1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-87
EASTMAN KODAK COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 16-0417150
(State of incorporation) (IRS Employer
Identification No.)
343 STATE STREET, ROCHESTER, NEW YORK 14650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 716-724-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding at
Class March 31, 1997
Common Stock, $2.50 par value 329,021,120
2
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS
First Quarter
1997 1996
(in millions)
REVENUES
Sales $3,133 $3,388
Earnings from equity interests and other revenues 69 58
------ ------
TOTAL REVENUES 3,202 3,446
------ ------
COSTS
Cost of goods sold 1,643 1,776
Selling, general and administrative expenses 849 971
Research and development costs 257 241
Purchased research and development 186 -
Interest expense 22 18
Other costs 20 19
------ ------
TOTAL COSTS 2,977 3,025
------ ------
Earnings before income taxes 225 421
Provision for income taxes 76 147
------ ------
NET EARNINGS $ 149 $ 274
====== ======
Earnings per share $ .45 $ .80
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
First Quarter
1997 1996
(in millions)
Retained earnings at beginning of year $5,931 $5,184
Net earnings 149 274
Cash dividends declared (147) (137)
Other changes (5) 2
------ ------
RETAINED EARNINGS at end of quarter $5,928 $5,323
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See Notes to Financial Statements
3
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
March 31, Dec. 31,
1997 1996
(in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 843 $ 1,777
Marketable securities 29 19
Receivables 2,583 2,738
Inventories 1,734 1,575
Deferred income tax charges 650 644
Other 232 212
------- -------
Total current assets 6,071 6,965
PROPERTIES
Land, buildings and equipment at cost 12,578 12,585
Less: Accumulated depreciation 7,129 7,163
------- -------
Net properties 5,449 5,422
OTHER ASSETS
Goodwill (net of accumulated amortization of
$367 and $366) 616 581
Long-term receivables and other noncurrent assets 1,214 1,238
Deferred income tax charges 278 232
------- -------
TOTAL ASSETS $13,628 $14,438
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables $ 3,364 $ 4,116
Short-term borrowings 557 541
Taxes-income and other 692 603
Dividends payable 147 133
Deferred income tax credits 26 24
------- -------
Total current liabilities 4,786 5,417
OTHER LIABILITIES
Long-term borrowings 577 559
Postemployment liabilities 2,943 2,967
Other long-term liabilities 908 659
Deferred income tax credits 72 102
------- -------
Total liabilities 9,286 9,704
SHAREHOLDERS' EQUITY
Common stock at par* 978 978
Additional capital paid in or
transferred from retained earnings 892 910
Retained earnings 5,928 5,931
Accumulated translation adjustment (29) 75
------- -------
7,769 7,894
Less: Treasury stock shares at cost* 3,427 3,160
------- -------
Total shareholders' equity 4,342 4,734
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,628 $14,438
======= =======
*Common stock: $2.50 par value, 950 million shares authorized, 391 million shares issued
as of March 31, 1997. Treasury stock shares at cost consists of approximately 62 million
shares at March 31, 1997 and 59 million shares at December 31, 1996.
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See Notes to Financial Statements
4
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
First Quarter
1997 1996
(in millions)
Cash flows from operating activities:
Net earnings $ 149 $ 274
Adjustments to reconcile above earnings to net cash
(used in) provided by operating activities,
excluding the effect of initial consolidation
of acquired companies:
Depreciation and amortization 193 213
Purchased research and development 186 -
(Benefit) provision for deferred income taxes (75) 1
(Gain) loss on sale and retirement of properties (16) 13
Decrease in receivables 97 286
Increase in inventories (198) (247)
Decrease in liabilities excluding borrowings (354) (24)
Other items, net 13 (92)
------- -------
Total adjustments (154) 150
------- -------
Net cash (used in) provided by
operating activities (5) 424
------- -------
Cash flows from investing activities:
Additions to properties (309) (250)
Proceeds from sale of properties 50 15
Acquistions, net of cash acquired (283) -
Marketable securities - purchases - (8)
Marketable securities - sales 10 27
Cash flows related to sales of non-imaging
health businesses - (7)
------- -------
Net cash used in investing activities (532) (223)
------- -------
Cash flows from financing activities:
Net increase (decrease) in borrowings
with original maturity of
90 days or less 31 (185)
Proceeds from other borrowings 427 213
Repayment of other borrowings (407) (217)
Dividends to shareholders (133) (137)
Exercise of employee stock options 52 70
Stock repurchases (348) (571)
------- -------
Net cash used in financing activities (378) (827)
------- -------
Effect of exchange rate changes on cash (19) 1
------- -------
Net decrease in cash and cash equivalents (934) (625)
Cash and cash equivalents, beginning of year 1,777 1,764
------- -------
Cash and cash equivalents, end of quarter $ 843 $ 1,139
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See Notes to Financial Statements
5
NOTES TO FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The financial statements have been prepared by the Company in accordance
with the accounting policies stated in the 1996 Annual Report and should be
read in conjunction with the Notes to Financial Statements appearing
therein. In the opinion of the Company, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation have been
included in the financial statements. The statements are based in part on
estimates and have not been audited by independent accountants. The annual
statements will be audited by independent accountants.
