<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995
or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-87
EASTMAN KODAK COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 16-0417150
(State of incorporation) (IRS Employer
Identification No.)
343 STATE STREET, ROCHESTER, NEW YORK 14650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 716-724-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of Shares Outstanding at
Class June 30, 1995
Common Stock, $2.50 par value 341,821,843
<PAGE>
<PAGE> 2
<TABLE>
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS
<CAPTION>
(in millions) Second Quarter First Half-Year
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES
Sales $3,938 $3,425 $7,075 $6,180
Earnings from equity interests and other
revenues 54 44 126 68
------ ------ ------ ------
TOTAL REVENUES 3,992 3,469 7,201 6,248
------ ------ ------ ------
COSTS
Cost of goods sold 2,030 1,782 3,643 3,252
Selling, general and administrative expenses 1,098 925 1,993 1,672
Research and development costs 233 230 452 434
Interest expense 19 28 38 85
Other charges 13 37 61 108
------ ------ ------ ------
TOTAL COSTS 3,393 3,002 6,187 5,551
------ ------ ------ ------
Earnings from continuing operations
before income taxes 599 467 1,014 697
Provision for income taxes from continuing
operations 222 172 375 257
------ ------ ------ ------
Earnings from continuing operations before
extraordinary item 377 295 639 440
Loss from discontinued operations - (30) - (81)
------ ------ ------ ------
Earnings before extraordinary item 377 265 639 359
Extraordinary item - (1) - (13)
------ ------ ------ ------
NET EARNINGS $ 377 $ 264 $ 639 $ 346
====== ====== ====== ======
Earnings per share from continuing
operations before extraordinary item $ 1.11 $ .88 $ 1.88 $ 1.33
Loss per share from discontinued operations - (.09) - (.25)
------ ------ ------ ------
Earnings per share before extraordinary item 1.11 .79 1.88 1.08
Extraordinary item - - - (.04)
------ ------ ------ ------
Earnings per share $ 1.11 $ .79 $ 1.88 $ 1.04
====== ====== ====== ======
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Retained earnings at beginning of period $4,605 $4,417 $4,485 $4,469
Net earnings 377 264 639 346
Cash dividends declared (137) (133) (273) (265)
Other changes (7) 4 (13) 2
------ ------ ------ ------
RETAINED EARNINGS at end of period $4,838 $4,552 $4,838 $4,552
====== ====== ====== ======
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See Notes to Financial Statements
</TABLE>
<PAGE>
<PAGE> 3
<TABLE>
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<CAPTION>
June 30, Dec. 31,
1995 1994
(in millions)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 823 $ 2,020
Marketable securities 65 48
Receivables (net of allowances of $126 and $120) 3,265 3,064
Inventories 1,873 1,480
Deferred income tax charges 536 711
Other 242 360
------- -------
Total current assets 6,804 7,683
------- -------
PROPERTIES
Land, buildings and equipment at cost 12,694 12,299
Less: Accumulated depreciation 7,321 7,007
------- -------
Net properties 5,373 5,292
------- -------
OTHER ASSETS
Goodwill (net of accumulated
amortization of $259 and $226) 611 616
Long-term receivables and other
noncurrent assets 893 872
Deferred income tax charges 496 505
------- -------
TOTAL ASSETS $14,177 $14,968
======= =======
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LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Payables $ 3,295 $ 3,398
Short-term borrowings 507 371
Taxes-income and other 424 1,701
Dividends payable 137 136
Deferred income tax credits 21 129
------- -------
Total current liabilities 4,384 5,735
OTHER LIABILITIES
Long-term borrowings 654 660
Postemployment liabilities 3,726 3,671
Other long-term liabilities 796 790
Deferred income tax credits 104 95
------- -------
Total liabilities 9,664 10,951
------- -------
SHAREOWNERS' EQUITY
Common stock at par* 971 966
Additional capital paid in or
transferred from retained earnings 583 515
Retained earnings 4,838 4,485
Accumulated translation adjustment 76 8
------- -------
6,468 5,974
Less: Treasury stock shares at cost* 1,955 1,957
------- -------
Total shareowners' equity 4,513 4,017
------- -------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $14,177 $14,968
======= =======
<FN>
* Common stock: $2.50 par value, 950 million shares authorized, 388 million shares and
386 million shares issued as of June 30, 1995 and December 31, 1994, respectively.
Treasury stock at cost consists of approximately 47 million shares at each balance sheet
date.
-----------------------------------------------------------------------------------------------
See Notes to Financial Statements
</TABLE>
<PAGE>
<PAGE> 4
<TABLE>
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
First Half-Year
1995 1994
(in millions)
<S> <C> <C>
Cash flows from operating activities:
Earnings from continuing operations before
extraordinary item $ 639 $ 440
Adjustments to reconcile above earnings to net cash
provided by operating activities:
Depreciation and amortization 429 381
Provision (benefit) for deferred taxes 82 (12)
Loss on sale and retirement of properties 48 20
Increase in receivables (89) (261)
Increase in inventories (331) (165)
Increase (decrease) in liabilities excluding borrowings 197 (114)
Other items, net (464) (96)
------- -------
Total adjustments (128) (247)
------- -------
Net cash provided by operating activities 511 193
------- -------
Cash flows from investing activities:
Additions to properties (459) (627)
Proceeds from sale of properties and investments 27 25
Marketable securities - sales 23 199
Cash flows related to sales of non-imaging
health businesses (1,241) -
------- -------
Net cash used in investing activities (1,650) (403)
------- -------
Cash flows from financing activities:
Net (decrease) increase in commercial paper borrowings
of 90 days or less (175) 805
Proceeds from other borrowings 1,797 -
Repayment of other borrowings (1,492) (1,470)
Dividends to shareowners (273) (297)
Exercise of employee stock options 71 21
------- -------
Net cash used in financing activities (72) (941)
------- -------
Effect of exchange rate changes on cash 14 7
------- -------
Net decrease in cash and cash equivalents (1,197) (1,144)
Cash and cash equivalents, beginning of year 2,020 1,635
------- -------
Cash and cash equivalents, end of quarter $ 823 $ 491
======= =======
---------------------------------------------------------------------------------------
See Notes to Financial Statements
</TABLE>
<PAGE>
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The financial statements have been prepared by the Company in accordance
with the accounting policies stated in the 1994 Annual Report and should
be read in conjunction with the Notes to Financial Statements appearing
therein. In the opinion of the Company, all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation have
been included in the financial statements. The statements are based in
part on estimates and have not been audited by independent accountants.
