Exhibit 10.1

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) is made and entered into as of
August 7, 2015 by Authentidate Holding Corp., a Delaware corporation (the
“Company”) and MKA 79, LLC (the “Secured Party”). This Agreement is being
executed and delivered by the Company and the Secured Party in connection with
the Company’s issuance to the Secured Party of that certain Senior Secured
Promissory Note, dated as of the date first set forth above (the “Secured
Note”). Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Secured Note.

W I T N E S S E T H:

WHEREAS, the Secured Party has purchased from the Company, and the Company
issued to the Secured Party, the Secured Note; and

WHEREAS, in order to induce the Secured Party to extend the loans evidenced by
the Secured Note, the Company has agreed to execute and deliver to the Secured
Party this Agreement and to grant the security interests described herein to
secure the prompt payment, performance and discharge in full of all of the
Company’s obligations under the Secured Note.

NOW, THEREFORE, in consideration of the foregoing, the covenants set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Secured Party and the Company hereby agree
as follows.

SECTION I

DEFINITIONS

Section 1.1. Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC.

(a) “Business Day” means any day except any Saturday, any Sunday, any day which
is a federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

(b) “Collateral” means the collateral in which the Secured Party are granted a
security interest by this Agreement and which consists of the following personal
property of the Company, whether presently owned or existing or hereafter
acquired or coming into existence, wherever situated, and all additions and
accessions thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without limitation, all
proceeds from the sale or transfer of the Collateral and of insurance covering
the same and of any tort claims in connection therewith: all assets of the
Company, including without limitation all of the Company’s rights, title and
interests in and to all of the following, whether now or hereafter existing or
acquired by the Company: (i) accounts; (ii) as-extracted collateral;
(iii) chattel paper; (iv) deposit accounts; (v) documents; (vi) equipment;
(vii) farm products; (viii) fixtures; (ix) general intangibles; (x) inventory;
(xi) instruments; (xii) investment property; (xiii) letter-of-credit rights;
(xiv) other goods; (xv) supporting obligations; (xvi) commercial tort claims;
and (xvii) all proceeds and products of all of the foregoing, including without
limitation whatever is received when any of the foregoing Collateral is sold,
exchanged, leased, licensed, collected or otherwise disposed of and includes all
distributions on account thereof, rights and claims

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

arising therefrom, except for any assets that are part of the “Collateral” as
defined under that certain Security Agreement dated as of May 29, 2015 among the
Company and the secured parties named therein. Notwithstanding the foregoing,
none of the following items will be included in the Collateral: (a) assets if
the granting of a security interest in such asset would (I) be prohibited by
applicable law (but proceeds and receivables thereof, the assignment of which is
expressly deemed effective under the UCC, shall not be deemed excluded from the
Collateral regardless of such prohibition), or (II) be prohibited by contract
(except to the extent such prohibition is overridden by UCC Section 9-408) (but
proceeds and receivables thereof shall not be deemed excluded from the
Collateral regardless of such prohibition); (b) any property and assets, the
pledge of which would require approval, license or authorization of any
governmental body, unless and until such consent, approval, license or
authorization shall have been obtained or waived provided that the Company has
used commercially reasonable efforts to obtain or waive such consent, approval,
license or authorization; (c) assets in circumstances where the Secured Party
reasonably determines that the cost, burden or consequences (including adverse
tax consequences) of obtaining or perfecting a security interest in such assets
is excessive in relation to the practical benefit afforded thereby; provided,
however, that to the extent permitted by applicable law, this Agreement shall
create a valid security interest in such asset and, to the extent permitted by
applicable law, this Agreement shall create a valid security interest in the
proceeds of such asset.

(c) “General Intangibles” means general intangibles (as that term is defined in
the UCC), and, in any event, includes payment intangibles, contract rights,
rights to payment, rights arising under common law, statutes, or regulations,
choses or things in action, goodwill (including the goodwill associated with any
Trademark), Patents, Trademarks, Copyrights, URLs and domain names, industrial
designs and other Intellectual Property or rights therein or applications
therefor, whether under license or otherwise, programs, programming materials,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, including Intellectual Property Licenses,
infringement claims, computer programs, information contained on computer disks
or tapes, software, literature, reports, catalogs, pension plan refunds, pension
plan refund claims, insurance premium rebates, tax refunds, and tax refund
claims, interests in a partnership or limited liability company which do not
constitute a security under Article 8 of the UCC, and any other personal
property of the Company, other than those assets which are excluded from the
definition of the term “General Intangibles” pursuant to the UCC.

(d) “Indebtedness” means (x) any liabilities for borrowed money or amounts
(other than trade accounts payable, accrued expenses or deferred revenue
incurred in the ordinary course of business), (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Company’s consolidated balance
sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments due under
leases required to be capitalized in accordance with GAAP; provided, further,
however, that in no event shall the term Indebtedness include the capital stock
surplus, retained earnings, minority interests in the common stock of
subsidiaries, operating lease obligations, reserves for deferred income taxes
and investment credits, other deferred credits or reserves.

