Exhibit 2.07
EXECUTION COPY
EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT is entered into effective as of
April 9, 2004, between Kinetics Group, Inc., a Delaware corporation (the
"COMPANY"), and Kinetic Systems, Inc., a California corporation ("KSI").
WHEREAS, the Company and KSI have agreed to enter into this Agreement
to allocate between them assets, liabilities and responsibilities with respect
to certain employee compensation and benefit plans, programs and arrangements,
and certain employment matters;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "AGREEMENT" means this Employee Matters Agreement, including
all referenced schedules, and all amendments made hereto from time to time.
1.2 "BENEFITS COMMITTEE" means the Benefits Committee established,
implemented and operated pursuant to Section 2.5.
1.3 "CLOSING DATE" has the meaning set forth in the Separation
Agreement.
1.4 "COBRA" means the continuation coverage requirements for
"group health plans" under Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended from time to time, and as codified in
Code Section 4980B and ERISA Sections 601 through 608.
1.5 "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
1.6 "COMPANY EMPLOYEE" means an individual who, on the Closing
Date, is: (a) either actively employed by, or on leave of absence from, the
Company or a subsidiary of the Company; (b) a former employee of the Company or
a subsidiary of the Company and who, on the Closing Date, is not a KSI Employee;
or (c) an employee or group of employees designated as Company Employees by the
Company and KSI.
1.7 "DEFERRED COMPENSATION PLAN," when immediately preceded by
"Company" means the Kinetics Group, Inc. Management Deferred Compensation Plan.
When immediately preceded by "KSI," "Deferred Compensation Plan" means the
deferred compensation plan to be established by KSI pursuant to Article 4.
1.8 "DISTRIBUTION" has the meaning set forth in the Separation
Agreement.
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1.9 OMITTED.
1.10 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.11 "FMLA" means the Family and Medical Leave Act of 1993, as
amended from time to time.
1.12 "FOREIGN PLAN," when immediately preceded by "Company," means
a Plan maintained by the Company for the benefit of eligible employees of the
Company and its subsidiaries outside the U.S. When immediately preceded by
"KSI," "Foreign Plan" means a Plan to be established by KSI for the benefit of
the eligible employees of KSI and its subsidiaries outside the U.S.
1.13 "401(k) PLAN," when immediately preceded by "Company," means
the Kinetics Group, Inc. Retirement Savings Plan. When immediately preceded by
"KSI," "401(k) Plan" means the 401(k) plan to be established by KSI pursuant to
Article 3 for the benefit of eligible employees of KSI and its subsidiaries.
1.14 "FRINGE BENEFIT PLANS," when immediately preceded by
"Company," means the fringe benefit plans, programs and arrangements, offered
from time to time under the personnel policies and practices of the Company and
sponsored and maintained by the Company for the benefit of eligible employees of
the Company and its subsidiaries. When immediately preceded by "KSI," "Fringe
Benefit Plans" means the fringe benefit plans, programs and arrangements to be
established by KSI pursuant to Article 7 for the benefit of eligible employees
of KSI and its subsidiaries.
1.15 "HEALTH PLANS," when immediately preceded by "Company," means
the medical, health maintenance organization ("HMO"), dental, and pre-tax
premium payment plans established and maintained by the Company for the benefit
of eligible employees of the Company and its subsidiaries. When immediately
preceded by "KSI," "Health Plans" means the medical, HMO, dental, and pre-tax
premium payment plans to be established by KSI pursuant to Article 5 for the
benefit of eligible employees of KSI and its subsidiaries.
1.16 "HEALTH AND WELFARE PLANS," when immediately preceded by
"Company," means the Health Plans, Section 125 Plan and any similar health and
welfare plans established and maintained by the Company for the benefit of
eligible employees of the Company and its subsidiaries, and such other welfare
plans or programs as may apply to such employees as of the Closing Date. When
immediately preceded by "KSI," "Health and Welfare Plans" means the medical,
HMO, dental, pre-tax premium payment, Section 125 and any similar health and
welfare plans to be established by KSI pursuant to Article 5 for the benefit of
eligible employees of KSI and its subsidiaries.
1.17 Omitted.
1.18 "INSURANCE PLANS," when immediately preceded by "Company,"
means the various insurance plans maintained by the Company for the benefit of
eligible employees of the Company and its subsidiaries including accidental
death and dismemberment, business travel
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accident, long term disability, group life and workers' compensation insurance
plan. When immediately preceded by "KSI," "Insurance Plans" means the KSI
insurance plans to be established by KSI pursuant to Article 5 for the benefit
of eligible employees of KSI and its subsidiaries.
1.19 Omitted.
1.20 Omitted.
1.21 "KSI EMPLOYEE" means any individual who is: (a) either
actively employed by, or on leave of absence from, KSI or a subsidiary of KSI on
or at any time after the Closing Date; (b) either actively employed by, or on
leave of absence from the Company as either part of a work group or
organization, or common support function that, at any time before the Closing
Date, moves to the employ of KSI from the employ of the Company; (c) any other
employee or group of employees designated as KSI Employees (as of the specified
date) by the Company and KSI by mutual agreement; or (d) an alternate payee
under a QDRO, alternate recipient under a QMCSO, beneficiary, covered dependent,
or qualified beneficiary (as such term is defined under COBRA), in each case, of
an employee or former employee, described in (a) through (c) with respect to
that employee's or former employee's benefit under the applicable Plan(s).
