At the age of twelve, two young boys met in the Town of Smithtown in what used to be called Junior High. They never became close friends at that time and they followed very different paths. One succeeded extremely well in his academic studies and graduated from Harvard Business School. He had both an excellent mind for business and knowledge of technology which was becoming extremely lucrative. The other failed to graduate from the local high school and, as a young man, was convicted of a felony involving a bank robbery. After his release from prison and completion of probation, he went on the obtain his GED. He also developed a good business sense and a great interest in technology without the benefit of higher education. The two men came together in the late 1990's and ultimately began to work together in 2002 for a corporation that held a potentially valuable technological patent. During approximately ten months they worked together as officers and for several months as CEO and COO of the corporation. However, their relationship soured as a result of certain business related disputes, and in the Spring of 2003, one of them either quit or was terminated, according to their stories. This lawsuit followed. After over nine years of litigation, the case was referred to this Court for trial. The trial occurred over 41 days, during which nineteen witnesses testified and literally hundreds of exhibits were placed into evidence.

Michael Trimarco testified that he received his Bachelor of Science degree from Cornell University; and, after working as an analyst for General Electric Capital Services for three years, attended business school at Harvard University. During his two year program at that institution, Mr. Trimarco asserted that he learned about finance, leadership, organizational behavior, technology, operations management, business law, international business, entrepreneurship, and business ethics. Following his graduation from that program, he was employed as an associate at Lehman Brothers, in the sales and trading area, engaging in what he termed "tax arbitrage derivatives and finance" (Tr.10/5/12 at 17).^[FN1] After two years, he began his own company in conjunction with several others in 1999, which he labeled a telecom services company called C Everything. That business was created to utilize pipelines of data that could flow into and out of a business to sell various services that would need to rely on the interactive nature of the cable infrastructure. Mr. Trimarco stated that the name of the company was later changed to Vitallink, which he described as having [*2]a more expansive view, in that it would provide far more than collecting information and sending it over the internet. It was in conjunction with the new Vitallink venture that Mr. Trimarco stated that the people involved began to secure venture capital; he asserted that through his efforts that business was able to raise close to $40 million.

According to Mr. Trimarco, it was during his time at Vitallink that he reconnected with Keith DeLucia, someone he had been acquainted with as a 12 year-old from Smithtown. Mr. DeLucia allegedly told him that his presence in the car wash business (through his father) had brought him into contact with many in that industry. Mr. Trimarco claimed that small businesses, such as car washes, were the original target customers for Vitallink, and that DeLucia informed him that he could provide a few hundred customers for the new venture. Mr. DeLucia was hired by Vitallink. During their collaboration at Vitallink, both Mr. Trimarco and Mr. DeLucia began discussions of what was referred to throughout the trial of this action as CPIP. He described "Card Present over Internet Protocol" (CPIP) as the process which allows the movement of a credit card transaction over internet protocol as opposed to over a POTS line (referring to plain old telephone service). CPIP allegedly allows transactions to be approved and cleared securely over the internet, so that a virtual terminal took the place of a physical terminal where computers sat in the past. Thus, the data contained in a purchaser's credit card would go more quickly over the public internet; however, such was considered to have a slightly higher risk of fraud than the old method. The result, according to the witness, was that the use of the new technology required the smaller retailer to pay a slightly higher rate to the banks for use of the credit card process than that charged by the old system. Apparently, this was not true for the larger retailers which had POTS systems with enough processing capacity to be secure. Smaller companies, like those being sought as customers for Vitallink, could benefit from the existence of a small credit card terminal that would move a CPIP transaction at the lower rate afforded larger businesses. According to Mr. Trimarco, this was one of the things he and Mr. DeLucia were attempting to develop at Vitallink. He described DeLucia's role at the time as business development, including developing the market for the CPIP idea. Mr. DeLucia allegedly worked for Mr. Trimarco for about a year; however, Trimarco stated that at the time the "tech bubble had burst", and Vitallink lost capital and needed to downsize, resulting in the release of Mr. DeLucia from employment with that entity. Vitallink ultimately folded due to the fact that no more funds were coming into the operation. Thereafter, Mr. Trimarco stated that he worked for an entity called I Deal, which provided internet related solutions for the capital market areas of investment banks. During this period, he continued to discuss the potential for CPIP opportunities with Mr. DeLucia.

Mr. Trimarco claimed that sometime in 2002, Mr. DeLucia informed him that he had obtained the ability to move credit card transactions over the internet and have them receive the lower card present rate; and that he wanted to move forward to acquire customers using the better method of processing credit cards. Mr. DeLucia assertedly proposed to him a triangular merger of three existing companies into a new entity which would be able to move forward with business that seeks to acquire customers using the better method of CPIP. The entities to which DeLucia allegedly referred were a credit card merchant services agent called Empire Processing (owned by one Mark Holzwanger); a credit card business owned by DeLucia (Infinity Payment Systems); and [*3]one Jeff Levine (who had also worked at Vitallink) and who, with DeLucia, owned a third business known as EmpowerBiz. The new entity, often referred to by Trimarco as IPS, would utilize the developed CPIP technology as well as various books of business and sales forces employed in these original entities. With the people and customers involved, apparently Trimarco and DeLucia believed the new entity would be in a position to manage a vast influx of merchants. Although the testimony concerning the process to achieve the triangular merger was far from clear, it is the Court's understanding that the witness stated that a new entity, called Infinity Processing Systems LLC, would arise from these various existing companies in the credit card processing business. These included Empire Processing Company and Empower Biz, but Empower Biz's assets would first be transferred to the company known as Infinity Payment Systems, Inc, the assets of which would also be merged into Infinity Processing Systems, Inc. According to Trimarco, the reason for the extra step involving Empower Biz resulted from DeLucia's falling out with his former business partner, Jeff Levine, whom he told Trimarco had attempted to steal some of the business. Mr. Trimarco testified that in late 2002, the parties decided to move ahead with this new CPIP venture and signed a Memorandum of Understanding (Pl. 22).^[FN2] The memorandum includes Michael Trimarco, Keith DeLucia, Shepard Lane, one Al Wanderlingh, who Trimarco described as a former colleague of Levine's who worked to acquire merchants; Eugene Beigelman, who would be in charge of the sales force; Sandy Fliderman, a former Vitallink employee brought in by DeLucia; Maurice Freedman, brought in by DeLucia, based on his experience in information technology; Evan Marmott , Brett Marmott, and Steve Guthartz who had all been involved with Empire Processing; Marc Holzwanger, who he described as the major shareholder of Empire Processing; and Steve Bassett, who the witness did not remember. The Memorandum of Understanding also lists DTC, which was a reference to Defendant Data Treasury Corporation, but it does not set forth that such entity was to receive any of the new corporation's shares. Mr. Trimarco stated that the new entity's name had to be changed to Infinity Payment Systems, Inc, which was already in existence, due to the fact that certain processing entities objected to the use of the word "processing" used by entities that were not in that field. According to Trimarco, Mr. DeLucia, under this memorandum, was to receive 27.88% of the post merger shares because, at the time, he was bringing in a book of business, and most significantly, because he had told the others that he already possessed the software on a terminal that would allow the movement of credit card transactions over IP at the lower card present rate. Mr. Trimarco testified that he believed DeLucia when he told him this and such was his reason for proceeding with the Memorandum of Understanding, which he set forth he participated in preparing. In addition, Trimarco testified that DeLucia was the party who was supposed to bring in what he termed a processing bank (termed an ISO) with the ability to process the new IPS card present transactions. However, he stated that he learned in early 2003 that the bank DeLucia had been working with was not utilizing the gateway necessary to obtain the lower card present rate.

At this point, Michael Trimarco stated that his relationship with DeLucia began to sour because Trimarco questioned DeLucia's right to receive such a large percentage of ownership of the proposed new entity, where he was not bringing to the table what he had promised. He believed that DeLucia's failure to bring in his share of assets also caused Holzwanger, who had infused cash in the [*4]proposal, to become frustrated. He claims that he and Mr. Holzwanger began to review the further claims of DeLucia that he had expended monies on software he was bringing into the new proposed merger and that such had some value. He believes that they found it was not as valuable as DeLucia had stated and that they got no information from DeLucia concerning amounts he had expended to obtain such. Thereafter, he claims that Empire Processing essentially withdrew from the proposal.

Trimarco stated that as the merger was not working out, he made a new proposal to DeLucia whereby Trimarco would find a processor and own most of the new company and give DeLucia a minority position. DeLucia allegedly became angry and Trimarco stated that he then began to work on the CPIP project on his own.

At about the same time period that Trimarco and DeLucia were first discussing the new IPS idea, DeLucia told Trimarco about his contacts with a Long Island company (Defendant herein), known as Data Treasury, which he described as having some intellectual property but was in need of financial assistance due to downturns in the market. He stated that DeLucia told him that the inventor of the technology, Claudio Ballard, and an investor and the company's general counsel, Shepard Lane, had raised $20 million from small investors but that the company was in dire straights, was on the verge of bankruptcy, was unable to pay its rent, and had far too many stockholders. Thus, Mr. Trimarco was assertedly called in to act as a consultant for Data Treasury and to manage the corporate restructuring. In April 2002, (Pl. 4), Mr. Trimarco signed a consulting agreement with the Defendant. The consulting agreement set forth Trimarco's duties in connection with "[o]perations and development, including but not limited to acquisitions, mergers, financings, strategic development plans and marketing, business ventures, alliances and investment activities . . .". This agreement allowed Trimarco to convert his role as a consultant into full time employment, making him a management employee, where he would be entitled to receive 5.5% of DTC warrants as well as a deferred salary and at which point the consulting agreement would terminate. (Pl. 4).

He testified that he began his duties by restructuring, which he oversaw. He stated that this involved swapping out old equity for new equity holders, so that old equity holders would have what he termed a smaller piece of the pie. He opined that this was preferable to their prior position because the existing situation would afford debt holders and those in a higher position than equity holders on the balance sheet the right to take everything and would give the existing shareholders nothing when the entity went out of business. The new equity would go to prospective workers; i.e., the ongoing participants who would then get the most equity following the "reverse split". This was performed, according to the witness, so that the company could continue as a going concern while it waited to see if its intellectual property provided it with ultimate revenues. The so-called "cram down" was concluded in December 31, 2002, when the witness received stock options, along with Mr. Lane, Mr. DeLucia (who had since become Data Treasury's CEO), Mr. Ballard, and another party, one Mr. Sonny Owens. By November 20, 2002, Trimarco had become an employee of Data Treasury and was made its Chief Operating Officer. (Pl. 5).

According to Mr. Trimarco, he believed in 2002 that Data Treasury was a good investment [*5]for him, as a result of federal legislation having been proposed as a result of problems arising from the inability to move checks electronically when so many airplanes were temporarily grounded following the September 11, 2001 terrorist attacks. It was his belief that Data Treasury's patent,described as a form of remote image capture technology, would afford a good method of resolving this huge problem. In addition to the reverse stock split, Michael Trimarco claimed he performed other services during his time as a consultant for the Defendant, including cutting unnecessary costs and resolving outstanding judgments. He stated that during this period Shepard Lane was able to raise some money to pay off these judgments and/or liens from one Dr. Knutsen in exchange for stock warrants. He asserted that he played no role in the agreement reached between DTC and Dr. Knutsen.

Mr. Trimarco testified that on December 31, 2002, he received a grant of non-qualified stock options (Pl. 7). This agreement provided him the option to purchase an aggregate of 1,500,000 shares of stock in Data Treasury over a ten year period. The option agreement set forth, in pertinent part, that any exercise was required to be in writing and that the option exerciser was required to represent in writing that the option shares were being purchased for such person's own account for investment and not resale, and that a subsequent offer for sale of such would be pursuant to a registration statement on a Securities Act form or a specific exemption therefrom with an opinion from counsel.(Pl. 7).

He testified that his duties were accomplished during both his time as a consultant for Defendant and as its COO. Trimarco testified that DeLucia, Lane and Ballard executed similar option agreements at the same time. He believed that the stock option agreement was a valuable one and several factors contributed to his decision to convert to a full time Data Treasury employee. These included the movement toward electronic check -processing; the imminent passage of the Check 21 federal legislation; and the retention of a large law firm, Nix Patterson, that had agreed to take on the patent litigations and underwrite the same. Trimarco asserted that he had conversations with his colleagues at the time and that they all felt with a sanctioned monopoly on its patent, Data Treasury was expecting to bring in billions of dollars in revenues. He stated that the 10 year option period was created in order to give the holders enough time to see whether sufficient cash flow would arise from the patent asset. After this was accomplished, Trimarco stated that he tried to get the others involved in scheduling a meeting of DTC's Board of Directors so that the board could make a formal resolution accepting the new capital structure and make provision for notification of existing shareholders, but that this was never accomplished. This caused Trimarco concern at the same time that he was encountering problems with Keith DeLucia in the CPIP enterprise.

In addition, according to Mr. Trimarco, when he began to start asking questions about the patent itself, as well as why a person identified as Sonny Owens was getting the same benefits as the others mentioned, he felt rebuffed at every turn; and he began to become suspicious. Trimarco testified that although he was DTC's COO, he was never given control of the operations of such entity and that he was never provided access to the information that would allow him to make any governing decisions. [*6]

Mr. Trimarco stated that in early 2003 he was also asked to look into the operations of an entity, DSG, located in Florida that was a wholly owned subsidiary of Data Treasury. He found that entity also on the verge of insolvency. DSG was a vendor of check processing and imaging equipment that could be used on a local basis. It had originally been contemplated that if DSG had the hardware to image a check and process the same, this technology might add value to the Data Treasury patents. Mr. Trimarco stated that he put together a summary of DSG's financial condition. Since he believed that DSG needed an influx of income to stay alive, he testified that he proposed that he would find the same and that he would both take over operating control of DSG in exchange for equity control and that ultimately DSG would enter into a licencing agreement with DTC. According to Trimarco, his suggestion caused Keith DeLucia to become angry as he had regarding his suggestions concerning IPS.

According to Trimarco, Data Treasury was not generating sufficient revenues to pay DeLucia or Trimarco a salary. Therefore, the two continued their discussions of forming a new entity ( the IPS newco) into 2003 in order to get into the CPIP business that they had been unable to capitalize on back at Vitallink. Crucial to Mr. Trimarco's testimony was his continued insistence that Data Treasury had no role whatsoever in the CPIP endeavor that he was launching with any of the aforementioned people, including Keith DeLucia. Trimarco insisted that during his term as both consultant and COO of Data Treasury, Data Treasury had no involvement with the credit card processing endeavor. He did later state, however, that there was discussion at Data Treasury that a potential existed that credit card transmissions could be covered under the Data Treasury patent. However, Michael Trimarco insisted that after conversations with Data Treasury's patent counsel, he was convinced that such technology played no role whatsoever in the CPIP venture.

