Kodak 2006 Annual Report Download - page 207

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Option Awards
On December 12, 2006, the Compensation Committee approved a non-qualifi ed stock option grant for each Named Executive Offi cer employed on
that date, other than Mr. Brust, who was planning to voluntarily retire from the Company on February 1, 2007. Because the Committee increased all of
our Named Executive Offi cers’ option grants in 2006 in line with the long-term incentive gap closure described in the CD&A on page 36, the Commit-
tee did not adjust the number of options granted to the CEO on the basis of the CEO evaluation process or any other Named Executive Offi cer on the
basis of Relative Leadership Assessment.
Options granted in 2006 have a seven-year term and vest in three equal annual installments beginning on the fi rst anniversary of the grant date. All
options become fully vested and exercisable upon the third anniversary of the grant date. Upon termination of employment, all unvested options will
be forfeited, except in certain cases. If a Named Executive Offi cer’s employment is terminated as a result of death, disability, transfer or divestiture
(as defi ned in the plan), all unvested options will fully vest and will expire on the third anniversary date of the Named Executive Offi cer’s termination of
employment. If a Named Executive Offi cer’s employment is terminated as a result of retirement, layoff, pursuant to a special separation program or for
an approved reason, any unvested options will continue to vest and will expire three years after termination of employment. The exercise price of the
options is $25.88, the mean between the high and low price at which the Kodak shares traded on the NYSE on the grant date.
Leadership Stock Program
By consent dated December 6, 2005, the Compensation Committee approved a performance stock unit allocation to each Named Executive Offi cer
pursuant to the 2006-2007 performance cycle of the Leadership Stock Program. The allocations became effective on January 1, 2006. The Leader-
ship Stock allocations granted to our Named Executive Offi cers in 2006 refl ected adjustments to partially close a gap in our long-term incentive
compensation as refl ected by market data, provided by the Compensation Committee’s independent compensation consultant. The target range for
each Named Executive Offi cer for the 2006-2007 performance cycle was increased by 25% over the 2005-2006 performance cycle.
Certain of our executives, other than our CEO, also received an additional upward adjustment to the target award size based on their individual perfor-
mance under the Company’s Relative Leadership Assessment program. Based upon the recommendation of our CEO, the Committee approved several
target increases to certain Named Executive Offi cers as a result of their individual performance as compared to their peers within the Company. As
described further in the CD&A, awards are earned under the plan based on each Named Executive Offi cer’s allocation multiplied by the applicable
percentage formula, which is based on the Company’s achievement of the performance metric established by the Compensation Committee.
2006 Executive Performance Share Program
On May 12, 2006, each Named Executive Offi cer was allocated performance stock units under the 2006 Executive Performance Share Program
(2006 EPSP). Similar to the Leadership Stock awards, units are earned based on Company’s achievement of performance metrics established by the
Compensation Committee. As described on page 38 of the CD&A, the Compensation Committee selected improvement in digital operating margin as
the sole performance metric for the plan and each Named Executive Offi cer received a target allocation under the plan equal to 50% of their actual
allocation under the 2006-2007 performance cycle of the Leadership Stock Program. Units earned under the plan are payable in stock after a one-
year vesting period is satisfi ed. During this vesting period, dividend equivalents accrue on the stock units at the same rate as dividends are paid on the
Company’s common stock. After the end of the one-year vesting period, any accrued dividend equivalents are paid in stock.
EXCEL Bonus
Annual variable pay is awarded under the EXCEL plan. Each Named Executive Offi cer was assigned a target award in 2006 based on a percentage of
their base salary. For information regarding the performance metrics under EXCEL for 2006, please read the description of the plan on page 34 of the
CD&A. As described on page 35 of the CD&A, our Named Executive Offi cers did not receive a bonus under the EXCEL plan for the 2006 performance
period, but instead received a discretionary performance award.