(e) “Intellectual Property” means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, (ii) all letters patent of
the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of

 

2

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

the United States or any other country and all divisions, continuations and
continuations-in-part thereof, (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.

(f) “Liens” means any lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction, other than restrictions
imposed by securities laws.

(g) “Majority in Interest” shall mean the holders of fifty-one percent (51%) or
more of the then outstanding principal amount of all then outstanding Secured
Notes at the time of such determination.

(h) “Material Adverse Effect” means an event or occurrence that has a material
adverse effect on (i) the legality, validity or enforceability of the Note or
this Security Agreement; (ii) the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) the Company’s ability to perform in any
material respect on a timely basis its obligations under the Note or this
Security Agreement.

(i) “Obligations” means all of the liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several) due or to become due, or
that are now or may be hereafter contracted or acquired, or owing to, of the
Company to the Secured Party, including, without limitation, all obligations
under this Agreement and the Secured Note, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later increased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from any of the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time. Without limiting the
generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) principal of, and interest on the Secured Note and the loans
extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Company from time to time under or in
connection with this Agreement or the Secured Note; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Company.

(j) “Permitted Indebtedness” means (a) Indebtedness secured by Permitted Liens,
including without limitation Indebtedness incurred in connection with
arrangements contemplated by clause (h) of the definition of the term “Permitted
Liens”; (b) Indebtedness to trade creditors or for professional services
incurred in the ordinary course of business; (c) all capital lease obligations
and other obligations or liabilities created or arising under any conditional
sale or other title retention agreement with respect to property used or
acquired by the subject Person, even if the rights and remedies of the lessor,
seller or lender thereunder are limited to repossession of such property and the
present value of lease payments due under synthetic leases; (d) obligations of
such Person in respect of letters of credit or similar instruments issued or
accepted by banks and other financial institutions for the account of such

 

3

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

Person in the ordinary course of the business of such Person; (e) purchase money
financing and equipment financing facilities covering existing and
newly-acquired property, plant or equipment; (f) Indebtedness of any amount
outstanding immediately prior to the execution of this Agreement;
(g) Indebtedness incurred by the Company that is made expressly subordinate in
right of payment to the Indebtedness evidenced by the Secured Note, which
Indebtedness does not provide at any time for the payment, prepayment,
repayment, repurchase or defeasance, directly or indirectly, of any principal or
premium, if any, thereon until after the maturity date of the Secured Note;
(h) Indebtedness incurred by the Company that is unsecured; (i) a maximum of
$2,100,000 of additional senior secured debentures that the Company may
hereafter issue pursuant to the terms and conditions of that certain Securities
Purchase Agreement dated as of May 29, 2015 among the Company and the purchasers
executing such agreement; and (j) extensions, refinancings and renewals of any
items of Permitted Indebtedness described above (including the issuance of new
debt or convertible debt securities in exchange for the cancellation of existing
debt securities in an Alternative Transaction), provided that the principal
amount is not increased or, other than with respect to debt or convertible debt
securities issued by the Company in an Alternative Transaction, the terms
modified to impose more burdensome terms upon the Company or its Subsidiaries,
as the case may be. As used herein, an “Alternative Transaction” is a
transaction between the Company and the holder of any Prior Notes pursuant to
which such Prior Notes are surrendered and exchanged for other equity and/or
debt securities of the Company on such terms as may be agreed upon by the
Company. Permitted Indebtedness shall include, without limitation, (i) the
principal amount of such Indebtedness, (ii) unpaid accrued interest thereon, and
(iii) all other obligations of the Company arising out of the Permitted
Indebtedness now existing or hereafter arising, together with all costs of
collecting such obligations (including attorneys’ fees), including, without
limitation, all interest accruing after the commencement by or against the
Company of any bankruptcy, reorganization or similar proceeding.

