Kodak 2001 Annual Report Download - page 109

Change in Control Arrangements
The Company maintains a change in control program to provide severance pay and continuation of certain welfare
benefits for virtually all U.S. employees. A “change in control” is generally defined under the program 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 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 benefits 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 benefit continuation is based on the employee’s position. Each of the named executive
officers would be eligible for severance pay equal to three times his or her total target annual compensation. In
addition, each named executive officer would be eligible to participate in the Company’s medical, dental, disability
and life insurance plans until the first anniversary of the date of his or her 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 benefits under the Company’s retirement plan. Any
participant whose employment is terminated, for a reason other than death, disability, cause or voluntary resignation,
within five years of a change in control is given up to five additional years of service. In addition, where the
participant is age 50 or over on the date of the change in control, up to five 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 benefit.
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 five years after a change in control, the
benefit for each participant will be calculated as indicated above.
In the event of a change in control which causes the Company’s stock to cease active trading on the New York Stock
Exchange, the Company’s compensation plans 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 the Management Variable Compensation Plan, each participant will be paid a pro rata target award for
the year in which the change in control occurs;
• under the Performance Stock Program, each participant will be awarded a pro rata target award for each
pending performance cycle and all awards will be cashed out based on the change in control price;
• under the Company’s stock option plans, 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; and
• under the Company’s restricted stock programs, all of the restrictions on the stock will lapse and the stock
will be cashed out based on the change in control price.
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