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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement | ||||
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||||
x Definitive Proxy Statement | ||||
o Definitive Additional Materials | ||||
o Soliciting Material Pursuant to §240.14a-12 |
Eastman Chemical Company
Payment of Filing Fee (Check the appropriate box):
x | No fee required. |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
o | Fee paid previously with preliminary materials. |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
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• | Elect Directors. To elect three directors to serve in the class for which the term in office expires at the 2011 Annual Meeting of Stockholders and until their successors are duly elected and qualified; | |
• | Ratify Appointment of Independent Auditors. To ratify the appointment of PricewaterhouseCoopers LLP as independent auditors for the Company for 2008; | |
• | Vote on Stockholder Proposals. To vote on two proposals submitted by stockholders if properly presented at the meeting; and | |
• | Transact Any Other Business. To transact such other business as may properly come before the meeting. |
• | Use the toll-free telephone numbershown on your proxy card or voting instruction form (if you received the proxy materials by mail from a broker or bank); | |
• | By Internet at the web address shown on your proxy card or voting instruction form; or | |
• | Mark, sign, date, and promptly return your proxy card or voting instruction form in the postage-paid envelope provided. |
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• | by telephone: call (888) 693-8683 and follow the instructions on your proxy card; | |
• | via the Internet: visit the www.cesvote.com website and follow the instructions on your proxy card; or | |
• | by mail: mark, sign, date, and mail your proxy card in the enclosed postage-paid envelope. |
• | giving written notice of revocation to the Corporate Secretary of the Company; | |
• | executing and delivering a later-dated, signed proxy card or submitting a later-dated proxy via the Internet or by telephone before the meeting; or | |
• | voting in person at the meeting. |
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NOMINEES FOR DIRECTOR Term Expiring Annual Meeting 2011 | ||||
MICHAEL P. CONNORS (director since March 2005) Mr. Connors has been Chairman of the Board and Chief Executive Officer of Information Services Group, Inc., a company formed for the purpose of acquiring one or more operating businesses in the information services industry, since July 2006. Mr. Connors served as a member of the Executive Board of VNU N.V., a major worldwide media and marketing information company, from the merger of ACNielsen into VNU in 2001 until 2005, and served as Chairman and Chief Executive Officer of VNU Media Measurement & Information Group and Chairman of VNU World Directories until 2005. He previously was Vice Chairman of the Board of ACNielsen from its spin-off from the Dun & Bradstreet Corporation in 1996 until 2001, was Senior Vice President of American Express Travel Related Services from 1989 until 1995, and before that was a Corporate Vice President of Sprint Corporation. Mr. Connors is also a member of the Board of Directors of R.H. Donnelley Corporation. Mr. Connors is 52. | ||||
J. BRIAN FERGUSON (director since January 2002) Mr. Ferguson has been Chairman of the Board and Chief Executive Officer of the Company since 2002. He joined Eastman in 1977. Mr. Ferguson was named Vice President, Industry and Federal Affairs in 1994, became Managing Director, Greater China in 1997, was named President, Eastman Chemical Asia Pacific in 1998, became President, Polymers Group in 1999, and became President, Chemicals Group in 2001. He is also a member of the Board of Directors of FPL Group, Inc., parent company of Florida Power & Light Company. Mr. Ferguson serves as a member of the American Chemistry Council Board of Directors, on the Executive Committee of the Business Roundtable, on the President’s Export Council, and as a Trustee of the United States Council for International Business. Mr. Ferguson is 53. | ||||
HOWARD L. LANCE (director since December 2005) Mr. Lance has served as President, Chief Executive Officer, and a director of Harris Corporation since January 2003, and was appointed Chairman of the Board in June 2003. Harris is an international communications and information technology company serving government and commercial markets. Mr. Lance was President of NCR Corporation, an information technology services provider, and Chief Operating Officer of its Retail and Financial Group from July 2001 until October 2002. Prior to joining NCR, he spent 17 years with Emerson Electric Company, an electronic products and systems company, where he held increasingly senior management positions. Earlier, Mr. Lance held sales and marketing positions with theScott-Fetzer Company and Caterpillar, Inc. Mr. Lance is also a member of the Board of Directors of Harris Stratex Networks, Inc. Mr. Lance is 52. | ||||
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MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE Term Expiring Annual Meeting 2009 | ||||
STEPHEN R. DEMERITT (director since February 2003) Mr. Demeritt served as Vice Chairman of General Mills, Inc. from 1999 until his retirement in 2005. General Mills is a leading producer of packaged consumer foods. He joined General Mills in 1969 and served in a variety of marketing positions, including President, International Foods from 1991 to 1993 and Chief Executive Officer of Cereal Partners Worldwide, General Mills’ global cereal joint venture with Nestle, from 1993 to 1999. Mr. Demeritt is 64. | ||||
ROBERT M. HERNANDEZ (director since August 2002) Mr. Hernandez has been Chairman of the Board of RTI International Metals, Inc. since 1990, and was Vice Chairman of the Board and Chief Financial Officer of USX Corporation from 1994 until his retirement in 2001. He joined U.S. Steel Corporation, the predecessor of USX, in 1968, and held positions of increasing responsibility in the financial and operating organizations, including Vice President and Treasurer from 1984 to 1987, Senior Vice President and Controller from 1987 to 1989, President, U.S. Diversified Group from 1989 to 1990, Senior Vice President, Finance from 1990 to 1991, and Executive Vice President and Chief Financial Officer from 1991 to 1994. RTI, a NYSE listed company, is a leading U.S. producer of titanium mill products and fabricated-metal parts for the global market, and was affiliated with USX prior to 2000. Mr. Hernandez is also Lead Director of American Casualty Excess (ACE) Ltd., Chairman of the Board of Trustees of BlackRock Open End Long Term Bond & Equity Funds, and a member of the Board of Directors of Tyco Electronics Ltd. Mr. Hernandez is 63. | ||||
LEWIS M. KLING (director since October 2006) Mr. Kling has served as President, Chief Executive Officer, and a director of Flowserve Corporation, a provider of industrial flow management products and services, since 2005, and was Chief Operating Officer of Flowserve from 2004 to 2005. Before joining Flowserve, he was Group Vice President and Corporate Vice President of SPX Corporation from 1999 to 2004, and served as President of Dielectric Communications, a division of General Signal Corporation, purchased by SPX Corporation, from 1997 to 1999. Mr. Kling is 63. | ||||
DAVID W. RAISBECK (director since December 2000) Mr. Raisbeck is Vice Chairman of Cargill, Incorporated, an agricultural trading and processing company. He joined Cargill in 1971 and has held a variety of merchandising and management positions focused primarily in the commodity and financial trading businesses. Mr. Raisbeck was appointed President of Cargill’s Financial Markets Division in 1988 and President of Cargill’s Trading Sector in 1993, was elected a director of Cargill in 1994, Executive Vice President in 1995, and to his current position in 1999. He is also a member of the Board of Directors of Cardinal Health, Inc. Mr. Raisbeck is 58. | ||||
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Term Expiring Annual Meeting 2010 | ||||
GARY E. ANDERSON (director since August 2007) Mr. Anderson is retired Chairman of the Board of the Dow Corning Corporation. He joined Dow Corning, a diversified company specializing in the development, manufacture, and marketing of silicones and related silicone-based products, in 1967 and served in various executive capacities for over 25 years, including Chairman, President, and Chief Executive Officer, retiring as Chairman in 2005. Mr. Anderson is also a member of the Board of Directors of Chemical Financial Corporation. Mr. Anderson is 62. | ||||
RENÉE J. HORNBAKER (director since September 2003) Ms. Hornbaker has served as Chief Financial Officer of Shared Technologies, Inc., a provider of converged voice and data networking solutions, since October 2006, and was Consultant to the Chief Executive Officer of CompuCom Systems, Inc., an information technology services provider, from 2005 to 2006. She was Vice President and Chief Financial Officer of Flowserve Corporation from 1997 until 2004. In 1977, Ms. Hornbaker joined the accounting firm Deloitte, Haskins & Sells, now Deloitte & Touche Tohmatsu, where she became a senior manager of its audit practice in the firm’s Chicago office. Following that, she served in senior financial positions with several major companies from 1986 until 1996, when she joined BW/IP, Inc., a predecessor of Flowserve, as Vice President, Business Development. Ms. Hornbaker is 55. | ||||
THOMAS H. MCLAIN (director since February 2004) Mr. McLain served as Chairman, Chief Executive Officer, and President of Nabi Biopharmaceuticals from 2004 until his resignation in February 2007, and was Chief Executive Officer, President and a director of Nabi from 2002 until 2004. Nabi is a biotechnology company that applies its knowledge of the human immune system to develop and market products that address serious medical conditions. Previously, Mr. McLain served as President, Chief Operating Officer and a director in 2002 and 2003, and in 2001 and 2002, he served as Executive Vice President and Chief Operating Officer. From 1998 to 2001, Mr. McLain served as Senior Vice President, Corporate Services and Chief Financial Officer. From 1988 to 1998, Mr. McLain was employed by Bausch & Lomb, Inc., a global eye care company, where he held various senior financial management positions of increasing responsibility. Before joining Bausch & Lomb, Mr. McLain practiced with the accounting firm of Ernst & Young LLP. Mr. McLain is 50. | ||||
PETER M. WOOD (director since May 2000) Mr. Wood served as Managing Director of J.P. Morgan & Company, an investment banking firm, from 1986 until his retirement in 1996, and was Vice President, Mergers & Acquisitions, of Kidder, Peabody & Company, Inc., an investment banking firm, from 1981 to 1986. From 1966 to 1981 Mr. Wood was a member (and a partner since 1971) of the international management consulting firm of McKinsey & Company. Mr. Wood was non-executive Chairman of the Board of Stone & Webster, Incorporated from 2000 to 2004. He is also a member of the Boards of Directors of Middlesex Mutual Assurance Company, Holyoke Mutual Insurance Company, and MSI Preferred Insurance Company. Mr. Wood is 69. | ||||
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• | has not been employed by the Company or any of its subsidiaries or affiliates, and who has no immediate family member who has been an executive officer of the Company, within the previous three years; | |
• | has not received, and whose immediate family member has not received, in any 12-month period within the previous three years more than $100,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued service; | |
• | as to the Company’s internal or external auditor, is not, and whose immediate family member is not, a partner; is not employed by, and whose immediate family member is not employed by and does not participate in the firm’s audit, assurance, or tax compliance (but not tax planning) practice; has not been, and whose immediate family member has not been, within the last three years, and is not currently, a partner or employee and personally worked on the Company’s audit; | |
• | is not and has not in the past three years been employed, and whose immediate family member is not and has not in the past three years been employed, as an executive officer of another company where any of the Company’s present executives at the same time serve or served on that company’s compensation committee; |
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• | is not an employee of, and whose immediate family member is not an executive officer of, another company that has made payments to, or received payments from, the Company for property or services in an amount that exceeds, in any of the last three years, the greater of $1 million or 2% of such other company’s consolidated gross revenues; | |
