EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into and effective as of this 1st day of
December 1997, by and between KENETECH Energy Systems, Inc. a Delaware
corporation (the "Company"), KENETECH Corporation (the "Parent"), KES Penuelas
Holdings, Inc., KES LNG, Ltd.; KES Penuelas Ltd., KES Puerto Rico, L.P., KES
Bermuda, Inc. (collectively referred to as the "Subsidiaries"), and Xxxxxxx X.
Xxxxxxx, an individual currently employed by the Company (the "Executive").
RECITALS:
A. The Executive presently is employed as an Executive Officer by the Company
and has valuable experience and knowledge with respect to the business and
affairs of the Company, the Parent and its Subsidiaries;
B. The Parent, the Company and its Subsidiaries (each jointly and severally an
"Employer" and, collectively, the "Employers") desire to continue the
services of the Executive for the purposes of disposing of the Company's
interests (the "EcoElectrica Interest") in EcoElectrica, L.P.
("EcoElectrica"), and are willing to offer the Executive the incentive to
do so in the form of a written Employment Agreement which supersedes all
prior Employment Agreements executed by the parties hereto, and the
Executive desires to enter into a new Employment Agreement;
C. Representatives of the holders of not less than $34 million principal
amount of the Parent's 12 3/4% Secured Notes (the "Secured Notes") have
participated in the negotiation of this Employment Agreement and have
represented that such holders, and perhaps others, are prepared to give
written assurances to the Executive substantially to the effect that such
holders (and their assignees and transferees) will not object to and will
support the terms of this Employment Agreement before any tribunal with
appropriate jurisdiction (the "Assurances") and each Employer has agreed to
use its best efforts to obtain Assurances from the holders of not less than
$51 million principal amount of Secured Notes which, when received, shall
be filed by the Secretary of each Employer with minutes of meetings of the
Board of Directors of such Employer. The Executive has specifically relied
on the expectation of receiving the Assurances prior to the filing by any
Employer of any bankruptcy petition under the Federal Bankruptcy Code as an
inducement to enter into this Employment Agreement and cancel the existing
employment agreement.
D. This Employment Agreement has been approved by the Board of Directors of
the Parent and is to be approved by the Board of Directors of each of the
Company and the Subsidiaries. The execution of this Employment Agreement
conclusively evidences that such approvals have been duly authorized by the
respective Boards of Directors certifying that each of the obligations
owing to the Executive hereunder are joint and several obligations of each
of the Employers. Copies of the Resolutions of the respective Boards of
Directors are attached hereto.
NOW, THEREFORE, in consideration of the above recitals; the continued employment
of the Executive by the Employers, the mutual promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed as follows:
AGREEMENT
1. EMPLOYMENT
1.1 Duties. The Employers will continue to employ the Executive in his current
position for the Employment Period. The Executive agrees to continue in
such employment for the duration of the Employment Period and to perform in
good faith and to the best of the Executive's ability all services which
may be required of the Executive's position and to be available to render
such services at all reasonable times and places in accordance with
reasonable directives and assignments issued by the President of the
Company and the Company's Board of Directors. During the Executive's
Employment Period, he will devote such time and effort as may be necessary
to implement the business and affairs of the Employers within the scope of
the executive office. The Executive's principal employment location shall
be San Francisco, California and the Executive shall have no obligation to
relocate at the request of the Company. Except to the extent allowed by the
Board of Directors of the Company, the Executive will not, whether for the
Executive's own account or as an employee, consultant or advisor, provide
services to any business enterprise which is in direct competition with the
Employers, provided, however, that the Executive will have the right to
consult with and provide services to any other business enterprise, and to
perform such incidental services as are necessary in connection with (a)
the Executive's private passive investments, (b) the Executive's charitable
or community activities, and (c) the Executive's participation in trade or
professional organizations, but only to the extent in each case that such
services do not interfere with the performance of the Executive's services
hereunder.
