[LOGO]
Eastman Kodak Company
343 State Street
Rochester, NY 14650
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Notice of 2001
Annual Meeting
and Proxy Statement
Date of Notice March 22, 2001
NOTICE OF THE 2001
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Eastman Kodak Company will be held on
Wednesday, May 9, 2001, at 10:00 AM, at the E.M. Pearson Theatre at Concordia
University, 312 North Hamline Avenue, St. Paul, MN 55104. There are three
proposals to be voted on at the Meeting:
1. Election of four Class II directors for a term of three years:
William W. Bradley
Alice F. Emerson
Hector de J. Ruiz
Laura D'Andrea Tyson
2. Ratification of election of PricewaterhouseCoopers LLP as
independent accountants
3. Amendment to 2000 Management Variable Compensation Plan
The Board of Directors recommends a vote FOR items 1-3.
If you were a shareholder of record at the close of business on March 12, 2001,
you are entitled to vote at the Annual Meeting.
If you have any questions about the Meeting, please contact:
Coordinator, Shareholder Services
Eastman Kodak Company
343 State Street
Rochester, New York 14650-0205
(716) 724-5492
The E.M. Pearson Theatre is handicap accessible. If you require special
assistance, call the Coordinator, Shareholder Services.
By Order of the Board of Directors
/s/ Joyce P. Haag
Joyce P. Haag
Secretary and Assistant General Counsel
Eastman Kodak Company
March 22, 2001
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[LOGO]
March 22, 2001
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders on
Wednesday, May 9, 2001, at 10:00 AM, at the E.M. Pearson Theatre at Concordia
University, 312 North Hamline Avenue, St. Paul, MN 55104. You will be asked to
vote on three proposals. We will also review Kodak's performance and answer your
questions.
You may vote by internet, telephone, written proxy, or written ballot at
the Meeting. We encourage you to use the internet; it is the most cost-effective
way to vote.
We look forward to seeing you on May 9 and would like to take this
opportunity to remind you that your vote is very important.
Sincerely,
/s/ Daniel A. Carp
Daniel A. Carp
Chairman of the Board
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343 STATE STREET o ROCHESTER, NEW YORK 14650
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TABLE OF CONTENTS
Notice of the Meeting..........................................................1
Letter to Shareholders.........................................................2
Questions and Answers..........................................................4
Householding of Annual Disclosure Documents....................................8
Audio Webcast of Annual Meeting Available on the Internet......................8
Proposals to be Voted On.......................................................9
Item 1 - Election of Directors.........................................9
Item 2 - Ratification of Election of Independent Accountants...........9
Item 3 - Amendment to 2000 Management Variable Compensation Plan......10
Board of Directors............................................................12
Board Committees......................................................16
Meeting Attendance....................................................17
Director Compensation.................................................17
Beneficial Security Ownership Table...........................................18
Transactions with Management..................................................19
Compensation of Named Executive Officers......................................20
Summary Compensation Table............................................20
Option/SAR Grants Table...............................................22
Option/SAR Exercises and Year-End Values Table........................23
Long-Term Incentive Plan..............................................24
Employment Contracts and Arrangements.................................25
Change in Control Arrangements........................................26
Retirement Plan.......................................................27
Report of the Executive Compensation and Development Committee................29
Report of the Audit Committee.................................................32
Performance Graph - Shareholder Return........................................33
Exhibit I - Amendment to 2000 Management Variable Compensation Plan...........34
Exhibit II - Audit Committee Charter..........................................34
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QUESTIONS AND ANSWERS
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Q: What am I voting on?
A: You are voting on three proposals:
1. Election of four Class II directors for a term of three years:
William W. Bradley
Alice F. Emerson
Hector de J. Ruiz
Laura D'Andrea Tyson
2. Ratification of election of PricewaterhouseCoopers LLP as
independent accountants
3. Amendment to 2000 Management Variable Compensation Plan
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Q: What are the voting recommendations of the Board?
A: The Board recommends the following votes:
o FOR each of the directors.
o FOR ratification of election of PricewaterhouseCoopers LLP as
independent accountants.
o FOR amendment to 2000 Management Variable Compensation Plan.
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Q: Will any other matters be voted on?
A: We are not aware of any other matters that you will be asked to vote on at
the Meeting. If any other matter is properly brought before the Meeting, Daniel
A. Carp and Joyce P. Haag, acting as your proxies, will vote for you in their
discretion. New Jersey law (under which the Company is incorporated) requires
that you be given notice of all matters to be voted on, other than procedural
matters such as adjournment of the Meeting.
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Q: How do I vote?
A: There are four ways to vote:
o By internet at http://www.eproxyvote.com/ek. We encourage you to vote
this way.
o By toll-free telephone at (877) 779-8683.
o By completing and mailing your proxy card.
o By written ballot at the Meeting.
If you vote by internet or telephone, your vote must be received before midnight
of the day before the Meeting. Your shares will be voted as you indicate. If you
do not indicate your voting preferences, Daniel A. Carp and Joyce P. Haag will
vote your shares FOR items 1 - 3.
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Q: Who can vote?
A: You can vote at the Meeting if you were a shareholder of record as of the
close of business on March 12, 2001 (the Record Date). Each share of common
stock is entitled to one vote.
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Q: Can I change my vote?
A: Yes. You can change your vote or revoke your proxy any time before the
Meeting by:
o entering a new vote by internet or telephone;
o returning a later-dated proxy card;
o notifying Joyce P. Haag, Secretary and Assistant General Counsel; or
o completing a written ballot at the Meeting.
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Q: What vote is required to approve each proposal?
A: The four director nominees receiving the greatest number of votes will be
elected. The ratification of election of the independent accountants and the
amendment to 2000 Management Variable Compensation Plan each requires the
affirmative vote of a majority of the votes cast at the Meeting.
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Q: Is my vote confidential?
A: Yes. Only the inspectors of election and certain individuals who help with
processing and counting the vote have access to your vote. Directors and
employees of the Company may see your vote only if the Company needs to defend
itself against a claim or if there is a proxy solicitation by someone other than
the Company. Therefore, please do not write any comments on your proxy card.
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Q: Who will count the vote?
A: Fleet National Bank will count the vote. Its representatives will be the
inspectors of election.
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Q: What shares are covered by my proxy card?
A: The shares covered by your card represent all the shares of Kodak stock you
own, including those in the Eastman Kodak Shares Program and the Employee Stock
Purchase Plan, and those credited to your account in the Eastman Kodak
Employees' Savings and Investment Plan and the Kodak Employees' Stock Ownership
Plan. The trustees and custodians of these plans will vote your shares in each
plan as you direct.
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Q: What does it mean if I get more than one proxy card?
A: It means your shares are in more than one account. You should vote the shares
on all your proxy cards. To provide better shareholder service, we encourage you
to have all your shares registered in the same name and address. You may do this
by contacting our transfer agent, Fleet National Bank, at (800) 253-6057.
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Q: Who can attend the Annual Meeting?
A: All shareholders of record as of the close of business on March 12, 2001, can
attend. Seating, however, is limited. Attendance at the Meeting will be on a
first-come, first-served basis, upon arrival at the Meeting. Photographs will be
taken at the Annual Meeting. We may use these photographs in publications. If
you attend the Meeting, we assume your permission to use your picture.
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Q: What do I need to do to attend the Annual Meeting?
A: To attend the Meeting, please follow these instructions:
o If you vote by using the enclosed proxy card, check the appropriate
box on the card.
o If you vote by internet or telephone, follow the instructions provided
for attendance.
o If a broker or other nominee holds your shares, bring proof of your
ownership with you to the Meeting.
o To enter the Meeting, bring the Admission Ticket attached to your
proxy card or printed from the internet.
o If you do not have an Admission Ticket, go to the Special Registration
desk upon arrival at the Meeting.
Seating at the Meeting will be on a first-come, first-served basis, upon arrival
at the Meeting.
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Q: Can I bring a guest?
A: Yes. If you plan to bring a guest to the Meeting, check the appropriate box
on the enclosed proxy card or follow the instructions on the internet or
telephone. When you go through the registration area at the Meeting, be sure
your guest is with you.
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Q: What is the quorum requirement of the Meeting?
A: A majority of the outstanding shares on March 12, 2001, constitutes a quorum
for voting at the Annual Meeting. If you vote, your shares will be part of the
quorum. Abstentions and broker non-votes will be counted in determining the
quorum, but neither will be counted as votes cast. On March 1, 2001, there were
290,089,490 shares outstanding.
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Q: How do I recommend someone to be a director?
A: You may recommend any person to be a director by writing to Joyce P. Haag,
Secretary and Assistant General Counsel, Eastman Kodak Company, 343 State
Street, Rochester, New York 14650-0218. You must include a description of your
nominee's principal occupations or employment over the last five years and a
statement from your nominee indicating that he or she will serve if elected. The
Committee on Directors will consider persons recommended by shareholders.
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Q: How much did this proxy solicitation cost?
A: The Company hired Georgeson Shareholder Communications Inc. to assist in the
distribution of proxy materials and solicitation of votes. The estimated fee is
$18,500 plus reasonable out-of-pocket expenses. In addition, the Company will
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy and solicitation
material to shareholders.
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Q: When are the shareholder proposals due for the 2002 Annual Meeting?
A: Shareholder proposals must be in writing, received by November 20, 2001, and
addressed to:
Joyce P. Haag, Secretary and Assistant General Counsel
Eastman Kodak Company
343 State Street
Rochester, New York 14650-0218
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Q: What other information about Kodak is available?
