EXHIBIT 10.2

KRATON PERFORMANCE POLYMERS, INC.

2009 EQUITY INCENTIVE PLAN

(As Amended and Restated Effective May 25, 2011)

 

1. Purpose of the Plan

This Kraton Performance Polymers, Inc. 2009 Equity Incentive Plan (formerly
known as the Polymer Holdings LLC 2009 Equity Incentive Plan) is intended to
promote the interests of the Company and its stockholders by providing the
(i) employees and independent contractors of the Company and (ii) non-employee
directors of Kraton Performance, who are largely responsible for the management,
growth, and protection of the business of the Company, with incentives and
rewards to encourage them to continue in the service of the Company. The Plan is
designed to meet this intent by providing such employees, independent
contractors, and eligible non-employee directors with a proprietary interest in
pursuing the long-term growth, profitability, and financial success of the
Company.

 

2. Definitions

As used in the Plan or in any instrument governing the terms of any Award, the
following definitions apply to the terms indicated below:

(a) “Awards” mean all equity awards granted pursuant to the terms of the Plan
including, but not limited to, Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, restricted stock awards and restricted stock
unit awards granted pursuant to the terms of the Plan.

(b) “Award Agreement” means the written agreement between the Company and a
Grantee that evidences and sets out the terms and conditions of an Award.

(c) “Board of Directors” means the Board of Directors of Kraton Performance.

(d) “Change in Control,” as used in any instrument governing the terms of any
Award, means the occurrence of any of the following:

(i) Change in the Ownership of a Corporation. Any one person, or more than one
person acting as a group (as defined in Treasury Regulation
Section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the corporation
that, together with stock held by such person or group, constitutes more than 50
percent of the total fair market value or total voting power of the stock of
such corporation.

(ii) Change in the Effective Control of a Corporation. The date any one person,
or more than one person acting as a group (as determined under Treasury
Regulation Section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by such person
or persons) ownership of stock of the corporation possessing 30 percent or more
of the total voting power of the stock of such corporation; or the date a
majority of members of the board of directors is replaced during any 12-month
period by directors whose appointment or election is not endorsed by a majority
of the members of the board of directors before the date of the appointment or
election.

(iii) Change in the Ownership of a Substantial Portion of a Corporation. A
change in the ownership of a substantial portion of a corporation’s assets
occurs on the date that any one person, or more than one person acting as a
group (as determined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)),
acquires (or has acquired during the 12-month period ending on the date of the
most recent acquisition by such person or persons) assets from the corporation
that have a total gross fair market value equal to or more than 40 percent of
the total gross fair market value of all of the assets of

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the corporation immediately before such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of such
corporation, or the value of the assets being disposed of, determined without
regard to any liabilities associated with such assets.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
as a result of any event or transaction to the extent that treating such event
or transaction as a Change in Control would cause any tax to become due under
Section 409A of the Code.

(e) “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and all regulations, interpretations, and administrative guidance issued
thereunder.

(f) “Committee” means the Compensation Committee of the Board of Directors or
such other committee as the Board of Directors shall appoint from time to time
to administer the Plan and to otherwise exercise and perform the authority and
functions assigned to the Committee under the terms of the Plan.

(g) “Common Stock” means the common stock of Kraton Performance, $0.01 par value
per share, or any other security into which the common stock shall be changed
pursuant to the adjustment provisions of Section 10 of the Plan.

(h) “Company” means Kraton Performance Polymers, Inc. and all of its
Subsidiaries and affiliates, collectively.

(i) “Covered Employee” means a Participant who at the time of reference is a
“covered employee” as defined in Section 162(m) of the Code.

(j) “Director” means a member of the Board of Directors who is not at the time
of reference an employee of the Company.

(k) “Effective Date” means November 30, 2009, the date the Plan was originally
approved by the Company’s stockholders.

(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(m) “Fair Market Value” means, with respect to a share of Common Stock, as of
the applicable date of determination (i) the average of the high and low sales
prices on the immediately preceding business day of a share of Common Stock as
reported on the principal securities exchange on which shares of Common Stock
are then listed or admitted to trading or (ii) if not so reported, the average
of the closing bid and ask prices on the immediately preceding business day as
reported on the National Association of Securities Dealers Automated Quotation
System or (iii) if not so reported, as furnished by any member of the National
Association of Securities Dealers, Inc. selected by the Committee. In the event
that the price of a share of Common Stock shall not be so reported or the
Committee otherwise determines a different valuation is appropriate, the Fair
Market Value of a share of Common Stock shall be determined by the Committee in
its sole discretion in any manner consistent with Section 409A of the Code.

(n) “Incentive Stock Option” means an Option qualified under Section 422 of the
Code.

(o) “Kraton Performance” means Kraton Performance Polymers, Inc., a Delaware
corporation (formerly known as Polymers Holdings LLC), and any successor
thereto.

(p) “Non-Qualified Stock Option” means an Option that is not an “incentive stock
option” within the meaning of Section 422 of the Code.

(q) “Option” means a stock option to purchase shares of Common Stock granted to
a Participant pursuant to Section 6.

 

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(r) “Other Stock-Based Award” means an award granted to a Participant pursuant
to Section 7.

(s) “Participant” means a Director, employee, or independent contractor of the
Company who is eligible to participate in the Plan and to whom one or more
Awards have been granted and, following the death of any such Person, his
successors, heirs, executors, and administrators, as the case may be.

(t) “Performance-Based Compensation” means compensation that satisfies the
requirements of Section 162(m) of the Code for deductibility of remuneration
paid to Covered Employees.

(u) “Performance Measures” means such measures as are described in Section 8 on
which performance goals are based in order to qualify certain awards granted
hereunder as Performance-Based Compensation.

(v) “Performance Period” means the period of time during which the performance
goals must be met in order to determine the degree of payout and/or vesting with
respect to an Award, other than an Option or Stock Appreciation Right, that is
intended to qualify as Performance-Based Compensation. Performance Periods may
be overlapping.

(w) “Performance Target” means performance goals and objectives with respect to
a Performance Period.

(x) “Person” means a “person” as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, including any “group” within the meaning of
Section 13(d)(3) of the Exchange Act.

(y) “Plan” means this Kraton Performance Polymers, Inc. 2009 Equity Incentive
Plan, as it may be amended from time to time.

(z) “Securities Act” means the Securities Act of 1933, as amended.

(aa) “Stock Appreciation Rights” means a right to receive, upon exercise
thereof, the excess of (i) the Fair Market Value of one share of Common Stock on
the date of exercise over (ii) the exercise price of the Stock Appreciation
Right.

(bb) “Subsidiary” means any “subsidiary” within the meaning of Rule 405 under
the Securities Act.

