NETWORK 1 SECURITY SOLUTIONS INC
EMPLOYMENT AGREEMENT DATED MARCH 4, 2002
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>3
<FILENAME>ex10-6_11118.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT DATED MARCH 4, 2002
<TEXT>

                                                                    EXHIBIT 10.6
                                                                    ------------


EMPLOYMENT AGREEMENT dated as of March 4, 2002, between NETWORK-1 SECURITY
SOLUTIONS, INC., a Delaware corporation with its principal office located at
1601 Trapelo Road, Reservoir Place, Waltham, MA 20451 (the "Company"), and
RICHARD KOSINSKI residing at 17 Somerset Drive, Andover, Massachusetts 01810
(the "Executive").

            The Company desires to enter into this Agreement in order to assure
itself of the service of Executive, and Executive desires to accept employment
with the Company, upon the terms and conditions hereinafter set forth.

            NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:

            SECTION 1. Employment. The Company hereby employs Executive, and
Executive hereby accepts employment by the Company, upon the terms and
conditions hereinafter set forth.

            SECTION 2. Term. The employment of Executive hereunder shall be for
a period commencing on March 11, 2002 (the "Commencement Date") and ending on
the second anniversary of the Commencement Date (the "Term") or such earlier
date upon which the employment of the Executive shall terminate in accordance
with the provisions hereof. In the event that neither the Company nor Executive
provide written notice to the other of non-renewal of this Agreement within
ninety (90) days of the end of the Term, this Agreement shall automatically be
extended for an additional one (1) year period from the end of the Term. The
period commencing on the Commencement Date and ending on the date of termination
of the Executive's employment hereunder shall be called the "Term of Employment"
for Executive, and the date on which the Executive's employment hereunder shall
terminate shall be called the "Termination Date."

            SECTION 3. Duties. During the Term of Employment, Executive shall be
employed as Chief Executive Officer and President of the Company and will act in
accordance with, and be subject to the policies and procedures as may be duly
adopted by the Board of Directors (the "Board") from time to time. Executive
shall perform such duties as are consistent therewith as the Board shall
designate. Executive will be responsible for the management and operations of
all aspects of the Company's business, including technology development,
engineering, sales, marketing, and finance and administration. Executive will
also have direct and exclusive responsibility, subject to Board of Directors
policies and resolutions as noted above, for all current and future budget and
staff, and profit and loss accountability for the Company in its entirety.
Executive shall use his best efforts to perform well and faithfully the
foregoing duties and responsibilities. In addition, effective upon the
Commencement Date, Executive shall serve as a member of the Board and shall be
nominated during the Term of Employment on an annual basis as a director
(subject to election by the stockholders of the Company). On the Termination
Date, if Executive serves on the Board at such time, he agrees to submit his
resignation as a Board member. For purposes of this Agreement, so long as
Executive shall serve as a member of the Board, any references herein to
decisions or determinations to be made by the Board with respect to Executive
(including, without limitation, matters relating to compensation and
termination) shall be made by a

<PAGE>

majority of the then members of the Board excluding Executive, who shall recuse
himself and abstain from voting with respect to any such matters.

            SECTION 4. Time to be Devoted to Employment. During the Term of
Employment, Executive shall devote all of his business time, attention and
energies to the business of the Company (except for (i) advisory services
rendered to Algomagic Technologies, Inc. which shall be no more than 3 hours per
quarter and such services shall be provided during evening hours and not
interfere with the performance of Executive's duty under this Agreement and (ii)
vacations to which he is entitled pursuant to Section 7(b) and periods of
illness or incapacity). During the Term of Employment, Executive shall not
engage in any business activity which, in the reasonable judgment of the Board,
conflicts with the duties of Executive hereunder, whether or not such activity
is pursued for gain, profit or other pecuniary advantage.

            SECTION 5. Compensation.

                    (a) The Company shall pay to Executive an annual base salary
(the "Base Salary") during the Term of Employment of $200,000 per annum, payable
in such installments (but not less often than monthly) as is generally the
policy of the Company with respect to its executive officers.

                    (b) In addition, to the Base Salary set forth in paragraph
5(a) above, during the Term of Employment, Executive shall be eligible to
receive incentive compensation ("Bonus Compensation") of up to $150,000 per
annum based upon the Company's attainment of certain goals as set forth on
Exhibit A hereto.

            SECTION 6. Equity.

                    (a) The Company recognizes that equity participation in the
Company through the grant of options is essential to induce Executive to agree
to provide the services pursuant to this Agreement. Accordingly, on the
Commencement Date the Company shall grant to Executive stock options (the
"Options") for the purchase of an aggregate of 1,200,000 shares of the Company's
Common Stock (the "Shares") at an exercise price equal to the closing price of
the Company's Common Stock on the Commencement Date. The Options shall include
incentive stock options to the fullest extent permitted under applicable IRS
regulations. The shares represent 5% of the Company's outstanding Common Stock
on a fully diluted basis (assuming the conversion of all outstanding Preferred
Stock and the exercise of all outstanding warrants and options having an
exercise price not greater than $5.00 per share). The Options shall vest as
follows: (i) 25% of the shares (300,000 shares) upon the one year anniversary
from the Commencement Date and (ii) the balance of 75% of the Shares in equal
amounts of 6.25% (75,000 shares) at the end of each three (3) month period for
the three (3) year period beginning one year from the Commencement Date;
conditioned only on Executive's continued employment by the Company. The form of
Options are attached as Exhibit B hereto. The Company agrees to file a
Registration Statement on Form S-8 within ninety (90) days of the Commencement
Date to register the Shares.

