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Eastman Kodak Company 2007 Annual Report on Form 10-K
and Notice of 2008 Annual Meeting and Proxy Statement

Table of contents

  • Page 1
    Eastman Kodak Company 2007 Annual Report on Form 10-K and Notice of 2008 Annual Meeting and Proxy Statement

  • Page 2
    ... File Number 1-87 to EASTMAN KODAK COMPANY (Exact name of registrant as specified in its charter) NEW JERSEY (State of incorporation) 16-0417150 (IRS Employer Identification No.) 14650 (Zip Code) 343 STATE STREET, ROCHESTER, NEW YORK (Address of principal executive offices...

  • Page 3
    ...2008 Annual Meeting and Proxy Statement: Item 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Item 11 - EXECUTIVE COMPENSATION Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...

  • Page 4
    ... Item 2. Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services 02...

  • Page 5
    ...," "us," the "Company" and "Kodak" refer to Eastman Kodak Company. The Company's products span: • Digital cameras and accessories • Consumer inkjet printers and media • Digital picture frames • Retail printing kiosks and related media • On-line imaging services • Prepress equipment and...

  • Page 6
    ... unique Image Science technologies. Additionally, the system is designed with a permanent print head. This unique offering is targeting the high-volume document and photo printer market with a breakthrough value proposition delivering lower cost per printed page as compared with competitive products...

  • Page 7
    ...and professional photo processing labs. The Company also offers to professional and commercial labs an industry-leading family of digital workflow software designed to improve their workflows and enhance our position as a leading supplier of consumables. Film Products Group (FPG) Segment Sales from...

  • Page 8
    ... media; high-speed production and workgroup document scanners; and micrographic peripherals and media (including micrographic films). GCG also provides maintenance and professional services for Kodak and other manufacturers' products, as well as providing imaging services to customers. Marketing and...

  • Page 9
    .... These groups work in close cooperation with manufacturing units and marketing organizations to develop new products and applications to serve both existing and new markets. It has been the Company's general practice to protect its investment in research and development and its freedom to use its...

  • Page 10
    ... inkjet printers and commercial printing systems and solutions) designed to produce high quality documents and images, and media (thermal and silver halide) optimized for digital workflows. Kodak's success depends in part on its ability to develop and introduce new products and services in a timely...

  • Page 11
    ... digital skills is highly competitive and therefore the Company's ability to attract such talent will depend on a number of factors, including compensation and benefits, work location and persuading potential employees that the Company is well-positioned for success in the new digital markets Kodak...

  • Page 12
    ... we do business are highly competitive, and we encounter aggressive price competition for all our products and services from numerous companies globally. Over the past several years, price competition in the market for digital products (including consumer inkjet printers), film and services has been...

  • Page 13
    ... 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, manufacturing, marketing, and processing facilities in various parts of...

  • Page 14
    ... on the Company's Senior Executive Diversity and Inclusion Council and Ethics Committee. He works closely with Kodak's CEO, Board of Directors and Executive Compensation and Development Committee on all executive compensation and development processes for the corporation. Prior to this position, Mr...

  • Page 15
    ... Program in December 2004. In February 2005 he was elected a Senior Vice President of the Company. In June 2005, he was also named Director, Corporate Strategy & Business Development. Prior to Kodak, Mr. Faraci served as Chief Operating Officer of Phogenix Imaging and President and General Manager...

  • Page 16
    ...2003. At that time, she took an operating line position as General Manager, Graphics and Printing Systems SPG, in the Commercial Imaging Group (now Graphic Communications Group). In mid-2005, Ms. Wilfong was appointed Director, Corporate Audit. Prior to joining Kodak, Ms. Wilfong was Chief Financial...

  • Page 17
    ... OF EQUITY SECURITIES Eastman Kodak Company common stock is traded on the New York Stock Exchange under the symbol "EK." There were 58,477 shareholders of record of common stock as of January 31, 2008. Market Price Data 2007 Price per share: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter High $27...

  • Page 18
    ... "Kodak Operating Model and Reporting Structure." The three business segments are: Consumer Digital Imaging Group ("CDG"), Film Products Group ("FPG") and Graphic Communications Group ("GCG"). During 2007, the Company met or exceeded each of its strategic objectives established for the year: • Net...

  • Page 19
    ...'s Products)." Such incentive programs include cash and volume discounts, price protection, promotional, cooperative and other advertising allowances and coupons. For those incentives that require the estimation of sales volumes or redemption rates, such as for volume rebates or coupons, the Company...

  • Page 20
    ... December 31, 2007 and 2006. Kodak's defined benefit pension and other postretirement benefit costs and obligations are dependent on the Company's assumptions used by actuaries in calculating such amounts. These assumptions, which are reviewed annually by the Company, include the discount rate, long...

  • Page 21
    ... "Recently Issued Accounting Standards" section of Note 1, "Significant Accounting Policies," in the Notes to Financial Statements. Kodak Operating Model and Reporting Structure For 2007, the Company had three reportable segments: Consumer Digital Imaging Group (CDG), Film Products Group (FPG), and...

  • Page 22
    ... technology and infrastructure associated with manufacturing and supply chain for all FPEG products. The following indicates the changes from the 2007 reporting structure to the new reporting structure that will be implemented beginning in the first quarter of 2008: Consumer Digital Imaging Group...

  • Page 23
    ... Before Interest, Other Income (Charges), Net and Income Taxes by Reportable Segment and All Other For the Year Ended December 31, (in millions) Consumer Digital Imaging Group Film Products Group Graphic Communications Group All Other Total of segments Restructuring costs and other Other...

  • Page 24
    ... sales Gross profit margin $ 10,301 24.4% Change vs. 2006 -2.5% 1.6pp Volume -2.2% 0.0pp Change vs. 2006 Price/Mix -3.4% -4.2pp Foreign Exchange 3.1% 1.4pp Manufacturing and Other Costs 0.0% 4.4pp Worldwide Revenues For the year ended December 31, 2007, net sales from traditional products...

  • Page 25
    ...from the proceeds on the sale of the Health Group (See Note 23, "Discontinued Operations" in the Notes to Financial Statements) and higher interest rates. This increase was partially offset by an impairment of an equity method investment. Income Tax (Benefit) Provision For the Year Ended December 31...

  • Page 26
    ... in Retail Printing. Net worldwide sales of Digital Capture and Devices, which includes consumer digital cameras, digital picture frames, accessories, memory products, snapshot printers and related media, and intellectual property royalties, increased 7% in the year ended December 31, 2007 as...

  • Page 27
    ... in 2007 as compared with the prior year, primarily reflecting continuing industry volume declines and negative price/mix, partially offset by favorable exchange. Net worldwide sales for Entertainment Imaging, which include origination, intermediate, and print films, and digital systems and services...

