Exhibit 10.1

NOTE EXCHANGE AGREEMENT

THIS NOTE EXCHANGE AGREEMENT (this “ Agreement ”) is dated as of March 20, 2017, between Authentidate Holding Corp., a Delaware corporation (the “ Company ”) and the holders identified on the signature pages hereto (each, a “ Holder ” and collectively, the “ Holders ”).

Recitals

WHEREAS, pursuant to the terms and conditions of this Agreement, the Company hereby offers to the Holder a new secured promissory note (the “New Note” ) and the Holder, wishes to purchase and acquire the New Note in exchange for the surrender and cancellation of one or more promissory notes held by the Holder, the terms and conditions of which are set forth on the signature page to this Agreement (“ Original Notes ”) upon the terms and conditions set forth herein; and

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby agreed and acknowledged, the parties hereto hereby agree as follows:

1.            Defined Terms . In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the New Note or Security Agreement (as defined herein); and (b) the following terms have the meanings set forth in this Section 1:

“ Affiliate ” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For the purposes of this definition, “control”, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“ 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.

“ Closing Date ” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to: (i) the Holders’ obligations to surrender the Original Note and (ii) the Company’s obligations to deliver the New Note have been satisfied or waived.

“ Commission ” means the United States Securities and Exchange Commission.

“ Common Stock ” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

“ Conversion Price ” shall have the meaning ascribed to such term in the New Note.

“ Conversion Shares ” means the shares of Common Stock issuable upon the conversion of the New Note.

“ Encumbrances ” shall mean any security or other property interest or right, claim, lien, pledge, option, charge, security interest, contingent or conditional sale, or other title claim or retention agreement interest or other right or claim of third parties, whether perfected or not perfected, voluntarily incurred or arising by operation of law, and including any agreement (other than this Agreement) to grant or submit to any of the foregoing in the future.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ New Note ” means the Secured Convertible Note due, subject to the terms therein, on the one-year anniversary of the date on which it is issued, as issued by the Company to the Holder hereunder, in an aggregate principal amount equal to the sum of (i) the principal amount of the Original Notes, plus (ii) the accrued and unpaid interest on the Original Notes up to the Business Day immediately preceding the Closing Date, which New Note shall be in the form of Exhibit A attached hereto.

“ 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.

“ Required Approvals ” shall have the meaning ascribed to such term in Section 4(d).

“ Required Minimum ” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the New Note, ignoring any conversion or exercise limits set forth therein.

“ Securities ” means the New Note and the Conversion Shares.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Security Agreement ” means that certain Amended and Restated Security Agreement, dated as of the date first set forth above, among the Company and the secured parties, as named therein.

“ Trading Day ” means a day on which the principal Trading Market is open for trading.

“ Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, or any tier of the OTC Markets Inc. (or any successors to any of the foregoing).

“ Transaction Documents ” means this Agreement, the New Note, the Security Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

2.            Securities Exchange .

2.1         Exchange and Closing

(a)         Upon the following terms and subject to the conditions contained herein, Holder agrees to exchange from the Company the Original Notes and Holder shall deliver and surrender to the Company at its principal offices for cancellation the Original Notes held by Holder, free and clear of any liens, claims, charges, security interest or other legal or equitable Encumbrances in exchange for a New Note in the aggregate principal amount equal to the principal amount of the Original Note, plus the accrued and unpaid interest on the Original Notes up to the Business Day immediately preceding the Closing Date in the form of Exhibit A to this Agreement. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Company’s counsel or such other location and on such Business Day as the parties shall mutually agree.

(b)        At Closing, the New Note issued in exchange for cancellation of the Original Notes shall be deemed the full and final consideration for the cancellation of the Original Notes, and notwithstanding anything to the contrary contained in the Original Notes or otherwise, the Company and Holder hereby agree that upon the Closing: (i) the Company’s obligations under the Original Notes held by Holder shall be deemed fully paid and satisfied; and (ii) the Original Notes shall automatically terminate and have no further force and effect (other than those specific provisions which pursuant to the terms and provisions of the Original Notes which expressly survive termination). Further, the Company and Holder hereby agree that upon the Closing the Company’s obligations to Holder pursuant to any security agreements previously entered into between the Company and Holder shall be deemed fully satisfied and the parties’ obligations to one another with respect to any security interests granted by the Company shall be governed solely by the Security Agreement entered into between the Company and the Holders pursuant to this Agreement.

(c)        Holder further agrees that it will write “PAID IN FULL” on the original of the Original Notes surrendered to the Company pursuant to this Agreement and initial such phrase and return the originally executed version of the Original Notes to the Company. Notwithstanding the foregoing, however, in the event the Holder does not inscribed the phrase “PAID IN FULL” on the Original Notes, it hereby authorizes the Company’s agents and officers to write such phrase on the Original Notes. In the event Holder has lost his, her or its Original Notes, or such Original Notes were lost, stolen or destroyed, Holder shall, instead of returning the Original Notes, execute and deliver to the Company an affidavit of loss and indemnification undertaking (in a form acceptable to the Company) with respect to such Original Notes and in which instrument the Holder acknowledges that the Original Notes are cancelled and paid in full.

2.2         Deliveries .

(a)        On or prior to the Closing Date (except as otherwise provided below), the Company shall deliver or cause to be delivered to Holder the following: (i) this Agreement duly executed by the Company; (ii) the Security Agreement, duly executed by the Company; (iii) a New Note registered in the name of Holder (such original New Note may be delivered within three Trading Days following Closing Date); (iv) an agreement executed between the Company or its subsidiary, Peachstate Health Management LLC d/b/a AEON Clinical Laboratories and the landlord of the premises in which the Company’s principal place of business is located pursuant to which the landlord agrees to subordinate its security interest into certain assets of the Company to the security interests to be granted to the Holder pursuant to the Security Agreement; and (v) such other documents relating to the transactions contemplated by this Agreement as the Holder or its counsel may reasonably request.

(b)        On or prior to the Closing Date, Holder shall deliver or cause to be delivered to the Company, as applicable, the following: (i) this Agreement duly executed by Holder; (ii) the Security Agreement, duly executed by the Holder; (iii) the Holder’s Original Notes (or an affidavit of loss and indemnity undertaking with respect thereto, in a form reasonably acceptable to the Company); and (iv) such other documents relating to the transactions contemplated by this Agreement as the Company or its counsel may reasonably request.

2.3          Closing Conditions .

(a)        The obligations of the Company hereunder in connection with the Closing are subject to the satisfaction, or waiver by the Company, of the following conditions: (i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Holder contained herein (unless as of a specific date therein in which case they shall be accurate as of such date); (ii) all obligations, covenants and agreements of the Holder required to be performed at or prior to the Closing Date shall have been performed; (iii) the delivery by the Holder of the items set forth in Section 2.2(b) of this Agreement; (iv) holders of an aggregate principal amount of $2,170,000 of outstanding notes shall have agreed to exchange such notes for New Notes pursuant to the terms of this Agreement; and (v) the Company shall have received any Required Approvals necessary to conduct the Closing.

(b)        The obligations of the Holder hereunder in connection with the Closing are subject to the satisfaction, or waiver by the Holder, of the following conditions: (i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein); (ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed; (iii) holders of an aggregate principal amount of $2,170,000 of outstanding notes shall have agreed to exchange such notes for New Notes pursuant to the terms of this Agreement; and (iv) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement.

(c)        Solely with respect to a Holder that beneficially owns (as determined in accordance with the rules and regulations promulgated under the Exchange Act) or is an Affiliate of the direct beneficial owner, of shares of the Company’s Series B Preferred Stock, the obligations of the parties hereunder are subject to the execution by the Company and the holder of the shares of the Company’s Series B Preferred Stock, of a definitive agreement to exchange such shares of Series B Preferred Stock for a new class of preferred stock, as described in such definitive agreement.

2.4         Status of Original Notes . Holder hereby expressly agrees that effective as of the date of this Agreement, as first set forth above, that the maturity dates of the Original Notes are hereby further extended until the date that is the Closing Date and that the definition of the term “Maturity Date” as set forth in the Original Notes is hereby amended to be “the Closing Date as contemplated by that certain Note Exchange Agreement dated as of March 20, 2017 between the Company and the Holder”. Accordingly, from and after the date hereof, each reference in the Original Notes to the Original Notes (or words of like import) shall mean and be a reference to the Original Notes as amended by hereby.

3.         Representations, Warranties and Covenants of Holder .  Holder hereby makes the following representations and warranties to the Company, and covenants for the benefit of the Company.

(a)         Due Organization and Authorization; Binding Agreement . Holder is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Holder has full right, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly authorized, executed and delivered by Holder and (assuming due authorization, execution and delivery by the Company) constitutes the valid and binding obligation of Holder enforceable against Holder in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at law).

(b)         No Conflicts . The execution, delivery and performance of this Agreement by the Holder and the consummation by the Holder of the transactions contemplated hereby do not and will not: (i) conflict with, or constitute a default (or an event which 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 of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Holder is a party or by which the Holder’s properties or assets are bound; or (ii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Holder or by which any property or asset of the Holder are bound or affected, except, in each case, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, materially and adversely affect the Holder’s ability to perform its obligations under this Agreement. No consent, approval, authorization or order of any person, entity, court, administrative agency or governmental authority is required for the execution, delivery or performance of this Agreement by the Holder.

