Kodak 2009 Annual Report Download - page 157

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• No other terms, conditions, restrictions and/or limitations will be imposed; and
• All of the affected participant’s outstanding awards will be 100% vested.
If the surviving company does not assume or substitute the awards, other than performance awards, then:
• All of the terms, conditions, restrictions and limitations in effect on any of the participant’s awards will lapse;
• No other terms, conditions, restrictions and/or limitations will be imposed;
• All of the participant’s outstanding awards will be 100% vested; and
• All of the participant’s stock options, Freestanding SARs, Restricted Stock awards, RSU awards, other stock-based awards and
any other award established at the discretion of the Committee, other than performance awards, will be paid in a lump sum cash
payment (or equivalents) equal to the difference, if any, between the Change in Control price (as defined in the Plan) and the
purchase price per share, if any, under the award, multiplied by the number of shares of common stock subject to the award.
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.
Plan Benefits
The benefits that will be awarded or paid under the Plan are not currently determinable. Such awards are within the discretion of the
Committee, and the Committee has not determined future awards or who might receive them. Information about awards granted in fiscal
year 2009 under the Plan to the Company’s Named Executive Officers can be found in the table under the heading “Grants of Plan-Based
Awards 2009” on page 66 of this Proxy Statement.
Federal Tax Treatment
The following is a summary of certain U.S. federal income tax consequences of participating in the Plan. This discussion does not purport
to be a complete statement of all aspects of the U.S. federal income tax consequences in this area, including any state, local or foreign tax
consequences of participating in the Plan. This section is based on the Internal Revenue Code, its legislative history, existing and
proposed regulations under the Internal Revenue Code and published rulings and court decisions, all as currently in effect. These laws are
subject to change, possibly on a retroactive basis.
Incentive Stock Options
A participant will not be subject to tax upon the grant of an incentive stock option (ISO) or upon the exercise of an ISO. However, the
excess of the fair market value of the shares on the date of exercise over the exercise price paid will be included in a participant’s
alternative minimum taxable income. Whether a participant is subject to the alternative minimum tax will depend on the participant’s
particular circumstances. The participant’s basis in the shares received will be equal to the exercise price paid, and the participant’s
holding period in such shares will begin on the day following the date of exercise.
If a participant disposes of the shares on or after the later of: 1) the second anniversary of the date of grant of the ISO and 2) the first
anniversary of the date of exercise of the ISO (the statutory holding period), a participant will recognize a capital gain or loss in an amount
equal to the difference between the amount realized on such disposition and a participant’s basis in the shares.
If the participant disposes of the shares before the end of the statutory holding period, the participant will have engaged in a “disqualifying
disposition.” As a result, the participant will be subject to tax: 1) on the excess of the fair market value of the shares on the date of exercise
(or the amount realized on the disqualifying disposition, if less) over the exercise price paid, as ordinary income and 2) on the excess, if
any, of the amount realized on such disqualifying disposition over the fair market value of the shares on the date of exercise, as capital
gain. If the amount a participant realizes from a disqualifying disposition is less than the exercise price paid (i.e., the participant’s basis)
and the loss sustained upon such disposition would otherwise be recognized, a participant will not recognize any ordinary income from
such disqualifying disposition and instead the participant will recognize a capital loss. In the event of a disqualifying disposition, the
Company or one of its subsidiaries can generally deduct the amount recognized as ordinary income by the participant.
The current position of the Internal Revenue Service is that income tax withholding and FICA and FUTA taxes (employment taxes) do not
apply upon the exercise of an ISO or upon any subsequent disposition, including a disqualifying disposition, of shares acquired pursuant to
the exercise of the ISO.
Non-Qualified Stock Options
The participant will not be subject to tax upon the grant of an option which is a nonqualified stock option. Upon exercise of a nonqualified
stock option, an amount equal to the excess of the fair market value of the shares acquired on the date of exercise over the exercise price
paid is taxable to the participant as ordinary income, and such amount is generally deductible by the Company or one of its subsidiaries.
This amount of income will be subject to income tax withholding and employment taxes. The participant’s basis in the shares received will
equal the fair market value of the shares on the date of exercise, and the participant’s holding period in such shares will begin.