Kodak 2002 Annual Report Download - page 108

Proxy Statement
103
CHANGE IN CONTROL ARRANGEMENTS
The Company maintains a change in control program to provide severance pay and continuation of certain welfare benefits for virtually
all U.S. employees. A “change in control” is generally defined under the program as:
• the incumbent directors cease to constitute a majority of the Board, unless the election of the new directors was approved by
at least two-thirds of the incumbent directors then on the Board;
• the acquisition of 25% or more of the combined voting power of the Company’s then outstanding securities;
• a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its
subsidiaries that requires the approval of the Company’s shareholders; or
• a vote by the shareholders to completely liquidate or dissolve the Company.
The purpose of the program is to assure the continued employment and dedication of all employees without distraction from the
possibility of a change in control. The program provides for severance payments and continuation of certain welfare benefits to eligible
employees whose employment is terminated, either voluntarily with “good cause” or involuntarily, during the two-year period following
a change in control. The amount of the severance pay and length of benefit continuation is based on the employee’s position. The
named executive officers would be eligible for severance pay equal to three times their total target annual compensation. In addition,
the named executive officers would be eligible to participate in the Company’s medical, dental, disability and life insurance plans until
the first anniversary of the date of their termination of employment. The Company’s change in control program also requires, subject to
certain limitations, tax gross-up payments to all employees to mitigate any excise tax imposed upon the employee under the Internal
Revenue Code.
Another component of the program provides enhanced benefits under the Company’s retirement plan. Any participant whose
employment is terminated, for a reason other than death, disability, cause or voluntary resignation, within five years of a change in
control is given credit for up to five additional years of service. In addition, where the participant is age 50 or over on the date of the
change in control, up to five additional years of age is given for the following plan purposes:
• to determine eligibility for early and normal retirement;
• to determine eligibility for a vested right; and
• to calculate the amount of retirement benefit.
The actual number of years of service and years of age that is given to such a participant decreases proportionately depending upon
the number of years that elapse between the date of a change in control and the date of the participant’s termination of employment.
If the plan is terminated within five years after a change in control, the benefit for each participant will be calculated as
indicated above.
In the event of a change in control which causes the Company’s stock to cease active trading on the New York Stock Exchange, the
Company’s compensation plans will generally be affected as follows:
• under the Executive Deferred Compensation Plan, each participant will be paid the amount in his or her account;
• under EXCEL, each participant will be paid a pro rata target award for the year in which the change in control occurs;
• under the Performance Stock Program, each participant will be awarded a pro rata target award for each pending performance
cycle and all awards will be cashed out based on the change in control price;
• under the Company’s stock option plans, all outstanding options will vest in full and be cashed out based on the difference
between the change in control price and the option’s exercise price; and
• under the Company’s restricted stock programs, all of the restrictions on the stock will lapse and the stock will be cashed out
based on the change in control price.