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Andrew G. Dietderich John J. Jerome Michael H. Torkin

Mark U. Schneiderman SULLIVAN & CROMWELL LLP 125 Broad Street New York, New York 10004-2498

Telephone:

(212) 558-4000

Facsimile:

(212) 558-3588

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Proposed Counsel to the Debtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re:

EASTMAN KODAK COMPANY, et al., 1

Debtors.

)

) Chapter 11

) Case No. 12-

)

)

)

(

)

) (Joint Administration Requested)

)

)

)

DEBTORS’ MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I) AUTHORIZING THE DEBTORS (A) TO OBTAIN POSTPETITION FINANCING PURSUANT TO 11 U.S.C. §§ 105, 361, 362, 364(C)(1), 364(C)(2), 364(C)(3), 364(D)(1) AND 364(E) AND (B) TO UTILIZE CASH COLLATERAL PURSUANT TO 11 U.S.C. § 363, (II) GRANTING ADEQUATE PROTECTION TO PREPETITION SECURED PARTIES PURSUANT TO 11 U.S.C. §§ 361, 362, 363, AND 364, AND (III) SCHEDULING FINAL HEARING PURSUANT TO BANKRUPTCY RULES 4001(B) AND (C)

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: Eastman Kodak Company (7150); Creo Manufacturing America LLC (4412); Eastman Kodak International Capital Company, Inc. (2341); Far East Development Ltd. (2300); FPC Inc. (9183); Kodak (Near East), Inc. (7936); Kodak Americas, Ltd. (6256); Kodak Aviation Leasing LLC (5224); Kodak Imaging Network, Inc. (4107); Kodak Philippines, Ltd. (7862); Kodak Portuguesa Limited (9171); Kodak Realty, Inc. (2045); Laser-Pacific Media Corporation (4617); NPEC Inc. (5677); Pakon, Inc. (3462); and Qualex Inc. (6019). The location of the Debtors’ corporate headquarters is: 343 State Street, Rochester, NY 14650.

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Eastman Kodak Company (“Kodak” or, the “Company”), on behalf of itself and its

affiliated debtors and debtors in possession in these chapter 11 cases (collectively, the

Debtors”), respectfully represent:

Relief Requested 2

1. The Debtors have valuable intellectual property, a diverse collection of

mature and growth businesses, and adequate liquidity outside of the United States to fund

foreign operations. In the United States, however, the Debtors have been unable to monetize

illiquid intellectual property assets as expected. The Debtors require immediate access to the

DIP Facility (as defined below) to pay vendors and employees, establish the minimally prudent

cash balances for a business of their size and stabilize their operations.

2. The Debtors’ business is affected by seasonal swings in liquidity, with

cash needs highest in the first half of each calendar year. In addition, certain of the Debtors’

businesses are at a point in their life cycle where the businesses require net investment in 2012

in order to preserve significant future revenues generated by sale of consumables and services.

These factors also affect the liquidity needs of the Debtors in the near term. The Debtors

currently project the consolidated global business to be cash positive on an operating basis by

next year (before financing, restructuring costs and pension and post-employment benefit

obligations).

3. Pursuant to this motion (the “Motion”), the Debtors seek entry of (a) an

interim order (the “Interim Order”), substantially in the form attached as Exhibit A,

2 Capitalized terms used but not otherwise defined herein shall have the meanings set forth in that Debtor-in-Possession Credit Agreement, attached hereto as Exhibit E (the “DIP Agreement”) and the Interim Order. This Motion is qualified in it is entirety by reference to the provisions of the DIP Agreement and the Interim Order. To the extent of any inconsistency between this Motion and the proposed DIP Agreement, the DIP Agreement shall govern.

