**Exhibit 10.4**

**AGREEMENT AND RELEASE**

**CONSULT WITH AN ATTORNEY        BEFORE SIGNING THIS AGREEMENT AND RELEASE.**

**BY SIGNING THIS AGREEMENT        AND RELEASE, YOU GIVE UP AND WAIVE IMPORTANT LEGAL RIGHTS.**

WHEREAS, Smith has been an employee        of AHC, and

WHEREAS, Smith has been employed        pursuant to a written offer letter dated as of November 4, 2003 (the “Offer        Letter”); and 

WHEREAS, Employee and AHC each        desire an amicable cessation of the employment relationship,

NOW, THEREFORE, in consideration        of the covenants and promises contained herein and for other good and        valuable consideration, receipt of which is hereby acknowledged, Employee        and AHC (who hereinafter collectively may be referred to as the “Parties”)        hereby agree as follows:

1.     Employee        acknowledges and agrees that effective the close of business December        31, 2004, Employee’s employment is terminated (the “Termination        Date”).

2.     In        consideration for Employee’s execution of this Agreement, and in        consideration for the release of claims against AHC, the Company will        give Employee the following:a.      Solely for the  purpose of determining the benefits under the Offer Letter, Employee’s  termination shall be deemed a termination without cause within the contemplation  of the definition of the term “cause” in the Offer Letter. 
b.      Subject        to Employee’s compliance with the provisions of this Agreement,        Employee shall receive a severance benefit of up to 12 months of his        current base salary of $300,000 (“Severance Payments”), payable        in equal installments on each of the Company's regular pay dates for        executives, commencing on the first regular executive pay date following        the Termination Date (such 12 month period commencing on the Termination        Date may be referred to herein as the “Severance Period”).        Notwithstanding the foregoing, the Company’s obligation to pay        the Severance Payments shall immediately cease: (i) on June 30, 2005,        in the event Employee accepts or commences new full-time employment on        or before June 30, 2005; (ii) upon the date that Employee commences new        full-time employment if such event occurs after June 30, 2005 but before        December 31, 2005; or (iii) if Employee does not accept new full-time        employment during the Severance Period, on December 31, 2005. 
 

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A.      Commencing    on July l, 2005, in the event Employee commences new full-time employment    on a date  other than the first business day of a month, the Severance Payment for that  month shall be paid on a *pro rata* basis.
 B.       Subsequent          to June 30, 2005, in the event Employee fails to promptly advise the          Company that he has accepted or commenced new employment during the          Severance Period, Employee will be deemed to have committed a material          breach of this Agreement and shall immediately refund all Severance          Payments made by the Company subsequent to the Termination Date. 

C.      For          the purposes of this Agreement, the term “full-time employment” shall          mean becoming an employee (or co-employee) of another employer without          regard to the level of compensation earned or available thereunder.          Full-time employment shall also include any consultancy or other self-employment          whereby Employee provides services to third parties and has a reasonable          expectation to provide such services for a period longer than three          consecutive months on a basis substantially similar to those he would          receive in an employment relationship.
3.     To the extent Employee  has unreimbursed business expenses incurred through the Termination Date, Employee  must immediately submit the expenses with all appropriate documentation; those  expenses which meet the Company’s guidelines will be reimbursed. Any  expense account that Employee has with the Company terminates effective on  the Termination Date, and any expenses already incurred will be reviewed and  processed in accordance with the policies and procedures of the Company. No  new expenses may be incurred after the Termination Date. Employee agrees to  promptly pay any outstanding balance on these accounts that represent non-reimbursable  expenses. Company will pay accepted expenses within twenty (20) business days  from the date Employee and Company execute this Agreement, in accordance with  the Company’s expense reimbursement guidelines existing as of the date  that this Agreement is executed by both the Company and Employee. 
4.      Employee      understands that this Agreement does not constitute an admission by the      Company of any liability, error or omission, including without limitation,      any: (a) violation of any statute, law, or regulation; (b) breach of contract,      actual or implied; or (c) commission of any tort.

