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DEFINITIVE COPY
EASTMAN KODAK COMPANY
343 State Street
Rochester, New York 14650
NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
(CORPORATE LOGO OMITTED)
Date of Notice March 27, 1997
TABLE OF CONTENTS
Notice of Annual Shareholders Meeting...................4
Information Requests....................................5
A Note for Kodak Employees and Retirees, and
Dividend Reinvestment Plan Participants...............5
Election of Directors (Item 1)..........................5
Committees of the Board of Directors...................10
Beneficial Security Ownership of Directors, Nominees
and Executive Officers...............................12
Compensation of Directors and Executive Officers.......13
Report on Executive Compensation by the Executive
Compensation and Development Committee...............28
Performance Graph - Shareholder Return.................32
Ratification of Election of
Independent Accountants (Item 2).....................34
Shareholder Proposal (Item 3)..........................34
Other Matters..........................................36
TO KODAK SHAREHOLDERS
On behalf of the Board of Directors, it is my pleasure to
invite you to attend the Annual Meeting of the shareholders of
Eastman Kodak Company. The Meeting will be held in Greeley,
Colorado, on May 14, 1997, at 10:00 a.m.
It is important that your shares be represented at the Meeting.
Please sign, date and return the enclosed proxy card as soon as
possible.
There will be time during the Meeting to discuss each item of
business described in the Proxy Statement. There will also be time
for you to ask questions about the Company.
s/George Fisher
George M. C. Fisher
Chairman of the Board
NOTICE OF ANNUAL SHAREHOLDERS MEETING
The Annual Meeting of the shareholders of Eastman Kodak Company
will be held at the Union Colony Civic Center, 701 Tenth Avenue,
Greeley, Colorado, on Wednesday, May 14, 1997, at 10:00 a.m.
If you plan to attend the Meeting and are a record holder,
please check the appropriate box on the enclosed proxy card. If you
plan to bring a guest with you to the Meeting, please check the
appropriate box on the enclosed proxy card. If you are a street
holder, please bring a statement from your broker showing your
holdings. You may bring a guest with you to the Meeting. Attendance
at the Meeting will be on a first-come, first-served basis, upon
arrival at the Meeting.
If you have any questions about the Meeting please contact:
Coordinator, Shareholder Services, Eastman Kodak Company, 343 State
Street, Rochester, New York 14650-0520, (716) 724-5492.
Please do not write any comments on your proxy card.
Consistent with the Company's policy on confidential voting (see page
37), proxy cards will not be seen by anyone at the Company.
Photographs will be taken at the Annual Meeting for use by the
Company. The Company may use these photographs in publications. If
you attend the Meeting, permission to use your picture is assumed.
The Union Colony Civic Center is handicap accessible. If you
require special assistance, please call Coordinator, Shareholder
Services at (716) 724-5492.
The business of the Meeting will be:
1. The election of directors;
2. The ratification of election of independent
accountants; and
3. Action on a shareholder proposal concerning annual
election of directors.
You will be entitled to vote at the Meeting if you are a
shareholder of record at the close of business on March 17, 1997.
By Order of the Board of Directors
/s/ Joyce P. Haag
Joyce P. Haag, Secretary
Eastman Kodak Company
March 27, 1997
INFORMATION REQUESTS
You may request any of the following Company documents by writing
to Coordinator, Shareholder Services, Eastman Kodak Company, 343
State Street, Rochester, New York 14650-0520:
Annual Report on Form 10-K;
Transcript of the Annual Meeting;
Plan descriptions, annual reports, and trust agreements and
contracts for the pension plans of the Company and its
subsidiaries;
Report on diversity; and
Health, Safety and Environment Annual Report.
A NOTE FOR KODAK EMPLOYEES AND RETIREES,
AND DIVIDEND REINVESTMENT PLAN PARTICIPANTS
If you participate in any of the following plans, you may vote
the shares you own in these plans by using the proxy card mailed to
you with this Proxy Statement:
Employee Stock Purchase Plan for Employees of Eastman Kodak
Company;
Dividend Reinvestment Plan for Shareholders of Eastman Kodak
Company;
Kodak Stock Fund of the Eastman Kodak Employees' Savings and
Investment Plan; or
Kodak Employee Stock Ownership Plan.
The trustees and the custodians for these plans are the
shareholders of record of the Kodak shares held in these plans.
Therefore, they are entitled to vote the shares held in these plans.
However, they may not vote the shares under the applicable trust
agreements or regulations unless they receive directions from you as
the plan participant. The trustees and custodians will vote the
number of shares you hold in each plan as you direct on the enclosed
proxy card. If you do not return the proxy card, none of the shares
you own, including your shares held in these plans, will be voted.
Therefore, we urge you to sign and date your proxy card and return it
promptly.
ITEMS 1 - ELECTION OF DIRECTORS
The By-laws of the Company provide that there be at least nine
directors, but no more than 18 directors. The number of directors is
set by the Board of Directors. The Company's Restated Certificate of
Incorporation provides that the Board of Directors is divided into
three classes or groups of directors with overlapping three-year
terms. There are four directors whose terms expire at the 1997
Annual Meeting.
Four people (Gov. Collins, Mr. Fisher, Dr. Gray, and Mr.
Phelan) have been nominated for election as Class I directors for a
term expiring at the 2000 Annual Meeting. All of these nominees were
previously elected by you. In addition, two people (Mr. Kavetas and
Dr. Tyson) have been nominated for election as Class II directors for
a term expiring at the 1998 Annual Meeting. These two nominees are
standing for election as directors for the first time. Biographical
information about each of the six nominees appears below. The
remaining directors whose terms are continuing until the 1998 or 1999
Annual Meeting also appear in the sections below. Mr. Prezzano, who
was a Class II director, retired January 1, 1997.
Each director, who is not an employee of the Company, is
elected to serve until the end of the term for which he or she is
elected and until his or her successor is elected and qualified.
Directors who are not employees leave the Board on the date of the
Annual Meeting that occurs on or immediately following their 70th
birthday. However, employee directors leave the Board when their
employment terminates.
The Board of Directors may substitute another person for any of
the nominees. In this unlikely event, all the shares represented by
proxies will be voted for this person.
If any director retires, resigns, dies or is unable to serve
for any reason, the Board may reduce the number of directors. If the
Board does not reduce the number of directors or if there is a
vacancy for any reason, the remaining directors will choose a person
to fill the vacancy. This person will serve until the next Annual
Meeting of shareholders.
The Board of Directors recommends a vote FOR the election of
directors.
NOMINEES TO SERVE AS DIRECTORS FOR A THREE-YEAR TERM EXPIRING AT THE
2000 ANNUAL MEETING
(Class I Directors)
MARTHA LAYNE
COLLINS (PICTURE
OMITTED)
Governor Collins, 60, was elected to the Kodak Board of Directors in
May 1988. She is Director, International Business and Management
Center, at the University of Kentucky, a position she assumed in
July 1996. She is also President of Martha Layne Collins and
Associates, a consulting firm. From July 1990 to July 1996 she was
President of St. Catharine College in Springfield, Kentucky.
Following her receipt of a BS degree from the University of Kentucky,
Governor Collins taught from 1959 to 1970. After acting as
Coordinator of Women's Activities in a number of political campaigns,
she served as Clerk of the Supreme Court of the Commonwealth of
Kentucky from 1975 to 1979. She was elected to a four-year term as
Governor of the Commonwealth of Kentucky in 1983 after having served
as Lieutenant Governor from 1979 to 1983. Governor Collins, who has
served as a Fellow at the Institute of Politics, Harvard University,
is a director of R. R. Donnelley & Sons Company, Bank of Louisville
and Mid-America Bancorp.
GEORGE M. C.
FISHER (PICTURE OMITTED)
Mr. Fisher, 56, who joined the Kodak Board of Directors in December
1993, is Chairman and Chief Executive Officer of Eastman Kodak
Company. Mr. Fisher also held the position of President from
December 1993 through December 1996 and the position of Chief
Operating Officer from October 1995 through December 1996. Before
joining Kodak, Mr. Fisher served as Chairman and Chief Executive
Officer of Motorola, Inc., after having served as President and Chief
Executive Officer between 1988 and 1990 and Senior Executive Vice
President and Deputy to the Chief Executive Officer between 1986 and
1988. Mr. Fisher holds a bachelor's degree in engineering from the
University of Illinois and a master's degree in engineering and a
doctorate degree in applied mathematics from Brown University. Mr.