A: The following information is available:
o Annual Report on Form 10-K
o Transcript of the Annual Meeting
o Plan descriptions, annual reports, and trust agreements and contracts
for the pension plans of the Company and its subsidiaries
o Diversity Report; Form EEO-1
o Health, Safety and Environment Annual Report on Kodak's website at
http://www.kodak.com/go/HSE
You may request copies by contacting:
Coordinator, Shareholder Services
Eastman Kodak Company
343 State Street
Rochester, New York 14650-0205
(716) 724-5492
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HOUSEHOLDING OF ANNUAL DISCLOSURE DOCUMENTS
The Securities and Exchange Commission recently approved a new rule concerning
the delivery of annual disclosure documents. The rule allows us to send a single
set of our annual report and proxy statement to any household at which two or
more shareholders reside if we believe the shareholders are members of the same
family. This rule benefits both you and Kodak. It reduces the volume of
duplicate information received at your household and helps to reduce Kodak's
expenses. The rule applies to Kodak's annual reports, proxy statements or
information statements. Each shareholder will continue to receive a separate
proxy card or voting instruction card.
If your household received a single set of disclosure documents for this year,
but you would prefer to receive your own copy, please contact our transfer
agent, Fleet National Bank, by calling their toll free number, (800) 253-6057.
If you would like to receive your own set of Kodak's annual disclosure documents
in future years, follow the instructions described below. Similarly, if you
share an address with another Kodak shareholder and together both of you would
like to receive only a single set of Kodak's annual disclosure documents, follow
these instructions:
If your Kodak shares are registered in your own name, please contact our
transfer agent, Fleet National Bank, and inform them of your request by calling
them at (800) 253-6057 or writing them at P.O. Box 43016, Providence, RI
02940-3016.
If a broker or other nominee holds your Kodak shares, please contact ADP and
inform them of your request by calling them at (888) 603-5847 or writing them at
Householding Department, 51 Mercedes Way, Edgewood, NY 11717. Be sure to include
your name, the name of your brokerage firm and your account number.
AUDIO WEBCAST OF ANNUAL MEETING
AVAILABLE ON THE INTERNET
This year, for the first time, Kodak's Annual Meeting will be webcast live. If
you have internet access, you can access the webcast by going to Kodak's
Investor Center webpage at the following address:
http://www.kodak.com/US/en/corp/investorCenter/investorsCenterHome.shtml
This webcast is listen only. You will not be able to ask questions.
The Annual Meeting audio webcast will be available on Kodak's website for a
short period of time after the Meeting.
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PROPOSALS TO BE VOTED ON
ITEM 1
ELECTION OF DIRECTORS
Kodak's By-Laws require us to have at least nine directors but no more than 18.
The number of directors is set by the Board and is currently 11. The Board is
divided into three classes of directors with overlapping three-year terms. There
are three Class II directors whose terms expire at the 2001 Annual Meeting.
Paul H. O'Neill, a Class II director, resigned from the Board effective December
31, 2000, in anticipation of his appointment as United States Secretary of the
Treasury. John J. Phelan, Jr., a Class I director, is retiring from the Board
effective May 9, 2001, in accordance with the Company's retirement policy for
directors.
Nominees for election as Class II directors are:
William W. Bradley
Alice F. Emerson
Hector de J. Ruiz
Laura D'Andrea Tyson
All the nominees agree to serve a three-year term. Information about them is
provided beginning on page 12. Alice F. Emerson and Laura Tyson were previously
elected by you. William W. Bradley and Hector de J. Ruiz are standing for
election by you for the first time.
If a nominee is unable to stand for election, the Board may reduce the number of
directors or choose a substitute. If the Board chooses a substitute, the shares
represented by proxies will be voted for the substitute. If a director retires,
resigns, dies or is unable to serve for any reason, the Board may reduce the
number of directors or elect a new director to fill the vacancy. This new
director will serve until the next Annual Meeting.
The Board of Directors recommends a vote FOR the election of directors.
ITEM 2
RATIFICATION OF ELECTION OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has been the Company's independent accountants for
many years. The Board, on the recommendation of its Audit Committee, elected
PricewaterhouseCoopers LLP the Company's independent accountants to serve until
the 2002 Annual Meeting.
Representatives of PricewaterhouseCoopers LLP will attend the Meeting to respond
to questions and, if they desire, to make a statement.
The Board of Directors recommends a vote FOR the ratification of election of
PricewaterhouseCoopers LLP as independent accountants.
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ITEM 3
AMENDMENT TO 2000 MANAGEMENT VARIABLE COMPENSATION PLAN
What am I voting on?
You are voting on an amendment to 2000 Management Variable Compensation Plan to
add performance measures that the Executive Compensation and Development
Committee may select in establishing performance goals. The Board approved this
amendment subject to your approval. The amendment appears as Exhibit I on page
34.
What is the 2000 Management Variable Compensation Plan?
The 2000 Management Variable Compensation Plan is our short-term annual bonus
plan for executives. The purpose of the Plan is to provide a performanced-based,
annual incentive award to attract, retain and motivate our management-level
employees and to appropriately recognize their performance. You previously
approved this Plan on May 12, 1999. The Plan currently has only one performance
measure, Economic Profit/Economic Value Added.
Why is the Plan being amended?
The Plan is being amended in anticipation of the results of a review of our
executive compensation program. Periodically we undertake a study of our
executive compensation program to determine whether it is fulfilling its stated
principles and objectives. At the request of the Executive Compensation and
Development Committee, such a study is presently underway. We anticipate
completing this study by yearend.
The amendment will provide the Committee the flexibility to select an
appropriate performance measure at the end of the study and introduce it in the
2002 performance period.
Why are we requesting your approval?
You are being asked to approve this amendment to allow all compensation paid
under the amended plan to continue to be deductible by the Company. Under
Section 162(m) of the Internal Revenue Code, a company is generally not
permitted to deduct compensation paid in excess of $1 million to its Chief
Executive Officer or its four other most highly compensated executive officers,
unless the compensation is paid under a performanced-based compensation plan. To
satisfy the requirements that apply to performanced-based compensation plans,
any performance measure used by the Plan must be approved by our shareholders.
Which additional performance measures are being added to the Plan?
If approved, the amendment would permit the following additional performance
measures to be used: return on net assets, return on shareholders' equity,
return on assets, return on capital, return on sales, shareholder return, total
shareholder return, profit margin, earnings per share, net earnings, operating
earnings, earnings before interest and taxes, common stock price per share, cash
flow, cost reduction, revenue, revenue growth, sales or market share.
Who is eligible to participate in the Plan?
Plan eligibility is generally limited to the Company's management-level
employees. The Committee determines which management-level employees will be
participants for a particular performance period. The approximate number of
management-level employees who are currently eligible to participate in the Plan
is 800.
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How are awards determined?
A target bonus is set annually for each executive. The target, which is a
percentage of base salary, varies depending on the executive's duties and
responsibilities. For 2001, target bonuses range from 25% of base salary to 145%
of base salary for the CEO.
If the Plan is amended, any of the Plan's performance measures can be used by
the Committee to establish the performance measure for the year. Using this
measure, the Committee establishes at the beginning of each year the performance
formula for the year. Based on Company performance for the year, this formula
determines the size of the award pool for the year. The Committee awards bonuses
from the award pool using in large part the results of the management appraisal
process. The total award pool does not have to be awarded. The Committee has the
authority to carry over unused award pool funds to subsequent performance
periods.
In what form are awards paid?
All awards are paid in cash.
What award limits exist under the Plan?
The maximum award payable to the Chief Executive Officer or any of the Company's
four other most highly compensated executive officers is $5 million.
Who administers the Plan?
The Executive Compensation and Development Committee oversees the administration
of the Plan.
What benefits would have been paid under the Plan if this amendment had been in
effect in 2000?
The benefits that would have been paid to the named executive officers,
executive officers and all other employees for the 2000 performance period had
the amendment been in effect cannot be determined because the amendment
identifies a list of performance criteria and does not establish a specific
criterion.
What benefits will be paid under this Plan, as amended?
The benefits that will be paid to the named executive officers, executive
officers and all other employees cannot be determined because the amendment
identifies a list of performance criteria and does not establish a specific
criterion.
The Board of Directors recommends a vote FOR the amendment to 2000 Management
Variable Compensation Plan.
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BOARD OF DIRECTORS
[PHOTO] [PHOTO] [PHOTO]
WILLIAM W. BRADLEY ALICE F. EMERSON HECTOR DE J. RUIZ
NOMINEES TO SERVE A THREE-YEAR TERM EXPIRING AT THE 2004 ANNUAL MEETING (Class
II Directors)
WILLIAM W. BRADLEY
Senator Bradley, 57, is a Managing Director of Allen & Company, Incorporated.
From 1997 to 1999, he was a Senior Advisor and Vice Chairman of the
International Council of JP Morgan & Co., Inc. During that time, he also served
as an essayist for CBS evening news, a visiting professor at Stanford
University, Notre Dame University and the University of Maryland. Senator
Bradley served in the U.S. Senate from 1978 to 1997 representing the state of
New Jersey. Prior to serving in the Senate, he was an Olympic gold medallist in
1964 and a professional basketball player with the New York Knicks from 1967 to
1977, during which time they won two world championships. Senator Bradley holds
a BA degree in American History from Princeton University and an MA degree from
Oxford University where he was a Rhodes Scholar. He has authored five books on
American politics, culture and economy.
ALICE F. EMERSON Director since May 1992
Dr. Emerson, 69, is Senior Advisor to The Andrew W. Mellon Foundation, a
position she assumed in 1998 after having served as Senior Fellow since 1991.
