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EASTMAN CHEMICAL COMPANY
EASTMAN PERFORMANCE PLAN
(AMENDED AND RESTATED EFFECTIVE MARCH 4, 1998)
ARTICLE 1. INTRODUCTION
The Eastman Performance Plan, as set forth in this document, has been approved
by the Board of Directors of Eastman Chemical Company (the "Company") as a
variable compensation program which provides eligible employees with tangible
recognition for their contributions to the success of the Company. The Eastman
Performance Plan is also intended to secure the full deductibility of Plan
Payouts to Covered Employees, and all cash compensation payable hereunder to
such persons is intended to qualify as "performance based compensation", as
described in Section 162(m) of the Internal Revenue Code of 1986, as amended.
The Company's Board of Directors is responsible for approving the declaration of
Plan Payouts under this Plan each year, except for Plan payouts to Covered
Employees, which shall be approved by the Compensation Committee. No declaration
of Plan Payout by the Board or the Compensation Committee for any given year
shall commit the Board or the Compensation Committee to any given level of Plan
Payout in future years.
ARTICLE 2. DEFINITIONS
2.01 Board. The Board of Directors of the Company.
2.02 Buffer Employees. Buffer Employee shall refer to those individuals
hired by the Company on a trial basis for a maximum of twelve (12) months, to
work on either a full-time or part-time schedule.
2.03 Capital. Capital shall designate the funds invested in the Company
through either debt or equity, including funds loaned to the Company from
financial institutions or through the issuance of bonds, debentures or other
private debt instruments, plus the shareholders' cumulative investment in the
Company through the ownership of all outstanding shares of all classes of stock.
2.04 Code. The Internal Revenue Code of 1986, as amended.
2.05 College Cooperative Student. College Cooperative Student shall refer to
an employee who is a college student pursuing studies of interest to the Company
and who generally works a full-time schedule on an alternate work/school block
basis.
2.06 Company. Eastman Chemical Company or its corporate successors.
Notwithstanding the foregoing, whenever reference is made in this Plan to "the
Company" in the context of financial performance, e.g., "the Company's capital
debt", the "Company" shall mean Eastman Chemical Company and all of its
affiliates that are included on its consolidated financial statements.
2.07 Compensation. For purposes of this Eastman Performance Plan,
Compensation shall have that meaning ascribed thereto under Section 2.11 of the
ESOP.
2.08 Compensation Committee. The Compensation and Management Development
Committee of the Board, or such other committee designated by the Board,
authorized to administer the Plan as provided herein. The Committee shall
consist of not less than two members, each of whom shall be an "outside
director" as that term is used in Code Section 162(m) and the regulations
promulgated thereunder.
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2.09 Cost of Capital. The Cost of Capital reflects the cost of debt and the
cost of equity, expressed as a percentage reflecting the percentage of interest
charged on debt and the percentage of expected return on equity.
2.10 Covered Employee. An individual defined in Code Section 162(m) (3).
2.11 Earnings from Continuing Operations. Earnings from Continuing
Operations shall be defined as the total sales of the Company minus the costs of
all operations of any nature used to produce such sales, including taxes, plus
after-tax interest associated with the Company's capital debt.
2.12 Eastman ESOP Excess Plan. The Eastman ESOP Excess Plan, a non-qualified
deferred compensation plan, including any amendments which may from time to time
be adopted thereto.
2.13 Eastman Investment Plan or EIP. The Eastman Investment Plan, a
qualified savings plan under Sections 401(a) and 401(k) of the Code, including
any amendments which may from time to time be adopted thereto.
2.14 Eastman Stock Ownership Plan or ESOP. The Eastman Stock Ownership Plan,
a qualified employee stock ownership plan under Sections 401(a) and 4975 of the
Code, including any amendments which may from time to time be adopted thereto.
2.15 Eligible Employee. Eligible Employees shall be all those individuals
who meet the eligibility criteria set forth under Article 3; provided however,
that nonresident aliens working outside of the United States shall not be
defined as Eligible Employees for the purposes of this Plan.