(k) “Permitted Liens” means: (a) Liens for taxes not yet due or delinquent or
being contested in good faith and by appropriate proceedings, for which adequate
reserves have been established; (b) Liens in respect of property or assets
imposed by law which were incurred in the ordinary course of business, such as
carriers’, warehousemen’s, materialmen’s and mechanics’ Liens and other similar
Liens arising in the ordinary course of business which are not delinquent or
remain payable without penalty or which are being contested in good faith and by
appropriate proceedings; (c) Liens incurred or deposits made in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance and other types of social security, and other Liens to secure the
performance of tenders, statutory obligations, contract bids, government
contracts, performance and return of money bonds and other similar obligations,
incurred in the ordinary course of business, whether pursuant to statutory
requirements, common law or consensual arrangements; (d) Liens in favor of the
Secured Party; (e) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payments of customs duties in connection with the
importation of goods; (f) Liens which constitute rights of setoff of a customary
nature or banker’s liens, whether arising by law or by contract; (g) leases or
subleases and licenses or sublicenses granted in the ordinary course of
Company’s business; (h) Liens in the ordinary course of business (A) upon or in
any equipment acquired or held by the Company (or any of its Subsidiaries) to
secure the purchase price of such equipment or Indebtedness incurred solely for
the purpose of financing the acquisition or lease of such equipment, or
(B) existing on such equipment at the time of its acquisition, provided that the
Lien is confined solely to the property so acquired and improvements thereon,
and the proceeds of such equipment; (i) Liens in existence prior to the
execution of this Agreement; (j) Liens that are expressly subordinated to the
Liens granted pursuant to the Security Agreement; and (k) Liens incurred in
connection with the extension, renewal or refinancing of the Permitted
Indebtedness secured by Liens of the type described above, provided that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the Indebtedness
being extended, renewed or refinanced does not increase.

 

4

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

(l) “Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.

(m) “Prior Notes” means instruments evidencing Indebtedness issued by the
Company prior to the date of this Agreement, as such instruments may be amended
to date, and any deferrals, renewals or extensions thereof, and any notes or
other instruments or evidences of Indebtedness issued in respect of or in
exchange thereof.

(n) “Subsidiary” means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of capital stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers, general partners or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such
Person; (ii) such Person and one or more Subsidiaries of such Person; or
(iii) one or more Subsidiaries of such Person.

(o) “UCC” means the Uniform Commercial Code as the same is, from time to time,
in effect in the State of New York and or any other applicable law of any state
or states which has jurisdiction with respect to all, or any portion of, the
Collateral or this Agreement, from time to time.

SECTION II

COLLATERAL; OBLIGATION SECURED

Section 2.1. Grant and Description. In order to secure the full and complete
payment and performance of the Obligations when due, the Company hereby grants
to the Secured Party, subject to the Permitted Liens, a first priority security
interest in all of the Company’s rights, titles, and interests in and to the
Collateral (the “Security Interest”) and subject to the Permitted Liens,
pledges, collaterally transfers, and assigns the Collateral to the Secured
Party, all upon and subject to the terms and conditions of this Security
Agreement. If the grant, pledge, or collateral transfer or assignment of any
specific item of the Collateral is expressly prohibited by any contract or by
law, then the Security Interest created hereby nonetheless remains effective to
the extent allowed by such contract, the UCC or other applicable laws, but is
otherwise limited by that prohibition. The Security Interest granted herein
shall terminate in accordance with Section 7.1 hereof.

Section 2.2. Financing Statements; Further Assurances.

(a) The Secured Party shall be named as the sole secured party on any and all
financing statements and security agreements filed pursuant to this Security
Agreement and is authorized to file any and all terminations of such financing
statements at such time or times as it determines is appropriate pursuant to the
Security Agreement.

(b) As soon as practicable following the execution and delivery of this
Agreement and upon the authorization of the Secured Party, the Company shall:

(i) file with the State of Delaware and any other offices that the Secured Party
may reasonably request in writing an initial financing statement that
(i) indicates the Collateral in a manner consistent with the definition of the
term “Collateral” as contained in this Agreement, and (ii) contains any other
information required by Article 9 of the UCC of the state or such jurisdiction
for the sufficiency or filing office acceptance of any financing statement or
amendment, including whether the Company is an organization, the type of
organization, and any organization identification number issued to the Company;

 

5

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

(ii) if necessary to perfect the Security Interest granted in the Collateral
hereunder, file with the U.S. Patent and Trademark Office, such financing
statements and/or patent security agreements in the form necessary to record the
Liens granted hereunder on the Company’s patents and patent applications; and

(iii) upon the reasonable request of the Secured Party, file such additional
financing statements and other documents, including amendments to the financing
statements, in order to maintain the Liens in the Collateral.

(c) Until the Obligations are paid and performed in full, the Company covenants
and agrees that it will, at its own expense and upon the request of the Secured
Party (or the Majority in Interest if there is more than one Secured Party), but
in all cases subject to the rights of the grantees of the Permitted Liens:
(i) after an Event of Default, file or cause to be filed such applications and
take such other actions as the Secured Party (or the Majority in Interest if
there is more than one Secured Party) may reasonably request to obtain the
consent or approval of any governmental authority to the rights of the Secured
Party hereunder, including, without limitation, the right to sell all the
Collateral upon an Event of Default without additional consent or approval from
such governmental authority; (ii) from time to time, either before or after an
Event of Default, promptly execute and deliver to the Secured Party all such
other assignments, certificates, supplemental documents, and financing
statements, and do all other acts or things as the Secured Party (or the
Majority in Interest if there is more than one Secured Party) may reasonably
request in order to more fully create, evidence, perfect, continue, and preserve
the priority of the Security Interest and to carry out the provisions of this
Agreement; and (iii) either before or after an Event of Default, pay all filing
fees in connection with any financing, continuation, or termination statement or
other instrument with respect to the Security Interest.

