Document:

exv10w2

 

Exhibit
10.2

OPTION GRANT AGREEMENT

This OPTION GRANT AGREEMENT, made as of the 2d day of December, 2004 between TJ Chemical
Holdings LLC (the “Company”) and James Ball (the “Participant”).

WHEREAS, the Company has adopted and maintains the TJ Chemical Holdings LLC 2004 Option Plan (the
“Plan”) to promote the interests of the Company and the Holders of Membership Units in the Company
by providing key employees, consultants, members and service providers of the Company and its
affiliates with an appropriate incentive to encourage them to continue in the employ or service and
to improve the growth and profitability of the Company and its affiliates;

WHEREAS, the Plan provides for the Grant to Participants of non-qualified Options to purchase
Membership Unit(s) in the Company;

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth,
the parties hereto hereby agree as follows:

1. Grant of Options. Pursuant to, and subject to, the terms and conditions set forth herein and in
the Plan, the Company hereby grants to the Participant a non-qualified option (the “Option”) with
respect to 25,000 Membership Unit(s) in the Company.

2. Grant Date. The Grant Date of the Option hereby granted is December 2, 2004.

3. Vesting Commencement Date. The Vesting Commencement Date of the Option hereby granted is
December 1, 2004.

4. Incorporation of Plan. All terms, conditions and restrictions of the Plan and the LLC Agreement
are incorporated herein and made part hereof as if stated herein. If there is any conflict between
the terms and conditions of the Plan or the LLC Agreement and this Option Grant Agreement, the
terms and conditions of this Option Grant Agreement, as interpreted by the Committee in its sole
discretion, shall govern, unless explicitly provided to the contrary in the Plan or this Option
Grant Agreement. All capitalized terms used herein shall have the meaning given to such terms in
the Plan.

5. Exercise Price. The exercise price per Membership Unit underlying the Option granted hereby is
$1.00.

6. Vesting Date. The Option shall become exercisable as follows: fifty percent (50%) of the
Membership Unit(s) (rounded down to the nearest Membership Unit) underlying the Option shall become
exercisable on each of the first two anniversaries of the Vesting Commencement Date; Provided
that the unvested portion of the Option shall become immediately vested as of the effective
date of a Change in Control.

7. Expiration Date. The Option or such portion thereof that has not yet become exercisable on the
date the Participant’s Services are terminated for any reason shall expire on such date. The Option
or such portion thereof that has become exercisable on or before the date the Participant’s
Services are terminated shall expire on the earlier of ( a) the commencement of business on the
date the Participant’s Services are terminated for Cause; (b) 90 calendar days after the date the
Participant’s Services are terminated for any reason other than Cause, death or Disability; (c) one
year after the date the Participant’s Services are terminated by reason of death or Disability; or
(d) the 10th anniversary of the Grant Date.

 

 

8. Limitations on Transfer of Membership Units; Termination of Employment. The Participant
acknowledges that upon becoming a member of the Company, the Participant will be subject to all the
terms and conditions provided in the LLC Agreement. Notwithstanding anything herein or the LLC
Agreement to the contrary, the Participant shall not sell or transfer any Membership Unit acquired
pursuant to the exercise of an Option, except (i) to the Participant’s beneficiaries or estate upon
the Participant’s death, (ii) upon consent of the Committee, (iii) pursuant to Sections 6.03, 6.04,
6.06 of the LLC Agreement, or (iv) if such sale or transfer occurs following the date set forth in
Section 6.07 of the LLC Agreement.

In the event of a termination of a Participant’s Services, the Company shall have the right to
purchase the Participant’s Membership Units acquired pursuant to the Options in accordance with
Section 6.06 of the LLC Agreement. Any Membership Units acquired pursuant to the exercise of the
Options shall be subject to certain Tag-Along and Drag-Along rights in accordance with Article VI
of the LLC Agreement.

9. Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any
party hereto upon any breach or default of any party under this Option Grant Agreement, shall
impair any such right, power or remedy of such party nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or default under this
Option Grant Agreement, or any waiver on the part of any party or any provisions or conditions of
this Option Grant Agreement, shall be in writing and shall be effective only to the extent
specifically set forth in such writing.

