<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ------------------
Commission file number 1-12626
EASTMAN CHEMICAL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 62-1539359
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 N. EASTMAN ROAD
KINGSPORT, TENNESSEE 37660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 229-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes___X____ No_________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding at
Class September 30, 1996
Common Stock, par value $0.01 per share 77,695,205
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PAGE 1 OF 59 TOTAL SEQUENTIALLY NUMBER PAGES
EXHIBIT INDEX ON PAGE 14
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
ITEM PAGE
- --------------------------------------------------------------------------------
<S> <C>
PART I. FINANCIAL INFORMATION
1. Financial Statements 3 - 6
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-11
PART II. OTHER INFORMATION
1. Legal Proceedings 12
6. Exhibits and Reports on Form 8-K 12
SIGNATURES
Signatures 13
</TABLE>
2
<PAGE> 3
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $1,167 $1,266 $3,669 $3,819
Cost of sales 873 858 2,735 2,667
------ ------ ------ ------
Gross profit 294 408 934 1,152
Selling and general administrative expenses 78 102 247 271
Research and development costs 47 46 137 128
------ ------ ------ ------
Operating earnings 169 260 550 753
Interest expense 16 19 51 58
Other (income) charges, net (3) 2 (12) (12)
------ ------ ------ ------
Earnings before income taxes 156 239 511 707
Provision for income taxes 60 91 191 269
------ ------ ------ ------
Net earnings $ 96 $ 148 $ 320 $ 438
====== ====== ====== ======
Net earnings per share $ 1.22 $ 1.81 $ 4.02 $ 5.28
====== ====== ====== ======
Retained earnings at beginning of period $1,842 $1,482 $1,684 $1,258
Net earnings 96 148 320 438
Cash dividends declared (34) (33) (100) (99)
------ ------ ------ ------
Retained earnings at end of period $1,904 $1,597 $1,904 $1,597
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 61 $ 100
Receivables 759 802
Inventories 459 467
Other current assets 122 100
------ ------
Total current assets 1,401 1,469
------ ------
Properties
Properties and equipment at cost 7,267 6,791
Less: Accumulated depreciation 3,945 3,742
------ ------
Net properties 3,322 3,049
------ ------
Other noncurrent assets 382 336
------ ------
Total assets $5,105 $4,854
====== ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Payables $ 633 $ 771
Other current liabilities 84 102
------ ------
Total current liabilities 717 873
Long-term borrowings 1,474 1,217
Deferred income tax credits 355 330
Postemployment obligations 712 690
Other long-term liabilities 249 216
------ ------
Total liabilities 3,507 3,326
------ ------
Shareowners' equity
Common stock ($0.01 par-350,000,000 shares authorized;
shares issued - 83,383,833 and 83,250,683) 1 1
Paid in capital 37 30
Retained earnings 1,904 1,684
Cumulative translation adjustment 11 13
------ ------
1,953 1,728
Less: Treasury stock at cost (5,688,628 and 3,308,200 shares) 355 200
------ ------
Total shareowners' equity 1,598 1,528
------ ------
Total liabilities and shareowners' equity $5,105 $4,854
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FIRST NINE MONTHS
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 320 $ 438
------- -------
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation 232 230
Provision (benefit) for deferred income taxes 12 (40)
(Increase) decrease in receivables 43 (119)
(Increase) decrease in inventories 4 (69)
Increase (decrease) in incentive pay and employee
benefit liabilities (88) 126
Increase (decrease) in liabilities excluding borrowings,
incentive pay, and employee benefit liabilities (23) 44
Other items, net (17) (5)
------- -------
Total adjustments 163 167
------- -------
Net cash provided by operating activities 483 605
------- -------
Cash flows from investing activities
Additions to properties and equipment (516) (285)
Acquisitions and investments in joint ventures (21) (57)
Proceeds from sale of assets 36 7
Capital advances to suppliers (33) (35)
Other items 2 (1)
------- -------
Net cash used in investing activities (532) (371)
------- -------
Cash flows from financing activities
Net increase in commercial paper borrowings 257 11
Dividends to shareowners (100) (99)
Treasury stock purchases (157) (175)
Other items 10 5
------- -------
Net cash provided by (used in) financing activities 10 (258)
------- -------
Net change in cash and cash equivalents (39) (24)
Cash and cash equivalents at beginning of period 100 90
------- -------
Cash and cash equivalents at end of period $ 61 $ 66
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared by the Company in accordance and consistent with the accounting
policies stated in the Company's 1995 Annual Report on Form 10-K and should
be read in conjunction with the consolidated financial statements appearing
therein. In the opinion of the Company, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation have been
included in the interim consolidated financial statements. The interim
consolidated financial statements are based in part on approximations and
have not been audited by independent accountants.
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
2. INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
(Dollars in millions) 1996 1995
<S> <C> <C>
At FIFO or average cost (approximates current cost):
Finished goods $ 427 $ 461
Work in process 142 127
Raw materials and supplies 207 199
------- -------
Total inventories at FIFO or average cost 776 787
------- -------
Reduction to LIFO value (317) (320)
------- -------
Total inventories at LIFO value $ 459 $ 467
======= =======
</TABLE>
Inventories valued on the LIFO method are approximately 80% of total
inventories in each of the periods.
<TABLE>
<CAPTION>
3. DIVIDENDS THIRD QUARTER FIRST NINE MONTHS
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash dividends declared per share $.44 $.42 $1.28 $1.22
</TABLE>
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company's Consolidated
Financial Statements and Management's Discussion and Analysis contained in the
1995 Annual Report on Form 10-K and the unaudited interim consolidated
financial statements included elsewhere in this report.
RESULTS OF OPERATIONS
The following analysis of Eastman's operations compares 1996 results with 1995,
a year in which the Company reported record sales and earnings. While 1996
results show overall decreases compared with 1995, the Company's net earnings
for the first nine months annualized still produced a solid return on equity of
27 percent.
EARNINGS
<TABLE>
<CAPTION>
(Dollars in millions, except THIRD QUARTER FIRST NINE MONTHS
per share amounts) 1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
Operating earnings $169 $ 260 (35)% $ 550 $ 753 (27)%
Net earnings 96 148 (35) 320 438 (27)
Net earnings per share 1.22 1.81 (33) 4.02 5.28 (24)
</TABLE>
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
CHANGES IN EARNINGS PER SHARE
Net earnings per share $1.22 $ 1.81 $ (.59) $4.02 $5.28 $(1.26)
======= ======
Operations
Selling price $ (1.06) $(1.47)
Volume and mix .17 .19
Raw materials, supplies, and
energy costs .39 .07
Variable-incentive pay .16 .36
Pre-production and start-up costs (.20) (.34)
Other (.16) (.33)
------- ------
Change from operations (.70) (1.52)
Other
Interest expense .02 .05
Other income/charges .04 -
Effective tax rate change - .04
Lower average shares outstanding .05 .16
Rounding - .01
------- ------
Total change $ (.59) $(1.26)
======= ======
</TABLE>
The principal factor contributing to the 1996 earnings decline was lower
selling prices for the Company's core plastics, polyethylene terephthalate
(PET) and polyethylene. Decreased earnings also resulted from pre-production
and start-up costs at new PET plants and higher labor costs. There were
positive impacts on overall earnings per share from higher overall volumes,
lower variable-incentive compensation, lower shares outstanding, and lower
paraxylene and other raw material and energy costs.
7
<PAGE> 8
SUMMARY BY INDUSTRY SEGMENT
PERFORMANCE SEGMENT
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
(Dollars in millions) 1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
Sales $862 $972 (11)% $2,763 $2,874 (4)%
Operating earnings 113 179 (37) 404 518 (22)
</TABLE>
The first nine months Performance segment sales and operating earnings
decreases were primarily attributable to lower PET selling prices and volumes,
partially offset by improved selling prices and higher volumes for the Fibers
business. The decreased PET volumes were principally a result of weak sales in
the soft European market. Contributing to the lower operating earnings were
increased pre-production and start-up costs for new manufacturing facilities.
Other Performance segment businesses, specifically Specialty Plastics and
Performance Chemicals, generally had a positive effect on third quarter sales
and earnings. Looking forward, the capacity additions within the PET industry
worldwide over the next 1-2 years are expected to result in continued downward
pressure on PET selling prices.
INDUSTRIAL SEGMENT
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
(Dollars in millions) 1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
Sales $305 $294 4% $906 $945 (4)%
Operating earnings 56 81 (31) 146 235 (38)
</TABLE>
The third quarter increase in the Industrial segment sales was due to volume
increases, primarily related to capacity increases in acetaldehyde and
propionic acid. Lower selling prices and higher feedstock costs contributed to
lower operating earnings in this segment. For the first nine months, sales
decreased due to lower selling prices for polyethylene, partially offset by
increased volumes. Decreased first nine months Industrial segment operating
earnings were primarily the result of higher feedstock costs and lower selling
prices for polyethylene.
(For supplemental analysis of Performance and Industrial segment business
organization results, see Exhibit 99.01 to this Form 10-Q.)
SUMMARY BY CUSTOMER LOCATION
<TABLE>
<CAPTION>
SALES BY REGION
THIRD QUARTER FIRST NINE MONTHS
(Dollars in millions) 1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
United States and Canada $777 $834 (7)% $2,448 $2,555 (4)%
Europe, Middle East, and Africa 171 212 (19)% 578 635 (9)%
Asia Pacific 145 146 (1)% 417 428 (3)%
Latin America 74 74 - 226 201 12 %
</TABLE>
Sales in the United States for third quarter 1996 were $731 million compared
with 1995 third quarter sales of $780 million. For the first nine months of
1996, sales in the United States were $2.294 billion compared with $2.384
billion in 1995. Third quarter 1996 sales outside the United States were down
10% compared with 1995, primarily due to lower PET selling prices and volumes
in Europe, and were 37% of total sales for third quarter 1996, compared with
38% for third quarter 1995.
8
<PAGE> 9
SUMMARY OF CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
(Dollars in millions) 1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
SALES $1,167 $1,266 (8)% $3,669 $3,819 (4)%
</TABLE>
Sales in the third quarter 1996 decreased 11% because of lower selling prices,
offset 3% because of volume gains. For the first nine months, sales decreased
5% because of lower selling prices, offset 1% because of volume gains.
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
(Dollars in millions) 1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
GROSS PROFIT $ 294 $ 408 (28)% $ 934 $1,152 (19)%
As a percentage of sales 25.2% 32.2% 25.5% 30.2%
</TABLE>
The 1996 gross profit decline was principally attributable to lower selling
prices and increased pre-production and start-up costs which were partially
offset by lower variable-incentive compensation, lower purchased raw material
costs, and increased volumes.
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
(Dollars in millions) 1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
SELLING AND GENERAL
ADMINISTRATIVE EXPENSES $ 78 $102 (24)% $247 $271 (9)%
As a percentage of sales 6.7% 8.1% 6.7% 7.1%
</TABLE>
The decrease in selling and general administrative expenses is attributable to
developmental costs incurred in 1995 for the installation of a global
integrated business information system that were not incurred in 1996. The
Company invested significant resources in this new information system to better
position itself for continued worldwide growth. Another factor resulting in
the decreased selling and general administrative expenses was decreased
variable-incentive compensation costs.
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
(Dollars in millions) 1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
GROSS INTEREST EXPENSE $ 25 $ 22 $ 70 $ 66
LESS CAPITALIZED INTEREST 9 3 19 8
------- ------- --------- ---------
NET INTEREST EXPENSE $ 16 $ 19 (16)% $ 51 $ 58 (12)%
======= ======= ========= =========
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
(Dollars in millions) 1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
OTHER (INCOME) CHARGES, NET $(3) $2 - % $(12) $(12) - %
</TABLE>
Other income and other charges include interest income, royalty income, gains
and losses on asset sales, results from equity investments, foreign exchange
transactions, and other items. Third quarter 1996 results include the
Company's proportionate share of a one-time gain recorded by an equity
investment.
9
<PAGE> 10
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
FINANCIAL INDICATORS 1996 1995
<S> <C> <C>
For the first nine months
Ratio of earnings to fixed charges 7.0x 10.0x
At the period ended September 30 and December 31
Current ratio 2.0x 1.7x
Percent of long-term borrowings to total capital 48% 44%
Percent of floating-rate borrowings to total borrowings 19% 2%
<CAPTION>
CASH FLOW FIRST NINE MONTHS
(Dollars in millions) 1996 1995
<S> <C> <C>
Net cash provided by (used in)
Operating activities $ 483 $ 605
Investing activities (532) (371)
Financing activities 10 (258)
--------- ---------
Net change in cash and cash equivalents $ (39) $ (24)
========= =========
Cash and cash equivalents at end of period $ 61 $ 66
========= =========
</TABLE>
The increase in cash used in investing activities of $161 million in the first
nine months of 1996 is consistent with the Company's global expansion
activities and primarily reflects capital expenditure increases. The cash
provided by financing activities for the first nine months of 1996 reflects
higher levels of commercial paper borrowings, primarily to meet cash needs for
higher capital expenditures, share repurchases, and other cash flow needs.
