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Exhibit 10.18
EASTMAN CHEMICAL COMPANY
BENEFIT SECURITY TRUST
THIS TRUST AGREEMENT is made this 24th day of December, 1997, by and
between Eastman Chemical Company ("Company"), and Wachovia Bank, N.A., as
Trustee ("Trustee").
W I T N E S S E T H:
WHEREAS, Company has adopted certain nonqualified deferred
compensation plans and severance agreements listed on Appendix A attached
hereto and made a part hereof (collectively, the "Plans", and each such plan
and severance agreement may be referred to herein as a "Plan"); and
WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plans; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plans
as unfunded plans maintained for the purpose of providing deferred compensation
for a select group of management or highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of 1974;
NOW, THEREFORE, the parties do hereby establish this Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
(a) Company hereby deposits with Trustee in trust Fifteen Thousand
Dollars ($15,000.00), which shall become the principal of the Trust to be held,
administered and disposed of by Trustee as provided in this Trust Agreement.
(b) The Trust shall be irrevocable once executed by the Company
and Trustee, except as provided in Section 12 of this Trust Agreement.
(c) The Trust is intended to be a grantor trust, of which Company
is the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be
held separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries shall
have no preferred claim on, or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plans and this Trust Agreement
shall be mere unsecured contractual rights of Plan participants and their
beneficiaries against Company. Any assets held by the Trust will be subject to
the claims of Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) The funding of the Trust shall be governed by the following
terms and conditions.
(1) The Company may at any time or from time to time make
contributions to the Trust, provided that such contributions are
approved by the Board of Directors of the Company in a resolution
validly adopted by the Board that expressly authorizes such
contributions. Notwithstanding the foregoing, assets contributed
to the Trust (other than the assets described on Appendix C) must
be (i) in the opinion of the Trustee, liquid or easily liquidated;
and (ii) in the case of equity securities, traded on a national
securities exchange or on the NASDAQ National Market System. Debt
securities must be at least "investment grade", as that term is
commonly used by debt rating agencies.
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(2) Upon the creation of this Trust, the Company shall
convey to the Trustee a deed of trust with respect to those parcels
of real property described on Appendix C attached hereto (the "Deed
of Trust") and a warrant to purchase common stock of the Company
described on Appendix C attached hereto (the "Warrant"). Such Deed
of Trust and Warrant (together with any additional security
interests granted to the Trustee by the Company hereafter and any
security which is substituted for such Deed of Trust, Warrant or
future security interests) may be referred to herein as the
"Security Interests." The real property with respect to which the
Deed of Trust is granted and the unissued Company common stock
which is subject to issuance under the Warrant (together with any
additional real, personal or intangible property as to which the
Trustee is given a security interest and any real, personal or
intangible property which is substituted for the property described
on Appendix C), may be referred to herein as the "Underlying
Property".
(3) Within five (5) business days after the first to
occur of (i) the date the Company has knowledge of a Potential
Change in Control (and for this purpose, "knowledge" shall mean
that the Chief Executive Officer, Chief Financial Officer or
General Counsel has actual knowledge of such event); (ii) the date
the Company experiences a Change in Control; (iii) the date the
Company receives a Notice or Notices of Plan Payment Default that
are not postponed under Section 1(f)(4) pending the final
resolution of independent judicial or arbitration proceedings; or
(iv) the date the Trustee issues a final Notice of Plan Payment
Default following the final resolution of the independent judicial
or arbitration proceedings described in Section 1(f)(4), the
Company shall transfer to the Trustee cash or other liquid funds
acceptable to the Trustee in the amount of the Value of the Benefit
Obligations as most recently determined by the Trustee in its sole
and absolute discretion or its agents under Section 2(b) of this
Trust, as well as the Expected Trust Expenses, and immediately upon
such transfer the Trustee shall release and convey to the Company
any and all interest which the Trustee has in the Security
Interests and the Underlying Property. If the Company fails to
make such transfer of cash or other liquid funds within the period
prescribed by the preceding sentence, then the Trustee shall
exercise the Warrant and shall foreclose on the Deed of Trust and
any other Security Interests without further notice to the Company.
Each of the events described in clauses (i) through (iv) of the
first sentence of this paragraph shall be referred to herein as a
"Triggering Event."
(4) The Company shall have the right at any time to
purchase from the Trustee (i) the Warrant and/or any Company common
stock issued pursuant to the Warrant; and (ii) any other Underlying
Property then held by the Trustee for then fair market value of the
Warrant, Company common stock issued pursuant to the Warrant, or
other Underlying Property (as determined by the Trustee in its sole
discretion), as applicable, upon such terms and conditions as are
determined reasonable by the Trustee in its sole and absolute
discretion, provided, however, that the consideration paid to the
Trust shall either be cash or property which meets the conditions
of the second sentence of Section 1(e)(1).
(5) If the event which caused the Company to transfer
cash or other liquid funds to the Trustee was a Potential Change in
Control, and the conditions which created the Potential Change in
Control cease to exist (other than by consummation of a Change in
Control), then the Company shall have the right at any time
thereafter to cause the Trustee to return to the Company any and
all cash or other assets then held by the Trustee, upon the
reconveyance to the Trustee of the Security Interests in the
Underlying Property or by giving the Trustee security acceptable to
the Trustee in an amount not less than the Value of the Benefit
Obligations as most recently determined by the Trustee in its sole
and absolute discretion under Section 2(b) of this Trust, as well
as the Expected Trust Expenses.
