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INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Filed by the Registrant  x

Filed by a Party other than the Registrant  o

Check the appropriate box:

Payment of Filing Fee (Check the appropriate box):

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March 21, 2003

Dear Fellow Stockholder:

      Our Annual Meeting will be held at the Toy F. Reid Employee Center, located at 400 South Wilcox Drive, in Kingsport, Tennessee, on May 1, 2003, at 11:30 a.m. Doors to the meeting will open at 10:30 a.m. The business to be considered and voted upon at the meeting is explained in the accompanying proxy materials (consisting of the Notice of Annual Meeting, the Proxy Statement, and the proxy card). A copy of Eastman’s 2002 Annual Report accompanies these materials.

      Your vote is important for this year’s Annual Meeting, regardless of the number of shares you own. Signing and returning a proxy card or submitting your proxy via the Internet or telephone will not prevent you from voting in person, but will assure that your vote is counted if you are unable to attend the meeting. Whether you choose to vote by proxy card, telephone, or computer, I urge you to vote as soon as possible. If you are a record holder, an admission ticket for the Annual Meeting is included with your proxy card. If you received our proxy materials from a broker or bank and do not have an admission ticket but wish to attend the meeting, please call (423) 229-4647.

      Thank you for your support of our Company.

	Sincerely,
	J. Brian Ferguson
	Chairman and Chief Executive Officer

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EASTMAN CHEMICAL COMPANY

To Our Stockholders:

      The 2003 Annual Meeting of Stockholders of Eastman Chemical Company (“Eastman” or the “Company”) will be held at the Toy F. Reid Employee Center, located at 400 South Wilcox Drive, Kingsport, Tennessee, on May 1, 2003, at 11:30 a.m., local time, for the following purposes:

      Only stockholders of record at the close of business on March 15, 2003 are entitled to vote at the Annual Meeting. It is important that your shares be represented and voted at the Annual Meeting. Please vote by proxy in one of these ways:

      Signing and returning the proxy card or submitting your proxy via Internet or by telephone does not affect your right to vote in person if you attend the Annual Meeting.

	By order of the Board of Directors
	Theresa K. Lee
	General Counsel and Secretary

March 21, 2003

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PROXY STATEMENT

FOR

ANNUAL MEETING OF STOCKHOLDERS OF

INFORMATION REGARDING THE ANNUAL MEETING

Proxy Statement and Annual Meeting

     This Proxy Statement is dated March 21, 2003 and is first being mailed and delivered electronically to Eastman stockholders, and made available on the Internet (www.eastman.com), on or about March 27, 2003. This Proxy Statement is being furnished to stockholders in connection with the solicitation of proxies by the Company’s Board of Directors for use at the Annual Meeting of Stockholders of the Company to be held on May 1, 2003, and at any adjournments or postponements thereof. At the Annual Meeting, stockholders will be asked to consider and vote on the items of business listed in the accompanying Notice of Annual Meeting and described in more detail under “Proposals to be Voted Upon at the Annual Meeting.”

Voting By Proxy

     By executing and returning your proxy (either by returning the paper proxy card or by submitting your proxy electronically via the Internet, or by telephone), you appoint James P. Rogers, the Company’s Chief Financial Officer, and Theresa K. Lee, the Company’s General Counsel and Secretary, to represent you at the Annual Meeting and direct them to vote your shares at the Annual Meeting according to your instructions. Shares of common stock represented by proxy will be voted by the proxy holders at the Annual Meeting in accordance with your instructions as indicated in the proxy. If you properly execute and return your proxy (in paper form, electronically via the Internet, or by telephone) but do not indicate any voting instructions, your shares will be voted in accordance with the recommendations of the Board of Directors as to the matters identified in this Proxy Statement and in the best judgment of the proxy holders as to any other matters.

     Stockholders of record may vote by proxy in one of three ways:

The Internet and telephone voting procedures are designed to authenticate stockholder identities, to allow stockholders to give voting instructions, and to confirm that stockholders’ instructions have been recorded properly. Stockholders voting by Internet should understand that there may be costs associated with electronic access, such as usage charges from Internet access and telephone or cable service providers, that must be borne by the stockholder.

     If your shares are held in “street name” through a broker, bank or other holder of record, you will receive instructions from the registered holder that you must follow in order for your shares to be voted for you by that record holder. Telephone and Internet voting is also offered to stockholders who own their shares through certain banks and brokers.

How to Revoke Your Proxy

     You may revoke your proxy at any time before its exercise at the Annual Meeting by either:

All written notices of revocation or other communications with respect to revocation of proxies should be sent to Eastman Chemical Company, P.O. Box 511, Kingsport, Tennessee 37662-5075, Attention: Secretary, so that they are received before the Annual Meeting.

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Record Date; Stockholders Entitled to Vote; Voting Rights

      The Company’s Board of Directors has fixed the close of business on March 15, 2003 as the record date for the determination of stockholders entitled to receive notice of, and to vote at, the Annual Meeting. Only holders of record of shares of common stock as of the record date will be entitled to vote at the Annual Meeting. If your shares are held in the name of a broker, bank or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the Annual Meeting.

      As of the record date, there were 77,530,471 shares of common stock issued and outstanding. Holders of common stock are entitled to one vote on each matter considered and voted upon at the Annual Meeting for each share of common stock they hold of record as of the record date.

Quorum

      The presence, in person or by proxy, of the holders of a majority of the shares of common stock entitled to vote at the Annual Meeting is necessary to constitute a quorum to conduct business at the Annual Meeting. Abstentions, votes withheld, and “broker non-votes” will be counted as present and entitled to vote for purposes of determining a quorum. A “broker non-vote” occurs when a nominee (such as a broker or bank) holding shares in “street name” as the registered holder for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received voting instructions from the beneficial owner.

Vote Required for Approval of Each Matter to be Considered

      A plurality of the votes cast is required for the election of directors. With respect to the election of directors, stockholders may by proxy (1) vote “for” all three nominees, (2) “withhold” authority to vote for all such nominees, or (3) withhold authority to vote for any individual nominee or nominees but vote for all other nominee(s). Because directors are elected by a plurality of the votes cast (meaning the three nominees receiving the greatest number of votes will be elected), withholding authority to vote with respect to one or more nominees will have no effect on the outcome of the election. Similarly, any broker non-votes are not considered to be votes cast and therefore would have no effect on the outcome of the election of directors.

      The affirmative vote of a majority of the votes cast is required for approval of the ratification of the appointment of independent accountants and the adoption of the stockholder proposal. With respect to these items, stockholders may by proxy (1) vote “for,” (2) vote “against,” or (3) “abstain” from voting. Abstentions and broker non-votes are not considered to be votes cast and therefore will have no effect on the outcome of these proposals.

Proxy Solicitation Costs

      The Company will bear the cost of soliciting proxies and the cost of the Annual Meeting. In addition to the solicitation of stockholders by mail and electronic means, proxies may be solicited by telephone, facsimile, personal contact, and similar means by directors, officers, or employees of the Company, none of whom will be specially compensated for these activities. The Company also contacts brokerage houses, banks, nominees, custodians, and fiduciaries who can be identified as record holders of common stock. Such holders, after inquiry by the Company, provide certain information concerning beneficial owners not objecting to the disclosure of such information and the quantities of proxy materials and annual reports needed to supply such materials to beneficial owners, and the Company reimburses such record holders for the expense of providing such beneficial ownership information and of mailing proxy materials and annual reports to beneficial owners. Georgeson Shareholder Communications has been retained by the Company to aid in the solicitation of proxies, at a cost of $10,000 plus expenses.

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Matters Raised at the Annual Meeting not Included in this Proxy Statement

      The Company’s management does not expect any business to be acted upon at the Annual Meeting other than as described in this Proxy Statement under “Proposals to be Voted Upon at the Annual Meeting.” If, however, other matters are properly brought before the Annual Meeting, the persons appointed as proxies will have the discretion to vote or act on those matters for you according to their best judgment.