• | has no personal services contract with the Company, any subsidiary or affiliate of the Company or any executive officer; | |
• | does not have any other business relationship with the Company or any of its subsidiaries or affiliates (other than service as a director) that the Company would be required to disclose in proxy statements or in annual reports onForm 10-K filed with the SEC; | |
• | is not an executive officer of another company that is indebted to the Company or to which the Company is indebted and the total amount of either company’s indebtedness to the other is more than 1% of the total consolidated assets of the company that he or she serves as an executive officer; | |
• | is not an officer, director, or trustee of a charitable organization to which discretionary charitable contributions to the organization by the Company or an affiliate are more than 1% of that organization’s total annual charitable receipts or $100,000, whichever is less; and | |
• | is not a director, executive officer, partner, or greater than 10% equity holder of an entity that provides advisory, consulting, or professional services to the Company, any of its affiliates, or any executive officer. |
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• | the integrity of the financial statements of the Company and the Company’s system of internal controls; | |
• | the Company’s management of and compliance with legal and regulatory requirements; | |
• | the independence and performance of the Company’s internal auditors; | |
• | the qualifications, independence, and performance of the Company’s independent auditors; and | |
• | the retention and termination of the Company’s independent auditors, including the approval of fees and other terms of their engagement, and the approval of non-audit relationships with the independent auditors. |
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• | identify individuals qualified to become Board members; | |
• | recommend to the Board candidates to fill Board vacancies and newly-created director positions; | |
• | recommend to the Board whether incumbent directors should be nominated for re-election to the Board upon the expiration of their terms; | |
• | develop and recommend corporate governance principles; | |
• | review and make recommendations to the Board regarding director compensation; and | |
• | recommend committee structures, membership, and chairs. |
• | integrity and demonstrated high ethical standards; | |
• | experience with business administration processes and principles; | |
• | the ability to express opinions, raise difficult questions, and make informed, independent judgments; | |
• | knowledge, experience, and skills in at least one specialty area, for example: |
• | accounting or finance, | |
• | corporate management, | |
• | marketing, | |
• | manufacturing, | |
• | technology, | |
• | information systems, | |
• | the chemical industry, | |
• | international business, or | |
• | legal or governmental expertise; |
• | the ability to devote sufficient time to prepare for and attend Board meetings (it is assumed that service on up to three other boards of directors will not impair a director’s service on the Company’s Board; the Nominating and Corporate Governance Committee reviews instances in which a director serves on more than three other for-profit companies’ boards of directors); | |
• | willingness and ability to work with other members of the Board in an open and constructive manner; | |
• | the ability to communicate clearly and persuasively; and | |
• | diversity in gender, ethnic background, geographic origin, or personal and professional experience. |
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Change in | ||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||
Fees | Non-Equity | and Nonqualified | ||||||||||||||||||||||||||
Earned | Incentive | Deferred | ||||||||||||||||||||||||||
or Paid | Stock | Option | Plan | Compensation | All Other | |||||||||||||||||||||||
in Cash | Awards | Awards | Compensation | Earnings | Compensation | |||||||||||||||||||||||
Name | ($)(1) | ($)(2) | ($)(3) | ($) | ($)(4) | ($)(5) | Total($) | |||||||||||||||||||||
Gary E. Anderson(6) | $ | 40,000 | $ | 1,393 | $ | 0 | $ | 0 | $ | 0 | $ | 18,750 | $ | 60,143 | ||||||||||||||
Michael P. Connors | 96,000 | 7,778 | 22,637 | 0 | 0 | 45,000 | 171,415 | |||||||||||||||||||||
Stephen R. Demeritt | 103,500 | 4,990 | 22,637 | 0 | 0 | 45,000 | 176,127 | |||||||||||||||||||||
Donald W. Griffin | 99,000 | 4,990 | 22,637 | 0 | 0 | 45,000 | 171,627 | |||||||||||||||||||||
Robert M. Hernandez | 105,000 | 4,990 | 22,637 | 0 | 0 | 45,000 | 177,627 | |||||||||||||||||||||
Renée J. Hornbaker | 110,000 | 4,990 | 22,637 | 0 | 0 | 45,000 | 182,627 | |||||||||||||||||||||
Lewis M. Kling | 90,000 | 4,405 | 7,949 | 0 | 0 | 45,000 | 147,354 | |||||||||||||||||||||
Howard L. Lance | 94,000 | 6,097 | 19,351 | 0 | 0 | 45,000 | 164,448 | |||||||||||||||||||||
Thomas H. McLain | 100,500 | 5,277 | 22,637 | 0 | 0 | 45,000 | 173,414 | |||||||||||||||||||||
David W. Raisbeck | 99,000 | 4,990 | 22,637 | 0 | 0 | 45,000 | 171,627 | |||||||||||||||||||||
Peter M. Wood | 121,500 | 4,990 | 22,637 | 0 | 0 | 45,000 | 194,127 |
1) | Consists of Board retainer fees and, where applicable, committee chair retainer or Audit Committee member retainer and compensation on an “event fee” basis for significant time spent outside Board or committee meetings for director training, interviewing director candidates, meeting with Company management, meeting with external auditors, or other meetings or activities deemed necessary by the Board or one of its committees. Event fees were paid in 2007 to Mr. Demeritt ($4,500), Ms. Hornbaker ($4,500), Mr. McLain ($4,500), and Mr. Wood ($13,500). Cash fees for 2007 were paid according to the following schedule: |
Cash Fees | ($) | |||
Annual Director Retainer | $ | 90,000 | ||
“Event” Fee (Per Event) | 1,500 | |||
Chair Retainer — Audit Committee | 12,000 | |||
Chair Retainer — Compensation and Management Development Committee | 9,000 | |||
Chair Retainer — Nominating and Corporate Governance Committee | 9,000 | |||
Chair Retainer — Finance Committee | 9,000 | |||
Chair Retainer — Health, Safety, Environmental and Security Committee | 9,000 | |||
Annual Retainer — Member of Audit Committee | 6,000 |
2) | Includes annual awards of restricted shares of common stock having a fair market value equal to $5,000 on the date of each annual meeting of stockholders and a one-time award of restricted shares of common stock having a fair market value equal to $10,000 on the first date of term of service as a director, each under the 2007 Director Long-Term Compensation Subplan of the Omnibus Long-Term Compensation Plan (the “DLTP”). The amounts reported in this column are the portion of the grant date fair value of outstanding restricted shares awarded in 2007 and in prior years that was recognized as cost in the Company’s financial statements for 2007 measured in accordance with FAS 123R. See note 1 to the Summary Compensation Table later in this proxy statement and note 16 to the Company’s consolidated financial statements in the Annual Report to Stockholders for 2007 mailed and delivered electronically with this proxy statement for discussion of the assumptions made in the valuation of stock awards under FAS 123R. |
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The full grant date fair values of the restricted shares awarded in 2007, computed in accordance with FAS 123R, were $1,393 for the one-time award to Mr. Anderson and $1,085 for each annual award to the other non-employee directors. The aggregate number of outstanding shares of restricted stock held by individual directors at December 31, 2007 was: Mr. Anderson (147), Mr. Connors (414), Mr. Demeritt (249), Mr. Griffin (249), Mr. Hernandez (249), Ms. Hornbaker (249), Mr. Kling (258), Mr. Lance (343), Mr. McLain (249), Mr. Raisbeck (249), and Mr. Wood (249). | ||
The restricted shares are not transferable (except by will or laws of descent and distribution) and are subject to forfeiture until the earlier of: (i) the third anniversary of grant (provided the grantee is still a director), (ii) death, disability, or resignation due to term limit or retirement age during the three years after grant, or (iii) departure from the Board at the end of the term of service to which elected. If none of the three alternative vesting events occurs by the third anniversary of the grant date, then the shares are forfeited. During the restricted period, the director has all of the rights of a stockholder (other than the right to transfer the shares) with respect to the restricted shares, including voting and dividend rights. The DLTP contains provisions regarding the treatment of restricted shares in the event of a “change in control” (as defined in the DLTP, generally involving circumstances in which the Company is acquired by another entity or its controlling ownership is changed). In such event all outstanding shares of restricted stock would immediately vest and become transferable, and would be valued and cashed out on the basis of the change in control price as soon as practicable but in no event more than 90 days after the change in control. However, the Nominating and Corporate Governance Committee has the discretion, notwithstanding any particular event constituting a change in control, to determine that the event is of the type that does not warrant the described consequences with respect to restricted shares under the DLTP, in which case such consequences would not occur. | ||
3) | Under the DLTP, each non-employee director receives a non-qualified stock option to purchase 2,000 shares of common stock immediately following each annual meeting of stockholders. The amounts reported in this column are the portion of the grant date fair value of outstanding options granted in 2007 and in prior years that was recognized as cost in the Company’s financial statements for 2007 measured in accordance with FAS 123R. See note 1 to the Summary Compensation Table later in this proxy statement and note 16 to the Company’s consolidated financial statements in the Annual Report to Stockholders for 2007 mailed and delivered electronically with this proxy statement for discussion of the assumptions made in the valuation of stock awards under FAS 123R. | |
The full grant date fair value of the options granted in 2007, computed in accordance with FAS 123R, was $7,949 for the annual grant to each non-employee director except Mr. Anderson. The aggregate number of outstanding stock options held by individual directors at December 31, 2007 was: Mr. Anderson (0), Mr. Connors (6,000), Mr. Demeritt (10,000), Mr. Griffin (16,000), Mr. Hernandez (10,000), Ms. Hornbaker (8,000), Mr. Kling (2,000), Mr. Lance (4,000), Mr. McLain (8,000), Mr. Raisbeck (14,000), and Mr. Wood (9,000). | ||
The options have an exercise price equal to the closing price of the underlying shares of common stock on the grant date. The options vest and become exercisable with respect to one-half of the option shares on the first anniversary of the date of the grant and with respect to the remaining shares on the second anniversary of the date of the grant. Each option has a term of ten years and is nonassignable (except by will or the laws of descent and distribution). If the director ceases to be a director for any reason other than death, disability, or completion of his or her normal term of service, all outstanding unexercised options, whether or not vested, will expire. The DLTP contains provisions regarding the treatment of stock options in the event of a “change in control” (as defined in the DLTP, generally involving circumstances in which the Company is acquired by another entity or its controlling ownership is changed). In such event all outstanding options would immediately vest and become exercisable, and would be valued and cashed out on the basis of the change in control price as soon as practicable but in no event more than 90 days after the change in control. However, the Nominating and Corporate Governance Committee has the discretion, notwithstanding any particular event constituting a change in control, to determine that the event is of the type that does not warrant the described consequences with respect to restricted shares under the DLTP, in which case such consequences would not occur. | ||
4) | The Company maintains the Directors’ Deferred Compensation Plan (the “DDCP”), an unfunded, non-qualified, deferred compensation plan under which non-employee directors of the Company may elect to defer |
