Exhibit 2.07
EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT is entered into effective as of
_________, 2002, between Celerity Group, Inc., a Delaware corporation (the
"COMPANY", formerly known as Kinetics Holdings Corporation), Kinetic Systems,
Inc., a California corporation ("KSI"), and Kinetics Biopharm, Inc., a
Delaware corporation ("KBI").
WHEREAS, the Company, KSI and KBI have agreed to enter into this Agreement
to allocate between them assets, liabilities and responsibilities with respect
to certain employee compensation, 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 the
Schedules hereto, 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 Distribution 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 Distribution Date, is not a KSI
Employee or KBI Employee; or (c) an employee or group of employees designated as
Company Employees by the Company and KSI or KBI, as the case may be.
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 "DISTRIBUTION DATE" has the meaning set forth in the Separation
Agreement.
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 (as set forth in Article 7 and Schedule 7.1) 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 listed on Schedule 5.1 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 listed on Schedule 5.1 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
Distribution 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 "INITIAL PUBLIC OFFERING" has the meaning set forth in the
Separation Agreement.
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 as set forth in Schedule 5.2. 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 "KBI EMPLOYEE" means any individual who is: (a) either actively
employed by, or on leave of absence from, KBI or a subsidiary of KBI on or at
any time after the Distribution Date; (b) either actively employed by, or on
leave of absence from, the Company or KSI as either part of a work group or
organization, or common support function that, at any time before the
Distribution Date, moves to the employ of KBI from the employ of the Company or
KSI; (c) any other employee or group of employees designated as KBI Employees
(as of the specified date) by the Company and KBI 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 KBI Employee with
respect to any benefits he or she accrues or has accrued under any applicable
Plan(s), unless he or she is a KBI Employee by virtue of (a) through (c).
1.20 "KSI BUSINESS" and "KBI BUSINESS" have the meanings set forth in the
Separation Agreement.
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 Distribution Date; (b) either actively employed by, or on
leave of absence from, the Company or KBI as either part of a work group or
organization, or common support function that, at any time before the
Distribution Date, moves to the employ of KSI from the employ of the Company or
KBI; (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.
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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, KSI or KBI.
1.26 "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.
1.27 "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.
1.28 "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.
1.29 "SEPARATION AGREEMENT" means Separation Agreement dated the date
hereof between the Company, KSI and KBI.
1.30 "STOCK PLAN" means any plan, program, or arrangement, pursuant to
which employees and other service providers hold stock options, restricted stock
(stock that is subject to transfer restrictions or to employment and/or
performance vesting conditions) or other equity incentives.
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 Distribution 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,
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KSI Employees relating to, arising out of, or resulting from future, present or
former employment with the KSI Business (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 Distribution 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 Distribution 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
DISTRIBUTION DATE. To the extent that KSI is a Participating Company in any
Company Plan prior to the Distribution Date, 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
Distribution Date, 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.
(d) TERMINATION OF PARTICIPATING COMPANY STATUS. Except as otherwise
may be mutually agreed upon by the Company and KSI, effective as of the
Distribution Date, KSI shall automatically cease to be a Participating Company
in the corresponding Company Plans.
2.3 ESTABLISHMENT OF KSI PLANS.
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Except as otherwise provided herein, KSI shall adopt certain Plans, as
described in Articles 3 through 7, as of the Distribution Date or as the Company
and KSI may mutually agree. Except as specified otherwise in this Agreement,
nothing in this Agreement shall preclude KSI at any time after the Distribution
Date, from amending, merging, modifying, terminating, eliminating, reducing, or
otherwise altering in any respect any KSI Plan, any benefit under any KSI Plan
or any trust, insurance policy or funding vehicle related to any 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 Distribution Date, the 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
Distribution Date, were recognized under the corresponding Company Plan shall,
as of the Distribution 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 long-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 later
of the Distribution Date or the end of the Post-Distribution Period, as
applicable, the management of the Plans shall be conducted under the supervision
of the Company's Chief Financial Officer, Company's Vice President of Human
Resources 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
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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. Without in any way limiting the general principle
set forth in the preceding sentence, Schedule 2.6 sets forth the manner in which
certain existing Company Foreign Plans in non-U.S. jurisdictions shall be
handled, effective as of the Distribution Date (or such other date(s)) as the
Company and KSI may mutually agree) consistent with the provisions of this
Section 2.6 or as permitted under applicable local law.
