EXHIBIT 10.7
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum, dated as of December 29, 2005, to the Employment
Agreement between Terra Insight Corporation ("TIC"), giving effect to the
reverse acquisition (the "Reverse Acquisition") between TIC and CompuPrint, Inc.
(the "Corporation" or "Employer"), and, the undersigned employee, dated as of
January 7, 2005 and amended on May 19, 2005, in contemplation of the
reincorporation and merger of the Corporation under the laws of the State of
Delaware, amends the Employment Agreement as follows:
1. Subject to the terms and conditions hereof, without foregoing any
rights Employee may otherwise be entitled to under the Employment
Agreement, Employee hereby agrees to remain in the employment of
Employer upon the contemplated reincorporation and merger, to which
Employee consents, and, to provide the additional consideration
stated in paragraph 4 below.
2. The Employment Agreement is hereby amended to include the following
Section:
5A. Certain Additional Payments by Employer. (a) Anything in this
Agreement to the contrary notwithstanding and except as set forth
below, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award,
benefit or distribution) by Employer to or for the benefit of
Employee (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this
Section 5) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") or any interest or penalties are incurred by Employee
with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred
to as the "Excise Tax"), then Employer shall pay to Employee an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, Employee retains an amount of the Gross-Up Payment equal to
the sum of (x) the Excise Tax imposed upon the Payments and (y) the
product of any deductions disallowed because of the inclusion of the
Gross-Up Payment in Employee's adjusted gross income and the highest
applicable marginal rate of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall
be deemed to (i) pay federal income taxes at the highest marginal
rates of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the
calendar year in which the Gross-Up Payment is to be made, net of
the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes and (iii) have
otherwise allowable deductions for federal income tax purposes at
least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross
income.
(b) Income Tax Gross-Up Payment. Anything in this Agreement to
the contrary notwithstanding, in the event any salary or other
payment or distribution by Employer to or for the benefit of
Employee, or any acceleration of any benefit (whether paid or
payable, distributed or distributable, or accelerated pursuant to
the terms of this Agreement or otherwise) is paid or payable,
distributed or distributable, or, if any such payment is accelerated
by reason of there having occurred a Change in Control, including
without limitation (i) any lump-sum, interest or
compensation-continuation payments under Section 5 of the Agreement,
(ii) any income tax liability associated with stock options or
restricted stock accelerated by a Change in Control, (iii) the
payment or receipt of any other benefit (cash or stock) triggered or
accelerated by a Change in Control, and (iv) an Excise Tax Gross-Up
Payment under Section 5A(a) above, a "Change in Control Benefit"),
then Employee shall be entitled to receive an additional payment (an
"Income Tax Gross-Up Payment") in an amount equal to the federal,
state and local taxes (including income taxes and social security,
FICA, FUTA and other employment taxes) owed by Employee with respect
to any such salary or with respect to any Change in Control Benefit
such that after payment by Employee of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any taxes (and any interest and
penalties imposed with respect thereto) imposed upon the Income Tax
Gross-Up Payment, Employee retains an amount of the Income Tax
Gross-Up Payment equal to the federal, state and local taxes
(including income taxes and social security, FICA, FUTA and other
employment taxes) imposed upon the salary and those imposed upon the
Change in Control Benefit.
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(c) Subject to the provisions of Section 5A(d), all
determinations required to be made under this Section 5, including
whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment, and the assumptions to be utilized in arriving at
such determinations, shall be made by Xxxxxxx & Xxxxx LLP or such
other certified public accounting firm reasonably acceptable to
Employee as may be designated by Employer (the "Accounting Firm")
which shall provide detailed supporting calculations both to
Employer and Employee within 15 business days of the receipt of
notice from Employee that there has been a Payment, or such earlier
time as is requested by Employer. All fees and expenses of the
Accounting Firm shall be borne solely by Employer. Any Gross-Up
Payment, as determined pursuant to this Section 5A, shall be paid by
Employer to Employee or directly to the Internal Revenue Service, in
the sole discretion of Employer, within five days of the later of
(i) the due date for the payment of any Income Tax or any Excise
Tax, and (ii) the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon
Employer and Employee. As a result of the uncertainty in the
application of provisions including Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by Employer should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that
Employer exhausts its remedies pursuant to Section 5A(d) and
Employee thereafter is required to make a payment of any Income Tax,
any Excise Tax or any additional Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and
any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code)shall be promptly paid by
Employer to or for the benefit of Employee.
(d) Employee shall notify Employer in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by Employer of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten business days
after Employee is informed in writing of such claim and shall
apprise Employer of the nature of such claim and the date on which
such claim is requested to be paid. Employee shall not pay such
claim prior to the expiration of the 30-day period following the
date on which it gives such notice to Employer (or such shorter
period ending on the date that any payment of taxes with respect to
such claim is due). If Employer notifies Employee in writing prior
to the expiration of such period that it desires to contest such
claim, Employee shall:
(i) give Employer any information reasonably requested by
Employer relating to such claim,
(ii) take such action in connection with contesting such
claim as Employer shall reasonably request in writing
from time to time, including, without limitation,
accepting legal representation with respect to such
claim by an attorney reasonably selected by Employer,
(iii) cooperate with Employer in good faith in order
effectively to contest such claim, and (iv) permit
Employer to participate in any proceedings relating to
such claim;
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"provided, however, that Employer shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold Employee harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 5A(d), Employer shall control all proceedings taken in
connection with such contest, and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and
may, at its sole option, either pay the tax claimed to the
appropriate taxing authority on behalf of Employee and direct
Employee to xxx for a refund or contest the claim in any permissible
manner, and Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as
Employer shall determine; provided, however, that, if Employer pays
such claim and directs Employee to xxx for a refund, Employer shall
indemnify and hold Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such payment or with
respect to any imputed income in connection with such payment; and
provided, further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Employee with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, Employer's
control of the contest shall be limited to issues with respect to
which the Gross-Up Payment would be payable hereunder, and Employee
shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other
taxing authority.
(e) If, after the receipt by Employee of a payment by Employer
of an amount on Employee's behalf pursuant to Section 5A(d),
Employee becomes entitled to receive any refund with respect to such
claim, Employee shall (subject to Employer's complying with the
requirements of Section 5A(d)) promptly pay to Employer the amount
of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after payment by Employer of an
amount on Employee's behalf pursuant to Section 5A(d), a
determination is made that Employee shall not be entitled to any
refund with respect to such claim and Employer does not notify
Employee in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then
the amount of such payment shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
3. Section 3.A of the Employment Agreement is amended to provide that:
Commenci1ng January 1, 2006, Employee is entitled to a Base Salary at the rate
of $247,500 per year.
4. Prior to the consummation of an actual "change in control" event,
Employer and Employee shall in good faith negotiate a new employment agreement,
whereby it is contemplated that Employee would continue to render similar
services in an executive capacity for a term of no less than five years, on
improved terms and conditions as to salary and benefits, recognizing that
additional duties, responsibilities and certain waivers are contemplated by such
"change in control".
5. Notwithstanding anything to the contrary, Employee shall to be entitled
to a performance bonus or other bonus as determined by the Board of Directors.
Dated: December 29, 2005
Terra Insight Corporation
By: /s/ Xxxxx Xxxxxxxxx
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Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
CompuPrint, Inc.
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
Employee:
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/s/ Xxxx Railyan
----------------------------------------
Name: Xxxx Railyan
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