  • Page 28
    ...impacted net worldwide sales. Net worldwide sales of Document Imaging, which includes document scanners and services, media, and imaging services, were flat compared with prior year. Unfavorable volume and price/mix were offset by favorable exchange. Net worldwide sales of Digital Printing Solutions...

  • Page 29
    ... Year Ended December 31, (in millions, except per share data) Digital net sales Traditional net sales New technologies Net sales Cost of goods sold Gross profit Selling, general and administrative expenses Research and development costs Restructuring costs and other Other operating expenses (income...

  • Page 30
    For the Year Ended December 31, 2006 Amount Total net sales Gross profit margin $10,568 22.8% Change vs. 2005 -7.3% 0.6pp Volume -10.1% 0.0pp Price/Mix -3.3% 0.4pp Change vs. 2005 Foreign Exchange 0.5% 0.1pp Manufacturing and Other Costs 0.0% -0.4pp Acquisitions 5.6% 0.5pp Worldwide ...

  • Page 31
    ... service, Kodak EasyShare digital cameras were number one in unit market share in the U.S. for the year 2006. Retail Printing includes color negative paper, photochemicals, service and support, photofinishing services, and retail kiosks and related media. Net worldwide sales of Retail Printing...

  • Page 32
    ...time-use cameras (OTUC), professional films, and reloadable film cameras, decreased 30% in 2006 as compared with 2005, primarily reflecting industry volume declines. Net worldwide sales for Entertainment Imaging, including origination, intermediate, and print films, and digital products and services...

  • Page 33
    ... of Prepress Solutions. Net worldwide sales of Document Imaging, which includes document scanners and services, media, and imaging services, were flat compared with 2005. Favorable volume and foreign currency were offset by unfavorable price/mix. Net worldwide sales of Digital Printing Solutions...

  • Page 34
    ... in connection with the Company's sale of its pharmaceutical, consumer health and household products businesses during that year. These items were partially offset by a pension settlement charge of $54 million resulting from the finalization of the transfer of pension assets to ITT Industries, Inc...

  • Page 35
    ...on cost efficiency opportunities with respect to its sales, manufacturing and administrative infrastructure. Liquidity and Capital Resources 2007 Cash Flow Activity The Company's primary sources and uses of cash for the year ended December 31, 2007 included proceeds on the sale of businesses/assets...

  • Page 36
    ...and non-U.S. defined benefit pension plans; and • Benefit payments totaling approximately $218 million relating to postretirement benefit plans in the U.S., United Kingdom and Canada. Net cash used in continuing operations in investing activities for the year ended December 31, 2007 of $41 million...

  • Page 37
    ... on the Consolidated Statement of Financial Position. See Note 9, "Short-Term Borrowings and Long-Term Debt" in the Notes to Financial Statements. (2) Purchase obligations include agreements related to supplies, production and administrative services, as well as marketing and advertising, that are...

  • Page 38
    ... of Financial Position. The Company issues indemnifications in certain instances when it sells businesses and real estate, and in the ordinary course of business with its customers, suppliers, service providers and business partners. Further, the Company indemnifies its directors and officers who...

  • Page 39
    ... to major U.S. and non-U.S. defined benefit pension plans; and • Benefit payments totaling approximately $240 million relating to U.S., United Kingdom and Canada postretirement benefit plans. Net cash used in continuing operations in investing activities for the year ended December 31, 2005 of...

  • Page 40
    ... report are subject to a number of factors and uncertainties, including the successful: • execution of the digital growth and profitability strategies, business model and cash plan; • implementation of the cost reduction programs; • transition of certain financial processes and administrative...

  • Page 41
    ... Treasury Center, as well as forecasted foreign currency denominated intercompany sales. Silver forward contracts are used to mitigate the Company's risk to fluctuating silver prices. The Company's exposure to changes in interest rates results from its investing and borrowing activities used to meet...

  • Page 42
    ... financial position of Eastman Kodak Company and its subsidiaries at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States...

  • Page 43
    Eastman Kodak Company n Consolidated Statement of Operations For the Year Ended December 31, (in millions, except per share data) Net sales Cost of goods sold Gross profit Selling, general and administrative expenses Research and development costs Restructuring costs and other Other operating (...

  • Page 44
    ... comprehensive income (loss) Treasury stock, at cost 103,292,930 shares as of December 31, 2007 and 103,959,637 shares as of December 31, 2006 Total shareholders' equity Total Liabilities And Shareholders' Equity The accompanying notes are an integral part of these consolidated financial statements...

  • Page 45
    ... Comprehensive (Loss) Income $ (90) - Treasury Stock $ (5,844) - Total $ 4,034 (1,261) (in millions, except share and per share data) Shareholders' Equity as of December 31, 2004 Net loss Other comprehensive income (loss): Unrealized losses on available-for-sale securities ($9 million...

  • Page 46
    Eastman Kodak Company n Consolidated Statement of Shareholders' Equit y Additional Common Paid In Stock (1) Capital $ 978 - $ 867 - Retained Earnings $ 6,717 (601) Accumulated Other Comprehensive (Loss) Income $ (467) - Treasury Stock $ (5,813) - Total $ 2,282 (601) ...

  • Page 47
    ... Other Comprehensive (Loss) Income $ (635) - Treasury Stock $ (5,803 Total $ 1,388 676 (in millions, except share and per share data) Shareholders' Equity as of December 31, 2006 Net earnings Other comprehensive income (loss): Unrealized gains on available-for-sale securities ($16 million...

  • Page 48
    ... cumulative effect of accounting change, net of income taxes Equity in earnings from unconsolidated affiliates Depreciation and amortization Gain on sales of businesses/assets Purchased research and development Non-cash restructuring costs, asset impairments and other charges (Benefit) provision for...

  • Page 49
    Eastman Kodak Company n Consolidated Statement of Cash Flows For the Year Ended December 31, (in millions) Cash flows from financing activities: Proceeds from borrowings Debt issuance costs Repayment of borrowings Dividends to shareholders Exercise of employee stock options Net cash (used in) ...

  • Page 50
    ... Standards (SFAS) No. 52, "Foreign Currency Translation," the financial statements of these subsidiaries and branches are translated into U.S. dollars as follows: assets and liabilities at year-end exchange rates; income, expenses and cash flows at average exchange rates; and shareholders' equity...

  • Page 51
    ..., technology developments or other economic factors. Properties Properties are recorded at cost, net of accumulated depreciation. The Company principally calculates depreciation expense using the straight-line method over the assets' estimated useful lives, which are as follows: Years Buildings...