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compensation received as a director until such time as they cease to serve as a director. Non-employee directors may make an annual advance irrevocable election to defer compensation for services to be rendered the following year. Compensation that may be deferred includes all cash compensation for service as a director, including retainer and “event” fees. In addition, each non-employee director receives an automatic deferral of $45,000 into the director’s stock account of the DDCP. Compensation deferred into the DDCP is credited to individual interest accounts and stock accounts. Amounts deferred to the interest account are credited with interest at the prime rate until transfer or distribution, and amounts deferred to the stock account increase or decrease in value depending on the market price of Eastman common stock. When cash dividends are declared on the common stock, each stock account receives a dividend equivalent which is used to “purchase” additional hypothetical shares. For 2007, there were no preferential or above-market earnings on amounts in individual stock accounts (appreciation in value and dividend equivalents earned at a rate higher than appreciation in value and dividends on common stock) or in individual interest accounts (interest on amounts deferred at a rate exceeding 120% of the federal long-term rate). |
Eastman does not offer a pension plan for directors. | ||
5) | Annual retainer of $45,000 deferred into the stock account of the DDCP. The amount deferred for Mr. Anderson was adjusted on a pro rata basis. Perquisites and personal benefits provided to Eastman non-employee directors (company-provided personal liability insurance and company-provided insurance for non-employee director travel) are not reported for 2007 since the total amount per individual was less than $10,000. | |
6) | Mr. Anderson was elected to the Board of Directors on August 2, 2007. |
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NONDISCRIMINATION POLICY TO PROHIBIT “DISCRIMINATION BASED ON
SEXUAL ORIENTATION AND GENDER IDENTITY”
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• | The Corporate Libraryhttp://www.thecorporatelibrary.com, an independent investment research firm, rated our company “High Concern” in Takeover Defenses. | |
• | We had no shareholder right to: |
• | Our company’s takeover defenses include the “effective classified board” combination, one of the strongest possible defenses. |
• | We did not have an independent Board Chairman nor even a Lead Director — independence concern. | |
• | Four directors owned only 183 to 882 shares each — Commitment concern. | |
• | Mr. Raisbeck (882 shares) was designated a “Problem Director” by The Corporate Library due to his involvement with the Armstrong Holdings board, which with at least two subsidiaries, filed under Chapter 11 Bankruptcy. | |
• | Plus Mr. Raisbeck served on 3 of our Board Committees. |
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Number of | ||||
Shares of | ||||
Common Stock | ||||
Name | Beneficially Owned(1)(2) | |||
J. Brian Ferguson | 716,779 | (3) | ||
Mark J. Costa | 51,105 | (4) | ||
Theresa K. Lee | 79,338 | (5) | ||
Richard A. Lorraine | 167,637 | (6) | ||
James P. Rogers | 205,618 | (7) | ||
Gary E. Anderson | 1,647 | (8) | ||
Michael P. Connors | 3,414 | (9) | ||
Stephen R. Demeritt | 8,822 | (10) | ||
Donald W. Griffin | 15,971 | (11) | ||
Robert M. Hernandez | 20,753 | (12) | ||
Renée J. Hornbaker | 8,353 | (13) | ||
Lewis M. Kling | 258 | (14) | ||
Howard L. Lance | 4,343 | (15) | ||
Thomas H. McLain | 6,678 | (16) | ||
David W. Raisbeck | 11,957 | (17) | ||
Peter M. Wood | 8,927 | (18) | ||
Directors, named executive officers, and other executive officers as a group (20 persons) | 1,549,240 | (19) |
(1) | Information relating to beneficial ownership is based upon information furnished by each person using “beneficial ownership” concepts set forth in rules of the SEC. Under those rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of, or to direct the disposition of, such security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership (such as by exercise of options) within 60 days. Under such rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may disclaim any beneficial interest. Except as indicated in other notes to this table, directors and executive officers possessed sole voting and investment power with respect to all shares of common stock referred to in the table. | |
(2) | The total number of shares of common stock beneficially owned by the directors, the named executive officers, and the other executive officers as a group represents approximately 1.92% of the shares of common stock outstanding as of December 31, 2007. The percentage beneficially owned by any individual director or executive officer does not exceed one percent of the outstanding shares of common stock. Shares not outstanding which are subject to options exercisable within 60 days by persons in the group or a named individual are deemed to be outstanding for the purpose of computing the percentage of outstanding shares of common stock owned by the group or such individual. | |
(3) | Includes 499,514 shares that may be acquired upon exercise of options, 578 shares allocated to Mr. Ferguson’s Employee Stock Ownership Plan (“ESOP”) account, and 62,000 shares held by a grantor retained annuity trust of which Mr. Ferguson is trustee and as to which he has voting and investment power. | |
(4) | Consists of 20,000 restricted shares that generally vest as to one-half of the shares on each of June 1, 2008 and June 1, 2009, respectively, but as to which Mr. Costa currently has voting power, 30,999 shares that may be acquired upon exercise of options, and 106 shares allocated to his ESOP account. |
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(5) | Includes 56,427 shares that may be acquired upon exercise of options and 737 shares allocated to Ms. Lee’s ESOP account. | |
(6) | Includes 55,832 shares that may be acquired upon exercise of options and 576 shares allocated to Mr. Lorraine’s ESOP account. Also includes 82,674 shares owned by the Eastman Chemical Company Foundation, Inc., of which shares Mr. Lorraine may also be deemed a beneficial owner by virtue of his shared voting and investment power as a director of the Foundation but in which he has no pecuniary interest. | |
(7) | Includes 141,432 shares that may be acquired upon exercise of options, 1,027 shares allocated to Mr. Rogers’ ESOP account, 40,000 shares held by a grantor retained annuity trust of which Mr. Rogers is trustee and as to which he has voting and investment power, and 19,656 shares pledged as security in a margin brokerage account. | |
(8) | Includes 147 restricted shares that generally vest in August 2010, but as to which Mr. Anderson currently has voting power. | |
(9) | Consists of 3,000 shares that may be acquired upon exercise of options, 165 restricted shares that generally vest in March 2008, but as to which Mr. Connors currently has voting power, 85 restricted shares that generally vest in May 2008, but as to which he currently has voting power, 89 restricted shares that generally vest in May 2009, but as to which he currently has voting power, and 75 restricted shares that generally vest in May 2010, but as to which he currently has voting power. |
(10) | Includes 7,000 shares that may be acquired upon exercise of options, 85 restricted shares that generally vest in May 2008, but as to which Mr. Demeritt currently has voting power, 89 restricted shares that generally vest in May 2009, but as to which he currently has voting power, and 75 restricted shares that generally vest in May 2010, but as to which he currently has voting power. |
(11) | Includes 13,000 shares that may be acquired upon exercise of options, 85 restricted shares that generally vest in May 2008, but as to which Mr. Griffin currently has voting power, 89 restricted shares that generally vest in May 2009, but as to which he currently has voting power, 75 restricted shares that generally vest in May 2010, but as to which he currently has voting power, and 2,000 shares pledged as security in a margin brokerage account. |
(12) | Includes 7,000 shares that may be acquired upon exercise of options, 85 restricted shares that generally vest in May 2008, but as to which Mr. Hernandez currently has voting power, 89 restricted shares that generally vest in May 2009, but as to which he currently has voting power, and 75 restricted shares that generally vest in May 2010, but as to which he currently has voting power. |
(13) | Includes 5,000 shares that may be acquired upon exercise of options, 85 restricted shares that generally vest in May 2008, but as to which Ms. Hornbaker currently has voting power, 89 restricted shares that generally vest in May 2009, but as to which she currently has voting power, and 75 restricted shares that generally vest in May 2010, but as to which she currently has voting power. |
(14) | Consists of 183 restricted shares that generally vest in October 2009, but as to which Mr. Kling currently has voting power, and 75 restricted shares that generally vest in May 2010, but as to which he currently has voting power. |
(15) | Includes 1,000 shares that may be acquired upon exercise of options, 179 restricted shares that generally vest in December 2008, but as to which Mr. Lance currently has voting power, 89 restricted shares that generally vest in May 2009, but as to which he currently has voting power, and 75 restricted shares that generally vest in May 2010, but as to which he currently has voting power. |
(16) | Includes 5,000 shares that maybe acquired upon exercise of options, 85 restricted shares that generally vest in May 2008, but as to which Mr. McLain currently has voting power, 89 restricted shares that generally vest in May 2009, but as to which he currently has voting power, and 75 restricted shares that generally vest in May 2010, but as to which he currently has voting power. Also includes 52 shares held by Mr. McLain’s spouse, as to which shares Mr. McLain disclaims beneficial ownership. |
(17) | Includes 11,000 shares that may be acquired upon exercise of options, 85 restricted shares that generally vest in May 2008, but as to which he currently has voting power, 89 restricted shares that generally vest in May 2009, but as to which Mr. Raisbeck currently has voting power, and 75 restricted shares that generally vest in May 2010, but as to which he currently has voting power. |
(18) | Includes 6,000 shares that may be acquired upon exercise of options, 85 restricted shares that generally vest in May 2008, but as to which Mr. Wood currently has voting power, 89 restricted shares that generally vest in May 2009, but as to which he currently has voting power, 75 restricted shares that generally vest in May 2010, |
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but as to which he currently has voting power, and 287 shares pledged as security in a margin brokerage account. Also includes 1,000 shares held by Mr. Wood’s spouse, as to which shares Mr. Wood disclaims beneficial ownership. |
(19) | Includes a total of 959,324 shares that may be acquired upon exercise of options and 4,267 shares allocated to executive officers’ ESOP accounts. Also includes 82,674 shares owned by the Eastman Chemical Company Foundation, Inc., of which shares Mr. Lorraine and one other executive officer not named above may each be deemed a beneficial owner by virtue of their shared voting and investment power as directors of the Foundation. |
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Number of | ||||
Shares of | ||||
Common Stock | ||||
and Common | ||||
Stock Units | ||||
Name | Beneficially Owned | |||
J. Brian Ferguson | 716,779 | |||
Mark J. Costa | 51,105 | |||
Theresa K. Lee | 79,356 | |||
Richard A. Lorraine | 167,637 | (1) | ||
James P. Rogers | 271,258 | |||
Gary E. Anderson | 1,925 | |||
Michael P. Connors | 6,263 | |||
Stephen R. Demeritt | 15,222 | |||
Donald W. Griffin | 17,280 | |||
Robert M. Hernandez | 22,062 | |||
Renée J. Hornbaker | 13,983 | |||
Lewis M. Kling | 1,021 | |||
Howard L. Lance | 5,366 | |||
Thomas H. McLain | 7,987 | |||
David W. Raisbeck | 20,766 | |||
Peter M. Wood | 10,236 | |||
Directors, named executive officers, and other executive officers as a group (20 persons) | 1,654,582 | (1) |
(1) | Includes 82,674 shares owned by the Eastman Chemical Company Foundation, Inc., over which shares Mr. Lorraine and one other executive officer not named share voting and investment power as directors of the Foundation but in which shares such executive officers have no pecuniary interest. |
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Number of | ||||||||
Shares of | Percent | |||||||
Common Stock | of | |||||||
Name and Address of Beneficial Owner | Beneficially Owned | Class(1) | ||||||
Barclays Global Investors, NA | 5,103,049 | (2) | 6.58 | % | ||||
45 Fremont Street San Francisco, California 94105 | ||||||||
Hotchkis & Wiley Capital Management, LLC | 10,383,400 | (3) | 13.39 | % | ||||