Mr. Trimarco testified at length about one Brian Blanchard, whom he described as a salesman working for Keith DeLucia in the CPIP venture, either for IPS or EmpowerBiz; but who had been placed in DSG's offices and was often paid out of DTC's or DSG's checking accounts against Trimarco's advice. According to Trimarco, Blanchard began expressing his dissatisfaction with the progress of the proposed CPIP merger as well as his personal fear of DeLucia. At about the time that the triangular merger opportunity began to dissipate, in the Spring of 2003, Trimarco and Blanchard began to plan their own credit card processing company, which would either exclude or minimize the participation of DeLucia for all the reasons set forth above. A large number of e-mails during this period were placed in evidence, in which Trimarco specifically instructed Blanchard on what to write to DeLucia, followed by e-mails to DeLucia from Blanchard essentially following Trimarco's instructions. According to Trimarco, the purpose of these secret communications was "[t]o try to keep this, . . . , the ownership of this venture and how we were going to do this on our own. . . as much of a secret as possible because, again, I wanted to make a clean break from Keith DeLucia for all the reasons that I said before and I don't think I have any obligation to have him necessarily completely in the know" (Defendant's AB).^[FN3] As explained by Trimarco, he was instructing Blanchard "[t]hat he cover over what we were doing and try to keep it in secret by . . . telling Keith he wanted to keep things in the open" (id). [*7]

Mr. Trimarco also described another venture in which he, DeLucia and Shepard Lane were involved during the same 2001 through 2003 time period. This included a company referred to as Skylink, which was using live stream videos from airplanes to the ground and in which Trimarco owned a "significant piece" (Tr. 10/19/12 at 34). According to Trimarco, Data Treasury was seeking some sort of teaming agreement with Skylink and was pressuring him to seek some sort of deal where Data Treasury would possess some interest in that entity. However, due to his position in both organizations, Trimarco stated that he stayed away from any negotiations and that ultimately no deal was consummated. Trimarco testified that contrary to Data Treasury's allegations, he never attended a meeting with Congressman Steven Israel concerning either the Skylink project or its potential relationship to Data Treasury.

Based on all of the problems he was experiencing, whether with regard to IPS (in which DeLucia and Lane were involved), DSG, DTC itself and DeLucia and Lane personally, Mr. Trimarco claims he decided to leave DTC employment in the Spring of 2003. He testified that he had come to the conclusion that he could not be involved in any project in which operating participants or substantial equity holders included Keith DeLucia and Shepard Lane. He stated he met with DeLucia in late April 2003 and told him that he could not have any business relationship with him in the future. He stated that they essentially ended up in a screaming match in which DeLucia fired him and he quit somewhat simultaneously. Shortly thereafter, Trimarco attempted to exercise his option to purchase 100 shares of DTC stock. He felt that such was important to secure his rights and privileges as a shareholder and because, at the time, he was considering a derivative lawsuit in view of his concerns for the corporation and its shareholders. His exercise was not honored and he filed the current lawsuit (Pl. 1). The complaint states, in paragraph 17, that "[b]y reason of DTC's willful breach, plaintiff has been damaged in an amount equal to the value of the right to purchase 1,500,000 shares of stock at 80 cents per share exercisable any time in whole or in part for a period of 10 years".

During cross-examination, it was brought out that Mr. Trimarco had been brought to arbitration by Lehman Brothers, his former employer, which resulted in his payment of $48,300 to that entity. There was considerable debate on the record with regard to whether Trimarco was terminated from his later employment with I-Deal in 2002; thus, while he had answered the question in the affirmative during his deposition, he claimed that such was a mischaracterization of his departure from employment by such entity during his testimony in court. It was brought out that in 2002 and 2003, while a consultant and/or employee of Data Treasury, and while sole owner of Trimarco Consulting Group, which was receiving funds, Trimarco collected unemployment. (Defendant's EG; EI; DN). Mr. Trimarco stated that he followed advice of counsel on this issue. Although he asserted that he began to have doubts and questions about the manner in which Data Treasury was run early in his consultancy, he produced no records demonstrating any investigative reports, memoranda and/or e-mails notifying senior management that his questions were not being answered. He set forth that he believed such documents were taken by the Defendant and destroyed. He reiterated that he asked more and more questions as he remained with DTC into 2003, including questions about the validity of the DTC patent and found more and more resistance to his inquiries. Yet, despite alleged lack of cooperation, Trimarco increased his role in DTC and agreed to become [*8]an employee, an officer and a director of the same. In addition, Mr. Trimarco wrote to DTC in November 2002 thanking the entity for its continued support of him in his engagement (Defendant's DH).

During cross- examination, Mr. Trimarco testified at some length about a meeting he had with Shepard Lane in February 2003, shortly after he claimed to have just learned of Mr. DeLucia's conviction in his early twenties in connection with a bank robbery. He testified that he expressed his concern over DeLucia remaining DTC's CEO, when the business of that entity was to culminate in negotiated licensing agreements with the banking industry. He averred that Mr. Lane became extremely angry with him, and ultimately he became convinced that Lane knew of this, had participated in concealing it and that neither DeLucia nor Lane were to be trusted. In response to Mr. Trimarco's comments concerning DeLucia's former felony conviction, the Defendant's counsel placed in evidence several federal and state regulatory actions alleging consumer fraud and deceptive practices taken against various corporations in which Mr. Trimarco had ownership interests, including entities known as Home Assure LLC and Advance Wellness Research Inc.

There were numerous e-mails introduced into evidence during Mr. Trimarco's cross-examination demonstrating a continuing plot between him and Brian Blanchard to take over the CPIP venture; either exclude or minimize DeLucia's role in such; and to form a new entity - Veracity. Trimarco admitted that he purposely kept DeLucia in the dark about these plans and "[d]id not furnish him with complete and total information". (Tr. 1/30/13 at 52). In addition, Mr. Trimarco sent e-mails directly to DeLucia, copies of which he also sent to Blanchard without DeLucia ever being informed that Blanchard was receiving copies of the same. Trimarco sent an e-mail on April 7, 2003 to DeLucia advising him to wait before "blowing up" IPS because at that time he and Blanchard were seriously discussing, in secret, the formation of Veracity Systems LLC and the two wanted the first advantage to make a move on the CPIP venture. (Defendant's AC). In fact, Veracity Systems LLC was formed by Trimarco on April 30, 2003. (Defendant's DJ). Mr. Trimarco set forth that as COO of DTC he owed a duty to DeLucia as CEO to be honest with him regarding business matters.

Mr. Trimarco insisted during his cross-examination that DTC and IPS were entirely separate and distinct entities and, therefore no duty existed. However, during his pre-trial deposition, Mr. Trimarco did answer affirmatively the question of whether Brian Blanchard rendered services on his behalf while he was affiliated with DTC or one of its affiliates (EBT 5/10/06 at 964-965). In an

e-mail to DeLucia of March 26, 2003, Trimarco raised certain issues specifically to be brought to the attention of the Board of Directors of DTC. These issues included: (1) a review of DTC's solvency; (2) a review of DTC's business plan; (3) a full accounting disclosure of all entities including DTC, DSG, EBI, and IPS; and (4) a review of current capitalization. (Defendant's DI). This same e-mail stated that at the meeting of the board of DTC a plan should be presented whereby Trimarco would: (1) take over operating and equity control of DSG with a clawback provision; and (2) take over operating and equity control of the credit card business. The same e-mail states that DeLucia's role would be to run the "holding company and manage its ip/lawsuits". (Id.). This e-mail also states that before the board meeting, these issues should be presented to Dr. Knutsen and, during cross-examination, Mr. Trimarco stated that he did this because he knew that Dr. Knutsen was [*9]somehow financing Data Treasury.

Brian Blanchard

Brian Blanchard testified that he began his career in the credit card industry as a manager for a company called Lynk Systems, hiring and training the sales force. It was in that position that he met Al Wanderlingh. He left Lynk Systems in 2001, following the company's national sales manger, whom he joined in a company called e-Commerce Processing. In early 2002, he stated that he was employed at Empower Biz in Florida by Keith DeLucia, after learning about the credit card processing business from Al Wanderlingh. Blanchard testified that when he first met DeLucia, Delucia told him that he was starting Empower Biz as a new company and that he was the owner. At the same time, DeLucia assertedly informed him that Empower Biz would be working out of the offices of a company called DSG until it found its own space. Blanchard stated that although he knew that DSG was in the check processing business, it had nothing whatsoever to do with Empower Biz. At some point, he stated that the work he was doing somehow was transitioned over to another corporation called Infinity Payment Systems, also owned by DeLucia, which was positioned to merge with a third entity owned by Mark Holzwanger. Around the time that Empower Biz transformed into Infinity, Blanchard stated that DeLucia brought in Michael Trimarco to run the business side of the entity. He set forth that both he and the sales force found Trimarco to be quite impressive.

According to Blanchard, he was being paid by checks drawn on DSG's accounts, which bothered him; however, he was told by DeLucia that Empower Biz was borrowing the money from DSG in order to get its own office funded and that, thereafter, the funds would be repaid. He found this arrangement unsettling. He described an incident where one of the sales employees received a check from DSG that bounced. In addition, Blanchard stated that he found that DeLucia did not know how to run the business as he changed processors several times, which, he claimed, caused the company to lose clients and sales personnel. Sometime in early 2003, Blanchard approached Michael Trimarco and told him that he was dissatisfied with DeLucia's performance; that he was losing sales staff and customers; and that he was considering quitting. Based upon these conversations, he and Trimarco spoke about opening their own office and starting their own credit card processing company. At that point, he communicated these same feelings to Al Wanderlingh, whom he understood was also in the process of leaving. Within days thereafter, Blanchard got a telephone call from DeLucia, whom he described as furious and threatening. DeLucia basically demanded that he forward all of the e-mails that Trimarco and Blanchard had exchanged in connection with their proposed departure. Blanchard complied as he feared DeLucia, based upon what he had learned from Trimarco about his criminal past. At some point thereafter, he learned that Trimarco had left but received no information from DeLucia concerning the cause. He was then told by DeLucia that the entity he was working for was again changing its name as well as its processor and it became Integrity Payment Systems. Blanchard was moved to an office in Fort Lauderdale; one day he found the door to his office locked and learned from one of the secretaries that he had been terminated.

Blanchard insisted that there was no connection between either Empower Biz or Infinity [*10]Payment Systems and Data Treasury. Blanchard testified that at some point he learned of Trimarco's lawsuit against DTC. He was contacted by DTC's attorney, Richard Friedman, who allegedly told him several times before his November 13, 2006 deposition, that Infinity was owned by Data Treasury. Blanchard stated that Shepard Lane spoke to him at some point during the deposition and told him that if the deposition went well, Data Treasury would rehire him. He stated that he considered this a bribe; told Mr. Friedman about it; and that DTC's attorney became very agitated with his client and told Blanchard he would deal with it later. According to Blanchard, he did not receive his transcript of the deposition until some time in 2011. He sent a letter in March 2011 (Pl. 49) in which he stated that his responses to the questions asked by Mr. Friedman were as a result of Friedman misleading him that Infinity was a subsidiary of DTC. This letter was responded to by a letter from separate DTC counsel stating that Blanchard had failed to follow the format required by CPLR 3116(a), as he had not set forth the changes and reasons therefor at the end of the transcript followed by his subscribed signature and returning his errata sheet. However, the witness stated that the reason he prepared the letter was because he felt he had been misled and that neither Empower Biz nor IPS had ever been connected to DTC. Blanchard averred that although he had more than one deposition, he never received copies of the other transcripts.

During his lengthy cross-examination, video taped portions of Blanchard's November 2006 depositions were played in response to his disparate testimony during trial. His statements during that deposition were diametrically opposed to his trial testimony. The Court sets forth some of the more significant portions of his deposition testimony below. He stated at the deposition that he learned from DeLucia at the beginning of his employment that DeLucia was in charge of DTC and that he would be using the office of DSG, which DTC was buying (Tr. 9/14/12 at 108). Blanchard stated that he accepted employment from Data Treasury Corporation from DeLucia (Tr. 9/14/12 at 109). He said that he was based at Data Treasury's offices in Tampa Florida (Tr. 9/14/12 at 110). He insisted that he knew that he was employed by Data Treasury but that the credit card portion of its business, where he worked, kept changing its name - including the names Empower Biz and Infinity Payment Systems (Tr. 9/14/12 at 113). Blanchard testified at his deposition that while employed by Data Treasury, he reported to DeLucia (Tr. 9,14/12 at 124). He was paid a weekly salary of $1,000 by Data Treasury in connection with the services he rendered to Infinity Payment Systems (Tr. 9/14/12 at 172).

Blanchard's deposition testimony also contradicted his trial testimony in that it was highly critical of Trimarco's behavior. He stated that Trimarco told him that he was going to try and persuade DeLucia to allow him to take over ownership of Infinity Payment Systems and that if he was not successful, he was going to form a new credit card company to compete with IPS (Tr. 9/14/123 at 181) and that Trimarco told him that he intended to use many of the same vendors used by IPS in his new company (Tr. 9/14//12 at 226). He testified at his deposition that in early 2003, Trimarco told him that he had a partner in a proposed new credit card processing business named Nick Molina and that they wanted him to join them (Tr./ 9/14/12 at 191). This deposition testimony is clearly confirmed by a March 14, 2003 e-mail from Trimarco to Blanchard setting forth the financial terms of the new venture with Molina (Defendant's S) and further testimony by Blanchard that Trimarco told him after this e-mail that Blanchard would be able to acquire about a 10% equity [*11]interest in the new credit card processing business (Tr. 9/14/12 at 193-194). He stated at that deposition that Trimarco asked for and obtained his personal e-mail address for the specific purpose of communicating with Blanchard about the new credit card business without anyone at Data Treasury having access to the same (Tr. 9/14/12 at 201). In addition, he was aware that Trimarco was writing deceptive e-mails to DeLucia, telling him that Blanchard was about to bolt from DTC in order to join Al Wanderlingh at his new business (Tr. 9/14/12 at 214), basically in order to deceive DeLucia into not realizing that Trimarco himself was the one forming a new credit card venture (Tr. 9/14/12 at 232). Blanchard also testified that Trimarco told him that after he formed his own credit card processing company to compete with IPS, he had obtained information that personnel from an entity known as Exadigm, would deal with him and not honor their exclusive contractual arrangement with Data Treasury( Tr. 9/14/12 at 210).

During his cross-examination, Brian Blanchard stated that he testified as set forth above at his deposition based upon what DTC's attorney had told him; that he lied under oath at the deposition because DTC's attorney told him to lie; that he lied under oath at his deposition because he had been offered a bribe; and that despite the requests that he lie and the alleged bribe, he never reported these things to any law enforcement authorities ( Tr. 9/14/12 at179,182, 237, 238). On redirect two weeks later, Brian Blanchard somewhat revised his testimony to state that he answered his deposition questions in the manner he did because Mr. Friedman had told him certain things that he later learned were mistaken (Tr. 10/1/12 at 15).

Eugene Beigelman

Eugene Beigelman testified that Trimarco offered him employment with Vitallink in 2001. DeLucia was also employed by Vitallink at that time. Beigelman sat next to DeLucia at Vitallink and they talked everyday. During his time at Vitallink, Beigelman discussed CPIP technology with Trimarco. Beigelman left Vitallink in 2002. Thereafter, Beigelman had contact with DeLucia while consulting for a company called Empower Biz, a credit card processing business started by DeLucia and Jeff Levine. After that, DeLucia contacted Beigelman, told him that he had become CEO of Data Treasury, and asked Beigelman to help in putting together financing for Data Treasury. Beigelman participated in a planning meeting regarding Data Treasury. At some point, DeLucia informed Beigelman that Trimarco would be joining Data Treasury.

