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1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the year ended December 31, 1996 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $2.50 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
At December 31, 1996, 331,841,872 shares of Common Stock of the registrant
were outstanding. The aggregate market value (based upon the closing price
of these shares on the New York Stock Exchange at January 16, 1997) of the
voting stock held by nonaffiliates was approximately $28.4 billion.
2
PART I
ITEM 1. BUSINESS
Eastman Kodak Company (the Company or Kodak) is engaged primarily in
developing, manufacturing and marketing consumer and commercial imaging
products. Kodak's sales, earnings and identifiable assets by industry
segment for the past three years are shown in Segment Information on page 35.
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CONSUMER IMAGING SEGMENT
Sales of the Consumer Imaging segment, including intersegment sales, for the
past three years were:
(in millions) 1996 1995 1994
$7,659 $6,830 $5,919
The products of the Consumer Imaging segment are used for capturing,
recording or displaying a consumer originated image. For example,
traditional amateur photography requires, at a minimum, a camera, film and
photofinishing. Photofinishing requires equipment and supplies, including
chemicals and paper for prints.
Kodak manufactures and markets various components of imaging systems. For
amateur photography, Kodak supplies films, photographic papers, processing
services, photographic chemicals, cameras and projectors. Recent imaging
products developed by Kodak include new generations of films, cameras
(including digital), photographic papers and one-time-use cameras. In early
1996, the Company announced its line-up of Advanced Photo System products
encompassing new cameras, films and photofinishing. The Advanced Photo
System is a new amateur film format which delivers a variety of new consumer
features such as drop-in loading, multiple print size options, index prints,
and negatives returned in the cartridge.
Marketing and Competition. Kodak's consumer imaging products and services
are distributed worldwide through a variety of channels. Individual
products are often used in substantial quantities in more than one market.
Most sales of the Consumer Imaging segment are made through retailers.
Independent retail outlets selling Kodak amateur products total many
thousands. In a few areas abroad, Kodak products are marketed by
independent national distributors.
Kodak's advertising programs actively promote its products and services in
its various markets, and its principal trademarks, trade dress and corporate
symbol are widely used and recognized.
Kodak's consumer imaging products and services compete with similar products
and services of others. Competition in traditional imaging markets is
strong throughout the world. Many large and small companies offer similar
products and services that compete with Kodak's business. Kodak's products
are continually improved to meet the changing needs and preferences of its
customers.
Raw Materials. The raw materials used by the Consumer Imaging segment are
many and varied and generally available. Silver is one of the essential
materials in photographic film and paper manufacturing. Digital electronics
are becoming more prevalent in product offerings.
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3
COMMERCIAL IMAGING SEGMENT
Sales of the Commercial Imaging segment for the past three years were:
(in millions) 1996 1995 1994
$8,340 $8,184 $7,646
The Commercial Imaging segment consists of businesses that serve the imaging
and information needs of commercial customers. Products in this segment are
used to capture, store, process and display images and information in a
variety of forms.
Kodak products for the Commercial Imaging segment include films,
photographic papers, photographic plates, chemicals, processing equipment
and audiovisual equipment, as well as copiers, graphic arts films, microfilm
products, applications software, printers and other business equipment,
supplies and service agreements to support these products. These products
serve professional photofinishers, professional photographers, customers in
the health care industry, and customers in motion picture, television,
commercial printing and publishing, office automation, banking, insurance
and government markets. Recently introduced commercial imaging products
include digital and applied imaging products which capture, store and print
images in an electronic format.
On December 31, 1996, the Company and Danka Business Systems PLC (Danka)
entered into an agreement for Danka to acquire the sales, marketing and
equipment service operations of the Company's copier business as well as the
Company's facilities management business known as Kodak Imaging Services.
In connection with this agreement, the Company will supply high-volume
copiers and printers to Danka.
Marketing and Competition. Kodak's commercial imaging products and services
are distributed through a variety of channels. The Company also sells and
leases business equipment directly to users.
Kodak's commercial imaging products and services compete with similar
products and services of other small and large companies. Strong
competition exists throughout the world in these markets. Kodak's products
are continually improved to meet the changing needs and preferences of its
customers.
Raw Materials. The raw materials used by the Commercial Imaging segment are
many and varied and generally available. Silver is one of the essential
materials in photographic film and paper manufacturing. Electronic
components represent a significant portion of the cost of the materials used
in the manufacture of business equipment.
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DISCONTINUED OPERATIONS - HEALTH BUSINESSES
In 1994, the Company divested the following non-imaging health businesses
for aggregate gross proceeds of $7,858 million: the pharmaceutical and
consumer health businesses of Sterling Winthrop Inc., the household products
and do-it-yourself products businesses of L&F Products and the Clinical
Diagnostics Division. The results of these businesses were reported as
discontinued operations in 1994. Sales of products of these discontinued
health businesses for the year ended December 31, 1994 were $3,175 million.
In 1996, the Company substantially completed negotiations with buyers and
filed tax returns associated with the sale of the non-imaging health
businesses. As a result of these actions and a further assessment of the
liabilities recorded at the time of the sale, the Company recognized a $277
million after-tax benefit in discontinued operations in 1996.
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4
RESEARCH AND DEVELOPMENT
Through the years, Kodak has engaged in extensive and productive efforts in
research and development. In 1996, $1,028 million (1995 - $935 million; 1994 -
$859 million) was expended for research and development for continuing
operations. Research and development groups are located principally in the
United States in Rochester, New York. Outside the U.S., research and
development groups are located principally in Australia, England, France,
Japan and Germany. These groups, in close cooperation with manufacturing
units and marketing organizations, are constantly developing new products and
applications to serve both existing and new markets.
It has been Kodak's general practice to protect its investment in research
and development and its freedom to use its inventions by obtaining patents
where feasible. The ownership of these patents contributes to Kodak's
ability to use its inventions but at the same time is accompanied by patent
licensing. While in the aggregate Kodak's patents are considered to be of
material importance in the operation of its business, the Company does not
consider that the patents relating to any single product or process are of
material significance when judged from the standpoint of its total business.
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ENVIRONMENTAL PROTECTION
Kodak is subject to various laws and governmental regulations concerning
environmental matters. Some of the U.S. federal environmental legislation
having an impact on Kodak includes the Toxic Substances Control Act, the
Resource Conservation and Recovery Act (RCRA), the Clean Air Act, and the
Comprehensive Environmental Response, Compensation and Liability Act (the
Superfund law).
It is the policy of Eastman Kodak Company to carry out its business
activities in a manner consistent with sound health, safety and environmental
management practices, and to comply with applicable health, safety and
environmental laws and regulations. Kodak continues to engage in a program
for environmental protection and control.
Environmental protection is further discussed in Item 3, Legal Proceedings,
on page 5, and in the Notes to Financial Statements. Refer to Note 1,
Significant Accounting Policies, Environmental Costs, on page 19, and Note
10, Commitments and Contingencies, on page 23.
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EMPLOYMENT
At the end of 1996, the Company employed 94,800 people, of whom 53,400 were
employed in the U.S.
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Financial information by geographic areas for the past three years is shown
in Segment Information on page 34.
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5
ITEM 2. PROPERTIES
The Consumer Imaging segment of Kodak's business in the United States is
centered in Rochester, New York, where photographic goods are manufactured.
Another manufacturing facility near Windsor, Colorado, also produces
sensitized photographic goods. Regional distribution centers are located in
various places within the United States.
Consumer imaging manufacturing facilities outside the United States are
located in Australia, Brazil, Canada, France, Mexico and England. Kodak
maintains marketing and distribution facilities in many parts of the world.
The Company also owns processing laboratories in numerous locations
worldwide.
Products in the Commercial Imaging segment are manufactured primarily in
Rochester, New York and Windsor, Colorado. Manufacturing facilities outside
the United States are located in Germany, Mexico, England and Ireland.
The Company owns or leases administrative, manufacturing, marketing and
processing facilities in various parts of the world. The leases are for
various periods and are generally renewable.
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ITEM 3. 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, before 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.
As a participant in the Environmental Protection Agency's (EPA) Toxic
Substances Control Act (TSCA) Section 8 (e) Compliance Audit Program, the
Company agreed to audit its files for materials which under current EPA
guidelines would be subject to notification under Section 8 (e) of TSCA and
to pay stipulated penalties for each report submitted under this program.
The Company's participation in the Program concluded in the fourth quarter,
with the payment by the Company of a civil penalty of $750,000.
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.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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6
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an unnumbered item in Part I of this Report in lieu of being
included in the Proxy Statement for the Annual Meeting of Shareholders.
(as of December 31, 1996)
Date First Elected
an to
Executive Present
Name Age Positions Held Officer Office
George M. C. Fisher (a) 56 Chairman of the Board,
President, Chief
Executive Officer and
Chief Operating Officer 1993 1995
Joerg D. Agin 54 Senior Vice President 1996 1996
Michael P. Benard 49 Vice President 1994 1994
David P. Biehn 53 Senior Vice President 1995 1995
Richard T. Bourns 62 Senior Vice President 1988 1990
Daniel A. Carp (b) 48 Executive Vice President and
Assistant Chief Operating
Officer 1995 1995
David J. FitzPatrick 42 Controller and
Vice President 1995 1996
Carl E. Gustin, Jr. 45 Senior Vice President 1995 1995
Harry L. Kavetas 59 Chief Financial Officer
and Executive Vice President 1994 1994
Carl F. Kohrt 53 Executive Vice President and
Assistant Chief Operating
Officer 1995 1995
James W. Meyer 53 Senior Vice President 1994 1994
Michael P. Morley 53 Senior Vice President 1994 1994
Wilbur J. Prezzano (c) 56 Vice Chairman 1980 1994
Gary P. Van Graafeiland 50 General Counsel and
Senior Vice President 1992 1992
(a) Relinquished the titles of President and COO, effective 1/1/97
(b) Elected President and COO effective 1/1/97
(c) Retired 1/1/97
Executive officers are elected annually in February.
All of the executive officers have been employed by Kodak in various executive
and managerial positions for more than five years, except Mr. Fisher, who
joined the Company on December 1, 1993; Mr. Kavetas, who joined the Company on
February 11, 1994; Mr. Gustin, who joined the Company on August 15, 1994; Mr.
FitzPatrick, who joined the Company on March 27, 1995; and Mr. Agin, who
joined the Company on September 1, 1995. Prior to joining Kodak, Mr. Fisher
held executive positions with Motorola, Inc., most recently as Chairman and
Chief Executive Officer. Prior to joining Kodak, Mr. Kavetas held executive
positions with International Business Machines (IBM) Corporation, most
recently as President, Chief Executive Officer and a director of IBM Credit
Corporation. Prior to joining Kodak, Mr. Gustin held executive positions with
Digital Equipment Corporation, which he joined in 1994, and Apple Computer.
Prior to joining Kodak, Mr. FitzPatrick held executive positions with General
Motors Corporation, most recently as finance director of the Cadillac/Luxury
Car Division. Prior to joining Kodak in 1995, Mr. Agin held executive
positions with Universal Studios, most recently as Senior Vice President, New
Technology and Business Development. Mr. Agin was previously employed by
Eastman Kodak Company, leaving in 1992 from the position of Vice President and
General Manager of Motion Picture and Television Imaging to join Universal
Studios.
There have been no events under any bankruptcy act, no criminal proceedings,
and no judgments or injunctions material to the evaluation of the ability and
integrity of any executive officer during the past five years.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Eastman Kodak Company common stock is principally traded on the New York
Stock Exchange. There were 137,092 shareholders of record of common stock as
of December 31, 1996. See Liquidity and Capital Resources, and Market Price
Data on pages 10 and 11.
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7
ITEM 6. SELECTED FINANCIAL DATA
Refer to Summary of Operating Data on page 37.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUMMARY
(in millions, except earnings per share) 1996 Change 1995 Change 1994
Sales from continuing operations $15,968 + 7% $14,980 + 10% $13,557
Earnings from operations before
extraordinary items:
Continuing 1,011 -19 1,252 +126 554
Discontinued 277 - 269
Net earnings 1,288 + 3 1,252 +125 557
Earnings per share 3.82 + 4 3.67 +121 1.66
1996
The Company results for the year included the following (all occurring in the
fourth quarter):
After-tax restructuring costs of $256 million. Refer to Note 13 on page
28.
An after-tax loss of $252 million related to the sale of the Office
Imaging business. Refer to Note 2 on page 20.
After-tax income of $277 million from discontinued operations associated
with the sale of the non-imaging health businesses in 1994. Refer to
Note 3 on page 20.
Excluding these items, net earnings would have been $1,519 million and
earnings per share would have been $4.50.
During the 1996 second quarter, Kodak concluded a $1 billion share repurchase
program, announced in October 1995, and initiated an additional $2 billion
repurchase program.
1995
Earnings included charges of $54 million ($51 million after-tax) for
write-offs of intangible assets principally associated with the Health
Imaging business.
1994
In 1994, the Company divested the pharmaceutical and consumer health
businesses of Sterling Winthrop Inc., the household products and
do-it-yourself products businesses of L&F Products and the Clinical Diagnostics
Division for aggregate proceeds of $7.9 billion. These businesses were
reported as discontinued operations for 1994. The Company used proceeds from
the divestiture, short-term borrowings and cash from operations to extinguish
$6,598 million (net carrying amount) of borrowings, $7,800 million (notional
amount) of financial instruments, a $292 million master lease program and a
$200 million receivable financing program.
Earnings from continuing operations in 1994 included $340 million of pre-tax
restructuring costs ($254 million or $.75 per share after-tax), pre-tax
incremental charges associated with the review of the carrying value of
assets of $65 million and a $110 million pre-tax loss associated with the
extinguishment of certain financial instruments. An extraordinary loss of
$266 million after-tax ($.79 per share) was also recognized in connection with
the reduction of debt and other financial instruments. Earnings from
discontinued operations were $269 million ($.80 per share), which was
comprised of a net after-tax gain of $350 million realized from the sale of
the non-imaging health businesses less an after-tax loss from operations
prior to measurement date of $81 million.
8
DETAILED RESULTS OF OPERATIONS
Sales by Industry Segment 1996 Change 1995 Change 1994
(in millions)
Sales from Continuing Operations:
Consumer Imaging
Inside the U.S. $ 3,319 +16% $ 2,854 +18% $ 2,428
Outside the U.S. 4,340 + 9 3,976 +14 3,491
------- --- ------- --- -------
Total Consumer Imaging 7,659 +12 6,830 +15 5,919
------- --- ------- --- -------
Commercial Imaging
Inside the U.S. 4,065 0 4,066 + 3 3,948
Outside the U.S. 4,275 + 4 4,118 +11 3,698
------- --- ------- --- -------
Total Commercial Imaging 8,340 + 2 8,184 + 7 7,646
------- --- ------- --- -------
Deduct: Intersegment Sales (31) (34) (8)
------- --- ------- --- -------
Total Sales from Continuing
Operations $15,968 + 7% $14,980 +10% $13,557
======= === ======= === =======
Earnings from Operations by Industry Segment
(in millions)
1996 Change 1995 Change 1994
Earnings from Operations
from Continuing Operations:
Consumer Imaging $ 1,141 - 9% $ 1,254 +43% $ 878
Percent of segment sales 14.9% 18.4% 14.8%
Commercial Imaging $ 704 + 2% $ 687 +59% $ 431
Percent of segment sales 8.4% 8.4% 5.6%
------- --- ------ --- ------
Total Earnings from Operations
from Continuing Operations $ 1,845 - 5% $ 1,941 +48% $ 1,309
======= === ======= === =======
Earnings from operations for 1996 are shown after deducting restructuring costs of
$183 million for Consumer Imaging and $175 million for Commercial Imaging. Earnings from
operations for 1994 are shown after deducting restructuring costs of $190 million for
Consumer Imaging and $150 million for Commercial Imaging.
Segment information is reported on pages 33 through 35, Notes to Financial Statements.
9
1996 COMPARED WITH 1995
Worldwide sales in 1996 were 7% higher than in 1995, primarily due to higher
unit volumes. Currency changes against the dollar unfavorably affected sales
by $243 million in 1996 compared with 1995.
Consumer Imaging segment sales for the year were up 12%, primarily due to
higher unit volumes partially offset by lower effective selling prices and
unfavorable effects of foreign currency rate changes. Sales increased both
inside and outside the U.S. Strong color film and paper volumes,
photofinishing increases in Qualex and sales of Advantix products led the
gains.
Commercial Imaging segment sales for the year were up 2%, primarily due to
higher unit volumes partially offset by unfavorable effects of foreign
currency rate changes and lower effective selling prices. Sales increased
outside the U.S., but were level in the U.S. Declines in Office Imaging
partially offset strong sales gains by Entertainment Imaging and continued
growth in Business Imaging Systems and Digital and Applied Imaging.
Earnings from operations decreased 5%; however, excluding restructuring costs
of $358 million, earnings from operations increased 13%, as the benefits of
higher unit volumes and manufacturing productivity were somewhat offset by
lower effective selling prices and higher advertising expenditures.
Earnings from operations in the Consumer Imaging segment decreased 9%;
however, excluding restructuring costs of $183 million, earnings from
operations increased 6%, as the benefits of higher unit volumes and
manufacturing productivity were partially offset by lower effective selling
prices and higher advertising expenditures.
Earnings from operations in the Commercial Imaging segment increased 2%;
however, excluding restructuring costs of $175 million, earnings from
operations increased 28%, as the benefits of manufacturing productivity and
higher unit volumes were somewhat offset by lower effective selling prices,
higher research and development expenditures, and unfavorable effects of
foreign currency rate changes.
Research and development expenditures were $1,028 million in 1996 and $935
million in 1995. Goodwill charges were $66 million in 1996 and $109 million
in 1995. The 1995 figure includes write-offs of intangible assets of $54
million, principally associated with the Health Imaging business.
Advertising and sales promotion expenses totaled $1,026 million in 1996 and
$840 million in 1995. Other marketing and administrative expenses totaled
$3,384 million in 1996 and $3,318 million in 1995.
Earnings from equity interests and other revenues decreased 5%, primarily due
to lower income from equity interests. Excluding the $387 million pre-tax
loss on the sale of the Office Imaging business from 1996, other costs
decreased 54%, mostly due to lower foreign exchange losses.
The effective tax rates were 34% in 1996, excluding restructuring costs and
the sale of the Office Imaging business, and 35% in 1995. The lower
effective tax rate in 1996 principally results from the utilization of
certain foreign tax loss carryforwards.
1995 COMPARED WITH 1994
Worldwide 1995 sales from continuing operations increased 10% compared with
1994, primarily due to higher unit volumes. Excluding sales of the Company's
Qualex subsidiary, acquired in August 1994, sales increased 8%, primarily due
to higher unit volumes and the favorable effects of foreign currency rate
changes. Currency changes against the dollar favorably affected sales by
$453 million in 1995 compared with 1994.
Sales for the Consumer Imaging segment increased significantly over 1994.
Sales to customers in the U.S. increased substantially over 1994 due to
higher volumes and the inclusion of Qualex revenues, whose sales are included
in the consolidated totals from August 1994. Prior to August 1994, Qualex's
results were recorded using the equity method of accounting. Sales to
customers in the U.S., excluding Qualex's sales, increased slightly. Sales
to customers outside the U.S. increased significantly from 1994, as good
volume gains and the favorable effects of foreign currency rate changes were
only partially offset by lower effective selling prices. Worldwide volume
increases were led by color papers and films and one-time-use cameras.
10
Commercial Imaging sales showed a moderate sales increase over 1994. Sales
to customers in the U.S. increased 3%, as volume increases were slightly
offset by lower effective selling prices. Sales to customers outside the
U.S. increased significantly from 1994, as good volume gains and the
favorable effects of foreign currency rate changes were slightly offset by
lower effective selling prices. Entertainment Imaging and Digital and
Applied Imaging led the worldwide sales increases.
Earnings from operations increased 48% from 1994. Excluding 1994
restructuring costs of $340 million, earnings from operations increased 18%.
Consumer Imaging earnings from operations increased 43% (17% excluding 1994
restructuring costs). Earnings benefited from increased unit volumes,
productivity gains and the favorable effects of foreign currency rate
changes, but were adversely affected by cost escalation, higher levels of
marketing and administrative activity and lower effective selling prices.
Commercial Imaging earnings from operations increased 59% (18% excluding 1994
restructuring costs). Earnings benefited from increased unit volumes,
productivity gains and the favorable effects of foreign currency rate
changes, but were adversely affected by cost escalation, lower effective
selling prices, and $54 million of intangible asset write-offs principally
associated with the Health Imaging business.
Research and development expenditures were $935 million in 1995 and $859
million in 1994. Goodwill charges were $109 million in 1995 and $67 million
in 1994. The increase was attributed to intangible asset write-offs,
principally associated with the Health Imaging business, and the inclusion of
a full year of Qualex goodwill amortization. Advertising and sales promotion
expenses totaled $840 million in 1995 and $744 million in 1994. Other
marketing and administrative expenses totaled $3,318 million in 1995 and
$2,967 million in 1994. Increases in selling, general and administrative
expenses in 1995 resulted from the unfavorable effects of foreign currency
rate changes, higher activity levels and the inclusion of a full year of
Qualex activity.
Earnings from equity interests and other revenues were $289 million in 1995
compared with $130 million in 1994. The increase in 1995 was primarily due
to higher interest income and gains from the sales of capital assets.
Interest expense of $78 million in 1995 decreased from $142 million in 1994
due to lower debt levels. Other costs of $210 million in 1995 are
essentially level with 1994 after excluding $110 million of 1994 pre-tax
charges associated with the extinguishment of certain financial instruments.
The effective tax rates were 35% in 1995 and 39% in 1994, excluding
restructuring costs. The lower effective tax rate in 1995 principally
results from the utilization of certain foreign tax loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
During the 1996 second quarter, Kodak concluded a $1 billion share repurchase
program, announced in October 1995, and initiated an additional $2 billion
repurchase program which is expected to extend over the next two to three
years. During 1996, $700 million of shares were purchased to complete the
first program, and $623 million of shares have been purchased against the
second program.
Cash flow from operations in 1996 was $2,484 million, primarily due to
earnings from continuing operations of $1,011 million which included non-cash
expenses for depreciation and amortization of $903 million. Net cash outflow
from investing activities was $636 million in 1996, due to capital
expenditures of $1,341 million, offset by proceeds of $688 million from the
sale of the Office Imaging business. Net cash outflow from financing
activities in 1996 of $1,833 million was primarily due to $1,323 million of
stock repurchases and $539 million of dividend payments.
11
Total cash dividends (paid on a quarterly basis) of approximately $539 million
($1.60 per share), $547 million ($1.60 per share) and $537 million ($1.60 per
share) were declared in 1996, 1995 and 1994, respectively. On January 15,
1997, the Company declared a quarterly cash dividend of $.44 per share,
representing an increase of $.04 per share, payable April 1 to shareholders
of record, March 3, 1997.
Cash, cash equivalents and marketable securities at year-end 1996 were $1,796
million, a $15 million decrease from the year-end 1995 total of $1,811
million. Net working capital at year-end 1996 decreased to $1,548 million
from $2,666 million at year-end 1995. The net change was caused primarily by
increases in short-term payables associated with the 1996 restructuring
program and sale of the Office Imaging business, as well as decreases in
accounts receivable due in part to the sale of the Office Imaging business.
Total short-term and long-term borrowings were $1,100 million at year-end 1996
and $1,251 million at year-end 1995. The Company has access to a $3.5 billion
revolving credit facility expiring in November 2001. The Company also has a
shelf registration statement for debt securities with an available balance of
$2.2 billion.
Capital additions were $599 million and $436 million for the Consumer Imaging
segment in 1996 and 1995, respectively, and $742 million and $598 million for
the Commercial Imaging segment.
OTHER
The after-tax restructuring charge of $256 million resulted from a plan
developed with the primary objective of dealing with infrastructure and
operational inefficiencies and redundancies around the world, including
actions required as a result of the sale of the Office Imaging business as
well as rationalization of the Company's photofinishing operations outside
the U.S. The plan will result in the separation of approximately 3,900
people, principally outside the U.S., and is expected to be largely completed
in the next twelve months. Approximately two-thirds of the charge relates to
separation payments and one-third is for business exits and facility
closures.
Kodak is subject to various laws and governmental regulations concerning
environmental matters. Refer to Note 10, Commitments and Contingencies, on
page 23.
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MARKET PRICE DATA
1996 1995
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
Price per share:
High $85 $79-1/8 $80-1/8 $77-7/8 $70-3/8 $64-1/2 $63-3/8 $54-5/8
Low 75 67 68-5/8 65-1/8 55-5/8 56 51-3/8 47-1/4
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SUMMARY OF OPERATING DATA
A summary of operating data for 1996 and for the four years prior is shown on
page 37.
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12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the preparation and integrity of the
consolidated financial statements and related notes which appear on pages 13
through 36. These financial statements have been prepared in accordance with
generally accepted accounting principles and include certain amounts that are
based on management's best estimates and judgments.
The Company's accounting systems include extensive internal controls
designed to provide reasonable assurance of the reliability of its financial
records and the proper safeguarding and use of its assets. Such controls are
based on established policies and procedures, are implemented by trained,
skilled personnel with an appropriate segregation of duties, and are
monitored through a comprehensive internal audit program. The Company's
policies and procedures prescribe that the Company and all employees are to
maintain the highest ethical standards and that its business practices
throughout the world are to be conducted in a manner which is above reproach.
The consolidated financial statements have been audited by Price Waterhouse
LLP, independent accountants, who were responsible for conducting their
audits in accordance with generally accepted auditing standards. Their
resulting report is shown below.
The Board of Directors exercises its responsibility for these financial
statements through its Audit Committee, which consists entirely of
non-management Board members. The independent accountants and internal
auditors have full and free access to the Audit Committee. The Audit
Committee meets periodically with the independent accountants and the
Director of Corporate Auditing, both privately and with management present,
to discuss accounting, auditing and financial reporting matters.
George M. C. Fisher Harry L. Kavetas
Chairman and Chief Financial Officer and
Chief Executive Officer Executive Vice President
January 15, 1997 January 15, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Eastman Kodak Company
In our opinion, the accompanying consolidated financial statements listed in
the index appearing under Item 14(a)(1) and (2) on page 38 of this Annual
Report on Form 10-K present fairly, in all material respects, the financial
position of Eastman Kodak Company and subsidiary companies at December 31,
1996 and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Rochester, New York
January 15, 1997
13
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS
For the Year Ended December 31,
1996 1995 1994
(in millions, except per share data)
REVENUES
Sales $15,968 $14,980 $13,557
Earnings from equity interests and
other revenues 276 289 130
------- ------- -------
TOTAL REVENUES 16,244 15,269 13,687
------- ------- -------
COSTS
Cost of goods sold 8,326 7,962 7,325
Selling, general and administrative expenses 4,410 4,158 3,711
Research and development costs 1,028 935 859
Interest expense 83 78 142
Restructuring costs 358 - 340
Other costs 483 210 308
------- ------- -------
TOTAL COSTS 14,688 13,343 12,685
------- ------- -------
Earnings from continuing operations
before income taxes 1,556 1,926 1,002
Provision for income taxes from
continuing operations 545 674 448
------- ------- -------
Earnings from continuing operations
before extraordinary items 1,011 1,252 554
Loss from discontinued operations - - (81)
Gain on sale of discontinued operations 277 - 350
------- ------- -------
Earnings before extraordinary items 1,288 1,252 823
Extraordinary items - - (266)
------- ------- -------
NET EARNINGS $ 1,288 $ 1,252 $ 557
======= ======= =======
Earnings (loss) per share:
From continuing operations before
extraordinary items $ 3.00 $ 3.67 $ 1.65
From discontinued operations - - (.25)
From sale of discontinued operations .82 - 1.05
------- ------- -------
Before extraordinary items 3.82 3.67 2.45
From extraordinary items - - (.79)
------- ------- -------
Earnings per share $ 3.82 $ 3.67 $ 1.66
======= ======= =======
The number of common shares used to compute
earnings per share amounts was as follows: 337.4 341.5 335.7
The notes on pages 18 through 36 are an integral part of these financial statements.
14
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions) At December 31,
1996 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,777 $ 1,764
Marketable securities 19 47
Receivables 2,738 3,145
Inventories 1,575 1,660
Deferred income tax charges 644 520
Other 212 173
------- -------
Total current assets 6,965 7,309
------- -------
PROPERTIES
Land, buildings and equipment 12,585 12,652
Accumulated depreciation 7,163 7,275
------- -------
Net properties 5,422 5,377
OTHER ASSETS
Goodwill (net of accumulated
amortization of $366 and $326) 581 536
Long-term receivables and other noncurrent assets 1,238 911
Deferred income tax charges 232 344
------- -------
TOTAL ASSETS $14,438 $14,477
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables $ 4,116 $ 3,327
Short-term borrowings 541 586
Taxes - income and other 603 567
Dividends payable 133 137
Deferred income tax credits 24 26
------- -------
Total current liabilities 5,417 4,643
OTHER LIABILITIES
Long-term borrowings 559 665
Postemployment liabilities 2,967 3,247
Other long-term liabilities 659 704
Deferred income tax credits 102 97
------- -------
Total liabilities 9,704 9,356
------- -------
SHAREHOLDERS' EQUITY
Common stock, par value $2.50 per share,
950,000,000 shares authorized; issued
391,292,760 shares in 1996 and
389,574,619 shares in 1995 978 974
Additional capital paid in or transferred
from retained earnings 910 803
Retained earnings 5,931 5,184
Accumulated translation adjustment 75 93
------- -------
7,894 7,054
Treasury stock, at cost
59,450,888 shares in 1996 and 43,685,196
shares in 1995 3,160 1,933
------- -------
Total shareholders' equity 4,734 5,121
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,438 $14,477
======= =======
The notes on pages 18 through 36 are an integral part of these financial statements.
15
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in millions, except for number of shares)
Trans-
Additional lation
Common Capital Retained Adjust- Treasury
Stock* Paid In Earnings ments Stock Total
Shareholders' Equity,
December 31, 1993 $948 $ 213 $ 4,469 $(235) $(2,039) $ 3,356
Net earnings - - 557 - - 557
Cash dividends declared - - (537) - - (537)
Retained earnings - other changes - - (4) - - (4)
Common stock issued under
employee plans (954,000 shares) 2 32 - - - 34
Treasury stock issued under
employee plans (30,000 shares) - - - - 1 1
Common stock issued for debt
conversions (6,310,000 shares) 16 252 - - - 268
Treasury stock issued for debt
conversions (1,954,000 shares) - 4 - - 81 85
Tax reductions - employee plans - 14 - - - 14
Translation adjustments:
Continuing operations - - - 186 - 186
Discontinued operations - - - 57 - 57
---- ------- ------- ----- ------- -------
Shareholders' Equity,
December 31, 1994 966 515 4,485 8 (1,957) 4,017
Net earnings - - 1,252 - - 1,252
Cash dividends declared - - (547) - - (547)
Retained earnings - other changes - - (6) - - (6)
Common stock issued under
employee plans (3,231,000
shares) 8 110 - - - 118
Treasury stock contribution
to U.S. pension plan (7,354,000
shares) - 178 - - 322 500
Treasury stock repurchase
(4,503,000 shares) - - - - (300) (300)
Treasury stock issued under
employee plans (12,000 shares) - - - - 1 1
Charitable contribution
(23,000 shares) - - - - 1 1
Translation adjustments - - - 85 - 85
---- ------- ------- ----- ------- -------
Shareholders' Equity,
December 31, 1995 974 803 5,184 93 (1,933) 5,121
Net earnings - - 1,288 - - 1,288
Cash dividends declared - - (539) - - (539)
Retained earnings - other changes - - (2) - - (2)
Common stock issued under
employee plans (1,718,141
shares) 4 64 - - - 68
Treasury stock repurchase
(17,625,850 shares) - - - - (1,323) (1,323)
Treasury stock issued under
employee plans (1,851,710
shares) - (25) - - 96 71
Tax reductions - employee plans - 68 - - - 68
Translation adjustments - - - (18) - (18)
---- ------- ------- ----- ------- -------
Shareholders' Equity,
December 31, 1996 $978 $ 910 $ 5,931 $ 75 $(3,160) $ 4,734
==== ======= ======= ===== ======= =======
* There are 100 million shares of $10 par value preferred stock authorized, none of which
have been issued.
The notes on pages 18 through 36 are an integral part of these financial statements.
16
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended December 31,
1996 1995 1994
(in millions)
Cash flows from operating activities:
Earnings from continuing operations
before extraordinary items $ 1,011 $ 1,252 $ 554
Adjustments to reconcile to net cash provided
by operating activities, excluding the
effects of dispositions and initial
consolidation of acquired companies
Depreciation and amortization 903 916 903
Loss on sale of Office Imaging business 387 - -
Restructuring costs 358 - 340
(Benefit) provision for deferred
income taxes (17) 283 (126)
Loss on sale/retirement of properties 65 82 145
Decrease (increase) in receivables 15 (42) 169
(Increase) decrease in inventories (130) (148) 151
Increase (decrease) in liabilities
excluding borrowings 18 450 (306)
Repurchase of receivables program - - (200)
Other items, net (126) (163) 12
------- ------- -------
Total adjustments 1,473 1,378 1,088
------- ------- -------
Net cash provided by operating activities 2,484 2,630 1,642
------- ------- -------
Cash flows from investing activities:
Additions to properties (1,341) (1,034) (1,153)
Proceeds from sale of properties 124 121 93
Proceeds from sale of Office Imaging
business 688 - -
Acquisitions, net of cash acquired (128) - (48)
Purchases of shares of Qualex, net of
cash acquired - (100) -
Cash flows related to sales of non-imaging
health businesses (7) (1,411) 7,644
Sales of marketable securities 59 48 249
Purchases of marketable securities (31) (4) (43)
------- ------- -------
Net cash (used in) provided by
investing activities (636) (2,380) 6,742
------- ------- -------
Cash flows from financing activities:
Net (decrease) increase in borrowings with
original maturity of 90 days or less (206) (106) 124
Proceeds from other borrowings 1,529 766 52
Repayment of other borrowings and certain
financial instruments (1,420) (440) (7,650)
Dividends (539) (547) (566)
Exercise of employee stock options 126 115 34
Stock repurchase programs (1,323) (300) -
------- ------- -------
Net cash used in financing activities (1,833) (512) (8,006)
------- ------- -------
Effect of exchange rate changes on cash (2) 6 7
------- ------- -------
Net increase (decrease) in cash and cash
equivalents 13 (256) 385
Cash and cash equivalents, beginning
of year 1,764 2,020 1,635
------- ------- -------
Cash and cash equivalents, end of year $ 1,777 $ 1,764 $ 2,020
======= ======= =======
17
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes for continuing operations was:
(in millions) 1996 1995 1994
Interest, net of portion capitalized of $29,
$30 and $28 $ 78 $ 97 $342
Income taxes 275 343 309
The following transactions are not reflected in the Consolidated Statement of Cash Flows:
in 1995, a $500 million stock contribution to the Company's U.S. pension plan, and, in
1994, certain assets acquired and liabilities assumed as a result of the Qualex
acquisition and the debentures and notes called by the Company resulting in the Company's
common stock being issued.
The notes on pages 18 through 36 are an integral part of these financial statements.
18
Eastman Kodak Company and Subsidiary Companies
NOTES TO FINANCIAL STATEMENTS
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
COMPANY OPERATIONS
Eastman Kodak Company (the Company or Kodak) is engaged primarily in
developing, manufacturing, and marketing consumer and commercial imaging
products. The Company's products are manufactured in a number of countries
in North and South America, Europe, Australia and Asia. The Company's
products are marketed and sold in many countries throughout the world.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Eastman Kodak
Company and its majority owned subsidiary companies. Intercompany
transactions are eliminated and net earnings are reduced by the portion of
the earnings of subsidiaries applicable to minority interests.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at year end and the reported amounts of
revenues and expenses during the reporting period. Certain significant
estimates are disclosed throughout this report.
FOREIGN CURRENCY
For most subsidiaries and branches outside the U.S., the local currency is
the functional currency and translation adjustments are accumulated in a
separate component of shareholders' equity.
For subsidiaries and branches that operate in U.S. dollars or whose economic
environment is highly inflationary, the U.S. dollar is the functional
currency and gains and losses that result from translation are included in
earnings. The effect from foreign currency translation was a loss of $4
million in 1996, a gain of $14 million in 1995 and a loss of $7 million in
1994.
The Company hedges certain foreign currency transactions and firm foreign
currency commitments by entering into forward exchange contracts. Gains and
losses associated with currency rate changes on forward contracts hedging
foreign currency transactions are recorded currently in earnings. The
effects from foreign currency transactions, including related hedging
activities, were losses of $37 million in 1996, $76 million in 1995 and $46
million in 1994. Gains and losses related to hedges of firm commitments are
deferred and recognized in earnings or as adjustments of carrying amounts
when the transaction occurs.
CASH EQUIVALENTS
All highly liquid investments with an original maturity of three months or
less at date of purchase are considered to be cash equivalents.
MARKETABLE SECURITIES AND NONCURRENT INVESTMENTS
Investments included in marketable securities of $18 million and $42 million
and in long-term receivables and other noncurrent assets of $46 million and
$60 million at December 31, 1996 and 1995, respectively, are considered held
to maturity. Investments included in marketable securities of $1 million and
$5 million and in long-term receivables and other noncurrent assets of $59
million and $55 million at December 31, 1996 and 1995, respectively, are
considered available for sale. The maturities of long-term receivables range
from 1998 to 2004.
Proceeds from the sale of securities were $59 million in 1996 and $48 million
in 1995. No gain or loss was realized from the sale of these securities in
1996 or 1995. Specific identification was used to determine the cost of
securities sold.
INVENTORIES
Inventories are valued at cost, which is not in excess of market. The cost
of most inventories in the U.S. is determined by the "last-in, first-out"
(LIFO) method. The cost of other inventories is determined by the "first-in,
first-out" (FIFO) or average cost method.
19
PROPERTIES
Properties are recorded at cost reduced by accumulated depreciation.
Depreciation expense is provided based on historical cost and estimated
useful lives ranging from approximately 5 years to 50 years for buildings and
building equipment and 3 years to 20 years for machinery and equipment. The
Company generally uses the straight-line method for calculating the provision
for depreciation. The Company regularly assesses all of its long-lived
assets for impairment, in accordance with Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." The impact of adopting SFAS
No. 121 in 1996 was not material to the Company's financial position or
results of operations.
GOODWILL
Goodwill is charged to earnings on a straight-line basis over the period
estimated to be benefited, not exceeding fifteen years for continuing
operations. The carrying value of goodwill is assessed periodically based on
the expected future cash flows of the asset grouping associated with the
goodwill.
REVENUE
Revenue is recognized from the sale of film, paper, supplies and equipment
(including sales-type leases for equipment) when the product is shipped; from
maintenance and service contracts over the contractual period, or as the
services are performed; from rentals under operating leases in the month in
which they are earned; and from financing transactions at level rates of
return over the term of the lease or receivable.
ADVERTISING
Advertising costs are expensed as incurred and included in "selling, general
and administrative expenses." Advertising expenses amounted to
$1,026 million, $840 million and $744 million in 1996, 1995 and 1994,
respectively.
ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are expensed or
capitalized, as appropriate. Remediation costs that relate to an existing
condition caused by past operations are accrued when it is probable that
these costs will be incurred and can be reasonably estimated.
INCOME TAXES
Income tax expense is based on reported earnings before income taxes.
Deferred income taxes reflect the impact of temporary differences between the
amounts of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes.
EARNINGS PER SHARE
Earnings per share, where such calculation is not anti-dilutive, is computed
on the basis of the weighted average number of common shares outstanding.
RECLASSIFICATIONS
Certain reclassifications of 1995 and 1994 financial statement and related
footnote amounts have been made to conform with the 1996 presentation.
- ------------------------------------------------------------------------------
20
NOTE 2
SALE OF ASSETS
On December 31, 1996, Danka Business Systems PLC (Danka) and Kodak entered
into an agreement for Danka to acquire the sales, marketing and equipment
service operations of Kodak's Office Imaging business, as well as Kodak's
facilities management business known as Kodak Imaging Services. In
connection with this agreement, Kodak will supply high-volume copiers and
printers to Danka. Danka paid Kodak $688 million in cash in exchange for
certain assets and the assumption of certain operating liabilities. The book
value of net assets sold was $802 million. The Company recorded amounts for
employee separation payments, contract termination payments, transaction
costs and other significant items. As a result of this transaction, the
Company recognized a pre-tax loss of $387 million in other costs. The
after-tax loss was $252 million.
- ------------------------------------------------------------------------------
NOTE 3
DISCONTINUED OPERATIONS
In 1994, the Company sold the pharmaceutical and consumer health businesses
of Sterling Winthrop Inc., the household products and do-it-yourself products
businesses of L&F Products and the Clinical Diagnostics Division. The Company
received $7,858 million in proceeds from the sale of these businesses. The
results of these businesses were reported as discontinued operations in 1994.
Summarized results of these businesses, including allocations of interest
expense, in 1994 included sales of $3,175 million, a loss from the
measurement date to the disposal date of $77 million ($86 million pre-tax), a
gain on the sale of businesses of $1,933 million before income taxes of
$1,506 million and an after-tax loss prior to measurement date of $81 million
($84 million pre-tax).
In computing the net gain from discontinued operations, the Company recorded
amounts for environmental exposures, product liabilities, buyer
indemnifications, purchase price adjustments, taxes and other significant
items based on the best estimates available at the time the transactions
occurred. The Company has substantially completed negotiations with buyers
and filed tax returns associated with the sale of the non-imaging health
businesses. As a result of these actions and a further assessment of the
liabilities recorded at the time of the sale, the Company recognized a $277
million after-tax benefit in discontinued operations in 1996, the primary
component of which is income and other taxes. While the remaining balances
included in these reserves are believed to be appropriate based on
management's current judgments, changes could occur as audits and other
activities related to these transactions are completed.
- ------------------------------------------------------------------------------
NOTE 4
RECEIVABLES
(in millions)
1996 1995
Trade receivables $2,340 $2,722
Miscellaneous receivables 398 423
------ ------
Total (net of allowances of $90 and $104) $2,738 $3,145
====== ======
The Company sells to customers in a variety of industries, markets and
geographies around the world. Receivables arising from these sales are
generally not collateralized. Adequate provisions have been recorded for
uncollectible receivables. There are no significant concentrations of credit
risk.
