Document:

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                                                                    EXHIBIT 10.1

                          SECURITY AND PLEDGE AGREEMENT

         SECURITY AND PLEDGE AGREEMENT, dated as of January 5, 2001, between
John T. Botti on the one hand (referred to herein as "Pledgor"), intending to be
liable under this security and pledge agreement (this "Agreement"), with an
address as indicated below his signature, and Bitwise Designs, Inc., on the
other hand, having its principal office at 2165 Technology Drive, Schenectady,
New York 12308 (the "Pledgee").

                              W I T N E S S E T H :

         WHEREAS, Pledgee has made a loan to Pledgor in the principal amount of
$317,000 (the "Loan") as evidenced by that certain Promissory Note (the "Note")
of even date herewith; and

         WHEREAS, the Pledgor owns 409,341 shares of the Common Stock of Bitwise
Designs, Inc., and has been granted options to purchase 1,065,000 shares of the
Common Stock of Bitwise Designs, Inc., all of which are fully vested; and

         WHEREAS, the 409,341 shares of Common Stock of Bitwise Designs owned by
Pledgor are held in account no. ________ with Bear Stearns (the "Bear Stearns
Account"); and

         WHEREAS, the Pledgor and Pledgee have agreed that the aforementioned
shares of Common Stock of Bitwise Designs, Inc., the options to purchase the
shares of Common Stock of Bitwise Designs, Inc., the proceeds of any sales of
the such securities and the Bear Stearns Account will secure the obligations
represented by the Note; and

         WHEREAS, in connection with and prior to the making of the Loan, the
Pledgee is requiring that the Pledgor shall have executed and delivered this
Agreement and granted to it the security
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interest contemplated hereby;

         NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce the Pledgee to make the Loan, it is agreed
as follows:

         1. Pledge.

         (a) In order to secure the payment or performance, as the case may be,
in full of the obligations of the Pledgor under the Note, the Pledgor hereby
pledges, assigns, transfers, delivers, deposits, sets over and confirms as a
second priority pledge unto the Pledgee, and its successors and assigns, (i)
409,341 Shares of Common Stock of Bitwise owned (beneficially and of record) by
the Pledgor (the "Pledged Shares"), (ii) options to purchase 1,065,000 shares of
the Common Stock of Bitwise Designs, Inc. (the "Pledged Options") (the Pledged
Shares and the Pledged Options may be collectively referred to herein as the
"Pledged Securities"), (iii) all proceeds of, including cash or other securities
delivered in exchange for, the Pledged Securities, and (iv) the Bear Stearns
Account.

         (b) All of the Pledged Securities collectively owned by the Pledgor are
free and clear of all liens, claims, encumbrances, rights of third parties, and
any and all lockup agreements, except that the Pledged Shares are subject to a
first priority lien held by Bear Stearns (the "First Lien"). Further, all
restrictions on the Pledged Securities, and all restrictive legends on the share
certificates and option certificates representing the Pledged Securities, have
been removed or may be removed pursuant to the Securities Act of 1933, as
amended.

         (c) Certificates representing the Pledged Securities are currently held
by Bear Stearns under the First Lien and may not be delivered to the Pledgee
until such time as the First Lien is satisfied or the earlier consent of Bear
Stearns to such delivery is obtained by Pledgee.

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         (d) Certificates representing the Pledged Options, accompanied by
proper instruments of assignment duly executed in blank by the Pledgor are
herewith delivered to Pledgee.

         (e) The Pledgor agrees that he has delivered herewith to the Pledgee
(i) proper instruments of assignment duly executed in blank by the Pledgor
together with the certificates representing any additional shares of capital
stock of Pledgee hereafter acquired, subject to the First Lien; and (ii) a duly
executed financing statements covering the Bear Stearns Account.

         2. Pledgor and Pledgee's Rights. Subject to the First Lien, unless an
Event of Default under this Agreement shall have occurred: (i) the Pledgor shall
be entitled to receive and retain non-cash dividends and other distributions
with respect to the Pledged Securities, other than any such distributions of
securities of Pledgee which shall be forthwith delivered by Pledgor to the
Pledgee, upon the execution and delivery of this Agreement; (ii) the Pledgor
shall be entitled to receive all cash dividends and distributions in respect of
the Pledged Securities declared and paid by Bitwise Designs; (iii) Pledgor shall
have all voting rights with respect to the Pledged Securities; (iv) Pledgee
shall have, with respect to the Pledged Securities, the rights and obligations
of a secured party under Article 9 of the Uniform Commercial Code; (v) the
Pledgee may file Financing Statements and continuations thereof relating to the
Pledgor in various filing offices to perfect the Pledgee's security interest in
the Bear Stearns Account, and Debtor agrees to execute copies thereof; and (vi)
Pledgee may contact the holder of the First Lien, at any time, for the purpose
of, among other things, inquiring about the status of the First Lien and to
arrange for the delivery of the Pledged Shares to Pledgee. If any distribution
in respect of the Pledged Securities is paid, in whole or in part, in voting
securities or capital interests of Bitwise Designs, the certificates for such
securities shall be delivered by the Pledgor, subject to the First Lien, to the
Pledgee and shall constitute a part of

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the Pledged Securities.