Section 2.3. Priority. The Secured Party hereby covenants and agrees with the
Company that the Company has granted and may subsequently grant, from time to
time, Permitted Liens and that the security interest granted to the Secured
Party in the Collateral hereunder is (i) subordinated to the respective
Permitted Liens in the Collateral that was granted and remains outstanding
immediately prior to the date hereof (the “Senior Permitted Liens”) or as
contemplated in Section 2.1, above; (ii) senior to other Liens granted by the
Company in the Collateral after the date hereof; and (iii) that as between all
Secured Party, the Security Interest granted to each Secured Party under this
Agreement is pari passu with the Security Interests of the other Secured Party.
The priorities specified herein are applicable irrespective of the time, order
or method of attachment or perfection of security interests or the time or order
of filing of financing statements. The Secured Party agrees not to seek to
challenge, to avoid, to subordinate or to contest or directly or indirectly to
support any other Person in challenging, avoiding, subordinating or contesting
in any judicial or other proceeding, including, without limitation, any
proceeding involving the Company, the priority, validity, extent, perfection or
enforceability of any Senior Permitted Liens in all or any part of the
Collateral. The Secured Party further covenants and agrees that it shall not
take any action that is in violation of, or inconsistent with, the provisions of
this section.

SECTION III

COVENANTS

Section 3.1. Duties of the Company Regarding Collateral. At all times from and
after the date hereof and until the Secured Note has been paid in full or this
Agreement is sooner terminated, the Company agrees that it shall:

(a) Preserve the Collateral in good condition and order (ordinary wear and tear
excepted) and not permit it to be abused or misused;

 

6

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

(b) Not allow any of the Collateral to be affixed to real estate, except for any
property deemed to be fixtures;

(c) Maintain good and complete title to the Collateral subject only to Permitted
Liens;

(d) Keep the Collateral free and clear at all times of all Liens other than
Permitted Liens;

(e) Take or cause to be taken such acts and actions as shall be necessary or
appropriate to assure that the Secured Party’s security interest in the
Collateral (other than the Permitted Liens) not become subordinate to or on
parity with the security interests, Liens or claims of any other Person;

(f) Except as permitted pursuant to this Agreement, refrain from selling,
assigning or otherwise disposing of any of the Collateral or moving or removing
any of the Collateral, without obtaining the prior written consent of the
Secured Party (or the Majority in Interest if there is more than one Secured
Party), or until all of the Obligations have been fully performed and paid in
full; provided, however, that concurrently with any disposition permitted by
this Section 3.1, (x) the security interest granted hereby shall automatically
be released from the Collateral so disposed, and (y) the security interest shall
continue in the Proceeds (as defined in the UCC) of such Collateral or any
property purchased with such Proceeds; and provided further, that, the Secured
Party shall execute and deliver, at the Company’s sole cost and expense, any
releases or other documents reasonably requested by the Company, that are in
form and substance reasonably acceptable to the executing party, confirming the
release of the security interest in that portion of the Collateral that is the
subject of a disposition permitted by this Section 3.1;

(g) Except in the ordinary course of business, the Company may not (i) transfer,
pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the
Collateral (except for non-exclusive licenses granted by the Company in its
ordinary course of business and sales of inventory or obsolete capital equipment
by the Company in its ordinary course of business) without the prior written
consent of either the Secured Party (or the Majority in Interest if there is
more than one Secured Party) or (ii) consign any of its inventory which
constitutes any part of the Collateral, or sell any of its inventory which
constitutes any part of the Collateral on bill and hold, sale or return, sale on
approval, or other conditional terms of sale without the consent of the Secured
Party, which shall not be unreasonably withheld;

(h) Promptly provide to the Secured Party such financial statements, reports,
lists and schedules related to the Collateral and any other information relating
to the Collateral as the Secured Party may reasonably request from time to time
and execute any documents related thereto, including, but not limited to any
Intellectual Property Security Agreement;

(i) Maintain, at the place where the Company is entitled to receive notices
under the Secured Note, a current record of where all material Collateral is
located, permit representatives of the Secured Party at any time, upon
reasonable prior written notice during normal business hours to inspect and make
abstracts from such records (provided, that so long as no Event of Default
exists, the Secured Party shall conduct such inspections no more frequently than
semi-annually);

(j) Within three (3) Business Days notify the Secured Party if any Event of
Default (as hereinafter defined) occurs; and

(k) In accordance with prudent business practices, endeavor to collect or cause
to be collected from each account debtor under its accounts, as and when due,
any and all amounts owing under such accounts.