In or around early 2003, Beigelman had discussions with DeLucia about forming a new company to go into the credit card processing business. Beigelman testified that DeLucia saw the credit card processing business as a good way to generate revenue to pay some of the people splitting time at Data Treasury. DeLucia told Beigelman the new entity, Infinity Payment Systems, Inc., would be separate from Data Treasury. The new entity was going to involve Beigelman, DeLucia, Trimarco, Fliderman, Steve Bassin, Jeff Levine and a few other people. According to Beigelman, an agreement listing each person's stake in the new company was executed at one of the meetings. It was represented to him that there would be a licensing agreement regarding technology between the new entity and Data Treasury. Beigelman was not given any information with regard to whether Infinity was supposed to be a wholly-owned subsidiary of Data Treasury. [*12]

On cross-examination, Beigelman admitted, among other things, that in 2002 the SEC barred him for life from any association with any broker or dealer, and the New Jersey Bureau of Securities barred him from any affiliation with brokers or dealers. Beigelman also admitted that he did not know whether an entity called Infinity Payment Systems, LLC ever came into legal existence.

Michael Greco

Michael Greco, a friend of Trimarco's, testified mainly about his formation of Skylink, an entity to develop an aviation security system mainly based on streaming live video from an airplane to the ground. Trimarco and his brother Vincent both owned stock in Skylink, with Trimarco owning approximately one-third. Trimarco was chairman of Skylink's board of directors. Greco was president. There were some discussions in 2003 between Greco on behalf of Skylink and Data Treasury with respect to a possible agreement between the two companies. During the discussions with Data Treasury, Greco had a "healthy suspicion" that Trimarco was being loyal to Data Treasury as opposed to Skylink. Ultimately, an agreement between Skylink and Data Treasury was not consummated. Greco never had any conversations with Trimarco about Trimarco having a meeting with a particular congressman.

Mark Holzwanger

Mark Holzwanger, a certified public accountant, testified that he was one of the owners of Empire Processing Corporation, a company that offered credit card processing services to retail stores and other businesses. Holzwanger stated that he paid the fee to incorporate Infinity Payment Systems, Inc., which was incorporated by Al Wanderlingh. Thereafter, Holzwanger was in possession of the stock book of Infinity Payment Systems. Holzwanger testified that DeLucia never claimed that Data Treasury owned Infinity Payment Systems, Inc. Holzwanger had not issued any stocks in Infinity Payment Systems. In January of 2003, he was aware that a company named Empire Biz (also in the credit card processing business) was owned by, among others, DeLucia and Wanderlingh. Holzwanger recalled discussions in 2002/2003 regarding a potential three-way merger between Empire Processing, Empower Biz and Infinity Payment Systems, to be called Infinity Processing Systems. There was some discussion about Data Treasury contributing some technology to the new company, for which Data Treasury would get a five percent ownership in Infinity Processing. According to Holzwanger, he walked away from the deal because DeLucia failed to provide documentation to substantiate expenses purportedly incurred by Empower Biz in connection with the new company. Holzwanger admitted that the Empower Biz "team" was really synonymous with the Data Treasury "team" because many of the people from Empower Biz were located within the offices of Data Treasury, including DeLucia, Wanderlingh, Beigelman, Fliderman, Trimarco, Lane, and Freedman. According to Holzwanger, Data Treasury did not have any involvement in Infinity Payment Systems, and he dealt with individual shareholders of Data Treasury regarding the merger, not Data Treasury as a business entity. Holzwanger testified that he does not know whether Data Treasury filed a tax return on the part of Infinity Payment Systems, Inc. He never filed any tax returns on behalf of Infinity Payment Systems. On cross-examination, Holzwanger admitted that he had discussions with Trimarco about the proposed merger and that he knew Trimarco was the chief operating officer of Data Treasury at that time. He also admitted that he testified at his deposition that Trimarco was in charge of the merger and that he was one of the people designated to negotiate [*13]it. Further, he admitted that he testified at his deposition that Data Treasury's failure to provide back-up documentation regarding costs it allegedly incurred in connection with the merger caused a lot of conflict and friction.

Keith DeLucia

Keith DeLucia testified that at the age of 21 in 1991 he pled guilty to Grand Larceny in the third degree, for which he received a four month sentence (Defendant's GQ) ; and he stated that he was released after 80 days for good behavior. He was also sentenced to probation for a period of five years, which he was required to serve for a period of two years, again he presumed due to his good behavior. He thereafter obtained a New York State Certificate of Relief from Disabilities (Defendant's GR). He stated that he had met Trimarco as a teenager in Smithtown and thereafter, when he was working with his family in a car wash business and needed zoning lawyers, had hired Trimarco's brother and father, whom he had told about his prior conviction. It was his belief that Michael Trimarco was aware of the conviction, both because of the relationship with his brother and father and because the robbery had been in the local press back in 1991 in the general neighborhood where he and Trimarco grew up. In the Fall of 2000, Trimarco's brother reintroduced him to Michael Trimarco who shortly thereafter hired him as an employee of Vitallink, which he described as being able to use existing DSL lines over which one could stream "video solutions. . .". He described a conversation between himself and Trimarco in the Spring of 2001, when he was asked to fill out an on-line application for Vitallink which asked whether he had been convicted of a felony; he asked Trimarco if his past would constitute a problem and set forth that Trimarco answered in the negative.

According to DeLucia, he had to leave Vitallink in the Summer of 2001 as the business had been unable to raise capital to stay in business. Thereafter, beginning in the Summer of 2001, he began a company called Empower Biz, which he described as a credit card reseller that sold terminals to merchants affording them the ability to run credit card transactions. On February 1, 2001 he went to work for Data Treasury. Within a few weeks, he contacted Michael Trimarco, asking him to join Data Treasury as a consultant. He spoke to him, first, about raising capital for the company and, second, about a potential partnership and/or licensing agreement between DTC and a company owned by Trimarco's family, called Skylink. He believed during these initial discussions that Skylink had obtained the Vitallink technology and wanted to utilize the video streaming capability in conjunction with federal government security agencies. He stated that Trimarco suggested that Skylink obtain a license to DTC's patent, raise money and infuse capital into Data Treasury in payment for the license. DeLucia explained that the Skylink/Data Treasury concept being discussed and worked on would tie the two companies in a project offering, whereby DTC would utilize its patented facial recognition technology and Skylink would capture and stream such information. Such information would be transmitted via a third entity, known as SAIC that already handled a lot of special operations communications with the Pentagon, the FBI, CIA and the Department of Defense. The practical application of this partnering would result in the federal agencies' ability to monitor both pilots as they entered the cockpit of airplanes and passengers to identify potential terrorists. During the Skylink discussions, Trimarco became a DTC consultant (Defendant's DG) in April 2002. [*14]

In addition to the potential Skylink deal, DeLucia brought in Trimarco to develop a business plan and raise capital for what he termed the "non-cash division" of Data Treasury, which he described as comprising three corporate entities - Dynamic Systems Group run out of Tampa, Florida; his company, Empower Biz; and Infinity Payment Systems. He testified that as owner of Empower Biz, he transferred such to Data Treasury in 2002; and that Data Treasury had acquired Dynamic Systems Group in 1999, before DeLucia's involvement. DeLucia set forth that he began the company known as Infinity Payment Systems in the Summer of 2002; that it was always owned by Data Treasury; that as CEO of DTC he assigned two of his colleagues, Al Wanderlingh and Sandy Fliderman, to sign the articles of incorporation; and that he made the decision to make those persons officers of the same. (Defendants' FX). He stated that Infinity was specifically formed to utilize the CPIP technology and go after the market that would utilize new credit card terminals to process credit card transactions; and that the entity would be run out of both Tampa, Florida and DTC's New York offices. On August 2, 2002, Data Treasury subscribed to fifty shares of stock of IPS and the document was signed by DeLucia (Defendant's ET). According to the witness, no other person or entity owned any shares of Infinity Payment Systems. He stated that IPS's tax returns were prepared by Shelton and Shelton, the accounting firm that prepares all of DTC's annual returns.

According to DeLucia, when IPS was formed in August 2002, he, as CEO of DTC, assigned Trimarco to become IPS's CEO, with a view toward building the high speed IP credit card sales organization. As CEO of DTC, DeLucia had already been working on these concepts. DeLucia testified that in early 2002, DTC had discovered a company called Exadigm at a trade show that actually produced a working credit card terminal with multiple modems to run IP transactions. DeLucia negotiated an exclusive agreement with Exadigm for Data Treasury which would ultimately allow a check imager to scan checks through Exadigm's credit card terminal, allowing customers who paid by check to see their checks online. In addition, DeLucia had conversations with another company after formation of IPS, called Tranvia, which was to be the first on the market with a credit card present rate over a high speed line. He believed that the Exadigm terminal would deliver these transactions and Tranvia would certify them, so that they would pass onto a member bank which would then accept the transaction and move the money. DeLucia stated that when Trimarco came in as CEO of IPS, he told Trimarco about DTC's exclusive agreement with Exadigm and asked him to work on getting Tranvia involved.

In addition to the desire to effectuate agreements with Tranvia and Exadigm, DeLucia claimed that he asked Trimarco to complete a contemplated merger of Infinity, Empire Processing and Empower Biz, which was described in some detail in Trimarco's testimony. In addition, when Trimarco came on board as COO of DTC, DeLucia told him he wanted him to take over financial operations of DSG, which was looking to convert its banking customers from local check imaging to remote check imaging.

Based on all of the above, according to DeLucia, Trimarco understood when he became COO of DTC, that he was to become the CEO of IPS; and he was required pursue financial opportunities for DSG, both subsidiaries of DTC. Trimarco became COO of DTC on November 20, 2002 (Defendant's H) and continued as one of that corporation's Directors. He set forth that Trimarco, [*15]along with himself, Shepard Lane, Claudio Ballard and Sonny Owens signed identical stock option agreements on December 31, 2002 (Defendant's I).

Mr. DeLucia testified at length regarding his view that Mr. Trimarco not only failed to accomplish any of his assigned tasks at his short time with DTC, but that he also violated his duty of loyalty to DTC and attempted, in a number of ways, to steal its assets. He stated that Skylink, owned by the Trimarco family, had posted a website claiming falsely that it had an exclusive agreement with Data Treasury. He set forth that not only was no such agreement ever reached but also that he sent a proposed teaming agreement to Trimarco on March 13, 2003, stating "[l]et's get it done"; but that nothing ever came of his attempts. With regard to the attempts of DTC to enter into a teaming agreement with SAIC, DeLucia stated that when DTC set up a meeting with the chair of SAIC's investment arm in the Summer of 2002, the SAIC representative, after spending several hours with him, insisted that Trimarco be kept out of any future meetings. As communications progressed, he stated that he learned that Trimarco was trying to move the teaming agreement away from Data Treasury and into the sole hands of Skylink in late 2002 and early 2003. In addition, according to the witness, a local congressman had expressed interest in setting up a biometric kiosk at Islip MacArthur Airport, with a view toward exploring the ability to capture biometric data into a data base so that prospective airplane passengers could be properly identified. Although the meeting occurred along with Trimarco and a DTC shareholder in late 2002, DeLucia stated he learned and discussed with Trimarco that Trimarco had spent the entire meeting discussing Skylink and not mentioning DTC. Although DeLucia confronted Trimarco concerning his acts at the meeting, Trimarco allegedly dismissed his concerns and stated that Skylink was the preferable entity to be connected with SAIC.

DeLucia asserted that after nothing was coming in from the DSG and IPS potential projects, he confronted Trimarco in February and March of 2003. At their initial meeting on these subjects, he stated that Trimarco handed him some spreadsheets and informed him that DSG was insolvent. Trimarco stated that the only solution would be for his family to take over DSG. Trimarco then added that they would also take over Empower Biz and Infinity Payment Systems (including all of the credit card processing prospective business) with his family. DeLucia testified that Trimarco told him this would be good for DTC because it could then focus solely on the pending patent litigations. Trimarco then told DeLucia that although DTC would get no cash infusion from this proposal, 100% of DSG, IPS and Empower Biz would go to Trimarco and his family, and he would put aside some equity in the new family venture which would constitute an exit strategy for DeLucia. He then tried to convince DeLucia at more then one meeting in March 2003 to put this proposal in a positive light before DTC's board. To convince DeLucia, Trimarco assertedly told him that DTC was "infectious" and that he needed to take over the entire check imaging side of the business. When DeLucia told him that some percentage had to be put aside for DTC, Trimarco basically told him no but not to worry as he would essentially take care of DeLucia. DeLucia stated that his view was that this was a plan to steal from DTC and he rejected it as disloyal and inappropriate. After DeLucia refused the deal, Trimarco sent out an e-mail proposing a similar deal with DTC getting the clawback rather than DeLucia, in his view, because Trimarco got nervous after DeLucia's negative reaction (Defendant's DI) with regard to the entire credit card processing business [*16]

DeLucia testified that although Trimarco was placed in charge of the entire merger operation, it failed completely, resulting in the departure of the separate entity called Empire Processing from all negotiations. This occurred, according to DeLucia, in late 2002, when Trimarco unwound the exclusive agreement he had negotiated between IPS with Exadigm. In addition, an alternative plan was developed to proceed with the DTC related entities (Empower Biz, IPS and DSG) and DeLucia had already delivered Trimarco the exclusive contract with Exadigm, as well as a deal being finalized with Tranvia and two offices in Tampa and New York. Yet, he stated that this also was a non starter as Trimarco had unwound IPS's deal with Exadigm and failed to finalize any agreement with Tranvia. Trimarco's scheming and disloyalty, in DeLucia's view, resulted in the total failure of the other prongs of the proposed business. DeLucia testified that in the Fall of 2003, he directed Al Wanderlingh and Sandy Fliderman to dissolve IPS (Defendant's FX).

Perhaps, most significant, was DeLucia's testimony concerning Brian Blanchard. According to DeLucia, Blanchard was an employee of IPS in the Tampa office, who acted as a salesperson signing up credit card merchants and selling them credit card terminals. He stated that Blanchard was paid by IPS, the monies for which came directly from Data Treasury. In early 2003, Trimarco allegedly approached DeLucia with news that Blanchard was unhappy with his Data Treasury employment and needed to make more money. This was followed in February or March 2003 by a telephone call from Blanchard himself reiterating what Trimarco had told DeLucia concerning Blanchard's dissatisfaction at DTC. However, shortly thereafter, Blanchard apparently approached DeLucia and told him that he wanted to come clean concerning an issue that had been on his mind. He then told DeLucia that Trimarco had approached him and told him that everyone at Data Treasury was incompetent and that he had a plan to take over the business end. Trimarco allegedly told him to keep quiet on this and help him in preparing his actions. When DeLucia questioned the validity of these claims, Blanchard gave him a large number of e-mails. After reading the e-mails, DeLucia stated that he came to the conclusion that Trimarco was conspiring with Blanchard to take over the business opportunities of DSG, Infinity Payment Systems and Empower Biz, as well as the sales force that DTC housed and paid; and to sell the check imaging technology through his own new initiative. All of the e-mails are contained within Defendant's AC. In these e-mails, Trimarco consistently wrote first to Blanchard, essentially instructing him to communicate general dissatisfaction with his position at DSG and IPS, so as to utilize Blanchard as the point person to first leave these entities and begin Trimarco's new venture without causing suspicion. An April 10, 2013 e-mail from Trimarco to DeLucia (later sent to Blanchard) states that Trimarco sensed Blanchard becoming frustrated and demotivated. An April 14, 2003 e-mail from Trimarco to Blanchard states "[s]o you should act a little cagey. Say I have some good ideas and plans, but you're not sure if it is ever going to happen based on the past. . . You can say you have talked with me about training someone in New York too". Upon reviewing these e-mails, it became clear to DeLucia that Trimarco, having been unsuccessful in obtaining DeLucia's complicity in his plans, was using Blanchard to do the same and essentially steal the assets of Data Treasury's credit card business operations.

