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Exhibit 10.9
EMPLOYMENT
AGREEMENT
DAVID DAVIS
EMPLOYMENT AGREEMENT (the "Agreement") dated as
of December 2, 2004 by and between KRATON Polymers LLC, ("KRATON"
or the "Company"), a Delaware limited liability company, which is a
wholly owned subsidiary of Polymer Holdings LLC ("Parent"), a
Delaware limited liability company and David Davis (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 November
22, 2004 (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 KRATON’s Vice-President and Chief Financial Officer.
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") which will
include at a minimum the Corporate Treasury, Corporate Accounting
and Tax functions. Executive shall report to the President &
Chief Executive Officer of KRATON.
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 9.
3. Base Salary . During the Employment
Term, the Company shall pay Executive a base salary (the "Base
Salary") at the annual rate of $325,000, payable in regular
installments in accordance with the Company’s usual payment
practices.
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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) 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, the Annual Bonus with respect to fiscal year
2005 shall be no less than $100,000 and shall be paid in the form
of a grant on April 1, 2006 of an award of Notional Units
("Notional Units") with a notional value of $100,000 based on the
value of membership unit(s) of TJ Chemical Holdings LLC (each
Notional Unit will be the equivalent of one notional membership
unit of TJ Chemical Holdings LLC) and provided further that if
Executive’s 2005 Annual Bonus is greater than $100,000 (based
upon the achievement of performance objectives established by the
Board), the amount of the 2005 Annual Bonus in excess of $100,000
shall be payable in cash. These Notional Units will be 100% vested
on April 1, 2006, provided that the Executive remains employed by
the Company through the vesting date. Distribution of membership
units representing the portion of vested Notional Units shall occur
as soon as practicable after the earlier of a Change in Control (as
defined in the TJ Chemical 2004 Option Plan) or termination of the
Executive’s employment, provided that following a Change in
Control, unvested Notional Units shall remain outstanding and
continue to vest as provided above until the Executive’s
employment terminates. Executive shall execute documentation
requested by the Company in connection with such award of the
Restricted Units.
The Company has established a deferred
compensation plan, under which Executive may elect to defer, no
later than July 1 st
(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) As soon as practicable after the date hereof,
the Company shall grant the Executive Restricted Units with a
current value of $100,000 (the "Restricted Units"), based on the
buy-in price of membership units of TJ Chemical Holdings LLC by the
initial investors in connection with the Transaction, as determined
by the Board. As soon as practicable after the grant date, these
Restricted Units will be recorded on the books of TJ Chemical
Holdings LLC or KRATON Management LLC, as applicable, in the
Executive’s name, subject to restrictions on transferability
and subject to forfeitability (as described below). These
Restricted Units will vest as to 20% of such shares on each of the
first five anniversaries of the grant date, provided that Executive
remains employed with the Company through the applicable vesting
date. Upon a termination of
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Executive’s employment for any reason, any
unvested Restricted Units will be forfeited. Unvested Restricted
Units will become vested upon a termination of employment without
Cause or resignation for Good Reason within the two-year period
following a "Change in Control" as defined in the TJ Chemical
Holdings LLC 2004 Option Plan. Executive shall execute the limited
liability company operating agreements for KRATON Management LLC
and/or TJ Chemical Holdings LLC or such other documentation
requested by the Company in connection with such award of the
Restricted Units. The Executive shall be permitted to make an
election pursuant to Section 83(b) of the Internal Revenue Code of
1986, as amended with respect to his Restricted Units.
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.
c. Relocation . In this position you will
be expected to relocate to Houston, Texas and will be eligible for
reimbursement for certain relocation expenses in accordance with
the KRATON Experienced New Employee Relocation Policy.
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.
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(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").
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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.
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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 for a period of twelve (12) months following such
termination date, (the "Severance Continuation Period"), provided
that such Severance Continuation Period will be extended for an
additional six (6) months if Executive has not secured employment
within such initial twelve (12) month Severance Continuation Period
("Additional Severance Continuation Period"). Such 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, (C) a relocation of
Executive’s primary work location more than 50 miles from the
work location on the date hereof, without written
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