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
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(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:
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(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 to
Polaroid
Retirement
Savings Plan
Participants
and 1999
Proxy Statement
<PAGE>
Polaroid Corporation
784 Memorial Drive
Cambridge, Massachusetts 02139
April 9, 1999
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
1998 and the Voting Instructions card enclosed with this booklet.
The Company's Annual Meeting will be held on Tuesday, May 11, 1999, for the
following purposes:
1. To elect ten 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 1999--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 as a
"named fiduciary" 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 shares will be voted in the same
proportion as the voting of shares allocated to ESOP participants' 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 10, 1999. We recommend you mark, sign and date the
enclosed voting instructions card and return it in the envelope provided not
later than May 3, 1999.
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<PAGE>
Polaroid
Corporation
Notice of
1999 Annual
Meeting of
Stockholders
and Proxy
Statement
<PAGE>
Polaroid Corporation
784 Memorial Drive
Cambridge, Massachusetts 02139
April 9, 1999
To Our Stockholders:
You are cordially invited to attend the Company's 1999 Annual Meeting on
Tuesday, May 11, 1999.
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 signing, dating and returning your proxy
promptly will be greatly appreciated.
Sincerely yours,
/s/ Gary T. DiCamillo
Gary T. DiCamillo
Chairman and Chief Executive Officer
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<PAGE>
NOTICE OF ANNUAL MEETING
To the Stockholders:
The Annual Meeting of Stockholders of Polaroid Corporation will be held on
Tuesday, May 11, 1999, 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 ten 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 1999--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 15, 1999 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
April 9, 1999
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, 784 Memorial Drive,
Cambridge, Massachusetts 02139 (the "Company") to be voted at the Annual
Meeting of Stockholders of the Company on Tuesday, May 11, 1999, and any
adjournment.
All holders of record of common stock of the Company as of the close of
business on March 15, 1999, the record date, are entitled to vote at the
meeting. As of that date, 44,100,466 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 April 9, 1999.
ELECTION OF DIRECTORS
At the Annual Meeting, ten 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 were elected directors at the last Annual Meeting.
<PAGE>
The following information is submitted respecting the nominees for election:
[Photo of Gary T. DiCamillo]
Gary T. DiCamillo, 48, 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. He is also a director of Pella Corporation,
Sheridan Group, and Whirlpool Corporation.
[Photo of Ralph E. Gomory]
Dr. Ralph E. Gomory, 69, 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.
[Photo of Stephen P. Kaufman]
Stephen P. Kaufman, 57, 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.
[Photo of John W. Loose]
John W. Loose, 57, 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 Executive Vice
President of Corning, Inc., and also President and CEO of Corning Consumer
Products Company. He is also a director of Corning, Inc.
[Photo of Albin F. Moschner]
Albin F. Moschner, 46, has been a director since 1994. Since August 1997 he has
been President and Chief Executive Officer of MilleCom, Inc. (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 of Zenith Electronics. He is also
a director of Pella Corporation, Vision Solutions, Inc., Wintrust Financial
Corporation, and MilleCom, Inc.
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<PAGE>
[Photo of Ronald F. Olsen]
Ronald F. Olsen, 58, 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.
[Photo of Dr. Ralph Z. Sorenson]
Dr. Ralph Z. Sorenson, 65, has been a director since 1984. Since 1993 he has
been Professor Emeritus, University of Colorado. He is also a director of Eaton
Vance Corporation, Exabyte Corporation, Houghton Mifflin Company, and Whole
Foods Market, Inc.
[Photo of Carole F. St. Mark]
Carole F. St. Mark, 56, has been a director since 1998. 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. She is
currently non-executive director of Royal and SunAlliance Insurance Group PLC,
and a director of SuperValu, Inc. and Gerber Scientific, Inc.
[Photo of Bernee D. L. Strom]
Bernee D. L. Strom, 51, has been a director since 1996. Since November 1998 she
has been President and Chief Operating Officer and a director of Infospace.com,
Inc. (a leading provider of private label solutions for content and commerce to
Web sites and Internet appliances). Prior to Infospace.com, Inc., she was
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 to December 1998 she was a director of
Walker Digital (an intellectual property studio) whose first spinout is
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. She is also a director of Krug
International and a member of the Board of Advisors of the J. L. Kellogg
Graduate School of Management of Northwestern University.