 

3. Stock Subject to the Plan, Share Counting Rules, and Individual Award Limits

(a) Stock Subject to the Plan. The maximum number of shares of Common Stock that
may be delivered pursuant to Awards granted under the Plan shall be 4,350,000.
Furthermore, the maximum number of shares of Common Stock that may be covered by
Awards granted under the Plan in any calendar year shall not exceed (i) 750,000
shares of Common Stock, plus (ii) any shares of Common Stock subject to Awards
that expire, are forfeited, or are cancelled during the immediately preceding
calendar year, plus (iii) any shares of Common Stock tendered by a Participant
or withheld by the Company or one of its Subsidiaries to satisfy the tax
withholding obligations related to any Award during the immediately preceding
calendar year, plus (iv) any shares of Common Stock tendered by a Participant or
withheld by the Company to satisfy all or any portion of the exercise price
related to an Award during the immediately preceding calendar year. The maximum
number of shares of Common Stock that may be covered by Incentive Stock Options
in all calendar years shall not exceed 1,000,000 shares of Common Stock. The
shares referred to in the preceding sentences of this paragraph shall in each
case be subject to adjustment as provided in Section 10 and the following
provisions of this Section 3. Shares of Common Stock issued under the Plan may
be either authorized and unissued shares or treasury shares, or both, in the
sole discretion of the Committee. For Performance-Based Compensation, Shares
payable upon achievement of target payouts shall be the number used for purposes
of determining what portion of Performance-Based Compensation is counted against
the total shares available for grant under the Plan.

 

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(b) Share Counting Rules. Shares of Common Stock covered by Awards granted
pursuant to the Plan in connection with the assumption, replacement, conversion,
or adjustment of outstanding equity-based awards in the context of a corporate
acquisition or merger (within the meaning of Section 303A.08 of the New York
Stock Exchange Listed Company Manual) as provided in Section 10 of the Plan
shall not count as used under the Plan for purposes of Section 3.

(c) Individual Award Limits. Subject to adjustment as provided in Section 10, no
Participant may receive Awards under this Plan in any calendar year that relate
to more than 300,000 shares of Common Stock.

 

4. Administration of the Plan

(a) The Committee

The Plan shall be administered by the Committee, which shall consist solely of
two or more persons, each of whom qualifies as a “non-employee director” (within
the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act), as
an “outside director” within the meaning of Treasury Regulation
Section 1.162-27(e)(3), and as “independent” within the meaning of any
applicable stock exchange or similar regulatory authority; provided that, with
respect to any “independent” composition requirement under any rule of any
applicable stock exchange or similar regulatory authority, the “independent”
composition requirement shall be phased in pursuant to any applicable transition
period; provided further that, with respect to any Award granted to, or any
determination made with respect to, any Person subject to Section 16 of the
Exchange Act prior to the date the “independent” composition requirement has
been satisfied, such grant shall be approved by the full Board of Directors, and
with respect to any Award granted to, or any determination made with respect to,
any Covered Employee, prior to the date the “independent” composition
requirement has been satisfied, such grant shall be approved by a subcommittee
of the Committee that is composed solely of two or more “outside directors”
within the meaning of Treasury Regulation Section 1.162-27(e)(3).

(b) Grant of Awards

The Committee shall, consistent with the terms of the Plan, from time to time
designate those employees and independent contractors of the Company who shall
be granted Awards under the Plan and the amount, type, and other terms and
conditions of such Awards. The Board of Directors may, consistent with the terms
of the Plan, from time to time grant Awards to Directors. The Committee may
prescribe agreements evidencing or setting the terms of any Awards, and
amendments thereto, which documents and amendments need not be identical for
each Participant.

The Committee may also enter into agreements with third parties pursuant to
which such third parties may issue Awards to the Participants in lieu of the
Company’s issuance thereof or assume the obligations of the Company under any
Awards previously issued by the Company, in any case on such terms and
conditions as may be determined by the Committee in its sole discretion.

Awards granted under the Plan may, in the Committee’s discretion, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award, any award granted under another plan of the Company or any
business entity to be acquired by the Company, or any other right of a
Participant to receive payment from the Company. Awards granted in addition to
or in tandem with other Awards or awards may be granted either as of the same
time as, or a different time from, the grant of such other Awards or awards.

(c) Delegation of Authority

All of the powers and responsibilities of the Committee under the Plan may be
delegated by the Committee, in writing, to any subcommittee thereof, in which
case the acts of such subcommittee shall be deemed to be acts of the Committee
hereunder. The Committee may also from time to time authorize a subcommittee
consisting of one or more members of the Board of Directors (including members
who are employees of the Company) to

 

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grant Awards under the Plan to persons who are not Directors or “executive
officers” of the Company (within the meaning of Rule 16a-1 under the Exchange
Act), subject to such restrictions and limitations as the Committee may specify.

In addition, the Committee may delegate the administration of the Plan to one or
more officers or employees of the Company, and such administrator(s) may have
the authority to execute and distribute Award Agreements or other documents
evidencing or relating to Awards granted by the Committee under this Plan, to
maintain records relating to Awards, to process or oversee the issuance of
Common Stock under Awards, to interpret and administer the terms of Awards, and
to take such other actions as may be necessary or appropriate for the
administration of the Plan and of Awards under the Plan; provided that in no
case shall any such administrator be authorized (i) to grant Awards under the
Plan, (ii) to take any action that would cause Awards intended to qualify as
Performance-Based Compensation to fail to so qualify, (iii) to take any action
inconsistent with Section 409A of the Code or (iv) to take any action
inconsistent with Section 157 and other applicable provisions of the Delaware
General Corporation Law. Any action by any such administrator within the scope
of its delegation shall be deemed for all purposes to have been taken by the
Committee and, except as otherwise specifically provided, references in this
Plan to the Committee shall include any such administrator. The Committee and,
to the extent it so provides, any subcommittee, shall have sole authority to
determine whether to review any actions and/or interpretations of any such
administrator, and if the Committee shall decide to conduct such a review, any
such actions and/or interpretations of any such administrator shall be subject
to approval, disapproval, or modification by the Committee.

(d) Committee Discretion

The Committee shall have full discretionary authority to administer the Plan,
including discretionary authority to interpret and construe any and all
provisions of the Plan and the terms of any Award (and any Award Agreement)
granted thereunder and to adopt and amend from time to time such rules and
regulations for the administration of the Plan as the Committee may deem
necessary or appropriate. Without limiting the generality of the foregoing, the
Committee shall determine whether an authorized leave of absence, or absence in
military or government service, shall constitute termination of employment;
provided that, no payment shall be made with respect to any Award that is
subject to Section 409A of the Code as a result of any such authorized leave of
absence or absence in military or government service unless such authorized
leave or absence constitutes a separation from service for purposes of
Section 409A of the Code. The employment of a Participant with the Company shall
be deemed to have terminated for all purposes of the Plan if such person is
employed by or provides services to a Person that is a Subsidiary of the Company
and such Person ceases to be a Subsidiary of the Company, unless the Committee
determines otherwise. Decisions of the Committee shall be final, binding, and
conclusive on all parties.

