1
EXHIBIT 10.11
EASTMAN ESOP EXCESS PLAN
Preamble. The Eastman ESOP Excess Plan is intended to be an unfunded,
non-qualified deferred compensation arrangement for a select group of management
or highly compensated employees of Eastman Chemical Company ("the Company") and
certain of its subsidiaries, under the Employee Retirement Income Security Act
of 1974, as amended, and shall be so interpreted. This Plan is designed to
provide benefits payable out of the Company's general assets where certain
benefits cannot be paid under the Eastman Employee Stock Ownership Plan (the
"ESOP") because of Internal Revenue Code Section 401(a)(17) and the provisions
of the ESOP that implement that Section. This Plan is adopted effective February
2, 1995.
Section 1. Definitions.
Section 1.1. "Account" means the Interest-Bearing Account or the Stock
Account.
Section 1.2. "Affiliated Company" has the same meaning as in the ESOP.
Section 1.3. "Board" means the Board of Directors of the Company.
Section 1.4. "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 stockholders, 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, (iii) upon approval by the
Company's stockholders 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. Notwithstanding the
occurrence of any of the foregoing, the Committee may determine, if it
deems it to be in the best
104
2
interest of the Company, that an event or events otherwise constituting a
Change In Control shall not to be so considered. Such determination shall
be effective only if it is made by the Committee 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 Committee 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 1.5. "Committee" means the Compensation and Management Development
Committee of the Board.
Section 1.6. "Common Stock" means the $.01 par value common stock of the
Company.
Section 1.7. "Company" means Eastman Chemical Company.
Section 1.8. "Effective Date" of an election means (i) the date such
election is made, 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.
Section 1.9. "Eligible Employee" means any Participant in the ESOP.
Section 1.10. "ESOP" means the Eastman Employee Stock Ownership Plan, as
the same now exists or may be amended hereafter.
Section 1.11. "ESOP Contribution Date" means the date, if any, on which the
Trustee of the ESOP receives the Company's contributions to the ESOP for a
particular Plan Year.
Section 1.12. "ESOP Payout Percentage" means the percentage amount of an
Eligible Employee's "Compensation" (as defined in the ESOP) to which such
Eligible Employee is entitled as an allocation, whether such allocation is
in the form of cash, Common Stock, or a combination thereof, under the ESOP
for a particular Plan Year.
Section 1.13. "Excess Compensation" means the excess, if any, of (1) an
Employee's "Participating Earnings," as specified in Section 2.11(a) of the
ESOP, over (2) the dollar amount referred to in Section 2.11(b) of the
ESOP.
Section 1.14. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Section 1.15. "Interest-Bearing Account" means the account established by
the Company for a Participant pursuant to Section 4, which shall bear
interest as described in Section 4. The maintenance of individual
Interest-Bearing Accounts is for bookkeeping purposes only.
Section 1.16. "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 1.17. "Market Value" means the closing price of the Common Stock on
the New York Stock Exchange as quoted in the New York Stock Exchange
Composite Transactions on the day for which the determination is to be
made, or if no sales of the Common Stock were made on that day, said
closing price on the next preceding business day on which the Common Stock
was traded.
Section 1.18. "Participant" means a person who in one or more years
receives an allocation pursuant to this Plan.
Section 1.19. "Plan" means this Eastman ESOP Excess Plan.
105
3
Section 1.20. "Plan Year" has the same meaning as in the ESOP.
Section 1.21. "Section 16 Insider" means a Participant who is, with respect
to the Company, subject to Section 16 of the Exchange Act.
Section 1.22. "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 1.23. "Valuation Date" means each business day.
Section 2. Allocations. For any Plan Year (including, without limitations, the
1994 Plan Year) in which an Eligible Employee has Excess Compensation, at such
time, if any, as the Company makes a contribution to the ESOP with respect to
such Plan Year, the Company shall credit to the Eligible Employee's Stock
Account under this Plan, an amount equal to the product of (1) the amount of
such Eligible Employee's Excess Compensation multiplied by (2) the ESOP Payout
Percentage.
Section 3. Description of Stock Account.
Section 3.1. General. Amounts in a Participant's Stock Account are
hypothetically invested in units of Common Stock. Such amounts 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 shares of Common Stock that may
be hypothetically purchased through allocations to Stock Accounts under
this Plan is 100,000.