2.7 RIGHTS AND OBLIGATIONS OF KBI AND KBI EMPLOYEES. KBI shall have the
same rights, duties, responsibilities, liabilities and obligations with respect
to the KBI Employees and KBI Business as KSI has with respect to the KSI
Employees and KSI Business under Articles 2 through 9 of this Agreement, except
that KBI shall not be required to establish any Plans or take actions related
thereto (e.g., as is required of KSI in Sections 2.3, 3.1, 4.1(a), 5.1(a),
5.1(c), 5.2(a) and 7.1(a)). Notwithstanding that new Plans shall be established
by KSI (and not KBI) upon or following the Distribution, the parties intend that
KBI Employees be entitled to the same treatment as KSI Employees with respect to
the benefits and other matters that are the subject of this Agreement and that
KBI Employees be entitled to participate in the same manner as KSI Employees in
any Company Plans or KSI Plans. KSI and KBI shall enter into such further
agreements and arrangements and take such other actions as may be necessary or
appropriate to allow such participation by KBI Employees in the KSI Plans and to
provide for the respective rights, duties, responsibilities, liabilities of KSI
and KBI in connection therewith.
ARTICLE 3
401(K) PLAN
3.1 401(k) PLAN. Effective as of the Distribution Date (or such other date
as the Company and KSI may mutually agree), 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 matching contributions and
discretionary profit sharing contributions. To the extent that KSI makes a
discretionary profit sharing contribution to the KSI 401(k) Plan for 2002, it
shall make such contribution with respect to compensation of plan participants
that was earned from the Company and KSI during 2002.
3.2 TRANSFER OF ACCOUNTS FROM COMPANY 401(k) PLAN. As of a date as soon as
practicable after the Distribution Date (or such other date as the Company and
KSI may mutually agree (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.
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ARTICLE 4
NON-QUALIFIED PLANS
4.1 DEFERRED COMPENSATION PLANS.
(a) ESTABLISHMENT OF KSI RABBI TRUST. Effective on or before the
Distribution Date (or such other date as the Company and KSI may mutually
agree), 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 policies of insurance (the "POLICIES") on the
lives of participants in the Company Deferred Compensation Plan as a means of
funding the benefit liabilities to participants thereunder. As of the
Distribution 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 under the Policies
that insure the lives of KSI Employees. Coincident with such transfer of the
Policies, 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 Distribution Date (or such other date as the Company and KSI may mutually
agree), 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 Distribution Date (or such other date as the
Company and KSI may mutually agree).
ARTICLE 5
HEALTH AND WELFARE PLANS
5.1 HEALTH PLANS.
(a) KSI HEALTH PLANS. As of the Distribution Date (or such other
date(s) and the Company and KSI may mutually agree), KSI shall establish the KSI
Health Plans similar to the Company Health Plans listed on Schedule 5.1 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 DISTRIBUTION DATE. Except as otherwise
agreed by the Company and KSI, until the Distribution Date, KSI shall be a
Participating Company in the Company Health Plans listed in Schedule 5.1. The
Company shall administer claims incurred under the Company Health Plans by KSI
Employees before the Distribution 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 Distribution Date (or such other date(s) as
the Company
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and KSI may mutually agree), including any claims that were administered by
Company as of, on, or after ________________ (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 Distribution Date, subject to Section 8.1.
(c) SECTION 125 PLAN. Through the Distribution Date (or such other
date as the Company and KSI may mutually agree), 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 Distribution Date (or such other date as Company and KSI may
mutually agree). Effective on the day after the Distribution Date (or such other
date immediately following the date that KSI's participation in the Company
Section 125 Plan terminates), 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 Distribution Date, the Company shall assign and transfer to
KSI the rights and obligations of the Company under the medical and dependent
care flexible spending accounts maintained on behalf of KSI Employees pursuant
to the KSI Section 125 Plan. As of the Distribution Date, the Company and KSI
shall determine, with respect to each KSI Employee as of the Distribution 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, 2002 and the Distribution 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 Distribution
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 Distribution Date, pay to the Company the amount
of such excess.
(d) COBRA. The Company shall be responsible through the Distribution
Date (or such other date as Company and KSI may mutually agree) 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 Distribution Date (or such other date as the Company and KSI may mutually
agree), 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 Distribution Date (or such
other date as the Company and KSI may mutually agree), 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
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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.
