Form 10-Q EASTMAN CHEMICAL CO For: Jun 30

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July 30, 2015 3:09 PM EDT

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q



(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2015
	OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ______________ to ______________

Commission file number 1-12626

EASTMAN CHEMICAL COMPANY

(Exact name of registrant as specified in its charter)



Delaware	62-1539359
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification no.)

200 South Wilcox Drive
Kingsport, Tennessee	37662
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (423) 229-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES [X] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	[X]		Accelerated filer	[ ]
Non-accelerated filer	[ ]	(Do not check if a smaller reporting company)	Smaller reporting company	[ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [ ] NO [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.



Class	Number of Shares Outstanding at June 30, 2015
Common Stock, par value $0.01 per share	148,664,334

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Table of Contents

TABLE OF CONTENTS



ITEM		PAGE



	Forward-Looking Statements	3

PART I. FINANCIAL INFORMATION



1.	Financial Statements

	Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings	4
	Unaudited Consolidated Statements of Financial Position	6
	Unaudited Consolidated Statements of Cash Flows	7
	Notes to the Unaudited Consolidated Financial Statements	8

2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31

3.	Quantitative and Qualitative Disclosures About Market Risk	54

4.	Controls and Procedures	54

PART II. OTHER INFORMATION



1.	Legal Proceedings	55

1A.	Risk Factors	55

2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

6.	Exhibits	56

SIGNATURES



	Signatures	57

EXHIBIT INDEX



	Exhibit Index	58



Table of Contents

FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements are all statements, other than statements of historical fact, that may be made by the Company from time to time. In some cases, you can identify forward-looking statements by terminology such as "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would," and similar expressions or expressions of the negative of these terms. Forward-looking statements may relate to, among other things, such matters as planned and expected capacity increases and utilization; anticipated capital spending; expected depreciation and amortization; environmental matters; pending and future legal proceedings; exposure to, and effects of hedging of, raw material and energy costs, foreign currencies and interest rates; global and regional economic, political, and business conditions; competition; growth opportunities; supply and demand, volume, price, cost, margin and sales; earnings, cash flow, dividends and other expected financial results, events, and conditions; expectations, strategies, and plans for individual assets and products, businesses, and segments, as well as for the whole of Eastman; cash requirements and uses of available cash; financing plans and activities; pension expenses and funding; credit ratings; anticipated and other future restructuring, acquisition, divestiture, and consolidation activities; cost reduction and control efforts and targets; the timing and costs of, and benefits from, the integration of, and expected business and financial performance of, acquired businesses; strategic initiatives and development, production, commercialization and acceptance of new products, services and technologies and related costs; asset, business, and product portfolio changes; and expected tax rates and net interest costs.

Forward-looking statements are based upon certain underlying assumptions as of the date such statements were made. Such assumptions are based upon internal estimates and other analyses of current market conditions and trends, management expectations, plans, and strategies, economic conditions, and other factors. Forward-looking statements and the assumptions underlying them are necessarily subject to risks and uncertainties inherent in projecting future conditions and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions and expectations proves to be inaccurate or is unrealized. The most significant known factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements are identified and discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations- Risk Factors" in Item 2 of this Quarterly Report.

The Company cautions you not to place undue reliance on forward-looking statements, which speak only as of the date such statements are made. Except as may be required by law, the Company undertakes no obligation to update or alter these forward-looking statements, whether as a result of new information, future events, or otherwise.



Table of Contents

UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS,

COMPREHENSIVE INCOME AND RETAINED EARNINGS



	Second Quarter					First Six Months
(Dollars in millions, except per share amounts)	2015		2014			2015			2014
Sales	$	2,533	$	2,460		$	4,976		$	4,765
Cost of sales	1,813		1,803			3,600			3,513
Gross profit	720		657			1,376			1,252
Selling, general and administrative expenses	194		172			374			340
Research and development expenses	57		56			113			109
Asset impairments and restructuring charges (gains), net	—		(7		)	109			6
Operating earnings	469		436			780			797
Net interest expense	66		45			132			87
Other (income) charges, net	—		(8		)	(11		)	(11		)
Earnings from continuing operations before income taxes	403		399			659			721
Provision for income taxes from continuing operations	104		107			188			195
Earnings from continuing operations	299		292			471			526
Earnings from discontinued operations, net of tax	—		2			—			2
Net earnings	$	299	$	294		$	471		$	528
Less: Net earnings attributable to noncontrolling interest	2		2			3			3
Net earnings attributable to Eastman	$	297	$	292		$	468		$	525
Amounts attributable to Eastman stockholders
Earnings from continuing operations, net of tax	$	297	$	290		$	468		$	523
Earnings from discontinued operations, net of tax	—		2			—			2
Net earnings attributable to Eastman stockholders	$	297	$	292		$	468		$	525
Basic earnings per share attributable to Eastman
Earnings from continuing operations	$	2.00	$	1.94		$	3.15		$	3.47
Earnings from discontinued operations	—		0.02			—			0.02
Basic earnings per share attributable to Eastman	$	2.00	$	1.96		$	3.15		$	3.49
Diluted earnings per share attributable to Eastman
Earnings from continuing operations	$	1.98	$	1.92		$	3.12		$	3.43
Earnings from discontinued operations	—		0.01			—			0.02
Diluted earnings per share attributable to Eastman	$	1.98	$	1.93		$	3.12		$	3.45



Table of Contents



	Second Quarter						First Six Months
(Dollars in millions, except per share amounts)	2015			2014			2015			2014
Comprehensive Income
Net earnings including noncontrolling interest	$	299		$	294		$	471		$	528
Other comprehensive income (loss), net of tax
Change in cumulative translation adjustment	76			9			(136		)	13
Defined benefit pension and other postretirement benefit plans:
Amortization of unrecognized prior service credits included in net periodic costs	(7		)	(4		)	(11		)	(8		)
Derivatives and hedging:
Unrealized gain (loss) during period	(16		)	6			39			6
Reclassification adjustment for (gain) loss included in net income	25			(6		)	22			(9		)
Total other comprehensive income (loss), net of tax	78			5			(86		)	2
Comprehensive income including noncontrolling interest	377			299			385			530
Comprehensive income attributable to noncontrolling interest	2			2			3			3
Comprehensive income attributable to Eastman	$	375		$	297		$	382		$	527
Retained Earnings
Retained earnings at beginning of period	$	4,656		$	4,191		$	4,545		$	4,012
Net earnings attributable to Eastman	297			292			468			525
Cash dividends declared	(60		)	(52		)	(120		)	(106		)
Retained earnings at end of period	$	4,893		$	4,431		$	4,893		$	4,431

The accompanying notes are an integral part of these consolidated financial statements.



Table of Contents

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



	June 30,			December 31,
(Dollars in millions, except per share amounts)	2015			2014
Assets
Current assets
Cash and cash equivalents	$	268		$	214
Trade receivables, net	1,021			936
Miscellaneous receivables	167			264
Inventories	1,439			1,509
Other current assets	272			250
Total current assets	3,167			3,173
Properties
Properties and equipment at cost	10,945			11,026
Less: Accumulated depreciation	5,934			5,939
Net properties	5,011			5,087
Goodwill	4,474			4,486
Intangible assets, net of accumulated amortization	2,777			2,905
Other noncurrent assets	457			421
Total assets	$	15,886		$	16,072
Liabilities and Stockholders' Equity
Current liabilities
Payables and other current liabilities	$	1,570		$	1,721
Borrowings due within one year	251			301
Total current liabilities	1,821			2,022
Long-term borrowings	7,072			7,248
Deferred income tax liabilities	962			946
Post-employment obligations	1,490			1,498
Other long-term liabilities	696			768
Total liabilities	12,041			12,482
Stockholders' equity
Common stock ($0.01 par value – 350,000,000 shares authorized; shares issued – 216,708,849 and 216,256,971 for 2015 and 2014, respectively)	2			2
Additional paid-in capital	1,840			1,817
Retained earnings	4,893			4,545
Accumulated other comprehensive loss	(363		)	(277		)
	6,372			6,087
Less: Treasury stock at cost (68,095,313 shares for 2015 and 67,660,313 shares for 2014)	2,608			2,577
Total Eastman stockholders' equity	3,764			3,510
Noncontrolling interest	81			80
Total equity	3,845			3,590
Total liabilities and stockholders' equity	$	15,886		$	16,072

The accompanying notes are an integral part of these consolidated financial statements.



Table of Contents

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS



	First Six Months
(Dollars in millions)	2015			2014
Operating activities
Net earnings	$	471		$	528
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	287			217
Asset impairment charges	89			8
Gain on sale of assets	—			(5		)
Provision (benefit) for deferred income taxes	(30		)	61
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
(Increase) decrease in trade receivables	(103		)	(191		)
(Increase) decrease in inventories	43			(54		)
Increase (decrease) in trade payables	(109		)	(44		)
Pension and other postretirement contributions (in excess of) less than expenses	(37		)	(45		)
Variable compensation (in excess of) less than expenses	(24		)	(53		)
Other items, net	95			(33		)
Net cash provided by operating activities	682			389
Investing activities
Additions to properties and equipment	(266		)	(254		)
Proceeds from sale of assets	4			12
Acquisitions, net of cash acquired	—			(283		)
Additions to capitalized software	(1		)	(1		)
Other items, net	(2		)	2
Net cash used in investing activities	(265		)	(524		)
Financing activities
Net increase in commercial paper borrowings	157			26
Proceeds from borrowings	250			615
Repayment of borrowings	(625		)	(125		)
Dividends paid to stockholders	(119		)	(106		)
Treasury stock purchases	(31		)	(360		)
Dividends paid to noncontrolling interest	(3		)	(9		)
Proceeds from stock option exercises and other items, net	12			30
Net cash (used in) provided by financing activities	(359		)	71
Effect of exchange rate changes on cash and cash equivalents	(4		)	2
Net change in cash and cash equivalents	54			(62		)
Cash and cash equivalents at beginning of period	214			237
Cash and cash equivalents at end of period	$	268		$	175

The accompanying notes are an integral part of these consolidated financial statements.



Table of Contents

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



ITEM		Page

Note 1.	Basis of Presentation	9
Note 2.	Acquisitions	9
Note 3.	Inventories	12
Note 4.	Payables and Other Current Liabilities	12
Note 5.	Provision for Income Taxes	12
Note 6.	Borrowings	13
Note 7.	Derivatives	14
Note 8.	Retirement Plans	19
Note 9.	Commitments	20
Note 10.	Environmental Matters and Asset Retirement Obligations	21
Note 11.	Legal Matters	22
Note 12.	Stockholders' Equity	22
Note 13.	Earnings and Dividends Per Share	25
Note 14.	Asset Impairments and Restructuring Charges (Gains), Net	25
Note 15.	Share-Based Compensation Awards	26
Note 16.	Supplemental Cash Flow Information	27
Note 17.	Segment Information	27
Note 18.	Recently Issued Accounting Standards	30



Table of Contents

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.	BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared by Eastman Chemical Company (the "Company" or "Eastman") in accordance and consistent with the accounting policies stated in the Company's 2014 Annual Report on Form 10-K and should be read in conjunction with the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K. The December 31, 2014 financial position data included herein was derived from the audited consolidated financial statements included in the 2014 Form 10-K but does not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). The unaudited consolidated financial statements are prepared in conformity with GAAP and of necessity include some amounts that are based upon management estimates and judgments. Future actual results could differ from such current estimates. The unaudited consolidated financial statements include assets, liabilities, sales revenue, and expenses of all majority-owned subsidiaries and joint ventures in which a controlling interest is maintained. Eastman accounts for other joint ventures and investments where it exercises significant influence on the equity basis. Intercompany transactions and balances are eliminated in consolidation.

Off Balance Sheet Financing Arrangements

The Company assumed the rights and obligations under non-recourse factoring facilities as part of the acquisition of Taminco Corporation ("Taminco"). The non-recourse factoring facilities have a combined limit of $176 million (the U.S. Dollar equivalent of the €158 million commitment amount as of June 30, 2015) and are committed until December 2017. These arrangements include receivables in the United States, Belgium, Germany, and Finland, and are subject to various eligibility requirements. The Company sells the receivables at face value but receives funding (approximately 85 percent) net of a deposit amount until collections are received from customers for the receivables sold. The total amount of cumulative receivables sold in second quarter and first six months 2015, was $240 million and $509 million, respectively. The total amount of cumulative receivables sold during the year ended December 31, 2014 since the acquisition of Taminco on December 5, 2014 was $70 million. As part of the program, the Company continues to service the sold receivables at market rates with no servicing assets or liabilities recognized. The amounts of sold receivables outstanding under the non-recourse factoring facilities were $124 million and $105 million at June 30, 2015 and December 31, 2014, respectively. The fair value of the receivables sold equals the carrying value at the time of the sale, and no gain or loss is recorded. The Company is exposed to a credit loss of up to 10 percent on sold receivables.


2.	ACQUISITIONS

Taminco Corporation

On December 5, 2014, the Company completed its acquisition of Taminco, a global specialty chemical company. The fair value of total consideration transferred was $2.8 billion, consisting of cash of $1.7 billion, net of cash acquired, and repayment of Taminco's debt of $1.1 billion. Taminco's former specialty amines and crop protection businesses are now operated as part of the Additives & Functional Products ("AFP") segment and its former functional amines business are now operated as part of the Specialty Fluids & Intermediates ("SFI") segment. For the preliminary purchase price allocation see Note 2, "Acquisitions", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K. During second quarter 2015, the Company continued to refine its preliminary purchase price allocation which resulted in a $32 million net increase to goodwill. As of June 30, 2015, the purchase price allocation remains preliminary as management completes its assessment of certain working capital accounts and liabilities including environmental, legal, and tax. The following table summarizes the preliminary purchase price allocation for the Taminco acquisition. Any subsequent adjustments are not expected to have a material impact on the Company's results of operations.



Table of Contents

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



Assets acquired and liabilities assumed
(Dollars in millions)	December 31, 2014			2015 Net Adjustments to Fair Value			June 30, 2015
Current assets	$	266		$	(3	)	$	263
Properties and equipment	658			(3		)	655
Intangible assets	1,002			(13		)	989
Other noncurrent assets	37			1			38
Goodwill	1,509			32			1,541
Current liabilities	(161		)	1			(160		)
Long-term liabilities	(546		)	(15		)	(561		)
Total purchase price, net of cash acquired	$	2,765		$	—		$	2,765

Acquired intangible assets are definite-lived assets and consist primarily of customer relationships, developed technologies, and contracts.



Intangible Assets acquired
(Dollars in millions)	Fair Value		Weighted-Average Amortization Period (Years)
Amortizable intangible assets
Customer relationships	$	604	24
Developed technologies	205		17
Contracts	180		5
Total	$	989

Goodwill from the Taminco acquisition has been preliminarily allocated to certain of the Company's reportable segments as set out in the table below. None of the goodwill is deductible for tax purposes.



Goodwill	Goodwill by Segment
(Dollars in millions)
Additives & Functional Products	$	918
Specialty Fluids & Intermediates	623
Total	$	1,541

In second quarter and first six months 2015, the Company recognized $7 million and $11 million, respectively in integration and transaction costs related to the acquisition. In 2014, the Company recognized $15 million in transaction and integration costs, and $13 million in pre-close financing costs related to the acquisition. Integration and transaction costs were expensed as incurred and are included in the "Selling, general and administrative expenses" line item and pre-close financing costs are included in the "Other (income) charges, net" and "Net interest expense" line items in the Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings.

Commonwealth Laminating & Coating, Inc.

On December 11, 2014, the Company acquired Commonwealth Laminating & Coating, Inc. ("Commonwealth") for a total cash purchase price of $438 million. The acquisition was accounted for as a business combination and is reported in the Advanced Materials ("AM") segment. There was no change to the final purchase price allocation from the preliminary allocation in the Company's 2014 Annual Report on Form 10-K, see Note 2, "Acquisitions", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K.



Table of Contents

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the final purchase price allocation for the Commonwealth acquisition:



Assets acquired and liabilities assumed
(Dollars in millions)	As of December 11, 2014
Current assets	$	51
Machinery and equipment	38
Goodwill	274
Intangible assets	125
Long-term liabilities	(50		)
Total purchase price	$	438

Current assets consist primarily of inventory acquired. Machinery and equipment acquired included a manufacturing operation in Martinsville, Virginia. Management valued machinery and equipment using the cost approach supported by published industry sources.

Acquired intangible assets included customer relationships and developed technologies in the window film industry. Also acquired was the SunTek^® brand name that is business-to-business in nature. Management valued intangible assets using the relief from royalty and multi-period excess earnings methods, both forms of the income approach supported by observable market data for peer chemical companies.



Intangible Assets acquired
(Dollars in millions)	Fair Value		Weighted-Average Amortization Period (Years)
Amortizable intangible assets
Customer relationships	$	72	14
Developed technologies	41		18
Indefinite-lived intangible asset
Brand name	12
Total	$	125

In connection with this acquisition, the Company recorded goodwill equal to the excess of the purchase price over the estimated fair value of net tangible and intangible assets acquired and liabilities assumed. None of the goodwill is deductible for tax purposes.

In second quarter and first six months 2015, the Company recognized $2 million and $4 million, respectively in integration costs related to the acquisition. In 2014, the Company recognized $7 million in transaction and integration costs related to the acquisition. Integration and transaction costs were expensed as incurred and are included in the "Selling, general and administrative expenses" line item in the Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings. As required by purchase accounting, acquired inventories were marked to fair value. In first six months 2015, the remaining portion of these inventories was sold resulting in an increase in cost of sales of $7 million.

Beginning in December 2014, the Company's consolidated results of operations included the results of Commonwealth. Based on applicable accounting and reporting guidance, the acquisition is not material to the Company's consolidated financial statements; therefore, pro forma financial information has not been presented.



Table of Contents

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


3.	INVENTORIES



	June 30,			December 31,
(Dollars in millions)	2015			2014
At FIFO or average cost (approximates current cost)
Finished goods	$	1,120		$	1,130
Work in process	223			288
Raw materials and supplies	510			553
Total inventories	1,853			1,971
LIFO Reserve	(414		)	(462		)
Total inventories	$	1,439		$	1,509

Inventories valued on the last-in, first-out ("LIFO") method were approximately 55 percent at both June 30, 2015 and December 31, 2014.


4.	PAYABLES AND OTHER CURRENT LIABILITIES



	June 30,		December 31,
(Dollars in millions)	2015		2014
Trade creditors	$	712	$	827
Derivative hedging liability	200		227
Accrued payrolls, vacation, and variable-incentive compensation	142		191
Accrued taxes	120		66
Other	396		410
Total payables and other current liabilities	$	1,570	$	1,721

"Other" consists primarily of accruals for interest payable, dividends payable, post-employment obligations, payroll deductions and employee benefits, and the current portion of environmental liabilities.


5.	PROVISION FOR INCOME TAXES



	Second Quarter						First Six Months
(Dollars in millions)	2015			2014			2015			2014
Provision for income taxes from continuing operations	$	104		$	107		$	188		$	195
Effective tax rate	26		%	27		%	29		%	27		%



Table of Contents

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


6.	BORROWINGS



	June 30,		December 31,
(Dollars in millions)	2015		2014
Borrowings consisted of:
3% notes due 2015	$	250	$	250
2.4% notes due 2017	998		998
6.30% notes due 2018	168		169
5.5% notes due 2019	250		250
2.7% notes due 2020	798		798
4.5% notes due 2021	250		250
3.6% notes due 2022	897		903
7 1/4% debentures due 2024	244		244
7 5/8% debentures due 2024	54		54
3.8% notes due 2025	796		796
7.60% debentures due 2027	222		222
4.8% notes due 2042	497		497
4.65% notes due 2044	877		877
Credit facilities and commercial paper borrowings	1,017		1,235
Capital leases	5		6
Total borrowings	7,323		7,549
Borrowings due within one year	251		301
Long-term borrowings	$	7,072	$	7,248

Credit Facility and Commercial Paper Borrowings

In connection with the acquisition of Taminco, Eastman entered into a $1.0 billion five-year Term Loan Agreement. As of June 30, 2015, the Term Loan Agreement balance outstanding was $375 million with an interest rate of 1.44 percent. In second quarter 2015, $625 million of the Term Loan Agreement balance was repaid primarily using available cash and proceeds from borrowings under the accounts receivable securitization agreement (the "A/R Facility") and commercial paper. As of December 31, 2014, the Term Loan Agreement balance outstanding was $1.0 billion with an interest rate of 1.41 percent. Borrowings under the Term Loan Agreement are subject to interest at varying spreads above quoted market rates.

The Company has access to a $1.25 billion revolving credit agreement (the "Credit Facility") expiring October 2019. Borrowings under the Credit Facility are subject to interest at varying spreads above quoted market rates and a commitment fee is paid on the total unused commitment. At June 30, 2015 and December 31, 2014, the Company had no outstanding borrowings under the Credit Facility.

The Credit Facility provides liquidity support for commercial paper borrowings and general corporate purposes. Accordingly, any outstanding commercial paper borrowings reduce capacity for borrowings available under the Credit Facility. Given the expiration date of the Credit Facility, any commercial paper borrowings supported by the Credit Facility are classified as long-term borrowings because the Company has the ability to refinance such borrowings on a long-term basis and intends, at least over the next twelve months, to maintain commercial paper borrowings at current levels. At June 30, 2015 the Company's commercial paper borrowings were $392 million with a weighted average interest rate of 0.50 percent. At December 31, 2014 the Company's commercial paper borrowings were $235 million with a weighted average interest rate of 0.47 percent.

In July 2015, the Company amended its $250 million A/R Facility to extend the maturity to April 2018. Borrowings under the A/R Facility are subject to interest rates based on a spread over the lender's borrowing costs, and the Company pays a fee to maintain availability of the A/R Facility. At June 30, 2015 the Company's borrowings under the A/R Facility were $250 million secured by trade receivables with an interest rate of 0.91 percent. At December 31, 2014 the Company had no outstanding borrowings under the A/R Facility. During first quarter 2014, $125 million of the available amount under the A/R Facility was borrowed and then repaid during second quarter 2014.



Table of Contents

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Term Loan Agreement, Credit Facility, and the A/R Facility contain a number of customary covenants and events of default, including the maintenance of certain financial ratios. The Company was in compliance with all such covenants for all periods presented. Total available borrowings under the Credit Facility and A/R Facility were $858 million and $1.265 billion as of June 30, 2015 and December 31, 2014, respectively. The Company would not violate applicable covenants for these periods if the total available amounts of the facilities had been borrowed.

Fair Value of Borrowings

The Company has classified its long-term borrowings at June 30, 2015 and December 31, 2014 under the fair value hierarchy as defined in the accounting policies in Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K. The fair value for fixed-rate debt securities is based on current market prices and is classified as Level 1. The fair value for the Company's other borrowings, which include the Term Loan Agreement, A/R Facility, commercial paper, and capital leases equals the carrying value and is classified as Level 2.



			Fair Value Measurements at June 30, 2015
(Dollars in millions)	Recorded Amount June 30, 2015		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Long-term borrowings	$	7,072	$	7,271	$	6,250	$	1,021	$	—



			Fair Value Measurements at December 31, 2014
(Dollars in millions)	Recorded Amount December 31, 2014		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Long-term borrowings	$	7,248	$	7,557	$	6,366	$	1,191	$	—


7.	DERIVATIVES

Hedging Programs

The Company is exposed to market risks, such as changes in foreign currency exchange rates, commodity prices, and interest rates. To mitigate these market risk factors and their effects on the cash flows of the underlying transaction, the Company uses various derivative financial instruments when appropriate in accordance with the Company's hedging strategy and policies. Designation is performed on a specific exposure basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the anticipated cash flows of the underlying exposures being hedged. The Company does not enter into derivative transactions for speculative purposes.

For further information on hedging programs, see Note 10, "Derivatives", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K.

Fair Value Hedges

Fair value hedges are defined as derivative or non-derivative instruments designated as and used to hedge the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk. For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. In 2014, the Company entered into interest rate swaps to hedge the interest rate risk on the 3.6% notes due 2022. As of June 30, 2015 and December 31, 2014, the total notional amount of the Company's interest rate swaps was $275 million.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurement of Derivatives Designated as Fair Value Hedging Instruments



(Dollars in millions)		Fair Value Measurement
Derivative Assets	Statement of Financial Position Location	June 30, 2015		December 31, 2014
Interest rate swap	Other noncurrent assets	$	3	$	5

Derivatives' Fair Value Hedging Relationships



	Second quarter
(Dollars in millions)	Consolidated Statement of Earnings Location of Gain/(Loss) Recognized in Income on Derivatives	Amount of Gain/ (Loss) Recognized in Income on Derivatives
Derivatives in Fair Value Hedging Relationships		June 30, 2015		June 30, 2014
Interest rate swaps	Net interest expense	$	3	$	1



	Six Months Ended
(Dollars in millions)	Consolidated Statement of Earnings Location of Gain/(Loss) Recognized in Income on Derivatives	Amount of Gain/ (Loss) Recognized in Income on Derivatives
Derivatives in Fair Value Hedging Relationships		June 30, 2015		June 30, 2014
Interest rate swaps	Net interest expense	$	7	$	1

Cash Flow Hedges

Cash flow hedges are derivative instruments designated as and used to hedge the exposure to variability in expected future cash flows that is attributable to a particular risk. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income, net of income taxes and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivatives representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.



Total notional amounts		June 30, 2015	December 31, 2014

Foreign Exchange Forward and Option Contracts (in millions)
	EUR/USD (in EUR)	€762	€810
	EUR/USD (in approximate USD equivalent)	$865	$1,000
	JPY/USD (in JPY)	¥3,600	¥4,800
	JPY/USD (in approximate USD equivalent)	$30	$40
Commodity Forward and Collar Contracts
	Contract ethylene sales (in thousand metric tons)	3	14
	Feedstock (in million barrels)	28	33
	Feedstock (in thousand metric tons)	15	30
	Energy (in million million british thermal units)	28	25
Interest rate swaps for the future issuance of debt (in millions)		$500	$500



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurement of Derivatives Designated as Cash Flow Hedging Instruments



(Dollars in millions)		Fair Value Measurements Significant Other Observable Inputs
Derivative Assets	Statement of Financial Position Location	June 30, 2015		December 31, 2014
Cash Flow Hedges
Commodity contracts	Other current assets	$	1	$	2
Foreign exchange contracts	Other current assets	74		61
Foreign exchange contracts	Other noncurrent assets	96		71
		$	171	$	134



(Dollars in millions)		Fair Value Measurements Significant Other Observable Inputs
Derivative Liabilities	Statement of Financial Position Location	June 30, 2015		December 31, 2014
Cash Flow Hedges
Commodity contracts	Payables and other current liabilities	$	177	$	193
Commodity contracts	Other long-term liabilities	229		289
Foreign exchange contracts	Payables and other current liabilities	4		10
Forward starting interest rate swap contracts	Other long-term liabilities	8		16
		$	418	$	508



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Derivatives' Hedging Relationships



	Second Quarter
(Dollars in millions)	Change in amount after tax of gain/(loss) recognized in Other Comprehensive Income on derivatives (effective portion)						Location of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)	Pre-tax amount of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
Derivatives' Cash Flow Hedging Relationships	June 30, 2015			June 30, 2014				June 30, 2015			June 30, 2014
Commodity contracts	$	22		$	(3	)	Sales	$	1		$	—
							Cost of Sales	(62		)	11
Foreign exchange contracts	(28		)	4			Sales	22			—
Forward starting interest rate swap contracts	15			(1		)	Net interest expense	(2		)	(2		)
	$	9		$	—			$	(41	)	$	9

	First Six Months
(Dollars in millions)	Change in amount after tax of gain/(loss) recognized in Other Comprehensive Income on derivatives (effective portion)						Location of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)	Pre-tax amount of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
Derivatives' Cash Flow Hedging Relationships	June 30, 2015			June 30, 2014				June 30, 2015			June 30, 2014
Commodity contracts	$	27		$	(5	)	Sales	$	3		$	—
							Cost of sales	(78		)	19
Foreign exchange contracts	27			2			Sales	43			(1		)
Forward starting interest rate swap contracts	7			—			Net interest expense	(4		)	(4		)
	$	61		$	(3	)		$	(36	)	$	14

Hedging Summary

Monetized positions and mark-to-market gains and losses from raw materials and energy, currency, and certain interest rate hedges that were included in accumulated other comprehensive income before taxes totaled losses of $333 million at June 30, 2015 and $67 million at June 30, 2014. Losses reclassified from Accumulated Other Comprehensive Income increased in 2015 compared to 2014 as a result of a sharp decline in commodity prices, particularly propane, partially offset by increased gains resulting from a weaker Euro and Japanese Yen. If realized, $128 million net losses as of June 30, 2015 will be reclassified into earnings during the next 12 months. Ineffective portions of hedges are immediately recognized in cost of sales or other charges (income), net.

The gains or losses on nonqualifying derivatives or derivatives that are not designated as hedges are marked to market and reported in the line item "Other (income) charges, net" of the Unaudited Consolidated Statements of Earnings, and, in all periods presented, represent foreign exchange derivatives denominated in multiple currencies and are transacted and settled in the same quarter. The Company recognized $1 million net losses during second quarter 2015 and $2 million net gains during second quarter 2014 on nonqualifying derivatives. The Company recognized approximately $12 million net losses and $3 million net gains on nonqualifying derivatives during the first six months of 2015 and 2014, respectively.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements

For additional information on fair value measurement, see Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K.

The following chart shows the gross financial assets and liabilities valued on a recurring basis.



(Dollars in millions)				Fair Value Measurements at June 30, 2015
Description	June 30, 2015			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative Assets	$	174		$	—	$	173		$	1
Derivative Liabilities	(418		)	—		(418		)	—
	$	(244	)	$	—	$	(245	)	$	1



(Dollars in millions)				Fair Value Measurements at December 31, 2014
Description	December 31, 2014			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative Assets	$	139		$	—	$	137		$	2
Derivative Liabilities	(508		)	—		(508		)	—
	$	(369	)	$	—	$	(371	)	$	2

The majority of the Company's derivative assets are classified as Level 2. Level 2 fair value is based on estimates using standard pricing models. These standard pricing models use inputs which are derived from or corroborated by observable market data such as interest rate yield curves and currency spot and forward rates. The fair value of commodity contracts is derived using forward curves supplied by an industry recognized and unrelated third party. In addition, on an ongoing basis, the Company tests a subset of its valuations against valuations received from the transaction's counterparty to validate the accuracy of its standard pricing models. Counterparties to these derivative contracts are highly rated financial institutions which the Company believes carry minimal risk of nonperformance.

All of the Company's derivative contracts are subject to master netting arrangements, or similar agreements, which provide for the option to settle contracts on a net basis when they settle on the same day and in the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event. The Company has elected to present the derivative contracts on a gross basis in the Unaudited Consolidated Statements of Financial Position. Had it chosen to present the derivatives contracts on a net basis, it would have a derivative in a net asset position of $170 million and a derivative in a net liability position of $414 million as of June 30, 2015. The Company does not have any cash collateral due under such agreements.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


8.	RETIREMENT PLANS

As described in more detail below, Eastman offers various postretirement benefits to its employees.

Defined Benefit Pension Plans and Other Postretirement Benefit Plans

Eastman maintains defined benefit pension plans that provide eligible employees with retirement benefits. In addition, Eastman provides a subsidy for life insurance, health care, and dental benefits to eligible retirees hired prior to January 1, 2007, and a subsidy for health care and dental benefits to retirees' eligible survivors. Costs recognized for these benefits are recorded using estimated amounts, which may change as actual costs derived for the year are determined.

For additional information regarding retirement plans, see Note 11, "Retirement Plans", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K.

Components of net periodic benefit (credit) cost were as follows:



	Second Quarter
	Pension Plans												Other Postretirement Benefit Plans
	2015						2014						2015			2014
(Dollars in millions)	U.S.			Non-U.S.			U.S.			Non-U.S.
Components of net periodic benefit (credit) cost:
Service cost	$	10		$	4		$	10		$	3		$	2		$	2
Interest cost	22			7			25			8			10			11
Expected return on assets	(37		)	(10		)	(35		)	(9		)	(1		)	(1		)
Curtailment gain⁽¹⁾	—			(7		)	—			—			—			—
Amortization of:
Prior service (credit) cost	(1		)	—			(1		)	—			(6		)	(6		)
Mark-to-market pension and other postretirement benefits loss⁽²⁾	—			2			—			—			—			—
Net periodic benefit (credit) cost	$	(6	)	$	(4	)	$	(1	)	$	2		$	5		$	6

	First Six Months
	Pension Plans												Other Postretirement Benefit Plans
	2015						2014						2015			2014
(Dollars in millions)	U.S.			Non-U.S.			U.S.			Non-U.S.
Components of net periodic benefit (credit) cost:
Service cost	$	19		$	8		$	20		$	7		$	4		$	4
Interest cost	44			13			50			16			20			22
Expected return on assets	(73		)	(19		)	(71		)	(19		)	(3		)	(3		)
Curtailment gain⁽¹⁾	—			(7		)	—			—			—			—
Amortization of:
Prior service (credit) cost	(2		)	—			(2		)	—			(12		)	(12		)
Mark-to-market pension and other postretirement benefits loss⁽²⁾	—			2			—			—			—			—
Net periodic benefit (credit) cost	$	(12	)	$	(3	)	$	(3	)	$	4		$	9		$	11


⁽¹⁾	Gain in the Fibers segment due to the closure of the Workington, UK acetate tow manufacturing facility.