         3. Representations and Warranties: Pledgor represents and warrants that
he owns the Pledged Securities, that the shares are not subject to any lien,
pledge, charge, encumbrance, security interest, lockup agreement effecting the
Pledgor's ability to sell the shares, or a right or action on the part of any
third person to purchase or require such shares or any part of such share,
except as disclosed in Paragraph 1 of this Agreement. Further, the undersigned
Pledgor executing this Agreement has been authorized to execute and deliver to
Pledgee this Agreement and any other documents required to consummate the
transactions contemplated by this Agreement.

         4. Authority. Pledgor has the power and authority to execute, deliver
and perform its obligations under this Agreement and this Agreement constitutes
the legal, valid and binding obligation of Pledgor, enforceable against Pledgor
in accordance with its terms, except as limited by equitable principles,
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditor's rights.

         5. Covenants.

         (a) The Pledgor covenants and agrees that, unless the prior written
consent of the Pledgee to the contrary is obtained, from and after the date
hereof until the payment and performance in full of all obligations of the
Pledgor under the Note, Pledgor shall defend the title to the Pledged Securities
and the lien of Pledgee thereon against the claim of any third party claiming
against or through the Pledgor and shall maintain and preserve such lien so long
as this Agreement shall remain in effect.

         (b) The Pledgor further covenants and agrees that (i) Bear Stearns, as
holder of the First Lien, may deliver the Pledged Shares to Pledgee without the
requirement of any further consent or

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writing on the part of Pledgor; and (ii) Pledgor shall, concurrently herewith,
cause Bear Stearns, as holder of the First Lien to execute and deliver to
Pledgee an Acknowledgment and Consent regarding this Security and Pledge
Agreement in the form and substance of that attached hereto as Exhibit A.

         6. Defaults and Remedies.

         (a) Subject to the rights of the First Lien, upon the occurrence of an
Event of Default as herein defined, the Pledgee is hereby authorized and
empowered and shall have the right, at its election, to transfer and register in
its name the whole or any part of the Pledged Securities, to exercise all voting
rights with respect thereto, to collect and receive all cash dividends and other
distributions made thereon, to sell in one or more sales after five (5) business
days' notice (which notice the Pledgor agrees is commercially reasonable) but
without any previous notice or advertisement, the whole or any part of the
Pledged Securities and otherwise to act with respect to the Pledged Securities
as though the Pledgee were the outright owner thereof, the Pledgor hereby
irrevocably constituting the Pledgee in such regard as his proxy and
attorney-in-fact, with full power of substitution to do so; provided, however,
that the Pledgee shall not have any duty to exercise any such right or to
preserve the same and shall not be liable for any failure to do so or for any
delay in doing so. Any sale shall be made at a public or private sale at the
Pledgee's place of business, or at any public building in the State of New York
to be named in the notice of sale, either for cash or upon credit or for future
delivery at such price as the Pledgee may deem fair, and the Pledgee may be the
purchaser of the whole or any part of the Pledged Securities so sold and hold
the same thereafter in its own right free from any claim of the Pledgor or any
right of redemption, which right is hereby expressly waived. Each sale shall be
made to the highest bidder, but the Pledgee reserves the right to reject any and
all bids at such sale which, in its sole discretion, it shall deem inadequate.

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Demands of performance, except as otherwise herein specifically provided for,
notices of sale, advertisements and the presence of property at sale are hereby
waived and any sale hereunder may be conducted by an auctioneer or any officer
or agent of the Pledgee.

         (b) If, at the original time or times appointed for the sale of the
whole or any part of the Pledged Securities, the highest bid, if there be but
one bid, shall be inadequate to discharge in full all of the obligations of the
Pledgor under the Promissory Note, or if the Pledged Securities be offered for
sale in lots, if at any of such sales, the highest bid for the lot offered for
sale would indicate to the Pledgee, in its sole discretion, the unlikelihood of
the proceeds of the sales of the whole of the Pledged Securities being
sufficient to discharge all of such obligations, the Pledgee may, on one or more
occasions, postpone any of said sales by public announcement at the time of such
sale. In the event of any such postponement, the Pledgee shall give the Pledgor
notice of such postponement or postponements of sale.

         (c) In the event of any sale(s) under this Section 6, the Pledgee
shall, after deducting all costs or expenses of every kind (including attorneys
fees and disbursements) for care, safekeeping, collection, sale, delivery or
otherwise, apply the residue of the proceeds of the sale(s) to the payment or
reduction, either in whole or in part, of the obligations of the Pledgor under
the Promissory Note, whether or not then due, returning the surplus (including
any Pledged Securities not sold by the Pledgee), if any, to the Pledgor.

         (d) In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of the Pledged
Securities may be affected, the Pledgor recognizes that the Pledgee may be
unable to effect a public sale of all or part of the Pledged Securities, and may
be compelled to resort to one or more private sales to a restricted group of

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purchasers who will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges that any such private
sales may be at places and on terms less favorable to the Pledgee than if sold
at public sales. The Pledgor agrees that any such private sales shall not be
deemed to have been made in other than a commercially reasonable manner because
such Pledged Securities shall not have been registered and that the Pledgee has
no obligation to delay sale of any such securities for the period of time
necessary to permit the issuer of such securities to register such securities
for public sale.

