Kodak 2011 Annual Report Download - page 77

effectively senior in right of payment to the Company’s existing and future unsecured indebtedness, are effectively subordinated in right of payment to
indebtedness under the Company’s Second Amended Credit Agreement (as defined below) to the extent of the collateral securing such indebtedness on a
first-priority basis; and effectively are subordinated in right of payment to all existing and future indebtedness and other liabilities of the Company’s
non-guarantor subsidiaries.
Certain events are considered events of default and may result in the acceleration of the maturity of the 2019 Senior Secured Notes, including, but not
limited to (subject to applicable grace and cure periods): default in the payment of principal or interest when it becomes due and payable; failure to
purchase Senior Secured Notes tendered when and as required; certain events of bankruptcy; and non-compliance with other provisions and covenants
and the acceleration or default in the payment of principal of certain other forms of debt. If an event of default occurs, the aggregate principal amount
and accrued and unpaid interest may become due and payable immediately.
The Bankruptcy Filing constituted an event of default with the 2019 Senior Secured Notes. The creditors are, however, stayed from taking any action as
a result of the default under Section 362 of the Bankruptcy Code. See discussion below regarding the Second Lien Holders Agreement.
Senior Secured Notes due 2018
On March 5, 2010, the Company issued $500 million of aggregate principal amount of 9.75% senior secured notes due March 1, 2018 (the “2018 Senior
Secured Notes”). The Company will pay interest at an annual rate of 9.75% of the principal amount at issuance, payable semi-annually in arrears on
March 1 and September 1 of each year, beginning on September 1, 2010.
Upon issuance of the 2018 Senior Secured Notes, the Company received net proceeds of approximately $490 million ($500 million aggregate principal
less $10 million stated discount). The proceeds were used to repurchase all of the Senior Secured Notes due 2017 and to fund the tender of $200 million
of the 7.25% Senior Notes due 2013.
In connection with the 2018 Senior Secured Notes, the Company and the subsidiary guarantors (as defined below) entered into an indenture, dated as of
March 5, 2010, with Bank of New York Mellon as trustee and collateral agent (the “Indenture”).
At any time prior to March 1, 2014, the Company will be entitled at its option to redeem some or all of the 2018 Senior Secured Notes at a redemption
price of 100% of the principal plus accrued and unpaid interest and a “make-whole” premium (as defined in the Indenture). On and after March 1, 2014,
the Company may redeem some or all of the 2018 Senior Secured Notes at certain redemption prices expressed as percentages of the principal plus
accrued and unpaid interest. In addition, prior to March 31, 2013, the Company may redeem up to 35% of the 2018 Senior Secured Notes at a redemption
price of 109.75% of the principal, plus accrued and unpaid interest, using proceeds from certain equity offerings, provided the redemption takes place
within 120 days after the closing of the related equity offering and not less than 65% of the original aggregate principal remains outstanding immediately
thereafter.
Upon the occurrence of a change of control, each holder of the 2018 Senior Secured Notes has the right to require the Company to repurchase some or all
of such holder’s 2018 Senior Secured Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the repurchase date.
The Indenture contains covenants limiting, among other things, the Company’s ability and the ability of the Company’s restricted subsidiaries (as defined
in the Indenture) to (subject to certain exceptions and qualifications): incur additional debt or issue certain preferred stock; pay dividends or make
distributions in respect of capital stock or make other restricted payments; make principal payments on, or purchase or redeem subordinated indebtedness
prior to any scheduled principal payment or maturity; make certain investments; sell certain assets; create liens on assets; consolidate, merge, sell or
otherwise dispose of all or substantially all of the Company’s and its subsidiaries’ assets; enter into certain transactions with affiliates; and designate the
Company’s subsidiaries as unrestricted subsidiaries. The Company was in compliance with these covenants as of December 31, 2011.
The 2018 Senior Secured Notes are fully and unconditionally guaranteed (the “guarantees”) on a senior secured basis by each of the Company’s existing
and future direct or indirect 100% owned domestic subsidiaries, subject to certain exceptions (the “Subsidiary Guarantors”). The 2018 Senior Secured
Notes and guarantees are secured by second
-priority liens, subject to permitted liens, on substantially all of the Company’s domestic assets and
substantially all of the domestic assets of the Subsidiary Guarantors pursuant to a security agreement entered into with Bank of New York Mellon as
second lien collateral agent on March 5, 2010. The carrying value of the assets pledged as collateral at December 31, 2011 was approximately $1 billion.
The 2018 Senior Secured Notes are the Company’s senior secured obligations and rank senior in right of payment to any future subordinated
indebtedness; rank equally in right of payment with all of the Company’s existing and future senior indebtedness; are effectively senior in right of
payment to the Company’s existing and future unsecured indebtedness, are effectively subordinated in
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