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NOTE 2: COMMITMENTS AND CONTINGENCIES
The Company and its subsidiary companies are involved in lawsuits, claims,
investigations and proceedings, including product liability, commercial,
environmental, and health and safety matters, which are being handled and
defended in the ordinary course of business. There are no such matters
pending that the Company and its General Counsel expect to be material in
relation to the Company's business, financial condition or results of
operations.
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NOTE 3: ACQUISITION OF WANG LABORATORIES' SOFTWARE UNIT
On March 17, 1997, the Company acquired Wang Laboratories' software business
unit for approximately $260 million in cash. The unit is engaged in the
development of workflow, imaging, document management and network storage
management software. The transaction was accounted for by the purchase
method and, accordingly, the operating results of the business have been
included in the accompanying consolidated financial statements from the date
of acquisition.
In connection with the acquisition, the Company recorded a pre-tax charge of
$186 million in purchased research and development expense in the current
quarter. The amount attributed to purchased research and development was
determined by a nationally recognized independent valuation firm through
established valuation techniques in the high technology document imaging
industry. The amount was expensed upon acquisition as the technology has
not reached technological feasibility and has no alternative future use.
David J. FitzPatrick, Controller and
Vice President
May 14, 1997
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SUMMARY
(in millions, except earnings per share) First Quarter
1997 1996 Change
Sales $3,133 $3,388 - 8%
Net earnings 149 274 -46
Earnings per share .45 .80 -44
1997
The Company results for the first quarter include a pre-tax charge of $186
million ($.37 per share after-tax) for in-process research and development
(R & D) associated with the acquisition of Wang Laboratories' software unit on
March 17, 1997. Excluding this charge, net earnings per share would have
been $.82. Refer to Notes to Financial Statements on page 5.
1996
On April 16, 1996, the Company announced a program to repurchase up to an
additional $2 billion of its outstanding common stock; as of March 31, 1997,
$971 million had been repurchased under this program. The remainder is
expected to be repurchased over the next one to two years.
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Sales by Industry Segment
(in millions)
First Quarter
1997 1996 Change
Consumer Imaging
Inside the U.S. $ 625 $ 558 +12%
Outside the U.S. 877 897 - 2
------ ------ ---
Total Consumer Imaging 1,502 1,455 + 3
------ ------ ---
Commercial Imaging
Inside the U.S. 776 933 -17
Outside the U.S. 862 1,008 -14
------ ------ ---
Total Commercial Imaging 1,638 1,941 -16
------ ------ ---
Deduct: Intersegment Sales (7) (8)
------ ------ ---
Total Sales $3,133 $3,388 - 8%
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Earnings from Operations by Industry Segment
(in millions)
First Quarter
1997 1996 Change
Consumer Imaging $ 145 $ 161 -10%
Percent of Segment Sales 9.7% 11.1%
Commercial Imaging $ 55 $ 239 -77%
Percent of Segment Sales 3.4% 12.3%
------ ------ ---
Total Earnings from Operations $ 200 $ 400 -50%
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COSTS AND EXPENSES
(in millions)
First Quarter
1997 1996 Change
Gross profit $1,490 $1,612 - 8%
Percent of Sales 47.6% 47.6%
Selling, general and administrative expenses $ 849 $ 971 -13%
Percent of Sales 27.1% 28.7%
Research and development costs $ 257 * $ 241 + 7%
Percent of Sales 8.2% 7.1%
* Excludes $186 million R & D charge associated with the purchase of Wang Laboratories'
software unit.
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1997 COMPARED WITH 1996
First quarter 1997 sales decreased 8% compared with the first quarter of
1996, due to the sale of the Office Imaging business. With Office Imaging
sales excluded from both years, the Company's sales would have increased 2%,
due to higher unit volumes partially offset by lower effective selling
prices and unfavorable effects of foreign currency rate changes.
Sales in the Consumer Imaging segment increased 3%, due to higher unit
volumes partially offset by lower effective selling prices and unfavorable
effects of foreign currency rate changes. Sales inside the U.S. increased
12%, due to higher unit volumes partially offset by lower effective selling
prices. Unit volume gains were driven by good growth in Kodacolor films and
one-time-use cameras, plus revenues from the acquisition of Fox Photo Inc.
Sales outside the U.S. decreased 2%, as lower effective selling prices and
unfavorable effects of foreign currency rate changes more than offset higher
unit volumes.
Sales in the Commercial Imaging segment decreased 16%, due to the sale of
the Office Imaging business. With Office Imaging sales excluded from both
years, sales would have been level, as higher unit volumes were completely
offset by unfavorable effects of foreign currency rate changes and lower
effective selling prices. The Entertainment Imaging and Digital & Applied
Imaging business units posted excellent sales growth.
Earnings from operations decreased 50% to $200 million, primarily due to the
R & D charge associated with the purchase of Wang Laboratories' software unit.
Earnings from operations in the Consumer Imaging segment decreased 10%, as
higher unit volumes were more than offset by lower effective selling prices
and unfavorable effects of foreign currency rate changes.
Excluding the R & D charge associated with the purchase of Wang Laboratories'
software unit, earnings from operations in the Commercial Imaging segment
were essentially level, as higher unit volumes were offset by lower
effective selling prices and unfavorable effects of foreign currency rate
changes.
Earnings from equity interests and other revenues increased for the first
quarter of 1997 compared with 1996, due primarily to gains on the sale of
property and on a non-strategic element of the Business Imaging Systems
business unit. The lower effective tax rate in 1997 principally results
from the utilization of certain foreign tax loss carryforwards.