- ------------------------------------------------------------------------------
21
NOTE 5
INVENTORIES
(in millions) 1996 1995
At FIFO or average cost (approximates current cost)
Finished goods $1,072 $1,193
Work in process 587 592
Raw materials and supplies 505 519
------ ------
2,164 2,304
LIFO reserve (589) (644)
------ ------
Total $1,575 $1,660
====== ======
Inventories valued on the LIFO method are approximately 50 percent and 60
percent of total inventories in 1996 and 1995, respectively.
- ------------------------------------------------------------------------------
NOTE 6
PROPERTIES
(in millions) 1996 1995
Land $ 193 $ 208
Buildings and building equipment 2,788 2,798
Machinery and equipment 8,996 9,294
Construction in progress 608 352
------- -------
12,585 12,652
Accumulated depreciation (7,163) (7,275)
------- -------
Net properties $ 5,422 $ 5,377
======= =======
- --------------------------------------------------------------------------------
NOTE 7
PAYABLES AND SHORT-TERM BORROWINGS
(in millions) 1996 1995
Trade creditors $ 966 $ 799
Accrued advertising and promotional expenses 279 252
Accrued vacation 271 313
Wage dividend and Company payments under
Employees' Savings and Investment Plan 134 180
Other employment-related liabilities 476 372
Restructuring programs 379 213
Liabilities related to sale of Office Imaging
business 384 -
Liabilities related to sale of non-imaging
health businesses 152 201
Other 1,075 997
------ ------
Total payables $4,116 $3,327
====== ======
Short-term bank borrowings, primarily by subsidiaries outside the U.S.,
totaled $296 million at year-end 1996 and $586 million at year-end 1995. The
weighted average interest rate was 7.0% in 1996 and 4.7% in 1995.
The Company has a $3,500 million unused revolving credit facility established
in 1996 and expiring in November 2001 which is available to support the
Company's commercial paper program and for general corporate purposes. If
unused, it has a commitment fee of $1.9 million per year. Interest on amounts
borrowed under this facility is calculated at rates based on spreads above
certain reference rates. The Company also has a shelf registration statement
for debt securities with an available balance of $2,200 million.
- ------------------------------------------------------------------------------
22
NOTE 8
LONG-TERM BORROWINGS
(in millions)
Maturity
Description Dates 1996 1995
Notes:
7.25% - 8.55% 1997 - 2003 $433 $433
9.38% - 9.5% 2003 - 2008 178 178
Debentures:
9.2% - 9.95% 2018 - 2021 13 13
Other
1.6% - 18.5% 1998 - 2011 180 41
---- ----
804 665
Current maturities (245) -
---- ----
Total $559 $665
==== ====
Annual maturities (in millions) of long-term borrowings outstanding at
December 31, 1996 are as follows: 1997: $245; 1998: $68; 1999: $104; 2000:
$29; 2001: $26; and 2002 and beyond: $332.
- ------------------------------------------------------------------------------
NOTE 9
OTHER LONG-TERM LIABILITIES
(in millions)
1996 1995
Deferred compensation $179 $124
Liabilities related to sale
of non-imaging health businesses 245 259
Other 235 321
---- ----
Total $659 $704
==== ====
- --------------------------------------------------------------------------------
23
NOTE 10
COMMITMENTS AND CONTINGENCIES
Expenditures for pollution prevention and waste treatment for continuing
operations at various manufacturing facilities were as follows:
1996 1995 1994
(in millions)
Recurring costs for managing
hazardous substances and
pollution $ 76 $ 72 $ 83
Capital expenditures to limit
or monitor hazardous substances
and pollutants 37 31 36
Site remediation costs 3 3 3
---- ---- ----
Total $116 $106 $122
==== ==== ====
At December 31, 1996 and 1995, the Company's accrued liabilities for
environmental remediation costs amounted to $106 million and $114 million,
respectively.
The Company expects these recurring and remediation costs and capital
expenditures to increase in the future. It is not expected that these costs
will have an impact materially different from 1996's environmental
expenditures on the Company's financial position, results of operations, cash
flows or competitive position.
In October 1994, the Company, the Environmental Protection Agency (EPA), and
the U.S. Department of Justice announced the settlement of a civil complaint
alleging noncompliance by the Company with federal environmental regulations
at the Company's Kodak Park manufacturing site in Rochester, New York. The
Company paid a penalty of $5 million. A Consent Decree was signed under
which the Company is subject to a Compliance Schedule by which the Company
will improve its waste characterization procedures, upgrade one of its
incinerators, and evaluate and upgrade its industrial sewer system. The
total expenditures required to complete this program are currently estimated
to be approximately $70 million over the next seven years. These
expenditures are capital in nature.
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 also not expected to be material to the Company's financial position or
results of operations.
In addition to the foregoing environmental actions, the Resource Conservation
and Recovery Act (RCRA) Facility Assessment (RFA) pertaining to the Kodak
Park site in Rochester, N.Y. is nearly complete and the Company has completed
a broad-based assessment of the site in response to the RFA. While future
expenditures associated with any remediation activities could be significant,
the Company is currently in the process of completing the RCRA Facility
Investigation (RFI). Upon completion of the RFI, the Company expects to have
developed estimates of the required remediation costs.
The Clean Air Act Amendments were enacted in 1990. Expenditures to comply
with the Clean Air Act implementing regulations issued to date have not been
material and have been primarily capital in nature. Future capital
expenditures cannot be reasonably estimated at the present time, as certain
of the regulations of this Act have not been issued.
24
The Company has retained certain obligations for environmental remediation
matters related to the non-imaging health businesses sold in 1994. Actions
to fulfill these obligations are not expected to be completed in the near
term and costs related to the obligations are included in remediation
accruals recorded at December 31, 1996.
The Company has entered into agreements with several companies to provide the
Company with products and services to be used in its normal operations. The
minimum payments for these agreements are approximately $94 million in 1997,
$88 million in 1998, $79 million in 1999, $62 million in 2000, $12 million in
2001 and $12 million in 2002 and thereafter.
The Company has also guaranteed debt and other obligations under agreements
with certain affiliated companies and customers. At December 31, 1996, these
guarantees totaled approximately $143 million. The Company does not expect
that these guarantees will have a material impact on the Company's future
financial position or results of operations.
The Company has issued letters of credit in lieu of making security deposits
to insure the payment of possible Workers' Compensation claims.
Rental expense, net of minor sublease income, amounted to $242 million in
1996 and $189 million in both 1995 and 1994. The approximate amounts of
noncancelable lease commitments with terms of more than one year, principally
for the rental of real property, reduced by minor sublease income, are
$188 million in 1997, $153 million in 1998, $120 million in 1999, $92 million
in 2000, $76 million in 2001 and $103 million in 2002 and thereafter.
The Company and its subsidiary companies are involved in lawsuits, claims,
investigations and proceedings, including product liability, commercial,
environmental, and health and safety matters, which are being handled and
defended in the ordinary course of business. There are no such matters
pending that the Company and its General Counsel expect to be material in
relation to the Company's business, financial position or results of
operations.
- ------------------------------------------------------------------------------
NOTE 11
FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and the estimated fair
values of financial instruments at December 31, 1996 and 1995; ( ) denotes
liabilities:
1996 1995
(in millions)
Carrying Fair Carrying Fair
Amount Value Amount Value
Marketable securities:
Current $ 19 $ 19 $ 47 $47
Long-term 46 46 60 60
Other investments 59 78 55 55
Long-term borrowings (559) (598) (665) (716)
Foreign currency swaps held - - (66) (66)
The fair values of long-term borrowings were determined by reference to
quoted market prices or by obtaining quotes from dealers. Marketable
securities and other investments are valued at quoted market prices, except
for $31 million and $34 million of equity investments included in other
investments at December 31, 1996 and 1995, respectively, which are reflected
at their carrying value because it is not practical to estimate fair value as
quoted market prices do not exist. The fair values for the remaining
financial instruments in the above table are based on dealer quotes and
reflect the estimated amounts the Company would pay or receive to terminate
the contracts. The carrying values of cash and cash equivalents,
receivables, short-term borrowings and payables approximate their fair
values.
25
The Company, as a result of its global operating and financial activities, is
exposed to changes in interest rates and foreign currency exchange rates
which may adversely affect its results of operations and financial position.
In seeking to minimize the risks and/or costs associated with such
activities, the Company manages exposure to changes in interest rates and
foreign currency exchange rates through its regular operating and financing
activities. In certain instances, the Company manages exposures to foreign
currency exchange rate changes through foreign currency forward agreements
with third parties. The Company does not utilize financial instruments for
trading or other speculative purposes, nor does it utilize leveraged
financial instruments.
The table below summarizes by major currency the notional amounts of foreign
currency forward contracts in U.S. dollars. Foreign currency amounts are
translated at rates current at the reporting date. The "buy" amounts
represent the U.S. dollar equivalent of commitments to purchase foreign
currencies, and the "sell" amounts represent the U.S. dollar equivalent of
commitments to sell foreign currencies. Substantially all of the Company's
foreign currency forward agreements will mature during 1997.
1996 1995
(in millions)
Buy Sell Buy Sell
British pound $ - $131 $ - $127
Australian dollar - 68 - -
French franc 82 - 35 -
Spanish peseta - 61 - 12
Swiss franc 55 - 61 -
Others 91 201 58 7
---- ---- ---- ----
Total $228 $461 $154 $146
==== ==== ==== ====
The Company's financial instrument counterparties are high quality investment
or commercial banks with significant experience with such instruments. The
Company manages exposure to counterparty credit risk through specific minimum
credit standards and diversification of counterparties. The Company has
procedures to monitor the credit exposure amounts.
-----------------------------------------------------------------------------
- -
26
NOTE 12
INCOME TAXES
The components of earnings from continuing operations before income taxes and
the related provision (benefit) for U.S. and other income taxes were as
follows:
(in millions) 1996 1995 1994
Earnings before income taxes
U.S. $1,125 $1,262 $ 740
Outside the U.S. 431 664 262
------ ------ ------
Total $1,556 $1,926 $1,002
====== ====== ======
U.S. income taxes
Current provision $ 286 $ 167 $ 339
Deferred provision (benefit) 7 224 (116)
Income taxes outside the U.S.
Current provision 231 200 170
Deferred (benefit) provision (36) 30 (2)
State and other income taxes
Current provision 45 24 65
Deferred provision (benefit) 12 29 (8)
------ ------ ------
Total $ 545 $ 674 $ 448
====== ====== ======
The components of earnings from consolidated operations before income taxes
and the related provision (benefit) for U.S. and other income taxes were as
follows:
1996 1995 1994
(in millions)
Earnings before income taxes
U.S. $1,190 $1,262 $1,787
Outside the U.S. 431 664 623
------ ------ ------
Total $1,621 $1,926 $2,410
====== ====== ======
U.S. income taxes
Current provision $ 206 $ 167 $1,430
Deferred provision (benefit) 15 224 (293)
Income taxes outside the U.S.
Current provision 231 200 369
Deferred (benefit) provision (36) 30 (3)
State and other income taxes
Current (benefit) provision (95) 24 358
Deferred provision (benefit) 12 29 (8)
------ ------ ------
Total $ 333 $ 674 $1,853
====== ====== ======
The components of consolidated income
taxes were as follows:
Continuing operations $ 545 $ 674 $ 448
Discontinued operations (212) - 1,506
Extraordinary items - - (101)
------ ------ ------
Total $ 333 $ 674 $1,853
====== ====== ======
27
The differences between the provision for income taxes and income taxes
computed using the U.S. federal income tax rate for continuing operations
were as follows:
(in millions) 1996 1995 1994
Amount computed using the statutory rate $545 $674 $351
Increase (reduction) in taxes resulting from:
State and other income taxes 37 34 37
Goodwill amortization 21 38 26
Export sales and manufacturing credits (41) (37) (22)
Operations outside the U.S. 6 (34) 43
Other, net (23) (1) 13
---- ---- ----
Provision for income taxes $545 $674 $448
==== ==== ====
The significant components of deferred tax assets and liabilities were as
follows:
(in millions)
1996 1995
Deferred tax assets
Postemployment obligations $1,190 $1,208
Restructuring programs 178 140
Inventories 109 93
Tax loss carryforwards 128 185
Other 744 691
------ ------
2,349 2,317
Valuation allowance (128) (185)
------ ------
Total $2,221 $2,132
====== ======
Deferred tax liabilities
Depreciation $ 678 $ 662
U.S. pension income 77 -
Leasing 349 385
Other 367 344
------ ------
Total $1,471 $1,391
====== ======
The valuation allowance is primarily attributable to certain net operating
loss carryforwards outside the U.S. A majority of the net operating loss
carryforwards are subject to a five-year expiration period.
Retained earnings of subsidiary companies outside the U.S. were approximately
$1,466 million and $1,924 million at December 31, 1996 and 1995, respectively.
Retained earnings at December 31, 1996 are considered to be reinvested
indefinitely. If remitted, they would be substantially free of additional
tax. It is not practicable to determine the deferred tax liability for
temporary differences related to these retained earnings.
- ------------------------------------------------------------------------------
28
NOTE 13
RESTRUCTURING COSTS
1996 Restructuring Program
In December 1996, the Company committed to implement a restructuring program
and recorded a pre-tax provision of $358 million ($256 million after-tax).
In addition, $20 million of reserves from the 1993 restructuring program will
be utilized for actions associated with the 1996 program. The principal
purpose of the program is to eliminate infrastructure and operational
inefficiencies and redundancies throughout the Company by taking actions to
separate personnel, close facilities and exit from non-strategic businesses.
A portion of the program includes the restructuring of retail and wholesale
photofinishing operations, primarily outside the U.S. Additionally, the plan
addressed certain infrastructure activities which supported the Office
Imaging business, which was sold to Danka Business Systems PLC.
This program will result in the separation of 3,900 employees worldwide at a
cost of $260 million. Approximately 1,200 of the separations are expected to
occur in the U.S. and 2,700 outside the U.S. Separations by functional area
are as follows: 2,400 administrative and marketing, 1,300 services including
photofinishing and 200 manufacturing. Most of the separations are expected
to be completed by the end of 1997. Approximately $118 million of the
restructuring costs relate to business exits and facility closures. No
significant amounts have been utilized in 1996.
1994 Restructuring Program
The Company recorded a pre-tax restructuring provision of $340 million in 1994
for severance and other termination benefits and exit costs related to the
realignment of the Company's worldwide manufacturing, marketing,
administrative and photofinishing operations. In addition, $50 million of
reserves from the 1993 restructuring program were utilized for these actions.
At December 31, 1996, substantially all of the personnel had been terminated
with approximately $60 million, $260 million, and $30 million being paid in
1996, 1995 and 1994, respectively. These amounts were spent substantially
according to plan. The remaining accrual balance at December 31, 1996, in
the amount of $40 million, will primarily provide for severance,
non-cancelable lease payments and business exit costs.
- ------------------------------------------------------------------------------
29
NOTE 14
RETIREMENT PLANS
Substantially all U.S. employees are covered by a noncontributory plan, the
Kodak Retirement Income Plan (KRIP), which is funded by Company contributions
to an irrevocable trust fund. Assets in the fund are held for the sole
benefit of retired employees. The assets of the trust fund are comprised of
corporate equity and debt securities, U.S. government securities, partnership
and joint venture investments, interests in pooled funds, and various types
of interest rate and foreign currency financial instruments.
Retirement benefits earned by employees prior to January 1, 1996, are based
on a point system. Retirement benefits earned by employees subsequent to
December 31, 1995, are based on age and years of service. The benefit
formula used to calculate the actual benefit dollars paid to an individual
once retired has not changed as a result of these new plan provisions.
The benefit obligations for KRIP include amounts for employees who retired
from Eastman Chemical Company (ECC) on or before December 31, 1993, the date
ECC was spun off from the Company. Benefit obligations of all other ECC
employees were transferred to ECC as part of the spin-off agreement. The
benefit obligation of KRIP excludes amounts for all employees (both retired
and active) of the non-imaging health businesses sold in 1994 because those
obligations were transferred to the buyers of the non-imaging health
businesses. The market value of assets of KRIP reflect the Company's
estimates of assets held for employees in continuing operations only. The
transfer of assets from the KRIP trust fund to ECC and the buyers of the
non-imaging health businesses was not completed as of December 31, 1996. The
Company anticipates the transfer of assets to ECC to be completed in 1997,
with the non-imaging health businesses to follow. The Company retained the
obligation for employees of the Office Imaging sales, marketing and equipment
service functions and recorded a $12 million curtailment loss in 1996 as a
result of the sale of this business.
Most subsidiaries and branches operating outside the U.S. have retirement
plans covering substantially all employees. Contributions by the Company for
these plans are typically deposited under government or other fiduciary-type
arrangements. Retirement benefits are generally based on contractual
agreements that provide for benefit formulas using years of service and/or
compensation prior to retirement. The actuarial assumptions used for these
plans reflect the diverse economic environments within the various countries
in which the Company operates.
Total pension expense for all plans included the following:
(in millions)
1996 1995 1994
Non- Non- Non-
U.S. U.S. U.S. U.S. U.S. U.S.
Major Plans:
Service cost $ 131 $ 42 $ 110 $ 21 $ 120 $ 19
Interest cost 476 112 480 81 470 77
Actual return on plan assets (1,069) (141) (834) (153) 50 (46)
Net deferral and amortization 519 22 288 76 (590) (24)
----- ----- ----- ----- ----- ----
Net pension expense 57 35 44 25 50 26
Other U.S. and non-U.S. plans 7 65 6 71 0 57
----- ----- ----- ----- ----- ----
Total pension expense $ 64 $ 100 $ 50 $ 96 $ 50 $ 83
===== ===== ===== ===== ===== ====
30
The funded status of Major Plans was as follows:
(in millions)
At December 31,
1996 1995
Non- Non-
U.S. U.S. U.S. U.S.
Actuarial present value of benefit obligations
Vested benefits $5,159 $1,353 $5,238 $ 962
====== ====== ====== ======
Accumulated benefits $5,477 $1,385 $5,522 $ 985
====== ====== ====== ======
Projected benefits $6,425 $1,515 $6,586 $1,066
Market value of assets 6,709 1,618 6,070 992
------ ------ ------ ------
Projected benefits (less than) in excess of
plan assets (284) (103) 516 74
Unrecognized net (loss) gain (90) 21 (828) (102)
Unrecognized net transition asset 398 64 464 58
Unrecognized prior service cost (134) (49) (163) (57)
------ ------ ------ ------
Prepaid pension expense $ (110) $ (67) $ (11) $ (27)
====== ====== ====== ======
The weighted assumptions used to compute pension amounts for Major Plans
were as follows:
December 31,
1996 1995
Non- Non-
U.S. U.S. U.S. U.S.
Discount rate 7.5% 7.9% 7.25% 8.2%
Salary increase rate 4.5% 4.4% 4.5% 5.4%
Long-term rate of return on plan assets 9.5% 9.0% 9.5% 9.6%
The annual cost of postretirement employee benefits is based on assumed
discount rates. These rates are set relative to the general level of
interest rates in the economy. As a result, significant year-to-year changes
in interest rates can cause material year-to-year changes in assumed discount
rates and employee benefit liabilities and costs based on those rates.
The Company also sponsors an unfunded plan for certain U.S. employees
(primarily executives). The benefits of this plan are obtained by applying
KRIP provisions to all compensation, including compensation currently being
deferred, and without regard to the legislated qualified plan maximums,
reduced by benefits under KRIP. At December 31, 1996 and 1995, the projected
benefit obligations of this plan amounted to $197 million and $159 million,
respectively. The Company had recorded long-term liabilities at those dates
of $179 million and $143 million, respectively. Pension expense recorded in
1996, 1995 and 1994 related to this plan was $24 million, $17 million and $17
million, respectively.
- ------------------------------------------------------------------------------
31
NOTE 15
NONPENSION POSTRETIREMENT BENEFITS
The Company provides health care, dental and life insurance benefits to
eligible retirees and eligible survivors of retirees. In general, these
benefits are provided to U.S. retirees that are covered by the provisions of
the Company's principal pension plan. A few of the Company's subsidiaries
and branches operating outside the U.S. offer health care benefits; however,
the cost of such benefits is insignificant to the Company.
Net nonpension postretirement benefit cost includes the following:
(in millions)
1996 1995 1994
Service cost $ 25 $ 23 $ 26
Interest cost 166 183 192
Net deferral and amortization (62) (58) (35)
----- ----- -----
Net postretirement
benefit cost $ 129 $ 148 $ 183
===== ===== =====
The total obligation and amount recognized in the Consolidated Statement of
Financial Position at December 31, 1996 and 1995, were as follows:
(in millions)
1996 1995
Accumulated postretirement
benefit obligation
Retirees $1,801 $1,994
Fully eligible active plan
participants 31 38
Other active plan participants 449 566
------ ------
Total obligation 2,281 2,598
Unrecognized net loss (278) (465)
Unrecognized negative plan
amendment 779 781
------ ------
Accrued postretirement
benefit obligation $2,782 $2,914
====== ======
To estimate this obligation, health care costs were assumed to increase 8% in
1997 with the rate of increase declining to an ultimate trend of 5% in 2002.
If the health care cost trend rates were increased by one percentage point,
the accumulated postretirement benefit obligation, as of December 31, 1996,
would increase by approximately $90 million while the net postretirement
benefit cost for the year then ended would increase by approximately $9
million. The discount rates utilized to measure the obligation at December
31, 1996 and 1995, were 7.5% and 7.25%, respectively. The annual costs of
employee benefits related to postretirement are based on assumed discount
rates set relative to the general level of interest rates in the economy. As
a result, significant year-to-year changes in interest rates can cause
material year-to-year changes in assumed discount rates and employee benefit
liabilities and costs based on these rates. The Company recorded a $97
million curtailment gain in 1996 as a result of the sale of the Office
Imaging business, which is included in the loss on the sale.
- ------------------------------------------------------------------------------
32
NOTE 16
STOCK OPTION AND COMPENSATION PLANS
The Company's stock incentive plans consist of the 1995 Omnibus Long-Term
Compensation Plan (the 1995 Plan), the 1990 Omnibus Long-Term Compensation
Plan (the 1990 Plan) and the 1985 Stock Option Plan (the 1985 Plan). The
Plans are administered by the Executive Compensation and Development
Committee of the Board of Directors.
Under the 1995 Plan, 16 million shares of the Company's common stock may be
granted to a variety of employees between February 1, 1995 and December 31,
1999. Option prices are not less than 100 percent of the per share fair
market value on the date of grant, and the options generally expire 10 years
from the dates of grant, but may expire sooner if the optionee's employment
terminates. The 1995 Plan also provides for Stock Appreciation Rights (SARs)
to be granted, either in tandem with options or freestanding. SARs allow
optionees to receive payment equal to the difference between the Company's
stock market price on grant date and exercise date. At December 31, 1996,
346,650 freestanding SARs were outstanding at option prices ranging from
$56.31 to $83.19.
Under the 1990 Plan, 16 million shares of the Company's common stock could be
granted to key employees between February 1, 1990 and January 31, 1995.
Option prices could not be less than 50 percent of the per share fair market
value on the date of grant; however, no options below fair market value were
granted. The options generally expire 10 years from the dates of grant, but
may expire sooner if the optionee's employment terminates. The 1990 Plan
also provided that options with dividend equivalents, tandem SARs and
freestanding SARs could be granted. At December 31, 1996, 113,702 tandem
SARs and 260,931 freestanding SARs were outstanding at option prices ranging
from $31.45 to $44.50.
Under the 1985 Plan, approximately 1.7 million options, 181,860 tandem SARs
and 34,900 freestanding SARs were outstanding at December 31, 1996, at option
prices ranging from $33.79 to $39.53. The 1985 Plan terms are similar to the
1995 Plan terms.
Further information relating to options is as follows:
Shares Range of Price
Under Option Per Share
Outstanding on December 31, 1995 21,198,746 $30.25 - $69.50
Granted 3,359,338 $68.00 - $83.44
Exercised 3,410,660 $30.25 - $71.81
Terminated, Canceled or Surrendered 292,986 $31.45 - $75.69
Outstanding on December 31, 1996 20,854,438 $30.25 - $83.44
Exercisable on December 31, 1996 15,103,173 $30.25 - $69.50
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB No. 25), in accounting for employee stock
options. Accordingly, no compensation expense has been recognized for stock
option plans.
Pro forma net earnings and earnings per share information, as required by
SFAS No. 123, "Accounting for Stock-Based Compensation," has been determined
as if the Company had accounted for employee stock options under SFAS No.
123's fair value method. The fair value of these options was estimated at
grant date using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1996 and 1995, respectively: dividend yields
of 2.25% and 3%; volatility factors of the expected market price of the
Company's common stock of 25%; an expected option life of 7 years; and the 7
year U.S. treasury interest rate on the grant dates. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the options' vesting period (3 years). The Company's pro forma
information follows:
(in millions, except per share data) 1996 1995
Pro Forma Net Earnings $1,262 $1,242
Pro Forma Earnings Per Share $ 3.74 $ 3.64
33
This disclosure is not likely to be representative of the effects on reported
net earnings for future years, because options vest over three years and
additional awards generally are made each year.
The weighted-average fair value of options granted was $22.84 and $17.43 for
1996 and 1995, respectively.
The Company recognized compensation expense of $31 million, $70 million and
$10 million related to stock-based employee compensation awards in 1996, 1995
and 1994, respectively.
- ------------------------------------------------------------------------------
NOTE 17
SEGMENT INFORMATION
The Company's business consists of two segments: Consumer Imaging and
Commercial Imaging. The Consumer Imaging segment includes amateur films,
photographic papers, chemicals and equipment for photographic imaging and
photofinishing operations. The Commercial Imaging segment includes x-ray,
motion picture, professional and graphic arts films, microfilms, copiers,
printers and other equipment for information management. Sales between
segments are made on a basis intended to reflect the market value of the
products.
Sales are reported in the geographic area where they originate. Transfers
among geographic areas are made on a basis intended to reflect the market
value of the products, recognizing prevailing market prices and distributor
discounts.
The parent company's equity in the net assets of subsidiaries outside the
U.S. was as follows:
(in millions) 1996 1995 1994
Net assets $2,927 $2,980 $3,057
====== ====== ======
34
SEGMENT INFORMATION (continued)
Financial information by geographic areas is as follows:
Europe, Canada
Middle &
United East Asia Latin Elimi- Consol-
(in millions) States & Africa* Pacific* America nations idated
1996
Sales to customers $ 7,453 $4,664 $2,453 $1,398 $15,968
Transfers among geographic
areas 3,065 228 79 632 $(4,004) -
------- ------ ------ ------ ------- -------
Total sales $10,518 $4,892 $2,532 $2,030 $(4,004) $15,968
======= ====== ====== ====== ======= =======
Earnings from operations $ 1,173 $ 497 $ 96 $ 79 $ - $ 1,845
======= ====== ====== ====== ======= =======
Assets by geographic areas $ 9,162 $3,036 $1,543 $1,161 $ (464) $14,438
======= ====== ====== ====== ======= =======
1995
Sales to customers $ 6,978 $4,391 $2,286 $1,325 $14,980
Transfers among geographic
areas 2,725 229 74 555 $(3,583) -
------- ------ ------ ------ ------- -------
Total sales $ 9,703 $4,620 $2,360 $1,880 $(3,583) $14,980
======= ====== ====== ====== ======= =======
Earnings from operations $ 1,153 $ 499 $ 152 $ 137 $ - $ 1,941
======= ====== ====== ====== ======= =======
Assets by geographic areas $ 9,266 $3,036 $1,624 $1,354 $ (803) $14,477
======= ====== ====== ====== ======= =======
1994
Sales to customers from
continuing operations $ 6,434 $3,832 $2,025 $1,266 $13,557
Transfers among geographic
areas 2,547 277 117 456 $(3,397) -
------- ------ ------ ------ ------- -------
Total sales $ 8,981 $4,109 $2,142 $1,722 $(3,397) $13,557
======= ====== ====== ====== ======= =======
Earnings (loss) from
operations from continuing
operations $ 884 $ 315 $ (17) $ 130 $ (3) $ 1,309
======= ====== ====== ====== ======= =======
Assets by geographic areas $10,131 $3,154 $1,658 $1,342 $(1,317) $14,968
======= ====== ====== ====== ======= =======
* Financial information for the Middle East and Africa is now shown with Europe instead of
with Asia Pacific. 1994 and 1995 data have been restated to conform to the 1996
presentation.
35
SEGMENT INFORMATION (continued)
(in millions) 1996 1995 1994
Sales from continuing operations,
including intersegment sales
Consumer Imaging $ 7,659 $ 6,830 $ 5,919
Commercial Imaging 8,340 8,184 7,646
Intersegment sales (31) (34) (8)
------- ------- -------
Total sales from continuing operations $15,968 $14,980 $13,557
======= ======= =======
Earnings from operations from
continuing operations (1)
Consumer Imaging $ 1,141 $ 1,254 $ 878
Commercial Imaging 704 687 431
------- ------- -------
Total earnings from operations
from continuing operations 1,845 1,941 1,309
Other revenues and charges
Consumer Imaging 51 35 (78)
Commercial Imaging (316) (36) (115)
Corporate 59 64 28
Interest expense 83 78 142
------- ------- -------
Earnings before income taxes $ 1,556 $ 1,926 $ 1,002
======= ======= =======
Assets
Consumer Imaging $ 5,846 $ 4,913 $ 4,873
Commercial Imaging 5,921 6,889 6,811
Corporate 2,671 2,675 3,284
------- ------- -------
Total assets at year end $14,438 $14,477 $14,968
======= ======= =======
Depreciation expense
Consumer Imaging $ 344 $ 311 $ 335
Commercial Imaging 493 496 501
------- ------- -------
Total depreciation expense $ 837 $ 807 $ 836
======= ======= =======
Amortization of goodwill
Consumer Imaging $ 43 $ 43 $ 25
Commercial Imaging 23 66 42
------- ------- -------
Total amortization of goodwill $ 66 $ 109 $ 67
======= ======= =======
Capital additions
Consumer Imaging $ 599 $ 436 $ 489
Commercial Imaging 742 598 664
------- ------- -------
Total capital additions $ 1,341 $ 1,034 $ 1,153
======= ======= =======
(1) Earnings from operations are shown after deducting restructuring costs of:
1996 1995 1994
Consumer Imaging $183 $ - $190
Commercial Imaging 175 - 150
- ----------------------------------------------------------------------------------------
36
NOTE 18
QUARTERLY SALES AND EARNINGS DATA - UNAUDITED
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
(in millions, except per share data)
1996
Sales $4,314 $4,149 $4,117 $3,388
Gross profit 2,016 1,997 2,017 1,612
Earnings (loss) from continuing
operations (113)(1) 410 440 274
Earnings from discontinued operations 277 - - -
Net earnings 164 (1) 410 440 274
Earnings (loss) per share from
continuing operations (2) (.34) 1.22 1.30 .80
Earnings per share from discontinued
operations (2) .83 - - -
Earnings per share (2) .49 1.22 1.30 .80
1995
Sales $4,092 $3,813 $3,938 $3,137
Gross profit 1,760 1,826 1,908 1,524
Net earnings 275 338 377 262
Earnings per share .80 .99 1.11 .77
(1) After deducting $358 million of restructuring costs, which reduced net earnings by
$256 million, and a $387 million loss related to the sale of the Office Imaging
business, which reduced net earnings by $252 million.
(2) Each quarter is calculated as a discrete period and the sum of the four quarters does
not equal the full year amount.
- --------------------------------------------------------------------------------------
37
SUMMARY OF OPERATING DATA
Eastman Kodak Company and Subsidiary Companies
(Dollar amounts and shares in millions, except per share data)
1996 1995 1994 1993 1992
Sales from continuing operations $15,968 $14,980 $13,557 $12,670 $12,992
Earnings from operations before
extraordinary items and cumulative effect
of changes in accounting principle:
Continuing 1,011(1) 1,252 554(3) 644 (4) 845(6)
Discontinued 277 - 269 23 (4) 149(6)
Net earnings (loss) 1,288(1) 1,252 557(3) (1,515)(4) 1,146(6)
(5) (7)
EARNINGS AND DIVIDENDS
Net earnings - percent of sales 8.1% 8.4% 4.1% (12.0%) 8.8%
- percent return on average
shareholders' equity 26.1% 27.4% 15.1% (30.6%) 18.1%
Earnings from continuing operations
per share (8) 3.00 3.67 1.65 1.95 2.60
Net earnings (loss) per share (8) 3.82 3.67 1.66 (4.62) 3.53
Cash dividends declared
- on common shares 539 547 537 657 650
- per common share 1.60 1.60 1.60 2.00 2.00
Common shares outstanding at year end 331.8 345.9 339.8 330.6 325.9
Shareholders at year end 137,092 143,574 151,349 157,797 166,532
STATEMENT OF FINANCIAL POSITION DATA
Working capital $ 1,548 $ 2,666 $ 1,948 $ 2,696 $ 545
Properties - net 5,422 5,377 5,292 5,027 5,520
Total assets 14,438 14,477 14,968 18,810 19,038
Long-term borrowings 559 665 660 6,727 5,259
Total shareholders' equity 4,734 5,121 4,017 3,356 6,557
SUPPLEMENTAL INFORMATION
Sales - Consumer Imaging $ 7,659 $ 6,830 $ 5,919 $ 5,292 $ 5,414
- Commercial Imaging 8,340 8,184 7,646 7,382 7,592
Research and development costs 1,028 935 859 864 988
Depreciation 837 807 836 817 936
Taxes (excludes payroll, sales, and excise
taxes) 663 796 567 545 584
Wages, salaries, and employee benefits 5,110 5,025 4,690 4,679 4,653
Employees at year end
- in the U.S. 53,400(2) 54,400 54,300 49,100 50,900
- worldwide 94,800(2) 96,600 96,300 91,800 95,200
(1) After deducting $358 million of restructuring costs, which reduced net earnings by
$256 million, and a $387 million loss related to the sale of the Office Imaging
business, which reduced net earnings by $252 million.
(2) Excludes approximately 10,000 employees worldwide and 5,800 employees in the U.S.
who were transferred to Danka Business Systems PLC.
(3) After deducting $340 million of restructuring costs from continuing operations,
which reduced net earnings by $254 million, and a $110 million loss on the
extinguishment of certain financial instruments, which reduced net earnings by
$80 million. Net earnings were also reduced by $266 million of extraordinary losses
related to the early extinguishment of debt.
(4) After deducting $495 million of restructuring costs from continuing operations,
which reduced net earnings by $353 million, and $55 million of restructuring costs
from discontinued operations, which reduced net earnings by $34 million.
(5) The net loss for 1993 was due to an after-tax charge of $2.17 billion from the
cumulative effect of adopting SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 112, "Employers'
Accounting for Postemployment Benefits."
(6) After deducting $219 million of restructuring costs from continuing operations,
which reduced net earnings by $140 million, and $1 million of restructuring costs
from discontinued operations, which reduced net earnings by less than $1 million.
(7) Net earnings for 1992 benefited by $152 million from the cumulative effect of
adopting SFAS No. 109, "Accounting for Income Taxes."
(8) Based on average number of shares outstanding.
38
PART III
ITEMS 10(a), 11 AND 12. DIRECTORS OF THE REGISTRANT
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Responses to the above items, as contained in the Notice of 1997 Annual
Meeting and Proxy Statement, which will be filed within 120 days of the
Company's fiscal year end, are hereby incorporated by reference in this
Annual Report on Form 10-K.
ITEM 10(b). EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers list is contained in PART I under the caption
"Executive Officers of the Registrant" on page 6.
- ------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None to report.
- ------------------------------------------------------------------------------
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page No.
(a) 1. Consolidated financial statements:
Report of independent accountants 12
Consolidated statement of earnings 13
Consolidated statement of financial position 14
Consolidated statement of shareholders' equity 15
Consolidated statement of cash flows 16-17
Notes to financial statements 18-36
2. Financial statement schedules:
II - Valuation and qualifying accounts 41
All other schedules have been omitted because they are not applicable
or the information required is shown in the financial statements or
notes thereto.
3. Additional data required to be furnished:
Exhibits required as part of this report are listed in the index
appearing on pages 42 through 44. The management contracts and
compensatory plans and arrangements required to be filed as exhibits
to this form pursuant to Item 14(c) of this report are listed on
pages 42 through 44, Exhibit Numbers (10)A - (10)O.
(b) Report on Form 8-K.
No reports on Form 8-K were filed or required to be filed during the
quarter ended December 31, 1996.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: By:
George M. C. Fisher, Chairman Harry L. Kavetas, Chief
and Chief Executive Officer Financial Officer and
Executive Vice President
David J. FitzPatrick,
Controller and Vice
President
Date: March 13, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
Richard S. Braddock, Director Paul E. Gray, Director
Martha Layne Collins, Director Karlheinz Kaske, Director
Alice F. Emerson, Director John J. Phelan, Jr., Director
George M. C. Fisher, Director Richard A. Zimmerman, Director
Roberto C. Goizueta, Director
Date: March 13, 1997
40
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (No. 33-48258,
No. 33-49285 and No. 33-64453), Form S-4 (No. 33-48891), and Form S-8
(No. 33-5803, No. 33-35214, No. 33-56499, No. 33-65033 and No. 33-65035) of
Eastman Kodak Company of our report dated January 15, 1997, appearing on page
12 of this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
Rochester, New York
March 13, 1997
41
Schedule II
Eastman Kodak Company and Subsidiary Companies
Valuation and Qualifying Accounts
(in millions)
Balance at Additions Deductions Balance
Beginning Charged to Amounts at End of
of Period Earnings Written Off Period
Year ended December 31, 1996
Deducted in the Statement of
Financial Position:
From Current Receivables
Reserve for doubtful accounts $ 85 $53 $68 $ 70
Reserve for loss on returns
and allowances 19 10 9 20
---- --- --- ----
TOTAL $104 $63 $77 $ 90
==== === === ====
From Long-Term Receivables and
Other Noncurrent Assets
Reserve for doubtful accounts $ 14 $ 3 $11 $ 6
==== === === ====
Year ended December 31, 1995
Deducted in the Statement of
Financial Position:
From Current Receivables
Reserve for doubtful accounts $105 $57 $77 $ 85
Reserve for loss on returns
and allowances 15 13 9 19
---- --- --- ----
TOTAL $120 $70 $86 $104
==== === === ====
From Long-Term Receivables and
Other Noncurrent Assets
Reserve for doubtful accounts $ 18 $10 $14 $ 14
==== === === ====
Year ended December 31, 1994
Deducted in the Statement of
Financial Position:
From Current Receivables
Reserve for doubtful accounts $ 82 $80 $57 $105
Reserve for loss on returns
and allowances 10 5 - 15
---- --- --- ----
TOTAL $ 92 $85 $57 $120
==== === === ====
From Long-Term Receivables and
Other Noncurrent Assets
Reserve for doubtful accounts $ 20 $ 8 $10 $ 18
==== === === ====
42
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits
Exhibit
Number Page
(3) A. Certificate of Incorporation.
(Incorporated by reference to the Eastman Kodak Company
Annual Report on Form 10-K for the fiscal year ended December
25, 1988, Exhibit 3.)
B. By-laws, as amended through September 11, 1992.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31, 1992,
Exhibit 3.)
(4) A. Indenture dated as of June 15, 1986 between Eastman Kodak
Company as issuer of 8.55% Notes due 1997 and The Bank of New
York as Trustee.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 28, 1986,
Exhibit 4.)
B. Indenture dated as of January 1, 1988 between Eastman Kodak
Company as issuer of (i) 9 3/8% Notes Due 2003, (ii) 9.95%
Debentures Due 2018, (iii) 9 1/2% Notes Due 2008, (iv) 9.20%
Debentures Due 2021, and (v) 7 1/4% Notes Due 1999, and The Bank
of New York as Trustee.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 25, 1988,
Exhibit 4.)
C. First Supplemental Indenture dated as of September 6, 1991 and
Second Supplemental Indenture dated as of September 20, 1991,
each between Eastman Kodak Company and The Bank of New York as
Trustee, supplementing the Indenture described in B.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31, 1991,
Exhibit 4.)
D. Third Supplemental Indenture dated as of January 26, 1993,
between Eastman Kodak Company and The Bank of New York as
Trustee, supplementing the Indenture described in B.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31, 1992,
Exhibit 4.)
E. Fourth Supplemental Indenture dated as of March 1, 1993, between
Eastman Kodak Company and The Bank of New York as Trustee,
supplementing the Indenture described in B.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31,
1993.)
Eastman Kodak Company and certain subsidiaries are parties to
instruments defining the rights of holders of long-term debt that
was not registered under the Securities Act of 1933. Eastman Kodak
Company has undertaken to furnish a copy of these instruments to
the Securities and Exchange Commission upon request.
(10) A. Eastman Kodak Company Retirement Plan for Directors, as amended
effective January 1, 1996.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31,
1995.)
B. Eastman Kodak Company Insurance Plan for Directors.
(Incorporated by reference to the Eastman Kodak Company
Annual Report on Form 10-K for the fiscal year ended December
29, 1985, Exhibit 10.)
C. Eastman Kodak Company Deferred Compensation Plan for
Directors, as amended effective November 1, 1996. 45
D. Eastman Kodak Company 1985 Long-Term Performance Award Plan,
as amended effective December 31, 1993.
(Incorporated by reference to the Eastman Kodak Company
Annual Report on Form 10-K for the fiscal year ended December
31, 1993.)
43
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits (continued)
Exhibit
Number Page
E. 1982 Eastman Kodak Company Executive Deferred Compensation
Plan, as amended effective November 1, 1996. 55
F. Eastman Kodak Company 1985 Stock Option Plan, as amended
effective November 1, 1996. 71
G. Eastman Kodak Company 1990 Omnibus Long-Term Compensation
Plan, as amended effective November 1, 1996. 77
H. Eastman Kodak Company Management Variable Compensation Plan,
effective as of November 1, 1996. 91
I. Eastman Kodak Company 1995 Omnibus Long-Term Compensation
Plan, effective as of November 1, 1996. 106
J. Kodak Executive Financial Counseling Program.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31, 1992,
Exhibit 10.)
K. Personal Umbrella Liability Insurance Coverage.
Eastman Kodak Company provides $5,000,000 personal umbrella
liability insurance coverage to its directors and approximately
160 key executives. The coverage, which is insured through The
Mayflower Insurance Company, Ltd., supplements participants'
personal coverage. The Company pays the cost of this insurance.
Income is imputed to participants.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31,
1995.)
L. Kodak Executive Health Management Plan, as amended effective
January 1, 1995.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31,
1995.)
M. Wilbur J. Prezzano Retention Agreement dated September 3, 1993,
as subsequently amended on January 3, 1995.
