Exhibit 10.01 - Employee Agreement with Mark J. Costa


    Form
      10-Q

    EXHIBIT
      10.01

    EMPLOYMENT
      AGREEMENT

    


    This
      Employment Agreement (this “Agreement”) is entered into as of this 4th day of
      May, 2006, by and among Eastman Chemical Company (“Eastman”
      or the
      "Company")
      and
      Mark
      J. Costa (“Costa”) (collectively referred to as “both parties”). Both parties
      agree to the employment by Eastman of Costa on the terms and conditions set
      forth below. 

    


    
      	1.  	
              TITLE;
                DUTIES; OFFICE.
                Senior Vice President, Corporate Strategy and Marketing. Costa will
                be
                responsible for overseeing corporate strategy, the corporate marketing
                function, and managing opportunities and growth platforms that involve
                more than one stream and cross businesses within Eastman, and other
                duties
                that the Chief Executive Officer, in his sole discretion, may
                add;
                provided, however, that such other duties are appropriate for a person
                in
                Costa's position. In
                performing his duties, Costa will report solely, exclusively and
                directly
                to Eastman’s Chief Executive Officer, subject to the general oversight of
                the Board of Directors. Costa’s office shall be located at Eastman’s
                corporate headquarters, wherever such headquarters are
                located.

            


    

    


    
      	2.  	
              ANNUAL
                SALARY.
                Eastman will provide to Costa an initial base annual salary of $420,000
                per year, with such increases as may be recommended by the Chief
                Executive
                Officer and approved from time-to-time by the Compensation and Management
                Development Committee of the Board of Directors (the "Compensation
                Committee"). 

            


    

    


    
      	3.  	
              OTHER
                COMPENSATION.
                Costa will receive the compensation specified below. Subject
                to Section 5(b), in all
                cases, Costa’s participation in Eastman compensation and benefits plans
                and arrangements will be subject to the existing terms and conditions
                of
                the plans and arrangements. Capitalized terms used herein, but not
                defined
                shall have the meaning given to them in the Eastman Chemical Company
                2002
                Omnibus Long-Term Compensation Plan (the
                “LTCP”).

            


    

    


    
      	
              a.
                Signing Bonus

            	
              $250,000
                cash, payable in first payroll following his initial date of employment.
                If, prior to the first anniversary of his initial date of employment
                with
                Eastman, Costa voluntarily terminates his employment (except for
                "Good
                Reason" as defined in Section 5(e) below), Costa must reimburse the
                amount
                of the Signing Bonus, payable in cash to Eastman, no later than 30
                days
                following the date of his termination. 

            
	
              b.
                Restricted Stock Award

            	
              30,000
                restricted shares of Common Stock, awarded as of his initial date
                of
                employment. Restrictions
                will lapse as to 10,000 shares on each of the first, second and third
                anniversaries of the award date. 

            
	
              c.
                Stock Option Grant at Hiring

            	
              Option
                to purchase 65,000 shares of Common Stock with an exercise price
                at Fair
                Market Value, granted as of his initial date of employment. Option
                will
                vest as to 1/3 of the shares on each of the first, second, and third
                anniversaries of his initial date of employment. 

            
	
              d.
                Unit Performance Plan/Target Annual Bonus

            	
              Costa
                shall be eligible
                for an annual target bonus opportunity (the "Target Annual Bonus")
                in cash
                under the Eastman Unit Performance Plan (as amended and restated
                effective
                January 1, 2004) (the “UPP”) or other plan or program the Company may have
                in place for similarly situated executive officers, as determined
                by the
                Compensation Committee. Costa’s initial Target Annual Bonus is at least
                65% of base annual rate of pay.

            
	
              e.
                Stock Options

            	
              Costa
                is eligible for stock option grants under LTCP or its successor,
                under
                such terms as the Compensation Committee determines. Most
                recent level of shares of Common Stock underlying options awarded
                for
                position was 31,000 shares. 