         (e) The Pledgor agrees that he will not at any time plead, claim or
take the benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of the whole or any part of
the Pledged Securities or the possession thereof by any purchaser at any sale
hereunder, and the Pledgor waives the benefit of all such laws to the extent he
lawfully may do so. The Pledgor agrees that he will not interfere with any
right, power or remedy of the Pledgee provided for in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, or the
exercise or beginning of the exercise by the Pledgee of any one or more of such
rights, powers or remedies. No failure or delay on the part of the Pledgee to
exercise any such right, power or remedy, and no notice or demand which may be
given to or made upon the Pledgor by the Pledgee with respect to any such
remedies shall operate as a waiver thereof, or limit or impair the Pledgee's
right to take any action or to exercise any power or remedy hereunder without
notice or demand, or prejudice its rights as against the Pledgor in any respect.

         (f) Each and every right granted to the Pledgee hereunder or under any
other document delivered hereunder or in connection herewith, or allowed it by
law or equity, shall be cumulative

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and may be exercised from time to time.

         (g) In addition to all other rights and remedies granted to the Pledgee
hereunder, the Pledgee shall have all the rights granted to creditors generally
under the Uniform Commercial Code as in effect in the State of New York.

         (h) For purposes herein, Event of Default shall be defined to mean the
occurrence of any of the following:

                  (i) an Event of Default under the Note; and

                  (ii) the failure to comply by Pledgor with any term or
provision of this Agreement which failure to comply has not been cured by the
Pledgor within five (5) days of such failure to comply or breach.

         7. Waiver. No failure or delay on the Pledgee's part in exercising any
power of sale, lien, option or other right hereunder, and no notice or demand
which may be given to or made upon the Pledgor by the Pledgee with respect to
any power of sale, lien, option or other right hereunder, shall constitute a
waiver thereof, or limit or impair the Pledgee's right to take any action or to
exercise any power of sale, lien, option or any other right hereunder, without
notice or demand, or prejudice the Pledgee's rights as against the Pledgor in
any respect, nor shall any single or partial exercise of any right preclude any
other or future exercise thereof or the exercise of any other right.

         8. Termination. Upon the payment and performance in full of all of the
obligations of the Pledgor under the Note, the Pledgee shall deliver to the
Pledgor the Pledged Securities which are subject to this Agreement at such time
and all instruments of assignment executed in connection therewith, free and
clear of the lien hereof and, except as otherwise provided herein, all of the
Pledgor's obligations hereunder shall, upon such payment and performance,
terminate.

         9. Renewal or Extensions: No renewal or extension of the Note, and no
delay in the

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enforcement or exercise of the rights granted the Pledgee under this Agreement
shall constitute a waiver or affect the rights of the Pledgee with respect to
the shares of stock or any part of such stock.

         10. Additional Documents: Pledgor stipulates that he will execute and
deliver to Pledgee any and all additional documents that may be necessary to
perfect the security interest given to the Pledgee under this Agreement. These
documents, include, but are not limited to, stock and/or option certificates
representing the Pledged Securities, Rule 144 paperwork, attorney opinion
letters, signed and medallion guaranteed stock powers, duly executed waivers of
any applicable lockup agreements, etc., signed by the Pledgor.

         11. Miscellaneous.

         (a) No Waiver. Neither the failure by Pledgee to, nor the delay on the
part of Pledgee in, the exercise of any power or right granted to it hereunder,
or with respect to any agreement or instrument executed and delivered pursuant
to this Agreement, shall constitute a waiver of such power or right or prevent
Pledgee's exercise or partial exercise of any other right, power or privilege,
it being understood that the rights and remedies of Pledgee under and in respect
of this Agreement and the other documents referred to herein are cumulative and
shall be in addition to any and all other rights and remedies now or hereafter
existing in law or in equity. No modification or waiver of any provision of this
Agreement nor consent to any departure herefrom by any party shall, in any
event, be effective unless such waiver or modification shall be in writing
signed by the party against whom enforcement of the waiver or modification is
sought and then shall be effective only for the period and on the conditions,
and for the specific instance and purpose, for which given. No notice to or
demand on Pledgor in any case shall entitle Pledgor to any other or further
notice or demand in similar or other circumstances. This Agreement may not be
changed or terminated orally.

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         (b) Entire Agreement. This Agreement, together with the other documents
executed and delivered in connection herewith, contains the sole and entire
understanding and agreement of Pledgor and Pledgee with respect to the subject
matter hereof and all prior negotiations, discussions, commitments,
representations, agreements and understandings heretofore between Pledgor and
Pledgee with respect thereto are merged herein.

         (c) Amendment or Modification: This Agreement may not be amended or
modified except in writing, executed and signed by the parties.

         (d) Successors and Assigns. This Agreement shall be binding on and
shall inure to the benefit of the parties hereto and their respective permitted
successors and assigns. Pledgor may not assign this Agreement without Pledgee's
written consent, and any such attempted assignment without such consent shall be
null and void.