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8
LIQUIDITY AND CAPITAL RESOURCES
Available cash reserves and cash from operations have been and will be used
to complete the $2 billion stock repurchase program.
Net cash used in operating activities for the first quarter of 1997 was
$5 million, as net earnings of $149 million, which included non-cash expenses
for depreciation and amortization of $193 million, were offset by decreases
in liabilities (excluding borrowings) and increases in inventories. Net
cash used in investing activities of $532 million was primarily due to
additions to properties of $309 million and acquisitions, net of cash
acquired, of $283 million. Net cash used in financing activities of
$378 million was due to stock repurchases of $348 million and dividend
payments of $133 million.
Total cash dividends of $147 million ($.44 per share) and $137 million ($.40
per share) were declared in the first quarters of 1997 and 1996,
respectively.
Cash, cash equivalents and marketable securities decreased from $1,796
million at December 31, 1996 to $872 million at March 31, 1997. Net working
capital also decreased from $1,548 million at year-end 1996 to $1,285
million at March 31, 1997. Both decreases are primarily attributable to the
stock repurchase program and the acquisition of Wang Laboratories' software
unit.
Capital additions for the first quarter of 1997 were $309 million compared
with $250 million for the first quarter of 1996.
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OTHER
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share."
This standard replaces primary earnings per share with basic earnings per
share and requires presentation of diluted EPS as well as a reconciliation
of basic earnings per share to diluted earnings per share. The Company
plans to adopt SFAS No. 128 in the fourth quarter of 1997 and at that time
all historical earnings per share data presented will be restated to conform
to the provisions of SFAS No. 128. The Company does not expect this
statement to have a material impact on its earnings per share.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
In April 1987, the Company was sued in federal district court in San
Francisco by a number of independent service organizations who alleged
violations of Sections 1 and 2 of the Sherman Act and of various state
statutes in the sale by the Company of repair parts for its copier and
micrographics equipment (Image Technical Service, Inc. (ITS), et al v.
Eastman Kodak Company). The complaint sought unspecified compensatory and
punitive damages. Trial began on June 19, 1995 and concluded on September
18, 1995 with a jury verdict for plaintiffs of $23,948,300 ($71,844,900
after trebling). The Company's appeal of the jury's verdict was argued in
the 9th Circuit Court of Appeals on September 19, 1996, and a decision is
awaited. The Company intends to continue to vigorously defend the ITS case.
Three cases that raise essentially the same antitrust issues as ITS are
pending (Nationwide, et al v. Eastman Kodak Company, filed March 10, 1995,
A-1 Copy Center, et al v. Eastman Kodak Company, filed December 13, 1993,
and Broward Microfilm, Inc. v. Eastman Kodak Company, filed February 27,
1996). The Nationwide and A-1 cases are pending in federal district court
in San Francisco, while Broward Microfilm is pending in federal district
court in Miami. A-1 is a consolidated class action, while Broward Microfilm
purports to be a national class action. The complaints in all three cases
seek unspecified compensatory and punitive damages. As is the case in ITS,
the Company is defending these matters vigorously.
The Company has been designated as a potentially responsible party (PRP)
under the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (the Superfund law), or under similar state laws,
for environmental assessment and cleanup costs as the result of the
Company's alleged arrangements for disposal of hazardous substances at
approximately twenty Superfund sites. With respect to each of these sites,
the Company's actual or potential allocated share of responsibility is
small. Furthermore, numerous other PRPs have similarly been designated at
these sites and, although the law imposes joint and several liability on
PRPs, as a practical matter, costs are shared with other PRPs. Settlements
and costs paid by the Company in Superfund matters to date have not been
material. Future costs are not expected to be material to the Company's
financial position or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and financial statement schedules required as part of
this report are listed in the index appearing on page 11.
(b) Reports on Form 8-K
No reports on Form 8-K were filed or required to be filed for
the quarter ended March 31, 1997.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EASTMAN KODAK COMPANY
(Registrant)
David J. FitzPatrick, Controller and
Vice President
Date May 14, 1997
11
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits
Exhibit Number Page No.
(10) F. Eastman Kodak Company 1985 Stock Option Plan, as
amended effective November 1, 1996.
(Incorporated by reference to the Eastman Kodak
Company Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.)
Amendment dated February 13, 1997 to Eastman Kodak
Company 1985 Stock Option Plan. 12
G. Eastman Kodak Company 1990 Omnibus Long-Term
Compensation Plan, as amended effective
November 1, 1996.
(Incorporated by reference to the Eastman Kodak
Company Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.)
Amendment dated February 13, 1997 to Eastman Kodak
Company 1990 Omnibus Long-Term Compensation Plan.14
H. Eastman Kodak Company Management Variable
Compensation Plan, as ammended effective
December 12, 1996. 16
I. Eastman Kodak Company 1995 Omnibus Long-term
Compensation Plan, effective as of November 1,
1996.
(Incorporated by reference to the Eastman Kodak
Company Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.)
Amendment dated February 13, 1997 to Eastman Kodak
Company 1995 Onmibus Long-Term Compensation Plan. 31
P. Eastman Kodak Company 1997 Stock Option Plan, as
adopted effective February 13, 1997. 33
(11) Statement Re Computation of Earnings Per Common Share 40
(27) Financial Data Schedule, Exhibit (27) - Submitted with
the Edgar filing as a second document to this Form 10-Q.