  • Page 52
    ... Products)." Such incentive programs include cash and volume discounts, price protection, promotional, cooperative and other advertising allowances, and coupons. For those incentives that require the estimation of sales volumes or redemption rates, such as for volume rebates or coupons, the Company...

  • Page 53
    .... The Company does not use derivatives for trading or other speculative purposes. Income Taxes In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 clarifies the accounting and reporting for...

  • Page 54
    ... weighted-average number of shares of common stock outstanding during the year. As a result of the net loss from continuing operations presented for the years ended December 31, 2007, 2006 and 2005, the Company calculates diluted earnings-pershare using weighted-average basic shares outstanding for...

  • Page 55
    ... the first quarter of 2007 did not have a material impact on the Company's Consolidated Financial Statements. FASB Interpretation No. 48 In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 clarifies the accounting and reporting for...

  • Page 56
    ...interests as equity in the Consolidated Statement of Financial Position, and separate identification and presentation in the Consolidated Statement of Operations of net income attributable to the entity and the noncontrolling interest. It also establishes accounting and reporting standards regarding...

  • Page 57
    ... INTANGIblE ASSETS Goodwill was $1,657 million and $1,584 million as of December 31, 2007 and 2006, respectively. The changes in the carrying amount of goodwill by reportable segment for 2006 and 2007 were as follows: Consumer Digital Imaging Group $ 208 - 9 $ 217 - - - 9 $ 226 Film Products...

  • Page 58
    ... 31, 2006 (in millions) Technology-based Customer-related Other Total $ Gross Carrying Amount $ 324 274 214 812 $ Accumulated Amortization $ 119 95 88 302 $ $ Net 205 179 126 510 Weighted-Average Amortization Period 7 years 10 years 8 years 8 years During the fourth quarter of 2007, the Company...

  • Page 59
    ... and reports such amounts in other income (charges), net in the accompanying Consolidated Statement of Operations. See Note 15, "Other Income (Charges), Net." In the fourth quarter of 2007, the shareholders of Matsushita-Ultra Tech Battery Corporation ("MUTEC"), a joint venture between the Company...

  • Page 60
    ... The weighted-average interest rates for short-term bank borrowings outstanding at December 31, 2007 and 2006 were 7.50% and 9.84%, respectively. As of December 31, 2007, the Company and its subsidiaries, on a consolidated basis, maintained $1,062 million in committed bank lines of credit and $499...

  • Page 61
    ... into an agreement to sell its Health Group to Onex Healthcare Holdings, Inc., a subsidiary of Onex Corporation. The sale closed on April 30, 2007 for approximately $2.35 billion. Consistent with the terms of the Secured Credit Agreement, on May 3, 2007 the Company used a portion of these proceeds...

  • Page 62
    ... sells assets for net proceeds totaling $75 million or more in any year, except for proceeds used within 12 months for reinvestments in the business of up to $300 million, proceeds from sales of assets used in the Company's non-digital products and services businesses to prepay or repay debt or pay...

  • Page 63
    ... offers and exchange offers. The holders may convert their Convertible Securities, in whole or in part, into shares of the Company's common stock under any of the following circumstances: (1) during any calendar quarter, if the price of the Company's common stock is greater than or equal to 120...

  • Page 64
    ... are reported in other long-term liabilities in the accompanying Consolidated Statement of Financial Position. The Company is currently implementing a Corrective Action Program required by the Resource Conservation and Recovery Act (RCRA) at the Kodak Park site in Rochester, NY. The Company is...

  • Page 65
    ... on the Company's competitive or financial position. However, such costs could be material to results of operations in a particular future quarter or year. Asset Retirement Obligations The Company adopted FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" (FIN...

  • Page 66
    ...share As reported Pro forma Number of shares used in loss per share Basic Diluted 287.9 287.9 $ (4.38) $ (4.21) $ (1,261) $ (1,211) $ (5.76) $ (5.78) $ (1,657) $ (1,664) 2005 As of December 31, 2007 and 2006, the Company has recorded approximately $64 million and $92 million, respectively, of asset...

  • Page 67
    ... with several companies, which provide Kodak with products and services to be used in its normal operations. These agreements are related to supplies, production and administrative services, as well as marketing and advertising. The terms of these agreements cover the next two to sixteen years. The...

  • Page 68
    ... of sale for a given product based on historical failure rates and related costs to repair. The change in the Company's accrued warranty obligations balance, which is reflected in accounts payable and other current liabilities in the accompanying Consolidated Statement of Financial Position, was...

  • Page 69
    ... Treasury Center, as well as forecasted foreign currency denominated intercompany sales. Silver forward contracts are used to mitigate the Company's risk to fluctuating silver prices. The Company's exposure to changes in interest rates results from its investing and borrowing activities used to meet...

  • Page 70
    ..., NET For the Year Ended December 31, (in millions) Expenses (income): Gain on sales of capital assets Gain on sale of Light Management Films business Lucky intangible asset impairment Other Total $ (139) (19) 46 16 $ (96) $ (70) - - 11 $ (59) $ (65) - - 25 $ (40) 2007 2006 2005 NOTE 15: OTHER...

  • Page 71
    ... as follows: For the Year Ended December 31, (in millions) Amount computed using the statutory rate Increase (reduction) in taxes resulting from: State and other income taxes, net of federal Export sales and manufacturing credits Foreign tax credits benefitted Operations outside the U.S. Valuation...

  • Page 72
    ... allowance of $646 million relate primarily to current year losses and certain tax credits which the Company believes it is more likely than not that the assets will be realized. During the fourth quarter of 2006, based on the Company's assessment of positive and negative evidence regarding the...

  • Page 73
    ... the IRS covering tax years 1999-2000. As a result, the Company recognized a tax benefit from continuing operations in the United States of $17 million, including interest. Also during 2007, the Company reached a settlement with the taxing authorities in two locations outside of the U.S. resulting...

  • Page 74
    ... in relation to all of the Company's restructuring programs were as follows for the year ended December 31, 2007: Balance Other Balance December 31, Cost Cash Non-cash Adjustments December 31, 2006 Incurred (1) Reversals (1) Payments (2) Settlements and Reclasses (3) 2007 (in...

  • Page 75
    ... reclassifications to Other long-term assets and Pension and other postretirement liabilities for the position elimination-related impacts on the Company's pension and other postretirement employee benefit plan arrangements, including net curtailment, settlement and special termination gains of $13...

  • Page 76
    ...and development, and administrative functions, which are shared across all segments. The remaining $24 million is applicable to discontinued operations. Pre-2004 Restructuring Programs At December 31, 2007, the Company had remaining exit costs reserves of $5 million, relating to restructuring plans...

  • Page 77
    ... benefit of participating employees and retirees. They are comprised of corporate equity and debt securities, U.S. government securities, partnership and joint venture investments, interests in pooled funds, and various types of interest rate, foreign currency and equity market financial instruments...