(c)         Holder Status . At the time Holder was offered the New Note, it was, and as of the date hereof it is, and on each date on which it converts the New Note it will be either: (i) an “accredited investor” as defined in Rule 501(a) under the Securities Act; or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Holder is not required to be registered as a broker-dealer under Section 15 of the Exchange Act. Holder has sufficient knowledge and experience in financial matters as to be capable of evaluating the risks and merits of the transaction contemplated hereby. Holder is able to bear the economic risk of its investment in the New Note for an indefinite period of time, is able to afford a complete loss of such investment, and acknowledges that no public market exists for the New Note and that there is no assurance that a public market will ever develop for such securities. Neither, the New Note nor the Conversion Shares have been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available.

(d)         Information . Holder has reviewed, or has had the opportunity to review, with the assistance of professional and legal advisors of its choosing, all information (including all documents filed or furnished to the Commission by the Company) relating to the business, finances and operations of the Company and materials relating to the exchange transaction which have been requested by such Holder. Such Holder has been afforded the opportunity to ask questions of the Company and has had sufficient access to the Company necessary for Holder to decide to exchange its Original Notes for the New Note in accordance with this Agreement. Such Holder acknowledges that all of the documents filed by the Company with the Commission under Sections 13(a), 14(a) or 15(d) of the Exchange Act, that have been posted on the EDGAR site maintained by the Commission are available to such Holder, and such Holder has not relied on any statement of the Company not contained in such documents in connection with such Holder’s decision to enter into this Agreement or any other Transaction Document and to consummate the transactions contemplated hereby.

(e)         Certain Disqualification Events . Neither the Holder, nor any director, executive officer, other member or officer of the Holder participating in the transactions contemplated by this Agreement, any beneficial owner of 20% of more of the Holder’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Holder in any capacity at the time of sale (each a “ Holder Covered Person ”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “ Disqualification Event ” ), except for a Disqualification Event covered by Rule 506(d)(2) or (3) (provided that the foregoing exception shall not be available hereunder with respect to Rule 506(d)(2)(iv) for any Disqualification Event of which the Company did not know as a result of the Holder’s failure to disclose such Disqualification Event to the Company). Holder has exercised reasonable care to determine: (i) the identity of each person that is a Holder Covered Person; and (ii) whether any Holder Covered Person is subject to a Disqualification Event.

(f)         Own Account . The Holder is and will be acquiring the Securities for the Holder’s own account, for investment purposes, and not with a view to any resale or distribution in whole or in part, in violation of the Securities Act or any applicable securities laws; provided , however , that by making the representations herein, the Holder does not agree to hold such Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with federal and state securities laws applicable to such disposition.

(g)         Restricted Securities . The Holder understands that the Securities purchased hereunder, including the Conversion Shares, are “restricted securities,” as that term is defined in the Securities Act and the rules thereunder, have not been registered under the Securities Act, and that none of the Securities can be sold or transferred unless they are first registered under the Securities Act and such state and other securities laws as may be applicable or an exemption from registration under the Securities Act is available (and then the Securities may be sold or transferred only in compliance with such exemption and all applicable state and other securities laws). Holder acknowledges that all certificates representing any of the New Note and the Conversion Shares will bear a restrictive legend in a form as set forth below and hereby consents to the transfer agent for the Company’s Common Stock making a notation on its records to implement the restrictions on transfer described herein.  Holder further understands that except as provided in the Transaction Documents: (i) the Securities have not been and are not being registered under the Securities Act or any state securities laws, must be held indefinitely and may not be offered for sale, sold, assigned or transferred unless: (A) subsequently registered thereunder; (B) Holder shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration; or (C) Holder provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “ Rule 144 ” ); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person (through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the Commission thereunder; and (iii) except as set forth in the Transaction Documents, neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

(h)         Reliance on Representations . Holder understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Holder set forth herein in order to determine the availability of such exemptions and the eligibility of Holder to acquire the Securities. The Holder undertakes to immediately notify the Company of any change in any statement or other information relating to the Holder which takes place prior to the Closing time. No Person has made any written or oral representations to the Holder that: (i) any Person will resell or repurchase the New Notes or the Conversion Shares or (ii) as to the future price or value of the shares of Common Stock of the Company.

(i)         No Brokers . The Holder has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with any of the transactions contemplated by this Agreement.

(j)         No General Solicitation . The Holder acknowledges that the Securities were not offered to the Holder by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including: (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio; or (ii) any seminar or meeting to which the Holder was invited by any of the foregoing means of communications.

(k)         Representations Regarding Original Notes . The Holder owns and holds, beneficially and of record, the entire right, title, and interest in and to the Original Notes held by it, free and clear of any and all pledges, liens, security interests, mortgage, claims, charges, restrictions, options, title defects or Encumbrances other than restrictions under the Securities Act and other applicable federal and state securities laws. Holder has not, in whole or in part, (x) assigned, transferred, hypothecated, pledged or otherwise disposed of the Original Notes or its rights in such Original Notes, or (y) given any person or entity any transfer order, power of attorney or other authority of any nature whatsoever with respect to such Original Notes which would limit the Holder’s power to transfer the Original Notes hereunder. Holder has the sole and unencumbered right and power to transfer and dispose of the Original Notes, and such Original Notes are not subject to any agreement, arrangement or restriction with respect to the voting or transfer of the Original Notes, except for this Agreement. No additional consideration for any purpose shall be due to Holder at Closing, with respect to the Original Notes, other than the New Note. Upon delivery of the Original Notes to the Company for cancellation (as contemplated by this Agreement), the Company will receive good and marketable title to the Original Notes, free and clear of all pledges, liens, security interests, mortgage, claims, charges, restrictions, options, title defects or Encumbrances. The Original Notes being surrendered by it for cancellation pursuant to this Agreement represent all of the Original Notes of the Company in which Holder owns any legal or beneficial interest. No Event of Default (as defined in the Original Notes) has been declared under the Original Notes and no Event of Default exists or is continuing with respect to the Original Notes.

(l)         No Representations . No person or entity, other than the Company, has been authorized to give any information or to make any representation on behalf of the Company in connection with the offering of Securities, and if given or made, such information or representations have not been relied upon by the Holder as having been made or authorized by the Company.  The only representations and warranties made by the Company in connection with the offering of Securities are those contained in this Agreement, and the only information made available by the Company in connection with the offering of Securities is contained in this Agreement.

(m)         No Legal, Tax or Investment Advice .   Holder understands that the tax consequences of the transactions contemplated by this Agreement are complex, and accordingly Holder represents and warrants that it understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to him, her or it in connection with this Agreement and the transactions contemplated herein, constitutes legal, tax or investment advice.   Holder has consulted such legal, tax and investment advisors as he, she or it, in his, her or its sole discretion, has deemed necessary or appropriate in the circumstances.   Holder is not relying on the Company or any of its respective affiliates or agents, including its counsel and accountants, for any tax advice regarding the tax consequences of the transactions contemplated by this Agreement.

(n)           No Governmental Review . Such Holder understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement in connection with the transactions contemplated by this Agreement or the fairness or suitability of the investment in the New Note nor have such authorities passed upon or endorsed the merits of the New Note.

4.        Representations, Warranties and Covenants of the Company .  The Company represents and warrants to the Holder, and covenants for the benefit of the Holder, as follows:

(a)           Due Organization . The Company has been duly incorporated and is validly existing and in good standing under the laws of the state of Delaware, with full corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted. The Company is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole; or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “ Material Adverse Effect ” ) and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(b)           Due Authorization; Binding Agreement; No Conflicts . The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the Required Approvals and except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(c)           Validity of New Note . The New Note issued pursuant to this Agreement, when delivered in exchange for the Original Notes in accordance with this Agreement, will be the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at law). The Conversion Shares, when paid for and issued in accordance with the terms of the New Notes, will be validly issued, fully paid and non-assessable, free and clear of all liens imposed by the Company other than restrictions on transfer provided for herein and in the Transaction Documents.

(d)           Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) those that have previously been obtained; (ii) the filings required pursuant to the Exchange Act; (iii) the notice and/or application(s) to each applicable Trading Market, if any, for the issuance and sale of the Securities and the listing of the Conversion Shares for trading thereon in the time and manner required thereby; and (iv) such other filings with the Commission as may be required under the Securities Act and such filings as are required to be made under applicable state securities laws (collectively, the “ Required Approvals ” ).

5.             Other Agreements .

5.1           Transfer Restrictions .

(a)          The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Holder, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Holder under this Agreement.

(b)          The Holders agree to the imprinting, so long as is required by this Section 5.1, of a legend on any of the Securities substantially in the following form:

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

(c)          Each Holder, severally and not jointly with the other Holders, agrees with the Company that Holder will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 5.1 is predicated upon the Company’s reliance upon this understanding.

5.2           Reservation of Securities . Subject to obtaining the Required Approvals, the Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in an amount no less than the Required Minimum. If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible, including by calling a meeting of the Company’s shareholders for such purpose.

5.3            Fees and Expenses .  Each party hereto shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

5.4           Waiver of Interest .  The Holder hereby irrevocably waives any and all claims, demands, suits, actions, causes of action and rights whatsoever at law or in equity, now existing or arising relating to any accrued and unpaid interest on the Original Note or any other agreement between the parties.  The Holder hereby acknowledges and agrees that it shall not commence or prosecute in any way, or cause to be commenced or prosecuted, any action in any court relating to such accrued and unpaid interest.

5.5           Treatment of Prior Security Interests .  Each Holder hereby authorizes the Company to execute and file any Uniform Commercial Code termination statements, release and termination of trademark security interests and other similar discharge or release documents as are necessary or reasonably requested by the Company to terminate and release, as of record, the security interests, financing statements, and all other notices of security interests and liens previously filed by with respect to the Original Notes of such Holder (to the extent of the aggregate principal amount of Original Notes which are surrendered pursuant to this Agreement). Such Holders hereby further authorize the Company and/or their counsel or representatives, immediately following the Closing, to file the foregoing UCC and other termination statements (including a Termination of Trademark Security Interest) in such jurisdictions as are deemed necessary by the Company to terminate and release the security interests granted pursuant to the Original Notes. The Holders shall execute and deliver to or for the Company such additional documents (in recordable form, as appropriate) as the Company may reasonably request to carry out the foregoing termination and release of the security interests granted under security agreements pertaining to the Original Notes.

