6.1 The Employee shall not, at any time during or after the termination of his employment hereunder, except when acting on behalf of and with the authorization of the Company, make use of or disclose to any person, corporation, or other entity, for any purpose whatsoever, any trade secret or other confidential information concerning the Company’s business, finances, marketing, computerized payroll, accounting and information business, personnel and/or employee leasing business of the Company and its subsidiaries, including information relating to any customer of the Company or pool of temporary employees, or any other nonpublic business information of the Company and/or its subsidiaries learned as a consequence of Employee’s employment with the Company (collectively referred to as the “Proprietary Information”). For the purposes of this Agreement, trade secrets and confidential information shall mean information disclosed to the Employee or known by him as a consequence of his employment by the Company, whether or not pursuant to this Agreement, and not generally known in the industry. The Employee acknowledges that trade secrets and other items of confidential information, as they may exist from time to time, are valuable and unique assets of the Company, and that disclosure of any such information would cause substantial injury to the Company. Trade secrets and confidential information shall cease to be trade secrets or confidential information, as applicable, at such time as such information becomes public other than through disclosure, directly or indirectly, by Employee in violation of this Agreement.
6.2 If Employee is requested or required (by oral questions, interrogatories, requests for information or document subpoenas, civil investigative demands, or similar process) to disclose any Proprietary Information, Employee shall, unless prohibited by law, promptly notify the Company of such request(s) so that the Company may seek an appropriate protective order.
ARTICLE VII
RESTRICTIVE COVENANT
7.1 In the event of the voluntary termination of employment with the Company prior to the expiration of the term hereof, or Employee’s discharge in accordance with Article IX, or the expiration of the term hereof without renewal, Employee agrees that he will not, for a period of one (1) year following such termination, directly or indirectly, enter into or become associated with or engage in any other business (whether as a partner, officer, director, shareholder, employee, consultant, or otherwise), which business is primarily involved in the manufacture, development and/or distribution of computers and/or document imaging systems, or digital image authentication or is otherwise engaged in the same or similar business as the Company in direct competition with the Company, or which the Company was in the process of developing, during the tenure of Employee’s employment by the Company. Notwithstanding the foregoing, the ownership by Employee of less than five percent of the shares of any publicly held corporation shall not violate the provisions of this Article VII.
7.2 In furtherance of the foregoing, Employee shall not during the aforesaid period of non-competition, directly or indirectly, in connection with any business primarily involved in the manufacture, development and/or distribution of computers and/or document imaging systems, or digital image authentication services, or any business similar to the business in which the Company was engaged, or in the process of developing during Employee’s tenure with the Company, solicit any customer or employee of the Company who was a customer or employee of the Company during the tenure of his employment.
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7.3 Except as otherwise may be agreed by the Company in writing, in consideration of the employment of Employee by the Company, and free of any additional obligations of the Company to make additional payment to Employee, Employee agrees to irrevocably assign to the Company any and all inventions, software, manuscripts, documentation, improvements or other intellectual property whether or not protectible by any state or federal laws relating to the protection of intellectual property, relating to the present or future business of the Company that are developed by Employee prior to the termination of his/her employment with the Company, either alone or jointly with others, and whether or not developed during normal business hours or arising within the scope of his/her duties of employment. Employee agrees that all such inventions, software, manuscripts, documentation, improvement or other intellectual property shall be and remain the sole and exclusive property of the Company and shall be deemed the product of work for hire. Employee hereby agrees to execute such assignments and other documents as the Company may consider appropriate to vest all right, title and interest therein to the Company and hereby appoints the Company Employee’s attorney-in-fact with full powers to execute such document itself in the event employee fails or is unable to provide the Company with such signed documents. This provision does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on Employee’s own time, unless (a) the invention relates (i) to the business of the Company, or (ii) to the Company’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by Employee for the Company.
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7.4 If any court shall hold that the duration of non-competition or any other restriction contained in this Article VII is unenforceable, it is our intention that same shall not thereby be terminated but shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable or, in the alternative, such judicially substituted term may be substituted therefor.
ARTICLE VIII
TERM
8.1 This Agreement shall be for a term (the “Initial Term”) commencing on July 1, 2003 (the “Commencement Date”) and terminating on June 30, 2006 (the “Expiration Date”), unless sooner terminated upon the death of the Employee, or as otherwise provided herein.