10. Limitation on Transfer of Options. Except as set forth in this Section 10, the Option shall be
exercisable only by the Participant. The Option shall not be assignable or transferable other than
by will or by the laws of descent and distribution. Notwithstanding the foregoing, the Participant
may request authorization from the Committee to assign the Option granted herein to a trust or
custodianship, the beneficiaries of which may include only the Participant, the Participant’s
spouse or the Participant’s lineal descendants (by blood or adoption), and, if the Committee grants
such authorization, the Participant may assign his rights accordingly. In the event of any such
assignment, such trust or custodianship shall be subject to all the restrictions, obligations, and
responsibilities as apply to the Participant under the Plan and this Option Grant Agreement and
shall be entitled to all the rights of the Participant under the Plan and this Option Grant
Agreement; Provided that notwithstanding such assignment, if the events or dates set forth
in Sections 6 and 7 of the Option Grant Agreement occur with respect to the Participant, the Option
shall not vest or expire at the times set forth in Sections 6 and 7 hereof; Provided further
that upon such assignment in accordance with this Section 10, all references in the Plan and
Option Grant Agreement except for Sections 6 and 7 of the Option Grant Agreement (and any other
provision of Services with the Company or its affiliates (or the termination thereof)) shall be
deemed to be replaced by a reference to the Transferee of the Option.

11. Indemnification. The Participant agrees, to the fullest extent permitted by law, to indemnify
and hold harmless the Company and any director, officer, or employee thereof against any and all
losses, liabilities, claims, damages, and expenses of any nature whatsoever (including attorneys’
fees and disbursements, judgments, fines and amounts paid in
settlement) (collectively,

 “Losses”) arising out of or based upon any breach or failure by the Participant to
comply with his obligations made herein. This Section 11 shall survive any termination or execution
of this Option Grant Agreement.

 

 

12. Representations.

     12.1 Participant Representations. In addition to any representations made by the Participant
in the LLC Agreement, the Participant hereby represents and warrants to the Company that: (a) the
Participant is an “accredited investor” as defined in Rule 501(a) under the Securities Act;
~provided that the Company may, in its discretion and subject to compliance with all
applicable securities laws, waive the foregoing representation with respect to a limited number of
Participants; (b) the Participant, alone or together with his representatives, possesses such
expertise, knowledge, and sophistication in financial and business matters generally, and in the
type of transactions in which the Company proposes to engage in particular; (c) the Participant is
aware that the LLC Agreement provides significant restrictions on the ability of a Participant to
sell, transfer, assign, mortgage, hypothecate, or otherwise encumber the Membership Units; (d) the
Participant has duly executed and delivered this Option Grant Agreement; and (e) the Participant’s
authorization, execution, delivery, and performance of this Option Grant Agreement do not conflict
with any other agreement or arrangement to which the Participant is a party or by which it is
bound.

     12.2 Truth of Representations and Warranties. The Participant represents and warrants that all
of his representations set forth in Section 12.1 of this Option Grant Agreement are true and
correct as of the date hereof and will be true and correct on any Exercise Date.

13. Integration. This Option Grant Agreement, and the other documents referred to herein or
delivered pursuant hereto (including, without limitation, the LLC Agreement) which form a part
hereof contain the entire understanding of the parties with respect to its subject matter and there
are no restrictions, agreements, promises, representations, warranties, covenants or undertakings
with respect to the subject matter hereof other than those expressly set forth in such documents.
This Option Grant Agreement, the Plan and the LLC Agreement supersede all prior agreements and
understandings between the parties with respect to its subject matter.

14. Counterparts. This Option Grant Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the same instrument.

15. Governing Law. This Option Grant Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware without regard to the provisions
thereof governing conflict of laws.

16. Participant Acknowledgment. The Participant hereby acknowledges receipt of a copy of the Plan
and the LLC Agreement. The Participant hereby acknowledges that all decisions, determinations and
interpretations of the Committee in respect of the Plan, this Option Grant Agreement and the Option
shall be final and conclusive.

[Remainder of page intentionally left blank]

 

 

     IN WITNESS WHEREOF, the Company has caused this Option Grant Agreement to be duly executed by its
duly authorized officer and said Participant has hereunto signed this Option Grant Agreement on his
own behalf, thereby representing that he has carefully read and understands this Option Grant
Agreement, the Plan, and the LLC Agreement as of the day and year first written above.

	 	 	 
	 

	 	TJ CHEMICAL HOLDINGS LLC
	 
	 
	 	/s/ Richard A. Ekleberry
	 

	 	 
	 

	 	By: Richard A. Ekleberry
	 

	 	Title: Vice President
	 
	 	 
	 

	 	JAMES BALL
	 
	 
	 	/s/ James Ballexv10w3

 

Exhibit 10.3

EMPLOYMENT AGREEMENT

KEVIN FOGARTY

     EMPLOYMENT AGREEMENT (the “Agreement”)
dated as of November 9, 2005 by and between KRATON
Polymers LLC, (“KRATON”), a Delaware limited liability company, which is a wholly owned subsidiary
of Polymer Holdings LLC (“Parent”), a Delaware limited liability company and Kevin Fogarty (the
“Executive”).