         (e) Binding Effect: This Agreement shall be binding on the parties and
their representatives, heirs, successors, and assigns.

         (f) Notices. All notices, requests, demands, consents or other
communications provided for herein shall be in writing and shall be deemed to
have been given or made when received or three days following deposit for
mailing by first-class registered or certified mail, return receipt requested,
to the address of the other party set forth below or to such other address as
may be specified by notice given in accordance with this Section 11:

         If to Pledgor, to:                          John T. Botti
                                                     Bitwise Designs, Inc.
                                                     2165 Technology Drive
                                                     Schenectady, NY 12308

         If to Pledgee, to:                          Bitwise Designs, Inc.
                                                     2165 Technology Drive
                                                     Schenectady, NY 12308
                                                     Attention: Dennis H. Bunt

         (g) APPLICABLE LAW: SERVICE OF PROCESS; APPOINTMENT OF PROCESS

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AGENT. THIS AGREEMENT SHALL BE DEEMED TO BE MADE AND TO BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PROVISIONS OF CHOICE OF LAW THEREUNDER. PLEDGOR HEREBY IRREVOCABLY CONSENTS
TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR OF
ANY FEDERAL COURT LOCATED WITHIN SCHENECTADY COUNTY, NEW YORK IN CONNECTION WITH
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. PLEDGOR
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION
OR PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE
OR FORUM NON- CONVENIENS OR ANY SIMILAR BASIS. PLEDGOR SHALL NOT BE ENTITLED IN
ANY SUCH ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER THE
LAWS OF ANY STATE OTHER THAN THE STATE OF NEW YORK. NOTHING IN THIS SECTION
SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF PLEDGEE TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST PLEDGOR IN ANY
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.

         (h) Waiver of Jury Trial. To the fullest extent permitted by law,
Pledgor hereby waives trial by jury in any litigation in any court with respect
to, in connection with, or arising out of this Agreement, or any instrument,
document or guaranty delivered pursuant to this Agreement, or the validity,
protection, interpretation, collection or enforcement hereof, or any other claim
or dispute hereunder.

         (i) Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole

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but this Agreement shall be construed and enforced only to such extent as shall
be permitted by law.

         (j) Captions. The captions of the various sections of this Agreement
have been inserted only for the purposes of convenience; such captions are not a
part of this Agreement and shall not be deemed, in any manner, to modify,
explain, enlarge or restrict any of the provisions of this Agreement.

         (k) Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed an original and both of which shall constitute a
single instrument.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                                    PLEDGOR:
                                                --------------------------------
                                                John T. Botti

                                    PLEDGEE:    BITWISE DESIGNS, INC.

                                             By:
                                                --------------------------------
                                                Dennis H. Bunt,
                                                Chief Financial Officer

                                       12<PAGE>
                                                                    EXHIBIT 10.2

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT (this "Agreement") dated as of December 24,
2001 is made by Zylab International, Inc., a Virginia corporation with its
principal address at 12800 Middlebrook Road, Suite 410, Germantown, MD 20874
("the Company") and Authentidate Holding Corp., a Delaware corporation with its
principal address at 2165 Technology Drive, Schenectady, NY 12308 (the "Secured
Party").

                                    RECITALS

         WHEREAS, the Secured Party has agreed to provide loans to the Company
in the principal amount of up to $500,000 evidenced by certain secured
promissory notes (collectively the "Notes");

         WHEREAS, to induce the Secured Party to make the loans evidenced by the
Notes, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company has agreed to pledge,
assign and grant a security interest in the Collateral, as defined below, as
security for the Secured Obligations.

         NOW, THEREFORE, in consideration of the mutual obligation herein
contained, the parties here agree as follows:

         1. Definitions and Interpretation.

         1.1 Certain Defined Terms. The following terms shall have the following
meanings under this Agreement:

                  "BASIC DOCUMENT" shall mean the Notes and this Agreement.

                  "CODE" or "UCC" shall mean the Uniform Commercial Code as in
effect in the State of Virginia from time to time or, by reason of mandatory
application, any other applicable jurisdiction.

                  "COLLATERAL" shall mean (a) All inventory, accounts,
equipment, and other tangible assets the Company now has or hereafter may
acquire an interest, wherever located, and all substitutions, renewals and
replacements thereof, together with all rights to payment and other rights
accruing to the Company, as the case may be, by reason of its interest therein;
(b) All general intangibles and other property the Company now has or hereafter
acquires an interest including, but not limited to, goodwill, patents
(including, without limitation, the patents described on Schedule A annexed
hereto), licenses, trade names or styles, trademarks, service marks, source code
to software, customer lists, location rights, correspondence files and credit
records with customers and suppliers, accounts receivable records, books and
records not otherwise described herein, and all computer software or other data
processing material on which such information may be

<PAGE>
maintained; (c) All cash and non-cash proceeds of all of the foregoing and all
rights to the payment of money, including, but not limited to, the proceeds of
any policy or policies of insurance, tax refund claims and commissions; and (d)
all cash proceeds and all rights to the payment of money payable on any life
insurance policy on the life of Jonathan Karlin.

                  "DEFAULT" shall mean any default described in the Notes.

