Eastman Kodak Company DEF 14A 2009
Documents found in this filing:
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the
Filed by the Registrant
(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
1) Title of each class of
securities to which transaction applies:
Date of Notice April 2, 2009
NOTICE OF 2009 ANNUAL MEETING AND PROXY STATEMENT
You are cordially invited to attend our Annual Meeting of Shareholders on Wednesday, May 13, 2009 at 9:00 a.m., local time, at the Embassy Suites Hotel Walnut Creek, 1345 Treat Boulevard, Walnut Creek, CA. 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.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be held on May 13, 2009. The Notice of 2009 Annual Meeting and Proxy Statement and 2008 Annual Report on Form 10-K are available at www.envisionreports.com/ek.
QUESTIONS & ANSWERS
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 are a beneficial owner of shares held in street name and do not provide your broker, trustee or nominee with specific voting instructions:
For a shareholder proposal that is not intended to be included in Kodaks 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:
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 Kodaks 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 Kodaks transfer agent, Computershare Trust Company, N.A., by calling its toll-free number, (800) 253-6057, or by mail at P.O. Box 43078, Providence, RI 02940-3078.
If you would like to receive your own Notice in future years, follow the instructions described 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:
AUDIO WEBCAST OF ANNUAL MEETING AVAILABLE ON THE INTERNET
Kodaks Annual Meeting will be webcast live. If you have internet access, you can listen to the webcast by going to Kodaks Investor Center webpage at www.kodak.com/US/en/corp/investorCenter/investorsCenterHome.shtml. 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 Form 10-K
The Company will provide without charge, upon your request, a printed copy of its 2008 Annual Report on Form 10-K. To receive a printed copy of the 2008 Annual Report on Form 10-K, please contact:
Coordinator, Shareholder Services
ITEM 1 Election of Directors
Kodaks By-laws 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. Perez is the only director who is an employee of the Company.
There are 11 directors standing for re-election (Richard S. Braddock, Timothy M. Donahue, Michael J. Hawley, William H. Hernandez, Douglas R. Lebda, Debra L. Lee, Delano E. Lewis, William G. Parrett, Antonio M. Perez, Dennis F. Strigl and Laura DAndrea Tyson). All the nominees agree to serve a one-year term. Information about them is provided on pages 13 - 15 of 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 Companys 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 Companys 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.
PricewaterhouseCoopers LLP has been the Companys independent accountants for many years. The Audit Committee has selected PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm to serve until the 2010 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 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 Committee will review its future selection of an independent registered public accounting firm.
The ratification of the Audit Committees 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 Committees selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm.
BOARD STRUCTURE AND CORPORATE GOVERNANCE
Ethical business conduct and good corporate
governance are not new 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 practiced good corporate governance and believe
it to be a prerequisite to providing sustained, long-term value to our
shareholders. We continually monitor developments in the area of corporate
governance and lead in developing and implementing best practices. This is a
fundamental goal of our Board.
Our Corporate Governance Guidelines reflect the
principles by which the Company 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 the Corporate Governance
Guidelines is published on our website at www.kodak.com/go/governance.
All of our employees, including the CEO, the
CFO, the Controller, all other senior financial officers and all other Section
16 executive officers, as defined under Section 16 of the Securities Exchange
Act of 1934 (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 Company also has a code of conduct for its directors, known as the
Directors Code of Conduct. Both our Business Conduct Guide and our Directors
Code of Conduct are published on our website at www.kodak.com/go/governance. 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 directors or the
Companys CEO, CFO or Controller. Our directors annually certify in writing that
they understand and are in compliance with the Directors Code of
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 Exchanges (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 Companys Director Independence Standards and, therefore, is independent within the meaning of the NYSEs 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 DAndrea 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 Boards determination regarding the independence of each non-employee director, it considered any transactions, relationships and arrangements as required by the Companys Independence Standards. In particular, with respect to the most recent completed fiscal year, the Board considered:
AUDIT COMMITTEE FINANCIAL QUALIFICATIONS AND MEMBERSHIPS
The Board has determined that all members of its Audit Committee (Richard S. Braddock, William H. Hernandez, Debra L. Lee, Delano E. Lewis, William G. Parrett and Dennis F. Strigl) are independent and are financially literate as required by the NYSE, and that Richard S. Braddock, William H. Hernandez and William G. Parrett possess the qualifications of an Audit Committee Financial Expert, as defined by SEC rules, and have accounting or related financial management expertise, as required by the NYSE.
The Board determined that William G. Parretts simultaneous service on the audit committees of three other public companies will not impair his ability to effectively serve on the Companys Audit Committee.
In February 2007, our Board, based on the recommendation of the Corporate Responsibility and Governance Committee, adopted written policies and procedures relating to approval or ratification of interested transactions with related parties. Under these policies and procedures, which are posted on our website at www.kodak.com/go/governance, our Governance Committee is to review the material facts of all interested transactions that require the Governance Committees approval. 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 circumstances and the extent of the related persons 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 beginning of the last fiscal year for 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 they presently do not serve in that role), any greater than 5% beneficial owner of the Companys common stock or any immediate family member of any of the foregoing. Immediate family member includes a persons 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 persons home (other than a tenant or employee).
The Governance Committee has reviewed and pre-approved certain types of interested transactions described below. In addition, our Board has delegated to the chair of 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:
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.
BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
The Board has the five committees described below. The Board has determined that each of the 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 DAndrea 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 DAndrea 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 is independent under the Companys Director Independence Standards and, therefore, independent within the meaning of the NYSEs Listing Standards and, in the case of the Audit Committee, the rules of the SEC.
Audit Committee 9 meetings in 2008
The Audit Committee assists the Board in overseeing: the integrity of the Companys financial reports; the Companys compliance with legal and regulatory requirements; the independent registered public accounting firms (PricewaterhouseCoopers LLP) selection, qualifications, performance and independence; the Companys systems of disclosure controls and procedures and internal controls over financial reporting; and the performance of the Companys internal auditors. A detailed list of the Audit Committees functions is included in its charter, which can be accessed at www.kodak.com/go/governance.
In the past year, the Audit Committee:
Corporate Responsibility and Governance Committee 6 meetings in 2008
The Corporate Responsibility and Governance Committee assists the Board in: overseeing the Companys corporate governance structure; identifying and recommending individuals to the Board for nomination as directors; performing an annual review of the Boards performance; and overseeing the Companys activities in the areas of environmental and social responsibility, charitable contributions, diversity and equal employment opportunity. A detailed list of the Corporate Responsibility and Governance Committees functions is included in its charter, which can be accessed at www.kodak.com/go/governance.
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.
Executive Compensation and Development Committee 10 meetings in 2008
The Executive Compensation and Development Committee assists the Board in: overseeing the Companys executive compensation strategy; overseeing the administration of its executive compensation and equity-based compensation plans; reviewing and approving the compensation of the Companys CEO; overseeing the compensation of the Companys Section 16 Executive Officers; reviewing the Companys succession plans for its CEO, President, if applicable, and other key positions; and overseeing the Companys activities in the areas of leadership and executive development. A detailed list of the Executive Compensation and Development Committees 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 Companys: 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 Committees functions is included in its charter, which can be accessed at www.kodak.com/go/governance.
In the past year, the Finance Committee:
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 Committees charter can be accessed at www.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.
The Compensation Committee is comprised of five members of the Board, all of whom are independent in accordance with the Boards Director Independence Standards, which standards reflect the NYSEs director independence standards. The Compensation Committee assists the Board in fulfilling its responsibilities in connection with the compensation of its executives, including our Named Executive Officers. It performs this function by overseeing the Companys executive compensation strategy, overseeing the administration of its executive compensation and long-term equity incentive compensation plans, assessing the effectiveness of the Companys executive compensation plans, reviewing and approving the compensation of the Companys CEO, and reviewing and approving the compensation of the Companys Named Executive Officers and other Section 16 Executive Officers. The entire Board reviews the Companys succession plans for its CEO and other key positions, and oversees the Companys activities in the areas of leadership and executive development. The Compensation Committee operates under a written charter adopted by the Board, which details the Compensation Committees duties and responsibilities. A current copy of the Compensation Committees charter can be accessed at www.kodak.com/go/governance.
The full Board sets the compensation of the Companys non-employee directors based on the recommendation of the Governance Committee.
The Compensation Committee has delegated limited authority to the Companys Chief Human Resources Officer to assist the Compensation Committee with administration of the Companys executive compensation and equity-based compensation plans. The Chief Human Resources 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).
The Compensation Committee meets routinely throughout the year. It is the Compensation Committees policy to make most compensation decisions in a two-step process to ensure sufficient deliberation. The Compensation Committee approves all compensation and awards under the Companys executive compensation plans for each of the Companys Named Executive Officers. The Compensation Committee also approves compensation levels for each component of total direct compensation following discussions and after review of analyses and recommendations received from its independent compensation consultant and management, as it deems appropriate. The CEO, Chief Human Resources Officer and Director of Global Compensation make recommendations regarding each compensation element for the Named Executive Officers other than the CEO. The Compensation Committees independent compensation consultant and the Director of Global Compensation present analyses and recommendations regarding CEO compensation to the Compensation Committee in executive sessions.
With respect to the Companys executive performance-based plans, management, including the CEO, CFO, Chief Human Resources 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 considering the Companys strategic and operational imperatives for the year and its executive compensation strategy and goals. Generally, the performance targets and individual award targets for the Companys 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 Companys 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. Throughout the year, the Compensation Committee reviews projections for achievement of each plans performance targets.
Role of Compensation Consultant
To assist the Compensation Committee in evaluating the Companys executive compensation plans, the Compensation Committee engaged an independent compensation consultant, Frederic W. Cook & Co., Inc., to advise it directly. The Compensation Committees 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 Companys executive compensation strategy and goals. The consultant is also asked to confirm that the Companys executive compensation goals continue to be aligned with best practices.
The Companys Chief Human Resources Officer and others directly involved with the Companys 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 directly 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 Committees responsibilities that management may engage the consultant without the Committees 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.
The following directors served on the Compensation Committee during 2008: Richard S. Braddock, Timothy M. Donahue, Michael J. Hawley, Douglas R. Lebda, Delano E. Lewis, William G. Parrett, Hector de J. Ruiz and Laura DAndrea Tyson. There were no Compensation Committee interlocks between the Company and other entities involving the Companys executive officers and directors.
