UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Exchange Act of 1934 (Amendment No.      )

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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

March 23, 2007

Dear Fellow Stockholder:

      Our 2007 Annual Meeting of Stockholders will be held at the Toy F. Reid Employee Center, located at 400 South Wilcox Drive, in Kingsport, Tennessee, on May 3, 2007, 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 2006 Annual Report to Stockholders is also included with 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 in advance of the meeting 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 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.

EASTMAN CHEMICAL COMPANY

200 South Wilcox Drive

Kingsport, Tennessee 37660

(423) 229-2000

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 3, 2007

To Our Stockholders:

      The 2007 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 3, 2007, at 11:30 a.m., local time. The purposes of the meeting are:

      Only stockholders of record at the close of business on March 15, 2007 are entitled to vote at the meeting. It is important that your shares be represented and voted at the 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 meeting.

March 23, 2007

PROXY STATEMENT

FOR

ANNUAL MEETING OF STOCKHOLDERS OF

EASTMAN CHEMICAL COMPANY

TO BE HELD ON MAY 3, 2007

INFORMATION ABOUT THE MEETING AND VOTING

Proxy Statement and Annual Meeting

     This proxy statement is dated March 23, 2007 and is first being mailed and delivered electronically to Eastman stockholders, and made available on the Internet at the Company’s website (www.eastman.com), on or about March 28, 2007. Our Board of Directors (the “Board”) is furnishing you this proxy statement to solicit proxies on its behalf to be voted at the Annual Meeting of Stockholders of the Company to be held on May 3, 2007, and at any adjournments or postponements of the meeting. A proxy statement is a document that Securities and Exchange Commission (“SEC”) regulations require us to give you when we ask you to vote your stock by proxy. At the 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 in this proxy statement.

Voting By Proxy

     A proxy is a legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy, a proxy card, or a form of proxy.

     By completing 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 Richard A. Lorraine, the Company’s Chief Financial Officer, and Theresa K. Lee, the Company’s Chief Legal Officer and Corporate Secretary, to represent you at the meeting and direct them to vote your shares at the meeting according to your instructions. Shares of common stock represented by proxy will be voted by the proxy holders at the 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 as to the matters identified in this proxy statement and in the best judgment of the proxy holders as to any other matters.

     If your shares are registered in your name, you are a stockholder of record. 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.

     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 meeting by:

All written notices of revocation or other communications with respect to revocation of proxies should be sent to Eastman Chemical Company, P.O. Box 431, Kingsport, Tennessee 37662-5280, Attention: Corporate Secretary, so that they are received before the meeting.

Record Date; Stockholders Entitled to Vote; Voting Rights

      The record date for the 2007 Annual Meeting of Stockholders is March 15, 2007. Owners of record of common stock at the close of business on the record date are entitled to receive notice of the meeting and to vote at the meeting. The record date is established by the Board as required by Delaware law. If your shares are held in “street name” through 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 meeting.

      On the record date, there were 84,093,252 shares of common stock issued and outstanding. Holders of common stock are entitled to one vote on each matter voted upon at the meeting for each share of common stock they hold of record on 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 meeting is necessary to constitute a quorum to conduct business. Abstentions 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 registered holder (such as a broker or bank) holding shares in “street name” for a beneficial owner does not vote on a particular proposal because the registered holder does not have discretionary voting power for that particular item and has not received voting instructions from the beneficial owner. Please note that banks and brokers which have not received voting instructions from their clients cannot vote on their clients’ behalf on the proposal to approve the 2007 Omnibus Long-Term Compensation Plan and on adoption of the stockholder proposal, but may vote their clients’ shares on the election of directors and the ratification of the appointment of independent auditors.

Vote Required for Approval of Matters to be Considered

      Each director who receives a majority of votes cast (number of shares voted “for” a director must exceed the number of shares voted “against” that director) will be elected as a director. With respect to the election of directors, stockholders may by proxy (1) vote “for” all three of the nominees, (2) vote “against” all three of the nominees, (3) vote “against” any individual nominee or nominees but vote “for” the other nominee(s) or (4) “abstain” from voting on one or more nominees. Shares not present at the meeting and abstentions will have no effect on the outcome of the election of directors. 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 each of the ratification of the appointment of independent auditors, the approval of the 2007 Omnibus Long-Term Compensation Plan, and adoption of the stockholder proposal. With respect to each of these items, stockholders may (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

      We will bear the cost of soliciting proxies and the cost of the 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 our directors, officers, or employees, none of whom will be specially compensated for these activities. We have also contacted brokerage houses, banks, nominees, custodians, and fiduciaries who can be identified as record holders of common stock. Such holders, after inquiry by us, have provided 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 we will reimburse such record holders for the expense of providing such beneficial ownership information and of mailing proxy materials and annual reports to beneficial owners. We have retained Georgeson Inc. to assist with the solicitation of proxies and vote projections for a fee of $19,500 plus reimbursement of out-of-pocket expenses.

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

      We do not expect any business to be acted upon at the meeting other than as described in this proxy statement. If, however, other matters are properly brought before the 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 2008 Annual Meeting

      In accordance with rules of the SEC, if you wish to submit a proposal for presentation at Eastman’s 2008 Annual Meeting of Stockholders, it must be received by the Company at its principal executive offices on or before November 29, 2007 in order to be included in the Company’s proxy materials relating to its 2008 Annual Meeting of Stockholders.

      In addition, our Bylaws 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 Corporate Secretary of the Company. To be adequate, the notice must set forth certain information specified in our Bylaws about the stockholder and the proposal. The Bylaws are available through the “Investors — Corporate Governance” section of the Company’s website, and also will be provided to any stockholder upon written request. To be timely, the notice must be delivered to the Corporate Secretary of the Company not less than 45 days prior to the day of the month 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 2007 Annual Meeting of Stockholders is first sent to stockholders on March 28, 2007, then such advance notice would be timely if delivered on or before February 12, 2008.

Nominations by Stockholders for Election to the Board of Directors

      Our Bylaws provide that nominations by stockholders of persons for election to the Board may be made by giving adequate and timely notice to the Corporate Secretary of the Company. To be adequate, the nomination notice must set forth certain information specified in our Bylaws about each stockholder submitting a nomination and each person being nominated. The Bylaws are available through the “Investors — Corporate Governance” section of the Company’s website, and also will be provided to any stockholder upon written request. To be timely, the nomination notice must be delivered to the Corporate Secretary of the Company not less than 45 days prior to the day of the month on which the 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 will consider persons properly and timely 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, Annual Report on Form 10-K, and Corporate Governance Materials

      Our Annual Report to Stockholders for 2006, including consolidated financial statements for the year ended December 31, 2006, is being mailed and delivered electronically to stockholders, and made available on the Internet at the Company’s web site, concurrently with this proxy statement but does not form any part of the proxy solicitation material. This year’s Annual Report to Stockholders includes the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 as filed with the SEC. This information is also available via the Internet at the Company’s web site (www.eastman.com), and the version of such report (with exhibits) filed with the SEC is available at the SEC’s web site (www.sec.gov).

      We also make available free of charge, through the “Investors — Corporate Governance” section of the Eastman web site, the Corporate Governance Guidelines, the charters of each of the committees of the Board, and codes of business conduct and ethics for our directors, officers, and employees. Such materials are also available in print upon written request of any stockholder to Eastman Chemical Company, P.O. Box 431, Kingsport, Tennessee 37662-5280, Attention: Investor Relations.

