View:
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001
or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-87
EASTMAN KODAK COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 16-0417150
(State of incorporation) (IRS Employer
Identification
No.)
343 STATE STREET, ROCHESTER, NEW YORK 14650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 716-724-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of Shares Outstanding at
Class March 31, 2001
Common Stock, $2.50 par value 290,047,550
PAGE 2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share data)
First Quarter
2001 2000
Sales $2,975 $3,095
Cost of goods sold 1,908 1,834
------ ------
Gross profit 1,067 1,261
Selling, general and
administrative expenses 574 568
Research and development costs 189 201
Goodwill amortization 42 36
------ ------
Earnings from operations 262 456
Interest expense 61 37
Other income (charges) 23 19
------ ------
Earnings before income taxes 224 438
Provision for income taxes 74 149
------ ------
NET EARNINGS $ 150 $ 289
====== ======
Basic earnings per share $ .52 $ .93
====== ======
Diluted earnings per share $ .52 $ .93
====== ======
Earnings used in basic and
diluted earnings per share $ 150 $ 289
Number of common shares used in
basic earnings per share 290.1 310.2
Incremental shares from
assumed conversion of options 0.4 2.1
----- -----
Number of common shares used in
diluted earnings per share 290.5 312.3
===== =====
CONSOLIDATED STATEMENT OF
RETAINED EARNINGS
Retained earnings at beginning
of period $7,869 $6,995
Net earnings 150 289
Cash dividends declared (128) (136)
------ ------
Retained Earnings
at end of period $7,891 $7,148
====== ======
- ------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
PAGE 3
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
March 31, Dec. 31,
2001 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 231 $ 246
Marketable securities 20 5
Receivables 2,549 2,653
Inventories 1,833 1,718
Deferred income tax charges 561 575
Other 269 294
------- -------
Total current assets 5,463 5,491
------- -------
PROPERTIES
Land, buildings and equipment at cost 12,925 12,963
Less: Accumulated depreciation 7,051 7,044
------- -------
Net properties 5,874 5,919
------- -------
OTHER ASSETS
Goodwill (net of accumulated amortization
of $797 and $778) 1,005 947
Long-term receivables and other
noncurrent assets 1,902 1,767
Deferred income tax charges 86 88
------- -------
TOTAL ASSETS $14,330 $14,212
======= =======
- ------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables $ 2,920 $ 3,275
Short-term borrowings 2,827 2,206
Taxes - income and other 605 572
Dividends payable 128 128
Deferred income tax credits 35 34
------- -------
Total current liabilities 6,515 6,215
OTHER LIABILITIES
Long-term borrowings 1,125 1,166
Postemployment liabilities 2,601 2,610
Other long-term liabilities 678 732
Deferred income tax credits 73 61
------- -------
Total liabilities 10,992 10,784
SHAREHOLDERS' EQUITY
Common stock at par* 978 978
Additional paid in capital 861 871
Retained earnings 7,891 7,869
Accumulated other comprehensive loss (572) (482)
------- -------
9,158 9,236
Less: Treasury stock at cost* 5,820 5,808
------- -------
Total shareholders' equity 3,338 3,428
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $14,330 $14,212
======= =======
* Common stock: $2.50 par value, 950 million shares authorized, 391
million shares issued at March 31, 2001 and December 31, 2000. Treasury
stock at cost consists of approximately 101 million shares at March 31,
2001 and December 31, 2000.
Total comprehensive income was $60 million and $202 million for the
quarters ended March 31, 2001 and March 31, 2000, respectively.
- ------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
PAGE 4
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
First Quarter
2001 2000
Cash flows from operating activities:
Net earnings $ 150 $ 289
Adjustments to reconcile to
net cash used in operating activities:
Depreciation and amortization 230 216
Provision for deferred taxes 29 8
Gain on sale of assets (15) (32)
Decrease in receivables 98 54
Increase in inventories (123) (234)
Decrease in liabilities excluding borrowings (398) (444)
Other items, net (19) (184)
------ ------
Total adjustments (198) (616)
------ ------
Net cash used in operating activities (48) (327)
------ ------
Cash flows from investing activities:
Additions to properties (196) (140)
Proceeds from sale of assets 15 44
Acquisitions, net of cash acquired (189) (1)
Cash flows related to sales of businesses (6) (6)
Marketable securities - purchases (20) (33)
Marketable securities - sales 5 27
------ ------
Net cash used in investing activities (391) (109)
------ ------
Cash flows from financing activities:
Net increase in borrowings
with original maturity of
90 days or less 476 612
Proceeds from other borrowings 567 388
Repayment of other borrowings (448) (358)
Dividends to shareholders (128) (139)
Exercise of employee stock options 7 5
Stock repurchases (44) (46)
------ ------
Net cash provided by financing activities 430 462
------ ------
Effect of exchange rate changes on cash (6) (5)
------ ------
Net (decrease) increase in cash and cash
equivalents (15) 21
Cash and cash equivalents, beginning of year 246 373
------ ------
Cash and cash equivalents, end of quarter $ 231 $ 394
====== ======
- -----------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
PAGE 5
Eastman Kodak Company and Subsidiary Companies
NOTES TO FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company
in accordance with the accounting policies stated in the 2000 Annual
Report and should be read in conjunction with the Notes to Financial
Statements appearing therein. In the opinion of the Company, all
adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation have been included in the financial statements.
The financial statements are based in part on estimates and have not
been audited by independent accountants. PricewaterhouseCoopers LLP
will audit the annual statements.
- ------------------------------------------------------------------------
NOTE 2: COMMITMENTS AND CONTINGENCIES
The Company and its subsidiary companies are involved in lawsuits,
claims, investigations and proceedings, including product liability,
commercial, environmental, and health and safety matters, which are
being handled and defended in the ordinary course of business. There
are no such matters pending that the Company and its General Counsel
expect to be material in relation to the Company's business, financial
position or results of operations. Refer to Item 1, Legal Proceedings,
on page 17.
- ------------------------------------------------------------------------
NOTE 3: DERIVATIVES AND MARKET RISK
The Company, as a result of its global operating and financing
activities, is exposed to changes in foreign currency exchange rates,
commodity prices, and interest rates, which may adversely affect its
results of operations and financial position. In seeking to minimize
the risks and/or costs associated with such activities, the Company may
enter into derivative contracts. The fair value of these contracts is
reported in other current assets and/or current liabilities in the
Company's Statement of Financial Position.
The Company has entered into foreign currency forward contracts that are
designated as cash flow hedges of exchange rate risk related to
forecasted foreign currency denominated intercompany sales. At March
31, 2001, the Company had cash flow hedges for the Euro, the Canadian
dollar, and the Australian dollar, with maturity dates ranging from
April 2001 to December 2001.
At March 31, 2001, the fair value of all open foreign currency forward
contracts was a pre-tax unrealized loss of $5 million. The offsets to
this loss are a $7 million pre-tax loss deferred to other comprehensive
income, and a $2 million pre-tax gain reported in other income
(charges). Additionally, realized pre-tax losses of $1 million, related
to closed foreign currency contracts, have been deferred in other
comprehensive income. If all amounts deferred to other comprehensive
income were to be realized, $8 million of pre-tax losses would be
reclassified into cost of goods sold over the next twelve months, based
on sales to third parties. During the first quarter of 2001, a pre-tax
loss of $5 million was reclassified from other comprehensive income to
cost of goods sold. Hedge ineffectiveness was insignificant.
PAGE 6
The Company does not apply hedge accounting to the foreign currency
forward contracts used to offset currency-related changes in the fair
value of foreign currency-denominated assets and liabilities. These
contracts are marked to market through earnings at the same time that
the exposed assets and liabilities are remeasured through earnings (both
in other income). The majority of the contracts held by the Company are
denominated in Euros, Australian dollars, Chinese renminbi, and Canadian
dollars.
The Company has entered into silver forward contracts that are
designated as cash flow hedges of price risk related to forecasted
worldwide silver purchases. The Company used silver forward contracts
to minimize virtually all of its exposure to increases in silver prices
in 2000. At March 31, 2001, the Company had open forward contracts,
with maturity dates ranging from April 2001 to January 2002, hedging
virtually all of its planned silver requirements through January 2002.
At March 31, 2001, the fair value of open contracts was a pre-tax
unrealized loss of $26 million, recorded in other comprehensive income.
If this amount were to be realized, $25 million (pre-tax) of this loss
would be reclassified into cost of goods sold within the next twelve
months. During the first quarter of 2001, a realized pre-tax loss of $6
million was recorded in cost of goods sold. At March 31, 2001, realized
pre-tax losses of $6 million, related to closed silver contracts, were
recorded in other comprehensive income. These losses will be
reclassified into cost of goods sold as silver-containing products are
sold (all within the next twelve months). Hedge ineffectiveness was
insignificant.
The Company is exposed to interest rate risk primarily through its
borrowing activities and, to a lesser extent, through investments in
marketable securities. The Company utilizes U.S. dollar denominated as
well as foreign currency denominated borrowings to fund its working
capital and investment needs. The majority of short-term and long-term
borrowings are in fixed-rate instruments. There is inherent roll-over
risk for borrowings and marketable securities as they mature and are
renewed at current market rates. The extent of this risk is not
predictable because of the variability of future interest rates and
business financing requirements.
The Company's financial instrument counterparties are high quality
investment or commercial banks with significant experience with such
instruments. The Company manages exposure to counterparty credit risk
by requiring specific minimum credit standards and diversification of
counterparties. The Company has procedures to monitor the credit
exposure amounts. The maximum credit exposure at March 31, 2001 was not
significant to the Company.
- ------------------------------------------------------------------------
PAGE 7
NOTE 4: ACQUISITIONS
On February 7, 2001, the Company completed its acquisition of
substantially all of the imaging businesses of Bell & Howell Company.
The purchase price of this stock and asset acquisition was $135 million
in cash. The acquired units provide business customers worldwide with
service and maintenance for document imaging components, micrographic-
related equipment, supplies, parts and service.
- ------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SUMMARY
(in millions, except per share data)
First Quarter
2001 2000 Change
Sales $2,975 $3,095 - 4%
Earnings from operations 262 456 -43
Net earnings 150 289 -48
Basic earnings per share .52 .93 -44
Diluted earnings per share .52 .93 -44
2001
The Company's results for the quarter included the following:
Pre-tax charges of approximately $10 million ($7 million after tax)
associated with the exit of one of the Company's equipment manufacturing
facilities. The costs for this effort, which began in 1999, related to
relocation of certain manufacturing operations. Additional relocation
costs of approximately $10 million pre-tax, will be recorded in the
second quarter of 2001 in connection with these actions.
Excluding the above, net earnings were $157 million, while basic and
diluted earnings per share were both $.54.