725 South Figueroa Street Los Angeles, California 90017 | ||||||||
Lord, Abbett & Co. LLC | 4,718,238 | (4) | 6.08 | % | ||||
90 Hudson Street Jersey City, New Jersey 07302 | ||||||||
Todasa S.A. | 4,452,434 | (5) | 5.74 | % | ||||
Via Augusta, 200 6th Floor Barcelona, Spain 08201 | ||||||||
(1) | Based upon the number of shares of common stock outstanding and entitled to be voted at the meeting as of the record date. |
(2) | As of December 31, 2007, based on a Schedule 13G filed with the SEC by Barclays Global Investors, NA, a bank, and certain affiliated bank, broker-dealer, and investment adviser entities. According to the Schedule 13G, Barclays Global Investors and such affiliated entities together have sole investment power with respect to all of such shares and sole voting power with respect to 4,767,337 of such shares. |
(3) | As of December 31, 2007, based on a Schedule 13G filed with the SEC by Hotchkis & Wiley Capital Management, LLC, an investment adviser. According to the Schedule 13G, Hotchkis & Wiley has sole investment power with respect to all of such shares and sole voting power with respect to 8,807,600 of such shares. |
(4) | As of December 31, 2007, based on a Schedule 13G filed with the SEC by Lord, Abbett & Co. LLC, an investment adviser. According to the Schedule 13G, Lord, Abbett has sole investment power with respect to all of such shares and sole voting power with respect to 4,555,538 of such shares. |
(5) | As of December 12, 2007, based on a Schedule 13G filed with the SEC by Todasa S.A. According to the Schedule 13G, Todasa has sole investment and voting power with respect to all of such shares. |
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• | Motivate executives through pay for performance by: |
• | encouraging and rewarding superior Company and individual performance on both a short- and long-term basis, | |
• | promoting alignment with long-term stockholder interests; and |
• | Attract and retain highly qualified executives by paying them: |
• | at rates competitive with our markets, | |
• | consistent with individual skills and their contributions to Company success. |
• | had their base pay increased to keep salaries at competitive levels; | |
• | received annual variable cash pay awards of 128% of target amounts as a result of the Company’s above-target corporate earnings from operations and the individual executives’ organizational and personal performance meeting or exceeding expectations; | |
• | received payouts of common stock of 190% of target awards under previously awarded long-term performance shares as a result of three-year total stockholder return in the 3rd quintile of compared companies and average return on capital of 6.3% in excess of target; and | |
• | received new stock option grants and long-term performance share awards to link their future pay to long-term performance of the Company and return to other stockholders. |
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• | Provide the appropriate amount of annual pay, including a mix of base and variable pay, that allows us to compete in the job market. | |
• | Attract and retain highly-qualified executives by providing incentives for the attainment of the Company’s strategic business objectives, while rewarding superior performance. | |
• | Provide appropriate short- and long-term incentives to reward short-and long-term corporate and individual objectives. | |
• | Ensure performance targets are appropriately challenging and align with the business strategy and stockholder interests. |
Base pay | Provides a market based annual salary at a level consistent with the individual’s position and contributions. | |
Variable pay | Makes a portion of each manager’s annual cash compensation dependent upon the success of the Company, organizational performance, and attainment of individual objectives. | |
Stock-based incentive pay | Encourages an ownership mindset by aligning the interests of senior managers with other stockholders, the achievement of long-term financial objectives and outperforming other companies. |
Reward | Reward | |||||||||||||||
Organizational | Long-Term | |||||||||||||||
Performance and | Performance in | |||||||||||||||
Retain | Attainment of | Alignment With | ||||||||||||||
�� | Compete | Executive | Individual | Stockholders’ | ||||||||||||
Compensation Element | in Market | Talent | Objectives | Interest | ||||||||||||
Annual Base Cash Pay | X | X | ||||||||||||||
Annual Variable Cash Pay | X | X | ||||||||||||||
Stock-Based Long-Term Incentive Pay — Stock Options | X | X | X | |||||||||||||
Stock-Based Long-Term Incentive Pay — Performance Shares | X | X | X | X | ||||||||||||
Other Compensation and Benefits | X | X |
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* | Grant date fair value of options granted by Compensation Committee in 2007 (excluding reload options). |
** | Market value of shares of common stock paid out under performance shares previously awarded for2005-2007 performance period. |
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• | The Company’s short-term variable pay program aligns management financial interests with the Company’s short-term business objectives. Individual variable pay for management employees correlates to the Company’s annual financial results compared to targeted results. The total amount available for variable pay is based upon annual financial results. | |
• | The short-term variable pay program is designed to take into account the incentive value and level of influence on Company results by participants in the program. | |
• | All levels of management participate in the short-term variable cash incentive pay program in order to retain a focus on execution of the Company’s short-term strategic and tactical goals. | |
• | Stock-based incentive pay, including stock options and performance shares, is designed to create incentives to meet strategic long-term objectives which are aligned with the creation of value for the Company’s stockholders. Stock-based incentive compensation is generally awarded to upper levels of management with the most influence over the strategic, long-term direction of the Company. | |
• | The balance of short-term and long-term components as devices to drive individual behaviors is carefully considered in the design and administration of the management compensation program. |
• | Reviewed the value of each individual type of compensation and benefits for each of the executive officers, including short-term cash and long-term stock-based compensation, perquisites and personal benefits, deferred accounts, and retirement plans and determined that the amounts, individually and in the aggregate, were appropriate and in line with internal and external market comparisons. | |
• | Considered the estimated value of outstanding unvested, unexercised, and unrealized stock-based awards in its review of the types and values of each executive officer’s compensation. | |
• | Determined the amount and forms of compensation considering the following: |
• | Individual performance, | |
• | Pay relative to that for similar positions in other companies, | |
• | The mix of short- and long-term compensation, and total compensation relative to other executive officers and other employees, | |
• | Background information and recommendations from the Company’s management compensation organization and from its external compensation consultant, and | |
• | The recommendations of the Chief Executive Officer for the other named executive officers. |
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Air Products and Chemicals | W.R. Grace and Company | |
Albemarle Corporation | Nalco Company | |
Baker Hughes, Inc. | Olin Corporation | |
Ball Corporation | PPG Industries, Inc | |
Dow Chemical Company | Praxair, Inc. | |
E. I. du Pont de Nemours and Company | Rohm and Haas Company | |
Ecolab, Inc. | The Scotts Miracle-Gro Company | |
H. B. Fuller Company | Sherwin-Williams Company | |
Goodyear Tire and Rubber Company |
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Target UPP Payout as a | ||||||
Name | Title | % of Base Salary | ||||
J. Brian Ferguson | Chairman and Chief Executive Officer | 100 | % | |||
Richard A. Lorraine | Senior Vice President and Chief Financial Officer | 70 | % | |||
James P. Rogers | President and Chemicals and Fibers Business Group Head | 80 | % | |||
Mark J. Costa | Senior Vice President, Corporate Strategy and Marketing | 65 | % | |||
Theresa K. Lee | Senior Vice President, Chief Legal Officer and Corporate Secretary | 60 | % |
Threshold | Target | Maximum | ||||||||||
(0% Award Pool Funding) | (100% Award Pool Funding) | (200% Award Pool Funding) | ||||||||||
Earnings From Operations | $ | 435 million | $ | 615 million | $ | 805 million |
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Stock Options | Stock option program, implemented under the Company’s Omnibus Long-Term Compensation Plan (the “Omnibus Plan”), creates a direct link between compensation of key Company managers and long-term performance of the Company through appreciation of stock price. | |
Performance Shares | Awarded from time-to-time under the Company’s Omnibus Plan to provide an incentive for key managers to meet specified business or individual performance goals by providing opportunities to earn stock awards. | |
Other Stock-Based Incentive Pay | Under the Omnibus Plan, the Compensation Committee may also award additional stock-based compensation (with or without restrictions), performance units, or additional options, including options with performance-based or other conditions to exercise. | |
Stock Ownership Expectations | Established for executive officers to encourage long-term stock ownership and the holding of shares awarded under the Omnibus Plan or acquired upon exercise of options. Over a five year period, executive officers are expected to invest two and one-half times their annual base pay (five times base pay for the Chief Executive Officer) in Company stock or stock equivalents. All named executives have met or are on schedule to meet their ownership expectations. |
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Air Products and Chemicals | W.R. Grace and Company | |
Albemarle Corporation | Nalco Company | |
Baker Hughes, Inc. | Olin Corporation | |
Ball Corporation | PPG Industries, Inc | |
Dow Chemical Company | Praxair, Inc. | |
E. I. du Pont de Nemours and Company | Rohm and Haas Company | |
Ecolab, Inc. | The Scotts Miracle-Gro Company | |
H. B. Fuller Company | Sherwin-Williams Company | |
Goodyear Tire and Rubber Company |
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Total Stockholder Return | ||||||||
Performance Year | Target Return on Capital | (TSR) Target Quintile | ||||||
2005 | 8.5 | % | 3rd Quintile | |||||
2006 | 8.5 | % | 3rd Quintile | |||||
2007 | 8.5 | % | 3rd Quintile |
Eastman TSR Relative | Differential from Target Return on Capital | |||||||||||||||||||||||||||||||||||||||
to Comparison | –5% to | –3 to | –1 to | –1 to | +1 to | +3 to | +5 to | +7 to | ||||||||||||||||||||||||||||||||
Companies | <–7% | –7% | –5% | –3% | +1% | +3% | +5% | +7% | +10% | >10% | ||||||||||||||||||||||||||||||
0-19%(5th quintile) | 0.0 | 0.0 | 0.0 | 0.0 | 0.6 | 0.8 | 1.0 | 1.3 | 1.6 | 1.9 | ||||||||||||||||||||||||||||||
20-39%(4th quintile) | 0.0 | 0.0 | 0.0 | 0.4 | 0.8 | 1.0 | 1.3 | 1.6 | 1.9 | 2.2 | ||||||||||||||||||||||||||||||
40-59%(3rd quintile) | 0.0 | 0.0 | 0.4 | 0.6 | 1.0 | 1.3 | 1.6 | 1.9 | 2.2 | 2.5 | ||||||||||||||||||||||||||||||
60-79%(2nd quintile) | 0.0 | 0.4 | 0.6 | 1.0 | 1.3 | 1.6 | 1.9 | 2.2 | 2.5 | 2.8 | ||||||||||||||||||||||||||||||
80-99%(1st quintile) | 0.0 | 0.6 | 0.8 | 1.3 | 1.6 | 1.9 | 2.2 | 2.5 | 2.8 | 3.0 |
• | personal financial counseling, estate planning, and tax preparation, | |
• | personal umbrella liability insurance coverage, | |
• | home security system and associated reimbursement for the cost of taxes associated with imputed income, and | |
• | non-business travel on corporate aircraft by executives, their families, and invited guests when seats are available and the aircraft is otherwise being used for Company business. |
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Change in | ||||||||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||||||||
Value | ||||||||||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||||||
Incentive | Deferred | |||||||||||||||||||||||||||||||||||
Stock | Option | Plan | Compensation | All Other | ||||||||||||||||||||||||||||||||
Name and Principal | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||||||||
Position | Year | ($) | ($) | ($)(1)(2) | ($)(1) | ($)(3) | ($)(4) | ($)(5) | ($) | |||||||||||||||||||||||||||
J. Brian Ferguson | 2007 | $ | 1,136,538 | $ | 0 | $ | 3,405,793 | $ | 3,194,764 | $ | 1,500,000 | $ | 542,849 | $ | 222,217 | $ | 10,002,161 | |||||||||||||||||||
Chairman and Chief | 2006 | 1,073,077 | 0 | 3,227,568 | 3,235,460 | 1,045,000 | 662,951 | 205,359 | 9,449,415 | |||||||||||||||||||||||||||