Communications to the Board of Directors

      Stockholders, and other interested parties, may communicate with non-management directors in writing by directing such communications to the Chair of the Nominating and Corporate Governance Committee, Eastman Chemical Company, P.O. Box 1976, Kingsport, Tennessee 37662-5075 or by telephone toll free by calling 800-782-2515. Any communications concerning substantive Board or Company matters are promptly forwarded by the office of the Corporate Secretary to the Chair of the Nominating and Corporate Governance Committee, and the office of the Corporate Secretary keeps and regularly provides to the Chair of the Nominating and Corporate Governance Committee a summary of any communications received.

PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING

ITEM 1 — ELECTION OF DIRECTORS

      The Company’s Certificate of Incorporation divides the Board 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, until the next annual meeting following his or her 71st birthday). Unless additional terms of office are approved by the Board in certain circumstances, the maximum number of consecutive full three-year terms of office that may be served by any director is three.

      Three directors are currently in the class for which the term in office expires at the 2007 Annual Meeting, and each of them has been nominated for re-election for a new three-year term. The terms of the other eight directors continue after the 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 2010 and their successors are duly elected and qualified. If any nominee is unable or unwilling to serve (which we do not anticipate), 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 meeting.

      Director Changes Since the 2006 Annual Meeting. In October 2006, the Board elected Lewis M. Kling as a director. The Board has unanimously extended the term of office of director Donald W. Griffin, who reached age 70, until the expiration of his term at the 2008 Annual Meeting of Stockholders.

      Adoption of Majority Vote Standard for Election of Directors. In October 2006, the Board amended the Company’s Bylaws to provide that directors be elected by a majority vote of stockholders. Before the amendment, the Company’s directors were elected by a plurality of the votes cast by stockholders. If a nominee who is serving as a director is not reelected by a majority vote at an annual meeting, under Delaware law the director would continue to serve on the Board as a “holdover director.” However, under the new director election provision of our Bylaws, any incumbent director who does not receive a majority of votes in favor of reelection and whose successor has not been elected by stockholders would offer to resign from the Board. The Nominating and Corporate Governance Committee would then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board would act on the recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation would not participate in the Board’s decision. If a nominee who was not already serving as a director was not elected at an annual meeting, under Delaware law that nominee would not become a director and would not serve on the Board as a “holdover director.” In 2007, all nominees for the election of directors are currently serving on the Board.

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

      Set forth below is information about each director nominated for re-election or whose term in office will continue after the meeting.

Information About the Board of Directors and Corporate Governance

      The Board is elected by the stockholders to oversee management and to assure that the long-term interests of the stockholders are being served. The primary role of the Board is to maximize stockholder value over the long-term. Eastman’s business is conducted by its employees, managers, and officers, under the direction of the Chief Executive Officer and the oversight of the Board. The Nominating and Corporate Governance Committee of the Board periodically reviews and assesses the Company’s Corporate Governance Guidelines and governance practices.

      The Board held seven meetings during 2006. Each 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).

      The non-management directors meet in an “executive session” (i.e., without management) at each regularly scheduled Board meeting and at such other times as the Board or one or more committees of the Board may determine. The presiding director of each such executive session is the chair of the committee with authority and expertise pertinent to the subject matters to be discussed or, if the subjects to be addressed do not directly pertain to one of the committees, a presiding director is appointed by the Chairman of the Board on a rotating basis.

      The Board meets before each annual meeting of stockholders, and the directors in attendance at such Board meeting attend the annual meeting of stockholders. All directors then in office attended the 2006 Annual Meeting of Stockholders.

Director Independence

      The Board and its Nominating and Corporate Governance Committee have reviewed the standards of independence for directors established by applicable laws and regulations, including the listing standards of the New York Stock Exchange, and by the Company’s Corporate Governance Guidelines and have reviewed and evaluated the relationships of directors with the Company and its management. Based upon this review and evaluation, the Board has determined that none of the current non-management members of the Board has a relationship with the Company or its management that would interfere with such director’s exercise of independent judgment, and that each non-employee member of the Board is an independent director.

      In making this determination, the Nominating and Corporate Governance Committee and the Board reviewed and evaluated all direct and indirect transactions and relationships between the Company and non- management directors and their affiliates and immediate family members. Under the New York Stock Exchange listing standards and the Corporate Governance Guidelines, an “independent” director is one who has “no direct or indirect material relationship with the Company or its management” and who:

Transactions with Directors, Executive Officers, and Related Persons

      As described above, at least annually the Board reviews and evaluates all current and recent past transactions involving the Company in which non-management directors and their affiliates (including immediate family members and other firms, corporations, or entities with which the director has a relationship) have or had a direct or indirect interest. The Board also reviews any such transactions and relationships in which executive officers of the Company or members of their immediate families have or had an interest. In the most recent such review, the Board considered purchases and sales of products and services in the ordinary course of business to and from companies of which non-employee directors or members of their family are executive officers. Each such transaction was below the thresholds of the categorical standards listed above and determined by the Board not to be a material transaction or relationship. The Board also reviewed the employment by the Company of the son of one of the executive officers and determined that such executive officer does not have a material interest in such employment relationship or transactions that creates a conflict of interest.

      Written Company policies require approval by the Board (in the case of the Chief Executive Officer)or senior management of each transaction in which an employee has a direct or indirect financial or other personal interest, and restrict direct or indirect reporting relationships between immediate family member employees.

Board Committees

      The Board 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 Security Committee. All committee members are non-management, independent directors. The written charter of each committee of the Board is available in the “Investors — Corporate Governance” section of the Company’s Internet web site (www.eastman.com).

     

     Audit Committee. The members of the Audit Committee are Messrs. Wood (Chair), Hernandez, and McLain, and Ms. Hornbaker. After the 2007 Annual Meeting, the Audit Committee will consist of Ms. Hornbaker (Chair) and Messrs. Hernandez, Lance, and McLain. The Audit Committee held nine meetings during 2006. The purpose of the Audit Committee is to assist the Board in fulfilling the Board’s oversight responsibilities relating to:

      The Board of Directors has determined that each current member of the Audit Committee is “independent” and is an “audit committee financial expert” under applicable provisions of the New York Stock Exchange’s listing standards and of the Securities Exchange Act of 1934.

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, 2006. The Audit Committee has also discussed with the Company’s independent auditors the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

      The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as adopted by the Public Company Accounting Oversight Board in Rule 3600T, 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, 2006 filed with the SEC.

Audit Committee

Peter M. Wood (Chair)

Robert M. Hernandez

Renée J. Hornbaker

Thomas H. McLain

      Nominating and Corporate Governance Committee. The members of the Nominating and Corporate Governance Committee are Messrs. Demeritt (Chair), Connors, Griffin, Kling, Lance, and Raisbeck. After the 2007 Annual Meeting, the Nominating and Corporate Governance Committee will consist of Messrs. Demeritt (Chair), Connors, Griffin, Kling, Raisbeck, and Wood. The Nominating and Corporate Governance Committee held four meetings during 2006. The purpose of the Nominating and Corporate Governance Committee is to:

     

      Director Nominations. The Nominating and Corporate Governance Committee is responsible for reviewing and selecting potential directors who possess the skills, knowledge, and understanding necessary for the Board to successfully perform its role in corporate governance. The Nominating and Corporate Governance Committee considers not only an individual director’s or possible nominee’s qualities, performance, and professional responsibilities, but also the then-current composition of the Board and the challenges and needs of the Board as a whole at that time. In general, the desired attributes of individual directors, including those of any nominees of stockholders, are as follows:

      The Nominating and Corporate Governance Committee 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. The Board and the Nominating and Corporate Governance Committee have from time to time engaged the services of director search firms to assist in the identification of qualified potential director nominees.