Stockholder Proposals for the 2004 Annual Meeting

      In accordance with rules of the Securities and Exchange Commission (the “SEC”), if you want to submit a proposal for presentation at Eastman’s 2004 Annual Meeting of Stockholders, it must be received by the Company at its principal executive offices on or before November 22, 2003 in order to be included in the Company’s proxy materials relating to its 2004 Annual Meeting of Stockholders.

      In addition, the Company’s Bylaws, as amended, require that a proposal to be submitted by a stockholder for a vote of the Company’s stockholders at an annual meeting of stockholders, whether or not also submitted for inclusion in the Company’s proxy materials, must be preceded by adequate and timely notice to the Secretary of the Company. To be adequate, the notice must set forth certain information specified in our Bylaws (which will be provided to any stockholder upon written request) about the stockholder and the proposal and be delivered to the Secretary of the Company not less than 45 days prior to the date on which the notice of the immediately preceding year’s annual meeting of stockholders was first sent to the stockholders of the Company. If, as expected, notice of the Annual Meeting is first sent to stockholders on March 27, 2003, then such advance notice would be timely if delivered on or before February 11, 2004.

Nominations by Stockholders for Election to Board of Directors

      The Company’s Bylaws provide that nominations by stockholders of persons for election to the Board of Directors may be made by giving adequate notice to the Secretary of the Company. To be adequate, the nomination notice must set forth certain information specified in our Bylaws (which will be provided upon written request) about each stockholder submitting a nomination and each person being nominated and be delivered to the Secretary not less than 45 days prior to the date on which notice of the immediately preceding year’s annual meeting of stockholders was first sent to the stockholders of the Company. The Nominating and Corporate Governance Committee of the Board of Directors will consider persons nominated by stockholders and recommend to the full Board whether or not such nominee should be included with the Board’s nominees for election by stockholders.

Annual Report to Stockholders and Annual Report on Form 10-K

      The Company’s Annual Report to Stockholders for 2002, including consolidated financial statements for the year ended December 31, 2002, is being mailed and delivered electronically to stockholders, and made available on the Internet at the Company’s web site (www.eastman.com), concurrently with this Proxy Statement but does not form any part of the proxy solicitation material. Upon the written request of any stockholder, the Company will furnish without charge a copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 as filed with the SEC. Requests may be made to Eastman Chemical Company, P.O. Box 511, Kingsport, Tennessee 37662-5075, Attention: Investor Relations. This information is also available via the Internet at the Company’s web site (www.eastman.com), and the EDGAR version of such report (with exhibits) is available at the SEC’s web site (www.sec.gov).

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PROPOSALS TO BE VOTED UPON AT THE ANNUAL MEETING

      The Company’s Board of Directors is divided into three classes, with the terms of office of the respective classes ending in successive years. Under the Company’s Bylaws, a director reaching age 70 during any term of office continues to be qualified to serve only until the next annual meeting of stockholders following his or her 70th birthday (or, if approved by unanimous action of the Board of Directors, until the next annual meeting following his or her 71st birthday), and, unless additional terms of office are approved by the Board of Directors in certain circumstances, the maximum number of consecutive full three-year terms of office that may be served by any director is three.

      Five directors are currently in the class for which the term in office expires at the Annual Meeting; three of these five directors have each been nominated for re-election for a new three-year term. Under the Board retirement policy, Jerry E. Dempsey, whose current term expires at the Annual Meeting, will not stand for re-election at the Annual Meeting. Under the Board term-limit policy, Marilyn R. Marks, whose current term expires at the Annual Meeting, will not stand for re-election at the Annual Meeting. One or both of the vacancies created by the retirements of Mr. Dempsey and Miss Marks may be filled by the Board prior to the 2004 Annual Meeting of Stockholders. Messrs. Hernandez and Demeritt were elected by the Board since the 2002 Annual Meeting of Stockholders to newly created Board positions in the class for which the term in office expires at the Annual Meeting. The terms of the other six directors continue after the Annual Meeting.

      The stockholders are being asked to vote on the election of three directors to the class for which the term of office shall expire at the Annual Meeting of Stockholders in 2006 and their successors are duly elected and qualified. All shares of common stock represented by valid proxies received pursuant to this solicitation, and not revoked before they are exercised, will be voted in the manner specified. If you execute and return a proxy without instruction, your shares will be voted for the election of the three nominees identified below. If any nominee is unable or unwilling to serve (which is not anticipated), the persons designated as proxies will vote your shares for the remaining nominees and for another nominee proposed by the Board or, as an alternative, the Board could reduce the number of directors to be elected at the Annual Meeting.

      The nominees have been recommended to the Board of Directors by the Nominating and Corporate Governance Committee of the Board. The Board of Directors unanimously recommends that you vote “FOR” election of the three nominees identified below.

      Set forth below is certain information regarding each director nominated for re-election or whose term in office will continue after the Annual Meeting, including the date of his first election to the Board; a description of his positions and offices with the Company (other than as a director), if any; a brief description of his principal occupation and business experience during at least the last five years; directorships and similar positions presently held by him in publicly traded and certain other companies, organizations, or associations; and his age.

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NOMINEES FOR DIRECTOR Term Expiring Annual Meeting 2006
		STEPHEN R. DEMERITT (director since February 2003) Mr. Demeritt has served as Vice Chairman of the Board of General Mills, Inc. since 1999. General Mills is a leading producer of packaged consumer foods. He joined General Mills in 1969 and has served in a variety of marketing positions, including President, International Foods from 1991 to 1993 and Chief Executive Officer of Cereal Partners Worldwide, General Mills’ global cereal joint venture with Nestle, from 1993 to 1999. Mr. Demeritt is 59.
		ROBERT M. HERNANDEZ (director since August 2002) Mr. Hernandez has been Chairman of the Board of RTI International Metals, Inc. since 1990, and was Vice Chairman of the Board and Chief Financial Officer of USX Corporation from 1994 until his retirement in December 2001. He joined U.S. Steel Corporation, the predecessor of USX, in 1968, and held positions of increasing responsibility in the financial and operating organizations, including Vice President and Treasurer from 1984 to 1987, Senior Vice President and Controller from 1987 to 1989, President, U.S. Diversified Group from 1989 to 1990, Senior Vice President, Finance from 1990 to 1991, and Executive Vice President and Chief Financial Officer from 1991 to 1994. RTI, a NYSE listed company, is a leading U.S. producer of titanium mill products and fabricated-metal parts for the global market, and was affiliated with USX prior to 2000. Mr. Hernandez is also a member of the board of directors of American Casualty Excess (ACE) Ltd., Vice Chairman of the Board of Trustees of Black Rock Mutual Funds, a trustee of the University of Pittsburgh and a director of the University of Pittsburgh Medical Center Health System. Mr. Hernandez is 58.
		DAVID W. RAISBECK (director since December 2000) Mr. Raisbeck is Vice Chairman of Cargill, Incorporated, an agricultural trading and processing company. He joined Cargill in 1971 and has held a variety of merchandising and management positions focused primarily in the commodity and financial trading businesses. Mr. Raisbeck was elected President of Cargill’s Financial Markets Division in 1988, President of Cargill’s Trading Sector in 1993, a director of Cargill in 1994, Executive Vice President in 1995, and to his current position in 1999. He is also a member of the board of directors of Cardinal Health, Inc. Mr. Raisbeck is 53.

