Exhibit 10.1(c)
January 24, 2008
George B. Gregory
238 N. Tranquil Path Drive
The Woodlands, TX 77380
     Dear George:
     Pursuant to our recent conversations, we mutually agree that you shall have
ceased to be the Chief Executive Officer of KRATON Polymers LLC (“KRATON”)
effective January 14, 2008 (“Resignation Date”) and your employment with KRATON
and any and all of its subsidiaries and affiliates (together and each
individually, the “Company”) shall terminate effective February 1, 2008 (the
“Separation Date”). In connection with your termination of employment, as of the
Resignation Date, you shall be deemed to have resigned all offices and
directorships, including without limitation any position on the board of
directors of the Company, that you held prior thereto in respect of the Company.
     1. Conditioned upon your executing the release and waiver attached hereto
as Appendix A (the “Release”) within 30 days of the Separation Date and, to the
extent the applicable payment has not then become payable, within 30 days of the
termination of your provision of consulting services to the Company, pursuant to
a consulting agreement to be entered into as of the date hereof by you and
KRATON (the “Consulting Agreement”), as set forth in the Consulting Agreement,
the Release becoming effective following the Separation Date and the termination
of the Consulting Agreement, and your continued compliance in all material
respects with the obligations set forth in this agreement, including without
limitation Sections 5 and 6 hereof, KRATON shall:
     a. Pay to you the following ((i), (ii) and (iii) together, the “Accrued
Benefit Payment”):
     (i) within 30 days of the Separation Date, your annual base salary of
$500,000 (“Base Salary”) through the date of termination, to the extent not
already paid;
     (ii) within 30 days of the Separation Date, reimbursement for any
unreimbursed business expenses properly incurred by you in accordance with
KRATON policy prior to the date of your termination; and
     (iii) pursuant to Section7(a)(iii)(D) of that certain employment agreement
between you and KRATON dated November 1, 2004 as amended (“Employment
Agreement”), any vested Employee Benefits, as defined in the Employment
Agreement, to which you are entitled, pursuant to the applicable terms of such
Employee Benefits.

 

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     b. Pay an amount, in the aggregate, equal to one and a half times (1.5x)
the Base Salary, payable as follows: (i) your Base Salary pro rated for the
period from February 2, 2008 through December 31, 2008, in accordance with the
standard payroll practices of KRATON as in effect from time to time; and
(ii) the remainder as soon as practicable on or after January 1, 2009, but in no
event later than January 31, 2009 (the “Continuation Payments”);
     c. For eighteen months following the Separation Date, provide to you and
any eligible dependents medical benefits substantially similar to those provided
generally to executive officers of KRATON pursuant to KRATON’s medical plan, as
applicable, provided that you shall not be responsible for any premiums,
contributions and other co-payments required to be paid by active executive
officers of KRATON under the terms of any such medical plan as may be in effect
from time to time (such coverage may be provided by paying the applicable
portion of the COBRA premiums) (the “Continuing Medical Benefits”); provided,
however, that if you become eligible to receive medical benefits from a new
employer under that employer’s plan, the Continuing Medical Benefits described
herein shall be terminated. You are required to promptly notify KRATON of any
changes in your medical benefits coverage; and
     d. Within 30 days following the Separation Date, pay to you $600,000, which
we agree is due to you and which shall reflect the full amount of the retention
award granted to you by KRATON pursuant to the Retention Award Agreement, dated
as of January 1, 2008 (the “Retention Award”), less any portion of the Retention
Award previously paid.
     2. Equity and Equity Based Awards. Conditioned in all respects upon your
executing the Release within 30 days of the Separation Date and, to the extent
the payment has not then become payable, within 30 days of the termination of
your provision of consulting services pursuant to the Consulting Agreement, the
Release becoming effective following the Separation Date and the termination of
the Consulting Agreement, and your continued compliance in all material respects
with the obligations set forth in this agreement, including without limitation
Sections 5 and 6 hereof:
     a. Set forth on Schedule I hereto is a true, accurate and complete list of
all of the equity, equity-based and profits interest awards that are, as of the
Separation Date, vested and/or exercisable (the “Equity Awards”).
Notwithstanding anything to the contrary in the TJ Chemical Holdings LLC 2004
Option Plan (the “Plan”) or applicable grant agreement, all Equity Awards that
are options shall remain outstanding and exercisable for the lesser of (i) the
period provided in the Plan or such grant agreement, without regard to a
termination of employment, and (ii) ten years from the date of grant. Except as
provided in this Section 2, the Equity Awards and all other equity, equity-based
or profits interest awards held by you on or prior to the Separation Date that
are not Equity Awards (the “Unvested Awards”) shall otherwise continue to be
governed by their terms; provided, that, notwithstanding anything to the
contrary in the plan or any applicable grant agreement, the Unvested Awards
shall remain outstanding, but shall cease to vest and you shall not have any
rights with respect thereto, subject to Section 3 hereof, pending determination
of whether the Additional Vesting Condition, as defined below,