(6) If the Company funds the Trust on a discretionary
basis (i.e., such funding was not required by a Triggering Event),
then, at any time when the aggregate fair market value (as
determined by the Trustee in its sole and absolute discretion) of
all property held by the Trustee (excluding the value of the Deed
of Trust, the Warrant and any other Security Interests) exceeds the
Value of the Benefit Obligations as most recently determined by the
Trustee in its sole and absolute
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discretion under Section 2(b) of this Trust, as well as the
Expected Trust Expenses, then upon the written request of the
Company the Trustee shall release and convey to the Company any and
all interest which the Trustee has in the Security Interests and
the Underlying Property. At any time thereafter, the Company shall
have the right at any time to cause the Trustee to return to the
Company (i) cash or other assets then held by the Trustee in an
amount equal to the lesser of (A) the current fair market value (as
determined by the Trustee in its sole and absolute discretion) of
the Security Interests previously released to the Company, or (B)
the fair market value (as determined by the Trustee in its sole and
absolute discretion) of the Security Interests previously released
to the Company at the time of their previous release to the
Company, in either case by reconveying to the Trustee the Security
Interests previously released to the Company; or (ii) any and all
cash or other assets then held by the Trustee, by giving the
Trustee security acceptable to the Trustee in an amount not less
than the Value of the Benefit Obligations as most recently
determined by the Trustee in its sole and absolute discretion under
Section 2(b) of this Trust, as well as the Expected Trust Expenses.
(f) Special Determinations Concerning Plan Payment Default.
(1) A "Claim of Plan Payment Default" means a written
notice from any Trust Beneficiary to the Trustee that (i) one or more
payment(s) have not been made on a timely basis to a participant or
beneficiary under any Plan; or (ii) if the Company or Trustee has
engaged a paying agent to make payments under one or more Plans, that
Company has not transferred funds to such paying agent on a timely
basis to enable the paying agent to make all payments then due under
the Plans for which the paying agent has responsibility.
(2) A "Notice of Plan Payment Default" means a written
notice from the Trustee to the Company given by facsimile not more
than ten (10) business days after its receipt of a Claim of Plan
Payment Default which the Trustee has determined to be accurate, or,
if the Trustee has not been able to determine the accuracy of such
claim, that appears to the Trustee to have been made in good faith,
stating that (i) the Company is not in compliance with the terms of
one or more of the Plans, specifying the Plan(s) involved, the
participants or beneficiaries involved, the payments not made on a
timely basis, and the actions necessary to cure such default, or (ii)
if the Company or the Trustee has engaged a paying agent to make
payments under one or more of the Plans, the Company has not
transferred funds to such paying agent on a timely basis to enable the
paying agent to make all payments then due under the Plans for which
the paying agent has responsibility, and the actions necessary to cure
such default.
(3) A "Plan Payment Default" shall mean (i) that one or
more payment(s) have not been made on a timely basis to a Participant
or beneficiary under any Plan; or (ii) if the Company or Trustee has
engaged a paying agent to make payments under one or more of the
Plans, that the Company has not transferred funds to such paying agent
on a timely basis to enable the paying agent to make all payments then
due under the Plans for which the paying agent has responsibility.
Notwithstanding the foregoing, a "Plan Payment Default" shall not be
deemed to occur if the Company makes an incorrect Plan payment to a
Participant or beneficiary, but the payment is at least ninety percent
(90%) of what is ultimately determined by the Trustee to be the
correct amount; provided, further that this exception shall no longer
apply with respect to a given Participant or beneficiary if the
Company makes three incorrect underpayments to such Participant or
beneficiary.
(4) Not more than ten (10) business days after the
Trustee's receipt of a Claim of Plan Payment Default which the Trustee
has determined to be accurate, or, if the Trustee has not been able to
determine the accuracy of such claim, that appears to the Trustee to
have been made in good faith, the Trustee shall issue by facsimile a
Notice of Plan Payment Default to the Company. The Company's
responses to such Notice shall be one of the following:
(A) If the Company does not respond by facsimile to such
Notice within five (5) business days after such Notice was
sent to and received by the Company, then the Trustee shall
exercise the Warrant and foreclose on the Deed of Trust and
any other Security Interests.
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(B) The Company may cure in full such Plan Payment
Default within five (5) business days after such Notice was
sent to and received by the Company, and in such event the
Trustee shall not exercise the Warrant or foreclose upon the
Security Interests unless and until the Trustee determines in
its sole discretion that the Company's actions did not
constitute a full and complete cure under the circumstances.
What constitutes a full and complete cure under the
circumstances shall be determined by the Trustee in its sole
discretion. If the Trustee determines in its sole discretion
that the Company's actions did not constitute a full and
complete cure under the circumstances, then the Trustee shall
exercise the Warrant and foreclose upon the Deed of Trust and
any other Security Interests without further notice to the
Company.