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<PAGE>

            SECTION 7. Business Expenses; Benefits.

                    (a) The Company shall reimburse Executive, in accordance
with the practice from time to time for executive officers of the Company, for
all reasonable and necessary expenses and other disbursements incurred by
Executive for or on behalf of the Company in the performance of Executive's
duties hereunder. Executive shall provide such appropriate documentation of
expenses and disbursements as may from time to time be required by the Company.

                    (b) During the Term of Employment, Executive shall be
entitled to four (4) weeks vacation per year.

                    (c) During the Term of Employment, Executive shall be
entitled to participate in the group health, life, dental and disability
insurance benefits, and retirement plan benefits made available from time to
time for its executive officers and other employees.

            SECTION 8. Involuntary Termination.

                    (a) If Executive is incapacitated or disabled (such
condition being hereinafter referred to as a "Disability") in a manner that
qualifies Executive for benefits under the disability policy of the Company for
employees generally (the "Disability Policy"), the Term of Employment and
employment of the Executive under this Agreement shall cease (such termination,
as well as a termination under Section 8(b), being hereinafter referred to as an
"Involuntary Termination") and Executive shall be entitled to receive the
benefits payable under the Disability Policy and in accordance with Section
11(b) hereof.

                    (b) If Executive dies during the Term of Employment, the
Term of Employment and Executive's employment hereunder shall cease as of the
date of the Executive's death and Executive shall be entitled to receive the
benefits payable in accordance with Section 11 (b) hereof.

            SECTION 9. Termination by the Company.

                    (a) Termination For Cause. The Company may terminate the
Term of Employment and the employment of the Executive hereunder at any time for
Cause (as hereinafter defined) (such termination being referred to herein as a
"Termination For Cause") by giving Executive written notice of such termination,
effective immediately upon the giving of such notice to Executive. As used in
this Agreement, "Cause" means the Executive's (a) commission of an act (i)
constituting a felony or (ii) involving fraud, moral turpitude, theft or
dishonesty which is not a felony and which materially adversely affects the
Company or could reasonably be expected to materially adversely affect the
Company, (b) repeated failure to be reasonably available to perform his duties
(other than as a result of illness or incapacity), which, if curable, shall not
have been cured within 30 days of written notice thereof from the Company, (c)
repeated failure to follow the lawful directions of the Board, which, if
curable, shall not have been cured within 30 days of

                                        3
<PAGE>

written notice thereof from the Company, or (d) material breach of the terms and
provisions of this Agreement or any agreement with the Company which, if
curable, shall not have been cured within 30 days of written notice thereof from
the Company.

                    (b) Termination Other Than for Cause. The Company may
terminate the Term of Employment and the employment of Executive hereunder at
any time other than for cause as defined in Section 9(a) above (such termination
shall be defined as a "Termination Other Than for Cause") by giving Executive
written notice of such termination, which notice shall be effective thirty (30)
days after the giving of such notice or such later date set forth therein.

            SECTION 10. Termination by Executive. If at any time during the Term
of Employment, Executive elects to terminate Executive's employment with the
Company (other than for "Good Reason", as defined below), then the Company's
obligations to Executive under this Agreement shall be as set forth in Section
11(e) hereof and such termination by Executive shall constitute a breach of this
Agreement. If Executive elects to terminate Executive's employment with the
Company for Good Reason, then the Company shall pay Executive the amounts set
forth in Section 11(d) hereof. For the purpose of this Section, "Good Reason"
means (i) any material diminution of duties inconsistent with Executive's title,
authority, duties and responsibilities as Chief Executive Officer and President;
(ii) any reduction of or failure to pay Executive compensation provided for
herein, except to the extent Executive consents in writing to any reduction,
deferral or waiver of compensation, which non-payment continues for a period of
thirty (30) days following written notice to the Company by Executive of such
non-payment; (iii) any relocation of the principal location of Executive's
employment more than 75 miles from the Corporation's current headquarters in
Waltham, Massachusetts without Executive's prior written consent; or (iv) any
material violation by the Company of its obligations under this Agreement that
is not cured (if curable) within thirty (30) days after receipt of notice
thereof.

            SECTION 11. Effect of Termination.

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

                    (b) Upon the termination of Executive's employment hereunder
due to an Involuntary Termination, neither Executive nor his beneficiary or
estate shall have any further rights or claims against the Company under this
Agreement except the right to receive (i) the amounts set forth in Section
11(a), and (ii)the vesting of all of the Options that would have vested twelve
(12) months from the date of Involuntary Termination.

                                        4
<PAGE>

                    (c) Upon the termination of Executive's employment upon a
Termination Other Than for Cause (as defined in Section 9(b) above), neither
Executive nor his beneficiary nor his estate shall have any rights or claims
against the Company except to receive (i) the amounts set forth in 11(b), and
(ii) nine (9) months Base Salary as in effect at the time of the Termination
Other Than for Cause, such sum to be paid in a lump sum payment upon
termination.

                    (d) Upon the termination of Executive's employment by
Executive for Good Reason (as defined in Section 10 above), neither Executive
nor his beneficiary or estate shall have any further rights or claims against
the Company under this Agreement, except the right to receive the amounts set
forth in Section 11(c).

                    (e) Upon the termination of Executive's employment by
Executive (other than for Good Reason), neither Executive nor his beneficiary or
estate shall have any further rights or claims against the Company under this
Agreement, except the right to receive the amounts set forth in Section 11(a).

            SECTION 12. Insurance. The Company may, for its own benefit, in its
sole discretion, maintain "key-man" life and disability insurance policies
covering Executive. Executive will cooperate with the Company and provide such
information or other assistance as the Company may reasonably request in
connection with the Company's obtaining and maintaining such policies.

