SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Polaroid Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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<PAGE>
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
Polaroid
Corporation
Notice of
1998 Annual
Meeting of
Stockholders
and Proxy
Statement
<PAGE>
Polaroid Corporation
549 Technology Square
Cambridge, Massachusetts 02139
March 30, 1998
To Our Stockholders:
You are cordially invited to attend the Company's 1998 Annual Meeting on
Tuesday, May 5, 1998, in Cambridge, Massachusetts.
The meeting will begin at 3:00 p.m. at the American Academy of Arts and
Sciences, Cambridge, Massachusetts (entrance located at 200 Beacon Street,
Somerville, Massachusetts--see map on back page).
The principal items of business will be the election of directors and the
ratification of the appointment of independent auditors. I will also report on
the progress of the Company during the past year and answer stockholder
questions.
The vote of every stockholder is important. Please note that returning your
completed proxy will not prevent you from voting in person at the meeting if
you wish to do so. Your cooperation in promptly signing, dating and returning
your proxy will be greatly appreciated.
Sincerely yours,
/s/ Gary T. DiCamillo
- ----------------------
Gary T. DiCamillo
Chairman and Chief Executive Officer
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NOTICE OF ANNUAL MEETING
To the Stockholders:
The Annual Meeting of Stockholders of Polaroid Corporation will be held on
Tuesday, May 5, 1998, at 3:00 p.m. at the American Academy of Arts and
Sciences, Cambridge, Massachusetts (entrance located at 200 Beacon Street,
Somerville, Massachusetts) for the following purposes:
1. To elect twelve directors to serve until the next Annual Meeting of
Stockholders.
2. To ratify the appointment of KPMG Peat Marwick LLP as independent auditors
of the Company for 1998--recommended by the Board of Directors.
3. To conduct such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 9, 1998 are entitled
to vote at the meeting.
By order of the Board of Directors,
/s/ Thomas M. Lemberg
- ------------------------
Thomas M. Lemberg
Senior Vice President, General Counsel and Secretary
March 30, 1998
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the meeting, please mark, sign and date the
enclosed proxy and return it promptly in the envelope provided, which requires
no postage if mailed in the United States.
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<PAGE>
POLAROID CORPORATION
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Polaroid Corporation, 549 Technology
Square, Cambridge, Massachusetts 02139 (the "Company") to be voted at the
Annual Meeting of Stockholders of the Company on Tuesday, May 5, 1998, and any
adjournment.
All holders of record of common stock of the Company as of the close of
business on March 9, 1998, the record date, are entitled to vote at the
meeting. As of that date, 44,430,639 shares of common stock of the Company were
outstanding. Each share is entitled to one vote. A favorable vote of a majority
of the shares of common stock represented in person or by proxy at the meeting
and entitled to vote is required for the approval of each of the proposals
described in this proxy statement.
If a proxy is signed and not revoked, the shares it represents will be voted in
accordance with the instructions of the stockholder. Proxies indicating
stockholder abstentions will, in accordance with Delaware law, be counted as
represented at the meeting for purposes of determining whether there is a
quorum present, but will not be voted for or against the proposal. However, the
effect of marking a proxy for abstention on any proposal other than for the
election of directors has the same effect as a vote against the proposal.
Shares represented by "broker non-votes" (i.e., shares held by brokers or
nominees that are represented at a meeting but with respect to which the broker
or nominee is not empowered to vote on a particular proposal) will be counted
for purposes of determining whether there is a quorum, but will not be voted on
such matter and will not be counted for purposes of determining the number of
votes cast on such matter.
A stockholder may sign and return a proxy without instructions as to one or
more proposals. If the shares represented by the proxy are not held by a
broker, the shares will be voted on those proposals in accordance with the
recommendations of the Board. If the shares are held by a broker and the broker
in turn submits a proxy covering the shares, the shares will, with respect to
issues on which the broker is empowered to act, be counted as present at the
meeting and voted in accordance with any instructions the broker may give. If a
stockholder submits a proxy without such instructions, the shares will be voted
with respect to those issues in accordance with the recommendations of the
Board.
At any time before a proxy is voted it may be revoked by the stockholder by
whom it was submitted.
For participants in the Company's Automatic Dividend Reinvestment Plan, proxies
representing shares of common stock held of record will also represent shares
held under that plan.
The approximate date on which this proxy statement and proxy are first being
sent to stockholders is March 30, 1998.
ELECTION OF DIRECTORS
At the Annual Meeting, twelve directors will be elected to hold office until
the next Annual Meeting and until their respective successors are elected and
qualify. All nominees have consented to be named in this proxy statement and to
serve if elected.
All nominees except Stephen P. Kaufman and Carole F. St. Mark were elected
directors at the last Annual Meeting.
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<PAGE>
The following information is submitted respecting the nominees for election:
[PHOTOGRAPH OF GARY T. DICAMILLO]
Gary T. DiCamillo, 47, has been a director since 1995. He is Chairman and
Chief Executive Officer of the Company. Prior to joining the Company in 1995 he
was employed at Black & Decker Corporation (a global marketer and manufacturer
of products for consumer and commercial applications). From 1993 to 1995 he was
Group Vice President of Black & Decker Corporation and President of its Power
Tools and Accessories business. From 1988 to 1993 he was President of the North
America Power Tools business at Black & Decker Corporation. He is also a
director of Pella Corporation, Sheridan Group, and Whirlpool Corporation.
[PHOTOGRAPH OF RALPH E. GOMORY]
Ralph E. Gomory, 68, has been a director since 1993. He is President of the
Alfred P. Sloan Foundation (a philanthropic foundation) and has held that
position since 1989. He is also a director of Ashland, Inc., Bank of New York,
Lexmark International, Inc., and Washington Post Company.
[PHOTOGRAPH OF FRANK S. JONES]
Frank S. Jones, 69, has been a director since 1973. He was Distinguished
Leadership Professor for the 1996-1997 academic year at Morehouse College in
Atlanta, Georgia. Since 1992 he has been Ford Professor of Urban Affairs
Emeritus, Massachusetts Institute of Technology. He is also a director of
Scientific Games Holdings Corporation.
[PHOTOGRAPH OF STEPHEN P. KAUFMAN]
Stephen P. Kaufman, 56, has been a director since September 1997. He is
Chairman, President and Chief Executive Officer of Arrow Electronics, Inc. (a
distributor of semiconductors, computer peripherals and components). Since 1986
he has been President and Chief Executive Officer; since 1994 he has been
Chairman of the Board. He is also a Director of Arrow Electronics, Inc.
[PHOTOGRAPH OF JOHN W. LOOSE]
John W. Loose, 56, has been a director since 1994. Since 1996 he has been
the President of Corning Communications, Corning, Inc. (a manufacturer of
advanced glass materials and components). From 1993 to 1996 he was the Executive
Vice President of Corning, Inc. and also President and CEO of Corning Consumer
Products Company. From 1990 to 1993 he was Executive Vice President, Information
Display Group, of Corning, Inc. He is also a director of Corning, Inc.
4
<PAGE>
[PHOTOGRAPH OF ALBIN F. MOSCHNER]
Albin F. Moschner, 45, has been a director since 1994. Since August 1997 he
has been President and Chief Executive Officer of MilleCom Corp. (an
Internet-based communications company). From 1996 to 1997 he was Vice Chairman
of DIBA Inc. (a computer software company). From 1995 to 1996 he was President
and Chief Executive Officer of Zenith Electronics (a TV manufacturer). From 1993
to 1995 he was President and Chief Operating Officer, Zenith Electronics, and
from 1991 to 1993 he was Senior Vice President, Zenith Electronics. He is also a
director of Pella Corporation, Vision Solutions Corp., and Wintrust Financial
Corporation.
[PHOTOGRAPH OF RONALD F. OLSEN]
Ronald F. Olsen, 57, has been a director since 1996. Since October 1996 he
has been a Technical Specialist for the Company. From 1992 to October 1996 he
was a Mechanical Specialist for the Company.