The annual statements will be audited by Price Waterhouse LLP.
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COMMITMENTS AND CONTINGENCIES
The Company and its subsidiary companies are involved in lawsuits, claims,
investigations and proceedings, including product liability, commercial,
environmental, and health and safety matters, which are being handled and
defended in the ordinary course of business. There are no such matters
pending that the Company and its General Counsel expect to be material in
relation to the Company's business, financial condition or results of
operations.
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RECLASSIFICATIONS
Certain 1994 financial statement amounts have been reclassified to conform
to the 1995 presentation.
David J. FitzPatrick, Controller
August 9, 1995
<PAGE>
<PAGE> 6
Management's Discussion and Analysis of Financial Condition and Results
of Operations
<TABLE>
SUMMARY
<CAPTION>
(in millions, except Second Quarter First Half-Year
earnings per share) 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Sales $3,938 $3,425 +15% $7,075 $6,180 +14%
Earnings (loss) from operations
before extraordinary item:
Continuing 377 295 639 440
Discontinued - (30) - (81)
Net earnings 377 264 639 346
Per share 1.11 .79 1.88 1.04
</TABLE>
Sales of $3,938 million for the second quarter of 1995 and $7,075 million
for the first half-year were significantly higher than sales for the
comparable periods of last year. Excluding sales of Qualex (a U.S.
photofinishing company which had been treated as an equity investment
until the remainder of its outstanding shares were acquired in August,
1994), sales increased 11% for the quarter and 10% for the year to date
over a year ago. Sales for the quarter and year to date benefited from
volume gains and the favorable effects of foreign currency rate changes,
but were adversely affected by lower effective selling prices. Currency
changes favorably affected 1995 sales by $191 million for the quarter and
$318 million year to date. Earnings for the quarter and year to date
increased significantly over a year ago as the benefits from higher
volumes, manufacturing productivity, the favorable effects of foreign
currency rate changes, lower interest expense and higher investment income
were only partially offset by cost escalation, increased selling, general
and administrative (SG&A) activity and lower effective selling prices. Net
earnings for the 1994 second quarter and year to date were adversely
affected by approximately $30 million ($.09 per share) for adjustments
relating to inventory valuations and revenues on certain service
agreements.
During 1994, the Company divested the following non-imaging health
businesses: 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 Diagnostic Division. These
businesses have been reported as discontinued operations. As part of the
divestitures, the Company announced on April 7, 1995, an agreement to sell
its pharmaceutical research and development facility to SmithKline Beecham
for approximately $120 million. The proceeds from this sale did not differ
materially from the Company's estimated proceeds for the sale of this
facility.
Net earnings for the first half of 1994 were reduced by an after-tax
extraordinary charge of $13 million ($.04 per share) related to the early
extinguishment of debt.
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<TABLE>
Sales by Segment (in millions)
<CAPTION>
Second Quarter First Half-Year
1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Consumer Imaging
Inside the U.S. $ 817 $ 670 +22% $1,303 $1,001 +30%
Outside the U.S. 1,061 896 +18 1,842 1,564 +18
------ ------ --- ------ ------ ---
Total Consumer Imaging 1,878 1,566 +20 3,145 2,565 +23
------ ------ --- ------ ------ ---
Commercial Imaging
Inside the U.S. 1,007 956 + 5 1,932 1,865 + 4
Outside the U.S. 1,062 903 +18 2,014 1,750 +15
------ ------ --- ------ ------ ---
Total Commercial Imaging 2,069 1,859 +11 3,946 3,615 +9
------ ------ --- ------ ------ ---
Deduct Intersegment Sales (9) - (16) -
Total Worldwide ------ ------ --- ------ ------ ---
$3,938 $3,425 +15% $7,075 $6,180 +14%
====== ====== === ====== ====== ===
</TABLE>
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SEGMENT SALES
In the Consumer Imaging segment, sales to customers inside the U.S.
increased for the quarter and year to date, when compared with sales for
the same periods of 1994, due primarily to Qualex sales. Excluding the
sales of Qualex, sales increased 1% in the quarter and 4% year to date due
to increased volumes. Outside the U.S., sales increased substantially in
the quarter and year to date compared with last year, as good increases in
unit volumes and the favorable effects of foreign currency rate changes
were only slightly offset by the unfavorable effects of lower effective
selling prices. Single-use cameras, Ektacolor papers and Kodacolor 35mm
films contributed to the worldwide volume gains in the second quarter and
year to date.