Ultimately, on April 24, 2003, DeLucia stated that he called Trimarco into his office and Trimarco began reciting verbatim what he had told Blanchard he was going to say; DeLucia [*17]interrupted him and continued Trimarco's sentence actually reading from the e-mail Blanchard had already provided him. He stated that at that point Trimarco's face turned white and he begged DeLucia not to hurt him. According to DeLucia, he fired Trimarco on the spot. As he departed that day, DeLucia set forth that he told Trimarco to return the company's laptop that contained proprietary data, but that it was never returned. After he left, Trimarco sent DeLucia an e-mail on May 5, 2013, requesting a meeting to discuss entering into a termination agreement. (Defendant's EB). DeLucia had one more telephone conversation with Trimarco, in which Trimarco told him that he could help with the patent litigations but that if DTC did not enter into an appropriate termination agreement with him, he could be a hindrance to the same. Although Brian Blanchard was given a thirty-day option to remain and attempt to raise some revenue, he did not accomplish a single deal and was let go in June of 2003. Thereafter, DeLucia received another e-mail in November, 2003, from Trimarco, again threatening Data Treasury, stating, "[H]ey, you fired Brian Blanchard. Smart!" (Defendant's GS). De Lucia later learned that while still a DTC officer, director and employee, Trimarco had instructed Blanchard to sign a form creating a new corporation in Florida, Veracity Systems LLC, to perform the CPIP venture.

With regard to the restructuring of Data Treasury, DeLucia claimed that the issue was raised when he first interviewed with Claudio Ballard and that the entire process was accomplished by DTC's securities counsel, the law firm of Weil, Gotshal and Manges, Trimarco playing no part therein whatsoever. However, during his examination by Plaintiff's counsel, he did admit that Trimarco did, in fact, play some role in the process.

According to DeLucia, Dr. Knutsen, who had been a DTC shareholder, was asked to loan money to the company and did so on June 17, 2002, in the amount of $600,000 (Defendant's FU). The loan was for a one-year period as it was originally planned that DSG would generate sufficient revenue to repay it. However, the amount needed was increased by another loan from Dr. Knutsen in January 2003, which provided Dr. Knutsen with a right to $5 million from potential recoveries from the patent litigations. (Defendant's FV). After the firing of Trimarco and DeLucia's realization that Trimarco had not moved the cash generating portion of the business along and had attempted to steal the same, he spoke again with Knutsen and informed him that DTC would not be in a position to satisfy the new note. Dr. Knutsen then extended payment on the note until 2004 and was provided a right to $10 million from the potential recoveries from the patent litigations. (Defendant's FV). DeLucia stated that when in June 2004, DTC was still not in a position to repay the note, Dr. Knutsen's special dividend payment was increased an additional $5 million in June 2005. (Defendant's FV). According to DeLucia, DTC eventually paid the entire $15 million to Dr. Knutsen, all of which it is seeking in its counterclaim against Trimarco.

DeLucia was cross examined at length regarding IPS's and DTC's tax returns, with the point being that DTC's returns did not mention IPS nor Empower Biz, as subsidiaries (Pl. 14 and 15), despite DeLucia's claims to the contrary. DeLucia stated that it was his understanding with the advice of DTC's CFO, the accounting firm of Shelton and Shelton, that where an entity's revenue is de minimus, it is consolidated under a single tax identification number and, therefore, part of the DTC gross revenues on these returns. He stated, in addition, that DSG is set forth as a subsidiary [*18]in the tax returns because, unlike IPS and Empower Biz, DSG was making income in the 2002/2003 time frame. In addition, DeLucia revised his testimony to state that Trimarco's initial proposal vis a vis DSG was that his family acquire it, give DTC some minor equity and provide some sort of clawback provision. He stated that he brought this first proposal to Dr. Knutsen. However, after he allegedly set up a meeting with Trimarco and Knutsen in Florida, he stated that Trimarco never showed up. He claimed that thereafter Trimarco made a second proposal to him in which he sought 100% equity ownership in DSG. Plaintiff's counsel also showed an e-mail to DeLucia from one of DTC's shareholders and dated February 2003 talking about a prospective meeting with the Congressman regarding the Islip MacArthur Airport proposal that at first lead DeLucia to state that perhaps the meeting with the Congressman occurred after the Fall or end of 2002. (Defendant's DL). However, on re-direct, DeLucia set forth that he suspected that the e-mail was not an authentic document as he recalled having a discussion with Shepard Lane about Trimarco's disloyalty with the Congressman before the date of the e-mail.

Kenneth Bayne

Kenneth Bayne, identified as the Chairman of the Huntington Independence Party, who attended the meeting with a local Congressman along with Michael Trimarco testified concerning the meeting, which he set forth occurred after the November 2002 elections. He stated that he informed the Congressman and his staff prior to the meeting, based statements made to him by a friend, Ed Collins, who was a shareholder of DTC. Based upon those conversations, Bayne understood and told the Congressman's staff that the meeting would concern DTC's biometric technology that could facilitate identification of persons for security at airports and other government buildings. Mr. Bayne attended the meeting in the Congressmen's office and testified that the person who spoke about the technology was Michael Trimarco. During the meeting, according to Bayne, which lasted approximately one hour, Trimarco spoke for a short period about DTC's biometrics and then turned the conversation to Skylink and its technology, which Trimarco explained at some length would eliminate the need for a black box to be retrieved after an airplane crash. Bayne testified that Trimarco spent the bulk of the meeting speaking about Skylink and that he was criticized by the Congressman following the meeting for having failed to inform him regarding the real subject matter of the meeting. He reported this to Ed Collins after the meeting. Mr. Bayne testified that he is a shareholder of DTC; that he knows Trimarco's attorney, who once ran a campaign for him; and that he knows and admires Trimarco's father through local politics.

Shepard Lane

Shepard Lane testified that he began as outside general counsel to Data Treasury in 1998, after a client of his introduced him to Claudio Ballard, DTC's president at the time. In the same year, he also became a shareholder of DTC. He described DTC as a technology company that had intellectual property that had been the subject of applications to the United States Patent and Trademark Office that were not yet actually approved when he came on board. He stated that the patent, previously owned by Claudio Ballard and transferred by Ballard to DTC, was approved in 1999. Mr. Lane became the grantee of non qualified stock options on December 31, 2002 in an agreement similar to that entered into between DTC and Michael Trimarco. He testified that under such agreement, he could exercise one or all of these options at any time the option was in effect - [*19]in this case, for a ten year period. Mr. Lane read into the record the portion of the December 31, 2002 option agreement which specified that the grant of options did not constitute a contract of employment and that in regard to the contract of employment, the option grant would not affect such employment. Lane testified that he never exercised any options to purchase shares of DTC but that he does own DTC shares as well as options to purchase the same. In late 2005, he renegotiated the terms of his December 31, 2002 agreement with DTC specifically to have the ability to have dividends paid without having to exercise stock options (Pl. 36 and 37). The first dividends were paid, he stated, in December 2008. DTC never gave and, in his opinion, was not required nor was it permitted, to give notice of such to existing shareholders.

Mr. Lane testified that he recalled a conversation with Trimarco in March 2003 concerning DeLucia's felony conviction, which Trimarco knew about before DTC employed him. Lane had also been aware of it; and that, in his opinion, it would have no effect on the existing patent litigations since it was over ten years in the past and under the Federal Rules of Civil Procedure, not admissible in evidence. He, therefore, allegedly told Trimarco that it would have no effect whatsoever on the pending and planned patent litigations.

Lane stated that Trimarco never raised issues with him concerning the validity of DTC's patent and that such would, in any event, not have made sense at the time, because the validity had not yet been finally determined during Trimarco's tenure as it was still subject to a claims construction hearing. He also denied that Trimarco told him that Sonny Owens, who was also given a similar December 31, 2002 option agreement, had claimed either to have contributed biometrics to the patent or that he had some sort of dangerous information concerning the same. Trimarco never gave advice that Lane heard stating that DTC should concentrate solely on the patent litigations and be stripped of all its subsidiaries.

According to Mr. Lane, Michael Trimarco was brought on as a consultant in April 2002 based upon his believed ability to raise funds for the company, which he described (as did all other witnesses) as on life support. However, he stated repeatedly, like DeLucia, that Trimarco was not brought in to perform a restructuring of DTC, described as a 40-to-1 reverse split of DTC stock, nor did he aid in doing so. He believed that the bulk of any such restructuring that occurred actually happened sometime in 2002 before Trimarco came on board as a consultant. According to Lane, the restructuring was implemented by the law firm of Weil Gotschal & Manges. Lane stated that Trimarco's prospective role as a consultant was to obtain revenues in the company's biometric and check clearing fields. He denied Trimarco ever advised him concerning the misuse of handing out too many warrants prior to the restructuring.

Lane stated that he was aware of Trimarco's involvement with Infinity Payment Systems, Inc., which he, like DeLucia, insisted was a subsidiary of DTC. Mr. Lane drafted the subscription agreement for Data Treasury in which it subscribed to purchase the shares of IPS (Pl. 25). He recalled that he then handed the agreement to Sandy Fliderman (charged with the responsibility of handling IPS) and asked him to issue and deliver the shares to Trimarco. However, because Trimarco, in Lane's view, never brought in any business to IPS, he was aware of discussions in early [*20]2003 concerning a prospective merger of IPS with other entities in order to form a new separate corporation. It was Lane's belief that Trimarco never fulfilled his duties either as a consultant in 2002 nor as an employee in 2003 vis-a-vis Data Treasury. During the consultancy period, Lane believes Trimarco breached his duty of loyalty to DTC both in the attempt to keep DTC away from any SAIC deal with Skylink and in unraveling DTC's exclusive agreement with Exidigm. Mr. Lane stated that he was aware of "offers" by Trimarco to take over the DSG business from Data Treasury, but he denied that there was ever an offer of payment by Trimarco to do so; and, in addition, it was his view at that juncture, that Trimarco was essentially attempting to steal DTC's assets.

Plaintiff's counsel questioned Shepard Lane at length regarding the various agreements entered into between Dr. Knutsen and DTC between 2002 and 2005, in which Dr. Knutsen received certain monetary benefits and secured interests in DTC in return for his loan of funds to DTC as well as his agreement to extend the due dates of such loans. Lane stated that negotiations with Dr. Knutsen began in May or June of 2002, necessitated by the need to obtain funds so that DTC, on life support, could remain a viable entity. The first promissory note (Defendant's FU) was set forth as effective June 17, 2002, and stated that Knutsen had loaned $600,000 to DTC, repayable within one year. A general security agreement (Defendant's FU), signed like the note, in September 2002, but made referable to the promissory note, also signed in September 2002, but made effective as of June 17, 2002, gave Knutsen a perfected security interest in all of the assets of Data Treasury, including its patents and subsidiaries. Although IPS was not incorporated until July of 2002, Lane pointed out that the promissory grid note and the security agreements gave Knutsen a secured interest in all after-acquired assets of DTC. The convertible promissory grid note also gave Dr. Knutsen the right to convert his debt to stock or stock options in DTC shares. With regard to these initial two instruments, Lane testified that he did not believe that Trimarco did anything that was so devastating that it required that Data Treasury enter into these agreements. He essentially stated that Trimarco's failure to raise funds for DTC resulted in the corporation's need for loans.

Following an additional loan of $220,000 from Dr. Knutsen as well as a grant of an extension to DTC to repay the loan, in January 2003, which Lane stated was necessary for DTC to continue paying its everyday expenses, the convertible promissory note was amended by Addendum No. 1 (Defendant's FV), giving Dr. Knutsen the ability, for his stock, if he so elected, to be purchased by a conversion from the principal of the note to be non-dilutable. In April 2003, Dr. Knutsen loaned an additional $20,000 to DTC. Addendum No. 2 to the promissory grid note (Defendant's FV), executed on April 29, 2003, modified the original conversion rights so that Dr, Knutsen had the right to elect or convert to receive an additional 6/10 of one percent of DTC's authorized shares, bringing his potential ownership of DTC to 5.2%. Addendum No. 2 also promised a special dividends of up to $10 million, based upon a formula that required DTC to be successful in its patent litigations. Lane described the agreement as essentially giving away ice in winter because, in his view, as of that date, Knutsen would not even get repayment of his principal if the patent lawsuits failed. Addendum No. 3, dated June 17, 2004, followed contribution of another $20,000 by Dr. Knutsen to DTC and again extended the due date of the principal of the promissory note. Addendum No. 3, according to Lane, gave Dr. Knutsen 6/10 of 1% of additional stock and it increased the conditional special dividend from $10 million to $15 million. The final Addendum (No. 4), extended the maturity date [*21]on the loan until 2006 and the conversion of principal; and accrued interest remained under the formula agreed to in the prior addendum. The potential special payment to the lender, according to Lane, remained at $15 million (Defendant's FV).

Claudio Ballard

Claudio Ballard, who described himself as an inventor and scientist, including the technology giving rise to the patents that constitute the major asset of Data Treasury, stated that he formed the corporation in 1998 and that the subject patents were assigned to Data Treasury in early 2000. At that time and through the present, he has been the chairman of DTC's Board of Directors. He stated that in 2000, other than the pursuit of the patent itself, DTC had a check processing facility and owned a division thereof in Florida. However, he set forth that in the period between 2000 and 2002, this business declined, in part, because the banking industry was attempting to exclude Data Treasury from the prospect of engaging in check processing operations. It was his understanding that Trimarco was brought in, initially as a consultant to DTC, to attempt to raise revenues for these related businesses. Like the other DTC witnesses, Claudio Ballard insisted that Trimarco had nothing whatever to do with either recommending or overseeing a restructuring of the corporation in order to aid its economic problems in 2002. He also stated that the restructuring issue was discussed solely with the corporation's attorneys, as well as Shepard Lane and Keith DeLucia. With regard to the DTC grant of stock options, Ballard testified that he, along with DeLucia, Lane and Trimarco, received the same in late December, 2002. In addition, he stated that his grant of options was renegotiated in 2005 so that he could obtain dividends associated with the underlying number of shares that the options represented without having to actually exercise the options. He described the process by which the Board of Directors declared dividends. It required a declaration by the Board with the assistance of counsel. The funds would then be wired, according to the witness, to a transfer agent who issued checks to stockholders. It was through the same process, he claimed, that DeLucia's and Lane's dividends were paid. He also confirmed the other witnesses' testimony that DTC does not announce to option holders that a dividend is imminent.