[PHOTOGRAPH OF RALPH Z. SORENSON]
Ralph Z. Sorenson, 64, has been a director since 1984. Since 1993 he has
been Professor Emeritus, University of Colorado. From 1992 to 1993 he was Dean
of the College of Business at the University of Colorado. From 1989 until 1992
he was an Adjunct Professor at Harvard Business School. Prior to that time, he
was the Chairman of the Board, President and Chief Executive Officer of Barry
Wright Corporation. He is also a director of Eaton Vance Corporation, Exabyte
Corporation, Houghton Mifflin Company, Sweetwater, Inc., Whole Foods Market,
Inc., and Xenometrix, Inc.
[PHOTOGRAPH OF CAROLE F. ST. MARK]
Carole F. St. Mark, 55, has been nominated for election to the Board of
Directors of the Company. Since 1997 she has been President of Growth
Management, LLC, (a business development and strategic management company). From
1994 to 1997 she was President and Chief Executive Officer of Pitney Bowes
Business Services, a unit of Pitney Bowes, Inc., and from 1990 to 1994 she was
President of Pitney Bowes Business Supplies and Services. She is a former
non-executive director of Grand Metropolitan PLC and is currently a director of
SuperValu, Inc., and Gerber Scientific, Inc.
[PHOTOGRAPH OF DELBERT C. STALEY]
Delbert C. Staley, 73, has been a director since 1989. He has been retired
since October 1991. From October 1989 until October 1991 he was Chairman and
Director of the NYNEX International Management Committee. From 1983 until his
retirement in September 1989 he was Chairman, Chief Executive Officer and a
Director of NYNEX Corporation. Mr. Staley is a director of Digital Equipment
Corporation; SRA International, Inc., and a member of the Board of Advisers of
the Cassidy Companies, Inc. He is Chairman of Alcatel Network Systems, Inc.,
Chairman of the Board of the Asian Infrastructure Telecommunications Fund, and
Principal of East Haven Investments, Ltd. He is a member of the Board of
Managers of Rose-Hulman Institute of Technology and a member of the Board of
Trustees of the New York Racing Association, Inc.
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<PAGE>
[PHOTOGRAPH OF BERNEE D. L. STROM]
Bernee D. L. Strom, 50, has been a director since 1996. Since 1990, she has
been President and Chief Executive Officer of The Strom Group (an investment and
business advisory firm that specializes in startups and turnarounds of high
technology companies). From July 1997 she has been a director of Walker Digital
(an intellectual property studio) and its first spin-out, Priceline.com (an
internet commerce company). From April 1995 to June 1997 she was President and
Chief Executive Officer of USA Digital Radio Partners, LP (a communication and
technology company), a partnership between Gannett Co., Inc., and Westinghouse
Electric Corporation. From 1990 to 1994 she was President and Chief Executive
Officer of MBS Technologies, Inc. (a software publishing company). She is also a
director of Krug International, a former director of Software Publishing and DDL
Electronics Corporation and a member of the Board of Advisors of the J. L.
Kellogg Graduate School of Management of Northwestern University.
[PHOTOGRAPH OF ALFRED M. ZEIEN]
Alfred M. Zeien, 68, has been a director since 1985. Since February 1991, he has
been Chairman of the Board and Chief Executive Officer of The Gillette Company
(a manufacturer of consumer products). From January 1991 to February 1991, he
was President and a director and prior to that time Vice Chairman of the Board
of The Gillette Company. He is also a director of BankBoston Corporation,
The Gillette Company, Massachusetts Mutual Life Insurance Company and
Raytheon Company.
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information with respect to shares of
common stock owned by beneficial owners of more than 5% of the outstanding
common stock of the Company as of December 31, 1997 and (i) the CEO and the
four other most highly compensated executive officers of the Company during
1997; (ii) each director of the Company; and (iii) all directors and executive
officers as a group as of January 16, 1998, unless otherwise noted. Individuals
have sole voting and investment power with regard to the stock unless otherwise
indicated in the footnotes.
<TABLE>
<CAPTION>
Common Stock Percent of
Name Beneficially Owned(1)(2) Class
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Executive Officers and Directors
- --------------------------------
Gary T. DiCamillo 180,000(3) *
Thomas M. Lemberg 15,100 *
William J. O'Neill, Jr. 83,306 *
Serafino Posa 18,481 *
Carole J. Uhrich 40,100 *
Ralph E. Gomory 10,410 *
Frank S. Jones 5,710(4) *
Stephen P. Kaufman 500 *
John W. Loose 4,960 *
Albin F. Moschner 3,960 *
Kenneth H. Olsen 7,210(5)(6) *
Ronald F. Olsen 1,877 *
Ralph Z. Sorenson 5,410 *
Carole F. St. Mark 500(7) *
Delbert C. Staley 5,438 *
Bernee D. L. Strom 1,060 *
Alfred M. Zeien 5,610 *
All directors and executive officers as a group
(18 persons) 436,822 1%
</TABLE>
- ------------
See footnotes on next page.
6
<PAGE>
<TABLE>
<CAPTION>
Common Stock Percent of
Name Beneficially Owned(1)(2) Class
- -------------------------------------------------------------------------------
<S> <C> <C>
Five Percent Owners
- -------------------
Harris Associates L.P.
Two North LaSalle Street, Suite 500
Chicago, Illinois 60602-3790 7,740,750(8) 17.4%
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110 7,335,231(9) 16.5%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 6,037,810(10) 13.6%
Putnam Investments, Inc.
One Post Office Square
Boston, Massachusetts 02109 1,728,318(11) 3.9%
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258 1,522,558(12) 3.4%
- -------------------------------------------------------------------------------
</TABLE>
*Less than 1%
(1) The number of shares set forth opposite the name of each director, nominee
or executive officer includes the following numbers of shares obtainable
upon the exercise of stock options under the Polaroid Stock Incentive Plan
or the Board of Directors Stock Option Plan within 60 days of January 16,
1998: 140,000 for Mr. DiCamillo; 15,100 for Mr. Lemberg; 15,500 for Mr.
Posa; 77,050 for Mr. O'Neill; 35,273 for Ms. Uhrich; 0 for Mr. R. Olsen;
and 5,000 shares for each other director (with the exception of Mr. Loose
and Mr. Moschner each of whom holds 3,750 options which are exercisable,
Mr. Staley, who holds 3,000 options which are exercisable, Ms. Strom, who
holds 750 options which are exercisable, and Mr. Kaufman and Ms. St. Mark,
who hold no options which are exercisable), and 360,748 for all directors
and executive officers as a group.
(2) Includes the following numbers of allocated shares under the Polaroid
Retirement Savings Plan: 0 for Mr. DiCamillo; 0 for Mr. Lemberg; 6,256 for
Mr. O'Neill; 221 for Mr. Posa; 4,827 for Ms. Uhrich; and 13,182 for all
directors and named executive officers as a group.
(3) Includes 30,000 shares of restricted common stock as to which Mr.
DiCamillo has sole voting power, of which 15,000 shares were granted in
February 1996 (see Footnote (3) to Summary Compensation Table) and of
which 15,000 shares were granted in December 1995.
(4) Dr. Jones disclaims beneficial ownership of 100 shares.
(5) Retiring member of the Board of Directors.
(6) Includes 2,210 shares held in a revocable trust created by Mr. K. Olsen.
Mr. Olsen does not have investment power with respect to such shares.
(7) Ms. St. Mark acquired 500 shares on February 26, 1998.
(8) As reported on Harris Associates LP Schedule 13G, Harris Associates L.P.
("Harris") is an Investment Adviser and Harris Associates, Inc. is the
sole General Partner of Harris and each has shared power to vote or to
direct the vote of 7,740,750 shares, sole power to dispose or to direct
the disposition of 2,177,450 shares and shared power to dispose or to
direct the disposition of 5,563,300 shares.
