EXHIBIT 10.13
 
                       [Color Kinetics Incorporated Logo]
 
                                                              September 14, 2001
 
Mr. William J. Sims
20 Brook Avenue
Montvale, NJ 07645
 
Re: Severance Eligibility
 
Dear Bill:
 
         In connection with your "at-will" employment offer by Color Kinetics,
Inc. ("Color Kinetics" or the "Company"), Color Kinetics agrees to provide you
with eligibility for the severance benefits set forth in this letter agreement
(the "Agreement") if your employment is terminated under the circumstances
described below:
 
         1.       AT-WILL EMPLOYMENT. This Agreement is not a contract to employ
you for a definite time period, and is not intended to be and does not
constitute a contract or part of a contractual agreement for continued
employment, either express or implied, between the Company and you, it being
acknowledged that your employment is "at will" and that either you or Color
Kinetics may terminate the employment relationship at any time, for any or no
reason, with or without "Cause" (as defined herein) and with or without prior
notice.
 
         2.       NOTICE OF TERMINATION AND OTHER MATTERS. Any termination of
your employment, whether by you or Color Kinetics, will be communicated by
written notice ("Notice of Termination") to the other party. All notices
provided for in this Agreement will be in writing and will be effective when
delivered or mailed by U.S. mail, postage prepaid, addressed to Color Kinetics,
10 Milk Street, Suite 1100, Boston, MA 02108, and to you at the address shown
above or to such other address as either Color Kinetics or you may have
furnished to the other in writing.
 
         3.       SEVERANCE PAYMENTS AND BENEFITS UPON A QUALIFIED TERMINATION.
 
         (a) Color Kinetics will provide you with the severance payments listed
below only in the event of a Qualified Termination and provided that you
continue to adhere to any post-termination obligations including, but not
limited to, any noncompetition, non-disclosure and non-solicitation covenants. A
"Qualified Termination" means your employment is terminated for any reason
including resignation for "Good Reason" OTHER than because (i) you die or become
Disabled, (ii) Color Kinetics terminates you for "Cause," (iii) you resign
(other than for "Good Reason") or (iv) the Company completely ceases and/or
discontinues its primary operations for a period in excess of one week.
 
         If a Qualified Termination occurs, you will be eligible to receive
severance pay, in equal monthly installments at your monthly base salary rate in
effect immediately prior to the Qualified Termination for twelve months from the
date of the Qualified Termination. Under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"). If you elect after the Separation Date and
in accordance with the provisions of COBRA to continue health coverage under the
same plans available to active Company employees, under the same rules,
restrictions and regulations applicable thereto, the Company shall make premium
payments on your behalf
 
<PAGE>
 
(equal to its contribution made during your employment with the Company), until
the date on which severance payments end. Thereafter, you will be responsible
for any and all payments for the elected period of continued health insurance
coverage under COBRA. The first severance payment will be made upon the first
regularly scheduled Company payday on or following your execution of the release
agreement referenced above, will be made in accordance with the Company's normal
payroll practices as established or modified from time to time, and will be
subject to all federal, state and/or local payroll and withholding taxes.
 
         (b) You will not be entitled to any of the severance payments set forth
above in Paragraph 3(a) if your employment termination from Color Kinetics is
not a Qualified Termination. If your employment termination is not a Qualified
Termination, your employment and this Agreement will automatically terminate and
the Company will pay you (or in the case of death, your designated beneficiary
or, if no beneficiary has been designated by you, your estate) your base salary
earned and vacation pay accrued but unused as of the termination date. To the
extent you qualify for either short term disability and/or long term disability
insurance in accordance with the terms and conditions of the Company's plans,
the Company may offset any such insurance payments against any amounts paid to
you, including any such payment made pursuant to this Agreement.
 
         (c) If Color Kinetics determines and provides definitive proof that you
have violated the terms of any noncompetition or confidentiality provision
contained in any employment, consulting, advisory, non-disclosure,
noncompetition or other similar agreement between you and Color Kinetics, then
you agree that Color Kinetics, regardless of the manner of your employment
termination, can refuse to pay and/or cease paying and/or performing all
severance-related obligations under this Paragraph 3. The cessation of these
severance payments and benefits shall be in addition to, and not as an
alternative to, any other remedies at law or in equity available to the Company,
including the right to seek an injunction, which you shall not oppose.
 
         4.       DEFINITIONS. For the purposes of this Agreement, the terms
listed below are defined as follows:
 
         (a) DISABLED. You are "Disabled" for the purposes of this Agreement if
you have been absent from the fulltime performance of your duties with Color
Kinetics for six (6) consecutive weeks because of incapacity due to physical or
mental impairment, and you fail to resume performance of your essential job
duties, with or without reasonable accommodation (provided any such
accommodation does not cause the Company an undue hardship).
 
         (b) CAUSE. As used in this Agreement, "Cause," which shall be
determined by the Company and/or the Company's Board of Directors, shall mean:
(i) Any act of willful or gross insubordination, (ii) your commission of any act
of disloyalty, gross negligence, dishonesty or breach of fiduciary duty, (iii)
your material breach of any term of this Agreement or any other agreement with
Color Kinetics, (iv) your commission of any crime or any act of fraud or
embezzlement, or your misappropriation of any money or other assets or property
(tangible or intangible) of the Company, (v) your disregard of or failure to
follow the Company's rules or policies, or your commission of any other action
that injures the Company, (vi) your willful commission of acts that would
intentionally generate adverse publicity toward the Company,
 
                                      -2-
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(vii) your conviction of a felony, or (viii) your attempt to secure any improper
personal profit in connection with Color Kinetics' business.
 