CAPITAL EXPENDITURES
Eastman anticipates that total capital expenditures will be approximately $750
million in 1996 and $850 million in 1997, primarily due to previously announced
expansions in worldwide manufacturing capacity. Depreciation expense is
expected to be approximately $321 million for 1996 and $331 million for 1997.
During 1996, the Company announced plans to construct an isophthalic acid (IPA)
plant in Kingsport, Tennessee; it is expected to be on-line by mid-1998. The
Company announced a planned increase in polyethylene naphthalate (PEN)
homopolymer capacity expected on-line in early 1997. In October, the Company
announced that it will not participate in the proposed project with three other
companies to build an olefins plant near Houston, Texas. In addition to
expanding its Longview, Texas oxo aldehydes and derivatives plants, the Company
announced plans for construction of new plant facilities in Singapore to
produce oxo aldehydes and derivatives; production operations for Singapore are
expected to begin in 1998. The Company announced plans to construct a
polyethylene terephthalate (PET) plant and a purified terephthalic acid (PTA)
plant at their South Carolina location; production is expected in early 1999.
An additional PTA plant is planned to be built in Kingsport, Tennessee by late
1997. In July, the Company announced plans to double production capacity for
general-purpose fine chemicals at the Peboc Division of Eastman Chemical (UK)
Ltd. in Llangefni, Wales. The Company recently signed a letter of intent to
study the feasibility of forming a joint venture in the People's Republic of
China; consideration is being given to building two plants in Nanjing, China,
one to produce hydrocarbon tackifying resins and the other to manufacture
sorbates.
LIQUIDITY
Eastman has access to an $800 million revolving credit facility ("Credit
Facility") expiring in December 2000. Amounts outstanding under the Credit
Facility are subject to interest at varying spreads above quoted market rates,
principally LIBOR. The Credit Facility also requires a facility fee on the
total commitment that varies based on Eastman's credit rating. The annual rate
for such fee was 0.075% as of September 30, 1996. The Credit Agreement
contains a number of covenants and events of default, including the maintenance
of certain financial ratios. Eastman was in compliance with all such covenants
for all periods.
10
<PAGE> 11
Eastman utilizes commercial paper, generally with maturities of 90 days or
less, to meet its liquidity needs. The Company's commercial paper, supported
by the Credit Facility, is classified as long-term borrowings because the
Company has the ability and intent to refinance such borrowings long-term.
During third quarter 1996, the average annual effective interest rate was 5.46%
for commercial paper borrowings; as of September 30, 1996, the Company's
commercial paper outstanding balance was $279 million.
In 1995, the Company repurchased $200 million of Eastman common stock. In
February 1996, the Company announced plans to repurchase up to $400 million of
additional Eastman common shares. Repurchased shares may be used to meet
common stock requirements for benefit plans and other corporate purposes.
Repurchase of common shares is not expected to have an adverse impact on the
liquidity of the Company. At September 30, 1996, the Company had acquired an
additional 2,408,400 shares at a cost of $157 million, pursuant to its
current repurchase program.
Existing sources of capital, together with cash flows from operations, are
expected to be sufficient to meet the Company's foreseeable cash flow
requirements. Eastman has on file with the Securities Exchange Commission a
shelf registration to issue up to an additional $300 million of debt
securities.
<TABLE>
<CAPTION>
DIVIDENDS THIRD QUARTER FIRST NINE MONTHS
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash dividends declared per share $.44 $.42 $1.28 $1.22
</TABLE>
OUTLOOK
Looking forward for the rest of 1996, the Company expects continued strong
demand for Fibers business products, improved PET volumes, but lower PET prices
than in third quarter 1996. Based on current and projected selling prices and
raw material costs, overall downward pressure on fourth quarter margins is
expected. It is now likely that earnings for the second half of 1996 will be
less than earnings in the first half of the year.
In 1997, the Company expects continued good demand for its products. It also
expects to have the capability for 3-5% volume growth as the result of a new
PET plant in Spain, a full year's effect of the new PET plant in Mexico, and
incremental gains in capacity for fibers and various chemicals. In relation to
PET, the Company expects no significant price improvement from current levels,
modest volume growth, and negative earnings comparisons overall for 1997. For
the rest of its businesses, the Company expects overall stable margins and
operating costs.
The above stated expectations, other forward-looking statements in this report,
and other statements of the Company relating to matters such as planned
capacity increases and capital spending, expected depreciation, future volume
and price changes, demand, and margin and earnings expectations for individual
products, businesses, and segments as well as for the whole of the Company, are
based upon certain underlying assumptions. These assumptions are in turn based
upon internal estimates and analyses of current market conditions and trends,
management plans and strategies, economic conditions, and other factors and are
subject to risks and uncertainties inherent in projecting future conditions and
results. The forward-looking statements in this report are based upon the
following assumptions: relatively stable business conditions in the United
States, improving business conditions in Europe, and continued growth in Latin
America and Asia Pacific, supporting continued good overall demand for the
Company's products; continued demand growth worldwide for PET; continued
capacity additions within the PET industry worldwide; availability of scheduled
Eastman capacity increases; stable to slightly lower pricing for Eastman
products; overall stable to slightly lower purchase costs for key Eastman raw
materials; productivity gains offsetting wage inflation; and continued progress
on the current share repurchase program. Actual results could differ
materially from current expectations if one or more of these assumptions prove
to be inaccurate or are unrealized.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LEGAL PROCEEDINGS
The Company began operating as an independent publicly held company on
January 1, 1994 as a result of its spin-off (the "Spin-Off") from
Eastman Kodak Company ("Kodak"). Prior to the Spin-Off, the Company
operated as a wholly-owned business of Kodak. Since the Spin-Off, the
Company has owned and operated substantially all of the worldwide
chemical business it previously conducted as a part of Kodak. Prior to
the Spin-Off, Kodak agreed to participate in the Environmental
Protection Agency's ("EPA") Toxic Substances Control Act ("TSCA")
Section 8(e) Compliance Audit Program ("CAP"). As a participant, Kodak
agreed to audit its files, including those of its chemical business,
for materials which under then-current EPA guidelines would be subject
to notification under Section 8(e) of TSCA and to pay stipulated
penalties for each report submitted under the CAP. After the Spin-Off,
the Company was added as a joint participant in Kodak's CAP. Under the
terms of the EPA's Consent Order dated October 3, 1996 and the Consent
Agreement among the EPA, Kodak, and the Company, Kodak and the Company
were assessed a civil penalty of $1,000,000. Kodak and the Company
have agreed that Kodak will pay the entire civil penalty to the EPA and
that the Company will pay $250,000 to Kodak as reimbursement for the
Company's agreed upon portion of the CAP penalty.
The Company's operations are parties to or targets of lawsuits, claims,
investigations, and proceedings, including product liability, patent,
commercial, environmental, and health and safety matters, which are
being handled and defended in the ordinary course of business. No such
pending matters, including the EPA CAP proceeding described in the
preceding paragraph, are expected to have a material adverse effect on
the Company's business, financial condition or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed as part of this report are listed in the Exhibit
Index appearing on page 14.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1996.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Eastman Chemical Company
Date: November 4, 1996 By: /s/ H. Virgil Stephens
------------------------------------
H. Virgil Stephens
Senior Vice President and
Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial Officer)
13
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT DESCRIPTION SEQUENTIAL
NUMBER PAGE
NUMBER
<S> <C>
3.01 Amended and Restated Certificate of Incorporation
of Eastman Chemical Company (incorporated herein by
reference to Exhibit 3.01 to Eastman Chemical
Company's Registration Statement on Form S-1, File
No. 33-72364, as amended)
3.02 Amended and Restated By-laws of Eastman Chemical
Company, as amended October 1, 1994 (incorporated by
reference to Exhibit 3.02 to Eastman Chemical
Company's Annual Report on Form 10-K for the year
ended December 31, 1994)
4.01 Form of Eastman Chemical Company Common Stock
certificate (incorporated herein by reference to
Exhibit 3.02 to Eastman Chemical Company's Annual
Report on Form 10-K for the year ended December 31,
1993)
4.02 Stockholder Protection Rights Agreement dated as of
December 13, 1993, between Eastman Chemical Company
and First Chicago Trust Company of New York, as
Rights Agent (incorporated herein by reference to
Exhibit 4.4 to Eastman Chemical Company's
Registration Statement on Form S-8 relating to the
Eastman Investment Plan, File No. 33-73810)
4.03 Indenture, dated as of January 10, 1994, between
Eastman Chemical Company and The Bank of New York,
as Trustee (incorporated herein by reference to
Exhibit 4(a) to Eastman Chemical Company's current
report on Form 8-K dated January 10, 1994 (the
"8-K"))
4.04 Form of 6 3/8% Notes due January 15, 2004
(incorporated herein by reference to Exhibit 4(c) to
the 8-K)
4.05 Form of 7 1/4% Debentures due January 15, 2024
(incorporated herein by reference to Exhibit 4(d) to
the 8-K)
4.06 Officers' Certificate pursuant to Sections 201 and
301 of the Indenture (incorporated herein by
reference to Exhibit 4(a) to Eastman Chemical
Company's Current Report on Form 8-K dated June 8,
1994 (the "June 8-K"))
4.07 Form of 7 5/8% Debentures due June 15, 2024
(incorporated herein by reference to Exhibit 4(b) to
the June 8-K)
4.08 Credit Agreement, dated as of December 19, 1995
(the "Credit Agreement") among Eastman Chemical
Company, the Lenders named therein, and The Chase
Manhattan Bank, as Agent (incorporated herein by
reference to Exhibit 4.08 to Eastman Chemical
Company's Annual Report on Form 10-K for the year
ended December 31, 1995)
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT DESCRIPTION SEQUENTIAL
NUMBER PAGE
NUMBER
<S> <C> <C>
*10.01 Third Amended and Restated Eastman Directors' Deferred 16
Compensation Plan.
*10.02 Amended and Restated Eastman Chemical Company 1996 23
Non-Employee Director Stock Option Plan
*10.03 Amended and Restated Eastman Executive Deferred 29
Compensation Plan
*10.04 1994-1996 Long-Term Performance Subplan of the Eastman 39
Chemical Company 1994 Omnibus Long-Term Compensation Plan
(as amended)
*10.05 1995-1997 Long-Term Performance Subplan of the Eastman 45
Chemical Company 1994 Omnibus Long-Term Compensation Plan
(as amended)
*10.06 1996-1998 Long-Term Performance Subplan of the Eastman 51
Chemical Company 1994 Omnibus Long-Term Compensation
Plan (as amended)
11.01 Statement re Computation of Earnings Per Common Share 57
12.01 Statement re Computation of Ratios of Earnings to Fixed 58
Charges
27.01 Financial Data Schedule (for SEC use only)
99.01 Supplemental Business Organization Information 59
</TABLE>
__________________________
* Management contract or compensatory plan or arrangement filed pursuant to
Item 601(b)(10)(iii) of Regulation S-K.
15
<PAGE> 1
EXHIBIT 10.01
THIRD AMENDED AND RESTATED
EASTMAN DIRECTOR'S DEFERRED COMPENSATION PLAN
Preamble. The Third Amended and Restated Eastman Directors' Deferred
Compensation Plan is an unfunded, non-qualified deferred compensation
arrangement for non-employee members of the Board of Directors of Eastman
Chemical Company (the "Company"). Under the Plan, each Eligible Director is
annually given an opportunity to elect to defer payment of part of his or her
compensation for serving as a Director. This Plan originally was adopted
effective January 1, 1994, was amended and restated effective as of December 1,
1994 and as of May 2, 1996, and is further amended and restated effective as of
October 10, 1996.
Section 1. Definitions
Section 1.1. "Account" means the Interest Account or the Stock Account.
Section 1.2. "Board" means the Board of Directors of the Company.