2.16 General Payout Table. The General Payout Table shall be that Table set
forth under Section 4.04 providing for the correlation between the Performance
Indicator and the Payout Basis.
2.17 Limited Service Employee. Limited Service Employee shall refer to any
individual hired by the Company for the specific purpose of meeting needs of
Nine Hundred (900) hours or less in any consecutive twelve (12) month period and
who is designated as a Limited Service Employee when hired.
2.18 Participating Affiliates. Participating Affiliates shall signify all
those companies or organizations which from time to time accept the provisions
of the Plan as applying to the employees of such company or organization.
2.19 Participating Earnings. Participating Earnings for a given Performance
Year shall be an Eligible Employee's Participating Earnings set forth in
Appendix A for such Performance Year.
2.20 Payout Basis. The Payout Basis shall signify the applicable percentage
set forth in accordance with the General Payout Table contained in Section 4.04.
2.21 Performance Indicator. The Performance Indicator shall mean the Return
on Capital minus the Cost of Capital. Such calculation shall be expressed as a
percentage, which shall be calculated to the third place after the decimal point
(i.e., xx.xxx%), and then rounded to the second place after the decimal point
(i.e., xx.xx%).
2.22 Performance Year. The Performance Year shall be the calendar year,
running from January 1 through December 31, with respect to which the financial
performance of the Company shall be determined.
2.23 Plan. The Eastman Performance Plan.
2.24 Plan Payout. The Plan Payout shall consist of those monies to which the
Eligible Employee shall be entitled in accordance with the provisions of this
Plan.
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2.25 Regular Full-Time Employee. Regular Full-Time Employee shall refer to
those individuals who are defined as such on the payrolls of the Company or a
Participating Affiliate and who work a regular schedule of:
(a) 40 or more hours per week (or shorter time periods where
required by law, by Company needs, or by the employee's
health); or
(b) Alternative work schedules such as alternating 36 and 48 hour
workweeks comprised of 12-hour days.
2.26 Regular Part-Time Employee. Regular Part-Time Employee shall refer to
those individuals who are defined as such on the payroll of the Company or a
Participating Affiliate, who work a regular schedule of less than 40 hours per
week, and who are not defined as Regular Full-Time Employees under Section 2.25.
2.27 Return on Capital. The Return on Capital shall mean the return produced
by funds invested in the Company and shall be defined as Earnings from
Continuing Operations, as defined in Section 2.11, divided by the Average
Capital Employed. Average Capital Employed shall be derived by adding the
Company's capital debt plus equity at the close of the last day of the year
preceding the Performance Year, to the Company's capital debt plus equity at the
close of the last day of the present Performance Year, with the resulting sum
being divided by two. Capital debt is defined as the sum of Borrowing by the
Company Due Within One Year and Long-Term Borrowing, as designated on the
Company's balance sheet. The resulting ratio shall be multiplied by One Hundred
(100) in order to convert such to a percentage. Such percentage shall be
calculated to the third place after the decimal point (i.e., xx.xxx%), and then
rounded to the second place after the decimal point (i.e., xx.xx%).
2.28 Special Program Employee. Special Program Employee shall refer to a
high school study-work student, a drafting trainee employed to work one quarter
or semester, a clerical assistant trainee hired to work for one quarter or
semester, a summer technical employee, a visiting scientist, or a normal
temporary employee hired for a limited period.
2.29 Termination Allowance Plan or TAP. Termination Allowance Plan or TAP
shall mean the Termination Allowance Plan adopted by the Company effective
January 1, 1994, and as amended thereafter from time to time.
