Item 5.02e
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15 (d) of the Securities and Exchange Act of
1934
Date
of report (Date of earliest event reported):
December
7, 2006
EASTMAN
CHEMICAL COMPANY
(Exact
Name of Registrant as Specified in Its Charter)
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Delaware
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1-12626
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62-1539359
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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200 South
Wilcox Drive, Kingsport, TN
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37660
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(423) 229-2000
(Registrant’s
Telephone Number, Including Area Code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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EASTMAN
CHEMICAL COMPANY - EMN
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December
7, 2006
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Item
5.02 (e) Compensatory Arrangements of Certain Officers
On
December 7, 2006 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 2007 performance year.
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 each of the 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. In determining individual awards, the CEO uses discretion
in
allocating UPP award budgets to the business groups and functional
organizations. Heads of business groups and functional organizations also use
discretion in further allocation of budgets to their direct reports. Individual
awards are ultimately determined based on unit and individual performance
against expectations, while considering the external business
environment.
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 attainment of individual and organizational 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. However, the
sum of all individual awards cannot exceed the total Company award
pool.
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.
2007
UPP Measures and Participant Eligibility
As
established by the Compensation Committee, for 2007 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
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 2007, 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;
80% for the President and Chemicals and Fibers Business Group Head; 75% for
the
Executive Vice President, Polymers Business Group; 65% for the Senior Vice
President, Chief Financial Officer; 65% for the Senior Vice President, Corporate
Strategy and Marketing; and 60% for the Senior Vice President, Chief Legal
Officer; the Senior Vice President, Chief Technology Officer ; and the Senior
Vice President, Human Resources, Communications and Public Affairs.
At
the
end of 2007, 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 results in supporting identified key initiatives for 2007. Based on
the Chief Executive Officer’s assessment, the Compensation Committee will
consider payouts to the executive officers for 2007 in early 2008. The
Compensation Committee will review the CEO's performance against his individual
financial, organizational, and strategic objectives and determine his payout
for
2007. The payouts, if any, to the CEO and executive officers for 2007 will
be
disclosed in the Company's proxy statement for its 2008 annual meeting of
stockholders.
In
determining EFO for the purpose of measuring corporate performance, the UPP
provides for adjustments by the Compensation Committee for unusual charges,
income items, or other events that are distortive of financial results.
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EASTMAN
CHEMICAL COMPANY - EMN
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December
7, 2006
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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, hereunto
duly authorized.
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Eastman
Chemical Company
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By:
/s/ Curtis E.
Espeland
Curtis E. Espeland
Vice President and Chief Accounting Officer
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Date: December
13, 2006
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