Exhibit 10.4
E
MPLOYMENT
A
GREEMENT
This Employment Agreement (“
Agreement ”) is made and entered effective the
1 st
day of January, 2007, by and between
Smart Document Solutions, LLC (the “ Company ”)
and Peter A. Schmitt ( “Employee ”).
R E C I T A L S
WHEREAS, the Company desires to
employ Employee and to have the benefit of his skills and services,
and Employee desires to accept employment with the Company, on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of
the mutual promises, terms, covenants, and conditions set forth
herein, and the performance of each, the parties hereto, intending
to be legally bound, agree as follows:
AGREEMENTS
1. Term .
The initial term of this Agreement
shall begin on January 1, 2007 (the “ Effective
Date ”), and continue through January 1, 2009 (the
“ Initial Term ”). The Agreement shall be
renewable for successive one-year terms thereafter at the
discretion of the Company (each, as applicable, a “
Renewal Term ”). In the event the Company chooses not
to renew this Agreement at the conclusion of the Initial Term, the
Company shall give Employee sixty (60) days advance written
notice of such intent. Failing such notice, this Agreement shall
automatically renew for an additional one-year period and shall
thereafter renew annually on January 1 subject to the
Company’s right to provide sixty (60) days advance
written notice of its intention not to renew the Agreement (also a
“Renewal Term”; the Initial Term and all Renewal
Term(s) collectively constituting the “ Term
”).
2. Position and Duties
. The Company hereby
employs Employee as the Chief Financial Officer of the Company.
Employee shall have such responsibilities, duties, and authorities
as are assigned to him by the Company’s Chief Executive
Officer; provided that all such services and functions shall be
reasonably consistent with the position of Chief Financial Officer,
and within Employee’s area of expertise. Employee shall
fulfill his duties and responsibilities in a reasonable and
appropriate manner and in compliance with the Company’s
published policies and practices and the laws and regulations that
apply to the Company’s operation and administration. Employee
shall devote his full business time and attention to the business
and affairs of the Company and shall not be engaged in or employed
by any other business enterprise (other than those Employee was
involved in as of the Effective Date and which have been disclosed
to the Company’s Chief Executive Officer) without the written
approval of the Company’s Chief Executive Officer.
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3. Compensation
. For all services rendered by
Employee, the Company shall compensate Employee as
follows:
(a) Base Salary. As of the Effective Date,
the gross annual salary payable to Employee shall be not less than
Two Hundred Fifty Thousand Dollars ($250,000) per year (the “
Base Salary ”) payable on a regular basis in
accordance with the Company’s standard payroll procedures,
but not less than monthly. For the fiscal year commencing
October 1, 2007 and following each subsequent fiscal year
during the Term, the Base Salary shall be subject to annual review
by the Company’s Board of Directors (the “ Board
”) (or the appropriate committee thereof).
(b) Perquisites and Benefits. Employee shall
be entitled to the same perquisites and benefits as are made
available to other senior executive employees of the Company, as
well as such other perquisites or benefits as may be specified from
time to time by the Board, including not less than four
(4) paid weeks of vacation per year. Such benefits shall
include, at a minimum and without limitation, welfare benefit plans
and programs (including medical, dental, disability, life insurance
and other welfare benefits that may be offered by the Company from
time to time), participation in a retirement savings plan and
participation in any other incentive or deferred compensation
programs that may be available.
(c) Annual Bonus. Employee shall be eligible
for an annual bonus of fifty percent (50%) of the then current
Base Salary as determined by the Board based upon Company financial
and other goals to be proposed annually by Employee and approved by
the Board.
(d) Options. The Company acknowledges that
Employee is the holder of Options (as defined in the Option Plan)
to purchase an aggregate of 150,263 Units (as defined in the Option
Plan) pursuant to (i) the Option Grant and Agreement,
effective October 11, 2002, granting Employee an Option to
purchase 105,263 Units (the “ 2002 Option Agreement
”) and (ii) the Option Grant and Agreement, effective
November 15, 2005, granting Employee an Option to purchase
45,000 Units (the “ 2005 Option Agreement ” and,
together with the 2002 Option Agreement, the “ Option
Agreements ”). For purposes of this Agreement, the
“ Option Plan ” means the Smart Document
Solutions, LLC 2002 Option Plan, effective October 11,
2002.
(e) Expense Reimbursement. The Company shall
reimburse Employee for (or, at the Company’s option, pay) all
business travel and other out-of-pocket expenses reasonably
incurred by Employee in the performance of his services hereunder
during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any
request for reimbursement or payment, and in a format and manner
consistent with the Company’s expense reporting policies and
applicable federal and state tax recordkeeping
requirements.
