Authentidate Holding Corp.
Corporate Governance Principles
The Board of Directors (the “Board”) of Authentidate Holding Corp. (the “Company”) is elected by the Company’s shareholders to oversee the management and conduct of the Company’s business. The directors should exercise their business judgment in good faith and in what they reasonably believe to be the best interests of the Company. It is the ultimate decision-making body of the Company, except with respect to matters reserved to the shareholders. The Board elects the Company’s senior management and then oversees their operation and performance, and provides advice and counsel, all in the interests of enhancing the long-term value of the Company for the benefit of shareholders. In discharging their obligations, directors should be entitled to rely on the honesty and integrity of their fellow directors as well as the Company’s senior management and outside advisors and auditors.
The Board has adopted the following Corporate Governance Principles (the “Principles”) to guide the Board in the exercise of its duties and responsibilities and to serve the best interests of the Company and its stockholders. The Principles should be applied in a manner consistent with any applicable rules and regulations of the Securities and Exchange Commission and the principal exchange or over the counter market upon which the Company’s securities are listed for trading and the Company’s By-Laws, each as amended and in effect from time to time. The Principles provide a framework for the conduct of the Board’s business. Where these Principles refer to a specific committee of the Board (for example, the Nominating and Corporate Governance Committee), the role and responsibilities of such committee will be filled by the entire Board during such periods of time that such committee is not fully constituted or regularly conducting business.
In fulfilling its role, the Board will be governed by the following principles:
- A. SELECTION AND COMPOSITION OF THE BOARD
- Size of the Board
According to the Company’s By-Laws, the Board may have no fewer than three and no more than fifteen members. Most recently, the Board has ranged in size from five to ninemembers. The Board will determine the number of members from time to time by resolution adopted by a majority of directors in office at the time of the vote. The Board’s objective is to achieve a size sufficiently large to encompass members with significant breadth in experience, skills and objectivity, while still small enough to function efficiently.
- Election of Directors
Directors are elected annually at an Annual Meeting of Shareholders and serve for a period of one year and until their successors are duly elected and qualified. The affirmative vote of a plurality of the outstanding shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote in the election of directors is required to elect the directors.
- Director Independence and Qualifications
At all times, a majority of directors shall be “independent directors” and will comply in all respects with the applicable rules of any exchange on which the Company’s securities are traded. or as may be otherwise required by federal securities laws. The Board envisions that independent, non-management directors will always represent a substantial majority of the Board and that directors who also hold management positions will be limited to no more than two persons if the Board is comprised of eight or less directors or three persons if the Board is comprised on more than eight directors. The Nominating and Corporate Governance Committee is responsible for reviewing the qualifications and independence of Board members.
- Board Membership Criteria
The Nominating and Corporate Governance Committee of the Board is responsible for screening potential director candidates and recommending nominees for election to the Board. In considering potential candidates, the Nominating and Corporate Governance Committee and the Board consider a number of factors, including the following: independence, employment and other professional experience, expertise and involvement in areas that are of relevance to the Company’s business, business ethics and professional reputation, character, other Board experience, the desire to have a Board that represents a diverse mix of backgrounds, perspectives and expertise and the extent to which the individual would fill a present need on the Board.
- Retirement Age
Recognizing the breadth of knowledge and experience its directors may provide, the Board has not established a retirement age for directors. All directors must continue to meet the criteria for Board service established by the Nominating and Corporate Governance Committee.
- Term Limits
The Board believes that much of the knowledge of the Company’s operations, management and business is cumulative. Therefore, the Board does not believe that fixed term limits are advisable, as they can interfere with the overall objective of maintaining the highest possible functionality and contribution from its members. The Board believes there is a benefit to maintaining a significant degree of continuity among directors, as members are able to gain greater insight into the Company over time, increasing the value of their contributions. At the same time, however, the Nominating and Corporate Governance Committee and the Board have the responsibility to monitor and assess the contribution of every director standing for re-election to assure that each such director is meeting the expectations necessary for continued service on the Board. The Board does not believe that directors who retire or change from the position they held when they came on the Board should necessarily leave the Board. There should, however, be an opportunity for the Board via the Nominating and Corporate Governance Committee to review the continued appropriateness of Board membership under these circumstances.
- B. BOARD OPERATION
- Selection of the Chairman; Lead Independent Director
The Chairman of the Board will normally be elected by the Board on an annual basis, typically after the Company’s annual meeting of shareholders. The Nominating and Corporate Governance Committee recommends to the Board a candidate for election as Chairman. The Chairman of the Board presides over all meetings of the Company’s Board. The Board envisions that the Company’s Chief Executive Officer will serve on the Board. The Board may determine, based on its assessment of the Company’s and its stockholders’ best interests, to appoint a director other than the Chief Executive Officer to serve as the Chairman of the Board.In the event that the Company is required by applicable law and/or the rules of a securities exchange on which the Company’s securities are traded to separate the role of the Chief Executive Officer and Chairman of the Board and the Board elects to appoint the Chief Executive Officer as the Chairman of the Board, the Board shall also appoint an independent member of the Board to serve as “Lead Director”. The Lead Director shall be responsible for coordinating the activities of the other independent directors and to perform various other duties. Service as Lead Director shall not exceed five consecutive years. The general authority and responsibilities of the Lead Director are as follows:
- advise the Chairman as to an appropriate schedule of Board meetings and provide the Chairman with input as to the preparation of the agendas for the Board of Directors’ and Board Committee meetings;
- ensure that the non-employee directors perform their duties responsibly while not interfering with on-going Company operations and understanding the boundaries between the Board of Directors and management responsibilities;
- advise the Chairman as to the quality, quantity and timeliness of the information submitted by the Company’s management that is necessary or appropriate for the non-employee directors to effectively and responsibly perform their duties;
- recommend to the Chairman the retention of advisers and consultants who report directly to the Board of Directors;
- serve as Chairman of the Executive Committee and as a member of the Corporate Governance and Nominating Committee of the Board of Directors;
- assist the Board of Directors, the Board’s Corporate Governance and Nominating Committee and the officers of the Company in better ensuring compliance with and implementation of the Board’s Corporate Governance Policies;
- develop the agendas for and serve as Chairman of the executive sessions of the Board’s non-employee directors;
- serve as principal liaison between the non-employee directors and the Chairman on sensitive issues; and
- recommend to the Corporate Governance and Nominating Committee and to the Chairman the membership of the various Board Committees, as well as the selection of Committee chairmen.
- Frequency of Board Meetings
The Board has determined to have at least four, regularly-scheduled meetings each year. The number of meetings may change at the discretion of the Board, and the Board may meet more frequently, in-person or by telephone, if circumstances warrant.
- Board Meeting Agendas; Advance Materials
The Board, in consultation with the Chief Executive Officer, is responsible for determining its agenda. Any director may request that a matter be placed on the Board’s agenda by contacting either the Secretary or the Chief Executive Officer, and members are encouraged to suggest items for inclusion in the agenda. Information and data that are important to the Board’s understanding of the business to be conducted at a Board or committee meeting should generally be distributed in writing to the directors before the meeting, and directors should review these materials in advance of the meeting. Management should ensure that the materials being distributed are as concise as possible while giving directors sufficient information to make informed decisions.
- Executive Sessions
The Board believes that it is important for independent, non-management directors to meet periodically in executive session without management directors present. Executive sessions of the independent directors are scheduled to occur in conjunction with each regularly-scheduled, in-person meeting of the Board. Any director may request additional sessions of the independent directors to address any area of concern. The Chairman (if not the Chief Executive Officer) will preside over executive sessions. Should the Chairman not be an independent director, the Nominating and Corporate Governance Committee or the Board may nominate an independent director to serve as “Lead Director,” who shall be approved by a majority of the independent directors and shall chair any executive session of the independent directors. The Board shall inform the Chief Executive Officer of matters discussed at such executive sessions.
- Board Self-Assessment
The Board will assess its performance on an annual basis, through a self-evaluation process coordinated by the Nominating and Corporate Governance Committee.The results will be analyzed by the Committee and reported to the full Board annually. The Committee will identify any areas for potential improvement and develop recommendations for future upgrades to the performance, processes and operation of the Board.