(Incorporated by reference to the Eastman Kodak Company Annual
Reports on Form 10-K for the fiscal years ended December 31,
1993 and December 31, 1994.)
N. George M. C. Fisher Employment Agreement dated October 27, 1993.
$4,000,000 Promissory Note dated November 2, 1993. $4,284,400
Promissory Note dated November 2, 1993. Notice of Award of
Restricted Stock dated November 11, 1993, as amended. Notice of
Award of Incentive Stock Options dated November 11, 1993.
Notice of Award of Non-Qualified Stock Options dated November
11, 1993.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31,
1993.)
Amendment No. 1 to Employment Agreement dated as of April 4,
1994.
(Incorporated by reference to the Eastman Kodak Company
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1994, Exhibit 10.)
Amendment No. 2 to Employment Agreement dated as of February 25,
1997. Notice of Award of Restricted Stock dated February 25,
1997. Notice of Award of Incentive Stock Options dated February
25, 1997. Notice of Award of Non-Qualified Stock Options dated
February 25, 1997. 130
44
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits (continued)
Exhibit
Number Page
O. Harry L. Kavetas Employment Agreement dated as of February 11,
1994, Notice of Award of Non-Qualified Stock Options, Notice of
Award of Incentive Stock Options, and Notice of Award of
Restricted Stock, each dated February 15, 1994.
(Incorporated by reference to the Eastman Kodak Company Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.)
Amendment No. 1 to Employment Agreement dated as of January 21,
1997. 145
Amendment No. 2 to Employment Agreement dated as of March 3,
1997. Notice of Award of Restricted Stock dated March 4, 1997.
Notice of Award of Incentive Stock Options dated March 4, 1997.
Notice of Award of Non-Qualified Stock Options dated March 4,
1997 under the Eastman Kodak Company 1995 Omnibus Long-Term
Compensation Plan. Notice of Award of Non-Qualified Stock
Options dated March 4, 1997 under the Eastman Kodak Company 1997
Stock Option Plan. 148
(11) Statement Re Computation of Earnings Per Common Share. 184
(12) Statement Re Computation of Ratio of Earnings to Fixed Charges. 185
(21) Subsidiaries of Eastman Kodak Company. 186
(23) Consent of Independent Accountants. 40
(27) Financial Data Schedule - Submitted with the EDGAR filing as a
second document to this Form 10-K.
(99) Eastman Kodak Employees' Savings and Investment Plan Annual Report
on Form 11-K for the fiscal year ended December 30, 1996 (to be filed
by amendment).
45
Exhibit (10) C.
EASTMAN KODAK COMPANY
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Article Page
Preamble 47
1. Definitions 47
2. Term 48
3. Participation 48
4. Deferral of Compensation 49
5. Deferral Elections 49
6. Hypothetical Investments 49
7. Investment Elections 50
8. Payment of Deferred Compensation 51
9. Administration 53
10. Miscellaneous 53
11. Change in Control 54
Amended and Restated
Effective November 1, 1996
46
Eastman Kodak Company
Deferred Compensation Plan For Directors
Table of Contents
Article Page
Preamble 47
1. Definitions 47
2. Term 48
3. Participation 48
4. Deferral of Compensation 49
5. Deferral Elections 49
6. Hypothetical Investments 49
6.1 Deferred Compensation Account 49
6.2 Stock Account 49
6.3 Time Accounts are Credited 50
6.4 Stock Account Crediting 50
7. Investment Elections 50
7.1 Elections 50
7.2 Elections into the Stock Account 50
7.3 Elections out of the Stock Account 50
7.4 Dividend Equivalents 51
7.5 Stock Dividends 51
7.6 Recapitalization 51
7.7 Distributions 51
8. Payment of Deferred Compensation 51
8.1 Background 51
8.2 Manner of Payment 51
8.3 Timing of Payments 52
8.4 Valuation 52
8.5 Payment of Deferred Compensation After Death 52
9. Administration 53
9.1 Responsibility 53
9.2 Authority of Administrator 53
9.3 Discretionary Authority 53
9.4 Delegation of Authority 53
10. Miscellaneous 53
10.1 Participant's Rights Unsecured 53
10.2 Non-Assignability 53
10.3 Statement of Account 53
10.4 Amendment 54
10.5 Governing Law 54
10.6 No Guarantee of Tax Consequences 54
10.7 Compliance with Securities Laws 54
11. Change In Control 54
11.1 Background 54
11.2 Payment of Deferred Compensation 54
11.3 Amendment On or After Change In Control 54
47
EASTMAN KODAK COMPANY
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Preamble.
The name of this Plan is the Eastman Kodak Company Deferred Compensation Plan
for Directors. Its purpose is to provide certain members of the Board of
Directors of Eastman Kodak Company with an opportunity to defer compensation
earned as a Director.
Article 1. Definitions
1.1 Account
"Account" means the Deferred Compensation Account or the Stock Account.
1.2 Administrator
"Administrator" means the Controller of Kodak.
1.3 Beneficiary
"Beneficiary" means the person or persons (including, but not limited to, a
trust) designated as such in accordance with Section 8.5(C).
1.4 Board
"Board" means Board of Directors of Kodak.
1.5 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 of Form 8-K, as in
effect on August 1, 1989, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without
limitation, a Change in Control shall be deemed to have occurred at such time
as (i) any "person" within the meaning of Section 14(d) of the Exchange Act
is or has become the "beneficial owner" as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly, of 25% or more of the combined voting
power of the outstanding securities of Kodak ordinarily having the right to
vote at the election of directors ("Voting Securities"), or (ii) individuals
who constitute the Board of Directors of Kodak on March 1, 1990 (the
"Incumbent Board") have ceased for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to
March 1, 1990 whose election, or nomination for election by Kodak's
stockholders, 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 clause (ii), considered as though such person were a member
of the Incumbent Board.
1.6 Common Stock
"Common Stock" means the common stock of Kodak.
1.7 Deferrable Amount
"Deferrable Amount" means the amount of cash compensation otherwise payable
to a Participant (exclusive of expense reimbursements) for serving on the
Board and attending meetings or committee meetings thereof.
48
1.8 Deferred Compensation Account
"Deferred Compensation Account" means the account established by Kodak for
each Participant for compensation deferred pursuant to this Plan. The
maintenance of individual Deferred Compensation Accounts is for bookkeeping
purposes only.
1.9 Enrollment Period
"Enrollment Period" means the period designated by the Administrator each
year; provided however, that the Enrollment Period for a given calendar year
shall always commence and end in the year immediately prior to such calendar
year.
1.10 Interest Rate
"Interest Rate" means the base rate, as reported in the "Money Rates" section
of The Wall Street Journal, on corporate loans posted by at least 75% of the
nation's 30 largest banks (known as the "Prime Rate").
1.11 Kodak
"Kodak" means Eastman Kodak Company.
1.12 Market Value
"Market Value" means the mean between the high and low at which the Common
Stock trades as quoted in the New York Stock Exchange Composite Transactions
as published in The Wall Street Journal on the day for which the
determination is to be made or, if such day is not a trading day, the
immediately preceding trading day.
1.13 Plan
"Plan" means the Eastman Kodak Company Deferred Compensation Plan For
Directors as adopted by the Board and amended.
1.14 Participant
"Participant" means (i) any member of the Board who is not
an employee of Kodak; or (ii) any former member of the Board who has a
balance in an Account under the Plan.
1.15 Stock Account
"Stock Account" means the account established by Kodak for each Participant,
the performance of which shall be measured by reference to the Market Value
of Common Stock. The maintenance of individual Stock Accounts is for
bookkeeping purposes only.
1.16 Valuation Date
"Valuation Date" means, with regards to a Participant's Deferred Compensation
Account, the last day of each calendar month and, with regards to the
Participant's Stock Account, the last business day of each calendar month.
Article 2. Term
The Plan became effective January 1, 1979.
Article 3. Participation
Only Participants shall be eligible to participate in the Plan.
49
Article 4. Deferral of Compensation
For any given calendar year, a Participant may make a deferral election, in
accordance with the requirements of Article 5 below, to defer receipt of all
or any portion of his or her Deferrable Amount to be earned during such year
into his or her Accounts. Any Deferrable Amount which is so deferred shall
be credited to the Participant's Accounts in accordance with Article 6 below.
Article 5. Deferral Elections
5.1 In General
A Participant may make a deferral election to defer compensation by executing
and returning to the Administrator in accordance with this Article 5 a
deferred compensation form provided by Kodak.
5.2 Timing
A Participant who wishes to make a deferral election must irrevocably elect
to do during an Enrollment Period. Such election shall be effective for the
calendar year immediately following the Enrollment Period during which such
election was made and for all succeeding calendar years, unless the
Participant revokes his or her election or files a new election during the
Enrollment Period for such a succeeding calendar year. In which case, such
revocation or election, as the case may be, shall be effective on the
first day of such succeeding calendar year.
5.3 Irrevocability
Deferral elections made under this Plan with respect to any calendar year
will be final and, after the close of the Enrollment Period for such calendar
year, may not be revoked or amended in any manner until the Enrollment Period
for a succeeding calendar. In which case, such revocation or amendment, as
the case may be, shall be effective on the first day of such succeeding
calendar year.
5.4 Elections
A deferred compensation form filed by a Participant during an Enrollment
Period shall indicate: (1) the amount of the Deferrable Amount to be
deferred; and (2) the allocation in whole percentages of the deferred
Deferrable Amount between the Deferred Compensation Account and the Stock
Account.
Article 6. Hypothetical Investments
6.1 Deferred Compensation Account
Amounts in a Participant's Deferred Compensation Account are hypothetically
invested in an interest bearing account which bears interest computed at the
Interest Rate, compounded monthly.
6.2 Stock Account
Amounts in a Participant's Stock Account are hypothetically invested in units
of Common Stock. Amounts transferred to a Stock Account are recorded as
units of Common Stock, and fractions thereof, with one unit equating to a
single share of Common Stock. Thus, the value of one unit shall be the
Market Value of a single share of Common Stock. The use of units is merely a
bookkeeping convenience; the units are not actual shares of Common Stock.
Kodak will not reserve or otherwise set aside any Common Stock for or to any
Stock Account.
50
6.3 Time Accounts are Credited
Amounts to be deferred shall be credited to the Participant's Accounts on the
date such amounts would otherwise be payable.
6.4 Stock Account Crediting
A. If a Participant makes an election to defer into his or her Stock
Account pursuant to Section 5.4 above, the Stock Account of the
Participant shall, for so long as the election remains in effect,
be credited with that number of units of Common Stock, and
fractions thereof, determined in accordance with Section 6.4(B)
immediately below as of each applicable date specified in Section
6.3 above.
B. In accordance with Section 6.4(A) above, the Stock Account of a
Participant shall be credited with that number of units of Common
Stock, and fractions thereof, equal to the number of full and
fractional shares of Common Stock, that could be purchased with the
dollar amount that would otherwise be paid to the Participant but
for his or her election to defer into the Stock Account using the
Market Value of the Common Stock as of the applicable date
specified in Section 6.3 above.
Article 7. Investment Elections
7.1 Elections
A Participant may make an investment election to direct that all or any
portion, designated as a whole percentage, of the existing balance of one of
his or her Accounts be transferred to his or her other Account, effective as
of the close of business on the last day of any calendar month (hereinafter
the election's "Effective Date"), by filing a written election with the
Administrator on or prior to such date.
7.2 Election into the Stock Account
If a Participant makes an investment election pursuant to Section 7.1 to
transfer an amount from his or her Deferred Compensation Account to his or
her Stock Account, effective as of the election's Effective Date, (i) his or
her Stock Account shall be credited with that number of units of Common
Stock, and fractions thereof, obtained by dividing the dollar amount elected
to be transferred by the Market Value of the Common Stock on the Valuation
Date immediately preceding or coincident with the election's Effective Date;
and (ii) his or her Deferred Compensation Account shall be reduced by the
amount elected to be transferred.
7.3 Election out of the Stock Account
If a Participant makes an investment election pursuant to Section 7.1 to
transfer an amount from his or her Stock Account to his or her Deferred
Compensation Account, effective as of the election's Effective Date, (i) his
or her Deferred Compensation Account shall be credited with a dollar amount
equal to the amount obtained by multiplying the number of units to be
transferred by the Market Value of the Common Stock on the Valuation Date
immediately preceding or coincident with the election's Effective Date; and
(ii) his or her Stock Account shall be reduced by the number of units elected
to be transferred.
51
7.4 Dividend Equivalents
Effective as of the payment date for each cash dividend on the Common Stock,
additional units of Common Stock shall be credited to the Stock Account of
each Participant who has a balance in his or her Stock Account on the record
date for such dividend. The number of units that shall be credited
to the Stock Account of such a Participant shall be computed by multiplying
the dollar value of the dividend paid upon a single share of Common Stock by
the number of units of Common Stock held in the Participant's Stock Account
on the record date for such dividend and dividing the product thereof by the
Market Value of the Common Stock on the payment date for such dividend.
7.5 Stock Dividends
Effective as of the payment date for each stock dividend (as defined in
Section 305 of the Internal Revenue Code of 1986) on the Common Stock,
additional units of Common Stock shall be credited to the Stock Account of
each Participant who has a balance in his or her Stock Account on the record
date for such dividend. The number of units that shall be credited to the
Stock Account of such a Participant shall equal the number of shares of
Common Stock which the Participant would have received as stock dividends had
he or she been the owner on the record date for such stock dividend of the
number of shares of Common Stock equal to the number of units credited to his
or her Stock Account on such record date. To the extent the Participant
would have also received cash, in lieu of fractional shares of Common Stock,
had he or she been the record owner of such shares for such stock dividend,
then his or her Stock Account shall also be credited with that number of
units, or fractions thereof, equal to such cash amount divided by the Market
Value of the Common Stock on the payment date for such dividend.
7.6 Recapitalization
If Kodak undergoes a reorganization as defined in Section 368 (a) of the
Internal Revenue Code of 1986, the Administrator may, in his or her sole and
absolute discretion, take whatever action he or she deems necessary,
advisable or appropriate with respect to the Stock Accounts in order to
reflect such transaction, including, but not limited to, adjusting the number
of units credited to a Participant's Stock Account.
7.7 Distributions
Amounts in respect of units of Common Stock shall be distributed in cash in
accordance with Articles 8 and 11. For purposes of a distribution pursuant
to Articles 8 or 11, the number of units to be distributed from a
Participant's Stock Account shall be valued by multiplying the number of such
units by the Market Value of the Common Stock as of the Valuation Date
immediately preceding the date such distribution is to occur. Pending the
complete distribution under Section 8.2 of the Stock Account of a Participant
who is no longer a member of the Board, the Participant shall continue to be
able to make elections pursuant to Sections 7.2 and 7.3 and his or her Stock
Account shall continue to be credited with additional units of Common Stock
pursuant to Sections 7.4, 7.5, and 7.6.
Article 8. Payment of Deferred Compensation
8.1 Background
No withdrawal may be made from a Participant's Accounts except as provided in
this Article 8 and Article 11.
8.2 Manner of Payment
Payment of a Participant's Accounts shall be made at the sole discretion of
the Administrator in a single sum or in annual installments; provided,
however, that payment in the event of death shall be made in accordance with
Section 8.5 below. The maximum number of annual installments is ten. All
payments from the Plan shall be made in cash.
52
8.3 Timing of Payments
Payments shall be made as soon as administratively possible following the
fifth business day in March and shall commence in any year designated by the
Administrator up through the tenth year following the year in which the
Participant for any reason ceases to be a member of the Board.
Notwithstanding the immediately preceding sentence, payment in the event of
death shall be made in accordance with Section 8.5.
8.4 Valuation
The amount of each payment shall be equal to the value, as of the immediately
preceding Valuation Date, of the Participant's Accounts, divided by the
number of installments remaining to be paid. If payment of a Participant's
Accounts is determined by the Administrator to be paid in installments and
the Participant has a balance in his or her Stock Account at the time of the
payment of an installment, the amount that shall be distributed from his or
her Stock Account shall be the amount obtained by multiplying the total
amount of the installment determined in accordance with the immediately
preceding sentence by the percentage obtained by dividing the balance in the
Stock Account as of the immediately preceding Valuation Date by the total
value of the Participant's Accounts as of such Valuation Date. Similarly, in
such case, the amount that shall be distributed from the Participant's
Deferred Compensation Account shall be the amount obtained by multiplying the
total amount of the installment determined in accordance with the first
sentence of this Section 8.4 by the percentage obtained by dividing the
balance in the Deferred Compensation Account as of the immediately preceding
Valuation Date by the total value of the Participant's Accounts as of such
Valuation Date.
8.5 Payment of Deferred Compensation After Death
If a Participant dies prior to complete payment of his or her Accounts, the
provisions of this Section 8.5 shall become operative.
A. Stock Account. Effective as of the date of a Participant's death,
the entire balance of his or her Stock Account shall be transferred to
his or her Deferred Compensation Account. For purposes of valuing the
units of Common Stock subject to such a transfer, the deceased
Participant's Deferred Compensation Account shall be credited with a
dollar amount equal to the amount obtained by multiplying the number of
units in the deceased Participant's Stock Account at the time of his or
her death by the Market Value of the Common Stock on the date of his or
her death. Thereafter, no amounts in the deceased Participant's
Deferred Compensation Account shall be eligible for transfer to the
deceased Participant's Stock Account by any person, including, but not
by way of limitation, the deceased Participant's beneficiary or legal
representative.
B. Distribution. The balance of the Participant's Accounts, valued as
of the Valuation Date immediately preceding the date payment is
made, shall be paid in a single, lump-sum payment to: (1) the
beneficiary or contingent beneficiary designated by the Participant
in accordance with Section 8.5(C); or, in the absence of a valid
designation of a beneficiary or contingent beneficiary, (2) the
Participant's estate within 30 days after appointment of a legal
representative of the deceased Participant.
C. Beneficiary Designation. Each Participant shall have the right, at
any time, to designate any person or persons as his or her
Beneficiary or Beneficiaries (both primary and contingent) to whom
payment under this Plan shall be paid in the event of his or her
death prior to complete distribution to the Participant of the
benefits due him or her under the Plan. Each Beneficiary
designation shall become effective only when filed in writing with
the Administrator during the Participant's lifetime on a form
provided by the Administrator. The filing of a new Beneficiary
designation form with the Administrator will cancel all Beneficiary
designation(s) previously filed.
53
Article 9. Administration
9.1 Responsibility
The Administrator shall have total and exclusive responsibility to control,
operate, manage and administer the Plan in accordance with its terms.
9.2 Authority of the Administrator
The Administrator shall have all the authority that may be necessary or
helpful to enable him or her to discharge his or her responsibilities with
respect to the Plan. Without limiting the generality of the preceding
sentence, the Administrator shall have the exclusive right: to interpret the
Plan, to decide all questions concerning the amount of benefits payable under
the Plan, to construe any ambiguous provision of the Plan, to correct any
default, to supply any omission, to reconcile any inconsistency, and to
decide any and all questions arising in the administration, interpretation,
and application of the Plan.
9.3 Discretionary Authority
The Administrator shall have full discretionary authority in all matters
related to the discharge of his or her responsibilities and the exercise of
his or her authority under the Plan including, without limitation, the
construction of the terms of the Plan and the determination of benefits under
the Plan. It is the intent of the Plan that the decisions of the
Administrator and his or her actions with respect to the Plan shall be final
and binding upon all persons having or claiming to have any right or interest
in or under the Plan and that no such decision or action shall be modified
upon judicial review unless such decision or action is proven to be arbitrary
or capricious.
9.4 Delegation of Authority
The Administrator may delegate some or all of his or her authority under the
Plan to any person or persons provided that any such delegation be in
writing.
Article 10. Miscellaneous
10.1 Participant's Rights Unsecured
The amounts payable under the Plan shall be unfunded, and the right of any
Participant or his or her estate to receive any payment under the Plan shall
be an unsecured claim against the general assets of Kodak. No Participant
shall have the right to exercise any of the rights or privileges of a
shareholder with respect to the units credited to his or her Stock Account.
10.2 Non-Assignability
The right of a Participant to the payment of deferred compensation as
provided in this Plan shall not be subject in any manner to alienation,
anticipation, sale, transfer (except by will or the laws of descent and
distribution), assignment, pledge, or encumbrance.
10.3 Statement of Account
Statements will be sent no less frequently than annually to each Participant
or his or her beneficiary or estate showing the value of the Participant's
Accounts.
54
10.4 Amendment
The Plan may at any time or from time to time be amended, modified, suspended
or terminated by resolution of the Board. However, no amendment,
modification, or termination shall, without the consent of a Participant,
adversely affect such Participant's accruals in his or her Accounts.
10.5 Governing Law
The Plan shall be construed, governed and enforced in accordance with the law
of New York State, except as such laws are preempted by applicable federal
law.
10.6 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 deferred under the
Plan, or paid to or for the benefit of a Participant or Beneficiary under the
Plan, or that such tax treatment will apply to or be available to a
Participant or Beneficiary on account of participation in the Plan.
10.7 Compliance with Securities Laws
The Board may, from time to time, impose additional, or modify or eliminate
existing, Plan terms, provisions, restrictions or requirements, including,
but not by way of limitation, the provisions regarding a Participant's
ability to elect into and out of his or her Stock Account under Sections 7.2
and 7.3 or the requirement of an automatic transfer pursuant to Section
8.5(A), as it deems necessary, advisable or appropriate in order to comply
with applicable federal or state securities laws.
Article 11. Change in Control
11.1 Background
Upon a Change In Control: (i) the terms of this Section 11 shall immediately
become operative, without further action or consent by any person or entity,
(ii) all terms, conditions, restrictions, and limitations in effect on any
deferred compensation shall immediately lapse as of the date of such event;
and (iii) no other terms, conditions, restrictions, and/or limitations shall
be imposed upon any deferred compensation on or after such date, and in no
circumstance shall any Account be forfeited on or after such date.
11.2 Payment of Deferred Compensation
Upon a Change in Control, each Participant, whether or not he or she is still
a member of the Board, shall be paid in a single, lump-sum cash payment the
balance of his or her Accounts as of the Valuation Date immediately preceding
the date payment is made. Such payment shall be made as soon as practicable,
but in no event later than 90 days after the date of the Change in Control.
11.3 Amendment On or After Change In Control
Upon a Change in Control, no action, including, but not by way of limitation,
the amendment, modification, suspension or termination of the Plan, shall be
taken which would affect the rights of any Participant or the operation of
this Plan with respect to the balance in the Participant's Accounts.
55
Exhibit (10) E.
1982 EASTMAN KODAK COMPANY
EXECUTIVE DEFERRED COMPENSATION PLAN
Article Page
Preamble 58
1. Definitions 58
2. Participation 60
3. Deferral of Compensation 60
4. Deferral Elections 61
5. Hypothetical Investments 62
6. Elections to Defer for A Fixed Period During Employment 63
7. Investment Elections 63
8. Payment of Deferred Compensation 65
9. Administration 66
10. Miscellaneous 67
11. Change in Control 68
12. Severance Payments 69
Schedule A 70
Amended and Restated
Effective November 1, 1996
56
1982 Eastman Kodak Company
Executive Deferred Compensation Plan
Table of Contents
Article Page
Preamble 58
1. Definitions 58
2. Participation 60
3. Deferral of Compensation 60
3.1 In General 60
3.2 SOG Participants 61
3.3 Eastman Kodak Employees' Savings and Investment
Plan (SIP) 61
3.4 Post Termination Deferrals 61
4. Deferral Elections 61
4.1 Elections 61
4.2 Timing 61
4.3 Irrevocability 62
4.4 Deferral Elections by Eligible Employee Other Than
SOG Participants 62
4.5 Deferral Elections by SOG Participants 62
5. Hypothetical Investments 62
5.1 Deferred Compensation Account 62
5.2 Stock Account 62
5.3 Time Accounts are Credited 62
6. Elections to Defer for A Fixed Period During Employment 63
6.1 In General 63
6.2 Form Of Payment 63
6.3 Valuation 63
6.4 Time Of Payment 63
7. Investment Elections 63
7.1 Elections 63
7.2 Election into the Stock Account 63
7.3 Election out of the Stock Account 64
7.4 Dividend Equivalents 64
7.5 Stock Dividends 64
7.6 Recapitalization 64
7.7 Distributions 64
7.8 Liquidation of Stock Account 65
8. Payment of Deferred Compensation 65
8.1 Background 65
8.2 Manner of Payment 65
8.3 Timing 65
8.4 Valuation 65
8.5 Termination of Employment 66
8.6 Payment of Deferred Compensation After Death 66
8.7 Acceleration of Payment for Hardship 66
57
1982 Eastman Kodak Company
Executive Deferred Compensation Plan
Table of Contents Continued
Article Page
9. Administration 66
9.1 Responsibility 66
9.2 Authority of the Compensation Committee 67
9.3 Discretionary Authority 67
9.4 Delegation of Authority 67
10. Miscellaneous 67
10.1 Non-Competition Provision 67
10.2 Participant's Rights Unsecured 67
10.3 No Right to Continued Employment 67
10.4 Statement of Account 67
10.5 Assignability 68
10.6 Deductions 68
10.7 Amendment 68
10.8 Governing Law 68
10.9 Compliance With Securities Laws 68
10.10 Diconix Deferred Compensation 68
11. Change in Control 68
11.1 Background 68
11.2 Acceleration of Payment Upon Change In Control 68
11.3 Amendment On or After Change In Control 69
12. Severance Payments 69
Schedule A 70
58
1982 EASTMAN KODAK COMPANY
EXECUTIVE DEFERRED COMPENSATION PLAN
Preamble.
The 1982 Eastman Kodak Company Executive Deferred Compensation Plan is an
unfunded non-qualified deferred compensation arrangement for eligible
executives of Eastman Kodak Company and certain of its subsidiaries effective
for compensation earned in 1982 and later years. Under the Plan, each
Eligible Employee is annually given an opportunity to elect to defer payment
of part of his or her compensation earned during the year following his or
her election.
Article 1. Definitions
1.1 Account
"Account" means the Deferred Compensation Account or the Stock Account.
1.2 Board
"Board" means Board of Directors of Kodak.
1.3 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 of Form 8-K, as in
effect on August 1, 1989, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without
limitation, a Change in Control shall be deemed to have occurred at such time
as (i) any "person" within the meaning of Section 14(d) of the Exchange Act
is or has become the "beneficial owner" as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly, of 25% or more of the combined voting
power of the outstanding securities of Kodak ordinarily having the right to
vote at the election of directors ("Voting Securities"), or (ii) individuals
who constitute the Board of Directors of Kodak on August 1, 1989 (the
"Incumbent Board") have ceased for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to
August 1, 1989 whose election, or nomination for election by Kodak's
stockholders, 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 the Company in which such person is named
as a nominee for director without objection to such nomination) shall be, for
purposes of this clause (ii), considered as though such person were a member
of the Incumbent Board.
1.4 Common Stock
"Common Stock" means the common stock of Kodak.
1.5 Company
"Company" means Kodak and its United States subsidiaries listed on Schedule
A.
1.6 Compensation Committee
"Compensation Committee" shall mean the Executive Compensation and
Development Committee of the Board.
59
1.7 Deferrable Amount
"Deferrable Amount" means an amount equal to the excess of the Eligible
Employee's individual annual salary rate as of August 1 of any year over the
Minimum Compensation Level.
1.8 Deferred Compensation Account
"Deferred Compensation Account" means the account established by the Company
for each Participant for compensation deferred pursuant to this Plan. The
maintenance of individual Deferred Compensation Accounts is for bookkeeping
purposes only.
1.9 Eligibility Compensation Level
"Eligibility Compensation Level" means the dollar amount used to determine
whether a person is an Eligible Employee. The Eligibility Compensation Level
is $108,000.
1.10 Eligible Employee
"Eligible Employee" means the corporate officers of Kodak and any other
employee of the Company employed in the United States whose individual annual
salary rate as of August 1 is equal to or greater than the Eligibility
Compensation Level and who has a wage grade of 48 or above. Eligible
Employee shall also include an employee of Kodak or any subsidiary of Kodak
selected annually by the Compensation Committee whose individual annual
salary rate as of August 1 is equal to or greater than the Eligibility
Compensation Level and who has a wage grade equivalent to wage grade 48 or
above. However, in no event shall a non-resident alien be eligible to
participate in this Plan. Any employee who becomes eligible to participate
in this Plan and in a future year does not qualify as an Eligible Employee
solely because his or her individual annual salary rate as of August 1 is
less than the Eligibility Compensation Level, shall nevertheless be eligible
to participate in such year.
1.11 Enrollment Period
"Enrollment Period" means the period of consecutive days designated by the
Director, Executive Compensation each year, provided however, that such
period shall begin no earlier than October 15 and shall end no later than
December 15 of each year.
1.12 Interest Rate
"Interest Rate" means the base rate, as reported in the "Money Rates" section
of the Wall Street Journal, on corporate loans posted by at least 75% of the
nation's 30 largest banks (known as the "Prime Rate").
1.13 Kodak
"Kodak" means Eastman Kodak Company.
1.14 Market Value
"Market Value" means the mean between the high and low at which the Common
Stock trades as quoted in the New York Stock Exchange Composite Transactions
as published in the Wall Street Journal on the day for which the
determination is to be made, or if such day is not a trading day, the
immediately preceding day.
1.15 Minimum Compensation Level
"Minimum Compensation Level" means the dollar amount used to determine the
amount of an Eligible Employee's Deferrable Amount. The Minimum Compensation
Level is $50,000.
60
1.16 Plan
"Plan" means the 1982 Eastman Kodak Company Executive Deferred Compensation
Plan as adopted by the Board and subsequently amended.
1.17 Participant
"Participant" means an Eligible Employee who elects for one or more years to
defer compensation pursuant to this Plan. All SOG Participants are
Participants.
1.18 SOG Participant
"SOG Participant" means a Participant who either: (1) is subject to the
Guidelines for Senior Management Ownership of Eastman Kodak Company Stock as
approved by the Compensation Committee; or (2) was subject to the Guidelines
for Senior Management Ownership of Eastman Kodak Company Stock as approved by
the Compensation Committee and still has a balance in his or her Stock
Account in accordance with the terms of the Plan.
1.19 Stock Account
"Stock Account" means the account established by the Company for each SOG
Participant, the performance of which is measured by reference to the Market
Value of Common Stock. The maintenance of individual Stock Accounts is for
bookkeeping purposes only.
1.20 Valuation Date
"Valuation Date" means, with regards to a Participant's Deferred Compensation
Account, the last business day of each calendar month and, with regards to a
SOG Participant's Stock Account, the last business day of each calendar
month.
Article 2. Participation
Only Eligible Employees are eligible to participate in the Plan.
Article 3. Deferral of Compensation
3.1 In General
All Eligible Employees, other than those Eligible Employees who are SOG
Participants, may elect, in accordance with the time requirements established
under Article 4 below, to defer receipt of one or more of the following to
his or her Deferred Compensation Account:
1) all or any portion of his or her Deferrable Amount to be earned
during the immediately succeeding calendar year;
2) all or any portion of his or her cash award, if any, under the Wage
Dividend Plan payable in the immediately succeeding calendar year;
3) all or any portion of his or her cash award, if any, under the
Management Variable Compensation Plan (MVCP) payable in the second
immediately succeeding calendar year; and
4) all or any portion of any other compensation identified by the
Compensation Committee.
61
3.2 SOG Participants
All SOG Participants may elect, in accordance with the requirements
established under Article 4 below, to defer receipt of one or more of the
following to his or her Deferred Compensation Account:
1) all or any portion of his or her Deferrable Amount to be earned
during the immediately succeeding calendar year;
2) all or any portion of his or her cash award, if any, under the
Management Variable Compensation Plan (MVCP) payable in the second
immediately succeeding calendar year; and
3) all or any portion of any other compensation identified by the
Compensation Committee.
3.3 Eastman Kodak Employees' Savings and Investment Plan (SIP)
A Participant in this Plan need not participate in the Eastman Kodak
Employees' Savings and Investment Plan.
3.4 Post Termination Deferrals
No deferral shall be made of any compensation payable after termination of
employment.
Article 4. Deferral Elections
4.1 Elections
An Eligible Employee may make a deferral election to defer compensation by
executing and returning to the Compensation Committee in accordance with this
Article 4 a deferred compensation form provided by Kodak. An Eligible
Employee may only make a deferral election into his or her Deferred
Compensation Account; deferral elections into the Stock Account are not
permitted under the Plan.
4.2. Timing
A. In General. Except as set forth in Section 4.2(B), an Eligible
Employee who wishes make a deferral election must irrevocably elect
to do so during the Enrollment Period immediately preceding the
calendar year for which such compensation is earned. Elections
made during the Enrollment Period shall be effective the first day
of the calendar year immediately following the Enrollment Period.
Elections shall be made annually.
B. Newly Eligible Employees. An Eligible Employee who is hired by the
Company during a calendar year may make a deferral election to
defer compensation earned during the remainder of such year by
filing an election in accordance with the terms of this Section
4.2(B). Such election must be filed by the Eligible Employee with
the Compensation Committee within ten business days of the first
day of the Eligible Employee's employment with the Company.
Notwithstanding any provision of this Plan to the contrary, such
election shall only be effective with respect to the Eligible
Employee's: (i) base salary, beginning with the first pay period
following the pay period in which the election is filed with the
Compensation Committee; and (ii) any award to which he or she may
be entitled under the Management Variable Compensation Plan, or any
successor plan thereto, for services performed during the calendar
year of his or her hire. By way of an administrative rule, the
Compensation Committee may impose such additional requirements upon
a newly Eligible Employee's election, including, but not limited
to, a minimum level of deferral, as it determines in the exercise
of its sole and absolute discretion.
62
4.3 Irrevocability
Deferral elections made under this Plan with respect to any calendar year
will be final and, after the close of the Enrollment Period for such calendar
year, may not be revoked or amended in any manner.
4.4 Deferral Elections by Eligible Employees Other Than SOG Participants
In the case of all Eligible Employees, other than SOG Participants, the
deferred compensation form shall indicate: (1) the dollar amount of the
Deferrable Amount to be deferred; (2) whether the deferral is to be at the
same rate throughout the year, or at one rate for part of the year and at a
second rate for the remainder of the year; (3) the amount, in terms of such
percentages as Kodak shall determine, of the cash Wage Dividend award, if
any, to be deferred; (4) the amount, in terms of such percentages as Kodak
shall determine, of the cash MVCP award, if any, to be deferred; and (5) the
portion of any other compensation that the Compensation Committee determines
is eligible for deferral under the Plan.
4.5 Deferral Elections by SOG Participants
The deferred compensation form of all SOG Participants shall indicate: (1)
the dollar amount of the Deferrable Amount to be deferred; (2) whether the
deferral is to be at the same rate throughout the year, or at one rate for
part of the year and at a second rate for the remainder of the year; (3) the
amount, in terms of such percentages as Kodak shall determine, of the cash
MVCP award, if any, to be deferred; and (4) the portion of any other
compensation that the Compensation Committee determines is eligible for
deferral under the Plan.
Article 5. Hypothetical Investments
5.1 Deferred Compensation Account
Amounts in a Participant's Deferred Compensation Account are hypothetically
invested in an interest bearing account which bears interest computed at the
Interest Rate, compounded monthly.
5.2 Stock Account
Amounts in a SOG Participant's Stock Account are hypothetically invested in
units of Common Stock. Amounts transferred to a Stock Account are recorded
as units of Common Stock, and fractions thereof, with one unit equating to a
single share of Common Stock. Thus, the value of one unit shall be the
Market Value of a single share of Common Stock. The use of units is merely a
bookkeeping convenience; the units are not actual shares of Common Stock.
The Company will not reserve or otherwise set aside any Common Stock for or
to any Stock Account.
5.3 Time Accounts Are Credited
Amounts to be deferred by a Participant shall be credited to the
Participant's Account as follows:
1) Deferrable Amount shall be credited each pay period on the date
such amount is otherwise payable;
2) wage dividend shall be credited on the date such amount is
otherwise payable;
3) MVCP award shall be credited on the date such amount is otherwise
payable; and
4) any other compensation shall be credited on the date such amount is
otherwise payable.
63
Article 6. Elections to Defer For a Fixed Period During Employment
6.1 In General
A Participant may elect to defer receipt of his or her compensation for a
fixed number of years, no less than 5, provided he or she continues as an
employee of the Company during the period of deferral. Any such election
shall be made during the Enrollment Period on the deferred compensation form
referenced in Article 4 above. If such Participant ceases to be an employee
of the Company prior to the end of the fixed period, Article 8 shall govern
the payment of his or her Accounts.
6.2 Form of Payment
If a Participant has elected to defer receipt of his or her compensation for
a fixed number of years, payment of such amount shall be made in cash in a
single lump-sum.
6.3 Valuation
The amount of the lump-sum due the Participant shall be valued as of the
Valuation Date in February in the year following the termination of the
deferral period.
6.4 Time of Payment
Payment shall be made as soon as administratively possible following the
Valuation Date in February in the year following the termination of the
deferral period.
Article 7. Investment Elections
The provisions of this Article 7 shall only apply to SOG Participants.
7.1 Elections
A. In General. Subject to Section 7.1(B), a SOG Participant may make
an investment election to direct that all or any portion,
designated as a whole percentage, of the existing balance of one of
his or her Accounts be transferred to his or her other Account,
effective as of the close of business on the last day of any
calendar month (hereinafter the election's "Effective Date"), by
filing a written election with the Compensation Committee on or
prior to such date.
B. Elections to Defer For A Fixed Period During Employment. A SOG
Participant may not transfer to his or her Stock Account any amount
subject to an election to defer for a fixed number of years
pursuant to Article 6, nor may he or she transfer to his or her
Stock Account any interest that has accrued on such amount.
7.2 Election into the Stock Account
If a SOG Participant makes an investment election pursuant to Section 7.1 to
transfer an amount from his or her Deferred Compensation Account to his or
her Stock Account, effective as of the election's Effective Date, (i) his or
her Stock Account shall be credited with that number of units of Common
Stock, and fractions thereof, obtained by dividing the dollar amount elected
to be transferred by the Market Value of the Common Stock on the Valuation
Date coincident with or immediately preceding the election's Effective Date;
and (ii) his or her Deferred Compensation Account shall be reduced by the
amount elected to be transferred.
64
7.3 Election out of the Stock Account
If a SOG Participant makes an investment election pursuant to Section 7.1 to
transfer an amount from his or her Stock Account to his or her Deferred
Compensation Account, effective as of the election's Effective Date, (i) his
or her Deferred Compensation Account shall be credited with a dollar amount
equal to the amount obtained by multiplying the number of units to be
transferred by the Market Value of the Common Stock on the Valuation Date
coincident with or immediately preceding the election's Effective Date; and
(ii) his or her Stock account shall be reduced by the number of units elected
to be transferred.
7.4 Dividend Equivalents
Effective as of the payment date for each cash dividend on the Common Stock,
additional units of Common Stock shall be credited to the Stock Account of
each SOG Participant who had a balance in his or her Stock Account on the
record date for such dividend. The number of units that shall be credited to
the Stock Account of such a SOG Participant shall be computed by multiplying
the dollar value of the dividend paid upon a single share of Common Stock by
the number of units of Common Stock held in the SOG Participant's Stock
Account on the record date for such dividend and dividing the product thereof
by the Market Value of the Common Stock on the payment date for such
dividend.
7.5 Stock Dividends
Effective as of the payment date for each stock dividend (as defined in
Section 305 of the Internal Revenue Code of 1986) on the Common Stock,
additional units of Common Stock shall be credited to the Stock Account of
each SOG Participant who had a balance in his or her Stock Account on the
record date for such dividend. The number of units that shall be credited to
the Stock Account of such a SOG Participant shall equal the number of shares
of Common Stock which the SOG Participant would have received as stock
dividends had he or she been the owner on the record date for such stock
dividend of the number of shares of Common Stock equal to the number of units
credited to his or her Stock Account on such record date. To the extent the
SOG Participant would have also received cash, in lieu of fractional shares
of Common Stock, had he or she been the record owner of such shares for such
stock dividend, then his or her Stock Account shall also be credited with
that number of units, or fractions thereof, equal to such cash amount divided
by the Market Value of the Common Stock on the payment date for
such dividend.
7.6 Recapitalization
If Kodak undergoes a reorganization as defined in Section 368 (a) of the
Internal Revenue Code of 1986, the Compensation Committee may, in its sole
and absolute discretion, take whatever action it deems necessary, advisable
or appropriate with respect to the Stock Accounts in order to reflect such
transaction, including, but not limited to, adjusting the number of units
credited to a SOG Participant's Stock Account.
7.7 Distributions
Amounts in respect of units of Common Stock shall be distributed in cash in
accordance with Articles 6, 8 and 11. For purposes of a distribution
pursuant to Article 6, 8, or 11, the number of units to be distributed from a
SOG Participant's Stock Account shall be valued by multiplying the number of
such units by the Market Value of the Common Stock as of the Valuation Date
coincident with or immediately preceding the date such distribution is to
occur. Pending the complete distribution under Section 8.2 or liquidation
under Section 7.8 of the Stock Account of a SOG Participant who has
terminated his or her employment with the Company, the SOG Participant shall
continue to be able to make elections pursuant to Sections 7.2 and 7.3 and
his or her Stock Account shall continue to be credited with additional units
of Common Stock pursuant to Sections 7.4, 7.5, and 7.6.
65
7.8 Liquidation of Stock Account
The provisions of this Section 7.8 shall be applicable if on the second
anniversary of the SOG Participant's retirement or, if earlier, termination
of employment from the Company, the SOG Participant has a balance remaining
in his or her Stock Account. In such case, effective as of the first day of
the first calendar month immediately following the date of such second
anniversary, the entire balance of the SOG Participant's Stock Account shall
automatically be transferred to his or her Deferred Compensation Account and,
he or she shall thereafter be ineligible to transfer any amounts to his or
her Stock Account. For purposes of valuing the units of Common Stock subject
to such a transfer, the method described in Section 7.3 shall be used.
Article 8. Payment of Deferred Compensation
8.1 Background
No withdrawal may be made from a Participant's Accounts except as provided in
this Article 8 and Articles 6 and 13.
8.2 Manner of Payment
Payment of a Participant's Accounts shall be made at the sole discretion of
the Compensation Committee in a single sum or in annual installments;
provided, however, that payment in the event of death shall be made in
accordance with Section 8.6. The maximum number of installments is ten. All
payments from the Plan shall be made in cash.