(C) The Company may respond to such Notice within five
(5) business days of receipt of such Notice by sending to the
Trustee by facsimile a notice signed by the Chief Executive
Officer, Chief Financial Officer or General Counsel of the
Company which (i) affirms that the Company has a good faith
belief that Plan Payment Default in question was permitted
under the applicable Plan; (ii) sets forth the basis for such
good faith belief; and (iii) represents that independent
judicial or arbitration proceedings are pending concerning the
Plan Payment Default, or will be instituted by the Company in
no less than thirty (30) calendar days, seeking to resolve
whether or not a Plan Payment Default was permitted under the
terms of the applicable Plan. If the Trustee receives such a
notice within such time period, then the Trustee shall not
exercise the Warrant or foreclose upon the Deed of Trust or
other Security Interests unless and until (i) the Trustee
determines in its sole and absolute discretion that the issue
of the Plan Payment Default has been finally resolved
adversely to the Company in such independent proceedings; (ii)
after making the determination referred to in clause (i), the
Trustee gives the Company by facsimile a final Notice of Plan
Payment Default; and (iii) such final Notice of Plan Payment
Default gives the Company a period of five (5) business days
after such final Notice was received by the Company to make a
full and complete cure of such Plan Payment Default. If the
Trustee determines in its sole and absolute discretion that
the Company's actions do not constitute a full and complete
cure under the circumstances, then the Trustee shall exercise
the Warrant and foreclose upon the Deed of Trust and any other
Security Interests without further notice to the Company.
(D) Notwithstanding paragraph (f)(4)(C) above, the
Trustee shall have the right at all times to determine in its
sole and absolute discretion the independence of the judicial
or arbitration proceeding described in paragraph (f)(4)(C)
above, the finality of such judicial or arbitration
proceeding, and the meaning of any such judicial or
arbitration proceeding. In addition, if the Trustee
determines that the issue of the Plan Payment Default has been
finally resolved adversely to the Company in such independent
proceedings, then in its final Notice of Plan Payment Default
to the Company the Trustee shall require that the Company pay
directly to the affected Trust Beneficiaries within five (5)
business days of the date the final Notice of Plan Payment
Default is received by the Company, the reasonable attorneys
fees and expenses incurred by such affected Trust
Beneficiaries in pursuing such judicial or arbitration
proceedings, and the Company's cure of the Plan Payment
Default shall not be full and complete unless such payment is
made to the affected Trust Beneficiaries within such period.
(g) As an alternative to exercising the Warrant or foreclosing
upon the Deed of Trust or other Security Interests under paragraphs (e) or (f)
above, the Trustee may sell or assign the Warrant, the Deed of Trust, and any
other Security Interests for adequate consideration (as determined by the
Trustee) to one or more persons other than the Company or any subsidiary of the
Company, provided that prior to such sale or assignment the Trustee (i) gives
the Company at least five (5) business days prior written notice of such sale
or assignment and offers the Company the opportunity to purchase the Warrant,
the Deed of Trust, or other Security Interests, as applicable, on the same
terms and conditions as are being offered by such proposed third party
purchaser, and (ii) gives the Company five (5) business days to accept such
offer in writing
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(h) Each participant in a Plan listed on Appendix A, and each
beneficiary of such participant (to the extent such beneficiary has become
entitled to payments from a Plan) shall be referred to herein as a "Trust
Beneficiary." Upon direction from the Company, the Trustee shall create (1) a
separate sub-trust for each Trust Beneficiary of the Class I and Class III
Plans listed on Appendix A, (2) a separate sub-trust for each of the Class II
Plans listed on Appendix A; and (3) a separate sub-trust (to be known as the
"Expense Sub-Trust") to hold Trust funds to be used to pay Trust administration
and Trustee fees and expenses. Each time the Company transfers property to the
Trust (other than a Security Interest), Company shall identify the specific
sub-trust to which such property shall be credited. Thereafter all income and
appreciation from such property shall also be credited to such sub-trust.
Notwithstanding the foregoing, to the extent the Trust is funded as a result of
a Triggering Event, then (A) if the then existing assets of the Trust, together
with the assets added as a result of a Triggering Event, are less than the
Value of the Benefit Obligations for all of the Plans as most recently
determined by the Trustee in its sole and absolute discretion under Section
2(b) of this Trust, together with the Expected Trust Expenses, then the assets
added as a result of the Triggering Event shall be allocated among the Plans
and the Expense Sub-Account in such a manner that the funding percentage of
each Plan and the Expense Sub-Account relative to each Plan's then Benefit
Obligations and the Expected Trust Expenses, and after such allocation, is as
equal as possible among the Plans and the Expense Sub-Account; and (B) if the
then existing assets of the Trust, together with the assets added as a result
of a Triggering Event, are more than the Value of the Benefit Obligations for
all of the Plans as most recently determined by the Trustee in its sole and
absolute discretion under Section 2(b) of this Trust, together with the
Expected Trust Expenses, then (i) the assets added as a result of the
Triggering Event shall first be allocated to the Class II Plans identified on
Appendix A (i.e., the defined benefit pension-type plans) until the funding
percentage for each such Class II Plan is 125% of the then Benefit Obligation
for each such Plan, (ii) the assets added as a result of the Triggering Event
shall next be allocated to the Expense Sub-Account until the funding percentage
for the Expense Sub-Account is 125% of the then Expected Trust Expenses, and
(iii) any remaining assets added as a result of the Triggering Event shall then
be allocated among all of the Plans identified on Appendix A and the Expense
Sub-Account in proportion to the Value of each Plan's then Benefit Obligation
and the Expected Trust Expenses.