Section 3.2. Manner of Crediting Stock Account. If a Participant is
entitled to an allocation pursuant to Section 2, effective as of the ESOP
Contribution Date, his or her Stock Account shall be credited with that
number of units of Common Stock, and fractions thereof, obtained by
dividing (1) the dollar amount of such allocation as described in Section 2
by (2) the Market Value of the Common Stock on the ESOP Contribution Date.
Section 3.3. Election Out of the Stock Account. If a Participant elects
pursuant to Section 4 to transfer an amount from his or her Stock Account
to his or her Interest-Bearing Account, effective as of the election's
Effective Date, (i) his or her Interest-Bearing 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
election's Effective Date; and (ii) his or her Stock Account shall be
reduced by the number of units elected to be transferred.
Section 3.4. 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 the 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.
Section 3.5. 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.
106
4
Section 3.6. 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 3.7. Distributions. Amounts in respect of units of Common Stock
shall be distributed in cash in accordance with Sections 5, 6, 7 and 15.
For purposes of a distribution pursuant to Sections 5, 6, 7 and 15, 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. Pending the complete distribution of the
Stock Account of a Participant who has terminated his or her employment
with the Company or any of its Affiliated Companies, the Participant's
Stock Account shall continue to be credited with additional units of Common
Stock pursuant to Sections 3.4, 3.5 and 3.6.
Section 3.8. Special Provision for Section 16 Insiders. The Stock Account
of a Section 16 Insider is not transferable by him or her to any other
person or entity other than by will or the laws of descent and
distribution. The designation of a beneficiary by a Section 16 Insider does
not constitute a transfer for this purpose.
Section 4. Transfers to Interest-Bearing Account.
Section 4.1. General. Each Participant who has become a "Qualified
Participant" under Article 9 of the ESOP, or any successor provisions
thereto, may direct that an amount determined under Section 4.2 be
transferred from the Participant's Stock Account to his or her
Interest-Bearing Account at such time or times as such Participant could
make a diversification election pursuant to Article 9 of the ESOP, or any
successor provisions thereto. Amounts in a Participant's Interest-Bearing
Account are hypothetically invested in an account which bears interest
computed at the Interest Rate, compounded monthly.
Section 4.2. Amount of Transfer. A Participant who is a Qualified
Participant under the ESOP may direct the Plan to transfer from the
Participant's Stock Account to the Participant's Interest-Bearing Account,
a dollar amount equal to the value of the same portion (or all, if
applicable) of the total number of units credited to the Participant's
Stock Account as the portion of the total number of shares of "Employer
Securities" treated as acquired after 1986 which the Participant could
direct the ESOP to distribute pursuant to Article 9 of the ESOP, or any
successor provisions thereto; provided, however, that if a Participant does
not transfer to the Interest-Bearing Account the full number of units
eligible for transfer in a given year, then such untransferred units may be
carried forward and eligible for transfer in future years using
substantially the same methodology as is used for carry forward of unused
shares eligible for diversification under Article 9 of the ESOP, or any
successor provisions thereto.
Section 4.3. Manner of Directing Transfer. A Participant's election to
transfer under this Section 4 shall be provided to the Company's Vice
President, Human Resources, during the same period during which any
diversification election pursuant to Article 9 of the ESOP, or any
successor provisions thereto, must be provided and shall be in writing.
Notwithstanding the provisions of the ESOP, any such election may not be
modified or revoked, but shall be effective as of the election's Effective
Date. No amounts transferred from a Participant's Stock Account to a
Participant's Interest-Bearing Account may subsequently be transferred back
to the Participant's Stock Account.
Section 5. Payment of Accounts.
Section 5.1. Background. No withdrawal may be made from a Participant's
Accounts except as provided in this Section 5 and Sections 6, 7 and 15.
107
5
Section 5.2. Manner of Payment. Payment of a Participant's Accounts shall
be made in a single lump sum or installments, in the sole discretion of the
Company's Vice President, Human Resources, with respect to Participants
other than executive officers of the Company, and by the Committee, with
respect to Participants who are executive officers (which, as used herein,
includes any officers who are Section 16 Insiders as a result of their
positions) of the Company. The maximum number of installments is ten. All
payments from the Plan shall be made in cash.
Section 5.3. 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 Company's Vice President, Human Resources, with respect
to Participants other than executive officers of the Company, and by the
Committee, with respect to Participants who are executive officers of the
Company, up through the tenth year following the year in which the
Participant retires, becomes disabled, or for any other reason ceases to be
an employee of the Company or any of its Affiliated Companies, but in no
event later than the year the Participant reaches age 71.
