Filed by the Registrant [x]Filed by a Party other than the Registrant [_]Check the appropriate box:[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule[_] Confidential, For Use of the 14a-12 Commission Only (as permitted by Rule 14a-6(e)(2))[x] Definitive Proxy Statement[_] Definitive Additional Materials
Eastman Kodak Company------------------------------------------------------------------------------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(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)(4) 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 pursuantto Exchange Act Rule 0-11 (set forth the amount on which the filing fee iscalculated and state how it was determined):4) Proposed maximum aggregate value of transaction:____________________________________________________________________________________5) Total fee paid:[_] Fee paid previously with preliminary materials:[_] Check box if any part of the fee is offset as provided by Exchange Act Rule0-11(a)(2) and identify the filing for which the offsetting fee was paidpreviously. 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.:____________________________________________________________________________________ 3) Filing Party: 4) Date Filed:
Check the appropriate box: | ||||
[ ] | Preliminary Proxy Statement | [ ] | Soliciting Material Under Rule 14a-12 | |
[ ] | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
[X] | Definitive Proxy Statement | |||
[ ] | Definitive Additional Materials |
EASTMAN KODAK COMPANY | ||
(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)(4) 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: | |||
[ ] | Fee paid previously with preliminary materials: | |||
[ ] | 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.: | |||
3) | Filing Party: | |||
4) | Date Filed: | |||
NOTICE OF 2014 ANNUAL MEETING
AND PROXY STATEMENT
Date of Notice April 2, 200915, 2014
EASTMAN KODAK COMPANY
343 STATE STREET
ROCHESTER, NEW YORK 14650
TABLE OF CONTENTS |
PROXY STATEMENT | |||
1 | Notice of the | ||
QUESTIONS & ANSWERS | |||
2 | Questions & Answers | ||
8 | Householding of Disclosure Documents | ||
8 | Audio Webcast of Annual Meeting | ||
8 | Printed Copy of 2013 Annual Report on Form 10-K | ||
PROPOSALS | |||
9 | Company Proposals | ||
9 | Item 1 — Election of Directors | ||
9 | Item 2 — Ratification of the Audit | ||
Committee’s Selection of PricewaterhouseCoopers | |||
LLP as | |||
our Independent Registered Public Accounting | |||
Firm | |||
9 | Item 3 — Advisory Vote on the Compensation of our | ||
Named Executive Officers | |||
10 | Item 4 — Advisory Vote on the Frequency of the | ||
Advisory Vote on the Compensation of our Named | |||
Executive Officers | |||
BOARD STRUCTURE AND | |||
CORPORATE GOVERNANCE | |||
Introduction | |||
Corporate Governance | |||
Business Conduct Guide and Directors’ | |||
Code of Conduct | |||
11 | Audit and Finance Committee Financial Qualifications | ||
and Memberships | |||
Board of Directors | |||
16 | Board Leadership Structure | ||
16 | Committees of the Board | ||
18 | 2013 Board Committee Membership | ||
Executive | |||
Compensation Committee Interlocks and | |||
Insider Participation | |||
Governance Practices | |||
COMMITTEE REPORTS | |||
Report of the Audit and Finance Committee | |||
Report of the Corporate | |||
Committee | |||
Report of the Executive Compensation | |||
Committee | |||
COMPENSATION DISCUSSION AND | |||
Executive Summary | |||
Determining Executive Target Total Direct | |||
Compensation |
24 | Elements of Total Direct Compensation | ||
Risk Mitigating Policies | |||
28 | Other Policies | ||
Other Compensation Elements | |||
Severance and | |||
30 | Satisfaction of Unsecured Claims and Cancellation of | ||
Equity | |||
COMPENSATION OF NAMED EXECUTIVE | |||
OFFICERS | |||
Summary Compensation Table | |||
Employment and Retention Arrangements | |||
Grants of Plan-Based Awards | |||
Outstanding Equity Awards at | |||
Year-End Table | |||
Option Exercises and Stock Vested Table | |||
Pension Benefits for | |||
Pension Benefits Table | |||
Non-Qualified Deferred Compensation for | |||
Termination and | |||
Director Compensation | |||
SECURITY OWNERSHIP OF CERTAIN | |||
BENEFICIAL OWNERS AND MANAGEMENT AND | |||
RELATED STOCKHOLDER MATTERS | |||
50 | Beneficial Security Ownership of More Than 5% | ||
of the Company’s Common Shares | |||
51 | Beneficial Security Ownership of Directors and | ||
Executive Officers | |||
52 | Section 16(a) Beneficial Ownership Reporting | ||
Compliance | |||
Interested Transactions | |||
Board Independence | |||
PRINCIPAL ACCOUNTING FEES AND SERVICES | |||
55 | Audit and Non-Audit | ||
55 | Policy Regarding Pre-Approval | ||
by the Independent Auditor | |||
ANNUAL MEETING INFORMATION | |||
2014 Annual Meeting Directions | |||
NOTICE OF 20092014 ANNUAL MEETING AND PROXY STATEMENT
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders on Wednesday, May 13, 200928, 2014 at 9:00 a.m., local time,am Eastern Time, at the Embassy Suites Hotel Walnut Creek, 1345 Treat Boulevard, Walnut Creek, CA.W New York, 541 Lexington Avenue, New York, NY 10022. You will be asked to vote on Company proposals.
Whether or not you attend the Annual Meeting, we hope you will vote as soon as possible. You may vote over the internet, as well as by telephone or by mailing a proxy card or voting instruction card. We encourage you to use the internet, as it is the most cost-effective way to vote.
We look forward to seeing you at the Annual Meeting and would like to take this opportunity to remind you that your vote is very important.
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Sincerely,
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James V. Continenza
Chairman of the Board
NOTICE OF THE 2014 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Eastman Kodak Company will be held on Wednesday, May 28, 2014 at 9:00 am Eastern Time, at the W New York, 541 Lexington Avenue, New York, NY 10022. The following will be voted on at the Annual Meeting:
1. Election of nine directors named in the Proxy Statement for a term of one year or until their successors are duly elected and qualified.
2. Ratification of the Audit and Finance Committee’s selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm.
3. Advisory vote on the compensation of our Named Executive Officers.
4. Advisory vote on the frequency of the advisory vote on the compensation of our Named Executive Officers.
5. Such other business as may properly come before the meeting or any adjournment thereof.
The Board of Directors recommends a vote FOR Items 1, 2 and 3, and recommends 1 year with respect to Item 4.
If you were a shareholder of record at the close of business on March 31, 2014, you are entitled to vote at the Annual Meeting.
We are taking advantage of the Securities and Exchange Commission “e-proxy” rules that allow public companies to furnish proxy materials to their shareholders over the internet. These rules allow us to provide you with the information you need, while lowering the cost of delivery and reducing the environmental impact of our Annual Meeting.
If you have any questions about the Annual Meeting, please contact: Shareholder Services, Eastman Kodak Company, 343 State Street, Rochester, NY 14650-0251, (585) 724-4053, e-mail: shareholderservices@kodak.com.
The Annual Meeting will be accessible by the handicapped. If you require special assistance, contact Shareholder Services.
By Order of the Board of Directors,
Patrick M. Sheller
General Counsel, Secretary & Chief Administrative Officer
Eastman Kodak Company
April 15, 2014
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be held on May 13, 2009.28, 2014. The Notice of 20092014 Annual Meeting and Proxy Statement and 20082013 Annual Report on Form 10-K are available at www.envisionreports.com/ek.KODK.
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QUESTIONS&ANSWERS
Q. | Why am I receiving these proxy materials? | |
A. | Our Board of Directors (the Board) is providing these proxy materials to you on the internet, or has delivered printed versions to you by mail in connection with Kodak’s | |
Q. | What is included in these proxy materials? | |
A. | These proxy materials include: |
If you received printed versions of the proxy materials by mail, these proxy materials also include the Proxy Card for the Annual Meeting. | |||||
Q. | What am I voting on? | ||||
A. | The Board is soliciting your proxy in connection with the Annual Meeting to be held on Wednesday, May | ||||
You are voting on the following proposals: | |||||
1. | Election of directors for a term of one year or until their successors are duly elected and qualified. | |||
2. | Ratification of the Audit and Finance Committee’s selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm. | |||
3. | ||||
4. | Advisory vote on the frequency of the |
The Board recommends |
Q. | Why did I receive a one-page notice in the mail regarding the internet availability of proxy materials this year instead of a full set of proxy materials? | |
A. | This year, we are pleased to be again | |
The Notice provides instructions on how to: |
In addition, shareholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis. Choosing to receive your future proxy materials by e-mail will save us the cost of printing and mailing documents to you and will reduce the environmental impact of printed materials. | |||
Q. | Why didn’t I receive a notice in the mail about the internet availability of the proxy materials? | ||
A. | We are providing some of our shareholders, including those who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of the Notice. | ||
In addition, we are providing the Notice by e-mail to those shareholders who have previously elected delivery of the proxy materials electronically. Those shareholders should have received an e-mail containing a link to the website where materials are available. |
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Q. | Where can I view the proxy materials on the internet? | |
A. | This Proxy Statement, the form of proxy and voting instructions are being made available to shareholders on or about April | |
Q. | How can I receive a printed copy of the proxy materials? | |
A. | Shareholder of |
Beneficial | |||
Q. | What is the difference between holding shares as a shareholder of record and as a beneficial owner? | ||
A. | Most Kodak shareholders hold their shares through a broker or other nominee (beneficial ownership) rather than directly in their own name (shareholder of record). As summarized below, there are some distinctions between shares held of record and those owned beneficially. | ||
Shareholder of Record.If your shares are registered in your name with Kodak’s transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the shareholder of record, and these proxy materials are being made available directly to you by Kodak. As the shareholder of record, you have the right to give your voting proxy to Kodak management or a third party, or to vote in person at the Annual Meeting. | |||
Beneficial Owner.If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being made available to you together with a voting instruction card on behalf of your broker, trustee or nominee. As the beneficial owner, you have the right to direct your broker, trustee or nominee on how to vote your shares and you are also invited to attend the Annual Meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or nominee on how to vote your shares. Since a beneficial owner is not the shareholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting. | |||
Q. | |||
Will any other matter be voted on? | |||
A. | We are not aware of any other matters you will be asked to vote on at the Annual Meeting. If | ||
Q. | How do I vote? | ||
A. | Shareholder of Record.There are four ways to vote, if you are a shareholder of record: |
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Your shares will be voted as you indicate. If you return your signed proxy card or otherwise give the Company’s management your proxy, but do not indicate your voting preferences, |
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Beneficial Owner.If you are a beneficial owner, please follow the voting instructions sent to you by your broker, trustee or nominee. | |||
Q. | What happens if I do not give specific voting instructions? | ||
A. | Shareholder of Record.If you are a shareholder of record and you: |
the proxy holders will vote your shares in the manner recommended by our Board on all matters presented in this ProxyStatement, and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting.
Beneficial Owner. If you are a beneficial owner of shares held in street name and do not provide your broker, trustee or nominee with specific voting instructions:
the proxy holders will vote your shares in the manner recommended by our Board on all matters presented in this Proxy Statement, and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting. | ||
Beneficial Owner. If you do not provide your broker, trustee or nominee with specific voting instructions or if you do not obtain a legal proxy that gives you the right to vote the shares, your shares will not be voted or counted. | ||
Q. | What is the deadline for voting my shares? | |
A. | Shareholder of Record.If you are a shareholder of record and vote by internet or telephone, your vote must be received by 1:00 a.m., Eastern Time, on May | |
Beneficial Owner.If you are a beneficial owner, please follow the voting instructions provided by your broker, trustee or nominee. You may vote your shares in person at the Annual Meeting only if you obtain a legal proxy from your broker, trustee or nominee and provide it at the Annual Meeting. | ||
Q. | Who can vote? | |
A. | To be able to vote your Kodak shares, the records of the Company must show that you held your shares as of the close of business on March | |
Q. | How can I change my vote or revoke my proxy? | |
A. | Shareholder of Record.If you are a shareholder of record, you can change your vote or revoke your proxy before the Annual Meeting by: |
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You may also complete a written ballot at the Annual Meeting. | |||
Beneficial Owner.If you are a beneficial owner, please follow the voting instructions sent to you by your broker, trustee or nominee. | |||
Q. | How are votes counted? | ||
A. | In the election of directors, you may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to each of the nominees. If you elect to abstain in the election of directors, the abstention will not impact the election of directors. In tabulating the voting results for the election of directors, only “FOR” and “AGAINST” votes are counted. | ||
You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the proposal to ratify the Audit and Finance Committee’s selection of the independent registered public accounting firm. In tabulating the voting results for this proposal, only “FOR” and “AGAINST” votes are counted. If you elect to abstain with respect to this proposal, the abstention will not impact the ratification of the Audit and Finance Committee’s selection of the independent registered public accounting firm. | |||
You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the advisory vote on executive compensation. In tabulating the voting results for this item, only “FOR” and “AGAINST” votes are counted. If you elect to abstain with respect to this proposal, the abstention will not impact the advisory vote on executive compensation. | |||
You may vote “1 YEAR,” “2 YEARS,” “3 YEARS” or “ABSTAIN” with respect to the frequency of shareholder votes on executive compensation. In tabulating the voting results for this item, only “1 YEAR,” “2 YEARS” and “3 YEARS” votes are counted. If you elect to abstain with respect to this proposal, the abstention will not impact the vote as to the frequency of shareholder voting on executive compensation. |
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Q. | What vote is required to approve each proposal? | |
A. | The following table describes the voting requirements for each proposal: | |
Item 1 — | Election of |
As set forth in the Company’s By-laws, | ||
To be elected in an uncontested election, a director nominee must be elected by a majority of the votes cast with respect to that director nominee. A majority of the votes cast means that the number of votes cast FOR a nominee’s election must exceed the number of votes cast AGAINST the nominee’s election. Each nominee receiving more votes FOR his or her election than votes AGAINST his or her election will be elected. | ||||
Item 2 | — | Ratification of the Audit and Finance Committee’s | To be approved, this proposal must receive the affirmative vote of a majority of the votes cast at the Annual Meeting. | |
Item 3 — | Advisory Vote on the Compensation of our Named Executive Officers | To be approved on an advisory basis, this proposal must receive the affirmative vote of a majority of the votes cast at the Annual Meeting. | ||
Item 4 — | Advisory Vote on the Frequency of the Advisory Vote on the Compensation of our Named Executive Officers | To be approved on an advisory basis, the frequency (1 year, 2 years or 3 years) will be that which receives the most votes cast at the Annual Meeting. |
Q. | Is my vote confidential? | |
A. | Yes. Only the inspectors of election and certain individuals who help with processing and counting the votes have access to your vote. Directors and employees of the Company may see your vote only if the Company needs to defend itself against a claim or if there is a proxy solicitation by someone other than the Company. Therefore, please do not write any comments on your proxy card. | |
Q. | Who will count the vote? | |
A. | Computershare Trust Company, N.A. will count the vote. Its representative will serve as the inspector of election. | |
Q. | Who can attend the Annual Meeting? | |
A. | If the records of the Company show that you held your shares as of the close of business on March | |
Q. | What do I need to do to attend the Annual Meeting? | |
A. | To attend the Annual Meeting, please follow these instructions: |
Seating at the Annual Meeting will be on a first-come, first-served | ||
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Q. | Can I bring a guest? | |
A. | Yes. If you plan to bring a guest to the Annual Meeting, follow the instructions on the internet or telephone or check the appropriate box on your proxy card. When you go through the registration area at the Annual Meeting, your guest must register with | |
Q. | What is the quorum requirement of the Annual Meeting? | |
A. | A majority of the outstanding shares on |
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Q. | Where can I find the voting results of the Annual Meeting? | |
A. | We intend to announce preliminary voting results at the Annual Meeting and disclose final results in a Form 8-K to be filed with the SEC within four business days of the Annual Meeting. If final results are not available at such time, the Form 8-K will disclose preliminary results, to be followed with an amended Form 8-K when final results are available. We also will publish final results on our corporate governance website at | |
Q. | Can I nominate someone to the Board? | |
A. | Our By-laws provide that any shareholder may nominate a person for election to the Board so long as the shareholder follows the procedure outlined in the By-laws as summarized below. In addition, the shareholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of Kodak common stock to elect the nominee. This is the procedure to be followed for direct nominations, as opposed to recommendations of nominees for consideration by our Corporate | |
The complete description of the procedure for shareholder nomination of director candidates is contained in our By-laws. A copy of the full text of the | ||
The written notice to our Secretary must contain the following information with respect to each nominee: 1) the proposing shareholder’s name and address; 2) the number of shares of the Company owned of record and beneficially by the proposing shareholder; 3) the name of the person to be nominated; 4) the number of shares of the Company owned of record and beneficially by the nominee; 5) a description of all relationships, arrangements and understandings between the shareholder and the nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by the shareholder; 6) such other information regarding the nominee as would have been required to be included in the Proxy Statement filed pursuant to the proxy rules of the SEC had the nominee been nominated, or intended to be nominated, by the Board, such as the nominee’s name, age and business experience; and 7) the nominee’s signed consent to serve as a director if so elected. | ||
Persons who are nominated in accordance with this procedure will be eligible for election as directors at the | ||
Q. | What is the deadline to propose actions for consideration at the | |
A. | For a shareholder proposal to be considered for inclusion in Kodak’s proxy statement for the | |
Secretary |
For a shareholder proposal that is not intended to be included in Kodak’s proxy statement under Rule 14a-8, the shareholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of Kodak common stock to approve that proposal, provide the information required by the By-laws of Kodak and give timely notice to the Secretary in accordance with the By-laws of Kodak, which, in general, require that the notice be received by the Secretary: If the date of the shareholder meeting is moved more than 30 days before or 30 days after the anniversary of the 2014 Annual Meeting, then notice of a shareholder proposal that is not intended to be included in Kodak’s proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days prior to the meeting and no later than the close of business on the later of the following two dates: You may request printed copies of any of these documents by contacting: The address of our principal executive office is: HOUSEHOLDING OF DISCLOSURE DOCUMENTS The SEC has adopted rules regarding the delivery of disclosure documents to shareholders sharing the same address. This rule benefits both you and Kodak. It reduces the volume of duplicate information received at your household and helps Kodak reduce expenses. Kodak expects to follow this rule any time it distributes annual reports, proxy statements, information statements and prospectuses. As a result, we are sending only one copy of the Notice to multiple shareholders sharing an address, unless we receive contrary instructions from one or more of these shareholders. If your household received a Notice for this year, but you would prefer to receive your own copy, please contact Kodak’s transfer agent, Computershare Trust Company, N.A., by calling its toll-free number, If you would like to receive your own Notice in future years, follow the instructions described If your Kodak shares are registered in your own name, please contact Kodak’s transfer agent, Computershare Trust Company,N.A., and inform them of your request by phone: SecretaryEastman Kodak Company343 State StreetRochester, NY 14650-0218For a shareholder proposal that is not intended to be included in Kodak’s proxy statement under Rule 14a-8, the shareholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of Kodak common stock to approve that proposal, provide the information required by the By-laws of Kodak and give timely notice to the Secretary of Kodak in accordance with the By-laws of Kodak, which, in general, require that the notice be received by the Secretary of Kodak:Not earlier than the close of business on January 13, 2010; andNot later than the close of business on February 12, 2010.If the date of the shareholder meeting is moved more than 30 days before or 30 days after the anniversary of the 2009 Annual Meeting, then notice of a shareholder proposal that is not intended to be included in Kodak’s proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days prior to the meeting and no later than the close of business on the later of the following two dates:90 days prior to the meeting; and10 days after public announcement of the meeting date.6You may contact our Secretary at our principal executive officesoffice for a copy of the relevant by-lawBy-law provisions regarding the requirements for making shareholder proposals. Our By-laws can also be accessed at www.kodak.com/go/governance.http://ek.client.shareholder.com/supporting.cfm. Q. How much did this proxy solicitation cost? A. The Company hired Georgeson Inc. to assist in the solicitation of votes. The estimated fee that the Company will pay for Georgeson’s services is $18,500$7,500 plus reasonable out-of-pocket expenses. In addition, the Company will reimburse brokerage houses and other custodians, nominees, trustees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to shareholders. Directors, officers and employees of the Company may solicit proxies and voting instructions in person, by telephone or other means of communication. These directors, officers and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with these solicitations. Q. What other information about Kodak is available? A. The following information is available:
Shareholder Services
Eastman Kodak Company
343 State Street
Rochester, NY 14650-0251
(585) 724-4053
E-mail: shareholderservices@kodak.com
Eastman Kodak Company
343 State Street
Rochester, NY 146502008 Annual Report on Form 10-KTranscript of the Annual MeetingPlan descriptions, annual reports and trust agreements and contracts for the pension plans of the Company and itssubsidiariesDiversity Report; Form EEO-1Health, Safety and Environment Annual Report on Kodak’s website atwww.kodak.com/go/HSECorporate Responsibility Principles on Kodak’s website atwww.kodak.com/US/en/corp/principlesCorporate Governance Guidelines on Kodak’s website atwww.kodak.com/go/governanceBusiness Conduct Guide on Kodak’s website atwww.kodak.com/US/en/corp/principles/businessConduct.shtmlEastman Kodak Company By-laws on Kodak’s website atwww.kodak.com/go/governanceCharters of the Board’s Committees (Audit Committee, Corporate Responsibility and Governance Committee, ExecutiveCommittee, Executive Compensation and Development Committee, and Finance Committee) on Kodak’s website atwww.kodak.com/go/governanceDirectors’ Code of Conduct on Kodak’s website atwww.kodak.com/go/governanceKodak Board of Directors Policy on Recoupment of Annual Incentive Bonuses in the Event of a Restatement Due to Fraudor Misconduct atwww.kodak.com/go/governanceYou may request printed copies of any of these documents by contacting: Coordinator, Shareholder Services Eastman Kodak Company 343 State Street Rochester, NY 14650-0218 (585) 724-5492 E-mail: shareholderservices@kodak.comThe address of our principal executive office is: Eastman Kodak Company 343 State Street Rochester, NY 146507(800) 253-6057,1-800-253-6057, or by mail at P.O. Box 43078, Providence, RI 02940-3078.below. Similarly, if you share an address with another Kodak shareholder, and together both of you would like to receive only a single Notice, follow these instructions:below:(800) 253-6057,1-800-253-6057, or by mail: P.O. Box 43078, Providence, RI 02940-3078.
AUDIO WEBCAST OF ANNUAL MEETING AVAILABLE ON THE INTERNET
Kodak’s Annual Meeting will be webcast live. If you have internet access, you can listen to the webcast by going to Kodak’s Investor Center webpage atwww.kodak.com/US/en/corp/investorCenter/investorsCenterHome.shtmlgo/invest. This webcast is listen only. You will not be able to ask questions. The Annual Meeting audio webcast will remain available on our website for a short period of time after the Annual Meeting.
Information included on our website, other than our Proxy Statement and proxy card, is not part of the proxy solicitation materials.
2008 Annual Report on FormPRINTED COPY OF 2013 ANNUAL REPORT ON FORM 10-K
The Company will provide without charge, upon your request, a printed copy of its 20082013 Annual Report on Form 10-K. To receive a printed copy of the 20082013 Annual Report on Form 10-K, please contact:
Coordinator,
Shareholder Services
Eastman Kodak Company
343 State Street
Rochester, NY 14650-0218 14650-0251
(585) 724-5492724-4053
E-mail: shareholderservices@kodak.com
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PROPOSALS
COMPANY PROPOSALS
ITEM 1 — Election of Directors
Kodak’s By-laws require us to have at least nine directors but no more than 18.13 directors. The number of directors is set by the Board and is currently 12.nine. Mr. PerezClarke is the only director who is an employee of the Company.
There are 11nine directors standing for re-election (Richard(Mark S. Braddock, Timothy M. Donahue, MichaelBurgess, Jeffrey J. Hawley, William H. Hernandez, Douglas R. Lebda, Debra L. Lee, Delano E. Lewis,Clarke, James V. Continenza, Matthew A. Doheny, John A. Janitz, George Karfunkel, Jason New, William G. Parrett Antonio M. Perez, Dennis F. Strigl and Laura D’Andrea Tyson)Derek Smith). All the nominees agree to serve a one-year term. Information about themthe director nominees is provided on pages 13 - 15in the section entitled “Board of Directors” in this Proxy Statement. Hector de J. Ruiz will not be standing for re-election.
If a nominee is unable to stand for election, the Board may reduce the number of directors or choose a substitute. If the Board chooses a substitute, the shares represented by proxies will be voted for the substitute. If a director retires, resigns, dies or is unable to serve for any reason, the Board may reduce the number of directors or elect a new director to fill the vacancy.
Each director nominee who receives more “FOR” votes than “AGAINST” votes representing shares of the Company’s common stock presented in person or represented by proxy and entitled to be voted at the Annual Meeting will be elected.
If a director nominee receives a greater number of votes “AGAINST” his or her election than votes “FOR” such election, the Board will decide, in accordance with the Company’s Majority Vote Policy, described on page 22 of this Proxy Statement, whether to accept the irrevocable letter of resignation the nominee submitted as a condition of being nominated to the Board as required by the Majority Vote Policy.
The Board of Directors recommends a vote FOR the election of all the director nominees.
ITEM 2 — | Ratification of the Audit and Finance Committee’s Selection of PricewaterhouseCoopers LLP as |
PricewaterhouseCoopers LLP has been the Company’s independent accountants for many years. The Audit and Finance Committee has selected PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm to serve untila one-year term beginning on the 2010 annual meeting.date of the 2014 Annual Meeting.
A representative of PricewaterhouseCoopers LLP is expected to attend the Annual Meeting to respond to questions and, if he or she desires, make a statement.
As a matter of good corporate governance, the Audit and Finance Committee has determined to submit its selection of the independent registered public accounting firm to our shareholders for ratification. In the event that this selection of PricewaterhouseCoopers LLP is not ratified, the Audit and Finance Committee will review its future selection of an independent registered public accounting firm.
The ratification of the Audit and Finance Committee’s selection of PricewaterhouseCoopers LLP requires the affirmative vote of a majority of the votes cast by the holders of shares entitled to vote.
The Board of Directors recommends a vote FOR ratification of the Audit and Finance Committee’s selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm.
ITEM 3 — Advisory Vote on the Compensation of our Named Executive Officers
What am I voting on?
Our Named Executive Officers are identified in the Compensation Discussion and Analysis of this Proxy Statement. Pursuant to Section 14A of the Securities Exchange Act, you are voting on a proposal, commonly known as the “say-on-pay” proposal, which gives our shareholders the opportunity to endorse or not endorse our Named Executive Officer pay programs and policies through the following resolution:
RESOLVED, that the shareholders approve the compensation of Eastman Kodak Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission in the Company’s Proxy Statement for the 2014 Annual Meeting of Shareholders (which disclosure includes the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure).
What factors should I consider in voting on this proposal?
We urge you to consider the various factors regarding compensation matters as discussed in the Compensation Discussion and Analysis of this Proxy Statement.
As discussed in the Compensation Discussion and Analysis, we believe that our executive compensation program is designed to attract, motivate and retain individuals with the skills required to implement the Company’s strategic plan and achieve annual and long-term performance goals necessary to create shareholder value. Our compensation strategy is to provide opportunities to reward our executives when they deliver defined performance results that are based on the business strategy of the Company. Through stock ownership we also
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align the interests of our executives with those of our shareholders and the long-term interests of the Company. We believe that the fiscal year 2013 compensation of our Named Executive Officers was appropriate and aligned with Company performance results and our strategic plan. In addition, as described in the Compensation Discussion and Analysis, the employee agreements of our Named Executive Officers, which contain terms on compensation, were approved by the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) in connection with the Company’s emergence from Chapter 11 bankruptcy on September 3, 2013.
Why is the proposal being submitted to the shareholders?
The Dodd-Frank Wall Street Reform and Consumer Protection Act, or simply the Dodd-Frank Act, requires that public companies give their shareholders the opportunity to vote say-on-pay proposals. The SEC has issued rules to implement the provisions of the Dodd-Frank Act relating to shareholder voting on executive compensation (including say-on-pay and say-when-on-pay proposals), which describe the means by which shareholders must be provided the opportunity to vote.
Is this vote binding on the Board of Directors?
In order to be approved on an advisory basis, this proposal must receive the affirmative vote of the majority of votes cast. Because your vote is advisory, it will not be binding on the Board of Directors. However, our Board of Directors values the opinions that our shareholders express in their votes and will take into account the outcome of the vote when considering future executive compensation arrangements as it deems appropriate.
How does the Board of Directors recommend that I vote?
The Board of Directors recommends that you vote FOR the advisory resolution approving the compensation of Eastman Kodak Company’s Named Executive Officers as described in the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.
ITEM 4 — | Advisory Vote on the Frequency of the Advisory Vote on the Compensation of our Named Executive Officers |
What am I voting on?
Pursuant to Section 14A of the Securities Exchange Act, you are voting on the frequency with which the say-on-pay vote should be held. Specifically, the Dodd-Frank Act enables our shareholders to indicate how frequently we should seek an advisory vote on the compensation of our Named Executive Officers. By voting on this proposal, shareholders may indicate whether they would prefer an advisory vote on Named Executive Officer compensation once every one, two or three years.
How do I indicate my preference?
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, or three years, or you may abstain from voting.
Is this vote binding on the Board of Directors?
The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on executive compensation that has been selected by shareholders. However, because this vote is advisory and is not binding on the Board of Directors, the Board may decide that it is in the best interests of our shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our shareholders.
How does the Board recommend that I vote?
After careful consideration of this proposal, our Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for the Company.
In deciding upon this recommendation, our Board considered that an annual vote on executive compensation is an effective means by which our shareholders may provide us with their direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year.
The Board of Directors recommends that you vote for a one-year interval for the advisory vote on executive compensation.
BOARD STRUCTURE AND CORPORATE GOVERNANCE
INTRODUCTIONINTRODUCTION: CONFIRMATION OF BOARD AS PART OF CHAPTER 11 PROCEEDINGS
On January 19, 2012, Kodak and its U.S. subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. On August 23, 2013, the Bankruptcy Court entered an order confirming the revised First Amended Joint Chapter 11 Plan of Reorganization of Eastman Kodak Company and its Debtor Affiliates (the Plan of Reorganization), based upon the favorable support of the Plan of Reorganization by the creditors entitled to vote. On September 3, 2013, the Plan of Reorganization became effective, and the Company and its U.S. subsidiaries emerged from Chapter 11 protection.
Kodak emerged from the bankruptcy restructuring process as a technology company, offering sophisticated solutions in product goods packaging, graphic communications, functional printing and enterprise services. The Company also offers leading products and services in the entertainment and commercial film markets. Kodak’s product portfolio is based on our unique expertise in materials science, deposition processes and digital imaging science. The Company’s stock trades on the New York Stock Exchange (KODK).
As part of the Plan of Reorganization, the prior Board of Directors nominated and elected, and the Bankruptcy Court confirmed, the Board of Directors of the emerged Kodak. Effective September 3, 2013, the following individuals are members of the Board of Directors, all of whom are standing for re-election: Mark S. Burgess, James V. Continenza, Matthew A. Doheny, John A. Janitz, George Karfunkel, Jason New, William G. Parrett, and Derek Smith. In addition, effective March 12, 2014, the Board appointed Jeffrey J. Clarke as Chief Executive Officer and a member of the Board. Mr. Clarke is standing for re-election.
CORPORATE GOVERNANCE OVERVIEW
Ethical business conduct and good corporate governance are not newwell established practices at Kodak. The reputation of our Company and our brand has been built by more than a century of ethical business conduct. The Company and the Board have long practicedpractice good corporate governance and believe it to be a prerequisite to providingdelivering sustained, long-term value to our shareholders. We continually monitor developments in the area of corporate governance to develop and lead in developing and implementingimplement best practices. ThisStrong corporate governance is a fundamental goal of our Board.CORPORATE GOVERNANCE GUIDELINES
Our Corporate Governance Guidelines reflect the principles by which the Companyour Board operates. From time to time, the Board reviews and revises our Corporate Governance Guidelines in response to regulatory requirements and evolving best practices. A copy of theOur Corporate Governance Guidelines isare published on our website atwww.kodak.com/go/governancehttp://ek.client.shareholder.com/supporting.cfm.
BUSINESS CONDUCT GUIDE AND DIRECTORS’ CODE OF CONDUCT
The reputation of our Company and our brand has been built by more than a century of ethical business conduct. All of our employees, including the CEO,Chief Executive Officer, the CFO,Chief Financial Officer, the Controller, all other senior financial officers and all other Section 16 executive officers,Executive Officers, as defined under Section 16 of the Securities Exchange Act of 1934, as amended (a Section 16 Executive Officer) are required to comply with our long-standing code of conduct, the “Business Conduct Guide.” The Business Conduct Guide requires our employees to maintain the highest ethical standards in the conduct of Company business so that they and the Company are always above reproach. The CompanyWe also hashave a code of conduct for its directors,our Directors, known as the Directors’ Code of Conduct. Both ourOur Business Conduct Guide and our Directors’ Code of Conduct are published on our website atwww.kodak.com/go/governancehttp://ek.client.shareholder.com/supporting.cfm. We will post on this website any amendments to the Business Conduct Guide or Directors’ Code of Conduct and any waivers of either code for directorsDirectors or the Company’s CEO, CFOChief Executive Officer, Chief Financial Officer or Controller. Our directors annuallyDirectors certify in writing that they understand and are in compliance with the Directors’ Code of Conduct.BOARD INDEPENDENCE
For a number of years, a substantial majority of our Board has been comprised of independent directors. In February 2004, the Board adopted Director Independence Standards to aid it in determining whether a director is independent. The Director Independence Standards, which were amended by the Board in February 2009 to comply with recent changes to the director independence requirements of the New York Stock Exchange’s (NYSE) Corporate Governance Listing Standards (Listing Standards), are attached as Exhibit I to this Proxy Statement.
The Board has determined that each of the following former and current directors has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and is independent under the Company’s Director Independence Standards and, therefore, is independent within the meaning of the NYSE’s Listing Standards and the rules of the SEC: Richard S. Braddock, Timothy M. Donahue, Michael J. Hawley, William H. Hernandez, Douglas R. Lebda, Debra L. Lee, Delano E. Lewis, William G. Parrett, Hector de J. Ruiz, Dennis F. Strigl and Laura D’Andrea Tyson. The remaining director, Antonio M. Perez, Chairman of the Board and CEO, is an employee of the Company and, therefore, is not independent.
In the course of the Board’s determination regarding the independence of each non-employee director, it considered any transactions, relationships and arrangements as required by the Company’s Independence Standards. In particular, with respect to the most recent completed fiscal year, the Board considered:
The annual amount of purchases from the Company by the company where Mr. Hernandez is an executive officer, and determined that the amount of purchases did not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of that company and, therefore, were immaterial.
The annual amount of sales to the Company by the company where Mr. Hernandez is an executive officer, and determined thatthe amount of sales did not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of that company and,therefore, were immaterial.
The annual amount of purchases from the Company by the company where Mr. Strigl is an executive officer, and determinedthat the amount of purchases did not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of thatcompany and, therefore, were immaterial.
The annual amount of sales to the Company by the company where Mr. Strigl is an executive officer, and determined that theamount of sales did not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of that company and,therefore, were immaterial.
The annual amount of sales to the Company by the company where Dr. Tyson is a director, and determined that the amount ofsales did not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of that company and, therefore, wereimmaterial.
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The annual amount of sales to the Company by the company where Dr. Tyson is employed, and determined that the amount of sales did not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of that company and, therefore, were immaterial.
The amount of the contributions from the Company to a charitable organization where Ms. Lee is a director, and determined thatthe amount of the contributions did not exceed the greater of $1,000,000 or 2% of the charitable organization’s gross revenuesand, therefore, were immaterial.
The amount of the contributions from the Company to a second charitable organization where Ms. Lee is a director, anddetermined that the amount of the contributions did not exceed the greater of $1,000,000 or 2% of the charitable organization’sgross revenues and, therefore, were immaterial.
AUDIT AND FINANCE COMMITTEE FINANCIAL QUALIFICATIONS AND MEMBERSHIPS
The Board has determined that all members of its Audit and Finance Committee (Richard(Mark S. Braddock, William H. Hernandez, Debra L. Lee, Delano E. Lewis,Burgess, Matthew A. Doheny, George Karfunkel and William G. Parrett and Dennis F. Strigl)Parrett) are independent and are financially literate as required by the NYSE, andNew York Stock Exchange (NYSE). The Board has also determined that Richard S. Braddock, William H. Hernandez and William G. Parrett possesspossesses the qualifications of an Audit and Finance Committee Financial Expert, as defined by SEC rules, and that all members of the Audit and Finance Committee have accounting or related financial management expertise, as required by the NYSE.
The Board has determined that William G. Parrett’s simultaneous service on the audit committees of three other public companies will not impair his ability to effectively serve on the Company’s Audit and Finance Committee.
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REVIEW, APPROVAL OR RATIFICATIONBOARD OF TRANSACTIONS WITH RELATED PERSONSDIRECTORS
In February 2007,Nominees to Serve a One-Year Term Expiring at the 2015 Annual Meeting
As set forth above, the membership on our Board based onwas approved by the recommendationBankruptcy Court and supported by our creditors as part of the confirmation of the Plan of Reorganization, effective September 3, 2013. Mr. Clarke, our Chief Executive Officer, was appointed a member of the Board effective March 12, 2014 and is the only director who was not included in the Plan of Reorganization.
