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EXHIBIT 10.05
EASTMAN CHEMICAL COMPANY
1995-1997 LONG-TERM PERFORMANCE SUBPLAN
OF THE 1994 OMNIBUS LONG-TERM COMPENSATION PLAN (as amended)
1. Background. Under Section 11 of the Eastman Chemical Company 1994
Omnibus Long-Term Compensation Plan (the "Plan"), the "Committee" (as
defined in the Plan), may, among other things, award shares of the $.01
par value common stock ("Common Stock") of Eastman Chemical Company (the
"Company") to "Employees" (as defined in the Plan), and such awards may
take the form of performance shares, which are contingent upon the
attainment of certain performance objectives during a specified period,
and subject to such other terms, conditions, and restrictions as the
Committee deems appropriate. The purpose of this 1995-1997 Long-Term
Performance Subplan (this "Subplan") is to set forth the terms of the
grant of performance shares specified herein, effective as of January 1,
1995 (the "Effective Date").
2. Definitions.
(a) The following definitions shall apply to this Subplan:
(i) "Actual Grant Amount" means the number of shares of Common Stock
to which a participant is entitled under this Subplan, calculated in
accordance with Section 6 of this Subplan.
(ii) "Award Payment Date" means the date the shares of Common Stock
covered by an award under this Subplan are delivered to a participant.
(iii) "Compared Group" means the Company and the companies in the Peer
Group.
(iv) "Maximum Deductible Amount" means the maximum amount deductible
by the Company under Section 162(a), taking into consideration the
limitations under Section 162(m), of the Internal Revenue Code of
1986, as amended, or any similar or successor provisions thereto.
(v) "Normal Grant Amount" means, with respect to any eligible
Employee, the number of shares of Common Stock specified on Exhibit A
hereto for the Salary Grade applicable to such Employee.
(vi) "Participation Date" means June 30, 1995.
(vii) "Peer Group" means the group of companies identified in Exhibit
B hereto, with any changes made by the Committee pursuant to Section 7
of this Subplan.
(viii) "Performance Period" means January 1, 1995 through December 31,
1997.
(ix) "TSR" means total return to shareowners, as reflected by the sum
of (A) change in stock price (measured as the difference between (I)
the average of the closing prices of a company's common stock on the
New York Stock Exchange, or of the last sale prices of such stock on
the Nasdaq Stock Market, as applicable, over the first 20 trading days
of the period for which such change is being measured and (II) the
average of such closing or last sale prices for such stock over the
final 20 trading days of the period for which such change is being
measured) plus (B) dividends declared, assuming reinvestment of
dividends, and expressed as a percentage return on a shareowner's
hypothetical investment.
(b) Any capitalized terms used but not otherwise defined in this
Subplan shall have the respective meanings set forth in the Plan.
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3. Administration. This Subplan shall be administered by the Committee.
The Committee shall have authority to interpret this Subplan, to prescribe
rules and regulations relating to this Subplan, and to take any other
actions it deems necessary or advisable for the administration of this
Subplan, and shall retain all general authority granted to it under
Section 3 of the Plan.
4. Eligibility. The Employees who are eligible to participate in this
Subplan are those Employees who, as of the Effective Date, have been
designated as "officers" of the Company for purposes of Section 16 of the
Exchange Act and those Employees designated by the Company's Chief
Executive Officer during 1995, which shall generally include Employees
who, as of the Effective Date or the Participation Date, held positions
with the Company considered by the Chief Executive Officer to carry
responsibilities and functions generally associated with a
vice-president-level position. Employees who are promoted during the
Performance Period to a position that would meet the above criteria, but
who do not hold such position as of the Participation Date, are not
eligible to participate in this Subplan; however, the ability of the Chief
Executive Officer under this Section 4 to designate eligible Employees at
any time during 1995 is intended to allow the participation of Employees
who, as of the Participation Date, held positions with the Company that
may not have been considered to carry responsibilities and functions
generally associated with a vice-president-level position but which
positions are or were evaluated during 1995 and determined by the Chief
Executive Officer to carry such responsibilities and functions.
5. Form of Awards. Subject to the terms and conditions of the Plan and this
Subplan, Awards under this Subplan shall be paid in the form of
unrestricted shares of Common Stock, except for conversions to cash and
deferrals under Section 9 of this Subplan, and except that if a
participant is entitled to any fraction of a share of Common Stock, as a
result of Section 10 of this Subplan or otherwise, then in lieu of
receiving such fraction of a share, the participant shall be paid a cash
amount representing the market value, as determined by the Committee, of
such fraction of a share at the time of payment.