- ------------------------------------------------------------------------
PAGE 8
Sales by Operating Segment
(in millions)
First Quarter
2001 2000 Change
Consumer Imaging
Inside the U.S. $ 645 $ 690 - 7%
Outside the U.S. 752 817 - 8
------ ------ ---
Total Consumer Imaging 1,397 1,507 - 7
------ ------ ---
Health Imaging
Inside the U.S. 268 245 + 9
Outside the U.S. 293 289 + 1
------ ------ ---
Total Health Imaging 561 534 + 5
------ ------ ---
Kodak Professional
Inside the U.S. 149 155 - 4
Outside the U.S. 218 257 -15
------ ------ ---
Total Kodak Professional 367 412 -11
------ ------ ---
Other Imaging
Inside the U.S. 347 306 +13
Outside the U.S. 303 336 -10
------ ------ ---
Total Other Imaging 650 642 + 1
------ ------ ---
Total Sales $2,975 $3,095 - 4%
====== ====== ===
- ------------------------------------------------------------------------
Earnings from Operations by Operating Segment
(in millions)
First Quarter
2001 2000 Change
Consumer Imaging $ 61 $184 -67%
Percent of Sales 4.4% 12.2%
Health Imaging $108 $118 - 8%
Percent of Sales 19.3% 22.1%
Kodak Professional $ 49 $ 68 -28%
Percent of Sales 13.4% 16.5%
Other Imaging $ 44 $ 86 -49%
Percent of Sales 6.8% 13.4%
---- ---- ---
Total Earnings from Operations $262 $456 -43%
==== ==== ===
- ------------------------------------------------------------------------
PAGE 9
Net Earnings by Operating Segment
(in millions)
First Quarter
2001 2000 Change
Consumer Imaging $ 51 $140 -64%
Percent of Sales 3.7% 9.3%
Health Imaging $ 73 $ 80 - 9%
Percent of Sales 13.0% 15.0%
Kodak Professional $ 31 $ 34 - 9%
Percent of Sales 8.4% 8.3%
Other Imaging $ 35 $ 56 -38%
Percent of Sales 5.4% 8.7%
---- ---- ---
Total of segments $190 $310 -39%
Percent of Sales 6.4% 10.0%
Interest expense (61) (37)
Other corporate items 2 5
Income tax effects on
above items and taxes
not allocated to
segments 19 11
---- ----
Total Net Earnings $150 $289
==== ====
- ------------------------------------------------------------------------
COSTS AND EXPENSES
(in millions)
First Quarter
2001 2000 Change
Gross profit $1,067 $1,261 -15%
Percent of Sales 35.9% 40.7%
Selling, general and
administrative expenses $ 574 $ 568 + 1%
Percent of Sales 19.3% 18.4%
Research and development costs $ 189 $ 201 - 6%
Percent of Sales 6.4% 6.5%
Goodwill amortization $ 42 36 +17%
Percent of Sales 1.4% 1.2%
- ------------------------------------------------------------------------
2001 COMPARED WITH 2000
First Quarter
Consolidated
Reported first quarter sales were $2.975 billion, down 4% from the
previous year. Adjusting for portfolio changes, revenues decreased 5%.
Portfolio adjustments relate to the August 2000 divestiture of Eastman
Software, the February 2001 acquisition of substantially all of Bell and
Howell's Imaging business and contributions from the Kodak Diamic Ltd.
joint venture with Mitsubishi, which was formed January 1, 2001. These
portfolio changes contributed a net $22 million of revenues in the first
quarter of 2001.
PAGE 10
Exchange had a $105 million negative impact on revenue in the quarter
due to changes in the Euro, Yen and Australian dollar exchange rates.
Adjusting for portfolio changes and exchange, revenues were down 1% on a
year-over-year basis.
For 2001, the Company amended its definition of digital to better
reflect the digital product components of our Commercial and Government
Systems (C&GS) business. Under this new definition, digital revenues in
the quarter were $776 million, an increase of 7% year over year and
represented 26% of the Company's total first quarter sales. In the
quarter, sales of Consumer Digital products and services decreased 4%,
primarily due to lower year-over-year sales of CD media and consumer
digital cameras (although consumer digital camera unit volumes
increased). Sales of Commercial Digital products and services increased
by 12%, reflecting strong product sales in the Health Imaging segment
and the C&GS business. Earnings from operations associated with these
sales resulted in profit of $2 million, primarily driven by the Health
Imaging segment and the C&GS business.
By way of comparison, under the previous digital definition (adjusted
for the divestiture of Eastman Software), sales during the first quarter
were $712 million, a year-over-year increase of 2%. Losses under this
definition increased by $5 million, from $1 million to $6 million.
Emerging markets sales posted a 5% year-on-year decline for the first
quarter. The emerging market portfolio accounted for approximately 19%
of Kodak's worldwide sales in the quarter. The portfolio showed sales
growth in Greater Russia (+15%), but declines in Greater China (-10%),
Asia Area
(-9%), Latin America (-3%), and Eastern Europe, Africa and the Middle
East (-2%). The declines are reflective of general economic weakening
in many emerging market countries. China is being impacted by a
combination of somewhat slower economic growth, continuing high level of
trade inventories and irregular trade flows.
First quarter gross profit declined by 4.8 percentage points, from 40.7%
to 35.9%, year over year. The elements responsible for this margin
decline include productivity, price/mix, and exchange. Year-over-year
productivity was down approximately 1.5 percentage points due to
inventory reduction initiatives. Year-over-year price declines reduced
gross profit margins by 2.3 percentage points. Quarter sequentially,
however, price was flat. Exchange subtracted approximately one
percentage point from the gross profit margin rate.
SG&A increased approximately 1% from $568 million in the first quarter
of 2000 to $574 million in the first quarter of 2001 and also increased
as a percent of sales from 18.4% to 19.3%. This increase was partially
due to spending increases in those parts of the business experiencing
sales growth, and acquisitions of businesses with SG&A rates higher than
Kodak's average rate. SG&A excluding advertising increased from $441
million to $466 million and increased from 14.3% to 15.7% as a
percentage of sales.
PAGE 11
R&D decreased from $201 million in the first quarter of 2000 to $189
million in the first quarter of 2001, a slight decrease as a percent of
sales from 6.5% to 6.4%. This reflects a somewhat slower rate of
spending on projects as the Company implements cost constraints in a
weakening economic environment.
Earnings from operations were $262 million, compared with $456 million
in the comparable 2000 quarter. This decline primarily reflects the
lower gross profit margin discussed previously.
Net earnings were $150 million, or $.52 per share, compared with $289
million, or $.93 per share in the first quarter of 2000. Excluding
charges of $.02 per share in both the first quarters of 2001 and 2000
related primarily to the exit of an equipment manufacturing facility,
net earnings were $.54 per share on an operational basis, compared with
$.95 per share on an operational basis last year. Earnings were reduced
by lower gross profit margins, the adverse effects of foreign exchange
and higher interest expense, reflecting higher debt levels. The
effective tax rate was 33% in the first quarter of 2001 and 34% in the
first quarter of 2000.
Consumer Imaging
Worldwide Consumer Imaging sales in the first quarter declined 7%,
essentially unchanged from the rate of decline experienced in the fourth
quarter. Adjusted for the contributions of the Kodak Diamic Ltd. joint
venture with Mitsubishi, revenues declined 8%. (Note: Kodak Japan Ltd.
and Mitsubishi Paper Mills Ltd. formed Kodak Diamic Ltd. as a sales
subsidiary, effective January 1, 2001, which should allow Kodak to
improve its color paper market share in Japan). Adjusted for both Kodak
Diamic Ltd. and unfavorable exchange, worldwide Consumer Imaging year-
over-year sales declined by 5%. U.S. sales declined by 7% and sales
outside the U.S. declined 8% as reported, and were down 2% with
unfavorable exchange excluded.
Despite unfavorable exchange and a continued weak economy, Consumer
Imaging experienced sales growth on a worldwide basis in the first
quarter for one-time-use cameras, Advantix film, reloadable cameras,
and Picture Maker kiosks and related media.
The majority of the year-over-year Consumer Imaging sales decline can be
attributed to a significant decline in revenue (-67%) associated with on-
site photofinishing equipment placements, as the U.S. market, that is
beginning to reach saturation, awaits the availability of new digital
minilabs.
From a geographic perspective, the segment experienced weak sales
performance in most areas of the world including the U.S. (-7%), Western
Europe (-4% excluding exchange), and Emerging Markets (-6% excluding
exchange). However, Russia continued to show strong growth of 19% and
Mexico was up 13%.
Worldwide film sales to dealers (including 35mm film, Advantix film, and
one-time-use cameras) in the first quarter declined by 5%, reflecting a
2% volume decline, negative 1% price/mix (unfavorable price was
partially offset by favorable mix) and a negative 3% exchange impact.
U.S. film sales to dealers increased by 6%, reflecting a 5% volume
increase and 1% positive price/mix impact. Outside the U.S., film sales
to dealers declined by 12%, reflecting a 4% volume decline, negative 3%
price/mix and 6% unfavorable exchange.
PAGE 12
The U.S. film industry was down 1% in the first quarter versus 2000,
which reflects an improvement in the rate of decline from the fourth
quarter. Despite this decline, it should be noted that 5% more pictures
were taken in the first quarter of 2001 than in the first quarter of
1999.
During the first quarter, Kodak continued to successfully shift
consumers to the differentiated, higher value MAX and Advantix product
lines. In the U.S., MAX and Advantix films combined grew to more than
65% of Kodak's total consumer roll film revenues. This movement in the
value mix increased 8 percentage points year over year and compares
favorably to the 62% recorded in the fourth quarter of 2000.
Worldwide paper volume in the first quarter declined slightly versus
2000, with U.S. volume down mid-single digits and volume outside the
U.S. flat, with pricing generally trending lower.
SG&A expenses for the segment decreased 4% from $318 million to $306
million, but increased as a percent of sales from 21.1% to 21.9%. R&D
decreased 17% from $87 million to $72 million.
In the first quarter, Consumer Imaging earnings from operations
decreased by 67% or $123 million year over year. The earnings decline in
the first quarter was driven by the combined effects of sales declines
and reduced gross profit margins. The reduction in gross profit margins
reflects higher manufacturing costs, as lower production volumes
resulted in higher per unit fixed cost absorption. Net earnings
decreased 64% or $89 million, from $140 million in 2000 to $51 million
in 2001.
Health Imaging
In the first quarter, worldwide sales in the Health Imaging Segment
increased 5% year over year, or 9% when adjusted for the impact of
exchange. U.S. sales increased 9% while sales outside the U.S.
increased 1% as reported, but were up 8% with exchange excluded. Sales
in emerging markets were up 11%, or 14% adjusted for exchange.
Sales of digital products (including laser printers, digital media,
digital capture equipment and Picture Archiving and Communications
Systems (PACS)) increased 15% year over year. Placements of DryView
laser imagers increased 36% over first quarter 2000. DryView media
sales increased 44% year over year, while sales of digital capture and
PACS products increased 100%. Wet laser imaging sales continued their
expected declines from last year.
Sales of traditional products, including analog film, equipment,
chemistry and services, declined 4% year over year, but decreased 1% when
adjusted for the impact of exchange. For traditional analog products
(excluding specialty films), year-over-year sales declined 9% reflecting
modest volume increases offset by lower prices and unfavorable exchange.
Dental sales grew modestly while sales of Mammography and Oncology
specialty products grew 15%.
PAGE 13
In the quarter, SG&A expenses for the segment increased 7% year over
year from $86 million to $92 million and as a percent of sales from
16.1% to 16.4%. The increase primarily relates to marketing and sales
investments for new product introductions in the expanded digital
solutions business. R&D expenses amounted to 6.4% of sales, up from
6.2% last year. The increase in R&D spending is focused on digital
product development.
Earnings from operations declined from $118 million to $108 million.
Excluding the effects of exchange, earnings increased 3%, reflecting
increased sales level. Net earnings decreased 9% or $7 million, from
$80 million in 2000 to $73 million in 2001.
Kodak Professional
Kodak Professional worldwide first quarter revenues declined 11% from
the previous year, and 8% when adjusted for unfavorable exchange. Sales
declines were seen in several product categories, including color
reversal film, graphics film, and professional digital cameras. Sales
were impacted both by ongoing digital substitution and continued
economic weakness in certain markets worldwide. Sales increases were
recorded for wide format inkjet paper, thermal paper and scanners.
In the quarter, SG&A expenses for the Kodak Professional segment
decreased 10% year over year, from $72 million to $65 million, while R&D
spending declined from $34 million to $26 million.
Kodak Professional earnings from operations decreased 28% from the year
ago quarter, due primarily to lower gross margins driven by adverse
pricing, lower sales volumes, unfavorable exchange and lower
manufacturing productivity. Net earnings decreased 9% or $3 million,
from $34 million in 2000 to $31 million in 2001.
Operational improvements in the Kodak Polychrome Graphics (KPG) joint
venture resulted in the joint venture returning to positive earnings and
cash flow during the first quarter. While improvement initiatives at
the joint venture have not yet been fully implemented, substantial
progress has been made in correcting the operational problems observed
in previous quarters. It is expected that year-on-year quarterly
comparisons of KPG's performance will remain favorable throughout 2001.
Other Imaging
First quarter Other Imaging Segment sales increased 1% on a year-over-
year basis. When adjusted for portfolio actions, sales were flat.
Excluding the impact of portfolio and foreign exchange, sales increased
4%. Segment sales growth in the quarter was led by strong sales
performance in the Commercial & Government Systems unit and continued
growth in the Entertainment Imaging business.