                  "EVENT OF DEFAULT" shall mean event of Default as described in
the Notes.

                  "HOLDERS" means the holder or holders of the Notes.

                  "LIEN" shall mean, with respect to any property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such property or any agreement to give, or notice of, any of the foregoing.

                  "MAJORITY HOLDERS" means holders of a majority of the
principal amount of the outstanding Notes.

                  "SECURED OBLIGATIONS" shall mean any and all obligations of
the Company for the performance of its agreements, covenants and undertakings
under or in respect of the Notes, including the payment of all amounts of
principal and interest thereunder.

         1.2 Interpretation. In this Agreement, unless otherwise indicated, the
singular includes the plural and plural the singular; words importing either
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments (without, however,
limiting any prohibition on any such amendments, extensions and other
modifications by the terms of any such document); and references to persons or
entities including their respective permitted successors and assigns.

         2. Collateral

         2.1 Grant. As collateral security for the prompt payment in full when
due (whether at stated maturity, by acceleration or otherwise) and performance
of the Secured Obligations, the Company hereby pledges, assigns and grants to
the Secured Party a security interest in all of the Company's right, title and
interest in and to the Collateral.

                                        2
<PAGE>
         2.2 Perfection. Concurrently with the execution and delivery of this
Agreement, the Company shall (i) file such financing statements and other
documents in such offices as the Secured Party may reasonably request in writing
to perfect and establish the Lien granted by this Agreement, and (ii) take all
such other actions as shall be necessary or as the Secured Party may request to
perfect and establish the priority of the Lien granted by this Agreement.

         2.3 Preservation and Protection of Security Interests

                  The Company shall:

                  (a) upon the acquisition after the date of this Agreement by
the Company of any instrument or chattel paper evidencing all or any part of the
interests constituting the Collateral, promptly deliver and pledge to the
Secured Party all such instruments or chattel paper, endorsed or accompanied by
such instruments of assignment and transfer in such form and substance as the
Secured Party may reasonably request; and

                  (b) give, execute, deliver, file or record any and all
financing statements, notices, contracts, agreements or other instruments,
obtain any and all governmental approvals and take any and all steps that may be
necessary or as the Secured Party may request to create, perfect, establish the
priority of, or to preserve the validity, perfection or priority of, the Lien
granted by this Agreement or to enable the Secured Party to exercise and enforce
its rights, remedies, powers and privileges under this Agreement with respect to
such Lien.

         2.4 Rights and Obligations

                  (a) The Company shall remain liable to perform its duties and
obligations under the contracts and agreements included in the Collateral in
accordance with their respective terms to the same extent as if this Agreement
had not been executed and delivered. The exercise by the Secured Party of any
right, remedy, power or privilege in respect of this Agreement shall not release
the Company from any of its duties and obligations under such contracts and
agreements. The Secured Party shall not have any duty, obligation or liability
under such contracts and agreements by reason of this Agreement or any other
Basic Document, nor shall the Secured Party be obligated to perform any of the
duties or obligations of the Company under any such contract or agreement or to
take any action to collect or enforce any claim under any such contract or
agreement.

                  (b) No Lien granted by this Agreement in the Company's right,
title and interest in any contract or agreement shall be deemed to be a consent
by the Secured Party to any such contract or agreement.

                  (c) No reference in this Agreement to proceeds or to the sale
or other disposition of Collateral shall authorize the Company to sell or
otherwise dispose of any Collateral.

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<PAGE>
                  (d) The Secured Party shall not be required to take steps
necessary to preserve any rights against prior parties to any part of the
Collateral.

                  (e) So long as no Default shall have occurred and be
continuing, the Company shall have the right to exercise all powers of ownership
pertaining to the Collateral for all purposes not inconsistent with the terms of
this Agreement.

                  (f) If any Default shall have occurred and be continuing, and
the Secured Party exercises its right to declare any Secured Obligation due and
payable or seeks or pursues any other right, remedy, power or privilege
available to it under applicable law, this Agreement or any other Basic
Document, all payments and other distributions on the Collateral shall be paid
directly to the Secured Party and applied as set forth in Section 4.4.

                  (g) The holders of the Notes as Secured Party(s) shall share
ratably in the distribution of benefits and any expenditures relating to this
Agreement based on the ratio of the principal amount of their respective Notes
to the total loan amount represented by all of the Notes.

                  (h) The Secured Party may exercise their rights with respect
to the Collateral without resort or regard to other collateral or sources of
reimbursement for liability. The Secured Party shall not be deemed to have
waived any of their rights with respect to the Secured Obligations or the
Collateral unless such waiver be in writing and signed by the Secured Party. No
delay or omission on the part of the Secured Party in exercising any right shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or any future
occasion. All rights and remedies of the Secured Party with respect to the
Secured Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised separately or
concurrently.

         3. Representations, Warranties and Covenants. As of the date of this
Agreement, the Company represents, warrants and covenants to the Secured Party
as follows:

         3.1 Title. The Company is the sole beneficial owner of the Collateral
in which it purports to grant a Lien pursuant to this Agreement, and such
Collateral is free and clear of all Liens. The Lien granted by this Agreement in
favor of the Secured Party has attached and constitutes a perfected security
interest in all of such Collateral. The Company shall pay, when due, the Secured
Obligations and any other obligations owing under the Notes or hereunder. The
Company shall defend title to the Collateral against the claims and demands of
all persons.