<PAGE>
<PAGE> 7
In the Commercial Imaging segment, sales to customers inside the U.S. for
the 1994 second quarter and year to date reflect a reduction for revenue
adjustments on certain service agreements. Excluding these adjustments,
sales were up slightly for the quarter and year to date as volume
increases were partially offset by lower effective selling prices. Sales
to customers outside the U.S. increased substantially in the quarter and
significantly year to date when compared with 1994. In both the quarter
and year-to-date periods, the benefits from increased unit volumes and the
favorable effects of foreign currency rate changes were partially offset
by lower effective selling prices. Worldwide volume increases were led by
motion picture and television imaging, printing and professional imaging,
and health sciences products in the quarter and year to date.
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<TABLE>
COSTS AND EXPENSES
<CAPTION>
Second Quarter First Half-Year
(in millions) 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Gross profit $1,908 $1,643 +16% $3,432 $2,928 +17%
Percent of Sales 48.5% 48.0% 48.5% 47.4%
Selling, general and
administrative expenses $1,098 $ 925 +19% $1,993 $1,672 +19%
Percent of Sales 27.9% 27.0% 28.2% 27.1%
Research and development costs $ 233 $ 230 +1% $ 452 $ 434 +4%
Percent of Sales 5.9% 6.7% 6.4% 7.0%
</TABLE>
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Gross profit as a percent of sales in the 1994 second quarter and year to
date was reduced by approximately 1.0 and 0.5 percentage points,
respectively, due to adjustments relating to inventory valuations and
revenue on certain service agreements. Excluding these adjustments, gross
profit as a percent of sales decreased in the second quarter as the
benefits from higher volumes and manufacturing productivity were more
than offset by the unfavorable effects of cost escalation and product mix
changes. Year-to-date gross profit as a percent of sales increased, when
compared with 1994, as the benefits from higher volumes and manufacturing
productivity more than offset cost escalation. SG&A expenses increased 19% in
the quarter and year to date when compared with 1994. Excluding the SG&A
expenses of Qualex, SG&A expenses increased 14% in the second quarter and year
to date. The quarter and year-to-date SG&A expenses increases are due primarily
to the unfavorable effects of foreign currency rate changes on locally
incurred costs, increased administrative costs and the effect of higher
volumes on distribution costs. Research and development costs were
essentially level in the quarter and were up slightly year-to-date when
compared with last year.
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<TABLE>
Earnings from Operations
by Industry Segment
<CAPTION>
(in millions) Second Quarter First Half-Year
1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Consumer Imaging $ 405 $ 384 + 5% $ 557 $ 487 +14%
Percent of Sales 21.6% 24.5% 17.7% 19.0%
Commercial Imaging $ 175 $ 105 +67% $ 439 $ 329 +33%
Percent of Sales 8.5% 5.6% 11.1% 9.1%
----- ----- --- ----- ----- ---
Total $ 580 $ 489 +19% $ 996 $ 816 +22%
===== ===== === ===== ===== ===
</TABLE>
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SEGMENT EARNINGS
Consumer Imaging operating earnings for the quarter increased moderately
when compared with the 1994 second quarter, as the benefits from increased
unit volumes, favorable effects of foreign currency rate changes and
manufacturing productivity were only partially offset by increased SG&A expenses
and cost escalation. Year-to-date Consumer Imaging operating earnings
increased significantly, as the benefits from increased unit volumes,
manufacturing productivity and favorable effects of foreign currency rate
changes were only partially offset by increased SG&A expenses, cost escalation
and lower effective selling prices.
Commercial Imaging segment operating earnings for the second quarter
increased 67% compared with 1994, as the benefits from manufacturing
productivity, increased unit volumes and favorable effects of foreign
currency rate changes were only partially offset by cost escalation and
lower effective selling prices. Year to date, Commercial Imaging segment
operating earnings increased 33% compared with the prior year, as the
benefits from increased unit volumes, manufacturing productivity and
favorable effects of foreign currency rate changes were only partially
offset by cost escalation, lower effective selling prices and increased SG&A
expenses. In addition, 1994 operating earnings for the quarter and year
to date were adversely affected by approximately $48 million for
adjustments relating to inventory valuations and revenue on certain
service agreements.
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<PAGE>
<PAGE> 8
OTHER REVENUES AND COSTS
Earnings from equity interests and other revenues were higher in the
quarter and year to date, when compared with the comparable periods of
1994, due primarily to increased interest income earned on higher average
cash balances and increased earnings from equity interests. Interest
expense for the 1995 second quarter and year to date decreased, when
compared with 1994, due to lower average borrowings. The net effect from
foreign exchange transactions and the translation of net monetary items in
highly inflationary economies was a gain of $4 million in the quarter and a
loss of $10 million for the first half of 1995 compared with a loss of $7
million in the 1994 second quarter and a loss of $43 million in the 1994
year to date, respectively. The year-to-date effective tax rate for both
1995 and 1994 was 37.0%.
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CASH DIVIDENDS
During the second quarter of 1995, a cash dividend of $137 million (40 cents
per share) was declared on the Company's common stock. Total cash
dividends declared for the year-to-date periods of 1995 and 1994 amounted
to $273 million and $265 million, respectively.
FINANCIAL POSITION
Cash and marketable securities were $888 million at the end of the second
quarter, compared with $2,068 million at year-end 1994. The decrease is
primarily due to tax payments of approximately $1.3 billion related to the
divestiture of the non-imaging health businesses. Net working capital at
the end of the quarter increased to $2,420 million from $1,948 million at
year-end 1994, primarily due to an increase in inventories and
receivables. Projected operating cash flows are expected to be adequate
to support normal business operations, planned capital expenditures and
dividend payments in 1995.
CAPITAL ADDITIONS
Capital additions for the second quarter of 1995 were $221 million compared
with $478 million for the second quarter of 1994. During the second
quarter of 1994, the Company terminated a Master Lease agreement by
purchasing approximately $292 million of equipment it had been leasing.