1.2 Term of Employment. Unless sooner terminated in connection with a
termination for cause (pursuant to paragraph 1.5 hereof), the Executive is
and will continue to be employed by the Employers for a period (the
"Employment Period") until the later to occur of: (a) December 31, 1998;
(b) 90 days following the closing of the sale of the EcoElectrica Interest;
and (c) the date on which all payments due hereunder are fully and finally
paid; at the Executive's current annual base salary ("Base Salary") and
with the same employee benefits applicable as of January 1, 1997.
1.3 Death of Executive. The employment relationship established by this
Employment Agreement shall be terminated automatically upon the death of
the Executive; provided, however, that if any of the Special Bonus Payments
(as defined in paragraph 2 hereof) would otherwise have been earned or
would have been payable within one year of the date of the Executive's
death, the Employers will pay the Executive's estate such Special Bonus
Payments.
1.4 Disability of Executive. This Employment Agreement shall be terminated
automatically upon the permanent disability of the Executive. For purposes
of this Employment Agreement, a permanent disability shall be deemed to
have occurred if (a) the Executive is unable to perform his material duties
hereunder for a period of ninety (90) consecutive days, or one hundred
eighty (180) days in any one (1) year period, on account of any physical or
mental disability, or (b) a licensed physician selected by the Company and
approved by the Executive (or his closest relative if the Executive is
unable to act), which approval shall not be unreasonably withheld, makes a
medical determination of physical or mental disability or incapacity of the
Executive, provided, however, that if any of the Special Bonus Payments
would otherwise have been earned or would have been payable within one year
of the date of the Executive's permanent disability, the Employers will pay
the Executive such Special Bonus Payments.
1.5 Termination for Cause. This Employment Agreement may be terminated
voluntarily by the Employers at any time during its term upon (a) any
finding of felonious conduct or material fraud by the Executive or (b)
embezzlement or misappropriation of funds or property of the Employers by
the Executive, in each case upon written notice to the Executive specifying
the cause for termination. This Employment Agreement may be terminated by
the Employers at any time during its term upon (A) any material breach by
the Executive of his duties under this Employment Agreement, (B) gross
negligence by the Executive, (C) any conduct or act of moral turpitude, or
any conduct or act done or committed by the Executive that will, in the
minds of reasonable people, reflect negatively on the Employers, or that
brings the Employers into public hatred, contempt or ridicule or that tends
to shock or offend the community in which the Executive represents the
Employers, in each case in a material or significant way, (D) the
Executive's consistent refusal to perform his material duties and
obligations, or (E) the Executive's willful and intentional misconduct in
the performance of his material duties and obligations, in each case after
written notice to the Executive specifying the cause for termination, and,
in the case of the causes described in subparagraph (A) and (D) above, the
passage of not less than thirty (30) days after receipt of such notice,
during which time the Executive shall have the right to respond to the
Employers' notice and cure the breach or other event giving rise to the
termination.
1.6 Change in Control. Upon a Change in Control, the Employers will pay the
Executive a lump sum amount equal to one year's Base Salary. For purposes
of this Employment Agreement, "Change in Control" means:
(a) a merger or acquisition in which the Parent is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State of the Parent's incorporation;
(b) the sale, transfer or other disposition of all or substantially all of
the assets of the Parent in liquidation or dissolution of the Parent;
(c) any reverse merger in which the Parent is the surviving entity, but in
which fifty percent (50%) or more of the Parent's outstanding voting
stock is transferred to holders different from those who held the
stock immediately prior to such merger; or
(d) the acquisition of more than fifty percent (50%) of the Parent's
outstanding voting stock pursuant to a tender or exchange offer made
by a person or related group of persons (other than the Parent or a
person that directly or indirectly controls, is controlled by or is
under common control with the Parent).
1.7 Withholding. The Employers will deduct and withhold, from the compensation
payable to the Executive under this Employment Agreement, any and all
Federal, State and local income and employment withholding taxes and any
other amounts required to be deducted or withheld by the Employers under
the applicable statute or regulation.