The Corporate ResponsibilityGovernance and GovernanceNominating Committee adopted written policies(Governance Committee) and procedures relatingthe Board seek to approval or ratificationensure that the Board is composed of “interested transactions” with “related parties.” Under these policiesmembers who bring an appropriate mix of skills and procedures,experience across a variety of disciplines, including strategic planning, organizational management, technology, corporate finance, mergers and acquisitions, marketing, digital technologies, public policy, economics, executive compensation, risk management, international operations, corporate governance and internal controls, each of which are posted on our website atwww.kodak.com/go/governance, our Governance Committee is to reviewimportant areas of responsibility for the material facts of all interested transactions that require the Governance Committee’s approval. Board and its Committees.
The Governance Committee will approve or disapprove the interested transactions, subject to certain exceptions, by taking into account, among other factors it deems appropriate, whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstancesBoard and the extent of the related person’s interest in the transaction. No director may participate in any discussion or approval of an interested transaction for which he or she is a related party. If an interested transaction will be ongoing, the Governance Committee may establish guidelines for our management to follow in its ongoing dealings with the related party and then at least annually must review and assess ongoing relationships with the related party.
Under the policies and procedures, an “interested transaction” is any transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness), in which the aggregate amount involved will or may be expected to exceed $100,000 in any calendar year, the Company is a participant and any related party has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A “related party” is any person who is or was since the beginningbelieve that each of the last fiscal year for which we have filed a Form 10-Kdirector nominees possesses important experience and proxy statement, a Section 16 Executive Officer, director or nominee for election as a director (even if they presently do not serveskills that provide the Board with an optimal balance of leadership, competencies and qualifications in areas that role), any greater than 5% beneficial ownerare important to the Company. Each of the Company’s common stockdirector nominees has high ethical standards, acts with integrity and exercises careful, mature judgment. Each is committed to employing his or any immediate family memberher skills and abilities to aid the long-term interests of any of the foregoing.Immediate family member includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone residing in such person’s home (other than a tenant or employee).our shareholders.
The Governance Committee has reviewed and pre-approved certain types of interested transactions described below. In addition our Board has delegated to the chair ofbiographical information in each director nominee’s profile below, the Governance Committee the authority to pre-approve or ratify (as applicable) any interested transaction with a related party in which the aggregate amount involved is expected to be less than $500,000. Pre-approved interested transactions include:
Employment of Section 16 Executive Officers either if the related compensation is required to be reported in our proxy statement or if the Section 16 Executive Officer is not an immediate family member of another Section 16 Executive Officer or a director of our CompanyBoard and the related compensation would be reportedCorporate Governance andNominating Committee considered the listedKey Experience, Skills and other Qualifications in our proxy statement ifdetermining to nominate the Section 16 Executive Officer was a “Named Executive Officer” and our Compensation Committee approved (or recommended that the Board approve) such compensation.
Any compensation paid to a director if the compensation is required to be reported in our proxy statement.
Any transaction with another company with which a related person’s only relationship is as an employee (other than an executiveofficer), director or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved does notexceed the greater of $1,000,000 or 2% of that company’s total annual revenues.
Any charitable contribution, grant or endowment by the Company to a charitable organization, foundation or university with whicha related person’s only relationship is as an employee (other than an executive officer) or a director, if the aggregate amountinvolved does not exceed the greater of $1,000,000 or 2% of the charitable organization’s total annual receipts.
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Any transaction where the related person’s interest arises solely from the ownership of the Company’s common stock and all holders of our common stock received the same benefit on a pro rata basis (e.g., dividends).
Any transaction involving a related party where the rates or charges involved are determined by competitive bids.
Any transaction with a related party involving the rendering of services as a common or contract carrier, or public utility, at ratesor charges fixed in conformity with law or governmental authority.
Any transaction with a related party involving services as a bank depository of funds, transfer agent, registrar, trustee under atrust indenture or similar services.
The Governance Committee reviewed two interested transactions with related parties occurring in 2008 that did not fall within any of the pre-approved interested transactions described above. In each case, the Committee ratified the transaction and determined that the related person did not have a material interest in the transaction. Therefore, there are no related party transactions that need to be disclosed in this Proxy Statement under the relevant SEC rules.
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BOARD OF DIRECTORSdirectors for re-election.
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JEFFREY J. CLARKE |
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he joined in 1998 following the merger of Compaq with Digital Equipment Corporation (DEC). Mr. Clarke was with DEC from 1985 to Mr. Clarke served as Chairman of Orbitz Worldwide, a Mr. Clarke earned an MBA from Northeastern University, where he serves as a Trustee. He holds a B.A. in Economics from the State University of New York at Geneseo. Key Experience, Skills and other Qualifications: | ||
JAMES V. CONTINENZA |
In addition to his management experience, Mr. Continenza currently serves on the boards of Tembec, Inc. (since 2008), a manufacturer of lumber-derived products, and Broadview Networks, LLC (since 2012), which provides integrated communications solutions. Previously, he was a director of Aventine Renewable Energy, Inc. (since 2012), which produces ethanol and corn-based products. Mr. Continenza has also served on the boards of several privately held companies. Key Experience, Skills and Other Qualifications: |
MATTHEW A. DOHENY | MATTHEW A. DOHENY Director since Mr. Key Experience, Skills and other Qualifications: | |
JOHN A. JANITZ | JOHN A. JANITZ Director since September 2013 |
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Mr. Janitz currently serves on the board of STR Holdings, Inc. (since June 2007), a manufacturer of solar power module encapsulants. Mr. Janitz previously served on the board of Textron Inc. and Wickes Manufacturing Company and has also served on the boards of several privately held companies. Key Experience, Skills and other Qualifications: |
GEORGE KARFUNKEL | ||
Key Experience, Skills and | ||
JASON NEW |
Key Experience, Skills and other Qualifications: | |
WILLIAM G. PARRETT | WILLIAM G. PARRETT Director since November 2007 Key Experience, Skills and other Qualifications: |
DEREK SMITH | ||
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Key Experience, Skills and other Qualifications: |
15BOARD LEADERSHIP STRUCTURE
The Board recognizes that one of its key responsibilities is to determine the most appropriate leadership structure for the Company and to ensure independent oversight of management. In view of this, on September 23, 2013, the Board elected James V. Continenza, an independent director, as Chairman of the Board, and subsequently, effective March 12, 2014, the Board appointed Jeffrey J. Clarke as Chief Executive Officer and a member of the Board. Prior to September 2013, the Company’s President and Chief Executive Officer held the role of Chairman, during which time the Board designated a Presiding Director to serve as the principal liaison between the independent directors and the Chief Executive Officer. The Board determined to separate the roles of Chairman and Chief Executive Officer in September 2013 in order to have an independent director lead the Board.
COMMITTEES OF THE BOARD
Upon its implementation in September 2013, the Board established the following committees: Audit and Finance Committee, Executive Compensation Committee, and Corporate Governance and Nominating Committee. During the pendency of the Chapter 11 proceedings, the Board committees consisted of the Audit and Finance Committee, the Restructuring and Executive Compensation Committee, and the Executive Committee.
Audit and Finance Committee
The Board hasAudit and Finance Committee consists of Mark S. Burgess, Matthew A. Doheny, George Karfunkel and William G. Parrett, Chair. During 2013, the five committees described below.Audit and Finance Committee met nine times. The Board has determined that each of theall members of the Audit Committee (Richard S. Braddock, William H. Hernandez, Debra L. Lee, Delano E. Lewis, William G. Parrett and Dennis F. Strigl), the Corporate Responsibility and Governance Committee (Timothy M. Donahue, Michael J. Hawley, Douglas R. Lebda, Hector de J. Ruiz and Laura D’Andrea Tyson), the Executive Compensation and Development Committee (Richard S. Braddock, Michael J. Hawley, Douglas R. Lebda, Delano E. Lewis and William G. Parrett) and the Finance Committee (Timothy M. Donahue, William H. Hernandez, Debra L. Lee, Hector de J. Ruiz, Dennis F. Strigl and Laura D’Andrea Tyson) has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and isare independent under the Company’s Director Independence Standards and, therefore, are independent within the meaning of the NYSE’s Listing Standards and, in the caseNYSE listing standards. The Board has also determined that all members of the Audit and Finance Committee are independent in accordance with SEC rules for audit committees and are financially literate as required by the NYSE, and that William G. Parrett possesses the qualifications of an “audit committee financial expert,” as defined by SEC rules, and has accounting or related financial management expertise, as required by the NYSE.
The Board has determined that William G. Parrett’s simultaneous service on the audit committees of three other public companies does not impair his ability to effectively serve on the SEC.
Audit Committee — 9 meetings in 2008and Finance Committee.
The Audit and Finance Committee assists the Board in overseeing:overseeing and making recommendations to the Board on such matters as: the integrity of the Company’s financial reports; the Company’s compliance with legal and regulatory requirements; the Company’s independent registered public accounting firm’s (PricewaterhouseCoopers LLP) selection, qualifications, performance and independence; the Company’s systems of disclosure controls and procedures and internal controls over financial reporting; and the performance of the Company’s internal auditors. A detailed listThe charter for the Audit and Finance Committee is posted athttp://ek.client.shareholder.com/supporting.cfm.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee (Governance Committee) is comprised of four members of the Audit Committee’s functions is included in its charter, which can be accessed atwww.kodak.com/go/governanceBoard (James V. Continenza, John A. Janitz, Jason New, Chair, and Derek Smith).
In During 2013, the past year, the Audit Committee:
Corporate Responsibility and Governance Committee — 6 meetings in 2008
The Corporate Responsibility and Governance Committee assistsare to oversee the Board in: overseeing the Company’sCompany's corporate governance structure; identifying and recommendingstructure, recommend individuals to the Board for nomination as directors; performing an annualmembers of the Board and its committees, lead the Board in its periodic review of Board performance, and oversee the Board’s performance; and overseeing the Company’sCompany's activities in the areas of diversity and environmental and social responsibility, charitable contributions, diversity and equal employment opportunity. A detailed list of the Corporate Responsibility and Governance Committee’s functions is included in itsresponsibility. The charter which can be accessed atwww.kodak.com/go/governance.
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In the past year, the Corporate Responsibility and Governance Committee:
The Corporate Responsibility and Governance Committee is also referred to as the “Governance Committee” in this Proxy Statement.posted athttp://ek.client.shareholder.com/supporting.cfm.
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Executive Compensation and Development Committee — 10 meetings in 2008
The Executive Compensation and Development Committee assists the Board in: overseeing the Company’s executive compensation strategy; overseeing the administration of its executive compensation and equity-based compensation plans; reviewing and approving the compensation of the Company’s CEO; overseeing the compensation of the Company’s Section 16 Executive Officers; reviewing the Company’s succession plans for its CEO, President, if applicable, and other key positions; and overseeing the Company’s activities in the areas of leadership and executive development. A detailed list of the Executive Compensation and Development Committee’s functions is included in its charter, which can be accessed at www.kodak.com/go/governance.
In the past year, the Executive Compensation and Development Committee:
The Executive Compensation and Development Committee is also referred to as the “Compensation Committee” in this Proxy Statement.
Finance Committee — 6 meetings in 2008
The Finance Committee assists the Board in overseeing the Company’s: balance sheet and cash flow performance; financing plans; capital expenditures; acquisitions, joint ventures and divestitures; risk management programs; performance of sponsored pension plans; and tax policy. A detailed list of the Finance Committee’s functions is included in its charter, which can be accessed atwww.kodak.com/go/governance.
In the past year, the Finance Committee:
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Executive Committee — No meetings in 2008
The Executive Committee is composed of the following directors: the Chairman of the Board, the Presiding Director and the Chairs of the other four committees. The Executive Committee is generally authorized to exercise all of the powers of the Board in the intervals between meetings of the Board. The Executive Committee did not meet in 2008. The Executive Committee’s charter can be accessed atwww.kodak.com/go/governance.
COMMITTEE MEMBERSHIP FROM FEBRUARY 26, 2008 – MARCH 20, 2009
COMMITTEE MEMBERSHIP BEGINNING MARCH 20, 2009
* Dr. Ruiz is not seeking reelection at the 2009 Annual Meeting.
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EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
The Compensation Committee is comprised of fivefour members of the Board (James V. Continenza, John A. Janitz, Jason New and Derek Smith, Chair), all of whom are independent in accordance with the Board’s Director Independence Standards which standards reflectand, therefore, are independent within the NYSE’s director independencemeaning of the NYSE listing standards. During 2013, the Executive Compensation Committee met eight times; six of these meetings were held by the former Restructuring and Executive Compensation Committee.
The Executive Compensation Committee assists the Board in fulfilling its responsibilities in connection with the compensation of itsthe Company’s executives, including our Named Executive Officers. It performs this function by overseeing the Company’s executive compensation strategy, overseeing the administration of its executive compensation and long-term equity incentive compensation plans, assessing the effectiveness of the Company’s executive compensation plans, reviewingstrategy and approving the compensation of the Company’s CEO,plans, and reviewing and approving the compensation of the Company’s Named Executive Officers, including the Chief Executive Officer, and the other Section 16 Executive Officers. The entire Board reviews the Company’s succession plans for its CEOChief Executive Officer and other key positions, and oversees the Company’s activities in the areas of leadership and executive development. The Executive Compensation Committee operates under a written charter adopted byalso reviews and makes recommendations to the Board which details the Compensation Committee’s duties and responsibilities. A current copyfrom time to time regarding compensation of directors. The charter of the Executive Compensation Committee’s charter can be accessedCommittee is posted atwww.kodak.com/go/governancehttp://ek.client.shareholder.com/supporting.cfm..
The full Board sets the compensation of the Company’s non-employee directors based on the recommendation of the Governance Committee.
TheExecutive Compensation Committee has delegated limited authority to the Company’sour Chief Human ResourcesAdministrative Officer to assist theCompensation Committee within the administration of the Company’s executive compensation and equity-based compensation plans. The Chief Human ResourcesAdministrative Officer is authorized to amend any executive compensation or equity-based compensation plan in which our Named Executive Officers participate, other than to materially increase the benefits accruing to a participant under the plan, increase the number of shares available for issuance under the plan or substantially modify the requirements as to eligibility for participation. The Chief Human Resources Officer has also been delegated the authority to amend award agreements under any executive compensation and equity-based compensation plan other than to increase the benefits accruing to the participant and to determine the manner and timing of payments under the Eastman Kodak Company 1982 Executive Deferred Compensation Plan (EDCP).eligibility.
The Compensation Committee meets routinely throughout the year. It is the Compensation Committee’s policy to make most compensation decisions in a two-step process to ensure sufficient deliberation. TheExecutive Compensation Committee approves all compensation and awards, under the Company’s executive compensation plans for each of the Company’s Named Executive Officers. The Compensation Committee also approves compensation levels forincluding each component of total direct compensation, following discussions and after reviewfor each of analyses and recommendations received from its independent compensation consultant and management, as it deems appropriate.the Company’s Section 16 Officers. The CEO, Chief Human ResourcesExecutive Officer and Director of Global Compensation makemakes recommendations regarding each compensation element for the Named ExecutiveSection 16 Officers other than the CEO.Chief Executive Officer. The Compensation Committee’s independent compensation consultant and the Director of Global Compensation presentpresents analyses regarding the compensation of the Chief Executive Officer. Based on these recommendations, the Committee reviews and recommendations regarding CEOdetermines the compensation toof the Compensation CommitteeChief Executive Officer in executive sessions.
With respect to the Company’s executive performance-based plans, management, including the CEO, CFO, Chief Human ResourcesExecutive Officer, Chief Financial Officer, Chief Administrative Officer and Director of Global Compensation, proposes performance goals. The CEO and Chief Human Resources Officer are involved in formulating recommendations to the Compensation Committee on award levels for each Named Executive Officer for the upcoming performance year, with the exception of award levels for the CEO. Management develops these performance targets consideringgoals based upon the Company’s strategic and operational imperatives for the year and its executive compensation strategy and goals. Generally, the performance targets and individual award targets for the Company’s annual variable pay plan are reviewed and approved by the Compensation Committee within the first 90 days of each calendar year. The performance targets of the Company’s long-term equity incentive compensation plans for the new performance cycle are reviewed and approved by the Compensation Committee within the first 90 days of each calendar year while annual stock option grants and allocations for the Leadership Stock Program for the next performance cycle are generally established in December of the prior year.strategy. Throughout the year, the Executive Compensation Committee reviews projections for achievement of each plan’s performance targets.
Role of Compensation Consultant
To assist the Compensation Committee in evaluating the Company’s executive compensation plans, the Compensation Committee engaged an independent compensation consultant, Frederic W. Cook & Co., Inc., to advise it directly. The Compensation Committee’s consultant attends Compensation Committee meetings on a regular basis and provides the Compensation Committee with market information and analysis with respect to establishing executive compensation practices that are in line with the Company’s executive compensation strategy and goals. The consultant is also asked to confirm that the Company’s executive compensation goals continue to be aligned with best practices.
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The Company’s Chief Human Resources Officer and others directly involved with the Company’s executive compensation programs routinely consult with and seek advice from the consultant regarding the design, competitiveness, operation and administration of our executive compensation programs and practices that fall within the scope of the Compensation Committee charter. In 2008, neither the Compensation Committee nor the Company engaged other consultants or advisors to advise in determining the amount or form of executive compensation. The consultant does not provide any services other than executive compensation consulting to Kodak.
During 2008 the Committee discussed principles of engagement between management and the consultant and approved an Independent Compensation Consultant Engagement Policy. This policy reinforces that the consultant reports directlyrelated to the Committee and provides services only in the area of Executive Compensation. In addition, the policy defines work done directly for the Committee and a limited set of work that is within the Committee’s responsibilities that management may engage the consultant without the Committee’s prior approval. The policy specifies that work outside the defined scope must be pre-approved by the Committee chair. At the end of 2008, the consultant provided to the Committee a written affirmation of its compliance with this policy.performance goals.
2013 BOARD COMMITTEE MEMBERSHIP
Board Committee Membership, Effective September 2013 | |||
Audit and Finance | Corporate Governance and | Executive Compensation | |
Director Name | Committee | Nominating Committee | Committee |
James V. Continenza | Member | Member | |
Mark S. Burgess | Member | ||
Matthew A. Doheny | Member | ||
John A. Janitz | Member | Member | |
George Karfunkel | Member | ||
Jason New | Chair | Member | |
William G. Parrett | Chair | ||
Derek Smith | Member | Chair |
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors served on the Executive Compensation Committee during 2008:effective September 2013: James V. Continenza, John A. Janitz, Jason New and Derek Smith, Chair. The following individuals served on the Restructuring and Executive Compensation Committee prior to September 2013: Richard S. Braddock, Timothy M. Donahue, Michael J. Hawley, Douglas R. Lebda, Delano E. Lewis,James V. Continenza, William G. Parrett, Hector de J. RuizHernandez, Chair, Kyle Legg, Joel Seligman and Laura D’Andrea Tyson.Dennis Strigl. There were no Executive Compensation Committee interlocks between the Company and other entities involving the Company’s executive officers and directors.
GOVERNANCE PRACTICES
Described below are some of the significant governance practices that have been adopted by our Board.
Presiding Director
Our Board created the position of Presiding Director in February 2003. The Board has designated Richard S. Braddock its Presiding Director. The primary functions of the Presiding Director are to: 1) see that our Board operates independently of our management; 2) chair the meetings of the independent directors; 3) act as the principal liaison between the independent directors and the CEO; and 4) assist the Board in its understanding of the boundaries between Board and management responsibilities. A more detailed description of the Presiding Director’s duties can be found atwww.kodak.com/go/governance.
Meeting Attendance
Our Board has a Director Attendance Policy. A copyPolicy that is part of this policy is attached as an appendix to our Corporate Governance Guidelines, which can be accessedaccessible atwww.kodak.com/go/governancehttp://ek.client.shareholder.com/supporting.cfm. Under this policy, all of our directors are strongly encouraged to attend all Board meetings and our annual meetingAnnual Meeting of shareholders.
Shareholders. In 2008,2013, the Board held a total of eight21 meetings. Each incumbent director attended at leastmore than 75% of the meetings of the Board and committeesCommittees of the Board on which the director served. Eleven outOur directors are expected to attend the Company’s Annual Meeting of our twelve directors attended our 2008 annual meeting; ten attendedShareholders. Due to the then pending bankruptcy proceedings, the Company did not hold an Annual Meeting of Shareholders in person, one attended via phone.2013.
Executive Sessions
Executive sessions of our non-management directors are chaired by our Presiding Director.
The Board’s Corporate Governance Guidelines provide that the non-management directors will regularly meet in executive session, without management, at least four times per year. If all of our non-management directors are not independent, the independent directors will meet in executive session at least once a year. Our Presiding Director will chair these meetings.
In 2008, all of our non-management directors were independent. They met in executive session four times.
Policy on Recoupment of Executive Bonuses in the Event of Certain Restatements
The Board has a policy requiring the recoupment of bonuses paid to Named Executive Officers upon certain financial restatements. Under the policy, which is posted on our website atwww.kodak.com/go/governance, the Company will require reimbursement of a certain portion of any bonus paid to a Named Executive Officer when:Chairman, James V. Continenza.
In each such instance, the Company will, to the extent practicable, seek to recover the amount by which the individual officer’s annual bonus for the relevant period exceeded the lower payment that would have been made based on the restated financial results, plus a reasonable rate of interest.
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Communications with Our Board
The Board maintains a process for our shareholders and other interested parties to communicate with the Board. Shareholders and interested parties who wish to communicate with the Board, the independent directors as a group or an individual director, including the Presiding Director, may send an e-mail to our Presiding DirectorChairman at presiding-director@kodak.comchairman@kodak.com or may send a letter to our Presiding DirectorChairman at P.O. Box 92818,92708, Rochester, NY 14650. Communications sent by e-mail will go simultaneously to Kodak’s Presiding Director and Secretary. Our Secretary will review communications sent by mail, and if they are relevant to, and consistent with, Kodak’s operations, policies and philosophies, they will be forwarded to the Presiding Director. By way of example, communications that are unduly hostile, threatening, illegal or similarly inappropriate will not be forwarded to the Presiding Director. Our Secretary will periodically provide the Board with a summary of all communications received that were not forwarded to the Presiding Director and will make those communications available to any director upon request. The Presiding Director will determine whether any communication sent to the full Board should be properly addressed by the entire Board or a committee thereof and whether a response to the communication is warranted. If a response is warranted, the Presiding Director may choose to coordinate the content and method of the response with our Secretary.
Consideration of Director Candidates
The Governance Committee will consider for nomination as director of the Company candidates recommended by its members, other Board members, management, shareholders and the search firms it retains.
Shareholders wishing to recommend candidates for consideration by the Governance CommitteeBoard may do so by providing the following information, in writing, to the Corporate Governance and Nominating Committee of the Board, c/o Secretary, Eastman Kodak Company, 343 State Street, Rochester, NY 14650-0218:14650-0224: 1) the name, address and telephone number of the shareholder making the request; 2) the number of shares of the Company owned, and, if such person is not a shareholder of record or if such shares are held by an entity, reasonable evidence of such person’s ownership of such shares or such person’s authority to act on behalf of such entity; 3) the full name, address and telephone number of the individual being recommended, together with a reasonably detailed description of the background, experience and qualifications of that individual; 4) a signed acknowledgement by the individual being recommended that he or she has consented to: a) serve as director if elected and b) the Company undertaking an inquiry into that individual’s background, experience and qualifications; 5) the disclosure of any relationship of the individual being recommended with the Company, or any subsidiaries or affiliates, whether direct or indirect; and 6) if known to the shareholder, any material interest of such shareholder or individual being recommended in any proposals or other business to be presented at the Company’s next annual meetingAnnual Meeting of shareholdersShareholders (or a statement to the effect that no material interest is known to such shareholder). Our Board may change the process by which shareholders may recommend director candidates to the Governance Committee. Please refer to the Company’s website at
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www.kodak.com/go/governanceConsideration of Director Candidates for any changes to this process. The Governance Committee will consider for nomination as director of the Company candidates recommended by its members, other Board members, management, shareholders onand the same basis as candidates identified through other means.search firms it retains.
Director Selection Process and Qualification Standards
When reviewing a potential candidate for the Board, the Governance Committee looks to whether the candidate possesses the necessary qualifications to serve as a director. To assist it in these determinations, the Governance Committee has adopted “Director Qualification Standards.” The Director Qualification Standards that are attached as Exhibit ll to this Proxy Statement andpart of our Corporate Governance Guidelines which can also be accessed at www.kodak.com/go/governancehttp://ek.client.shareholder.com/supporting.cfm. These standards specify the minimum qualifications that a nominee must possess in order to be considered for election as a director. If a candidate possesses these minimum qualifications, the Governance Committee, in accordance with theits Director Selection Process, described in the next section, will then consider the candidate’s qualifications in light of the needs of the Board and the Company at that time, given the then-current mix of director attributes.
Director Selection Process
As provided in the Company’s Corporate Governance Guidelines, the Governance Committee seeks to create a diversemulti-disciplinary and inclusivecohesive Board that, as a whole, is strong in both its knowledge and experience. When identifying, screening and recommending new candidates to the Board for membership, the Governance Committee follows the procedures outlined in its “Director Selection Process.” The Director Selection Process is attached as Exhibit lll to this Proxy Statement and can also be accessed atwww.kodak.com/go/governance. The Governance Committee generally uses the services of a third-party executive search firm when identifying and evaluating possible nominees for director. This firm assists in identifying candidates
Board Goals
Our Board has a formal process for annually establishingwho meet skills and prioritizing its goals. The Board believes that adopting annual goals enhances its ability to measure its performance and improves its focus on the Company’s long-term strategic issues. The Board’s goals are aligned with the Company’s operational and strategic imperatives.
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Under the process approvedqualifications specified by the Board, each yearGovernance Committee.
Although the Governance Committee submitsdoes not have a formal policy as to the Boardconsideration of diversity in the selection of candidates, diversity is listed as a proposed list of Board goals for the following year. At its first meetingfactor to be considered among all of the year, the Board finalizes its goals for the year based on the Governance Committee’s recommendations. Once the goals are established by the Board, the Governance Committee is responsible for tracking the Board’s performance against its goals and routinely reporting these results to the Board. Performance against the goals is assessed as part of the Board’s annual evaluation process.Director Qualification Standards.
Strategic Role of Board
The Board plays a key role in developing, reviewing and overseeing the execution of the Company’s business strategy. Twice eachEach year, the Board devotes anat least one extended meeting to an update from management regardinga review of the Company’s proposed strategic issues and opportunities facing the Company andplans for each of its key businesses. In addition, the Board receives progress reports from management throughout the year reviewson the Company’simplementation of the strategic plan and receives briefings andplan. These reports on critical aspects of its implementation. These include business unitsegment performance and strategy reviews, product categoryline reviews and presentations regarding research and development initiatives and the Company’s intellectual property portfolio.
Succession Planning
The entire Board reviews the Company’s succession plans for its Chief Executive Officer and other key senior management positions and oversees the Company’s activities in the areas of leadership and executive development. To assist the Board, management periodically reports to the Board on succession planning to ensure that it is a continuous and ongoing effort.
Majority Voting for Directors
In February 2009, the Board amended theThe Company’s By-laws as a result of a recent change in New Jersey law, to provide for majority voting in uncontested director elections. Previously, the
The Company hadalso maintains a policy providing for the election of directors by majority vote in uncontested elections; the change in New Jersey law allowed the Company to implement majority voting of directors in uncontested elections via a by-law amendment.
Along with the by-law amendment, the Board also amended the Company’s Majority Vote Policy to address the so-called “holdover” rule of New Jersey law. Under this rule, a director who fails to receive the required votes for reelection remains in office until his or her resignation or removal.
The amended Majority Vote Policywhich requires a director nominee, in connection with his or her nomination to the Board, to submit a resignation letter in which the director nominee irrevocably elects to resign if he or she fails to receive the required majority vote in the next election and the Board accepts the resignation. The policy requires the Board to nominate for election or reelection as a director only those candidates who agree to execute such a letter upon his or her nomination. A copy of the amendedThe Majority Vote Policy can be found on the Company’s corporate governance website atwww.kodak.com/go/governancehttp://ek.client.shareholder.com/supporting.cfm.
If a director nominee fails to receive a majority vote in an uncontested election, the amended Majority Vote Policy provides that the Governance Committee will consider the resignation letter and recommend to the Board whether to accept it. The Governance Committee, in making its recommendation to the Board, and the Board, in reaching its decision, may under the policy consider thoserelevant factors, it considers relevant, including any stated reason why shareholders voted against the election of the director, the director’s qualifications, the director’s past and expected future contributions to the Company, the overall composition of the Board and whether accepting the resignation letter would cause the Company to fail to meetcomply with any applicable rule, such as the NYSE’s Listing Standards.
The policy provides that the Board will act on the Governance Committee’s recommendation and publicly disclose its decision whether to accept the director’s letter of resignation within 90 days following the certification of the shareholder vote. If the letter of resignation is not accepted by the Board within these 90 days,this 90-day period, the resignation will not be effective until the next annual meeting.
All of the director nominees standing for election at the Annual Meeting have submitted thean irrevocable letter of resignation as a condition of being renominated to the Board as called for under the amended Majority Vote Policy.
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DIRECTOR COMPENSATIONRisk Management
Introduction
Our directors are compensated through a combination of cash retainers and equity-based incentives. Consistent withBoard oversees an enterprise-wide approach to risk management, designed to support the Board’s Director Compensation Principles, a substantial portion of director compensation is linked to our stock performance. In addition, directors can elect to receive their entire Board remuneration in equity-based compensation. Our directors are required to keep allachievement of the shares, netCompany's objectives, including strategic objectives, to improve long-term performance and enhance shareholder value. A fundamental part of any shares usedrisk management is not only identifying and prioritizing the risks the Company faces and monitoring the steps management is taking to paymanage those risks, but also determining the exercise price when exercising an option, they receive as compensation until they own shares equal in market value to at least five times their annual retainerlevel of risk that is paidappropriate for the Company. As an integral part of its review and approval of the Company’s strategic plan, the Board considers the appropriate level of risk for the Company to accept. Through this process, risk is assessed throughout the Company, focusing on four primary categories of risk: strategic, operational, legal/compliance and financial reporting. The Audit and Finance Committee is responsible for reviewing the results of the Company’s enterprise risk assessment on an annual basis. The Board also receives reports on management’s progress in cash.
Kodak does not pay management directors for Board service in addition to their regular employee compensation.
Director Compensation Principlesmitigating key risks.
The Board has adopteddelegated to its committees responsibility for the following director compensation principles, which are aligned with the Company’s executive compensation principles:
Review
The Governance Committee, which consists solely of independent directors, has the primary responsibility for reviewing and considering any changes to the Board’s compensation program. The Board reviews the Governance Committee’s recommendation and determines the amount of director compensation.
The Governance Committee last completed a review of the Board’s compensation program in 2007. In connection with this review, the Governance Committee retained Peal Meyer & Partners, independent compensation consultant, to competitively assess our director compensation relative to market trends and comparable peer companies.
Director Compensation Program
The annual cash and equity components of the Company’s director compensation program are now as follows:
Cash | Equity(1) | |||||||||
Chair/Presiding | ||||||||||
Board Retainer | Director Retainer | Restricted Stock | Stock Options | |||||||
(2) | (3) | (4) | (5) | Total | ||||||
Director | $70,000 | — | $70,000 | $70,000 | $210,000 | |||||
Presiding Director(6) | 70,000 | $100,000 | 70,000 | 70,000 | 310,000 | |||||
Audit Committee Chair | 70,000 | 20,000 | 70,000 | 70,000 | 230,000 | |||||
Compensation Committee Chair | 70,000 | 10,000 | 70,000 | 70,000 | 220,000 | |||||
Finance Committee Chair | 70,000 | 10,000 | 70,000 | 70,000 | 220,000 | |||||
Governance Committee Chair | 70,000 | 10,000 | 70,000 | 70,000 | 220,000 |
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Director Share Ownership Requirements
A director is not permitted to exercise any stock options or sell any restricted shares granted to him or her by the Company unless and until the director owns shares of stock in the Company (either outright or through phantom stock units in the Directors’ Deferred Compensation Plan) that have a value equal to at least five times the then maximum amount of the annual retainer which may be taken in cash by the director (currently, this amount is $350,000).
Director Compensation Table
In 2008, we provided the following compensation to our directors who are not employees:
Non-qualified | |||||||||||||
Deferred | |||||||||||||
Fees Earned or | Compensation | All Other | |||||||||||
Paid In Cash | Stock Awards | Option Awards | Earnings | Compensation | Total | ||||||||
($) | ($) | ($) | ($) | ($) | ($) | ||||||||
Name | (1) | (2) | (3) | (4) | (5) | ||||||||
Richard S. Braddock | $180,000 | $59,240 | $59,691 | $ | 0 | $32,442 | $331,372 | ||||||
Timothy M. Donahue | 80,000 | 59,240 | 59,691 | 0 | 4,351 | 203,282 | |||||||
Michael J. Hawley | 70,000 | 59,240 | 59,691 | 0 | 23,471 | 212,402 | |||||||
William H. Hernandez | 90,000 | 59,240 | 59,691 | 0 | 3,174 | 212,105 | |||||||
Douglas R. Lebda | 70,000 | 59,240 | 59,691 | 0 | 31,212 | 220,143 | |||||||
Debra L. Lee | 70,000 | 59,240 | 59,691 | 0 | 34,475 | 223,406 | |||||||
Delano E. Lewis | 70,000 | 59,240 | 59,691 | 0 | 25,083 | 214,014 | |||||||
William G. Parrett | 70,000 | 59,240 | 59,691 | 0 | 7,975 | 196,906 | |||||||
Hector de J. Ruiz | 80,000 | 59,240 | 59,691 | 0 | 760 | 199,691 | |||||||
Dennis F. Strigl | 70,000 | 1,903 | 4,136 | 0 | 1,686 | 77,725 | |||||||
Laura D’Andrea Tyson | 70,000 | 59,240 | 59,691 | 2,555 | 760 | 192,246 |
Deferred | Phantom | ||
Name | Amount | Stock Units | |
Douglas R. Lebda | $70,000 | 4,091.62 |
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The following table reports the outstanding stock awards held by each of the non-employee directors at the end of fiscal year 2008.
Aggregate Stock Awards Outstanding at Fiscal Year End
Name | Unvested | Vested | |
Richard S. Braddock | 4,600 | 7,070 | |
Timothy M. Donahue | 4,600 | 7,070 | |
Michael J. Hawley | 4,600 | 7,070 | |
William H. Hernandez | 4,600 | 7,070 | |
Douglas R. Lebda | 4,600 | 2,570 | |
Debra L. Lee | 4,600 | 7,070 | |
Delano E. Lewis | 4,600 | 7,070 | |
William G. Parrett | 4,600 | 2,570 | |
Hector de J. Ruiz | 4,600 | 7,070 | |
Dennis F. Strigl | 4,600 | 0 | |
Laura D’Andrea Tyson | 4,600 | 7,070 |
Risk-Free | Expected Option | Expected | Expected Dividend | |
Grant Date | Interest Rate (%) | Life (Years) | Volatility (%) | Yield (%) |
December 11, 2007 | 3.59 | 7 | 35.15 | 1.90 |
December 9, 2008 | 1.82 | 6 | 32.17 | 7.42 |
The following table reports the outstanding option awards held by each of the non-employee directors at the end of fiscal year 2008.
Aggregate Stock Options Outstanding at Fiscal Year End
Name | Unvested | Vested | |
Richard S. Braddock | 18,180 | 24,120 | |
Timothy M. Donahue | 18,180 | 22,120 | |
Michael J. Hawley | 18,180 | 14,120 | |
William H. Hernandez | 18,180 | 16,120 | |
Douglas R. Lebda | 18,180 | 9,620 | |
Debra L. Lee | 18,180 | 24,120 | |
Delano E. Lewis | 18,180 | 22,120 | |
William G. Parrett | 18,180 | 9,620 | |
Hector de J. Ruiz | 18,180 | 22,120 | |
Dennis F. Strigl | 18,180 | 0 | |
Laura D’Andrea Tyson | 18,180 | 24,120 |
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Company | Company | |||||||
Sponsored | Samples of | |||||||
Transportation | Events | Products & | ||||||
Name | (a) | (b) | Services | Total | ||||
Richard S. Braddock | $26,115 | $5,068 | $1,259 | $32,442 | ||||
Timothy M. Donahue | 920 | 2,671 | 760 | 4,351 | ||||
Michael J. Hawley | 17,705 | 4,640 | 1,126 | 23,471 | ||||
William H. Hernandez | 0 | 2,048 | 1,126 | 3,174 | ||||
Douglas R. Lebda | 26,112 | 3,974 | 1,126 | 31,212 | ||||
Debra L. Lee | 27,898 | 5,211 | 1,366 | 34,475 | ||||
Delano E. Lewis | 19,256 | 4,701 | 1,126 | 25,083 | ||||
William G. Parrett | 834 | 6,015 | 1,126 | 7,975 | ||||
Hector de J. Ruiz | 0 | 0 | 760 | 760 | ||||
Dennis F. Strigl | 0 | 0 | 1,686 | 1,686 | ||||
Laura D’Andrea Tyson | 0 | 0 | 760 | 760 |
Deferred Compensation
Non-employee directors may defer some or all of their Board retainer, chair retainer, presiding director retainer and restricted stock award into the Directors’ Deferred Compensation Plan. The plan has two investment options: an interest-bearing account that pays interest at the prime rate and a Kodak phantom stock account. The value of the Kodak phantom stock account reflects changes in the market price of the common stock and dividends paid. Five directors deferred compensation in 2008. In the event of a change-in-control, the amounts in the phantom accounts will generally be paid in a single cash payment. The plan’s benefits are neither funded nor secured.