For the first half of 1995, capital additions were $459 million versus
$627 million a year ago. The provision for depreciation for the first two
quarters of 1995 was $396 million, compared with $364 million for the
comparable period of 1994.
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<PAGE>
<PAGE> 9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is participating in the Environmental Protection Agency's
(EPA) Toxic Substances Control Act (TSCA) Section 8 (e) Compliance Audit
Program. As a participant, the Company has 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 anticipates
that its liability under the Program will be $1,000,000.
In addition to the foregoing environmental action, 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-five 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 condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
The 1995 Annual Meeting of Shareowners of Eastman Kodak Company
was held on May 10.
A total of 282,330,138 of the Company's shares were present or
represented by proxy at the meeting. This represented more than
83% of the Company's shares outstanding.
The individuals named below were elected to three-year terms as
Class II Directors:
Name Votes Received Votes Withheld
Alice F. Emerson 280,657,500 1,672,638
Robert C. Goizueta 280,728,285 1,601,853
Wilbur J. Prezzano 280,682,958 1,647,180
Leo J. Thomas 280,706,045 1,624,093
Richard S. Braddock, Karlheinz Kaske, Richard A. Zimmerman, Martha
Layne Collins, George M. C. Fisher, Paul E. Gray and John J.
Phelan, Jr. all continue as Directors of the Company.
The election of Price Waterhouse LLP as independent accountants
was ratified, with 280,730,169 shares voting for, 778,042 shares
voting against, and 821,927 shares abstaining.
The Eastman Kodak Company 1995 Long-term Compensation Plan was approved, with
191,928,211 shares voting for, 45,475,837 shares voting against, 3,831,219
shares abstaining, and 41,094,871 non-votes.
The Management Variable Compensation Plan was approved, with 191,086,773
shares voting for, 46,003,341 shares voting against, 4,146,555 shares
abstaining, and 41,093,469 non-votes.
The Wage Dividend Plan was approved, with 196,841,787 shares voting for,
40,479,256 shares voting against, 3,807,292 shares abstaining, and 41,201,803
non-votes.
<PAGE>
<PAGE> 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and financial statement schedules required as
part of this report are listed in the index appearing on
page 12.
(b) Reports on Form 8-K
No reports on Form 8-K were filed or required to be filed
for the quarter ended June 30, 1995.
<PAGE>
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EASTMAN KODAK COMPANY
(Registrant)
Date August 9, 1995
David J. FitzPatrick, Controller,
Principal Accounting Officer and
Duly Authorized Officer
<PAGE>
<PAGE> 12
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits and Financial Statement Schedules
Page No.
Exhibit
(10) A. Management Variable Compensation Plan,
effective January 1, 1995. 13 - 31
B. 1995 Omnibus Long-Term Compensation Plan,
effective February 1, 1995. 32 - 61
(11) First Half-Year 1995 Computation of Earnings Per
Common Share 62
<PAGE>
<PAGE> 13
EASTMAN KODAK COMPANY Exhibit (10) A.
MANAGEMENT VARIABLE COMPENSATION PLAN
Article Page
1. Purpose, Effective Date and Term of Plan 14
2. Definitions 14
3. Eligibility 20
4. Plan Administration 20
5. Forms of Awards 21
6. Determination of Awards for a Performance Period 22
7. Payment of Awards for a Performance Period 24
8. Deferral of Awards 25
9. Additional Awards 25
10. Change In Ownership 26
11. Change In Control 27
12. Shares Subject to the Plan 28
13. Miscellaneous 29
Copyright 1995, Eastman Kodak Company
<PAGE>
<PAGE> 14
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.
<PAGE>
<PAGE> 15
2.4. Award Payment Date
"Award Payment Date" means, for each Performance Period, the date that
the amount of the Award for that Performance Period shall be paid to the
Participant under Article 7, without regard to any election to defer
receipt of the Award made by the Participant under Article 8 of the
Plan.
2.5. Board
"Board" means the Board of Directors of Kodak.
2.6. Carryforward Amount
"Carryforward Amount" means, for any Performance Period, the sum of the
Carryovers for all prior Performance Periods less the sum of all Awards
granted from the Carryforward Amount pursuant to Sections 6.4(d) and
9.5.
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
<PAGE>
<PAGE> 16
25% or more of the combined voting power of the outstanding securities
of Kodak ordinarily having the right to vote at the election of
directors, or (ii) individuals who constitute the Board on January 1,
1995 (the "Incumbent Board") have ceased for any reason to constitute
at least a majority thereof, provided that any person becoming a director
subsequent to January 1, 1995 whose election, or nomination for election
by Kodak's shareholders, was approved by a vote of at least three-
quarters (3/4) of the directors comprising the Incumbent Board (either
by a specific vote or by approval of the proxy statement of Kodak in
which such person is named as a nominee for director without objection
to such nomination) shall be, for purposes of this Plan, considered as
though such person were a member of the Incumbent Board.
2.11. Change In Ownership
"Change In Ownership" means a Change In Control which results directly
or indirectly in Kodak's Common Stock ceasing to be actively traded on
the New York Stock Exchange.
2.12. Code
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, including regulations thereunder and successor provisions and
regulations thereto.
2.13. Committee
"Committee" means the Executive Compensation and Development Committee
of the Board, or such other Board committee as may be designated by the
Board to administer the Plan; provided that the Committee shall consist
of three or more directors, all of whom are both a "disinterested
person" 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.
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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 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.