Section 1.3. "Change In Control" means a change in control of the Company
of a nature that would be required to be reported (assuming such event has
not been "previously reported") in response to Item 1(a) of a Current
Report on Form 8-K, as in effect on August 1, 1993, pursuant to Section 13
or 15(d) of the Exchange Act; provided that, without limitation, a Change
In Control shall be deemed to have occurred at such time as (i) any
"person" within the meaning of Section 14(d) of the Exchange Act, other
than the Company, a subsidiary of the Company, or any employee benefit
plan(s) sponsored by the Company or any subsidiary of the Company, is or
has become the "beneficial owner," as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly, of 25% or more of the combined voting
power of the outstanding securities of the Company ordinarily having the
right to vote at the election of directors; provided, however, that the
following will not constitute a Change In Control: any acquisition by any
corporation if, immediately following such acquisition, more than 75% of
the outstanding securities of the acquiring corporation ordinarily having
the right to vote in the election of directors is beneficially owned by all
or substantially all of those persons who, immediately prior to such
acquisition, were the beneficial owners of the outstanding securities of
the Company ordinarily having the right to vote in the election of
directors; or (ii) individuals who constitute the Board on January 1, 1994
(the "Incumbent Board") have ceased for any reason to constitute at least
a majority thereof, provided that: any person becoming a director
subsequent to January 1, 1994 whose election, or nomination for election by
the Company's shareowners, was approved by a vote of at least
three-quarters (3/4) of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director without
objection to such nomination) shall be, for purposes of the Plan,
considered as though such person were a member of the Incumbent Board; or
(iii) upon approval by the Company's shareowners of a reorganization,
merger or consolidation, other than one with respect to which all or
substantially all of those persons who were the beneficial owners,
immediately prior to such reorganization, merger or consolidation, of
outstanding securities of the Company ordinarily having the right to vote
in the election of directors own, immediately after such transaction, more
than 75% of the outstanding securities of the resulting corporation
ordinarily having the right to vote in the election of directors; or (iv)
upon approval by the Company's stockholders of a complete liquidation and
dissolution of the Company or the sale or other disposition of all or
substantially all of the assets of the Company other than to a subsidiary
of the Company. Notwithstanding the occurrence of any of the foregoing,
the Board of Directors may determine, if it deems it to be in the best
interest of the Company, that an event or events otherwise constituting a
Change in Control shall not be so considered. Such determination shall be
effective only if it is made by the Board of Directors prior to the
occurrence of an event that otherwise would be or probably will lead to a
Change In Control or after such event if made by the Board of Directors a
majority of which is composed of directors who were members of the Board
immediately prior to the event that otherwise would be or probably will
lead to a Change In Control.
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<PAGE> 2
Section 1.4. "Committee on Directors" means the Committee on Directors of
the Board.
Section 1.5. "Common Stock" means the $.01 par value common stock of the
Company.
Section 1.6. "Company" means Eastman Chemical Company.
Section 1.7. "Deferrable Amount" means an amount equal to the sum of the
Eligible Director's cash compensation, including retainer, meeting fees,
and any other compensation otherwise payable in cash.
Section 1.8. "Eligible Director" means a member of the Board of Directors
of the Company who is not an employee of the Company or any subsidiary of
the Company.
Section 1.9. "Enrollment Period" means the period designated by the
Committee on Directors each year; provided however, that such period shall
end on or before December 31 of each year.
Section 1.10. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Section 1.11. "Interest Account" means the account established by the
Company for each Participant for compensation deferred pursuant to this
Plan and which shall bear interest as described in Section 4.1 below. The
maintenance of individual Interest Accounts is for bookkeeping purposes
only.
Section 1.12. "Interest Rate" means the monthly average of bank prime
lending rates to most favored customers as published in THE WALL STREET
JOURNAL, such average to be determined as of the last day of each month.
Section 1.13. "Market Value" means the closing price of the shares of
Common Stock on the New York Stock Exchange on the day on which such value
is to be determined or, if no such shares were traded on such day, said
closing price on the next business day on which such shares are traded;
provided, however, that if at any relevant time the shares of Common Stock
are not traded on the New York Stock Exchange, then "Market Value" shall be
determined by reference to the closing price of the shares of Common Stock
on another national securities exchange, if applicable, or if the shares
are not traded on an exchange but are traded in the over-the-counter
market, by reference to the last sale price or the closing "asked" price of
the shares in the over-the-counter market as reported by the National
Association of Securities Dealers Automated Quotation System (NASDAQ) or
other national quotation service.
Section 1.14. "Plan" means this Third Amended and Restated Eastman
Directors' Deferred Compensation Plan.
Section 1.15. "Participant" means an Eligible Director who elects for one
or more years to defer compensation pursuant to this Plan.
Section 1.16. "Stock Account" means the account established by the Company
for each Participant, the performance of which shall be measured by
reference to the Market Value of Common Stock. The maintenance of
individual Stock Accounts is for bookkeeping purposes only.
Section 1.17. "Valuation Date" means each business day.
Section 2. Deferral of Compensation. An Eligible Director may elect to defer
receipt of all or any portion of his or her Deferrable Amount to his or her
Interest Account and/or Stock Account. No deferral shall be made of any
compensation payable after termination of the Eligible Director's service on
the Board.
17
<PAGE> 3
Section 3. Time of Election of Deferral. An Eligible Director who wishes to
defer compensation must irrevocably elect to do so during the applicable
Enrollment Period. The Enrollment Period shall end on or before December 31 of
the calendar year immediately preceding the year in which the Eligible
Director's applicable Deferrable Amount will be earned. Elections shall be
made annually.
Section 4. Hypothetical Investments.
Section 4.1. Interest Account. Amounts in a Participant's Interest Account
are hypothetically invested in an interest bearing account which bears
interest computed at the Interest Rate, compounded monthly.
Section 4.2. Stock Account. Amounts in a Participant's Stock Account are
hypothetically invested in units of Common Stock. Amounts deferred into a
Stock Account are recorded as units of Common Stock, and fractions thereof,
with one unit equating to a single share of Common Stock. Thus, the value
of one unit shall be the Market Value of a single share of Common Stock.
The use of units is merely a bookkeeping convenience; the units are not
actual shares of Common Stock. The Company will not reserve or otherwise
set aside any Common Stock for or to any Stock Account. The maximum number
of Common Stock units that may be hypothetically purchased by deferral of
compensation to Stock Accounts under this Plan is 80,000.
Section 5. Deferrals and Crediting Amounts to Accounts.
Section 5.1. Manner of Electing Deferral. An Eligible Director may elect
to defer compensation by executing and returning to the Committee on
Directors a deferred compensation form provided by the Company. The form
shall indicate: (i) the amount of Deferrable Amount to be deferred; and
(ii) the portion of the deferral to be credited to the Participant's
Interest Account and Stock Account, respectively. An election to defer
compensation shall be irrevocable following the end of the applicable
Enrollment Period, but the portion of the deferral to be credited to the
Participant's Interest Account and Stock Account, respectively, may be
reallocated by the Participant in the manner specified by the Committee on
Directors or its authorized designee through and including the business day
immediately preceding the date on which the deferred amount is credited to
the Participant's Accounts pursuant to Section 5.2.
Section 5.2. Crediting of Amounts to Accounts. Amounts to be deferred
shall be credited to the Participant's Interest Account and/or Stock
Account, as applicable, as of the date such amounts are otherwise payable.
Section 6. Deferral Period. Subject to Sections 9, 10 and 17 hereof, the
compensation which a Participant elects to defer under this Plan shall be
deferred until the Participant ceases to serve as a member of the Board. Any
such election shall be made during the applicable Enrollment Period on the
deferred compensation form referenced in Section 5 above. The payment of a
Participant's account shall be governed by Sections 8, 9, 10 and 17, as
applicable.
Section 7. Investment in the Stock Account and Transfers Between Accounts
Section 7.1. Election Into the Stock Account. If a Participant elects to
defer compensation into his or her Stock Account, his or her Stock Account
shall be credited, as of the date described in Section 5.2, with that
number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount to be deferred into the Stock Account by the
Market Value of the Common Stock as of such date.
18
<PAGE> 4
Section 7.2. Transfers Between Accounts. A Participant may direct that all
or any portion, designated as a whole dollar amount, of the existing
balance of one of his or her Accounts be transferred to his or her other
Account, effective as of (i) the date such election is made, if and only
if such election is made prior to the close of trading on the New York
Stock Exchange on a day on which the Common Stock is traded on the New York
Stock Exchange, or (ii) if such election is made after the close of
trading on the New York Stock Exchange on a given day or at any time on a
day on which no sales of Common Stock are made on the New York Stock
Exchange, then on the next business day on which the Common Stock is traded
on the New York Stock Exchange (the date described in (i) or (ii), as
applicable, is referred to hereinafter as the election's "Effective Date").
Such election shall be made in the manner specified by the Committee on
Directors or its authorized designee during the period that begins on the
third business day following the public release of the Company's quarterly
earnings report and that ends on the last business day of the second
calendar month following the release of the Company's quarterly earnings
report; provided, however, that a Participant may only elect to transfer
between his or her Accounts if he or she has made no election within the
previous six months to effect an "opposite way" fund-switching (i.e.,
transfer out versus transfer in) transfer into or out of the Stock Account
or any other "opposite way" intra-plan transfer or plan distribution
involving a Company equity securities fund which constitutes a
"Discretionary Transaction" as defined in Rule 16b-3 under the Exchange
Act.
Section 7.3. Transfer Into the Stock Account. If a Participant elects
pursuant to Section 7.2 to transfer an amount from his or her Interest
Account to his or her Stock Account, effective as of the election's
Effective Date, (i) his or her Stock Account shall be credited with that
number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount elected to be transferred by the Market Value of
the Common Stock on the Valuation Date immediately preceding the election's
Effective Date; and (ii) his or her Interest Account shall be reduced by
the amount elected to be transferred.
Section 7.4. Transfer Out of the Stock Account. If a Participant elects
pursuant to Section 7.2 to transfer an amount from his or her Stock Account
to his or her Interest Account, effective as of the election's Effective
Date, (i) his or her Interest Account shall be credited with a dollar
amount equal to the amount obtained by multiplying the number of units to
be transferred by the Market Value of the Common Stock on the Valuation
Date immediately preceding the election's Effective Date; and (ii) his or
her Stock Account shall be reduced by the number of units elected to be
transferred.
Section 7.5. Dividend Equivalents. Effective as of the payment date for
each cash dividend on the Common Stock, the Stock Account of each
Participant who had a balance in his or her Stock Account on the record
date for such dividend shall be credited with a number of units of Common
Stock, and fractions thereof, obtained by dividing (i) the aggregate dollar
amount of such cash dividend payable in respect of such Participant's Stock
Account (determined by multiplying the dollar value of the dividend paid
upon a single share of Common Stock by the number of units of Common Stock
held in the Participant's Stock Account on the record date for such
dividend); by (ii) the Market Value of the Common Stock on the Valuation
Date immediately preceding the payment date for such cash dividend.
Section 7.6. Stock Dividends. Effective as of the payment date for each
stock dividend on the Common Stock, additional units of Common Stock shall
be credited to the Stock Account of each Participant who had a balance in
his or her Stock Account on the record date for such dividend. The number
of units that shall be credited to the Stock Account of such a Participant
shall equal the number of shares of Common Stock, and fractions thereof,
which the Participant would have received as stock dividends had he or she
been the owner on the record date for such stock dividend of the number of
shares of Common Stock equal to the number of units credited to his or her
Stock Account on such record date.
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<PAGE> 5
Section 7.7. Recapitalization. If, as a result of a recapitalization of
the Company, the outstanding shares of Common Stock shall be changed into a
greater number or smaller number of shares, the number of units credited to
a Participant's Stock Account shall be appropriately adjusted on the same
basis.
Section 7.8. Distributions. Amounts in respect of units of Common Stock
may only be distributed out of the Stock Account by transfer to the
Interest Account (pursuant to Sections 7.2 and 7.4 or 7.10) or withdrawal
from the Stock Account (pursuant to Section 8, 9, 10, or 17), and shall be
distributed in cash. The number of units to be distributed from a
Participant's Stock Account shall be valued by multiplying the number of
such units by the Market Value of the Common Stock as of the Valuation Date
immediately preceding the date such distribution is to occur.
Section 7.9. Responsibility for Investment Choices. Each Participant is
solely responsible for any decision to defer compensation into his or her
Stock Account and to transfer amounts to and from his or her Stock Account
and accepts all investment risks entailed by such decision, including the
risk of loss and a decrease in the value of the amounts he or she elects to
defer into his or her Stock Account.
Section 7.10. Liquidation of Stock Account. Upon the date that a
Participant ceases to serve on the Board, the entire balance, if any, of
the Participant's Stock Account shall automatically be transferred to his
or her Interest Account. For purposes of valuing the units of Common Stock
subject to such a transfer, the approach described in Section 7.8 shall be
used.
Section 8. Payment of Deferred Compensation
Section 8.1. Background. No withdrawal may be made from a Participant's
Account except as provided in this Section 8 and Sections 9, 10 and 17.
Section 8.2. Manner of Payment. Payment of a Participant's Account shall
be made in a single lump sum or annual installments, in the sole discretion
of the Committee on Directors. The maximum number of annual installments
is ten. All payments from the Plan shall be made in cash.
Section 8.3. Timing of Payments. Payments shall be made by the fifth
business day in March and shall commence in any year designated in the sole
discretion of the Committee on Directors, up through the tenth year
following the year in which the Participant ceases to be a member of the
Board for any reason, but in no event shall payment commence later than the
year the Participant reaches age 71.
Section 8.4. Valuation. The amount of each payment shall be equal to the
value, as of the preceding Valuation Date, of the Participant's Account,
divided by the number of installments remaining to be paid.
Section 9. Payment of Deferred Compensation After Death. If a Participant dies
prior to complete payment of his or her Accounts, the balance of such Accounts,
valued as of the Valuation Date immediately preceding the date payment is made,
shall be paid in a single, lump-sum payment to: (i) the beneficiary or
contingent beneficiary designated by the Participant on forms supplied by the
Committee on Directors; or, in the absence of a valid designation of a
beneficiary or contingent beneficiary, (ii) the Participant's estate within 30
days after appointment of a legal representative of the deceased Participant.
