PERFORMANCE SHARE AWARD SUBPLAN OF THE 2002 OMNIBUS LONG-TERM COMPENSATION PLAN 2004-2005 PERFORMANCE PERIOD

TABLE OF CONTENTS

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 2004-2005 Performance Period specified herein, effective as of January 1, 2004 (the "Effective Date").

Section 2. Definitions .

(a)    The following definitions shall apply to this Subplan:

     (i)    "Actual Grant Amount" means the number of shares of Common Stock to which a participant is entitled under this Subplan, calculated in accordance with Section 6 of this Subplan.

     (ii)    "Award Amount" means the performance shares awarded to the participant under this Subplan at the beginning of the Performance Period.

     (iii)    "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.

     (iv)    "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.

     (v)    "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.

     (vi)    "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.

     (vii)    "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.

     (viii)    "Participation Date" means April 2, 2004.

     (ix)    Performance Period" means January 1, 2004 through December 31, 2005.

     (x)    "      "Performance Year" means one of the two calendar years in the Performance Period.

     (xi)    "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%).

     (xii)    "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.

     (xiii)    "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.

(b)    Any capitalized terms used but not otherwise defined in this Subplan shall have the respective meanings set forth in the Plan.

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 53 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 .

(a)    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 nearest 10 performance shares. Each member of senior management will have a performance share budget, based on the cumulative award targets for their reports, which must be balanced for their organizations.

(b)    Actual Grant Amount. Subject to the Committee’s authority to adjust the Actual Grant Amount described in Section 12, the Actual Grant Amount awarded to the participant at the end of the Performance Period is determined by applying a multiplier to the participant’s Award Amount. The multiplier shall be determined by comparing Company performance relative to two measures:

     (i)    The Company's TSR during the Performance Period relative to the TSRs of the companies in the Comparison Group during the Performance Period. The Company and each company in the Comparison Group shall be ranked by TSR, in descending order, with the company having the highest TSR during the Performance Period being ranked number one. The Comparison Group shall further be separated into quintiles (first 20%, second 20%, etc.) and the Company's position, in relation to the Comparison Group, shall be expressed as a pos