            SECTION 13. Disclosure of Information. Executive will not, either
during the Term of Employment or at any time thereafter, divulge, publish,
communicate, furnish or make accessible to anyone (other than in furtherance of
the purposes of the Company) any knowledge or information with respect to the
Company's confidential, secret or proprietary products, technology, methods,
plans, materials and processes, or with respect to any other confidential,
secret or proprietary aspects of the business, activities or products of the
Company including, without limitation, (a) software programs, source code,
object code, product development information, research and development projects
or other technical data pertaining to the Company's products (whether or not
subject to patent, trademark or copyright protection) or (b) any customer or
client lists, telephone leads, prospects lists, sales figures and forecasts,
purchase costs, financial projections, advertising and marketing plans and
business strategies and plans; except as such items set forth in clauses (a) and
(b) above may already be in the public domain through no fault of Employee (all
of the foregoing items set forth in clauses (a) and (b) being referred to herein
collectively as "Confidential Property") or except as otherwise required by law.
In the event that Executive becomes legally compelled to disclose any
Confidential Property, Executive shall advise the Company as soon as practicable
so that the Company may seek a protective order or other appropriate remedy. In
addition, Executive agrees to cooperate in the Company's effort, at the
Company's expense, to obtain a protective order or other appropriate remedy.
Upon the termination of the Term of Employment, Executive shall return to the
Company all property (including Confidential Property) of the Company (or any
subsidiary or affiliate thereof) then in the possession of Executive and all
books, records, computer tapes or discs and all other material containing
non-public information concerning the business, clients or affairs of the
Company or any subsidiary or affiliate thereof.

                                        5
<PAGE>

            SECTION 14. Right to Inventions. (a) Executive shall promptly
disclose, grant and assign to the Company for its sole use and benefit any and
all marks, designs, logos, inventions, improvements, technical information and
suggestions relating in any way to the business conducted by the Company, which
he may develop or which may be acquired by Executive during the Term of
Employment (whether or not during usual working hours), together with all
trademarks, patent applications, letters, patent, copyrights and reissues
thereof that may at any time be granted for or upon any such mark, design, logo,
invention, improvement or technical information (collectively, "Inventions"). In
connection therewith, Executive shall (at the Company's sole cost and expense)
take all actions reasonably necessary or desirable to assign and/or confirm the
assignment of any Invention to the Company.

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

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

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

                    (a) Executive agrees to perform, during and after his
employment, all acts deemed necessary or desirable by the Company to permit and
assist the Company (during any period after Executive's termination of
employment with the Company, subject to Executive's obligations to his then
employer, if any), at the Company's expense, in obtaining and enforcing the full
benefits, enjoyment, rights and title throughout the world in the Inventions or
Confidential

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<PAGE>

Property assigned or licensed to, or whose rights are irrevocably waived and
shall not be asserted against, the Company under this Agreement. Such acts may
include, but are not limited to, execution of documents and assistance or
cooperation (i) in the filing, prosecution, registration, and memorialization of
assignment of any applicable patents, copyrights, mask work, or other
applications, (ii) in the enforcement of any applicable patents, copyrights,
mask work, moral rights, trade secrets, or other proprietary rights, and (iii)
in other legal proceedings related to the Inventions or Confidential Property.

                    (b) In the event that the Company is unable (after
reasonable efforts) to secure Executive's signature to any document required to
file, prosecute, register, or memorialize the assignment of any patent,
copyright, mask work or other applications or to enforce any patent, copyright,
mask work, moral right, trade secret or other proprietary right under any
Inventions (including derivative works, improvements, renewals, extensions,
continuations, divisionals, continuations in part, continuing patent
applications, reissues, and reexaminations thereof), Executive hereby
irrevocably designates and appoints the Company and the Company's duly
authorized officers and agents as his agents and attorneys-in-fact to act for
and on his behalf and instead of him, (i) to execute, file, prosecute, register
and memorialize the assignment of any such application, (ii) to execute and file
any documentation required for such enforcement, and (iii) to do all other
lawfully permitted acts to further the filing, prosecution, registration,
memorialization of assignment, issuance, and enforcement of patents, copyrights,
mask works, moral rights, trade secrets or other rights under Inventions, all
with the same legal force and effect as if executed by Executive.

            SECTION 17. Restrictive Covenant.

                    (a) The Company is in the business of developing, marketing,
licensing and supporting host based security products including firewalls,
intrusion detection technology (including intrusion prevention technology) and
application control, application integrity and access control technology (the
"Business"). Executive acknowledges and recognizes that the Business has been
conducted, and sales of its products have been made, throughout the world, and
Executive further acknowledges and recognizes the highly competitive nature of
the industry in which the Business is involved. Accordingly, in consideration of
the premises contained herein, the consideration to be received hereunder and
the Options granted Executive hereunder, Executive shall not, during the
Non-Competition Period (as defined below): (i) directly or indirectly engage,
whether or not such engagement shall be as a partner, stockholder (except with
respect to Executive's current investment in Entercept Inc.), officer, director,
affiliate or other participant, in any Competitive Business (as defined below),
or represent in any way any Competitive Business, whether or not such engagement
or representation shall be for profit, (ii) interfere with, disrupt or attempt
to disrupt the relationship, contractual or otherwise, between the Company and
any other person or entity, including, without limitation, any customer,
supplier, employee or consultant of the Company, (iii) induce any employee of
the Company to terminate his employment with the Company or to engage in any
Competitive Business in any manner described in the foregoing clause (i), or
(iv) affirmatively assist or induce any other person or entity to engage in any
Competitive Business in any manner described in the foregoing clause (i).
Anything contained in this Section 17 to the contrary notwithstanding, an
investment by Executive in any publicly traded company in

                                        7
<PAGE>

which Executive and his affiliates exercise no operational or strategic control
and which constitutes less than 5% of the capital of such entity shall not
constitute a breach of this Section 17.