- Evaluation and Compensation of the Chief Executive Officer
At the beginning of each fiscal year, the Management Resources and Compensation Committee, with input from other independent members of the Board, shall establish performance goals for the Chief Executive Officer. These goals may be modified during the course of the year if unforeseen business circumstances warrant. At year-end, or throughout the year, as may be appropriate, the Chief Executive Officer will report to the Board on the achievement of these goals. At fiscal year end, the Management Resources and Compensation Committee, in consultation with the other non-management members of the Board, will evaluate the performance of Chief Executive Officer of the Company. The Management Resources and Compensation Committee is also responsible for approving the compensation of the Chief Executive Officer, as well as evaluating and approving the compensation of the Company’s senior executives (provided, however, that the evaluation of senior financial executives shall be made in conjunction with the Audit Committee).
- Interaction with Senior Management
Board members have complete access to members of senior management, and to other employees of the Company with whom they want to speak. Non-management directors may speak with individual members of management or other employees of the Company on a confidential basis. It is understood that Board members will use judgment to assure that this contact is not distracting to the business operation of the Company and respects the boundaries between the responsibilities of management in the operation of the Company and the responsibilities of the Board. Additionally, the Board will schedule informal meetings with departmental managers of the Company in conjunction with each regularly-scheduled, in-person meeting of the Board.Certain members of senior management, such as the Chief Financial Officer, may be regular attendees at Board meetings to help facilitate the operations of the Board. In addition, the Board encourages management to periodically invite other executives to make presentations at Board meetings and attend Board functions in order to provide the Board with additional insight into the Company and provide the Board with exposure to individuals whom management believes are potential succession candidates.
- Succession Planning
The Management Resources and Compensation Committee shall recommend to the full Board for its approval a succession plan for the Chief Executive Officer developed by management and approved by the Committee. The plan shall address the policies and principles for selecting a successor to the Chief Executive Officer, both in an emergency situation and in the ordinary course of business. The Committee shall also review programs created and maintained by Management for the development and succession of the Company’s other executive officers and any other individuals identified by senior management or the Committee.
- Board Interaction with Third Party Constituencies
The Board believes that management speaks for the Company, and therefore it will not normally be appropriate for Board members to speak on behalf of the Company to investors, employees, the press or other third parties. However, there may be instances in which selected Board members may be asked to participate in conversations with representatives of various constituencies, although those interactions will be coordinated with appropriate members of senior management. In addition, the Company has established a process for interested shareholders to contact members of the Board either individually or as a group by mail addressed to a director by name or to the Board of Directors c/o Corporate Secretary, Authentidate Holding Corp., 2225 Centennial Dr., Gainesville, GA 30504. The Secretary of the Company will ensure that mailed and electronic mail communications are forwarded to the appropriate Board members.
- Access to Independent Advisors
The Board and its Committees have the right at any time to retain independent financial, legal or other advisors, and the Company shall pay all expenses incurred in connection with such independent advisors.
- Director Orientation and Continuing Education
The Nominating and Corporate Governance Committee is charged with developing and overseeing the implementation and operation of a new director orientation program and determining whether and what form of continuing education for directors is appropriate. In addition, management will provide further information on an ongoing basis to assure that Board members are aware of the business, legal and other developments necessary to fulfill their role and will make available such outside educational opportunities as the Board deems relevant and appropriate.
- C. REQUIREMENTS OF BOARD SERVICE
- Attendance at Board Meetings
It is the expectation that directors will attend all Board meetings, and all meetings of Committees upon which they serve, and spend the time necessary to properly discharge their responsibilities, including the time necessary to carefully review all materials provided in advance of meetings. In the unusual instance when a Board member cannot attend a scheduled in-person meeting, he or she will make every effort to participate by telephone.
- Code of Ethics
All Board members are subject to the Company’s Code of Ethics (“Code”). The Code, and any waivers granted thereunder, for directors and executive officers, will be disclosed in compliance with Nasdaq listing and other applicable legal requirements.
- Limits on Service With Other Boards
There is no pre-determined limitation on Board members’ membership on the boards of other companies or charitable institutions. It is expected that each director will devote the time and effort necessary to discharge his or her duties in an appropriate and diligent fashion, irrespective of other activities and commitments. In the event this is not occurring, whether because of service on other boards or for some other reason, the matter will be addressed by the Nominating and Corporate Governance Committee.
- D. COMMITTEE MATTERS
- Number and Types of Committees
The Board has determined that the following committees serve important functions in assisting it to fulfill its role: the Audit Committee, the Management Resources and Compensation Committee, and the Nominating and Corporate Governance Committee. The Board has also established a special committee to provide recommendations on the matters identified in the resolutions establishing such special committee. The Board does not believe that any additional committees are necessary at this time. The Board, in its discretion may determine to establish additional committees in the future.
- Independence of Committee Members
Each member of the Audit Committee, the Management Resources and Compensation Committee and the Nominating and Corporate Governance Committee shall meet the independence requirements set forth in the Nasdaq Marketplace Rules. All members of the Audit Committee shall satisfy the applicable requirements for financial acumen, and at least one shall meet the applicablerequirement of financial sophistication as may be adopted by any exchange on which the Company’s securities are traded. Additionally, at least one member shall be an “audit committee financial expert” in accordance with applicable Securities and Exchange Commission regulations.
- Committee Charters
The Audit Committee, the Management Resources and Compensation Committee and the Nominating and Corporate Governance Committee shall have a written Charter, which will be reviewed annually. The Charters of the Audit Committee, the Management Resources and Compensation Committee and the Nominating and Corporate Governance Committee will comply in all respects with the applicable rules of any exchange on which the Company’s securities are traded. Other committees which may be established by the Boardwill operate in accordance with resolutions established by the Board, which will be reviewed annually.
- Committee Agendas
The agendas for each Committee meeting will be determined by the Chair of that Committee, in conjunction with fellow Committee members and appropriate members of management. The agenda is provided to Committee members in advance of each meeting, along with written materials on certain matters being presented for consideration.
- Committee Operation
Committees will meet at such times and with such frequency as is required by their Charters and as is necessary to conduct their assigned business. Each Committee has the ability to delegate matters to a sub-committee to the extent it believes such delegation will assist in the evaluation or decision-making process. The Chairs of each of the Committees are responsible for providing timely reports to the Board regarding the deliberations, recommendations and decisions of their respective Committees. Each Committee – as does the Board – has authority to obtain advice and assistance from external legal, accounting or other experts, advisors and consultants to assist in carrying out its duties and responsibilities and has the authority to retain and approve fees for any external experts, advisors or consultants.
- Assignment and Rotation of Committee Members
Assignment of Board members to various Committees, and selection of Committee Chairs, are reviewed at least annually by the Nominating and Corporate Governance Committee. It is the sense of the Board that a balance should be struck between the desirability of continuity in Committee assignments – which allows for greater depth of understanding by Committee members of their roles – and the need to periodically add new perspectives and avoid stagnation. These factors are taken into account in determining annual Committee assignments, but the Board does not believe that an inflexible, formal rotation schedule would be productive.
- Committee Self-Assessments
In addition to the self-assessment process for the Board as a whole, each of the Audit Committee, the Management Resources and Compensation Committee and the Nominating and Corporate Governance Committee will conduct annual self-assessments.
- E. BOARD COMPENSATION
- Determination of Compensation
The Management Resources and Compensation Committee is responsible for making recommendations to the full Board regarding the components and amount of director compensation. Such recommendations are based on compensation levels at entities comparable to the Company, and will be set at levels necessary to attract and retain high caliber Board members and appropriately compensate them for their time and effort. The Board is responsible for approving the compensation payable to directors.
- Mix of Compensation
The Board believes that compensation for directors should include a mix of elements, but should include some component of equity, to align the interests of Board members with shareholders.
- Share Ownership by Directors
The Board believes that share ownership by directors is desirable, in that it aligns the interests of directors and shareholders. Pursuant to compensation policies adopted from time to time by the Board, each non-management director may be awardedequity securities upon joining the Board and at such other times as may be specified in applicable resolutions adopted by the Board.