Unless specified otherwise in this Agreement, such an alternate payee, alternate
recipient, beneficiary, covered dependent, or qualified beneficiary shall not
otherwise be considered a KSI Employee with respect to any benefits he or she
accrues or has accrued under any applicable Plan(s), unless he or she is a KSI
Employee by virtue of (a) through (c).
1.22 "MATERIAL FEATURE" means any feature of a Plan that could
reasonably be expected to be of material importance, in the aggregate, to the
sponsoring employer or the participants (or their dependents or beneficiaries)
of that Plan, which could include, depending on the type and purpose of the
particular Plan, the class or classes of employees eligible to participate in
such Plan, the nature, type, form, source, and level of benefits provided under
such Plan, the amount or level of contributions, if any, required to be made by
participants (or their dependents or beneficiaries) to such Plan, and the costs
and expenses incurred by the sponsoring employer or Participating Companies for
implementing and/or maintaining such Plan.
1.23 "PARTICIPATING COMPANY" means: (a) the Company; (b) any Person
(other than an individual) that the Company has approved for participation in, a
Plan sponsored by the Company; and (c) any Person (other than an individual)
which, by the terms of such Plan, participates in such Plan or any employees of
which, by the terms of such Plan, participate in or are covered by such Plan.
1.24 "PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, and a governmental entity or any
department, agency or political subdivision thereof.
1.25 "PLAN" means any plan, policy, program, payroll practice,
arrangement, contract, trust, insurance policy, or any agreement or funding
vehicle providing compensation or benefits to employees, former employees,
directors or consultants of the Company or KSI.
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1.26 "PLAN SEPARATION DATE," means with respect to (i) the KSI
Deferred Compensation Plan, the KSI Fringe Benefit Plans, the KSI Foreign Plan,
the KSI 401(k) Plan, and the KSI Rabbi Trust, the date of the Company IPO (as
defined in the Separation Agreement), or if later, the date the Company and KSI
are no longer considered members of a controlled group of corporations within
the meaning of Code Section 414(b); and (ii) the KSI Health and Welfare Plans
and the KSI Insurance Plans, December 31, 2004; or such earlier or later date(s)
as may be mutually agreed upon by the Company and KSI with respect to a Plan or
Plans.
1.27 "QDRO" means a domestic relations order which qualifies under
Code Section 414(p) and ERISA Section 206(d) and which creates or recognizes an
alternate payee's right to, or assigns to an alternate payee, all or a portion
of the benefits payable to a participant under the Company 401(k) Plan.
1.28 "QMCSO" means a medical child support order which qualifies
under ERISA Section 609(a) and which creates or recognizes the existence of an
alternate recipient's right to, or assigns to an alternate recipient the right
to, receive benefits for which a participant or beneficiary is eligible under
any of the Company or KSI Health and Welfare Plans that are group health plans.
1.29 "RABBI TRUST," when immediately preceded by "Company," means
the grantor trust established for purposes of holding assets under the Company
Deferred Compensation Plan. When immediately preceded by "KSI," "Rabbi Trust"
means the grantor trust to be established by KSI pursuant to Section 4.1(a) for
the purpose of holding assets under the KSI Deferred Compensation Plan.
1.30 "SEPARATION AGREEMENT" means Separation Agreement dated the
date hereof between the Company and KSI.
1.31 "STOCK PLAN" means any plan, program, or arrangement, pursuant
to which employees and other service providers hold stock options.
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ARTICLE 2
GENERAL PRINCIPLES
2.1 ASSUMPTION OF KSI LIABILITIES. Except as specified otherwise
in this Agreement or as mutually agreed upon by KSI and the Company from time to
time, effective as of the Closing Date, KSI hereby assumes and agrees to pay,
perform, fulfill and discharge, in accordance with their respective terms, all
of the following: (a) all liabilities of, or relating to, KSI Employees relating
to, arising out of, or resulting from future, present or former employment with
the KSI Business (as defined in the Separation Agreement) (including liabilities
relating to, arising out of, or resulting from Company Plans and KSI Plans,
other than any liability for medical coverage for KSI Employees who terminated
service prior to the Closing Date); (b) all liabilities relating to, arising out
of, or resulting from any other actual or alleged employment relationship with
the KSI Business; and (c) all other liabilities relating to, arising out of, or
resulting from obligations, liabilities and responsibilities expressly assumed
or retained by KSI, or a KSI Plan pursuant to this Agreement.
2.2 KSI'S PARTICIPATION IN COMPANY PLANS.
(a) PARTICIPATION IN COMPANY PLANS. Except as specified
otherwise in this Agreement or as the Company and KSI may mutually agree, KSI
Employees shall, until the applicable Plan Separation Date, continue to
participate in the Company 401(k) Plan as provided in Article 3, and in such
other Company Plans as provided in Articles 3 through 7.