She was President of Wheaton College in Massachusetts from 1975 to 1991 and
served the University of Pennsylvania, first as Dean of Women and subsequently
as Dean of Students from 1966 to 1975. Dr. Emerson received her bachelor's
degree from Vassar College and her Ph.D. degree from Bryn Mawr College. She is a
director of AES Corporation and FleetBoston Financial Corporation.
HECTOR DE J. RUIZ Director since January 2001
Dr. Ruiz, 55, is President and Chief Operating Officer of Advanced Micro
Devices, Inc. (AMD). He joined AMD in these capacities in January 2000. Before
joining AMD, Dr. Ruiz served as President of Motorola, Inc.'s Semiconductor
Products Sector since May 1997. From 1991 to 1994, Dr. Ruiz was Senior Vice
President and General Manager of Motorola's paging and messaging businesses, and
in 1996 became Executive Vice President and General Manager of those businesses.
Dr. Ruiz joined Motorola in 1977, and from 1977 to 1991, he held the positions
of Operations Manager, Vice President of MOS Wafer Processing, Vice President of
the Memory Products Division, Corporate Vice President and General Manager of
Integrated Circuit Wafer Manufacturing, Corporate Vice President and Assistant
General Manager, Microprocessor Products Group, Corporate Vice President and
Director of Technology and Senior Vice President. Before joining Motorola, Dr.
Ruiz worked at Texas Instruments, Inc. from 1972 to 1977. Dr. Ruiz holds a BS
degree in electrical engineering from the University of Texas at Austin and a
Ph.D. from Rice University. Dr. Ruiz is a member of the Board of Directors of
Darden Restaurants, Inc.
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[PHOTO] [PHOTO] [PHOTO]
LAURA D'ANDREA TYSON RICHARD S. BRADDOCK DANIEL A. CARP
LAURA D'ANDREA TYSON Director since May 1997
Dr. Tyson, 53, is Dean of the Walter A. Haas School of Business, at the
University of California, Berkeley, a position she assumed in July 1998.
Previously, she was professor of the Class of 1939 Chair in Economics and
Business Administration at the University of California, Berkeley, a position
she held from January 1997 to July 1998. Prior to this position, Dr. Tyson
served in the first Clinton Administration as Chairman of the President's
National Economic Council and 16th Chairman 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
director of Fox Entertainment Company, Human Genome Sciences, Inc., Morgan
Stanley, Dean Witter, Discover & Co., SBC Communications, Inc. and Exodus
Communications.
DIRECTORS CONTINUING TO SERVE A TERM EXPIRING AT THE 2002 ANNUAL MEETING (Class
III Directors)
RICHARD S. BRADDOCK Director since May 1987
Mr. Braddock, 59, is Chairman of priceline.com, a position he has held since
August 1998. He also served as CEO of priceline.com from August 1998 to July
2000. He was Chairman of True North Communications from July 1997 to January
1999. He was a principal of Clayton, Dubilier & Rice, from June 1994 until
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 company's three core businesses. Mr. Braddock was graduated from Dartmouth
College with a degree in history, and received his MBA degree from the Harvard
School of Business Administration. He is a director of Cadbury Schweppes and
priceline.com.
DANIEL A. CARP Director since December 1997
Mr. Carp, 52, is Chairman, President and Chief Executive Officer of Eastman
Kodak Company. He became Chairman on December 8, 2000. He was elected CEO
effective January 1, 2000 and President and COO effective January 1, 1997, after
having served as Executive Vice President and Assistant Chief Operating Officer
since November 1995. Mr. Carp began his career with Kodak in 1970 and has held a
number of increasingly responsible positions in market research, business
planning, marketing management and line of business management. In 1986, Mr.
Carp was named Assistant General Manager of Latin American Region and in
September 1988, he was elected a Vice President and named General Manager of
that region. In 1991, he was named General Manager of the European Marketing
Companies and later that same year, General Manager, European, African and
Middle Eastern Region. He holds a BBA degree in quantitative methods from Ohio
University, an MBA degree from Rochester Institute of Technology and an MS
degree in management from the Sloan School of Management, Massachusetts
Institute of Technology. Mr. Carp is a director of Texas Instruments
Incorporated.
13
[PHOTO] [PHOTO] [PHOTO]
DURK I. JAGER DEBRA L. LEE RICHARD A. ZIMMERMAN
DURK I. JAGER Director since January 1998
Mr. Jager, 57, is the former Chairman, President and Chief Executive Officer of
The Procter & Gamble Company. He left these positions in July 2000. He was
elected to the position of Chief Executive Officer in January 1999 and Chairman
of the Board effective September 1999, while continuing to serve as President
since 1995. He served as Executive Vice President from 1990 to 1995. Mr. Jager
joined The Procter & Gamble Company in 1970 and was named Vice President in
1987. He was graduated from Erasmus Universiteit, Rotterdam, The Netherlands.
DEBRA L. LEE Director since September 1999
Ms. Lee, 46, is President and Chief Operating Officer of BET Holdings, Inc.
(BET), a position she has held since March 1996. She joined BET in 1986 as Vice
President and General Counsel. In 1992, she was elected Executive Vice President
of Legal Affairs and named publisher of BET's magazine division, in addition to
serving as general counsel. She was placed in charge of strategic business
development in 1995. Ms. Lee holds a BA degree from Brown University and MA and
JD degrees from Harvard University. Ms. Lee is a director of WGL Company and
Genuity, Inc.
RICHARD A. ZIMMERMAN Director since July 1989
Mr. Zimmerman, 69, 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 director of
Stabler Companies, Inc. and Westvaco Corporation.
14
[PHOTO] [PHOTO]
MARTHA LAYNE COLLINS PAUL E. GRAY
DIRECTORS CONTINUING TO SERVE A TERM EXPIRING AT THE 2002 ANNUAL MEETING (Class
I Directors)
MARTHA LAYNE COLLINS Director since May 1988
Governor Collins, 64, is Executive Scholar in Residence at Georgetown College, a
position she assumed in August 1998, after having been Director, International
Business and Management Center, at the University of Kentucky since July 1996.
From 1988 to 1997, she was President of Martha Layne Collins and Associates, a
consulting firm, and 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 and PurchasePro.
PAUL E. GRAY Director since September 1990
Dr. Gray, 69, is President Emeritus of the Massachusetts Institute of Technology
(M.I.T.) and Professor of Electrical Engineering and Computer Science. Dr. Gray
served as Chairman of the governing board of M.I.T. from 1990 to June 1997 and
as its President from 1980 to 1990. 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 The
Boeing Co.
15
Board Committees
The Board has the committees listed below. All committee members are
non-employee, independent directors as defined by the New York Stock Exchange
listing standards. Mr. O'Neill, who left the Board on December 31, 2000, was a
member of the Audit Committee and the Public Policy Committee. Dr. Ruiz, who
joined the Board in January 2001, became a member of the Audit Committee and
Public Policy Committee on February 8, 2001.
Audit Committee 4 meetings in 2000
o reviewed the Committee's written charter which is attached as Exhibit II;
o discussed the independence of the independent accountants;
o discussed the quality of the accounting principles used to prepare the
Company's financial statements;
o recommended the firm that Kodak should retain as independent accountants;
o reviewed the audit and non-audit activities of both the independent
accountants and the internal audit staff of the Company; and
o met separately and privately with the independent accountants and with
the Company's Director, Corporate Auditing, to ensure that the scope of
their activities has not been restricted and that adequate responses to
their recommendations have been received.
Committee on Directors 4 meetings in 2000
o reviewed the qualifications of individuals for election as members of the
Board;
o recommended qualified individuals to be considered for Board membership;
and
o discussed the shareholder proposals submitted to the Company.
Executive Compensation and Development Committee 6 meetings in 2000
o reviewed the Company's executive development process;
o set the compensation for the executive officers and recommended the
compensation of other key management;
o certified and granted awards under the Company's compensation plans; and
o initiated a review of Kodak's executive compensation program.
Finance Committee 5 meetings in 2000
o reviewed the Company's financing strategies including dividend
declaration, capital expenditures, debt issuances and foreign exchange
hedging;
o reviewed significant acquisitions, divestitures, and joint ventures; and
o reviewed the investment performance and the administration of the
Company's defined benefit pension plan.
Public Policy Committee 2 meetings in 2000
o reviewed philanthropic programs;
o reviewed environmental initiatives;
o reviewed employee survey results;
o reviewed employee relations issues; and
o reviewed diversity initiatives.
16
COMMITTEE MEMBERSHIP
Committee Executive Public
Name Audit on Compensation Finance Policy
Directors and Development
- --------------------- ----- --------- --------------- ------- ------
Richard S. Braddock X X*
Martha Layne Collins X X*
Alice F. Emerson X X
Paul E. Gray X* X
Durk I. Jager X X*
Debra L. Lee X X
John J. Phelan, Jr. X X
Laura D'Andrea Tyson X X
Richard A. Zimmerman X* X
- ----------
*Chairman
Meeting Attendance
The Board held a total of eight meetings in 2000. Each director attended at
least 75% of the meetings of the Board and committees of the Board on which the
director served. The average attendance by all directors was over 93%.
Director Compensation
Annual Payments Non-employee directors receive:
o $65,000 as a retainer, at least half of which must be taken in stock or
deferred into stock units;
o 2,000 stock options; and
o reimbursement of out-of-pocket expenses for the meetings they attend.
Employee directors receive no additional compensation for serving on the Board.