ARTICLE 3. ELIGIBILITY
3.01 BASIC ELIGIBILITY
All Regular Full-Time Employees and Regular Part-Time Employees of Eastman
Chemical Company and any other Participating Affiliates as may from time to time
participate under this Plan, are eligible to receive a Plan Payout as described
herein if they:
(a) Meet all of the following requirements;
(i) Are employed by Eastman Chemical Company or one of
the Participating Affiliates on December 31 of the
Performance Year; and
(ii) Receive Participating Earnings with respect to the
Performance Year; and
(iii) Are living at 11:59 p.m. on the last scheduled
workday for such Employee during the Performance Year
(e.g., if an Employee regularly works a Monday to
Friday shift, his last scheduled workday for the 1996
Performance Year would be Tuesday, December 31,
1996);
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or
(b) Meet the requirements of Section 3.02.
3.02 SPECIAL ELIGIBILITY
Regular Full-Time Employees and Regular Part-Time Employees who are not actively
employed with the Company or a Participating Affiliate as of December 31 of the
Performance Year are eligible to participate under the provisions of this Plan
provided that they meet one of the following criteria:
(a) Such employee has retired in accordance with the Eastman
Retirement Assistance Plan on or after February 1 of the
Performance Year; or
(b) Such employee has exhausted Short-Term Disability benefits
during the Performance Year and:
(i) Is approved for benefits under the Eastman Long-Term
Disability Plan; or
(ii) Is not approved for benefits under the Eastman
Long-Term Disability Plan and is terminated by the
Company due to lack of prescribed work; or
(c) Such employee's employment with the Company was terminated
during the Performance Year and as a result of such
termination the employee becomes entitled to a Termination
Allowance Benefit under the Company's Termination Allowance
Plan; or
(d) All of the following conditions are met: (i) an employee's
employment with the Company is terminated during the
Performance Year under a layoff as defined in Section 4.01 of
TAP, a special separation as defined in Section 4.02 of TAP,
or a divestiture as defined in Section 4.03 of TAP; (ii) such
employee does not become entitled to a Termination Allowance
Benefit under TAP; and (iii) management of the Company
nevertheless resolves in writing that such employee shall be
entitled to participate in the Performance Plan for such
Performance Year upon meeting such conditions as management
shall determine in its sole discretion. For this purpose,
"management of the Company" shall mean any of the following:
the Board of Directors of the Company, a committee of the
Board; a committee of the Company responsible for benefits
plans oversight; or an officer of the Company; or
(e) Such employee is (i) paid on a United States-based salary
structure, and (ii) is temporarily employed with a
non-participating affiliate of the Company and serving outside
the borders of the United States at the direction or request
of the Company or any Participating Affiliate; or
(f) Such employee's employment with the Company was terminated
during the Performance Year in order to accompany or follow
their Eastman employee spouse who is transferred to a company
unit or subsidiary or affiliated company in a different
geographic area which is not a Participating Affiliate.
If an employee meets the requirements of this Section 3.02 for a given
Performance Year but is not eligible for an allocation under the ESOP for such
Performance Year (as determined under the ESOP), then such employee shall
receive the entire amount of his individual Plan Payout, as calculated under
Section 4.06(a), in cash, and no contribution shall be made to the ESOP or
Eastman ESOP Excess Plan for the benefit of such individual.
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3.03 TRANSFER INTO PLAN
Employees who transfer to the Company during the course of any Performance Year
from a subsidiary or affiliated company which is not a Participating Affiliate
in the Plan will be eligible for the Plan Payout payable for the Performance
Year if they satisfy the eligibility requirements of Section 3.01 or 3.02 above.
Earnings and allowances received from such subsidiary or affiliated company are
not included in Compensation or Participating Earnings.
3.04 TRANSFER FROM PLAN
Employees who are transferred during any Performance Year from the Company to
employment with a subsidiary or affiliated company which is not a Participating
Affiliate will qualify for the Plan Payout payable for that Performance Year.
However, earnings and allowances received from such subsidiary or affiliated
company are not included in Compensation or Participating Earnings.