 

7

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

For purposes of clarity, nothing in this Agreement, including without limitation
the restrictions set forth in Section 3.1(f) of this Agreement, shall be
construed as restricting the Company and its Subsidiaries from (I) granting
licenses or sublicenses to any of the Collateral which constitutes Intellectual
Property; (II) from licensing, selling, leasing or renting, directly or
indirectly, any inventory or other property sold or disposed of in the ordinary
course of business and on ordinary business terms); (III) from engaging in joint
ventures, strategic alliances or other similar arrangements for bona fide
business purposes consistent with industry practices; (IV) from utilizing the
cash generated from the Company’s business operations in accordance with the
business judgment of management or the board of directors; or (V) from entering
into transactions contemplated by the definition of Permitted Liens.

Section 3.2. Duties with Respect to Intellectual Property. At all times from and
after the date hereof and until the Secured Note has been paid in full or this
Agreement is sooner terminated, the Company agrees that it shall:

(a) Except to the extent that failure to act cannot reasonably be expected to
have a Material Adverse Effect, take all commercially reasonable steps necessary
to (x) maintain the validity and enforceability of any Collateral that
constitutes Intellectual Property in full force and effect and (y) pursue the
application, obtain the relevant registration and maintain the registration of
each of its patents, trademarks and copyrights that is part of the Collateral,
including, without limitation, by the payment of required fees and taxes, the
filing of responses to office actions issued by the U.S. Patent and Trademark
Office, the U.S. Copyright Office or other governmental authorities, the filing
of applications for renewal or extension, the filing of affidavits, the filing
of divisional, continuation, continuation-in-part, reissue and renewal
applications or extensions, the payment of maintenance fees and the
participation in interference, reexamination, opposition, cancellation,
infringement and misappropriation proceedings.

(b) Except to the extent that failure to act cannot reasonably be expected to
have a Material Adverse Effect, not do or permit any act or knowingly omit to do
any act whereby any of its Intellectual Property that is part of the Collateral
may lapse, be terminated, or become invalid or unenforceable or placed in the
public domain (or in case of a trade secret, lose its competitive value).

(c) Except to the extent that failure to act cannot reasonably be expected to
have a Material Adverse Effect, take all commercially reasonable steps to
preserve and protect each item of its Intellectual Property that is part of the
Collateral, including, without limitation, maintaining the quality of any and
all products or services used or provided in connection with any of the
trademarks, consistent with the quality of the products and services as of the
date hereof, and taking all commercially reasonable steps necessary to ensure
that all licensed users of any of the Trademarks abide by the applicable
license’s terms with respect to the standards of quality.

Notwithstanding the foregoing provisions of this Section 3.2 or anything to the
contrary elsewhere in this Security Agreement, nothing in this Security
Agreement shall prevent the Company or its Subsidiaries from discontinuing the
use or maintenance of any of its Intellectual Property, the enforcement of its
license agreements or the pursuit of actions against infringers, if they
determine in its reasonable business judgment that such discontinuance is
desirable in the conduct of its business.

Section 3.3. Other Encumbrances. At all times after the date hereof and until
such time as there are no Obligations due to the Secured Party or this Agreement
is sooner terminated, the Company shall, subject to the rights of the holders of
the Permitted Liens: (i) defend its title to, and the Secured Party’s

 

8

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

interest in, the Collateral against all claims, (ii) take any action necessary
to remove any encumbrances on the Collateral other than Permitted Liens, and
(iii) defend the right, title and interest of the Secured Party in and to any of
the Company’s rights in the Collateral.

Section 3.4. Change Name or Location. At all times after the date hereof and
until such time as there are no Obligations due to the Secured Party or this
Agreement is sooner terminated, the Company shall not, except upon 10 days’
prior written notice to the Secured Party, change its company name or conduct
its business under any name other than that set forth herein or change its
jurisdiction of organization or incorporation, chief executive office, place of
business from the current location.

SECTION IV

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to each Secured Party as follows:

Section 4.1. Title to Collateral. The Company is the owner of and has good and
marketable title to, or has a valid and subsisting leasehold interest in, all of
the Collateral.

Section 4.2. No Other Encumbrances. Other than the Permitted Liens, the Company
has not granted, nor will it grant, a security interest in the Collateral to any
other individual or entity, and to the actual knowledge of the Company, such
Collateral is free and clear of any mortgage, pledge, lease, trust, bailment,
lien, security interest, encumbrance, charge or other arrangement, other than
the Permitted Liens.

Section 4.3. No Other Indebtedness. Other than Permitted Indebtedness, the
Company has not incurred, created, assumed or guaranteed, nor will it incur,
create, assume or guarantee any Indebtedness from any other individual or
entity.