[Photo of Alfred M. Zeien]
Alfred M. Zeien, 69, 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). He is also a director of
BankBoston Corporation, The Gillette Company, Massachusetts Mutual Life
Insurance Company, and Raytheon Company.
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<PAGE>
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, 1998 and (i) the CEO and the
four other most highly compensated executive officers of the Company during
1998; (ii) each director of the Company; and (iii) all directors and executive
officers as a group as of January 15, 1999, 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 311,699(3) 1%
Judith G. Boynton 20,798(4) *
Thomas M. Lemberg 39,395 *
William J. O'Neill, Jr. 113,349 *
Carole J. Uhrich 79,750 *
Dr. Ralph E. Gomory 14,138 *
Dr. Frank S. Jones 6,000(5)(6) *
Stephen P. Kaufman 3,478 *
John W. Loose 11,938 *
Albin F. Moschner 11,473 *
Ronald F. Olsen 3,975 *
Dr. Ralph Z. Sorenson 7,138 *
Carole F. St. Mark 1,500 *
Delbert C. Staley 9,812(6) *
Bernee D. L. Strom 5,538 *
Alfred M. Zeien 21,938 *
All directors and executive officers as a group
(20 persons) 956,600 2%
Five Percent Owners
- -------------------
State Street Bank and Trust Company 7,267,479(7) 16.5%
225 Franklin Street
Boston, Massachusetts 02110
Harris Associates LP 6,142,780(8) 13.9%
Two North LaSalle Street, Suite 500
Chicago, Illinois 60602-3790
Joseph L. Harrosh 4,345,800(9) 9.9%
40900 Grimmer Blvd.
Fremont, California 94538
FMR Corp. 4,151,910(10) 9.4%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
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*Less than 1%
(1) The number of shares set forth opposite the name of each director 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 15,
1999 (i.e., March 16, 1999): 238,625 for Mr. DiCamillo; 0 for Ms. Boynton;
34,325 for Mr. Lemberg; 98,550 for Mr. O'Neill; 69,148 for Ms. Uhrich; and
6,500 shares for each other director (with the exception of Dr. Jones who
holds 5,000 options which are exercisable, Ms. Strom who holds 3,000
options which are exercisable, Mr. Kaufman who holds 750 options which are
exercisable, and Mr. Olsen, Mr. Staley and Ms. St. Mark who each hold 0
options which are exercisable), and 749,067 for all directors and
executive officers as a group.
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<PAGE>
(2) Includes the following numbers of allocated shares under the Polaroid
Retirement Savings Plan: 202 for Mr. DiCamillo; 249 for Ms. Boynton; 215
for Mr. Lemberg; 3,975 for Mr. Olsen; 6,476 for Mr. O'Neill; 5,053 for Ms.
Uhrich; and 16,170 for all directors and named executive officers as a
group.
(3) Includes 25,000 shares of restricted common stock as to which Mr.
DiCamillo has sole voting power (see Footnote (3) to Summary Compensation
Table). Mr. DiCamillo disclaims beneficial ownership of 5,000 unrestricted
shares, which were transferred to his sons under the Uniform Gifts to
Minors Act on December 29, 1998.
(4) Includes 10,000 shares issued pursuant to Ms. Boynton's employment
contract (see Footnote (3) to Summary Compensation Table). Ms. Boynton
elected to defer receipt of these shares pursuant to the Polaroid Elective
Deferred Compensation Plan. No actual shares have been issued to Ms.
Boynton's account under the Plan and there are no voting rights.
(5) Dr. Jones disclaims beneficial ownership of 100 shares.
(6) Member of the Board of Directors not standing for re-election.
