Note 23: Stock Option And Compensation Plans

12 Months Ended

Dec. 31, 2012

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

NOTE 23:  STOCK OPTION AND COMPENSATION PLANS

Kodak recognized stock-based compensation expense in the amount of $7 million, $20 million and $21 million for the years ended December 31, 2012, 2011 and 2010, respectively.  There were no proceeds from the issuance of common stock through stock option plans for the years ended December 31, 2012, 2011, or 2010.

Of the expense amounts noted above, compensation expense related to stock options during the years ended December 31, 2012, 2011 and 2010 was $2 million, $3 million and $4 million, respectively.  Compensation expense related to unvested stock and performance awards during the years ended December 31, 2012, 2011 and 2010 was $5 million, $17 million and $17 million, respectively.

Kodak’s stock incentive plans consist of the 2005 Omnibus Long-Term Compensation Plan (the “2005 Plan”), and the 2000 Omnibus Long-Term Compensation Plan (the “2000 Plan”).  The Plans are administered by the Restructuring and Executive Compensation Committee of the Board of Directors.  Stock options are generally non-qualified and are 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 are 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 may be granted to employees between January 1, 2005 and December 31, 2014.  This share reserve may be increased by: shares that are forfeited pursuant to awards made under the 2000 and 2005 Plans; 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 is substantially similar to and is intended to replace the 2000 Plan, which expired on January 18, 2005.  Options granted under the 2005 Plan generally expire seven years from the date of grant, but may be forfeited or canceled earlier if the optionee's employment terminates prior to the end of the contractual term.  The 2005 Plan provides for, but is not limited to, grants of unvested stock, performance awards, and Stock Appreciation Rights (“SARs”), either in tandem with options or freestanding.  SARs allow 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.  As of December 31, 2012, 10,000 freestanding SARs were outstanding under the 2005 Plan at an option price of $7.50.  Compensation expense recognized for the years ended December 31, 2012, 2011, and 2010 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 Plan, which expired on December 31, 1999.  The options generally expire ten years from the date of grant, but may expire sooner if the optionee's employment terminates.  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.  As of December 31, 2012, 4,450 freestanding SARs were outstanding under the 2000 Plan at option prices ranging from $23.25 to $27.55.  Compensation expense recognized for the years ended December 31, 2012, 2011, and 2010 on those freestanding SARs was not material.

Further information relating to stock options is as follows:

(Amounts in thousands, except per share amounts)	Shares Under Option		Range of Price Per Share			Weighted-Average Exercise Price Per Share
Outstanding on December 31, 2009		23,520	$2.64	-	$65.91	$	28.55
Granted		300	$3.96	-	$5.96	$	4.17
Exercised		-		N/A			N/A
Terminated, Expired, Surrendered		5,790	$7.41	-	$65.91	$	37.68
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
Exercisable on December 31, 2010		16,036	$2.64	-	$48.34	$	27.64
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

The following table summarizes information about stock options as of December 31, 2012:

(Number of options in thousands)

					Options Outstanding						Options Exercisable
Range of Exercise Prices							Weighted-Average Remaining
At Least			Less Than		Options		Contractual Life (Years)		Weighted-Average Exercise Price		Options		Weighted-Average Exercise Price
$	2	-	$	10		5,145		3.56	$	5.34		3,661	$	5.96
$	10	-	$	30		2,222		1.33	$	23.97		2,222	$	23.97
$	30	-	$	40		573		0.28	$	31.00		573	$	31.00
						7,940						6,456

At December 31, 2012, the weighted-average remaining contractual term of all options outstanding and exercisable was 2.70 years and 2.38 years respectively.  There was no intrinsic value of options outstanding and exercisable due to the fact that the market price of the Company's common stock as of December 31, 2012 was below the weighted-average exercise price of options.  There were no option exercises during 2010, 2011 or 2012.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table.  Expected volatilities are 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 is 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 is calculated using the U.S. Treasury yield curve, and is based on the expected term of the option.  Kodak uses 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			2010
Weighted-average risk-free interest rate		2.48%			1.50%
Risk-free interest rates	2.2%	-	2.5%	1.5%	-	2.9%
Weighted-average expected option lives (years)		6			6
Expected option lives (years)		6			6
Weighted-average volatility		59%			57%
Expected volatilities	59%	-	60%	45%	-	58%
Weighted-average expected dividend yield		0.0%			0.0%
Expected dividend yields		0.0%			0.0%

No options were granted in 2012.

The weighted-average fair value per option granted in 2011 and 2010 was $1.92 and $2.16, respectively.

As of December 31, 2012, there was $1 million of total unrecognized compensation cost related to unvested options.  The cost is expected to be recognized over a weighted-average period of 0.9 years.