4. Place of Performance
. Employee shall carry
out his duties and responsibilities hereunder principally in and
from the metropolitan area of Atlanta, Georgia, and shall not be
required to relocate his residence from the Atlanta, Georgia
metropolitan area without his consent.
5. Termination; Rights on
Termination . Employee’s employment may be terminated in
any one of the following ways, prior to the expiration of the
Term:
(a) Termination by the Company for Good
Cause. The Company may terminate the Term and Employee’s
employment for Good Cause (as defined below), effective as of the
date determined by the Company upon written notice provided to
Employee. “ Good
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Cause ” shall mean: (i) Employee’s
material breach of this Agreement if such breach has not been cured
within twenty (20) days after written notice by the Company to
Employee specifying the performance or nonperformance constituting
such breach; (ii) Employee’s negligence in the
performance or nonperformance of any of Employee’s material
duties or responsibilities after notice by the Company specifying
the performance or nonperformance by Employee that constitutes
negligence of Employee’s material duties or responsibilities
if such negligence has not been cured within twenty (20) days
after receipt by Employee of such notice;
(iii) Employee’s dishonesty, fraud, or misconduct which
has a material adverse effect on the interests of the Company; or
(iv) Employee’s conviction of a felony or conviction of
a misdemeanor involving theft, fraud, dishonesty, or act of moral
turpitude, or a plea of “guilty” to the same, subject
to confirmation by the Board at a duly called meeting. In the event
of termination of Employee’s employment for Good Cause, no
compensation or benefits shall be payable to Employee after the
date of termination, except as provided for in Paragraph
5(g).
(b) Termination for Employee’s Death or
Disability. In the event that Employee dies or becomes Disabled
(as defined below), no compensation or benefits shall be payable to
Employee or his estate after the date of termination, except as
provided for in Paragraph 5(g). “ Disabled ”
shall mean that Employee has a physical or mental disability that,
after the expiration of more than 26 weeks after its commencement,
is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to Employee or his legal
representatives (such agreement to acceptability not be withheld
unreasonably).
(c) Termination by the Company Without Good
Cause. At any time during the Term, the Company may, without
Good Cause and for any reason whatsoever, terminate the Term and
Employee’s employment, effective sixty (60) days after
written notice is provided to Employee. In the event
Employee’s employment is terminated by the Company without
Good Cause, or the Company elects not to renew this Agreement
pursuant to Paragraph 1, Employee shall be entitled to compensation
pursuant to Paragraph 5(g). If Employee’s employment is
terminated by the Company without Good Cause, or the Company elects
not to renew this Agreement pursuant to Paragraph 1, and Employee
signs a mutual general release of claims in substantially the form
attached as Exhibit A (the “ General Release
”) and Employee does not revoke such General Release, in
addition to payment of compensation pursuant to Paragraph 5(g),
Employee shall also be entitled to the following once the General
Release becomes effective pursuant to its terms: (i) salary
continuation in an amount equal to his then current annual Base
Salary (less applicable withholding for payroll and other taxes)
payable in twelve (12) equal consecutive monthly installments,
the first installment to be paid within ten (10) days of the
date the General Release becomes effective and the remaining
installments to be paid thereafter on the first business day of
each calendar month commencing in the month following the month he
receives his first salary continuation payment; (ii) if
Employee elects continued coverage under the Company’s group
health plan for himself and/or his qualified dependents pursuant to
the Consolidated Omnibus Budget Reconciliation Act (“
COBRA ”), the Company shall pay the portion of the
costs that are paid by the Company for active employees who are
senior executives for the continued group health plan coverage
until the earlier of: (a) the first anniversary of the
effective date of Employee’s employment termination, or
(b) such time as Employee is no longer eligible for COBRA
continuation coverage; and (iii) the Company shall maintain in
full force and effect, at the sole cost of the Company for the
continued benefit of the Employee and his dependents until the
first anniversary of the effective date of the Employee’s
employment termination, each of the Company sponsored life and
disability insurance benefits in effect as of the date of
termination or substantially comparable substitute
benefits.
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(d) Termination by Employee for Good Reason.