8.3 Timing
Payments shall be made as soon as is administratively possible following the
fifth business day in March and shall commence in any year designated by the
Compensation Committee up through the tenth year following the year in which
the Participant retires, becomes disabled, or for any other reason, ceases to
be an employee of Kodak or any subsidiary of Kodak, but in no event later
than the year the Participant reaches age 71. Notwithstanding the preceding
sentence of this Section 8.3, payment in the event of death shall be made in
accordance with Section 8.6.
8.4 Valuation
The amount of each payment shall be equal to the value, as of the immediately
preceding Valuation Date, of the Participant's Accounts, divided by the
number of installments remaining to be paid. If payment of a Participant's
Accounts is determined by the Compensation Committee to be paid in
installments and the Participant has a balance in his or her Stock Account at
the time of the payment of an installment, the amount that shall be
distributed from his or her Stock Account shall be the amount obtained by
multiplying the total amount of the installment determined in accordance with
the immediately preceding sentence by the percentage obtained by dividing the
balance in the Stock Account as of the immediately preceding Valuation Date
by the total value of the Participant's Accounts as of such date. Similarly,
in such case, the amount that shall be distributed from the Participant's
Deferred Compensation Account shall be the amount obtained by multiplying the
total amount of the installment determined in accordance with the first
sentence of this Section 8.4 by the percentage obtained by dividing the
balance in the Deferred Compensation Account as of the immediately preceding
Valuation Date by the total value of the Participant's Accounts as of such
date.
66
8.5 Termination of Employment
Anything herein to the contrary notwithstanding, Participants who cease to be
employed by Kodak or any Subsidiary of Kodak and are employed by Eastman
Chemical Company or one of its subsidiaries in connection with the
distribution of the common stock of Eastman Chemical Company to the
shareholders of Kodak, shall not be deemed to have terminated employment for
purposes of this Plan.
8.6 Payment of Deferred Compensation After Death
If a Participant dies prior to complete payment of his or her Accounts, the
provisions of this Section 8.6 shall become operative.
A. Stock Account. Effective as of the date of a SOG Participant's
death, the entire balance of his or her Stock Account shall be
transferred to his or her Deferred Compensation Account. For
purposes of valuing the units of Common Stock subject to such a
transfer, the deceased SOG Participant's Deferred Compensation
Account shall be credited with a dollar amount equal to the amount
obtained by multiplying the number of units in the deceased SOG
Participant's Stock Account at the time of his or her death by the
Market Value of the Common Stock on the date of his or her death.
Thereafter, no amounts in the deceased SOG Participant's Deferred
Compensation Account shall be eligible for transfer to the deceased
SOG Participant's Stock Account by any person, including, but not
by way of limitation, the deceased SOG Participant's beneficiary or
legal representative.
B. Distribution. The balance of the Participant's Accounts, valued as
of the Valuation Date immediately preceding the date payment is
made, shall be paid in a single, lump-sum payment to: (1) the
beneficiary or contingent beneficiary designated by the Participant
on forms supplied by the Compensation Committee; or, in the absence
of a valid designation of a beneficiary or contingent beneficiary,
(2) the Participant's estate within 30 days after appointment of a
legal representative of the deceased Participant.
8.7 Acceleration of Payment for Hardship
Upon written approval from Kodak's Chairman of the Board (the Compensation
Committee, in the case of a request from the Chairman of the Board) a
Participant, whether or not he or she is still employed by Kodak or any
subsidiary of Kodak, may be permitted to receive all or part of his or her
Accounts if the Chairman of the Board (or the Compensation Committee, when
applicable) determines that an emergency event beyond the Participant's
control exists which would cause such Participant severe financial hardship
if the payment of his or her Accounts were not approved. Any such
distribution for hardship shall be limited to the amount needed to meet such
emergency. If such a distribution occurs while the Participant is employed
by Kodak or any subsidiary of Kodak, any election to defer compensation for
the year in which the Participant receives a hardship withdrawal shall be
ineffective as to compensation earned for the pay period following the pay
period during which the withdrawal is made and thereafter for the remainder
of such year and shall be ineffective as to any wage dividend or any other
compensation elected to be deferred for such year.
Article 9. Administration
9.1 Responsibility
The Compensation Committee shall have total and exclusive responsibility to
control, operate, manage and administer the plan in accordance with its
terms.
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9.2 Authority of the Compensation Committee
The Compensation 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
Compensation Committee shall have the exclusive right: to interpret the Plan,
to determine eligibility for participation in the Plan, to decide all
question concerning eligibility for and the amount of benefits payable under
the Plan, to construe any ambiguous provision of the Plan, to correct any
default, to supply any omission, to reconcile any inconsistency, and to
decide any and all questions arising in the Administration, interpretation,
and application of the Plan.
9.3 Discretionary Authority
The Compensation 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 benefits under the Plan. It is the intent of Plan that the
decisions of the Compensation Committee and its action with respect to the
Plan shall be final and binding upon all persons having or claiming to have
any right or interest in or under the Plan and that no such decision or
action shall be modified upon judicial review unless such decision or action
is proven to be arbitrary or capricious.
9.4 Delegation of Authority
The Compensation 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.
Article 10. Miscellaneous
10.1 Non-Competition Provision
If a Participant, without the written consent of Kodak, engages either
directly or indirectly, in any manner or capacity, as principal, agent,
partner, officer, director, employee, or otherwise, in any business or
activity competitive with the business conducted by Kodak or any subsidiary
of Kodak, while a balance remains credited to his or her Account, the Company
may, in its sole discretion, pay to the Participant the balance credited to
his or her Deferred Compensation Account and/or Stock Account.
10.2 Participant's Rights Unsecured
The amounts payable under the Plan shall be unfunded, and the right of any
Participant or his or her estate to receive any payment under the Plan shall
be an unsecured claim against the general assets of the Company. No
Participant shall have the right to exercise any of the rights or privileges
of a shareholder with respect to the units credited to his or her Stock
Account.
10.3 No Right to Continued Employment
Participation in the Plan shall not give any employee any right to remain in
the employ of the Company. The Company reserves the right to terminate any
Participant at any time.
10.4 Statement of Account
Statements will be sent no less frequently than annually to each Participant
or his or her estate showing the value of the Participant's Accounts.
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10.5 Assignability
Neither the Participant nor the Company shall have the right to assign any
rights or obligations under the Plan. However, the Plan shall inure to the
benefit of and be binding upon the successors of the Company.
10.6 Deductions
The Company will withhold to the extent required by law all applicable income
and employment taxes from amounts paid under the Plan.
10.7 Amendment
The Plan may at any time or from time to time be amended, modified, or
terminated by the Compensation Committee. However, no amendment,
modification, or termination shall, without the consent of a Participant,
adversely affect such Participant's accruals in his or her Accounts.
10.8 Governing Law
The Plan shall be construed, governed and enforced in accordance with the law
of New York State, except as such laws are preempted by applicable federal
law.
10.9 Compliance with Securities Laws
The Compensation Committee may, from time to time, impose additional, or
modify or eliminate existing, Plan restrictions and requirements, including,
but not by way of limitation, the restrictions regarding a SOG Participant's
ability to elect into and out of his or her Stock Account under Sections 7.2
and 7.3 or the requirement of an automatic transfer pursuant to Section
8.6(B), as it deems necessary, advisable or appropriate in order to comply
with applicable federal and state securities laws. All such restrictions
shall be accomplished by way of written administrative guidelines adopted by
the Compensation Committee.
10.10 Diconix Deferred Compensation
The deferred compensation accounts maintained by Research Boulevard Realty
Co., Inc. (formerly Diconix, Inc.) pursuant to the Diconix, Inc. Deferred
Compensation Plan shall be treated as Deferred Compensation Accounts under
this Plan and shall be subject to all the terms and conditions of this Plan.
Article 11. Change in Control
11.1 Background
The terms of this Article 11 shall immediately become operative, without
further action or consent by any person or entity, upon a Change in Control,
and once operative shall supersede and control over any other provisions of
this Plan.
11.2 Acceleration of Payment Upon Change In Control
Upon the occurrence of a Change in Control, each Participant, whether or not
he or she is still employed by Kodak or any subsidiary of Kodak, shall be
paid in a single, lump-sum cash payment the balance of his or her Accounts as
of the Valuation Date immediately preceding the date payment is made. Such
payment shall be made as soon as practicable, but in no event later than 90
days after the date of the Change in Control.
69
11.3 Amendment On or After Change In Control
On or after 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 Participant or the operation of
this Plan with respect to the balance in the Participant's Accounts.
Article 12. Severance Payments
With the exception of Articles 1 and 9 hereof and Sections 10.2, 10.3, 10.5,
10.6, and 10.8 hereof, the provisions of this Article 12 shall operate
independent of any other Sections of this Plan.
Subject to the terms and conditions established in this Article 12, the Chief
Executive Officer of the Company may award severance payments under the Plan
to certain Eligible Employees who terminate their employment from the
Company. The classification of Eligible Employees who are eligible for such
severance payments shall be limited to those Eligible Employees who are
officers of the Company. The amount of any such severance payment shall be
determined by the Chief Executive Officer with reference to the Eligible
Employee's base salary at the time of his or her termination of employment.
The Chief Executive Officer shall have the sole discretion to determine the
timing, manner of payment (e.g., lump sum or installments) and terms,
conditions and limitations of any such severance payment, except that all
such payments shall be made in cash. Any award made by the Chief Executive
Officer pursuant to the provisions of this paragraph shall be evidenced by a
written agreement signed by the Chief Executive Officer.
70
Schedule A
Eastman Gelatine Corporation
Eastman Kodak International Capital Company, Inc.
71
Exhibit (10) F.
As Amended October 10, 1996
Effective November 1, 1996
EASTMAN KODAK COMPANY 1985 STOCK OPTION PLAN
1. Purposes
The purposes of this Plan are to encourage ownership of the Company's stock
by eligible key employees and to provide increased incentive for such
employees to put forth maximum effort for the success of the business.
2. Definitions
2.01 "Board" means the Board of Directors of Eastman Kodak Company.
2.02 "Committee" means the Compensation Committee of the Board, consisting
of not less than three members of the Board. A member of the Committee shall
not be and shall not within one year prior to appointment to the Committee
have been, eligible to be selected to participate in the Plan or any other
plan of the Company or any of its affiliates entitling participants to
acquire stock, stock options or stock appreciation rights of the Company or
its affiliates.
2.03 "Common Stock" means Common Stock of Eastman Kodak Company.
2.04 "Company" means Eastman Kodak Company.
2.05 "Participant" means an employee of the Company or a Subsidiary to whom
a grant has been made by the Committee.
2.06 "Plan" means the Eastman Kodak Company 1985 Stock Option Plan.
2.07 "Subsidiary" means a corporation or other business entity in which the
Company directly or indirectly has an ownership interest of fifty percent or
more.
2.08 "Change In Control" means a change in control of the Company of a
nature that would be required to be reported (assuming such event has not
been "previously reported") in response to Item l(a) of the Current Report of
Form 8-K, as in effect on August 1, 1989, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act");
provided that, without limitation, a Change In Control shall be deemed to
have occurred at such time as (i) any "person" within the meaning of Section
14(d) of the Exchange Act is or has become the "beneficial owner" as defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of 25% or more
of the combined voting power of the outstanding securities of the Company
ordinarily having the right to vote at the election of director ("Voting
Securities"), or (ii) individuals who constitute the Board of Directors of
the Company on August 1, 1989 (the "Incumbent Board") have ceased for any
reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to August 1, 1989 whose election, or
nomination for election by the Company's stockholders, 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 the
Company in which such person is named as a nominee for director without
objection to such nomination) shall be, for purposes of this clause (ii),
considered as though such person were a member of the Incumbent Board.
72
3. Administration
This Plan shall be administered by the Committee. The Committee is
authorized to establish such rules and regulations as it deems necessary for
the proper administration of the Plan, and to make such determinations and
interpretations and to take such action in connection with the Plan and any
options or stock appreciation rights granted under the Plan as it deems
necessary or advisable. All determinations of the Committee shall be by a
majority of its members, and its determinations shall be final.
4. Eligibility
Key employees of the Company and its Subsidiaries shall be eligible to
receive grants under the Plan. Directors of the Company or any Subsidiary
who are not full-time employees of the Company or Subsidiary shall not be
eligible to receive grants.
5. Shares Available
An aggregate of 9,000,000 shares of common stock (par value $2.50) of the
Company shall be available for grant under the Plan (subject to adjustment as
provided in paragraph 10). Such shares may be authorized and unissued shares
or may be treasury shares. Upon the expiration or termination in whole or in
part of any unexercised grant, shares of common stock covered by such
unexercised grant shall be available again for grant under the Plan.
6. Grant of Options
Subject to the provisions of paragraphs 7 and 8, options may be granted to
such eligible employees in such numbers, at such times during the term of the
Plan, and for such durations as the Committee shall determine. These stock
options may be incentive stock options within the meaning of Section 422A of
the Internal Revenue Code or non-qualified stock options (i.e., stock options
which are not incentive stock options), or a combination of both. Options
may contain dissimilar provisions provided that all such provisions are
consistent with the Plan.
7. Terms and Conditions of Grants
(a) All options granted under the Plan shall be subject to the
following terms and conditions:
(i) Option Price -- The option price shall be not less than 100%
of the fair market value of the Common Stock, as determined by the
Committee, on the date of grant.
(ii) Duration of Options -- Each option shall expire not later than
ten years from the date of grant, unless sooner exercised or
terminated in accordance with subparagraph (vi) or (vii) below.
(iii) Exercise of An Option -- No option may be exercised within
one year of the date on which the option is granted. One half
(50%) of an option shall become exercisable on the first
anniversary of the date of grant of such option and the remaining
half shall become exercisable on the second anniversary of the
date of grant.
Notwithstanding the preceding two sentences, if any Participant
dies, becomes disabled, retires or terminates employment for any
approved reason, prior to the second anniversary of the date of
grant of any options to him, such options may be exercised at any
time between the date of the event and the date of termination of
the option indicated by its terms. Options may be exercised from
time to time by written notice to the Company stating the number
of shares with respect to which the option is being exercised.
73
(iv) Payment -- No shares shall be issued or delivered until full
payment for the shares has been made, with cash, with Company
shares valued as of the date of exercise (including shares
previously acquired pursuant to the exercise of an option),
or with a combination of both.
(v) Nontransferability of Options -- An option shall not be
transferable by a Participant except by will or the
laws of descent and distribution and shall be exercisable, during
his lifetime, only by him.
(vi) Termination of Employment -- On the sixtieth (60th) day after
termination of a Participant's employment, each option previously
granted to him shall expire; provided, however, if employment is
terminated by reason of death, disability, retirement or any
approved reason, the option shall terminate at such time as
determined by the Committee. Transfers between the Company and a
Subsidiary shall not be a termination of employment. Anything
herein to the contrary notwithstanding, Participants who cease to
be employed by the Company or a Subsidiary and are employed by
Eastman Chemical Company or one of its subsidiaries in connection
with the distribution of the common stock of Eastman Chemical
Company to the shareholders of the Company, shall not be deemed to
have terminated employment for purposes of this Plan and all
options and SARs outstanding on the date of such distribution.
(vii) Non-Competitive Provision -- Notwithstanding any Plan
provision, other than Paragraph 18.07 hereof, to the contrary,
if a Participant, without the written consent of the Company,
engages either directly or indirectly, in any manner or capacity,
as principal, agent, partner, officer, director, employee, or
otherwise, in any business or activity competitive with the
business conducted by the Company or any Subsidiary, or performs
any act or engages in any activity which, in the opinion of the
Chief Executive Officer, is inimical to the best interests of the
Company, either during or after employment with the Company or
Subsidiary, all options previously granted to him shall expire
forthwith.
(b) In addition to the terms and conditions of paragraph (a) above,
incentive stock options granted under the Plan shall also be subject to
the following: If a Participant disposes of shares acquired pursuant to
the exercise of an incentive stock option in a disqualifying
disposition within the time periods identified in Section 422A(a)(l)
of the Internal Revenue Code, such Participant is required to notify
the Company of such disposition and provide information as to the date
of disposition, sale price, quantity disposed of and any other
information about such disposition which the Company may reasonably
request.
8. Stock Appreciation Rights
Stock appreciation rights covering shares of Common Stock ("SARs") may be
granted to such eligible employees in such numbers and at such times during
the term of the Plan as the Committee shall determine. An SAR may be granted
in tandem with all or a portion of a related stock option under the Plan
("Tandem SARs"), or may be granted separately ("Freestanding SAR"). Tandem
SARs shall be granted concurrently with the grant of the stock option. A
Tandem SAR shall be exercisable only to the extent that the related stock
option is exercisable, and the "exercise price" of such an SAR (the base from
which the value of the SAR is measured at its exercise) shall be the option
price under the related stock option. The exercise price of a Freestanding
SAR shall be not less than 100% of the fair market value of the Common Stock,
as determined by the Committee, on the date of grant of the Freestanding SAR.
A Tandem SAR and a Freestanding SAR shall entitle the recipient to
74
receive a payment equal to the excess of the fair market value of the shares
of Common Stock covered by the SAR on the date of exercise over the exercise
price of the SAR. Such payment may be made in cash or in shares of Common
Stock or a combination of both, as the Committee shall determine. The
Committee may cancel or place a limit on the term of, or the amount payable
for, any SAR at any time. The Committee shall determine all other terms and
conditions of any SAR grant. An SAR shall not be transferable by a
Participant except by will or the laws of descent- and distribution and shall
be exercisable, during his lifetime, only by him. Unless the Committee shall
otherwise determine, to the extent a Freestanding SAR is exercisable, it will
be exercised automatically for a cash settlement on its expiration date.
Upon exercise of a Tandem SAR as to some or all of the shares covered by the
grant, the related stock option shall be cancelled automatically to the
extent of the number of shares covered by such exercise, and such shares
shall no longer be available for grant under Section 5. Conversely, if the
related stock option is exercised as to some or all of the shares covered by
the grant, the related Tandem SAR, if any, shall be cancelled automatically
to the extent of the number of shares covered by the stock option exercise.
9. Regulatory Approvals and Listing
The Company shall not be required to issue any certificate or certificates
for shares of Common Stock upon the exercise of an option or SAR 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 any stock exchange on which the
Common Stock may then be listed, and (c) the completion of any registration
or other qualification of such shares under any state or Federal law or
rulings or regulations of any governmental body which the Company shall, in
its sole discretion, determine to be necessary or advisable.
10. Adjustment of Shares Available
If there is any change in the number of outstanding shares of Common Stock of
the Company through the declaration of stock dividends, or through stock
splits, the number of shares available for options and SARs and the shares
subject to any option or SAR and the option prices or exercise prices shall
be automatically adjusted. If there is any change in the number of
outstanding shares of Common Stock of the Company through any change in the
capital account of the Company or through any other transaction referred to
in Section 425(a) of the Internal Revenue Code, the number of shares
available for options and SARs and the shares subject to any option or SAR
and the option prices or exercise prices shall be appropriately adjusted by
the Committee.
11. Prohibition of Loans to Participants
Neither the Company nor any Subsidiary shall directly or indirectly lend
money to a Participant for the purpose of assisting him to exercise any
option granted under the Plan.
12. Amendment
The Board may from time to time amend the Plan in any manner which it deems
in the best interest of the Company, but may not, without the approval of the
Company's shareholders, adopt any amendment which would (a) materially
increase the benefits accruing to participants under the Plan, (b) materially
increase the maximum number of shares which may be issued under the Plan
(other than pursuant to paragraph 10), or (c) materially modify the
requirements as to eligibility for participation in the Plan.
75
13. Term
The Plan shall become effective on November 8, 1985, and shall be submitted
for approval by the Company's shareholders at the 1986 annual meeting. No
option or SARs shall be exercisable before shareholder approval of the Plan.
No option or SAR shall be granted pursuant to the Plan after December 31,
1989.
14. Rights as a Shareholder
A Participant shall possess no rights as a shareholder with respect to the
shares covered by an option or SAR granted to him until the issuance to the
Participant of the stock certificate for the shares purchased.
15. Governing Law
The Plan shall be construed and enforced in accordance with the law of New
York State.
16. Taxes
The Company will withhold, to the extent required by law, all applicable
income and employment taxes due as a result of transactions under this Plan
and the Company may require the Participant to pay to it such tax as a
condition of exercise of an option or SAR.
17. No Right to Continued Employment
Participation in the Plan shall not give any employee any right to remain in
the employ of the Company. The Company reserves the right to terminate any
Participant at any time.
18. Change In Control
18.01 Background. The terms of this Paragraph 18 shall immediately
become operative, without further action or consent by any
person or entity, upon a Change In Control, and once operative
shall supersede and control over any other provisions of this
Plan and its Administrative Guide.
18.02 Lapse of Restrictions. Upon a Change In Control, all terms,
conditions or restrictions in effect on any outstanding stock
options, regardless of whether such stock options are
incentive stock options or non- qualified stock options, or
SARs, regardless of whether such SARs are Tandem SARs or
Freestanding SARs, shall immediately lapse as of the date of
the event.
In addition, no other terms, conditions, or restrictions shall
be imposed on any stock options or SARs on or after such date.
18.03 Vesting of Stock Options and SARs. Upon a Change In Control,
all outstanding stock options and SARs shall automatically
become one hundred percent (100%) vested immediately upon the
occurrence of such event.
76
18.04 Exercise and Payment of Freestanding SARs. Upon a Change In
Control, all outstanding -Freestanding SARs shall
automatically be exercised, without further action by the
Committee or any Participant, immediately upon the occurrence
of such event. As a result, any Participant, whether or not
he is still employed by the Company or any Subsidiary, then
holding any outstanding Freestanding SARs shall be paid the
value of his or her Freestanding SARs in a single lump-sum
cash payment as soon as practicable, but in no event later
than 90 days after the date of the Change In Control. For
purposes of making this payment, the value of such
Participant's Freestanding SARs shall be determined by
averaging the mean between the high and low at which Kodak
common stock is traded on the New York Stock Exchange on the
day of the Change In Control.
18.05 Cash Surrender of Stock Options. Upon the occurrence of a
Change In Control, any Participant, whether or not he is still
employed by the Company or a Subsidiary, then holding any
stock options, regardless of whether they are incentive stock
options or non-qualified stock options, shall be paid in a
single lump-sum cash payment the "Change In Control Value," as
that term is hereafter defined, of such stock options as soon
as practicable, but in no event later than 90 days after the
date of the Change In Control. For purposes of this Paragraph
18, the "Change In Control Value" of a given stock option
shall be determined by multiplying the total number of shares
of common stock the Participant would then be entitled to
purchase under such option (assuming the application of
Subparagraphs 18.02 and 18.03 hereof) by the amount resulting
from subtracting the option price of such stock option from
the stock value obtained by averaging the mean between the
high and low at which Kodak common stock is traded on the New
York Stock Exchange on the date of the Change In Control.
Upon receipt of the foregoing lump sum cash payment by a
Participant, the outstanding stock options for which such
payment is being made, as well as the Tandem SARs related to
such stock options, shall be automatically cancelled.
18.06 Amendment on or After Change In Control. On or after 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
Participant or the operation of this Plan with respect to any
stock options or SARs to which the Participant may have become
entitled hereunder on or prior to the date of such action or
as a result of such Change In Control.
18.07 Subparagraphs 7(a)(vi) and 7(a)(vii). Upon a Change In
Control, the terms and provisions of Subparagraphs 7(a)(vi)
and 7(a)(vii) shall become null and void and shall have no
further force and effect.
77
Exhibit (10) G.
1990 OMNIBUS LONG-TERM COMPENSATION PLAN
EASTMAN KODAK COMPANY
Effective November 1, 1996
78
1990 OMNIBUS LONG-TERM COMPENSATION PLAN
November 1, 1996
TABLE OF CONTENTS
Paragraph Title Page
1 Purpose 79
2 Definitions 79
3 Administration 80
4 Eligibility 81
5 Shares Available 81
6 Term 82
7 Participation 82
8 Stock Options 82
9 Stock Appreciation Rights 83
10 Stock Awards 83
11 Performance Units 84
12 Performance Shares 84
13 Payment of Awards 85
14 Dividends and Dividend Equivalents 85
15 Deferral of Awards 85
16 Termination of Employment 85
17 Nonassignability 86
18 Adjustment of Shares Available 86
19 Withholding Taxes 86
20 Noncompetition Provision 86
21 Amendments to Awards 87
22 Regulatory Approvals and Listings 87
23 No Right to Continued Employment
or Grants 87
24 Amendment 87
25 Governing Law 87
26 Change in Ownership 87
27 Change in Control 89
28 No Right, Title, or Interest in
Company Assets 90
29 Gender 90
79
EASTMAN KODAK COMPANY
1990 OMNIBUS LONG-TERM COMPENSATION PLAN
1. Purpose
The purpose of the Plan is to provide motivation to Key Employees of the
Company and its subsidiaries to put forth maximum efforts toward the
continued growth, profitability, and success of the Company and its
Subsidiaries by providing incentives to such Key Employees through the
ownership and performance of the Common Stock of the Company. Toward this
objective, the Committee may grant stock options, stock appreciation rights,
Stock Awards, performance units, performance shares, and/or other incentive
awards to Key Employees of the Company and its Subsidiaries on the terms and
subject to the conditions set forth in the Plan.
2. Definitions
2.1 "Award" means any form of stock option, stock appreciation right, Stock
Award, performance unit, performance shares, or other incentive award
granted under the Plan, whether singly, in combination, or in tandem, to
a Participant by the Committee pursuant to such terms, conditions,
restrictions and/or limitations, if any, as the Committee may establish
by the Award Notice or otherwise.
2.2 "Award Notice" means a written notice from the Company 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" means the Board of Directors of the Company.
2.4 "Cause" means (a) the willful and continued failure by a Key Employee to
substantially perform his duties with his employer after written
warnings identifying the lack of substantial performance are delivered
to the Key Employee by his employer to specifically identify the manner
in which the employer believes that the Key Employee has not
substantially performed his duties, or (b) the willful engaging by a Key
Employee in illegal conduct which is materially and demonstrably
injurious to the Company or a Subsidiary.
2.5 "Change In Control" means a change in control of the Company of a nature
that would be required to be reported (assuming such event has not been
"previously reported") in response to Item 1(a) of the Current Report on
Form 8-K, as in effect on August 1, 1989, pursuant to Section 13 or
15(d) of the Exchange Act; provided that, without limitation, a Change
In Control shall be deemed to have occurred at such time as (i) any
"person" within the meaning of Section 14(d) of the Exchange Act, other
than the Company, a subsidiary of the Company, or any employee benefit
plan(s) sponsored by the Company or any subsidiary of the Company, is or
has become the "beneficial owner," as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly, of 25% or more of the combined
voting power of the outstanding securities of the Company ordinarily
having the right to vote at the election of directors, or (ii)
individuals who constitute the Board on February 1, 1990 (the "Incumbent
Board") have ceased for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to
February 1, 1990 whose election, or nomination for election by the
Company'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 the
Company 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.
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2.6 "Change In Control Price" means the highest closing price per share paid
for the purchase of Common Stock on the New York Stock Exchange during
the ninety (90) day period ending on the date the Change In Control
occurs.
2.7 "Change In Ownership" means a Change In Control which results directly
or indirectly in the Company's Common Stock ceasing to be actively
traded on the New York Stock Exchange.
2.8 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.9 "Committee" means the Compensation Committee of the Board or such other
committee designated by the Board, authorized to administer the Plan
under paragraph 3 hereof. The Committee shall consist of not less than
three members. A member of the Committee shall not be, and shall not
within one year prior to appointment to the Committee have been,
eligible to be selected to participate in the Plan or any other plan of
the Company or any of its affiliates entitling participants to acquire
stock, stock options, or stock appreciation rights of the Company or its
affiliates.
2.10 "Common Stock" means common stock of the Company.
2.11 "Company" means Eastman Kodak Company.
2.12 "Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
2.13 "Key Employee" means an employee of the Company or a Subsidiary who
holds a position of responsibility in a managerial, administrative, or
professional capacity, and whose performance, as determined by the
Committee in the exercise of its sole and absolute discretion, can have
a significant effect on the growth, profitability, and success of the
Company.
2.14 "Participant" means any individual to whom an Award has been granted by
the Committee under this Plan.
2.15 "Plan" means the Eastman Kodak Company 1990 Omnibus Long-Term
Compensation Plan.
2.16 "Stock Award" means an award granted pursuant to paragraph 10 hereof in
the form of shares of Common Stock, restricted shares of Common Stock,
and/or Units of Common Stock.
2.17 "Subsidiary" means a corporation or other business entity in which the
Company directly or indirectly has an ownership interest of 80 percent
or more.
2.18 "Unit" means a bookkeeping entry used by the Company to record and
account for the grant of the following Awards until such time as the
Award is paid, cancelled, forfeited or terminated, as the case may be;
Units of Common Stock, performance units, and performance shares which
are expressed in terms of Units of Common Stock.
3. Administration
The Plan shall be administered by the Committee. The Committee shall have
the authority to: (a) interpret the Plan; (b) establish such rules and
regulations as it deems necessary for the proper operation and administration
of the Plan; (c) select Key Employees to receive Awards under the Plan; (d)
determine the form of an Award, whether a stock option, stock appreciation
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right, Stock Award, performance unit, performance share, or other incentive
award established by the Committee in accordance with (h) below, the number
of shares or Units subject to the Award, all the terms, conditions,
restrictions and/or limitations, if any, of an Award, including the time and
conditions of exercise or vesting, and the terms of any Award Notice; (e)
determine whether Awards should be granted singly, in combination or in
tandem; (f) grant waivers of Plan terms, conditions, restrictions, and
limitations; (g) accelerate the vesting, exercise, or payment of an Award or
the performance period of an Award when such action or actions would be in
the best interest of the Company; (h) establish such other types of Awards,
besides those specifically enumerated in paragraph 2.1 hereof, which the
Committee determines are consistent with the Plan's purpose; and (i) take any
and all other action it deems necessary or advisable for the proper operation
or administration 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. The
Committee shall also have the authority to grant Awards in replacement of
Awards previously granted under this Plan or any other executive compensation
plan of the Company or a Subsidiary. All determinations of the Committee
shall be made by a majority of its members, and its determinations shall be
final, binding and conclusive.
The Committee, in its discretion, may delegate its authority and duties under
the Plan to the Chief Executive Officer and/or to other senior officers of
the Company under such conditions and/or limitations as the Committee may
establish; provided, however, that only the Committee may select and grant
Awards to Participants who are subject to Section 16 of the Exchange Act.
4. Eligibility
Any Key Employee is eligible to become a Participant of the Plan.
In addition, any individual who on the effective date of the Plan is both (i)
a former Key Employee of the Company or a Subsidiary, and (ii) a participant
under the Eastman Kodak Company 1985 Long-Term Performance Award Plan (the
"1985 Plan"), shall be eligible to become a Participant of the Plan.
However, the participation of any such individual under the Plan shall be
limited solely to receiving Awards granted by the Committee under this Plan
in replacement of any unpaid or unearned award under the 1985 Plan on the
effective date of the Plan.
5. Shares Available
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
(including incentive stock options) during its term shall not exceed
Twenty-Two Million Thirty-Three Thousand and Six Hundred (22,033,600). (Such
amount shall be subject to adjustment as provided in paragraph 18.) Any
shares of Common Stock related to Awards which terminate by expiration,
forfeiture, cancellation or otherwise without the issuance of such shares,
are settled in cash in lieu of Common Stock, or are exchanged with the
Committee's permission for Awards not involving Common Stock, shall be
available again for grant under the Plan. Further, any shares of Common
Stock which are used by a Participant for the full or partial payment to the
Company of the purchase price of shares of Common Stock upon exercise of a
stock option, or for any withholding taxes due as a result of such exercise,
shall again be available for Awards under the Plan. Similarly, shares of
Common Stock with respect to which an SAR has been exercised and paid in cash
shall again be eligible 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.
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6. Term
The Plan shall become effective as of February 1, 1990, subject to its
approval by the Company's shareholders at the 1990 annual meeting. No awards
shall be exercisable or payable before approval of the Plan has been obtained
from the Company's shareholders. Awards shall not be granted pursuant to the
Plan after January 31, 1995.
7. Participation
The Committee shall select, from time to time, Participants from those Key
Employees who, in the opinion of the Committee, can further the Plan's
purposes. Once a Participant is so selected, the Committee shall determine
the type or types of Awards to be made to the Participant and shall establish
in the related Award Notices the terms, conditions, restrictions and/or
limitations, if any, applicable to the Awards in addition to those set forth
in this Plan and the administrative rules and regulations issued by the
Committee.
8. Stock Options
(a) Grants. Awards may be granted in the form of stock options. These
stock options may be incentive stock options within the meaning of
Section 422A of the Code or non-qualified stock options (i.e.,
stock options which are not incentive stock options), or a
combination of both.
(b) Terms and Conditions of 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 established
by the Committee, but such price shall not be less than 50 percent
of the fair market value of the Common Stock, as determined by the
Committee, on the date of the stock option's grant.
(c) Restrictions Relating to Incentive Stock Options. Stock options
issued in the form of incentive stock options shall, in addition to
being subject to all applicable terms, conditions, restrictions
and/or limitations established by the Committee, comply with
Section 422A of the Code. Accordingly, the aggregate fair market
value (determined at the time the option was granted) of the Common
Stock with respect to which incentive stock options are exercisable
for the first time by a Participant during any calendar year (under
this Plan or any other plan of the Company or any of its
Subsidiaries) shall not exceed $100,000 (or such other limit as may
be required by the Code). Further, the per-share option price of
an incentive stock option shall not be less than 100 percent of the
fair market value of the Common Stock, as determined by the
Committee, on the date of grant. Also, each option shall expire
not later than ten years from its date of grant. The number of
shares of Common Stock that shall be available for incentive stock
options granted under the Plan is 16,000,000.
(d) 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.
(e) Exercise. Upon exercise, the option price of a stock option may be
paid in cash, shares of Common Stock, shares of restricted 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.
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9. Stock Appreciation Rights
(a) Grants. Awards may be granted in the form of stock appreciation
rights ("SARs"). An SAR may be granted in tandem with all or a
portion of a related stock option under the Plan ("Tandem SARs"),
or may be granted separately ("Freestanding SARs"). A Tandem SAR
may be granted either at the time of the grant of the related stock
option or at any time thereafter during the term of the stock
option. SARs shall entitle the recipient to receive a payment
equal to the appreciation in market value of a stated number of
shares of Common Stock from the exercise price to the market value
on the date of exercise. In the case of SARs granted in tandem
with stock options granted prior to the grant of such SARs, the
appreciation in value is from the option price of such related
stock option to the market value on the date of exercise.
(b) Terms and Conditions of Tandem SARs. A Tandem SAR shall be
exercisable to the extent, and only to the extent, that the related
stock option is exercisable, and the "exercise price" of such an
SAR (the base from which the value of the SAR is measured at its
exercise) shall be the option price under the related stock option.
However, at no time shall a Tandem SAR be issued if the option
price of its related stock option is less than 50 percent of the
fair market value of the Common Stock, as determined by the
Committee, on the date of the Tandem SAR's grant. If a related
stock option is exercised as to some or all of the shares covered
by the Award, the related Tandem SAR, if any, shall be cancelled
automatically to the extent of the number of shares covered by the
stock option exercise. Upon exercise of a Tandem SAR as to some or
all of the shares covered by the Award, the related stock option
shall be cancelled automatically to the extent of the number of
shares covered by such exercise, and such shares shall again be
eligible for grant in accordance with paragraph 5 hereof, except to
the extent any shares of Common Stock are issued to settle the SAR.
(c) Terms and Conditions of Freestanding SARs. Freestanding SARs shall
be exercisable in whole or in such installments and at such times
as may be determined by the Committee. The exercise price of a
Freestanding SAR shall also be determined by the Committee;
provided, however, that such price shall not be less than 50
percent of the fair market value of the Common Stock, as determined
by the Committee, on the date of the Freestanding SAR's grant.
(d) Deemed Exercise. The Committee may provide that an SAR shall be
deemed to be exercised at the close of business on the scheduled
expiration date of such SAR if at such time the SAR by its terms
remains exercisable and, if so exercised, would result in a payment
to the holder of such SAR.
(e) Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, determine such other terms, conditions,
restrictions and/or limitations, if any, of any SAR Award, provided
they are not inconsistent with the Plan.
10. Stock Awards
(a) Grants. Awards may be granted in the form of Stock Awards. Stock
Awards shall be awarded in such numbers and at such times during
the term of the Plan as the Committee shall determine.
(b) Award Restrictions. Stock Awards shall be subject to such terms,
conditions, restrictions, and/or limitations, if any, as the
Committee deems appropriate including, but not by way of
limitation, restrictions on transferability and continued
employment. The Committee may modify or accelerate the delivery of
a Stock Award under such circumstances as it deems appropriate.
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(c) Rights as Shareholders. During the period in which any restricted
shares of Common Stock are subject to the restrictions imposed
under paragraph 10(b), the Committee may, in its discretion, grant
to the Participant to whom such restricted shares have been awarded
all or any of the rights of a shareholder with respect to such
shares, including, but not by way of limitation, the right to vote
such shares and to receive dividends.
(d) Evidence of Award. Any stock award granted under the Plan may be
evidenced in such manner as the Committee deems appropriate,
including, without limitation, book-entry registration or issuance
of a stock certificate or certificates.
11. Performance Units
(a) Grants. Awards may be granted in the form of performance units.
Performance units, as that term is used in this Plan, shall refer
to Units valued by reference to designated criteria established by
the Committee, other than Common Stock.
(b) Performance Criteria. Performance units shall be contingent on the
attainment during a performance period of certain performance
objectives. The length of the performance period, the performance
objectives to be achieved during the performance period, and the
measure of whether and to what degree such objectives have been
attained shall be conclusively determined by the Committee in the
exercise of its absolute discretion. Performance objectives may be
revised by the Committee, at such times as it deems appropriate
during the performance period, in order to take into consideration
any unforeseen events or changes in circumstances.
(c) Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, determine such other terms, conditions,
restrictions, and/or limitations, if any, of any Award of
performance units, provided they are not inconsistent with the
Plan.
12. Performance Shares
(a) Grants. Awards may be granted in the form of performance shares.
Performance shares, as that term is used in this Plan, shall refer
to shares of Common Stock or Units which are expressed in terms of
Common Stock.
(b) Performance Criteria. Performance shares shall be contingent upon
the attainment during a performance period of certain performance
objectives. The length of the performance period, the performance
objectives to be achieved during the performance period, and the
measure of whether and to what degree such objectives have been
attained shall be conclusively determined by the Committee in the
exercise of its absolute discretion. Performance objectives may be
revised by the Committee, at such times as it deems appropriate
during the performance period, in order to take into consideration
any unforeseen events or changes in circumstances.
(c) Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, determine such other terms, conditions,
restrictions and/or limitations, if any, of any Award of
performance shares, provided they are not inconsistent with the
Plan.
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13. Payment of Awards
At the discretion of the Committee, payment of Awards may be made in cash,
Common Stock, a combination of cash and Common Stock, or any other form of
property as the Committee shall determine. In addition, payment of Awards may
include such terms, conditions, restrictions and/or limitations, if any, as
the Committee deems appropriate, including, in the case of Awards paid in the
form of Common Stock, restrictions on transfer and forfeiture provisions.
Further, payment of Awards may be made in the form of a lump sum or
installments, as determined by the Committee.
14. Dividends and Dividend Equivalents
If an Award is granted in the form of a Stock Award, stock option, or
performance share, or in the form of any other stock-based grant, the
Committee may choose, at the time of the grant of the Award or any time
thereafter up to the time of the Award's payment, to include as part of such
Award an entitlement to receive dividends or dividend equivalents, subject to
such terms, conditions, restrictions and/or limitations, if any, as the
Committee may establish. Dividends and dividend equivalents shall be paid in
such form and manner (i.e., lump sum or installments), and at such time as the
Committee shall determine. All dividends or dividend equivalents which are
not paid currently may, at the Committee's discretion, accrue interest, be
reinvested into additional shares of Common Stock or, in the case of dividends
or dividend equivalents credited in connection with performance shares, be
credited as additional performance shares and paid to the Participant if and
when, and to the extent that, payment is made pursuant to such Award.
15. Deferral of Awards
At the discretion of the Committee, payment of a Stock Award, performance
share, performance unit, dividend, dividend equivalent, or any portion thereof
may be deferred by a Participant until such time as the Committee may
establish. All such deferrals shall be accomplished by the delivery of a
written, irrevocable election by the Participant prior to the time such
payment would otherwise be made, on a form provided by the Company. Further,
all deferrals shall be made in accordance with administrative guidelines
established by the Committee to ensure that such deferrals comply with all
applicable requirements of the Code and its regulations. Deferred payments
shall be paid in a lump sum or installments, as determined by the Committee.
The Committee may also credit interest, at such rates to be determined by the
Committee, on cash payments that are deferred and credit dividends or dividend
equivalents on deferred payments denominated in the form of Common Stock.
16. Termination of Employment
If a Participant's employment with the Company or a Subsidiary terminates for
a reason other than death, disability, retirement, or any approved reason, all
unexercised, unearned, and/or unpaid Awards, including, but not by way of
limitation, Awards earned but not yet paid, all unpaid dividends and dividend
equivalents, and all interest accrued on the foregoing shall be cancelled or
forfeited, as the case may be, unless the Participant's Award Notice provides
otherwise. The Committee shall have the authority to promulgate rules and
regulations to (i) determine what events constitute disability, retirement, or
termination for an approved reason for purposes of the Plan, and (ii)
determine the treatment of a Participant under the Plan in the event of his
death, disability, retirement or termination for an approved reason. Anything
herein to the contrary notwithstanding, Participants who cease to be employed
by the Company or a Subsidiary and are employed by Eastman Chemical Company or
one of its subsidiaries in connection with the distribution of the common
stock of Eastman Chemical Company to the shareholders of the Company, shall
not be deemed to have terminated employment for purposes of this Plan and all
Awards outstanding on the date of such distribution.
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17. Nonassignability
No Awards or any other payment 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 or exercisable by anyone other than the Participant to
whom it was granted.
18. Adjustment of Shares Available
If there is any change in the number of outstanding shares of Common Stock
through the declaration of stock dividends, stock splits or the like, the
number of shares available for Awards, the shares subject to any Award and the
option prices or exercise prices of Awards shall be automatically adjusted.
If there is any change in the number of outstanding shares of Common Stock
through any change in the capital account of the Company, or through any other
transaction referred to in Section 425(a) of the Code, 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 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 deems
appropriate.
19. 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.
