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DEFINITIVE COPY
Eastman Kodak Company
Notice of 1999 Annual Meeting and Proxy Statement
(CORPORATE LOGO AND PICTURE OMITTED)
Date of Notice March 24, 1999
NOTICE OF THE 1999
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of shareholders of Eastman Kodak Company will
be held on Wednesday, May 12, 1999, at 10:00 AM, at the Theater on
the Ridge, 200 Ridge Road West, Rochester, New York. There are
seven proposals to be voted upon at the Meeting:
1. The re-election of four Class III directors for a term of
three years: Richard S. Braddock, Daniel A. Carp, Durk I.
Jager and Richard A. Zimmerman.
2. The ratification of election of PricewaterhouseCoopers LLP
as the independent accountants.
3. Approval of 2000 Omnibus Long-Term Compensation Plan.
4. Approval of 2000 Management Variable Compensation Plan.
5. A shareholder proposal requesting an executive compensation
review.
6. A shareholder proposal requesting annual election of all
directors.
7. A shareholder proposal requesting additional environmental
disclosure.
The Board of Directors recommends a vote "FOR" items 1-4 and a
vote "AGAINST" items 5-7.
If you were a shareholder of record at the close of business on
March 15, 1999, you are entitled to vote at the Annual Meeting.
If you plan to attend the Meeting, please check the appropriate
box on the enclosed proxy card. If you vote by Internet or
telephone, follow the instructions provided for attendance. If
your shares are held by a broker or other nominee, bring proof of
your ownership with you to the Meeting. To enter the Meeting,
bring the "Admission Ticket" attached to your proxy card or
printed from the Internet. If you do not have a ticket, go to the
Special Registration desk. Seating at the Meeting will be on a
first-come, first-served basis, upon arrival at the Meeting.
If you would like to bring a guest to the Meeting, check the
appropriate box on the enclosed proxy card or follow the
instructions on the Internet or telephone. When you go through the
registration area at the Meeting, be sure your guest is with you.
If you have any questions about the Meeting, please contact:
Coordinator, Shareholder Services
Eastman Kodak Company
343 State Street
Rochester, New York 14650-0520
(716) 724-5492
Please do not write any comments on your proxy card. Consistent
with the Company's policy on confidential voting (see page 8), we
will not see your comments.
Photographs will be taken at the Annual Meeting. The Company may
use these photographs in publications. If you attend the Meeting,
we assume your permission to use your picture.
The Theater on the Ridge is handicap accessible. If you require
special assistance, call the Coordinator, Shareholder Services at
(716) 724-5492.
By Order of the Board of Directors
/s/ Joyce P. Haag
Joyce P. Haag
Secretary
Eastman Kodak Company
March 24, 1999
March 24, 1999
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of
shareholders on Wednesday, May 12, 1999, at 10:00 AM, at the
Theater on the Ridge, 200 Ridge Road West, Rochester, New York.
Seven proposals will be voted upon. We will also review Kodak's
performance and answer your questions.
You may vote by Internet, telephone, written proxy, or
written ballot at the Meeting. We encourage you to use the
Internet because it is the most cost-effective way to vote.
We look forward to seeing you on May 12 and would like to take
this opportunity to remind you that your vote is very important.
Sincerely,
/s/ George M. C. Fisher
George M.C. Fisher
Chairman of the Board
TABLE OF CONTENTS
Notice of the Meeting 4
Letter to Shareholders 5
Questions and Answers 7
Proposals to be Voted Upon 11
Item 1-Election of Directors 11
Item 2-Ratification of Election of Independent Accountants 11
Item 3-Approval of 2000 Omnibus Long-Term Compensation Plan 11
Item 4-Approval of 2000 Management Variable Compensation Plan 17
Item 5-Shareholder Proposal-Executive Compensation Review 19
Item 6-Shareholder Proposal-Annual Election of All Directors 21
Item 7-Shareholder Proposal-Additional Environmental
Disclosure 23
Board of Directors 25
Board Committees 30
Meeting Attendance 31
Director Compensation 32
Beneficial Security Ownership Table 33
Compensation of Named Executive Officers 35
Summary Compensation Table 35
Option/SAR Grants Table 37
Option/SAR Exercises and Year-End Values Table 39
Long-Term Incentive Plan 40
Employment Contracts 42
Retirement Plan 44
Report of the Executive Compensation and Development Committee 47
Performance Graph-Shareholder Return 51
QUESTIONS and ANSWERS
Q: What am I voting upon?
A: You are voting upon seven proposals:
1. The re-election of four directors: Richard S. Braddock,
Daniel A. Carp, Durk I. Jager and Richard A. Zimmerman.
2. The ratification of election of PricewaterhouseCoopers LLP
as independent accountants.
3. Approval of 2000 Omnibus Long-Term Compensation Plan.
4. Approval of 2000 Management Variable Compensation Plan.
5. A shareholder proposal requesting an executive compensation
review.
6. A shareholder proposal requesting annual election of all
directors.
7. A shareholder proposal requesting additional environmental
disclosure.
Q: What are the voting recommendations of the Board of Directors?
A: The Board recommends the following votes:
- FOR each of the directors.
- FOR ratification of election of PricewaterhouseCoopers LLP
as independent accountants.
- FOR approval of 2000 Omnibus Long-Term Compensation
Plan.
- FOR approval of 2000 Management Variable
Compensation Plan.
- AGAINST the shareholder proposal requesting an executive
compensation review.
- AGAINST the shareholder proposal requesting annual election
of all directors.
- AGAINST the shareholder proposal requesting additional
environmental disclosure.
Q: Will any other matters be voted upon?
A: The Company is not aware of any other matters that will be
brought before the shareholders for a vote. If any other matter is
properly brought before the Meeting, George M. C. Fisher and Joyce
P. Haag, acting as your proxies, will vote for you in their
discretion. New Jersey law (under which the Company is
incorporated) requires that you be given notice of all matters to
be voted upon, other than procedural matters, such as adjournment
of the Meeting.
Q: Who is entitled to vote?
A: Shareholders of record as of the close of business on March
15, 1999 (the Record Date) are entitled to vote at the Annual
Meeting. Each share of common stock is entitled to one vote.
__________________________________________________________________
Q: How do I vote?
A: There are four ways to vote:
- By Internet at http://www.eproxyvote.com/ek. We encourage
you to vote this way.
- By toll-free telephone at (877) 779-8683.
- By completing and mailing your proxy card.
- By written ballot at the Meeting.
If you vote by Internet or telephone, your vote must be received
at least 36 hours prior to the Meeting.
Your shares will be voted as you indicate. If you return your
proxy card but you do not indicate your voting preferences, George
M. C. Fisher and Joyce P. Haag will vote your shares FOR items 1-4
and AGAINST items 5-7.
Q: Can I change my vote?
A: Yes. You may change your vote or revoke your proxy any time
before the Meeting by:
- entering a new vote by Internet or telephone;
- returning a later-dated proxy card;
- notifying Joyce P. Haag, Secretary; or
- completing a written ballot at the Meeting.
Q: What vote is required to approve each proposal?
A: The four director nominees receiving the greatest number of
votes will be elected.
The ratification of election of the independent accountants
and the two compensation plans require the affirmative vote of a
majority of the votes cast at the Meeting.
The shareholder proposals require the affirmative vote of a
majority of the votes cast at the Meeting. However, the adoption
of the shareholder proposal requesting annual election of all
directors would not by itself eliminate board classification.
Eliminating board classification requires an amendment to the
Company's Restated Certificate of Incorporation. This requires
action by the Board of Directors and the affirmative vote of at
least 80 percent of the outstanding shares of the Company.
Q: Is my vote confidential?
A: Yes. Only the election inspectors and certain individuals who
help with processing and counting the vote have access to your
vote. Directors and employees of the Company may see your vote
only if the Company needs to defend itself against a claim or if
there is a proxy solicitation by someone other than the Company.
Q: Who will count the vote?
A: BankBoston N.A. will count the vote and its representatives
will be the inspectors of election.
Q: What shares are covered by the proxy card?
A: The shares covered by your card represent all your shares
including those in the Eastman Kodak Shares Program and the
Employee Stock Purchase Plan, and the shares credited to your
account in the Savings and Investment Plan and the Kodak Employees
Stock Ownership Plan. The Trustees and custodians of these plans
will vote your shares in each plan as you direct.
__________________________________________________________________
Q: What does it mean if I get more than one proxy card?
A: It means your shares are in more than one account. You should
vote the shares on all your proxy cards. To provide better
shareholder service, we encourage you to have all your shares
registered in the same name and address. You may do this by
contacting our transfer agent at (800) 253-6057.
Q: Who can attend the Annual Meeting?
A: All shareholders as of March 15, 1999, can attend and bring a
guest. Seating, however, is limited. Attendance at the Meeting
will be on a first-come, first-served basis, upon arrival at the
Meeting.
__________________________________________________________________
Q: What do I need to do to attend the Annual Meeting?
A: You need to indicate your intention to attend the Meeting when
you vote, and bring the "Admission Ticket" to the Meeting. If your
shares are held by a broker or nominee, bring proof of your
ownership to the Meeting.
__________________________________________________________________
Q: What is the quorum requirement of the Meeting?
A: A majority of the outstanding shares as determined on March
15, 1999, present or represented by proxy, constitutes a quorum
for voting on proposals at the Annual Meeting. If you vote by
Internet, telephone, proxy card or written ballot, your shares
will be part of the quorum. Abstentions and broker non-votes will
be counted in determining the quorum but neither will be counted
as votes cast. On March 1, 1999, there were 321,992,863 shares
outstanding.
Q: How do I recommend someone to be a director of Kodak?
A: You may recommend any person as a director by writing to Joyce
P. Haag, Secretary, Eastman Kodak Company, 343 State Street,
Rochester, New York 14650-0218. You must include with your
recommendation a description of the nominee's principal
occupations or employment over the last five years and a statement
from your nominee indicating that he or she will serve if elected.
The Committee on Directors will consider persons recommended by
shareholders.
Q: How much did this proxy solicitation cost?
A: The Company hired Georgeson & Co. Inc. to assist in the
distribution of proxy materials and solicitation of votes. The
estimated fee is $18,500 plus reasonable out-of-pocket expenses.
In addition, the Company will reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-
pocket expenses for forwarding proxy and solicitation material to
the owners of common stock.
Q: When are the shareholder proposals due for the 2000 Annual
Meeting?
A: Shareholder proposals must be in writing, addressed to Joyce
P. Haag, Secretary, Eastman Kodak Company, 343 State Street,
Rochester, New York 14650-0218, and received by November 24, 1999.
Q: What other information about the Company is available?
A: The following information is available:
- Annual Report on Form 10-K
- Transcript of the Annual Meeting
- Plan descriptions, annual reports, and trust agreements and
contracts for the pension plans of the Company and its
subsidiaries
- Diversity Report
- Health, Safety and Environment Annual Report
You may request copies by contacting:
Coordinator, Shareholder Services
Eastman Kodak Company
343 State Street
Rochester, New York 14650-0520
(716) 724-5492
PROPOSALS TO BE VOTED UPON
ITEM 1-ELECTION OF DIRECTORS
The Company's By-Laws require the Company to have at least nine
directors but no more than 18. The number of directors is set by
the Board and is currently 13. The Board is divided into three
classes of directors with overlapping three-year terms. There are
four Class III directors whose terms expire at the 1999 Annual
Meeting.
Nominees for re-election as Class III directors are:
Richard S. Braddock
Daniel A. Carp
Durk I. Jager
Richard A. Zimmerman
All four nominees agree to serve a three-year term (see page 25
for more information).
If any nominee is unable to stand for re-election, the Board may
reduce the number of directors or choose a substitute. If the
Board chooses a substitute, the shares represented by proxies will
be voted for the substitute.
If any director retires, resigns, dies or is unable to serve for
any reason, the Board may reduce the number of directors or elect
a new director to fill the vacancy. This new director will serve
until the next Annual Meeting of shareholders.
The Board of Directors recommends a vote FOR the election of
directors.
ITEM 2-RATIFICATION OF ELECTION OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has been the Company's independent
accountants for many years. The Board of Directors, on the
recommendation of its Audit Committee, elected
PricewaterhouseCoopers LLP, the independent accountants, to serve
until the 2000 Annual Meeting of shareholders.
Representatives of PricewaterhouseCoopers LLP will attend the
Meeting to respond to questions and make a statement, if they
desire.
The Board of Directors recommends a vote FOR the ratification of
election of PricewaterhouseCoopers LLP as independent accountants.
ITEM 3-APPROVAL OF 2000 OMNIBUS LONG-TERM COMPENSATION PLAN
Background
The Board of Directors has adopted, subject to shareholder
approval, the 2000 Omnibus Long-Term Compensation Plan (the
"2000 Omnibus Plan" or the "Plan"). If approved by the
shareholders, the 2000 Omnibus Plan will become effective
January 1, 2000, and expire on December 31, 2004. The 2000
Omnibus Plan is substantially similar to, and is intended to
replace, the Eastman Kodak Company 1995 Omnibus Long-Term
Compensation Plan (the "1995 Omnibus Plan") which expires on
December 31, 1999. The following are the principal differences
between the 2000 Omnibus Plan and the 1995 Omnibus Plan:
- All employees of the Company and its 50% or more owned
subsidiaries are eligible to participate in the Plan.
The 1995 Omnibus Plan limits participation to the
Company's employees and its 80% or more owned
subsidiaries.
- The Company's directors are eligible to participate in
the Plan.
- The 2000 Omnibus Plan requires a participant who
violates the confidentiality or non-compete provisions
of his or her Employee's Agreement to repay to the
Company all stock option and SAR gains realized by the
participant within the preceding 24 months.
- All shares related to awards that terminate by
expiration, forfeiture or cancellation are available
again for grant under the 2000 Omnibus Plan.
A summary of the Plan appears below. This summary is qualified
in its entirety by reference to the text of the Plan. The
Company will send, without charge, a copy of the Plan to any
shareholder who requests a copy.
Purpose
As was the case with the 1995 Omnibus Plan, the purpose of the
2000 Omnibus Plan is to motivate selected employees of the
Company and its subsidiaries to put forth maximum efforts
toward the continued growth, profitability and success of the
Company and its subsidiaries.
Administration
The Executive Compensation and Development Committee, or
another committee designated by the Board of Directors, (the
"Committee") will administer the Plan.
Eligibility for Participation
The following persons are eligible to participate in the Plan:
- all employees of the Company or any of its 50% or more
owned subsidiaries;
- certain foreign nationals who, but for the laws of their
countries, would be employees of one of the
company's subsidiaries; and
- the Company's directors.
The selection of those participants who will receive awards is
entirely within the discretion of the Committee.
Only those employees who are senior-level executives are
eligible to participate in the Plan's Performance Stock
Program.
The Committee has not yet determined how many employees are
likely to participate in the Plan. The Committee intends,
however, to grant most of the Plan's awards to those managerial
employees who can have a significant effect on the growth,
profitability and success of the Company. There are currently
approximately 800 employees in this category.
Types of Awards
The Plan authorizes the grant of:
- non-qualified and incentive stock options,
- stock appreciation rights ("SARs"),
- stock awards, performance shares (which are stock or
stock-based awards contingent upon attaining performance
objectives during a performance period),
- performance units (which are units valued by reference
to criteria chosen by the Committee),
- shares of the Company's stock under the Plan's
Performance Stock Program, and
- any other award established by the Committee which is
consistent with the Plan's purpose.
Termination and Amendment of Plan
The Committee may terminate or amend the Plan at any time for
any reason or no reason. Without shareholder approval, however,
the Committee may not adopt any amendment affecting "covered
employees" that requires the vote of the Company's shareholders
under Section 162(m) of the Internal Revenue Code. The
Company's Chief Executive Officer and its four other most
highly-compensated executive officers are "covered employees."
Available Shares
Up to 22,000,000 shares of the Company's common stock may be
granted under the Plan. This number may be adjusted for
changes in the Company's capital structure, such as a stock
split. Shares of common stock related to awards which
terminate by expiration, forfeiture, cancellation or otherwise
without the issuance of shares, or are settled in cash in lieu
of common stock, will be available again for grant.
Award Limits
The maximum number of shares of common stock available for
awards granted in the form of stock awards, performance units
or performance shares (including those issued in the form of
performance awards) is 3,500,000. If granted, 1,000,000 of
these shares may be awarded only if the Company achieves a
specific performance goal. The performance goal is total
shareholder return by the Company equal to at least that earned
over the same period by a company at the 50th percentile in
terms of shareholder return within the Standard & Poor's 500
Composite Stock Price Index. Fifty percent of the target award
will be earned if this performance goal is achieved. One
hundred percent of the target award will be earned if total
shareholder return for the period equals that of a company at
the 60th percentile in terms of shareholder return within the
Standard & Poor's 500 Composite Stock Price Index.
The maximum number of shares of common stock that may be
awarded to any one participant in a single calendar year in the
form of stock awards, performance units or performance shares
is 75,000.
The maximum number of shares for which stock options may be
granted to any one participant for a performance period is
300,000.
The maximum number of shares for which SARs may be granted to
any one participant for a performance period is 300,000.
The maximum award payable to any one participant under the
Performance Stock Program for a performance cycle is 75,000
shares of common stock.
Grants To Non-U.S. Employees
To facilitate the granting of awards to participants who are
employed outside of the United States, the Plan authorizes the
Committee to modify and amend the terms and conditions of an
award to accommodate differences in local law, policy or
custom.
Stock Options
The Committee may grant awards in the form of stock options to
purchase shares of the Company's common stock. For each stock
option grant, the Committee will determine the number of shares
subject to the option, the manner and time of the option's
exercise and the exercise price. Stock options must be granted
for a term of 10 years or less. The exercise price of a stock
option may not be less than 100% of the fair market value of
the Company's common stock on the date the stock option is
granted. Upon exercise, a participant may pay the exercise
price in cash, shares of common stock, a combination thereof,
or such other consideration as the Committee determines. The
Plan prohibits the repricing of stock options. Any stock
option granted in the form of an incentive stock option will
satisfy the requirements of Section 422A of the Internal
Revenue Code.
Stock Appreciation Rights
The Committee may grant SARs either in tandem with a stock
option ("Tandem SARs") or independent of a stock option
("Freestanding SARs").
A Tandem SAR may be granted either at the time of the grant of
the related stock option or at any time thereafter during the
term of the stock option. A Tandem SAR will be exercisable to
the extent its related stock option is exercisable, and the
exercise price of such an SAR will be the same as the option
price of its related stock option. Upon the exercise of a
stock option as to some or all of the shares covered by the
award, the related Tandem SAR will automatically be canceled to
the extent of the number of shares covered by the stock option
exercise.
The Committee will determine the number of shares subject to a
freestanding SAR, the manner and time of the SAR's exercise,
and the exercise price of the SAR. Freestanding SARs must be
granted for a term of 10 years or less. The exercise price of
a Freestanding SAR may not be less than 100% of the fair market
value of the Company's common stock on the date of grant.
Performance Stock Program
Through the Performance Stock Program, the Committee will
continue the long-term stock based compensation program it
began under the Eastman Kodak Company 1990 Omnibus Long-Term
Compensation Plan. A description of the program appears on
page 40 under the heading "Long-Term Incentive Plan".
Participation in the program is limited to a small group of
senior-level executives who are expected to have the most
influence on and accountability for the Company's future
performance.
Awards granted under the program provide participants with the
opportunity to earn shares of the Company's common stock,
subject to such terms, restrictions and conditions as the
Committee may determine. Each award granted under the program
for a performance cycle consists of a target award expressed as
a fixed number of shares of common stock.
A performance cycle consists of three consecutive calendar
years. These cycles will operate concurrently. That is, a new
performance cycle will commence annually. Generally a
participant must be continuously employed throughout a
performance cycle in order to be eligible for an award for the
cycle.
Within the first 90 days of a cycle, the Committee will
establish objective performance goals for the cycle from the
listed performance criteria set forth in the Plan. Awards may
not be paid for a cycle unless the performance goals for the
cycle are achieved. The Committee will also establish the
performance formula for the cycle. This formula will
determine, assuming the performance goals for the cycle are
achieved, what percentage of the participant's target award has
been earned.
After the close of each performance cycle, the Committee will
determine whether the performance goals for the cycle have been
achieved. If the goals are met, the Committee will then
determine what percentage of each participant's target award
has been earned for the cycle. In determining the actual award
to be paid to a participant, the Committee has the authority to
reduce or eliminate the award earned by the participant, based
upon any objective or subjective criteria it deems appropriate.
Other Terms
Awards may be paid in cash, common stock, a combination of cash
and common stock, or any other form of property, as the
Committee determines. If an award is granted in the form of a
stock award, stock option, or performance share, or in the form
of any other stock-based grant, the Committee may include as
part of the award an entitlement to receive dividends or
dividend equivalents. At the discretion of the Committee, a
participant may defer payment of a stock award, performance
share, performance unit, dividend, or dividend equivalent.
Change In Control and Change In Ownership
In the event of a Change In Control (as defined in the Plan), a
participant whose employment is terminated within two years for
a reason other than death, disability, cause, voluntary
resignation or retirement will receive the following treatment:
- all of the terms, conditions, restrictions and
limitations in effect on any of the participant's awards
will lapse;
- all of the participant's outstanding awards will be
100% vested;
- all of the participant's outstanding stock options,
SARs, common stock units, performance shares, and other
stock-based awards will be cashed out based
on the Change In Control Price (as defined in the
Plan); and
- all of the participant's outstanding performance units
will be cashed out.
All payments will be made as soon as possible, but no later
than the 90th day following the date of the participant's
termination of employment.
The Plan also provides that upon a Change In Ownership all
participants, regardless of whether their employment is
terminated, will automatically receive the same treatment
afforded to a terminated participant in the event of a Change
In Control. The Plan defines a Change In Ownership as a Change
In Control that results in the Company's common stock ceasing
to be actively traded on the New York Stock Exchange.
New Plan Benefits
The benefits or amounts that will be received by or allocated to the
CEO, the named executive officers, all current executive officers as
a group, and all employees who are not executive officers are not
presently determinable. If the 2000 Omnibus Plan had been in effect
in 1998, the stock option awards received by the Company's executive
officers would have been the same as the stock option awards actually
received by such persons for 1998 under the 1995 Omnibus Plan. The
Option/SAR Grants in Last Fiscal Year table on Page 37 lists for 1998
the stock option awards for the CEO and the four other highest-paid
executive officers.
Federal Tax Treatment
The following is a brief summary of the principal United States
federal income tax consequences related to stock options. This
summary is not intended to be exhaustive and, among other
things, does not describe state or local tax consequences.
A participant who is granted an incentive stock option does not
realize any taxable income at the time of grant or at the time
of exercise. Similarly, the Company is not entitled to a
deduction at the time of grant or at the time of exercise. If a
participant does not sell or transfer the shares acquired upon
exercise of an incentive stock option before the later of two
years from the date of the option's grant or one year from the
date of the participant's acquisition of the shares, any gain
or loss realized on the sale of the shares will be a long-term
capital gain or loss. Under such circumstances, the Company
will not be entitled to any deduction for federal income tax
purposes.
A participant who is granted a non-qualified stock option does
not have taxable income at the time of grant. The participant
will, however, realize ordinary income at the time of the
option's exercise. The amount of the income will equal the
difference between the market value of the shares on the date
of exercise and the exercise price of the underlying shares.
The Company is entitled to a corresponding deduction for the
same amount.
Limitation on Income Tax Deduction
Under Section 162(m) of the Internal Revenue Code, the
Company's federal income tax deductions may be limited to the
extent that total compensation paid to a "covered employee"
exceeds $1,000,000 in any one year. The Company can, however,
preserve the deductibility of certain compensation in excess of
$1,000,000 provided it complies with the conditions imposed by
Section 162(m), including the payment of performance-based
compensation pursuant to a plan approved by shareholders. The
Plan has been designed to enable any award granted by the
Committee to a "covered employee" to qualify as performance-
based compensation under Section 162(m).
Other Information
The closing price of the Company's common stock reported on the
New York Stock Exchange for March 1, 1999, was $65.8125 per
share.
The Board of Directors recommends a vote FOR approval of 2000
Omnibus Long-Term Compensation Plan.
ITEM 4-APPROVAL OF 2000 MANAGEMENT VARIABLE COMPENSATION PLAN
Background
In 1995, the shareholders of the Company adopted the Eastman Kodak
Company Management Variable Compensation Plan ("1995 MVCP"), a
performance-based annual compensation plan for management-level
employees. The 1995 MVCP expires at the end of 1999, and the Board
of Directors has adopted, subject to shareholder approval, the 2000
Management Variable Compensation Plan ("2000 MVCP" or "Plan"). If
approved by the shareholders, the 2000 MVCP will become effective
January 1, 2000, and expire on December 31, 2004. The 2000 MVCP is
virtually identical to 1995 MVCP.