⁽²⁾	Mark-to-market loss due to the interim remeasurement of the Workington, UK pension plan, triggered by the closure of the Workington, UK acetate tow manufacturing facility.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Second quarter and first six months 2015 include pension curtailment gains related to the remeasurement of the Workington, UK pension plan triggered by the closure of the Workington, UK acetate tow manufacturing facility. The remeasurement of the plan also resulted in a mark-to-market ("MTM") loss which was primarily due to asset returns being lower than expected returns.

The Company contributed $27 million to its U.S. defined benefit pension plans in first six months 2014. The Company did not make any contributions to its U.S. defined benefit pension plans in first six months 2015.


9.	COMMITMENTS

Purchase Obligations and Lease Commitments

The Company had various purchase obligations at June 30, 2015 totaling $2.0 billion over a period of approximately 30 years for materials, supplies, and energy incident to the ordinary conduct of business. The Company also had various lease commitments for property and equipment under cancelable, noncancelable, and month-to-month operating leases totaling $267 million over a period of approximately 45 years. Of the total lease commitments, approximately 50 percent relate to real property, including office space, storage facilities, and land; approximately 40 percent relate to railcars; and approximately 10 percent relate to machinery and equipment, including computer and communications equipment and production equipment.

Guarantees

The Company has operating leases with terms that require the Company to guarantee a portion of the residual value of the leased assets upon termination of the lease as well as other guarantees. Disclosures about each group of similar guarantees are provided below.

Residual Value Guarantees

The Company has operating leases with terms that require the Company to guarantee a portion of the residual value of the leased assets upon termination of the lease. These residual value guarantees at June 30, 2015 totaled $121 million and consisted primarily of leases for railcars and company aircraft and will expire beginning in 2016. Management's current expectation is that the likelihood of material residual guarantee payments is remote.

Other Guarantees

Guarantees and claims also arise during the ordinary course of business from relationships with customers, suppliers, joint venture partners, and other parties when the Company undertakes an obligation to guarantee the performance of others, if specified triggering events occur. Non-performance under a contract could trigger an obligation of the Company. The Company's current other guarantees include guarantees relating primarily to intellectual property, environmental matters, and other indemnifications and have arisen through the normal course of business. The ultimate effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists as to the final outcome of these claims, if they were to occur. These other guarantees have terms up to 30 years with maximum potential future payments of $29 million in the aggregate, with none of these guarantees being individually significant to the Company's operating results, financial position, or liquidity. Management's current expectation is that future payment or performance related to non-performance under other guarantees is remote.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


10.	ENVIRONMENTAL MATTERS AND ASSET RETIREMENT OBLIGATIONS

Certain Eastman manufacturing sites generate hazardous and nonhazardous wastes, the treatment, storage, transportation, and disposal of which are regulated by various governmental agencies. In connection with the cleanup of various hazardous waste sites, the Company, along with many other entities, has been designated a potentially responsible party ("PRP") by the U.S. Environmental Protection Agency under the Comprehensive Environmental Response, Compensation and Liability Act, which potentially subjects PRPs to joint and several liability for such cleanup costs. In addition, the Company will be required to incur costs for environmental remediation and closure and postclosure under the federal Resource Conservation and Recovery Act. Reserves for environmental contingencies have been established in accordance with Eastman's policies described in Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K. The Company's total reserve for environmental contingencies was $337 million and $345 million at June 30, 2015 and December 31, 2014, respectively. At June 30, 2015 and December 31, 2014, this reserve included $8 million and $10 million, respectively, related to sites previously closed and impaired by Eastman and sites that have been divested by Eastman but for which the Company retains the environmental liability related to these sites.

Estimated future environmental expenditures for remediation costs ranged from the minimum or best estimate of $314 million to the maximum of $539 million and from the minimum or best estimate of $324 million to the maximum of $548 million at June 30, 2015 and December 31, 2014, respectively. The maximum estimated future costs are considered to be reasonably possible and include the amounts accrued at both June 30, 2015 and December 31, 2014. Although the resolution of uncertainties related to these environmental matters may have a material adverse effect on the Company's consolidated results of operations in the period recognized, because of the availability of legal defenses, the Company's preliminary assessment of actions that may be required, and if applicable, the expected sharing of costs, management does not believe that the Company's liability for these environmental matters, individually or in the aggregate, will be material to the Company's consolidated financial position or cash flows.

An asset retirement obligation is an obligation for the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development, or normal operation of that long-lived asset. The Company recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be made. The asset retirement obligation is subsequently adjusted for changes in fair value. The associated estimated asset retirement costs are capitalized as part of the carrying value of the long-lived assets and depreciated over their useful life. Environmental asset retirement obligations consist of primarily closure and post-closure costs. For facilities that have environmental asset retirement obligations, the best estimate accrued to date over the facilities' estimated useful lives for these environmental asset retirement obligation costs was $23 million and $21 million at June 30, 2015 and December 31, 2014, respectively.

Reserves for environmental remediation that management believe to be probable and estimable are recorded as current and long-term liabilities in the Unaudited Consolidated Statements of Financial Position. These reserves include liabilities expected to be paid out within 30 years. The amounts charged to pre-tax earnings for environmental remediation and related charges are included in cost of sales and other charges (income), net, and are summarized below:



(Dollars in millions)	Environmental Remediation Liabilities
Balance at December 31, 2014	$	324
Changes in estimates recognized in earnings	4
Cash reductions	(14		)
Balance at June 30, 2015	$	314



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company's total environmental reserve for environmental contingencies, including remediation costs and asset retirement obligations, is recognized in the Unaudited Consolidated Statements of Financial Position as follows:



(Dollars in millions)	June 30, 2015		December 31, 2014
Environmental contingent liabilities, current	$	35	$	35
Environmental contingent liabilities, long-term	302		310
Total	$	337	$	345

The Company also has contractual asset retirement obligations not associated with environmental liabilities. Eastman's non-environmental asset retirement obligations are primarily associated with the future closure of leased manufacturing assets at Pace, Florida and Oulu, Finland acquired from Taminco. These accrued non-environmental asset retirement obligations were $44 million as of both June 30, 2015 and December 31, 2014, respectively.


11.	LEGAL MATTERS

From time to time, the Company and its operations are parties to, or targets of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which are being handled and defended in the ordinary course of business. While the Company is unable to predict the outcome of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations, or cash flows.


12.	STOCKHOLDERS' EQUITY

A reconciliation of the changes in stockholders' equity for first six months 2015 is provided below:



(Dollars in millions)	Common Stock at Par Value $	Paid-in Capital $		Retained Earnings $		Accumulated Other Comprehensive Income (Loss) $		Treasury Stock at Cost $		Total Stockholders' Equity Attributed to Eastman $		Noncontrolling Interest $		Total Stockholders' Equity $
Balance at December 31, 2014	2	1,817		4,545		(277	)	(2,577	)	3,510		80		3,590
Net Earnings	—	—		468		—		—		468		3		471
Cash Dividends Declared ⁽¹⁾ ($.40 per share)	—	—		(120	)	—		—		(120	)	—		(120	)
Other Comprehensive Income	—	—		—		(86	)	—		(86	)	—		(86	)
Share-Based Compensation Expense⁽²⁾	—	21		—		—		—		21		—		21
Stock Option Exercises	—	4		—		—		—		4		—		4
Other⁽³⁾	—	(2	)	—		—		—		(2	)	—		(2	)
Share Repurchase	—	—		—		—		(31	)	(31	)	—		(31	)
Distributions to Noncontrolling Interest	—	—		—		—		—		—		(2	)	(2	)
Balance at June 30, 2015	2	1,840		4,893		(363	)	(2,608	)	3,764		81		3,845


⁽¹⁾	Includes cash dividends paid and dividends declared, but unpaid.


⁽²⁾	Includes the fair value of equity share-based awards recognized for share-based compensation.


⁽³⁾	Paid in capital includes tax benefits/charges relating to the differences between the amounts deductible for federal income taxes over the amounts charged to income for book value purposes and other items. Equity attributable to noncontrolling interest includes adjustments for currency revaluation.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX



(Dollars in millions)	Cumulative Translation Adjustment			Benefit Plans Unrecognized Prior Service Credits			Unrealized Gains (Losses) on Derivative Instruments			Unrealized Losses on Investments			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2013	$	133		$	78		$	(39	)	$	(1	)	$	171
Period change	(201		)	(17		)	(230		)	—			(448		)
Balance at December 31, 2014	(68		)	61			(269		)	(1		)	(277		)
Period change	(136		)	(11		)	61			—			(86		)
Balance at June 30, 2015	$	(204	)	$	50		$	(208	)	$	(1	)	$	(363	)

Amounts of other comprehensive income (loss) are presented net of applicable taxes. The Company records deferred income taxes on the cumulative translation adjustment related to branch operations and income from other entities included in the Company's consolidated U.S. tax return. No deferred income taxes are provided on the cumulative translation adjustment of other subsidiaries outside the United States, as such cumulative translation adjustment is considered to be a component of indefinitely invested, unremitted earnings of these foreign subsidiaries.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Components of other comprehensive income recorded in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings are presented below, before tax and net of tax effects:



	Second Quarter
	2015						2014
(Dollars in millions)	Before Tax			Net of Tax			Before Tax			Net of Tax
Other comprehensive income (loss)
Change in cumulative translation adjustment	$	76		$	76		$	9		$	9
Defined benefit pension and other postretirement benefit plans:
Amortization of unrecognized prior service credits included in net periodic costs ⁽¹⁾	(10		)	(7		)	(7		)	(4		)
Derivatives and hedging: ⁽²⁾
Unrealized gain (loss)	(26		)	(16		)	9			6
Reclassification adjustment for (gain) loss included in net income	40			25			(9		)	(6		)
Change in derivatives and hedging	14			9			—			—
Total other comprehensive income (loss)	$	80		$	78		$	2		$	5

	First Six Months
	2015						2014
(Dollars in millions)	Before Tax			Net of Tax			Before Tax			Net of Tax
Other comprehensive income (loss)
Change in cumulative translation adjustment	$	(136	)	$	(136	)	$	12		$	13
Defined benefit pension and other postretirement benefit plans:
Amortization of unrecognized prior service credits included in net periodic costs ⁽¹⁾	(17		)	(11		)	(14		)	(8		)
Derivatives and hedging:⁽²⁾
Unrealized gain (loss)	63			39			9			6
Reclassification adjustment for (gain) loss included in net income	35			22			(14		)	(9		)
Change in derivatives and hedging	98			61			(5		)	(3		)
Total other comprehensive income (loss)	$	(55	)	$	(86	)	$	(7	)	$	2


⁽¹⁾	Included in the calculation of net periodic benefit costs for pension and other postretirement benefit plans. See Note 8, "Retirement Plans".


⁽²⁾	For additional information regarding the impact of reclassifications into earnings, refer to Note 7, "Derivatives".



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


13.	EARNINGS AND DIVIDENDS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share ("EPS") from continuing operations:



	Second Quarter				First Six Months
	2015		2014		2015		2014
(In millions, except per share amounts)
Numerator
Earnings attributable to Eastman:
Earnings from continuing operations, net of tax	$	297	$	290	$	468	$	523

Denominator
Weighted average shares used for basic EPS	148.6		149.5		148.6		150.4
Dilutive effect of stock options and other awards	1.2		1.8		1.2		1.8
Weighted average shares used for diluted EPS	149.8		151.3		149.8		152.2

EPS from continuing operations ⁽¹⁾
Basic	$	2.00	$	1.94	$	3.15	$	3.47
Diluted	$	1.98	$	1.92	$	3.12	$	3.43


⁽¹⁾	Earnings per share are calculated using whole dollars and shares.

In second quarter and first six months 2015, common shares underlying options to purchase 619,418 and 272,143 shares, respectively, of common stock were excluded from the shares treated as outstanding for computation of diluted earnings per share because the total market value of option exercises for these awards was less than the total cash proceeds that would be received for these exercises. Second quarter and first six months 2015 reflect the impact of share repurchases of 65,000 and 435,000, respectively.

In both second quarter and first six months 2014, common shares underlying options to purchase 210,143 shares of common stock were excluded from the shares treated as outstanding for computation of diluted earnings per share because the total market value of option exercises for these awards was less than the total cash proceeds that would be received for these exercises. Second quarter and first six months 2014 reflect the impact of share repurchases of 1,153,784 and 4,326,556 shares, respectively.

The Company declared cash dividends of $0.40 and $0.35 per share in second quarter 2015 and 2014, respectively, and $0.80 and $0.70 per share in first six months 2015 and 2014, respectively.


14.	ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES (GAINS), NET

In first six months 2015 there were net asset impairments and restructuring charges of $109 million.

During second quarter 2015, net asset impairments and restructuring charges of $7 million consisted of restructuring charges, primarily for dismantlement related to the closure of the Workington, UK acetate tow manufacturing facility. The charges were offset by a pension curtailment gain of $7 million as a result of the Workington, UK acetate tow facility closure.

In first six months 2015, net asset impairments and restructuring charges included $81 million of asset impairments and $14 million of restructuring charges, including severance, in the Fibers segment due to the closure of the Workington, UK acetate tow manufacturing facility which is expected to be substantially completed in 2015. Additionally, in first six months 2015, management decided not to continue a growth initiative that was reported in "Other". This resulted in the Company recognizing asset impairments of $8 million and restructuring charges of $4 million.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

During second quarter 2014, the Company recognized gains from the sales of previously impaired assets at the former Photovoltaics production facility in Germany and a former polymers production facility in China of $5 million and $2 million, respectively.

In first six months 2014, charges consisted of $8 million of asset impairments, including intangible assets, and $2 million of restructuring charges in the AM segment primarily due to the closure of a production facility in Taiwan for the Flexvue^® product line. First six months 2014 also included $3 million of restructuring charges for severance associated with the continued integration of Solutia.

Changes in Reserves for Asset Impairments, Restructuring Charges, Net, and Severance Charges

The following table summarizes the changes in asset impairments and restructuring charges and gains, the non-cash reductions attributable to asset impairments, and the cash reductions in restructuring reserves for severance costs and site closure costs paid for first six months 2015 and full year 2014:



(Dollars in millions)	Balance at January 1, 2015		Provision/ Adjustments		Non-cash Reductions			Cash Reductions			Balance at June 30, 2015
Non-cash charges	$	—	$	89	$	(89	)	$	—		$	—
Severance costs	13		12		1			(16		)	10
Site closure and restructuring costs	15		8		1			(10		)	14
Total	$	28	$	109	$	(87	)	$	(26	)	$	24



(Dollars in millions)	Balance at January 1, 2014		Provision/ Adjustments		Non-cash Reductions			Cash Reductions			Balance at December 31, 2014
Non-cash charges	$	—	$	52	$	(52	)	$	—		$	—
Severance costs	22		13		—			(22		)	13
Site closure and restructuring costs	14		12		(4		)	(7		)	15
Total	$	36	$	77	$	(56	)	$	(29	)	$	28

Substantially all costs remaining for severance are expected to be applied to the reserves within one year.


15.	SHARE-BASED COMPENSATION AWARDS

The Company utilizes share-based awards under employee and non-employee director compensation programs. These share-based awards may include restricted and unrestricted stock, restricted stock units, stock options, and performance shares. In second quarter 2015 and 2014, $10 million and $8 million, respectively, of compensation expense before tax were recognized in selling, general and administrative expense in the Unaudited Consolidated Statements of Earnings for all share-based awards. The impact on second quarter 2015 and 2014 net earnings of $6 million and $5 million, respectively, is net of deferred tax expense related to share-based award compensation for each period.

In first six months 2015 and 2014, approximately $21 million and $17 million, respectively, of compensation expense before tax were recognized in selling, general and administrative expense in the Unaudited Consolidated Statements of Earnings for all share-based awards. The impact on first six months 2015 and 2014 net earnings of approximately $13 million and $10 million, respectively, is net of deferred tax expense related to share-based award compensation for each period.

For additional information regarding share-based compensation plans and awards, see Note 18, "Share-Based Compensation Plans and Awards", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


16.	SUPPLEMENTAL CASH FLOW INFORMATION

Included in the line item "Other items, net" of the "Operating activities" section of the Unaudited Consolidated Statements of Cash Flows are the following changes to Unaudited Consolidated Statement of Financial Position line items:



(Dollars in millions)	First Six Months
	2015			2014
Other current assets	$	15		$	21
Other noncurrent assets	17			16
Payables and other current liabilities	139			(28		)
Long-term liabilities and equity	(76		)	(42		)
Total	$	95		$	(33	)

The above changes resulted primarily from accrued taxes, deferred taxes, environmental liabilities, monetized positions from raw material and energy, currency, and certain interest rate hedges, prepaid insurance, miscellaneous deferrals, value-added taxes, and other miscellaneous accruals.


17.	SEGMENT INFORMATION

The Company's products and operations are currently managed and reported in five operating segments: Additives & Functional Products ("AFP"), Adhesives & Plasticizers ("A&P"), Advanced Materials ("AM"), Fibers, and Specialty Fluids & Intermediates ("SFI"). For additional financial and product information concerning each segment, see Note 20, "Segment Information", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K.

Second quarter and first six months 2015 included sales revenue from the acquired Taminco businesses reported in the AFP and SFI segments, sales revenue from the acquired Commonwealth business reported in the AM segment, sales revenue from the acquired aviation turbine oil business reported in the SFI segment, and sales revenue from the acquired Knowlton Technologies, LLC, part of the Eastman™ microfibers technology platform, reported in "Other".



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



	Second Quarter
(Dollars in millions)	2015		2014
Sales
Additives & Functional Products	$	616	$	452
Adhesives & Plasticizers	317		358
Advanced Materials	647		631
Fibers	299		386
Specialty Fluids & Intermediates	642		633
Total Sales by Segment	2,521		2,460
Other	12		—
Total Sales	$	2,533	$	2,460

	First Six Months
(Dollars in millions)	2015		2014
Sales
Additives & Functional Products	$	1,225	$	875
Adhesives & Plasticizers	637		703
Advanced Materials	1,208		1,212
Fibers	583		740
Specialty Fluids & Intermediates	1,299		1,234
Total Sales by Segment	4,952		4,764
Other	24		1
Total Sales	$	4,976	$	4,765



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



	Second Quarter
(Dollars in millions)	2015			2014
Operating Earnings (Loss)
Additives & Functional Products	$	119		$	105
Adhesives & Plasticizers	63			56
Advanced Materials	135			80
Fibers	93			123
Specialty Fluids & Intermediates	83			94
Total Operating Earnings by Segment	493			458
Other
Growth initiatives and businesses not allocated to segments	(22		)	(15		)
Pension and other postretirement benefit income (expense), net not allocated to operating segments	8			3
Acquisition integration, transaction, and restructuring costs	(10		)	(10		)
Total Operating Earnings	$	469		$	436


	First Six Months
(Dollars in millions)	2015			2014
Operating Earnings (Loss)
Additives & Functional Products	$	239		$	199
Adhesives & Plasticizers	116			103
Advanced Materials	203			141
Fibers	86			240
Specialty Fluids & Intermediates	185			158
Total Operating Earnings by Segment	829			841
Other
Growth initiatives and businesses not allocated to segments	(48		)	(28		)
Pension and other postretirement benefit income (expense), net not allocated to operating segments	17			6
Acquisition integration, transaction, and restructuring costs	(18		)	(22		)
Total Operating Earnings	$	780		$	797



	June 30,		December 31,
(Dollars in millions)	2015		2014
Assets by Segment ⁽¹⁾
Additives & Functional Products	$	4,843	$	4,900
Adhesives & Plasticizers	965		1,011
Advanced Materials	4,259		4,235
Fibers	973		986
Specialty Fluids & Intermediates	3,606		3,710
Total Assets by Segment	14,646		14,842
Corporate Assets	1,240		1,230
Total Assets	$	15,886	$	16,072


⁽¹⁾	The chief operating decision maker holds segment management accountable for accounts receivable, inventory, fixed assets, goodwill, and intangible assets.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


18.	RECENTLY ISSUED ACCOUNTING STANDARDS

In May 2014, the Financial Accounting Standards Board ("FASB") and International Accounting Standards Board jointly issued new principles-based accounting guidance for revenue recognition that will supersede virtually all existing revenue guidance. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. To achieve the core principle, the guidance establishes the following five steps: 1) identify the contract(s) with a customer, 2) identify the performance obligation in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also details the accounting treatment for costs to obtain or fulfill a contract. Lastly, disclosure requirements have been enhanced to provide sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB decided to delay the effective date of the new revenue standard by one year. The deferral results in the new revenue standard being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early application is permitted under the original effective date of fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company is currently evaluating the impact on the Company's financial position or results of operations and related disclosures.

In April 2015, the FASB issued new guidance for debt issuance costs as a part of the simplification and productivity initiative. Under this guidance debt issuance costs will be presented as a direct reduction from the carrying amount of the debt liability, consistent with the presentation of debt discounts. The amortization of debt issuance costs will be reported as interest expense. The recognition and measurement guidance for debt issuance costs is not affected by the amendment. The new guidance is to be applied on a retrospective basis and reported as a change in an accounting principle. This guidance is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early adoption is permitted for financial statements that have not been previously issued. The Company is currently evaluating changes in its accounting required by this new guidance and the impact to the Company's financial position, results of operations and related disclosures.

In April 2015, the FASB issued new guidance for cloud computing arrangement fees, also as a part of the simplification and productivity initiative. The guidance establishes a new requirement to determine if cloud computing arrangements includes a software license. If an arrangement is deemed to include a software license then the customer would account for the license as any other purchased software, capitalized and depreciated over the life of the contract. If an arrangement is deemed not to include a license, the agreement would be accounted for as a service contract. This guidance is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period and early adoption is permitted. The Company is currently evaluating changes in its accounting required by this new guidance and the impact to the Company's financial position, results of operations and related disclosures.



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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



ITEM	Page

Critical Accounting Estimates	32

Non-GAAP Financial Measures	33

Overview	35

Results of Operations	36

Summary by Operating Segment	40

Summary by Customer Location	45

Liquidity, Capital Resources, and Other Financial Information	46

Recently Issued Accounting Standards	50

2015 Outlook	50

Risk Factors	51

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is based upon the consolidated financial statements of Eastman Chemical Company ("Eastman" or the "Company"), which have been prepared in accordance with accounting principles generally accepted ("GAAP") in the United States, and should be read in conjunction with the Company's audited consolidated financial statements, including related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's 2014 Annual Report on Form 10-K, and the Company's unaudited consolidated financial statements, including related notes, included elsewhere in this Quarterly Report on Form 10-Q. All references to earnings per share ("EPS") contained in this report are diluted earnings per share unless otherwise noted.

On December 5, 2014, Eastman Chemical Company completed its acquisition of Taminco Corporation ("Taminco"), a global specialty chemical company. The fair value of total consideration transferred was $2.8 billion, consisting of cash of $1.7 billion, net of cash acquired, and repayment of Taminco's debt of $1.1 billion. The acquisition was accounted for as a business combination. Taminco's former specialty amines and crop protection businesses are managed and reported as part of the Additives & Functional Products segment and its former functional amines business are managed and reported as part of the Specialty Fluids & Intermediates ("SFI") segment. Certain pro forma combined financial information giving effect to the Taminco acquisition is presented in Exhibit 99.01 to the Quarterly Report on Form 10-Q for first quarter 2015 and in the Current Report on Form 8-K/A filed with the SEC on February 19, 2015.

On December 11, 2014, the Company acquired Commonwealth Laminating & Coating, Inc. ("Commonwealth") for a total purchase price of $438 million including the repayment of debt. The acquisition was accounted for as a business combination and the acquired Commonwealth business is managed and reported in the Advanced Materials segment.

On June 2, 2014, the Company acquired BP plc's global aviation turbine engine oil business ("aviation turbine oil business") for a total cash purchase price of $283 million. The acquisition was accounted for as a business combination and the acquired aviation turbine oil business is managed and reported in the SFI segment.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

On August 6, 2014, the Company acquired Knowlton Technologies, LLC ("Knowlton"), for a total cash purchase price of $42 million. The acquisition was accounted for as a business combination. The acquired Knowlton business is a developing business of the Eastman™ microfiber technology platform, the financial results of which are not identifiable to an operating segment and are shown as "other" operating earnings (loss).

CRITICAL ACCOUNTING ESTIMATES

In preparing the consolidated financial statements in conformity with GAAP, the Company's management must make decisions which impact the reported amounts and the related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and assumptions on which to base estimates and judgments that affect the reported amounts of assets, liabilities, sales revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to allowances for doubtful accounts, impairment of long-lived assets, environmental costs, pension and other postretirement benefits, litigation and contingent liabilities, income taxes, and purchase accounting. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company's management believes the critical accounting estimates described in Part II, Item 7 of the Company's 2014 Annual Report on Form 10-K, as updated and enhanced below, are the most important to the fair presentation of the Company's financial condition and results. These estimates require management's most significant judgments in the preparation of the Company's consolidated financial statements.

Impairment of Long-Lived Assets

The Company conducts testing of goodwill and indefinite-lived intangibles assets annually in third quarter of each year or when impairment indicators arise, whichever comes first.

Goodwill

The testing of goodwill is performed at the "reporting unit" level which the Company has determined to be its "components". Components are defined as one level below an operating segment, and in order to be a reporting unit, the component must 1) be a "business" as defined by applicable accounting standards (an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to the investors or other owners, member, or participants); 2) have discrete financial information available; and 3) be reviewed regularly by Company operating segment management. The Company aggregates certain components into reporting units based on economic similarities.

The Company uses an income approach and applies a fair value methodology based on discounted cash flows in testing the carrying value of goodwill for each reporting unit. The key assumptions and estimates used in the Company's 2014 goodwill impairment testing included projections of revenues, expenses, and cash flows determined using the Company’ s annual multi-year strategic plan, the estimated discount rate, the estimated tax rate, and a projected long-term growth rate. The Company believes these assumptions are consistent with those a hypothetical market participant would use given circumstances that were present at the time the estimates were made. However, actual results and amounts may be significantly different from the Company's estimates. In addition, the use of different estimates or assumptions could result in materially different determinations. In order to determine the discount rate, the Company uses a market perspective weighted average cost of capital ("WACC") approach. The WACC is calculated incorporating weighted average returns on debt and equity from market participants. Therefore, changes in the market, which are beyond the control of the Company, may have an impact on future calculations of estimated fair value.

If the estimated fair value of a reporting unit is determined to be less than the carrying value of the net assets of the reporting unit including goodwill, additional steps, including an allocation of the estimated fair value to the assets and liabilities of the reporting unit, would be necessary to determine the amount, if any, of goodwill impairment.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

As a result of the tests performed during third quarter 2014, there was no impairment of the Company's goodwill. Fair values substantially exceeded the carrying values for each reporting unit tested, except for the specialty fluids reporting unit (a part of the Specialty Fluids and Intermediates operating segment as described in the “Business” section) which had an estimated fair value that approximated it carrying value including goodwill. As of December 31, 2014, goodwill of $545 million is allocated to the specialty fluids reporting unit.

Cash flows from the specialty fluids reporting unit are susceptible to changes in demand due to cyclicality and timing of customer project completions primarily in the industrial and solar markets. Weakened demand has caused lower sales volume for specialty fluids products in recent periods, and further delay in the timing of customer project completions or slower overall growth in these markets could decrease the estimated fair value of the specialty fluids reporting unit. Two of the most critical assumptions used in the calculation of the fair value of the specialty fluids reporting unit are the target market long-term growth rate and the discount rate. The Company performed a sensitivity analysis on both of those assumptions. The fair value was 13 percent less than the carrying value with a one percent decrease in the target market long-term growth rate and 16 percent less than the carrying value with a one percent increase in the discount rate. In first six months 2015, the business has shown improvements from expectations. Although we believe our estimate of fair value is reasonable, if the specialty fluids reporting unit’s financial performance falls below our expectations or there are negative revisions to key assumptions, we may be required to recognize an impairment charge.

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures, and the accompanying reconciliations of the non-GAAP financial measures to the most comparable GAAP measures, are presented in "Overview", "Results of Operations", and "Summary by Operating Segment" in this MD&A.

Company Use of Non-GAAP Financial Measures

In addition to evaluating the Company's financial condition, results of operations, liquidity, and cash flows as reported in accordance with GAAP, Eastman management also evaluates Company and operating segment performance, and makes resource allocation and performance evaluation decisions, excluding the effect of transactions, costs, and losses or gains that do not directly arise from Eastman's normal, or "core", business and operations, or are otherwise of an unusual or non-recurring nature. These transactions, costs, and losses or gains relate to, among other things, cost reduction, growth and profitability improvement initiatives, and other events outside of core business operations (such as mark-to-market ("MTM") losses or gains for pension and other postretirement benefit plans, typically in the fourth quarter of each year and any other quarters in which an interim remeasurement is triggered). Because non-core or non-recurring transactions, costs, and losses or gains may materially affect the Company's, or any particular operating segment's, financial condition or results in a specific period in which they are recognized, Eastman believes it is appropriate to evaluate both the financial measures prepared and calculated in accordance with GAAP and the related non-GAAP financial measures excluding the effect on our results of these non-core or non-recurring items. In addition to using such measures to evaluate results in a specific period, management evaluates such non-GAAP measures, and believes that investors may also evaluate such measures, because such measures may provide more complete and consistent comparisons of the Company's, and its segments', operational performance on a period-over-period historical basis and, as a result, provide a better indication of expected future trends. Management discloses these non-GAAP measures, and the related reconciliations to the most comparable GAAP financial measures, because it believes investors use these metrics in evaluating longer term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess the Company's, and its operating segments', performance, make resource allocation decisions and evaluate organizational and individual performance in determining certain performance-based compensation. Non-GAAP measures do not have definitions under GAAP, and may be defined differently by, and not be comparable to, similarly titled measures used by other companies. As a result, management cautions investors not to place undue reliance on any non-GAAP measure, but to consider such measures with the most directly comparable GAAP measure.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Non-GAAP Measures in this Quarterly Report

The following non-core items are excluded by management in its evaluation of certain results in this Quarterly Report:


•	Asset impairments and restructuring charges (gains), net, of which asset impairments are non-cash transactions impacting profitability;


•	Costs resulting from the sale of acquired inventories at fair value, net of the last-in, first-out ("LIFO") impact for certain of these inventories (as required by purchase accounting, these inventories were marked to fair value);


•	Acquisition integration and transaction costs; and


•	MTM pension and other postretirement benefit plans loss due to an interim remeasurement of the Workington, UK pension plan obligation triggered by the closure of the Workington, UK acetate tow manufacturing facility.

in each case for the periods and in the amounts in the table below.

Non - GAAP Financial Measures -- Excluded Non-Core Items



	Second Quarter					First Six Months
(Dollars in millions)	2015		2014			2015		2014
Non-core items impacting operating earnings:
Asset impairments and restructuring charges (gains), net ⁽¹⁾	$	0	$	(7	)	$	109	$	6
Acquisition integration and transaction costs		9	10			17		19
Additional costs of acquired inventories		—	2			7		2
Mark-to-market pension and other postretirement benefits loss		2	—			2		—


⁽¹⁾	See Results of Operations - Earnings from Continuing Operations and Diluted Earnings per Share for additional item excluded only from earnings per share.

This MD&A includes the effect of the foregoing on the following financial measures:


•	Gross profit,


•	Selling, general, and administrative ("SG&A") expenses,


•	Operating earnings,


•	Earnings from continuing operations, and


•	Diluted earnings per share.

Other Non-GAAP Financial Measures

Alternative Non-GAAP Cash Flow Measures

In addition to the non-GAAP measures presented in this Quarterly Report and other periodic reports, from time to time management evaluates and discloses to investors and securities analysts the non-GAAP measure cash provided by operating activities excluding certain non-core or non-recurring items ("cash provided by operating activities, as adjusted") when analyzing, among other things, business performance, liquidity and financial position, and performance-based compensation. Eastman management uses this non-GAAP measure in conjunction with the GAAP measure cash provided by operating activities because it believes it is a more appropriate metric to evaluate the cash flows from Eastman's core operations that are available to grow the business and create stockholder value, and because it allows for a more consistent period-over-period presentation of such amounts. In its evaluation, Eastman management generally excludes the impact of certain non-core activities and decisions of management because such activities and decisions are not considered core, ongoing components of operations and the decisions to undertake or not to undertake such activities may be made irrespective of the cash generated from operations. From time to time, management discloses this non-GAAP measure and the related reconciliation to investors and securities analysts to allow them to better understand and evaluate the information used by management in its decision making processes and because management believes investors and securities analysts use similar measures to assess Company performance, liquidity, and financial position over multiple periods and to compare these with other companies.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Similarly, from time to time, Eastman may disclose to investors and securities analysts an alternative non-GAAP measure of "free cash flow", which management defines as cash provided by operating activities, as adjusted, described above, less the amount of capital expenditures. Management believes such items are generally funded from available cash and, as such, should be considered in determining free cash flow. Eastman management believes this is an appropriate metric to use to evaluate the Company's overall ability to generate cash to fund future operations, inorganic growth opportunities, and to meet the Company's debt repayment obligations. Management believes this metric is useful to investors and securities analysts in order to provide them with information similar to that used by management in evaluating potential future cash available for various initiatives and because management believes investors and securities analysts often use a similar measure of free cash flow to compare the results, and value, of comparable companies. In addition, Eastman may disclose to investors and securities analysts an alternative non-GAAP measure of "free cash flow yield", which management defines as free cash flow per outstanding share of common stock divided by per share stock price.