(b) COMPANY'S GENERAL OBLIGATIONS AS PLAN SPONSOR PRIOR
TO THE APPLICABLE PLAN SEPARATION DATE(S). To the extent that KSI is a
Participating Company in any Company Plan prior to the applicable Plan
Separation Date(s), the Company shall continue to administer, or cause to be
administered, in accordance with its terms and applicable law, such Company
Plan, and shall have the sole and absolute discretion and authority to interpret
the Company Plan, as set forth therein. The Company shall not amend any Material
Feature of any Company Plan in which KSI is a Participating Company, except to
the extent: (i) such amendment would not materially affect any coverage or
benefits solely with respect to KSI Employees under such Plan; or (ii) such
amendment is necessary or appropriate to comply with applicable law.
(c) KSI'S GENERAL OBLIGATION AS PARTICIPATING COMPANY.
KSI shall perform, with respect to its participation in the Company Plans prior
to the applicable Plan Separation Date(s), the duties of a Participating Company
as set forth in each such Plan or any procedures adopted pursuant thereto,
including (without limitation): (i) assistance in the administration of claims,
to the extent requested by the claims administrator of the applicable Company
Plan; (ii) full cooperation with Company Plan auditors, benefit personnel and
benefit vendors; (iii) preservation of the confidentiality of all financial
arrangements the Company has or may have with any vendors, claims
administrators, trustees, service providers or any other entity or individual
with whom the Company has entered into an agreement relating to the Company
Plans; and (iv) preservation of the confidentiality of participant information
(including, without limitation, health information in relation to FMLA leaves)
to the extent not specified otherwise in this Agreement.
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(d) TERMINATION OF PARTICIPATING COMPANY STATUS. Except
as otherwise may be mutually agreed upon by the Company and KSI, effective as of
the applicable Plan Separation Date(s), KSI shall automatically cease to be a
Participating Company in the corresponding Company Plans.
2.3 ESTABLISHMENT OF KSI PLANS.
Except as otherwise provided herein, KSI shall adopt certain Plans, as
described in Articles 3 through 7, as of the applicable Plan Separation Date(s).
Except as specified otherwise in this Agreement, nothing in this Agreement shall
preclude KSI at any time after the applicable Plan Separation Date(s), from
amending, merging, modifying, terminating, eliminating, reducing, or otherwise
altering in any respect any applicable KSI Plan, any benefit under any
applicable KSI Plan or any trust, insurance policy or funding vehicle related to
any applicable KSI Plans, or any employment or other service arrangement with
the KSI Employees or vendors (to the extent permitted by law).
2.4 TERMS OF PARTICIPATION BY KSI EMPLOYEES IN KSI PLANS.
(a) NON-DUPLICATION OF BENEFITS. Except as specified
otherwise in the Agreement, as of the applicable Plan Separation Date, the
applicable KSI Plans shall be, with respect to KSI Employees, in all respects
the successors in interest to, and shall not provide benefits that duplicate
benefits provided by, the corresponding Company Plans. The Company and KSI shall
agree on methods and procedures, including amending the respective Plan
documents, to prevent KSI Employees from receiving duplicate benefits from the
Company Plans and the KSI Plans.
(b) SERVICE CREDIT. Except as specified otherwise in this
Agreement, with respect to KSI Employees, each KSI Plan shall provide that all
service, all compensation and all other benefit-affecting determinations that,
as of the applicable Plan Separation Date, were recognized under the
corresponding Company Plan shall, as of the applicable Plan Separation Date,
receive full recognition and credit and be taken into account under such KSI
Plan to the same extent as if such items occurred under such KSI Plan, except to
the extent that duplication of benefits would result. The service crediting
provisions shall be subject to any respectively applicable "service bridging,"
"break in service," "employment date," or "eligibility date" rules under the KSI
Plans and the Company Plans.
(c) ASSUMPTION OF LIABILITIES. Except as specified
otherwise in this Agreement (including, without limitation, the exception
applicable to self-insured short-term disability and workers compensation
plans), the provisions of this Agreement for the transfer of assets relating to
Company Plans to KSI and/or the appropriate KSI Plans are based upon the
understanding of the parties that KSI and/or the appropriate KSI Plan shall
assume all liabilities of the corresponding Company Plan to or relating to KSI
Employees, as provided for herein.
2.5 BENEFITS COMMITTEE. From the date of this Agreement through
the applicable Plan Separation Dates (or such other date(s) as the Company and
KSI may mutually agree), the management of the Plans shall be conducted under
the supervision of the Company's Benefits Committee, consisting of the Company's
Chief Financial Officer, the Company's
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Senior Vice President of Administration and the KSI Vice President of Human
Resources (or their authorized delegates). Issues that cannot be resolved by
such Benefits Committee shall be decided, at the request of either party, by a
designated representative of the KSI Corporate Executive Committee and a
designated representative of the Company Corporate Executive Committee.
