Kodak 2003 Annual Report Download - page 87

Proxy Statement
87
MANAGEMENT PROPOSALS
ITEM 1—Election of Directors
Kodak’s bylaws require us to have at least nine directors but no more than
18. The number of directors is set by the Board and is currently 12. Mr.
Carp is the only director who is an employee of the Company. The Board is
divided into three classes of directors with overlapping three-year terms.
There are four Class II directors whose terms expire at the 2004 Annual
Meeting. One of the directors, William W. Bradley, is not standing for re-
election.
Nominees for election as Class II directors are:
William H. Hernandez
Hector de J. Ruiz
Laura D’Andrea Tyson
These nominees agree to serve a three-year term. Information about them
is provided beginning on page 94.
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 substi-
tute, 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.
The Board of Directors recommends a vote FOR the election of these
directors.
ITEM 2—Ratification of Election of Independent
Accountants
PricewaterhouseCoopers LLP have been the Company’s independent
accountants for many years. The Board, on the recommendation of its Audit
Committee, elected PricewaterhouseCoopers LLP the Company’s
independent accountants to serve until the 2005 Annual Meeting.
Representatives of PricewaterhouseCoopers LLP will attend the Meeting to
respond to questions and, if they desire, to make a statement.
The Board of Directors recommends a vote FOR the ratification of election
of PricewaterhouseCoopers LLP as independent accountants.
ITEM 3—Re-Approval of the Material Terms of
the Performance Goals Under the 2000
Omnibus Long-Term Compensation Plan
Introduction
You are being asked to re-approve the material terms of the performance
goals under the 2000 Omnibus Long-Term Compensation Plan (the
“Plan”). This re-approval is required under Internal Revenue Service regu-
lations in order to preserve the Company’s federal income tax deduction
when payments based on these performance goals are made to certain
executive officers. These material terms, which were approved by our
shareholders when the plan was first adopted in 1999, remain unchanged.
Re-approval requires the favorable vote of a majority of the votes cast. We
are not asking you to approve any amendments to the Plan. YOUR BOARD
RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.
Purpose of Proposal
As discussed in the Report of the Executive Compensation and
Development Committee, the Company generally seeks to preserve its
ability to claim tax deductions for compensation paid to executives to the
greatest extent practicable. Section 162(m) of the Internal Revenue Code
sets limits on the Company’s federal income tax deduction for compensa-
tion paid in a taxable year to an individual who, on the last day of the tax-
able year, was (i) the chief executive officer or (ii) among the four other
highest-compensated executive officers whose compensation is reported
in the Summary Compensation Table. “Qualified performance-based com-
pensation,” which can include compensation from stock options, stock
appreciation rights, performance shares, performance share units, cash
awards and certain grants of restricted stock, is not subject to this deduc-
tion limit, and therefore is fully deductible, if certain conditions are met.
One of the conditions is shareholder approval of the material terms of the
performance goals under which the compensation is paid.
In 1999, our shareholders initially approved the Plan, including its per-
formance goals. A company is generally required by Internal Revenue
Service regulations, however, to obtain re-approval of the material terms
of the performance goals from its shareholders every five years. Thus, the
effectiveness of the 1999 shareholder approval of the material terms of
the Plan’s performance goals expires at the Annual Meeting. As a result,
the Company is seeking re-approval of the material terms of the perform-
ance goals in order to have the compensation paid based on these per-
formance goals to the CEO and the four other highest-compensated exec-
utive officers remain fully deductible by the Company for federal tax pur-
poses.
Material Terms of the Performance Goals
Under the Plan, the following kinds of performance awards may be grant-
ed based on the Plan’s performance goals: stock awards, performance
shares, performance units and awards under the Plan’s Performance
Stock Program.
The material terms of the performance goals for these performance
awards consist of (i) the class of employees eligible to receive the per-
formance awards; (ii) the performance criteria on which the performance
goals are based; and (iii) the maximum payout of a performance award
that can be provided to any employee under the Plan during a specified
period.
Eligible Class
All employees of the Company and its 50% or more owned subsidiaries
and the Company’s directors are eligible to receive awards under the Plan
in the form of stock awards, performance shares and performance units.
Only the Company’s executives are eligible to participate in the Plan’s
Performance Stock Program.
Performance Criteria
The performance criteria that may be used to establish the Plan’s per-
formance goals are: economic profit/economic value added, return on net
assets, return on shareholders’ equity, return on assets, return on capital,
shareholder returns, total shareholder return, profit margin, earnings per
Proposals to Be Voted On