued by a state health agency or similar agency or body
        certifying that a facility of the Provider has been inspected and found to
        comply with applicable law for operating such health facility, any applicable
        accreditation certification by the Joint Commission for Accreditation of
        Health
        Care Organizations that such facility fully complies with the standards set
        by
        it for operation of such facility, and Governmental Certifications necessary
        for
        the activities and business of the Provider as currently conducted and proposed
        to be conducted, the ownership, use, operation and maintenance of its
        properties, facilities and assets and the performance by the Provider of
        this
        Agreement and the related transactions contemplated by this
        Agreement.

       

      “Governmental
        Entity”
or
        “Governmental
        Obligor”
means
        the United States, any State, any political subdivision of a State and any
        agency or instrumentality of the United States or any State, political
        subdivision or fiscal intermediary thereof which is obligated to make any
        payments with respect to Medicare or Medicaid Receivables or with respect
        to
        Healthcare Receivables representing amounts owing under any other program
        established by federal or state law which provides for payments for healthcare
        services to be made to the Providers of such services (including, without
        limitation, CMS and the program set forth in Title 38 U.S.C. Section
        1713).

       

      “Governmental
        Programs”
means
        Medicare or Medicaid.

       

      “Governmental
        Receivable”
means
        a
        Healthcare Receivable that is payable by a Governmental Obligor.

       

      
        
          
          

        

        
          -47-

          
            

          

        

        
          
          

        

      

      

       

      “Healthcare
        Receivables”
means
        all accounts receivable billed to Obligors representing amounts due and owing
        to
        the Provider arising from the prospective (with respect to Governmental
        Receivables, solely as contemplated by the CMS in the rules and regulations
        governing the prospective payment system for healthcare providers or similar
        governmental programs or regulations), or actual (i) sale, rental or lease
        of
        durable health care goods (including, without limitation, medical equipment),
        or
        (ii) the provision of medical services (and services and sales ancillary
        thereto), including all rights and remedies of the Provider relating thereto,
        together with any and all proceeds in any way derived, directly or indirectly,
        therefrom; provided, however, that “Healthcare Receivable” shall not include
        claims arising under any workers’ compensation statutes. 

       

      “Initial
        Commitment Fee”
means
        the fee set forth in Section 2(d) of this Agreement in consideration for
        PHCC’s
        Commitment.

       

      “Insurer”
means
        any nonindividual Person, other than a Governmental Entity, located in the
        United States which, in the ordinary course of its business or activities,
        agrees to pay for healthcare goods and services received by individuals,
        including, without limitation, a commercial insurance company, a nonprofit
        insurance company (such as a Blue Cross/Blue Shield entity), an employer
        or
        union who self-insures for employee or member health insurance, an HMO and
        a
        PPO. “Insurer” shall include insurance companies issuing health, personal
        injury, workmen’s compensation or other types of insurance.

       

      “Interest”
has
        the
        meaning set forth in Section 2(c)(iv) of this Agreement.

       

      “Interest
        Payment Date”
        means
        (i) the first Business Day of each calendar month during the term of this
        Agreement or during such time as amounts remain outstanding on the Note,
        commencing on the first Business Day of the calendar month following the
        month
        in which the Note or any successor Note is executed and delivered to PHCC
        and
        amounts are outstanding thereon, (ii) any date the Loan is prepaid and, (iii)
        the Scheduled Maturity Date.

       

      “Inventory”
        means all of the Provider’s (or other entities’, as applicable) inventory (as
        defined in the UCC) and all finished goods, other goods, merchandise and
        other
        personal property now owned or hereafter acquired by the Provider which are
        held
        for sale, lease, or rental or are furnished or to be furnished under a contract
        of service and all raw materials, work in process, component parts, materials
        or
        supplies used or to be used, or consumed or to be consumed, in the Provider’s
        business, and related products and all goods represented thereby, wherever
        located, and all such goods that may be reclaimed or repossessed from or
        returned by the Provider’s customers, and all shipping and packaging materials
        relating to any of the foregoing.

       

      “Loan”
means
        the Advances made by PHCC to Provider from time to time.

       

      “Loan
        Documents”
means
        the Agreement, the Note, and all other documents and instruments executed
        by the
        Provider in favor of or with PHCC in connection therewith.