2.6 FOREIGN PLANS. KSI and the Company each intend that the
matters, issues or liabilities relating to, arising out of, or resulting from
Foreign Plans and non-U.S.-related employment matters be handled in a manner
that is in compliance with the requirements of applicable local law and, to the
extent permitted by applicable local law, in a manner consistent with comparable
U.S. matters, issues or liabilities as reflected in this Agreement.
2.7 Omitted.
ARTICLE 3
401(K) PLAN
3.1 401(k) PLAN. Effective as of the applicable Plan Separation
Date, KSI shall establish or cause to be established a separate plan and trust
which are intended to be tax-qualified under Code Section 401(a) and 401(k), to
be exempt from taxation under Code Section 501(a) (1), (the "KS1 401(k) PLAN")
to which KSI Employees may make salary reduction contributions and KSI can make
discretionary matching contributions and discretionary profit sharing
contributions.
3.2 TRANSFER OF ACCOUNTS FROM COMPANY 401(k) PLAN. As of a date as
soon as practicable after the applicable Plan Separation Date, (the "401(k)
TRANSFER DATE"), the Company and KSI shall cause to be transferred to the KSI
401(k) Plan the accounts in the Company 401(k) Plan that are attributable to KSI
Employees. In addition, effective as of the 401(k) Transfer Date (or such other
date as the Company and KSI may mutually agree), the Company shall cause any
participant loans held in the Company 401(k) Plan that are attributable to KSI
Employees to be assigned to the Trustee of the KSI 401(k) Plan to enable such
KSI Employees to continue to repay such loans through payroll deduction, and
after such assignment such KSI Employees shall repay such loans to the KSI
401(k) Plan only.
ARTICLE 4
NON-QUALIFIED PLANS
4.1 DEFERRED COMPENSATION PLANS.
(a) ESTABLISHMENT OF KSI RABBI TRUST. Effective as of the
applicable Plan Separation Date, KSI shall establish the KSI Deferred
Compensation Plan and the KSI Rabbi Trust.
(b) TRANSFER OF LIABILITIES AND RABBI TRUST INSURANCE
POLICIES. The Company Rabbi Trust maintains mutual funds for the benefit of the
participants in the Company Deferred Compensation Plan as a means of funding the
benefit liabilities to
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participants thereunder (the "Mutual Funds"). Effective as of the applicable
Plan Separation Date, the Company shall cause the Company Rabbi Trust to assign
and transfer to the KSI Rabbi Trust, and KSI shall cause the KSI Rabbi Trust to
assume, the rights and obligations of the Company Rabbi Trust with respect to
the Mutual Funds used to fund the KSI Employee participants. Coincident with
such transfer of such Mutual Funds, KSI shall assume all responsibilities and
obligations relating to, arising out of, or resulting from such liabilities
under the Company Deferred Compensation Plan.
(c) PARTICIPATION IN DEFERRED COMPENSATION PLANS.
Effective as of the applicable Plan Separation Date, eligible KSI Employees may
commence participation in the KSI Deferred Compensation Plan. KSI Employees who
are currently participating in the Company Deferred Compensation Plans shall
continue their participation in such Plans (according to its terms) to the
applicable Plan Separation Date.
ARTICLE 5
HEALTH AND WELFARE PLANS
5.1 HEALTH PLANS.
(a) KSI HEALTH PLANS. Effective as of the applicable Plan
Separation Date, KSI shall establish the KSI Health Plans similar to the Company
Health Plans and, correspondingly, KSI shall be solely responsible for the
administration of the KSI Health Plans, including the payment of all
employer-related costs in establishing and maintaining the KSI Health Plans, and
for the collection and remittance of employee premiums, subject to Section 8.1.
(b) MEDICAL PLANS THROUGH THE PLAN SEPARATION DATE.
Except as otherwise agreed by the Company and KSI, until the applicable Plan
Separation Date, KSI shall be a Participating Company in the Company Health
Plans. The Company shall administer claims incurred under the Company Health
Plans by KSI Employees before the applicable Plan Separation Date. Any
determination made or settlements entered into by the Company with respect to
such claims shall be final and binding. The Company shall retain financial and
administrative ("run-out") liability and all related obligations and
responsibilities for all claims incurred by KSI Employees before the Closing
Date (or such other date(s) as the Company and KSI may mutually agree). Except
as set forth in the preceding sentence, KSI shall reimburse the Company for any
and all direct and indirect costs and expenses associated with its participation
in the Company Health Plans prior to the applicable Plan Separation Date,
subject to Section 8.1.
