Kodak 2013 Annual Report Download - page 11

Table of Contents
Kodak’s inability to effectively complete and manage partnerships and other significant transactions could adversely impact our
business performance, including our financial results.
As part of the Company’s strategy, we may be engaged in discussions with third parties regarding possible divestitures, asset sales,
investments, acquisitions, strategic alliances, joint ventures, and outsourcing transactions and enter into agreements relating to such transactions
in order to further our business objectives. In order to pursue this strategy successfully, we must identify suitable buyers, sellers and partners
and successfully complete transactions, some of which may be large and complex, and manage post closing issues such as the elimination of
any remaining post-sale costs related to divested businesses. Risks of transactions can be more pronounced for larger and more complicated
transactions, or if multiple transactions are pursued simultaneously. If we fail to identify and successfully complete transactions that further the
Company’s strategic objectives, we may be required to expend resources to develop products and technology internally, we may be at a
competitive disadvantage or we may be adversely affected by negative market perceptions. Any of these factors could have an adverse effect
on our revenue, gross margins and profitability. In addition, unpredictability surrounding the timing of such transactions could adversely affect
our financial results.
There can be no assurance that the Company will be able to comply with the terms of our various credit facilities.
A breach of any of the financial or other covenants contained in our Senior Secured First Lien Term Credit Agreement (the “First Lien Term
Credit Agreement”), Senior Secured Second Lien Term Credit Agreement (the “Second Lien Term Credit Agreement”, and together with the
First Lien Term Credit Agreement, the “Term Credit Agreements”) or the Asset Based Revolving Credit Agreement (the “ABL Credit
Agreement”), and together with the Term Credit Agreements, the “Credit Agreements”) could result in an event of default under these
facilities, subject, in certain cases, to applicable grace and cure periods. If any event of default occurs and we are not able either to cure it or
obtain a waiver from the requisite lenders under each of these facilities, the administrative agent of each credit facility may, and at the request
of the requisite lenders for that facility shall, declare all of our outstanding obligations under the applicable credit facility, together with accrued
interest and fees, to be immediately due and payable, and the agent under the ABL Credit Agreement may, and at the request of the requisite
lenders shall, terminate the lenders’ commitments under that facility and cease making further loans, and if applicable, each respective agent
could institute foreclosure proceedings against our pledged assets. This could adversely affect our operations and our ability to satisfy our
obligations as they come due.
The extent to which the U.K. Kodak Pension Plan (KPP) Purchasing Parties are able to successfully operate the Personalized Imaging
and Document Imaging Businesses (the Business) that they acquired from the Company, and to meet their commitments under
transition services and other agreements entered into with the Company, could affect our brand, reputation and financial results.
The Amended Stock and Asset Purchase Agreement (“Amended SAPA”) and certain related agreements permit the KPP Purchasing Parties to
use the Kodak name and brand in its operations of the Business on a going-forward basis. If the KPP Purchasing Parties are not successful in
the operation of the Business, the Company’s brand image and reputation as a producer of high quality products could be harmed, which could
affect our financial results or operations. In addition, in connection with the closing under the Amended SAPA, on the Effective Date, the
Company entered into certain transition services agreements with the KPP Purchasing Parties under which the KPP Purchasing Parties are
purchasing services from the Company. The inability of the KPP Purchasing Parties to make payments as they are due under the transition
service agreements could negatively affect our financial results. Further, with respect to certain jurisdictions for which deferred closings are
scheduled to occur pursuant to the Amended SAPA on certain future dates, certain factors may delay the closings from occurring on the dates
specified in the Amended SAPA, which could result in costs or operational impacts to Kodak.
Upon our emergence from chapter 11, a new Board of Directors was appointed, whose ability to quickly learn our business and lead
our Company will be critical to our success.
Pursuant to the Plan, a new Board of Directors was appointed to lead the Company upon emergence from chapter 11. The Board consists of six
new Directors who have not previously served on the Kodak Board and are expanding their knowledge of the Company’s operations and
strategic plans. The ability of the new Directors to quickly expand their knowledge of our business plans, operations and strategies and our
technologies will be critical to their ability to make informed decisions about Company strategy and operations, particularly given the
competitive environment in which our businesses operate and the need to quickly adjust to technological trends and advancements. If our
Board of Directors is not sufficiently informed to make such decisions, our ability to compete effectively and profitably could be adversely
affected.
Kodak’s future pension and other postretirement benefit plan costs and required level of contributions could be unfavorably impacted
by changes in actuarial assumptions, market performance of plan assets and obligations imposed by legislation or pension
authorities which could adversely affect our financial position, results of operations, and cash flow.
Kodak has significant defined benefit pension and other postretirement benefit obligations. The funded status of our U.S. and non U.S. defined
benefit pension plans (and other postretirement benefit plans), and the related cost reflected in our financial statements, are affected by various
factors that are subject to an inherent degree of uncertainty. Key assumptions used to value
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