Except as specifically otherwise provided in this Trust, (x)
all amounts credited to the sub-trust of an individual Trust Beneficiary of a
Class I or Class III Plan shall be used solely and exclusively to pay to such
Trust Beneficiary the benefits to which such persons are entitled under the
Plan(s), (y) all amounts credited to the sub-trust of a Class II Plan shall be
used solely and exclusively to pay the benefits owing to such Trust
Beneficiaries under such Plan(s); and (z) all amounts credited to the Expense
Sub-Account shall be used solely and exclusively to pay Trust administration and
Trustee fees and expenses (including fees and expenses of any agent of the
Trustee). The Trustee may commingle the property of the separate sub-trusts for
administration and investment purposes, provided that the Trustee maintains
sufficient records to identify the principal and income of the commingled
property which is allocable to each sub-trust, and further provided that under
no circumstances shall the property of a sub-trust be distributed to or used for
the benefit of any other sub-trust.
Section 2. Payments to Plan Participants and Their Beneficiaries.
(a) Company has appointed Fidelity Institutional Retirement
Services Company as the independent recordkeeper with respect to the Class I
and Class III Plans listed on Appendix A. Company has appointed Towers Perrin
as the independent actuary with respect to the Class II Plans listed on
Appendix A.
The Company may change the recordkeeper or actuary with respect to any
of the Plans before or after a Triggering Event, provided that in all cases
(before or after a Triggering Event), the Steering Committee described in
Section 12 of this Trust consents to the removal of the existing entity
performing such function and the appointment of the new entity performing such
function; and further provided that after a Triggering Event the Trustee also
consents to the removal of the existing entity performing such function and the
appointment of the new entity performing such function. The original or
successor recordkeeper may be referred to herein as "Recordkeeper", and the
original or successor independent actuary may be referred to herein as
"Actuary."
The fees and expenses of such agents shall be deemed to be
administrative fees and expenses for purposes of Section 9 of this Trust
Agreement.
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(b) Prior to a Triggering Event, the Company shall provide to the
Trustee and the Steering Committee at least once each calendar year, and more
frequently if requested by the Trustee, a report which shows (i) the aggregate
amount of the Benefit Obligation for each Plan; (ii) the Security Interests
held by the Trustee; and (iii) the fair market value of the aggregate assets
held by the Trust and allocable to each Plan (other than the Security Interests
or Underlying Property); provided, however, that this shall not be construed to
require the Company to contribute additional assets or additional Security
Interests to the Trust.
After a Triggering Event, the Company shall provide to the Trustee or
its agents such information as the Trustee or its agents may reasonably request
in order to determine the Benefit Obligations, the Value thereof, or any aspect
concerning the payment thereof. Once the Trustee or its agents has determined
the aggregate amount of the Benefit Obligations for each Plan, the Trustee
shall promptly provide to the Steering Committee a report with the items of
information described in clauses (i) through (iii) of the immediately preceding
paragraph.
The Company shall pay all of the expenses, including without limitation
attorneys' fees and expenses, incurred by the Trustee or its agents in
enforcing in good faith the duties and obligations of the Company as set forth
in this Section 2(b). The Recordkeeper and Actuary shall provide the Trustee
with any information within the knowledge of the Recordkeeper or the Actuary
concerning the Company, the Plans, the Trust Beneficiaries, the Benefit
Obligations, or the Value thereof, which is necessary for the Trustee to
discharge its duties hereunder.
(c) Prior to the date a Triggering Event occurs, the Company,
either directly or through a paying agent (if one has been appointed) shall
make all payments to the Plan participants and their beneficiaries in
accordance with the Plans. Once a Triggering Event occurs, the Trustee or the
paying agent (if one has been appointed) shall make payments to Plan
participants and their beneficiaries in accordance with such information as is
available from time to time to the paying agent, the Recordkeeper or the
Trustee, and which the Trustee or its agents deems reliable.
(d) The Trustee or the paying agent (if one has been appointed)
shall make provision for the reporting and withholding of any federal, state or
local taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plans and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by Company.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When
Company is Insolvent.
(a) Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if the Company is Insolvent. Company shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) Company is
unable to pay its debts as they become due, or (ii) Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of Company under federal and state law as set
forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in writing of
Company's Insolvency. If a person claiming to be a creditor of Company alleges
in writing to Trustee that Company has become Insolvent, Trustee shall
determine whether Company is Insolvent and, pending such determination, Trustee
shall discontinue payment of benefits to Plan participants or their
beneficiaries. In making the determination whether Company is Insolvent,
Trustee may employ an accounting firm (other than the auditors to the Company)
and such other agents as are necessary or appropriate in making such
determination. The fees and expenses of such agents shall be deemed to be fees
and expenses for purposes of Section 9 of this Trust. The Insolvency of any
subsidiary or affiliate of the Company will not in and of itself cause the
Company or any other subsidiary or affiliate to be deemed Insolvent.