                    (b) As used herein, "Non-Competition Period" shall mean the
period commencing on the date hereof and terminating on the Termination Date;
provided, however, that (i) if the Term of Employment shall have been Terminated
Other Than For Cause pursuant to Section 9(b) hereof, then the "Non-Competition
Period" shall mean the period commencing on the date hereof and ending nine (9)
months thereafter; provided Executive is paid the nine (9) months Base Salary as
provided in Section 11(c) hereof and (ii) if the Term of Employment shall have
been terminated for Cause by the Company pursuant to Section 9(a) hereof or
without Good Reason pursuant to Section 10 hereof, then the "Non-Competition
Period" shall mean the period commencing on the date hereof and ending on the
second anniversary of the Termination Date. "Competitive Business" shall mean
any business throughout the world engaged in the development, marketing and
licensing of host based security products including firewalls, intrusion
detection technology (including intrusion prevention technology) and application
control, application integrity and access control technology, or in any other
line of business in which the Company was engaged or had a formal plan to enter
as of the Termination Date.

                    (c) Executive understands that the foregoing restrictions
may limit his ability to earn a livelihood in a business similar to the business
of the Company, but he nevertheless believes that he has received and will
receive sufficient consideration and other benefits as an employee of the
Company and as otherwise provided hereunder and pursuant to other agreements
between the Company and Executive to justify clearly such restrictions which, in
any event (given his education, skills and ability), Executive does not believe
would prevent him from earning a living.

            SECTION 18. Enforcement; Severability; Etc. It is the desire and
intent of the parties that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to (a) delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made or (b) otherwise to render it enforceable in
such jurisdiction.

            SECTION 19. Remedies. Executive acknowledges and understands that
the provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
that the breach or threatened breach of the provisions of this Agreement would
cause the Company irreparable harm. In the event of a breach or threatened
breach by Executive of the provisions of this Agreement, the Company shall be
entitled to an injunction restraining him from such breach. Nothing contained in
this Agreement shall be construed as prohibiting the Company from or limiting
the Company in pursuing any other remedies available for any breach or
threatened breach of this Agreement.

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<PAGE>

            SECTION 20. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given and delivered if personally delivered or if sent
by a nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:

if to the Company, to:        Network-1 Security Solutions, Inc.
                              1601 Trapelo Road
                              Waltham, Massachusetts 02451
                              Telecopier: (781) 466-6309
                              Telephone: (781) 522-3400

with copies to:               Olshan Grundman Frome Rosenzweig & Wolosky LLP
                              505 Park Avenue, 16th Floor
                              New York, New York 10022
                              Telecopier: (212) 980-7177
                              Telephone: (212) 451-2306
                              Attention: Sam Schwartz, Esq.

if to Executive, to:          Richard Kosinski
                              17 Somerset Drive
                              Andover, MA 01810
                              Telephone: (978) 204-5300
                              Telecopier: (978) 685-4111

with copies to:               Bingham Dana LLP
                              150 Federal Street
                              Boston, Massachusetts 02110
                              Telephone: (617) 951-8000
                              Telecopier: (617) 951-8736
                              Attention: Russell E. Isaia, Esq.

or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day following that on which the piece
of mail containing such communication is posted.

            SECTION 21. Binding Agreement; Benefit. The provisions of this
Agreement will be binding upon, and will inure to the benefit of, the respective
heirs, legal representatives, successors and assigns of the parties.

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<PAGE>

            SECTION 22. Governing Law. This Agreement will be governed by,
construed and enforced in accordance with, the laws of the Commonwealth of
Massachusetts without giving effect to principles of conflicts of laws.

            SECTION 23. Waiver of Breach. The waiver by either party of a breach
of any provision of this Agreement must be in writing and shall not operate or
be construed as a waiver of any other breach.

            SECTION 24. Entire Agreement; Amendments. This Agreement contains
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings, whether written or
oral, between the parties with respect thereto. This Agreement may be amended
only by an agreement in writing signed by the parties.

            SECTION 25. Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

            SECTION 26. Assignment. This Agreement is personal in its nature and
the parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder.

            SECTION 27. Gender. Any reference to the masculine gender shall be
deemed to include the feminine and neuter genders unless the context otherwise
requires.

            SECTION 28. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.

            IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Employment Agreement as of the date first written above.

                                   NETWORK-1 SECURITY SOLUTIONS, INC.


                                   By:
                                       ---------------------------------------
                                       Murray P. Fish, Chief Financial Officer


                                       ---------------------------------------
                                       Richard Kosinski

                                       10
<PAGE>


                                    EXHIBIT A
                                    ---------



Cash Bonus Measurements (up to $150,000 per annum):

    1.         Performance under Board approved 2002 Budget (conservative case,
               with revenue assumptions no less than $3 million). 45%
    2.         Product Roadmap in Place with acceptable development schedule by
               May Board Meeting. 10%
    3.         Three new Alliance partners other than those in progress as of
               March 11, 2002. 10%
    4.         Successful launch (commencement of shipping) of FalconStor OEM
               offering. 15%
    5.         $2.5 million of new financing either from exercise of outstanding
               warrants or otherwise. 20%







<PAGE>

                                    EXHIBIT B
                                    ---------

                       NETWORK-1 SECURITY SOLUTIONS, INC.

