Exhibit 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
October 8, 2003 by and between Kinetics Holdings Corporation, a Delaware
corporation (the "Employer," "Kinetics" or "Company"), and Xxxx X. Xxxxxx (the
"Employee").
WHEREAS, Employer, a current employee of Kinetics, desires to retain
the services of Employee, and Employee desires to continue to provide
his services in exchange for compensation, Employer' hereby agrees that
it shall offer to continue to employ Employee, and Employee agrees that
he shall accept such continued employment, under the terms and
conditions hereinafter set forth, the parties hereby agree as follows.
1. Position and Title. Employee will be employed by Kinetics as
its Chief Financial Officer upon the date hereof (the
"Effective Date") and continuing thereafter until December 31,
2005 (the "Term"), or until earlier termination pursuant to
Section 6. Employee will have overall responsibility for the
management of the Company's financial and administrative
affairs, and such other duties as the Company may reasonably
require, and shall report directly to its Chief Executive
Officer (the "CEO"). Employee will be expected to devote
Employee's full working time and attention to the business of
Kinetics, and Employee will not render services to any other
business without the prior approval of the CEO or, directly or
indirectly, engage or participate in any business that is
competitive in any manner with the business of Kinetics.
Employee will also be expected to comply with and be bound by
the Company's operating policies, procedures and practices
that are from time to time in effect during the term of
Employee's employment.
2. Cash Compensation.
Base Salary. Employee's annual base salary is $292,500. Employee's
annual base salary shall be reviewed and increased from time to time at
the discretion of the CEO, in consultation with the Compensation
Committee
Bonus Compensation. Employee's cash bonus for 2003 shall be $200,000,
and shall be payable upon the execution hereof. Employee's performance
bonus in each of 2004 and 2005 shall be earned on the basis of
employee's performance against a defined set of metrics, to be
determined through agreement by the Employee and the CEO (in
consultation with the Compensation Committee), and shall be in writing.
For such periods, Employee would be eligible for a bonus equal to
30%-120% of his then-current base salary. Eligibility for the 2004 and
2005 bonus shall be dependant upon continued employment including being
on the payroll on the last day of each year. All unpaid amounts of
Employee's annual bonus shall be paid not later than the 91st day of
the following year.
3. Vacation: Employee shall be eligible for three (3) weeks of vacation
annually, which shall accrue pursuant to the Company's normal vacation
accrual policy.
4. Other Benefits. Employee will be eligible for the normal health
insurance, 401(k), any employee stock purchase plan and other benefits
that are offered to all Kinetics senior executives of similar rank and
status.
5. Stock Options. Employee shall be eligible to participate in the
Company's employee equity compensation programs at a level consistent
with that of other Kinetics senior executives of similar rank and
status and as provided by the program or plan.
6. Employment and Termination. Employee's employment with Kinetics will be
at-will and may be terminated by Employee or by Kinetics at any time
for any reason. Employee may terminate his employment upon written
notice to the CEO for any reason, including "Good Reason," as provided
below;
a. Employee may terminate his employment upon written
notice to the CEO at any time at Employee's discretion
without Good Reason ("Voluntary Termination");
b Employee may terminate his employment upon written
notice to the CEO at any time at Employee's discretion
with Good Reason (an "Constructive Termination");
c. Kinetics may terminate Employee's employment upon
written notice to Employee at any time following a
determination by the CEO, the Compensation Committee or
the Board, upon a finding that there is "Cause," as
defined below, For such termination ("Termination for
Cause");
d. Kinetics may terminate Employee's employment upon
written notice to Employee at any time in the sole
discretion of the CEO, the Compensation Committee or the
Board, without a determination that there is Cause for
such termination ("Termination without Cause");
e. Employee's employment will automatically terminate upon
Employee's death or upon Employee's disability as
determined by the Company ("Termination for Death or
Disability"); provided that "disability" shall mean
Employee's inability to perform Employee's essential job
responsibilities with or without reasonable
accommodation Due to the critical importance of this
position to the Company, it is agreed that it would be
an undue hardship for the Employee to be on a medical
leave of absence for a period exceeding 180 consecutive
days or 180 days in the aggregate in any 12-month
period.
7. Definitions. As used in this Agreement, the following terms have the
following meanings:
a. "Good Reason" means:
i. a material reduction in Employee's duties
that is inconsistent with Employee's
position as Chief Financial Officer of
Kinetics or a change in Employee's
reporting relationship such that Employee
no longer report directly to the CEO;
ii. Employee's no longer being Chief Financial
Officer of Kinetics or, in the case of a
Change in Control, of the surviving entity
or acquirer that results from any Change in
Control;
iii. any reduction in Employee's base annual
salary or target bonus (other than in
connection with a general decrease in the
salary or target bonuses for all officers
of Kinetics) without Employee's consent;
iv. a material breach by Kinetics of any of
its obligations hereunder after providing
Kinetics with written notice and an
opportunity to cure within 30 business
days;
v. a requirement by Kinetics that Employee
relocate Employee's principal office to a
facility more than 50 miles from Kinetics'
current headquarters; or
vi. failure of any successor to assume this
agreement pursuant to Section 14(b) below.