Described below are some of the significant governance practices that have been adopted by our Board.
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 Directors duties can be found at www.kodak.com/go/governance.
Our Board has a Director Attendance Policy. A copy of this policy is attached as an appendix to our Corporate Governance Guidelines, which can be accessed at www.kodak.com/go/governance. Under this policy, all of our directors are strongly encouraged to attend our annual meeting of shareholders.
In 2008, the Board held a total of eight meetings. Each incumbent director attended at least 75% of the meetings of the Board and committees of the Board on which the director served. Eleven out of our twelve directors attended our 2008 annual meeting; ten attended in person, one attended via phone.
Executive sessions of our non-management directors are chaired by our Presiding Director.
The Boards 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 at www.kodak.com/go/governance, the Company will require reimbursement of a certain portion of any bonus paid to a Named Executive Officer when:
In each such instance, the Company will, to the extent practicable, seek to recover the amount by which the individual officers 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.
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 Director at email@example.com or may send a letter to our Presiding Director at P.O. Box 92818, Rochester, NY 14650. Communications sent by e-mail will go simultaneously to Kodaks Presiding Director and Secretary. Our Secretary will review communications sent by mail, and if they are relevant to, and consistent with, Kodaks 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 Committee may do so by providing the following information, in writing, to the Governance Committee, c/o Secretary, Eastman Kodak Company, 343 State Street, Rochester, NY 14650-0218: 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 persons ownership of such shares or such persons 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 individuals 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 Companys 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 Companys website at www.kodak.com/go/governance for any changes to this process. The Governance Committee will consider candidates recommended by shareholders on the same basis as candidates identified through other means.
Director 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 are attached as Exhibit ll to this Proxy Statement and can also be accessed at www.kodak.com/go/governance. 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 the Director Selection Process described in the next section, will then consider the candidates 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 Companys Corporate Governance Guidelines, the Governance Committee seeks to create a diverse and inclusive 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 at www.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.
Our Board has a formal process for annually establishing and prioritizing its goals. The Board believes that adopting annual goals enhances its ability to measure its performance and improves its focus on the Companys long-term strategic issues. The Boards goals are aligned with the Companys operational and strategic imperatives.
Under the process approved by the Board, each year the Governance Committee submits to the Board a proposed list of Board goals for the following year. At its first meeting of the year, the Board finalizes its goals for the year based on the Governance Committees recommendations. Once the goals are established by the Board, the Governance Committee is responsible for tracking the Boards performance against its goals and routinely reporting these results to the Board. Performance against the goals is assessed as part of the Boards annual evaluation process.
Strategic Role of Board
The Board plays a key role in developing, reviewing and overseeing the Companys business strategy. Twice each year, the Board devotes an extended meeting to an update from management regarding the strategic issues and opportunities facing the Company and its businesses. In addition, the Board throughout the year reviews the Companys strategic plan and receives briefings and reports on critical aspects of its implementation. These include business unit performance reviews, product category reviews and presentations regarding research and development initiatives and the Companys intellectual property portfolio.
Majority Voting for Directors
In February 2009, the Board amended the Companys By-laws, as a result of a recent change in New Jersey law, to provide for majority voting in uncontested director elections. Previously, the Company had 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 Companys 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 Policy 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 director only those candidates who agree to execute such a letter upon his or her nomination. A copy of the amended Majority Vote Policy can be found on the Companys corporate governance website at www.kodak.com/go/governance.
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 those factors it considers relevant, including any stated reason why shareholders voted against the election of the director, the directors qualifications, the directors 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 meet any applicable rule, such as the NYSEs Listing Standards.
The policy provides that the Board will act on the Governance Committees recommendation and publicly disclose its decision whether to accept the directors 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, 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 the irrevocable letter of resignation as a condition of being renominated to the Board as called for under the amended Majority Vote Policy.
Our directors are compensated through a combination of cash retainers and equity-based incentives. Consistent with the Boards 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 all of the shares, net of any shares used to pay 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 retainer that is paid in cash.
Kodak does not pay management directors for Board service in addition to their regular employee compensation.
Director Compensation Principles
The Board has adopted the following director compensation principles, which are aligned with the Companys executive compensation principles:
The Governance Committee, which consists solely of independent directors, has the primary responsibility for reviewing and considering any changes to the Boards compensation program. The Board reviews the Governance Committees recommendation and determines the amount of director compensation.
The Governance Committee last completed a review of the Boards 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 Companys director compensation program are now as follows:
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:
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
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
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 plans benefits are neither funded nor secured.
The Company reimburses its directors for travel expenses incurred in connection with attending Board, 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 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 Companys 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 directors death, to be shared by a maximum of four charitable institutions recommended by the director. 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.
BENEFICIAL SECURITY OWNERSHIP OF MORE THAN 5% OF THE COMPANYS 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:
BENEFICIAL SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND SECTION 16 EXECUTIVE OFFICERS
The above table reports beneficial ownership of the Companys 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, 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.
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 executives account under Kodaks 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 executives share ownership requirement. The Compensation Committee monitors each executives 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:
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Companys 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 of the Audit Committees charter can be found on our website at www.kodak.com/go/governance.
