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EXHIBIT 10.03
LONG-TERM PERFORMANCE SUBPLAN
OF THE 1997 OMNIBUS LONG-TERM COMPENSATION PLAN
1999-2001 PERFORMANCE PERIOD
EASTMAN CHEMICAL COMPANY
Effective January 1, 1999
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LONG-TERM PERFORMANCE SUBPLAN
OF THE 1997 OMNIBUS LONG-TERM COMPENSATION PLAN
1999-2001 PERFORMANCE PERIOD
TABLE OF CONTENTS
SECTION TITLE PAGE
Section 1. Background
Section 2. Definitions
Section 3. Administration
Section 4. Eligibility
Section 5. Form of Awards
Section 6. Size of Awards
Section 7. Composition of Peer Group
Section 8. Preconditions to Receipt of an Award
Section 9. Manner and Timing of Award Payments
Section 10. No Rights as Shareowner
Section 11. Application of Plan
Section 12. Amendments
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EASTMAN CHEMICAL COMPANY
LONG-TERM PERFORMANCE SUBPLAN
OF THE 1997 OMNIBUS LONG-TERM COMPENSATION PLAN
1999-2001 PERFORMANCE PERIOD
SECTION 1. BACKGROUND. Under Section 11 of the Eastman Chemical Company 1997
Omnibus Long-Term Compensation Plan (the "Plan"), the "Committee" (as defined
in the Plan), may, among other things, award shares of the $.01 par value
common stock ("Common Stock") of Eastman Chemical Company (the "Company") to
"Employees" (as defined in the Plan), and such awards may take the form of
performance shares, which are contingent upon the attainment of certain
performance objectives during a specified period, and subject to such other
terms, conditions, and restrictions as the Committee deems appropriate. The
purpose of this Long-Term Performance Subplan (this "Subplan") is to set forth
the terms of the grant of performance shares for the 1999-2001 Performance
Period specified herein, effective as of January 1, 1999 (the "Effective
Date").
SECTION 2. DEFINITIONS.
(a) The following definitions shall apply to this Subplan:
(i) "Actual Grant Amount" means the number of shares of Common
Stock to which a participant is entitled under this Subplan,
calculated in accordance with Section 6 of this Subplan.
(ii) "Award Payment Date" means the date the shares of Common
Stock covered by an award under this Subplan are delivered
to a participant.
(iii) "Compared Group" means the Company and the companies in the
Peer Group.
(iv) "Maximum Deductible Amount" means the maximum amount
deductible by the Company under Section 162(a), taking into
consideration the limitations under Section 162(m), of the
Internal Revenue Code of 1986, as amended, or any similar or
successor provisions thereto.
(v) "Target Grant Amount" means, with respect to any eligible
Employee, the number of shares of Common Stock specified on
Exhibit A hereto for the Salary Grade applicable to such
Employee.
(vi) "Participation Date" means June 30, 1999.
(vii) "Peer Group" means the group of companies identified in
Exhibit B hereto, with any changes made by the Committee
pursuant to Section 7 of this Subplan.
(viii) "Performance Period" means January 1, 1999 through December 31,
2001.
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(ix) "TSR" means total return to shareowners, as reflected by the
sum of (A) change in stock price (measured as the difference
between (I) the average of the closing prices of a company's
common stock on the New York Stock Exchange, or of the last
sale prices of such stock on the Nasdaq Stock Market, as
applicable, in the period beginning on the tenth trading day
preceding the beginning of the Performance Period and ending on
the tenth trading day of the Performance Period and (II) the
average of such closing or last sale prices for such stock in
the period beginning on the tenth trading day preceding the end
of the Performance Period and ending on the tenth trading day
following the end of the Performance Period) plus (B) dividends
declared, assuming reinvestment of dividends, and expressed as
a percentage return on a shareowners's hypothetical investment.
(b) Any capitalized terms used but not otherwise defined in this Subplan
shall have the respective meanings set forth in the Plan.
