Summary of the Terms of the 2008 Incentive Compensation Plan



 Exhibit 10.31 
 Summary of 2008 Incentive Compensation Plan 
 Annual bonuses in 2008
shall be paid pursuant to this 2008 Incentive Compensation Plan, subject to the discretion of the Compensation Committee to make such adjustments as it deems appropriate, including in certain instances, its discretion to exceed the maximum amount
otherwise payable under the plan. The common bonus pool amount shall be $17 million. Those eligible for payout from the common bonus pool include all employees, with the exception of the non-exempt hourly plant workers at the Belpre Plant, on the
payroll as of December 31, 2007. The Incentive Compensation Plan is intended to encourage strong performance on factors that are key to Kraton’s growth and success. 
 A participant’s initial bonus amount is determined as follows: 
  

																	
	Participant’s	  		  	Target	  		  	Kraton	  		  	Individual	  		  	Amount allocated from
	Base Salary	  	X	  	 Bonus
 Factor
 (%)
	  	X	  	 Performance
 Factor
	  	X	  	 Performance
 Factor
	  	+	  	 the additional
 $1,000,000 pool, if any


 Target Bonus Factor is a percentage of base salary and shall be established by the
Compensation Committee for each participant, unless specifically provided in such participant’s employment agreement. 
 Kraton’s
Performance Factor shall be determined through use of a sliding scale based on EBITDA generated by Kraton. For example, if Kraton successfully achieves EBITDA that is exactly equal to the EBITDA target as set in the annual business plan of
Kraton, then the Kraton performance factor would be 1. The annual business plan also establishes a stretch EBITDA target, which if achieved or exceeded, would result in a Kraton performance factor of 2. The Kraton performance factor can never exceed
2. Sixty-five percent of the EBITDA target is a minimum threshold below which the Kraton performance factor, and thus the common bonus pool, would be zero. If actual EBITDA falls between 65% of EBITDA and the stretch EBITDA target, the Kraton
performance factor is adjusted based on a sliding scale. 
 The Individual Performance Factor shall be determined after review by the
Compensation Committee of that executive’s key contributions and key weaknesses for the year on an aggregate basis and is not based on a mathematical or formulaic method and no objectively determinable weighting is applied. Each
participant’s individual performance factor shall range from 0 to 2.0. 
 An Additional Bonus Pool of up to $1 million may be added
or subtracted from the common bonus pool amount based on additional performance criteria. 
 Adjustments Initial bonus amounts are
adjusted downwards as necessary so as not to exceed the common bonus pool amount or maximum payouts as established by employment contracts. 
 Targets. For fiscal year 2008, Kraton’s EBITDA target is $100 million, and Kraton’s stretch EBITDA target for such period is $120 million. The determinate additional performance criteria which shall determine whether the
pool is increased by an additional $1 million are (i) safety








 
performance as determined by the Company’s Occupational Safety and Health Administration (“OSHA”) Recordable Rate, (ii) innovation expressed as a percent of total revenue,
(iii) cost out restructuring projects and (iv) pricing initiatives. 
  

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