     In consideration of the premises and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:

          1. Term of Employment. Subject to the provisions of Section 7 of this Agreement,
Executive shall continue to be employed by the Company for a period commencing on June 15, 2005
(the “Effective Date”) and ending on the day before the third anniversary of the Effective Date
(the “Employment Term”) on the terms and subject to the conditions set forth in this Agreement;
provided, however, that commencing with the third anniversary of the Effective Date and on each
anniversary thereafter (each an “Extension Date”), the Employment Term shall be automatically
extended for an additional one-year period, unless KRATON or Executive provides the other party
hereto 30 days prior written notice before the next Extension Date that the Employment Term shall
not be so extended.

          2. Position.

               a. During the Employment Term, Executive shall serve as Executive Vice President of KRATON.
In such position, Executive shall have the duties and authority commensurate with the position as
shall be determined from time to time by the Board of Directors of KRATON (“Board”). Executive
shall report to the chief executive officer of KRATON (the Chief Executive Officer”).

               b. During the Employment Term, Executive will devote Executive’s full business time and best
efforts to the performance of Executive’s duties hereunder and will not engage in any other
business, profession or occupation for compensation or otherwise which would conflict or interfere
with the rendition of such services either directly or indirectly, without the prior written
consent of the Board; provided that nothing herein shall preclude Executive, subject to the prior
approval of the Board, from accepting appointment to or continue to serve on any board of directors
or trustees of any business corporation or any charitable organization; provided in each case, and
in the aggregate, that such activities do not conflict or interfere with the performance of
Executive’s duties hereunder or conflict with Section 8.

          3. Base Salary. During the Employment Term, the Company shall pay Executive a base
salary (the “Base Salary”) at the annual rate of $315,000, payable in regular installments in
accordance with the Company’s usual payment practices. Executive shall be entitled to annual
reviews and increases in Executive’s Base Salary, if any, as may be determined in the sole
discretion of the Board.

 

 

          4. Incentive Compensation.

               a. Annual Bonus. With respect to the first partial fiscal year and each full fiscal
year during the Employment Term, Executive shall be eligible to earn an annual bonus award (an
“Annual Bonus”) equal to (i) up to fifty percent (50%) of Executive’s Base Salary (the “Target”)
based upon the achievement of performance objectives established by the Board, and (ii) up to 100%
of the Target if such performance objectives are exceeded due to extraordinary performance, as
determined by the Board, provided that, with respect to fiscal year 2005, Executive’s Annual Bonus
will not be less than $150,000, provided the Executive is employed with KRATON on December 31,
2005. The Company has established a deferred compensation plan, under which Executive may elect to
defer, no later than July 1st (or such later date as is provided in the plan) of the
year in which the affected Annual Bonus is earned, up to 50% of such Annual Bonus which may be paid
at a later date in shares or units through KRATON Management LLC. The terms and conditions of the
deferred compensation plan shall be provided in a separate plan document, which will provide, among
other things, that the Board shall determine the value of the shares or units as applicable for
purposes of the deferred compensation plan.

               b. Notional Restricted Unit Award. As soon as practicable after the date hereof, the
Company shall grant Executive a restricted unit award with a current notional value of $300,000
based on the value of membership units of TJ Chemical Holdings LLC, as determined by the Board.
Each “Restricted Unit” will be the equivalent of one notional membership unit of TJ Chemical
Holdings LLC. Executive shall not have any beneficial ownership in the notional membership units
underlying the Restricted Units and the grant of Restricted Units shall represent an unsecured
promise to deliver membership units of T.J. Chemical Holdings LLC (either directly or through
membership units of KRATON Management LLC) on a future date. Twenty percent of the Restricted
Units shall vest on each anniversary of the grant date, provided that Executive remains employed
with the Company through the applicable vesting date. Except as provided in the next succeeding
sentence, upon termination of employment for any reason all unvested Restricted Units shall
immediately and automatically be forfeited. In the event of a Change in Control, if the
Executive’s employment is terminated without Cause or for Good Reason during the two-year period
immediately following the date of the Change in Control, all unvested Restricted Units shall become
immediately vested. Distribution of membership units representing the portion of vested Restricted
Units shall occur as soon as practicable after the earlier of a Change in Control or termination of
Executive’s employment, provided that following a Change in Control, unvested Restricted Units
shall remain outstanding and continue to vest as provided above until the Executive’s employment
terminates.

          5. Employee Benefits.

               a. General. During the Employment Term, Executive shall be entitled to participate in
the Company’s employee benefit plans, as amended from time to time, (other than bonus, incentive or
severance plans) as in effect from time to time

 

 

(collectively “Employee Benefits”), on the same basis as those benefits are generally made
available to other senior executives of the Company.

               b. Other. During the Employment Term, Executive shall be eligible to participate in
the equity incentive plans of the Company, its Parent and TJ Chemical Holdings LLC.