PAGE 14
In the quarter, SG&A expenses for the segment increased from $91 million
to $111 million, and increased as a percent of sales from 14.2% to
17.1%, reflecting higher costs associated with online initiatives.
Earnings from operations for the Other Imaging Segment were down $42
million, from $86 million to $44 million in the first quarters of 2000
and 2001, respectively. This decline is primarily a result of increased
losses from consumer digital cameras and writeable CD media, partially
offset by gains in the Commercial and Government Systems business. Net
earnings decreased 38% or $21 million, from $56 million in 2000 to $35
million in 2001.
- ------------------------------------------------------------------------
RESTRUCTURING PROGRAMS AND COST REDUCTION
During the second and third quarters of 2001, Kodak intends to implement
a series of cost reduction actions, which are expected to result in pre-
tax charges totaling $375 million to $450 million, the majority of which
will be recorded in the second quarter. It is anticipated that these
actions will result in a reduction of approximately 3,000 to 3,500 jobs
worldwide. The anticipated savings from these actions are expected to
total approximately $50 million in 2001 and have a run rate impact, by
the end of 2002, of between $200 million and $250 million.
- ------------------------------------------------------------------------
PAGE 15
THE EURO
The Treaty on European Union provided that an economic and monetary
union (EMU) be established in Europe whereby a single European currency,
the Euro, replaces the currencies of participating member states. The
Euro was introduced on January 1, 1999, at which time the value of
participating member state currencies was irrevocably fixed against the
Euro and the European Currency Unit (ECU) was replaced at the rate of
one Euro to one ECU. For the three-year transitional period ending
December 31, 2001, the national currencies of member states will
continue to circulate, but as sub-units of the Euro. New public debt
will be issued in Euros and existing debt may be redenominated into
Euros. At the end of the transitional period, Euro banknotes and coins
will be issued, and the national currencies of the member states will
cease to be legal tender no later than June 30, 2002. The countries
that adopted the Euro on January 1, 1999 are Austria, Belgium, Finland,
France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal,
and Spain. Greece will now be part of the transition. The Company has
operations in all of these countries.
As a result of the Euro conversion, it is possible that selling prices
of the Company's products and services will experience downward
pressure, as current price variations among countries are reduced due to
easy comparability of Euro prices across countries. Prices will tend to
harmonize, although value added taxes and transportation costs will
still justify price differentials. Adoption of the Euro will probably
accelerate existing market and pricing trends including pan-European
buying and general price erosion.
On the other hand, currency exchange and hedging costs will be reduced;
lower prices and pan-European buying will benefit the Company in its
purchasing endeavors; the number of banks and suppliers needed will be
reduced; there will be less variation in payment terms; and it will be
easier for the Company to expand into new marketing channels such as
mail order and Internet marketing.
The Company is in the process of making changes in areas such as
marketing and pricing, purchasing, contracts, payroll, taxes, cash
management and treasury operations. Under the 'no compulsion no
prohibition' rules, billing systems have been modified so that the
Company is now able to show total gross, value added tax, and net in
Euros on national currency invoices. This enables customers to pay in
the new Euro currency if they wish to do so. Countries that have
installed ERP/SAP software in connection with the Company's enterprise
resource planning project are able to invoice and receive payments in
Euros as well as in other currencies. Systems for pricing, payroll and
expense reimbursements will continue to use national currencies until
year-end 2001. The functional currencies of the Company's operations in
affected countries will remain the national currencies until
approximately May 2001 (except Germany and Austria (October 2001)), when
they will change to the Euro. Systems changes for countries not on SAP
(Finland and Greece) are also being implemented in 2001.
- ------------------------------------------------------------------------
PAGE 16
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the first quarter of 2001 was
$48 million. Net earnings, adjusted for depreciation and amortization,
provided $380 million of operating cash. This was offset by decreases
in liabilities (excluding borrowings) of $398 million related primarily
to the payment of accrued wage dividend, incentive compensation and
normal seasonality. Also offsetting was an increase in inventories as
sensitized goods inventory improvements were offset by increases in
equipment inventories. Net cash used in investing activities of $391
million for the first quarter of 2001 was primarily for capital
expenditures and acquisitions. The Company anticipates total capital
spending of approximately $800 million in 2001, a 15% decrease from full
year 2000 levels. Net cash provided by financing activities of $430
million for the first quarter of 2001 was primarily due to net increases
in total borrowings of $595 million, reduced by $128 million of dividend
payments and $44 million for stock repurchases.
Cash dividends per share of $.44, payable quarterly, were declared in
the first quarter of 2001 and 2000. Total cash dividends of $128
million and $139 million were paid in the first quarter of 2001 and
2000, respectively.
During the first quarter, the Company repurchased about 0.9 million
shares for approximately $41 million as part of the $2 billion
authorization program approved April 16, 1999. The cumulative program
total to date is approximately 32 million shares or $1.8 billion. As of
March 2, 2001, the Company suspended the stock repurchase program in a
move designed to accelerate debt reduction and increase financial
flexibility to take advantage of acquisition opportunities.
- ------------------------------------------------------------------------
PAGE 17
Item 3. Quantitative And Qualitative Disclosures About Market Risk
See NOTE 3, DERIVATIVES AND MARKET RISK.
- ------------------------------------------------------------------------
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
On October 6, 2000, the U.S. Environmental Protection Agency, Region 2,
initiated an administrative enforcement action against the Company,
alleging violations of air monitoring requirements under the Resource
Conservation and Recovery Act (RCRA), the law that regulates the
management of hazardous waste. These issues arose as the result of an
inspection conducted by EPA at the Company's Kodak Park manufacturing
facility in Rochester, New York in May 1999. The complaint, alleging
six counts of failing to test and monitor certain valves, containers,
and pumps at Kodak Park, seeks a penalty of $303,064 and an Order
requiring the Company to come into compliance within sixty days.
Although the Company does not dispute the allegations with respect to
some equipment, many of the Agency's allegations are based on its more
expansive interpretation of the applicability of the hazardous waste
program to equipment that the Company believes to be process equipment
(and therefore exempt). Settlement discussions are ongoing.
- ------------------------------------------------------------------------
Item 5. Other Information
On April 11, 2001, Eastman Kodak Company announced that Patricia F.
Russo will join the Company as President and Chief Operating Officer
effective April 16, 2001, reporting to Chairman and Chief Executive
Officer Daniel A. Carp. Russo will oversee the day-to-day operations of
Kodak's operating divisions and serve as the CEO's strategic partner in
pursuing the business opportunities created by the convergence of
imaging and information management technologies.
- ------------------------------------------------------------------------
PAGE 18
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and financial statement schedules required as part of this
report are listed in the index appearing on page 19.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed or required to be filed for the
quarter ended March 31, 2001.
- ------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
EASTMAN KODAK COMPANY
(Registrant)
Date May 11, 2001
E. Mark Rajkowski
Controller
- ------------------------------------------------------------------------
PAGE 19
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits and Financial Statement Schedules
Exhibit
Number
Page
(3) B. By-laws, as amended through April 24, 2001. 20
(10) O. Eastman Kodak Company 1997 Stock Option Plan, as amended,
effective as of March 13, 2001.
(Incorporated by reference to the Eastman Kodak Company
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, Exhibit 10.) 34
X. Robert H. Brust Agreement dated December 20, 1999.
(Incorporated by reference to the Eastman Kodak Company
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, Exhibit 10.)
Amendment, dated February 8, 2001, to Agreement dated
December 20, 1999. 36
Y. Patricia F. Russo Agreement dated April 1, 2001. 37
PAGE 20
Exhibit (3) B.
EASTMAN KODAK COMPANY
A New Jersey Corporation
BY-LAWS
AS AMENDED THROUGH APRIL 24, 2001
PAGE 21
EASTMAN KODAK COMPANY
A New Jersey Corporation
BY-LAWS
Article 1
SHAREHOLDERS
Section 1. Annual Meeting.
The annual meeting of the shareholders of the corporation, for the
election of directors and for the transaction of such other business as
may properly come before the meeting, shall be held on such date in May
in each year at such hour and place as shall be fixed by the Board of
Directors.
Section 2. Notice of Annual Meeting.
Notice of the annual meeting of shareholders shall be given by mail
or any other method permitted by law, not less than ten (10) nor more
than sixty (60) days before the meeting, to each shareholder of record
of the corporation entitled to vote at such meeting.
Section 3. Special Meetings.
Special meetings of the shareholders, except where otherwise
provided by law or these by-laws, may be called to be held at such place
and time as shall be fixed by the Board of Directors or by the Chairman
of the Board of Directors or by the President and shall be called by the
Chairman of the Board of Directors or by the President or by the
Secretary at the request in writing of a majority of the members of the
Board of Directors or at the request in writing of shareholders owning
and holding, in the aggregate, shares entitled to at least one-tenth of
the total number of votes represented by the entire amount of capital
stock of the corporation issued and outstanding and entitled to vote at
such meeting. Such request shall state the purpose or purposes of the
proposed meeting.
Section 4. Notice of Special Meetings.
Notice of each special meeting of the shareholders shall be given
in the manner required by law and by mailing, not less than ten (10) nor
more than sixty (60) days before the meeting, a copy of the notice of
such meeting, stating the purpose or purposes for which the same is
called, to each shareholder of record of the corporation entitled to
vote at such meeting, directed to him at his address as it appears on
the stock books of the corporation.
PAGE 22
Section 5. Quorum.
Unless otherwise provided by law or in the Certificate of
Incorporation, the holders of shares entitled to cast a majority of the
votes at a meeting of shareholders shall constitute a quorum at such
meeting. Any action, other than the election of directors, shall be
authorized by a majority of the votes cast at the meeting by the holders
of shares entitled to vote thereon, unless a greater plurality is
required by law or the Certificate of Incorporation. Less than a quorum
may adjourn the meeting. No notice of an adjournment of the meeting
shall be necessary if the Board of Directors does not fix a new record
date for the adjourned meeting and if the time and place to which the
meeting is adjourned are announced at the meeting at which the
adjournment is taken and at the adjourned meeting only such business is
transacted as might have been transacted at the original meeting.
Section 6. Qualifications of Voters.
At each meeting of the shareholders, each holder of record of each
outstanding share of common stock of the corporation shall be entitled
to one vote on each matter submitted to a vote.
The Board of Directors of the corporation may fix in advance a date
not less than ten (10) nor more than sixty (60) days preceding the date
of any meeting of shareholders and not exceeding sixty (60) days
preceding the date for the payment of any dividend, or for the allotment
of any rights, or for the purpose of any other action, as a record date
for the determination of shareholders entitled to notice of and to vote
at any such meeting or to express consent to or dissent from any
proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any such dividend or
allotment of any right, or for the purpose of any other action, and in
each case only shareholders of record at the close of business on the
date so fixed shall be entitled to such notice of and vote at such
meeting or to consent to or dissent from any proposal without a meeting,
or to receive payment of such dividend or allotment of rights or take
any other action, as the case may be, notwithstanding any transfer of
any shares on the books of the corporation after any such record date
fixed as aforesaid.
Section 7. Voting.
The vote for the election of directors may be taken by ballot and
shall be taken by ballot if requested by a shareholder and the vote upon
any question before the meeting may be taken by ballot, each of which
shall state the name of the shareholder voting, if the shareholder is
voting in person, or if voting by proxy, then the name of such proxy,
the number of shares of each class voted by him, and the number of his
votes. A shareholder may vote either in person or by proxy.
PAGE 23
Section 8. Selection of Inspectors.
The Board of Directors may, in advance of any shareholders'
meeting, appoint one or more inspectors to act at the meeting or any
adjournment thereof. If inspectors are not so appointed, or if so
appointed and any inspector fails to qualify or fails to appear or act
and the vacancy is not filled by the Board of Directors in advance of
the meeting, the person presiding at the meeting may, and on the request
of any shareholder entitled to vote thereat shall, make such
appointment. No person shall be elected a director at a meeting at
which he has served as an inspector.
Section 9. Duties of Inspectors.
The inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and shall
receive votes or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and
tabulate all votes or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all
shareholders.
Article 2
DIRECTORS
Section 1. Directors and Their Term of Office.