Management is responsible for the Companys internal control over financial reporting, the Companys disclosure controls and procedures, and preparing the Companys consolidated financial statements. The Companys independent registered public accounting firm (independent accountants), PricewaterhouseCoopers LLP (PwC), is responsible for performing an independent audit of the consolidated financial statements and of its 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 Committee is responsible for overseeing these processes.
During 2008, the Audit Committee met and held discussions with management and the independent accountants on a regular basis. Management represented to the Audit Committee that the Companys consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP), and the Audit Committee reviewed and discussed the audited consolidated financial statements with management and the independent accountants.
The Audit Committee met and discussed with the Corporate Controller and Assistant Controller the Companys significant accounting matters, key fluctuations in the Companys financial statements and the quality of the Companys earnings reports.
The Audit Committee discussed with the independent accountants the matters specified by Statement on Auditing Standards No. 61, Communications with Audit Committee, as adopted by the PCAOB in Rule 3200T. The independent accountants provided to the Audit Committee the written disclosures required by the PCAOB in Rule 3526, Communication with Audit Committees Concerning Independence. The Audit Committee discussed with the independent accountants their independence.
The Audit Committee discussed with the Companys internal auditors and independent accountants the plans for their audits. The Audit 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 Committee the results of their examinations, their evaluations of the Companys internal control over financial reporting, the Companys disclosure controls and procedures, and the quality of the Companys financial reporting.
With reliance on these reviews, discussions and reports, the Audit Committee recommended that the Board approve the audited financial statements for inclusion in the Companys Annual Report on Form 10-K for the year ended December 31, 2008, and the Board accepted the Audit Committees recommendations. The following fees were paid to PwC for services rendered in 2008 and 2007:
The audit fees related primarily to the annual audit of the Companys consolidated financial statements (including Section 404 internal control assessment under the Sarbanes-Oxley Act of 2002) included in the Companys Annual Report on Form 10-K, quarterly reviews of interim financial statements included in the Companys Quarterly Reports on Forms 10-Q, statutory audits of certain of the Companys 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 Companys 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.
The Audit Committee appointed PwC as the Companys independent accountants. In addition, the Audit Committee approved the scope of non-audit services anticipated to be performed by PwC in 2009 and the estimated budget for those services. The Audit 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.
REPORT OF THE CORPORATE RESPONSIBILITY AND GOVERNANCE COMMITTEE
The Governance Committee continually considers ways to improve the Companys corporate governance practices. In this regard, the Governance Committee periodically reviews the Boards governance policies and procedures to ensure that they are aligned with best practices, the Boards corporate governance documents and applicable statutory and regulatory requirements.
This report, an annual voluntary governance practice that the Governance Committee began in 2003, highlights the Governance Committees corporate governance activities during the past year.
Governance Committee Composition
The Governance Committee is composed of five directors, each of whom meets the definition of independence set forth in the NYSEs 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 at www.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 Companys activities in the areas of environmental and social responsibility, charitable contributions, diversity and equal employment opportunity; and generally oversee the Companys 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 Companys governance practices and policies. In addition, the Governance Committee is responsible for, among other things: 1) administering the Boards Director Selection Process; 2) developing the Boards Director Qualification Standards; 3) implementing the Boards director orientation and education programs; 4) overseeing and reviewing the Companys Corporate Governance Guidelines and Director Independence Standards; and 5) recommending to the Board the compensation for directors. A complete description of the Governance Committees responsibilities can be found in its charter.
Described below are some of the significant governance actions that the Governance Committee has taken since its report in last years proxy statement.
The Governance Committee continued to spend a significant amount of its time considering and recruiting candidates to fill the Boards 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 Boards target candidate profiles and fit the Boards Director Qualification Standards.
Based on the Governance Committees 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 Committees external executive search first suggested that it consider Mr. Strigl as a candidate for the Board. In accordance with the Boards Director Selection Process, the Committee oversaw the process of electing Mr. Strigl to the Board. A copy of the Boards Director Selection Process and Director Qualification Standards can be found in the Corporate Governance section of www.kodak.com/go/governance.
Based on the recommendation of the Governance Committee, the Board recently approved an amendment to the Companys 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.
The Governance Committee assessed each non-management directors independence based upon the Boards Director Independence Standards and those of the NYSE, and made recommendations to the full Board regarding each non-management directors independence.
Board Annual Goals
Based on the Governance Committees 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 Boards 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 Committees performance.
Diversity Advisory Panels Recommendations
The Governance Committee met with the Companys Chief Diversity Officer to assess the Companys 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 Companys comprehensive diversity strategy and assess future diversity trends and the potential impact on Kodak.
Board Action Plan
The Governance Committee monitored the Boards performance against the action plan arising from the Boards 2007 annual evaluation and provided periodic reports to the Board concerning its progress against the action plan.
The Executive Compensation and Development Committee has reviewed and discussed the Compensation Discussion and Analysis that is required by the SEC rules with the Companys management.
Based on such review and discussions, the Compensation Committee recommended to the Companys Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION DISCUSSION AND ANALYSIS
The Executive Compensation and Development Committee, to which we refer in this discussion as the Committee, has oversight responsibility for the Companys executive compensation strategy. The Committee approves our compensation objectives, plans, philosophy and forms of compensation for all executives, including our Named Executive Officers. In 2008, our Named Executive Officers included our:
Our Named Executive Officers for 2008 also included one former Senior Vice President, James T. Langley. Decisions for Mr. Langley can be found on pages 45, 54, 65 and 71 of this Proxy Statement.