A summary of the Plan appears below. This summary is qualified in
its entirety by reference to the text of the Plan. The Company will
send, without charge, a copy of the Plan to any shareholder who
requests a copy.
Purpose
As was the case with the 1995 MVCP, the purpose of the 2000 MVCP is
to provide a performance-based, profit-driven, annual incentive award
in order to attract, retain and motivate the Company's management-
level employees.
Administration
The Executive Compensation and Development Committee, or another
committee designated by the Board of Directors, (the "Committee")
will administer the Plan.
Eligibility
Plan eligibility is generally limited to the Company's management-
level employees. The Committee determines which management-level
employees will be participants for a particular performance period
(Kodak's fiscal year). The approximate number of management-level
employees who are currently eligible to participate in the 1995 MVCP
is 800.
Form of Awards
The Plan provides for cash awards.
Award Limits
The maximum award payable to any employee who is a "covered employee"
under Section 162(m) of the Internal Revenue Code for a performance
period is $5,000,000. A "covered employee" is the Company's Chief
Executive Officer and each of its four other most highly paid
executive officers. A "covered employee" may not receive an award
for a performance period unless the performance goal for the period
is attained.
Procedure For Determining Awards
Within the first 90 days of a performance period, the Committee
establishes for the period:
- the performance goal,
- the performance formula, and
- the formula for determining what percentage of the award pool
should be allocated to each "covered employee".
The Plan's sole performance measure to determine the award pool is
Economic Profit/EVA. Using this measure, the Committee establishes
the performance goal for the performance period. If Company
performance is equal to or greater than the performance goal, the
performance formula for the performance period determines the amount
of the award pool for the period. The total of all bonuses for a
given performance period cannot exceed the amount of the award pool
for the year. The total award pool does not, however, have to be
awarded. The Committee has the authority to carry over unused award
pool funds to subsequent performance periods.
A target award is established in advance for each participant. The
target, which is a percentage of base salary, varies depending on the
participant's position within the Company. Target awards are
expected to range from 25 to 105 percent of base salary.
Awards To Covered Employees
Before any award is paid for a performance period, the Committee must
certify in writing that the performance goal for the period has been
met. If the performance goal is satisfied, the Committee calculates
the portion of the award pool that is to be allocated to each
"covered employee" based on the formula it established at the
beginning of the performance period. The Committee has the
discretion to reduce or eliminate the formula's allocation of the
award pool to each "covered employee".
Payment of Awards
The Plan authorizes the Committee to allocate the award pool among
the Plan's participants based on such factors, goals and measures as
it determines. To date under 1995 MVCP, performance in the
management appraisal process has influenced the size of awards given
to participants.
With Committee approval, a participant may defer the payment of all
or any part of his or her award.
Change In Control and Change In Ownership
In the event of a Change In Control (as defined in the Plan), if a
participant's employment is terminated within two years for a reason
other than death, disability, cause, voluntary resignation or
retirement, the participant will receive the following treatment:
- the participant will be paid a prorata award for the
performance period in which he or she terminates employment;
and
- all of the participant's other unpaid awards will be paid to
the participant.
The Plan also provides that upon a Change In Ownership, all
participants, regardless of whether their employment is terminated,
will automatically receive the same treatment provided to a
terminated participant in the event of a Change In Control. The Plan
defines a Change In Ownership as a Change In Control that results in
the Company's common stock ceasing to be actively traded on the New
York Stock Exchange.
Termination and Amendment of Plan
The Committee may terminate or amend the Plan at any time for any
reason or no reason. Without shareholder approval, however, the
Committee may not adopt any amendment affecting "covered employees"
that requires the vote of Kodak's shareholders under Section 162(m)
of the Internal Revenue Code.
New Plan Benefits
The benefits or amounts that will be received by or allocated to the
CEO, the named executive officers, all current executive officers as
a group and all employees who are not executive officers are not
presently determinable. If the 2000 MVCP had been in effect in 1998:
- the amounts received by the Company's Ceo and the named
executive officers would have been the same as the amounts
actually received by such persons for 1998 under 1995 MVCP;
- the amounts received by all current executive officers as a
group would have been the same as the amounts received by
such persons for 1998 under 1995 MVCP, i.e., approximately
$5,314,626; and
- the amounts received by all participants as a group would have
been the same as the amounts received by such participants
for 1998 under 1995 MVCP, i.e., $29,400,000.
The Summary Compensation Table on page 35 lists for 1998 the MVCP
awards for the CEO and the four other highest-paid executive
officers.
Federal Tax Treatment
Under current federal tax law awards will be included in income at
the time of receipt and will be subject to tax at ordinary income tax
rates. The Company will be entitled to a corresponding deduction at
the same time.
The Board of Directors recommends a vote FOR approval of 2000
Management Variable Compensation Plan.
ITEM 5-SHAREHOLDER PROPOSAL-EXECUTIVE COMPENSATION REVIEW
Helen Glenn Burlingham, Wellspring Farm, 6320 Soper Road, Perry,
New York, owner of 100 shares, submitted the following proposal:
"WHEREAS:
We believe that financial, social and environmental criteria
should be taken into account in setting compensation packages for
top corporate officers. Public scrutiny of executive compensation
is intensifying worldwide with serious concerns being expressed
about the disparity between salaries of top corporate officers, US
employees, and workers in low wage countries.
Shareholders and our Board of Directors need to be vigilant in
safeguarding our company's best interest by challenging executive
pay packages that create rewards to executives regardless of
return to shareholders. For example, should executive pay be
reduced when stockholders' dividends are down?
Executives of companies like ours, with Mexican operations, often
make several thousand times the pay of their Mexican employees. In
1994, Ford's CEO, Alexander Trotman made 2,003 times the annual
pay of an average Ford employee in Mexico. According to Kodak
documents, some of our Mexican workers are making an average of
$ .95 per hour.
In 1995, Pearl Meyer and Partners reported that CEO compensation
packages at large corporations increased 23%, to an average of
$4.37 million, that is $2,100 an hour, or 183 times the average US
worker's 1995 hourly earnings according to the Council on
International and Public Affairs.
In 1996, Kodak's CEO and COO, George Fisher, had a reported
combined salary and bonus of $3,986,884 and held restricted stock
totaling $6,835,053 in addition to other compensation and
benefits. Yet, a severe drop in earnings in 1997 resulted in
Kodak's decision to cut payroll by 10,000 workers. Is it fair that
comparatively low-wage workers lose their income while top
executives salaries do not reflect financial performance?
Our company needs to adopt a policy of equitable compensation of
key officers based on success in serving shareholders, customers
and employees. We also need to address the implications of paying
high executives salaries and poverty wages to workers.
The relationship between compensation and the social and
environmental impact of company decisions also raises important
concerns. For example, should top officers pay be reduced for a
given year if the company is found guilty of poor environmental
performance, especially if it results in costly fines or expensive
protracted litigation?
BE IT RESOLVED:
That shareholders request the Board institute a comprehensive
Executive Compensation Review, with a summary report available
upon request to shareholders by October 15, 1999. Among questions
to be addressed are:
1. Whether the compensation of corporate executives should be
frozen or reduced during periods of significant corporate
downsizing and cost cutting.
2. Whether a cap should be placed on compensation packages for
officers to prevent our company from paying excessive
compensation.
3. How to develop appropriate performance measures for the
long-term incentive programs during periods of
restructuring.
4. How to develop an equitable and fair wage policy, because
paying widely divergent compensation levels can result in
decreased worker morale and/or productivity, poor labor-
management relations, and harm Kodak's public image.
5. How issues such as social and environmental responsibility
are reflected in executive compensation.
If you AGREE, Please mark your proxy FOR this resolution."
The Board of Directors recommends a vote AGAINST this proposal for
the following reasons:
The Executive Compensation and Development Committee of the Board
of Directors oversees all of our executive compensation programs.
The Committee's report on pages 47 - 51 demonstrates that the
Committee already considers many of the issues raised by the
shareholder in her proposal.
In determining appropriate compensation levels, the Committee
considers Company performance and the amount of compensation paid
by other companies for comparable jobs. In analyzing Company
performance, the Committee reviews the Company's financial
performance as well as the Company's performance in the areas of
customer satisfaction, employee satisfaction and public
responsibility. For example, if management fails to increase
diversity in the workforce, improve safety in the workplace, or
decrease the Company's emissions, management receives less bonus.
The Company believes that only if shareholders, customers and
employees are satisfied will the Company be successful.
In 1998 the criteria used to measure employee satisfaction and
public responsibility included Company compliance with
environmental and equal employment opportunity laws and
regulations. In addition, the Committee reviewed employee
responses to opinion surveys which measured management's
leadership capabilities and employee satisfaction with the
workplace, management and the Company.
The Company recognizes that, in addition to delivering solid,
sustained financial performance, it must abide by environmental
laws and regulations, provide a work environment free from sexual
harassment and race discrimination, and generally be a socially
responsible corporate citizen. Annual bonuses are determined based
upon performance in all of these areas.
The Executive Compensation and Development Committee's report
demonstrates that the Company is already considering many of the
issues identified in the proposal. Management, therefore, believes
that the time, effort and expense necessary to complete the review
and produce the summary report requested is not justified.
The Board of Directors recommends a vote AGAINST this proposal.
ITEM 6-SHAREHOLDER PROPOSAL - ANNUAL ELECTION OF DIRECTORS
The Service Employees International Union Master Trust, 1343 L
Street NW, Washington, DC 20005, owner of 19,500 shares, submitted
the following proposal:
"BE IT RESOLVED: That the stockholders of Eastman Kodak Company
urge the Board of Directors take the necessary steps to declassify
the Board of Directors for the purpose of director elections. The
Board declassification shall be done in a manner that does not
affect the unexpired terms of directors previously elected.
SUPPORTING STATEMENT
In 1997 and 1998, a majority of shareholders supported this
resolution. Following the 1997 vote, the board encouraged us to
resubmit the resolution and decided not to take a position on the
resolution so they could receive a "clear indication" of how
shareholders wanted the board to proceed. Since 71% of the
shareholders voting supported the resolution in 1998, we found it
disturbing that the board has not acted to declassify the board.
Because of this inaction, we again urge you to vote for this
proposal.
The Board of Directors of Eastman Kodak is divided into three
classes serving staggered three-year terms. It is our belief that
the classification of the Board of Directors is not in the best
interests of Eastman Kodak and its shareholders. The elimination
of the staggered board would require each director to stand for
election annually. This procedure would allow shareholders an
opportunity to annually register their views on the performance of
the board collectively and each director individually. Concerns
that the annual election of directors would leave Eastman Kodak
without experienced board members in the event that all incumbents
are voted out are unfounded. If the owners should choose to
replace the entire board, it would be obvious that the incumbent
directors' contributions were not valued.
A classified board of directors protects the incumbency of the
board of directors and current management which in turn limits
accountability to stockholders. It is our belief that Eastman
Kodak's corporate governance procedures and practices, and the
level of management accountability they impose, are related to the
financial performance of Eastman Kodak. While Eastman Kodak's
current performance is good, we believe sound corporate governance
practices, such as the annual election of directors, will impose
the level of management accountability necessary to help insure
that a good performance record continues over the long term."
The Board of Directors recommends a vote AGAINST this proposal for
the following reasons:
A classified Board of Directors provides director continuity and
stability, which enhances the Board's ability to focus on long-
term strategy and long-term performance. For example, if the
Company were confronted with an unsolicited takeover offer, the
fact that the entire Board could not be removed in a single proxy
fight would allow directors to weigh remaining independent against
accepting the offer, or a competing offer, from a position of
strength. This is not merely a theoretical consideration;
anecdotal data suggest that companies with classified boards
secure a higher price-per-share premium in unsolicited takeover
situations than companies whose directors are elected annually.
In short, a classified board is beneficial to shareholders.
Proponent claims that a classified board protects the incumbency
of directors, which in turn limits accountability to shareholders.
While proponent's incumbency point is correct, the fact is that
shareholders have a variety of tools at their disposal to ensure
that directors, even directors who are elected on a classified
basis, are accountable to shareholders. These tools include
withholding votes from directors who are standing for election,
meeting with directors to express shareholder concerns, and
publicity campaigns. Shareholders have used these accountability
tools with a number of companies, with considerable success.
This proposal was first submitted by the proponent at the
Company's 1997 Annual Meeting. The Board opposed the proposal.
When the proposal was resubmitted at the 1998 Annual Meeting, the
Board took the extraordinary step of maintaining a neutral
position in order to receive the opinion of shareholders,
uninfluenced by a recommendation from the Board. Although the
proposal received 71 percent of the vote in 1998, this represented
only 39 percent of the shares outstanding. This is relevant
because, pursuant to Section 5 of the Company's Restated
Certificate of Incorporation, the vote of at least 80 percent of
the Company's shares outstanding is required to declassify the
Board.
The Board believes that a classified Board is a better governance
vehicle than annual election of Directors.
The Board of Directors recommends a vote AGAINST this proposal.
ITEM 7-SHAREHOLDER PROPOSAL - ADDITIONAL ENVIRONMENTAL DISCLOSURE
Nancy Watson Dean, 6 Sibley Place, Rochester, New York 14607,
owner of 600 shares, submitted the following proposal:
"Whereas, the US Securities and Exchange Commission (SEC) requires
publicly-held corporations to disclose potential environmental
liabilities to shareholders;
Whereas, various environmental codes of conduct, including the
CERES principles, (Coalition for Environmental Responsible
Economies) call for public disclosure and openness;
Whereas, Kodak's Vision of Environmental Responsibility affirms
the intent of environmental responsibility stated: "Eastman Kodak
is recognized as a world-class company, and the leading imaging
company, in protecting the quality of the environment and the
health and safety of its employees, customers, and the community
in which it operates;"
Whereas, there is increased community concern about hazardous
waste incineration at Kodak Park and emissions of known
carcinogens, including dioxin and hexavalent chromium and Kodak
acknowledges that costly pollution controls may be necessary to
meet Clean Air Act requirements;
Whereas, Kodak has a history of environmental violations resulting
in substantial penalties including $2,000,000 in fines (1990) and
$5,000,000 in civil fines (1994) and a negotiated settlement with
the US Environmental Protection Agency (EPA) to spend $12,000,000
over eight years on environmental cleanup projects;
Whereas, Kodak's SEC reports, list potential instances of
significant environmental liability that may accrue to the company
in pollution and toxic waste cleanup activities, including
potential cleanup at "approximately 20 Superfund sites;"
Whereas, there may exist additional liability, cleanup
responsibility and remedial costs at Kodak facilities beyond what
is presently reported in SEC reports;
BE IT RESOLVED: The shareholders request Kodak's Board to
disclose in its environmental progress report, a complete listing
of all hazardous waste sites where Kodak is a potentially
responsible party, and other circumstances in which the company
and its shareholders can be expected to accrue environmentally-
based financial liabilities through retirement of operations,
court orders, consent decrees, litigation, or government
requirements, that environmental remediation, pollution clean-up,
pollution equipment upgrades, and/or damage compensation.
SUPPORTING STATEMENT
In recent years, Kodak has been subject to federal and state
investigations for environmental violations, EPA's 1991
investigation uncovered 150 federal hazardous waste violations at
Kodak Park "potentially worth tens of millions of dollars."
(Environmental Reporter, Washington DC). In addition to a
$100,000,000 underground storage tank improvement project at Kodak
Park, the company is liable for the investigation and remediation
of five hazardous waste sites on that property, and is listed as a
PRP at numerous other Superfund sites. Kodak continues to be New
York State's largest toxic chemical releaser (Federal Toxic
Release Inventory). In 1998, the NYS Department of Environmental
Conservation investigated Kodak and cited the company for numerous
environmental violations subject to financial penalties.
Kodak shareholders, in evaluating the company's continued economic
prospects, need to receive the best possible information on the
company's current assets and liabilities, including prospective
environmental liabilities, as can be reasonably ascertained.
For these reasons, we believe it is imperative that Kodak include
in its annual environmental progress report, a listing and
identification of known and expected environmental liabilities and
cleanup responsibilities that are likely to accrue.
If you AGREE, please mark your proxy FOR this resolution."
The Board of Directors recommends a vote AGAINST this proposal for
the following reasons:
The Company accrues and discloses liabilities for environmental
matters in accordance with generally accepted accounting principles
(GAAP) and the rules and regulations of the Securities and Exchange
Commission (SEC). The disclosures are made in the Annual Report and
on Form 10-K filed with the SEC.
In addition, for the past eight years the Company has produced and
made available to its shareholders a Health, Safety and Environment
Annual Report. This report provides a summary of the Company's
efforts and results in complying with environmental protection laws.
Any shareholder may obtain a copy of this annual environmental report
by contacting the Company.
This shareholder proposal requests the Company to provide more
extensive, detailed information than is required by GAAP and the SEC.
The rules of the SEC require the Company to disclose the material
effects that compliance with environmental laws may have upon capital
expenditures, earnings and the competitive position of the Company.
These rules also require the Company to disclose each year all
material estimated capital expenditures for environmental control
facilities. The Company complies with all the requirements of GAAP
and the SEC related to environmental matters.
We believe that the Company's current method of disclosing
environmental costs and other financial data in its Annual Report and
on Form 10-K, as well as the availability of an easy-to-read
description of the Company's efforts to protect and restore the
environment in its Health, Safety and Environment Annual Report, meet
the information needs of shareholders. All material information is
disclosed concerning the Company's activity in this area.
The Board of Directors recommends a vote AGAINST this proposal
BOARD OF DIRECTORS
RICHARD S. BRADDOCK (PICTURE OMITTED)
DANIEL A. CARP (PICTURE OMITTED)
DURK I. JAGER (PICTURE OMITTED)
RICHARD A. ZIMMERMAN (PICTURE OMITTED)
NOMINEES TO SERVE FOR A THREE-YEAR TERM EXPIRING AT THE 2002
ANNUAL MEETING (Class III Directors)
RICHARD S. BRADDOCK Director since May 1987
Mr. Braddock, 57, is Chairman and CEO of priceline.com, a position
he has held since August of 1998. He was Chairman of True North
Communications from July 1997 to January 1999. He was a principal
of Clayton, Dubilier & Rice, from June 1994 until September 1995.
From January 1993 until October 1993, he was Chief Executive
Officer of Medco Containment Services, Inc. From January 1990
through October 1992, he served as President and Chief Operating
Officer of Citicorp and its principal subsidiary, Citibank, N.A.
Prior to that, he served for approximately five years as Sector
Executive in charge of Citicorp's Individual Bank, one of the
financial services company's three core businesses. Mr. Braddock
was graduated from Dartmouth College in 1963 with a degree in
history, and received his MBA degree from the Harvard School of
Business Administration in 1965. He is a director of AmTec, Inc.,
Cadbury Schweppes, E*Trade and priceline.com.
DANIEL A. CARP Director since December 1997
Mr. Carp, 50, is President and Chief Operating Officer of Eastman
Kodak Company. He was elected to this position effective January
1, 1997, after having served as Executive Vice President and
Assistant Chief Operating Officer since November 1995. Mr. Carp
began his career with Kodak in 1970 and has held a number of
increasingly responsible positions in market research, business
planning, marketing management and line of business management. In
1986 Mr. Carp was named Assistant General Manager of Latin
American Region and in September 1988 he was elected a Vice
President and named General Manager of that region. In 1991 he was
named General Manager of the European Marketing Companies and
later that same year, General Manager, European, African and
Middle Eastern Region. He holds a BBA degree in quantitative
methods from Ohio University, an MBA degree from Rochester
Institute of Technology and an MS degree in management from the
Sloan School of Management, Massachusetts Institute of Technology.
Mr. Carp is a director of Texas Instruments Incorporated.
DURK I. JAGER Director since January 1998
Mr. Jager, 55, is President and Chief Executive Officer of The
Procter & Gamble Company. He was elected to this position
effective January 1999 after having served as President and Chief
Operating Officer since 1995 and Executive Vice President from
1990-1995. Mr. Jager joined The Procter & Gamble Company in 1970
and was named Vice President in 1987. He was graduated from
Erasmus Universiteit, Rotterdam, The Netherlands. Mr. Jager is a
director of The Procter & Gamble Company.
RICHARD A. ZIMMERMAN Director since July 1989
Mr. Zimmerman, 67, is the retired Chairman and Chief Executive
Officer of Hershey Foods Corporation. Mr. Zimmerman joined Hershey
in 1958 and was named Vice President in 1971. Appointed a Group
Vice President later in 1971, he became President and Chief
Operating Officer in 1976. He was named Chief Executive Officer in
January 1984 and Chairman of the Board in March 1985. Mr.
Zimmerman was graduated from Pennsylvania State University. He is
a director of Stabler Companies, Inc. and Westvaco Corporation.
BOARD OF DIRECTORS
MARTHA LAYNE COLLINS (PICTURE OMITTED)
GEORGE M. C. FISHER (PICTURE OMITTED)
PAUL E. GRAY (PICTURE OMITTED)
DELANO E. LEWIS (PICTURE OMITTED)
JOHN J. PHELAN, JR. (PICTURE OMITTED)
DIRECTORS CONTINUING TO SERVE A TERM EXPIRING AT THE 2000 ANNUAL
MEETING (Class I Directors)
MARTHA LAYNE COLLINS Director since May 1988
Governor Collins, 62, is Executive Scholar in Residence at
Georgetown College, a position she assumed in August 1998, after
having been Director, International Business and Management
Center, at the University of Kentucky, since July 1996. From 1988
to 1997, she was President of Martha Layne Collins and Associates,
a consulting firm, and from July 1990 to July 1996, she was
President of St. Catharine College in Springfield, Kentucky.
Following her receipt of a BS degree from the University of
Kentucky, Governor Collins taught from 1959 to 1970. After acting
as Coordinator of Women's Activities in a number of political
campaigns, she served as Clerk of the Supreme Court of the
Commonwealth of Kentucky from 1975 to 1979. She was elected to a
four-year term as Governor of the Commonwealth of Kentucky in 1983
after having served as Lieutenant Governor from 1979 to 1983.
Governor Collins, who has served as a Fellow at the Institute of
Politics, Harvard University, is a director of R. R. Donnelley &
Sons Company, Bank of Louisville and Mid-America Bancorp.
GEORGE M. C. FISHER Director since December 1993
Mr. Fisher, 58, is Chairman and Chief Executive Officer of Eastman
Kodak Company. Mr. Fisher also held the position of President from
December 1993 through December 1996 and the position of Chief
Operating Officer from October 1995 through December 1996. Before
joining Kodak, Mr. Fisher served as Chairman and Chief Executive
Officer of Motorola, Inc., after having served as President and
Chief Executive Officer between 1988 and 1990. Mr. Fisher holds a
bachelor's degree in engineering from the University of Illinois
and a master's degree in engineering and a doctorate degree in
applied mathematics from Brown University. Mr. Fisher is a
director of General Motors Corporation and AT&T.
PAUL E. GRAY Director since September 1990
Dr. Gray, 67, is President Emeritus of the Massachusetts Institute
of Technology (M.I.T.) and Professor of Electrical Engineering and
Computer Science. Dr. Gray served as Chairman of the governing
board of M.I.T. from 1990 to June 1997 and as its President from
1980 to 1990. He has also served on the M.I.T. faculty and in the
academic administration, including responsibilities as Associate
Provost, Dean of Engineering and Chancellor. Dr. Gray earned his
bachelor's, master's and doctorate degrees in electrical
engineering from M.I.T. He is a director of Nvest, L.P. and The
Boeing Co.
DELANO E. LEWIS Director since May 1998
Mr. Lewis, 60, is the retired President and Chief Executive
Officer of National Public Radio Corporation, a position he held
from January 1994 until August 1998. He was President and Chief
Executive Officer of C&P Telephone Company, a subsidiary of Bell
Atlantic Corporation, from 1988 to 1993, after having served as
Vice President since 1973. Mr. Lewis held several positions in the
public sector prior to joining C&P Telephone Company. Mr. Lewis
received a BA from University of Kansas and a JD from Washburn
School of Law. He is a director of BET Holding, Inc., Colgate-
Palmolive Co. and Halliburton, Inc.