12
Exhibit (10) F.
EASTMAN KODAK COMPANY BOARD OF DIRECTORS
EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
February 13, 1997
RESOLVED: That Section 7(a)(v) of the Eastman Kodak
Company 1985 Stock Option Plan is hereby amended to read as follows:
7(a)(v) 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 corporate officers of Kodak on the date
of the transfer of their nonqualified stock option.
2. Permissible Transferees. Transfers shall only be permitted
to: (i) the Participant's "Immediate Family Members," as that
term is defined in Subsection (a)(v)(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 such Immediate Family Members are the
only partners.
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
7(a)(v)(B)(1) to the contrary, be permitted provided, however,
such subsequent transfer complies with all of the terms and
conditions of this Section 7(a)(v), with the exception of
Section 7(a)(v)(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.
13
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 nonqualifed stock option is entitled to
the same rights as the Participant to whom such nonqualifed
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
7(a)(v), the term "Immediate Family Member" shall mean the
Participant's spouse, children or grandchildren, whether
natural, step or adopted children or grandchildren.
14
Exhibit (10) G.
EASTMAN KODAK COMPANY BOARD OF DIRECTORS
EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
February 13, 1997
RESOLVED: That Section 17 of the Eastman Kodak Company 1990 Omnibus
Long-Term Compensation Plan is hereby amended to read as follows:
17. 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 corporate officers of Kodak on the
date of the transfer of their nonqualified stock option.
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 such Immediate Family Members
are the only partners.
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 17(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 17(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.
15
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 nonqualifed stock option is entitled to
the same rights as the Participant to whom such nonqualifed
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 17,
the term "Immediate Family Member" shall mean the
Participant's spouse, children or grandchildren, whether
natural, step or adopted children or grandchildren.
16
Exhibit (10) H.
EASTMAN KODAK COMPANY
MANAGEMENT VARIABLE COMPENSATION PLAN
Article Page
1. Purpose, Effective Date and Term of Plan 17
2. Definitions 17
3. Eligibility 22
4. Plan Administration 22
5. Forms of Awards 23
6. Determination of Awards for a Performance Period 23
7. Payment of Awards for a Performance Period 25
8. Deferral of Awards 26
9. Additional Awards 26
10. Change In Ownership 27
11. Change In Control 27
12. Shares Subject to the Plan 28
13. Miscellaneous 29
1996, Eastman Kodak Company
17
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, 1995, subject to approval by
Kodak's shareholders at the 1995 Annual Meeting of the Shareholders of
Kodak.
1.3 Term
Awards shall not be granted pursuant to the Plan after December 31, 1999;
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 6.4.
2.2 Average Net Assets
"Average Net Assets" means, for the Performance Period, the simple average
of the Company's Net Assets for each of the following five fiscal quarters
of the Company: the four fiscal quarters of the Performance Period and the
fiscal quarter immediately preceding the Performance Period. For purposes
of this calculation, Net Assets for a fiscal quarter shall be determined as
of the end of such quarter.
2.3 Award
"Award" means the compensation granted to a Participant by the Committee for
a Performance Period pursuant to Articles 6 and 7 or the compensation
granted to a Key Employee by the Committee pursuant to Article 9. All
Awards shall be issued in the form(s) specified by Article 5.
2.4 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 7, without regard to any election to defer receipt
of the Award made by the Participant under Article 8 of the Plan.
2.5 Board
"Board" means the Board of Directors of Kodak.
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 Sections 6.4(d) and 9.5.
18
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, 1995 (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, 1995 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 which 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.
19
2.14 Common Stock
"Common Stock" means the common stock, $2.50 par value per share, of Kodak
which may be newly issued or treasury stock.
2.15 Company
"Company" means Kodak and its Subsidiaries.
2.16 Covered Employee
"Covered Employee" means a Key Employee who is a "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 Effective Date
"Effective Date" means the date an Award is determined to be effective by
the Committee upon its grant of such Award.
2.19 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.
2.20 Key Employee
"Key Employee" means:
(a) either (1) a salaried employee of the Company in wage grade 48
or above, or the equivalent thereof; or (2) 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: provided, however, that the persons
described in Subsection (b) below of this Section 2.20 are not
Key Employees.
(b) The following persons are not Key Employees:
(1) Any person employed by the Company who: (i) is offered a
position of employment by Danka; (ii) accepts such offer of
employment; and (iii) is employed by Danka on January 1,
1997.
(2) Any person employed by the Company who: (i) is disabled and
receiving benefits under the Short Term Disability Plan on
January 1, 1997; (ii) does not have a "Continuous
Disability" (as defined in Section 2.06 of the Short Term
Disability Plan) as a result of such disability for a
period in excess of 180 days; (iii) returns to work for the
Company prior to March 14, 1997, (iv) is offered a position
of employment by Danka; (vi) accepts such offer of
employment; and (vi) is employed by Danka prior to March
14, 1997; and
(3) Any person employed by the Company who: (i) is on a leave
of absence on January 1, 1997; (ii) returns to work for the
Company prior to March 14, 1997, (iii) is offered a
position of employment by Danka; (iv) accepts such offer of
employment; and (v) is employed by Danka prior to March 14,
1997.
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2.21 Kodak
"Kodak" means Eastman Kodak Company.