          6. Business Expenses. During the Employment Term, reasonable business expenses
incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the
Company in accordance with Company policies.

          7. Termination. The Employment Term and Executive’s employment hereunder may be
terminated by either party at any time and for any reason; provided that Executive will be required
to give KRATON at least 60 days advance written notice of any resignation of Executive’s
employment. Notwithstanding any other provision of this Agreement, the provisions of this Section
7 shall exclusively govern Executive’s rights upon termination of employment with the Company and
its affiliates.

               a. By KRATON For Cause or By Executive Resignation without Good Reason.

          (i) The Employment Term and Executive’s employment hereunder may be terminated
by KRATON for Cause (as defined below) and shall terminate automatically upon
Executive’s resignation without Good Reason (as defined below), provided that
Executive will be required to give KRATON at least 60 days advance written notice
of any such resignation, and provided further that KRATON may elect to waive such
notice period and to pay Executive in lieu of such notice.

          (ii) For purposes of this Agreement “Cause” shall mean (A) Executive’s
continued failure substantially to perform Executive’s duties hereunder (other than
as a result of total or partial incapacity due to physical or mental illness) for a
period of 30 days following written notice by KRATON to Executive of such failure;
provided that it is understood that this clause (A) shall not permit KRATON to
terminate Executive’s employment for Cause because of dissatisfaction with the
quality of services provided by or disagreement with the actions taken by Executive
in the good faith performance of Executive’s duties to KRATON, (B) failure of
Executive to maintain his principal residence in the same metropolitan area as
KRATON’s principal headquarters, which is currently located in Houston, Texas, or
elsewhere as mutually agreed to by Executive and Company, (C) theft or embezzlement
of Company property, (D) Executive’s conviction of or plea of guilty or no contest
to (x) a felony or (y) a crime involving moral turpitude, (E) Executive’s willful
malfeasance or willful misconduct in connection with Executive’s duties hereunder
or any act or omission which is materially injurious to the financial condition or
business reputation of the Company or any of its

 

 

subsidiaries or affiliates, or (F) Executive’s breach of the provisions of
Sections 9 or 10 of this Agreement.

          (iii) If Executive’s employment is terminated by KRATON for Cause, or if
Executive resigns without Good Reason, Executive shall be entitled to receive,
within 30 days following such termination with respect to (A)-(C) below and at such
time, if any, as the Employee Benefits under (D) below become due in accordance
with the applicable terms thereof:

          (A) the Base Salary through the date of termination, to the extent
not already paid;

          (B) any Annual Bonus earned but unpaid as of the date of termination
for any previously completed fiscal year;

          (C) reimbursement for any unreimbursed business expenses properly
incurred by Executive in accordance with KRATON policy prior to the date
of Executive’s termination; and

          (D) such vested Employee Benefits, if any, as to which Executive may
be entitled under the employee benefit plans of the Company as described
in Section 5(a) (including, without limitation, any retirement benefits,
medical, life insurance or disability benefits, accrued but unpaid
vacation or other benefits Executive is entitled to pursuant to the terms
of the applicable plans then in effect (the amounts described in clauses
(A) through (D) hereof being referred to as the “Accrued Obligations”).

          Following such termination of Executive’s employment by KRATON for Cause or resignation by
Executive without Good Reason, except as set forth in this Section 7(a)(iii), Executive shall have
no further rights to any compensation or any other benefits in the nature of severance or
termination pay or in connection with the termination of his employment.

               b. Disability or Death.

          (i) The Employment Term and Executive’s employment hereunder shall terminate
upon Executive’s death and may be terminated by KRATON if Executive becomes
physically or mentally incapacitated and is therefore unable for a period of six
(6) consecutive months or for an aggregate of nine (9) months in any twenty-four
(24) consecutive month period to perform Executive’s duties (such incapacity is
hereinafter referred to as “Disability”); provided that a termination on the basis
of a Disability must occur within 90 days of the date when Executive is subject to
termination due to Disability. Any question as to the existence of the Disability
of Executive as to which Executive and KRATON cannot agree shall be determined in
writing by a qualified independent physician mutually acceptable to Executive and
KRATON. If Executive and

 

 

KRATON cannot agree as to a qualified independent physician, each shall
appoint such a physician and those two physicians shall select a third who shall
make such determination in writing. The determination of Disability made in
writing to the Company and Executive shall be final and conclusive for all purposes
of the Agreement.