Employee may terminate Employee’s employment and the Term in
the event the Employment Agreement remains in effect for
“Good Reason,” effective ten (10) days after
written notice is provided to the Company. “ Good
Reason ” shall mean: (i) a material reduction in
Employee’s position, authority, duties or responsibilities;
(ii) a reduction in salary; (iii) failure by the Company
to maintain or substitute a benefit program, or any other action by
the Company intended to diminish the benefits to Employee of any
such program, in either case, if the resulting reduction in
benefits is material to Employee’s overall compensation;
(iv) failure to require a successor to assume, honor and
perform this agreement other than an insubstantial or inadvertent
failure promptly remedied by the Company after receipt of written
notice thereof from Employee; or (v) the Company’s
breach of Paragraph 4 of this Agreement. “Good Reason”
does not include death or disability. In the event Employee’s
employment is terminated for Good Reason, Employee shall be
entitled to compensation pursuant to Paragraph 5(g). If
Employee’s employment is terminated for Good Reason and
Employee signs the General Release and Employee does not revoke
such General Release, in addition to the payment of compensation in
Paragraph 5(g), Employee shall also be entitled to the following
once the General Release becomes effective pursuant to its terms:
(i) salary continuation in an amount equal to his then current
annual Base Salary (less applicable withholding for payroll and
other taxes) payable in twelve (12) equal consecutive monthly
installments, the first installment to be paid within ten
(10) days of the date the General Release becomes effective
and the remaining installments to be paid thereafter on the first
business day of each calendar month commencing in the month
following the month he receives his first salary continuation
payment; and (ii) if Employee elects continued coverage under
the Company’s group health plan for himself and/or his
qualified dependents pursuant to COBRA, the Company shall pay the
portion of the costs that are paid by the Company for active
employees who are senior executives for the continued group health
plan coverage until the earlier of: (a) the first anniversary
of the effective date of Employee’s employment termination,
or (b) such time as Employee is no longer eligible for COBRA
continuation coverage; and (iii) the Company shall maintain in
full force and effect, at the sole cost of the Company for the
continued benefit of the Employee and his dependents until the
first anniversary of the effective date of the Employee’s
employment termination, each of the Company sponsored life and
disability insurance benefits in effect as of the date of
termination or substantially comparable substitute
benefits.
(e) Specified Employee. Notwithstanding the
provisions of Paragraph 5(c) Paragraph 5(d), or Paragraph 5(g), if
Employee is a “specified employee” (as defined for
purposes of Code Section 409A), then all payments to which
Employee is entitled under Paragraph 5(c) or Paragraph 5(d) (which
are in addition to the payments to which Employee is entitled under
Paragraph 5(g)) shall be delayed to the minimum extent necessary to
avoid the imposition of additional tax under Code
Section 409A.
(f) Termination by Employee Without Good
Reason. Employee may resign or terminate his employment
hereunder for any reason or no reason, effective sixty
(60) days after written notice is provided to the Company. In
such event, no compensation or benefits shall be payable to
Employee after the date of termination, except as provided for in
Paragraph 5(g).
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(g) Payment Through Termination. Upon
termination of Employee’s employment for any reason provided
for in this Agreement, Employee shall be entitled to receive all
Base Salary earned but not paid, any bonus earned but not yet paid
for Employee’s performance during a completed, prior, period
(with the understanding that (i) a bonus will be deemed to
have been earned only if Employee has satisfied all performance
criteria for such bonus, other than continued employment beyond the
period during which such performance criteria are to be tested
unless such continued employment is specified as a performance
criteria and (ii) it is not the intent of this
Section 5(g) that Employee be entitled to any pro rata
bonus for any partial year or other bonus period worked) and all
benefits and reimbursements due through the effective date of
termination (including payment for accrued unused vacation). In
addition, the Company shall offer Employee and his qualified
dependents continued coverage under the Company’s group
health plan, as required by COBRA, at Employee’s cost, so
long as Employee or his dependents are eligible for COBRA coverage.
No other compensation or benefits will be due or payable to
Employee subsequent to termination, except as provided by this
Agreement or required by law or as may be expressly set forth in
any separate benefit plan.
(h) Termination of Obligations for Breach of
Employee’s Obligations. Subject to and without waiver of
the Company’s other rights and remedies, all obligations of
the Company and rights of the Employee to payments under this
Paragraph 5 shall cease as of the date that the Employee commits a
material breach of an obligation under Paragraphs 7 through 10
hereof.
(i) Provisions that Survive Termination of
Agreement. All rights and obligations of the Company and
Employee under this Agreement, except with respect to those that
are on their face continuing in nature, shall cease as of the
effective date of termination, and further provided that
(i) the Company’s obligations under Paragraph 5 shall
survive such termination in accordance with its terms, and
(ii) Employee’s and Company’s obligations under
Paragraphs 7 through 10, 16, and 17 shall survive such termination
in accordance with their terms.