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(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming to be a
creditor alleging that Company is Insolvent, Trustee shall have no duty to
inquire whether Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished to Trustee and that
provides Trustee with a reasonable basis for making a determination concerning
Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their beneficiaries to pursue their
rights as general creditors of Company with respect to benefits due under the
Plan(s) or otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after Trustee has determined that Company is not Insolvent (or
is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan(s) for the
period of such discontinuance, plus interest from the date each such payment
was due to the date actual payment is made (using an interest rate of eight
percent (8%) per annum, compounded monthly), less the aggregate amount of any
payments made to Plan participants or their beneficiaries by Company in lieu of
the payments provided for hereunder during any such period of discontinuance.
Section 4. Payments to Company.
(a) Except as provided in Section 3 (Company Insolvency), Section
12 (certain actions taken with consent of Trust Representatives) hereof, and
Section 4(b) below, Company shall have no right or power to direct Trustee to
return to Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan participants and their beneficiaries
pursuant to the terms of the Plans. This Section shall not prohibit or
diminish the right of the Company to substitute assets of equal fair market
value for any asset then held by the Fund, as permitted in Section 1(e) and
Section 5(b)(13).
(b) Notwithstanding paragraph (a) above, if the fair
market value of the assets (excluding the Deed of Trust, the Warrant, the
Underlying Property, and any other Security Interest) in each and every
sub-account under this Trust Agreement (including the Expense Sub-Account) is
more than 125% of the most recent Value of the Benefit Obligations of such
sub-account (and, in the case of the Expense Sub-Account, more than 125% of the
most recently determined Expected Benefit Expenses), then upon written request
by the Company, the Trustee shall deliver all or part of such excess (as
requested by the Company) of any sub-account(s) hereunder to the Company.
Section 5. Authority of Trustee.
In the management, care and disposition of the Trust Fund, the
following provisions shall apply:
(a) The Trustee shall have the sole authority to manage, acquire,
or dispose of the assets of the Trust. The Company may request that certain
general investment guidelines and diversification policies be followed with
regard to assets of the Trust, but the decision whether to follow and how to
implement such guidelines shall be made solely by the Trustee.
(b) The Trustee shall have the following powers, rights, and
duties in addition to those provided elsewhere in this Trust or by law, all of
which may be exercised without order or report to any court:
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(1) To receive and hold all contributions paid to it under the
Plans; provided, however, that the Trustee shall have no duty to determine that
the contributions received by it comply with the provisions of the Plans. The
Trustee shall be authorized at any time when the Company is obligated to make a
contribution to this Trust to use all legal means to compel the Company to make
such contribution, and the Company shall pay all of the expenses, including
without limitation attorneys' fees and expenses, incurred by the Trustee or its
agents in enforcing in good faith the obligation of the Company to make
contributions to this Trust when due.
(2) To have the authority to invest and reinvest assets of the
Trust in shares of common or preferred stock (including shares of common or
preferred stock of the Company, including the rights to acquire such common or
preferred stock), bonds, notes, debentures, short-term securities, mutual
funds, certificates of deposits, and other property, real or personal, of any
kind; to purchase and sell "put" and "call" options on publicly traded
securities; and to acquire, hold, manage, operate, sell, contract to sell,
grant options with respect to, convey, exchange, transfer, abandon, lease,
manage, and otherwise deal with respect to assets of the Trust.
(3) To borrow from anyone such amount or amounts of money as the
Trustee shall consider necessary to carry out the purpose of this Trust and for
that purpose to mortgage or pledge all or any part of the Trust.
(4) To retain in cash any portion of the Trust deemed appropriate
by the Trustee.
(5) To establish accounts in the commercial department of any bank
or other financial institution (including any financial institution which is
affiliated with the Company) for payment of benefits or other amounts under the
Plans.
(6) To make the payments from the Trust in accordance with the
terms of the Plans, as directed by Company, which directions are proper on
their face, without inquiring as to whether a payee is entitled to the payment
or as to whether a payment is proper, without liability for a payment made in
good faith without actual notice or knowledge of the changed condition or
status of the payee, and without obligation to search for or ascertain the
whereabouts of any payee or distributee of benefits from the Trust.
(7) To compromise, contest, arbitrate, settle, or abandon claims
and demands in favor of or against the Trust.
(8) To begin, maintain, defend, compromise, or settle any
litigation in connection with the Trust and the administration of the Trust.
(9) To have all rights of an individual owner, including the power
to give proxies, to join in or oppose (alone or jointly with others) voting
trusts, mergers, consolidations, foreclosure, reorganizations,
recapitalizations, or liquidations, and to exercise or sell stock subscription
or conversion rights.
(10) To hold securities or other property in the name of the
Trustee or its nominee or nominees, or in such other form as it determines
best, with or without disclosing the trust relationship, provided the records
of the Trustee shall indicate the actual ownership of such securities or other
property.
(11) To deposit securities with a clearing corporation; to hold the
certificates representing securities, including those in bearer form, in bulk
form and to merge such certificates into certificates of the same class of the
same issuer which constitute assets of other accounts or owners, without
certification as to the ownership attached; and to utilize a book-entry system
for the transfer or pledge of securities held by the Trustee or by a clearing
corporation, provided that the records of the Trustee shall indicate the actual
ownership of the securities and other property of the Trust.