Section 4.4. Authority; Enforceability. The execution, delivery and performance
of this Agreement by the Company does not: (i) violate any of the provisions of
the Certificate of Incorporation or By-laws of the Company or any judgment,
decree, order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to the Company; or (ii) subject to
the Secured Party’s performance of its respective obligations under any
subordination agreements with respect to Permitted Liens or Permitted
Indebtedness, conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing the Company’s debt or otherwise) or other
understanding to which the Company is a party or by which any property or asset
of the Company is bound or affected. The Company has the authority and capacity
to perform its obligations hereunder, and this Agreement is the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors’ rights or general equitable principles, whether
applied in law or equity.

Section 4.5. Company Name; Place of Business; Location of Collateral. The
Company’s true and correct company name, all trade name(s) under which it
conducts its business, its jurisdiction of organization or incorporation and
each of its chief executive offices, its place(s) of business and the locations
of the Collateral or records relating to the Collateral are set forth in
Schedule I hereto. The Company’s place of business and chief executive office is
where the Company is entitled to receive notices hereunder; the present and
foreseeable location of the Company’s books and records concerning any of the
Collateral that is accounts is as set forth on Schedule I hereto, and the
location of all other Collateral, including, without limitation, the Company’s
inventory and equipment is as set forth on Schedule I hereto.

 

9

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

Section 4.6. Perfection; Security Interest. This Agreement creates in favor of
the Secured Party, a valid security interest in the Collateral, subject only to
Permitted Liens securing the payment and performance of the Obligations. For
Collateral in which the Security Interest may be perfected by the filing of
financing statements, once those financing statements have been properly filed
in the appropriate jurisdictions, the Security Interest in such Collateral will
be fully perfected, subject only to Permitted Liens. Other than the financing
statements and with respect to this Agreement, to the actual knowledge of the
Company, there are no other financing statements or control agreements covering
any Collateral, other than those evidencing Permitted Liens.

SECTION V

EVENTS OF DEFAULT

Section 5.1. Events of Default Defined. The occurrence of any of the following
events prior to the termination or expiration of this Agreement shall constitute
an event of default under this Agreement (each, an “Event of Default”):

(a) The failure of the Company to perform or comply in a material respect with
any act, duty or obligation required to be performed under this Agreement if
such failure is not remedied within ten (10) business days after the Company
receives written notice of such failure from the Secured Party (or the Majority
in Interest if there is more than one Secured Party) or thirty (30) days after
the occurrence thereof;

(b) If any of the representations or warranties of the Company set forth in this
Agreement shall prove to have been incorrect in any material respect when made,
or becomes incorrect in any material respect and, if subject to cure, is not
cured within ten (10) business days after the Company receives written notice
thereof from the Secured Party (or the Majority in Interest if there is more
than one Secured Party) or within thirty (30) days after the Company becomes
aware, and immediately notifies the Secured Party, of any such incorrectness;

(c) If any material portion of the Collateral shall be damaged, destroyed or
otherwise lost and such damage, destruction or loss is not covered by insurance;
or

(d) If an “Event of Default” as defined in the Secured Note shall have occurred
and is continuing.

Section 5.2. Rights and Remedies Upon Default. If an Event of Default exists and
is continuing, the Secured Party shall, at its election (but subject to the
remainder of this Agreement), exercise any and all rights available to a secured
party under the UCC, in addition to any and all other rights afforded by the
Secured Note and this Agreement, at law, in equity, or otherwise, including,
without limitation, (a) requiring the Company to assemble all or part of the
Collateral and make it available to the Secured Party at a place to be
designated by the Secured Party which is reasonably convenient to the Secured
Party and the Company, (b) surrendering any policies of insurance on all or part
of the Collateral and receiving and applying the unearned premiums as a credit
on the Obligation, (c) applying by appropriate judicial proceedings for
appointment of a receiver for all or part of the Collateral (and the Company
hereby consents to any such appointment), (d) applying to the Obligation any
cash held by the Secured Party under this Security Agreement, and (e) as legally
permissible, selling, reselling, assigning and delivering or granting a license
to use or otherwise dispose of the Collateral or any part thereof, in one or
more parcels at public or private sale, at any of the Secured Party’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as the Secured Party may deem commercially reasonable.

 

10

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

Section 5.3. Notice. Reasonable notification of the time and place of any public
sale of the Collateral, or reasonable notification of the time after which any
private sale or other intended disposition of the Collateral is to be made,
shall be sent to the Company, the holders of Permitted Liens, and to any other
person or entity entitled to notice under the UCC. It is agreed that notice sent
or given not less than ten calendar days prior to the taking of the action to
which the notice relates is reasonable notification and notice for the purposes
of this subparagraph.