5.      Employee      acknowledges that the consideration provided in this Agreement exceed that      to which Employee would otherwise be entitled under the normal operation      of any benefit plan, policy or procedure of the Company or under any previous      agreement (written or oral) between Employee and the Company. Employee      further acknowledges that the agreement by AHC to provide consideration      pursuant to this Agreement beyond Employee’s entitlement is conditioned      upon Employee’s release of all claims against AHC and Employee’s      compliance with all the terms and conditions of this Agreement.
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6.     The Parties agree  that, except as provided for herein, there shall be no other payments or benefits  payable to Employee, including but not limited to, salary, bonuses, commissions,  finder’s fees and/or other payments.
7.      Arbitration:a.      The Parties specifically  and knowingly and voluntarily agree to arbitrate any controversy, dispute or  claim which has arisen or should arise in connection with Employee’s  employment, the cessation of Employee’s employment, or in any way related  to the terms of this Agreement. The Parties agree to arbitrate any and all  such controversies, disputes, and claims before a single arbitrator in the  State of New York in accordance with the Rules of the American Arbitration  Association. The arbitrator shall be selected by the Association and shall  be an attorney-at-law experienced in the field of corporate law and admitted  to practice in the State of New York. In the course of any arbitration pursuant  to this Agreement, Employee and the Company agree (i) to request that a written  award be issued by the arbitrator and (ii) that each side is entitled to receive  any and all relief it would be entitled to receive in a court proceeding. The  Parties knowingly and voluntarily agree to enter into this arbitration clause  and to waive any rights that might otherwise exist to request a jury trial  or other court proceeding, except that Employee agrees that AHC has the right  to seek injunctive or other equitable relief from a court to enforce Paragraphs  9, 10 and 11 of this Agreement. This paragraph is intended to be both a post-dispute  and pre-dispute arbitration clause. Any judgment upon any arbitration award  may be entered in any court, federal or state, having competent jurisdiction  of the parties.
b.       The        Parties’ agreement to arbitrate disputes includes, but is not limited        to, any claims of unlawful discrimination and/or unlawful harassment        under Title VII of the Civil Rights Act of 1964, as amended, the Age        Discrimination in Employment Act 1967, as amended, the Americans with        Disabilities Act, the New Jersey and New York Civil Rights Laws, the        New Jersey Law Against Discrimination, the New York Executive Law, the        New York City Human Rights Law, the New Jersey Conscientious Employee        Protection Act, the New Jersey Family Leave Act, or any other federal,        state or local law relating to discrimination in employment and any claims        relating to wage and hour claims and any other statutory or common law        claims.8.     Employee    and AHC agree that the terms and existence of this Agreement are and shall    remain confidential and agrees not to disclose any terms or provisions of    this Agreement, or to talk or write about the negotiation, execution or implementation    of this Agreement, without the prior written consent of the other, except    (a) as required by law; (b) as required by regulatory authorities; (c) as    required within AHC to process this Agreement; or (d) in connection with    any arbitration or litigation arising out of this Agreement. Anything herein    to the contrary notwithstanding, Employee may disclose the terms of this    Agreement to Employee’s immediate family, accountant or attorney, provided    they are made aware of and agree to the confidentiality provisions.
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9.     The    Employee further agrees that he shall not, at any time before or after the    Termination Date,  make use of or disclose to any person, corporation, or other entity, for any  purpose whatsoever, any trade secret or other confidential and/or proprietary  information of or concerning the Company’s business, finances, marketing,  technology, software, accounting and other information of the Company and its  subsidiaries, including information relating to any customer of the Company  or any other nonpublic business information of the Company and/or its subsidiaries  disclosed to, prepared by or otherwise learned as a consequence of Employee’s  employment with the Company (collectively referred to as the “Proprietary  Information”). For the purposes of this Agreement, trade secrets and  confidential information shall mean information disclosed to the Employee or  known by him as a consequence of his employment by the Company, whether or  not pursuant to this Agreement, and not generally known in the industry. The  Employee acknowledges that Proprietary Information, as it may exist from time  to time, is a valuable and unique asset of the Company, and that disclosure  of any such information would cause substantial injury to the Company. Trade  secrets and confidential information shall cease to be trade secrets or confidential  information, as applicable, at such time as such information becomes public  other than through disclosure, directly or indirectly, by Employee in violation  of this Agreement. If Employee is requested or required (by oral questions,  interrogatories, requests for information or document subpoenas, civil investigative  demands, or similar process) to disclose any Proprietary Information, Employee  shall, unless prohibited by law, promptly notify the Company of such request(s)  so that the Company may seek an appropriate protective order.
10.     Employee        agrees that in consideration for the payments and other consideration        provided in this Agreement, Employee will not, for a period of one (1)        year following the Termination Date, directly or indirectly, enter into        or become associated with or engage in any other business (whether as        a partner, officer, director, shareholder, employee, consultant, or otherwise),        which business is primarily involved in the manufacture, development        and distribution of computers and/or document imaging systems, or digital        image authentication or is otherwise engaged in the same or similar business        as the Company in direct competition with the Company, or which the Company        was in the process of developing, during the tenure of Employee’s employment        by the Company (a “Competitive Business”). Notwithstanding        the foregoing, the ownership by Employee of less than five percent of        the shares of any publicly held corporation shall not violate the provisions        of this provision. In furtherance of the foregoing, Employee shall not        during the aforesaid period of non-competition, directly or indirectly,        (a) solicit any customer, employee or prospective customers (a customer        that was being solicited by the Company during the time of his employment)        of the Company who was a customer, employee or prospective customer of        the Company during the tenure of his employment or (b) otherwise interferein any manner with the business of the Company.
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11.     In consideration  of the foregoing, you agree to irrevocably assign to the Company any and all  inventions, software (including source code and source code documentation for  all computer programs developed or modified), manuscripts, documentation, improvements  or other intellectual property whether or not protectible by any state or federal  laws relating to the protection of intellectual property, relating to the present  or future business of the Company that have been developed by you during the  course of your employment with the Company, either alone or jointly with others,  and whether or not developed during normal business hours or arising within  the scope of his/her duties of employment (all of the foregoing “Intellectual  Property”). You agree that all such Intellectual Property, including  without limitation all copyrights, trademarks, trade secrets and patent rights  therein, is irrevocably assigned to and shall be and remain the sole and exclusive  property of the Company and shall be deemed the product of work for hire. You  further agree to execute such assignments and other documents as the Company  may consider appropriate to vest all right, title and interest therein to the  Company and hereby appoint the Company your attorney-in-fact with full powers  to execute such document itself in the event you fail or are unable to provide  the Company with such signed documents.
12.     Employee        agrees that as long as Employee is entitled to receive any payments under        this Agreement, Employee shall not make any negative or derogatory statements        in verbal, written, electronic or any other form about the Company, or        its officers, employees and directors including, but not limited to,        a negative or derogatory statement made in, or in connection with, any        article or book, on a website, in a chat room or via the internet.