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(i) authorizing the Debtors, on an interim basis, to (A) obtain postpetition financing facilities on

a senior secured, priming, superpriority basis (the “DIP Facility”), and (B) use the funds on

deposit with any Pre-Petition Secured Creditor as of the Petition Date, any proceeds of

prepetition collateral and any other cash collateral of the Pre-Petition Secured Creditors within

the meaning of section 363(a) of the Bankruptcy Code (together, the “Cash Collateral”);

(ii) granting adequate protection to the Pre-Petition Secured Creditors; (iii) scheduling a hearing

to consider entry of the Final Order; and (iv) granting related relief; and (b) a final order (the

Final Order,” together with the Interim Order, the “DIP Orders”) authorizing the relief

granted in the Interim Order on a permanent basis as described in this Motion. More

specifically, the Debtors seek authority to:

a. obtain postpetition financing up to the aggregate principal amount of $950 million (the actual available principal amount at any time being subject to those conditions set forth in the DIP Agreement), secured by liens on property of the Debtors’ estates pursuant to sections 364(c)(1), 364(c)(2), 364(c)(3), and 364(d)(1) of the Bankruptcy Code;

b. use cash collateral and other collateral pursuant to section 363 of the Bankruptcy Code;

c. borrow or obtain, on an interim basis, loans or letters of credit from the DIP Lenders under the terms of the DIP Agreement up to an aggregate principal amount not to exceed $450 million under the U.S. Term Facility and $225 million under the U.S. Revolving Credit Facility, with an additional $25 million under the Canadian Revolving Credit Facility to be made available for borrowing by Kodak Canada with guarantees from the Debtors;

d. use the proceeds of the DIP Facility to, simultaneously with the initial draw under the DIP Facility, refinance the Prepetition First Lien Debt (other than with respect to certain letters of credit and secured agreements);

e. grant superpriority claims to the DIP Lenders, subject to the Carve-Out, on the terms and conditions set forth herein and in the DIP Agreement;

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f.

grant to the DIP Lenders valid, enforceable, non-avoidable and fully perfected first priority priming liens on and senior security interests in all of the prepetition and postpetition tangible and intangible property of the Debtors, subject to the Carve-Out;

g.

grant adequate protection to the First Lien Secured Lenders and the Second Lien Noteholders, whose liens and security interests are being primed by the DIP Facility, as provided for in the Interim Order and consistent with the Existing Intercreditor Agreement; and

h.

schedule a final hearing (the “Final Hearing”) to consider the entry of the Final Order authorizing, among other things, the balance of the borrowings under the DIP Loan Documents on a final basis, as set forth in the DIP Loan Documents.

4. In further support of this Motion, the Debtors submit the Declarations of

Matthew J. Hart, of Lazard Frères & Co. LLC (“Lazard”), the Debtors’ proposed financial

advisor and investment banker in these chapter 11 cases, attached as Exhibit B and incorporated

by reference herein (the “Hart Declaration”), Michael J. Lasinski of 284 Partners, LLC,

attached as Exhibit C and incorporated by reference herein (the “Lasinski Declaration”), and

Antoinette P. McCorvey, the Chief Financial Officer and a Senior Vice President of Kodak,

attached as Exhibit D and incorporated by reference herein (the “McCorvey Declaration”;

together with the Hart Declaration and the Lasinski Declaration, the “DIP Declarations”).

Concise Statement Pursuant to Local Rule 4001-2

5. The Debtors submit this concise statement listing certain material terms

set forth in the DIP Loan Documents and the proposed DIP Orders. Specifically, the Debtors

believe that the following financing terms are required to be identified pursuant to Bankruptcy

Rule 4001(b) and (c) and Local Rule 4001-2 and, as discussed in detail herein, are necessary

and justified in the context of, and the circumstances relating to, these chapter 11 cases.

a. Cash Collateral. The Debtors seek authority to use Cash Collateral, subject to the granting of adequate protection as provided for in the Interim Order. Interim Order at ¶¶ 10, 11.