According to Mr. Ballard, two prospective business deals were being considered at about the time Trimarco joined Data Treasury. He stated that both included the development of a partnering agreement with a company called SAIC, which he described as a major US defense contractor. He asserted that Trimarco told him and Lane that he and/or his family had an interest in an entity known as Skylink, which he believed would be able to aid in the development of this business. He, like the other Defendant's witnesses, referenced a potential for Data Treasury along with Skylink and SAIC to obtain contracts to be utilized to enforce security at the Islip MacArthur Airport through discussions with a local Congressman. He also stated, like the other witnesses, that when Trimarco was brought to a meeting on this subject with the Congressman, as well as himself, DeLucia and Lane, Trimarco spoke only about his family business - Skylink - and never mentioned DTC. He believed that Trimarco's actions violated his fiduciary duty to DTC as a member of its Board of Directors.

Ballard also stated that Trimarco was brought in to aid in the financial development of DSG, DTC's subsidiary, which had suffered losses by 2002 and needed attention from a financial expert. [*22]He described DSG as the aforementioned entity that provided check imaging solutions and coupon capture solutions to various banks. However, rather than obtaining an infusion of cash for DSG, he asserted that Trimarco attempted to divert the DSG business to himself or his family, initially by a proposal whereby he would keep 90% of the ownership and later by telling DeLucia that he could have a piece of it after Trimarco took over 100% of the company. According to Ballard, he understood that this made DeLucia very angry and resulted in the meeting in which DeLucia fired Trimarco. He knew Brian Blanchard was an employee of DSG. Ballard identified two documents (Defendant's GB and Defendant's FZ) which are DSG 1099 tax forms for 2002 and 2003 in the name of Blanchard.

Mr. Ballard did not recall whether DeLucia ever planned on merging a wholly owned subsidiary of DTC into a new entity to be known as Infinity Payment Systems, LLC. He also stated that although he was aware that DeLucia had an interest in the credit card processing area, and was attempting to make money outside of DTC with this, he was not particularly involved therewith.

Ballard did not recall Trimarco ever suggesting to him that Data Treasury's only valuable asset was its patent and that the same should be protected. He denied that Trimarco ever questioned him in any manner concerning the validity of the patent, nor did he believe Trimarco ever undertook any due diligence actions concerning the patent. Rather, he stated that the US Patent Office was required to and did in fact accomplish the same. In addition, Ballard described DeLucia as a valuable person at DTC and did not believe that DeLucia's prior criminal record could impair Data Treasury's prospects either with regard to the patent itself or the litigations against the banks.

Mr. Ballard stated that Dr. Knutsen loaned DTC $600,000 in mid-2002, and that it was DeLucia who negotiated the terms of the loan, which gave Knutsen a security interest in the assets of the corporation. Ballard was questioned at length regarding a capitalization sheet that he prepared in early 2002, in which he suggested that Dr. Knutsen obtain stock warrants in connection with his first infusion of $600,000 into Data Treasury. He stated, however, that these were merely his thoughts at the time and that the loan documents themselves set forth the benefits provided to Dr. Knutsen. He believes that DeLucia aided DTC in bringing in Dr. Knutsen and that without this money the corporation may not have survived.

Ballard testified that as of the date of trial, he has received $5 million in dividends from DTC.

Sandy Fliderman

Sandy Fliderman testified that he acted as a consultant in technology services to Data Treasury sometime in 2002. Fliderman is currently employed by Zaah Technologies, which provides technical services to Data Treasury. Fliderman testified that he formed Infinity Payment Systems, Inc. in mid-2002 at the request of DeLucia by filling out a form on-line with the State of Nevada. Thereafter, he received and maintained the corporate kit until the corporation was dissolved. He was treasurer of Infinity Payment Systems. Fliderman believes that he issued shares in Infinity Payment Systems to Data Treasury. He does not have any recollection of filing federal corporate tax returns [*23]for Infinity Payment Systems, and was never asked by Infinity Payment Systems' accountant to provide any documents for use in the preparation of tax returns. Fliderman was aware of the proposed merger between Empower Biz, Infinity Payment Systems, and Empire Processing. He was supposed to be an owner of the new company but the merger was not completed. Fliderman admitted that his technology company, Primary Development, was indicted for promoting gambling. He denied that the company was engaged in on-line bookmaking. On cross-examination, Fliderman testified that he was told by DeLucia that Data Treasury owned Infinity Payment Systems when it was formed. The address for Infinity Payment Systems listed on its Articles of Incorporation is the same as Data Treasury's. Fliderman testified that he billed Data Treasury for the services that he rendered to Infinity Payment Systems and that Data Treasury paid his bills. Fliderman signed a certificate of dissolution of Infinity Payments Systems on October 1, 2003, which was filed with the state.

Wayne Shelton

Wayne Shelton, an accountant from the accounting firm of Shelton and Shelton, testified that he was the accountant for Data Treasury from 2002 through the present time. He produced tax returns for the period 2002 through 2011 for DTC which were admitted into evidence. The corporate tax returns for the years 2006 through 2011 were sealed upon application on behalf of DTC without objection. (Plaintiff's 43-48). He described his role as accountant to include the monitoring of monthly cash flow for DTC. Although he stated that he did not prepare the tax returns of Infinity Payment Systems, he did prepare a general ledger for that entity and he also stated that Infinity was a subsidiary of Data Treasury. When shown the tax returns for Infinity, he was unable to state who prepared them. Although Mr. Shelton did prepare DTC's 2002 and 2003 Tax returns (Pl. 15 and 16), he admitted that Infinity was not listed on either as a subsidiary of DTC. He was questioned at length regarding the statements on the sealed tax returns regarding the listing of the number of shareholders and simply stated that he had no recollection of why the numbers he set forth in were on the documents. He also testified that although he was aware that Data Treasury issued stock from time to time, he was unaware that it had ever issued stock options. Mr. Shelton did confirm that in 2002 DTC was in poor financial shape and in need of raising funds for operations.

Gary Knutsen

Dr. Gary Knutsen graduated with a degree in veterinary medicine and a graduate degree in veterinary physiology in 1975. He served as a captain in the U.S. Army working in an antiviral pulmonary therapeutics program. He set forth that he left the army in 1980 and began his own company, Pathology Associates, Inc., which worked in conjunction with various federal agencies and grew rapidly into a successful enterprise. In 1995, his corporation was sold to the Science Applications International Corporation (referred to by the other witnesses as SAIC), where he continued as the general manager of the pathology division until sometime in 2000, when the company was again sold; however, Knutsen continued to work as a contract consultant with SAIC until 2004/2005. In 2004, Dr. Knutsen began a small business called Toxicologic Pathology Associates, and is still chair and CEO of the same. In 2006, the witness formed a software company called Systems Pathology Company, which was designed to use artificial intelligence and algorithm computerization to automate part of the process of toxicologic pathology. [*24]

According to Knutsen, he was introduced to Data Treasury sometime in late 1999 or early 2000, by a friend of his stepson and became an investor in the second quarter of 2000. His initial investment, in four stages, was $600,000 for which he received DTC stock. When he read the private placement memorandum in existence at the early stages of the corporation, he was particularly interested in the biometrics and storage of images aspect of the entity. He was also made aware of the entity, known as DSG, which had become a wholly owned subsidiary of DTC, and was in the process of developing the business of point of sale imaging of checks and moving them into a remote repository, making the point-of-sale quick and expeditious. He stated that at this point, DTC's patents were still a long way off from producing revenue; however, he believed that DSG had been revenue producing and had access to markets that made his initial investment an attractive one.

Dr. Knutsen met Keith DeLucia in early 2002. At that point, DeLucia informed him that DTC was having serious financial difficulties. He believed that after September 11, 2001, DTC's technology had advanced to the point that he felt that it possessed a true commercialization opportunity, especially in light of Congress's consideration of the ultimately passed Check 21 legislation. He described the Check 21 legislation as permitting the imaging of checks without their physical presence. Dr. Knutsen also believed that the Check 21 legislation would also have a positive impact on DSG's business. Therefore, based upon these factors and his conversations with DeLucia, Knutsen loaned funds in the amount of $600,000 in or around the Summer of 2002, in exchange for his first promissory note (Defendant's FU). As part of his deal with DTC, he was given a one-year note, and, in addition, he was permitted to be made whole on the percentage of stock that his original $600,000 investment had represented at the time he made it.

It was Dr. Knutsen who arranged the first meeting between representatives of DTC and SAIC, in June 2002, based upon his interest in integrating DTC's potential technology into SAIC technology with which he had some familiarity. It was his belief that DTC would need a host of its server system, like SAIC, that was performing hosting services already for extremely sensitive documents for federal agencies, such as the FBI. Dr. Knutsen wanted to begin to forge a marketing strategic plan and collaboration between the two entities. It was at this meeting he set up in California that he first met Michael Trimarco. He stated that Shepard Lane and Keith DeLucia were also present along with the president of SAIC Venture Capital Corporation. It was Dr. Knutsen's opinion that Michael Trimarco's attitude during that meeting destroyed any hope of DTC obtaining any venture capital based upon his inability to talk about anything other than himself. He opined that he understood, after working for years with SAIC, that it was an entity that existed and grew based upon a belief in teamwork not present in Trimarco's general attitude.

Dr. Knutsen renegotiated his grid note in January 2003 (Defendant's FV) due to the continuing cash needs of DTC and a decrease in the sales of the Tampa organization. He invested another $220,000, still believing that DSG was a viable business despite its recent poor performance. In addition to the extra funds and the extension of the due date of the note, this first addendum stated that all shares of common stock issued to Knutsen would be non-dilutable.

Some time after the first addendum to the grid note, a meeting was scheduled to take place [*25]between Dr. Knutsen, DeLucia and Trimarco to discuss the DSG issues, but Trimarco did not show up. During his testimony, Knutsen was shown certain e-mails in which Trimarco had proposed to DeLucia that the DSG business be moved out of Data Treasury, given to him, and with some proposal permitting DTC to retain a small percentage of the business. He specifically remembered seeing e-mails to and from Brian Blanchard, which he found extremely disturbing. Knutsen described these writings as Trimarco tutoring Blanchard on how to convey information to DeLucia. He found at the time that (1) the revenue performance of DSG was far below that expected; (2) that a well qualified individual had been placed in charge to raise that entity's revenues; and (3) that Trimarco was pulling the entity out of DTC for himself. He believed that the termination of Trimarco at about this time was completely justified and necessary.

Based upon the now ruined opportunities for DSG, and DTC's continued capital needs, Dr. Knutsen stated that he again loaned DTC another $20,000 and extended the promissory note. However, in the second note addendum of April 2003 his total non-dilutable holdings were raised to 5.2051%. In addition, for the first time, the second addendum provided Dr. Knutsen with a substantial special dividend based upon the potential success of the DTC patent. The dividend would be triggered by providing Knutsen with 20% of any amount brought in from the patent over the first $5 million up to a cap of $10 million. It also extended the maturity date of the note until June of 2004. (Defendant's FV). Dr. Knutsen testified that this deal was caused entirely by Trimarco's actions in causing the failure of the DSG revenue producing aspects of the entity. Dr. Knutsen believed when he first invested in DTC that DSG would serve the purpose of paying the company's bills and provide the pivotal foundation from which to build the new technology. It was his belief that Michael Trimarco's poor performance and misconduct caused the collapse of DSG. He then negotiated a third addendum with DTC in June 2004, at the request of Keith DeLucia, extending the note for yet another year, issuing Knutsen an additional six-tenths of one percent of DTC stock on a non-dilutable basis; and increasing the previous dividend from 20 to 25% of amounts the corporation made from the patent over the first 5 million, up to a cap of $15 million. It was his belief that at the time he was essentially betting on the ultimate success of DTC, since there were no revenue producing branches left other than the patent holder potential. Dr. Knutsen stated that the special dividend was eventually paid (Defendant's GW).

Under cross examination, Dr. Knutsen stated that there were many attempts by companies in various businesses during the same period as DSG was around that attempted to fuse the same newly formed technology into their business operations, and that many of them simply did not get off the ground.

Lewis Lazarus, Vanessa Seidman, Daniel Devito

Three attorneys testified briefly concerning issues that arose during trial regarding whether DTC was obligated to notify shareholders of its intent to declare a dividend under Delaware Law and whether several of the DTC settlement agreements set forth the total amounts that were paid to Data Treasury in its patent enforcement litigations. Lewis Lazarus, a Delaware attorney in the corporate and commercial litigation group of Morris James, LLP, stated that the decision of whether or not to declare a dividend is vested in the corporation's board of directors, based upon statutory tests that [*26]must be satisfied concerning the proper amount of net surplus necessary. He set forth that until the board deliberates and makes such determination, it not only has no obligation to disclose its proposed action, but to do so would be unwise in his opinion. He stated that once the dividend is declared but not paid, no disclosure duty exists to shareholders. He also stated that there is clear Delaware common law that holds that directors owe no duty to option holders, i.e. "future holder of stock" (Tr. 2/15/13 at 19). Thus, absent an agreement to the contrary, option holders would not be entitled to advance notice of either a proposed or approved dividend. While similar questions were posed to Venessa Seidman, who provided legal services to DTC at the time of the initial dividend, the Court sustained objections regarding her advice to her client on such issues. Daniel Devito, an attorney from Skadden, Arps, Slate, Meagher & Flom, the lead counsel for several banking entities involved in patent enforcement litigation with Data Treasury, testified that the settlement agreements that were admitted by the Court under seal set forth the precise amounts that were paid to DTC and that such were the only amounts paid in such matters.

Martin Paul Randisi testified as an expert on behalf of Michael Trimarco, regarding his potential damages relating to the value of his 1,500,000 Data Treasury stock options, which the Defendant assertedly denied him the opportunity to exercise. He described himself as a certified public accountant and business appraiser, who has provided both forensic accounting and appraisal services for many entities, including closely held corporations. Mr. Randisi began his career as an auditor and management consultant for Peat, Marwick and has been a member of the American Society of Appraisers since 1986. He was also involved as the director of finance and operations for Entenmann's Bakery. He has lectured for professional societies in forensic accounting and business appraisals and has been qualified as and testified as an expert witness in the valuation and appraisal fields on literally thousands of occasions.

In order to make his calculations, Mr. Randisi stated that he reviewed, among other things, DTC's tax returns that were placed in the record under seal, a 2002 private placement memorandum prepared by DTC, various complaints that were filed by DTC in patent litigations, a schedule of corporate dividends that were paid by DTC, a listing of shareholders, and Michael Trimarco's December 31, 2002 grant of options (Pl. 7).

Mr. Randisi remarked that the grant of options was quite broad in that it gave the grantee flexibility by not requiring the individual to remain and/or even become an employee of the corporation; and that the ten-year grant, in his view, constituted "a long horizon" (Tr. 10/17/123 at 46). These factors increased the value of the options in that they assertedly allowed the time for the maturity of the patent litigations that had been filed. On the other hand, Mr. Randisi did not attach much credence to the corporate private placement memorandum ("PPM", Defendant's GG), stating that the $40 million valuation was unsupported by any real evidence or competent business appraisal. He also opined that the company's major asset - the patents themselves- are nowhere valued in the PPM. [*27]

Mr. Randisi set forth that he read the information that was available with a particular emphasis on DTC's patents, which he stated he understood to be proprietary rights to the imaging of checks. He considered this in light of Federal Reserve studies conducted after the September 11, 2001 terrorist attacks as a result of which airplanes were grounded and approximately five days of checks were unable to be processed in the United States, and the potential solution envisioned in the Check 21 legislation pending by the time Trimarco attempted to exercise options in late 2003. Based upon all of the above, Mr. Randisi described what he believed Trimarco could expect from these stock options; i.e., the type of cash flow that could be generated based upon lawsuits against those entities that refused to sign licensing agreements with the patent owners.