     

      Compensation and Management Development Committee. The members of the Compensation and Management Development Committee (the “Compensation Committee”) are Messrs. Griffin (Chair), Connors, Demeritt, Kling, Lance, and Raisbeck. After the 2007 Annual Meeting, the Compensation Committee will consist of Messrs. Connors (Chair), Demeritt, Griffin, Kling, Raisbeck, and Wood. The Compensation Committee held seven meetings during 2006. The purpose of the Compensation Committee is to establish and administer the Company’s policies, programs, and procedures for evaluating, developing, and compensating the Company’s senior management. Among other things, the committee discharges the Board’s responsibilities relating to compensation of the Company’s executive officers, reviews and approves the adoption of cash and equity-based incentive management compensation plans, and oversees the administration of the Company’s benefits plans.

Compensation Committee Report

      The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” which appears later in this proxy statement. Based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC and in this proxy statement.

Compensation and Management Development Committee

Donald W. Griffin (Chair)

Michael P. Connors

Stephen R. Demeritt

Lewis M. Kling

Howard L. Lance

David W. Raisbeck

     

      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 2006. The purpose of the Finance Committee is to review with management and, where appropriate, make recommendations to the Board regarding the Company’s financial position and financing activities, including consideration of the Company’s financing plans, corporate transactions (including acquisitions and divestitures), capital expenditures, financial status of the Eastman Retirement Assistance Plan (the Company’s defined benefit pension plan), payment of dividends, and use of financial instruments, commodity purchasing, and other hedging arrangements and strategies to manage exposure to market risks.

     

      Health, Safety, Environmental and Security Committee. All of the directors except Mr. Ferguson are members, and Mr. Hernandez is the Chair, of the Health, Safety, Environmental and Security Committee. The Health, Safety, Environmental and Security Committee held two meetings during 2006. The purpose of the Health, Safety, Environmental and Security Committee is to review with management and, where appropriate, make recommendations to the Board regarding the Company’s policies and practices concerning health, safety, environmental and security matters.

Director Compensation

      The following table sets forth certain information concerning compensation of the Company’s non-employee directors for 2006. Directors who are also employees of the Company receive no Board or committee fees.

Director Compensation for Year Ended December 31, 2006

ITEM 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

      The Audit Committee of the Board of Directors has retained PricewaterhouseCoopers LLP to serve as independent auditors for the year ended December 31, 2007.

      PricewaterhouseCoopers LLP also served as the Company’s independent auditors for the years ended December 31, 2006 and 2005, and has billed the Company the following amounts for fees and related expenses for professional services rendered during 2006 and 2005:

      Audit Fees: $6.7 million, in the aggregate, for the year ended December 31, 2006 and $6.5 million, in the aggregate, for the year ended December 31, 2005 for professional services rendered for the audits of the consolidated financial statements of the Company (including the audit of internal controls over financial reporting), statutory and subsidiary audits, issuance of comfort letters, and assistance with review of documents filed with the SEC.

      Audit-Related Fees: $105,000, in the aggregate, for the year ended December 31, 2006 and $700,000, in the aggregate, for the year ended December 31, 2005 for assurance and related services, including employee benefit plan audits, other audit procedures, and consultations concerning financial accounting and reporting standards. Also included as part of the “Audit-Related Fees” was approximately $500,000 for 2005 for services rendered in connection with carve out financial statement audits associated with divested assets, businesses, and product lines. (Under the terms of the sale of such assets, businesses, and product lines, the Company was reimbursed by the purchaser for such fee payments.) In addition, various employee benefit plans were billed for fees and related expenses of $235,000 for 2006 and $204,000 for 2005 for audits of their plan financial statements by PricewaterhouseCoopers LLP.

      Tax Fees: $1.3 million, in the aggregate, for the year ended December 31, 2006 and $1.3 million, in the aggregate, for the year ended December 31, 2005 for services related to tax compliance, including expatriate tax services and preparation of tax returns and claims for refunds, tax planning and tax advice, assistance with respect to tax audits, and requests for rulings for technical advice from tax authorities.

      All Other Fees: $17,600, in the aggregate, for the year ended December 31, 2006 and $34,600, in the aggregate, for the year ended December 31, 2005 for all services other than those covered above under “Audit Fees,” “Audit-Related Fees,” and “Tax Fees.” “All Other Fees” for 2006 were for services related to technology access and conference fees. “All Other Fees” for 2005 were for services rendered related to technology access and conference fees, and advisory services related to divested assets, businesses, and product lines.

      All auditing and non-audit services provided to the Company by the independent auditors are pre-approved by the Audit Committee or in certain instances by the Chair of the Audit Committee pursuant to delegated authority. 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 auditors. During the year, specific audit and non-audit services or fees not previously approved by the Audit Committee are approved in advance by the Audit Committee or by the Chair of the Audit Committee pursuant to delegated authority. In addition, during the year the Chief Financial Officer and the Audit Committee monitor actual fees to the independent auditors for audit and non-audit services.

      The stockholders are being asked to ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP. If the stockholders fail to ratify this appointment, the Audit Committee may, but is not required to, reconsider whether to retain that firm. Even if the appointment is ratified, the Audit Committee in its discretion may direct the appointment of a different accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

      A representative of PricewaterhouseCoopers LLP is expected to attend the 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 recommends that you vote “FOR” ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors.

ITEM 3 — APPROVAL OF THE 2007 OMNIBUS LONG-TERM

COMPENSATION PLAN

      On February 20, 2007, the Board adopted, subject to stockholder approval at the meeting, the Eastman Chemical Company 2007 Omnibus Long-Term Compensation Plan (the “2007 Omnibus Plan”). The 2007 Omnibus Plan will become effective as of the date it is approved by the stockholders.

      We currently maintain the 1994 Omnibus Long-Term Compensation Plan, 1997 Omnibus Long-Term Compensation Plan, 2002 Omnibus Long-Term Compensation Plan, 1996 Non-Employee Director Stock Option Plan, 1994 Director Long-Term Compensation Plan, 1999 Director Long-Term Compensation Plan and 2002 Director Long-Term Compensation Plan, which we refer to as the “Prior Plans.” As of December 31, 2006, there were approximately 1,244,900 shares of our common stock reserved and available for future awards under the Prior Plans. If the stockholders approve the 2007 Omnibus Plan, all future equity grants to our employees, officers, and directors will be made from the 2007 Omnibus Plan, and we will not grant any additional awards under the Prior Plans.

      As of December 31, 2006, all of our approximately 11,000 employees, officers, and directors were eligible to participate in the 2007 Omnibus Plan.

      A summary of the 2007 Omnibus Plan is set forth below. This summary is qualified in its entirety by the full text of the 2007 Omnibus Plan, which is attached to this proxy statement as Appendix A.