Section 10. Acceleration of Payment for Hardship. Upon written approval from
the Committee on Directors and subject to the restrictions in the next two
sentences, a Participant, whether or not he or she is still serving as a member
of the Board, may be permitted to receive all or part of his or her Accounts if
the Committee on Directors determines that an emergency event beyond the
Participant's control exists which would cause such Participant severe
financial hardship if the payment of his or her Accounts were not
20
<PAGE> 6
approved. Any such distribution for hardship shall be limited to the amount
needed to meet such emergency. A Participant may only receive a hardship
withdrawal from his or her Stock Account pursuant to this Section 10 if he or
she has made no election within the previous six months to effect a
fund-switching transfer into the Stock Account or any other "opposite way"
intra-plan transfer into a Company equity securities fund which constitutes a
"Discretionary Transaction" as defined in Rule 16b-3 under the Exchange Act.
Section 11. Participant's Rights Unsecured. The benefits payable under this
Plan shall be paid by the Company each year out of its general assets. To the
extent a Participant acquires the right to receive a payment under this Plan,
such right shall be no greater than that of an unsecured general creditor of
the Company. No amount payable under this Plan may be assigned, transferred,
encumbered or subject to any legal process for the payment of any claim against
a Participant. No Participant shall have the right to exercise any of the
rights or privileges of a shareowner with respect to units credited to his or
her Stock Account.
Section 12. No Right to Continued Service. Participation in the Plan shall not
give any Participant any right to remain a member of the Board.
Section 13. Statement of Account. Statements will be sent no less frequently
than annually to each Participant or his or her estate showing the value of the
Participant's Accounts.
Section 14. Deductions. The Company will withhold to the extent required by
law all applicable income and other taxes from amounts deferred or paid under
the Plan.
Section 15. Administration.
Section 15.1. Responsibility. Except as expressly provided otherwise
herein, the Committee on Directors shall have total and exclusive
responsibility to control, operate, manage and administer the Plan in
accordance with its terms.
Section 15.2. Authority of the Committee on Directors. The Committee on
Directors shall have all the authority that may be necessary or helpful to
enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the preceding sentence, the Committee on
Directors shall have the exclusive right: to interpret the Plan, to
determine eligibility for participation in the Plan, to decide all
questions concerning eligibility for and the amount of benefits payable
under the Plan, to construe any ambiguous provision of the Plan, to correct
any default, to supply any omission, to reconcile any inconsistency, and to
decide any and all questions arising in the administration, interpretation,
and application of the Plan.
Section 15.3. Discretionary Authority. The Committee on Directors shall
have full discretionary authority in all matters related to the discharge
of its responsibilities and the exercise of its authority under the Plan
including, without limitation, its construction of the terms of the Plan
and its determination of eligibility for participation and benefits under
the Plan. It is the intent that the decisions of the Committee on
Directors and its action with respect to the Plan shall be final and
binding upon all persons having or claiming to have any right or interest
in or under the Plan and that no such decision or action shall be modified
upon judicial review unless such decision or action is proven to be
arbitrary or capricious.
Section 15.4. Delegation of Authority. The Committee on Directors may
delegate some or all of its authority under the Plan to any person or
persons provided that any such delegation be in writing.
Section 15.5. Restriction on Authority of the Committee on Directors.
Under any circumstances where the Committee on Directors is authorized to
make a discretionary decision concerning a payment of any type under this
Plan to a member of such Committee, the member of the Committee who is to
receive such payment shall take no part in the deliberations or have any
voting or other power with respect to such decision.
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<PAGE> 7
Section 16. Amendment. The Board may suspend or terminate the Plan at any
time. In addition, the Board may, from time to time, amend the Plan in any
manner without shareowner approval; provided, however, that the Board may
condition any amendment on the approval of shareowners if such approval is
necessary or advisable with respect to tax, securities, or other applicable
laws. No amendment, modification, or termination shall, without the consent of
a Participant, adversely affect such Participant's accruals in his or her
Accounts as of the date of such amendment, modification, or termination.
Section 17. Change in Control.
Section 17.1. Background. The terms of this Section 17 shall immediately
become operative, without further action or consent by any person or
entity, upon a Change in Control, and once operative shall supersede and
control over any other provisions of this Plan.
Section 17.2. Acceleration of Payment Upon Change in Control. Upon the
occurrence of a Change in Control, each Participant, whether or not he or
she is still a Director, shall be paid in a single, lump-sum cash payment
the balance of his or her Accounts as of the Valuation Date immediately
preceding the date payment is made. Such payment shall be made as soon as
practicable, but in no event later than 90 days after the date of the
Change in Control.
Section 17.3. Amendment On or After Change in Control. On or after a
Change in Control, no action, including, but not by way of limitation, the
amendment, suspension or termination of the Plan, shall be taken which
would affect the rights of any Participant or the operation of this Plan
with respect to the balance in the Participant's Accounts.
Section 18. Governing Law. The Plan shall be construed, governed and enforced
in accordance with the law of Tennessee, except as such laws are preempted by
applicable federal law.
Section 19. Successors and Assigns. This Plan shall be binding upon the
successors and assigns of the parties hereto.
Section 20. Compliance with SEC Regulations. It is the Company's intent that
the Plan comply in all respects with Rule 16b-3 of the Exchange Act, and any
regulations promulgated thereunder. If any provision of the Plan is found not
to be in compliance with such rule, the provision shall be deemed null and
void. All transactions under the Plan, including, but not by way of
limitation, a Participant's election to defer compensation or transfer Account
balances under Section 7 and hardship withdrawals under Section 10, shall be
executed in accordance with the requirements of Section 16 of the Exchange Act,
as amended and any regulations promulgated thereunder. To the extent that any
of the provisions contained herein do not conform with Rule 16b-3 of the
Exchange Act or any amendments thereto or any successor regulation, then the
Committee may make such modifications so as to conform the Plan to the Rule's
requirements.
22
<PAGE> 1
EXHIBIT 10.02
AMENDED AND RESTATED
EASTMAN CHEMICAL COMPANY
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE 1 - PURPOSE OF THE PLAN
Section 1.1. Purpose. The purpose of the Eastman Chemical Company 1996
Non-Employee Director Stock Option Plan is to promote the long-term growth of
Eastman Chemical Company by providing a vehicle for Non-Employee Directors to
increase their proprietary interest in Eastman Chemical Company and to attract
and retain highly qualified and capable Non-Employee Directors. This Plan was
originally adopted effective May 2, 1996, and is amended and restated effective
as of November 1, 1996.
ARTICLE 2 - DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
Section 2.1. "Annual Retainer" means the annual cash retainer fee
(specifically, not including meeting fees) payable by the Company to a
Non-Employee Director for services as a director (and, if applicable, as the
chairman of a committee of the Board) of the Company, as such amount may be
changed from time to time. The Annual Retainer is payable one-half in January
and one-half in July of each year, with each half being referred to hereinafter
as a "Semi-Annual Retainer."
Section 2.2. "Acquisition" has the meaning assigned such term in Section
11.3 hereof.
Section 2.3. "Acquisition Consideration" has the meaning assigned such
term in Section 11.3 hereof.
Section 2.4. "Board" means the Board of Directors of the Company.
Section 2.5. "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 February 1, 1996, pursuant to Section 13 or 15(d) of
the Exchange Act; provided that, without limitation, a Change in Control shall
be deemed to have occurred at such time as (i) any "person" within the meaning
of Section 14(d) of the Exchange Act, other than the Company, a subsidiary of
the Company, or any employee benefit plan(s) sponsored by the Company or any
subsidiary of the Company, is or has become the "beneficial owner," as defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of 25% or more of
the combined voting power of the outstanding securities of the Company
ordinarily having the right to vote at the election of directors; provided,
however, that the following will not constitute a Change in Control: any
acquisition by any corporation if, immediately following such acquisition, more
than 75% of the outstanding securities of the acquiring corporation ordinarily
having the right to vote in the election of directors is beneficially owned by
all or substantially all of those persons who, immediately prior to such
acquisition, were the beneficial owners of the outstanding securities of the
Company ordinarily having the right to vote in the election of directors; or
(ii) individuals who constituted the Board on January 1, 1994 (the "Incumbent
Board") have ceased for any reason to constitute at least a majority thereof,
provided that: any person becoming a director subsequent to January 1, 1994
whose election, or nomination for election by the Company's shareowners, was
approved by a vote of at least three-quarters (3/4) of the directors comprising
the Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is or was named as a nominee for
director without objection to such nomination) shall be, for purposes of the
Plan, considered as though such person were a member of the Incumbent Board; or
(iii) upon approval by the Company's shareowners of a reorganization, merger or
consolidation, other than one with respect to which all or substantially all of
those persons who were the beneficial owners, immediately prior to such
reorganization, merger or consolidation, of outstanding securities of the
Company ordinarily
23
<PAGE> 2
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 of
the Company. Notwithstanding the occurrence of any of the foregoing, the Board
may determine, if it deems it to be in the best interest of the Company, that
an event or events otherwise constituting a Change in Control shall not be so
considered. Such determination shall be effective only if it is made by the
Board prior to the occurrence of an event that otherwise would be or probably
will lead to a Change in Control or after such event if made by the Board a
majority of which is composed of directors who were members of the Board
immediately prior to the event that otherwise would be or probably will lead to
a Change in Control.
Section 2.6. "Committee" means the Committee on Directors of the Board.
Section 2.7. "Company" means Eastman Chemical Company.
Section 2.8. "Election Period" means the period designated by the
Committee on Directors each year during which Non-Employee Directors may elect
to receive Options in lieu of some or all of their Annual Retainer; provided
however, that such period shall end on or before December 31 of each year.
Section 2.9. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Section 2.10. "Fair Market Value" means the closing price of the shares of
Common Stock on the New York Stock Exchange on the day on which such value is
to be determined or, if no such shares were traded on such day, on the next
preceding day on which such shares were traded; provided, however, that if at
any relevant time the shares of Common Stock are not traded on the New York
Stock Exchange, then "Fair Market Value" shall be determined by reference to
the closing price of the shares of Common Stock on another national securities
exchange, if applicable, or if the shares are not traded on an exchange but are
traded in the over-the-counter market, by reference to the last sale price or
the closing "asked" price of the shares in the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotation
System (NASDAQ) or other national quotation service.
Section 2.11. "Option" means an option to purchase Shares awarded under
Article 8 which does not meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended, or any successor law.
Section 2.12. "Option Grant Date" means the date upon which an Option is
granted to a Non-Employee Director.
Section 2.13. "Optionee" means a Non-Employee Director of the Company to
whom an Option has been granted or, in the event of such Non-Employee
Director's death prior to the expiration of an Option, such Non-Employee
Director's executor, administrator, beneficiary or similar person.
Section 2.14. "Non-Employee Director" means a director of the Company who
is not an employee of the Company or any subsidiary of the Company.
Section 2.15. "Plan" means this Amended and Restated Eastman Chemical
Company 1996 Non-Employee Director Stock Option Plan.
Section 2.16. "Shares" means shares of the Common Stock, par value $0.01
per share, of the Company.
Section 2.17. "Stock Option Award Notice" means a written award notice to
a Non-Employee Director from the Company evidencing an Option.
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ARTICLE 3 - ADMINISTRATION OF THE PLAN
Section 3.1. Administrator of the Plan. The Plan shall be administered by
the Committee.
Section 3.2. Authority of Committee. The Committee shall have full power
and authority to: (i) interpret and construe the Plan and adopt such rules and
regulations as it shall deem necessary and advisable to implement and
administer the Plan, and (ii) designate persons other than members of the
Committee or the Board to carry out its responsibilities, subject to such
limitations, restrictions and conditions as it may prescribe, such
determinations to be made in accordance with the Committee's best business
judgment as to the best interests of the Company and its shareowners and in
accordance with the purposes of the Plan. The Committee may delegate
administrative duties under the Plan to one or more agents as it shall deem
necessary or advisable.
Section 3.3. Effect of Committee Determinations. No member of the
Committee or the Board shall be personally liable for any action or
determination made in good faith with respect to the Plan or any Option or to
any settlement of any dispute between a Non-Employee Director and the Company.
Any decision or action taken by the Committee or the Board with respect to an
Option or the administration or interpretation of the Plan shall be conclusive
and binding upon all persons.
ARTICLE 4 - AWARDS UNDER THE PLAN
Section 4.1. Stock Option Award Notice. Options may be granted to
Non-Employee Directors in accordance with Article 8. Each Option granted under
the Plan shall be evidenced by a Stock Option Award Notice which shall be
executed by an authorized officer of the Company. Such Award Notice shall
contain provisions regarding (a) the number of Shares that may be issued upon
exercise of the Option, (b) the purchase price of the Shares and the means of
payment therefor, (c) the term of the Option, and (d) such other terms and
conditions not inconsistent with the Plan as may be determined from time to
time by the Committee.
ARTICLE 5 - ELIGIBILITY
Section 5.1. Eligibility. Non-Employee Directors of the Company shall be
eligible to participate in the Plan in accordance with Article 8.