Authentidate Holding Corp. (“AHC”) Code of Ethics and Conduct
- Introduction to and Administration of the AHC Code of Ethics and Conduct
1.1 Introduction. AHC has adopted this Code of Ethics and Conduct (the “Code”) to advise all AHC Employees of the ethical and legal standards that we expect you to observe when dealing with AHC, your AHC colleagues, our customers and our vendors. When you encounter ethical or legal issues where you are not certain about the correct course of action, you should apply the principles described in this Code as guideposts in deciding how to proceed. We have adopted this Code to give you guidance for resolving these questions. When you are in doubt about the correct or best course of action, you should always consider consulting your manager or our Chief Financial Officer or Human Resources director for guidance. AHC expects all AHC Employees to adhere to this Code and to comply with all legal requirements. Accordingly, we have established a procedure for reporting suspected violations of the Code. Any violations of the Code may result in disciplinary action, including termination of employment. These matters are described in more detail below. Throughout this Code, we use the terms “AHC Employees”, “you” and “your” to refer to all AHC employees, directors and independent contractors, and the terms “AHC”, the “company”, “we” and “our” to refer to AHC and its subsidiaries.
1.2.1 Ongoing Review of Compliance. We require all AHC Employees to comply with this Code. Upon your receipt of this Code, and also from time to time as we deem to be necessary, we may require you to sign an acknowledgment that you have read and understood this Code and agree to comply with its provisions. We reserve the right to monitor the ongoing compliance by any or all AHC Employees with this Code and to investigate any suspected violations. If substantiated, these violations could result in disciplinary action, including immediate termination of employment.
1.2.2 Reporting of Suspected Violations. All AHC Employees are to report information about suspected violations of this Code by any other AHC Employee, regardless of the identity or position of the person who is the subject of such report, to the attention of our Chief Financial Officer, Human Resources director or Audit Committee. If you suspect improper accounting or auditing matters, you should bring such information to the attention of our Chief Financial Officer or a member of our Audit Committee. To contact our Audit Committee or to submit a report to them, please contact Audit Committee Chairman. With respect to any suspected violation, you may make an anonymous report through the Assistant to the President.
AHC will treat all information in a confidential manner and will not take any acts of retribution or retaliation against any AHC Employee for making a report. As the failure to report wrongful conduct may be interpreted as condoning such actions, the failure to report knowledge of wrongdoing may result in disciplinary action against any AHC Employee who fails to report.
1.2.3 Non-Retaliation. Retaliation in any form against an AHC Employee who reports a violation of this Code (even if the report is mistaken but was submitted in good faith) or who assists in the investigation of a reported violation is a serious violation of this Code. Acts of retaliation should be reported immediately and may result in severe disciplinary action.
1.2.4 Investigation of Suspected Violations. Suspected violations will be investigated under the supervision of our Chief Financial Officer, Human Resources director or Audit Committee as deemed appropriate. All AHC Employee’s are expected to cooperate in the investigation of reported violations. In order to protect the privacy of persons involved in investigations, persons investigating a suspected violation will use their best efforts to keep confidential, the identity of anyone reporting a suspected violation or participating in an investigation, unless disclosure is required by law or is otherwise in the company’s best interests. Persons involved in an investigation are obliged to act in the best interests of AHC as a company and not on behalf of any AHC Employee, including executive officers. Our Board of Directors has ultimate responsibility for final interpretation of this Code and for determining whether any violations of this Code have occurred.
1.2.5 Disciplinary Action. If we determine, in our good faith discretion, that any AHC Employee has violated any provision of this Code, such AHC Employee may be subject to disciplinary action, including termination of employment, without prior warning.
1.2.6 Amendments to this Code; Disclaimers. This Code may be revised, changed or amended at any time by our Board of Directors. Following any material revisions or updates, an amended version of this Code will be distributed to you, and will immediately supercede the prior version of this Code. We may ask you to sign an acknowledgment confirming that you have read and understood the revised version of the Code, and that you agree to comply with its provisions. This Code reflects general principles to assist AHC Employees in making ethical decisions and cannot, and is not intended to, address every specific situation in which we may find it appropriate to take disciplinary action. This Code is not intended to create any contract (express or implied) with you, including without limitation any employment contract, and is not a promise that your employment will be not terminated except for cause.
1.2.7 Special Provisions Applicable to AHC Employees with Financial Reporting Obligations. Given the important position of trust and authority that they occupy, our Chief Executive Officers, Chief Financial Officer, the heads of our subsidiaries and operating divisions and AHC Employees involved in the Company’s financial reporting function (collectively, the “Financial Reporting Personnel”) should use the utmost of discretion and caution in interpreting and applying this Code. In the event that any Financial Reporting Personnel wishes to engage in a proposed action that is not consistent with the Code, such person must obtain a waiver of the relevant Code provisions in advance from our Audit Committee. U.S. federal law requires AHC to make public disclosure of our Financial Reporting Personnel’s compliance with the Code. Therefore, we will publicly report on a Current Report on Form 8-K any waivers of any provision of the Code granted by our Board of Directors to any Financial Reporting Personnel. Similarly, violations of the Code by our Financial Reporting Personnel may also be immediately reported on Form 8-K. Additional provisions of this Code pertaining solely to Financial Reporting Personnel are set forth in Section 5.
- Conflicts of Interest
2.1 Generally . All AHC Employees have a duty of loyalty to act in the best interests of the company. The business decisions and actions of AHC Employees must never be influenced by personal considerations or personal relationships. AHC Employees should avoid any relationship or activity that might impair, or appear to impair, their ability to make objective and fair business decisions. Generally, a conflict of interest arises whenever your personal interests diverge from your responsibilities to AHC or from AHC’s best interests. For example, a conflict of interest may occur when family members or close personal friends are involved in business relationships with you, either inside or outside the company. Other examples of potential conflicts of interest include, but are not limited to:
- employment by an actual or potential competitor, customer, vendor or regulator while you are employed by AHC;
- acceptance of gifts, payments, products or anything of value from anyone seeking to do business with AHC;
- placement of AHC business with an entity in which you or a family member has a financial interest;
- Appropriating or diverting to yourself or others any business opportunity or idea in which AHC might have an interest; and
- a significant ownership interest in a AHC competitor.
In such situations, or where even the appearance of a conflict of interest may exist, seek guidance from your manager or our Human Resources Director.
2.2 Use of Company Assets. You are responsible for the proper use of AHC’s assets and property, as well as its proprietary information. Our offices, equipment, supplies and other resources may not be used for activities which are not related to your employment with AHC, except for any activities that have been approved in writing in advance by us, or for personal usage that is minor in amount and reasonable. If you are found to be engaging in, or attempting, theft of any AHC property, including without limitation, documents, equipment, intellectual property, personal property of other employees, you may be subject to immediate termination of your employment and we reserve the right to refer the matter for criminal proceedings. We expect you to report any theft or attempted theft to your manager or our Human Resources director.
Proprietary marks, slogans, logos or other devices used to identify AHC and its proprietary products and technologies are important and valuable assets which require discretion in their use. You may not negotiate or enter into any agreement concerning AHC’s trademarks, service marks or logos without first consulting an authorized officer of the Company. We also respect the intellectual property rights of others, and any proposed name of a new product or offering intended to be sold or provided to customers should be submitted to the appropriate authorized officer for clearance prior to its adoption and use. Similarly, using the trademark or service mark of another company for marketing purposes (even one with whom AHC has a business relationship), requires clearance or approval. You must avoid the unauthorized use of copyrighted or patented materials of others and should ask an authorized officer if you have any questions regarding the permissibility of photocopying, excerpting, electronically copying or otherwise using copyrighted or patented materials. All copies of work that is authorized to be made available for ultimate distribution to the public should bear the prescribed form of copyright notice.
2.3 Gifts, Gratuities and Entertainment. You may not offer money, gifts or other items or products of value to customers or potential customers for the purpose of securing a contract or obtaining favorable treatment. Business-connected favors or gifts may not be extended to customers or vendors (current or prospective), unless they (a) are consistent with customary business practices; (b) do not have substantial monetary value and would not be viewed as improper by others; and (c) do not violate applicable laws or regulations. Business entertainment in the form of meals and beverages or other entertainment may be offered only if these activities and related expenses are modest and infrequent.