            
	
              f.
                Performance Shares

            	
              When
                eligible for an award of performance shares under a Performance Share
                Award Subplan of LTCP (a "Performance Plan”) or its successor, Costa is
                eligible to receive an award thereunder, under such terms as the
                Compensation Committee determines. Most recent Award Amount (as defined
                in
                the Performance Plan) for position was 8,270 performance shares.
                

            
	
              g.
                Retirement Savings Contribution

            	
              Contribution
                equal to 3% of pay contributed into an individual ESOP/401(k) account
                during first year. Annual contribution equal to 5% of pay into an
                individual ESOP/401(k) account for each year after first year, consistent
                with plan contributions made to all Company
                employees.

            


    

     

    
      
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    EXHIBIT
      10.01

     

    For
      all
      future compensation
      involving awards,
      grants, or bonuses
      including those
      listed
      in Sections 3.d., 3.e., 3.f., and 3.g. above
      (or any
      successors thereto),
      the
      Company reserves the right to modify such compensation plan or arrangement,
      consistent with that provided for similarly situated executive
      officers;
      provided, however, that for so long as Costa remains employed by Eastman,
      Eastman shall not in any year, with respect to any of the aforementioned
      compensation arrangements (or their successors): (i) fail to compensate Costa
      under any of the same unless it also fails to so compensate similarly situated
      executive officers; or (ii) compensate Costa under any of the same in any
      material amount less than similarly situated executive officers unless the
      Compensation Committee has determined in good faith that Costa's performance
      of
      his duties warrants such reduced compensation. 

    


    
      	4.  	
              CHANGE-IN-CONTROL
                AND INDEMNIFICATION ARRANGEMENTS.
                Subject to authorization by the Compensation Committee at their earliest
                scheduled meeting after Costa’s first day of employment (in no case later
                than three months after this Agreement is executed), Costa will be
                offered
                (a) a Change-in-Control Severance Agreement in the form filed as
                an
                exhibit to Eastman's Current Report on Form 8-K dated December 5,
                2005,
                and (b) an Indemnification Agreement in the form filed as an exhibit
                to
                Eastman's Annual Report on Form 10-K for the year ended December
                31,
                2003.

            


    

    


    5.
      OTHER
      TERMINATION ARRANGEMENTS.
      

    


    (a)
      If
      Costa’s employment is terminated without "Cause" (as defined in Section 5(d)
      below) or if he terminates his employment for "Good Reason" (as defined in
      Section 5(e) below, other than in circumstances occurring
      after a Change-in-Control (as defined in the Change-in-Control Severance
      Agreement described in Section 4) that
      would give rise to Good Reason which would be governed under the
      Change-in-Control Severance Agreement described in Section 4),
      he
      will receive the "Severance Benefit" (as defined in Section 5(c) below) which
      amount shall be payable in cash and must be made within 30 days of the
      termination of Costa’s employment (or such other
      date as
      may be required under Internal Revenue Code Section 409A). 

    


    (b)
      Notwithstanding
      anything to the contrary contained in the Agreement, the
      following will be included in the terms of long-term stock-based awards to
      Costa
      under the LTCP, or any successor plans (collectively, "Compensation Plans”): in
      the event of a termination of Costa's employment without Cause or for Good
      Reason: (i)
      unvested stock options shall immediately vest and remain exercisable for the
      lesser of five (5) years following Costa's date of termination or the expiration
      date of the options; (ii)
      all
      restrictions on transfer of issued shares of common stock shall lapse; and
      (iii)
      Eastman shall issue to Costa, within 30 days of the termination of Costa’s
      employment (or such other
      date
      as
      may be required under Internal Revenue Code Section 409A), shares of common
      stock underlying outstanding performance shares on a pro rata basis based upon
      the number of months employed during the performance period (as
      if
all
      performance objectives with respect thereto had been met at a level of 100%).
      The terms and conditions of the Compensation Plans and any applicable awards
      thereunder shall control with respect to the any other matters concerning
      Costa’s options, restricted shares or other awards thereunder then held by
      Costa.

    


    (c)
      As
      used herein, the term “Severance Benefit” means a lump-sum cash payment equal to
      the sum of: (i) all accrued unpaid salary and unused vacation pay through the
      date of termination; (ii) an amount equal to one year of base annual salary
      (then in effect); and (iii) an amount equal to 100% of Costa’s Target Annual
      Bonus for the year in which his employment terminates (as
      if
all
      performance objectives applicable thereto had been met at a level of 100%).
      