SECTION 3. ADMINISTRATION. This Subplan shall be administered by the Committee.
The Committee shall have authority to interpret this Subplan, to prescribe
rules and regulations relating to this Subplan, and to take any other actions
it deems necessary or advisable for the administration of this Subplan, and
shall retain all general authority granted to it under Section 3 of the Plan.
SECTION 4. ELIGIBILITY. The Employees who are eligible to participate in this
Subplan are those Employees who, as of the Effective Date, have been designated
as "officers" of the Company for purposes of Section 16 of the Exchange Act and
those Employees designated by the Company's Chief Executive Officer during
1999, which shall generally include Employees who, as of the Effective Date or
the Participation Date, held positions with the Company considered by the Chief
Executive Officer to carry responsibilities and functions generally associated
with a vice-president-level position. Employees who are promoted during the
Performance Period to a position that would meet the above criteria, but who do
not hold such position as of the Participation Date, are not eligible to
participate in this Subplan; however, the ability of the Chief Executive
Officer under this Section 4 to designate eligible Employees at any time during
1999 is intended to allow the participation of Employees who, as of the
Participation Date, held positions with the Company that may not have been
considered to carry responsibilities and functions generally associated with a
vice-president-level position but which positions are or were evaluated during
1999 and determined by the Chief Executive Officer to carry such
responsibilities and functions.
SECTION 5. FORM OF AWARDS. Subject to the terms and conditions of the Plan and
this Subplan, Awards under this Subplan shall be paid in the form of
unrestricted shares of Common Stock, except for conversions to cash and
deferrals under Section 9 of this Subplan, and except that if a participant is
entitled to any fraction of a share of Common Stock, as a result of Section 10
of this Subplan or otherwise, then in lieu of receiving such fraction of a
share, the participant shall be paid a cash amount representing the market
value, as determined by the Committee, of such fraction of a share at the time
of payment.
SECTION 6. SIZE OF AWARDS. Exhibit A hereto shows by Salary Grade the Target
Grant Amount. The Salary Grade to be used in calculating the size of any Award
to a participant under this Subplan shall be the higher of (a) the Salary Grade
applicable to the position held by the participant on the Participation Date
(or, in the case of participants whose employment is terminated prior to the
Participation Date, the Effective Date) and (b) the Salary Grade assigned to
such position during 1999 as a result of any reevaluation of the Salary Grade
appropriate for such position. The Actual Grant Amount shall be determined by
comparing the Company's TSR during the Performance Period to the TSRs of the
companies in the Peer Group during the Performance Period. Specifically, the
Company and each company in the Peer Group shall be ranked by TSR, in
descending order, with the company having the highest TSR during the
Performance Period being ranked number one. The Company's rank, by TSR, in
relation to the Compared Group, shall determine a multiplier to be applied to
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the Target Grant Amount. Multipliers range from 2.0 (i.e. 200%), if the
Company's TSR is ranked number one, to 0.0 (with no shares of Common Stock
being delivered to participants under this Subplan), if the Company's rank is
lower than company fifteen in the Compared Group. The payout table with
multipliers for each TSR rank is shown in Exhibit C. The Actual Grant Amount is
determined by applying the multiplier corresponding to the Company's TSR rank
(Exhibit C) to the Target Grant Amount. Notwithstanding the foregoing, if the
Peer Group produces fewer than 19 distinct TSRs (as a result of the removal of
a company from the Peer Group without substitution of a replacement company
therefor, as described in Section 7 of this Subplan), then the Committee shall,
in its sole discretion, determine the appropriate means of calculating the
Actual Grant Amount.