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b. Borrowing. The Debtors seek to borrow an aggregate of up to $950 million under the DIP Facility, as follows: (a) up to $700 million under a senior secured non-amortizing term loan facility, with $450 million available at the Effective Date and an additional $250 million that will be available after entry of the Final Order; and (b) up to $250 million under a senior secured non- amortized asset-based Revolving Credit Facility (provided, however, that $25 million will be available to fund only non-debtor affiliate Kodak Canada). The Revolving Credit Facility shall include a subfacility for letters of credit in the aggregate amount of $200 million. Interim Order at ¶ 5(a); DIP Agmt. at §§ 2.01(a)-(d).

c. Conditions to Closing and Borrowing. Among the conditions for borrowing under the DIP Facilities is entry of the Interim Order within five (5) business days of the Debtors filing these chapter 11 cases, entry, with certain provisos, of the Final Order no later than 30 days after entry of the Interim Order, and the hiring by Debtors of a chief restructuring officer. DIP Agmt. at §§ 3.01, 3.02, 3.03.

d. Pricing, Economic Terms and Fees. The DIP Facility contemplates the payment of fees and reimbursement of expenses to professionals of the Agent, the Issuing Bank, and in certain circumstances, any Lender. Interim Order at ¶¶ 5(b)(iii), 6(b); DIP Agmt. at § 2.04. The DIP Facility also includes various commitment fees and letter of credit fees. Interim Order at ¶ 5(b)(iii); DIP Agmt. at § 2.04. The provisions with respect to the Base Rate, the Eurodollar Rate and Default Interest are set forth in § 2.07 of DIP Agreement.

e. Effect on Existing Liens. The DIP Facility includes priming liens granted pursuant to section 364(d)(1) of the Bankruptcy Code that prime the Existing Second Lien Debt. DIP Agmt. at § 2.24. Additionally, the Debtors will provide adequate protection to the Pre-Petition First Lien Secured Lenders by deeming certain prepetition letters of credit to be issued pursuant to, and secured under, the DIP Agreement, or backstopping such letters of credit by depositing cash collateral or issuing new letters of credit issued under the DIP Agreement. Outstanding obligations with respect to secured agreements under the Pre-Petition First Lien Credit Agreement will be adequately protected through the issuance of letters of credit, the provision of cash collateral or other arrangements satisfactory to the holders of such secured agreements. The Pre-Petition Second Lien Noteholders will receive adequate protection in the form of administrative claims and adequate protection liens.

f. Carve-Out. The Carve-Out applies to U.S. Trustee fees and applicable interest, professional fees of the Debtors and the official committee of unsecured creditors incurred prior to the occurrence of an Event of Default and professional fees of the Debtors and the official committee of unsecured creditors incurred after an Event of Default up to $10 million. Cash or other

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amounts on deposit in the L/C Cash Deposit Account shall not be subject to the Carve-Out. Interim Order at ¶ 6(b); DIP Agmt. at § 1.01.

g. Roll-Up Provision. The Interim Order authorizes the Debtors to immediately use proceeds of the Financing to, simultaneously with the initial draw under the Financing, refinance the Pre-Petition First Lien Debt, and, in the case of letters of credit or secured agreements under the Pre-Petition First Lien Credit Agreement, to provide for such obligations in a manner satisfactory to the applicable issuing bank or holder, respectively. Interim Order at ¶ 5; DIP Agmt. at § 3.01.

h. Waivers and Limitations. There is a 60-day period after the entry of the Final Order during which interested parties must bring an adversary proceeding or contested matter, provided, however, that a later date may be agreed to in writing by the Pre-Petition First Lien Agent or ordered by the Court. Interim Order at ¶ 17.

i. Limitations on Funding. In addition to certain limits on asset dispositions, there are limitations on investments made by the Company in its Subsidiaries that are not Loan Parties under the DIP Facility (with the exception of Kodak Canada, to which these limitations do not apply) in amounts exceeding $100 million at any time outstanding (determined net of any cash repayments in respect of such investments), provided that (a) the aggregate amount of such investments made during any fiscal quarter (net of cash repayments in respect of such investments) cannot exceed $25 million and (b) no such investments are permitted to be made if at the time of their making any default under the DIP Facility exists or would result therefrom. DIP Agmt. at § 5.02.