On or after the date of grant of an Award under the Plan, the Committee may
(i) in the event of a Participant’s death, disability or retirement (in the case
of disability and retirement, unless otherwise specified in the relevant grant
agreement, as determined in accordance with the applicable policies and
procedures of the Company as in effect from time to time) or in the event of a
Change in Control, accelerate the date on which any such Award becomes vested or
exercisable, as the case may be, (ii) accelerate the date on which any such
Award becomes transferable, (iii) extend the term of any such Award, including,
without limitation, extending the period following a termination of a
Participant’s employment during which any such Award may remain outstanding,
(iv) waive any conditions to the vesting, exercisability, or transferability, as
the case may be, of any such Award or (v) provide for the payment of dividends
or dividend equivalents with respect to any such Award; provided that the
Committee shall not have any such authority and shall not take any such action
to the extent that the grant of such authority or the taking of such action
would cause any tax to become due under Section 409A of the Code.

The Committee may grant dividend equivalents to any Participant based on the
dividends declared on shares of Common Stock that are subject to any Award
during the period between the date the Award is granted and the date the Award
is exercised, vests, pays out, or expires. Such dividend equivalents may be
awarded or paid in the

 

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form of cash, shares of Common Stock, restricted stock, or restricted stock
units, or a combination, and shall be determined by such formula and at such
time and subject to such accrual, forfeiture, or payout restrictions or
limitations as determined by the Committee in its sole discretion. Dividend
equivalents granted with respect to Options or Stock Appreciation Rights that
are intended to be Performance-Based Compensation shall be payable, with respect
to pre-exercise periods, regardless of whether such Option or Stock Appreciation
Right is subsequently exercised.

(e) Payments by the Company

The Company shall pay any amount payable with respect to an Award in accordance
with the terms of such Award; provided that the Committee may, in its
discretion, defer the payment of amounts payable with respect to an Award
subject to and in accordance with the terms of a deferred compensation plan
established and maintained by the Company, to the extent such deferred
compensation plan permits deferral of Awards granted hereunder. Payments to be
made by the Company upon the exercise of an Option or other Award or settlement
of an Award may be made in such forms as the Committee shall determine,
including, without limitation, cash, Common Stock, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on a deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Common Stock in connection with such settlement, in the
Committee’s discretion or upon occurrence of one or more specified events;
provided that, with respect to any Award subject to Section 409A of the Code,
such acceleration or payment shall comply with Section 409A of the Code.

The Company may, to the extent permitted by applicable law and permissible under
Section 409A of the Code, deduct from and set off against any amounts the
Company may owe to the Participant from time to time (including amounts payable
in connection with any Award, owed as wages, fringe benefits, or other
compensation owed to the Participant), such amounts as may be owed by the
Participant to the Company, although the Participant shall remain liable for any
part of the Participant’s payment obligation not satisfied through such
deduction and setoff. By accepting any Award granted hereunder, the Participant
agrees to any deduction or setoff under this Section 4.

The Company may, to the extent deemed necessary or advisable by the Committee,
postpone the issuance or delivery of Common Stock or payment of other benefits
under any Award until completion of such registration or qualification of such
Common Stock or other required action under any federal or state law, rule or
regulation, listing or other required action with respect to any stock exchange
or automated quotation system upon which the Common Stock or other securities of
the Company are listed or quoted, or compliance with any other obligation of the
Company, as the Committee may consider appropriate, and may require any
Participant to make such representations, furnish such information and comply
with or be subject to such other conditions as it may consider appropriate in
connection with the issuance or delivery of Common Stock or payment of other
benefits in compliance with applicable laws, rules, and regulations, listing
requirements, or other obligations; provided that the Committee shall take no
action to the extent that the taking of such action would cause any tax to
become due under Section 409A of the Code. The foregoing notwithstanding, in
connection with a Change of Control, the Company shall take or cause to be taken
no action, and shall undertake or permit to arise no legal or contractual
obligation, that results or would result in any postponement of the issuance or
delivery of Common Stock or payment of benefits under any Award or the
imposition of any other conditions on such issuance, delivery, or payment, to
the extent that such postponement or other condition would represent a greater
burden on a Participant than existed on the 90th day preceding the Change of
Control.

The inability of the Company (after reasonable efforts) to obtain authority from
any regulatory body having jurisdiction, which authority is deemed by the
Company’s counsel to be necessary to the lawful issuance and/or sale of any
Awards or shares of Common Stock hereunder, shall relieve the Company of any
liability in respect of the failure to issue and/or sell such Awards or shares
of Common Stock as to which such requisite authority shall not have been
obtained.

 

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In addition, the Committee may permit (including, without limitation, for
purposes of deductibility under Section 162(m) of the Code) a Participant to
defer such Participant’s receipt of the payment of cash or the delivery of
shares of Common Stock that would otherwise be due to such Participant in
connection with any Award.

If any such deferral is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures, in accordance with Section 409A of
the Code (to the extent applicable), for such payment or Common Stock delivery
deferrals and any notional earnings to be credited on such deferred amounts;
provided that in the case of any Award intended to qualify as Performance-Based
Compensation, such earnings shall be in compliance with Code Section 162(m) of
the Code.

(f) Limitation on Liability

The Committee may employ attorneys, consultants, accountants, agents, and other
persons, and the Committee, the Company, and its officers, directors, and
employees shall be entitled, in good faith, to rely or act upon any advice,
opinions, or valuations of any such persons. In addition, the Committee and each
member thereof, and any person acting pursuant to authority delegated by the
Committee, shall be entitled, in good faith, to rely or act upon any report or
other information furnished by any officer, director, or employee of the
Company, the Company’s independent auditors, consultants, or any other agents
assisting in the administration of the Plan.

No member of the Committee, nor any person acting pursuant to authority
delegated by the Committee, nor any officer, director, or employee of the
Company acting at the direction or on behalf of the Committee, shall be liable
for any action, omission, or determination relating to the Plan, and Kraton
Performance shall, to the fullest extent permitted by law, indemnify and hold
harmless each member of the Committee, each person acting pursuant to authority
delegated by the Committee, and each other officer, director, or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated, against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission, or determination was taken or made by such member, director, employee,
or other person acting pursuant to authority delegated by the Committee in bad
faith and without reasonable belief that it was in the best interests of the
Company.

 

5. Eligibility

The persons who shall be eligible to receive Awards pursuant to the Plan shall
be (a) those employees and independent contractors of the Company whom the
Committee shall select from time to time and (b) Directors whom the Board of
Directors shall select from time to time. Eligible persons shall include any
person who has been offered employment by the Company; provided that such
prospective employee may not receive any payment or exercise any right relating
to an Award until such person has commenced employment with the Company. An
employee on leave of absence may be considered as still in the employ of the
Company for purposes of eligibility for participation in the Plan, if so
determined by the Committee. In lieu of making Awards directly to Participants,
the Committee may make Awards under the Plan through or to a trust or other
funding vehicle which in turn makes Awards to Participants or which issues
interests in Awards held by it to Participants, in any case on such terms and
conditions as may be determined by the Committee in its sole discretion. Each
Award granted under the Plan shall be evidenced by an instrument in writing in
form and substance approved by the Committee.

 

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6. Options

The Committee may from time to time grant Options, subject to the following
terms and conditions:

(a) Exercise Price

The exercise price per share of Common Stock covered by any Option shall be not
less than 100% of the Fair Market Value of a share of Common Stock on the date
on which such Option is granted. The Award Agreement of each Option shall fix
the exercise price and shall clearly identify such Option as either an
“incentive stock option” within the meaning of Section 422 of the Code or as a
Non-Qualified Stock Option.