b. "Cause" means:
x. xxxxx negligence or willful misconduct in
the performance of Employee's duties to
Kinetics that has resulted or is likely to
result in substantial and material damage
to Kinetics. No act or failure to act by
Employee shall be considered "willful" if
done or omitted by Employee in good faith
with reasonable belief that Employee's
action or omission was in the best
interests of Kinetics.
ii. material failure in the performance of
Employee's duties to Kinetics (other than
gross negligence or willful misconduct
described above) after a written demand for
substantial performance is delivered to
Employee by the Company which specifically
identifies the manner in which the Company
believes Employee have not substantially
performed Employee's duties and Employee
have been provided with a reasonable
opportunity, of not less than 30 days, to
cure any alleged material failure in
performance;
iii. commission of any act of fraud with
respect to Kinetics; or
iv. conviction of a felony or a crime
involving moral turpitude either of which
causes or reasonably could cause material
harm to the business and affairs of
Kinetics.
c. "Change in Control" means
i. The acquisition (other than from the
Company) by any person, entity or "group",
within the meaning of section 13(d) (3) or
14 (d) (2) of the Securities and Exchange
Act of 1934 (the "Exchange Act"),
(excluding, for this purpose, Kinetics or
its subsidiaries, or any employee benefit
plan of Kinetics or its subsidiaries which,
or any current holder of more than 5% of
the Company's outstanding securities whom
acquires beneficial ownership of voting
securities of Kinetics) of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50%
or more of either the then outstanding
shares of common stock or the combined
voting power of the Kinetics' then
outstanding voting securities entitled to
vote generally in the election of
directors; or
ii. the individuals who, as of the date
hereof, constitute the Board (the
"Incumbent Board") cease for any reason to
constitute at least a majority of the
Board, provided that any person becoming a
director subsequent to the date hereof
whose election, or nomination for election
by Kinetics' shareholders, was approved by
a vote of at least a majority of the
directors then comprising the Incumbent
Board (other than an election or nomination
of an individual whose initial assumption
of the office is in connection with an
actual or threatened election contest
relating to the election of the directors
of Kinetics, as such terms are used in Rule
14a-l1 of Regulation 14A promulgated under
the Exchange Act) shall be, for the
purposes of this Agreement, considered as
though such person were a member of the
Incumbent Board; or
iii. Approval of the stockholders of Kinetics
of a reorganization, merger or
consolidation, in each case, with respect
to which persons who were the stockholders
of Kinetics immediately prior to such
reorganization, merger or consolidation do
not, immediately thereafter, own more than
50% of the combined voting power entitled
to vote generally in the election of
directors of the reorganized, merged or
consolidated company's then outstanding
voting securities, or a liquidation or
dissolution of Kinetics or of the sale of
all or substantially all of the assets of
Kinetics.
8. Separation Benefits. Upon termination of Employee's employment with
Kinetics for any reason, Employee will receive payment for all unpaid
salary and vacation accrued to the date of Employee's termination of
employment; and Employee's benefits will be continued under Kinetics'
then existing benefit plans and policies for so long as provided under
the terms of such plans and policies and as required by applicable law.
Under certain circumstances, subject to Employee's execution of a
termination and general release agreement, Employee will also be
entitled to receive severance benefits as set forth below. Kinetics'
termination and general release agreement will contain provisions
specifying that Employee will not solicit employees for a period of one
year after any final payment, that Employee shall not compete to the
extent legally enforceable while receiving payments from the Employer,
that the termination and general release agreement shall be
confidential, that neither Employee nor Kinetics shall disparage the
other party, and that Employee shall have no waivable claims against
Kinetics that survive that agreement, other than as set forth in
Section 13, below. Within sixty days of the signing of this Agreement
the parties shall agree upon a model termination and general release
agreement available to be used in conjunction with this Section.
9. Severance Benefits.
a. In the event of a Voluntary Termination or a Termination
for Cause, Employee will not be entitled to Severance
Benefits. In the event of Employee's Constructive
Termination or Termination without Cause during the Term
of this Agreement after September 30, 2003, Employee
will be entitled to:
i. A severance payment equal to eighteen
months of Employee's then-current annual
base salary. All amounts due under this
Section 9 shall be payable as follows: 20%
within seven days, 30% within 60 days, and
the remaining unpaid balance within 180
days from the date of such termination, in
accordance with Kinetics' normal payroll
practices with such payroll deductions and
withholdings as are required by law,
provided, that Employee provide Kinetics
with reasonable transition services during
such period after the date of termination;
and
ii. Accelerated vesting and exercisability of
that portion of Employee's outstanding
unvested options to purchase Kinetics
Common Stock that would have vested within
two years from the date of the Constructive
Termination or Termination without Cause,
with all vested options exercisable for a
period of two years from the date of
Employee's Constructive Termination or
Termination without Cause.