(12) To employ, and to be protected in relying upon, such agents,
attorneys, actuaries, and accountants (including any such person who may be
retained by Company or the Plans) as are reasonably necessary in managing and
protecting the Trust.
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(13) Notwithstanding anything to the contrary in Section 5, (i) all
rights associated with assets of the Trust (including but not limited to
Company stock held by the Trust) shall be exercised by the Trustee or the
person designated by the Trustee, and shall in no event be exercisable by or
rest with Plan participants; and (ii) Company shall have the right at any time,
and from time to time in its sole discretion, to substitute assets of equal
fair market value for any asset held by the Trust; provided, however, that the
specific provisions of Section 1(e) (4), (5), and (6) shall override the
general provisions of this clause (ii).
(c) Notwithstanding anything to the contrary in this Section 5, at
no time before a Triggering Event occurs shall the Trustee be authorized or
permitted to sell, assign, convey, exchange, transfer, or abandon the Security
Interests or the Underlying Property to any person or entity other than (i) the
Company, or (ii) with the consent of the Company, to an affiliate of the
Company.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the Trust, net
of expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within sixty (60) days following the close of each
calendar year and within sixty (60) days after the removal or resignation of
Trustee, Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period from the
close of the last preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and investments
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities and other property held in the Trust at the end of such year
or as of the date of such removal or resignation, as the case may be.
Section 8. Special Provisions.
(a) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein,
provided however, that if an insurance policy is held as an asset of the Trust,
Trustee shall have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(b) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedures and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
(c) Should it become necessary for the Trustee (hereinafter called
the "Domiciliary Trustee" in this paragraph (c)) to hold property or otherwise
any action in any state in which the Domiciliary Trustee shall be unable to
qualify as Trustee, then and in that event, a bank or trust company designated
in writing by the Domiciliary Trustee shall serve as the ancillary Trustee in
such state.
(d) (i) The Company shall indemnify the Trustee, directly
from the Company's own assets (including the proceeds of any
insurance policy the premiums of which are paid from the
Company's own assets), from and against any and all claims,
demands, losses, damages, expenses (including, by way of
illustration and not limitation, reasonable attorneys' fees
and other legal and litigation costs), judgments and
liabilities arising from, out of, or in connection with the
administration of the Plans or this Trust, except when
determined to be due to the Trustee's gross negligence or
willful misconduct.
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(ii) The Trustee shall have no responsibility for: (a)
any condition which now exists or may hereafter be found to
exist in, under, or about any real estate investment of the
Trust or of a corporation, the stock of which is held as an
asset of the Trust; or (b) any violation of any applicable
environmental or health or safety law, ordinance, regulation
or ruling; or (c) the presence, use, generation, storage,
release, threatened release, or containment, treatment or
disposal of any hazardous or toxic substances or materials
including such situations at or activities on any investment
of the Trust or of a corporation, the stock of which is held
as an asset of the
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Trust. The Trustee is hereby authorized to pay from the Trust
all costs and expenses (including attorneys fees) relating to
or connected with any condition, violation, presence or other
situation referred to in (a), (b) and (c) above, and
notwithstanding anything to the contrary in this Trust
Agreement, to the extent permitted by law, Wachovia Bank, N.A.
shall be indemnified from the Trust from all claims, suits,
losses and expenses (including attorneys fees) arising
therefrom. The authority to pay from the Trust and the right
of indemnification set forth in the preceding sentence include
and relate to, without limitation, any claims, suits,
liabilities, losses and expenses (including attorneys fees)
arising from any matters relating to the existence of
petroleum including crude oil and any fraction thereof,
hazardous substances, pollutants, or contaminants as defined
in the Comprehensive Environmental, Responsibility,
Compensation, and Liability Act, as amended, 42 U.S.C. Section
9601 et seq., or hazardous wastes as defined in the Resource
Conservation and Liability Act, 42 U.S.C. Section 6906 et
seq., or as any of the foregoing terms or similar terms may be
defined in similar state environmental laws or subsequent
federal or state legislation of a similar nature which may be
enacted from time to time. This Section 8(d)(ii) shall
survive the sale or other disposition of any real estate
investment of the Trust and the termination of this Trust
Agreement. Nothing in this Section 8(d)(ii) shall be
construed to in any way limit the indemnification rights of
the Trustee provided for in this Section 8.
(iii) The indemnification provided the Trustee by this
Section 8(d) shall survive termination of this Agreement.
Section 9. Compensation and Expenses of Trustee.
Company shall pay all administrative and Trustee's fees and expenses,
including the cost of reasonable fiduciary liability insurance for the members
of the Steering Committee. If Company does not pay such fees and expenses on a
timely basis, Trustee may withdraw such amounts from the Trust and shall then
seek to recover such amounts from Company. If Trustee seeks recovery of such
amounts from Company, then Company shall pay all of the expenses, including
without limitation attorneys' fees and expenses, incurred by Trustee or its
agents in enforcing in good faith the obligations of Company as set forth in
this Section 9.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to Company,
which shall be effective one hundred eighty (180) days after receipt of such
notice unless Company and Trustee agree otherwise.