(7) As reported on the State Street Bank and Trust Company Schedule 13G, State
Street Bank and Trust Company beneficially owned 7,267,479 shares as
trustee of the Polaroid Retirement Savings Plan. State Street also held
959,231 shares in various other fiduciary capacities, with sole voting
power for 521,698 shares, shared voting power for 396,899, sole investment
power for 952,932 shares and shared investment power for 6,299 shares.
(8) As reported on Harris Associates LP Amended Schedule 13G, Harris
Associates LP ("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 6,142,780 shares, sole power to dispose or
to direct the disposition of 1,590,380 shares and shared power to dispose
or to direct the disposition of 4,552,400 shares.
(9) As reported on Amended Schedule 13G, Joseph L. Harrosh has sole power to
vote or to direct the vote over 4,345,800 shares, no shared power to vote
or to direct the vote over any shares, sole power to dispose or to direct
the disposition over 4,345,000 shares and no shared power to dispose or to
direct the disposition of any shares.
(10) As reported on FMR Corp. Amended Schedule 13G, FMR Corp. has sole power to
vote or to direct the vote over 447,410 shares, no shared power to vote or
to direct the vote over any shares, sole power to dispose or to direct the
disposition over 4,151,910 shares and no shared power to dispose or to
direct the disposition of any shares.
Meetings and Committees of the Board of Directors
The Executive Committee, which met one time in 1998, 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), Dr. Ralph E. Gomory, Albin F. Moschner, Delbert C. Staley, and
Alfred M. Zeien.
The Audit Committee, which met four times in 1998, 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: Dr. Ralph E. Gomory
(Chairman), Dr. Frank S. Jones, Ronald F. Olsen, Carole F. St. Mark, and
Delbert C. Staley.
The Finance Committee, which met six times in 1998, 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), Dr. Ralph E. Gomory, Stephen P. Kaufman, John W.
Loose, and Bernee D. L. Strom.
The Human Resources Committee, which met four times during 1998, 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
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<PAGE>
(Chairman), Dr. Frank S. Jones, John W. Loose, Albin F. Moschner, Dr. Ralph Z.
Sorenson, Bernee D. L. Strom, and Alfred M. Zeien.
The Committee on Directors, which met three times in 1998, 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), Stephen P. Kaufman, Dr.
Ralph Z. Sorenson and Carole F. St. Mark.
The Committee of Outside Directors, which met one time during 1998, considers
matters of corporate governance, including such matters suggested by any of its
own members. Members are the non-employee directors: Dr. Ralph E. Gomory, Dr.
Frank S. Jones, Stephen P. Kaufman, John W. Loose, Albin F. Moschner, Dr. Ralph
Z. Sorenson, Carole F. St. Mark, Delbert C. Staley, Bernee D. L. Strom, and
Alfred M. Zeien.
During 1998, the average attendance of directors at meetings of the Board of
Directors was 91%. 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. Jones, whose attendance was 53%.
Dr. Jones and Mr. Staley 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
$35,000 per year, of which $15,000 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 $5,000 per year for
the Chairperson of each Committee, $1,500 for each Board or Committee meeting a
director attends, 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 served for at least five years. This plan is
available to current retirees; however, future accruals under this plan have
now ceased. In its place, under the Board of Directors Stock Plan, members of
the Board of Directors receive annual stock option grants on May 1st of each
year valued at $35,000 which vest one year from the grant date and are
exercisable for ten years from date of grant.
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<PAGE>
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 1999.
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 stockholders, 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 year 2000 Annual Meeting will be subject
to ratification by the stockholders 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 attract and retain outstanding
executives and to motivate these individuals to achieve superior levels of
performance and thereby maximize stockholder value. The total compensation
package is designed to provide a significant percentage of executive
compensation through variable programs such as the bonus plan and stock based
long-term incentive programs, which link executive rewards to long-term
stockholder rewards. The variable proportion of an executive's compensation
opportunity 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, stock ownership guidelines developed by the Board of Directors require
the CEO to own common stock valued at five times base pay, corporate officers
at three times base pay, and other executives at one times base pay. Over the
past year, the CEO, executive officers and key employees have made significant
progress toward meeting these guidelines. During August of 1998, the CEO and
corporate officers as a group purchased over three million dollars of the
Company's common stock as reflected in part in the Beneficial Ownership chart
on page 6.
