Exhibit 10.1

EMPLOYMENT AGREEMENT

AGREEMENT made as of the 6th day of August, 2004 by and between John Waters,
residing at _____________ , __________ , New York ____ (hereinafter referred to
as the “Employee”) and AuthentiDate Holding Corp., a Delaware corporation with
principal offices located at 2165 Technology Drive, Schenectady, New York 12308.

W I T N E S S E T H:

WHEREAS, AuthentiDate Holding Corp. and its subsidiaries (together referred to
as the “Company”) are engaged in the business of the manufacture and
distribution of computers and document imaging systems, providing Internet and
software-based document authentication services and related business
enterprises; and

WHEREAS, the Company employs and desires to continue the employment of the
Employee for the purpose of securing for the Company the experience, ability and
services of the Employee; and

WHEREAS, the Employee desires to continue his present employment with the
Company pursuant to the terms and conditions herein set forth, superseding all
prior oral and written employment agreements and term sheets and letters between
the Company, its subsidiaries and/or predecessors and Employee;

NOW, THEREFORE, it is mutually agreed by and between the parties hereto as
follows:

ARTICLE I

DEFINITIONS

1.1 Accrued Compensation. Accrued Compensation shall mean an amount which shall
include all amounts earned or accrued through the “Termination Date” (as defined
below) but not paid as of the Termination Date, including (i) Base Salary, (ii)
reimbursement for business expenses incurred by the Employee on behalf of the
Company, pursuant to the Company’s expense reimbursement policy in effect at
such time, (iii) car allowance, (iv) discretionary time and vacation pay, and
(v) bonuses and incentive compensation earned and awarded prior to the
Termination Date.

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

 

1.2 Base Salary. “Base Salary” shall mean the greater of the Employee’s annual
base compensation (a) at the rate in effect on the Termination Date or (b) at
the highest rate in effect at any time during the ninety (90) day period prior
to the Termination Date or a Change in Control, and shall include all amounts of
his base compensation that are reported as income; provided however, Base Salary
shall not include the Bonus or any other payment contingent on performance. Base
Salary shall be paid to the Employee in regular installments on each of the
Company’s regular pay dates for executives.

1.3 Cause. Cause shall mean: (i) willful disobedience by the Employee of a
reasonable, material and lawful instruction of the Board of Directors of the
Company consistent with the duties and functions of Employee’s position; (ii)
conviction of the Employee of any misdemeanor involving fraud or embezzlement or
similar crime, or any felony; (iii) fraud, gross negligence or willful
misconduct in the performance of his duties to the Company; or (iv) excessive
absences from work, other than for illness or Disability; provided that the
Company shall not have the right to terminate the employment of Employee
pursuant to the foregoing clauses (i), (iii) and (iv) above unless written
notice specifying such breach shall have been given to the Employee and, in the
case of breach which is capable of being cured, the Employee shall have failed
to cure such breach within thirty (30) days after his receipt of such notice.

2

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

 

1.4 Continuation Benefits. Continuation Benefits shall be the continuation of
the Benefits, as defined in Section 5.1, for the period from the Termination
Date to either (i) the later of 2 the Expiration Date, or the end of the month
in which the final Severance Payment installment is payable pursuant to this
Agreement, or (ii) such other period as specifically stated by this Agreement
(the “Continuation Period”), at the Company’s expense on behalf of the Employee
and his dependents; provided, however, that the benefits required to be provided
during the Continuation Period with respect to any benefit plan not available to
non-employees of the Company, shall be such benefits as shall be reasonably
available and substantially similar to the benefits provided to employees of the
Company on the Termination Date. The Company’s obligation hereunder with respect
to the foregoing benefits shall also be limited to the extent that if the
Employee obtains any such benefits pursuant to a subsequent employer’s benefit
plan, the Company may reduce the coverage of any benefits it is required to
provide the Employee hereunder as long as the aggregate coverage and benefits of
the combined benefit plans is no less favorable to the Employee than the
coverage and benefits required to be provided hereunder. This definition of
Continuation Benefits shall not be interpreted so as to limit any benefits to
which the Employee, his dependents or beneficiaries may be entitled under any of
the Company’s employee benefit plans, programs or practices following the
Employee’s termination of employment, including, without limitation, retiree
medical and life insurance benefits.

1.5 Disability. Disability shall mean a physical or mental infirmity which
impairs the Employee’s ability to substantially perform his duties with the
Company for a period of ninety (90) consecutive days, and the Employee has not
returned to his full time employment prior to the Termination Date as stated in
the “Notice of Termination” (as defined below).

