EXHIBIT 10.01
EASTMAN CHEMICAL COMPANY
EASTMAN UNIT PERFORMANCE PLAN
(AMENDED AND RESTATED EFFECTIVE FEBRUARY 6, 2002)
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ARTICLE 1. PURPOSE
The Eastman Unit Performance Plan ("UPP", or the "Plan") is a variable
compensation plan for management level individuals at Eastman Chemical Company
(the "Company") and subsidiaries of the Company, as recommended by the CEO and
as designated by the Compensation and Management Development Committee (the
"Committee") of the Board of Directors. It is designed to deliver a portion of
annual cash compensation according to corporate and organizational unit
performance and the attainment of individual objectives and expectations. The
UPP is intended to provide an incentive for superior business and individual
performance, and to tie the interests of management-level individuals to the
performance of the Company's businesses and, thereby, the interests of the
Company and its shareowners.
ARTICLE 2. RELATIONSHIP TO OTHER VARIABLE COMPENSATION PLANS
Total cash compensation for all Company employees, including Plan participants,
is intended to be competitive with pay in the applicable labor market and in the
chemical industry for similar jobs when target levels of performance are
achieved. Accordingly, a portion of each employee's target pay level is placed
"at risk" under the Eastman Performance Plan (the "EPP"). Depending upon Company
performance, employees may lose the at risk amount, receive some or all of the
amount at risk, or receive an amount in excess of the pay at risk. In addition,
under the UPP and/or the Annual Performance Plan (the "APP"), management-level
employees may also earn additional variable pay based upon corporate,
organizational unit, and individual performance.
The annual cash compensation of each participant in the Plan consists of a base
salary and, depending on eligibility and participation level, awards under
variable compensation plans --- the EPP, the UPP and/or the APP.
The portion of total target annual cash compensation that is variable under the
Plan is determined for each performance year for which performance is measured
(a "Performance Year") by the Committee based (in all cases except for Chief
Executive Officer ("CEO")) on the recommendation of the CEO.
Variable pay amounts under the UPP are in addition to the pay at risk under the
EPP and to variable pay under the APP. UPP awards, if any, are paid in a lump
sum in March of the year following the Performance Year.
ARTICLE 3. SUMMARY OF PLAN DESIGN
The UPP is designed so that a pool of dollars ("Bonus Pool") is generated for
each major functional organization (a "Unit") within the Company. For purposes
of this plan, the CEO shall be a participant of the CEO Unit Bonus Pool, and the
Committee shall be the "head" and "management" of the CEO Unit. The amount
generated for a Unit Bonus Pool will equal (1) the aggregate of the UPP target
variable pay for each eligible participant in the Unit if Unit and individual
performance were at target levels, multiplied by (2) a percentage (the
"Performance Factor") determined by performance compared to pre-set corporate
and/or specified organizational unit ("Business Group Units") performance goals.
Generally, the Performance Factor can range from 0%, if performance goals are
not met, up to the weighted average of the maximum performance factors for each
UPP measure. The performance goals and correlative Performance Factors for each
Unit will be established as soon as practicable, either prior to the beginning
of each Performance Year or as soon as reasonably determinable at the beginning
of the Performance Year. The performance goals and correlative Performance
Factors are established by the Committee, based (in all cases except for the
CEO) upon the recommendation of the CEO.
At the end of each Performance Year, the Committee will certify performance in
relation to the pre-established performance goals, thereby determining the
Performance Factor and Bonus Pool for each Unit. The CEO, after consultation
with the Company executive officers with management responsibility for the
affected Units, will determine whether, in his discretion, any adjustments to
the amounts of any of the Unit Bonus Pools is appropriate. Once the amount of
each Unit Bonus Pool has been determined within each Unit, management will
exercise discretion in allocating the Bonus Pool for individual payouts. The
payouts will be based on the attainment of individual objectives and
expectations established at the beginning of such Performance Year by Unit
management
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for each individual participant. Maximum potential for an individual award could
exceed the weighted average of the maximum performance factors for each of the
UPP performance goals, based on management's assessment of individual
performance. However, the sum of all individual awards cannot exceed the Bonus
Pool for the Unit.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.01 GENERAL ELIGIBILITY
The UPP is designed for management-level individuals who have an impact on the
financial performance of the Company. Prior to or at the time performance goals
are established for a Performance Year, the Committee, upon the recommendation
of the CEO, will confirm in writing the eligibility criteria for participation
in the UPP for such Performance Year and the portion of each participant's total
annual compensation that is variable under the Plan.