  • Page 78
    ... Settlements Special termination benefits Currency adjustments Projected benefit obligation at December 31 Change in Plan Assets Fair value of plan assets at January 1 Acquisitions/divestitures Actual return on plan assets Employer contributions Participant contributions Settlements Benefit payments...

  • Page 79
    ... transition obligation Prior service cost Net actuarial (gain) loss Total $ - 7 (977) $ (970) 2007 Non-U.S. $ 1 3 871 $ 875 $ U.S. - 2 (429) $ (427) 2006 Non-U.S. $ 2 6 903 $ 911 Changes in plan assets and benefit obligations recognized in other comprehensive income (loss) during 2007 for all major...

  • Page 80
    ... Year Ended December 31, 2007 (in millions) Major defined benefit plans: Service cost Interest cost Expected return on plan assets Amortization of: Transition asset Prior service cost Actuarial loss Pension (income) expense before special termination benefits, curtailments and settlements Special...

  • Page 81
    ...-average assumptions used to determine net pension (income) expense for all the major funded and unfunded U.S. and Non-U.S. defined benefit plans were as follows: For the Year Ended December 31, 2007 U.S. Discount rate Salary increase rate Expected long-term rate of return on plan assets 6.12% 4.59...

  • Page 82
    ... to pay the full cost of their benefits under the plan. The Company's subsidiaries in the United Kingdom and Canada offer similar healthcare benefits. The measurement date used to determine the net benefit obligation for the Company's other postretirement benefit plans is December 31. Changes in...

  • Page 83
    ...of: (in millions) Prior service credit Net actuarial loss Total As of December 31, 2007 $ (145) 538 $ 393 2006 $ (123) 923 $ 800 Changes in benefit obligations recognized in other comprehensive income (loss) during 2007 for the Company's U.S., United Kingdom, and Canada plans follows: (in millions...

  • Page 84
    ...As of December 31, 2007 Discount rate Salary increase rate 6.46% 4.38% 2006 5.73% 4.22% The weighted-average assumptions used to determine the net postretirement benefit cost were as follows: For the Year Ended December 31, 2007 Discount rate Salary increase rate 5.98% 4.49% 2006 5.79% 4.26% The...

  • Page 85
    ...diluted earnings per share for the years ended December 31, 2007, 2006 and 2005 was a reduction of $.07, $.06 and $.06, respectively. The impacts on the Company's cash flow for 2007, 2006 and 2005 were not material. Stock-based compensation costs for employees related to manufacturing activities are...

  • Page 86
    ...except per share amounts) Outstanding on December 31, 2004 Granted ...fact that the market price of the Company's common stock as of December 31, 2007 was below the weighted-average exercise price of options. The total intrinsic value of options exercised during years ended December 31, 2007, 2006...

  • Page 87
    ... "Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards." During the third quarter of 2007, the Company elected to adopt the alternative transition method provided in FSP No. FAS 123(R)-3 for calculating the tax effects of stock-based compensation. The alternative...

  • Page 88
    ... million of intangible assets, which relate to developed technology, trademarks and customer relationships, have useful lives ranging from six to eight years. The $483 million of goodwill was assigned to the Company's Graphic Communications Group segment. As of the acquisition date, management began...

  • Page 89
    ... This joint venture between the Company and Sun Chemical Corporation was accounted for using the equity method of accounting. Summarized unaudited income statement information for KPG for the three months ended March 31, 2005 is as follows: (in millions) Net sales Gross profit Income from continuing...

  • Page 90
    ... of intangible assets, which relate to developed technology, trademarks and customer relationships, have useful lives ranging from three to sixteen years. The $237 million of goodwill was assigned to the Company's Graphic Communications Group segment. As of the acquisition date, management began...

  • Page 91
    ...100 employees of the Company associated with the Health Group transitioned to Carestream Health, Inc. as part of the transaction. Also included in the sale were manufacturing operations focused on the production of health imaging products, as well as an office building in Rochester, NY. The Company...

  • Page 92
    ... allocated to Health Group discontinued operations totaled $72 million for the year. During the fourth quarter of 2005, the Company was informed that the United States Congress Joint Committee on Taxation had approved, and the Internal Revenue Service had signed, a settlement between the Company and...

  • Page 93
    ..., and other entertainment imaging customers with film-related products and services. Graphic Communications Group Segment (GCG): GCG serves a variety of customers in the creative, in-plant, data center, commercial printing, packaging, newspaper and digital service bureau market segments with...

  • Page 94
    ... 83 $ 11,395 2007 2006 2005 As of December 31, (in millions) Segment total assets: Consumer Digital Imaging Group Film Products Group Graphic Communications Group All Other Total of segments Cash and marketable securities Deferred income tax assets Other corporate reserves Assets of discontinued...

  • Page 95
    ...-total Restructuring-related depreciation Consolidated total Capital additions from continuing operations: Consumer Digital Imaging Group Film Products Group Graphic Communications Group All Other Consolidated total Net sales to external customers attributed to : The United States Europe, Middle...

  • Page 96
    ... technology and infrastructure associated with manufacturing and supply chain for all FPEG products. The following indicates the changes from the 2007 reporting structure to the new reporting structure that will be implemented beginning in the first quarter of 2008: Consumer Digital Imaging Group...

  • Page 97
    NOTE 25: QUARTERlY SAlES AND EARNINGS DATA - UNAUDITED (in millions, except per share data) 2007 Net sales from continuing operations Gross profit from continuing operations Earnings (loss) from continuing operations Earnings from discontinued operations (9) Net earnings (loss) Basic net earnings (...

  • Page 98
    ...31, 2007, the Company recorded a charge of approximately $24 million, net of tax, related to changes in estimate with respect to certain of its employee benefit and compensation accruals. These changes in estimates negatively impacted the results for the fourth quarter by $.08 per share. Changes in...

  • Page 99
    ... effect of accounting change Total Cash dividends declared and paid - on common shares - per common share Common shares outstanding at year end Shareholders at year end Statement of Financial Position Data Working capital Property, plant and equipment, net Total assets Short-term borrowings...

  • Page 100
    ... - CDG - FPG - GCG - All Other Research and development costs Depreciation Taxes (excludes payroll, sales and excise taxes) (7) Wages, salaries and employee benefits Employees as of year end - in the U.S (7) - worldwide (7) (8) 2007 2006 2005 2004 2003 $ 4,631 1,968 3,590 112 535 679 5 2,846...

  • Page 101
    ... of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of...

  • Page 102
    ... "Board Structure and Corporate Governance - Board of Directors" in the Company's Notice of 2008 Annual Meeting and Proxy Statement (the Proxy Statement), which will be filed within 120 days after December 31, 2007. The information required by Item 10 regarding audit committee financial expert...