The Board of Directors of the corporation shall consist of as many
members, not less than nine (9) nor more than eighteen (18), as may from
time to time be fixed by the Board of Directors. They shall,
respectively, be at all times bona fide shareholders of the corporation.
The directors shall be divided into three classes: Class I, Class II
and Class III, each such class, as nearly as possible, to have the same
number of directors. The term of office of the initial Class I
directors shall expire at the annual meeting of the shareholders in
1988, the term of office of the initial Class II directors shall expire
at the annual meeting of the shareholders in 1989, and the term of
office of the initial Class III directors shall expire at the annual
meeting of the shareholders in 1990.
Section 2. Election of Directors.
A class of directors of the corporation whose term is expiring,
shall be elected at the annual meeting of the shareholders or at any
meeting of the shareholders held in lieu of such annual meeting, which
meeting, for the purposes of these by-laws, shall be deemed the annual
meeting. At each annual meeting of the shareholders held after 1987,
the directors chosen to succeed those whose terms have then expired
shall be identified as being of the same class as the directors they
succeed and shall be elected by the shareholders for a term expiring at
the third succeeding annual meeting of the shareholders.
PAGE 24
Section 3. Vacancies.
In the event of a vacancy occurring in the Board of Directors, the
remaining directors, by affirmative vote of a majority thereof,
expressed at a duly called meeting of the directors, may fill such
vacancy until the next succeeding annual meeting of shareholders
including one resulting from an increase in the number of directors as
provided in Section 5 of the Certificate of Incorporation.
Section 4. Compensation.
Directors may receive from the corporation such reasonable
compensation for their services as such or for their services to the
corporation in any other capacity, including a fixed sum and expenses
for attendance at meetings of the Board and at meetings of committees of
the Board as shall be determined from time to time by the Board of
Directors.
Section 5. Regular Meetings of Directors.
The Board of Directors shall by resolution provide for the
scheduling of regular meetings of the Board.
Section 6. Notice of Regular Meetings of Directors.
No notice shall be required to be given of any regular meeting of
the Board of Directors except as the Board may require.
Section 7. Special Meetings of Directors.
Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board, the President or any two members of
the Board and may be held at any time and place within or without the
State of New Jersey.
Section 8. Notice of Special Meetings of Directors.
Notice of each special meeting of the Board of Directors, stating
the time, place, and purpose or purposes thereof, shall be given by the
Chairman of the Board, the President, the Secretary or any two members
of the Board to each member of the Board not less than two (2) days by
mail or one (1) day by telegraph or telephone prior to the date
specified for such meeting. Special meetings of the Board of Directors
may also be held at any place and time, without notice, by unanimous
consent of all the members or provided all the members are present at
such meeting.
PAGE 25
Section 9. Quorum.
At any meeting of the Board of Directors a quorum shall consist of
one-third of the total number thereof and, except as otherwise provided
by law or these by-laws, a majority of such quorum shall decide any
question that may come before the meeting. A majority of the members
present at any regular or special meeting, although less than a quorum,
may adjourn the same from time to time, without notice other than
announcement at the meeting, until a quorum is present. At such
adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the meeting as
originally called.
Section 10. Action of Directors or Committees Without a Meeting or When
Members are in Separate Places.
Any action required or permitted to be taken pursuant to
authorization voted at a meeting of the Board of Directors or any
committee of the Board may be taken without a meeting if, prior or
subsequent to such action, all members of the Board or of such
committee, as the case may be, consent thereto in writing and such
written consents are filed with the minutes of the proceedings of the
Board or committee.
Any or all directors may participate in a meeting of the Board or
in a meeting of a committee of the Board by means of a conference
telephone or any means of communication by which all persons
participating in the meeting are able to hear each other as though he or
they were present in person at such meeting.
Section 11. Common Directorship and Directors' Personal Interest.
No contract or other transaction between the corporation and one or
more of its directors, or between the corporation and any other
corporation, firm or association of any type or kind in which one or
more of this corporation's directors are directors or are otherwise
interested, shall be void or voidable solely by reason of such common
directorship or interest, or solely because such director or directors
are present at the meeting of the Board or a committee thereof which
authorizes or approves the contract or transaction, or solely because
his or their votes are counted for such purpose, (1) if the contract or
other transaction is fair and reasonable as to the corporation at the
time it is authorized, approved or ratified; (2) or the fact of the
common directorship or interest is disclosed or known to the Board or
committee and the Board or committee authorizes, approves or ratifies
the contract or transaction by a vote sufficient for the purpose without
counting the vote or votes of such common or interested director or
directors; (3) or the fact of the common directorship or interest is
disclosed or known to the shareholders and they authorize, approve, or
ratify the contract or transaction.
Common or interested directors may be counted in determining the
presence of a quorum at a Board or committee meeting at which a contract
or transaction described in this by-law is authorized, approved or
ratified.
PAGE 26
Section 12. Standard of Care and Reliance upon Opinions of Counsel,
Reports, etc.
Directors and members of any committee of the Board of Directors
shall discharge their duties to the corporation when they act in good
faith and with that degree of diligence, care and skill which ordinarily
prudent men would exercise under similar circumstances in like
positions. In discharging their duties, directors and members of any
such committee shall not be liable if, acting in good faith, they rely
(a) upon the opinion of counsel for the corporation, or (b) upon written
reports setting forth financial data concerning the corporation and
prepared by an independent public accountant or certified public
accountant or firm of such accountants, or (c) upon financial
statements, books of account or reports of the corporation represented
to them to be correct by the President, the officer of the corporation
having charge of its books of account, or the person presiding at a
meeting of the Board.
Section 13. Committees of the Board
In addition to the Executive Committee provided for in Article 3
below, the Board may from time to time appoint from among its members
one or more other committees, each of which shall have one or more
members. Each such committee shall have and may exercise such authority
as is given to it by the Board, subject only to the limitations set
forth in the New Jersey Business Corporation Act.
Article 3
EXECUTIVE COMMITTEE
Section 1. Members of Executive Committee and Their Term of Office.
There may be an Executive Committee, consisting of three (3) or
more directors, one of whom shall be the President of the Corporation,
appointed by the Board of Directors. They shall be appointed for the
term of one (1) year but shall hold office until their successors are
elected and have qualified. Any member of the Executive Committee,
however, may be removed by the affirmative vote of a majority of the
members of the Board of Directors.
Section 2. Vacancies.
In the event of a vacancy occurring in the Executive Committee, the
Board of Directors, by resolution adopted by a majority of the entire
board, shall fill such vacancy for the unexpired term.
PAGE 27
Section 3. Powers of Executive Committee.
Subject to such limitations and regulations as may be prescribed by
law, including any pertinent section of the New Jersey Business
Corporation Act, or these by-laws or by the Board of Directors, the
Executive Committee shall have and may exercise all the authority of the
Board of Directors in the intervals between the meetings of the Board.
Section 4. Regular Meetings.
Regular meetings of the Executive Committee shall be held on such
days and at such hours as the Committee may by resolution fix and
determine.
Section 5. Notice of Regular Meetings.
No notice shall be required to be given of any regular meeting of
the Executive Committee.
Section 6. Special Meetings.
Special meetings of the Executive Committee may be called at any
time by the Chairman of the Committee, the President or by any two
members of the Committee and may be held at any place within or without
the State of New Jersey and at any time.
Section 7. Notice of Special Meetings.
Notice of each special meeting of the Executive Committee, stating
the time, place, and purpose or purposes thereof, shall be given by the
Chairman of the Committee, the President or by the Secretary or by any
two members of the Committee to each member of the Committee not less
than two (2) days by mail or one (1) day by telegraph or telephone prior
to the date specified for such meeting. Special meetings of the
Executive Committee may also be held at any place and time, without
notice, by unanimous consent of all the members or provided all the
members are present at such meeting.
Section 8. Quorum.
At any meeting of the Executive Committee a majority of the entire
Committee shall constitute a quorum and, except where otherwise provided
by law or these by-laws, a majority of such quorum shall decide any
question that may come before the meeting. A majority of the members
present at any regular or special meeting, although less than a quorum,
may adjourn the same from time to time, without notice other than
announcement at the meeting, until a quorum is present. At such
adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the meeting as
originally called.
PAGE 28
Article 4
OFFICERS
Section 1. Officers Enumerated.
The officers of the corporation shall be a Chairman of the Board of
Directors, a President, one or more Vice-Presidents, a Secretary, a
Treasurer, a General Comptroller, and one or more Assistant Vice-
Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant
Comptrollers, all of whom shall be elected annually by the Board of
Directors. The Chairman of the Board and the President shall be
directors of the corporation.
Section 2. Other Officers and Committees.
The Board may by resolution appoint such other officers, managers,
agents, employees, or committees as it shall deem necessary, who shall
hold their offices for such terms and shall have such powers and perform
such duties in the management of the property and affairs of the
corporation as shall be prescribed from time to time by the Board of
Directors or in the by-laws. Any person may hold more than one office.
The Board may also designate the officer who shall be the chief
executive officer of the corporation.
Section 3. Term of Office.
The enumerated officers of the corporation shall be elected for the
term of one (1) year but shall hold office until their successors are
elected and have qualified. Any officer, however, may be removed at any
time by the affirmative vote of a majority of the whole Board of
Directors expressed at any duly called regular or special meeting of the
Board of Directors.
Section 4. Vacancies.
If any vacancy shall occur among the officers of the corporation,
the Board of Directors may fill such vacancy for the unexpired term.
Section 5. The Chairman of the Board of Directors.
The Chairman of the Board of Directors shall preside at all
meetings of the Board of Directors and at all meetings of the
shareholders and shall perform such other duties as the Board of
Directors may properly direct.
PAGE 29
Section 6. The President.
The President shall have the general powers and duties of
supervision and management of the property and affairs of the
corporation which usually pertain to his office, and shall perform all
such other duties as the Board of Directors may properly direct. In the
absence of the Chairman of the Board, he shall preside at all meetings
of the Board of Directors and at all meetings of the shareholders.
Section 7. The Vice-Presidents.
The Vice-President, and each Vice-President if there be more than
one, shall have such powers and perform such duties as usually pertain
to such office or as the Board of Directors may properly direct. In the
absence or disability of the President, the Vice-President designated by
the Board of Directors shall perform the duties and exercise the powers
of the President.
Section 8. The Secretary.
The Secretary shall issue notices of all meetings of shareholders
and of the directors and of the Executive Committee where notices of
such meetings are required by law or these by-laws. He shall keep the
minutes of meetings of shareholders and of the Board of Directors and of
the Executive Committee. He shall sign such instruments as require his
signature and shall perform such other duties as usually pertain to his
office and as the Board of Directors may properly direct.
Section 9. The Treasurer.
The Treasurer shall have the care and custody of all the moneys and
securities of the corporation. He shall cause to be entered in books of
the corporation to be kept for that purpose, full and accurate accounts
of all moneys received and paid on account of the corporation. He shall
sign such instruments as require his signature and shall perform such
other duties as usually pertain to his office and as the Board of
Directors shall properly direct.
Section 10. The General Comptroller.
The General Comptroller shall have the custody and operation of the
accounting books and records of the corporation and shall establish and
maintain adequate systems of internal control and audit to safeguard the
assets of the corporation and shall perform such other duties as usually
pertain to his office and as the Board of Directors may properly direct.
Section 11. Assistant Vice-Presidents, Assistant Secretaries, Assistant
Treasurers and Assistant Comptrollers.
The duties of the Assistant Vice-Presidents, Assistant Secretaries,
Assistant Treasurers and Assistant Comptrollers shall be such as usually
pertain to their respective offices and as may be properly required of
them by the Board of Directors from time to time.
PAGE 30
Section 12. Salaries.
The Board of Directors shall have the authority to fix the salaries
of all officers of the corporation.