2.22 Maximum Award
"Maximum Award" means, for a Performance Period, the dollar amount
calculated in accordance with Section 6.2 by applying the Performance
Formula for such Performance Period against the Performance Goals for the
same Performance Period.
2.23 Maximum Award Pool
"Maximum Award Pool" means, for a Performance Period, the dollar amount
calculated in accordance with Section 6.3(b) by adding the Maximum Award for
the Performance Period with the Carryforward Amount.
2.24 Negative Discretion
"Negative Discretion" means the discretion granted to the Committee pursuant
to Section 6.3(e) to reduce or eliminate the Maximum Award Pool or a portion
of the Maximum Award Pool allocated to a Covered Employee.
2.25 Net Assets
"Net Assets" means the Company's consolidated Total Shareholders' Equity and
Borrowings (both short-term and long-term) as reported in its audited
consolidated financial statements. 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 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 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, 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.
2.26 Net Income
"Net Income" means, for a Performance Period, the Company's consolidated Net
Earnings (Loss) before Cumulative Effect of Changes in Accounting Principle
for the Performance Period as reported in its audited consolidated financial
statements. 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 Income 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,
21
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.
2.27 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 9, a Key Employee who is
granted an Award pursuant to such Article.
2.28 Performance Criterion
"Performance Criterion" means the stated business criterion 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, RONA shall be the Performance Criterion.
2.29 Performance Formula
"Performance Formula" means, for a Performance Period, the one or more
objective formulas applied against the Performance Goals to determine
whether all, some portion but less than all, or none of the Awards have been
earned for the Performance Period. The dollar amount obtained through
application of the Performance Formula shall be the Maximum Award. 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).
2.30 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 Criterion. 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.
2.31 Performance Period
"Performance Period" means Kodak's fiscal year or any other period
designated by the Committee with respect to which an Award may be granted.
2.32 Plan
"Plan" means the Management Variable Compensation Plan.
22
2.33 Retirement
"Retirement" means retirement under any defined benefit pension plan
maintained by the Company which is either a tax-qualified plan under Section
401(a) of the Code or is identified in writing by the Committee as a defined
benefit pension plan.
2.34 RONA
"RONA" means, for a Performance Period, Return on Net Assets for the
Performance Period. RONA shall be calculated by dividing Net Income for the
Performance Period by Average Net Assets for the same period.
2.35 Subsidiary
Subsidiary means a subsidiary which is majority owned by Kodak and reported
in Kodak's audited consolidated financial statements.
2.36 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 6.4(c), but subject to Section 6.5, a Participant may receive an
Award for a Performance Period which 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 6 and 7 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 they from time to time deem proper, and to decide any
23
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 provided that
any such delegation be in writing; provided, however, only the Committee may
select and grant Awards to Participants who are Covered Employees.
ARTICLE 5 -- FORM OF AWARDS
Awards may at the Committee's sole discretion be paid in cash, Common Stock
or a combination thereof. The Committee may, in its sole judgment, subject
an Award to such terms, conditions, restrictions and/or limitations
(including, but not limited to, restrictions on transferability and
vesting), provided they are not inconsistent with the terms of the Plan.
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.
ARTICLE 6 -- DETERMINATION OF AWARDS FOR A PERFORMANCE PERIOD
6.1 Procedure for Determining Awards
As detailed below in the succeeding Sections of this Article 6, the
procedure for determining Awards for a Performance Period entails the
following: (a) determination of Maximum Award; (b) determination of Maximum
Award Pool; (c) determination of Actual Award Pool; and (d) allocation of
Actual Award Pool among individual Participants. Upon completion of this
process, any Awards earned for the Performance Period shall be paid in
accordance with Article 7.
6.2 Determination of Maximum Award
(a) Purpose of Maximum Award. The Maximum Award for a Performance
Period is an addend in the calculation of the Maximum Award Pool
for such Performance Period.
24
(b) Calculation of Maximum Award. The Maximum Award for a
Performance Period is the dollar amount obtained by applying the
Performance Formula for such Performance Period against the
Performance Goals for the same Performance Period.
6.3 Determination of Maximum Award Pool
(a) Purpose of Maximum Award Pool. 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 .
(b) Calculation of Maximum Award Pool. The Maximum Award Pool for a
Performance Period shall be calculated by adding the Maximum
Award for such Performance Period with the Carryforward Amount.
(c) Limitation. The total of all Awards granted for a Performance
Period shall not exceed the amount of the Maximum Award Pool for
such Performance Period.
(d) Allocation of Maximum Award Pool to Covered Employees. 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 allocate in writing, or establish in writing
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 6.5(a)) to be granted for such
Performance Period in the event the Performance Goals for such
period are attained.
(e) Negative Discretion. The Committee is authorized at any time
during or after a Performance Period, in its sole and absolute
discretion, to reduce or eliminate the Maximum Award Pool for
the Performance Period, for any reason, based on such factors,
indicia, standards, goals, and/or measures it determines in the
exercise of its sole discretion. Similarly, the Committee is
authorized at any time during or after a Performance Period, in
its sole and absolute discretion, to reduce or eliminate the
portion of the Maximum Award Pool allocated to any Covered
Employee for the Performance Period, for any reason.
6.4 Determination of Actual Award Pool
(a) Purpose of Actual Award Pool. 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.