JOHN J. PHELAN, JR. Director since December 1987
Mr. Phelan, 67, is the retired Chairman and Chief Executive
Officer of the New York Stock Exchange, Inc., a position he held
from 1984 until 1991. He was President of the International
Federation of Stock Exchanges from 1991 through 1993. He is a
member of the Council on Foreign Relations and is a senior advisor
to the Boston Consulting Group. Mr. Phelan, a graduate of Adelphi
University, is active in educational and philanthropic
organizations and is also a director of Merrill Lynch & Co., Inc.,
Metropolitan Life Insurance Company and SONAT Inc.
ALICE F. EMERSON (PICTURE OMITTED)
HARRY L. KAVETAS (PICTURE OMITTED)
PAUL H. O'NEILL (PICTURE OMITTED)
LAURA D'ANDREA TYSON (PICTURE OMITTED)
DIRECTORS CONTINUING TO SERVE A TERM EXPIRING AT THE 2001 ANNUAL
MEETING (Class II Directors)
ALICE F. EMERSON Director since May 1992
Dr. Emerson, 67, is Senior Advisor to The Andrew W. Mellon
Foundation, a position she assumed in 1998 after having served as
Senior Fellow since 1991. She was President of Wheaton College in
Massachusetts from 1975-1991 and served the University of
Pennsylvania, first as Dean of Women and subsequently as Dean of
Students from 1966 to 1975. Dr. Emerson received her bachelor's
degree from Vassar College and her Ph.D. degree from Bryn Mawr
College. She is a director of AES Corporation, BankBoston
Corporation and Champion International Corp.
HARRY L. KAVETAS Director since May 1997
Mr. Kavetas, 61, is Chief Financial Officer and Executive Vice
President of Eastman Kodak Company. He was elected to this
position in September 1994 after serving as Senior Vice President
since February 1994. Before joining Kodak, Mr. Kavetas served as
President, Chief Executive Officer and Director of IBM Credit
Corporation, a position he held from 1986 until he retired from
IBM in December 1993. In his 32 years at IBM, Mr. Kavetas held a
number of management positions. Mr. Kavetas holds a BA degree in
finance and economics from the University of Illinois. He is a
director of Lincoln National Corporation.
PAUL H. O'NEILL Director since December 1997
Mr. O'Neill, 63, is Chairman and Chief Executive Officer of
Aluminum Company of America (Alcoa) and has held this position
since April 1987. Prior to joining Alcoa, Mr. O'Neill served as
President of International Paper Company from 1985-1987, after
having joined that company in 1977. Mr. O'Neill began his career
as an engineer for Morrison-Knudsen, Inc., worked as a computer
systems analyst with the U.S. Veterans Administration from 1961-
1966, and served on the staff of the U.S. Office of Management and
Budget from 1967-1977. He was deputy director of OMB from 1974-
1977. Mr. O'Neill received a BA degree in economics from Fresno
State College and a master's degree in public administration from
Indiana University. Mr. O'Neill is a director of Alcoa, Lucent
Technologies and National Association of Securities Dealers, Inc.
LAURA D'ANDREA TYSON Director since May 1997
Dr. Tyson, 51, is Dean of the Walter A. Haas School of Business, a
position she assumed in July 1998. Previously, she was professor
of the Class of 1939 Chair in Economics and Business
Administration at the University of California, Berkeley, a
position she held from January 1997 to July 1998. Prior to this
position, Dr. Tyson served in the first Clinton Administration as
Chairman of the President's National Economic Council and 16th
Chairman of the White House Council of Economic Advisers. Prior to
joining the Administration, Dr. Tyson was professor of Economics
and Business Administration, Director of the Institute of
International Studies, and Research Director of the Berkeley
Roundtable on the International Economy at the University of
California, Berkeley. Dr. Tyson holds a BA degree from Smith
College and a Ph.D. degree in economics from the Massachusetts
Institute of Technology. Dr. Tyson is the author of numerous
articles on economics, economic policy and international
competition. She is a director of Ameritech Corporation, Morgan
Stanley, Dean Witter, Discover & Co., and Human Genome Sciences,
Inc.
Board Committees
The Board of Directors has an Audit Committee, a Committee on
Directors, an Executive Compensation and Development Committee, a
Finance Committee and a Public Policy Committee. All committee
members are non-employee, independent directors.
Audit Committee 5 meetings in 1998
- recommended the firm that Kodak should retain as independent
accountants;
- reviewed the audit and non-audit activities of both the
independent accountants and the internal audit staff of the
Company;
- met separately and privately with the independent accountants
and with the Company's Director, Corporate Auditing, to ensure
that the scope of their activities has not been restricted and
that adequate responses to their recommendations have been
received; and
- reviewed the Committee's charter.
Committee on Directors 2 meetings in 1998
- reviewed the qualifications of individuals for election as
members of the Board;
- recommended qualified individuals to be considered for Board
membership;
- recommended directors' compensation and benefits; and
- reviewed the Committee's charter.
Executive Compensation and Development Committee 6 meetings in 1998
- reviewed the Company's executive development process;
- set the compensation for the Chief Executive Officer,
President, executive vice presidents and senior
vice presidents and recommended the compensation of other
Company officers;
- certified and granted awards under the Company's compensation
plans;
- approved and recommended to the Board approval of
2000 Omnibus Long-Term Compensation Plan and
2000 Management Variable Compensation Plan; and
- reviewed the Committee's charter.
Finance Committee 5 meetings in 1998
- reviewed the Company's financing strategies;
- reviewed significant acquisitions, divestitures, and joint
ventures;
- reviewed the investment performance and the administration of
the Company's defined benefit pension plan; and
- reviewed the Committee's charter.
Public Policy Committee 2 meetings in 1998
- reviewed proposals submitted by shareholders;
- reviewed the Company's philanthropic programs;
- reviewed the Company's environmental initiatives; and
- reviewed the Committee's charter.
COMMITTEE MEMBERSHIP
Audit Committee Executive Finance Public
On Compensation Policy
Directors and
Development
Name
- -------------------- ----- --------- ----------- ------- ------
Richard S. Braddock X X*
Martha Layne Collins X X*
Alice F. Emerson X X
Paul E. Gray X* X
Durk I. Jager X X
Delano E. Lewis X X
Paul H. O'Neill X X
John J. Phelan, Jr. X X*
Laura D'Andrea Tyson X X
Richard A. Zimmerman X* X
* Chairman
Meeting Attendance
The Board of Directors held a total of six meetings in 1998. All
of the directors attended at least 75 percent of the meetings of
the Board and committees of the Board on which such director
served. The average attendance by all directors was over 94
percent.
Director Compensation
Annual Payments
Non-employee directors receive:
- $18,000 in cash and $20,000 in Kodak stock annually;
- $1,000 for each Board, committee and special meeting
attended;
- an additional $1,000 for each committee meeting they chair;
and
- reimbursement of out-of-pocket expenses for the meetings
they attend.
Employee directors receive no additional compensation for serving
on the Board.
Deferred Compensation
Non-employee directors may defer some or all of their compensation
into a phantom Kodak stock account or into a phantom interest-
bearing account. Five directors deferred compensation in 1998. In
the event of a change In control of the Company, the amounts in
the phantom accounts will be paid in a single cash payment.
Retirement Plan
The retirement plan for current non-employee directors was
terminated effective February 12, 1999. Retired directors
currently receiving benefits will continue to receive benefits in
accordance with the plan. The value of current directors'
benefits will be converted to units and credited to each
director's account under the Deferred Compensation Plan for
Directors. For directors elected prior to January 1, 1996, the
plan provided an annual retirement benefit for life equal to the
then-current annual retainer. For directors elected after January
1, 1996, the plan provided an annual retirement benefit equal to
the annual retainer when the director retired. The benefit is paid
until the earlier of the director's death or the end of a period
of time equal to the director's length of service. In the event of
a change In control of the Company, all retirement benefits will
be paid in a single cash payment equal to the present value of the
remaining retirement benefits.
Life Insurance
The Company provides group term life insurance in the amount of
$100,000 to all non-employee directors. This amount decreases to
$50,000 at retirement or age 65, whichever occurs later.
Charitable Award Program
The program provides for a contribution by the Company of up to
$1,000,000 following the director's death to up to four charitable
institutions recommended by the director. The individual directors
derive no financial benefits from this program. It is funded by
joint life insurance policies purchased by the Company and self-
insurance. The purposes of the program are to further the
Company's philanthropic endeavors, with particular emphasis on
education, acknowledge the services of the Company's directors,
and recognize the interest of the Company and the directors in
supporting worthy charitable and educational institutions. Each
non-employee director who commenced service prior to January 1,
1997, is eligible to participate in the program. Current directors
who are participating are Messrs. Braddock, Phelan, and Zimmerman,
Drs. Emerson and Gray, and Gov. Collins. Directors whose service
commenced after December 31, 1996, are not eligible.
BENEFICIAL SECURITY OWNERSHIP OF DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS
Directors, Nominees
and Executive Number of Common Shares
Officers Owned on January 4, 1999
- ------------------- ------------------------
Richard T. Bourns 169,077(a)(b)(c)
Richard S. Braddock 3,676
Daniel A. Carp 239,535(a)(b)
Martha Layne Collins 3,481(d)
Alice F. Emerson 4,222(d)
George M. C. Fisher 2,417,417(a)(b)
Paul E. Gray 3,000
Durk I. Jager 2,792(d)
Harry L. Kavetas 449,943(a)(b)(c)
Carl F. Kohrt 141,700(a)(b)(c)
Delano E. Lewis 555(d)
Paul H. O'Neill 1,934(d)
John J. Phelan, Jr. 8,683(d)
Laura D'Andrea Tyson 839
Richard A. Zimmerman 5,175(d)
All Directors, Nominees and
Executive Officers as a
Group (28), including the above 4,127,796(a)(b)(c)(d)(e)
(a) Includes the following number of shares which may be
acquired by exercise of stock options: R. T. Bourns -
34,272; D. A. Carp - 193,259; G. M. C. Fisher - 2,162,402;
H. L. Kavetas - 366,224; C. F. Kohrt - 113,725; and all
directors, nominees and executive officers as a group -
3,524,126.
(b) Includes the following Eastman Kodak Company common stock
equivalents, receipt of which was deferred under the
Performance Stock Program: R. T. Bourns - 31,428; D. A. Carp
- - 24,391; G. M. C. Fisher - 86,975; H. L. Kavetas - 20,265;
C. F. Kohrt - 24,391; and all directors, nominees and
executive officers as a group - 231,183.
(c) Includes the following Eastman Kodak Company common stock
equivalents, which are held in the Executive Deferred
Compensation Plan: R. T. Bourns - 5,717; H. L. Kavetas -
40,644; C. F. Kohrt - 1,064; and all directors, nominees and
executive officers as a group - 51,078.
(d) Includes the following Eastman Kodak Company common stock
equivalents, which are held in the Deferred Compensation
Plan for Directors: M. L. Collins - 281; A. F. Emerson -
1,698; D. I. Jager - 792; D. E. Lewis - 480; P. H. O'Neill -
934; J. J. Phelan, Jr. - 4,844; and R. A. Zimmerman - 1,115.
(e) The total number of shares beneficially owned by all
directors, nominees and executive officers as a group is
less than 2 percent of the Company's outstanding shares.
The above table reports beneficial ownership in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934. This means
all Company securities over which the directors, nominees and
executive officers directly or indirectly have or share voting or
investment power are listed as beneficially owned. The figures
above include shares held for the account of the above persons in
the Eastman Kodak Shares Program and the Kodak Employee Stock
Ownership Plan, and the interests, if any, of the above persons in
the Kodak Stock Fund of the Eastman Kodak Employees' Savings and
Investment Plan, stated in terms of Kodak shares.
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The individuals named in the following table were the Company's Chief Executive Officer and the four other highest-paid
executive officers during 1998. The figures shown include both amounts paid and amounts deferred.
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation Long-Term Compensation
(Paid or Deferred)
---------------------------------- -------------------------------
Awards Payouts
------------------------ -----------
Securities
Other Under-
Annual Restricted lying All Other
Name and Compen- Stock Options/ LTIP Compensa-
Principal Position Year Salary Bonus(a) sation(b) Awards(c) SARs(d) Payouts(e) tion(f)
- ------------------ ---- ---------- ---------- --------- ----------- ----------- ----------- ------------
G. M. C. Fisher 1998 $2,000,000 $1,710,000 $ - $ 0 159,087 $ 0 $1,768,222
Chairman & CEO 1997 2,000,000 0 - 4,506,250 2,084,701 0 1,847,065
1996 2,000,000 1,725,000 - 0 75,000 1,495,463 1,925,188
D. A. Carp 1998 741,250 545,063 30,334 1,476,800 401,402 0 0
President & COO 1997 677,885 0 52,257 0 151,993 0 0
1996 517,309 600,000 - 0 34,000 365,558 0
H. L. Kavetas 1998 635,000 361,950 - 0 101,180 0 0
Executive 1997 625,385 0 - 885,000 237,676 0 0
Vice President & CFO 1996 597,692 450,000 - 0 34,000 728,346 0
C. F. Kohrt 1998 550,000 313,500 340,123 0 71,032 0 0
Executive Vice President 1997 540,385 0 98,384 0 36,674 0 0
& Assistant COO 1996 486,538 400,000 - 0 34,000 365,558 75,000
R. T. Bourns 1998 424,000 194,510 - 0 36,767 0 0
Senior Vice President 1997 445,000 119,568 - 0 27,621 0 0
1996 445,000 253,446 - 0 23,000 440,331 0
(a) This column shows Management Variable Compensation Plan awards for
services in the year indicated.
(b) Where no amount is shown, the value of personal benefits provided
was less than the minimum amount required to be reported. For D.
A. Carp the amounts represent tax reimbursement associated with
expatriate payments. For C. F. Kohrt for 1998, the amount
represents expatriate payments of $215,794 and tax reimbursement
of $124,329 and for 1997, the amount represents expatriate
payments.
(c) The total number and value of restricted stock held as of December
31, 1998, for each named individual (valued at $72.00 per share)
are: G. M. C. Fisher - 131,372 shares - $9,458,784; D. A. Carp -
42,742 shares - $3,077,424; H. L. Kavetas - 22,810 shares -
$1,642,320; C. F. Kohrt - 22,742 shares - $1,637,424; and R. T.
Bourns - 0 shares. The amount shown for D. A. Carp for 1998
represents 20,000 shares valued as of the date of grant (May 1,
1998) at $73.84 per share. Amounts shown for 1997 represent grants
made in connection with the extension of G. M. C. Fisher's and H.
L. Kavetas' employment contracts with the shares valued as of the
date of grant, i.e., G. M. C. Fisher 50,000 shares - $4,506,250 at
$90.125 per share on February 25, 1997, and H. L. Kavetas 10,000
shares - $885,000 at $88.50 per share on March 4, 1997. Dividends
are paid on restricted shares as and when dividends are paid on
Kodak common stock.
(d) For G. M. C. Fisher for 1997, this amount includes 2,000,000 stock
options granted in connection with the extension of his employment
contract. For H. L. Kavetas for 1997, this amount includes 200,000
stock options granted in connection with the extension of his
employment contract.
(e) No awards were paid for the periods 1996-1998 and 1995-1997 under
the Performance Stock Program. Amounts for 1996 were paid based on
performance over the period 1995-1996 and computed as of the date
of award, February 13, 1997, at $92.3125 per share. The value of
these shares as of December 31, 1998, is included in footnote (c).
All these awards were paid in shares of restricted stock, which
restrictions lapse upon attainment of age 60. Dividends are paid
on the restricted shares as and when dividends are paid on Kodak
common stock.
(f) For G. M. C. Fisher for 1998, this amount includes $1,738,382 of
principal and interest forgiven by the Company with respect to two
loans described under the heading "Employment Contracts" on page
42 and $29,840 for life insurance premiums; for 1997, this amount
includes $1,819,805 of principal and interest forgiven and $27,180
for life insurance premiums; for 1996 this amount includes
$1,901,388 of principal and interest forgiven and $23,800 for life
insurance premiums. For C. F. Kohrt for 1996, the amount is a
special recognition award paid in connection with repositioning of
the Office Imaging Business.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------------------------------
Number of Percentage
Securities of Total
Underlying Options/SARs
Options/ Granted to Exercise or
SARs Employees Base Price Expiration Grant Date
Name Granted in Fiscal Year Per Share Date Present Value (f)
- --------------- ---------- -------------- ----------- ---------- ----------------
G. M. C. Fisher 4,087(a) .001% $61.594 3/12/08 $ 72,544
155,000(b)(c) .011 65.906 4/01/08 3,087,600
D. A. Carp 1,402(a) .001 61.594 3/12/08 24,886
100,000(b)(c) .008 65.906 4/01/08 1,992,000
300,000(d) .022 73.844 4/30/08 6,558,000
H. L. Kavetas 1,180(a) .001 61.594 3/12/08 20,945
100,000(b)(c) .008 65.906 4/01/08 1,992,000
C. F. Kohrt 1,032(a) .001 61.594 3/12/08 18,318
70,000(b)(c) .005 65.906 4/01/08 1,394,400
R. T. Bourns 767(a) .001 61.594 3/12/08 13,614
26,000(b)(c) .002 65.906 4/01/08 517,920
10,000(e)(c) .001 66.656 3/01/08 199,200
(a) These options were awarded under the Wage Dividend
Plan and are immediately vested.
(b) These options were awarded under the Spring 1998 stock
option grant.
(c) One third of the options vest on each of the first
three anniversaries of the grant date. Termination of
employment, for other than death or a permitted
reason, prior to the first anniversary of the grant
date, results in forfeiture of the options.
Thereafter, termination of employment prior to vesting
results in forfeiture of the options unless the
termination is due to retirement, death, disability or
an approved reason. Vesting accelerates upon death.
(d) These options were awarded under the 1995 Omnibus
Long-Term Compensation Plan and the 1997 Stock Option
Plan. One third of these options vest on each of the
third, fourth and fifth anniversaries of the date of
grant. Termination of employment, for other than death
or a permitted reason, prior to the first anniversary
of the grant date, results in forfeiture of the
options. Thereafter, termination of employment prior
to vesting results in forfeiture of the options unless
the termination is due to retirement, death,
disability or an approved reason. Vesting accelerates
upon death.
(e) These options were awarded under the 1998 Management
Recognition Subplan to the 1995 Omnibus Long-Term
Compensation Plan.
(f) The present value of these options was determined
using the Black-Scholes model of option valuation in a
manner consistent with the requirements of Statement
of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation".
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Value of Unexercised
Unexercised in-the-money
Number Options/SARs at Options/SARs at
of Fiscal Year-End Fiscal Year-End*
Shares ----------------------------- -----------------------------
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------- ------------ ---------- ------------ -------------- ------------ -------------
G. M. C. Fisher 0 $ 0 1,662,402 1,729,925 $25,196,500 $ 949,240
D. A. Carp 5,760 319,962 159,959 511,222 1,913,387 611,517
H. L. Kavetas 0 0 116,224 484,632 94,035 6,423,517
C. F. Kohrt 0 0 113,725 104,632 1,675,825 428,697
R. T. Bourns 3,757 149,981 122,848 60,975 2,721,058 213,316
* Based on the closing price on the New York Stock Exchange - Composite Transactions of the Company's
common stock on December 31, 1998, of $72.00 per share.
Long-Term Incentive Plan
Each February the Executive Compensation and Development
Committee approves a three-year performance cycle under the
Performance Stock Program. Participation in the program is
limited to senior executives. Awards under each cycle are
contingent upon achieving a performance goal established by the
Committee. The performance goal is total shareholder return by
the Company equal to at least that earned over the same period by
a company at the 50th percentile in terms of total shareholder
return within the Standard & Poor's 500 Composite Stock Price
Index. After the close of a cycle, the Committee determines
whether the performance goal was achieved and, if so, calculates
the percentage of each participant's target award earned. No
award is paid unless the performance goal is achieved. Fifty
percent of the target award is earned if the performance goal is
achieved. One hundred percent of the target award is earned if
total shareholder return for the cycle equals that of a company
at the 60th percentile within the Standard & Poor's 500 Composite
Stock Price Index. In determining the actual award to be paid to
a participant, the Committee has the discretion to reduce or
eliminate the award earned, based upon any criteria it deems
appropriate. Awards, if any, are paid in the form of restricted
stock, which restrictions lapse at age 60. The table below shows
the threshold (i.e., attainment of the performance goal), target
and maximum number of shares for the Chief Executive Officer and
the other named executive officers for each cycle.
Individuals who participate for less than the full performance
cycle are eligible for only a prorated award based upon the
length of their participation.
No awards were earned for the 1996-1998 performance cycle as
shown in the "LTIP Payouts" column of the Summary Compensation
Table shown on page 35.
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
Number
of Performance Estimated Future Payouts Under
Shares, or Other Non-Stock Price-Based Plans
Units or Period Until -----------------------------------------
Other Maturation Threshold Target Maximum
Rights or Payout # of Shares # of Shares # of Shares
Name
- ---------------- ------------- ------------- ----------- ------------ -----------
G. M. C. Fisher N/A 1996-1998 6,750 13,500 20,250
1997-1999 6,750 13,500 20,250
1998-2000 6,750 13,500 20,250
D. A. Carp N/A 1996-1998 3,288 6,575 9,863
1997-1999 4,250 8,500 12,750
1998-2000 4,250 8,500 12,750
H. L. Kavetas N/A 1996-1998 3,288 6,575 9,863
1997-1999 3,288 6,575 9,863
1998-2000 3,288 6,575 9,863
C. F. Kohrt N/A 1996-1998 3,288 6,575 9,863
1997-1999 3,288 6,575 9,863
1998-2000 3,288 6,575 9,863
R. T. Bourns N/A 1996-1998 1,988 3,975 5,963
1997-1999 1,988 3,975 5,963
1998-2000 1,988 3,975 5,963
EMPLOYMENT CONTRACTS
The Company employs Mr. Fisher under a contract which terminates
on December 31, 2000. In addition to information found elsewhere
in this Proxy Statement, this contract provides:
- two loans to Mr. Fisher in the total amount of $8,284,400
which were fully forgiven as of November 2, 1998;
- credit for years of service under the Company's benefit
plans, including 22 years of deemed service and five
additional years of age for the retirement plan. Any
pension benefit payable to Mr. Fisher will be reduced by
pension paid from his prior employer;
- life insurance equal to 3.5 times his base salary; and
- a disability benefit equal to 60 percent of his base
salary.
If Mr. Fisher's employment is terminated without cause, including
following a change In control, Mr. Fisher is entitled to three
years of salary continuation, immediate vesting of stock options,
lapsing of restrictions on restricted stock and payment of unpaid
bonuses. Mr. Fisher is entitled to reimbursement for taxes on
certain payments, including any amounts constituting "parachute
payments" under the Internal Revenue Code.
The Company employs Mr. Kavetas under a contract which terminates
on February 10, 2001. The contract provides credit for years of
service under the Company's benefit plans. For calculating his
pension benefit, Mr. Kavetas receives credit for five years of
service for each of the first five years of employment and 3.5
years of service for the sixth and seventh years of employment.
Any pension benefit payable to Mr. Kavetas will be reduced by
pension payments from Mr. Kavetas' prior employer. If employment
terminates due to death, Mr. Kavetas' estate is entitled to three
months' salary. If he is terminated without cause he is entitled
to 18 months' salary, vesting of stock options and lapsing of
restrictions on restricted stock.
Termination of Employment
The Company has a general severance arrangement available to
substantially all U.S. employees which provides two weeks of pay
for every year of service with a maximum of 52 weeks.
The Company has a severance agreement with Mr. Bourns. The
agreement assures Mr. Bourns that he will not forfeit his awards
and bonuses under the Company's compensation plans due to his
retirement. Also, the Company has agreed to continue to provide
a post-retirement survivor income benefit to Mr. Bourns' spouse
in the event the Company terminates or modifies this plan
benefit. Finally, the agreement permits Mr. Bourns to continue
to participate in the Company's financial consulting program for
a two-year period.
Change In Control Arrangements
In the event of a change In control of the Company which causes
the Company's stock to cease active trading on the New York Stock
Exchange, the Company will make the following payments within 90
days after the change In control:
- to each participant in the Executive Deferred Compensation
Plan, the amount in his or her account;
- to each participant in the Management Variable
Compensation Plan, a pro rata target award for the year in
which the event occurs and payment of any other awards not
yet paid; and
- to each holder of a stock option or stock appreciation
right, the difference between the exercise price and the
change In control price.
RETIREMENT PLAN
The Company funds a tax-qualified, defined benefit pension plan
for virtually all U.S. employees. Retirement income benefits are
based upon an employee's "average participating compensation"
(APC). The Plan defines APC as one-third of the sum of the
employee's "participating compensation" for the highest
consecutive 39 periods of earnings over the 10-year period ending
immediately prior to retirement or termination. "Participating
compensation," in the case of the executive officers included in
the Summary Compensation Table, is base salary and Management
Variable Compensation Plan awards, including allowances in lieu
of salary for authorized periods of absence, such as illness,
vacation or holidays.