Article 5
INDEPENDENT ACCOUNTANTS
The Board of Directors shall annually elect independent
accountants, and such independent accountants shall serve for one year
or until removed by the Board of Directors, whichever occurs first. The
annual election of independent accountants shall be subject to
ratification by the shareholders. If the shareholders fail to ratify
the independent accountants elected by the Board of Directors, the Board
of Directors shall elect other independent accountants, who shall serve
the remainder of the one-year term for which the independent accountants
not ratified by the shareholders had been elected or until removed by
the Board of Directors, whichever occurs first. No representative of
the corporation's independent accountants shall be a director or officer
of the corporation. The independent accountants shall perform such
work, render such reports, and make such certificates in connection with
the books and accounts and financial affairs of the corporation as the
Board of Directors may from time to time direct, and, for that purpose,
shall have access at all reasonable times to the records, books,
accounts, and vouchers of the corporation, and shall be entitled to
require such information and explanations as may be reasonably necessary
in the performance of their duties.
Article 6
CAPITAL STOCK
Section 1. Stock Certificates.
Certificates of stock shall be issued only in numerical order.
They shall be signed by or bear the facsimile signatures of the Chairman
of the Board, the President, or one of the Vice-Presidents and the
Secretary, the Treasurer, Assistant Secretary or Assistant Treasurer.
They shall also be signed by or bear the facsimile signature of one of
the Transfer Agents and of one of the Registrars of the corporation as
permitted or required by law. In case any officer, Transfer Agent or
Registrar who has signed or whose facsimile signature has been placed
upon any such certificate shall have ceased to be such officer, Transfer
Agent or Registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if such signatory had not
ceased to be such at the date of its issue.
PAGE 31
Section 2. Transfer of Shares.
Transfers of shares, except where otherwise provided by law or
these by-laws, shall be made on the books of the corporation pursuant to
authority granted by power of attorney duly executed and filed by the
holder thereof with one of the Transfer Agents, upon surrender of the
certificate or certificates of such shares and in accordance with the
provisions of the Uniform Commercial Code as adopted in New Jersey as
amended from time to time.
Section 3. Transfer Agents and Registrars.
The Board of Directors may at any time appoint one or more Transfer
Agents and/or Registrars for the transfer and/or registration of shares
of stock, and may from time to time by resolution fix and determine the
manner in which shares of stock of the corporation shall be transferred
and/or registered by such Transfer Agent or Agents and Registrar or
Registrars, respectively.
Section 4. Lost, Stolen or Destroyed Certificates.
Where a certificate for shares has been lost, apparently destroyed,
or wrongfully taken and the owner thereof fails to so notify the
corporation or the Transfer Agent within a reasonable time after he has
notice of the fact and the Transfer Agent or the corporation registers a
transfer of the shares before receiving such a notification, the owner
shall be precluded from asserting against the corporation any claim for
registering the transfer of such shares or any claim to a new
certificate.
Subject to the foregoing, where the owner of shares claims that the
certificate representing such shares has been lost, destroyed, or
wrongfully taken, the corporation shall issue a new certificate in place
of the original certificate if the registered owner thereof, or his
legal representative, (a) requests the issue of a new certificate before
the corporation has notice that the certificate has been acquired by a
bona fide purchaser; (b) makes proof in such form as the corporation may
prescribe of his ownership of the shares represented by the certificate
and that the certificate has been lost, destroyed or wrongfully taken;
(c) files either (i) an assumption of liability by a surety approved by
the corporation under a blanket lost instrument indemnity bond,
substantially in the form approved by the corporation, or (ii) an
indemnity bond in such form and with such surety and in such amount
(open or specified) as may be approved by the corporation, indemnifying
the corporation and its transfer agents and registrars against all loss,
cost and damage which may arise from issuance of a new certificate in
place of the original certificate; and (d) satisfies any other
reasonable requirements imposed by the corporation. Approvals or any
requirements pursuant to this section by the corporation may be granted
or imposed by the President, and Vice-President, the Secretary, any
Assistant Secretary, or any other officer as authorized by the Board of
Directors.
PAGE 32
Article 7
DIVIDENDS AND FINANCES
Section 1. Dividends.
Dividends may be declared by the Board of Directors and paid by the
corporation at such times as the Board of Directors may determine, all
pursuant to the provisions of the New Jersey Business Corporation Act.
Before payment of any dividend or making of any distribution of net
profits there may be set aside out of the net profits of the corporation
such sum or sums as the Board of Directors from time to time, in their
absolute discretion, think proper and for such purposes as the Board
shall think conducive to the interests of the corporation.
Section 2. Finances.
All funds of the corporation not otherwise employed shall be
deposited in its name in, and shall be subject to application or
withdrawal from, banks, trust companies or other depositories to be
selected in accordance with and in such manner and under such conditions
as may be authorized by, or pursuant to the authority of, resolution of
the Board of Directors. All checks, notes, drafts and other negotiable
instruments of the corporation shall be signed by such officer or
officers, agent or agents, employee or employees as may be authorized
by, or pursuant to the authority of, resolution of the Board of
Directors. No officers, agents, or employees of the corporation, either
singly or together, shall have power to make any check, note, draft, or
other negotiable instrument in the name of the corporation or to bind
the corporation thereby, except as may be authorized in accordance with
the provisions of this section.
Article 8
GENERAL
Section 1. Form of Seal.
The seal of the corporation shall be circular in form, with the
words and figures "Eastman Kodak Company, Incorporated, 1901" in the
outer circle, and a monogram of the letters EKC in the inner circle.
PAGE 33
Section 2. Indemnification of Directors, Officers and Employees.
To the full extent authorized or permitted by law, the corporation
shall indemnify against his expenses and liabilities any person who is
or was a director, officer, employee or agent of this corporation, or
who is or was serving at the request of this corporation as a director,
officer, trustee, employee or agent of any other enterprise, or the
legal representative of any such person, and who is or was a party to or
threatened to be made a party to any proceeding, civil, criminal or
otherwise in respect of any past, present or future matter, by reason of
the fact that such person is or was serving in any of the foregoing
capacities. The determination as to whether an applicant has met the
standards to entitle him to indemnification shall be made by a Committee
of Directors, not less than three, appointed by the Board of Directors
for the purpose, none of whom shall be parties to the proceedings, or if
there are not at least three directors who are not parties to the
proceedings, or if there are three such directors and the Board so
directs, the determination shall be made in a written opinion by
independent legal counsel designated by the Board of Directors. The
question of indemnification shall not be submitted to shareholders
unless so directed by the Board of Directors.
Article 9
AMENDMENTS
Except as may otherwise be required by law or by the Certificate of
Incorporation, these by-laws may be amended, altered, or repealed, in
whole or in part, by a vote of a majority of the members of the Board of
Directors at the time in office at any regular or special meeting of the
Board of Directors. The shareholders, by a majority of the votes cast
at a meeting of the shareholders, may adopt, alter, amend or repeal the
by-laws whether made by the Board of Directors or otherwise.
PAGE 34
Exhibit (10) O.
March 13, 2001 Amendment
to
EASTMAN KODAK COMPANY 1997 STOCK OPTION PLAN
The Eastman Kodak Company 1997 Stock Option Plan is amended to add new
Section 2.17 and Article 11 to read as follows and to replace Sections
1.1, 1.2, 2.1, 5.1, 6.1 in their entirety so as to read as follows:
1.1 Purpose
The purpose of the Plan is to provide motivation to the corporate
officers of Kodak to put forth maximum efforts toward the continued
growth, profitability, and success of Kodak by providing incentives
through the ownership and performance of the Common Stock of Kodak.
Toward this objective, the Committee may grant stock options or Stock
Awards to the corporate officers of Kodak on the terms and subject to
the conditions set forth in the Plan.
1.2 Term
The Plan shall become effective on February 13, 1997. Awards shall not
be granted pursuant to the Plan after December 31, 2001.
2.1 Award
"Award" means any stock option or Stock Award granted under the Plan to
a Participant by the Committee pursuant to the terms, conditions,
restrictions and limitations of the Plan and those that the Committee
may establish by the Award Notice or otherwise.
2.17 Stock Award
"Stock Award" means an Award granted pursuant to Article 11 in the form
of shares of Common Stock or restricted shares of Common Stock.
5.1 In General
Awards shall be paid in the form of stock options pursuant to Article 7
or Stock Award pursuant to Article 11. All Awards shall be subject to
the terms, conditions, restrictions and limitations of the Plan. The
Committee may, in its sole judgment, subject an Award to such other
terms, conditions, restrictions and/or limitations (including, but not
limited to, the time and conditions of exercise and restrictions on
transferability and vesting), provided they are not inconsistent with
the terms of the Plan.
PAGE 35
6.1 Available Shares
The maximum number of shares of Common Stock, $2.50 par value per share,
of Kodak which shall be available for grant of Awards under the Plan
during its term shall not exceed 2,780,000. (Such amount shall be
subject to adjustment as provided in Section 6.2.) Any shares of Common
Stock related to Awards which terminate by expiration, forfeiture,
cancellation or otherwise without the issuance of such shares, are
settled in cash in lieu of Common Stock, or are exchanged with the
Committee's permission for Awards not involving Common Stock, shall not
be available again for grant under the Plan. The shares of Common Stock
available for issuance under the Plan shall be treasury shares.
ARTICLE 11 -- STOCK AWARDS
11.1 Grants
Awards may be granted in the form of Stock Awards. Stock Awards shall
be awarded in such numbers and at such times during the term of the Plan
as the Committee shall determine.
11.2 Award Restrictions
Stock Awards shall be subject to such terms, conditions, restrictions,
and/or limitations, if any, as the Committee deems appropriate
including, but not by way of limitation, restrictions on transferability
and continued employment; provided, however, they are not inconsistent
with the Plan. The Committee may modify or accelerate the delivery of a
Stock Award under such circumstances as it deems appropriate.
11.3 Rights as Shareholders
During the period in which any restricted shares of Common Stock are
subject to the restrictions imposed under Section 11.2, the Committee
may, in its sole discretion, grant to the Participant to whom such
restricted shares have been awarded all or any of the rights of a
shareholder with respect to such shares, including, but not by way of
limitation, the rights to vote such shares and receive dividends.
11.4 Evidence of Award
Any Stock Award granted under the Plan may be evidenced in such manner
as the Committee deems appropriate, including, without limitation, book-
entry registration or issuance of a stock certificate or certificates.
PAGE 36
Exhibit (10) X.
February 8, 2001 Amendment to December 20, 1999 Offer Letter
If Mr. Brust's employment terminates for any reason other than "cause,"
as defined in Mr. Brust's December 20, 1999 offer letter with the
Company, after completing 5 years of service with the Company, his
termination of employment will be for an Approved Reason for purposes of
any stock options held by him at the time of his termination of
employment.
PAGE 37
Exhibit (10) Y.
April 1, 2001
Patricia F. Russo
New Jersey
Dear Pat:
We are delighted to extend you an offer to join Eastman Kodak Company
("Kodak") as its President and Chief Operating Officer. We are
confident that your professional talent will be a tremendous asset to
our company and we are enthusiastic about welcoming you as a member of
our top management team. We look forward to you playing a crucial
leadership role, working with others throughout the company to realize
our potential.
This letter agreement outlines the role, compensation and benefits of
your offer of employment with Kodak. Due to the strategic importance
of your role, we are pleased to offer you a comprehensive package with
the following elements. Given the large number of subjects covered by
this letter, we anticipate that you may have questions about it. I
would be pleased to discuss any aspect of the letter with you.
1. Position
Your position will be President and Chief Operating Officer, Eastman
Kodak Company. You will report directly to Daniel A. Carp, Chairman
and Chief Executive Officer, Eastman Kodak Company.
As President and Chief Operating Officer, your responsibilities and
duties will be commensurate with the titles of these positions and
include those duties and responsibilities normally performed by the
President and Chief Operating Officer of a large publicly-held
corporation operating worldwide. You will also perform such other
duties and responsibilities that are consistent with the positions of
President and Chief Operating Officer as the Chief Executive Officer or
the Board may direct. The Board or Chief Executive Officer may also
modify your duties and responsibilities from time to time with your
consent.
2. Election to Board of Directors
Kodak management will recommend to the Board of Directors at its July
2001 meeting that you be elected a member of the Board effective July
25, 2001.
3. Location
You will be located at the Company's offices in Rochester, New York.
PAGE 38
4. Employment Date
You will commence your employment with Kodak as soon as possible, but
not later than April 16, 2001.
5. Base Salary
Your base salary will be at the rate of $900,000 per year. Your base
salary will be reviewed no less frequently than annually for increase
in the discretion of the Executive Compensation and Development
Committee of the Board. Once increased, your base salary will not be
decreased below the increased amount.
