Kodak 2007 Annual Report Download - page 173

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SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
Severance Arrangements
Our Named Executive Officers are responsible for the continued success of the Company and the execution of the Company’s strategic
plan to transform the Company from a traditional products and services company to a digital technology company. The Committee believes
that it is important to provide our senior management some measure of financial security in the event their employment is terminated
without cause. Most of our Named Executive Officers have an individual letter agreement that provides various severance benefits in the
event their employment is terminated under various circumstances. These individual letter agreements were negotiated at the time each
Named Executive Officer commenced employment with the Company or later in connection with entering into a retention arrangement to
provide for the executive’s continued employment and are consistent with guidelines established by the Committee for executive
severance. Especially during the Company’s digital transformation process, our individual severance arrangements are designed to serve
as a retention tool and to eliminate any reluctance of executives and employees to implement the Company’s strategic plan. In certain
instances, an executive’s successful completion of his or her responsibilities may result in the elimination of his/her job. These
arrangements also provide an incentive for individuals to sign a release of claims against the Company, to refrain from competing with the
Company and to cooperate with the Company both before and after their employment is terminated.
Mr. Perez’s individual severance arrangement provides him with severance benefits that are payable in the event his employment is
terminated by the Company without “cause” or if he terminates for “good reason.” Under their individual severance arrangements, Messrs.
Faraci, Sklarsky and Langley and Ms. Hellyar are entitled to severance benefits for termination by the Company without “cause.” The
arrangements for Mr. Sklarsky and Ms. Hellyar also provide them with severance benefits upon their long-term disability. For purposes of
these severance arrangements, the definitions of “cause” vary slightly among the relevant individual letter agreements negotiated between
the Company and the Named Executive Officers. When approving any letter agreement for employment or retention, the Committee
focuses on the severance triggers relative to each executive’s position and responsibilities.
Our severance arrangements with our Named Executive Officers also provide for the treatment of other compensation provided under the
Company’s annual bonus plan, equity plans and retirement plans. For additional information regarding the potential severance benefits
payable to our Named Executive Officers under various circumstances see the description under the Severance Benefits Tables beginning
on page 72 of this Proxy Statement.
Change-in-Control Arrangements
Consistent with our compensation philosophy, we believe that the interests of our shareholders are best served if the interests of our senior
management are aligned with theirs. To this end, our Executive Protection Plan, which the Company adopted in 1992, provides for
enhanced change-in-control severance benefits for our Named Executive Officers to reduce any reluctance of our Named Executive
Officers to support potential change-in-control transactions and to promote the continued employment and dedication of our Named
Executive Officers without distraction. The Committee believes that these change-in-control benefits also encourage smooth transition of
management in the event of a change-in-control. The terms of the Executive Protection Plan are more fully described on page 75 of this
Proxy Statement.
Certain of our other employee benefit and compensation plans also provide enhanced benefits to our Named Executive Officers after a
change-in-control. These benefits are designed to protect our Named Executive Officers against possible loss of promised benefits after a
change-in-control. Additional plan terms and the treatment of any benefits after a change-in-control under the Company’s retirement and
welfare plans, deferred compensation plan, EXCEL plan and equity incentive plans are described below after the Change-in-Control
Severance Payments Table on page 78 of this Proxy Statement.
Committee Decision and Analysis
In 2007 the Company undertook a review of change-in-control benefits. This review was initiated to understand the positioning of Kodak
plans in relation to best practices from governance, competitive and potential cost perspectives. Based on the review, the Committee
adopted a provision in which the pension enhancement provided under the Company’s plans known as the Kodak Retirement Income Plan
(KRIP) and the Kodak Unfunded Retirement Income Plan (KURIP) would be eliminated gradually over a five-year period (i.e., the age and
service enhancement would decline annually in equal increments). This change was made in recognition of: 1) comparison with market
competitive practices; and 2) the high potential costs of the provision in the event of a change-in-control transaction. The Committee
decided to retain the change in control provisions in other compensation and benefit programs with the intention of reviewing these
provisions again in 2008.