      
        
          
          

        

        
          -48-

          
            

          

        

        
          
          

        

      

      

      “Lockbox”
has
        the
        meaning set forth in Section 4(a) of this Agreement.

       

      “Lockbox
        Account”
has
        the
        meaning set forth in Section 4(a) of this Agreement.

       

      “Material
        Adverse Effect”
or
        “Material
        Adverse Change”
means
        any event, condition or circumstance or set of events, conditions or
        circumstances or any change(s) which (i) has, had or could reasonably be
        expected to have any material adverse effect upon or change in the validity
        or
        enforceability of any Provider Agreement, (ii) has been or could reasonably
        be
        expected to be material and adverse to the value of any of the Collateral
        or to
        the business, operations, prospects, properties, assets, liabilities or
        condition of the Provider, or (iii) has materially impaired the ability of
        the
        Provider to perform its obligations under the Provider Agreements or to
        consummate the transactions thereunder. 

       

      “Maximum
        Aggregate Loan Amount”
means
        the maximum aggregate principal balance of the Loan outstanding at any time
        during the term of this Agreement, which amount shall not exceed the lesser
        of
        (i) the Commitment or (ii) the Availability Amount as determined by
        PHCC.

       

      “Maximum
        Rate”
means
        the maximum non-usurious rate of interest permitted by applicable law that
        at
        any time, or from time to time, may be contracted for, taken, reserved, charged
        or received on the debt in question or, to the extent that at any time
        applicable law may thereafter permit a higher maximum non-usurious rate of
        interest, then such higher rate. Notwithstanding any other provision hereof,
        the
        Maximum Rate shall be calculated on a daily basis (computed on the actual
        number
        of days elapsed over a year of 365 or 366 days, as the case may
        be).

       

      “Medicaid”
means
        the medical assistance program established by Title XIX of the Social Security
        Act, 42 U.S.C. Sections 1396 et seq., and any statutes succeeding
        thereto.

       

      “Medicare”
means
        the health insurance program established by Title XVIII of the Social Security
        Act, 42 U.S.C. Sections 1395 et seq., and any statutes succeeding
        thereto.

       

      “Medicare
        or Medicaid Receivable”
means
        a
        Healthcare Receivable representing a claim against a Governmental Entity
        pursuant to the Medicare program (as set forth in Title 42 U.S.C. Section
        1395
        et seq.) or the Medicaid program (as set forth in Title 42 U.S.C. Section 1396
        et seq.).

       

      “Monthly
        Commitment Fee”
means
        the Fee set forth in Section 2(d) of this Agreement.

       

      “Note”
has
        the
        meaning set forth in Section 2(b)(i) of this Agreement.

       

      “Net
        Value”
means,
        with respect to a Healthcare Receivable, the amount, determined by the Servicer
        or PHCC as of the date of such determination, as collectible from the Obligor
        on
        such Healthcare Receivable after giving effect to contractual allowances
        with
        respect thereto and any amounts determined by the Servicer or PHCC to be
        not
        collectible from the Obligor on that Healthcare Receivable.

       

      
        
          
          

        

        
          -49-

          
            

          

        

        
          
          

        

      

      

       

      “Obligations”
has
        the
        meaning set forth in Section 5(b) of this Agreement.

       

      “Obligor”
means
        an Eligible Obligor which is identified by the Provider as being obligated
        to
        make payment of all or a portion of a Healthcare Receivable.

       

      “Overadvance
        Fee”
has
        the
        meaning set forth in Section 2 of this Agreement.

       

      “Person”
means
        any individual, corporation, partnership, joint venture, association,
        joint-stock company, trust, unincorporated organization or government or
        any
        agency or political subdivision thereof (including, without limitation, any
        Governmental Entity) whether acting in an individual, fiduciary or other
        capacity.

       

      “PHCC”
has
        the
        meaning set forth in Section 1 of this Agreement.

       

      “Prepayment
        Amount”
has
        the
        meaning set forth in Section 2(b)(ii) of this Agreement.