5.6           Piggyback Registration Rights . Holder and the Company agree that the Holder shall be entitled to the registration rights with respect to the Underlying Shares as set forth in this Section 5.6.

(a)           Definition of Registrable Securities . As used in this Section 5.6, the term “Registrable Security” means, as of any date of determination, (a) all of the shares of Common Stock then issued and issuable upon conversion in full of the New Notes (assuming on such date the New Note is converted in full without regard to any conversion limitations therein), (b) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the New Notes (in each case, without giving effect to any limitations on conversion set forth in the New Notes), and (c) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, registration statement hereunder with respect thereto) for so long as (i) a registration statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective registration statement, (ii) such Registrable Securities have been previously sold in accordance with Rule 144, or (iii) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Company’s transfer agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company). The term “Registrable Securities” means any and all of the securities falling within the foregoing definition of “Registrable Security.”

(b)           Piggyback Registration Rights . As used herein, a “Registration Statement” shall mean any registration statement filed by the Company with the Commission under the Securities Act at any time or from time to time commencing on a date within one year that any Underlying Shares may be issuable to the Holder and while any Registrable Securities remain outstanding; provided, however, that a Registration Statement for the purposes hereof shall not include: (A) any registration statement (or amendment thereto) filed by the Company which has not been declared effective on or before the date hereof; (B) any registration statement on Form S-3 (or any successor form) filed by the Company for the purpose of effecting offers and sales of securities on a continuous or delayed basis pursuant to Rule 415(a)(ix) or (x) under the Securities Act; (C) a registration relating to employee benefit plans (whether effected on Form S-8 or its successor); or (D) a registration effected on Form S-4 (or its successor). If at any time or from time to time while any Registrable Securities remain outstanding, the Company shall determine to register or shall be required to register any of its Common Stock, whether or not for its own account, the Company shall:

(i)          provide to each Holder written notice thereof at least seven (7) days prior to the filing of the Registration Statement by the Company in connection with such registration;

(ii)          include in such registration, and in any underwriting involved therein, all those Registrable Securities specified in a written request by each Holder received by the Company within five (5) days after the Company mails the written notice referred to above. The Company may withdraw the registration at any time. If a registration covered by this Section 5.6 is an underwritten registration on behalf of the Company, and the underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company shall include in such registration: (1) first, the securities the Company proposes to sell, (2) second, the Registrable Securities and other securities requested to be included in such registration, pro rata among the selling Holders and any other selling security holders on the basis of the number of Registrable Securities owned by each such Holder and other selling security holders. The Holders’ right to have Registrable Securities included in the first registration statement filed by the Company may be deferred to the second registration statement filed by the Company, which deferral may be continued to the third or subsequent registration statement so long as the registration statements are pursuant to underwritten offerings and the underwriter determines in good faith that marketing factors require exclusion of some or all of the Registrable Securities held by the Holders, but such deferral shall be only to the extent of such required exclusion as determined by the underwriter; and

(iii)          if the registration is an underwritten registration, each Holder of Registrable Securities shall enter into an underwriting agreement in customary form with the underwriter and provide such information regarding Holder that the underwriter shall reasonably request in connection with the preparation of the prospectus describing such offering, including completion of FINRA Questionnaires.

(c)           Covenants with Respect to Registration . In connection with the registration in which the Registrable Securities are included, the Company and Holder covenant and agree as follows:

(i)          The foregoing registration rights shall be contingent on the Holders furnishing the Company with such appropriate information as the Company shall reasonably request, including (A) such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least seven days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Holder of the information the Company requires from such Holder if such Holder elects to have any of the Registrable Securities included in the Registration Statement. A Holder shall provide such information to the Company at least two (2) Business Days prior to the first anticipated filing date of such Registration Statement if it elects to have any of the Registrable Securities included in the Registration Statement. Each Holder agrees to furnish to the Company a completed selling security holder questionnaire (a “Questionnaire”) in the form provided to it by the Company not less than two Business Days prior to the filing date of such Registration Statement. The Company shall not be required to include the Registrable Securities of a Holder in a Registration Statement and shall not be required to pay any damages to such Holder who fails to furnish to the Company a fully completed Questionnaire at least two Business Days prior to the filing date. The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by it and, if required by the Commission, the natural persons thereof that have voting and dispositive control over its shares of Common Stock.

(ii)          Each Holder, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Holder has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement. Each Holder agrees that, upon receipt of any notice from the Company that it must suspend sales of Common Stock pursuant to the Registration Statement, it will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Holder is advised by the Company that such dispositions may again be made.

(iii)          Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.

(iv)          The Company shall indemnify each Holder of Registrable Securities to be sold pursuant to the registration statement and each person, if any, who controls such Holder within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or liability (including reasonable expenses reasonably incurred in investigating, preparing or defending against any claim) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement, except to the extent arising under paragraph (v) below.

(v)          Each Holder owning Registrable Securities to be sold pursuant to a registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and any underwriter, and each person, if any, who controls the Company or such underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or reasonable expense or liability (including expenses reasonably incurred in investigating, preparing or defending against any claim) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising (A) from information furnished by or on behalf of such Holder, or their successors or assigns, for inclusion in such registration statement, or (B) as a result of use by the Holder of a registration statement that the Holder was advised to discontinue.

6.              Miscellaneous .

6.1           Governing Law; Consent to Jurisdiction . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws principles thereof. Each party hereto agrees that it shall bring any action, proceeding, suit, demand, or claim with respect to any matter arising out of or related to this Agreement or the transactions contained in or contemplated by this Agreement, exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (unless the Delaware Court of Chancery shall decline to accept jurisdiction over a particular matter, in which case, in any Delaware state or federal court within the State of Delaware) (such courts, collectively, the “ Delaware Courts ”), and solely in connection with claims arising under this Agreement or the transactions that are the subject of this Agreement (i) irrevocably submits to the exclusive jurisdiction of the Delaware Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Delaware Courts, (iii) waives any objection that the Delaware Courts are an inconvenient forum or do not have jurisdiction over either party hereto, (iv) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 6.5 of this Agreement, although nothing contained in this Agreement shall affect the right to serve process in any other manner permitted by law and (v) agrees not to seek a transfer of venue on the basis that another forum is more convenient. Notwithstanding anything herein to the contrary, (A) nothing in this Section 6.1 shall prohibit any party from seeking or obtaining orders for conservatory or interim relief from any court of competent jurisdiction and (B) each party hereto agrees that any judgment issued by a Delaware Court may be recognized, recorded, registered or enforced in any jurisdiction in the world and waives any and all objections or defenses to the recognition, recording, registration or enforcement of such judgment in any such jurisdiction.

6.2           Confidentiality .  The Holder acknowledges and agrees that the existence of this Agreement and the information contained herein and in the Exhibits hereto (collectively, “ Confidential Information ”) is of a confidential nature and shall not, without the prior written consent of the Company, be disclosed by the Holder to any person or entity, other than the Holder’s personal financial and legal advisors for the sole purpose of evaluating an investment in the Company, and that it shall not, without the prior written consent of the Company, directly or indirectly, make any statements, public announcements or release to trade publications or the press with respect to the subject matter of this Agreement.  Notwithstanding the foregoing, the Holder may use or disclose Confidential Information to the extent the Holder is required by law to disclose such Confidential Information, provided, however, that prior to any such required disclosure, Holder shall give the Company reasonable advance notice of any such disclosure and shall cooperate with the Company in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of such disclosure and/or use of the Confidential Information.  The Holder further acknowledges and agrees that the information contained herein and in the other documents relating to this transaction may be regarded as material non-public information under United States federal securities laws, and that United States federal securities laws prohibit any person who has received material non-public information relating to the Company from purchasing or selling securities of the Company, or from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of the Company.  Accordingly, until such time as any such non-public information has been adequately disseminated to the public, the Holder shall not purchase or sell any securities of the Company, or communicate such information to any other person.

6.3           Entire Agreement; Amendment and Waivers .  This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior and/or contemporaneous oral or written proposals or agreements relating thereto all of which are merged herein.  This Agreement may not be amended or any provision hereof waived in whole or in part, except by a written amendment signed by all of the parties hereto. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

6.4           Counterparts .  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

6.5           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 Trading Day; (b) the next Trading 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 Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day; (c) the second (2 ^nd ) Trading Day following the date of mailing, if sent by U.S. nationally 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.

6.6           Severability . Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

6.7           Survival . All representations and warranties made by the Company and each Holder will survive the execution of this Agreement and the Closing until the first anniversary of the Closing Date, except for those representations and warranties which speak as of a specific date. All covenants and other agreements set forth in this Agreement shall survive the Closing for the respective periods set forth therein and if no such period is specified until the first anniversary of the Closing Date.

6.8           Specific Performance; Enforcement . Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore, each of the parties hereto agrees that in the event of any such breach the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled at law or in equity. The parties agree that they shall be entitled to enforce specifically the terms and provisions of this Agreement in addition to any other remedy to which they may entitled at law or in equity.

6.9           Assignment; Binding Effect; Benefits . This Agreement is not assignable without the written consent of each of the other parties hereto. Subject to the foregoing, the provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and permitted assigns. Except as expressly stated elsewhere herein, nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

6.10         Independent Nature of Holders’ Obligations and Rights . The obligations of Holder under any Transaction Document are several and not joint with the obligations of any other Holder, and no Holder shall be responsible in any way for the performance or non-performance of the obligations of any other Holder under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.