Fisher is a director of General Motors Corporation.
PAUL E.
GRAY (PICTURE OMITTED)
Dr. Gray, 65, was elected to the Kodak Board of Directors in
September 1990. Chairman of the Corporation of the Massachusetts
Institute of Technology (M.I.T.) since October 1990, Dr. Gray served
for the ten preceding years as President of M.I.T. He has also
served on the M.I.T. faculty and in the academic administration,
including responsibilities as Associate Provost, Dean of Engineering,
and Chancellor. Dr. Gray earned his bachelor's, master's, and
doctorate degrees in electrical engineering from M.I.T. He is a
director of Arthur D. Little, Incorporated, The New England, New
England Investment Company and The Boeing Co.
JOHN J.
PHELAN, JR. (PICTURE OMITTED)
Mr. Phelan, 65, who joined the Kodak Board of Directors in December
1987, is the retired Chairman and Chief Executive Officer of the New
York Stock Exchange, a position which he held from 1984 until 1990.
He was President of the International Federation of Stock Exchanges
from 1991 through 1993. He is a member of the Council on Foreign
Relations and is a senior advisor to the Boston Consulting Group.
Mr. Phelan, a graduate of Adelphi University, is active in
educational and philanthropic organizations and is also a director of
Merrill Lynch & Co., Inc., Metropolitan Life Insurance Company and
SONAT Inc.
NOMINEES TO SERVE AS DIRECTORS FOR A ONE-YEAR TERM EXPIRING AT THE
1998 ANNUAL MEETING
(Class II Directors)
HARRY L.
KAVETAS (PICTURE OMITTED)
Mr. Kavetas, 59, is Chief Financial Officer and Executive Vice
President and of Eastman Kodak Company. He was elected to this
position in September 1994 after serving as Senior Vice President
since February 1994. Before joining Kodak, Mr. Kavetas served as
President, Chief Executive Officer and Director of IBM Credit
Corporation, a position he held from 1986 until he retired from IBM
in December 1993. In his 32 years at IBM, Mr. Kavetas held a number
of management positions. Mr. Kavetas holds a BA degree in finance
and economics from the University of Illinois. He is a director of
Lincoln National Corporation and Caliber Systems, Inc.
LAURA D'ANDREA
TYSON (PICTURE OMITTED)
Dr. Tyson, 49, is professor of the Class of 1939 Chair at the
University of California, Berkeley, a position she accepted in
January 1997. Prior to accepting this position, Dr. Tyson served in
the first Clinton Administration as Chairman of the President's
National Economic Council and 16th Chair of the White House Council
of Economic Advisers. Prior to joining the Administration, Dr. Tyson
was professor of Economics and Business Administration, Director of
the Institute of International Studies, and Research Director of the
Berkeley Roundtable on the International Economy at the University of
California, Berkeley. Dr. Tyson holds a BA degree from Smith College
and a Ph.D. degree in economics from the Massachusetts Institute of
Technology. Dr. Tyson is the author of numerous articles on
economics, economic policy and international competition. She is a
member of the board of directors of Ameritech Corporation.
DIRECTORS CONTINUING TO SERVE A TERM EXPIRING AT THE 1998 ANNUAL
MEETING
(Class II Directors)
ALICE F.
EMERSON (PICTURE OMITTED)
Dr. Emerson, 65, is Senior Fellow of The Andrew W. Mellon Foundation,
a position she assumed in 1991 after having served as President of
Wheaton College in Massachusetts since 1975. Prior to 1975, Dr.
Emerson served the University of Pennsylvania, first as Dean of Women
from 1966 to 1969 and subsequently as Dean of Students. Elected to
the Kodak Board of Directors in May 1992, Dr. Emerson received her
bachelor's degree from Vassar College and her Ph.D. degree from Bryn
Mawr College. She is a member of the boards of directors of AES
Corporation, Bank of Boston Corporation and Champion International
Corp.
ROBERTO C.
GOIZUETA (PICTURE OMITTED)
Mr. Goizueta, 65, is Chairman and Chief Executive Officer of The
Coca-Cola Company. He was elected to this position in March 1981,
having served as President from May 1980 to March 1981. Prior to
becoming President, he was a Vice Chairman and Executive Vice
President. Mr. Goizueta, who was elected to the Kodak Board of
Directors in May 1989, received a BS degree in chemical engineering
from Yale University. He is a member of the boards of directors of
Ford Motor Company, SONAT Inc. and SunTrust Banks, Inc.
DIRECTORS CONTINUING TO SERVE A TERM EXPIRING AT THE 1999 ANNUAL
MEETING
(Class III Directors)
RICHARD S.
BRADDOCK (PICTURE OMITTED)
Mr. Braddock, 55, who was elected to the Kodak Board of Directors in
May 1987, was a principal of Clayton, Dubilier & Rice, for the period
June 1994 to September 1995. From January 1993 until October 1993,
he was Chief Executive Officer of Medco Containment Services, Inc.
From January 1990 through October 1992, he served as President and
Chief Operating Officer of Citicorp and its principal subsidiary,
Citibank, N.A. Prior to that, he served for approximately five years
as Sector Executive in charge of Citicorp's Individual Bank, one of
the financial services company's three core businesses. Mr. Braddock
was graduated from Dartmouth College in 1963 with a degree in
history, and received his MBA degree from the Harvard School of
Business Administration in 1965. He is a director of True North
Communications Inc., E-Trade and Ion Laser Technology.
KARLHEINZ
KASKE (PICTURE OMITTED)
Dr. Kaske, 68, who was elected to the Kodak Board of Directors in May
1993, served as President and Chief Executive Officer of Siemens AG
from 1981 until his retirement in September 1992. Dr. Kaske joined
Siemens in 1960 and held a variety of positions with Siemens AG,
including head of Process Engineering and head of the Power
Engineering Group. Dr. Kaske is a professor at the Technical
University of Munich. He holds a diploma in physics from the
Technical University of Aachen and a Doctorate of Engineering from
the Technical University of Brunswick. Dr. Kaske is a member of the
supervisory boards of MAN Aktiengesellschaft and Linde AG.
RICHARD A.
ZIMMERMAN (PICTURE OMITTED)
Mr. Zimmerman, 65, who joined the Kodak Board of Directors in July
1989, is the retired Chairman and Chief Executive Officer of Hershey
Foods Corporation. Mr. Zimmerman joined Hershey in 1958 and was
named Vice President in 1971. Appointed a Group Vice President later
in 1971, he became President and Chief Operating Officer in 1976. He
was named Chief Executive Officer in January 1984 and Chairman of the
Board in March 1985. Mr. Zimmerman was graduated from Pennsylvania
State University. He is a member of the boards of directors of
Lance, Inc. and Westvaco Corporation.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee, an Executive
Compensation and Development Committee, a Committee on Directors, a
Finance Committee, and a Public Policy Committee.
Audit Committee The members of the Audit Committee are Mr. Zimmerman
(Chairman), Dr. Kaske and Gov. Collins. The Committee had four
meetings during 1996, at which it:
(1) recommended to the Board that Price Waterhouse LLP be elected
as independent accountants;
(2) reviewed the audit and non-audit activities of both the
independent accountants and the internal audit staff of the
Company; and
(3) met separately and privately with the independent accountants
and with the Company's Director, Corporate Auditing, to ensure
that the scope of their activities had not been restricted and
that adequate responses to their recommendations had been
received.
Executive Compensation and Development Committee The members of the
Executive Compensation and Development Committee are Mr. Braddock
(Chairman), Dr. Emerson and Messrs. Goizueta and Phelan. The
Committee had four meetings in 1996. The Committee's activities
included:
(1) a review of the Company's executive development process;
(2) approval of remuneration to be paid to the Chief Executive
Officer, President, executive vice presidents and senior vice
presidents of the Company and recommendations concerning
compensation of other Company officers;
(3) certification of awards and grant of stock options under the
1995 Omnibus Long-Term Compensation Plan; and
(4) certification of awards under the Management Variable
Compensation Plan and Wage Dividend Plan.