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
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response to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions; and (c) in
view of the Committee's assessment of the business strategy of the
Company, performance of comparable organizations, economic and business
conditions, and any other circumstances deemed relevant. However, if and
to the extent the exercise of such authority after the first 90 days of a
Performance Period would cause the Awards granted to the Covered Employees
for the Performance Period to fail to qualify as "Performance- Based
Compensation" under Section 162(m) of the Code, then such
authority shall only be exercised with respect to those Participants who
are not Covered Employees.
2.26. Net Income
"Net Income" means, for a Performance Period, the Company's consolidated
Net Earnings (Loss) before Cumulative Effect of Changes in Accounting
Principle for the Performance Period as reported in its audited
consolidated financial statements. The Committee is authorized at any
time during the first 90 days of a Performance Period, or at any time
thereafter in its sole and absolute discretion, to adjust or modify the
calculation of Net Income for such Performance Period in order to
prevent the dilution or enlargement of the rights of Participants, (a)
in the event of, or in anticipation of, any dividend or other
distribution (whether in the form of cash, securities or other
property), recapitalization, restructuring, reorganization, merger,
consolidation, spin off, combination, repurchase, share exchange,
liquidation, dissolution, or other similar corporate transaction, event
or development; (b) in recognition of, or in anticipation of, any other
unusual or nonrecurring event affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or
business conditions; (c) in recognition of, or in anticipation of, any
other extraordinary gains or losses; and (d) in view of the Committee's
assessment of the business strategy of the Company, 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.
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2.29. Performance Formula
"Performance Formula" means, for a Performance Period, the one or more
objective formulas applied against the Performance Goals to determine
whether all, some portion but less than all, or none of the Awards have
been earned for the Performance Period. The dollar amount obtained
through application of the Performance Formula shall be the Maximum
Award. The Performance Formula for a Performance Period shall be
established in writing by the Committee within the first 90 days of the
Performance Period (or, if later, within the maximum period allowed
pursuant to Section 162(m) of the Code).
2.30. Performance Goals
"Performance Goals" means, for a Performance Period, the one or more
goals for the Performance Period established by the Committee in writing
within the first 90 days of the Performance Period (or, if longer,
within the maximum period allowed pursuant to Section 162(m) of the Code)
based upon the Performance Criterion. The Committee is authorized at any
time during the first 90 days of a Performance Period, or at any time
thereafter in its sole and absolute discretion, to adjust or modify the
calculation of a Performance Goal for such Performance Period in order to
prevent the dilution or enlargement of the rights of Participants, (a) in
the event of, or in anticipation of, any unusual or extraordinary
corporate item, transaction, event or development; (b) in recognition of,
or in anticipation of, any other unusual or nonrecurring events affecting
the Company, or the financial statements of the
Company, or in response to, or in anticipation of, changes in applicable
laws, regulations, accounting principles, or business conditions; and
(c) in view of the Committee's assessment of the business strategy of
the Company, performance of comparable organizations, economic and
business conditions, and any other circumstances deemed relevant.
However, to the extent the exercise of such authority after the first 90
days of a Performance Period would cause the Awards granted to the
Covered Employees for the Performance Period to fail to qualify as
"Performance-Based Compensation" under Section 162(m) of the Code, then
such authority shall only be exercised with respect to those
Participants who are not Covered Employees.
2.31. Performance Period
"Performance Period" means Kodak's fiscal year or any other period
designated by the Committee with respect to which an Award may be
granted.
2.32. Plan
"Plan" means the Management Variable Compensation Plan.
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.
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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
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the terms of the Plan. For purposes of the Plan, the value of any Award
granted in the form of Common Stock shall be the mean between the high
and low at which the Common Stock trades on the New York Stock Exchange
as of the date of the grant's Effective Date.
ARTICLE 6 -- DETERMINATION OF AWARDS FOR A PERFORMANCE PERIOD
6.1 Procedure for Determining Awards
As detailed below in the succeeding Sections of this Article 6, the
procedure for determining Awards for a Performance Period entails the
following: (a) determination of Maximum Award; (b) determination of
Maximum Award Pool; (c) determination of Actual Award Pool; and (d)
allocation of Actual Award Pool among individual Participants. Upon
completion of this process, any Awards earned for the Performance Period
shall be paid in accordance with Article 7.
6.2 Determination of Maximum Award
(a) Purpose of Maximum Award. The Maximum Award for a
Performance Period is an addend in the calculation of the
Maximum Award Pool for such Performance Period.
(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.
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(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.
(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.
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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.
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.
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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.
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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.
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.
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10.3 Miscellaneous
Upon a Change In Ownership, no action, including, but not by way of
limitation, the amendment, suspension, or termination of the Plan,
shall be taken which would affect the rights of any Key Employee or the
operation of the Plan with respect to any Award to which the Key
Employee may have become entitled hereunder on or prior to the date of
such action or as a result of such Change In Ownership.
ARTICLE 11 -- CHANGE IN CONTROL
11.1 Background
Notwithstanding any provision contained in the Plan, including, but not
limited to, Sections 1.1, 4.4 and 13.10, the provisions of this Article
11 shall control over any contrary provision. All Key Employees shall
be eligible for the treatment afforded by this Article 11 if their
employment with the Company terminates within two years following a
Change In Control, unless the termination is due to (a) death; (b)
Disability; (c) Cause; (d) resignation other than (1) resignation from
a declined reassignment to a job that is not reasonably equivalent in
responsibility or compensation (as 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
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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.
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
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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 16 of the
Exchange Act or 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.
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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.
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EASTMAN KODAK COMPANY Exhibit (10) B.