The 2008 year marked Kodaks 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.
Management selected our 2008 business metrics because they provide insight to the Companys 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 success of the Companys business goals. During 2008, our compensation strategy focused on:
Following the completion of 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 managements recommendation that no payouts be made under our annual variable pay or long-term equity incentive compensation plans in 2008. The Committees decision was consistent with our highly results-oriented compensation strategy.
Our overall compensation philosophy focuses on attracting, retaining and motivating world-class executive talent critical to the success of the Companys 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: 1) base salary; 2) annual variable pay; 3) long-term equity incentives; and 4) benefits, which include retirement, termination and change-in-control arrangements. Our Named Executive Officers are 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 Companys executive compensation principles, which provide a framework for the Companys executive compensation programs. In 2008, the Committee reviewed and approved the following principles:
The Committee oversees the Companys executive compensation strategy and reviews and approves the compensation of our Named Executive Officers. The Committee annually conducts a review of each Named Executive Officers total direct compensation including a review of base salary, target total cash and total long-term equity incentive. In the course of the Committees review in 2008, the Committee sought the advice and input of its independent compensation consultant, Frederic W. Cook & Co., Inc. (Consultant), as well as Company management. In general, 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 with 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.
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) 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 Companys 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 Officers level of annual target total direct compensation after reviewing market 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 Companys 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 Companys 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 Companys 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 Officers 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 derives the market data from the average 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 specific 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. The Committee reviewed this competitive data for companies at both revenue levels to reflect the Companys revenue size at the start of 2008 and its revenue size prior to the divestiture of the Health Group on April 30, 2007. Given 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 lieu of a smaller group of specific companies to conduct a comparative analysis of total direct compensation because there were few companies with a similar product portfolio, revenue and market capitalization size during the Companys transformation and emergence as a digital company. Based on the recommendation of its Consultant, the Committee believes these surveys provide a reasonable representation of the cost to hire and retain executive talent.
In 2008, the Committee agreed that this approach continued to be appropriate for 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 Named 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 responsibility and the percentage of total direct compensation delivered through annual variable pay and long-term equity incentive compensation. This relationship reflects the CEOs greater opportunity to influence the Companys financial performance. (Another difference between our CEO compensation and that of our Named Executive Officers is reflected in the CEOs change in pension value, which is described further in the narrative accompanying the Summary Compensation Table on page 49 of this Proxy Statement.)
The Committee does not have a pre-defined target for each element of total direct compensation. Rather, 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 Companys 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
The 2008 compensation mix supports the Companys 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
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 Officers 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 components 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 Committees views on a variety of issues, such as changes to severance plans and employment agreements, special equity grants to promote retention, or changes in long-term equity incentives.
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 Companys 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. Perezs performance. The Board recognized Mr. Perezs strong leadership of the Companys 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 Companys 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 CEOs 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 years determination as further described on page 41 of this Proxy Statement. The Committee considered the 2007 CEO evaluation when determining our CEOs long-term equity target allocation in December 2008 as described on page 43 of this Proxy Statement.
Total direct compensation consists of the following elements: base salary, annual variable pay and long-term equity incentives.
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
compensation, with a positive correlation between the degree of compensation at risk and the level of an executives 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 reviews base salaries annually at the beginning of the year, but it does not automatically increase salaries. Rather, base salaries are adjusted if, and as, 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 last base salary change. Any change in base salary will affect an executives target opportunity under our annual variable pay plan, which is based on a percentage of base salary.
Committee Decision and Analysis
In making 2008 base salary decisions, 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 Companys 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 Companys multi-year strategy designed to increase the proportion of our Named Executive Officers total direct compensation delivered in the form of equity and decrease the proportion delivered as base salary.
For 2009, the Committee reviewed the 2008 market analysis that its Consultant prepared and considered each Named Executive Officers total direct compensation, target total cash compensation and base salary in relation to the market median for comparable sized companies and responsibilities. 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 Companys size prior to the Health Group divestiture. Further, the Committee considered the number of years since the Named Executive Officer received a base salary increase. The CEO provided a summary of the individuals prior year contributions and Tally Sheet as background, with the exception of Mr. Berman, since he was not a Named Executive Officer in 2007. After this review, and based on managements recommendation, the Committee determined that there would be no salary increases for any Named Executive Officers. The Committee made this decision in light of managements 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.
Annual Variable Pay: EXCEL Plan
The Company provides an annual variable cash incentive opportunity to our executives, including our Named Executive Officers, through its EXCEL plan. The purpose of EXCEL is to provide annual cash compensation based on the Companys overall annual operating performance, thereby 1) motivating management to pursue operational and strategic objectives deemed most critical for the Companys 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).
Executives participating in the plan 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 through a corporate funding pool, the size of which is based on 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 executives 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.
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 to exercise 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 Companys 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
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 Officers 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 corporate award pool (without discretion), or 500% of his or her prior year-end base salary, not to exceed $5 million. In addition, the Committee may also choose to exercise discretion to recognize circumstances such as unanticipated economic or market changes, extreme currency exchange effects and management of significant workforce issues. Following its determination regarding the size of the corporate funding pool for the year, the Committee determines the amount of any awards for the Named Executive Officers.