    


    (d)
      For
      purposes of this Agreement, "Cause" shall mean: (i) a material breach by Costa
      of any provision of this Agreement; (ii) the conviction of Costa of any criminal
      act that Eastman’s Compensation Committee shall, in its sole and absolute
      discretion, deem to constitute Cause for purposes of this Agreement; (iii)
      material breach by Costa of published Eastman code of conduct or code of ethics;
      or (iv) conduct by Costa that is grossly inappropriate or insubordinate and
      demonstrably likely to lead to material injury to Eastman, as determined by
      the
      Compensation Committee acting reasonably and in good faith; provided, however,
      that in the case of clauses (i), (iii), and (iv) above, such conduct shall
      not
      constitute Cause unless Eastman shall have delivered to Costa notice setting
      forth with specificity (x) the conduct deemed to qualify as Cause, (y)
      reasonable action, if any, that would remedy such objection, and (z) if such
      conduct is of a nature that may be remedied, a reasonable time (not less than
      thirty (30) days) within which Costa may take such remedial action, and Costa
      shall not have taken such specified remedial action to the satisfaction of
      the
      Compensation Committee within such specified reasonable time.

    


    (e)
      For
      purposes of this Agreement, "Good Reason" shall mean,
      without
      the written consent of Costa: (i) except as otherwise contemplated by Section
      1,
the
      assignment to Costa of any
      duties
      materially inconsistent with Costa's position
      (including status, office, titles and reporting requirements), authority,
      duties or responsibilities as set forth herein, or any other action by Eastman
      which results in a material diminution in such position, authority, duties
      or
      responsibilities, excluding for this purpose an isolated, insubstantial and
      inadvertent action not taken in bad faith and which is remedied by Eastman
      promptly after receipt of notice thereof given by Costa; (ii) a reduction by
      Eastman in Costa's base salary,
      Target
      Annual Bonus,
      or
      target
      level of stock-based pay
      (as
      referred to in Section 3 above) (or
      other
      form of compensation as may replace stock-based pay, consistent with that
      provided for similarly situated executive officers); or
      (iii)
      any failure by Eastman to comply with any of the other provisions of this
      Agreement, other than an isolated, insubstantial, and inadvertent failure not
      occurring in bad faith
      and
      which is remedied by Eastman promptly after receipt of notice therof given
      by
      Costa. Costa's continued employment shall not constitute consent to, or a waiver
      of rights with respect to, any circumstance constituting Good Reason hereunder.
      A termination by Costa shall not constitute termination for Good
      Reason
      unless
      Costa shall first have personally delivered to Eastman's
      Chief
      Executive Officer, within 90 days of the occurrence of
      the
      event giving
      rise to Good Reason, written notice setting forth with
      reasonable specificity the
      occurrence deemed
      by
      Costa
      to give
      rise to a right to terminate for Good Reason, and there shall have passed a
      reasonable time (not
      less
      than 60 days)
      within
      which Eastman may take action to correct, rescind,
      or
      otherwise substantially reverse the occurrence supporting termination for Good
      Reason as identified by Costa.  

    


    (f)
      In
      addition to the foregoing, to the extent not theretofore paid or provided,
      Eastman shall timely pay or provide to Costa any other amounts or benefits
      required to be paid or provided or which Costa is eligible to receive under
      any
      plan, program, policy or practice or contract or agreement of Eastman and its
      affiliated companies. The provisions of this Section 5 shall survive the
      termination of this Agreement and of Costa’s employment with Eastman for any
      reason or no reason regardless of the terminating party.

     

    
      
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    EXHIBIT
      10.01

     

     6. PERSONAL
      BENEFITS AND PROVISIONS.
      Both
      parties agree that, in addition to the other payments and benefits provided
      hereunder, Costa will receive the following personal benefits; (a) an annual
      personal travel allowance of $75,000, payable in quarterly installments
      beginning with the first payroll following his initial date of employment (if
      the cost of air travel shall increase materially, then the personal travel
      allowance shall increase proportionally), and (b) customary perquisites as
      provided to other Eastman executive officers.