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MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE Term Expiring Annual Meeting 2004
		H. JESSE ARNELLE (director since January 1994) Mr. Arnelle is of counsel to the Winston-Salem, North Carolina-based law firm of Womble, Carlyle, Sandridge & Rice. He was a partner of the San Francisco-based law firm of Arnelle, Hastie, McGee, Willis & Greene and its predecessor from 1985 until 1996. Mr. Arnelle is a Past Chairman of the Board of Trustees of Pennsylvania State University, a director of the National Football Foundation and Collegiate Hall of Fame, and a member of the boards of directors of Armstrong World Industries, Inc., FPL Group, Inc., Gannett Corporation, Metropolitan Series Funds, Inc., Textron, Inc., and Waste Management, Inc. Mr. Arnelle is 69.
		DR. JOHN A. WHITE (director since January 1994) Dr. White is Chancellor of, and Distinguished Professor of Industrial Engineering at, the University of Arkansas. From 1991 to 1997, he was Dean of the College of Engineering at the Georgia Institute of Technology. From July 1988 to September 1991, he was Assistant Director of the National Science Foundation in Washington, D.C., and served on the faculty of the Georgia Institute of Technology from 1975 to 1997. Dr. White is also a member of the National Science Board, a member of the National Academy of Engineering, and a member of the boards of directors of J. B. Hunt Transport Services, Inc., Logility, Inc., Motorola, Inc., and Russell Corporation. Dr. White is 63.
		PETER M. WOOD (director since May 2000) Mr. Wood is non-executive Chairman of the Board of Stone & Webster, Incorporated, an engineering and construction firm, and served as Managing Director of J.P. Morgan & Company, an investment banking firm, from 1986 until his retirement in 1996. He is also a member of the board of directors of Middlesex Mutual Assurance Company. Mr. Wood is 64.

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Term Expiring Annual Meeting 2005
		CALVIN A. CAMPBELL, JR. (director since January 1994) Mr. Campbell has been Chairman of the Board and Chief Executive Officer of Goodman Equipment Corporation since 1971. Goodman Equipment designs, manufactures, and markets worldwide underground mining locomotives and personnel carriers and provides services and parts for injection molding machinery. He was also President and Chief Executive Officer of Cyprus Amax Minerals Company, a producer of copper and molybdenum, in 1992, Chairman of the Board in 1991 and 1992, and a director from 1985 through 1994. Mr. Campbell is a member of the boards of directors of Mine Safety Appliances Company and of Bulley & Andrews Company. He is also a director and former Chairman of the National Association of Manufacturers, a director of the National Mining Association, and a director and former Chairman of the Illinois Manufacturers Association, and serves as Chairman of Armour College of Engineering and Science and as a trustee of the Illinois Institute of Technology. Mr. Campbell is 68.
		J. BRIAN FERGUSON (director since January 2002) Mr. Ferguson has been Chairman of the Board and Chief Executive Officer of the Company since January 2002. He joined Eastman in 1977. Mr. Ferguson was named Vice President, Industry and Federal Affairs in 1994, became Managing Director, Greater China in 1997, was named President, Eastman Chemical Asia Pacific in 1998, became President, Polymers Group in 1999, and became President, Chemicals Group in 2001. Mr. Ferguson is 48.
		DONALD W. GRIFFIN (director since May 1999) Mr. Griffin is Chairman of the Board of Olin Corporation, a manufacturer of chemicals, metals, and ammunition. He joined Olin in 1961, served in a series of marketing and management positions prior to appointment to the position of President and Chief Operating Officer in 1994, became Chairman, President, and Chief Executive Officer in 1996, and retired as President and Chief Executive Officer in 2002. Mr. Griffin is also a member of the board of directors of Barnes Group, Inc., and serves as a trustee of the University of Evansville and the Buffalo Bill Historical Center. Mr. Griffin is 66.

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Board Committees

      The Board of Directors has an Audit Committee, a Nominating and Corporate Governance Committee, a Compensation and Management Development Committee, a Finance Committee, and a Health, Safety & Environmental and Public Policy Committee. All committee members are non-employee, independent directors. Certain committee assignments will be changed by the Board following the Annual Meeting, as indicated below.

      Audit Committee. The members of the Audit Committee are Messrs. Wood (Chair), Campbell, Hernandez, and Raisbeck, and Dr. White. After the Annual Meeting, the Audit Committee will consist of Messrs. Wood (Chair), Hernandez, and Raisbeck, and Dr. White. The Audit Committee held ten meetings during 2002. The Audit Committee:

      The Board of Directors has adopted a written Audit Committee Charter, a copy of which was included as Appendix A to the Company’s Proxy Statement for the 2001 Annual Meeting of Stockholders and which is also available in the investor information section of the Eastman website (www.eastman.com). All members of the Audit Committee are “independent” as defined in Section 303.01(B)(2)(a) and (3) of the New York Stock Exchange’s listing standards.

Audit Committee Report

      The Audit Committee has reviewed and discussed with the Company’s management and PricewaterhouseCoopers LLP, the Company’s independent auditors, the audited financial statements of the Company contained in the Company’s Annual Report to Stockholders for the year ended December 31, 2002. The Audit Committee has also discussed with the Company’s independent auditors the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, Communication with Audit Committees), as amended.

      The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1 (titled, “Independence Discussions with Audit Committees”), and has discussed with PricewaterhouseCoopers LLP their independence. The Audit Committee has also considered whether the provision of non-audit services to the Company by PricewaterhouseCoopers LLP is compatible with maintaining their independence.

      Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 filed with the SEC.

Audit Committee

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      Nominating and Corporate Governance Committee. The members of the Nominating and Corporate Governance Committee (formerly known as the Committee on Directors) are Messrs. Dempsey (Chair), Arnelle, Demeritt, and Griffin, and Miss Marks. After the Annual Meeting, the Nominating and Corporate Governance Committee will consist of Messrs. Campbell (Chair), Arnelle, Demeritt, and Griffin. The Nominating and Corporate Governance Committee held five meetings during 2002. The Nominating and Corporate Governance Committee:

      Compensation and Management Development Committee. The members of the Compensation and Management Development Committee (the “Compensation Committee”) are Messrs. Griffin (Chair), Arnelle, Demeritt, and Dempsey, and Miss Marks. After the Annual Meeting, the Compensation Committee will consist of Messrs. Griffin (Chair), Arnelle, Campbell, and Demeritt. The Compensation Committee held seven meetings during 2002. The Compensation Committee:

      Finance Committee. All of the directors except Mr. Ferguson are members, and Mr. Raisbeck is the Chair, of the Finance Committee. The Finance Committee held five meetings during 2002. The Finance Committee:

      Health, Safety & Environmental and Public Policy Committee. All of the directors except Mr. Ferguson are members, and Miss Marks is the Chair, of the Health, Safety & Environmental and Public Policy Committee. After the Annual Meeting, Mr. Arnelle will serve as Chair of the Health, Safety & Environmental and Public Policy Committee. The Health, Safety & Environmental and Public Policy

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Meeting Attendance

      The Board of Directors held seven meetings during 2002. Each incumbent director attended at least 75% of the aggregate of the total number of meetings of the Board (held during the period for which he or she was a director) and the total number of meetings held by all committees of the Board on which he or she served (during the period that he or she served).

Director Compensation

      Directors’ Annual Compensation. Currently, each director who is not an employee of the Company receives an annual cash retainer fee of $30,000. In addition, each such director receives a fee of $1,100 for each Board meeting attended and for each committee meeting attended, and reimbursement of expenses related to attendance. The chairperson of each committee receives an additional annual retainer of $5,000.

      Effective after the Annual Meeting, each non-employee director will receive the following fees, in addition to payment or reimbursement of expenses related to attendance:

      Non-employee directors are also entitled to compensation on a “per diem” basis for significant time spent outside of Board or committee meetings for director training, interviewing director candidates, meeting with Company management, or other meetings or activities deemed necessary by the Board or one of its committees, with each such fee equal in amount to the meeting fee then in effect.

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      Directors who are also employees of the Company receive no Board or committee fees.