Other Benefits
The Company reimburses its directors for travel expenses incurred2013, in connection with attendingdecisions on executive compensation matters, the Restructuring and Executive Compensation Committee of the prior Board, committee and shareholder meetings and other Company-sponsored events, and provides Company transportationthe Executive Compensation Committee of the new Board, received input from management on an assessment of risks relating to the directors (including use of Company aircraft) to attend such meetingsCompany’s compensation programs and events. From time to time, we also invite our directors’ spouses, significant others and other family members to accompany them to these meetings and events, and we reimburse travel and incidental expenses related to their attendance, in order to encourage attendance and to foster social interaction among directors. To encourage our directors to experience and familiarize themselves with our products and services, we occasionally provide them samples of the Company’s products and services.
Charitable Award Program
This program, which was closed to new participants effective January 1, 1997, provides for a contribution by the Company of up to a total of $1,000,000 following a director’s death, to be shared by a maximum of four charitable institutions recommended by the director.awards. The individual directors derive no financial benefits from this program. It is funded by self-insurance and joint life insurance policies purchased by the Company. Mr. Braddock is the only current director who continues to participate in the program.
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BENEFICIAL OWNERSHIP
BENEFICIAL SECURITY OWNERSHIP OF MORE THAN 5% OF THE COMPANY’S COMMON STOCK
As of February 17, 2009, based on Schedule 13G/A and Schedule 13D filings, the Company was aware of the following beneficial owners of more than 5% of its common stock:
Percentage of Number of Common Shares Company’s Common Shareholder’s Name and Address Beneficially Owned Shares Beneficially Owned Legg Mason Capital Management, Inc. LMM LLC 100 Light St. 47,298,653 (1) 17.62 % Baltimore, MD 21202 Brandes Investment Partners, L.P. 11988 El Camino Real Suite 500 24,381,748 (2) 9.08 % San Diego, CA 92130 Franklin Mutual Advisors, LLC 101 John F. Kennedy Parkway 15,575,778 (3) 5.4 % Short Hills, NJ 07078 Cascade Investment, L.L.C. 2365 Carillon Point Kirkland, WA 98033 Bill & Melinda Gates Foundation Trust 14,000,000 (4) 5.2 % 1551 East Lake Avenue E. Seattle, WA 98102
Number of Shares with Shared Voting | ||
Name | and Dispositive Power | Percent of Class Represented |
Legg Mason Capital Management, Inc. | 41,009,453* | 15.28% |
LMM LLC | 6,289,200 | 2.34% |
| ||
Number of Shares with Shared Voting | Number of Shares with Sole | Percent of Class | ||||
Name | and Dispositive Power | Voting and Dispositive Power | Represented | |||
Cascade Investment, L.L.C. | 0 | 7,950,000 | * | 3.0 | % | |
Bill & Melinda Gates Foundation | ||||||
Trust | 6,050,000 | ** | 0 | 2.2 | % |
| ||
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BENEFICIAL SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND SECTION 16 EXECUTIVE OFFICERS
Percentage of | |||
Number of Common Shares | Company’s Common | ||
Directors, Nominees | Beneficially Owned on | Shares Beneficially | |
and Section 16 Executive Officers | March 2, 2009 | Owned | |
Robert L. Berman | 188,990 | (b) (c) | * |
Richard S. Braddock | 113,259 | (a) (b) | * |
Timothy M. Donahue | 39,516 | (a) (b) | * |
Philip J. Faraci | 259,201 | (b) | * |
Michael J. Hawley | 25,903 | (a) (b) | * |
Mary Jane Hellyar | 256,066 | (b) | * |
William H. Hernandez | 20,190 | (a) (b) | * |
James T. Langley | 152,712 | (b) | * |
Douglas R. Lebda | 12,593 | (a) (b) | * |
Debra L. Lee | 33,878 | (a) (b) | * |
Delano E. Lewis | 30,990 | (a) (b) | * |
William G. Parrett | 14,593 | (a) (b) (d) | * |
Antonio M. Perez | 1,564,712 | (b) (c) | * |
Hector de J. Ruiz | 62,771 | (b) | * |
Frank S. Sklarsky | 143,255 | (b) | * |
Dennis F. Strigl | 6,700 | (b) | * |
Laura D’Andrea Tyson | 31,659 | (a) (b) | * |
All Directors, Nominees and Section 16 | |||
Executive Officers as a Group (21),including | |||
the above | 3,350,707 | (b) (e) | 1.2364% |
The above table reports beneficial ownership of the Company’s common stock in accordance with the applicable SEC rules. All Company securities over which the directors, nominees and Section 16 Executive Officers directly or indirectly have or share voting or investment power are listed as beneficially owned. The figures above include shares held for the account of the above persons in the Kodak Employees’ Stock Ownership Plan,assessment concluded, and the interests ofCommittee agreed, that such programs and awards do not present any material adverse risks to the above persons in the Kodak Stock Fund of the Eastman Kodak Employees’ Savings and Investment Plan, stated in terms of Kodak shares.Company.
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Share Ownership Program
In order to closely align the interests of our executives with those of our shareholders, the Company strongly encourages executives to acquire a significant ownership stake in Company stock. Effective February 26, 2008, our share ownership program was revised to require our Section 16 Executive Officers to retain 100% of shares attributable to stock option exercises or the vesting or earn-out of full value shares (such as restricted shares or Leadership Stock) until they attain specified ownership levels, which are expressed below as a multiple of base salary. Also, stock acquired upon stock option exercise, restricted stock, restricted stock units, any shares held in the executive’s account under Kodak’s Employee Stock Ownership Plan or Savings and Investment Plan and any “phantom stock” selected by an executive as an investment option in the Executive Deferred Compensation Plan count toward meeting the executive’s share ownership requirement. The Compensation Committee monitors each executive’s status regarding achievement of the applicable minimum ownership requirement throughout the year utilizing a fixed stock price of $25.66 per share that was established at the commencement of the program. As of January 31, 2009, Messrs. Berman, Perez and Sklarsky and Ms. Hellyar had met their share ownership targets.
Effective February 26, 2008, our Named Executive Officers have the following share ownership guidelines:
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COMMITTEE REPORTS
REPORT OF THE AUDIT AND FINANCE COMMITTEE
The Audit and Finance Committee of the Company’s Board is composed solely of independent directors and operates under a written charter adopted by the Board, most recently amended on February 17, 2004. A copy ofOctober 22, 2013. The Committee reviews and approves the charter annually. The Audit and Finance Committee’s charter can be found on our website atwww.kodak.com/go/governancehttp://ek.client.shareholder.com/supporting.cfm.
Management is responsible for the Company’s internal control over financial reporting, the Company’s disclosure controls and procedures, and preparing the Company’s consolidated financial statements. The Company’s independent registered public accounting firm (independent accountants), PricewaterhouseCoopers LLP (PwC), is responsible for performing an independent audit of the consolidated financial statements and of itsthe Company’s internal control over financial reporting in accordance with standards of the Public Company Accounting Oversight Board (United States) and for issuing a report of the results. As outlined in its charter, the Audit and Finance Committee is responsible for overseeing these processes.
During 2008,2013, the Audit and Finance Committee met and held discussions with management and the independent accountants on a regular basis. Management represented to the Audit and Finance Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, (U.S. GAAP), and the Audit and Finance Committee reviewed and discussed the audited consolidated financial statements and significant accounting matters with management and the independent accountants.
The Audit Committee met and discussed with the Corporate Controller and Assistant Controller the Company’s significant accounting matters, key fluctuations in the Company’s financial statements and the quality of the Company’s earnings reports.
The AuditFinance Committee discussed with the independent accountants the matters specified by Statement on Auditing Standards No. 61, “Communications with Audit and Finance Committee,” as amended, as adopted by the PCAOB in Rule 3200T. The independent accountants provided to the Audit and Finance Committee the written disclosures required by the PCAOB in Rule 3526, “Communication with Audit and Finance Committees Concerning Independence.” The Audit and Finance Committee discussed with the independent accountants their independence.
The Audit and Finance Committee also received reports from the Company’s Chief Compliance Officer on the implementation and effectiveness of the Company’s compliance program.
The Audit and Finance Committee discussed with the Company’s internal auditors and independent accountants the plans for their audits. The Audit and Finance Committee met with the internal auditors and independent accountants, with and without management present. The internal auditors and independent accountants discussed with or provided to the Audit and Finance Committee the results of their examinations, their evaluations of the Company’s internal control over financial reporting, the Company’s disclosure controls and procedures, and the quality of the Company’s financial reporting.
With reliance on these reviews, discussions and reports, the Audit and Finance Committee recommended that the Board approve the audited financial statements for inclusion in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008,2013, and the Board accepted the Audit and Finance Committee’s recommendations. The following fees were paid to PwC for services rendered in 2008 and 2007:
(in millions) 2008 2007 Audit Fees $13.0 $14.4 Audit-Related Fees 0.5 3.2 Tax Fees 1.0 2.1 All Other Fees 0.0 0.0 Total $14.5 $19.7
The audit fees related primarily to the annual audit of the Company’s consolidated financial statements (including Section 404 internal control assessment under the Sarbanes-Oxley Act of 2002) included in the Company’s Annual Report on Form 10-K, quarterly reviews of interim financial statements included in the Company’s Quarterly Reports on Forms 10-Q, statutory audits of certain of the Company’s subsidiaries, and services relating to filings under the Securities Act of 1933 and the Securities Exchange Act of 1934.
The audit-related fees for 2008 related primarily to audits of certain benefit plans of the Company. The audit-related fees for 2007 related primarily to separate financial statement audits for the Company’s former Health Group Segment.
Tax fees in 2008 consisted of $0.9 million for tax compliance services and $0.1 million for tax planning and advice. Tax fees in 2007 consisted of $1.9 million for tax compliance services and $0.2 million for tax planning and advice.
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The Audit and Finance Committee, with the approval of the Board and our shareholders, appointed PwC as the Company’s independent accountants.accountants in 2013. In addition, the Audit and Finance Committee approved the scope of non-audit services anticipated to be performed by PwC in 20092013 and the estimated budget for those services. The Audit and Finance Committee has adopted an Audit and Non-Audit Services Pre-Approval Policy, a copy of which is attached to this Proxy Statement as Exhibit IV.Policy.
William G. Parrett, Chair | Dated: April 14, 2014 |
Matthew A. Doheny | |
George Karfunkel |
REPORT OF THE CORPORATE RESPONSIBILITYGOVERNANCE AND GOVERNANCENOMINATING COMMITTEE
IntroductionThe Company has long practiced and led in developing and implementing good corporate governance. The Corporate Responsibility and Governance CommitteeDuring the Company’s Chapter 11 proceedings, the Board determined that the duties of the Corporate Governance and Nominating Committee should be assumed by the full Board is primarily responsible for overseeinggiven the importance of overall governance as part of the Company’s governance practices, with the intent of seeking to maintain “best practices” in the area of corporate governance.
The Governance Committee continually considers ways to improve the Company’s corporate governance practices. In this regard,restructuring and reorganization. Following emergence from Chapter 11 proceedings, the Governance Committee periodically reviews the Board’s governance policieswas re-initiated and procedures to ensure that they are aligned with best practices, the Board’s corporate governance documents and applicable statutory and regulatory requirements.
This report, an annual voluntary governance practice that the Governance Committee begancommenced meeting in 2003, highlights the Governance Committee’s corporate governance activities during the past year.2014.
Governance Committee CompositionEXECUTIVE COMPENSATION
The Governance Committee is composed of five directors, each of whom meets the definition of independence set forth in the NYSE’s corporate governance listing standards. During 2008, the Governance Committee met six times and routinely reported its activities to the full Board. The Governance Committee acts pursuant to a written charter, which can be accessed electronically in the “Corporate Governance” section atwww.kodak.com/go/governance.
Governance Committee Responsibilities
The primary role of the Governance Committee is to: assess the independence of Board members; lead the annual evaluation of the Board and its committees; identify and assess candidates for Board membership; oversee the Company’s activities in the areas of environmental and social responsibility, charitable contributions, diversity and equal employment opportunity; and generally oversee the Company’s corporate governance structure. The Governance Committee monitors emerging issues and practices in the area of corporate governance and pursues those initiatives that it believes will enhance the Company’s governance practices and policies. In addition, the Governance Committee is responsible for, among other things: 1) administering the Board’s Director Selection Process; 2) developing the Board’s Director Qualification Standards; 3) implementing the Board’s director orientation and education programs; 4) overseeing and reviewing the Company’s Corporate Governance Guidelines and Director Independence Standards; and 5) recommending to the Board the compensation for directors. A complete description of the Governance Committee’s responsibilities can be found in its charter.
Governance Initiatives
Described below are some of the significant governance actions that the Governance Committee has taken since its report in last year’s proxy statement.
Director Search
The Governance Committee continued to spend a significant amount of its time considering and recruiting candidates to fill the Board’s vacancies. To assist in this process, the Governance Committee engaged an external executive search firm who helped in identifying and evaluating qualified independent candidates who met the Board’s target candidate profiles and fit the Board’s Director Qualification Standards.
Based on the Governance Committee’s recommendation, Dennis F. Strigl was elected to the Board in February 2008. Mr. Strigl was reelected to the Board by you at the 2008 annual meeting. The Governance Committee’s external executive search first suggested that it consider Mr. Strigl as a candidate for the Board. In accordance with the Board’s Director Selection Process, the Committee oversaw the process of electing Mr. Strigl to the Board. A copy of the Board’s Director Selection Process and Director Qualification Standards can be found in the “Corporate Governance” section ofwww.kodak.com/go/governance.
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Majority Voting
Based on the recommendation of the Governance Committee, the Board recently approved an amendment to the Company’s By-laws to provide for majority voting in the election of directors in uncontested elections. A description of this by-law amendment appears on page 22 of this Proxy Statement. The Committee suggested this action in response to your vote at our 2008 annual meeting on the shareholder proposal on majority voting requirements for director nominees.
The Board first addressed this topic in early 2007 when it adopted a majority voting policy for the election of directors. While the Board would have preferred to implement majority voting by way of a by-law amendment, rather than a policy, New Jersey law at the time did not permit this.
Other Key Actions
Some of the other key actions taken by the Governance Committee last year are described below.
Director Independence Standards
The Board, based on the advice of the Governance Committee, amended its Director Independence Standards to be consistent with the recent changes by the NYSE to its independence standards. A copy of the amended Director Independence Standards is attached to this Proxy Statement as Exhibit I.
Director Independence
The Governance Committee assessed each non-management director’s independence based upon the Board’s Director Independence Standards and those of the NYSE, and made recommendations to the full Board regarding each non-management director’s independence.
Board Annual Goals
Based on the Governance Committee’s assistance, the Board last year continued its practice of establishing annual Board goals. A more detailed description of this process appears on page 21 of this Proxy Statement. The Governance Committee tracked the Board’s performance against its goals and provided periodic reports to the Board on its progress.
Governance Committee Evaluation
The Governance Committee prepared and conducted an annual self-evaluation, discussed the results of this evaluation and developed an action plan from these discussions to further enhance the Governance Committee’s performance.
Diversity Advisory Panel’s Recommendations
The Governance Committee met with the Company’s Chief Diversity Officer to assess the Company’s progress with regard to the recommendations of the Diversity Advisory Panel, a seven-member, blue-ribbon panel launched in 2001 to provide advice on the Company’s comprehensive diversity strategy and assess future diversity trends and the potential impact on Kodak.
Board Action Plan
The Governance Committee monitored the Board’s performance against the action plan arising from the Board’s 2007 annual evaluation and provided periodic reports to the Board concerning its progress against the action plan.
REPORT OF THE EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
The Executive Compensation and Development Committee has reviewed and discussed the Compensation Discussion and Analysis that is required by the SEC rulesfollows with the Company’s management.
Based on such review and discussions, the Executive Compensation Committee recommended to the Company’s Board of Directors thatapproved the Compensation Discussion and Analysis be includedfor inclusion in this Proxy Statement.
Dated: | |
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COMPENSATION DISCUSSION AND ANALYSIS
INTRODUCTIONEXECUTIVE SUMMARY
The compensation of our Named Executive Officers in 2013 was largely based on the goals and objectives for completing the reorganization of the Company that began in 2012. On January 19, 2012, Kodak and its U.S. subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of New York. On September 3, 2013, the Company’s Plan of Reorganization became effective, and Kodak and its U.S subsidiaries emerged from Chapter 11 protection.
Through the restructuring process, the Company accomplished the goals that it had set at the commencement of the Chapter 11 filing: increase liquidity in the U.S and abroad, monetize non-strategic intellectual property, fairly resolve legacy liabilities, and focus on the most valuable business lines to enable sustainable profitability. Specifically, the Company achieved the following:
As part of the pursuit of the goals and achievements described above, the Company adopted the following actions and practices relating to executive compensation in 2013:
Management Agreements
The Restructuring and Executive Compensation Committee of the Board approved new employment agreements with selected senior leaders, including our Named Executive Officers. The terms of these agreements were approved by the Bankruptcy Court as part of the Plan of Reorganization and Development Committee, to which we refer in this discussion as the Committee, has oversight responsibility forbecame effective upon the Company’s executiveemergence from Chapter 11. In approving the agreements, the Restructuring and Executive Compensation Committee, based on the survey data described below, considered the market median for base salary, total target cash compensation, strategy. total direct compensation and severance provisions. In addition, the agreements include a grant of equity in the form of Restricted Stock Units that vest in installments over a period of time.
Annual Incentive Pay for 2013
The Committee approvesBankruptcy Court approved the continued use of our compensation objectives, plans, philosophy and forms of compensationannual performance-based variable pay program for all executives, including our Named Executive Officers. In 2008,For the 2013 performance period of the program, we obtained support from creditor constituents on the performance metrics used to determine awards under the program. Based upon performance under these metrics, our executives, including our Named Executive Officers, included our:earned awards above the target level.
Long Term Incentive Compensation
Due to the bankruptcy proceedings, during 2013, executives did not receive any equity compensation under the Company’s traditional long term incentive compensation program. Effective upon emergence from Chapter 11, as part of the Plan of Reorganization, and as approved by the Restructuring and Executive Compensation Committee, the Company implemented a new Omnibus Long Term Incentive Plan to govern the issuance of long term performance-based compensation to executives in the future.
Executive Compensation Committee
During the bankruptcy proceedings, the Restructuring and Executive Compensation Committee had oversight for certain restructuring activities and continued to have oversight for executive compensation matters, particularly those pertaining to our Section 16 Officers. Upon emergence from Chapter 11, with the formation of the new Board of Directors, the Board formed the Executive Compensation Committee (the Committee).
Named Executive Officers
Our Named Executive Officers for 2008 also2013 were:
1) | Antonio M. Perez, President and Chief Executive Officer (CEO) | |
Effective March 12, 2014, the Board appointed Jeffrey J. Clarke Chief Executive Officer and a member of the Board, and Mr. Perez resigned from his position as President and Chief Executive Officer and as a member of the Board. | ||
2) | Rebecca A. Roof, Chief Financial Officer (CFO) | |
Ms. Roof is a Managing Director of AlixPartners LLP. Ms. Roof held the position of Chief Financial Officer for the full year 2013. Pursuant to an agreement with Kodak, AP Services LLC, an affiliate of AlixPartners LLP, provided restructuring advisory services relating to our Chapter 11 proceedings. Our agreement with AP Services LLC includes fees for Ms. Roof's services. The rate charged for Ms. Roof’s services was $915 per hour effective January 1, 2013. Since Ms. Roof is not an employee of the Company, she does not participate in any of the compensation programs or employee benefits arrangements discussed herein. | ||
3) | Brad W. Kruchten, President, Graphics, Entertainment and Commercial Films and Senior Vice President (SVP) | |
4) | Douglas J. Edwards, President, Digital Printing and Enterprise Services and Senior Vice President (SVP) | |
5) | Patrick M. Sheller, General Counsel, Secretary, Chief Administrative Officer and Senior Vice President (GC&SVP) |
In addition, disclosures are included onefor the following former Senior ViceNamed Executive Officer: Laura G. Quatela, President, James T. Langley. Decisions for Mr. Langley can be found on pages 45, 54, 65Eastman Kodak Company, and 71President, Personalized Imaging. Ms. Quatela served as President, Personalized Imaging, until the sale of this Proxy Statement.
The 2008 year marked Kodak’s first year following its four-year transformation to a digital company. The focus of our business strategy and key financial metrics for 2008 are described in the table below.
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Management selected our 2008 business metrics because they provide insight to the Company’s ability to grow revenue from our digital portfolio and generate cash and profitability.
To support our business strategy, our compensation philosophy continued to focus on attracting, retaining and motivating world-class executive talent critical to the successKodak Pension Plan of the Company’s business goals. During 2008, ourUnited Kingdom on September 1, 2013. Ms. Quatela was no longer a Section 16 Officer following the sale.
DETERMINING EXECUTIVE TARGET TOTAL DIRECT COMPENSATION
Overview
The Committee reviews the total direct compensation strategy focused on:
Following the completion ofOfficer on an annual basis. In 2013, our four-year transformation, the Company created significant momentum in our digital portfolio. Revenues from digital businesses grew by double-digits for four consecutive quarters from the third quarter of 2007 through the second quarter of 2008. The revenue decline in our traditional businesses during the first half of 2008 was in line with our expectations.
As we entered the second half of 2008, the global recession broadened dramatically and began to negatively impact all of our businesses. The global economic downturn is particularly challenging for the Company and other businesses in our industries that rely heavily on consumer discretionary spending and business capital investment to fuel growth in revenue and profit. In addition, the heavy fourth quarter seasonality of our consumer businesses coincided with the acceleration of the economic downturn. In response, the Company aggressively implemented necessary actions to align the business with external realities.
Despite the economic downturn, we achieved most of our strategic business objectives in 2008, such as key product introductions, market share maintenance or growth and effective cash management, all of which will help to position us well when the economy recovers. We did not, however, achieve our key operational objectives, which were established prior to the deteriorating economic conditions that occurred in the second half of the year. While the Committee felt the Company performed well leading up to the economic downturn, and responded aggressively and appropriately to the downturn, it agreed with management’s recommendation that no payouts be made under our annual variable pay or long-term equity incentive compensation plans in 2008. The Committee’s decision was consistent with our highly results-oriented compensation strategy.
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COMPENSATION PHILOSOPHY AND PROGRAM
Our overall compensation philosophy focuses on attracting, retaining and motivating world-class executive talent critical to the success of the Company’s business goals. Our objective is to leverage all elements of market competitive total compensation to drive profitable growth and shareholder value consistent with our Company values. We design our plans to be highly performance-based to drive appropriate rewards for outstanding performance.
Our executive compensation program consists of the following material elements:consisted of: 1) base salary; 2) annual variable pay; 3) long-term equity incentives;equity-based compensation for our Named Executive Officers under their employment agreements; and 4) indirect compensation elements that include limited perquisites, retirement benefits, which include retirement, termination and change-in-control arrangements.severance protection. Our Named Executive Officers arewere also eligible to participate in a limited set of perquisites and the benefit plans and programs that are generally available to our employees.
The Committee regularly reviews the Company’s executive compensation principles, which provide a framework for the Company’s executive compensation programs. In 2008, the Committee reviewed and approved the following principles:
DETERMINING EXECUTIVE TOTAL DIRECT COMPENSATION
The Committee oversees the Company’s executive compensation strategy and reviews and approves the compensation of our Named Executive Officers. The Committee annually conducts a review of each Named Executive Officer’s total direct compensation including a review of base salary, target total cash and total long-term equity incentive. In the course of the Committee’s review in 2008,of compensation, the Committee soughtobtains input and recommendations from management.
Role of Compensation Consultant
To advise the adviceCommittee on our executive compensation plans, practices and inputawards, the Committee typically engages an independent compensation consultant. The consultant historically has attended Committee meetings on a regular basis to provide the Committee with market information and analysis of our executive compensation practices to ensure consistency with the Company’s executive compensation strategy and goals, and has provided insight on best practices in executive compensation and updates on market trends. The consultant does not provide any other services to the Company.
During 2013, the Committee engaged Frederic W. Cook & Co. as its independent compensation consultant Frederic W. Cook & Co., Inc. (Consultant), as well as Company management. In general,and used the services of this consultant primarily in the first half of the year.
Use of Market Reference Data
Typically management gathers and analyzes data and provides a recommendation, with rationale, for dialog with the Committee. Management provides a recommendation for each Named Executive Officer, with the exception of our CEO. In the case of our CEO, the Consultant gathers and analyzes data and discusses a recommendation withhas provided the Committee Chair. The Committee takes these recommendations into consideration and exercises its judgment to make decisions. For additional information regarding the role of the Consultant, see page 19 of this Proxy Statement.
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The Committee made the following decisions in 2008, which are described and referred within this Compensation Discussion and Analysis as the “2008 Awards.”
Decisions made by the Committee in 2007, which impacted 2008 compensation, were described in the Notice of 2008 Annual Meeting and Proxy Statement.
Factors Considered by the Committee to Determine Level and Mix of Total Direct Compensation
The Committee considers a broad range of facts and circumstances when determining levels of executive compensation. Among the factors that the Committee considers are: 1)with market competitiveness; 2) experience relative to typical market peers; 3) the importance of the position in the Company relative to other senior management positions; 4) sustained individual performance; 5) readiness for promotion to a higher level and/or role in the Company’s senior management succession plans; and 6) retention of critical talent. The significance of any individual factor will vary from year-to-year and may vary among Named Executive Officers.
The Committee establishes each Named Executive Officer’s level of annual target total direct compensation after reviewing marketmedian reference data and factors listed in the prior paragraph. In general, the Committee does not consider awards granted or earned under plans in past years, or the effect of changes in the Company’s stock price when setting annual target total direct compensation levels of our Named Executive Officers. The Committee does, however, consider equity awards granted in past years in the evaluation of the retentive value of the Company’s long-term equity incentive plans and the mix of long-term equity incentives as further described on page 42 of this Proxy Statement. In addition, the Committee averaged the Company’s stock price over a 60-day period when converting the dollar-denominated annual long-term incentive target opportunities into share equivalents as discussed on page 46 of this Proxy Statement.
Competitive Compensation Analysis
To assist the Committee in its annual market review of each Named Executive Officer’s total direct compensation, the Consultant prepares an analysis of the market competitiveness of the aggregate value of total direct compensation as well as the market competitiveness of each element of total direct compensation for each Named Executive Officer. The Consultant derivesCommittee uses national survey data to assess compensation. The Company has recently undergone and completed a restructuring process resulting in a portfolio of businesses that are in various stages of growth. In view of these variables, there are no similarly sized, domestically based peer companies that are readily identifiable for the market data from the averagepurpose of data from national surveys in which the Company participates.
In 2008, market data was compiled from the Towers Perrin Executive Compensation Survey, the Hewitt Executive Compensation Survey and the Radford Survey. These surveys are national non-industry specificbenchmarking compensation surveys. The data in each survey was size-adjusted to be representative of companies with approximately $10.3 billion and $13.3 billion in revenue.data. The Committee reviewed this competitive data for companies at both revenue levels to reflect the Company’s revenue size at the start of 2008 and its revenue size prior to the divestiture of the Health Group on April 30, 2007. Givenbelieves that the divestiture of the Health Group occurred in the prior year, the Committee wanted visibility to the competitive target positioning at both revenue levels to ensure appropriate consideration for executives who drove a divestiture decision in the best interest of shareholders. The number of companies included in the data with regard to each survey is approximately 50.
The Committee does not review the individual companies who participate in these surveys. The Committee has used the national survey data in lieuprovides a competitive frame of a smaller group of specific companies to conduct a comparative analysis of total directreference for compensation decisions because there were few companies with a similar product portfolio, revenue and market capitalization size during the Company’s transformation and emergence as a digital company. Based on the recommendation of its Consultant, the Committee believes these surveys provideit offers a reasonable representation of the cost to hire and retain executive talent.
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In 2008, The surveys referenced are from three independent external survey providers: the Committee agreed that this approach continued to be appropriate forTowers Watson Executive
Compensation Survey, the same reasons as outlined above. The Committee intends to periodically review the methodology to assess the market competitiveness of our total direct compensation, including, but not limited to, the process of using survey versus specific peer frame data and adopt, if and when appropriate, changes to its methodology.
The Committee generally targets total direct compensation for each NamedAon Hewitt Executive Officer at approximately the median of total direct compensation paid to executives in similar positions with similar responsibilities as identified by the market data derived from these national surveys. Our CEO target total direct compensation differs from other Named Executive Officer target total direct compensation primarily because the benchmark market data reflects a higher target total direct compensation for a CEO than for the other Named Executive Officer positions. Our target total direct compensation approximates the median in order to ensure that the overall target compensation level is sufficient to attract highly talented executives while avoiding the creation of an unaffordable cost structure. By setting target compensation at a level which approximates the median, the Committee ensures that actual realized compensation will range above or below the median based on payouts in the annual variable pay and long-term incentive plans, which vary based on performance against operating and strategic goals and changes in shareholder value. Differences in actual direct compensation between our CEO and other Named Executive Officers are impacted by the fact that, as shown in the table below, there is a positive correlation between responsibilityCompensation Survey and the percentage of total direct compensation delivered through annual variable pay and long-term equity incentive compensation. This relationship reflects the CEO’s greater opportunity to influence the Company’s financial performance. (Another difference between our CEO compensation and that of our Named Executive Officers is reflected in the CEO’s change in pension value, which is described further in the narrative accompanying the Summary Compensation Table on page 49 of this Proxy Statement.)
Radford Technology Survey. The Committee does not review or have a pre-defined target for each element of total direct compensation. Rather,access to the Committee reviews the market data as a reference to assess how each component compares to market practices and to confirm that the overall compensation mix is reasonably aligned with market practices as well as the Company’s compensation philosophy. The table below shows the mix of total direct compensation for each of our Named Executive Officers in 2008.
2008 Compensation Elements as a Percentage of Target Total Direct Compensation
Base Salary as a % of | Annual Variable Pay | Long-Term Equity | |
Target Total Direct | (EXCEL) at Target(2) as | Incentive(3) as a % of | |
Named Executive Officer | Compensation(1) (TDC) | a % of TDC | TDC |
A.M. Perez, Chairman & CEO | 13% | 20% | 67% |
F.S. Sklarsky, EVP & CFO | 23% | 17% | 60% |
P.J. Faraci, President & COO | 22% | 19% | 59% |
M.J. Hellyar, EVP & President, FPEG | 27% | 17% | 56% |
R.L. Berman, SVP & CHRO | 27% | 18% | 55% |
The 2008 compensation mix supports the Company’s compensation principles that: 1) a significant amount of pay should be at risk, as demonstrated by the fact that 13% - 27% of target total direct compensation is delivered in base salary, and the remaining 73% - 87% is performance based; 2) realized compensation is significantly tied to performance against operating results and changes in shareholder value through our annual variable pay plan, our Leadership Stock equity plan, and stock options, which are dependent solely on stock price appreciation; 3) the economic interests of our executives are aligned with our shareholders, as demonstrated by the fact that 55% - 67% of our Named Executive Compensation is tied to long-term equity incentives; and 4) the senior-most executives are held most accountable for overall performance, as demonstrated by the fact that the mix of compensation at risk increases by level of responsibility.
The Committee utilized market data provided by the Consultant as a reference when the Committee considered base salary, long-term equity incentive awards and the annual variable pay plan target opportunity for Named Executive Officers. The 2008 market review indicated that:
The compensation decision and analysis resulting from this review and specific to each component of total direct compensation for the
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Named Executive Officers are discussed under “Elements of Total Direct Compensation,” beginning on page 38 of this Proxy Statement.
Use of Tally Sheets
The Committee annually reviews all components of our Named Executive Officers’ compensation as presented in a comprehensive set of Tally Sheets that the Consultant prepares. The Tally Sheets provide a comprehensive view of each Named Executive Officer’s compensation, broken down into three components:
The Tally Sheets provide the Committee with context for the decisions it makes in relation to total direct compensation. The Tally Sheets allow the Committee to holistically assess total direct compensation and the relationship of various componentsnames of the total compensation program to each other. The Tally Sheets also enable the Committee to determine how much wealth creation opportunity exists through equity-based compensation and how strong the retention power is as a result of unvested value. The Tally Sheets may also influence the Committee’s views on a variety of issues, such as changes to severance plans and employment agreements, special equity grants to promote retention, or changesindividual companies that participate in long-term equity incentives.these surveys.
From the 2008 Tally Sheets, the Committee found that the total outstanding equity held by our Named Executive Officers had little intrinsic value and thereby did not provide sufficient retentive power, even in the event of significant stock price appreciation. The Committee considered this factor in determining, at the end of 2008, the long-term equity mix for 2009 as described on page 42 of this Proxy Statement. Mr. Berman is the only Named Executive Officer for whom Tally Sheets were not prepared or reviewed in 2008, because he was not a Named Executive Officer in 2007.
Use of the CEO Evaluation Process
The Presiding Director and the Chair of the Compensation Committee, with support from the CHRO, lead the annual CEO evaluation process to assess the performance of our CEO. Each February, our CEO completes a written self-assessment of his performance against the business plan of record for the prior year. This written assessment is sent to the full Board for review. Later in the same month, the CHRO interviews each member of the Board to collect feedback against an established set of criteria, including reaction to our CEO self-assessment and the Company’s leadership imperatives, which are: 1) “Drives to Win,” 2) “Develops Leaders” and 3) “Leads With Values.” The CHRO summarizes the input of each Board member and reviews all input with the Presiding Director and the Chair of the Committee. The Presiding Director and the Chair of the Committee discuss the summary with the Board and subsequently review the feedback with our CEO. Since the same director currently is both the Presiding Director and Chair of the Committee, the Chair of the Finance Committee served as co-leader of this process for 2008.
For 2008, the Board noted a number of strengths in Mr. Perez’s performance. The Board recognized Mr. Perez’s strong leadership of the Company’s digital transformation, which resulted in four consecutive quarters of double-digit growth in our digital businesses, from the second half of 2007 through the first half of 2008. It acknowledged his strong strategic capability in guiding the identification and development of key digital properties. It also recognized the strong operating capability demonstrated by his leadership of the changes required to address the global economic challenges that impacted the business during the second half of 2008. While acknowledging the impact of the global economic downturn on operational results that fell short of goals, the Board recognized the leadership he demonstrated in enabling the Company to maintain a strong balance sheet, while maintaining and growing market share in key businesses and achieving key milestones related to new product introductions throughout the year. The Board noted the important role Mr. Perez has played in leading the Company’s continued progress in developing a robust, diverse pipeline of senior executive talent during a period of dramatic change. The Board also recognized his leadership in modeling the Company values as he reinforces the cultural transformation of Kodak. Typically, the Committee utilizes the CEO evaluation results when determining our CEO’s annual variable pay plan award. Given, however, that no annual variable pay plan award was earned for 2008, the 2008 evaluation did not influence this year’s determination as further described on page 41 of this Proxy Statement. The Committee considered the 2007 CEO evaluation when determining our CEO’s long-term equity target allocation in December 2008 as described on page 43 of this Proxy Statement.
ELEMENTS OF TOTAL DIRECT COMPENSATION
Total direct compensation consists of the following elements: base salary, annual variable pay and long-term equity incentives.
Base Salaries
Base salaries provide a regular source of income to our Named Executive Officers. Consistent with our philosophy of tying pay to performance, our Named Executive Officers receive a relatively small proportion of overall total direct compensation in the form of base salary. The base salaries of our Named Executive Officers in 2008 ranged from approximately 13% - 27% of their target total direct
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compensation, with a positive correlation between the degree of compensation at risk and the level of an executive’s responsibility, as seen on the “2008 Compensation Element as a percentage of Total Direct Compensation” chart on page 37 of this Proxy Statement.
The Committee typically reviews base salaries annually, at the beginning of the year, but it does not automatically increase salaries. Rather, base salaries are adjusted only if and as,deemed appropriate by the Committee, deems appropriate utilizing market median data as a reference and in consideration of: 1) experience; 2) expanded responsibilities; 3) the importance of the position relative to other senior management positions within the Company; 4) external relative scope or changes in the competitive marketplace; and 5) years since the last base salary change. Any change in base salary will affect an executive’s target opportunity under our annual variable pay plan, which is based on a percentage of base salary.
The market median base salary reference is used because it:
2013 Committee DecisionDiscussion and Analysis Regarding Base Salaries
In making 2008The Restructuring and Executive Compensation Committee determined it appropriate to freeze executive base salary decisions,salaries during the Chapter 11 proceedings absent a significant increase in job responsibilities. However, the Committee determined not to increase base salaries for any Named Executive Officer. The Committee reached this conclusion after reviewing the total direct compensation as well as base salary and target total cash compensation of each of our Named Executive Officers against the 2007 market median data prepared by the Consultant. For those Named Executive Officers who held their current position prior to the divestiture of the Health Group (Mr. Perez and Mr. Berman), the Committee also considered market data for revenue reflecting the Company’s size prior to the Health Group divestiture. The Committee found the base salary levels of our Named Executive Officers to be appropriate and competitive. The market analysis indicated that the total direct compensation of each of our Named Executive Officers was approximately at or slightly above median, and their base salaries were competitively positioned to median. The Committee recognized that the total direct compensation and target total cash compensation data reflected the completion of the Company’s multi-year strategy designed to increase the proportion of our Named Executive Officer’s total direct compensation deliveredstudied all positions included in the form of equity and decreaseemployment agreements that became effective upon emergence from the proportion delivered as base salary.
For 2009, the Committee reviewed the 2008 market analysis that its Consultant prepared and considered each Named Executive Officer’s total direct compensation, target total cash compensation and base salary in relationChapter 11 proceedings with regard to competitiveness to the market median (based on the survey data described above). As a result, base salaries remained frozen in 2013 for comparable sized companiesMr. Perez and responsibilities. For thoseMs. Quatela and were increased for the following Named Executive Officers who held their current position priorOfficers:
The Company’s agreement with AP Services LLC includes fees for Ms. Roof's services as our CFO. AlixPartners LLP directly compensates Ms. Roof; the Company does not maintain a separate compensation arrangement with Ms. Roof. Accordingly, the Committee also considered market data for revenue reflectingdoes not determine Ms. Roof's compensation.