In designing the executive compensation program, the Committee considers the
following basic compensation components: base salary, annual bonuses and
long-term incentive opportunities. The Committee reviews the compensation
standards of a group of ten comparison companies. The companies included in the
comparison group represent a cross-section of general industry, with a focus on
consumer products companies. Four of those companies are included in the
industry index used by the Company in the Performance Graph on page 19. The
Committee uses an average of the comparison group's compensation information to
provide a basis for comparison and relies upon an independent consultant to
provide the comparative data which has been adjusted based on annual sales
volumes.
Components of Compensation
Base Salary. In 1998 the base salary range for each executive officer was
established by considering their 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
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<PAGE>
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 somewhat 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 that 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.
The bonus award pool is comprised of two basic components: a corporate
EVA[RegTM] component and a business area (region or division) EVA[RegTM]
component. For the CEO and other executives who are not assigned to a specific
business area, the annual bonus is determined based upon achieving a corporate
EVA[RegTM] target. In addition, an award may be increased or decreased based
upon an executive's individual performance within his/her specific business
area. 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.
In 1998 the corporate EVA[RegTM] thresholds were not achieved, primarily due to
the decline in sales caused by reductions in Russia where shipments ceased in
mid 1998, and reduction in dealer inventories, primarily in the United States.
One named executive officer was awarded a minimal bonus in recognition of his
service during the year.
Long-Term Incentives. The Company's long-term incentive programs are comprised
of stock and performance awards. 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 stockholder 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.
During 1998, two option grants were issued. The standard 1998 grant was issued
in April 1998, and a second grant was issued in the fourth quarter of 1998. The
Committee decided to advance the date of the 1999 grant to provide an incentive
for an executive's achievement of the 1999 Business Plan. This means that
officers and executives will not receive a stock option grant in April 1999.
The 1998 grants for the named executive officers under this Plan are set forth
below in the table captioned "Option/SAR Grants in 1998."
Additionally, officers and a limited number of senior executives are eligible
to receive performance share awards. 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 and is based on improvements
in revenue 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. In 1998 the Committee issued three-year
performance share awards, which become due in the year 2000. Later in the year,
the targets
- ----------
[RegTM]EVA is a registered trademark of Stern Stewart & Co.
10
<PAGE>
for this award and the award due in 1999 were modified to ensure alignment with
the long-term business plans. No shares will be issued pursuant to the awards
that came due at the end of 1998 since the performance targets for 1998 were
not met.
For the named executive officers and the CEO, the value of the Company's
long-term incentives is comparable with those incentives for executives in
similarly held positions of the Company's comparison group.
Finally, during this past year the Company established a Phantom Stock Plan,
which will enable the Company to grant long-term incentives to executives. One
individual award for 20,000 shares was granted in this Plan to the CEO. Other
perquisites include the Executive Life Insurance Program and the Elective
Deferred Compensation Plan.
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 $1,000,000 limit was
not exceeded for any executive officer.