Executive Officer | ||||||||||||||||||||||||||||||||||||
Richard A. Lorraine | 2007 | 462,058 | 0 | 682,225 | 303,016 | 415,000 | 114,678 | 66,846 | 2,043,823 | |||||||||||||||||||||||||||
Senior Vice President and | 2006 | 441,923 | 0 | 831,012 | 199,726 | 292,000 | 106,440 | 73,884 | 1,944,985 | |||||||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||||||||||
James P. Rogers | 2007 | 575,962 | 0 | 738,201 | 470,540 | 600,000 | 181,909 | 94,918 | 2,661,530 | |||||||||||||||||||||||||||
President and Chemicals | 2006 | 548,846 | 0 | 701,649 | 569,173 | 545,000 | 153,699 | 98,190 | 2,616,557 | |||||||||||||||||||||||||||
and Fibers Business | ||||||||||||||||||||||||||||||||||||
Group Head | ||||||||||||||||||||||||||||||||||||
Mark J. Costa(6) | 2007 | 438,269 | 0 | 753,528 | 361,297 | 380,000 | 14,201 | 1,113,702 | 3,060,997 | |||||||||||||||||||||||||||
Senior Vice President, | 2006 | 237,462 | 250,000 | (7) | 329,700 | 161,914 | 200,000 | 5,394 | 77,920 | 1,262,390 | ||||||||||||||||||||||||||
Corporate Strategy and | ||||||||||||||||||||||||||||||||||||
Marketing | ||||||||||||||||||||||||||||||||||||
Theresa K. Lee | 2007 | 416,318 | 0 | 617,269 | 703,960 | 320,000 | 121,894 | 67,399 | 2,246,840 | |||||||||||||||||||||||||||
Senior Vice President, | 2006 | 388,885 | 0 | 580,333 | 316,340 | 220,000 | 148,707 | 62,612 | 1,716,877 | |||||||||||||||||||||||||||
Chief Legal Officer and | ||||||||||||||||||||||||||||||||||||
Corporate Secretary |
(1) | The amounts reported include the portions of the grant date fair value of outstanding restricted stock and performance shares (reported in the “Stock Awards” column) and options (reported in the “Option Awards” column) recognized as compensation cost in the Company’s financial statements for 2007 and 2006, respectively, measured in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment (referred to as FAS 123R), or with respect to awards granted prior to 2006, in accordance with Financial Accounting Board Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (referred to as FAS 123). See note 16 to the Company’s consolidated financial statements in the Annual Report to Stockholders for 2007 mailed and |
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delivered electronically with this proxy statement for discussion of the assumptions made in the valuation of stock awards and option grants. | ||
(2) | Stock-related awards, other than stock options, consisting of: (i) restricted stock with transfer restrictions subject to satisfaction of continued employment for a specified time and (ii) contingent stock awards (“performance shares”) with future payment subject to specified performance-based conditions. Performance share awards were made for performance periods beginning January 1, 2004 and ending December 31, 2006, beginning January 1, 2005 and ending December 31, 2007, beginning January 1, 2006 and ending December 31, 2008, and beginning January 1, 2007 and ending December 31, 2009, respectively. For more information about stock-related awards, see “Grants of Plan-Based Awards”, “Outstanding Equity Awards at Fiscal Year-End”, and “Option Exercises and Stock Vested” tables. | |
(3) | Cash payments in the following year for performance in the year indicated under the Unit Performance Plan. As described in the “Compensation Discussion and Analysis” section earlier under “Executive Compensation,” and in the “Grants of Plan-Based Awards” table, the Unit Performance Plan is the Company’s variable pay program under which a portion of the total annual compensation of managers is dependent upon corporate, organizational, and individual performance. | |
(4) | “Change in Pension Value” is the aggregate change in actuarial present value of the executive officer’s accumulated benefit under all defined benefit and actuarial retirement plans (including supplemental plans) accrued during the year. These plans are the Company’s tax-qualified defined benefit pension plan (the Eastman Retirement Assistance Plan, or “ERAP”) and unfunded, nonqualified retirement plans supplemental to the ERAP and providing benefits in excess of those allowed under the ERAP (the Eastman Unfunded Retirement Income Plan, or “URIP”; and the Eastman Excess Retirement Income Plan, or “ERIP”). The aggregate increase in actuarial value of the pension plans is computed as of the same pension plan measurement date used for financial statement reporting purposes with respect to the Company’s financial statements for 2007 and 2006, respectively. The actuarial present value calculation is based on the 1994 Group Annuity Reserve — Unisex post-retirement mortality tables, and assumes individual compensation and service through December 31, 2007 and December 31, 2006, respectively, with benefit commencement at normal retirement age of 65. Benefits are discounted from age 65 using a 6.16% discount rate for the 2007 calculation and a 5.86% discount rate for the 2006 calculation. See the “Pension Benefits” table for additional information about the named executive officers’ pension benefits. | |
“Nonqualified Deferred Compensation Earnings” refers to above-market or preferential earnings on compensation that is deferred on a basis that is not tax-qualified, including such earnings on nonqualified defined contribution plans. The Company maintains the Executive Deferred Compensation Plan (the “EDCP”), an unfunded, nonqualified deferred compensation plan into which executive officers can defer compensation until retirement or termination from the Company. For 2007 and 2006, there were no preferential or above-market earnings on amounts in individual EDCP stock accounts (appreciation in value and dividend equivalents earned at a rate higher than appreciation in value and dividends on common stock) or on individual EDCP interest accounts (interest on amounts deferred at a rate exceeding 120% of the federal long term rate). See the “Nonqualified Deferred Compensation” table for additional information about the named executive officers’ EDCP accounts. | ||
(5) | The items of “All Other Compensation” reported for the named executive officers for 2007 are identified and quantified below: |
Annual Company | Reimbursement | |||||||||||
Contributions to | for Payment of | |||||||||||
Perquisites and | Defined | Taxes on | ||||||||||
Other Personal | Contribution | Compensation and | ||||||||||
Name | Benefits ($) | Plans($) | Benefits($) | |||||||||
J. B. Ferguson | $ | 98,831 | $ | 109,077 | $ | 14,309 | ||||||
R. A. Lorraine | 25,285 | 37,703 | 3,858 | |||||||||
J. P. Rogers | 28,169 | 56,048 | 10,701 | |||||||||
M. J. Costa | 1,074,607 | 31,913 | 7,182 | |||||||||
T. K. Lee | 26,869 | 31,467 | 9,063 |
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• | Perquisites and other personal benefits. The amounts reported are the aggregate values, based upon the incremental cost to the Company, of the following perquisites and other personal benefits made available to executive officers during 2007: personal financial counseling, estate planning, and tax preparation; personal umbrella liability insurance coverage; home security system; personal travel allowance; relocation and home purchase cost payments; non-business travel on corporate aircraft by executives, their families, and invited guests when seats are available and the aircraft is otherwise being used for Company business purposes, including an added destination of a flight when the plane is otherwise in reasonable proximity to the added destination; and personal use of corporate aircraft by the Chief Executive Officer and his family. The aggregate incremental cost to the Company for flying additional passengers on business flights is ade minimisamount, and no amount is included for these flights for purposes of determining “All Other Compensation.” The aggregate incremental cost to the Company for operating the corporate aircraft for non-business added destination portions of business flights and for personal flights for the Chief Executive Officer and his family is based upon calculation of direct operating costs including fuel, fuel additives, lubricants, maintenance, reserves for engine restoration and overhaul, landing and parking expenses, crew expenses, and miscellaneous supplies and catering. The aggregate incremental costs to the Company of umbrella liability insurance, home security system and financial counseling, personal travel allowance, and relocation and home purchase costs are based upon the actual amounts paid by the Company for such perquisites and personal benefits. The perquisites and other personal benefits reported as “All Other Compensation” are further quantified in the following table: |
Perquisites and Other Personal Benefits | ||||||||||||||||||||||||
Personal | Relocation | |||||||||||||||||||||||
Use of | Umbrella | Home | Personal | and Home | ||||||||||||||||||||
Corporate | Liability | Security | Financial | Travel | Purchase | |||||||||||||||||||
Aircraft | Insurance | System | Counseling | Allowance | Costs | |||||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||
J. B. Ferguson | $ | 68,051 | $ | 1,230 | $ | 18,370 | $ | 11,180 | $ | 0 | $ | 0 | ||||||||||||
R. A. Lorraine | 11,213 | 861 | 5,031 | 8,180 | 0 | 0 | ||||||||||||||||||
J. P. Rogers | 0 | 861 | 11,823 | 15,485 | 0 | 0 | ||||||||||||||||||
M. J. Costa | 1,862 | 861 | 0 | 9,870 | 75,000 | * | 987,014 | ** | ||||||||||||||||
T. K. Lee | 0 | 861 | 15,801 | 10,207 | 0 | 0 |
* | Annual personal travel allowance, payable in quarterly installments, under Mr. Costa’s employment agreement. | |
** | Reimbursement to Mr. Costa of one-time relocation-related costs and expenses, consisting of his out-of-pocket relocation costs and temporary living expenses and cost to Eastman of payments to relocation company for provision to Mr. Costa of services and payments related to home sale including loss on sale and real estate commissions and fees. |
• | Annual company contributions or other allocations to vested and unvested defined contribution plans.The amounts reported for 2007 are annual Company contributions to the accounts of Messrs. Ferguson, Lorraine, and Rogers, and Ms. Lee in the Eastman Investment Plan, a 401(k) retirement plan, and in the EDCP, and to Mr. Costa in the Eastman Stock Ownership Plan (“ESOP”) and EDCP. Contributions to the Eastman Investment Plan or ESOP equaled $11,250 for each named executive, with the remaining Company contributions to their EDCP accounts. See the “Nonqualified Deferred Compensation” table for additional information about Company contributions into the named executive officers’ EDCP accounts. Annual Company contributions were based upon actual compensation paid during the calendar year. | |
• | Amounts reimbursed during 2007 for the payment of taxes on certain compensation and benefits.Consists of tax reimbursements for imputed income for home security systems (Mr. Ferguson, $10,537; Mr. Lorraine, $2,886; Mr. Rogers, $6,781; and Ms. Lee, $9,063) and non-business flights on corporate aircraft (Mr. Ferguson, $3,772; Mr. Lorraine, $972; and Mr. Rogers, $3,920) and, for Mr. Costa, $7,182 for tax reimbursements related to relocation. |
(6) | Mr. Costa joined the Company in June 2006. | |
(7) | Signing bonus paid to Mr. Costa under employment agreement. |
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All Other | All Other | |||||||||||||||||||||||||||||||||||||||||||||||
Stock | Option | Grant | ||||||||||||||||||||||||||||||||||||||||||||||
Awards: | Awards: | Exercise or | Date Fair | |||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Base Price | Value of | |||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under | Estimated Future Payouts Under Equity | Shares of | Securities | of Option | Stock and | |||||||||||||||||||||||||||||||||||||||||||
Approval | Grant | Non-Equity Incentive Plan Awards(3) | Incentive Plan Awards(4) | Stock or | Underlying | Awards | Option | |||||||||||||||||||||||||||||||||||||||||
Date | Date | Threshold | Target | Maximum | Threshold | Target | Maximum | Units | Options | ($/Share) | Awards | |||||||||||||||||||||||||||||||||||||
Name | (1) | (2) | ($) | ($) | ($) | (#) | (#) | (#) | (#) | (#)(5) | (6) | (7) | ||||||||||||||||||||||||||||||||||||
J. B. Ferguson | 1/1/2007 | $ | 575,000 | $ | 1,150,000 | $ | 2,300,000 | |||||||||||||||||||||||||||||||||||||||||
10/4/2006 | 1/1/2007 | 17,600 | 44,000 | 132,000 | $ | 2,642,200 | ||||||||||||||||||||||||||||||||||||||||||
4/5/2002 | 5/1/2007 | (8) | 113,400 | $ | 66.50 | 1,070,679 | ||||||||||||||||||||||||||||||||||||||||||
10/3/2007 | 10/30/2007 | 110,000 | 66.15 | 1,299,427 | ||||||||||||||||||||||||||||||||||||||||||||
-0- | ||||||||||||||||||||||||||||||||||||||||||||||||
R. A. Lorraine | 1/1/2007 | 163,275 | 326,550 | 653,100 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2006 | 1/1/2007 | 4,052 | 10,130 | 30,390 | 608,307 | |||||||||||||||||||||||||||||||||||||||||||