       

      “Prepayment
        Fee”
has
        the
        meaning set forth in Section 11 of this Agreement

       

      “Proceeds”
        means all cash proceeds, non-cash proceeds and all forms of payment and other
        property received or due from the sale, lease, rental, transfer, disposition,
        licensing, collection, use or exchange of property constituting Collateral
        hereunder and any and all claims against any third party for loss of or damage
        to any Collateral, including insurance, contract and tort claims, and further,
        without limiting the generality of the foregoing, Proceeds shall include
        all
        Accounts, checks, cash, money orders, drafts, chattel paper, general
        intangibles, instruments, notes and other documents evidencing payment and
        payment obligations to Provider for the sale, lease, rental, transfer,
        disposition, licensing, collection, use or exchange of Collateral.

       

      “Provider
        Agreements”
means
        this Agreement, the Note, the Servicing Agreement, and each certificate,
        document or agreement executed or delivered by the Provider pursuant to any
        of
        the foregoing, each as amended or restated by the parties from time to
        time.

       

      “Records”
means
        all Contracts and other documents, information, books and other records
        maintained by the Provider or the Servicer with respect to Healthcare
        Receivables, the related Obligors and any other Collateral. “Records” shall
        include, but not be limited to, computer programs, tapes, disks, data processing
        software and related property and rights.

       

      “Reimbursable
        Expenses”
means
        the following expenses which are incurred in connection with this Agreement
        and/or the Healthcare Receivables: (i) $20 for each wire transfer; (ii) $12
        per
        package for overnight mail delivery; (iii) $15 per check for check
        certification; (iv) $3 per debtor for debtor notification; (v) any amounts
        payable under Sections 2(e) and 11 hereof; (vi) the internal costs to PHCC
        of
        any collateral audit performed by PHCC personnel; 

       

      
        
          
          

        

        
          -50-

          
            

          

        

        
          
          

        

      

      (vii)
        PHCC’s reasonable out-of-pocket expenses incurred in connection with the
        preparation, execution, delivery and administration of, and any amendment,
        supplement or modification to, this Agreement, the Note, the Control Agreement
        and the other Provider Agreements and any other documents prepared in connection
        herewith or therewith, and the consummation of the transactions contemplated
        hereby and thereby, including, without limitation, any and all lien search
        fees,
        collateral audit fees, credit inquiry and investigation fees and costs,
        healthcare consultant fees, and the fees and charges of counsel to PHCC,
        (viii)
        PHCC’s costs and expenses incurred in connection with the enforcement or
        preservation of any rights under this Agreement, the Note, the Control
        Agreement, the other Provider Agreements and any such other documents,
        including, without limitation, fees and charges of counsel to PHCC, and (ix)
        any
        and all recording and filing fees and any and all liabilities with respect
        to,
        or resulting from any delay in paying, any registration tax, stamp, duty
        and
        other similar taxes or duties, if any, which may be payable or determined
        to be
        payable in connection with the execution and delivery of, or consummation
        of any
        of the transactions contemplated by, or any amendment, supplement or
        modification of, or any waiver or consent under or in respect of, this
        Agreement, the Note, the other Provider Agreements and any such other
        documents.

       

      “Scheduled
        Maturity Date”
means
        the date that is three (3) years after the date the Agreement is entered
        into as
        shown in the first paragraph of the first page of the Agreement.

       

      “Servicer”
means
        Healthcare Claims Management Corporation acting in such capacity under the
        Servicing Agreement, and its successors and assigns.

       

      “Servicing
        Agreement”
means
        the Medical Claims Servicing Agreement dated of even date herewith, by and
        between the Provider and the Servicer and approved by PHCC, substantially
        in the
        form of Exhibit F of this Agreement, as amended and restated by the parties
        from
        time to time.

       

      “Social
        Security Act”
means
        the federal Social Security Act of 1935, as amended, as set forth in Title
        42,
        U.S.C.A.

       

      “State”
means
        any state of the United States of America, the District of Columbia and the
        Commonwealth of Puerto Rico.

       

      “Termination
        Fee”
means
        the fee set forth in Section 2(d) of this Agreement.

       

      “UCC”
has
        the
        meaning set forth in Section 5(a) of this Agreement.

       

      “Unused
        Line Fee”
        had the
        meaning set forth in Section 2(d) of this Agreement.

       

      “United
        States”
means
        the United States of America, its territories and possessions.

       

       -51-

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