2. SPECIAL BONUS PAYMENTS
The Employers shall pay the Executive certain bonuses (collectively referred to
as "Special Bonus Payments") as set forth below.
2.1 Financial Closing Bonus. On the date EcoElectrica closes the funding of a
nonrecourse construction loan pursuant to a Credit Agreement, dated as of
October 31, 1997, among EcoElectrica, Banque Paribas and ABN AMRO Bank (the
"Financial Closing"), the Employers will pay to the Executive a Financial
Closing bonus in the amount of $350,000.
2.2 ECOELECTRICA BONUS. An EcoElectrica bonus (the "EcoElectrica Incentive")
shall be paid to the Executive as follows. The EcoElectrica Incentive shall
be determined with reference to Distributable Cash (as defined below)
resulting from the transactions in which the Employers directly or
indirectly sell, transfer or otherwise dispose of all or substantially all
of the EcoElectrica Interest and shall not exceed six million dollars
($6,000,000) in an aggregate amount to be shared by the Executive, Xxxxx X.
Xxxxxx and Xxxxx X. Xxxxxx. "Distributable Cash" means cash and or cash
equivalents distributable or available for distribution by the Company and
the Subsidiaries, to the Parent (including all cash paid, advanced, or
distributed to the Parent and its affiliates after the date hereof) net of
(a) amounts due under the Loan Agreement, dated as of August 30, 1996, by
and between Lyon Credit Corporation and KES Penuelas Holdings, Inc., (b)
liabilities known to the Company and those actually known by the Executive
(other than nonrecourse debt or obligations) arising from the Company's
ownership of Hartford Hospital, Chateaugay, Pepperell and other Company
assets (other than the EcoElectrica Interest), (c) direct and approved
costs of sale of EcoElectrica Interest, (d) up to $10 million in the
aggregate in respect of the provision or payment of taxes payable by the
Parent (on a consolidated basis) arising from the sale of the EcoElectrica
Interest and/or amounts, if any, paid or provided by the Parent to reduce
or settle intercompany claims or debts within the Parent's family as
certified by the Chief Financial Officer, or other authorized officer of
the Parent as of the date of such distribution (including crossclaims
involving KENETECH Windpower, Inc. ("KWI")) and (e) Gross Sales Proceeds
(as defined below) with respect to which Other Asset Incentive (as defined
below) is paid. Distributable Cash is not reduced by (a) payments with
respect to the EcoElectrica Incentive and the Other Asset Incentive or (b)
costs or fees associated with bankruptcy filings, if any, by the Parent
and/or affiliates. The Executive shall be entitled to receive a forty
percent (40%) share (the "Share") of the EcoElectrica Incentive. The Share
shall be paid to the Executive (the "Share Payments") as and when payments
are made to the holders of the Secured Notes (the "Note Payments") in the
same proportion each Note Payments bear to the lesser of (x) amounts of
principal and interest remaining due on the Secured Notes on the date of
such Note Payment or (y) the amount the holders of the Secured Notes have
agreed to accept in full satisfaction of the Secured Notes; provided,
however, that to the extent a Note Payment has been reduced, in effect, by
an offset against Distributable Cash not described above, such Note Payment
shall be deemed not to have been so reduced for purposes of the
corresponding Share Payment; and, provided further, that in no event shall
the entire Share be paid to the Executive later than the earlier of the
first anniversary of the date of the sale of the EcoElectrica Interest or
the date that the obligations under the Secured Notes have been cancelled.