 

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has been, and shall be forfeited without payment and without any future
obligation or rights in the event that the Additional Vesting Condition is not,
or cannot be, satisfied.
     b. The Company shall (i) exercise its right to repurchase 149,000
restricted units, for an aggregate purchase price of $149,000; and (ii) settle
the Phantom Equity Units listed on Schedule 1 in cash, pursuant to the terms of
the agreement governing such Phantom Equity Units, for an aggregate payment of
$101,010, in each case in accordance with the terms governing the restricted
stock units or Phantom Equity Units, as applicable.
     3. Triumph. In the event that the Company enters into a definitive
agreement (subject to customary closing conditions) on or before April 30, 2008
to engage in Project Triumph on terms and conditions substantially similar to
the terms and conditions negotiated in December 2007, as determined by the
Company in good faith, and such transaction is consummated on or before December
31, 2008 (together, the “Additional Vesting Condition”), you shall have the
right to have the Equity Awards and any Unvested Award repurchased or otherwise
settled by the Company in cash, at a fair market value equal to the transaction
price, as if you had been employed on the date of such change of control and
terminated without cause by the Company on the day following such change in
control; provided, however, that this provision shall not apply to any Equity
Award or Unvested Award that has already been repurchased or otherwise settled
by the Company in cash and in no event shall this provision result in a
duplication of benefits; and provided, further, that this Section 3 is
conditioned in all respects upon your executing the Release within 30 days of
the Separation Date and, to the extent the payment has not then become payable,
within 30 days of the termination of your provision of consulting services
pursuant to the Consulting Agreement, the Release becoming effective following
the Separation Date and the termination of the Consulting Agreement, and your
continued compliance in all material respects with the obligations set forth in
this agreement, including without limitation Sections 5 and 6 hereof.
     4. Except (i) for the Accrued Benefits Payment, the Continuation Payments,
the Continuing Medical Benefits and the Retention Award, (ii) as set forth in
Sections 2 and 3, and (iii) for any payment pursuant to the Consulting
Agreement, you shall not be entitled to any other payments or benefits as a
result of your employment with the Company or the termination thereof or
pursuant to any agreement, arrangement, plan or understanding you may have with
the Company.
     5. Restrictive Covenants; Indemnity and Insurance. Sections 8 through 10
(inclusive) and Section 11(m) of the Employment Agreement are hereby included in
this agreement as if fully restated herein.
     6. Non-Disparagement. You agree not to defame or disparage the Company, or
any of its officers, directors, members, executives or employees in any material
respect. You agree to reasonably cooperate with the Company (at no expense to
you) in refuting any defamatory or disparaging remarks by any third party made
in respect of the Company or any of its directors, members, officers, executives
or employees.

 

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     7. Legal Fees. KRATON agrees to pay all reasonable legal fees and expenses
incurred by you as a result of the negotiation and preparation of this
agreement; provided that KRATON shall not have any obligation to pay any such
fees and expenses in excess of $10,000.
     8. Miscellaneous. Any notice or other communication required or permitted
under this agreement shall be effective only if it is in writing and shall be
deemed to be given when delivered personally or two business days after it is
mailed by registered or certified mail, postage prepaid, return receipt
requested or one business day after it is sent by a reputable overnight courier
service and, in each case, addressed as follows (or if it is sent through any
other method agreed upon by the parties):
If to KRATON:
KRATON Polymers LLC
c/o Texas Pacific Group
301 Commerce Street, Suite 3300
Fort Worth, TX 76102
with a copy to:
Robert J. Raymond
Cleary, Gottlieb, Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
If to George Gregory:
George B. Gregory
238 N. Tranquil Path Drive
The Woodlands, TX 77380
with a copy to:
Andrew H. Seiden
Curtis, Mallet-Prevost, Colt & Mosle LLP
101 Park Avenue
New York, N.Y. 10178
     or to such other address as any party hereto may designate by notice to the
others.
     This agreement shall constitute the entire agreement among the parties
hereto with respect to the subject matter hereof, and supersedes and is in full
substitution for any and all prior understandings or agreements with respect to
your employment and the termination thereof; provided, that the Equity Awards
shall continue to be governed by the agreements evidencing, and any plan
document governing, the award thereof except as otherwise provided herein; and
provided, further, that the consulting services shall be governed by the
Consulting Agreement.