         (c) GOOD REASON. Unless otherwise agreed to by you in writing, the
following will constitute "Good Reason": (i) A material breach by the Company of
any material provisions of this Agreement or any other written agreements with
the Company, provided that the Company receives written notice specifying the
nature of such material breach and the Company fails to cure such material
breech within 30 days thereof; (ii) Any material change in your business title,
or a substantial, material reduction in your authority and assigned
responsibilities; (iii) Any material reduction in base salary or change to the
targeted annual bonus opportunity, other than such reductions that are part of a
concessionary arrangement affecting other executives of similar rank and tenure.
 
         5.       ASSIGNMENT. Color Kinetics may assign this Agreement, which
will inure to the benefit of and be enforceable by Color Kinetics' successors
and assigns. You may not assign this Agreement.
 
         6.       ARBITRATION.
 
         (a) The parties agree that any legal disputes arising out of or related
to this Agreement, your employment, and/or termination of your employment from
Color Kinetics and/or the termination of this Agreement (including but not
limited to claims arising under federal or state statute, contract, tort, or
public policy) that may occur between you and Color Kinetics ("Each Party"), and
which disputes cannot be resolved informally, will be resolved exclusively
though final and binding arbitration. The parties will be precluded from raising
in any other forum, including, but not limited to, any federal or state court of
law, or equity, any claim which could be raised in arbitration; provided,
however that nothing in this Agreement precludes you from filing a charge or
from participating in an administrative investigation of a charge before an
appropriate government agency or Color Kinetics from initiating an arbitration
over a matter covered by this Agreement. Notwithstanding the foregoing, you
agree that in the event of a breach or threatened breach of this Agreement or of
any agreement related to your Color Kinetics employment, Each Party shall be
entitled, in addition to all other rights and remedies existing in its favor,
including Each Party's right to arbitrate disputes arising out of this Agreement
pursuant to this Paragraph, to apply to any court of competent jurisdiction for
specific performance and/or injunctive or other relief.
 
         (b) Each party may demand arbitration, no later than one hundred eighty
(180) days after the date on which the claim arose, by submitting to the other
party a written demand which states: (i) the claim asserted, (ii) the facts
alleged, (iii) the applicable statute or principal of law (e.g., breach of
contract) upon which the demand is based, and (iv) the remedy sought. Any
response to such demand must be made, in writing, within twenty (20) days after
receiving the demand, and will specifically admit or deny each factual
allegation.
 
         (c) The arbitration will be conducted in accordance with the Rules for
Employment Arbitration of the American Arbitration Association (AAA) and any
arbitration will take place in Boston, Massachusetts. Each party will bear its
own costs and attorney's fees. The arbitrator will have the power to award any
types of legal or equitable relief that would be available in a court
 
                                      -3-
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of competent jurisdiction. Any relief or recovery to which you are entitled
(including, but not limited to, any claim of unlawful discrimination) will be
limited to that awarded by the arbitrator.
 
         7.       WAIVER OF JURY TRIAL. If any claim arising out of or related
to this Agreement, your termination of employment from Color Kinetics and/or the
termination of this Agreement (including but not limited to claims arising under
federal or state statute, contract, tort, or public policy) is found not to be
subject to final and binding arbitration, the parties agree to waive any right
to a jury trial if such claim is filed in court.
 
         8.       CONFIDENTIALITY. The terms and conditions of this Agreement
are strictly confidential. You shall not discuss or reveal any information
concerning this letter agreement to any past or present Color Kinetics employee
or any third person or entity other than your counsel and members of your
immediate family.
 
         9.       MISCELLANEOUS.
 
         (a) In the event that any nonmaterial provision of this Agreement is
determined to be legally invalid, the affected provision shall be stricken from
the Agreement and the remaining terms of the Agreement shall be enforced so as
to give effect to the intention of the parties to the maximum extent
practicable. In the event that any material provision of this Agreement is
determined to be legally invalid by a court of competent jurisdiction, the
parties hereto, upon returning the consideration exchanged in executing this
Agreement, may discontinue performance under this Agreement.
 
         (b) This Agreement shall be deemed to be made and entered into in the
Commonwealth of Massachusetts. This Agreement and any claims arising out of this
Agreement (or any other claims arising out of the relationship between the
parties) shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts and shall in all respects be interpreted, enforced
and governed under the internal and domestic laws of such Commonwealth, without
giving effect to the principles of conflicts of laws of such Commonwealth.
 
         (c) No waiver by the Company or by you of any breach of any provision
hereof shall be deemed to be a waiver of any later or other breach thereof or as
a waiver of any other provision of this Agreement. This Agreement may not be
waived, changed, discharged or terminated orally or by any course of dealing
between the parties, but only by an instrument in writing signed by you and the
Chief Executive Officer of Color Kinetics.
 
         (d) You must execute a legally enforceable separation agreement and
general release in a form mutually acceptable to Each Party prior to the receipt
of any payments set forth above.
 
         (e) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment. All prior negotiations and agreements regarding severance benefits,
whether oral or written, express or implied, are hereby superseded and
cancelled.
 
                                      -4-
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         If this letter sets forth our agreement, kindly sign and return to
Color Kinetics the enclosed copy of this letter.
 
                                             Sincerely,
 
                                             COLOR KINETICS, INC.
 
                                             By: /s/ George G. Mueller
                                                 -------------------------------
                                                 George G. Mueller
 
                                             Title: Chairman & CEO
 
Accepted and agreed to this 17th day of September, 2001
 
William J. Sims                              /s/ William J. Sims
---------------------------                  -----------------------------------
Name - Please print                          Signature
 
                                      -5-
 
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