(b) Term and Exercise of Options

(1) Each Option shall become vested and exercisable on such date or dates,
during such period, and for such number of shares of Common Stock as shall be
determined by the Committee on or after the date such Option is granted;
provided, however, that no Option shall be exercisable after the expiration of
ten years from the date such Option is granted; and; provided further that each
Option shall be subject to earlier termination, expiration, or cancellation as
provided in the Plan or in the relevant Award Agreement.

(2) Each Option may be exercised in whole or in part. The partial exercise of an
Option shall not cause the expiration, termination, or cancellation of the
remaining portion thereof.

(3) An Option shall be exercised by such methods and procedures as the Committee
determines from time to time; provided, however, that Participants shall have
the right to exercise vested Options through net settlement in shares of Common
Stock; provided, further that net cash settlement shall not be permitted.

(4) Options may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of a Participant, only by
the Participant; provided, however, that the Committee may permit Non-Qualified
Stock Options to be sold, pledged, assigned, hypothecated, transferred, or
disposed of, on a general or specific basis, subject to such conditions and
limitations as the Committee may determine. In addition, the Committee may
impose such restrictions on any shares acquired pursuant to the exercise of an
Option as it may deem advisable, including, without limitation, minimum holding
period requirements, restrictions under applicable federal securities laws,
under the requirements of any stock exchange or market upon which such shares
are then listed and/or traded, or under any blue sky or state securities laws
applicable to such shares.

(5) The terms of outstanding awards may not be amended to reduce the exercise
price of outstanding Options or Stock Appreciation Rights nor may outstanding
Options or Stock Appreciation Rights be cancelled in exchange for cash, other
awards or Options or Stock Appreciation Rights with an exercise price that is
less than the exercise price of the original Options or Stock Appreciation
Rights.

(6) Regardless of the terms of any Award Agreement, the Committee shall have the
right to substitute Stock Appreciation Rights for outstanding Options granted to
any Participant; provided the substituted Stock Appreciation Rights call for
settlement by the issuance of shares of Common Stock, and the terms of the
substituted Stock Appreciation Rights and economic benefit of such substituted
Stock Appreciation Rights are at least equivalent to the terms and economic
benefit of the Options being replaced.

(c) Special Rules for Incentive Stock Options

(1) The aggregate Fair Market Value of shares of Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year under the Plan and any other stock option
plan of Kraton Performance or any of its “subsidiaries” (within the meaning of
Section 424 of the Code) shall not exceed $100,000. Such Fair Market Value shall
be determined as of the date on which each such

 

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Incentive Stock Option is granted. In the event that the aggregate Fair Market
Value of shares of Common Stock with respect to such Incentive Stock Options
exceeds $100,000, then Incentive Stock Options granted hereunder to such
Participant shall, to the extent and in the order required by regulations
promulgated under the Code (or any other authority having the force of
regulations), automatically be deemed to be Non-Qualified Stock Options, but all
other terms and provisions of such Incentive Stock Options shall remain
unchanged. In the absence of such regulations (and authority), or in the event
such regulations (or authority) require or permit a designation of the Options
which shall cease to constitute Incentive Stock Options, Incentive Stock Options
granted hereunder shall, to the extent of such excess and in the order in which
they were granted, automatically be deemed to be Non-Qualified Stock Options,
but all other terms and provisions of such Incentive Stock Options shall remain
unchanged.

(2) No Incentive Stock Option may be granted to an individual if, at the time of
the proposed grant, such individual owns stock possessing more than ten percent
of the total combined voting power of all classes of stock of Kraton Performance
or any of its “subsidiaries” (within the meaning of Section 424 of the Code),
unless (i) the exercise price of such Incentive Stock Option is at least one
hundred and ten percent of the Fair Market Value of a share of Common Stock at
the time such Incentive Stock Option is granted and (ii) such Incentive Stock
Option is not exercisable after the expiration of five years from the date such
Incentive Stock Option is granted.

Options are not intended to provide for the deferral of compensation under
Section 409A of the Code, and thus, are intended to be exempt from Treasury
Regulations issued under Section 409A of the Code.

 

7. Other Stock-Based Awards

The Committee may grant equity-based or equity-related awards not otherwise
described herein, including but not limited to restricted stock awards and
restricted stock unit awards, in such amounts and subject to such terms and
conditions as the Committee shall determine. Without limiting the generality of
the preceding sentence, each such Other Stock-Based Award may (i) involve the
transfer of actual shares of Common Stock to Participants, either at the time of
grant or thereafter, or payment in cash or otherwise of amounts based on the
value of shares of Common Stock, (ii) be subject to performance-based and/or
service-based conditions, (iii) be in the form of Stock Appreciation Rights,
phantom stock, restricted stock, restricted stock units, performance shares,
deferred share units, or share-denominated performance units, (iv) be designed
to comply with applicable laws of jurisdictions other than the United States,
and (v) be designed to qualify as Performance-Based Compensation; provided that
each Other Stock-Based Award shall be denominated in, or shall have a value
determined by reference to, a number of shares of Common Stock that is specified
at the time of the grant of such award. With respect to awards of restricted
stock subject only to service-based conditions, such awards shall vest over a
period of no fewer than three years. Notwithstanding the foregoing, to the
extent any such Other Stock-Based Award is subject to Section 409A of the Code,
the Award Agreement of such Other Stock-Based Award shall contain terms and
conditions (including, without limitation and to the extent applicable, deferral
and payment provisions) that comply with Section 409A of the Code.

 

8. Performance-Based Compensation

(a) Calculation, Written Determinations, and Right of Recapture

The amount payable with respect to an Award that is intended to qualify as
Performance-Based Compensation shall be determined in any manner permitted by
Section 162(m) of the Code.

Determinations by the Committee as to the establishment of Performance Measures,
the level of actual achievement of performance goals, and the amount payable
with respect to an Award intended to qualify as Performance-Based Compensation
under Section 162(m) of the Code shall be recorded in writing. Specifically, the
Committee shall certify in writing, in a manner conforming to applicable
regulations under Section 162(m) of the Code, prior to settlement of each such
Award granted to a Covered Employee, that the performance goals and other
material terms upon which settlement of the Award was conditioned have been
satisfied.

 

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If at any time after the date on which a Participant has been granted or becomes
vested in an Award pursuant to the achievement of a performance goal under
Section 8, the Committee determines that the earlier determination as to the
achievement of the performance goal was based on incorrect data and that in fact
the performance goal had not been achieved or had been achieved to a lesser
extent than originally determined and a portion of an Award would not have been
granted, vested, or paid given the correct data, then (i) such portion of the
Award that was granted shall be forfeited and any related shares of Common Stock
(or, if such shares were disposed of, the cash equivalent) shall be returned to
the Company as provided by the Committee, (ii) such portion of the Award that
became vested shall be deemed to be not vested and any related shares of Common
Stock (or, if such shares were disposed of, the cash equivalent) shall be
returned to the Company as provided by the Committee, and (iii) such portion of
the Award paid to the Participant shall be paid by the Participant to the
Company upon notice from the Company as provided by the Committee.