20. Noncompetition Provision
Unless the Award Notice specifies otherwise, a Participant shall forfeit all
unexercised, unearned, and/or unpaid Awards, including, but not by way of
limitation, Awards earned but not yet paid, all unpaid dividends and dividend
equivalents, and all interest, if any, accrued on the foregoing if, (i) in the
opinion of the Committee, the Participant, without the written consent of the
Company, engages directly or indirectly in any manner or capacity as
principal, agent, partner, officer, director, employee, or otherwise, in any
business or activity competitive with the business conducted by the Company or
any Subsidiary; or (ii) the Participant performs any act or engages in any
activity which in the opinion of the Chief Executive Officer of the Company is
inimical to the best interests of the Company. In addition, the Committee
may, in its discretion, condition the deferral of any Award, dividend, or
dividend equivalent under paragraph 15 hereof on a Participant's compliance
with the terms of this paragraph 20, and cause such a Participant to forfeit
any payment which is so deferred if the Participant fails to comply with the
terms hereof.
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21. 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.
22. Regulatory Approvals and Listings
Notwithstanding anything contained in this Plan to the contrary, the Company
shall have no obligation to issue or deliver certificates of Common Stock
evidencing Stock Awards or any other Award resulting in the payment of Common
Stock prior to (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.
23. 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 or any Subsidiary. The Company 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.
24. Amendment
The Committee may suspend or terminate the Plan at any time. In addition, the
Committee may, from time to time, amend the Plan in any manner, but may not
without shareholder approval adopt any amendment which would (a) materially
increase the benefits accruing to Participants under the Plan, (b) materially
increase the number of shares of Common Stock which may be issued under the
Plan (except as specified in paragraph 18), or (c) materially modify the
requirements as to eligibility for participation in the Plan.
25. 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.
26. Change In Ownership
(a) Background. Upon a Change In Ownership: (i) the terms of this
paragraph 26 shall immediately become operative, without further
action or consent by any person or entity; (ii) all terms,
conditions, restrictions, and limitations in effect on any
unexercised, unearned, unpaid, and/or deferred Award, or any other
outstanding Award, shall immediately lapse as of the date of such
event; (iii) no other terms, conditions, restrictions and/or
limitations shall be imposed upon any Awards on or after such date,
and in no circumstance shall an Award be forfeited on or after such
date; (iv) all unexercised, unvested, unearned, and/or unpaid Awards
or any other outstanding Awards shall automatically become one
hundred percent (100%) vested immediately.
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(b) Dividends and Dividend Equivalents. Upon a Change In Ownership, all
unpaid dividends and dividend equivalents and all interest accrued
thereon, if any, shall be treated and paid under this paragraph 26
in the identical manner and time as the Award under which such
dividends or dividend equivalents have been credited. For example,
if upon a Change In Ownership, an Award under this paragraph 26 is
to be paid in a prorated fashion, all unpaid dividends and dividend
equivalents with respect to such Award shall be paid according to
the same formula used to determine the amount of such prorated
Award.
(c) Treatment of Performance Units and Performance Shares. If a Change
In Ownership occurs during the term of one or more performance
periods for which the Committee has granted performance units and/or
performance shares (hereinafter a "current performance period"), the
term of each such performance period shall immediately terminate
upon the occurrence of such event. Upon a Change In Ownership, for
each "current performance period" and each completed performance
period for which the Committee has not on or before such date made a
determination as to whether and to what degree the performance
objectives for such period have been attained (hereinafter a
"completed performance period"), it shall be assumed that the
performance objectives have been attained at a level of one hundred
percent (100%) or the equivalent thereof.
A Participant in one or more "current performance periods" shall be
considered to have earned and, therefore, be entitled to receive, a
prorated portion of the Awards previously granted to him for each
such performance period. Such prorated portion shall be determined
by multiplying the number of performance shares or performance
units, as the case may be, granted to the Participant by a fraction,
the numerator of which is the total number of whole and partial
years (with each partial year being treated as a whole year) that
have elapsed since the beginning of the performance period, and the
denominator of which is the total number of years in such
performance period.
A Participant in one or more "completed performance periods" shall
be considered to have earned and, therefore, be entitled to receive
all the performance shares or performance units, as the case may be,
previously granted to him during each such performance period.
(d) Valuation of Awards. Upon a Change In Ownership, all outstanding
Units of Common Stock, Freestanding SARs, stock options (including
incentive stock options), and performance shares (including those
earned as a result of the application of paragraph 26(c) above) and
all other outstanding stock-based Awards, including those granted by
the Committee pursuant to its authority under paragraph 3(h) hereof,
shall be valued and cashed out on the basis of the Change In Control
Price.
(e) Payment of Awards. Upon a Change In Ownership, any Participant,
whether or not he is still employed by the Company or a Subsidiary,
shall be paid, in a single lump-sum cash payment, as soon as
practicable but in no event later than 90 days after the Change In
Ownership, all of his outstanding Units of Common Stock,
Freestanding SARs, stock options (including incentive stock
options), performance units (including those earned as a result of
the application of paragraph 26(c) above), and performance shares
(including those earned as a result of paragraph 26(c) above), and
all other outstanding Awards, including those granted by the
Committee pursuant to its authority under paragraph 3(h) hereof.
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(f) Deferred Awards. Upon a Change In Ownership, all Awards deferred
by a Participant under paragraph 15 hereof, but for which he has
not received payment as of such date, shall be paid to him in a
single lump-sum cash payment as soon as practicable, but in no
event later than 90 days after the Change In Ownership. For
purposes of making such payment, the value of all Awards which are
stock based shall be determined by the Change In Control Price.
27. Change In Control
(a) Background. All Participants shall be eligible for the treatment
afforded by this Paragraph 27 if their employment terminates within
two years following a Change In Control, unless the termination is
due to (i) death, (ii) disability entitling the Participant to
benefits under his employer's long-term disability plan, (iii)
Cause, (iv) resignation other than (A) resignation from a declined
reassignment to a job that is not reasonably equivalent in
responsibility or compensation (as defined in the Company's
Termination Allowance Plan), or that is not in the same geographic
area (as defined in the Company's Termination Allowance Plan), or
(B) resignation within thirty days following a reduction in base
pay, or (v) retirement entitling the Participant to benefits under
his employer's retirement plan.
(b) Vesting and Lapse of Restrictions. If a Participant is eligible
for treatment under this paragraph 27, (i) all of the terms,
conditions, restrictions, and limitations in effect on any of his
unexercised, unearned, unpaid and/or deferred Awards shall
immediately lapse as of the date of his termination of employment;
(ii) no other terms, conditions, restrictions and/or limitations
shall be imposed upon any of his Awards on or after such date, and
in no event shall any of his Awards be forfeited on or after such
date; and (iii) all of his unexercised, unvested, unearned and/or
unpaid Awards shall automatically become one hundred percent (100%)
vested immediately upon his termination of employment.
(c) Dividends and Dividend Equivalents. If a Participant is eligible
for treatment under this paragraph 27, all of his unpaid dividends
and dividend equivalents and all interest accrued thereon, if any,
shall be treated and paid under this Paragraph 27 in the identical
manner and time as the Award under which such dividends or dividend
equivalents have been credited.
(d) Treatment of Performance Units and Performance Shares. If a
Participant holding either performance units or performance shares
is terminated under the conditions described in (a) above, the
provisions of this paragraph (d) shall determine the manner in
which such performance units and/or performance shares shall be
paid to him. For purposes of making such payment, each "current
performance period," as that term is defined in paragraph 26(c)
hereof, shall be treated as terminating upon the date of the
Participant's termination of employment, and for each such "current
performance period" and each "completed performance period," as
that term is defined in paragraph 26(c) hereof, it shall be assumed
that the performance objectives have been attained at a level of
one hundred percent (100%) or the equivalent thereof. If the
Participant is participating in one or more "current performance
periods," he shall be considered to have earned and, therefore, be
entitled to receive that prorated portion of the Awards previously
granted to him for each such performance period, as determined in
accordance with the formula established in paragraph 26(c) hereof.
A Participant in one or more "completed performance periods" shall
be considered to have earned and, therefore, be entitled to receive
all the performance shares and performance units previously granted
to him during each performance period.
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(e) Valuation of Awards. If a Participant is eligible for treatment
under this paragraph 27, his Awards shall be valued and cashed out
in accordance with the provisions of paragraph 26(d) hereof.
(f) Payment of Awards. If a Participant is eligible for treatment
under this paragraph 27, he shall be paid, in a single lump-sum
cash payment, as soon as practicable but in no event later than 90
days after the date of his termination of employment, all of his
outstanding Units of Common Stock, Freestanding SARs, stock options
(including incentive stock options), performance units (including
those earned as a result of the application of paragraph 27(d)
above), and performance shares (including those earned as a result
of paragraph 27(d) above), and all of his other outstanding Awards,
including those granted by the Committee pursuant to its authority
under paragraph 3(h) hereof.
(g) Deferred Awards. If a Participant is eligible for treatment under
this paragraph 27, all of his deferred Awards for which he has not
received payment as of the date of his termination of employment
shall be paid to him in a single lump-sum cash payment as soon as
practicable, but in no event later than 90 days after the date of
his termination. For purposes of making such payment, the value of
all Awards which are stock based shall be determined by the Change
In Control Price.
(h) Section 16 of Exchange Act. Notwithstanding anything contained in
this paragraph 27 to the contrary, any Participant who, on the date
of his termination of employment under the conditions described in
subparagraph (a) above, holds any stock options or Freestanding
SARs that have not been outstanding for a period of at least six
months from their date of grant and who on the date of such
termination is required to report under Section 16 of the Exchange
Act shall not be paid such Award until the first day next following
the end of such six-month period.
(i) Miscellaneous. Upon a Change In Control, (i) the provisions of
paragraphs 16, 20 and 21 hereof shall become null and void and of
no force and effect insofar as they apply to a Participant who has
been terminated under the conditions described in (a) above; and
(ii) no action, including, but not by way of limitation, the
amendment, suspension or termination of the Plan, shall be taken
which would affect the rights of any Participant or the operation
of the Plan with respect to any Award to which the Participant may
have become entitled hereunder on or prior to the date of the
Change In Control or to which he may become entitled as a result of
such Change In Control.
(j) Legal Fees. The Company shall pay all legal fees and related
expenses incurred by a Participant in seeking to obtain or enforce
any payment, benefit or right he may be entitled to under the Plan
after a Change In Control; provided, however, the Participant shall
be required to repay any such amounts to the Company to the extent
a court of competent jurisdiction issues a final and non-appealable
order setting forth the determination that the position taken by
the Participant was frivolous or advanced in bad faith.
28. 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 name, and, in the case of restricted shares of Common Stock, such
rights are granted to the Participant under paragraph 10(c) hereof. 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.
29. Gender
Throughout this Plan, the masculine gender shall include the feminine.
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Exhibit (10) H.
EASTMAN KODAK COMPANY
MANAGEMENT VARIABLE COMPENSATION PLAN
Article Page
1. Purpose, Effective Date and Term of Plan 92
2. Definitions 92
3. Eligibility 97
4. Plan Administration 97
5. Forms of Awards 98
6. Determination of Awards for a Performance Period 98
7. Payment of Awards for a Performance Period 100
8. Deferral of Awards 101
9. Additional Awards 101
10. Change In Ownership 102
11. Change In Control 102
12. Shares Subject to the Plan 103
13. Miscellaneous 104
1996, Eastman Kodak Company
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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.
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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.
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.
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2.13 Committee
"Committee" means the Executive Compensation and Development Committee of the
Board, or such other Board committee as may be designated by the Board to
administer the Plan; provided that the Committee shall consist of three or
more directors, all of whom are both a "Non-Employee Director" within the
meaning of Rule 16b-3 under the Exchange Act and an "outside director" within
the meaning of the definition of such term as contained in Proposed Treasury
Regulation Section 1.162- 27(e)(3), or any successor definition adopted.
2.14 Common Stock
"Common Stock" means 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 "Continuos 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
95
(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.
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
96
dividend or other distribution (whether in the form of cash, securities or
other property), recapitalization, restructuring, reorganization, merger,
consolidation, spin off, combination, repurchase, share exchange,
liquidation, dissolution, or other similar corporate transaction, event or
development; (b) in recognition of, or in anticipation of, any other unusual
or nonrecurring event affecting the Company, or the financial statements of
the Company, or in response to, or in anticipation of, changes in applicable
laws, regulations, accounting principles, or business conditions; (c) in
recognition of, or in anticipation of, any other extraordinary gains or
losses; and (d) in view of the Committee's assessment of the business
strategy of the Company, performance of comparable organizations, economic
and business conditions, and any other circumstances deemed relevant.
However, if and to the extent the exercise of such authority after the first
90 days of a Performance Period would cause the Awards granted to the Covered
Employees for the Performance Period to fail to qualify as "Performance-Based
Compensation" under Section 162(m) of the Code, then such authority shall
only be exercised with respect to those Participants who are not Covered
Employees.
2.27 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.
97
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.
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.
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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 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.
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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.
(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.
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(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.
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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.
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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
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that is not reasonably equivalent in responsibility or compensation (as
defined in Kodak's Termination Allowance Plan), or that is not in the same
geographic area (as defined in Kodak's Termination Allowance Plan), or (2)
resignation within thirty days of a reduction in base pay; or (e) Retirement.
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.
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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.
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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.
106
Exhibit (10) I.
EASTMAN KODAK COMPANY
1995 OMNIBUS LONG-TERM COMPENSATION PLAN
Article Page
1. Purpose and Term of Plan 107
2. Definitions 107
3. Eligibility 112
4. Plan Administration 112
5. Forms of Awards 113
6. Shares Subject to Plan 114
7. Performance Awards 115
8. Stock Options 116
9. Stock Appreciation Rights 117
10. Stock Awards 118
11. Performance Units 119
12. Performance Shares 119
13. Performance Stock Program 119
14. Payment of Awards 122
15. Dividend and Dividend Equivalents 123
16. Deferral of Awards 123
17. Change In Ownership 123
18. Change In Control 125
19. Miscellaneous 127
1996, Eastman Kodak Company
107
ARTICLE 1 -- PURPOSE AND TERM OF PLAN
1.1 Purpose
The purpose of the Plan is to provide motivation to selected Employees of the
Company to put forth maximum efforts toward the continued growth,
profitability, and success of the Company by providing incentives to such
Employees through the ownership and performance of the Common Stock of Kodak.
Toward this objective, the Committee may grant stock options, stock
appreciation rights, Stock Awards, performance units, performance shares,
Performance Awards, Common Stock and/or other incentive awards to Employees
of the Company on the terms and subject to the conditions set forth in the
Plan.
1.2 Term
The Plan shall become effective as of February 1, 1995, subject to its
approval by Kodak's shareholders at the 1995 Annual Meeting of the
Shareholders. No Awards shall be exercisable or payable before approval of
the Plan has been obtained from Kodak's shareholders. Awards shall not be
granted pursuant to the Plan after December 31, 1999; except that the
Committee may grant Awards after such date in recognition of performance for
Performance Cycles commencing prior to such date.
ARTICLE 2 -- DEFINITIONS
2.1 Approved Reason
"Approved Reason" means a reason for terminating employment with the Company
which, in the opinion of the Committee, is in the best interests of the
Company.
2.2 Award
"Award" means any form of stock option, stock appreciation right, Stock
Award, performance unit, performance share, Performance Award, shares of
Common Stock under the Performance Stock Program, or other incentive award
granted under the Plan, whether singly, in combination, or in tandem, to a
Participant by the Committee pursuant to such terms, conditions, restrictions
and/or limitations, if any, as the Committee may establish by the Award
Notice or otherwise.
2.3 Award Notice
"Award Notice" means a written notice from the Company 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.
2.4 Award Payment Date
"Award Payment Date" means, for a Performance Cycle, the date the Awards for
such Performance Cycle shall be paid to Participants. The Award Payment Date
for a Performance Cycle shall occur as soon as administratively possible
following the completion of the certifications required pursuant to
Subsection 13.5(c).
2.5 Board
"Board" means the Board of Directors of Kodak.
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2.6 Cause
"Cause" means (a) the willful and continued failure by an Employee to
substantially perform his or her duties with his or her employer after
written warnings identifying the lack of substantial performance are
delivered to the Employee by his or her employer to specifically identify the
manner in which the employer believes that the Employee has not substantially
performed his or her duties, or (b) the willful engaging by an Employee in
illegal conduct which is materially and demonstrably injurious to Kodak or a
Subsidiary.
2.7 CEO
"CEO" means the Chief Executive Officer of Kodak.
2.8 Change In Control
"Change In Control" means a change in control of Kodak of a nature that would
be required to be reported (assuming such event has not been "previously
reported") in response to Item 1(a) of the Current Report on Form 8-K, as in
effect on August 1, 1989, pursuant to Section 13 or 15(d) of the Exchange
Act; provided that, without limitation, a Change In Control shall be deemed
to have occurred at such time as (i) any "person" within the meaning of
Section 14(d) of the Exchange Act, other than Kodak, a Subsidiary, or any
employee benefit plan(s) sponsored by Kodak or any Subsidiary, is or has
become the "beneficial owner," as defined in Rule 13d-3 under the Exchange
Act, directly or indirectly, of 25% or more of the combined voting power of
the outstanding securities of Kodak ordinarily having the right to vote at
the election of directors, or (ii) individuals who constitute the Board on
January 1, 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.
2.9 Change In Control Price
"Change In Control Price" means the highest closing price per share paid for
the purchase of Common Stock on the New York Stock Exchange during the ninety
(90) day period ending on the date the Change In Control occurs.
2.10 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.
2.11 Code
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
including regulations thereunder and successor provisions and regulations
thereto.
2.12 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.
109
2.13 Common Stock
"Common Stock" means common stock, $2.50 par value per share, of Kodak which
may be newly issued or treasury stock.
2.14 Company
"Company" means Kodak and its Subsidiaries.
2.15 Covered Employee
"Covered Employee" means an Employee who is a "Covered Employee" within the
meaning of Section 162(m) of the Code.
2.16 Disability
"Disability" means a disability under the terms of any long-term disability
plan maintained by the Company.
2.17 Effective Date
"Effective Date" means the date an Award is determined to be effective by the
Committee upon its grant of such Award.
2.18 Employee
" Employee" means either: (a) an employee of Kodak; or (b) an employee of a
Subsidiary.
2.19 Exchange Act
"Exchange Act" means the Securities and Exchange Act of 1934, as amended from
time to time, including rules thereunder and successor provision and rules
thereto.
2.20 Key Employee
"Key Employee" means a senior level Employee who holds a position of
responsibility in a managerial, administrative, or professional capacity.
2.21 Kodak
"Kodak" means Eastman Kodak Company.
2.22 Negative Discretion
"Negative Discretion" means the discretion authorized by the Plan to be
applied by the Committee in determining the size of an Award for a
Performance Period or Performance Cycle if, in the Committee's sole judgment,
such application is appropriate. Negative Discretion may only be used by the
Committee to eliminate or reduce the size of an Award. By way of example and
not by way of limitation, in no event shall any discretionary authority
granted to the Committee by the Plan, including, but not limited to Negative
Discretion, be used to: (a) grant Awards for a Performance Period or
Performance Cycle if the Performance Goals for such Performance Period or
Performance Cycle have not been attained; or (b) increase an Award above the
maximum amount payable under Sections 7.5, 8.6, 9.6 or 13.6 of the Plan.
2.23 Participant
"Participant" means either any Employee to whom an Award has been granted by
the Committee under the Plan or a Key Employee who, for a Performance Cycle,
has been selected to participate in the Performance Stock Program.
110
2.24 Performance Awards
"Performance Awards" means the Stock Awards, Performance units and
Performance Shares granted to Covered Employees pursuant to Article 7. All
Performance Awards are intended to qualify as "Performance-Based
Compensation" under Section 162(m) of the Code.
2.25 Performance Criteria
"Performance Criteria" means the one or more criteria that the Committee
shall select for purposes of establishing the Performance Goal(s) for a
Performance Period or Performance Cycle. The Performance Criteria that will
be used to establish such Performance Goal(s) shall be limited to the
following: return on net assets ("RONA"), return on shareholders' equity,
return on assets, return on capital, shareholder returns, profit margin,
earnings per share, net earnings, operating earnings, Common Stock price per
share, and sales or market share. To the extent required by Section 162(m)
of the Code, the Committee shall, within the first 90 days of a Performance
Period or Performance Cycle (or, if longer, within the maximum period allowed
under Section 162(m) of the Code), define in an objective fashion the manner
of calculating the Performance Criteria it selects to use for such
Performance Period or Performance Cycle.
2.26 Performance Cycle
"Performance Cycle" means the one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which
the attainment of one or more Performance Goals will be measured for the
purpose of determining a Participant's right to and the payment of an Award
under the Performance Stock Program.
2.27 Performance Formula
"Performance Formula" means, for a Performance Period or Performance Cycle,
the one or more objective formulas applied against the relevant Performance
Goals to determine, with regards to the Award of a particular Participant,
whether all, some portion but less than all, or none of the Award has been
earned for the Performance Period or Performance Cycle. In the case of an
Award under the Performance Stock Program, in the event the Performance Goals
for a Performance Cycle are achieved, the Performance Formula shall determine
what percentage of the Participant's Target Award for the Performance Cycle
will be earned.
2.28 Performance Goals
"Performance Goals" means, for a Performance Period or Performance Cycle, the
one or more goals established by the Committee for the Performance Period or
Performance Cycle based upon the Performance Criteria. The Committee is
authorized at any time during the first 90 days of a Performance Period or
Performance Cycle, or at any time thereafter (but only to the extent the
exercise of such authority after the first 90 days of a Performance Period or
Performance Cycle would not cause the Awards granted to the Covered Employees
for the Performance Period or Performance Cycle to fail to qualify as
"Performance-Based Compensation" under Section 162(m) of the Code), in its
sole and absolute discretion, to adjust or modify the calculation of a
Performance Goal for such Performance Period or Performance Cycle in order to
prevent the dilution or enlargement of the rights of Participants, (a) in the
event of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event or development; (b) in recognition of, or in anticipation
of, any other unusual or nonrecurring events affecting the Company, or the
financial statements of the Company, or in response to, or in anticipation
of, changes in applicable laws, regulations, accounting principles, or
business conditions; and (c) in view of the Committee's assessment of the
business strategy of the Company, performance of comparable organizations,
economic and business conditions, and any other circumstances deemed
relevant.
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2.29 Performance Period
"Performance Period" means the one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which
the attainment of one or more Performance Goals will be measured for the
purpose of determining a Participant's right to and the payment of a
Performance Award. In the case of Awards issued under Article 8 or Article 9
hereof, the Performance Period shall be Kodak's fiscal year.
2.30 Performance Stock Program
"Performance Stock Program" means the program established under Article 13 of
the Plan pursuant to which selected Key Employee receive Awards for a
Performance Cycle in the form of shares of Common Stock based upon attainment
of Performance Goals for such Performance Cycle. All Awards granted to
Covered Employees under the Performance Stock Program are intended to qualify
as "Performance-based Compensation" under Section 162(m) of the Code.
2.31 Plan
"Plan" means the Eastman Kodak Company 1995 Omnibus Long-Term Compensation
Plan.
2.32 Retirement
"Retirement" means, for all Plan purposes other than Article 18, a
termination of employment from the Company on or after attainment of age 60
which constitutes a 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. For purposes of Article 18, "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.
2.33 Stock Award
"Stock Award" means an award granted pursuant to Article 10 in the form of
shares of Common Stock, restricted shares of Common Stock, and/or Units of
Common Stock.
2.34 Subsidiary
"Subsidiary" means a corporation or other business entity in which Kodak
directly or indirectly has an ownership interest of 80 percent or more.
2.35 Target Award
"Target Award" means, for a Performance Cycle, the target award amount,
expressed as a number of shares of Common Stock, established for each wage
grade by the Committee for the Performance Cycle. The fact, however, that a
Target Award is established for a Participant's wage grade shall not in any
manner entitle the Participant to receive an Award for such Performance
Cycle.
2.36 Unit
"Unit" means a bookkeeping entry used by the Company to record and account
for the grant of the following Awards until such time as the Award is paid,
canceled, forfeited or terminated, as the case may be: Units of Common Stock,
performance units, and performance shares which are expressed in terms of
Units of Common Stock.
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ARTICLE 3 -- ELIGIBILITY
3.1 In General
Subject to Section 3.2, all Employees are eligible to participate in the
Plan. The Committee shall select, from time to time, Participants from those
Employees who, in the opinion of the Committee, can further the Plan's
purposes. Once a Participant is so selected, the Committee shall determine
the type or types of Awards to be made to the Participant and shall establish
in the related Award Notices the terms, conditions, restrictions and/or
limitations, if any, applicable to the Awards in addition to those set forth
in this Plan and the administrative rules and regulations issued by the
Committee.
3.2 Performance Stock Program
Only Key Employees shall be eligible to participate in the Performance Stock
Program.
ARTICLE 4 -- PLAN ADMINISTRATION
4.1 Responsibility
The Committee shall have total and exclusive responsibility to control,
operate, manage and administer the Plan in accordance with its terms.
4.2 Authority of the Committee
The Committee shall have all the authority that may be necessary or helpful
to enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the preceding sentence, the Committee
shall have the exclusive right to: (a) 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 or the
performance period of an Award when such action or actions would be in the
best interest of the Company; (m) establish such other types of Awards,
besides those specifically enumerated in Article 5 hereof, which the
Committee determines are consistent with the Plan's purpose; (n) subject to
Section 8.2, grant Awards in replacement of Awards previously granted under
this Plan or any other executive compensation plan of the Company; and (o)
establish and administer the Performance Goals and certify whether, and to
what extent, they have been attained; and (p) 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.
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4.4 Section 162(m) of the Code
With regards to all Covered Employees, the Plan shall, for all purposes, be
interpreted and construed in accordance with Section 162(m) of the Code.
4.5 Action by the Committee
The Committee may act only by a majority of its members. Any determination
of the Committee may be made, without a meeting, by a writing or writings
signed by all of the members of the Committee. In addition, the Committee
may authorize any one or more of its number to execute and deliver documents
on behalf of the Committee.
4.6 Delegation of Authority
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, that only the Committee may select and grant Awards to Participants
who are subject to Section 16 of the Exchange Act or are Covered Employees.
ARTICLE 5 -- FORM OF AWARDS
5.1 In General
Awards may, at the Committee's sole discretion, be paid in the form of
Performance Awards pursuant to Article 7, stock options pursuant to Article
8, stock appreciation rights pursuant to Article 9, Stock Awards pursuant to
Article 10, performance units pursuant to Article 11, performance shares
pursuant to Article 12, shares of Common Stock pursuant to Article 13, any
form established by the Committee pursuant to Subsection 4.2(m), or a
combination thereof. All Awards shall be subject to the terms, conditions,
restrictions and limitations of the Plan. The Committee may, in its sole
judgment, subject an Award to such other terms, conditions, restrictions
and/or limitations (including, but not limited to, the time and conditions of
exercise and restrictions on transferability and vesting), provided they are
not inconsistent with the terms of the Plan. Awards under a particular
Article of the Plan need not be uniform and Awards under two or more Articles
may be combined into a single Award Notice. Any combination of Awards may be
granted at one time and on more than one occasion to the same Employee. For
purposes of the Plan, the value of any Award granted in the form of Common
Stock shall be the mean between the high and low at which the Common Stock
trades on the New York Stock Exchange as of the date of the grant's Effective
Date.
5.2 Foreign Jurisdictions
Awards may be granted, without amending the Plan, to Participants who are
foreign nationals or employed outside the United States or both, on such
terms and conditions different from those specified in the Plan as may, in
the judgment of the Committee, be necessary or desirable to further the
purposes of the Plan or to accommodate differences in local law, tax policy
or custom. Moreover, the Committee may approve such supplements to or
alternative versions of the Plan as it may consider necessary or appropriate
for such purposes without thereby affecting the terms of the Plan as in
effect for any other purpose; provided, however, no such supplement or
alternative version shall: (a) increase the limitations contained in Sections
7.5, 8.6, 9.6 and 13.6; (b) increase the number of available shares under
Section 6.1; or (c) cause the Plan to cease to satisfy any conditions of Rule
16b-3 under the Exchange Act or, with respect to Covered Employees, Section
162(m) of the Code.
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ARTICLE 6 -- SHARES SUBJECT TO PLAN
6.1 Available Shares
The maximum number of shares of Common Stock, $2.50 par value per share, of
Kodak which shall be available for grant of Awards under the Plan (including
incentive stock options) during its term shall not exceed 16,000,000. (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. Moreover, shares of Common Stock
with respect to which an SAR has been exercised and paid in cash shall not
again be eligible for grant under the Plan. The maximum number of shares
available for issuance under the Plan shall not be reduced to reflect any
dividends or dividend equivalents that are reinvested into additional shares
of Common Stock or credited as additional performance shares. The shares of
Common Stock available for issuance under the Plan may be authorized and
unissued shares or treasury shares.
6.2 Adjustment to Shares
(a) In General. The provisions of this Subsection 6.2(a) are subject
to the limitation contained in Subsection 6.2(b). If there is any
change in the number of outstanding shares of Common Stock through
the declaration of stock dividends, stock splits or the like, the
number of shares available for Awards, the shares subject to any
Award and the option prices or exercise prices of Awards shall be
automatically adjusted. If there is any change in the number of
outstanding shares of Common Stock through any change in the
capital account of Kodak, or through a merger, consolidation,
separation (including a spin off or other distribution of stock or
property), reorganization (whether or not such reorganization comes
within the meaning of such term in Section 368(a) of the Code) or
partial or complete liquidation, the Committee shall make
appropriate adjustments in the maximum number of shares of Common
Stock which may be issued under the Plan and any adjustments and/or
modifications to outstanding Awards as it, in its sole discretion,
deems appropriate. In the event of any other change in the capital
structure or in the Common Stock of Kodak, the Committee shall also
be authorized to make such appropriate adjustments in the maximum
number of shares of Common Stock available for issuance under the
Plan and any adjustments and/or modifications to outstanding Awards
as it, in its sole discretion, deems appropriate. The maximum
number of shares available for issuance under the Plan shall be
automatically adjusted to the extent necessary to reflect any
dividend equivalents paid in the form of Common Stock.
b) Covered Employees. In no event shall the Award of any Participant
who is a Covered Employee be adjusted pursuant to Subsection 6.2(a)
to the extent it would cause such Award to fail to qualify as
"Performance-Based Compensation" under Section 162(m) of the Code.
6.3 Maximum Number of Shares for Stock Awards, Performance Units and
Performance Shares
From the maximum number of shares available for issuance under the Plan under
Section 6.1, the maximum number of shares of Common Stock, $2.50 par value
per share, which shall be available for Awards granted in the form of Stock
Awards, performance units or performance shares (including those issued in
the form of Performance Awards) under the Plan during its term shall be
5,000,000.
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ARTICLE 7 -- PERFORMANCE AWARDS
7.1 Purpose
For purposes of grants issued to Covered Employees, the provisions of this
Article 7 shall apply in addition to and, where necessary, in lieu of the
provisions of Articles 10, 11 and 12. The purpose of this Article is to
provide the Committee the ability to qualify the Stock Awards authorized
under Article 10, the performance units under Article 11, and the performance
shares under Article 12 as "Performance-Based Compensation" under Section
162(m) of the Code. The provisions of this Article 7 shall control over any
contrary provision contained in Articles 10, 11 or 12.
7.2 Eligibility
Only Covered Employees shall be eligible to receive Performance Awards. The
Committee will, in its sole discretion, designate within the first 90 days of
a Performance Period (or, if longer, within the maximum period allowed under
Section 162(m) of the Code) which Covered Employees will be Participants for
such period. However, designation of a Covered Employee as a Participant for
a Performance Period shall not in any manner entitle the Participant to
receive an Award for the period. The determination as to whether or not such
Participant becomes entitled to an Award for such Performance Period shall be
decided solely in accordance with the provisions of this Article 7.
Moreover, designation of a Covered Employee as a Participant for a particular
Performance Period shall not require designation of such Covered Employee as
a Participant in any subsequent Performance Period and designation of one
Covered Employee as a Participant shall not require designation of any other
Covered Employee as a Participant in such period or in any other period.
7.3 Discretion of Committee with Respect to Performance Awards
With regards to a particular Performance Period, the Committee shall have
full discretion to select the length of such Performance Period, the type(s)
of Performance Awards to be issued, the Performance Criteria that will be
used to establish the Performance Goal(s), the kind(s) and/or level(s) of the
Performance Goal(s), whether the Performance Goal(s) is(are) to apply to the
Company, Kodak, a Subsidiary, or any one or more subunits of the foregoing,
and the Performance Formula. Within the first 90 days of a Performance
Period (or, if longer, within the maximum period allowed under Section 162(m)
of the Code), the Committee shall, with regards to the Performance Awards to
be issued for such Performance Period, exercise its discretion with respect
to each of the matters enumerated in the immediately preceding sentence of
this Section 7.3 and record the same in writing.
7.4 Payment of Performance Awards
(a) Condition to Receipt of Performance Award. Unless otherwise
provided in the relevant Award Notice, a Participant must be
employed by the Company on the last day of a Performance Period to
be eligible for a Performance Award for such Performance Period.
(b) Limitation. A Participant shall be eligible to receive a
Performance Award for a Performance Period only to the extent that:
(1) the Performance Goals for such period are achieved; and (2) and
the Performance Formula as applied against such Performance Goals
determines that all or some portion of such Participant's
Performance Award has been earned for the Performance Period.
(c) Certification. Following the completion of a Performance Period,
the Committee shall meet to review and certify in writing whether,
and to what extent, the Performance Goals for the Performance
Period have been achieved and, if so, to also calculate and certify
in writing the amount of the Performance Awards earned for the
period based upon the Performance Formula. The Committee shall then
determine the actual size of each Participant's Performance Award
for the Performance Period and, in so doing, shall apply Negative
Discretion, if and when it deems appropriate.
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(d) Negative Discretion. In determining the actual size of an
individual Performance Award for a Performance Period, the
Committee may reduce or eliminate the amount of the Performance
Award earned under the Performance Formula for the Performance
Period through the use of Negative Discretion, if in its sole
judgment, such reduction or elimination is appropriate.
(e) Timing of Award Payments. The Awards granted for a Performance
Period shall be paid to Participants as soon as administratively
possible following completion of the certifications required by
Subsection 7.4(c).
(f) Noncompetition. No Participant shall receive payment for an Award
if, subsequent to the commencement of a Performance Period and
prior to the date the Awards for such period are paid, the
Participant engages in any of the conduct prohibited under Section
14.3.
7.5 Maximum Award Payable
Notwithstanding any provision contained in the Plan to the contrary, the
maximum Performance Award payable to any one Participant under the Plan for a
Performance Period is 50,000 shares of Common Stock or, in the event the
Performance Award is paid in cash, the equivalent cash value thereof on the
Performance Award's Effective Date.
ARTICLE 8 -- STOCK OPTIONS
8.1 In General
Awards may be granted to Employees in the form of stock options. These stock
options may be incentive stock options within the meaning of Section 422 of
the Code or non-qualified stock options (i.e., stock options which are not
incentive stock options), or a combination of both. All Awards under the
Plan issued to Covered Employees in the form of stock options shall qualify
as "Performance-Based Compensation" under Section 162(m) of the Code.
8.2 Terms and Conditions of Stock Options
An option shall be exercisable in 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.
8.3 Restrictions Relating to Incentive Stock Options
Stock options issued in the form of incentive stock options shall, in
addition to being subject to the terms and conditions of Section 8.2, comply
with Section 422 of the Code. Accordingly, the aggregate fair market value
(determined at the time the option was granted) of the Common Stock with
respect to which incentive stock options are exercisable for the first time
by a Participant during any calendar year (under this Plan or any other plan
of the Company) shall not exceed $100,000 (or such other limit as may be
required by the Code). From the maximum number of shares available for
issuance under the Plan under Section 6.1, the number of shares of Common
Stock that shall be available for incentive stock options granted under the
Plan is 16,000,000.
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8.4 Additional Terms and Conditions
The Committee may, by way of the Award Notice or otherwise, establish such
other terms, conditions, restrictions and/or limitations, if any, of any
stock option Award, provided they are not inconsistent with the Plan.
8.5 Exercise
Upon exercise, the option price of a stock option may be paid in cash, 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. Subject to Section 19.9,
stock options awarded under the Plan may be exercised by way of the Company's
broker-assisted stock option exercise program, provided such program is
available at the time of the option's exercise. The Committee may permit a
Participant to satisfy any amounts required to be withheld under applicable
Federal, state and local tax laws, in effect from time to time, by electing
to have the Company withhold a portion of the shares of Common Stock to be
delivered for the payment of such taxes.
8.6 Maximum Award Payable
Notwithstanding any provision contained in the Plan to the contrary, the
maximum number of shares for which stock options may be granted under the
Plan to any one Participant for a Performance Period is 200,000 shares of
Common Stock.
ARTICLE 9 -- STOCK APPRECIATION RIGHTS
9.1 In General
Awards may be granted to Employees in the form of stock appreciation rights
("SARs"). An SAR may be granted in tandem with all or a portion of a related
stock option under the Plan ("Tandem SARs"), or may be granted separately
("Freestanding SARs"). A Tandem SAR may be granted either at the time of the
grant of the related stock option or at any time thereafter during the term
of the stock option. SARs shall entitle the recipient to receive a payment
equal to the appreciation in market value of a stated number of shares of
Common Stock from the exercise price to the market value on the date of
exercise. All Awards under the Plan issued to Covered Employees in the form
of an SAR shall qualify as "Performance-Based Compensation" under Section
162(m) of the Code.
9.2 Terms and Conditions of Tandem SARs
A Tandem SAR shall be exercisable to the extent, and only to the extent, that
the related stock option is exercisable, and the "exercise price" of such an
SAR (the base from which the value of the SAR is measured at its exercise)
shall be the option price under the related stock option. However, at no
time shall a Tandem SAR be issued if the option price of its related stock
option is less than the fair market value of the Common Stock, as determined
by the Committee, on the Effective Date of the Tandem SAR's grant. If a
related stock option is exercised as to some or all of the shares covered by
the Award, the related Tandem SAR, if any, shall be canceled automatically to
the extent of the number of shares covered by the stock option exercise.
Upon exercise of a Tandem SAR as to some or all of the shares covered by the
Award, the related stock option shall be canceled automatically to the extent
of the number of shares covered by such exercise, and such shares shall not
again be eligible for grant in accordance with Section 6.1. Moreover, all
Tandem SARs shall not expire later than 10 years from the Effective Date of
the SAR's grant.
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9.3 Terms and Conditions of Freestanding SARs
Freestanding SARs shall be exercisable in whole or in such installments and
at such times as may be determined by the Committee. The exercise price of a
Freestanding SAR shall be not less than 100% of the fair market value of the
Common Stock, as determined by the Committee, on the Effective Date of the
Freestanding SAR's grant. Moreover, all Freestanding SARs shall not expire
later than 10 years from the Effective Date of the Freestanding SAR's grant.
9.4 Deemed Exercise
The Committee may provide that an SAR shall be deemed to be exercised at the
close of business on the scheduled expiration date of such SAR if at such
time the SAR by its terms remains exercisable and, if so exercised, would
result in a payment to the holder of such SAR.
9.5 Additional Terms and Conditions
The Committee may, by way of the Award Notice or otherwise, determine such
other terms, conditions, restrictions and/or limitations, if any, of any SAR
Award, provided they are not inconsistent with the Plan.
9.6 Maximum Award Payable
Notwithstanding any provision contained in the Plan to the contrary, the
maximum number of shares for which SARs may be granted under the Plan to any
one Participant for a Performance Period is 200,000 shares of Common Stock.
ARTICLE 10 -- STOCK AWARDS
10.1 Grants
Awards may be granted in the form of Stock Awards. Stock Awards shall be
awarded in such numbers and at such times during the term of the Plan as the
Committee shall determine.
10.2 Award Restrictions
Stock Awards shall be subject to such terms, conditions, restrictions, and/or
limitations, if any, as the Committee deems appropriate including, but not by
way of limitation, restrictions on transferability and continued employment;
provided, however, they are not inconsistent with the Plan. The Committee
may modify or accelerate the delivery of a Stock Award under such
circumstances as it deems appropriate.
10.3 Rights as Shareholders
During the period in which any restricted shares of Common Stock are subject
to the restrictions imposed under Section 10.2, the Committee may, in its
sole discretion, grant to the Participant to whom such restricted shares have
been awarded all or any of the rights of a shareholder with respect to such
shares, including, but not by way of limitation, the right to vote such
shares and, pursuant to Article 15, the right to receive dividends.
10.4 Evidence of Award
Any Stock Award granted under the Plan may be evidenced in such manner as the
Committee deems appropriate, including, without limitation, book-entry
registration or issuance of a stock certificate or certificates.
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ARTICLE 11 -- PERFORMANCE UNITS
11.1 Grants
Awards may be granted in the form of performance units. Performance units,
as that term is used in this Plan, shall refer to Units valued by reference
to designated criteria established by the Committee, other than Common Stock.
11.2 Performance Criteria
Performance units shall be contingent on the attainment during a performance
period of certain performance objectives. The length of the performance
period, the performance objectives to be achieved during the performance
period, and the measure of whether and to what degree such objectives have
been attained shall be conclusively determined by the Committee in the
exercise of its absolute discretion. Performance objectives may be revised
by the Committee, at such times as it deems appropriate during the
performance period, in order to take into consideration any unforeseen events
or changes in circumstances.
11.3 Additional Terms and Conditions
The Committee may, by way of the Award Notice or otherwise, determine such
other terms, conditions, restrictions, and/or limitations, if any, of any
Award of performance units, provided they are not inconsistent with the Plan.
ARTICLE 12 -- PERFORMANCE SHARES
12.1 Grants
Awards may be granted in the form of performance shares. Performance shares,
as that term is used in this Plan, shall refer to shares of Common Stock or
Units which are expressed in terms of Common Stock.
12.2 Performance Criteria
Performance shares shall be contingent upon the attainment during a
performance period of certain performance objectives. The length of the
performance period, the performance objectives to be achieved during the
performance period, and the measure of whether and to what degree such
objectives have been attained shall be conclusively determined by the
Committee in the exercise of its absolute discretion. Performance objectives
may be revised by the Committee, at such times as it deems appropriate during
the performance period, in order to take into consideration any unforeseen
events or changes in circumstances.
12.3 Additional Terms and Conditions
The Committee may, by way of the Award Notice or otherwise, determine such
other terms, conditions, restrictions and/or limitations, if any, of any
Award of performance shares, provided they are not inconsistent with the
Plan.