13.     Transition. a.      Litigation.  Employee shall, subject to the reasonable requirements of new employment, cooperate  fully with the Company in the prosecution or defense, as the case may be, of  any and all actions, governmental inquiries or other legal or regulatory proceedings  in which Employee’s assistance may be reasonably requested by the Company.  Reasonable expenses arising from the cooperation will be reimbursed within  the Company’s guidelines. Consistent with the “Certificate of Incorporation  of Authentidate Holding Corp.,” and the Company’s Amended and Restated  By-Laws, AHC will hold harmless and indemnify Employee from and against any  expenses (including attorneys’ fees), judgments, fines and amounts paid  in settlement arising from any claim, suit or other action against Employee  by any third party, on account of any action or inaction by Employee taken  or omitted to be taken by Employee on behalf of AHC during the course of his  employment, up to his date of termination, provided that such action or inaction  by Employee was within the scope of Employee’s employment and consistent  with the Company’s policies and procedures. Employee acknowledges that  he has advised the Company completely and candidly of all facts of which he  is aware that may give rise to legal matters.
b.      General.      In consideration of the Company’s payments hereunder, for a period      of sixty (60) days after the Termination Date, Employee shall make himself      reasonably available to, and cooperate with, the Company and its officers,      directors, employees and advisors in order to assist the Company in (i)      reviewing matters that were Employee’s responsibility prior to the      Termination Date and (ii) transitioning to new personnel. 
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14.     You    agree to cause all requests for references to be forwarded in writing to    the Company, attention:  Office of the President. The Company will state in response to such inquiries  your dates of employment and positions held and no executive officer or director  or the Company shall make any derogatory statements about Employee during the  period specified in paragraph 12. The Company shall not be responsible for  responses to reference requests sought or obtained other than under the procedures  set forth in this paragraph.
15.     Employee        realizes there are many laws and regulations prohibiting employment discrimination,        or otherwise regulating employment or claims related to employment pursuant        to which Employee may have rights or claims. These include but are not        limited to Title VII of the Civil Rights Act of 1964, as amended; the        Americans with Disabilities Act of 1990; the Pregnancy Discrimination        Act; the National Labor Relations Act, as amended; 42 U.S.C 1981; the        Employee Retirement Income Security Act of 1974, as amended; the Age        Discrimination in Employment Act of 1967, as amended; the Civil Rights        Act of 1991; the Worker Adjustment and Retraining Notification Act; the        New York State and City Human Rights Laws; the New Jersey Law Against        Discrimination; the New Jersey Conscientious Employee Protection Act,        the New Jersey Family Leave Act, and other Federal, State and local human        rights, fair employment and other laws. Employee also understands there        are other statutes and contract and tort laws which relate to Employee’s        employment and/or the termination of Employee’s employment. Employee        hereby knowingly and voluntarily agrees to waive and release any rights        or claims Employee may have under these and other laws, but does not        intend to, nor is Employee waiving any rights or claims that may arise        after the date that this Agreement is signed by Employee. Notwithstanding        the foregoing sentence, Employee’s waiver and release shall not        extend to (i) any rights, remedies, or claims Employee may have in enforcing        the terms of the Agreement; and (ii) any rights Employee may have to        receive vested amounts under AHC’s stock option plans or pension        plans.