         3.2 Sales and Other Liens. So long as any portion of the Notes remains
unpaid, the Company shall not create or incur any Liens upon any of the
Collateral except for: (i) Liens granted to the Holders; (ii) Liens being
contested in good faith by the Company; (iii) purchase money Liens on newly
acquired assets in connection with the establishment or acquisition of, or
investment or participation in, any business, which Liens shall extend solely to
the assets so acquired; (iv) Liens on any assets of the Company granted in
connection with the purchase or lease

                                        4
<PAGE>
of new capital equipment and the incurrence of the obligations or indebtedness
related thereto; (v) Liens securing account receivable financing which do not
exceed $150,000 principal amount are limited solely to accounts receivables of
the Company (and Authentidate Holding Corp hereby agrees to subordinate any lien
and security interest under this Security Agreement to the provider of account
receivable financing) and (vi) Liens junior in right to those created by this
Security Agreement. Until the occurrence of an Event of Default under this
Security Agreement, the Company may use, sell or exchange the Collateral in the
ordinary course of business without the written consent of the Holders, if such
sales or exchanges are in accordance with the Company's usual customary
practices and if, with regard to equipment, such transaction results (a) in the
acquisition of a substitute item of at least comparable value; or (b) from the
disposition of obsolete or worn out equipment.

         3.3 Preservation of the Collateral; Inspection. The Company shall use
reasonable care in the custody and preservation of the Collateral, and shall
comply with all legal and insurance requirements permitted with respect to its
use. The Company shall permit the Holders from time to time during regular
business hours, to enter upon the premises where the Collateral is located and
examine it.

         3.4 Principal Place of Business. The Company's chief executive office
and principal place of business is located at the address set forth below.

         3.5 Further Assurances; Attorney in Fact. At any time and from time to
time, upon the written request of a Holder, at the sole expense of the Company,
the Company will promptly and duly execute and deliver such further instruments
and documents and take such further action as the Holder may reasonably request
for the purpose of obtaining or preserving the full benefits of this Agreement
and the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the UCC in effect in
any jurisdiction with respect to the liens created hereby. The Company hereby
authorizes the Holders to file any such financing or continuation statement
without the signature of the Company, as the case may be, to the extent
permitted by applicable law, and the Holders agree to use reasonable efforts to
provide the Company with a copy of any such statement filed by them, but shall
have no liability to the Company for its failure to do so, and hereby appoints
the Holders as the Company's attorney-in-fact for the purpose of signing the
Company's names to any such financing and continuation statements. A carbon,
photograph or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.

         3.6 Inspection Rights. The Company hereby grants to the Holders and its
employees, representatives and agents the right to visit, during reasonable
hours upon prior reasonable written notice to the Company, any of the Company's
properties and/or facilities holding, utilizing and/or representing any of the
Collateral, and to inspect the records relating thereto upon reasonable written
notice to the Company and as often as may be reasonably requested.

         3.7 Additional Covenants and Warranties. The Company represents,
warrants, covenants and agrees as follows:

                                        5
<PAGE>
                  (a) Performance of this Agreement does not conflict with or
result in a breach of any agreement to which the Company is bound.

                  (b) The Company will not (a) change the location of its chief
executive office or other places of business or remove its books and records
from such location, or (b) remove any equipment or inventory from any location
in which it may be located (except for sales in the ordinary course of
business), (c) change its identity or corporate structure to such an extent that
any financing statement filed by or on behalf of the Holders would become
misleading, unless, in each of the foregoing cases the Company shall have given
the Holders at least 30 days prior written notice thereof and shall do all
things necessary to maintain the first priority status (subject only to the
holders of senior indebtedness) of the Holders' security interest.

                  (c) If any Event of Default (as defined in the Notes) shall
occur, the Holders may exercise any and all rights and remedies of a Secured
Party after default under the UCC.

                  (d) No security agreement or financing statement with respect
to all or any part of the Collateral is on file or of record in any public
office. When appropriate financing statements have been filed by or on behalf of
the Secured Party against the Company, the security interest granted pursuant to
this Agreement will constitute a perfected security interest (to the extent such
liens can be perfected by filing) on the Collateral in favor of the Secured
Party, which security interest will be prior to all other liens on the
Collateral created by the Company and in existence on the date hereof and which
security interests are enforceable as such against all creditors of the Company.