You should decline any gift, favor, entertainment or anything else of value from current or prospective customers, vendors or contractors or their representatives except for (a) gifts that do not have substantial monetary value given at holidays or other special occasions and (b) reasonable entertainment at lunch, dinner or business meetings where the return of the expenditure on a reciprocal basis is likely to occur and would be properly chargeable as a business expense. Other routine entertainment that is business-related such as sports outings or cultural events is acceptable under this policy only if reasonable, customary and not excessive. If you question the propriety of any gift, consult with your manager or our Chief Financial Officer.
- Laws and Regulations
3.1 Generally. All AHC Employees are to comply with all applicable local, state and federal laws and regulations, both domestic and international, and refrain from illegal, dishonest or unethical conduct. Although laws and regulations may sometimes be difficult to interpret, we expect you to make a good-faith effort to follow both the letter and the spirit of the law. You must consult your manager or our Human Resources director if you are uncertain as to whether a specific act or omission is legal. In addition, all AHC Employees are to comply with all applicable AHC policies and procedures. This includes, but is not limited to, our policies on equal opportunity, harassment, drug-free workplace, computer usage and information technology, data protection, expense reimbursement and travel, as well as our internal financial controls and procedures. We may modify or update these policies and procedures in the future, and adopt new company policies and procedures from time to time. You must ensure that you remain aware of all such changes to these policies. You are also expected to observe the terms of any Non-Disclosure, Non-Solicitation or Non-Compete Agreement, Employment Agreement or other similar agreement that applies to you. If you previously signed one of these agreements with AHC, it remains in full force and effect.
3.2 Bribes. Bribery is illegal and subject to criminal penalties. You may not give any bribes, kickbacks or other similar considerations to any person or organization to attract business. All decisions regarding the purchasing of materials, supplies, products and services must be made on the basis of competitive price, quality and performance, and in a way that preserves AHC’s integrity. Fees, commissions or other amounts paid to outside consultants, agents or other third parties must be fully disclosed to our Chief Financial Officer or Controller, and must be legal, proper and reasonable.
3.3 International Operations. You are expected to comply with the legal requirements and ethical standards of each country in which you conduct AHC business, as well as with all U.S. laws applicable in other countries. The U.S. Foreign Corrupt Practices Act (FCPA) applies to business transactions both inside the United States and in other countries. Its requirements relate to accurate and complete financial recording, transactions with foreign government officials and restrictions on the use of funds for unlawful or improper purposes. The FCPA makes illegal any corrupt offer, payment, promise to pay, or authorization to pay any money, gift, or anything of value to any foreign official, or any foreign political party, candidate or official, for the purpose of:
- Influencing any act, or failure to act, in the official capacity of that foreign official or party; or
- Inducing the foreign official or party to use influence to affect a decision of a foreign government or agency, in order to obtain or retain business for anyone, or direct business to anyone.
Because violation of the FCPA can bring severe penalties, including criminal fines for the company and individuals and jail terms, it is essential that you become familiar with the FCPA’s requirements if you are living or working in a foreign country. Other statutes that may affect our international operations include, but are not limited to, the Anti-Bribery and Fair Competition Act and the Export Administration Act. All supervisory personnel are expected to monitor continued compliance with these laws to ensure our compliance. If you have any questions regarding these legal requirements, please contact your manager or our Chief Financial Officer.
3.4 Political Activity. You should not make political contributions in a way that might appear to be an endorsement or contribution by AHC. We will not reimburse you for political contributions under any circumstances.
3.5 Antitrust Considerations. Antitrust laws prohibit agreements or actions that restrain trade or reduce competition. Violation of antitrust laws can result in severe civil and criminal penalties, including imprisonment for individuals, and AHC can be subjected to substantial fines and monetary awards. AHC as a company avoids conduct that may even appear to be questionable under antitrust laws and expects all AHC Employees to carry out company business consistent with this policy. In all contacts with our competitors, you are expected to avoid discussing prices, costs, competition, market share, marketing plans or studies, and any other proprietary or confidential information. Examples of agreements or arrangements with competitors which should therefore be avoided include: (a) Agreements that affect the price or other terms or conditions of sale; (b) Agreements regarding the customer to whom AHC will, or will not, sell its products; (c) Agreements to refuse to buy from particular vendors; and (d) Agreements that limit the types of products which AHC will provide. Furthermore, AHC cannot coerce customers into complying with restrictive arrangements. Therefore, you should not negotiate agreements with customers without the approval of an authorized company officer which (a) require or prohibit customers from purchasing all of their requirements from AHC or other companies or (b) require customers to buy one AHC product as a condition of obtaining another. In all cases where there is question or doubt about a particular activity or practice, AHC Employees should promptly contact our Chief Financial Officer or Human Resources director.
3.6 Securities Laws and Insider Trading. AHC is a publicly-traded company. As an employee of AHC you have been subject to AHC’s policy against insider trading as set forth in the Employee Handbook previously distributed to you. Simply stated, material, non-public information is not to be used for personal gain, and you should not trade in AHC stock when you possess such information. If you have any question regarding whether it is appropriate to engage in any transaction, contact the Chief Financial Officer.
The U.S. securities laws forbid an investor from purchasing or selling securities based upon “inside” information not available to the other party. The consequences of insider trading violations can be severe. AHC Employees who trade on inside information, or who communicate (or “tip”) this information to others so that they may trade, may face substantial civil penalties, criminal fines and imprisonment. Additionally, AHC may also face severe legal consequences, including, among other things, substantial criminal penalties.
AHC Employees who have material, nonpublic (i.e., “inside”) information about the company should not buy or sell AHC securities until a reasonable time after the inside information has been publicly disclosed. You also should not disclose inside information to others outside AHC until a reasonable time after the information has been publicly disclosed. In addition, it is never appropriate for you to advise others to buy or sell AHC securities. We further believe that it is highly inappropriate for any AHC person to “sell short” AHC stock or engage in other transactions where the person will earn a profit based on a decline in AHC’s stock price. These rules also apply to the use of material, nonpublic information about other companies (including, for example, our customers, competitors and potential business partners). In addition to you, these rules apply to your spouse, children, parents and siblings, as well as any other family members living with you in your household. Additional guidance pertaining to this issue is provided in your Employee Manual.
3.7 Government Contracting. AHC frequently does business with federal, state or local government agencies in the United States and in other countries. All AHC Employees engaged in business with these government entities must comply with specific rules and regulations concerning relations with these entities. Important considerations for doing business with government entities include:
- Not offering or accepting kickbacks, bribes, gifts, or anything else of value with the intent of obtaining favorable treatment from the recipient (note that a gift that is customary in the private sector may be impermissible to a government entity); and
- Not improperly soliciting or obtaining confidential information, such as sealed competitors’ bids, from government officials prior to the award of a contract.
3.8 Retention of Documents. Certain documents and records must be retained for specific periods of time to comply with legal and regulatory requirements or contractual obligations. You are to comply with all document retention requirements applicable to your work. If you are uncertain whether the documents or records you are handling are subject to these requirements, please consult with your manager or our Chief Financial Officer. If at any time you become aware that any document or record may be required to be disclosed in connection with a lawsuit or government investigation, you must preserve all possibly relevant documents. This means that you must immediately cease disposing of or altering all potentially relevant documents, even if that activity is ordinary or routine. If you are uncertain whether documents or records under your control should be preserved because they might relate to a lawsuit or investigation, you should contact your manager or our Chief Financial Officer.
4.1 AHC Confidential Information. You will often have access to information that is confidential and proprietary to AHC, has not been made public and constitutes trade secrets or proprietary information. Protection of this information is critical to our success. Your obligations with respect to our confidential trade secrets and proprietary information are:
- Not to disclose the information outside of AHC;
- Not to use the information for any purpose except to benefit AHC’s business; and
- Not to disclose the information within AHC, except to other AHC Employees who need to know, or use, the information and are aware that it constitutes a trade secret or proprietary information.