                             INCENTIVE STOCK OPTION





                          Date of Grant: March 11, 2002



To:        Richard Kosinski
           17 Somerset Drive
           Andover, MA  01810


           You are hereby granted an option (the "Option"), effective as of the
date hereof, to purchase [ ] shares of Common Stock, par value $.01 per share
("Common Stock"), of Network-1 Security Solutions, Inc. (the "Company") at a
price of $[ ] per share pursuant to the Company's Stock Option Plan (the
"Plan"), as amended. Your option price is intended to equal at least the fair
market value of the Company's Common Stock as of the date hereof; provided,
however, that if, at the time this option is granted, you own stock possessing
more than 10% of the total combined voting power of all shares of stock of the
Company or any parent or subsidiary (an "Affiliate") of the Company (a "10%
Shareholder"), your option price is intended to be at least 110% of the fair
market value of the Company's Common Stock as of the date hereof.

           This Option shall vest as follows:

             1.   25% of the shares underlying the Option on March 11, 2003,
                  provided the Optionee is then an employee of the Company;

             2.   6.25% of such shares on the last day of each of the next
                  twelve (12) three (3) month periods, provided the Optionee is
                  then an employee of the Company;

             3.   as to 25% of the shares underlying the Option if a Change in
                  Control (as hereinafter defined) occurs within one year of the
                  date of this Option, provided the Optionee is then an employee
                  of the Company;

             4.   as to all of the unvested portion of this Option if a Change
                  of Control (as hereinafter defined) occurs more than one year
                  after the date of this Option, provided the Optionee is then
                  an employee of the Company.

<PAGE>

           In the event your employment, pursuant to your Employment Agreement,
dated March 4, 2002, with the Company, is terminated due to (i) an Involuntary
Termination (as defined in Section 8 of your Employment Agreement) as provided
in Section 11(b) of your Employment Agreement, (ii) a Termination Other Than For
Cause (as defined in Section 9(b) of your Employment Agreement) as provided in
Section 11(c) of your Employment Agreement or (iii) Good Reason (as defined in
Section 10 of your Employment Agreement), as provided in Section 11(d) of your
Employment Agreement, all of the shares underlying this Option that would have
vested twelve (12) months from the date of such Termination shall vest
immediately upon termination.

           The shares subject to this Option shall be adjusted for any change in
the outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar circumstances.
No fractional shares shall be issued or delivered.

           This Option shall terminate and is not exercisable after the
expiration of ten years from the date of its grant (five years from the date of
grant if, at the time of the grant, you are a 10% Shareholder) (the "Scheduled
Termination Date"), except if terminated earlier as hereinafter provided (the
"Termination Date").

           A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:

                     (i) the acquisition by any person, entity or "group",
           within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
           Exchange Act of 1934, as amended(the "Exchange Act"), of beneficial
           ownership (within the meaning of Rule 13d-3 promulgated under the
           Exchange Act) of forty (40%) percent or more of the combined voting
           power of the then outstanding securities entitled to vote generally
           in the election of directors where such person, entity or group owned
           less than 5% of such voting power on the date of this Option
           (including, however, FalconStor Software, Inc. which owns more than
           5% of such voting power on the date of this Option or any group
           including FalconStor Software, Inc.); or

                     (ii) The shareholders of the Company approve a merger or
           consolidation of the Company with any other corporation, other than a
           merger or consolidation which would result in the voting securities
           of the Company outstanding immediately prior thereto continuing to
           represent (either by remaining outstanding or by being converted into
           voting securities of the surviving entity) more than fifty percent
           (50%) of the total voting power represented by the voting securities
           of the Company or such surviving entity outstanding immediately after
           such merger or consolidation, or the shareholders of the Company
           approve a plan of complete liquidation of the Company or an agreement
           for the sale or disposition by the Company of all or substantially
           all of the Company's assets (other than to a subsidiary or
           subsidiaries).

                                        2
<PAGE>

                     (iii) Any other event deemed to constitute a "change in
           control" by the Compensation Committee.

           You may exercise your option as set forth in Section 7 of the Plan.

           If the Company's Common Stock has not been registered under Section
12 of the Securities Exchange Act of 1934, the exercise of your option will not
be effective unless and until you execute and deliver to the Company a Stock
Restriction Agreement, in the form on file in the office of the Secretary of the
Company.

           Your Option will, to the extent not previously exercised by you,
terminate one (1) year after the date on which your employment by the Company or
Affiliate of the Company is terminated (other than as a result of a Termination
For Cause as provided below), whether such termination is voluntary or not,
whether by reason of disability as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder,
or death; provided, that, in the event your employment with the Company is
Terminated For Cause (as such term is defined in Section 9(a) of your Employment
Agreement) your Option will terminate thirty (30) days from the date of
termination of your employment. After the date your employment is terminated, as
aforesaid, you may exercise this Option only for the number of shares which you
had a right to purchase and did not purchase on the date your employment
terminated. If you are employed by an Affiliate of the Company, your employment
shall be deemed to have terminated on the date your employer ceases to be an
Affiliate of the Company, unless you are on that date transferred to the Company
or another Affiliate of the Company. Your employment shall not be deemed to have
terminated if you are transferred from the Company to an Affiliate, or vice
versa, or from one Affiliate to another Affiliate.