    


     7. EMPLOYEE
      BENEFITS.
      Both
      parties agree that, in addition to the payments and benefits provided hereunder,
      Costa will be eligible for existing pension plans, welfare plans, severance
      plans, and compensation plans applicable to other Eastman executive
      officers.

    


     8.
      VACATION.
      Both
      parties agree that Costa will be eligible for four weeks annual vacation
      beginning in 2007 under the provisions of the Eastman vacation and holiday
      plan.
      Costa will be eligible for a prorated amount of 4 weeks vacation in 2006, based
      upon his first day of work.

    


     9.
      RELOCATION.
      Both
      parties agree that housing and relocation arrangements will be made subject
      to
      the attached Summary of Major Components of Home Purchase Program (Attachment
      1).
      Costa
      will receive normal and customary reimbursement for relocation expenses, net
      of
      taxes. Costa will receive a temporary living expense reimbursement for up to
      three months, net of taxes.

     

    10.
      “AT-WILL”
      EMPLOYMENT.
      Costa’s
      employment will be an “at will” employment. As such, this Agreement is not a
      contract for a term of employment and Costa's employment can be terminated
      at
      any time at the will of Eastman with or without cause. This “at will” status
      shall not be changed by any written or oral representation or statement by
      Eastman or its employees or agents, unless such writing is signed by Eastman’s
      Chief Executive Officer.

    


    11.
      NO
      CONFLICTING AGREEMENTS.
      Both
      parties agree that Costa’s employment with Eastman cannot be in conflict with or
      violate any continuing obligation Costa has with his former employer not to
      solicit a current employee of Costa's former employer for employment with
      another firm, corporation, or other entity. Costa certifies to Eastman that
      his
      Eastman employment will not violate any such obligation. Upon reporting to
      work,
      Costa will be required to sign the Agreement attached (Attachment
      2),
      the
      terms of which are incorporated by reference into this Agreement. 

    


    12.
       NOTICES.
      Notices
      under this Agreement shall be in writing and shall be mailed by registered
      or
      certified mail, effective upon mailing, addressed as follows:

    


    To
      Eastman:  Eastman
      Chemical Company 

    200
      South
      Wilcox Drive

    Kingsport,
      Tennessee 37660-5280

    Attn:
      Chairman of the Board

    


    To
      Costa:  to
      any
      address provided to Eastman by Costa.

    


    With
      a
      copy to: Craig
      and
      Macauley Professional Corporation

    Federal
      Reserve Plaza

    600
      Atlantic Avenue

    Boston,
      Massachusetts 02210

    Attn:
      Allison M. O’Neil, Esquire

    


    Either
      party may by notice in writing change the address to which notices to it or
      him
      are to be addressed hereunder.

     

    
      
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    EXHIBIT
      10.01

    
 

    13.
      MISCELLANEOUS.
      Eastman
      and Costa agree that Costa will report to work at a date mutually agreeable
      to
      Eastman and Costa, but no later than June 15, 2006. The actual terms of any
      benefit plan or pay policy as stated in this Agreement take precedence over
      any
      oral representation. Subject
      to Section 5(b), in the
      event
      of any conflict between the terms of this Agreement and any benefit plan or
      pay
      policy including, without limitation, any compensation plan or awards
      thereunder, then the terms of the compensation plan or awards shall govern.
      This
      Agreement comprises the full and complete understanding of the parties and
      there
      are no other representations or descriptions, oral or written, unless such
      writing is signed by both Eastman’s Chief Executive Officer and Costa, which
      shall apply to Costa’s employment. Any amendments, waivers or other
      modifications of this Agreement or any of its provisions must be in writing
      and
      executed by both parties.