3

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

 

1.6 Good Reason. Good Reason shall mean (i) a change in the Employee’s status,
title, position or responsibilities (including reporting responsibilities)
which, in the Employee’s reasonable judgment, represents an adverse change from
his status, title, position or responsibilities; the assignment to the Employee
of any duties or responsibilities which, in the Employee’s reasonable judgment,
are inconsistent with his status, title, position or responsibilities; or any
removal of the Employee from or failure to reappoint or reelect him to any of
such offices or positions, except in connection with the termination of his
employment for Disability, Cause or as a result of his death or by the Employee
for other than for Good Reason; (ii) a reduction in the Employee’s base salary
or benefits, or any failure to pay the Employee any compensation or benefits to
which Employee is entitled within five (5) days of the date due; and (iii) a
Change of Control, as described in Article XI.

1.7 Notice of Termination. Notice of Termination shall mean a written notice
from the Company, or the Employee, of termination of the Employee’s employment
which indicates the specific termination provision in this Agreement relied
upon, if any, and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee’s
employment under the provision so indicated; provided that termination for Good
Reason based on a Change of Control shall be served in accordance Article XI. A
Notice of Termination served by the Company shall specify the effective date of
termination.

1.8 Severance Payment. Severance Payment shall mean an amount equal to six
months of Base Salary (“Severance Payments”) payable in equal installments on
each of the Company’s regular pay dates for executives during such six month
period commencing on the first regular executive pay date following the
Termination Date. For purposes of computing the Severance Payment, Base Salary
shall include any automatic increases to Base Salary to which the Employee would
have been entitled had this Agreement not been terminated.

4

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

 

1.9 Termination Date. Termination Date shall mean (i) in the case of the
Employee’s death, his date of death; (ii) in the case of Good Reason, ten (10)
days from the date the Notice of Termination is given to the Company, except for
a Change in Control, as described in Section 11.2 which shall be governed by
Article XII; (iii) in the case of termination of employment after the Expiration
Date, the last day of employment; and (iv) in all other cases, the date
specified in the Notice of Termination; provided, however, if the Employee’s
employment is terminated by the Company for any reason except Cause, the date
specified in the Notice of Termination shall be at least 30 days from the date
the Notice of Termination is given to the Employee, and provided further that in
the case of Disability, the Employee shall not have returned to the full-time
performance of his duties during such period of at least 30 days.

ARTICLE II

EMPLOYMENT

2.1 Subject to and upon the terms and conditions of this Agreement, the Company
hereby employs and agrees to continue the employment of the Employee, and the
Employee hereby accepts such continued employment in his capacity as Executive
Vice-President and Chief Administrative Officer.

5

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

ARTICLE III

DUTIES

3.1 The Employee shall, during the term of his employment with the Company, and
subject to the direction and control of the Company’s Board of Directors,
perform such duties and functions as he may be called upon to perform by the
Company’s Board of Directors during the term of this Agreement, consistent with
his position as Executive Vice-President and Chief Administrative Officer.

3.2 The Employee agrees to devote full business time and his best efforts in the
performance of his duties for the Company and any subsidiary corporation of the
Company.

3.3 Employee shall undertake regular travel to the Company’s executive and
operational offices, and such other occasional travel within or outside the
United States as is or may be reasonably necessary in the interests of the
Company. All such travel shall be at the sole cost and expense of the Company.
All lodging and food costs incurred by Employee while traveling and/or
conducting business at the Company’s operational offices shall be paid by the
Company.

ARTICLE IV

COMPENSATION

4.1 During the term of this Agreement, Employee shall be compensated initially
at the rate of $275,000 per annum, subject to such increases to be determined by
the Board of Directors, or if the Board so designates, the Compensation
Committee, in its discretion, at the commencement of each of the Company’s
fiscal years during the term of this Agreement (the “Base Salary”).

6

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

 

4.2 Employee shall be eligible to receive a bonus (the “Bonus”) in the
discretion of the Board of Directors, or if the Board so designates, the
Compensation Committee of the Board of Directors based on the annual performance
of the Company. Employee will have an opportunity to earn a Bonus of up to 50%
of Employee’s Base Salary for each fiscal year of employment; provided, however,
that the bonus for the first year of employment shall be no less than 50% of
Employee’s Base Salary. The Bonus will be based on Employee’s achievement of
revenue and income targets and other key objectives established by the Board of
Directors or if the Board so designates, the Compensation Committee of the Board
of Directors, and recorded in writing, at the commencement of each fiscal year.
For the first fiscal year after the commencement of this Agreement, such
objectives shall include achieving cost reductions of $2,000,000 in such fiscal
year.

4.3 The Company shall deduct from Employee’s compensation all federal, state,
and local taxes which it may now or may hereafter be required to deduct.