          (ii) Upon termination of Executive’s employment hereunder for either
Disability or death, Executive or Executive’s estate (as the case may be) shall be
entitled to receive:

          (A) at the times set forth in Section 7(a)(iii) hereof, the Accrued
Obligations;

          (B) a pro rata portion of any Annual Bonus that Executive would have
been entitled to receive pursuant to Section 4 hereof in such year based
upon the percentage of the fiscal year that shall have elapsed through the
date of Executive’s termination of employment, payable when such Annual
Bonus would have otherwise been payable had Executive’s employment not
terminated.

          Following Executive’s termination of employment due to death or Disability, except as set
forth in this Section 7(b)(ii), Executive shall have no further rights to any compensation or any
other benefits in the nature of severance or termination pay or in connection with the termination
of his employment.

               c. By KRATON Without Cause or Resignation by Executive for Good Reason.

          (i) The Employment Term and Executive’s employment hereunder may be terminated
by KRATON without Cause or by Executive’s resignation for Good Reason.

          (ii) If Executive’s employment is terminated by KRATON without Cause (other
than by reason of death or Disability) or by Executive’s resignation for Good
Reason, Executive shall be entitled to receive:

          (A) At the times set forth in Section 7(a)(iii) hereof, the Accrued
Obligations;

          (B) continuation of Executive’s annual Base Salary until the first
anniversary of such termination, provided that if, prior to such first
anniversary, Executive begins to provide services (as an employee,
consultant or otherwise) to another person or entity and such services are
expected to continue or actually continue for more than 30 days, then the
period of continuation of Base Salary shall be reduced to the later of (A)
6 months following

 

 

such termination of employment or (B) the date the Executive begins
to provide such services (the ”Severance Continuation Period”) and, in
either case, the Base Salary continuation shall be paid at the same time
and in the same manner as if Executive had remained employed by KRATON
during such period; and

          (C) medical benefits for Executive and his eligible dependents
comparable to those medical benefits Executive participated in on the date
of termination during the Severance Continuation Period, provided in any
case such medical benefits shall cease if Executive becomes entitled to
medical benefits from a new employer. KRATON may provide such medical
benefits by paying the Executive’s COBRA continuation coverage through
such Severance Continuation Period.

          (iii) For purposes of this Agreement, “Good Reason” shall mean (A) the failure
of the Company to pay or cause to be paid Executive’s Base Salary or Annual Bonus
(if any) when due, (B) a reduction in Executive’s Base Salary, the Target Annual
Bonus opportunity described in Section 4 herein, or Employee Benefits other than an
across-the-board reduction in salary or bonus opportunity for all of the members of
the Company’s management team and other than a decrease in Employee Benefits that
applies to all employees otherwise eligible to participate in the affected plan, or
(C) a relocation of Executive’s primary work location more than 50 miles from the
work location on the date hereof, without written consent; provided that none of
these events shall constitute Good Reason unless the Company fails to cure such
event within 30 days after receipt from Executive of written notice specifying in
reasonable detail the event which constitutes Good Reason; provided, further, that
“Good Reason” shall cease to exist for an event on the 60th day
following the later of its occurrence or Executive’s knowledge thereof, unless
Executive has given KRATON written notice thereof prior to such date.

          The payments and benefits described in subparagraphs (B) — (C) above shall be subject to and
conditioned upon the Executive’s execution and delivery of a valid and effective general release
and waiver, in a form satisfactory to the Company, waiving all claims the Executive may have
against the Company, its affiliates and their respective executives, directors, partners, members,
shareholders, successors and assigns. Following Executive’s termination of employment by the
Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s
resignation for Good Reason, except as set forth in Section 7(c)(ii), Executive shall have no
further rights to any compensation or any other benefits in the nature of severance or termination
pay or in connection with the termination of his employment.

 

 

               d. Expiration of Employment Term.

          (i) Election Not to Extend the Employment Term. In the event either
party elects not to extend the Employment Term pursuant to Section 1, unless
Executive’s employment is earlier terminated pursuant to paragraphs (a), (b) or (c)
of this Section 7, Executive’s termination of employment hereunder (whether or not
Executive continues as an employee of the Company thereafter) shall be deemed to
occur on the close of business on the day immediately preceding the next scheduled
Extension Date. If Executive’s employment is terminated due to Executive’s
election not to extend the Employment Term, Executive shall be entitled to receive
the Accrued Obligations. If Executive’s employment is terminated by KRATON other
than for Cause following KRATON ’s election not to extend the Employment Term,
Executive shall be entitled to receive (1) at the times set forth in Section
7(a)(iii) hereof, the Accrued Obligations, (2) continuation of Executive’s annual
Base Salary during the Severance Continuation Period at the same time and in the
same manner as if Executive had remained employed by KRATON during such period, and
(3) medical benefits for Executive and his eligible dependents comparable to those
medical benefits Executive participated in on the date of termination during the
Severance Continuation Period, provided in any case such medical benefits shall
cease if Executive becomes entitled to medical benefits from a new employer.
KRATON may provide such medical benefits by paying the Executive’s COBRA
continuation coverage through such Severance Continuation Period.