Alternative Non-GAAP Earnings Measures

From time to time, Eastman may disclose to investors and securities analysts the non-GAAP earnings measures "Adjusted EBITDA" and "Return on Invested Capital" (or "ROIC"). Management defines "Adjusted EBITDA" as "EBITDA" (net earnings or net earnings per share before interest, taxes, depreciation and amortization) adjusted to exclude the same non-core and non-recurring items as are excluded from the Company's other non-GAAP earnings measures for the same periods. "EBITDA Margin" is Adjusted EBITDA divided by the GAAP measure sales revenue in the Company's income statement for the same periods. Management defines "ROIC" as net income plus interest expense after tax divided by average total borrowings plus average stockholders' equity for the periods presented, each derived from the GAAP measures in the Company's financial statements for the periods presented. Management believes that Adjusted EBITDA and ROIC are useful as supplemental measures in evaluating the performance of and returns from Eastman's operating businesses, and from time to time uses such measures in internal performance calculations. Further, management understands that investors and securities analysts often use similar measures of Adjusted EBITDA and ROIC to compare the results, returns, and value, of the Company with those of other companies.

OVERVIEW

Eastman's businesses are managed and reported in five reporting segments: Additives & Functional Products ("AFP"), Adhesives & Plasticizers ("A&P"), Advanced Materials ("AM"), Fibers, and Specialty Fluids & Intermediates ("SFI"). Eastman management believes that the Company's end-market diversity is a source of strength, and that many of the markets into which the Company's products are sold are benefiting from longer-term global trends such as energy efficiency, a rising middle class in emerging economies, and an increased focus on health and wellness. Management believes that these trends, combined with the diversity of the Company's end markets, facilitate more consistent demand for the Company's products over time. The businesses acquired from Taminco are expected to provide additional opportunities for growth in agriculture, personal care, coatings, and oil and gas markets. Eastman is focused on consistent earnings growth through a market-driven approach that takes advantage of the Company's existing technology platforms, global market and manufacturing presence, and leading positions in key end markets.

As anticipated, the Company's second quarter and first six months 2015 sales revenue and operating results benefited from the 2014 acquisitions. The comparisons of sales revenues under "Results of Operations" and "Summary by Operating Segment" below include the contribution to revenue and earnings of businesses acquired in 2014.

The Company generated sales revenue of $2.53 billion and $2.46 billion in second quarter 2015 and 2014, respectively, and sales revenue of $5.0 billion and $4.8 billion in first six months 2015 and 2014, respectively. Sales revenue increased $73 million and $211 million in second quarter and first six months 2015 compared to second quarter and first six months 2014, respectively. Sales revenue increased primarily due to sales volume from the acquired businesses and higher AM and AFP segments sales volume, partially offset by lower selling prices, particularly in the SFI segment primarily due to lower raw material and energy costs, lower Fibers segment sales volume, and an unfavorable shift in foreign currency exchange rates.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Operating earnings were $469 million in second quarter 2015 compared with $436 million in second quarter 2014. Excluding the non-core items referenced in "Non-GAAP Financial Measures", operating earnings in second quarter 2015 and 2014 were $480 million and $441 million, respectively. Adjusted operating earnings increased in second quarter 2015 primarily due to improved spread as lower raw material and energy costs exceeded lower selling prices by $89 million and earnings from the acquired businesses. Adjusted operating earnings were negatively impacted $58 million by commodity hedges, particularly for propane, and by an unfavorable shift in foreign currency exchange rates of $27 million.

Operating earnings were $780 million in first six months 2015 compared with $797 million in first six months 2014. Excluding the non-core items referenced in "Non-GAAP Financial Measures", operating earnings in first six months 2015 and 2014 were $915 million and $824 million, respectively. Adjusted operating earnings increased in first six months 2015 primarily due to improved spread as lower raw material and energy costs exceeded lower selling prices by $149 million and earnings from the acquired businesses. Adjusted operating earnings were negatively impacted $80 million by commodity hedges, particularly for propane, and by an unfavorable shift in foreign currency exchange rates of $42 million.

Earnings and diluted earnings per share attributable to Eastman were as follows:



	Second Quarter
	2015				2014
(Dollars in millions, except diluted EPS)	$		EPS		$		EPS
Earnings from continuing operations, net of tax	$	297	$	1.98	$	290	$	1.92
Total non-core items	3		0.03		1		0.00
Earnings from continuing operations excluding non-core items, net of tax	$	300	$	2.01	$	291	$	1.92

	First Six Months
	2015				2014
(Dollars in millions, except diluted EPS)	$		EPS		$		EPS
Earnings from continuing operations, net of tax	$	468	$	3.12	$	523	$	3.43
Total non-core items	108		0.73		15		0.11
Earnings from continuing operations excluding non-core items, net of tax	$	576	$	3.85	$	538	$	3.54

The Company generated $682 million in cash from operating activities in first six months 2015 compared with cash generated by operating activities of $389 million in first six months 2014. The increase in cash from operating activities was primarily due to earnings and a lower than usual increase in working capital primarily due to the impact on inventory costs of the recent decline in raw material and energy costs.

RESULTS OF OPERATIONS



	Second Quarter									First Six Months
					Change									Change
(Dollars in millions)	2015		2014		$			%		2015		2014		$			%
Sales	$	2,533	$	2,460	$	73		3	%	$	4,976	$	4,765	$	211		4	%
Acquired business effect					364			15	%					752			16	%
Volume / product mix effect					(48		)	(2	)%					(114		)	(3	)%
Price effect					(173		)	(7	)%					(299		)	(6	)%
Exchange rate effect					(70		)	(3	)%					(128		)	(3	)%



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Sales revenue increased $73 million and $211 million in second quarter and first six months 2015 compared to second quarter and first six months 2014, respectively. Sales revenue increased primarily due to sales volume from the acquired businesses and higher AM and AFP segments sales volume, partially offset by lower selling prices, particularly in the SFI segment primarily due to lower raw material and energy costs, lower Fibers segment sales volume, and an unfavorable shift in foreign currency exchange rates.



	Second Quarter						First Six Months
(Dollars in millions)	2015		2014		Change		2015		2014		Change
Gross Profit	$	720	$	657	10	%	$	1,376	$	1,252	10	%
Additional costs of acquired inventories	—		2				7		2
Mark-to-market pension and other postretirement benefits loss	2		—				2		—
Gross Profit excluding non-core items	$	722	$	659	10	%	$	1,385	$	1,254	10	%

Gross profit increased in second quarter 2015 compared with second quarter 2014, primarily due to gross profit from improved spread as lower raw material and energy costs exceeded lower selling prices by $89 million and from the acquired businesses. Gross profit was negatively impacted $58 million by commodity hedges, particularly for propane, and by an unfavorable shift in foreign currency exchange rates of $32 million.

Gross profit increased in first six months 2015 compared to first six months 2014 primarily due to gross profit from the acquired businesses, and improved spread as lower raw material and energy costs exceeded lower selling prices by $149 million. Gross profit was negatively impacted $80 million by commodity hedges, particularly for propane, and by an unfavorable shift in foreign currency exchange rates of $51 million.

Gross profit in second quarter and first six months 2015 included $2 million MTM loss in the Fibers segment due to the interim remeasurement of the Workington, UK pension plan, triggered by the closure of the Workington, UK acetate tow manufacturing facility.



	Second Quarter								First Six Months
(Dollars in millions)	2015			2014			Change		2015			2014			Change
Selling, General and Administrative Expenses	$	194		$	172		13	%	$	374		$	340		10	%
Acquisition integration and transaction costs	(9		)	(10		)			(17		)	(19		)
Selling, General, and Administrative Expenses excluding non-core items	$	185		$	162		14	%	$	357		$	321		11	%

SG&A expenses in second quarter and first six months 2015 were higher compared to second quarter and first six months 2014. Excluding non-core items, SG&A expenses were higher primarily due to SG&A expenses of acquired businesses.



	Second Quarter						First Six Months
(Dollars in millions)	2015		2014		Change		2015		2014		Change
Research and Development Expenses	$	57	$	56	2	%	$	113	$	109	4	%

R&D expenses were slightly higher in second quarter and first six months 2015 compared to second quarter and first six months 2014 primarily due to R&D expenses of acquired businesses.

Asset Impairments and Restructuring Charges (Gains), Net

In first six months 2015 there were net asset impairments and restructuring charges of $109 million.



Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

In first six months 2015, net asset impairments and restructuring charges included $81 million of asset impairments and $14 million of restructuring charges, including severance, in the Fibers segment due to the closure of the Workington, UK acetate tow manufacturing facility which is expected to be substantially completed in 2015. Management anticipates annual cost savings in the Fibers segment of approximately $20 million, primarily cost of sales, to be realized beginning upon completion of the closure. Additionally, in first six months 2015, management decided not to continue a growth initiative that was reported in "Other". This resulted in the Company recognizing asset impairments of $8 million and restructuring charges of $4 million.

During second quarter 2014, the Company recognized gains from the sale of previously impaired assets at the former Photovoltaics production facility in Germany and a former polymers production facility in China of $5 million and $2 million, respectively.

In first six months 2014, charges consisted of $8 million of asset impairments, including intangible assets, and $2 million of restructuring charges in the AM segment primarily due to the closure of a production facility in Taiwan for the Flexvue^®product line. First six months 2014 also included $3 million of restructuring charges for severance associated with the continued integration of Solutia.

For more information regarding asset impairments and restructuring charges and gains see Note 14, "Asset Impairments and Restructuring Charges (Gains), Net", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Operating Earnings



	Second Quarter							First Six Months
(Dollars in millions)	2015		2014			Change		2015		2014		Change
Operating earnings	$	469	$	436		8	%	$	780	$	797	(2	)%
Asset impairments and restructuring charges (gains), net	—		(7		)			109		6
Acquisition integration and transaction costs	9		10					17		19
Additional costs of acquired inventories	—		2					7		2
Mark-to-market pension and other postretirement benefits loss	2		—					2		—
Operating earnings excluding non-core items	$	480	$	441		9	%	$	915	$	824	11	%

Net Interest Expense



	Second Quarter						First Six Months
(Dollars in millions)	2015		2014		Change		2015		2014		Change
Gross interest costs	$	72	$	50			$	144	$	97
Less: Capitalized interest	2		2				4		4
Interest expense	70		48		46	%	140		93		51	%
Interest income	4		3				8		6
Net interest expense	$	66	$	45	47	%	$	132	$	87	52	%

Net interest expense increased $21 million in second quarter 2015 compared to second quarter 2014 and increased $45 million in first six months 2015 compared to first six months 2014, primarily due to interest on the additional $3 billion of debt incurred in fourth quarter 2014 to finance the Taminco acquisition and on the additional $500 million of debt incurred in May 2014.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Other Charges (Income), Net



	Second Quarter						First Six Months
(Dollars in millions)	2015			2014			2015			2014
Foreign exchange transaction (gains) losses, net	$	3		$	—		$	(5	)	$	—
(Income) loss from equity investments and other investment (gains) losses, net	(4		)	(2		)	(8		)	(5		)
Other, net	2			(6		)	3			(6		)
Other charges (income), net	$	1		$	(8	)	$	(10	)	$	(11	)

Included in other charges (income), net are gains or losses on foreign exchange transactions, equity investments, business venture investments, non-operating assets, and in second quarter 2014 certain litigation costs and earnings. Included in "Foreign exchange transaction (gains) losses, net" are gains from the revaluation of foreign entity assets and liabilities partially offset by losses from certain derivatives. See Note 7, "Derivatives", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Provision for Income Taxes



	Second Quarter						First Six Months
(Dollars in millions)	2015			2014			2015			2014
Provision for income taxes, as reported	$	104		$	107		$	188		$	195
Effective tax rate	26		%	27		%	29		%	27		%

The second quarter 2015 effective tax rate included $6 million benefit from the settlement of non-U.S. income tax audits. The first six months 2015 effective tax rate was negatively impacted by an unfavorable foreign rate variance due to increased earnings in higher-tax jurisdictions. Excluding non-core items, the second quarter and first six months 2015 effective tax rates on reported earnings were 27 percent.



Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Earnings from Continuing Operations and Diluted Earnings per Share



	Second Quarter
	2015						2014
(Dollars in millions, except diluted EPS)	$			EPS			$			EPS
Earnings from continuing operations, net of tax	$	297		$	1.98		$	290		$	1.92
Asset impairments and restructuring charges (gains), net of tax ⁽¹⁾	(4		)	(0.02		)	(6		)	(0.04		)
Acquisition integration and transaction costs, net of tax	6			0.04			6			0.04
Additional costs of acquired inventories, net of tax	—			—			1			—
Mark-to-market pension and other post-employment benefits loss, net of tax	1			0.01			—			—
Earnings from continuing operations excluding non-core items, net of tax	$	300		$	2.01		$	291		$	1.92
⁽¹⁾ Second quarter 2015 tax adjustment related to Workington, UK acetate tow facility closure.
	First Six Months
	2015						2014
(Dollars in millions, except diluted EPS)	$			EPS			$			EPS
Earnings from continuing operations, net of tax	$	468		$	3.12		$	523		$	3.43
Asset impairments and restructuring charges (gains), net of tax	92			0.62			3			0.02
Acquisition transaction and integration costs, net of tax	11			0.07			11			0.08
Additional costs of acquired inventories, net of tax	4			0.03			1			0.01
Mark-to-market pension and other post-employment benefits loss, net of tax	1			0.01			—			—
Earnings from continuing operations excluding non-core items, net of tax	$	576		$	3.85		$	538		$	3.54

SUMMARY BY OPERATING SEGMENT

Eastman has five reporting segments: Additives & Functional Products ("AFP"), Adhesives & Plasticizers ("A&P"), Advanced Materials ("AM"), Fibers, and Specialty Fluids & Intermediates ("SFI"). For additional financial and product information for each segment, see Part 1, Item 1, Business -- Business Segments and Part II, Item 8, Note 20, "Segment Information", in the Company's 2014 Annual Report on Form 10-K.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Additives & Functional Products Segment



	Second Quarter										First Six Months
						Change										Change
(Dollars in millions)	2015		2014			$			%		2015		2014			$			%

Sales	$	616	$	452		$	164		36	%	$	1,225	$	875		$	350		40	%
Acquired business effect						191			42	%						401			46	%
Volume / product mix effect						22			5	%						23			3	%
Price effect						(33		)	(7	)%						(43		)	(5	)%
Exchange rate effect						(16		)	(4	)%						(31		)	(4	)%

Operating earnings	119		105			14			13	%	239		199			40			20	%
Asset impairments and restructuring charges (gains), net	—		(2		)	2					—		(2		)	2
Operating earnings excluding non-core items	119		103			16			16	%	239		197			42			21	%

Sales revenue in second quarter and first six months 2015 increased compared to second quarter and first six months 2014, primarily due to sales of products of the acquired Taminco specialty amines and crop protection businesses, and higher coatings products sales volume attributed to demand in key end-markets including transportation and building and construction. These items were partially offset by lower coatings and other formulated products selling prices due to lower raw material and energy costs and an unfavorable shift in foreign currency exchange rates.

Operating earnings increased in second quarter and first six months 2015 compared to second quarter and first six months 2014 primarily as a result of earnings of the acquired Taminco specialty amines and crop protection businesses, and improved spread as lower raw material and energy costs exceeded lower coatings and other formulated products selling prices by $15 million and $17 million, respectively, partially offset by $12 million and $17 million, respectively, negative impact of commodity hedges, primarily for propane, and an unfavorable shift in foreign currency exchange rates of $5 million and $9 million, respectively.

Adhesives & Plasticizers Segment



	Second Quarter									First Six Months
					Change									Change
(Dollars in millions)	2015		2014		$			%		2015		2014		$			%

Sales	$	317	$	358	$	(41	)	(11	)%	$	637	$	703	$	(66	)	(9	)%
Volume / product mix effect					(9		)	(2	)%					(13		)	(2	)%
Price effect					(18		)	(5	)%					(26		)	(3	)%
Exchange rate effect					(14		)	(4	)%					(27		)	(4	)%

Operating earnings	63		56		7			13	%	116		103		13			13	%

Sales revenue in second quarter and first six months 2015 decreased compared to second quarter 2014 and first six months 2014 primarily due to lower plasticizers products selling prices and an unfavorable shift in foreign currency exchange rates. Lower plasticizers products selling prices were primarily in response to lower raw material and energy costs and continued competitive pressures resulting from weakened demand in Asia Pacific and Europe.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Operating earnings increased in second quarter and first six months 2015 compared to second quarter and first six months 2014, primarily due to $31 million and $47 million, respectively, of lower raw material and energy costs and lower plasticizers products selling prices partially offset by slightly higher adhesives resins products selling prices. The higher adhesives resins products selling prices were attributed to demand in packaging and hygiene markets and constrained industry supply due to limited raw material availability. This was partially offset by higher operating costs of $8 million and $7 million, respectively, an unfavorable shift in foreign currency exchange rates of $7 million and $11 million, respectively, and the negative impact of commodity hedges, primarily for propane, of $6 million and $8 million, respectively.

Advanced Materials Segment



	Second Quarter									First Six Months
					Change									Change
(Dollars in millions)	2015		2014		$			%		2015		2014		$			%

Sales	$	647	$	631	$	16		3	%	$	1,208	$	1,212	$	(4	)	—	%
Acquired business effect					36			6	%					66			6	%
Volume / product mix effect					35			6	%					25			2	%
Price effect					(27		)	(4	)%					(44		)	(4	)%
Exchange rate effect					(28		)	(5	)%					(51		)	(4	)%

Operating earnings	135		80		55			69	%	203		141		62			44	%
Additional costs of acquired inventories	—		—		—					7		—		7
Asset impairments and restructuring charges (gains), net	—		—		—					—		10		(10		)
Operating earnings excluding non-core items	135		80		55			69	%	210		151		59			39	%

Sales revenue in second quarter 2015 increased compared to second quarter 2014 due to higher sales volume across the segment including Eastman Tritan™ copolyester and interlayers with acoustic properties, and sales of products of the acquired Commonwealth performance films business, partially offset by an unfavorable shift in foreign currency exchange rates and lower selling prices primarily for copolyesters due to lower raw material and energy costs.

Sales revenue in first six months 2015 decreased compared to first six months 2014 as sales of products of the acquired Commonwealth business and higher sales volume were more than offset by an unfavorable shift in foreign currency exchange rates and lower selling prices primarily for copolyesters due to lower raw material and energy costs.

Operating earnings in first six months 2015 included additional costs of acquired Commonwealth inventories of $7 million. Operating earnings in first six months 2014 included asset impairment and restructuring charges of $10 million primarily for the closure of a Flexvue^®production facility. Excluding these non-core items, operating earnings in second quarter and first six months 2015 increased compared to second quarter and first six months 2014 primarily due to higher sales volume and resulting higher capacity utilization which led to $26 million and $33 million, respectively, in lower unit costs and improved product mix, especially of Eastman Tritan™ copolyester and interlayers with acoustic properties. Operating earnings also benefited from earnings from the acquired business and improved spread as lower raw material and energy costs exceeded lower selling prices by $15 million and $14 million, respectively. These items were partially offset by an unfavorable shift in foreign currency exchange rates of $10 million and $15 million, respectively.



Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Fibers Segment



	Second Quarter										First Six Months
						Change									Change
(Dollars in millions)	2015			2014		$			%		2015		2014		$			%

Sales	$	299		$	386	$	(87	)	(23	)%	$	583	$	740	$	(157	)	(21	)%
Volume / product mix effect						(84		)	(22	)%					(157		)	(21	)%
Price effect						(1		)	—	%					3			—	%
Exchange rate effect						(2		)	(1	)%					(3		)	—	%

Operating earnings	93			123		(30		)	(24	)%	86		240		(154		)	(64	)%
Asset impairments and restructuring charges (gains), net	(2		)	—		(2		)			95		—		95
Operating earnings excluding non-core items	91			123		(32		)	(26	)%	181		240		(59		)	(25	)%

Sales revenue in second quarter and first six months 2015 decreased compared to second quarter and first six months 2014, primarily due to lower acetate tow and acetyl chemicals sales volume attributed to customer inventory destocking.

Operating earnings in second quarter and first six months 2015 decreased compared to second quarter and first six months 2014. Excluding non-core items, operating earnings decreased in second quarter and first six months 2015 compared to second quarter and first six months 2014 primarily due to lower acetate tow sales volume.

As a result of acetate tow market conditions, including additional industry capacity, management decided in first quarter 2015 to close its Workington, UK acetate tow manufacturing site resulting in $95 million of asset impairments and restructuring charges. Site closure is expected to be substantially completed in 2015. Management anticipates annual cost savings of approximately $20 million, primarily cost of sales, to be realized beginning upon completion of the closure. The Workington site has 24,000 metric tons of acetate tow manufacturing capacity.



Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Specialty Fluids & Intermediates Segment



	Second Quarter									First Six Months
					Change									Change
(Dollars in millions)	2015		2014		$			%		2015		2014		$			%

Sales	$	642	$	633	$	9		1	%	$	1,299	$	1,234	$	65		5	%
Acquired business effect					126			20	%					263			21	%
Volume / product mix effect					(13		)	(2	)%					7			—	%
Price effect					(94		)	(15	)%					(189		)	(15	)%
Exchange rate effect					(10		)	(2	)%					(16		)	(1	)%

Operating earnings	83		94		(11		)	(12	)%	185		158		27			17	%
Additional costs of acquired inventories	—		2		(2		)			—		2		(2		)
Operating earnings excluding non-core items	83		96		(13		)	(14	)%	185		160		25			16	%

Sales revenue in second quarter and first six months 2015 increased compared to second quarter and first six months 2014, primarily due to sales of products of the acquired Taminco functional amines and aviation turbine oil businesses, mostly offset by lower olefin-based intermediates selling prices. The lower selling prices were primarily in response to lower raw material and energy costs.

Operating earnings in second quarter 2015 decreased compared to second quarter 2014. Excluding non-core items, operating earnings decreased in second quarter 2015 primarily due to earnings from acquired businesses being more than offset by the $35 million negative impact of commodity hedges, primarily for propane.

Operating earnings increased in first six months 2015 compared to first six months 2014. Excluding non-core items, operating earnings increased in first six months 2015 primarily due to improved spread as lower raw material and energy costs exceeded lower selling prices by $50 million and earnings from the acquired businesses, partially offset $50 million by the negative impact of commodity hedges, primarily for propane, and by an unfavorable shift in foreign currency exchange rates of $7 million.



Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Other



	Second Quarter						First Six Months
(Dollars in millions)	2015			2014			2015			2014

Sales	$	12		$	—		$	24		$	1

Operating loss
Growth initiatives and businesses not allocated to segments	$	(22	)	$	(15	)	$	(48	)	$	(28	)
Pension and other postretirement benefit income (expense), net not allocated to operating segments	8			3			17			6
Acquisition integration, transaction, and restructuring costs	(10		)	(10		)	(18		)	(22		)
Operating loss before exclusions	(24		)	(22		)	(49		)	(44		)
Acquisition integration and transaction costs	9			10			17			19
Mark-to-market pension and other postretirement benefits loss	2			—			2			—
Asset impairments and restructuring charges (gains), net	2			(5		)	14			(2		)
Operating loss excluding non-core items	$	(11	)	$	(17	)	$	(16	)	$	(27	)

Sales revenue and costs related to growth initiatives, certain components of pension and other postretirement benefits, and other expenses and income not identifiable to an operating segment are not included in segment operating results for any of the periods presented and are shown as "other" sales revenue and "other" operating earnings (loss). Sales revenue in second quarter and first six months 2015 increased compared to second quarter and first six months 2014, primarily due to sales of products of the acquired Knowlton business, part of the Eastman™ microfiber technology platform.

Included in second quarter and first six months 2015 operating losses are integration and transaction costs of $9 million and $17 million, respectively primarily for the acquired Taminco and Commonwealth businesses. Included in first six months 2015 operating losses are $12 million of asset impairments and restructuring charges resulting from management's decision not to continue a growth initiative.

Operating losses for second quarter 2014 included a gain from the sale of previously impaired assets at the former Photovoltaics production facility in Germany of $5 million. Included in second quarter and first six months 2014 are transaction costs of $3 million for the acquisition of the aviation turbine oil business in June 2014 and integration costs of $7 million and $16 million, respectively, for the acquired Solutia and aviation turbine oil businesses. Included in first six months 2014 operating losses were $3 million for severance related to the continued integration of Solutia.

SUMMARY BY CUSTOMER LOCATION



	Sales Revenue
	Second Quarter						First Six Months
(Dollars in millions)	2015		2014		Change		2015		2014		Change
United States and Canada	$	1,142	$	1,138	—	%	$	2,302	$	2,211	4	%
Asia Pacific	624		654		(5	)%	1,141		1,255		(9	)%
Europe, Middle East, and Africa	625		544		15	%	1,250		1,058		18	%
Latin America	142		124		15	%	283		241		17	%
	$	2,533	$	2,460	3	%	$	4,976	$	4,765	4	%

Sales revenue in United States and Canada increased slightly in second quarter and first six months 2015 compared to second quarter and first six months 2014, primarily due to sales of products of the acquired Taminco, Commonwealth, Knowlton, and aviation turbine oil businesses partially offset by lower SFI, A&P, AFP and AM segments sales revenue, primarily due to lower selling prices.



Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Sales revenue in Asia Pacific decreased in second quarter and first six months 2015 compared to second quarter and first six months 2014, primarily due to lower Fibers segment sales volume, particularly for acetate tow, partially offset by sales of products of the acquired Taminco, Commonwealth and aviation turbine oil businesses.

Sales revenue in Europe, Middle East, and Africa increased in second quarter and first six months 2015 compared to second quarter and first six months 2014, primarily due to sales of products of the acquired Taminco and aviation turbine oil businesses, partially offset by an unfavorable shift in foreign currency exchange rates.

Sales revenue in Latin America increased in second quarter and first six months 2015 compared to second quarter and first six months 2014, primarily due to sales of products of the acquired Taminco businesses.

With a substantial portion of sales to customers outside the United States, Eastman is subject to the risks associated with operating in international markets. To mitigate its exchange rate risks, the Company frequently seeks to negotiate payment terms in U.S. dollars or euros. In addition, where it deems such actions advisable, the Company engages in foreign currency hedging transactions and requires letters of credit and prepayment for shipments where its assessment of individual customer and country risks indicates their use is appropriate. For additional information concerning these practices, see Note 10, "Derivatives", to the consolidated financial statements in Part II, Item 8 and Part II, Item 7A "Qualitative and Quantitative Disclosures About Market Risk" of the Company's 2014 Annual Report on Form 10-K and "Risk Factors" of this Quarterly Report on Form 10-Q.

LIQUIDITY, CAPITAL RESOURCES, AND OTHER FINANCIAL INFORMATION

Cash and Cash Flows



	First Six Months
(Dollars in millions)	2015			2014
Net cash provided by (used in)
Operating activities	$	682		$	389
Investing activities	(265		)	(524		)
Financing activities	(359		)	71
Effect of exchange rate changes on cash and cash equivalents	(4		)	2
Net change in cash and cash equivalents	54			(62		)
Cash and cash equivalents at beginning of period	214			237
Cash and cash equivalents at end of period	$	268		$	175

Cash provided by operating activities was $682 million in first six months 2015 compared with $389 million in first six months 2014. The increase in cash from operating activities was primarily due to earnings and a lower than usual increase in working capital primarily due to the impact on inventory costs of the recent decline in raw material and energy costs.

Cash used in investing activities decreased $259 million in first six months 2015 compared with first six months 2014. The decrease was primarily due to cash used for the acquisition of the aviation turbine oil business in first six months 2014. Cash used for additions to properties and equipment was $266 million in first six months 2015 and $254 million in first six months 2014.

Cash used in financing activities was $359 million in first six months 2015 compared with $71 million cash provided in first six months 2014. The increase in cash used is primarily due to the repayment of borrowings in 2015 compared to proceeds from borrowings in 2014 used for acquisitions. This was partially offset by lower share repurchases in first six months of 2015 compared to first six months 2014. During first six months 2015, the Company had net proceeds of $157 million from commercial paper borrowings and $250 million from its accounts receivable securitization facility (the "A/R Facility") and $625 million repayment of term loan borrowings. During first six months 2014, the Company has net proceeds of $490 million from the issuance of new debt and $26 million from commercial paper borrowings. Share repurchases totaled $31 million in first six months 2015 compared with $360 million in first six months 2014. Dividend payments were $119 million in first six months 2015 and $106 million in first six months 2014.



Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The priorities for uses of available cash in 2015 are payment of the quarterly stock dividend, repayment of debt, funding targeted growth initiatives, pension funding, and stock repurchases primarily to offset dilution.

Liquidity and Capital Resources

The Company has access to the sources of liquidity described below.

The Credit Facility is available for general corporate purposes and provides liquidity support for commercial paper borrowings. Accordingly, any outstanding commercial paper borrowings reduce capacity for borrowings available under the Credit Facility. Given the expiration date of the Credit Facility, any commercial paper borrowings supported by the Credit Facility are classified as long-term borrowings because the Company has the ability to refinance such borrowings on a long-term basis and intends, at least over the next twelve months, to maintain commercial paper borrowings at current levels. At June 30, 2015, the Company's commercial paper borrowings were $392 million with a weighted average interest rate of 0.50 percent. At December 31, 2014, the Company's commercial paper borrowings were $235 million with a weighted average interest rate of 0.47 percent.

The Credit Facility and the A/R Facility contain a number of customary covenants and events of default, including the maintenance of certain financial ratios. The Company was in compliance with all such covenants for all periods presented. Total available borrowings under the Credit Facility and A/R Facility were $858 million and $1.265 billion as of June 30, 2015 and December 31, 2014, respectively. The Company would not violate applicable covenants for these periods if the total available amounts of the facilities had been borrowed.

In 2015, the Company expects U.S. defined benefit pension plan funding of $100 million.

Cash flows from operations, cash and cash equivalents, and the other sources of liquidity described above are expected to be available and sufficient to meet foreseeable cash requirements. However, the Company's cash flows from operations can be affected by numerous factors including risks associated with global operations, raw material availability and cost, demand for and pricing of Eastman's products, capacity utilization, and other factors described under "Risk Factors" below. Eastman management believes maintaining a financial profile consistent with an investment grade credit rating is important to its long-term strategic and financial flexibility.

Capital Expenditures

Capital expenditures were $266 million and $254 million in first six months 2015 and 2014, respectively. The expenditures in first six months 2015 were primarily for organic growth initiatives particularly in the SFI and AM segments, improvements to plants, and purchases of equipment. The expenditures in first six months 2014 were primarily for improvements to plants, purchases of equipment, and organic growth initiatives particularly in the SFI and AM segments. The Company expects that 2015 capital spending will be between $700 million and $725 million, including capital investment that will modernize and expand the Kingsport, Tennessee site, investment in the Kuantan, Malaysia site in the AFP and AM segments, additional expansion of Eastman Tritan™ copolyester capacity in Kingsport, Tennessee, and a Therminol^® heat transfer fluid capacity expansion in Newport, Wales. Capital expenditures in 2015 are expected to include approximately $70 million for the recently acquired Taminco facilities.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Debt and Other Commitments

Debt Securities and Term Loan

At June 30, 2015, the Company's borrowings totaled approximately $7.3 billion to be paid over a period of approximately 30 years. See Note 6, "Borrowings", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In connection with the acquisition of Taminco, Eastman entered into a $1.0 billion five-year Term Loan Agreement. As of June 30, 2015, the Term Loan Agreement balance outstanding was $375 million with an interest rate of 1.44 percent. In second quarter 2015, $625 million of the Term Loan Agreement balance was repaid primarily using available cash and proceeds from borrowings under the A/R Facility and commercial paper. As of December 31, 2014, the Term Loan Agreement balance outstanding was $1.0 billion with an interest rate of 1.41 percent. Borrowings under the Term Loan Agreement are subject to interest at varying spreads above quoted market rates.

Other Commitments

The Company had various purchase obligations at June 30, 2015 totaling $2.0 billion over a period of approximately 30 years for materials, supplies, and energy incident to the ordinary conduct of business. The Company also had various lease commitments for property and equipment under cancelable, noncancelable, and month-to-month operating leases totaling approximately $267 million over a period of approximately 45 years. Of the total lease commitments, approximately 50 percent relate to real property, including office space, storage facilities, and land; approximately 40 percent relate to railcars; and approximately 10 percent relate to machinery and equipment, including computer and communications equipment and production equipment.

In addition, the Company had other liabilities at June 30, 2015, totaling $2.3 billion related primarily to pension, retiree medical, other postretirement obligations, and environmental reserves.

As of June 30, 2015, there have been no material changes to the Company's commitments at December 31, 2014. See Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company's 2014 Annual Report on Form 10-K.

Off Balance Sheet and Other Financing Arrangements

If certain operating leases are terminated by the Company, it has guaranteed a portion of the residual value loss, if any, incurred by the lessors in disposing of the related assets. For information on the Company's residual value guarantees, see Note 9, "Commitments", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Guarantees and claims also arise during the ordinary course of business from relationships with customers, suppliers, joint venture partners, and other parties when the Company undertakes an obligation to guarantee the performance of others, if specified triggering events occur. Non-performance under a contract could trigger an obligation of the Company. The Company's current other guarantees include guarantees relating primarily to intellectual property, environmental matters, and other indemnifications and have arisen through the normal course of business. The ultimate effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists as to the final outcome of these claims, if they were to occur. These other guarantees have terms up to 30 years with maximum potential future payments of $29 million in the aggregate, with none of these guarantees being individually significant to the Company's operating results, financial position, or liquidity. The Company's current expectation is that future payment or performance related to non-performance under other guarantees is considered remote.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The Company assumed the rights and obligations under non-recourse factoring facilities as part of the acquisition of Taminco. The non-recourse factoring facilities have a combined limit of $176 million (the U.S. Dollar equivalent of the €158 million commitment amount as of June 30, 2015) and are committed until December 2017. These arrangements include receivables in the United States, Belgium, Germany, and Finland, and are subject to various eligibility requirements. The Company sells the receivables at face value but receives funding (approximately 85 percent) net of a deposit amount until collections are received from customers for the receivables sold. The total amount of cumulative receivables sold in second quarter and first six months 2015, was $240 million and $509 million, respectively. The total amount of cumulative receivables sold during the year ended December 31, 2014 since the acquisition of Taminco on December 5, 2014 was $70 million. As part of the program, the Company continues to service the receivables at market rates with no servicing assets or liabilities recognized. The amounts of sold receivables outstanding under the non-recourse factoring facilities were $124 million and $105 million at June 30, 2015 and December 31, 2014, respectively. The fair value of the receivables sold equals the carrying value at the time of the sale, and no gain or loss is recorded. The Company is exposed to a credit loss of up to 10 percent on sold receivables.