4.02 NEW PARTICIPANTS AND JOB CHANGES DURING THE PERFORMANCE YEAR
Individuals who are appointed to positions eligible for UPP participation during
the Performance Year become eligible for participation on the first day of the
month of the appointment. Individuals who become participants during the
Performance Year will be eligible to receive a UPP award based on the discretion
of Unit management. Each participant's UPP target variable pay for target levels
of Unit and individual performance will be allocated to a Unit Bonus Pool based
upon the following process:
I. The Performance Year will be divided into four, three-month
(quarterly) intervals (January 1 to March 31; April 1 to June 30;
July 1 to September 30; and October 1 to December 31)
II. Anyone promoted into UPP, who changes UPP participation level, or
who moves between Units at any time during one of these three-month
intervals will have a portion of his/her target variable pay under
the UPP allocated to a Unit Bonus Pool as follows:
TABLE 1. PROMOTION INTO UPP
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Percent of Target
UPP Variable Pay
QUARTER DATE OF PROMOTION Allocated to Unit
Bonus Pool of Unit
in which Promoted
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1st January 1 - March 31 100%
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2nd April 1 - June 30 75%
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3rd July 1 - September 30 50%
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4th October 1 - December 31 25%
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TABLE 2. CHANGE IN UPP PARTICIPATION LEVEL
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Percent of Percent of New
Quarter DATE OF CHANGE IN UPP Pre-existing Target Target UPP Variable
PARTICIPATION LEVEL UPP Variable Pay Pay Allocated to
Allocated to Unit Unit Bonus Pool
Bonus Pool
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1st JANUARY 1 - MARCH 31 25% 75%
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2nd April 1 - June 30 50% 50%
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3rd July 1 - September 30 75% 25%
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4th October 1 - December 31 100% 0%
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TABLE 3. MOVE BETWEEN UNITS
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Percent of Target Percent of Target
Quarter DATE OF MOVE BETWEEN UPP Variable Pay UPP Variable Pay
UNITS Allocated to Unit Allocated to Unit
Bonus Pool of Bonus Pool of New
Former Unit Unit
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1st JANUARY 1 - MARCH 31 25% 75%
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2nd April 1 - June 30 50% 50%
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3rd July 1 - September 30 75% 25%
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4th October 1 - December 31 100% 0%
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4.03 TERMINATIONS
In the event an eligible participant (1) retires, (2) dies, (3) becomes disabled
under the Eastman Long-Term Disability Plan, or (4) terminates employment as a
result of, pursuant to, or in connection with layoff, special separation,
divestiture, or similar circumstances, such person's target UPP variable pay
will be allocated to his or her Unit's Bonus Pool for such Performance Year in
accordance with the process outlined in Section 4.02, Part II, Table 2, under
the column "Percent of Pre-existing Target UPP Variable Pay Allocated to Unit
Bonus Pool." He/she will be eligible to receive a UPP award for such Performance
Year at the sole discretion of the Unit management.
Participants who terminate employment with the Company for reasons other than
those specified under this Section 4.03 will be credited to a Unit Bonus Pool
and be eligible to receive an award under the UPP only if they were actively
employed on the last scheduled workday of the Performance Year.
ARTICLE 5. PERFORMANCE YEAR AND PERFORMANCE GOALS
5.01 PERFORMANCE YEAR
The Plan's Performance Year shall be the calendar year beginning on January 1
and ending on December 31.
