Note 22 - Stock-Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 22: STOCK-BASED COMPENSATION

2013 Omnibus Incentive Plan

As part of the Plan, the Bankruptcy Court approved the Company’s 2013 Omnibus Incentive Plan (the “2013 Plan”) which replaces all prior stock-based employee benefit plans (including the 2005 Omnibus Long-Term Compensation Plan and the 2000 Omnibus Long-Term Compensation Plan).

The 2013 Plan is administered by the Executive Compensation Committee of the Board of Directors, and the Board of Directors also has the authority and responsibility granted to the Executive Compensation Committee with respect to the 2013 Plan. Awards under the 2013 Plan may be cash-based or stock-based. Officers, directors and employees of the Company and its consolidated subsidiaries are eligible to receive awards under the 2013 Plan. Unless sooner terminated by the Executive Compensation Committee, no awards may be granted under the 2013 Plan after the tenth anniversary of the Effective Date.

The maximum number of shares of common stock that may be issued under the 2013 Plan is approximately 4.8 million. In addition, under the 2013 Plan, the maximum number of shares available for the grant of incentive stock options is 2.0 million shares. The maximum number of shares as to which stock options or stock appreciation rights may be granted to any one person under the 2013 Plan in any calendar year is 2.0 million shares. The maximum number of the performance-based compensation awards that may be granted to any one employee under the 2013 Plan in any calendar year is 1.0 million shares or, in the event such award is paid in cash, $2.5 million. The maximum number of awards that may be granted to any non-employee director under the 2013 Plan in any calendar year may not exceed a number of awards with a grant date fair value of $900,000, computed as of the grant date.

For awards that vest based solely on service conditions, Kodak recognizes compensation expense on a straight-line basis over the requisite service period. For awards with vesting that is contingent upon the achievement of performance conditions, Kodak recognizes compensation expense on a straight-line basis over the performance period for each separately vesting tranche of the award. Kodak reduces the compensation expense by an estimated forfeiture rate which is based on actual experience. Kodak assesses the likelihood that performance-based shares will be earned based on the probability of meeting the performance criteria. For those performance-based awards that are deemed probable of achievement, expense is recorded, and for those awards that are deemed not probable of achievement, no expense is recorded. Kodak assesses the probability of achievement each quarter.

Kodak did not issue any stock options during the four months ended December 31, 2013. Kodak recognized compensation expense related to unvested stock and performance awards of $1 million for the four months ended December 31, 2013.

As of December 31, 2013 there was $5 million of total unrecognized compensation cost related to unvested awards. The cost is expected to be recognized over a weighted-average period of 1.4 years.

Predecessor

Prior to the Effective Date, Kodak had shares or share-based awards outstanding under two share-based employee compensation plans consisting of the 2005 Omnibus Long-Term Compensation Plan (the “2005 Plan”), and the 2000 Omnibus Long-Term Compensation Plan (the “2000 Plan”). In conjunction with the Plan (see Note 2, “Emergence from Voluntary Reorganization under Chapter 11 Proceedings”), all shares, options, restricted shares and other share-based awards that were outstanding on the Effective Date were canceled.

Kodak recognized stock-based compensation expense in the amount of $3 million, $7 million and $20 million for the eight months ended August 31, 2013, and the years ended December 31, 2012 and 2011, respectively. There were no proceeds from the issuance of common stock through stock option plans for the eight months ended August 31, 2013 (Predecessor) or the years ended December 31, 2012 (Predecessor) or 2011 (Predecessor).

Of the expense amounts noted above, compensation expense related to stock options during the eight months ended August 31, 2013, and the years ended December 31, 2012 and 2011 was $1 million, $2 million and $3 million, respectively. Compensation expense related to unvested stock and performance awards during the eight months ended August 31, 2013, and years ended December 31, 2012 and 2011 was $2 million, $5 million and $17 million, respectively.

The 2005 Plan and the 2000 Plan were administered by the Restructuring and Executive Compensation Committee of the Board of Directors. Stock options were generally non-qualified and were at exercise prices not less than 100% of the per share fair market value on the date of grant. Stock-based compensation awards granted under Kodak’s stock incentive plans were generally subject to a three-year vesting period from the date of grant.