3.05 EXCLUSIONS
Limited Service Employees, Special Program Employees, College Cooperative
Employees, Buffer Employees and all other employees of the Company and
Participating Affiliates not defined as Regular Full-Time Employees or Regular
Part-Time Employees are not eligible to receive a Plan Payout as authorized
herein unless reclassified before December 31 of the Performance Year into a
class of employees eligible to receive a Plan Payout in accordance with Sections
3.01 and 3.02. For such reclassified employees, except those employees who were
classified as Limited Service Employees prior to such reclassification, earnings
before reclassification are included in Compensation or Participating Earnings.
3.06 PARTICIPATION OF RECENTLY HIRED EMPLOYEES
Notwithstanding any language to the contrary contained herein, during the
Performance Year in which an Eligible Employee is first hired by the Company or
by a Participating Affiliate, and the next Performance Year, Eligible Employees
shall receive allocations of the Plan Payout, as follows. For the Performance
Year of the Eligible Employee's date of hire, the Eligible Employee shall
receive an allocation equal to Twenty-Five Percent (25%) of the Eligible
Employee's total Plan Payout as calculated under Section 4.06(a). For the first
full Performance Year after the Eligible Employee's date of hire, the Eligible
Employee shall receive an allocation equal to Fifty Percent (50%) of that
Eligible Participant's total Plan Payout as calculated under Section 4.06(a).
Such allocation made shall be paid entirely in cash pursuant to the provisions
of Section 5.01(b). During the Performance Year in which the Eligible Employee
is first hired and the next succeeding Performance Year, the Eligible Employee
shall not be eligible to receive an ESOP Payout. However, this Section 3.06
shall not apply to an Eligible Employee for a given Performance Year if such
Employee is entitled to an ESOP allocation (under the terms of the ESOP) for
such Performance Year.
3.07 TERMINATION OF EMPLOYMENT SUBSEQUENT TO PERFORMANCE YEAR
Any Eligible Employee who has met the requirements for participation contained
in this Article 3 for the Performance Year and with whom the employment
relationship with the Company or any Participating Affiliate is subsequently
terminated for any reason prior to the distribution of the Plan Payout for that
Performance Year shall be entitled to the Plan Payout for that Performance Year.
Payment of such Plan Payout shall be made in accordance with the provisions set
forth under Section 5.01.
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3.08 ELIGIBILITY IN CASE OF DEATH
Notwithstanding any language contained herein, if an employee dies before
qualifying for the Plan Payout for the Performance Year, the Company may, in its
sole discretion, elect to pay all, part, or none of the Plan Payout to the
estate of the employee or to a designated beneficiary thereof. However, if an
Eligible Employee dies after qualifying for but before receiving a given Plan
Payout, such Plan Payout will be paid to the decedent's estate as a legal right.
ARTICLE 4. DETERMINATION OF PLAN PAYOUT
4.01 IN GENERAL
The Plan Payout, if any, is intended to reflect the financial performance of the
Company over the course of the Performance Year. Financial performance shall be
measured in terms of the Performance Indicator. Such Plan Payout, if any, shall
be calculated as determined under Section 4.06. The resulting Plan Payout for
each Eligible Employee shall be distributed pursuant to the provisions of
Article 5 below.
4.02 DETERMINATION OF PERFORMANCE INDICATOR
No later than the first day of a Performance Year (or such later date as may be
permitted by Code Section 162(m)), the Compensation Committee shall establish in
writing for that Performance Year, the Performance Indicator (including the Cost
of Capital for the Performance Year), the Payout Basis, the General Payout
Table, and the formula or method for calculating the Plan Payout payable to each
Eligible Employee if certain levels of the Performance Indicator are attained.