6.11          Independent Representation . Each Holder expressly represents and warrants to the Company that (a) before executing this Agreement, said Holder has fully informed himself or itself of the terms, contents, conditions and effects of this Agreement; (b) said Holder has relied solely and completely upon his or its own judgment in executing this Agreement; (c) said Holder has had the opportunity to seek the advice of his or its own counsel and advisors before executing this Agreement; (d) said Holder has acted voluntarily and of his or its own free will in executing this Agreement; (e) said Holder is not acting under duress, whether economic or physical, in executing this Agreement; (f) this Agreement is the result of arm’s length negotiations conducted by and among the parties; and (g) said Holder acknowledges that the law firm of Becker & Poliakoff, LLP has been retained by the Company to prepare this Agreement as legal counsel for the Company, that Becker & Poliakoff, LLP does not represent any Holder in connection with the preparation or execution of this Agreement, that such firm has not given any legal, investment or tax advice to any Holder regarding this Agreement, and that such Holder has not relied upon any legal advice except as provided by its own attorneys. Becker & Poliakoff, LLP is expressly intended as a beneficiary of the representations and warranties of the Holders contained in this Section 6.11 .

6.12          Fees and Expenses . Except as expressly set forth in this Agreement to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

6.13          Replacement of Securities . If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

6.14          Termination . If the Initial Closing has not been consummated on or before March 15, 2017, this Agreement may be terminated (a) by any Holder (except where any such Holder is in breach of this Agreement or has failed to perform or satisfy any closing condition applicable to it), as to such Holder’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Holders, or (b) by the Company (except for any breach by it or failure to perform or satisfy any closing condition applicable to it), by written notice to the other parties; provided , however , that such termination will not affect the right of any non-breaching party to sue or seek specific performance for any breach by any other party (or parties).

6.15          Construction . The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement. In this Agreement, unless the context otherwise requires: (i) words of the masculine or neuter gender will include the masculine, neuter and/or feminine gender, and words in the singular number or in the plural number will each include, as applicable, the singular number or the plural number, (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, (iii) the words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation,” (iv) reference to any law means such law as amended, modified codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, (v) except as otherwise indicated, all references in this Agreement to the words “Section,” “Schedule” and “Exhibit” are intended to refer to Sections, Schedules and Exhibits to this Agreement, (vi) the headings of the Sections of this Agreement are for convenience only and in no way modify, interpret or construe the meaning of specific provisions of this Agreement, (vi) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular Section or other subdivision of this Agreement, (vii) any reference herein to “dollars” or “$” shall mean United States dollars, (viii) any reference herein to a Governmental Authority shall be deemed to include reference to any successor thereto, and (ix) the specificity of any representation or warranty contained herein shall not be deemed to limit the generality of any other representation or warranty contained herein.

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IN WITNESS WHEREOF , the Company and each Holder has caused this Agreement to be executed on its behalf as of the date first written above.

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SIGNATURE PAGE FOR PURCHASER FOLLOWS]

[HOLDER SIGNATURE PAGES TO EXCHANGE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Note Exchange Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Principal amount of New Note to be Issued at Closing: $ ________________

Original Note(s) Owned by Holder and Issue Date (the “ Original Notes ”):

EXHIBIT A

FORM OF NEW NOTE

Exhibit 10.2 

EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT (this “ Agreement ”) is dated as of March 20, 2017, between Authentidate Holding Corp., a Delaware corporation (the “ Company ”) and the holder identified on the signature pages hereto (the “ Holder ”).

  Recitals

WHEREAS , the Holders beneficially owns and holds 28,000 shares of the Company’s Series B Preferred Stock, par value $0.10 per share; and

WHEREAS, pursuant to the terms and conditions of this Agreement, the Company hereby offers to the Holder shares of a newly created class of convertible preferred stock (the “Series E Preferred Stock” ) and the Holder wishes to acquire shares of Series E Preferred Stock in exchange for the surrender and cancellation of all of the shares of Series B Preferred Stock currently held by the Holder upon the terms and conditions set forth herein in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby agreed and acknowledged, the parties hereto hereby agree as follows:

1.              Defined Terms . In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Series E Designation and (b) the following terms have the meanings set forth in this Section 1:

“ Affiliate ” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For the purposes of this definition, “control”, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“ 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.

“ Closing Date ” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to: (i) the Holders’ obligations to surrender the Series B Preferred Stock and (ii) the Company’s obligations to deliver the Series E Preferred Stock have been satisfied or waived.

“ Commission ” means the United States Securities and Exchange Commission.

“ Common Stock ” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

“ Conversion Price ” shall have the meaning ascribed to such term in the Series E Designation.

“ Conversion Shares ” means the shares of Common Stock issuable upon the conversion of the shares of Series E Preferred Stock.

“ Encumbrances ” shall mean any security or other property interest or right, claim, lien, pledge, option, charge, security interest, contingent or conditional sale, or other title claim or retention agreement interest or other right or claim of third parties, whether perfected or not perfected, voluntarily incurred or arising by operation of law, and including any agreement (other than this Agreement) to grant or submit to any of the foregoing in the future.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ 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.

“ Required Approvals ” shall have the meaning ascribed to such term in Section 4(d).

“ Required Minimum ” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the shares of Series E Preferred Stock to be issued under this Agreement, ignoring any conversion or exercise limits set forth therein.

“ Securities ” means the Series E Preferred Stock and the Conversion Shares.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Series B Preferred Stock ” means the shares of Series B Convertible Preferred Stock, par value $0.10 per share, with such preferences, rights and other terms and conditions as is set forth in that certain Certificate of Designations, Preferences and Rights and Number of Shares of Series B Convertible Preferred Stock originally filed by the Company with the Secretary of State of the State of Delaware on October 5, 1999 and as has been amended to date.

“ Series E Preferred Stock ” means the shares of Series E Convertible Preferred Stock, par value $0.10 per share, with such preferences, rights and other terms and conditions as is set forth in the Series E Designation.

“ Series E Designation ” means the Certificate of Designations, Preferences and Rights and Number of Shares of Series E Convertible Preferred Stock filed by the Company with the Secretary of State of the State of Delaware on or before the Closing Date. The form of Series E Designation to be filed with the Secretary of State of the State of Delaware is attached as Exhibit A to this Agreement.

“ Trading Day ” means a day on which the principal Trading Market is open for trading.

“ Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, or any tier of the OTC Markets Inc. (or any successors to any of the foregoing).

“ Transaction Documents ” means this Agreement, the Series E Designation, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

2.             Securities Exchange .

2.1             Exchange and Closing .

(a)            Upon the following terms and subject to the conditions contained herein, Holder agrees to acquire from the Company the number of shares of Series E Preferred Stock set forth on the Holder’s signature page to this Agreement in exchange for and in consideration of all of such Holder’s rights, title and interest in and to the 28,000 shares of Series B Preferred Stock owned by the Holder. In accordance with the terms and conditions of this Agreement, Holder shall deliver and surrender to the Company at its principal offices for cancellation certificates representing all of the shares of Series B Preferred Stock owned by Holder, free and clear of any liens, claims, charges, security interest or other legal or equitable Encumbrances in exchange for a certificate representing such number of shares of Series E Preferred Stock set forth on the Holder’s signature page to this Agreement. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Company’s counsel or such other location and on such Business Day as the parties shall mutually agree.

(b)            Assuming the accuracy of the representations and warranties of the Company and the Holder set forth in Sections 2 and 3, respectively, of this Agreement, the parties acknowledge and agree that the purpose of such representations and warranties is, among other things, to ensure that the exchange transaction contemplated hereby qualifies as an exchange of securities under Section 3(a)(9) of the Securities Act.

(c)            In the event Holder has lost his, her or its physical certificate(s) representing its shares of Series B Preferred Stock, or such certificate(s) were lost, stolen or destroyed, Holder shall, instead of returning such physical certificate(s), execute and deliver to the Company an affidavit of loss and indemnification undertaking (in a form acceptable to the Company) with respect to such shares of Series B Preferred Stock and in which instrument the Holder acknowledges that the shares of Series B Preferred Stock are cancelled in all respect in consideration of the Company’s issuance of the shares of Series E Preferred Stock hereunder.

2.2           Deliveries .

(a)            On or prior to the Closing Date (except as otherwise provided below), the Company shall deliver or cause to be delivered to Holder the following: (i) this Agreement duly executed by the Company; (ii) physical certificate representing the shares of Series Preferred Stock acquired by the Holder hereunder and registered in the name of Holder (such original certificate may be delivered within three Trading Days following Closing Date); and (iii) such other documents relating to the transactions contemplated by this Agreement as the Holder or its counsel may reasonably request.

(b)           On or prior to the Closing Date, Holder shall deliver or cause to be delivered to the Company, as applicable, the following: (i) this Agreement duly executed by Holder; (ii) the Holder’s certificates representing shares of Series B Preferred Stock (or an affidavit of loss and indemnity undertaking with respect thereto, in a form reasonably acceptable to the Company); and (iii) such other documents relating to the transactions contemplated by this Agreement as the Company or its counsel may reasonably request.

2.3            Closing Conditions .

(a)          The obligations of the Company hereunder in connection with the Closing are subject to the satisfaction, or waiver by the Company, of the following conditions: (i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Holder contained herein (unless as of a specific date therein in which case they shall be accurate as of such date); (ii) all obligations, covenants and agreements of the Holder required to be performed at or prior to the Closing Date shall have been performed; (iii) the delivery by the Holder of the items set forth in Section 2.2(b) of this Agreement; and (iv) the Company shall have received any Required Approvals necessary to conduct the Closing.