(9) As reported on the State Street Bank and Trust Company Amended Schedule
13G, State Street Bank and Trust Company, Trustee, beneficially owned
7,335,231 shares as trustee of the Polaroid Retirement Savings Plan. State
Street also held 708,234 shares as trustee or discretionary advisor, with
sole voting power for 646,010 shares and sole investment power for 708,234
shares. In addition, State Street held 5,495 shares as trustee or
co-trustee of various personal trust accounts, with sole
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<PAGE>
voting power for 5,495 shares, shared voting power for 0 shares, sole
investment power for 5,081 shares and shared investment power for 414
shares.
(10) As reported on FMR Corp. Schedule 13G, FMR Corp. has sole power to vote or
to direct the vote over 514,010 shares, shared power to vote or to direct
the vote over 0 shares, sole power to dispose or to direct the disposition
over 6,037,810 shares and no shared power to dispose or to direct the
disposition over any shares.
(11) As reported on Putnam Investments Inc. Schedule 13G, Putnam Investments
Inc. is a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. and
wholly owns two registered investment advisers: Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc. Putnam Investments,
Inc. has shared voting power over 86,656 shares and shared dispositive
power over 1,728,318 shares.
(12) As reported on Mellon Bank Corporation Schedule 13G, Mellon Bank
Corporation, as parent holding company and its subsidiaries in their
various fiduciary capacities, have sole voting power over 1,055,592
shares, shared voting power over 31,000 shares, sole dispositive power
over 1,305,813 shares and shared dispositive power over 187,428 shares.
Meetings and Committees of the Board of Directors
The Executive Committee, which did not meet in 1997, may meet between scheduled
meetings of the Board of Directors and has the authority to exercise all the
powers of the Board except as to matters for which Board action is specifically
required by law or the Company's by-laws. Members are: Gary T. DiCamillo
(Chairman), Ralph E. Gomory, Albin F. Moschner, Delbert C. Staley, and Alfred
M. Zeien.
The Audit Committee, which met three times in 1997, monitors the adequacy and
effectiveness of the internal and external audit functions, the system of
internal accounting controls, financial accounting and reporting, and the
adequacy and effectiveness of systems for ensuring compliance with federal,
state and local laws and regulations. Members are: Ralph E. Gomory (Chairman),
Frank S. Jones, Ronald F. Olsen, and Delbert C. Staley.
The Finance Committee, which met two times in 1997, is responsible for the
issuance or purchase of equity securities and credit facilities, approval of
capital expenditures and third party guarantees in excess of $10 million, and
approval of all material contracts relating to financing matters. Members are:
Albin F. Moschner (Chairman), Ralph E. Gomory, Stephen P. Kaufman, John W.
Loose, and Bernee D. L. Strom.
The Human Resources Committee, which met five times during 1997, recommends to
the Board of Directors the remuneration of the Company's officers and other
senior personnel, administers the Company's stock compensation plans and
proposes the adoption of various employee benefit plans in which directors,
officers and senior personnel are eligible to participate. Members are: Delbert
C. Staley (Chairman), Frank S. Jones, John W. Loose, Albin F. Moschner, Ralph
Z. Sorenson, Bernee D. L. Strom, and Alfred M. Zeien.
The Committee on Directors, which met two times in 1997, recommends nominees to
the Board of Directors, determines the size and composition of the Board and
the criteria for nominees and members, and provides guidance with respect to
the Board's effectiveness. The committee will consider director nominations
made by the Company's stockholders. Stockholder recommendations must be in
writing, addressed to the Corporate Secretary at the address set forth at the
beginning of this proxy statement, and should include a statement describing
the qualifications and experience of the proposed candidate and the basis for
nomination. Members are: Alfred M. Zeien (Chairman), Kenneth H. Olsen, and
Ralph Z. Sorenson.
The Committee of Outside Directors, which met one time during 1997, considers
matters of corporate governance, including such matters suggested by any of its
own members. Members are the non-employee directors: Ralph E. Gomory, Frank S.
Jones, Stephen P. Kaufman, John W. Loose, Albin F. Moschner, Kenneth H. Olsen,
Ralph Z. Sorenson, Delbert C. Staley, Bernee D. L. Strom, and Alfred M. Zeien.
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<PAGE>
During 1997, the average attendance of directors at meetings of the Board of
Directors was 92%. All current directors attended 75% or more of the aggregate
of the meetings of the Board and meetings of Committees of the Board on which
they served except Dr. Gomory, whose attendance was 69%.
Kenneth H. Olsen will be retiring from the Board of Directors.
Further Information Concerning the Board of Directors
Directors' fees are paid only to directors who are not employees of the
Company. Each such director standing for re-election is paid a retainer of
$30,000 per year, of which $10,000 is granted as unrestricted common stock.
This stock grant is based on the fair market price of common stock on May 1st
of each year. Other compensation paid to directors includes $1,500 for each
Board or Committee meeting a director attends; $2,000 for the Chairperson of
each Committee for each meeting attended; and may include, from time to time, a
small additional fee for consultations with management.
Pursuant to the terms of the Polaroid Board of Directors Stock Option Plan, a
one-time grant of an option to purchase 3,000 shares of common stock was made
to each non-employee director on April 24, 1990, or, if later, the date the
director joined the Board. Options are valued at the fair market value on the
date of grant. In addition, a one-time grant of an option to purchase 2,000
shares of common stock was awarded to each non-employee director who was a
director on July 25, 1995. Under the Board of Directors Stock Plan, a stock
option grant of 1,500 options is granted each year to each non-employee member
of the Board who is 68 years old or younger as of December 31, 1996.
Polaroid has had a Board of Directors Retirement Plan for each retired
non-employee director who has served for at least five years. This plan is
available to current retirees. Directors who were 68 years of age or older on
December 31, 1996, continue to receive accruals. Any director who was younger
than 68 years of age on December 31, 1996, receives no future accrual under
this plan.
BOARD PROPOSAL--TO RATIFY THE APPOINTMENT OF INDEPENDENT
AUDITORS
Subject to stockholder ratification, the Board of Directors has appointed KPMG
Peat Marwick LLP as the independent auditors of the financial statements of the
Company for 1998.
KPMG Peat Marwick LLP has performed audit and non-audit services for the
Company for many years. Representatives of KPMG Peat Marwick LLP will be
present at the Annual Meeting, will have an opportunity to make a statement if
they so desire, and will be available to respond to questions. If the
appointment of KPMG Peat Marwick LLP is not approved by the shareholders, or
KPMG Peat Marwick ceases to act as the Company's independent accountants, the
Board will appoint other independent accountants. The engagement of new
accountants for periods following the 1999 Annual Meeting will be subject to
ratification by the shareholders at that meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS BOARD PROPOSAL.
EXECUTIVE COMPENSATION
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Human Resources Committee (the "Committee") of the Board of Directors acts
as the compensation committee of the Company. The Committee is comprised
entirely of Board members who are independent, non-employee directors of the
Company. None of the members of the Committee receives remuneration from the
Company other than for his/her capacity as a director. The Committee is
responsible for the Company's executive compensation policies and practices and
for the actual pay structure for the executive officers of the Company. It also
makes recommendations to the Board of Directors on the compensation paid to the
CEO. The Board of Directors has final approval on the CEO's compensation
package.
Compensation Philosophy
One of the essential elements of the Company's compensation policy is to align
the interests of the CEO, executive officers and key employees with the
interests of stockholders. This objective is being achieved in two ways. First,
the compensation program is designed to motivate individuals to achieve
superior levels of performance and thereby maximize stockholder value. A
considerable portion of each executive's total com-
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<PAGE>
pensation is directly related to the success of the Company, tying compensation
to corporate, business unit and individual goals aimed at increasing
stockholder value through the bonus plan and stock-based long-term incentive
compensation. The proportion of an executive's total compensation which is
directly related to the achievement of these objectives progressively increases
at each higher level of management. The Committee believes that the current
executive compensation program, which promotes rewards based on enhancement in
stockholder value, will contribute to the Company's success.
