Document:

Prepared and filed by St Ives Burrups

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. 

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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). 	

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  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. 	

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 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.  

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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”). 

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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. 

 

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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. 

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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. 

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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. 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. 

 

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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.

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  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).
	 

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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. 

 

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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
      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. 	

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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” 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.

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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. 
	 	 	 	 
	 	 	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:
	 	 	 	 	 
	 	 	 	(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
	 	 	 	 	 
	 	 	 	(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. 

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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) 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<PAGE>

                                                                   EXHIBIT 10.18

                              SETTLEMENT AGREEMENT

                  SETTLEMENT AGREEMENT, dated the 19th day of September, 2004
("Agreement"), by and between MedStrong International Corporation, a Delaware
corporation, with offices at 350 Bedford Street, Suite 203, Stamford,
Connecticut 06901("MedStrong"), and Jerry R. Farrar/Cargril Acceptance
Corporation, of 734 Silver Spur Road, Suite 105, Rolling Hills Estates, CA 90274
("Farrar/Cargril"), MedStrong and Farrar/Cargril are sometimes referred to
herein as the "Parties", or individually as a "Party".

         WHEREAS, MedStrong and Farrar are parties to an Employment Agreement,
dated December 15, 2000 (the "Employment Agreement"); and

         WHEREAS, MedStrong has licensed MedStrong's Patient Data Quickly
("PDQ") software rights on an exclusive basis to Farrar and Cargril, pursuant to
a License Agreement, made as of April 1, 2004 (the "License Agreement"); and

         WHEREAS, MedStrong and Farrar have agreed that Farrar desires to resign
his employment ("Employment") as President, Chief Executive Officer and Acting
Chief Financial Officer of MedStrong; and

<PAGE>

         WHEREAS, the parties wish to provide for settlement of the obligations
of each respective Party to the other Party pursuant to the terms of this
Agreement; and

         WHEREAS, each of the Parties could attempt to assert claims against the
other party; and

         WHEREAS, the Parties desire to resolve all potential disputes with this
Settlement Agreement.

NOW, THEREFORE, in consideration of the agreements and covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, it is agreed by and between the parties as
follows:

         1.   Settlement of Obligation. The Parties shall make full settlement
of Farrar's Employment as follows:

              A.    Effective Date. The official date of termination of
                    Farrar's employment shall be the date the Board fully
                    accepts the Settlement Agreement.

              B.    Termination of Employment Agreement. The Employment
                    Agreement shall be terminated on the date the Board
                    fully accepts the Settlement Agreement, and MedStrong
                    shall have no further obligations, past, present or
                    future, to Farrar thereunder (including without
                    limitation, bonuses, stock options, medical or life
                    insurance, and expenses).

              C.    Resignation as Officer and Director. Farrar hereby
                    resigns, effective the date first set forth above, as
                    a member of the Board of Directors of MedStrong and
                    from all offices held by Farrar as an officer of
                    MedStrong.

<PAGE>

              D.    Amendment of License Agreement. The parties shall execute
                    the amendment to the License Agreement in the form attached
                    hereto as Exhibit A.

              E.    MedStrong reaffirms that this agreement excludes the
                    Resolution of MedStrong wherein it was unanimously agreed on
                    September 29, 2003 by the Board of Directors that MedStrong
                    indemnified Farrar against certain creditors of MedStrong
                    where he guaranteed payment, i.e. Metro Properties and
                    Capital One corporate credit card. The general release by
                    Farrar herein does not extend to these matters.

         2.   Settlement Subject to MedStrong Board of Directors Approval.

         This Agreement shall be subject to the approval of MedStrong's Board of
 Directors.

         3.   Representations and Warranties of Farrar.

              A.    Farrar has delivered all necessary financial information or
records to MedStrong's independent accountants and has delivered all other
corporate records in his possession or under his control to MedStrong.

              B.    Farrar understands that Michael Paige and Jackson &
Campbell, P.C. are acting as counsel for MedStrong with respect to the drafting
and negotiation of this Agreement and confirms that he is represented by
independent counsel with respect to this Agreement.

         4.   Release by Farrar. In consideration for settlement of the
termination of Farrar's Employment as provided hereinabove and the agreements of
MedStrong made as provided herein, Farrar, as releasor, remises, releases and
forever discharges MedStrong, its respective subsidiaries, officers, directors,
agents, representatives, counsel, successors and assigns, jointly and severally,
from any and all debts, demands, actions, causes of action, suits, damages,
claims and liabilities based on matters relating to Farrar's Employment or any
other matter of whatever kind or nature, known or unknown, suspected or
unsuspected, accrued or unaccrued, whether in law, equity or otherwise, and
whether under contract, warranty, tort or otherwise, which Farrar ever had, now
has or may have, claim or assert from the beginning of the world to the date of
this Settlement Agreement, excepting 1. Settlement of Obligation, item E and the
obligations of MedStrong under this Settlement Agreement.

<PAGE>

         5.   Release by MedStrong. In consideration of the agreements of Farrar
made as provided herein, MedStrong, as releasor, remises, releases and forever
discharges Farrar, his respective, agents, representatives, heirs, successors
and assigns, jointly and severally, from any and all debts, demands, actions,
causes of action, suits, damages, claims and liabilities based on matters
relating to Farrar's Employment or any other matter of whatever kind or nature,
known or unknown, suspected or unsuspected, accrued or unaccrued, whether in
law, equity or otherwise, and whether under contract, warranty, tort or
otherwise, which MedStrong ever had, now has or may have, claim or assert from
the beginning of the world to the date of this Settlement Agreement, excepting
for the obligations of Farrar under this Settlement Agreement.

