Kodak 2008 Annual Report Download - page 202

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Change-in-Control Severance Payments
Executive Protection Plan
The Company maintains the Executive Protection Plan to provide severance pay and continuation of certain welfare benefits for Named
Executive Officers in the event 1) a change-in-control occurs and 2) the Named Executive Officer’s employment is terminated by the
Company for reasons other than cause or by the Named Executive Officer for good reason within two years after a change-in-control. A
change-in-control is generally defined under the plan 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 plan provides that, in the event of a termination of employment, either voluntarily with “good reason” or involuntarily without “cause,”
within two years following a change-in-control, each of the Named Executive Officers will receive a lump-sum severance payment equal to
1) three times their base salary and target EXCEL bonus and 2) continued participation in the Company’s medical, dental, disability and life
insurance plans for 12 months at no cost to the executive. The plan also requires, subject to certain limitations, tax gross-up payments to
all employees to mitigate any excise tax imposed upon the employee under the Code. If it is determined that an executive would not be
subject to an excise tax if the payments received in connection with the change-in-control were reduced by 10%, then amounts payable to
the executive under the plan will be reduced to the maximum amount the executive could be paid without giving rise to an excise tax.
“Good reason” is defined under the plan for our Named Executive Officers to mean:
• The assignment of, or change in, the duties or responsibilities of the Named Executive Officer that are not comparable in any
adverse respect with his or her duties prior to the change-in-control, other than a change in the executive’s title or reporting
relationship;
• A reduction of the Named Executive Officer’s pay, target bonus opportunities or benefits;
• A material reduction in the perquisites or fringe benefits provided;
• The failure of any successor to the Company to assume the plan; or
• Any amendment or termination of the plan not permitted by its terms.
“Cause” is defined under the program for our Named Executive Officers to mean:
• The willful and continued failure of the executive to substantially perform his or her duties (other than due to physical or mental
illness) after a written demand by the Board; or
• The willful engaging in illegal conduct or gross misconduct which is materially injurious to the Company or its affiliates.
In addition to the above, the plan provides that both Mr. Perez and Mr. Faraci would also be entitled to these severance benefits if they
voluntarily terminate their employment for any reason during the 30-day period commencing 23 months after the change-in-control. A
Named Executive Officer will also receive severance benefits under the plan if his or her employment is terminated prior to a change-in-
control if they are able to demonstrate that their employment was terminated in contemplation of a change-in-control and a change-in-
control occurs.
Other Benefit Plans
As a result of the Company’s review in 2007 of the change-in-control benefits under various Company plans, the Compensation Committee
determined to gradually phase out over a five-year period beginning January 1, 2008 the change-in-control pension enhancements under
the Company’s defined benefit pension plan (KRIP) and unfunded supplemental retirement plan (KURIP). For 2008, the additional age and
service resulting from the change-in-control pension enhancement was a maximum of four years and the maximum will thereafter
decrease by one year for every additional year that transpires until the enhancement is fully phased out effective January 1, 2012.
Previously under KRIP and KURIP, any participant in the traditional defined benefit component, including the affected Named Executive
Officers, whose employment is terminated for a reason other than death, disability, cause or voluntary resignation, within five years of a
change-in-control was provided up to five additional years of service to determine eligibility for a vested right, to calculate the amount of the
accrued benefit, and to determine any applicable early retirement factors. In addition, a participant was deemed to have up to five
additional years of age in determining any applicable early retirement factors. For participants age 50 or older as of the date of the change-
in-control, the enhanced age and service was used to determine eligibility for retirement.
The actual additional number of years of service and age that are given to a participant decreases proportionately depending upon the