                  (e) The Company agrees to pay, and to hold the Secured Party
harmless from, any and all liabilities, costs and expenses (including without
limitation, reasonable legal fees and expenses) (i) with respect to fees, taxes
or other costs incurred with respect to recording financing statements under the
Code and (ii) in connection with any of the transactions contemplated by this
Agreement or the enforcement of the Secured Party' rights hereunder, except
those liabilities, costs and expenses arising out of the willful misconduct of
the Secured Party. In any suit, proceeding or action brought by the Secured
Party under any account for any sum owing thereunder, or to enforce any
provisions of any account for any sum owing thereunder, or to enforce any
provisions of any account or contract, the Secured Party shall be indemnified by
the Company from and against all expense, loss or damage suffered by the Secured
Party in any such action, except for expenses, loss or damage arising out of the
willful misconduct of the Secured Party (in the case of indemnified amounts
which would otherwise be owing to the Secured Party);

                  (f) The Company shall keep, or cause the Collateral to be
kept, insured against such risks, including fire, casualty and public liability,
as are usually insured against by persons engaged in the same or similar
business in the same location in at least such amounts as such insurance is
usually carried by persons engaged in the same or similar businesses. The
Company will use its best efforts to cause the Secured Party to be added as an
additional insured to all policies insuring the Collateral;

                                        6
<PAGE>
                  (g) The Company shall pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation; and

                  (f) All information heretofore, herein or hereafter supplied
to the Secured Party by or on behalf of the Company with respect to the
Collateral is accurate and complete in all material respects.

         4. Escrow of ZyLAB Source Code. Simultaneously herewith, the Company is
delivering to Fort Knox Escrow Services, Inc., as escrow agent ("Escrow Agent"),
to hold in escrow, the source code known as HAPI32 and ZDK (the "Source Code").
The Escrow Agent shall hold the source in escrow and shall not release except
upon an Event of Default as provided herein. Neither the Escrow Agent not the
Secured Party shall make use, in any manner, of the Source Code pending release
pursuant to the terms hereof. Upon payment in full of the Notes, Escrow Agent
shall return the Source Code to the Company.

         5. Remedies

         5.1 Events of Default. If any Event of Default shall have occurred and
be continuing, and without limiting the generality of the remedies available to
the Holders, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by
law), to or upon the Company, all and each of which demands, presentments,
protests, advertisements and notices are hereby waived:

                  (a) The Holders in their discretion may make any reasonable
compromise or settlement they deem desirable with respect to any of the
Collateral and may extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, all or any part of the
Collateral;

                  (b) The Holders in their discretion may, in their name or in
the name of the Company or otherwise, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in exchange
for all or any part of the Collateral, but shall be under no obligation to do
so;

                  (c) The Holders in their discretion may with respect to all or
any part of the Collateral which shall then be or shall thereafter come into the
possession, custody or control of the Holders in their discretion or any of
their agents, sell, lease or otherwise dispose of all or any part of such
Collateral, at such place or places as the Holders in their discretion deems
best, upon such terms and conditions as they deem advisable and at such prices
as they may deem best, for cash, for credit or for future delivery (without
thereby assuming any credit risk) and at public or private sale, without demand
of performance or notice of intention to effect any such disposition or of time
or place of any such sale, and the Holders in their discretion or any other
person or entity may be the purchaser, lessee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent permitted by
law, at any private sale) and thereafter hold the same absolutely, free from any
claim

                                        7
<PAGE>
or right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Company, any such demand, notice and right or
equity being hereby expressly waived and released. The Holders in their
discretion may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the sale may be so adjourned (if any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale or other
disposition.) The Company further agrees, at the Holders' request, to assemble
the Collateral and make it available to the Holders, at the place which the
Holders shall reasonably select, whether at the Company's premises or elsewhere.

                  (d) The Holders shall have, and in their discretion may
exercise, all of the rights, remedies, powers and privileges with respect to the
Collateral of a secured party under the Code (whether or not the Code is in
effect in the jurisdiction where such rights, remedies, powers and privileges
are asserted) and such additional rights, remedies, powers and privileges to
which a secured party is entitled under the laws in effect in any jurisdiction
where any rights, remedies, powers and privileges in respect of this Agreement
or the Collateral may be asserted, including the right, to the maximum extent
permitted by law, to exercise all voting, consensual and other powers of
ownership pertaining to the Collateral as if the Secured Party were the sole and
absolute owner of the Collateral (and the Company agrees to take all such action
as may be appropriate to give effect to such right).

The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 4.1 shall be applied in accordance with
Section 4.4.

         5.2 Deficiency. If the proceeds of, or other realization upon, the
Collateral by virtue of the exercise of remedies under Section 5.1 are
insufficient to cover the costs and expenses of such exercise and the payment in
full of the other Secured Obligations, the Company shall remain liable for any
deficiency.

         5.3 Private Sale

                  (a) The Secured Party shall incur no liability as a result of
the sale, lease or other disposition of all or any part of the Collateral at any
private sale pursuant to Section 4.1 conducted in a commercially reasonable
manner. The Company hereby waives any claims against the Secured Party arising
by reason of the fact that the price at which the Collateral may have been sold
at such a private sale was less than the price which might have been obtained at
a public sale or was less than the aggregate amount of the Secured Obligations,
even if the Secured Party accepts the first offer received and does not offer
the Collateral to more than one offeree.

                  (b) The Company recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws, the Secured Party may be compelled, with respect to any sale of
all or any part of the Collateral, to limit purchasers to those who will agree,

                                       8
<PAGE>
among other things, to acquire the Collateral for their own account, for
investment and not with a view to distribution or resale. The Company
acknowledges that any such private sales may be at prices and on terms less
favorable to the Secured Party than those obtainable through a public sale
without such restrictions, and, notwithstanding such circumstances, agree that
any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Secured Party shall have no obligation to engage
in public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit a public sale.