Second, the Board of Directors has developed stock ownership guidelines which
require the CEO, executive officers and key employees to own designated amounts
of the Company's common stock. Within the next few years, the CEO will be
required to own common stock valued at five times base pay, the officers three
times base pay and other executives one times base pay.
In designing the executive compensation program, the Committee reviews the
compensation standards of a group of ten comparison companies. The Committee
considers the following basic compensation components: base salary, annual
bonuses and long-term incentive compensation. The Company's comparison group is
engaged in diverse photographic, technological and consumer goods businesses.
Four of those companies are included in the industry index used by the Company
in the Performance Graph on page 18. The Committee uses an average of the
comparison group's compensation information in order to provide a basis for
comparison. The Committee relies upon an independent consultant to calculate
the comparison group's average for total compensation, base salary, annual
bonus and long-term incentive. These values have been adjusted based on annual
sales volumes.
Components Of Compensation
Base Salary. In 1997 the base salary range for each executive officer was
established by considering each executive officer's position, the Company's
assessment of the importance of the position to achieving the long-term
performance objectives of the Company and the base salaries of executives in
the Company's comparison group. An actual salary was then determined based on
individual performance. The base salary for each named executive officer, other
than the CEO, remains comparable with the average base salaries of executive
officers in similarly held positions in the Company's comparison group.
The CEO's base salary is moderately below the base salaries of CEOs in
similarly held positions in the Company's comparison group. While the CEO's
salary is periodically reviewed by the Board, and is consistent with the
Compensation Philosophy, a higher proportion of the CEO's total compensation is
based on the achievement of corporate performance objectives designed to
produce long-term growth in stockholder value.
Annual Bonus Awards. The CEO, named executives, and other executives are
eligible for annual cash bonuses pursuant to the Polaroid Incentive Plan for
Executives. The key factor for determining whether an award will be paid under
this plan is Economic Value Added (EVA[RegTM]). EVA[RegTM] is a financial
metric which is calculated using profits of the business less a charge for the
use of the capital employed to generate those profits. The EVA[RegTM] targets
and thresholds are determined by the Board. If the EVA[RegTM] threshold is not
met there is no payout of bonus awards.
The bonus award is comprised of three components: a corporate EVA[RegTM]
component, a business unit EVA[RegTM] component and a personal component. For
the CEO and other executives who are not assigned to a business unit, the
annual bonus stems from achieving a corporate EVA[RegTM] target. For executives
who are working in business units, a portion of the annual bonus is based on
the EVA[RegTM] target for the participant's business unit, and the remainder is
based upon achieving the corporate EVA[RegTM] target. The personal component is
based on performance goals set for the officers and executives for the year.
There is no distribution of awards if the corporate EVA[RegTM] threshold is not
reached. The applicable business unit EVA[RegTM] target must also be met for a
distribution of this component.
In 1997 the corporate EVA[RegTM] threshold was missed. The principal reasons
for missing the threshold were the translation effects of a stronger U.S.
dollar and lower sales in Russia and China. The bonus opportunity for each
named executive officer and the CEO was comparable with the bonus opportunity
of executive officers in similarly held positions in the Company's comparison
group. While some officers received a special award for extraordinary service
during the year, no named executive received such award.
- --------------------
[RegTM]EVA is a registered trademark of Stern Stewart & Co.
10
<PAGE>
Long-Term Incentives. Pursuant to the Company's Stock Incentive Plan,
executives may receive common stock-based incentive awards as determined by the
Committee. Stock-based awards provide incentives for executives for
improvements in shareholder value. The Committee seeks to align the economic
interests of senior management with the Company's stockholders by increasing
the equity interest of its executives. The Plan provides for this through
options and performance share awards.
Most executive awards under this Plan are options. The Company issues options
at fair market value on the date of grant, and the executive receives
compensation from the grant only if the stock appreciates in value. The primary
factors the Committee considers in making option awards are: (i) the
executive's level of responsibility in the Company, (ii) industry standards and
norms as reflected in the practices of the Company's comparison group, (iii)
the anticipated value of the executive's contributions to the long-term growth
of the Company, and (iv) the size of the option pool.
In 1997 executives received non-qualified stock options at the fair market
price on the date of grant. Pursuant to Mr. DiCamillo's employment agreement,
he was eligible to participate in the Company's stock incentive program
commencing in 1997. The 1997 grants for the other named executive officers
under this Plan are set forth below in the table captioned "Option Grants in
1997."
The Committee expanded its equity-based incentive by issuing to officers and a
limited number of senior executives performance share awards under the Plan.
These awards are tied to the achievement of specific financial metrics critical
to the long-term success of the Company. Performance is measured over a
three-year period (or two-year start-up period) and is based on improvements in
revenue growth and Return on Net Assets (RONA). No awards are granted unless
both threshold performance targets are reached. In making these grants to the
select group of officers and senior executives, adjustments have been made to
the size of their option awards to keep their overall long-term incentives in
line with the Company's comparison group.
The final long-term incentive is the Officers' Compensation Exchange Plan
("OCEP"). This program was initiated approximately ten years ago and is being
phased out. Under this Plan officers who have been with the Company for more
than two years receive a biannual allocation of units tied to the market price
of the common stock in exchange for a mandatory 5% reduction in their base
compensation. All units were distributed in cash or rolled over to the Elective
Deferred Compensation Plan described below if timely elections were made, based
upon the fair market value of the common stock from the distribution date of
December 31, 1997.
For the named executive officers and the CEO, the value of the Company's
long-term incentive is comparable with those incentives for executives in
similarly held positions of the Company's comparison group.
Finally, during this past year the Company has implemented two new executive
benefits. The first is the Elective Deferred Compensation Plan which allows
executives the opportunity to defer a portion of their base salary, their
bonus, or both. Assets are held in a Rabbi Trust in separate accounts
maintained for each participant. The growth or earnings in this account may be
managed by selecting from among a "menu" of mutual fund options and Polaroid
common stock. An executive life insurance program was also adopted. These
programs were implemented to provide a competitive benefits package similar to
the Company's comparison group.
The Committee has studied the provisions of Section 162(m) of the Code, which
limits the deductibility of executive compensation in excess of $1,000,000 per
year. Future options granted under the 1993 Polaroid Stock Incentive Plan have
been structured to be exempt from the deduction limit. The $1,000,000 limit was
not exceeded for any executive officer.
Submitted by the Human Resources Committee:
Delbert C. Staley, Chairman
Frank S. Jones
John W. Loose
Albin F. Moschner
Ralph Z. Sorenson
Bernee D. L. Strom
Alfred M. Zeien
11
<PAGE>
Summary Compensation Table
The following table sets forth the compensation paid to the CEO and the four
most highly compensated executive officers in 1997.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------- ---------------------
Other Restricted
Annual Stock Stock All Other
Salary Bonus Compensation Awards Options Compensation
Name and Position Year ($) ($)(1) ($)(2) ($)(3) (#) ($)(4)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G.T. DiCamillo 1997 650,004 0 0 0 60,000 0
Chairman and 1996 550,008 400,000 178,377 688,125 0 0
Chief Executive Officer 1995 129,168 0 505,714 1,162,500 250,000 0
- ---------------------------------------------------------------------------------------------------------------------
T. M. Lemberg 1997 287,502 75,000 0 0 60,400 0
Senior Vice President, General 1996 91,668 0 0 0 0 0
Counsel and Secretary
- ---------------------------------------------------------------------------------------------------------------------
W.J. O'Neill, Jr. 1997 336,258 0 64,491 0 12,000 81,654
Executive Vice President, 1996 322,926 155,000 60,835 0 20,000 75,430
Chief Financial Officer and 1995 287,514 20,000 48,347 0 20,000 56,377
President Corporate Business
Development
- ---------------------------------------------------------------------------------------------------------------------
S. Posa 1997 320,004 176,000 135,861 0 62,000 0
Executive Vice President and 1996 51,283 110,000 5,128 0 0 0
President Consumer Imaging Group
- ---------------------------------------------------------------------------------------------------------------------
Carole J. Uhrich 1997 320,004 0 35,169 0 12,000 73,101
Executive Vice President and 1996 252,917 190,000 31,724 0 20,000 59,030
President Commercial Imaging Group 1995 218,508 20,000 22,190 0 13,000 42,827
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For 1995 and 1996, the amounts shown in this column represent the payments
under the Polaroid Incentive Plan for Executives, with the following
exceptions: (i) for 1995 for Mr. O'Neill and Ms. Uhrich, a one-time
special bonus for their significant contributions to the restructuring
program; (ii) for 1996, the amount shown for Mr. Posa represents a
one-time hiring bonus; (iii) bonuses for 1997 for Messrs. Lemberg and Posa
represent guaranteed payments as part of their employment agreements.