ARTICLE 13 -- PERFORMANCE STOCK PROGRAM
13.1 Purpose
The purposes of the Performance Stock Program are: (a) to promote the
interests of the Company and its shareholders by providing a means to acquire
a proprietary interest in the Company to selected Key Employees who are in a
position to make a substantial contribution to the continued progress and
success of the Company; (b) to attract and retain qualified individuals to
serve as Employees in those positions; (c) to enhance long-term performance
of the Company by linking a meaningful portion of the compensation of
selected Key Employees to the achievement of specific long-term financial
objectives of the Company; and (d) to motivate and reward selected Key
Employees to undertake actions to increase the price of the Common Stock.
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13.2 Eligibility
Any Key Employee is eligible to participate in the Performance Stock Program.
Within the first 90 days of a Performance Cycle (or, if longer, within the
maximum period allowed under Section 162(m) of the Code), the CEO will
recommend to the Committee, and from such recommendations the Committee will
select, those Key Employees who will be Participants for such Performance
Cycle. However, designation of a Key Employee as a Participant for a
Performance Cycle shall not in any manner entitle the Participant to receive
payment of an Award for the cycle. The determination as to whether or not
such Participant becomes entitled to payment of an Award for such Performance
Cycle shall be decided solely in accordance with the provisions of this
Article 13. Moreover, designation of a Key Employee as a Participant for a
particular Performance Cycle shall not require designation of such Key
Employee as a Participant in any subsequent Performance Cycle and designation
of one Key Employee as a Participant shall not require designation of any
other Key Employee as a Participant in such Performance Cycle or in any other
Performance Cycle.
13.3 Description of Awards
Awards granted under the Performance Stock Program provide Participants with
the opportunity to earn shares of Common Stock, subject to the terms and
conditions of Section 13.8 below. Each Award granted under the Plan for a
Performance Cycle shall consist of a Target Award expressed as fixed number
of shares of Common Stock. In the event the Performance Goals for the
Performance Cycle are achieved, the Performance Formula shall determine, with
regards to a particular Participant, what percentage of the Participant's
Target Award for the Performance Cycle will be earned. All of the Awards
issued under the Performance Stock Program to Covered Employees are intended
to qualify as "Performance-Based Compensation" under Section 162(m) of the
Code.
13.4 Procedure for Determining Awards
Within the first 90 days of a Performance Cycle (or, if longer, within the
maximum period allowed under Section 162(m) of the Code), the Committee shall
establish in writing for such Performance Cycle the following: the specific
Performance Criteria that will be used to establish the Performance Goal(s),
the kind(s) and/or level(s) of the Performance Goal(s), whether the
Performance Goal(s) is(are) to apply to the Company, Kodak, a Subsidiary, or
any one or more subunits of the foregoing, the amount of the Target Awards,
and the Performance Formula.
13.5 Payment of Awards
(a) Condition to Receipt of Awards. Except as provided in Section
13.7, a Participant must be employed by the Company on the
Performance Cycle's Award Payment Date to be eligible for an Award
for such Performance Cycle.
(b) Limitation. A Participant shall be eligible to receive an Award
for a Performance Cycle only if: (1) the Performance Goals for such
cycle are achieved; and (2) the Performance Formula as applied
against such Performance Goals determines that all or some portion
of the Participant's Target Award has been earned for the
Performance Period.
(c) Certification. Following the completion of a Performance Cycle,
the Committee shall meet to review and certify in writing whether,
and to what extent, the Performance Goals for the Performance Cycle
have been achieved. If the Committee certifies that the
Performance Goals have been achieved, it shall, based upon
application of the Performance Formula to the Performance Goals for
such cycle, also calculate and certify in writing for each
Participant what percentage of the Participant's Target Award has
been earned for the cycle. The Committee shall then determine the
actual size of each Participant's Award for the Performance Cycle
and, in so doing, shall apply Negative Discretion, if and when it
deems appropriate.
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(d) Negative Discretion. In determining the actual size of an
individual Award to be paid for a Performance Cycle, the Committee
may, through the use of Negative Discretion, reduce or eliminate
the amount of the Award earned under the Performance Formula for
the Performance Cycle, if in its sole judgment, such reduction or
elimination is appropriate.
(e) Timing of Award Payments. The Awards granted by the Committee for
a Performance Cycle shall be paid to Participants on the Award
Payment Date for such Performance Cycle.
(f) New Participants. Participants who are employed by the Company
after the Committee's selection of Participants for the Performance
Cycle, as well as Key Employees who are selected by the Committee
to be Participants after such date, shall, in the event Awards are
paid for the Performance Cycle, only be entitled to a pro-rata
Award. The amount of the pro-rata Award shall be determined by
multiplying the Award the Participant would have otherwise been
paid if he or she had been a Participant for the entire Performance
Cycle by a fraction the numerator of which is the number of full
months he or she was eligible to participate in the Performance
Stock Program during the Performance Cycle over the total number of
full months in the Performance Cycle. For purposes of this
calculation, a partial month of participation shall: (1) be treated
as a full month of participation to the extent a Participant
participates in the Performance Stock Program on 15 or more days of
such month; and (2) not be taken into consideration to the extent
the Participant participates in the Performance Stock Program for
less than 15 days of such month.
(g) Noncompetition. No Participant shall receive payment for an Award
if, subsequent to the commencement of the Performance Cycle and
prior to the Award Payment Date for such cycle, the Participant
engages in the conduct prohibited under Section 14.3.
13.6 Maximum Award Payable
Notwithstanding any provision contained in the Plan to the contrary, the
maximum Award payable to any one Participant under the Plan for a Performance
Cycle is 50,000 shares of Common Stock.
13.7 Termination of Employment During Performance Cycle
In the event a Participant terminates employment due to death, Disability,
Retirement or termination of employment for an Approved Reason prior to the
Award Payment Date for a Performance Cycle, the Participant shall receive, if
Awards are paid for such Performance Cycle and if he or she complies with the
requirements of Subsection 13.5(g) through the Award Payment Date, a pro-rata
Award. The amount of the pro-rata Award shall be determined by multiplying
the Award the Participant would have otherwise been paid if he or she had
been a Participant through the Award Payment Date for the Performance Cycle
by a fraction, the numerator of which is the number of full months he or she
was a Participant during such Performance Cycle over the total number of full
months in the Performance Cycle. For purposes of this calculation, a partial
month of participation shall: (1) be treated as a full month of participation
to the extent a Participant participates in the Performance Stock Program on
15 or more days of such month; and (2) not be taken into consideration to the
extent the Participant participates in the Performance Stock Program for less
than 15 days of such month. Such pro-rata Award shall be paid in the form of
shares of Common Stock, not subject to any restrictions, limitations or
escrow requirements. In the event of Disability, Retirement or termination
for an Approved Reason, the pro-rata Award shall be paid directly to the
Participant and, in the event of death, to the Participant's estate.
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13.8 Awards
On the Award Payment Date for a Performance Cycle, the Committee shall issue
to each Participant the Award, in the form of shares of Common Stock, he or
she has earned for such Performance Cycle. Such shares of Common Stock shall
be subject to such terms, conditions, limitations and restrictions as the
Committee, in its sole judgment, determines.
ARTICLE 14 -- PAYMENT OF AWARDS
14.1 In General
Absent a Plan provision to the contrary, payment of Awards may, at the
discretion of the Committee, be made in cash, Common Stock, a combination of
cash and Common Stock, or any other form of property as the Committee shall
determine. In addition, payment of Awards may include such terms,
conditions, restrictions and/or limitations, if any, as the Committee deems
appropriate, including, in the case of Awards paid in the form of Common
Stock, restrictions on transfer and forfeiture provisions; provided, however,
such terms, conditions, restrictions and/or limitations are not inconsistent
with the Plan. Further, payment of Awards may be made in the form of a lump
sum or installments, as determined by the Committee.
14.2 Termination of Employment
If a Participant's employment with the Company terminates for a reason other
than death, Disability, Retirement, or any Approved Reason, all unexercised,
unearned, and/or unpaid Awards, including, but not by way of limitation,
Awards earned but not yet paid, all unpaid dividends and dividend
equivalents, and all interest accrued on the foregoing shall be canceled or
forfeited, as the case may be, unless the Participant's Award Notice provides
otherwise. The Committee shall, notwithstanding Sections 4.4 and 19.11 to
the contrary, have the authority to promulgate rules and regulations to
determine the treatment of an Award under the Plan in the event of the
Participant's death, Disability, Retirement or termination for an Approved
Reason, provided, however, in the case of Awards issued under the Restricted
Stock Program, such rules and regulations are consistent with Section 13.7.
14.3 Noncompetition
Unless the Award Notice specifies otherwise, a Participant shall forfeit all
unexercised, unearned, and/or unpaid Awards, including, but not by way of
limitation, Awards earned but not yet paid, all unpaid dividends and dividend
equivalents, and all interest, if any, accrued on the foregoing if, (i) in
the opinion of the Committee, the Participant, without the prior written
consent of Kodak, engages directly or indirectly in any manner or capacity as
principal, agent, partner, officer, director, stockholder, employee, or
otherwise, in any business or activity competitive with the business
conducted by Kodak or any Subsidiary; (ii) at any time divulges to any person
or any entity other than the Company any trade secrets, methods, processes or
the proprietary or confidential information of the Company; or (iii) the
Participant performs any act or engages in any activity which in the opinion
of the CEO is inimical to the best interests of the Company. For purposes of
this Section 14.3, a Participant shall not be deemed a stockholder if the
Participant's record and beneficial ownership amount to not more than 1% of
the outstanding capital stock of any company subject to the periodic and
other reporting requirements of the Exchange Act.
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ARTICLE 15 -- DIVIDEND AND DIVIDEND EQUIVALENTS
If an Award is granted in the form of a Stock Award, stock option, or
performance share, or in the form of any other stock-based grant, the
Committee may choose, at the time of the grant of the Award or any time
thereafter up to the time of the Award's payment, to include as part of such
Award an entitlement to receive dividends or dividend equivalents, subject to
such terms, conditions, restrictions and/or limitations, if any, as the
Committee may establish. Dividends and dividend equivalents shall be paid in
such form and manner (i.e., lump sum or installments), and at such time(s) as
the Committee shall determine. All dividends or dividend equivalents which
are not paid currently may, at the Committee's discretion, accrue interest,
be reinvested into additional shares of Common Stock or, in the case of
dividends or dividend equivalents credited in connection with performance
shares, be credited as additional performance shares and paid to the
Participant if and when, and to the extent that, payment is made pursuant to
such Award. The total number of shares available for grant under Section 6.1
shall not be reduced to reflect any dividends or dividend equivalents that
are reinvested into additional shares of Common Stock or credited as
additional performance shares.
ARTICLE 16 -- DEFERRAL OF AWARDS
At the discretion of the Committee, payment of any Award, dividend, or
dividend equivalent, or any portion thereof, may be deferred by a Participant
until such time as the Committee may establish. All such deferrals shall be
accomplished by the delivery of a written, irrevocable election by the
Participant prior to the time established by the Committee for such purpose,
on a form provided by the Company. Further, all deferrals shall be made in
accordance with administrative guidelines established by the Committee to
ensure that such deferrals comply with all applicable requirements of the
Code. Deferred payments shall be paid in a lump sum or installments, as
determined by the Committee. Deferred Awards may also be credited with
interest, at such rates to be determined by the Committee, and, with respect
to those deferred Awards denominated in the form of Common Stock, with
dividends or dividend equivalents.
ARTICLE 17 -- CHANGE IN OWNERSHIP
17.1 Background
Notwithstanding any provision contained in the Plan, including, but not
limited to, Sections 4.4 and 19.11, the provisions of this Article 17 shall
control over any contrary provision. Upon a Change In Ownership: (i) the
terms of this Article 17 shall immediately become operative, without further
action or consent by any person or entity; (ii) all terms, conditions,
restrictions, and limitations in effect on any unexercised, unearned, unpaid,
and/or deferred Award, or any other outstanding Award, shall immediately
lapse as of the date of such event; (iii) no other terms, conditions,
restrictions and/or limitations shall be imposed upon any Awards on or after
such date, and in no circumstance shall an Award be forfeited on or after
such date; and (iv) except in those instances where a prorated Awards is
required to be paid under this Article 17, all unexercised, unvested,
unearned, and/or unpaid Awards or any other outstanding Awards shall
automatically become one hundred percent (100%) vested immediately.
17.2 Dividends and Dividend Equivalents
Upon a Change In Ownership, all unpaid dividends and dividend equivalents and
all interest accrued thereon, if any, shall be treated and paid under this
Article 17 in the identical manner and time as the Award under which such
dividends or dividend equivalents have been credited. For example, if upon a
Change In Ownership, an Award under this Article 17 is to be paid in a
prorated fashion, all unpaid dividends and dividend equivalents with respect
to such Award shall be paid according to the same formula used to determine
the amount of such prorated Award.
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17.3 Treatment of Performance Units and Performance Shares
If a Change In Ownership occurs during the term of one or more performance
periods for which the Committee has granted performance units and/or
performance shares (including those issued as Performance Awards under
Article 7), the term of each such performance period (hereinafter a "current
performance period") shall immediately terminate upon the occurrence of such
event. Upon a Change In Ownership, for each "current performance period" and
each completed performance period for which the Committee has not on or
before such date made a determination as to whether and to what degree the
performance objectives for such period have been attained (hereinafter a
"completed performance period"), it shall be assumed that the performance
objectives have been attained at a level of one hundred percent (100%) or the
equivalent thereof.
A Participant in one or more "current performance periods" shall be
considered to have earned and, therefore, be entitled to receive, a prorated
portion of the Awards previously granted to him for each such performance
period. Such prorated portion shall be determined by multiplying the number
of performance shares or performance units, as the case may be, granted to
the Participant by a fraction, the numerator of which is the total number of
whole months that have elapsed since the beginning of the performance period,
and the denominator of which is the total number of full months in such
performance period. For purposes of this calculation, a partial month shall
be treated as a full month to the extent 15 or more days in such month have
elapsed.
A Participant in one or more "completed performance periods" shall be
considered to have earned and, therefore, be entitled to receive all the
performance shares or performance units, as the case may be, previously
granted to him during each such performance period.
17.4 Treatment of Awards under Performance Stock Program
Upon a Change in Ownership, any Participant of the Performance Stock Program,
whether or not he or she is still employed by the Company, shall be paid, as
soon as practicable but in no event later than 90 days after the Change in
Ownership, a pro-rata Award for each Performance Cycle in which Participant
was selected to participate and during which the Change in Ownership occurs.
The amount of the pro-rata Award shall be determined by multiplying the
Target Award for such Performance Cycle for Participants in the same wage
grade as the Participant by a fraction, the numerator of which shall be the
number of full months in the Performance Cycle prior to the date of the
Change in Ownership and the denominator of which shall be the total number of
full months in the Performance Cycle. For purposes of this calculation, a
partial month shall be treated as a full month to the extent 15 or more days
in such month have elapsed. To the extent Target Awards have not yet been
established for the Performance Cycle, the Target Awards for the immediately
preceding Performance Cycle shall be used.
17.5 Valuation of Awards
Upon a Change In Ownership, all outstanding Units of Common Stock,
Freestanding SARs, stock options (including incentive stock options), Stock
Awards (including those issued as Performance Awards under Article 7),
performance shares (including those earned as a result of the application of
Section 17.3 above), and all other outstanding stock-based Awards (including
those earned as a result of the application of Section 17.4 above and those
granted by the Committee pursuant to its authority under Subsection 4.2(m)
hereof), shall be valued and cashed out on the basis of the Change In Control
Price.
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17.6 Payment of Awards
Upon a Change In Ownership, any Participant, whether or not he or she is
still employed by the Company, shall be paid, in a single lump-sum cash
payment, as soon as practicable but in no event later than 90 days after the
Change In Ownership, all of his or her Units of Common Stock, Freestanding
SARs, stock options (including incentive stock options), Stock Awards
(including those issued as Performance Awards under Article 7), performance
units and shares (including those earned as a result of the application of
Section 17.3 above), all other outstanding stock-based Awards (including
those earned as a result of the application of Section 17.4 above and those
granted by the Committee pursuant to its authority under Subsection 4.2(m)
hereof), and all other outstanding Awards.
17.7 Deferred Awards
Upon a Change In Ownership, all Awards deferred by a Participant under
Article 16 hereof, but for which he or she has not received payment as of
such date, shall be paid in a single lump-sum cash payment as soon as
practicable, but in no event later than 90 days after the Change In
Ownership. For purposes of making such payment, the value of all Awards
which are stock based shall be determined by the Change In Control Price.
17.8 Section 16 of Exchange Act
(Intentionally Omitted)
17.9 Miscellaneous
Upon a Change In Ownership, (i) the provisions of Sections 14.2, 14.3 and
19.3 hereof shall become null and void and of no further force and effect;
and (ii) no action, including, but not by way of limitation, the amendment,
suspension, or termination of the Plan, shall be taken which would affect the
rights of any Participant or the operation of the Plan with respect to any
Award to which the Participant may have become entitled hereunder on or prior
to the date of such action or as a result of such Change In Ownership.
ARTICLE 18 -- CHANGE IN CONTROL
18.1 Background
Notwithstanding any provision contained in the Plan, including, but not
limited to, Sections 4.4 and 19.11, the provisions of this Article 18 shall
control over any contrary provision. All Participants shall be eligible for
the treatment afforded by this Article 18 if their employment terminates
within two years following a Change In Control, unless the termination is due
to (i) death, (ii) Disability, (iii) Cause, (iv) resignation other than (A)
resignation from a declined reassignment to a job that is not reasonably
equivalent in responsibility or compensation (as defined in Kodak's
Termination Allowance Plan), or that is not in the same geographic area (as
defined in Kodak's Termination Allowance Plan), or (B) resignation within 30
days following a reduction in base pay, or (v) Retirement.
18.2 Vesting and Lapse of Restrictions
If a Participant is eligible for treatment under this Article 18, (i) all of
the terms, conditions, restrictions, and limitations in effect on any of his
or her unexercised, unearned, unpaid and/or deferred Awards shall immediately
lapse as of the date of his or her termination of employment; (ii) no other
terms, conditions, restrictions and/or limitations shall be imposed upon any
of his or her Awards on or after such date, and in no event shall any of his
or her Awards be forfeited on or after such date; and (iii) except in those
instances where a prorated Award is required to be paid under this Article
18, all of his or her unexercised, unvested, unearned and/or unpaid Awards
shall automatically become one hundred percent (100%) vested immediately upon
his or her termination of employment.
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18.3 Dividends and Dividend Equivalents
If a Participant is eligible for treatment under this Article 18, all of his
or her unpaid dividends and dividend equivalents and all interest accrued
thereon, if any, shall be treated and paid under this Article 18 in the
identical manner and time as the Award under which such dividends or dividend
equivalents have been credited.
18.4 Treatment of Performance Units and Performance Shares
If a Participant holding either performance units or performance shares
(including those issued as Performance Awards under Article 7) is terminated
under the conditions described in Section 18.1 above, the provisions of this
Section 18.4 shall determine the manner in which such performance units
and/or performance shares shall be paid to the Participant. For purposes of
making such payment, each "current performance period," as that term is
defined in Section 17.3, shall be treated as terminating upon the date of the
Participant's termination of employment, and for each such "current
performance period" and each "completed performance period," as that term is
defined in Section 17.3, it shall be assumed that the performance objectives
have been attained at a level of one hundred percent (100%) or the equivalent
thereof. If the Participant is participating in one or more "current
performance periods," he or she shall be considered to have earned and,
therefore, be entitled to receive that prorated portion of the Awards
previously granted to him for each such performance period, as determined in
accordance with the formula established in Section 17.3 hereof. A
Participant in one or more "completed performance periods" shall be
considered to have earned and, therefore, be entitled to receive all the
performance shares and performance units previously granted to him during
each performance period.
18.5 Treatment of Awards under Performance Stock Program
If a Participant of the Performance Stock Program is eligible for treatment
under this Article 18, he or she shall be paid, as soon as practicable but in
no event later than 90 days after the date of his or her termination of
employment, a pro-rata Award for each Performance Cycle in which Participant
was selected to participate and during which the Change in Ownership occurs.
The amount of the pro-rata Award shall be determined by multiplying the
Target Award for such Performance Cycle for Participants in the same wage
grade as the Participant by a fraction, the numerator of which shall be the
number of full months in the Performance Cycle prior to the date of his or
her termination of employment and the denominator of which shall be the total
number of full months in the Performance Cycle. For purposes of this
calculation, a partial month shall be treated as a full month to the extent
15 or more days in such month have elapsed. To the extent Target Awards have
not yet been established for the Performance Cycle, the Target Awards for the
immediately preceding Performance Cycle shall be used.
18.6 Valuation of Awards
If a Participant is eligible for treatment under this Article 18, his or her
Awards shall be valued and cashed out in accordance with the provisions of
Section 17.5.
18.7 Payment of Awards
If a Participant is eligible for treatment under this Article 18, he or she
shall be paid, in a single lump-sum cash payment, as soon as practicable but
in no event later than 90 days after the date of his or her termination of
employment, all of his or her Units of Common Stock, Freestanding SARs, stock
options (including incentive stock options), Stock Awards (including those
issued as Performance Awards under Article 7), performance units and shares
(including those earned as a result of the application of Section 18.4
above), all other outstanding stock-based Awards (including those earned as a
result of the application of Section 18.5 above and those granted by the
Committee pursuant to its authority under Subsection 4.2(m) hereof), and all
other outstanding Awards.
127
18.8 Deferred Awards
If a Participant is eligible for treatment under this Article 18, all of his
or her deferred Awards for which payment has not been received as of the date
of his or her termination of employment shall be paid to the Participant in a
single lump-sum cash payment as soon as practicable, but in no event later
than 90 days after the date of the Participant's termination. For purposes
of making such payment, the value of all Awards which are stock based shall
be determined by the Change In Control Price.
18.9 Section 16 of Exchange Act
(Intentionally Omitted)
18.10 Miscellaneous
Upon a Change In Control, (i) the provisions of Sections 14.2, 14.3 and 19.3
hereof shall become null and void and of no force and effect insofar as they
apply to a Participant who has been terminated under the conditions described
in Section 18.1 above; and (ii) no action, including, but not by way of
limitation, the amendment, suspension or termination of the Plan, shall be
taken which would affect the rights of any Participant or the operation of
the Plan with respect to any Award to which the Participant may have become
entitled hereunder on or prior to the date of the Change In Control or to
which he or she may become entitled as a result of such Change In Control.
18.11 Legal Fees
Kodak shall pay all legal fees and related expenses incurred by a Participant
in seeking to obtain or enforce any payment, benefit or right he or she may
be entitled to under the Plan after a Change In Control; provided, however,
the Participant shall be required to repay any such amounts to Kodak to the
extent a court of competent jurisdiction issues a final and non-appealable
order setting forth the determination that the position taken by the
Participant was frivolous or advanced in bad faith.
ARTICLE 19 -- MISCELLANEOUS
19.1 Nonassignability
No Awards or any other payment 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 or exercisable by anyone other than the Participant to
whom it was granted.
19.2 Withholding Taxes
The Company shall be entitled to deduct from any payment under the Plan,
regardless of the form of such payment, the amount of all applicable income
and employment taxes required by law to be withheld with respect to such
payment or may require the Participant to pay to it such tax prior to and as
a condition of the making of such payment. In accordance with any applicable
administrative guidelines it establishes, the Committee may allow a
Participant to pay the amount of taxes required by law to be withheld from an
Award by withholding from any payment of Common Stock due as a result of such
Award, or by permitting the Participant to deliver to the Company, shares of
Common Stock having a fair market value, as determined by the Committee,
equal to the amount of such required withholding taxes.
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19.3 Amendments to Awards
The Committee may at any time unilaterally amend any unexercised, unearned,
or unpaid Award, including, but not by way of limitation, Awards earned but
not yet paid, to the extent it deems appropriate; provided, however, that any
such amendment which, in the opinion of the Committee, is adverse to the
Participant shall require the Participant's consent.
19.4 Regulatory Approvals and Listings
Notwithstanding anything contained in this Plan to the contrary, the Company
shall have no obligation to issue or deliver certificates of Common Stock
evidencing Stock Awards or any other Award resulting in the payment of Common
Stock prior to (i) the obtaining of any approval from any governmental agency
which the Company shall, in its sole discretion, determine to be necessary or
advisable, (ii) the admission of such shares to listing on the stock exchange
on which the Common Stock may be listed, and (iii) the completion of any
registration or other qualification of said shares under any state or Federal
law or ruling of any governmental body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
19.5 No Right to Continued Employment or Grants
Participation in the Plan shall not give any Employee any right to remain in
the employ of Kodak or any Subsidiary. Kodak or, in the case of employment
with a Subsidiary, the Subsidiary, reserves the right to terminate any
Employee at any time. Further, the adoption of this Plan shall not be deemed
to give any Employee or any other individual any right to be selected as a
Participant or to be granted an Award.
19.6 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.
19.7 Governing Law
The Plan shall be governed by and construed in accordance with the laws of
the State of New York, except as superseded by applicable Federal Law.
19.8 No Right, Title, or Interest in Company Assets
No Participant shall have any rights as a shareholder as a result of
participation in the Plan until the date of issuance of a stock certificate
in his or her name, and, in the case of restricted shares of Common Stock,
such rights are granted to the Participant under the Plan. To the extent any
person acquires a right to receive payments from the Company under the Plan,
such rights shall be no greater than the rights of an unsecured creditor of
the Company and the Participant shall not have any rights in or against any
specific assets of the Company. All of the Awards granted under the Plan
shall be unfunded.
19.9 Section 16 of the Exchange Act
In order to avoid any Exchange Act violations, the Committee may, from time
to time, impose additional restrictions upon an Award, including but not
limited to, restrictions regarding tax withholdings and restrictions
regarding the Participant's ability to exercise Awards under the Company's
broker-assisted exercise program.
129
19.10 No Guarantee of Tax Consequences
No person connected with the Plan in any capacity, including, but not limited
to, Kodak and its Subsidiaries and their directors, officers, agents and
employees makes any representation, commitment, or guarantee that any tax
treatment, including, but not limited to, Federal, state and local income,
estate and gift tax treatment, will be applicable with respect to amounts
deferred under the Plan, or paid to or for the benefit of a Participant under
the Plan, or that such tax treatment will apply to or be available to a
Participant on account of participation in the Plan.
19.11 Compliance with Section 162(m)
If any provision of the Plan, other than the application of those contained
in Articles 17 or 18 hereof, would cause the Awards granted to a Covered
Person not to qualify as "Performance-Based Compensation" under Section
162(m) of the Code, that provision, insofar as it pertains to the Covered
Person, shall be severed from, and shall be deemed not to be a part of, this
Plan, but the other provisions hereof shall remain in full force and effect.
19.12 Other Benefits
No Award granted under the Plan shall be considered compensation for purposes
of computing benefits under any retirement plan of the Company nor affect any
benefits or compensation under any other benefit or compensation plan of the
Company now or subsequently in effect.
1995 Omnibus Long- Term Compensation Plan
November 1, 1996
130
Exhibit (10) N.
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Second Amendment" or "Amendment"), made as of the
25th day of February, 1997, is intended to further amend a certain Employment
Agreement, dated as of the 27th day of October, 1993 and amended on April 4,
1994, by and between George M.C. Fisher (the "Executive") and the Eastman
Kodak Company (the "Company") hereinafter the "Employment Agreement."
WHEREAS, the Executive served as Chairman, President and Chief Executive
Officer of the Company until December 31, 1996 and Chairman and Chief
Executive Officer since January 1, 1997 under the Employment Agreement, and
WHEREAS, the Company desires to continue the employment of the Executive
as Chairman and Chief Executive Officer and the Executive desires to continue
such employment beyond the originally scheduled term of employment; and
WHEREAS, the Company further desires to grant the Executive an award of
restricted shares of common stock pursuant to the Company's 1995 Omnibus
Long-Term Compensation Plan; and
WHEREAS, the Company further desires to grant the Executive an option to
purchase shares of the Company's common stock; and
WHEREAS, the Executive and the Company additionally desire to clarify
several other provisions of the Employment Agreement.
NOW, THEREFORE, based upon the mutual promises and conditions contained
herein, the parties hereto do hereby agree that the Employment Agreement
shall be amended effective as of the date and year first written above as
follows:
1. Subsection (f) of Section 1 entitled "Definitions" is amended by
changing the second sentence to read as follows:
A competitive activity shall mean a business that (i) is being conducted
by the Company or any Subsidiary at the time in question and (ii) is, in
the case of Competition engaged in by the Executive during employment,
being conducted by the Company or a Subsidiary during the term of
employment and, in the case of Competition engaged in by the Executive
after termination of employment, was being conducted at the date of the
termination of the Executive's employment, provided that competitive
activities shall not include (x) any business principally in the
telecommunications industry or (y) any non-imaging business, or
combination of similar non-imaging businesses, contributing less than 5%
of the Company's revenues on a consolidated basis for the fiscal year in
question.
2. Subsection (g)(iii) of Section 1 is amended to delete ", President".
3. Section 2 entitled "Term of Employment" is amended as follows:
The date "October 26, 1998" is replaced with "December 31, 2000."
4. Subsection (a) of Section 5 entitled "Annual Incentive Awards" is
amended by changing it to read as follows:
(a) The Company's Annual Incentive Plan. He shall have an accrual
target award opportunity under the Company's Management Annual
Performance Plan of at least $1,000,000 and a minimum guaranteed payment
of $1,000,000 for each of 1994 and 1995. Effective for years beginning
with 1997, his annual target award opportunity under the Management
Variable Compensation Plan or any successor plan shall be at least 90%
of Base Salary.
131
5. Subsection (b) of Section 6 entitled "Long-Term Incentive Programs" is
amended to add "s" to "Award" in the sub-caption, to insert "(i)"
immediately after the sub-caption and to add a new subsection 6(b)(ii)
as follows:
(ii) As soon as practicable after the execution of the Second
Amendment, the Company shall grant the Executive 50,000 shares
of stock substantially in the form attached to the Amendment
as Exhibit A, such stock to be subject to forfeiture if the
Executive's employment terminates pursuant to Section 11(c) or
11(f) below prior to the end of the Term of Employment.
6. Subsection (c) of Section 6 is amended to add "s" to "Award" in the
sub-caption, to insert "(i)" immediately after the sub-caption and to
add a new subsection (ii) as follows:
(ii) As soon as practicable after the execution of the Second
Amendment, the Company shall grant the Executive a 10-year
option, substantially in the form attached to this Amendment
as Exhibit B, to purchase 2,000,000 shares of Stock (the
"Option"). The exercise price of the Option shall be the
closing market price for the Stock on the New York Stock
Exchange on the date of grant.
7. Subsection (a) of Section 9 entitled "Supplemental Pension" is amended
to read as follows:
(a) The Executive shall be entitled to a pension benefit to be
determined in accordance with the formula under the Company's Retirement
Income Plan as in effect on the date of this Agreement (the "Plan")
(without regard to any limitations that may be applicable under the
Internal Revenue Code), subject to adjustment for any future
enhancements in that formula. For purposes of determining his benefit
under this Section 9(a), upon execution of the Second Amendment, the
Executive shall be deemed credited, for all Plan purposes, with 22 years
of service under the Plan in addition to credited service for actual
employment with the Company and shall be deemed to have 5 years of age
in addition to his actual age. The Executive shall also be provided
with credited service following certain terminations of employment as
described in Section 11 below. The pension benefit provided under this
Section 9(a) shall be offset by any other pension benefit provided to
the Executive under any other Company pension plan or any pension plan
of his prior employer. The Executive shall be entitled to receive the
pension benefit provided in this Section 9(a) at age 60 with no
reduction for age.
8. Subsection (d) of Section 10 is amended to insert "(i)" immediately
after (d) and to add a new subsection (ii) as follows:
(ii) At any time within 1 year following the termination of the
Executive's employment, at the election of the Executive, the
Company shall promptly purchase his primary Rochester
residence at a price equal to the greater of (x) the
Executive's purchase price plus the cost of documented
improvements or (y) the then fair market value. The fair
market value shall be determined by a nationally-recognized
appraiser, as mutually agreed by the Parties.
9. Subsections (h) and (i) of Section 11 entitled "Termination of
Employment" are redesignated subsections (i) and (j), respectively and a
new subsection (h) is added as follows:
(h) Termination for an Approved Reason. Any termination of Executive's
employment on or after December 31, 2000, other than a termination
for Cause as that term is defined in the Employment Agreement,
shall be deemed a termination for an "Approved Reason" under the
Administrative Guides or other operating guidelines under the 1990
Omnibus Long-Term Compensation Plan and the 1995 Omnibus Long-Term
Compensation Plan, or for any other purpose for which "Approved
Reason" is a relevant term.
132
10. Section 12 is amended to add the word "Non-competition" at the end of
the heading and to add a new subsection (c) as follows:
(c) During the Term of Employment and for the period ending on the
earlier of December 31, 2002 or the second anniversary of the
Executive's termination of employment under the Employment
Agreement, the Executive shall not, without the written consent of
an officer of the Company, engage in Competition, as defined in
Section 1(f) above.
11. All of the remaining terms of the Employment Agreement, to the extent
they are not inconsistent with the terms hereof, shall remain in full
force and effect, without amendment or modification.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the date and year first above written.
Eastman Kodak Company
By: (Signature)
Michael P. Morley
Title: Senior Vice President and
Director, Human Resources
(Signature)
George M.C. Fisher
133
Exhibit A
NOTICE OF RESTRICTED STOCK
GRANTED FEBRUARY 25, 1997
PURSUANT TO
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
(Grant Notice)
To: George M.C. Fisher
You are granted 50,000 shares of Eastman Kodak Company (the "Company")
Common Stock (the "Restricted Shares"). The Restricted Shares are granted
under the Eastman Kodak Company 1995 Omnibus Long-Term Compensation Plan (the
"Plan") and are subject to the terms of the Plan and the following
conditions:
1. The Restricted Shares awarded hereunder shall be promptly issued
and a certificate(a) for such shares shall be issued in your name. You shall
thereupon be a shareholder of all the shares represented by the
certificate(a). As such, you shall have all the rights of a shareholder with
respect to such shares, including, but not limited to, the right to vote such
shares and to receive all dividends and other distributions (subject to
Paragraph 2 below) paid with respect to them, provided, however, that the
shares shall be subject to the restrictions in Paragraph 4 below. The stock
certificates representing such shares shall be imprinted with a legend
stating that the shares represented thereby are restricted shares subject to
the terms and conditions of this Grant Notice and, as such may not be sold,
exchanged, transferred, pledged, hypothecated or otherwise disposed of except
in accordance with the terms of this Grant Notice. Each transfer agent for
the Common Stock shall be instructed to like effect in respect of such
shares. In aid of such restrictions, you shall immediately upon receipt of
the certificate(a) therefore, deposit such certificate(a) together with a
stock power or other like instrument of transfer, appropriately endorsed in
blank, with an escrow agent designated by the Committee, which may be the
Company, under a deposit agreement containing such terms and conditions as
the Committee shall approve, the expenses of such escrow to be borne by the
Company.
2. If under Section 6.2 of the Plan, entitled "Adjustment to Shares,"
you, as the owner of the Restricted Shares, shall be entitled to new,
additional or different shares of stock or securities, the certificate or
certificates for, or other evidences of, such new, additional or different
shares or securities together with a stock power or other instrument of
transfer appropriately endorsed, shall be imprinted with a legend as provided
in Paragraph l above, deposited by you under the deposit agreement provided
for therein, and subject to the restrictions provided for in Paragraph 4
below.
3. The term "Restricted Period" with respect to the Restricted
Shares, shall mean the period beginning on February 25, 1997 and ending on
January 1, 2001.
4. During the Restricted Period, none of the Restricted Shares, shall
be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed
of except by will or the laws of descent and distribution. Any attempt by
you to dispose of your shares in any such manner shall result in the
immediate forfeiture of such shares and any other shares then held by the
designated escrow agent on your behalf.
5. Subject to Paragraph 6 below, if your employment is terminated
pursuant to Section ll(c) or ll(f) of the Employment Agreement between you
and the Company dated October 27, 1993, as amended through February 25, 1997
(the "Employment Agreement"), at any time before the Restriction Period ends,
you shall immediately forfeit all of the Restricted Shares then held on your
behalf by the designated escrow agent.
134
6. The restrictions set forth in Paragraph 4 above, with respect to
the Restricted Shares held by the designated escrow agent on your behalf,
will lapse upon the earlier of:
(i) the expiration of the Restricted Period; or
(ii) the termination of your employment under Section ll(a), ll(b),
ll(d), or ll(e) of the Employment Agreement.
7. During the Restricted Period, if you engage in Competition, as
defined in Section 1(f) of the Employment Agreement, you shall forfeit the
Restricted Shares.
8. The Company, or the designated escrow agent at the request of the
Company, shall be entitled to deduct from the Restricted Shares the amount of
all applicable income and employment taxes required to be withheld unless you
make other arrangements with the Company for the timely payment of such
taxes.
135
EXHIBIT B
NOTICE OF STOCK OPTION
GRANTED FEBRUARY 25, 1997
("Grant Notice")
To: George M. C. Fisher
You are granted a Nonqualified Stock Option to purchase 2,000,000
shares (See Footnote 1) of Eastman Kodak Company (the "Company") Common Stock
at $ per share. This option is granted subject to the terms of this
Grant Notice.
1. This option shall become exercisable (vested) in 25%
cumulative annual installments starting one year after grant.
2. This option, unless sooner terminated or exercised in full,
shall expire on February 24, 2007.
3. If your employment is terminated due to death, Disability,
Retirement after December 31, 2000 or termination for an Approved Reason,
this option shall immediately become exercisable and vested in full and shall
continue to be exercisable until its scheduled expiration date under
Paragraph 2 above or, if sooner, its exercise in full. If your employment is
terminated for any reason other than death, Disability, Retirement or an
Approved Reason, any portion of the option exercisable at the time of such
termination shall not be exercisable beyond the 60th day following the date
of your termination of employment and any portion of the option not
exercisable at the time of your termination shall be immediately forfeited.
4. In the event of a Change in Control (as defined in the
Employment Agreement), this option shall immediately become vested and
exercisable in full and shall continue to be exercisable until its scheduled
expiration date under Paragraph 2 above or, if sooner, its exercise in full.
Termination of your employment for any reason following such Change in
Control shall not affect this option.
5. You may exercise this option regardless of whether any other
option you have been granted by the Company remains unexercised.
6. The option price for the shares for which this option is
exercised by you shall be paid by you, on the date the option is exercised,
in cash, in shares of Common Stock owned by you or a combination of the
foregoing. Any share of Common Stock delivered in payment of the option
price shall be valued at its "fair market value". For purposes of this
paragraph, "fair market value" shall mean the opening price of the Common
Stock on the New York Stock Exchange on the date of exercise; provided,
however, if the Common Stock is not traded on such date, then the opening
price on the immediately preceding date on which Common Stock is traded shall
be used.
7. This option shall not be treated as an incentive stock option
under the Internal Revenue Code.
8. You may pay the amount of taxes required to be withheld upon
exercise of the option by (i) delivering a check made payable to the Company
or (ii) delivering to the Company at the time of such exercise shares of
Common Stock having a "fair market value", as determined in accordance with
Paragraph 6 above, equal to the amount of such withholding taxes.
136
9. You shall not have any of the rights of a shareholder with
respect to the shares of Common Stock covered by this option except to the
extent one or more certificates for such shares shall be delivered to you
upon the exercise of the option.
10. Notwithstanding paragraphs 8 and 9 above to the contrary, you
may exercise this option by way of the Company's broker-assisted stock option
exercise program to the extent such program is available at the time of such
exercise. Pursuant to the terms of such program, the amount of any taxes
required to be withheld upon exercise of any options under the program shall
be paid in cash directly to the Company.
11. The obligation of the Company to sell and deliver any stock
under this option is specifically subject to all applicable laws, rules,
regulations and required governmental approvals. The Company shall use its
reasonable best efforts to obtain such approvals as promptly as practicable.
12. 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 the Company's participation in any corporate merger,
consolidation or similar transaction in which the Company is the surviving
entity and is not substantially or completely liquidated, the number and kind
of shares with respect to which this option may thereafter be exercised and
the exercise price shall be appropriately adjusted. Any fractional shares
resulting from such adjustments shall be disregarded.
13. The Company shall use its best efforts so that on or prior to
December 31, 1997, all shares received by you on any exercise of the option
shall be, and shall remain, (1) fully registered (at the Company's expense)
under the Securities Act of 1933, as amended (the "1933 Act"), both for
issuance and for resale, pursuant to a registration on Form S-3 under the
1933 Act or such successor procedure that provides comparable opportunity
under the 1933 Act for issuance and resale; (2) fully registered or qualified
(at the Company's expense), under such state securities laws as you may
reasonably request, both for issuance and for resale; and (3) listed on the
New York Stock Exchange.
14. Any notice by you to the Company and any notice by the Company
to you shall be in writing and shall be deemed duly given if mailed to the
other at the address you or the Company have last specified to the other.
15. The validity and construction of this Grant Notice shall be
governed by the laws of the State of New York without reference to principles
of conflict of laws.
16. "Termination for an Approved Reason" shall include, without
limitation, (i) a Termination Without Cause or Constructive Termination
Without Cause under Section 11(d) of the Employment Agreement between you and
the Company dated as of October, 1993, as amended through [February] 1997
(the "Employment Agreement"); (ii) a Termination of Employment Following a
Change in Control under Section 11(e) of the Employment Agreement; or (iii) a
Termination for an Approved Reason under Section 11(h) of the Employment
Agreement.
17. "Disability" shall have the same meaning as ascribed to it
under Section 1(h) of the Employment Agreement.
18. "Retirement" shall mean the occurrence of your retirement as
determined in accordance with Section 9 of the Employment Agreement.
137
19. During the term of your employment and for the period ending
on the earlier of December 31, 2002 or the second anniversary of the
termination of your employment under the Employment Agreement, if you engage
in Competition, as defined in Section 1(f) of the Employment Agreement,
without the written consent of an officer of the Company, you shall
immediately forfeit all unexercised option shares.
20. This option is non-assignable and non-transferable, in whole
or in part, other than (i) by gratuitous transfers to immediate family
members, to trusts for their benefit, or to limited partnerships in which
immediate family members are the sole partners, (ii) by will or under the
laws of descent and distribution, or (iii), on your death, to a beneficiary
designated in writing by you, with any such permitted transferee to succeed
to your rights and obligations under the option to the extent of such
transfer.