Deferred Compensation Non-employee directors may defer some or all of their
compensation into a phantom Kodak stock account or into a phantom
interest-bearing account. Seven directors deferred compensation in 2000. In the
event of a change in control, the amounts in the phantom accounts will generally
be paid in a single cash payment.
Life Insurance The Company provides $100,000 of group term life insurance to
each non-employee director. This decreases to $50,000 at retirement or age 65,
whichever occurs later.
Charitable Award Program This program is closed to new participants effective
January 1, 1997. The program provides for a contribution by the Company of up to
$1,000,000 following a director's death to a maximum of 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. Each of the following
non-employee directors continues to participate in the program: Messrs.
Braddock, Phelan, and Zimmerman, Drs. Emerson and Gray, and Gov. Collins.
17
BENEFICIAL SECURITY OWNERSHIP OF DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS
Directors, Nominees Number of Common Shares
and Executive Officers Owned on January 2, 2001
- ----------------------- ------------------------
Richard S. Braddock 18,447 (a)(b)
William W. Bradley 20 (c)
Robert H. Brust 60,377 (b)
Daniel A. Carp 412,258 (b)(d)
Martha Layne Collins 12,115 (a)(b)
Martin M. Coyne 115,949 (b)
Alice F. Emerson 13,922 (a)(b)
George M. C. Fisher 3,657,153 (b)(d)
Paul E. Gray 11,817 (a)(b)
Durk I. Jager 8,622 (a)(b)
Debra L. Lee 3,780 (b)
Michael P. Morley 160,766 (b)(d)
John J. Phelan, Jr. 18,077 (a)(b)
Hector de J. Ruiz 839
Eric L. Steenburgh 39,681 (b)(d)
Laura D'Andrea Tyson 4,790 (a)(b)
Richard A. Zimmerman 15,597 (a)(b)
All Directors, Nominees and
Executive Officers as a
Group (31), including
the above 5,617,483 (a)(b)(c)(d)(e)
- ----------
(a) Includes the following Kodak common stock equivalents, which are held in
the Deferred Compensation Plan for Directors: R. S. Braddock - 5,418; M. L.
Collins - 6,915; A. F. Emerson - 9,389; P. E. Gray - 6,817; D. I. Jager -
4,622; J. J. Phelan, Jr. - 12,238; L. D. Tyson - 773; and R. A. Zimmerman -
7,940; and all directors, nominees and executive officers as a group -
54,112.
(b) Includes the following number of shares which may be acquired by exercise
of stock options: R. S. Braddock - 2,000; R. H. Brust - 46,666; D. A. Carp
- 355,362; M. L. Collins - 2,000; M. M. Coyne - 101,430; A. F. Emerson -
2,000; G. M. C. Fisher - 3,396,505; P. E. Gray - 2,000; D. I. Jager -
2,000; D. L. Lee - 2,000; M. P. Morley - 132,344; J. J. Phelan, Jr. -
2,000; E. L. Steenburgh - 12,872; L. D. Tyson - 2,000; R. A. Zimmerman -
2,000; and all directors, nominees and executive officers as a group -
5,012,526.
(c) W. W. Bradley is a nominee for director. As of March 2001 he owned 20
shares.
(d) Includes the following Kodak common stock equivalents, receipt of which are
deferred: D. A. Carp - 25,970; G. M. C. Fisher - 92,608; M. P. Morley -
23,126; E. L. Steenburgh - 16,819; and all directors, nominees and
executive officers as a group - 190,778.
(d) The total number of shares beneficially owned by all directors, nominees
and executive officers as a group is less than 2% 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 all Company securities over
which the directors, nominees and executive officers directly or indirectly have
or share voting or investment power are listed as beneficially owned. The
figures above include shares held for the account of the above persons in the
Eastman Kodak Shares Program and the Kodak Employees' Stock Ownership Plan, and
the interests, if any, of the above persons in the Kodak Stock Fund of the
Eastman Kodak Employees' Savings and Investment Plan, stated in terms of Kodak
shares.
18
TRANSACTIONS WITH MANAGEMENT
Under Mr. Brust's offer letter, the Company loaned Mr. Brust, Chief Financial
Officer and Executive Vice President, the sum of $3,000,000 at an annual
interest rate of 6.21%, the applicable federal rate for mid-term loans,
compounded annually, in effect for January 2000. The unsecured loan is evidenced
by a promissory note dated January 6, 2000. Under Mr. Brust's offer letter,
twenty percent of the principal and all of the accrued interest on the loan is
to be forgiven on each of the first five anniversaries of the loan. Mr. Brust is
not entitled to forgiveness on any anniversary date if he voluntarily terminates
his employment or is terminated for cause on or before the anniversary date. The
balance due under the loan on December 31, 2000 was $3,000,000.
In March 2001, the Company loaned Mr. Carp, Chairman, President and Chief
Executive Officer, $1,000,000 for the purchase of a home. The loan is unsecured
and bears interest at 5.07% per year, the applicable federal rate for mid-term
loans, compounded annually, in effect for March 2001. The entire amount of the
loan and all accrued interest is due upon the earlier of March 1, 2006 or the
date of Mr. Carp's termination of employment from the Company. The loan is
evidenced by a promissory note dated March 2, 2001.
In August 1999, the Company loaned Mr. Gustin, Chief Marketing Officer and
Senior Vice President, $170,000 for the purchase of a home. The loan is
unsecured and bears interest at 5.96% per year, the applicable federal rate for
mid-term loans, compounded annually, in effect for August 1999. Under the
original terms of the loan, the entire amount of the loan and all accrued
interest was due upon the earlier of August 10, 2000 or the date of Mr. Gustin's
termination of employment. The loan was subsequently modified to require
repayment on the earlier of August 10, 2001 or the date of Mr. Gustin's
termination of employment. The loan is evidenced by a promissory note dated
August 10, 1999. The balance due under the loan on December 31, 2000 was
$184,338.
In October 2000, the Company loaned Mr. Lewis, Senior Vice President, Digital
Business Development, $240,000 at an annual interest rate of 6.3%, the
applicable federal rate for mid-terms loans, compounded annually, in effect for
October 2000. The loan will be secured by a mortgage on Mr. Lewis' principal
residence. The loan was made under the terms of Mr. Lewis' offer letter and is
evidenced by a promissory note dated October 13, 2000. Under Mr. Lewis' offer
letter, one third of the principal and all of the accrued interest on the loan
is to be forgiven on each of the first three anniversaries of the loan. Mr.
Lewis is not entitled to forgiveness on any anniversary date if he voluntarily
terminates his employment or is terminated for cause on or before the
anniversary date. The balance due under the loan on December 31, 2000 was
$243,273.
19
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The individuals named in the following table were the Company's Chief Executive
Officer and the five other highest-paid executive officers during 2000. The
figures shown include both amounts paid and amounts deferred.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Securities
Other Under-
Annual Restricted lying All Other
Name and Compen- Stock Options/ LTIP Compensa-
Principal Position(a) Year Salary Bonus(b) sation(c) Awards(d) SARs Payouts(e) tion(f)
- --------------------- ---- ---------- ---------- --------- ---------- ---------- ---------- ----------
G. M. C. Fisher 2000 $2,000,000 $ 855,000 $ - $ 0 140,000 $0 $ 288,874
Chairman until 12/7/00 1999 2,000,000 2,520,000 - 0 155,998 0 32,390
1998 2,000,000 1,710,000 - 0 159,087 0 1,768,222
D. A. Carp 2000 1,000,000 598,500 - - 100,000 0 0
Chairman, 1999 817,308 1,020,000 - - 102,223 0 0
President & CEO 1998 741,250 545,063 30,334 1,476,800 401,402 0 0
R. H. Brust 2000 492,764 225,720 - 467,542 228,000 0 1,269
Executive Vice President
& CFO
E. L. Steenburgh 2000 588,457 258,552 - 467,000 40,000 0 0
Executive Vice President 1999 569,231 432,000 - 523,504 36,872 0 0
1998 420,000 189,000 - 643,130 0 0 0
M. M. Coyne 2000 449,449 400,075 - 409,375 146,000 0 0
Executive Vice President 1999 384,996 325,004 - 0 24,176 0 0
1998 328,017 180,560 - 0 43,528 0 0
M. P. Morley 2000 393,186 184,680 - 0 73,000 0 0
Executive Vice President 1999 358,450 270,816 - 371,720 74,208 0 0
1998 344,189 166,250 - 0 43,582 0 0
20
(a) D. A. Carp became Chairman on December 8, 2000. R. H. Brust was hired on
January 3, 2000. E. L. Steenburgh was hired on April 13, 1998. M. M. Coyne
and M. P. Morley were Senior Vice Presidents until October 23, 2000, when
they became Executive Vice Presidents.
(b) This column shows Management Variable Compensation Plan awards for services
in the year indicated.
(c) Where no amount is shown, the value of personal benefits provided was less
than the minimum amount required to be reported. For D. A. Carp the amount
represents tax reimbursement associated with expatriate payments.
(d) The total number and value of restricted stock held as of December 31,
2000, for each named individual (valued at $39.38 per share) were: G. M. C.
Fisher - 50,000 shares - $1,969,000; D. A. Carp - 45,679 shares -
$1,798,839; R. H. Brust - 11,625 shares - $457,793; M. M. Coyne - 12,640
shares - $497,763; M. P. Morley - 27,867 shares - $1,097,402; E. L.