Summary of the 2007 Omnibus Plan

      Purpose. The purpose of the 2007 Omnibus Plan is to promote the Company’s success by linking the personal interests of our employees, officers, and directors to those of our stockholders, and by providing participants with an incentive for outstanding performance.

      Permissible Awards. The 2007 Omnibus Plan authorizes the granting of awards in any of the following forms:

      Shares Available for Awards. Subject to adjustment as provided in the 2007 Omnibus Plan, the aggregate number of shares of our common stock reserved and available for issuance pursuant to awards granted under the 2007 Omnibus Plan is 4,100,000, which will consist of a number of shares not previously authorized for issuance under any plan.

      Limitations on Individual Awards. The maximum aggregate number of shares of our common stock subject to stock-based awards granted under the 2007 Omnibus Plan in any 12-month period to any one participant is as follows:

      Administration. Except with respect to non-employee directors, the 2007 Omnibus Plan will be administered by the Compensation and Management Development Committee of the Board. The Compensation Committee will have the authority to designate participants; determine the type or types of awards to be granted to each participant and the number, terms, and conditions thereof; establish, adopt, or revise any rules and regulations as it may deem advisable to administer the 2007 Omnibus Plan; and make all other decisions and determinations that may be required under the 2007 Omnibus Plan. For awards to non-employee directors, the Nominating and Corporate Governance Committee will administer the 2007 Omnibus Plan. The full Board may at any time administer the 2007 Omnibus Plan. If it does so, it will have all the powers of the Compensation and the Nominating and Corporate Governance Committees under the 2007 Omnibus Plan.

      Grants to Non-Employee Directors. The 2007 Omnibus Plan provides for the grant of awards to our non-employee directors according to the parameters of a separate plan, program, or policy for the compensation on non-employee directors as in effect from time to time. Any shares issued pursuant to such separate plan would come from the 2007 Omnibus Plan. The Nominating and Corporate Governance Committee is not authorized to make other discretionary grants to non-employee directors under the 2007 Omnibus Plan.

      Minimum Vesting Requirements. Except in the case of substitute awards or awards granted as an inducement to join the Company as a new employee to replace forfeited awards from a former employer, any “full-value” award (generally defined as an award, other than an option or stock appreciation right, that is valued on the basis of our common stock) granted under the 2007 Omnibus Plan to an employee or officer will either (i) be subject to a minimum vesting period of three years (which may include graduated vesting within such three-year period), or one year if the vesting is based on performance criteria other than continued service, or (ii) be granted solely in exchange for foregone cash compensation. Notwithstanding the foregoing, the Compensation Committee may permit acceleration of vesting of such awards in the event of the participant’s death, disability, or retirement, or upon the occurrence of a change in control. The minimum vesting restrictions will not apply with respect to a maximum of 5% of the authorized shares.

      Performance Goals. All options and SARs granted under the 2007 Omnibus Plan are designed to be exempt from the $1,000,000 deduction limit imposed by Internal Revenue Code Section 162(m). The Compensation Committee may designate any other award granted under the 2007 Omnibus Plan as a qualified performance-based award in order to make the award fully deductible without regard to the $1,000,000 deduction limit imposed by Code Section 162(m). If an award is so designated, the Compensation Committee must establish objectively determinable performance goals for the award based on one or more of the following business criteria, which may be expressed in terms of company-wide objectives or in terms of objectives that relate to the performance of an affiliate or a division, region, departments or function within the Company or an affiliate:

      The Compensation Committee must establish such goals within 90 days after the beginning of the period for which such performance goal relates (or such later date as may be permitted under applicable tax regulations) and the Compensation Committee may for any reason reduce (but not increase) any award, notwithstanding the achievement of a specified goal. The Compensation Committee may provide, at the time the performance goals are established, that any evaluation of performance may include or exclude any of the following events that occurs during a performance period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30; (f) extraordinary nonrecurring items as described in management’s discussion and analysis of financial condition and results of operations appearing in our annual report to stockholders for the applicable year or in the quarterly report on Form 10-Q for the applicable quarter; (g) acquisitions or divestitures; and (h) foreign exchange gains and losses.

      Limitations on Transfer; Beneficiaries. No award will be assignable or transferable by a participant other than by will or the laws of descent and distribution; provided, however, that the Compensation Committee may permit other transfers (other than transfers for value) where it concludes that such transferability does not result in accelerated taxation, does not cause any option intended to be an incentive stock option to fail to qualify as such, and is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, any state or federal tax or securities laws or regulations applicable to transferable awards.

      Treatment of Awards upon a Participant’s Termination of Service. Unless otherwise provided in an award notice, upon the termination of a participant’s service for a reason other than death, disability, retirement, or any other approved reason, all unexercised, unearned, and/or unpaid awards, including without limitation, awards earned but not yet paid, all unpaid dividends and dividend equivalents, and all interest accrued on the foregoing will be canceled or forfeited, as the case may be. Subject to limitations applicable to certain qualified performance-based awards, the Compensation Committee has the authority to promulgate rules and regulations to (i) determine what events constitute retirement or termination for an approved reason for purposes of the 2007 Omnibus Plan, and (ii) determine the treatment of a participant under the 2007

Omnibus Plan in the event of such participant’s death, disability, retirement, or termination for an approved reason.

      Treatment of Awards upon a Change in Ownership. Unless otherwise provided by the Compensation Committee, upon a change in ownership (as defined):

      Treatment of Awards upon a Change in Control. Unless otherwise provided by the Compensation Committee, upon a participant’s termination of employment within two years after the effective date of a change in control other than termination due to (i) death, (ii) disability, (iii) cause, (iv) resignation other than (A) resignation from a declined reassignment to a job that is not reasonably equivalent in responsibility or compensation, or that is not in the same geographic area, or (B) resignation within thirty (30) days following a reduction in base pay, or (v) retirement entitling the participant to benefits under his or her employer’s retirement plan, then:

      Forfeiture Events. The Compensation Committee may specify in an award notice that the participants’ rights, payments and benefits with respect to an award will be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, including, but not limited to, termination of employment for cause, violation of Company policies, breach of applicable non-competition, confidentiality or other restrictive covenants, or other conduct by the participant that is detrimental to the business or reputation of the Company.

      If we are required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if a participant knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, such participant will reimburse the Company the amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial reporting requirement.

      Adjustments. In the event of a nonreciprocal transaction between the Company and its stockholders that causes the per-share value of the common stock to change (including, without limitation, any stock

dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend), the share authorization limits under the 2007 Omnibus Plan will be adjusted proportionately, and the Compensation Committee must make such adjustments to the 2007 Omnibus Plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock-split, a stock dividend, or a combination or consolidation of the outstanding common stock into a lesser number of shares, the authorization limits under the 2007 Omnibus Plan will automatically be adjusted proportionately, and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price.

      Termination and Amendment. The Board may, at any time and from time to time, terminate or amend the 2007 Omnibus Plan, but if an amendment would constitute a material amendment requiring stockholder approval under applicable listing requirements, laws, policies or regulations, then such amendment will be subject to stockholder approval. In addition, the Board may condition any amendment on the approval of stockholders for any other reason. No termination or amendment of the 2007 Omnibus Plan may, without the written consent of the participant, reduce or diminish the value of an award determined as if the award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination.