1995 OMNIBUS LONG-TERM COMPENSATION PLAN
Article Page
1. Purpose and Term of Plan 33
2. Definitions 33
3. Eligibility 39
4. Plan Administration 39
5. Forms of Awards 41
6. Shares Subject to Plan 41
7. Performance Awards 43
8. Stock Options 45
9. Stock Appreciation Rights 46
10. Stock Awards 47
11. Performance Units 48
12. Performance Shares 48
13. Performance Stock Program 49
14. Payment of Awards 52
15. Dividend and Dividend Equivalents 53
16. Deferral of Awards 54
17. Change In Ownership 54
18. Change In Control 57
19. Miscellaneous 59
Copyright 1995, Eastman Kodak Company
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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.
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2.4. Award Payment Date
"Award Payment Date" means, for a Performance Cycle, the date the Awards
for such Performance Cycle shall be paid to Participants. The Award
Payment Date for a Performance Cycle shall occur as soon as
administratively possible following the completion of the certifications
required pursuant to Subsection 13.5(c).
2.5. Board
"Board" means the Board of Directors of Kodak.
2.6. 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.
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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 "disinterested person"
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.
2.13. 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) a salaried employee of Kodak; or (b) a
salaried employee of a Subsidiary.
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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.
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
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<PAGE> 37
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.
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.
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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.
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
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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.
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.
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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.
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
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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.
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7.4 Payment of Performance Awards
(a) Condition to Receipt of Performance Award. Unless otherwise
provided in the relevant Award Notice, a Participant must be
employed by the Company on the last day of a Performance
Period to be eligible for a Performance Award for such
Performance Period.
(b) Limitation. A Participant shall be eligible to receive a
Performance Award for a Performance Period only to the
extent that: (1) the Performance Goals for such period are
achieved; and (2) and the Performance Formula as applied
against such Performance Goals determines that all or some
portion of such Participant's Performance Award has been
earned for the Performance Period.
(c) Certification. Following the completion of a Performance
Period, the Committee shall meet to review and certify in
writing whether, and to what extent, the Performance Goals
for the Performance Period have been achieved and, if so, to
also calculate and certify in writing the amount of the
Performance Awards earned for the period based upon the
Performance Formula. The Committee shall then determine the
actual size of each Participant's Performance Award for the
Performance Period and, in so doing, shall apply Negative
Discretion, if and when it deems appropriate.
(d) Negative Discretion. In determining the actual size of an
individual Performance Award for a Performance Period, the
Committee may reduce or eliminate the amount of the
Performance Award earned under the Performance Formula for
the Performance Period through the use of Negative
Discretion, if in its sole judgment, such reduction or
elimination is appropriate.
(e) Timing of Award Payments. The Awards granted for a
Performance Period shall be paid to Participants as soon as
administratively possible following completion of the
certifications required by Subsection 7.4(c).
(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.
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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.
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.
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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.
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10.3 Rights as Shareholders.
During the period in which any restricted shares of Common Stock are
subject to the restrictions imposed under Section 10.2, the Committee
may, in its sole discretion, grant to the Participant to whom such
restricted shares have been awarded all or any of the rights of a
shareholder with respect to such shares, including, but not by way of
limitation, the right to vote such shares and, pursuant to Article 15,
the right to receive dividends.
10.4 Evidence of Award.
Any Stock Award granted under the Plan may be evidenced in such manner
as the Committee deems appropriate, including, without limitation,
book- entry registration or issuance of a stock certificate or
certificates.
ARTICLE 11 -- PERFORMANCE UNITS
11.1 Grants.
Awards may be granted in the form of performance units. Performance
units, as that term is used in this Plan, shall refer to Units valued
by reference to designated criteria established by the Committee, other
than Common Stock.
11.2 Performance Criteria.
Performance units shall be contingent on the attainment during a
performance period of certain performance objectives. The length of the
performance period, the performance objectives to be achieved during the
performance period, and the measure of whether and to what degree such
objectives have been attained shall be conclusively determined by the
Committee in the exercise of its absolute discretion. Performance
objectives may be revised by the Committee, at such times as it deems
appropriate during the performance period, in order to take into
consideration any unforeseen events or changes in circumstances.
11.3 Additional Terms and Conditions.
The Committee may, by way of the Award Notice or otherwise, determine
such other terms, conditions, restrictions, and/or limitations, if any,
of any Award of performance units, provided they are not inconsistent
with the Plan.
ARTICLE 12 -- PERFORMANCE SHARES
12.1 Grants.
Awards may be granted in the form of performance shares. Performance
shares, as that term is used in this Plan, shall refer to shares of
Common Stock or Units which are expressed in terms of Common Stock.
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12.2 Performance Criteria.
Performance shares shall be contingent upon the attainment during a
performance period of certain performance objectives. The length of
the performance period, the performance objectives to be achieved
during the performance period, and the measure of whether and to what
degree such objectives have been attained shall be conclusively
determined by the Committee in the exercise of its absolute discretion.
Performance objectives may be revised by the Committee, at such times
as it deems appropriate during the performance period, in order to take
into consideration any unforeseen events or changes in circumstances.
12.3 Additional Terms and Conditions.
The Committee may, by way of the Award Notice or otherwise, determine
such other terms, conditions, restrictions and/or limitations, if
any, of any Award of performance shares, provided they are not
inconsistent with the Plan.
ARTICLE 13 -- PERFORMANCE STOCK PROGRAM
13.1 Purpose
The purposes of the Performance Stock Program are: (a) to promote the
interests of the Company and its shareholders by providing a means to
acquire a proprietary interest in the Company to selected Key Employees
who are in a position to make a substantial contribution to the continued
progress and success of the Company; (b) to attract and retain qualified
individuals to serve as Employees in those positions; (c) to enhance
long-term performance of the Company by linking a meaningful portion of
the compensation of selected Key Employees to the achievement of specific
long-term financial objectives of the Company; and (d) to motivate and
reward selected Key Employees to undertake actions to increase the price
of the Common Stock.