(b)          The obligations of the Holder hereunder in connection with the Closing are subject to the satisfaction, or waiver by the Holder, of the following conditions: (i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein); (ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed; and (iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement.

(c)           The obligations of the parties hereunder are subject to the execution by the Company and an entity affiliated with the Holder, of a definitive agreement to exchange an aggregate principal amount of $950,000 of convertible notes held by such Affiliate for a new convertible note upon the terms and conditions described in such definitive agreement.

2.4            Status of Series B Preferred Stock . At Closing, the shares of Series E Preferred Stock issued in exchange for surrender and cancellation of the shares of Series B Preferred Stock shall be deemed the full and final consideration for the cancellation of such shares of Series B Preferred Stock. On the Closing Date, each holder of record of shares of Series B Preferred Stock shall be deemed to be the holder of record of the shares of Series E Preferred Stock issuable to such Holder hereunder, notwithstanding that certificates representing such shares of Series E Preferred Stock shall not then be actually delivered to such Holder. From and after the Closing Date, all of the shares of Series B Preferred Stock required to be delivered for exchange under this Agreement shall be deemed to have been retired and cancelled in all respects, all rights of the Holder of such shares shall cease and terminate with respect to such shares of Series B Preferred Stock except that such shares of Series B Preferred Stock shall solely represent the right to receive the applicable number of shares of Series E Preferred Stock issuable in consideration of the surrender of the certificates representing shares of Series B Preferred Stock. From and after the Closing, the shares of Series B Preferred Stock surrendered for exchange shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever and shall return to the status of authorized but unissued shares of preferred stock of the Company. The Company shall thereafter be authorized to take any and all action it determines may be reasonably necessary to effect such cancellation of the shares of Series B Preferred Stock.

3.             Representations, Warranties and Covenants of Holder .  Holder hereby makes the following representations and warranties to the Company, and covenants for the benefit of the Company.

(a)             Due Organization and Authorization; Binding Agreement . Holder is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Holder has full right, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly authorized, executed and delivered by Holder and (assuming due authorization, execution and delivery by the Company) constitutes the valid and binding obligation of Holder enforceable against Holder in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at law). No consent, approval, authorization or order of any person, entity, court, administrative agency or governmental authority is required for the execution, delivery or performance of this Agreement by the Holder.

(b)             No Conflicts . The execution, delivery and performance of this Agreement by the Holder and the consummation by the Holder of the transactions contemplated hereby do not and will not: (i) conflict with, or constitute a default (or an event which 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 of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Holder is a party or by which the Holder’s properties or assets are bound; or (ii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Holder or by which any property or asset of the Holder are bound or affected, except, in each case, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, materially and adversely affect the Holder’s ability to perform its obligations under this Agreement.

(c)              Holder Status . At the time Holder was offered the Series E Preferred Stock, it was, and as of the date hereof it is, and on each date on which it converts shares of Series E Preferred Stock it will be either: (i) an “accredited investor” as defined in Rule 501(a) under the Securities Act; or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Holder is not required to be registered as a broker-dealer under Section 15 of the Exchange Act. Holder has sufficient knowledge and experience in financial matters as to be capable of evaluating the risks and merits of the transaction contemplated hereby. Holder is able to bear the economic risk of its investment in the Series E Preferred Stock for an indefinite period of time, is able to afford a complete loss of such investment, and acknowledges that no public market exists for the Series E Preferred Stock or the Conversion Shares and that there is no assurance that a public market will ever develop for such securities. Neither, the Series E Preferred Stock nor the Conversion Shares have been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available.

(d)            Information . Holder has reviewed, or has had the opportunity to review, with the assistance of professional and legal advisors of its choosing, all information (including all documents filed or furnished to the Commission by the Company) relating to the business, finances and operations of the Company and materials relating to the exchange transaction which have been requested by such Holder. Such Holder has been afforded the opportunity to ask questions of the Company and has had sufficient access to the Company necessary for Holder to decide to exchange its Series B Preferred Stock for the Series E Preferred Stock in accordance with this Agreement. Such Holder acknowledges that all of the documents filed by the Company with the Commission under Sections 13(a), 14(a) or 15(d) of the Exchange Act, that have been posted on the EDGAR site maintained by the Commission are available to such Holder, and such Holder has not relied on any statement of the Company not contained in such documents in connection with such Holder’s decision to enter into this Agreement or any other Transaction Document and to consummate the transactions contemplated hereby.

(e)            Certain Disqualification Events . Neither the Holder, nor any director, executive officer, other member or officer of the Holder participating in the transactions contemplated by this Agreement, any beneficial owner of 20% of more of the Holder’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Holder in any capacity at the time of sale (each a “ Holder Covered Person ”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “ Disqualification Event ” ), except for a Disqualification Event covered by Rule 506(d)(2) or (3) (provided that the foregoing exception shall not be available hereunder with respect to Rule 506(d)(2)(iv) for any Disqualification Event of which the Company did not know as a result of the Holder’s failure to disclose such Disqualification Event to the Company). Holder has exercised reasonable care to determine: (i) the identity of each person that is a Holder Covered Person; and (ii) whether any Holder Covered Person is subject to a Disqualification Event.

(f)               Own Account . The Holder is and will be acquiring the Securities for the Holder’s own account, for investment purposes, and not with a view to any resale or distribution in whole or in part, in violation of the Securities Act or any applicable securities laws; provided , however , that by making the representations herein, the Holder does not agree to hold such Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with federal and state securities laws applicable to such disposition.

(g)             Restricted Securities . The Holder understands that the Securities purchased hereunder, including the Conversion Shares, are “restricted securities,” as that term is defined in the Securities Act and the rules thereunder, have not been registered under the Securities Act, and that none of the Securities can be sold or transferred unless they are first registered under the Securities Act and such state and other securities laws as may be applicable or an exemption from registration under the Securities Act is available (and then the Securities may be sold or transferred only in compliance with such exemption and all applicable state and other securities laws). Holder acknowledges that all certificates representing any of the shares of Series E Preferred Stock and the Conversion Shares will bear a restrictive legend in a form as set forth below and hereby consents to the transfer agent for the Company’s Common Stock making a notation on its records to implement the restrictions on transfer described herein.  Holder further understands that except as provided in the Transaction Documents: (i) the Securities have not been and are not being registered under the Securities Act or any state securities laws, must be held indefinitely and may not be offered for sale, sold, assigned or transferred unless: (A) subsequently registered thereunder; (B) Holder shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration; or (C) Holder provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “ Rule 144 ” ); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person (through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the Commission thereunder; and (iii) except as set forth in the Transaction Documents, neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

(h)            Reliance on Representations . Holder understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Holder set forth herein in order to determine the availability of such exemptions and the eligibility of Holder to acquire the Securities. The Holder undertakes to immediately notify the Company of any change in any statement or other information relating to the Holder which takes place prior to the Closing time. No Person has made any written or oral representations to the Holder that: (i) any Person will resell or repurchase the shares of Series E Preferred Stock or the Conversion Shares or (ii) as to the future price or value of the shares of Common Stock of the Company.

(i)              No Brokers . The Holder has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with any of the transactions contemplated by this Agreement.

(j)              No General Solicitation . The Holder acknowledges that the Securities were not offered to the Holder by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including: (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio; or (ii) any seminar or meeting to which the Holder was invited by any of the foregoing means of communications.

(k)             Representations Regarding Series B Preferred Stock . The Holder owns and holds, beneficially and of record, the entire right, title, and interest in and to the shares of Series B Preferred Stock held by it, free and clear of any and all pledges, liens, security interests, mortgage, claims, charges, restrictions, options, title defects or Encumbrances other than restrictions under the Securities Act and other applicable federal and state securities laws. Holder has not, in whole or in part, (x) assigned, transferred, hypothecated, pledged or otherwise disposed of the shares of Series B Preferred Stock or its rights in such shares of Series B Preferred Stock, or (y) given any person or entity any transfer order, power of attorney or other authority of any nature whatsoever with respect to such shares of Series B Preferred Stock which would limit the Holder’s power to transfer the shares of Series B Preferred Stock hereunder. Holder has the sole and unencumbered right and power to transfer and dispose of the shares of Series B Preferred Stock, and such shares of Series B Preferred Stock are not subject to any agreement, arrangement or restriction with respect to the voting or transfer of the shares of Series B Preferred Stock, except for this Agreement. No additional consideration for any purpose shall be due to Holder at Closing, with respect to the shares of Series B Preferred Stock, other than the shares of Series E Preferred Stock. Upon delivery of the shares of Series B Preferred Stock to the Company for cancellation (as contemplated by this Agreement), the Company will receive good and marketable title to the shares of Series B Preferred Stock, free and clear of all pledges, liens, security interests, mortgage, claims, charges, restrictions, options, title defects or Encumbrances. The shares of Series B Preferred Stock being surrendered by it for cancellation pursuant to this Agreement represent all of the shares of Series B Preferred Stock of the Company in which Holder owns any legal or beneficial interest.

(l)              No Representations . No person or entity, other than the Company, has been authorized to give any information or to make any representation on behalf of the Company in connection with the offering of Securities, and if given or made, such information or representations have not been relied upon by the Holder as having been made or authorized by the Company.  The only representations and warranties made by the Company in connection with the offering of Securities are those contained in this Agreement, and the only information made available by the Company in connection with the offering of Securities is contained in this Agreement.