Submitted by the Human Resources Committee:
Delbert C. Staley, Chairman
Dr. Frank S. Jones
John W. Loose
Albin F. Moschner
Dr. Ralph Z. Sorenson
Bernee D. L. Strom
Alfred M. Zeien
11
<PAGE>
Summary Compensation Table
The following table sets forth the compensation paid to the CEO and the four
other most highly compensated executive officers in 1998.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------- ---------------------------
Other Restricted All
Annual Stock Stock Other
Salary Bonus Compensation Awards Options/SARs Compensation
Name and Position Year ($) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. T. DiCamillo 1998 715,008 0 0 0 269,500 52,981
Chairman and Chief 1997 650,004 0 0 0 60,000 0
Executive Officer 1996 550,008 400,000 178,377 688,125 0 0
- -------------------------------------------------------------------------------------------------------------------
J. G. Boynton 1998 249,041 225,000 120,159 186,900 75,000 16,732
Executive Vice President and 1997 0 0 0 0 0 0
Chief Financial Officer 1996 0 0 0 0 0 0
- -------------------------------------------------------------------------------------------------------------------
T. M. Lemberg 1998 310,002 30,000 0 0 41,500 20,820
Senior Vice President, 1997 287,502 75,000 0 0 60,400 0
General Counsel and 1996 91,668 75,000 0 0 0 0
Secretary
- -------------------------------------------------------------------------------------------------------------------
W. J. O'Neill, Jr. 1998 347,313 0 63,373 0 49,000 23,726
Executive Vice President and 1997 336,258 0 64,491 0 12,000 81,654
President Corporate Business 1996 322,926 155,000 60,835 0 20,000 75,430
Development
- -------------------------------------------------------------------------------------------------------------------
C. J. Uhrich 1998 334,622 0 34,536 0 117,500 24,172
Executive Vice President and 1997 320,004 0 35,169 0 12,000 73,101
Assistant Chief Operating 1996 252,917 190,000 31,724 0 20,000 59,030
Officer
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For 1996 and 1997, the amounts shown in this column represent payments
under the Polaroid Incentive Plan for Executives, with the exception of
the amounts for Mr. Lemberg, which represent guaranteed payments as part
of his employment agreement. For 1998, the bonus for Ms. Boynton includes
a $100,000 sign-up bonus, and a guaranteed payment of $125,000 as part of
her employment agreement; the bonus for Mr. Lemberg was in recognition of
his performance during the year.
(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; (ii) for Ms. Boynton
the amount in 1998 represents 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. As of December 31, 1998, 25,000 shares remain
restricted.
Ms. Boynton's employment agreement included an award of 10,000 shares of
restricted stock that vest at the rate of 2,500 shares per year as long as
she is employed by the Company. Ms. Boynton elected to defer receipt of
these shares pursuant to the Polaroid Elective Deferred Compensation Plan.
No actual shares have been awarded to Ms. Boynton's account under the Plan
and there are no voting rights in respect thereof. Ms. Boynton's account
under the Plan will, however, be credited for the equivalent of the
dividends paid on the underlying shares.
(4) For 1998, includes an award of 20,000 units received by Mr. DiCamillo under
the Phantom Stock Plan, which vests at the rate of 25% per year over a
period of four years beginning on October 27,
12
<PAGE>
2000 and expires ten years from date of issue. The award, which is treated
as the equivalent of a stock appreciation right for purposes hereof,
provides a cash benefit equal to the incremental increase in stock price on
the date Mr. DiCamillo elects to receive these units from the issue price
of $24.69, which produced a negative number at year end.
(5) For 1996 and 1997, the amounts shown in this column include the value of
shares of common stock allocated in the Retirement Savings Plan (RSP) and
the value of units allocated to participants under the Officers
Compensation Exchange Plan (OCEP). For 1998, the amounts shown include the
value of shares of common stock allocated in the RSP and amounts allocated
to participants under the Elective Deferred Compensation Plan (EDCP). The
value of the shares or units was calculated by using a year-end closing
price of $18.69 per share of common stock for 1998, $48.69 for 1997, and
$43.50 for 1996. For 1998, the amounts represent $8,580 RSP and $44,401
EDCP for Mr. DiCamillo, $9,609 RSP and $7,123 EDCP for Ms. Boynton, $8,820
RSP and $12,000 EDCP for Mr. Lemberg, $8,741 RSP and $14,985 EDCP for Mr.
O'Neill, and $8,902 RSP and $15,270 EDCP for Ms. Uhrich.
Option/SAR Grants in 1998
The following table sets forth information concerning stock options and stock
appreciation right (SAR) equivalents granted in 1998 under the 1993 Polaroid
Stock Incentive Plan to the CEO and the four other most highly compensated
executive officers.