Steenburgh - 26,631 shares - $1,048,729. The amount shown for D. A. Carp
for 1998 represents 20,000 shares valued as of the date of grant (May 1,
1998) at $73.84 per share. The amount shown for R. H. Brust represents
11,625 shares valued as of the date of grant (January 3, 2000) at $40.2187
per share. The amount shown for E. L. Steenburgh represents 8,000 shares
valued as of the date of grant (February 11, 2000) at $58.375 per share,
8,000 shares valued as of the date of grant (February 12, 1999) at $65.438
per share, and 10,000 shares valued as of the date of grant (April 13,
1998) at $64.313 per share. The amount shown for M. M. Coyne represents
10,000 shares valued as the date of grant (October 2, 2000) at $40.9375 per
share. The amount shown for M. P. Morley represents 5,000 shares valued as
of the date of grant (October 11, 1999) at $74.344 per share. Dividends are
paid on restricted shares as and when dividends are paid on Kodak common
stock.
(e) No awards were paid for the periods 1998-2000, 1997-1999 and 1996-1998
under the Performance Stock Program.
(f) For G. M. C. Fisher for 2000, this amount represents a payment in
connection with the sale of his house in Rochester, NY; for 1999, this
amount represents life insurance premiums; for 1998, this amount includes
$1,738,382 of principal and interest forgiven by the Company with respect
to two loans which were fully forgiven in 1998 and $29,840 for life
insurance premiums. For R. H. Brust for 2000, this amount represents the
company matching contribution to his account under the Eastman Kodak
Employees' Savings and Investment Plan because he is a participant in the
Company's cash balance feature of the Kodak Retirement Income Plan.
21
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Number of Percentage
Securities of Total
Underlying Options/SARs
Options/ Granted to Exercise or Grant Date
SARs Employees Base Price Expiration Present
Name Granted(a) in Fiscal Year Per Share Date Value(e)
- --------------- ---------- -------------- ----------- ---------- ----------
G. M. C. Fisher 140,000 (b) 1.17% $55.1875 03/29/10 $2,389,800
D. A. Carp 100,000 (b) 0.84 55.1875 03/29/10 1,707,000
R. H. Brust 50,000 (b) 0.42 65.6250 01/02/10 967,000
150,000 (c) 1.26 65.6250 01/02/10 2,901,000
28,000 (b) 0.23 55.1875 03/29/10 477,960
E. L. Steenburgh 40,000 (b) 0.33 55.1875 03/29/10 682,800
M. M. Coyne 10,000 (b) 0.08 65.6250 01/02/10 193,400
36,000 (b) 0.30 55.1875 03/29/10 614,520
100,000 (d) 0.84 39.7500 10/23/10 1,195,000
M. P. Morley 23,000 (b) 0.19 55.1875 03/29/10 392,610
50,000 (d) 0.42 39.7500 10/23/10 597,500
- ----------
(a) 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 options. Thereafter, termination of employment prior to vesting results
in forfeiture of the options unless the termination is due to retirement,
death, disability or an approved reason. Vesting accelerates upon death.
(b) One third of the options vest on each of the first three anniversaries of
the grant date.
(c) One fifth of the options vest on each of the first five anniversaries of
the grant date.
(d) One half of the options vest on each of the first two anniversaries of the
grant date.
(e) 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".
22
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Underlying Value of Unexercised
Unexercised Options/SARs In-the-Money Options/SARs
at Fiscal Year-End at Fiscal Year-End*
---------------------------- ----------------------------
Number of
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------- --------------- -------- ----------- ------------- ----------- -------------
G. M. C. Fisher 0 $ 0 2,896,505 791,820 $ 0 $0
D. A. Carp 17,942 408,576 355,362 500,100 50,409 0
R. H. Brust 0 0 0 228,000 0 0
E. L. Steenburgh 0 0 12,872 64,012 0 0
M. M. Coyne 1,879 20,291 91,420 175,702 18,089 0
M. P. Morley 0 0 125,664 152,703 0 0
- ----------
* Based on the closing price on the New York Stock Exchange - Composite
Transactions of the Company's common stock on December 29, 2000, of $39.38
per share.
23
Long-Term Incentive Plan
Each February the Executive Compensation and Development Committee approves a
three-year performance cycle under the Performance Stock Program. Participation
in the program is limited to senior executives. The program's performance goal
is total shareholder return equal to at least that earned by a company at the
50th percentile in terms of total shareholder return within the Standard &
Poor's 500 Composite Stock Price Index.
After the close of a cycle, the Committee calculates the percentage earned of
each participant's target award. No awards are paid unless the performance goal
is achieved. Fifty percent of the target award is earned if the performance goal
is achieved. One hundred percent is earned if total shareholder return for the
cycle equals that of a company at the 60th percentile within the Standard &
Poor's 500 Composite Stock Price Index.
The Committee has the discretion to reduce or eliminate the award earned by any
participant based upon any criteria it deems appropriate. Awards are paid in the
form of restricted stock, which restrictions lapse at age 60. The table below
shows the threshold (i.e., attainment of the performance goal), target and
maximum number of shares for the named executive officers for each cycle. No
awards were earned for the 1998-2000 performance cycle as shown in the "LTIP
Payouts" column of the Summary Compensation Table shown on page 20.
LONG-TERMINCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
Under Non-Stock Price-Based Plans
Number of Performance or -----------------------------------------
Shares, Units Other Period Until Threshold Target Maximum
Name or Other Rights Maturation or Payout # of Shares # of Shares # of Shares
- ---------------- --------------- -------------------- ----------- ----------- -----------
G. M. C. Fisher N/A 1998-2000 6,750 13,500 20,250
1999-2001* 6,667 13,334 20,000
2000-2002* 3,334 6,661 10,000
D. A. Carp N/A 1998-2000 4,250 8,500 12,750
1999-2001 4,250 8,500 12,750
2000-2002 10,000 20,000 30,000
R. H. Brust N/A 1998-2000* 875 1,750 2,625
1999-2001* 1,750 3,500 5,250
2000-2002 2,625 5,250 7,875
E. L. Steenburgh N/A 1998-2000* 3,014 6,027 9,041
1999-2001 3,400 6,800 10,200
2000-2002 3,400 6,800 10,200
M. M. Coyne N/A 1998-2000 1,650 3,300 4,950
1999-2001 1,813 3,625 5,438
2000-2002 1,813 3,625 5,438
M. P. Morley N/A 1998-2000 1,813 3,625 5,438
1999-2001 1,813 3,625 5,438
2000-2002 1,813 3,625 5,438
* Individuals who participate for less than the full performance cycle are
eligible for a prorated award based upon the length of their participation.
24
Employment Contracts and Arrangements
George M. C. Fisher - The Company employed Mr. Fisher under an employment
contract that terminated on December 31, 2000. In addition to information found
elsewhere in this Proxy Statement, the contract, as amended, provided credit for
years of service under the Company's benefit plans, including 22 years of deemed
service and five additional years of age for the retirement plan. The pension
benefit paid to Mr. Fisher was reduced by the pension paid to him by his prior
employer.
The contract also provided Mr. Fisher the following benefits after his
retirement from the Company:
o use of office facilities and secretarial assistance;
o use of the Company's aircraft for certain business travel;
o limited use for personal purposes of the Company's aircraft during the
two-year period immediately following his retirement;
o life insurance coverage of $3 million;
o retiree coverage under the Company's health and dental plans.
Following his retirement, Mr. Fisher retained both his stock option and
restricted stock awards.
Daniel A. Carp - Effective December 10, 1999, the Company entered into a letter
agreement with Mr. Carp providing for his employment as President and Chief
Executive Officer. The letter agreement provides for a base salary of
$1,000,000, subject to annual adjustment, and a target annual bonus of 105% of
his base salary. Mr. Carp's compensation will be reviewed annually by the
Executive Compensation and Development Committee. In light of Mr. Carp's
promotion to Chairman in December 2000, the Executive Compensation and
Development Committee approved an increase to Mr. Carp's target annual bonus to
145% of his base salary.
If the Company terminates Mr. Carp's employment without cause, Mr. Carp will be
permitted to retain his stock options and restricted stock. He will also receive
severance pay equal to three times his base salary plus target annual bonus and
prorated awards under the Company's bonus plans. The letter agreement also
provides that for pension purposes, Mr. Carp will be treated as if he were age
55, if he is less than age 55 at the time of his termination, or age 60, if he
is age 55 or older but less than age 60, at the time of his termination of
employment.
In the event of Mr. Carp's disability, he will receive the same severance pay as
he would receive upon termination without cause; except it will be reduced by
the present value of any Company-provided disability benefits he receives. The
letter agreement also states that upon Mr. Carp's disability, he will be
permitted to retain all of his stock options.
Eric L. Steenburgh - In April 1998, the Company hired Mr. Steenburgh under an
offer letter dated March 12, 1998. If, during the first five years of Mr.
Steenburgh's employment, the Company terminates his employment without cause, or
if Mr. Steenburgh voluntarily terminates employment for good reason, he will
receive severance pay equal to one times his base salary plus target annual
bonus. After he has been employed for five years, Mr. Steenburgh will be
credited with 20 extra years of service for pension purposes.
Robert H. Brust - The Company employed Mr. Brust under an offer letter dated
December 20, 1999. In addition to the information provided elsewhere in this
Proxy Statement, the offer letter provides Mr. Brust a special severance
benefit. If during the first five years of Mr. Brust's employment, the Company
terminates his employment without cause, he will receive severance pay equal to
one times his base salary plus target annual bonus. After completing five years
of service with the Company, Mr. Brust will be allowed to keep his stock options
upon his termination of employment for other than cause.