Section 5.4. Application of Proceeds. The Secured Party shall apply the proceeds
of any sale or other disposition of the Collateral hereunder in the following
order: first, to the payment of all expenses incurred in retaking, holding, and
preparing any of the Collateral for sale(s) or other disposition, in arranging
for such sale(s) or other disposition, and in actually selling or disposing of
the same (all of which are part of the Obligation); second, toward repayment of
amounts expended by the Secured Party in so acting hereunder; and third, toward
payment of the balance of the Obligations in the order and manner as the Secured
Party determines in its sole discretion. Any surplus remaining shall be
delivered to the Company or as a court of competent jurisdiction may direct. If
the proceeds are insufficient to pay the Obligations in full, then the Company
shall remain liable for any deficiency.

Section 5.5. Compliance with Other Laws; Certain Limitations. The Secured Party
shall comply with any applicable state or federal laws in connection with a
disposition of the Collateral and compliance will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral. By virtue of
its execution of this Agreement, the Secured Party shall be deemed irrevocably
to agree that it shall not take any action to enforce any provisions of this
Agreement against the Company, to exercise any remedy hereunder or to give any
consents or approvals hereunder except as expressly provided in this Agreement
or in the Secured Note. The Secured Party may exercise any of its rights or
perform any of its obligations hereunder by or through its agents or employees.

SECTION VI

ADDITIONAL REMEDIES

Section 6.1. Additional Remedies. If an Event of Default exists and is
continuing, the Company shall:

(a) Endorse any and all documents evidencing any Collateral (other than any
Collateral if and to the extent subject to the Permitted Liens) in accordance
with the instructions provided by the Secured Party, and notify any payor that
said documents have been so endorsed and that all sums due and owing pursuant to
them should be paid directly to such Secured Party, or as otherwise instructed
by the Secured Party;

(b) Turn over to the Secured Party, or as otherwise instructed by the Secured
Party, copies of all documents evidencing any right to collection of any sums
due to the Company arising from or in connection with any of the Collateral;

(c) Take any action reasonably required by a Secured Party with reference to the
Federal Assignment of Claims Act; and

(d) Keep all of its books, records, documents and instruments relating to the
Collateral in such manner as the Secured Party may require.

 

11

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

SECTION VII

MISCELLANEOUS

Section 7.1. Termination and Release. This Agreement, and the Liens created by
this Agreement shall automatically terminate in all respects upon the full and
final payment by the Company of the Secured Note or the conversion of the
Secured Note into shares of capital stock of the Company, in accordance with the
terms of the Secured Note. Further, the Liens created by this Agreement on any
of the Collateral shall be automatically released if the Company disposes of
such Collateral pursuant to a transaction permitted by the Secured Note or
otherwise consented to by the Secured Party (or the Majority in Interest if
there is more than one Secured Party, (or the Majority in Interest if there is
more than one Secured Party). In connection with any termination or release
pursuant to this Section 7.1, the Secured Party (or the Majority in Interest if
there is more than one Secured Party) shall promptly execute and deliver to the
Company all documents that the Company shall reasonably request to evidence such
termination or release.

Section 7.2. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, that in such case the parties shall negotiate
in good faith to replace such provision with a new provision which is not
illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the parties.

Section 7.3. Continuing Security Interest; Successors. This Agreement creates a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until the Obligations are paid and performed in full or this
Agreement is sooner terminated in accordance with Section 7.1; and (ii) inure to
the benefit of and be enforceable by the Secured Party and their successors,
transferees, and assigns. The Secured Party may assign its rights hereunder in
connection with any private sale or transfer of its Secured Note in accordance
with the terms of the Secured Note and applicable law, in which case the term
“Secured Party” shall be deemed to refer to such transferee as though such
transferee was an original signatory hereto.

Section 7.4. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed under the laws of the State of New York applicable to contracts
made and to be performed entirely within the State of New York. The Company
hereby irrevocably submit to the non-exclusive jurisdiction of the state and
federal courts sitting in the City of New York, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waive, and agree not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper.

Section 7.5. Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.

Section 7.6. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New
York City time) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Business Day or later than 5:30 p.m. (New York City time) on any
Business Day, (c) the second (2nd) Business Day following the date of mailing,
if sent by U.S. nationally

 

12

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

recognized overnight courier service or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and
communications shall be as set forth on the signature pages attached hereto.