For an employee with up to 35 years of accrued service, the
annual normal retirement income benefit is calculated by
multiplying the employee's years of accrued service by the sum of
(a) 1.3 percent of APC, plus (b) .3 percent of APC in excess of
the average Social Security wage base. For an employee with more
than 35 years of accrued service, the amount is increased by one
percent for each year in excess of 35 years.
The retirement income benefit is not subject to any deductions
for Social Security benefits or other offsets. Officers are
entitled to benefits on the same basis as other employees. The
normal form of benefit is an annuity, but a lump sum payment is
available in some limited situations.
PENSION PLAN TABLE - Annual Retirement Income Benefit
Straight Life Annuity Beginning at Age 65
Years of Service
------------------------------------------------------------
Remuneration 25 30 35 40 45
- ------------- ---------- ---------- ---------- ----------- -----------
$ 500,000 $ 200,000 $ 240,000 $ 280,000 $ 294,000 $ 308,000
1,000,000 400,000 480,000 560,000 588,000 616,000
1,500,000 600,000 720,000 840,000 882,000 924,000
2,000,000 800,000 960,000 1,120,000 1,176,000 1,232,000
2,500,000 1,000,000 1,200,000 1,400,000 1,470,000 1,540,000
3,000,000 1,200,000 1,440,000 1,680,000 1,764,000 1,848,000
3,500,000 1,400,000 1,680,000 1,960,000 2,058,000 2,156,000
4,000,000 1,600,000 1,920,000 2,240,000 2,352,000 2,464,000
4,500,000 1,800,000 2,160,000 2,520,000 2,646,000 2,772,000
5,000,000 2,000,000 2,400,000 2,800,000 2,940,000 3,080,000
NOTE: For purposes of this table Remuneration means APC. To the extent that any employee's annual retirement
income benefit exceeds the amount payable from the Company's funded Plan, it is paid from one or more unfunded
supplementary plans.
The following table shows the years of service credited as of
December 31, 1998, to each of the five employees named in the
Summary Compensation Table. This table also shows the amount of
each named employee's APC at the end of 1998.
RETIREMENT PLAN
Years of
Service APC
-------- -------------
G. M. C. Fisher 27(a) $3,794,998
D. A. Carp 28 936,761
H. L. Kavetas 29(b) 1,061,643
C. F. Kohrt 27 722,438
R. T. Bourns 40 671,246
(a) Mr. Fisher is credited with 22 extra years of service for
purposes of calculating his retirement benefit.
(b) Mr. Kavetas is credited with 24 extra years of service for
purposes of calculating his retirement benefit.
In the event of a change In control, a participant whose
employment is terminated, for a reason other than death,
disability, cause or voluntary resignation, within five years of
such event is given up to five additional years of service. In
addition, where the participant is age 50 or over on the date of
the change In control, up to five additional years of age is given
for the following plan purposes:
- to determine eligibility for early and normal retirement,
- to determine eligibility for a vested right, and
- to calculate the amount of retirement benefit.
The actual number of years of service and years of age that is
given to such a participant decreases proportionately depending
upon the number of years that elapse between the date of a change
In control and the date of the participant's termination of
employment. Further, if the plan is terminated within five years
after a change In control, the benefit for each plan participant
will be calculated as indicated above.
REPORT OF THE EXECUTIVE COMPENSATION
AND DEVELOPMENT COMMITTEE
Purposes
The Company's executive compensation plans aim to:
- Tie compensation to performance consistent with Company
values and with increasing shareholder value.
- Attract and retain talented management by paying
compensation competitive with the compensation paid by
similar companies.
- Link compensation both to short-term and long-term Company
performance.
- Increase senior management's stock ownership.
Types of Compensation
There are two main types of compensation:
- Annual Compensation. This includes salary and bonus.
- Long-Term Compensation. This includes stock options and a
performance stock program that pays awards in restricted
stock.
Factors to be Considered in Determining Compensation
Survey Data: The Executive Compensation and Development Committee
is composed entirely of independent outside directors. The
Committee sets overall targeted levels of compensation, both
annual compensation and long-term incentives, for the Chief
Executive Officer, President, Executive Vice Presidents and Senior
Vice Presidents. The Committee wants management compensation to be
competitive with the compensation paid by similar companies. Each
year, the Company participates in surveys prepared by outside
consultants. The companies included in these surveys are those
that we compete with for executive talent. Most, but not all, of
these companies are included in the Dow Jones Industrial Index
shown in the Performance Graph on page 51. Based largely on the
median compensation of these surveyed companies, the Committee
sets the target compensation of the Company's executives.
Management Appraisal Process: Management compensation is also
determined through our management appraisal process. This process
consists of two parts: the Management Performance Commitment
Process (MPCP) and Touchstone Review.
We use the MPCP to reinforce a performance-based culture, to focus
and coordinate our efforts and, most importantly, to improve
performance. In the first step of this process, each member of
management at the start of the year develops specific and
measurable goals in the following three areas:
- shareholder satisfaction,
- customer satisfaction, and
- employee satisfaction/public responsibility.
To achieve a common, Company-wide focus, managers align their
goals and efforts both across the entire Company and throughout
all levels of the Company. The criteria used to measure
achievement of these goals are: financial performance, achievement
of diversity goals, employee development, quality and cycle time
and customer satisfaction.
Periodically and at year-end, each manager's performance is
measured against his or her goals.
The final step of the process links compensation to results. The
manager's MPCP score plays a significant role in determining his
or her base salary, stock option grant and annual bonus.
The other part of our management appraisal process is the
Touchstone Review. This is an annual questionnaire which measures
a manager's practice of the five Company values:
- respect for the dignity of the individual
- integrity
- trust
- credibility
- continuous improvement and personal renewal
A manager's peers and subordinates complete the questionnaire. The
results are included in the appraisal process and have an impact
on the manager's base salary, stock option grant and annual bonus.
Stock Ownership Requirements: The Company has stock ownership
requirements for its senior executives. Senior executives must own
common stock of the Company worth a multiple of salary. The
multiples range from one times salary to four times salary for the
CEO.
Today, these requirements apply to approximately 25 executives,
all of whom have either satisfied or are on track to satisfy the
requirements.
Annual Compensation
Annual compensation for our executives includes salary and bonus
under our annual incentive plan.
Base Salary: The Company determines a manager's salary based on
individual performance and comparisons to executive compensation
in similar companies. Individual performance is measured through
our MVCP and Touchstone Review.
Bonuses: Under the Company's annual bonus plan, the Management
Variable Compensation Plan (MVCP), a target bonus is set for each
manager. The target, which is a percentage of salary, varies
depending on the manager's position in the Company. For 1998,
target bonuses range from 18 percent of base salary to 90 percent
of base salary for the CEO.
In 1998, MVCPs sole performance measure to determine the award
pool for the year was Economic Profit/EVA. Using Economic
Profit/EVA, the Committee established at the beginning of the year
a performance threshold for the year. The plan provides that no
bonuses will be paid to the Company's "covered employees" if the
performance threshold is not met. Company performance equal to or
greater than the year's performance threshold determines the size
of the award pool for such year. The total amount of all bonuses
for a given year cannot exceed the amount of the award pool for
the year. The Committee awards bonuses from the award pool using
the results of the management appraisal process.
1998 Bonuses: During 1998, the Company aimed to increase revenue,
grow market share, continue cost-reduction activities, and improve
earnings. The Company introduced the use of Economic Profit/EVA as
its performance measure for its bonus pool. During 1998,
management goals also focused on:
- customer satisfaction,
- product leadership,
- employee training and development, and
- diversity.
In 1998, the Company exceeded its Economic Profit/EVA threshold.
Performance results across the different goals ranged from very
strong to disappointing. Overall, Company results showed
excellent progress.
The Summary Compensation Table on page 35 lists for 1998 the
awards for the CEO and the four other highest-paid executive
officers.
Long-Term Compensation
The Company's long-term compensation program consists of stock
options and a performance stock program. The purpose of both types
of awards is to increase shareholder value.
Stock Options: Stock options tie compensation directly to the
future value of the Company's common stock. Our managers gain only
when you gain-when the price of our common stock rises.
To determine the size of individual grants for 1998, the Committee
reviewed survey data covering other companies' practices. Most of
the companies included in these surveys are the same companies
used in the surveys of annual cash compensation. The Committee
used median survey values as reference points to determine the
size of option grants. The Committee also considered the frequency
with which other companies grant stock options, as well as the
number of options granted by the Company to its managers in prior
years. The Committee granted stock options in 1998 to all Company
managers at market price for a term of ten years. The 1998 stock
option awards for the CEO and the four other highest-paid
executive officers appear on page 37. For those who received no
bonus payment in 1997, the stock option award was greater than
their normal target award grant.
Performance Stock Program: The Performance Stock Program is a
multi-year program for the Company's senior executives. The
purpose of the program is to focus the attention of senior
management on the long-term results of the Company. A description
of the program, as well as the threshold, target and maximum
awards for the CEO and the four other highest-paid executive
officers, appear on page 40.
The performance threshold for the 1996-1998 performance cycle was
shareholder return equal to at least that earned over the same
period by a company at the 50th percentile in terms of shareholder
return within the Standard & Poor's 500 Composite Stock Price
Index. For the 1996-1998 performance cycle, the Company's
shareholder return was equal to the 22nd percentile company in the
Standard & Poor's 500 Composite Stock Price Index. Due to the
Company's failure to achieve threshold performance, no awards were
paid for the 1996-1998 performance cycle.
Wage Dividend
In 1998, management employees also participated in the Wage
Dividend Plan, an annual profit-sharing plan for all U.S.
employees. For managers, the plan's sole performance measure was
Economic Profit/EVA. If the Plan's Economic Profit/EVA threshold
is met in a given year, all employees receive awards based on the
same percentage of their earnings for the year. The level of
Economic Profit/EVA determines this percentage. For 1998, the
percentage was 6.52%. Awards for all management employees are paid
in the form of stock options. The 1998 Wage Dividend awards for
the CEO and the four other highest-paid executive officers appear
on page 37.
Beginning in 1999, management-level participants will no longer
participate in the U.S. Wage Dividend Plan as well as similar
plans in other countries. This action was taken to reinforce MVCP
as the Company's only annual incentive award for managers. As a
result of this change, target award levels under MVCP were
increased.
New Plans
The Committee reviewed and approved two new plans, summaries of
which appear in this proxy statement. They are 2000 Omnibus Long-
Term Compensation Plan (page 11) and 2000 Management Variable
Compensation Plan (page 17). East plan is a follow-on plan to one
approved by shareowners in 1995, which expires at the end of 1999.
The new plans are necessary to provide an on-going basis for
short-term and long-term compensation.
Chief Executive Officer Compensation
Mr. Fisher joined the Company in October 1993. His employment
agreement with the Company covers a period of five years. An
amendment to this agreement in February 1997 extended Mr. Fisher's
employment until December 31, 2000. Under the terms of Mr.
Fisher's extension, he was granted 50,000 shares of restricted
stock and 2,000,000 stock options. The restrictions on the
restricted stock lapse on January 1, 2001. The exercise price of
the stock options is $90.125, the closing price of the Company's
common stock on the New York Stock Exchange on February 25, 1997.
Other details of his agreement appear on page 42.
During 1998, as in the past four years, no change was made to Mr.
Fisher's salary of $2,000,000. This amount is set under the terms
of Mr. Fisher's employment agreement.
The Committee used the CEO's results under the management
appraisal process to determine his bonus and stock option award
for the year. Based upon the Company's performance described
earlier in this Report, Mr. Fisher received a bonus of $1,710,000
for 1998. The Committee granted Mr. Fisher 155,000 stock options
in 1998 as shown in the Option/SAR Grants in Last Fiscal Year
Table on page 37.
Leadership and Development
The Committee reviewed the Company's leadership and organization
development plans, as well as the Company's profiles for
succession candidates. It also discussed the Company's executive
compensation strategies. These are designed to provide leaders
capable of creating effective organizations and executing business
strategies that will drive the success of the Company. In
addition, the Committee reviewed diversity activities and goals as
part of the Company's diversity program.
Company Policy on Qualifying Compensation
Under Section 162(m) of the Internal Revenue Code, the Company may
not deduct certain forms of compensation in excess of $1,000,000
paid to any of the senior executives named in the Summary
Compensation Table. The Committee believes that, while there may
be circumstances in which the Company's interests are best served
by maintaining flexibility whether or not the compensation is
fully deductible under Section 162(m), it is generally in the
Company's best interests to comply with Section 162(m).
Other Committee Action
Supporting the Company's encouragement of stock ownership by all
employees and believing such a program will reinforce the efforts
of employees and further encourage them to act as owners, the
Committee approved a grant of 100 stock options to all non-
management employees of the Company. The grant was made on April
2, 1998.
The Committee also agreed to continue the Stock Option Recognition
Program (SORP) through 1999. This program provides for the use of
stock options as special recognition awards for significant
contributions. Awards from SORP can generally be made only to
employees who are not participants in the management-level stock
option plan.
Richard S. Braddock (Chairman)
Alice F. Emerson
Durk I. Jager
John J. Phelan, Jr.
PERFORMANCE GRAPH - SHAREHOLDER RETURN
The following graph compares the performance of the Company's
common stock with the performance of the Standard & Poor's 500
Composite Stock Price Index and the Dow Jones Industrial Index, by
measuring the changes in common stock prices from December 31,
1993 plus assumed reinvested dividends.
[graph omitted]
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
Eastman Kodak $100.00 $111.00 $160.00 $196.00 $152.00 $185.00
S&P 500 Index 100.00 101.00 139.00 171.00 228.00 286.00
Dow Jones 100.00 105.00 144.00 185.00 232.00 273.00
The graph assumes that $100 was invested on December 31, 1993, in
each of the Company's common stock, the Standard & Poor's 500
Composite Stock Price Index and the Dow Jones Industrial Index,
and that all dividends were reinvested. In addition, the graph
weighs the constituent companies on the basis of their respective
market capitalizations, measured at the beginning of each relevant
time period.
By Order of the Board of Directors
/s/ Joyce P. Haag
Joyce P. Haag
Secretary
Eastman Kodak Company
March 24, 1999
[map omitted]
Parking for the Meeting is available in Lot 42 between Eastman
Avenue and Merrill Street. A shuttle service will run between the
parking lot and the Theater on the Ridge beginning at
approximately 8:30 AM, and ending approximately one hour after the
conclusion of the Meeting. The Visitor Parking Lot will not be
available for shareholder parking for this Meeting.
DEFINITIVE COPY
(CORPORATE LOGO OMITTED)
EASTMAN KODAK COMPANY
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints George M. C. Fisher and Joyce P.
Haag, and each of them, as Proxies with full power of
substitution, to vote, as designated on the reverse side, for
director substitutes if any nominee becomes unavailable, and in
their discretion, on matters properly brought before the Meeting
and on matters incident to the conduct of the Meeting, all of the
shares of common stock of Eastman Kodak Company which the
undersigned has power to vote at the Annual Meeting of
shareholders to be held on May 12, 1999, or any adjournment
thereof.
NOMINEES FOR DIRECTOR: Richard S. Braddock, Daniel A. Carp,
Durk I. Jager and Richard A. Zimmerman
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR
DIRECTOR, FOR THE RATIFICATION OF ELECTION OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS, FOR
APPROVAL OF 2000 LONG-TERM COMPENSATION PLAN, FOR APPROVAL OF 2000
MANAGEMENT VARIABLE COMPENSATION PLAN, AND AGAINST THE THREE
SHAREHOLDER PROPOSALS.
This Proxy will be voted as directed. If no direction to the
contrary is indicated, it will be voted as follows:
FOR the election of all nominees for director;
FOR the ratification of election of independent accountants;
FOR approval of 2000 Omnibus Long-Term Compensation Plan;
FOR approval of 2000 Management Variable Compensation Plan;
AGAINST the shareholder proposal requesting an executive
compensation review;
AGAINST the shareholder proposal requesting annual
election of all directors; and
AGAINST the shareholder proposal requesting additional
environmental disclosure.
(CONTINUED, and To Be Signed and Dated on the REVERSE SIDE)
SEE REVERSE SIDE
The Board of Directors recommends a vote FOR Items 1-4.
1. Election of FOR WITHHOLD
Directors AUTHORITY
0 0
(01) Richard S. Braddock
(02) Daniel A. Carp
(03) Durk I. Jager
(04) Richard A. Zimmerman0
______________________________________________________________
To withhold authority to vote for any particular nominee(s), write
the name(s) above.
2. Ratification FOR AGAINST ABSTAIN
of Election
of Independent
Accountants 0 0 0
3. Approval of FOR AGAINST ABSTAIN
2000 Omnibus Long-Term
Compensation Plan 0 0 0
4. Approval of FOR AGAINST ABSTAIN
2000 Management Variable
Compensation Plan 0 0 0
The Board of Directors recommends a vote AGAINST Items 5-7.
5. Shareholder FOR AGAINST ABSTAIN
Proposal-
Executive Compensation
Review 0 0 0
6. Shareholder FOR AGAINST ABSTAIN
Proposal-
Annual Election of All
Directors 0 0 0
7. Shareholder FOR AGAINST ABSTAIN
Proposal-
Additional
Environmental
Disclosure 0 0 0
If you receive more than one Annual Report at the address shown on
this proxy card and have no need for the extra copy, please check
the box at the right. This will not affect the distribution of
dividends or proxy statements. 0
I plan to attend the
Annual Meeting. 0
I plan to bring
a guest. 0
When completed, promptly forward this card to: Proxy Services,
EquiServe, P. O. Box 9370, Boston, MA 02205-9940.
SIGNATURE(s) DATE
NOTE: Please sign exactly as the name appears on this card.
Joint owners must each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title.
Appendix I
EASTMAN KODAK COMPANY
2000 OMNIBUS LONG-TERM COMPENSATION PLAN
Article Page
1. Purpose and Term of Plan 1
2. Definitions 2
3. Eligibility 11
4. Plan Administration 12
5. Forms of Awards 14
6. Shares Subject to Plan 16
7. Performance Awards 18
8. Stock Options 21
9. Stock Appreciation Rights 23
10. Stock Awards 25
11. Performance Units 26
12. Performance Shares 27
13. Performance Stock Program 28
14. Payment of Awards 32
15. Dividend and Dividend Equivalents 35
16. Deferral of Awards 36
17. Change In Ownership 37
18. Change In Control 40
19. Miscellaneous 43
copyright 1998, Eastman Kodak Company
ARTICLE 1 -- PURPOSE AND TERM OF PLAN
1.1 Purpose
The purpose of the Plan is to provide motivation to selected
Employees and Directors to put forth maximum efforts toward the
continued growth, profitability, and success of the Company by
providing incentives to such Employees and Directors through the
ownership and performance of Kodak Common Stock.
1.2 Term
The Plan will become effective on January 1, 2000, subject to its
approval by Kodak's shareholders at the 1999 Annual Meeting of the
Shareholders. Awards may not be granted after December 31, 2004;
except that the Committee may grant Awards after this date in
recognition of performance for Performance Cycles commencing prior
to such date.
ARTICLE 2 -- DEFINITIONS
In any necessary construction of a provision of this Plan, the
masculine gender may include the feminine, and the singular may
include the plural, and vice versa. This Plan should be construed
in a manner consistent with the intent of Kodak to establish an
omnibus long-term compensation plan subject to fixed accounting
treatment.
2.1 Approved Reason
"Approved Reason" means a reason for terminating employment with
the Company which, in the opinion of the Committee, is in the best
interests of the Company.
2.2 Award
"Award" means any form of stock option, stock appreciation right,
Stock Award, performance unit, performance share, Performance
Award, shares of Common Stock under the Performance Stock Program,
or other incentive award granted under the Plan, whether singly,
in combination, or in tandem, to a Participant by the Committee
pursuant to such terms, conditions, restrictions and/or
limitations, if any, as the Committee may establish by the Award
Notice or otherwise.
2.3 Award Notice
"Award Notice" means the written document establishing the terms,
conditions, restrictions, and/or limitations of an Award in
addition to those established by this Plan and by the Committee's
exercise of its administrative powers. The Committee will
establish the form of the written document in the exercise of its
sole and absolute discretion. The Committee may, but need not,
require a Participant to sign a copy of the Award Notice as a
precondition to receiving an Award.
2.4 Award Payment Date
"Award Payment Date" means, for a Performance Cycle, the date the
Awards for such Performance Cycle shall be paid to Participants.
The Award Payment Date for a Performance Cycle shall occur as soon
as administratively possible following the completion of the
certifications required pursuant to Subsection 13.5(c).
2.5 Board
"Board" means the Board of Directors of Kodak.
2.6 Capital Charge
"Capital Charge" means, for a Performance Period, the amount
obtained by multiplying the Cost of Capital for the Performance
Period by the Operating Net Assets for the Performance Period.
2.7 Cause
"Cause" means (a) the willful and continued failure by an Employee
to substantially perform his or her duties with his or her
employer after written warnings identifying the lack of
substantial performance are delivered to the Employee by his or
her employer to specifically identify the manner in which the
employer believes that the Employee has not substantially
performed his or her duties, or (b) the willful engaging by an
Employee in illegal conduct which is materially and demonstrably
injurious to Kodak or a Subsidiary.
2.8 CEO
"CEO" means the Chief Executive Officer of Kodak.
2.9 Change In Control
"Change In Control" means a change in control of Kodak of a nature
that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on August 1, 1989,
pursuant to Section 13 or 15(d) of the Exchange Act; provided
that, without limitation, a Change In Control shall be deemed to
have occurred at such time as (i) any "person" within the meaning
of Section 14(d) of the Exchange Act, other than Kodak, a
Subsidiary, or any employee benefit plan(s) sponsored by Kodak or
any Subsidiary, is or has become the "beneficial owner," as
defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 25% or more of the combined voting power of the
outstanding securities of Kodak ordinarily having the right to
vote at the election of directors, or (ii) individuals who
constitute the Board on January 1, 2000 (the "Incumbent Board")
have ceased for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent
to January 1, 2000 whose election, or nomination for election by
Kodak's shareholders, was approved by a vote of at least three-
quarters (3/4) of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement
of Kodak in which such person is named as a nominee for director
without objection to such nomination) shall be, for purposes of
this Plan, considered as though such person were a member of the
Incumbent Board.
2.10 Change In Control Price
"Change In Control Price" means the highest closing price per
share paid for the purchase of Common Stock on the New York Stock
Exchange during the ninety (90) day period ending on the date the
Change In Control occurs.
2.11 Change In Ownership
"Change In Ownership" means a Change In Control that results
directly or indirectly in Kodak's Common Stock ceasing to be
actively traded on the New York Stock Exchange.
2.12 Code
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor
provisions and regulations thereto.
2.13 Committee
"Committee" means the Executive Compensation and Development
Committee of the Board, or such other Board committee as may be
designated by the Board to administer the Plan; provided that the
Committee shall consist of three or more directors, all of whom
are both a "Non-Employee Director" within the meaning of Rule 16b-
3 under the Exchange Act and an "outside director" within the
meaning of the definition of such term as contained in Proposed
Treasury Regulation Section 1.162-27(e)(3), or any successor
definition adopted.
2.14 Common Stock
"Common Stock" means common stock, $2.50 par value per share, of
Kodak that may be newly issued or treasury stock.
2.15 Company
"Company" means Kodak and its Subsidiaries.
2.16 Cost of Capital
"Cost of Capital" means, for a Performance Period, the estimated
weighted average of the Company's cost of equity and cost of debt
for the Performance Period as determined by the Committee in its
sole and absolute discretion. The Committee will determine the
Cost of Capital for a Performance Period within the first 90 days
of the Performance Period.
2.17 Covered Employee
"Covered Employee" means an Employee who is a "Covered Employee"
within the meaning of Section 162(m) of the Code.
2.18 Director
"Director" means a non-employee member of the Board.
2.19 Disability
"Disability" means a disability under the terms of the long-term
disability plan maintained by the Participant's employer, or in
the absence of such a plan, the Kodak Long-Term Disability Plan.
2.20 Economic Profit
"Economic Profit" means, for a Performance Period, the Net
Operating Profit After Tax that remains after subtracting the
Capital Charge for such Performance Period. Economic Profit may
be expressed as follows: Economic Profit = Net Operating Profit
After Tax - Capital Charge. Economic Profit may be either
positive or negative.
2.21 Economic Value Added or EVA
"Economic Value Added or EVA" means Economic Profit for the
current year minus Economic Profit for the immediately prior year.