           If you die while employed by the Company or an Affiliate of the
Company, your legatee(s), distributee(s), executor(s) or administrator(s), as
the case may be, may, at any time within one (1) year after the date of your
death, exercise the Option as to any shares which you had a right to purchase
and did not purchase during your lifetime. If your employment with the Company,
or an Affiliate is terminated by reason of your becoming disabled (within the
meaning of Section 22(e)(3) of the Code and the regulations thereunder), you or
your legal guardian or custodian may at any time within one (1) year after the
date of such termination, exercise the Option as to any shares which you had a
right to purchase and did not purchase prior to such termination. Your legatee,
distributee, executor, administrator, guardian or custodian must present proof
of his authority satisfactory to the Company prior to being allowed to exercise
this Option.

           This Option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the Option price has been paid in full pursuant to due
exercise of this Option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of

                                        3
<PAGE>

the exercise of this Option during any period of time in which the Company
deems, in its sole discretion, that such delivery would violate a federal,
state, local or securities exchange rule, regulation or law.

           The following two paragraphs shall be applicable if, on the date of
exercise of this Option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:

           (a) The Optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The Optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The Optionee shall
execute such instruments, representations, acknowledgements and agreements as
the Company may, in its sole discretion, deem advisable to avoid any violation
of federal, state, local or securities exchange rule, regulation or law; (b) The
certificates for Common Stock to be issued to the Optionee hereunder shall bear
the following legend:

                     "The shares represented by this certificate have not been
           registered under the Securities Act of 1933, as amended, or under
           applicable state securities laws. The shares have been acquired for
           investment and may not be offered, sold, transferred, pledged or
           otherwise disposed of without an effective registration statement
           under the Securities Act of 1933, as amended, and under any
           applicable state securities laws or an opinion of counsel acceptable
           to the Company that the proposed transaction will be exempt from such
           registration."

           The foregoing legend shall be removed upon registration of the
legended shares under the Securities Act of 1933, as amended, and under any
applicable state laws or upon receipt of any opinion of counsel acceptable to
the Company that said registration is no longer required.

           The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.

           It is the intention of the Company and you that this option shall, if
possible, be an "Incentive Stock Option" as that term is used in Section 422 of
the Code and the regulations thereunder. In the event this Option is in any way
inconsistent with the legal requirements of the Code or the regulations
thereunder for an "Incentive Stock Option"

                                        4
<PAGE>

this Option shall be deemed automatically amended as of the date hereof to
conform to such legal requirements, if such conformity may be achieved by
amendment.

           This Option shall be subject to the terms of the Plan in effect on
the date this Option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this Option and the terms of the Plan in effect on the date of this Option,
the terms of the Plan shall govern. This Option constitutes the entire
understanding between the Company and you with respect to the subject matter
hereof and no amendment, modification or waiver of this Option, in whole or in
part, shall be binding upon the Company unless in writing and signed by an
appropriate officer of the Company. This Option and the performances of the
parties hereunder shall be construed in accordance with and governed by the laws
of the Commonwealth of Massachusetts without regard to principles of conflict of
law.

           Please sign the copy of this Option and return it to the Company,
thereby indicating your understanding of and agreement with its terms and
conditions.

                                          NETWORK-1 SECURITY SOLUTIONS, INC.



                                          By:
                                             ------------------------------
                                              Murray P. Fish
                                              Chief Financial Officer




           I hereby acknowledge receipt of a copy of the foregoing Stock Option
for [ ] shares at an Option Price of $[ ] per share and the Network-1 Security
Solutions, Inc. Stock Option Plan, and having read such documents, hereby
signify my understanding of, and my agreement with, their terms and conditions.



____________________________                     ______________________________
Richard Kosinski                                 (Date)


                                        5
<PAGE>



                                    EXHIBIT B
                                    ---------

                NEITHER THE OPTION REPRESENTED BY THIS AGREEMENT
                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 OPTION AGREEMENT


                  OPTION 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

                                Richard Kosinski

                              DATED: March 11, 2002

                     THIS IS TO CERTIFY that, for value received, Richard
Kosinski (the "Optionholder"), is hereby granted an
option (the "Option") at any time commencing on the date hereof (the
"Commencement Date") and ending on the tenth anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated, to purchase from
Network-1 Security Solutions, Inc., a Delaware corporation (the "Company"), [ ]
shares of common stock, par value $0.01 per share (the "Common Stock"), of the
Company upon surrender hereof, with the exercise form included herein (the
"Election to Exercise") 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 and/or check
payable to the order of the Company or by "cashless exercise" (as set forth in
Section 6). The number of shares of Common Stock issuable upon exercise of the
Option (individually, a "Share" and collectively, the "Shares") and the Purchase
Price therefor are subject to adjustment as provided herein.

            1. Purchase Price
               --------------

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

                                        2
<PAGE>

            2. Vesting Schedule
               ----------------

            The Shares underlying the Option shall vest as follows: 25% of the
Shares on March 11, 2003, and the balance of 75% of the Shares in equal amounts
of 6.25% of the Shares at the end of each quarter for the three year period
commencing on March 11, 2003.

            In the event Optionholder's employment, pursuant to his Employment
Agreement, dated March 4, 2002, with the Company (the "Employment Agreement"),
is terminated due to (i) an Involuntary Termination (as defined in Section 8 of
the Employment Agreement) as provided in Section 11(b) of the Employment
Agreement, (ii) upon a Termination Other Than For Cause (as defined in Section
9(b) of the Employment Agreement) as provided in Section 11(c) of the Employment
Agreement or (iii) Good Reason (as defined in Section 10 of the Employment
Agreement) as provided in Section 11(d) of the Employment Agreement, all of the
Shares that would have vested twelve (12) months from the date of such
Termination shall vest immediately upon termination.