6. Size of Awards. Exhibit A hereto shows by Salary Grade the Normal Grant
Amount. The Salary Grade to be used in calculating the size of any Award
to a participant under this Subplan shall be the higher of (a) the Salary
Grade applicable to the position held by the participant on the
Participation Date (or, in the case of participants whose employment is
terminated prior to the Participation Date, the Effective Date) and (b)
the Salary Grade assigned to such position during 1995 as a result of any
reevaluation of the Salary Grade appropriate for such position. The
Actual Grant Amount shall be determined by comparing the Company's TSR
during the Performance Period to the TSRs of the companies in the Peer
Group during the Performance Period. Specifically, the Company and each
company in the Peer Group shall be ranked by TSR, in descending order,
with the company having the highest TSR during the Performance Period
being ranked number one. If the Company ranks in the highest quartile of
the Compared Group on that basis, then the Normal Grant Amount shall be
multiplied by 2.0 (i.e., 200%) to determine the Actual Grant Amount; if in
the second highest quartile, then the Actual Grant Amount shall be equal
to the Normal Grant Amount; if in the third highest quartile, then the
Normal Grant Amount shall be multiplied by 0.5 (i.e., 50%) to determine
the Actual Grant Amount; and if in the lowest quartile, then the Actual
Grant Amount shall be 0 and no shares of Common Stock shall be delivered
to participants under this Subplan. Notwithstanding the foregoing, if the
Peer Group produces fewer than 19 distinct TSRs (as a result of the
removal of a company from the Peer Group without substitution of a
replacement company therefor, as described in Section 7 of this Subplan),
then the Committee shall, in its sole discretion, determine the
appropriate means of calculating the Actual Grant Amount.
7. Composition of Peer Group. The members of the Peer Group identified in
Exhibit B hereto have been identified as companies currently relevant for
purposes of TSR comparisons under this Subplan. However, the Committee
shall have the authority, at any time and from time to time, to determine
that any member of the Peer Group is no longer appropriate for inclusion.
Circumstances that might require such a determination include, without
limitation, the following events: a company's common stock ceasing to be
publicly traded on an exchange or on the Nasdaq Stock
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Market; a company's being a party to a significant merger, acquisition, or
other reorganization; or a company's ceasing to operate in the chemical
industry. In any case where the Committee determines that a particular
company is no longer appropriate for inclusion in the Peer Group, the
Committee may designate a replacement company, which shall then be
substituted in the Peer Group for the former member. In any such case, the
Committee shall have authority to determine the appropriate method of
calculating the TSR of such former and/or replacement company or companies,
whether by complete substitution of the replacement company (and disregard
of the former company) over the entire Performance Period or by pro rata
calculations for each company or otherwise. Alternatively, in any case
where the Committee determines that a particular company is no longer
appropriate for inclusion in the Peer Group, the Committee may remove such
company from the Peer Group without substituting a replacement company
therefor.
8. Preconditions to Receipt of an Award.
(a) Continuous Employment. Except as specified in paragraph (b)
below, to remain eligible for an Award under this Subplan, an eligible
Employee must remain continuously employed with the Company or a
Subsidiary at all times from the Participation Date (or the Effective
Date) through the Award Payment Date.
(b) Death, Disability, Retirement, or Termination for an Approved
Reason Before the Award Payment Date. If a participant's employment
with the Company or a Subsidiary is terminated due to death,
disability, retirement, or any approved reason prior to the Award
Payment Date, the participant shall receive, subject to the terms and
conditions of the Plan and this Subplan, an Award representing a
prorated portion of the Actual Grant Amount to which such participant
otherwise would be entitled, with the precise amount of such Award to
be determined by multiplying the Actual Grant Amount by a fraction,
the numerator of which is the number of full calendar months in the
Performance Period from the Effective Date through and including the
effective date of such termination, and the denominator of which is 36
(the total number of months in the Performance Period). If the
effective date of a participant's termination of employment occurs on
or after the last business day of a particular calendar month, then
such month shall be considered a full calendar month and shall be
counted in determining the numerator of the fraction described in the
preceding sentence; if the effective date of such termination occurs
prior to the last business day of a particular calendar month, then
such month shall not be so counted.
