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Kodak offers new options
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November 30, 2001: 12:24 p.m. ET
Employees may get to exchange 33M options now priced above market.
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NEW YORK (CNN/Money) - Eastman Kodak Co. said Friday it will allow 61,000 employees to exchange stock options that are currently priced well above market prices for a lesser number of lower-priced options sometime next year.
The world's largest manufacturer of photographic film said the offer affects 33 million options issued in 1998 that allow employees to buy shares at either $65.91 or $53.94. The current price of Kodak (EK: Research, Estimates) stock makes those options essentially worthless, since shares closed Thursday trading at $29.50, up 62 cents. Stock options that are priced above current market prices are popularly known as being "underwater."
Employees will be able to exchange those options for new options, generally at a ratio of two or three old options for one new option, although an unspecified minority of the options will be able to be exchanged on a one-for-one basis.
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CNNfn's Deborah Marchini reports on Kodak's stock options.
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Kodak said the exchange program will be voluntary and requires shareholder approval. Assuming it is approved, the company said the new options will be priced at market prices at the time of the new grant in the third quarter of 2002.
"When we issued these options, our intention was to provide people with performance-based rewards that recognize and provide an incentive to employees," said a statement from Kodak CEO Daniel Carp. "We want to establish new performance incentives for employees. This option exchange program provides a fresh start by putting reward and recognition back on an even footing."
The company said the option exchange will not be open to the six highest-ranking officers of the company.
The world's largest photography company, a component of the Dow Jones industrial average, has been cutting jobs in the face of declining profit. 
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