(m)            No Legal, Tax or Investment Advice .   Holder understands that the tax consequences of the transactions contemplated by this Agreement are complex, and accordingly Holder represents and warrants that it understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to him, her or it in connection with this Agreement and the transactions contemplated herein, constitutes legal, tax or investment advice.  Holder has consulted such legal, tax and investment advisors as he, she or it, in his, her or its sole discretion, has deemed necessary or appropriate in the circumstances.  Holder is not relying on the Company or any of its respective affiliates or agents, including its counsel and accountants, for any tax advice regarding the tax consequences of the transactions contemplated by this Agreement.

(n)             No Governmental Review . Such Holder understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement in connection with the transactions contemplated by this Agreement or the fairness or suitability of the investment in the Series E Preferred Stock nor have such authorities passed upon or endorsed the merits of the Series E Preferred Stock.

4.             Representations, Warranties and Covenants of the Company .  The Company represents and warrants to the Holder, and covenants for the benefit of the Holder, as follows:

(a)               Due Organization . The Company has been duly incorporated and is validly existing and in good standing under the laws of the state of Delaware, with full corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted. The Company is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole; or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “ Material Adverse Effect ” ) and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(b)             Due Authorization; Binding Agreement; No Conflicts . The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the Required Approvals and except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(c)            Issuance of Series E Preferred Stock. The issuance of the Series E Preferred Stock is duly authorized and, upon issuance in accordance with the terms hereof, the shares of Series E Preferred Stock will be validly issued, fully paid and non-assessable. The shares of Common Stock issuable upon conversion of the Series E Preferred Stock, when issued and delivered in accordance with the terms of the Series E Designation, will be duly and validly issued, fully paid and non-assessable, free and clear of all Encumbrances, other than restrictions on transfer under applicable state and federal securities laws.

(d)             Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) those that have previously been obtained; (ii) the filings required pursuant to the Exchange Act; (iii) the notice and/or application(s) to each applicable Trading Market, if any, for the issuance and sale of the Securities and the listing of the Conversion Shares for trading thereon in the time and manner required thereby; and (iv) such other filings with the Commission as may be required under the Securities Act and such filings as are required to be made under applicable state securities laws (collectively, the “ Required Approvals ” ).

5.             Other Agreements .

5.1           Transfer Restrictions .

(a)           The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Holder, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Holder under this Agreement.

(b)            The Holders agree to the imprinting, so long as is required by this Section 5.1, of a legend on any of the Securities substantially in the following form:

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

(c)            Each Holder, severally and not jointly with the other Holders, agrees with the Company that Holder will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 5.1 is predicated upon the Company’s reliance upon this understanding.

5.2             Reservation of Securities . Subject to obtaining the Required Approvals, the Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in an amount no less than the Required Minimum. If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible, including by calling a meeting of the Company’s shareholders for such purpose.

5.3            Fees and Expenses .  Each party hereto shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

5.4           Waiver of Dividends .   Effective as of the Closing Date, t he Holder hereby irrevocably waives any and all claims, demands, suits, actions, causes of action and rights whatsoever at law or in equity, now existing or arising relating to any accrued and unpaid dividends on the shares of Series B Preferred Stock.  The Holder hereby acknowledges and agrees that it shall not commence or prosecute in any way, or cause to be commenced or prosecuted, any action in any court relating to such accrued and unpaid dividends.

5.5          Piggyback Registration Rights . Holder and the Company agree that the Holder shall be entitled to the registration rights with respect to the Underlying Shares as set forth in this Section 5.5.

(a)             Definition of Registrable Securities . As used in this Section 5.5, the term “Registrable Security” means, as of any date of determination, (a) all of the shares of Common Stock then issued and issuable upon conversion in full of the Series E Preferred Stock (assuming on such date the shares of Series E Preferred Stock is converted in full without regard to any conversion limitations therein), (b) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the Series E Preferred Stock (in each case, without giving effect to any limitations on conversion set forth in the Series E Preferred Stock), and (c) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, registration statement hereunder with respect thereto) for so long as (i) a registration statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective registration statement, (ii) such Registrable Securities have been previously sold in accordance with Rule 144, or (iii) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Company’s transfer agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company). The term “Registrable Securities” means any and all of the securities falling within the foregoing definition of “Registrable Security.”

(b)             Piggyback Registration Rights . As used herein, a “Registration Statement” shall mean any registration statement filed by the Company with the Commission under the Securities Act at any time or from time to time commencing on a date within one year that any Underlying Shares may be issuable to the Holder and while any Registrable Securities remain outstanding; provided, however, that a Registration Statement for the purposes hereof shall not include: (A) any registration statement (or amendment thereto) filed by the Company which has not been declared effective on or before the date hereof; (B) any registration statement on Form S-3 (or any successor form) filed by the Company for the purpose of effecting offers and sales of securities on a continuous or delayed basis pursuant to Rule 415(a)(ix) or (x) under the Securities Act; (C) a registration relating to employee benefit plans (whether effected on Form S-8 or its successor); or (D) a registration effected on Form S-4 (or its successor). If at any time or from time to time while any Registrable Securities remain outstanding, the Company shall determine to register or shall be required to register any of its Common Stock, whether or not for its own account, the Company shall:

(i)          provide to each Holder written notice thereof at least seven (7) days prior to the filing of the Registration Statement by the Company in connection with such registration;

(ii)         include in such registration, and in any underwriting involved therein, all those Registrable Securities specified in a written request by each Holder received by the Company within five (5) days after the Company mails the written notice referred to above. The Company may withdraw the registration at any time. If a registration covered by this Section 5.5 is an underwritten registration on behalf of the Company, and the underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company shall include in such registration: (1) first, the securities the Company proposes to sell, (2) second, the Registrable Securities and other securities requested to be included in such registration, pro rata among the selling Holders and any other selling security holders on the basis of the number of Registrable Securities owned by each such Holder and other selling security holders. The Holders’ right to have Registrable Securities included in the first registration statement filed by the Company may be deferred to the second registration statement filed by the Company, which deferral may be continued to the third or subsequent registration statement so long as the registration statements are pursuant to underwritten offerings and the underwriter determines in good faith that marketing factors require exclusion of some or all of the Registrable Securities held by the Holders, but such deferral shall be only to the extent of such required exclusion as determined by the underwriter; and

(iii)        if the registration is an underwritten registration, each Holder of Registrable Securities shall enter into an underwriting agreement in customary form with the underwriter and provide such information regarding Holder that the underwriter shall reasonably request in connection with the preparation of the prospectus describing such offering, including completion of FINRA Questionnaires.

(c)           Covenants with Respect to Registration . In connection with the registration in which the Registrable Securities are included, the Company and Holder covenant and agree as follows:

(i)            The foregoing registration rights shall be contingent on the Holders furnishing the Company with such appropriate information as the Company shall reasonably request, including (A) such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least seven days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Holder of the information the Company requires from such Holder if such Holder elects to have any of the Registrable Securities included in the Registration Statement. A Holder shall provide such information to the Company at least two (2) Business Days prior to the first anticipated filing date of such Registration Statement if it elects to have any of the Registrable Securities included in the Registration Statement. Each Holder agrees to furnish to the Company a completed selling security holder questionnaire (a “Questionnaire”) in the form provided to it by the Company not less than two Business Days prior to the filing date of such Registration Statement. The Company shall not be required to include the Registrable Securities of a Holder in a Registration Statement and shall not be required to pay any damages to such Holder who fails to furnish to the Company a fully completed Questionnaire at least two Business Days prior to the filing date. The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by it and, if required by the Commission, the natural persons thereof that have voting and dispositive control over its shares of Common Stock.

(ii)             Each Holder, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Holder has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement. Each Holder agrees that, upon receipt of any notice from the Company that it must suspend sales of Common Stock pursuant to the Registration Statement, it will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Holder is advised by the Company that such dispositions may again be made.

(iii)           Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.

(iv)           The Company shall indemnify each Holder of Registrable Securities to be sold pursuant to the registration statement and each person, if any, who controls such Holder within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or liability (including reasonable expenses reasonably incurred in investigating, preparing or defending against any claim) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement, except to the extent arising under paragraph (v) below.

(v)            Each Holder owning Registrable Securities to be sold pursuant to a registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and any underwriter, and each person, if any, who controls the Company or such underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or reasonable expense or liability (including expenses reasonably incurred in investigating, preparing or defending against any claim) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising (A) from information furnished by or on behalf of such Holder, or their successors or assigns, for inclusion in such registration statement, or (B) as a result of use by the Holder of a registration statement that the Holder was advised to discontinue.

6.             Miscellaneous .

6.1           Governing Law; Consent to Jurisdiction . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws principles thereof. Each party hereto agrees that it shall bring any action, proceeding, suit, demand, or claim with respect to any matter arising out of or related to this Agreement or the transactions contained in or contemplated by this Agreement, exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (unless the Delaware Court of Chancery shall decline to accept jurisdiction over a particular matter, in which case, in any Delaware state or federal court within the State of Delaware) (such courts, collectively, the “ Delaware Courts ”), and solely in connection with claims arising under this Agreement or the transactions that are the subject of this Agreement (i) irrevocably submits to the exclusive jurisdiction of the Delaware Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Delaware Courts, (iii) waives any objection that the Delaware Courts are an inconvenient forum or do not have jurisdiction over either party hereto, (iv) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 6.5 of this Agreement, although nothing contained in this Agreement shall affect the right to serve process in any other manner permitted by law and (v) agrees not to seek a transfer of venue on the basis that another forum is more convenient. Notwithstanding anything herein to the contrary, (A) nothing in this Section 6.1 shall prohibit any party from seeking or obtaining orders for conservatory or interim relief from any court of competent jurisdiction and (B) each party hereto agrees that any judgment issued by a Delaware Court may be recognized, recorded, registered or enforced in any jurisdiction in the world and waives any and all objections or defenses to the recognition, recording, registration or enforcement of such judgment in any such jurisdiction.