Mr. Randisi made several analyses, looking to projections from late 2003; looking at the value by considering the dividends actually paid from 2008 (when they began) through the latest information before trial (2011). The Court permitted this testimony, despite its initial belief that the damages were to be measured solely from the date of the alleged breach in late 2003 because, as set forth in the Court's in limine determination, the Court wanted a full and fair record, had not been provided with the pleadings in this case which had proceeded for almost ten years before coming to the court, and because Plaintiff's counsel claimed he had also made a claim for specific performance.

Mr. Randisi's projection analysis considered the following: (1) the number of checks that would be processed based on 2003 numbers; (2) a potential licensing fee per check; (3) a risk factor applied to the product of the first two numbers on the basis that not all checks would be captured; and (4) the probable earnings before interest, taxes, depreciation and amortization (EBITDA) reduced for income taxes. From this, Mr, Randisi made an estimate from 2003 of the potential dividends that could be paid by the Defendant and then he made a separate calculation of the amount that DTC could be sold for in the future. These figures are set forth using a range of values in Plaintiff's 58. The witness provided two columns of numbers: column A starting with a projection of 40 billion checks per year and column B with 30 billion. These were projections he stated were based upon Federal Reserve figures as well as an indication that the numbers would be somewhat reduced in the future. He then further projected 1 ½ cents per check in column B and 2 cents per check in column A for DTC's Check 21 technology. These figures were allegedly based, in part, on his review of studies of the cost of processing checks and what would be saved if checks were then imaged under new technology. Mr. Randisi then calculated a range of corporate earnings based upon a 40% chance of the technology becoming a success in column B and a 50% chance in his column A. This produced a range of gross revenues from licensing fees of $182,739,726 to $406,088,281. To these two figures, Mr. Randisi applied EBIDTA margins of 45% and 55% based upon his consideration of the company's cost structure, to reach EBITDA of between $82,232,877 and $223,348,422. The witness applied prospective tax rates for a type C corporation to achieve an after tax cash flow projection for DTC of between $49,339,726 (column B) and $134,009,133 (column A). From these figures, Mr, Randisi then projected dividends payable to shareholders based upon 70% and 80% payout rations, reaching figures from a low of $34,537,808 to a high of $107,207 306. Taking Michael Trimarco's 5.5% interest in the corporation had he exercised his options, the witness valued his potential dividends at a low per year of $1,899,579 and a high of $5,159,352. From these figures, the witness calculated the total dividends that would have been payable to Trimarco for a [*28]five year period at the 70% rate up to seven years at the 80% rate to reach a total of potential dividends payable of a range from $9,497897 up to $29,482,009. It was the witness's belief that five to seven years was a proper range for the payout of dividends based upon his knowledge that the patent was good until somewhere around 2018 . It was Randisi's opinion that the 70% payout was more appropriate and that the range attributable to Michael Trimarco when measured from late 2003 should be from the $9,497,897 figure (based on a five year payout) to $13,297,056 (based on a seven year payout).

As an alternative, Mr. Randisi determined the value to the various DTC shareholders, which the witness termed the terminal value, resulting from a potential sale of DTC. The witness began with the two EBITDA figures as in his prior scenario of $82,739,726 and $223,348,554. He then multiplied these figures by what he termed risk rates of 7 and 9, termed the rates by which one takes the earnings stream and divides it into the cash flow of the company to determine value. When he began with the low annual EBITDA of $82,232,877 million and applied an EBITDA multiple of 7, he reached a number of $575,630,138; whereas his high of $223,348,554, when applied an EBITDA multiple of 9, resulted in a value of $2,010,136,990. The witness then discounted these figures by another 30% based upon the potential difficulty of accomplishing a sale of the business, to reach total values of between $402,941,097 to a high of $1,904,407,917. Based upon Trimarco's alleged entitlement to 5.5%, this would result in a net to him following this potential sale of DTC of a low of $22,161,760 to a high of $60,192,435.

Mr. Randisi stated that the reason he chose relatively high EBITDA margins was due to his understanding that companies that are heavy with intellectual property do not have a lot of overhead. He also stated that his EBITDA margins of 55% and 45% on Plaintiff's 58 did, in fact, assume that legal fees were to be paid out of gross income received.

Mr. Randisi made alternative calculations of the value of Trimarco's potential dividends based on two other scenarios, using what actually occurred long after the 2003 date on which Trimarco attempted unsuccessfully to exercise 100 options. In Plaintiff's 59, he calculated the dividends payable to Trimarco based upon the actual dividends paid by Defendant from 2008 through 2011. He then: (1) multiplied that number by the 5.5% claimed ownership; (2) calculated the average annual dividend paid for the four years from 2008 through 2011; (3) multiplied that figure to determine the potential future dividends payable to Trimarco over a seven year period; and (4) arrived at a total of past and future dividends payable to Trimarco of $20,039,250. On the same exhibit, the witness calculated a slightly higher figure of $24,427,026 based upon a payout of dividends at a higher rate than actually occurred based upon a potential that the major corporate expenses had already been paid. In Exhibit 60, the witness performed an analysis similar to that in his 2003 projections by showing a combination of dividends not paid to Trimarco and a terminal event based upon a potential sale of the company. He started with the actual dividends not paid to Plaintiff based upon those actually paid between 2008 and 2011. To that number, he calculated the EBITDA based upon actual data for 2008 through 2011; took the average of those figures, and multiplied them by EBITDA multiples of 9 and 11 to reach total company values of between $432.9 and $529.1 million, attributing a value to Trimarco on the potential sale of DTC of between $23.8 [*29]and $29.1 million. The witness stated that this exhibit, like Exhibit 59 was devised with the benefit of hindsight simply not available in 2003. Looking at Exhibits 58, 59 and 60, the witness opined that he saw Trimarco's potential damages at a range of between 15 and 20 million dollars.

Mr Randisi's final calculation looks at Mr. Trimarco's potential damages based upon a valuation of DTC as it stood in 2008. He presented a chart in Plaintiff's 61, based upon an actual EBITDA and projecting decreases and increases from that figure and applying the 7,9 and 11 alternative EBITDA multiples to his various projections. From this he reached DTC values of from a low of $350,000,000 to a high of $880,000,000 and an average of $585 million. Again, Trimarco's purported 5.5% share of these values resulted in potential damages ranging from $19.2 million to $48.4 million or an average of $32.2 million. Randisi opined that he dropped the EBITDA multiple of 7 when looking at the corporation's value as of 2008 because at that point he believed he had more data than in 2003 and did not need to go to the higher degree of risk.

Mickey Cavuoti

Mickey Cavuoti testified on behalf of the Plaintiff as an expert on the issue of the manner in which stock options can be valued. He stated that over a span of thirteen years, he worked at Susquehanna Investment Group, Bank of America, and Goldman Sachs, which he described as preeminent in the investment field. He set forth that in his work, he was often called upon to value options and opine on what were proper investments based upon these values. He testified that in valuing an option, the key is to determine the value of the entity's underlying asset. This is determined, as per the witness, by looking to the probability of certain events occurring and associating such with different outcomes. He averred that people who invest in companies are essentially betting on the expectancy of the future value of revenue streams. In the case of entities holding technology, he stated that the value of such would depend, for example, on the uniqueness of the technology, the need for its use, the number of probable users, the number of instances where such will need to be used, and the cost associated therewith.

Mr. Cavuoti was asked to value stock options in a corporation based upon a series of hypotheticals. The assumptions included the following: (1) the subject corporation owned a patent relevant and necessary to the scanning of ordinary checks and remotely transmitting a check's image to the Federal Reserve for clearing; (2) the corporation had no business operations other than the technology; (3) as a result of the grounding of airplanes following the September 11, 2001 attacks, paper checks were stranded on the ground on the way to the Federal Reserve for a number of days at a great cost; (4) the technology covered by the subject patents contained the answer to the technological flaw uncovered by the prior events; (5) a law firm had undertaken the work of prosecuting the patent claims of the corporation on a contingency basis; (6) such law firm had also committed to expend significant amounts of money to keep the company operating during prosecution of the patent process and litigations; (7) legislation pending before Congress and about to be voted upon would, if enacted, have a very positive effect on the viability of the corporation's technology and its use because it would then require the banking industry to come into compliance with the need to fix the flaw uncovered vis-a-vis paper checks. Based upon those assumptions, Mr. [*30]Cavuoti opined that those are extremely significant in valuing the probability that the underlying asset was a valuable one; but that he would then have to examine the approximate number of checks per year utilized in the US and the amount banks would be willing to pay for use of the patented technology.

The witness was then asked to assume that in 2003, there had been thirty billion checks processed in the US and that the banking industry would be willing to pay a minimum of one cent per check for the right to utilize the technology. The witness stated that even before the corporation had generated a single penny of revenue, the company could be expected to generate approximately three billion dollars over a ten year period. He then set forth that due to risks inherent in the process one could obtain the underlying asset's value. He stated that fifty percent was a very high risk in the world of investment. Based upon the one further assumption that the corporation had approximately 25 million shareholders, and utilizing what the witness believed to be a very conservative and very high fifty percent discount rate, Mr. Cavuoti valued the underlying corporate asset at $600 million. That number equates in the witness's words to twenty four dollars per share. With a strike price of 80 cents per share, the intrinsic value of each option would initially equate to $23.20. However, he then stated that given the time value of money and what he termed a "put" value of eighty cents, the actual value of the option in this case would be equal to the value of the underlying asset, i.e. $24.00. This translates, of course, into a value of $36,000,000 for 1,500,000 options from as early as 2003, when viewed from the facts assumed by the witness. This number, interestingly, is not far off from Randisi's average figure of $32.2 million when valuing the options with the benefit of hindsight in 2008.

John Kwon

John Kwon testified as an expert in the field of business valuation in companies and options on behalf of Data Treasury. After obtaining an MBA from NYU, he worked for several large accounting and investment firms including Coopers & Lybrand, Price Waterhouse Coopers, Standard & Poors, Duff & Phelps, and Deloitte & Touche. He acted in the valuation services departments of each of these entities. He stated that he is currently employed as the managing director in the valuation services practice of BDO, a large accounting and professional services firm. The witness stated that he provides financial reporting valuations, tax reporting valuations, M & A advisory related valuations and performs litigation and dispute resolution valuation work. His valuations assertedly cover an array of industries, including financial services, technology, telecommunications, industrial products related and services. He has provided valuation services to companies based upon the value of their intellectual property.

Mr. Kwon reviewed a number of documents in preparation for his testimony, including DTC's tax returns for 2002 and 2003; Mr. Trimarco's initial consulting agreement as well as the agreement converting the consulting to employment and a Defendant proposed but unsigned termination agreement, and various settlement agreements entered into between DTC and the banking industry. The witness stated that based upon his review of documents, as well as testimony in this case, he learned that in the 2002-2003 time frame, DTC was in dire financial straits, and, as part of an overall strategic plan, had brought in Michael Trimarco, to help raise some revenues. At [*31]that time, in late 2002, a Private Placement Memorandum was issued by DTC, which prominently mentioned Trimarco and his educational and financial experience background. Like the other witnesses, Mr. Kwon found that DTC was financially insolvent at that juncture.

Mr. Kwon took note that in the PPM the overall calculation of DTC was set at $40,000,000 and that there was an offering of shares which were priced at $1.56 per share. The PPM also indicates quite prominently, as per the witness, that DTC held patents in the area of check imaging and that the company was intending both to use this technology in its own operations and to assert those patents against the financial community. It went so far as to mention some actions that had already commenced at the time. Mr. Kwon also learned from this document that a law firm - Nix Patterson - which had just won a substantial monetary war chest as a result of a successful unrelated litigation, had been retained to pursue DTC's patent rights. He stated that the retention of Nix Patterson did not contain a commitment in terms of setting forth an amount of money that they would invest in this process.

Mr. Kwon set forth that the choice of a valuation date is significant as the value can change dramatically over time. Kwon was told to value Trimarco's stock options as of September 2, 2003 - the date on which he first attempted to exercise 100 of the same. He stated that once a date is chosen, the valuator can consider subsequent events but only if the same are either known or knowable. He reviewed on the record three different valuation methods utilized by appraisers. These included the income approach, the market approach, and the cost approach. He described the income approach as predicated on estimation of future cash flows. He rejected this approach because, he stated, DTC was in dire financial straits and generating negative income at the time, having been the subject of its auditor's "going concern" opinion. He described the cost approach as one that views the assets and liabilities that appear on a company's balance sheets and converts these to fair market value. He also rejected this approach because DTC was essentially insolvent and he wanted to see if their existed certain intangible assets that had value but did not appear at that time on company books.

The witness described three subsets of the market approach. These included the guideline public company method, the guideline mergers and acquisitions (M & A) method, and the precedent transaction method. In the guideline company method, the valuator looks at public company comparables traded in the public market to view their market activity, capitalization as well as market valuation of invested capital. In this vein, one can ascertain multiples of total invested capital ("TIC") to revenue and then apply TIC to earnings before interest and taxes (EBITDA). If the companies reviewed are sufficiently similar to the one at issue, the same multiples can assertedly be applied to the financial parameters of the subject entity. The witness set this method aside because he could not identify any appropriate companies close enough in size, breadth, product, or scope to provide a good indication of value. The guideline M & A method also involves ascertaining the same sort of multiples; however, it garners such from looking at actual transactions rather than at information available regarding publicly traded entities. The witness set forth that he was unable to utilize this methodology because he could not name a single transaction that was relevant. [*32]

The third subset market approach described by Kwon was called the precedent transaction method. In that approach, the valuator looks to transactions that actually occur within the company being valued, such as an offering of stock. The witness ultimately chose this as the proper approach, since actual transactions did in fact occur contemporaneously with the valuation date he was given. He stated that the PPM was issued in December 2002, seeking to raise $5,000,000, (Defendant's GG) and during the following months two transactions were consummated at the PPM price of $1.56. The aggregate shares sold were 32,500. According to Kwon, when a PPM is issued, it is typically based upon sound financial data and provides the basis upon which a potential investor invests. He noted that Trimarco was not only listed in the PPM, but was also the corporation's vice-president, chief operating officer and a member of the board of directors at this juncture.