Treasury Stock

In May 2013, the Company's Board of Directors authorized repurchase of up to $300 million of the Company's outstanding common stock. The Company completed the $300 million of repurchases in March 2014, acquiring a total of 3,840,949 shares.

In February 2014, the Company's Board of Directors authorized repurchase of up to an additional $1 billion of the Company's outstanding common stock at such times, in such amounts, and on such terms, as determined to be in the best interests of the Company. As of June 30, 2015, a total of 3,368,029 shares have been repurchased under this authorization for a total amount of $281 million.

During first six months 2015, the Company repurchased 435,000 shares of common stock for a cost of approximately $31 million.

Dividends

The Company declared cash dividends of $0.40 and $0.35 per share in second quarter 2015 and 2014, respectively, and $0.80 and $0.70 per share in first six months 2015 and 2014, respectively.

Environmental Matters and Asset Retirement Obligations

Certain Eastman manufacturing sites generate hazardous and nonhazardous wastes, the treatment, storage, transportation, and disposal of which are regulated by various governmental agencies. In connection with the cleanup of various hazardous waste sites, the Company, along with many other entities, has been designated a potentially responsible party ("PRP"), by the U.S. Environmental Protection Agency under the Comprehensive Environmental Response, Compensation and Liability Act, which potentially subjects PRPs to joint and several liability for such cleanup costs. In addition, the Company will be required to incur costs for environmental remediation and closure and postclosure under the federal Resource Conservation and Recovery Act. Reserves for environmental contingencies have been established in accordance with Eastman's policies described in Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K. The Company's total reserve for environmental contingencies was $337 million and $345 million at June 30, 2015 and December 31, 2014, respectively. At June 30, 2015 and December 31, 2014, this reserve included $8 million and $10 million, respectively, related to sites previously closed and impaired by Eastman and sites that have been divested by Eastman but for which the Company retains the environmental liability related to these sites.

Estimated future environmental expenditures for remediation costs ranged from the minimum or best estimate of $314 million to the maximum of $539 million and from the minimum or best estimate of $324 million to the maximum of $548 million at June 30, 2015 and December 31, 2014, respectively. The maximum estimated future costs are considered to be reasonably possible and are inclusive of the amounts accrued at both June 30, 2015 and December 31, 2014. Although the resolution of uncertainties related to these environmental matters may have a material adverse effect on the Company's consolidated results of operations in the period recognized, because of the availability of legal defenses, the Company's preliminary assessment of actions that may be required, and if applicable, the expected sharing of costs, management does not believe that the Company's liability for these environmental matters, individually or in the aggregate, will be material to the Company's consolidated financial position or cash flows.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

An asset retirement obligation is an obligation for the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development, or normal operation of that long-lived asset. The Company recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be made. The asset retirement obligation is subsequently adjusted for changes in fair value. The associated estimated asset retirement costs are capitalized as part of the carrying value of the long-lived assets and depreciated over their useful life. Environmental asset retirement obligations consist of primarily closure and post-closure costs. For facilities that have environmental asset retirement obligations, the best estimate accrued to date over the facilities' estimated useful lives for asset retirement obligation costs was $23 million and $21 million at June 30, 2015 and December 31, 2014, respectively.

Reserves for environmental remediation that management believe to be probable and estimable are recorded as current and long-term liabilities in the Unaudited Consolidated Statements of Financial Position. These reserves include liabilities expected to be paid out within 30 years. Changes in the reserves for environmental remediation liabilities during first six months 2015 including net charges taken, which are included in cost of goods sold, and cash reductions are summarized below:



(Dollars in millions)	Environmental Remediation Liabilities
Balance at December 31, 2014	$	324
Changes in estimates recognized in earnings	4
Cash reductions	(14		)
Balance at June 30, 2015	$	314

RECENTLY ISSUED ACCOUNTING STANDARDS

For information regarding the impact of recently issued accounting standards, see Note 18, "Recently Issued Accounting Standards", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

2015 OUTLOOK

Eastman is focused on consistent earnings growth through a market-driven approach that takes advantage of the Company's existing technology platforms, global market and manufacturing presence, leading positions in key end markets, vertically integrated manufacturing streams, and advantaged cost positions. This focus is supported by the Company's geographic and end-market diversity as it serves global markets, including emerging economies with above average growth rates, and offers both original equipment manufacturing and after-market products in a variety of end markets, such as transportation and building and construction.

While the impact of regional and global economic growth on the Company's financial results varies by product and market, management expects global growth in 2015 to be approximately three percent, with the U.S. approximately two percent, Europe approximately one percent, and China below seven percent.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Management expects that market prices for commodity products and raw material and energy costs will continue to be volatile, and management will continue to evaluate and when appropriate use pricing and hedging strategies to mitigate this volatility. Management expects that recent significant declines in crude oil and certain related commodity prices will not be fully reflected in Company raw material and energy costs primarily because the positive impact will be largely offset in 2015 by our current commodity hedges, particularly for propane.

Management expects the significant strengthening of the U.S. Dollar to continue to have an overall negative impact on the Company's results, partially offset by hedging of those foreign currencies, particularly the euro.

For 2015, management also expects:


•	operating results to continue to benefit from recent acquisitions, organic growth, and improved product mix from continued market adoption of specialty products;


•	cash generated by operating activities of approximately $1.6 billion;


•	capital spending to be between $700 million and $725 million;


•	priorities for uses of available cash to be payment of the quarterly stock dividend, repayment of debt, funding targeted growth initiatives, pension funding, and stock repurchases primarily to offset dilution; and


•	the full year effective tax rate on reported earnings before income tax to be between 26 percent and 27 percent, excluding non-core items.

Based on first six months results and the foregoing expectations and assumptions, management has increased its outlook for 2015 earnings since the first quarter 2015 10-Q, and expects a solid increase in 2015 earnings per share excluding non-core and non-recurring items.

See "Risk Factors" below.

RISK FACTORS

In addition to the factors described elsewhere in this Quarterly Report, the following are the most significant known factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements made in this Quarterly Report and elsewhere from time to time. See "Forward-looking Statements".

Continued uncertain conditions in the global economy and the financial markets could negatively impact the Company.

Continued uncertain conditions in the global economy and global capital markets may adversely affect the Company's results of operations, financial condition, and cash flows. The Company's business and operating results were affected by the impact of the most recent global recession, including the credit market crisis, declining consumer and business confidence, fluctuating commodity prices, volatile exchange rates, and other challenges that affected the global economy. If the global economy or financial markets again deteriorate or experience significant new disruptions, or if current uncertainty over the timing or extent of a full long-term recovery persists, the Company's results of operations, financial condition, and cash flows could be materially adversely affected; in addition the Company's ability to access the credit and capital markets under attractive rates and terms could be constrained, which may negatively impact the Company's liquidity or ability to pursue certain growth initiatives.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Volatility in costs for strategic raw material and energy commodities or disruption in the supply of these commodities could adversely affect our financial results.

The Company is reliant on certain strategic raw material and energy commodities for its operations which are subject to significant market fluctuations in cost. Significant changes to raw material and energy costs could negatively impact the Company's financial results. The Company seeks to manage and mitigate the impact of this volatility through a number of risk management strategies including formula pricing for sales of certain products, inventory management, and hedging. These risk mitigation measures cannot eliminate all exposure to market fluctuations, and have from time-to-time reduced the positive impact of unexpected decreases of the market price of purchased raw materials. In addition, natural disasters, plant interruptions, changes in laws or regulations, war or other outbreak of hostilities or terrorism, and breakdown or degradation of transportation infrastructure used for delivery of strategic raw material and energy commodities, could adversely impact both the cost and availability of these commodities.

The Company's business is subject to operating risks common to chemical manufacturing businesses, including cyber risks, any of which could disrupt manufacturing operations or related infrastructure and adversely affect results of operations.

As a global specialty chemicals manufacturing company, our business is subject to operating risks common to chemical manufacturing, storage, handling, and transportation. Significant limitation on the Company's ability to manufacture products due to disruption of manufacturing operations or related infrastructure could have a material adverse effect on the Company's sales revenue, costs, results of operations, and financial condition. Disruptions could occur due to internal factors such as computer or equipment malfunction (accidental or intentional), operator error, or process failures; or external factors such as computer or equipment malfunction at third-party service providers, natural disasters, pandemic illness, changes in laws or regulations, war or other outbreak of hostilities or terrorism, cyber attacks, or breakdown or degradation of transportation infrastructure used for delivery of supplies to the Company or for delivery of products to customers. The Company has in the past experienced cyber attacks and breaches of its computer information systems, and although none of these has had a material adverse effect on the Company's operations, no assurances can be provided that any future disruptions due to these, or other, circumstances will not have a material effect on operations. Such disruptions could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors, and the environment, and could have a negative impact on the Company's results of operations.

Loss or financial weakness of any of the Company's largest customers could adversely affect our financial results.

Although the Company has an extensive customer base, loss of, or material financial weakness of, certain of our largest customers could adversely affect the Company's financial condition and results of operations until such business is replaced. No assurances can be made that the Company would be able to regain or replace any lost customers.

Growth initiatives may not achieve desired business or financial objectives and may require a significant use of resources in excess of those estimated or budgeted for such initiatives.

The Company continues to identify and pursue growth opportunities through both organic growth initiatives and inorganic initiatives. These growth opportunities include development and commercialization or licensing of innovative new products and technologies and related employee leadership, expertise, and skill development and retention, expansion into new markets and geographic regions, and alliances, ventures, and acquisitions that complement and extend the Company's portfolio of businesses and capabilities. There can be no assurance that such innovation, development and commercialization or licensing efforts, investments, or acquisitions and alliances (including integration of acquired businesses) will result in financially successful commercialization of products, or acceptance by existing or new customers, or successful entry into new markets or otherwise achieve their underlying strategic business objectives or that they will be beneficial to the Company's results of operations. There also can be no assurance regarding the timing of completion of proposed acquisitions or licensing, expected benefits of proposed acquisitions or licensing, completion of integration plans, and synergies therefrom. There also can be no assurance that capital projects for growth efforts can be completed within the time or at the costs projected due, among other things, to demand for and availability of construction materials and labor and obtaining regulatory approvals and operating permits and reaching agreement on terms of key agreements and arrangements with potential suppliers and customers. Any such delays or cost overruns or the inability to obtain such approvals or to reach such agreements on acceptable terms could negatively affect the returns from any proposed or current investments and projects.



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Significant acquisitions expose the Company to risks and uncertainties, the occurrence of any of which could materially adversely affect the Company's business, financial condition, and results of operations.

While acquisitions have been and continue to be a part of the Company's growth strategy, acquisitions of large companies (such as the acquisition of Taminco and Solutia) subject the Company to a number of risks and uncertainties, the occurrence of any of which could have a material adverse effect on Eastman. These include, but are not limited to the possibilities that the financial performance of the acquired business may be significantly worse than expected; that significant additional indebtedness may constrain the Company's ability to access the credit and capital markets at attractive interest rates and favorable terms, which may negatively impact the Company's liquidity or ability to pursue certain growth initiatives; that the Company may not be able to achieve the cost, revenue, tax, or other "synergies" expected from any acquisition, or that there may be delays in achieving any such synergies; that management's time and effort may be dedicated to the new business resulting in a loss of focus on the successful operation of the Company's existing businesses; and that the Company may be required to expend significant additional resources in order to integrate any acquired business into Eastman or that the integration efforts will not achieve the expected benefits.

Legislative or regulatory actions could increase the Company's future compliance costs.

The Company and its facilities and businesses are subject to complex health, safety and environmental laws and regulations, which require and will continue to require significant expenditures to remain in compliance with such laws and regulations. The Company's accruals for such costs and associated liabilities are subject to changes in estimates on which the accruals are based. For example, any amount accrued for environmental matters reflects the Company's assumptions about remediation requirements at the contaminated site, the nature of the remedy, the outcome of discussions with regulatory agencies and other potentially responsible parties at multi-party sites, and the number and financial viability of other potentially responsible parties. Changes in the estimates on which the accruals are based, unanticipated government enforcement action, or changes in health, safety, environmental, chemical control regulations, and testing requirements could result in higher costs. Specifically, pending and proposed U.S. Federal legislation and regulation increase the likelihood that the Company's manufacturing sites will in the future be impacted by regulation of greenhouse gas emissions and energy policy, which legislation and regulation, if enacted, may result in capital expenditures, increases in costs for raw materials and energy, limitations on raw material and energy source and supply choices, and other direct compliance costs.

In addition to the foregoing most significant known risk factors to the Company, there may be other factors, not currently known to the Company, which could, in the future, materially adversely affect the Company, its business, financial condition, or results of operations. The foregoing discussion of the most significant risk factors to the Company does not necessarily present them in order of importance. This disclosure, including that under "Outlook" and other forward-looking statements and related disclosures made by the Company in this Quarterly Report and elsewhere from time to time, represents management's best judgment as of the date the information is given. The Company does not undertake responsibility for updating any of such information, whether as a result of new information, future events, or otherwise, except as required by law. Investors are advised, however, to consult any further public Company disclosures (such as in filings with the Securities and Exchange Commission or in Company press releases) on related subjects.



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ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There are no material changes to the Company's market risks from those disclosed in Part II, Item 7A of the Company's 2014 Annual Report on Form 10-K.


ITEM 4.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. An evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that as of June 30, 2015, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed was accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company's internal control over financial reporting that occurred during the second quarter of 2015 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.



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PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

General

From time to time, Eastman Chemical Company ("Eastman" or the "Company") and its operations are parties to, or targets of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which are being handled and defended in the ordinary course of business. While the Company is unable to predict the outcome of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters (including the Solutia Legacy Torts Claims described below) will have a material adverse effect on its overall financial condition, results of operations, or cash flows.

Solutia Legacy Torts Claims Litigation

Pursuant to an Amended and Restated Settlement Agreement effective February 28, 2008 between Solutia Inc. ("Solutia") and Monsanto Company ("Monsanto") in connection with Solutia's emergence from Chapter 11 bankruptcy proceedings (the "Monsanto Settlement Agreement"), Monsanto is responsible to defend and indemnify Solutia against any Legacy Tort Claims (as defined in the Monsanto Settlement Agreement) and Solutia agreed to retain responsibility for certain tort claims, if any, that may arise from Solutia's conduct after its spinoff from Pharmacia Corporation (f/k/a Monsanto), which occurred on September 1, 1997. Solutia, which became a wholly owned subsidiary of Eastman on July 2, 2012, has been named as a defendant in several such proceedings, and has submitted the matters to Monsanto as Legacy Tort Claims. To the extent these matters are not within the meaning of Legacy Tort Claims, Solutia could potentially be liable thereunder. In connection with the completion of its acquisition of Solutia, Eastman guaranteed the obligations of Solutia and Eastman was added as an indemnified party under the Monsanto Settlement Agreement.


ITEM 1A.	RISK FACTORS

For identification and discussion of the most significant risks applicable to the Company and its business, see "Risk Factors" in Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of this Quarterly Report on Form 10-Q.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)	Approximate Dollar Value (in millions) that May Yet Be Purchased Under the Plans or Programs (3)
April 1 - 30, 2015	—	$	—	—	$	724
May 1 - 31, 2015	30,000	$	79.60	30,000	$	721
June 1 - 30, 2015	35,000	$	77.93	35,000	$	719
Total	65,000	$	78.71	65,000


⁽¹⁾	All shares were repurchased under a Company announced repurchase plan.


⁽²⁾	Average price paid per share reflects the weighted average purchase price paid for shares.

⁽³⁾

In February 2014, the Board of Directors authorized repurchase of up to an additional $1 billion of the Company's outstanding common stock. As of June 30, 2015, a total of 3,368,029 shares have been repurchased under this authorization for a total amount of $281 million. During first six months 2015, the Company repurchased 435,000 shares of common stock for a cost of approximately $31 million. For additional information, see Note 12, "Stockholders' Equity", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.



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ITEM 6.	EXHIBITS

Exhibits filed as part of this report are listed in the Exhibit Index.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			Eastman Chemical Company



Date:	July 30, 2015	By:	/s/ Curtis E. Espeland
			Curtis E. Espeland
			Executive Vice President and Chief Financial Officer



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	EXHIBIT INDEX
Exhibit Number	Description	Sequential Page Number

3.01	Amended and Restated Certificate of Incorporation of Eastman Chemical Company (incorporated herein by reference to Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)

3.02	Amended and Restated Bylaws of Eastman Chemical Company (incorporated herein by reference to Exhibit 3.02 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014)

4.01	Form of Eastman Chemical Company common stock certificate as amended February 1, 2001 (incorporated herein by reference to Exhibit 4.01 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)

4.02	Indenture, dated as of January 10, 1994, between Eastman Chemical Company and The Bank of New York, as Trustee (the "Indenture") (incorporated herein by reference to Exhibit 4(a) to the Company's Current Report on Form 8-K dated January 10, 1994)

4.03	Indenture, dated as of June 5, 2012, between Eastman Chemical Company and Wells Fargo Bank, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated June 5, 2012)

4.04	Form of 7 1/4% Debentures due January 15, 2024 (incorporated herein by reference to Exhibit 4(d) to the Company's Current Report on Form 8-K dated January 10, 1994)

4.05	Officers' Certificate pursuant to Sections 201 and 301 of the Indenture related to 7 5/8% Debentures due 2024 (incorporated herein by reference to Exhibit 4(a) to the Company's Current Report on Form 8-K dated June 8, 1994)

4.06	Form of 7 5/8% Debentures due June 15, 2024 (incorporated herein by reference to Exhibit 4(b) to the Company's Current Report on Form 8-K dated June 8, 1994)

4.07	Form of 7.60% Debentures due February 1, 2027 (incorporated herein by reference to Exhibit 4.08 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996)

4.08	Officer's Certificate pursuant to Sections 201 and 301 of the Indenture related to 7.60% Debentures due February 1, 2027 (incorporated herein by reference to Exhibit 4.09 to the Company's Annual Report on Form 10-K for the year ended December 31, 2006)

4.09	Form of 5.500% Notes due 2019 (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated November 2, 2009)

4.10	Form of 6.30% Notes due 2018 (incorporated herein by reference to Exhibit 4.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003)

4.11	Form of 3% Note due 2015 (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 10, 2010)

4.12	Form of 4.5% Note due 2021 (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated December 10, 2010)

4.13	Form of 2.4% Note due 2017 (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated June 5, 2012)

4.14	Form of 3.6% Note due 2022 (incorporated herein by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K dated June 5, 2012)



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	EXHIBIT INDEX
Exhibit Number	Description	Sequential Page Number
4.15	Form of 4.8% Note due 2042 (incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K dated June 5, 2012)

4.16	Form of 4.65% Note due 2044 (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated May 15, 2014)

4.17	Form of 2.70% Note due 2020 (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated November 20, 2014)

4.18	Form of 3.80% Note due 2025 (incorporated herein by reference to Exhibit 4.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014)

10.01	Amended and Restated $250,000,000 Accounts Receivable Securitization agreement dated July 9, 2008 between the Company and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as agent	60

12.01	Statement re: Computation of Ratios of Earnings to Fixed Charges	130

31.01	Rule 13a – 14(a) Certification by Mark J. Costa, Chief Executive Officer, for the quarter ended June 30, 2015	131

31.02	Rule 13a – 14(a) Certification by Curtis E. Espeland, Executive Vice President and Chief Financial Officer, for the quarter ended June 30, 2015	132

32.01	Section 1350 Certification by Mark J. Costa, Chief Executive Officer, for the quarter ended June 30, 2015	133

32.02	Section 1350 Certification by Curtis E. Espeland, Executive Vice President and Chief Financial Officer, for the quarter ended June 30, 2015	134

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Calculation Linkbase Document

101.DEF	XBRL Definition Linkbase Document

101.LAB	XBRL Taxonomy Label Linkbase Document

101.PRE	XBRL Presentation Linkbase Document

Exhibit 10.01

AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT

Dated as of July 9, 2008

Among

EASTMAN CHEMICAL FINANCIAL CORPORATION,

as Seller and initial Servicer,

VICTORY RECEIVABLES CORPORATION,

and

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,

individually, as a Victory Liquidity Bank, as Victory Agent and as Administrative

Agent

TABLE OF CONTENTS

ARTICLE I.AMOUNTS AND TERMS OF THE PURCHASES

Section 1.1 Purchase Facility.

Section 1.2 Receivable Interest Increases

Section 1.3 Receivable Interest Decreases

Section 1.4 Payment Requirements

ARTICLE II.CONDUIT PURCHASES

Section 2.1 CP Costs

Section 2.2 Calculation of CP Costs

Section 2.3 CP Costs Payments

Section 2.4 Late Charges

ARTICLE III.PAYMENTS AND COLLECTIONS

Section 3.1 Payments

Section 3.2 Collections Prior to Liquidation

Section 3.3 Collections Following Liquidation

Section 3.4 Application of Collections

Section 3.5 Payment Rescission

Section 3.6 Limitation on Receivable Interests

ARTICLE IV.LIQUIDITY BANK PURCHASES

Section 4.1 Liquidity Bank Funding

Section 4.2 Discount Payments to Liquidity Banks

Section 4.3 Selection and Continuation of Tranche Periods.

Section 4.4 Liquidity Bank Discount Rates

Section 4.5 Suspension of the LIBO Rate.

Section 4.6 Late Charges

ARTICLE V.REPRESENTATIONS AND WARRANTIES

Section 5.1 Seller Party Representations and Warranties

Section 5.2 Liquidity Bank Representations and Warranties

ARTICLE VI.CONDITIONS OF PURCHASES

Section 6.1 Conditions Precedent to Initial Purchase

Section 6.2 Conditions Precedent to All Incremental Purchases and Reinvestments

ARTICLE VII.COVENANTS

Section 7.1 Affirmative Covenants of Seller Parties

Section 7.2 Negative Covenants of the Seller Parties

ARTICLE VIII.ADMINISTRATION AND COLLECTION

Section 8.1 Designation of Servicer.

Section 8.2 Duties of Servicer.

Section 8.3 Collection Notices

Section 8.4 Responsibilities of the Seller

Section 8.5 Receivables Reports

Section 8.6 Servicer Fee

ARTICLE IX.SERVICER DEFAULTS

Section 9.1 Servicer Default

ARTICLE X.INDEMNIFICATION

Section 10.1 Indemnities by the Seller

Section 10.2 Increased Cost and Reduced Return.

Section 10.3 Costs and Expenses Relating to this Agreement

ARTICLE XI.THE Administrative Agent AND THE CO-Agents

Section 11.1 Authorization and Action

Section 11.2 Delegation of Duties

Section 11.3 Exculpatory Provisions

Section 11.4 Reliance by Administrative Agent and Co-Agents

Section 11.5 Non-Reliance on Administrative Agent, Co-Agents and Other Purchasers

Section 11.6 Reimbursement and Indemnification

Section 11.7 Administrative Agent and Co-Agents in their Individual Capacities

ARTICLE XII.[INTENTIONALLY DELETED]

ARTICLE XIII.ASSIGNMENTS; PARTICIPATIONS

Section 13.1 Assignments

Section 13.2 Participations

Section 13.3 Federal Reserve

ARTICLE XIV.MISCELLANEOUS

Section 14.1 Waivers and Amendments

Section 14.2 Notices.

Section 14.3 Ratable Payments

Section 14.4 Protection of the Interests of the Administrative Agent

Section 14.5 Confidentiality.

Section 14.6 Bankruptcy Petition

Section 14.7 Limitation of Liability

Section 14.8 CHOICE OF LAW

Section 14.9 CONSENT TO JURISDICTION

Section 14.10 WAIVER OF JURY TRIAL

Section 14.11 Integration; Survival of Terms

Section 14.12 Counterparts; Severability

Section 14.13 Co-Agent Roles

Section 14.14 Characterization.

Section 14.15 Release of Liens

EXHIBITS AND SCHEDULES

Exhibit I Definitions

Exhibit II Chief Executive Office; Place(s) of Business; Records Locations; FEIN

Exhibit III Collection Accounts

Exhibit IV Form of Compliance Certificate

Exhibit V Form of Monthly Report

Exhibit VI Form of Purchase Notice

Exhibit VII Form of Reduction Notice

Exhibit VIII Form of Performance Indemnity

Schedule I Closing Documents

THIS AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as of July 9, 2008 (as amended, restated or otherwise modified from time to time, this “Agreement”), is by and among Eastman Chemical Financial Corporation, a Delaware corporation, as seller (the “Seller”) and as initial Servicer, Victory Receivables Corporation (“Victory” or a “Conduit”), and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch (“BTMU”), individually as a Victory Liquidity Bank, as Victory Agent and as Administrative Agent. Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I hereto. This Agreement amends and restates in its entirety that certain Receivables Purchase Agreement dated as of July 14, 2005 among the parties hereto, as amended from time to time.

PRELIMINARY STATEMENTS

The Seller desires to transfer and assign Receivable Interests to the Administrative Agent for the benefit of the Purchasers from time to time.

Any Conduit may, in its absolute and sole discretion, purchase its Group’s Percentage of each Receivable Interest from the Seller from time to time.

In the event that any Conduit declines to make any Purchase, its Liquidity Banks shall, at the request of the Seller, purchase its Group’s Percentage of the Receivable Interests from time to time.

BTMU has been requested and is willing to act as agent on behalf of Victory and the Victory Liquidity Banks (collectively, the “Victory Group”) in accordance with the terms hereof. BTMU has also been requested and is willing to act as Administrative Agent on behalf of the Groups in accordance with the terms hereof.

ARTICLE I.

AMOUNTS AND TERMS OF THE PURCHASES

Section 1.1 Purchase Facility.

(a)Upon the terms and subject to the conditions hereof, the Seller may, at its option, sell and assign Receivable Interests to the Administrative Agent for the ratable benefit of the Groups in accordance with their respective Percentages. From time to time during the period from the date hereof to but not including the Facility Termination Date, any Conduit (or its Co-Agent, on behalf of such Conduit) may, at its option, instruct the Administrative Agent to purchase such Conduit’s Group’s Percentage of each Receivable Interest on behalf of such Conduit or, if such Conduit declines to purchase any such Percentage (unless the Seller cancels such Purchase as to each Group in accordance with Section 1.2), the Administrative Agent shall purchase such Percentage on behalf of such Conduit’s Liquidity Banks; provided, however, that in no event will the aggregate Capital outstanding at any one time with respect to all Receivable Interests of the Purchasers in any Group exceed such Group’s Group Limit. The Seller hereby assigns, transfers and conveys to the Administrative Agent, for the benefit of the applicable Purchasers, and the Administrative Agent hereby acquires, all of the Seller’s now owned and existing and hereafter arising or acquired right, title and interest in and to the Receivable Interests.

(b)The Seller may, upon at least 10 Business Days’ notice to the Administrative Agent and the Co-Agents, terminate in whole or reduce in part, ratably between the Groups (and within each Group, ratably among the Liquidity Banks), the unused portion of the Group Purchase Limits; provided that each partial reduction of a Group Purchase Limit shall be in an amount equal to $5,000,000 or an integral multiple thereof.

Section 1.2Receivable Interest Increases. The Seller shall provide the Administrative Agent and the Co-Agents with at least two (2) Business Day’s prior notice in the form of Exhibit VI hereto (each, a “Purchase Notice”) of the initial Purchase and each subsequent Incremental Purchase; provided, however, that in the case of a Receivable Interest that will accrue Discount at a LIBO Rate, such Purchase Notice shall be given at least three (3) Business Days prior to the proposed Purchase Date. Each Purchase Notice shall, except as set forth below, be irrevocable and shall specify a requested Purchase Price and each Group’s Percentage thereof (which shall not be less than $1,000,000 per Group) and the proposed Purchase Date. Following receipt of a Purchase Notice, the Co-Agents will determine whether its Conduit agrees to make its Group’s Percentage of the Purchase. If a Conduit declines to make its Group’s Percentage of a proposed Purchase, its Co-Agent shall promptly advise the Seller Parties and the Administrative Agent of such fact, and (i) the Seller may thereupon cancel the Purchase Notice as to each Group or (ii) in the absence of such a cancellation, the Incremental Purchase of the declining Conduit’s Group’s Percentage of the Receivable Interest will be made by its Liquidity Banks, and the Incremental Purchase of the other Conduit’s Group’s Percentage of the Receivable Interest will be made by such other Conduit. On the date of each Incremental Purchase, upon satisfaction of the applicable conditions precedent set forth in Article VI, any Conduit or its Liquidity Banks, as applicable, shall deposit to the Seller’s account no. 4074-1612 at Citibank, N.A., in New York, New York, ABA No. 021-000-089, in immediately available funds, no later than 2:00 p.m. (New York time), an amount equal to (i) in the case of a Conduit, its Group’s Percentage of the Purchase Price of such Receivable Interest or (ii) in the case of a Liquidity Bank, such Liquidity Bank’s Pro Rata Share of its Group’s Percentage of such Purchase Price.

Section 1.3 Receivable Interest Decreases. The Seller shall provide the Administrative Agent and the Co-Agents with irrevocable prior written notice in the form of Exhibit VII hereto of any reduction of Capital requested by the Seller (each, a “Reduction Notice”), which reduction shall be made only if each Co-Agent consents thereto. Such Reduction Notice shall designate (i) the Business Day (the “Proposed Reduction Date”) upon which any such reduction of Capital shall occur (which date shall give effect to the applicable Required Notice Period), and (ii) the aggregate amount of Capital to be reduced (the “Aggregate Reduction”) and each Group’s Percentage thereof. If each Co-Agent consents to a requested reduction, such reduction shall be made ratably amongst the Purchasers in accordance with their respective amounts of outstanding Capital. Only one (1) Reduction Notice shall be outstanding at any time. If for any reason, the Aggregate Reduction shall not occur on the applicable Proposed Reduction Date taking into account the Required Notice Period, the Seller shall be liable for any Early Collection Fees or Broken Funding Costs which the Co-Agents determine to be applicable.

Section 1.4 Payment Requirements. All amounts to be paid or deposited by any Person hereunder pursuant to Sections 1.3, 2.1, 2.2, 3.1, 3.2, 3.3, 3.5, 3.6 and 4.2 which represent a payment in respect of Capital shall be paid or deposited in accordance with the terms hereof no later than 12:00 noon (Eastern time) on the date when due in immediately available funds (it being understood that, in the case of a payment to or for the benefit of a Conduit, such deadline is required to comply with Section B(1)(a) of the DTC Operational Arrangements and the DTC Notice (B#2078-07) dated September 11, 2007). All amounts to be paid or deposited by any Person hereunder pursuant to Sections 1.3, 2.1, 2.2, 3.1, 3.2, 3.3, 3.5, 3.6 and 4.2 which represent a payment in respect of Aggregate Unpaids other than Capital shall be paid or deposited in accordance with the terms hereof no later than 12:00 noon (Eastern time) on the date when due in immediately available funds (it being understood that, in the case of a payment to or for the benefit of a Conduit, such deadline is required to comply with Section B(1)(a) of the DTC Operational Arrangements and the DTC Notice (B#2078-07) dated September 11, 2007). Any amounts not received by the times specified in the preceding two sentences shall be deemed to be received on the next succeeding Business Day. All computations of Discount at the Base Rate shall be made on the basis of a year of 365 (or when appropriate 366) days and for the actual number of days elapsed. All other computations of Discount, Unused Fees and Program Fees shall be made on the basis of a year of 360 days for the actual number of days elapsed. If any amount hereunder shall be payable on a day which is not a Business Day, such amount shall be payable on the next succeeding Business Day. All amounts to be paid to any of the Purchasers shall be paid to such account of such Purchaser’s Co-Agent as may be specified in writing from time to time.

ARTICLE II.

CONDUIT PURCHASES

Section 2.1 CP Costs. The Seller shall pay CP Costs with respect to the Capital of all Receivable Interests funded through the issuance of Commercial Paper. Each portion of a Receivable Interest of a Pool-Funded Conduit that is funded substantially with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based upon the percentage share that the Capital in respect of such portion represents in relation to all assets held by such Pool-Funded Conduit and funded substantially with related Pooled Commercial Paper.

Section 2.2 Calculation of CP Costs. Not later than the 2^nd Business Day of each month, the Co-Agents shall calculate the aggregate amount of CP Costs applicable to its Conduit’s Receivable Interests for the month (or portion thereof) then most recently ended and shall notify the Seller of such aggregate amount.

Section 2.3 CP Costs Payments. On each Settlement Date, Seller shall pay to the Co-Agents (for the benefit of its Conduit) an aggregate amount equal to all accrued and unpaid CP Costs in respect of such Conduit’s Capital for the month (or portion thereof) then most recently ended in accordance with Article II.

Section 2.4 Late Charges. From and after the occurrence of a Servicer Default and during the continuance thereof, at the discretion of a Co-Agent, all Receivable Interests of the Conduit in its Group shall accrue Late Charges in lieu of CP Costs.

ARTICLE III.