10/3/2007 | 10/30/2007 | 26,000 | 66.15 | 307,137 | ||||||||||||||||||||||||||||||||||||||||||||
-0- | ||||||||||||||||||||||||||||||||||||||||||||||||
J. P. Rogers | 1/1/2007 | 232,000 | 464,000 | 928,000 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2006 | 1/1/2007 | 4,268 | 10,670 | 32,010 | 640,734 | |||||||||||||||||||||||||||||||||||||||||||
10/3/2007 | 10/30/2007 | 31,500 | 66.15 | 372,109 | ||||||||||||||||||||||||||||||||||||||||||||
4/6/2001 | 5/8/2007 | (8) | 16,701 | 66.31 | 131,564 | |||||||||||||||||||||||||||||||||||||||||||
-0- | ||||||||||||||||||||||||||||||||||||||||||||||||
M. J. Costa | 1/1/2007 | 144,625 | 289,250 | 578,500 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2006 | 1/1/2007 | 2,988 | 7,470 | 22,410 | 448,574 | |||||||||||||||||||||||||||||||||||||||||||
10/3/2007 | 10/30/2007 | 19,200 | 66.15 | 226,809 | ||||||||||||||||||||||||||||||||||||||||||||
-0- | ||||||||||||||||||||||||||||||||||||||||||||||||
T. K. Lee | 1/1/2007 | 124,500 | 249,000 | 498,000 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2006 | 1/1/2007 | 2,988 | 7,470 | 22,410 | 448,574 | |||||||||||||||||||||||||||||||||||||||||||
10/3/2007 | 10/30/2007 | 19,200 | 66.15 | 226,809 | ||||||||||||||||||||||||||||||||||||||||||||
4/5/2002 | 5/1/2007 | (8) | 8,333 | 66.50 | 78,677 | |||||||||||||||||||||||||||||||||||||||||||
-0- |
(1) | The Compensation Committee approved a stock option grant for executive officers and other eligible managers at its regularly scheduled meeting in October 2007. The Committee approved performance share awards for executive officers and other eligible officers for the2007-2009 performance period at its regularly scheduled meeting in October 2006. “Reload” options were received in 2007 by Mr. Ferguson and by Ms. Lee to purchase a number of shares equal to the number of previously owned shares of Eastman common stock surrendered in payment of the exercise price of a options originally approved on April 5, 2002 and by Mr. Rogers to purchase a number of shares equal to the number of previously owned shares of Eastman common stock surrendered in payment of the exercise price of an option originally approved on April 6, 2001. Stock options granted after 2003 do not include a “reload” feature. | |
(2) | For stock options, the grant effective date was the third business day after public release of third quarter 2007 financial results, except for “reload” options which are granted on the date of exercise of the original underlying option grant. Stock options granted after 2003 do not include a “reload” feature. Performance share awards for2007-2009 were effective as of the beginning of the performance period on January 1, 2007. | |
(3) | Estimated future payouts under the Unit Performance Plan, a variable pay program which makes a portion of participants’ total annual compensation dependent upon corporate, organizational, and individual performance. The amount of the award pool from which payouts are made is determined by annual performance of the Company versus pre-set goals for specified measures. For 2007, the measure of performance under the UPP was earnings from operations. Annual performance goals are established such that the target level is reached if corresponding Company performance goals for the year are achieved. The target level for 2007 earnings from operations corresponded to the Company’s operating earnings target under the annual business plan for 2007 as approved by the Board in late 2006. An award pool is generated for the Company, equal to the aggregate of the UPP payouts for each participant if the individual’s organizational and individual performance were at target levels, multiplied by a performance factor determined by applicable corporate or a combination of corporate and business organization performance compared to the pre-set performance goal. The “Threshold” column reflects the payout level if performance factors are at minimum of 50% of target levels. The “Target” column reflects the payout level if performance factors are at 100% of target levels. The “Maximum” column reflects the payout level if performance factors are at 200% of target levels for specified above-goal performance. See |
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the “Summary Compensation Table” for actual payout under the UPP for 2007 and “Compensation Discussion and Analysis.” | ||
(4) | Estimated future shares awarded at threshold, target, and maximum levels for performance shares for the2007-2009 performance period, when performance conditions are satisfied. Performance is measured by Company performance against two measures: (i) the Company’s total return to stockholders (change in stock price plus dividends declared during the relevant period, assuming reinvestment of dividends) relative to that of the “Materials Sector” group of companies from the Standard and Poor’s Super Composite 1500 Index and (ii) the Company’s average return on capital minus a return on capital target over the performance period. Based upon the Company’s performance against the two measures, if the performance is below the threshold, no award will be earned; if performance is at threshold, 40% of the target awards will be earned; if performance is at target, 100% of the target awards will be earned, and at maximum performance, 300% of the target awards will be earned. See also “Compensation Discussion and Analysis” and “Outstanding Equity Awards at Fiscal Year-End” table. | |
(5) | Non-incentive based stock options granted during the fiscal year. Options granted in 2007 have an exercise price equal to the closing price on the New York Stock Exchange of the underlying common stock as of the date of grant. The options vest and become exercisable in one-third increments on each of the first three anniversaries of the grant date, with acceleration of vesting in the event of a “change in ownership” or in certain circumstances following a “change in control.” Options generally expire ten years from the date of grant. Upon termination by reason of death, disability, or retirement, the options remain exercisable for the lesser of five years following the date of termination or the expiration date. If an optionee resigns, the options remain exercisable for the lesser of ninety days or the expiration date. Options not previously exercised are canceled and forfeited upon termination for cause. Column also includes new “reload” options received in 2007 by Messrs. Ferguson and Rogers and Ms. Lee to purchase a number of shares equal to the number of previously owned shares of Eastman common stock surrendered in payment of the exercise price of previously granted options. Stock options granted after 2003 do not include a “reload” feature, and no additional options will be granted upon exercise of those options. See “Summary Compensation Table”, “Outstanding Equity Awards at Fiscal Year-End”, and “Option Exercises and Stock Vested” tables. | |
(6) | Per-share exercise price of stock options granted in 2007. The exercise price is the closing price of Eastman common stock on the New York Stock Exchange on the grant date. | |
(7) | Full grant date fair value of each stock-based award, computed in accordance with FAS 123R. | |
(8) | “Reload” options received in 2007 by Messrs. Ferguson and Rogers and Ms. Lee to purchase a number of shares equal to the number of previously owned shares of Eastman common stock surrendered in payment of the exercise price of previously granted options. Reload options immediately vest at grant and expire on the same date as the original underlying option. Stock options granted after 2003 do not include a “reload” feature. |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity Incentive | ||||||||||||||||||||||||||||||||||||
Equity Incentive | Plan Awards: | |||||||||||||||||||||||||||||||||||
Number of | Number of | Equity Incentive | Market Value | Plan Awards: | Market or | |||||||||||||||||||||||||||||||
Securities | Securities | Plan Awards: | Number of | of Shares | Number of | Payout Value | ||||||||||||||||||||||||||||||
Underlying | Underlying | Number of | Shares or | or Units | Unearned | of Unearned | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Securities | Units of | of Stock | Shares, Units | Shares, Units | ||||||||||||||||||||||||||||||
Options | Options | Underlying | Option | Option | Stock That | That Have | or Other Rights | or Other Rights | ||||||||||||||||||||||||||||
(#) | (#) | Unearned | Exercise | Expiration | Have Not | Not Vested | That Have Not | That Have Not | ||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | Options (#) | Price ($) | Date | Vested (#) | ($)(1) | Vested (#)(2) | Vested ($)(3) | |||||||||||||||||||||||||||
J. B. Ferguson | 1,414 | (4) | $ | 55.06 | 2/15/2009 | |||||||||||||||||||||||||||||||
510 | 46.0625 | 4/6/2010 | ||||||||||||||||||||||||||||||||||
12,122 | (4) | 55.06 | 4/6/2010 | |||||||||||||||||||||||||||||||||
22,500 | 49.22 | 4/5/2011 | ||||||||||||||||||||||||||||||||||
41,406 | 47.55 | 4/4/2012 | ||||||||||||||||||||||||||||||||||
52,516 | (4) | 60.92 | 4/3/2013 | |||||||||||||||||||||||||||||||||
4,700 | (4) | 46.28 | 4/3/2013 | |||||||||||||||||||||||||||||||||
7,613 | (4) | 53.57 | 4/3/2013 | |||||||||||||||||||||||||||||||||
75,000 | 46.98 | 11/1/2014 | ||||||||||||||||||||||||||||||||||
113,333 | 56,667 | (5) | 53.51 | 10/31/2015 | ||||||||||||||||||||||||||||||||
55,000 | 110,000 | (6) | 60.92 | 10/30/2016 | ||||||||||||||||||||||||||||||||
113,400 | (4) | 66.50 | 4/4/2012 | |||||||||||||||||||||||||||||||||
110,000 | (7) | 66.15 | 10/29/2017 | |||||||||||||||||||||||||||||||||
89,330 | $ | 5,457,170 | ||||||||||||||||||||||||||||||||||
R. A. Lorraine | 8,500 | 43.66 | 4/1/2014 | |||||||||||||||||||||||||||||||||
14,000 | 46.98 | 11/1/2014 | ||||||||||||||||||||||||||||||||||
20,666 | 10,334 | (5) | 53.51 | 10/31/2015 | ||||||||||||||||||||||||||||||||
12,666 | 25,334 | (6) | 60.92 | 10/30/2016 | ||||||||||||||||||||||||||||||||
26,000 | (7) | 66.15 | 10/29/2017 | |||||||||||||||||||||||||||||||||
18,400 | 1,124,056 | |||||||||||||||||||||||||||||||||||
J. P. Rogers | 11,665 | (4) | 59.23 | 4/6/2010 | ||||||||||||||||||||||||||||||||
38,978 | (4) | 60.02 | 4/4/2012 | |||||||||||||||||||||||||||||||||
14,755 | (4) | 52.66 | 4/3/2013 | |||||||||||||||||||||||||||||||||
8,000 | 43.66 | 4/1/2014 | ||||||||||||||||||||||||||||||||||
16,000 | 46.98 | 11/1/2014 | ||||||||||||||||||||||||||||||||||
22,000 | 11,000 | (5) | 53.51 | 10/31/2015 | ||||||||||||||||||||||||||||||||
13,333 | 26,667 | (6) | 60.92 | 10/30/2016 | ||||||||||||||||||||||||||||||||
16,701 | (4) | 66.31 | 4/5/2011 | |||||||||||||||||||||||||||||||||
31,500 | (7) | 66.15 | 10/29/2017 | |||||||||||||||||||||||||||||||||
19,470 | 1,189,422 | |||||||||||||||||||||||||||||||||||
M. J. Costa | 21,666 | 43,334 | (8) | 56.52 | 5/31/2016 | |||||||||||||||||||||||||||||||
9,333 | 18,667 | (6) | 60.92 | 10/30/2016 | ||||||||||||||||||||||||||||||||
19,200 | (7) | 66.15 | 10/29/2017 | |||||||||||||||||||||||||||||||||
20,000 | (9) | $ | 1,221,800 | |||||||||||||||||||||||||||||||||
7,470 | 456,342 | |||||||||||||||||||||||||||||||||||
T. K. Lee | 4,590 | (4) | 56.97 | 4/4/2012 | ||||||||||||||||||||||||||||||||
6,538 | (4) | 57.06 | 4/4/2012 | |||||||||||||||||||||||||||||||||
2,300 | (4) | 58.80 | 4/3/2013 | |||||||||||||||||||||||||||||||||
4,667 | 46.98 | 11/1/2014 | ||||||||||||||||||||||||||||||||||
20,666 | 10,334 | (5) | 53.51 | 10/31/2015 | ||||||||||||||||||||||||||||||||
9,333 | 18,667 | (6) | 60.92 | 10/30/2016 | ||||||||||||||||||||||||||||||||
8,333 | (4) | 66.50 | 4/4/2012 | |||||||||||||||||||||||||||||||||
19,200 | (7) | 66.15 | 10/29/2017 | |||||||||||||||||||||||||||||||||
15,740 | 961,557 |
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(1) | Market value of restricted shares of common stock determined as of December 31, 2007, based on the per share closing price of the common stock on the New York Stock Exchange. | |
(2) | Number of shares of common stock to be paid under outstanding performance shares, assuming achievement of target performance goals for2006-2008 and2007-2009 performance periods. Performance is measured by Company performance against two measures: (i) the Company’s total return to stockholders (change in stock price plus dividends declared during the relevant period, assuming reinvestment of dividends) relative to that of the “Materials Sector” group of companies from the Standard and Poor’s Super Composite 1500 Index; and (ii) the Company’s average return on capital minus a return on capital target over the performance period. Based upon the Company’s performance against the two measures, if the performance is below the threshold, no award will be earned; if performance is at threshold, 40% of the target awards will be earned; if performance is at target, 100% of the target awards will be earned; and at maximum performance, 300% of the target awards will be earned. If earned, the awards will be paid after the end of the performance period in unrestricted shares of Eastman common stock, or participants may irrevocably elect in advance to defer the award payout into the EDCP. | |