  • Page 103
    ...3-year Average 1,757 130 201 287,519 0.73% The Company continues to manage its run rate of awards granted over time to levels it believes are reasonable in light of changes in its business and number of outstanding shares while ensuring that our overall executive compensation program is competitive...

  • Page 104
    ... financial statements: Report of independent registered public accounting firm Consolidated statement of operations Consolidated statement of financial position Consolidated statement of shareholders' equity Consolidated statement of cash flows Notes to financial statements 2. Financial statement...

  • Page 105
    ...authorized. EASTMAN KODAK COMPANY (Registrant) By: /s/ Antonio M. Perez Antonio M. Perez Chairman & Chief Executive Officer By: /s/ Frank S. Sklarsky Frank S. Sklarsky Chief Financial Officer, and Executive Vice President /s/ Diane E. Wilfong Diane E. Wilfong Chief Accounting Officer, and Corporate...

  • Page 106
    ...Assets: Reserve for doubtful accounts From Deferred Tax Assets: Valuation allowance Year ended December 31, 2006 Deducted in the Statement of Financial Position: From Current Receivables: Reserve for doubtful accounts...Period Earnings and Equity Amounts Written Off Balance at End of Period 05

  • Page 107
    ... Company Current Report on Form 8-K for the date October 10, 2003 as filed on October 10, 2003, Exhibit 4.) J. K. Secured Credit Agreement, dated as of October 18, 2005, among Eastman Kodak Company and Kodak Graphic Communications Canada Company, the banks named therein, Citigroup Global Markets...

  • Page 108
    ... June 30, 1999, and the Eastman Kodak Company Annual Report on Form 10- K for the fiscal year ended December 31, 1999, Exhibit 10.) Eastman Kodak Company Non-Employee Director Annual Compensation Program. The equity portion of the retainer became effective December 11, 2007; the cash portion of the...

  • Page 109
    ... of Award of Restricted Stock Granted To _____, Pursuant to the 2000 Omnibus Long-Term Compensation Plan. (Incorporated by reference to the Eastman Kodak Company Annual Report on Form 10-K for the fiscal year ended December 31, 2004, Exhibit 10.) S. Eastman Kodak Company Executive Compensation for...

  • Page 110
    ...Kodak Company Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Exhibit 10.) Letter dated May 10, 2005, from the Chair, Executive Compensation and Development Committee, to Daniel A. Carp. (Incorporated by reference to the Eastman Kodak Company Current Report on Form 8-K, filed...

  • Page 111
    ... To the Asset Purchase Agreement. (Incorporated by reference to the Eastman Kodak Company Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007, Exhibit (10) CC.) (12) (18) Statement Re Computation of Ratio of Earnings to Fixed Charges. Letter Re Change in Accounting Principles...

  • Page 112
    E xhibit (10) n (10) D. Eastman Kodak Company Non-Employee Director Annual Compensation Program. The equity portion of the retainer became effective December 11, 2007; the cash portion of the retainer became effective January 1, 2008. M. Amended leaving arrangement for James T. Langley. (These ...

  • Page 113
    ... $ (199) 2007 $ (256) 2006 $ (583) 2005 $ (1,208) 2004 $ (625) 2003 $ (436) (1) Interest component of rental expense is estimated to equal 1/3 of such expense, which is considered a reasonable approximation of the interest factor. * Earnings for the year ended December 31, 2007 were inadequate...

  • Page 114
    ... OF EASTMAN KODAK COMPANY Companies Consolidated Eastman Kodak Company Laser-Pacific Media Corporation FPC, Inc. Qualex Inc. Qualex Canada Photofinishing Inc. Eastman Gelatine Corporation Kodak Imaging Network, Inc. (formerly Ofoto, Inc.) Eastman Canada Company Kodak Canada Inc. Kodak Graphic...

  • Page 115
    ... m.b.H. Kodak Kft. Kodak Oy Kodak S.p.A. Kodak Portuguesa Limited Kodak, S.A. Kodak Nordic AB Kodak Japan Ltd. K.K. Kodak Information Systems Kodak Digital Product Center, Japan Ltd. Kodak (China) Limited Kodak Electronic Products (Shanghai) Company Limited Kodak (China) Company Limited Kodak (China...

  • Page 116
    ..., and No. 333-125355) of Eastman Kodak Company of our report dated February 27, 2008 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP...

  • Page 117
    ...internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons...

  • Page 118
    ...internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons...

  • Page 119
    ... with the Annual Report of Eastman Kodak Company (the "Company") on Form 10-K for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Antonio M. Perez, Chairman and Chief Executive Officer of the Company, certify, pursuant...

  • Page 120
    ...In connection with the Annual Report of Eastman Kodak Company (the "Company") on Form 10-K for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Frank S. Sklarsky, Chief Financial Officer of the Company, certify, pursuant to...

  • Page 121
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  • Page 122
    NOTICE OF 2008 ANNUAL MEETING AND PROXY STATEMENT Date of Notice April 3, 2008 EASTMAN KODAK COMPANY 343 STATE STREET ROCHESTER, NEW YORK 14650

  • Page 123
    ...-Control Arrangements COMPENSATION OF NAMED EXECUTIVE OFFICERS 51 Summary Compensation Table 54 Employment and Retention Arrangements 57 Grants of Plan-Based Awards Table 60 Outstanding Equity Awards at Fiscal Year-End Table 62 Option Exercises and Stock Vested Table 63 Pension Benefits for 2007 66...

  • Page 124
    ... 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 14650-0207, (585) 724-5492...

  • Page 125
    ... • Our 2007 Annual Report on Form 10-K; and • Notice of 2008 Annual Meeting and Proxy Statement. If you requested printed versions of the proxy materials by mail, these proxy materials also include the Proxy Card for the Annual Meeting. Q. A. Q. A. What am I voting on? The Board is soliciting...

  • Page 126
    ... E-mail at [email protected]. Reference "Proxy Materials Order" on the subject line. In the message, include your full name and address, the three numbers located in the shaded bar on the Notice and state that you want to receive a paper copy of current and/or future meeting materials...

  • Page 127
    ... 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 17, 2008, the record date for the Annual Meeting. Each share of common stock is entitled to one vote. How can I change my vote or revoke my proxy? Shareholder of Record. If...

  • Page 128
    ... the Annual Meeting? If the records of the Company show that you held your shares as of the close of business on March 17, 2008, the record date for the Annual Meeting, you can attend the Annual Meeting. Seating, however, is limited. Attendance at the Annual Meeting will be on a first-come, first...

  • Page 129
    ...90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting. 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...