(b) Discretionary Reduction

The Committee may, in its discretion, reduce or eliminate the amount payable to
any Participant with respect to an Award that is intended to qualify as
Performance-Based Compensation, based on such factors as the Committee may deem
relevant, but the Committee may not increase any such amount above the amount
established in accordance with the relevant Performance Schedule. For purposes
of clarity, the Committee may exercise the discretion provided for by the
foregoing sentence in a non-uniform manner among Participants.

(c) Performance Measures

The performance goals upon which the payment or vesting of any Award (other than
Options and Stock Appreciation Rights) to a Covered Employee that is intended to
qualify as Performance-Based Compensation depends shall (a) be objective
business criteria and shall otherwise meet the requirements of Section 162(m) of
the Code, including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance goals being
“substantially uncertain” at the time of establishment of such goals, and
(b) relate to one or more of the following Performance Measures: EBITDA; profit;
safety performance; innovation as a percent of total revenue; cost out and
pricing initiatives before or after tax net income; earnings per share; book
value per share; stock price; return on stockholder’s equity; expense
management; improvements in capital structure; profitability of an identifiable
business unit or product (including return on investment on new business
acquisitions or growth and expansion activities for the year); business growth
(percent increase in revenue from year to year); before or after tax profit
margins; budget comparisons; total return to stockholders; market share (percent
shares the Company has captured in the market); increase in production volume
(percent of increase from year to year); increase in productivity yield per
acreage; percent of decrease in production costs; customer satisfaction based on
a third party survey; decrease costs of delivery of service (e.g. freight costs,
costs of loans, reduction of inventory); decrease turnaround time for servicing
requests or processing information (e.g. number of days closing, numbers of days
accounts payables turnaround time); identification of ways to cut down costs on
a long term basis; implementation of new systems, processes, procedures to
accomplish better efficiency, reduce current costs, or provide better management
information reports; implementation of improvements in area of accountability
and responsibility that has great impact on the management of the business; the
relative performance of the Company against a peer group of companies on any of
the measures above. Performance goals may relate to individual performance,
Company performance or business unit performance. Performance goals may differ
for Awards granted to any one Participant or to different Participants.

The Committee shall determine the length of the Performance Period with respect
to each Award that is intended to be Performance-Based Compensation; provided
that in no event shall such Performance Period be shorter than one fiscal year
of the Company. Performance Periods may be overlapping. The Committee shall
establish the Performance Targets and Performance Schedules for such Performance
Period prior to the earlier to occur of 90 days after the commencement of such
Performance Period or the lapse of 25% of the Performance Period, and in any
event while the outcome of such performance measures is substantially uncertain.

 

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The measurement of any Performance Measure(s) may include or exclude the impact
of charges for asset write-downs, any impact of using the LIFO or FIFO method of
inventory accounting, litigation or claim judgments or settlements,
restructurings, discontinued operations, mergers, acquisitions, divestitures,
foreign exchange gains and losses, extraordinary items, and other unusual or
non-recurring items, and the cumulative effects of changes in tax laws,
accounting principles or regulations, or other laws or provisions affecting
reporting results, each as defined by generally accepted accounting principles
and as identified in the Company’s audited financial statements, including the
notes thereto; provided, however, that such inclusions or exclusions that affect
Awards to Covered Employees shall satisfy the requirements of Section 162(m) of
the Code for deductibility. Any Performance Measure(s) may be used to measure
the performance of the Company or a Subsidiary as a whole or any business unit
of the Company or a Subsidiary or any combination thereof, as the Committee may
deem appropriate, or any of the above Performance Measures as compared to the
performance of a group of comparator companies, or a published or special index
that the Committee, in its sole discretion, deems appropriate.

Nothing in this Section 8 is intended to limit the Committee’s discretion to
adopt conditions with respect to any Award that is not intended to qualify as
Performance-Based Compensation that relate to performance other than the
Performance Measures. In addition, the Committee may, subject to the terms of
the Plan, amend previously granted Awards in a way that disqualifies them as
Performance-Based Compensation.

In the event that the requirements of Section 162(m) of the Code and the
regulations thereunder change to permit Committee discretion to alter the
Performance Measures without obtaining stockholder approval of such changes, the
Committee shall have sole discretion to make such changes without obtaining
stockholder approval.

 

9. Effect of Separation from Service

Each Award Agreement shall set forth the effect of the Participant’s separation
from service on any outstanding Awards. Such provisions shall be determined in
the sole discretion of the Committee, need not be uniform among all Awards
issued, and may reflect distinctions based on the reasons for the separation
from service.

 

10. Adjustment Upon Certain Changes

(a) Shares Available for Grants

In the event of any change in the number of shares of Common Stock outstanding
by reason of any stock dividend or split, recapitalization, merger,
consolidation, combination or exchange of shares, or similar corporate change,
the maximum aggregate number of shares of Common Stock with respect to which the
Committee may grant Awards in any year, and the maximum aggregate number of
shares of Common Stock with respect to which the Committee may grant Awards to
any individual Participant in any year, shall be appropriately adjusted by the
Committee. In the event of any change in the number of shares of Common Stock
outstanding by reason of any other similar event or transaction, including any
extraordinary cash dividend, the Committee shall, to the extent deemed
appropriate by the Committee, make such adjustments in the number and class of
shares of Common Stock with respect to which Awards may be granted.

(b) Increase or Decrease in Issued Shares Without Consideration

Subject to any required action by the stockholders of Kraton Performance, in the
event of any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of shares of Common Stock or the
payment of a stock dividend (but only on the shares of Common Stock), or any
other increase or decrease in the number of such shares effected without receipt
or payment of consideration by the Company, the Committee shall appropriately
adjust the number of shares of Common Stock subject to each outstanding Award
and the exercise price per share of Common Stock of each such Award.

 

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(c) Certain Mergers

Subject to any required action by the stockholders of Kraton Performance, in the
event that Kraton Performance shall be the surviving corporation in any merger,
consolidation, or similar transaction as a result of which the holders of shares
of Common Stock receive consideration consisting exclusively of securities of
such surviving corporation, the Committee shall, to the extent deemed
appropriate by the Committee, adjust each Award outstanding on the date of such
merger or consolidation so that it pertains and applies to the securities which
a holder of the number of shares of Common Stock subject to such Award would
have received in such merger or consolidation.