j. Events of Default. The DIP Facility sets forth a number of Events of Default, including, but not limited to (a) failure to pay principal, interest or any other amount when due under the DIP Facility, (b) postpetition judgments, subject to certain provisos, in excess of $25 million, (c) certain changes to the ownership or control of the Company, (d) the entry of an order appointing a chapter 7 or chapter 11 trustee, (e) reversing, amending, supplementing, staying for a period of five days or more, vacating or otherwise amending the Interim Order or the Final Order in a fashion not satisfactory to the Agent (provided, that any such final order that limits the aggregate amount of the DIP Facility to an amount that is less than $900 million shall not be satisfactory to the Agent), and (f) the occurrence of certain actions or events in respect of UK pension-related proceedings that would reasonably be expected to have a Material Adverse Effect. DIP Agmt. at § 6.01.

k. Change of Control. The occurrence of a “Change of Control,” as defined in section 6.01(g) of the DIP Agreement, constitutes an Event of Default thereunder. DIP Agmt. at § 6.01.

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l. Joint Liability. Each of the Company and each US Subsidiary Guarantor, jointly and severally, absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all obligations of each other Loan Party and each other Subsidiary of the Company now or hereafter existing under or in respect of the DIP Loan Documents or any Secured Agreement. DIP Agmt. at § 7.01.

m. Funding of Non-Debtor Entities Under DIP Facility. $25 million of the $250 million Revolving Credit Facility shall made available solely to Non-debtor affiliate Kodak Canada. Interim Order at ¶ 5(a); DIP Agmt. at § 2.01(a)(ii).

n. Waiver or Release of Claims. Section 7.03 of DIP Agreement provides, among other things, for the waiver by each Guarantor of any requirement that the Agent or any Lender protect, secure, perfect or insure any Lien or any property subject thereto. DIP Lenders’ superpriority liens grant them recourse, after the entry of the Final Order, to proceeds obtained as a result of Debtors’ claims and causes of action under sections 502(d), 544, 545, 547, 548, 549 and 550 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code. Interim Order ¶ 7(a); DIP Agmt. at § 2.24(a).

o. Indemnification. The DIP Facility contains customary indemnification provisions whereby the Company, and guaranteed by the other Debtors, agrees to indemnify the Agent, the Collateral Agent, each Issuing Bank and each Lender and each of their Related Parties (the “Indemnified Parties”) incurred by or asserted or awarded against any Indemnified Party in connection with the Notes, the DIP Facility, any of the transactions contemplated thererein or the actual or proposed use of the proceeds of the Loans or Letters of Credit and, with certain provisos, the actual or alleged presence of Hazardous Materials on any property of the Company or any of its Subsidiaries or any Environmental Action relating in any way to the Company or any of its Subsidiaries. DIP Agmt. at § 9.04.

p. Milestones or Deadlines. The DIP Agreement provides for certain milestones or deadlines, including: (a) not later than June 30, 2012, the filing of a bidding procedures motion under section 363 of the Bankruptcy Code relating to the sale of the Digital Imaging Patent Portfolio, (b) not later than January 15, 2013, the delivery to the Administrative Agent drafts of (i) a plan of reorganization in the Cases that provides for the termination of the unused commitments and the payment in full in cash of the Loan Parties’ obligations under the DIP Facility (an “Acceptable Reorganization Plan”) and (ii) a disclosure statement with respect thereto, and (c) not later than February 15, 2013, the filing with the Bankruptcy Court an Acceptable Reorganization Plan and a disclosure statement with respect thereto. DIP Agmt. at § 5.01(s).

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q. Repayment Provisions. The Debtors may, upon notice and at the end of any applicable interest period (or at other times with the payment of applicable breakage costs), prepay in full or in part, without premium or penalty (other than such breakage costs), the Loans; provided that each such partial prepayment shall be in an aggregate amount of $10 million (or $5 million in the case of the Canadian Revolving Credit Facility) or multiples of $1 million in excess thereof (or $5 million in the case of the Term Facility) (or, if less, the then outstanding principal amount of the Revolving Loans or Term Loans, as the case may be). DIP Agmt. at § 2.10(a).

