Kodak 2006 Annual Report Download - page 217

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Executives may elect to defer amounts under the plan for a fi xed period of time during employment. After the period of fi xed deferment, any account
balance may be paid in a cash lump-sum payment as soon as administratively possible coincident with a pay cycle in September after the account
is valued in August following the end of the deferment. Upon termination of employment, for amounts not subject to Section 409A of the Internal
Revenue Code, the Compensation Committee has the sole discretion to pay such amounts in a lump sum or in annual installments, not to exceed ten
annual installments. For amounts subject to Section 409A of the Internal Revenue Code, most Named Executive Offi cers fi led a distribution election to
be paid in a lump sum or in installments, provided that payments begin no later than when the executive reaches age 71. If an executive has not fi led
an election, then any amounts subject to Section 409A of the Internal Revenue Code will be paid in a lump sum. Any amounts subject to Section 409A
of the Internal Revenue Code are subject to a further six-month period delay following termination of employment in order to ensure compliance with
Section 409A of the Internal Revenue Code. Withdrawals prior to termination of employment are not permitted under the Plan except in cases of severe
fi nancial hardship not within the executive’s control, although amounts not subject to Section 409A of the Internal Revenue Code may be withdrawn by
an executive prior to termination of employment, provided that 10% of the amount withdrawn will be forfeited by the executive.
Salary and Bonus Deferral Program
To preserve the full deductibility for federal income tax purposes of our Chief Executive Offi cer’s base salary, Mr. Perez is required to defer that portion
of his base salary that exceeds $1 million. The amount deferred each pay period bears interest at the same rate as described above for our Executive
Deferred Compensation Plan. The deferred amounts and interest earned on these amounts are tracked through a notational account maintained by
the Company. Amounts deferred are only payable upon Mr. Perez’s retirement from the Company in the form of a lump sum. The notational account is
neither funded nor secured.
Under the terms of Mr. Langley’s offer letter described on page 48 of this Proxy Statement, Mr. Langley participated in an individual long-term bonus
plan established to incent achievement of certain pre-established goals in the Graphic Communications Group. The maximum target award for the
2005 performance period was $300,000. In February 2006, the Committee determined that $293,570 was earned by Mr. Langley under the bonus
plan as a result of achievement of the 2005 performance goals. This amount was contributed in February 2006 to an unfunded, deferred compensa-
tion account established on behalf of Mr. Langley. Any bonus amounts contributed to this account by the Company continue to bear interest at the
prime rate, compounded annually, until they are distributed. Distributions from the account are subject to the same distribution rules as those in effect
under our Executive Deferred Compensation Plan described above.
Deferral of Stock Awards
Under prior equity award programs, the Company at times permitted Named Executive Offi cers to defer the receipt of various equity awards to a date
later than the date as of which they vest. Mr. Perez elected to defer awards earned under the Alternative Award of the Executive Incentive Plan under
the 2002-2004 performance cycle of the Company’s Performance Stock Program, his restricted stock award granted on October 1, 2003 and per-
formance stock units earned under the 2004-2005 performance cycle of the Leadership Stock Program. Similarly, Mr. Brust elected to defer certain
awards earned under the Alternative Award of the Executive Incentive Plan under the 2002-2004 performance cycle of the Company’s Performance
Stock Program. Mr. Brust was also granted a restricted stock unit award on January 16, 2001, which was deferred in accordance with the terms of
the award. Each of these awards have fully vested as of December 31, 2006, with the exception of a portion of Mr. Perez’s October 1, 2003 restricted
stock award.
All of these deferred awards are tracked through notational accounts maintained by the Company. For each share or unit deferred, the executive
receives a phantom unit of our common stock in his account. Any stock dividends or amounts equivalent to dividends paid on our common stock are
added to the executive’s notational account in the form of additional phantom units as they are paid at the same rate as dividends are paid on shares
of our common stock. For these deferred awards, stock dividends were unrestricted, but are subject to the original payment terms of the underlying
deferred award. The notational accounts are neither funded nor secured.
The payout, withdrawal and distribution terms are generally similar for each deferred award, other than the performance stock units earned under
the 2004-2005 performance cycle of the Leadership Stock Program that were deferred by Mr. Perez. Pursuant to his deferral election, Mr. Perez will
be entitled to receive a distribution following his termination of employment of all amounts in his deferred account attributable to these performance
stock units (and any earnings thereon) in an immediate lump-sum payment, in shares, as soon as administratively practicable in March following his
termination of employment with the Company.
For all other deferred awards, upon termination of employment for any reason other than death, the amounts held in an executive’s notational accounts
will be distributed in a single lump sum or in up to 10 annual installments as determined by the Committee at its sole discretion. The Committee
will also have the discretion to pay the amounts in cash or in shares, or in any combination of both. Upon an executive’s death, the balance of an
executive’s deferred account that is not subject to restriction will be paid in a lump-sum cash payment within 30 days after appointment of a legal rep-
resentative of the deceased executive. With respect to any restricted portion of Mr. Perez’s deferred October 1, 2003 award of restricted stock, if Mr.
Perez dies prior to the last day of the restricted period, then his estate will be entitled to receive all of his unrestricted units of common stock credited
to his deferred account and a pro rata shares of the restricted units credited to his account.
Withdrawals prior to termination of employment are not permitted under the terms of the deferral program except in cases of severe fi nancial hardship
not within the executive’s control, as determined at the Committee’s sole discretion.