Kodak’s stock incentive plan is the 2013 Omnibus Incentive Plan (the “2013 Plan”). The 2013 Plan is administered by the Compensation, Nominating and Governance Committee of the Board of Directors.

Officers, directors and employees of the Company and its consolidated subsidiaries are eligible to receive awards. Stock options are generally non-qualified, are at exercise prices equal to or greater than the closing price of Kodak’s stock on the date of grant and expire seven years after the grant date. Stock-based compensation awards granted under Kodak’s stock incentive plan are generally subject to a three-year vesting period from the date of grant, or a later date as determined by the Compensation, Nominating and Governance Committee. Awards are subject to settlement in newly-issued shares of common stock. Unless sooner terminated by the Compensation, Nominating and Governance Committee, no awards may be granted under the 2013 Plan after May 20, 2030.

The maximum number of shares of common stock available for grant under the 2013 Plan is 8.0 million. For purposes of the number of shares available for grant, in accordance with the 2013 Plan, a stock option counts as a fraction of a share, based on the fair market value of the stock option relative to the closing stock price on the date of grant, while each restricted stock unit counts as one share. The total number of shares of common stock registered for issuance under the 2013 Plan is approximately 13.5 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 2.5 million shares.

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 $450,000, computed as of the grant date.

Compensation expense is recognized on a straight-line basis over the service or performance period for each separately vesting tranche of the award and is adjusted for actual forfeitures before vesting. 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.

Restricted stock units are payable in shares of the Company common stock upon vesting. The fair value is based on the closing market price of the Company’s stock on the grant date. Compensation cost related to restricted stock units was $1 million and $2 million for the years ended December 31, 2020 and 2019, respectively.

The weighted average grant date fair value of restricted stock unit awards granted for the years ended December 31, 2020 and 2019 was $2.91 and $2.93, respectively. The total fair value of restricted stock units that vested was $2 million for both the years ended December 31, 2020 and 2019. As of December 31, 2020, there was $0.1 million of unrecognized compensation cost related to restricted stock units. The cost is expected to be recognized over a weighted average period of 0.8 years.

The following table summarizes information about restricted stock unit activity for the year ended December 31, 2020:

	Number of Restricted Stock Units		Weighted-Average Grant Date Fair Values
Outstanding on December 31, 2019		721,801	$	3.25
Granted		351,909	$	2.91
Vested		692,750	$	3.05
Outstanding on December 31, 2020		380,960	$	3.31

The following table summarizes information about stock option activity for the year ended December 31, 2020:

	Shares Under Option		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value ($ millions)
Outstanding on December 31, 2019		6,843,079	$	10.96
Granted		2,917,456	$	5.86
Exercised		2,019,187	$	14.51
Forfeited		16,922	$	12.50
Outstanding on December 31, 2020		7,724,426	$	8.10	4.83	$	19.42
Exercisable on December 31, 2020		7,024,347	$	8.41	4.69	$	16.86
Expected to vest December 31, 2020		700,080	$	4.97	6.24	$	2.56

The aggregate intrinsic value represents the total pretax intrinsic value that option holders would have received had all option holders exercised their options on the last trading day of the year. The aggregate intrinsic value is the difference between the Kodak closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options.

The Company issued stock-based compensation grants for 2.4 million stock options on July 27, 2020. The terms of 1.8 million of the options awarded on July 27, 2020 provided for immediate vesting or vesting upon conversion of the Convertible Notes. As 100% of the Convertible Notes were converted during the three months ended September 30, 2020, the 1.8 million options with accelerated vesting terms vested in that same period. The remaining 0.6 million options provide for vesting terms of between two and three years.

The valuation of the stock options granted on July 27, 2020 resulted in approximately $12.6 million of compensation expense being reported in Selling, general and administrative expenses in the Consolidated Statement of Operations in the year ended December 31, 2020.

There were approximately 2.0 million options exercised in the year ended December 31, 2020 and no options exercised in the year ended December 31, 2019. The options exercised in 2020 included 0.3 million options exercised by ex-employees of Kodak that had previously been forfeited. The Company issued shares to the ex-employees in exchange for proceeds based on the exercise prices of the forfeited options. The Company is accounting for the exercise of the forfeited options as a modification of the original awards.

The Company has been seeking to recover the fair value of the shares at the time of the sale of the shares by the ex-employees less the exercise proceeds and withholding (approximately $3.9 million) and the right to retain any refund of the withholding taxes the Company is seeking to obtain on behalf of the ex-employees (approximately $3.0 million). The Company received $3.6 million during the three months ended December 31, 2020 from certain of the ex-employees. The Company is due to receive a $2 million refund of withholding taxes on behalf of those ex-employees.

The Company recognized compensation expense of approximately $5.1 million in the three months ended September 30, 2020 related to the 0.3 million previously forfeited options, representing the fair value of the shares issued to the ex-employees less the exercise proceeds received from the ex-employees. Stock compensation expense, reported in Selling, general and administrative expenses in the Consolidated Statement of Operations, was reduced by $4.6 million in the three months ended December 31, 2020, representing the cash received for certain of the erroneous grants and the refund of withholding taxes due on behalf of the ex-employees. Income recognized in excess of the original stock compensation expense recorded for each individual grant (approximately $1 million) was recognized in Other operating (income) expense, net in the Consolidated Statement of Operations.

The weighted average grant date fair value of options granted for the years ended December 31, 2020 and 2019 was $5.86 and $1.73, respectively. The total fair value of options that vested during the years ended December 31, 2020 and 2019 was $13 million and $7 million, respectively. Compensation cost related to stock options for the years ended December 31, 2020 and 2019 was $14 million and $5 million, respectively.

As of December 31, 2020, there was $3.1 million of unrecognized compensation cost related to stock options. The cost is expected to be recognized over a weighted average period of 1.6 years.

Other than for the awards granted on July 27, 2020, Kodak utilizes the Black-Scholes option valuation model to estimate the fair value of stock options.

The expected term of options granted is the period of time the options are expected to be outstanding and is calculated using a simplified method based on the option’s vesting period and original contractual term. The Company uses the historical volatility of the Company’s stock to estimate expected volatility. The risk-free rate was based on the yield on U.S. Treasury notes with a term equal to the option’s expected term.

The following inputs were used for the valuation of option grants issued in each year:

	Year Ended December 31,
	2020		2019
Weighted-average fair value of options granted	$	1.50	$	1.73
Weighted-average risk-free interest rate	2.43%		2.47%
Expected option lives	3.7 years		4.5 years
Weighted-average volatility	98%		90%
Expected dividend yield	0.00%		0.00%

Given the volatility of the Company’s stock price in the third quarter of 2020, the Company utilized a lattice-based valuation model to value the time-based vesting awards granted July 27, 2020 and a Monte Carlo simulation valuation model to value the options granted on July 27, 2020 which vested upon conversion of the Convertible Notes.

The following inputs were used in the lattice-based valuation of the July 27, 2020 option grants:

	July 27, 2020
	Option Awards
Weighted-average fair value of options granted	$	6.57
Range of risk-free interest rates	0.11% - 0.30%
Weighted-average term	5.57 years
Weighted-average volatility	98%
Weighted-average expected dividend yield	0.00%