PAYMENTS AND COLLECTIONS

Section 3.1 Payments. Notwithstanding any limitation on recourse contained in this Agreement, the Seller shall pay to the Co-Agents when due, for the account of the relevant Purchaser(s) in its Group, on a full-recourse basis, all of the following (collectively, the “Obligations”): (i) all Administration Fees, Program Fees and Unused Fees, (ii) all CP Costs, (iii) all amounts payable as Discount, (iv) all amounts payable as Deemed Collections, (v) all amounts payable to reduce Capital if required pursuant to Section 1.3 or 3.6 hereof, (vi) all other amounts payable by the Seller pursuant to the Transaction Documents from time to time, (vii) all amounts payable pursuant to Article X, if any, (viii) all Early Collection Fees, (ix) all Broken Funding Costs, and (x) all Late Charges. If the Seller fails to pay any of the Obligations when due, the Seller agrees to pay, on demand, the Late Charge in respect thereof. Notwithstanding the foregoing, no provision of this Agreement or the Fee Letters shall require payment or permit the collection of any Obligations in excess of the maximum permitted by applicable law.

Section 3.2 Collections Prior to Liquidation. Prior to the Facility Termination Date, any Collection or Collections received by the Servicer (after the initial Purchase of a Receivable Interest hereunder and on or prior to the Facility Termination Date) shall be set aside and held in trust by the Servicer for the payment of any accrued and unpaid Obligations owed by the Seller, and not previously paid by the Seller in accordance with Section 3.1 hereof. On each Settlement Date prior to the occurrence of the Facility Termination Date, the Servicer shall remit to each Co-Agent its Group’s Percentage of the amounts accrued and owing for the preceding Settlement Period (if not previously paid in accordance with Section 3.1 hereof) and apply such amounts to reduce unpaid Obligations. To the extent that Collections set aside pursuant to the first sentence of this Section 3.2 are insufficient to make all payments required by the preceding sentence, the Seller shall demand payment of the Demand Advances in an amount equal to the lesser of (a) the deficiency in the amount remitted by the Servicer, and (b) the aggregate principal amount of Demand Advances then outstanding, together with all accrued and unpaid interest thereon, and shall forthwith turn such amounts over to the Co-Agents. If such Obligations shall be reduced to zero, any additional Collections received by the Servicer shall (i) if applicable, be remitted to the Co-Agents no later than 12:00 noon (Eastern time) to the extent required to fund any Aggregate Reduction on such Settlement Date, and (ii) thereafter be remitted from the Servicer to the Seller on such Settlement Date and shall be applied by the Seller, simultaneously with such receipt, as a reinvestment (each, a “Reinvestment”) with that portion of each and every Collection received by the Servicer that is part of such Receivable Interest, such that after giving effect to such Reinvestment, the amount of Capital of such Receivable Interest immediately after such receipt and corresponding Reinvestment shall be equal to the amount of Capital immediately prior to such receipt.

Section 3.3 Collections Following Liquidation. On each day from and after the Facility Termination Date, the Servicer shall set aside and hold in trust for the Purchasers, all Collections received on such day for the payment of any Aggregate Unpaids not previously paid by the Seller in accordance with Section 3.1 hereof. To the extent that Collections set aside pursuant to the preceding sentence are insufficient to pay the Aggregate Unpaids in full, the Seller shall demand payment on the Demand Advances in an amount equal to the lesser of (a) the deficiency in the amount remitted by the Servicer, and (b) the aggregate principal amount of Demand Advances then outstanding, together with all accrued and unpaid interest thereon, and shall forthwith turn such amounts over to each Co-Agent, its Group’s Percentage thereof.

Section 3.4 Application of Collections. If there shall be insufficient funds on deposit for the Servicer to distribute funds in payment in full of the aforementioned amounts pursuant to Section 3.2 or 3.3 (as applicable), after taking into account all payments received in respect of the Demand Advances pursuant to such Sections, funds shall be distributed as follows:

first, to the reimbursement of the Administrative Agent’s and the Co-Agents’ reasonable costs of collection and enforcement of this Agreement,

second, if the Seller (or one of its Affiliates) is not then acting as the Servicer, to the payment of the Servicer’s reasonable out-of-pocket costs and expenses in connection with servicing, administering and collecting the Receivables,

third, in payment of all accrued and unpaid CP Costs and Discount,

fourth, (if applicable) in reduction of Capital of the Receivable Interests, and

fifth, in payment of all other unpaid Obligations.

Collections allocated to the Capital of Receivable Interests shall be shared ratably by the Groups in accordance with their respective Percentages and within each Group, ratably by the Purchasers in accordance with the amount of Capital owing to each of them. Collections allocated to the Capital or Discount of Receivable Interests of the Liquidity Banks shall be shared ratably by the Groups in accordance with their respective amounts thereof, and within each Group, ratably by the Liquidity Banks in such Group in accordance with their Pro Rata Shares. Collections applied to the payment of all other Obligations shall be allocated ratably among the Administrative Agent, the Co-Agents and the Purchasers in accordance with the amount of such Obligations owing to each of them. If at any time the Seller receives any Collections or is deemed to receive any Collections (except for Collections received as a Reinvestment pursuant to Section 3.2 hereof), the Seller shall immediately pay such Collections or deemed Collections to the Servicer and, at all times prior to such payment, such Collections shall be held in trust by the Seller for the exclusive benefit of the Purchasers, the Administrative Agent and the Co-Agents. Notwithstanding the limitations contained in the previous sentence, following the date on which the Obligations have been indefeasibly reduced to zero, the Servicer shall pay to the Seller any remaining Collections set aside and held by the Servicer pursuant to Section 3.3.

Section 3.5 Payment Rescission. No payment or Collection shall be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application or law or judicial authority, or must otherwise be returned or refunded for any reason. The Seller shall remain obligated for the amount of any amount so rescinded, returned or refunded, and shall promptly pay to the applicable Co-Agent (for application to the Person or Persons who suffered such rescission, return or refund) an amount (but not in excess of the aggregate amount of all Collections previously received by the Seller pursuant to Section 3.3) equal to all payments so rescinded, returned or refunded, plus, in the case of a payment of or Collection applied to Capital, the Late Charge thereon from the date of rescission, return or refunding.

Section 3.6 Limitation on Receivable Interests. The Seller shall ensure that the Receivable Interests of the Groups at no time exceed 100%. If the aggregate of the Receivable Interests of the Groups exceeds 100%, the Seller shall, on or within two (2) Business Days thereafter, pay to each Co-Agent its Group’s Percentage of an amount to be applied to reduce the Capital of its Group’s Receivable Interests (as allocated by such Co-Agent), such that after giving effect to such payment and at all times thereafter, the aggregate of the Receivable Interests of the Groups equals or is less than 100%.

ARTICLE IV.

LIQUIDITY BANK PURCHASES

Section 4.1 Liquidity Bank Funding. Each Receivable Interest of the Liquidity Banks shall accrue Discount at either the LIBO Rate or the Base Rate in accordance with the terms and conditions hereof. Discount shall accrue for each such Receivable Interest for each day occurring during the Tranche Period associated with either the LIBO Rate or the Base Rate therefor. If any Funding Source acquires by assignment or otherwise any interest in a Receivable Interest pursuant to a Funding Agreement, such interest shall be deemed to have a new Tranche Period commencing on the date of any such acquisition.

Section 4.2 Discount Payments to Liquidity Banks. On the last day of the relevant Tranche Period in respect of each Receivable Interest of the Liquidity Banks, the Seller shall pay to the Co-Agents (for the benefit of the Liquidity Banks in each Co-Agent’s Group) an aggregate amount equal to the accrued and unpaid Discount for the entire Tranche Period of each such Receivable Interest.

Section 4.3 Selection and Continuation of Tranche Periods.

(a)With consultation from (and approval by) the applicable Co-Agent, the Seller shall from time to time request Tranche Periods for the Receivable Interests of the Liquidity Banks, provided that, if at any time the Liquidity Banks shall have a Receivable Interest, the Seller shall always request Tranche Periods such that at least one Tranche Period shall end on each Settlement Date.

(b)The Seller or the applicable Co-Agent may, upon notice to and consent by the other received at least three (3) Business Days prior to the end of a Tranche Period (the “Terminating Tranche”), for any Receivable Interest, take any of the following actions to continue such Terminating Tranche: (i) divide any such Receivable Interest into two or more Receivable Interests having aggregate Capital of such divided Receivable Interest, (ii) combine any such Receivable Interest with another Receivable Interest having a Terminating Tranche ending on the same day (creating a new Receivable Interest having Capital equal to the Capital of the two Receivable Interests combined) or (iii) combine any such Receivable Interest with a new Receivable Interest to be purchased on such day by the Liquidity Banks (creating a new Receivable Interest having Capital equal to the Capital of the two Receivable Interests combined), provided that in no event may a Receivable Interest of a Conduit be combined with a Receivable Interest of any Liquidity Bank.

Section 4.4 Liquidity Bank Discount Rates. The Seller may select the LIBO Rate or the Base Rate for the Receivable Interests of the Liquidity Banks in each Group. The Seller shall by 12:00 noon (New York time): (i) at least three (3) Business Days prior to the expiration of any Terminating Tranche with respect to which the LIBO Rate is being requested as a new Discount Rate, and (ii) at least one (1) Business Day prior to the expiration of any Terminating Tranche with respect to which the Base Rate is being requested as a new Discount Rate, give the applicable Co-Agent irrevocable notice of the new Discount Rate for the Receivable Interest associated with such Terminating Tranche. Until the Seller gives notice to the applicable Co-Agent of another Discount Rate, the initial Discount Rate for any Receivable Interest transferred to the Liquidity Banks pursuant to a Funding Agreement shall be the Base Rate.

Section 4.5 Suspension of the LIBO Rate.

(a)If any Liquidity Bank notifies its Co-Agent that it has determined that funding its Pro Rata Share of the Receivable Interests of the Liquidity Banks in its Group at a LIBO Rate would violate any applicable law, rule, regulation, or directive of any governmental or regulatory authority, whether or not having the force of law, or that (i) deposits of a type and maturity appropriate to match fund its Receivable Interests at such LIBO Rate are not available or (ii) such LIBO Rate does not accurately reflect the cost of acquiring or maintaining a Receivable Interest at such LIBO Rate, then the applicable Co-Agent shall suspend the availability of such LIBO Rate for its Group and require the Seller to select the Base Rate for any Receivable Interest of its Group that has been accruing Discount at such LIBO Rate.

(b)If less than all of the Liquidity Banks in a Group give a notice to the applicable Co-Agent pursuant to Section 4.5(a), each Liquidity Bank which gave such a notice shall be obliged, at the request of the Seller or such Co-Agent, to assign all of its rights and obligations hereunder to (i) another Liquidity Bank or (ii) another financial institution nominated by the Seller or such Co-Agent that is acceptable to the applicable Conduit and willing to participate in this Agreement through the Liquidity Termination Date in the place of such notifying Liquidity Bank; provided that (i) the notifying Liquidity Bank receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such notifying Liquidity Bank’s Pro Rata Share of the Capital and Discount owing to all of the Liquidity Banks in that Group and all accruing but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Receivable Interests of the Liquidity Banks in such Group, and (ii) the replacement Liquidity Bank otherwise satisfies the requirements of Section 13.1(b).

Section 4.6 Late Charges. From and after the occurrence of a Servicer Default and during the continuance thereof, at the discretion of a Co-Agent, all Receivable Interests of the Liquidity Banks in its Group shall accrue Late Charges in lieu of Discount.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

Section 5.1 Seller Party Representations and Warranties. Each of the Seller Parties, as to itself, hereby represents and warrants to the Administrative Agent, the Co-Agents and the Purchasers that:

(a)Corporate Existence and Power. Such Seller Party is a corporation validly organized and existing and in good standing under the laws of the state of its incorporation, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect. Such Seller Party has full corporate power and authority and, except where the failure to so hold would not reasonably be expected to have a Material Adverse Effect, holds all requisite governmental licenses, permits and other approvals to enter into and perform its obligations under the Transaction Documents to which it is a party and to own and hold under lease its property and to conduct its business as currently proposed to be conducted.

(b)Non-Contravention, Due Authorization, Etc. The execution, delivery and performance by such Seller Party of the Transaction Documents to which it is a party, and, in the case of the Seller, its use of the proceeds of Purchases made hereunder, are within its corporate powers, have been duly authorized by all necessary corporate action, and do not: (i) contravene such Seller Party’s certificate of incorporation, by-laws, or any shareholder agreements, voting trusts, and similar arrangements applicable to any of its authorized shares, (ii) contravene any law, governmental regulation, court decree, order or material contractual restriction binding on or affecting such Seller Party, or (iii) result in, or require the creation or imposition of, any lien on any of such Seller Party’s properties. No transaction contemplated hereby requires compliance with any bulk sales act or similar law.

(c)Governmental Authorization. Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery and performance by such Seller Party of the Transaction Documents to which it is a party.

(d)Binding Effect. Each of the Transaction Documents to which such Seller Party is a party has been duly executed and delivered by such Seller Party. Each of such Transaction Documents constitutes the legal, valid and binding obligation of such Seller Party enforceable against it in accordance with its respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws of general applicability and by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

(e)Accuracy of Information. All written information, certified by an Authorized Officer, heretofore furnished by such Seller Party or the Originator to the Administrative Agent, the Co-Agents or the Purchasers for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by such Seller Party or the Originator to the Administrative Agent, the Co-Agents and/or the Purchasers will be, true and accurate in every material respect, on the date such information is stated or certified and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading. All other material information heretofore furnished by such Seller Party or the Originator to the Administrative Agent, the Co-Agents or the Purchasers for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter so furnished will be, true and accurate in every material respect on the date such information is stated or furnished.

(f)Use of Proceeds. No proceeds of any Purchase hereunder will be used by the Seller (i) for a purpose which violates, or would be inconsistent with, Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

(g)Title to Receivables. Each Receivable has been acquired by the Seller from the Originator in accordance with the terms of the Sale Agreement, and the Seller has thereby irrevocably obtained all legal and equitable title to, and has the legal right to sell and encumber, such Receivable, its Collections and the Related Security. Each such Receivable has been transferred to the Seller free and clear of any Adverse Claim. Without limiting the foregoing, there have been duly filed all financing statements or other similar instruments or documents necessary under the UCC of all appropriate jurisdictions to perfect the Seller’s ownership or security interest in such Receivable. Immediately prior to each Purchase hereunder, the Seller shall be the legal and beneficial owner of the Receivables and Related Security with respect thereto, free and clear of any Adverse Claim, except as created by the Transaction Documents. This Agreement, together with the filing of the financing statements contemplated hereby, is effective to, and shall, upon each Purchase hereunder, transfer to the Administrative Agent for the benefit of the relevant Purchasers (and the Administrative Agent on behalf of such Purchasers shall acquire from the Seller) a valid and perfected first priority undivided percentage ownership or security interest in each Receivable existing or hereafter arising and in the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, except as created by the Transactions Documents.

(h)Places of Business and Locations of Records. The principal place of business and chief executive office of the Seller and the offices where the Seller keeps all its Records are located at the address listed on Exhibit II or such other locations notified to the Administrative Agent in accordance with Section 7.2(a) in jurisdictions where all action required by Section 7.2(a) has been taken and completed. The Seller’s Federal Employer Identification Number is correctly set forth on Exhibit II.

(i)Collections; etc. Except as otherwise notified to the Administrative Agent in accordance with Section 7.2(b):

(i)each of the Lock-Boxes and Lock-Box Accounts is accurately identified on Exhibit III hereto; all checks, drafts and money orders received in any of the Lock-Boxes are deposited each Business Day for clearing in the Lock-Box Account set forth opposite such Lock-Box on Exhibit III hereto; the only funds in the Lock-Box Accounts are Collections on the Receivables; and each Business Day, all of the collected funds in the Lock-Box Accounts are electronically swept or otherwise transferred into the Existing Concentration Account,

(ii)the Direct Wire Accounts are accurately identified on Exhibit III hereto; the only funds in the Direct Wire Accounts are Collections on Receivables; and each Business Day, all of the collected funds in the Direct Wire Accounts are electronically swept or otherwise transferred into the Existing Concentration Account,

(iii)to the extent that payments on the Receivables are made by check or money order delivered directly to a Seller Party or the Originator, all such payments are deposited into the Depositary Account within 2 Business Days after receipt at all times prior to the occurrence of a Collection Notice Event and within 1 Business Day after receipt at all times from and after the occurrence of a Collection Notice Event; and each Business Day, all of the collected funds in the Depositary Account are electronically swept or otherwise transferred into the Existing Concentration Account, and

(iv)each Collection Account to which Collections are remitted shall be subject to a Collection Agreement that is then in full force and effect.

Such Seller Party has not granted any Person, other than the Administrative Agent as contemplated by this Agreement, dominion and control of any Collection Account, or the right to take dominion and control of any such account at a future time or upon the occurrence of a future event.

(j)Material Adverse Effect. Since December 31, 2007, no event has occurred which would have a Material Adverse Effect.

(k)Names. In the past five years, the Seller has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement.

(l)Actions, Suits. Except as set forth in the most recent Annual Report of Originator on Form 10-K or in any document filed pursuant to Section 13(a), 14 or 15 of the Securities and Exchange Act of 1934 or in the financial statements delivered to the Administrative Agent and the Co-Agents from time to time, there are no actions, suits or proceedings pending, or to the best of such Seller Party’s knowledge, threatened, against or affecting such Seller Party, or any of the properties of such Seller Party, in or before any court, arbitrator or other body, which are reasonably likely to have a Material Adverse Effect of the types described in clauses (i)-(v) of the definition of “Material Adverse Effect.” Such Seller Party is not in default with respect to any order of any court, arbitrator or governmental or regulatory body.

(m)Credit and Collection Policy. With respect to each Receivable, each of the Seller Parties has complied in all material respects with the Credit and Collection Policy, and no change has been made to the Credit and Collection Policy since the date of this Agreement which would be reasonably likely to materially and adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables except for such changes as to which each of the Administrative Agent and the Co-Agents has received the notice required under Section 7.1(a)(v) and has given its prior written consent thereto (which consent shall not be unreasonably withheld or delayed).

(n)Payments to Originator. With respect to each Receivable sold to the Seller by the Originator, the Seller has given reasonably equivalent value to the Originator in consideration for such Receivable and the Related Security with respect thereto under the Sale Agreement and such transfer was not made for or on account of an antecedent debt. No transfer by the Originator of any Receivable is or may be voidable under any Section of the Bankruptcy Reform Act of 1978 (11 U.S.C. §§ 101 et seq.), as amended.

(o)Ownership of the Seller. The Originator owns, directly or indirectly, 100% of the issued and outstanding capital stock of the Seller, free and clear of any Adverse Claim. Such capital stock is validly issued, fully paid and nonassessable, and there are no options, warrants or other rights to acquire securities of the Seller.

(p)Not an Investment Company. The Seller (i) is not a “covered fund” under the Volcker Rule and (ii) is not, and after giving effect to the transactions contemplated hereby, will not be required to register as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended from time to time, or any successor statute. In determining that the Seller is not a covered fund, the Seller is relying on the exclusion set forth in Section 3(c)(5) of the Investment Company Act of 1940, as amended, although other exclusions or exemptions may also be available to the Seller.

(q)Purpose. The Seller has determined that, from a business viewpoint, the purchase of Receivables and related interests from the Originator under the Sale Agreement, and the sale of Receivable Interests to the Purchasers and the other transactions contemplated herein, are in the best interest of the Seller.

(r)Net Receivables Balance. As of each Purchase Date, after giving effect to the Purchase to be made on such date, the Net Receivables Balance is at least equal to the sum of (i) aggregate Capital outstanding, plus (ii) the Aggregate Reserves.

(s)Rebills. Any reissued Invoice relating to a Receivable that has been the subject of a Rebill clearly indicates that such Receivable has been rebilled, and any such reissued Invoice is linked to the original Invoice in the Seller’s Receivables records.

(t)OFAC. Seller (a) is not a Sanctioned Person, (b) does not do business in a Sanctioned Country in violation of the economic sanctions of the United States administered by OFAC or (c) does not knowingly conduct business with any Sanctioned Person in violation of the economic sanctions of the United States administered by OFAC.

(u)Anti-Corruption Laws and Sanctions. Policies and procedures have been implemented and maintained by or on behalf of the Seller Parties that are designed to achieve compliance by the Seller Parties and their respective Subsidiaries, directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, giving due regard to the nature of such Person’s business and activities, and each of the Seller Parties, its subsidiaries, and their respective officers and employees and, to the knowledge of Seller, its officers, employees, directors and agents acting in any capacity in connection with or directly benefitting from this Agreement, are in compliance with Anti-Corruption Laws and applicable Sanctions, in each case in all material respects. None of (a) the Seller Parties or any of their subsidiaries or, to the knowledge of the Seller Parties, any of their respective directors, officers, employees, or agents that will act in any capacity in connection with or directly benefit from this Agreement, is a Sanctioned Person, and (b) the Seller Parties nor any of their subsidiaries are organized or resident in a Sanctioned Country. No Purchase or use of proceeds thereof by the Seller Parties in any manner will violate Anti-Corruption Laws or applicable Sanctions.

Section 5.2 Liquidity Bank Representations and Warranties. Each Liquidity Bank hereby represents and warrants to its Co-Agent, its Conduit and the Seller that:

(a)Existence and Power. Such Liquidity Bank is a corporation or a banking association duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, and has all corporate or association power to perform its obligations hereunder.

(b)No Conflict. The execution, delivery and performance by such Liquidity Bank of this Agreement are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its articles or certificate of incorporation or association or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on its assets. This Agreement has been duly authorized, executed and delivered by such Liquidity Bank.

(c)Governmental Authorization. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Liquidity Bank of this Agreement.

(d)Binding Effect. This Agreement constitutes the legal, valid and binding obligation of such Liquidity Bank enforceable against such Liquidity Bank in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally.

ARTICLE VI.

CONDITIONS OF PURCHASES

Section 6.1 Conditions Precedent to Initial Purchase. The initial Purchase of a Receivable Interest under this Agreement is subject to the conditions precedent that:

(a)the Administrative Agent shall have received on or before the date of such Purchase those opinions, Collection Agreements and other documents listed on Schedule I hereto,

(b)the Seller shall have marked its master data processing records to evidence the Receivable Interests of the Administrative Agent in all of the Seller’s then existing and thereafter arising Receivables, and

(c)the Administrative Agent shall have been paid the Administration Fee, the Co-Agents shall have been paid their Arrangement Fees, and the Administrative Agent shall have been paid all other fees and expenses required to be paid on such date pursuant to the terms hereof and of the Fee Letters.

Section 6.2 Conditions Precedent to All Incremental Purchases and Reinvestments. Each Incremental Purchase of a Receivable Interest and each Reinvestment shall be subject to the further conditions precedent that:

(a) in the case of each such Purchase, the Servicer shall have delivered to the Administrative Agent on or prior to the date of such Purchase, in form and substance satisfactory to the Administrative Agent, all Monthly Reports as and when due under Section 8.5;

(b)on the date of each such Purchase, the following statements shall be true both before and after giving effect to such Purchase (and acceptance of the proceeds of such Purchase shall be deemed a representation and warranty by the Seller that such statements are then true):

(i)the representations and warranties set forth in Section 5.1 are true and correct in all material respects on and as of the date of such Purchase as though made on and as of such date (except that the representations in Sections 5.1(j) and 5.1(l) need only be correct in all material respects as of the date of this Agreement); provided that the materiality threshold in the preceding sentence shall not be applicable with respect to any representation or warranty which itself contains a materiality threshold;

(ii)no event has occurred and is continuing, or would result from such Purchase, that will constitute a Servicer Default, and, solely in the case of an Incremental Purchase, no event has occurred and is continuing, or would result from such Purchase, that would constitute a Potential Servicer Default;

(iii)the Liquidity Termination Date shall not have occurred, the aggregate Capital of all Receivable Interests of each Group shall not exceed the applicable Group Limit, and the aggregate Receivable Interests shall not exceed 100%; and

(c)any Conduit shall have received such other approvals, opinions or documents as it may reasonably request.

ARTICLE VII.

COVENANTS

Section 7.1 Affirmative Covenants of Seller Parties. Until the date on which the Aggregate Unpaids have been indefeasibly paid in full, each of the Seller Parties hereby covenants as to itself that:

(a)Financial Reporting. The Seller will maintain a system of accounting established and administered in accordance with GAAP, and furnish to the Administrative Agent:

(i)Annual Reporting. Within 120 days after the close of each of its fiscal years, financial statements for such fiscal year certified in a manner acceptable to the Administrative Agent by an Authorized Officer of the Seller.

(ii)Quarterly Reporting. Within 60 days after the close of each of the first three fiscal quarters of each year, balance sheets as at the close of each such period and statements of income and retained earnings for such quarter, all certified by an Authorized Officer of the Seller.

(iii)Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit IV signed by an Authorized Officer of the Seller and dated the date of such annual financial statement or such quarterly financial statement, as the case may be.

(iv)Notices under Transaction Documents. Forthwith upon its receipt from the Originator or any Collection Bank, as applicable, of (A) any notice of breach or termination, (B) any request for a consent, amendment or waiver, or (C) any financial statements of the Originator, in each case, under or in connection with any Transaction Document from any Person party thereto other than the Administrative Agent or the Purchasers, copies of the same.

(v)Proposed Changes in Credit and Collection Policy. At least 30 days prior to the effectiveness of any proposed material change in or material amendment to the Credit and Collection Policy, a notice indicating such proposed change or amendment and, if such proposed change or amendment would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables, requesting the Administrative Agent’s consent thereto (which consent shall not be unreasonably withheld or delayed).

(vi)Other Information. Such other information (including non-financial information) relating to the Originator, the Seller or the Receivables as the Administrative Agent, the Co-Agents or any Purchaser may from time to time reasonably request.

(b)Notices. Such Seller Party will notify the Administrative Agent in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto:

(i)Servicer Defaults or Potential Servicer Defaults. The occurrence of each Servicer Default or each Potential Servicer Default.

(ii)Judgment. The entry of any judgment or decree against the Seller.

(iii)Litigation. The institution of any litigation, arbitration proceeding or governmental proceeding against the Seller or in which the Seller becomes a defendant or respondent.

(iv)Termination Date under Sale Agreement. The occurrence of the “Termination Date” under the Sale Agreement.

(c)Compliance with Laws. Such Seller Party will comply with all applicable laws, rules, regulations, orders writs, judgments, injunctions, decrees or awards to which it may be subject except for such noncompliances as would not be reasonably expected to have a Material Adverse Effect.

(d)Audits. Such Seller Party will furnish to the Administrative Agent from time to time such information with respect to the Receivables as the Administrative Agent may reasonably request; provided, however, that the Administrative Agent agrees to use (and to cause its agents and representatives to use) reasonable efforts not to request information that has no direct bearing on the amount owing under a Receivable or the payment terms thereof, and provided, further, that to the extent the Administrative Agent engages an outside auditor or consultant as their agent to audit Records, the Administrative Agent will use reasonable efforts to engage only auditors and consultants who enter into a reasonable written confidentiality agreement with the Seller, the Originator and the Administrative Agent. In the event any Seller Party or the Originator advise the Administrative Agent that the Administrative Agent has requested information of a confidential nature, the Administrative Agent shall either (a) withdraw its request for such information, or (b) assure the same is maintained as confidential in accordance with the provisions of Section 14.5(b). Such Seller Party shall, from time to time during regular business hours as requested by the Administrative Agent upon reasonable prior notice, permit the Administrative Agent, or its agents or representatives (and shall use its reasonable best efforts to require the Originator to permit the Administrative Agent or its agents or representatives): (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Seller Party or the Originator relating to Receivables and the Related Security, including, without limitation, the related Invoices, and (ii) to visit the offices and properties of such Seller Party or the Originator for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Seller Party’s or the Originator’s financial condition or the Receivables and the Related Security or such Seller Party’s performance hereunder, or the Originator’s performance under any of the other Transaction Documents, or such Seller Party’s or the Originator’s performance under the Invoices with any of the officers or employees of the Seller or the Originator having knowledge of such matters; provided, however, that no copies or abstracts shall be made of any Contract unless (A) such copy is a Redacted Copy, and (B) the Administrative Agent reasonably believes such Contract is necessary to litigate or otherwise resolve a dispute in which the applicable Obligor claims that goods sold or services rendered by the Originator did not conform to the Contract, and provided further, that, so long as no Servicer Default has occurred and is continuing, the Seller Parties will only be responsible for the costs and expenses of one (1) such review under this Section in any one calendar year unless (1) the first such review in such calendar year results in negative findings (in which case the Seller Parties will be responsible for the costs and expenses of two (2) such reviews in such calendar year if requested by the Administrative Agent), (2) the Seller delivers a request for extension of this Agreement more than three (3) calendar months after the first review in such calendar year, or (3) the Originator proposes a material change in the composition of the Receivable pool (in which case the Seller Parties will be responsible for the costs and expenses of two (2) such reviews in such year if requested by the Administrative Agent).

(e)Keeping and Marking of Records and Books.

(i)Each of the Seller Parties will establish and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). Each of the Seller Parties will give the Administrative Agent notice of any material change in the administrative and operating procedures referred to in the previous sentence.

(ii)Each of the Seller Parties will, and will use its reasonable best efforts to require the Originator to: (a) on or prior to the date hereof, mark its master data processing records and other books and records relating to the Receivable Interests with a legend, acceptable to the Administrative Agent, describing the Receivable Interests and (b) upon the request of the Administrative Agent following the occurrence of a Servicer Default: (1) mark each Invoice with a legend describing the Receivable Interests and (2) deliver to the Administrative Agent all Invoices relating to the Receivables then in such Seller Party’s possession.

(f)Compliance with Contracts and Credit and Collection Policy. Each of the Seller Parties will and will use its best efforts to request the Originator to timely and fully (i) perform and comply, in all material respects, with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and (ii) comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract and Invoice.

(g)Purchase of Receivables from the Originator. With respect to each Receivable purchased under the Sale Agreement, such Seller Party shall (or shall use its reasonable best efforts to require the Originator to) take all actions necessary to vest legal and equitable title to such Receivable and the Related Security irrevocably in the Seller, including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC of all appropriate jurisdictions (or any comparable law) to perfect the Seller’s interest in such Receivable and such other action to perfect, protect or more fully evidence the interest of the Seller as the Administrative Agent may reasonably request.

(h)Ownership Interest. The Seller shall take all necessary action to establish and maintain a valid and perfected first priority undivided percentage ownership or security interest in the Receivables and the Related Security and Collections with respect thereto, to the full extent contemplated herein, in favor of the Administrative Agent for the benefit of the Purchasers, including, without limitation, taking such action to perfect, protect or more fully evidence the interest of the Administrative Agent, Co-Agents and the Purchasers hereunder as the Administrative Agent may reasonably request.

(i)Payment to the Originator. With respect to any Receivable purchased by the Seller from the Originator, such sale shall be effected under, and in strict compliance with the terms of, the Sale Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to the Originator in respect of the purchase price for such Receivable.

(j)Performance and Enforcement of Sale Agreement. The Seller shall timely perform the obligations required to be performed by the Seller, and shall vigorously enforce the rights and remedies accorded to the Seller, under the Sale Agreement. The Seller shall take all actions to perfect and enforce its rights and interests (and the rights and interests of the Administrative Agent, on behalf of the Purchasers, as assignee of the Seller) under the Sale Agreement as the Administrative Agent may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Sale Agreement.

(k)Purchasers’ Reliance. The Seller acknowledges that the Purchasers are entering into the transactions contemplated by this Agreement in reliance upon the Seller’s identity as a legal entity that is separate from the Originator. Therefore, from and after the date of execution and delivery of this Agreement, the Seller shall take all reasonable steps including, without limitation, all steps that the Administrative Agent. Co-Agents or any Purchaser may from time to time reasonably request to maintain the Seller’s identity as a separate legal entity and to make it manifest to third parties that the Seller is an entity with assets and liabilities distinct from those of the Originator and any Affiliates thereof and not just a division of the Originator. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, the Seller shall:

(i)conduct its own business in its own name and require that all full-time employees of the Seller, if any, identify themselves as such and not as employees of the Originator (including, without limitation, by means of providing such employees with business or identification cards identifying such employees as the Seller’s employees);

(ii)compensate all employees, consultants and agents from Seller’s own funds for services provided to the Seller by such employees, consultants and agents and, to the extent any employee, consultant or agent of the Seller is also an employee, consultant or agent of the Originator, allocate the compensation of such employee, consultant or agent between the Seller and the Originator on a basis which reflects the services rendered to the Seller and the Originator;

(iii)clearly identify its offices (by signage or otherwise) as its offices and, if such office is located in the offices of the Originator, the Seller shall lease such office at a fair market rent;

(iv)have a separate telephone number, which will be answered only in its name and separate stationery and checks in its own name;

(v)conduct all transactions with the Originator (including, without limitation, any delegation of its obligations hereunder as Servicer) strictly on an arm’s-length basis, allocate all overhead expenses (including, without limitation, telephone and other utility charges) for items shared between the Seller and the Originator on the basis of actual use to the extent practicable and, to the extent such allocation is not practicable, on a basis reasonably related to actual use;

(vi)at all times have at least one member of its Board of Directors who is an “Independent Director” as provided in the Seller’s restated certificate of incorporation as in effect on the date hereof

(vii)observe all corporate formalities as a distinct entity, and ensure that all corporate actions relating to (A) the selection, maintenance or replacement of the Independent Director, (B) the dissolution or liquidation of the Seller or (C) the initiation or participation in, acquiescence in or consent to any bankruptcy, insolvency, reorganization or similar proceeding involving the Seller, are duly authorized by unanimous vote of its Board of Directors (including the Independent Director);

(viii)maintain the Seller’s books and records as separate from those of the Originator and otherwise readily identifiable as its own assets rather than assets of the Originator;

(ix)prepare its financial statements separately from those of the Originator and insure that any consolidated financial statements of the Originator or any Affiliate thereof that include the Seller have detailed notes clearly stating that the Seller is a separate corporate entity and that its assets will be available first and foremost to satisfy the claims of the creditors of the Seller;

(x)except with respect to funds deposited to, or maintained in, the Depositary Account and except pursuant to the Cash Management Agreement, not commingle funds or other assets of the Seller with those of the Originator and not maintain bank accounts or other depository accounts to which the Originator is an account party, into which the Originator makes deposits or from which the Originator has the power to make withdrawals;

(xi)not permit the Originator to pay any of the Seller’s operating expenses (except pursuant to allocation arrangements that comply with the requirements of this Section 7.1(k)); and

(xii)take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinion issued by Jones Day, as counsel for the Seller, in connection with the closing or initial Purchase under this Agreement and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times.