(2) Except as noted, amounts shown in this column for all years include
dividend equivalents paid under the OCEP and the Polaroid Stock Incentive
Plans to each named executive. The exceptions are: (i) for Mr. DiCamillo
the amount in 1996 represents relocation expenses and the amount in 1995
represents his special payment as provided in his employment agreement
plus relocation expenses of $5,714; (ii) for Mr. Posa the amounts for 1996
and 1997 also include relocation expenses.
(3) Mr. DiCamillo's employment agreement included an award of 40,000 shares of
restricted stock of which 15,000 shares were granted in February 1996 and
25,000 shares were granted in December 1995. The restriction on the
February 1996 grant provides that shares vest if certain corporate
financial objectives are achieved and Mr. DiCamillo is an employee as of
October 2000. The restriction on the December 1995 grant provides that
5,000 shares vest on each anniversary of Mr. DiCamillo's employment
agreement if he is an employee on such date. Regular dividends will be
paid on all shares.
(4) The amounts shown in this column include the value of shares of common
stock allocated in the Retirement Savings Plan and the value of units
allocated to participants under the OCEP in the years shown. The value of
the shares or units was calculated by using a year-end closing price of
$48.69 per share of common stock for 1997, $43.50 for 1996, and $47.38 for
1995. For 1997 the amounts represent $55,432 OCEP and $26,222 Retirement
Savings Plan for Mr. O'Neill, and $47,094 OCEP and $26,007 Retirement
Savings Plan for Ms. Uhrich.
12
<PAGE>
Option Grants in 1997
The following table sets forth information concerning stock options granted in
1997 under the 1993 Polaroid Stock Incentive Plan to the CEO and the four other
most highly compensated executive officers.
<TABLE>
<CAPTION>
Individual Grants
- ---------------------------------------------------------------------------------------------------------------
Percent of
Total Options
Options Granted to Exercise or Market Price Grant Date
Granted Employees in Base Price on Grant Date Expiration Present
Name (#) Fiscal Year ($/Sh) ($/Sh)(1) Date Value $(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
G.T. DiCamillo 60,000 7.5 41.75 41.75 3-12-07 1,372,000
- ---------------------------------------------------------------------------------------------------------------
T. M. Lemberg 10,000 1.3 41.75 41.75 3-12-07 229,000
50,400 6.3 42.88 42.88 9-03-06 1,144,000
- ---------------------------------------------------------------------------------------------------------------
W.J. O'Neill, Jr. 12,000 1.5 41.75 41.75 3-12-07 274,000
- ---------------------------------------------------------------------------------------------------------------
S. Posa 12,000 1.5 41.75 41.75 3-12-07 274,000
50,000 6.3 39.75 39.75 11-08-06 1,065,000
- ---------------------------------------------------------------------------------------------------------------
C. J. Uhrich 12,000 1.5 41.75 41.75 3-12-07 274,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All grants (i) were made at the fair market value of the stock on the date
of the grant; (ii) vest 25% per year normally beginning on the first
anniversary of the grant date; (iii) will terminate ten years from the
grant date, or earlier if there is a separation of service (including
termination, retirement, death); (iv) cease vesting when an officer's
employment terminates; and (v) accelerate to full vesting upon a change in
control, death or retirement at age 65 or older with ten years of service,
or retirement before age 65 with age and service equal to at least 90.
Dividend equivalents identical in both timing and value to the dividends
paid to stockholders on common stock are paid only on options granted
prior to May 1996. Common stock dividends have been $0.15 per share per
quarter since 1987.
(2) Option valuations are based on the Black-Scholes option pricing model using
various assumptions regarding common stock price volatility, future
dividend yield and interest rates. In calculating the grant date present
values for the options with expiration dates of March 12, 2007 set forth
in the table above: (i) a factor of 22.271% has been assigned to the
volatility of the common stock, based on daily stock market quotations for
the 12 months preceding the date of grant; (ii) the yield on the common
stock has been set at 1.44% based upon its annual dividend rate of $.60
per share at date of grant; (iii) the dividend equivalent feature has been
valued by taking the present value of the dividends which would be paid
over time assuming a constant dividend yield; (iv) the risk-free rate of
return has been fixed at 6.69%, the rate for a ten-year U.S. Treasury Note
with a maturity date corresponding to that of the option term; and (v) the
actual option term to the expiration date has been used.
For options with an expiration date of September 3, 2006, (i) a factor of
22.674% has been assigned to the volatility of the common stock, based on
daily stock market quotations for the 12 months preceding the date of
grant; (ii) the yield on the common stock has been set at 1.40% based upon
its annual dividend rate of $.60 per share at date of grant; (iii) the
dividend equivalent feature has been valued by taking the present value of
the dividends which would be paid over time assuming a constant dividend
yield; (iv) the risk-free rate of return has been fixed at 6.40%, the rate
for a ten-year U.S. Treasury Note with a maturity date corresponding to
that of the option term; and (v) the actual option term to the expiration
date has been used.
For options with an expiration date of November 8, 2006, (i) a factor of
21.652% has been assigned to the volatility of the common stock, based on
daily stock market quotations for the 12 months preceding the date of
grant; (ii) the yield on the common stock has been set at 1.51% based upon
its annual dividend rate of $.60 per share at date of grant; (iii) the
dividend equivalent feature has been valued by taking the present value of
the dividends which would be paid over time assuming a constant dividend
yield; (iv) the risk-free rate of return has been fixed at 6.68%, the rate
for a ten-year U.S. Treasury Note with a maturity date corresponding to
that of the option term; and (v) the actual option term to the expiration
date has been used.
13
<PAGE>
The actual value that an executive may realize, if any, will depend on the
amount by which the common stock price at the time of exercise exceeds the
exercise price. There is no assurance that the value realized by an
executive will equal or approximate the value estimated by the
Black-Scholes model.
Aggregated Option Exercises in 1997 and 1997 Year-End Option Values
The following chart shows the number of shares obtained by stock option
exercise in 1997 and the number of shares covered by both exercisable (vested)
and unexercisable (unvested) stock options as of December 31, 1997. Also
reported are the values for in-the-money options, which represent the positive
spread between the exercise price of any such stock options and the year-end
price of the common stock of $48.69.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-money Options
as of 12/31/97 as of 12/31/97 ($)(1)
----------------------------------------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
G. T. DiCamillo 0 0 125,000 185,000 836,000 1,252,280
- ----------------------------------------------------------------------------------------------------------------------
T. M. Lemberg 0 0 12,600 47,800 73,244 289,111
- ----------------------------------------------------------------------------------------------------------------------
W. J. O'Neill, Jr. 0 0 74,050 40,750 1,253,951 355,849
- ----------------------------------------------------------------------------------------------------------------------
S. Posa 0 0 12,500 49,500 111,725 418,431
- ----------------------------------------------------------------------------------------------------------------------
C. J. Uhrich 0 0 32,273 35,500 440,616 273,487
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Aggregate fair market value underlying unexercised options at year end,
less the exercise price.
