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EXHIBIT 10.05
THIRD AMENDED AND RESTATED
EASTMAN DIRECTORS' DEFERRED COMPENSATION PLAN
Preamble. The Third Amended and Restated Eastman Directors' Deferred
Compensation Plan is an unfunded, non-qualified deferred compensation
arrangement for non-employee members of the Board of Directors of Eastman
Chemical Company (the "Company"). Under the Plan, each Eligible Director is
annually given an opportunity to elect to defer payment of part of his or her
compensation for serving as a Director. This Plan originally was adopted
effective January 1, 1994, was amended and restated effective as of December 1,
1994 and as of May 2, 1996, and is further amended and restated effective as of
October 10, 1996.
Section 1. Definitions.
Section 1.1. "Account" means the Interest Account or the Stock Account.
Section 1.2. "Board" means the Board of Directors of the Company.
Section 1.3. "Change In Control" means a change in control of the Company
of a nature that would be required to be reported (assuming such event has
not been "previously reported") in response to Item 1(a) of a Current
Report on Form 8-K, as in effect on August 1, 1993, pursuant to Section 13
or 15(d) of the Exchange Act; provided that, without limitation, a Change
In Control shall be deemed to have occurred at such time as (i) any
"person" within the meaning of Section 14(d) of the Exchange Act, other
than the Company, a subsidiary of the Company, or any employee benefit
plan(s) sponsored by the Company or any subsidiary of the Company, is or
has become the "beneficial owner," as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly, of 25% or more of the combined voting
power of the outstanding securities of the Company ordinarily having the
right to vote at the election of directors; provided, however, that the
following will not constitute a Change In Control: any acquisition by any
corporation if, immediately following such acquisition, more than 75% of
the outstanding securities of the acquiring corporation ordinarily having
the right to vote in the election of directors is beneficially owned by all
or substantially all of those persons who, immediately prior to such
acquisition, were the beneficial owners of the outstanding securities of
the Company ordinarily having the right to vote in the election of
directors; or (ii) individuals who constitute the Board on January 1, 1994
(the "Incumbent Board") have ceased for any reason to constitute at least a
majority thereof, provided that: any person becoming a director subsequent
to January 1, 1994 whose election, or nomination for election by the
Company's shareowners, was approved by a vote of at least three-quarters
(3/4) of the directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director without objection to such
nomination) shall be, for purposes of the Plan, considered as though such
person were a member of the Incumbent Board; or (iii) upon approval by the
Company's shareowners of a reorganization, merger or consolidation, other
than one with respect to which all or substantially all of those persons
who were the beneficial owners, immediately prior to such reorganization,
merger or consolidation, of outstanding securities of the Company
ordinarily having the right to vote in the election of directors own,
immediately after such transaction, more than 75% of the outstanding
securities of the resulting corporation ordinarily having the right to vote
in the election of directors; or (iv) upon approval by the Company's
stockholders of a complete liquidation and dissolution of the Company or
the sale or other disposition of all or substantially all of the assets of
the Company other than to a subsidiary of the Company.
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Notwithstanding the occurrence of any of the foregoing, the Board of
Directors may determine, if it deems it to be in the best interest of the
Company, that an event or events otherwise constituting a Change in Control
shall not be so considered. Such determination shall be effective only if
it is made by the Board of Directors prior to the occurrence of an event
that otherwise would be or probably will lead to a Change In Control or
after such event if made by the Board of Directors a majority of which is
composed of directors who were members of the Board immediately prior to
the event that otherwise would be or probably will lead to a Change In
Control.
Section 1.4. "Committee on Directors" means the Committee on Directors of
the Board.
Section 1.5. "Common Stock" means the $.01 par value common stock of the
Company.
Section 1.6. "Company" means Eastman Chemical Company.
Section 1.7. "Deferrable Amount" means an amount equal to the sum of the
Eligible Director's cash compensation, including retainer, meeting fees,
and any other compensation otherwise payable in cash.