     

     

    
      	 /s/
              Norris P.
              Sneed                                                            
              	 /s/
              Mark J.
              Costa                                                              
              	 05/04/2006                       
              
	
               Norris
                P. Sneed

              Senior Vice President

              HR, Communications, and Public Affairs

            	 Mark
              J. Costa	 Date


    

    
 

    
      
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    EXHIBIT
      10.01

    
 

    Attachment
      1

    EASTMAN
      CHEMICAL COMPANY

    SUMMARY
      OF MAJOR COMPONENTS OF HOME PURCHASE PROGRAM

    (FULL
      ASSISTANCE-NEW HIRE - HOMEOWNER)

    


    


    Cendant
      Mobility (Cendant) will offer to purchase your home at a guarantee price based
      on the average of two (2) fair market broker’s market analyses (BMAs). The
      guarantee price will be established by the average of the two (2) BMAs if the
      values are within 7%. If they are outside of the 7%, a third BMA will be ordered
      and the average of the two (2) highest will be used.

    


    You
      will
      have 60 days in which to market your property and obtain an offer.

    


    You
      may
      be eligible for the Transferee Incentive Plan (TIP) payment. This plan provides
      an incentive payment of 2% of the net
      sales price
      when you
      and Cendant accept an offer over 95% of your guarantee price (within your 60-day
      marketing you period).

    


    If
      you do
      not receive a purchase offer and signed contract in 60 days, Cendant will
      purchase your home and market the property.

    


    Eastman
      will pay customary selling expenses, including the real estate
      commission.

    


    Eastman
      will pay 50% of loss, if any, between original home acquisition price and actual
      selling price of the home. The total Protection-Against-Loss (PAL) payment
      is
      not to exceed 20% of the guarantee price.

    


    Eastman
      will reimburse expenses for a one (1) week house hunting trip for you and your
      spouse (round trip transportation, lodging, meals and rental car).

    


    Cendant
      will provide real estate broker referrals and must make the first contact with
      a
      real estate broker in both the departure and destination locations.

    


    Eastman
      will pay customary and required closing costs on your new home.

    


    You
      will
      be eligible to participate in a nationwide mortgage lending program (Wells
      Fargo
      Home Mortgage or Cendant Mortgage) to aid in buying your home.

    


    Cendant
      will provide you interest-free advances of your established equity, if needed,
      during your 60-day marketing period.

    


    Eastman
      will protect against duplicate
      housing
      costs. If you need to start your new job before vacating your home, Eastman
      will
      consider the cost of temporary living expenses. Through a real estate broker,
      Eastman will cover maintenance and utilities after you vacate your
      home.

    


    Cendant/HomeExpress
      will arrange to have your household goods packed and shipped (including
      vehicles) to your new location.

    


    Mortgage
      Interest Subsidy (MIS) - Eastman will protect you for two years if your new
      first mortgage interest rate is higher than the old rate. This is a lump sum
      payment.

    


    Your
      spouse will be eligible to participate in the Spouse Relocation Assistance
      Program to facilitate re-employment in the destination city. Previous employment
      is NOT a prerequisite for the program.

    


    The
      Internal Revenue Service considers the moving expenses paid by the company,
      whether the expenses are paid directly to the employee or directly to a third
      party, as taxable income for the employee. Eastman will provide a tax gross-up
      for nondeductible expenses which are shown as income on your W-2.

    


    You
      will
      receive a homeowner’s Miscellaneous Expense Allowance (MEA) equal to 4 weeks’
gross pay with a minimum amount of $2,500.

     

    
      
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    EXHIBIT
      10.01

     

    Attachment
      2

     

    Eastman
      Chemical Company

    Employment
      Agreement

    


    


    In
      consideration of my employment by Eastman, the Compensation and benefits
      afforded to me, and any opportunities for advancement, training or reassignment,
      which Eastman may from time to time offer me, I agree as follows:

    


    
      	I.  	
              Confidential
                Information

            


    

    I
      acknowledge there is a relationship of trust and confidence between Eastman
      and
      its employees. All information pertaining directly or indirectly to Eastman's
      business is confidential information unless such information has already been
      disclosed in public literature. I shall treat all such information as
      confidential.

    


    I
      agree
      that, expect as expressly authorized by Eastman in writing, I will not at any
      time, whether during or after employment with Eastman, disclose to any person
      or
      entity or use any Confidential Information in any manner whatsoever without
      the
      prior written consent of Eastman.