In his sole discretion, the Executive may direct the Company to allocate a
portion of his share of the EcoElectrica Incentive (and the Other Asset
Incentive) to other employees as additional compensation to them. If, due
to reasons reasonably beyond the control of the Employers, the liabilities
described in clause (d) have not been paid or provided for as of the time
of distribution, then the Executive shall be entitled to distribution of
100% of his share of the EcoElectrica Incentive calculated to be due,
assuming the total of such liabilities is $10 million less the amount that
such liabilities as have been paid or provided for prior to the date of
distribution; provided, however, that the balance due to the Executive
shall from time to time be distributed immediately upon the provision or
payment of any such liability (up to $10 million in the aggregate) or upon
any determination that no further liabilities described in clause (d)
exist, whichever first occurs. In the event the Parent determines not to
sell the EcoElectrica Interest by December 31, 1998, and instead determines
to refinance or otherwise provide for the payment or satisfaction of the
Secured Notes or determines to recapitalize the Parent, Distributable Cash
shall be determined at that time, with reference to the implied value of
the EcoElectrica Interest and/or the Employers' then going concern value
and shall make the Share Payments as and when the Note Payments are made as
above provided, but in no event shall the entire Share be paid to the
Executive later than the earlier of the first anniversary of the date of
such refinancing or recapitalization or the date the Secured Notes have
been cancelled.
Distributable Cash EcoElectrica Incentive (Expressed as
Incremental % of Distributable Cash)
$100 million to $110 million 5
$110 million to $120 million 6
$120 million to $130 million 7.5
$130 million to $140 million 9
more than $140 million 10
2.3 Other Asset Bonuses. Fifteen percent (15%) (but not to exceed $750,000 in
the aggregate for the Executive, Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxx) of
the Gross Sales Proceeds resulting from the disposition of all
miscellaneous assets of the Company (other than EcoElectrica) or settlement
of any claims by or against the Company, including, but not limited to
Hartford Hospital, KES Chateaugay, L.P. and Pepperell, shall be set aside
at the time of each closing thereof for a fund to make bonus payments to
the Executive, Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxx (the "Other Asset
Incentive"). The Executive shall be entitled to a forty percent (40%) share
of the Other Asset Incentive funds received from the disposition of such
assets or settlement of such claims within five (5) days of receipt by the
Employers thereof.
"Gross Sales Proceeds" means the amount of cash proceeds realized or to be
realized by the Company and affiliates, without regard to actual or
proposed timing of receipt, from a purchaser or through escrow releases
(e.g., cash releases securing equity funding or indemnity deposits) and, in
any case, without deduction for legal expenses, taxes, other fees, loan
repayments, compensation payments or amounts paid to the KWI estate to
settle creditors' claims.
3. CONFIDENTIALITY. The Executive hereby acknowledges that the Employers may,
from time to time during the Employment Period, disclose to the Executive
confidential information pertaining to the Employers' business and affairs
and client base, including (without limitation) customer lists and
accounts, other similar items indicating the source of the Employers'
income, and information pertaining to the salaries and performance levels
of the Employers' employees. The Executive will not, at any time during or
after such Employment Period, disclose to any third party or directly or
indirectly make use of any such confidential information, including
(without limitation) the names, addresses and telephone numbers of the
Employers' customers, other than in connection with, and in furtherance of,
the Employers' business and affairs. All documents and data (whether
written, printed or otherwise reproduced or recorded) containing or
relating to any such proprietary information of the Employers which come
into the Executive's possession during the Employment Period will be
returned by the Executive to the Employers immediately upon the termination
of the Employment Period or upon any earlier request by the Employers, and
the Executive will not retain any copies, notes or excerpts thereof. The
Executive's obligations under this Section 3 will continue in effect after
termination of the Executive's employment with the Employers, whatever the
reason or reasons for such termination, and the Employers will have the
right to communicate with any of the Executive's future or prospective
employers concerning the Executive's continuing obligations under this
Section 3.
4. INDEMNIFICATION. The indemnification provisions for Officers and Directors
under the Employers' Bylaws will (to the maximum extent permitted by law)
be extended to the Executive, and during the period following the
Executive's termination irrespective of a Change in Control, with respect
to any and all matters, events or transactions occurring or effected during
the Executive's Employment Period.
5. GOVERNING LAW. This Employment Agreement shall be governed, construed and
interpreted under, and in accordance with, the laws of the State of
California.