The Performance Indicator for any Performance Year shall be the Return on
Capital (as defined in Section 2.27) minus the Cost of Capital (as defined in
Section 2.09), expressed as a percentage, which shall be calculated to the third
place after the decimal point (i.e., xx.xxx%), and then rounded to the second
place after the decimal point (i.e., xx.xx%). Except as otherwise provided in
the next two sentences, measurement of the Company's performance against the
performance goals established by the Committee shall be objectively determinable
and, to the extent they are expressed in standard accounting terms, shall be
determined according to generally accepted accounting principles as in existence
on the date on which the performance goals are established and without regard to
any changes in such principles after such date. With respect to participants
other than Covered Employees, in determining whether the performance goals
established by the Committee have been met, the Committee may in its discretion
adjust the financial results for a Performance Year to exclude the effect of
unusual charges or income items or other events (including, without limitation,
acquisitions or divestitures), which are distortive of financial results for the
Performance Year. The Committee may in its discretion reduce (but not increase)
the resulting award to Covered Employees if deemed necessary to exclude the
effect of unusual charges or income items or other events (including, without
limitation, acquisitions or divestitures), which are distortive of financial
results for the Performance Year. No adjustment will be made with respect to a
Covered Employee if the Committee determines that such adjustment will cause an
award to such Covered Employee to fail to qualify as performance-based
compensation under Section 162(m).
4.03 DETERMINATION OF PAYOUT BASIS
The Payout Basis, expressed as a percentage as follows, shall be determined
according to the General Payout Table shown in Section 4.04. If the Return on
Capital minus Cost of Capital is not an even percentage, then the exact Payout
Basis shall be calculated by straight line interpolation, and shall be
calculated to the third place after the decimal point (i.e., xx.xxx%), and then
rounded to the second place after the decimal point (i.e., xx.xx%).
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4.04 GENERAL PAYOUT TABLE
RETURN ON CAPITAL
MINUS COST OF CAPITAL PAYOUT BASIS*
(PERCENTAGE) TOTAL % ESOP % CASH %
------------ ------- ------ ------
10 or More 30 5 25
9 27 5 22
8 24 5 19
7 22 5 17
6 20 5 15
5 18 5 13
4 16 5 11
3 14.5 5 9.5
2 13 5 8
1 11.5 5 6.5
0 10 5 5
-1 9 5 4
-2 8 5 3
-3 7 5 2
-4 6 5 1
-5 5 5 0
Less than -5 0 ** 0
*Actual Payout percentages may vary based on pay at
risk as determined under Section 4.06.
**The ESOP Payout Basis will be determined pursuant
to Section 4.05 below.
4.05 BOARD ELECTION REGARDING 0% PAYOUT BASIS
Neither the Board nor the Compensation Committee shall have discretion to
increase or reduce the Plan Payout payable in cash determined according to this
Article 4.
In the event of a Performance Year in which the total Payout Basis pursuant to
the General Payout Table contained in Section 4.04 is to be 0%, the Board of
Directors of the Company will determine whether to make any contribution to the
ESOP for such Performance Year and if so, how much. Nothing in this Section 4.05
shall be deemed to provide an implied or express promise or commitment to
provide an ESOP contribution arising from this Eastman Performance Plan in a
Performance Year in which the total Payout Basis under the Payout Table is 0%.
4.06 CALCULATION OF INDIVIDUAL PLAN PAYOUT
Calculations of the individual Plan Payout shall be done on a three part basis
as follows:
(a) The total Plan Payout for each Eligible Employee shall be
calculated by multiplying the Participating Earnings of the
Eligible Employee for the Performance Year by a fraction, the
numerator of which is the Total Payout Basis derived from the
General Payout Table contained in Section 4.04 and the
denominator of which is One (1) minus that percentage of the
Eligible Employee's pay at risk as defined under the regular
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employment practices of the Company. Such fraction shall be
calculated to the seventh place after the decimal point (i.e.,
xx.xxxxxxx%), and then rounded to the sixth place after the
decimal point (i.e., xx.xxxxxx%). Thus, the calculation shall
be expressed as follows:
Plan Payout (Total) = Participating Earnings x Total Payout
Basis / 1 - % of Pay at Risk
(b) That portion of the Plan Payout to be contributed to the ESOP
account of Eligible Employees shall be calculated by
multiplying the Compensation of the Eligible Employee for the
Performance Year by a fraction, the numerator of which is the
ESOP Payout Basis derived from the General Payout Table
contained in Section 4.04 and the denominator of which is 95%.
