Document:

exv10w4

 

Exhibit 10.4

OPTION GRANT AGREEMENT

          THIS OPTION GRANT AGREEMENT, made as of the 24th day of October, 2005 between TJ Chemical
Holdings LLC (the “Company”) and Raymond Guba (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 1,000,000 Membership Unit(s) in the Company.

2. Grant Date. The Grant Date of the Option hereby granted is September 29, 2005.

3. Vesting Commencement Date. The Vesting Commencement Date of the Option hereby granted is
October 24, 2005.

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: twenty percent (20%) of the
Membership Unit(s) (rounded down to the nearest Membership Unit) underlying the Option shall become
exercisable on each of the first five anniversaries of the Vesting Commencement Date;
provided that the Participant remains employed with the Company or any of its affiliates on
each such anniversary; and provided further that notwithstanding the foregoing, if
within the two-year period following a Change in Control the Participant’s Services are terminated
by the Company or its affiliate without Cause or by the Participant for Good Reason, the unvested
portion of the Option shall become immediately vested as of the effective date of the termination

 

 

of such Participant’s Services. For purposes of this Option Grant Agreement, the definition of
Good Reason contained in the Plan shall govern the Participant’s rights during the two-year period
following a Change in Control, without regard to that definition’s reference to the Participant’s
employment agreement.

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

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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.

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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.]

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          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/ David A. Spuria	 	 
	 	 	 	 	 
	 

	 	By:	 	David A. Spuria	 	 
	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	RAYMOND GUBA	 	 
	 
	 	 	/s/ Raymond Guba	 	 
	 	 	 	 	 

5exv10w5

 

Exhibit 10.5

PROFITS UNIT AWARD AGREEMENT

PROFITS UNIT AWARD AGREEMENT, (“Agreement”) dated as of October 24, 2005 (the “Date of Grant”), by
and between KRATON Management LLC, a Delaware limited liability company (the “Company”) and Raymond
Guba (the “Participant”). Unless the context otherwise provides, capitalized terms not defined
herein shall have the meanings ascribed to them in the Limited Liability Company Operating
Agreement of KRATON Management LLC, as amended from time to time (the “Management LLC Agreement”).

1. Description of Profits Units. Each Company Profits Unit represents the right to a
pro rata share of any distributions received by the Company in respect of the corresponding
TJ Chemical Profits Units held by the Company in accordance with the Management LLC Agreement. Each
TJ Chemical Profits Unit represents the right to receive a pro rata portion of the
appreciation of the assets of TJ Chemical above the Threshold Amount (as defined in the TJ Chemical
LLC Agreement) for such TJ Chemical Profits Unit after the Date of Grant. The Threshold Amount for
the Company Profits Units granted hereunder is $250,019,229, representing the current value of the
assets of TJ Chemical (net of debt) as of the Date of Grant, provided that such Threshold Amount
may be appropriately and equitably adjusted by the Board of Directors of TJ Chemical for
contributions and distributions that affect the aggregate balances of all Capital Accounts (as
defined in the TJ Chemical LLC Agreement) maintained under the TJ Chemical LLC Agreement in order
to place all holders of profits units, including the Participant, in the same position they would
have been in had such contributions and distributions not been made. The pro rata portion
of appreciation shall be determined based on all outstanding TJ Chemical Membership Units and TJ
Chemical Profits Units for which the applicable Threshold Amount has been achieved (but only as to
the appreciation above the Threshold Amount with respect to the applicable TJ Chemical Profits
Units).

Each Company Profits Unit is intended to be a “profits interest” within the meaning of Rev. Proc.
93-27 (6/09/93) and Rev. Proc. 2001-43 (8/03/01). By virtue of ownership of a Company Profits Unit,
the Participant shall have no right or obligation to make any Capital Contribution to the Company
at any time and shall have no rights to any capital contributed to the Company.

2. Grant of Award. The Company hereby grants to the Participant 300,000 Company Profits
Units (the “Profits Units”), subject to the terms and conditions of this Agreement and the
Management LLC Agreement.