2.22 Effective Date
"Effective Date" means the date an Award is determined to be
effective by the Committee upon its grant of such Award.
2.23 Employee
"Employee" means: (a) any person employed by Kodak on a full or
part time basis; (b) any person employed by a Subsidiary on a full
or part time basis; or (c) any person employed by a foreign
country identified in writing by the Committee who is providing
services to a Subsidiary pursuant to a written contract between
such country and the Company and who would, but for the laws of
such country, otherwise be classified by the Subsidiary as an
Employee.
2.24 Exchange Act
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended from time to time, including rules thereunder and
successor provision and rules thereto.
2.25 Key Employee
"Key Employee" means a senior level Employee who holds a position
of responsibility in a managerial, administrative, or professional
capacity.
2.26 Kodak
"Kodak" means Eastman Kodak Company.
2.27 Negative Discretion
"Negative Discretion" means the discretion authorized by the Plan
to be applied by the Committee in determining the size of an Award
for a Performance Period or Performance Cycle if, in the
Committee's sole judgment, such application is appropriate.
Negative Discretion may only be used by the Committee to eliminate
or reduce the size of an Award. By way of example and not by way
of limitation, in no event shall any discretionary authority
granted to the Committee by the Plan, including, but not limited
to Negative Discretion, be used to: (a) grant Awards for a
Performance Period or Performance Cycle if the Performance Goals
for such Performance Period or Performance Cycle have not been
attained; or (b) increase an Award above the maximum amount
payable under Sections 7.5, 8.6, 9.6 or 13.6 of the Plan.
2.28 Net Operating Profit After Tax
"Net Operating Profit After Tax" means, for a Performance Period,
the after-tax operating earnings of the Company for the
Performance Period adjusted for interest expense and Wang in-
process R&D. The Committee is authorized at any time during the
first 90 days of a Performance Period, or at any time thereafter
in its sole and absolute discretion, to adjust or modify the
calculation of Net Operating Profit After Tax for such Performance
Period in order to prevent the dilution or enlargement of the
rights of Participants, (a) in the event of, or in anticipation
of, any dividend or other distribution (whether in the form of
cash, securities or other property), re-capitalization,
restructuring, reorganization, merger, consolidation, spin off,
combination, repurchase, share exchange, liquidation, dissolution,
or other similar corporate transaction, event or development; (b)
in recognition of, or in anticipation of, any other unusual or
nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation
of, changes in applicable laws, regulations, accounting
principles, or business conditions; (c) in recognition of, or in
anticipation of, any other extraordinary gains or losses, and (d)
in view of the Committee's assessment of the business strategy of
the Company, performance of comparable organizations, economic and
business conditions, and any other circumstances deemed relevant.
However, if and to the extent the exercise of such authority after
the first 90 days of a Performance Period would cause the Awards
granted to the Covered Employees for the Performance Period to
fail to qualify as "Performance-Based Compensation" under Section
162(m) of the Code, then such authority shall only be exercised
with respect to those Participants who are not Covered Employees.
2.29 Operating Net Assets
"Operating Net Assets" means, for a Performance Period, the net
investment used in the operations of the Company. Operating Net
Assets is calculated from the Company's audited consolidated
financial statements as being total assets minus non-interest-
bearing liabilities adjusted for LIFO inventories, postemployment
benefits other than pensions (OPEB) and Wang in-process R&D. The
Committee is authorized at any time during a Performance Period to
adjust or modify the calculation of Operating Net Assets for such
Performance Period in order to prevent the dilution or enlargement
of the rights of Participants, (a) in the event of, or in
anticipation of, any dividend or other distribution (whether in
the form of cash, securities or other property), recapitalization,
restructuring, reorganization, merger, consolidation, spin off,
combination, repurchase, share exchange, liquidation, dissolution,
or other similar corporate transaction, event or development; (b)
in recognition of, or in anticipation of, any other unusual or
nonrecurring event affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation
of, changes in applicable laws, regulations, accounting
principles, or business conditions; (c) in recognition of, or in
anticipation of, any other extraordinary gains or losses; and (d)
in view of the Committee's assessment of the business strategy of
the Company, performance of comparable organizations, economic and
business conditions, and any other circumstances deemed relevant.
However, if and to the extent the exercise of such authority after
the first 90 days of a Performance Period would cause the Awards
granted to the Covered Employees for the Performance Period to
fail to qualify as "Performance-Based Compensation" under Section
162(m) of the Code, then such authority shall only be exercised
with respect to those Participants who are not Covered Employees.
2.30 Participant
"Participant" means either an Employee or Director to whom an
Award has been granted by the Committee under the Plan or a Key
Employee who, for a Performance Cycle, has been selected to
participate in the Performance Stock Program.
2.31 Performance Awards
"Performance Awards" means the Stock Awards, Performance units and
Performance Shares granted to Covered Employees pursuant to
Article 7. All Performance Awards are intended to qualify as
"Performance-Based Compensation" under Section 162(m) of the Code.
2.32 Performance Criteria
"Performance Criteria" means the one or more criteria that the
Committee shall select for purposes of establishing the
Performance Goal(s) for a Performance Period or Performance Cycle.
The Performance Criteria that will be used to establish such
Performance Goal(s) shall be limited to the following: Economic
Profit/EVA, return on net assets ("RONA"), return on shareholders'
equity, return on assets, return on capital, shareholder returns,
total shareholder return, profit margin, earnings per share, net
earnings, operating earnings, Common Stock price per share, and
sales or market share. To the extent required by Section 162(m)
of the Code, the Committee shall, within the first 90 days of a
Performance Period or Performance Cycle (or, if longer, within the
maximum period allowed under Section 162(m) of the Code), define
in an objective fashion the manner of calculating the Performance
Criteria it selects to use for such Performance Period or
Performance Cycle.
2.33 Performance Cycle
"Performance Cycle" means the one or more periods of time, which
may be of varying and overlapping durations, as the Committee may
select, over which the attainment of one or more Performance Goals
will be measured for the purpose of determining a Participant's
right to and the payment of an Award under the Performance Stock
Program. In no event, however, shall a Performance Cycle exceed 3
years.
2.34 Performance Formula
"Performance Formula" means, for a Performance Period or
Performance Cycle, the one or more objective formulas applied
against the relevant Performance Goal(s) to determine, with
regards to the Award of a particular Participant, whether all,
some portion but less than all, or none of the Award has been
earned for the Performance Period or Performance Cycle. In the
case of an Award under the Performance Stock Program, in the event
the Performance Goal(s) for a Performance Cycle are achieved, the
Performance Formula shall determine what percentage of the
Participant's Target Award for the Performance Cycle will be
earned.
2.35 Performance Goals
"Performance Goals" means, for a Performance Period or Performance
Cycle, the one or more goals established by the Committee for the
Performance Period or Performance Cycle based upon the Performance
Criteria. The Committee is authorized at any time during the
first 90 days of a Performance Period or Performance Cycle, or at
any time thereafter (but only to the extent the exercise of such
authority after the first 90 days of a Performance Period or
Performance Cycle would not cause the Awards granted to the
Covered Employees for the Performance Period or Performance Cycle
to fail to qualify as "Performance-Based Compensation" under
Section 162(m) of the Code), in its sole and absolute discretion,
to adjust or modify the calculation of a Performance Goal for such
Performance Period or Performance Cycle in order to prevent the
dilution or enlargement of the rights of Participants, (a) in the
event of, or in anticipation of, any unusual or extraordinary
corporate item, transaction, event or development; (b) in
recognition of, or in anticipation of, any other unusual or
nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation
of, changes in applicable laws, regulations, accounting
principles, or business conditions; and (c) in view of the
Committee's assessment of the business strategy of the Company,
performance of comparable organizations, economic and business
conditions, and any other circumstances deemed relevant.
2.36 Performance Period
"Performance Period" means the one or more periods of time, which
may be of varying and overlapping durations, as the Committee may
select, over which the attainment of one or more Performance Goals
will be measured for the purpose of determining a Participant's
right to and the payment of a Performance Award. In the case of
Awards issued under Article 8 or Article 9 hereof, the Performance
Period shall be Kodak's fiscal year.
2.37 Performance Stock Program
"Performance Stock Program" means the program established under
Article 13 of the Plan pursuant to which selected Key Employee
receive Awards for a Performance Cycle in the form of shares of
Common Stock based upon attainment of Performance Goals for such
Performance Cycle. All Awards granted to Covered Employees under
the Performance Stock Program are intended to qualify as
"Performance-based Compensation" under Section 162(m) of the Code.
2.38 Plan
"Plan" means the 2000 Omnibus Long-Term Compensation Plan.
2.39 Retirement
"Retirement" means, in the case of a Participant employed by
Kodak, voluntary termination of employment: (i) on or after age 55
with 10 or more years of service or on or after age 65; or (ii) at
any time if the Participant had an age and years of service
combination of at least 75 points on December 31, 1995. In the
case of a Participant employed by a Subsidiary, "Retirement" means
early or normal retirement under the terms of the Subsidiary's
retirement plan, or if the Subsidiary does not have a retirement
plan, termination of employment on or after age 60. A Participant
must voluntarily terminate his or her employment in order for his
or her termination of employment to be for "Retirement."
2.40 Stock Award
"Stock Award" means an award granted pursuant to Article 10 in the
form of shares of Common Stock, restricted shares of Common Stock,
and/or Units of Common Stock.
2.41 Subsidiary
"Subsidiary" means a corporation or other business entity in which
Kodak directly or indirectly has an ownership interest of 50
percent or more except that with respect to incentive stock
options, "Subsidiary" shall mean "subsidiary corporation" as
defined in Section 424(f) of the Code.
2.42 Target Award
"Target Award" means, for a Performance Cycle, the target award
amount, expressed as a number of shares of Common Stock,
established for each wage grade by the Committee for the
Performance Cycle. The fact, however, that a Target Award is
established for a Participant's wage grade shall not in any manner
entitle the Participant to receive an Award for such Performance
Cycle.
2.43 Unit
"Unit" means a bookkeeping entry used by the Company to record and
account for the grant of the following Awards until such time as
the Award is paid, canceled, forfeited or terminated, as the case
may be: Units of Common Stock, performance units, and performance
shares which are expressed in terms of Units of Common Stock.
ARTICLE 3 -- ELIGIBILITY
3.1 In General
Subject to Section 3.2, all Employees and Directors are eligible
to participate in the Plan. The Committee may select, from time
to time, Participants from those Employees who, in the opinion of
the Committee, can further the Plan's purposes. In addition, the
Committee may select, from time to time, Participants from those
Directors (who may or may not be Committee members) who, in the
opinion of the Committee, can further the Plan's purposes. Once a
Participant is so selected, the Committee shall determine the
type(s) of Awards to be made to the Participant and shall
establish in the related Award Notice(s) the terms, conditions,
restrictions and/or limitations, if any, applicable to the
Award(s) in addition to those set forth in this Plan and the
administrative rules and regulations issued by the Committee.
3.2 Performance Stock Program
Only Key Employees shall be eligible to participate in the
Performance Stock Program.
ARTICLE 4 -- PLAN ADMINISTRATION
4.1 Responsibility
The Committee shall have total and exclusive responsibility to
control, operate, manage and administer the Plan in accordance
with its terms.
4.2 Authority of the Committee
The Committee shall have all the authority that may be necessary
or helpful to enable it to discharge its responsibilities with
respect to the Plan. Without limiting the generality of the
preceding sentence, the Committee shall have the exclusive right
to: (a) select the Participants and determine the type of Awards
to be made to Participants, the number of shares subject to Awards
and the terms, conditions, restrictions and limitations of the
Awards; (b) interpret the Plan; (c) determine eligibility for
participation in the Plan; (d) decide all questions concerning
eligibility for and the amount of Awards payable under the Plan;
(e) construe any ambiguous provision of the Plan; (f) correct any
default; (g) supply any omission; (h) reconcile any inconsistency;
(i) issue administrative guidelines as an aid to administer the
Plan and make changes in such guidelines as it from time to time
deems proper; (j) make regulations for carrying out the Plan and
make changes in such regulations as it from time to time deems
proper; (k) determine whether Awards should be granted singly, in
combination or in tandem; (l), to the extent permitted under the
Plan, grant waivers of Plan terms, conditions, restrictions, and
limitations; (m) accelerate the vesting, exercise, or payment of
an Award or the performance period of an Award when such action or
actions would be in the best interest of the Company; (n)
establish such other types of Awards, besides those specifically
enumerated in Article 5 hereof, which the Committee determines are
consistent with the Plan's purpose; (o) subject to Section 8.2,
grant Awards in replacement of Awards previously granted under
this Plan or any other executive compensation plan of the Company;
(p) establish and administer the Performance Goals and certify
whether, and to what extent, they have been attained; (q)
determine the terms and provisions of any agreements entered into
hereunder; (r) take any and all other action it deems necessary or
advisable for the proper operation or administration of the Plan;
and (s) make all other determinations it deems necessary or
advisable for the administration of the Plan, including factual
determinations.
4.3 Discretionary Authority
The Committee shall have full discretionary authority in all
matters related to the discharge of its responsibilities and the
exercise of its authority under the Plan including, without
limitation, its construction of the terms of the Plan and its
determination of eligibility for participation and Awards under
the Plan. It is the intent of Plan that the decisions of the
Committee and its actions with respect to the Plan shall be final,
binding and conclusive upon all persons having or claiming to have
any right or interest in or under the Plan.
4.4 Section 162(m) of the Code
With regards to all Covered Employees, the Plan shall, for all
purposes, be interpreted and construed in accordance with Section
162(m) of the Code.
4.5 Action by the Committee
The Committee may act only by a majority of its members. Any
determination of the Committee may be made, without a meeting, by
a writing or writings signed by all of the members of the
Committee. In addition, the Committee may authorize any one or
more of its number to execute and deliver documents on behalf of
the Committee.
4.6 Allocation and Delegation of Authority
The Committee may allocate all or any portion of its
responsibilities and powers under the Plan to any one or more of
its members and may delegate all or any part of its
responsibilities and powers to any person or persons selected by
it provided that any such allocation or delegation be in writing;
provided, however, that only the Committee may select and grant
Awards to Participants who are subject to Section 16 of the
Exchange Act or are Covered Employees. The Committee may revoke
any such allocation or delegation at any time for any reason with
or without prior notice.
ARTICLE 5 -- FORM OF AWARDS
5.1 In General
Awards may, at the Committee's sole discretion, be paid in the
form of Performance Awards pursuant to Article 7, stock options
pursuant to Article 8, stock appreciation rights pursuant to
Article 9, Stock Awards pursuant to Article 10, performance units
pursuant to Article 11, performance shares pursuant to Article 12,
shares of Common Stock pursuant to Article 13, any form
established by the Committee pursuant to Subsection 4.2(n), or a
combination thereof. 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.
Awards under a particular Article of the Plan need not be uniform
and Awards under two or more Articles may be combined into a
single Award Notice. Any combination of Awards may be granted at
one time and on more than one occasion to the same Participant.
For purposes of the Plan, the value of any Award granted in the
form of Common Stock shall be the mean between the high and low at
which the Common Stock trades on the New York Stock Exchange as of
the date of the grant's Effective Date.
5.2 Foreign Jurisdictions
(a) special Terms. In order to facilitate the making of any
Award to Participants who are employed by the Company outside the
United States (or who are foreign nationals temporarily within the
United States), the Committee may provide for such modifications
and additional terms and conditions ("special terms") in Awards as
the Committee may consider necessary or appropriate to accommodate
differences in local law, policy or custom or to facilitate
administration of the Plan. The special terms may provide that
the grant of an Award is subject to (1) applicable governmental or
regulatory approval or other compliance with local legal
requirements and/or (2) the execution by the Participant of a
written instrument in the form specified by the Committee, and
that in the event such conditions are not satisfied, the grant
shall be void. The special terms may also provide that an Award
shall become exercisable or redeemable, as the case may be, if an
Employee's employment with the Company ends as a result of
workforce reduction, realignment or similar measure and the
Committee may designate a person or persons to make such
determination for a location. The Committee may adopt or approve
sub-plans, appendices or supplements to, or amendments,
restatements, or alternative versions of, the Plan as it may
consider necessary or appropriate for purposes of implementing any
special terms, without thereby affecting the terms of the Plan as
in effect for any other purpose; provided, however, no such sub-
plans, appendices or supplements to, or amendments, restatements,
or alternative versions of, the Plan shall: (a) increase the
limitations contained in Sections 6.3, 7.5, 8.6, 9.6 and 13.6; (b)
increase the number of available shares under Section 6.1; or (c)
cause the Plan to cease to satisfy any conditions of Rule 16b-3
under the Exchange Act or, with respect to Covered Employees,
Section 162(m) of the Code.
(b) Currency Effects. Unless otherwise specifically determined
by the Committee, all Awards and payments pursuant to such Awards
shall be determined in U.S. currency. The Committee shall
determine, in its discretion, whether and to the extent any
payments made pursuant to an Award shall be made in local
currency, as opposed to U.S. dollars. In the event payments are
made in local currency, the Committee may determine, in its
discretion and without liability to any Participant, the method
and rate of converting the payment into local currency.
(c) Modifications to Awards. The Committee shall have the right
at any time and from time to time and without prior notice to
modify outstanding Awards to comply with or satisfy local laws and
regulations or to avoid costly governmental filings. By means of
illustration but not limitation, the Committee may restrict the
method of exercise of an Award to avoid securities laws or
exchange control filings, laws or regulations.
(d) Acquired Rights. No Employee in any country shall have any
right to receive an Award, except as expressly provided for under
the Plan. All Awards made at any time are subject to the prior
approval of the Committee.
ARTICLE 6 -- SHARES SUBJECT TO PLAN
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 (including incentive stock options) during its term shall
not exceed 22,000,000. (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 be available again for grant under the Plan. Moreover, if
the option price of any stock option granted under the Plan is
satisfied by tendering shares of Common Stock to the Company (by
either actual delivery or by attestation), only the number of
shares of Common Stock issued net of the shares of Common Stock
tendered will be deemed delivered for purposes of determining the
maximum number of shares of Common Stock available for delivery
under the Plan. The maximum number of shares available for
issuance under the Plan shall not be reduced to reflect any
dividends or dividend equivalents that are reinvested into
additional shares of Common Stock or credited as additional
performance shares. The shares of Common Stock available for
issuance under the Plan may be authorized and unissued shares or
treasury shares.
6.2 Adjustment to Shares
(a) In General. The provisions of this Subsection 6.2(a) are
subject to the limitation contained in Subsection 6.2(b). If
there is any change in the number of outstanding shares of Common
Stock through the declaration of stock dividends, stock splits or
the like, the number of shares available for Awards, the shares
subject to any Award and the option prices or exercise prices of
Awards shall be automatically adjusted. If there is any change in
the number of outstanding shares of Common Stock through any
change in the capital account of Kodak, or through a merger,
consolidation, separation (including a spin off or other
distribution of stock or property), reorganization (whether or not
such reorganization comes within the meaning of such term in
Section 368(a) of the Code) or partial or complete liquidation,
the Committee shall make appropriate adjustments in the maximum
number of shares of Common Stock which may be issued under the
Plan and any adjustments and/or modifications to outstanding
Awards as it, in its sole discretion, deems appropriate. In the
event of any other change in the capital structure or in the
Common Stock of Kodak, the Committee shall also be authorized to
make such appropriate adjustments in the maximum number of shares
of Common Stock available for issuance under the Plan and any
adjustments and/or modifications to outstanding Awards as it, in
its sole discretion, deems appropriate. The maximum number of
shares available for issuance under the Plan shall be
automatically adjusted to the extent necessary to reflect any
dividend equivalents paid in the form of Common Stock.
(b) Covered Employees. In no event shall the Award of any
Participant who is a Covered Employee be adjusted pursuant to
Subsection 6.2(a) to the extent it would cause such Award to fail
to qualify as "Performance-Based Compensation" under Section
162(m) of the Code.
6.3 Maximum Number of Shares for Stock Awards, Performance Units
and Performance Shares
(a) Plan Limit. From the maximum number of shares available for
issuance under the Plan under Section 6.1, the maximum number of
shares of Common Stock, $2.50 par value per share, which shall be
available for Awards granted in the form of Stock Awards under
Article 10, performance units under Article 11 and performance
shares under Article 12 (including those issued in the form of
Performance Awards under Article 7) under the Plan during its term
shall be 3,500,000. If granted, 1,000,000 of these shares may be
awarded only if the Company achieves a specific Performance Goal.
The Performance Goal is total shareholder return by the Company
equal to at least that earned over the same period by a company at
the 50th percentile in terms of total shareholder return within
the Standard & Poor's 500 Composite Stock Price Index. Fifty
percent of the Award will be earned if this Performance Goal is
achieved. One hundred percent of the Award will be earned if
total shareholder return for the period equals that of a company
at the 60th percentile in terms of total shareholder return within
the Standard & Poor's Composite Stock Price Index.
(b) Annual Limit. The maximum number of shares of Common Stock,
$2.50 par value per share, that may be awarded to any one
Participant in a single calendar year in the form of Stock Awards
under Article 10, performance units under Article 11 and
performance shares under Article 12 (including those issued in the
form of Performance Awards under Article 7) is 75,000 shares of
Common Stock.
ARTICLE 7 -- PERFORMANCE AWARDS
7.1 Purpose
For purposes of grants issued to Covered Employees, the provisions
of this Article 7 shall apply in addition to and, where necessary,
in lieu of the provisions of Articles 10, 11 and 12. The purpose
of this Article is to provide the Committee the ability to qualify
the Stock Awards authorized under Article 10, the performance
units under Article 11, and the performance shares under Article
12 as "Performance-Based Compensation" under Section 162(m) of the
Code. The provisions of this Article 7 shall control over any
contrary provision contained in Articles 10, 11 or 12.
7.2 Eligibility
Only Covered Employees shall be eligible to receive Performance
Awards. The Committee will, in its sole discretion, designate
within the first 90 days of a Performance Period (or, if longer,
within the maximum period allowed under Section 162(m) of the
Code) which Covered Employees will be Participants for such
period. However, designation of a Covered Employee as a
Participant for a Performance Period shall not in any manner
entitle the Participant to receive an Award for the period. The
determination as to whether or not such Participant becomes
entitled to an Award for such Performance Period shall be decided
solely in accordance with the provisions of this Article 7.
Moreover, designation of a Covered Employee as a Participant for a
particular Performance Period shall not require designation of
such Covered Employee as a Participant in any subsequent
Performance Period and designation of one Covered Employee as a
Participant shall not require designation of any other Covered
Employee as a Participant in such period or in any other period.
7.3 Discretion of Committee with Respect to Performance Awards
With regards to a particular Performance Period, the Committee
shall have full discretion to select the length of such
Performance Period, the type(s) of Performance Awards to be
issued, the Performance Criteria that will be used to establish
the Performance Goal(s), the kind(s) and/or level(s) of the
Performance Goal(s), whether the Performance Goal(s) is(are) to
apply to the Company, Kodak, a Subsidiary, or any one or more
subunits of the foregoing, and the Performance Formula. Within
the first 90 days of a Performance Period (or, if longer, within
the maximum period allowed under Section 162(m) of the Code), the
Committee shall, with regards to the Performance Awards to be
issued for such Performance Period, exercise its discretion with
respect to each of the matters enumerated in the immediately
preceding sentence of this Section 7.3 and record the same in
writing.
7.4 Payment of Performance Awards
(a) Condition to Receipt of Performance Award. Unless otherwise
provided in the relevant Award Notice, a Participant must be
employed by the Company on the last day of a Performance Period to
be eligible for a Performance Award for such Performance Period.
(b) Limitation. A Participant shall be eligible to receive a
Performance Award for a Performance Period only to the extent
that: (1) the Performance Goals for such period are achieved; and
(2) and the Performance Formula as applied against such
Performance Goals determines that all or some portion of such
Participant's Performance Award has been earned for the
Performance Period.
(c) Certification. Following the completion of a Performance
Period, the Committee shall meet to review and certify in writing
whether, and to what extent, the Performance Goals for the
Performance Period have been achieved and, if so, to also
calculate and certify in writing the amount of the Performance
Awards earned for the period based upon the Performance Formula.
The Committee shall then determine the actual size of each
Participant's Performance Award for the Performance Period and, in
so doing, shall apply Negative Discretion, if and when it deems
appropriate.
(d) Negative Discretion. In determining the actual size of an
individual Performance Award for a Performance Period, the
Committee may reduce or eliminate the amount of the Performance
Award earned under the Performance Formula for the Performance
Period through the use of Negative Discretion, if in its sole
judgment, such reduction or elimination is appropriate.