25
Change in Control Arrangements
The Company maintains a change in control program to provide severance pay and
continuation of certain welfare benefits for virtually all U.S. employees. A
"change in control" is generally defined under the program as:
o the incumbent directors cease to constitute a majority of the Board,
unless the election of the new directors was approved by at least
two-thirds of the incumbent directors then on the Board;
o the acquisition of 25% or more of the combined voting power of the
Company's then outstanding securities;
o a merger, consolidation, statutory share exchange or similar form of
corporate transaction involving the Company or any of its subsidiaries
that requires the approval of the Company's shareholders; or
o a vote by the shareholders to completely liquidate or dissolve the
Company.
The purpose of the program is to assure the continued employment and dedication
of all employees without distraction from the possibility of a change in
control. The program provides for severance payments and continuation of certain
welfare benefits to eligible employees whose employment is terminated, either
voluntarily with "good cause" or involuntarily, during the two-year period
following a change in control. The amount of the severance pay and length of
benefit continuation is based on the employee's position. Each of the named
executive officers would be eligible for severance pay equal to three times his
base salary plus target annual bonus award. In addition, each named executive
officer would be eligible to participate in the Company's medical, dental,
disability and life insurance plans until the first anniversary of the date of
his termination of employment. The Company's change in control program also
requires, subject to certain limitations, tax gross-up payments to all employees
to mitigate any excise tax imposed upon the employee under the Internal Revenue
Code.
Another component of the program provides enhanced benefits under the Company's
retirement plan. Any participant whose employment is terminated, for a reason
other than death, disability, cause or voluntary resignation, within five years
of a change in control is given up to five additional years of service. In
addition, where the participant is age 50 or over on the date of the change in
control, up to five additional years of age is given for the following plan
purposes:
o to determine eligibility for early and normal retirement;
o to determine eligibility for a vested right; and
o to calculate the amount of retirement benefit.
The actual number of years of service and years of age that is given to such a
participant decreases 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. If the plan is terminated within five years after a
change in control, the benefit for each participant will be calculated as
indicated above.
In the event of a change in control which causes the Company's stock to cease
active trading on the New York Stock Exchange, the Company's compensation plans
will generally be affected as follows:
o under the Executive Deferred Compensation Plan, each participant will be
paid the amount in his or her account;
o under the Management Variable Compensation Plan, each participant
will be paid a pro rata target award for the year in which the change in
control occurs;
o under the Performance Stock Program, each participant will be awarded a
pro rata target award for each pending performance cycle and all awards
will be cashed out based on the change in control price;
o under the Company's stock option plans, all outstanding options will
vest in full and be cashed out based on the difference between the
change in control price and the option's exercise price; and
o under the Company's restricted stock programs, all of the restrictions
on the stock will lapse and the stock will be cashed out based on the
change in control price.
26
Retirement Plan
The Company funds a tax-qualified defined benefit pension plan for virtually all
U.S. employees. Effective January 1, 2000, the Company amended the plan to
include a cash balance feature. All of the named executive officers, with the
exception of Mr. Brust, participate in the non-cash balance portion of the plan.
The cash balance feature covers all new employees hired after March 31, 1999,
including Mr. Brust.
Retirement income benefits are based upon an employee's average participating
compensation (APC). The plan defines APC as one third of the sum of the
employee's participating compensation for the highest consecutive 39 periods of
earnings over the 10-year period ending immediately prior to retirement or
termination of employment. Participating compensation, in the case of the named
executive officers 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 calculated by multiplying the employee's years of
accrued service by the sum of (a) 1.3% of APC, plus (b) 0.3% of APC in excess of
the average Social Security wage base. For an employee with more than 35 years
of accrued service, the amount is increased by 1% 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. The normal form of benefit is an annuity,
but a lump sum payment is available in limited situations.
PENSION PLAN TABLE - Annual Retirement Income Benefit
Straight Life Annuity Beginning at Age 65
Years of Service
---------------------------------------------------------------------------------
Remuneration 2 20 25 30 35 40
- ------------ --------- ----------- ----------- ----------- ----------- -----------
$ 500,000 $ 16,000 $ 160,000 $ 200,000 $ 240,000 $ 280,000 $ 294,000
1,000,000 32,000 320,000 400,000 480,000 560,000 588,000
1,500,000 48,000 480,000 600,000 720,000 840,000 882,000
2,000,000 64,000 640,000 800,000 960,000 1,120,000 1,176,000
2,500,000 80,000 800,000 1,000,000 1,200,000 1,400,000 1,470,000
3,000,000 96,000 960,000 1,200,000 1,440,000 1,680,000 1,764,000
3,500,000 112,000 1,120,000 1,400,000 1,680,000 1,960,000 2,058,000
4,000,000 128,000 1,280,000 1,600,000 1,920,000 2,240,000 2,352,000
4,500,000 144,000 1,440,000 1,800,000 2,160,000 2,520,000 2,646,000
5,000,000 160,000 1,600,000 2,000,000 2,400,000 2,800,000 2,940,000
NOTE: For purposes of this table, Remuneration means APC. To the extent that an
employee'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.
27
The following table shows the years of service credited as of December 31, 2000,
to each of the named executive officers. This table also shows the amount of
each named executive officer's APC at the end of 2000, except for Mr. Brust who
participates in the cash balance feature.
RETIREMENT PLAN
Name Years of Service Average Participating Compensation
- ---------------- ---------------- ----------------------------------
G. M. C. Fisher 29(a) $3,794,998
D. A. Carp 30 1,372,617
E. L. Steenburgh 2(b) 700,440
M. M. Coyne 18 580,000
M. P. Morley 36 530,780
- ----------
(a) Mr. Fisher was credited with 22 extra years of service for purposes of
calculating his retirement benefit; any pension benefit payable is offset by any
pension paid by his previous employer.
(b) After Mr. Steenburgh has been employed for five years, he will be credited
with 20 extra years of service for purposes of calculating his retirement
benefit.
Cash Balance Feature
Under the cash balance feature of the Company's pension plan, the Company
establishes an account for each participating employee. Every month the employee
works, the Company credits the employee's account with an amount equal to four
percent of the employee's monthly pay. In addition, the ongoing balance of the
employee's account earns interest at the 30-year Treasury bond rate. To the
extent federal laws place limitations on the amount of pay that may be taken
into account under the plan, four percent of the excess pay is credited to an
account established for the employee in an unfunded supplementary plan. If a
participating employee leaves the Company and is vested (five or more years of
service), the employee's account balance will be distributed to the employee in
the form of a lump sum or monthly annuity. If the participating employee's
account balance exceeds $5,000, the employee also has the choice of leaving his
or her account balance in the plan to continue to earn interest.
In addition to the benefits described above, Mr. Brust is covered under a
special supplemental pension arrangement established under his December 20,
1999, offer letter. The supplemental pension arrangement provides Mr. Brust a
single life annuity of $12,500 per month upon his retirement if he remains
employed with the Company for at least five years. The $12,500 monthly annuity
will be offset by Mr. Brust's cash balance benefit and by all other Company-paid
retirement income benefits provided to Mr. Brust.
28
REPORT OF THE EXECUTIVE COMPENSATION
AND DEVELOPMENT COMMITTEE
Role of the Committee
The Executive Compensation and Development Committee is made up of four
independent members of the Board. The Committee members are neither employees
nor former employees of the Company. The functions of the Committee include:
o reviewing the executive compensation strategy,
o reviewing the design of the executive compensation program,
o overseeing the administration of the executive compensation plans,
o monitoring and overseeing the career development of executives,
o annually establishing performance commitments for the CEO, executive
officers and key management,
o reviewing performance annually and determining the individual elements of
total compensation for the CEO and other designated executives, and
o reviewing at least annually diversity representation at the senior and
mid-management levels.
Principles of Executive Compensation
The Company's executive compensation program is designed to:
o tie compensation to performance that is consistent with the Company's
values and increases shareholder value,
o attract and retain employees needed to meet the Company's growth and
performance objectives,
o set the total compensation of executives at market competitive levels,
o link compensation to both short and long-term performance,
o place a significant portion of each executive's compensation at risk; the
more senior an executive's position, the more compensation should be at
risk, and
o link the interests of executives with our owners through stock ownership.
Executive Compensation Practices
Each year, the Company participates in surveys prepared by outside consultants.
The companies included in these surveys are those the Company competes with for
executive talent. Most, but not all, of these companies are included in the Dow
Jones Industrial Index shown in the Performance Graph on page 33. Based largely
on the median compensation of these surveyed companies, the Committee sets the
target compensation of senior executives.
Components of Executive Compensation Program
The components of the executive compensation program are:
o base salary,
o short-term bonus, and
o long-term incentives.
Base Salary: Base salary is the only fixed portion of an executive's
compensation. Each executive's base salary is reviewed annually based on (1) a
compensation range which corresponds to the executive's job responsibilities;
and (2) the executive's individual performance.
The Company measures individual performance in large part through the management
appraisal process. This process evaluates performance against a combination of
financial and non-financial goals established in the following three areas:
o shareholder satisfaction,
o customer satisfaction, and
o employee satisfaction.
29
The other portion of the management appraisal process measures an executive's
performance relative to the six Company values:
o respect for the dignity of the individual,
o integrity,
o trust,
o credibility,
o continuous improvement and personal renewal, and
o recognition and celebration.
Short-Term Bonus: Under the short-term bonus plan, a target bonus is set
annually for each executive. The target, which is a percentage of base salary,
varies depending on the executive's duties and responsibilities. For 2000,
target bonuses ranged from 25% of base salary to 105% of base salary for the
CEO.
