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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
writte
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