Consistent with current practice, the Company’s size prior to the Health Group divestiture. Further, the Committee considered the numberamount of years since the Named Executive Officer received a baseMr. Perez’s salary increase. The CEO provided a summaryin excess of the individual’s prior year contributions and Tally Sheet as background, with$1,000,000 deductibility limit under Section 162(m) of the exception of Mr. Berman, since heInternal Revenue Code (Code) was not a Named Executive Officer in 2007. After this review, and based on management’s recommendation, the Committee determined that there would be no salary increases for any Named Executive Officers. The Committee made this decision in light of management’s recommendation, based on the severe economic environment, to provide no increases in either base salary or annual variable pay target opportunity for executives except in limited cases where an executive makes a job change that involves a substantial increase in responsibility.deferred.
Annual Variable Pay: EXCEL PlanExecutive Compensation for Excellence and Leadership (EXCEL)
The Company provides an annual variable cash incentive opportunity to drive annual performance aligned to success in our executives, includingbusiness strategy, known as Executive Compensation for Excellence and Leadership (EXCEL). The Bankruptcy Court approved the participation of our Named Executive Officers through itsin EXCEL plan. The purpose of EXCEL is to provide annual cash compensation based on the Company’s overall annual operating performance, thereby 1) motivating management to pursue operational and strategic objectives deemed most critical for the Company’s short-term success; 2) aligning realized pay with delivered performance; and 3) ensuring that costs are supported by underlying operating results. The EXCEL plan is intended to comply with the “performance-based” compensation requirements of Section 162(m) of the Internal Revenue Code (the Code) so that any cash incentives payable under the plan will be fully deductible by the Company to the extent permitted under Section 162(m).2013 performance year.
Executives participating in the planEXCEL are assigned a target opportunity expressed as a percentage of base salary. Annual cash incentives may be awarded under the plan based on achievement of key operational performance goal(s) that the Committee establishes at the beginning of the year. These objective measures are designed to drive Company performance. Typically, the Committee establishes threshold, target and stretch performance goals. Payouts under EXCEL are provided throughbased on a corporate funding pool, the size of which is based onformula that represents results achieved against the goals.
If the threshold performance level is not achieved, no amounts will be paid under the plan to our Named Executive Officers. If performance targets are exceeded, payouts may exceed an executive’s target opportunity. If a Named Executive Officer has not met his or her share ownership guidelines, as described further on page 30 of this Proxy Statement, the amount of the EXCEL awards earned above target, if any, will be paid in unrestricted shares of Kodak common stock to the point required to meet the ownership guideline.
metrics. The Committee also establishes a set of EXCEL baseline metrics for each performance year. These metrics are designed to provide the Committee with additional guidance should it decide tomay not exercise positive discretion to adjust (upward or downward) the size of the corporate award pool and the amount allocated to each Named Executive Officer. These metrics reflect the key strategic and operational imperatives for the year in support of the Company’s business strategy. The Committee selects these metrics in part to ensure that the primary EXCEL performance metrics are not achieved at the expense of the longer-term interest of the shareholders. Typically, the baseline metrics are not assigned any relative weight vis-à-vis each other.
After the end of the performance year, the Committee determines the extent to which the operational performance goals were achieved and the corporate funding pool resulting from any such achievement. Based on performance against the baseline metrics, the Committee
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may decide whether to increase or decrease the amount of the corporate funding pool; positive discretion, however, may not increase the size of a Named Executive Officer’s award above the maximum award level established under the plan. The maximum award under the plan
for any Named Executive Officer is the lesser of 10% of the corporateEXCEL award pool (without discretion), or 500% of his or her prior year-end base salary, not to exceed $5 million. In addition,
Given the complexity of the Company’s Chapter 11 proceedings and the need to obtain support from creditor constituencies with respect to the 2013 EXCEL performance metrics, the Committee may also choosedetermined it necessary to exercise discretioncontinue to recognize circumstancesseek such as unanticipated economic or market changes, extreme currency exchange effects and managementsupport beyond the first 90 days of significant workforce issues. Following its determination regarding2013. As such, the sizeEXCEL program for 2013 did not meet all of the corporate funding pool forrequirements to qualify as “performance-based” compensation under Section 162(m) of the year, the Committee determines the amount of any awards for the Named Executive Officers.Code.
EXCEL Target Opportunity
As noted above, ourOur Named Executive Officers are assigned target opportunities under EXCEL based on a percentage of base salary. Since a
2013 Committee Discussion and Analysis Regarding Target Leverage
For 2013, the Committee determined it appropriate to review the target leverage opportunities of the Named Executive Officer’sOfficers and to make adjustments only where necessary to align to market median (based on the survey data described above). As a result of this review, the Committee determined that target EXCEL opportunities would remain frozen in 2013 for Messrs. Perez and Kruchten, Dr. Edwards and Ms. Quatela. As part of the implementation of his new employment agreement in September 2013, the EXCEL opportunity is a componentfor Mr. Sheller was reduced from 75% to 65% to better align to market median for his position (bringing his target leverage to 104% of total direct compensation,market median).
The following table shows the Committee annually reviews survey data to determine the position of each Named Executive Officer’s2013 full year EXCEL target opportunity relative to the market.
Committee Decision and Analysis
For 2008, the target EXCEL opportunities as a percent of base salary for our Named Executive Officers were: 155% for Mr. Perez, 85% for Mr. Faraci, 75% for Mr. Sklarsky, and 65% for Ms. Hellyar and Mr. Berman (changed from 62% to 65% effective May 12, 2008). The targetOfficers:
Name | Base Salary | EXCEL % Target Opportunity | EXCEL $ Target Opportunity | ||||||
A.M. Perez | $1,155,000 | 155% | $1,790,250 | ||||||
R.A. Roof(1) | See SCT | Not eligible | Not eligible | ||||||
B.W. Kruchten | 465,000 | 75% | 348,750 | ||||||
D.J. Edwards | 450,000 | 75% | 337,500 | ||||||
P.M. Sheller | 401,500 | 65% | 260,975 | ||||||
Former Executives | |||||||||
L.G. Quatela | 465,000 | 75% | 348,750 |
(1)Ms. Roof is not an employee of the Company and is not eligible for EXCEL. |
2013 EXCEL opportunity for our Named Executive Officers, other than Ms. Hellyar and Mr. Berman, remained unchanged from 2007 because the Committee felt that each executive’s target total cash position was appropriately positioned against the market median. Ms. Hellyar’s target opportunity was increased by 3% to recognize her increase in responsibilities as President FPEG and to move her total direct compensation to market median. Mr. Berman’s target opportunity was also increased by 3% to maintain internal equity in target EXCEL opportunities and to more closely align his target total cash to market median.
For 2009, the Committee determined that the target EXCEL opportunity for our Named Executive Officers will remain unchanged due to the challenging economic environment and management’s decision to provide no salary and no annual variable pay target opportunity increase for executives.
2008 EXCEL Plan Design and Performance Results
Performance Metrics Design and Results
For 2008, theThe Committee selected two performance metrics to be used to determine“Adjusted EBITDA (consolidated)” (Adjusted EBITDA) as the corporate award pool from which awards would be allocated. The Committee set the targets of these performance metrics in alignment with the Company’s external guidance to investors. Using these targets, a performance matrix was created that determined the funding percentage of the plan’s corporate award pool. The Committee also established a set of baseline metrics. The Committee reviewed and finalized thesesingle performance metric targets and baseline metrics in the first 90 days of the performance year.
For 2008, the Committee selected: 1) Net Cash Generation and 2) Combined Consumer Digital Imaging Group (CDG) and GraphicCommunications Group (GCG) year-over-year percent revenue growth as the two primary metrics for the plan, each of which was equally weighted. Specific definitions2013 EXCEL performance period. The full definition for these non-GAAP financial measuresthe metric can be found in the narratives forfollowing the Grants of Plan-basedPlan-Based Awards Table. The Adjusted EBITDA target included performance of all businesses of the Company, including the Document Imaging and Personalized Imaging businesses that were sold as part of the Chapter 11 process. The initial target for Adjusted EBITDA was based on page 55a projected sale of this Proxy statement.the Document Imaging business by March 31, 2013, and the Personalized Imaging business by June 30, 2013. Because the actual date of sale of these businesses occurred later in the year than projected, the Adjusted EBITDA target was modified to reflect the actual sale dates of these businesses as allowed in the Company’s applicable financing arrangements. The resulting metric shown below was adjusted to account for the actual sale date of September 1, 2013 for both businesses.
TheIn addition to the single performance metric, the Committee established baseline metrics for 2008performance gates such that were focused on:
These baseline metrics were not assigned any relative weight vis-à-vis each other.
The following abbreviated performance matrix shows the threshold, targetapplicable financing agreements throughout 2013; and stretch goals for 2008 and the resulting EXCEL corporate funding pool percentage:
EXCEL Corporate Funding Pool Percentage Matrix
Combined CDG and GCG year-over-year % revenue growth | |||||||
Net Cash Generation | 4% | 7% | 10% | ||||
(in millions) | (Threshold) | (Target) | (Stretch) | ||||
$ 50 (Threshold) | 11% | 44 | % | 114% | |||
300 (Target) | 67% | 100 | % | 170% | |||
500 (Stretch) | 120% | 144 | % | 214% |
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If the Company achieved both2) Adjusted EBITDA of $228.3M, which represented 85% of the Company’s target goals,Adjusted EBITDA for fiscal year 2013, as adjusted for the corporate pool would fund at 100%. If either threshold goal was not achieved,timing of the corporate pool would not be fundedsale of Document Imaging and our Named Executive Officers will not earn a bonus underPersonalized Imaging.
The financial targets and actual performance for the plan.2013 EXCEL performance period were as follows:
Excel Primary Performance Goals | Weight | Threshold | Target | Stretch | Result | |
Adjusted EBITDA (consolidated) | 100% | Metric | $228.3M | $268.6M | $537.2M | |
Payout Opportunity | 60% | 100% | 200% | |||
Result | $302M | |||||
EXCEL earned award for Named Executive Officers | 112.4% | |||||
EXCEL approved award for Named Executive Officers | 112.4% |
Committee Discussion and Analysis
The Committee selected the two primary metrics because they are key operational metrics for the Company of Performance Metric and are among the metrics our CEO periodically reports to the investment community. They provide insight to the Company’s ability to generate cash to invest in organic and non-organic growth as well as the continued growth of the Company’s digital businesses.Goals
The Committee establishedselected Adjusted EBITDA as the Net Cash Generation threshold at $50 million to provide a levelonly metric for 2013 because it focuses on earnings from operational performance, including that of positive cash flow (after dividends), while still providing the flexibility to make investments to drive growthtwo businesses (Document Imaging and Personalized Imaging) that were sold in our digital businesses. Further, the targetChapter 11 process. The definition of $300 million wasthis metric is consistent with the midpoint ofCompany’s applicable financing agreements in order to align management incentives with the Net Cash Generation range communicated to investors, as adjusted for dividends.Company’s financial covenants. The Committee established the target for CDG and GCG year-over-year percent revenue growth at the low end of the range communicated to investors (7%), because it wasthis metric consistent with prior full-year digital revenue growth after reflecting the realignment of two analog business product groups.plan presented by the Company to the creditor constituency in the Chapter 11 proceedings. The threshold for an earned payment was established at 4% revenue growth, which was$7M above the midpoint of the range communicatedminimum Adjusted EBITDA covenant calculated to investors in 2007.
In the creation of the matrix, the Committee increased the rate of payout for digital revenue growth above 8.5%. The Committee felt that an accelerated payout forinclude January plan performance above 8.5% was appropriate because it representedto ensure full year performance above the midpoint ofminimum level required by the revenue growth communicated to investors andcovenant. The resulting payout slope was a challenging objective given the strong full year growth the Company achieved in 2007.much steeper below target performance than above target performance. In addition to the single metric, the Committee set the matrix so that the rate of payout was relatively flat for results delivered within the range communicated to investors and which increased or decreased more steeply outside the range. The Committee selected this payout rate to reinforce the importance of delivering net cash generation within the target range shared with investors.
As discussed above, the Committee also established a set of baseline metrics in 2008. The Committee chose these metrics because they reflected key strategicgate for minimum consolidated Adjusted EBITDA and operational imperatives for the year in support of the Company’s business strategy. The metrics were selected in partminimum U.S. liquidity to ensure that no award would be earned absent compliance with the primary EXCEL performance metrics were not achieved atfinancial covenants in the expense of the longer-term interest of shareholders.
Determination of Corporate Award Pool for 2008
Company’s applicable financing agreements. The Company ended 2008 with a negative $144 million Net Cash Generation and a negative 4% Combined CDG and GCG year-over-year percentage digital revenue growth.obtained the support of creditor constituents in the bankruptcy process in developing the performance metric for the 2013 performance period.
Committee DecisionDiscussion and Analysis of 2013 Named Executive Officer Awards
Given that the result for each EXCEL performance metric was below threshold, the Committee determined that the matrix produced a funding pool of 0%. The Committee reviewed the results of the baseline metrics but, in light of the below-threshold results in Net Cash Generation and digital revenue growth, the Committee did not factor in the results of the baseline metrics in its determination of the funding pool.
Because the EXCEL matrix resulted in a corporate funding pool of 0%, and because the Committee did not factor in the baseline metric results, none of our Named Executive Officers earned an EXCEL award for 2008.
Long-Term Equity Incentive CompensationOverall Award Pool
Our Named Executive Officers receive an annual grant of long-term equity incentive awards as described further below. In addition to these awards, Named Executive Officers may receive additional equity awards during the year in recognition of a promotion or other significant achievement. All equity awards are issued under the 2005 Omnibus Long-Term Compensation Plan.
Purpose
The objectives of our long-term equity incentive programs are to:
The Committee reviews our long-term equity incentive programs annually to ensure that they are meeting the intended objectives.
Over the last several years, in connection with our digital transformation, the Committee implemented a compensation strategy designed to increase the proportion of our Named Executive Officers’ total direct compensation delivered in the form of long-term equity incentive awards. For 2008, the percentage of our Named Executive Officer’s target total direct compensation that is based upon the long-term equity program ranges from 55% to 67% (as seen on the chart titled “2008 Compensation Elements as a Percentage of Target Total Direct Compensation” on page 37 of this Proxy Statement), underscoring the alignment of the interests of our Named Executive Officers with the interests of the Company’s shareholders.
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Mix of Long-Term Equity Incentive Compensation
The Committee has no pre-determined mix of the form of long-term equity incentives granted to our Named Executive Officers. In December 2008, the Committee determined, based on the analysis discussed below, that the equity compensation program for 2009 would deliver:
The stock options vest in substantially equal annual installments over a three-year period. Leadership Stock program awards are granted in the form of performance stock units, which, if earned, are paid in the form of shares of common stock upon fulfilling a two-year vesting period which follows a one-year performance period. The performance goals for the Leadership Stock program are established each year, providing flexibility to the Committee to design a pay-for-performance plan that rewards achievement of key financial and/or operational metrics. Awards delivered in restricted stock units are paid in the form of shares of common stock when the three-year vesting period lapses.
Committee Decision and Analysis
In determining the annual mix of the form of long-term equity for 2009, the Committee considered the following:
Determining Annual Target Allocations of Long-Term Equity Incentive Compensation
The number of stock options, Leadership Stock, and restricted stock units granted to theAwards for Named Executive Officers is calculated based on
After a dollar value forreview of each executive. This dollar-denominated value is set and intended to align target total direct compensation with approximately the market median. The Committee reviews the dollar amount and, if appropriate, adjusts it to reflectNamed Executive Officer’s individual performance, factors. The methodology usedparticularly related to convert this dollar-denominated long-term equity incentive opportunity into equity grants (stock options, leadership stock units and restricted stock units) cantheir contributions towards achieving the goals of the Chapter 11 reorganization process, the Committee determined that their individual awards should be found on page 46 of this Proxy Statement. The equity grants are made in accordanceconsistent with the Boardoverall award pool, without further adjustments. Sixty percent (60%) of Directors Policy on Equity Awards, discussed further on page 46the total amount of this Proxy Statement.
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While the Committee determines a total dollar value for purposes of calculating the number of stock options, Leadership Stock units and restricted stock units toawards will be granted, this value does not represent the actual compensation that our Named Executive Officers might realize. The actual value that our executives receive will depend on the Company’s stock price on the grant date, stock price appreciationpaid in April 2014 and the number of shares earned under the Leadership Stock program based on Company performance against established metrics for the performance year. The number of stock optionsremaining forty percent (40%) is fully vested and Leadership Stock units granted to our Named Executive Officers in 2008 is shown in the Grants of Plan-Based Awards Table on page 55 of this Proxy Statement. As indicated in the 2008 Executive Compensation determination timeline table on page 36, this Proxy Statement addresses the equity decisions made in 2008. For Committee Decision and Analysis for 2008 Leadership Stock grants, determinedpayable in December 2007, see the Company’s Notice of 2008 Annual Meeting and Proxy Statement.
Committee Decision and Analysis2014.
With respect to the award determinations madefor Mr. Perez, the Committee considered his leadership throughout the Chapter 11 process, including the Company’s emergence on September 3, 2013. The Committee considered Mr. Perez's focus on securing customer and partner relationships; leadership of the asset sale process; successful negotiations to settle and eliminate large legacy liabilities; completion of two refinancing arrangements; and transition of responsibilities to the new Chairman and Board. In addition, the Committee considered Mr. Perez's performance resulting in December 2008,strategic and operational balance to maintain profitable revenue and overall liquidity.
In considering the award for Mr. Kruchten, the Committee considered the results for his leadership of the Graphics, Entertainment and Commercial Films business, including the successful launch and stabilization of certain products and technologies; his focus on overall operational and manufacturing productivity improvements; year-over-year margin improvement in Entertainment and Commercial Films; and his significant role in the asset sales and settlement of liabilities in the Chapter 11 process that were a critical component of the Company’s ability to emerge from Chapter 11 protection.
With respect to Dr. Edwards, the Committee determined there would be no increasehis award based on results in his leadership of the Digital Printing and Enterprise Services business, including year-over-year improvement in EBITDA before corporate costs; progress in driving various partnership models; technology productivity and reliability improvements; and successful management of key retailer relationships.
Mr. Sheller's leadership in his three corporate roles as General Counsel, Chief Administrative Officer and Secretary were considered in determining his award. The Committee considered Mr. Sheller's performance in leading the Chapter 11 legal processes through communications with several diverse constituencies; managing the transition to the post-emergence Board; oversight of several key components of the asset sales; and leadership in the target dollar valuestabilization of long-term equity incentive compensation for any Named Executive Officer fromoverall Company governance and employee issues beyond emergence.
With respect to Ms. Quatela, the prior year. The Committee made this decision considering: 1) the challenging economic environment; 2) the Company’s financial performance for 2008; and 3) the position of our Named Executive Officer’s total direct compensation relativelooked to market median.
Target Dollar Value of Long-Term Incentive Opportunity | ||||
Named Executive Officer | Target Dollar Value | |||
A.M. Perez, Chairman & CEO | $ | 5,786,885 | ||
F.S. Sklarsky, EVP & CFO | $ | 1,600,080 | ||
P.J. Faraci, President & COO | $ | 1,899,978 | ||
M.J. Hellyar, EVP & President, FPEG | $ | 1,017,962 | ||
R.L. Berman, SVP & CHRO | $ | 775,716 |
The above amountsher leadership in the table representPersonalized Imaging and Document Imaging businesses, leading to the intended target dollar valuecompletion of the long-term incentive opportunity. Becausesuccessful sale of significant declines in the pricethese businesses, which was a fundamental component of the Company’s stockPlan of Reorganization, and her ongoing support in the fourth quarter of 2008, the methodology used to convert this opportunity into stock optionstransitioning these businesses.
Ms. Roof was not considered for and full value shares resulteddid not receive an EXCEL award as she is not a participant in an actual equity value at the time of grant equal to 33% of the intended dollar value. The methodology used can be found on page 46 of this Proxy Statement.our EXCEL program.
Leadership Stock — 20082011-2012 Performance Cycle AwardsCash Program
As part of its annual review of long-term equity incentives,Under the Committee approves the performance criteria and terms of the annual Leadership Stock award. The Leadership Stock performance goals are approved in compliance with the rules of Section 162(m) of the Code, which require that goals be established no later than 90 days after the start of the performance period.
For 2008, given the difficulty in establishing multi-year performance goals,Company’s former Omnibus Long-Term Incentive Plan, the Committee decidedestablished a performance cash program to commence in 2011 and continue its use of athrough 2012. The 2011-2012 Performance Cash program was established with two one-year performance periodperiods, followed by a two-year time-based vesting scheduleperiod of one year, to ensure a total earn-out period of three years. The terms of the program and the basis on which metrics were established were disclosed in the Company’s Forms 10-K/A filed April 27, 2012 and April 22, 2013.
The 2011 performance goal and result were disclosed in the Company’s Form 10-K/A filed April 27, 2012. The performance threshold for Leadership Stock. Leadership Stock awards provide2011 was not met, resulting in a certification of 0% for the participant with2011 performance period. The 2012 performance goal and result were disclosed in the right to earn sharesCompany’s Form 10-K/A filed April 22, 2013. The performance threshold for 2012 was met, and overall performance resulted in a 150% payout opportunity for the 2012 performance period. Total performance for the 2011 and 2012 performance periods resulted in a total payout at 75% of target. These payments vested on December 31, 2013.
2013 Long-Term Incentive Compensation
Long term incentives, mainly in the form of equity, have historically been a significant part of our common stock based upon attainment of certain performance goals.
For 2008, the Committee selected a single performance goal, Total Segment Earnings from Operations (EFO), a non-GAAP financial measure, because it provides insight into the Company’s profitability. It is the third of the key financial metrics the CEO periodically reports to the investment community. The specific definition for Total Segment Earnings from Operations (EFO) can be found on page 57 of this Proxy statement.
The following abbreviated corporate performance matrix shows the threshold, target and maximum goal and associated payout percentage for 2008 Leadership Stock:
Awards earned under the plan are based on an executive’s target Leadership Stock allocation multiplied by the applicable payout percentage. Performance results below $200 million EFO would result in a zero performance percentage, and, therefore, no awards would be earned for the performance cycle. Performance at $400 million would lead to a 100% performance percentage and results of $500 million or greater would result in a 200% performance percentage. Results are interpolated between threshold and target and between target and maximum. The threshold, target and maximum number of shares allocated to our Named Executive Officers under the 2008 Leadership Stock performance cycle are shown in the Grants of Plan-Based Awards Table on page 55 of this Proxy Statement.
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Committee Decision and Analysis
The Committee established the threshold, target and maximum award levels as follows: 1) the threshold was established at $200M; 2) the target was established at the low-end of the external guidance range; and 3) the maximum was set at the top end of the external guidance range. These levels were established to align with external guidance, while also providing the Company flexibility to make additional investment during the fiscal year to grow the Company’s digital businesses.
2008 Leadership Stock Program Results
For 2008, the Company’s EFO was $33 million. Since this result was below the threshold EFO of $200 million, the Leadership Stock Matrix delivered a zero performance percentage.
Committee Decision and Analysis
Based on the Company results, the Committee certified a zero performance award for Leadership Stock. As a result, our Named Executive Officers did not receive a Leadership Stock award for the 2008 performance cycle.
2008 Delivered Compensation
Largely due to the Company’s results in 2008, the delivered compensation program for our Named Executive OfficersOfficers. The objectives of this element of compensation are to: (i) align executive compensation with shareholder interest; (ii) create incentives for executive retention; (iii) encourage long-term performance; and (iv) promote stock ownership.
The Company did not issue long-term incentive awards to its executives in 2008 was significantly below2013 due to the target total direct compensation levelsongoing bankruptcy proceedings. However, as approved under the Plan of Reorganization, Messrs. Perez, Kruchten and Sheller and Dr. Edwards along with certain other Company executives in leadership roles, received an equity grant in the form of Restricted Stock Units (RSUs) upon emergence from Chapter 11 under the 2013 Eastman Kodak Company Omnibus Plan as described in their individual employment agreements. In setting the amount of equity to be awarded to each Named Executive Officer, the Committee determined that the grant should be valued at 20% of the Named Executive Officer’s Total Direct Compensation, based upon the intent to place one-year Total Direct Compensation at the 75th percentile of market Total Direct Compensation. Mr. Perez’s RSU grant vests one-third upon the grant date, one-third upon the first anniversary of the grant date, and one-third upon the achievement of performance metrics determined by the Committee, established. By “delivered compensation,” we meanif and as certified by the compensation that was actually delivered to ourCommittee. The vesting schedule of Mr. Perez’s RSUs derives from the scheduled term of his employment agreement, which is one year. The RSU grants for Messrs. Kruchten and Sheller and Dr. Edwards vest one-third upon the first, second and third anniversary of the grant date. The vesting schedule of the RSUs for these Named Executive Officers derives from the term of their respective employment agreements, which is three years.
One-Time Special Incentive for 2008 (i.e., delivered compensation = 2008 base salary +Mr. Perez
Under the actual 2008 annual variable pay (EXCEL) award earned + the actual 2008 Leadership Stock award earned + the SFAS 123R grant date fair valueterms of his management agreement effective September 3, 2013, which was approved as part of the stock options grantedPlan of Reorganization, Mr. Perez is eligible to receive a performance-based payment in 2008).an amount up to $2 million, based upon the satisfaction of certain performance metrics as determined by the Committee. The performance metrics focus on achievements with respect to key customer and contractual arrangements in the Company’s Commercial Imaging businesses by December 31, 2014. In identifying these metrics, the Committee determined that these customer and contractual arrangements were critical indicators of the performance of the Company’s Commercial Imaging businesses.
One-Time Special Incentive Agreement for Ms. Quatela
Effective September 3, 2013, the Company entered into a one-time special transition incentive agreement with Ms. Quatela pertaining to the successful sale of our Document Imaging and Personalized Imaging businesses to the Kodak Pension Plan of the United Kingdom, which was a necessary component in the Company’s ability to emerge from Chapter 11. The Committee reviewed and approved this agreement, and it was approved as part of the Company’s Plan of Reorganization in the Chapter 11 process. The performance criteria under the agreement focused on the successful closing of the asset sale agreement as staged in various jurisdictions throughout the world, the transition of key customers in these businesses to the new owner, and the development and implementation of the organizational structure to support deferred close country operations. Subject to achievement of these performance goals within the performance period, Ms. Quatela was eligible to earn an award of $813,750.
Committee Discussion and Analysis on Goal and Metric Selection and Award Determination
The following tables demonstrate thatCommittee intended for Ms. Quatela’s agreement to incent her to complete a timely sale of the deliveredDocument Imaging and Personalized Imaging businesses, which was critical to the Company’s ability to emerge from Chapter 11, and to incent Ms. Quatela to continue to fulfill steps necessary for full implementation of the transfer of the businesses to the new owner. The target/maximum payout opportunity was established to provide Ms. Quatela an opportunity to earn total compensation in line with her Total Target Cash Compensation for our2013. The Committee approved the payment in full based upon Ms. Quatela’s successful performance in all of the criteria under the agreement. The award is included in the Grant of Plan Based Awards Table.
RISK MITIGATING POLICIES
Policy on Recoupment of Executive Incentive Payments in the Event of Certain Restatements
The Board has a policy requiring the recoupment of bonuses paid to Named Executive Officers upon certain financial restatements. Under the policy, which is posted on our website athttp://ek.client.shareholder.com/supporting.cfm, we require reimbursement of a certain portion of any amounts paid to a Named Executive Officer under EXCEL when:
In each such instance, the Company will, to the extent practicable, seek to recover the amount by which the Named Executive Officer’s annual incentive payment for the relevant period exceeded the lower payment that would have been made based on the restated financial results, plus a reasonable rate of their target total directinterest.
Committee Discussion of Risk in Goal and Metric Selection
The Committee considers risk management in all decisions related to executive compensation, in 2008. This outcome resulted fromand the Committee’s independent consultant has historically advised the Committee and management on the degree to which individual components and the program as a zero payout under the EXCEL and Leadership Stock plans andwhole may influence the manner in which dollar-denominated long-term equityexecutives are encouraged or discouraged from taking risk. In establishing the metric selection, metric definitions, performance thresholds, targets were converted into actual awards (as described on page 46 of this Proxy Statement) and valued based onpayout curves for our incentive-based compensation, the grant date fair value.
The grant date fair value of stock options will be realized only in the event of stock price appreciation. As indicated in footnote 4 below, as of December 31, 2008, the intrinsic value of the stock options was zero. If the stock option value in the tables reflected the intrinsic stock option value, rather than the SFAS 123R grant date fair value, as of December 31, 2008, delivered compensation of our Named Executive Officers as a percentage of their target total direct compensation would range from 13%Committee considers how to 27%.
These tables demonstrate the degree of performance sensitivity inherent in our overall compensation programs and how the various incentive plans operate to ensure that compensation realized by Named Executive Officers is aligned with overall Company results and changes in shareholder value. The information on these tables differs substantially from the Summary Compensation Table on page 49 of this Proxy Statement and is not a substitute for that table. A description of those differences is found following these tables.
2008 Target Compensation | ||||||||||
Target Long-Term Equity Value(2) | ||||||||||
Named | Target Annual | 2008 Leadership | 2008 Stock | Target Total Direct | ||||||
Executive Officer | Base Salary | Variable Pay(1) | Stock | Options | Compensation(3) | |||||
A.M. Perez, | ||||||||||
Chairman & CEO | $1,100,000 | $1,705,000 | $2,893,443 | $2,893,443 | $8,591,886 | |||||
F.S. Sklarsky, | ||||||||||
EVP & CFO | 600,000 | 450,000 | 800,040 | 800,040 | 2,650,080 | |||||
P.J. Faraci, | ||||||||||
President & COO | 700,000 | 595,000 | 949,989 | 949,989 | 3,194,978 | |||||
M.J. Hellyar, | ||||||||||
EVP & President, | ||||||||||
FPEG | 490,000 | 313,600 | 508,981 | 508,981 | 1,821,562 | |||||
R.L. Berman, SVP | ||||||||||
& CHRO | 385,000 | 246,400 | 387,858 | 387,858 | 1,407,116 |
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2008Delivered Compensation vs. Target | ||||||
Long-Term Equity | ||||||
Incentive Plan | ||||||
Grant Date Fair | % 2008 Delivered | |||||
Named | Actual | Actual 2008 | Actual 2008 | Value of 2008 | Delivered 2008 | Compensation vs. |
Executive | 2008 Base | Annual | Leadership | Stock Option | Total Direct | Target Total Direct |
Officer | Salary | Variable Pay | Stock Award | Award(4) | Compensation | Compensation(5) |
A.M. Perez, | ||||||
Chairman & CEO | $1,096,168 | $0 | $0 | $683,901 | $1,780,069 | 21% |
F.S. Sklarsky, | ||||||
EVP & CFO | 597,911 | 0 | 0 | 189,098 | 787,009 | 30% |
P.J. Faraci, | ||||||
President & COO | 697,561 | 0 | 0 | 224,543 | 922,104 | 29% |
M.J. Hellyar, EVP | ||||||
& President, | ||||||
FPEG | 488,293 | 0 | 0 | 120,302 | 608,595 | 33% |
R.L. Berman, | ||||||
SVP & CHRO | 383,658 | 0 | 0 | 91,673 | 475,331 | 34% |
As previously indicated, these tables are not a substitute for the Summary Compensation table, and the information provided in these tables differs from the Summary Compensation Table in two major ways. First, a significant difference between these tables and the Summary Compensation Table is in the representation of equity value. In the Summary Compensation Table, the equity awards represent the expense recognized for financial reporting purposes, with respect to equity awards granted in the current year and prior years. In the table reflecting 2008 Delivered Compensation vs. Target, the equity awards represent: 1) the grant date fair value of the 2008 stock option award in accordance with SFAS 123R, and 2) the actual 2008 Leadership Stock awards earned. Secondly, the Summary Compensation Table includes changes in pension value, non-qualified deferred compensation and perquisites. These amounts are not included in the tables above because they are not taken into account in determining total direct compensation.
Initial Hire Grants and Ad Hoc Awards
In addition to annual equity awards, our Named Executive Officers may receive stock options and time-based restricted stock grants in connectionappropriately balance risk with the commencementachievement of their employment, election as a Company Officer, as a result of a promotion or for retention purposes. The objectives of these grants are to encourage hiring, retentionshareholder objectives. Throughout 2013, the Restructuring and stock ownership and to align an executive’s interests with those of our shareholders. On occasion, the Committee may also grant one-time, ad hoc stock option awards to reward an executive for superior individual performance.
There were no ad hoc awards granted to any Named Executive Officers in 2008.
Former Executive: James T. Langley
Mr. Langley’s last day of employment with the Company was March 14, 2008. In connection with Mr. Langley’s planned separation from service with the Company, the Compensation Committee approved a severance payment of $810,000, which was equivalent to Mr. Langley’s target cash compensation. Mr. Langley’s severance was determined in consideration of: 1)considered risks associated with key compensation decisions, as did the severance guidelines for Named Executive Officers discussed on page 48 of this Proxy Statement; 2) the Company organizational changes resulting in the elimination of Mr. Langley’s position; and 3) the severance arrangement in Mr. Langley’s hiring agreement, which had expired a year earlier and provided a comparable benefit. In addition to severance, thenew Committee granted an “approved reason” and accelerated vesting for the remaining
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3,453 restricted shares of the Company’s stock granted to Mr. Langley on February 27, 2007 as a performance award. The Committee felt it was appropriate to accelerate vesting on the remaining shares given that these shares were granted to recognize 2006 results. Finally, for purposes of Mr. Langley’s supplemental unfunded retirement benefit, the Committee determined that Mr. Langley would receive service credit for the period beginning August 18, 2007 and ending on March 14, 2008, and, therefore, he would receive a pro-rated portion of the $100,000 that would have been credited to him had he remained employed through August 18, 2008.
Given that Mr. Langley’s last day of work was planned for the first quarter of 2008, the Committee determined that Mr. Langley would not receive an annual stock option grant in 2007 or a 2008 Leadership Stock grant, nor would he be eligible for a base salary increase or an EXCEL award for the 2008 performance year.
EXECUTIVE COMPENSATION POLICIES RELATING TO INCENTIVE PLANS
Share Ownership Program
Under our Share Ownership Program, our Section 16 Executive Officers are expected, over time, to acquire a significant ownership stake in the Company equal to at least one to five times their base salary amounts, depending on the executive’s position. Details regarding this program are on page 30 of this Proxy Statement. The Committee believes this program furthers its objective of closely aligning the interests of our executives with those of our shareholders. The Committee plans to revisit the terms of the Share Ownership Program during 2009.
Equity Award Policy
All equity awards granted to Named Executive Officers in 2008 were granted in accordance with our Board of Directors Policy on Equity Awards approved by the Board effective as of January 1, 2007. In accordance with this policy, our grant timing guidelines are as follows:
Annual Stock Option Award.Annual grants of stock options are approved at the Committee’s regularly scheduled December meeting. If grants of stock options are to be awarded, the grant date for such options will be the date of the December meeting in which the grants were approved.following emergence from Chapter 11.
Grant Dates for Ad Hoc and New Hire Equity Awards. For awards to Section 16 Executive Officers, the grant date for any ad hoc or new hire equity award approved in a meeting of the Committee will be:
The grant date of any ad hoc or new hire equity award approved by unanimous written consent of the Committee will be the next regularly scheduled Committee meeting following:
The exercise price of any stock options awarded will be the fair market value (defined as the average of the high and low value) of the Company’s common stock on the grant date as defined in the applicable equity compensation plan.
Methodology for converting dollar-denominated annual long-term incentive target opportunity into share equivalentsOTHER POLICIES
In December of each year, the Committee determines the target dollar value to be delivered in long-term equity incentives for each Named Executive Officer. To determine the number of stock options to be delivered, the average of the closing price of Kodak stock over 60 trading days ending on the last trading day of September is calculated. A Black-Scholes value is then calculated using the 60-day average stock price determined above. The target dollar value to be delivered in stock options (50% of the target total long-term equity value) is divided by the Black-Scholes value to determine the number of stock options, which may then be rounded to the nearest reasonable whole number. The stock option grant price is the fair market value of the Company’s stock on the grant date. The number of full value shares, Leadership Stock and/or restricted stock units are calculated using the intended dollar value (50% of the target total long-term equity value) divided by the average of the closing price of Kodak stock over the 60 trading days ending on the last trading day of September.
This same methodology is used annually to determine the number of stock options and shares of restricted stock to be granted to the directors under the Director Compensation Program.
This methodology was selected for administrative purposes and so that short-term fluctuations in stock price would not impact the conversion from dollar-denominated awards to shares. A change to the 60-day methodology was discussed as part of the annual strategy review, but since the strategy review took place during the 60-day period it was determined appropriate to continue this methodology for 2008 and revisit it again in 2009. Use of this approach in 2008 resulted in granting equity value equal to approximately 33% of the intended equity value because the Company’s stock price fell after determination of the 60-day average stock price and prior to the issuance of the equity awards.