(3) | Value of shares of common stock to be paid under outstanding performance shares, assuming achievement of target performance goals for2006-2008 and2007-2009 performance periods and assuming a market value equal to the closing price of the common stock on the New York Stock Exchange as of December 31, 2007. | |
(4) | “Reload” options received to purchase a number of shares equal to the number of previously owned shares of Eastman common stock surrendered in payment of the exercise price of previously granted options. Option exercise price is based upon the market price of underlying common stock on the date of exercise of the underlying option grant. Reload options are exercisable at grant and expire as of the date of the original underlying option grant. Stock options granted after 2003 do not include a “reload” feature, and no additional options will be granted upon exercise of those options. See also “Summary Compensation Table”, and “Grants of Plan-Based Awards” table. | |
(5) | Option becomes exercisable on November 1, 2008. | |
(6) | Option becomes exercisable as to one-half of the shares on October 31, 2008 and as to the remaining shares on October 31, 2009. | |
(7) | Option becomes exercisable as to one-third of the shares on October 30, 2008, one-third of the shares on October 30, 2009, and as to the remaining shares on October 30, 2010. | |
(8) | Option becomes exercisable as to 21,667 shares on June 1, 2008 and as to 21,667 shares on June 1, 2009. | |
(9) | Restricted shares of common stock, 10,000 of which vest on June 1, 2008 and 10,000 of which vest on June 1, 2009. |
Option Awards(1) | Stock Awards(2) | |||||||||||||||
Number of | Number of | |||||||||||||||
Shares Acquired | Shares Acquired | |||||||||||||||
on Exercise | Value Realized | on Vesting | Value Realized | |||||||||||||
Name | (#) | on Exercise($) | (#) | on Vesting($) | ||||||||||||
J. B. Ferguson | 232,714 | $ | 4,779,913 | 85,340 | $ | 5,667,080 | ||||||||||
R. A. Lorraine | 0 | 0 | 14,250 | 943,493 | ||||||||||||
J. P. Rogers | 22,500 | 384,525 | 16,150 | 1,069,292 | ||||||||||||
M. J. Costa | 0 | 0 | 10,000 | 663,400 | ||||||||||||
T. K. Lee | 25,877 | 500,296 | 14,250 | 943,493 |
(1) | Represents number and aggregate value realized upon exercise of stock options during 2007. |
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(2) | Represents: (i) number of shares of common stock for which transfer restrictions lapsed during 2007, and the aggregate value of such shares of common stock based upon the per share closing price of the common stock on the New York Stock Exchange on the vesting date; and (ii) number of shares received upon payout under 2005-2007 performance shares, and the aggregate value of such shares of common stock based upon the per share closing price of the common stock on the New York Stock Exchange on the payout date. |
Number of | Present Value | Payments During | ||||||||||||||||||
Plan Name | Years of Credited | of Accumulated | Last Fiscal | |||||||||||||||||
Name | (1)(2) | Service (#) | Benefit ($)(3) | Year($) | ||||||||||||||||
J. B. Ferguson | ERAP | 31 | $ | 410,049 | $ | 0 | ||||||||||||||
ERIP/URIP | 31 | 1,894,134 | 0 | |||||||||||||||||
R. A. Lorraine(4) | ERAP | 4 | 57,254 | 0 | ||||||||||||||||
ERIP/URIP | 4 | 220,463 | 0 | |||||||||||||||||
J. P. Rogers | ERAP | 8 | 94,646 | 0 | ||||||||||||||||
ERIP/URIP | 8 | 554,466 | 0 | |||||||||||||||||
M. J. Costa(5) | ERAP | 2 | 7,647 | 0 | ||||||||||||||||
ERIP/URIP | 2 | 11,948 | 0 | |||||||||||||||||
T. K. Lee | ERAP | 20 | 295,620 | 0 | ||||||||||||||||
ERIP/URIP | 20 | 450,482 | 0 |
(1) | The Eastman Retirement Assistance Plan (“ERAP”) is the tax-qualified, non-contributory defined benefit pension plan for essentially all active U.S. employees, other than employees of certain subsidiaries and some employees covered by collective bargaining agreements. A participant’s total ERAP benefit consists of his or her “Pre-2000 Benefit” and “Pension Equity Benefit,” as described below: |
(2) | The Company maintains two unfunded, nonqualified plans, the Unfunded Retirement Income Plan (“URIP”) and the Excess Retirement Income Plan (“ERIP”). The ERIP and the URIP will restore to participants in the ERAP benefits that cannot be paid under the ERAP because of restrictions under the Internal Revenue Code of 1986, as amended, and benefits that are not accrued under the ERAP because of a voluntary deferral by the participant of compensation that would otherwise be counted under the ERAP. As to accruals after |
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December 31, 2004, in order to comply with Section 409A of the Internal Revenue Code, it may be necessary to delay commencement of payment until six months after the participant’s separation from service with the Company. The Company has established a “Rabbi Trust” to provide a degree of financial security for the participants’ unfunded account balances under the ERIP and URIP. | ||
(3) | Actuarial present value of the accumulated benefit under the plan, computed as of the same pension plan measurement date used for financial statement reporting purposes with respect to the Company’s audited financial statements for 2007. The actuarial present value calculation is based on the 1994 Group Annuity Reserve-Unisex post-retirement mortality tables, and assumes individual compensation and service through December 31, 2007, with benefit commencement at normal retirement age of 65. Benefits are discounted from age 65 using a 6.16% discount rate. | |
(4) | Mr. Lorraine has not met the minimum vesting requirement for his retirement benefits as of December 31, 2007. Accrued benefits vest after five years of service, which would be in October 2008 for Mr. Lorraine. Accumulated benefits shown are calculated as if minimum vesting requirements had been met. | |
(5) | Mr. Costa has not met the minimum vesting requirement for his retirement benefits as of December 31, 2007. Accrued benefits vest after five years of service, which would be in June 2011 for Mr. Costa. Accumulated benefits shown are calculated as if minimum vesting requirements had been met. |
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Executive | Registrant | Aggregate | ||||||||||||||||||
Contributions | Contributions | Earnings | Aggregate | Aggregate | ||||||||||||||||
in Last | for Last | in Last | Withdrawals/ | Balance at | ||||||||||||||||
Fiscal Year | Fiscal Year | Fiscal Year | Distributions | Last Fiscal | ||||||||||||||||
Name | ($) | ($)(1) | ($)(2) | ($) | Year-End($)(3) | |||||||||||||||
J. B. Ferguson | $0 | $97,827 | $ | 113,388 | $0 | $1,532,947 | ||||||||||||||
R. A. Lorraine | 0 | 26,453 | 6,265 | 0 | 89,296 | |||||||||||||||
J. P. Rogers | 0 | 44,798 | 378,071 | 0 | 8,156,216 | |||||||||||||||
M. J. Costa | 0 | 20,664 | 51 | 0 | 791 | |||||||||||||||
T. K. Lee | 0 | 20,217 | 98,643 | 0 | 1,161,132 |
(1) | Annual Company contributions are made to the accounts of Messrs. Ferguson, Lorraine, and Rogers, and Ms. Lee in the Eastman Investment Plan, a 401(k) retirement plan, and in the EDCP, and to Mr. Costa in the Eastman ESOP and EDCP. Amounts shown are the amounts contributed into the EDCP and represent amounts that could not be contributed into the 401(k) retirement plan or ESOP accounts of the individuals due to restrictions under the Internal Revenue Code. The total amount of the contributions for each named executive officer in the Eastman Investment Plan, the ESOP, and the EDCP was five percent of his or her 2007 earnings. These contributions are included in the “Summary Compensation Table” in the “All Other Compensation” column. |
(2) | Aggregate amounts credited to participant accounts during 2007. No earnings on deferred amounts are included in the “Summary Compensation Table” in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column because there were no preferential or above-market earnings on individual stock accounts or interest accounts. Quarterly dividend equivalents of $0.44 per hypothetical share were credited to amounts in individual stock accounts, and the prime rate of interest credited to amounts in individual interest accounts varied from 7.75% to 8.25%, during 2007. |
(3) | Balance in individual EDCP accounts as of December 31, 2007. The portions of the balances from annual Company contributions before provision for certain taxes ($421,274 for Mr. Ferguson, $88,721 for Mr. Lorraine, $207,001 for Mr. Rogers, $100,477 for Ms. Lee, and $824 for Mr. Costa) were reported as “All Other Compensation” in the Summary Compensation Table in this proxy statement and in the annual meeting proxy statements for previous years; the |
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Amount of Payment | ||||||||||||||||||||
J. B. | R. A. | J. P. | M. J. | T. K. | ||||||||||||||||
Ferguson | Lorraine | Rogers | Costa | Lee | ||||||||||||||||
Form of Payment | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
Cash severance(1) | $ | 6,900,000 | $ | 2,379,150 | $ | 3,132,000 | $ | 2,202,750 | $ | 1,992,000 | ||||||||||
Value of unvested stock-based awards at target(2) | 5,633,688 | 1,083,849 | 1,182,793 | 1,569,269 | 1,028,963 | |||||||||||||||
Additional pension credit(3) | 745,897 | 477,673 | 236,401 | 56,723 | 183,807 | |||||||||||||||
Health and welfare continuation(4) | 29,733 | 19,977 | 29,733 | 29,733 | 29,733 | |||||||||||||||
Excise tax payment(5) | 0 | 1,311,986 | 0 | 936,778 | 0 | |||||||||||||||
Total Payments | $ | 13,309,318 | $ | 5,272,635 | $ | 4,580,927 | $ | 4,795,253 | $ | 3,234,503 | ||||||||||
(1) | Lump sum cash severance under Change in Control Agreement equal to three times the sum of annual base pay and the target Unit Performance Plan payout. | |
(2) | Value of unvested awards at target which vest and are paid out under the Omnibus Plans at termination following change in control (or earlier upon a change in control that is a change in ownership as shown in the next table below, in which case the payment would not also be received upon a subsequent termination without cause or resignation for good reason). Awards are valued as of year-end 2007 based upon the closing price of Eastman common stock on the New York Stock Exchange. | |
(3) | Lump sum present value of additional pension credit under Change in Control Agreement. | |
(4) | Value of continuation of health and welfare benefits for three years following termination under Change in Control Agreement. | |
(5) | Estimated payment under Change in Control Agreement for excise tax imposed by Section 4999 of the Internal Revenue Code. The calculation of thegross-up amount in the above table is based upon an excise tax rate of 20%, a 35% federal income tax rate, and a 1.45% Medicare tax rate. |
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Amount of Payment | ||||||||||||||||||||
J. B. | R. A. | J. P. | M. J. | T. K. | ||||||||||||||||
Ferguson | Lorraine | Rogers | Costa | Lee | ||||||||||||||||
Form of Payment | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
Value of unvested stock-based awards at target(1) | $ | 5,633,608 | $ | 1,083,849 | $ | 1,182,793 | $ | 1,569,269 | $ | 1,028,963 | ||||||||||
(1) | Value of unvested awards at target which vest and are paid out under the Omnibus Plans following change in ownership of the Company. Awards are valued as of year-end 2007 based upon the closing price of Eastman common stock on the New York Stock Exchange. |
Amount of Payment | ||||
to M. J. Costa | ||||
Form of Payment | ($) | |||
Cash severance | $ | 2,202,750 | ||
Value of unvested stock-based awards at target | 1,569,269 | |||
Total Payments | $ | 3,772,019 | ||
• | value of outstanding vested stock-based awards (see the “Outstanding Equity Awards at Fiscal Year-End” table), | |
• | earned Unit Performance Plan payout (see “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” column in the “Grants of Plan-Based Awards” table), | |
• | earned Company contribution to vested and unvested defined contribution plans (see “All Other Compensation” column in the “Summary Compensation Table”), | |
• | account balance in the Eastman Investment Plan, a 401(k) retirement plan, and the ESOP, | |
• | account balance in the Executive Deferred Compensation Plan (see “Aggregate Balance at Last Fiscal Year-End” column in the “Nonqualified Deferred Compensation” table), and | |
• | lump sum present value of pension under the Company’s qualified and non-qualified pension arrangements (see “Present Value of Accumulated Benefit” column in the “Pension Benefits” table). |
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[FORM OF PAPER PROXY-FRONT]
ADMISSION TICKET
Please bring this ticket if you choose to attend the Annual Meeting.