SECTION 7. COMPOSITION OF PEER GROUP. The members of the Peer Group identified
in Exhibit B hereto have been identified as companies currently relevant for
purposes of TSR comparisons under this Subplan. However, the Committee shall
have the authority, at any time and from time to time, to determine that any
member of the Peer Group is no longer appropriate for inclusion. Circumstances
that might require such a determination include, without limitation, the
following events: a company's common stock ceasing to be publicly traded on an
exchange or on the Nasdaq Stock Market; a company's being a party to a
significant merger, acquisition, or other reorganization; or a company's
ceasing to operate in the chemical industry. In any case where the Committee
determines that a particular company is no longer appropriate for inclusion in
the Peer Group, the Committee may designate a replacement company, which shall
then be substituted in the Peer Group for the former member. In any such case,
the Committee shall have authority to determine the appropriate method of
calculating the TSR of such former and/or replacement company or companies,
whether by complete substitution of the replacement company (and disregard of
the former company) over the entire Performance Period or by pro rata
calculations for each company or otherwise. Alternatively, in any case where
the Committee determines that a particular company is no longer appropriate for
inclusion in the Peer Group, the Committee may remove such company from the
Peer Group without substituting a replacement company therefor.
SECTION 8. PRECONDITIONS TO RECEIPT OF AN AWARD
(a) CONTINUOUS EMPLOYMENT. Except as specified in paragraph (b) below, to
remain eligible for an Award under this Subplan, an eligible Employee
must remain continuously employed with the Company or a Subsidiary at
all times from the Participation Date (or the Effective Date) through
the Award Payment Date.
(b) DEATH, DISABILITY, RETIREMENT, OR TERMINATION FOR AN APPROVED
REASON BEFORE THE AWARD PAYMENT DATE. If a participant's employment
with the Company or a Subsidiary is terminated due to death,
disability, retirement, or any approved reason prior to the Award
Payment Date, the participant shall receive, subject to the terms and
conditions of the Plan and this Subplan, an Award representing a
prorated portion of the Actual Grant Amount to which such participant
otherwise would be entitled, with the precise amount of such Award to
be determined by multiplying the Actual Grant Amount by a fraction,
the numerator of which is the number of full calendar months in the
Performance Period from the Effective Date through and including the
effective date of such termination, and the denominator of which is
36 (the total number of months in the Performance Period). If the
effective date of a participant's termination of employment occurs on
or after the last business day of a particular calendar month, then
such month shall be considered a full calendar month and shall be
counted in determining the numerator of the fraction described in the
preceding sentence; if the effective date of such termination occurs
prior to the last business day of a particular calendar month, then
such month shall not be so counted.
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SECTION 9. MANNER AND TIMING OF AWARD PAYMENTS.
(a) TIMING OF AWARD PAYMENT. Except for deferrals under Sections 9(c) and
9(d), if any Awards are payable under this Subplan, the payment of
such Awards to eligible Employees shall be made as soon as is
administratively practicable after the end of the Performance Period.
(b) TAX WITHHOLDING. The company may withhold or require the grantee to
remit a cash amount sufficient to satisfy federal, state, and local
taxes (including the participant's FICA obligation) required by law
to be withheld. Further, either the Company or the grantee may elect
to satisfy the withholding requirement by having the Company withhold
shares of common stock having a fair market value on the date the tax
is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction.
(c) DEFERRAL OF AWARD IN EXCESS OF THE MAXIMUM DEDUCTIBLE AMOUNT. If
payment of the Award would, or could in the reasonable estimation of
the Committee, result in the participant's receiving compensation in
excess of the Maximum Deductible Amount in a given year, then such
portion (or all, as applicable) of the Award as would, or could in
the reasonable estimation of the Committee, cause such participant to
receive compensation from the Company in excess of the Maximum
Deductible Amount shall be converted into the right to receive a cash
payment, which shall be deferred until after the participant retires
or otherwise terminates employment with the Company and its
Subsidiaries.
(d) ELECTION TO DEFER THE AWARD. Any participant in this Subplan may
elect to defer the Award until after the participant retires or
otherwise terminates employment with the Company and its Subsidiaries
under the terms and subject to the conditions of the Eastman
Executive Deferred Compensation Plan, as the same now exists or may
be amended hereafter (the "EDCP"). If the participant chooses to
defer the Award, the Award shall be converted into the right to
receive a cash payment.