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Policy on Qualifying Compensation
When designing all aspects of compensation, the Company considerswe consider the deductibility of executive compensation under Section 162(m) of the Code, whichCode. Section 162(m) provides that the Company may not deductdeductions are capped at compensation of more than $1 million paid to certain executives, other than “performance-based” compensation meeting certain requirements. Annual variable pay under our EXCEL plan is designed to satisfy the requirements for “performance-based” compensation asCovered Employees (as defined in Section 162(m) of the Code. Stock options), other than compensation that is “performance-based.” EXCEL and Leadership Stockour long-term incentive program are alsotypically designed in a manner intended to satisfy the requirements forso qualify. However, these programs were not intended to qualify as “performance-based” compensation underin 2013 since, as discussed above, with respect to the EXCEL metrics, the bankruptcy process necessitated collaboration with creditor constituents beyond the 90 day period required for Section 162(m). qualification, and no long-term incentive equity was granted in 2013. While we design these plans and programs typically are designed to operate in a manner that is intended to qualify as “performance-based” under Section 162(m), the Committee may administer the plans in a manner that does not satisfy the requirements of Section 162(m) in order to achieve a result that the Committee determines to be appropriate.
WhileMs. Quatela’s special incentive plan was designed in a manner intended to satisfy the Committee considers the impact of the tax treatment, the primary factor influencing program design is the support of business objectives. requirements for “performance-based” compensation under Section 162(m).
Generally, whether or not compensation will be deductible under Section 162(m) will be an important, but not thea decisive, factor with respect to the Committee’s compensation determinations. In 2008 the Committee recognized that, while both stock options and Leadership Stock are 162(m) compliant, restricted stock units are not. The Committee nonetheless determined that the benefit to be derived from restricted stock units, namely their retentive value, outweighed any impact resulting from the inability to claim a deduction under Section 162(m) of the Internal Revenue Code.decisions.
Policy on Recoupment of Bonuses
The Company has a policy regarding the recoupment of bonuses in the event of financial restatements. Under this policy, the Board may seek to recover, to the extent permitted under applicable local law, any performance-based pay awarded to a Named Executive Officer under EXCEL if an executive’s fraud or misconduct caused or partially caused the need for significant financial restatement and if the bonuses would have been lower as a result of the restatement. The policy is more fully discussed on page 20 of this Proxy Statement.
OTHER COMPENSATION ELEMENTS
Retirement Plans
The Company offers a tax-qualified defined benefit plan, comprised of a cash balance component and a traditional defined benefit component (KRIP), and a tax-qualified 401(k) defined contribution plan (SIP), which cover virtually all U.S. employees. In addition to theseOur tax-qualified retirement plans are designed and intended to attract and retain employees.
Until September 3, 2013, the Company provides supplementalprovided non-qualified retirement benefits to our employees, including the Named Executive Officers, under the Kodak Unfunded Retirement Income Plan (KURIP) and the Kodak Excess Retirement Income Plan (KERIP). KURIP and KERIP arewere unfunded retirement plans that are designed to provide our executivesemployees with pension benefits that make(1) made up for the Internal Revenue Code’s limitations on allocations and benefits that may be paid under KRIP and SIP, and (2) recognize deferred compensation that is ignored when calculating benefits under KRIP and SIP. None of our Named Executive Officers hashad an accumulated benefit under KERIP. The details of KRIP and KURIP are described underin the Pension Benefits Table on page 63Table.
Upon the commencement of this Proxy Statement.
the Company’s Chapter 11 proceedings in January 2012, pre-petition balances under KURIP and KERIP were frozen. The plans continued to earn benefits after the filing date. Any individuals holding pre-petition balances under those plans were entitled to file an unsecured claim in the bankruptcy proceedings to seek recovery of their balances, and those claims were satisfied in a manner consistent with all other similarly situated general unsecured creditors, with a distribution of equity following emergence from bankruptcy. KURIP and KERIP were terminated upon the Company’s emergence from bankruptcy. KURIP benefits earned after the filing date and prior to emergence were frozen and are payable as a lump sum upon the employee’s termination of employment with the Company believes that our tax-qualified retirement plans(less applicable withholding and non-qualified supplemental retirement plans enhance our executive compensation package. The primary objective of our retirement plans issubject to attract and retain our employees.compliance with Code Section 409A).
Individual Supplemental Individual Retirement Arrangements
We have alsoAt the time of his hire, the Company entered into an individual letter agreementsagreement with Messrs.Mr. Perez Faraci and Sklarsky to provide additional retirement benefits beyond those available under our tax-qualified retirement plans and non-qualified supplemental retirement plans. For Messrs. PerezThis agreement provided eligibility for the traditional benefit component of KRIP and Faraci, these agreements provideKURIP and for additional years of service in calculating their benefits under KRIP and KURIP. Supplementalthose benefits. A supplemental individual retirement arrangements werearrangement was necessary to recruit these Named Executive Officers.Mr. Perez. The benefits provided to our Named Executive OfficersMr. Perez under anyhis individual retirement arrangement are described on page 65in the section entitled Individual Supplemental Retirement Arrangements.
Upon the Company’s emergence from bankruptcy, Mr. Perez’s original letter agreement was terminated and benefits earned prior to the filing date were settled by a distribution of this Proxy Statement.equity in a manner consistent with other similarly situated general unsecured creditors. Benefits earned after the filing date and prior to emergence were frozen and are payable as a lump sum upon Mr. Perez’s termination of employment with the Company (less applicable withholding and subject to compliance with Code Section 409A).
Deferred Compensation Plan
The Company maintainsformerly maintained a non-qualified deferred compensation plan for itsour executives, known as the Eastman Kodak Company 1982 Executive Deferred Compensation Plan (EDCP). The plan permits the Company’s executives to defer a portion of their base salary and annual bonus awards. Each fall, the Company’s executives may elect to defer base salary for the following year and up to a portion of any bonus earned under EXCEL the following year. The plan is intended to promote retention by providing our executives with a long-term savings opportunity on a tax-deferred basis. The details of this plan are described under the Non-Qualified Deferred Compensation Table on page 66 of this Proxy Statement. In 2008,2009, the Committee froze the receipt of new monies into this plan. This action was takenplan indefinitely due to the plan’s administrative costs and low utilizationutilization. Upon filing for bankruptcy in January 2012, EDCP accounts were frozen and administrative costs.no additional interest was earned. The Company did not assume the plan upon emergence from Chapter 11, and it therefore has been terminated. All existing account balances under EDCP became an unsecured claim in the bankruptcy proceedings.
Perquisites
The Company provides certain perquisites primarily for our Named Executive Officers. The perquisites are reviewed periodically and are provided to ensure the personal security related reasons,of senior executives, to maximize an executive’sexecutive's time spent on Company business or to attract and retain our Named Executive Officers. The primary perquisites that our Named Executive Officers receive are financial counseling services, personal umbrella liability insurance coverage and occasional use of the Company’s driver service. Home security services are provided forsenior executives.
In 2013, Mr. Perez but were discontinued in December 2008 for Messrs. Faraci, Sklarsky and Berman and in January 2009 for Ms. Hellyar. The Company’s driver service was discontinued for all Named Executive Officers in October 2008. The elimination of these perquisites is in addition to the discontinuation of executive physicals in December 2007.
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Our executive security program requires our CEO to use Company aircraft for all air travel, whether personal or business. Our Named Executive Officers, other than our CEO, are not permitted to use corporate aircraft for personal travel without approval from our CEO. This restriction applies to personal travel of these Named Executive Officers as well as the travel of a spouse when accompanying theonly Named Executive Officer who received perquisites. In order to ensure his personal safety and maximize time spent on Company business, travel.
the Company provided home security services and personal IT services for Mr. Perez. The compensation attributed to our Named Executive Officers for 2008 forvalue of these perquisites is included in the All Other Compensation column of the Summary Compensation Table on page 49 of this Proxy Statement.Table.
SEVERANCE AND CHANGE-IN-CONTROLCHANGE IN CONTROL ARRANGEMENTS
Severance Arrangements
Our Named Executive Officers are responsible for the continued success of the Company and the execution of the Company’s strategic plan to grow our digital portfolio and to continue management of a sustainable business model for our traditional businesses. The Committee believes that it is important to provide our senior management some measure of financial security in the event their employment is terminated without cause.
Mostcause, because of their responsibility for the success of the Company and the execution of the Company’s strategic plan. However, while the Company operated in Chapter 11, any severance payments were managed in compliance with the provisions of the Bankruptcy Code, irrespective of any letter agreements or severance guidelines. Under these provisions, our Named Executive Officers havecould receive only limited severance amounts under plans applicable to employees generally.
Effective September 3, 2013, as part of the management agreements approved under the Plan of Reorganization, the Company entered into an individual letter agreement that provides various severance benefits in the event their employment is terminated under various circumstances. These individual letter agreements were established at the timearrangement with each Named Executive Officer commenced employment with the Company or later in connection with entering into a retention arrangement.Additionally, when determining the appropriate severance arrangement for a Named Executive Officer, the Committee generally applies pre-established guidelines. Under these guidelines, our Named Executive Officers may be eligible to receive a severance allowance equal to one to two times their target cash compensation depending on their position, length of serviceother than Mmes. Roof and the circumstances surrounding their departure. The individual letter agreements for Named Executive Officers are approved by the Committee and are consistent with guidelines for executive severance that the Committee has established.
Our individual severanceQuatela. These arrangements are designed to serve as a retention tool and to eliminate any reluctanceprovide incentive for the Named Executive Officers to focus on the best interests of executives to implement anystockholders in connection with the transformational components of the Company’s strategic plan. Inplan given that, in certain instances, an executive’s successful completion of his or her responsibilities may result in the elimination of his/his or her job. These arrangements also provide an incentive for individualsthe Named Executive Officers to sign a release of claims against the Company, to refrain from competing with the Company and to cooperate with the Company both before and after their employment is terminated.
At the time that Mr. Perez’sPerez commenced employment with the Company, an individual severance arrangement providesletter agreement dated March 3, 2003 was established to provide him with severance and other benefits. Upon the Company’s emergence from bankruptcy, this letter agreement, as amended, was terminated and any remaining entitlements thereunder were settled in the form of an unsecured claim, consistent with the treatment of other general unsecured creditors.
The 2013 individual severance arrangements established for Messrs. Sheller and Kruchten and Dr. Edwards provide severance benefits that are payable in the event histhe Named Executive Officer’s employment is terminated by the Company without “cause” or if he terminates for “good reason.” Under their individual severance arrangements, Messrs. Faraci and Sklarsky and Ms. Hellyar are entitled to severance benefits for termination by the Company without “cause.” The arrangements for Mr. Sklarsky and Ms. Hellyar also provide them with severance benefits upon their long-term disability. For purposes of these severance arrangements, the definitions of “cause” vary slightly amongand “good reason” as applicable to the relevant individual letter agreements negotiated betweenseverance arrangements are set forth in the Company andsection entitled Individual Severance Agreements. Under his 2013 management agreement, Mr. Perez is entitled to certain termination benefits as more fully described in the Named Executive Officers. section entitled Individual Termination Benefits.
When approving any letter agreement for employment or retention, the Committee focuses on the reasons for which severance triggersmay be triggered relative to each executive’sthe Named Executive Officer’s position and responsibilities.
Our Ms. Quatela’s severance arrangementsarrangement is provided in accordance with our Named Executive Officers also providethe Company plans applicable to employees generally. Ms. Roof is not eligible for the treatment of other compensation providedseverance benefits under the Company’s annual bonus plan, equity plans and retirementany Company plans. For additional information regarding the potential severance benefits payable to our Named Executive Officers under various circumstances, see the description underpreceding the Severance Benefits Tables beginning on page 72 of this Proxy Statement.Payments Table.
Change-in-ControlChange in Control Arrangements
Consistent with our compensation philosophy, we believe that the interests of our shareholders are best served if the interests of our senior management are aligned with theirs. To this end, ourThe Company first adopted an Executive Protection Plan which the Company adopted in 1992, provideswhich provided for enhanced change-in-controlchange in control severance benefits for executives, including our Named Executive Officers other than Ms. Roof, to reduce any reluctance of our Named Executive Officerson their part to support potential change-in-controlchange in control transactions that may be in the best interest of shareholders and to promote thetheir continued employment and dedication of our Named Executive Officers without distraction. The Committee believes that these change-in-control benefits also encourage smooth transition of management in the event of a change-in-control. The terms of the Executive Protection Plan are more fully described on page 76 of this Proxy Statement.
When determiningin the appropriate level of change-in-control benefits for a Namedsection entitled Executive Officer underProtection Plan. Upon theCompany’s emergence from bankruptcy, the Executive Protection Plan the Committee considers how to ensure that the plan continues to fulfill the objectives described above and, in doing so, it takes market practice and cost of the benefits into consideration. The Committee’s decisions concerning these benefits do not affect decisions made regarding other compensation elements.was terminated.
Certain of our other employee benefit and compensation plans also provideprovided enhanced benefits to our Named Executive Officers other than Ms. Roof, as well as other U.S. employees, after a change-in-control.change in control. These benefits arewere designed to protect our Named Executive Officerscovered employees against the possible loss of certain benefits after a change-incontrol. Additional planchange in control. The terms of the Executive Protection Plan and the treatment of any benefits after a change-in-controlchange in control under the Company’s retirement and welfare plans, deferred compensation plan, EXCEL plan and equity incentive plans are more fully described beginningprior to the Severance Payments Table. Upon the Company’s emergence from bankruptcy, these enhanced benefits were eliminated.
SATISFACTION OF UNSECURED CLAIMS AND CANCELLATION OF EQUITY
As discussed throughout this Compensation Discussion and Analysis and the tables that follow, certain compensation plans, programs and agreements were terminated or expunged as part of the Company’s restructuring process under the Chapter 11 proceedings. In those cases where our Named Executive Officers were entitled to benefits under such arrangements, their benefits were converted to a general unsecured claim, which was satisfied following emergence from bankruptcy in the form of an equity distribution, consistent with treatment of all other similarly situated general unsecured creditors, in a gross pre-tax amount that was approximately 6% of the value of the claim. In addition, all common stock of the Company that was outstanding prior to the emergence date of September 3, 2013 was cancelled on page 76emergence from bankruptcy. To the extent any of our executives, including our Named Executive Officers, held stock of the Company as of that date, it was cancelled, and no consideration was provided for this Proxy Statement.lost value.
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COMPENSATION OF NAMED EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation of each of our Named Executive Officers (NEO) for 2006, 20072011, 2012 and 2008.2013.
Change in | |||||||||||||
Pension | |||||||||||||
Value and | |||||||||||||
Non- | |||||||||||||
Non-Equity | qualified | ||||||||||||
Name and | Incentive | Deferred | |||||||||||
Principal | Stock | Option | Plan | Comp. | All Other | ||||||||
Position | Year | Salary(1) | Bonus | Awards (2) | Awards (3) | Comp. (4) | Earnings (5) | Comp. (6) | Total | ||||
A.M. Perez Chairman & CEO | 2008 | $1,096,168 | — | $1,256,622 | $2,560,101 | $ — | $3,438,295 | $285,442 | $8,636,628 | ||||
2007 | 1,096,168 | — | 1,515,177 | 2,444,914 | 3,324,750 | 519,560 | 377,865 | 9,278,434 | |||||
2006 | 1,096,168 | $690,525 | (7) | 1,801,792 | (8) | 1,704,007 | — | 3,214,598 | 269,020 | 8,776,110 | |||
F.S. Sklarsky EVP & CFO(9) | 2008 | 597,911 | — | 599,729 | 611,143 | — | 119,720 | 10,369 | 1,938,872 | ||||
2007 | 597,911 | — | 649,584 | 383,486 | 900,000 | 104,165 | 37,504 | 2,672,650 | |||||
2006 | 91,986 | 75,000 | (10) | 74,781 | 78,333 | — | 18,303 | 2,539 | 340,942 | ||||
P.J. Faraci President & COO | 2008 | 697,561 | — | 193,936 | 536,849 | — | 341,208 | 27,947 | 1,797,501 | ||||
2007 | 606,879 | — | 257,987 | 503,845 | 1,066,158 | 386,094 | 31,362 | 2,852,325 | |||||
2006 | 518,188 | 130,572 | (7) | 179,631 | 381,227 | — | 319,305 | 42,614 | 1,571,537 | ||||
M.J. Hellyar EVP & President, FPEG | 2008 | 488,293 | — | 446,508 | 613,015 | — | 517 | 10,904 | 1,559,237 | ||||
2007 | 488,293 | — | 234,000 | 616,539 | 637,980 | 4,093 | 2,653 | 1,983,557 | |||||
2006 | 484,843 | 130,634 | (7) | 211,734 | 279,322 | — | 1,102,430 | 10,349 | 2,219,312 | ||||
R.L. Berman SVP & CHRO | 2008 | 383,658 | — | 112,065 | 267,163 | — | 100,757 | 6,117 | 869,760 | ||||
Former Executive | |||||||||||||
J.T. Langley Former SVP(11) | 2008 | 114,983 | — | — | — | — | 116,293 | 918,424 | (12) | 1,149,700 | |||
2007 | 498,258 | — | 199,394 | 520,455 | 785,750 | (13) | 212,069 | 54,486 | 2,270,412 | ||||
2006 | 498,258 | 150,550 | (14) | 160,299 | 291,079 | 490,000 | 171,160 | 58,400 | 1,819,746 |
Change in | |||||||||||||||||
Pension | |||||||||||||||||
Value and Non- | |||||||||||||||||
Name and | Non-Equity | qualified | |||||||||||||||
Principal | Stock | Option | Incentive Plan | Deferred Comp. | All Other | ||||||||||||
Position | Year | Salary(1) | Bonus | Awards(2) | Awards(3) | Comp.(4) | Earnings(5) | Comp.(6) | Total | ||||||||
A.M. Perez President & CEO | 2013 | $ | 1,150,976 | - | $ | 2,245,310 | - | $ | 3,314,316 | $ | 725,402 | $ | 9,143 | $ | 7,445,147 | ||
2012 | 1,149,421 | - | - | - | 2,148,300 | 2,014,817 | 159,711 | 5,472,249 | |||||||||
2011 | 1,115,140 | - | 3,083,185 | 1,355,005 | 0 | 1,311,499 | 115,285 | 6,980,114 | |||||||||
R.A. Roof CFO | 2013 | 2,231,957 | N/A | N/A | N/A | N/A | N/A | N/A | 2,231,957 | ||||||||
2012 | 800,726 | N/A | N/A | N/A | N/A | N/A | N/A | 800,726 | |||||||||
B.W. Kruchten SVP | 2013 | 448,484 | - | 390,875 | - | 547,695 | 0 | - | 1,387,054 | ||||||||
D.J. Edwards SVP | 2013 | 410,606 | - | 384,667 | - | 519,975 | 7,926 | 7,548 | 1,330,722 | ||||||||
2012 | 351,570 | - | - | - | 254,016 | 26,355 | 18,349 | 650,290 | |||||||||
P.M. Sheller GC & SVP | 2013 | 356,022 | - | 299,584 | - | 313,944 | 0 | - | 969,549 | ||||||||
2012 | 336,516 | - | - | - | 306,000 | 908,864 | 15,026 | 1,566,406 | |||||||||
Laura Quatela, Former President, EKC and Personalized Imaging | 2013 | 463,380 | - | - | - | 1,363,245 | 25,481 | 7,350 | 1,859,456 | ||||||||
2012 | 463,380 | - | - | - | 418,500 | 38,227 | 82,306 | 1,002,413 | |||||||||
2011 | 403,877 | - | 562,409 | 208,003 | 0 | 39,546 | 7,825 | 1,221,660 |
(1) | This column reports the base salary | |
Dr. Edwards’ base salary increased from 2012 as a result of a salary increase that he received effective January 1, 2013 and a subsequent increase effective September 4, 2013 (as part of his management agreement). Mr. Sheller’s base salary increased from 2012 as a result of a salary increase effective September 4, 2013 (as part of his management agreement). (2) |
(3) This column reports the grant date fair value (as calculated for financial reporting purposes), without any reduction for risk or forfeiture, for all stock option awards granted during each year reported. No stock options were granted during 2013. The assumptions used to calculate the grant date fair value of stock options granted in 2011 are included in the table below.
Named | ||||||
Executive | Grant Date | Expected | Expected | |||
Officers | Fair Value of | Risk-Free | Option | Expected | Dividend | |
Receiving | Award | Rate | Life | Volatility | Yield | |
Grant Date | Award | ($) | (%) | (years) | (%) | (%) |
1/24/2011 | L.G. Quatela | 2.94 | 2.40 | 6 | 59.08 | 0.00 |
2/28/2011 | A.M. Perez | 1.92 | 2.48 | 6 | 59.15 | 0.00 |
2/28/2011 | L.G. Quatela | 1.92 | 2.48 | 6 | 59.15 | 0.00 |
(4)The amounts in this column reflect payments under EXCEL for | ||
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Grant Date | Expected | Expected | ||||||
NEOs | Fair Value of | Risk-Free | Option | Expected | Dividend | |||
Receiving | Award | Rate | Life | Volatility | Yield | |||
Grant Date | Award | ($) | (%) | (years) | (%) | (%) | ||
12/6/2004 | P.J. Faraci | 9.20 | 3.34 | 4 | 36.470 | 1.56 | ||
12/10/2004 | A.M. Perez | 9.20 | 3.34 | 4 | 36.470 | 1.56 | ||
M.J. Hellyar | 9.20 | 3.34 | 4 | 36.470 | 1.56 | |||
J.T. Langley | 9.20 | 3.34 | 4 | 36.470 | 1.56 | |||
1/17/2005 | M.J. Hellyar | 9.27 | 3.57 | 4 | 35.700 | 1.53 | ||
5/12/2005 | P.J. Faraci | 7.46 | 3.59 | 4 | 35.190 | 1.82 | ||
6/1/2005 | A.M. Perez | 7.46 | 3.59 | 4 | 35.190 | 1.82 | ||
P.J. Faraci | 7.46 | 3.59 | 4 | 35.190 | 1.82 | |||
M.J. Hellyar | 7.46 | 3.59 | 4 | 35.190 | 1.82 | |||
R.L. Berman | 7.46 | 3.59 | 4 | 35.190 | 1.82 | |||
J.T. Langley | 7.46 | 3.59 | 4 | 35.190 | 1.82 | |||
12/7/2005 | A.M. Perez | 8.65 | 4.46 | 7 | 34.730 | 2.06 | ||
12/7/2005 | P.J. Faraci | 7.44 | 4.43 | 5 | 34.370 | 2.15 | ||
M.J. Hellyar | 7.44 | 4.43 | 5 | 34.370 | 2.15 | |||
R.L. Berman | 7.44 | 4.43 | 5 | 34.370 | 2.15 | |||
J.T. Langley | 7.44 | 4.43 | 5 | 34.370 | 2.15 | |||
2/1/2006 | P.J. Faraci | 7.82 | 4.83 | 5 | 34.090 | 1.86 | ||
12/12/2006 | A.M. Perez | 9.40 | 4.45 | 7 | 35.314 | 1.90 | ||
F.S. Sklarsky | 9.40 | 4.45 | 7 | 35.314 | 1.90 | |||
12/12/2006 | P.J. Faraci | 7.66 | 4.45 | 5 | 32.502 | 1.98 | ||
M.J. Hellyar | 7.66 | 4.45 | 5 | 32.502 | 1.98 | |||
R.L. Berman | 7.66 | 4.45 | 5 | 32.502 | 1.98 | |||
J.T. Langley | 7.66 | 4.45 | 5 | 32.502 | 1.98 | |||
10/16/2007 | M.J. Hellyar | 5.18 | 3.16 | 4 | 30.580 | 2.02 | ||
12/11/2007 | A.M. Perez | 7.70 | 3.59 | 7 | 35.150 | 1.90 | ||
F.S. Sklarsky | 7.70 | 3.59 | 7 | 35.150 | 1.90 | |||
12/11/2007 | P.J. Faraci | 5.18 | 3.16 | 4 | 30.580 | 2.02 | ||
M.J. Hellyar | 5.18 | 3.16 | 4 | 30.580 | 2.02 | |||
R.L. Berman | 5.18 | 3.16 | 4 | 30.580 | 2.02 | |||
12/9/2008 | A.M. Perez | .91 | 1.82 | 6 | 32.170 | 7.42 | ||
F.S. Sklarsky | .91 | 1.82 | 6 | 32.170 | 7.42 | |||
P.J. Faraci | .91 | 1.82 | 6 | 32.170 | 7.42 | |||
M.J. Hellyar | .91 | 1.82 | 6 | 32.170 | 7.42 | |||
R.L. Berman | .91 | 1.82 | 6 | 32.170 | 7.42 |
50
Officer Awards). (5) | This column reports the aggregate change in the present value of the Named Executive Officer's accumulated benefits under KRIP, KURIP and supplemental individual retirement arrangements, to the extent a Named Executive Officer participates, without recognition of any equity received in satisfaction of a general unsecured claim in the bankruptcy proceedings. The determination of the Change in Pension Value is highly dependent upon the discount rate and/or interest rate utilized, which may change based on the interest rate environment, thereby impacting the reported Change in Pension Value from year to year. Significant portions of the Pension Values for 2012 and prior years were settled following the Company’s emergence from bankruptcy, in the form of an equity distribution of approximately 6% (pre-tax) of the value of the claim, consistent with the treatment of other general unsecured creditors. This column also includes the estimated above-market interest, if any, earned |
2006 | 2007 | 2008 | |||||||
Above- | Above- | Above- | |||||||
Pension | Market | Total | Pension | Market | Total | Pension | Market | Total | |
Executive | Value | Interest(a) | Value | Value | Interest(a) | Value | Value(b) | Interest(a) | Value |
A.M. | |||||||||
Perez | $3,192,022 | $22,576 | $3,214,598 | $491,469 | $28,091 | $519,560 | $3,434,567 | $3,728 | $3,438,295 |
F.S. | |||||||||
Sklarsky | 18,303 | — | 18,303 | 104,165 | — | 104,165 | 119,720 | — | 119,720 |
P.J. | |||||||||
Faraci | 319,305 | — | 319,305 | 386,094 | — | 386,094 | 341,208 | — | 341,208 |
M.J. | |||||||||
Hellyar | 1,098,877 | 3,553 | 1,102,430 | 0 | 4,093 | 4,093 | 0 | 517 | 517 |
R.L. | |||||||||
Berman | N/A | N/A | N/A | N/A | N/A | N/A | 98,186 | 2,571 | 100,757 |
Former Executive | |||||||||
J.T. | |||||||||
Langley | 144,232 | 26,928 | 171,160 | 167,844 | 44,225 | 212,069 | 110,470 | 5,823 | 116,293 |
2011 | 2012 | 2013 | |||||||
Change in | Above- | Change in | Above- | Change in | Above- | ||||
Pension | Market | Total | Pension | Market | Total | Pension | Market | ||
Name | Value | Interest(a) | Value | Value | Interest(a) | Value | Value(b) | Interest(a) | Total Value |
A.M. Perez | $1,311,441 | $58 | $1,311,499 | $2,008,425 | $6,392 | $2,014,817 | $718,231 | $7,171 | $725,402 |
R.A. Roof | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
B. W. Kruchten | — | — | — | — | — | — | 0 | 0 | 0 |
D.J. Edwards | — | — | — | 26,355 | 0 | 26,355 | 7,926 | 0 | 7,926 |
P.M. Sheller | — | — | — | 908,864 | 0 | 908,864 | 0 | 0 | 0 |
L.G. Quatela | 39,543 | 3 | 39,546 | 37,901 | 326 | 38,117 | 25,481 | 0 | 25,481 |
(a) | A Named Executive | ||
51
|
Security | Personal | |||||||||||||||||||||||
Financial | Services/ | Aircraft | ||||||||||||||||||||||
Name | 401(k) Match | Counseling | Systems | Usage(a) | Other | Total | ||||||||||||||||||
A.M. Perez | $ | 0 | $ | 7,000 | $ | 9,410 | $ | 264,143 | $ | 4,889(b) | $ | 285,442 | ||||||||||||
F.S. Sklarsky | 6,750 | 0 | 770 | 0 | 2,849(c) | 10,369 | ||||||||||||||||||
P.J. Faraci | 6,750 | 0 | 2,406 | 11,680 | 7,111(d) | 27,947 | ||||||||||||||||||
M.J. Hellyar | 0 | 1,243 | 685 | 0 | 8,976(e) | 10,904 | ||||||||||||||||||
R.L. Berman | 0 | 4,870 | 460 | 0 | 787(f) | 6,117 | ||||||||||||||||||
Former Executive | ||||||||||||||||||||||||
J.T. Langley | 2,300 | 0 | 410 | 2,594 | 913,120 (g) | 918,424 |
52(b) The primary actuarial assumption changes used to calculate Pension Values were an increase in the discount rate as well as an increase in the lump sum interest rate. As a result of the freeze of post-petition non-qualified benefits upon the Company’s emergence from bankruptcy on September 3, 2013, the accrued benefit for each eligible individual was calculated as of the emergence date and payable as a lump sum; however, this lump sum is not adjusted for interest due to deferral of payment, producing a lower present value for individuals with an assumed deferred payment. Because Mr. Perez is beyond age 65, his benefits are payable as a lump sum; the change in discount rate and the non-qualified benefit freeze therefore have no impact on his value for 2013. His Pension Value increased from 2012 to 2013 primarily due to additional pay and service earned on his post-petition non-qualified benefits. The Pension Values for Ms. Quatela and Dr. Edwards are driven primarily by their respective cash balance accrual under KRIP for a full year of service in 2013 and under KURIP for service through the emergence date, offset by a decrease in present value due to the loss of previously assumed future interest credits on their frozen KURIP benefits. Mr. Kruchten had a negative Pension Value of ($37,092) for 2013 due to the increase in discount rate and lump sum rate, which more than offset his accruals under KRIP and KURIP due to additional pay and service. Mr. Sheller had a negative Pension Value of ($710,976) for 2013 which was driven by a decrease in his assumed final average pay due to his frozen KURIP benefit and an increase in the discount rate and the lump sum rate, the combination of which more than offset his normal accruals under KRIP and KURIP.
(6) The table below shows the components of the All Other Compensation column for 2013:
401(K) | ||||||||||
Name | Match | Other(a) | Total | |||||||
A.M. Perez | $ | 0 | $9,143 | $9,143 | ||||||
R.A. Roof | N/A | N/A | N/A | |||||||
B. W. Kruchten | - | 0 | 0 | |||||||
D.J. Edwards | 7,548 | 0 | 7,548 | |||||||
P.M. Sheller | - | 0 | 0 | |||||||
L.G. Quatela | 7,350 | 0 | 7,350 |
(a)Mr. Perez’s Other compensation includes $4,301 for his home security system and $4,842 for personal IT support. While Mr. Perez’s individual arrangement dated March 3, 2003, as amended, provided for an annual reimbursement of up to $7,000 for the cost of financial planning services, no reimbursement was made as a result of the termination of the letter agreement and settlement of all entitlements thereunder following the Company’s emergence from bankruptcy.
EMPLOYMENT AND RETENTION ARRANGEMENTS
The material terms of eachemployment and retention arrangements that Named Executive Officer’s employment or retention arrangementsOfficers have with the Company are described below. The levels of salary, annual variable incentive compensation and long-term equity-based incentive compensation, as well as the material considerations that the Compensation Committee takes into account in establishing thosetarget levels for each of these elements, are described in the Compensation Discussion and Analysis on page 34Analysis.
Each Named Executive Officer except Ms. Roof has an individual employment arrangement with the Company as a result of this Proxy Statement.the management agreements that were approved as part of the Company’s emergence from Chapter 11 proceedings.
Antonio M. Perez
The CompanyKodak employed Mr. Perez as President and COOChief Operating Officer under a letter agreement dated March 3, 2003. OnThis agreement was subsequently amended on February 27, 2007, December 9, 2008, April 29, 2009 and September 28, 2009. In addition, by letter dated May 10, 2005, in connection withthe Board elected Mr. Perez’s electionPerez as Chief Executive Officer, effective immediately, and Chairman of the Board, effective December 31, 2005. Upon the Compensation Committee modifiedCompany’s emergence from bankruptcy, this letter agreement, as amended, was terminated and all entitlements thereunder were settled in accordance with the compensation-related termsunsecured claims process in the bankruptcy, consistent with the treatment of his employment. In addition to the compensation described elsewhere in this Proxy Statement,other general unsecured creditors.
The Company entered into a new letter agreement with Mr. Perez iseffective September 3, 2013, with a scheduled term ending September 3, 2014. Under this letter agreement, Mr. Perez was eligible to receive afor the following in 2013:
Brad W. Kruchten
The Company entered into a letter agreement with Mr. Kruchten effective September 3, 2013, recognizing his position as President, Graphics, Entertainment and Commercial Film. The scheduled term of the Company.
Mr. Kruchten’s agreement runs to September 3, 2016. Under his March 3, 2003this letter agreement, Mr. Perez is alsoKruchten was eligible to receive a supplemental unfunded retirement benefit, which is described on page 65for the following in 2013:
The term of Mr. Perez’s employment is indefinite but, according to his March 3, 2003 letter agreement, as amended by his December 9, 2008 letter agreement, he will be eligible to receive certain severance benefits in connection with termination of his employment under various circumstances. For information regarding his potential severance payments and benefits, please read the narrative descriptions and tables beginning on page 69 of this Proxy Statement.
Frank S. Sklarsky
The Company employed Mr. Sklarsky as Chief Financial Officer under a letter agreement dated September 19, 2006. In addition to the compensation described elsewhere in this Proxy Statement, his letter agreement provides that Mr. Sklarsky is eligible to receive a base salary of $600,000 and a target award under the EXCEL plan of 75% of his base salary. He is also eligible under his letter agreement to participate in the annual Corporate Officer stock option program with a target value of approximately $800,000 and the annual Leadership Stock Program with a target value of approximately $800,000. The letter agreement was amended by a letter agreement dated September 26, 2006 to provide that Mr. Sklarsky was eligible to receive a cash award equal to $75,000, less any amount actually received under the EXCEL plan for the 2006 performance period. Mr. Sklarsky is eligible to participate in all incentive compensation, retirement, supplemental retirement and deferred compensation plans, policies and arrangements that are provided to other senior executives of the Company.
53
In addition, Mr. Sklarsky’s letter agreements provide that he is eligible to receive a supplemental retirement benefit, which is described under the Pension Benefits Table on page 63 of this Proxy Statement.
The term of Mr. Sklarsky’s employment is indefinite but, according to his September 19, 2006 letter agreement, he will be eligible to receive certainemployees generally; and
PhilipDouglas J. FaraciEdwards
The Company employed Mr. Faraci underentered into a letter agreement dated Novemberwith Dr. Edwards effective September 3, 2004. In addition2013, recognizing his position as President, Digital Printing and Enterprise. The scheduled term of Dr. Edward’s agreement runs to September 3, 2016. Under this letter agreement, Dr. Edwards was eligible for the information provided elsewherefollowing in this Proxy Statement, Mr. Faraci initially received a2013:
Mr. Faraci’s letter agreement was amended by a letter agreement dated February 28, 2007 to provide for lump-sum payment of his supplemental retirement benefits followingin the six-month anniversary of his termination.
In connection with his promotion to co-lead the Chief Operating Office with Mr. Langley in March 2007, Mr. Faraci’s base salary was increased from $520,000 to $600,000 and his target EXCEL from 62% to 75% of his base salary. In September 2007, Mr. Faraci was promoted to President and Chief Operating Officer and his base salary was increased to $700,000 and his target award under the EXCEL plan was increased to 85% of his base salary.
The term of Mr. Faraci’s employment is indefinite but, according to his November 3, 2004 letter agreement, as amended by his December 9, 2008 letter agreement, he will be eligible for certain severance benefits in connection with termination of his employment under various circumstances. For information regarding his potential severance payments and benefits in connection with termination of his employment under various circumstances, please read the narrative descriptions and tables beginning on page 69 of this Proxy Statement.
Mary Jane HellyarPatrick M. Sheller
The Company and Ms. Hellyar entered into a letter agreement dated August 18, 2006 to provide her with a restricted stock grant of 15,000 shares for retention purposes.
Mr. Sheller effective September 3, 2013, recognizing his position as General Counsel, Secretary, and Chief Administrative Officer. The scheduled term of Ms. Hellyar’s employment is indefinite but, accordingMr. Sheller’s agreement runs to her August 18, 2006September 3, 2016. Under this letter agreement, she will also beMr. Sheller was eligible for certainthe following in 2013:
On October 16, 2007, Ms. Hellyar was granted 20,000 stock options upon her election to Executive Vice President. There was no other change to her compensation associated with this election.
Robert L. BermanLaura G. Quatela
Mr. Berman does not haveThe Company entered into a letter agreement concerning his employment or retention.with Ms. Quatela effective September 3, 2013, recognizing her position as President, Eastman Kodak Company. Under this letter agreement, Ms. Quatela was eligible for the following in 2013:
Former Executive: James T. Langley
Mr. Langley’s last dayAn annual base salary of employment with$465,000;
54
GRANTS OF PLAN-BASED AWARDS IN 2008TABLE
The compensation plans under which the grants were made in 2008 that are shownincluded in the following table includeis our annual variable pay plan (EXCEL) and the Company’s annual bonus plan (EXCEL), the 2005equity granted under our 2013 Omnibus Long-Term CompensationIncentive Plan, which provides forpursuant to the grant of stock options, restricted stock grants and performance stock units, and any individual non-equity incentive bonus plan in which a Named Executive Officer participated.