Section 1.8. "Eligible Director" means a member of the Board of Directors
of the Company who is not an employee of the Company or any subsidiary of
the Company.
Section 1.9. "Enrollment Period" means the period designated by the
Committee on Directors each year; provided however, that such period shall
end on or before December 31 of each year.
Section 1.10. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Section 1.11. "Interest Account" means the account established by the
Company for each Participant for compensation deferred pursuant to this
Plan and which shall bear interest as described in Section 4.1 below. The
maintenance of individual Interest Accounts is for bookkeeping purposes
only.
Section 1.12. "Interest Rate" means the monthly average of bank prime
lending rates to most favored customers as published in The Wall Street
Journal, such average to be determined as of the last day of each month.
Section 1.13. "Market Value" means the closing price of the shares of
Common Stock on the New York Stock Exchange on the day on which such value
is to be determined or, if no such shares were traded on such day, said
closing price on the next business day on which such shares are traded;
provided, however, that if at any relevant time the shares of Common Stock
are not traded on the New York Stock Exchange, then "Market Value" shall be
determined by reference to the closing price of the shares of Common Stock
on another national securities exchange, if applicable, or if the shares
are not traded on an exchange but are traded in the over-the-counter
market, by reference to the last sale price or the closing "asked" price of
the shares in the over-the-counter market as reported by the National
Association of Securities Dealers Automated Quotation System (NASDAQ) or
other national quotation service.
Section 1.14. "Plan" means this Third Amended and Restated Eastman
Directors' Deferred Compensation Plan.
Section 1.15. "Participant" means an Eligible Director who elects for one
or more years to defer compensation pursuant to this Plan.
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Section 1.16. "Stock Account" means the account established by the Company
for each Participant, the performance of which shall be measured by
reference to the Market Value of Common Stock. The maintenance of
individual Stock Accounts is for bookkeeping purposes only.
Section 1.17. "Valuation Date" means each business day.
Section 2. Deferral of Compensation. An Eligible Director may elect to defer
receipt of all or any portion of his or her Deferrable Amount to his or her
Interest Account and/or Stock Account. No deferral shall be made of any
compensation payable after termination of the Eligible Director's service on the
Board.
Section 3. Time of Election of Deferral. An Eligible Director who wishes to
defer compensation must irrevocably elect to do so during the applicable
Enrollment Period. The Enrollment Period shall end on or before December 31 of
the calendar year immediately preceding the year in which the Eligible
Director's applicable Deferrable Amount will be earned. Elections shall be made
annually.
Section 4. Hypothetical Investments.
Section 4.1. Interest Account. Amounts in a Participant's Interest Account
are hypothetically invested in an interest bearing account which bears
interest computed at the Interest Rate, compounded monthly.
Section 4.2. Stock Account. Amounts in a Participant's Stock Account are
hypothetically invested in units of Common Stock. Amounts deferred into a
Stock Account are recorded as units of Common Stock, and fractions thereof,
with one unit equating to a single share of Common Stock. Thus, the value
of one unit shall be the Market Value of a single share of Common Stock.
The use of units is merely a bookkeeping convenience; the units are not
actual shares of Common Stock. The Company will not reserve or otherwise
set aside any Common Stock for or to any Stock Account. The maximum number
of Common Stock units that may be hypothetically purchased by deferral of
compensation to Stock Accounts under this Plan is 80,000.
Section 5. Deferrals and Crediting Amounts to Accounts.
Section 5.1. Manner of Electing Deferral. An Eligible Director may elect to
defer compensation by executing and returning to the Committee on Directors
a deferred compensation form provided by the Company. The form shall
indicate: (i) the amount of Deferrable Amount to be deferred; and (ii) the
portion of the deferral to be credited to the Participant's Interest
Account and Stock Account, respectively. An election to defer compensation
shall be irrevocable following the end of the applicable Enrollment Period,
but the portion of the deferral to be credited to the Participant's
Interest Account and Stock Account, respectively, may be reallocated by the
Participant in the manner specified by the Committee on Directors or its
authorized designee through and including the business day immediately
preceding the date on which the deferred amount is credited to the
Participant's Accounts pursuant to Section 5.2.