Such fraction shall be calculated to the seventh place after
the decimal point (i.e., xx.xxxxxxx%), and then rounded to the
sixth place after the decimal point (i.e., xx.xxxxxx%). Thus,
the calculation shall be expressed as follows:
Plan Payout (ESOP) = Compensation x (ESOP Payout Basis / 95%)
In the event that the Eligible Employee's Compensation as
determined under Section 2.11 of the ESOP is less than his
Participating Earnings for a given Performance Year, that
portion of the Plan Payout that would have been contributed to
the ESOP under this subsection (b) for such Employee but for
the limitations of Section 401(a)(17) of the Code, shall be
credited to the Eastman ESOP Excess Plan in accordance with
the provisions thereof.
(c) That portion of the Plan Payout designated for distribution in
cash shall be calculated by subtracting the ESOP portion of
the total Plan Payout calculated pursuant to subsection (b) of
this Section 4.06 (including that portion to be credited to
the Eastman ESOP Excess Plan, if applicable) from the total
Plan Payout derived under subsection (a) of this Section 4.06.
Thus, the calculation shall be expressed as follows:
Plan Payout (Total) - Plan Payout (ESOP) = Plan Payout (Cash)
The maximum annual Plan Payout to any individual is $500,000.
4.07 ESTIMATED PLAN PAYOUT
The Vice President and Chief Financial Officer, or his delegate, shall, on or
about the close of each quarter of the Company's fiscal year, estimate the
annual Payout Basis for the Plan based upon financial performance for the
Performance Year to date. The estimates thus generated shall subsequently be
communicated to Eligible Employees in such a manner as determined by the
Company.
4.08 FINAL DETERMINATIONS BY BOARD AND BY COMPENSATION COMMITTEE
As soon as practicable following the availability of performance results for the
completed Performance Year, the Committee shall determine the Company's
performance in relation to the Performance Indicator for that period and certify
in writing the Company's performance. Such certification shall include
confirmation of the Return on Capital (determined as described in Section 2.27),
and final approval and declaration of the Plan Payout to Covered Employees.
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Notwithstanding any language contained herein, final approval for any Plan
Payout to Eligible Employees other than Covered Employees determined in
conjunction with this Article 4 must be given by the Board of Directors of the
Company. No declaration of Plan Payout by the Board or the Compensation
Committee for any given year shall commit the Board or the Compensation
Committee to any given level of Plan Payout in future years.
4.09 SHAREOWNER APPROVAL
No Plan Payout payable in cash shall be paid under the Plan to any Covered
Employee for any Performance Year after 1996 unless and until the material terms
(within the meaning of Section 162(m) of the Code) of the Plan, including the
performance goals on which the Plan Payout would be based, are disclosed to the
Company's shareowners and are approved by the shareowners by a majority of the
votes cast.
ARTICLE 5. MECHANISM OF PLAN PAYOUT
5.01 PLAN PAYOUT
Approved Plan Payouts for any Performance Year shall be made in the subsequent
Performance Year as follows:
(a) That portion of the Plan Payout determined pursuant to the
provisions of Section 4.06 which is designated for
contribution to the ESOP account of the Eligible Employee
shall be contributed by the Company to the ESOP account of the
Eligible Employee no later than the date of the Company's due
date for filing its corporate tax return (with extensions) for
such Performance Year.
(b) That portion of the Plan Payout determined pursuant to the
provisions of Section 4.06 which is designated for
distribution in cash shall, at the discretion of the Company,
be paid out in March of the subsequent Performance Year in
cash by check or into an account designated by the Eligible
Employee and held with a commercial bank. The portion of the
Plan Payout dispersed pursuant to the provisions of this
Subsection (b) shall reflect any deductions made by the
Company for purposes of Federal or other taxation or pursuant
to request for deferral of benefits made by the Eligible
Employee under the provisions of Article 5.02.