Estimated Future Payouts Under | Estimated Future Payouts | Exercise | Grant Date | ||||||||||
Non-Equity Incentive Plan Awards | Under Equity Incentive | All Other | or Base | Fair Value | |||||||||
(1) | Plan Awards(2) | Stock | All Other | Price of | of Stock & | ||||||||
Thresh- | Thresh- | Awards | Option | Option | Option | ||||||||
Award | Grant | old | Target | Max. | old | Target | Max. | Or Units | Awards | Awards | Awards | ||
Name | Description | Date | ($) | ($) | ($)(3) | (#) | (#) | (#) | (#) | (#) | ($) | ($)(4) | |
A.M. | EXCEL | 2/26/08 | — | $1,705,000 | $5,000,000 | ||||||||
Perez | 2008 LS | 1/1/08 | — | 106,140 | 212,280 | $2,321,282 | |||||||
Option Grant | 12/9/08 | 751,540 | $7.41 | 683,901 | |||||||||
F.S. | EXCEL | 2/26/08 | — | 450,000 | 3,000,000 | ||||||||
Sklarsky | 2008 LS | 1/1/08 | — | 29,350 | 58,700 | 641,885 | |||||||
Option Grant | 12/9/08 | 207,800 | 7.41 | 189,098 | |||||||||
P.J. Faraci | EXCEL | 2/26/08 | — | 595,000 | 3,500,000 | ||||||||
2008 LS | 1/1/08 | — | 34,850 | 69,700 | 762,170 | ||||||||
2007 EXCEL(5) | 3/27/08 | 30,322 | 538,822 | ||||||||||
Option Grant | 12/9/08 | 246,750 | 7.41 | 224,543 | |||||||||
M.J. | EXCEL | 2/26/08 | — | 313,600 | (6) | 2,450,000 | |||||||
Hellyar | 2008 LS | 1/1/08 | — | 18,670 | 37,340 | 408,313 | |||||||
2007 EXCEL(5) | 3/27/08 | 18,806 | 334,183 | ||||||||||
Option Grant | 12/9/08 | 132,200 | 7.41 | 120,302 | |||||||||
R.L. | EXCEL | 2/26/08 | — | 246,400 | (6) | 1,925,000 | |||||||
Berman | 2008 LS | 1/1/08 | — | 14,230 | 28,460 | 311,210 | |||||||
Option Grant | 12/9/08 | 100,740 | 7.41 | 91,673 | |||||||||
Former Executive | |||||||||||||
J.T. | EXCEL | 2/26/08 | — | — | — | ||||||||
Langley(7) | 2008 LS | 1/1/08 | — | — | — | — | |||||||
Option Grant | 12/9/08 | — | — | — | — |
55
EXCEL Plan
EXCEL (Executive Compensation for Excellence and Leadership) is our short-term variable incentive plan for executives. For a discussionterms of the EXCEL plan, target allocations forSeptember 2013 employment agreements of our Named Executive OfficersOfficers.
Estimated Future Payouts Under | ||||||||
Non-Equity Incentive Plan | ||||||||
Awards(1) | ||||||||
Award | Grant | Target | Max. | All Other stock | Grant Date Fair Value | |||
Name | Description | Date | ($) | ($)(2) | Awards or Units (#) | of Stock Awards ($)(3) | ||
A.M. Perez | EXCEL | — | $1,790,250 | $5,000,000 | ||||
2013 RSU | 9/3/13 | 159,129 | $2,245,310 | |||||
Special | ||||||||
Incentive Award | — | 2,000,000 | (4) | 2,000,000 | ||||
R.A. Roof(5) | NONE | N/A | N/A | N/A | N/A | N/A | ||
B.W. Kruchten | EXCEL | — | 348,750 | 1,758,500 | ||||
2013 RSU | 9/3/13 | 27,702 | 390,875 | |||||
D.J. Edwards | EXCEL | — | 337,500 | 1,764,000 | ||||
2013 RSU | 9/3/13 | 27,262 | 384,667 | |||||
P.M. Sheller | EXCEL | — | 260,975 | 1,700,000 | ||||
2013 RSU | 9/3/13 | 21,232 | 299,584 | |||||
L.G. Quatela | EXCEL | — | 348,750 | |||||
Special | ||||||||
Incentive Plan | — | 813,750 | 813,750 | — | — |
(1) The amounts shown for the "target" and performance"maximum" levels represent the possible payouts for 2013 under EXCEL. There is no "threshold" level for EXCEL as the potential payouts can range from zero to the maximum amount allowable under the plan based on performance.
(2) The maximum amounts for 2008, seeEXCEL represent the discussionmaximum payout permitted under the EXCEL Plan in accordance with the formula established under the Plan. The maximum EXCEL payout for Covered Employees is the lesser of: (i) 10% of the corporate funding pool determined in accordance with performance against pre-established performance targets; (ii) 500% of a Covered Employee's annual base salary as of December 31, 2012; or (iii) $5 million. The maximum amount shown for EXCEL is the lesser of 500% of annual base salary or $5 million since the amount representing 10% of the corporate funding pool is not determinable as of the beginning of the year.
(3)The amounts shown represent the grant date fair value of $14.11, which is based on the assumptions used at emergence from bankruptcy in determining the fair value of our common stock as disclosed in Note 3 to the Company’s audited financial statements for fiscal year ended December 31, 2013 included in the “Compensation Discussion and Analysis” underCompany’s Annual Report on Form 10-K filed with the heading “Annual Variable Pay.”SEC on March 19, 2014. The actual number of RSUs granted was based on an initial emergence stock price of $11.94 as determined as part of the Plan of Reorganization.
In 2008,(4) Under his management agreement, Mr. Perez is eligible for a special incentive award in an amount up to $2 million provided that he satisfies certain performance metrics as determined by the Compensation Committee selected Net Cash Generation and Combined Consumer Digital Imaging Group (CDG) and Graphics Communication Group (GCG) Year-Over-Year Percent Revenue Growth asCommittee.
(5) Ms. Roof is not eligible for participation in the two primary metrics for EXCEL each of which was equally weighted. The definitions of both metrics, which are non-GAAP financial measures, are as follows:Plan or any other plan-based awards.
36
Metric | Definition | ||
Adjusted EBITDA as defined by the applicable financing arrangement | For any period, Consolidated Net | Income for such period, plus without duplication and to theextent deducted in determining Consolidated Net | |
| |||
| |||
Compliance with financial covenants within the applicable financing arrangements, which included Minimum Consolidated Adjusted EBITDA of $171.5M (January through September2013 assuming no consummation of DI/PI sale transaction during the period), and Minimum USLiquidity of $100M as Adjusted EBITDA (as defined by the applicable financing arrangements) of $228.3M (85% of target ACP Adjusted EBITDA of $268.6M) for fiscal year 2013, as adjusted for the |
In establishing the 2008 EXCEL performance matrix using these two performance metrics (as discussed on page 40 of this Proxy Statement), results between the goals shown in the performance matrix were interpolated to derive a percentage, except, however, that the revenue growth curve accelerated after 8.5% (the midpoint of the communicated guidance), and the net cash generation curve was flatter within the range of guidance and accelerated equally both positively and negatively for performance outside the range. Due to Company results in 2008, our Named Executive Officers did not earn an EXCEL award for 2008.37
2008 Leadership Stock
On December 11, 2007, the Compensation Committee approved a performance stock allocation to each Named Executive Officer pursuant to the 2008 performance cycle of the Leadership Stock Program. The allocations became effective on January 1, 2008.Leadership Stock may be earned by our executives at the end of a performance cycle if the Company achieves the performance threshold established for the performance cycle. The actual number of stock units earned by an executive is based on the executive’s target allocation multiplied by the applicable performance percentage based on the Company’s performance. Any unearned units are forfeited at the end of the performance period. The performance metric established for the 2008 performance cycle is discussed in the “Compensation Discussion and Analysis” under the heading “Leadership Stock – 2008 Performance Cycle Awards.” The specific metric definition, which is a non-GAPP financial measure, is:
56
| ||
|
For the 2008 Leadership Stock performance cycle, the payment of any stock units earned under the program for the 2008 performance cycle is delayed for two years contingent on the executive’s continued employment with the Company. During this two-year vesting period, dividend equivalents accrue on the stock units, but payment of the dividends is also subject to this two-year vesting period. At the end of the two-year period, the stock units and the dividend equivalents earned on these stock units are paid to the executive in the form of shares of Company common stock. All shares earned under the Leadership Stock program are granted under the Company’s 2005 Omnibus Long-Term Compensation Plan. Due to Company results, there were no shares of common stock earned under the 2008 Leadership Stock performance cycle.
2008 Option Grants
On December 9, 2008, the Compensation Committee approved a non-qualified stock option grant for each Named Executive Officer. Stock options granted in 2008 have a seven-year term and vest in three substantially equal annual installments beginning on the first anniversary of the grant date. Upon termination of employment, all unvested stock options will be forfeited, except in certain cases. If a Named Executive Officer’s employment is terminated as a result of death, disability, transfer or divestiture (as defined in the plan), all unvested stock options will fully vest and will expire on the third anniversary date of the Named Executive Officer’s termination of employment. If a Named Executive Officer’s employment is terminated as a result of retirement, layoff, pursuant to a special separation program or for an approved reason, any unvested stock options will continue to vest and will expire three years after termination of employment. The exercise price of the stock options granted to the Named Executive Officers on December 9, 2008 is $7.41, the mean between the high and low price at which the Kodak shares traded on the NYSE on the grant date. All options are granted under the Company’s 2005 Omnibus Long-Term Compensation Plan.
57
OUTSTANDING EQUITY AWARDS AT 20082013 FISCAL YEAR-END TABLE(1)
The following table sets forth additional information concerning option awards and stock awards held by Named Executive Officers as of December 31, 2008, including awards2013. Upon emergence from bankruptcy on September 3, 2013, all previously issued equity was expunged.
Number of Shares or Units of | Market Value of Shares or Units | |||||
Stock Held that Have Not Vested(2) | of Stock that Have Not Vested(3) | |||||
Name | (#) | ($) | ||||
A.M. Perez | 106,086 | $3,682,245 | ||||
R.A. Roof | N/A | N/A | ||||
B.W. Kruchten | 27,702 | 961,536 | ||||
D.J. Edwards | 27,262 | 946,264 | ||||
P.M. Sheller | 21,232 | 736,963 | ||||
Former Executives | ||||||
L.G. Quatela | — | — |
(1)This table includes only those grants outstanding as of December 31, 2013.
(2)This column represents outstanding grants of RSUs held by our Named Executive Officers. RSUs granted during 2008to Messrs. Kruchten and describedSheller and Dr. Edwards as part of the emergence grant under their management agreements will vest in substantially equal installments on the Grantsfirst, second and third anniversaries of Plan-Based Awards Table.the grant date. RSUs granted to Mr. Perez under his management agreement vest in substantially equal installments on the grant date and the first anniversary thereof and upon the achievement of performance metrics defined by the Committee.
Option Awards | Stock Awards | |||||||||
Equity | ||||||||||
Equity | Incentive | |||||||||
Incentive | Plan Awards: | |||||||||
Plan Awards: | Market or | |||||||||
Number of | Payout Value | |||||||||
Number of | Market Value | Unearned | of Unearned | |||||||
Number of | Number of | Shares or | of Shares or | Shares, Units | Shares, Units | |||||
Securities | Securities | Units of | Units of | or Other | or Other | |||||
Underlying | Underlying | Option | Stock Held | Stock that | Rights that | Rights that | ||||
Unexercised | Unexercised | Exercise | Option | that Have Not | Have Not | Have Not | Have Not | |||
Options (#) | Options (#) | Price | Expiration | Vested(2) | Vested(3) | Vested(4) | Vested | |||
Name | Exercisable | Unexercisable | ($) | Date | (#) | ($) | (#) | ($) | ||
A.M. Perez | 500,000 | 0 | $30.96 | 4/1/2013 | ||||||
51,500 | 0 | 24.49 | 11/18/2010 | |||||||
90,130 | 0 | 31.71 | 12/9/2011 | |||||||
300,000 | 0 | 26.47 | 5/31/2012 | |||||||
135,000 | 0 | 24.75 | 12/6/2012 | |||||||
209,666 | 104,864 | (5) | 25.88 | 12/11/2013 | ||||||
132,473 | 264,987 | (6) | 23.28 | 12/10/2014 | ||||||
0 | 751,540 | (7) | 7.41 | 12/8/2015 | ||||||
126,754 | $834,041 | (11) | 0 | $0 | ||||||
F.S. Sklarsky | 66,660 | 33,340 | (5) | 25.88 | 12/11/2013 | |||||
36,626 | 73,264 | (6) | 23.28 | 12/10/2014 | ||||||
0 | 207,800 | (7) | 7.41 | 12/8/2015 | ||||||
49,723 | 327,177 | (12) | 0 | 0 | ||||||
P.J. Faraci | 32,800 | 0 | 32.50 | 12/5/2011 | ||||||
10,000 | 0 | 26.46 | 5/11/2012 | |||||||
52,500 | 0 | 26.47 | 5/31/2012 | |||||||
20,940 | 0 | 24.75 | 12/6/2012 | |||||||
16,666 | 8,334 | (8) | 25.01 | 1/31/2013 | ||||||
39,122 | 19,568 | (5) | 25.88 | 12/11/2013 | ||||||
43,492 | 86,998 | (6) | 23.28 | 12/10/2014 | ||||||
0 | 246,750 | (7) | 7.41 | 12/8/2015 | ||||||
23,101 | 152,005 | (13) | 0 | 0 |
(3)The market value of shares, units or other rights that have not vested was calculated using a stock price of $34.71, which was the closing price of the Company’s common stock as of December 31, 2013, the last trading day of the year.
OPTION EXERCISES AND STOCK VESTED TABLE | ||||||||
Option Awards(1) | Stock Awards | |||||||
Number of Shares | ||||||||
Acquired on | Value Realized | Number of Shares | Value Realized | |||||
Exercise | On Exercise | Acquired on Vesting | On Vesting(2) | |||||
Name | (#) | ($) | (#) | ($) | ||||
A.M. Perez | 0 | 0 | 53,043 | $748,437 | ||||
R.A. Roof | N/A | N/A | N/A | N/A | ||||
B.W. Kruchten | 0 | 0 | 0 | 0 | ||||
D.J. Edwards | 0 | 0 | 0 | 0 | ||||
P.M. Sheller | 0 | 0 | 0 | 0 | ||||
Former Executives | ||||||||
L.G. Quatela | 0 | 0 | 0 | 0 |
58(1) All outstanding stock options were expunged upon emergence from bankruptcy.
Option Awards | Stock Awards | |||||||||
Equity | ||||||||||
Equity | Incentive | |||||||||
Incentive | Plan Awards: | |||||||||
Plan Awards: | Market or | |||||||||
Number of | Payout Value | |||||||||
Number of | Market Value | Unearned | of Unearned | |||||||
Number of | Number of | Shares or | of Shares or | Shares, Units | Shares, Units | |||||
Securities | Securities | Units of | Units of | or Other | or Other | |||||
Underlying | Underlying | Option | Stock Held | Stock that | Rights that | Rights that | ||||
Unexercised | Unexercised | Exercise | Option | that HaveNot | Have Not | Have Not | Have Not | |||
Options (#) | Options (#) | Price | Expiration | Vested(2) | Vested(3) | Vested(4) | Vested | |||
Name | Exercisable | Unexercisable | ($) | Date | (#) | ($) | (#) | ($) | ||
M.J. Hellyar | 273 | 0 | 31.30 | 3/11/2009 | ||||||
3,750 | 0 | 31.30 | 3/31/2009 | |||||||
2,000 | 0 | 31.30 | 5/2/2009 | |||||||
8,000 | 0 | 31.30 | 3/29/2010 | |||||||
6,333 | 0 | 31.30 | 1/11/2011 | |||||||
13,800 | 0 | 31.30 | 11/15/2011 | |||||||
16,830 | 0 | 36.66 | 11/21/2012 | |||||||
5,000 | 0 | 24.49 | 11/18/2010 | |||||||
5,000 | 0 | 31.71 | 12/9/2011 | |||||||
10,000 | 0 | 31.52 | 1/16/2012 | |||||||
50,000 | 0 | 26.47 | 5/31/2012 | |||||||
16,750 | 0 | 24.75 | 12/6/2012 | |||||||
39,122 | 19,568 | (5) | 25.88 | 12/11/2013 | ||||||
6,666 | 13,334 | (9) | 28.44 | 10/15/2014 | ||||||
23,304 | 46,616 | (6) | 23.28 | 12/10/2014 | ||||||
0 | 132,200 | (7) | 7.41 | 12/8/2015 | ||||||
32,892 | 216,429 | (14) | 0 | 0 |
59
Option Awards | Stock Awards | |||||||||
Equity | ||||||||||
Equity | Incentive | |||||||||
Incentive | Plan Awards: | |||||||||
Plan Awards: | Market or | |||||||||
Number of | Payout Value | |||||||||
Market Value | Unearned | of Unearned | ||||||||
Number of | Number of | Number of | of Shares or | Shares, Units | Shares, Units | |||||
Securities | Securities | Shares or | Units of | or Other | or Other | |||||
Underlying | Underlying | Option | Units of Stock | Stock that | Rights that | Rights that | ||||
Unexercised | Unexercised | Exercise | Option | Held that Have | Have Not | Have Not | Have Not | |||
Options (#) | Options (#) | Price | Expiration | Not Vested(2) | Vested(3) | Vested(4) | Vested | |||
Name | Exercisable | Unexercisable | ($) | Date | (#) | ($) | (#) | ($) | ||
R.L. Berman | 256 | 0 | 31.30 | 3/11/2009 | ||||||
13,300 | 0 | 31.30 | 11/15/2011 | |||||||
4,934 | 0 | 31.30 | 3/29/2010 | |||||||
2,751 | 0 | 31.30 | 3/31/2009 | |||||||
8,867 | 0 | 31.30 | 1/11/2011 | |||||||
5,000 | 0 | 31.30 | 8/25/2012 | |||||||
19,125 | 0 | 36.66 | 11/21/2012 | |||||||
5,810 | 0 | 24.49 | 11/18/2010 | |||||||
5,810 | 0 | 31.71 | 12/9/2011 �� | |||||||
10,000 | 0 | 26.46 | 5/11/2012 | |||||||
32,083 | 0 | 26.47 | 5/31/2012 | |||||||
15,500 | 0 | 24.75 | 12/6/2012 | |||||||
29,384 | 14,696 | (5) | 25.88 | 12/11/2013 | ||||||
17,755 | 35,515 | (6) | 23.28 | 12/10/2014 | ||||||
0 | 100,740 | (7) | 7.41 | 12/8/2015 | ||||||
17,561 | 115,551 | (15) | 0 | 0 | ||||||
Former Executive | ||||||||||
J.T.Langley(10) | 13,400 | 0 | 24.49 | 11/18/2010 | ||||||
16,750 | 0 | 31.71 | 3/15/2011 | |||||||
62,500 | 0 | 26.47 | 3/15/2011 | |||||||
20,940 | 0 | 24.75 | 3/15/2011 | |||||||
39,122 | 19,568 | (5) | 25.88 | 3/15/2011 | ||||||
0 | 0 | 0 | 0 |
60
61
OPTION EXERCISES AND STOCK VESTED TABLE
Option Awards(1) | Stock Awards | ||||||
Number of Shares | Value Realized | Number of Shares | Value Realized | ||||
Acquired on Exercise | On Exercise | Acquired on Vesting | On Vesting(2) | ||||
Name | (#) | ($) | (#) | ($) | |||
A.M. Perez | 0 | $ | 0 | 119,732 | (3) | $1,996,480 | |
F.S. Sklarsky | 0 | 0 | 25,000 | 255,500 | |||
P.J. Faraci | 0 | 0 | 32,117 | (4) | 565,478 | ||
M.J. Hellyar | 0 | 0 | 20,602 | (5) | 363,045 | ||
R.L. Berman | 0 | 0 | 438 | (6) | 3,317 | ||
Former Executive | |||||||
J.T. Langley | 0 | 0 | 19,688 | (7) | 343,539 |
(2)This column represents the value of | ||
62
PENSION BENEFITS FOR 20082013
The Pension Benefits Table below shows the present value as of December 31, 20082013 of the accumulated benefits payable to each of our Named Executive Officers, including the number of years of service credited to each Named Executive Officer under KRIP, KURIP and, when applicable, their supplemental individual retirement arrangements. The methods and assumptions for calculating the present value of accumulated benefits generally follow those set forth in statement No. 87Accounting Standards Codification Topic 715 under GAAP and are consistent with those used in our financial statements as described in Note 17 to the Notes to the Consolidated Financial Statements to our Form 10-K, filed March 19, 2014. The assumptions used to calculate the present value of accumulated benefits for each Named Executive Officer are described below. Payment of benefits under KURIP and individual arrangements that accrued prior to the Chapter 11 filing were settled upon the Company’s Form 10-Kemergence from bankruptcy by means of an equity distribution in the approximate amount of 6% (pre-tax) of the value of the benefit; post-petition benefits under KURIP and individual arrangements were frozen upon the Company’s emergence from bankruptcy on September 3, 2013.
PENSION BENEFITS TABLE | ||||||||||||
Release of Benefit Value | ||||||||||||
Number of Years | Present Value of | During | ||||||||||
of Credited Service | Accumulated Benefit | Last Fiscal Year | ||||||||||
Name | Plan Name | (#) | ($) | ($) | ||||||||
KRIP | 10.75 | $ | 127,305 | $ | 0 | |||||||
KURIP (pre-petition) | 8.80 | 0 | 1,402,496 | |||||||||
KURIP (post-petition) | 1.62 | 167,768 | 0 | |||||||||
A.M. Perez(1) | Individual Arrangement (pre-petition) | 26.13 | 0 | 16,170,882 | ||||||||
Individual Arrangement (post-petition) | 1.62 | 831,245 | 0 | |||||||||
R.A. Roof | N/A | N/A | N/A | N/A | ||||||||
KRIP | 31.58 | 1,312,805 | 0 | |||||||||
B. W. Kruchten(2) | KURIP (pre-petition) | 29.63 | 0 | 1,584,030 | ||||||||
KURIP (post-petition) | 1.62 | 66,074 | 0 | |||||||||
KRIP | 17.58 | 87,287 | 0 | |||||||||
D.J. Edwards(3) | KURIP (pre-petition) | 15.63 | 0 | 112,230 | ||||||||
KURIP (post-petition) | 1.62 | 10,159 | 0 | |||||||||
KRIP | 20.58 | 704,234 | 0 | |||||||||
P.M. Sheller(4) | KURIP (pre-petition) | 18.63 | 0 | 137,974 | ||||||||
KURIP (post-petition) | 1.62 | 73,251 | 0 | |||||||||
KRIP | 15.00 | 173,373 | 0 | |||||||||
L.G. Quatela(5) | KURIP (pre-petition) | 13.05 | 0 | 89,188 | ||||||||
KURIP (post-petition) | 1.62 | 33,204 | 0 |
(1)Mr. Perez has been employed with the Company for the year ended10.75 years as of December 31, 2008.2013. Under his individual letter agreement dated March 3, 2003, as amended, he accumulated 27.75 years, representing a difference of 17 years of additional service. This agreement was terminated upon the Company’s emergence from bankruptcy and all entitlements thereunder settled, resulting in a release of $16,170,882 in benefit value for his pre-petition benefit and a frozen post-petition benefit of $831,245. The released value was converted to a general unsecured claim in the bankruptcy and satisfied by means of an equity distribution of approximately 6% of the released value. The post-petition value is payable to Mr. Perez as a lump sum upon his termination of employment with the Company. Due to the termination of KURIP upon the Company’s emergence, Mr. Perez’s pre-petition KURIP benefit was also settled resulting in a release of $1,402,496 in benefit value (which was satisfied through an equity distribution of approximately 6% of the released value), and his post-petition KURIP benefit of $167,768 is payable to him as a lump sum upon his termination of employment with the Company.
(2) The present value of Mr. Kruchten’s accumulated benefit assumes he will remain in service until age 60 and that his benefit is payable as a lump sum. Due to the termination of KURIP upon the Company’s emergence, Mr. Kruchten’s pre-petition KURIP benefit was settled upon the Company’s emergence from bankruptcy resulting in a release of $1,584,030 in benefit value, which was converted to a general unsecured claim and satisfied by means of an equity distribution of approximately 6% of the released value. Mr. Kruchten’s post-petition KURIP benefit of $66,074 is payable to him as a lump sum upon his termination of employment with the Company.
(3) Dr. Edwards has been calculated for all Named Executive Officers,employed with the exceptionCompany for 17.58 years as of Ms. Hellyar and Mr. Berman, assuming theyDecember 31, 2013 which includes 7.08 years of service credit earned since his re-employment by the Company on December 26, 2005. The present value of Dr. Edwards’ accumulated benefit assumes he will remain in service until the normal retirement age of 65 and that thehis benefit is payable as a lump sum. Due to the termination of KURIP upon the Company’s emergence, Dr. Edwards’ pre-petition KURIP benefit was settled resulting in a release of $112,230 in benefit value, which was converted to a general unsecured claim and satisfied by means of an equity distribution of approximately 6% of the released value. Dr. Edwards’ post-petition KURIP benefit of $10,159 is payable to him as a lump sum upon his termination of employment with the Company.
39
(4) The present value of Mr. Sheller’s accumulated benefit assumes he will remain in service until age 62 and that his KRIP benefit is payable as a single life annuity. Due to the termination of KURIP upon the Company’s emergence, Mr. Sheller’s pre-petition KURIP benefit was settled resulting in a release of $137,974 in benefit value, which was converted to a general unsecured claim and satisfied by means of an equity distribution of approximately 6% of the released value. Mr. Sheller’s post-petition KURIP benefit of $73,251 is payable to him as a lump sum upon his termination of employment with the Company.
(5)The present value of Ms. Hellyar’s and Mr. Berman’sQuatela’s accumulated benefit assumedas of December 31, 2013 is calculated using an estimated payment date of February 11, 2014, her last day of employment with the Company, and assumes that her benefit is payable as a lump sum.Due to the termination of KURIP upon the Company’s emergence, Ms. Quatela’s pre-petition KURIP benefit commencement at age 60, when eachwas settled resulting in a release of them would be entitled$89,188 in benefit value, which was converted to retire without anya general unsecured claim and satisfied by means of an equity distribution of approximately 6% of the released value. Ms. Quatela’s post-petition KURIP benefit reduction, inof $33,204 is payable to her as a lump sum upon her termination of employment with the form of a straight life annuity.Company on February 11, 2014.
Number of Years | Present Value of | Payments During | |||||||
of Credited Service | Accumulated Benefit | Last Fiscal Year | |||||||
Name | Plan Name | (#) | ($) | ($) | |||||
A.M. Perez | KRIP | 5.75 | $ | 57,280 | $ | 0 | |||
KURIP | 5.75 | 918,494 | 0 | ||||||
Individual Arrangement | 18.91 | (1) | 8,958,240 | 0 | |||||
F.S. Sklarsky | KRIP | 2.17 | 16,192 | 0 | |||||
KURIP | 2.17 | 83,732 | 0 | ||||||
Individual Arrangement | 2.17 | 142,263 | 0 | ||||||
P.J. Faraci | KRIP | 4.08 | 29,111 | 0 | |||||
KURIP | 4.08 | 136,823 | 0 | ||||||
Individual Arrangement | 9.92 | (2) | 985,714 | 0 | |||||
M.J. Hellyar | KRIP | 26.17 | 724,676 | 0 | |||||
KURIP | 26.17 | 1,811,009 | 0 | ||||||
R.L. Berman | KRIP | 26.67 | 530,616 | 0 | |||||
KURIP | 26.67 | 1,192,239 | 0 | ||||||
Former Executive | |||||||||
J.T. Langley | KRIP | N/A | N/A | 51,034 | |||||
KURIP | N/A | N/A | 168,509 | ||||||
Individual Arrangement | N/A | N/A | 500,013 |
Tax-Qualified Retirement Plan (KRIP)
The Company funds a tax-qualified defined benefit pension plan known as the Kodak Retirement Income Plan (KRIP) for virtually all U.S. employees. Effective January 1, 2000, the Company amended the plan to include a cash balance component. KRIP’s cash balance component covers employees hired before March 1, 1999 who elected that coverage and all new employees hired on or after March 31,1, 1999, including Mr. Perez, Dr. Edwards, and Ms. Quatela. Messrs. Perez, Sklarsky, FaraciSheller and Langley. Ms. Hellyar and Mr. Berman are the only Named Executive Officers whoKruchten participate in KRIP’s traditional defined benefit component. Ms. Roof is not eligible for KRIP benefits.
Due to the Company’s emergence from bankruptcy and the result of KRIP’s certified funding percentage for 2013, benefit payments in the form of a lump sum became available beginning September 3, 2013.
Cash Balance Component
Under KRIP’s cash balance component, a hypothetical account is established for each participating employee and, for every month the employee works, the employee’s account is credited with an amount equal to 4% of the employee’s monthly pay (i.e., base salary and EXCEL awards, including allowances in lieu of salary for authorized periods of absence, such as illness, vacation or holidays). In addition, the ongoing balance of the employee’s account earns interest at the 30-year Treasury bond rate. Employees vest in their account balance after completing three years of service. BenefitsVested benefits under the cash balance component are payable upon normal retirement (age 65), vested termination or death. Participants in the cash balance component of the plan may choose from among optionalvarious forms of benefits such as a lump sum, a joint and survivor annuity and a straight life annuity.
63
Traditional Defined Benefit Component
Under the traditional defined benefit component of KRIP, benefits are based upon an employee’s average participating compensation (APC). The plan defines APC as one-third of the sum of the employee’s participating compensation for the highest consecutive 39 periods of earnings over the 10 years ending immediately prior to retirement or termination of employment. Participating compensation in the case of the Named Executive Officers, is base salary and any EXCEL award, including allowances in lieu of salary for authorized periods of absence, such as illness, vacation or holidays.
For an employee with up to 35 years of accrued service, the annual normal retirement income benefit is calculated by multiplying the employee’s years of accrued service by the sum ofof: (a) 1.3% of APC, plus (b) 1.6% of APC in excess of the average Social Security wage base. For an employee with more than 35 years of accrued service, the amount is increased by 1% for each year in excess of 35 years.
The retirement income benefit is not subject to any deductions for Social Security benefits or other offsets. Participants in the traditional defined benefit component of the plan may choose from among optional forms of benefits such as a straight life annuity, a qualified joint and 50% survivor annuity, other forms of annuity or a lump sum.
An employee may be eligible for normal retirement, early retirement benefits, vested benefits or disability retirement benefits under the traditional defined benefit component depending on the employee’s age and total service when employment with the Company ends. An employee is entitled to normal retirement benefits at age 65. For early retirement benefits, an employee must have reached age 55 and have at least 10 years of service or have a combined age and total service equal to 75. Generally, the benefit is reduced if payment begins before age 65. As of January 1, 2008, an employee who hasEmployees vest in their accrued benefit after completing three or more years of vesting service with the Company will be entitled to a reduced vested benefit if employment with the Company is terminated before becoming eligible for normal retirement or early retirement benefits.
As of December 31, 2008, Ms. Hellyar and Mr. Berman are the only Named Executive Officers eligible for an early retirement benefit under the traditional defined benefit component of the plan.Company.
Non-Qualified Supplemental Retirement Plans (KURIP and KERIP)Plan
Each of our Named Executive Officers isexcept Ms. Roof was eligible to receive benefits under the Kodak Unfunded Retirement Income Plan (KURIP). KURIP iswas an unfunded non-contributory retirement plan. It providesprovided pension benefits where benefits cannot be paid under KRIP and matching contributions cannot be made to the Company’s Savings and Investment Plan (SIP)(a (a 401(k) defined contribution plan), because of the limitation on the inclusion of earnings in excess of limits contained in Section 401(a)(17) of the Internal Revenue Code (for 20072011, 2012 and 2008, $225,0002013, $245,000, $250,000 and $230,000,$255,000, respectively) and because deferred compensation is ignored when calculating benefits under KRIP and SIP.
40
For Named Executive Officers participating in the cash balance component of KRIP, the annual benefit under KURIP was calculated by crediting an employee’s notional account with an amount equal to 7% of his or her compensation that is ignored under KRIP and SIP because it is either in excess of the Section 401(a)(17) compensation limit or deferred compensation. The ongoing balance of the executive’s account earns interest at the 30-year Treasury bond rate. Mr. Perez, Dr. Edwards, and Ms. Quatela were eligible for a benefit based on this calculation.
For Named Executive Officers participating in the traditional defined benefit component of KRIP, the annual benefit is calculated by determining the amount of the retirement benefit to which the employee would otherwise be entitled under KRIP if deferred compensation were considered when calculating such benefit and the limits under Section 401(a)(17) of the Internal Revenue Code were ignored, less any benefits earned under KRIP or under the Company’s excessKRIP. Messrs. Sheller and Kruchten were eligible for a benefit plan (KERIP). KERIP is further described in the Compensation Discussion and Analysisbased on page 47 of this Proxy Statement. As of December 31, 2008, none of our Named Executive Officers had any accrued benefit under KERIP.
For Named Executive Officers participating in the cash balance component of KRIP, the annual benefit under KURIP is calculated by crediting an employee’s account with an amount equal to 7% of his/her compensation that is ignored under KRIP and SIP because it is either in excess of the Section 401(a)(17) compensation limit or deferred compensation. The ongoing balance of the executive’s account earns interest at the 30-year Treasury bond rate. For 2009, the amount of an employee’s compensation used to credit his/her KURIP account is reduced to 4% to parallel the Company’s suspension of matching contributions to SIP for that year.calculation.
Benefits due under KURIP arewere payable upon an employee’s termination of employment or death. Effective January 1, 2008,Upon the plan administrator may select,Company’s emergence from bankruptcy, KURIP was terminated and, as a result, each participant’s pre-petition benefit was settled in his/her sole discretion, the form of payment options available under KURIPan equity distribution, consistent with treatment for other similarly situated general unsecured creditors, and post-petition benefits not subject to Section 409Awere calculated using September 3, 2013 as the hypothetical last day of employment with the Code. For benefits subject to Section 409A of the Code, payments are made inCompany. The post-petition benefit is frozen and payable as a lump sum. If an employee’s benefit under KRIP is subject to actuarial reduction, then any benefit payable under KURIP will also be subject to actuarial reduction.
64
SUPPLEMENTAL INDIVIDUAL RETIREMENT ARRANGEMENTSsum upon the participant’s termination of employment with the Company.
Antonio M. PerezIndividual Supplemental Retirement Arrangements
Mr. Perez is the only Named Executive Officer who had an individual supplemental retirement arrangement with the Company before the Company’s emergence from bankruptcy. This arrangement was terminated upon the Company’s emergence from bankruptcy.
Under the terms of his former letter agreement dated March 3, 2003, as amended, Mr. Perez was eligible for a supplemental unfunded retirement benefit under the terms of his March 3, 2003, February 27, 2007 andDecember 9, 2008 letter agreements. Under these agreements, because Mr. Perez has been employedthat allowed for three years,treatment as if he will be treated as ifwere eligible for the traditional defined benefit component of KRIP. For this purpose,KRIP and, with regard to his employment prior to December 1, 2010, for extra credited service of 17.25 years so that he will beis considered to have completed eighta total of 25 years of service with the Company as of that date. For employment on and attained age 65. If, instead,after December 1, 2010, Mr. Perez actually remains employed until age 65, he will be considered to have completed 25 yearsreceived credit for his actual service at the rate of one month of service with the Company.credit for each month of employment. Mr. Perez’s letter agreement provided that his supplemental retirement benefit willwould be offset by his cash balance benefit under KRIP KERIP and KURIP, and any Company matching contributions contributed to his account under SIP. Mr. Perez will receive his supplemental retirement benefitSIP, with payment made in a lump sum after the six-monthsix month waiting period required for compliance under Section 409A409A.
Upon the Company’s emergence from bankruptcy, this letter agreement was terminated and benefits earned prior to the filing date were settled in the form of an equity distribution consistent with treatment for all other similarly situated general unsecured creditors, in an amount of approximately 6% (pre-tax) of the Code.
Frank S. Sklarsky
In addition to the benefit Mr. Sklarsky may be eligible for under the cash balance component of KRIP, he is covered under a supplemental unfunded retirement benefit under the terms of his letter agreements dated September 19, 2006 and September 26, 2006. Under these agreements, the Company established a phantom cash balance account on behalf of Mr. Sklarsky. The Company agreed to credit the account by $100,000 each year for up to five years, beginning October 30, 2007. Any amounts credited to this account will earn interest at the same interest rate that amounts accrue interest under the cash balance benefit. In order to receive anyvalue of the amounts creditedbenefits. Benefits earned after the filing date and prior to this account,emergence were frozen and are payable as a lump sum upon Mr. Sklarsky must remain continuously employed for at least five years unless the Company terminates his employment for a reason other than cause. UponPerez’s termination of employment any vested amount will be payable in a lump sum afterwith the six-month waiting period required for compliance underCompany (less applicable withholding and subject to Section 409A compliance).
NON-QUALIFIED DEFERRED COMPENSATION FOR 2013 | ||||||||
Executive | Registrant | Aggregate | Aggregate | |||||
Contributions | Contributions | Earnings in | Aggregate | Balance at | ||||
Account | in Last | in Last | in Last | Withdrawals/ | Last Fiscal | |||
Name | Type | Fiscal Year | Fiscal Year | Fiscal Year | Distributions | Year End | ||
A.M. Perez | Salary Deferral | $150,977(1) | $0 | $7,171(2) | $0 | $298,383 | ||
R.A. Roof | N/A | N/A | N/A | N/A | N/A | N/A | ||
B.W. Kruchten | — | — | — | — | — | — | ||
P.M. Sheller | — | — | — | — | — | — | ||
D.J. Edwards | — | — | — | — | — | — | ||
Former Executives | ||||||||
L. G. Quatela | EDCP Plan | 0 | 0 | 0 | 0 | 0 |
(1) This amount represents a salary deferral of $150,977, which is also reported in the Code.Summary Compensation Table for fiscal 2013.