Footnote
1 Actual grant shall be for 2,000,000 shares less the number of shares
that shall be granted concurrently under a stock option intended to
qualify as an incentive stock option under Section 422 of the Internal
Revenue Code. Such option grant shall be in substantially the same form
as this grant except to the extent necessary to constitute an incentive
stock option under Section 422.
138
February 25, 1997
TO: George M. C. Fisher
RE: Post Retirement Arrangements
Dear George:
I would like to record the Company's intentions with respect to two of
your post-retirement arrangements. The Company will furnish you with an
office and full-time secretary for as long as you desire, according to the
Company policy for former chief executive officers in effect as of the date
of your retirement. Additionally, you and your spouse will be entitled to
the continued use of Company aircraft, also according to the Company policy
for former chief executive officers in effect as of the date of your
retirement.
Eastman Kodak Company
By: (Signature)
Michael P. Morley
Title: Senior Vice President and
Director, Human Resources
(Signature)
George M. C. Fisher
139
NOTICE OF RESTRICTED STOCK
GRANTED FEBRUARY 25, 1997
PURSUANT TO
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
(Grant Notice)
To: George M.C. Fisher
You are granted 50,000 shares of Eastman Kodak Company (the "Company")
Common Stock (the "Restricted Shares"). The Restricted Shares are granted
under the Eastman Kodak Company 1995 Omnibus Long-Term Compensation Plan (the
"Plan") and are subject to the terms of the Plan and the following
conditions:
1. The Restricted Shares awarded hereunder shall be promptly issued
and a certificate(a) for such shares shall be issued in your name. You shall
thereupon be a shareholder of all the shares represented by the
certificate(a). As such, you shall have all the rights of a shareholder with
respect to such shares, including, but not limited to, the right to vote such
shares and to receive all dividends and other distributions (subject to
Paragraph 2 below) paid with respect to them, provided, however, that the
shares shall be subject to the restrictions in Paragraph 4 below. The stock
certificates representing such shares shall be imprinted with a legend
stating that the shares represented thereby are restricted shares subject to
the terms and conditions of this Grant Notice and, as such may not be sold,
exchanged, transferred, pledged, hypothecated or otherwise disposed of except
in accordance with the terms of this Grant Notice. Each transfer agent for
the Common Stock shall be instructed to like effect in respect of such
shares. In aid of such restrictions, you shall immediately upon receipt of
the certificate(a) therefore, deposit such certificate(a) together with a
stock power or other like instrument of transfer, appropriately endorsed in
blank, with an escrow agent designated by the Committee, which may be the
Company, under a deposit agreement containing such terms and conditions as
the Committee shall approve, the expenses of such escrow to be borne by the
Company.
2. If under Section 6.2 of the Plan, entitled "Adjustment to Shares,"
you, as the owner of the Restricted Shares, shall be entitled to new,
additional or different shares of stock or securities, the certificate or
certificates for, or other evidences of, such new, additional or different
shares or securities together with a stock power or other instrument of
transfer appropriately endorsed, shall be imprinted with a legend as provided
in Paragraph l above, deposited by you under the deposit agreement provided
for therein, and subject to the restrictions provided for in Paragraph 4
below.
3. The term "Restricted Period" with respect to the Restricted Shares,
shall mean the period beginning on February 25, 1997 and ending on January 1,
2001.
4. During the Restricted Period, none of the Restricted Shares, shall
be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed
of except by will or the laws of descent and distribution. Any attempt by you
to dispose of your shares in any such manner shall result in the immediate
forfeiture of such shares and any other shares then held by the designated
escrow agent on your behalf.
5. Subject to Paragraph 6 below, if your employment is terminated
pursuant to Section ll(c) or ll(f) of the Employment Agreement between you
and the Company dated October 27, 1993, as amended through February 25, 1997
(the "Employment Agreement"), at any time before the Restriction Period ends,
you shall immediately forfeit all of the Restricted Shares then held on your
behalf by the designated escrow agent.
140
6. The restrictions set forth in Paragraph 4 above, with respect to
the Restricted Shares held by the designated escrow agent on your behalf,
will lapse upon the earlier of:
(i) the expiration of the Restricted Period; or
(ii) the termination of your employment under Section ll(a), ll(b),
ll(d), or ll(e) of the Employment Agreement.
7. During the Restricted Period, if you engage in Competition, as
defined in Section 1(f) of the Employment Agreement, you shall forfeit the
Restricted Shares.
8. The Company, or the designated escrow agent at the request of the
Company, shall be entitled to deduct from the Restricted Shares the amount of
all applicable income and employment taxes required to be withheld unless you
make other arrangements with the Company for the timely payment of such
taxes.
141
NOTICE OF STOCK OPTION
GRANTED FEBRUARY 25, 1997
PURSUANT TO
EASTMAN KODAK COMPANY
1995 OMNIBUS LONG-TERM COMPENSATION PLAN
("Grant Notice")
To: George M. C. Fisher
You are granted an Incentive Stock Option to purchase 3,328 shares
of Eastman Kodak Company (the "Company") Common Stock at $90.125 per share.
This option is granted under the Eastman Kodak Company 1995 Omnibus Long-Term
Compensation Plan (the "Plan") subject to the terms of this Grant Notice.
1. This option shall become exercisable (vested) in accordance
with the following schedule:
February 25, 1999 1109
February 25, 2000 1109
February 25, 2001 1110
2. This option, unless sooner terminated or exercised in full,
shall expire on February 24, 2007.
3. If your employment is terminated due to death, Disability,
Retirement after December 31, 2000 or termination for an Approved Reason,
this option shall immediately become exercisable and vested in full and shall
continue to be exercisable until its scheduled expiration date under
Paragraph 2 above or, if sooner, its exercise in full. If your employment is
terminated for any reason other than death, Disability, Retirement after
December 31, 2000 or an Approved Reason, any portion of the option
exercisable at the time of such termination shall not be exercisable beyond
the 60th day following the date of your termination of employment and any
portion of the option not exercisable at the time of your termination shall
be immediately forfeited.
4. In the event of a Change in Control (as defined in the
Employment Agreement between you and the Company dated October 27, 1993, as
amended through February 25, 1997 [the "Employment Agreement]), this option
shall immediately become vested and exercisable in full and shall continue to
be exercisable until its scheduled expiration date under Paragraph 2 above
or, if sooner, its exercise in full. Termination of your employment for any
reason following such Change in Control shall not affect this option.
5. You may exercise this option regardless of whether any other
option you have been granted by the Company remains unexercised.
6. The option price for the shares for which this option is
exercised by you shall be paid by you, on the date the option is exercised,
in cash, in shares of Common Stock owned by you or a combination of the
foregoing. Any share of Common Stock delivered in payment of the option
price shall be valued at its "fair market value". For purposes of this
paragraph, "fair market value" shall mean the opening price of the Common
Stock on the New York Stock Exchange on the date of exercise; provided,
however, if the Common Stock is not traded on such date, then the opening
price on the immediately preceding date on which Common Stock is traded shall
be used.
7. This option is an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986. To the extent any
provision in this Grant Notice is determined to be inconsistent or contrary
to Section 422, such provision shall automatically without any further action
be changed, effective as of the date of the option's grant, so as to be
consistent and in compliance with such section.
142
8. You may pay the amount of taxes required to be withheld upon
exercise of the option by (i) delivering a check made payable to the Company
or (ii) delivering to the Company at the time of such exercise shares of
Common Stock having a "fair market value", as determined in accordance with
Paragraph 6 above, equal to the amount of such withholding taxes.
9. You shall not have any of the rights of a shareholder with
respect to the shares of Common Stock covered by this option except to the
extent one or more certificates for such shares shall be delivered to you
upon the exercise of the option.
10. The obligation of the Company to sell and deliver any stock
under this option is specifically subject to all applicable laws, rules,
regulations and required governmental approvals. The Company shall use its
reasonable best efforts to obtain such approvals as promptly as practicable.
11. 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 the Company's participation in any corporate merger,
consolidation or similar transaction in which the Company is the surviving
entity and is not substantially or completely liquidated, the number and kind
of shares with respect to which this option may thereafter be exercised and
the exercise price shall be appropriately adjusted. Any fractional shares
resulting from such adjustments shall be disregarded.
12. Any notice by you to the Company and any notice by the Company
to you shall be in writing and shall be deemed duly given if mailed to the
other at the address you or the Company have last specified to the other.
13. The validity and construction of this Grant Notice shall be
governed by the laws of the State of New York without reference to principles
of conflict of laws.
14. "Termination for an Approved Reason" shall include, without
limitation, (i) a Termination Without Cause or Constructive Termination
Without Cause under Section 11(d) of the Employment Agreement; (ii) a
Termination of Employment Following a Change in Control under Section 11(e)
of the Employment Agreement; or (iii) a Termination for an Approved Reason
under Section 11(h) of the Employment Agreement.
15. "Disability" shall have the same meaning as ascribed to it
under Section 1(h) of the Employment Agreement.
16. "Retirement" shall mean the occurrence of your retirement as
determined in accordance with Section 9 of the Employment Agreement.
17. During the term of your employment and for the period ending
on the earlier of December 31, 2002 or the second anniversary of the
termination of your employment under the Employment Agreement, if you engage
in Competition, as defined in Section 1(f) of the Employment Agreement,
without the written consent of an officer of the Company, you shall
immediately forfeit all unexercised option shares.
18. This option is non-assignable and non-transferable, in whole
or in part, other than by will or under the laws of descent and distribution.
143
NOTICE OF STOCK OPTION
GRANTED FEBRUARY 25, 1997
PURSUANT TO
EASTMAN KODAK COMPANY
1997 STOCK OPTION PLAN
("Grant Notice")
To: George M. C. Fisher
You are granted a Nonqualified Stock Option to purchase 1,996,672
shares of Eastman Kodak Company (the "Company") Common Stock at $90.125 per
share. This option is granted under the Eastman Kodak Company 1997 Stock
Option Plan (the "Plan") subject to the terms of this Grant Notice.
1. This option shall become exercisable (vested) in accordance
with the following schedule:
February 25, 1998 500,000
February 25, 1999 498,891
February 25, 2000 498,891
February 25, 2001 498,890
2. This option, unless sooner terminated or exercised in full,
shall expire on February 24, 2007.
3. If your employment is terminated due to death, Disability,
Retirement after December 31, 2000 or termination for an Approved Reason,
this option shall immediately become exercisable and vested in full and shall
continue to be exercisable until its scheduled expiration date under
Paragraph 2 above or, if sooner, its exercise in full. If your employment is
terminated for any reason other than death, Disability, Retirement after
December 31, 2000 or an Approved Reason, any portion of the option
exercisable at the time of such termination shall not be exercisable beyond
the 60th day following the date of your termination of employment and any
portion of the option not exercisable at the time of your termination shall
be immediately forfeited.
4. In the event of a Change in Control (as defined in the
Employment Agreement between you and the Company dated October 27, 1993, as
amended through February 25, 1997 [the "Employment Agreement]), this option
shall immediately become vested and exercisable in full and shall continue to
be exercisable until its scheduled expiration date under Paragraph 2 above
or, if sooner, its exercise in full. Termination of your employment for any
reason following such Change in Control shall not affect this option.
5. You may exercise this option regardless of whether any other
option you have been granted by the Company remains unexercised.
6. The option price for the shares for which this option is
exercised by you shall be paid by you, on the date the option is exercised,
in cash, in shares of Common Stock owned by you or a combination of the
foregoing. Any share of Common Stock delivered in payment of the option
price shall be valued at its "fair market value". For purposes of this
paragraph, "fair market value" shall mean the opening price of the Common
Stock on the New York Stock Exchange on the date of exercise; provided,
however, if the Common Stock is not traded on such date, then the opening
price on the immediately preceding date on which Common Stock is traded shall
be used.
7. This option shall not be treated as an incentive stock option
under the Internal Revenue Code.
8. You may pay the amount of taxes required to be withheld upon
exercise of the option by (i) delivering a check made payable to the Company
or (ii) delivering to the Company at the time of such exercise shares of
Common Stock having a "fair market value", as determined in accordance with
Paragraph 6 above, equal to the amount of such withholding taxes.
9. You shall not have any of the rights of a shareholder with
respect to the shares of Common Stock covered by this option except to the
extent one or more certificates for such shares shall be delivered to you
upon the exercise of the option.
144
10. Notwithstanding paragraphs 8 and 9 above to the contrary, you
may exercise this option by way of the Company's broker-assisted stock option
exercise program to the extent such program is available at the time of such
exercise. Pursuant to the terms of such program, the amount of any taxes
required to be withheld upon exercise of any options under the program shall
be paid in cash directly to the Company.
11. The obligation of the Company to sell and deliver any stock
under this option is specifically subject to all applicable laws, rules,
regulations and required governmental approvals. The Company shall use its
reasonable best efforts to obtain such approvals as promptly as practicable.
12. 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 the Company's participation in any corporate merger,
consolidation or similar transaction in which the Company is the surviving
entity and is not substantially or completely liquidated, the number and kind
of shares with respect to which this option may thereafter be exercised and
the exercise price shall be appropriately adjusted. Any fractional shares
resulting from such adjustments shall be disregarded.
13. The Company shall use its best efforts so that on or prior to
December 31, 1997, all shares received by you on any exercise of the option
shall be, and shall remain, (1) fully registered (at the Company's expense)
under the Securities Act of 1933, as amended (the "1933 Act"), both for
issuance and for resale, pursuant to a registration on Form S-3 under the
1933 Act or such successor procedure that provides comparable opportunity
under the 1933 Act for issuance and resale; (2) fully registered or qualified
(at the Company's expense), under such state securities laws as you may
reasonably request, both for issuance and for resale; and (3) listed on the
New York Stock Exchange.
14. Any notice by you to the Company and any notice by the Company
to you shall be in writing and shall be deemed duly given if mailed to the
other at the address you or the Company have last specified to the other.
15. The validity and construction of this Grant Notice shall be
governed by the laws of the State of New York without reference to principles
of conflict of laws.
16. "Termination for an Approved Reason" shall include, without
limitation, (i) a Termination Without Cause or Constructive Termination
Without Cause under Section 11(d) of the Employment Agreement; (ii) a
Termination of Employment Following a Change in Control under Section 11(e)
of the Employment Agreement; or (iii) a Termination for an Approved Reason
under Section 11(h) of the Employment Agreement.
17. "Disability" shall have the same meaning as ascribed to it
under Section 1(h) of the Employment Agreement.
18. "Retirement" shall mean the occurrence of your retirement as
determined in accordance with Section 9 of the Employment Agreement.
19. During the term of your employment and for the period ending
on the earlier of December 31, 2002 or the second anniversary of the
termination of your employment under the Employment Agreement, if you engage
in Competition, as defined in Section 1(f) of the Employment Agreement,
without the written consent of an officer of the Company, you shall
immediately forfeit all unexercised option shares.
20. This option is non-assignable and non-transferable, in whole
or in part, other than (i) by gratuitous transfers to immediate family
members, to trusts for their benefit, or to limited partnerships in which
immediate family members are the sole partners, (ii) by will or under the
laws of descent and distribution, or (iii), on your death, to a beneficiary
designated in writing by you, with any such permitted transferee to succeed
to your rights and obligations under the option to the extent of such
transfer.
145
Exhibit (10) O.
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "First Amendment"), made as of the 21st day of
January, 1997, is intended to amend a certain Employment Agreement,
hereinafter the "Employment Agreement," dated as of the 11th day of February,
1994 by and between Harry L. Kavetas (the "Executive") and the Eastman Kodak
Company (the "Company");
WHEREAS, Kodak maintains a welfare benefit plan, entitled the "Family
Protection Program" (hereinafter "FPP"); and
WHEREAS, one of the welfare benefits provided to certain eligible
participants of the FPP is a Post-Retirement Survivor Income Benefit
(hereinafter "Post-Retirement SIB"); and
WHEREAS, in general, the Post-Retirement SIB provides to the eligible
survivors of a participant a percentage of the participant's retirement
income benefit after the participant's death; and
WHEREAS, the Employment Agreement contains certain terms and conditions
regarding the Executive's eligibility for and participation in the Company's
benefits plans; and
WHEREAS, the Executive and the Company desire to clarify and amend the
Employment Agreement insofar as it pertains to the Executive's eligibility
for and coverage under the Post-Retirement SIB; and
WHEREAS, the Executive and the Company further desire to clarify the
Executive's eligibility for and coverage under the retiree welfare benefits
provided by the Company; and
WHEREAS, the Executive and the Company additionally desire to clarify
several other provisions of Section 8 of the Employment Agreement.
NOW, THEREFORE, based upon the mutual promises and conditions contained
herein, the parties hereto do hereby agree that the Employment Agreement
shall be amended as follows:
1. The Employment Agreement is amended to add the following as
new subsection (e) to Section 8 entitled "Supplemental Pension":
(e) Post-Retirement Survivor Income Benefit.
(i) Notwithstanding any provision contained in this Agreement to
the contrary, the Executive shall be treated as if he were an
eligible participant for the Post-Retirement Survivor Income
Benefit (hereinafter "Post-Retirement SIB") as set forth in
the Company's Family Protection Program in effect on the date
of the Agreement (the "FPP").
(ii) The benefit, if any, payable by virtue of the terms of this
Section 8(e) shall, except as otherwise specifically provided
in this Section 8(e), be paid as if the benefit were payable
under the terms and conditions of the FPP as in effect on the
date of the Agreement.
(iii) The amount of the Executive's Post-Retirement SIB coverage
shall be calculated pursuant to Section 7.2 of FPP; except,
however, that for purposes of Step 1, the Executive's "full
accrued (not reduced for early retirement) monthly retirement
income benefit under KRIP" shall be calculated by taking into
account any deemed service credited to the Executive under
Section 8(b), as amended.
146
(iv) The benefit, if any, payable by virtue of this Section 8(e)
shall be paid out of the Company's general assets, not subject
to offset for any benefits from a prior employer, and not
funded in any manner.
2. The last sentence of subsection (a) of Section 8, entitled
"Supplemental Pension," is amended in its entirety to read as follows:
For purposes of this Section 8, "supplements thereto" shall include the
Kodak Excess Retirement Income Plan and the Kodak Unfunded Retirement
Income Plan.
3. The last sentence of subsection (b) of Section 8, entitled
"Supplemental Pension," is amended in its entirety to read as follows:
(In the event of a sixth year of employment, the Executive shall be
credited with two more years of service, one year of actual service and
one year of additional, deemed service, bringing the Executive's total
years of service to 32.)
4. The last sentence of subsection (c) of Section 7 of the
Employment Agreement is hereby deleted in its entirety.
5. The Employment Agreement is amended to add the following as
new subsection (d) to Section 7 entitled "Employee Benefit Programs":
(d) Retiree Welfare Benefits.
(i) Subject to Section 7(d)(ii), for purposes of any retiree
welfare benefit of the Company for which the Executive may be
eligible, the Executive shall for all plan purposes be
credited with any deemed service credited to him under Section
8(b).
(ii) The terms of Section 7(d)(i) shall apply with regards to a
particular Company-provided retiree welfare benefit if at any
time, and from time to time, during the Executive's
retirement, he is not eligible for a comparable retiree
welfare benefit under any plan of a prior employer. For
purposes of the immediately preceding sentence, whether a
retiree welfare benefit under any plan of a prior employer is
comparable to a Company-provided welfare benefit shall be
measured in terms of the following factors: (1) its
availability to the Executive, (2) the scope and amount of its
benefit coverage, and (3) its cost to the Executive. If in
measuring a prior employer's retiree welfare benefit against a
similar Company-provided retiree welfare benefit (determined
as if Section 7(d)(i) applied), one or more of the foregoing
factors is determined not to be comparable, then the retiree
welfare benefits themselves shall not be considered
comparable. If a prior employer of the Executive maintains a
retiree welfare benefit for which the Executive is eligible,
but it is determined that such retiree welfare benefit is not,
under the terms of this Section 7(d)(ii), comparable to a
Company-provided retiree welfare benefit, then the terms of
Section 7(d)(i) shall apply irrespective of whether the
Executive determines to maintain coincident coverage under the
retiree welfare benefit of such prior employer.
147
6. The Employment Agreement is amended to add the following as
new subsection (e) to Section 7 entitled "Employee Benefit Programs":
(e) Survivor Welfare Benefits.
(i) Subject to Section 7(e)(ii) below, for purposes of any
survivor welfare benefit of the Company for which any spouse,
child, parent, or survivor (collectively "Survivor") may be
eligible under the relevant welfare benefit plan, the
Executive's service with the Company shall for all plan
purposes be calculated by taking into account any deemed
service credited to the Executive under Section 8(b).
(ii) The terms of Section 7(e)(i) above shall apply with regards to
a particular Company-provided survivor welfare benefit if at
any time, and from time to time, the Survivor is not eligible
for a comparable survivor welfare benefit under any plan of a
prior employer. For purposes of the immediately preceding
sentence, whether a survivor welfare benefit under any plan of
a prior employer is comparable to a Company-provided survivor
welfare benefit shall be measured in terms of the following
factors: (1) its availability to the Survivor, (2) the scope
and amount of its benefit coverage, and (3) its cost to the
Survivor. If in measuring a prior employer's survivor welfare
benefit against a similar Company-provided survivor welfare
benefit (determined as of Section 7(e)(i) applied), one or
more of the foregoing factors is determined not to be
comparable, then the survivor welfare benefits themselves
shall not be considered comparable. If a prior employer of
the Executive maintains a survivor welfare benefit for which
the Survivor is eligible, but it is determined that such
survivor welfare benefit is not, under the terms of this
Section 7(e)(ii), comparable to a Company-provided survivor
welfare benefit, then the terms of Section 7(e)(i) shall apply
irrespective of whether the Survivor determines to maintain
coincident coverage under the survivor welfare benefit of such
prior employer.
7. All of the remaining terms of the Agreement, to the extent
they are not inconsistent with the terms hereof, shall remain in full force
and effect, without amendment or modification.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
Eastman Kodak Company
By: (Signature)
Michael P. Morley
Title: Senior Vice President and
Director, Human Resources
(Signature)
Harry L. Kavetas
148
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Second Amendment" or "Amendment"), made as of the
3rd day of March, 1997, is intended to further amend a certain Employment
Agreement, dated as of the 11th day of February, 1994 and amended as of
January 21, 1997, by and between Harry L. Kavetas (the "Executive") and the
Eastman Kodak Company (the "Company") hereinafter the "Employment
Agreement."
WHEREAS, the Executive is serving as Executive Vice President and
Chief Financial Officer of the Company, and
WHEREAS, the Company desires to continue the employment of the
Executive as Executive Vice President and Chief Financial Officer and the
Executive desires to continue such employment beyond the originally
scheduled term of employment; and
WHEREAS, the Company further desires to grant the Executive an award
of restricted shares of common stock pursuant to the Company's 1995 Omnibus
Long-Term Compensation Plan; and
WHEREAS, the Company further desires to grant the Executive an option
to purchase shares of the Company's common stock; and
WHEREAS, the Executive and the Company additionally desire to clarify
several other provisions of the Employment Agreement.
NOW, THEREFORE, based upon the mutual promises and conditions
contained herein, the parties hereto do hereby agree that the Employment
Agreement shall be amended, except as otherwise noted, effective as of the
date and year first written above as follows:
1. Section 2 entitled "Term of Employment" is amended as follows:
The date "February 10, 1999" is replaced with "February 10, 2001."
2. Effective September 9, 1994, Subsection (a) of Section 3 entitled
"Position, Duties and Responsibilities" is amended to replace the word
"Senior" with "Executive."
3. Subsection (b) of Section 6 entitled "Long-Term Incentive Programs" is
amended to add "s" to "Award" in the sub-caption, to insert "(i)"
immediately after the sub-caption and to add a new subsection 6(b)(ii)
as follows:
(ii) As soon as practicable after the execution of the Second
Amendment, the Company shall grant the Executive 10,000
shares of restricted stock substantially in the form
attached to the Amendment as Exhibit C, such stock to be
subject to forfeiture if the Executive's employment
terminates pursuant to Section 11(c) or 11(e) below prior to
the end of the Term of Employment.
4. Subsection (c) of Section 6 is amended to add "s" to "Award" in the
sub-caption, to insert "(i)" immediately after the sub-caption and to
add a new subsection (ii) as follows:
(ii) As soon as practicable after the execution of the Second
Amendment, the Company shall grant the Executive a 10-year
option, substantially in the form attached to this Amendment
as Exhibit D, to purchase 200,000 shares of Stock (the
"Option"). The exercise price of the Option shall be the
closing market price for the Stock on the New York Stock
Exchange on the date of grant.
149
5. Subsection (b) of Section 8 entitled "Supplemental Pension" is amended
to read as follows:
(b) For purposes of establishing (i) the total amount of "Accrued
Service" used to calculate the Executive's retirement and
pre-retirement survivor income benefits under KRIP, (ii) the
Executive's "Total Service" for purposes of determining the
applicability of any early retirement reduction factor contained
in KRIP, and (iii) the Executive's vesting service, Executive
shall be credited, for each year of service earned under the
terms of KRIP prior to February 11, 1999, with six years of
service (one year of actual service and five years of additional,
deemed service) and, for each year of service earned under the
terms of KRIP on or after February 11, 1999 and prior to February
11, 2001, with four and one half years of service (one year of
actual service and three and one half years of additional, deemed
service). Thus, in the event the Executive remains employed by
the Company throughout the Term of Employment, he shall be
credited in total with thirty nine years of service (seven years
of actual service and thirty two years of additional, deemed
service) for the foregoing plan purposes. In the event the
Executive's employment terminates pursuant to Section 11(a),
11(b) or 11(d) between February 10, 1999 and February 10, 2001,
the credited service (i.e., both the actual and the deemed) for
the year in which the termination occurs shall be prorated based
on the number of days of employment in that year divided by 365.
6. All of the remaining terms of the Employment Agreement, to the extent
they are not inconsistent with the terms hereof, shall remain in full
force and effect, without amendment or modification.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the date and year first above written.
Eastman Kodak Company
By: (Signature)
Michael P. Morley
Title: Senior Vice President and
Director, Human Resources
(Signature)
Harry L. Kavetas
150
EXHIBIT C
NOTICE OF AWARD OF RESTRICTED STOCK
GRANTED TO HARRY L. KAVETAS
MARCH , 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
APPROVED BY:
Action of the
Executive Compensation and
Development Committee
151
NOTICE OF AWARD OF RESTRICTED STOCK
GRANTED TO HARRY L. KAVETAS
MARCH , 1997 PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
TABLE OF CONTENTS
Section Title Page
1 Background 152
2 Award 152
3 Terms and Conditions of Restricted
Shares 152
(a) Issuance 152
(b) Stock Splits, Dividends, etc. 152
(c) Restriction Period 152
(d) Restrictions on Restricted Shares 153
(e) Lapse of Restrictions 153
4 Termination of Employment 153
5 Issuance of Shares of Common Stock 153
6 Withholding 153
7 Definitions 153
8 Effect of Award Notice 154
9 Administration 154
10 Impact On Benefits 154
11 Miscellaneous 154
(a) Headings 154
(b) Applicable Law 154
(c) Amendment 154
152
NOTICE OF AWARD OF RESTRICTED STOCK
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH , 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
1. Background. Under Article 10 of the 1995 Omnibus Long-Term
Compensation Plan (the "Plan"), the Committee may, among other things,
award restricted shares of the Company's Common Stock to those Key
Employees as the Committee in its discretion may determine, subject to
such terms, conditions and restrictions as it deems appropriate.
2. Award. Effective March , 1997, (the "Grant Date"), the Committee
granted, to Harry L. Kavetas (the "Participant") an Award of ten
thousand (10,000) restricted shares of Common Stock ("Restricted
Shares"). This Award is granted under the Plan, subject to the terms
and conditions of the Plan and those set forth in this Notice of Award
of Restricted Stock ("Award Notice").
3. Terms and Conditions of Restricted Shares. The following terms and
conditions shall apply to the Restricted Shares:
(a) Issuance. The Restricted Shares awarded hereunder to the
Participant shall be promptly issued and a certificate(s) for
such shares shall be issued in the Participant's name. The
Participant shall thereupon be a shareowner of all the shares
represented by the certificate(s). As such, the Participant
shall have all the rights of a shareowner with respect to such
shares, including but not limited to, the right to vote such
shares and to receive all dividends and other distributions
(subject to Section 3(b)) paid with respect to them, provided,
however, that the shares shall be subject to the restrictions in
Section 3(d). The stock certificates representing the Restricted
Shares shall be imprinted with a legend stating that the shares
represented thereby are restricted shares subject to the terms
and conditions of this Award Notice and, as such, may not be
sold, exchanged, transferred, assigned, pledged, hypothecated, or
otherwise disposed of except in accordance with this Award
Notice. Each transfer agent for the Common Stock shall be
instructed to like effect in respect of such shares. In aid of
such restrictions, the Participant shall immediately upon receipt
of the certificate(s) therefor, deposit such certificate(s)
together with a stock power or other like instrument of transfer,
appropriately endorsed in blank, with the Company.
(b) Stock Splits, Dividends, etc. If under Section 6.2 of the Plan,
entitled "Adjustment to Shares," the Participant, as the owner of
the Restricted Shares, shall be entitled to new, additional, or
different shares of stock or securities, the certificate or
certificates for, or other evidences of, such new, additional, or
different shares or securities, together with a stock power or
other instrument of transfer appropriately endorsed in blank,
shall be imprinted with a legend as provided in Section 3(a)
above, deposited by the Participant with the Company as provided
for therein, and subject to the restrictions provided for in
Section 3(d) below.
(c) Restriction Period. The "Restriction Period" for the Restricted
Shares shall begin on the Grant Date and terminate, subject to
Section 4 below, on February 10, 2001.
153
(d) Restrictions on Restricted Shares. The restrictions to which the
Restricted Shares are subject are:
(i) Nonalienation. During the Restriction Period, the
Restricted Shares shall not be sold, exchanged, transferred,
assigned, pledged, hypothecated, or otherwise disposed of
except by will or the laws of descent and distribution. Any
attempt by the Participant to dispose of a Restricted Share
in any such manner shall result in the immediate forfeiture
of such share and any other Restricted Shares then held by
the Company on the Participant's behalf.
(ii) Continuous Employment. Except as set forth in Section 4
below, if the Participant's employment is terminated for any
reason, whether voluntarily or involuntarily, before the
Restriction Period ends, he shall immediately forfeit all of
the Restricted Shares.
(e) Lapse of Restrictions. The restrictions set forth in Section
3(d) above, with respect to the Restricted Shares held by the
Company on behalf of the Participant, will, unless the Restricted
Shares are forfeited sooner, lapse upon the earlier of:
(i) expiration of the Restriction Period; or
(ii) the termination of the Participant's employment due to
Illness or under Section 11(a), 11(b), or 11(d) of his
Employment Agreement with the Company dated February 11,
1994, as amended through March 1, 1997 (the "Employment
Agreement").
4. Termination of Employment. Subject to Section 3(e) above, if the
Participant's employment terminates pursuant to Section 11(c) or 11(e)
of the Employment Agreement at any time before the Restriction Period
ends, the Participant shall immediately forfeit all of the Restricted
Shares then held on his behalf by the Company.
5. Issuance of Shares of Common Stock. Upon the lapse of the Restriction
Period, the Company shall, unless the Restricted Shares are sooner
forfeited, promptly deliver to the Participant a stock certificate,
free of any restrictions including those set forth in Section 3(d)
above. Subject to any shares that are withheld pursuant to Section 6
below, the certificate shall be for that number of shares of Common
Stock which, by virtue of the lapse of such Restriction Period, are no
longer subject to the restrictions set forth in Section 3(d).
6. Withholding. The Company shall deduct from the Restricted Shares the
amount of all applicable income and employment taxes required to be
withheld unless the Participant makes other arrangements with the
Company for the timely payment of such taxes.
7. Definitions.
(a) Any defined term used in this Award Notice, other than that set
forth in Section 7(b) below, shall have the same meaning for
purposes of this document as that ascribed to it under the terms
of the Plan.
(b) The following definition shall apply to this Award Notice:
(i) Illness. A termination of employment will be for "Illness"
if the Participant voluntarily terminates his employment
following a continuous period of at least 90 days during
154
which the Participant is unable to perform the regularly
assigned duties and responsibilities of his position with
the Company due to illness, disease or injury and the
condition is verified by such examinations and/or tests,
performed by a mutually agreeable doctor; provided, however,
that the Company may, if it reasonably so determines,
request additional examinations and/or tests by mutually
agreeable doctor(s).
8. Effect of Award Notice. This Award Notice, including its reference to
the Plan, constitutes the entire understanding between the Company and
the Participant concerning the Award and supersedes any prior notices,
letters, statements or other documents issued by the Company relating
to the Award and all prior agreements and understandings between the
Company and the Participant, whether written or oral, concerning the
Award.
9. Administration. The Committee shall have full and absolute authority
and discretion, subject to the provisions of the Plan, to interpret,
construe and implement this Award Notice, to prescribe, amend and
rescind rules and regulations relating to it, and to make all other
determinations necessary, appropriate or advisable for its
administration. All such Committee determinations shall be final,
conclusive and binding upon any and all interested parties and their
heirs, successors, and personal representatives.
10. Impact on Benefits. The Restricted Shares (either at the date of
their grant or at the time their restrictions lapse) shall not be
includible as compensation or earnings for purposes of any other
compensation or benefit plan offered by the Company.
11. Miscellaneous.
(a) Headings. The headings of the Sections of the Award Notice have
been prepared for convenience and reference only and shall not
control, affect the meaning, or be taken as the interpretation of
any provision of the Award Notice.
(b) Applicable Law. The Award Notice, including its reference to the
Plan, and its interpretation and application, will be governed
and controlled by the laws of the State of New York, except as
superseded by applicable Federal Law.
(c) Amendment. The Committee may, from time to time, amend this
Award Notice in any manner; provided, however, that any such
amendment which is adverse to the Participant shall require the
Participant's consent.
155
EXHIBIT D
NOTICE OF AWARD OF NON-QUALIFIED STOCK OPTIONS (1)
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH , 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN (2)
APPROVED BY:
Action of the
Executive Compensation and
Development Committee
(1) Actual size of the grant of nonqualified stock option shall be reduced
by the number of shares that shall be granted concurrently under a
stock option intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code. Such option grant shall be
in substantially the same form as this grant except to the extent
necessary to constitute an incentive stock option under Section 422.
(2) Recognizing that the maximum number of options that may be granted to
a single participant under the 1995 Omnibus Plan in given year is
200,000, some of the options will have to be granted under the terms
of the 1997 Stock Option Plan. Given this, the 1997 Stock Option Plan
will have to be amended by the Compensation Committee to increase the
number of available shares. Any options granted under the 1997 Stock
Option Plan will be granted in substantially the same form as this
grant.
156
NOTICE OF AWARD OF NON-QUALIFIED STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH , 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
TABLE OF CONTENTS
Section Title Page
1
Background 157
2 Award 157
3 Terms and Conditions of Award 157
(a) Option Price 157
(b) Duration of Option 157
(c) Vesting 157
(d) Payment of Option Price 157
(e) Withholding 157
(f) Rights as a Shareholder 157
(g) Broker Assisted Exercise 157
(h) Termination of Employment 158
(i) Exercise Upon Expiration 158
4 Definitions 158
5 Section 16 of the Exchange Act 159
6 Non-Assignability 159
7 Effect of Award Notice 159
8 Miscellaneous 160
9 Administration 160
10 Impact On Benefits 160
157
NOTICE OF AWARD OF NON-QUALIFIED STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH , 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
1. Background. Under Article 8 of the 1995 Omnibus Long-Term
Compensation Plan (the "Plan"), the Committee may, among other things,
award non-qualified stock options of the Company's Common Stock to
those Key Employees as the Committee in its discretion may determine,
subject to such terms, conditions and restrictions as it deems
appropriate.
2. Award. Effective March , 1997, (the "Grant Date"), the Committee
granted to Harry L. Kavetas (the "Participant") an award of two
hundred thousand (200,000) non-qualified stock options (the "Award").
One option provides for the ability to purchase a single share of
Common Stock. The Award is granted under the Plan, subject to the
terms and conditions of the Plan and those set forth in this Notice of
Award of Non-Qualified Stock Options ("Award Notice").
3. Terms and Conditions of Award. The following terms and conditions
shall apply to the Award:
(a) Option Price. The option price for the options evidenced by way
of this Award Notice shall be $ .
(b) Duration of Option. Subject to Section 3(i) below, each option
shall expire at the close of business on the tenth anniversary of
the Grant Date, unless sooner terminated or forfeited in
accordance with the terms and conditions of this Award Notice or
the Plan.
(c) Vesting. No option shall be exercisable prior to the date on
which it vests. Twenty five percent (25%) of the options shall
vest, on a cumulative basis, on each of the first 4 anniversaries
of the Grant Date. Once vested, the options may be exercised by
written notice to the Committee stating the number of options to
be exercised.
(d) Payment of Option Price. The option price for the share for
which an option is exercised by the Participant shall be paid by
the Participant on the date the option is exercised in cash, in
shares of Common Stock owned by the Participant, or a combination
of the foregoing. Any share of Common Stock delivered in payment
of the option price shall be valued at its Fair Market Value on
the date of exercise.
(e) Withholding. The Participant shall pay the amount of taxes
required to be withheld upon exercise of his options by
delivering a check made payable to the Company.
(f) Rights as a Shareholder. The Participant shall not have any of
the rights of a shareholder with respect to the shares of Common
Stock covered by an option except to the extent one or more
certificates for such shares shall be delivered to him upon the
exercise of such option.
(g) Broker Assisted Exercise. Notwithstanding Sections 3(d) and 3(e)
above, the Participant may, subject to Section 5(a) hereof,
exercise any option granted to him under this Award Notice by way
of the Company's broker-assisted stock option exercise program,
to the extent such program is available at the time of such
exercise. Pursuant to the terms of such program, the amount of
any taxes required to be withheld upon exercise of any options
must be paid in cash directly to the Company.
158
(h) Termination of Employment. If the Participant's employment
terminates due to death, Disability, Illness, Retirement after
February 11, 2001 or termination for an Approved Reason, the
options shall immediately become exercisable and vested in full
and shall continue to be exercisable until their scheduled
expiration date under Section 3(b) above or, if sooner, their
exercise in full. If the Participant's employment terminates for
any reason other than due to death, Disability, Illness,
Retirement after February 11, 2001 or termination for an Approved
Reason, any options which are vested at the time of the
Participant's termination shall not be exercisable beyond the
60th day following the date of the Participant's termination of
employment and any options not vested at the time of the
Participant's termination shall be immediately forfeited.
(i) Exercise Upon Expiration.
(i) Notwithstanding Section 3(b) hereof to the contrary, if on
the options' scheduled expiration date (A) any options
remain unexercised and (B) the Fair Market Value of a share
of Common Stock exceeds the option price, then the
provisions of Section 3(i)(ii) below shall apply.
(ii) The Participant may exercise any of his unexercised options
as of the date they are scheduled to expire, unless already
forfeited under the terms and conditions of this Award
Notice or the Plan, by providing written notice thereof to
the Committee within sixty (60) days after such scheduled
expiration date. In such event, such options shall, for
purposes of this Award Notice and the Plan, be treated as
exercised prior to the close of business on their scheduled
expiration date; provided, however, the Participant shall
not be the record owner of the shares acquired upon exercise
of such options until the one or more certificates for the
shares have been delivered to the Participant. The strike
price of any options issued pursuant to the provisions of
this Section 3(i) shall be the mean between the high and low
at which the Common Stock trades on the New York Stock
Exchange on the options' scheduled expiration date, or, if
such day is not a trading day, the immediately preceding
trading day.
(iii) Notwithstanding Section 3(g) above to the contrary, any
options exercised pursuant to this Section 3(i) shall not,
without the Committee's prior approval, be exercised by way
of the Company's broker-assisted stock option program.
4. Definitions.
(a) Any defined term used in this Award Notice, other than those set
forth in Section 4(b) below, shall have the same meaning for
purposes of this document as that ascribed to it under the terms
of the Plan.
(b) The following definitions shall apply to this Award Notice:
(i) Fair Market Value. The opening price of the Common Stock on
the New York Stock Exchange on the relevant date; provided,
however, if the Common Stock is not traded on the relevant
date, then the opening price on the immediately preceding
date on which the Common Stock is traded shall be used.
159
(ii) Retirement. The term "Retirement" shall mean the occurrence
of the Participant's retirement as determined in accordance
with Section 8 of the Employment Agreement between the
Participant and the Company dated February 11, 1994, as
amended through March 1, 1997 (the "Employment Agreement").
(iii) Illness. A termination of employment will be for "Illness"
if the Participant voluntarily terminates his employment
following a continuous period of at least 90 days during
which the Participant is unable to perform the regularly
assigned duties and responsibilities of his position with
the Company due to illness, disease or injury and the
condition is verified by such examinations and/or tests,
performed by a mutually agreeable doctor; provided, however,
that the Company may, if it reasonably so determines,
request additional examinations and/or tests by mutually
agreeable doctor(s).
(iv) Approved Reason. A termination for "Approved Reason" shall
include, without limitation, a Termination Without Cause or
Constructive Termination without Cause under Section 11(d)
of the Employment Agreement.
5. Section 16 of the Exchange Act.
(a) In order to avoid any Exchange Act violations, the Committee may,
at any time and from time to time, impose additional restrictions
upon the Awards, including, but not by way of limitation,
restrictions regarding the Participant's ability to exercise
options under the Company's broker-assisted stock option exercise
program under Section 3(g).
(b) The Company shall use its best efforts so that on or prior to
December 31, 1997, all shares received by the Participant on any
exercise of an option shall be, and shall remain, (1) fully
registered (at the Company's expense) under the Securities Act of
1933, as amended (the "1933 Act"), both for issuance and for
resale, pursuant to a registration on Form S-3 under the 1933 Act
or such successor procedure that provides comparable opportunity
under the 1933 Act for issuance and resale; (2) fully registered
or qualified (at the Company's expense), under such state
securities laws as the Participant may reasonably request, both
for issuance and for resale; and (3) listed on the New York Stock
Exchange.
6. Non-Assignability. These options are non-assignable and
non-transferable, in whole or in part, other than i) by gratuitous
transfers to immediate family members, to trusts for their benefit, or
to limited partnerships in which immediate family members are the sole
partners, (ii) by will or under the laws of descent and distribution,
or (iii), on the Participant's death, to a beneficiary designated in
writing by the Participant, with any such permitted transferee to
succeed to the Participant's rights and obligations under the options
to the extent of such transfer.