Committee on Directors The members of the Committee on Directors are
Messrs. Goizueta (Chairman), Braddock and Zimmerman. The Committee
will consider persons whom shareholders recommend as candidates for
election as Company directors. Any shareholder wishing to make such
a recommendation should submit it to the Secretary of the Company.
The Committee, which acted by a written consent and met once in 1996,
took the following actions:
(1) reviewed the qualifications of individuals for election as
members of the Board;
(2) recommended qualified individuals to be considered for Board
membership;
(3) recommended revisions to the directors' committee fees; and
(4) recommended revisions to the Deferred Compensation Plan for
Directors and the Directors' Charitable Award Program.
Finance Committee The members of the Finance Committee are Mr.
Phelan (Chairman) and Drs. Gray and Kaske. The Committee had eight
meetings during 1996 and reviewed:
(1) the investment performance and the administration of the
Company's pension plan;
(2) the Company's financing strategies; and
(3) significant acquisitions, divestitures, and joint ventures.
Public Policy Committee The members of the Public Policy Committee
are Gov. Collins (Chairman) and Drs. Emerson and Gray. The Committee
met twice during 1996. Its activities included a review of:
(1) proposals submitted by shareholders;
(2) the Company's philanthropic programs; and
(3) the Company's environmental initiatives.
Meeting Attendance The Board of Directors held a total of nine
meetings in 1996. All of the directors attended at least 75 percent
of the meetings of the Board and committees of the Board on which
such director served, and the average attendance by all directors was
over 96 percent.
BENEFICIAL SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS
Directors, Nominees
and Executive Number of Common Shares
Officers Owned on Jan. 2, 1997
- ------------------- -----------------------
Richard S. Braddock 3,080
Daniel A. Carp 90,805 (a)(b)
Martha Layne Collins 2,885
Alice F. Emerson 3,553 (c)
George M. C. Fisher 1,004,769 (a)(b)
Roberto C. Goizueta 5,044
Paul E. Gray 2,404
Karlheinz Kaske 1,898
Harry L. Kavetas 55,150 (a)(b)(d)
Carl F. Kohrt 79,427 (a)(b)(d)
John J. Phelan, Jr. 7,852 (c)
Wilbur J. Prezzano 288,620 (a)(b)
Laura D'Andrea Tyson 50 (e)
Richard A. Zimmerman 3,577 (c)
All Directors, Nominees and 2,022,440 (a)(b)(d)(f)
Executive Officers as a
Group (23), including the above
(a) Includes the following number of shares which may be acquired
by exercise of stock options which were vested as of March 2,
1997: D. A. Carp - 71,367; G. M. C. Fisher - 810,824; H. L.
Kavetas - 9,352; C. F. Kohrt - 57,521; W. J. Prezzano -
239,565; and all directors, nominees and executive officers as
a group - 1,521,339.
(b) Includes the following Eastman Kodak Company common stock
equivalents, receipt of which was deferred under the
Performance Stock Program: D. A. Carp - 19,244; G. M. C.
Fisher - 66,545; H. L. Kavetas - 11,390; C. F. Kohrt - 19,244;
W. J. Prezzano - 37,810; and all directors, nominees and
executive officers as a group - 243,274.
(c) Includes the following Eastman Kodak Company common stock
equivalents, which are held in the Deferred Compensation Plan
For Directors: A. F. Emerson - 1,616; J. J. Phelan, Jr. -
4,609; and R. A. Zimmerman - 113.
(d) Includes the following Eastman Kodak Company common stock
equivalents, which are held in the Executive Deferred
Compensation Plan: H. L. Kavetas - 21,598; C. F. Kohrt - 1,012;
and all directors, nominees, and executive officers as a group
- - 34,385.
(e) These shares were purchased in March 1997.
(f) The total number of shares beneficially owned by all directors,
nominees and executive officers as a group is less than one
percent of the Company's outstanding shares.
The above table reports beneficial ownership in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934. This means,
except as noted below, all Company securities over which the
directors, nominees and executive officers directly or indirectly
have or share voting or investment power have been deemed
beneficially owned. The figures above include shares held for the
account of the above persons in the Dividend Reinvestment Plan for
Shareholders of Eastman Kodak Company, in the Kodak Employee Stock
Ownership Plan, and the interests, if any, of those of the above
persons in the Kodak Stock Fund of the Eastman Kodak Employees'
Savings and Investment Plan, stated in terms of Kodak shares.
The table does not include approximately 6,956,190 shares of
the Company's stock (less than three percent of the outstanding
shares) held in the Kodak Stock Fund of the Eastman Kodak Employees'
Savings and Investment Plan for the benefit of approximately 26,310
employees and former employees. A committee consisting of six
individuals, including four Company officers, has discretionary
voting power over this fund.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation of Directors Directors who are employees of the
Company are not paid any additional compensation as directors. Each
director who is not an employee of the Company is paid an annual
retainer of $38,000, consisting of $20,000 worth of the common stock
of the Company and $18,000 in cash. In addition, each director who
is not an employee of the Company is paid $1,000 for each Board
meeting, Board committee meeting and special meeting. Each director
who chairs a Board committee or special meeting is paid an additional
$1,000 per such meeting.
There is a deferred compensation plan available to all non-
employee directors for the cash portion of their compensation. Two
directors participated in this plan during 1996. Directors who
participate in this plan choose between an account that is credited
interest and a phantom Kodak stock account. The value of the phantom
Kodak stock account fluctuates with the market price of Kodak stock.
In the event of a Change In Control, each account under the deferred
compensation plan will be paid in a single cash payment.
Each director who is not an employee of the Company is eligible
to participate in a retirement plan for directors. For those
directors whose service as a director commenced prior to January 1,
1996, the plan provides an annual retirement benefit for life equal
to the then current annual retainer. Directors who have served fewer
than five years are entitled to a pro rata retirement benefit.
Effective for those directors whose service as a director commences
on or after January 1, 1996, the annual retirement benefit will be
paid until the earlier of the director's death or the end of a period
of time equal to the director's length of service. In addition, the
annual retirement benefit will be based on the annual retainer in
effect on the date of the director's termination of service. In the
event of a Change In Control, all retirement benefit payments will be
paid in a single cash payment equal to the present value of the
remaining retirement benefits.
Each director who is not an employee of the Company is covered
by group term life insurance in the amount of $100,000. This amount
decreases to $50,000 at the later of retirement from the Board under
the retirement plan described above or at age 65.
Each non-employee director whose service commenced prior to
January 1, 1997, is eligible to participate in the Company's
Directors' Charitable Award Program. This program provides for a
contribution by the Company of up to $1,000,000 following the
director's death to up to four charitable institutions recommended by
the director. The individual directors derive no financial benefits
from this program. It is funded by joint life insurance policies
purchased by the Company and self-insurance. The purposes of the
program are to further the Company's philanthropic endeavors, with
particular emphasis on education, acknowledge the services of the
Company's directors, and recognize the interest of the Company and
the directors in supporting worthy charitable and educational
institutions. Directors who are participating in the program are
Messrs. Braddock, Phelan, and Zimmerman,
Drs. Emerson, Gray, and Kaske, and Gov. Collins.
Compensation of Executive Officers The individuals named in the
following table were the Company's Chief Executive Officer and the
four highest-paid executive officers during 1996.
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation(a) Long-Term Compensation(a)
-------------------------------- -------------------------------
Awards Payouts
----------------------- -------
Securities
Other Under-
Annual Restricted lying All Other
Name and Compen- Stock Options/ LTIP Compensa-
Principal Position Year Salary Bonus(b) sation(c) Award(s)(d) SARs Payouts(e) tion
- ------------------ ---- ---------- ---------- --------- ----------- ----------- ----------- ------------
G. M. C. Fisher 1996 $2,000,000 $1,986,884 $ 0 $ 0 75,000 $1,495,463 $1,925,188(f)
Chairman, President 1995 2,000,000 2,282,496 0 0 50,000 5,010,098 2,004,941(f)
CEO & COO 1994 2,000,000 1,816,400 84,901 0 0 0 2,103,524(f)
D. A. Carp 1996 517,309 653,779 0 0 34,000 365,558 0
Executive Vice President 1995 334,616 342,645 206,339 0 29,820 1,443,866 0
& Assistant COO 1994 319,231 213,212 351,231 0 7,600 0 0
H. L. Kavetas 1996 597,692 522,228 0 0 34,000 728,346 0
Executive 1995 567,231 581,561 67,037 0 28,000 857,541 0
Vice President 1994 478,077 457,605 56,044 550,830 200,000 0 55,000(g)
C. F. Kohrt 1996 486,538 445,174 0 0 34,000 365,558 75,000(h)
Executive Vice President 1995 296,000 236,769 0 0 29,820 1,443,866 0
& Assistant COO 1994 237,369 173,724 0 0 6,800 0 0
W. J. Prezzano 1996 600,769 580,656 0 0 34,000 664,650 100,000(h)
Vice Chairman 1995 577,154 709,432 0 0 28,000 2,887,656 0
1994 552,615 501,328 113,686 0 65,000 0 1,351,200(h)
(a) These columns include amounts paid and deferred.