The plan's performance measure is Economic Profit/Economic Value Added. Using
this measure, the Committee establishes at the beginning of each year a
performance formula for the year. Based on Company performance for the year,
this formula determines the size of the award pool for the year. The Committee
awards bonuses from the award pool using in large part the results of the
management appraisal process. The total award pool does not have to be awarded.
The Committee has the authority to carry over unused award pool funds to
subsequent years.
Based chiefly on the Company's failure to achieve its financial goals, the
Committee awarded short-term bonuses for 2000 that were on the whole
substantially below target. The Summary Compensation Table on page 20 lists for
2000 the awards for the named executive officers.
Long-Term Incentives: Long-term compensation is delivered through stock options,
the Performance Stock Program and restricted stock.
The Company maintains a management stock option program. Stock options encourage
executives to act as owners, which helps to further align their interests with
the interests of our shareholders. The Committee generally grants stock options
once a year under this program. The options are priced at 100% of the fair
market value of the Company's stock on the day of grant. The options vest within
three years and expire ten years from the date of grant. The Company bases
target grants on the median survey values of the companies it surveys. Grants to
individual executives are then adjusted using in large part the results of the
management appraisal process.
The Performance Stock Program places a portion of top executives' long-term
compensation at risk. The program measures performance over a three-year period
based on the Company's total shareholder return relative to those companies
within the Standard & Poor's 500 Composite Price Index. A description of the
program, as well as the threshold, target and maximum awards for the named
executive officers appears on page 24. Based on the Company's performance over
the three-year performance cycle ending in 2000, no awards were paid for this
cycle.
From time to time, the Company grants restricted stock awards to selected
executives. These awards are generally made to either (1) induce the recipients
to remain with or to become employed by the Company; or (2) recognize
exceptional performance.
Share Ownership Program
The interests of the Company's executives must be consistent with those of its
shareholders. The Company aims to link these interests by encouraging stock
ownership by its executives.
One program designed to meet this objective is the Company's share ownership
program. Under this program, each senior executive is required to own stock of
the Company worth a multiple of his or her base salary. These multiples range
from one times base salary to four times base salary for the CEO. Today, the
program
30
applies to approximately 24 senior executives, all of whom have either satisfied
or are on track to satisfy the requirements.
Chief Executive Officer Compensation
Mr. Carp was named Chief Executive Officer on January 1, 2000. Coincident with
this promotion, the Company entered into an agreement with Mr. Carp concerning
his compensation. The terms of this agreement are described on page 25. Below is
a description of Mr. Carp's compensation for 2000.
Base Salary: Mr. Carp received a base salary of $1,000,000 as required under his
agreement with the Company.
Short-Term Bonus: The Committee used the results of the management appraisal
process to determine the CEO's short-term bonus for 2000. Mr. Carp's award is
listed in the Summary Compensation Table on page 20. Based primarily on the
Company's inability to achieve its financial goals, the Committee awarded Mr.
Carp a short-term bonus well below his target award.
Stock Options: In March of 2000, the Committee awarded Mr. Carp his target award
of 100,000 shares under the Company's management stock option program.
Performance Stock Program: Based on the Company's financial performance over the
three-year period ending in 2000, Mr. Carp did not receive an award for the
1998-2000 performance cycle.
Election as Chairman: On December 7, 2000, the Board elected Mr. Carp its
Chairman. As a result of this promotion, the Committee reviewed Mr. Carp's
compensation. The Committee did not adjust Mr. Carp's base salary of $1,000,000.
The Committee did, however, increase Mr. Carp's target award under the
short-term bonus plan from 105% to 145% of base salary and under the management
stock option program from 100,000 to 140,000 shares. To recognize Mr. Carp's
promotion, the Committee granted him, effective January 12, 2001, a stock option
award of 160,000 shares and an award of 20,000 shares of restricted stock.
Leadership and Development
The Committee reviewed the Company's leadership and organization development
plans, as well as the Company's profiles for succession candidates. It also
discussed the Company's leadership and development strategies. These are
designed to provide leaders capable of creating effective organizations and
executing business strategies that will drive the success of the Company. In
addition, the Committee reviewed diversity activities and goals as part of the
Company's diversity program.
Company Policy on Qualifying Compensation
Under Section 162(m) of the Internal Revenue Code, the Company may not deduct
certain forms of compensation in excess of $1,000,000 paid to any of the named
executive officers that are employed at yearend. The Committee believes that it
is generally in the Company's best interests to comply with Section 162(m). The
Committee also believes, however, that there may be circumstances in which the
Company's interests are best served by maintaining flexibility, whether or not
compensation is fully deductible under Section 162(m).
Richard S. Braddock, Chairman
Alice F. Emerson
Durk I. Jager
John J. Phelan, Jr.
31
REPORT OF THE AUDIT COMMITTEE
The Audit Committee (the Committee) is composed of independent directors and
operates under a written charter adopted by the Committee and the Board. A copy
of the Committee's charter is attached to this Proxy Statement as Exhibit II.
The members of the Committee are Paul E. Gray (Chairman), Martha Layne Collins
and Laura D'Andrea Tyson. Paul H. O'Neill, who was also a member of this
Committee during 2000, resigned from the Board effective December 31, 2000, in
anticipation of his appointment as United States Secretary of the Treasury.
Management has the primary responsibility for the Company's financial statements
and the reporting process, including the system of internal controls.
PricewaterhouseCoopers LLP, the independent accountants for the Company, are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted auditing standards
and to issue a report thereon. The Committee's responsibility is to monitor
these processes.
In this context, the Committee has met and held discussions with management and
the independent accountants. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States, and the Committee
has reviewed and discussed the consolidated financial statements with management
and the independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 "Communication With Audit Committees".
The independent accountants provided to the Committee the written disclosures
required by the Independence Standards Board Standard No.1 "Independence
Discussion With Audit Committees". The Committee discussed with the accountants
the accountants' independence.
The Committee discussed with the Company's internal auditors and independent
accountants the plans for their respective audits. The Committee met with the
internal auditors and independent accountants, with and without management
present, and discussed the results of their examinations, their evaluations of
the Company's internal controls, and the quality of the Company's financial
reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended that the Board approve the audited financial statements for
inclusion in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000, and the Board accepted the Committee's recommendation.
The following fees were paid to PricewaterhouseCoopers LLP for services
rendered in 2000:
Audit Fees: $3.8 million
All Other Fees: $10.8 million
There were no financial information systems design and implementation fees paid
to PricewaterhouseCoopers LLP for services during 2000.
The Committee has reviewed the above fees for non-audit services and believes
such fees are compatible with the independent accountants' independence.
The Committee recommended to the Board, subject to shareholder ratification, the
election of PricewaterhouseCoopers LLP as the Company's independent accountants.
Paul E. Gray, Chairman
Martha Layne Collins
Laura D'Andrea Tyson
32
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 and the
Dow Jones Industrial Index, by measuring the changes in common stock prices from
December 31, 1995, plus assumed reinvested dividends.
[LINE GRAPH INSERTED HERE]
Performance Graph Plot Points
EK S&P 500 DJIA
-----------------------------------------------
12/31/95 $100.0 $100.0 $100.0
12/31/96 $122.4 $122.7 $128.6
12/31/97 $94.5 $163.3 $160.4
12/31/98 $115.3 $209.6 $189.3
12/31/99 $108.8 $253.3 $240.5
12/31/00 $66.8 $230.5 $229.1
The graph assumes that $100 was invested on December 31, 1995, in each of the
Company's common stock, the Standard & Poor's 500 Composite Stock Price 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.
By Order of the Board of Directors
/s/ Joyce P. Haag
Joyce P. Haag
Secretary and Assistant General Counsel
Eastman Kodak Company
March 22, 2001
33
EXHIBIT I
AMENDMENT TO 2000 MANAGEMENT
VARIABLE COMPENSATION PLAN
Section 2.30 of the 2000 Management Variable Compensation Plan entitled
"Performance Criteria" is hereby amended in its entirety to read as follows:
2.30 Performance Criteria
"Performance Criteria" means the stated business criterion or criteria upon
which the Performance Goals for a Performance Period are based as required
pursuant to Proposed Treasury Regulation Section 1.162-27(e)(4)(iii). The
Performance Criteria that will be used to establish such Performance
Goal(s) will be based on or derived from one or more of the following as
designated by the Committee on a company specific basis, business unit
basis or in comparison with peer group performance: Economic Profit/EVA,
return on net assets ("RONA"), return on shareholders' equity, return on
assets, return on capital, return on sales, shareholder return, total
shareholder return, profit margin, earnings per share, net earnings,
operating earnings, earnings before interest and taxes, Common Stock price
per share, cash flow, cost reduction, revenue, revenue growth, sales or
market share.
EXHIBIT II
CHARTER OF THE AUDIT COMMITTEE
I. PURPOSE
The primary purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities with respect to the Company's:
1. financial statements and financial information provided to shareholders and
others,
2. system of internal controls,
3. financial reporting principles and policies,
4. internal and external audit processes, and
5. regulatory compliance programs for ethical business conduct.
II. COMPOSITION
The Audit Committee shall consist of at least three members of the Board who
meet the requirements of independence under the NYSE rules, that is, each of
whom:
1. is not and has not been an employee of the Company or a Company subsidiary,
2. has no relationship to the Company that may interfere with the exercise of
such director's independence from management and the Company,
3. is financially literate or will become so in a reasonable amount of time,
4. has no "cross compensation committee link" as that requirement is defined in
Section 303 of the NYSE Listed Company Manual, and
5. has no family relationship with any executive officer of the Company or any
affiliate of the Company.