  • Page 130
    ....kodak.com/go/governance You may request printed copies of any of these documents by contacting: Coordinator, Shareholder Services Eastman Kodak Company 343 State Street Rochester, NY 14650-0207 (585) 724-5492 The address of our principal executive office is: Eastman Kodak Company 343 State Street...

  • Page 131
    ...at an annual meeting of shareholders, with a plurality vote standard retained for contested director elections, that is, when the number of director nominees exceeds the number of board seats. Supporting Statement: In order to provide shareholders a meaningful role in director elections, our Company...

  • Page 132
    ... as Kodak directors. Most large public companies continue to use a plurality voting standard. Our Board of Directors has been mindful of the ongoing corporate governance developments and debates on the subject of majority voting in the election of directors and has examined this issue very closely...

  • Page 133
    ...governance record and robust director election process, already serves and protects the interests of our shareholders. The proposal is premature given the continuing debate on majority voting standard. We do not believe that the proposal, at this point in time, is in the best interest of the Company...

  • Page 134
    ... in the New York Stock Exchange's (NYSE) corporate governance listing standards. A copy of the Corporate Governance Guidelines is published on our website at www.kodak.com/go/governance. BUSINESS CONDUCT GUIDE AND DIRECTORS' CODE OF CONDUCT All of our employees, including the CEO, the CFO, the...

  • Page 135
    ... family member of another Section 16 Executive Officer or a director of our Company and the related compensation would be reported in our proxy statement if the Section 16 Executive Officer was a "Named Executive Officer" and our Compensation Committee approved (or recommended that the Board...

  • Page 136
    ... employee (other than an executive officer) or a director, if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of the charitable organization's total annual receipts. • Any transaction where the related person's interest arises solely from the ownership of the Company...

  • Page 137
    ... 2009 ANNUAL MEETING RICHARD S. BRADDOCK Director since May 1987 Mr. Braddock, 66, is the Chairman & CEO of Fresh Direct. He was named CEO on March 4, 2008 and has been the Chairman since 2005. Mr. Braddock began his business career in 1965 spending a number of years in product management at General...

  • Page 138
    ... CEO of HP's Inkjet Imaging Business. In his career, Mr. Perez held a variety of positions in research and development, sales, manufacturing, marketing and management both in Europe and the United States. Just prior to joining Kodak, Mr. Perez served as an independent consultant for large investment...

  • Page 139
    ... was named Chief Executive Officer in April 2002. He was appointed Chairman of the Board in April 2004. Previously, Dr. Ruiz served as President of Motorola's Semiconductor Products Sector. In his 22-year career with Motorola, Dr. Ruiz held a variety of executive positions in the United States and...

  • Page 140
    ...meaning of the NYSE's corporate governance listing standards and, in the case of the Audit Committee, the rules of the SEC. Audit Committee - 9 meetings in 2007 The Audit Committee assists the Board in overseeing: the integrity of the Company's financial reports; the Company's compliance with legal...

  • Page 141
    ... plan from its 2006 evaluation; and • Oversaw the Board's annual performance review. The Corporate Responsibility and Governance Committee is also referred to as the "Governance Committee" in this Proxy Statement. Executive Compensation and Development Committee - 8 meetings in 2007 The Executive...

  • Page 142
    ..., crisis management and asset protection programs; • Reviewed the Company's tax policy and strategies; and • Modified its charter to more specifically delineate its oversight of proposed capital expenditures and transactions. Executive Committee - No meeting in 2007 The Executive Committee is...

  • Page 143
    ...the Company's Named Executive Officers and other Section 16 Executive Officers. The entire Board reviews the Company's succession plans for its CEO and other key positions, and oversees the Company's activities in the areas of leadership and executive development. The Compensation Committee operates...

  • Page 144
    ...the CEO. Management develops these performance targets considering 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 cash bonus plan are...

  • Page 145
    ... next annual meeting of shareholders (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 www.kodak.com/go...

  • Page 146
    ... Board's annual evaluation process. Strategic Role of Board The Board plays a key role in developing, reviewing and overseeing the Company's business strategy. Twice each year, the Board devotes an extended meeting to an update from management regarding the strategic issues and opportunities facing...

  • Page 147
    ... compensation, and stock ownership guidelines. With this background in mind, the Governance Committee's independent compensation consultant conducted a competitive review of director pay levels and practices at peer companies. This analysis compared Kodak's Board compensation to competitive market...

  • Page 148
    ... effective on December 11, 2007. The remaining changes became effective as of January 1, 2008. As a result of these changes, the annual cash and equity components of the Company's director compensation program are now as follows: Cash Board Retainer (1) Equity Stock Options (4) Chair/Presiding...

  • Page 149
    ... in 2007. The following table reports the amount of the retainer that was deferred by a director into his or her deferred stock account under the Directors Deferred Compensation Plan and the amount of phantom stock units that were credited to the director as a result of that deferral. Name Martha...

  • Page 150
    ... 2.0 1.9 Grant Date December 12, 2006 December 11, 2007 The following table reports the outstanding option awards held by each of the non-employee directors at the end of fiscal year 2007. Aggregate Stock Options Outstanding at Fiscal Year End Name Richard S. Braddock Martha Layne Collins Timothy...

  • Page 151
    ... 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...

  • Page 152
    ..., committee and shareholder meetings and other Company-sponsored events, and provides Company transportation to the directors (including use of Company aircraft) to attend such meetings and events. From time to time, we also invite our directors' spouses, significant others and other family members...

  • Page 153
    ... on Schedule 13G/A filings, the Company was aware of the following beneficial owners of more than 5% of its common stock: Number of Common Shares Beneficially Owned Percentage of Company's Common Shares Beneficially Owned Shareholder's Name and Address Legg Mason Capital Management, Inc. LMM LLC...

  • Page 154
    ... in the Kodak Employees' Stock Ownership Plan, and the interests of the above persons in the Kodak Stock Fund of the Eastman Kodak Employees' Savings and Investment Plan, stated in terms of Kodak shares. (a) The amounts listed for each non-employee director do not include stock units representing...

  • Page 155
    ..., 2008, which was after the applicable date for this table. (e) Each individual Section 16 Executive Officer and director listed beneficially owned less than 1% of the outstanding shares of the Company's common stock. As a group, these Section 16 Executive Officers and directors owned 0.769% of the...

  • Page 156
    ...units, any shares held in the executive's account under Kodak's Employee Stock Ownership Plan or Savings & Investment Plan and any "phantom stock" selected by an executive as an investment option in the EDCP count toward meeting the executive's share ownership requirement. The Compensation Committee...

  • Page 157
    ... financial statements for inclusion in the Company's Annual Report on Form 10-K for the year ended December 31, 2007, and the Board accepted the Audit Committee's recommendations. The following fees were paid to PwC for services rendered in 2007 and 2006: (in millions) Audit Fees Audit-Related...