(b) This column includes Management Variable Compensation Plan and the Wage Dividend
Plan awards for services in the year indicated. For services in 1996, Wage Dividend
was paid in the form of stock options except for Mr. Prezzano. The value of the
options in the following amounts is included in the amount shown for 1996: G. M. C.
Fisher - $261,884 ; D. A. Carp - $53,779 ; H. L. Kavetas - $72,228; and C. F. Kohrt
- - $45,174.
(c) Where no amount is shown, the value of personal benefits provided was less than the
minimum amount required to be reported. For G. M. C. Fisher for 1994 the amount
includes $43,973 for club memberships. For D. A. Carp the amounts represent
expatriate payments in connection with an overseas assignment: 1994 - $102,238 for
housing and $207,006 for tax reimbursement; 1995 - $111,433 for housing and $61,542
for tax reimbursement. For H. L. Kavetas for 1994 this amount includes $55,934 for
club membership including tax reimbursement, and for 1995 this amount includes
$35,615 as a temporary living allowance. For W. J. Prezzano this amount represents
expatriate payments and tax reimbursement for overseas assignments in 1990 and 1991.
(d) The total number and value of restricted stock held (or deferred) as of December 31,
1996 for each named individual (valued at $80.25 per share) are: G. M. C. Fisher -
85,172 shares - $6,835,053; D. A. Carp - 18,782 shares - $1,507,256; H. L. Kavetas -
23,965 shares - $1,923,191; C. F. Kohrt - 18,782 shares - $1,507,256; and W. J.
Prezzano - 37,563 shares - $3,014,431. Dividends are paid on restricted shares as
and when dividends are paid on Kodak common stock. The amount for H. L. Kavetas for
1994 represents 12,810 shares valued at $43.00 per share, on the date of grant,
February 15, 1994.
(e) The following amounts for 1996 are the value of the awards paid under the
Performance Stock Program based on performance over the period 1995-1996, computed
as of the date of award, February 13, 1997, at $92.3125 per share: G. M. C. Fisher
- - 16,200; D. A. Carp - 3,960; H. L. Kavetas - 7,890; C. F. Kohrt - 3,960; and W. J.
Prezzano - 7,200. W. J. Prezzano received an award even though he retired before
the payment date because his retirement was deemed to be an approved reason.
Amounts for 1995 were paid based on performance over the period 1993 - 1995, and
computed as of the date of award, February 9, 1996, at $76.875 per share. The value
of these shares as of December 31, 1996 is included in footnote (d). All these
awards were paid in shares of restricted stock, which restrictions lapse upon
attainment of age 60. Dividends are paid on the restricted shares as and when
dividends are paid on Kodak common stock.
(f) For 1996, this amount includes $1,901,388 of principal and interest forgiven by the
Company with respect to two loans described under the heading "Employment Contracts"
on page 22 and $23,800 for life insurance premiums; for 1995 this amount includes
$1,982,891 of principal and interest forgiven by the Company and $22,050 for life
insurance premiums; and for 1994 the amount includes $2,064,394 of principal and
interest forgiven by the Company and $39,130 for life insurance premiums.
(g) This amount is a hiring bonus.
(h) For 1996 the amount is a special recognition award paid in connection with
repositioning of the Office Imaging Business. For 1994 the amount is a special
recognition award paid in connection with the divestiture of the non-imaging health
businesses.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
- --------------------------------------------------------------------
Number of Percentage
Securities of Total
Underlying Options/SARs
Options/ Granted to Exercise or
SARs Employees Base Price Expiration Grant Date
Name Granted (a) in Fiscal Year Per Share Date Present Value (b)
- --------------- ---------- -------------- ----------- ---------- ----------------
G. M. C. Fisher 75,000 2.2000% $71.813 3/28/06 $1,713,000
D. A. Carp 34,000 .9974 71.813 3/28/06 776,560
H. L. Kavetas 34,000 .9974 71.813 3/28/06 776,560
C. F. Kohrt 34,000 .9974 71.813 3/28/06 776,560
W. J. Prezzano 34,000 .9974 71.813 3/28/06 776,560
(a) One third of these options vest on each of the first three anniversaries
of the grant date. Termination of employment, for other than death or a
permitted reason, prior to the first anniversary of the grant date
results in forfeiture of the option. Thereafter, termination of
employment prior to vesting results in forfeiture of the option unless
the termination is due to retirement, death, disability or an approved
reason. Vesting accelerates upon death.
(b) The present value of these options was determined using the Black-
Scholes model of option valuation in a manner consistent with the
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation."
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities
Underlying Value of Unexercised
Unexercised in-the-money
Number Options/SARs at Options/SARs at
of Fiscal Year-End Fiscal Year-End(b)
Shares ----------------------------- --------------------------
Acquired on Value
Name Exercise (a) Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------- ------------ -------- ----------- ------------- ------------ -------------
G. M. C. Fisher 0 $ 0 810,824 637,715 $27,606,627 $19,567,767
D. A. Carp 10,018 443,632 71,367 153,870 2,934,496 767,436
H. L. Kavetas 0 0 9,352 252,648 223,859 8,195,235
C. F. Kohrt 742 57,481 57,521 53,870 2,312,135 698,736
W. J. Prezzano 0 0 239,565 52,648 10,248,685 733,235
(a) The number for D. A. Carp is the number of securities with respect to which SARs were exercised.
(b) Based on the closing price on the New York Stock Exchange - Composite Transactions of the Company's
common stock on December 31, 1996 of $80.25 per share.
Long-Term Incentive Plan In February 1995, the Committee approved
the 1995-1996 and 1995-1997 Performance Cycles of the Performance
Stock Program, the successor to the Restricted Stock Program. A
third cycle under the Program, the 1996-1998 Performance Cycle, was
approved by the Committee in February 1996. Awards under each cycle
are contingent upon attaining a performance goal established by the
Committee at the beginning of the cycle. This performance goal is
total shareholder return by the Company equal to at least that earned
over the same period by a company at the 50th percentile in terms of
total shareholder return within the Standard & Poor's 500 Index.
After the close of a cycle, the Committee will determine whether the
performance goal was achieved and, if so, calculate, based upon
application of the performance formula to the performance goal, what
percentage of each participant's target award for the cycle has been
earned. No awards will be paid for a cycle unless the performance
goal is achieved. The performance formula for each cycle provides
that 50 percent of the target award will be earned if the performance
goal is achieved. In order for 100 percent of target to be earned,
total shareholder return for the cycle must equal that of the company
used to demarcate performance at the 60th percentile within the
Standard & Poor's 500 Index. In determining the actual award amount
to be paid to a participant, the Committee has the discretion to
reduce or eliminate the target award earned by a participant, based
upon any objective or subjective criteria it deems appropriate.
Awards, if any, will be paid in the form of restricted stock, which
restrictions will lapse upon the participant's attainment of age 60.
The table below shows the threshold (i.e., attainment of the
performance goal), target and maximum number of shares for the Chief
Executive Officer and the other named executive officers for each
cycle.
Individuals who participate for less than the full performance
cycle are eligible for only a prorated award. The amount of the
prorated award is determined at the end of the performance cycle
based upon the duration of their participation during the performance
cycle.
The awards earned for the 1995-1996 performance cycle are shown
in the Long-Term Incentive Payout column of the Summary Compensation
Table shown on page 15.