(e) Timing of Award Payments. The Awards granted for a
Performance Period shall be paid to Participants as soon as
administratively possible following completion of the
certifications required by Subsection 7.4(c).
7.5 Maximum Award Payable
Notwithstanding any provision contained in the Plan to the
contrary, the maximum Performance Award payable to any one
Participant under the Plan for a Performance Period is 75,000
shares of Common Stock or, in the event the Performance Award is
paid in cash, the equivalent cash value thereof on the Performance
Award's Effective Date.
ARTICLE 8 -- STOCK OPTIONS
8.1 In General
Awards may be granted in the form of stock options. These stock
options may be incentive stock options within the meaning of
Section 422 of the Code or non-qualified stock options (i.e.,
stock options which are not incentive stock options), or a
combination of both. All Awards under the Plan issued to Covered
Employees in the form of stock options shall qualify as
"Performance-Based Compensation" under Section 162(m) of the Code.
8.2 Terms and Conditions of Stock Options
An option shall be exercisable in accordance with such terms and
conditions and at such times and during such periods as may be
determined by the Committee. The price at which Common Stock may
be purchased upon exercise of a stock option shall be not less
than 100% of the fair market value of the Common Stock, as
determined by the Committee, on the Effective Date of the option's
grant. Moreover, all options shall not expire later than 10 years
from the Effective Date of the option's grant. Stock options
shall not be repriced, i.e., there shall be no grant of a stock
option(s) to a Participant in exchange for a Participant's
agreement to cancellation of a higher-priced stock option(s) that
was previously granted to such Participant.
8.3 Restrictions Relating to Incentive Stock Options
Stock options issued in the form of incentive stock options shall,
in addition to being subject to the terms and conditions of
Section 8.2, comply with Section 422 of the Code. Accordingly,
the aggregate fair market value (determined at the time the option
was granted) of the Common Stock with respect to which incentive
stock options are exercisable for the first time by a Participant
during any calendar year (under this Plan or any other plan of the
Company) shall not exceed $100,000 (or such other limit as may be
required by the Code). From the maximum number of shares
available for issuance under the Plan under Section 6.1, the
number of shares of Common Stock that shall be available for
incentive stock options granted under the Plan is 22,000,000.
8.4 Additional Terms and Conditions
The Committee may, by way of the Award Notice or otherwise,
establish such other terms, conditions, restrictions and/or
limitations, if any, of any stock option Award, provided they are
not inconsistent with the Plan.
8.5 Exercise
Upon exercise, the option price of a stock option may be paid in
cash, or by tendering, by either actual delivery or shares or by
attestation, shares of Common Stock, a combination of the
foregoing, or such other consideration as the Committee may deem
appropriate. Any shares of Common Stock tendered by a Participant
upon exercise of a stock option must, if acquired by the
Participant pursuant to a previous stock option exercise, be owned
by the Participant for at least six months prior to the date of
exercise of the stock option. The Committee shall establish
appropriate methods for accepting Common Stock, whether restricted
or unrestricted, and may impose such conditions as it deems
appropriate on the use of such Common Stock to exercise a stock
option. Subject to Section 19.9, stock options awarded under the
Plan may also be exercised by way of the Company's broker-assisted
stock option exercise program, provided such program is available
at the time of the option's exercise. The Committee may permit a
Participant to satisfy any amounts required to be withheld under
applicable Federal, state and local tax laws, in effect from time
to time, by electing to have the Company withhold a portion of the
shares of Common Stock to be delivered for the payment of such
taxes.
8.6 Maximum Award Payable
Notwithstanding any provision contained in the Plan to the
contrary, the maximum number of shares for which stock options may
be granted under the Plan to any one Participant for a Performance
Period is 300,000 shares of Common Stock.
ARTICLE 9 -- STOCK APPRECIATION RIGHTS
9.1 In General
Awards may be granted in the form of stock appreciation rights
("SARs"). SARs entitle the Participant to receive a payment equal
to the appreciation in a stated number of shares of Common Stock
from the exercise price to the market value of the Common Stock on
the date of exercise. An SAR may be granted in tandem with all or
a portion of a related stock option under the Plan ("Tandem
SARs"), or may be granted separately ("Freestanding SARs"). A
Tandem SAR may be granted either at the time of the grant of the
related stock option or at any time thereafter during the term of
the stock option. All Awards under the Plan issued to Covered
Employees in the form of an SAR shall qualify as "Performance-
Based Compensation" under Section 162(m) of the Code.
9.2 Terms and Conditions of Tandem SARs
A Tandem SAR shall be exercisable to the extent, and only to the
extent, that the related stock option is exercisable, and the
"exercise price" of such an SAR (the base from which the value of
the SAR is measured at its exercise) shall be the option price
under the related stock option. However, at no time shall a
Tandem SAR be issued if the option price of its related stock
option is less than the fair market value of the Common Stock, as
determined by the Committee, on the Effective Date of the Tandem
SAR's grant. If a related stock option is exercised as to some or
all of the shares covered by the Award, the related Tandem SAR, if
any, shall be canceled automatically to the extent of the number
of shares covered by the stock option exercise. Upon exercise of
a Tandem SAR as to some or all of the shares covered by the Award,
the related stock option shall be canceled automatically to the
extent of the number of shares covered by such exercise, and such
shares shall not again be eligible for grant in accordance with
Section 6.1. Moreover, all Tandem SARs shall not expire later
than 10 years from the Effective Date of the SAR's grant.
9.3 Terms and Conditions of Freestanding SARs
Freestanding SARs shall be exercisable in accordance with such
terms and conditions and at such times and during such periods as
may be determined by the Committee. The exercise price of a
Freestanding SAR shall be not less than 100% of the fair market
value of the Common Stock, as determined by the Committee, on the
Effective Date of the Freestanding SAR's grant. Moreover, all
Freestanding SARs shall not expire later than 10 years from the
Effective Date of the Freestanding SAR's grant.
9.4 Deemed Exercise
The Committee may provide that an SAR shall be deemed to be
exercised at the close of business on the scheduled expiration
date of such SAR if at such time the SAR by its terms remains
exercisable and, if so exercised, would result in a payment to the
holder of such SAR.
9.5 Additional Terms and Conditions
The Committee may, by way of the Award Notice or otherwise,
determine such other terms, conditions, restrictions and/or
limitations, if any, of any SAR Award, provided they are not
inconsistent with the Plan.
9.6 Maximum Award Payable
Notwithstanding any provision contained in the Plan to the
contrary, the maximum number of shares for which SARs may be
granted under the Plan to any one Participant for a Performance
Period is 300,000 shares of Common Stock.
ARTICLE 10 -- STOCK AWARDS
10.1 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.
10.2 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.
10.3 Rights as Shareholders
During the period in which any restricted shares of Common Stock
are subject to the restrictions imposed under Section 10.2, 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 right to vote such shares and,
pursuant to Article 15, the right to receive dividends.
10.4 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.
ARTICLE 11 -- PERFORMANCE UNITS
11.1 Grants
Awards may be granted in the form of performance units.
Performance units, as that term is used in this Plan, shall refer
to Units valued by reference to designated criteria established by
the Committee, other than Common Stock.
11.2 Performance Criteria
Performance units shall be contingent on the attainment during a
Performance Period of certain performance objectives. The length
of the Performance Period, the performance objectives to be
achieved during the Performance Period, and the measure of whether
and to what degree such objectives have been attained shall be
conclusively determined by the Committee in the exercise of its
absolute discretion. Performance objectives may be revised by the
Committee, at such times as it deems appropriate during the
Performance Period, in order to take into consideration any
unforeseen events or changes in circumstances.
11.3 Additional Terms and Conditions
The Committee may, by way of the Award Notice or otherwise,
determine such other terms, conditions, restrictions, and/or
limitations, if any, of any Award of performance units, provided
they are not inconsistent with the Plan.
ARTICLE 12 -- PERFORMANCE SHARES
12.1 Grants
Awards may be granted in the form of performance shares.
Performance shares, as that term is used in this Plan, shall refer
to shares of Common Stock or Units that are expressed in terms of
Common Stock.
12.2 Performance Criteria
Performance shares shall be contingent upon the attainment during
a Performance Period of certain performance objectives. The
length of the Performance Period, the performance objectives to be
achieved during the Performance Period, and the measure of whether
and to what degree such objectives have been attained shall be
conclusively determined by the Committee in the exercise of its
absolute discretion. Performance objectives may be revised by the
Committee, at such times as it deems appropriate during the
Performance Period, in order to take into consideration any
unforeseen events or changes in circumstances.
12.3 Additional Terms and Conditions
The Committee may, by way of the Award Notice or otherwise,
determine such other terms, conditions, restrictions and/or
limitations, if any, of any Award of performance shares, provided
they are not inconsistent with the Plan.
ARTICLE 13 -- PERFORMANCE STOCK PROGRAM
13.1 Purpose
The purposes of the Performance Stock Program are: (a) to promote
the interests of the Company and its shareholders by providing a
means to acquire a proprietary interest in the Company to selected
Key Employees who are in a position to make a substantial
contribution to the continued progress and success of the Company;
(b) to attract and retain qualified individuals to serve as
Employees in those positions; (c) to enhance long-term performance
of the Company by linking a meaningful portion of the compensation
of selected Key Employees to the achievement of specific long-term
financial objectives of the Company; and (d) to motivate and
reward selected Key Employees to undertake actions to increase the
price of the Common Stock.
13.2 Eligibility
Any Key Employee is eligible to participate in the Performance
Stock Program. Within the first 90 days of a Performance Cycle
(or, if longer, within the maximum period allowed under Section
162(m) of the Code), the CEO will recommend to the Committee, and
from such recommendations the Committee will select, those Key
Employees who will be Participants for such Performance Cycle.
However, designation of a Key Employee as a Participant for a
Performance Cycle shall not in any manner entitle the Participant
to receive payment of an Award for the cycle. The determination
as to whether or not such Participant becomes entitled to payment
of an Award for such Performance Cycle shall be decided solely in
accordance with the provisions of this Article 13. Moreover,
designation of a Key Employee as a Participant for a particular
Performance Cycle shall not require designation of such Key
Employee as a Participant in any subsequent Performance Cycle and
designation of one Key Employee as a Participant shall not require
designation of any other Key Employee as a Participant in such
Performance Cycle or in any other Performance Cycle.
13.3 Description of Awards
Awards granted under the Performance Stock Program provide
Participants with the opportunity to earn shares of Common Stock,
subject to the terms and conditions of Section 13.8 below. Each
Award granted under the Plan for a Performance Cycle shall consist
of a Target Award expressed as fixed number of shares of Common
Stock. In the event the Performance Goals for the Performance
Cycle are achieved, the Performance Formula shall determine, with
regards to a particular Participant, what percentage of the
Participant's Target Award for the Performance Cycle will be
earned. All of the Awards issued under the Performance Stock
Program to Covered Employees are intended to qualify as
"Performance-Based Compensation" under Section 162(m) of the Code.
13.4 Procedure for Determining Awards
Within the first 90 days of a Performance Cycle (or, if longer,
within the maximum period allowed under Section 162(m) of the
Code), the Committee shall establish in writing for such
Performance Cycle the following: the specific Performance Criteria
that will be used to establish the Performance Goal(s), the
kind(s) and/or level(s) of the Performance Goal(s), whether the
Performance Goal(s) is(are) to apply to the Company, Kodak, a
Subsidiary, or any one or more subunits of the foregoing, the
amount of the Target Awards, and the Performance Formula.
13.5 Payment of Awards
(a) Condition to Receipt of Awards. Except as provided in
Section 13.7, a Participant must be employed by the Company on the
Performance Cycle's Award Payment Date to be eligible for an Award
for such Performance Cycle.
(b) Limitation. A Participant shall be eligible to receive an
Award for a Performance Cycle only if: (1) the Performance Goals
for such cycle are achieved; and (2) the Performance Formula as
applied against such Performance Goals determines that all or some
portion of the Participant's Target Award has been earned for the
Performance Period.
(c) Certification. Following the completion of a Performance
Cycle, the Committee shall meet to review and certify in writing
whether, and to what extent, the Performance Goals for the
Performance Cycle have been achieved. If the Committee certifies
that the Performance Goals have been achieved, it shall, based
upon application of the Performance Formula to the Performance
Goals for such cycle, also calculate and certify in writing for
each Participant what percentage of the Participant's Target Award
has been earned for the cycle. The Committee shall then determine
the actual size of each Participant's Award for the Performance
Cycle and, in so doing, shall apply Negative Discretion, if and
when it deems appropriate.
(d) Negative Discretion. In determining the actual size of an
individual Award to be paid to a Participant for a Performance
Cycle, the Committee may, through the use of Negative Discretion,
reduce or eliminate the amount of the Award earned by the
Participant under the Performance Formula for the Performance
Cycle, if in its sole judgment, such reduction or elimination is
appropriate.
(e) Timing of Award Payments. Any Awards payments that are to
made for a Performance Cycle shall be paid on the Award Payment
Date for such Performance Cycle.
(f) New Participants. Participants who are employed by the
Company after the Committee's selection of Participants for the
Performance Cycle, as well as Key Employees who are selected by
the Committee to be Participants after such date, shall, in the
event Awards are paid for the Performance Cycle, only be entitled
to a pro-rata Award. The amount of the pro-rata Award shall be
determined by multiplying the Award the Participant would have
otherwise been paid if he or she had been a Participant for the
entire Performance Cycle by a fraction the numerator of which is
the number of full months he or she was eligible to participate in
the Performance Stock Program during the Performance Cycle over
the total number of full months in the Performance Cycle. For
purposes of this calculation, a partial month of participation
shall: (1) be treated as a full month of participation to the
extent a Participant participates in the Performance Stock Program
on 15 or more days of such month; and (2) not be taken into
consideration to the extent the Participant participates in the
Performance Stock Program for less than 15 days of such month.
13.6 Maximum Award Payable
Notwithstanding any provision contained in the Plan to the
contrary, the maximum Award payable to any one Participant under
the Performance Stock Program for a Performance Cycle is 75,000
shares of Common Stock.
13.7 Termination of Employment During Performance Cycle
In the event a Participant terminates employment due to death,
Disability, Retirement or termination of employment for an
Approved Reason prior to the Award Payment Date for a Performance
Cycle, the Participant will remain eligible for a pro-rata Award.
The amount of the pro-rata Award shall be determined by
multiplying the Award, if any, that the Participant would have
otherwise been awarded by the Committee if he or she had been a
Participant through the Award Payment Date for the Performance
Cycle by a fraction, the numerator of which is the number of full
months he or she was a Participant during such Performance Cycle
over the total number of full months in the Performance Cycle.
For purposes of this calculation, a partial month of participation
shall: (1) be treated as a full month of participation to the
extent a Participant participates in the Performance Stock Program
on 15 or more days of such month; and (2) not be taken into
consideration to the extent the Participant participates in the
Performance Stock Program for less than 15 days of such month.
Such pro-rata Award shall be paid in the form of shares of Common
Stock, not subject to any restrictions, limitations or escrow
requirements. In the event of Disability, Retirement or
termination for an Approved Reason, the pro-rata Award shall be
paid directly to the Participant and, in the event of death, to
the Participant's estate.
13.8 Awards
Any Awards payments that are to made for a Performance Cycle shall
be paid by the Committee on the Award Payment Date for such
Performance Cycle in the form of shares of Common Stock. Such
shares of Common Stock shall be subject to such terms, conditions,
limitations and restrictions as the Committee, in its sole
judgment, determines.
ARTICLE 14 -- PAYMENT OF AWARDS
14.1 In General
Absent a Plan provision to the contrary, payment of Awards may, at
the discretion of the Committee, be made in cash, Common Stock, a
combination of cash and Common Stock, or any other form of
property as the Committee shall determine. In addition, payment
of Awards may include such terms, conditions, restrictions and/or
limitations, if any, as the Committee deems appropriate,
including, in the case of Awards paid in the form of Common Stock,
restrictions on transfer and forfeiture provisions; provided,
however, such terms, conditions, restrictions and/or limitations
are not inconsistent with the Plan. Further, payment of Awards
may be made in the form of a lump sum or installments, as
determined by the Committee.
14.2 Termination of Employment
The Committee shall have the authority to determine the treatment
of a Participant's Award under the Plan in the event of the
Participant's termination of employment, provided, however, in the
case of Awards issued under the Performance Stock Program, such
rules and regulations are consistent with Section 13.7.
14.3 Inimical Conduct
If a Participant performs any act or engages in any activity which
the CEO, in the case of an Employee or former Employee, or the
Committee, in the case of a Director or former Director,
determines is inimical to the best interests of the Company, the
Participant shall, effective as of the date the Participant
engages in such conduct, forfeit all unexercised, unearned, and/or
unpaid Awards, including, but not by way of limitation, Awards
earned but not yet paid, all unpaid dividends and dividend
equivalents, and all interest, if any, accrued on the foregoing.
14.4 Breach of Employee's Agreement
(a) In General. A Participant who engages in conduct described
in Section 14.4(c) below shall immediately: (1) forfeit, effective
as of the date the Participant engages in such conduct, all
unexercised, unearned, and/or unpaid Awards, including, but not by
way of limitation, Awards earned but not yet paid, all unpaid
dividends and dividend equivalents, and all interest, if any,
accrued on the foregoing; and (2) pay to the Company the amount of
any gain realized or payment received as a result of any stock
option or stock appreciation right exercised by the Participant
under the Plan within the two year period immediately preceding
the date the Participant engages in such conduct.
(b) Set-Off. By accepting an Award under this Plan, a
Participant consents to a deduction from any amounts the Company
owes the Participant from time to time (including, but not limited
to, amounts owed to the Participant as wages or other
compensation, fringe benefits, or vacation pay), to the extent of
the amounts the Participant owes the Company under Section
14.4(a). Whether or not the Company elects to make any set-off in
whole or in part, if the Company does not recover by means of set-
off the full amount the Participant owes the Company, the
Participant shall immediately pay the unpaid balance to the
Company.
(c) Conduct. The following conduct shall result in the
consequences described in Section 14.4(a):
1. Kodak. In the case of a Participant who has signed an
Eastman Kodak Company Employee's Agreement, the Participant's
breach of the Eastman Kodak Company Employee's Agreement.
2. Subsidiary. In the case of a Participant who is employed by
a Subsidiary and has signed a written agreement with the
Subsidiary that contains restrictive covenants similar to those in
the Eastman Kodak Company Employee's Agreement, the Participant's
breach of such written agreement.
3. Other Participants. In the case of a Participant other than
a Participant described in Section 14.4(c)(1) or (2) above, the
Participant without the prior written consent of Kodak, in the
case of an Employee or former Employee, or the Committee, in the
case of a Director or former Director: (i) engages directly or
indirectly in any manner or capacity as principal, agent, partner,
officer, director, stockholder, employee, or otherwise, in any
business or activity competitive with the business conducted by
Kodak or any Subsidiary; or (ii) at any time divulges to any
person or any entity other than the Company any trade secrets,
methods, processes or the proprietary or confidential information
of the Company. For purposes of this Section 14.4(c)(3), a
Participant shall not be deemed a stockholder if the Participant's
record and beneficial ownership amount to not more than 1% of the
outstanding capital stock of any company subject to the periodic
and other reporting requirements of the Exchange Act.
ARTICLE 15 -- DIVIDEND AND DIVIDEND EQUIVALENT
If an Award is granted in the form of a Stock Award, stock option,
or performance share, or in the form of any other stock-based
grant, the Committee may choose, at the time of the grant of the
Award or any time thereafter up to the time of the Award's
payment, to include as part of such Award an entitlement to
receive dividends or dividend equivalents, subject to such terms,
conditions, restrictions and/or limitations, if any, as the
Committee may establish. Dividends and dividend equivalents shall
be paid in such form and manner (i.e., lump sum or installments),
and at such time(s) as the Committee shall determine. All
dividends or dividend equivalents which are not paid currently
may, at the Committee's discretion, accrue interest, be reinvested
into additional shares of Common Stock or, in the case of
dividends or dividend equivalents credited in connection with
performance shares, be credited as additional performance shares
and paid to the Participant if and when, and to the extent that,
payment is made pursuant to such Award. The total number of
shares available for grant under Section 6.1 shall not be reduced
to reflect any dividends or dividend equivalents that are
reinvested into additional shares of Common Stock or credited as
additional performance shares.
ARTICLE 16 -- DEFERRAL OF AWARDS
At the discretion of the Committee, payment of any Award,
dividend, or dividend equivalent, or any portion thereof, may be
deferred by a Participant until such time as the Committee may
establish. All such deferrals shall be accomplished by the
delivery of a written, irrevocable election by the Participant
prior to the time established by the Committee for such purpose,
on a form provided by the Company. Further, all deferrals shall
be made in accordance with administrative guidelines established
by the Committee to ensure that such deferrals comply with all
applicable requirements of the Code. Deferred payments shall be
paid in a lump sum or installments, as determined by the
Committee. Deferred Awards may also be credited with interest, at
such rates to be determined by the Committee, and, with respect to
those deferred Awards denominated in the form of Common Stock,
with dividends or dividend equivalents.
ARTICLE 17 -- CHANGE IN OWNERSHIP
17.1 Background
Notwithstanding any provision contained in the Plan, including,
but not limited to, Sections 4.4 and 19.11, the provisions of this
Article 17 shall control over any contrary provision. Upon a
Change In Ownership: (i) the terms of this Article 17 shall
immediately become operative, without further action or consent by
any person or entity; (ii) all terms, conditions, restrictions,
and limitations in effect on any unexercised, unearned, unpaid,
and/or deferred Award, or any other outstanding Award, shall
immediately lapse as of the date of such event; (iii) no other
terms, conditions, restrictions and/or limitations shall be
imposed upon any Awards on or after such date, and in no
circumstance shall an Award be forfeited on or after such date;
and (iv) except in those instances where a prorated Awards is
required to be paid under this Article 17, all unexercised,
unvested, unearned, and/or unpaid Awards or any other outstanding
Awards shall automatically become one hundred percent (100%)
vested immediately.
17.2 Dividends and Dividend Equivalents
Upon a Change In Ownership, all unpaid dividends and dividend
equivalents and all interest accrued thereon, if any, shall be
treated and paid under this Article 17 in the identical manner and
time as the Award under which such dividends or dividend
equivalents have been credited. For example, if upon a Change In
Ownership, an Award under this Article 17 is to be paid in a
prorated fashion, all unpaid dividends and dividend equivalents
with respect to such Award shall be paid according to the same
formula used to determine the amount of such prorated Award.
17.3 Treatment of Performance Units and Performance Shares
If a Change In Ownership occurs during the term of one or more
Performance Periods for which the Committee has granted
performance units and/or performance shares (including those
issued as Performance Awards under Article 7), the term of each
such Performance Period (hereinafter a "current performance
period") shall immediately terminate upon the occurrence of such
event. Upon a Change In Ownership, for each "current performance
period" and each completed Performance Period for which the
Committee has not on or before such date made a determination as
to whether and to what degree the performance objectives for such
period have been attained (hereinafter a "completed performance
period"), it shall be assumed that the performance objectives have
been attained at a level of one hundred percent (100%) or the
equivalent thereof.
A Participant in one or more "current performance periods" shall
be considered to have earned and, therefore, be entitled to
receive, a prorated portion of the Awards previously granted to
him for each such "current performance period." Such prorated
portion shall be determined by multiplying the number of
performance shares or performance units, as the case may be,
granted to the Participant by a fraction, the numerator of which
is the total number of whole months that have elapsed since the
beginning of the "current performance period," and the denominator
of which is the total number of full months in such "current
performance period." For purposes of this calculation, a partial
month shall be treated as a full month to the extent 15 or more
days in such month have elapsed.
A Participant in one or more "completed performance periods" shall
be considered to have earned and, therefore, be entitled to
receive all the performance shares or performance units, as the
case may be, previously granted to him during each such "completed
performance period."
17.4 Treatment of Awards under Performance Stock Program
Upon a Change in Ownership, any Participant of the Performance
Stock Program, whether or not he or she is still employed by the
Company, shall be paid, as soon as practicable but in no event
later than 90 days after the Change in Ownership, a pro-rata Award
for each Performance Cycle in which Participant was selected to
participate and during which the Change in Ownership occurs. The
amount of the pro-rata Award shall be determined by multiplying
the Target Award for such Performance Cycle for Participants in
the same wage grade as the Participant by a fraction, the
numerator of which shall be the number of full months in the
Performance Cycle prior to the date of the Change in Ownership and
the denominator of which shall be the total number of full months
in the Performance Cycle. For purposes of this calculation, a
partial month shall be treated as a full month to the extent 15 or
more days in such month have elapsed. To the extent Target Awards
have not yet been established for the Performance Cycle, the
Target Awards for the immediately preceding Performance Cycle
shall be used.