EXCEL Target Opportunity
As noted above, our Named Executive Officers are assigned target opportunities based on a percentage of base salary. Since a Named Executive Officers EXCEL opportunity is a component of total direct compensation, the Committee annually reviews survey data to determine the position of each Named Executive Officers 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 target EXCEL opportunity for our Named Executive Officers, other than Ms. Hellyar and Mr. Berman, remained unchanged from 2007 because the Committee felt that each executives target total cash position was appropriately positioned against the market median. Ms. Hellyars 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. Bermans 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 managements decision to provide no salary and no annual variable pay target opportunity increase for executives.
2008 EXCEL Plan Design and Performance Results
For 2008, the Committee selected two performance metrics to be used to determine the corporate award pool from which awards would be allocated. The Committee set the targets of these performance metrics in alignment with the Companys external guidance to investors. Using these targets, a performance matrix was created that determined the funding percentage of the plans corporate award pool. The Committee also established a set of baseline metrics. The Committee reviewed and finalized these 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 Graphic Communications Group (GCG) year-over-year percent revenue growth as the two primary metrics for the plan, each of which was equally weighted. Specific definitions for these non-GAAP financial measures can be found in the narratives for the Grants of Plan-based Awards on page 55 of this Proxy statement.
The Committee established baseline metrics for 2008 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, target and stretch goals for 2008 and the resulting EXCEL corporate funding pool percentage:
EXCEL Corporate Funding Pool Percentage Matrix
If the Company achieved both of the target goals, the corporate pool would fund at 100%. If either threshold goal was not achieved, the corporate pool would not be funded and our Named Executive Officers will not earn a bonus under the plan.
Committee Discussion and Analysis
The Committee selected the two primary metrics because they are key operational metrics for the Company and are among the metrics our CEO periodically reports to the investment community. They provide insight to the Companys ability to generate cash to invest in organic and non-organic growth as well as the continued growth of the Companys digital businesses.
The Committee established the Net Cash Generation threshold at $50 million to provide a level of positive cash flow (after dividends), while still providing the flexibility to make investments to drive growth in our digital businesses. Further, the target of $300 million was consistent with the midpoint of the Net Cash Generation range communicated to investors, as adjusted for dividends. 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 was consistent with prior full-year digital revenue growth after reflecting the realignment of two analog business product groups. The threshold was established at 4% revenue growth, which was the midpoint of the range communicated 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 for performance above 8.5% was appropriate because it represented performance above the midpoint of the revenue growth communicated to investors and was a challenging objective given the strong full year growth the Company achieved in 2007. In addition, 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 strategic and operational imperatives for the year in support of the Companys business strategy. The metrics were selected in part to ensure that the primary EXCEL performance metrics were not achieved at the expense of the longer-term interest of shareholders.
Determination of Corporate Award Pool for 2008
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.
Committee Decision and Analysis
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 Compensation
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.
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 Officers 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 Companys shareholders.
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 the Named Executive Officers is calculated based on a dollar value for 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 reflect individual performance factors. The methodology used to convert this dollar-denominated long-term equity incentive opportunity into equity grants (stock options, leadership stock units and restricted stock units) can be found on page 46 of this Proxy Statement. The equity grants are made in accordance with the Board of Directors Policy on Equity Awards, discussed further on page 46 of this Proxy Statement.
While the Committee determines a total dollar value for purposes of calculating the number of stock options, Leadership Stock units and restricted stock units to 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 Companys stock price on the grant date, stock price appreciation 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 options 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, determined in December 2007, see the Companys Notice of 2008 Annual Meeting and Proxy Statement.
Committee Decision and Analysis
With respect to the award determinations made in December 2008, the Committee determined there would be no increase in the target dollar value of long-term equity incentive compensation for any Named Executive Officer from the prior year. The Committee made this decision considering: 1) the challenging economic environment; 2) the Companys financial performance for 2008; and 3) the position of our Named Executive Officers total direct compensation relative to market median.
The above amounts in the table represent the intended target dollar value of the long-term incentive opportunity. Because of significant declines in the price of the Companys stock in the fourth quarter of 2008, the methodology used to convert this opportunity into stock options and full value shares resulted 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.
Leadership Stock 2008 Performance Cycle Awards
As part of its annual review of long-term equity incentives, 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, the Committee decided to continue its use of a one-year performance period followed by a two-year time-based vesting schedule for Leadership Stock. Leadership Stock awards provide the participant with the right to earn shares 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 Companys 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 executives 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.
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 Companys digital businesses.
2008 Leadership Stock Program Results
For 2008, the Companys 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 Companys results in 2008, the delivered compensation for our Named Executive Officers in 2008 was significantly below the target total direct compensation levels that the Committee established. By delivered compensation, we mean the compensation that was actually delivered to our Named Executive Officers for 2008 (i.e., delivered compensation = 2008 base salary + the actual 2008 annual variable pay (EXCEL) award earned + the actual 2008 Leadership Stock award earned + the SFAS 123R grant date fair value of the stock options granted in 2008). The following tables demonstrate that the delivered compensation for our Named Executive Officers was 21% to 34% of their target total direct compensation in 2008. This outcome resulted from a zero payout under the EXCEL and Leadership Stock plans and the manner in which dollar-denominated long-term equity targets were converted into actual awards (as described on page 46 of this Proxy Statement) and valued based on 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% 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.
