Kodak 2003 Annual Report Download - page 108

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Proxy Statement
108
LONG-TERM INCENTIVE PLAN
Leadership Stock Program
Beginning January 1, 2004, long-term compensation will principally be provided to all of the Company’s executives in the form of performance stock
units under the Company’s new Leadership Stock Program. As a result, those selected senior executives who formerly participated in the Company’s
Performance Stock Program will now be eligible for grants of performance stock units under the Leadership Stock Program. The terms of this new pro-
gram are detailed in the Report of the Executive Compensation and Development Committee on page 118.
Performance Stock Program
Although the new Leadership Stock Program replaces the Performance Stock Program, the pending cycles of the Performance Stock Program will con-
tinue to run until they expire. Participation in the Performance Stock Program was limited to selected senior executives. The program’s performance goal
was total shareholder return equal to at least that earned by a company at the 50th percentile in terms of total shareholder return within the Standard &
Poor’s 500 Composite Stock Price Index.
After the close of a cycle, the Committee calculates the percentage earned of each participant’s target award. No awards are paid unless the perform-
ance goal is achieved. Fifty percent of the target award is earned if the performance goal is achieved. One hundred percent is earned if total shareholder
return for the cycle equals that of a company at the 60th percentile within the Standard & Poor’s 500 Composite Stock Price Index.
The Committee has the discretion to reduce or eliminate the award earned by any participant based upon any criteria it deems appropriate. Awards are
paid in the form of restricted stock, which restrictions lapse at age 60. The table below shows the threshold (i.e., attainment of the performance goal),
target and maximum number of shares for the named executive officers for each cycle. No awards were earned for the 2001-2003 performance cycle.
Executive incentive Program
In early 2002, the Executive Compensation and Development Committee approved a performance-based, long-term award program, i.e., the Executive
Incentive Program, under the 2002-2004 cycle of the Performance Stock Program. The purposes of this one-time program were to increase by year-end
2003 investable cash flow and the financial performance of certain strategic product groups. In this regard, certain target and threshold performance
goals were established by the Committee based on these two metrics for the two-year period commencing January 1, 2002, and ending December 31,
2003.
Participation in the Executive Incentive Program was limited to 19 selected key executive officers, including the five named executive officers. Each par-
ticipant’s target award under the program was 75% of the participant’s total target annual compensation (annual base salary plus target EXCEL award)
expressed in the form of shares of common stock based on a March 8, 2002 stock price of $32.37 per share.
As explained in the Report of the Executive Compensation and Development Committee on page 120, both of the program’s threshold performance goals
were achieved by year-end 2003. As a result of the Company’s performance, the program’s performance formula provided a payout equal to 79% of tar-
get. As explained in last year’s Proxy Statement, the program’s participants received an interim award in 2002 of 30% of their target award due to
achieving certain pre-established interim goals by year-end 2002. Each participant’s interim award was then subtracted from the award he or she
earned for the entire cycle, and the net award amount was paid to the participant in the form of shares of the Company’s common stock. The net award
amounts paid to the named executive officers are listed under the column entitled “LTIP Payouts” in the Summary Compensation Table on page 104.
Awards under the Executive Incentive Program will be coordinated with awards received under the 2002-2004 performance cycle of the Performance
Stock Program. As a result, any award earned by a participant under the 2002-2004 performance cycle of the Performance Stock Program will be
reduced by the amount of any award earned by the participant under the Executive Incentive Program.