         5.4 Application of Proceeds. Except as otherwise expressly provided in
this Agreement and except as provided below in this Section 5.1, the proceeds
of, or other realization upon, all or any part of the Collateral by virtue of
the exercise of remedies under Section 5.1 and any other cash at the time held
by the Secured Party under this Agreement, shall be applied as follows:

                  First, to the payment of the costs and expenses of such
exercise of remedies, including reasonable out-of-pocket costs and expenses of
the Secured Party, the fees and expenses of its agents and counsel and all other
expenses incurred and advances made by the Secured Party in that connection, as
provided in this Agreement and/or the Note;

                  Next, to the payment in full of the remaining Secured
Obligations in such manner as the Secured Party may determine; and

                  Finally, to the payment to the Company, or its respective
successors or assigns, or as a court of competent jurisdiction may direct, of
any surplus then remaining.

         As used in this Section 5, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Company or any issuer of,
or account debtor or other obligor on, any of the Collateral.

         6. Miscellaneous

         6.1 Waiver. No failure on the part of the Secured Party to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement shall operate as a waiver of
such right, remedy, power or privilege, nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement preclude any other
or further exercise of any such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided in this Agreement are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.

         6.2 Notices. All notices and communications to be given under this
Agreement shall be given or made in writing to the intended recipient at the
address specified below or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly

                                        9
<PAGE>
given when transmitted by telex or telecopier, delivered to the telegraph or
cable office or personally delivered or, in the case of a mailed notice, upon
receipt, in each case, given or addressed as provided in this Section 5.2:

         To the Company:            Zylab International, Inc.
                                    12800 Middlebrook Road
                                    Suite 410
                                    Germantown, MD 20874
                                    Attn: John Karlin

         With a copy to:            Gorham S. Clark, Esq.
                                    Foust & Clark, P.C.
                                    8345-A Greensboro Drive
                                    McLean, Virginia 22102
                                    Attn: Rory Clark, Esq.

         To the Secured Party:      Authentidate Holding Corp.
                                    2165 Technology Center
                                    Schenectady, NY  12308
                                    Attn: John T. Botti, Pres.

         With a copy to:            Goldstein & DiGioia, LLP
                                    369 Lexington Avenue
                                    New York, New York 10017
                                    Fax No.: (212) 557-0295
                                    Attn: Victor J. DiGioia, Esq.

         6.3 Expenses. The Company agrees to pay or to reimburse the Secured
Party for all costs and expenses (including reasonable attorney's fees and
expenses) that may be incurred by the Secured Party in any effort to enforce any
of the provisions of Section 4 or any of the obligations of the Company in
respect of the Collateral or in connection with (a) the preservation of the Lien
of, or the rights of the Secured Party under this Agreement or (b) any actual or
attempted sale, lease, disposition, exchange, collection, compromise, settlement
or other realization in respect of, or care of, the Collateral, including all
such costs and expenses (and reasonable attorney's fees and expenses) incurred
in any bankruptcy, reorganization, workout or other similar proceeding relating
to the Company.

         6.4 Amendments. Any provision of this Agreement may be modified,
supplemented or waived only by an instrument in writing duly executed by the
Company and the Secured Party. Any such modification, supplement or waiver shall
be for such period and subject to such conditions as shall be specified in the
instrument effecting the same and shall be binding upon the Secured Party, each
holder of any of the Secured Obligations and the Company, and any such waiver
shall be effective only in the specific instance and for the purposes for which
given.

                                       10
<PAGE>
         6.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company, the Secured Party and each holder of any of
the Secured Obligations and their respective successors and permitted assigns.
The Company shall not assign or transfer its rights under this Agreement without
the prior written consent of the Secured Party.

         6.6 Survival. All representations and warranties made in this Agreement
or in any certificate or other document delivered pursuant to or in connection
with this Agreement shall survive the execution and delivery of this Agreement
or such certificate or other document (as the case may be) or any deemed
repetition of any such representation or warranty.

         6.7 Agreements Superseded. This Agreement and the Notes and
subscription documents executed in connection therewith, supersede all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.

         6.8 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

         6.9 Continuing Effect. All agreements, representations and warranties
herein made by Debtor shall be continuing as long as the Note remains
outstanding and unpaid.

         6.10 Headings. Section headings are for reference purposes only.

         6.11 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which, when
taken together, shall constitute but one agreement, and shall become effective
when copies which, when taken together, bear the signature of each of the
parties hereto shall have been delivered to Secured Party and Debtor.

         6.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAW. THE COMPANY HEREBY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK, NEW YORK FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

                                       11
<PAGE>
         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

                                         Zylab International, Inc.

                                         By
                                           -------------------------------------
                                              John Karlin, President

                                         SECURED PARTY

                                         Authentidate Holding Corp.

                                         By
                                           -------------------------------------
                                              John T. Botti, President

                                       12
<PAGE>
                                   Schedule A

ZyLAB International Inc. owns no patents

                                       13

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