Section 5.2. Crediting of Amounts to Accounts. Amounts to be deferred shall
be credited to the Participant's Interest Account and/or Stock Account, as
applicable, as of the date such amounts are otherwise payable.
Section 6. Deferral Period. Subject to Sections 9, 10 and 17 hereof, the
compensation which a Participant elects to defer under this Plan shall be
deferred until the Participant ceases to serve as a member of the Board. Any
such election shall be made during the applicable Enrollment Period on the
deferred compensation form referenced in Section 5 above. The payment of a
Participant's account shall be governed by Sections 8, 9, 10 and 17, as
applicable.
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Section 7. Investment in the Stock Account and Transfers Between
Accounts.
Section 7.1. Election Into the Stock Account. If a Participant elects to
defer compensation into his or her Stock Account, his or her Stock Account
shall be credited, as of the date described in Section 5.2, with that
number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount to be deferred into the Stock Account by the
Market Value of the Common Stock as of such date.
Section 7.2. Transfers Between Accounts. A Participant may direct that all
or any portion, designated as a whole dollar amount, of the existing
balance of one of his or her Accounts be transferred to his or her other
Account, effective as of (i) the date such election is made, if and only if
such election is made prior to the close of trading on the New York Stock
Exchange on a day on which the Common Stock is traded on the New York Stock
Exchange, or (ii) if such election is made after the close of trading on
the New York Stock Exchange on a given day or at any time on a day on which
no sales of Common Stock are made on the New York Stock Exchange, then on
the next business day on which the Common Stock is traded on the New York
Stock Exchange (the date described in (i) or (ii), as applicable, is
referred to hereinafter as the election's "Effective Date"). Such election
shall be made in the manner specified by the Committee on Directors or its
authorized designee during the period that begins on the third business day
following the public release of the Company's quarterly earnings report and
that ends on the last business day of the second calendar month following
the release of the Company's quarterly earnings report; provided, however,
that a Participant may only elect to transfer between his or her Accounts
if he or she has made no election within the previous six months to effect
an "opposite way" fund-switching (i.e., transfer out versus transfer in)
transfer into or out of the Stock Account or any other "opposite way"
intra-plan transfer or plan distribution involving a Company equity
securities fund which constitutes a "Discretionary Transaction" as defined
in Rule 16b-3 under the Exchange Act.
Section 7.3. Transfer Into the Stock Account. If a Participant elects
pursuant to Section 7.2 to transfer an amount from his or her Interest
Account to his or her Stock Account, effective as of the election's
Effective Date, (i) his or her Stock Account shall be credited with that
number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount elected to be transferred by the Market Value of
the Common Stock on the Valuation Date immediately preceding the election's
Effective Date; and (ii) his or her Interest Account shall be reduced by
the amount elected to be transferred.
Section 7.4. Transfer Out of the Stock Account. If a Participant elects
pursuant to Section 7.2 to transfer an amount from his or her Stock Account
to his or her Interest Account, effective as of the election's Effective
Date, (i) his or her Interest Account shall be credited with a dollar
amount equal to the amount obtained by multiplying the number of units to
be transferred by the Market Value of the Common Stock on the Valuation
Date immediately preceding the election's Effective Date; and (ii) his or
her Stock Account shall be reduced by the number of units elected to be
transferred.
Section 7.5. Dividend Equivalents. Effective as of the payment date for
each cash dividend on the Common Stock, the Stock Account of each
Participant who had a balance in his or her Stock Account on the record
date for such dividend shall be credited with a number of units of Common
Stock, and fractions thereof, obtained by dividing (i) the aggregate dollar
amount of such cash dividend payable in respect of such Participant's Stock
Account (determined by multiplying the dollar value of the dividend paid
upon a single share of Common Stock by the number of units of Common Stock
held in the Participant's Stock Account on the record date for such
dividend); by (ii) the Market Value of the Common Stock on the Valuation
Date immediately preceding the payment date for such cash dividend.
