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Exhibit
10.5
EMPLOYMENT
AGREEMENT
GEORGE
GREGORY
EMPLOYMENT AGREEMENT (the
“Agreement”) dated as of November 1, 2004 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 George Gregory (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 July 1, 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 President and Chief Executive
Officer of KRATON and will report to the Board of Directors of
KRATON (the “Board”), 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. In addition,
Executive shall serve as a member of the Board without additional
compensation.
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
$450,000, 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 seventy-five percent (75%) of Executive’s Base Salary (the
“Target”) based upon the achievement of performance
objectives established by the Board, and (ii) up to 150% 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 2004, Executive’s Annual
Bonus will not be less than $168,750. The Company intends to
establish 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. 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 $875,000 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 TJ 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.
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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;
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(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;
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(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 for a period of 18 months
following such termination (the “Severance Continuation
Period”) which 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
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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 consent, or (D) a material reduction in
Executive’s duties and responsibilities as described in
Section 2(a) of this Agreement; 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 60 th
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
respect
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