16.     This        Agreement shall be deemed to have been made within the County of New        York, State of New York, and shall be interpreted and construed and enforced        in accordance with the laws of the State of New York without regard to        its conflicts of law provision.

17.     Employee        is hereby advised of Employee’s rights to review this Agreement        with counsel of Employee’s choice. Employee has had the opportunity        to consult with an attorney and/or other advisor of Employee’s        choosing before signing the Agreement, and was given a period of twenty-one        (21) days to consider the Agreement. Employee is permitted, at his discretion,        to return the Agreement prior to the expiration of this 21-day period.        Employee acknowledges that in signing this Agreement, Employee has relied        only on the promises written in this Agreement, and not on any other        promise made by the Company or any other entity or person.

18.     Employee        shall, subject to the reasonable requirements of new employment, cooperate        fully with the Company in the prosecution or defense, as the case may        be, of any and all actions, governmental inquiries or other legal or        regulatory proceedings in which Employee’s assistance may be reasonably        requested by the Company, until December 31, 2005. Subsequently, Employee        and Company may agree to Employee’s assistance for an agreed upon        fee.
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19.     Employee    represents that Employee has not filed any complaints, charges or claims    against AHC with  any local, State, or Federal agency or court, or with any other forum.
20.     Employee        agrees to immediately return any AHC property in his possession or custody        or under his control, no matter where located including, but not limited        to, AHC I.D. or security cards, corporate credit card, keys, computer        disks, equipment, furniture, computers, peripherals and other electronic        devices, and any written or electronic material prepared or received        in the course of his employment at AHC, including without limitation,        memoranda, reports, files, correspondence, manuals, notes, specifications,        data, whether existing in hard copy or other media.

21.     If        any provision of this Agreement, or any part thereof, is held to be invalid        or unenforceable because of the scope or duration of or the area covered        by such provision, Employee and AHC agree that the court or other appropriate        decision-making authority making such determination shall reduce the        scope, duration and/or area of such provision (and shall substitute appropriate        provisions for any such invalid or unenforceable provisions) in order        to make such provision enforceable to the fullest extent permitted by        law and/or shall delete specific words and phrases, and such modified        provision shall then be enforceable and shall be enforced. In the event        that any court or other appropriate decision-making authority determines        that the time period or the area, or both, are unreasonable and that        any of the covenants is to that extent invalid or unenforceable, the        parties hereto agree that such covenants will remain in full force and        effect, first, for the greatest time period, and second, in the greatest        geographical area that would not render them unenforceable. If any provision        of this Agreement is held to be invalid or unenforceable, the remaining        provisions of this Agreement shall nonetheless survive and be enforced        to the fullest extent permitted by law.

22     .Except        as otherwise expressly provided herein, this Agreement and Release, together        with the General Release attached hereto, constitute the entire agreement        between the Parties and supersede any and all prior agreements, whether        written or oral. This Agreement may not be modified or changed, except        in a written agreement signed by both Parties.

23.     The        Agreement may be executed in multiple counterparts, each of which shall        be considered an original but all of which shall constitute one agreement.
*Remainder of page intentionally left blank.  Signature page follows.*

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IN WITNESS WHEREOF, the parties have executed this  Agreement as of the dates set forth below.
**I have read this Agreement,          and I understand all of its terms. I enter into and sign this Agreement          knowingly and voluntarily with full knowledge of what it means. I understand          that I have twenty-one (21) days to consider this Agreement and return          it to AHC. I also understand that I have seven (7) days to revoke this          Agreement in writing after I sign it. I understand that a revocation          will become effective only if I furnish AHC with written notice, within          such seven (7) day period. This Agreement will not become effective          or enforceable until AHC’s receipt back of Employee’s executed          Agreement and the expiration of the seven day revocation period.**
****
/s/ Peter R. Smith                                       Peter R. SmithFebruary 4, 2005      Date  
**Authentidate Holding Corp.**

/s/ Surendra Pai                                        By: Surendra PaiTitle: Chief Executive Officer