3. Vesting. Notwithstanding Section 4.8 of the Management LLC Agreement, 50% of the Profits
Unit shall vest when the fair value of the assets of TJ Chemical equal or exceed two times (2X) the
Threshold Amount and the remaining 50% of the Profits Units shall vest when the fair value of the
assets of TJ Chemical equal or exceed three times (3X) the Threshold Amount, in each case, as
determined by the Board of Directors of TJ Chemical, provided that the Participant is employed by
the KRA TON Group on such vesting date, and provided further that if, at the time the Company makes
a determination as to whether the Participant is entitled to any appreciation with respect to the
Profits Units, the value of the assets of the Company is more

 

 

than two times (2X) but less than (3X) the value of the assets on the grant date, a pro-rata
portion of the second 50% will vest based on the appreciation above the amount equal to two times
(2X) the value of the assets on the grant date, and provided, further, that 100% of the Profits
Units shall vest upon the effective date of a disposition by the Initial Investors of 51 % or more
of their aggregate interests in KRA TON to one or more unrelated third Persons if the Participant
is employed by the KRATON Group through such date. Notwithstanding anything to the contrary in any
other agreement, including the Management LLC Agreement, in the event the Participant’s employment
with the KRATON Group is terminated prior to a portion or all Profits Units becoming vested as
provided above, all unvested Profits Units shall immediately and without any further action be
forfeited on the date of termination.

4. LLC Agreements. This Agreement shall be subject to all of the provisions of the
Management LLC Agreement, and such provisions are incorporated herein by this reference. The
Participant understands that, as a condition to receiving the Profits Units granted hereunder, the
Participant must execute and comply with the Management LLC Agreement. The Participant shall be a
Member and holder of Profits Unit for all purposes under the Management LLC Agreement. Unless
expressly stated otherwise in this Agreement, to the extent that, with respect to any right or
obligation of the Participant, any provisions of this Agreement are not consistent with the
Management LLC Agreement, the provisions of the Management LLC Agreement shall govern.

5. Representations by Participant. The Participant represents and warrants that he has
received, read and executed a copy of the Management LLC Agreement.

6. Restrictions on Transferability. Except as specifically provided in Article IX of the
Management LLC Agreement, the Profits Units may not be sold, transferred or otherwise disposed of
without the written approval of the Managing Member.

7. Corporate Transaction: Termination of Employment. The Company shall have the right to
cancel the Profits Units in the event of a merger, consolidation, recapitalization or other
corporate transaction involving TJ Chemical in which TJ Chemical cancels the corresponding TJ
Chemical Profits Units and shall distribute the cash, securities or other property, or any
combination thereof, if any, received from TJ Chemical in respect of such corresponding TJ Chemical
Profits Units in accordance with Section 9.6 of the Management LLC Agreement. If the Participant
becomes a Terminated Employee, the Company shall have the right to purchase any then-vested Profits
Units held by the Participant in accordance with Article IX of the Management LLC Agreement.

8. Fair Value. Any determination relating to the value of the assets of TJ Chemical or any
TJ Chemical Profits Unit shall be determined in good faith by the Board of Directors of TJ Chemical
in accordance with the TJ Chemical LLC Agreement and all determinations of the Board of Directors
shall be final and binding on all parties.

9. Assignment. This Agreement and the rights hereunder shall not be assignable or
transferable by the Participant without the prior written consent of the Company. This Agreement
shall inure to the benefit of and be binding upon the parties and to their respective heirs,
executors, administrators, successors and permitted assigns.

 

 

10. Amendments. The terms and provisions of this Agreement may not be amended except by a
written instrument signed by the parties hereto.

11. Counterparts: Effectiveness. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all such counterparts shall
together constitute but one and the same contract.

12. Severability. Every provision of this Agreement is intended to be severable. If any
term or provision hereof is illegal or invalid for any reason whatsoever, such term or provision
shall be enforced to the maximum extent permitted by law and, in any event, such illegality or
invalidity shall not affect the validity of the remainder of this Agreement.

13. Non-Waiver. No provision of this Agreement shall be deemed to have been waived except
if the giving of such waiver is contained in a written notice given to the party claiming such
waiver, and no such waiver shall be deemed to be a waiver of any other or further obligation or
liability of the party or parties in whose favor the waiver was given.

14. Applicable Law. This Agreement and the rights and obligations of the parties hereto
shall be interpreted and enforced in accordance with and governed by the laws of the state of
Delaware without regard to its principles of conflict of laws.

15. Integration. This Agreement, and the other documents referred to herein or delivered
pursuant hereto (including, without limitation, the Management LLC Agreement and the TJ Chemical
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 and such documents supersede all prior agreements and
understandings between the parties with respect to their subject matter.

 

 

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

KRATON MANAGEMENT LLC

	 	 	 	 	 
	By:
	 	/s/ David A. Spuria	 	 
	 	 	 	 	 
	Name: David A. Spuria	 	 
	Title: Vice-President	 	 
	 
	 	 	 	 
	RAYMOND GUBA	 	 
	 
	/s/ Raymond Guba

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