      The Board or the Compensation Committee may amend or terminate outstanding awards. However, such amendments may require the consent of the participant and, unless approved by the stockholders, the exercise price of an outstanding option may not be reduced, directly or indirectly, and the original term of an option may not be extended.

      Prohibition on Repricing. As indicated above under “Termination and Amendment,” outstanding stock options cannot be repriced, directly or indirectly, without the prior consent of the Company’s stockholders. The exchange of an “underwater” option (i.e., an option having an exercise price in excess of the current market value of the underling stock) for another award would be considered an indirect repricing and would, therefore, require the prior consent of the Company’s stockholders.

Certain Federal Tax Effects

      Nonstatutory Stock Options. There will be no federal income tax consequences to the optionee or to us upon the grant of a nonstatutory stock option under the 2007 Omnibus Plan. When the optionee exercises a nonstatutory option, however, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of the common stock received upon exercise of the option at the time of exercise over the exercise price, and we will be allowed a corresponding federal income tax deduction. Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the shares were held.

      Incentive Stock Options. There will be no federal income tax consequences to the optionee or to us upon the grant of an incentive stock option. If the optionee holds the option shares for the required holding period of at least two years after the date the option was granted and one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term capital gain or loss, and we will not be entitled to a federal income tax deduction. If the optionee disposes of the option shares in a sale, exchange, or other disqualifying disposition before the required holding period ends, he or she will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise over the exercise price, and we will be allowed a federal income tax deduction equal to such amount. While the exercise of an incentive stock option will not result in current taxable income, the excess of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment for purposes of determining the optionee’s alternative minimum taxable income.

      Stock Appreciation Rights. A participant receiving a SAR under the 2007 Omnibus Plan will not recognize income, and we will not be allowed a tax deduction, at the time the award is granted. When the participant exercises the SAR, the fair market value of any shares of common stock received will be ordinary income to the participant and we will be allowed a corresponding federal income tax deduction at that time.

      Restricted Stock. Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below, a participant will not recognize income, and we will not be allowed a tax deduction, at the time a restricted stock award is granted, provided that the award is nontransferable and is subject to a substantial risk of forfeiture. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the common stock as of that date (less any amount he or she paid for the stock), and we will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Internal Revenue Code Section 162(m). If the participant files an election under Internal Revenue Code Section 83(b) within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less any amount paid for the stock), and we will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m). Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be able to recover the tax previously paid pursuant to the Section 83(b) election.

      Restricted or Deferred Stock Units. A participant will not recognize income, and we will not be allowed a tax deduction, at the time a stock unit award is granted. Upon receipt of shares of common stock (or the equivalent value in cash or other property) in settlement of a stock unit award, a participant will recognize ordinary income equal to the fair market value of the common stock or other property as of that date (less any amount he or she paid for the stock or property), and we will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m).

      Performance Awards. A participant generally will not recognize income, and we will not be allowed a tax deduction, at the time performance awards are granted. Upon receipt of shares of stock or other property in settlement of a performance award, the fair market value of the stock or other property will be ordinary income to the participant, and we will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m).

      Internal Revenue Code Section 409A. The 2007 Omnibus Plan permits the grant of various types of incentive awards, which may or may not be exempt from Internal Revenue Code Section 409A. If an award is subject to Section 409A, and if the requirements of Section 409A are not met, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties. Restricted stock awards, and stock options and SARs that comply with the terms of the 2007 Omnibus Plan, are designed to be exempt from the application of Section 409A. Restricted and deferred stock units granted under the 2007 Omnibus Plan would be subject to Section 409A unless they are designed to satisfy the short-term deferral exemption from such law. If not exempt, such awards must be specially designed to meet the requirements of Section 409A in order to avoid early taxation and penalties.

Benefits to Named Executive Officers and Others

      No awards may be granted under the 2007 Omnibus Plan until it becomes effective upon approval by stockholders. Awards will be made to employees at the discretion of the Compensation Committee or pursuant to delegated authority or to non-employee directors under the terms of a separate plan, program, or policy approved by the Board under the 2007 Omnibus Plan. Therefore, it is not presently possible to determine the benefits or amounts that will be received by such persons or groups pursuant to the 2007 Omnibus Plan in the future.

Equity Compensation Plan Information

      The following table gives information about our common stock that may be issued under all of our equity compensation plans as of December 31, 2006.

      Since December 31, 2006, options to purchase 66,200 shares and 25,750 restricted shares were awarded, and 109,684 shares were paid out under performance shares previously awarded for the 2004-2006 performance period above the “target” levels, from the shares in column “(c)” of the table above. No additional shares will be awarded under the Prior Plans other than those that may be issued upon exercise of already outstanding options indicated in column “(a)” of the table above and the restricted shares and options to be awarded to non-employee directors immediately following the 2007 Annual Meeting under the 2002 Director Long-Term Compensation Plan (described under “Director Compensation” earlier in this proxy statement).

The Board of Directors recommends that you vote “FOR” approval of the 2007 Omnibus Long-Term Compensation Plan.

ITEM 4 — PROPOSAL TO ESTABLISH POLICY LIMITING BENEFITS UNDER SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS

      Stockholder United Brotherhood of Carpenters Pension Fund, holder of 1,300 shares of Eastman common stock, has given notice that it intends to submit the following proposal and supporting statement:

Response of the Company

      The Board of Directors 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, 2006 by each director, by each executive officer named in the Summary Compensation Table (under “Executive Compensation — Compensation Tables”), and by the directors, the named executive officers, and the other executive officers as a group.

Common Stock and Common Stock Units

      As described elsewhere in this proxy statement, in addition to shares of Eastman common stock beneficially owned, certain executive officers and directors have units of common stock credited to their individual stock accounts in the Eastman Executive Deferred Compensation Plan (the “EDCP”) and in the Directors’ Deferred Compensation Plan (the “DDCP”), respectively.

      Eastman has stock ownership guidelines for its directors and executive officers. These guidelines require such persons to acquire and maintain a stake in the Company valued at five times annual base pay for the Chief Executive Officer, two and one-half times annual base pay for the other executive officers named in the Summary Compensation Table, and four times the annual cash retainer fee for non-employee directors. 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 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. 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. The table below shows, for each director and each executive officer named in the Summary Compensation Table, and for the directors, the named executive officers, and the other 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, 2006. The table below is included to provide a better indication of the stake of the named individuals, and of the group, with respect to Eastman common stock.

PRINCIPAL STOCKHOLDERS

      The following table sets forth information about persons we know to be the beneficial owners of more than five percent of Eastman common stock as of December 31, 2006.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

      This section of the proxy statement is intended to provide context for the executive compensation information detailed in the tables and narrative in the remaining sections under “Executive Compensation”. What follows is a summary of our compensation objectives for executive officers, the relationship of corporate performance to their compensation, and the bases for the compensation of our executive officers. The Compensation and Management Development Committee of the Board of Directors (our “Compensation Committee”) establishes and administers the policies, programs, and procedures for evaluating, developing, and compensating our senior management.

Management Compensation Philosophy and Program

      With our management compensation program, we seek to attract and retain highly-qualified executives, provide incentives for the attainment of the Company’s strategic business objectives, and reward superior performance. Our management compensation program has three primary components:

      Our compensation philosophy is to focus on the total compensation package of each employee, stress the importance of pay for performance, and maintain flexibility to meet changing employee, business, and market conditions. In selecting the major components of pay, the Compensation Committee considers how each component of pay provides appropriate incentives to meet short-term and long-term corporate and individual objectives. The Committee considers the appropriate amount of annual pay, including the mix of base and variable pay, and the short-term and long-term mix of incentive pay. In designing the specific elements of the management compensation program, the Company balances risk and reward by providing rigorous performance hurdles necessary to achieve incentive targets that align with business strategy and stockholder interests.