(b) With the consent of the Steering Committee, the Trustee may be
removed by Company on one hundred eighty (180) days notice or upon shorter
notice accepted by Trustee.
(c) If Trustee resigns within five (5) years after a Triggering
Event, Company, with the consent of the Steering Committee, shall apply to a
court of competent jurisdiction for the appointment of a successor Trustee or
for instructions.
(d) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor trustee. The transfer shall be completed within one-hundred eighty
(180) days after receipt of notice of resignation, removal or transfer, unless
Company extends the time limit.
(e) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraph(s) (a) or (b) of this section. If no
such appointment has been made, Trustee or any participant in a Plan may apply
to a court of competent jurisdiction for appointment of a successor or for
instructions. All expenses of Trustee in connection with the proceeding shall
be allowed as administrative expenses of the Trust.
Section 11. Appointment of Successor.
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(a) If Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, Company, with the consent of the Steering Committee, may
appoint any third party, such as a bank trust department or other party that
may be granted corporate trustee powers under state law, as a successor to
replace Trustee upon resignation or removal; provided, however, that such bank
or trust company must have shareholder equity of at least $1.0 billion. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of
any prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and
Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company only as follows:
(1) The Trustee obtains an opinion of legal counsel that
is independent of the Company (as determined by the Trustee in its
sole discretion) that such amendment is being made for the purpose of
and only to the extent reasonably necessary to preserve for the Trust
Beneficiaries the deferral of federal income taxation of amounts paid
under the Plans until the time such amounts are actually paid to the
Trust Beneficiaries; or
(2) The Trustee obtains the written approval of the
Steering Committee, as hereinafter defined. The initial members of
the Steering Committee, each of which shall be known as a "Trust
Representatives", shall be the persons listed on Appendix B attached
hereto and made a part hereof. A person shall cease to be a Trust
Representative as of the earliest of (A) the date such person ceases
to be entitled to any benefits from any of the Plans, (B) the date
such person delivers written notice to the Trustee that he or she no
longer wishes to serve as a Trust Representative hereunder, provided
that such Trust Representative shall simultaneously deliver to the
Trustee a written designation of a successor Trust Representative, (C)
the Trustee determines in its sole discretion that the Trust
Representative, because of mental or physical incapacity certified by
the Trust Representative's primary attending physician, is no longer
able to properly serve in such capacity manage his affairs; (D) the
date of the Trust Representative's death; or (E) the fifth anniversary
of the date of the Participant's termination of employment with or
retirement from the Company. A person may serve as a successor Trust
Representative only if such person is himself or herself a Trust
Beneficiary under this Trust and is actively employed by the Company
at the time of such appointment. A successor Trust Representative
shall take the place of and succeed to all of the powers and duties of
the designating Trust Representative (including the power to resign
and appoint his own successor Trust Representative). If at any time
there are fewer than ten (10) Trust Representatives then serving, then
the Trustee may apply to a court of competent jurisdiction for
appointment of one or more Trust Representatives; and all expenses of
Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
(b) In addition to consenting to amendments to this Trust
Agreement, the Trust Representatives may also consent to (i) the complete
revocation of this Trust; and (ii) any changes with respect to the Security
Interests.
(c) Unless sooner revoked as provided in Section 12(b) above, the
Trust shall not terminate until the date on which Plan participants and their
beneficiaries are no longer entitled to benefits pursuant to the terms of the
Plan(s). Upon termination of the Trust any assets remaining in the Trust shall
be returned to Company.
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(d) An action of the Steering Committee shall be valid only if
approved in writing by at least two-thirds of the members of the Steering
Committee who are serving at the time of such approval.
Section 13. Miscellaneous.
(a) Except to the extent expressly provided otherwise herein, any
action permitted or required to be taken by the Company under this Trust
Agreement shall be exercised by the management committee currently known as the
Benefit Plans Committee.
(b) Any provision of this Trust Agreement prohibited by law shall
be ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(c) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or
in equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(d) Definitions.
(1) "Actuarial Present Value" shall be determined by the Actuary,
using the interest rate, mortality tables, and other actuarial
assumptions used to determine the value of a lump sum distribution
under the tax-qualified defined benefit pension plan maintained by the
Company which covers the participants in one or more of the "Class II"
plans identified in Appendix A to the Trust, and if no such plan then
exists, then "actuarial present value" shall be determined using such
interest rates, mortality tables, and other actuarial assumptions which
the Actuary determines to be reasonable under the circumstances.
(2) "Actuary." See Section 2(a).
(3) "Benefit Obligations" means, collectively, (a) the obligations
owing to the employees and other beneficiaries under the "Class I"
plans identified in Appendix A to the Trust; (b) the obligations owing
to the employees and other beneficiaries under the "Class II" plans
identified in Appendix A to the Trust; and (c) the obligations that
would be owed to the employees and other beneficiaries covered by the
"Class III" agreements identified in Appendix A to the Trust if all of
the conditions for all payments were met.
(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 December 31, 1996,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
("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 19% or more
of the combined voting power of the outstanding securities of the
Company ordinarily having the right to vote in 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,
1997 (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, 1997 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
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(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
shareowners 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.
(5) "Claim of Plan Payment Default." See Section 1(f)(1).
(6) "Deed of Trust." See Section 1(e)(2).