It will expedite your admittance when presented upon your arrival.
EASTMAN CHEMICAL COMPANY
Annual Meeting of Stockholders
Thursday, May 1, 2008
11:30 a.m.
Toy F. Reid Employee Center
400 South Wilcox Drive
Kingsport, Tennessee 37660
1-423-229-4647
Proxy | EASTMAN CHEMICAL COMPANY | Proxy |
1. | Election of Directors: | |||
Nominees for election of three directors to serve in the class for which the term in office expires at the Annual Meeting of Stockholders in 2011 and their successors are duly elected and qualified: |
(1) Michael P. Connors | q | FOR | q | AGAINST | q | ABSTAIN | ||||||||||||||||||
(2) J. Brian Ferguson | q | FOR | q | AGAINST | q | ABSTAIN | ||||||||||||||||||
(3) Howard L. Lance | q | FOR | q | AGAINST | q | ABSTAIN |
2. | Ratification of Appointment of PricewaterhouseCoopers LLP as Independent Auditors. |
qFOR | qAGAINST | qABSTAIN |
3. | Stockholder proposal requesting that management revise employment nondiscrimination policy to prohibit “discrimination based on sexual orientation and gender identity.” |
qFOR | qAGAINST | qABSTAIN |
4. | Stockholder proposal requesting that Board of Directors take steps necessary to elect each director annually. |
qFOR | qAGAINST | qABSTAIN |
(CONTINUED, AND TO BE SIGNED AND DATED, ON THE OTHER SIDE.)
-1-
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[FORM OF PAPER PROXY-BACK]
→ [electronic voting number] |
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
To Vote by Phone: | Call anytime toll free1-888-693-8683 There is no charge for this call. Follow the simple instructions to record your vote. | |
To Vote by Internet or | Access http://www.cesvote.com | |
Review the Proxy Statement | Follow the simple instructions presented to record your vote. |
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT MAIL THE PROXY CARD.
THANK YOU FOR VOTING.
Proxy | EASTMAN CHEMICAL COMPANY | Proxy |
The undersigned hereby appoints Theresa K. Lee and Richard A. Lorraine as proxies with power to act without the other and with power of substitution, and hereby authorizes them to represent and vote, as designated on the other side of this proxy card, all the shares of stock of Eastman Chemical Company held of record as of March 10, 2008 by the undersigned with all the powers that the undersigned would possess if present at the Annual Meeting of Stockholders of the Company to be held May 1, 2008 or any adjournment or postponement thereof.
Signature(s) | ||||||
Signature(s) | ||||||
Date: | , 2008 | |||||
Please sign exactly as your name(s) appears on this proxy. If shares are held jointly, all joint owners should sign. If signing as executor, administrator, attorney, trustee, guardian, or in any other representative capacity, please also give your full title. |
MARK (ON THE OTHER SIDE), SIGN AND DATE YOUR PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
-2-
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[SCRIPT OF DIALOGUE FOR REGISTERED STOCKHOLDER PROXY VOTING BY TELEPHONE]
STOCKHOLDER HEARS THIS SCRIPT
Speech 1 | Hello, let’s begin your telephone vote. Please enter the number located in the box by the arrow. Welcome to Eastman Chemical Company’s telephone voting system. Voting your shares by telephone has the same effect as if you returned your proxy card by mail. You hereby direct the named proxies to vote your shares as instructed. | |
Speech 2 | To vote as the Board of Directors recommends on all items, please press 1. | |
Speech 2A | You have voted as the Board of Directors has recommended. If this is correct, please press 1; if this is not correct, please press 0. | |
Speech 2B | If you would like to vote another proxy, please press 1; if not press 0. | |
Speech 2C | If you would like to try again, please press 1; if not, please press 0. Please try your call again, or vote, sign, date, and mail your proxy card in the envelope provided. Goodbye. | |
Speech 3 | To vote on each item separately, please press 0 | |
Speech 4 | Nominee 1, to vote FOR, please press 1; to vote AGAINST, please press 6; to ABSTAIN, please press 0 Nominee 2, to vote FOR, please press 1; to vote AGAINST, please press 6, to ABSTAIN, please press 0 | |
Nominee 3, to vote FOR, please press 1; to vote AGAINST, please press 6; to ABSTAIN, please press 0 | ||
Item 2, to vote FOR, please press 1; to vote AGAINST, please press 6; to ABSTAIN, please press 0 | ||
Item 3, to vote FOR, please press 1; to vote AGAINST, please press 6; to ABSTAIN, please press 0 | ||
Item 4, to vote FOR, please press 1; to vote AGAINST, please press 6; to ABSTAIN, please press 0 | ||
Speech 5 | Your vote has been cast as follows: | |
Nominee 1: [For] [Against] [Abstain] | ||
Nominee 2: [For] [Against] [Abstain] | ||
Nominee 3: [For] [Against] [Abstain] | ||
Item 2: [For] [Against] [Abstain] | ||
Item 3: [For] [Against] [Abstain] | ||
Item 4: [For] [Against] [Abstain] | ||
If this is correct, please press 1; if this is not correct, please press 0. | ||
Speech 5A | If you would like to vote another proxy, please press 1, if not press 0 | |
Thank you for voting. Goodbye. | ||
Speech 5B | If you would like try again, please press 1; if not, please press 0. Please try your call again, or vote, sign, date, and mail your proxy card in the envelope provided. Goodbye. |
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only the last instructions you submit will be valid. All previous instructions are revoked.
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Click here to view the Eastman Chemical Company Annual Report in a new window. | ||||
Click here to view the Eastman Chemical Company Proxy Statement in a new window. |
1. | Election of Directors: | |||||||
Nominees for election of three directors to serve in the class for which the term in office expires at the Annual Meeting of Stockholders in 2011 and their successors are duly elected and qualified: | ||||||||
FOR | AGAINST | ABSTAIN | ||||||
(1) | Michael P. Connors | ¡ | ¡ | ¡ | ||||
(2) | J. Brian Ferguson | ¡ | ¡ | ¡ | ||||
(3) | Howard L. Lance | ¡ | ¡ | ¡ |
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FOR | AGAINST | ABSTAIN | ||||||
2. | Ratification of Appointment of PricewaterhouseCoopers LLP as Independent Auditors. | ¡ | ¡ | ¡ | ||||
FOR | AGAINST | ABSTAIN | ||||||
3. | Stockholder proposal requesting that management revise employment nondiscrimination policy to prohibit “discrimination based on sexual orientation and gender identity.” | ¡ | ¡ | ¡ | ||||
4. | Stockholder proposal requesting that Board of Directors take steps necessary to elect each director annually. | ¡ | ¡ | ¡ |
• | Please enter your email address to receive confirmation that your instructions were recorded. |
Note: We respect your privacy. Your email address will not be saved or used for any purpose other than sending your confirmation email. | ||
• | Please enter any change of address. |
• | Please enter any comments. |
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Your Number | ||||||||
Submitted | ||||||||
Confirmation | ||||||||
(1). | Michael P. Connors | [FOR] | [AGAINST] | [ABSTAIN] | ||||
(2). | J. Brian Ferguson | [FOR] | [AGAINST] | [ABSTAIN] | ||||
(3). | Howard L. Lance | [FOR] | [AGAINST] | [ABSTAIN] | ||||
2. | Ratification of Appointment of PricewaterhouseCoopers LLP as Independent Auditors. | [FOR] | [AGAINST] | [ABSTAIN] | ||||
3. | Stockholder proposal requesting that management revise employment nondiscrimination policy to prohibit “discrimination based on sexual orientation and gender identity.” | [FOR] | [AGAINST] | [ABSTAIN] | ||||
4. | Stockholder proposal requesting that Board of Directors take steps necessary to elect each director annually. | [FOR] | [AGAINST] | [ABSTAIN] | ||||
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Eastman Chemical Company | ||
P.O. Box 431 | ||
Kingsport, Tennessee 37662-5280 | ||
Theresa K. Lee | ||
Senior Vice President, Chief Legal Officer, | ||
and Corporate Secretary | ||
Phone: (423) 229-2097 | ||
FAX: (423) 224-9399 | ||
tklee@eastman.com |
Re: | 2008 Annual Meeting Materials |
Theresa K. Lee
Senior Vice President, Chief Legal Officer and Corporate Secretary