(d) Certain Other Transactions

In the event of (i) a dissolution or liquidation of Kraton Performance, (ii) a
sale of all or substantially all of the Company’s assets (on a consolidated
basis), (iii) a merger, consolidation, or similar transaction involving Kraton
Performance in which Kraton Performance is not the surviving corporation, or
(iv) a merger, consolidation or similar transaction involving Kraton Performance
in which Kraton Performance is the surviving corporation but the holders of
shares of Common Stock receive securities of another corporation and/or other
property, including cash, the Committee shall, in its sole discretion but
subject to Section 409A of the Code to the extent applicable, have the power to:

(i) cancel, effective immediately prior to the occurrence of such event, each
Award (whether or not then exercisable), and, in full consideration of such
cancellation, pay to the Participant to whom such Award was granted an amount in
cash, for each share of Common Stock subject to such Award, equal to the value,
as determined by the Committee in its reasonable discretion, of such Award;
provided that with respect to any outstanding Option such value shall be equal
to the excess of (A) the value, as determined by the Committee in its reasonable
discretion, of the property (including cash) received by the holder of a share
of Common Stock as a result of such event over (B) the exercise price of such
Option; or

(ii) provide for the exchange of each Award (whether or not then exercisable or
vested) for an Award with respect to, as appropriate, some or all of the
property which a holder of the number of shares of Common Stock subject to such
Award would have received in such transaction and, incident thereto, make an
equitable adjustment as determined by the Committee in its reasonable discretion
in accordance with U.S. Department of Treasury Regulation
Section 1.409A-1(b)(5)(v)(D) in the exercise price of the Award, and/or the
number of shares or amount of property subject to the Award or, if appropriate,
provide for a cash payment to the Participant to whom such Award was granted in
partial consideration for the exchange of the Award; or

(iii) a combination of (i) and (ii) above.

(e) Other Changes

In the event of any change in the capitalization of Kraton Performance or
corporate change other than those specifically referred to in paragraphs (b),
(c), or (d), the Committee shall make such adjustments in the number and class
of shares subject to Awards outstanding on the date on which such change occurs
and in such other terms of such Awards as the Committee may consider
appropriate.

(f) No Other Rights

Except as expressly provided in the Plan, no Participant shall have any rights
by reason of any subdivision or consolidation of shares of stock of any class,
the payment of any dividend, any increase or decrease in the number of shares of
stock of any class, or any dissolution, liquidation, merger, or consolidation of
Kraton Performance or any other corporation. Except as expressly provided in the
Plan, no issuance by Kraton

 

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Performance of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number of shares or amount of other property
subject to, or the terms related to, any Award.

(g) Savings Clause

No provision of this Section 10 shall be given effect to the extent that such
provision would cause any tax to become due under Section 409A of the Code.

 

11. Rights Under the Plan

No person shall have any rights as a stockholder with respect to any shares of
Common Stock covered by or relating to any Award granted pursuant to the Plan
until the date of the issuance of a stock certificate with respect to such
shares. Except as otherwise expressly provided in Section 10 hereof, no
adjustment of any Award shall be made for dividends or other rights for which
the record date occurs prior to the date such stock certificate is issued.
Nothing in this Section 11 is intended, or should be construed, to limit
authority of the Committee to cause the Company to make payments based on the
dividends that would be payable with respect to any share of Common Stock if it
were issued or outstanding, or from granting rights related to such dividends.

Nothing in the Plan shall be construed to: (a) limit, impair, or otherwise
affect the Company’s right or power to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets; or, (b) limit the right or power of the Company to take any
action which such entity deems to be necessary or appropriate. Neither the
adoption of the Plan nor the grant of any Award shall be construed as creating
any limitations on the power of the Board of Directors or Committee to adopt
such other compensation arrangements as it may deem desirable for any
Participant.

The Company shall not have any obligation to establish any separate fund or
trust or other segregation of assets to provide for payments under the Plan. To
the extent any person acquires any rights to receive payments hereunder from the
Company, such rights shall be no greater than those of an unsecured creditor.
Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any Participant, beneficiary, legal
representative, or any other person. The Plan is not subject to the Employee
Retirement Income Security Act of 1974, as amended.

 

12. No Special Employment Rights; No Right to Award

(a) Nothing contained in the Plan or any Award shall confer upon any Participant
any right with respect to the continuation of his employment by or service to
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or service or to increase or decrease the compensation
of the Participant from the rate in existence at the time of the grant of an
Award. Neither an Award nor any rights arising under the Plan shall constitute
an employment contract with the Company and, accordingly, the Plan and any Award
hereunder may be terminated at any time in the sole and exclusive discretion of
the Committee without giving rise to any liability on the part of the Company.

(b) No person shall have any claim or right to receive an Award hereunder. The
Committee’s granting of an Award to a Participant at any time shall neither
require the Committee to grant an Award to such Participant or any other
Participant or other person at any time nor preclude the Committee from making
subsequent grants to such Participant or any other Participant or other person.

 

13. Securities Matters

(a) Kraton Performance is under no obligation to effect the registration
pursuant to the Securities Act of any shares of Common Stock to be issued
hereunder or to effect similar compliance under any state laws.

 

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Notwithstanding anything herein to the contrary, Kraton Performance shall not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the Plan unless and until Kraton Performance is
advised by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange on which shares of Common Stock are
traded. The Committee may require, as a condition to the issuance and delivery
of certificates evidencing shares of Common Stock pursuant to the terms hereof,
that the recipient of such shares make such covenants, agreements, and
representations, and that such certificates bear such legends, as the Committee
deems necessary or desirable.

(b) The exercise of any Option granted hereunder shall only be effective at such
time as counsel to Kraton Performance shall have determined that the issuance
and delivery of shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authority, and
the requirements of any securities exchange on which shares of Common Stock are
traded. Kraton Performance may, in its sole discretion, defer the effectiveness
of an exercise of an Option hereunder or the issuance or transfer of shares of
Common Stock pursuant to any Award pending or to ensure compliance under federal
or state securities laws. Kraton Performance shall inform the Participant in
writing of its decision to defer the effectiveness of the exercise of an Option
or the issuance or transfer of shares of Common Stock pursuant to any Award.
During the period that the effectiveness of the exercise of an Option has been
deferred, the Participant may, by written notice, withdraw such exercise and
obtain the refund of any amount paid with respect thereto.

 

14. Tax Provisions & Withholding

(a) Cash Remittance

Whenever shares of Common Stock are to be issued upon the exercise of an Option
or the grant or vesting of an Award, and whenever any amount shall become
payable in respect of any Award, Kraton Performance shall have the right to
require the Participant to remit to Kraton Performance in cash an amount
sufficient to satisfy federal, state, and local withholding tax requirements, if
any, attributable to such exercise, grant, vesting, or payment prior to the
delivery of any certificate or certificates for such shares or the effectiveness
of the lapse of such restrictions or making of such payment. In addition, upon
the exercise or settlement of any Award in cash, or any payment with respect to
any Award, Kraton Performance shall have the right to withhold from any payment
required to be made pursuant thereto an amount sufficient to satisfy the
federal, state, and local withholding tax requirements, if any, attributable to
such exercise, settlement, or payment. The Company can delay the delivery to a
Participant of any Common Stock or cash payable to such Participant to determine
the amount of withholding to be collected and to collect and process such
withholding.