Prospective members shall be recommended by the Committee on Directors with
input from the Chairman and CEO and elected by the Board. One member shall be
designated by the Board as the Chairman of the Committee.
At least one member of the Committee shall have accounting or related financial
management expertise.
III. MEETINGS
The Audit Committee shall meet at least four times per
year or more frequently as circumstances require. The Audit Committee shall
review its charter at least annually.
34
The Committee may have in attendance at meetings such members of management or
others as it may deem necessary to provide the information to carry out its
duties.
IV. DUTIES AND RESPONSIBILITIES
The Audit Committee shall have the following duties and responsibilities with
respect to:
1. Independent Accountant
(a) Serve as the Board's primary avenue of communication with the
independent accountant.
(b) Make recommendations to the Board regarding the selection, evaluation,
retention, or discharge of the independent accountant.
(c) Ensure understanding by the independent accountant and management that
the Board, as the shareholders' representative, is the independent
accountant's client and therefore the independent accountant is
ultimately accountable to the Board and the Audit Committee.
(d) Provide the opportunity for the independent accountant to meet with the
full Board as deemed necessary and appropriate by the Committee.
(e) Confirm and assure the independence of the independent accountant by:
(i) accepting receipt of their annual submission of a formal written
statement delineating all relationships between the independent
accountant and the Company,
(ii) monitoring fees paid to the independent accountant for consulting
and other non-audit services, and
(iii) engaging in a dialogue with the independent accountant with regard
to any disclosed relationships or services that may impact the
objectivity or independence of the independent accountant.
(f) Review the annual audit plan of the independent accountant and its
scope.
2. Internal Auditors
(a) Serve as the Board's primary avenue of communication with the Director
of Corporate Auditing.
(b) Review and concur in the appointment, replacement, reassignment, or
dismissal of the Director of Corporate Auditing.
(c) Confirm and assure the independence of the internal auditors.
(d) Review the annual internal audit plan of the internal auditors and its
scope, and the degree of coordination of this plan with the independent
accountant.
(e) Review periodically the internal audit activities, staffing, and budget.
3. Financial Statements
(a) Inquire of the independent accountant and management as to the
acceptability and appropriateness of financial accounting practices and
disclosures used or proposed by the Company.
(b) Review and discuss with management and the independent accountant prior
to releasing the year-end earnings and at the completion of the annual
audit examination:
(i) the Company's financial statements and related footnote
disclosures,
(ii) the independent accountant's audit of the statements and its
report thereon,
(iii) any significant changes required in the independent accountant's
audit plan,
(iv) any serious difficulties or disputes with management encountered
during the course of the audit, and
(v) other matters related to the conduct of the audit which are to be
communicated to the Committee under generally accepted auditing
standards.
(c) Review legal matters that may have a material impact on the financial
statements with the General Counsel, Director of Corporate Auditing,
the Controller and the independent accountant.
(d) Review and discuss with management and the independent accountant, prior
to releasing the quarterly earnings, the Company's quarterly financial
information. Assure that the independent accountant has reviewed the
financial information included in the Company's Quarterly Reports on
Form 10-Q prior to filing such reports with the SEC. Such review is to
be performed in accordance with AICPA Statement on Auditing Standards
No. 71 "Interim Financial Information."
(e) Recommend to the Board whether the audited financial statements be
included in the Company's Annual Report on Form 10-K, in advance of
filing such form with the SEC.
35
(f) Discuss with the independent accountant the matters required to be
discussed by Statement on Auditing Standards No. 61, including, but not
limited to:
(i) the quality and appropriateness of the accounting principles and
underlying estimates used in the preparation of the Company's
financial statements, and
(ii) the clarity of financial disclosures in the Company's financial
statements.
4. Risks and Uncertainties, Including Contingent Liabilities
(a) Inquire of management, the Director of Corporate Auditing, and the
independent accountant about risks or exposures and review the steps
management has taken to minimize such risks or exposures to the Company.
(b) Consider and review management's analysis and evaluation of significant
financial accounting and reporting issues and the extent to which such
issues may affect the Company's financial statements.
5. Internal Control Environment
(a) Consider and review with the independent accountant, the Director of
Corporate Auditing, and other members of management:
(i) the adequacy of the Company's internal controls, and
(ii) significant findings and recommendations of the independent
accountant and internal auditors together with management's
proposed responsive actions.
(b) Review the Company's regulatory compliance programs for ethical business
conduct.
6. Access and Communication
(a) Meet separately and privately with the independent accountant and with
the Director of Corporate Auditing and with the Company's chief
financial and accounting officers to ascertain if any restrictions have
been placed on the scope of their activities, and to discuss any other
matters that the Committee or these groups believe should be discussed
privately with the Audit Committee.
(b) Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
7. Reporting
(a) Review its charter annually and recommend changes, as necessary, to the
Board.
(b) Report its activities to the Board on a regular basis and make
recommendations to the Board with respect to matters within the purview
of the Audit Committee, as necessary or appropriate.
(c) Cause to be included with the Company's Proxy Statement once every three
years a copy of the Committee's Charter.
(d) Cause to be included in the Company's Proxy Statement an Audit Committee
Report in accordance with Item 306 of Regulation S-K.
(e) Cause the Company to annually submit to the NYSE a written affirmation
in the form specified by the NYSE.
36
EASTMAN KODAK COMPANY
2001 ANNUAL MEETING
E.M. Pearson Theatre
at Concordia University
312 North Hamline Avenue
St. Paul, Minnesota
[STREET MAP]
Shareholders may park in the following lots for attending the Meeting:
o Lot E on Hamline Avenue
o Lot C on Hamline Avenue
o Lot D on Marshall Avenue
Parking in these lots is on a first-come, first-served basis.
Lot B will be available only for handicapped parking for this Meeting.
[MAP WITH PARKING LOTS INDICATED]
37
www.kodak.com
Eastman Kodak Company o 343 State Street o Rochester, New York 14650
[LOGO]
Take Pictures Further.(TM)
CC5-2 2001 This Proxy was printed on recyclable paper. Cat No. 1897909
NOTICE OF THE 2001 Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Eastman Kodak Company will be held on
Wednesday, May 9, 2001, at 10:00 AM, at the E.M. Pearson Theatre at Concordia
University, 312 North Hamline Avenue, St. Paul, MN 55104.
There are three proposals to be voted on at the Meeting:
1. Election of four Class II directors for a term of three years: William W.
Bradley, Alice F. Emerson, Hector de J. Ruiz, and Laura D'Andrea Tyson.
2. Ratification of election of PricewaterhouseCoopers LLP as independent
accountants.
3. Amendment to 2000 Management Variable Compensation Plan.
The Board of Directors recommends a vote FOR items 1 - 3.
If you were a shareholder of record at the close of business on March 12, 2001,
you are entitled to vote at the Annual Meeting.
If you have any questions about the Meeting, please contact the Coordinator,
Shareholder Services, Eastman Kodak Company, 343 State Street, Rochester, NY
14650-0205, (716) 724-5492.
The E.M. Pearson Theatre is handicap accessible. If you require special
assistance, call the Coordinator, Shareholder Services.
By Order of the Board of Directors
/s/ Joyce P. Haag
Joyce P. Haag, Secretary and Assistant General Counsel
Eastman Kodak Company, March 22, 2001
(Please detach Proxy Card at perforation.)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
EASTMAN KODAK COMPANY
[LOGO] This Proxy is solicited on behalf of the Board of Directors
- --------------------------------------------------------------------------------
The undersigned hereby appoints Daniel A. Carp 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 9, 2001, or any adjournment
thereof.
NOMINEES FOR DIRECTOR: Class II: William W. Bradley, Alice F. Emerson,
Hector de J. Ruiz and Laura D'Andrea Tyson
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR, FOR THE
RATIFICATION OF ELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS, AND FOR THE AMENDMENT TO 2000 MANAGEMENT VARIABLE COMPENSATION
PLAN.
This Proxy will be voted as directed. If no direction to the contrary is
indicated, it will be voted as follows:
FOR the election of all nominees for director,
FOR the ratification of election of independent accountants; and
FOR the amendment to 2000 Management Variable Compensation Plan.
SEE
(CONTINUED, and To Be Signed and Dated on the REVERSE SIDE) REVERSE SIDE
Please mark
/X/ votes as in
this example
The Board of Directors recommends a vote FOR Items 1 - 3.
WITHHOLD
1. Election of Directors FOR AUTHORITY
/ / / /
(01) William W. Bradley
(02) Alice F. Emerson
(03) Hector de J. Ruiz
(04) Laura D'Andrea Tyson
______________________________________________________________
To withhold authority to vote for any particular nominee(s),
write the name(s) above.
FOR AGAINST ABSTAIN
2. Ratification of Election
of Independent / / / / / /
Accountants
3. Amendment to 2000 FOR AGAINST ABSTAIN
Management Variable / / / / / /
Compensation Plan
If you receive more than one Annual Report at the address shown on
this proxy card and have no need for the extra copy, please check
the box at the right. This will not affect the distribution of
dividends. / /
I plan to attend the
Annual Meeting. / /
I plan to bring
a guest. / /
When completed, promptly forward this card to: Proxy Services
EquiServe
P. O. Box 9370
Boston, MA
02205-9940
SIGNATURE(s) DATE
---------------------------------------------- ----------------
NOTE: Please sign exactly as the name appears on this card. Joint
owners must each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title.