         6.   Confidential Treatment. Except as required by law or applicable
regulation, this Settlement Agreement, and the terms hereof, shall be maintained
in confidence by the parties and shall not be disclosed to any third party.
Neither MedStrong nor Farrar shall discuss this Settlement Agreement or any of
the transactions leading up to this Settlement Agreement with any other person,
other than their respective counsel.

         7.   No Disparagement. Following the execution of this Agreement,
Farrar shall not disparage MedStrong, or any of its individual officers,
directors, consultants, counsel or independent accountants. MedStrong shall not
disparage Farrar and shall disclose to third parties, when asked, that Farrar
resigned on terms acceptable to both Farrar and MedStrong.

         8.   Agreement Represents Compromise. This Settlement Agreement
represents a compromise of disputed claims and is not to be deemed or construed
to be an admission of liability or of the truth of any fact on the part of any
party. By this Settlement Agreement, the parties intend merely to avoid the
potential for protracted dispute.

         9.   Governing Law and Venue. This Settlement Agreement shall
be construed under the laws of the State of Connecticut pertaining to contracts
made and to be performed in Connecticut, without giving effect to its choice of
law provisions. The Parties hereto hereby consent to venue in any state or
federal court within the State of Connecticut having jurisdiction over the City
of Stamford for all purposes in connection with this Agreement.

         10.  Entire Agreement. This Settlement Agreement embodies the entire
agreement of the parties on the subject matter hereof and supersedes and
replaces all prior agreements between the parties regarding these matters. It
may not be changed or modified orally, but only by a writing signed by each of
the parties to be bound by such changes or modification.

         11.  Counterparts. This Settlement Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same instrument.

<PAGE>

         12.  Attorney's Fees. In any litigation arising out of this Agreement,
the prevailing party shall be entitled to reimbursement of reasonable attorney's
and costs associated with such litigation through all levels of appeals.

         IN WITNESS WHEREOF, the parties have set their hands and seals to this
Settlement Agreement which is effective as of the day and year first above
written.

                                MEDSTRONG INTERNATIONAL CORPORATION

                                By:   /s/ Joel San Antonio
                                    --------------------------
                                     (Signature)

                                Name:  Joel San Antonio
                                Title: Chairman of the Board

                                JERRY R. FARAR
                                CARGRIL ACCEPTANCE CORPORATION

                                By:   /s/ Jerry R. Farrar
                                    ---------------------------
                                     (Signature)

                                Name:  Jerry R. Farrar
                                Title: President

<PAGE>

                                    EXHIBIT A

                      AMENDMENT NO. 1 TO LICENSE AGREEMENT

THIS AMENDMENT NO. 1 (this "Amendment") TO LICENSE AGREEMENT dated April 1, 2004
(the "License Agreement") is entered into as of September 1, 2004 (the
"Effective Date") by and between MedStrong International Corporation, having an
address at 350 Bedford Street, Suite 203, Stamford, CT 06901 ("MedStrong") and
Jerry R. Farrar, having an address at 734 Silver Spur Road, Suite 105, Rolling
Hills Estates, CA 90274 ("Farrar/Cargril"). Capitalized terms used but not
defined herein shall have the respective meanings ascribed to them in the
License Agreement.

                                    RECITALS
WHEREAS, the MedStrong and Farrar entered into the License Agreement for the
exclusive license of the Software Rights;

WHEREAS, the License Agreement requires a Minimum Royalty Payment, in addition
to continuing royalties.

WHEREAS, MedStrong and Farrar desire to amend the License Agreement to extend
these dates for the payments under the License Agreement;

NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual
promises herein contained, the parties hereby agree as follows:

                         AMENDMENT TO LICENSE AGREEMENT

1.1   Amendment of Section 3.2(a). Section 3.2(a) of the License Agreement
      shall be amended to eliminate any requirement for Farrar to make the
      Minimum Royalty Payment and to read in its entirety as set forth below:

      "(a)  Royalty Amount. Licensee shall pay to MedStrong, on a monthly
            basis, royalties equal to Thirty-Five (35%) Percent of the
            Gross Net Margin of Licensed Products and Services for
            revenues from Road America/Warrantech and American Doctors
            Network, with no right of offset for any client cancellations,
            overpayments or other moneys due one party or the other.

                         MISCELLANEOUS PROVISIONS

2.1   Effect of Amendment. Except as amended and set forth above, the License
      Agreement shall continue in full force and effect.

2.2   Governing Law. This Amendment shall be governed, construed and interpreted
      in accordance with the laws of the State of Connecticut, without giving
      effect to principles of conflicts of law.

2.3   Counterparts. This Amendment may be executed in two or more counterparts,
      each of which shall be deemed an original and all of which together shall
      constitute one instrument.

2.4   Entire Agreement. This Amendment, together with the License Agreement,
      constitute the entire agreement among the parties hereto pertaining to the
      subject matter hereof or thereof, and any and all other written or oral
      agreements existing among the parties hereto are expressly canceled.

<PAGE>

         IN WITNESS WHEREOF, both MedStrong and Farrar/Cargril Acceptance
Corporation have executed this Amendment, in duplicate originals, by their
respective and duly authorized officers on the day and year first written above.

         Jerry R. Farrar:                   MedStrong International Corporation

         Cargril Acceptance Corporation

By:  ----------------------------------      By: ------------------------------
       (Signature)                                 (Signature)

Name:  Jerry R. Farrar                              Name:  Joel San Antonio
Title: President                                    Title: Chairman of the Board

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