Long-Term Incentive Awards
Performance Shares
<TABLE>
<CAPTION>
Estimated Future Payouts
---------------------------------------------
Number of Performance Period
Name Shares (1) Until Payout Threshold Target Shares Maximum
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
G. T. DiCamillo 12,000 1998 6,000.0 12,000 (2) 18,000.0
18,000 1999 9,000.0 18,000 (3) 27,000.0
- ----------------------------------------------------------------------------------------------------------
T. M. Lemberg 2,275 1998 1,137.5 2,275 (2) 3,412.5
3,450 1999 1,725.0 3,450 (3) 5,175.0
- ----------------------------------------------------------------------------------------------------------
W. J. O'Neill, Jr. 2,675 1998 1,337.5 2,675 (2) 4,012.5
4,050 1999 2,025.0 4,050 (3) 6,075.0
- ----------------------------------------------------------------------------------------------------------
S. Posa 2,650 1998 1,325.0 2,650 (2) 3,975.0
4,000 1999 2,000.0 4,000 (3) 6,000.0
- ----------------------------------------------------------------------------------------------------------
C. J. Uhrich 2,650 1998 1,325.0 2,650 (2) 3,975.0
4,000 1999 2,000.0 4,000 (3) 6,000.0
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Number of shares underlying the grant assuming target is achieved.
(2) These awards are tied to the achievement of specific financial metrics
critical to the long-term success of the Company. Performance is measured
over a two-year start-up period and is based on improvements in revenue
growth and Return on Net Assets (RONA). No awards are granted unless both
threshold performance targets are reached. In making these grants to the
select group of officers and senior executives, adjustments have been made
to the size of their option awards to keep their overall long-term
incentives in line with the Company's comparison group.
(3) Same as (2) above with the exception that performance is measured over a
three-year period.
14
<PAGE>
Pension Plan Table
The Polaroid Pension Plan is a defined benefit plan qualified under the rules
of the Code, which provides a pension benefit to all eligible employees,
including officers. The Plan has a five-year vesting provision. To the extent
that any participant's benefit exceeds limitations imposed by the Code, the
excess benefits are paid out of unfunded supplementary plans.
Effective January 1, 1998, the Polaroid Pension Plan was amended to include a
cash balance feature for its U.S. employees. Under the cash balance feature,
pension benefits for U.S. employees are determined by multiplying the
employee's eligible wages for the period by an annual earning rate of 4.5% for
the first seven years of employment; 6% for the next eight years of employment;
and 8% for all remaining years of employment. This benefit is credited
quarterly by the Company and interest is also provided to the accrued benefit.
At the participant's election the accumulated, vested account balance is
payable in one lump sum or in a series of annuity payments. The opening account
balance under the cash balance feature was determined by multiplying the
participant's 1997 Compensation (as defined below) by the participant's
applicable annual earning rate for each year of the participant's years of
credited benefit accrual.
The cash balance formula is the primary manner for calculating the pension
benefit. However, there is a ten-year transition benefit based upon the final
average pay formula. A participant is eligible to receive this transition
benefit if he or she was an active employee on January 1, 1998 with (i) an age
of at least 45 and fifteen years of service, or (ii) an age of at least 55 with
at least five years of service and a combined age and service factor of at
least 65.
An estimated annual retirement benefit, payable at age 65 using the cash
balance formula and based on projected current compensation and continued
employment for the named executives, is as follows: for Mr. DiCamillo $261,858;
for Mr. Lemberg $47,228; for Mr. O'Neill $204,405; for Mr. Posa $94,547; for
Ms. Uhrich $180,312.
Two of the named executives are entitled to the transition benefit. Using the
transition benefit formula, the following table provides the aggregate annual
pension benefit that would be payable under this plan or under any unfunded
supplemental benefit plans where necessary to a participant at age 65 in the
form of a straight life annuity based on the Final Average Compensation and
benefit accrual as of December 31, 1997, before the deduction for Social
Security. Final Average Compensation is a participant's average annual
compensation for the five consecutive highest compensation years in the
participant's last ten years of employment.
For this purpose, 1997 Compensation for the named officers includes the salary
amount which is shown in the "Salary" column of the Summary Compensation Table
uplifted by .07552.
<TABLE>
<CAPTION>
Final Years of Service
Average --------------------------------------------------------
Pay($) 15 20 25 30 35
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
150,000 40,725 54,300 67,875 81,450 81,450
- --------------------------------------------------------------------
175,000 47,513 63,350 79,188 95,025 95,025
- --------------------------------------------------------------------
200,000 54,300 72,400 90,500 108,600 108,600
- --------------------------------------------------------------------
225,000 61,088 81,450 101,813 122,175 122,175
- --------------------------------------------------------------------
250,000 67,875 90,500 113,125 135,750 135,750
- --------------------------------------------------------------------
300,000 81,450 108,600 135,750 162,900 162,900
- --------------------------------------------------------------------
350,000 95,025 126,700 158,375 190,050 190,050
- --------------------------------------------------------------------
400,000 108,600 144,800 181,000 217,200 217,200
- --------------------------------------------------------------------
450,000 122,175 162,900 203,625 244,350 244,350
- --------------------------------------------------------------------
500,000 135,750 181,000 226,250 271,500 271,500
- --------------------------------------------------------------------
550,000 149,325 199,100 248,875 298,650 298,650
- --------------------------------------------------------------------
600,000 162,900 217,200 271,500 325,800 325,800
- --------------------------------------------------------------------
650,000 176,475 235,300 294,125 352,950 352,950
- --------------------------------------------------------------------
</TABLE>
15
<PAGE>
The following table sets forth the current compensation as defined in the
Pension Plan and credited years of service (also called years of credited
benefit accrual) of the other named executive officers who could receive a
transitional benefit. This compensation was uplifted by an additional 5.12% in
order to ensure that pensions were not adversely affected by a reduction in pay
and benefits which occurred in 1988.
<TABLE>
<CAPTION>
Name Pension Plan Compensation($) Credited Years of Service
- ---------------------------------------------------------------------------------
<S> <C> <C>
W.J. O'Neill, Jr. 334,250 28.25
- ---------------------------------------------------------------------------------
C. J. Uhrich 262,159 31.25
- ---------------------------------------------------------------------------------
</TABLE>
Compliance With Section 16(a) of the Securities Exchange Act of 1934--Form 3
and 4 Reporting Obligation
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, named officers and persons who beneficially own more than ten
percent (10%) of any class of the Company's equity securities ("Reporting
Persons") to file certain reports concerning their beneficial ownership of the
Company's equity securities. Bernee D. L. Strom, a member of the Board of
Directors, inadvertently omitted to file her 1997 Form 5 and her Form 3 when
she joined the Board. The omitted Form 3 and Form 5 filings have since been
filed. On the basis of reports filed with the Company, the Company believes
that during 1997 all other Reporting Persons complied with their Section 16(a)
filing obligations.
The Polaroid Extended Severance Plan
The Extended Severance Plan is established for all employees of the Company who
may be adversely affected following a change in control of the Company. The
Extended Severance Plan becomes operative upon certain events effectively
constituting a change in control of the Company. Such events (the date on which
any such event occurs is referred to as a "Trigger Date" in this plan and
"Change in Control" in the employment agreements referenced in the section
below) include: (i) a change in control within the meaning of certain federal
securities laws; (ii) a specified change in composition of the Company's Board
of Directors within two years following the acquisition by a person or group
(other than a subsidiary of the Company or an employee benefit plan of the
Company or any of its subsidiaries) of 20% or more of the outstanding common
stock; (iii) following such an acquisition of 20% or more of the outstanding
common stock, a merger or consolidation involving the Company or a disposition
by the Company and its subsidiaries of a major part of the assets of the
Company and its subsidiaries; (iv) the acquisition by a person or group (other
than a subsidiary of the Company or an employee benefit plan of the Company or
any of its subsidiaries) of 30% or more of the outstanding common stock; (v)
the date stockholders approve either the liquidation of the Company,
disposition of substantially all its assets; or (vi) the date stockholders
approve any merger or consolidation other than one in which at least 50% of the
voting securities of the Company immediately prior thereto remain viable.