     The payments and benefits described in this subparagraph (i) shall be subject
to and conditioned upon the Executive’s execution and delivery of a valid and
effective general release and waiver, in a form satisfactory to the Company,
waiving all claims the Executive may have against the Company, its affiliates and
their respective executives, directors, partners, members, shareholders, successors
and assigns. Following such termination of Executive’s employment hereunder as a
result either party’s election not to extend the Employment Term, except as set
forth in this Section 7(d)(i), Executive shall have no further rights to any
compensation or any other benefits in the nature of severance or termination pay or
in connection with the termination of his employment.

          (ii) Continued Employment Beyond the Expiration of the Employment
Term. Unless the parties otherwise agree in writing, continuation of
Executive’s employment with the Company beyond the expiration of the Employment
Term shall be deemed an employment at-will and shall not be deemed to extend any of
the provisions of this Agreement and Executive’s employment may thereafter be
terminated at will by either Executive or the Company; provided that the provisions
of Sections 8, 9 and 10 of this Agreement (and the Company’s potential severance
obligation under Section 7(d)(i) if applicable) shall survive any

 

 

termination of this Agreement or Executive’s termination of employment
hereunder.

               e. Notice of Termination. Any purported termination of employment by the Company or
by Executive (other than due to Executive’s death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 11(h) hereof. For purposes of
this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of employment under the
provision so indicated.

               f. Equity Investment. Nothwithstanding anything herein to the contrary, upon a
termination of employment, the Executive shall have such rights and obligations with respect to any
options to purchase membership units of TJ Chemical Holdings LLC (“TJ Chemical”) then held by the
Executive and with respect to Executive’s investment in TJ Chemical and/or KRATON Management LLC
(including with respect to profits units and/or membership units, as applicable) in accordance with
the applicable governing documents thereof.

          8. Non-Competition.

               a. Executive acknowledges and recognizes the highly competitive nature of the businesses of
the Company and accordingly agrees as follows:

          (i) During the Employment Term and, for a period of one year following the
date Executive ceases to be employed by the Company (the “Restricted Period”),
Executive will not, whether on Executive’s own behalf or on behalf of or in
conjunction with any person, company, business entity or other organization engaged
in a Competitive Business (as defined below), directly or indirectly solicit or
assist in soliciting on behalf of any entity engaged in a Competitive Business, the
business of any client or prospective client:

          (A) with whom Executive had personal contact or dealings on behalf of
the Company during the one year period preceding Executive’s termination
of employment;

          (B) with whom employees reporting to Executive have had personal
contact or dealings on behalf of the Company during the one-year period
immediately preceding the Executive’s termination of employment; or

          (C) for whom Executive had direct or indirect responsibility during
the one-year period immediately preceding Executive’s termination of
employment.

 

 

          (ii) During the Restricted Period, Executive will not directly or indirectly:

          (A) engage in a Competitive Business;

          (B) enter the employ of, or render any services to, any person or
entity (or any division of any person or entity) who or which engages in a
Competitive Business; provided that Executive shall not be prohibited from
rendering any services to any company that derives less than 10% of its
revenues from a Competitive Business (a “Permitted Company”), if such
services or employment relate solely to a business of the Company that is
not in competition with a Competitive Business;

          (C) acquire a financial interest in, or otherwise become actively
involved with, any Competitive Business, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent,
trustee or consultant; provided, however, a Competitive Business shall not
include a Permitted Company, or

          (D) interfere with, or attempt to interfere with, business
relationships (whether formed before, on or after the date of this
Agreement) between the Company and customers, clients, suppliers partners,
members or investors of the Company of which it is reasonable to expect
that Executive is aware.

          (iii) For purposes of this Agreement, “Competitive Business” means the
development, manufacture, license, sale or provision of products or services that
the Company currently, or at any time during the Employment Term, sells,
manufactures, licenses or provides, or has specific plans to do so, including
without limitation styrenic block copolymers made by anionic polymerization.

          (iv) Notwithstanding anything to the contrary in this Agreement, Executive
may, directly or indirectly own, solely as an investment, securities of any person
engaged in a Competitive Business which is publicly traded on a national or
regional stock exchange or on the over-the-counter market if Executive (i) is not a
controlling person of, or a member of a group which controls, such person and (ii)
does not, directly or indirectly, own 5% or more of any class of securities of such
person.