<TABLE>
<CAPTION>
Individual Grants
- -------------------------------------------------------------------------------------------------------------------
Percent of Total
Options/SARs Options/SARs Exercise or Market Price Grant Date
Granted Granted to Employees Base Price on Grant Date Expiration Present
Name (#)(1) in Fiscal Year ($/Sh) ($/Sh)(2) Date Value ($)(3)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
G. T. DiCamillo 84,500 3.9 42.125 42.125 1-27-08 1,589,000
185,000 8.5 24.6875 24.6875 10-27-08 2,161,000
- -------------------------------------------------------------------------------------------------------------------
J. G. Boynton 35,000 1.6 43.5625 43.5625 4-13-08 689,000
40,000 1.8 24.6875 24.6875 10-27-08 467,000
- -------------------------------------------------------------------------------------------------------------------
T. M. Lemberg 16,500 0.8 42.125 42.125 1-27-08 310,000
25,000 1.2 24.6875 24.6875 10-27-08 292,000
- -------------------------------------------------------------------------------------------------------------------
W. J. O'Neill, Jr. 19,000 0.9 42.125 42.125 1-27-08 357,000
30,000 1.4 24.6875 24.6875 10-27-08 350,000
- -------------------------------------------------------------------------------------------------------------------
C. J. Uhrich 80,000 3.7 41.4375 41.4375 1-22-08 1,477,000
2,500 0.1 42.125 42.125 1-27-08 47,000
35,000 1.6 24.6875 24.6875 10-27-08 409,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See note (4) above.
(2) 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 and death); and (iv) 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.
(3) 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 January 22, 2008 set forth
in the table above: (i) a factor of 32.171% 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 1.45% 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 5.54%, the rate for a ten-year U.S. Treasury Note
with a maturity date
13
<PAGE>
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 January 27, 2008, (i) a factor of
32.097% 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 1.42% 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 5.54%, 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 April 13, 2008, (i) a factor of
32.018% 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 1.38% 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 5.64%, 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 October 27, 2008, (i) a factor of
48.516% 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 2.43% 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 4.53%, 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.
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 1998 and 1998 Year-End Option Values
The following chart shows the number of shares obtained by stock option
exercise in 1998 and the number of shares covered by both exercisable (vested)
and unexercisable (unvested) stock options as of December 31, 1998. 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 $18.69.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-money Options
Shares as of 12/31/98 as of 12/31/98 ($)(1)(2)
Acquired on Value -----------------------------------------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
G. T. DiCamillo 0 0 202,500 357,000 0 0
- --------------------------------------------------------------------------------------------------------------------------
J. G. Boynton 0 0 0 75,000 0 0
- --------------------------------------------------------------------------------------------------------------------------
T. M. Lemberg 0 0 27,700 74,200 0 0
- --------------------------------------------------------------------------------------------------------------------------
W. J. O'Neill, Jr. 0 0 90,800 73,000 0 0
- --------------------------------------------------------------------------------------------------------------------------
C. J. Uhrich 0 0 45,523 139,750 0 0
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Aggregate fair market value underlying unexercised options at year end,
less the exercise price.
(2) As of December 31, 1998, the options set forth in this table had no value
because at that date the market value of the underlying shares was below
the option price.
14
<PAGE>
Long-Term Incentive Awards
Performance Shares
<TABLE>
<CAPTION>
Estimated Future Payouts (Shares)
----------------------------------------
Number of Performance Period
Name Shares (1) Until Payout Threshold Target Maximum
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
G. T. DiCamillo 12,000 1998 6,000 12,000(2) 18,000
18,000 1999 9,000 18,000(3) 27,000
23,000 2000 11,500 23,000(3) 34,500
- ----------------------------------------------------------------------------------------------------
J. G. Boynton 0 1998 0 0 0
4,000 1999 2,000 4,000(3) 6,000
4,000 2000 2,000 4,000(3) 6,000
- ----------------------------------------------------------------------------------------------------
T. M. Lemberg 2,275 1998 1,137 2,275(2) 3,412
3,450 1999 1,725 3,450(3) 5,175
3,575 2000 1,787 3,575(3) 5,362
- ----------------------------------------------------------------------------------------------------
W. J. O'Neill, Jr. 2,675 1998 1,337 2,675(2) 4,012
4,050 1999 2,025 4,050(3) 6,075
4,175 2000 2,087 4,175(3) 6,262
- ----------------------------------------------------------------------------------------------------
C. J. Uhrich 2,650 1998 1,325 2,650(2) 3,975
4,000 1999 2,000 4,000(3) 6,000
4,050 2000 2,025 4,050(3) 6,075
- ----------------------------------------------------------------------------------------------------
</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.