8.2 Unless this Agreement is earlier terminated pursuant to the terms hereof, the Company agrees to use its best efforts to notify Employee in writing whether it intends to negotiate a renewal of this Agreement six (6) months prior to the Expiration Date.
8.3 Upon termination of the Employee’s employment on or after the Expiration Date for any reason except Cause, the Company shall pay Employee, in addition to any other payments due hereunder, the Severance Payment.
ARTICLE IX
TERMINATION
9.1 The Company may terminate this Agreement by giving a Notice of Termination to the Employee in accordance with this Agreement:
| | | a. | For Disability; |
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| | | b. | For Cause. |
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| | | c. | Without Cause. |
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9.2 Employee may terminate this Agreement by giving a Notice of Termination to theCompany in accordance with this Agreement, at any time, with or without Good Reason.
9.3 If the Employee’s employment with the Company shall be terminated, the Company shall pay and/or provide to the Employee the following compensation and benefits in lieu of any other compensation or benefits arising under this Agreement or otherwise:
| | | a. | if the Employee was terminated by the Company for Cause, or the Employee terminates without Good Reason, the Accrued Compensation; |
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| | | b. | if the Employee was terminated by the Company for Disability, the Accrued
Compensation, the Severance Payment and the Continuation Benefits; or |
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| | | c. | if termination was due to the Employee’s death, the Accrued Compensation; |
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| | | | or |
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| | | d. | if the Employee was terminated by the Company prior to the Expiration Date without cause, (i) the Accrued Compensation; (ii) the greater of (A) the Base Salary to the Expiration Date, or (B) the Severance Payment; and (iii) the Continuation Benefits. |
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| | 9.4 | The amounts payable under this Section 9, shall be paid as follows: |
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| | | a. | Accrued Compensation shall be paid within five (5) business days after the Employee’s Termination Date (or earlier, if required by applicable law). |
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| | | b. | If the Continuation Benefits are paid in cash, the payments shall be made on the first day of each month during the Continuation Period (or earlier, if required by applicable law). |
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| | | c. | The Severance Payments shall be paid in accordance with the Company’s regular pay periods (or earlier, if required by applicable law). |
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9.5 The Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Employee in any subsequent employment except as provided in Sections 1.4.
9.6 Employee agrees that as long as Employee is entitled to receive any payments under this Agreement, Employee will not make any negative or derogatory statements in verbal, written, electronic or any other form about the Company, including, but not limited to, a negative or derogatory statement made in, or in connection with, any article or book, on a website, in a chat room or via the internet.
ARTICLE X
TERMINATION OF PRIOR AGREEMENTS
10.1 This Agreement sets forth the entire agreement between the parties and supersedes all prior agreements, letters and understandings between the parties, whether oral or written prior to the effective date of this Agreement.
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ARTICLE XI
STOCK OPTIONS
11.1 As an inducement to Employee to enter into this Agreement the Company hereby grants as of September 5, 2003, to Employee options to purchase shares of the Company’s Common Stock, $.001 par value, as follows:
Subject to the terms and conditions of the Company’s 2000 Employees’ Stock Option Plan (the “Plan”), and the terms and conditions set forth in the Stock Option Certificate which are incorporated herein by reference, the Employee is hereby granted options to purchase 450,000 shares of the Company’s Common Stock, of which options to purchase 150,000 shares shall vest on September 5, 2003; 100,000 shall vest on September 5, 2004; 100,000 shall vest on September 5, 2005; and 100,000 shall vest on September 5, 2006 (the “Options”). The exercise price of the Options shall be $3.15 per share and shall contain such other terms and conditions as set forth in the stock option agreement. The foregoing Options shall be qualified as incentive stock options to the maximum as allowed by law. The Options provided for herein are not transferable by Employee and shall be exercised only by Employee, or by his legal representative or executor, as provided in the Plan. Such Options shall terminate as provided in the Plan, except as otherwise modified by this Agreement.
11.2 In the event the Employee’s employment is terminated for any reason other than death, Disability, Cause or Employee’s voluntary resignation without Good Reason, the conditions to the vesting of any outstanding incentive awards (including restricted stock, stock options and granted performance shares or units) granted to the Employee under any of the Company’s plans, or under any other incentive plan or arrangement, shall be deemed void and all such incentive awards shall be immediately and fully vested and the terms of the awards shall be deemed amended to provide that the awards shall remain exercisable for the duration of their original term.
