Item
5.02 (e) Compensatory Arrangements of Certain
Officers
On
December 5, 2007 the Compensation and Management Development Committee (the
"Compensation Committee") of the Board of Directors of Eastman Chemical Company
("Eastman" or "the Company") approved Unit Performance Plan ("UPP") performance
measures and goals, specific target objectives with respect to such performance
goals, the method for computing the amount of the UPP award allocated to
the
award pool if the performance goals are attained, and the eligibility criteria
for employee participation in the UPP, for the 2008 performance
year.
The
UPP
is on file with the Securities and Exchange Commission as Exhibit 10.09 to
the
Company's Annual Report on Form 10-K for the year ended December 31, 2003,
and
is available through the "Investors - SEC Filings" section of the Company's
Internet website ( www.eastman.com ) and the SEC's Internet
site at http://www.sec.gov .
Unit
Performance Plan
The
UPP
is the Company's short-term incentive compensation vehicle for executive
officers and other management-level employees. The UPP is designed to provide
incentive by delivering a portion of cash compensation according to corporate
performance and the attainment of individual objectives and expectations.
The
amount of target compensation that is made variable under the UPP ranges
from
15% of base pay for managers to 100% of base pay for the Chief Executive
Officer. An award pool is generated for the Company, equal to the aggregate
of
the UPP payouts for each participant at target levels, multiplied by a
"performance factor" determined by corporate performance compared to the
pre-set
performance goal. The performance factor can range from 0% if threshold Company
performance goals are not met to 200% for specified above-goal corporate
performance. The Compensation Committee may, in its discretion, adjust the
award
pool to reflect overall corporate performance and business and financial
conditions.
The
CEO,
in consultation with executive officers responsible for major organizations,
determines the allocation of the Company award pool to organizations within
the
Company based on his assessment of the performance of the organizations relative
to objectives established at the beginning of the performance year. Once
each
organization’s award pool is determined, management within each organization (or
in the case of the Chief Executive Officer, the Compensation Committee)
allocates the organization’s portion of the Company award pool for individual
payouts, based upon individual and organizational performance against objectives
and expectations established at the beginning of the performance year. An
actual
individual award could exceed an individual’s target award, based on the
manager’s assessment of individual and organizational performance, but the sum
of all individual awards within an organization cannot exceed the amount
of the
organization's allocated portion of the total Company award pool without
specific approval by the Compensation Committee .
2008
UPP Measures and Participant Eligibility
As
established by the Compensation Committee, for 2008 the performance measure
for
the UPP will be earnings from operations ("EFO"). The Compensation Committee
approved specific EFO targets and corresponding performance factors for the
Company. The target level for 2008 EFO corresponds to the Company's EFO
target under the annual business plan for 2008 as approved by the Board of
Directors.
The
amount of the Company award pool allocated to the executive officers will
be
determined by aggregating their individual target variable pay amounts,
multiplied by a "performance factor" corresponding to their overall performance
compared to pre-established targets related to organizational results and
personal performance objectives. For 2008, the target variable pay for
performance that meets the pre-established objectives under the UPP (expressed
as a percentage of annual salary) will be 100% for the Chief Executive
Officer (J. Brian Ferguson); 80% for the President and Chemicals and Fibers
Business Group Head (James P. Rogers); 75% for the Executive Vice President
and Polymers Business Group Head (Gregory O. Nelson); 70% for the
Senior Vice President, Chief Financial Officer (Richard A. Lorraine); 65%
for
the Senior Vice President, Corporate Strategy and Marketing (Mark J. Costa);
and
60% for the Senior Vice President, Chief Legal Officer and Corporate Secretary
(Theresa K. Lee); the Senior Vice President, Chief Technology Officer (Ronald
C.
Lindsay); and the Senior Vice President, Human Resources, Communications
and
Public Affairs (Norris P. Sneed).
At
the
end of 2008, following determination of the total amount of the Company award
pool available to the executive officers, the Chief Executive Officer will
assess each of their individual performance against established goals and
expectations, and determine the amounts of the individual payouts from the
portion of the allocated award pool. The Chief Executive Officer’s assessment
will be based upon measurement of each executive officer’s performance against
individual goals and expectations related to corporate and organizational
performance compared to established EFO and other performance targets and
the
officer’s contributions to achievement of identified key initiatives for 2008.
Based on the Chief Executive Officer’s assessment, the Compensation Committee
will consider payouts to the executive officers for 2008 in early 2009. The
Compensation Committee will review the CEO's performance against his individual
financial, organizational, and strategic objectives and determine his payout
for
2008. The payouts, if any, to the CEO and executive officers for 2008 will
be
disclosed in the Company's proxy statement for its 2009 annual meeting of
stockholders.
In
determining EFO for the purpose of measuring corporate performance, the UPP
provides for adjustments by the Compensation Committee for certain charges,
income items, or other events that are distortive of financial
results.