Pension Plan Table
The Polaroid Pension Plan is a defined benefit plan qualified under the rules
of the Internal Revenue Code of 1986, as amended, ("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 eligible employees. Under the cash balance
feature, pension benefits for eligible 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
15
<PAGE>
Mr. DiCamillo $369,837; for Ms. Boynton $346,062; for Mr. Lemberg $55,318; for
Mr. O'Neill $208,134; for Ms. Uhrich $181,315.
Two of the named executives are entitled to the transition benefit. Using the
transition benefit formula, the following table provides the aggregate annual
pension benefit that would be payable under this plan or under any unfunded
supplemental benefit plans where necessary to a participant at age 65 in the
form of a straight life annuity based on the Final Average Compensation and
benefit accrual as of December 31, 1998, before the deduction for Social
Security. Final Average Compensation is a participant's average annual
compensation for the five consecutive highest compensation years in the
participant's last ten years of employment.
For this purpose, 1998 Compensation for the named officers includes the salary
amount, which is shown in the "Salary" column of the Summary Compensation
Table.
<TABLE>
<CAPTION>
Years of Service
Final Average ---------------------------------------------------------
Pay($) 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>
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 for years prior to 1998 was uplifted by
12.674% in order to ensure that pensions were not adversely affected by a
reduction in pay and benefits that occurred in 1988.
<TABLE>
<CAPTION>
Name Pension Plan Compensation($) Credited Years of Service
- ----------------------------------------------------------------------------------
<S> <C> <C>
W. J. O'Neill, Jr. 344,771 29.25
- ----------------------------------------------------------------------------------
C. J. Uhrich 290,945 32.25
- ----------------------------------------------------------------------------------
</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. Dr. Ralph Z. Sorenson, a member of the Board of
Directors, filed his Form 5 after the February 14, 1999 deadline. The Company
believes that during 1998 all other Reporting Persons complied with their
Section 16(a) filing obligations.
16
<PAGE>
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 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; (v)
pension enhancements which include one additional year of credited benefit
accrual for each year of credited benefit accrual earned under the Plan for a
period of up to ten years, and full vesting in these and the pension plan
benefits upon the completion of two and one-half years of service; (vi) 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.
17
<PAGE>
The Company has a contract with Ms. Boynton, Executive Vice President and Chief
Financial Officer. In addition to the normal benefits provided to any executive
at Ms. Boynton's level, her contract provides: (i) at sign-up, a bonus of
$100,000; 15,000 stock options and 10,000 shares of restricted stock, both with
four year ratable vesting; (ii) a guaranteed 1998 bonus of $125,000; (iii)
pension enhancements which include an opening account balance of $350,000,
three years of credited benefit accrual for each year of credited benefit
accrual earned under the Plan for a period of up to seven years, and full
vesting in these and the pension plan benefits upon the completion of three
years of service; (iv) a severance benefit equal to two years base pay upon the
execution of a full and complete release if she is terminated by the Company
for any reason within the first twenty-four months of employment, other than
serious or willful misconduct or if she voluntarily terminates her employment
following a reassignment to a position of significantly lesser responsibility
or relocation outside of the Boston metropolitan area without her consent; and
(v) the Change in Control protection described below.
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) 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; and
(ii) the Change in Control protection as described below.
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.
18
<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 1998: 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
[Linear representation of graph]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Polaroid Corp. $100 $ 99 $146 $136 $154 $ 60
S&P 500 $100 $101 $139 $171 $229 $294
Fortune Industry Group
(19 Stocks) $100 $107 $164 $201 $219 $262
- ---------------------------------------------------------------------------------------------
</TABLE>
19
<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 2000 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, 1999. In addition, under
the Company's By-Laws, if a stockholder wishes to present a proposal at the
2000 Annual Meeting outside the proxy inclusion process, such proposal must be
received by the Company on or before February 11, 2000. After that date, the
proposal will be considered untimely and the person named in the enclosed proxy
will have discretionary voting authority with respect to such matter.