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ARTICLE XII
EXTRAORDINARY TRANSACTIONS
12.1 The Company’s Board of Directors has determined that it is appropriate to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Employee, to their assigned duties without distraction in potentially disturbing circumstances arising from the possibility of a change in control of the Company.
12.2 Changes in Control. For purposes of this Agreement, a “Change in Control” shallmean any of the following events:
| | | a | (i) An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) immediately after which such Person has “Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty percent (20%) or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a “Non-Control Acquisition” (as defined below) shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (1) an employee benefit plan (or a trust forming a part thereof) maintained by (x) the Company or (y) any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a “Subsidiary”), or (2) the Company or any Subsidiary. |
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| | | | (ii) Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because a Person (the “Subject Person”) gained Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. |
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| | | (b) | The individuals who, as of the date this Agreement is approved by the Board, are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least two-thirds of the Board; provided, however, that if the election, or nomination for election by the Company’s stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered and defined as a member of the Incumbent Board; and provided, further, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election Contest" (as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or |
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| | | (c) | Approval by stockholders of the Company of: |
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| | | | (i) | A merger, consolidation or reorganization involving the Company, unless: (1) the stockholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization, (2) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation, and (3) no Person (other than the Company, any Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any Subsidiary) becomes Beneficial Owner of twenty percent (20%) or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities as a result of such merger, consolidation or reorganization, a transaction described in clauses (1) through (3) shall herein be referred to as a “Non-Control Transaction”; or |
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| | | | (ii) | An agreement for the sale or other disposition of all or substantially all of the assets of the Company, to any Person, other than a transfer to a Subsidiary, in one transaction or a series of related transactions; or |
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| | | | (iii) | The stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company. |
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| | | d. | Notwithstanding anything contained in this Agreement to the contrary, if the Employee’s employment is terminated prior to a Change in Control and the Employee reasonably demonstrates that such termination (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control (a “Third Party”) or (ii) otherwise occurred in connection with, or in anticipation of, a Change in Control, then for all purposes of this Agreement, the date of a Change in Control with respect to the Employee shall mean the date immediately prior to the date of such termination of the Employee’s employment. |
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12.3 In the event that within ninety (90) days of a Change of Control as described in Section 12.2, (i) Employee is terminated, or (ii) Employee=s status, title, position or responsibilities are materially reduced and Employee terminates his Employment for Good Reason, the Company shall pay and/or provide to the Employee, the following compensation and benefits:
| | | a. | The Company shall pay the Employee, in lieu of any other payments due hereunder, (i) the Accrued Compensation; (ii) the Continuation Benefits; (iii) and (iii) as additional severance, in a single payment, an amount in cash equal to three times the amount of the five year average of the gross income of the Employee, as reported by the Company for federal income tax purposes; and |
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| | | b. | The conditions to the vesting of any outstanding Options or other incentive awards (including restricted stock, stock options and granted performance shares or units (collectively, the “Awards”)) granted to the Employee under any of the Company=s benefit plans, or under any other incentive plan or arrangement, shall be deemed void and all such Awards shall be immediately and fully vested and exercisable. Further, the Options shall be deemed amended to provide that in the event of termination after an event enumerated in this Article XII, the options shall remain exercisable for the duration of their original term. |
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12.4 (a) Notwithstanding the foregoing, if the payment under this Article XII, either alone or together with other payments which the Employee has the right to receive from the Company, would constitute an “excess parachute payment" as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), and if the event which constitutes the Change of Control is a sale or merger of the Company for a valuation of at least $100,000,000, in addition to the payments due to Employee as set forth in Section 12.2 of this Agreement, the Company shall also pay to the Employee within five (5) business days of making any payment subject to the Excise Tax, a gross up payment (the “Gross Up Payment”) equal to the amount which, after the deduction of any applicable Federal, State and Local income taxes attributable to the Gross Up Payment, is equal to the Excise Tax including the Excise Tax attributable to the Gross Up Payment.
(b) The Company shall pay to the applicable government taxing authorities, as Excise Tax withholding, the amount of the Excise Tax that the Company has actually withheld from the Payment or Payments.