      The Company’s variable pay program aligns management financial interests with the Company’s short-term business objectives. Individual variable pay opportunities for management employees correlate to the Company’s annual financial results compared to targeted results. Multi-year time horizons for stock-based incentive pay are designed to create incentives to meet strategic long-term objectives which are aligned with creation of value for the Company’s stockholders. The variable pay program is also designed to take into account the incentive value and level of influence on Company results by participants in the program. Stock-based incentive compensation is generally awarded to upper levels of management with the most influence over the strategic, long-term direction of the Company. All levels of management participate in the short-term variable cash incentive pay program in order to retain a focus on execution of the Company’s short-term strategic and tactical goals. The balance of short-term and long-term components as devices to drive individual behaviors is carefully considered in the design and utilization of the management compensation program.

      In order to provide a complete compensation package to our executives, the Company’s executive officers participate in benefits plans generally available to all other employees. We have also entered into change in control severance agreements with certain executive officers and provide a modest program of executive perquisites and personal benefits as further described in this proxy statement. As previously disclosed, the Compensation Committee in November 2005 approved new change in control severance agreements which, based upon recommendations from its compensation consultant, reduced the compensation and benefits to executives under such agreements.

Review of 2006 Executive Compensation

      The Compensation Committee reviewed overall compensation of the Chief Executive Officer and other executive officers and determined each component of executive compensation for 2006 as discussed below. The Compensation Committee also reviewed the value of each individual type of compensation and benefits for each of the executive officers, including short-term and long-term cash and stock-based compensation, perquisites and personal benefits, deferred accounts, and retirement plans and determined that the amounts, individually and in the aggregate, were appropriate and in line with internal and external market comparisons. The Compensation Committee also considered the estimated value of outstanding unvested, unexercised, and unrealized stock-based awards in its review of the types and values of each executive officer’s compensation. In determining each executive officer’s compensation, the Committee considered individual performance, pay relative to that for similar positions in other companies, the mix of short- and long-term compensation, and total compensation relative to other executive officers and other employees. In its determination of the amounts and forms of compensation for executive officers, the Compensation Committee considers background information and recommendations from the Company’s management compensation organization and from its external compensation consultant and, in its determination of compensation of the executive officers reporting to the Chief Executive Officer, the Committee also considers the recommendations of the Chief Executive Officer.

      In connection with its review of external market data, the Compensation Committee has directly engaged Hewitt Associates, LLP as its external compensation consultant. Under the terms of Hewitt’s engagement by the Compensation Committee, Hewitt reports to and receives its direction from the Committee and a representative of Hewitt attends each meeting of the Committee as its independent advisor. Hewitt Associates provides the Compensation Committee with third-party survey information used in setting short- and long-term compensation levels, perspective in emerging trends in compensation issues, and expertise in incentive compensation structure, terms, and design. The Company’s management also uses the services of several outside firms, including Hewitt, for compensation analysis, third-party surveys, and executive pay research and analysis. Management’s use of the Committee’s consultant is limited to advice on emerging trends and competitive compensation practices.

      In June 2006, the Company hired Mark J. Costa as its new Senior Vice President, Corporate Strategy and Marketing. In determining Mr. Costa’s compensation, the Compensation Committee established the components of his compensation and benefits. In addition to compensation components available to other executive officers, Mr. Costa received a signing bonus, certain termination arrangements in his employment agreement that are in addition to those of our standard change in control severance agreements, and certain additional perquisites and personal benefits. As inducement for his employment with the Company and as a special retention incentive, upon his date of hire in 2006, Mr. Costa was awarded an option to purchase 65,000 shares of common stock plus 30,000 restricted shares of common stock. The option will vest and become exercisable in one-third increments on each of the first three anniversaries of the grant date, and the transfer restrictions on the restricted stock lapse on the third anniversary of the date of the award. The option and shares of restricted stock are subject to forfeiture in the event of termination for an unapproved reason. The Committee considered information provided by its compensation consultant and Mr. Costa’s former compensation arrangements, and approved the compensation package as part of an employment agreement with Mr. Costa. The Committee considered Mr. Costa’s compensation package and additional benefits appropriate in order to hire an executive with the skills and experience level of Mr. Costa.

Elements of our Executive Compensation

  Annual Cash Compensation — Base Pay and Variable Pay

      How Base Pay and Variable Pay Levels Were Determined. For our executive officers, targeted total cash compensation is intended to be competitive with comparable pay for similar jobs when target levels of corporate, organizational, and individual performance are achieved. The targeted levels of cash compensation are based upon information provided by the Committee’s compensation consultant and publicly available information. For 2006, a portion of each executive officer’s pay was made variable. Depending upon Company,

organizational, and individual performance, executive officers could receive more or less than the target amount.

      For 2006, the Compensation Committee compared total cash compensation levels for executive officers with those of the following manufacturing, industrial, and chemical companies of comparable size with which the Company competes for executive talent:

      The Committee’s compensation consultant provided analysis of this total cash pay benchmarking information. In addition, the Committee also considered executive officer pay trends by reviewing surveys of a broader group of manufacturing, industrial, and chemical companies of a size (based on revenues) comparable to the Company. In determining each executive officer’s total cash compensation, the Committee also applied its judgment considering the competitive market for executive talent, and compared pay levels to each other executive officer and relative to other jobs in the Company and considered differences in the Company’s executive positions and those with which they were compared in the benchmarking information. In determining levels of executive compensation, the Committee targeted the mid-range of total cash compensation of the companies surveyed.

      Base pay. In early 2006, after reviewing market competitive pay levels and the targeted total cash compensation of the executive officers, the Compensation Committee determined that base pay increases were appropriate for the executive officers because of their performance in the previous year and their base pay relative to the mid-range of companies surveyed. In addition to external comparisons, the Committee considered the Chief Executive Officer’s recommendations for adjustments to the base annual salaries of other executive officers, the impact of base pay increases on the mix of short- and long-term compensation and total compensation, and the cash compensation level of each executive officer relative to that of each other executive officer. As a result, base annual salaries for our executive officers were increased by 5% to 12%.

      Variable cash pay — Unit Performance Plan. For 2006, the variable portion of cash compensation paid to the executive officers was determined solely under the Unit Performance Plan (the “UPP”). The UPP is designed to determine a portion of annual cash compensation according to corporate performance, organizational or business unit performance, and the attainment of individual objectives and expectations. The amount of target compensation that is made variable under the UPP ranges from 100% of base pay for the Chief Executive Officer to 60% to 80% of base pay for our other named executive officers. The UPP is intended to provide incentive for superior business and individual performance and to tie the interests of our executive officers to the performance of our businesses and the interests of our stockholders.

      The amount of the award pool from which payouts are made is determined by annual performance of the Company versus pre-set goals established by the Compensation Committee. For 2006, the measure of corporate performance under the UPP was earnings from operations. Annual performance goals are established such that the target level is reached if corresponding Company performance goals for the year are achieved. The target level for 2006 earnings from operations corresponded to the Company’s operating earnings target under the annual business plan for 2006 as approved by the Board in late 2005.