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
Number
of Performance Estimated Future Payouts Under
Shares, or Other Non-Stock Price-Based Plans
Units or Period Until
Other Maturation Threshold Target Maximum
Rights or Payout # of Shares # of Shares # of Shares
Name
- ---------------- ------------- ------------- ----------- ------------ ------------
G. M. C. Fisher N/A 1995-1996 6,750 13,500 20,250
1995-1997 6,750 13,500 20,250
1996-1998 6,750 13,500 20,250
D. A. Carp N/A 1995-1996 1,650 3,300 4,950
1995-1997 1,650 3,300 4,950
1996-1998 3,288 6,575 9,863
H. L. Kavetas N/A 1995-1996 3,288 6,575 9,863
1995-1997 3,288 6,575 9,863
1996-1998 3,288 6,575 9,863
C. F. Kohrt N/A 1995-1996 1,650 3,300 4,950
1995-1997 1,650 3,300 4,950
1996-1998 3,288 6,575 9,863
W. J. Prezzano N/A 1995-1996 3,000 6,000 9,000
1995-1997 3,000 6,000 9,000
1996-1998 3,000 6,000 9,000
Employment Contracts On October 27, 1993, the Company entered into an
agreement covering a period of five years, for the employment of George
M. C. Fisher as Chairman, President and Chief Executive Officer of the
Company. This agreement was amended, effective as of February 25, 1997,
to extend Mr. Fisher's employment as Chairman and Chief Executive
Officer until December 31, 2000.
Mr. Fisher's base salary is $2,000,000, subject to review on an
annual basis. His annual target award opportunity under the Management
Variable Compensation Plan is fixed under the amended agreement at 90
percent of base salary.
Pursuant to the amended agreement, Mr. Fisher was granted 50,000
shares of restricted stock, with the restrictions lapsing on January 1,
2001, and 2,000,000 stock options. The exercise price of the options is
$90.125, the closing price of Kodak common stock on the New York Stock
Exchange on February 25, 1997.
The original agreement provided for the Company to make two loans
to Mr. Fisher in the total amount of $8,284,400 for five years with
interest at the rate of 4.86 percent (which was the most recently
announced rate under Section 1274(d) of the Internal Revenue Code, prior
to the date of the loan). Of this total amount, $4,284,400 was loaned
to Mr. Fisher due to his forfeiture of 80,000 stock options from his
prior employer resulting from his accepting employment with the Company.
Mr. Fisher was required to use all of the loan proceeds except
$1,500,000 to purchase Kodak stock. The shares he purchased are
reflected in the security ownership table on page 12 of this Proxy
Statement. Twenty percent of the principal and all of the accrued
interest on each of these loans are to be forgiven on each of the first
five anniversaries of such loans. Forgiveness of the $4,000,000 loan is
conditioned upon Mr. Fisher's not having voluntarily terminated his
employment with the Company and forgiveness of the $4,284,400 loan is
conditioned upon Mr. Fisher's not entering into competition with the
Company. The amount of the forgiveness for 1996 is shown in the column
of the Summary Compensation Table entitled "All Other Compensation," on
page 15.
Where necessary, Mr. Fisher has been given credit for a period of
service sufficient to allow him to obtain the maximum benefit available
under the Company's benefit plans. In particular, the amended agreement
credits Mr. Fisher with 22 years of deemed service and five additional
years of age for purposes of calculating a retirement benefit. Any
pension benefit payable to Mr. Fisher by the Company will be reduced by
any pension benefit paid to Mr. Fisher by his prior employer.
The Company is providing Mr. Fisher with life insurance equal to
3.5 times his base salary and a disability benefit equal to 60 percent
of base salary. In the event of Mr. Fisher's death prior to the
termination of this agreement, the agreement provides for salary
continuation for 90 days, payment of the annual incentive for the year
of his death and annual and long-term incentives earned but not yet
paid, vesting of all stock options and awards and forgiveness of the
loans. In the event of Mr. Fisher's disability prior to termination of
the agreement, the agreement provides for a disability benefit payable
to age 65, the payment of the annual incentive for the year in which his
disability occurs and annual and long-term incentives earned but not yet
paid and vesting of all stock options and awards. If Mr. Fisher's
employment is terminated by the Company without cause, including
following a Change In Control, Mr. Fisher is entitled to the greater of
the remaining term of his employment contract or 36 months of salary
continuation, immediate vesting of stock options, the lapsing of any
restrictions on any restricted stock award and the payment of any
incentive awards earned but not yet paid. Mr. Fisher is entitled to
reimbursement for taxes paid on certain of the foregoing payments,
including any amounts constituting "parachute payments" under the
Internal Revenue Code. If Mr. Fisher dies prior to retirement, his
spouse is entitled to a 50 percent survivor annuity.
The Company has agreed to purchase Mr. Fisher's residence in
Rochester, New York, if requested by Mr. Fisher within the one-year
period following his termination of employment.
The amended agreement specifies that Mr. Fisher's termination of
employment on or after December 31, 2000, for any reason other than for
cause, shall be treated as termination for an approved reason for all
purposes under the 1990 and 1995 Omnibus Long-Term Compensation Plans.
On February 11, 1994, the Company entered into an agreement
covering a period of five years, for the employment of Harry L. Kavetas
as Chief Financial Officer of the Company. Effective as of March 3,
1997, this agreement was amended to extend Mr. Kavetas' employment as
Chief Financial Officer and Executive Vice President until February 10,
2001.
Mr. Kavetas' current base salary is $610,000, subject to review on
an annual basis. Mr. Kavetas participates in the Management Variable
Compensation Plan and currently has an annual target award opportunity
of 60 percent of his base salary.
Under the amended agreement, Mr. Kavetas was granted 10,000 shares
of restricted stock, with the restrictions lapsing on February 10, 2001,
and 200,000 stock options. The exercise price of the options is $88.50,
the closing price of Kodak common stock on the New York Stock Exchange
on March 4, 1997.
Where necessary, Mr. Kavetas has been given credit for a period of
service sufficient to allow him to obtain the maximum benefits available
under Kodak's benefit plans. For purposes of calculating his pension
benefit, Mr. Kavetas will be credited with five years of deemed service
for each of his first five years of employment and three and one-half
years of deemed service for each of the subsequent two years of his
employment. Any pension benefit payable to Mr. Kavetas by the Company
will be reduced by any pension benefit paid to Mr. Kavetas by his prior
employer.
Mr. Kavetas is entitled to 90 days of salary continuation should
his employment terminate due to death, and for 18 months if terminated
without cause. The awards granted to Mr. Kavetas upon the commencement
of his employment vest on a pro rata basis if his employment terminates
due to death or disability or without cause. The stock options and
restricted stock awarded to Mr. Kavetas under his amended agreement vest
in full upon these events.
Termination of Employment The Company has a general severance
arrangement available to substantially all U.S. employees which provides
two weeks of pay for every year of service with a maximum of fifty-two
weeks.
The Company had a retention agreement with Wilbur J. Prezzano.
The arrangement provided that any Company retirement benefits which Mr.
Prezzano would have qualified for had he retired in 1994 would be
provided to him when he retired.
Change In Control Arrangements In the event of a Change In Control
which results directly or indirectly in the Company's stock ceasing to
be actively traded on the New York Stock Exchange, the following would
occur:
(1) each participant in the Executive Deferred Compensation Plan would
receive the balance in his or her account in a single cash
payment;
(2) each participant in the Management Variable Compensation Plan
would be paid a pro rata target award for such year and any other
year for which payment of awards had not been made as of such
date; and
(3) all outstanding stock options and stock appreciation rights would
become fully vested and each holder would be paid in a single cash
payment, the difference between the exercise price and the Change
In Control price.
Each of these payments would be made in a single cash payment as soon as
possible but no later than the 90th day following such event.
Retirement Plan The Company funds a tax-qualified, defined benefit
pension plan for virtually all U.S. employees. Retirement income
benefits are based upon an individual's "average participating
compensation" (APC) which is one-third of the sum of the individual's
"participating compensation" for the highest consecutive 39 periods of
earnings over the 10-year period ending immediately prior to retirement
or termination. "Participating compensation," in the case of the
executive officers included in the Summary Compensation Table, is base
salary and Management Variable Compensation Plan awards, including
allowances in lieu of salary for authorized periods of absence, such as
illness, vacation or holidays.