Background

6. On the date hereof (the “Petition Date”), each of the Debtors filed a

voluntary petition in this Court for relief under chapter 11 of title 11 of the United States Code,

11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”). The Debtors continue to operate their

businesses and manage their properties as debtors in possession pursuant to sections 1107(a)

and 1108 of the Bankruptcy Code. No request for appointment of a trustee or examiner has

been made in these chapter 11 cases. No committees have been appointed or designated.

7. Founded in 1880, Kodak is one of the world’s leading materials sciences

companies with a long history of invention and the successful commercialization of proprietary

technologies. Kodak has a diverse collection of mature and growth businesses. Kodak also

holds approximately 10,700 patents, 21,000 trademarks and other valuable intellectual property.

8. Over the past several years, Kodak has been working to transform from a

business primarily based on film and consumer photography to a smaller business with a digital

growth strategy focused on the commercialization of proprietary digital and printing

technologies. The significant restructuring charges and other liabilities arising from this

transition have been funded with cash flow from the legacy businesses, asset sales and the

proceeds of its vast intellectual property portfolio.

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9. As a result of Kodak’s deteriorating financial condition, the Company

began to have difficulties in the pursuit of royalties owed to it by Apple Inc., which in turn

triggered difficulties obtaining royalties due from other market leaders Research In Motion

Corp. and HTC Corporation. Kodak has been vigorously pursuing patent litigation to enforce

its rights relating to its Digital Imaging Patent Portfolio used in digital cameras included in

smart phone handsets. Kodak expects that these litigations, once resolved, will benefit Kodak

stakeholders substantially.

10. Additional information regarding the background of the Debtors’

businesses and the commencement of these chapter 11 cases is set forth in the Declaration of

Antoinette P. McCorvey Pursuant to Rule 1007-2 of the Local Bankruptcy Rules for the

Southern District of New York in Support of First Day Pleadings dated January 18, 2012 (the

First Day Declaration”).

Jurisdiction

11. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157

and 1334. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. This matter is a core

proceeding pursuant to 28 U.S.C. § 157(b). The bases for the relief requested herein are

sections 105(a), 361, 362, 363, 364, 1107(a) and 1108 of the Bankruptcy Code, Rules 4001 and

6003 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and rule 9013-1

of the Local Rules for the United States Bankruptcy Court for the Southern District of New

York (the “Local Rules”).

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Facts Specific to the Relief Requested

A. Prepetition Capitalization

12. On the Petition Date, the Debtors’ outstanding secured funded debt was

$946 million. This consists of (a) approximately $100 million of loans outstanding under the

first lien revolving credit facility plus an additional $96 million in face amount of outstanding

letters of credit and (b) $750 million in principal amount of second lien secured notes. First

Day Decl. ¶ 20. 3

i. Pre-Petition First Lien Credit Agreement

13. As of the Petition Date, the Debtors had approximately $100 million

outstanding in prepetition secured loans arising under the Second Amended and Restated Credit

Agreement, dated as of April 26, 2011 (the “Pre-Petition First Lien Credit Agreement”), by

and among Kodak and certain of its affiliates (including Kodak Canada Inc.), as borrowers,

Bank of America, N.A., as administrative agent and co-collateral agent, Citicorp USA as co-

collateral agent, Citibank N.A. and Wells Fargo Capital Finance LLC as co-syndication agents

and Bank of America, N.A., Bank of America, N.A. (acting through its Canada branch),

Citigroup USA, Inc., Wells Fargo Bank, N.A., Morgan Stanley, PNC Bank, National

Association, Bank of New York Mellon, Industrial and Commercial Bank of China, Sumitomo

Mitsui, as lenders (the “Pre-Petition First Lien Secured Lenders”), which provided the

Debtors with a five (5) year, $400 million revolving line of credit—including a $225 million

letter of credit subfacility. The facility contains sublimits of $370 million in the U.S. revolving

credit facility and $30 million under the Canadian revolving credit facility.