6. Management Variable Compensation Plan
You will be eligible to participate in Kodak's short-term variable pay
plan for its management level employees, the Management Variable
Compensation Plan ("MVCP"). Your annual target award under MVCP will
be 100% of your base salary, making your total target annual
compensation $1.8 million. Your actual award for a year will vary
based on company performance, your job performance, and such other
criteria selected by the Executive Compensation and Development
Committee (the "Compensation Committee") or the Chief Executive
Officer.
For the current performance period, you will be granted a guaranteed
prorated MVCP award. The amount of the prorated MVCP award will be at
least that amount calculated by multiplying your total targeted annual
MVCP award by a fraction, the numerator of which is your total number
of full months of employment in 2001 and the denominator of which is
12. To the extent all or any part of this amount cannot be paid
pursuant to MVCP, it will be paid to you outside of MVCP in 2002 at the
same time that other participants of MVCP receive their awards. Even
though all or part of this award may be paid outside the terms of MVCP,
you nevertheless must be employed by Kodak on December 31, 2001 in
order to receive this award, except as otherwise expressly provided
herein. That portion, if any, paid outside of MVCP will not be subject
to deferral nor will it be "benefits bearing." In other words, the
amount will not be taken into account, or considered for any reason,
for purposes of determining any company provided benefits or
compensation to which you become eligible, including, by way of
illustration and not by way of limitation, any pension or other
retirement benefit.
7. Signing Incentive-Stock Option Award
To encourage you to join Kodak, you will receive as a incentive bonus a
one-time grant of 500,000 options to acquire Kodak common stock. The
options will be issued to you under the terms of the Eastman Kodak
Company 1997 Stock Option Plan. The options will be granted to you on
the first day of your employment. The options will have a term of 10
years and an exercise price equal to the mean between the high and low
at which Kodak common stock trades on the New York Stock Exchange on
the date they are granted. The options will vest 33 1/3% on each of
the first three anniversaries of the date they are granted.
PAGE 39
If your employment terminates during the one-year period following the
date the options are granted, you will forfeit the options unless your
termination is due to death, Disability or for a Permitted Reason, as
defined below. Thereafter, so long as the options remain unvested,
they will be subject to forfeiture in the event of your termination of
employment for any reason other than for death or for Disability or an
Approved Reason, as those terms are defined below.
For purposes of this stock option incentive bonus, if Kodak terminates
your employment without Cause, as defined below, or if you terminate
your employment for Good Reason, as defined below, your termination
will be for both a Permitted Reason and an Approved Reason.
Consequently, in such event you will not forfeit by virtue of your
termination any of the stock options granted to you prior to your
termination of employment.
The specific terms, conditions and restrictions of your stock option
grant, which will be consistent with those described in this letter
agreement, will be contained in an award notice delivered to you
shortly after the commencement of your employment.
8. Signing Incentive-Restricted Stock Award
As a further inducement to join Kodak, you will receive as a signing
incentive, a one-time grant of 100,000 shares of restricted Kodak
Common Stock. The restricted shares will be issued to you under the
terms of the 2000 Omnibus Long-Term Compensation Plan (the "Omnibus
Plan"). The restrictions on 25,000 shares will lapse on the third
anniversary of the date of the commencement of your employment. The
restriction on the remaining 75,000 shares will lapse on the fourth
anniversary of the date of the commencement of your employment.
For so long as these shares remain restricted, they will be subject to
forfeiture in the event of your termination of employment for any
reason other than for death, Disability, termination by Kodak without
Cause or termination by you for Good Reason. In the event of your
death, all of the restrictions on the shares will immediately lapse on
the date of your death and the shares will be paid to your estate. If
your employment is terminated by Kodak without Cause or terminates due
to Disability or Good Reason, you will receive a pro rata portion of
the restricted shares based on your service with Kodak until your
termination of employment. The remaining restricted shares will be
immediately forfeited.
The specific terms, conditions and restrictions of your restricted
stock grant, which will be consistent with those described in this
letter agreement, will be contained in an award notice delivered to you
shortly after the commencement of your employment.
PAGE 40
9. Stock Option Program
You will be eligible to participate in our Management Stock Option
Program under the Omnibus Plan. Grants are typically made annually
under this program. Your annual target award under the program will be
100,000 options. Individual awards under the program are, however,
wholly within the discretion of the Compensation Committee. Presently,
the Compensation Committee grants awards under the program based
primarily on the results of Kodak's leadership assessment and
succession planning process. The first grant that you will be eligible
for under the program is the grant for 2002.
10. Performance Stock Program
You will be eligible to participate in the Performance Stock Program,
Kodak's long-term compensation plan for its senior management. Upon
your employment, you will be named a participant in the program's three
pending performance cycles. Awards earned under the program are paid
in the form of restricted shares of Kodak common stock. The
restrictions, which lapse at age 60, require continuous employment and
noncompetition and prohibit the transferability of awards. Newly
eligible participants are eligible for pro rata awards under the
program's pending performance cycles based on their service during the
cycle. Your target award for a full performance cycle under the
program will be 15,000 shares of restricted Kodak common stock.
11. Pension Benefits
A. Cash Balance Plan. Upon your employment, you will be
eligible for the cash balance benefit provided under the
Kodak Retirement Income Plan ("KRIP"). This program is
Kodak's retirement plan for all employees hired on or after
March 1, 1999. The enclosed brochure describes this program
in more detail.
B. Enhanced Pension. In addition to the retirement benefits you
are eligible for under the cash balance benefit of KRIP, you
will be eligible for an enhanced pension benefit. Assuming you
satisfy the conditions of Section 11(C) below and subject to
the offset provisions contained in Section 11(E) below, Kodak
will provide you a retirement income benefit (1) as if you were
eligible to participate in Kodak's retirement plans by virtue
of being employed by Kodak after December 31, 1995, but prior to
March 1, 1999, and (2) based on 20 years of deemed service. The
names of the specific retirement plans that you will be treated
as participating in by virtue of being treated as employed after
December 31, 1995, but prior to March 1, 1999, are KRIP, the
Kodak Unfunded Retirement Plan ("KURIP") and the Kodak Excess
Retirement Income Plan ("KERIP"). These three plans insofar as
they apply to employees employed by Kodak after March 31, 1995,
but prior to March 1, 1999, will be collectively referred to as
the "Retirement Plan."
PAGE 41
As explained in Section 11(C) below, the 20 years of
deemed service that you will be treated as receiving under
the Retirement Plan will not be credited to you unless and
until you complete 5 years of actual service under the
Retirement Plan. Thus, upon completion of these 5 years
of service, you will have 25 years of service in total.
Thereafter, you will continue to earn additional service
credit under the Retirement Plan based on your actual
service with Kodak. Any service credited to you under the
Retirement Plan (whether actual or deemed) will only apply
for purposes of establishing under the Retirement Plan:
(i) the total amount of your "Vesting Service"; (ii) the
total amount of your "Accrued Service" used to calculate
your retirement income benefit; and (iii) your "Total
Service" for purposes of determining the applicability of
any early retirement reduction factor. The crediting of
service applies solely for these purposes and is not
intended to enhance any other Kodak benefit or
compensation.
C. Continuous Employment. In order to receive the enhanced
retirement benefit described above, you must remain
continuously employed with Kodak during the 5-year period
commencing on the date of your employment. Except as
provided in Section 11(D) below, if your employment
terminates for any reason, whether voluntarily or
involuntarily, prior to the fifth anniversary of your
employment with Kodak, you will not be entitled to receive
any of the enhanced retirement benefits described above.
D. Termination Without Cause or Termination due to Death,
Disability or Good Reason. Notwithstanding Section 11(C)
above, if Kodak terminates your employment without Cause
or your employment terminates due to Death, Disability or
Good Reason, you will receive your actual years of service
and a pro rata portion of the 20 years of deemed service.
The pro rata portion will be determined by multiplying the
20 years of deemed service by the following fraction:
(A)
60
For purposes of this fraction, "A" will be the total
number of your completed full months of service with Kodak
prior to your termination of employment. In the case of
your death, your actual and pro rata deemed service will
be used solely for purposes of determining the survivor
benefit which your survivor may be eligible for under the
Retirement Plan (but not the post-retirement survivor
income benefit which is provided under our life insurance
plans for a specified grandfathered population).
E. Offset. The amount of the retirement income benefit or
survivor benefit, if any, provided under Section 11(B)
will be offset by: (1) the retirement benefits payable to
you under the cash balance benefit of KRIP and any
supplemental and successor plan(s) thereto and (2) any
company matching contribution made to your account under
the Eastman Kodak Employees' Savings and Investment Plan
("SIP") or any supplement or successor plan(s) thereto.
PAGE 42
For purposes of determining the amount of any offset under
this Section 11(E), the amount of the retirement benefits
payable to you under Cash Balance Plus and any
supplemental and successor plan(s) thereto will be
calculated pursuant to the same actuarial assumptions that
are used to calculate the retirement income benefit that
you will be treated as receiving under the Retirement Plan
and assuming the same frequency of payment, form of
benefit and commencement date of payment as such
retirement income benefit.
F. Payment. The amount of the enhanced retirement benefit,
if any, payable to you under this Section 11 will: (i) be
paid in the form of a monthly annuity commencing on the
date(s) permitted under the terms of the Retirement Plan;
(ii) be paid out of Kodak's general assets, not under
KRIP; (iii) not be funded in any manner; (iv) be included
in your gross income as ordinary income, subject to all
income and payroll tax withholding required to be made
under all applicable laws; and (v) not be grossed up or be
given any other special tax treatment by Kodak.
G. Employee Benefit Plan. To the extent the terms of this
enhanced retirement benefit constitute an "employee benefit
plan" under Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), the Senior Vice President,
Eastman Kodak Company and Director, Human Resources will be
the plan administrator of the plan. The plan administrator
will have total and exclusive responsibility to control,
operate, manage and administer the plan in accordance with
its terms and all the authority that may be necessary or
helpful to enable him/her to discharge his/her responsibilities
with respect to the plan. Without limiting the generality
of the preceding sentence, the plan administrator shall have
the exclusive right to: interpret the plan, decide all
questions concerning eligibility for and the amount of benefits
payable under the plan, construe any ambiguous provision of the
plan, correct any default, supply any omission, reconcile any
inconsistency, and decide all questions arising in the
administration, interpretation and application of the plan.
The plan administrator will have full discretionary authority
in all matters related to the discharge of his/her
responsibilities and the exercise of his/her authority under
the plan, including, without limitation, his/her construction
of the terms of the plan and his/her determination of
eligibility for benefits under the plan. It is the intent of
the plan, as well as both parties hereto, that the decisions
of the plan administrator and his/her action with respect to
the plan shall be final and binding upon all persons having
or claiming to have any right or interest in or under the
plan and that no such decision or actions shall be modified
upon judicial review unless such decision or action is
proven to be arbitrary or capricious.
PAGE 43
Notwithstanding the foregoing paragraph of this Section
11(G), the plan administrator will not determine the
resolution of disputes concerning whether your termination
of employment is for Cause or Good Reason, but rather such
disputes will be arbitrated in accordance with the terms
of Section 22 below.
12. Termination of Employment.
A. Termination Due to Death. In the event your employment
terminates due to your death, your estate or your
beneficiaries, as the case may be, will receive:
I. base salary through the date of death;
II. a pro rata annual target award under MVCP for the
year in which your death occurs, based on service
performed for such year, payable in a single
installment on the normal payment date for awards
earned for the year;
III. any earned, but unpaid, MVCP award for the year
immediately prior to the year in which your death
occurs;
IV. any restricted stock award outstanding at the time
of your death, including the award under Section 8,
whereupon the award will become fully vested and any
forfeiture provisions set forth in the award's
restricted stock agreement will immediately lapse;
V. any outstanding stock option award at the time of
your death will become fully vested and your estate
or, in the event of an assignment of your stock option
award, your transferee will have the right to exercise
any such award for the remainder of the full original
term of the option;
VI. a pro rata award under the Performance Stock Program
for each cycle during which your death occurs, based
on performance and your service during such cycle,
payable in a single installment on the normal payment
date for awards earned for the cycle;
VII. any outstanding award under the Performance Stock
Program at the time of your death, and any forfeiture
provisions under the program applicable to such awards
will immediately lapse;
VIII.services under Kodak's financial counseling program
for the two year period immediately following the date
of your death;
PAGE 44
IX. continuation of existing health and dental coverage for
up to 18 months, provided your qualified beneficiary
timely elects COBRA continuation coverage and pays
the required COBRA premiums;
X. a survivor benefit under the terms of Section 11 (D)
above; and
XI. other or additional benefits in accordance with
applicable plans and programs of the company.