(l)Collections.

(i)Prior to the occurrence of a Collection Notice Event and delivery by the Administrative Agent of a Collection Notice: (A) such Seller Party shall instruct all Obligors to pay all Collections either (1) prior to the occurrence of a Servicer Default, to the Seller, for deposit into the Depositary Account within 2 Business Days after receipt, (2) to a Lock-Box or Lock-Box Account, or (3) to the Direct Wire Account, and (B) all collected funds from time to time in any of the Collection Accounts shall be electronically swept or otherwise transferred each Business Day into the Existing Concentration Account. All Collections received by such Seller Party pursuant to the preceding clause (A)(1), and all Collections from time to time deposited in any Collection Account, shall be held in trust, for the exclusive benefit of the Administrative Agent, Co-Agents and the Purchasers, except as otherwise permitted in connection with the Cash Management Agreement.

(ii)From and after delivery by the Administrative Agent of a Collection Notice following the occurrence of a Collection Notice Event: (A) the Administrative Agent, on behalf of the Purchasers, as assignee of the Seller, may request that the Servicer, and the Servicer promptly shall, direct all Obligors to remit all payments on the Receivables directly to a Lock-Box or a Collection Account which contains only Collections in respect of the Receivables and which is the subject of a Collection Agreement, and/or (B) the Administrative Agent may require the Seller to establish a segregated account at the Administrative Agent (the “New Concentration Account”), which account shall be subject to a perfected security interest in favor of the Administrative Agent, for the benefit of the Purchasers, and under the Administrative Agent’s exclusive dominion and control, into which all Collections shall be electronically swept on each Business Day, in lieu of being swept or otherwise transferred into the Existing Concentration Account.

(iii)In the case of any remittances received in any Collection Account that shall have been identified, to the satisfaction of the Servicer, to not constitute Collections or other proceeds of the Receivables or the Related Security, the Seller shall promptly remit such items to the Person identified to it as being the owner of such remittances.

(m)Minimum Net Worth. The Seller shall at all times maintain Net Worth of not less than 3% of the Purchase Limit.

(n)Anti-Corruption Laws and Sanctions. Policies and procedures will be maintained and enforced by or on behalf of the Seller Parties that are designed in good faith and in a commercially reasonable manner to promote and achieve compliance, in the reasonable judgment of the Seller Parties, by the Seller Parties, each of their Subsidiaries, and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, in each case giving due regard to the nature of such Person’s business and activities.

Section 7.2 Negative Covenants of the Seller Parties. Until the date on which the Obligations have been indefeasibly paid in full, each of the Seller Parties hereby covenants as to itself that:

(a)Name Change, Offices, Records and Books of Accounts. The Seller will not change its name, identity or legal structure or relocate its chief executive office or any office where Records are kept unless it shall have: (i) given the Administrative Agent at least 10 Business Days prior notice thereof and (ii) delivered to the Administrative Agent all financing statements, instruments and other documents requested by the Administrative Agent in connection with such change or relocation.

(b)Change in Payment Instructions to Obligors. Except as may be required by the Administrative Agent pursuant to Section 7.1(l)(ii), such Seller Party will not: (i) add or terminate any Collection Account, (ii) add or terminate any bank as a Collection Bank, (iii) make any change in its instructions to Obligors regarding payments to be made to any Collection Account, or (iv) make any change in the standing sweep instructions in place with respect to the Collection Accounts and the Existing Concentration Account, unless, in each of the foregoing cases, the Administrative Agent shall have received at least ten (10) Business Days before the proposed effective date therefor:

(A)written notice of such addition, termination or change, and

(B)with respect to the addition of a new Lock-Box or Collection Account, an executed account agreement and an executed Collection Agreement from the applicable Collection Bank relating thereto;

provided, however, that each Seller Party may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Lock-Box or Collection Account in which Collections are not commingled with other funds if such Lock-Box or Collection Account is subject to a Collection Agreement that is then in effect.

(c)Modifications to Credit and Collection Policy and Invoices. Without the Administrative Agent’s prior written consent (which consent shall not be unreasonably withheld or delayed), such Seller Party will not make any change to the Credit and Collection Policy which would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables. Except as provided in Section 8.2(c), such Seller Party will not extend, amend or otherwise modify the terms of any Receivable or any Invoice related thereto other than in accordance with the Credit and Collection Policy.

(d)Sales, Liens, Etc. Such Seller Party shall not, and shall not authorize the Originator to, sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any Receivable or Related Security or Collections in respect thereof, or upon or with respect to any Invoice under which any Receivable arises, or any Lock-Box Account or Collection Account or assign any right to receive income in respect thereof (other than, in each case, the creation of the interests therein in favor of the Administrative Agent, for the benefit of the Purchasers, provided for herein), and such Seller Party shall defend the right, title and interest of the Administrative Agent, for the benefit of the Purchasers, in, to and under any of the foregoing property, against all claims of third parties claiming through or under such Seller Party or the Originator.

(e)Nature of Business; Other Agreements; Other Indebtedness. The Seller shall not engage in any business or activity of any kind or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, in each case other than the transactions contemplated and authorized by this Agreement and the Sale Agreement. Without limiting the generality of the foregoing, the Seller shall not create, incur, guarantee, assume or suffer to exist any indebtedness or other liabilities, whether direct or contingent, other than:

(i)as a result of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business,

(ii)the incurrence of obligations under this Agreement,

(iii)the incurrence of obligations, as expressly contemplated in the Sale Agreement, to make payment to the Originator thereunder for the purchase of Receivables from the Originator under the Sale Agreement, and

(iv)the incurrence of operating expenses in the ordinary course of business of the type otherwise contemplated in Section 7.1(k) of this Agreement.

In the event the Seller shall at any time borrow a “Subordinated Loan” under the Sale Agreement, the obligations of the Seller in connection therewith shall be subordinated to the obligations of the Seller to the Purchasers, the Administrative Agent and the Co-Agents under this Agreement, on the terms provided for in the Subordinated Note and the Sale Agreement; provided, however, that such subordination terms shall not restrict payments to be made in respect of such Subordinated Loans except to the extent set forth in Section 7.2(i) of this Agreement and provided, further, that amounts owing in respect of such Subordinated Loans shall be automatically, without presentment, demand, protest or other notice to the Originator, set-off and otherwise reduced by any obligations at any time owing by the Originator to the Seller in respect of any intercompany loans from the Seller to the Originator made with the proceeds of Collections. Notwithstanding this Section 7.2(e), Seller shall be permitted to enter into the Cash Management Agreement and administrative services agreements with the Originator and to lend all or a portion of the sale proceeds to the Originator pursuant to a promissory note.

(f)Amendments to Sale Agreement. The Seller shall not, without the prior written consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed):

(i)cancel or terminate the Sale Agreement,

(ii)give any consent, waiver, directive or approval under the Sale Agreement,

(iii)waive any default, action, omission or breach under the Sale Agreement, or otherwise grant any indulgence thereunder, or

(iv)amend, supplement or otherwise modify any of the terms of the Sale Agreement.

(g)Amendments to Corporate Documents. Without the prior written consent of the Administrative Agent, the Seller shall not amend its restated certificate of incorporation or its amended and restated by-laws in any respect that would impair its ability to comply with the terms or provisions of any of the Transaction Documents, including, without limitation, Section 7.1(k) of this Agreement.

(h)Merger. The Seller shall not merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions, and except as otherwise contemplated herein) all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets of, any Person.

(i)Restricted Junior Payments. From and after the Facility Termination Date, the Seller shall not make any Restricted Junior Payment if, after giving effect thereto, the Seller would fail to meet its obligations pursuant to Section 7.1(m) of this Agreement.

(j)Anti-Corruption Laws and Sanctions. The Seller Parties shall not use, and the Seller Parties shall procure that their Subsidiaries and their respective directors, officers, employees and agents shall not use, the proceeds of any Purchase (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding or financing any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, in each case to the extent doing so would violate any Sanctions, or (C) in any other manner that would result in liability to any party hereto under any applicable Sanctions or the violation of any Sanctions by any such Person.

ARTICLE VIII.

ADMINISTRATION AND COLLECTION

Section 8.1 Designation of Servicer.

(a)The servicing, administration and collection of the Receivables shall be conducted by such Person (the “Servicer”) so designated from time to time in accordance with this Section 8.1. Eastman Chemical Financial Corporation is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms of this Agreement. The Administrative Agent may at any time following a Servicer Default designate as Servicer any Person to succeed Eastman Chemical Financial Corporation or any successor Servicer.

(b)Without the prior written consent of the Co-Agents, the Servicer shall not be permitted to delegate any of its duties or responsibilities as Servicer to any Person other than, with respect to certain Defaulted Receivables, to outside collection agencies in accordance with its customary practices. Notwithstanding any delegation of its duties to an outside collection agency, the Servicer shall remain primarily liable for all duties and responsibilities imposed on the Servicer hereunder.

Section 8.2 Duties of Servicer.

(a)The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy.

(b)The Servicer shall administer the Collections in accordance with the procedures described herein and in Article III. The Servicer shall set aside and hold in trust for the account of the Seller and the Purchasers their respective shares of the Collections of Receivables in accordance with Sections 3.2 and 3.3 except as otherwise permitted in connection with the Cash Management Agreement and the Concentration Account. The Servicer shall upon the request of the Administrative Agent at the direction of the Co-Agents after the occurrence of the Facility Termination Date, segregate, in a manner acceptable to the Administrative Agent, all cash, checks and other instruments received by it from time to time constituting Collections from the general funds of the Servicer or the Seller prior to the remittance thereof in accordance with Section 3.3. If the Servicer shall be required to segregate Collections pursuant to the preceding sentence, the Servicer shall segregate and deposit with a bank designated by the Administrative Agent such allocable share of Collections of Receivables set aside for the Purchasers on the first Business Day following receipt by the Servicer of such Collections, duly endorsed or with duly executed instruments of transfer.

(c)The Servicer, may, in accordance with the Credit and Collection Policy, extend the maturity of any Receivable or adjust the Outstanding Balance of any Receivable as the Servicer may determine to be appropriate to maximize Collections thereof; provided, however, that such extension or adjustment shall not alter the status of such Receivable as a Defaulted Receivable or limit the rights of the Administrative Agent, for the benefit of the Purchasers, under this Agreement. Notwithstanding anything to the contrary contained herein, from and after the occurrence of a Servicer Default, the Administrative Agent, for the benefit of the Purchasers, shall have the absolute and unlimited right to direct the Servicer to commence or settle any legal action with respect to any Receivable or to foreclose or otherwise realize upon or repossess any Related Security.

(d)The Servicer shall hold in trust for the Seller and the Purchasers, in accordance with their respective interests in the Receivables, all Records that evidence or relate to the Receivables, the related Invoices and Related Security or that are otherwise necessary to collect the Receivables and shall, as soon as practicable upon demand of the Administrative Agent at the direction of the Co-Agents, deliver or make available to the Administrative Agent all such Records, (x) if such demand is made at any time prior to the replacement of Eastman Chemical Financial Corporation as Servicer hereunder, at the chief executive office of the Originator and (y) if such demand is made at any time after the replacement of Eastman Chemical Financial Corporation as Servicer hereunder, to such location as the Administrative Agent may designate in writing. The Servicer shall, as soon as practicable following receipt thereof, turn over to the Seller (i) that portion of Collections of Receivables representing the Seller’s undivided fractional ownership or security interest therein, and (ii) any cash collections or other cash proceeds received with respect to indebtedness not constituting Receivables. The Servicer shall, from time to time at the request of any Purchaser, furnish to the Purchasers (promptly after any such request) a calculation of the amounts set aside for the Purchasers pursuant to Section 3.3.

(e)Any payment by an Obligor in respect of any indebtedness owed by it to the Seller shall, except as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Administrative Agent, be applied as a Collection of any Receivable of such Obligor (starting with the oldest such Receivable) to the extent of any amounts then due and payable thereunder before being applied to any other receivable or other obligation of such Obligor.

Section 8.3 Collection Notices. The Administrative Agent, for the benefit of the Purchasers, is authorized at any time after the occurrence of a Collection Notice Event to date and to deliver to the Collection Banks a Collection Notice under any Collection Agreement. The Seller hereby transfers to the Administrative Agent, for the benefit of the Purchasers, effective when the Administrative Agent delivers such notice, the exclusive ownership and control of the Lock-Box Accounts and Collection Accounts. In case any authorized signatory of the Seller whose signature appears on a Collection Agreement shall cease to have such authority before the delivery of such notice, such Collection Notice shall nevertheless be valid as if such authority had remained in force. The Seller hereby authorizes the Administrative Agent, for the benefit of the Purchasers, and agrees that the Administrative Agent shall be entitled to (i) endorse the Seller’s name on checks and other instruments representing Collections from and after delivery of any Collection Notice, (ii) from and after the occurrence of a Servicer Default, enforce the Receivables, the related Invoices and the Related Security, and (iii) from and after the occurrence of a Collection Notice Event, subject to the other provisions of this Agreement, take such action as shall be necessary to cause all cash, checks and other instruments constituting Collections of Receivables to come into the possession of the Administrative Agent rather than the Seller.

Section 8.4 Responsibilities of the Seller. Anything herein to the contrary notwithstanding, the exercise by the Administrative Agent, for the benefit of the Purchasers, of their rights hereunder shall not release the Servicer or the Seller from any of their duties or obligations with respect to any Receivables or under the related Invoices or Contracts. The Purchasers shall have no obligation or liability with respect to any Receivables or related Contracts or Invoices, nor shall any of them be obligated to perform the obligations of the Seller.

Section 8.5 Receivables Reports. Not later than the 20^th of each month hereafter (or, if the 20^th of any month is not a Business Day, on the next succeeding Business Day), and at such other times as the Administrative Agent may reasonably request, the Servicer shall prepare and forward to the Administrative Agent a Monthly Report; provided that in the event the long-term rating of the Performance Indemnitor is BB+ (or below) by Standard & Poor’s and Ba1 (or below) by Moody’s Investors Service, Inc., Servicer shall prepare and forward to Administrative Agent a Weekly Report.

Section 8.6 Servicer Fee. To the extent of available Collections in accordance with the priorities set forth in Sections 3.2 and 3.3, on each Settlement Date hereafter, the Servicer (if other than the Seller) shall be paid the Servicer Fee in arrears for the preceding Settlement Period.

ARTICLE IX.

SERVICER DEFAULTS

Section 9.1 Servicer Default. The occurrence of any one or more of the following events shall constitute a Servicer Default:

(a)Any Seller Party shall fail to make any payment or deposit when required hereunder.

(b)Any Seller Party shall fail to deliver any Monthly Report within two (2) Business Days after the same is due or shall fail to perform or observe any covenant in Section 7.2(e), (f), (g) or (h) and such failure shall remain unremedied for two (2) Business Days after the earlier to occur of written notice thereof from the Administrative Agent to such Seller Party or discovery thereof by an Authorized Officer of such Seller Party.

(c)Any Seller Party shall fail to perform or observe any other term, covenant or agreement hereunder (other than as referred to in any other subsection of this Section 9.1) and, if capable of being remedied, such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Seller Parties by the Administrative Agent; provided that there shall be deducted from such number of days any grace period utilized by the Seller Parties in notifying the Administrative Agent of such nonperformance or failure to observe pursuant to Section 7.1(b)(iv).

(d)Any representation, warranty or certification made by a Seller Party in this Agreement, any other Transaction Document or in any other document delivered pursuant hereto shall prove to have been incorrect when made or deemed made, and such incorrect representation, warranty or certification has or would reasonably be expected to have a Material Adverse Effect.

(e)(i) Any Seller Party or the Performance Indemnitor or any Material Subsidiary shall commence a voluntary case concerning itself under the Bankruptcy Code; or (ii) an involuntary case is commenced against any Seller Party, the Performance Indemnitor or any Material Subsidiary and the petition is not controverted within 30 days, or is not dismissed within 60 days, after commencement of the case; or (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of any Seller Party, the Performance Indemnitor or any Material Subsidiary or any Seller Party, the Performance Indemnitor or any Material Subsidiary commences any other proceedings under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to any Seller Party, the Performance Indemnitor or any Material Subsidiary or there is commenced against any Seller Party, the Performance Indemnitor or any Material Subsidiary any such proceeding which remains undismissed for a period of 60 days; or (iv) any order of relief or other order approving any such case or proceeding is entered; or (v) any Seller Party, the Performance Indemnitor or any Material Subsidiary is adjudicated insolvent or bankrupt; or (vi) any Seller Party, the Performance Indemnitor or any Material Subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or (vii) any Seller Party, the Performance Indemnitor or any Material Subsidiary makes a general assignment for the benefit of creditors; or (viii) any Seller Party, the Performance Indemnitor or any Material Subsidiary shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or (ix) any Seller Party, the Performance Indemnitor or any Material Subsidiary shall by any act or failure to act consent to, approve of or acquiesce in any of the foregoing; or (x) any corporate action is taken by any Seller Party, the Performance Indemnitor or any Material Subsidiary for the purpose of effecting any of the foregoing.

(f)(i) The Originator shall for any reason cease to transfer, or cease generally to have the legal capacity or otherwise generally be incapable of transferring, Receivables to the Seller, as purchaser under the Sale Agreement, except following the Originator’s receipt of notice from the Seller or the Administrative Agent of the occurrence of the Facility Termination Date, or (ii) any “Termination Event” shall occur under the Sale Agreement.

(g)The aggregate Receivable Interests hereunder shall at any time exceed 100% and such excess shall not be eliminated within two (2) Business Days after discovery thereof.

(h)A Change of Control shall occur.

(i)The Internal Revenue Service or the Pension Benefit Guaranty Corporation files one or more tax or ERISA liens against the assets of the Seller and the same shall remain in effect for any period of 15 consecutive days.

(j)The 3-Month Average Default Ratio shall exceed 1.35%.

(k)The 3-Month Average Delinquency Ratio shall exceed 1.35%.

(l)The 3-Month Average Dilution Ratio shall exceed 4.0%.

(m)Failure of the Seller to pay any Indebtedness when due; or the default by the Seller in the performance of any term, provision or condition contained in any agreement under which any Indebtedness was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity (whether or not such default has been waived); or any Indebtedness of the Seller shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof.

(n)The Performance Indemnity shall cease to be in full force and effect, or the Performance Indemnitor shall deny liability thereunder.

(o)One or more judgments or decrees in an aggregate amount of $100,000,000 or more shall be entered by a court against the Performance Indemnitor and (i) any such judgments or decrees shall not be stayed, discharged, paid, bonded or vacated within 30 days or (ii) enforcement proceedings shall be commenced by any creditor on any such judgments or decrees; provided, however, that any such judgment or order shall not be a default under this section if and for so long as (i) the amount of such judgment or order is covered by a valid and binding policy of insurance, with deductible or self-insured retention consistent with industry practices, between the defendant and the insurer covering payment thereof and (ii) such insurer, which shall be rated at least "A-" by A.M. Best Company, has been notified of, and has not disputed the claim made for payment of, the amount of such judgment or order.

(p)One or more judgments or decrees (of which an Authorized Officer of Seller has actual knowledge) in an aggregate amount of $13,474 or more shall be entered by a court against the Seller and (i) any such judgments or decrees shall not be stayed, discharged, paid, bonded or vacated within 30 days or (ii) enforcement proceedings shall be commenced by any creditor on any such judgments or decrees; provided, however, that any such judgment or order shall not be a default under this section if and for so long as (i) the amount of such judgment or order is covered by a valid and binding policy of insurance, with deductible or self-insured retention consistent with industry practices, between the defendant and the insurer covering payment thereof and (ii) such insurer, which shall be rated at least "A-" by A.M. Best Company, has been notified of, and has not disputed the claim made for payment of, the amount of such judgment or order.

ARTICLE X.

INDEMNIFICATION

Section 10.1 Indemnities by the Seller. Without limiting any other rights which the Administrative Agent, Co-Agents or Purchasers may have hereunder or under applicable law, the Seller hereby agrees to indemnify each of the Administrative Agent, Co-Agents and Purchasers and their respective officers, directors, agents and employees (each, an “Indemnified Party”) from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”) awarded against or actually incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by a Purchaser of an interest in the Receivables, excluding, however:

(a)Indemnified Amounts to the extent final judgment of a court of competent jurisdiction holds such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification;

(b)Indemnified Amounts to the extent the same includes losses in respect of Receivables which are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or

(c)taxes imposed by the jurisdiction in which such Indemnified Party’s principal executive office is located (such Indemnified Party’s “Principal Jurisdiction”) or taxes imposed by other jurisdictions to the extent a corresponding apportionment is available in such Indemnified Party’s Principal Jurisdiction, on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is consistent with the Intended Characterization;

provided, however, that nothing contained in this sentence shall limit the liability of the Seller or the Servicer or limit the recourse of the Administrative Agent, the Co-Agents or the Purchasers to the Seller or Servicer for amounts otherwise specifically provided to be paid by the Seller or the Servicer under the terms of this Agreement. Without limiting the generality of the foregoing indemnification (but subject to the exclusions above), the Seller shall indemnify the Administrative Agent, the Co-Agents and the Purchasers for Indemnified Amounts (including, without limitation, losses in respect of uncollectible Receivables, regardless of whether reimbursement therefor would constitute recourse to the Seller or the Servicer) relating to or resulting from:

(i)any representation or warranty made by the Seller, the Originator or the Servicer (or any officers of the Seller, the Originator or the Servicer) under or in connection with this Agreement, any other Transaction Document, any Monthly Report or any other written information or report delivered by the Seller, the Originator or the Servicer pursuant hereto or thereto, which shall have been false or incorrect in any respect when made or deemed made;

(ii)the failure by the Seller, the Originator or the Servicer to comply with any applicable law, rule or regulation with respect to any Receivable or any Contract or Invoice related thereto, or the nonconformity of any Receivable, Contract or Invoice with any such applicable law, rule or regulation;

(iii)any failure of the Seller, the Originator or the Servicer to perform its duties or obligations in accordance with the provisions of this Agreement or any other Transaction Document;

(iv)any product liability or similar claim arising out of or in connection with merchandise, insurance or services which are the subject of any Contract or Invoice;

(v)any Rebill or any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of any Obligor to the payment of any Receivable (including, without limitation, a defense based on (A) such Receivable or the related Contract or Invoice not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms, (B) a claim based on the assertion that disclosure of any Invoice to the Seller, the Administrative Agent, the Co-Agents or any Purchaser constituted a breach of a confidentiality provision in the applicable Contract, and/or (C) a claim based on any assertion that the sale of all or any part of the Originator’s rights to receive payment under the Contracts violates any anti-assignment clauses contained therein), or any other claim resulting from the sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services;

(vi)the commingling of Collections of Receivables at any time with other funds;

(vii)any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby or thereby, the use of the proceeds of a Purchase, the ownership of or security interest in the Receivable Interests or any other investigation, litigation or proceeding relating to the Seller or the Originator in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby or thereby (other than an investigation, litigation or proceeding (A) relating to a dispute solely amongst the Purchasers (or certain Purchasers) and the Administrative Agent or the Co-Agents, or (B) excluded by Section 10.1(a));

(viii)any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding;

(ix)a Servicer Default described in Section 9.1(e);

(x)the failure to vest and maintain vested in the Administrative Agent, for the benefit of the Purchasers, or to transfer to the Administrative Agent, for the benefit of the Purchasers, legal and equitable title to, a first priority perfected undivided percentage ownership interest (to the extent of the Receivable Interests contemplated hereunder) or security interest in the Receivables, the Related Security and the Collections, free and clear of any Adverse Claim (except as created by the Transaction Documents or as provided in the Cash Management Agreement); or

(xi)any failure of the Seller to give reasonably equivalent value to the Originator under the Sale Agreement in consideration of the transfer by the Originator of any Receivable, or any attempt by any Person to void any such transfer under statutory provisions or common law or equitable action, including, without limitation, any provision of the federal Bankruptcy Code, 11 U.S.C. § 101 et seq.

Section 10.2 Increased Cost and Reduced Return.

(a)If after the date hereof, any Affected Entity shall be charged any fee, expense or increased cost on account of the adoption of any applicable law, rule or regulation (including any applicable law, rule or regulation regarding capital adequacy), any accounting principles or any change in any of the foregoing, or any change in the interpretation or administration thereof by the Financial Accounting Standards Board (“FASB”), any governmental authority, any central bank or any compara-ble agency charged with the interpretation or administration thereof, or compliance with any request or directive (whether or not having the force of law) of any such authority or agency (a “Regulatory Change”): (i) that subjects any Affected Entity to any charge or withhold-ing on or with respect to any Funding Agreement or an Affected Entity’s obligations under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of taxation of payments to any Affected Entity of any amounts payable under any Funding Agreement (except for changes in the rate of tax on the overall net income of an Affected Entity or taxes excluded by Section 10.1(c)) or (ii) that imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of an Affected Entity, or credit extended by an Affected Entity pursuant to a Funding Agreement or (iii) that imposes any other condition the result of which is to increase the cost to an Affected Entity of performing its obligations under a Funding Agreement, or to reduce the rate of return on an Affected Entity’s capital as a consequence of its obligations under a Funding Agreement, or to reduce the amount of any sum received or receivable by an Affected Entity under a Funding Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, then, subject to Section 10.2(b) below, upon demand by the applicable Co-Agent (which shall be accompanied by a certificate of the relevant Affected Entity setting forth the information required in Section 10.2(b) below), the Seller shall pay to such Co-Agent, for the benefit of the relevant Affected Entity, such amounts charged to such Affected Entity or such amounts to otherwise compensate such Affected Entity for such increased cost or such reduction. For the avoidance of doubt, if the issuance after the date hereof of any other change in accounting standards (including, without limitation, Statement of Financial Accounting Standards 140 and FASB Interpretation No. 46) or the issuance of any other pronouncement, release or interpretation (or revisions to the foregoing), causes or requires the consolidation of all or a portion of the assets and liabilities of a Conduit or Seller with the assets and liabilities of the Administrative Agent, the Co-Agents, any Liquidity Bank or any other Affected Entity, such event shall constitute a circumstance on which such Affected Entity may base a claim for reimbursement under this Section.

(b)Payment of any sum pursuant to Section 10.2(a) shall be made by the Seller to the applicable Co-Agent, for the benefit of the relevant Affected Entity, not later than ten (10) days after any such demand is made in writing, and no payment of any such sum shall be due or owing unless written demand therefor is made within ninety (90) days after the occurrence of the Regulatory Change giving rise thereto. A certificate of any Affected Entity, signed by an authorized officer claiming compensation under this Section 10.2 and setting forth the additional amount to be paid for its benefit and explaining the manner in which such amount was determined shall constitute prima facie evidence of the amount to be paid.

(c)If less than all of the Liquidity Banks in a Group make a claim pursuant to Section 10.2(a), each claiming Liquidity Bank shall be obliged, at the request of the Seller, the applicable Conduit or the applicable Co-Agent, to assign all of its rights and obligations hereunder to (i) another Liquidity Bank or (ii) another financial institution nominated by the Seller or such Co-Agent that is acceptable to such Conduit and willing to participate in this Agreement through the Liquidity Termination Date in the place of such claiming Liquidity Bank; provided that (i) the claiming Liquidity Bank receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such notifying Liquidity Bank’s Pro Rata Share of the Capital and Discount owing to all of the Liquidity Banks and all accruing but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Receivable Interests (excluding amounts assessed pursuant to Section 10.2(a)), and (ii) the replacement Liquidity Bank otherwise satisfies the requirements of Section 13.1(b).

Section 10.3 Costs and Expenses Relating to this Agreement. In addition to the fees specified in the Fee Letters, the Seller shall pay to the Administrative Agent, the Co-Agents and any Conduit within 30 days after receipt of a written invoice all reasonable out-of-pocket expenses (including, without limitation, reasonable audit fees and time charges of counsel for the Administrative Agent, the Co-Agents and the Purchasers) actually incurred in connection with the preparation, execution, delivery, amendments and waivers of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder. The Seller shall pay to the Administrative Agent and Co-Agents within 30 days after receipt of a written invoice any and all costs and expenses of the Administrative Agent, Co-Agents and the Purchasers, if any, including reasonable counsel fees and expenses actually incurred in connection with the enforcement of this Agreement and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following a Servicer Default. The Seller shall reimburse any Conduit promptly for all other costs and expenses incurred by such Conduit or any shareholder of such Conduit (“Other Costs”), including, without limitation, the cost of auditing such Conduit’s books by certified public accountants, the cost of rating the Commercial Paper by independent financial rating agencies, and the reasonable fees and out-of-pocket expenses of counsel for such Conduit or any counsel for any shareholder of such Conduit with respect to advising such Conduit or such shareholder as to matters relating to such Conduit’s operations; provided, however, that (i) each Conduit shall allocate the liability for such Other Costs to the Seller and to each other borrower or seller that is a party to a Receivables Purchase Facility of such Conduit (“Other Customers”) on the basis of such Conduit’s relative outstanding investments under this Agreement and the agreements with such Other Customers or on some other reasonable basis selected by such Conduit which reflects the relative size of its relationships with or exposure to the Seller and such Other Customers; (ii) if such Other Costs are attributable to the Seller and not attributable to any Other Customer, the Seller shall be solely liable for such Other Costs; and (iii) if such Other Costs are attributable to Other Customers and not attributable to the Seller, such Other Customers shall be solely liable for such Other Costs; and provided, further, that Other Costs of the type described in the preceding clause (i) shall not exceed 0.01% of such Conduit’s Group Limit.

ARTICLE XI.

THE Administrative Agent AND THE CO-Agents

Section 11.1 Authorization and Action. (a) Each Purchaser hereby designates and appoints The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch to act as its Administrative Agent hereunder and under each other Transaction Document, and authorizes the Administrative Agent to take such actions as Administrative Agent on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of this Agreement and the other Transaction Documents together with such powers as are reasonably incidental thereto. The Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein or in any other Transaction Document, or any fiduciary relationship with any Purchaser or Co-Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Administrative Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for the Administrative Agent. In performing its functions and duties hereunder and under the other Transaction Documents, the Administrative Agent shall act solely as Administrative Agent for the Purchasers and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for any Seller Party or any of its successors or assigns. The Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement, any other Transaction Document or applicable law. The appointment and authority of the Administrative Agent hereunder shall terminate upon the indefeasible payment in full of all Aggregate Unpaids and termination of the Commitments.

(b) [Reserved]

(d) Each of Victory and the Victory Liquidity Banks hereby designates and appoints BTMU to act as the Victory Agent hereunder and under each other Transaction Document, and authorizes such Co-Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to such Co-Agent by the terms of this Agreement and the other Transaction Documents together with such powers as are reasonably incidental thereto.

(e) No Co-Agent shall have any duties or responsibilities to any Person that is not a member of its Group. No Co-Agent shall have any duties or responsibilities, except those expressly set forth herein or in any other Transaction Document, or any fiduciary relationship with any Purchaser, any other Co-Agent, or the Administrative Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of any Co-Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for any Co-Agent. In performing its functions and duties hereunder and under the other Transaction Documents, each Co-Agent shall act solely as agent for the Purchasers in its Group and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for any Purchaser in the other Group or any Seller Party or any of its successors or assigns. No Co-Agent shall be required to take any action which exposes such Co-Agent to personal liability or which is contrary to this Agreement, any other Transaction Document or applicable law. The appointment and authority of the Co-Agents hereunder shall terminate upon the indefeasible payment in full of all Aggregate Unpaids.

Section 11.2 Delegation of Duties. Each of the Administrative Agent and the Co-Agents may execute any of its duties under this Agreement and each other Transaction Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. None of the Administrative Agent or the Co-Agents shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

Section 11.3 Exculpatory Provisions. None of the Administrative Agent or the Co-Agents or any of their respective directors, officers, agents or employees shall be (i) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement or any other Transaction Document (except for its, their or such Person’s own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Purchasers for any recitals, statements, representations or warranties made by any Seller Party contained in this Agreement, any other Transaction Document or any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement, or any other Transaction Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or any other Transaction Document or any other document furnished in connection herewith or therewith, or for any failure of any Seller Party to perform its obligations hereunder or thereunder, or for the satisfaction of any condition specified in Article VI, or for the perfection, priority, condition, value or sufficiency or any collateral pledged in connection herewith. None of the Administrative Agent or the Co-Agents shall be under any obligation to any Purchaser, Co-Agent or the Administrative Agent to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement or any other Transaction Document, or to inspect the properties, books or records of the Seller Parties. None of the Administrative Agent or the Co-Agents shall be deemed to have knowledge of a Servicer Default or Potential Servicer Default unless the Administrative Agent and the Co-Agents have received notice from another party hereto.