      Director Long-Term Compensation Plan. The Company’s 2002 Director Long-Term Compensation Plan (the “DLTP”) provides for an automatic one-time restricted stock award and annual option grants and restricted stock awards to each non-employee director. (The DLTP replaced the 1999 Director Long-Term Compensation Plan, which was substantially similar to the DLTP. Under a prior plan, the 1994 Director Long-Term Compensation Plan, each non-employee director received a one-time restricted stock award and option grant on the first day of his or her initial term of service as a director.) The maximum number of shares of common stock that may be granted or subject to awards under the DLTP is 200,000, subject to adjustment in the event of stock splits, stock dividends, or changes in capital structure affecting common stock. No award may be made under the DLTP after the later of May 1, 2007 or the 2007 Annual Meeting of Stockholders of the Company.

           Annual Option Grants. Under the DLTP, immediately following each annual meeting of stockholders, each non-employee director receives a non-qualified stock option to purchase 2,000 shares of Eastman common stock. Such options have an exercise price equal to the fair market value of the underlying shares of common stock on the date the options are granted. The options vest and become exercisable with respect to one-half of the option shares on the first anniversary of the date of the grant and with respect to the remaining shares on the second anniversary of the date of the grant. Each such option has a term of ten years and is nonassignable (except by will or the laws of descent and distribution). If the grantee ceases to be a director for any reason other than death, disability or completion of his or her normal term of service, all outstanding unexercised options, whether or not vested, will expire.

           If an option is exercised by the surrender of previously-owned shares of Eastman common stock while the director is still a director or within 60 days thereafter, then the director exercising the option will be granted a new “reload” option for the number of shares so surrendered. Such reload option will have a term equal to the remaining term of the original option, will have an exercise price equal to the fair market value of the underlying shares as of the date of exercise of the original option, and will otherwise have the same terms and conditions as the original option. Reload options will not, however, have similar replacement rights, and will be exercisable on the earlier of six months from the date of grant or the date of the grantee’s termination as a director.

           Annual Restricted Stock Awards. Immediately following each annual meeting of stockholders, each non-employee director is granted an award of shares of common stock having a fair market value equal to $5,000 as of such date, subject to certain restrictions. The restricted shares are not transferable (except by will or the laws of descent and distribution) and are subject to forfeiture until the earlier of: (i) the third anniversary of grant (provided the grantee is still a director), (ii) death, disability or resignation due to term limit or retirement age during the three years after grant, or (iii) departure from the Board at the end of the term of service to which elected. If none of the three alternative vesting events occurs by the third anniversary of the grant date, then the shares are forfeited. During the restricted period, the director has all of the rights of a stockholder (other than the right to transfer the shares) with respect to the restricted shares, including voting and dividend rights.

           One-Time Restricted Stock Awards. In addition to the options and restricted shares described above, each non-employee director is granted, on the first date of such director’s term of service as a director, an award of shares of common stock having a fair market value equal to $10,000 as of such date, subject to certain restrictions. These restricted shares are not transferable (except by will or the laws of descent and distribution) and are subject to forfeiture until the earlier of: (i) the third anniversary of grant (provided the grantee is still a director), (ii) death, disability or resignation due to term limit or retirement age during the three years after grant, or (iii) failure to be reelected as a director during the three years after grant. If none of the three alternative vesting events occurs by the third anniversary of the grant date, then the shares are forfeited. During the restricted period, the director has all of the rights of a stockholder (other than the right to transfer the shares) with respect to the restricted shares, including voting and dividend rights.

           Treatment of Options and Restricted Stock Upon “Change In Control.” The DLTP contains provisions regarding the treatment of options and restricted shares in the event of a “change in control” of the

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      Non-Employee Director Stock Option Plan. Under the Company’s 1996 Non-Employee Director Stock Option Plan (the “Director Stock Option Plan”), each non-employee director may elect to receive options to purchase Eastman common stock in lieu of his or her annual retainer (but not meeting fees or other compensation as a director). A maximum of 150,000 shares of common stock are available for the grant of stock options under the Director Stock Option Plan, subject to adjustment in the event of stock splits, stock dividends or changes in capital structure affecting common stock. No grant may be made under the Director Stock Option Plan after May 2, 2006.

           Options In Lieu of Retainer Fees. Each non-employee director may make an annual advance irrevocable election to receive all or a portion of his or her retainer to be earned in the following year in options to purchase Eastman common stock. The number of shares of common stock underlying stock options granted is determined by multiplying the amount of the annual retainer the director elects to receive in stock options by three and one-third, then dividing by the fair market value per share of common stock on the date the options are granted. The exercise price per share of all stock options granted under the Director Stock Option Plan is the fair market value per share of common stock on the grant date. Options granted under the Director Stock Option Plan are not exercisable until six months from the date of grant, and remain exercisable thereafter until the tenth anniversary of the date of grant, regardless of whether the participant is still a director.

           Treatment of Options Upon “Change In Control.” Upon the occurrence of a “change in control” of the Company (as defined in the Director Stock Option Plan, generally circumstances in which the Company is acquired by another entity or its controlling ownership is changed), any and all outstanding options under the Director Stock Option Plan become immediately exercisable.

      Directors’ Deferred Compensation Plan. The Company maintains the Directors’ Deferred Compensation Plan (the “DDCP”), an unfunded, non-qualified, deferred compensation plan under which non-employee directors of the Company may elect to defer compensation received as a director until such time as they cease to serve as a director. Non-employee directors may make an annual advance irrevocable election to defer compensation for services to be rendered the following year. Compensation that may be deferred includes all cash compensation for service as a director, including retainer, meeting, and “per diem” fees.

           Terms of Deferral of Director Compensation. The deferred amounts may be credited to individual “Interest Accounts” under the DDCP (which are credited with interest until transfer or distribution at the prime rate as quoted in The Wall Street Journal), to individual “Stock Accounts” under the DDCP (which increase or decrease in value depending upon the market price of Eastman common stock), or to a combination thereof. Under the Stock Account, dollar amounts are “invested” in hypothetical shares of the Company’s common stock. If cash dividends are declared on shares of common stock, then any participant who has hypothetical shares in his or her Stock Account receives a dividend equivalent which is used to “purchase” additional hypothetical shares under the DDCP. A participant may elect to transfer the dollar amount of all or any portion of his or her Stock Account to the Interest Account, or vice versa.

           Upon termination as a director, the value of a participant’s Interest Account and Stock Account will be paid, in cash, in a single lump sum or up to ten annual installments, as determined in the sole discretion of the Nominating and Corporate Governance Committee. Payment will commence in any year up through the tenth year following termination of directorship, as determined by the Nominating and Corporate Governance

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           The DDCP provides that a participant, whether or not still a director, may request that part or all of such participant’s Interest Account and Stock Account be distributed immediately in the event of a severe financial hardship. The determination of whether a hardship exists will be made by the Nominating and Corporate Governance Committee.

           The DDCP also provides that a participant may withdraw at any time all or a portion of his or her balances in the Interest Account and Stock Account, provided that the participant forfeits 10% of the balance of his or her accounts and will not be permitted to participate in the DDCP for a period of 36 months from the date of the early withdrawal payment. In addition, if, within any six month period, either 50% or more of the DDCP participants elect such early withdrawal from the DDCP or 20% or more of DDCP participants with aggregate account balances valued at 50% or more of the total value of all DDCP accounts elect such early withdrawal, then the accounts of each remaining DDCP participant will be distributed in a single lump sum.

           Treatment of Deferred Compensation Upon “Change In Control.” If the Company undergoes a “change in control” (as defined in the DDCP, generally circumstances in which the Company is acquired by another entity or its controlling ownership is changed), then the accounts of each participant, whether or not the participant is still a director, will be paid in a single lump sum no later than 90 days following the change in control.