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 connection with the commencement 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, retention and stock ownership and to align an executives 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. Langleys last day of employment with the Company was March 14, 2008. In connection with Mr. Langleys planned separation from service with the Company, the Compensation Committee approved a severance payment of $810,000, which was equivalent to Mr. Langleys target cash compensation. Mr. Langleys severance was determined in consideration of: 1) 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. Langleys position; and 3) the severance arrangement in Mr. Langleys hiring agreement, which had expired a year earlier and provided a comparable benefit. In addition to severance, the Committee granted an approved reason and accelerated vesting for the remaining
3,453 restricted shares of the Companys 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. Langleys 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. Langleys 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 executives 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 Committees 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.
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 Companys 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 equivalents
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 Companys 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 Companys stock price fell after determination of the 60-day average stock price and prior to the issuance of the equity awards.
Policy on Qualifying Compensation
When designing all aspects of compensation, the Company considers the deductibility of executive compensation under Section 162(m) of the Code, which provides that the Company may not deduct 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 as defined in Section 162(m) of the Code. Stock options and Leadership Stock are also intended to satisfy the requirements for performance-based compensation under Section 162(m). While we design these plans 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.
While the Committee considers the impact of the tax treatment, the primary factor influencing program design is the support of business objectives. Generally, whether or not compensation will be deductible under Section 162(m) will be an important, but not the decisive factor, with respect to the Committees 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.
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 executives 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
The Company offers a tax-qualified defined benefit plan comprised of a cash balance component and a traditional defined benefit component (KRIP) and tax-qualified 401(k) defined contribution plan (SIP), which cover virtually all U.S. employees. In addition to these tax-qualified retirement plans, the Company provides supplemental non-qualified retirement benefits to our Named Executive Officers under the Kodak Unfunded Retirement Income Plan (KURIP) and the Kodak Excess Retirement Income Plan (KERIP). KURIP and KERIP are unfunded retirement plans that are designed to provide our executives with pension benefits that make up for the Codes limitations on allocations and benefits that may be paid under KRIP and SIP. None of our Named Executive Officers has an accumulated benefit under KERIP. The details of KRIP and KURIP are described under the Pension Benefits Table on page 63 of this Proxy Statement.
The Company believes that our tax-qualified retirement plans and non-qualified supplemental retirement plans enhance our executive compensation package. The primary objective of our retirement plans is to attract and retain our employees.
Supplemental Individual Retirement Arrangements
We have also entered into individual letter agreements with Messrs. 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. Perez and Faraci, these agreements provide for additional years of service in calculating their benefits under KRIP and KURIP. Supplemental individual retirement arrangements were necessary to recruit these Named Executive Officers. The benefits provided to our Named Executive Officers under any individual retirement arrangement are described on page 65 of this Proxy Statement.
Deferred Compensation Plan
The Company maintains a non-qualified deferred compensation plan for its executives, known as the Eastman Kodak Company 1982 Executive Deferred Compensation Plan (EDCP). The plan permits the Companys executives to defer a portion of their base salary and annual bonus awards. Each fall, the Companys 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, the Committee froze the receipt of new monies into this plan. This action was taken due to the plans low utilization and administrative costs.
The Company provides certain perquisites primarily for security related reasons, to maximize an executives 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 Companys driver service. Home security services are provided for Mr. Perez but were discontinued in December 2008 for Messrs. Faraci, Sklarsky and Berman and in January 2009 for Ms. Hellyar. The Companys 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.
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 the Named Executive Officer on business travel.
The compensation attributed to our Named Executive Officers for 2008 for perquisites is included in the Summary Compensation Table on page 49 of this Proxy Statement.
SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
Our Named Executive Officers are responsible for the continued success of the Company and the execution of the Companys 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.
Most of our Named Executive Officers have 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 time 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 service 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 severance arrangements are designed to serve as a retention tool and to eliminate any reluctance of executives to implement any transformational components of the Companys strategic plan. In certain instances, an executives successful completion of his or her responsibilities may result in the elimination of his/her job. These arrangements also provide an incentive for individuals 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.
Mr. Perezs individual severance arrangement provides him with severance benefits that are payable in the event his 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 among the relevant individual letter agreements negotiated between the Company and the Named Executive Officers. When approving any letter agreement for employment or retention, the Committee focuses on the severance triggers relative to each executives position and responsibilities.
Our severance arrangements with our Named Executive Officers also provide for the treatment of other compensation provided under the Companys annual bonus plan, equity plans and retirement plans. For additional information regarding the potential severance benefits payable to our Named Executive Officers under various circumstances see the description under the Severance Benefits Tables beginning on page 72 of this Proxy Statement.
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, our Executive Protection Plan, which the Company adopted in 1992, provides for enhanced change-in-control severance benefits for our Named Executive Officers to reduce any reluctance of our Named Executive Officers to support potential change-in-control transactions that may be in the best interest of shareholders and to promote the 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 determining the appropriate level of change-in-control benefits for a Named Executive Officer under 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 Committees decisions concerning these benefits do not affect decisions made regarding other compensation elements.