  • Page 158
    ... 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 2007, the Governance Committee met six times and routinely reported its activities to the full Board. The Governance Committee...

  • Page 159
    ... non-management director's independence. Board Business Plan Based on the Governance Committee's assistance, the Board last year continued its practice of establishing an annual Board business plan. The business plan is the end product of a formal process developed by the Governance Committee to...

  • Page 160
    ... The Executive Compensation and Development Committee has reviewed and discussed the Compensation Discussion and Analysis that is required by the SEC rules with the Company's management. Based on such review and discussions, the Compensation Committee recommended to the Company's Board of Directors...

  • Page 161
    ... the Company's executive compensation strategy and reviews and approves the compensation of our Named Executive Officers. In the first quarter of each year, the Committee establishes base salaries and target award opportunities under our annual variable pay plan, the Executive Compensation for...

  • Page 162
    ... factor will vary from year to year and may vary among Named Executive Officers. In general, the Committee does not consider awards granted or earned under plans in past or current years or the effect of changes in the Company's stock price when setting annual target total direct compensation levels...

  • Page 163
    ... to severance plans and employment agreements, special equity grants to promote retention, or changes in long-term variable equity incentives. Use of the CEO Evaluation Process The Presiding Director, the Chair of the Compensation Committee and the Chief Human Resources Officer lead the annual CEO...

  • Page 164
    position to the Company relative to other senior management positions or changes in the competitive marketplace. 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. Committee Decision and Analysis...

  • Page 165
    ..., a Named Executive Officer's EXCEL bonus cannot exceed the lesser of: i) 10% of the total corporate award pool calculated by reference to the performance metric targets (without discretion); ii) five times his or her prior year-end base salary; or iii) $5 million. In 2007 the Committee selected Net...

  • Page 166
    ... Committee reviews a set of baseline metrics to determine the corporate award pool and the amount of such pool allocated to the Named Executive Officers. These baseline performance metrics reflect key strategic or operational imperatives for the year associated with the Company's business strategy...

  • Page 167
    ...levels received by certain of our Named Executive Officers reflect in part the fact that certain business units contributed more to the Company's earnings performance relative to their goals. Ms. Hellyar received an award equal to 210% of her target opportunity based on FPG's delivery of an EFO rate...

  • Page 168
    ... rates and support important retention and shareholder alignment objectives, the Committee increased the prior year guidelines for each Named Executive Officer in 2006 to "close the gap" in target total direct compensation relative to market. The 2006 stock option awards and 2007 Leadership Stock...

  • Page 169
    ... number of shares earned under the Leadership Stock program. The number of stock options and Leadership Stock units granted to, or earned by, our Named Executive Officers in 2007 are shown in the Grants of Plan-Based Awards Table on page 57 of this Proxy Statement. Committee Decision and Analysis...

  • Page 170
    ..., target and maximum number of shares allocated to our Named Executive Officers under the 2007 Leadership Stock performance cycle are shown in the Grants of Plan-Based Awards Table on page 57 of this Proxy Statement. Committee Decision and Analysis For 2007, the Company achieved a GCG Digital...

  • Page 171
    ... fair market value of our common stock on the date of grant of the award. This award was made in accordance with the Board of Directors Policy on Equity Awards, discussed further on page 48 of this Proxy Statement. EXECUTIVE COMPENSATION POLICIES RELATING TO INCENTIVE PLANS Share Ownership Program...

  • Page 172
    ... our Named Executive Officers under any individual retirement arrangement are described following the Pension Benefits Table on page 63 of this Proxy Statement. Deferred Compensation Plan The Company maintains a non-qualified deferred compensation plan for its executives, known as the Eastman Kodak...

  • Page 173
    ... Severance Payments Table on page 78 of this Proxy Statement. Committee Decision and Analysis In 2007 the Company undertook a review of change-in-control benefits. This review was initiated to understand the positioning of Kodak plans in relation to best practices from governance, competitive...

  • Page 174
    ... Stock, restricted stock, restricted stock units and 2006 Executive Performance Share Program (EPSP)) during each year reported. The value disclosed represents the annual aggregate expense for stock awards granted in 2007 and in prior years as compensation cost is recognized for financial reporting...

  • Page 175
    ...our share ownership program, Mr. Faraci and Ms. Hellyar received the above-target portion of their EXCEL bonus in the form of fully-vested shares of common stock, which were awarded on March 27, 2008. Most Named Executive Officers did not receive any non-equity incentive compensation in 2006 because...

  • Page 176
    ...Hellyar (a) A Named Executive Officer's deferral account balances are credited with interest at the "prime rate" as reported in the Wall Street Journal, compounded monthly. Above-market interest is calculated as the difference between the prime rate and 120% of the Applicable Federal Rate (AFR) for...

  • Page 177
    ... number of restricted shares awarded is shown in the Grants of Plan-Based Awards for 2007 table. EMPLOYMENT AND RETENTION ARRANGEMENTS The material terms of each Named Executive Officer's employment or retention arrangement with the Company are described below. The levels of salary, annual variable...

  • Page 178
    ...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...

  • Page 179
    ... under the Pension Benefits Table on page 63 of this Proxy Statement. This letter agreement was amended by a letter agreement dated February 28, 2007 to provide that his supplemental retirement benefit will be paid in a lump sum. At the time of Mr. Langley's employment, the Company agreed to pay the...

  • Page 180
    ... the Company's annual bonus plan (EXCEL), the 2005 Omnibus Long-Term Compensation Plan, which provides for 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...

  • Page 181
    ... EXCEL plan, target allocations for our Named Executive Officers and the award earned under the plan for 2007 performance, see the discussion in the "Compensation Discussion and Analysis" under the heading "Annual Variable Pay." 2007 Leadership Stock On December 12, 2006, the Compensation Committee...

  • Page 182
    ... at 33% of target. 2007 Option Grants On December 11, 2007, the Compensation Committee approved a non-qualified stock option grant for each Named Executive Officer. Stock options granted in 2007 have a seven-year term and vest in three substantially equal annual installments beginning on the...

  • Page 183
    ... Securities Exercise Price Underlying ($) Unexercised Options (#) Unexercisable Option Expiration Date Stock Awards Number of Market Value Equity Equity Shares or of Shares or Incentive Plan Incentive Plan Units of Stock Units of Stock Awards: Awards: Held that Have that Have Not Number of Market or...

  • Page 184
    ... units and the 2007 Leadership Stock award held by our Named Executive Officers. (3) The market value of unearned shares, units or other rights that have not vested was calculated using the closing price of Kodak common stock on December 31, 2007, which was $21.87, multiplied by the number of shares...