          (v) During the Restricted Period, Executive will not, whether on Executive’s
own behalf or on behalf of or in conjunction with any person, company, business
entity or other organization whatsoever, directly or indirectly:

          (A) solicit or encourage any employee of the Company to leave the
employment of the Company or

 

 

          (B) hire any such employee who was employed by the Company as of the
date of Executive’s termination of employment with the Company or who left
the employment of the Company coincident with, or within six months prior
to or after, the termination of Executive’s employment with the Company.
Notwithstanding the foregoing, following a Change in Control, Executive
will not be restricted from hiring any employee who is terminated without
Cause following such Change in Control.

          (vi) During the Restricted Period, Executive will not, directly or indirectly,
solicit or encourage to cease to work with the Company any individual consultant
then under contract with the Company.

               b. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 8 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.

          9. Confidentiality; Inventions.

               a. Confidentiality. During the Employment Term and thereafter, Executive will not
disclose or use for Executive’s own benefit or purposes or the benefit or purposes of any other
person, firm, partnership, joint venture, association, corporation or other business organization,
entity or enterprise other than the Company, any trade secrets, or other confidential information
or data of the Company relating to the Company’s customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial data, manufacturing
processes, financing methods, plans, or the business and affairs of the Company generally; provided
that the foregoing shall not apply to information which is not unique to the Company or which is
generally known to the industry or the public other than as a result of Executive’s breach of this
covenant. Except as required by law, Executive will not disclose to anyone, other than his
immediate family, legal or financial advisors or any subsequent employer, the contents of this
Agreement. Executive agrees that upon termination of Executive’s employment with the Company for
any reason, he will return to the Company immediately all memoranda, books, papers, plans,
information, letters and other data, and all copies thereof or therefrom, in any way relating to
the business of the Company, except that he may retain personal notes, notebooks and diaries and
personally owned books, reference material or information of a similar nature, that do not contain
confidential information of the type described in the preceding sentence of this section.
Executive further agrees that he will not retain or use for Executive’s account at any time

 

 

any trade names, trademark or other proprietary business designation used or owned in
connection with the business of the Company.

               b. Prior Inventions. Executive has attached hereto, as Exhibit A, a list describing
all material creations, inventions, and developments which were created or contributed to by
Executive either solely or jointly with others prior to Executive’s employment with the Company
which relate to the Company’ proposed or current business, services, products or research and
development (collectively referred to as “Prior Inventions”). If no such list is attached,
Executive either will advise the Company that Prior Inventions exist but cannot be disclosed
because of prior existing confidentiality obligations or, absent such advice, will be understood to
represent that there are no such Prior Inventions. If in the course of Executive’s employment with
the Company, Executive uses or relies upon a Prior Invention, or any works of authorship (including
software, related items, data bases, documentation, site content, text or graphics), developments,
improvements or trade secrets which were created or contributed to by Executive either solely or
jointly with others prior to Executive’s employment with the Company (“Prior Intellectual
Property”) in Executive’s creation or contribution to any work of authorship, invention, product,
service, process, machine or other property of the Company, Executive will inform the Company
promptly and, upon request, use Executive’s best efforts to procure any consents of third parties
necessary for the Company’ use of such Prior Intellectual Property. To the fullest extent
permissible by law, and to the extent not in contravention of any prior legal obligation of
Executive to others all of which are disclosed to KRATON on Exhibit B, attached hereto, Executive
hereby grants the Company a non-exclusive royalty-free, irrevocable, perpetual, worldwide license
under all of Executive’s Prior Inventions to make, have made, copy, modify, distribute, use and
sell works of authorship, products, services, processes and machines and to otherwise operate the
Company’ current and future business.

               c. Ownership of Inventions. Executive agrees that Executive will promptly make full
written disclosure to the Company, and hereby assigns to the Company, or its designee, all of
Executive’s right, title, and interest in and to any and all creations, inventions or developments,
whether or not patentable, which Executive may solely or jointly conceive or develop or reduce to
practice, during the period of time Executive is in the employ of the Company (collectively
referred to as “the Company Inventions”), other than (and the Company Inventions shall not include)
any such creations, inventions or developments which demonstrably bear no relationship whatsoever
to the business of the Company, the chemical industry, or the application of technologies, ideas,
or processes directly or indirectly related to the business of the Company or the chemical industry
to any other industries or disciplines. For the avoidance of doubt, the Company Inventions shall
include any creations, inventions or developments that relate directly or indirectly to a
Competitive Business. Executive further acknowledges that all original works of authorship which
are created or contributed to by Executive (solely or jointly with others) within the scope of and
during the period of Executive’s employment with the Company (“the Company Copyrights”) are to be
deemed “works made for hire,” as that term is defined in the United States Copyright Act, and the
copyright and all intellectual property rights therein shall be the sole property of the Company.
To the extent any of such works are deemed not to be

 

 

“works made for hire,” Executive hereby assigns the copyright and all other intellectual
property rights in such works to the Company.