B. Termination Due to Disability. In the event your employment
terminates due to Disability, you will receive:
I. base salary through the date of your termination
of employment;
II. those benefits to which you are entitled under the
Kodak Long-Term Disability Plan;
III. a pro rata annual target award under MVCP for the year
in which your termination occurs, based on service
performed during such year until your date of termination,
payable in a single installment on the normal payment
date for awards earned for the year;
IV. any earned, but unpaid, MVCP award for the year
immediately prior to the year in which your
termination occurs;
V. any restricted stock award, other than the restricted
stock award described in Section 8 above, outstanding
for at least one year at the time of your termination,
and the forfeiture provisions applicable to the award
will immediately lapse;
VI. a pro rata portion of the restricted stock award
described in Section 8 which will be determined in
accordance with the terms of Section 8;
VII. any stock option award, other than the stock option award
described in Section 7, outstanding for at least one year
at the time of your termination of employment and, if the
award is unvested at the time of your termination, it will
continue to vest per its terms and, once vested, you will
have the right to exercise the award for the remainder
of its term unless the award is forfeited sooner pursuant
to its terms;
PAGE 45
VIII.the stock options granted under Section 7 above and, if
any of the options are unvested at the time of your
termination, they will continue to vest per their terms
and, once vested, you will have the right to exercise
the options for the remainder of their term unless they
are forfeited sooner pursuant to their terms;
IX. a pro rata award under the Performance Stock Program for
each cycle during which your termination occurs, based on
performance and your service during such cycle until your
date of termination, payable in a single installment on
the normal payment date for awards earned for the cycle;
X. any outstanding award under the Performance Stock Program
at the time of your termination, any forfeiture provisions
under the program applicable to such award will
immediately lapse;
XI. services under Kodak's financial counseling program for
the two year period immediately following the date of your
termination of employment;
XII. continuation of existing health and dental coverage for up
to the maximum applicable COBRA period, provided you timely
elect COBRA continuation coverage and pay the required
COBRA premiums;
XIII.a pro rata enhanced retirement income benefit under the
terms of Section 11(D) above; and
XIV. other or additional benefits in accordance with applicable
plans and programs of the company.
C. Termination by the Company for Cause. In the event Kodak
terminates your employment for Cause, you will receive:
I. base salary through the date of your termination of
employment;
II. any earned, but unpaid, MVCP award for the year
immediately prior to the year in which your termination
occurs;
III. any award earned (but not yet paid) pursuant to the terms
of the Performance Stock Program, but you will forfeit
any award subject to any restriction at the time of your
termination;
IV. payment for any reimbursed business expenses in
accordance with Kodak's expense reimbursement policy; and
PAGE 46
V. other or additional benefits in accordance with
applicable plans or programs of the company.
D. Termination Without Cause. In the event your employment is
terminated by Kodak without Cause, you will receive:
I. base salary through the date of your termination of
employment;
II. a severance allowance equal to two (2) times the sum
of your then-current annual base salary plus your
then-current target annual incentive award under
MVCP, payable in equal consecutive bi-monthly
payments over the two (2) year period commencing on
the date of your termination of employment;
III. a pro rata annual target award under MVCP for the year
in which your termination occurs, based on service
performed for such year, payable in a single
installment on the normal payment date for awards
earned for the year;
IV. any earned, but unpaid, MVCP award for the year
immediately prior to the year in which your
termination occurs;
V. any restricted stock award, other than the restricted
stock award described in Section 8 above, outstanding
at the time of your termination, and the forfeiture
provisions applicable to such award will immediately
lapse;
VI. a pro rata portion of the restricted stock award
described in Section 8 which will be determined in
accordance with the terms of Section 8;
VII. any stock option award outstanding at the time of
your termination of employment and, if the award is
unvested at the time of your termination, it will
continue to vest per its terms and, once vested, you
will have the right to exercise the award for the
remainder of its term unless the award is forfeited
sooner pursuant to its terms;
VIII.a pro rata award under the Performance Stock
Program for each cycle during which your termination
occurs, based on performance and your service during
such cycle, payable in a single installment on the
normal payment date for awards earned for the cycle;
IX. any outstanding award under the Performance Stock
Program at the time of your termination, any
forfeiture provisions under the program applicable to
such award will immediately lapse;
PAGE 47
X. a pro rata enhanced retirement income benefit under
the terms of Section 11(D) above; and
XI. continuation, at Kodak's expense, of your then
existing elections under Kodak's health and dental
plans for the four month period immediately following
the month in which you terminate your employment;
XII. following the expiration of the 4 months of company
paid health and dental coverage, continuation of
existing health and dental coverage for up 14 months,
provided you timely elect COBRA continuation coverage
and pay the required COBRA premiums;
XIII. outplacement services in the same manner, and on
the same terms and conditions, as if you were
eligible for "Outplacement Services" pursuant to
Article 8 of Kodak's Termination Allowance Plan;
XIV. services under Kodak's financial counseling program
for the two year period immediately following the
date of your termination of employment; and
XV. other or additional benefits in accordance with
applicable plans and programs of the company.
E. Good Reason. In the event you terminate your employment
for "Good Reason," you will receive:
I. base salary through the date of your termination of
employment;
II. a severance allowance equal to two (2) times the sum
of your then-current annual base salary plus your
then-current target annual incentive award under
MVCP, payable in equal consecutive bi-monthly
payments over the two (2) year period commencing on
the date of your termination of employment;
III. a pro rata annual target award under MVCP for the
year in which your termination occurs, based on
service performed for such year, payable in a single
installment on the normal payment date for awards
earned for the year;
IV. any earned, but unpaid, MVCP award for the year
immediately prior to the year in which your
termination occurs;
PAGE 48
V. any restricted stock award, other than the restricted
stock award described in Section 8 above, outstanding
at the time of your termination, and the forfeiture
provisions applicable to such award will immediately
lapse;
VI. a pro rata portion of the restricted stock award
described in Section 8 which will be determined in
accordance with the terms of Section 8;
VII. any stock option award outstanding at the time of
your termination of employment and, if the award is
unvested at the time of your termination, it will
continue to vest per its terms and, once vested, you
will have the right to exercise the award for the
remainder of its term unless the award is forfeited
sooner pursuant to its terms;
VIII.a pro rata award under the Performance Stock
Program for each cycle during which your termination
occurs, based on performance and your service during
such cycle, payable in a single installment on the
normal payment date for awards earned for the cycle;
IX. any outstanding award under the Performance Stock
Program at the time of your termination, any
forfeiture provisions under the program applicable to
such award will immediately lapse;
X. a pro rata enhanced retirement income benefit under
the terms of Section 11(D) above; and
XI. continuation, at Kodak's expense, of your then
existing elections under Kodak's health and dental
plans for the four month period immediately following
the month in which you terminate your employment;
XII. following the expiration of the 4 months of company
paid health and dental coverage, continuation of
existing health and dental coverage for up 14 months,
provided you timely elect COBRA continuation coverage
and pay the required COBRA premiums;
XIII.outplacement services in the same manner, and on
the same terms and conditions, as if you were
eligible for "Outplacement Services" pursuant to
Article 8 of Kodak's Termination Allowance Plan;
XIV. services under Kodak's financial counseling program
for the two year period immediately following the
date of your termination of employment; and
PAGE 49
XV. other or additional benefits in accordance with
applicable plans and programs of the company.
F. Voluntary Termination. In the event you voluntarily
terminate your employment, you will receive the same
benefits as provided in Section 12(C) above for a
termination for Cause.
G. Exclusivity of Severance Allowance. The severance
allowance payable to you under this Section 12 will be
paid to you in lieu of any other severance benefit,
payment or allowance that you would otherwise be eligible
for, except any benefits payable to you under any Kodak
severance plan. To the extent, however, you are eligible
for a benefit under a Kodak severance plan, the severance
allowance payable to you under this Section 12 will be
reduced by the amount of such severance benefit.
H. Release. As a condition of your entitlement to any of the
rights, benefits and payments provided in this Section 12,
you will be required to execute immediately prior to your
termination of employment and honor a general release of
claims and covenant not to sue in a form substantially
similar to that attached to this letter agreement as
Addendum A, which may be amended or supplemented from time
to time by written agreement of the parties.
I. Termination at Will. Notwithstanding anything herein to
the contrary, your employment by Kodak is terminable at
will with or without Cause; provided, however, that a
termination of your employment will be governed in
accordance with the terms of this Section 12. Thus, you
will be free to terminate your employment at any time, for
any reason, and Kodak is free to do the same.
J. Benefits Bearing. None of the benefits or payments payable
under this Section 12 are "benefits bearing." That is,
they will not be taken into account, nor considered for
any reason, for purposes of determining any company provided
benefits or compensation to which you are or may become
eligible.
K. No Mitigation/No Offset. You will not be required to seek
other employment or otherwise mitigate the value of any
severance benefits payable under this letter agreement,
nor will any such benefits be reduced by any earnings or
benefits that you may receive from any other source.
Except as expressly provided in this letter agreement or
Addendum A, the severance allowance payable under this
letter agreement will not be subject to setoff,
counterclaim, recoupment, defense or other right which
Kodak may have against you or others.
13. Vacation
You will be entitled to 6 weeks vacation per calendar year.
PAGE 50
14. Benefits
You will be immediately eligible to participate in Kodak's Flexible
Benefits Plan, which includes health and dental coverage, long-term
disability coverage, group life insurance and eligibility for long-
term care insurance.
You will also be able to participate in Kodak's Short-Term
Disability Plan. You will be eligible for up to 52 weeks of
benefits under the terms of such plan. This is based upon a special
credit of having 15 years of deemed service for purposes of the
plan. Under the plan, participants receiving benefits remain Kodak
employees and, as such, are eligible for the same benefits as other
Kodak employees.
Our executives also qualify for company-paid coverage of $5 million
of personal umbrella liability insurance ("PULI").
In addition, you will be eligible to participate in the 1982 Eastman
Kodak Company Executive Deferred Compensation Plan ("EDCP"). This
is a non-qualified/unfunded plan in which you may elect to defer a
portion of your base salary and MVCP award.
Immediately upon your employment, you will also be eligible to
participate in the Eastman Kodak Employees' Savings and Investment
Plan ("SIP"). You will be eligible to make rollover deferrals to
SIP from other qualified plans within two years from the date of
your hire.
Our executives are provided with individual financial counseling
services through one of three companies. You will be immediately
eligible for this benefit. You are also eligible to participate in
the Kodak Executive Health Management Plan.
You will be eligible to participate in any of Kodak's executive
fringe benefits in accordance with the terms and conditions of such
arrangements as are in effect from time to time for Kodak's senior-
level executives.
You will be eligible to participate in the Eastman Kodak Company
Executive Protection Plan. You will be treated under the plan as a
Tier 1 employee. Upon your employment, the plan's definition of
"Qualifying Termination" will be amended to include the following
provision:
In the case of Kodak's President, "Qualifying Termination"
means: (a) a termination of the President's employment by the
Employer other than for Cause, or (b) a termination of the
President's employment by the President for Good Reason or (c)
a voluntary termination of employment by the President for any
reason (or no reason at all) during the 30-day period
commencing 23 months after the date of a Change in Control.
15. Use of Company Aircraft
For security concerns, you will use company or company chartered
aircraft for all business travel. For the same concerns, you will
also be required to use company or company chartered aircraft when
traveling back and forth to New Jersey and Florida. Your immediate
family may accompany you on these trips to New Jersey and Florida,
but such use by your immediate family will be subject to income
imputation rules pursuant to applicable Internal Revenue Service
regulations. To the extent your own use of company or company
chartered aircraft when traveling back and forth to New Jersey and
Florida results in imputed income to you, Kodak will provide you
with tax gross-up payments so that after taxes are incurred on any
such use you will be kept whole.