For the purpose of this agreement, termination by death or disability
shall not create eligibility for the severance benefits provided for a
Constructive Termination or a Termination Without Cause.
b. If Employee's severance and other benefits provided for
in this Section 9 constitute "parachute payments" within
the meaning of Section 280G of the Code and, but for
this subsection, would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code,
then Employee's severance and other benefits under this
Section 9 will be payable, at Employee's election,
either in full or in such lesser amount as would result,
after taking into account the applicable federal, state
and local income taxes and the excise tax imposed by
Section 4999, in Employee's receipt on an after-tax
basis of the greatest amount of severance and other
benefits.
c. No payments due Employee hereunder shall be subject to
mitigation or offset.
10. Indemnification Agreement. Within 60 days of the Effective Date,
Kinetics will enter into a standard form of indemnification agreement
for officers and directors to indemnify Employee against certain
liabilities Employee may incur as an officer or director of Kinetics.
It is intended that this agreement will provide for the maximum
indemnification reasonably available for acts or failure to act when
the conduct is within the scope of the officer's or director's actual
or apparent authority.
11. No Solicitation. During the term of Employee's employment with Kinetics
and for one year thereafter, Employee will not, on behalf of Employee
or any third party, solicit or attempt to induce any employee of
Kinetics to terminate his or her employment with Kinetics.
12. Arbitration. The parties agree that any dispute regarding the
interpretation or enforcement of this agreement shall be decided by
confidential, final and binding arbitration conducted by Judicial
Arbitration and Mediation Services ("JAMS") under the then existing
JAMS rules rather than by litigation in court, trial by jury,
administrative proceeding or in any other forum. The filing fees and
arbitrator's fees and costs in such arbitration will be borne by
Kinetics. The parties will be entitled to reasonable discovery of
essential matters as determined by the arbitrator. In the arbitration,
the parties will be entitled to all remedies that would have been
available if the matter were litigated in a court of law.
13. Survival. In the event that this Agreement expires or is terminated,
Kinetics' payment obligations to Employee as set forth herein shall
survive such expiration or termination. Following the expiration
hereof, any continuation of Employee's employment with the Company
shall be unaffected by the terms hereof, and shall be upon terms
determined by the Company and subject to the Company's regular
employment policies applicable to other senior executives of Kinetics.
14. Miscellaneous.
a. Attorneys Fees. If a legal action or other proceeding is
brought for enforcement of this agreement because of an
alleged dispute, breach, default, or misrepresentation in
connection with any of the provisions of this agreement,
the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs incurred, both before
and after judgment, in addition to any other relief to
which they may be entitled.
b. Successors. This agreement is binding on and may be
enforced by Kinetics and its successors and assigns and is
binding on and may be enforced by Employee and Employee's
heirs and legal representatives. Any successor to Kinetics
or substantially all of its business (whether by purchase,
merger, consolidation or otherwise) will in advance assume
in writing and be bound by all of Kinetics' obligations
under this agreement.
c. Notices. Notices under this agreement must be in writing
and will be deemed to have been given when personally
delivered or two days after mailed by U.S. registered or
certified mail, return receipt requested and postage
prepaid. Mailed notices to Employee will be addressed to
Employee at the home address that Employee has most
recently communicated to Kinetics in writing. Notices to
Kinetics will be addressed to its CEO with copy to the
Chief Financial Officer at Kinetics' corporate
headquarters.
d. Waiver. No provision of this agreement will be modified or
waived except in writing signed by Employee and an officer
of Kinetics duly authorized by its Board of Directors.
No waiver by either party of any breach of this agreement by
the other party will be considered a waiver of any other
breach of this agreement.
e. Entire Agreement. This agreement, along with the
Confidentiality, Development and Nondisclosure Agreement
between Employee and the Company dated on or about February
28, 2000, represents the entire agreement between us
concerning the subject matter of Employee's employment by
Kinetics, unless otherwise referenced in this Agreement
f. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not
affect the validity and enforceability of the other provisions
hereof. If any provision of this Agreement is unenforceable
for any reason whatsoever, such provision shall be
appropriately limited and given effect to the extent that it
may be enforceable.
g. Governing Law. This agreement will be governed by the laws of
the State of California without reference to conflict of laws
provisions.
The parties hereto acknowledge and agree to the terms of this Agreement by their
signatures below, effective as of the date first written above.
KINETICS GROUP, INC. EMPLOYEE
/s/ XXXXX X. XXXXXXX /s/ XXXX X. XXXXXX
---------------------------- -----------------------------
Xxxxx X. Xxxxxxx, CEO Xxxx X. Xxxxxx
Acknowledged & Agreed this_____________day of October 2003 by the Compensation
Committee of the Company's Board of Directors.
/s/ XXXXXXX XXXXXXX
------------------------------
Xxxxxxx Xxxxxxx, Member