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Section 7.6. Stock Dividends. Effective as of the payment date for each
stock dividend on the Common Stock, additional units of Common Stock shall
be credited to the Stock Account of each Participant who had a balance in
his or her Stock Account on the record date for such dividend. The number
of units that shall be credited to the Stock Account of such a Participant
shall equal the number of shares of Common Stock, and fractions thereof,
which the Participant would have received as stock dividends had he or she
been the owner on the record date for such stock dividend of the number of
shares of Common Stock equal to the number of units credited to his or her
Stock Account on such record date.
Section 7.7. Recapitalization. If, as a result of a recapitalization of the
Company, the outstanding shares of Common Stock shall be changed into a
greater number or smaller number of shares, the number of units credited to
a Participant's Stock Account shall be appropriately adjusted on the same
basis.
Section 7.8. Distributions. Amounts in respect of units of Common Stock may
only be distributed out of the Stock Account by transfer to the Interest
Account (pursuant to Sections 7.2 and 7.4 or 7.10) or withdrawal from the
Stock Account (pursuant to Section 8, 9, 10, or 17), and shall be
distributed in cash. The number of units to be distributed from a
Participant's Stock Account shall be valued by multiplying the number of
such units by the Market Value of the Common Stock as of the Valuation Date
immediately preceding the date such distribution is to occur.
Section 7.9.Responsibility for Investment Choices. Each Participant is
solely responsible for any decision to defer compensation into his or her
Stock Account and to transfer amounts to and from his or her Stock Account
and accepts all investment risks entailed by such decision, including the
risk of loss and a decrease in the value of the amounts he or she elects to
defer into his or her Stock Account.
Section 7.10. Liquidation of Stock Account. Upon the date that a
Participant ceases to serve on the Board, the entire balance, if any, of
the Participant's Stock Account shall automatically be transferred to his
or her Interest Account. For purposes of valuing the units of Common Stock
subject to such a transfer, the approach described in Section 7.8 shall be
used.
Section 8. Payment of Deferred Compensation.
Section 8.1. Background. No withdrawal may be made from a Participant's
Account except as provided in this Section 8 and Sections 9, 10 and 17.
Section 8.2. Manner of Payment. Payment of a Participant's Account shall be
made in a single lump sum or annual installments, in the sole discretion of
the Committee on Directors. The maximum number of annual installments is
ten. All payments from the Plan shall be made in cash.
Section 8.3. Timing of Payments. Payments shall be made by the fifth
business day in March and shall commence in any year designated in the sole
discretion of the Committee on Directors, up through the tenth year
following the year in which the Participant ceases to be a member of the
Board for any reason, but in no event shall payment commence later than the
year the Participant reaches age 71.
Section 8.4. Valuation. The amount of each payment shall be equal to the
value, as of the preceding Valuation Date, of the Participant's Account,
divided by the number of installments remaining to be paid.
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Section 9. Payment of Deferred Compensation After Death. If a Participant dies
prior to complete payment of his or her Accounts, the balance of such Accounts,
valued as of the Valuation Date immediately preceding the date payment is made,
shall be paid in a single, lump-sum payment to: (i) the beneficiary or
contingent beneficiary designated by the Participant on forms supplied by the
Committee on Directors; or, in the absence of a valid designation of a
beneficiary or contingent beneficiary, (ii) the Participant's estate within 30
days after appointment of a legal representative of the deceased Participant.
Section 10. Withdrawals.