 

February 8, 2005      Date

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**CONSULT WITH AN ATTORNEY BEFORE SIGNING GENERAL RELEASE. BY SIGNING THIS GENERAL RELEASE, YOU GIVE UP AND WAIVE IMPORTANT LEGAL RIGHTS.**

**GENERAL RELEASE**
Peter R. Smith understands and, of his own free  will, enters into this General Release.
In consideration of the payments,        benefits, agreements, and other consideration to be provided by Authentidate        Holding Corp. as described in the agreement of which this General Release        is a part (such agreement, this General Release, together, the “Agreement”),        Peter R. Smith, for himself or herself and for his heirs, executors,        administrators, and their respective successors and assigns (collectively, “Employee”), **HEREBY        RELEASES AND FOREVER DISCHARGES**, to the maximum extent permitted        by law, Authentidate Holding Corp., its stockholders, subsidiaries, affiliates,        divisions, successors and assigns, their respective current and former        officers, directors, employees, agents, attorneys, whether as individuals        or in their official capacity, and each of their respective successors        and assigns (hereinafter collectively referred to as “AHC”)        of and from all or any manner of actions, causes and causes of action,        suits, debts, obligations, damages, complaints, liabilities, losses,        covenants, contracts, controversies, agreements, promises, variances,        trespasses, judgments and expenses (including attorneys’ fees and        costs), extents, executions, claims and demands whatsoever at law or        in equity (“claims”), specifically including by way of example        but not limitation, Title VII of the Civil Rights Acts of 1964 and 1991,        as amended; the Civil Rights Act of 1866; the Employee Retirement Income        Security Act of 1974, as amended; the National Labor Relations Act, as        amended; the Americans with Disabilities Act of 1990; the Age Discrimination        in Employment Act of 1967, as amended; the Worker Adjustment and Retraining        Notification Act; the Pregnancy Discrimination Act; and all Federal,        State and local statutes, regulations, decisional law and ordinances        and all human rights, fair employment, contract and tort laws relating        to Employee’s employment with AHC and/or the termination thereof        including, again by way of example but without limitation, the New Jersey        and New York Civil Rights Laws, the New Jersey Law Against Discrimination,        the New York Executive Law, the New York City Human Rights Law, the New        Jersey Conscientious Employee Protection Act, the New Jersey Family Leave        Act, any civil rights or human rights law, as well as all claims for        wrongful discharge, breach of contract, personal injury, defamation,        mental anguish, injury to health and reputation, and sexual harassment,        which Employee ever had, now has, or which Employee hereafter can, shall        or may have for, upon or by reason of any matter, cause or thing whatsoever        arising out of Employee’s employment by AHC or the termination        thereof, provided that this General Release shall not extend to (i) any        rights, remedies, or claims Employee may have in enforcing the terms        of this Agreement; (ii) any rights Employee may have to receive vested        amounts under AHC’s stock option plan, 401-K or pension plans;        (iii) Employee’s rights to medical benefit continuation coverage,        on a self-pay basis, pursuant to federal law (COBRA); and (iv) claims        for indemnification (whether under state law, AHC’s by-laws or        otherwise) for acts performed as an officer of AHC or any of its affiliates.        Employee takes this action fully aware of Employee’s rights arising        under the laws of the United States (and any State or local governmental        entity thereof) and voluntarily waives and releases all such rights or        claims under these or other laws, but does not intend to, nor is Employee        waiving any rights or claims that may arise after the date that this        Agreement is signed by Employee. The provisions of any laws providing        in substance that releases shall not extend to claims which are at the        time unknown to or unsuspected by the person executing such release,        are hereby waived.
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Employee    represents that Employee has been advised to and has had an opportunity to    consult with an attorney and/or any other  advisors of Employee’s choosing before signing this Agreement, and was  given a period of twenty-one (21) days to consider this Agreement. Employee  is permitted, at his discretion, to return the Agreement prior to the expiration  of this 21-day period. Employee has relied only on the promises written in  the Agreement, and not on any other promise made by AHC or any other entity  or person.
**Employee has seven (7) days          to revoke the Agreement after Employee signs it. The Agreement will          not become effective or enforceable until AHC’s receipt back          of Employee’s executed Agreement and the expiration of the seven          day revocation period.**

Employee has read and understood        the Agreement and enters into it knowingly and voluntarily.

IN WITNESS WHEREOF, Peter R.        Smith has set his hand this ___ day of December, 2004 having had the        opportunity to review this with counsel of his choice./s/ Peter R. Smith                                       Peter R. Smith2/5/05      Date
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