(b) Establishment of Actual Award Pool. The Actual Award Pool for a
Performance Period shall be the Maximum Award Pool for such
period after adjustment, if any, by the Committee through
Negative Discretion. Thus, to the extent the Committee elects
for a Performance Period not to exercise Negative Discretion
with respect to the Maximum Award Pool, the Actual Award Pool
for the Performance Period shall be the Maximum Award Pool for
such period.
25
(c) Allocation of Actual Award Pool to Individual Participants. The
portion of the Actual Award Pool that will be awarded to any
individual Participant will be determined by the Committee, in
its sole and absolute discretion, based on such factors,
indicia, standards, goals, and measures which it determines in
the exercise of its sole discretion. 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.
(d) Adjustment to Carryforward Amount. 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.
6.5 Limitations on Awards to Covered Employees
The provisions of this Section 6.5 shall control over any Plan provision to
the contrary.
(a) Maximum Award Payable to Covered Employees. The maximum Award
payable to any Covered Employee under the Plan for a Performance
Period shall be $4,000,000.
(b) 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.
(c) Allocation of Actual Award Pool. The portion of the Actual
Award Pool allocated to a Covered Employee by the Committee
pursuant to Section 6.4(c) shall not exceed the portion of the
Maximum Award Pool allocated to such Covered Employee under
Section 6.3(d).
ARTICLE 7 -- PAYMENT OF AWARDS FOR A PERFORMANCE PERIOD
7.1 Certification
(a) In General. Following the completion of each 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.
(b) Performance Goals 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 period, calculate and certify in writing 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 6.3(d). Upon completion of these
written certifications, the Committee shall determine the amount
of the Actual Award Pool for the Performance Period.
(c) Performance Goals Not Achieved. In the event the Performance
Goals for a Performance Period are not achieved, the limitation
contained in Section 6.5(b) shall apply to the Covered
Employees. Further, any Awards granted for the Performance
Period must be paid from the Carryforward Amount which shall be
reduced to reflect the amount of such Awards.
26
7.2 Election of Form of Award
Prior to or coincident with its calculation of the amount of the Actual
Award Pool for a Performance Period, the Committee shall, in its sole
discretion, determine the form(s) in which to grant Awards under the Plan
for such period.
7.3 Timing of Award Payments
Unless deferred pursuant to Article 8 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 7.1.
ARTICLE 8 -- 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 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 9 -- ADDITIONAL AWARDS
9.1 In General
In addition to the Awards that are authorized to be granted under Article 6
and paid under Article 7 for a Performance Period, the Committee may, in its
sole judgment, from time to time grant Awards under the Plan from the
Carryforward Amount.
9.2 Eligibility
All Key Employees, other than those who are Covered Employees, are eligible
to receive the Awards authorized to be granted under this Article 9.
9.3 Form of Awards
Any Award granted by the Committee pursuant to the provisions of this
Article 9 shall be issued in one or more of the forms permitted under
Article 5 of the Plan.
9.4 Terms and Conditions
The Committee shall, by way of an award notice or otherwise, establish the
terms, conditions, restrictions and/or limitations that will apply to an
Award issued pursuant to this Article 9; provided, however, such terms,
conditions, restrictions and limitations are not inconsistent with the terms
of the Plan.
9.5 Carryforward Amount
Upon the issuance of any Award under this Article 9, the Carryforward Amount
shall be immediately reduced by an amount equal to the value of such Award.
27
ARTICLE 10 -- CHANGE IN OWNERSHIP
10.1 Background
Notwithstanding any provision contained in the Plan, including, but not
limited to, Sections 1.1, 4.4 and 13.10, the provisions of this Article 10
shall control over any contrary provision. Upon a Change in Ownership: (a)
the terms of this Article 10 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; (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; and (d) except where a prorated Award is
required to be paid under this Article 10, all unvested and/or unpaid Awards
or any other outstanding Awards shall automatically become one hundred
percent (100%) vested immediately.
10.2 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 and/or deferred 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.
10.3 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 11 -- CHANGE IN CONTROL
11.1 Background
Notwithstanding any provision contained in the Plan, including, but not
limited to, Sections 1.1, 4.4 and 13.10, the provisions of this Article 11
shall control over any contrary provision. All Key Employees shall be
eligible for the treatment afforded by this Article 11 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
28
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.
11.2 Vesting and Lapse of Restrictions
If a Key Employee qualifies for treatment under Section 11.1, his or her
Awards shall be treated in the manner described in Subsections 10.1(b) and
(c). Further, except where a prorated Award is required to be paid under
this Article 11, all of the Key Employee's unvested and/or unpaid Awards
shall automatically become one hundred percent (100%) vested immediately.
11.3 Payment of Awards
If a Key Employee qualifies for treatment under Section 11.1, 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 and/or deferred 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.
11.4 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 12 -- SHARES SUBJECT TO THE PLAN
12.1 Available Shares
Subject to adjustment as provided in Subsection 12.2 below, the maximum
number of shares of Common Stock, $2.50 par value per share, of the Company
which shall be available for grant of Awards under the Plan during its term
shall not exceed 1,000,000. Any shares of Common Stock related to Awards
which terminate by expiration, forfeiture, cancellation or otherwise without
the issuance of such shares, are settled in cash in lieu of Common Stock, or
are exchanged with the Committee's permission for Awards not involving
Common Stock, shall not be available again for grant under the Plan. The
shares of Common Stock available for issuance under the Plan may be
authorized and unissued shares or treasury shares.