ARTICLE 6 - SHARES SUBJECT TO THE PLAN
Section 6.1. Shares Subject to the Plan. Subject to adjustment as
provided in Article 11, the aggregate number of Shares which may be issued upon
the exercise of Options shall not exceed 150,000 Shares, and there are hereby
reserved for issuance under the Plan 150,000 Shares. To the extent that Shares
subject to an outstanding Option are not issued or delivered by reason of the
expiration, termination, cancellation or forfeiture of such Option or by reason
of the delivery of Shares (either actually or by attestation) to pay all or a
portion of the exercise price of such Option, then such Shares shall again be
available under the Plan.
ARTICLE 7 - NON-TRANSFERABILITY OF OPTIONS
Section 7.1. Options Not Transferable. All Options granted under the Plan
shall not be transferable by a Non-Employee Director during his or her lifetime
and may not be assigned, exchanged, pledged, transferred or otherwise
encumbered or disposed of except by court order, will or by the laws of descent
and distribution. Options shall be exercisable during the Optionee's lifetime
only by the Optionee or by the Optionee's guardian, legal representative or
similar person.
ARTICLE 8 - ELECTIVE OPTIONS
Each Non-Employee Director shall be granted Options subject to the
following terms and conditions:
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Section 8.1. Time of Grant.
(a) On the first business day of January of each year, Options shall be
granted to each Non-Employee Director who, during the applicable Election
Period, filed with the Committee or its designee a written irrevocable election
to receive Options in lieu of all or a portion of such Non-Employee Director's
Semi-Annual Retainer payable in January of such year.
(b) On the first business day of July of each year, Options shall be
granted to each Non-Employee Director who, during the applicable Election
Period, filed with the Committee or its designee a written irrevocable election
to receive Options in lieu of all or a portion of such Non-Employee Director's
Semi-Annual Retainer payable in July of such year.
(c) Elections shall be made annually. The Election Period shall end on or
before December 31 of the calendar year immediately preceding the year in which
the Non-Employee Director's applicable Annual Retainer will be earned.
Section 8.2. Number and Terms of Options. The number of Shares subject to
an Option granted pursuant to this Article 8 shall be the number of whole
Shares equal to (i) the product of three and one-third, times the portion of
the Annual Retainer which the Non-Employee Director has elected pursuant to
Section 8.1 shall be payable in Options, divided by (ii) the Fair Market Value
per Share on the Option Grant Date. In determining the number of Shares
subject to an Option, any fraction of a Share shall be rounded up to the next
whole number of Shares. The purchase price per Share under each Option granted
pursuant to this Article 8 shall be 100% of the Fair Market Value per Share on
the Option Grant Date.
Section 8.3. Exercise of Options. Each Option shall be fully exercisable
on and after that date which is six months after the Option Grant Date and,
subject to Article 9, shall not be exercisable prior to such date. An
optionee's death, disability, retirement or other termination of directorship
or failure to be reelected as a director shall not shorten the term of any
outstanding option. In no event shall the period of time over which the Option
may be exercised exceed ten years from the Option Grant Date. An Option, or
portion thereof, may be exercised in whole or in part only with respect to
whole Shares.
Shares shall be issued to the Optionee pursuant to the exercise of an
Option only upon receipt by the Company from the Optionee of payment in full
either in cash or by surrendering (or attesting to the ownership of) Shares
together with proof acceptable to the Committee that such Shares, if acquired
by the Optionee pursuant to a previous option exercise, have been owned by the
Optionee for at least six months prior to the date of exercise of the Option,
or a combination of cash and Shares, in an amount or having a combined value
equal to the aggregate purchase price for the Shares subject to the Option or
portion thereof being exercised. The value of owned Shares submitted (directly
or by attestation) in full or partial payment for the Shares purchased upon
exercise of an Option shall be equal to the aggregate Fair Market Value of such
owned Shares on the date of the exercise of such Option.
ARTICLE 9 - CHANGE IN CONTROL
Section 9.1. Change in Control. Upon the occurrence of a Change in
Control, any and all outstanding Options shall become immediately exercisable.
ARTICLE 10 - AMENDMENT AND TERMINATION
Section 10.1. Amendment, Suspension or Early Termination. The Board may
suspend or terminate the Plan at any time. In addition, the Board may, from
time to time, amend the Plan in any manner without shareowner approval;
provided, however, that the Board may condition any amendments on the approval
of shareowners if such approval is necessary or advisable with respect to
applicable rules of the New York Stock Exchange or tax, securities, or other
applicable laws. No action authorized by this Article shall adversely change
the terms and conditions of an outstanding Option without the Optionee's
consent.
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Section 10.2. Expiration. Unless earlier terminated by the Board, the
Plan shall expire on the tenth anniversary of its effective date. No Options
may be granted under the Plan thereafter, but Options granted prior thereto
shall continue to be exercisable and may be exercised according to their terms.
ARTICLE 11 - ADJUSTMENT PROVISIONS
Section 11.1. Change in Corporate Structure Affecting Shares. If the
Company shall at any time change the number of issued Shares without new
consideration to the Company (such as by stock dividend, stock split,
recapitalization, reorganization, exchange of shares, liquidation, combination
or other change in corporate structure affecting the Shares) or make a
distribution of cash or property which has a substantial impact on the value of
issued Shares, the total number of Shares reserved for issuance under the Plan
shall be appropriately adjusted and the number of Shares covered by each
outstanding Option and the purchase price per Share under each outstanding
Option and the number of shares underlying Options to be issued annually
pursuant to Section 8.1 shall be adjusted so that the aggregate consideration
payable to the Company and the value of each such Option shall not be changed.
Section 11.2. Certain Reorganizations. Notwithstanding any other
provision of the Plan, and without affecting the number of Shares reserved or
available hereunder, the Committee shall authorize the issuance, continuation
or assumption of outstanding Options or provide for other equitable adjustments
after changes in the Shares resulting from any merger, consolidation, sale of
assets, acquisition of property or stock, recapitalization, reorganization or
similar occurrence in which the Company is the continuing or surviving
corporation, upon such terms and conditions as it may deem necessary to
preserve Optionees' rights under the Plan.
Section 11.3. Acquisitions. In the case of any sale of assets, merger,
consolidation or combination of the Company with or into another corporation
other than a transaction in which the Company is the continuing or surviving
corporation and which does not result in the outstanding Shares being converted
into or exchanged for different securities, cash or other property, or any
combination thereof (an "Acquisition"), any Optionee who holds an outstanding
Option shall have the right (subject to the provisions of the Plan and any
limitation applicable to the Option) thereafter and during the term of the
Option, to receive upon exercise thereof the Acquisition Consideration (as
defined below) receivable upon the Acquisition by a holder of the number of
Shares which would have been obtained upon exercise of the Option or portion
thereof, as the case may be, immediately prior to the Acquisition. The term
"Acquisition Consideration" shall mean the kind and amount of shares of the
surviving or new corporation, cash, securities, evidence of indebtedness, other
property or any combination thereof receivable in respect of one Share of the
Company upon consummation of an Acquisition.
ARTICLE 12 - EFFECTIVE DATE
Section 12.3. Effective Date. The Plan was initially adopted effective
May 2, 1996, upon approval by the affirmative vote of the holders of a majority
of the Shares represented and entitled to vote at the 1996 annual meeting of
shareowners, and is amended and restated effective November 1, 1996, by action
of the Board taken on October 10, 1996.
ARTICLE 13 - MISCELLANEOUS
Section 13.1. Compliance with SEC Regulations. It is the Company's intent
that the Plan comply in all respects with Rule 16b-3 of the Exchange Act, and
any regulations promulgated thereunder. If any provision of the Plan is found
not to be in compliance with such rule, the provision shall be deemed null and
void. All grants and exercises of Options under the Plan shall be executed in
accordance with the requirements of Section 16 of the Exchange Act, as amended
and any regulations promulgated thereunder. To the extent that any of the
provisions contained herein do not conform with Rule 16b-3 of the Exchange Act
or any amendments thereto or any successor regulation, then the Committee may
make such modifications so as to conform the Plan and any Options granted
thereunder to the Rule's requirements.
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Section 13.2. Right to Service. Except as provided in the Plan, no
Non-Employee Director shall have any claim or right to be granted an Option
under the Plan. Neither the Plan nor any action pursuant thereto shall be
construed as giving any Non-Employee Director a right to be retained in the
service of the Company. The adoption of this Plan shall not affect any other
compensation, retirement or other benefit plan or program in effect for the
Company.
Section 13.3. Validity. In the event that any provision of the Plan or
any related Stock Option Award Notice is held to be invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of the Plan or any related Stock Option Award
Notice.
Section 13.4. Inurement of Rights and Obligations. The rights and
obligations under the Plan and any related agreements shall inure to the
benefit of, and shall be binding upon the Company, its successors and assigns,
and the Non-Employee Directors and their beneficiaries.
Section 13.5. Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of the Plan.
Section 13.6. Governing Law. The Plan shall be construed, governed and
enforced in accordance with the law of Tennessee, except as such laws are
preempted by applicable federal law.
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EXHIBIT 10.03
AMENDED AND RESTATED
EASTMAN EXECUTIVE DEFERRED COMPENSATION PLAN
Preamble. The Amended and Restated Eastman Executive Deferred Compensation
Plan is an unfunded, nonqualified deferred compensation arrangement for
eligible employees of Eastman Chemical Company ("the Company") and certain of
its subsidiaries. Under the Plan, each Eligible Employee is annually given an
opportunity to elect to defer payment of part of his or her cash compensation.
This Plan also assumed the liabilities accrued under the Kodak Executive
Deferred Compensation Plan, as of January 1, 1994, in respect of each Eligible
Employee who was actively employed by the Company as of such date and who chose
to transfer his or her deferred compensation account to the Company. This Plan
originally was adopted effective January 1, 1994, was amended effective March
2, 1994, and is further amended and restated effective as of October 10, 1996.
Section 1. Definitions.
Section 1.1. "Account" means the Interest Account or the Stock Account.
Section 1.2. "Board" means the Board of Directors of the Company.
Section 1.3. "Change In Control" means a change in control of the Company
of a nature that would be required to be reported (assuming such event
has not been "previously reported") in response to Item 1 (a) of a
Current Report on Form 8-K, as in effect on August 1, 1993, pursuant to
Section 13 or 15(d) of the Exchange Act; provided that, without
limitation, a Change In Control shall be deemed to have occurred at such
time as (i) any "person" within the meaning of Section 14(d) of the
Exchange Act, other than the Company, a subsidiary of the Company, or any
employee benefit plan(s) sponsored by the Company or any subsidiary of
the Company, is or has become the "beneficial owner," as defined in Rule
13d-3 under the Exchange Act, directly or indirectly, of 25% or more of
the combined voting power of the outstanding securities of the Company
ordinarily having the right to vote at the election of directors;
provided, however, that the following will not constitute a Change In
Control: any acquisition by any corporation if, immediately following
such acquisition, more than 75% of the outstanding securities of the
acquiring corporation ordinarily having the right to vote in the election
of directors is beneficially owned by all or substantially all of those
persons who, immediately prior to such acquisition, were the beneficial
owners of the outstanding securities of the Company ordinarily having the
right to vote in the election of directors, or (ii) individuals who
constitute the Board on January 1, 1994 (the "Incumbent Board") have
ceased for any reason to constitute at least a majority thereof, provided
that: any person becoming a director subsequent to January 1, 1994 whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least three-quarters (3/4) of the directors
comprising the Incumbent Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a
nominee for director without objection to such nomination) shall be, for
purposes of the Plan, considered as though such person were a member of
the Incumbent Board, (iii) upon approval by the Company's stockholders of
a reorganization, merger or consolidation, other than one with respect to
which all or substantially all of those persons who were the beneficial
owners, immediately prior to such reorganization, merger or
consolidation, of outstanding securities of the Company ordinarily having
the right to vote in the election of directors own, immediately after
such transaction, more than 75 % of the outstanding securities of the
resulting corporation ordinarily having the right to vote in the election
of directors; or (iv) upon approval by the Company's stockholders of a
complete liquidation and dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company
other than to a subsidiary of the Company. Notwithstanding the
occurrence of any of the foregoing, the Compensation Committee may
determine, if it deems it to be in the best interest of the Company, that
an event or events otherwise constituting a Change In Control shall not
be so considered. Such determination shall be effective only if it is
made by the Compensation Committee prior to the occurrence of an event
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that otherwise would be or probably will lead to a Change In Control or
after such event if made by the Compensation Committee a majority of
which is composed of directors who were members of the Board immediately
prior to the event that otherwise would be or probably will lead to a
Change In Control.
Section 1.4. "Common Stock" means the $.01 par value common stock of
the Company.
Section 1.5. "Company" means Eastman Chemical Company.
Section 1.6. "Compensation Committee" shall mean the Compensation and
Management Development Committee of the Board.