 

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     This agreement may be amended only by an instrument in writing signed by
the parties hereto, and any provision hereof may be waived only by an instrument
in writing signed by the party or parties against whom or which enforcement of
such waiver is sought. No waiver of any provision or violation of this agreement
by KRATON shall be implied by KRATON’s forbearance or failure to take action.
The failure of any party hereto at any time to require the performance by any
other party hereto of any provision hereof shall in no way affect the full right
to require such performance at any time thereafter, nor shall the waiver by any
party hereto of a breach of any provision hereof be taken or held to be a waiver
of any succeeding breach of such provision or a waiver of the provision itself
or a waiver of any other provision of this agreement.
     The parties hereto acknowledge and agree that each party has reviewed and
negotiated the terms and provisions of this agreement and has had the
opportunity to contribute to its revision. Accordingly, the rule of construction
to the effect that ambiguities are resolved against the drafting party shall not
be employed in the interpretation of this agreement. Rather, the terms of this
agreement shall be construed fairly as to both parties hereto and not in favor
or against either party.
     Any provision of this agreement (or portion thereof) which is deemed
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this paragraph, be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions thereof in such jurisdiction or rendering that or any other
provisions of this agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable.
     KRATON may withhold from any amounts payable to you hereunder all federal,
state, city or other taxes that KRATON may reasonably determine are required to
be withheld pursuant to any applicable law or regulation (it being understood,
that you are responsible for payment of all taxes in respect of the payments and
benefits provided herein).
     This agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without reference to its principles of conflicts
of law.
     You agree that the payment of any amounts due hereunder shall be delayed
until this agreement is executed and returned to KRATON and until the Release
becomes effective pursuant to the terms of the Release, and that the Release
must be signed within 30 days following the Separation Date. In addition, you
agree that the payments hereunder and payments under the Consulting Agreement
that have not become payable as of the termination of the Consulting Agreement
shall be contingent upon your re-executing the Release following the termination
of the Consulting Agreement. You acknowledge that you have been advised to
consult, and have consulted, with an attorney prior to executing this agreement.
     This agreement may be executed in several counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
instrument. A facsimile of a signature shall be deemed to be and have the effect
of an original signature.

 

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     The headings in this agreement are inserted for convenience of reference
only and shall not be a part of or control or affect the meaning of any
provision hereof.
     This agreement shall inure to the benefit of, be binding upon, and
enforceable by the Company and its successors and assigns. This agreement shall
inure to the benefit of your successors, heirs, legatees and personal
representatives but is not assignable by you without KRATON’s consent.
     This agreement is intended to comply with Section 409A of the Internal
Revenue Code of 1986 and the regulations and guidance promulgated thereunder, as
amended, and shall be construed accordingly.
* * * * *

 

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     If you agree with the foregoing provisions, please sign in the appropriate
space below and return the original to me.

            Sincerely,

KRATON Polymers LLC
      By:   /s/ Richard A. Ott        Name:   Richard A. Ott        Title:   VP
- HR   

          Agreed and Accepted:
      /s/ George B. Gregory       George B. Gregory       

Date:

 

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SCHEDULE I
Options

  •   1,500,000 options to purchase units of TJ Chemical, pursuant to a grant
made on December 2, 2004.     •   300,000 options to purchase units of TJ
Chemical, pursuant to a grant made February 1, 2005.

Restricted Units

  •   200,000 restricted units of TJ Chemical, pursuant to a grant made
March 17, 2005.

Notional Units

  •   525,000 notional units of TJ Chemical, pursuant to a grant made
September 10, 2004.

Profits Units

  •   None.

Phantom Equity Units

  •   101,010 notional units of TJ Chemical, pursuant to a deferral agreement
dated April 1, 2007.

Company Membership Units

  •   300,000 Company Membership Units in KRATON Management LLC, purchased
September 10, 2004.