3 The Debtors’ complete prepetition capitalization and indebtedness is summarized in the First Day Declaration. See First Day Decl. ¶¶ 19-20.

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14. All obligations under the Pre-Petition Agreement (the “Pre-Petition First

Lien Obligations”) are guaranteed by Kodak and substantially all of its direct and indirect

domestic and, for the Canadian facility, Canadian subsidiaries (the “Pre-Petition First Lien

Guarantors”), some of which are Debtors in these chapter 11 cases. The Pre-Petition First

Lien Obligations, and the guarantees thereof, also are secured by substantially all of the tangible

and intangible assets of Kodak and the Pre-Petition First Lien Guarantors and the proceeds

therefrom, subject to certain exceptions including, but not limited to: (a) manufacturing plants

and facilities located within the United States deemed to be materially important by the Kodak

Board of Directors and capital stock or other equity of any subsidiary that owns such a

manufacturing plant or facility; (b) any of the outstanding capital stock of a controlled foreign

corporation in excess of 65% of the voting power of all classes of capital stock; and (c) any

deposit account for taxes, payroll, employee benefits or similar items (collectively, the

Excluded Assets”). The DIP Agreement provides that the outstanding loans owed to the Pre-

Petition First Lien Secured Lenders will be paid following entry of the Interim Order, while

other Pre-Petition First Lien Obligations, consisting of certain existing letters of credit or other

obligations constituting Existing Secured Agreements, will remain outstanding and (i) be

considered to be issued or outstanding under and secured by the DIP Facility, or (ii) supported

with a back-to-back letter of credit issued under the DIP Facility, cash collateralized or made

subject to other arrangements satisfactory to the holders thereof (including, with respect to any

DIP Lender, having such obligations secured by the DIP Collateral), and all the related

prepetition liens will be released.

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ii. Pre-Petition Senior Secured Notes

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15. Prior to the Petition Date, Kodak issued $500 million in 9.75% Senior

Secured Notes due 2018 (the “9.75% Notes”) and $250 million in 10.625% Senior Secured

Notes due 2019 (the “10.625% Notes,” together with the 9.75% Notes, the “Senior Secured

Notes”). The 9.75% Notes are governed by that certain Indenture dated as of March 5, 2010, by

and among Kodak, as issuer, the other Debtors as guarantors, and the Bank of New York

Mellon, as trustee and second lien collateral agent, and the 10.625% Notes are governed by that

certain Indenture dated as of March 15, 2011, by and among Kodak, as issuer, the other Debtors

as guarantors, and the Bank of New York Mellon, as trustee and second lien collateral agent

(together, the “Senior Secured Notes Indentures”).

16. All obligations under the Senior Secured Notes Indentures (the “Pre-

Petition Second Lien Obligations,” together with the Pre-Petition First Lien Obligations, the

Pre-Petition Obligations”), are guaranteed by Kodak and each direct or indirect subsidiary of

the Company listed on the signature pages of that certain Security Agreement dated as of March

5, 2010 (the “Pre-Petition Second Lien Guarantors,” together with the Pre-Petition First Lien

Guarantors, the “Pre-Petition Guarantors”), all of which are Debtors in these chapter 11 cases.

The Pre-Petition Second Lien Obligations, and the guarantees thereof, also are secured by

substantially the same collateral that secures the Pre-Petition First Lien Obligations, including

all of the tangible and intangible assets of Kodak and its domestic subsidiaries and the proceeds

therefrom, subject to certain exceptions including, but not limited to the Excluded Assets.

B. Existing Intercreditor Agreement and Adequate Protection

17. The Pre-Petition First Lien Secured Lenders, through their agent, and

those parties owed the Pre-Petition Second Lien Obligations (the “Pre-Petition Second Lien

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Noteholders,” together with the First Lien Secured Parties, the “Pre-Petition Secured

Creditors”), through their agents, entered into an intercreditor agreement, dated March 5, 2010,

as amended (the “Existing Intercreditor Agreement”) in connection with the Senior Secured

Notes Indentures. Kodak also is a party to the Existing Intercreditor Agreement. The Existing

Intercreditor Agreement establishes, among other things, certain relative rights and priorities

among the Pre-Petition Secured Creditors and provides for certain rights and obligations in the

event of an insolvency proceeding. See Existing Intercreditor Agreement, Article V. A copy of

the Existing Intercreditor Agreement is attached as Exhibit F.