5.2 INSURANCE PLANS
(a) KSI INSURANCE PLANS. Effective as of the Distribution 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 Distribution Date. As
of the Distribution 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 listed on Schedule 5.2 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 DISTRIBUTION DATE. Except as
otherwise agreed by the Company and KSI, for the period ending on the
Distribution Date (or such other period as Company and KSI may mutually agree),
KSI shall be a Participating Company in the Company Insurance Plans listed in
Schedule 5.2. The Company shall administer claims incurred under the Company
Insurance Plans by KSI Employees before the Distribution 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
Distribution 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 Distribution 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 treatment of options and restricted stock issued under Stock
Plans of the Company and held by Company Employees and KSI Employees as of the
Distribution Date shall be as described in Schedule 6.
ARTICLE 7
FRINGE AND OTHER BENEFITS
7.1 FRINGE BENEFITS:
(a) KSI FRINGE BENEFIT PLANS. Effective as of the Distribution Date,
KSI shall assume and be solely responsible for all liabilities relating to,
arising out of, or
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resulting from KSI Employees' participation in fringe benefit plans, programs,
personnel policies and practices of Company listed on Schedule 7.1, whether such
liabilities are incurred before or after the Distribution Date. As of the
Distribution 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 listed on Schedule 7.1 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 DISTRIBUTION DATE. Except as
otherwise agreed by the Company and KSI, for the period ending on the
Distribution 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
listed in Schedule 7.1. The Company shall administer benefits under the Company
Fringe Benefit Plans for KSI Employees before the Distribution Date 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 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 specified in Schedule 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
Distribution 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 Distribution 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 Distribution 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
11
responsible, through either direct payment or reimbursement to the Company, for
its allocable share of actual third party and/or vendor 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
Distribution Date and ending on ____________________ (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.
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8.5 EMPLOYEE IDENTIFICATION NUMBERS. Until the Distribution Date (or such
other period as the Company and KSI may mutually agree), the 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 Distribution 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, subject to the Management Services Agreement. 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
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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 Distribution Date as the terms and conditions
that were in place when the KSI Employee or KSI Employee 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 Distribution 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 HR DATA SUPPORT SYSTEMS. [The Company shall provide human resources
data support for KSI Employees through __________________ (or such other period
as the Company and KSI may mutually agree). KSI agrees to fully reimburse the
Company for any and all direct and indirect costs and expenses associated with
its use of the Company human resources data support systems, subject to Section
8.1. In the event that the Company and KSI agree to extend the time period
beyond ___________________, then the costs and expenses shall be computed in
accordance with Section 8.1. The Company and KSI each reserves the right to
discontinue KSI's access to any Company human resources data support systems
with sixty (60) days' notice (or such other period as Company and KSI may
mutually agree).]
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 Distribution 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 Distribution Date
(or such other date as the Company and KSI may mutually agree), medical records
of KSI Employees to the extent such records (a) 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
14
_____________ (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, pursuant to the
Management Services Agreement. 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 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 Distribution 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 Distribution 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 Distribution Date relating to, arising out of, or
resulting from their employment with KSI.
ARTICLE 10
GENERAL PROVISIONS
10.1 EFFECT IF DISTRIBUTION AND/OR INITIAL PUBLIC OFFERING AND/OR
DISTRIBUTION. Subject to Section 10.9, if the Initial Public Offering and/or
Distribution does not occur, then all actions and events that are, under this
Agreement, to be taken or to occur effective as of the Distribution Date and/or
Closing Date, 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).
15
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 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
and/or the Initial Public Offering may be deferred, modified or abandoned at any
time prior to Distribution Date or the Closing Date, as applicable, by and in
the sole discretion of the Board of Directors of the Company without the
approval of KSI or KBI. 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.
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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.
IN WITNESS WHEREOF, each of the parties have 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.
CELERITY GROUP, INC. (formerly
known as Kinetics Holdings
Corporation)
By: __________________________________
Name:
Title:
KINETIC SYSTEMS, INC.
BY: __________________________________
Name:
Title:
KINETICS BIOPHARM, INC.
By: __________________________________
Name:
Title:
[SIGNATURE PAGE TO EMPLOYEE MATTERS AGREEMENT]
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[SCHEDULES (OTHER THAN THE ATTACHED SCHEDULE 6) TO BE AGREED TO BY THE
PARTIES ON OR BEFORE THE DISTRIBUTION DATE.]
18