Section 10.1. Acceleration of Payment for Hardship. Upon written approval
from the Company's Vice President, Human Resources, with respect to
Participants other than executive officers of the Company, and by the
Compensation Committee, with respect to Participants who are executive
officers of the Company, and subject to the restrictions in the next two
sentences, a Participant, whether or not he or she is still employed by the
Company or any of its U.S. Subsidiaries, may be permitted to receive all or
part of his or her Accounts if the Company's Vice President, Human
Resources, or the Compensation Committee, as applicable, determines that an
emergency event beyond the Participant's control exists which would cause
such Participant severe financial hardship if the payment of his or her
Accounts were not approved. Any such distribution for hardship shall be
limited to the amount needed to meet such emergency.
Section 10.2. Payment to Individuals. Any participant in the Eastman
Executive Deferred Compensation Plan may at his or her discretion withdraw
at any time all or part of that person's account balance under the Plan;
provided, if this option is exercised the individual will forfeit to the
Corporation 10% of his or her account balance or $50,000, whichever is
less, and will not be permitted to participate in this plan for a period of
36 months from date any payment to a participant is made under this
section.
Section 10.3. Accelerated Payment. If under Eastman Executive Deferred
Compensation Plan one-half or more of the Participants or one-fifth or more
of the Participants with one-half or more of the value of all benefits owed
exercise their option for immediate distribution in any consecutive
six-month period this will trigger immediate payment to all Participants of
all benefits owed under the terms of the plan. Immediate payout under this
section will not involve reduction of the amounts paid to Participants as
set forth in section 10.2. Any individual that has been penalized in this
six-month period for electing immediate withdrawal will be paid that
penalty, and continuing participation will be allowed, if payout to all
Participants under this section occurs.
Section 10.4. Section 16. A Section 16 Insider may only receive a
withdrawal from his or her Stock Account pursuant to this Section 10 if he
or she has made no election within the previous six months to effect a
fund-switching transfer into the Stock Account or the Eastman Stock Fund of
the Eastman Investment Plan or the Savings and Investment Plan Appendix, or
any other "opposite way" intra-plan transfer into a Company equity
securities fund which constitutes a "Discretionary Transaction" as defined
in Rule 16b-3 under the Exchange Act. If such a distribution occurs while
the Participant is employed by the Company or any of its U.S. Subsidiaries,
any election to defer compensation for the year in which the Participant
receives a withdrawal shall be ineffective as to compensation earned for
the pay period following the pay period during which the withdrawal is made
and thereafter for the remainder of such year and shall be ineffective as
to any other compensation elected to be deferred for such year.
Section 11. Participant's Rights Unsecured. The benefits payable under this Plan
shall be paid by the Company each year out of its general assets. To the extent
a Participant acquires the right to receive a payment under this Plan, such
right shall be no greater than that of an unsecured general creditor of the
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Company. No amount payable under this Plan may be assigned, transferred,
encumbered or subject to any legal process for the payment of any claim against
a Participant. No Participant shall have the right to exercise any of the rights
or privileges of a shareowner with respect to units credited to his or her Stock
Account.
Section 12. No Right to Continued Service. Participation in the Plan shall not
give any Participant any right to remain a member of the Board.
Section 13. Statement of Account. Statements will be sent no less frequently
than annually to each Participant or his or her estate showing the value of the
Participant's Accounts.
Section 14. Deductions. The Company will withhold to the extent required by law
all applicable income and other taxes from amounts deferred or paid under the
Plan.
Section 15. Administration.
Section 15.1. Responsibility. Except as expressly provided otherwise
herein, the Committee on Directors shall have total and exclusive
responsibility to control, operate, manage and administer the Plan in
accordance with its terms.
Section 15.2. Authority of the Committee on Directors. The Committee on
Directors shall have all the authority that may be necessary or helpful to
enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the preceding sentence, the Committee on
Directors shall have the exclusive right: to interpret the Plan, to
determine eligibility for participation in the Plan, to decide all
questions concerning eligibility for and the amount of benefits payable
under the Plan, to construe any ambiguous provision of the Plan, to correct
any default, to supply any omission, to reconcile any inconsistency, and to
decide any and all questions arising in the administration, interpretation,
and application of the Plan.