Section 5.4. Valuation. The amount of each payment shall be equal to the
value, as of the preceding Valuation Date, of the Participant's Accounts,
divided by the number of installments remaining to be paid. If a
Participant's Accounts are to be paid in installments and the Participant
has a balance in both his or her Stock Account and his or her
Interest-Bearing Account at the time of the payment of an installment, the
amount that shall be distributed from each Account shall be proportional to
the value of the balance in each such Account as of the immediately
preceding Valuation Date.
Section 6. 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 the same person who would be
entitled to receive survivor benefits with respect to the Participant under the
ESOP.
Section 7. Withdrawals.
Section 7.1. 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
Committee, with respect to Participants who are executive officers of the
Company, a Participant, whether or not he or she is still employed by the
Company or any of its Affiliated Companies, may be permitted to receive all
or part of his or her Accounts if the Company's Vice President, Human
Resources, or the 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. If at the time of such
distribution for hardship a Participant has a balance in both his or her
Stock Account and his or her Interest-Bearing Account, then the amount to
be distributed from each Account shall be determined in accordance with the
principles described in Section 5.4.
Section 7.2. Payment to Individuals. Any participant in the Eastman ESOP
Excess Plan may at his or her discretion withdraw at any time all or part
of that person's account balance under the Plan. 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 7.3. Accelerated Payment. If under Eastman ESOP Excess Plan
one-half or more of the participants or one-fifth of the participants with
one-half of the value of all benefits owed exercise their option for
immediate distribution in a six month period then this will trigger
immediate payout to all participants of all benefits owed under the plans.
Immediate payout under this section will not involve reduction of the
amounts paid to participants as set forth in section 7.2. Any individual
that has been penalized in this six month period for electing immediate
withdrawal will be paid that penalty if payout to all participants under
this section occurs.
108
6
Section 8. Participant's Rights Unsecured. The benefits payable under this Plan
shall be paid by the Company 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 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 stockholder with respect to the units credited to his or her Stock Account.
Section 9. No Right to Continued Employment. Participation in this Plan shall
not give any employee any right to remain in the employ of the Company or any of
its Affiliated Companies. The Company and each employer Affiliated Company
reserve the right to terminate any Participant at any time.
Section 10. 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 11. Deductions. The Company will withhold to the extent required by law
all applicable income and other taxes with respect to amounts deferred or paid
under the Plan. Such withholding may, at the discretion of the Committee, be
deducted from sources outside of this Plan.
Section 12. Administration.
Section 12.1. Responsibility. Except as expressly provided otherwise
herein, the Committee shall have total and exclusive responsibility to
control, operate, manage and administer the Plan in accordance with its
terms.
Section 12.2. Authority of the Committee. The Committee 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 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 12.3. Discretionary Authority. The Committee 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 of the Plan that the decisions of the Committee
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 12.4. Authority of Vice President, Human Resources. Where expressly
provided for under Sections 4 and 6, the authority of the Committee is
delegated to the Company's Vice President, Human Resources, and to that
extent the provisions of Section 11.1 through 11.3 above shall be deemed to
apply to such Vice President.
Section 12.5. Delegation of Authority. The Committee may provide for an
additional delegation of some or all of its authority under the Plan to any
person or persons provided that any such delegation be in writing.
Section 13. Amendment. The Committee may suspend or terminate the Plan at any
time, and may, from time to time, amend the Plan in any manner. However, 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.
109
7
Section 14. 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 15. Change In Control.
Section 15.1. Background. The terms of this Section 15 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 15.2. 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 employed by the Company or any of its Affiliated Companies,
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 15.3. 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 15.4. 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 16. Compliance with Securities Laws. The hypothetical units of Common
Stock provided for by this Plan are intended not to constitute "derivative
securities" for purposes of Rule 16a-1(c), or any successor provisions, under
the Exchange Act. To the extent any provision of this Plan or action by the
Committee would cause such units to constitute "derivative securities" for those
purposes, it shall be deemed to be null and void, to the extent permitted by law
and deemed advisable by the Committee.
The Committee may, from time to time, impose additional restrictions upon
Participants as it deems necessary, advisable or appropriate in order to comply
with applicable federal and state securities laws. All such restrictions shall
be accomplished by way of written administrative guidelines adopted by the
Committee.
Section 17. Successors and Assigns. This Plan shall be binding upon the
successors and assigns of the parties hereto.
110