(e) AWARD DEFERRAL TO THE EDCP. In the event that all or any portion of
an Award is converted into a right to receive a cash payment pursuant
to Sections 9(c) or 9(d), an amount representing the Fair Market
Value, as of the date the Common Stock covered by the Award otherwise
would be delivered to the participant, of the Actual Grant Amount (or
the deferred portion thereof) will be credited to the Stock Account
of the EDCP, and hypothetically invested in units of Common Stock.
Thereafter, such amount shall be treated in the same manner as other
investments in the EDCP and shall be subject to the terms and
conditions thereof.
SECTION 10. NO RIGHTS AS SHAREOWNER. No certificates for shares of Common Stock
shall be issued under this Subplan nor shall any participant have any rights as
a shareowner as a result of participation in this Subplan, until the Actual
Grant Amount has been determined and such participant has otherwise become
entitled to an Award under the terms of the Plan and this Subplan. In
particular, no participant shall have any right to vote or to receive dividends
on any shares of Common Stock under this Subplan, until certificates for such
shares have been issued as described above; provided, however, that if payment
of all or any portion of an Award under this Subplan has been deferred pursuant
to Section 9 of this Subplan or otherwise, but such Award otherwise has become
payable hereunder, then during the period during which payment is deferred, the
deferred Award shall be credited with additional units of Common Stock, and (if
applicable) fractions thereof, based on any dividends declared on the Common
Stock, in accordance with the terms of the EDCP.
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SECTION 11. APPLICATION OF PLAN. The provisions of the Plan shall apply to this
Subplan, except to the extent that any such provisions are inconsistent with
specific provisions of this Subplan. In particular, and without limitation,
Section 11 (relating to performance shares), Section 12 (relating to
qualification of Awards as "performance-based" under Code Section 162(m)),
Section 17 (relating to nonassignability), Section 18 (relating to adjustment
of shares available), Section 19 (relating to withholding taxes), Section 20
(relating to noncompetition and confidentiality), Section 21 (relating to
regulatory approvals and listings), Section 23 (relating to the governing law),
Section 24 (relating to changes in ownership), Section 25 (relating to changes
in control), Section 26 (relating to no rights, title, or interest in Company
assets), and Section 27 (relating to securities laws) shall apply to this
Subplan.
SECTION 12. AMENDMENTS. The Committee may, from time to time, amend this
Subplan in any manner.
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EXHIBIT A
EASTMAN CHEMICAL COMPANY
LONG-TERM PERFORMANCE SUBPLAN GRANT TABLE
1999-2001 CYCLE
Original on File in
Management Compensation
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EXHIBIT B
COMPANIES IN THE PEER GROUP
Air Products and Chemicals, Inc.
Crompton & Knowles Corporation
Cytec Industries, Inc.
Dow Chemical Company
E. I. du Pont de Nemours and Company
H. B. Fuller Company
The Geon Company
Great Lakes Chemical Corporation
M. A. Hanna Company
Hercules Chemical Corporation
Imperial Chemical Industries PLC
Lyondell Petrochemical Company
Millennium Chemicals, Inc.
Morton International, Inc.
Rohm and Haas Company
Solutia
Union Carbide Corporation
Wellman, Inc.
Witco Corporation
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EXHIBIT C
EASTMAN CHEMICAL COMPANY
LONG-TERM PERFORMANCE SUBPLAN
1999-2001 PERFORMANCE PERIOD
PAYOUT TABLE
EASTMAN'S TSR PAYOUT MULTIPLIER
RANKING (TIMES TARGET GRANT AMOUNT)
1 2.0 X
2 1.9 X
3 1.8 X
4 1.7 X
5 1.6 X
6 1.5 X
7 1.4 X
8 1.3 X
9 1.2 X
10 1.1 X
11 0.9 X
12 0.7 X
13 0.5 X
14 0.3 X
15 0.1 X
16 0.0 X
17 0.0 X
18 0.0 X
19 0.0 X
20 0.0 X
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