According to the witness, the Defendant's inability to raise the $5 million at this point in 2003 was significant because it provides a good indication of the ceiling value for the stock of the company. He believed that this ceiling should be somewhat reduced based upon the fact that the offering was ultimately unsuccessful despite its discussion of the patent technology and the litigation plan and because the corporate balance sheet demonstrated a company basically insolvent at the time. Since the witness considered the $1.56 to be the value of share of company stock on a marketable basis and due to the financial straits and lack of success in reaching a goal, the witness discounted that figure due to a lack of marketability. Based upon what he termed studies by appraisal organizations, the witness chose a 30% discount which he set forth was in the mid range of studies. He supported this choice by an SEC study which stated that a discount of 33% should be applied to restricted stock and a second study recommending a discount of between the high twenty's and high thirties. He also stated that discounts of those magnitudes have been upheld in tax courts where individuals gift stock in closely held corporations and attempt to apply such discounts. Kwon also relied on the testimony of Professor David Henry who , as later described, set forth numerous difficulties in monetizing a patent. The witness stated that patent portfolios can be extremely volatile as there is often uncertainty concerning the future success. The company could either fail or become wildly successful, therefore, according to Kwon, there exists no ready market for IP assets. The discounting brought the witness's underlying stock price down to $1.09.

Based on these above described factors, the witness applied what he termed the Black-Scholes option pricing model. Based on his $1.09 underlying stock price, the witness valued a single option at ninety cents. The reduction from $1.09 to ninety cents took into consideration the following: (1) a nine-year risk-free rate from the valuation date; (2) the exercise price set by the various option agreements; (3) the time to maturity set forth in these agreements; and (4) the relatively high volatility based upon the uncertainty facing the corporation's goals.

The witness opined that it was inappropriate to utilize the various settlement agreements DTC entered into years after the valuation dates, because he felt that such were both unknown and unknowable as of 2003. In order to counter the statements made by the other expert witnesses, who spoke about what actually occurred, Kwon set forth that a review of the settlement documents demonstrates that the financial institutions only conceded the applicability of the patents to a relatively small percentage of the checks being processed by the banks. [*33]

Mr. Kwon spoke at some length regarding Mr. Randisi's testimony. He criticized Randisi's analysis based on many factors. These included, among other things, his claims that: (1) the analysis relies on information that existed only long after the valuation date; (2) the Randisi valuation is totally based on hypotheticals which do not reflect what a willing buyer and willing seller would exchange for a particular asset on the valuation date; (3) to the extent that Randisi relies on future information, he does not take into account the large reduction in use of checks in the period between 2006 and the more recent data, which demonstrates an increase in electronic payments, all of which can be attributed, as per the Federal Reserve, to technological and financial innovations; (4) the assumption of a payment by the financial industry of between one and one half cents and two cents per check is highly overstated based upon actual events; (5) Randisi gives no explanation or basis for his 40% and 50% probability of success figures nor for his 45% and 55 % EBITDA margins; (7) there is no basis set forth for the use by Randisi underlying the 7, 9, and 11 multiples, especially since in September 2003, DTC was clearly on financial life support and these multiples assume that the company would garner cash flows far beyond expiration of the patent; and (8) the 7, 9, and 11 multiples utilized by Randisi also ignore the possibility of negative legislation that was in fact proposed in the Patent Reform Act of 2007. Finally, Kwon opined that it was simply not credible to set forth proposed revenues of between 402 million and 1.4 billion dollars for a corporation which could not even raise 5 million dollars at the period of the valuation date.

The witness's final statement on this issue concerns the manner in which regulatory agencies, such as the IRS and SEC view fair value measurements when appraisers argue such before them. He stated that if data exists to apply the precedent transaction methodology of valuation and such is not used, these agencies tend to balk. In this case, stock was actually sold at a price between a willing buyer and seller within months of the valuation date.

David Henry

Professor David Henry testified as an expert in measuring the value of patents from the perspective of the administrative and litigation process required by law. After graduating from Baylor Law School, in 1985, he received his license to practice in the patent field in 1987 and has been admitted to practice in the federal courts of ten different states. He has practiced as a patent attorney in several different law firms, including Kenley, Boyland, & Coughlin; Jenkins & Gilchrist; K & L Gates; Patton Boggs; and Looper, Reed & McGraw, where he is currently the chair of the firm's intellectual property section. He has taught the subject in law school for twenty years. He described his area of specialization as including both obtaining patent protection and litigating patent claims. In his practice, Professor Henry has represented what he described as garage inventors to fortune 500 entities to universities in the patent process. He has authored numerous articles in his field.

Professor Henry stated that he reviewed Data Treasury records from the U.S. Patent & Trademark Office as well as articles by that agency in or around the 2003 time period. The witness described a patent as a legal monopoly, which acts as an exception to a free enterprise system granted in exchange for disclosure of an invention that is useful, novel and not obvious. Henry went on to set forth an extremely lengthy and complicated process which an inventor, who believes he, she or [*34]it has developed a new device or process, must go through in order to benefit from an enforceable patent. He set forth that the patent application itself must describe: (1) what came before, as well as the problems society faces for lack of that which has been invented; (2) details of the device or process that the inventor seeks to own; and (3) the metes and bounds of patent protection the applicant is seeking. As part of the process, the applicant must disclose what is known as "prior art", which the witness described as that which was publicly known before the inventor created the subject of the application. According to Professor Henry, the applicant must provide "enabling disclosure" which incorporates three requirements: (1) a detailed description of the manner in which the item works; (2) the "best mode", meaning the best version of what is being proposed; and (3) a written description demonstrating that the applicant fully understands the scope of the invention.

Professor Henry testified that it often takes the U.S. Patent and Trademark Office approximately 26 months to begin its examination of this initial application; and, in his experience, can take four to five years before obtaining substantive action. Once the application is filed, it is reviewed by various technology units, after which it is placed literally on a queue before it gets reviewed by a patent examiner. The patent examiner then reviews the application and does his/her own search for "prior art". The patent examiner also focuses on what are termed issues of novelty and obviousness; the failure of any of these tests assertedly resulting in the rejection of the application. Based upon the consideration of all these factors, the examiner gives a first statement of position, which is often negative, allowing the applicant several months to respond. According to Professor Henry, there is almost always a back and forth exchange, often covering the issues of prior art and/or best mode, and sometimes requiring the amendment of the application. If an application is rejected, there is an opportunity, rarely taken, for an interview, and there is an appeals process before the Board of Patent Appeals. The witness stated that the interview can take up to five months . He also stated that the Appeals Board does overturn the examiner's rejection in about fifty percent of the cases. Once a patent examiner has concluded that the application should be granted, a notice of allowability and notice of allowance are issued; the applicant has three months to pay a fee; and approximately three to six months thereafter, the patent actually issues. This stage, according to the witness, cannot possibly occur within a twelve month period.

In addition to the above, Professor Henry stated that often a third-party will bring what it claims to be "prior art" to the attention of the Patent Office and a re-examination process will proceed; he set forth that in 70% of these re-examinations, the patent claims were found to be defective. Then, in the litigation process itself, where the patent holder seeks to enforce its claim, approximately 40% of the claims were declared invalid at the summary judgment stage and 30% found invalid after trial in the 2002 time frame. The witness described a special proceeding that goes forward in a patent litigation, known as a "Markman Hearing" which is held by the court to determine "claim construction". This Federal District Court determination is reviewable de novo by the Court of Appeals, despite the intervention of a successful trial.

It was the witness's conclusion that there are simply too many variables to be able to predict the odds of a potential patent being upheld and actually enforceable. In the case of Data Treasury's patents, in 2003, according to the witness, there had been no re-examination of the patents involved [*35]in this case and neither had been tested by litigation.

The claims that went to trial before this Court are the two causes of action raised in Plaintiff's Complaint alleging breach of contract and seeking a declaratory judgment with regard to the December 31, 2002 option agreement. Defendant DTC raised the affirmative defenses of nonperformance and breach of loyalty and fiduciary duty. Defendant's counterclaim sounding essentially in breach of fiduciary duty was also tried on the theory that such caused the $15 million ultimate payout to Dr. Knutsen.

New York courts will enforce a clear and unambiguous choice-of-law clause contained in a contract in order to give effect to the parties' intent. Welsbach Electric Corp. v MasTec N. Am. Inc., 7 NY3d 629, 825 NYS 2d 692, 859 NE 2d 498 (2006); Frankel v Citicorp Insurance Services Inc., 80 AD3d 280, 913 NYS 2d 254 (2d Dep't 2010). However, because common law provides that matters of procedure are governed by the law of the forum, New York courts will apply contractual choice of law clauses only to substantive issues. Frankel v Citicorp Insurance Services, Inc., supra; see, Sears, Roebuck & Co. v Enco Assoc., 43 NY2d 389, 401 NYS 2d 767, 372 NE 555 (1977). In addition, where there exists no conflict between the substantive laws set forth in the parties' contract and the law of the forum jurisdiction, the necessity for a choice of law analysis is avoided.

In the case at bar, the parties have signed three sets of agreements, which give rise to the issues in this case: (1) the consulting agreement, effective April 3, 2002, in which Michael Trimarco agreed to provide certain services to Data Treasury and which afforded Trimarco a grant of non dilutable stock warrants (Pl. 4); (2) an amendment to the consulting agreement, dated December 31, 2002, under which the consultant agreed to forego his rights to receive equity securities with anti dilution rights (Pl. 6); and (3) an option agreement, signed also on December 31, 2002, containing a grant to Trimarco of 1,500,000 stock options exercisable over a ten year period. The first two agreements are made expressly subject to the laws of the State of New York and the third agreement is made expressly subject to the laws of the State of Delaware. It is this Court's finding that both laws apply to the substantive issues reached in this Decision and that there exists no conflict in the principles of law relevant in this matter.

Under Delaware law, the implied covenant of good faith and fair dealing attaches to every contract , Dunlap v StateFarm fire and Casualty Co, Inc., 878 A.2d 434, 442 (Del. 2005). In Dunlap, supra, the Delaware Supreme Court found that an insurer's refusal to cooperate with its insured and to agree to the injured passenger's settlement with a bus owner for less that its liability coverage limits constituted a breach of the implied covenant of good faith and fair dealing. As set forth by the Delaware Supreme Court:

"Stated in its most general terms, the implied covenant requires a party in a contractual relationship to refrain from arbitrary or unreasonable conduct which has the effect of preventing the other party to the contract from receiving the fruits' of the bargain. Thus, parties are liable for breaching the covenant when their conduct frustrates the overarching purpose' of the contract by taking advantage of their position to control implementation of the agreement's terms. This Court has recognized the occasional necessity' of implying contract terms to ensure the parties' reasonable expectations' are fulfilled."

Id. at 442-443 (internal citations omitted).

New York law does not differ. Thus, every contract contains within its ambit a covenant of good faith and fair dealing. 511 West 232nd Owners Corp v Jennifer Realty Co., 98 NY2d 144, 746 NYS 2d 131, 773 NE 2d 496 (2002); Dalton v Educational Testing Service, 87 NY2d 384, 639 NYS 2d 977, 663 NE 2d 289 (1995); Rowe v Great Atlantic & Pacific Tea Co., Inc., 46 NY2d 62, 412 NYS 2d 827, 385 NE 2d 566 (1978); Lonner v Simon Property Group, Inc., 57 AD3d 100, 866 NYS 2d 239 (2d Dep't 2008). The covenant is implied and embraces within its meaning a pledge that neither party shall act in any manner to injure the rights of the other to receive the fruits of the bargain, 511 West 232nd Owners Corp. v Jennifer Realty Corp., supra; Sorenson v Bridge Capital Corp., 52 AD3d 265, 861 NYS 2d 280 (1st Dep't 2008). The New York Court of Appeals found that the board of directors of a cooperative as well as a number of its lessees stated a claim for breach of contract against the cooperative sponsor based upon his failure to dispose of unsold shares within a reasonable period of time despite the fact that such was not contained within the precise terms of the parties' agreement, 511 West 232nd Owners Corp. at 151.Thus, the covenant is breached when a contracting party acts in any manner to deprive the other of its benefits even where such behavior is not expressly forbidden or mentioned within the four corners of the written instrument. P.T. & L. Contracting Corporation v Trataros Construction Inc., 29 AD3d 763, 816 NYS 2d 508 (2d Dep't 2006). While the covenant must not be construed to nullify the express terms of an agreement, or to create independent contractual rights, Phoenix Capital Investments, LLC v Ellington Management Group, LLC, 51 AD3d 549, 859 NYS 2d 46 (1st [*37]Dep't 2002); it must be understood to encompass any promises that a reasonable person in the position of the promisee would be justified in understanding were included, 511 West 232nd Owners Corp v Jennifer Realty Co., supra.

Somewhat closely related to the covenant of good faith implied in the contractual arena is the duty of loyalty that an officer or director of a corporation owes to the entity. As stated above, this doctrine is raised as a defense to the Plaintiff's breach of contract claims. Under Delaware law,

"[t]he corporate opportunity doctrine . . . holds that a corporate officer or director may not take a business opportunity for his own if: (1) the corporation is financially able to exploit the opportunity; (2) the opportunity is within the corporation's line of business; (3) the corporation has an interest or expectancy in the opportunity; and (4) by taking the opportunity for his own, the corporate fiduciary will thereby be placed in a position inimicable to his duties to the corporation."

Broz and RFB Cellular , Inc. v Cellular Info.Sys. Inc, 673 A.2d 148, 154-155 (Del. 1996).

"Delaware law dictates that the scope of recovery for the breach of the duty of loyalty is not to be determined narrowly". Thorpe by Castleman v CERBCO. Inc, 676 A.2d 436, 445(Del. 1996). A breach of the duty of loyalty permits broad, discretionary, and equitable remedies. Gotham Partners L.P.v Hallwood Realty Partners, L.P, 817 A.2d 160, 175 (Del. 2002).

Similarly, under New York law, the unqualified duty of loyalty requires that these officers and directors adhere to fiduciary standards of conduct and exercise their responsibilities in good faith when undertaking any corporate action. Alpert v 28 Williams Street Corp, 63 NY2d 557, 483 NYS 2d 667, 473 NE 2d 19 (1984 ); Collins V Telcoa International Corp., 283 AD2d 128, 726 NYS 2d 679 (2d Dep't 2001). Such duty arises because such parties stand in a fiduciary relationship to the corporate body and owe their undivided and unqualified loyalty thereto. Yu Han Young v Chiu, 49 AD3d 535, 853 NYS 2d 575 (2d Dep't 2008); Adirondack Capital Management Inc v Ruberti, Girvin and Ferlazzo, PC, 43 AD3d 1211, 842 NYS 2d 603 (3d Dep't 2007); Global Minerals and Metals Corp v Holme, 35 AD3d 93, 824 NYS 2d 210 (1st Dep't 2006 ). This duty also applies to persons in positions of management to the entities they serve. Yuko Ito v Suzuki, 57 AD3d 205, 869 NYS 2d 298 (1st Dep't 2008). In fulfilling such duties, a corporate officer, director or manager may not assume or engage in the promotion of personal interests which are incompatible with the superior interests of the corporation. Yu Han Young v Chiu, supra; Foley v D'Agostino, 21 AD2d 60, 248 NYS 2d 121 (1st Dep't 1964). Specifically, a corporate officer or [*38]director may not, without consent, divert and exploit for personal benefit any opportunity that should be deemed an asset of the corporation. In Yu Han Young, supra, the Second Department found that the secret establishment of a competing entity by a corporate officer in order to acquire property in which the corporation had a tangible expectancy constituted a breach of her fiduciary duty to the corporation. See also, Commodities Research Unit (Holdings) Ltd v Chemical Week Associates, 174 AD2d 476, 571 NYS 2d 253 (1st Dep't 1991).