(c) SECTION 125 PLAN. Until the applicable Plan
Separation Date, KSI shall remain a Participating Company in the Company Section
125 Plan. The existing elections for KSI Employees participating in the Company
Section 125 Plan shall remain in effect until the applicable Plan Separation
Date. Effective as of the applicable Plan Separation Date, KSI shall establish,
or caused to be established, the KSI Section 125 Plan and KSI shall be solely
responsible for the KSI Section 125 Plan. As of the applicable Plan Separation
Date, the Company shall assign and transfer to KSI the rights and obligations of
the Company under the
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medical and dependent care flexible spending accounts maintained on behalf of
KSI Employees pursuant to the KSI Section 125 Plan. As of the applicable Plan
Separation Date, the Company and KSI shall determine, with respect to each KSI
Employee as of the applicable Plan Separation Date, the net difference between
the amount of flexible spending account contributions and the amount of flexible
spending account reimbursements for such KSI Employee during the period between
January 1, 2004 and the applicable Plan Separation Date. If the total
contributions during such period for a KSI Employee exceed the total
reimbursement during such period for such KSI Employee, the difference for such
KSI Employee shall be characterized as a "NET CONTRIBUTION." If the total
reimbursement during such period for a KSI Employee exceeds the total
contributions during such period for such KSI Employee, the difference for such
KSI Employee shall be characterized as a "NET REIMBURSEMENT." If the sum of all
Net Contributions for all KSI Employees exceeds the sum of all Net
Reimbursements for all KSI Employees, the Company shall, as of the applicable
Plan Separation Date, pay to KSI the amount of such excess. If the sum of all
Net Reimbursements for all KSI Employees exceeds the sum of all Net
Contributions for all KSI Employees, KSI shall, as of the Closing Date, pay to
the Company the amount of such excess.
(d) COBRA. The Company shall be responsible through the
applicable Plan Separation Date for compliance with the health care continuation
coverage requirements of COBRA and the Company Health and Welfare Plans with
respect to KSI Employees and qualified beneficiaries (as such term is defined
under COBRA). KSI shall be responsible for providing the Company with all
necessary employee change notices and related information for covered
dependents, spouses, qualified beneficiaries (as such term is defined under
COBRA), and alternate recipients pursuant to any QMCSO, in accordance with
applicable Company COBRA policies and procedures. Effective as of the applicable
Plan Separation Date, the Company shall be solely responsible for compliance
with the health care continuation coverage requirements of COBRA and the Company
Health and Welfare Plans for Company Employees and their qualified beneficiaries
(as such term is defined under COBRA). Effective as of the applicable Plan
Separation Date, KSI shall be solely responsible for compliance with the health
care continuation coverage requirements of COBRA and the KSI Health and Welfare
Plans for KSI Employees and their qualified beneficiaries (as such term is
defined under COBRA); provided, however, KSI may elect to retain the Company's
services in such manner and for such period as the Company and KSI may mutually
agree to assist it with COBRA administration and KSI shall reimburse the Company
for its costs and expenses associated with such administration, subject to
Section 8.1.
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5.2 INSURANCE PLANS
(a) KSI INSURANCE PLANS. Effective as of the Closing
Date, KSI shall assume and be solely responsible for all liabilities relating
to, arising out of, or resulting from claims by KSI Employees attributable to
employment with the KSI Business whether incurred before or after the Closing
Date. As of the Closing Date (or such other date(s) as the Company and KSI may
mutually agree), KSI shall establish Insurance Plans to provide benefits similar
to those of the Company Insurance Plans and, correspondingly, KSI shall be
solely responsible for the administration of the KSI Insurance Plans, including
the payment of all employer-related costs in establishing and maintaining the
KSI Insurance Plans, and for the collection and remittance of employee premiums,
subject to Section 8.1.
(b) INSURANCE PLANS THROUGH THE CLOSING DATE. Except as
otherwise agreed by the Company and KSI, for the period ending on the Closing
Date (or such other period as Company and KSI may mutually agree), KSI shall be
a Participating Company in the Company Insurance Plans. The Company shall
administer claims incurred under the Company Insurance Plans by KSI Employees
before the Closing Date but only to the extent that KSI has not, before such
date, established and assumed administrative responsibility for a corresponding
Insurance Plan. Any determination made or settlements entered into by the
Company with respect to such claims shall be final and binding. The Company
shall retain financial and administrative ("run-out") liability and all related
obligations and responsibilities for all claims incurred by KSI Employees before
the Closing Date (or such other date(s) as the Company and KSI may mutually
agree), including any claims that were administered by the Company as of, on, or
after the Closing Date (or such other date(s) as Company and KSI may mutually
agree). Except as set forth in the preceding sentence, KSI shall reimburse the
Company for any and all direct and indirect costs and expenses associated with
its participation in the Company Insurance Plans, subject to Section 8.1.
ARTICLE 6
EQUITY COMPENSATION
The stock options issued under Stock Plans of the Company and held by Company
Employees and KSI Employees as of the Closing Date shall be treated as directed
by a duly adopted resolution of the Company's board of directors in accordance
with the Company's articles of incorporation and bylaws.
ARTICLE 7
FRINGE AND OTHER BENEFITS
7.1 FRINGE BENEFITS:
(a) KSI FRINGE BENEFIT PLANS. Effective as of the Closing
Date, KSI shall assume and be solely responsible for all liabilities relating
to, arising out of, or resulting from KSI Employees' participation in fringe
benefit plans, programs, personnel policies and practices of the Company,
whether such liabilities are incurred before or after the Closing Date.
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As of the Closing Date (or such other date(s) as the Company and KSI may
mutually agree), KSI shall establish Fringe Benefit Plans to provide benefits
similar to those of the Company Fringe Benefit Plans and, correspondingly, KSI
shall be solely responsible for the administration of the KSI Fringe Benefit
Plans, including the payment of all employer-related costs in establishing and
maintaining the KSI Fringe Benefit Plans, subject to Section 8.1.