5.02 PERFORMANCE GOALS
Each year, the CEO will recommend to the Committee performance goals for each
Unit for a given Performance Year. Such performance goals may be for one or more
Units, for the Company as a whole, or for a combination of one or more Units and
the Company. Either by the first day of the Performance Year, or such later date
as is practicable, the Committee shall establish in writing, with respect to the
Performance Year, a target objective(s) with respect to such performance goals
and formulae or methods for computing the applicable Performance Factor(s) based
on the extent to which such performance goals are attained. Performance Factors
can range from 0%, if performance goals are not met, to the weighted average of
the maximum performance factors for each UPP measure. Performance goals for each
measure may be based upon any quantitative and objectively determinable business
or financial criteria, alone or in combination, as the CEO and the Unit heads
shall deem appropriate.
Once established, performance goals for a particular Performance Year cannot be
changed during the Performance Year.
ARTICLE 6. AWARD DETERMINATION
6.01 CERTIFICATION OF PERFORMANCE
As soon as practicable following the availability of performance results for the
completed Performance Year, the Committee shall certify performance in relation
to the pre-established goals, thereby determining the Performance Factor(s) and
Bonus Pools for each Unit. To the extent the performance goals are expressed in
standard accounting terms, they shall be measured according to generally
accepted accounting principles as in existence on the date on which the
performance goals are established and without regard to any changes in such
principles after such date.
In determining whether the performance goals have been met, to the extent that
such goals are expressed in terms of financial performance, the Committee may
adjust the financial results for a Performance Year to exclude the effect of
unusual charges or income items or other events which are distortive of
financial results for the Performance Year. Notwithstanding actual performance,
the Committee may, in its sole discretion, adjust the amounts of the Unit Bonus
Pools to reflect overall Company performance and business and financial
conditions.
6.02 CALCULATION OF BONUS POOL AND INDIVIDUAL AWARDS; REPORT TO COMMITTEE
Based upon Company and/or Unit performance against the performance goals, the
Performance Factors are determined as provided in Sections 5.02 and 6.01. The
amount generated for each Unit Bonus Pool will equal (1) the aggregate of the
target UPP variable pay for each eligible participant in the Unit, multiplied by
(2) the applicable Performance Factor(s). The CEO, after consultation with the
Company executive officers with management responsibility for the affected
Units, will determine whether, in his discretion, any adjustments to the amounts
of any of the Unit Bonus Pools is appropriate. Once the amount of each Unit
Bonus Pool has been determined within each
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Unit, management shall have the sole discretion to allocate the Unit Bonus Pool
among eligible participants, based on objective or subjective assessments of the
participants' achievement of pre-established goals and expectations for the
Performance Year. To the extent that the sum of individual awards as allocated
by the Unit management within a particular Unit exceeds the Bonus Pool amount
for that Unit, the Unit management shall make adjustments to individual awards
to account for the difference. Individual adjustments shall be at the discretion
of the Unit management, but aggregate payouts cannot exceed the total Bonus Pool
allocation for the Unit and may be less than the Bonus Pool allocation for the
Unit. Final allocations of the Unit Bonus Pools shall be reported to the CEO,
who shall report the UPP results to the Committee. The Committee shall approve
the UPP award amounts for all executive officers of the Company, and shall
determine the UPP Award amount for the CEO.
ARTICLE 7. PAYMENT OF AWARDS
UPP awards shall be paid by the Company in March for performance in the previous
Performance Year, based upon the Unit management's allocation of awards from the
Unit Bonus Pools. The Committee has the authority, in its discretion, to defer
payment of a participant's award into the Executive Deferred Compensation Plan
until the participant retires or otherwise terminates employment, if the
Committee determines that payment of the award could result in the participant
receiving compensation in excess of the maximum amount deductible by the Company
for Federal income tax purposes.
ARTICLE 8. SALARY ADJUSTMENTS AND BENEFITS
8.01 SALARY ADJUSTMENT UPON ENTRY INTO THE UPP
The UPP is a variable compensation program whereby participants may earn
compensation based upon corporate, organizational, and individual performance.