These obligations continue even after you leave AHC. If you have previously signed a Non-Disclosure Agreement, Employment Agreement or other similar agreement that governs your obligations with respect to our information, you must also follow such agreements. Any documents, papers or records that contain trade secrets or proprietary information are our property, and must remain at the company. Our confidential trade secrets and proprietary information may include, information regarding our operations, business plans, customers, strategies, trade secrets, finances, assets, technology, data or other information that reveals the processes, methodologies, technology or “know how” by which our existing or future products, services or methods of operation are developed or conducted.
4.2 Confidential Information of Third Parties. In the normal course of business, you will acquire information about others, including customers, vendors and competitors. We properly gather this kind of information for such purposes as evaluating customers’ business needs, determining requirements and evaluating vendors. We also collect information on competitors from a variety of legitimate sources to evaluate the relative merits of our products and marketing methods. You may not use information obtained from our customers or vendors in any way that harms them or violates contractual obligations to them. When working with sensitive information about customers or vendors, you should use that information only for the purposes for which it was disclosed to you and make it available only to other AHC Employees with a legitimate “need to know”.
4.3 Inadvertent Disclosure. In order to avoid the inadvertent disclosure of any confidential information, you should never discuss with any unauthorized person (whether or not an AHC Employee) any information that AHC considers confidential or which we have not made public. You should also not discuss this information with family members or with friends, as they may unintentionally pass the information on to someone else.
4.4 Contacts with Reporters, Analysts and Other Media. Because of the importance of the legal requirements regarding disclosure of certain information to our investors, we must ensure the accuracy of any information regarding our business, financial condition or operating results that is released to the public. As a result, you should not discuss internal AHC matters with anyone outside of AHC, except as clearly required in the performance of your job duties. This prohibition applies particularly to inquiries about AHC made by the news media, securities analysts and investors. All responses to these inquiries must be made only by the following authorized persons: our Chief Executive Officer, Chief Financial Officer or any individuals specifically designated by them. Only these individuals are authorized to discuss information about AHC with the news media, securities analysts and investors. If you receive inquiries from these sources, you should immediately refer them to one of these authorized spokespersons.
- Duties of Financial Reporting Personnel; Accounting and Financial Records and Disclosure
5.1 General. AHC has a responsibility to maintain complete, accurate and reliable records of our business and must comply with various disclosure requirements imposed by the United States Securities and Exchange Commission and by any exchange on which its securities are listed for trading. AHC’s executive officers, the heads of AHC’s subsidiaries and operating divisions and members of AHC’s finance department have a special role in the preparation of these reports. To satisfy these requirements, AHC has implemented procedures to ensure that only proper transactions are entered into by the Company, that such transactions have proper management approval, that such transactions are properly accounted for in the books and records of the Company and that the reports and financial statements of the Company fairly and accurately reflect such transactions. All AHC Financial Reporting Personnel are to familiarize themselves with these policies, accounting controls, procedures and records and comply with these requirements. Ultimately, AHC’s Financial Reporting Personnel bear significant responsibility for the accuracy and timeliness of disclosures in reports and documents AHC files with or submits to the Securities and Exchange Commission and in other public communications.
Due to these considerations, AHC’s Financial Reporting Personnel bear a special responsibility for promoting integrity throughout the organization, with responsibilities to stakeholders both inside and outside of AHC. These particular persons have a special role both to adhere to these principles themselves and also to ensure that a culture exists throughout the company as a whole that ensures the fair and timely reporting of AHC’s financial results and condition. Each AHC Financial Reporting Personnel agrees to:
- Provide information that is accurate, complete, objective, relevant, timely and understandable to ensure full, fair, accurate, timely, and understandable disclosure in reports and documents that AHC files with, or submits to, government agencies and in other public communications.
- Comply with rules and regulations of federal, state and local governments, and other appropriate private and public regulatory agencies.
- Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing one’s independent judgment to be subordinated.
- Respect the confidentiality of information acquired in the course of work except when authorized or otherwise legally obligated to disclose.
- Promptly report to the Audit Committee any conduct that the individual believes to be a violation of law or business ethics or of any provision of this Code, including any transaction or relationship that reasonably could be expected to give rise to such a conflict.
5.2 Disclosures to Investors; Financial Reporting Considerations. AHC is required under U.S. federal securities laws to provide the public with periodic disclosure regarding our business and financial condition (such as quarterly and annual reports and materials for our annual stockholders’ meeting). We provide additional disclosures to the public through quarterly earnings releases and other press releases. All AHC Employees who participate in the preparation or dissemination of this information, or who provide information that they know may be used in the preparation of these disclosures, have a legal and ethical duty to ensure that the content of the disclosures is accurate, complete and timely. We have created disclosure controls and procedures which are designed to ensure that all public disclosures are accurate, complete and timely.
To administer these controls and procedures, AHC has established a Disclosure Committee that reports to the Chief Executive Officer and Chief Financial Officer. The Disclosure Committee is (or certain of its members are), among other things, charged with reviewing AHC’s periodic reports and press releases. It is the responsibility of the Committee to ensure that it has reviewed and disseminated all material information about the Company that, by law, should be disseminated. You may be asked to serve on this Committee or to assist the Disclosure Committee in reviewing certain materials in connection with it’s responsibilities. If you do so, you must accomplish this faithfully and in accordance with all the Committee’s policies. You should report to the Disclosure Committee all information that it needs to fulfill its duties.
5.3 Accounting and Financial Records. AHC is required under U.S. federal securities laws and generally accepted accounting principles to keep books, records and accounts that accurately reflect all transactions and to provide an adequate system of internal accounting and controls. We expect you to ensure that those portions of our books, records and accounts for which you have responsibility are valid, complete, accurate and supported by appropriate documentation in verifiable form.
You should not:
- Improperly accelerate or defer expenses or revenues to achieve financial results or goals;
- Maintain any undisclosed or unrecorded funds or “off the book” assets;
- Establish or maintain improper, misleading, incomplete or fraudulent accounting documentation or financial reporting;
- Record revenue for any project that has not fully complied with AHC’s revenue recognition guidelines;
- Make any payment for purposes other than those described in the documents supporting the payment;
- Submit or approve any expense report where you know or suspect that any portion of the underlying expenses were not incurred or are not accurate; or
- Sign any documents believed to be inaccurate or untruthful.
All AHC Employees who exercise supervisory duties over AHC’s assets or records are expected to establish and implement appropriate internal controls over all areas of their responsibility. This will help ensure the safeguarding of AHC’s assets and the accuracy of our financial records and reports. We have adopted various types of internal controls and procedures as required to meet internal needs and applicable laws and regulations. You are to adhere to these controls and procedures to assure the complete and accurate recording of all transactions. Any accounting entries or adjustments that materially depart from generally accepted accounting principles must be approved by our Audit Committee and reported to our independent auditors. You must not interfere with or seek to improperly influence (directly or indirectly) the review or auditing of our financial records by our Audit Committee or independent auditors.
If you become aware of any questionable transaction or accounting practice concerning AHC or our assets, we expect you to report the matter immediately to our Chief Financial Officer or to a member of our Audit Committee. In addition, we expect you to report all material off-balance-sheet transactions, arrangements and obligations, contingent or otherwise, and other AHC relationships with unconsolidated entities or other persons that may have material current or future effects on our financial condition or results of operations to our Chief Financial Officer or to a member of our Audit Committee.
5.4 Confidentiality Considerations; Securities Law Compliance. All Financial Reporting Personnel will have special access to AHC’s confidential financial information. This may include non-public reports and analyses, pro-forma financial statements and other draft or preliminary financial information. AHC’s Financial Reporting Personnel should (i) never disclose this information to individuals outside the Company and (ii) caution individuals within the Company to whom you provide such information to carefully maintain its confidentiality and prevent its disclosure. AHC’s Financial Reporting Personnel must also apply the utmost consideration to transactions involving AHC securities in light of their possession to confidential financial information. Financial Reporting Personnel are therefore expected to notify our Chief Financial Officer prior to engaging in any transactions involving AHC securities in order to ensure compliance with all securities laws and regulations. Similarly, AHC imposes periodic blackout periods during which Financial Reporting Personnel may not engage in transactions involving AHC securities. All Financial Reporting Personnel should notify our Chief Financial Officer before purchasing or selling any AHC securities in order to obtain clearance from the Chief Financial Officer that the proposed transaction complies with all securities laws and regulations and AHC policies.
