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EXHIBIT 10.03
PERFORMANCE SHARE AWARD
SUBPLAN
OF THE 2002 OMNIBUS LONG-TERM COMPENSATION
PLAN
2007-2009 PERFORMANCE PERIOD
EASTMAN CHEMICAL
COMPANY
PERFORMANCE SHARE AWARD
SUBPLAN
OF THE 2002 OMNIBUS LONG-TERM COMPENSATION
PLAN
2007-2009 PERFORMANCE PERIOD
TABLE OF
CONTENTS
Section TitlePage
Section 1. Background 1
Section 2. Definitions 1
Section 3. Administration 2
Section 4. Eligibility 3
Section 5. Form of Awards 3
Section 6. Size of Awards 3
Section 7. Composition of Comparison Group
4
Section 8. Preconditions to Receipt of an Award
5
Section 9. Manner and Timing of Award Payments
5
Section 10. No Rights as Stockholder 6
Section 11. Application of Plan 6
Section 12. Adjustment of Actual Grant Amount
7
Section 13. Amendments 7
Exhibit A 8
Exhibit B 9
EASTMAN CHEMICAL COMPANY
PERFORMANCE SHARE AWARD SUBPLAN
OF THE 2002 OMNIBUS LONG-TERM COMPENSATION
PLAN
2007-2009 PERFORMANCE PERIOD
Section 1. Background . Under Section
11 of the Eastman Chemical Company 2002 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 Performance Share Award Subplan (this "Subplan") is to set
forth the terms of the grant of performance shares for the
2007-2009 Performance Period specified herein, effective as of
January 1, 2007 (the "Effective Date").
Section 2. Definitions .
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(a)
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The following definitions shall apply to this
Subplan:
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(i)
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"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.
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(ii)
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"Award Amount" means the performance shares
awarded to the participant under this Subplan at the beginning of
the Performance Period.
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(iii)
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"Award Payment Date" means the date the
Compensation Committee approves the payout of Common Stock covered
by an award under this Subplan to a participant.
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(iv)
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"Comparison Group" is the group of companies
comprising the "Materials Sector" from Standard and Poor’s
Super Composite 1500 Index, identified as Global Industry
Classification Standard ("GICS") 15.
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(v)
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"Cost of Capital" reflects the cost of debt and
the cost of equity, expressed as a percentage, reflecting the
percentage of interest charged on debt and the percentage of
expected return on equity.
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(vi)
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"Earnings from Continuing Operations" shall be
defined as the total sales of the Company minus the costs of all
operations of any nature used to produce such sales, including
taxes, plus after-tax interest associated with the Company's
capital debt.
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(vii)
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"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.
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(viii)
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"Participation Date" means October 31,
2006.
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(ix)
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"Performance Period" means January 1, 2007
through December 31, 2009.
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(x)
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"Performance Year" means one of the three
calendar years in the Performance Period.
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(xi)
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"Return on Capital" shall mean the return
produced by funds invested in the Company and shall be determined
as Earnings from Continuing Operations, as defined in Section
2.a.(vi), divided by the Average Capital Employed. Average Capital
Employed shall be derived by adding the Company's capital debt plus
equity at the close of the last day of the year preceding the
Performance Year, to the Company's capital debt plus equity at the
close of the last day of the present Performance Year, with the
resulting sum being divided by two. Capital debt is defined as the
sum of borrowing by the Company due within one year and long-term
borrowing, as designated on the Company's balance sheet. The
resulting ratio shall be multiplied by One Hundred (100) in order
to convert such to a percentage. Such percentage shall be
calculated to the third place after the decimal point (i.e.,
xx.xxx%), and then rounded to the second place after the decimal
point (i.e., xx.xx%).
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(xii)
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"Target Award Range" means, with respect to any
eligible Employee, the number of performance shares within the
range specified on Exhibit A hereto for the Salary Grade applicable
to such Employee.
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(xiii)
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"TSR" means total stockholder return, 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 or closing prices of such stock on another
national trading exchange, as applicable, in the period beginning
on the tenth trading day preceding the beginning of the Performance
Period and ending on the tenth trading day of the Performance
Period and (II) the average of such closing or last sale prices for
such stock in the period beginning on the tenth trading day
preceding the end of the Performance Period and ending on the tenth
trading day following the end of the Performance Period) plus (B)
dividends declared, assuming reinvestment of dividends, and
expressed as a percentage return on a stockholder’s
hypothetical investment.
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(b)
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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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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. At the end of the Performance Period,
the Committee shall approve Actual Grant Amounts awarded to
participants under this Subplan.
Section 4. Eligibility . The Employees
who are eligible to participate in this Subplan are those Employees
who, as of the Participation Date, are at Salary Grade 120 and
above. These Salary Grades generally include Employees who, as of
the Participation Date, have been designated as "officers" of the
Company for purposes of Section 16 of the Exchange Act, and held
positions with the Company considered carrying 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.
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 .
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(a)
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Target Award Range. Exhibit A hereto
shows by Salary Grade the Target Award Range. The Salary Grade to
be used in determining the size of any Award Amount to a
participant under this Subplan shall be the Salary Grade applicable
to the position held by the participant on the Participation Date.
The actual size of the Award Amount to the participant shall be
determined based on an assessment by his or her senior management
of the participant’s past performance and potential for
contributions to the Company’s future long term success.
Based on this assessment, the participant may receive no award, the
target award amount, or any amount within the Target Award Range to
the n
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