Under the 2005 Plan, 11 million shares of the Company's common stock could be granted to employees between January 1, 2005 and December 31, 2014. This share reserve could be increased by: shares that are forfeited pursuant to awards made under the 2000 Plan and 2005 Plan; shares retained for payment of tax withholding; shares delivered for payment or satisfaction of tax withholding; shares reacquired on the open market using cash proceeds from option exercises; and awards that otherwise do not result in the issuance of shares. The 2005 Plan was substantially similar to and was intended to replace the 2000 Plan, which expired on January 18, 2005. Options granted under the 2005 Plan generally expired seven years from the date of grant, but could be forfeited or canceled earlier if the optionee's employment terminated prior to the end of the contractual term. The 2005 Plan provided for, but was not limited to, grants of unvested stock, performance awards, and Stock Appreciation Rights (“SARs”), either in tandem with options or freestanding. SARs allowed optionees to receive payment equal to the increase in the market price of the Company's stock from the grant date to the exercise date. Compensation expense recognized for the eight months ended August 31, 2013 and the years ended December 31, 2012 and 2011 on those freestanding SARs was not material.

Under the 2000 Plan, 22 million shares of the Company's common stock were eligible for grant to a variety of employees between January 1, 2000 and December 31, 2004. The 2000 Plan was substantially similar to, and was intended to replace, the 1995 Omnibus Long-Term Compensation Plan, which expired on December 31, 1999. The options generally expire ten years from the date of grant, but could expire sooner if the optionee's employment terminated. The 2000 Plan provided for, but was not limited to, grants of unvested stock, performance awards, and SARs, either in tandem with options or freestanding. Compensation expense recognized for the eight months ended August 31, 2013 and the years ended December 31, 2012 and 2011 on those freestanding SARs was not material.

Further information relating to stock options is as follows:

	Shares							Weighted-Average
	Under		Range of Price					Exercise
(Amounts in thousands, except per share amounts)	Option		Per Share					Price Per Share

Outstanding on December 31, 2010		18,030	$	2.64	-	$	48.34	$	25.22
Granted		2,179	$	2.82	-	$	5.22	$	3.41
Exercised		-			N/A				N/A
Terminated, Expired, Surrendered		6,599	$	3.40	-	$	65.91	$	31.07
Outstanding on December 31, 2011		13,610	$	2.64	-	$	38.04	$	18.89
Granted		-			N/A				N/A
Exercised		-			N/A				N/A
Terminated, Expired, Surrendered		5,670	$	3.40	-	$	38.04	$	27.97
Outstanding on December 31, 2012		7,940	$	2.64	-	$	36.66	$	12.40
Canceled		7,940	$	2.64	-	$	36.66	$	12.40
Outstanding on September 3, 2013		-			-				-
Exercisable on December 31, 2011		10,568	$	2.64	-	$	38.04	$	23.25
Exercisable on December 31, 2012		6,456	$	2.64	-	$	36.66	$	14.38

There were no option exercises during 2011, 2012 or 2013.

The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities were based on historical volatility of the Company's stock, management's estimate of implied volatility of the Company's stock, and other factors. The expected term of options granted was derived from the vesting period of the award, as well as historical exercise behavior, and represents the period of time that options granted are expected to be outstanding. The risk-free rate was calculated using the U.S. Treasury yield curve, and is based on the expected term of the option. Kodak used historical data to estimate forfeitures.

The Black-Scholes option pricing model was used with the following weighted-average assumptions for options issued in each year:

	For the Year Ended
	2011
Weighted-average risk-free interest rate		2.48%	-	2.25%
Risk-free interest rates		2.2%	-	2.50%
Weighted-average expected option lives			6	years
Expected option lives			6	years
Weighted-average volatility			59%
Expected volatilities		59%	-	60%
Weighted-average expected dividend yield			0.00%
Expected dividend yields			0.00%

No options were granted in 2012 or 2013.

The weighted-average fair value per option granted in 2011 was $1.92.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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