AHC has a responsibility to maintain complete, accurate and reliable records of our business and must comply with various disclosure requirements imposed by the United States Securities and Exchange Commission and by any exchange on which its securities are listed for trading. AHC’s executive officers, the heads of AHC’s subsidiaries and operating divisions and members of AHC’s finance department have a special role in the preparation of these reports. To satisfy these requirements, AHC has implemented procedures to ensure that only proper transactions are entered into by the Company, that such transactions have proper management approval, that such transactions are properly accounted for in the books and records of the Company and that the reports and financial statements of the Company fairly and accurately reflect such transactions. All AHC Financial Reporting Personnel are to familiarize themselves with these policies, accounting controls, procedures and records and comply with these requirements. Ultimately, AHC’s Financial Reporting Personnel bear significant responsibility for the accuracy and timeliness of disclosures in reports and documents AHC files with or submits to the Securities and Exchange Commission and in other public communications.
Chair: Marc A. Horowitz
Members: Charles C. Lucas III
Financial Expert: Charles C. Lucas III
Management Resources and Compensation Committee
Chair: Charles C. Lucas III
Members: Mustafa Chagani
AMENDED AND RESTATED CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF AUTHENTIDATE HOLDING CORP.
The primary function of the Audit Committee is to assist the Board of Directors of Authentidate
Holding Corp. (the “Company”) in fulfilling its oversight responsibilities by: (a) reviewing and monitoring the integrity of the financial reports and other financial information provided by the Company to any governmental body or the public; (b) reviewing the Company’s systems of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established; (c) reviewing and monitoring the Company’s internal auditing, accounting and financial reporting processes generally; and (d) overseeing the independent auditor’s qualifications and independence. Consistent with this function, the Audit Committee should encourage improvement of, and foster adherence to, the Company’s policies, procedures and practices at all levels. Similarly, the Audit Committee shall provide an open avenue of communication among the independent accountants, financial and senior management, the internal auditing department, and the Board of Directors. The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section IV of this Charter.
The Audit Committee shall be comprised of three or more directors, as determined by the Board, each of whom shall be independent directors as defined in Section 10A(M)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the regulations promulgated thereunder by the U.S. Securities and Exchange Commission (the “Commission”) and by the rules of any exchange on which the Company’s securities may be listed for trading. Each member of the Audit Committee shall be free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Audit Committee. At least one member of the Audit Committee shall be an “Audit Committee Financial Expert” as that term is defined by the Commission in regulations it has promulgated under the Exchange Act. All members of the Audit Committee shall have a working familiarity with basic finance and accounting practices. The members of the Audit Committee shall be elected by the Board at the annual organizational meeting of the Board or until their successors shall be duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Audit Committee may designate a Chair by majority vote of the full Audit Committee membership. All members of the Audit Committee may be replaced by the Board.
The Audit Committee shall meet at least once quarterly and more frequently as circumstances dictate. In addition, the Audit Committee shall meet with the independent auditors and management quarterly to review the Company’s financial statements. The Audit Committee shall meet periodically with management and the Company’s independent auditors in separate executive sessions to discuss any matters that the Audit Committee or each of these groups believes should be discussed privately. The Audit Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to attend a meeting of the Audit Committee or to meet with any members of or consultants to the Audit Committee.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall undertake the following:
- A. Independent Auditors
- The Audit Committee shall have the sole authority to appoint or replace the independent auditor (subject, if applicable, to shareholder ratification). The Audit Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Audit Committee.
- The Audit Committee shall preapprove all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor, in accordance with Section 10A of the Exchange Act which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee shall adopt policies and procedures governing its preapproval of all audit and permitted non-audit services to be performed by the Company’s independent auditor. Subject to applicable law and the requirements of any exchange upon which the Company’s common stock is traded, the Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant preapprovals of audit and permitted non-audit services, provided that decisions of such delegatee to grant preapprovals shall be presented to the full Audit Committee at its next scheduled meeting.
- Review and discuss with the independent auditor (and separately with management) the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit. This review shall include:
- The adequacy of the Company’s internal controls and the fullness and accuracy of the
- Company’s financial statements;
- Whether there have been (and if so, the nature of) any audit problems or difficulties and any related responses by management;
- Confirmation that management is not placing any restrictions on the scope of the independent auditors’ work or their access to information;
- Any significant disagreements with management and management’s response;
- Inquiry as to any accounting adjustments noted or proposed by the independent auditors but “passed” (as immaterial or otherwise) and any communications between the audit team and the audit firm’s national office regarding auditing or accounting issues raised in connection with the Company’s audit;
- Discussion of any “management” or “internal control” letters issued or proposed to be issued by the independent auditors to the Company, as well any other material written communications between the independent auditors and management; and
- Discussion of the responsibilities, budget and staffing of the Company’s internal accounting function and the adequacy and appropriateness thereof.
- Review and evaluate the lead partner of the independent auditor team and ensure the rotation of the audit partners as required by law. Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis.
- Obtain and review a report from the independent auditor at least annually regarding (a) the independent auditor’s internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) all relationships between the independent auditor and the Company consistent with Independence Standards Board Standard No. 1. The Audit Committee shall evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, taking into account the opinions of management and internal auditors. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.
- Recommend to the Board policies for the Company’s hiring of employees or former employees of the independent auditor who participated in any capacity in the audit of the Company.
- B. Financial Statement and Disclosure Matters
- Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in management’s discussion and analysis (“MD&A”), the critical accounting estimates employed in the MD&A and inquire whether such financial statements and any related notes are prepared in accordance with U.S. generally accepted accounting principles and, together with such MD&A, are consistent with the information known to Audit Committee members, and recommend to the Board whether the audited financial statements should be included in the Company’s Form 10-K.
- Review and discuss with management and the independent auditor the Company’s quarterly financial statements, related notes, the MD&A and the critical accounting estimates employed in the MD&A prior to the filing of its Form 10-Q, including the results of the independent auditor’s review of the quarterly financial statements and inquire whether such financial statements and any related notes are prepared in accordance with U.S. generally accepted accounting principles and, together with such MD&A, are consistent with the information known to Audit Committee members.
- In consultation with the independent auditors, the Audit Committee shall review the adequacy and integrity of the organization’s financial reporting and business control processes, both internal and external. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls and any special steps adopted in light of material control deficiencies or significant changes thereto.
- Review the independent auditors’ judgments about the quality and appropriateness of the Company’s accounting principles and approve significant changes to the Company’s auditing and accounting principles and practices as suggested by the independent auditors or management. Evaluate with management and the independent auditors, on an independent basis, the implementation of changes or improvements in financial or accounting practices as approved by the Audit Committee.
- Review and discuss periodic reports from the independent auditors on: (a) all critical accounting policies and practices to be used; (b) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and (c) other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
- Discuss with management (on a pre-issuance basis) (a) the Company’s earnings press releases, financial information and earnings guidance provided to analysts and rating agencies; (b) significant financial reporting matters to be disclosed in any Commission filings, such as a change in accounting principles or extraordinary and non-recurring items and transactions; and (c) significant matters to be disclosed in Form 8-K filings with the Commission.
- Discuss with management and the independent auditor the effect of regulatory and accounting initiatives including the Company’s use, if any, of “pro forma” or “adjusted” non-GAAP financial information and off-balance sheet structures on the Company’s financial statements.
- Review and evaluate the Company’s policies and practices with respect to risk assessment and risk management, including the Company’s major financial risk exposures and litigation and insurance management processes and review steps taken by management to monitor and control such exposures. If appropriate, initiate special investigations into matters within the Audit Committee’s scope of responsibilities or as delegated by the Board of Directors.
- If applicable, review the appointment and replacement of the senior internal accounting personnel and the organizational structure, and qualifications of the internal accounting department.
- C. Ethical and Legal Compliance; Additional Responsibilities
- Establish, review and update periodically a Code of Ethics compliant with Commission regulations and applicable to all employees, including the Company’s principal executive officer, senior financial officers and directors; ensure that management has established a system to enforce this Code; and review management’s monitoring of compliance with the Code of Ethics. Determine whether to grant any waivers of or approve any other deviations from the Company’s Code of Ethics, including those concerning related party transactions.