(b) FRINGE BENEFIT PLANS THROUGH THE CLOSING DATE. Except
as otherwise agreed by the Company and KSI, for the period ending on the Closing
Date (or such other period as the Company and KSI may mutually agree), KSI shall
be a Participating Company in the Company Fringe Benefit Plans. The Company
shall administer benefits under the Company Fringe Benefit Plans for KSI
Employees before the Closing Date (or such other date(s) as the Company and KSI
may mutually agree) but only to the extent that KSI has not, before such date,
established and assumed administrative responsibility for a corresponding Fringe
Benefit Plan. KSI shall reimburse the Company for any and all direct and
indirect costs and expenses associated with its participation in the Company
Fringe Benefit Plans, subject to Section 8.1.
7.2 OTHER BENEFIT PLANS. To the extent that the Company maintains,
sponsors or provides benefits other than those covered by Section 7.1 to its
eligible employees, then the Company shall, to the extent permitted by law,
continue to make such benefits available to KSI Employees on substantially
similar terms and conditions as are offered to Company Employees through the
Closing Date (or such other date upon which KSI and the Company mutually agree).
KSI shall reimburse the Company for any and all direct and indirect costs and
expenses associated with, arising out of, or resulting from the provision of
such other fringe benefits.
ARTICLE 8
ADMINISTRATIVE PROVISIONS
8.1 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS.
(a) EXPENSES AND COSTS CHARGEABLE TO A TRUST. Effective
as of the Closing Date, KSI shall pay its share of any contributions made to any
trust maintained in connection with a Company Plan while KSI is a Participating
Company in that Company Plan.
(b) CONTRIBUTIONS TO TRUSTS. With respect to Company
Plans to which KSI Employees make contributions, the Company shall use
reasonable procedures to determine KSI assets and liabilities associated with
each such Plan, taking into account such contributions, settlements, refunds and
similar payments.
(c) ADMINISTRATIVE EXPENSES NOT CHARGEABLE TO A TRUST.
Effective as of the Closing Date, to the extent not charged pursuant to the
Management Services Agreement entered into by the parties of even date herewith,
and to the extent not otherwise agreed to in writing by the Company and KSI, and
to the extent not chargeable to a trust established in connection with a Company
Plan (as provided in paragraph (a)), KSI shall be responsible, through either
direct payment or reimbursement to the Company, for its allocable
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share of actual third party, and/or vendor employee costs and expenses incurred
by the Company and additional costs and expenses, subject to the methodology
reasonably agreed upon by the Company and KSI, in the administration of (i) the
Company Plans while KSI participates in such Company Plans, and (ii) the KSI
Plans, to the extent the Company procures, prepares, implements and/or
administers such KSI Plans. To the extent not otherwise determinable through
direct allocation of costs and expenses, KSI's allocable share of such costs and
expenses will be based on the number of KSI Employees at the commencement of the
period for which costs are being allocated, as a percentage of the total number
of Company Employees and KSI Employees at such time.
8.2 SHARING OF PARTICIPANT INFORMATION. In addition to the
responsibilities and obligations of the Company and KSI specified in this
Agreement, the Company and KSI shall share, or cause to be shared, all
participant information that is necessary or appropriate for the efficient and
accurate administration of each of the Company Plans and the KSI Plans during
the respective periods applicable to such Plans (as KSI and the Company may
mutually agree). The Company and KSI and their respective authorized agents
shall, subject to applicable laws of confidentiality and data protection, be
given reasonable and timely access to, and may make copies of, all information
relating to the subjects of this Agreement in the custody of the other party or
its agents, to the extent necessary or appropriate for such administration.
8.3 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS. While
KSI is a Participating Company in the Company Plans, KSI shall take, or cause to
be taken, all actions necessary or appropriate to facilitate the distribution of
all Company Plan-related communications and materials to its employees,
participants and beneficiaries, including (without limitation) summary plan
descriptions and related summaries of material modification(s), summary annual
reports, investment information, prospectuses, notices and enrollment material
for the Company Plans and KSI Plans. KSI shall reimburse the Company for the
costs and expenses relating to the copies of all such documents provided to KSI.
KSI shall assist the Company in complying with all reporting and disclosure
requirements of ERISA, including the preparation of Form Series 5500 annual
reports for the Company Plans, as applicable.
8.4 AUDITS REGARDING VENDOR CONTRACTS. From the period beginning
as of the Closing Date and ending on December 31, 2004 (or such later date as
the Company and KSI may mutually agree), the Company and KSI and their duly
authorized representatives shall have the right to conduct joint audits with
respect to any vendor contracts that relate to both the Company Health and
Welfare Plans and the KSI Health and Welfare Plans. The scope of such audits
shall encompass the review of all correspondence, account records, claim forms,
cancelled drafts (unless retained by the bank), provider bills, medical records
submitted with claims, billing corrections, vendor's internal corrections of
previous errors and any other documents or instruments relating to the services
performed by the vendor under the applicable vendor contracts. The Company and
KSI shall agree on the performance standards, audit methodology, auditing policy
and quality measures, reporting requirements, and the manner in which costs and
expenses incurred in connection with such audits shall be shared.