      The total UPP award pool is equal to the aggregate of the UPP payouts for each participant if the individual’s organizational and individual performance were at target levels, multiplied by a “performance factor” determined by corporate or a combination of corporate and business organization performance compared to the pre-set performance goal. The performance factor can range from 0% if threshold

performance goals are not met to 250% for specified above-goal performance. The Committee may, in its discretion, adjust the award pool to reflect overall corporate performance and business and financial conditions. In 2006, the total Company award pool was not increased.

      The Chief Executive Officer, in consultation with executive officers responsible for major organizations, determines the allocation of the Company award pool to organizations within the Company based on his assessment of the performance of the organizations relative to objectives established at the beginning of the performance year. There were eight such organizations for 2006. Once each organization’s award pool is determined, management within each organization (or in the case of the Chief Executive Officer, the Compensation Committee) allocates the organization’s portion of the Company award pool for individual payouts, based upon individual and organizational performance against objectives and expectations established at the beginning of the performance year. An actual individual award could exceed an individual’s target award, based on the manager’s assessment of individual and organizational performance, but the sum of all individual awards within an organization cannot exceed the amount of the organization’s allocated portion of the total Company award pool without specific approval by the Compensation Committee.

      Our named executive officers participated in an organization consisting of all executive officers reporting to the Chief Executive Officer. The amount of the Company award pool allocated to the executive officers was determined by aggregating their individual target variable pay amounts, multiplied by a “performance factor” corresponding to their overall performance compared to pre-established targets related to organizational results and personal performance objectives. For 2006, the target variable pay for performance that meets pre-established objectives under the UPP (expressed as a percentage of annual base pay) was 100% for Mr. Ferguson, 80% for Mr. Rogers, 75% for Dr. Nelson, 65% for Mr. Lorraine, and 60% for Ms. Lee.

      Mr. Ferguson participated in the UPP in an organization established for the Chief Executive Officer. The Compensation Committee established individual financial, organizational, and strategic performance objectives and expectations for Mr. Ferguson, and determined his payout considering his allocated portion of the Company total award pool and the Committee’s assessment of his attainment of these objectives for 2006. Mr. Ferguson established individual performance objectives and expectations for the other executive officers related to corporate and organizational performance compared to established earnings from operations and performance targets and results in support of identified key initiatives, and the Compensation Committee reviewed and approved his recommended assessment of each of their individual performance against the pre-established goals and expectations and the corresponding amounts of the individual payouts from the portion of the UPP award pool allocated to the executive officers. The Company’s overall earnings from operations was the corporate performance measure for each executive officer for 2006 except for Messrs. Rogers and Nelson, for whom UPP performance was 75% corporate operating earnings and 25% operating earnings of their respective operating segments.

      Earnings from operations for 2006, as adjusted as described below, were $683 million, slightly less than the target level of performance established for the Company as a whole under the UPP. This resulted in a Company award pool equivalent to 95% of target award.

      After review of performance against earnings from operations targets, the Committee certified the performance results and approved the total UPP pool and payout amount. Following determination by the Compensation Committee of the total amount of the Company award pool available to the executive officers as a group, the Chief Executive Officer assessed individual performance against established goals and expectations for each other named executive officer and determined the amounts of the individual payouts from the portion of the allocated award pool. The Chief Executive Officer’s assessment was based upon measurement of each other executive officer’s performance against individual goals and expectations related to corporate and organizational performance compared to established earnings from operations targets and other performance targets and the officer’s contributions to improving financial results, executing strategies for value-creating growth, and building organizational capabilities to continue to deliver successful results. Considering recommendations from the Chief Executive Officer, the Compensation Committee approved payouts to the named executive officers.

      The Compensation Committee reviewed Mr. Ferguson’s performance against his 2006 financial, organizational, and strategic objectives approved by the Board in early 2006. The Compensation Committee determined Mr. Ferguson’s UPP award in recognition of his and the Company’s performance in the areas of corporate revenue and earnings, financial discipline, cost reduction, asset and product portfolio restructuring and growth strategy development, meeting financial targets, operational excellence, achieving milestones in executing growth strategy initiatives, achieving customer and market milestones, optimizing core businesses, enhancing human resource objectives related to organization, staffing, and corporate culture initiatives, and managing and continually improving internal controls and corporate governance practices.

      In determining earnings from operations for the purpose of measuring performance of the Company, the UPP provides for adjustments by the Compensation Committee for certain charges, income items, or other events. The calculation of earnings from operations under the UPP for 2006 was adjusted to exclude the impact on financial results of: asset impairments and restructuring charges in the Coatings, Adhesives, Specialty Polymers, and Inks (“CASPI”), Performance Chemicals and Intermediates (“PCI”), Performance Polymers, and former Developing Businesses segments; severance costs; gains and losses from the divestiture of businesses and product lines in the Performance Polymers, PCI, and CASPI segments; and accelerated depreciation associated with asset shutdowns in the Performance Polymers and CASPI segments. Exclusion of these items increased the calculated earnings from operations under the UPP by $43 million and resulted in a net increase of the UPP award pool for all participants of $4 million.

Stock-Based Incentive Pay

      Equity-Based Compensation Program. Equity-based compensation is designed to facilitate stock ownership which links senior managers’ pay to long-term return to other stockholders. Important elements of the current equity-based compensation program are:

      How Stock-Based Incentive Pay Levels Were Determined. The Compensation Committee established the size and other terms of option grants under the stock option program, and the number and terms of performance shares awarded, by considering recommendations from its compensation consultant based upon long-term compensation surveys of a broad group of manufacturing, industrial, and chemical companies and of the following manufacturing, industrial, and chemical companies of comparable size with which the Company competes for executive talent:

      Stock options were granted and performance shares were awarded at a target level intended to be near the mid-range of total stock-based compensation of the compared companies. The Compensation Committee determined that approximately one-half of the stock-based incentive pay for executive officers would be granted as stock options to align their interests with stockholders and the other half of stock-based incentive pay would be awarded as performance shares to provide incentives for exceeding internal financial objectives and external return versus a peer group of companies. The Compensation Committee also considered the estimated value of all outstanding unvested, unexercised, and unrealized stock-based awards in determining stock-based incentive pay levels. In determining the size of option awards, the Committee utilized the services of its compensation consultant to derive approximate values of options using a variation of the Black-Scholes option-pricing model. Computation of the approximate value of option awards is comparable to values determined under FAS 123R and reported in the “Grant of Plan Based Awards” table. In making its final determination of long-term incentive award levels, the Committee also reviewed recommendations by the Chief Executive Officer regarding individual performance of executive officers, incentive value of the awards, retention considerations, and the relative award levels for the executive officers. In addition, as inducement for new executives, retention incentive, and to recognize certain performance or provide additional incentive to achieve specific business or retention objectives, the Compensation Committee from time-to-time awards stock-based compensation in addition to the regular stock option grants and performance share awards. The amount and terms of these special awards is determined considering the nature and purpose of the incentive, the desired time horizon of the award, and the impact on the total compensation of the executive officer relative to the competitive range of compensation of the compared companies.

      The current values of total stock-based incentive pay for 2006 ranged from 49% to 68% of total compensation for the named executive officers.

