Kodak 2005 Annual Report Download - page 191

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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 benefi ts 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 benefi t continuation is based on the employee’s position. The named executive offi cers would be eligible for severance pay equal to
three times their total target annual compensation. In addition, the named executive offi cers would be eligible to participate in the Company’s medical,
dental, disability and life insurance plans until the fi rst 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 benefi ts under the Company’s retirement plan. Any participant whose employment is
terminated, for a reason other than death, disability, cause, retirement or voluntary resignation, within fi ve years of a change in control is given up to
fi ve additional years of service. In addition, where the participant is age 50 or over on the date of the change in control, up to fi ve 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 benefi t.
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
fi ve years after a change in control, the benefi t for each participant will be calculated as indicated above.
In the event of a change in control, the Company’s compensation plans (with the exception of the 2005 Omnibus Long-Term Compensation Plan, which
is described below) 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 Company’s stock option plans, in the event of a change in control which causes the Company’s stock to cease active trading on
the NYSE and Kodak common stock is not exchanged solely for common stock of the surviving company or the surviving company does not
assume all plan awards, 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.
• Under the Company’s restricted stock programs, in the event of a change in control which causes the Company’s stock to cease active trading
on the NYSE and Kodak common stock is not exchanged solely for common stock of the surviving company or the surviving company does not
assume all plan awards, all of the restrictions on the stock will lapse and the stock will be cashed out based on the change in control price.
Under the Company’s 2005 Omnibus Long-Term Compensation Plan, upon a change in control, if outstanding stock option and restricted stock awards
are assumed or substituted by the surviving company, as determined by the Compensation Committee, then the awards will not immediately vest or
be exercisable. If the awards are so assumed or substituted, then the awards will be subject to accelerated vesting and exercisability upon certain
terminations of employment within the fi rst two years after the change in control. Only if the awards are not so assumed or substituted will they
become immediately vested, exercisable and paid out in cash or shares. For performance awards, if more than 50% of the performance cycle has
elapsed when a change in control occurs, the award will vest and be paid out at the greater of target performance or performance to date. If 50% or
less of the performance cycle has elapsed when a change in control occurs, the award will vest and be paid out at 50% of target performance,
regardless of actual performance to date.
DEFERRED COMPENSATION
The Company maintains a deferred compensation plan for its executives, i.e., the Eastman Kodak Company 1982 Executive Deferred Compensation
Plan. The plan permits the Company’s executives to defer a portion of their base salary and short-term variable pay awards. Each Fall, the Company’s
executives may elect to defer base salary for the following year and up to 75% of any short-term variable pay award earned for that year, which is
payable in the following year. The plan has only two investment options, an interest-bearing account that pays interest at the prime rate and a Kodak
phantom stock account. Only the Company’s executive offi cers are permitted to defer into the phantom stock account. The Company does not provide
its executive offi cers any incentives to encourage them to participate in the phantom stock account. The plan’s benefi ts are neither funded nor
secured. As of December 31, 2005, one executive offi cer has a phantom stock account balance.