            3. Change of Control
               -----------------

            In the event of a Change of Control (as defined below) the vesting
schedule for the Shares as provided Section 2 above shall accelerate as follows:
(i) as to 25% of the Shares if a Change in Control (as hereinafter defined)
occurs within one year of the date of this Option and (ii) as to all of the
Shares if a Change of Control (as herewith defined) occurs after March 11, 2003.
A "Change of Control" shall be deemed to have occurred upon the happening of any
of the following events: (i) the acquisition by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended(the "Exchange Act"), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of forty (40%) percent
or more of the combined voting power of the then outstanding securities entitled
to vote generally in the election of directors where such person, entity or
group owned less than 5% of such voting power on the date of this Option
(including, however, FalconStor Software, Inc. which owns more than 5% of such
voting power on the date of this Option or any group including FalconStor
Software, Inc.); or (ii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent more than fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation, or the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets (other than to a
subsidiary or subsidiaries) or (iii) any other event deemed to constitute a
"Change of Control" by the Board of Directors of the Company.

                                        2
<PAGE>

            4. 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; (iii) if the Common Stock is not listed or admitted for trading on
any national securities exchange or the Nasdaq Stock Market, 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 quoted on the Nasdaq Stock Market 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.

            5. Transfer
               --------

            The Option may not be transferred, sold or assigned except to, in
whole or in part, (i) any entity controlled by, or under common control with,
the Optionholder, (ii) the spouse, lineal descendants, estate or a trust for the
benefit of any of the foregoing, or (iii) by operation of law. Upon any such
transfer, the Company agrees to accept and cancel the Option originally issued
and issue a new option (otherwise on identical terms to this Option) in
substitution thereof to any of the transferees set forth above.

            6. Issuance of Shares; Cashless Exercise
               -------------------------------------

            Subject to the restrictions set forth in Section 6 below, upon
surrender of the Option and payment of the Purchase Price, the Company shall
issue and deliver with all reasonable dispatch the certificate(s) for the Shares
to or upon the written order of the Optionholder and in such name or names as
the Optionholder may designate, together with a cash amount in respect of any
fraction of a Share otherwise issuable upon such exercise (as set forth in
Section 12 below). Such certificate(s) shall represent the number of Shares
issuable upon the exercise of the Option, rounded down to the nearest whole
number.

            In lieu of paying the Purchase Price in cash and/or check upon
exercise of this Option, the Optionholder may elect a "cashless exercise" in
which event the Optionholder will receive upon exercise of this Option a reduced
number of Shares equal to (i) the number of Shares that would be issuable
pursuant to this Option upon payment of the Purchase Price minus (ii) the number
of Shares that have an aggregate Market Price equal to the Purchase Price.

                                        3
<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
Option 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 Option shall then be closed or the certificate(s) for the Shares
in respect of which the Option is then exercised shall not then have been
actually delivered to the Optionholder. As soon as practicable after each such
exercise of the Option, the Company shall issue and deliver the certificate(s)
for the Shares issuable upon such exercise, registered as requested. The Option
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 Option. In the event that only a portion of the Option is
exercised at any time prior to the close of business on the Expiration Date, a
new option (otherwise on identical terms to this Option) shall be issued to the
Optionholder for the remaining number of Shares purchasable pursuant hereto. The
Company shall cancel the Option when it is surrendered upon exercise.

            Prior to due presentment for registration of transfer of the Option,
the Company shall deem and treat the Optionholder as the absolute owner of the
Option for the purpose of any exercise hereof or any distribution to the
Optionholder and for all other purposes, and the Company shall not be affected
by any notice to the contrary.

            7. Termination of Employment.
               -------------------------

            The Option will, to the extent not previously exercised by
Optionholder, terminate one (1) year after the date on which his employment by
the Company is terminated (other than as a result of a Termination For Cause as
provided below), whether such termination is voluntary or not, by reason of
disability as defined in Section 22(e)(3) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations thereunder or death; provided,
that, in the event the employment of Optionholder by the Company is Terminated
For Cause (as such term is defined in Section 9(a) of the Employment Agreement,
dated March 4, 2002, between the Company and Optionholder) the Option will
terminate thirty (30) days from the date of such termination of Optionholder's
employment. After the date Optionholder's employment is terminated, as
aforesaid, Optionholder may exercise the Option only for the number of vested
shares which he had a right to purchase and did not purchase on the date his
employment was terminated.

            If Optionholder dies while employed by the Company, his legatee(s),
distributee(s), executor(s) or administrator(s), as the case may be, may, at any
time within one (1) year after the date of the death of Optionsholder, exercise
the Option as to any vested shares which he had a right to purchase and did not
purchase during Optionholder's lifetime. If Optionholder's employment with the
Company, is terminated by reason of his becoming disabled (within the meaning of
Section 22(e)(3) of the Code and the regulations thereunder), Optionholder's
legal guardian or custodian may at any time within one (1) year after the date
of such termination, exercise the Option as to any

                                        4
<PAGE>

vested shares, which he had a right to purchase and did not purchase prior to
such termination. Optionholder's legatee, distributee, executor, administrator,
guardian or custodian must present proof of his or her authority satisfactory to
the Company prior to being allowed to exercise the Option.

            8. 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 upon the exercise of the
Option; 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
Optionholder upon the exercise of the Option, 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.

            9. Lost, Stolen, or Mutilated Option Certificate
               ---------------------------------------------

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

            10. 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
Option.

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

            (c) For so long as the Option is outstanding, the Company shall
notify the Optionholder not less than 30 days prior to any cash dividend being
paid to the holders of Common Stock.