18. The Existing Intercreditor Agreement remains in full force and effect. The

DIP Agreement has been structured to comply with the terms of Section 5.02 of the Existing

Intercreditor Agreement, based on financial information as of September 30, 2011 and

preliminary information as of December 31, 2011. Therefore the Pre-Petition Second Lien

Noteholders have effectively ceded to the Pre-Petition First Lien Secured Lenders the right to

consent to the Debtors’ use of Cash Collateral and any debtor-in-possession financing,

including the DIP Facility. Interim Order ¶ 5(d). Amounts owed under outstanding loans to the

Pre-Petition First Lien Secured Lenders will be satisfied from the initial draw from the DIP

Facility pursuant to the terms of the DIP Agreement. Interim Order ¶ 12. The Pre-Petition First

Lien Secured Lenders will be provided, pursuant to sections 361, 363(e) and 364(d)(1) of the

Bankruptcy Code, until indefeasible repayment of the remaining Pre-Petition First Lien

Obligations and the conclusion of the Challenge Period, adequate protection in the form of a

replacement security interest in and lien upon all Collateral subordinate only to the liens

securing the DIP Facility and the Carve-Out in addition to an administrative claim and the right

to receive certain payments. Interim Order ¶ 13.

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19. In accordance with the terms of the Existing Intercreditor Agreement, and

pursuant to sections 361, 363(3) and 364(d)(1) of the Bankruptcy Code, the Pre-Petition Second

Lien Noteholders will be provided as adequate protection, subject to the Carve-Out, (i) liens on

the Collateral that are junior to the liens securing the DIP Facility, the adequate protection liens,

and other liens of the Pre-Petition First Lien Secured Lien Lenders; and (ii) administrative

claims as provided for in section 507(b) of the Bankruptcy Code, junior to the DIP Superpriority

Claims. Interim Order ¶ 14. Moreover, all parties are adequately protected by the Debtors’

equity cushion.

Need for Postpetition Financing

20. It is essential that the Debtors obtain immediate access to the DIP Facility.

There are several key drivers for the Debtors’ near-term liquidity issues. First, market

conditions since 2008, including substantially higher than normal commodity prices and

revenue declines substantially in excess of industry estimates, have caused a significant

reduction in profitability at Kodak’s traditional businesses. Second, poor investment

performance and declining interest rates have dramatically changed the Company’s aggregate

pension funding status, impairing efforts to reduce contributions toward pension benefits as the

Company becomes smaller. Third, cash flow from the licensing and sale of intellectual property

has been delayed due to litigation tactics employed by a small number of infringing technology

companies with strong balance sheets and a growing sense of Kodak’s liquidity challenges.

Fourth, near the end of 2011, negative publicity and other external issues have caused

substantial strains on trade credit. First Day Decl. ¶¶ 34-42.

21. Faced with a deteriorating liquidity position, Kodak began to explore

strategic alternatives and ways to enhance liquidity in the summer of 2011. Since then, Kodak

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has explored numerous sale, licensing, merger, financing and other transactions in an attempt to

identify a path to the preservation of stakeholder value that is superior to the commencement of

these chapter 11 cases. Unfortunately, these initiatives have not culminated in a realized

liquidity solution. See Hart Decl. ¶ 11.

22. The Debtors believe the proposed DIP Facility will allow them to stabilize

U.S. and global operations, establish prudent cash balances and meet their liquidity needs for

the duration of their stay in chapter 11. McCorvey Decl. ¶¶ 7. The proceeds of the DIP

Facility will be used to refinance the Prepetition First Lien Debt (except for certain letters of

credit and existing secured agreements), pay vendors and suppliers while minimizing disruption

to day-to-day operations, fund restructuring costs and necessary capital expenditures, and

satisfy working capital requirements. McCorvey Decl. ¶¶ 7-8.