A participant in the Extended Severance Plan is entitled to receive a severance
payment under the Extended Severance Plan. This payment will be made in lieu of
a normal severance payment if, within two years of the Extended Severance Plan
becoming operative, his or her employment is terminated for any reason by the
Company, except for serious or willful misconduct, or if he or she voluntarily
leaves the Company after the occurrence of certain defined events that
adversely affect the participant. This severance payment will be the greater of
(i) twice the highest amount provided under any Company layoff or severance
plan; (ii) one-twelfth of one month's Compensation (as defined) for each month
of service; or (iii) six months' Compensation. However, this severance payment
may not exceed thirty months of Compensation. For purposes of the Extended
Severance Plan, Compensation includes base pay, shift and overtime premiums and
cash bonuses (except for payments under long-term incentive plans). A
participant who receives a severance payment under the Extended Severance Plan
has the right to continue to receive certain Company welfare benefits, such as
medical, dental and life insurance coverage.
Employment Agreements
On October 20, 1995, the Company entered into an employment agreement for a
term of approximately five years with Gary T. DiCamillo. The agreement was
amended in December, 1995 and March, 1997. Pursuant to the terms of Mr.
DiCamillo's amended employment agreement, he became the Company's
16
<PAGE>
Chairman and Chief Executive Officer effective December 1, 1995. Currently
applicable provisions of the agreement provide for: (i) a ten-year option to
purchase 250,000 shares of common stock that vests in four equal annual
installments commencing October 20, 1996, if Mr. DiCamillo is an employee on
the applicable vesting date; (ii) 25,000 shares of restricted common stock that
vests in five equal annual installments commencing October 20, 1996, if Mr.
DiCamillo is an employee on the applicable vesting date; (iii) 15,000 shares of
restricted stock that vest in 5,000 share increments when Mr. DiCamillo
achieves performance factors established by the Board on February 23, 1996, if
such date is prior to October 20, 2000 and Mr. DiCamillo is an employee on the
date the performance is achieved; (iv) a severance package, if Mr. DiCamillo's
employment is terminated without "Cause" or has a "Constructive Termination"
(as each such terms are defined), equal to two times his base pay and his
annual bonus paid at target for the pro-rata portion of the year worked; and
(v) if there is a Change in Control (as referenced in previous section) and Mr.
DiCamillo's employment terminates for any reason within eighteen months, a
severance payment equal to three times the sum of his base salary and annual
target bonus plus (a) payment of a pro-rata bonus (based on the annual target
bonus) for the year in which the termination of Mr. DiCamillo's employment
occurs; (b) a gross up in the event any payments are subject to the excise tax
imposed by Section 4999 of the Code; and (c) continuation of benefits
(including additional pension benefit accruals) for thirty-six months.
The Company has a contract with Mr. Posa, Executive Vice President, Consumer
Imaging Group. Provisions of this contract which are currently applicable
include: (i) a guaranteed annual bonus for 1997 of no less than $176,000; (ii)
50,000 stock options; (iii) relocation expenses; and (iv) the Change In Control
protection as described in the second following paragraph.
The Company has a contract with Mr. Lemberg, Senior Vice President, General
Counsel and Secretary. Provisions of this contract which are currently
applicable include: (i) his enrollment in the annual bonus plan with a
guaranteed 1997 bonus of $75,000; (ii) an enhancement to the benefit provided
by the Polaroid Pension Plan equal to one additional year of credited benefit
accrual for every four years of credited benefit accrual earned under the Plan
with full vesting in the Plan upon the completion of four years of credited
vested service; (iii) if within his first twenty-four months of employment, he
is terminated for any reason other than serious or willful misconduct or
terminates his employment during this time-frame due to a reassignment by
Polaroid to a position of significantly lesser responsibility or relocation
outside of the Boston metropolitan area without his consent, he shall receive a
severance payment equal to twenty-four months pay, two years medical and dental
insurance and full vesting of all options; and (iv) the Change in Control
protection as described in the following paragraph.
In addition to the named executives referenced above, the Company has also
entered into Change in Control Severance Agreements (the "Agreements") with Mr.
O'Neill and Ms. Uhrich (the "Executives"). Under the terms of the Agreements,
the severance protections contained therein apply only if (i) there is a
"Change in Control" (as referenced in previous section) and (ii) an Executive
is terminated without "Cause" or has a "Constructive Termination" (as each such
term is defined) within two years following the Change in Control. The
severance amount is equal to the greater of (i) the amount that is provided for
under the Extended Severance Plan or (ii) two times the sum of their respective
base salaries and annual target bonuses. The Agreements also provide for (i)
payment of a pro-rata bonus (based on the annual target bonus) for the year in
which the termination of an Executive's employment occurs; (ii) a gross up in
the event any payments to the Executives are subject to the excise tax imposed
by Section 4999 of the Code and (iii) continuation of benefits (including
additional pension benefit accruals) for the greater of twenty-four months or
the protected period under the Extended Severance Plan.
17
<PAGE>
Performance Graph
The following graph compares the Company's cumulative total stockholder return
(including dividends) over the last five fiscal years with the S&P 500 Index
and a peer group index comprised of the Fortune 500 Scientific, Photographic,
and Control Equipment Index (for 1997: Bausch & Lomb, Baxter International,
Beckman Instruments, Becton Dickinson, Boston Scientific, C. R. Bard, Eastman
Kodak, EG&G, Guidant, Honeywell, Medtronic, Minnesota Mining & Manufacturing,
Perkin-Elmer, Polaroid, Tektronix, Teradyne, Thermo Electron, United States
Surgical, and Varian Associates).
Comparison of Five-year
Cumulative Total stockholder Return
[TABULAR REPRESENTATION OF LINE CHART]
Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97
- --------------------------------------------------------------------------------
Polaroid Corp. $100 $110 $108 $160 $149 $169
S&P 500[RegTM] $100 $110 $112 $153 $189 $252
Fortune 500 Industry
Group $100 $105 $112 $171 $210 $228
18
<PAGE>
OTHER MATTERS
The cost of this solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, some officers and regular employees of the
Company may solicit proxies personally or by telephone or by facsimile. The
Company has engaged Georgeson & Co. Inc. to assist in proxy solicitation at a
cost of $15,000 plus out-of-pocket expenses. The Company will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy material to beneficial owners of the
Company's common stock. Nominations to the Board of Directors by Stockholders
must be made in accordance with the information and timely notice requirements
of the Company's By-Laws, a copy of which may be obtained from the Secretary of
the Company. Such nominations must be in writing. For consideration at an
annual meeting, such nominations must be received by the Secretary of the
Company not later than 90 days in advance of such meeting.
Stockholder proposals intended for presentation at the 1999 Annual Meeting of
Stockholders must be received by the Company for inclusion in its proxy
statement and form of proxy not later than December 1, 1998.
By order of the Board of Directors,
/s/ Thomas M. Lemberg
- ----------------------
Thomas M. Lemberg
Senior Vice President, General Counsel and Secretary
March 30, 1998
19
<PAGE>
American Academy of Arts and Sciences
Driveway entrance: 200 Beacon Street, Somerville
Parking is not available on the Academy grounds; however, for the Annual
Meeting the Academy has arranged to have the "Parking Permit Only" restrictions
waived on Scott, Bryant and Irving Streets surrounding the House. In addition,
the "Two Hour Limit" restriction on Beacon Street (200 block), Somerville will
also be waived for the Annual Meeting. The map shown below details the
surrounding area and provides directions to the Academy from four well-known
locations: Harvard, Porter, Inman and Kendall Squares.