6.2            Confidentiality .  The Holder acknowledges and agrees that the existence of this Agreement and the information contained herein and in the Exhibits hereto (collectively, “ Confidential Information ”) is of a confidential nature and shall not, without the prior written consent of the Company, be disclosed by the Holder to any person or entity, other than the Holder’s personal financial and legal advisors for the sole purpose of evaluating an investment in the Company, and that it shall not, without the prior written consent of the Company, directly or indirectly, make any statements, public announcements or release to trade publications or the press with respect to the subject matter of this Agreement.  Notwithstanding the foregoing, the Holder may use or disclose Confidential Information to the extent the Holder is required by law to disclose such Confidential Information, provided, however, that prior to any such required disclosure, Holder shall give the Company reasonable advance notice of any such disclosure and shall cooperate with the Company in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of such disclosure and/or use of the Confidential Information.  The Holder further acknowledges and agrees that the information contained herein and in the other documents relating to this transaction may be regarded as material non-public information under United States federal securities laws, and that United States federal securities laws prohibit any person who has received material non-public information relating to the Company from purchasing or selling securities of the Company, or from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of the Company.  Accordingly, until such time as any such non-public information has been adequately disseminated to the public, the Holder shall not purchase or sell any securities of the Company, or communicate such information to any other person.

6.3             Entire Agreement; Amendment and Waivers .  This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior and/or contemporaneous oral or written proposals or agreements relating thereto all of which are merged herein.  This Agreement may not be amended or any provision hereof waived in whole or in part, except by a written amendment signed by all of the parties hereto. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

6.4            Counterparts .  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

6.5             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 Trading Day; (b) the next Trading 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 Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day; (c) the second (2 ^nd ) Trading Day following the date of mailing, if sent by U.S. nationally 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.

6.6             Severability . Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

6.7             Survival . All representations and warranties made by the Company and each Holder will survive the execution of this Agreement and the Closing until the first anniversary of the Closing Date, except for those representations and warranties which speak as of a specific date. All covenants and other agreements set forth in this Agreement shall survive the Closing for the respective periods set forth therein and if no such period is specified until the first anniversary of the Closing Date.

6.8             Specific Performance; Enforcement . Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore, each of the parties hereto agrees that in the event of any such breach the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled at law or in equity. The parties agree that they shall be entitled to enforce specifically the terms and provisions of this Agreement in addition to any other remedy to which they may entitled at law or in equity.

6.9           Assignment; Binding Effect; Benefits . This Agreement is not assignable without the written consent of each of the other parties hereto. Subject to the foregoing, the provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and permitted assigns. Except as expressly stated elsewhere herein, nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

6.10          Independent Nature of Holders’ Obligations and Rights . The obligations of Holder under any Transaction Document are several and not joint with the obligations of any other Holder, and no Holder shall be responsible in any way for the performance or non-performance of the obligations of any other Holder under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.

6.11          Independent Representation . Each Holder expressly represents and warrants to the Company that (a) before executing this Agreement, said Holder has fully informed himself or itself of the terms, contents, conditions and effects of this Agreement; (b) said Holder has relied solely and completely upon his or its own judgment in executing this Agreement; (c) said Holder has had the opportunity to seek the advice of his or its own counsel and advisors before executing this Agreement; (d) said Holder has acted voluntarily and of his or its own free will in executing this Agreement; (e) said Holder is not acting under duress, whether economic or physical, in executing this Agreement; (f) this Agreement is the result of arm’s length negotiations conducted by and among the parties; and (g) said Holder acknowledges that the law firm of Becker & Poliakoff, LLP has been retained by the Company to prepare this Agreement as legal counsel for the Company, that Becker & Poliakoff, LLP does not represent any Holder in connection with the preparation or execution of this Agreement, that such firm has not given any legal, investment or tax advice to any Holder regarding this Agreement, and that such Holder has not relied upon any legal advice except as provided by its own attorneys. Becker & Poliakoff, LLP is expressly intended as a beneficiary of the representations and warranties of the Holders contained in this Section 6.11 .

6.12          Fees and Expenses . Except as expressly set forth in this Agreement to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

6.13         Replacement of Securities . If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

6.14           Termination . If the Initial Closing has not been consummated on or before March 15, 2017, this Agreement may be terminated (a) by the Holder (except where such Holder is in breach of this Agreement or has failed to perform or satisfy any closing condition applicable to it), as to such Holder’s obligations hereunder only, or (b) by the Company (except for any breach by it or failure to perform or satisfy any closing condition applicable to it), by written notice to the other parties; provided , however , that such termination will not affect the right of any non-breaching party to sue or seek specific performance for any breach by any other party (or parties).

6.15           Construction . The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement. In this Agreement, unless the context otherwise requires: (i) words of the masculine or neuter gender will include the masculine, neuter and/or feminine gender, and words in the singular number or in the plural number will each include, as applicable, the singular number or the plural number, (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, (iii) the words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation,” (iv) reference to any law means such law as amended, modified codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, (v) except as otherwise indicated, all references in this Agreement to the words “Section,” “Schedule” and “Exhibit” are intended to refer to Sections, Schedules and Exhibits to this Agreement, (vi) the headings of the Sections of this Agreement are for convenience only and in no way modify, interpret or construe the meaning of specific provisions of this Agreement, (vi) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular Section or other subdivision of this Agreement, (vii) any reference herein to “dollars” or “$” shall mean United States dollars, (viii) any reference herein to a Governmental Authority shall be deemed to include reference to any successor thereto, and (ix) the specificity of any representation or warranty contained herein shall not be deemed to limit the generality of any other representation or warranty contained herein.

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IN WITNESS WHEREOF , the Company and each Holder has caused this Agreement to be executed on its behalf as of the date first written above.

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SIGNATURE PAGE FOR PURCHASER FOLLOWS]

[HOLDER SIGNATURE PAGES TO EXCHANGE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Exchange Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Number of Shares of Series E Preferred Stock to be issued at Closing: ________________

EXHIBIT A

CERTIFICATE OF DESIGNATIONS OF SERIES E PREFERRED STOCK

Exhibit 10.3

AMENDED AND RESTATED SECURITY AGREEMENT

THIS AMENDED AND RESTATED SECURITY AGREEMENT (this “ Security Agreement ”) is made and entered into as of March 20, 2017 by Authentidate Holding Corp., a Delaware corporation (the “ Company ”) and the parties signatory hereto (each, a “ Secured Party ” and collectively, the “ Secured Parties ”). This Security Agreement is being executed and delivered by the Company and the Secured Parties in connection with the Company’s issuance to the Secured Parties of those certain Senior Secured Promissory Notes, dated as of the date first set forth above (the “ Secured Notes ”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Secured Notes.

WITNESSETH:

WHEREAS, the Company had previously issued an aggregate principal amount of $1,270,000 of Secured Notes to certain of the Secured Parties (the “ Prior Notes ”), which Prior Notes are secured by liens certain of the Company’s assets pursuant to that certain security agreement, dated as of August 7, 2015, between the Company and the holders of the Prior Notes, and as subsequently amended on December 11, 2015 (the “ Prior Security Agreement ”);

WHEREAS, the Company now wishes to issue up to $2,545,199 of new Secured Notes due March 20, 2018 to certain Persons, including holders of the Prior Notes, pursuant to a certain Exchange Agreements dated as of the date first set forth above (the “ Exchange Agreement ”); and;

WHEREAS, it is a condition of the transactions contemplated by the Exchange Agreement that the Company enter into a security agreement with the Secured Parties; and

WHEREAS, in order to induce the Secured Parties to extend the loans evidenced by the Secured Note, the Company has agreed to execute and deliver to the Secured Parties this Security 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 Notes, and the holders of the Prior Notes, being the sole secured parties under the Prior Security Agreement, have all agreed to exchange such Prior Notes for Secured Notes pursuant to the Exchange Agreement.

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 Parties and the Company hereby agree as follows.

SECTION I

DEFINITIONS

Section 1.1    Certain Definitions . As used in this Security Agreement, the following terms shall have the meanings set forth in this Section 1.  Terms used but not otherwise defined in this Security 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 Security 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. 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 Parties 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 Security Agreement shall create a valid security interest in such asset and, to the extent permitted by applicable law, this Security 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 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 Secured Notes 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 Secured Notes 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 Parties, including, without limitation, all obligations under this Security Agreement and the Secured Notes, 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 Parties 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 Notes 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 Security Agreement or the Secured Notes; 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 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 Security 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) Indebtedness in an amount of up to $5,000,000 pursuant to a term loan, revolving credit facility, credit line or other extensions of credit from a commercial banking or financial institution; 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 the terms modified to impose more burdensome terms upon the Company or its Subsidiaries, as the case may be. 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 Parties; (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 Security Agreement; (j) Liens that are expressly subordinated to the Liens granted pursuant to this Security Agreement; (k) Liens securing Indebtedness contemplated by clause (i) of the definition of “Permitted Indebtedness” set forth in Section 1.1(j) of this Security Agreement; and (l) 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.