               d. Contracts with the United States. Executive agrees to execute any licenses or
assignments of the Company Inventions or the Company Copyrights as required by any contract between
the Company and the United States or any of its agencies.

               e. Maintenance of Records. Executive agrees to keep and maintain adequate and current
written records of all the Company Inventions made by Executive (solely or jointly with others)
during the term and within the scope of Executive’s employment with the Company. The records will
be in the form of notes, sketches, drawings, and any other format that may be specified to
Executive or within the Company’ policies, manuals or procedures by the Company. The records will
be available to and remain the sole property and intellectual property of the Company at all times.

               f. Further Assurances. Executive covenants to take all requested actions and execute
all requested documents to assist the Company, or its designee, at the Company’ expense, in every
way; consistent with applicable law, (1) to secure the Company’s above rights in the Prior
Intellectual Property and Company Inventions and any of the Company’s Copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and all countries, and
(2) to pursue any patents or registrations with respect thereto. This covenant shall survive the
termination of this Agreement. If the Company is unable for any reason, after reasonable efforts,
to secure Executive’s signature on any document for this purpose, then Executive hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents as Executive’s
agent and attorney in fact, for the limited purpose of acting for and in Executive’s behalf and
stead to execute such documents and to do all other lawfully permitted acts in connection with the
execution of such documents.

          10. Specific Performance. Executive acknowledges and agrees that the Company’s
remedies at law for a breach or threatened breach of any of the provisions of Sections 8 through 10
would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable remedy which may then
be available and in the event of a breach of Sections 8 through 10, shall be entitled to cease
making any payments or providing any benefit otherwise required by this Agreement.

          11. Miscellaneous.

               a. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to conflicts of laws principles thereof.

 

 

               b. Entire Agreement/Amendments. Except for the documents related to the Company and
its affiliates’ equity incentive plans, this Agreement contains the entire understanding of the
parties with respect to the employment of Executive by the Company, there are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties hereto.

               c. No Waiver. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.

               d. Severability. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.

               e. Assignment. This Agreement shall not be assignable by Executive. This Agreement
may be assigned by the Company to a person or entity which is an affiliate or a successor in
interest to substantially all of the business operations of the Company. Upon such assignment, the
rights and obligations of the Company hereunder shall become the rights and obligations of such
affiliate or successor person or entity.

               f. Set Off. The Company’s obligation to pay Executive the amounts provided and to
make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of
amounts owed by Executive to the Company or its affiliates.

               g. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be
binding upon personal or legal representatives, executors, administrators, successors, heirs,
distributes, devises and legatees.

               h. Notice. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or overnight courier or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the respective addresses
set forth below Agreement, or to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notice of change of address shall be effective only
upon receipt.

If to the Company:

KRATON Polymers LLC

c/o Texas Pacific Group

301 Commerce Street, suite 3300

 

 

Fort Worth, Texas 76102

AND

KRATON Polymers LLC

700 Milam Street 13th floor, North Tower

Houston, TX 77002

Attention: General Counsel

Fax: 832.204.1346

If to Executive:

To the most recent address of Executive set forth in the personnel records of the Company.

                  i. Executive Representation. Executive hereby represents to the Company that the
execution and delivery of this Agreement by Executive and the Company and the performance by
Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement or policy to which Executive
is a party or otherwise bound.

                  j. Cooperation. Executive shall at the Company’s expense provide his reasonable
cooperation in connection with any action or proceeding (or any appeal from any action or
proceeding) which relates to events occurring during Executive’s employment hereunder. This
provision shall survive any termination of this Agreement.

                  k. Withholding Taxes. The Company may withhold from any amounts payable under this
Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.

                  l. Counterparts. This Agreement may be signed in counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.

                  m. Insurance. Notwithstanding anything to the contrary herein:

          (i) All rights the Executive has to indemnification as a director, officer or
fiduciary pursuant to any agreement, applicable statue, Company by-laws or articles
of organization as in effect from time to time shall not be impacted by the
provisions of this Agreement and all such rights, if any, shall survive the
termination and/or expiration of this Agreement and/or the termination of the
Executive’s employment with the Company; and

 

 

          (ii) So long as the Executive is employed by the Company and for a period of
six (6) years following the Executive’s termination of employment, the Company
agrees to purchase and maintain insurance for the Executive’s benefit, covering
director, officer and fiduciary liability on the same basis as active directors,
officers and/or fiduciaries, as applicable, of the Company.

          IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.

	 	 	 
	KRATON POLYMERS LLC

	 	KEVIN FOGARTY
	 
	/s/
Richard A. Ott
	 	/s/ Kevin M. Fogarty
	 

	 	 
	By:
Richard A. Ott
	 	 
	Title:
Vice President

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