13.2 Eligibility
Any Key Employee is eligible to participate in the Performance Stock
Program. Within the first 90 days of a Performance Cycle (or, if
longer, within the maximum period allowed under Section 162(m) of the
Code), the CEO will recommend to the Committee, and from such
recommendations the Committee will select, those Key Employees who will
be Participants for such Performance Cycle. However, designation of a
Key Employee as a Participant for a Performance Cycle shall not in any
manner entitle the Participant to receive payment of an Award for the
cycle. The determination as to whether or not such Participant becomes
entitled to payment of an Award for such Performance Cycle shall be
decided solely in accordance with the provisions of this Article 13.
Moreover, designation of a Key Employee as a Participant for a
particular Performance Cycle shall not require designation of such Key
Employee as a Participant in any subsequent Performance Cycle and
designation of one Key Employee as a Participant shall not require
designation of any other Key Employee as a Participant in such
Performance Cycle or in any other Performance Cycle.
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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
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Participant through the Award Payment Date for the Performance Cycle by
a fraction, the numerator of which is the number of full months he or
she was a Participant during such Performance Cycle over the total
number of full months in the Performance Cycle. For purposes of this
calculation, a partial month of participation shall: (1) be treated as
a full month of participation to the extent a Participant participates in
the Performance Stock Program on 15 or more days of such month; and (2)
not be taken into consideration to the extent the Participant
participates in the Performance Stock Program for less than 15 days of
such month. Such pro-rata Award shall be paid in the form of shares of
Common Stock, not subject to any restrictions, limitations or escrow
requirements. In the event of Disability, Retirement or termination for
an Approved Reason, the pro-rata Award shall be paid directly to the
Participant and, in the event of death, to the Participant's estate.
13.8 Awards
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.
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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.
ARTICLE 15 -- DIVIDEND AND DIVIDEND EQUIVALENT
If an Award is granted in the form of a Stock Award, stock option, or
performance share, or in the form of any other stock-based grant, the
Committee may choose, at the time of the grant of the Award or any time
thereafter up to the time of the Award's payment, to include as part of
such Award an entitlement to receive dividends or dividend equivalents,
subject to such terms, conditions, restrictions and/or limitations, if
any, as the Committee may establish. Dividends and dividend
equivalents shall be paid in such form and manner (i.e., lump sum or
installments), and at such time(s) as the Committee shall determine.
All dividends or dividend equivalents which are not paid currently may,
at the Committee's discretion, accrue interest, be reinvested into
additional shares of Common Stock or, in the case of dividends or
dividend equivalents credited in connection with performance shares, be
credited as additional performance shares and paid to the Participant
if and when, and to the extent that, payment is made pursuant to such
Award. The total number of shares available for grant under Section
6.1 shall not be reduced to reflect any dividends or dividend
equivalents that are reinvested into additional shares of Common Stock
or credited as additional performance shares.
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ARTICLE 16 -- DEFERRAL OF AWARDS
At the discretion of the Committee, payment of any Award, dividend, or
dividend equivalent, or any portion thereof, may be deferred by a
Participant until such time as the Committee may establish. All such
deferrals shall be accomplished by the delivery of a written, irrevocable
election by the Participant prior to the time established by the
Committee for such purpose, on a form provided by the Company. Further,
all deferrals shall be made in accordance with administrative guidelines
established by the Committee to ensure that such deferrals comply with
all applicable requirements of the Code. Deferred payments shall be paid
in a lump sum or installments, as determined by the Committee. Deferred
Awards may also be credited with interest, at such rates to be determined
by the Committee, and, with respect to those deferred Awards denominated
in the form of Common Stock, with dividends or dividend equivalents.
ARTICLE 17 -- CHANGE IN OWNERSHIP
17.1 Background.
Notwithstanding any provision contained in the Plan, including, but not
limited to, Sections 4.4 and 19.11, the provisions of this Article 17
shall control over any contrary provision. Upon a Change In Ownership:
(i) the terms of this Article 17 shall immediately become operative,
without further action or consent by any person or entity; (ii) all
terms, conditions, restrictions, and limitations in effect on any
unexercised, unearned, unpaid, and/or deferred Award, or any other
outstanding Award, shall immediately lapse as of the date of such event;
(iii) no other terms, conditions, restrictions and/or limitations shall
be imposed upon any Awards on or after such date, and in no circumstance
shall an Award be forfeited on or after such date; and (iv) except in
those instances where a prorated Awards is required to be paid under
this Article 17, all unexercised, unvested, unearned, and/or unpaid
Awards or any other outstanding Awards shall automatically become one
hundred percent (100%) vested immediately.
17.2 Dividends and Dividend Equivalents.
Upon a Change In Ownership, all unpaid dividends and dividend
equivalents and all interest accrued thereon, if any, shall be treated
and paid under this Article 17 in the identical manner and time as the
Award under which such dividends or dividend equivalents have been
credited. For example, if upon a Change In Ownership, an Award under
this Article 17 is to be paid in a prorated fashion, all unpaid
dividends and dividend equivalents with respect to such Award shall be
paid according to the same formula used to determine the amount of such
prorated Award.
17.3 Treatment of Performance Units and Performance Shares.
If a Change In Ownership occurs during the term of one or more
performance periods for which the Committee has granted performance
units and/or performance shares (including those issued as Performance
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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
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Section 17.4 above and those granted by the Committee pursuant to its
authority under Subsection 4.2(m) hereof), shall be valued and cashed
out on the basis of the Change In Control Price.