(j) Right to Offset. In the event of any
termination of Employee’s employment under this Agreement for
any reason, the Company’s obligation to make any payments
hereunder shall be subject to offset for any loans or other
documented payment or reimbursement obligations that Employee has
to the Company, under the Company’s published policies and
practices. All payments and benefits payable under this Agreement
are gross payments subject to applicable withholdings.
(k) Limitation on Compensation; Gross Up Payment
for Golden Parachute Excise Taxes. All payments and
compensation paid or payable to or for the benefit of Employee
(whether paid or payable pursuant to the terms of this Agreement or
otherwise) that would be included in the calculation of a
“parachute payment” to Employee as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the “ Code ”) are referred to herein as
“ 280G Compensation .” The amount equal to three
times Employee’s “base amount” as defined in Code
Section 280G(b)(3), less one hundred dollars ($100.00), shall
be referred to herein as the “ 280G Limit
.”
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Regardless of the outcome of the
shareholder vote described below in this Paragraph 5(k), Employee
will be entitled to receive the amount of 280G Compensation that
does not exceed the 280G Limit. As soon as administratively
possible following the execution of an agreement pursuant to which
either (i) a change in the ownership or effective control of
the Company or (ii) a change in the ownership of a substantial
portion of the Company’s assets will occur, then, the Company
shall use its best efforts to obtain approval, in accordance with
the shareholder approval requirements of Code
Section 280G(b)(5), with respect to Employee’s right to
receive the amount of 280G Compensation, if any, that exceeds the
280G Limit. If such shareholder approval is not obtained, and
Employee would otherwise be the recipient of 280G Compensation,
Employee shall not be entitled to receive the amount of any such
280G Compensation that exceeds the 280G Limit.
If the foregoing shareholder
approval is obtained and payment of the 280G Compensation is made,
and following such payment it is determined by the Company’s
independent accountants or the Internal Revenue Service that the
shareholder approval requirements of Code Section 280G(b)(5)
were not satisfied or for any other reason an excise tax would be
assessed with respect to some or all of the 280G Compensation under
Code Section 4999, Employee agrees to repay to the Company, or
its successor, upon demand the amount of 280G Compensation which he
received that exceeds the 280G Limit but shall not be required to
repay more than $50,000. Employee’s obligation to repay 280G
Compensation up to $50,000 shall not apply unless the repayment
would reduce the amount of 280G Compensation below the 280G Limit.
If the repayment of the 280G Compensation as described herein would
not avoid the assessment of an excise tax under Code
Section 4999, Employee shall be entitled to retain the 280G
Compensation and receive a Gross Up Payment (as defined herein)
from the Company or its successor promptly after either:
(i) the Company’s independent accountants determine that
any payments and benefits called for under this Agreement together
with any other payments and benefits made available to Employee by
the Company and any other person will result in Employee’s
being subject to an excise tax under Code Section 4999, or
(ii) such an excise tax is assessed against Employee,
provided, however, that the Employee takes such action (in addition
to any repayment of 280G Compensation as provided herein) as the
Company reasonably requests under the circumstances to mitigate or
challenge such excise tax. If the Company reasonably requests that
Employee take action to mitigate or challenge, or to mitigate and
challenge any such excise tax (other than waiving Employee’s
right to any payments or benefits in excess of the payments or
benefits which Employee has expressly agreed to waive under this
Paragraph 5(k)), and Employee complies with such request, then the
Company shall provide Employee with such information and such
expert advice and assistance from the Company’s independent
accountants, lawyers and other advisors as Employee may reasonably
request and the Company shall pay for all expenses of such advisors
and the reasonable expenses of Employee incurred in effecting such
action.
The term “ Gross Up
Payment ” as used in this Agreement shall mean a payment
to or on behalf of Employee which shall be sufficient to pay
(i) 100% of any excise tax described in this Paragraph 5(k),
(ii) 100% of any federal, state and local income tax and
social security and other employment tax on the payment made to pay
such excise tax as well as any additional excise or
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other taxes on such payment, (iii) 100% of
any interest, penalties or other amounts assessed by the Internal
Revenue Service on Employee which are related to the timely payment
of such excise tax (unless such interest or penalties are
attributable to Employee’s willful misconduct or gross
negligence with respect to such timely payment), and
(iv) solely in the event of nonpayment of any of the amounts
set forth in clauses (