      Stock-Based Compensation Award Practices. The Compensation Committee has always granted options with an exercise price equal to the market price of the underlying stock at the grant date, and on the date of its authorization of grants has set a grant date that is on or after the date of approval of the grant by the Committee. The Committee’s recent practice has been to grant options and other stock-based awards annually in the fall, and to set effective dates for option grants at the third business day after the next release of quarterly financial results so the market price of the underlying common stock, and thus the exercise price of the options, reflects such results. During 2006 the Compensation Committee and the Audit Committee reviewed the Company’s past and current option grant practices and concluded that such practices, including Compensation Committee actions and oversight, timing, administration, recordkeeping, and accounting, have been and are appropriate and consistent with legal and accounting requirements and good practice.

      Stock Options. In 2006, the Company determined to deliver approximately fifty percent of the individual executive officer’s stock-based equity value as stock options. Options granted in 2006 have an exercise price equal to the closing price on the New York Stock Exchange of the underlying common stock as

of the date of grant. These options vest and become exercisable in one-third increments on each of the first three anniversaries of the grant date, with acceleration of vesting in the event of a “change in ownership” or in certain circumstances following a “change in control.” Options generally expire ten years from the date of grant. Upon termination by reason of death, disability, or retirement, the options remain exercisable for the lesser of five years following the date of termination or the expiration date. If an optionee resigns, the options remain exercisable for the lesser of ninety days or the expiration date. Options not previously exercised are canceled and forfeited upon termination for cause. Consistent with its recent practice, the Committee at its October meeting approved the 2006 option grants effective the third business day after the release of financial results for the third quarter of 2006.

      Long-Term Performance Shares. In 2006, the Company awarded performance shares to each executive officer, representing approximately fifty percent of each executive officer’s stock-based equity value. Performance is measured by comparing the Company’s multi-year performance as measured against a return on capital target established at the beginning of the performance period, and the Company’s total return to stockholders (change in stock price plus dividends declared during the performance period, assuming reinvestment of dividends) relative to a peer group of industrial companies comprising the Standard and Poor’s “Materials Sector” from Standard and Poor’s Super Composite 1500 Index. The return on capital target corresponds to the Company’s target under the annual business plan for 2006 as approved by the Board in late 2005. Performance relative to the total return to stockholder target is determined by the Company’s quintile placement relative to the peer group of industrial companies at the end of the performance period. If earned, awards will be paid after the end of the performance period in unrestricted shares of Eastman common stock, or participants may irrevocably elect in advance to defer any award payouts into the Executive Deferred Compensation Plan.

      The Committee reviewed and certified performance results and approved a payout of shares to the executive officers under performance shares previously awarded for the 2004-2006 performance period. Payouts for the named executive officers range from 72,600 shares for the Chief Executive Officer to 9,900 shares, and represent 220% of the target award (of a possible 300% of the target award) based upon the Company’s total stockholder return ranking in the second quintile of the compared companies and an average return on capital of 5.16% in excess of the return on capital target.

Executive Perquisites and Personal Benefits

      We provide limited executive perquisites and personal benefits designed to provide a level of personal and financial security for our executives. The Committee annually reviews the types and values of perquisites provided, the imputation to the executives of taxable income for the provided perquisites, and tax treatment of the perquisites to the Company and executives. Perquisites and personal benefits provided to executives are:

      In addition, in considering time demands on the Chief Executive Officer, the Compensation Committee has authorized the personal use of corporate aircraft by the Chief Executive Officer, and his family when traveling with him, whenever possible for business and personal travel.

Tax Treatment of Executive Officer Compensation

      The Compensation Committee intends to preserve the Company’s ability to deduct compensation paid to the Company’s Chief Executive Officer and other executive officers to the extent possible while maintaining the flexibility to compensate the officers in accordance with the Company’s compensation policies.

      Section 162(m) of the Internal Revenue Code 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 UPP, any bonus payments outside the UPP, and stock and stock-based compensation without performance conditions are generally subject to the $1 million limit on deductible compensation.

      Compensation attributable to stock options granted under the Company’s Omnibus Plans qualifies for deductibility under Section 162(m). The UPP allows the Compensation Committee to require, and certain stock-based awards under the Omnibus Plans not qualifying as deductible compensation require, 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).

      A portion of each named executive officer’s compensation for 2006 was non-deductible to the Company under Section 162(m). The Compensation Committee determined not to require deferral of any of the non-deductible compensation. The anticipated amount of the Company’s taxes for non-deductible compensation in 2006 is $3 million. The Compensation Committee will continue to retain the discretion to pay non-deductible amounts. The Compensation Committee believes that such flexibility best serves the interests of the Company and its stockholders by allowing the Committee to recognize and motivate executive officers as circumstances warrant.

      The Company has also structured deferred compensation arrangements to comply with the limitations and restrictions of Internal Revenue Code Section 409A. Section 409A applies to any plan or arrangement that provides for the deferral of compensation, and, unless certain requirements are met, amounts deferred under deferred compensation arrangements will be currently includible in income and subject to an excise tax. The Compensation Committee has taken several actions to structure its deferred compensation arrangements so that they do not give rise to taxable income or excise taxes or penalties to executive officers under Section 409A.

Reimbursement of Certain Compensation Following Restatements

      Pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, a Company policy governs the process for reimbursement by the Chief Executive Officer and the Chief Financial Officer of any bonus or other incentive-based or equity-based compensation received during the 12-month period following public disclosure of an accounting restatement due to material noncompliance by the Company with any financial reporting requirements as the result of misconduct. In addition, as described earlier in this proxy statement, the new 2007 Omnibus Plan, if approved by stockholders at the meeting, will require reimbursement of certain amounts following public disclosure of an accounting restatement due to material noncompliance by the Company with any financial reporting requirement as a result of misconduct.

Compensation Tables

      The following Summary Compensation Table sets forth certain information concerning compensation of Eastman Chemical Company’s Chief Executive Officer, Chief Financial Officer and each of the Company’s three other most highly compensated executive officers for the year ended December 31, 2006.

Summary Compensation Table

The Company maintains the Executive Deferred Compensation Plan (the “EDCP”), an unfunded, nonqualified deferred compensation plan into which executive officers and other management-level employees can defer compensation until retirement or termination from the Company. Compensation deferred into the EDCP is credited to individual interest accounts and stock accounts. Amounts deferred into interest accounts are credited with interest at the prime rate until transfer or distribution, and amounts deferred into stock accounts increase or decrease in value depending on the market price of Eastman common stock. When cash dividends are declared on the common stock, each stock account receives a dividend equivalent which is used to “purchase” additional hypothetical shares. For 2006, there were no preferential or above-market earnings on amounts in individual stock accounts (appreciation in value and dividend equivalents earned at a rate higher than appreciation in value and dividends on common stock) or on individual interest accounts (interest on amounts deferred at a rate exceeding 120% of the federal long term rate). See the “Nonqualified Deferred Compensation” table for additional information about the named executive officers’ EDCP accounts.

      The following table sets forth certain information regarding grants in 2006 to the individuals named in the Summary Compensation Table of non-equity incentive awards, equity incentive awards, and all other non-incentive stock and option awards.

Grants of Plan-Based Awards

      The following table sets forth information regarding outstanding option and stock awards held by individuals named in the Summary Compensation Table as of December 31, 2006.

Outstanding Equity Awards at Fiscal Year-End