5.02 EASTMAN INVESTMENT PLAN AND EASTMAN EXECUTIVE DEFERRED COMPENSATION
PLAN PARTICIPATION
Eligible Employees who are also eligible to participate in the Eastman
Investment Plan may elect to defer the cash portion of the Plan Payout for a
given Performance Year into the Eastman Investment Plan, to the extent provided
under such Plan. Eligible Employees who are also eligible to participate in the
Eastman Executive Deferred Compensation Plan may elect to defer the cash portion
of the Plan Payout for a given Performance Year into the Eastman Executive
Deferred Compensation Plan, to the extent provided under such Plan. Any funds
deferred pursuant to the provisions of this Section 5.02 shall become subject to
the rules and regulations of the EIP or the Executive Deferred Compensation
Plan, and shall reflect any deductions made for purposes of payment of social
security taxes due under the Code.
5.03 EASTMAN STOCK OWNERSHIP PLAN/EASTMAN ESOP EXCESS PLAN
All portions of the Plan Payout which are to be contributed to the ESOP or
credited to the Eastman ESOP Excess Plan pursuant to the terms of this Plan
shall, after such contribution or crediting of such amounts
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(as applicable), be governed in accordance with the provisions of the ESOP or
Eastman ESOP Excess Plan (as applicable). The Eastman Performance Plan solely
purports to determine the amount of contributions to the ESOP or the level of
credits to the Eastman ESOP Excess Plan. All decisions as to eligibility,
benefits or any matter other than the level of ESOP contributions or the level
of ESOP Excess crediting amounts shall be governed by the ESOP or the Eastman
ESOP Excess Plan (as applicable).
5.04 DEFERRAL OF AWARD
Notwithstanding anything in this Article 5 to the contrary, if the Compensation
Committee determines that the current payment of any award under this Article 5
could result in the Eligible Employee's receiving compensation in excess of the
maximum amount deductible by the Company for Federal income tax purposes, then
such Committee in its sole discretion may determine that such award shall not be
paid currently, and instead shall be transferred to the Employee's account under
the Eastman Executive Deferred Compensation Plan (and thereafter shall be
subject to the provisions of the Executive Deferred Compensation Plan).
ARTICLE 6. CLAIM AGAINST PERFORMANCE PAYMENT
The payment of any Plan Payout which may be subject in whole or in part to
execution, lien, assignment, or other claim, notice of which is received by the
Company on or before the Plan Payout payment date, may be delayed for an
appropriate time in order to facilitate proper handling of the claim and in
order to make any necessary adjustments.
ARTICLE 7. INABILITY TO LOCATE PAYEE
If the Company is unable to make payment hereunder to any Eligible Employee to
whom a Plan Payout is due because the Company is unable to ascertain the
whereabouts of such Eligible Employee after reasonable efforts have been made,
such payment otherwise due shall be forfeited one (1) year after the date the
Plan Payout was to be made.
ARTICLE 8. PLAN DOCUMENT CONTROLS
In the event of a conflict between this Plan document and any other information
or enrollment materials provided to the Eligible Employees (whether written or
oral), the provisions of this document shall control.
ARTICLE 9. RIGHT TO AMEND OR TERMINATE
Although the Company intends to continue the Plan indefinitely, the Plan may be
terminated, suspended or modified, in whole or in part, at any time for any
reason by action of the Compensation Committee. No amendment may be made to the
class of individuals who are eligible to participate in the Plan, the
performance criteria specified in Article 4, or the maximum annual Plan Payout
payable to any individual, without shareowner approval unless shareowner
approval is not required in order for Plan Payouts paid to Covered Employees to
constitute qualified performance-based compensation under Section 162(m) of the
Code.