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ITEM 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

      The Audit Committee of the Board of Directors has retained PricewaterhouseCoopers LLP as independent accountants to audit the financial statements of the Company and its subsidiaries for the year ended December 31, 2003.

      PricewaterhouseCoopers LLP also served as the Corporation’s independent accountants for the years ended December 31, 2002 and 2001, and has billed the Company the following amounts for professional services rendered during 2002 and 2001:

      All auditing and non-audit services provided to the Company by the independent accountants are pre-approved by the Audit Committee. At the beginning of each year, the Audit Committee reviews and approves all known audit and non-audit services and fees to be provided by and paid to the independent accountants. During the year, specific non-audit service engagements previously approved by the Audit Committee with fees of less than $100,000 are also approved by the Chief Financial Officer, and those with fees of greater than $100,000 by the Chair of the Audit Committee, and any non-audit services or fees not previously approved by the Audit Committee are approved in advance by the Audit Committee. In addition, during the year the Chief Financial Officer and the Audit Committee monitor actual fees to the independent accountants for audit and non-audit services.

      The stockholders are being asked to ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP. All shares of common stock represented by valid proxies received pursuant to this solicitation, and not revoked before they are exercised, will be voted in the manner specified. If you execute and return a proxy without instruction, your shares will be voted for ratification of the appointment of PricewaterhouseCoopers LLP as independent accountants for the Company.

      A representative of PricewaterhouseCoopers LLP is expected to attend the Annual Meeting and will have the opportunity to make a statement on behalf of the firm if he desires to do so. The representative is also expected to be available to respond to appropriate questions from stockholders.

      The Board of Directors unanimously recommends that you vote “FOR” ratification of the appointment of PricewaterhouseCoopers LLP as independent accountants.

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STOCKHOLDER PROPOSAL

      The following stockholder proposal has been submitted for a vote of the stockholders at the Annual Meeting. The proposal and the proponent’s supporting statement are set forth below along with the Company’s reasons for recommending a vote “AGAINST” the proposal. All shares of common stock represented by valid proxies received pursuant to this solicitation, and not revoked before they are exercised, will be voted in the manner specified. If you execute and return a proxy without instruction concerning the proposal, your shares will be voted against adoption of the proposal.

ITEM 3 — PROPOSAL TO STUDY POTENTIAL HEALTH RISKS FROM CELLULOSE

      Stockholder Trinity Health, 34605 Twelve Mile Road, Farmington Hills, Michigan 48336, holder of 2,210 shares of Eastman common stock, has given notice that it intends to submit the following proposal and supporting statement:

      WHEREAS Eastman Chemical is a major producer of cellulose acetate tow, which is used in the manufacture of cigarette filters:

      RESOLVED: That shareholders request that management conduct a study examining possible health risks posed by our filter tows among consumers who smoke cigarettes with cellulose acetate filters. This study shall include a review of all information known or available to the company on this subject but need not involve any new primary research. The study and any recommendations that emerge from it are to be completed within one year of the 2003 Annual Meeting. Copies of the complete report shall be made available to requesting shareholders.

Supporting Statement of Proponent

      Cigarette smoke contains dozens of potent carcinogens. Cellulose acetate fibers that are supposed to trap these poisons can themselves be transported into the lungs, laden with these dangerous substances. We believe this resolution and the study it requests are in the best interests of consumers as well as in the interests of our company and shareholders.

      Certainly it is in our interest as management and investors to be fully informed about any and all health risks to smokers to which Eastman Chemical contributes. We need to know, for example, if our products are deemed to contribute to cancer or if we may be faced with legal and financial liabilities. It is only fair to consumers as well that they are fully aware of all of the dangers of smoking.

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      If you believe that Eastman Chemical and its shareholders should be fully apprised as to whether the cellulose acetate tow the company sells to the cigarette manufacturers is contributing to the various illnesses caused by cigarettes, please vote YES in support of this resolution.

Response of the Company

      The proposal concerns substantially the same subject matter as proposals concerning our acetate tow product line which have been submitted in past years by the proponent and other members of the Interfaith Center on Corporate Responsibility. Your management’s views on the current proposal are the same as those it had concerning these previous proposals, which views have consistently been supported overwhelmingly by stockholders. A proposal identical to the current proposal was submitted last year and was supported by only 7.6% of the votes cast and 6.7% of the shares represented at the 2002 Annual Meeting of Stockholders.

      In addition, original research recently performed by Eastman and reported in peer-reviewed scientific journal articles (“Inertial Impactors to Measure Aerodynamic Diameter of Man-Made Fibers,” Aerosol Science and Technology Journal, Vol. 36, No. 2 (Feb. 2002), pages 166-177, and “Aerodynamic Diameter Measurement of Cellulose Acetate Fibers from Cigarette Filters: What is the Potential for Human Exposure?”, Inhalation Toxicology, 14:247-262 (2002)) is directly responsive to and goes beyond what is called for in the proposal. Eastman has made the proponent aware of this research, has provided the proponent with copies of the published journal articles, and has presented its belief that the research and publications address everything requested in the stockholder proposal and demonstrate the Company’s responsible corporate approach to issues concerning the acetate tow product line. The proponent, however, has declined the Company’s request that the proposal be withdrawn.

      The Board of Directors unanimously recommends that you vote “AGAINST” adoption of this proposal.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

Common Stock

      The table below sets forth certain information regarding the beneficial ownership of Eastman common stock as of December 31, 2002 by each current director, by each executive officer named in the Summary Compensation Table (under “Executive Compensation — Compensation Tables”), and by the current directors, the named executive officers, and the other current executive officers as a group.

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Common Stock and Common Stock Units

      In addition to shares of Eastman common stock beneficially owned, the executive officers have units of common stock (“Common Stock Units”) credited to their individual Stock Accounts in the Eastman Executive Deferred Compensation Plan (the “EDCP”), and certain of the directors have Common Stock Units credited to their individual Stock Accounts in the DDCP. See “Item 1 — Election of Directors — Director Compensation — Directors’ Deferred Compensation Plan,” “Executive Compensation — Compensation Tables — Summary Compensation Table” and “— Compensation and Management Development Committee Report on Executive Compensation.”

      The table below shows, for each current director and each executive officer named in the Summary Compensation Table, and for the current directors, the named executive officers, and the other current executive officers as a group, the aggregate of the number of shares of common stock beneficially owned by such person and group, as set forth in the preceding table, and the number of Common Stock Units credited to the Stock Accounts of such person and group as of December 31, 2002. Common Stock Units represent hypothetical “investments” in Eastman common stock. The value of one Common Stock Unit is equal to the market value of one share of Eastman common stock. Although the DDCP and EDCP allow Common Stock Units to be paid out only in the form of cash, and not in shares of common stock, Common Stock Units create essentially the same stake in the market performance of the Company’s common stock as do actual shares of common stock. As a result, Common Stock Units are counted with certain shares of common stock beneficially owned (excluding certain shares that may be deemed beneficially owned under SEC rules, such as shares underlying options, shares owned by the individual’s spouse, and shares over which the individual shares voting and investment power, but in which the individual has no pecuniary interest) for purposes of the Company’s stock ownership guidelines — three times annual base pay for the Chief Executive Officer, two times annual base pay for the other executive officers named in the Summary Compensation Table, and three times the annual retainer fee for non-employee directors. See “Executive Compensation — Compensation and Management Development Committee Report on Executive Compensation.” The table below is included to

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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

      The following table sets forth certain information regarding the only known beneficial owners of more than 5% of Eastman common stock as of December 31, 2002.