- Review with management and the organization’s counsel, legal compliance matters including corporate securities trading policies and any other legal matter, including material litigation or special investigations that could have a significant impact on the organization’s policies or financial statements to ensure that reports and other information disseminated to governmental organizations or the public satisfy legal requirements.
- Obtain from the independent auditor assurance that Section 10A(b) of the Exchange Act (“Required Response to Audit Discoveries”) has not been implicated.
- Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
- Evaluate, approve, and monitor on an ongoing basis any related party transactions.
- Report to the Board on a regular basis about the Audit Committee’s activities and make appropriate recommendations. Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. Conduct an annual self-evaluation to assess the Audit Committee’s effectiveness.
- The Audit Committee shall have the authority, to the extent it deems necessary or appropriate and without obtaining specific Board approval, to retain independent legal, accounting or other advisors. The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditor for the purpose of rendering or issuing an audit report and to any advisors employed by the Audit Committee.
- Prepare the reports required by the rules of the Commission which are required to be in the Company’s annual proxy statement and other reports filed pursuant to the Exchange Act and the rules and regulations promulgated thereunder by the Commission.
- Perform any other activities consistent with this Charter, the Company’s By-laws and governing law, as the Audit Committee or the Board deems necessary or appropriate.
Authentidate Holding Corp.
Charter of the Management Resources and Compensation Committee
The purpose of the Management Resources and Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Authentidate Holding Corp., Inc. (the “Company”) is to discharge the Board’s responsibilities relating to executive compensation and to (a) review the performance and development of Company management in achieving corporate goals and objectives; (b) to assure that senior executives of the Company are compensated effectively in a manner consistent with the strategy of the Company, competitive practice, and the requirements of the appropriate regulatory bodies; and (c) review and make recommendations to the Board regarding employee benefit policies and programs, incentive compensation plans, equity-based plans and succession planning for the Company’s executive team. Toward these ends, the Committee will oversee, review and administer all compensation, equity and employee benefit plans and programs.
II. COMMITTEE MEMBERSHIP
The Committee will consist of not less than two directors, each of whom will be an “independent director” as required by the applicable rules of any exchange on which the Company’s securities are traded, a “non-employee director” within the meaning of Rule 16b-3 issued by the Securities and Exchange Commission (“SEC”), and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code, as amended. Each Committee member will be subject to annual reconfirmation and may be removed by the Board of Directors (the “Board”) at any time.
III. COMMITTEE STRUCTURE AND OPERATIONS
The Board shall designate one member of the Committee as its chairperson. The Committee shall meet in person or via teleconference at least three times per year at a time and place determined by the Committee chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its chairperson.
The Committee may request any officer or employee of the Company or the Company’s outside counsel to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. The Committee shall meet without the presence of the Company’s chief executive officer (“CEO”) when approving or deliberating on the CEO’s compensation but may, in its or their discretion, invite the CEO to be present during the approval of, or deliberations with respect to, compensation for the Other Executive Officers. The Committee shall hold executive sessions without management present.
Meetings of the Committee shall be called by the Chairman thereof upon not less than 24 hours notice. Notice shall be sufficient if delivered verbally or by fax communication or by ordinary mail and shall be held at such place as the Chairman may designate in the notice. A quorum of the Committee shall consist of a majority of the members of the Committee then constituting the Committee. The Committee shall act and adopt and/or authorize all action by either (i) a majority vote of its members present at a meeting where a quorum is present (unless a greater vote is required by law, rule, regulation, listing standard or the Company’s Certificate of Incorporation or Bylaws) or (ii) upon the unanimous written consent of all of the members of the Committee then constituting the Committee. Minutes of each meeting will be duly filed in the Company records. The compensation of the Committee’s members shall be as determined by the Board of Directors of the Company. The Committee may delegate specific tasks to its Chairperson or a sub-committee consisting of at least two Committee members, provided that no such delegation shall be permitted if the authority is required by law, rule, regulation, listing standard or the Company’s Certificate of Incorporation or Bylaws to be exercised by the Committee as a whole.
IV. COMMITTEE DUTIES AND RESPONSIBILITIES
The following are the duties and responsibilities of the Committee:
- Review and, as appropriate, discuss with Management and the Board the objectives, philosophy/strategy, structure, cost and administration of the Company’s executive compensation and employee benefit policies and programs. In making such review, the Committee shall consider peer group compensation comparisons.
- No less than annually, review and approve, with respect to the CEO and the other officers designated as Section 16 officers for purposes of the Securities Exchange Act of 1934 (“Other Executive Officers”), (a) all elements of compensation, (b) incentive compensation targets, (c) any employment agreements, severance agreements and change in control agreements or provisions, in each case as, when and if appropriate, and (d) any special or supplemental benefits, including special perquisites, special cash payments and other special compensation and benefit arrangements for the Company’s Executive Officers. In making such review with respect to the CEO, the Committee shall consider and approve corporate goals and objectives relevant to the compensation of the CEO and evaluate the performance of the CEO in light of accomplishment of the prior year’s goals and objectives. The Committee, in connection with its responsibilities contemplated by this paragraph, shall have the further authority to negotiate and enter into employment agreements, severance agreements, change in control agreements, deferred compensation agreements or similar arrangements with the CEO or Other Executive Officers of the Company, and any amendments to such agreements and to determine compensation including bonuses and compensation arising out of such agreements and otherwise.
- Review and recommend compensation for non-employee members of the Board, including but not limited to the following elements: retainer, meeting fees, committee fees, committee chair fees, equity or stock compensation, benefits and perquisites.
- Make recommendations to the Board with respect to the Company’s incentive compensation plans and equity-based plans, including stock option and restricted stock plans, employee stock purchase plans and other major long-term incentive plans, applicable to directors, executives and/or non-executive employees of the Company.
- Make and approve stock option grants and other discretionary equity awards under the Company’s stock option or other equity incentive plans to all persons who are Board members or Executive Officers. Grant stock options and other equity-based discretionary awards under the Company’s stock option or other equity incentive plans to all other eligible individuals in the Company’s service. Subject to Delaware General Corporate Law, the Committee may delegate to one or more corporate officers designated by the Committee the authority to make grants to eligible individuals (other than any such corporate officer) who are not Executive Officers, provided that the Committee shall have fixed the price (or a formula for determining the price) and the vesting schedule for such grants, approved the form of documentation evidencing such grants, and determined the appropriate number of shares or the basis for determining such number of shares by position, compensation level or category of personnel. Any corporate officer(s) to whom such authority is delegated shall regularly report to the Committee the grants so made. Any such delegation may be revoked at any time by the Committee.
- Amend the provisions of the Company’s stock option or other equity incentive plans, to the extent authorized by the Board, and make recommendations to the Board with respect to incentive compensation and equity-based plans. Approve the foregoing for submission to the shareholders.
- Recommend to the Board for its approval a succession plan for the CEO developed by Management and approved by the Committee, addressing the policies and principles for selecting a successor to the CEO, both in an emergency situation and in the ordinary course of business.
- Review programs created and maintained by Management for the development and succession of Other Executive Officers and any other individuals identified by Management or the Committee.
- Review the establishment, amendment and termination of employee benefits plans, recognizing that certain authority to amend the plans may be delegated to Members of Management in the plans. Review employee benefit plan operations and administration, recognizing that certain authority related to the operation and administration of the plans may have been delegated to members of Management.
- Review compensation practices for incentives that may promote inappropriate risk taking, and any mitigating factors that the Company has or should consider implementing, such as policies requiring clawbacks or imposing holding periods and no less frequently than annually, provide oversight and assistance, for and among management and the Board, with respect to the analysis as to whether the Company’s compensation policies and practices create risks, including risks that are reasonably likely to have a material adverse effect on the Company.
- The Committee shall review and recommend for approval by the Board how frequently the Company should permit stockholders to have an advisory vote on executive compensation (a say on pay) taking into account the results of stockholder votes on the frequency of say on pay resolutions at the Company. The Committee also shall review the results of say on pay resolutions, including in relation to golden parachutes, if any, and consider whether to make any adjustments to the Company’s executive compensation policies and practices.