7. Effect of Award Notice. This Award Notice, including its reference to
the Plan, constitutes the entire understanding between the Company and
the Participant concerning the Award and supersedes any prior notices,
letters, statements or other documents issued by the Company relating
to the Award and all prior agreements and understandings between the
Company and the Participant, whether written or oral, concerning the
Award.
160
8. Miscellaneous.
(a) Headings. The headings of the Sections of this Award Notice have
been prepared for convenience and reference only and shall not
control, affect the meaning, or be taken as the interpretation of
any provision of the Award Notice.
(b) Applicable Law. This Award Notice, including its reference to
the Plan, and its interpretation and application, will be
governed and controlled by the laws of the State of New York,
except as superseded by applicable Federal Law.
(c) Amendment. The Committee may, from time to time, amend this
Award Notice in any manner; provided, however, that any such
amendment which is adverse to the Participant shall require the
Participant's consent.
9. Administration. The Committee shall have full and absolute authority
and discretion, subject to the provisions of the Plan, to interpret,
construe and implement this Award Notice, to prescribe, amend and
rescind rules and regulations relating to it, and to make all other
determinations necessary, appropriate or advisable for its
administration. All such Committee determinations shall be final,
conclusive and binding upon any and all interested parties and their
heirs, successors, and personal representatives.
10. Impact on Benefits. The nonqualified stock options granted pursuant
to this Award Notice (either at the date of their grant or at the time
the shares are vested) shall not be includible as compensation or
earnings for purposes of any compensation or benefit plan offered by
the Company.
161
NOTICE OF AWARD OF RESTRICTED STOCK
GRANTED TO HARRY L. KAVETAS
MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
APPROVED BY:
Action of the
Executive Compensation and
Development Committee
162
NOTICE OF AWARD OF RESTRICTED STOCK
GRANTED TO HARRY L. KAVETAS
MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
TABLE OF CONTENTS
Section Title Page
1 Background 163
2 Award 163
3 Terms and Conditions of Restricted
Shares 163
(a) Issuance 163
(b) Stock Splits, Dividends, etc. 163
(c) Restriction Period 163
(d) Restrictions on Restricted Shares 164
(e) Lapse of Restrictions 164
4 Termination of Employment 164
5 Issuance of Shares of Common Stock 164
6 Withholding 164
7 Definitions 164
8 Effect of Award Notice 165
9 Administration 165
10 Impact On Benefits 165
11 Miscellaneous 165
(a) Headings 165
(b) Applicable Law 165
(c) Amendment 165
163
NOTICE OF AWARD OF RESTRICTED STOCK
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
1. Background. Under Article 10 of the 1995 Omnibus Long-Term
Compensation Plan (the "Plan"), the Committee may, among other things,
award restricted shares of the Company's Common Stock to those Key
Employees as the Committee in its discretion may determine, subject to
such terms, conditions and restrictions as it deems appropriate.
2. Award. Effective March 4, 1997, (the "Grant Date"), the Committee
granted, to Harry L. Kavetas (the "Participant") an Award of ten
thousand (10,000) restricted shares of Common Stock ("Restricted
Shares"). This Award is granted under the Plan, subject to the terms
and conditions of the Plan and those set forth in this Notice of Award
of Restricted Stock ("Award Notice").
3. Terms and Conditions of Restricted Shares. The following terms and
conditions shall apply to the Restricted Shares:
(a) Issuance. The Restricted Shares awarded hereunder to the
Participant shall be promptly issued and a certificate(s) for
such shares shall be issued in the Participant's name. The
Participant shall thereupon be a shareowner of all the shares
represented by the certificate(s). As such, the Participant
shall have all the rights of a shareowner with respect to such
shares, including but not limited to, the right to vote such
shares and to receive all dividends and other distributions
(subject to Section 3(b)) paid with respect to them, provided,
however, that the shares shall be subject to the restrictions in
Section 3(d). The stock certificates representing the Restricted
Shares shall be imprinted with a legend stating that the shares
represented thereby are restricted shares subject to the terms
and conditions of this Award Notice and, as such, may not be
sold, exchanged, transferred, assigned, pledged, hypothecated, or
otherwise disposed of except in accordance with this Award
Notice. Each transfer agent for the Common Stock shall be
instructed to like effect in respect of such shares. In aid of
such restrictions, the Participant shall immediately upon receipt
of the certificate(s) therefor, deposit such certificate(s)
together with a stock power or other like instrument of transfer,
appropriately endorsed in blank, with the Company.
(b) Stock Splits, Dividends, etc. If under Section 6.2 of the Plan,
entitled "Adjustment to Shares," the Participant, as the owner of
the Restricted Shares, shall be entitled to new, additional, or
different shares of stock or securities, the certificate or
certificates for, or other evidences of, such new, additional, or
different shares or securities, together with a stock power or
other instrument of transfer appropriately endorsed in blank,
shall be imprinted with a legend as provided in Section 3(a)
above, deposited by the Participant with the Company as provided
for therein, and subject to the restrictions provided for in
Section 3(d) below.
(c) Restriction Period. The "Restriction Period" for the Restricted
Shares shall begin on the Grant Date and terminate, subject to
Section 4 below, on February 10, 2001.
164
(d) Restrictions on Restricted Shares. The restrictions to which the
Restricted Shares are subject are:
(i) Nonalienation. During the Restriction Period, the
Restricted Shares shall not be sold, exchanged, transferred,
assigned, pledged, hypothecated, or otherwise disposed of
except by will or the laws of descent and distribution. Any
attempt by the Participant to dispose of a Restricted Share
in any such manner shall result in the immediate forfeiture
of such share and any other Restricted Shares then held by
the Company on the Participant's behalf.
(ii) Continuous Employment. Except as set forth in Section 4
below, if the Participant's employment is terminated for any
reason, whether voluntarily or involuntarily, before the
Restriction Period ends, he shall immediately forfeit all of
the Restricted Shares.
(e) Lapse of Restrictions. The restrictions set forth in Section
3(d) above, with respect to the Restricted Shares held by the
Company on behalf of the Participant, will, unless the Restricted
Shares are forfeited sooner, lapse upon the earlier of:
(i) expiration of the Restriction Period; or
(ii) the termination of the Participant's employment due to
Illness or under Section 11(a), 11(b), or 11(d) of his
Employment Agreement with the Company dated February 11,
1994, as amended through March 3, 1997 (the "Employment
Agreement").
4. Termination of Employment. Subject to Section 3(e) above, if the
Participant's employment terminates pursuant to Section 11(c) or 11(e)
of the Employment Agreement at any time before the Restriction Period
ends, the Participant shall immediately forfeit all of the Restricted
Shares then held on his behalf by the Company.
5. Issuance of Shares of Common Stock. Upon the lapse of the Restriction
Period, the Company shall, unless the Restricted Shares are sooner
forfeited, promptly deliver to the Participant a stock certificate,
free of any restrictions including those set forth in Section 3(d)
above. Subject to any shares that are withheld pursuant to Section 6
below, the certificate shall be for that number of shares of Common
Stock which, by virtue of the lapse of such Restriction Period, are no
longer subject to the restrictions set forth in Section 3(d).
6. Withholding. The Company shall deduct from the Restricted Shares the
amount of all applicable income and employment taxes required to be
withheld unless the Participant makes other arrangements with the
Company for the timely payment of such taxes.
7. Definitions.
(a) Any defined term used in this Award Notice, other than that set
forth in Section 7(b) below, shall have the same meaning for
purposes of this document as that ascribed to it under the terms
of the Plan.
(b) The following definition shall apply to this Award Notice:
(i) Illness. A termination of employment will be for "Illness"
if the Participant voluntarily terminates his employment
following a continuous period of at least 90 days during
which the Participant is unable to perform the regularly
assigned duties and responsibilities of his position with
the Company due to illness, disease or injury and the
condition is verified by such examinations and/or tests,
performed by a mutually agreeable doctor; provided, however,
that the Company may, if it reasonably so determines,
request additional examinations and/or tests by mutually
agreeable doctor(s).
165
8. Effect of Award Notice. This Award Notice, including its reference to
the Plan, constitutes the entire understanding between the Company and
the Participant concerning the Award and supersedes any prior notices,
letters, statements or other documents issued by the Company relating
to the Award and all prior agreements and understandings between the
Company and the Participant, whether written or oral, concerning the
Award.
9. Administration. The Committee shall have full and absolute authority
and discretion, subject to the provisions of the Plan, to interpret,
construe and implement this Award Notice, to prescribe, amend and
rescind rules and regulations relating to it, and to make all other
determinations necessary, appropriate or advisable for its
administration. All such Committee determinations shall be final,
conclusive and binding upon any and all interested parties and their
heirs, successors, and personal representatives.
10. Impact on Benefits. The Restricted Shares (either at the date of
their grant or at the time their restrictions lapse) shall not be
includible as compensation or earnings for purposes of any other
compensation or benefit plan offered by the Company.
11. Miscellaneous.
(a) Headings. The headings of the Sections of the Award Notice have
been prepared for convenience and reference only and shall not
control, affect the meaning, or be taken as the interpretation of
any provision of the Award Notice.
(b) Applicable Law. The Award Notice, including its reference to the
Plan, and its interpretation and application, will be governed
and controlled by the laws of the State of New York, except as
superseded by applicable Federal Law.
(c) Amendment. The Committee may, from time to time, amend this
Award Notice in any manner; provided, however, that any such
amendment which is adverse to the Participant shall require the
Participant's consent.
166
NOTICE OF AWARD OF INCENTIVE STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
APPROVED BY:
Action of the
Executive Compensation and
Development Committee
167
NOTICE OF AWARD OF INCENTIVE STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
TABLE OF CONTENTS
Section Title Page
1 Background 168
2 Award 168
3 Terms and Conditions of Award 168
(a) Option Price 168
(b) Duration of Option 168
(c) Vesting 168
(d) Payment of Option Price 168
(e) Withholding 168
(f) Broker Assisted Exercise 168
(g) Termination of Employment 168
(h) Exercise Upon Expiration 169
4 Definitions 169
5 Section 16 of the Exchange Act 170
6 Non-Assignability 170
7 Effect of Award Notice 170
8 Miscellaneous 170
9 Administration 171
10 Impact On Benefits 171
168
NOTICE OF AWARD OF INCENTIVE STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
1. Background. Under Article 8 of the 1995 Omnibus Long-Term
Compensation Plan (the "Plan"), the Committee may, among other things,
award incentive stock options of the Company's Common Stock to those
Key Employees as the Committee in its discretion may determine,
subject to such terms, conditions and restrictions as it deems
appropriate.
2. Award. Effective March 4, 1997, (the "Grant Date"), the Committee
granted to Harry L. Kavetas (the "Participant") an award of three
thousand three hundred and eighty nine (3,389) incentive stock options
(the "Award"). One option provides for the ability to purchase a
single share of Common Stock. The Award is granted under the Plan,
subject to the terms and conditions of the Plan and those set forth in
this Notice of Award of Incentive Stock Options ("Award Notice").
3. Terms and Conditions of Award. The following terms and conditions
shall apply to the Award:
(a) Option Price. The option price for the options evidenced by way
of this Award Notice shall be $88.50.
(b) Duration of Option. Subject to Section 3(i) below, each option
shall expire at the close of business on the tenth anniversary of
the Grant Date, unless sooner terminated or forfeited in
accordance with the terms and conditions of this Award Notice or
the Plan.
(c) Vesting. No option shall be exercisable prior to the date on
which it vests. Once vested, the options may be exercised by
written notice to the Committee stating the number of options to
be exercised. The options shall vest in accordance with the
following schedule:
March 4, 1998 1,129
March 4, 2000 1,130
March 4, 2001 1,130
(d) Payment of Option Price. The option price for the share for
which an option is exercised by the Participant shall be paid by
the Participant on the date the option is exercised in cash, in
shares of Common Stock owned by the Participant, or a combination
of the foregoing. Any share of Common Stock delivered in payment
of the option price shall be valued at its Fair Market Value on
the date of exercise.
(e) Withholding. The Participant shall pay the amount of taxes
required to be withheld upon exercise of his options by
delivering a check made payable to the Company.
(f) Rights as a Shareholder. The Participant shall not have any of
the rights of a shareholder with respect to the shares of Common
Stock covered by an option except to the extent one or more
certificates for such shares shall be delivered to him upon the
exercise of such option.
(g) Termination of Employment. If the Participant's employment
terminates due to death, Disability, Illness, Retirement after
February 11, 2001 or termination for an Approved Reason, the
options shall immediately become exercisable and vested in full
169
and shall continue to be exercisable until their scheduled
expiration date under Section 3(b) above or, if sooner, their
exercise in full. If the Participant's employment terminates for
any reason other than due to death, Disability, Illness,
Retirement after February 11, 2001 or termination for an Approved
Reason, any options which are vested at the time of the
Participant's termination shall not be exercisable beyond the
60th day following the date of the Participant's termination of
employment and any options not vested at the time of the
Participant's termination shall be immediately forfeited.
(h) Exercise Upon Expiration.
(i) Notwithstanding Section 3(b) hereof to the contrary, if on
the options' scheduled expiration date (A) any options
remain unexercised and (B) the Fair Market Value of a share
of Common Stock exceeds the option price, then the
provisions of Section 3(h)(ii) below shall apply.
(ii) The Participant may exercise any of his unexercised options
as of the date they are scheduled to expire, unless already
forfeited under the terms and conditions of this Award
Notice or the Plan, by providing written notice thereof to
the Committee within sixty (60) days after such scheduled
expiration date. In such event, such options shall, for
purposes of this Award Notice and the Plan, be treated as
exercised prior to the close of business on their scheduled
expiration date; provided, however, the Participant shall
not be the record owner of the shares acquired upon exercise
of such options until the one or more certificates for the
shares have been delivered to the Participant. The strike
price of any options issued pursuant to the provisions of
this Section 3(h) shall be the mean between the high and low
at which the Common Stock trades on the New York Stock
Exchange on the options' scheduled expiration date, or, if
such day is not a trading day, the immediately preceding
trading day.
4. Definitions.
(a) Any defined term used in this Award Notice, other than those set
forth in Section 4(b) below, shall have the same meaning for
purposes of this document as that ascribed to it under the terms
of the Plan.
(b) The following definitions shall apply to this Award Notice:
(i) Fair Market Value. The opening price of the Common Stock on
the New York Stock Exchange on the relevant date; provided,
however, if the Common Stock is not traded on the relevant
date, then the opening price on the immediately preceding
date on which the Common Stock is traded shall be used.
(ii) Retirement. The term "Retirement" shall mean the occurrence
of the Participant's retirement as determined in accordance
with Section 8 of the Employment Agreement between the
Participant and the Company dated February 11, 1994, as
amended through March 3, 1997 (the "Employment Agreement").
(iii) Illness. A termination of employment will be for "Illness"
if the Participant voluntarily terminates his employment
following a continuous period of at least 90 days during
which the Participant is unable to perform the regularly
assigned duties and responsibilities of his position with
the Company due to illness, disease or injury and the
condition is verified by such examinations and/or tests,
performed by a mutually agreeable doctor; provided, however,
that the Company may, if it reasonably so determines,
request additional examinations and/or tests by mutually
agreeable doctor(s).
170
(iv) Approved Reason. A termination for "Approved Reason" shall
include, without limitation, a Termination Without Cause or
Constructive Termination without Cause under Section 11(d)
of the Employment Agreement.
5. Section 16 of the Exchange Act.
(a) In order to avoid any Exchange Act violations, the Committee may,
at any time and from time to time, impose additional restrictions
upon the Awards.
(b) The Company shall use its best efforts so that on or prior to
December 31, 1997, all shares received by the Participant on any
exercise of an option shall be, and shall remain, (1) fully
registered (at the Company's expense) under the Securities Act of
1933, as amended (the "1933 Act"), both for issuance and for
resale, pursuant to a registration on Form S-3 under the 1933 Act
or such successor procedure that provides comparable opportunity
under the 1933 Act for issuance and resale; (2) fully registered
or qualified (at the Company's expense), under such state
securities laws as the Participant may reasonably request, both
for issuance and for resale; and (3) listed on the New York Stock
Exchange.
6. Non-Assignability. These options are non-assignable and
non-transferable, in whole or in part, other than by will or under the
laws of descent and distribution.
7. Effect of Award Notice. This Award Notice, including its reference to
the Plan, constitutes the entire understanding between the Company and
the Participant concerning the Award and supersedes any prior notices,
letters, statements or other documents issued by the Company relating
to the Award and all prior agreements and understandings between the
Company and the Participant, whether written or oral, concerning the
Award.
8. Miscellaneous.
(a) Headings. The headings of the Sections of this Award Notice have
been prepared for convenience and reference only and shall not
control, affect the meaning, or be taken as the interpretation of
any provision of the Award Notice.
(b) Applicable Law. This Award Notice, including its reference to
the Plan, and its interpretation and application, will be
governed and controlled by the laws of the State of New York,
except as superseded by applicable Federal Law.
(c) Amendment. The Committee may, from time to time, amend this
Award Notice in any manner; provided, however, that any such
amendment which is adverse to the Participant shall require the
Participant's consent.
(d) Section 422 of the IRC. The options granted under this Award
Notice are incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986. To the extent any
provision in this Award Notice is determined to be inconsistent
or contrary to Section 422, such provision shall automatically
without any further action be changed, effective as of the date
of the option's grant, so as to be consistent and in compliance
with such section.
171
9. Administration. The Committee shall have full and absolute authority
and discretion, subject to the provisions of the Plan, to interpret,
construe and implement this Award Notice, to prescribe, amend and
rescind rules and regulations relating to it, and to make all other
determinations necessary, appropriate or advisable for its
administration. All such Committee determinations shall be final,
conclusive and binding upon any and all interested parties and their
heirs, successors, and personal representatives.
10. Impact on Benefits. The incentive stock options granted pursuant to
this Award Notice (either at the date of their grant or at the time
the shares are vested) shall not be includible as compensation or
earnings for purposes of any compensation or benefit plan offered by
the Company.
172
NOTICE OF AWARD OF NON-QUALIFIED STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
APPROVED BY:
Action of the
Executive Compensation and
Development Committee
173
NOTICE OF AWARD OF NON-QUALIFIED STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
TABLE OF CONTENTS
Section Title Page
1 Background 174
2 Award 174
3 Terms and Conditions of Award 174
(a) Option Price1
(b) Duration of Option 174
(c) Vesting 174
(d) Payment of Option Price 174
(e) Withholding 174
(f) Rights as a Shareholder 174
(g) Broker Assisted Exercise 174
(h) Termination of Employment 175
(i) Exercise Upon Expiration 175
4 Definitions 175
5 Section 16 of the Exchange Act 176
6 Non-Assignability 176
7 Effect of Award Notice 176
8 Miscellaneous 176
9 Administration 177
10 Impact On Benefits 177
174
NOTICE OF AWARD OF NON-QUALIFIED STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM
COMPENSATION PLAN
1. Background. Under Article 8 of the 1995 Omnibus Long-Term
Compensation Plan (the "Plan"), the Committee may, among other things,
award non-qualified stock options of the Company's Common Stock to
those Key Employees as the Committee in its discretion may determine,
subject to such terms, conditions and restrictions as it deems
appropriate.
2. Award. Effective March 4, 1997, (the "Grant Date"), the Committee
granted to Harry L. Kavetas (the "Participant") an award of one
hundred fifty five thousand (155,000) non-qualified stock options (the
"Award"). One option provides for the ability to purchase a single
share of Common Stock. The Award is granted under the Plan, subject
to the terms and conditions of the Plan and those set forth in this
Notice of Award of Non-Qualified Stock Options ("Award Notice").
3. Terms and Conditions of Award. The following terms and conditions
shall apply to the Award:
(a) Option Price. The option price for the options evidenced by way
of this Award Notice shall be $88.50.
(b) Duration of Option. Subject to Section 3(i) below, each option
shall expire at the close of business on the tenth anniversary of
the Grant Date, unless sooner terminated or forfeited in
accordance with the terms and conditions of this Award Notice or
the Plan.
(c) Vesting. No option shall be exercisable prior to the date on
which it vests. Once vested, the options may be exercised by
written notice to the Committee stating the number of options to
be exercised. The options shall vest in accordance with the
following schedule:
March 4, 1998 38,469
March 4, 1999 39,597
March 4, 2000 38,467
March 4, 2001 38,467
(d) Payment of Option Price. The option price for the share for
which an option is exercised by the Participant shall be paid by
the Participant on the date the option is exercised in cash, in
shares of Common Stock owned by the Participant, or a combination
of the foregoing. Any share of Common Stock delivered in payment
of the option price shall be valued at its Fair Market Value on
the date of exercise.
(e) Withholding. The Participant shall pay the amount of taxes
required to be withheld upon exercise of his options by
delivering a check made payable to the Company.
(f) Rights as a Shareholder. The Participant shall not have any of
the rights of a shareholder with respect to the shares of Common
Stock covered by an option except to the extent one or more
certificates for such shares shall be delivered to him upon the
exercise of such option.
(g) Broker Assisted Exercise. Notwithstanding Sections 3(d) and 3(e)
above, the Participant may, subject to Section 5(a) hereof,
exercise any option granted to him under this Award Notice by way
of the Company's broker-assisted stock option exercise program,
to the extent such program is available at the time of such
exercise. Pursuant to the terms of such program, the amount of
any taxes required to be withheld upon exercise of any options
must be paid in cash directly to the Company.
175
(h) Termination of Employment. If the Participant's employment
terminates due to death, Disability, Illness, Retirement after
February 11, 2001 or termination for an Approved Reason, the
options shall immediately become exercisable and vested in full
and shall continue to be exercisable until their scheduled
expiration date under Section 3(b) above or, if sooner, their
exercise in full. If the Participant's employment terminates for
any reason other than due to death, Disability, Illness,
Retirement after February 11, 2001 or termination for an Approved
Reason, any options which are vested at the time of the
Participant's termination shall not be exercisable beyond the
60th day following the date of the Participant's termination of
employment and any options not vested at the time of the
Participant's termination shall be immediately forfeited.
(i) Exercise Upon Expiration.
(i) Notwithstanding Section 3(b) hereof to the contrary, if on
the options' scheduled expiration date (A) any options
remain unexercised and (B) the Fair Market Value of a share
of Common Stock exceeds the option price, then the
provisions of Section 3(i)(ii) below shall apply.
(ii) The Participant may exercise any of his unexercised options
as of the date they are scheduled to expire, unless already
forfeited under the terms and conditions of this Award
Notice or the Plan, by providing written notice thereof to
the Committee within sixty (60) days after such scheduled
expiration date. In such event, such options shall, for
purposes of this Award Notice and the Plan, be treated as
exercised prior to the close of business on their scheduled
expiration date; provided, however, the Participant shall
not be the record owner of the shares acquired upon exercise
of such options until the one or more certificates for the
shares have been delivered to the Participant. The strike
price of any options issued pursuant to the provisions of
this Section 3(i) shall be the mean between the high and low
at which the Common Stock trades on the New York Stock
Exchange on the options' scheduled expiration date, or, if
such day is not a trading day, the immediately preceding
trading day.
(iii) Notwithstanding Section 3(g) above to the contrary, any
options exercised pursuant to this Section 3(i) shall not,
without the Committee's prior approval, be exercised by way
of the Company's broker-assisted stock option program.
4. Definitions.
(a) Any defined term used in this Award Notice, other than those set
forth in Section 4(b) below, shall have the same meaning for
purposes of this document as that ascribed to it under the terms
of the Plan.
(b) The following definitions shall apply to this Award Notice:
(i) Fair Market Value. The opening price of the Common Stock on
the New York Stock Exchange on the relevant date; provided,
however, if the Common Stock is not traded on the relevant
date, then the opening price on the immediately preceding
date on which the Common Stock is traded shall be used.
(ii) Retirement. The term "Retirement" shall mean the occurrence
of the Participant's retirement as determined in accordance
with Section 8 of the Employment Agreement between the
Participant and the Company dated February 11, 1994, as
amended through March 3, 1997 (the "Employment Agreement").
176
(iii) Illness. A termination of employment will be for "Illness"
if the Participant voluntarily terminates his employment
following a continuous period of at least 90 days during
which the Participant is unable to perform the regularly
assigned duties and responsibilities of his position with
the Company due to illness, disease or injury and the
condition is verified by such examinations and/or tests,
performed by a mutually agreeable doctor; provided, however,
that the Company may, if it reasonably so determines,
request additional examinations and/or tests by mutually
agreeable doctor(s).
(iv) Approved Reason. A termination for "Approved Reason" shall
include, without limitation, a Termination Without Cause or
Constructive Termination without Cause under Section 11(d)
of the Employment Agreement.
5. Section 16 of the Exchange Act.
(a) In order to avoid any Exchange Act violations, the Committee may,
at any time and from time to time, impose additional restrictions
upon the Awards, including, but not by way of limitation,
restrictions regarding the Participant's ability to exercise
options under the Company's broker-assisted stock option exercise
program under Section 3(g).
(b) The Company shall use its best efforts so that on or prior to
December 31, 1997, all shares received by the Participant on any
exercise of an option shall be, and shall remain, (1) fully
registered (at the Company's expense) under the Securities Act of
1933, as amended (the "1933 Act"), both for issuance and for
resale, pursuant to a registration on Form S-3 under the 1933 Act
or such successor procedure that provides comparable opportunity
under the 1933 Act for issuance and resale; (2) fully registered
or qualified (at the Company's expense), under such state
securities laws as the Participant may reasonably request, both
for issuance and for resale; and (3) listed on the New York Stock
Exchange.
6. Non-Assignability. These options are non-assignable and
non-transferable, in whole or in part, other than (i) by gratuitous
transfers to immediate family members, to trusts for their benefit, or
to limited partnerships in which immediate family members are the sole
partners, (ii) by will or under the laws of descent and distribution,
or (iii), on the Participant's death, to a beneficiary designated in
writing by the Participant, with any such permitted transferee to
succeed to the Participant's rights and obligations under the options
to the extent of such transfer.
7. Effect of Award Notice. This Award Notice, including its reference to
the Plan, constitutes the entire understanding between the Company and
the Participant concerning the Award and supersedes any prior notices,
letters, statements or other documents issued by the Company relating
to the Award and all prior agreements and understandings between the
Company and the Participant, whether written or oral, concerning the
Award.
8. Miscellaneous.
(a) Headings. The headings of the Sections of this Award Notice have
been prepared for convenience and reference only and shall not
control, affect the meaning, or be taken as the interpretation of
any provision of the Award Notice.
(b) Applicable Law. This Award Notice, including its reference to
the Plan, and its interpretation and application, will be
governed and controlled by the laws of the State of New York,
except as superseded by applicable Federal Law.
177
(c) Amendment. The Committee may, from time to time, amend this
Award Notice in any manner; provided, however, that any such
amendment which is adverse to the Participant shall require the
Participant's consent.
9. Administration. The Committee shall have full and absolute authority
and discretion, subject to the provisions of the Plan, to interpret,
construe and implement this Award Notice, to prescribe, amend and
rescind rules and regulations relating to it, and to make all other
determinations necessary, appropriate or advisable for its
administration. All such Committee determinations shall be final,
conclusive and binding upon any and all interested parties and their
heirs, successors, and personal representatives.
10. Impact on Benefits. The nonqualified stock options granted pursuant
to this Award Notice (either at the date of their grant or at the time
the shares are vested) shall not be includible as compensation or
earnings for purposes of any compensation or benefit plan offered by
the Company.
178
NOTICE OF AWARD OF NON-QUALIFIED STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1997 STOCK OPTION PLAN
APPROVED BY:
Action of the
Executive Compensation and
Development Committee
179
NOTICE OF AWARD OF NON-QUALIFIED STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1997 STOCK OPTION PLAN
TABLE OF CONTENTS
Section Title Page
1 Background 180
2 Award 180
3 Terms and Conditions of Award 180
(a) Option Price 180
(b) Duration of Option 180
(c) Vesting 180
(d) Payment of Option Price 180
(e) Withholding 180
(f) Rights as a Shareholder 180
(g) Broker Assisted Exercise 180
(h) Termination of Employment 181
(i) Exercise Upon Expiration 181
4 Definitions 181
5 Section 16 of the Exchange Act 182
6 Non-Assignability 182
7 Effect of Award Notice 182
8 Miscellaneous 182
9 Administration 183
10 Impact On Benefits 183
180
NOTICE OF AWARD OF NON-QUALIFIED STOCK OPTIONS
GRANTED TO HARRY L. KAVETAS
EFFECTIVE MARCH 4, 1997
PURSUANT TO THE
EASTMAN KODAK COMPANY 1997 STOCK OPTION PLAN
1. Background. Under Article 7 of the 1997 Stock Option Plan (the
"Plan"), the Committee may, among other things, award non-qualified
stock options of Kodak Common Stock to those Key Employees as the
Committee in its discretion may determine, subject to such terms,
conditions and restrictions as it deems appropriate.
2. Award. Effective March 4, 1997, (the "Grant Date"), the Committee
granted to Harry L. Kavetas (the "Participant") an award of forty one
thousand six hundred and eleven (41,611) non-qualified stock options
(the "Award"). One option provides for the ability to purchase a
single share of Common Stock. The Award is granted under the Plan,
subject to the terms and conditions of the Plan and those set forth in
this Notice of Award of Non-Qualified Stock Options ("Award Notice").
3. Terms and Conditions of Award. The following terms and conditions
shall apply to the Award:
(a) Option Price. The option price for the options evidenced by way
of this Award Notice shall be $88.50.
(b) Duration of Option. Subject to Section 3(i) below, each option
shall expire at the close of business on the tenth anniversary of
the Grant Date, unless sooner terminated or forfeited in
accordance with the terms and conditions of this Award Notice or
the Plan.
(c) Vesting. No option shall be exercisable prior to the date on
which it vests. Once vested, the options may be exercised by
written notice to the Committee stating the number of options to
be exercised. The options shall vest in accordance with the
following schedule:
March 4, 1998 10,402
March 4, 1999 10,403
March 4, 2000 10,403
March 4, 2001 10,403
(d) Payment of Option Price. The option price for the share for
which an option is exercised by the Participant shall be paid by
the Participant on the date the option is exercised in cash, in
shares of Common Stock owned by the Participant, or a combination
of the foregoing. Any share of Common Stock delivered in payment
of the option price shall be valued at its Fair Market Value on
the date of exercise.
(e) Withholding. The Participant shall pay the amount of taxes
required to be withheld upon exercise of his options by
delivering a check made payable to Kodak.
(f) Rights as a Shareholder. The Participant shall not have any of
the rights of a shareholder with respect to the shares of Common
Stock covered by an option except to the extent one or more
certificates for such shares shall be delivered to him upon the
exercise of such option.
(g) Broker Assisted Exercise. Notwithstanding Sections 3(d) and 3(e)
above, the Participant may, subject to Section 5(a) hereof,
exercise any option granted to him under this Award Notice by way
of Kodak's broker-assisted stock option exercise program, to the
extent such program is available at the time of such exercise.
Pursuant to the terms of such program, the amount of any taxes
required to be withheld upon exercise of any options must be paid
in cash directly to Kodak.
181
(h) Termination of Employment. If the Participant's employment
terminates due to death, Disability, Illness, Retirement after
February 11, 2001 or termination for an Approved Reason, the
options shall immediately become exercisable and vested in full
and shall continue to be exercisable until their scheduled
expiration date under Section 3(b) above or, if sooner, their
exercise in full. If the Participant's employment terminates for
any reason other than due to death, Disability, Illness,
Retirement after February 11, 2001 or termination for an Approved
Reason, any options which are vested at the time of the
Participant's termination shall not be exercisable beyond the
60th day following the date of the Participant's termination of
employment and any options not vested at the time of the
Participant's termination shall be immediately forfeited.
(i) Exercise Upon Expiration.
(i) Notwithstanding Section 3(b) hereof to the contrary, if on
the options' scheduled expiration date (A) any options
remain unexercised and (B) the Fair Market Value of a share
of Common Stock exceeds the option price, then the
provisions of Section 3(i)(ii) below shall apply.
(ii) The Participant may exercise any of his unexercised options
as of the date they are scheduled to expire, unless already
forfeited under the terms and conditions of this Award
Notice or the Plan, by providing written notice thereof to
the Committee within sixty (60) days after such scheduled
expiration date. In such event, such options shall, for
purposes of this Award Notice and the Plan, be treated as
exercised prior to the close of business on their scheduled
expiration date; provided, however, the Participant shall
not be the record owner of the shares acquired upon exercise
of such options until the one or more certificates for the
shares have been delivered to the Participant. The strike
price of any options issued pursuant to the provisions of
this Section 3(i) shall be the mean between the high and low
at which the Common Stock trades on the New York Stock
Exchange on the options' scheduled expiration date, or, if
such day is not a trading day, the immediately preceding
trading day.
(iii) Notwithstanding Section 3(g) above to the contrary, any
options exercised pursuant to this Section 3(i) shall not,
without the Committee's prior approval, be exercised by way
of Kodak's broker-assisted stock option program.
4. Definitions.
(a) Any defined term used in this Award Notice, other than those set
forth in Section 4(b) below, shall have the same meaning for
purposes of this document as that ascribed to it under the terms
of the Plan.
(b) The following definitions shall apply to this Award Notice:
(i) Fair Market Value. The opening price of the Common Stock on
the New York Stock Exchange on the relevant date; provided,
however, if the Common Stock is not traded on the relevant
date, then the opening price on the immediately preceding
date on which the Common Stock is traded shall be used.
(ii) Retirement. The term "Retirement" shall mean the occurrence
of the Participant's retirement as determined in accordance
with Section 8 of the Employment Agreement between the
Participant and Kodak dated February 11, 1994, as amended
through March 3, 1997 (the "Employment Agreement").
182
(iii) Illness. A termination of employment will be for "Illness"
if the Participant voluntarily terminates his employment
following a continuous period of at least 90 days during
which the Participant is unable to perform the regularly
assigned duties and responsibilities of his position with
Kodak due to illness, disease or injury and the condition is
verified by such examinations and/or tests, performed by a
mutually agreeable doctor; provided, however, that Kodak
may, if it reasonably so determines, request additional
examinations and/or tests by mutually agreeable doctor(s).
(iv) Approved Reason. A termination for "Approved Reason" shall
include, without limitation, a Termination Without Cause or
Constructive Termination without Cause under Section 11(d)
of the Employment Agreement.
5. Section 16 of the Exchange Act.
(a) In order to avoid any Exchange Act violations, the Committee may,
at any time and from time to time, impose additional restrictions
upon the Awards, including, but not by way of limitation,
restrictions regarding the Participant's ability to exercise
options under Kodak's broker-assisted stock option exercise
program under Section 3(g).
(b) Kodak shall use its best efforts so that on or prior to December
31, 1997, all shares received by the Participant on any exercise
of an option shall be, and shall remain, (1) fully registered (at
Kodak's expense) under the Securities Act of 1933, as amended
(the "1933 Act"), both for issuance and for resale, pursuant to a
registration on Form S-3 under the 1933 Act or such successor
procedure that provides comparable opportunity under the 1933 Act
for issuance and resale; (2) fully registered or qualified (at
Kodak's expense), under such state securities laws as the
Participant may reasonably request, both for issuance and for
resale; and (3) listed on the New York Stock Exchange.
6. Non-Assignability. These options are non-assignable and
non-transferable, in whole or in part, other than (i) by gratuitous
transfers to immediate family members, to trusts for their benefit, or
to limited partnerships in which immediate family members are the sole
partners, (ii) by will or under the laws of descent and distribution,
or (iii), on the Participant's death, to a beneficiary designated in
writing by the Participant, with any such permitted transferee to
succeed to the Participant's rights and obligations under the options
to the extent of such transfer.
7. Effect of Award Notice. This Award Notice, including its reference to
the Plan, constitutes the entire understanding between Kodak and the
Participant concerning the Award and supersedes any prior notices,
letters, statements or other documents issued by Kodak relating to the
Award and all prior agreements and understandings between Kodak and
the Participant, whether written or oral, concerning the Award.
8. Miscellaneous.
(a) Headings. The headings of the Sections of this Award Notice have
been prepared for convenience and reference only and shall not
control, affect the meaning, or be taken as the interpretation of
any provision of the Award Notice.
(b) Applicable Law. This Award Notice, including its reference to
the Plan, and its interpretation and application, will be
governed and controlled by the laws of the State of New York,
except as superseded by applicable Federal Law.
(c) Amendment. The Committee may, from time to time, amend this
Award Notice in any manner; provided, however, that any such
amendment which is adverse to the Participant shall require the
Participant's consent.
183
9. Administration. The Committee shall have full and absolute authority
and discretion, subject to the provisions of the Plan, to interpret,
construe and implement this Award Notice, to prescribe, amend and
rescind rules and regulations relating to it, and to make all other
determinations necessary, appropriate or advisable for its
administration. All such Committee determinations shall be final,
conclusive and binding upon any and all interested parties and their
heirs, successors, and personal representatives.
10. Impact on Benefits. The nonqualified stock options granted pursuant
to this Award Notice (either at the date of their grant or at the time
the shares are vested) shall not be includible as compensation or
earnings for purposes of any compensation or benefit plan offered by
Kodak.
184
Exhibit (11)
Eastman Kodak Company and Subsidiary Companies
Computation of Earnings Per Common Share
1996 1995 1994
(in millions, except
per share data)
Earnings from continuing operations
before income taxes $1,556 $1,926 $1,002
Provision for income taxes from
continuing operations 545 674 448
------ ------ ------
Earnings from continuing operations
before extraordinary items 1,011 1,252 554
Loss from discontinued operations - - (81)
Gain on sale of discontinued operations 277 - 350
------ ------ ------
Earnings before extraordinary items 1,288 1,252 823
Extraordinary items - - (266)
------ ------ ------
NET EARNINGS $1,288 $1,252 $ 557
====== ====== ======
Average number of common shares
outstanding 337.4 341.5 335.7
------ ------ ------
Earnings (loss) per share:
From continuing operations before
extraordinary items $3.00 $3.67 $1.65
From discontinued operations - - (.25)
From sale of discontinued operations .82 - 1.05
----- ----- -----
Before extraordinary items 3.82 3.67 2.45
From extraordinary items - - (.79)
----- ----- -----
Earnings per share $3.82 $3.67 $1.66
===== ===== =====
185
Exhibit (12)
Eastman Kodak Company and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
(in millions, except for ratios)
Year Ended December 31,
1996 1995 1994 1993 1992
Earnings from
continuing operations
before provision for
income taxes $1,556 $1,926 $1,002 $1,077 $1,379
Add:
Interest expense 83 78 535 753 825
Interest component of
rental expense (1) 81 63 66 80 76
Amortization of
capitalized interest 22 22 25 40 37
------ ------ ------ ------ ------
Earnings as adjusted $1,742 $2,089 $1,628 $1,950 $2,317
====== ====== ====== ====== ======
Fixed charges
Interest expense $ 83 $ 78 $ 535 $ 753 $ 825
Interest component of
rental expense (1) 81 63 66 80 76
Capitalized interest 29 30 35 87 95
------ ------ ------ ------ ------
Total fixed charges $ 193 $ 171 $ 636 $ 920 $ 996
====== ====== ====== ====== ======
Ratio of earnings to
fixed charges 9.0x (2) 12.2x 2.6x (3) 2.1x (4) 2.3x (5)
(1) Interest component of rental expense is estimated to equal 1/3 of such expense,
which is considered a reasonable approximation of the interest factor.
(2) The ratio is 12.9x before deducting restructuring costs of $358 million and the loss
on the sale of the Office Imaging business of $387 million.
(3) The ratio is 3.1x before deducting restructuring costs of $340 million.
(4) The ratio is 2.6x before deducting restructuring costs of $495 million.
(5) The ratio is 2.5x before deducting restructuring costs of $219 million.
186
Exhibit (21)
Subsidiaries of Eastman Kodak Company
Organized
Companies Consolidated Under Laws of
Eastman Kodak Company New Jersey
Eastman Kodak International
Finance B.V. Netherlands
Eastman Kodak International
Sales Corporation Barbados
Torrey Pines Realty Company, Inc. Delaware
The Image Bank, Inc. New York
Cinesite, Inc. Delaware
FPC Inc. California
Qualex Inc. Delaware
Fox Photo, Inc. Delaware
Jamieson Film Company Delaware
Eastman Gelatine Corporation Massachusetts
Eastman Canada Inc. Canada
Kodak Canada Inc. Canada
Kodak (Export Sales) Ltd. Hong Kong
Kodak Argentina S.A.I.C. Argentina
Kodak Brasileira C.I.L. Brazil
Kodak Chilena S.A.F. Chile
Kodak Colombiana, Ltd. New York
Kodak Panama, Ltd. New York
Kodak Peruana, Ltd. New York
Kodak Caribbean, Limited New York
Kodak Uruguaya, Ltd. New York
Kodak Venezuela, S.A. Venezuela
Kodak (Near East), Inc. New York
Kodak (Singapore) Pte. Limited Singapore
Kodak Philippines, Ltd. New York
Kodak Limited England
Cinesite (Europe) Limited England
Kodak AO Russia
Kodak India Limited India
Kodak Ireland Limited Ireland
Kodak-Pathe SA France
Kodak A.G. Germany
Kodak Korea Limited South Korea
Kodak Far East Purchasing, Inc. New York
Kodak New Zealand Limited New Zealand
Kodak (Australasia) Pty. Ltd. Australia
Kodak (Kenya) Limited Kenya
Kodak (Egypt) S.A.E. Egypt
Kodak (Malaysia) S.B. Malaysia
Kodak Taiwan Limited Taiwan
Eastman Kodak International Capital
Company, Inc. Delaware
Kodak de Mexico S.A. de C.V. Mexico
Kodak Mexicana S.A. de C.V. Mexico
Industria Mexicana de Foto Copiadoras,
S.A. de C.V. Mexico
N.V. Kodak S.A. Belgium
Kodak a.s. Denmark
Kodak Norge A/S Norway
Kodak SA Switzerland
Kodak (Far East) Limited Hong Kong
Kodak (Thailand) Limited Thailand
Kodak G.m.b.H. Austria
Kodak Kft. Hungary
Kodak Oy Finland
Kodak Nederland B.V. Netherlands
187
Exhibit (21)
(Continued)
Organized
Companies Consolidated Under Laws of
Kodak S.p.A. Italy
Kodak Portuguesa Limited New York
Kodak S.A. Spain
Kodak AB Sweden
EK Asia Pacific Ltd. Japan
K.K. Kodak Information Systems Japan
Kodak Japan Ltd. Japan
Kodak Imagica K.K. Japan
Kodak Japan Industries Ltd. Japan
Note: Subsidiary Company names are indented under the name of the parent
company.