17.5 Valuation of Awards
Upon a Change In Ownership, all outstanding Units of Common Stock,
Freestanding SARs, stock options (including incentive stock
options), Stock Awards (including those issued as Performance
Awards under Article 7), performance shares (including those
earned as a result of the application of Section 17.3 above), and
all other outstanding stock-based Awards (including those earned
as a result of the application of Section 17.4 above and those
granted by the Committee pursuant to its authority under
Subsection 4.2(m) hereof), shall be valued and cashed out on the
basis of the Change In Control Price.
17.6 Payment of Awards
Upon a Change In Ownership, any Participant, whether or not he or
she is still employed by the Company, shall be paid, in a single
lump-sum cash payment, as soon as practicable but in no event
later than 90 days after the Change In Ownership, all of his or
her Units of Common Stock, Freestanding SARs, stock options
(including incentive stock options), Stock Awards (including those
issued as Performance Awards under Article 7), performance units
and shares (including those earned as a result of the application
of Section 17.3 above), all other outstanding stock-based Awards
(including those earned as a result of the application of Section
17.4 above and those granted by the Committee pursuant to its
authority under Subsection 4.2(n) hereof), and all other
outstanding Awards.
17.7 Deferred Awards
Upon a Change In Ownership, all Awards deferred by a Participant
under Article 16 hereof, but for which he or she has not received
payment as of such date, shall be paid in a single lump-sum cash
payment as soon as practicable, but in no event later than 90 days
after the Change In Ownership. For purposes of making such
payment, the value of all Awards that are stock based shall be
determined by the Change In Control Price.
17.8 Miscellaneous
Upon a Change In Ownership, (i) the provisions of Sections 14.2,
14.3, 14.4 and 19.3 hereof shall become null and void and of no
further force and effect; and (ii) no action, including, but not
by way of limitation, the amendment, suspension, or termination of
the Plan, shall be taken which would affect the rights of any
Participant or the operation of the Plan with respect to any Award
to which the Participant may have become entitled hereunder on or
prior to the date of such action or as a result of such Change In
Ownership.
ARTICLE 18 -- CHANGE IN CONTROL.
18.1 Background
Notwithstanding any provision contained in the Plan, including,
but not limited to, Sections 4.4 and 19.11, the provisions of this
Article 18 shall control over any contrary provision. All
Participants shall be eligible for the treatment afforded by this
Article 18 if their employment by the Company terminates within
two years following a Change In Control, unless the termination is
due to (i) death, (ii) Disability, (iii) Cause, (iv) resignation
other than (A) resignation from a declined reassignment to a job
that is not reasonably equivalent in responsibility or
compensation (as defined in Kodak's Termination Allowance Plan),
or that is not in the same geographic area (as defined in Kodak's
Termination Allowance Plan), or (B) resignation within 30 days
following a reduction in base pay, or (v) Retirement.
18.2 Vesting and Lapse of Restrictions
If a Participant is eligible for treatment under this Article 18,
(i) all of the terms, conditions, restrictions, and limitations in
effect on any of his or her unexercised, unearned, unpaid and/or
deferred Awards shall immediately lapse as of the date of his or
her termination of employment; (ii) no other terms, conditions,
restrictions and/or limitations shall be imposed upon any of his
or her Awards on or after such date, and in no event shall any of
his or her Awards be forfeited on or after such date; and (iii)
except in those instances where a prorated Award is required to be
paid under this Article 18, all of his or her unexercised,
unvested, unearned and/or unpaid Awards shall automatically become
one hundred percent (100%) vested immediately upon his or her
termination of employment.
18.3 Dividends and Dividend Equivalents
If a Participant is eligible for treatment under this Article 18,
all of his or her unpaid dividends and dividend equivalents and
all interest accrued thereon, if any, shall be treated and paid
under this Article 18 in the identical manner and time as the
Award under which such dividends or dividend equivalents have been
credited.
18.4 Treatment of Performance Units and Performance Shares
If a Participant holding either performance units or performance
shares (including those issued as Performance Awards under Article
7) is terminated under the conditions described in Section 18.1
above, the provisions of this Section 18.4 shall determine the
manner in which such performance units and/or performance shares
shall be paid to the Participant. For purposes of making such
payment, each "current performance period," as that term is
defined in Section 17.3, shall be treated as terminating upon the
date of the Participant's termination of employment, and for each
such "current performance period" and each "completed performance
period," as that term is defined in Section 17.3, it shall be
assumed that the performance objectives have been attained at a
level of one hundred percent (100%) or the equivalent thereof. If
the Participant is participating in one or more "current
performance periods," he or she shall be considered to have earned
and, therefore, be entitled to receive that prorated portion of
the Awards previously granted to him for each such performance
period, as determined in accordance with the formula established
in Section 17.3 hereof. A Participant in one or more "completed
performance periods" shall be considered to have earned and,
therefore, be entitled to receive all the performance shares and
performance units previously granted to him during each
performance period.
18.5 Treatment of Awards under Performance Stock Program
If a Participant of the Performance Stock Program is eligible for
treatment under this Article 18, he or she shall be paid, as soon
as practicable but in no event later than 90 days after the date
of his or her termination of employment, a pro-rata Award for each
Performance Cycle in which Participant was selected to participate
and during which the Change in Ownership occurs. The amount of
the pro-rata Award shall be determined by multiplying the Target
Award for such Performance Cycle for Participants in the same wage
grade as the Participant by a fraction, the numerator of which
shall be the number of full months in the Performance Cycle prior
to the date of his or her termination of employment and the
denominator of which shall be the total number of full months in
the Performance Cycle. For purposes of this calculation, a
partial month shall be treated as a full month to the extent 15 or
more days in such month have elapsed. To the extent Target Awards
have not yet been established for the Performance Cycle, the
Target Awards for the immediately preceding Performance Cycle
shall be used.
18.6 Valuation of Awards
If a Participant is eligible for treatment under this Article 18,
his or her Awards shall be valued and cashed out in accordance
with the provisions of Section 17.5.
18.7 Payment of Awards
If a Participant is eligible for treatment under this Article 18,
he or she shall be paid, in a single lump-sum cash payment, as
soon as practicable but in no event later than 90 days after the
date of his or her termination of employment, all of his or her
Units of Common Stock, Freestanding SARs, stock options (including
incentive stock options), Stock Awards (including those issued as
Performance Awards under Article 7), performance units and shares
(including those earned as a result of the application of Section
18.4 above), all other outstanding stock-based Awards (including
those earned as a result of the application of Section 18.5 above
and those granted by the Committee pursuant to its authority under
Subsection 4.2(n) hereof), and all other outstanding Awards.
18.8 Deferred Awards
If a Participant is eligible for treatment under this Article 18,
all of his or her deferred Awards for which payment has not been
received as of the date of his or her termination of employment
shall be paid to the Participant in a single lump-sum cash payment
as soon as practicable, but in no event later than 90 days after
the date of the Participant's termination. For purposes of making
such payment, the value of all Awards that are stock based shall
be determined by the Change In Control Price.
18.9 Miscellaneous
Upon a Change In Control, (i) the provisions of Sections 14.2,
14.3, 14.4 and 19.3 hereof shall become null and void and of no
force and effect insofar as they apply to a Participant who has
been terminated under the conditions described in Section 18.1
above; and (ii) no action, including, but not by way of
limitation, the amendment, suspension or termination of the Plan,
shall be taken which would affect the rights of any Participant or
the operation of the Plan with respect to any Award to which the
Participant may have become entitled hereunder on or prior to the
date of the Change In Control or to which he or she may become
entitled as a result of such Change In Control.
18.10 Legal Fees
Kodak shall pay all legal fees and related expenses incurred by a
Participant in seeking to obtain or enforce any payment, benefit
or right he or she may be entitled to under the Plan after a
Change In Control; provided, however, the Participant shall be
required to repay any such amounts to Kodak to the extent a court
of competent jurisdiction issues a final and non-appealable order
setting forth the determination that the position taken by the
Participant was frivolous or advanced in bad faith.
ARTICLE 19 -- MISCELLANEOUS
19.1 Nonassignability
(a). In General. Except as otherwise determined by the Committee
or as otherwise provided in Subsection (b) below, no Awards or any
other payment under the Plan shall be subject to any manner to
alienation, anticipation, sale, transfer (except by will or the
laws of descent and distribution), assignment, pledge, or
encumbrance, nor shall any Award be payable to or exercisable by
anyone other than the Participant to whom it was granted.
(b). Nonqualified Stock Options. The Committee shall have the
discretionary authority to grant Awards of nonqualified stock
options or amend outstanding Awards of nonqualified stock options
to provide that they be transferable, subject to such terms and
conditions as the Committee shall establish. In addition to any
such terms and conditions, the following terms and conditions
shall apply to all transfers of nonqualified stock options:
1. Permissible Transferors. The only Participants permitted to
transfer their nonqualified stock options are those Participants
who are, on the date of the transfer of their nonqualified stock
option, either in wage grade 56 or above, or the equivalent
thereof, a corporate officer of Kodak, or a Director.
2. Permissible Transferees. Transfers shall only be permitted
to: (i) the Participant's "Immediate Family Members," as that term
is defined in Subsection (b)(9) below; (ii) a trust or trusts for
the exclusive benefit of such Immediate Family Members; or (iii) a
family partnership or family limited partnership in which each
partner is, at the time of transfer and all times subsequent
thereto, either an Immediate Family Member or a trust for the
exclusive benefit of one or more Immediate Family Members.
3. No Consideration. All transfers shall be made for no
consideration.
4. Subsequent Transfers. Once a Participant transfers a
nonqualified stock option, any subsequent transfer of such
transferred option shall, notwithstanding Section 19.1(b)(1) to
the contrary, be permitted provided, however, such subsequent
transfer complies with all of the terms and conditions of this
Section 19.1, with the exception of Section 19.1(b)(1).
5. Transfer Agent. In order for a transfer to be effective,
the Committee's designated transfer agent must be used to
effectuate the transfer. The costs of such transfer agent shall
be borne solely by the transferor.
6. Withholding. In order for a transfer to be effective, a
Participant must agree in writing prior to the transfer on a form
provided by Kodak to pay any and all payroll and withholding taxes
due upon exercise of the transferred option. In addition, prior
to the exercise of a transferred option by a transferee,
arrangements must be made by the Participant with Kodak for the
payment of all payroll and withholding taxes.
7. Terms and Conditions of Transferred Option. Upon transfer,
a nonqualified stock option continues to be governed by and
subject to the terms and conditions of the Plan and the option's
applicable administrative guide and Award Notice. A transferee of
a nonqualified stock option is entitled to the same rights as the
Participant to whom such nonqualified stock options was awarded,
as if no transfer had taken place. Accordingly, the rights of the
transferee are subject to the terms and conditions of the original
grant to the Participant, including provisions relating to
expiration date, exercisability, option price and forfeiture.
8. Notice to Transferees. Kodak shall be under no obligation
to provide a transferee with any notice regarding the transferred
options held by the transferee upon forfeiture or any other
circumstance.
9. Immediate Family Member. For purposes of this Section 19.1,
the term "Immediate Family Member" shall mean the Participant and
his or her spouse, children or grandchildren, whether natural,
step or adopted children or grandchildren.
19.2 Withholding Taxes
The Company shall be entitled to deduct from any payment under the
Plan, regardless of the form of such payment, the amount of all
applicable income and employment taxes required by law to be
withheld with respect to such payment or may require the
Participant to pay to it such tax prior to and as a condition of
the making of such payment. In accordance with any applicable
administrative guidelines it establishes, the Committee may allow
a Participant to pay the amount of taxes required by law to be
withheld from an Award by withholding from any payment of Common
Stock due as a result of such Award, or by permitting the
Participant to deliver to the Company, shares of Common Stock
having a fair market value, as determined by the Committee, equal
to the amount of such required withholding taxes.
19.3 Amendments to Awards
The Committee may at any time unilaterally amend any unexercised,
unearned, or unpaid Award, including, but not by way of
limitation, Awards earned but not yet paid, to the extent it deems
appropriate; provided, however, that any such amendment which, in
the opinion of the Committee, is adverse to the Participant shall
require the Participant's consent.
19.4 Regulatory Approvals and Listings
Notwithstanding anything contained in this Plan to the contrary,
the Company shall have no obligation to issue or deliver
certificates of Common Stock evidencing Stock Awards or any other
Award resulting in the payment of Common Stock prior to (i) the
obtaining of any approval from any governmental agency which the
Company shall, in its sole discretion, determine to be necessary
or advisable, (ii) the admission of such shares to listing on the
stock exchange on which the Common Stock may be listed, and (iii)
the completion of any registration or other qualification of said
shares under any state or Federal law or ruling of any
governmental body which the Company shall, in its sole discretion,
determine to be necessary or advisable.
19.5 No Right to Continued Employment or Grants
Participation in the Plan shall not give any Employee any right to
remain in the employ of Kodak or any Subsidiary. Kodak or, in the
case of employment with a Subsidiary, the Subsidiary, reserves the
right to terminate any Employee at any time. Further, the
adoption of this Plan shall not be deemed to give any Employee or
any other individual any right to be selected as a Participant or
to be granted an Award. In addition, no Employee having been
selected for an Award, shall have at any time the right to receive
any additional Awards.
19.6 Amendment/Termination
The Committee may suspend or terminate the Plan at any time for
any reason with or without prior notice. In addition, the
Committee may, from time to time for any reason and with or
without prior notice, amend the Plan in any manner, but may not
without shareholder approval adopt any amendment which would
require the vote of the shareholders of Kodak pursuant to Section
162(m) of the Code, but only insofar as such amendment affects
Covered Employees.
19.7 Governing Law
The Plan shall be governed by and construed in accordance with the
laws of the State of New York, except as superseded by applicable
Federal Law, without giving effect to its conflicts of law
provisions.
19.8 No Right, Title, or Interest in Company Assets
No Participant shall have any rights as a shareholder as a result
of participation in the Plan until the date of issuance of a stock
certificate in his or her name, and, in the case of restricted
shares of Common Stock, such rights are granted to the Participant
under the Plan. To the extent any person acquires a right to
receive payments from the Company under the Plan, such rights
shall be no greater than the rights of an unsecured creditor of
the Company and the Participant shall not have any rights in or
against any specific assets of the Company. All of the Awards
granted under the Plan shall be unfunded.
19.9 Section 16 of the Exchange Act
In order to avoid any Exchange Act violations, the Committee may,
from time to time, impose additional restrictions upon an Award,
including but not limited to, restrictions regarding tax
withholdings and restrictions regarding the Participant's ability
to exercise Awards under the Company's broker-assisted stock
option exercise program.
19.10 No Guarantee of Tax Consequences
No person connected with the Plan in any capacity, including, but
not limited to, Kodak and its Subsidiaries and their directors,
officers, agents and employees makes any representation,
commitment, or guarantee that any tax treatment, including, but
not limited to, Federal, state and local income, estate and gift
tax treatment, will be applicable with respect to amounts deferred
under the Plan, or paid to or for the benefit of a Participant
under the Plan, or that such tax treatment will apply to or be
available to a Participant on account of participation in the
Plan.
19.11 Compliance with Section 162(m)
If any provision of the Plan, other than the application of those
contained in Articles 17 or 18 hereof, would cause the Awards
granted to a Covered Person not to qualify as "Performance-Based
Compensation" under Section 162(m) of the Code, that provision,
insofar as it pertains to the Covered Person, shall be severed
from, and shall be deemed not to be a part of, this Plan, but the
other provisions hereof shall remain in full force and effect.
19.12 Other Benefits
No Award granted under the Plan shall be considered compensation
for purposes of computing benefits under any retirement plan of
the Company nor affect any benefits or compensation under any
other benefit or compensation plan of the Company now or
subsequently in effect
Appendix II
EASTMAN KODAK COMPANY
2000 MANAGEMENT VARIABLE COMPENSATION PLAN
Article Page
1. Purpose, Effective Date and Term of Plan 1
2. Definitions 2
3. Eligibility 9
4. Plan Administration 10
5. Forms of Awards 12
6. Setting Performance Goals and Performance Formula 13
7. Award Determination 14
8. Payment of Awards for a Performance Period 17
9. Deferral of Awards 18
10. Additional Awards 19
11. Change In Ownership 20
12. Change In Control 22
13. Shares Subject to the Plan 24
14. Miscellaneous 26
copyright 1998, Eastman Kodak Company
ARTICLE 1 -- PURPOSE, EFFECTIVE DATE AND TERM OF PLAN
1.1 Purpose
The purposes of the Plan are to provide an annual incentive to Key
Employees of the Company to put forth maximum efforts toward the
continued growth and success of the Company, to encourage such Key
Employees to remain in the employ of the Company, to assist the
Company in attracting and motivating new Key Employees on a
competitive basis, and to endeavor to qualify the Awards granted
to Covered Employees under the Plan as performance-based
compensation as defined in Section 162(m) of the Code. The Plan
is intended to apply to Key Employees of the Company in the United
States and throughout the world.
1.2 Effective Date
The Plan shall be effective as of January 1, 2000, subject to
approval by Kodak's shareholders at the 1999 Annual Meeting of the
Shareholders of Kodak.
1.3 Term
Awards shall not be granted pursuant to the Plan after December
31, 2004; provided, however, the Committee may grant Awards after
such date in recognition of performance for a Performance Period
completed on or prior to such date.
ARTICLE 2 -- DEFINITIONS
2.1 Actual Award Pool
"Actual Award Pool" means, for a Performance Period, the amount
determined in accordance with Section 7.2(e). The Actual Award
Pool for a Performance Period determines the aggregate amount of
all the Awards that are to be issued under the Plan for such
Performance Period.
2.2 Award
"Award" means the compensation granted to a Participant by the
Committee for a Performance Period pursuant to Articles 7 and 8 or
the compensation granted to a Key Employee by the Committee
pursuant to Article 10. All Awards shall be issued in the form
specified by Article 5.
2.3 Award Payment Date
"Award Payment Date" means, for each Performance Period, the date
that the amount of the Award for that Performance Period shall be
paid to the Participant under Article 8, without regard to any
election to defer receipt of the Award made by the Participant
under Article 9 of the Plan.
2.4 Board
"Board" means the Board of Directors of Kodak.
2.5 Capital Charge
"Capital Charge" means, for a Performance Period, the amount
obtained by multiplying the Cost of Capital for the Performance
Period by Operating Net Assets for the Performance Period.
2.6 Carryforward Amount
"Carryforward Amount" means, for any Performance Period, the sum
of the Carryovers for all prior Performance Periods less the sum
of all Awards granted from the Carryforward Amount pursuant to
Articles 7 and 10. To the extent the sum of all Awards paid for a
Performance Period exceeds the Maximum Award for such period, the
Carryforward Amount shall be reduced by an amount equal to such
difference.
2.7 Carryover
"Carryover" means, for a Performance Period, that portion, if any,
or all of the difference, if any, between the Maximum Award for
such Performance Period and the sum of all Awards paid under the
Plan for such Performance Period, which the Committee elects to
add to the Carryforward Amount.
2.8 Cause
"Cause" means (a) the willful and continued failure by a Key
Employee to substantially perform his or her duties with his or
her employer after written warnings identifying the lack of
substantial performance are delivered to the Key Employee by his
or her employer to specifically identify the manner in which the
employer believes that the Key Employee has not substantially
performed his or her duties; or (b) the willful engaging by a Key
Employee in illegal conduct which is materially and demonstrably
injurious to the Company.
2.9 CEO
"CEO" means the Chief Executive Officer of Kodak.
2.10 Change In Control
"Change In Control" means a change in control of Kodak of a nature
that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on August 1, 1989,
pursuant to Section 12 or 15(d) of the Exchange Act; provided
that, without limitation, a Change In Control shall be deemed to
have occurred at such time as (i) any "person" within the meaning
of Section 13(d) of the Exchange Act, other than Kodak, a
Subsidiary, or any employee benefit plan(s) sponsored by Kodak or
any Subsidiary, is or has become the "beneficial owner," as
defined in Rule 12d-3 under the Exchange Act, directly or
indirectly, of 25% or more of the combined voting power of the
outstanding securities of Kodak ordinarily having the right to
vote at the election of directors, or (ii) individuals who
constitute the Board on January 1, 2000 (the "Incumbent Board")
have ceased for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent
to January 1, 2000 whose election, or nomination for election by
Kodak's shareholders, was approved by a vote of at least three-
quarters (3/4) of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement
of Kodak in which such person is named as a nominee for director
without objection to such nomination) shall be, for purposes of
this Plan, considered as though such person were a member of the
Incumbent Board.
2.11 Change In Ownership
"Change In Ownership" means a Change In Control that results
directly or indirectly in Kodak's Common Stock ceasing to be
actively traded on the New York Stock Exchange.
2.12 Code
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor
provisions and regulations thereto.
2.13 Committee
"Committee" means the Executive Compensation and Development
Committee of the Board, or such other Board committee as may be
designated by the Board to administer the Plan; provided that the
Committee shall consist of three or more directors, all of whom
are both a "Non-Employee Director" within the meaning of Rule 16b-
3 under the Exchange Act and an "outside director" within the
meaning of the definition of such term as contained in Proposed
Treasury Regulation Section 1.162-27(e)(3), or any successor
definition adopted.
2.14 Company
"Company" means Kodak and its Subsidiaries.
2.15 Cost of Capital
"Cost of Capital" means, for a Performance Period, the estimated
weighted average of the Company's cost of equity and cost of debt
for the Performance Period as determined by the Committee in its
sole and absolute discretion. The Committee will determine the
Cost of Capital for a Performance Period within the first 90 days
of the Performance Period.
2.16 Covered Employee
"Covered Employee" means a Key Employee who is either a "Covered
Employee" within the meaning of Section 162(m) of the Code or a
Key Employee who the Committee has identified as a potential
"Covered Employee" within the meaning of Section 162(m) of the
Code.
2.17 Disability
"Disability" means a disability under the terms of any long-term
disability plan maintained by the Company.
2.18 Economic Profit
"Economic Profit" means, for a Performance Period, the Net
Operating Profit After Tax that remains after subtracting the
Capital Charge for such Performance Period. Economic Profit may
be expressed as follows: Economic Profit = Net Operating Profit
After Tax - Capital Charge. Economic Profit may be either
positive or negative.
2.19 Economic Value Added or EVA
"Economic Value Added or EVA" means Economic Profit for the
current year minus Economic Profit for the immediately prior year.
2.20 Effective Date
"Effective Date" means the date an Award is determined to be
effective by the Committee upon its grant of such Award.
2.21 Exchange Act
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and
successor provisions and rules thereto.
2.22 Key Employee
"Key Employee" means either (a) a salaried employee of the Company
in wage grade 48 or above, or the equivalent thereof; or (b) a
salaried employee of the Company who holds a position of
responsibility in a managerial, administrative, or professional
capacity and is in wage grade 43 or above
2.23 Kodak
"Kodak" means Eastman Kodak Company.
2.24 Maximum Award
"Maximum Award" means, for a Performance Period, the dollar amount
calculated in accordance with Section 7.2(b) by applying the
Performance Formula for such Performance Period against the
Performance Goals for the same Performance Period. The Maximum
Award for a Performance Period is an addend in the calculation of
the Maximum Award Pool for such Performance Period.
2.25 Maximum Award Pool
"Maximum Award Pool" means, for a Performance Period, the dollar
amount calculated in accordance with Section 7.2(c) by adding the
Maximum Award for the Performance Period with the Carryforward
Amount. The Maximum Award Pool, for a Performance Period, serves
as the basis for calculating the maximum amount of Awards that may
be granted to all Participants for such Performance Period.
2.26 Negative Discretion
"Negative Discretion" means the discretion granted to the
Committee pursuant to Sections 7.2(d) and (e) to reduce or
eliminate the Maximum Award Pool or a portion of the Maximum Award
Pool allocated to a Covered Employee.