Certain of our other employee benefit and compensation plans also provide enhanced benefits to our Named Executive Officers after a change-in-control. These benefits are designed to protect our Named Executive Officers against possible loss of benefits after a change-incontrol. Additional plan terms and the treatment of any benefits after a change-in-control under the Companys retirement and welfare plans, deferred compensation plan, EXCEL plan and equity incentive plans are described beginning on page 76 of this Proxy Statement.
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, 2007 and 2008.
EMPLOYMENT AND RETENTION ARRANGEMENTS
The material terms of each Named Executive Officers employment or retention arrangements 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 those levels are described in the Compensation Discussion and Analysis on page 34 of this Proxy Statement.
Antonio M. Perez
The Company employed Mr. Perez as President and COO under a letter agreement dated March 3, 2003. On May 10, 2005, in connection with Mr. Perezs election as Chief Executive Officer and Chairman of the Board, the Compensation Committee modified the compensation-related terms of his employment. In addition to the compensation described elsewhere in this Proxy Statement, Mr. Perez is eligible to receive a base salary of $1.1 million and a target award under the EXCEL plan of 155% of his base salary. Mr. Perez 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.
Under his March 3, 2003 letter agreement, Mr. Perez is also eligible to receive a supplemental unfunded retirement benefit, which is described on page 65 of this Proxy Statement. Mr. Perezs letter agreement was amended by a letter agreement dated February 27, 2007 to provide that this supplemental retirement benefit will vest when he turns age 65, consistent with the Companys mandatory retirement policy for our corporate officers. This February 27, 2007 letter agreement also provides lump sum payment of his supplemental retirement benefit following the six-month anniversary of his termination. Mr. Perezs letter agreement was further amended by a letter agreement dated December 9, 2008 to specify how his surviving spouses pre-retirement survivor benefits related to his supplemental unfunded retirement benefit will be calculated, clarify what persons qualify as survivors, and provide for payment of pre-retirement survivor benefits in the form of a lump sum. With respect to the calculation of his surviving spouses pre-retirement survivor benefits, Section 409A of the Code triggers immediate taxation on Mr. Perezs deferred compensation if his surviving spouse has control over which of two formulas would be used for this calculation. To avoid this tax implication, the December 9, 2008 letter agreement requires the surviving spouses pre-retirement survivor benefits to be the greater of the benefits calculated using either formula. With regard to the definition of survivor, the December 9, 2008 letter agreement clarifies that the only persons who qualify as survivors include Mr. Perezs surviving spouse or domestic partner and, if none, his surviving child(ren) under age 19. This definition was added because both his March 3, 2003 and February 27, 2007 letter agreements did not specify the intended meaning of the term survivor. With regard to the lump sum payment of pre-retirement survivor benefits, the December 9, 2008 letter agreement provides for a form of payment because one was not specified in Mr. Perezs March 3, 2003 and February 27, 2007 letter agreements. A lump sum form of payment was selected because it is consistent with the form of payment provided for Mr. Perezs supplemental unfunded retirement benefit under his February 27, 2007 letter agreement.
The term of Mr. Perezs 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.
In addition, Mr. Sklarskys 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. Sklarskys employment is indefinite but, according to his September 19, 2006 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.
Philip J. Faraci
The Company employed Mr. Faraci under a letter agreement dated November 3, 2004. In addition to the information provided elsewhere in this Proxy Statement, Mr. Faraci initially received a base salary of $520,000 and a target award under the EXCEL plan of 62% of his base salary. Mr. Faraci 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. Mr. Faracis letter agreement also provides him with a supplemental retirement benefit, as described on page 65 of this Proxy Statement.
Mr. Faracis letter agreement was amended by a letter agreement dated February 28, 2007 to provide for lump-sum payment of his supplemental retirement benefits following 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. Faracis 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. Faracis 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 Hellyar
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.
The term of Ms. Hellyars employment is indefinite but, according to her August 18, 2006 letter agreement, she will also be eligible for certain severance benefits in connection with termination of her employment under various circumstances. For information regarding her potential severance payments and benefits in connection with termination of her employment under various circumstances, please read the narrative descriptions and tables beginning on page 69 of this Proxy Statement.
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. Berman
Mr. Berman does not have a letter agreement concerning his employment or retention.
Former Executive: James T. Langley
Mr. Langleys last day of employment with the Company was March 14, 2008. In connection with Mr. Langleys planned separation from service with the Company, Mr. Langley received certain severance payments and other benefits 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. These payments and benefits are described on pages 65 and 71 of this Proxy Statement.
GRANTS OF PLAN-BASED AWARDS IN 2008
The compensation plans under which the grants were made in 2008 that are shown in the following table include the Companys 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.
EXCEL (Executive Compensation for Excellence and Leadership) is our short-term variable incentive plan for executives. For a discussion of the EXCEL plan, target allocations for our Named Executive Officers and performance under the plan for 2008, see the discussion in the Compensation Discussion and Analysis under the heading Annual Variable Pay.
In 2008, 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 as 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:
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.
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 executives target allocation multiplied by the applicable performance percentage based on the Companys 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:
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 executives 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 Companys 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 Officers 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 Officers termination of employment. If a Named Executive Officers 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 Companys 2005 Omnibus Long-Term Compensation Plan.
OUTSTANDING EQUITY AWARDS AT 2008 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 awards granted during 2008 and described in the Grants of Plan-Based Awards Table.