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EXECUTIVE COMPENSATION

Compensation Tables

      The following Summary Compensation Table sets forth certain information concerning compensation of Eastman Chemical Company’s Chief Executive Officer and each of the company’s four other most highly compensated executive officers for 2002:

Summary Compensation Table

[Additional columns below]

[Continued from above table, first column(s) repeated]

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      The following table sets forth certain information regarding options granted during 2002 under the Omnibus Long-Term Compensation Plan to the individuals named in the Summary Compensation Table:

Option Grants in Last Fiscal Year

[Additional columns below]

[Continued from above table, first column(s) repeated]

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      The following table sets forth certain information regarding exercises of options during 2002, and total options held at year-end, by the individuals named in the Summary Compensation Table:

Aggregated Option Exercises in Last Fiscal Year

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Pension Plans

      Eastman Retirement Assistance Plan. The Company presently has in effect a tax-qualified, non-contributory defined benefit pension plan known as the Eastman Retirement Assistance Plan (“ERAP”) for substantially all active U.S. employees, other than employees of certain subsidiaries and some employees covered by collective bargaining agreements. A participant’s total ERAP benefit consists of his “Pre-2000 Benefit” and “Pension Equity Benefit,” as described below.

        Pre-2000 Benefit. Prior to 2000, the ERAP used a traditional pension formula which gave each participant a life annuity commencing at age 65. The following table sets forth the estimated annual Pre-2000 Benefits payable upon retirement (including any amounts attributable to the plans described under “Supplemental Pension Plans” below) to persons in the specified compensation and years-of-service classifications who are eligible for a full unreduced Pre-2000 Benefit.

Pension Plan Table

           To the extent that any individual’s annual Pre-2000 Benefit, as reflected in the foregoing table, exceeds the amount payable from the ERAP, such excess will be paid from one or more unfunded, supplementary plans. See “Supplemental Pension Plans” below.

           Pre-2000 Benefits under the ERAP are based upon the participant’s “average participating compensation,” which is the average of three years of those earnings described in the ERAP as “participating compensation.” “Participating compensation,” in the case of the executive officers identified in the Summary Compensation Table, consists of salary and bonus payments, including allowance in lieu of salary for authorized periods of absence, such as illness, vacation, and holidays.

           The estimated annual Pre-2000 Benefits reflected in the preceding Pension Plan Table have been computed in straight-life annuity amounts and are not subject to any deductions for Social Security or other offset amounts. An employee is eligible for an unreduced Pre-2000 Benefit when such employee’s aggregate age plus years of eligible service totals 85 or at age 65.

           Years of accrued service credited through 2002 and the amount of average participating compensation at the end of 2002 for the individuals named in the Summary Compensation Table were as follows: Mr. Ferguson, 25 years and $615,855; Mr. Rothwell, 33 years and $562,088; Mr. Rogers, 3 years and $538,580; Mr. Mowen, 32 years and $436,808; and Ms. Lee, 15 years and $340,701.

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        Pension Equity Benefit. Effective January 1, 2000, the Company redesigned the ERAP to use a pension equity formula. Under the new formula, beginning January 1, 2000, a participant earns a certain pension equity percentage each year based on his age and total service with the Company, using the following chart:

           When a participant terminates employment, he is entitled to a pension lump sum, payable over five years, which is equal to the accumulated percentages in the second column times his average participating compensation, plus the accumulated percentages in the third column times his average participating compensation in excess of his average Social Security wage base. The lump sum may also be converted to various forms of annuities.

           To the extent that any individual’s Pension Equity Benefit exceeds the amount payable from the ERAP, such excess will be paid from one or more unfunded, supplementary plans. See “Supplemental Pension Plans” below.

        Supplemental Pension Plans. The Company maintains two unfunded, nonqualified plans that will restore to participants in the ERAP benefits that cannot be paid under the ERAP because of restrictions under the Internal Revenue Code of 1986, as amended, and benefits that are not accrued under the ERAP because of a voluntary deferral by the participant of compensation that would otherwise be counted under the ERAP.

      The Company has established a “Rabbi Trust” to provide a degree of financial security for the participants’ unfunded account balances under the supplemental pension plans. See “Change-in-Control Arrangements — Benefit Security Trust.”

Change-in-Control Arrangements

      Severance Agreements. The Company has entered into Severance Agreements with the five individuals named in the Summary Compensation Table and certain other officers of the Company. Each Severance Agreement has a term of three years (with automatic one-year extensions absent advance notice otherwise from the Company); provided, however, that upon the occurrence of a “change in control” or a “potential change in control” (each as defined) prior to such termination date, the term of the Severance Agreement will automatically be extended for two years from the date of the change in control or potential change in control, as the case may be. If, at any time during the term of the Severance Agreement and before the occurrence of a change in control or a potential change in control, there occurs a reduction in the employee’s level of responsibility, position, authority or duties, the Company may in its sole discretion terminate the Severance Agreement.

      A “change in control” is generally defined in the Severance Agreements to include the following, subject to certain exceptions: the acquisition by a person of 19% or more of the voting stock of the Company; the incumbent Board members (and subsequent directors approved by them) ceasing to constitute a majority of the Board; approval by the Company’s stockholders of a reorganization or merger unless, after such proposed transaction, the former stockholders of the Company will own more than 75% of the resulting corporation’s voting stock; or approval by the Company’s stockholders of a complete liquidation and dissolution of the

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      If during the term of the Severance Agreements and following a change in control (or within 120 days before or after a potential change in control) of the Company, the employee’s employment with the Company is terminated by the Company other than for “cause” (as defined), death or disability, or by the employee for “good reason” (as defined, which includes a reduction in the employee’s compensation, certain relocations of the employee’s office, the exclusion of the employee from new compensation arrangements offered to similarly situated employees, or a material reduction in the employee’s responsibility, position, authority, or duties, and also includes a termination by the employee for any reason or no reason during the 30-day period beginning on the first anniversary of the change in control), then, in addition to any other benefits accruing to the employee outside the scope of the Severance Agreement: (1) the acquiror will pay the employee any unpaid salary, benefits or awards that shall have been earned or become payable through the date of termination; (2) the acquiror will pay to the employee as severance an amount equal to three times (or four times in the case of Mr. Ferguson) the employee’s “pay” (defined as the average of the three highest out of the last ten years of the employee’s total annual compensation, including base annual salary, bonus, the grant date value of stock grants, and incentive compensation); (3) the acquiror will maintain in effect for three years (or four years in the case of Mr. Ferguson) after the date of termination for the employee and his dependents all welfare benefit plans in which the employee was entitled to participate immediately prior to termination; and (4) the acquiror will pay the employee a single lump sum amount equal to the actuarial equivalent of (a) the retirement benefit to which the employee would have been entitled under the ERAP and the excess retirement plans described above under “Pension Plans” if the employee had five additional years of service and was five years older, minus (b) the retirement benefit to which the employee is actually entitled under the ERAP and the excess retirement plans.

      If the amount payable to the employee under these Severance Agreements exceeds certain threshold amounts, federal excise tax could be imposed on the employee and the Company could lose a tax deduction for a portion of the payment. If the amount payable would result in such effects, but exceeds the applicable threshold by $30,000 or less, the amount payable will be reduced by the amount the payment exceeds the threshold. If the payment exceeds the threshold by more than $30,000, the employee will be entitled to full benefits under the Severance Agreement and to additional amounts to compensate him or her fully for the imposition of the federal excise tax (including federal, state, and excise taxes applicable to the receipt of such additional amount).

      The Company has established a “Rabbi Trust” to provide a degree of financial security for any amounts that may become payable to officers under the Severance Agreements. See “Benefit Security Trust.”