PAGE 51
16. Share Ownership Program
Kodak firmly believes that the interests of its executives must be
consistent with those of its shareholders. One program designed to
meet this objective is Kodak's share ownership program. Under this
program, all senior executives are required to own common stock of
Kodak equal to a set multiple of his or her base salary. The
multiple that you are expected to own is 3 times your base salary.
This amount must be achieved by the fifth anniversary of the date of
your commencement of employment by Kodak.
17. Relocation
You will be eligible to participate in Kodak's Enhanced New Hire
Relocation Program (the "Relocation Program"). We have enclosed a
summary of the program's benefits. To the extent you are required
to include any of the Relocation Program's benefits in your gross
income for federal, state or local income or payroll tax purposes,
Kodak will provide you with tax gross-up payments so that after
taxes are incurred on any benefits under the Relocation Program you
will be kept whole.
To assist you in finding a permanent residence in the Rochester, New
York area, Kodak will reimburse you for your temporary housing
expenses. More specifically, for up to a 6-month period commencing
on your start date, Kodak agrees to reimburse you for your temporary
housing expenses up to a maximum dollar amount of $2,000 per month.
These expenses must be incurred for temporary housing in the
Rochester, New York area. Proper documentation of these expenses
will be required in accordance with the terms of Kodak's relocation
program. To the extent you are required to include any of these
expense reimbursement in your gross income for federal, state or
local income or payroll tax purposes, Kodak will provide you with
tax gross-up payments so that after taxes are incurred on any such
expense reimbursement you will be kept whole. The amount of any
such "gross-up" will not be included in the calculation of the
$2,000 per month limit.
18. Confidential Information
It is important that the relationship between you and Kodak be
established at the outset so as to enable you to properly safeguard
confidential information that you may have acquired from your
previous employer(s). "Confidential Information" is defined as
information proprietary to a previous employer which is generally
secret, and which you learned while employed with that employer.
By accepting this conditional offer, you represent to Kodak that
your obligations regarding the Confidential Information will not
impede your ability to perform the duties and responsibilities
required by virtue of the positions offered to you under this letter
agreement. You further represent that the performance of these
duties and responsibilities will not violate any agreement between
you and any other person, firm, entity or organization or violate
any Federal, state or local law, executive order or regulation.
During your employment with Kodak, we would expect that you will
keep in mind the Confidential Information and inform us if you
believe that any duties or responsibilities to which you are
assigned will involve its use or disclosure. I am available at any
time to discuss questions which might arise in this regard. All such
discussions you may have with me or anyone at Kodak in this regard
should refer to the Confidential Information only in general terms
so as to avoid disclosure of the information you believe to be
confidential.
PAGE 52
19. No Conflicts of Interest
We understand that some of your present activities may conflict with
your proposed duties and responsibilities at Kodak. In this regard,
we look forward to discussing the particulars of these situations
with you. While we are confident that the conflicts posed by these
situations can be eliminated, you should understand that the
satisfactory resolution of these issues is a condition of your
employment.
By signing this letter, you represent that as of the commencement of
your employment you will not be subject to any restrictions,
particularly, but without limitation, in connection with any
previous employment, which at such time or thereafter will prevent
you from performing your obligations under this letter or will
materially and adversely affect (or may in the future, so far as you
can reasonably foresee, materially affect) your rights to
participate in the affairs of Kodak.
20. Employment Preconditions
This conditional offer of employment is subject to the following
conditions and may be withdrawn by Kodak due to your inability to
satisfy any one or more of these conditions. By signing this
letter, you agree and acknowledge that Kodak may perform the
activities contemplated below in order to verify the stated
conditions.
A. Drug Test. You are required to complete a drug screen
before this offer becomes final. This will be at Kodak's
expense. This offer is contingent upon a negative drug
screen urinalysis test result. Additional information
will be sent to you under separate cover from our Medical
Department.
B. INS. All employers are now required by Federal law to
verify identity and authorization to work for all
prospective employees. Enclosed is an Immigration and
Naturalization Service I-9 form that outlines the details
of these requirements. Inability to comply with these
requirements will cause rescission of this conditional
offer.
C. Check of Past Employment, Education, Credit History, etc.
Kodak will conduct a check of your past employment,
education, credit history and criminal convictions
records. This offer is contingent upon such check being
acceptable to Kodak. Informed Directions International of
110 15th Street NE, Canton, Ohio 44714, has been engaged
by Kodak to conduct this check. Enclosed is a disclosure
letter required by Federal Law concerning our request to
obtain a copy of your credit report. You will also find
enclosed a consent form authorizing Kodak to obtain such
credit report. Please sign and date the consent form and
enclose it along with this letter.
21. Employee's Agreement
Attached is a copy of the Kodak Employees' Agreement, which you must
sign and return to me upon your acceptance of this letter agreement.
PAGE 53
22. Resolution of Disputes
Any controversy or claim arising out of or relating to this letter
agreement, or the breach, termination or validity hereof will be
submitted to binding arbitration before a sole arbitrator in
Rochester, New York administered by the American Arbitration
Association in accordance with its rules. The arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. 1-16, and
judgment upon the award rendered may be entered by any court having
jurisdiction thereof. All costs and expenses of any arbitration
(including the fees and expenses reasonably incurred by you) will be
borne by Kodak unless your claim is determined by the arbitrator to
be either frivolous or in bad faith.
Kodak will not be required to arbitrate any dispute relating to
Sections 11(B) through 11(G) or your breach of your Eastman Kodak
Company Employee's Agreement or the Release attached as Addendum A,
but shall the right to institute judicial proceedings in a court of
competent jurisdiction with respect to such a dispute or claim.
23. Outside Activities
Except as may otherwise be agreed in writing by the Chief Executive
Officer and you, you are expected to devote all of your business
time to the affairs of Kodak. You may, however, engage in
charitable, civic and community activities and manage your personal
affairs and personal passive investments, provided, however, such
conduct does not materially interfere with your Kodak duties and
responsibilities. You may also serve on the boards of directors or
advisory committees of other corporations with the prior approval of
the Board of Directors or Chief Executive Officer provided such
activities do not (1) materially interfere with your Kodak duties
and responsibilities; or (2) conflict with the Company's businesses
or strategies.
24. Definitions
The following definitions will apply to this letter agreement:
A. Approved Reason. Approved Reason is a term used in all of
Kodak's stock option grants and means a reason for
terminating employment with Kodak which, in the opinion of
the Compensation Committee, is in the best interests of
Kodak.
B. Cause. Cause means:
I. your Willful and continued failure or refusal for a
period of at least 60 days following delivery to you
of a written notification from the Chief Executive
Officer or Board to attempt to perform the usual,
customary or reasonable functions of your positions;
or
II. your gross negligence or Willful misconduct in the
performance of your duties or obligations to Kodak
that is, or is likely to be or is intended to be,
materially detrimental to the Company; or
III. your conviction of any felony (other than a felony
predicated on your vicarious liability or involving a
routine traffic violation, but not excluding any
felony resulting from such traffic violation) or
crime involving moral turpitude; or
PAGE 54
IV. your unlawful possession, use or sale of narcotics or
other controlled substances, or performing job duties
while illegally used controlled substances are
present in your system; or
V. your material breach of this letter agreement which,
if correctable, remains uncorrected for 20 days after
written notice to you by Kodak of the breach; or
VI. your material breach of a requirement of the Kodak
Business Conduct Guide which requirement has
consistently resulted in the termination of
employment by employees who have committed similar
breaches and which, if correctable, remains
uncorrected for 20 days after written notice to you
by Kodak of the breach; or
VII. your breach of your Employee's Agreement.
C. Company. "Company" means Kodak and all of its
subsidiaries and affiliates.
D. Disability. "Disability" means meeting the definition of
disability under the terms of the Kodak Long-Term
Disability Plan and receiving benefits under such plan.
E. Good Reason. "Good Reason" means the occurrence or
failure to cause the occurrence, as the case may be,
without your express written consent, of any of the
following circumstances:
I. any adverse change in your titles; or
II. a material diminution of your duties,
responsibilities or authority; or
III. your assignment of duties or responsibilities which
are materially inconsistent with your then
position(s) which if correctable, remain uncorrected
for 20 days following written notice to Kodak by you
of the assignment (your nonperformance of those
duties or responsibilities you consider materially
inconsistent solely during such 20 day notice period
will not be considered a breach of this letter
agreement); or
IV. failure to elect or reelect you to the Board or your
removal from the Board; or
V. any material breach by Kodak of any material provision
of this letter agreement that is not cured within 20
days of written notice by you to Kodak's General
Counsel specifying the nature of the material breach; or
PAGE 55
VI. failure of any successor to Kodak (whether direct or
indirect and whether by merger, acquisition,
consolidation, or otherwise) to assume in a writing
delivered to you upon the assignee becoming such, the
obligations of Kodak hereunder.
F. Permitted Reason. "Permitted Reason" is a term used in all
of Kodak's stock option grants and means a reason for
terminating employment that is approved by the Chief
Executive Officer.
G. Willful. "Willful" means any act done or omitted to be
done not in good faith and without reasonable belief that
such action or omission was in the best interest of Kodak.
25. Withholding
All amounts paid by Kodak under this letter agreement will be
subject to reduction in order to comply with applicable Federal,
state and local tax withholding requirements.
26. Successors
This letter agreement is personal to you and, without the prior
written consent of the Board, will not be assignable by you
otherwise than by will or the laws of descent and distribution. This
letter agreement will inure to the benefit of and be enforceable by
your legal representatives.
This letter agreement is assignable by Kodak to any successor to all
or substantially all of the business and/or assets of Kodak (whether
direct or indirect, by purchase, merger, consolidation or
otherwise). Kodak will require any successor to assume and agree to
perform this letter agreement in the same manner and to the same
extent that Kodak would have been required to perform it if no such
succession had taken place. This letter agreement will inure to the
benefit of and be binding upon Kodak and any such successor or
assigns.
27. Indemnification
During your employment and thereafter for the period during which
you may be subject to potential liability for any claim, action or
proceeding (whether civil or criminal) as a result of your service
as an officer of director of Kodak or in any capacity at the request
of Kodak, Kodak agrees to (1) indemnify and hold you harmless to the
extent permitted under the terms of its Certificate of Incorporation
and Bylaws as such document are in effect on the date of this letter
agreement; and (2) continue to cover you under its directors and
officers insurance at the same level then maintained by Kodak for
its officers and directors.
28. Miscellaneous
By accepting this conditional offer of employment, you agree and
acknowledge that this letter contains the entire understanding
between Kodak and yourself with respect to your employment and
supersedes all previous written or oral negotiations, commitments,
and agreements with respect to such subject matter.
You agree to keep the content and existence of this letter, and all
of the facts concerning its negotiation and implementation,
confidential until it is filed by Kodak with the Securities and
Exchange Commission. You may, however, review it with your
financial advisor, attorney and/or spouse and with my designee or
me.
PAGE 56
If any portion of this letter is deemed to be void or unenforceable
by a court of competent jurisdiction, the remaining portions will
remain in full force and effect to the maximum extent allowed by
law. The parties intend and desire that each portion of this letter
be given the maximum possible effect by law.
This letter agreement, and its interpretation and application, will
be governed and controlled by the laws of the State of New York,
applicable as though to a contract made in New York by residents of
New York and wholly to be performed in New York without giving
effect to principles of conflicts of laws.
* * *
Please respond to this conditional offer of employment prior to
April 2, 2001. If you find the conditional offer acceptable, please
acknowledge this by signing your name on the signature line provided
and returning the signed original of this letter agreement, along
with the executed copy of the enclosed Employees' Agreement and the
consent form authorizing Kodak to obtain your credit report,
directly to me.
Please feel free to contact me at (716) 724-4573 if you have any
questions.
Sincerely,
Michael P. Morley
MPM:llh
Enclosures
cc: Daniel A. Carp
I accept the terms and conditions of this letter agreement.
Signature Date
Patricia F. Russo
Social Security No. Birthdate