(b) Stock Remittance

At the election of the Participant, subject to the approval of the Committee,
when shares of Common Stock are to be issued upon the exercise, grant, or
vesting of an Award, the Participant may tender to Kraton Performance a number
of shares of Common Stock that have been owned by the Participant for at least
six months (or such other period as the Committee may determine) having a Fair
Market Value at the tender date determined by the Committee to be sufficient to
satisfy the federal, state, and local withholding tax requirements, if any,
attributable to such exercise, grant, or vesting but not greater than such
withholding obligations. Such election shall be irrevocable, made in writing,
and signed by the Participant, shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate, and
shall satisfy the Participant’s obligations under Section 14 hereof, if any. The
Company can delay the delivery to a Participant of any Common Stock or cash
payable to such Participant to determine the amount of withholding to be
collected and to collect and process such withholding.

(c) Stock Withholding

At the election of the Participant, subject to the approval of the Committee,
when shares of Common Stock are to be issued upon the exercise, grant, or
vesting of an Award, Kraton Performance shall withhold a number of

 

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such shares having a Fair Market Value at the exercise date determined by the
Committee to be sufficient to satisfy the federal, state, and local withholding
tax requirements, if any, attributable to such exercise, grant, or vesting but
not greater than such withholding obligations. Such election shall be
irrevocable, made in writing, and signed by the Participant, shall be subject to
any restrictions or limitations that the Committee, in its sole discretion,
deems appropriate, and shall satisfy the Participant’s obligations under
Section 14 hereof, if any. The Company can delay the delivery to a Participant
of any Common Stock or cash payable to such Participant to determine the amount
of withholding to be collected and to collect and process such withholding.

(d) Consent to and Notification of Code Section 83(b) Election

No election under Section 83(b) of the Code (to include in gross income in the
year of transfer the amounts specified in Code Section 83(b)) or under a similar
provision of the laws of a jurisdiction outside the United States may be made
unless expressly permitted by the terms of the Award document or by action of
the Committee in writing prior to the making of such election. In any case in
which a Participant is permitted to make such an election in connection with an
Award, the Participant shall notify the Company of such election within ten days
of filing notice of the election with the Internal Revenue Service or other
governmental authority, in addition to any filing and notification required
pursuant to regulations issued under Code Section 83(b) or other applicable
provision.

(e) Notification Upon Disqualifying Disposition Under Code Section 421(b)

If any Participant shall make any disposition of shares of Common Stock
delivered pursuant to the exercise of an Incentive Stock Option under the
circumstances described in Code Section 421(b) (i.e., a disqualifying
disposition), such Participant shall notify the Company of such disposition
within ten days thereof.

 

15. Amendment or Termination of the Plan

The Board of Directors may at any time suspend or discontinue the Plan or revise
or amend it in any respect whatsoever; provided, however, that to the extent
that any applicable law, regulation, or rule of a stock exchange requires
stockholder approval in order for any such revision or amendment to be
effective, such revision or amendment shall not be effective without such
approval. The preceding sentence shall not restrict the Committee’s ability to
exercise its discretionary authority hereunder pursuant to Section 4 hereof,
which discretion may be exercised without amendment to the Plan; provided that
no provision of this Section 15 shall be given effect to the extent that such
provision would cause any tax to become due under Section 409A of the Code.

Except as expressly provided in the Plan, no action hereunder may, without the
consent of a Participant, reduce the Participant’s rights under any previously
granted and outstanding Award. Notwithstanding the foregoing, the Committee may
terminate any Award previously granted and any agreement relating thereto in
whole or in part provided that upon any such termination the Company, in full
consideration of the termination of (i) any Option outstanding under the Plan
(whether or not vested or exercisable) or portion thereof, pays to such
Participant an amount in cash for each share of Common Stock subject to such
Option or portion thereof being terminated equal to the excess, if any, of
(a) the value at which a share of Common Stock received pursuant to the exercise
of such Option would have been valued by the Company at that time for purposes
of determining applicable withholding taxes or other similar statutory amounts,
over (b) the exercise price, or, if the Committee permits and the Participant
elects, accelerates the exercisability of such Participant’s Option or portion
thereof (if necessary) and allows such Participant 30 days to exercise such
Option or portion thereof before the termination of such Option or portion
thereof, or (ii) any Award other than an Option outstanding under the Plan or
portion thereof, pays to such Participant an amount in shares of Common Stock or
cash or a combination thereof (as determined by the Committee in its sole
discretion) equal to the value of such Award or portion thereof being terminated
as of the date of termination (assuming the acceleration of the exercisability
of such Award or portion thereof, the lapsing of any restrictions on such Award
or portion thereof or the expiration of any deferral or

 

15

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vesting period of such Award or portion thereof) as determined by the Committee
in its sole discretion; provided that, to the extent any such Award is subject
to Section 409A of the Code, any such payment (including, without limitation,
the timing and form thereof) shall comply with Section 409A of the Code.

Notwithstanding any other provision of the Plan to the contrary, the Committee
may authorize the repurchase of any Award by the Company or a third party at any
time for such price and on such terms and conditions as the Committee may
determine in its sole discretion. Nothing in the Plan shall limit the right of
the Company to pay compensation of any kind outside the terms of the Plan.

 

16. No Obligation to Exercise

The grant to a Participant of an Award shall impose no obligation upon such
Participant to exercise such Award.

 

17. Transfer Restrictions

Upon the death of a Participant, outstanding Awards granted to such Participant
may be exercised only by the executors or administrators of the Participant’s
estate or by any person or persons who shall have acquired such right to
exercise by will or by the laws of descent and distribution. No transfer by will
or the laws of descent and distribution of any Award, or the right to exercise
any Award, shall be effective to bind Kraton Performance unless the Committee
shall have been furnished with (a) written notice thereof and with a copy of the
will and/or such evidence as the Committee may deem necessary to establish the
validity of the transfer and (b) an agreement by the transferee to comply with
all the terms and conditions of the Award that are or would have been applicable
to the Participant and to be bound by the acknowledgements made by the
Participant in connection with the grant of the Award.

Except as provided in the preceding paragraph (regarding transfers upon the
death of a Participant) and Section 6 (regarding the transfer of certain
Non-Qualified Stock Options), no Award or other right or interest of a
Participant under the Plan shall be pledged, hypothecated, or otherwise
encumbered or subject to any lien, obligation, or liability of such Participant
to any party (other than the Company), or assigned or transferred by such
Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or his
or her guardian or legal representative, except that Awards and other rights
(other than Incentive Stock Options and Stock Appreciation Rights in tandem
therewith) may be transferred to one or more transferees during the lifetime of
the Participant, and may be exercised by such transferees in accordance with the
terms of such Award, but only if and to the extent such transfers are permitted
by the Committee, subject to any terms and conditions which the Committee may
impose thereon (which may include limitations the Committee may deem appropriate
in order that offers and sales under the Plan will meet applicable requirements
of registration forms under the Securities Act of 1933 specified by the
Securities and Exchange Commission). A beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan and any Award document
applicable to such Participant, except as otherwise determined by the Committee,
and to any additional terms and conditions deemed necessary or appropriate by
the Committee.

 

18. Expenses and Receipts

The expenses of the Plan shall be paid by Kraton Performance. Any proceeds
received by Kraton Performance in connection with any Award will be used for
general corporate purposes.