      Employee Protection Plan. The Company’s Employee Protection Plan provides severance pay, health, dental, disability, and life insurance continuation, and a retraining allowance (of up to $5,000) for substantially all employees whose employment is terminated within two years following a “change in control” (as defined, generally circumstances in which the Company is acquired by another entity or its controlling ownership is changed). For purposes of the Employee Protection Plan, participants have been credited with service with Eastman Kodak Company and its affiliates prior to the Company’s spin-off from Eastman Kodak. The Employee Protection Plan provides for a lump sum severance payment of three weeks of “pay” (as defined) for each year of service up to 16 years and four weeks of pay for each year of service in excess of 16 years, with a minimum of six weeks of pay and a maximum of 104 weeks. Health, dental, disability, and life insurance would be continued at the Company’s expense for up to 12 months, depending on years of service, on the same basis as in effect on the date of employment termination (except that no employee contributions would be required). In addition, the Employee Protection Plan provides for the payment of certain bonuses

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      Omnibus Long-Term Compensation Plans. The Company’s 2002 Omnibus Long-Term Compensation Plan (the “2002 Omnibus Plan”), which is administered by the Compensation Committee, provides for grants to employees of nonqualified and incentive stock options, stock appreciation rights, stock awards, performance shares, and other stock and stock-based awards (collectively, “Awards”). The 2002 Omnibus Plan is substantially similar to, and was intended to replace, the 1997 Omnibus Long-Term Compensation Plan (the “1997 Omnibus Plan”) which in turn replaced the 1994 Omnibus Long-Term Compensation Plan (the “1994 Omnibus Plan”). (Any of the 2002 Omnibus Plan, the 1994 Omnibus Plan, and 1997 Omnibus Plan are sometimes referred to in this Proxy Statement as the “Omnibus Long-Term Compensation Plan” or the “Omnibus Plan,” and the 2002 Omnibus Plan, the 1994 Omnibus Plan, and 1997 Omnibus Plan are sometimes collectively referred to as the “Omnibus Long-Term Compensation Plans” or the “Omnibus Plans.”) No new awards have been made under the 1994 or the 1997 Omnibus Plans following the effectiveness of the 2002 Omnibus Plan, and outstanding grants and awards under the 1994 and the 1997 Omnibus Plans were unaffected by the replacement of the 1997 Omnibus Plan with the 2002 Omnibus Plan.

      The Omnibus Plans contain provisions regarding the treatment of Awards in the event of a “change in ownership” (as defined, generally concerning circumstances in which the Company’s common stock is no longer publicly traded) and of a “change in control” (as defined, generally concerning circumstances in which the Company is acquired by another entity or its controlling ownership is changed). Upon a change in ownership or change in control, the rules described below will apply to Awards granted under the Omnibus Plans. However, the Compensation Committee has the discretion, notwithstanding any particular transaction constituting a change in ownership or a change in control, either to determine that such transaction is of the type that does not warrant the described consequences with respect to Awards (in which case such consequences would not occur) or to alter the way in which Awards are treated from the consequences outlined in the Omnibus Plans.

      If a change in ownership occurs (and the Compensation Committee has not exercised its discretion outlined above) during the term of one or more performance periods for which the Compensation Committee has granted performance shares, the term of such performance period will immediately terminate and, except with respect to performance periods for which the Compensation Committee has previously reached a determination regarding the degree to which the performance objectives have been attained, it will be assumed that the performance objectives have been attained at a level of 100%. Participants, as a result, will be considered to have earned and therefore be entitled to receive a prorated share of the Awards previously granted for such performance period. In addition, upon a change in ownership, all outstanding Awards will be valued and cashed out on the basis of the change in ownership price as soon as practicable but in no event more than 90 days after the change in ownership.

      In the event of a change in control (assuming the Compensation Committee has not exercised its discretion outlined above), if a participant’s employment terminates within two years following the change in control, unless such termination is due to death, disability (as defined), cause (as defined), resignation (other than as a result of certain actions by the Company and any successor), or retirement, participants will be entitled to the following treatment. All conditions, restrictions, and limitations in effect with respect to any unexercised Award will immediately lapse and no other terms or conditions will be applied. Any unexercised, unvested, unearned, or unpaid Award will automatically become 100% vested. Performance shares will be treated in a manner similar to that described above in the case of a change in ownership. A participant will be entitled to a lump sum cash payment as soon as practicable but in no event more than 90 days after the date of such participant’s termination of employment with respect to all of such participant’s Awards.

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      Benefit Security Trust. The Company has established a Benefit Security Trust (sometimes referred to as the “Rabbi Trust”) to provide a degree of financial security for its unfunded obligations under the Executive Deferred Compensation Plan, the supplemental ERAP plans, and the Severance Agreements with the Company’s executives. The assets of the Rabbi Trust would be subject to the claims of the Company’s creditors in the event of insolvency. Upon the occurrence of a “change in control” or a “potential change in control” (each as defined), or if the Company fails to meet its payment obligations under the covered plans and agreements, the Company would be required to transfer to the trustee cash or other liquid funds in an amount equal to the value of the Company’s obligations under the covered plans and agreements. The Company has conveyed to the trustee rights to certain assets as partial security for the Company’s funding obligations under the Rabbi Trust.

      A “change in control” is generally defined to include the following, subject to certain exceptions: the acquisition by a person of 19% or more of the voting stock of the Company; the incumbent Board members (and subsequent directors approved by them) ceasing to constitute a majority of the Board; approval by the Company’s stockholders of a reorganization or merger unless, after such proposed transaction, the former stockholders of the Company will own more than 75% of the resulting corporation’s voting stock; or approval by the Company’s stockholders of a complete liquidation and dissolution of the Company or the sale or other disposition of substantially all of the assets of the Company, other than to a subsidiary or in a spin-off transaction. A “potential change in control” will generally be deemed to have occurred if the Company enters into an agreement, the consummation of which would result in the occurrence of a change in control; any person (including the Company) publicly announces an intention to take action which, if consummated, would constitute a change in control; or any person (other than the Company, certain affiliated entities, or certain institutional investors) becomes the beneficial owner of 10% or more of the combined voting power of the Company’s then-outstanding securities.

      The Rabbi Trust is irrevocable until participants and their beneficiaries are no longer entitled to payments under the covered plans and agreements, but may be amended or revoked by agreement of the trustee, the Company, and a committee of individual beneficiaries of the Rabbi Trust.

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Compensation and Management Development Committee

      The Compensation and Management Development Committee is composed of five independent non-employee directors. This report summarizes the Compensation Committee’s policies governing compensation to executive officers for 2002, including those in the Summary Compensation Table, and the relationship of corporate performance to that compensation. This report also discusses specifically the Compensation Committee’s bases for the compensation reported for the Chief Executive Officer for the past year.

Compensation Philosophy and Program

      The Compensation Committee seeks to ensure that the Company’s management compensation program is consistent with the Company’s strategic business objectives and provides incentives for the attainment of those objectives. For 2002, the Company’s compensation program included three components:

Principles for Determining Executive Compensation

      The Compensation Committee applies the following principles when it determines the compensation of the executive officers under the Company’s compensation program:

      The Compensation Committee follows these principles in periodically reviewing overall compensation of the Chief Executive Officer and other executive officers, and in determining each component of executive compensation as discussed in the remainder of this report.

Components of Executive Compensation

     Annual Cash Compensation — Base Pay and Variable Pay

      How Base Pay and Variable Pay Levels are Determined. Total cash compensation for all Company employees, including executive officers, is intended to be competitive with pay in the applicable labor market and in the chemical industry for similar jobs when target levels of performance are achieved. The targeted levels of cash compensation are based upon information provided by outside consultants and publicly available information. Accordingly, a portion of each employee’s target pay level is placed “at risk.” Depending upon

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      For 2002, the Compensation Committee compared total cash compensation levels for executive officers with companies in the chemical industry with which the Company competes for executive talent and for which data were available, including the 15 companies in the peer group identified in the Performance Graph which follows this report. In addition, in determining the Chief Executive Officer’s base salary and variable compensation, the Committee also considered chief executive officer pay reported in surveys of a broader group of manufacturing, industrial, and chemical companies of a size (based on revenues) comparable to the Company, including the 15 peer companies in the Performance Graph. Total cash compensation to the executive officers named in the Summary Compensation Table for 2002 is reported in the “Salary” (base pay) and “Bonus” (variable pay) columns.