8.5 EMPLOYEE IDENTIFICATION NUMBERS. Until the applicable Plan
Separation Date(s) (or such other period as the Company and KSI may mutually
agree), the
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Company and KSI shall not change any employee identification numbers assigned by
the Company. The Company and KSI mutually agree to establish a policy pursuant
to which employee identification numbers assigned to either employees of the
Company or KSI shall not be duplicated between the Company and KSI.
8.6 BENEFICIARY DESIGNATIONS. Subject to Section 8.9, all
beneficiary designations made by KSI Employees for the Company Plans shall be
transferred to and be in full force and effect under the corresponding KSI
Plans, in accordance with the terms of each such applicable KSI Plan, until such
beneficiary designations are replaced or revoked by the KSI Employees who made
the beneficiary designations.
8.7 REQUESTS FOR REGULATORY OPINIONS. The Company and KSI shall
make such applications to regulatory agencies, including the Internal Revenue
Service and Department of Labor, as may be necessary or appropriate. KSI and the
Company shall cooperate fully with one another on any issue relating to the
transactions contemplated by this Agreement for which the Company and/or KSI
elects to seek a determination letter or private letter ruling from the Internal
Revenue Service or an advisory opinion from the Department of Labor.
8.8 FIDUCIARY MATTERS. The Company and KSI each acknowledge that
actions contemplated to be taken pursuant to this Agreement may be subject to
fiduciary duties or standards of conduct under ERISA or other applicable law,
and that no party shall be deemed to be in violation of this Agreement if such
party fails to comply with any provisions hereof based upon such party's good
faith determination that to do so would violate such a fiduciary duty or
standard.
8.9 CONSENT OF THIRD PARTIES. If any provision of this Agreement
is dependent on the consent of any third party (such as a vendor) and such
consent is withheld, the Company and KSI shall use their commercially reasonable
best efforts to implement the applicable provisions of this Agreement. If any
provision of this Agreement cannot be implemented due to the failure of such
third party to consent, the Company and KSI shall negotiate in good faith to
implement such provision in a mutually satisfactory manner.
8.10 COMPANY INTRANET. Through the Closing Date (or such other date
as KSI and the Company may mutually agree), the Company shall make its Company
intranet site available to KSI Employees. KSI shall reimburse the Company for
any and all costs and expenses related to making its intranet site available to
KSI Employees. The Company and KSI shall use their commercially reasonable best
efforts to mutually agree on the appropriate methods by which KSI shall
establish its own intranet site.
ARTICLE 9
EMPLOYMENT-RELATED MATTERS
9.1 TERMS OF KSI EMPLOYMENT. All basic terms and conditions of
employment for KSI Employees including, without limitation, their pay and
benefits in the aggregate, shall, to the extent legally and practicably
possible, remain substantially the same through the applicable Plan Separation
Date(s) as the terms and conditions that were in place when the KSI Employee
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was employed by the Company, as applicable. Notwithstanding the foregoing, KSI
Employees shall be required to execute a new agreement regarding confidential
information and proprietary developments in a form approved by KSI by the
Closing Date. In addition, nothing in this Agreement shall be construed to
change the at-will status of the employment of any of the employees of the
Company or KSI.
9.2 [Omitted]
9.3 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS. KSI shall
request amendments to the nonimmigrant visa status of KSI Employees with U.S.
work visas authorizing them to work for the Company, to request authorization to
work for KSI.
9.4 CONFIDENTIALITY AND PROPRIETARY INFORMATION. No provision of
this Agreement shall be deemed to release any individual for any violation of
the Company non-competition guideline or any agreement or policy pertaining to
confidential or proprietary information of the Company, or otherwise relieve any
individual of his or her obligations under such non-competition guideline,
agreement, or policy.
9.5 PERSONNEL RECORDS. Subject to applicable laws on
confidentiality and data protection, the Company shall deliver to KSI prior to
the Closing Date (or such other date as the Company and KSI may mutually agree),
personnel records of KSI Employees to the extent such records relate to KSI
Employees' active employment by, leave of absence from, or termination of
employment with KSI. KSI shall fully reimburse Company for any and all direct
and indirect costs and expenses associated with such delivery, subject to
Section 8.1.
9.6 MEDICAL RECORDS. Subject to applicable laws on confidentiality
and data protection, the Company shall deliver to KSI prior to the Closing Date
(or such other date as the Company and KSI may mutually agree), medical records
of KSI Employees to the extent such records relate to KSI Employees' active
employment by, leave of absence from, or termination of employment with KSI. KSI
shall fully reimburse the Company for any and all direct and indirect costs and
expenses associated with such delivery, subject to Section 8.1.
9.7 UNEMPLOYMENT INSURANCE PROGRAM. Unless otherwise directed by
KSI, the Company shall use its commercially reasonable best efforts to cause KSI
to receive service from the Company's third party unemployment insurance
administrator through Closing Date (or such other date as the Company and KSI
may mutually agree). KSI shall reimburse the Company for its allocable share of
fees paid and related costs and expenses by the Company to its third party
unemployment insurance administrator for services rendered during such period.