Section 7.7. Entire Agreement; Amendments; Waivers. This Agreement constitutes
the entire agreement between the parties with regard to the subject matter
hereof and thereof, superseding all prior agreements or understandings, whether
written or oral, between or among the parties. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended except
pursuant to a written instrument executed by Company and the Secured Party, or
if there is more than one Secured Party, the Majority in Interest, and no
provision hereof may be waived other than by a written instrument signed by the
party against whom enforcement of any such waiver is sought. The Secured Party
shall not, by any act, any failure to act or any delay in acting be deemed to
have (i) waived any right or remedy under this Agreement, or (ii) acquiesced in
any Event of Default or in any breach of any of the terms and conditions of this
Agreement. No failure to exercise, nor any delay in exercising, any right, power
or privilege of the Secured Party under this Agreement shall operate as a waiver
of any such right, power or privilege. No single or partial exercise of any
right, power or privilege under this Agreement shall preclude any other or
further exercise of any other right, power or privilege. A waiver by a Secured
Party of any right or remedy under this Agreement on any one occasion shall not
be construed as a bar to any right or remedy that such Secured Party would
otherwise have on any future occasion.

Section 7.8. Multiple Counterparts. This Agreement has been executed in a number
of identical counterparts, each of which shall be deemed an original for all
purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart.

Section 7.9. Cumulative Remedies. The rights and remedies provided in this
Agreement are cumulative, may be exercised singly or concurrently, and are not
exclusive of any other rights or remedies provided by law.

Section 7.10. Waivers. The Company acknowledges that the Obligations arose out
of a commercial transaction and hereby knowingly waives any right to require the
Secured Party to (i) proceed against any person or entity, (ii) proceed against
any other collateral under any other agreement, (iii) pursue any other remedy
available to the Secured Party, or (iv) make presentment, demand, dishonor,
notice of dishonor, acceleration and/or notice of non-payment.

Section 7.11. Release. No transfer or renewal, extension, assignment or
termination of this Agreement or of any instrument or document executed and
delivered by the Company to the Secured Party, nor additional advances made by
the Secured Party to the Company, nor the taking of further security, nor the
retaking or re-delivery of the Collateral by the Secured Party nor any other act
of the Secured Party shall release the Company from any Obligation, except a
release or discharge executed in writing by the Secured Party or the Majority in
Interest if there is more than one Secured Party, with respect to such
Obligation or upon full payment and satisfaction of all Obligations and
termination of the Secured Note. At such time the Obligations have been
satisfied in full, the Secured Party or the Majority in Interest if there is
more than one Secured Party, shall execute and deliver to the Company all
assignments and other instruments as may be reasonably necessary or proper to
terminate the Secured Party’s security interest in the Collateral, subject to
any disposition of the Collateral that may have been made by or on behalf of the
Secured Party pursuant to this Agreement. For the purpose of this Agreement, the
Obligations shall be deemed to continue if the Company enters into any
bankruptcy or similar proceeding at a time when any amount paid to the Secured
Party could be ordered to be repaid as a preference or pursuant to a similar
theory, and shall continue until it is finally determined that no such repayment
can be ordered.

 

13

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

Section 7.12. Separate Counsel. Secured Party has engaged and consulted with its
own attorney prior to the execution of this Agreement. The Secured Party
understands, confirms and agrees that counsel to the Company is not acting as
counsel to the Secured Party and the undersigned Secured Party has not relied
upon any legal advice except as provided by its own attorney and counsel.

Remainder of page intentionally left blank. Signature pages follow.

 

14

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

IN WITNESS WHEREOF, the Company and the Secured Party have duly executed this
Agreement as of the date first written above.

 

AUTHENTIDATE HOLDING CORP. By:  

/s/ Ian C. Bonnet

  Name:   Ian C. Bonnet   Title:   Chief Executive Officer Address for Notice:
Connell Corporate Center 300 Connell Drive, 5th Floor Berkeley Heights, NJ 07922
Attn:   President

SIGNATURE PAGE TO SECURITY AGREEMENT

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

SIGNATURE PAGE TO SECURITY AGREEMENT

 

SECURED PARTY: MKA 79, LLC By:  

/s/ J. David Luce

  Name:   [                    ]   Title:   [                    ] Address for
Notices to Secured Party: [                    ] [                    ]
[                    ] [                    ]

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

Schedule I

List of Collateral Locations, Executive Offices and

Jurisdiction of Organization or Incorporation of Obligors

 

Company Name:    Authentidate Holding Corp. Executive Officers:   

Ian C. Bonnet – President and Chief Executive Officer

William A. Marshall – Chief Financial Officer and Treasurer

Jurisdiction of Incorporation:    Delaware Subsidiaries of Company:   
Authentidate, Inc.    300 Connell Drive, 5th Floor    Berkeley Heights, NJ 07922
   Express MD Solutions, LLC    300 Connell Drive, 5th Floor    Berkeley
Heights, NJ 07922    Trac Medical Solutions, Inc.    300 Connell Drive, 5th
Floor    Berkeley Heights, NJ 07922

Location of Collateral

and/or related records:

   Authentidate Holding Corp.    300 Connell Drive, 5th Floor    Berkeley
Heights, NJ 07922