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.
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 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.
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.
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.
(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
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.
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