Section 11.4 Reliance by Administrative Agent and Co-Agents. Each of the Administrative Agent and the Co-Agents shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Seller), independent accountants and other experts selected by the Administrative Agent or the Co-Agents. The Administrative Agent shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it shall first receive such advice or concurrence of the Co-Agents if it deems such advice or concurrence necessary or appropriate and it shall first be indemnified to its satisfaction by the Purchasers, provided that unless and until the Administrative Agent shall have received such advice, the Administrative Agent may take or refrain from taking any action, as the Administrative Agent shall deem advisable and in the best interests of the Purchasers. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of the Co-Agents, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Co-Agents and the Purchasers.

Section 11.5 Non-Reliance on Administrative Agent, Co-Agents and Other Purchasers. Each Purchaser expressly acknowledges that none of the Administrative Agent or Co-Agents, nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Administrative Agent or Co-Agent hereafter taken, including, without limitation, any review of the affairs of the Seller, shall be deemed to constitute any representation or warranty by the Administrative Agent or Co-Agents. Each Purchaser represents and warrants to the Administrative Agent and Co-Agents that it has and will, independently and without reliance upon the Administrative Agent, the Co-Agents or any other Purchaser and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Seller and made its own decision to enter into this Agreement, the other Transaction Documents and all other documents related hereto or thereto.

Section 11.6 Reimbursement and Indemnification. Each of the Liquidity Banks agrees to reimburse and indemnify its Co-Agent and its officers, directors, employees, representatives and agents ratably according to their Pro Rata Shares, to the extent not paid or reimbursed by the Seller (i) for any amounts for which such Co-Agent, acting in its capacity as Co-Agent, is entitled to reimbursement by the Seller hereunder and (ii) for any other expenses actually incurred by such Co-Agent, in its capacity as a Co-Agent and acting on behalf of the Purchasers in its Group, in connection with the administration and enforcement of this Agreement and the other Transaction Documents. In addition, each of the Liquidity Banks agrees to reimburse and indemnify the Administrative Agent and its officers, directors, employees, representatives and agents ratably according to their respective Commitments, to the extent not paid or reimbursed by the Seller (i) for any amounts for which the Administrative Agent, acting in its capacity as Administrative Agent, is entitled to reimbursement by the Seller hereunder and (ii) for any other expenses actually incurred by the Administrative Agent, in its capacity as Administrative Agent and acting on behalf of the Purchasers, in connection with the administration and enforcement of this Agreement and the other Transaction Documents.

Section 11.7 Administrative Agent and Co-Agents in their Individual Capacities. Each of the Administrative Agent and the Co-Agents, and each of its Affiliates, may make loans to, accept deposits from and generally engage in any kind of business with the Seller or any Affiliate of the Seller as though each such party was not Administrative Agent or Co-Agent hereunder. With respect to the acquisition of Receivable Interests pursuant to this Agreement, each of the Administrative Agent and the Co-Agents shall have the same rights and powers under this Agreement as any Purchaser and may exercise the same as though it were not an Administrative Agent or Co-Agent, and the terms “Liquidity Bank,” “Purchaser,” “Liquidity Banks” and “Purchasers” shall include each of the Administrative Agent and Co-Agent in its individual capacity.

ARTICLE XII.

[INTENTIONALLY DELETED]

ARTICLE XIII.

ASSIGNMENTS; PARTICIPATIONS

Section 13.1 Assignments.

(a)The parties hereby agree and consent to the complete or partial assignment by each Conduit of all of its rights under, interest in, title to and obligations under this Agreement to its Liquidity Banks and to any other special purpose receivables funding or purchasing conduit for which the same Co-Agent (or one of its Affiliates) performs administrative functions. Upon any complete or partial assignment by a Conduit in accordance with the preceding sentence, such Conduit shall be released from its obligations so assigned. Further, each of the parties hereby agrees that any assignee of a Conduit of this Agreement or all or any of the Receivable Interests of such Conduit shall have all of the rights and benefits under this Agreement as if references to such Conduit explicitly referred to such assignee, and no such assignment shall in any way impair the rights and benefits of such Conduit hereunder. Neither the Seller nor the Servicer shall have the right to assign its rights or obligations under this Agreement without the consent of the Administrative Agent and the Co-Agents in their sole discretion.

(b)With the prior written consent of the applicable Conduit and (except in the case of an assignment by a Liquidity Bank that ceases to have short-term debt ratings of both A-1 or better by Standard & Poor’s and P-1 by Moody’s Investors Service, Inc.) the Seller (which consent of the Seller shall not be unreasonably withheld or delayed), any Liquidity Bank may at any time and from time to time assign to one or more Persons (each, a “Purchasing Liquidity Bank”) all or any part of its rights and obligations under this Agreement pursuant to an assignment agreement, in a form and substance satisfactory to the applicable Co-Agent (the “Assignment Agreement”), executed by such Purchasing Liquidity Bank and such selling Liquidity Bank. Each assignee of a Liquidity Bank must have a short-term debt rating of A-1 or better by Standard & Poor’s and P-1 by Moody’s Investors Service, Inc. and must agree to deliver to its Co-Agent and Conduit, promptly following any request therefor by such Co-Agent or Conduit, an enforceability opinion in form and substance satisfactory to such Co-Agent and Conduit. Upon delivery of the executed Assignment Agreement to such Co-Agent with a copy to the Administrative Agent and the Seller, such selling Liquidity Bank shall be released from its obligations hereunder to the extent of such assignment. Thereafter, the Purchasing Liquidity Bank shall for all purposes be a Liquidity Bank party to this Agreement and shall have all the rights and obligations of a Liquidity Bank under this Agreement to the same extent as if it were an original party hereto and no further consent or action by any other party hereto shall be required.

Section 13.2 Participations. Any Purchaser may, in the ordinary course of its business at any time sell to one or more Persons (each, a “Participant”) participating interests in its interests in the Receivable Interests and all other rights and interests of such Purchaser hereunder. Notwithstanding any such sale by a Purchaser of a participating interest to a Participant, such Purchaser’s rights and obligations under this Agreement shall remain unchanged, such Purchaser shall remain solely responsible for the performance of its obligations hereunder, and the other parties hereto shall continue to deal solely and directly with such Purchaser in connection with such Purchaser’s rights and obligations under this Agreement.

Section 13.3 Federal Reserve. Notwithstanding any other provision of this Agreement to the contrary, any Liquidity Bank may at any time pledge or grant a security interest in all or any portion of its rights (including, without limitation, any Receivable Interest and any rights to payment of Capital and Discount) under this Agreement to secure obligations of such Liquidity Bank to a Federal Reserve Bank, without notice to or consent of the Seller, the Administrative Agent or the Co-Agents; provided that no such pledge or grant of a security interest shall release a Liquidity Bank from any of its obligations hereunder, or substitute any such pledgee or grantee for such Liquidity Bank as a party hereto.

ARTICLE XIV.

MISCELLANEOUS

Section 14.1 Waivers and Amendments. No failure or delay on the part of any party hereto in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given. No provision of this Agreement or any other Transaction Document may be amended, supplemented, modified or waived except in writing signed by each of the Seller, the Servicer (if, in the case of an amendment, supplement, modification or waiver that relates to a Transaction Document other than this Agreement, the Servicer is a party to such Transaction Document), the Administrative Agent and the Co-Agents.

Section 14.2 Notices.

(a)Except as provided in subsection (b) below, all communications and notices provided for hereunder shall be in writing (including executed originals, executed .PDF copies or images transmitted via electronic mail, and executed facsimile copies) and shall be given to the other parties hereto at their respective addresses, fax numbers or E-mail addresses set forth on the signature pages hereof. Such communications and notices shall be effective (i) if mailed, five (5) days after being deposited in the mail with first class postage pre-paid, (ii) if transmitted as an executed .PDF file via electronic mail, when an electronic “read receipt” is received by the sender, and (iii) if delivered via courier, when delivered to the intended recipient.

(b) The Seller hereby authorizes each Co-Agent to effect Purchases and Tranche Period and Discount Rate selections based on telephonic notices made by any Person whom such Co-Agent in good faith believes to be acting on behalf of the Seller. The Seller agrees to deliver promptly to each Co-Agent, upon request, a written confirmation of each telephonic notice signed by an authorized officer of the Seller. However, the absence of such confirmation shall not affect the validity of such notice. If the written confirmation differs from the action taken by the applicable Co-Agent, the records of such Co-Agent shall govern absent manifest error.

Section 14.3 Ratable Payments. If any Purchaser, whether by setoff or otherwise, has payment made to it with respect to any portion of the Aggregate Unpaids owing to such Purchaser (other than payments received pursuant to Section 10.2 or 10.3) in a greater proportion than that received by any other Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such Purchaser agrees, promptly upon demand, to purchase for cash without recourse or warranty a portion of the Aggregate Unpaids held by the other Purchasers so that after such purchase each Purchaser will hold its ratable proportion of the Obligations; provided that if all or any portion of such excess amount is thereafter recovered from such Purchaser, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

Section 14.4 Protection of the Interests of the Administrative Agent.

(a)The Seller agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary, or that the Administrative Agent and the Co-Agents may reasonably request, to perfect, protect or more fully evidence the Receivable Interests, or to enable the Administrative Agent, for the benefit of the Purchasers, to exercise and enforce its rights and remedies hereunder. At any time after the occurrence of a Servicer Default and replacement of the Servicer, the Administrative Agent may, or the Administrative Agent may direct the Seller Parties to, notify the Obligors of Receivables, at the Seller’s expense, of the ownership or security interests of the Administrative Agent, for the benefit of the Purchasers, under this Agreement and, following the occurrence of a Collection Notice Event, may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to the Administrative Agent or its designee. The Seller Parties shall, at any Purchaser’s written request, withhold the identity of such Purchaser in any such notification.

(b)If the Seller or the Servicer fails to perform any of its obligations hereunder, the Administrative Agent, for the benefit of the Purchasers, may (but shall not be required to) perform, or cause performance of, such obligation; and the Administrative Agent’s reasonable costs and expenses actually incurred in connection therewith shall be payable by the Seller (if the Servicer that fails to so perform is Eastman Chemical Financial Corporation or an Affiliate thereof) as provided in Section 10.3, as applicable. Each of the Seller Parties each irrevocably authorizes the Administrative Agent at any time and from time to time, and appoints the Administrative Agent, for the benefit of the Purchasers, as its attorney-in-fact, to act on behalf of the Seller Parties (i) to execute on behalf of the Seller as debtor (if required) and to file financing statements necessary in the Administrative Agent’s or the Co-Agents’ sole discretion to perfect and to maintain the perfection and priority of the interest of the Purchasers in the Receivables and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as the Administrative Agent or the Co-Agents in their sole discretion deem necessary to perfect and to maintain the perfection and priority of the interests of the Purchasers in the Receivables. This appointment is coupled with an interest and is irrevocable.

Section 14.5 Confidentiality.

(a)Each of the Seller and the Servicer shall maintain, and shall cause each of its employees and officers to maintain, the confidentiality of the Fee Letters and the other confidential or proprietary information with respect to the Conduits their respective businesses which is obtained by it or them in connection with the structuring, negotiating and execution of the Transaction Documents and the transactions contemplated therein, except that the Seller, the Servicer and their respective officers and employees may disclose such information to the Administrative Agent, the Co-Agents, the Originator, any rating agency and to the Seller’s or the Servicer’s external accountants and attorneys and as required by any applicable law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings with competent jurisdiction (whether or not having the force or effect of law) so long as such required disclosure is made under seal to the extent permitted by applicable law or by rule of court or other applicable body and, except to the extent prohibited by law, with prior notice to the Administrative Agent and the Co-Agents.

(b) Each of the Administrative Agent, the Co-Agents and the Purchasers shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the Sale Agreement and the other confidential or proprietary information with respect to the Seller, the Originator, the Obligors and their respective businesses obtained by it or them in connection with the due diligence evaluations, structuring, negotiating and execution of the Transaction Documents, and the consummation of the transactions contemplated herein and any other activities of the Administrative Agent, the Co-Agents or the Purchasers arising from or related to the transactions contemplated herein; provided, however, that each of the Administrative Agent, the Co-Agents, the Purchasers and their respective employees, officers, directors and credit enhancers shall be permitted to disclose such confidential or proprietary information: (i) to the other Administrative Agent, Co-Agents and Purchasers, (ii) to any prospective or actual assignee or participant of any of them who executes a confidentiality agreement for the benefit of the Seller and the Originator on terms comparable to those required of the Administrative Agent, Co-Agents and Purchasers hereunder with respect to such disclosed information, (iii) to any rating agency or provider of a surety, guaranty or credit or liquidity enhancement to a Conduit, (iv) to any officers, directors, employees, investors, potential investors, credit enhancers, outside accountants, attorneys and other advisors of any of the foregoing, and (v) to the extent required pursuant to any applicable law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings with competent jurisdiction (whether or not having the force or effect of law) so long as such required disclosure is made under seal to the extent permitted by applicable law or by rule of court or other applicable body and, except to the extent prohibited by law, with prior notice to the Seller and the Originator. Either the Seller or the Originator, and their respective successors, may enforce the provisions of this Section 14.5(b).

(c) Notwithstanding any other express or implied agreement to the contrary, the parties agree and acknowledge that each of them and each of their employees, representatives, and other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to any of them relating to such tax treatment and tax structure, except to the extent that confidentiality is reasonably necessary to comply with U.S. federal or state securities laws. For purposes of this paragraph, the terms “tax treatment” and “tax structure” have the meanings specified in Treasury Regulation section 1.6011-4(c).

100

Section 14.6 Bankruptcy Petition. The Seller Parties, the Administrative Agent, the Co-Agents and each of the other Purchasers hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all outstanding senior indebtedness of any Conduit, it will not institute against, or join any other Person in instituting against, such Conduit any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.

Section 14.7 Limitation of Liability. Except with respect to any claim arising out of the willful misconduct or gross negligence of the Administrative Agent, Co- Agents or Purchaser, no claim may be made by the Seller, the Servicer or any other Person against the Administrative Agent, Co- Agents or Purchaser or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and each of the Seller and the Servicer hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Notwithstanding anything in this Agreement to the contrary, neither Conduit shall have any obligation to pay any amount required to be paid by it hereunder in excess of any amount available to it after paying or making provision for the payment of its Commercial Paper. All payment obligations of each Conduit hereunder are contingent on the availability of funds in excess of the amounts necessary to pay its Commercial Paper; and each of the other parties hereto agrees that it will not have a claim under Section 101(5) of the Bankruptcy Code if and to the extent that any such payment obligation owed to it by such Conduit exceeds the amount available to such Conduit to pay such amount after paying or making provision for the payment of its Commercial Paper.

Section 14.8 CHOICE OF LAW. THIS AGREEMENT shall be governed by the laws of the State of New York (INCLUDING Section 5-1401 of the General Obligations Law) without regard to ANY conflict of law principles.

Section 14.9 CONSENT TO JURISDICTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE TRANSACTION DOCUMENTS AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT, CO-AGENTS OR ANY PURCHASER TO BRING PROCEEDINGS AGAINST THE SELLER OR THE SERVICER IN THE COURTS OF ANY OTHER JURISDICTION WHEREIN ANY OF THEIR RESPECTIVE ASSETS MAY BE LOCATED. ANY JUDICIAL PROCEEDING BY THE SELLER OR THE SERVICER AGAINST THE ADMINISTRATIVE AGENT, CO-AGENTS, ANY PURCHASER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT, CO-AGENTS OR ANY PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE TRANSACTION DOCUMENTS SHALL BE BROUGHT ONLY IN A COURT IN THE BOROUGH OF MANHATTAN, NEW YORK.

101

Section 14.10 WAIVER OF JURY TRIAL. EACH OF THE ADMINISTRATIVE AGENT, THE CO-AGENTS, THE SELLER, THE SERVICER AND THE PURCHASERS HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE TRANSACTION DOCUMENTS OR THE RELATIONSHIPS ESTABLISHED THEREUNDER.

Section 14.11 Integration; Survival of Terms. The Transaction Documents contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. The provisions of Article X and Section 14.6 shall survive any termination of this Agreement.

Section 14.12 Counterparts; Severability. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 14.13 Co-Agent Roles. Each of the Liquidity Banks acknowledges that each Co-Agent and certain of its Affiliates acts, or may in the future act, (i) as administrator of or administrative agent for a Conduit, (ii) as issuing and paying agent for a Conduit’s Commercial Paper, (iii) to provide credit or liquidity enhancement for the timely payment for the Commercial Paper or a Conduit and (iv) to provide other services from time to time for a Conduit (collectively, the “Co-Agent Roles”). Without limiting the generality of this Section 14.13, each of the parties hereby acknowledges and consents to any and all of the Co-Agent Roles and agrees that in connection with any Co-Agent Role, a Co-Agent may take, or refrain from taking, any action which it, in its discretion, deems appropriate, including, without limitation, in its role as administrator of or administrative agent for a Conduit, the giving of notice to one or more Funding Sources of a mandatory purchase pursuant to a Funding Agreement.

Section 14.4 Characterization.

(a)It is the intention of the parties hereto that each Purchase hereunder shall constitute an absolute and irrevocable sale, which Purchase shall provide the applicable Purchaser with the full benefits of ownership of the applicable Receivable Interest. Except as specifically provided in this Agreement, each sale of a Receivable Interest hereunder is made without recourse to the Seller; provided, however, that (i) the Seller shall be liable to each of the Purchasers, the Administrative Agent and the Co-Agents for all representations, warranties, covenants and indemnities made by the Seller pursuant to the terms of this Agreement, and (ii) such sale does not constitute and is not intended to result in an assumption by any Purchaser, Administrative Agent, Co-Agent or any assignee thereof of any obligation of the Seller or the Originator or any other Person arising in connection with the Receivables, the Related Security, or the related Contracts or Invoices, or any other obligations of the Seller Parties or the Originator.

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(b)If the conveyance by the Seller to the Administrative Agent for the benefit of the Purchasers of interests in Receivables hereunder shall be characterized as a secured loan and not a sale, it is the intention of the parties hereto that this Agreement shall constitute a security agreement under applicable law. In furtherance of the foregoing, the Seller hereby grants to the Administrative Agent for the ratable benefit of the Purchasers a security interest in all of the Seller’s right, title and interest in, to and under all Receivables, all payments on or with respect thereto, all other rights relating thereto (including the Related Security), and all proceeds thereof, whether now owned or existing or hereafter arising or acquired, to secure the Obligations. After a Servicer Default, the Administrative Agent, on behalf of the Purchasers, shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided to a secured creditor after default under the UCC and other applicable law, which rights and remedies shall be cumulative.

(c)Upon termination of this Agreement in accordance with its terms (including, without limitation, following the reduction of the Obligations to zero pursuant to Section 1.3), the security interest granted pursuant to Section 14.14(b) shall automatically terminate and be of no further force and effect without performance of any act by any party hereto, and all rights to the Receivable Interests, all payments on or with respect thereto, all other rights relating thereto, and all proceeds thereof shall automatically revert to the Seller. At the request and expense of the Seller following such termination, the Administrative Agent shall execute and deliver to the Seller such documents as the Seller may reasonably request to evidence such termination.

Section 14.15 Release of Liens. Upon payment in full of the Obligations and termination of the Commitments, the Administrative Agent shall execute such UCC-3 termination statements and notices of termination of Collection Agreements as the Seller or the Servicer may reasonably request.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof.

EASTMAN CHEMICAL FINANCIAL CORPORATION, as Seller

By:

Name:

Title:

104

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH, as Victory Agent

By:

Name:

Title:

105

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH, as Administrative Agent

By:

Name:

Title:

106

VICTORY RECEIVABLES Corporation

By:

Name:

Title:

107

LIQUIDITY BANKS:

Commitment


$250,000,000	THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH, as a Victory Liquidity Bank

By:

Name:

Title:

108

Exhibit I

Definitions

As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Adjusted Dilution Ratio” means, at any time, the rolling average of the Dilution Ratio for the 12 Calculation Periods then most recently ended

“Administration Fee” has the meaning specified in the Administrative Agent’s Fee Letter.

“Administrative Agent” means BTMU in its capacity as Administrative Agent for the Purchasers pursuant to Article XI, and not in its individual capacity as a Liquidity Bank or as Victory Agent, and any successor Administrative Agent appointed by the Purchasers.

“Administrative Agent’s Fee Letter” means that certain letter agreement dated as of July 9, 2008 between the Seller and the Administrative Agent, as amended, restated and/or otherwise modified from time to time.

“Adverse Claim” means a lien, security interest, charge or encumbrance, or other right or claim in, of or on any Person’s assets or properties in favor of any other Person.

“Affected Entity” means (i) any Funding Source, (ii) any agent, administrator or manager of a Conduit, or (iii) any bank holding company in respect of any of the foregoing.

“Affiliate” means, with respect to any specified Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. For the purpose of this definition, “control” when used with respect to any specified Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled by” have meanings correlative to the foregoing.

“Aggregate Reduction” has the meaning specified in Section 1.3 hereof.

“Aggregate Reserves” means, on any date of determination, the greater of (a) the sum of the Loss Reserve, the Discount Reserve, the Servicer Fee Reserve and the Dilution Reserve, and (b) the product of the Required Reserve Factor Floor multiplied by the Net Receivables Balance as of the most recent Cut-Off Date

“Aggregate Unpaids” means, collectively, at any time, the Obligations and all Capital then outstanding.

“Agreement” means this Amended and Restated Receivables Purchase Agreement, as it may be amended or modified and in effect from time to time.

“Allowance for Volume Incentives” means, for any Calculation Period, an amount equal to the product of i) 1.5 times and ii) the average of the total amount of actual volume incentives accrued during such Calculation Period and each of the eleven (11) prior Calculation Periods.

109

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Seller Parties or their respective Subsidiaries from time to time concerning or relating to bribery or corruption, including, without limitation, the Foreign Corrupt Practices Act of 1977, as amended, and any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

“Applicable Margin” means, with respect to any Liquidity Funding, 1.40% per annum.

“Arrangement Fee” means the upfront fee specified in numbered paragraph 1 of the Co-Agents’ Fee Letter.

“Assignment Agreement” has the meaning specified in Section 13.1(b).

“Authorized Officer” shall mean, with respect to the Seller, the Servicer or the Originator, its chairman, its chief executive officer, its president, any of its senior vice presidents, any of its vice presidents, its treasurer or any of its assistant treasurers who, in each instance, has been duly and validly authorized by all necessary corporate action to execute the applicable agreement, document, instrument or certificate, or to take any other authorized action.

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as amended from time to time, and any successor statute or statutes.

“Base Rate” means a fluctuating interest rate per annum in effect from time to time equal, for any day, to the sum of (a) the higher of (i) the rate of interest announced publicly by the applicable Co-Agent, from time to time, as its prime rate or base rate for such day, or (ii) ½ of one percent per annum above the Federal Funds Effective Rate for such day, plus (b) the Applicable Margin.

“Broken Funding Costs” means, for any Receivable Interest of a Conduit which: (a) has its Capital reduced without compliance by the Seller with the notice requirements hereunder, (b) is not prepaid in the amount specified in a Reduction Notice on the date specified therein or (c) is assigned or otherwise transferred by such Conduit to its respective Liquidity Banks under a Funding Agreement or terminated prior to the date on which it was originally scheduled to end, an amount equal to, the excess, if any, of (A) the CP Costs that would have accrued during the remainder of the applicable commercial paper tranche periods determined by the applicable Co-Agent to relate to such Receivable Interest subsequent to the date of such reduction, assignment or termination (or in respect of clause (b) above, the date such prepayment was designated to occur pursuant to the applicable Reduction Notice) of the Capital of such Receivable Interest if such reduction, assignment or termination had not occurred or such Reduction Notice had not been delivered, over (B) the sum of (x) to the extent all or a portion of such Capital is allocated to another Receivable Interest, the amount of CP Costs actually accrued during the remainder of such period on such Capital for the new Receivable Interest, and (y) to the extent such Capital is not allocated to another Receivable Interest of such Conduit, the income, if any, actually received during the remainder of such period by the holder of such Receivable Interest from investing the portion of such principal not so allocated.

“BTMU” has the meaning specified in the preamble.

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“Business Day” means any day on which banks are not authorized or required to close in Kingsport, Tennessee, New York, New York or Charlotte, North Carolina and The Depository Trust Company of New York is open for business, and, if the applicable Business Day relates to any computation or payment to be made with respect to the LIBO Rate, any day on which dealings in dollar deposits are carried on in the London interbank market.

“Calculation Period” means each period from (and including) the first day of each calendar month to (and including) the last day of such calendar month; provided that the initial Calculation Period hereunder shall be the period from (and including) the date of the initial Purchase hereunder to (and including) the last day of the calendar month in which the date of such initial Purchase occurred.

“Capital” means, at any time with respect to any Purchaser, the sum of the aggregate Purchase Prices paid to the Seller by such Purchaser, minus the sum of the aggregate amount of Collections and other payments received by the applicable Co-Agent for such Purchaser which in each case are applied to reduce such Capital.

“Cash Management Agreement” has the meaning set forth in the Sale Agreement.

“Change of Control” means:

(a) a change in control of the Originator of a nature that would be required to be reported (assuming such event has not been previously reported) in response to Item 1(a) of the Current Report on Form 8-K, pursuant to Section 13 or 15(d) of the Exchange Act; provided that, without limitation, a Change in Control shall be deemed to have occurred at such time as (i) any “person” within the meaning of Section 14(d) of the Exchange Act, other than the Originator, a Subsidiary of the Originator, or any employee benefit plan(s) sponsored by the Originator or any Subsidiary of the Originator, is or has become the “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of 30% or more of the combined voting power of the outstanding securities of the Originator ordinarily having the right to vote at the election of directors, or (ii) individuals who constituted the Board of Directors of the Originator on the date of this Agreement (the “Incumbent Board”) have ceased for any reason to constitute at least a majority thereof; provided further that any person becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Originator’s shareholders, was approved by a vote of at least a majority of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Originator in which such person is named as a nominee for director without objection to such nomination) shall be, for purposes of this definition, considered as though such person were a member of the Incumbent Board; or

(b) the Originator shall cease to own, free and clear of all Adverse Claims, all of the outstanding shares of voting stock of the Seller on a fully-diluted basis.

“Charged-Off Receivable” means any Receivable or any portion of such a Receivable: (i) as to which the Obligor thereof has taken any action, or suffered any event to occur, of the type described in Section 9.1(e) (as if references to the Seller therein refer to such Obligor); or (ii) which, consistent with the Credit and Collection Policy, should be written off the Seller’s books as uncollectible.

“Co-Agent” means the Victory Agent.

“Co-Agents’ Fee Letter” means that certain Third Amended and Restated Co-Agents’ Fee Letter dated as of August 1, 2013 between the Seller and BTMU, as amended, restated and/or otherwise modified from time to time.

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“Collection Account” means each of the Lock-Box Accounts, the Direct Wire Account, the Depositary Account and, when and if applicable, the New Concentration Account.

“Collection Agreement” means, in the case of any actual or proposed Collection Account and any New Concentration Account that is established pursuant to Section 7.1(l)(ii), an agreement in a form reasonably acceptable to the Seller, the applicable Collection Bank and the Administrative Agent giving the Administrative Agent control over such account for the benefit of the Purchasers.

“Collection Bank” means, at any time, any of the banks or other financial institutions holding one or more Lock-Boxes or Collection Accounts.

“Collection Notice” means a notice from the Administrative Agent to a Collection Bank in the form attached to the applicable Collection Agreement.

“Collection Notice Event” means (a) the occurrence of any Potential Servicer Default under Section 9.1(e), (b) the occurrence with respect to the Originator of any event of the type described in Section 9.1(e) (but without regard to the 60-day grace period included in the last clause thereof) or (c) the occurrence of any Servicer Default.

“Collections” means, with respect to any Receivable, all cash collections and other cash proceeds in respect of such Receivable, including, without limitation, all cash proceeds of Related Security with respect to such Receivable.

“Commercial Paper” means promissory notes of a Conduit issued in the commercial paper market.

“Commitment” means, for each Liquidity Bank, the commitment of such Liquidity Bank to purchase its Pro Rata Share of its Group’s Percentage of the Receivable Interests from the Seller in the aggregate, the amount set forth opposite such Liquidity Bank’s name on the signature pages of this Agreement, as such amount may be modified in accordance with the terms hereof.

“Concentration Limit” means, in each case without duplication:

(a) for all Receivables that require payment (i) within 66-90 days after the original invoice date therefor, an amount equal to 5% of the aggregate Outstanding Balance of all Eligible Receivables at such time, and (ii) within 91-120 days after the original invoice date therefor, an amount equal to 5% of the aggregate Outstanding Balance of all Eligible Receivables at such time;

(b) for any Obligor and its Affiliates considered as if they were one and the same Obligor, at any time, in relation to the aggregate Outstanding Balance of Receivables owed by any such single Obligor and its Affiliates (if any), the applicable concentration limit determined according to the following table, based on the short term unsecured debt ratings currently assigned to such Obligor by S&P and Moody’s (or in the absence thereof, the equivalent long term unsecured senior debt ratings):

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Short-Term S&P Rating	Long-Term S&P Rating	Short-Term Moody’s Rating	Long-Term Moody’s Rating	Allowable % of Net Eligible Receivables (“Concentration Limit”)
A-1+	AAA	P-1	Aaa	10%
A-1	AA+, AA, AA- or A+	P-1	Aa1, Aa2, Aa3 or A1	8%
A-2	A, A- or BBB+	P-2	A2, A3 or Baa1	6.25%
A-3	BBB or BBB-	P-3	Baa2 or Baa3	4.15%
Below A-3 or Not Rated by either S&P or Moody’s	Below BBB- or Not Rated by either S&P or Moody’s	Below P-3 or Not Rated by either S&P or Moody’s	Below Baa3 or Not Rated by either S&P or Moody’s	2.5%; provided that up to two such Obligors may exceed 2.5% (but in no event exceed 3.1%) so long as (i) each other such Obligor is less than 2.5% and (ii) the sum of the percentages for the five Obligors within this category with the highest percentages (including any Obligor(s) with a percentage in excess of 2.5%) shall not exceed 12.5%.

; provided, however, that (a) if any Obligor has a split rating, the applicable rating will be the lower of the two, (b) if any Obligor is not rated by either S&P or Moody’s, the applicable Concentration Limit shall be the one set forth in the last line of the table above, and (c) upon Seller’s request from time to time, the Administrative Agent and Co-Agents may agree to a higher percentage of Eligible Receivables for a particular Obligor and its Affiliates (each such higher percentage, a “Special Concentration Limit”), it being understood that any Special Concentration Limit may require consent of the rating agencies that rate any Conduit’s Commercial Paper, may be conditioned upon an increase in the Required Reserve Factor Floor, and/or may be cancelled by the Administrative Agent at the request of either Co-Agent upon not less than five (5) Business Days’ written notice from the Administrative Agent and Co-Agents to the Seller Parties; and

(c) for all Receivables the Obligor of which, if a natural person, is not a resident of the United States or, if a corporation or other business organization, is either not organized under the laws of the United States or any political subdivision thereof or does not have its chief executive office in the United States, an amount equal to 5% of the aggregate Outstanding Balance of all Eligible Receivables at such time.

“Conduit” has the meaning specified in the preamble.

“Contingent Obligation” of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or application for a letter of credit.

“Contract” means with respect to any Receivable, any agreement, contract or other writing (other than, in each of the foregoing cases, an Invoice) with respect to the sale of goods or provision of services by the Originator to an Obligor.

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“CP Costs” means for each Pool-Funded Conduit for each day, the sum of (i) discount or interest accrued on Pooled Commercial Paper of such Pool-Funded Conduit on such day, plus (ii) any and all accrued commissions in respect of placement agents and dealers, and issuing and paying agent fees incurred, in respect of such Pooled Commercial Paper for such day, plus (iii) other costs associated with funding small or odd-lot amounts with respect to all receivable purchase facilities which are funded by Pooled Commercial Paper for such day, minus (iv) any accrual of income net of expenses received on such day from investment of collections received under all receivable purchase or financing facilities funded substantially with Pooled Commercial Paper, minus (v) any payment received on such day net of expenses in respect of Broken Funding Costs (or similar costs) related to the prepayment of any investment of such Conduit, as applicable, pursuant to the terms of any receivable purchase or financing facilities funded substantially with Pooled Commercial Paper of such Pool-Funded Conduit. In addition to the foregoing costs, if the Seller shall request any Purchase by a Pool-Funded Conduit during any period of time determined by the applicable Co-Agent in its sole discretion to result in incrementally higher CP Costs applicable to such Receivable Interest, the Capital associated with any such Receivable Interest shall, during such period, be deemed to be funded by such Pool-Funded Conduit in a special pool (which may include capital associated with other receivable purchase or financing facilities) for purposes of determining such additional CP Costs applicable only to such special pool and charged each day during such period against such principal.

“Credit Agreement” means that certain Amended and Restated Five-Year Credit Agreement dated as of April 3, 2006 by and among the Originator, the lenders and issuing banks from time to time party thereto, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., as joint lead arrangers, JPMorgan Chase Bank, N.A., as syndication agent, Deutsche Bank AG New York Branch and Wachovia Bank, National Association, as documentation agents, and Citicorp USA, Inc., as administrative agent thereunder, as the same may be amended, restated or otherwise modified or replaced from time to time.

“Credit and Collection Policy” means the Seller’s credit and collection policies and practices relating to Invoices and Receivables existing on the date hereof, as modified from time to time in accordance with this Agreement.

“Cut-Off Date” means the last day of a Calculation Period.

“Days Sales Outstanding” means, as of any day, an amount equal to the product of (x) 91, multiplied by (y) the amount obtained by dividing (i) the aggregate outstanding balance of Receivables as of the most recent Cut-Off Date, by (ii) the aggregate amount of Receivables created during the three (3) Calculation Periods including and immediately preceding such Cut-Off Date.