6. ENTIRE EMPLOYMENT AGREEMENT. This Employment Agreement constitutes the
entire Employment Agreement (and supersedes and replaces in their entirety
any prior Employment Agreements, arrangements and understandings) between
the Executive, the Parent, the Company or the Subsidiaries with respect to
the subject matter hereof, and no amendment hereof shall be deemed valid
unless in writing and signed by the parties hereto.
7. INTERPRETATION AND CONSTRUCTION. The headings and sections of this
Employment Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Employment Agreement. It is the intention
of the parties hereto that the provisions contained herein be enforceable
to the fullest extent permitted by applicable law. In the event that any
provision of this Employment Agreement shall be finally determined to be
unenforceable, such provision shall not be entirely void, but rather shall
be limited or revised by a court of competent jurisdiction only to the
extent necessary to make it enforceable, but every other provision of this
Employment Agreement shall remain in full force and effect. In the event
that this Employment Agreement is rejected as an executory contract or
otherwise by any one, or more of the obligors hereunder, such rejection
shall have no effect upon the liability of the remaining obligors.
8. BINDING EFFECT NONASSIGNABILITY; WAIVER. The rights and obligations of the
Company, the Parent and the Subsidiaries under this Employment Agreement
shall inure to the benefit of, and shall be binding upon, the Parent, the
Company and its Subsidiaries and their successors and assigns. The rights
and obligations of the Executive under this Employment Agreement are
personal to the Executive and may not be assigned, transferred or delegated
by the Executive to any other person or entity except as provided for
herein. The waiver of any of the parties of any breach of any provision
hereof shall not be effective unless in writing and shall not constitute a
waiver by such party of any other succeeding breach of any provision
hereof.
9. ACKNOWLEDGMENT. The Executive acknowledges that he has carefully read all
of the provisions of this Employment Agreement, and has given careful
consideration to the restrictions imposed upon him hereby, and he agrees
that the same are necessary for the proper protection of the Employer's
business and that the Employers have agreed to enter into this Employment
Agreement in partial consideration of the representation of the Executive
that he will abide by and be bound by such provisions. He further confirms
that he considers each of said provisions to be reasonable with respect to
the subject matter thereof.
10. DISPUTES. Any dispute or controversy arising among the parties to this
Employment Agreement relating to the validity, enforceability, enforcement,
performance, construction, and interpretation of this Employment Agreement,
including a dispute pertaining to the validity or enforceability of this
provision shall be enforceable in law and in equity and the expenses and
attorneys' fees incurred by the Executive in seeking relief, in addition to
such other relief as may be granted, shall be paid by the Employers. Any
proceeding for injunctive relief (including temporary restraining orders,
preliminary injunctions and permanent injunctions) may be brought in any
court of competent jurisdiction.
11. COUNTERPARTS. This Employment Agreement may be executed in two or more
counterparts, all of which, when taken together, shall constitute one and
the same Employment Agreement.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of
the day and year first above written.
Dated: February 20, 1998
______________________________ KES PENUELAS, LTD.
Xxxxxxx X. Xxxxxxx a BVI Company
KENETECH ENERGY SYSTEMS, INC. By:
a Delaware corporation Xxxx X. Xxxxxx, Vice President
By: KES PUERTO RICO, L.P.
Xxxx X. Xxxxxx, Vice President a Bermuda Exempted Limited Partnership
KENETECH CORPORATION, By:
Delaware corporation Xxxx X. Xxxxxx, Vice President
KES LNG, Ltd., General Partner
By: KES BERMUDA, INC.
Xxxx X. Xxxxxx, CEO & President a Delaware corporation
KES PENUELAS HOLDINGS, INC. By:
a Delaware corporation Xxxx X. Xxxxxx, Vice President
By:
Xxxx X. Xxxxxx, Vice President
KES LNG, LTD.
a BVI Company
By:
Xxxx X. Xxxxxx, Vice President