Section 1.7. "Deferrable Amount" means, for a given fiscal year of the
Company, an amount equal to the sum of the Eligible Employee's (i)
annual base cash compensation; (ii) annual cash payments under the
Eastman Performance Plan and the Annual Performance Plan of the Company;
and (iii) stock and stock-based awards under the Omnibus Plan which,
under the terms of the Omnibus Plan and the award, are payable in cash
and required or allowed to be deferred into this Plan; provided, however,
that the Deferrable Amount shall not include any amount that must be
withheld from the Eligible Employee's wages for income or employment tax
purposes. In addition, each Eligible Employee as of January 1, 1994, who
had previously participated in the Kodak Executive Deferred Compensation
Plan could elect to transfer the amount then in his or her account in the
Kodak Executive Deferred Compensation Plan into the Plan. Furthermore,
"Deferred Amount" included, for 1993, annual cash payments under the
Kodak Wage Dividend policy and Success Sharing program payable in 1994
and attributable to 1993 service.
Section 1.8. "Eligible Employee" means a U.S.-based employee of the
Company or any of its U.S. Subsidiaries who, as of the first day of the
applicable Enrollment Period (i) has a salary grade classification of SG
49 or above; or (ii) is not covered under clause (i), but who was an
Eligible Employee under the Kodak Executive Deferred Compensation Plan,
as in effect on January 1, 1994. Any employee who becomes eligible to
participate in this Plan and in a future year does not qualify as an
Eligible Employee because of a change in position level shall
nevertheless be eligible to participate in such year.
Section 1.9. "Enrollment Period" means the period designated by the
Compensation Committee each year; provided however, that such period
shall end on or before the last business day before the last Sunday in
December of each year.
Section 1.10. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
Section 1.11. "Interest Account" means the account established by the
Company for each Participant for compensation deferred pursuant to this
Plan and which shall bear interest as described in Section 4.1 below.
The maintenance of individual Interest Accounts is for bookkeeping
purposes only.
Section 1.12. "Interest Rate" means the monthly average of bank prime
lending rates to most favored customers as published in THE WALL STREET
JOURNAL, such average to be determined as of the last day of each month.
Section 1.13. "Market Value" means the closing price of the shares of
Common Stock on the New York Stock Exchange on the day on which such
value is to be determined or, if no such shares were traded on such day,
said closing price on the next business day on which such shares are
traded; provided, however, that if at any relevant time the shares of
Common Stock are not traded on the New York Stock Exchange, then "Market
Value" shall be determined by reference to the closing price of the
shares of Common Stock on another national securities exchange, if
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<PAGE> 3
applicable, or if the shares are not traded on an exchange but are traded
in the over-the-counter market, by reference to the last sale price or
the closing "asked" price of the shares in the over-the-counter market as
reported by the National Association of Securities Dealers Automated
Quotation System (NASDAQ) or other national quotation service.
Section 1.14. "Omnibus Plan" means the Eastman Chemical Company 1994
Omnibus Long-Term Compensation Plan or any successor plan to the Omnibus
Plan providing for awards of stock and stock-based compensation to
Company employees.
Section 1.15. "Participant" means an Eligible Employee who elects for one
or more years to defer compensation pursuant to this Plan.
Section 1.16. "Plan" means this Amended and Restated Eastman Executive
Deferred Compensation Plan.
Section 1.17. "Section 16 Insider" means a Participant who is, with
respect to the Company, subject to Section 16 of the Exchange Act.
Section 1.18. "Stock Account" means the account established by the
Company for each Participant, the performance of which shall be measured
by reference to the Market Value of Common Stock. The maintenance of
individual Stock Accounts is for bookkeeping purposes only.
Section 1.19. "U.S. Subsidiaries" means the United States subsidiaries of
the Company listed on Schedule A.
Section 1.20. "Valuation Date" means each business day.
Section 2. Deferral of Compensation. An Eligible Employee may elect to defer
receipt of all or any portion of his or her Deferrable Amount to his or her
Interest Account and/or Stock Account. A Participant in this Plan need not
participate in the Eastman Investment Plan. If an Eligible Employee terminates
employment with the Company or any of its U.S. Subsidiaries, any previous
deferral election with respect to a Wage Dividend, Success Sharing, Eastman
Performance Plan, Annual Performance Plan or Omnibus Plan payment or award
shall remain in effect with respect to such items of compensation payable after
termination of employment.
Section 3. Time of Election of Deferral. An Eligible Employee who wishes to
defer compensation must irrevocably elect to do so during the applicable
Enrollment Period. Except as provided in the next sentence, the Enrollment
Period shall end prior to the first day of the calendar year in which the
applicable Deferrable Amount will first be paid, earned, or awarded. The
Enrollment Period with respect to payouts (if any) in 1997 under the 1994-1996
Long-Term Performance Subplan of the Omnibus Plan shall end prior to October
31, 1996. Elections shall be made annually.
This Plan was first adopted January 1, 1994, and is generally effective with
respect to compensation earned on or after such date. However, (i) if a person
who is eligible to participate in this Plan made an election under the Kodak
Executive Deferred Compensation Plan with respect to a payment under the
Management Annual Performance Plan (MAPP) that would be paid in calendar year
1994, such election remained in force and was effective under this Plan for
such MAPP payment; and (ii) Participants could elect to defer under this Plan a
Wage Dividend or Success Sharing payment payable in calendar year 1994 but
attributable to 1993 service.
Section 4. Hypothetical Investments.
Section 4.1. Interest Account. Amounts in a Participant's Interest
Account are hypothetically invested in an interest bearing account which
bears interest computed at the Interest Rate, compounded monthly.
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Section 4.2. Stock Account. Amounts in a Participant's Stock Account are
hypothetically invested in units of Common Stock. Amounts deferred into
a Stock Account are recorded as units of Common Stock, and fractions
thereof, with one unit equating to a single share of Common Stock. Thus,
the value of one unit shall be the Market Value of a single share of
Common Stock. The use of units is merely a bookkeeping convenience; the
units are not actual shares of Common Stock. The Company will not
reserve or otherwise set aside any Common Stock for or to any Stock
Account. The maximum number of Common Stock units that may be
hypothetically purchased by deferral of compensation to Stock Accounts
under this Plan is 4,500,000.
Section 5. Deferrals and Crediting Amounts to Accounts.
Section 5.1. Manner of Electing Deferral. An Eligible Employee may elect
to defer compensation by executing and returning to the Compensation
Committee a deferred compensation form provided by the Company. The form
shall indicate (i) the amount and sources of Deferrable Amount to be
deferred; (ii) whether deferral of annual base cash compensation is to be
at the same rate throughout the year, or at one rate for part of the year
and at a second rate for the remainder of the year; and (iii) the portion
of the deferral to be credited to the Participant's Interest Account and
Stock Account, respectively. An election to defer compensation shall be
irrevocable following the end of the applicable Enrollment Period, but
the portion of the deferral to be credited to the Participant's Interest
Account and Stock Account, respectively, may be reallocated by the
Participant in the manner specified by the Compensation Committee or its
authorized designee through and including the business day immediately
preceding the date on which the deferred amount is credited to the
Participant's Accounts pursuant to Section 5.2.
Section 5.2. Crediting of Amounts to Accounts. Amounts to be deferred
shall be credited to the Participant's Interest Account and/or Stock
Account, as applicable, as of the date such amounts are otherwise
payable.
Section 6. Deferral Period. Subject to Sections 9, 10, and 19 hereof, the
compensation which a Participant elects to defer under the Plan will be
deferred until the Participant retires or otherwise terminates employment with
the Company or any of its U.S. Subsidiaries. Any such election shall be made
during the applicable Enrollment Period on the deferred compensation form
referenced in Section 5 above. The payment of a Participant's Account shall be
governed by Sections 8, 9, 10, and 19, as applicable.
Notwithstanding the foregoing, any fixed date election made by an Eligible
Employee under the Kodak Executive Deferred Compensation Plan shall remain in
force under this Plan, provided he or she continues as an employee of the
Company or any of its U.S. Subsidiaries during the period of deferral. Payment
of such amount pursuant to a deferral election made under such Kodak Plan shall
be made in cash in a single lump sum on the fifth business day in March in the
year following the termination of such deferral period, and the amount of the
lump-sum due the Participant shall be valued as of the last Valuation Date in
February in the year following the termination of the deferral period. If such
Participant ceases to be an employee of the Company or any of its U.S.
Subsidiaries prior to the end of the fixed period, Section 8 shall govern the
payment of his or her Accounts.
Section 7. Investment in the Stock Account and Transfers Between Accounts.
Section 7.1. Election Into the Stock Account. If a Participant elects to
defer compensation into his or her Stock Account, his or her Stock
Account shall be credited, as of the date described in Section 5.2, with
that number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount to be deferred into the Stock Account by the
Market Value of the Common Stock as of such date.
Section 7.2. Transfers Between Accounts. A Participant may direct that
all or any portion, designated as a whole dollar amount, of the existing
balance of one of his or her Accounts be transferred to his or her other
Account, effective as of (i) the date such election is made, if and only
if such election is made prior to the close of trading on the New York
Stock Exchange on a
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day on which the Common Stock is traded on the New York Stock Exchange,
or (ii) if such election is made after the close of trading on the New
York Stock Exchange on a given day or at any time on a day on which no
sales of Common Stock are made on the New York Stock Exchange, then on
the next business day on which the Common Stock is traded on the New York
Stock Exchange (the date described in (i) or (ii), as applicable, is
referred to hereinafter as the election's "Effective Date"). Such
election shall be made in the manner specified by the Compensation
Committee or its authorized designee during the period that begins on the
third business day following the public release of the Company's
quarterly earnings report and that ends on the last business day of the
second calendar month following the end of each fiscal quarter of the
Company; provided however, that a Section 16 Insider may only elect to
transfer between his or her Accounts if he or she has made no election
within the previous six months to effect an "opposite way" fund-switching
(i.e., transfer out versus transfer in) transfer into or out of the Stock
Account or the Eastman Stock Funds of the Eastman Investment Plan or the
Savings and Investment Plan Appendix, or any other "opposite way"
intra-plan transfer or plan distribution involving a Company equity
securities fund which constitutes a "Discretionary Transaction" as
defined in Rule 16b-3 under the Exchange Act.
Section 7.3. Transfer Into the Stock Account. If a Participant elects
pursuant to Section 7.2 to transfer an amount from his or her Interest
Account to his or her Stock Account, effective as of the election's
Effective Date, (i) his or her Stock Account shall be credited with that
number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount elected to be transferred by the Market Value
of the Common Stock on the Valuation Date immediately preceding the
election's Effective Date; and (ii) his or her Interest Account shall be
reduced by the amount elected to be transferred.
Section 7.4. Transfer Out of the Stock Account. If a Participant elects
pursuant to Section 7.2 to transfer an amount from his or her Stock
Account to his or her Interest Account, effective as of the election's
Effective Date, (i) his or her Interest Account shall be credited with a
dollar amount equal to the amount obtained by multiplying the number of
units to be transferred by the Market Value of the Common Stock on the
Valuation Date immediately preceding the election's Effective Date; and
(ii) his or her Stock Account shall be reduced by the number of units
elected to be transferred.
Section 7.5. Dividend Equivalents. Effective as of the payment date for
each cash dividend on the Common Stock, the Stock Account of each
Participant who had a balance in his or her Stock Account on the record
date for such dividend shall be credited with a number of units of Common
Stock, and fractions thereof, obtained by dividing (i) the aggregate
dollar amount of such cash dividend payable in respect of such
Participant's Stock Account (determined by multiplying the dollar value
of the dividend paid upon a single share of Common Stock by the number of
units of Common Stock held in the Participant's Stock Account on the
record date for such dividend); by (ii) the Market Value of the Common
Stock on the Valuation Date immediately preceding the payment date for
such cash dividend.
Section 7.6. Stock Dividends. Effective as of the payment date for each
stock dividend on the Common Stock, additional units of Common Stock
shall be credited to the Stock Account of each Participant who had a
balance in his or her Stock Account on the record date for such dividend.
The number of units that shall be credited to the Stock Account of such
a Participant shall equal the number of shares of Common Stock, and
fractions thereof, which the Participant would have received as stock
dividends had he or she been the owner on the record date for such stock
dividend of the number of shares of Common Stock equal to the number of
units credited to his or her Stock Account on such record date.
Section 7.7. Recapitalization. If, as a result of a recapitalization of
the Company, the outstanding shares of Common Stock shall be changed into
a greater number or smaller number of shares, the number of units
credited to a Participant's Stock Account shall be appropriately adjusted
on the same basis.
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Section 7.8. Distributions. Amounts in respect of units of Common Stock
may only be distributed out of the Stock Account by transfer to the
Interest Account (pursuant to Sections 7.2 and 7.4 or 7.10) or withdrawal
from the Stock Account (pursuant to Section 8, 9, 10, or 19), and shall
be distributed in cash. The number of units to be distributed from a
Participant's Stock Account shall be valued by multiplying the number of
such units by the Market Value of the Common Stock as of the Valuation
Date immediately preceding the date such distribution is to occur.
Pending the complete distribution under Section 8.2 or liquidation under
Section 7.10 of the Stock Account of a Participant who has terminated his
or her employment with the Company or any of its U.S. Subsidiaries, the
Participant shall continue to be able to make elections pursuant to
Sections 7.2, 7.3, and 7.4 and his or her Stock Account shall continue to
be credited with additional units of Common Stock pursuant to Sections
7.5, 7.6, and 7.7.