(7) "Expected Trust Expenses" shall mean the Actuarial Present
Value of the Trust administration and Trustee fees and expenses
(including fees and expenses of any agent of the Trustee) which the
Trustee reasonably determines are expected to be incurred over the
life of the Trust.
(8) "Insolvent." See Section 3(a).
(9) "Notice of Plan Payment Default." See Section 1(f)(2).
(10) "Plan Payment Default." See Section 1(f)(3).
(11) A "Potential Change in Control" shall be deemed to have
occurred if (a) the Company enters into a definitive agreement, the
consummation of which would result in the occurrence of a Change in
Control, (b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a Change in Control, but only if the Trustee
determines, in its sole discretion, that such announcement is credible
in the sense that the person making the announcement has or appears to
have the reasonable ability to carry out the announced intention,
without regard for whether such person's ultimate success in bringing
about a Change in Control is reasonably likely, or (c) after the date
this Trust is created, any person (other than (i) the Company or any
of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company; or (v) a person which is eligible to use Schedule 13G to
report its ownership of Company stock to the SEC; provided, however,
that the exception under this clause (v) shall lapse as of the day
such person ceases to be eligible to use Schedule 13G for such
ownership reports) becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10% or more of
the combined voting power of the Company's then-outstanding
securities.
(12) "Recordkeeper." See Section 2(a).
(13) "Security Interest." See Section 1(e)(2)
(14) "Steering Committee." See Section 12(a)(2).
(15) "Triggering Event." See Section 1(e)(3).
(16) "Trust Beneficiary." See Section 1(h).
(17) "Trust Representative." See Section 12(a)(2).
(18) "Underlying Property." See Section 1(e)(2).
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(19) "Value" means, on any date of determination, (i) with respect
to Benefit Obligations described in clause (a) of the definition of
"Benefit Obligations" (which are defined contribution, individual
account plans), the aggregate amount owed to participants in such
Plans as of such date of determination; (ii) with respect to Benefit
Obligations described in clause (b) of the definition of "Benefit
Obligations" (which are defined benefit pension-type plans), the
Actuarial Present Value of the aggregate amount owed to participants
in such Plans as of such date of determination; and (iii) with respect
to Benefit Obligations with respect to the Plans described in clause
(c) of the definition of "Benefit Obligations" (which are individual
severance agreements), the aggregate amount that would be owed to the
employees and other beneficiaries covered by such agreements if all of
the conditions for all payments were met under such agreements as of
such date of determination.
(20) "Warrant." See Section 1(e)(2).
(e) The Trustee may from time to time request that the Chief
Executive Officer of the Company, the members of the Company's Benefit Plans
Committee, and the members of the Steering Committee provide specimen
signatures to the Trustee, and the Trustee shall not be required to take action
at the direction of any such parties until the specimen signature for the
applicable parties has been delivered.
(f) Notices to the Company under this Trust shall be made by
facsimile and U.S. mail to:
Vice President of Human Resources, Health, Safety, Environment and
Security
Eastman Chemical Company
100 North Eastman Road
Kingsport, Tennessee 37660
Facsimile (423) 229-1351
and
Senior Vice President and General Counsel
Eastman Chemical Company
100 North Eastman Road
Kingsport, Tennessee 37660
Facsimile (423) 229-4137
Notices to the Trustee under this Trust shall be made by facsimile and
U.S. mail to
Wachovia Bank, N.A.
Trust Services Division
Attn: Beverley H. Wood
301 North Main Street
Winston-Salem, North Carolina 27150-3099
Facsimile (910) 770-4059
The sender of a facsimile letter or other notice or message may show receipt of
such facsimile by the recipient by any reasonable means of proof.
(g) This Trust Agreement shall be governed by and constructed in
accordance with the laws of the State of North Carolina.
Section 14. Effective Date.
The effective date of this Agreement shall be the date first shown above.
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IN WITNESS WHEREOF, this Trust has been executed by the duly
authorized officers of the Company and the Trustee as of the date first shown
above.
EASTMAN CHEMICAL COMPANY
By: /s/ H. V. Stephens
------------------------------------
Title: Senior Vice President and
---------------------------------
Chief Financial Officer
Attest:
/s/ Gary R. Whitaker
- --------------------------
Assistant Secretary
WACHOVIA BANK, N.A., as Trustee
By: /s/ Beverley H. Wood
------------------------------------
Title: Senior Vice President
---------------------------------
Attest:
/s/ Donna L. Stern
- --------------------------
Assistant Secretary
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APPENDIX A
PLANS SUBJECT TO THIS TRUST AGREEMENT
Class I Plans
Executive Deferred Compensation Plan
ESOP Excess Plan
Class II Plans
Unfunded Retirement Income Plan
Excess Retirement Income Plan
Class III Agreements
Severance Agreement
(Provided to Wachovia)
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APPENDIX B
INITIAL TRUST REPRESENTATIVES
WHO ARE MEMBERS OF STEERING COMMITTEE
(NAMES HAVE BEEN PROVIDED TO WACHOVIA)
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APPENDIX C
SECURITY INTERESTS AND UNDERLYING PROPERTY
(SEE ATTACHED DEED OF TRUST AND WARRANT)
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