2.27 Net Operating Profit After Tax
"Net Operating Profit After Tax" means, for a Performance Period,
the after-tax operating earnings of the Company for the
Performance Period adjusted for interest expense and Wang in-
process R&D. The Committee is authorized at any time during the
first 90 days of a Performance Period, or at any time thereafter
in its sole and absolute discretion, to adjust or modify the
calculation of Net Operating Profit After Tax for such Performance
Period in order to prevent the dilution or enlargement of the
rights of Participants, (a) in the event of, or in anticipation
of, any dividend or other distribution (whether in the form of
cash, securities or other property), re-capitalization,
restructuring, reorganization, merger, consolidation, spin off,
combination, repurchase, share exchange, liquidation, dissolution,
or other similar corporate transaction, event or development; (b)
in recognition of, or in anticipation of, any other unusual or
nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation
of, changes in applicable laws, regulations, accounting
principles, or business conditions; (c) in recognition of, or in
anticipation of, any other extraordinary gains or losses, and (d)
in view of the Committee's assessment of the business strategy of
the Company, performance of comparable organizations, economic and
business conditions, and any other circumstances deemed relevant.
However, if and to the extent the exercise of such authority after
the first 90 days of a Performance Period would cause the Awards
granted to the Covered Employees for the Performance Period to
fail to qualify as "Performance-Based Compensation" under Section
162(m) of the Code, then such authority shall only be exercised
with respect to those Participants who are not Covered Employees.
2.28 Operating Net Assets
"Operating Net Assets" means, for a Performance Period, the net
investment used in the operations of the Company. Operating Net
Assets is calculated from the Company's audited consolidated
financial statements as being total assets minus non-interest-
bearing liabilities adjusted for LIFO inventories, postemployment
benefits other than pensions (OPEB) and Wang in-process R&D. The
Committee is authorized at any time during a Performance Period to
adjust or modify the calculation of Operating Net Assets for such
Performance Period in order to prevent the dilution or enlargement
of the rights of Participants, (a) in the event of, or in
anticipation of, any dividend or other distribution (whether in
the form of cash, securities or other property), recapitalization,
restructuring, reorganization, merger, consolidation, spin off,
combination, repurchase, share exchange, liquidation, dissolution,
or other similar corporate transaction, event or development; (b)
in recognition of, or in anticipation of, any other unusual or
nonrecurring event affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation
of, changes in applicable laws, regulations, accounting
principles, or business conditions; (c) in recognition of, or in
anticipation of, any other extraordinary gains or losses; and (d)
in view of the Committee's assessment of the business strategy of
the Company, performance of comparable organizations, economic and
business conditions, and any other circumstances deemed relevant.
However, if and to the extent the exercise of such authority after
the first 90 days of a Performance Period would cause the Awards
granted to the Covered Employees for the Performance Period to
fail to qualify as "Performance-Based Compensation" under Section
162(m) of the Code, then such authority shall only be exercised
with respect to those Participants who are not Covered Employees.
2.29 Participant
"Participant," means either (a) for a Performance Period, a Key
Employee who is designated to participate in the Plan for the
Performance Period pursuant to Article 3; or (b) for purposes of
Article 10, a Key Employee who is granted an Award pursuant to
such Article.
2.30 Performance Criteria
"Performance Criteria" means the stated business criterion or
criteria upon which the Performance Goals for a Performance Period
are based as required pursuant to Proposed Treasury Regulation
Section 1.162-27(e)(4)(iii). For purposes of the Plan, Economic
Profit/EVA shall be the Performance Criteria.
2.31 Performance Formula
"Performance Formula" means, for a Performance Period, the one or
more objective formulas applied against the Performance Goals to
determine the Maximum Award for the Performance Period. The
Performance Formula for a Performance Period shall be established
in writing by the Committee within the first 90 days of the
Performance Period (or, if later, within the maximum period
allowed pursuant to Section 162(m) of the Code).
2.32 Performance Goals
"Performance Goals" means, for a Performance Period, the one or
more goals for the Performance Period established by the Committee
in writing within the first 90 days of the Performance Period (or,
if longer, within the maximum period allowed pursuant to Section
162(m) of the Code) based upon the Performance Criteria. The
Committee is authorized at any time during the first 90 days of a
Performance Period, or at any time thereafter in its sole and
absolute discretion, to adjust or modify the calculation of a
Performance Goal for such Performance Period in order to prevent
the dilution or enlargement of the rights of Participants, (a) in
the event of, or in anticipation of, any unusual or extraordinary
corporate item, transaction, event or development; (b) in
recognition of, or in anticipation of, any other unusual or
nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation
of, changes in applicable laws, regulations, accounting
principles, or business conditions; and (c) in view of the
Committee's assessment of the business strategy of the Company,
performance of comparable organizations, economic and business
conditions, and any other circumstances deemed relevant. However,
to the extent the exercise of such authority after the first 90
days of a Performance Period would cause the Awards granted to the
Covered Employees for the Performance Period to fail to qualify as
"Performance-Based Compensation" under Section 162(m) of the Code,
then such authority shall only be exercised with respect to those
Participants who are not Covered Employees.
2.33 Performance Period
"Performance Period" means Kodak's fiscal year.
2.34 Plan
"Plan" means the 2000 Management Variable Compensation Plan.
2.35 Retirement
"Retirement" means, in the case of a Participant employed by
Kodak, voluntary termination of employment: (i) on or after age 55
with 10 or more years of service or on or after age 65; or (ii) at
any time if the Participant had an age and years of service
combination of at least 75 points on December 31, 1995. In the
case of a Participant employed by a Subsidiary, "Retirement" means
early or normal retirement under the terms of the Subsidiary's
retirement plan, or if the Subsidiary does not have a retirement
plan, termination of employment on or after age 60. A Participant
must voluntarily terminate his or her employment in order for his
or her termination of employment to be for "Retirement."
2.36 Subsidiary
Subsidiary means a corporation or other business entity in which
Kodak directly or indirectly has an ownership interest of at least
50%.
2.37 Target Award
"Target Award" means, for a Performance Period, the target award
amounts established for each wage grade by the Committee for the
Performance Period. The Target Awards shall serve only as a
guideline in making Awards under the Plan. Depending upon the
Committee's exercise of its discretion pursuant to Section 7.2(f),
but subject to Section 7.3, a Participant may receive an Award for
a Performance Period that may be more or less than the Target
Award for his or her wage grade for that Performance Period.
Moreover, the fact that a Target Award is established for a
Participant's wage grade for a Performance Period shall not in any
manner entitle the Participant to receive an Award for such
period.
ARTICLE 3 -- ELIGIBILITY
All Key Employees are eligible to participate in the Plan. The
Committee will, in its sole discretion, designate within the first
90 days of a Performance Period which Key Employees will be
Participants for such Performance Period. However, the fact that
a Key Employee is a Participant for a Performance Period shall not
in any manner entitle such Participant to receive an Award for the
period. The determination as to whether or not such Participant
shall be paid an Award for such Performance Period shall be
decided solely in accordance with the provisions of Articles 7 and
8 hereof.
ARTICLE 4 -- PLAN ADMINISTRATION
4.1 Responsibility
The Committee shall have total and exclusive responsibility to
control, operate, manage and administer the Plan in accordance
with its terms.
4.2 Authority of the Committee
The Committee shall have all the authority that may be necessary
or helpful to enable it to discharge its responsibilities with
respect to the Plan. Without limiting the generality of the
preceding sentence, the Committee shall have the exclusive right:
to interpret the Plan, to determine eligibility for participation
in the Plan, to decide all questions concerning eligibility for
and the amount of Awards payable under the Plan, to establish and
administer the Performance Goals and certify whether, and to what
extent, they are attained, to construe any ambiguous provision of
the Plan, to correct any default, to supply any omission, to
reconcile any inconsistency, to issue administrative guidelines as
an aid to administer the Plan, to make regulations for carrying
out the Plan and to make changes in such regulations as it from
time to time deems proper, and to decide any and all questions
arising in the administration, interpretation, and application of
the Plan. In addition, in order to enable Key Employees who are
foreign nationals or are employed outside the United States or
both to receive Awards under the Plan, the Committee may adopt
such amendments, procedures, regulations, subplans and the like as
are necessary or advisable, in the opinion of the Committee, to
effectuate the purposes of the Plan.
4.3 Discretionary Authority
The Committee shall have full discretionary authority in all
matters related to the discharge of its responsibilities and the
exercise of its authority under the Plan including, without
limitation, its construction of the terms of the Plan and its
determination of eligibility for participation and Awards under
the Plan. It is the intent of Plan that the decisions of the
Committee and its action with respect to the Plan shall be final,
binding and conclusive upon all persons having or claiming to have
any right or interest in or under the Plan.
4.4 Section 162(m) of the Code
With regard to all Covered Employees, the Plan shall for all
purposes be interpreted and construed in accordance with Section
162(m) of the Code.
4.5 Delegation of Authority
Except to the extent prohibited by law, the Committee may delegate
some or all of its authority under the Plan to any person or
persons as long as any such delegation is in writing; provided,
however, only the Committee may select and grant Awards to
Participants who are Covered Employees.
ARTICLE 5 -- FORM OF AWARDS
All Awards will be paid in cash.
ARTICLE 6 -- SETTING PERFORMANCE GOALS AND PERFORMANCE FORMULA
Within the first 90 days of a Performance Period (or, if longer,
within the maximum period allowed pursuant to Section 162(m) of
the Code), the Committee shall establish in writing:
(a) the one or more Performance Goals for the Performance
Period based upon the Performance Criteria;
(b) the one or more Performance Formulas for the
Performance Period; and
(c) an objective means of allocating, on behalf of each
Covered Person, a portion of the Maximum Award Pool
(not to exceed the amount set forth in Section 7.3(b)
to be granted, subject to the Committee's exercise of
Negative Discretion, for such Performance Period in
the event the Performance Goals for such period are
attained.
ARTICLE 7 -- AWARD DETERMINATION
7.1 Certification
(a) In General. As soon as practicable following the
availability of performance results for the completed
Performance Period, the Committee shall determine the
Company's performance in relation to the Performance
Goals for that period and certify in writing whether
the Performance Goals were satisfied.
(b) Performance Goals Achieved. If the Committee
certifies that the Performance Goals for a Performance
Period were satisfied, it shall determine the Awards
for such Performance Period by following the procedure
described in Section 7.2. During the course of this
procedure, the Committee shall certify in writing for
the Performance Period the amount of: (i) the Maximum
Award; (ii) the Maximum Award Pool; and (iii) the
Maximum Award Pool to be allocated to each Covered
Employee in accordance with Section 7.2(d).
(c) Performance Goals Not Achieved. In the event the
Performance Goals for a Performance Period are not
satisfied, the limitation contained in Section 7.3(c)
shall apply to the Covered Employees. Should the
Committee nevertheless decide to grant awards for such
Performance Period to Participants other than those
who are Covered Employees, such Awards must be paid
pursuant to Section 7.2(f) from the Carryforward
Amount. Upon payment of the Awards by the Committee,
the Carryforward Amount shall be reduced to reflect
the amount of such Awards.
7.2 Calculation of Awards
(a) In General. As detailed below in the succeeding
provisions of this Section 7.2, the procedure for
determining Awards for a Performance Period involves
the following steps:
(1) determining the Maximum Award;
(2) determining the Maximum Award Pool;
(3) allocating the Maximum Award Pool to Covered
Employees;
(4) determining the Actual Award Pool; and
(5) allocating the Actual Award Pool among individual
Participants other than Covered Employees.
Upon completion of this process, any Awards earned for
the Performance Period shall be paid in accordance
with Article 8.
(b) Determining Maximum Award. The Committee shall
determine the Maximum Award for the Performance Period
by applying the Performance Formula for such
Performance Period against the Performance Goals for
the same Performance Period.
(c) Determining Maximum Award Pool. By adding the Maximum
Award for the Performance Period with the Carryforward
Amount, if any, the Committee shall determine the
Maximum Award Pool for such Performance Period.
(d) Allocating Maximum Award Pool to Covered Employees.
The Committee shall determine, by way of the objective
means established pursuant to Article 6, the portion
of the Maximum Award Pool that is to be allocated to
each Covered Employee for the Performance Period. The
Committee shall have no discretion to increase the
amount of any Covered Employee's Award as so
determined, but may through Negative Discretion reduce
the amount of or totally eliminate such Award if it
determines, in its absolute and sole discretion, that
such a reduction or elimination is appropriate.
(e) Determining Actual Award Pool. The Committee may
through Negative Discretion reduce the amount of or
totally eliminate the Maximum Award Pool for a
Performance Period if it determines, in its absolute
and sole discretion, that such a reduction or
elimination is appropriate. To the extent the
Committee determines to exercise Negative Discretion
with regard to the Maximum Award Pool for a
Performance Period, the amount remaining after such
adjustment shall be the Actual Award Pool for the
Performance Period. Thus, if the Committee elects not
to exercise Negative Discretion with respect to the
Maximum Award Pool for a Performance Period, the
Actual Award Pool for the Performance Period shall be
the Maximum Award Pool for such period.
(f) Allocating Actual Award Pool to Individual
Participants Other Than Covered Employee. Based on
such factors, indicia, standards, goals, criteria
and/or measures that the Committee shall determine,
the Committee shall, in its sole and absolute
discretion, determine for each Participant, other than
those that are Covered Employees, the portion, if any,
of the Actual Award Pool that will be awarded to such
Participant for the Performance Period. By way of
illustration, and not by way of limitation, the
Committee may, but shall not be required to, consider:
(1) the Participant's position and level of
responsibility, individual merit, contribution to the
success of the Company and Target Award; (2) the
performance of the Company or the organizational unit
of the Participant based upon attainment of financial
and other performance criteria and goals; and (3)
business unit, division or department achievements.
7.3 Limitations on Awards
The provisions of this Section 7.3 shall control over any Plan
provision to the contrary.
(a) Maximum Award Pool. The total of all Awards granted
for a Performance Period shall not exceed the amount
of the Maximum Award Pool for such Performance Period.
(b) Maximum Award Payable to Covered Employees. The
maximum Award payable to any Covered Employee under
the Plan for a Performance Period shall be $5,000,000.
(c) Attainment of Performance Goals. The Performance Goals
for a Performance Period must be achieved in order for
a Covered Employee to receive an Award for such
Performance Period.
ARTICLE 8 -- PAYMENT OF AWARDS FOR A PERFORMANCE PERIOD
8.1 Termination of Employment
The Committee shall determine rules regarding the treatment of a
Participant under the Plan for a Performance Period in the event
of the Participant's termination of employment prior to the Award
Payment Date for such Performance Period.
8.2 Timing of Award Payments
Unless deferred pursuant to Article 9 hereof, the Awards granted
for a Performance Period shall be paid to Participants on the
Award Payment Date for such Performance Period, which date shall
occur as soon as administratively practicable following the
completion of the procedure described in Section 7.2.
ARTICLE 9 -- DEFERRAL OF AWARDS
At the discretion of the Committee, a Participant may, subject to
such terms and conditions as the Committee may determine, elect to
defer payment of all or any part of any Award which the
Participant might earn with respect to a Performance Period by
complying with such procedures as the Committee may prescribe.
Any Award, or portion thereof, upon which such an election is made
shall be deferred into, and be subject to the terms, conditions
and requirements of, the Eastman Kodak Employees' Savings and
Investment Plan, 1982 Eastman Kodak Company Executive Deferred
Compensation Plan or such other applicable deferred compensation
plan of the Company.
ARTICLE 10 -- ADDITIONAL AWARDS
10.1 In General
In addition to the Awards that are authorized to be granted under
Article 7 and paid under Article 8 for a Performance Period, the
Committee may, in its sole judgment, from time to time grant
Awards under the Plan from the Carryforward Amount.
10.2 Eligibility
All Key Employees, other than those who are Covered Employees, are
eligible to receive the Awards authorized to be granted under this
Article 10.
10.3 Carryforward Amount
Upon the issuance of any Award under this Article 10, the
Carryforward Amount shall be immediately reduced by an amount
equal to the value of such Award.
ARTICLE 11 -- CHANGE IN OWNERSHIP
11.1 Background
Notwithstanding any provision contained in the Plan, including,
but not limited to, Sections 1.1, 4.4 and 13.9, the provisions of
this Article 11 shall control over any contrary provision. Upon a
Change in Ownership: (a) the terms of this Article 11 shall
immediately become operative, without further action or consent by
any person or entity; (b) all terms, conditions, restrictions and
limitations in effect on any unpaid and/or deferred Award shall
immediately lapse as of the date of such event; and (c) no other
terms, conditions, restrictions, and/or limitations shall be
imposed upon any Awards on or after such date, and in no event
shall an Award be forfeited on or after such date.
11.2 Payment of Awards
Upon a Change in Ownership, any Key Employee, whether or not he or
she is still employed by the Company, shall be paid, as soon as
practicable but in no event later than 90 days after the Change in
Ownership, the Awards set forth in (a) and (b) below:
(a) All of the Key Employee's unpaid Awards; and
(b) A pro-rata Award for the Performance Period in which
the Change in Ownership occurs. The amount of the
pro-rata Award shall be determined by multiplying the
Target Award for such Performance Period for
Participants in the same wage grade as the Key
Employee by a fraction, the numerator of which shall
be the number of full months in the Performance Period
prior to the date of the Change in Ownership and the
denominator of which shall be the total number of full
months in the Performance Period. For purposes of
this calculation, a partial month shall be treated as
a full month to the extent of 15 or more days in such
month have elapsed. To the extent Target Awards have
not yet been established for the Performance Period,
the Target Awards for the immediately preceding
Performance Period shall be used. The pro-rata Awards
shall be paid to the Key Employee in the form of a
lump-sum cash payment.
11.3 Miscellaneous
Upon a Change In Ownership, no action, including, but not by way
of limitation, the amendment, suspension, or termination of the
Plan, shall be taken which would affect the rights of any Key
Employee or the operation of the Plan with respect to any Award to
which the Key Employee may have become entitled hereunder on or
prior to the date of such action or as a result of such Change In
Ownership.
ARTICLE 12 -- CHANGE IN CONTROL
12.1 Background
Notwithstanding any provision contained in the Plan, including,
but not limited to, Sections 1.1, 4.4 and 13.9, the provisions of
this Article 12 shall control over any contrary provision. All
Key Employees shall be eligible for the treatment afforded by this
Article 12 if their employment with the Company terminates within
two years following a Change In Control, unless the termination is
due to (a) death; (b) Disability; (c) Cause; (d) resignation other
than (1) resignation from a declined reassignment to a job that is
not reasonably equivalent in responsibility or compensation (as
defined in Kodak's Termination Allowance Plan), or that is not in
the same geographic area (as defined in Kodak's Termination
Allowance Plan), or (2) resignation within thirty days of a
reduction in base pay; or (e) Retirement.
12.2 Vesting and Lapse of Restrictions
If a Key Employee qualifies for treatment under Section 12.1, his
or her Awards shall be treated in the manner described in
Subsections 11.1(b) and (c).
12.3 Payment of Awards
If a Key Employee qualifies for treatment under Section 12.1, he
or she shall be paid, as soon as practicable but in no event later
than 90 days after his or her termination of employment, the
Awards set forth in (a) and (b) below:
(a) All of the Key Employee's unpaid Awards; and
(b) A pro-rata Award for the Performance Period in which
his or her termination of employment occurs. The
amount of the pro-rata Award shall be determined by
multiplying the Target Award for such Performance
Period for Participants in the same wage grade as the
Key Employee by a fraction, the numerator of which
shall be the number of full months in the Performance
Period prior to the date of the Key Employee's
termination of employment and the denominator of which
shall be the total number of full months in the
Performance Period. For purposes of this calculation,
a partial month shall be treated as a full month to
the extent 15 or more days in such month have elapsed.
To the extent Target Awards have not yet been
established for the Performance Period, the Target
Awards for the immediately preceding Performance
Period shall be used. The pro-rata Awards shall be
paid to the Key Employee in the form of a lump-sum
cash payment.
12.4 Miscellaneous
Upon a Change In Control, no action, including, but not by way of
limitation, the amendment, suspension, or termination of the Plan,
shall be taken which would affect the rights of any Key Employee
or the operation of the Plan with respect to any Award to which
the Key Employee may have become entitled hereunder prior to the
date of the Change In Control or to which he or she may become
entitled as a result of such Change In Control.
ARTICLE 13 -- MISCELLANEOUS
13.1 Nonassignability
No Awards under the Plan shall be subject in any manner to
alienation, anticipation, sale, transfer (except by will or the
laws of descent and distribution), assignment, pledge, or
encumbrance, nor shall any Award be payable to anyone other than
the Participant to whom it was granted.
13.2 Withholding Taxes
The Company shall be entitled to deduct from any payment under the
Plan, regardless of the form of such payment, the amount of all
applicable income and employment taxes required by law to be
withheld with respect to such payment or may require the
Participant to pay to it such tax prior to and as a condition of
the making of such payment.
13.3 Amendments to Awards
The Committee may at any time unilaterally amend any unearned,
deferred or unpaid Award, including, but not by way of limitation,
Awards earned but not yet paid, to the extent it deems
appropriate; provided, however, that any such amendment which, in
the opinion of the Committee, is adverse to the Participant shall
require the Participant's consent.
13.4 No Right to Continued Employment or Grants
Participation in the Plan shall not give any Key Employee any
right to remain in the employ of the Company. Kodak or, in the
case of employment with a Subsidiary, the Subsidiary, reserves the
right to terminate any Key Employee at any time. Further, the
adoption of this Plan shall not be deemed to give any Key Employee
or any other individual any right to be selected as a Participant
or to be granted an Award.
13.5 Amendment/Termination
The Committee may suspend or terminate the Plan at any time with
or without prior notice. In addition, the Committee may, from
time to time and with or without prior notice, amend the Plan in
any manner, but may not without shareholder approval adopt any
amendment which would require the vote of the shareholders of
Kodak pursuant to Section 162(m) of the Code, but only insofar as
such amendment affects Covered Employees.
13.6 Governing Law
The Plan shall be governed by and construed in accordance with the
laws of the State of New York, except as superseded by applicable
Federal Law, without giving effect to its conflicts of law
provisions.
13.7 No Right, Title, or Interest in Company Assets
To the extent any person acquires a right to receive payments from
the Company under this Plan, such rights shall be no greater than
the rights of an unsecured creditor of the Company and the
Participant shall not have any rights in or against any specific
assets of the Company. All of the Awards granted under the Plan
shall be unfunded.
13.8 No Guarantee of Tax Consequences
No person connected with the Plan in any capacity, including, but
not limited to, Kodak and its Subsidiaries and their directors,
officers, agents and employees makes any representation,
commitment, or guarantee that any tax treatment, including, but
not limited to, Federal, state and local income, estate and gift
tax treatment, will be applicable with respect to amounts deferred
under the Plan, or paid to or for the benefit of a Participant
under the Plan, or that such tax treatment will apply to or be
available to a Participant on account of participation in the
Plan.
13.9 Compliance with Section 162(m)
If any provision of the Plan would cause the Awards granted to a
Covered Person not to constitute qualified Performance-Based
Compensation under Section 162(m) of the Code, that provision,
insofar as it pertains to the Covered Person, shall be severed
from, and shall be deemed not to be a part of, this Plan, but the
other provisions hereof shall remain in full force and effect.
March 23, 1999
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Attention: Document Control
Subject: Annual Meeting of Shareholders of Eastman Kodak Company
May 12, 1999
Dear Sir:
Pursuant to Rule 14a-6 under the Securities Exchange Act, we
hereby transmit for filing the definitive proxy statement and form
of proxy for use in connection with the Annual Meeting of
shareholders of Eastman Kodak Company to be held May 12, 1999.
Mailing to shareholders of the definitive proxy statement and form
of proxy is expected to commence on March 24, 1998.
Pursuant to Rule 14a-6(a) the Company did not file a preliminary
proxy statement and form of proxy because the only matters to be
acted upon at the Annual Meeting are the election of directors,
ratification of the election of independent accountants, adoption
of two compensation plans and action on three shareholder
proposals.
The material changes from last year's proxy statement are as
follows:
1) the inclusion of three shareholder proposals (pages 19
through 25);
2) the nomination for election of four Class III
directors;
3) the approval of two compensation plans, and
4) the inclusion of one additional shareholder proposal.
In addition, please be advised that the pagination of the
electronically filed proxy statement differs from the printed
version thereof and the printed proxy statement contains the
performance graph while the electronic version contains a chart.
Also, pursuant to item 10 of Schedule 14A, the full text of the
two compensation plans is attached as Appendices I and II to this
electronic filing but are not included in the printed proxy
statement.
The ratification of election of independent accountants is a
matter upon which shareholders must vote, according to the
Company's by-laws. Item 18 of Schedule 14A is not, therefore,
applicable to the election of independent accountants.
Under separate cover, seven copies of the Annual Report for the
year 1998 are being forwarded to you. In addition, two copies of
the Annual Report and six copies of the Notice of Meeting, Proxy
Statement and Form of Proxy are being mailed to the New York Stock
Exchange.
Very truly yours,
Joyce P. Haag
JPH:csm
Enc
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