For an employee with up to 35 years of accrued service, the annual
normal retirement income benefit is computed by multiplying the number
of years of accrued service by the sum of (a) 1.3 percent of APC, plus
(b) .3 percent of APC in excess of the average Social Security wage
base. For an employee with more than 35 years of accrued service, the
amount computed above is increased by one percent for each year in
excess of 35 years.
The retirement income benefit is not subject to any deductions for
Social Security benefits or other offsets. Officers are entitled to
benefits on the same basis as other employees. The normal form of
benefit is an annuity, but a lump sum payment is available in some
limited situations.
The following table shows the years of accrued service credited as
of December 31, 1996, to each of the five individuals named in the
Summary Compensation Table. This table also shows for each named
individual the amount of his APC at the end of 1996.
Years of
Service APC
-------- -------------
G. M. C. Fisher 20(a) $3,173,998
D. A. Carp 26 587,600
H. L. Kavetas 17(b) 879,978
C. F. Kohrt 25 486,981
W. J. Prezzano 31 1,001,848
(a) Mr. Fisher is credited with 17 years of deemed service for
purposes of calculating his retirement benefit.
(b) Mr. Kavetas is credited with 14 years of deemed service for
purposes of calculating his retirement benefit.
In the event of a Change In Control, a participant whose
employment is terminated, for a reason other than death, disability,
cause or voluntary resignation, within five years of the date of such
event would be credited with up to five additional years of service. In
addition, where the participant is age 50 or over on the date of such
event, up to five additional years of age would be credited for the
following plan purposes:
(1) to determine eligibility for early and normal retirement;
(2) to determine eligibility for a vested right; and
(3) to calculate the amount of retirement benefit.
The actual number of years of service and years of age that would be
granted to such a participant would decrease proportionately depending
upon the number of years that elapse between the date of a Change In
Control and the date of the participant's termination of employment.
Further, if the Plan is terminated within five years after a Change In
Control, the benefit for each plan participant will be calculated as
indicated above.
PENSION PLAN TABLE - Annual Retirement Income Benefit
Straight Life Annuity Beginning at Age 65
Years of Service
---------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------- -------- ---------- ---------- ---------- -----------
$ 400,000 $ 96,000 $ 128,000 $ 160,000 $ 192,000 $ 224,000
800,000 192,000 256,000 320,000 384,000 448,000
1,200,000 288,000 384,000 480,000 576,000 672,000
1,600,000 384,000 512,000 640,000 768,000 896,000
2,000,000 480,000 640,000 800,000 960,000 1,120,000
2,400,000 576,000 768,000 960,000 1,152,000 1,344,000
2,800,000 672,000 896,000 1,120,000 1,344,000 1,568,000
3,200,000 768,000 1,024,000 1,280,000 1,536,000 1,792,000
3,600,000 864,000 1,152,000 1,440,000 1,728,000 2,016,000
4,000,000 960,000 1,280,000 1,600,000 1,920,000 2,240,000
NOTE: For purposes of this table Remuneration means APC. To the extent that any individual's annual
retirement income benefit exceeds the amount payable from the Company's funded Plan, it is paid from one or
more unfunded supplementary plans.
REPORT ON EXECUTIVE COMPENSATION BY THE EXECUTIVE COMPENSATION AND
DEVELOPMENT COMMITTEE
The Company's executive compensation plans are formulated
based on four fundamental principles:
1. Compensation should be related to performance consistent with
Company values, as well as the objective of increasing
shareholder value.
2. Compensation should be at a level consistent with that
provided by comparable companies in order to attract and
retain talented management.
3. Compensation should take into account both short- and long-
term corporate performance.
4. Senior management should have a meaningful equity stake in
the Company.
These four principles are implemented through compensation
consisting of a mix of base salary, an annual incentive plan, and
long-term incentive plans. Specifically in support of the fourth
principle, share ownership requirements were established for
senior executives in 1993 pursuant to which they are required to
own a specified value of Kodak stock by the end of a five-year
period. The required level of ownership is stated as a multiple
of the executive's base salary and ranges from a multiple of four
for the Chief Executive Officer down to a multiple of one for the
lowest level of participating executive. The requirements can be
satisfied by shares owned directly or by one's spouse, restricted
shares held by the executive, and investment in the Kodak Stock
Fund in the Company's Savings and Investment Plan. These
requirements apply to approximately 25 individuals. All
participants have either satisfied their requirements or are on
track to do so within the allotted time period.
The Executive Compensation and Development Committee, which
is composed entirely of independent outside directors, sets
overall targeted levels of compensation, both annual compensation
and long-term incentives, for the Chief Executive Officer,
President, executive vice presidents and senior vice presidents.
These levels are set based on surveys of other companies conducted
by external consultants. A cross-section of companies is
surveyed, varying in size and industry. The surveyed companies
represent those with whom the Company competes for executive
talent and include most, but not all, of the companies included in
the Dow Jones Industrial Index shown in the Performance Graph on
page 32. Through the mix of varied companies, a comprehensive
picture is obtained to set a frame of reference for executive
compensation. The mean compensation level of the surveyed
companies is a primary reference for determining target levels of
compensation.
Annual Cash Compensation Annual cash compensation in 1996 was
made up of two components: base salary and the Management
Variable Compensation Plan (MVCP), an annual incentive plan.
The administration of base salaries is based upon
consideration of individual performance, the position of the
manager's salary in the rate range, and the range of short-term
compensation for similar jobs in the marketplace, if known. The
management appraisal process is entitled the Management
Performance Commitment Process. This process measures performance
of each member of management with respect to shareholder
satisfaction, customer satisfaction and employee
satisfaction/public responsibility. Various measurement criteria
are used, including financial performance; improvements in health,
safety and the environment; achievement of diversity goals;
employee development; product leadership, cycle time and customer
satisfaction. In addition, managers are appraised by their peers
and the employees they manage on how well they evidence the five
corporate values: respect for the dignity of the individual,
integrity, trust, credibility and continuous improvement/personal
renewal.
The target annual incentive award for executives in MVCP is
dependent upon their position in the Company, with the lowest
level of executives having an incentive target of 18 percent of
base salary and the Chief Executive Officer having a target for
1996 of 75 percent of base salary. The amount of funds available
for awards through MVCP is based upon Company performance versus
its Return On Net Assets (RONA) goal. Incentive awards for
individuals are then determined using the results of the
management appraisal process.
During 1996, Company management sought to solidify the
financial base established in 1995 and to reinforce its goals in
the areas of customer satisfaction and employee satisfaction. It
continued to look to RONA as an accurate measure of Company
performance, using it as a key factor in determining annual
incentive awards. While focus was maintained on growing revenue,
managing assets and costs, and increasing earnings, the
achievement of goals in such areas as customer satisfaction,
product leadership, employee training and development, and
diversity was given a higher profile compared to prior years. The
results achieved versus goals in the areas of shareholder,
customer and employee satisfaction most heavily influenced
management compensation awards for 1996. Based primarily on
overall Company results, but also on unit and individual
performance, MVCP awards for 1996 were slightly above the target
level, and below the levels paid for 1995. Shareholder
satisfaction, measured primarily by such measures as RONA,
earnings and cash flow, was strong. Customer satisfaction,
measured primarily by such measures as customer satisfaction
indices, quality and product leadership, was below expectations.
Employee satisfaction, measured primarily by such measures as
amount of employee training, diversity and employee satisfaction
indices, was above expectations. Based upon these results, MVCP
awards for the Chief Executive Officer and the four highest-paid
executive officers for 1996 were as detailed in the Summary
Compensation Table on page 15.
Long-Term Incentive Compensation The Company's long-term
incentive compensation consists of stock options and a performance
share program, with the latter being a multi-year goal-based
program for senior executives in which awards earned are paid in
restricted stock.
Stock options tie compensation directly to increases in
shareholder value. Surveys of other companies' practices are used
to determine the size of grants. Almost all of the companies
included in these surveys are also included in the surveys on
annual cash compensation. They differ due to the fact that
different companies choose to participate in different surveys of
long-term compensation. Taking into account such factors as
anticipated stock price growth and volatility, future dividend
yield, term of grant and an estimated risk-free rate of return,
anticipated long-term compensation levels are estimated. Mean
survey values are used as reference points in determining the size
of option grants. Consideration is given to grant frequency in
other companies as well as to the frequency and size of past
grants to Kodak participants. Stock options were granted in 1996
at market price for terms of ten years.