KSI shall cooperate with the unemployment insurance administrator by providing
any and all necessary or appropriate information reasonably available to KSI.
9.8 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES.
No provision of this Agreement shall be construed to create any right or
accelerate entitlement to any compensation or benefit whatsoever on the part of
any Company Employee, KSI Employee or other former, present or future employee
of the Company or KSI under any Company Plan or KSI Plan or otherwise. Without
limiting the generality of the foregoing: (a) neither the Distribution, nor the
termination of the Participating Company status of
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KSI shall cause any employee to be deemed to have incurred a termination of
employment; and (b) no transfer of employment between the Company and KSI before
the Closing Date shall be deemed a termination of employment for any purpose
hereunder.
9.9 EMPLOYMENT LITIGATION.
(a) CLAIMS TO BE TRANSFERRED TO KSI AND/OR JOINTLY
DEFENDED BY THE COMPANY AND KSI. On or before the Closing Date, the Company and
KSI shall enter into a written agreement that specifies the legal responsibility
and accompanying liability for any identified claims of KSI.
(b) UNSCHEDULED CLAIMS. KSI shall have the sole
responsibility for all employment-related claims regarding KSI Employees that
exist, or come into existence, on or after the Closing Date relating to, arising
out of, or resulting from their employment with KSI.
ARTICLE 10
GENERAL PROVISIONS
10.1 EFFECT OF DISTRIBUTION. Subject to Section 10.9, if the
Distribution does not occur, then all actions and events that are, under this
Agreement, to be taken or to occur effective as of the Closing Date and/or
applicable Plan Separation Date(s), shall not be taken or occur except to the
extent specifically agreed by the parties.
10.2 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, the understanding and agreement being that no provision contained
herein, and no act of the parties, shall be deemed to create any relationship
between the parties other than the relationship set forth herein.
10.3 SUBSIDIARIES. Each party shall cause to be performed and
hereby guarantees the performance of any and all of its actions and those of its
subsidiaries (as such subsidiaries exist immediately following the
Distribution).
10.4 GOVERNING LAW; DISPUTE RESOLUTION. To the extent not preempted
by applicable federal law, including, without limitation, ERISA, the Code and
applicable securities laws, this Agreement shall be construed in accordance with
the laws of the State of California, excluding its conflict of law rules and the
United Nations Convention on Contracts for the International Sale of Goods. The
Superior Court of Santa Xxxxx County, California and/or the United States
District Court for the Northern District of California, San Xxxx Division, shall
have jurisdiction and venue over all disputes between the parties that are
permitted to be brought in a court of law pursuant to Article VII of the
Separation Agreement. The terms of Article VII of the Separation Agreement shall
govern with respect to all disputes, claims and controversies under this
Agreement.
10.5 ASSIGNMENT. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns, and nothing in this Agreement, express or
implied, is intended to confer upon any other
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Person any rights or remedies of any nature whatsoever under or by reason of
this Agreement. Except as herein specifically provided to the contrary, a party
may not assign this Agreement or any rights or obligations hereunder (including,
without limitation, in connection with a sale of all or substantially all of
such party's assets), without the prior written consent of each of the other
parties hereto.
10.6 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
10.7 TITLES AND HEADINGS. Titles and headings to Sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
10.8 AMENDMENT. This Agreement may not be altered or amended, nor
may rights hereunder be waived, except by an instrument in writing executed by
the party or parties to be charged with such amendment or waiver. No waiver of
any terms, provision or condition of or failure to exercise or delay in
exercising any rights or remedies under this Agreement, in any one or more
instances shall be deemed to be, or construed as, a further or continuing waiver
of any such term, provision, condition, right or remedy or as a waiver of any
other term, provision or condition of this Agreement.
10.9 TERMINATION. This Agreement may be terminated and the
Distribution may be deferred, modified or abandoned at any time prior to Closing
Date, by and in the sole discretion of the Board of Directors of the Company
without the approval of KSI. In the event of such termination, no party hereto
(or any of its respective directors or officers) shall have any liability to any
other party pursuant to this Agreement.
10.10 CONFLICT. In the event of any conflict between the provisions
of this Agreement and any Plan, the provisions of this Agreement shall control.
10.11 COUNTERPARTS. This Agreement, including the Schedules hereto
and the other documents referred to herein, may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
10.12 FORCE MAJEURE. A party shall not be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by a party's employees, or any other similar cause beyond the
reasonable control of a party unless such delay or failure in performance is
expressly addressed elsewhere in this Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Employee Matters
Agreement to be executed on its behalf by its officers hereunto duly authorized
on the day and year first above written.
KINETICS GROUP, INC.
By: /s/ Xxxx Xxxxxxx
______________________________
Name:
Title:
KINETIC SYSTEMS, INC.
By: /s/ Xxxx Xxxxxxx
______________________________
Name:
Title:
[EMPLOYEE MATTERS SIGNATURE PAGE]
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