Section 15.3. Discretionary Authority. The Committee on Directors shall
have full discretionary authority in all matters related to the discharge
of its responsibilities and the exercise of its authority under the Plan
including, without limitation, its construction of the terms of the Plan
and its determination of eligibility for participation and benefits under
the Plan. It is the intent that the decisions of the Committee on Directors
and its action with respect to the Plan shall be final and binding upon all
persons having or claiming to have any right or interest in or under the
Plan and that no such decision or action shall be modified upon judicial
review unless such decision or action is proven to be arbitrary or
capricious.
Section 15.4. Delegation of Authority. The Committee on Directors may
delegate some or all of its authority under the Plan to any person or
persons provided that any such delegation be in writing.
Section 15.5. Restriction on Authority of the Committee on Directors. Under
any circumstances where the Committee on Directors is authorized to make a
discretionary decision concerning a payment of any type under this Plan to
a member of such Committee, the member of the Committee who is to receive
such payment shall take no part in the deliberations or have any voting or
other power with respect to such decision.
Section 16. Amendment. The Board may suspend or terminate the Plan at any time.
In addition, the Board may, from time to time, amend the Plan in any manner
without shareowner approval; provided, however, that the Board may condition any
amendment on the approval of shareowners if such approval is necessary or
advisable with respect to tax, securities, or other applicable laws. No
amendment, modification, or termination shall, without the consent of a
Participant, adversely affect such Participant's accruals in his or her Accounts
as of the date of such amendment, modification, or termination.
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Section 17. Change in Control.
Section 17.1. Background. The terms of this Section 17 shall immediately
become operative, without further action or consent by any person or
entity, upon a Change in Control, and once operative shall supersede and
control over any other provisions of this Plan.
Section 17.2. Acceleration of Payment Upon Change in Control. Upon the
occurrence of a Change in Control, each Participant, whether or not he or
she is still a Director, shall be paid in a single, lump-sum cash payment
the balance of his or her Accounts as of the Valuation Date immediately
preceding the date payment is made. Such payment shall be made as soon as
practicable, but in no event later than 90 days after the date of the
Change in Control.
Section 17.3. Amendment On or After Change in Control. On or after a Change
in Control, no action, including, but not by way of limitation, the
amendment, suspension or termination of the Plan, shall be taken which
would affect the rights of any Participant or the operation of this Plan
with respect to the balance in the Participant's Accounts.
Section 17.4. Attorney Fees. The Corporation shall pay all reasonable legal
fees and related expenses incurred by a participant in seeking to obtain or
enforce any payment, benefit or right such participant may be entitled to
under the plan after a Change in Control; provided, however, the
participant shall be required to repay any such amounts to the Corporation
to the extent a court of competent jurisdiction issues a final and
non-appealable order setting forth the determination that the position
taken by the participant was frivolous or advanced in bad faith.
Section 18. Governing Law. The Plan shall be construed, governed and enforced in
accordance with the law of Tennessee, except as such laws are preempted by
applicable federal law.
Section 19. Successors and Assigns. This Plan shall be binding upon the
successors and assigns of the parties hereto.
Section 20. Compliance with SEC Regulations. It is the Company's intent that the
Plan comply in all respects with Rule 16b-3 of the Exchange Act, and any
regulations promulgated thereunder. If any provision of the Plan is found not to
be in compliance with such rule, the provision shall be deemed null and void.
All transactions under the Plan, including, but not by way of limitation, a
Participant's election to defer compensation or transfer Account balances under
Section 7 and hardship withdrawals under Section 10, shall be executed in
accordance with the requirements of Section 16 of the Exchange Act, as amended
and any regulations promulgated thereunder. To the extent that any of the
provisions contained herein do not conform with Rule 16b-3 of the Exchange Act
or any amendments thereto or any successor regulation, then the Committee may
make such modifications so as to conform the Plan to the Rule's requirements.
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