In 1995, the Committee approved the establishment of the
Performance Stock Program, under the 1995 Omnibus Long-Term
Compensation Plan. Its purpose is to focus the attention of
senior management on the long-term results of the Company. The
Committee intends to initiate a new multi-year performance cycle
each year. In 1995, a 1995-1996 cycle and a 1995-1997 cycle were
approved. In 1996, a 1996-1998 cycle was approved. The
threshold, target and maximum award amounts for the Chief
Executive Officer and the four highest-paid executive officers are
shown in the table on page 21. In each cycle, the sole
performance measure is Kodak's total return to shareholders versus
that of the Standard & Poor's 500 Index for the performance cycle.
Should awards be earned, they would be paid early in the year
following the end of the performance cycle in the form of Kodak
common stock. Transfer of these shares would be restricted until
the executive reaches the age of 60.
In the 1995-1996 performance cycle, Kodak's total return to
shareholders was equal to the 68th percentile company in the
Standard & Poor's 500 Index. Based on these results, the
Committee approved awards at 120 percent of target levels,
according to the program formula. The awards were distributed in
the form of shares of Kodak common stock, as described above.
Wage Dividend Management employees also participate in the Wage
Dividend Plan, an annual profit sharing plan for all U.S.
employees. For 1996, the award payments under the Plan were based
upon the Company's RONA. All award recipients receive the same
percentage award, 6.58 percent for 1996, which is multiplied by
the individual's participating earnings (generally, the person's
last year's salary, or salary and annual incentive for MVCP
participants) to arrive at the bonus amount. Awards to senior
executives for 1996 were paid in the form of non-qualified stock
options.
Chief Executive Officer Compensation Mr. Fisher joined the
Company in October 1993, entering into an employment agreement
with the Company covering a period of five years. An amendment to
this agreement in February 1997 extended Mr. Fisher's employment
for two additional years. The details of the agreement and the
amendment are set forth on page 22 of this Proxy Statement.
During 1996, as in the two prior years, no change was made to
the base salary of $2,000,000 which was established in Mr.
Fisher's agreement. Based upon the Company's performance
described earlier in this Report, Mr. Fisher received an annual
incentive award under MVCP of $1,725,000. This represents an
award 15 percent above Mr. Fisher's target award of $1,500,000 (75
percent of his base salary) and was based on the results achieved
against the financial goals, customer satisfaction goals and goals
in the area of employee satisfaction/public responsibility. As
shown in the Option/SAR Grants in Last Fiscal Year table on page
17, 75,000 non-qualified stock options were granted to Mr. Fisher
in 1996. That number was derived from the survey-based grant
schedule used for all stock option recipients in 1996.
Mr. Fisher's agreement also provided for the forgiveness of
20 percent per year for each year of the contract of the principal
and all of the accrued interest on two loans which were made to
him by the Company, as described on page 22.
Leadership and Development The Committee reviewed leadership and
organization development plans, as well as profiles of succession
candidates. It discussed executive development strategies
designed to provide leaders capable of creating effective
organizations and executing business strategies that will drive
the success of the Company.
Company Policy on Qualifying Compensation Internal Revenue Code
Section 162(m), adopted in 1993, provides that publicly held
companies may not deduct in any taxable year compensation in
excess of one million dollars paid to any of the individuals named
in the Summary Compensation Table which is not "performance-based"
as defined in Section 162(m). The Committee believes that, while
there may be circumstances in which the Company's interests are
best served by maintaining flexibility whether or not the
compensation is fully deductible under Section 162(m), it is
generally in the Company's best interests to comply with Section
162(m).
Other Committee Action The Committee supports the Company's
encouragement of stock ownership by all employees. To reinforce
the achievement of that objective, the Committee agreed to
continue the Stock Option Recognition Program (SORP) through 1997.
This program provides for the use of stock options as special
recognition awards for extraordinary contributions and
achievements. Awards under SORP can generally be made only to
employees who are not participants in the management-level stock
option plan. Options under this program are granted from the 1995
Omnibus Long-Term Compensation Plan.
Richard S. Braddock (Chairman) Roberto C. Goizueta
Alice F. Emerson John J. Phelan, Jr.
PERFORMANCE GRAPH -- SHAREHOLDER RETURN
The following graph compares the performance of the Company's
common stock with the performance of the Standard & Poor's 500
Composite Stock Price Index ("Standard & Poor's 500 Index") and the
Dow Jones Industrial Index, by measuring the changes in common stock
prices from December 31, 1991, plus assumed reinvested dividends.
[graph omitted]
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- --------
Eastman Kodak $100.00 $ 87.95 $126.53 $140.71 $202.88 $248.25
S&P 500 Index 100.00 107.60 118.40 120.01 164.95 202.72
Dow Jones 100.00 107.41 125.60 131.95 180.56 229.36
The graph assumes that $100 was invested on December 31, 1991
in each of the Company's common stock, the Standard & Poor's 500
Index and the Dow Jones Industrial Index, and that all dividends were
reinvested. In addition, the graph weighs the constituent companies
on the basis of their respective market capitalizations, measured at
the beginning of each relevant time period.
ITEM 2 - RATIFICATION OF ELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, on the recommendation of the Audit
Committee, elected Price Waterhouse LLP, independent accountants of
the Company for many years, to serve until the Annual Meeting of
shareholders in 1998. The Board of Directors proposes that the
shareholders ratify the Board's election of Price Waterhouse LLP as
the independent accountants of the Company. Representatives of Price
Waterhouse LLP are expected to be present at the Meeting and to be
available to respond to appropriate questions. They will be given
the opportunity to make a statement if they desire to do so.
The Board of Directors recommends a vote FOR the ratification of
election of independent accountants.
ITEM 3 SHAREHOLDER PROPOSAL
The Service Employees International Union Master Trust, 1343 L
Street NW, Washington, DC 20005, owner of 26,700 shares, submitted
the following proposal:
"BE IT RESOLVED: That the stockholders of Eastman Kodak Company
urge the Board of Directors take the necessary steps to declassify
the Board of Directors for the purpose of director elections. The
Board declassification shall be done in a manner that does not affect
the unexpired terms of directors previously elected.
SUPPORTING STATEMENT
The Board of Directors of Eastman Kodak is divided into three
classes serving staggered three-year terms. It is our belief that
the classification of the Board of Directors is not in the best
interests of Eastman Kodak and its shareholders. The elimination of
the staggered board would require each director to stand for election
annually. This procedure would allow shareholders an opportunity to
annually register their views on the performance of the board
collectively and each director individually. Concerns that the
annual election of directors would leave Eastman Kodak without
experienced board members in the event that all incumbents are voted
out are unfounded. If the owners should choose to replace the entire
board, it would be obvious that the incumbent directors'
contributions were not valued.
A classified board of directors protects the incumbency of the
board of directors and current management which in turn limits
accountability to stockholders.
It is our belief that Eastman Kodak's corporate governance
procedures and practices, and the level of management accountability
they impose, are related to the financial performance of Eastman
Kodak. While Eastman Kodak's current performance is good, we believe
sound corporate governance practices, such as the annual election of
directors, will impose the level of management accountability
necessary to help insure that a good performance record continues
over the long term.
We urge you to VOTE FOR this proposal."
The Board of Directors recommends a vote AGAINST this proposal for
the following reasons:
At the Company's 1987 Annual Meeting of shareholders, over 75
percent of the shares voted were cast in favor of creating a
classified Board of Directors, that is, a Board approximately one-
third of whose members are elected each year for a three-year
term. In the late 1980's, similar resolutions were passed by the
shareholders of many large U.S. corporations for a number of
reasons, including inhibiting unfriendly take-over attempts.
A classified Board of Directors provides for continuity and
stability and allows the Company to implement its long-term
strategy and to focus on long-term performance. A classified
Board of Directors makes it more difficult for a substantial
shareholder to change abruptly the entire Board of Directors
without the approval, or at least the cooperation, of the
incumbent Board. A classified board permits a more orderly
process for directors to consider any and all alternatives to
maximize shareholder value, in the exercise of their fiduciary
responsibility.