4.4 Employee may receive such other additional compensation as may be determined
from time to time by the Board of Directors including bonuses and other long
term compensation plans. Nothing in thus subparagraph 4.4 shall be deemed or
construed to require the Board to award any bonus or additional compensation.

ARTICLE V

BENEFITS

5.1 During the term hereof, the Company shall provide Employee with the
following benefits (the “Benefits”): (i) group health care and insurance
benefits as generally made available to the Company’s senior management; and
(ii) such other insurance benefits obtained by the Company and made generally
available to the Company’s senior management.

 

7

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

5.2 The Company shall provide an automobile for the use of the Employee not to
exceed a lease payment of $1,000 per month. The Company shall reimburse
Employee, upon presentation of appropriate vouchers, for all reasonable business
expenses incurred by Employee on behalf of the Company upon presentation of
suitable documentation including up to $1,500 per month for living expenses.

5.3 In the event the Company wishes to obtain Key Man life insurance on the life
of Employee, Employee agrees to cooperate with the Company in completing any
applications necessary to obtain such insurance and promptly submit to such
physical examinations and furnish such information as any proposed insurance
carrier may request.

5.4 For the term of this Agreement, Employee shall be entitled to paid vacation
at the rate of four (4) weeks per annum.

8

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

ARTICLE VI

NON-DISCLOSURE

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, or when required by law or legal process, or where appropriate
in response to regulatory authorities, 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 any other nonpublic
business information of the Company and/or its subsidiaries learned as a
consequence of Employee’s employment with the Company, except for information
available publicly or from other non-confidential sources (collectively referred
to as the “Proprietary Information”). The Employee acknowledges that Proprietary
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. Proprietary Information shall cease to be
Proprietary 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.

9

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

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.

10

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

 

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. Notwithstanding the foregoing, 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.

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.

11

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

ARTICLE VIII

TERM

8.1 This Agreement shall be for a term (the “Initial Term”) commencing on August
6, 2004 (the “Commencement Date”) and terminating on August 5, 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;             b. for Cause; or             c.
without Cause.

12

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

9.2 Employee may terminate this Agreement by giving a Notice of Termination to
the Company 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;       b. if
the Employee was terminated by the Company for Disability, the Accrued
Compensation, the Severance Payment and the Continuation Benefits; or       c.
if termination was due to the Employee’s death, the Accrued Compensation;      
        or             d. if the Employee was terminated by the Company prior to
the Expiration Date without cause, or the Employee terminates for Good Reason,
(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.        

9.4 The amounts payable under this Section 9, shall be paid as follows:

            a. Accrued Compensation shall be paid within five (5) business days
after the Employee’s Termination Date (or earlier, if required by applicable
law).        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).        c. The Severance Payments shall
be paid in accordance with the Company’s regular pay periods (or earlier, if
required by applicable law).  

13

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

 

9.5 The Employee shall not be required to mitigate the amount of any payment,
including the value of any Continuation Benefit, 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 except where such statement is required by law or regulation.

ARTICLE X

TERMINATION OF PRIOR AGREEMENTS

10.1 This Agreement, and the stock option, bonus plan and benefit plan, 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.

 

14

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

ARTICLE XI

STOCK OPTIONS

11.1 As an inducement to Employee to enter into this Agreement the Company
hereby grants as of August 6, 2004, 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 300,000 shares of the Company’s Common Stock,
of which options to purchase 75,000 shares shall vest on the date of this
Agreement and an additional 18,750 shall vest on the first monthly anniversary
of this Agreement (the “Options”). The balance of the options shall vest in
equal increments on each monthly anniversary of this Agreement over the balance
of the initial term of this Agreement. The exercise price of the Options shall
be $5.85 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.

15

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

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”
shall mean 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.

16

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

               (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.             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

17

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

 

    c. Approval by stockholders of the Company of:                 (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  

18

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

 

      (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                 (iii) The stockholders of the Company approve
any plan or proposal for the liquidation or dissolution of the Company.        
      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.

19

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

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)
the Severance Payment; and
            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.

 

20

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

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.

 

21

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

 

(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.

 

22

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

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.

 

23

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

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       WITH A COPY TO:  

Victor J. DiGioia
Goldstein & DiGioia, LLP
45 Broadway
New York, NY 10006

      IF TO THE EMPLOYEE:   John Waters                                  , New
York       WITH A COPY TO:   Benedict J. Pollio
Redmond, Pollio & Caso, LLP
1461 Franklin Ave
Garden City, NY 11530

24

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

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.

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.

25

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

 

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.

By:
___________________________________
           J. Edward Sheridan
           Chairman of the Compensation Committee

Employee

______________________________________
           John Waters
           Employee

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