[Map of Cambridge Massachusetts highlighting Porter Square, Inman Square,
Kendall Square, Harvard Square and The Academy]
From HARVARD SQUARE: Take Massachusetts Avenue (north) from Harvard Square.
After passing the Harvard Yard, bear right down through the underpass. Stay to
the left, following signs for Kirkland Street. Turn left at the lights onto
Quincy Street. Continue to the next set of lights and turn right onto Kirkland
Street. Follow Kirkland four blocks. Turn left onto Irving Street. Bear right
at the next intersection onto Scott Street. At the next corner is the
pedestrian entrance to the Academy. Enter the Academy grounds by the gate;
follow the pathway to the main entrance.
From PORTER SQUARE: Take Somerville Avenue (southeast) 1/4 mile to the blinking
traffic light. Turn right over the bridge onto Beacon Street. Follow Beacon
about 1/2 mile. Pass by the vehicle entrance to the Academy and continue to the
second set of lights. Turn right on Kirkland Street. Take the first right onto
Holden Street. Go two short blocks to the corner of Bryant and Scott Streets.
Park and enter the Academy grounds by the gate; follow the pathway to the main
entrance.
From KENDALL and INMAN SQUARES: From just north of Kendall Square, take
Hampshire Street (northwest) about 1 mile to Inman Square. Continue straight
through Inman Square onto Beacon Street. Go 1/2 mile to the lights at the first
major intersection. Turn left onto Kirkland Street. Take the first right onto
Holden Street. Go two short blocks to the corner of Bryant and Scott Streets.
Park and enter the Academy grounds by the gate; follow the pathway to the main
entrance.
20
<PAGE>
Polaroid Corporation
Notice to
Polaroid
Retirement
Savings Plan
Participants
and 1998
Proxy Statement
<PAGE>
Polaroid Corporation
549 Technology Square
Cambridge, Massachusetts 02139
March 30, 1998
To Polaroid Employee Benefit Plan Participants:
This booklet contains important information to assist you in voting as a
participant in the Polaroid Retirement Savings Plan which includes the ESOP
Fund and the Common Stock Fund (old 401(k) match, Paysop and the new 401(k)
investment choice). You should refer also to the Company's Annual Report for
1997 and the Voting Instructions card enclosed with this booklet.
The Company's Annual Meeting will be held on Tuesday, May 5, 1998, for the
following purposes:
1. To elect twelve directors to serve until the next Annual Meeting of
Stockholders.
2. To ratify the appointment of KPMG Peat Marwick LLP as independent auditors
of the Company for 1998--recommended by the Board of Directors.
3. To conduct such other business as may properly come before the meeting.
State Street Bank is the Trustee for this stock and will vote at the Annual
Meeting on your behalf. You have a right to instruct the Plan Trustee on how to
vote your stock. These instructions are confidential. No one from Polaroid will
know your decision. Subject to the Trustee's responsibilities under the plans,
your shares and fractions of shares will be voted in accordance with your
instructions on the enclosed Voting Instructions card. If you do not send in
your instructions, your shares will be voted in the same proportion as the
shares of other participants from whom instructions are received. Unallocated
ESOP Fund shares will be voted in the same proportion as the voting of shares
allocated to participants' ESOP Fund accounts.
Sincerely yours,
/s/ Thomas M. Lemberg
Thomas M. Lemberg
Senior Vice President, General Counsel and Secretary
You must make sure your voting instructions are mailed in sufficient time to be
received by NOON on May 4, 1998. We recommend you mark, sign and date the
enclosed voting instructions card and return it in the envelope provided not
later than April 28, 1998.
1
<PAGE>
POL93 2F DETACH HERE
PROXY
POLAROID CORPORATION
Proxy Solicited on Behalf of the Board of Directors
of the Company for Annual Meeting, May 5, 1998
The undersigned hereby appoints Thomas M. Lemberg and William J. O'Neill, Jr.,
individually, with the power of substitution, proxies to represent the
undersigned at the Annual Meeting of Stockholders of POLAROID CORPORATION to be
held at the American Academy of Arts and Sciences, Cambridge, Massachusetts
(entrance located at 200 Beacon Street, Somerville, Massachusetts), on Tuesday,
May 5, 1998 at 3:00 p.m. on all matters coming before the meeting or any
adjournment of the meeting.
Stockholders are encouraged to specify their choices by marking the appropriate
boxes, SEE REVERSE SIDE. To vote in accordance with the Board of Directors'
recommendations it is not necessary to mark any boxes. Shares cannot be voted
unless this card is signed and returned.
Election of Directors, Nominees:
Gary T. DiCamillo, Ralph E. Gomory, Frank S. Jones, Stephen P. Kaufman, John W.
Loose, Albin F. Moschner, Ronald F. Olsen, Ralph Z. Sorenson, Carole F. St.
Mark, Delbert C. Staley, Bernee D.L. Strom, Alfred M. Zeien
- -------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- -------------- -------------
<PAGE>
POLAROID CORPORATION
575 TECHNOLOGY SQUARE
CAMBRIDGE, MA 02139
POL93 2F DETACH HERE
[X] Please mark
votes as in
this example.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of directors and
FOR item 2.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR items 1 and 2.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors 2. Board Proposal to [ ] [ ] [ ]
(see reverse) ratify the appointment
FOR WITHHELD of independent public
[ ] [ ] accountants.
For, except vote withheld
from the following nominee(s):
------------------------------
- --------------------------------------------------------------------------------
3. In their discretion, upon other matters as
may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT [ ]
The signer revokes the appointment of any
other agent or proxy prior to this time.
NOTE: Please sign name exactly as it appears
on this card. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such.
Signature: _______________ Date: ______ Signature: ________________ Date: ______
<PAGE>
POL93 2F DETACH HERE
PROXY
POLAROID CORPORATION
Proxy Solicited on Behalf of the Board of Directors
of the Company for Annual Meeting, May 5, 1998
The undersigned hereby appoints Thomas M. Lemberg and William J. O'Neill, Jr.,
individually, with the power of substitution, proxies to represent the
undersigned at the Annual Meeting of Stockholders of POLAROID CORPORATION to be
held at the American Academy of Arts and Sciences, Cambridge, Massachusetts
(entrance located at 200 Beacon Street, Somerville, Massachusetts), on Tuesday,
May 5, 1998 at 3:00 p.m. on all matters coming before the meeting or any
adjournment of the meeting.
Stockholders are encouraged to specify their choices by marking the appropriate
boxes, SEE REVERSE SIDE. To vote in accordance with the Board of Directors'
recommendations it is not necessary to mark any boxes. Shares cannot be voted
unless this card is signed and returned.
Election of Directors, Nominees:
Gary T. DiCamillo, Ralph E. Gomory, Frank S. Jones, Stephen P. Kaufman, John W.
Loose, Albin F. Moschner, Ronald F. Olsen, Ralph Z. Sorenson, Carole F. St.
Mark, Delbert C. Staley, Bernee D.L. Strom, Alfred M. Zeien
- -------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- -------------- -------------
<PAGE>
POLAROID CORPORATION
575 TECHNOLOGY SQUARE
CAMBRIDGE, MA 02139
POL93 2F DETACH HERE
[X] Please mark
votes as in
this example.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of directors and
FOR item 2.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR items 1 and 2.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors 2. Board Proposal to [ ] [ ] [ ]
(see reverse) ratify the appointment
FOR WITHHELD of independent public
[ ] [ ] accountants.
For, except vote withheld
from the following nominee(s):
------------------------------
- --------------------------------------------------------------------------------
3. In their discretion, upon other matters as
may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT [ ]
The signer revokes the appointment of any
other agent or proxy prior to this time.
NOTE: Please sign name exactly as it appears
on this card. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such.
Signature: _______________ Date: ______ Signature: ________________ Date: ______