There are those who argue, as the proponent does, that
classified boards serve to protect the incumbency of the current
board of directors and management. The proponent argues that a
classified board therefore is less accountable to shareholders
than a board whose members stand for election every year.
The Company's Board of Directors currently consists of nine
members, eight of whom are independent directors. The Company's
Board of Directors has been responsive to the concerns of
shareholders, a fact most notably demonstrated a few years ago
when the Board replaced the senior management of the Company. In
1996, the Company's Board of Directors was identified by Business
Week as one of the 25 best boards.
While declassifying the Board might theoretically increase
accountability to shareholders, this Board has been extremely
responsive to shareholder concerns. Moreover, Board
declassification would come at the expense of the legitimate
protection afforded to shareholders through such a structure.
In view of the foregoing, it is recommended that shareholders vote
AGAINST this proposal.
OTHER MATTERS
In accordance with New Jersey law, under which the Company is
incorporated, matters not properly noticed to shareholders, other
than procedural matters, may not be made the subject of a vote by
shareholders at the Meeting.
Vote Required To Adopt Resolutions The election of directors
requires a plurality of votes cast. Each other matter to be
submitted to shareholders requires the affirmative vote of a majority
of the votes cast at the Meeting. Although abstentions and broker
non-votes will be included in the calculation of the number of shares
that are considered present at the Annual Meeting, they will not be
counted as votes cast.
It should be noted that the adoption of the shareholder proposal
would not in itself eliminate Board classification. Eliminating
Board classification requires an amendment to the Company's Restated
Certificate of Incorporation, which requires action by the Board of
Directors and the affirmative vote of at least 80 percent of the
outstanding shares of the Company.
Voting A Proxy The proxy card enclosed is designed to permit each
shareholder of record at the close of business on March 17, 1997, to
vote in the election of directors, the ratification of election of
independent accountants, and on the shareholder proposal. The proxy
is solicited by the Board of Directors of the Company. The proxy may
be revoked in writing at any time prior to its being voted at the
Meeting. Each valid and timely proxy not revoked will be voted at
the Meeting in accordance with the instructions on the card.
It is the intention of the proxy holders to vote as follows,
unless instructed to the contrary:
(1) FOR the election of directors;
(2) FOR the ratification of the election of Price Waterhouse LLP as
the independent accountants of the Company; and
(3) AGAINST the shareholder proposal.
If, for any reason, any of the nominees for election to the
Board of Directors becomes unavailable, the holders of the proxies
may exercise discretion to vote for substitutes proposed by the Board
of Directors. The Board of Directors of the Company has no reason to
believe that the nominees will be unable or will decline to serve if
elected.
Confidential Voting The Company has had for a number of years a
policy which protects the confidentiality of shareholder votes. This
policy provides that neither the identity nor the vote of any
shareholder will be disclosed to the Company, its directors, officers
or employees except:
(1) to allow the election inspectors to certify the results of the
vote;
(2) as necessary to meet applicable legal requirements and to
assert or defend claims for or against the Company; or
(3) in the event of a proxy solicitation based on an opposition
proxy statement.
Outstanding Voting Shares As of February 3, 1997, there were
332,600,616 shares of the Company's voting securities outstanding.
Each share of the Company's common stock is entitled to one vote.
Shareholder Proposals For 1998 The last day for the Company to
receive proposals from shareholders for the 1998 Annual Meeting of
shareholders is November 26, 1997. Proposals should be sent
certified mail - return receipt requested to Joyce P. Haag,
Secretary, Eastman Kodak Company, Rochester, New York 14650-0208.
Costs of Solicitation The cost of this solicitation of proxies will
be borne by the Company. In addition to the solicitation of the
proxies by use of the mails, some of the officers and regular
employees of the Company, without extra remuneration, may solicit
proxies personally, or by telephone, facsimile, telegraph or cable.
The Company may also request brokerage houses, nominees, custodians
and fiduciaries to forward soliciting material to the beneficial
owners of shares held of record. The Company will reimburse such
persons for their expenses in forwarding soliciting material. In
addition, the Company has retained Georgeson & Co., Inc. to assist in
the solicitation of proxies from all shareholders for an estimated
fee not to exceed $18,500, plus reimbursement of reasonable out-of-
pocket expenses.
By Order of the Board of Directors
s/Joyce P. Haag
Joyce P. Haag, Secretary
March 27, 1997
DEFINITIVE COPY
(CORPORATE LOGO OMITTED)
EASTMAN KODAK COMPANY
This Proxy is solicited on behalf of the Board of
Directors
The undersigned hereby appoints George M. C. Fisher and
Joyce P. Haag, and each of them, as Proxies with full
power of substitution, to vote, as designated on the
reverse side, for director substitutes if any nominee
becomes unavailable, and in their discretion, on matters
properly brought before the Meeting and on matters
incident to the conduct of the Meeting, all of the shares
of common stock of Eastman Kodak Company which the
undersigned has power to vote at the Annual Meeting of
shareholders to be held on May 14, 1997 or any
adjournment thereof.
NOMINEES FOR DIRECTORS:
Class I: Martha Layne Collins, George M. C. Fisher,
Paul E. Gray and John J. Phelan, Jr.
Class II: Harry L. Kavetas and Laura D'Andrea Tyson
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL DIRECTORS AND THE
RATIFICATION OF ELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS AND AGAINST THE SHAREHOLDER PROPOSAL.
This Proxy will be voted as directed; if no direction to the contrary
is indicated, it will be voted for the election of directors, for the
ratification of the election of independent accountants, and against
the shareholder proposal.
(CONTINUED, and To Be Signed and Dated on the REVERSE
SIDE)
The Board of Directors recommends a vote FOR Items 1 and 2.
1. Election of FOR WITHHOLD
Directors AUTHORITY
0 0
To withhold authority to vote for any particular nominee, write the
name above.
2. Ratification FOR AGAINST ABSTAIN
of Election
of Independent
Accountants 0 0 0
The Board of Directors recommends a vote AGAINST Item 3
3. Shareholder FOR AGAINST ABSTAIN
Proposal-
Annual Election of
Directors 0 0 0
If you receive more than one Annual Report at the address set
forth on this proxy card and have no need for the extra copy,
please check the box at the right. This will not effect the
distribution of dividends or proxy statements. 0
I plan to attend the
Annual Meeting. 0
I plan to bring
a guest 0
SIGNATURE(s) DATE
NOTE: Please sign exactly as the name appears hereon. Joint owners
should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
When executed, promptly forward this card to: Proxy Services, Boston
EquiServe, P. O. Box 9372, Boston, MA 02205-9942
March 26, 1997
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Attention: Document Control
Subject: Annual Meeting of Shareholders of Eastman Kodak Company --
May 14, 1997
Dear Sir:
Pursuant to Rule 14a-6 under the Securities Exchange Act, we hereby
transmit for filing herewith the definitive proxy statement and form
of proxy for use in connection with the Annual Meeting of
shareholders of Eastman Kodak Company to be held May 14, 1997.
Mailing of the definitive proxy statement and form of proxy to
shareholders is expected to commence on March 27, 1997.
Pursuant to Rule 14a-6(a) the Company did not file a preliminary
proxy statement and form of proxy because the only matters to be
acted upon at the Annual Meeting are the election of directors,
ratification of the election of independent accountants, and action
on a shareholder proposal.
The material changes from last year's proxy statement are as follows:
1) the inclusion of one shareholder proposal (pages 34
through 35); and
2) the nomination for election of four Class I directors
and two Class II directors.
In addition, please be advised that the pagination of the
electronically filed proxy statement differs from the printed version
thereof and the printed proxy statement contains the performance
graph while the electronic version contains a chart.
Securities and Exchange Commission--2
March 26, 1997
The ratification of election of independent accountants is a matter
upon which shareholders must vote, according to the Company's by-
laws. Item 18 of Schedule 14A is not, therefore, applicable to the
election of independent accountants.
Under separate cover, eight copies of the Annual Report for the year
1996 will be forwarded to you on or before March 27, 1997, the date
mailing to the shareholders is expected to commence. In addition,
five copies of the Annual Report will be mailed to the New York Stock
Exchange at that time.
Very truly yours,
Joyce P. Haag
JPH:cbs
Enc.
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