Philip J. Faraci
Mr. Faraci is eligible for a supplemental unfunded retirement benefit under the terms(2) This amount represents interest earned during fiscal 2013 including above-market interest of his November 3, 2004, February 28, 2007 and December 9, 2008 letter agreements. Under these agreements, he is eligible to receive an extra 1.5 years of credited service for each year he is employed, up to a maximum of 20 years of enhanced credited service. If Mr. Faraci remains employed for five years, he will be treated as if eligible for the traditional defined benefit component of KRIP, and will be considered to have completed 12.5 years of service with the Company. If, instead, he remains employed for 12 years, he will be considered to have completed 30 years of service with the Company. Mr. Faraci’s supplemental retirement benefit will be offset by his cash balance benefit under KRIP, KERIP and KURIP, any Company matching contributions contributed to his account under SIP and any retirement benefits provided to him pursuant to the retirement plan of any former employer. Mr. Faraci he will receive his supplemental retirement benefit in a lump sum after the six-month waiting period required for compliance under Section 409A of the Code.
Mary Jane Hellyar
Ms. Hellyar’s August 18, 2006 letter agreement does not provide supplemental retirement benefits.
Robert L. Berman
Mr. Berman does not have a letter agreement with the Company. He has no supplemental retirement benefits.
Former Executive: James T. Langley
In addition to the benefit Mr. Langley may be eligible for under the cash balance component of KRIP, he received a supplemental unfunded retirement benefit under the terms of his August 12, 2003 and February 28, 2007 letter agreements and the terms of his leaving arrangement approved by the Compensation Committee on September 21, 2007. Under the August 12, 2003 letter agreement, the Company established a phantom cash balance account on behalf of Mr. Langley. For each full year he was employed, the Company credited the account with $100,000. Since Mr. Langley was employed by the Company for four full years, the account was credited with $400,000.
Mr. Langley’s August 12, 2003 letter agreement was amended by a letter agreement dated February 28, 2007 to provide for a lump-sum payment of his supplemental retirement benefits. In addition, under the leaving arrangement approved by the Compensation Committee$7,171 for Mr. Langley on September 21, 2007, Mr. Langley received service creditPerez for his salary deferral account. This was also reported in the period beginning August 18, 2007 and ending on the date of his termination of employment, March 14, 2008. His phantom cash balance account was, therefore, credited with a pro-rated portion of the $100,000 that would have been credited to him if he remained employed through August 18, 2008. This pro-rated portion amounted to $57,534.Summary Compensation Table for fiscal year 2013.
65
NON-QUALIFIED DEFERRED COMPENSATION FOR 2008
Executive | Registrant | Aggregate | Aggregate | Aggregate | ||||||||||
Contributions | Contributions | Earnings in | Withdrawals/ | Balance at | ||||||||||
in Last FY | in Last FY | in Last FY | Distributions | Last FYE | ||||||||||
Name | Plan Name | ($) | ($) | ($) | ($) | ($) | ||||||||
Salary Deferral | $ | 96,169 | (1) | $0 | $ | 15,864 | (2) | $0 | $ | 371,250 | (3) | |||
A.M. Perez | EDCP | 0 | 0 | 57,308 | (4) | 0 | 1,149,623 | (5) | ||||||
Deferred Stock Units | 387,777 | (6) | 0 | -1,185,496 | (7) | 0 | 623,726 | |||||||
F.S. Sklarsky | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||
P.J. Faraci | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||
M.J. Hellyar | EDCP | 0 | 0 | 9,923 | (8) | 0 | 199,065 | (9) | ||||||
R.L. Berman | EDCP | 0 | 0 | 49,346 | (10) | 0 | 989,908 | |||||||
Deferred Stock Units | 0 | 0 | -49,012 | (11) | 0 | 22,871 | ||||||||
Former Executive | ||||||||||||||
J.T. Langley | Indiv. Bonus Deferral | 0 | 0 | 57,432 | (12) | 0 | 1,152,104 | (13) | ||||||
EDCP | 0 | 0 | 54,350 | (14) | 0 | 1,090,288 | (15) |
66
Executive Deferred Compensation Plan
The Company maintainsformerly maintained the Eastman Kodak Company 1982 Executive Deferred Compensation Plan (EDCP) for its executives. Near. In 2009, the end of each year, the Company’s executives may elect to defer any portion of their base salary in excess of $50,000 for the following year and a portion of any EXCEL award earned for the following year. In 2008, the Compensation Committee approved to continue to freezefroze the receipt of new monies into the plan, in 2009 due to its low utilization and its administrative cost. The plan has only two investment options: an interest-bearing account that pays interest atPrior to 2009, the prime rateCommittee had made annual decisions to freeze the receipt of new monies in both 2007 and a Kodak phantom stock account. Participants may only invest amounts in the Kodak phantom stock account if they are, or were, subject to our stock ownership guidelines. Dividend equivalents on amounts invested in an executive’s phantom stock account are credited to an executive’s account in the form of additional stock units at the same rate as dividends are paid on shares of Company common stock.2008. The plan’s benefits arewere neither funded nor secured.
Executives may elect to defer amounts under the plan for a fixed period of time during employment. After the period of fixed deferment, any41
secured. Mr. Perez had an outstanding pre-bankruptcy EDCP account balance may be paidof $1,270,688, and Ms. Quatela had an outstanding pre-bankruptcy EDCP account balance of $104,082. All accounts were frozen upon filing for Chapter 11 in a cash lump-sum payment2012 and did not earn any interest. The plan was not assumed upon emergence from Chapter 11 and any outstanding account balances were settled as soon as administratively possible coincidentunsecured claims, consistent with a pay cycle in September after the account is valued in August following the end of the deferment. Upon termination of employment,treatment for amounts not subject to Section 409A of the Code, the Compensation Committee has the sole discretion to pay such amounts in a lump sum or in annual installments, not to exceed ten annual installments. For amounts subject to Section 409A of the Code, most Named Executive Officers filed a distribution election to be paid in a lump sum or in installments, provided that payments begin no later than when the executive reaches age 71. If an executive has not filed an election, then any amounts subject to Section 409A of the Code will be paid in a lump sum. Any amounts subject to Section 409A of the Code are subject to a further six-month waiting period following termination of employment in order to ensure compliance with Section 409A of the Code. Withdrawals prior to termination of employment are not permitted under the plan except in cases of severe financial hardship not within the executive’s control, although amounts not subject to Section 409A of the Code may be withdrawn by an executive prior to termination of employment, provided that 10% of the amount withdrawn will be forfeited by the executive.all other similarly situated general unsecured creditors.
Salary and Bonus Deferral Program
To preserve the full deductibility for federal income tax purposes of our Chief Executive Officer’sMr. Perez’s base salary, Mr. Perezhe is required to defer that portion of his base salary that exceeds $1 million. The amount deferred in each pay period bears interest at the same rate as described above for our EDCP. The deferred amounts and interest earned on these amounts are tracked through a notional account maintained by the Company. Amounts deferred are payable only payable upon Mr. Perez’s retirement from the Company, in the form of a lump sum. The notional account is neither funded nor secured.
Under the terms Mr. Perez had an outstanding pre-bankruptcy salary deferral account balance of Mr. Langley’s offer letter, he participated$678,162. This account was frozen upon filing for Chapter 11 in 2012 and did not earn any interest. The outstanding account balance was settled as an individual bonus plan established to incent achievement of certain pre-established goals in GCGunsecured claim, consistent with treatment for 2007. In February 2007, the Compensation Committee determined that Mr. Langley earned $490,000 under the bonus plan as a result of achievement of the 2006 performance goals. This amount, less applicable withholding, was contributed in February 2007 to an unfunded, deferred compensation account established on behalf of Mr. Langley. Any bonus amounts contributed to this account by the Company continue to bear interest at the prime rate, compounded annually, until they are distributed. Distributions from the account are subject to the same distribution rules as those in effect under our EDCP described previously.all other similarly situated general unsecured creditors.
Deferral of Stock AwardsTERMINATION AND CHANGE IN CONTROL ARRANGEMENTS
UnderThe discussion below regarding the Company’s prior equity award programs,amounts payable to our Named Executive Officers were at times permitted to deferupon certain employment terminations and a change in control reflects the receipt of various equity awards to a date later than the date they vest. Mr. Perez elected to defer awards earnedamounts payable under the Alternative Award of the Executive Incentive Plan under the 2002 - 2004 performance cycle of the Company’s Performance Stock Program, his restricted stock award granted on October 1, 2003 and the performance stock units earned under the 2004 - 2005 performance cycle of the Leadership Stock Program. Each of these awards has fully vestedoutstanding arrangements as of December 31, 2008.
All2013. The Company’s emergence from bankruptcy on September 3, 2013 resulted in the termination of our change in control plans. The values set forth in the Severance Payments Table reflects the impact of these deferred awards are tracked through notional accounts maintained byterminations; however, for the Company. Forpurposes of full disclosure, the discussion below covers all arrangements that would be payable to each shareNamed Executive Officer upon a qualifying termination or unit deferred,change in control assuming the executive receives a phantom unit of our common stock in his account. Any stock dividends or amounts equivalent to dividends paid on our common stock are added to the executive’s notional account in the form of additional phantom units as they are paid at the same rate as dividends are paid on shares of our common stock. For these deferred awards, stock dividends were unrestricted, but are subject to the original payment terms of the underlying deferred award. The notional accounts are neither funded nor secured.
The payout, withdrawal and distribution terms are generally similar for each deferred award, other than the performance stock units earned under the 2004 - 2005 performance cycle of the Leadership Stock Program that were deferred by Mr. Perez. Pursuant to his deferral election, Mr. Perez will be entitled to receive a distribution following his termination of employment of all amounts in his deferred account attributable to these performance stock units (and any earnings thereon) in a lump-sum payment, in shares, as soon as administratively practicable in March of the following year after his termination of employment with the Company. If applicable, a six-month waiting period is required for compliance under Section 409A of the Code.
For all other deferred awards, upon termination of employment for any reason other than death, the amounts held in an executive’s notional accounts will be distributed in a single lump sum or in up to 10 annual installments as determined by the Compensation Committee at its sole discretion. The Compensation Committee will also have the discretion to pay the amounts in cash or in shares, or in
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any combination of both. Upon an executive’s death, the balance of an executive’s deferred account that is not subject to restriction will be paid in a lump-sum cash payment within 30 days after appointment of a legal representative of the deceased executive.
Withdrawals prior to termination of employment are not permitted under the terms of the deferral program except in cases of severe financial hardship not within the executive’s control, as determined at the Compensation Committee’s sole discretion.
TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTSplans still existed.
Potential PaymentsBenefits upon Termination or Change-in-Controlfor Reasons other than Change in Control
Each of our Named Executive Officers except Ms. Roof is eligible to receive certain severance payments and benefits in connection with termination of employment under various circumstances. The potential severance benefits payable to our Named Executive Officers in the event of termination of employment on December 31, 20082013 pursuant to any individual arrangement with the Company are described below. For Ms. Quatela, severance benefits equal to one week of base salary per year of service with the Company, with a minimum of three weeks and a maximum of 26 weeks, may be payable in accordance with the Company’s Termination Allowance Plan (TAP).
Actual amounts paid or distributed to our Named Executive Officers as a result of one of the separation events occurring in the future may be different than those described below due to the fact that many factors affect the amounts of any payments described under the various separation events discussed later.events. For example, factors that could affect the amounts payable include the executive’s base salary, the Company’s stock price, and the executive’s age and service with the Company. At the time of separation of a Named Executive Officer, the Committee may approve severance terms that vary from those provided in the Named Executive Officer'spre-existing individual letter agreement(s), if any, or in relevant employee benefit plans, provided that such terms are consistent with the guidelines that the Committee establishes for executive severance.plans.
In addition to benefits outlined in our Named Executive Officers’ individual severance arrangements, Named Executive Officers will be eligible to receive any benefits accruedprovided under the Company’s broad-based benefit and compensation plans applicable to employees generally, such as distributions under SIP, outplacement services under TAP, frozen KURIP benefits, disability benefits and accrued vacation pay, in accordance with those plans and policies. Our Named Executive Officers will also be eligible to receive any account balances at the 2008 fiscal year end under our non-qualified deferred compensation plans and programs as set forth in the Non-Qualified Deferred Compensation Table on page 66 of this Proxy Statement and any present value of accrued benefits as set forth in the Pension Benefits Table on page 63 of this Proxy Statement.Benefits.
Following termination of employment, each of our Named Executive Officers except for Ms. Roof is subject to compliance with the post-termination restrictive covenants set forth in theirhis or her Eastman Kodak Company Employee’s Agreement, in addition to any covenants provided for in theirunder individual arrangements with the Company. These covenants generally prohibit our Named Executive Officers from disclosing proprietary or confidential information of the Company and from competing with the Company for a certain period after termination of their employment. All of our Named Executive Officers are prohibited for one year after termination of their employment from soliciting any of our employees to leave employment with the Company, or soliciting any of our customers or suppliers to do business with any of our competitors.competitors, for one year after termination of their employment. All of our Named Executive Officers are prohibited from engaging in any work for a competitor of the Company in the field in which they were employed by Kodak for a period of not more than 18 months after their employment is terminated. As described further below,termination. Mr. Perez is also subject to a two-year non-compete after termination of his employment under his lettermanagement agreement, dated March 3, 2003.in exchange for a payment from the Company of $1M in each year.
For any unvested or restricted equity awards, related restriction periods may lapse and vesting may be accelerated automatically pursuant to the terms of the awards depending on the circumstances surrounding a Named Executive Officer’s termination of employment. The Compensation Committee may waive any restrictions or accelerate vesting if an executive’s termination is determined to be without “cause” or for an “approved“good reason.” An approved reason
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For purposes of these letter agreements, “cause” is defined as the Named Executive Officer’s failure to perform or gross negligence in performing his duties, conviction of a crime, or a material breach of his letter agreement, the Company’s Business Conduct Guide or his Employee Agreement. “Good reason” is defined as an adverse change in Named Executive Officer’s title or responsibilities, a material breach of his agreement by the Company, or the failure of any successor to the Company to assume obligations under his agreement.
Upon termination of employment that is inwithout cause or for good reason or due to death, disability or retirement, the best interest of the Company, as determined by the Compensation Committee. Absent an employment agreement specifying different treatment,emergence equity awards held by Named Executive Officers will generally be affected as follows:
Named Executive Officers will also be eligible to receive a pro rata amount of any EXCEL bonus award, if earned, if their employment is terminated due to death, disability, retirement or an approved reason.
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Individual SeveranceTermination Arrangements
The Company entered into individual management agreements with each Named Executive Officer other than Ms. Roof, effective September 3, 2013. Mr. Perez is entitled to certain termination benefits as set forth below. Ms. Quatela was eligible to receive severance benefits under her management agreement, calculated in accordance with the Company’s Termination Allowance Plan.
Under their management agreements, Messrs. Kruchten and Sheller and Dr. Edwards are eligible to receive severance benefits payable in connection with termination without cause or with good reason, subject to:
Antonio M. Perez
Under the terms of his letter agreement dated March 3, 2003, Mr. Perez will bewas eligible to receive certain severance benefits in the event his employment is terminated under various circumstances as described below.circumstances. The amount and nature of the severance benefits he willwould be eligible to receive variesvaried depending on the circumstances surrounding his termination. As a condition to receiving severance benefits, Mr. Perez must execute a general release and covenant not to sue in favorUpon the Company’s emergence from bankruptcy, this letter agreement, as amended, was terminated.
Under the terms of the Company. He is not required to seek other employment to mitigate the amount of any severance payments payable to him.his letter agreement effective September 3, 2013, Mr. Perez will be subjectprovided certain benefits in the event his employment is terminated on or before September 3, 2014. The amount and nature of the benefits he would be eligible to a two-year non-compete agreement afterreceive vary depending on the circumstances surrounding his termination and are described below. In addition, beginning as of the end of the scheduled term of his employment. Tomanagement agreement (September 3, 2014), in consideration for his compliance with the extent he breaches this non-compete obligations in his agreement, heMr. Perez will forfeit the right to receive certain severance benefits otherwise payablea payment of $1 million in connection with termination without cause and for good reason. He will also be obligated to repay the Company for any severance benefits received. Mr. Perez’s March 3, 2003 letter agreement was amended by a letter agreement dated December 9, 2008 to provide that any severance benefits payable under his letter agreements will begin after the six-month waiting period required for compliance under Section 409Aeach of the Code.two years following the end of his scheduled term.
Termination by the Company without Cause or by Mr. Perez forwith Good Reason.If Mr. PerezPerez’s employment is terminated by the Company without cause or if Mr. Perez terminates his employmentby him with good reason, provided that he executes a release of any and all claims that he may have against the Company, for good reason, he is eligible to receive (less applicable withholding)withholding and subject to Section 409A compliance):
Termination by the Company for Cause.Cause or by Mr. Perez without Good Reason.If Mr. Perez’s employment is terminated by the Company for cause or by him without good reason, he is not eligible to receive any benefits other than, in the case of termination without good reason, he remains eligible for continued vesting and/or payment of his emergence equity grant and any other equity-based compensation awarded by the Company (less applicable withholding and subject to Section 409A compliance), provided that he executes a release of any and all claims that he may have against the Company.
Termination for Disability or Death.In the event Mr. Perez’s employment is terminated due to his death, he or his estate, as applicable, will be eligible to receive (less applicable withholding)withholding and subject to Section 409A compliance):
End of Scheduled Term.At the end of the scheduled term of his management agreement, Mr. Perez will be eligible to receive (less applicable withholding and subject to Section 409A compliance):
Brad W. Kruchten, Douglas J. Edwards, and Patrick M. Sheller
Under the terms of their respective management agreements effective September 3, 2013, Messrs. Kruchten and Sheller and Dr. Edwards will be provided certain severance benefits in the event their employment is terminated on or before September 3, 2016. The amount and nature of the option’s original term, if earlier), unlessseverance benefits each would be eligible to receive vary depending on the optionis forfeited by its termscircumstances surrounding termination as a result of his termination for cause.described below:
Termination by Mr. Perezthe Company without Cause or by the Named Executive Officer with Good Reason.If Mr. Perez terminates his employment of an aforementioned Named Executive Officer is terminated by the Company without cause or by him with good reason, he is eligible to receive (less applicable withholding)withholding and subject to Section 409A compliance):
Termination by the Company for Cause or by the Named Executive Officer without Good Reason.If employment of an aforementioned Named Executive Officer is terminated by the Company for cause or by him without good reason, he is not eligible to receive any severance benefits other than, in the case of termination without good reason, he remains eligible for continued vesting and/or payment of his emergence equity grant and any other equity-based compensation awarded by the Company or any affiliate, in accordance with the terms of such awards.
Termination for Disability or Death.In the event Mr. Perez’s employment of an aforementioned Named Executive Officer is terminated due to his death, he or his estate, as applicable, will be eligible to receive (less applicable withholding):withholding and subject to Section 409A compliance) continued vesting of his emergence equity grant.
A pro rata annual target awardPotential Benefits Upon Change in Control
Executive Protection Plan
The Company previously maintained an Executive Protection Plan to provide severance pay and continuation of certain welfare benefits for executives, including our Named Executive Officers other than Ms. Roof, in the event of a change in control. Upon the Company’s emergence from bankruptcy on September 3, 2013, this plan was terminated. Under the plan, no amendment adversely impacting the rights of covered executives will be effective if a change in control occurs during the 12-month period following the amendment. However, the letter agreements between the Company and each Named Executive Officer (other than Ms. Roof) effective September 3, 2013 provide that the Named Executive Officer releases his or her claims under the Executive Protection Plan, and each Named Executive Officer expressly agreed that he or she is not entitled to any benefits or payments under the plan.
Other Compensation Programs
The 2013 EXCEL plan payablePlan contains no provisions for change in a single installment oncontrol. The Committee agreed to remove the normal payment date when awardsare paid to other executives;
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Termination for Disability.In the event Mr. Perez’s employment is terminated as a result of disability pursuant to the Company’s long-term disability plan, he will be eligible to receive (less applicable withholding):
Frank S. Sklarsky
Mr. Sklarsky’s September 19, 2006 letter agreement provides that he will be eligible to receive certain severance benefits if his employment is terminated prior to October 30, 2011 due to disability or if we terminate his employment without cause without offering him a reasonably comparable position. He will be eligible to receive a severance allowance equal to his current annual base salary plus target EXCEL award, less applicable withholding, payable over a 12-month period commencing after the six-month waiting period required for compliance under Section 409A of the Code. In addition to outplacement services, he will also be eligible for fully paid continued coverage under the Kodak medical and dental plan and basic coverage under the Kodak Life Insurance Plan for four months. If we terminate his employment without cause, Mr. Sklarsky will also be eligible for the supplemental retirement benefit provided under his individual arrangement as set forth in the Regular Severance Payments Table on page 72 of this Proxy Statement.
As a condition to receiving severance benefits, Mr. Sklarsky must execute a general waiver and release in favor of the Company. He will also be subject to the restrictive covenants under the Eastman Kodak Company Employee’s Agreement. To the extent he breaches the terms of the waiver agreement or the Employee’s Agreement, he will forfeit the right to receive certain severance benefits otherwise payableplan that protect participants in connection with termination without cause.
Philip J. Faraci
Pursuant to his letter agreements dated November 3, 2004 and December 9, 2008, Mr. Faraci will be eligible to receive certain severance benefits if his employment is terminated by the Company prior to November 15, 2009 for any reason other than cause or disability. He will be entitled to a severance allowance equal to one times his current annual base salary plus target EXCEL award, payable over a 12-month period commencing after the six-month waiting period required for compliance under Section 409A of the Code. Additionally, Mr. Faraci will be entitled to a pro rated portion of his individual enhanced retirement benefit if his employment is terminated prior to November 15, 2009.
As a condition to receiving these severance benefits, Mr. Faraci must execute a general release in favor of the Company. He will also be subject to the restrictive covenants under the Eastman Kodak Company’s Employee’s Agreement. In the event Mr. Faraci breaches his waiver and release agreementof a layoff regardless of whether there has been a change in control.
Under the Company’s 2013 Omnibus Long-Term Compensation Plan, upon a change in control, the Committee may provide for accelerated exercisability, lapse of restrictions or the Eastman Kodak Company’s Employee’s Agreement, all severance payments will cease and he will be required to repay all severance amounts previously paid by the Company.
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Mary Jane Hellyar
Pursuant to her August 18, 2006 letter agreement, Ms. Hellyar will be entitled to certain severance benefits if her employment is terminated due to disability or if we terminate her employment without cause without offering her a reasonably comparable position. She will be entitled to a severance allowance equal to two times her current annual base salary plus target EXCEL award, payable over a 12-month period commencing after the six-month waiting period required for compliance under Section 409Adeemed satisfaction of the Code. In addition to outplacement services, she will also be entitled to fully paid continued coverage under the Kodak medical and dental plan and for basic coverage under the Kodak Life Insurance Plan for four months.
If Ms. Hellyar’s employment is terminated without cause, Kodak will recommend that her termination be treated as an “approved reason”performance goals with respect to any outstanding restricted shares granted in connection with her 2006 retention award. As a condition to receive these severance benefits, Ms. Hellyar must execute a general waiver and release in favor of the Company. She will also be subject to the restrictive covenants under the Eastman Kodak Company’s Employee’s Agreement. In the event Ms. Hellyar breaches the waiver and release or the Eastman Kodak Company’s Employee’s Agreement, all severance payments will cease and she will be required to repay all severance amounts previously paid by the Company.awards.
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Mr. Berman does not have a letter agreement with the Company. His severance benefits would be provided in accordance with applicable employee benefit and compensation plans for U.S. employees.
Former Executive: James T. Langley
Mr. Langley’s last day of employment with the Company was March 14, 2008. Under the terms of his leaving arrangement approved by the Compensation Committee on September 21, 2007, Mr. Langley received: 1) a cash severance of $810,000, an amount equal to Mr.Langley’s annual target total compensation; 2) “approved reason” and accelerated vesting of the 3,453 restricted shares of the Company’s common stock granted to him on February 27, 2007 as a performance award for 2006 performance; and 3) for purposes of his supplemental unfunded retirement benefit, Mr. Langley received service credit for the period beginning August 18, 2007 and ending of the date of his termination of employment and, therefore, received a pro-rated portion of the $100,000 that would have been credited to him had he remained employed through August 18, 2008.
In addition, Mr. Langley’s termination of employment was treated as an “approved reason” with respect to any unvested stock options he held upon his termination that were granted to him earlier than one year prior to termination.
Under this August 12, 2003 letter agreement, Mr. Langley received certain relocation benefits in connection with his termination of employment. These included the payment of expenses related to the sale of his house in Rochester, New York and the shipment of his household goods to his permanent residence. The amount of these expenses are reported in the “All Other Compensation” column of the Summary Compensation Table on page 49 of this Proxy Statement.
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Regular Severance Payments Table(1)
A.M. | F.S. | P.J. | M.J. | R.L. | J.T. | ||||||
Perez | Sklarsky | Faraci | Hellyar | Berman | Langley(2) | ||||||
Cash Severance(3) | $5,610,000 | $1,050,000 | $1,295,000 | $1,617,000 | $476,438 | N/A | |||||
Intrinsic Value of Stock Options(4) | 0 | 0 | 0 | 0 | 0 | N/A | |||||
Restricted Stock(5) | 322,367 | 164,500 | 56,535 | 122,342 | 43,869 | N/A | |||||
Leadership Stock(6) | 511,676 | 162,679 | 95,472 | 94,088 | 71,680 | N/A | |||||
Benefits/Perquisites(7) | 25,997 | 12,017 | 12,017 | 12,017 | 12,017 | N/A | |||||
Pension(8) | 1,644,234 | 205,697 | 863,103 | 0 | 0 | N/A | |||||
Total | $8,114,275 | $1,594,893 | $2,322,127 | $1,845,447 | $604,004 | N/A |
Termination | Termination | |||||||||||
Without Cause | Termination | Based on | ||||||||||
or With Good | Without Good | Disability or | ||||||||||
Reason | Reason | Death | ||||||||||
A.M. Perez | ||||||||||||
Cash Severance(1) | — | — | — | |||||||||
Restricted Stock/RSUs(2) | $ | 3,682,245 | $3,682,245 | $ | 3,682,245 | |||||||
EXCEL(3) | 2,012,241 | 0 | 2,012,241 | |||||||||
Benefits/Perquisites(4) | — | — | — | |||||||||
Total | $ | 5,694,486 | $3,682,245 | $ | 5,694,486 | |||||||
R.A. Roof | N/A | N/A | N/A | |||||||||
B.W. Kruchten | ||||||||||||
Cash Severance(1) | $ | 1,220,625 | 0 | 0 | ||||||||
Restricted Stock/RSUs(2) | 961,536 | $961,536 | $ | 961,536 | ||||||||
EXCEL(3) | 391,995 | 0 | 391,995 | |||||||||
Benefits/Perquisites(4) | 4,500 | 0 | 0 | |||||||||
Total | $ | 2,578,656 | $961,536 | $ | 1,353,531 | |||||||
D.J. Edwards | ||||||||||||
Cash Severance(1) | $ | 1,181,250 | 0 | 0 | ||||||||
Restricted Stock/RSUs(2) | 946,264 | $946,264 | $ | 946,264 | ||||||||
EXCEL(3) | 379,350 | 0 | 379,350 | |||||||||
Benefits/Perquisites(4) | 4,500 | 0 | 0 | |||||||||
Total | $ | 2,511,364 | $946,264 | $ | 1,325,614 | |||||||
P.M. Sheller | ||||||||||||
Cash Severance(1) | $ | 993,713 | 0 | 0 | ||||||||
Restricted Stock/RSUs(2) | 736,963 | $736,963 | $ | 736,963 | ||||||||
EXCEL(3) | 293,336 | 0 | 293,336 | |||||||||
Benefits/Perquisites(4) | 4,500 | 0 | 0 | |||||||||
Total | $ | 2,028,512 | $736,963 | $ | 1,030,299 | |||||||
L.G. Quatela | ||||||||||||
Cash Severance(1) | $133,667 | 0 | 0 | |||||||||
Restricted Stock/RSUs(2) | — | — | — | |||||||||
EXCEL(3) | 391,995 | 0 | $ | 391,995 | ||||||||
Benefits/Perquisites(4) | 4,500 | 0 | 0 | |||||||||
Total | $530,162 | 0 | $ | 391,995 |
(1) | ||
The cash severance amounts disclosed above were calculated using base salary for | ||
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Severance Benefits Based on Termination Due to Disability Table(1)
The table below estimates the incremental amounts payable upon a termination of employment due to disability, as if the Named Executive Officer’s employment was terminated as of December 31, 2008, using the closing price of our common stock as of December 31, 2008, which was $6.58.
A.M. | F.S. | P.J. | M.J. | R.L. | J.T. | |||||||||
Perez | Sklarsky | Faraci | Hellyar | Berman | Langley(2) | |||||||||
Cash Severance(3) | $ | 0 | $1,050,000 | $ | 0 | $1,617,000 | $ | 0 | N/A | |||||
Intrinsic Value of Stock Options(4) | 0 | 0 | 0 | 0 | 0 | N/A | ||||||||
Restricted Stock(5) | 322,367 | 164,500 | 56,535 | 122,342 | 43,869 | N/A | ||||||||
Leadership Stock(6) | 511,676 | 162,679 | 95,472 | 94,088 | 71,680 | N/A | ||||||||
Benefits/Perquisites(7) | 14,000 | 12,017 | 0 | 12,017 | 0 | N/A | ||||||||
Pension(8) | 1,644,234 | 0 | 0 | 0 | 0 | N/A | ||||||||
Total | $ | 2,492,278 | $1,389,196 | $ | 152,008 | $1,845,447 | $ | 115,549 | N/A |
(2) The RSU award for Mr. Perez will vest immediately in the case of a termination without cause or with good reason. For the other leaving reasons, the RSUs will continue to vest under the vesting schedule associated with the grants. The RSU award to Messrs. Kruchten and Sheller and Dr. Edwards has a continued vesting provision for all leaving reasons except that, in the case of termination With Cause, the value of their RSU grant is still available to them under the plan vesting schedule. | ||
(3) EXCEL awards for the 2013 performance period will be paid in 2014 for any Named Executive Officer who leaves the Company Without Cause, For Good Reason, or Death and Disability. | ||
(4)In the event of termination Without Cause, each Named Executive Officer | ||
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Severance Benefits Based on Termination Due to Death Table(1)
The table below estimates the incremental amounts payable upon a termination of employment due to death, as if the Named Executive Officer’s employment was terminated as of December 31, 2008, using the closing price of our common stock as of December 31, 2008, which was $6.58.
A.M. | F.S. | P.J. | M.J. | R.L. | J.T. | |||||||||||
Perez | Sklarsky | Faraci | Hellyar | Berman | Langley(2) | |||||||||||
Cash Severance | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | N/A | |||||
Intrinsic Value of Stock Options(3) | 0 | 0 | 0 | 0 | 0 | N/A | ||||||||||
Restricted Stock(4) | 322,367 | 164,500 | 43,375 | 122,342 | 43,869 | N/A | ||||||||||
Leadership Stock(5) | 511,676 | 162,679 | 95,472 | 94,088 | 71,680 | N/A | ||||||||||
Benefits/Perquisites(6) | 14,000 | 0 | 0 | 0 | 0 | N/A | ||||||||||
Pension(7) | 1,644,234 | 0 | 0 | 0 | 0 | N/A | ||||||||||
Total | $ | 2,492,278 | $ | 327,179 | $ | 138,848 | $ | 216,430 | $ | 115,549 | N/A |
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Severance Benefits Based on Termination with Good Reason Table(1)(2)
The table below estimates the incremental amounts payable upon a termination of employment by Mr. Perez with good reason, as if the Named Executive Officer’s employment was terminated as of December 31, 2008, using the closing price of our common stock as of December 31, 2008, which was $6.58.
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Change-in-Control Severance PaymentsDIRECTOR COMPENSATION
Executive Protection PlanIntroduction
Historically, our directors have been compensated through a combination of cash retainers and equity. The Company does not pay management directors for Board service in addition to their regular employee compensation.
The Company maintains the Executive Protection Plan to provide severance pay and continuation of certain welfare benefits for Named Executive Officers in the event 1) a change-in-control occurs and 2) the Named Executive Officer’s employment is terminated byBankruptcy Court authorized the Company to continue to make cash payments to directors as compensation for reasons other than cause or bytheir services. Upon the Named Executive Officer for good reason within two years after a change-in-control. A change-in-control is generally defined under the plan as:
Non-qualified | |||||||||||||||
Earned | Deferred | ||||||||||||||
Fees Earned or | Equity | Compensation | |||||||||||||
Paid In Cash | Compensation | Earnings | Total | ||||||||||||
Name | ($)(1) | Paid in Cash(2) | ($)(3) | ($) | |||||||||||
Richard S. Braddock | $170,000 | $112,000 | $0 | $282,000 | |||||||||||
James V. Continenza(4) | 35,000 | 0 | 0 | 35,000 | |||||||||||
Timothy M. Donahue | 70,000 | 112,000 | 0 | 182,000 | |||||||||||
Michael J. Hawley | 70,000 | 112,000 | 0 | 182,000 | |||||||||||
William H. Hernandez | 80,000 | 112,000 | 0 | 192,000 | |||||||||||
Douglas R. Lebda | 70,000 | 112,000 | 0 | 182,000 | |||||||||||
Kyle P. Legg | 70,000 | 112,000 | 0 | 182,000 | |||||||||||
Delano E. Lewis | 70,000 | 112,000 | 0 | 182,000 | |||||||||||
William G. Parrett(4) | 67,500 | 112,000 | 0 | 179,500 | |||||||||||
Joel Seligman | 70,000 | 112,000 | 0 | 182,000 | |||||||||||
Dennis F. Strigl | 70,000 | 112,000 | 0 | 182,000 |
(1)This column reports the Director, Chair and Presiding Director Cash Retainers earned in 2013. The Retainers were paid on a quarterly basis, with one-quarter of the total payments made in January, April, July and September. |
(2)This portion of director compensation was paid in cash at a 20% reduction. |
(3)No above-market interest was earned under the prior Directors’ Deferred Compensation Plan in 2013. This prior plan was terminated as part of the bankruptcy proceedings, and the new Board adopted a Directors’ Deferred Compensation Plan in December 2013. |
(4)Mr. Continenza joined the Board on April 1, 2013. The Retainer amounts shown for Messrs. Continenza and Parrett reflect the amounts earned for service on the prior Board only (prior to September 2013). Because Mr. Continenza joined the Board after the annual grant of equity that was part of the former Board’s compensation, he did not receive that sum (which was converted to a cash payment as discussed above). |
Board Retainer(1) | Chair Retainer | Restricted Stock Units(2) | ||||
Chairman | $100,000 | $20,000 | 10,869 | |||
Director (not associated with | 100,000 | — | 6,957 | |||
significant shareholder) | ||||||
Director (associated with | 180,000 | — | 0 | |||
significant shareholder) | ||||||
Audit and Finance Committee | — | 20,000 | — | |||
Chair | ||||||
Corporate Governance and | — | 20,000 | — | |||
Nominating Committee Chair | ||||||
Executive Compensation | — | 20,000 | — | |||
Committee Chair |
(1)All retainer payments are made in equal quarterly installments in January, April, July and October. |
(2)The RSUs vest in approximately equal amounts on January 1, 2015, January 1, 2016, and January 1, 2017, subject to continued Board service. |
Chairman/Committee | ||||||||
Board Retainer | Chair Retainer | Total Cash | Restricted Stock | |||||
Name | ($)(1) | ($) | ($) | Units (RSUs)(2) | ||||
Mark S. Burgess | $25,000 | — | $25,000 | 7,827 | (3) | |||
James V. Continenza | 25,000 | $5,000 | 30,000 | 10,869 | ||||
Matthew A. Doheny | 25,000 | — | 25,000 | 6,957 | ||||
John A. Janitz | 25,000 | — | 25,000 | 6,957 | ||||
George Karfunkel | 25,000 | — | 25,000 | 6,957 | ||||
Jason New | 45,000 | 0 | (4) | 45,000 | 0 | |||
William G. Parrett | 25,000 | 5,000 | 30,000 | 6,957 | ||||
Derek Smith | 45,000 | 5,000 | 50,000 | 0 |
(1)The Board Retainer, the Chairman Retainer and the Committee Chair Retainer are paid on a quarterly basis, with one-quarter of the total payments made in January, April, July and October. The directors received the first of these payments in December 2013 for their service from September 2013 - December 2013. |
(2)The RSUs were granted on December 31, 2013 and vest one-third on January 1, 2015, January 1, 2016 and January 1, 2017, subject to continued Board service. |
(3)Mr. Burgess received an incremental one-time award of RSUs in recognition of additional time and expertise spent in advising the Company’s business segments and on operational issues. |
(4)Mr. New is the Chair of the Corporate Governance and Nominating Committee. This Committee did not meet in 2013; therefore, no Committee Chair Retainer was paid to him. |
The following table reports the outstanding securities;
The plan provides that, in the event of a termination of employment, either voluntarily with “good reason” or involuntarily without “cause,” within two years following a change-in-control, each of the Namednon-employee directors at the end of fiscal year 2013:
Aggregate Stock Awards Outstanding at Fiscal Year End | ||||
Name | Unvested (RSUs) | Vested | ||
Mark S. Burgess | 7,827 | 0 | ||
James V. Continenza | 10,869 | 0 | ||
Matthew A. Doheny | 6,957 | 0 | ||
John A. Janitz | 6,957 | 0 | ||
George Karfunkel | 6,957 | 0 | ||
Jason New | 0 | 0 | ||
William G. Parrett | 6,957 | 0 | ||
Derek Smith | 0 | 0 |
The following table reports the outstanding Stock Option awards held by each of the non-employee directors at the end of fiscal year 2013:
Aggregate Stock Options Outstanding at Fiscal Year End | ||||
Name | Unvested | Vested | ||
Mark S. Burgess | 0 | 0 | ||
James V. Continenza | 0 | 0 | ||
Matthew A. Doheny | 0 | 0 | ||
John A. Janitz | 0 | 0 | ||
George Karfunkel | 0 | 0 | ||
Jason New | 0 | 0 | ||
William G. Parrett | 0 | 0 | ||
Derek Smith | 0 | 0 |
Deferred Compensation
Effective December 26, 2013, the Executive Officers will receiveCompensation Committee adopted a lump-sum severance payment equalDirectors Deferred Compensation Plan, which allows non-employee directors to 1) three timesdefer some or all of their base salaryBoard Retainer and target EXCEL bonus and 2) continued participation inRestricted Stock awards into a phantom stock account. Pursuant to this plan, the Company’s medical, dental, disability and life insurance plansfollowing directors elected to defer Restricted Stock Units granted on December 31, 2013: Mark S. Burgess (3,914 RSUs); James V. Continenza (10,869 RSUs); Matthew A. Doheny (6,957 RSUs).
