Kodak 2006 Annual Report Download - page 23

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Products in the KHG segment are manufactured in the United States, primarily in Rochester, New York; Windsor, Colorado; Oakdale, Minnesota; and
White City, Oregon. Manufacturing facilities outside the United States are located in Brazil, China, France, Germany, India and Mexico. The seg-
ment provides digital and traditional products and services including picture archiving and communications systems, radiology information systems,
enterprise and departmental healthcare information systems, digital and computed radiography systems, laser imaging, mammography and oncology
systems, x-ray film systems for general radiography, and dental imaging products.
Properties within a country may be shared by all segments operating within that country.
Regional distribution centers are located in various places within and outside of the United States. The Company owns or leases administrative, manu-
facturing, marketing and processing facilities in various parts of the world. The leases are for various periods and are generally renewable.
The Company has significantly reduced its property portfolio as a result of the 2004-2007 Restructuring Program. Under this program, the Company
plans to reduce its traditional manufacturing infrastructure by two-thirds below 2004 levels. The program is expected to be largely complete by year-
end 2007. During 2006, the Company made significant progress towards achieving this goal and remains committed to this plan.
ITEM 3. LEGAL PROCEEDINGS
During March 2005, the Company was contacted by members of the Division of Enforcement of the SEC concerning the announced restatement of the
Company’s financial statements for the full year and quarters of 2003 and the first three unaudited quarters of 2004. An informal inquiry by the staff
of the SEC into the substance of that restatement is continuing. The Company continues to fully cooperate with this inquiry, and the staff has indicated
that the inquiry should not be construed as an indication by the SEC or its staff that any violations of law have occurred.
On June 13, 2005, a purported shareholder class action lawsuit was filed against the Company and two of its executives in the United States District
Court for the Southern District of New York. On June 20, 2005 and August 10, 2005, similar lawsuits were filed against the same defendants in the
United States District Court for the Western District of New York. The cases were consolidated in the Western District of New York and the lead plain-
tiffs were John Dudek and the Alaska Electrical Pension Fund. The complaints filed in each of these actions (collectively, the “Complaints”) sought
to allege claims under the Securities Exchange Act on behalf of a proposed class of persons who purchased securities of the Company between April
23, 2003 and September 25, 2003, inclusive. An amended complaint was filed on January 20, 2006, containing essentially the same allegations
as the original complaint but adding an additional named defendant. Defendants’ motion to dismiss was argued on October 3, 2006 and granted on
November 1, 2006. The plaintiffs did not appeal.
On or about November 9, 2005, the Company was served with a purported shareholder derivative lawsuit that had been commenced against the
Company, as a nominal defendant, and eleven current and former directors and officers of the Company, in the New York State Supreme Court,
Monroe County. The Complaint seeks to allege claims on behalf of the Company that, between April 2003 and September 2003, the defendant officers
and directors caused the Company to make allegedly improper statements, in press release and other public statements, which falsely represented or
omitted material information about the Company’s financial results and guidance. The plaintiff alleges that this conduct was a breach of the defen-
dants’ common law fiduciary obligations to the Company, and constituted an abuse of control, gross mismanagement, waste and unjust enrichment.
Defendants’ initial responses to the Complaint are not yet due. The Company intends to defend this lawsuit vigorously.
The Company is named a Potentially Responsible Party (“PRP”) along with seven other companies in connection with certain alleged environmental
contamination at the Rochester Fire Academy, located in Rochester, New York. The Company provided flammable materials to the Fire Academy, which
were used in fire-fighting training. The Company and the seven other PRPs have been negotiating with the New York State Attorney General’s office.
On November 15, 2005, the New York State Attorney General filed a complaint in the U.S. District Court, Western District of New York against all eight
PRPs seeking recovery of expenses to remediate the site. The companies have reached a conceptual settlement with the NYS Attorney General, which
if mutually acceptable terms are reached and the court approves the settlement, would result in the Company paying approximately $196,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.