29
12.2 Adjustment of Shares Available
(a) In General. The provisions of this Subsection 12.2(a) are
subject to the limitation contained in Subsection 12.2(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
and the shares subject to any Award 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 definition 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 the Company, 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.
(b) Covered Employees. In no event shall the Award of any
Participant who is a Covered Employee be adjusted pursuant to
Subsection 12.2(a) to the extent it would cause such Award to
fail to qualify as "Performance-Based Compensation" under
Section 162(m) of the Code.
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. 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.
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.
30
13.4 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 Awards or any other Award resulting in the payment of Common
Stock prior to (a) the obtaining of any approval from any governmental
agency which the Company shall, in its sole discretion, determine to be
necessary or advisable, (b) the admission of such shares to listing on the
stock exchange on which the Common Stock may be listed, and (c) 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.
13.5 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.
13.6 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.
13.7 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.
13.8. 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 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.
13.9 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.
13.10 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.
31
Exhibit (10) I.
EASTMAN KODAK COMPANY BOARD OF DIRECTORS
EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
February 13, 1997
RESOLVED: That Section 19.1 of the Eastman Kodak Company 1995 Omnibus
Long-Term Compensation Plan is hereby amended to read as follows:
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 corporate officers of Kodak on the
date of the transfer of their nonqualified stock option.
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 such Immediate Family Members
are the only partners.
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.
32
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 nonqualifed stock option is entitled to
the same rights as the Participant to whom such nonqualifed
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's spouse, children or grandchildren, whether
natural, step or adopted children or grandchildren.
33
Exhibit (10) P.
EASTMAN KODAK COMPANY
1997 STOCK OPTION PLAN
Article Page
1. Purpose and Term of Plan 34
2. Definitions 34
3. Eligibility 35
4. Plan Administration 35
5. Form of Awards 36
6. Shares Subject to Plan 36
7. Stock Options 36
8. Miscellaneous 37
1997, Eastman Kodak Company
34
ARTICLE 1 -- PURPOSE AND TERM OF PLAN
1.1 Purpose
The purpose of the Plan is to provide motivation to the corporate officers
of Kodak to put forth maximum efforts toward the continued growth,
profitability, and success of Kodak by providing incentives through the
ownership and performance of the Common Stock of Kodak. Toward this
objective, the Committee may grant stock options to the corporate officers
of Kodak on the terms and subject to the conditions set forth in the Plan.
1.2 Term
The Plan shall become effective on February 13, 1997. Awards shall not be
granted pursuant to the Plan after December 31, 1997.
ARTICLE 2 -- DEFINITIONS
2.1 Award
"Award" means any stock option granted under the Plan to a Participant by
the Committee pursuant to the terms, conditions, restrictions and
limitations of the Plan and those that the Committee may establish by the
Award Notice or otherwise.
2.2 Award Notice
"Award Notice" means a written notice from Kodak to a Participant that
establishes the terms, conditions, restrictions, and/or limitations
applicable to an Award in addition to those established by this Plan and by
the Committee's exercise of its administrative powers.
2.3 Board
"Board" means the Board of Directors of Kodak.
2.4 Code
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, including regulations thereunder and successor provisions and
regulations thereto.
2.5 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 a "Non-Employee Director" within the
meaning of Rule 16b-3 under the Exchange Act.
2.6 Common Stock
"Common Stock" means common stock, $2.50 par value per share, of Kodak.
2.7 Effective Date
"Effective Date" means the date an Award is determined to be effective by
the Committee upon its grant of such Award.
2.8 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.
35
2.9 Kodak
"Kodak" means Eastman Kodak Company.
2.10 Participant
"Participant" means any corporate officer of Kodak to whom an Award has been
granted by the Committee under the Plan.
2.11 Plan
"Plan" means the Eastman Kodak Company 1997 Stock Option Plan.
ARTICLE 3 -- ELIGIBILITY
3.1 In General
All of the corporate officers of Kodak are eligible to participate in the
Plan. The Committee shall select, from time to time, Participants from those
corporate officers who, in the opinion of the Committee, can further the
Plan's purposes. Once a Participant is so selected, the Committee shall
determine the size of the Award(s) 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 any administrative rules and regulations issued
by the Committee.
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) interpret the Plan; (b) determine
eligibility for participation in the Plan; (c) decide all questions
concerning eligibility for and the amount of Awards payable under the Plan;
(d) construe any ambiguous provision of the Plan; (e) correct any default;
(f) supply any omission; (g) reconcile any inconsistency; (h) issue
administrative guidelines as an aid to administer the Plan and make changes
in such guidelines as it from time to time deems proper; (i) make
regulations for carrying out the Plan and make changes in such regulations
as it from time to time deems proper; (j) determine whether Awards should be
granted singly, in combination or in tandem; (k), to the extent permitted
under the Plan, grant waivers of Plan terms, conditions, restrictions, and
limitations; (l) accelerate the vesting, exercise, or payment of an Award
when such action or actions would be in the best interest of Kodak; and (m)
take any and all other action it deems necessary or advisable for the proper
operation or administration 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.
36
4.4 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.
4.5 Delegation of Authority
The Committee may delegate some or all of its authority under the Plan to
any person or persons so long as such delegation is 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.
ARTICLE 5 -- FORM OF AWARDS
5.1 In General
Awards shall be paid in the form of stock options pursuant to Article 7.