The Board of Directors does not know of any other business to be presented to
the 1999 Annual Meeting of Stockholders. If any other matters are presented to
the meeting, the persons named in the enclosed proxy have discretionary
authority to vote and will vote all proxies with respect to such matters in
accordance with their judgment.
By order of the Board of Directors,
/s/ Thomas M. Lemberg
Thomas M. Lemberg
Senior Vice President, General Counsel and Secretary
April 9, 1999
20
<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.
21
<PAGE>
PID#1BB287A
<PAGE>
PID#1BB286A
<PAGE>
PO141B DETACH HERE
PROXY
POLAROID CORPORATION
Proxy Solicited on Behalf of the Board of Directors
of the Company for Annual Meeting, May 11, 1999
The undersigned hereby appoints Thomas M. Lemberg and Judith G. Boynton,
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 11, 1999 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, Dr. Ralph E. Gomory, Stephen P. Kaufman, John W. Loose, Albin
F. Moschner, Ronald F. Olsen, Dr. Ralph Z. Sorenson, Carole F. St. Mark, Bernee
D.L. Strom, Alfred M. Zeien
- -------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- -------------- -------------
<PAGE>
POLAROID CORPORATION
784 MEMORIAL DRIVE
CAMBRIDGE, MA 02139
PO141A 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
of independent public
FOR WITHHELD accountants.
ALL FROM ALL
NOMINEES [ ] [ ] NOMINEES
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>
PO242B DETACH HERE
POLAROID CORPORATION
EMPLOYEE BENEFIT PLAN
VOTING INSTRUCTIONS
To Plan Participants:
As a participant and a "named fiduciary" in the Polaroid benefit plan under
which Polaroid common stock is held in trust, the Polaroid Retirement Savings
Plan, you may instruct the Plan Trustee or Trustees to vote the stock allocated
to your accounts in such Plan ("benefit stock") at the Company's 1999 Annual
Meeting of Stockholders as you direct. For additional information on voting
procedures, please refer to the booklet which accompanies this Voting
Instructions card.
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE. If you wish to vote in accordance with the Board of Directors'
recommendations, you may do so by signing, dating and returning this Voting
Instructions card, without the necessity of marking any boxes. If a signed card
is not returned, benefit stock will be voted in the same proportion as benefit
stock of other participants in the Plan from whom instructions are received.
Unallocated ESOP shares will be voted in the same proportion as the voting of
benefit stock allocated to ESOP participants accounts.
Election of Directors, Nominees:
Gary T. DiCamillo, Dr. Ralph E. Gomory, Stephen P. Kaufman, John W. Loose, Albin
F. Moschner, Ronald F. Olsen, Dr. Ralph Z. Sorenson, Carole F. St. Mark, Bernee
D.L. Strom, Alfred M. Zeien
- -------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- -------------- -------------
<PAGE>
POLAROID CORPORATION
784 MEMORIAL DRIVE
CAMBRIDGE, MA 02139
PO242A DETACH HERE
[X] Please mark
votes as in
this example.
These instructions when properly executed will direct the voting of your benefit
stock in the manner you indicate, subject to the responsibilities of the Plan
Trustee or Trustees. If no direction is made, benefit stock 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
of independent public
FOR WITHHELD accountants.
ALL FROM ALL
NOMINEES [ ] [ ] NOMINEES
For, except vote withheld
from the following nominee(s):
------------------------------
- --------------------------------------------------------------------------------
3. In the discretion of the proxies appointed
by the Plan Trustee or Trustees upon other
matters as may properly come before the
meeting.
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT [ ]
The signer revokes any voting instructions
prior to this time.
NOTE: Please sign name exactly as it appears
on this card.
Signature: _______________ Date: ______ Signature: ________________ Date: ______