9. Manner and Timing of Award Payments.
(a) Timing of Award Payment. Except for deferrals under Sections
9(b) and 9(c), if any Awards are payable under this Subplan, the
payment of such Awards to eligible Employees shall be made as soon as
is administratively practicable after the end of the Performance
Period.
(b) Deferral of Award in Excess of the Maximum Deductible Amount. If
payment of the Award would, or could in the reasonable estimation of
the Committee, result in the participant's receiving compensation in
excess of the Maximum Deductible Amount in a given year, then such
portion (or all, as applicable) of the Award as would, or could in the
reasonable estimation of the Committee, cause such participant to
receive compensation from the Company in excess of the Maximum
Deductible Amount shall be converted into the right to receive a cash
payment, which shall be deferred until after the participant retires
or otherwise terminates employment with the Company and its
Subsidiaries.
(c) Election to Defer the Award. Any participant in this Subplan may
elect to defer the Award until after the participant retires or
otherwise terminates employment with the Company and its Subsidiaries
under the terms and subject to the conditions of the Eastman Executive
Deferred Compensation Plan, as the same now exists or may be amended
hereafter (the "EDCP"). If the participant chooses to defer the
Award, the Award shall be converted into the right to receive a cash
payment.
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(d) Award Deferral to the EDCP. In the event that all or any portion
of an Award is converted into a right to receive a cash payment
pursuant to Sections 9(b) or 9(c), an amount representing the Fair
Market Value, as of the date the Common Stock covered by the Award
otherwise would be delivered to the participant, of the Actual Grant
Amount (or the deferred portion thereof) will be credited to the Stock
Account of the EDCP, and hypothetically invested in units of Common
Stock. Thereafter, such amount shall be treated in the same manner as
other investments in the EDCP and shall be subject to the terms and
conditions thereof.
10. No Rights as Shareowner. No certificates for shares of Common Stock
shall be issued under this Subplan nor shall any participant have any
rights as a shareowner as a result of participation in this Subplan, until
the Actual Grant Amount has been determined and such participant has
otherwise become entitled to an Award under the terms of the Plan and this
Subplan. In particular, no participant shall have any right to vote or to
receive dividends on any shares of Common Stock under this Subplan, until
certificates for such shares have been issued as described above;
provided, however, that if payment of all or any portion of an Award under
this Subplan has been deferred pursuant to Section 9 of this Subplan or
otherwise, but such Award otherwise has become payable hereunder, then
during the period during which payment is deferred, the deferred Award
shall be credited with additional units of Common Stock, and (if
applicable) fractions thereof, based on any dividends declared on the
Common Stock, in accordance with the terms of the EDCP.
11. Application of Plan. The provisions of the Plan shall apply to this
Subplan, except to the extent that any such provisions are inconsistent
with specific provisions of this Subplan. In particular, and without
limitation, Section 11 (relating to performance shares), Section 16
(relating to nonassignability), Section 17 (relating to adjustment of
shares available), Section 18 (relating to withholding taxes), Section 19
(relating to noncompetition and confidentiality), Section 20 (relating to
regulatory approvals and listings), Section 22 (relating to the governing
law), Section 23 (relating to changes in ownership), Section 24 (relating
to changes in control), Section 25 (relating to no rights, title, or
interest in Company assets), and Section 26 (relating to securities laws)
shall apply to this Subplan.
12. Amendment. The Committee may, from time to time, amend this Subplan in
any manner.
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EXHIBIT A
EASTMAN CHEMICAL COMPANY LTPP GRANT TABLE
1995-1997 CYCLE
Normal Grant Amount
Original on File in
Personnel Resources
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EXHIBIT B
COMPANIES IN THE PEER GROUP
Air Products and Chemicals, Inc.
ARCO Chemical Company
Crompton & Knowles Corporation
Dow Chemical Company
E. I. du Pont de Nemours and Company
H. B. Fuller Company
The Geon Company
Georgia Gulf Corporation
Great Lakes Chemical Corporation
M. A. Hanna Company
Lyondell Petrochemical Company
Monsanto Company
Morton International, Inc.
Rohm and Haas Company
A. Schulman, Inc.
Sterling Chemicals Inc.
Union Carbide Corporation
Wellman, Inc.
Witco Corporation
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