    


    I
      agree
      that upon request by Eastman, and in any event upon termination of employment,
      I
      shall turn over to Eastman all documents, papers or other materials including
      all copies in my possession or under my control, which may contain or be derived
      from Confidential Information.

    


    
      	II.  	
              Inventions

            


    

    


    I
      understand that Eastman invests considerable sums of money in research and
      development and that Eastman's future growth and competitiveness depend in
      large
      part upon the success of these efforts. Eastman employees make major
      contributions to this effort through inventions ("inventions" including but
      not
      limited to discoveries, developments, improvements, innovations, concepts,
      ideas
      and know-how).

    


    I
      agree
      to promptly disclose in writing to Eastman all inventions, whether or not
      patentable, conceived by me or in concert with others during the period of
      my
      employment with Eastman, whether or not made or conceived during working hours
      that relate in any manner to the existing or contemplated business or research
      activities of Eastman. I waive all rights and interest I otherwise would have,
      and acknowledge that all such inventions shall be the exclusive property of
      Eastman.

    


    I
      agree
      to assign to Eastman my entire right, title, and interest to all inventions
      under the preceding paragraphs of this Employment Agreement (hereinafter
      "Agreement"). I will, at Eastman's request and expense ("expense" to cover
      reasonable compensation for time involved), execute, acknowledge and deliver
      documents and take action as many be considered necessary by Eastman at any
      time
      during or subsequent to my employment with Eastman to obtain and define letters
      patent in any and all countries and to vest title in such inventions in Eastman
      or its assigns.

    


    
      	III.  	
              Noncompetition

            


    

    


    I
      agree
      and covenant that during my employment and for a period of
      two
      years after the termination of my employment with Eastman, I will not, as a
      principal, agent, consultant, or employee, engage in any work or other activity,
      where such work or activity is in competition with Eastman's business activities
      or interest.

    


    I
      agree
      that the provisions contained in this agreement are necessary for the protection
      of Eastman's legitimate business interests and are fair and reasonable in both
      scope and content. In the event that a court should hold my noncompetition
      covenant
      unreasonable,
      that covenant shall be deemed to be modified to restrict my competition with
      Eastman to the maximum extent, in both time and geography, which a court shall
      find reasonable and enforceable.

     

    
      
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    EXHIBIT
      10.01

    
 

    
      	IV.  	
              Saving
                Provision

            


    

    


    If
      any
      provision of this agreement is found to be invalid or unenforceable by any
      court, the invalidity of such provision shall not affect the validity of the
      remaining provisions.

    


    
      	V.  	
              Governing
                Law and Application

            


    

    


    I
      understand and agree that the construction and interpretation of this agreement
      shall at all times and in all respects be governed by the laws of the State
      of
      Tennessee. The provision of this Agreement shall apply in the United States
      and
      in all other countries.

    


    


    EASTMAN'S
      GENERAL PRACTICES CONCERNING YOUR EMPLOYMENT ARE REFLECTED IN COMPANY-WIDE
      COMMUNICATIONS. HOWEVER, EVERY EASTMAN EMPLOYEE IS EMPLOYED "AT WILL", AND
      EITHER YOU OR THE COMPANY CAN TERMINATE YOUR EMPLOYMENT AT ANY
      TIME.

     

    


     

    I
      ACKNOWLEDGE THAT BEFORE SIGNING BELOW, I HAVE READ AND UNDERSTOOD ALL OF THE
      PROVISIONS OF THIS AGREEMENT, AND HAVE RECEIVED A COPY. THIS AGREEMENT REPLACES
      ALL PREVIOUS AGREEMENTS RELATING TO THE SAME OR SIMILAR MATTERS. NO ORAL
      STATEMENT OR UNDERSTANDING SHALL ALTER THIS AGREEMENT. THIS AGREEMENT IS BINDING
      UPON ME, MY HEIRS, ASSIGNS AND/OR REPRESENTATIVES.

     

    


     

    Date: ______________________ 

     

    


     

    Employee: _______________________Witness:
      _______________________

     

    53