Section 7.9. Responsibility for Investment Choices. Each Participant is
solely responsible for any decision to defer compensation into his or her
Stock Account and to transfer amounts to and from his or her Stock
Account and accepts all investment risks entailed by such decision,
including the risk of loss and a decrease in the value of the amounts he
or she elects to transfer into his or her Stock Account.
Section 7.10. Liquidation of Stock Account. The provisions of this
Section 7.10 shall be applicable if the Vice President, Human Resources,
or the Compensation Committee, as applicable, determines pursuant to
Section 8 to pay a Participant's Accounts in annual installments and, on
the second anniversary of the Participant's retirement or, if earlier,
termination of employment from the Company or any of its U.S.
Subsidiaries, the Participant has a balance remaining in his or her Stock
Account. In such case, effective as of the first day of the first
calendar month immediately following the date of such second anniversary,
the entire balance of the Participant's Stock Account shall automatically
be transferred to his or her Interest Account and he or she shall
thereafter be ineligible to transfer any amounts to his or her Stock
Account. For purposes of valuing the units of Common Stock subject to
such a transfer, the approach described in Section 7.8 shall be used.
Section 8. Payment of Deferred Compensation.
Section 8.1. Background. No withdrawal may be made from a Participant's
Accounts except as provided in this Section 8 and Sections 9, 10, and 19.
Section 8.2. Manner of Payment. Payment of a Participant's Accounts
shall be made in a single lump sum or annual installments, in the sole
discretion of the Company's Vice President, Human Resources, with respect
to Participants other than executive officers of the Company, and by the
Compensation Committee, with respect to Participants who are executive
officers of the Company. The maximum number of annual installments is
ten. All payments from the Plan shall be made in cash.
Section 8.3. Timing of Payments. Payments shall be made by the fifth
business day in March and shall commence in any year designated in the
sole discretion of the Company's Vice President, Human Resources, with
respect to Participants other than executive officers of the Company, and
by the Compensation Committee, with respect to Participants who are
executive officers of the Company, up through the tenth year following
the year in which the Participant retires, becomes disabled, or for any
other reason, ceases to be an employee of the Company or any of its U.S.
Subsidiaries, but in no event shall payment commence later than the year
the Participant reaches age 71.
Section 8.4. Valuation. The amount of each payment shall be equal to the
value, as of the preceding Valuation Date, of the Participant's Accounts,
divided by the number of installments remaining to be paid. If payment
of a Participant's Accounts is to be paid in installments and the
Participant has a balance in his or her Stock Account at the time of the
payment of an installment,
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<PAGE> 7
the amount that shall be distributed from his or her Stock Account shall
be the amount obtained by multiplying the total amount of the installment
determined in accordance with the immediately preceding sentence by the
percentage obtained by dividing the balance in the Stock Account as of
the immediately preceding Valuation Date by the total value of the
Participant's Accounts as of such date. Similarly, in such case, the
amount that shall be distributed from the Participant's Interest Account
shall be the amount obtained by multiplying the total amount of the
installment determined in accordance with the first sentence of this
Section 8.4 by the percentage obtained by dividing the balance in the
Interest Account as of the immediately preceding Valuation Date by the
total value of the Participant's Accounts as of such date.
Section 9. Payment of Deferred Compensation After Death. If a Participant dies
prior to complete payment of his or her Accounts, the balance of such Accounts,
valued as of the Valuation Date immediately preceding the date payment is made,
shall be paid in a single, lump-sum payment to: (i) the beneficiary or
contingent beneficiary designated by the Participant on forms supplied by the
Compensation Committee; or, in the absence of a valid designation of a
beneficiary or contingent beneficiary, (ii) the Participant's estate within 30
days after appointment of a legal representative of the deceased Participant.
Section 10. Acceleration of Payment for Hardship. Upon written approval from
the Company's Vice President, Human Resources, with respect to Participants
other than executive officers of the Company, and by the Compensation
Committee, with respect to Participants who are executive officers of the
Company, and subject to the restrictions in the next two sentences, a
Participant, whether or not he or she is still employed by the Company or any
of its U.S. Subsidiaries, may be permitted to receive all or part of his or her
Accounts if the Company's Vice President, Human Resources, or the Compensation
Committee, as applicable, determines that an emergency event beyond the
Participant's control exists which would cause such Participant severe
financial hardship if the payment of his or her Accounts were not approved.
Any such distribution for hardship shall be limited to the amount needed to
meet such emergency. A Section 16 Insider may only receive a hardship
withdrawal from his or her Stock Account pursuant to this Section 10 if he or
she has made no election within the previous six months to effect a
fund-switching transfer into the Stock Account or the Eastman Stock Fund of the
Eastman Investment Plan or the Savings and Investment Plan Appendix, or any
other "opposite way" intra-plan transfer into a Company equity securities fund
which constitutes a "Discretionary Transaction" as defined in Rule 16b-3 under
the Exchange Act. If such a distribution occurs while the Participant is
employed by the Company or any of its U.S. Subsidiaries, any election to defer
compensation for the year in which the Participant receives a hardship
withdrawal shall be ineffective as to compensation earned for the pay period
following the pay period during which the withdrawal is made and thereafter for
the remainder of such year and shall be ineffective as to any other
compensation elected to be deferred for such year.
Section 11. Non-Competition and Non-Disclosure Provision. Participant will
not, without the written consent of the Company, either during his or her
employment by Company or any of its U.S. Subsidiaries or thereafter, disclose
to anyone or make use of any confidential information which he or she has
acquired during his or her employment relating to any of the business of the
Company or any of its subsidiaries, except as such disclosure or use may be
required in connection with his or her work as an employee of Company or any of
its U.S. Subsidiaries. During Participant's employment by the Company or any
of its U.S. Subsidiaries, and for a period of two years after the termination
of such employment, he or she will not, without the written consent of the
Company, either as principal, agent, consultant, employee or otherwise, engage
in any work or other activity in competition with the Company in the field or
fields in which he or she has worked for the Company or any of its U.S.
Subsidiaries. The agreement in this Section 11 applies separately in the
United States and in other countries but only to the extent that its
application shall be reasonably necessary for the protection of the Company.
If the Participant does not comply with the terms of this Section 11, the
Company's Vice President, Human Resources, with respect to Participants other
than executive officers of the Company, or the Compensation Committee, with
respect to executive officers of the Company may, in his or its sole
discretion, direct the Company to pay to the Participant the balance credited
to his or her Interest Account and/or Stock Account.
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<PAGE> 8
Section 12. Participant's Rights Unsecured. The benefits payable under this
Plan shall be paid by the Company each year out of its general assets. To the
extent a Participant acquires the right to receive a payment under this Plan,
such right shall be no greater than that of an unsecured general creditor of
the Company. No amount payable under this Plan may be assigned, transferred,
encumbered or subject to any legal process for the payment of any claim against
a Participant. No Participant shall have the right to exercise any of the
rights or privileges of a shareowner with respect to the units credited to his
or her Stock Account.
Section 13. No Right to Continued Employment. Participation in the Plan shall
not give any employee any right to remain in the employ of the Company or any
of its U.S. Subsidiaries. The Company and each employer U.S. Subsidiary
reserve the right to terminate any Participant at any time.
Section 14. Statement of Account. Statements will be sent no less frequently
than annually to each Participant or his or her estate showing the value of the
Participant's Accounts.
Section 15. Deductions. The Company will withhold to the extent required by
law all applicable income and other taxes from amounts deferred or paid under
the Plan.
Section 16. Administration.
Section 16.1. Responsibility. Except as expressly provided otherwise
herein, the Compensation Committee shall have total and exclusive
responsibility to control, operate, manage and administer the Plan in
accordance with its terms.
Section 16.2. Authority of the Compensation Committee. The Compensation
Committee shall have all the authority that may be necessary or helpful
to enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the preceding sentence, the
Compensation Committee shall have the exclusive right: to interpret the
Plan, to determine eligibility for participation in the Plan, to decide
all questions concerning eligibility for and the amount of benefits
payable under the Plan, to construe any ambiguous provision of the Plan,
to correct any default, to supply any omission, to reconcile any
inconsistency, and to decide any and all questions arising in the
administration, interpretation, and application of the Plan.
Section 16.3. Discretionary Authority. The Compensation Committee shall
have full discretionary authority in all matters related to the discharge
of its responsibilities and the exercise of its authority under the Plan
including, without limitation, its construction of the terms of the Plan
and its determination of eligibility for participation and benefits under
the Plan. It is the intent that the decisions of the Compensation
Committee and its action with respect to the Plan shall be final and
binding upon all persons having or claiming to have any right or interest
in or under the Plan and that no such decision or action shall be
modified upon judicial review unless such decision or action is proven to
be arbitrary or capricious.
Section 16.4. Authority of Vice President, Human Resources. Where
expressly provided for under Sections 8, 10 and 11, the authority of the
Compensation Committee is delegated to the Company's Vice President,
Human Resources, and to that extent the provisions of Section 16.1
through 16.3 above shall be deemed to apply to such Vice President.
Section 16.5. Delegation of Authority. The Compensation Committee may
provide for an additional delegation of some or all of its authority
under the Plan to any person or persons provided that any such delegation
be in writing.
Section 17. Amendment. The Board may suspend or terminate the Plan at anytime.
In addition, the Board may, from time to time, amend the Plan in any manner
without shareowner approval; provided however, that the Board may condition any
amendment on the approval of shareowners if such approval is necessary or
advisable with respect to tax, securities, or other applicable laws. However,
no amendment, modification, or termination shall, without the consent of a
Participant, adversely affect such Participant's accruals in his or her
Accounts as of the date of such amendment, modification, or termination.
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<PAGE> 9
Section 18. Governing Law. The Plan shall be construed, governed and enforced
in accordance with the law of Tennessee, except as such laws are preempted by
applicable federal law.
Section 19. Change in Control.
Section 19.1. Background. The terms of this Section 19 shall immediately
become operative, without further action or consent by any person or
entity, upon a Change in Control, and once operative shall supersede and
control over any other provisions of this Plan.
Section 19.2. Acceleration of Payment Upon Change In Control. Upon the
occurrence of a Change in Control, each Participant, whether or not he or
she is still employed by the Company or any of its U.S. Subsidiaries,
shall be paid in a single, lump-sum cash payment the balance of his or
her Accounts as of the Valuation Date immediately preceding the date
payment is made. Such payment shall be made as soon as practicable, but
in no event later than 90 days after the date of the Change in Control,
Section 19.3. Amendment On or After Change in Control. On or after a
Change in Control, no action, including, but not by way of limitation,
the amendment, suspension or termination of the Plan, shall be taken
which would affect the rights of any Participant or the operation of this
Plan with respect to the balance in the Participant's Accounts.
Section 20. Compliance with SEC Regulations. It is the Company's intent that
the Plan comply in all respects with Rule 16b-3 of the Exchange Act, and any
regulations promulgated thereunder. If any provision of the Plan is found not
to be in compliance with such rule, the provision shall be deemed null and
void. All transactions under the Plan, including, but not by way of
limitation, a Participant's election to defer compensation or transfer Account
balances under Section 7 and hardship withdrawals under Section 10, shall be
executed in accordance with the requirements of Section 16 of the Exchange Act,
as amended and any regulations promulgated thereunder. To the extent that any
of the provisions contained herein do not conform with Rule 16b-3 of the
Exchange Act or any amendments thereto or any successor regulation, then the
Committee may make such modifications so as to conform the Plan to the Rule's
requirements.
Section 21. Successors and Assigns. This Plan shall be binding upon the
successors and assigns of the parties hereto.
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<PAGE> 10
SCHEDULE A
Holston Defense Corporation
38
<PAGE> 1
EXHIBIT 10.04
EASTMAN CHEMICAL COMPANY
1994-1996 LONG-TERM PERFORMANCE SUBPLAN
OF THE 1994 OMNIBUS LONG-TERM COMPENSATION PLAN (as amended)
Section 1. Background. Under Section 11 of the Eastman Chemical Company 1994
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 1994-1996 Long-Term Performance Subplan (this "Subplan") is to
set forth the terms of the grant of performance shares specified herein,
effective as of January 1, 1994 (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) "Normal 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, 1994.
(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, 1994 through December 31,
1996.
(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, over the first 20 trading days of the period
for which such change is being measured and (II) the average of such
closing or last sale prices for such stock over the final 20 trading days
of the period for which such change is being measured) plus (B) dividends
declared, assuming reinvestment of dividends, and expressed as a
percentage return on a shareowner'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.
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<PAGE> 2
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
1994, 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
1994 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
1994 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 Normal
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 1994 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. If the Company ranks in the
highest quartile of the Compared Group on that basis, then the Normal Grant
Amount shall be multiplied by 2.0 (i.e., 200%) to determine the Actual Grant
Amount; if in the second highest quartile, then the Actual Grant Amount shall
be equal to the Normal Grant Amount; if in the third highest quartile, then the
Normal Grant Amount shall be multiplied by 0.5 (i.e., 50%) to determine the
Actual Grant Amount; and if in the lowest quartile, then the Actual Grant
Amount shall be 0 and no shares of Common Stock shall be delivered to
participants under this Subplan. 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
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<PAGE> 3
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.