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.
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 during
its term shall not exceed 2,000,000. (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 not be available again for grant under the
Plan. The shares of Common Stock available for issuance under the Plan
shall be treasury shares.
6.2 Adjustment to Shares
If the number of outstanding shares of Common Stock shall, at any time, be
increased or decreased or changed or converted into cash or other property
as a result of (a) any subdivision or consolidation of shares, stock
dividend, stock split, recapitalization, reclassification or similar capital
adjustment or (b) any combination, exchange of shares or similar event
arising from Kodak's participation in any corporate merger, consolidation,
or similar transaction in which Kodak is the surviving entity and is not
substantially or completely liquidated, the number and kind of shares with
respect to which an Award may thereafter be exercised and the exercise price
shall be appropriately adjusted by the Committee. Any fractional shares
resulting from such adjustments shall be disregarded.
ARTICLE 7 -- STOCK OPTIONS
7.1 In General
Awards may be granted under the Plan by the Committee in the form of stock
options. These stock options shall be non- qualified stock options (i.e.,
stock options which are not incentive stock options).
37
7.2 Terms and Conditions of Stock Options
An option shall be exercisable in whole or in such installments and at such
times 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.
7.3 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.
7.4 Exercise
Upon exercise, the option price of a stock option may be paid in cash,
shares of Common Stock, a combination of the foregoing, or such other
consideration as the Committee may deem appropriate. 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. Stock options
awarded under the Plan may be exercised by way of Kodak'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
withhold a portion of the shares of Common Stock to be delivered for the
payment of such taxes.
ARTICLE 8 -- MISCELLANEOUS
8.1 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). Exception. The Committee shall have the discretionary authority to
grant Awards or amend outstanding Awards 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
Awards:
1. Permissible Transferees. Transfers shall only be permitted to:
(i) the Participant's "Immediate Family Members," as that term
is defined in Subsection (b)(8) 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 such Immediate Family Members are the only partners.
2. No Consideration. All transfers shall be made for no
consideration.
3. Subsequent Transfers. Once a Participant transfers an Award,
any subsequent transfer of such transferred Award shall be
permitted provided, however, such subsequent transfer complies
with all of the terms and conditions of this Section 8.1.
38
4. 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.
5. 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 Award.
In addition, prior to the exercise of a transferred Award by a
transferee, arrangements must be made by the Participant with
Kodak for the payment of all payroll and withholding taxes.
6. Terms and Conditions of Transferred Awards. Upon transfer, an
Award continues to be governed by and subject to the terms and
conditions of the Plan and the Award's Award Notice. A
transferee of an Award is entitled to the same rights as the
Participant to whom such Award 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.
7. Notice to Transferees. Kodak shall be under no obligation to
provide a transferee with any notice regarding the transferred
Award held by the transferee upon forfeiture or any other
circumstance.
8. Immediate Family Member. For purposes of this Section 8.1, the
term "Immediate Family Member" shall mean the Participant's
spouse, children or grandchildren, whether natural, step or
adopted children or grandchildren.
8.2 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 Kodak, shares of
Common Stock having a fair market value, as determined by the Committee,
equal to the amount of such required withholding taxes.
8.3 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.
8.4 Regulatory Approvals and Listings
Notwithstanding anything contained in this Plan to the contrary, Kodak shall
have no obligation to issue or deliver certificates of Common Stock
evidencing any Award resulting in the payment of Common Stock prior to (i)
the obtaining of any approval from any governmental agency which Kodak
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 Kodak shall, in its sole discretion,
determine to be necessary or advisable.
39
8.5 No Right to Continued Employment or Grants
Participation in the Plan shall not give a Participant any right to remain
in the employ of Kodak. Kodak 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.
8.6 Amendment/Termination
The Committee may suspend or terminate the Plan at any time with or without
prior notice. In addition, the Committee may at any time and from time to
time, with or without prior notice, amend the Plan in any manner.
8.7 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.
8.8 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 Kodak under the Plan,
such rights shall be no greater than the rights of an unsecured creditor of
Kodak and the Participant shall not have any rights in or against any
specific assets of Kodak. All of the Awards granted under the Plan shall be
unfunded.
8.9 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 Kodak's
broker-assisted exercise program.
8.10 No Guarantee of Tax Consequences
No person connected with the Plan in any capacity, including, but not
limited to, Kodak and its 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 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.
8.11 Other Benefits
No Award granted under the Plan shall be considered compensation for
purposes of computing benefits under any retirement plan of Kodak nor affect
any benefits or compensation under any other benefit or compensation plan of
Kodak now or subsequently in effect.
40
Exhibit (11)
Eastman Kodak Company and Subsidiary Companies
Computation of Earnings Per Common Share
First Quarter
1997 1996
(in millions, except
per share amounts)
Earnings before income taxes $ 225 $ 421
Provision for income taxes 76 147
------ ------
Net Earnings $ 149 $ 274
====== ======
Average number of common shares outstanding 332.4 343.4
------ ------
Earnings per share $ .45 $ .80
====== ======
5
0000031235
EASTMAN KODAK COMPANY
1,000,000
U.S. DOLLARS
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
1.0
843
29
2583
89
1734
6071
12578
7129
13628
4786
577
0
0
978
3364
13628
3133
3202
1643
1643
1312
0
22
225
76
149
0
0
0
149
.45
0