 

19. No Fractional Shares

No fractional shares of Common Stock shall be issued or delivered pursuant to
the Plan or any Award. The Committee shall determine whether cash, Awards, or
other property shall be issued or paid in lieu of fractional shares of Common
Stock or whether such fractional shares of Common Stock or any rights thereto
shall be forfeited or otherwise eliminated.

 

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20. Retirement and Welfare Plans

Neither Awards made under the Plan nor shares of Common Stock or cash paid
pursuant to such Awards will be included as “compensation” for purposes of
computing the benefits payable to any Participant under the Company’s retirement
plans (both qualified and non-qualified) or welfare benefit plans unless such
other plan expressly provides that such compensation shall be taken into account
in computing a participant’s benefit or except as the Committee may otherwise
determine in its discretion.

 

21. Compliance with Code Section 162(m)

It is the intent of the Company that Options and Stock Appreciation Rights
granted to Covered Employees and other Awards designated as Awards to Covered
Employees subject to Section 8 shall constitute qualified “performance-based
compensation” within the meaning of Section 162(m) of the Code, unless otherwise
determined by the Committee at the time of allocation of an Award. Accordingly,
the terms of Section 8, including the definitions of Covered Employee and other
terms used therein, shall be interpreted in a manner consistent with
Section 162(m) of the Code. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Committee as likely to be a Covered Employee with respect to a specified fiscal
year. If any provision of the Plan or any Award document relating to an Award
that is designated as intended to comply with Section 162(m) of the Code does
not comply or is inconsistent with the requirements of Section 162(m) of the
Code, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements, and no provision shall be deemed to
confer upon the Committee or any other person discretion to increase the amount
of compensation otherwise payable in connection with any such Award upon
attainment of the applicable performance goals.

 

22. Certain Limitations on Awards to Ensure Compliance with Code Section 409A

The Company intends that the Plan and each Award granted hereunder that is
subject to Section 409A of the Code shall comply with or be exempt from
Section 409A of the Code and that the Plan shall be interpreted, operated and
administered accordingly. In the event any term and/or condition of an Award
granted hereunder would cause the application of an accelerated or additional
tax under Section 409A of the Code, such term and/or condition shall be
restructured, to the extent possible, in a manner, determined by the Committee,
that does not cause such an accelerated or additional tax. Any reservation of
rights by the Company hereunder affecting the timing of payment of any Award
subject to Section 409A of the Code (including, without limitation, the rights
of the Committee pursuant to Section 10(d)) will only be as broad as is
permitted by Section 409A of the Code. Notwithstanding anything herein to the
contrary, in no event shall the Company be liable for the payment of or gross-up
in connection with any taxes and or penalties owed by the Participant pursuant
to Section 409A of the Code.

If an Award is intended to comply with Section 409A of the Code, all payments to
be made upon a termination of employment under such Award may only be made upon
a “Separation from Service” (as defined in Section 409A of the Code and the
accompanying Treasury Regulations and guidance issued by the Internal Revenue
Service). For purposes of Section 409A of the Code, each payment under an Award
is treated as a separate and independent payment. In no event may the
Participant, directly or indirectly, designate the calendar year of payment.

If the Participant is deemed to be a “Specified Employee” (as term is defined in
Section 409A of the Code and the accompanying Treasury Regulations and guidance
issued by the Internal Revenue Service) as of the date of his Separation from
Service, as determined by Kraton Performance, the payment of any amount under an
Award on account of Separation from Service that is deferred compensation
subject to Section 409A of the Code and not otherwise exempt from Section 409A,
shall not be paid before the earliest of (i) the first business day that is at
least six months after the date of the Participant’s Separation from Service,
(ii) the date of the Participant’s

 

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death, or (iii) the date that otherwise complies with the requirements of
Section 409A of the Code. This provision shall be applied by accumulating all
payments that otherwise would have been paid within six months of the
Participant’s Separation from Service and paying such accumulated amounts,
without interest, at the earliest date as described in the preceding sentence
and any remaining payments due under such Award shall be paid or provided in
accordance with the normal payment dates specified therein.

 

23. Uncertificated Shares

To the extent that the Plan provides for issuance of certificates to reflect the
transfer of shares of Common Stock, the transfer of such shares may be effected
on a noncertificated basis, to the extent not prohibited by applicable law or
the rules of any stock exchange.

 

24. Participants Based Outside of the United States

Notwithstanding any provision of the Plan to the contrary, in order to comply
with the laws in other countries in which the Company operates or has employees,
Directors or independent contractors, the Committee, in its sole discretion,
shall have the power and authority to:

(a) Determine which affiliates and Subsidiaries shall be covered by the Plan;

(b) Determine which employees, Directors, and/or independent contractors outside
the United States are eligible to participate in the Plan;

(c) Modify the terms and conditions of any Award granted to employees,
Directors, and/or independent contractors outside the United States to comply
with applicable foreign laws;

(d) Establish subplans and modify exercise procedures and other terms and
procedures, to the extent such actions may be necessary or advisable. Any
subplans and modifications to Plan terms and procedures established under this
Section 24 by the Committee shall be attached to the Plan document as
appendices; and

(e) Take any action, before or after an Award is made, that it deems advisable
to obtain approval or comply with any necessary local government regulatory
exemptions or approvals.

Notwithstanding the above, the Committee may not take any actions hereunder, and
no Awards shall be granted, that would violate applicable law.

 

25. Legend

The certificates or book entry for shares of Common Stock may include any legend
or coding, as applicable, which the Committee deems appropriate to reflect any
restrictions on transfer of such shares.

 

26. Severability; Entire Agreement

If any of the provisions of the Plan or any Award Agreement is finally held to
be invalid, illegal, or unenforceable (whether in whole or in part), such
provision shall be deemed modified to the extent, but only to the extent, of
such invalidity, illegality, or unenforceability, and the remaining provisions
shall not be affected thereby; provided that, if any of such provisions is
finally held to be invalid, illegal, or unenforceable because it exceeds the
maximum scope determined to be acceptable to permit such provision to be
enforceable, such provision shall be deemed to be modified to the minimum extent
necessary to modify such scope in order to make such provision enforceable
hereunder. The Plan and any Award Agreement or other agreements or documents
designated by the Committee as setting forth the terms of an Award contain the
entire agreement of the parties with respect to the subject matter thereof and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations, and warranties between them, whether written or
oral, with respect to the subject matter thereof.

 

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27. Descriptive Headings

The headings in the Plan are for convenience of reference only and shall not
limit or otherwise affect the meaning of the terms contained herein.

 

28. Governing Law

The Plan and the rights of all persons under the Plan shall be construed and
administered in accordance with the laws of the State of Texas without regard to
its conflict of law principles.

 

29. Effective Date, Term of Plan and Approval By Stockholders

The Plan was originally adopted and effective as of the Effective Date and shall
terminate automatically on the ten year anniversary of the Effective Date and
may be terminated on any earlier date as provided in Section 15.

The Plan, as amended and restated effective as of May 25, 2011, as adopted by
the Board of Directors, was approved by the stockholders of Kraton Performance
at the Annual Meeting of the Stockholders of Kraton Performance Polymers, Inc.
held on May 25, 2011.

 

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