Section 9. Manner and Timing of Award Payments.
(a) Timing of Award Payment. Except for deferrals under Sections 9(b) and
9(c), 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) 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.
(c) 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.
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<PAGE> 4
(d) 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(b) or 9(c), 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.
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 16 (relating
to nonassignability), Section 17 (relating to adjustment of shares available),
Section 18 (relating to withholding taxes), Section 19 (relating to
noncompetition and confidentiality), Section 20 (relating to regulatory
approvals and listings), Section 22 (relating to the governing law), Section 23
(relating to changes in ownership), Section 24 (relating to changes in
control), Section 25 (relating to no rights, title, or interest in Company
assets), and Section 26 (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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<PAGE> 5
EXHIBIT A
EASTMAN CHEMICAL COMPANY LTPP GRANT TABLE
1994-1996 CYCLE
Normal Grant Amount
Original on File in
Personnel Resources
43
<PAGE> 6
EXHIBIT B
COMPANIES IN THE PEER GROUP
Air Products and Chemicals, Inc.
ARCO Chemical Company
Crompton & Knowles Corporation
Dow Chemical Company
E. I. du Pont de Nemours and Company
H. B. Fuller Company
The Geon Company
Georgia Gulf Corporation
Great Lakes Chemical Corporation
M. A. Hanna Company
Lyondell Petrochemical Company
Monsanto Company
Morton International, Inc.
Rohm and Haas Company
A. Schulman, Inc.
Sterling Chemicals Inc.
Union Carbide Corporation
Wellman, Inc.
Witco Corporation
44
<PAGE> 1
EXHIBIT 10.05
EASTMAN CHEMICAL COMPANY
1995-1997 LONG-TERM PERFORMANCE SUBPLAN
OF THE 1994 OMNIBUS LONG-TERM COMPENSATION PLAN (as amended)
1. Background. Under Section 11 of the Eastman Chemical Company 1994
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 1995-1997 Long-Term
Performance Subplan (this "Subplan") is to set forth the terms of the
grant of performance shares specified herein, effective as of January 1,
1995 (the "Effective Date").
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) "Normal 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, 1995.
(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, 1995 through December 31,
1997.
(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, over the first 20 trading days
of the period for which such change is being measured and (II) the
average of such closing or last sale prices for such stock over the
final 20 trading days of the period for which such change is being
measured) plus (B) dividends declared, assuming reinvestment of
dividends, and expressed as a percentage return on a shareowner'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.
45
<PAGE> 2
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.
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 1995, 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 1995 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 1995 and determined by the Chief
Executive Officer to carry such responsibilities and functions.
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.
6. Size of Awards. Exhibit A hereto shows by Salary Grade the Normal 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 1995 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. If the Company ranks in the highest quartile of
the Compared Group on that basis, then the Normal Grant Amount shall be
multiplied by 2.0 (i.e., 200%) to determine the Actual Grant Amount; if in
the second highest quartile, then the Actual Grant Amount shall be equal
to the Normal Grant Amount; if in the third highest quartile, then the
Normal Grant Amount shall be multiplied by 0.5 (i.e., 50%) to determine
the Actual Grant Amount; and if in the lowest quartile, then the Actual
Grant Amount shall be 0 and no shares of Common Stock shall be delivered
to participants under this Subplan. 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.
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
46
<PAGE> 3
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.
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.
9. Manner and Timing of Award Payments.
(a) Timing of Award Payment. Except for deferrals under Sections
9(b) and 9(c), 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) 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.
(c) 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.
47
<PAGE> 4
(d) 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(b) or 9(c), 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.
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.
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 16
(relating to nonassignability), Section 17 (relating to adjustment of
shares available), Section 18 (relating to withholding taxes), Section 19
(relating to noncompetition and confidentiality), Section 20 (relating to
regulatory approvals and listings), Section 22 (relating to the governing
law), Section 23 (relating to changes in ownership), Section 24 (relating
to changes in control), Section 25 (relating to no rights, title, or
interest in Company assets), and Section 26 (relating to securities laws)
shall apply to this Subplan.
12. Amendment. The Committee may, from time to time, amend this Subplan in
any manner.
48
<PAGE> 5
EXHIBIT A
EASTMAN CHEMICAL COMPANY LTPP GRANT TABLE
1995-1997 CYCLE
Normal Grant Amount
Original on File in
Personnel Resources
49
<PAGE> 6
EXHIBIT B
COMPANIES IN THE PEER GROUP
Air Products and Chemicals, Inc.
ARCO Chemical Company
Crompton & Knowles Corporation
Dow Chemical Company
E. I. du Pont de Nemours and Company
H. B. Fuller Company
The Geon Company
Georgia Gulf Corporation
Great Lakes Chemical Corporation
M. A. Hanna Company
Lyondell Petrochemical Company
Monsanto Company
Morton International, Inc.
Rohm and Haas Company
A. Schulman, Inc.
Sterling Chemicals Inc.
Union Carbide Corporation
Wellman, Inc.
Witco Corporation
50
<PAGE> 1
EXHIBIT 10.06
EASTMAN CHEMICAL COMPANY
1996-1998 LONG-TERM PERFORMANCE SUBPLAN
OF THE 1994 OMNIBUS LONG-TERM COMPENSATION PLAN (as amended)
Section 1. Background. Under Section 11 of the Eastman Chemical Company 1994
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 1996-1998 Long-Term Performance Subplan (this "Subplan") is to
set forth the terms of the grant of performance shares specified herein,
effective as of January 1, 1996 (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) "Normal 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, 1996.
(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, 1996 through December 31,
1998.
(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, over the first 20 trading days of the period
for which such change is being measured and (II) the average of such
closing or last sale prices for such stock over the final 20 trading days
of the period for which such change is being measured) plus (B) dividends
declared, assuming reinvestment of dividends, and expressed as a
percentage return on a shareowner'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.
51
<PAGE> 2
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
1996, 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
1996 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
1996 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 Normal
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 1996 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. If the Company ranks in the
highest quartile of the Compared Group on that basis, then the Normal Grant
Amount shall be multiplied by 2.0 (i.e., 200%) to determine the Actual Grant
Amount; if in the second highest quartile, then the Actual Grant Amount shall
be equal to the Normal Grant Amount; if in the third highest quartile, then the
Normal Grant Amount shall be multiplied by 0.5 (i.e., 50%) to determine the
Actual Grant Amount; and if in the lowest quartile, then the Actual Grant
Amount shall be 0 and no shares of Common Stock shall be delivered to
participants under this Subplan. 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
52
<PAGE> 3
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.
Section 9. Manner and Timing of Award Payments.
(a) Timing of Award Payment. Except for deferrals under Sections 9(b) and
9(c), 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) 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.
(c) 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.
53
<PAGE> 4
(d) 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(b) or 9(c), 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.
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 16 (relating
to nonassignability), Section 17 (relating to adjustment of shares available),
Section 18 (relating to withholding taxes), Section 19 (relating to
noncompetition and confidentiality), Section 20 (relating to regulatory
approvals and listings), Section 22 (relating to the governing law), Section 23
(relating to changes in ownership), Section 24 (relating to changes in
control), Section 25 (relating to no rights, title, or interest in Company
assets), and Section 26 (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.
54
<PAGE> 5
EXHIBIT A
Eastman Chemical Company LTPP Grant Table
1996-1998 Cycle
Normal Grant Amount
Original on File in
Personnel Resources
55
<PAGE> 6
EXHIBIT B
COMPANIES IN THE PEER GROUP
Air Products and Chemicals, Inc.
ARCO Chemical Company
Crompton & Knowles Corporation
Dow Chemical Company
E. I. du Pont de Nemours and Company
H. B. Fuller Company
The Geon Company
Georgia Gulf Corporation
Great Lakes Chemical Corporation
M. A. Hanna Company
Lyondell Petrochemical Company
Monsanto Company
Morton International, Inc.
Rohm and Haas Company
A. Schulman, Inc.
Sterling Chemicals Inc.
Union Carbide Corporation
Wellman, Inc.
Witco Corporation
56
<PAGE> 1
EXHIBIT 11.01
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net earnings $ 96 $ 148 $ 320 $ 438
======= ======= ========= =========
PRIMARY EARNINGS PER SHARE
Average number of common shares outstanding 77.9 81.0 78.8 82.2
Common share equivalents (1) 0.6 0.9 0.8 0.7
------- ------- --------- ---------
Average number of common shares and
share equivalents 78.5 81.9 79.6 82.9
======= ======= ========= =========
Primary earnings per share $ 1.22 $ 1.81 $ 4.02 $ 5.28
======= ======= ========= =========
FULLY DILUTED EARNINGS PER SHARE
Average number of common shares outstanding 77.9 81.0 78.8 82.2
Common share equivalents (1) 0.7 0.9 0.8 0.9
------- ------- --------- ---------
Average number of common shares and
share equivalents 78.6 81.9 79.6 83.1
======= ======= ========= =========
Fully diluted earnings per share $ 1.22 $ 1.81 $ 4.02 $ 5.27
======= ======= ========= =========
</TABLE>
- --------------------------
(1) Common share equivalents of the Company represent the effect of dilutive
stock options outstanding during the period.
57
<PAGE> 1
EXHIBIT 12.01
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Earnings before provision for income taxes $ 156 $ 239 $ 511 $ 707
Add:
Interest expense 16 19 51 58
Rental expense (1) 4 2 14 13
Amortization of capitalized interest 3 3 10 9
------ ------ -------- --------
Earnings as adjusted $ 179 $ 263 $ 586 $ 787
====== ====== ======== ========
Fixed charges:
Interest expense $ 16 $ 19 $ 51 $ 58
Rental expense (1) 4 2 14 13
Capitalized interest 9 3 19 8
------ ------ -------- --------
Total fixed charges $ 29 $ 24 $ 84 $ 79
====== ====== ======== ========
Ratio of earnings to fixed charges 6.2x 11.0x 7.0x 10.0x
====== ====== ======== ========
</TABLE>
- ----------------------
(1) For all periods presented, interest component of rental expense is
estimated to equal one-third of such expense.
58
<PAGE> 1
EXHIBIT 99.01
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
SUPPLEMENTAL BUSINESS ORGANIZATION INFORMATION
1996 CHANGE FROM 1995
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
% CHANGE OPERATING % CHANGE OPERATING
SALES VOLUME EARNINGS(1) SALES VOLUME EARNINGS(1)
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE SEGMENT
Container Plastics (41)% (7)% -- (16)% (2)% --
Fibers 12 % 7 % ++ 11 % 4 % ++
Coatings, Inks & Resins 5 % 10% - 1 % 4 % -
Fine Chemicals (2)% (2)% -- - % - % --
Performance Chemicals 3 % 6 % ++ (1)% (2)% ++
Specialty Plastics(2) 3 % 12 % ++ 1 % 2 % --
Total Segment (11)% 1 % (37)% (4)% (1)% (22)%
=== ===== ========= ==== ==== =========
INDUSTRIAL SEGMENT
Industrial Intermediates 4 % 13 % -- (1)% 8 % --
Flexible Plastics (1)% 6 % -- (12)% 2 % --
Total Segment 4 % 12 % (31)% (4)% 7 % (38)%
=== ===== ========= ==== ==== =========
Total Eastman (8)% 3 % (35)% (4)% 1 % (27)%
=== ===== ========= ==== ==== =========
</TABLE>
=============================
(1) 0 = Change of approximately 0 - 2% (+ or -)
+ = Increase of approximately 2 - 10%
++ = Increase of greater than 10%
- = Decrease of approximately (2) - (10)%
-- = Decrease of greater than (10%)
Sm = Negligible change in dollar amount
Nm = Not meaningful
(2) On September 1, the Company created a new business organization,
Specialty Plastics, by combining its Specialty Packaging Plastics and
Performance Plastics businesses. The two businesses represented about 10%
of the approximately $5 billion in Eastman sales in 1995.
59
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF EASTMAN CHEMICAL COMPANY FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 61
<SECURITIES> 0
<RECEIVABLES> 759<F1>
<ALLOWANCES> 0
<INVENTORY> 459
<CURRENT-ASSETS> 1,401
<PP&E> 7,267
<DEPRECIATION> 3,945
<TOTAL-ASSETS> 5,105
<CURRENT-LIABILITIES> 717
<BONDS> 1,474
0
0
<COMMON> 1
<OTHER-SE> 1,597
<TOTAL-LIABILITY-AND-EQUITY> 5,105
<SALES> 3,669
<TOTAL-REVENUES> 3,669
<CGS> 2,735
<TOTAL-COSTS> 2,735
<OTHER-EXPENSES> 384
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 511
<INCOME-TAX> 191
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 320
<EPS-PRIMARY> 4.02
<EPS-DILUTED> 4.02
<FN>
<F1>ASSET VALUES REPRESENT NET AMOUNTS
</FN>
</TABLE>