These principles apply to employees, as well as agents of corporate entities, in that they are both prohibited from acting in any manner inconsistent with their agency or trust and are, therefore, bound in all instances, to exercise the utmost good faith and loyalty in the performance of their tasks. American Map Corporation v Stone, 264 AD2d 492, 694 NYS 2d 704 (2d Dep't 1999). While a violation of such can result in a requirement of accounting to the principal for secret profits made in the exercise of such actions, it also results in the forfeiture of the right to compensation for services rendered by the disloyal agent or employee. Accordingly, in American Map Corporation, supra, the Second Department found that an employee who sold his employer's products to fictional buyers forfeited his right to compensation for services rendered. Id. at 493.

An employee also owes a fiduciary duty to its employer not to seek to divert the corporation's opportunities to himself. Lamdin v Broadway Surface Advertising Corporation, 272 NY 133, 5 NE 2d 66 (1936); Luskin v Seoane, 226 AD2d 1144, 641 NYS 2d 478 (4th Dept 1996); see Henderson v Rep Tech, Inc., 162 AD2d 1028, 557 NYS 2d 224 (4th Dep't 1990); TPL Associates v Helmsley-Spear, Inc., 146 AD2d 468, 536 NYS 2d 754 (1st Dep't 1989 ). Where this occurs, the employer has the right to seek compensation paid to the employee during the period of the disloyalty and breach. Id.

Under Delaware law, the elements of a breach of contract claim are (1) the existence of the contract, whether express or implied, (2) the breach of an obligation imposed by the contract, and (3) resultant damage to the plaintiff . VLIW Tech.,LLC v Hewlett Packard Co., 840 A.2d 606, 612 (Del. 2003). To recover damages, plaintiff must demonstrate his compliance with all the provisions of the contract. Preferred Investment Services, Inc. v T & H Bail Bonds Inc., 2013 WL 3934992 (Del. Ch. July 24, 2013). As set forth by the Chancery Court in Preferred Investment Services, Inc., supra, where the failure of a party to perform under a contract goes to the substance of the agreement, the contract will be considered terminated.

Similarly, under New York law, where a party claims that the other has breached the parties' contract, the claimant must demonstrate that: (1) the parties entered into an agreement; (2) that the claimant performed his obligations thereunder; (3) that the obligated party failed to perform its duties; and (4) that damages resulted directly from the obligant's breach. Furia v Furia, 116 AD2d 684, 498 NYS 2d 12 (2d Dep't 1986). When interpreting a contract entered into by sophisticated parties in a business relationship, the tests to be applied in interpreting the contract's terms are the reasonable expectation and purpose of the ordinary business person or entity in the factual context [*39]in which terms of art and understanding are used, often keyed to the level of business sophistication and acumen of the particular parties. BP Air Conditioning Corp v One Beacon Ins. Co., 8 NY3d 708, 840 NYS 2d 302, 871 NE 2d 1128 (2007). As stated by the Court of Appeals in upholding an insurer's duty to defend an additional insured in the construction field, the general rational expectations of a business entity will be considered when construing an ordinary business agreement, Id.; see also, Uribe v Merchants Bank of New York, 91 NY2d 336, 670 NYS 2d 393, 693 NE 2d 740 (1998); Baughman v Merchants Mutual Ins Co., 87 NY2d 589, 640 NYS 2d 857, 663 NE 2d 898 (1996); Michaels v Buffalo, 85 NY2d 754, 628 NYS 2d 253, 651 NE 2d 1272 (1995).

Infidelity is a defense that will bar an employee seeking to enforce the terms of his contract and from recovering compensation, whether in the form of commissions or salary or benefits and, significantly, regardless of whether the services rendered were beneficial to the principal and regardless of whether the principal suffered damage as a result of the breach of fidelity. Feiger v Iral Jewelry Ltd;, 41 NY2d 928, 394 NYS 2d 626, 363 NE 2d 350 (1977); see, G.K. Alan Assoc., Inc v Lazzari, 44 AD3d 95, 840 NYS 2d 378, aff'd, 10 NY3d 941, 862 NYS 2d 855, 893 NE 2d 133 (2007).

Where a party makes a claim for breach of fiduciary duty, as opposed to the description of such as a defense discussed, supra, the party must demonstrate the existence of a fiduciary relationship; misconduct by the other party; and damages that are directly caused by the defendant's misconduct. Kurtzman v Bergstol, 40 AD3d 588, 835 NYS 2d 644 (2d Dep't 2007). The claimant must demonstrate its damages, which include the amount of loss sustained, including lost opportunities for profit by reason of the other party's conduct. Duane Jones Company, Inc v Burke, 306 NY 172, 117 NE 2d 237 (1954). While a court has leeway in calculating damages attributable to the other party's misconduct, the proponent of such a claim must, at a minimum, establish that the offending party's actions were a substantial factor in causing an identifiable loss. Northbay Const. Co., Inc v Bauco Const. Corp., 38 AD3d 737, 832 NYS 2d 280 (2d Dep't 2007).

While he attended the business school at Harvard University, Michael Trimarco stated that he studied the principles inherent in organizational behavior and business ethics. According to all of the DTC witnesses, whose testimony in this regard the Court found credible, the Plaintiff's disloyal behavior toward Data Treasury began early in his consultancy. It involved, according to Keith DeLucia and Dr. Knutsen, Trimarco's first discussions with SAIC in the Summer of 2002, concerning investments into DTC, which were never consummated and continued through late 2002, culminating in the meeting with Congressman Israel. These encounters were described consistently in detail by DeLucia, Lane, Ballard, and Dr. Knutsen. Clearly, Kenneth Bayne, who this Court found credible and who had a good relationship with both Defendant and Plaintiff's family, when he described the local meeting, which Trimarco denied ever occurred, also confirmed the same occurrences. Like the prior meeting with SAIC, that encounter was designed to help DTC, through a teaming agreement with Skylink, to obtain lucrative business opportunities regarding use of biometrics at a local airport. All of the witnesses who attended such encounter described Mr. [*40]Trimarco as concentrating on his family's business rather than on Data Treasury and frustrating any efforts by the Defendant to pursue this avenue of opportunity. Kenneth Bayne clearly remembered this meeting because he recalled being taken to task by the Congressman specifically for having failed to instruct him that the business of Skylink rather than that of Data Treasury was to be the subject of the meeting. The same DTC witnesses confirmed that while Trimarco was brought into the corporation, at least in part, to raise revenues for DSG's check processing business, he merely told DeLucia that the business was insolvent and that he and/or his family would take it over. When a meeting was scheduled by DeLucia in Florida to discuss this with Dr. Knutsen, a major investor in DTC, Michael Trimarco simply did not appear.

Most significant of all are the actions describing Michael Trimarco's activities concerning Infinity Payment Systems, Inc. There was great controversy at the trial as to whether this entity was or was not a subsidiary of Data Treasury. The Court was confronted with the testimony of Trimarco, who insisted that they were totally separate entities. Eugene Beigelman stated that while he was aware that IPS would provide an opportunity for the DTC people to generate revenue during the patent litigation process, he was never given any information that IPS was actually owned by Data Treasury. Mark Holzwanger testified that DeLucia never stated that IPS was a subsidiary of DTC, although he acknowledged that he believed that DTC was to receive a small percentage of the proposed merged entity in exchange for technology and he also stated that the personnel of DTC and IPS/Empower Biz were the same. On the other hand, DeLucia insisted that DTC owned IPS and that as original owner of the same, he arranged for DTC to subscribe to the only shares of stock IPS ever issued (Defendant's ET). Claudio Ballard signed the 1099 forms in 2002 and 2003, which set forth the payments made by DSG (DTC's admitted wholly owned subsidiary) to Brian Blanchard, who described himself as an employee of IPS. Sandy Fliderman, who stated that he formed IPS and maintained the corporate books, testified that IPS stock was issued to DTC and set forth that IPS articles of incorporation list IPS's address as that maintained by DTC. Fliderman also stated that he billed DTC for the technology services that he provided to IPS. Wayne Shelton, the DTC accountant for its entire existence, testified that he kept the IPS general ledger and that he understood that IPS was a wholly owned subsidiary of DTC. Shelton did not prepare the IPS tax returns for 2002 and 2003; however, the corporation does not appear to have earned any income, as per all witnesses. Shepard Lane, DTC's in-house general counsel, testified that IPS was a wholly owned subsidiary of DTC. Brian Blanchard testified at trial that IPS and DTC were separate corporations as Trimarco stated. His deposition testimony in 2006 was completely to the contrary; and, when asked to explain the disparity, he responded, at least in part, that he lied as he was offered a "bribe" in the form of a new hiring by DTC.

While the testimony on this significant issue was contradictory, the most significant piece of evidence came from the Plaintiff himself. On March 26, 2003, while DeLucia and Trimarco were having serious disagreements about the manner in which IPS and DSG were being handled, Trimarco wrote an e-mail to DeLucia (Defendant's DI). Trimarco instructs DeLucia that a Data Treasury board meeting must occur immediately. Among the topics to be discussed before the DTC board are a "full accounting disclosure on the consolidation of all entities: DTC, DSG, EBI, IPS". Trimarco also insists that the DTC board be presented with his plan to take over operating and equity control (with [*41]clawback provision) of DSG and a statement to the DTC board that "I take over operating and equity control (with clawback provision) of the CC [credit card] business". Thus, Trimarco's memo refers to the DTC board both the issues of accounting disclosure concerning Infinity Payment Systems and his desire to capture and take over that very entity, which is the one operating the credit card business. This memorandum was written before Trimarco was terminated or quit his positions with Data Treasury. Michael Trimarco had a graduate degree in business from Harvard University. There is no conceivable reason why he would include in an e-mail a request to notify the Data Treasury Board that they were to order a full accounting disclosure of IPS if that entity were separate and apart from Data Treasury. Thus, whatever other witnesses believed or were told, the COO and executive vice president of DTC - Michael Trimarco- understood that Infinity Payment Systems was part and parcel of the Data Treasury corporate entity.

Mr. Trimarco's activities in both late 2002 and continuing through March and April of 2003 regarding Infinity Payment Systems were both a violation of the covenant of good faith and fair dealing embedded by implication in all his contracts with DTC and a breach of his fiduciary duty to that entity as an employee, chief operating officer, an executive vice president and a member of the board of directors. The Court found credible the testimony of DeLucia that in 2002, Trimarco unwound IPS's exclusive arrangement with Exadigm. In 2003, not only did he himself secret information concerning his plans from the entity and its CEO - Keith DeLucia - but he coached one of the IPS employees to lie to the entity concerning his plans in order to divert attention from his intent to remove that business from DTC, form a new business, and take the same for himself and his new proposed partner. The e-mails from Trimarco to Blanchard during that period (Defendant's AC) describe Trimarco's plans in detail.

While the agreement giving Mr. Trimarco his 1,500,000 stock options was not made dependent on his continuing employment, it contains within its ambit, under the case law cited above, an implied promise not to act in a disloyal manner to DTC nor to attempt to transfer its business opportunities to himself or to a new entity he creates. As both Delaware and New York law require, it must be read in conjunction with his consulting agreement, which was in effect until late 2002 and which also set forth his duties and contained the same implied covenants. The Court agrees with Plaintiff's argument that he could have departed from employment with DTC without losing his stock option benefits. Indeed, he could have brought to the attention of DTC's board of directors the various concerns he raised in his e-mail to DeLucia. Even if he failed in his attempts to raise revenues for DTC, he would not have lost his stock options under that scenario. However, that was not the path Mr. Trimarco chose. Infidelity is a bar to a claim for enforcement of the terms of a contract as stated above. The concept clearly applies in this case, where evidence of such breach of loyalty began at the outset of the Plaintiff's relationship with the Defendant and continued through his departure.

Counsel for both parties cite the case of Phansalker v Anderson Weinroth & Co, 344 F 3d 184 (2d Cir. 2003), as supporting their legal arguments in this case. Plaintiff argues that it stands for the proposition that even a disloyal employee does not lose his past earned compensation; whereas Defendant argues that it holds that all such compensation is forfeited from the time of [*42]disloyalty. The Court agrees with Defendant's counsel that the Second Circuit found that although the New York Court of Appeals had not yet opined on the issue, the lower appellate courts have held that a disloyal employee's compensation is to be forfeited if it is provided during the period of disloyalty. Id. at 205. Here, the Plaintiff is not entitled to exercise any of the options as his disloyalty extended throughout his relationship with the Defendant.

While Defendant raises the issue of the improper manner of Plaintiff's attempted exercise 100 stock options, which this Court agrees failed to comply with the specific terms of the parties' option agreement, the Court has found that such agreement was already unenforceable at the time of the attempted exercise as Plaintiff's behavior resulted in a bar to enforcement.

Data Treasury's counterclaim requires a direct connection between the asserted disloyalty, which it has demonstrated, of the Plaintiff, and its alleged damages in the form of several amendments to an agreement with its lender/investor - Dr. Knutsen. The testimony in this case demonstrates that the IPS, CPIP and DSG check imaging concepts had been tried by different entities before and had failed. Vitallink, by all accounts, had been active in pursuing the concept and had not succeeded. Holzwanger testified that he departed from the proposed merger based upon the failure of DeLucia to provide the information he believed necessary to proceed. Blanchard set forth that he was frustrated and lost sales personnel as a result of DeLucia's constant changing of processors. Most significantly, Dr. Knutsen himself, a loyal supporter of Data Treasury, testified that there had been many attempts by businesses during the same period that DSG was attempting to raise revenues, that simply could not get off the ground. While Michael Trimarco could have done more to help DSG and IPS as part of Data Treasury, and indeed attempted to divert these corporate opportunities, there is an insufficient connection set forth in this trial to demonstrate that his actions, although disloyal, were a substantial factor in causing DTC to amend Dr. Knutsen's agreements with that entity. Dr. Knutsen had already invested and loaned substantial funds to DTC both before and at the very outset of Trimarco's involvement with these entities; it appears to the Court that DeLucia himself did not perform well in his role concerning these subsidiaries; and, in any case, the evidence of these sorts of businesses at this time period demonstrates that many of them failed to raise revenues. The Court notes that the difference between DeLucia's and Trimarco's behavior lies in the manner in which they reacted to their frustration with these "non cash" entities. Trimarco became angry and secretly attempted to procure the business for himself; DeLucia went to an investor and obtained funds to help Data Treasury through its rough years. However, the facts bear out that many factors contributed to the failure of these businesses and they cannot be directly attributed to the acts of the Plaintiff.

For all the reasons set forth, the Court finds that Plaintiff failed to perform under the December 31, 2002 and the April 2002 contracts with DTC, took actions that were disloyal to the entity for this entire period, and, therefore, cannot sustain his claim for breach of the option agreement. On the counterclaim, Defendant has failed to demonstrate that the Plaintiff's breach of his duty of loyalty was a substantial factor in the amendments of the loan agreements between that entity and Dr. Knutsen. Therefore, the complaint and the counterclaim are dismissed without costs [*43]to either party.

While the expert testimony regarding Plaintiff's alleged damages was extensive, as described in detail, supra, the Court, having rejected Plaintiff's claim on the issue of liability, is constrained to refrain from opining on the testimony concerning damages.

This constitutes the DECISION and ORDER of the Court. Submit Judgment in accordance herewith.

Dated: October 30, 2013 Riverhead, New York