                                        5
<PAGE>

            11. Rights Upon Expiration
                ----------------------

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

            12. Adjustment for Certain Events
                -----------------------------

            (a) In case the Company shall at any time after the date the Option
is 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 Option on such date, shall be proportionately adjusted so
that the holder of any Option exercised after such time shall be entitled to
receive the aggregate number and kind of securities which, if such Option had
been exercised immediately prior to such date, such holder would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, reverse split or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.

            (b) 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
12(b) is not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 12 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 Option.

            (c) In the event that at any time, as a result of an adjustment made
pursuant to Section 10 hereof, the holder of any Option thereafter exercised
shall become entitled to receive any shares of capital stock or options or other
securities of the Company other than the Shares, thereafter the number of such
other shares of capital stock or options or other securities so receivable upon
exercise of this Option shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Shares contained in this Section 12, and the provisions of this
Option with respect to the Shares shall apply, to the extent applicable, on like
terms to any such other shares of capital stock or options or other securities.

                                        6
<PAGE>

            (d) Upon each adjustment of the Purchase Price as a result of
calculations made in this Section 12, the Option outstanding immediately prior
to the making of such adjustment shall 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 this Option 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.

            (e) 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, the Option shall, after such
reorganization, reclassification, consolidation, merger or sale, vest, 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 Option would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 12(e) with respect to the
rights and interests thereafter of the Optionholder shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to any shares
of Common Stock or other capital stock or options or other securities or
property thereafter deliverable on the exercise of the Option. The subdivision,
reverse split or combination of shares of Common Stock at any time outstanding
into a greater or lesser number of shares shall not be deemed to be a
reclassification of the Common Stock for the purposes of this Section 12(e).

            (f) In any case in which this Section 12 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 Optionholder, if such Optionholder exercised any Option
after such record date, shares of capital stock or options 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 options or other securities upon the occurrence of
the event requiring such adjustment.

            13. Fractional Shares
                -----------------

            Upon exercise of the Option, the Company shall not be required to
issue fractional shares of Common Stock or other capital stock. In lieu of such
fractional shares, the Optionholder shall receive an amount in cash equal to the
same fraction of the (i) current Market Price of one

                                        7
<PAGE>

whole Share if clause (i), (ii) or (iii) in the definition of Market Price in
Section 4 above is applicable 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 4 above is applicable. All calculations
under this Section 13 shall be made to the nearest cent.

            14. Securities Act Legend
                ---------------------

            The Optionholder 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 Option shall bear a legend reading substantially as follows:

                     "These securities have not been registered under the
                     Securities Act of 1933, as amended, or the securities laws
                     of any state and may not be sold or transferred in the
                     absence of such registration or any exemption therefrom
                     under such Act and laws, if applicable. 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."

            15. Notice of Adjustment
                --------------------

            (a) Upon any adjustment of the Purchase Price pursuant to Section 12
hereof, the Company, within 30 calendar days thereafter, shall have on file for
inspection by the Optionholder 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 upon exercise of an Option after
such adjustment in the Purchase Price, which certificate shall be conclusive
evidence of the correctness of the matters set forth therein.

            (b) In case:

                               (i) the Company shall authorize the issuance to
all 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 distribution
to all holders of Common Stock of evidences of its indebtedness or assets; or

                                        8
<PAGE>

                               (iii) of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the Company is
required, of the conveyance or transfer of the properties and assets of the
Company substantially as an entirety or of 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 12
hereof;

then, in each such case, the Company shall give to the Optionholder 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. 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 Optionholder 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.

            16. Notices
                -------

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

                                        9
<PAGE>

           If to the Company:

                     Network-1 Security Solutions, Inc.
                     1601 Trapelo Road, Reservoir Place
                     Waltham, Massachusetts 02451
                     Attention:  Murray Fish, Chief Financial Officer

           with copies to:

                     Olshan Grundman Frome Rosenzweig & Wolosky LLP
                     505 Park Avenue, 16th Floor
                     New York, NewYork 10022
                     Attention: Sam Schwartz, Esq.

           If to the Optionholder:

                     Richard Kosinski
                     17 Somerset Drive
                     Andover, Massachusetts 01810

           with copies to:

                     Bingham Dana LLP
                     150 Federal Street
                     Boston, Massachusetts 02110
                     Attention: Russell E. Isaia, Esq.

or to such other address or such other counsel as the Company or the
Optionholder may designate by written notice to the party.

            17. 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 Optionholder
hereof shall inure to the benefit of its successors or assigns.

            (b) This Option shall be deemed to be a contract made under the laws
of the Commonwealth of Massachusetts for all purposes and shall be construed in
accordance with the laws of such jurisdiction.

                                       10
<PAGE>

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

            IN WITNESS WHEREOF, an authorized officer of the Company has signed
and delivered to the Optionholder this Option as of the date first written
above.


                                      NETWORK-1 SECURITY SOLUTIONS, INC.


                                      By:
                                          ---------------------------------

                                           Name:
                                           Title:

                                       11
<PAGE>

                              ELECTION TO EXERCISE

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

To:        Network-1 Security Solutions, Inc.
           1601 Trapelo Road, Reservoir Place
           Waltham, MA 02451
           Attention:  Murray Fish, Chief Financial Officer

The undersigned hereby (1) irrevocably elects to exercise his or its rights to
purchase _____ shares of Common Stock covered by the within Option, (2) makes
payment in full of the Purchase Price by enclosure of a certified check or by a
cashless exercise, (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 Option, requests that a new option certificate for the balance of the
shares covered by the within Option be registered in the name of, and delivered
to:

Please print name and address:

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

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

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

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

Dated:  _____________________          RICHARD KOSINSKI

                                       By: __________________________
                                           Name:
                                           Title:

                                       12




</TEXT>
</DOCUMENT>