“Deemed Collections” means the aggregate of the following amounts:

(a) If on any day the Outstanding Balance of a Receivable is (i) reduced as a result of any rejected or returned goods, any cash discount, any Rebill or any adjustment by the Seller (other than a reduction due to a volume discount which was previously deducted in determining the Outstanding Balance of such Receivable), (ii) reduced as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction), or (iii) is otherwise reduced as a result of any of the factors set forth in the definition of “Dilutions,” the Seller shall be deemed to have received a Collection in the amount of such reduction, and

(b) If on any day any of the representations or warranties in Sections 5.1(g), (i) or (m) is no longer true with respect to a Receivable, the Seller shall be deemed to have received a Collection in an amount equal to the Outstanding Balance of such Receivable.

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The Seller hereby agrees to pay all Deemed Collections promptly to the Servicer for application on the Settlement Date immediately succeeding the event which gave rise thereto.

“Default Ratio” means, at any time, an amount expressed as a percentage equal to (i) the sum of (A) the Outstanding Balance of all Receivables that were unpaid for 91-120 days after the original due date as of the most recent Cut-Off Date, plus (B) the aggregate Outstanding Balance of all Receivables that became Charged-Off Receivables during such Calculation Period divided by (ii) the gross amount of sales during the Calculation Period that ended five (5) months prior to the first day of the month described in clause (i).

“Defaulted Receivable” means a Receivable: (i) as to which any payment, or part thereof, remains unpaid for more than 90 days from the original due date for such payment; (ii) as to which the Obligor thereof has taken any action, or suffered any event to occur, of the type described in Section 9.1(e) (as if references to any Seller Party therein refer to such Obligor); (iii) as to which the Obligor thereof, if a natural person, is deceased; or (iv) which has been identified by the Originator as uncollectible.

“Delinquency Ratio” means, for any Calculation Period, the ratio (expressed as a percentage) of (i) the aggregate Outstanding Balance of all Delinquent Receivables as of the Cut-Off Date for such Calculation Period, to (ii) the aggregate Outstanding Balance of all Receivables as of the Cut-Off Date for such Calculation Period.

“Delinquent Receivable” means a Receivable as to which any payment, or part thereof, remains unpaid for more than 60 days but less than 91 days from the original due date for such payment.

“Demand Advances” means that portion of the demand loans or advances of Purchaser Collections made pursuant to the Cash Management Agreement, and accrued and unpaid interest on such loans and advances.

“Depositary Account” means the Seller’s account no. 2079900401181 at Wells Fargo Bank in Charlotte, North Carolina, or any account established in substitution therefor with a bank that executes a Collection Agreement for the purpose of receiving deposits of Collections which are sent directly to the Seller or the Originator (and which may contain funds of the Seller or the Originator in addition to Collections).

“Dilution Horizon Factor” means, at any time, a percentage equal to (i) the gross amount of sales during the mostly recently ended Calculation Period, divided by (ii) the aggregate Net Receivables Balance at the end of the Calculation Period then most recently ended.

“Dilution Ratio” means, at any time, a percentage equal to (i) the aggregate amount of Dilutions which occurred during the Calculation Period then most recently ended, divided by (ii) the aggregate amount of Receivables originated during the Calculation Period one month prior to the Calculation Period then most recently ended.

“Dilution Reserve” means, on any date, an amount equal to (i) the Dilution Reserve Percentage, multiplied by (ii) the Net Receivables Balance as of the opening of business of the Servicer on such date.

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“Dilution Reserve Percentage” means as of any date of determination the percentage calculated in accordance with the following formula:

DRP = [(2.25 x ADR) + [(HDR - ADR) x (HDR/ADR)]] x DHF

where:

DRP = the Dilution Reserve Percentage;

ADR = the average of the monthly Dilution Ratios occurring during the 12 most recent calendar months;

HDR = the highest average three-month Dilution Ratio occurring during the 12 most recent calendar months; and

DHF = the Dilution Horizon Factor at such time.

“Dilutions” means, at any time, the aggregate amount of reductions in the Outstanding Balances of the Receivables as a result of any setoff, discount, adjustment, Rebill or otherwise, other than (i) volume discounts, (ii) cash Collections on account of the Receivables, (iii) charge-offs, and (iv) Intra-month Dilutions in excess of $100,000; provided, however, that for purposes of this definition, the net of cancellations and Rebills during a month shall never be greater than $0 even if Rebills exceed cancellations.

“Direct Wire Account” means those identified on Exhibit III hereto or any account established in substitution therefor with a bank that executes a Collection Agreement for the purposes of receiving Collections which are paid by automated clearing house (ACH) or wire transfer.

“Discount” means, for any Tranche Period relating to Receivable Interests of the Liquidity Banks:

DR x C x (AD/N)

where:

DR = the Discount Rate for such Tranche Period;

C = the amount of Capital allocated to the Receivable Interests associated with such Tranche Period;

AD = the actual number of days elapsed during such Tranche Period; and

N = 360 days when the Discount Rate is the LIBO Rate, and 365 (or when appropriate, 366) days when the Discount Rate is the Base Rate.

“Discount Rate” means the LIBO Rate or the Base Rate, as applicable with respect to a Tranche Period relating to Receivable Interests of the Liquidity Banks.

“Discount Reserve” means, for any Calculation Period, the product (expressed as a percentage) of (i) 2.25 times (ii) the Base Rate as of the most recent Cut-Off Date times (iii) a fraction the numerator of which is the highest Days Sales Outstanding for the most recent 12 Calculation Periods and the denominator of which is 360 times (iv) the Net Receivables Balance.

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“Early Collection Fee” means, for any Receivable Interest held by a Liquidity Bank which (i) has its Capital reduced, or (ii) has its Receivable Interest assigned pursuant to a Funding Agreement (which shall be deemed to create a new Tranche Period), or (iii) has its Tranche Period terminated prior to the date on which it was originally scheduled to end or (iv) does not become subject to an Aggregate Reduction following the delivery of any Reduction Notice, the excess, if any, of (A) the Discount that would have accrued during the remainder of the Tranche Period subsequent to the date of such reduction or termination (or in respect of clause (iv) above, the date such Aggregate Reduction was designated to occur pursuant to the Reduction Notice) on the Capital of such Receivable Interest if such reduction or termination had not occurred or Reduction Notice had not been delivered, over (B) the sum of (x) to the extent all or a portion of such Capital is allocated to another Receivable Interest, the Discount actually accrued during such period on such Capital for the new Receivable Interest, and (y) to the extent such Capital is not allocated to another Receivable Interest, the income, if any, actually received during such period by the holder of such Receivable Interest from investing the portion of such Capital not so allocated. In the event that the amount referred to in clause (B) exceeds the amount referred to in clause (A), the relevant Purchaser or Purchasers agree to pay to the Seller the amount of such excess. All Early Collection Fees shall be due and payable hereunder on the Settlement Date immediately following demand therefor.

“Eligible Receivable” means, at any time:

(1) a Receivable which is denominated and payable only in United States dollars in the United States,

(2) a Receivable the Obligor of which (a) is not an Affiliate of any of the parties hereto, (b) is not a government or a governmental subdivision or agency, and (c) is not a Sanctioned Person,

(3) a Receivable the Obligor of which is not the Obligor of Receivables of which more than 50% of the aggregate Outstanding Balance constitute Defaulted Receivables,

(4) a Receivable which is not a Defaulted Receivable,

(5) subject to the limitations set forth in clause (a) of the definition of “Concentration Limit,” a Receivable which arises under a Contract that requires payment within 120 days after the original invoice date therefor and has not had its payment terms extended,

(6) a Receivable which is an “account” within the meaning of Section 9-102 of the UCC of all applicable jurisdictions,

(7) a Receivable evidenced by an Invoice which arises under a non-executory contract, which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor enforceable by the Seller and its assignees against such Obligor in accordance with its terms,

(8) a Receivable evidenced by an Invoice that contains an obligation to pay a specified sum of money, contingent only upon the sale of the underlying goods or services by the Originator,

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(9) a Receivable which is not subject to any right of rescission, set-off (in respect of all or any portion of the Outstanding Balance thereof then being proposed for inclusion in Net Receivables Balance as of any date), counterclaim, any other defense (including defenses arising out of violations of usury laws) of the applicable Obligor or the Originator or any other Adverse Claim,

(10) a Receivable as to which the Originator has satisfied and fully performed all obligations on its part with respect to such Receivable required to be fulfilled by it, and no further action is required to be performed by any Person with respect thereto other than payment thereon by the applicable Obligor,

(11) a Receivable all right, title and interest to and in which has been validly transferred by the Originator directly to the Seller under and in accordance with the Sale Agreement, and the Seller has good and marketable title thereto free and clear of any Adverse Claim,

(12) a Receivable which, together with the Invoice related thereto, was created in compliance with any applicable underlying contract, and does not contravene any law, rule or regulation applicable thereto (including, without limitation, any law, rule and regulation relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) in any material respect which would limit the collectibility of such Receivable or give rise to a claim for money damages against the Originator, the Seller or any of the Seller’s assignees and with respect to which no part of the Contract related thereto is in violation of any such law, rule or regulation,

(13) a Receivable which satisfies, in all material respects, all applicable requirements of the Credit and Collection Policy,

(14) a Receivable which was generated in the ordinary course of the Originator’s business in connection with the sale of chemicals, plastics, fibers and related products and services to the applicable Obligor by the Originator, and

(15) a Receivable as to which the Administrative Agent has not notified the Seller that the Administrative Agent and Co-Agents have reasonably determined that such Receivable or class of Receivables is not acceptable as an Eligible Receivable, including, without limitation, because such Receivable is evidenced by an Invoice that is not acceptable to the Administrative Agent and Co-Agents.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“Excess Concentration Balances” means, on any day, the portion of the aggregate Outstanding Balance of Receivables owing from an Obligor and its Affiliates (considered as if they were a single Obligor) as shown on the most recent Monthly Report, which exceeds the applicable Concentration Limit or Special Concentration Limit.

“Existing Concentration Account” means the Originator’s account no. 40634446 at Citibank, N.A. in New York, New York (ABA No. 021000089), or any account established in substitution therefor upon not less than fifteen (15) Business Days’ prior written notice to the Administrative Agent, accompanied by any necessary amendments to Collection Agreements which reference funds being swept or transferred each Business Day from Collection Accounts into such existing concentration account.

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“Face Value” means, when used with reference to any Commercial Paper issued by Victory, the face amount stated therein in the case of any Commercial Paper note issued on a discount basis, and the principal amount stated therein plus the amount of all interest accruing on such Commercial Paper note from the date of its issue to its stated maturity date in the case of any Commercial Paper note issued on an interest-bearing basis.

“Facility Termination Date” means the earliest to occur of (a) the Liquidity Termination Date, (b) the date on which a Servicer Default of the type described in Section 9.1(e) occurs, (c) the date designated by the Administrative Agent on behalf of the Purchasers in a written notice to the Seller following the occurrence of a Servicer Default other than as described in Section 9.1(e), (d) the date designated by the Seller in a written notice delivered to the Administrative Agent not less than 10 Business Days (or, if longer, the Required Notice Period) prior to such proposed termination date, and (e) the day on which the conditions precedent set forth in Section 6.2 are not satisfied with respect to a Reinvestment.

“Federal Funds Effective Rate” means for the Victory Group for any day, an interest rate per annum equal to (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the preceding Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities; or (ii) if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:30 a.m. (New York time) for such day on such transactions received by BTMU from three federal funds brokers of recognized standing selected by it. Each determination of the Federal Funds Effective Rate by BTMU shall be conclusive and binding on the Seller in the absence of manifest error.

“Fee Letters” means the Administrative Agent’s Fee Letter and the Co-Agents’ Fee Letter.

“Finance Charges” means, with respect to any Invoice, any finance, interest, late payment charges or similar charges owing by an Obligor pursuant to such Invoice.

“Funding Agreement” means any agreement or instrument executed by any Funding Source with or for the benefit of a Conduit.

“Funding Source” means (i) any Liquidity Bank or (ii) any insurance company, bank or other financial institution providing liquidity, credit enhancement or back-up purchase support or facilities to a Conduit.

“GAAP” means generally accepted accounting principles in effect in the United States of America as of the date of this Agreement.

“Group” means the Victory Group.

“Group Limit” means $250,000,000.

“Incremental Purchase” means any purchase of a Receivable Interest which increases the total outstanding Capital hereunder.

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“Indebtedness” of a Person means such Person’s (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property or services (other than accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) capitalized lease obligations, (vi) net liabilities under interest rate swap, exchange or cap agreements, and (vii) Contingent Obligations.

“Intended Characterization” means, for income tax purposes, the characterization of the acquisition by the Purchasers of Receivable Interests as a loan or loans by the Purchasers to the Seller secured by the Receivables, the Related Security, the Collection Accounts and the Collections.

“Intra-month Dilutions” means, at any time the aggregate amount of reductions in the Outstanding Balances of the Receivables as a result of any setoff, discount, adjustment that is solely a result of intra-month internal accounting and does not reflect any adjustment made to the Outstanding Balance of any invoiced Receivable payable by the applicable Obligor.

“Invoice” means, collectively, with respect to any Receivable: (i) any paper or electronic bill, statement or invoice for goods sold or services rendered by the Originator to an Obligor, and (ii) any instrument or chattel paper now or hereafter evidencing all or any portion of the same, but in all instances excluding Contracts.

“Late Charge” means with respect to any amount due and payable by the Seller hereunder or under the Fee Letters, an amount equal to the greater of (i) $1000 and (ii) interest on any such amount at a rate per annum equal to 2% above the Base Rate accruing from and including the date that such amount was due to and excluding the date that such amount is paid; provided, however, that such interest rate will not at any time exceed the maximum rate permitted by applicable law.

“LIBO Rate” means, for any Tranche Period, the rate per annum equal to the sum of (a)(i) LIBOR divided by (ii) one minus the Reserve Requirement (expressed as a decimal), if any, applicable to such Tranche Period plus (b) the Applicable Margin per annum.

“LIBOR” means, for each Group for any Tranche Period, the rate per annum determined on the basis of the offered rate for deposits in U.S. dollars of amounts equal or comparable to the Capital of the related Receivable Interest offered for a term comparable to such Tranche Period, which rates appear on a Bloomberg L.P. terminal, displayed under the address “US0001M <Index> Q <Go>” for one-month Tranche Periods, “US0003M <Index> Q <Go>” for three-month Tranche Periods, and “US0006M <Index> Q <Go>“ for six-month Tranche Periods effective as of 11:00 A.M., London time, two Business Days prior to the first day of such Tranche Period, provided that if no such offered rates appear on such page, LIBOR for such Tranche Period will be the arithmetic average of rates quoted by not less than two major banks in New York, New York, selected by the applicable Co-Agent, at approximately 10:00 a.m. (New York time), two Business Days prior to the first day of such Tranche Period, for deposits in U.S. dollars offered by leading European banks for a period comparable to such Tranche Period in an amount comparable to such Capital.

“Liquidity Bank” means a Victory Liquidity Bank.

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“Liquidity Funding” means (a) the portion of any Receivable Interest that is purchased by the Administrative Agent on behalf of a Conduit’s Liquidity Banks pursuant to Section 1.1, and (b) the portion of any Receivable Interest that is put to or financed by a Conduit’s Liquidity Banks pursuant to a Funding Agreement.

“Liquidity Termination Date” means April 28, 2018.

“Lock-Box” means a locked postal box maintained by the Seller to which a bank who has executed a Collection Agreement has been granted exclusive access for the purposes of retrieving and processing payments made on the Receivables.

“Lock-Box Account” means the deposit account of the Seller that is associated with each Lock-Box.

“Loss Horizon Factor” means, at any time, a percentage equal to (i) the gross amount of sales during the five (5) Calculation Periods then most recently ended, divided by (ii) the aggregate Net Receivables Balance at the end of the Calculation Period then most recently ended.

“Loss Reserve” means an amount equal to the product of the Loss Reserve Percentage multiplied by the Net Receivables Balance.

“Loss Reserve Percentage” means at any time the percentage calculated in accordance with the following formula:

LRP = 2.25 x LHF x DR

where:

LRP = the Loss Reserve Percentage;

LHF = the Loss Horizon Factor; and

DR = the highest three month rolling average of the Default Ratios occurring during the 12 most recent calendar months.

“Material Adverse Effect” means a material adverse effect on (i) the financial condition or operations of any Seller Party, (ii) the ability of any Seller Party or the Originator to perform its obligations under the Transaction Documents to which it is a party, (iii) the legality, validity or enforceability of this Agreement or any Collection Agreement relating to a Lock-Box Account or Collection Account into which a material portion of Collections are deposited, (iv) the Administrative Agent’s interest, on behalf of the Purchasers, in the Receivables generally or in any significant portion thereof, (v) the collectibility of the Receivables generally or of any material portion of the Receivables, or (vi) the financial condition or operations of the Originator.

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“Material Subsidiary” means each Subsidiary of the Performance Indemnitor which meets any of the following conditions: (a) the Performance Indemnitor and its other Subsidiaries, investments in and advances to such Subsidiary exceed 10% of the total assets of the Performance Indemnitor and its Subsidiaries consolidated as of the end of the most recently completed fiscal year, (b) the Performance Indemnitor’s and its other Subsidiaries’ proportionate share of the total assets (after intercompany eliminations) of such Subsidiary exceeds 10% of the total assets of the Performance Indemnitor and its Subsidiaries consolidated as of the end of the most recently completed fiscal year, or (c) the Performance Indemnitor’s and its other Subsidiaries’ equity in the income from the continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principles (excluding non-recurring items and special charges) of such Subsidiary exceeds 10% of such income of the Performance Indemnitor and its Subsidiaries consolidated for the most recently completed fiscal year.

“Monthly Report” means a report, in substantially the form of Exhibit V hereto (appropriately completed), furnished by the Servicer to the Administrative Agent pursuant to Section 8.5.

“Net Eligible Receivables” means, on any date of determination, the aggregate Outstanding Balance of all Eligible Receivables at such time less the Allowance for Volume Incentives at such time.

“Net Receivables Balance” means, at any time, the amount of Net Eligible Receivables at such time less the aggregate amount of all Excess Concentration Balances and less the aggregate amount of sales taxes payable included in such Outstanding Balances.

“Net Worth” means, as of the last Business Day of each Calculation Period preceding any date of determination, (a) the aggregate Outstanding Balance of the Receivables at such time, minus (b) the sum of (i) the aggregate Capital outstanding at such time, plus (ii) the aggregate outstanding principal balance of the Subordinated Loans (including any Subordinated Loan proposed to be made on the date of determination).

“New Concentration Account” has the meaning specified in Section 7.1(l)(ii).

“Obligations” has the meaning specified in Section 3.1.

“Obligor” means a Person obligated to make payments pursuant to an Invoice.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“Originator” means Eastman Chemical Company, a Delaware corporation.

“Other Costs” has the meaning specified in Section 10.3.

“Other Customers” has the meaning specified in Section 10.3.

“Outstanding Balance” of any Receivable at any time means the then outstanding principal balance thereof, less the sum of: (a) any interest or finance charges thereon, without regard to whether any of the same shall have been capitalized, and (b) any allowances for volume discounts granted or to be granted thereon.

122

“Percentage” means, for each Group (a) on any date of determination on which no Receivable Interests are outstanding, the ratio of such Group’s Group Limit to the Purchase Limit, and (b) on any date of determination on which any Receivable Interests are outstanding, the ratio of the aggregate Capital outstanding from the Purchasers in such Group to the aggregate Capital outstanding from all Purchasers in each Group.

“Performance Indemnitor” means the Originator.

“Performance Indemnity” means an Amended and Restated Performance Indemnity in the form of Exhibit VIII hereto, duly executed by the Performance Indemnitor in favor of the Administrative Agent and the Purchasers.

“Person” means an individual, partnership, corporation, limited liability company, joint venture, association, trust, or any other entity, or organization, including a government or political subdivision or agent or instrumentality thereof.

“Pooled Commercial Paper” means Commercial Paper notes of a Pool-Funded Conduit subject to any particular pooling arrangement by such Pool-Funded Conduit, but excluding Commercial Paper issued by such Pool-Funded Conduit for a tenor and in an amount specifically requested by any Person in connection with any agreement effected by such Pool-Funded Conduit.

“Pool-Funded Conduit” means Victory.

“Potential Servicer Default” means an event which, with the expiration of a grace period without cure or the giving of notice, or both, would constitute a Servicer Default.

“Program Fee” has the meaning specified in the Co-Agents’ Fee Letter.

“Proposed Reduction Date” has the meaning set forth in Section 1.3.

“Pro Rata Share” means, for each Liquidity Bank, the Commitment of such Liquidity Bank divided by the aggregate of the Commitments of the Liquidity Banks in its Group.

“Purchase” means the sale by the Seller hereunder to the Administrative Agent for the benefit of the Groups of a Receivable Interest. Each Purchase shall either be an Incremental Purchase or a Reinvestment.

“Purchase Date” means each Business Day on which an Incremental Purchase or a Reinvestment occurs pursuant to the terms of this Agreement.

“Purchase Limit” means $250,000,000.

“Purchase Notice” has the meaning specified in Section 1.2

“Purchase Price” means, with respect to any Incremental Purchase of a Receivable Interest, the amount paid to the Seller for such Receivable Interest which shall not exceed the least of: (i) the amount requested by the Seller in the applicable Purchase Notice, (ii) the unused portion of the Purchase Limit on the applicable Purchase Date, and (iii) the excess, if any, of the Net Receivables Balance on the applicable Purchase Date over the aggregate outstanding amount of Capital.

“Purchaser” means a Conduit or a Liquidity Bank.

123

“Purchaser Collections” means an undivided percentage interest in each Collection and Deemed Collection equal to the Receivable Interest.

“Rebill” means, with respect to any Receivable, any cancellation of the applicable Invoice and reissuance of a replacement Invoice therefor in a different amount.

“Receivable” means all rights to payment for goods sold or services performed by the Originator, but only to the extent such right to payment is either an account or a payment intangible (as each of the foregoing terms is used in Article 9 of the UCC) and includes, without limitation, the obligation to pay any Finance Charges with respect to all of the foregoing. Rights to payment arising from any one transaction, including without limitation, rights to payment represented by an individual Invoice, shall constitute a Receivable separate from a Receivable consisting of the rights to payment arising from any other transaction; provided, however, that a Rebill shall not be deemed to be the creation of a new Receivable and shall instead be deemed to be an amendment and restatement of the original Receivable and related Invoice; and provided, further, that any right to payment referred to in the immediately preceding sentence shall be a Receivable regardless of whether the account debtor or the Originator treats such right to payment as a separate payment obligation.

“Receivable Interest” means, at any time, an undivided percentage ownership interest (computed as set forth below) associated with a designated amount of Capital, selected pursuant to the terms and conditions hereof in (i) each Receivable arising prior to the time of the most recent computation or recomputation of such undivided interest, (ii) all Related Security with respect to each such Receivable, and (iii) all Collections with respect to, and other proceeds of, each such Receivable. Each such undivided percentage interest shall equal:

NRB - AR

where:

C = the Capital of such Receivable Interest.

NRB = the Net Receivables Balance.

AR = the Aggregate Reserves.

“Receivables Purchase Facility” means any receivables purchase agreement, loan agreement or other similar contracted arrangement to which a Conduit is a party relating to the transfer, purchase or financing of receivables or other financial assets.

“Records” means, with respect to any Receivable, all Invoices and other documents, books, records and other information (including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property and rights) relating to such Receivable (but solely to the extent of such Receivable or any Related Security therefor), excluding, however, (a) any Contracts, and (b) any other documents, information or writings (other than Invoices) which relate to confidential, proprietary, nonpublic or commercially sensitive matters.

“Redacted Copy” means, with respect to (a) any Contract or (b) any Record (other than an Invoice) that contains confidential, proprietary, nonpublic or commercially sensitive information, a photocopy or facsimile copy thereof as to which the Seller has redacted only such confidential, proprietary, nonpublic or commercially sensitive information.

“Reduction Notice” has the meaning set forth in Section 1.3.

124

“Reinvestment” has the meaning specified in Section 3.2.

“Related Security” means, with respect to any Receivable:

(i) all of the Seller’s interest in the goods (if any), the sale of which gave rise to such Receivable,

(ii) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable (but solely to the extent of such Receivable), whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements and security agreements (if any) describing any collateral securing such Receivable,

(iii) all guaranties of all or any portion of such Receivable (whether pursuant to the Contract related to such Receivable or otherwise) and all government insurance policies or other third-party insurance policies or surety bonds insuring payment of all or any portion of such Receivable, in each of the foregoing cases, solely to the extent of such Receivable,

(iv) all Records related to such Receivable,

(v) all of the Seller’s right, title and interest in, to and under the Sale Agreement, the Cash Management Agreement and the Demand Advances made pursuant to the Cash Management Agreement; and

(vi) all proceeds of any of the foregoing.

“Required Capital Amount” has the meaning set forth in the Sale Agreement.

“Required Liquidity Banks” means, at any time, Liquidity Banks with Commitments in excess of 66-2/3% of the Purchase Limit.

“Required Notice Period” means the number of days required notice set forth below applicable to the Aggregate Reduction indicated below:



Aggregate Reduction	Required Notice Period
up to $25,000,000	2 Business Days
> $25,000,000	3 Business Days

“Required Reserve Factor Floor” means, for any Calculation Period, the sum (expressed as a percentage) of (a) 12.5% plus (b) the product of the Adjusted Dilution Ratio and the Dilution Horizon Factor, in each case, as of the immediately preceding Cut-Off Date.

“Reserve Requirement” means, as to either Group, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is actually imposed against its Co-Agent in respect of Eurocurrency liabilities, as defined in Regulation D of the Board of Governors of the Federal Reserve System as in effect from time to time.

125

“Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of capital stock of the Seller now or hereafter outstanding, except a dividend payable solely in shares of that class of stock or in any junior class of stock to the Seller, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of capital stock of the Seller now or hereafter outstanding, (iii) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to the Subordinated Loans (as defined in the Sale Agreement), (iv) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of capital stock of the Seller now or hereafter outstanding, and (v) any payment of management fees by the Seller.

“Sale Agreement” means that certain Second Amended and Restated Receivables Purchase and Sale Agreement dated as of July 14, 2005, by and between the Originator, as seller, and the Seller, as buyer, as the same may be further amended, restated and/or otherwise modified from time to time in accordance with the terms thereof and hereof.

“Sanctioned Country” means, at any time, a country or territory which is the subject or target of any Sanctions.

“Sanctioned Person” means, at any time, (a) any Person currently the subject or the target of any Sanctions, including any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, and (b) any Person controlled by any such Person.

“Sanctions” means economic, financial or other sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or other relevant sanctions authority, including the U.S. and Canada.

“Section” means a numbered section of this Agreement, unless another document is specifically referenced.

“Seller” has the meaning specified in the preamble.

“Seller Parties” means (a) the Seller and (b) at any time while Eastman Chemical Financial Corporation or one of its Affiliates is acting as the Servicer, the Servicer.

“Servicer” means at any time the Person then authorized pursuant to Article VIII of this Agreement to service, administer and collect Receivables.

“Servicer Default” has the meaning specified in Section 9.1.

“Servicer Fee” means, for each day in a Calculation Period:

(a) an amount equal to (i) the Servicer Fee Percentage (or, at any time while Eastman Chemical Financial Corporation or one of its Affiliates is the Servicer, such lesser percentage as may be agreed between Seller and the Servicer on an arms’ length basis based on then prevailing market terms for similar services), times (ii) the aggregate Outstanding Balance of all Receivables at the close of business on the Cut-Off Date immediately preceding such Calculation Period, times (iii) 1/360; or

126

(b) on and after the Servicer’s reasonable request made at any time when Eastman Chemical Financial Corporation or one of its Affiliates is no longer acting as Servicer hereunder, an alternative amount specified by the successor Servicer not exceeding (i) 110% of such Servicer’s reasonable costs and expenses of performing its obligations under this Agreement during the preceding Calculation Period, divided by (ii) the number of days in the current Calculation Period.

“Servicer Fee Percentage” means 1.0% or such other percentage as may be agreed upon between the Administrative Agent and the Servicer as an arms-length rate for the Servicer Fee.

“Servicer Fee Reserve” means an amount equal to the product of (i) 2.25, times (ii) the Servicer Fee Percentage, times (iii) the Net Receivables Balance, times (iv) a fraction the numerator of which is the highest Days Sales Outstanding for the most recent 12 Calculation Periods and the denominator of which is 360.

“Settlement Date” means the 5^th Business Day following each Cut-Off Date.

“Settlement Period” means, for any Settlement Date, the immediately preceding Calculation Period.

“Subordinated Loan” has the meaning set forth in the Sale Agreement.

“Subordinated Note” has the meaning set forth in the Sale Agreement.

“Subsidiary” of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Seller.

“Terminating Tranche” has the meaning set forth in Section 4.3(b).

“Termination Event” shall have the meaning set forth in the Sale Agreement.

“3-Month Average Default Ratio” means, on any date of determination, the average of the Default Ratios for the three Calculation Periods then most recently ended.

“3-Month Average Delinquency Ratio” means, on any date of determination, the average of the Delinquency Ratios for the three Calculation Periods then most recently ended.

“3-Month Average Dilution Ratio” means, on any date of determination, the average of the Dilution Ratios for the three Calculation Periods then most recently ended.

127

“Tranche Period” means, with respect to any Receivable Interest held by a Liquidity Bank:

(a) if Discount for such Receivable Interest is calculated on the basis of the LIBO Rate, a period of one month, or such other period as may be mutually agreeable to the applicable Co-Agent and the Seller, commencing on a Business Day selected by the Seller or such Co-Agent pursuant to this Agreement. Such Tranche Period shall end on the day in the applicable succeeding calendar month which corresponds numerically to the beginning day of such Tranche Period, provided, however, that if there is no such numerically corresponding day in such succeeding month, such Tranche Period shall end on the last Business Day of such succeeding month; or

(b) if Discount for such Receivable Interest is calculated on the basis of the Base Rate, a period commencing on a Business Day selected by the Seller, provided that no such period shall exceed 30 days.

If any Tranche Period would end on a day which is not a Business Day, such Tranche Period shall end on the next succeeding Business Day, provided, however, that in the case of a Tranche Period corresponding to the LIBO Rate, if such next succeeding Business Day falls in a new month, such Tranche Period shall end on the immediately preceding Business Day. In the case of any Tranche Period for any Receivable Interest of which commences before the Facility Termination Date and would otherwise end on a date occurring after the Facility Termination Date, such Tranche Period shall end on the Facility Termination Date. The duration of each Tranche Period which commences after the Facility Termination Date shall be of such duration as selected by the Administrative Agent.

“Transaction Documents” means, collectively, this Agreement, the Fee Letters, the Sale Agreement, the Subordinated Note, the Performance Indemnity, each Collection Agreement and all other instruments, documents and agreements executed and delivered by the Seller or the Originator in connection with this Agreement or the Sale Agreement, but excluding Contracts.

“UCC” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

“Unused Fee” has the meaning specified in the Co-Agents’ Fee Letter.

“Victory” has the meaning specified in the preamble.

“Victory Agent” means BTMU in its capacity as agent for the Victory Group under the Transaction Documents and its successors in such capacity.

“Victory Group” has the meaning specified in the preamble.

“Victory Liquidity Bank” means BTMU and its assigns.

“Volcker Rule” means Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and the applicable rules and regulations thereunder.

“Weekly Report” means a report, in the form to be determined by the Administrative Agent from time to time (appropriately completed), furnished by the Servicer to the Administrative Agent pursuant to the proviso in Section 8.5.

128

All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of/New York, and not specifically defined herein, are used herein as defined in such Article 9. Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Sale Agreement.

129

Exhibit 12.01

EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES

Computation of Ratios of Earnings to Fixed Charges




		Second Quarter				First Six Months
(Dollars in millions)		2015		2014		2015		2014
Earnings from continuing operations before income taxes excluding noncontrolling interest	$	401	$	397	$	656	$	718
Add:
Interest expense		70		48		140		93
Appropriate portion of rental expense ⁽¹⁾		6		6		13		11
Amortization of capitalized interest		2		2		3		4
Earnings as adjusted	$	479	$	453	$	812	$	826

Fixed charges:
Interest expense	$	70	$	48	$	140	$	93
Appropriate portion of rental expense ⁽¹⁾		6		6		13		11
Capitalized interest		2		2		4		4
Total fixed charges	$	78	$	56	$	157	$	108

Ratio of earnings to fixed charges		6.1x		8.1x		5.2x		7.6x


⁽¹⁾	For all periods presented, the interest component of rental expense is estimated to equal one-third of such expense.

130

Exhibit 31.01

EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES

Rule 13a - 14(a)/15d - 14(a) Certifications

I, Mark J. Costa, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Eastman Chemical Company;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 30, 2015

/s/ Mark J. Costa

Mark J. Costa

Chief Executive Officer

131

Exhibit 31.02

EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES

Rule 13a - 14(a)/15d - 14(a) Certifications

I, Curtis E. Espeland, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Eastman Chemical Company;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 30, 2015

/s/ Curtis E. Espeland

Curtis E. Espeland

Executive Vice President and Chief Financial Officer

132

Exhibit 32.01

EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES

Section 1350 Certifications

In connection with the Quarterly Report of Eastman Chemical Company (the "Company") on Form 10-Q for the period ending June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:


1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

A signed original of this written statement required by Section 906 has been provided to Eastman Chemical Company and will be retained by Eastman Chemical Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: July 30, 2015

/s/ Mark J. Costa

Mark J. Costa

Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.

133

Exhibit 32.02

EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES

Section 1350 Certifications


1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: July 30, 2015

/s/ Curtis E. Espeland

Curtis E. Espeland

Executive Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.

134

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Form 10-Q EASTMAN CHEMICAL CO For: Jun 30

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