- To the extent required by the applicable law or regulation, including the rules and standards of the NASDAQ Stock Market (or any other exchange or market on which the Company’s securities may be listed for trading), the Committee shall conduct the independence analysis and to consider the factors described in Rule 10C-1 promulgated under the Exchange Act, before retaining compensation consultants, legal, accounting or other experts.
- Any other duties or responsibilities that is either (i) expressly delegated to the Committee by the Board from time to time relating to the Committee’s purpose or (ii) that is otherwise required by applicable law, rules or regulations (including the rules of any exchange or market on which the Company’s securities are traded) which is consistent with this Charter, the Company’s Bylaws and governing law that the Committee or the Board deems necessary or appropriate.
- At least annually, review the adequacy of this Charter and recommend any proposed changes to the Board for its approval.
- Notwithstanding the foregoing, any action of the Committee, other than the grant of stock options or other equity-based discretionary awards under the Company’s stock option or other equity incentive plans, may be subject to Board review and may be revised, modified or rescinded by the Board.
V. COMMITTEE REPORTS
The Committee shall produce the following reports and provide them to the Board:
- Assist in the preparation of any required “Compensation Discussion and Analysis” and the related “Compensation Committee Report” for inclusion in the Company’s annual proxy statement and Form 10-K, subject to and in accordance with the rules of the Securities and Exchange Commission. The Committee shall review and discuss any required Compensation Discussion and Analysis with management each year prior to preparing any required Compensation Committee Report, shall approve any required Compensation Discussion and Analysis and shall determine whether or not to recommend to the Board that any required Compensation Discussion and Analysis be included in the Company’s proxy statement and/or 10-K.
- An annual evaluation of the Committee to determine whether to recommend to the Board any amendments to the Charter or the composition of the Committee.
- A summary of the matters discussed, material reviewed and actions taken at each Committee meeting, which shall be presented to the Board at its next meeting. The Committee shall have responsibility for the review and approval of all reports and summaries of compensation policies and decisions as may be appropriate for operational purposes or as may be required under applicable law.
VI. RESOURCES AND AUTHORITY OF THE COMMITTEE
The Committee shall have the sole authority, at the Company’s expense, to retain and terminate any compensation consultant to be used to assist in the evaluation of director, CEO or Other Executive Officer compensation or employee benefit plans, and shall have sole authority to approve the consultant’s fees and other retention terms. The Committee shall also have the authority, at the Company’s expense, to obtain advice and assistance from internal or external legal, accounting or other experts, advisers and consultants to assist in carrying out its duties and responsibilities, and shall have the sole authority to retain and terminate, and to approve the fees and other retention terms for any external experts, advisers or consultants. To the extent the Committee engages any consultants or legal, accounting or other experts, the Committee shall be directly responsible for the oversight of such advisor’s work. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the compensation consultants and to any advisors employed by the Committee. The Committee shall further have full access to the Company’s executives and personnel as necessary to carry out its responsibilities.
Amended: June 25, 2013
Authentidate Holding Corp.
Nominating and Corporate Governance Committee Charter
A. PURPOSE AND SCOPE
The primary function of the Nominating and Corporate Governance Committee (the “Committee”) is to assist the Board of Directors (the “Board”) of Authentidate Holding Corp. (the “Company”) in fulfilling
its responsibilities by:
- (i) reviewing and making recommendations to the Board regarding the Board’s composition and
structure, establishing criteria for Board membership and evaluating corporate policies relating to the recruitment of Board members; and
- (ii) establishing, implementing and monitoring policies and processes regarding principles of
corporate governance in order to ensure the Board’s compliance with its fiduciary duties to the Company and its shareholders; and
- (iii) making recommendations regarding proposals submitted by shareholders of the Company.
B. COMPOSITION AND MEETINGS
The Committee shall be comprised of a minimum of two members of the Board as appointed by the Board, each of whom shall meet any independence requirements promulgated by the Securities and Exchange Commission, the National Association of Securities Dealers, any exchange upon which securities of the Company are traded, or any governmental or regulatory body exercising authority over the Company (collectively a “Regulatory Body”), and each member of the Committee shall be free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee.
The members of the Committee shall be elected by the Board and shall serve until their successors shall be duly elected and qualified or until their earlier resignation or removal. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.
The Committee shall meet in person or telephonically at least three times per year at a time and place determined by the Committee chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its chairperson.
The Committee shall report its actions to the Board and keep written minutes of its meetings which shall be recorded and filed with the books and records of the Company. The Committee may request any officer or employee of the Company or the Company’s outside counsel to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
C. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
- Determine, from time to time as appropriate, the criteria for qualification and selection of directors for election to the Board. The Committee shall also assist the Board in developing a strategy to attract and retain qualified members for the Board.
- Review the composition and size of the Board in order to ensure that the Board is comprised of members reflecting the proper expertise, skills, attributes and personal and professional backgrounds for service as a director of the Company, as determined by the Committee.
- Develop and recommend to the Board for approval standards and processes for determining the independence of Board members that meet the requirements that may be adopted, from time to time, by any Regulatory Body or required by law. In addition, in accordance with such processes and using such standards, the Committee shall conduct a preliminary review of the independence of each Director and provide its findings and make appropriate recommendations to the Board.
- Evaluate the performance of current Board members proposed for reelection, and make recommendations to the Board regarding the appropriateness of members of the Board standing for reelection.
- Evaluate and, if deemed necessary, recommend the termination of Board membership of any director in accordance with corporate governance principles adopted by the Board or required by law or any Regulatory Body, for cause or for other appropriate reason.
- Review and recommend to the Board an appropriate course of action upon the resignation of current Board members, or any planned expansion of the Board, and review the qualifications, experience and fitness for service on the Board of any potential new members of the Board.
- Evaluate and recommend to the Board the appointment of Board members to committees of the Board.
- Identify, evaluate and approve a slate of nominees for election to the Board and, as may be necessary, nominees to fill any vacancies on the Board, and review the qualifications, experience and fitness for service on the Board of any potential members of the Board.
- Review all stockholder proposals submitted to the Company (including any proposal relating to the nomination of a member of the Board) and the timeliness of the submission thereof and recommend to the Board appropriate action on each such proposal.
- To the extent deemed necessary by the Committee, engage outside counsel and/or independent consultants to review any matter under its responsibility.
- Develop and oversee the operation of an orientation program for new directors and determine whether and what form of continuing education for Directors is appropriate.
- Develop and recommend to the Board, written corporate governance principles, including all subjects required to be addressed by any Regulatory Body or applicable law, and any other matters deemed appropriate by the Committee.
- Periodically review the adequacy and appropriateness of the Company’s corporate governance principles, including Board processes, and make recommendations to the Board concerning any amendments to those principles.
- Review material breaches of the governance principles and recommend to the Board appropriate action in response to such breaches.
- At least once every three years, review and make recommendations to the Board regarding the components and amount of Board compensation.
16. Take such other actions regarding the Company’s corporate governance that are in the best interests of the Company and its shareholders as the Committee shall deem appropriate or as shall otherwise be required by any Regulatory Body and any other duties or responsibilities expressly delegated to the Committee by the Board from time to time relating to the Committee’s purpose.
D. COMMITTEE REPORTS
The Committee shall produce the following reports and provide them to the Board:
- An Annual Report of the Committee to the Board, which shall include an annual performance evaluation of the Committee’s work, including an evaluation of whether the Committee has performed its duties and met its responsibilities as required by this Charter. As part of the performance evaluation, the Committee shall also consider and recommend to the Board any improvements to the Charter deemed appropriate by the Committee.
- A summary of the matters discussed, material reviewed and actions taken at each Committee meeting, which shall be presented to the Board at its next meeting.
E. RESOURCES AND AUTHORITY OF THE COMMITTEE
The Committee shall also have the authority to obtain advice and assistance from internal or
external legal, accounting or other experts, advisors and consultants to assist in carrying out its duties and responsibilities, and shall have the authority to retain and approve the fees and other retention terms for any external experts, advisors or consultants.