17.6 Payment of Awards.
Upon a Change In Ownership, any Participant, whether or not he or she is
still employed by the Company, shall be paid, in a single lump-sum cash
payment, as soon as practicable but in no event later than 90 days after
the Change In Ownership, all of his or her Units of Common Stock,
Freestanding SARs, stock options (including incentive stock options),
Stock Awards (including those issued as Performance Awards under Article
7), performance units and shares (including those earned as a result of
the application of Section 17.3 above), all other outstanding stock-
based Awards (including those earned as a result of the application of
Section 17.4 above and those granted by the Committee pursuant to its
authority under Subsection 4.2(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.
Notwithstanding anything contained in this Article 17 to the contrary,
any Participant who, on the date of the Change In Ownership, 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 such
date 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.
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.
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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.
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
<PAGE>
<PAGE> 58
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.
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.
<PAGE>
<PAGE> 59
18.9 Section 16 of Exchange Act.
Notwithstanding anything contained in this Article 18 to the contrary,
any Participant who, on the date of his or her termination of
employment under the conditions described in Section 18.1, 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 business day
next following the end of such six-month period.
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.
18.10 Legal Fees.
Kodak shall pay all legal fees and related expenses incurred by a
Participant in seeking to obtain or enforce any payment, benefit or
right he or she may be entitled to under the Plan after a Change In
Control; provided, however, the Participant shall be required to repay
any such amounts to Kodak to the extent a court of competent
jurisdiction issues a final and non-appealable order setting forth the
determination that the position taken by the Participant was frivolous
or advanced in bad faith.
ARTICLE 19 -- MISCELLANEOUS
19.1 Nonassignability
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
<PAGE>
<PAGE> 60
to such payment or may require the Participant to pay to it such tax
prior to and as a condition of the making of such payment. In accordance
with any applicable administrative guidelines it establishes, the
Committee may allow a Participant to pay the amount of taxes required by
law to be withheld from an Award by withholding from any payment of
Common Stock due as a result of such Award, or by permitting the
Participant to deliver to the Company, shares of Common Stock having a
fair market value, as determined by the Committee, equal to the amount of
such required withholding taxes.
19.3 Amendments to Awards
The Committee may at any time unilaterally amend any unexercised,
unearned, or unpaid Award, including, but not by way of limitation,
Awards earned but not yet paid, to the extent it deems appropriate;
provided, however, that any such amendment which, in the opinion of the
Committee, is adverse to the Participant shall require the Participant's
consent.
19.4. Regulatory Approvals and Listings
Notwithstanding anything contained in this Plan to the contrary, the
Company shall have no obligation to issue or deliver certificates of
Common Stock evidencing Stock Awards or any other Award resulting in the
payment of Common Stock prior to (i) the obtaining of any approval from
any governmental agency which the Company shall, in its sole discretion,
determine to be necessary or advisable, (ii) the admission of such
shares to listing on the stock exchange on which the Common Stock may be
listed, and (iii) the completion of any registration or other
qualification of said shares under any state or Federal law or ruling of
any governmental body which the Company shall, in its sole discretion,
determine to be necessary or advisable.
19.5 No Right to Continued Employment or Grants
Participation in the Plan shall not give any Employee any right to
remain in the employ of Kodak or any Subsidiary. Kodak or, in the case
of employment with a Subsidiary, the Subsidiary, reserves the right to
terminate any Employee at any time. Further, the adoption of this Plan
shall not be deemed to give any Employee or any other individual any
right to be selected as a Participant or to be granted an Award.
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 16 of the
Exchange Act or 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.
<PAGE>
<PAGE> 61
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.
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.
<PAGE>
<PAGE> 62
<TABLE>
Exhibit (11)
Eastman Kodak Company and Subsidiary Companies
Computation of Earnings Per Common Share
<CAPTION>
Second Quarter First Half-Year
1995 1994 1995 1994
(in millions, except per share amounts)
<S> <C> <C> <C> <C>
Earnings from continuing operations before
extraordinary item $ 377 $ 295 $ 639 $ 440
Loss from discontinued operations - (30) - (81)
----- ----- ----- -----
Earnings before extraordinary item 377 265 639 359
Extraordinary item - (1) - (13)
----- ----- ----- -----
Net Earnings $ 377 $ 264 $ 639 $ 346
===== ===== ===== =====
Average number of common shares outstanding 341.2 332.8 340.6 331.8
Earnings per share from continuing
operations before extraordinary item $1.11 $ .88 $1.88 $1.33
Loss per share from discontinued operations - (.09) - (.25)
----- ----- ----- -----
Earnings per share before extraordinary item 1.11 .79 1.88 1.08
Extraordinary item - - - (.04)
----- ----- ----- -----
Earnings per share $1.11 $ .79 $1.88 $1.04
===== ===== ===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER 1995 FORM 10-Q OF EASTMAN KODAK COMPANY, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000031235
<NAME> EASTMAN KODAK COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1.0
<CASH> 823
<SECURITIES> 65
<RECEIVABLES> 3,265
<ALLOWANCES> 126
<INVENTORY> 1,873
<CURRENT-ASSETS> 6,804
<PP&E> 12,694
<DEPRECIATION> 7,321
<TOTAL-ASSETS> 14,177
<CURRENT-LIABILITIES> 4,384
<BONDS> 654
<COMMON> 971
0
0
<OTHER-SE> 3,542
<TOTAL-LIABILITY-AND-EQUITY> 14,177
<SALES> 7,075
<TOTAL-REVENUES> 7,201
<CGS> 3,643
<TOTAL-COSTS> 3,643
<OTHER-EXPENSES> 2,506
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 1,014
<INCOME-TAX> 375
<INCOME-CONTINUING> 639
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 639
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 0
</TABLE>