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ARTICLE 10. NO EMPLOYMENT RIGHTS
Nothing contained in this Plan shall give any Eligible Employee the right to be
retained in the employment of the Company or affect the right of the Company to
dismiss any employee. The adoption and maintenance of this Plan shall not
constitute a contract between the Company and the Eligible Employee for
consideration for, or inducement or condition of, the employment of the Eligible
Employee.
ARTICLE 11. CONCLUSIVENESS OF RECORDS
The records of the Company with respect to financial data, Participating
Earnings, and all other relevant matters shall be conclusive for purposes of the
administration of the Plan described in this document.
ARTICLE 12. ADMINISTRATION; ACTIONS BY THE COMPANY
All members of the Compensation Committee shall be persons who qualify as
"outside directors" as defined under Section 162(m) of the Code. The Committee
shall have full power and authority to administer and interpret the provisions
of the Plan and to adopt such rules, regulations, agreements, guidelines, and
instruments for the administration of the Plan and for conduct of its business
as the Committee deems appropriate or advisable. The Committee sets and
interprets policy, establishes annual performance goals, evaluates Company
performance against the goals, and confirms and certifies the extent to which
Company performance goals were satisfied under the Plan.
Except with respect to matters which under Section 162(m) of the Code are
required to be determined in the sole and absolute discretion of the Committee,
the Committee shall have full power to delegate to any officer or employee of
the Company the authority to administer and interpret the procedural aspects of
the Plan, subject to the Plan's terms, including adopting and enforcing rules to
decide procedural and administrative issues.
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APPENDIX A
PARTICIPATING AND NON-PARTICIPATING EARNINGS
PARTICIPATING EARNINGS
Pay for all time worked including:
Wages and salaries
Pay for clothes change
Pay for time spent attending meetings
Paid lunch periods
Pay for time in Eastman Medical Department (scheduled hours only)
Pay for work on community campaigns and special community projects (at
company request)
Pay when serving as pallbearer (at company request)
Overtime pay
Shift premiums
Shift supplements
Compensating time off
Holiday pay, premiums, and allowances (including payment for holiday during a
full week of absence)
Vacation pay (including payment in lieu of vacation and excluding purchased
vacation cashout)
Pay for travel status
Lack of work allowance
Time spent by Apprentices in supervised tests or labs
Medical pay allowance (as recommended and arranged by the Eastman Medical
Department)
Jury duty
Call-in allowance
On-call allowance
Adjustment for amount of time spent on Final Warning1
Note 1: Participating Earnings does not include pay during the period of
time while a Employee is on Final Warning Status, as determined
under the Company's regular employment practices. This adjustment
is made by taking an Employee's Participating Earnings for the
Performance Year, and excluding a pro rata portion based on the
amount of time that the Employee was on Final Warning Status during
such year.
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NON-PARTICIPATING EARNINGS
Eastman Performance Plan payouts
Annual Performance Plan payouts
Omnibus Plan awards such as:
Stock Option grants
Restricted Stock grants
Long-Term Performance Award Plan awards
Tuition refunds
Educational support payments
Termination allowance and special separation allowance
Moving expenses and allowances as the result of domestic relocation
Additions to allowances on prizes for tax purposes
Taxable awards and prizes such as:
25-year service awards
40-year service awards
Safety awards
Attendance awards
Allowances for excused absences due to:
accident at work
death of a relative
emergency blood donation
emergency relief activities
organized color guard
employee medical or dental appointment
serving in public office
personal absences
temporary military duty
time spent voting
voluntary community services
other allowances not specifically identified under Participating Earnings
Allowances for expatriates:
cost-of-living allowance
housing allowance
tax makeup allowance
travel allowance
education allowance
Foreign service premium payments
Payment in lieu of notice of termination
Short-Term Disability benefits
Taxable portion of insurance premium paid by Company
Workers' Compensation payments and allowances:
makeup payments
statutory payments
supplements
All other payments or allowances not specifically identified as Participating
Earnings
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