(c) The Company shall give notice to the Employee as soon as practicable after its determination that Change of Control payments and benefits are subject to the Excise Tax, but no later than ten (10) days in advance of the due date of such Change of Control payments and benefits, specifying the proposed date of payment and the Change of Control benefits and payments subject to the Excise Tax.
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(d) If it is established pursuant to a determination of a court, or an Internal Revenue Service (the “IRS”) decision, action or proceeding, that there has been an underpayment of the Excise Tax (an “Underpayment”), the Company shall pay to the Employee within thirty (30) days of such determination or resolution, the amount which, after the deduction of any applicable federal, state and local income taxes, including the Excise Tax, is equal to the Underpayment, plus applicable interest and penalties until the date of payment.
(e) The Company hereby agrees to indemnify, defend, and hold harmless the Employee for any and all claims arising from or related to non-payment of Excise Tax, including the amount of such tax and any and all costs, interest, expenses, penalties associated with the non-payment of such tax to the fullest extent permitted by law.
ARTICLE XIII
ARBITRATION AND INDEMNIFICATION
13.1 Any dispute arising out of the interpretation, application, and/or performance of this Agreement with the sole exception of any claim, breach, or violation arising under Articles VI or VII hereof shall be settled through final and binding arbitration before a single arbitrator in the State of New York in accordance with the Rules of the American Arbitration Association. The arbitrator shall be selected by the Association and shall be an attorney-at-law experienced in the field of corporate law. Any judgment upon any arbitration award may be entered in any court, federal or state, having competent jurisdiction of the parties.
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13.2 The Company hereby agrees to indemnify, defend, and hold harmless the Employee for any and all claims arising from or related to his employment by the Company at any time asserted, at any place asserted, to the fullest extent permitted by law. The Company shall maintain such insurance as is necessary and reasonable to protect the Employee from any and all claims arising from or in connection with his employment by the Company during the term of Employee’s employment with the Company and for a period of six (6) years after the date of termination of employment for any reason. The provisions of this Section 13.2 are in addition to and not in lieu of any indemnification, defense or other benefit to which Employee may be entitled by statute, regulation, common law or otherwise.
ARTICLE XIV
SEVERABILITY
If any provision of this Agreement shall be held invalid and unenforceable, the remainder of this Agreement shall remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall remain in full force and effect in all other circumstances.
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ARTICLE XV
NOTICE
For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when (a) personally delivered or (b) sent by (i) a nationally recognized overnight courier service or (ii) certified mail, return receipt requested, postage prepaid and in each case addressed to the respective addresses as set forth below or to any such other address as the party to receive the notice shall advise by due notice given in accordance with this paragraph. All notices and communications shall be deemed to have been received on (A) if delivered by personal service, the date of delivery thereof; (B) if delivered by a nationally recognized overnight courier service, on the first business day following deposit with such courier service; or (C) on the third business day after the mailing thereof via certified mail. Notwithstanding the foregoing, any notice of change of address shall be effective only upon receipt.
The current addresses of the parties are as follows:
| | IF TO THE COMPANY: | | AuthentiDate Holding Corp.
2165 Technology Drive
Schenectady, NY 12308 | |
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| | IF TO THE EMPLOYEE: | | John T. Botti | |
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ARTICLE XVI
BENEFIT
This Agreement shall inure to, and shall be binding upon, the parties hereto, the successors and assigns of the Company, and the heirs and personal representatives of the Employee.
ARTICLE XVII
WAIVER
The waiver by either party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of construction and validity.
ARTICLE XVIII
GOVERNING LAW
This Agreement has been negotiated and executed in the State of New York. The law of the State of New York shall govern the construction and validity of this Agreement.
ARTICLE XIX
JURISDICTION
Any or all actions or proceedings which may be brought by the Company or Employee under this Agreement shall be brought in courts having a situs within the State of New York, and Employee and the Company each hereby consent to the jurisdiction of any local, state, or federal court located within the State of New York.
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ARTICLE XX
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties hereto. No change, addition, or amendment shall be made hereto, except by written agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their hands and seals the day and year first above written.
| | AuthentiDate Holding Corp. |
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| | By: | /s/ J. Edward Sheridan |
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| | | J. Edward Sheridan
Chairman of the Compensation Committee |
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| | Employee |
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| | | /s/ John T. Botti |
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| | | John T. Botti
Employee |
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