New participants to the Plan are immediately administered on the appropriate
rate schedule for their assigned salary grade. This may reduce or eliminate
promotional increases, depending upon the person's pay position in the rate
range of the new salary grade. Subsequent salary treatment will depend upon
pay/performance relationships for their assigned grade.
8.02 SALARY CONVERSION UPON WITHDRAWAL FROM THE UPP
In unusual circumstances when it is necessary for an individual to be removed
from the Plan, the individual's base salary and target annual cash compensation
will be reviewed to ensure competitiveness with pay in the applicable labor
market and in the chemical industry for similar jobs when target levels of
performance are achieved. Should the removal from the Plan involve a reduction
in salary grade, base salary in the new salary grade will be selected based upon
the individual's applicable training and experience.
8.03 RELATIONSHIP TO BENEFITS AND OTHER COMPENSATION
The UPP award payout is considered in calculating the basis for other
compensation and benefits. For participants who are U. S.-based employees, base
salary, the actual UPP payout (if applicable), the actual APP payout (if
applicable), and the actual EPP payout (if applicable), are included in
calculating retirement benefits. For Participants who are non-U.S.-based
employees, generally retirement benefits are calculated using only base salary
plus amounts earned under the UPP, APP, and EPP; however, some countries have
different rules concerning the pay that must be counted in calculating
retirement benefits, and non-U.S. based employees should contact their human
resources representatives if they have questions. Base salary, the target UPP
award payout, the target APP award payout and the target EPP payout are included
in the basis for calculating the actual UPP payout (if applicable), the actual
APP payout (if applicable), the actual EPP payout (if applicable), life
insurance, long-term disability, termination allowance, miscellaneous expense
allowance, and foreign service premium. The base salary rate is the basis for
calculating short-term disability, vacation pay, holiday pay, personal absence
and field allowance.
ARTICLE 9. OTHER TERMS AND CONDITIONS
9.01 CLAIMS
No person shall have any legal claim to be granted an award under the Plan.
Except as may be otherwise required by law, payouts under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary. Plan payouts shall be payable from the general assets
of the Company and no participant shall have any claim with respect to any
specific assets of the Company.
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9.02 NO EMPLOYMENT RIGHTS
Neither the UPP nor any action taken under the UPP shall be construed as giving
any employee the right to be retained in the employ of the Company or to
maintain any participant's compensation at any level.
9.03 WITHHOLDING
For Participants who are U.S.-based employees, the Company shall have the power
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the participant's OASDI and MEDI obligation) required by law to be
withheld. For Participants who are non-U.S. based employees, the Company shall
have the power and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy all applicable foreign and
local taxes required by law to be withheld.
ARTICLE 10. ADMINISTRATION
10.01 POWER AND AUTHORITY OF THE COMMITTEE
The Committee shall have full power and authority to administer and interpret
the provisions of the Plan and to adopt such rules, regulations, agreements,
guidelines, and instruments for the administration of the Plan and for conduct
of its business as the Committee deems appropriate or advisable. The Committee
sets and interprets policy, confirms the individual participants in the UPP and
the amounts of variable pay under the UPP, establishes annual performance
measures and performance goals, certifies the extent to which performance goals
were satisfied under the Plan, and approves the UPP award amounts to
participants who are executive officers of the Company.
10.02 COMMITTEE'S DELEGATION OF AUTHORITY
The Committee shall have full power to delegate to any officer or employee of
the Company the authority to administer and interpret the procedural aspects of
the Plan, subject to the Plan's terms, including adopting and enforcing rules to
decide procedural and administrative issues.
10.03 AMENDING OR TERMINATING THE PLAN
By action of the Committee, the Plan may be amended, modified, suspended, or
terminated, in whole or in part, at any time for any reason.
ARTICLE 11. PLAN AUDIT
The Vice President, Human Resources, has responsibility for monitoring and
reporting on the administration and effectiveness of the Plan. The Vice
President's role is to provide independent, objective appraisal and guidance to
both the Committee and the CEO in the administration of the UPP. Each year, the
Vice President will provide a formal review to the Committee and the CEO on the
overall effectiveness of the UPP.
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