For years, Kodak's high-volume copiers and printers have been cited for superior quality, productivity and ease of use. Our ImageSource and LionHeart products continue to set the standard for outstanding performance, so combining these strengths with Danka's broad line of office products — and marketing them to a large worldwide customer base — creates a powerful growth engine for the future. We've been an acknowledged industry leader with more than 1,100 patents — and our products consistently have ranked tops in customer surveys. But we concluded that we needed to reposition this division to meet the aggressive growth and earnings targets for all Kodak businesses. DANKA PURCHASE In 1996, Danka Business Systems PLC of St. Petersburg, Fla., paid Kodak $688 million in cash and assumed certain operating liabilities to acquire certain assets related to the sales, marketing and equipment service functions of our Office Imaging business, as well as our facilities management business, known as Kodak Imaging Services. The resulting business offers global coverage in office products and services with more than 700 offices in 35 countries. Danka's acquisition of Kodak's sales, marketing and facilities management operations placed our sales and service people in a growing operation devoted exclusively to providing business solutions for the office. More than 10,000 Kodak employees who supported Office Imaging worldwide accepted employment offers with Danka. As part of the deal, Kodak and Danka formed a strategic alliance in which Kodak supplies high-volume copiers and printers to Danka. Danka is now the principal distributor of Kodak-branded office copiers and printers, while Kodak retains the research, development and manufacturing functions for all Office Imaging products. In selling this business, we achieved our goals of strengthening the unit and maximizing its value to Kodak shareholders, while simultaneously looking out for the interests of our customers and our employees. The Danka alliance promises to increase market access for office products bearing the Kodak brand. The transition went smoothly. Our customers retained a continuity of service backed by the latest in Kodak technology. They kept the same contacts and service relationships. As an added benefit, they also have available additional product offerings from Danka's extensive line of other business equipment. R & D PROGRESS Kodak's research and development efforts for electrophotography will provide a pipeline of new black-and-white and accent-color office imaging products for Danka to market. This effort will be stronger and more focused as the two companies work together to identify product solutions to customer needs. In addition, Kodak will retain its key color electrophotography technology for use in Kodak's other imaging businesses. The Danka sale, in effect, strengthens our products' presence and market position. Office Imaging now has the necessary position and focus to grow.