     Cash Compensation for 2002

      Base pay. In early 2002, the Compensation Committee assessed executive officer jobs in light of the recent retirement of several executive officers and reassignment of their responsibilities and the creation of a new corporate structure, and approved corresponding adjustments to the base pay of certain executive officers, including those named in the Summary Compensation Table. In October 2002, the Compensation Committee determined that the targeted total cash compensation of the executive officers named in the Summary Compensation Table, and of certain other senior managers, was below competitive pay levels. The increases in the base pay amounts reported in the Summary Compensation Table reflect both of these increases in the cash compensation levels for the executive officers.

      Variable pay. For 2002, the variable portion of cash compensation, and the amount of variable pay actually received, were determined under the Eastman Performance Plan and the Unit Performance Plan (the “UPP”).

       Eastman Performance Plan

       Key Features:

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          2002 Payout:

               Unit Performance Plan

        Beginning with the 2000 performance year, a new variable compensation plan, the Unit Performance Plan, was implemented for management-level employees. Management-level employees formerly participated in the Annual Performance Plan, a variable compensation plan designed to provide incentives for management to meet corporate performance objectives. Beginning in 2001, no employees participated in the Annual Performance Plan, but instead participated in the UPP.

        The UPP is designed to deliver a portion of annual cash compensation according to corporate and organizational performance and the attainment of individual objectives and expectations. The UPP is intended to provide additional incentive for superior business and individual performance, and further to tie the interests of management-level individuals to performance of the Company’s business and the interests of the Company’s stockholders.

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         Key Features:

         2002 Payout:

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       Other Bonuses

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Long-Term Stock-Based Incentive Pay

      Equity-Based Compensation Program. Equity-based compensation plans are designed to facilitate employee stock ownership which links employee pay to long-term return to all stockholders. Important aspects of the current equity-based compensation program are:

      How Stock-Based Incentive Pay Levels are Determined. The Compensation Committee establishes the size and other terms of annual option awards under the current stock option program by considering recommendations from outside compensation consultants based upon long-term compensation reported by the peer companies in the chemical industry described above under “How Base Pay and Variable Pay Levels are Determined.” These stock options are granted at a level so that the estimated value of normalized annual option grants, as a proportion of total annual compensation, approximates the median of the range of similar compensation of the compared companies. In determining the size of option awards, the Company utilizes the services of an external compensation consultant to derive approximate values of options using an option-pricing model. In addition, in order to recognize certain performance or provide additional incentive to achieve specific business objectives, the Compensation Committee from time-to-time awards stock-based compensation in addition to the regular option awards.

      The estimated current values of total long-term stock-based incentive pay for 2002 range from approximately 15% of total compensation at lower levels of management to approximately 80% of total compensation for the Chief Executive Officer.

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     Stock-Based Incentive Pay for 2002

        Stock Options and Restricted Stock:

        Performance Shares — Long-Term Performance Subplans:

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Compensation of Chief Executive Officer

      Mr. Ferguson was elected Chairman and Chief Executive Officer effective January 1, 2002. In early 2002, the Compensation Committee assessed executive officer jobs, in light of the recent retirement of several executive officers and reassignment of their responsibilities and the creation of a new corporate structure. The Compensation Committee reviewed Mr. Ferguson’s compensation in comparison with short-term and long-term compensation of other chief executive officers and set his base pay level, amount of target variable pay, and eligibility level for long-term stock-based compensation, effective January 1, 2002. In addition, in October, Mr. Ferguson’s base salary was increased, along with the other named executive officers, as described under “How Base Pay and Variable Pay Levels are Determined” and “Cash Compensation for 2002 — Base pay.”

      In March 2003, Mr. Ferguson received an Eastman Performance Plan award in the amount of $18,416 and an award of $300,000 under the UPP, in each case determined as described above under “Cash Compensation for 2002 — Variable pay.”

      Mr. Ferguson received an option to purchase 200,000 shares of Eastman common stock with an exercise price equal to the grant date market price of the underlying common stock. The size and terms of the option award and the award of performance shares were determined as described above under “Long-Term Stock-Based Incentive Pay — How Stock-Based Incentive Pay Levels are Determined.”

      In recognition of his significant contribution to, and as an incentive for continued service with, the Company, Mr. Ferguson was awarded 28,020 restricted shares of stock, with restrictions lapsing as to one-third of the shares on each of the third, fourth, and fifth anniversaries of the award date. See “Summary Compensation Table” and “Stock-Based Incentive Pay for 2002 — Stock Options and Restricted Stock.”

      In February 2003, Mr. Ferguson received a payout for the 2000-2002 LTPS performance period equal to 8,800 shares, which represents 160% of his target award. Such payout was based upon the same relative total stockholder returns as were the other payouts under the 2000-2002 LTPS. See “Performance Shares — Long Term Performance Subplans” above.

Omnibus Budget Reconciliation Act of 1993

      The Compensation Committee intends to continue to maximize the tax deductibility of compensation paid to the Company’s Chief Executive Officer and other executive officers while maintaining the flexibility to compensate the officers in accordance with the Company’s compensation policies.

      Section 162(m) of the Internal Revenue Code enacted pursuant to the Omnibus Budget Reconciliation Act of 1993 generally limits the deductibility to the Company of annual compensation (other than qualified “performance-based” compensation) in excess of $1 million paid to each of the Company’s five highest paid executive officers. Base salaries, variable compensation under the Eastman Performance Plan and UPP, any bonus payments outside the Eastman Performance Plan and UPP, and stock and stock-based compensation without performance conditions are generally subject to the $1 million limit on deductible compensation.

      Based on transition rules under Section 162(m), compensation attributable to stock options granted and performance shares awarded under the Company’s 1994 Omnibus Plan prior to the approval by stockholders of the 1997 Omnibus Plan is expected to qualify for deductibility under Section 162(m). The Eastman Performance Plan and the UPP allow the Compensation Committee to require, and LTPSs under the Omnibus Plans and outstanding restricted stock awards under the Omnibus Plans each provide for, the deferral of compensation into the Executive Deferred Compensation Plan to the extent that payout or vesting would result in the recipient receiving compensation in excess of the $1 million cap under Section 162(m). Based on a review of developments under Section 162(m), the Company adopted the 1997 Omnibus Plan, and established certain amendments to the Eastman Performance Plan, and these plans were approved by stockholders in 1997. The 1997 Omnibus Plan and the 2002 Omnibus Plan (which was approved by stockholders in 2002) continue to meet the requirements of Section 162(m) with respect to stock option and performance share awards. To provide additional flexibility consistent with the Company’s current compensation philosophy and program, the Compensation Committee amended the Eastman Performance Plan in 2000

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      For 2002, the Compensation Committee deferred a portion of Mr. Ferguson’s compensation that otherwise would have resulted in non-deductible compensation. The Compensation Committee will continue to consider the deferral of any payouts under the Eastman Performance Plan and the UPP or any other compensation, to the extent that such compensation would not be deductible to the Company.

Compensation and Management Development Committee

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      The following graph compares the cumulative total return on Eastman common stock from December 31, 1997 through December 31, 2002 to that of the Standard & Poor’s 500 Stock Index and a group of peer issuers in the chemical industry. The peer group consists of the 15 chemical companies which meet three objective criteria: (i) common shares traded on a major trading market; (ii) similar lines of business to those of the Company; and (iii) more than $1 billion in annual sales. Cumulative total return represents the change in stock price and the amount of dividends received during the indicated period, assuming reinvestment of dividends. The graph assumes an investment of $100 on December 31, 1997. The data in the graph have been provided by Standard & Poor’s Institutional Market Services. The stock performance shown in the graph is included in response to SEC requirements and is not intended to forecast or to be indicative of future performance.

Comparison of Total Return to Stockholders