  • Page 185
    ... of the Named Executive Officers exercised stock options in 2007. (2) This column represents the value of restricted stock that vested during 2007 and the award of shares earned under the 2006 EPSP. All awards represented in this column were valued using a stock price equal to the closing price on...

  • Page 186
    ... 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...

  • Page 187
    ... 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...

  • Page 188
    ...by a letter agreement dated February 28, 2007 to provide for a lump-sum payment of his supplemental retirement benefits. Under the leaving benefits approved by the Compensation Committee for Mr. Langley on September 21, 2007, Mr. Langley will receive service credit for the period beginning August 18...

  • Page 189
    ... Compensation Table for fiscal 2007. Named Executive Officers' deferral account balances are credited with interest at the "prime rate" as reported in the Wall Street Journal compounded monthly. Above-market interest is calculated as the difference between the prime rate and 120% of the Applicable...

  • Page 190
    ... year. In 2007, the Compensation Committee froze the receipt of new monies into the plan in 2008 due to its low utilization and its administrative cost. The plan has only two investment options: an interest-bearing account that pays interest at the prime rate and a Kodak phantom stock account...

  • Page 191
    ... benefits as set forth in the Pension Benefits table on page 63 of this Proxy Statement. Following termination of employment, each of our Named Executive Officers is subject to compliance with the post-termination restrictive covenants set forth in their Eastman Kodak Company Employee's Agreement...

  • Page 192
    ... employment with the Company for good reason, he is eligible to receive (less applicable withholding): • An amount equal to two times the sum of his current base salary and target EXCEL bonus award, payable over 24 months; • A pro rata target bonus award under the EXCEL plan payable in a single...

  • Page 193
    ...and • A survivor benefit calculated by using his additional retirement benefit provided under his individual arrangement based on eight years of deemed service plus the supplemental retirement benefit provided under his individual arrangement as set forth in the Regular Severance Payments Table on...

  • Page 194
    ... 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. James T. Langley The Compensation Committee approved a severance arrangement for Mr. Langley in 2007 in connection with his planned...

  • Page 195
    ...by the Company without cause and for an "approved reason" as if the Named Executive Officer's employment was terminated as of December 31, 2007, using the closing price of our common stock as of December 31, 2007, which was $21.87. A.M. Perez Cash Severance (2) Additional Severance Payment Intrinsic...

  • Page 196
    ... the Named Executive Officer's employment was terminated as of December 31, 2007, using the closing price of our common stock as of December 31, 2007, which was $21.87. A.M. Perez Cash Severance (2) Additional Severance Payment Intrinsic Value of Stock Options (3) Restricted Stock (4) F.S. Sklarsky...

  • Page 197
    ... 31, 2007 because the exercise price of these stock options is above the closing market price of our common stock on December 31, 2007. (3) For all Named Executive Officers, except Mr. Faraci, the values in this row report the value of unvested shares of restricted stock/restricted stock units that...

  • Page 198
    ... receive his supplemental retirement benefit in the form of a lump sum. Change-in-Control Severance Payments Executive Protection Plan The Company maintains the Executive Protection Plan to provide severance pay and continuation of certain welfare benefits for Named Executive Officers in the event...

  • Page 199
    ... within two years following a change-in-control, each of the Named Executive Officers will receive a lump-sum severance payment equal to (a) three times their base salary and target EXCEL bonus and (b) continued participation in the Company's medical, dental, disability and life insurance plans for...

  • Page 200
    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 ...

  • Page 201
    ...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, 2007 using the closing price of our common stock as of December 31, 2007, which was $21.87. A.M. Perez Cash Severance (2) Additional Severance Payment...

  • Page 202
    ...that, for the reporting period covering our 2007 fiscal year, four SEC Form 4s were not filed timely. These reports were filed by Carl Gustin, Joyce Haag and Mary Jane Hellyar. By Order of the Board of Directors Laurence L. Hickey Secretary and Assistant General Counsel Eastman Kodak Company April...

  • Page 203
    ... Relationship: if a director of the Company is an executive officer or an employee, or whose immediate family member is an executive officer of another company that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year...

  • Page 204
    ... Company. 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...

  • Page 205
    ... by senior managers, to familiarize new Directors with the Company's overall business and operations, strategic plans and goals, financial statements and key policies and practices, including corporate governance matters. EXHIBIT IV - AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY I. Statement of...

  • Page 206
    ...'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...

  • Page 207
    ...time after appointment; 4) At least one member of the Committee shall have accounting or related financial management expertise as required by the NYSE Listing Standards, as determined by the Board in its business judgment, and shall be a "Financial Expert", as defined by the SEC; and 5) All members...

  • Page 208
    ... level of resources is available. 3. With respect to Kodak's financial disclosures and statements the Committee shall: (a) Inquire of management and the independent accountant as to: (i) The acceptability and appropriateness of financial accounting principles, policies and disclosures, used...

  • Page 209
    ... consolidated financial statements with the Company's General Counsel, Director of Corporate Auditing, the Controller and the independent accountant; (iii) Review the annual audited and quarterly reviewed consolidated financial statements, including "Management's Discussion and Analysis of Financial...

  • Page 210
    ... Perform an annual Committee self assessment; and (b) Receive training in order to better develop skills related to the performance of its duties. V. OVERSIGHT ROLE Kodak's financial statements are the responsibility of management. The independent accountant's responsibility is to plan and perform...

  • Page 211
    ... 2008 ANNUAL MEETING DIRECTIONS AND PARKING INFORMATION Columbus Marriott 800 Front Avenue, Columbus, GA 31901 Directions From I-185 South Take Exit 7/US-27. Turn right onto Manchester Expressway/US-27. Turn left onto Veteran's Parkway. Turn right onto 9th Street. From Columbus Airport Head...

  • Page 212
    ... General Manager, Worldwide Kiosk Systems and Service, Consumer Digital Imaging Group Brad W. Kruchten General Manager, Retail Printing Jaime Cohen Szulc Solutions Business, Managing Director, Consumer Digital Global Customer Operations, CDG Chief Operating Officer Consumer Digital Imaging Group...

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  • Page 214
    About Kodak As the world's foremost imaging innovator, Kodak helps consumers, businesses and creative professionals unleash the power of pictures and printing to enrich their lives. To learn more, visit http://www.kodak.com and our blogs: 1000words.kodak.com and 1000nerds.kodak.com.

  • Page 215
    Eastman Kodak Company 343 State Street Rochester, NY 14650 www.kodak.com This document was produced using solutions from Kodak's Graphic Communications Group including Kodak Approval XP4 Digital Color Imager, Kodak Thermal Gold Digital Plates, Kodak Trendsetter 800 C Quantum Platesetter, and other ...