Expense Reimbursement
The Company reimburses its directors for 12 months at no cost to the executive. The plan also requires, subject to certain limitations, tax gross-up payments to all employees to mitigate any excise tax imposed upon the employee under the Code. If it is determined that an executive would not be subject to an excise tax if the payments receivedreasonable travel expenses incurred in connection with the change-in-control were reduced by 10%, then amounts payable to the executive under the plan will be reduced to the maximum amount the executive could be paid without giving rise to an excise tax.attending Board, Committee and shareholder meetings and other Board business events.
“Good reason” is defined under the plan for our Named Executive Officers to mean:49
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The assignmentfollowing tables set forth ownership of or change in,Company common stock. As of March 31, 2014, there were 41,676,220 common shares outstanding.
“Cause” is definedSEC under the program for our Named Executive Officers to mean:
In addition to the above, the plan provides that both Mr. Perez and Mr. Faraci would also be entitled to these severance benefits if they voluntarily terminate their employment for any reason during the 30-day period commencing 23 months after the change-in-control. A Named Executive Officer will also receive severance benefits under the plan if his or her employment is terminated prior to a change-incontrol if they are able to demonstrate that their employment was terminated in contemplation of a change-in-control and a change-incontrol occurs.
Other Benefit Plans
As a result of the Company’s review in 2007 of the change-in-control benefits under various Company plans, the Compensation Committee determined to gradually phase out over a five-year period beginning January 1, 2008 the change-in-control pension enhancements under the Company’s defined benefit pension plan (KRIP) and unfunded supplemental retirement plan (KURIP). For 2008, the additional age and service resulting from the change-in-control pension enhancement was a maximum of four years and the maximum will thereafter decrease by one year for every additional year that transpires until the enhancement is fully phased out effective January 1, 2012.
Previously under KRIP and KURIP, any participant in the traditional defined benefit component, including the affected Named Executive Officers, whose employment is terminated for a reason other than death, disability, cause or voluntary resignation, within five years of a change-in-control was provided up to five additional years of service to determine eligibility for a vested right, to calculate the amount of the accrued benefit, and to determine any applicable early retirement factors. In addition, a participant was deemed to have up to five additional years of age in determining any applicable early retirement factors. For participants age 50 or older as of the date of the change-in-control, the enhanced age and service was used to determine eligibility for retirement.
The actual additional number of years of service and age that are given to a participant decreases proportionately depending upon the
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number of years that elapsed between the date of a change-in-control and the date of the participant’s termination of employment. If the plan is terminated within five years after a change-in-control, the benefit for each participant would be calculated as indicated previously.
Participants in the cash balance component of KRIP and KURIP, including the affected Named Executive Officers, are entitled to a benefit equal to 7% of the participant’s annual compensation at the time of the termination times the number of additional years of service that the executive is entitled to under the plan’s change-in-control pension enhancement.
Compensation Programs
Upon a change-in-control (as defined in EDCP and by Section 409A of the Code to the extent applicable), each Named Executive Officer who participates in EDCP will be entitled to a lump-sum cash payment of his or her account balance under the plan. For amounts not subject to Section 409A of the Code, this rule will not apply if the executive elects in writing no later than prior to the beginning of the year preceding the year in which a change-in-control occurs that payment shall be made in equal installments over a period not longer than 11 years.
Under the EXCEL plan, if a Named Executive Officer’s employment is terminated within two years following a change-in-control other than as a result of death, disability, voluntary termination or for cause, the executive will be entitled to be paid any earned but unpaid award and a pro rata target award for the year in which their employment is terminated. If, upon a change-in-control, Kodak’s common stock ceases to be actively traded on the NYSE, then each Named Executive Officer will be entitled to receive any earned but unpaid award and a pro rata target award for the year in which the change-in-control occurs.
In the event of a change-in-control which causes the Company’s stock to cease active trading on the NYSE, the Company’s compensation plans (with the exception of the 2005 Omnibus Long-Term Compensation Plan) will generally be affected as follows, when Kodak common stock is not exchanged solely for common stock of the surviving company or the surviving company does not assume all Plan awards:
Under the Company’s 2005 Omnibus Long-Term Compensation Plan, upon a change-in-control (as defined in the plan), if outstanding stock option and restricted stock awards are assumed or substituted by the surviving company, as determined by the Compensation Committee, then the awards will not immediately vest or be exercisable. If the awards are so assumed or substituted, then the awards will be subject to accelerated vesting and exercisability upon certain terminations of employment within the first two years after the change-in-control. Only if the awards are not so assumed or substituted will they become immediately vested, exercisable and cashed out. For performance awards, if more than 50% of the performance cycle has elapsed when a change-in-control occurs, the award will vest and be paid out at the greater of target performance or performance to date. If 50% or less of the performance cycle has elapsed when a change-in-control occurs, the award will vest and be paid out at 50% of target performance, regardless of actual performance to date.
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Change-in-Control Severance Payments Table(1)
The table below estimates the incremental amounts payable upon a termination of employment by the Company in connection with a change-in-control, as if the Named Executive Officer’s employment was terminated as of December 31, 2008 using the closing price of our common stock as of December 31, 2008, which was $6.58.
A.M. | F.S. | P.J. | M.J. | R.L. | J.T. | |||||||||||||
Perez | Sklarsky | Faraci | Hellyar | Berman | Langley(2) | |||||||||||||
Cash Severance(3) | $ 8,415,000 | $3,150,000 | $3,885,000 | $2,425,500 | $1,905,750 | N/A | ||||||||||||
Intrinsic Value of Stock Options(4) | 0 | 0 | 0 | 0 | 0 | N/A | ||||||||||||
Restricted Stock(5) | 322,367 | 164,500 | 56,535 | 122,342 | 43,869 | N/A | ||||||||||||
Leadership Stock(6) | 511,676 | 162,679 | 95,472 | 94,088 | 71,680 | N/A | ||||||||||||
Benefits/Perquisites(7) | 9,050 | 9,050 | 9,050 | 9,050 | 9,050 | N/A | ||||||||||||
Pension(8) | 1,644,234 | 769,590 | 1,976,349 | 809,754 | 792,159 | N/A | ||||||||||||
Excise Tax Gross-Up | 4,487,822 | 1,922,694 | 2,982,354 | 1,451,334 | 1,197,107 | N/A | ||||||||||||
Total | $15,390,150 | $6,178,513 | $9,004,761 | $4,912,068 | $4,019,616 | N/A |
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REPORTING COMPLIANCE
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 1613(g) of the Securities Exchange Act of 1934, as amended, requiresas to each person or group who beneficially owns more than 5% of our Section 16outstanding common shares.
Percentage of Company’s | ||||
Number of Common Shares | Common Shares | |||
Shareholder’s Name and Address | Beneficially Owned | Beneficially Owned | ||
Serengeti Asset Management LP | ||||
632 Broadway, 12th Floor | ||||
New York, NY 10012 | 2,282,926 | (1) | 5.5% | |
Contrarian Capital Management, L.L.C. | ||||
411 West Putnam Avenue, Suite 425 | ||||
Greenwich, CT 06830 | 4,741,909 | (2) | 11.4% | |
BlueMountain Capital Management, LLC | ||||
280 Park Avenue, 5th Floor East | ||||
New York, New York 10017. | 7,884,905 | (3) | 18.7% | |
Blackstone Holdings I L.P. | ||||
c/o The Blackstone Group | ||||
345 Park Avenue | ||||
New York, New York 10154 | 8,490,846 | (4) | 20.0% | |
The George Karfunkel 2007 Grantor Retained Annuity Trust #1 | ||||
The George Karfunkel 2007 Grantor Retained Annuity Trust #2 | ||||
430 East 57thStreet | ||||
New York, New York 10022 | 2,341,830 | (5) | 5.6% | |
Moses Marx | ||||
160 Broadway | ||||
New York, New York 10038 | 4,716,531 | (6) | 11.3% |
(1)Serengeti Asset Management LP shares voting and dispositive power over 2,282,926 shares of Company common stock with J.L. Serengeti Management LLC and Joseph A. LaNasa III, which amount includes 182,926 warrants convertible into shares of Company common stock. This information has been obtained from Serengeti Asset Management LP’s Schedule 13G filed on February 14, 2014, reporting beneficial ownership as of December 31, 2013. |
(2)Contrarian Capital Management, L.L.C. shares voting and dispositive power over 4,741,909 shares of Company common stock with its advisory clients in its capacity as investment adviser to certain funds, including Contrarian Capital Fund I, L.P. which beneficially owns 2,823,817 shares, or 6.8% of Company common stock. This information has been obtained from Amendment No. 2 to Contrarian Capital Management, L.L.C.’s Schedule 13G filed on February 13, 2014, reporting beneficial ownership as of December 31, 2013. |
(3)This amount constitutes 7,468,155 shares of Company common stock and 416,750 warrants convertible into shares of Company common stock. BlueMountain Capital Management, LLC serves as investment manager to various funds and shares voting and dispositive power with respect to the Company’s common stock directly owned by the funds. This information has been obtained from Amendment No. 1 to BlueMountain Capital Management, LLC’s Schedule 13D, filed on October 8, 2013. |
(4)Blackstone shares voting and dispositive power over 8,490,846 shares of Company common stock, which amount constitutes 8,316,330 shares of Company common stock and 174,516 warrants convertible into shares of Company common stock. This information has been obtained from Amendment No. 1 to Blackstone Holdings I L.P.’s Schedule 13D, filed on October 3, 2013, as well as from our internal records. |
(5)The George Karfunkel 2007 Grantor Retained Annuity Trust #1 (Trust #1), the George Karfunkel 2007 Grantor Retained Annuity Trust #2 (Trust #2), and Jay M. Miller, the trustee of Trust #1 and Trust #2, have sole voting and dispositive power with respect to 2,341,830 shares of Company common stock, which amount includes 152,752 warrants convertible into shares of Company common stock. This information has been obtained from Trust #1’s Schedule 13D, filed on September 13, 2013, as well as from our internal records. |
(6)Moses Marx (Mr. Marx) has sole voting and dispositive power over 4,716,531 shares of Company common stock, including 3,139,741 shares which are held by Momar Corporation, constituting 7.5% of Company common stock, of which Mr. Marx serves as president. This amount includes 233,076 warrants convertible into shares of Company common stock. This information has been obtained from Moses Marx’s Schedule 13D, filed on September 13, 2013, as well as from our internal records. |
Number of Common Shares | Percentage of Company’s | ||||
Beneficially Owned on | Common Shares | ||||
Directors and Executive Officers(1) | March 31, 2014 | Beneficially Owned | |||
Mark S. Burgess | 0 | (2) | * | ||
James V. Continenza | 0 | (2) | * | ||
Matthew A. Doheny | 0 | (2) | * | ||
Douglas J. Edwards | 256 | (3)(4) | * | ||
John A. Janitz | 0 | (2) | * | ||
George Karfunkel | 1,295,958 | (2)(5) | 3.1% | ||
Brad W. Kruchten | 4,916 | (3)(4)(6) | * | ||
Jason New | 0 | * | |||
William G. Parrett | 0 | (2) | * | ||
Antonio M. Perez | 68,577 | (3)(4)(7) | * | ||
Laura Quatela | 0 | * | |||
Rebecca Roof | 0 | * | |||
Patrick M. Sheller | 318 | (3)(4) | * | ||
Derek Smith | 0 | * | |||
All Directors and Executive Officers as a Group (17), including | |||||
the above | 1,372,440 | 3.3% | (8) |
* Represents holdings of less than 1% of the Company’s total common shares that are beneficially owned. |
(1) The address of each of the named parties to this table is: 343 State Street, Rochester, New York, 14650. |
(2) The amounts listed for each non-employee director do not include restricted stock units granted under the 2013 Omnibus Incentive Plan because such units do not vest within 60 days after March 31, 2014 and have not yet vested under their vesting schedules. The number of restricted stock units of non-employee directors as of March 31, 2014 were as follows: Mr. Burgess: 7,827 shares; Mr. Continenza: 10,869 shares; Mr. Doheny: 6,957 shares; Mr. Janitz: 6,957 shares; Mr. Karfunkel: 6,957 shares; Mr. Parrett: 6,957 shares; Total non-employee directors as a group: 46,524 shares. Restricted stock units vest one-third on January 1, 2015, January 1, 2016 and January 1, 2017 subject to continued Board service. |
(3) This sum does not include unvested restricted stock issued on September 3, 2013 at emergence from bankruptcy, that will not vest within 60 days after March 31, 2014. Restricted stock is held by Executive Officers as follows: Dr. Edwards: 27,262 shares; Mr. Kruchten: 27,702 shares; Mr. Perez: 106,086 shares; Mr. Sheller: 21,232 shares. Total Executive Officers as a group: 213,079 shares. The restricted stock vest one-third on each of the first three anniversaries of the grant date. |
(4)This sum includes 125% Warrants to purchase Common Stock, par value $.01 (the 125% Warrants) and 135% Warrants to purchase Common stock, par value $.01 (the 135% Warrants) which are currently exercisable as of September 3, 2013 or exercisable within 60 days after March 31, 2014. The number of 125% Warrants are held by Executive Officers as follows: Dr. Edwards: 52 shares; Mr. Kruchten: 1,007 shares; Mr. Perez: 7,202 shares; Mr. Sheller: 65 shares; Total Executive Officers as a Group: 8,326. The number of 135% Warrants are held by Executive Officers as follows: Dr. Edwards: 52 shares; Mr. Kruchten: 1,007 shares; Mr. Perez: 7,202 shares; Mr. Sheller: 65 shares; Total Executive Officers as a Group: 8,326. |
(5)This sum includes 25,057 125% Warrants and 25,057 135% Warrants held by Mr. Karfunkel. |
(6)This sum includes 736 shares of common stock, 255 125% Warrants, and 255 135% Warrants held by Dolores Kruchten, the spouse of Mr. Kruchten, of which Mr. Kruchten may be deemed a beneficial owner. |
(7)This sum includes restricted stock units that were issued on September 3, 2013 at emergence from bankruptcy, 53,043 of which vested on the grant date. This sum does not include the remaining 106,086 unvested restricted stock, one-third of which will vest on the first anniversary of the grant date, and one-third of which vests based on the achievement of performance metrics. |
(8)Except for Mr. Karfunkel, each individual executive officer and director listed beneficially owned less than 1% of the outstanding shares of the Company’s common stock as of March 31, 2014. As a group, all executive officers and directors owned 0.18% of the outstanding shares of the Company’s common stock as of March 31, 2014. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s executive officers and directors and persons who beneficially own greatermore than 10% of a registered class of our equity securitiesthe Company’s common stock to file reports of ownership on Forms 3, 4 and changes in ownership5 with the SEC. WeExecutive officers, directors and greater than 10% beneficial owners are also required to disclose any failurefurnish the Company with copies of these Section 16 Executive Officers, directorsall Forms 3, 4 and 10% shareholders to file these reports by the required deadlines.5 they file. Based solely on ourthe Company’s review of the copies of such forms it has received, the Company believes that all its executive officers, directors and greater than 10% beneficial owners complied with all the filing requirements applicable to them with respect to transactions during 2013, except that three reports covering acquisitions of Company common stock and an acquisition of warrants convertible into Company common stock at the Company’s emergence from bankruptcy by Mr. Karfunkel were filed after the filing deadline.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
INTERESTED TRANSACTIONS
Our Board has adopted written policies and procedures relating to approval or ratification of “interested transactions” with “related parties.” Under these forms receivedpolicies and procedures, which are posted on our website athttp://ek.client.shareholder.com/supporting.cfm, our Governance Committee reviews the material facts of all interested transactions that require the Committee’s approval. The Committee will approve or disapprove the interested transactions, subject to certain exceptions, by ustaking into account, among other factors it deems appropriate, whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or written representations furnishedsimilar circumstances and the extent of the related person’s interest in the transaction. No director may participate in any discussion or approval of an interested transaction for which he or she is a related party. If an interested transaction will be ongoing, the Committee may establish guidelines for our management to us, we believe that, forfollow in its ongoing dealings with the reporting period covering our 2008related party and then, at least annually, must review and assess ongoing relationships with the related party.
Under the Board’s policies and procedures, an “interested transaction” is any transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness), in which the aggregate amount involved will or may be expected to exceed $100,000 in any calendar year, the Company is a participant and any related party has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A “related party” is any person who is or was, since the beginning of the last fiscal year duefor which we have filed a Form 10-K and proxy statement, a Section 16 Executive Officer, director or nominee for election as a director (even if the person does not presently serve in that role), a beneficial owner of greater than 5% of the Company’s common stock or any immediate family member of any of the foregoing. Immediate family member includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone residing in such person’s home (other than a tenant or employee).
The Board has reviewed and pre-approved certain types of interested transactions described below. In addition, any interested transaction with a related party in which the aggregate amount involved is expected to be less than $500,000 may be approved. Pre-approved interested transactions include:
The Governance Committee reviewed and approved two interested transactions with a related party occurring since the beginning of 2013 that did not fall within any of the pre-approved interested transactions described above, as follows:
By OrderBrad Kruchten, aSenior Vice President and Section 16 Executive Officer of the BoardCompany. There was no employment reporting relationship betweenMr. Kruchten and Ms. Kruchten. Ms. Kruchten became an employee of Directors Laurence L. Hickey
the entity that purchased certain assets of the Company,Secretaryeffective September 1, 2013. In 2013, Ms. Kruchten earned $208,165 in compensation from the Company, consisting of base salary.
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EXHIBITSBOARD INDEPENDENCE
EXHIBIT I — DIRECTOR INDEPENDENCE STANDARDS
Pursuant to the NYSE Listing Standards, theFor a number of years, a substantial majority of our Board has been comprised of Directorsindependent directors. The Board has adopted Director Independence Standards to assistfor use in its determination of director independence. To be considered “independent” for purposes of these standards,determining whether a director must beis independent. The Director Independence Standards are consistent with the independence standards set forth in the NYSE listing standards. The Board also uses the NYSE listing standards in determining whether members of specific committees are independent. The Director Independence Standards are part of our Corporate Governance Guidelines, which are published on our website athttp://ek.client.shareholder.com/directors.cfm.
The Board has determined by resolutionthat each of the Board as a whole, after due deliberation, to havefollowing directors has no material relationship with the Company other than(either directly or as a director. In each case,partner, shareholder or officer of an organization that has a relationship with the Board will broadly consider all relevant factsCompany) and circumstancesis independent under the Company’s Director Independence Standards and, will apply the following standards.
54
PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDIT AND NON-AUDIT FEES
The following fees were approved by the director for former services as an interim Chairman or CEO or other executive officer need not be considered in determining independence under this test; or
Type of Service (in millions) | 2013 | 2012 | ||
Audit Fees | $13.8 | $ 9.7 | ||
Audit-Related Fees | 13.8 | 10.8 | ||
Tax Fees | 0.3 | 0.4 | ||
All Other Fees | 0.0 | 0.0 | ||
Total | $27.9 | $20.9 |
The audit fees related primarily to the director is a current employee of such a firm; the director has an immediate family member who is a current employee of such a firm and personally works on the Company’s audit; or, the director or an immediate family member was, in the last three years, a partner or employee of such a firm and personally worked on the Company’sannual audit within that time; or
| ||
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EXHIBIT II — DIRECTOR QUALIFICATION STANDARDS
Reputation. Directors should have reputations, both personal and professional, consistentadoption of fresh-start accounting in connection with the Company’s image and reputation.emergence from Chapter 11 proceedings.
Judgment. Directors should haveThe audit-related fees for 2013 related primarily to fees for the abilityaudit of carve-out financial statements required to exercise sound business judgment on a broad range of issues.
Knowledge. Directors should be financially literate and have a sound understanding of business strategy, business environment, corporate governance and board operations.
Experience. In selecting directors,consummate the Board should generally seek active and former CEOs, CFOs, international operating executives, presidents of large and complex divisions of publicly held companies and leaders of major complex organizations, including scientific, accounting, government, educational and other non-profit institutions.
Maturity. Directors should value board and team performance over individual performance, possess respect for others and facilitate superior board performance.
Commitment. Directors should be able and willing to devote the required amount of time to the Company’s affairs, including preparing for and attending meetings of the Board and its committees. Directors should be actively involved in the Board and its decision making.
Skills. Directors should be selected so that the Board has an appropriate mix of skills in core areas such as accounting and finance, technology, management, marketing, crisis management, strategic planning, international markets and industry knowledge.
Track Record. Directors should have a proven track record of excellence in their field.
Diversity. Directors should be selected so that the Board of Directors is a diverse body, with diversity reflecting gender, ethnic background, country of citizenship and professional experience.
Age. Given the Board’s mandatory retirement age of 72, directors must be able to, and should be committed to, serve on the Board for an extended period of time.
Independence. Directors should be independent in their thought and judgment and be committed to represent the long-term interests of alldisposition of the Company’s shareholders.Personalized Imaging and Document Imaging businesses and the complexity resulting from the adoption of fresh-start accounting in connection with the Company’s emergence from Chapter 11 proceedings. The audit-related fees for 2012 related primarily to fees for the audit of carve-out financial statements in connection with the expected disposition of the Company’s Personalized Imaging and Document Imaging businesses.
Tax fees in 2013 consisted of $0.3 million for tax compliance services. Tax fees in 2012 consisted of $0.4 million for tax compliance services.
Ownership Stake.POLICY REGARDING PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT AUDITOR Directors should be committed to having a meaningful, long-term equity ownership stake in the Company.
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EXHIBIT III — DIRECTOR SELECTION PROCESS
The entire Board of Directors is responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of the shareholders. The Corporate Responsibility and Governance Committee is responsible for identifying, screening and recommending candidates to the Board for Board membership. The Chair of the Corporate Responsibility and Governance Committee will oversee this process.
The Corporate Responsibility and Governance Committee will generally use the following process when recruiting, evaluating and selecting director candidates. The various steps outlined in the process may be performed simultaneously and in an order other than that presented below. Throughout the process, the Committee will keep the full Board informed of its progress.
The Company is committed to maintaining its tradition of inclusion and diversity within the Board, and confirms that its policy of non-discrimination based on sex, race, religion or national origin applies in the selection of Directors.
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EXHIBIT IV — AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY
I. Statement of Principles
The Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent auditor. As part of this responsibility, the Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that they do not impair the auditor’s independence from the Company. Accordingly, the AuditFinance Committee has adopted thisan Audit and Non-Audit Services Pre-Approval Policy which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditor may be pre-approved.
This Pre-Approval Policy establishes two different approaches to pre-approving services: proposed services either may be pre-approved without specific consideration by the Audit Committee (general pre-approval) or require the specific(the “Pre-Approval Policy”) requiring its pre-approval of the Audit Committee (specific pre-approval). The Audit Committee believes that the combination of these two approaches in this policy will result in an effectiveall audit and efficient procedure to pre-approvepermissible non-audit services performedprovided by the independent auditor. The Pre-Approval Policy sets forth principles that must be considered by the Audit and Finance Committee in approving services to ensure that the independent auditor’s independence is not impaired; describes the audit, audit-related, tax and other permissible non-audit services that may be provided and the non-audit services that are prohibited; and sets forth the pre-approval requirements for all permitted services. The Pre-Approval Policy provides for the general pre-approval of specific types of audit, audit-related, tax and other permissible non-audit services and annual approval of a budget for such services. As set forth in this policy,the Pre-Approval Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit and Finance Committee. AnyIn addition, any proposed services exceeding pre-approved budgeted amounts will also require specific pre-approval by the Audit and Finance Committee. For both types of pre-approval, the Audit Committee shall consider whether such services are consistent with the SEC’s rules on auditor independence. The Audit Committee shall determine whether the audit firm is best positioned to provide the most effective and efficient service.
The non-audit services that have the general pre-approval of the Audit Committee will be reviewed on an annual basis unless the Audit Committee considers a different period and states otherwise. The Audit Committee shall annually review and pre-approve the audit, audit-related and tax services that can be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee. The Audit Committee will revise the list of general pre-approved services from time to time, based upon subsequent determinations. The Audit Committee does not delegate its responsibilities to pre-approve services performed by the independent auditor to management or to others.
The independent auditor has reviewed this policy and believes that implementation of the policy will not adversely affect the auditor’s independence.
II. Audit Services
The Audit Committee shall approve the annual audit services engagement terms and fees no later than its review of the independent auditor’s audit plan. Audit services may include the annual financial statement audit (including required quarterly reviews), subsidiary audits and other proceduresis required to be performed by the independent auditor to be able to form an opinion on the Company’s consolidated financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations occurring during, and as a result of, the audit. Audit services also include the attestation engagement for the independent auditor’s report on management’s report on internal control over financial reporting. The Audit Committee shall also approve, if necessary, any significant changes in terms, conditions and fees resulting from changes in audit scope, company structure or other items.
In addition to the annual audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other audit services, which are those services that only the independent auditor reasonably can provide. Other audit services may include statutory audits or financial audits for subsidiaries or affiliates of the Company and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.
III. Audit-Related Services
Audit-related services are assurance and related services that traditionally are performed by the independent auditor. Because the Audit Committee believes that the provision of audit-related services does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor independence, the Audit Committee may grant general pre-approval to audit-related services. Audit-related services include, among others, due diligence services pertaining to potential business acquisitions/dispositions, accounting consultations for significant or unusual transactions not classified as “audit services,” assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities, financial audits of employee benefit plans, agreed-upon or expanded audit procedures performed at the request of management and assistance with internal control reporting requirements.
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IV. Tax Services
The Audit Committee believes that the independent auditor can provide traditional tax services to the Company such as U.S. and international tax planning and compliance. The Audit Committee will not pre-approve the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Code and related regulations.
V. Other Permissible Non-Audit Services
The Audit Committee may grant general pre-approval to those permissible non-audit services (other than tax services, which are addressed above) that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC’s rules on auditor independence.
A list of the SEC’s prohibited non-audit services is attached to the end of this policy as Attachment 1. The SEC’s rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions.
VI. Pre-Approval Budgeted Amounts
Pre-approval budgeted amounts for all services to be provided by the independent auditor shall be reviewed and approved annually by the Audit Committee. Any proposed services exceeding these levels or amounts shall require specific pre-approval by the Audit Committee. On a quarterly basis, the Audit Committee will be provided with updates regarding actual projects and fees by category in comparison to the pre-approved budget.
VII. Procedures
All requests or applications from the independent auditor to provide services that do not require specific approval by the Audit Committee shall be submitted to the Corporate Controller and must include a detailed description of the services to be rendered. The Corporate Controller will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee.
Requests or applications to provide services that require specific approval by the Audit Committee shall be submitted to the Audit and Finance Committee regarding the extent of services provided in accordance with their pre-approval and the fees for approval by the Corporate Controller.
VIII. Delegation
services performed to date. The CommitteePre-Approval Policy also delegates to the Audit and Finance Committee’s Chair is authorizedthe authority to pre-approve specific engagements or changes to engagements when it is not practical to bring the matter before the Committee as a whole. The Audit and Finance Committee may not delegate its responsibilities to pre-approve services performed by the independent auditor to management or to others.
Attachment 1
Prohibited Non-Audit Services
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports
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ANNUAL MEETING INFORMATION
20092014 ANNUAL MEETING DIRECTIONS AND PARKING INFORMATION
Location |
W New York |
541 Lexington Avenue |
New York, NY 10022 |
Directions |
From LaGuardia Airport, NY |
Proceed on Marine Terminal Road (Airport Exit) (South-West) |
Turn Left (South) onto Ditmars Blvd, then immediately turn Right (West) onto Astoria Blvd N |
Take Ramp (Left) onto Bqe E (Brooklyn Queens Expy E) |
Take Ramp onto Brooklyn Queens Expy (I-278) |
At I-278 Exit 38, turn off onto Ramp (towards RT-25A) |
Turn Right (West) onto Northern Blvd (SR-25A) |
Bear Right (West) onto Bridge Plaza N (Queens Plaza N) |
Keep Straight onto Queensboro Bridge |
Keep Straight onto Ramp |
Road name changes to Queensboro Brg-Lower Level (59thSt Bridge) |
Keep Straight onto Ramp (towards 2 Ave-South) |
Keep Left to stay on Ramp |
Turn Left (South) onto 2ndAvenue |
Turn Right (West) onto E 49th St. |
Arrive: W New York – 541 Lexington Ave, New York City, NY |
From John F. Kennedy International Airport, NY |
Proceed on JFK Expy (South-East) |
Turn Left (North) onto Ramp (towards Airport Exit/Other Terminals) |
Road name changes to JFK Expy |
Take Ramp (Right) onto Van Wyck Expy (I-678) |
At exit 12B, take Ramp (Right) onto Long Island Expy (I-495) |
Turn off onto Ramp |
Keep Right to stay on Ramp |
Turn Left (West) onto E37th St, then immediately turn Right (North) onto 3rdAve |
Turn Left (West) onto E 49thSt |
Arrive: W New York - 541 Lexington Ave, New York City, NY |
From Newark Liberty International Airport, NJ |
Proceed on Newark International Airport Exit (North) |
Keep Left onto Ramp (towards US-1/US-9/US-22/RT 21/Newark-Elizabeth/NY Via Skyway) |
Keep Right to stay on Ramp |
Take Ramp onto US-9 (US-1 and 9) |
Keep Left onto Ramp (towards I-95/US-1-Truck/US-9-Truck/New Jersey Turnpike |
Keep Right to stay on Ramp |
Keep Right to stay on Ramp |
*Toll road*Merge onto New Jersey Tpke (I-95) |
At I-95 Exit 16E, take Ramp (Right) onto I-495 |
Keep Straight onto Dyer Ave |
Turn Left (East) onto (W) 34thSt |
Turn Left (North) onto 3rdAve |
Turn Left (West) onto E 49thSt |
Arrive: W New York – 541 Lexington Ave, New York City, NY |
A | Proposals—The Board of Directors recommends a voteFOR all the nominees listed in Item 1,FOR Item 2 and Item 3, and1 Yr on Item 4. |
1. | Election of Directors: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | | ||||||||||||||||||||
01 | - | Mark S. Burgess | o | o | o | 02 | - | Jeffrey J. Clarke | o | o | o | 03 | - | James V. Continenza | o | o | o | ||||||||||||||
04 | - | Matthew A. Doheny | o | o | o | 05 | - | John A. Janitz | o | o | o | 06 | - | George Karfunkel | o | o | o | ||||||||||||||
07 | - | Jason New | o | o | o | 08 | - | WIlliam G. Parrett | o | o | o | 09 | - | Derek Smith | o | o | o |
For | Against | Abstain | |||||||
2. | Ratification of the Audit and Finance Committee’s Selection of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm. | o | o | o | |||||
1 Yr | 2 Yrs | 3 Yrs | Abstain | ||||||
4. | Advisory Vote on the Frequency of the Advisory Vote on the Compensation of our Named Executive Officers. | o | o | o | o |
For | Against | Abstain | |||||||
3. | Advisory Vote on the Compensation of our Named Executive Officers. | o | o | o |
B | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |||
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. |
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||
/ / | ||||
Embassy Suites Hotel Walnut Creek
IF VOTING BY MAIL, YOU1345 Treat Boulevard, Walnut Creek, CA 94596-2184MUST
Directions COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
From 680 Freeway NorthExit at Treat Boulevard.Turn right onto Treat Boulevard for¼ mile.Turn left onto Oak Road to hotel entrance.
From 680 Freeway SouthExit at Oak Park Boulevard.Proceed left on North Main to Treat Boulevard.Turn left onto Treat Boulevard for¼ mile.Turn left onto Oak Road to hotel entrance.
From Oakland International AirportHead north on 880 towards downtown Oakland.Follow 880 to 24 East toward Walnut Creek.Follow 24 East to 680 junction.Take 680 North towards Sacramento.Exit at Treat Boulevard.Turn right onto Treat Boulevard for¼ mile.Turn left onto Oak Road to hotel entrance.
From San Francisco International AirportHead north on 101 toward San Francisco to 80 East.Cross the Bay Bridge and follow signs to 24 Walnut Creek.Follow 24 East to 680 junction.Take 680 North towards Sacramento.Exit at Treat Boulevard.Turn right onto Treat Boulevard for¼ mile.Turn left onto Oak Road to hotel entrance.
ParkingAll parking at the Embassy Suites Hotel Walnut Creek is Valet only. Shareholders attending the Annual Meeting will be charged a discounted rate of $9.00 for Valet parking for the Annual Meeting. In order to receive the discounted parking rate, shareholders must notify the Valet attendant that you are attending the Annual Meetingbefore checking in your vehicle.
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NOTICE OF THE 20092014 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Eastman Kodak Company will be held on Wednesday, May 13, 200928, 2014 at 9:00 a.m., local time,Eastern Time at the Embassy Suites Hotel Walnut Creek, 1345 Treat Boulevard, Walnut Creek, CA.W New York, 541 Lexington Avenue, New York, NY 10022. The following proposals will be voted on at the Annual Meeting:
1. | Election of | |
2. | Ratification of the Audit and Finance Committee’s selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm. | |
3. | Advisory Vote on the Compensation of our Named Executive Officers. | |
4. | Advisory Vote on the Frequency of the Advisory Vote on the Compensation of our Named Executive Officers. | |
5. | Such other business as may properly come before the meeting or any adjournment thereof. |
The Board of Directors recommends a voteFORItems 1, 2 and 2.3 and1 Yron Item 4.
If you were a shareholder of record at the close of business on March 16, 2009,31, 2014, you are entitled to vote at the Annual Meeting.
Again this year, weWe are taking advantage of the Securities and Exchange Commission “e-proxy” rules that allow public companies to furnish proxy materials to their shareholders over the internet. We believe theThese rules will allow us to provide you with the information you need, while lowering the cost of delivery and reducing the environmental impact of our Annual Meeting.
If you have any questions about the Annual Meeting, please contact: Coordinator, Shareholder Services, Eastman Kodak Company, 343 State Street, Rochester, NY 14650-0218,14650-0251, (585) 724-5492,724-4053, e-mail: shareholderservices@kodak.com.
The Annual Meeting will be accessible by the handicapped. If you require special assistance, contact the Coordinator, Shareholder Services.
By Order of the Board of Directors
Patrick M. Sheller
Secretary
April 15, 2014
6IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6 |
|
Proxy — Eastman Kodak Company |
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersignedshareowner(s) whose signature(s) appear(s) on the reverse side of this Proxy Form hereby appoints Antonioappoint(s) James V. Continenza and Patrick M. Perez and Laurence L. Hickey, and eachSheller, or either of them, as Proxieseach with full power of substitution, as proxies, to vote as designated on the reverse side, for director substitutes if any nominee becomes unavailable, andall stock in their discretion, on matters properly brought before the Annual Meeting and on matters incident to the conduct of the Annual Meeting, all of the shares of common stock of Eastman Kodak Company which the undersigned has powershareowner(s) would be entitled to vote aton all matters which may properly come before the 2014 Annual Meeting of Shareholders and any adjournments or postponements thereof. The proxies shall vote subject to be heldthe directions indicated on May 13, 2009,the reverse side of this card, and proxies authorized to vote in their discretion upon other business as may properly come before the meeting and any adjournments or any adjournmentpostponements thereof.The proxies will vote as the Board of Directors recommends where a choice is not specified.
NOMINEES FOR DIRECTOR: RichardMark S. Braddock, Timothy M. Donahue, MichaelBurgess, Jeffrey J. Hawley, William H. Hernandez, Douglas R. Lebda, Debra L. Lee, Delano E. Lewis,Clarke, James V. Continenza, Matthew A. Doheny, John A. Janitz, George Karfunkel, Jason New, William G. Parrett, Antonio M. Perez, Dennis F. Strigl and Laura D’Andrea Tyson.Derek Smith.
THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR ALL NOMINEES FOR DIRECTORON ITEMS 1, 2 AND FOR THE RATIFICATION OF THE AUDIT COMMITTEE’S SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.3 AND1 YRON ITEM 4 BELOW.
This Proxy will be voted as directed. If no direction to the contrary is indicated, it will be voted as follows: | ||
1. | FOR the election of all nominees for director; | |
2. | FOR the ratification of the Audit and Finance Committee’s selection of PricewaterhouseCoopers LLP as our independent registered public accounting | |
3. | FOR the Advisory Vote on the Compensation of our Named Executive Officers; and | |
4. | 1 YR Advisory Vote on the Frequency of the Advisory Vote on the Compensation of our Named Executive Officers. |
Meeting Attendance | |||||||||||||||
Change of Address— Please print new address below. | |||||||||
I plan to attend the Annual Meeting.o | I plan to bring a guest. |
IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. |