(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 described in Recitals to this Security Agreement which evidence Indebtedness issued by the Company prior to the date of this Security 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 Georgia 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 Security 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 Parties, 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 Parties, all upon and subject to the terms and conditions of this Security Agreement; provided , however , that each Secured Party shall subordinate from time to time upon the Company’s request its Security Interests granted in such Collateral to any Lien(s) granted by the Company or any of its Subsidiaries to third parties which constitutes Permitted Liens contemplated within clauses (h) through (k) of the definition of Permitted Liens. 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 Parties shall be named as the sole secured parties on any and all financing statements and security agreements filed pursuant to this Security Agreement for the ratable benefit of all of the Secured Parties, and agree that the Majority in Interest of the Secured Parties are 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 Security Agreement and upon the authorization of the Majority in Interest of the Secured Parties, the Company shall:

(i)    file with the State of Delaware and any other offices that the Majority in Interest of the Secured Parties 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 Security 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;

(ii)    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 Majority in Interest of the Secured Parties, 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 Majority in Interest, 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 Majority in Interest may reasonably request to obtain the consent or approval of any governmental authority to the rights of the Secured Parties 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 Parties all such other assignments, certificates, supplemental documents, and financing statements, and do all other acts or things as the Majority in Interest 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 Security 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 Parties hereby covenant and agree 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 Parties 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 or as contemplated in Section 2.1, above (the “ Senior Permitted Liens ”); (ii) senior to other Liens granted by the Company in the Collateral after the date hereof; and (iii) that as between all Secured Parties, the Security Interest granted to each Secured Party under this Security Agreement is pari passu with the Security Interests of the other Secured Parties. 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 Parties agree 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 Parties further covenant and agree that they shall not, and they shall not instruct, authorize or otherwise permit or consent to allowing any third party to, take any action that is in violation of, or inconsistent with, the provisions of this section.

Section 2.4     Company Remains Liable; Third Party Licensees .  (A) Anything herein to the contrary notwithstanding, (a) the Company shall remain liable under the contracts and agreements included in the Collateral to perform all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Secured Parties of any of the rights hereunder shall not release the Company from any of its duties or obligations under such contracts and agreements included in the Collateral, and (c) the Secured Parties shall not have any obligation or liability under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Secured Parties be obligated to perform any of the obligations or duties of the Company thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.  Until an Event of Default shall occur and be continuing, except as otherwise provided in this Security Agreement, the Secured Notes, or other Transaction Documents, the Company shall have the right to possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of its business, subject to and upon the terms hereof and of the Secured Notes, and the other Transaction Documents.

(B)    The Secured Parties acknowledge and agree that the security interest arising hereunder in any Intellectual Property licensed by the Company to a third party in an arms-length transaction shall be subject to the rights of such third party licensee, whether such arms-length transaction is now existing or is entered into following the execution and delivery of this Security Agreement. Upon the request of the Company, the Secured Parties shall promptly provide an estoppel to such third party licensee with respect to the foregoing. The Secured Parties acknowledge and agree that no security interest or right is granted by the Company in property to the extent that such property is not owned by the Company.

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 Notes have been paid in full (including if such Secured Notes shall have been converted into the Common Stock of the Company in accordance with their terms) or this Security 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;

(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 each 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 Security 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 Majority in Interest of the Secured Parties, 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 Parties 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 the Majority in Interest 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 Majority in Interest of the Secured Parties which shall not be unreasonably withheld.

(h)          Promptly provide to the Secured Parties such financial statements, reports, lists and schedules related to the Collateral and any other information relating to the Collateral as the Majority in Interest of the Secured Parties may reasonably request from time to time;

(i)          Maintain, at the place where the Company is entitled to receive notices under the Secured Notes, a current record of where all material Collateral is located, permit representatives of the Secured Parties (acting upon the authorization of the Majority in Interest) 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 Parties shall conduct such inspections no more frequently than semi-annually);

(j)          Within three (3) Business Days notify each 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.

For purposes of clarity, nothing in this Security Agreement, including without limitation the restrictions set forth in Section 3.1(f) of this Security 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 Notes have been paid in full (including if such Secured Notes shall have been converted into the Common Stock of the Company in accordance with their terms) or this Security 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 Parties or this Security Agreement is sooner terminated, the Company shall, subject to the rights of the holders of the Permitted Liens: (i) defend its title to, and each Secured Party’s 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 each 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 Parties or this Security Agreement is sooner terminated, the Company shall not, except upon 10 days’ prior written notice to the Secured Parties, 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     Authority; Enforceability . The execution, delivery and performance of this Security 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 each 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 Security 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 4.4     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.

Section 4.5     Perfection; Security Interest . This Security Agreement creates in favor of the Secured Parties, 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 Security 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 Security Agreement shall constitute an event of default under this Security 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 Security Agreement if such failure is not remedied within twenty (20) calendar days after the Company receives written notice of such failure from the Majority in Interest or thirty (30) calendar days after the occurrence thereof;

(b)          If any of the representations or warranties of the Company set forth in this Security 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 twenty (20) calendar d ays after the Company receives written notice thereof from the Majority in Interest of the Secured Parties or within thirty (30) calendar days after the Company becomes aware, and immediately notifies the Secured Parties, 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 Notes shall have occurred and is continuing.

Section 5.2    Rights and Remedies Upon Default . If an Event of Default exists and is continuing, the Majority in Interest of the Secured Parties shall, at its election (but subject to Section 7 below and to the terms and conditions of the Transaction Documents), exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Transaction Documents, 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 Parties at a place to be designated by the Majority in Interest of the Secured Parties which is reasonably convenient to the Secured Parties 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 Secured Parties 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 Parties’ offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Majority in Interest of the Secured Parties may deem commercially reasonable.

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 Parties 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 Parties in so acting hereunder; and third, toward payment of the balance of the Obligations in the order and manner as the Majority in Interest of the Secured Parties 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 . The Secured Parties 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.

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 Majority in Interest of the Secured Parties, 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 Parties, or as otherwise instructed by the Majority in Interest of the Secured Parties;

(b)          Turn over to the Secured Parties, or as otherwise instructed by the Majority in Interest of the Secured Parties, 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 Parties may require.

SECTION VII
MISCELLANEOUS

Section 7.1     Termination and Release . This Security Agreement, and the Liens created by this Security Agreement shall automatically terminate in all respects upon the full and final payment by the Company of the Secured Notes or the conversion of the Secured Notes into shares of capital stock of the Company, in accordance with the terms of the Secured Notes. Further, the Liens created by this Security 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 Notes or otherwise consented to by the Majority in Interest. In connection with any termination or release pursuant to this Section 8.1, the Majority in Interest 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 Security Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Security 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 Security Agreement to the parties.

Section 7.3     Continuing Security Interest; Successors . This Security 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 Security Agreement is sooner terminated in accordance with Section 7.1; and (ii) inure to the benefit of and be enforceable by Secured Parties and their successors, transferees, and assigns. Each 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 Exchange Agreement 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 . This Security Agreement shall be governed by and construed under the laws of the State of Delaware applicable to contracts made and to be performed entirely within the State of Delaware.

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

Section 7.6     Notices .  Any notice to the Company or to a Secured Party shall be given in the manner set forth in the Exchange Agreement; provided that a Secured Party, if not a party to such Exchange Agreement, shall provide the Company with its proper delivery instructions for notices. Either party may, by notice given in accordance with the Exchange Agreement, change the address to which notices, demands and requests shall be sent to such party. Any notice to be given by the Company to the Secured Parties shall be given in the manner provided for in the Exchange Agreement, and delivered to such addresses as the Company is instructed by the Secured Parties.

Section 7.7     Entire Agreement; Amendments; Waivers . This Security 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 Security Agreement nor any term hereof may be amended except pursuant to a written instrument executed by Company and 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 Parties 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 Security Agreement, or (ii) acquiesced in any Event of Default or in any breach of any of the terms and conditions of this Security Agreement. No failure to exercise, nor any delay in exercising, any right, power or privilege of the Secured Parties under this Security 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 Security 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 Security 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 Security 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 Security 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 Security 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 Parties 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 Parties, 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 Security Agreement or of any instrument or document executed and delivered by the Company to the Secured Parties, nor additional advances made by the Secured Parties to the Company, nor the taking of further security, nor the retaking or re-delivery of the Collateral by the Secured Parties nor any other act of the Secured Parties shall release the Company from any Obligation, except a release or discharge executed in writing by the Majority in Interest with respect to such Obligation or upon full payment and satisfaction of all Obligations and termination of the Secured Notes. At such time the Obligations have been satisfied in full, the Majority in Interest shall execute and deliver to the Company all assignments and other instruments as may be reasonably necessary or proper to terminate the Secured Parties’ security interest in the Collateral, subject to any disposition of the Collateral that may have been made by or on behalf of the Secured Parties pursuant to this Security Agreement. For the purpose of this Security 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 Parties 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.

Section 7.12   Independent Representation . Each Secured Party expressly represents and warrants to the Company that (a) before executing this Agreement, such Secured Party has fully informed himself or itself of the terms, contents, conditions and effects of this Agreement; (b) such Secured Party has relied solely and completely upon his or its own judgment in executing this Agreement; (c) such Secured Party has had the opportunity to seek the advice of his or its own counsel and advisors before executing this Agreement; (d) such Secured Party has acted voluntarily and of his or its own free will in executing this Agreement; (e) such Secured Party is not acting under duress, whether economic or physical, in executing this Agreement; (f) this Agreement is the result of arm’s length negotiations conducted by and among the parties; and (g) such Secured Party acknowledges that the law firm of Becker & Poliakoff, LLP has been retained by the Company to prepare this Agreement as legal counsel for the Company, that Becker & Poliakoff, LLP does not represent any Secured Party in connection with the preparation or execution of this Agreement, that such firm has not given any legal, investment or tax advice to any Secured Party regarding this Agreement and that such Secured Party has not relied upon any legal advice except as provided by its own attorneys. Becker & Poliakoff, LLP is expressly intended as a beneficiary of the representations and warranties of the Holders contained in this Section 7.12 .

[Signature Pages to Follow]

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

Signature Page to Security Agreement

Signature Page to Security Agreement