23. The Debtors’ business is affected by seasonal swings in liquidity, with

cash needs highest in the first half of each calendar year. Id. ¶ 5. In addition, certain businesses

of the Debtors are at a point in their life cycle where the businesses require net investment in

2012 in order to grow and preserve significant future revenues generated by sale of

consumables and services. Id. ¶ 6.

24. Schedule A to the McCorvey Declaration presents draft pro forma 13-

week cash flow projections for the Debtors (the “13-Week Projections”), prepared by the

Debtors in consultation with FTI Consulting, Inc. The 13-Week Projections reflect the Debtors’

reasonable judgment as to the cash needs of the business over the identified period. Id. ¶ 9. The

Debtors believe that the level of expenditures reflected in the 13-Week Projections is prudent

for the preservation of the value of their estates. The 13-Week Projections demonstrate an

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ending operating cash balance of $335.9 million as of the week ended April 6, 2012, which is in

excess of the initial DIP Facility minimum liquidity requirement of $175 milion. Id. ¶ 10.

25. The cash position of the Debtors after the period identified in the 13-Week

Projections will depend a number of factors, such as operational performance, asset

dispositions, intellectual property licensing, the pace of business restructurings, and global

liquidity needs. Id. ¶ 13. The Debtors currently project the consolidated global business to be

cash flow positive on an operating basis by next year (before financing, restructuring costs and

pension and post-employment benefit obligations). Id. ¶ 11.

The Debtors’ Marketing Efforts for Postpetition Financing

26. As set forth in the Hart Declaration, prior to the Petition Date, the Debtors

attempted to procure debtor-in-possession financing from numerous sources, including

prepetition lenders, as well as new potential third party lenders. See Hart Decl. ¶¶ 12-19.

27. Facing an increasing liquidity shortfall in the United States, the Debtors

and Lazard began good faith negotiations with parties who were viewed as qualified to provide

the Debtors with fully committed debtor-in-possession financing in the short timeframe

required. Id. ¶ 12. The Debtors and Lazard solicited interest from no less than eleven potential

lenders, including (a) five banks that are the Prepetition First Lien Secured Lenders; (b) two

other large global banks; (c) one large global commercial finance company; (d) the lending

affiliates of two large asset management firms that were actively involved in the earlier out-of-

court financing process; and (e) Blackstone Advisory Partners (“Blackstone”), as advisor to an

ad hoc group (the “Second Lien Group”) of holders of the Company’s Senior Secured Notes,

regarding their willingness to provide postpetition financing to the Debtors. Id. After active

due diligence and management presentations, only a limited number of the potential lenders

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expressed interest in committing to any term financing, and none was willing to commit

postpetition financing on an unsecured or junior secured basis. Id. ¶¶ 13-14.

28. On December 31, 2011, Blackstone, on behalf of the Second Lien Group,

provided to the Debtors an indicative, non-binding financing proposal, a significant portion of

which would have consisted of a “roll-up” of the prepetition claims of participating holders of

Second Lien Notes into postpetition debt. This “roll-up” debt would have significantly

increased the interest expense of the DIP financing, been required to be paid in full in cash in

the context of any plan of reorganization, and potentially been adverse to the interests of other

stakeholders. The non-binding proposal was also contingent on providing certain material non-

public information to members of the Second Lien Group and publicly disclosing this

information shortly thereafter, which management of the Debtors indicated could have had an

adverse impact on the operations of the Debtors. Lastly, a significant portion of the facility was

proposed to be provided by an ABL, yet no party was identified as being prepared to provide

the ABL. Id. ¶ 17.

29. Eventually, three binding commitment letters with associated term sheets

were proposed by five of the Potential Financing Parties. The first commitment letter was

submitted by Citibank Global Markets Inc. (“Citibank”), and evolved into the proposed DIP

facility. The second of the three commitment letters was subsequently withdrawn. The last of

the three commitment letters was a joint proposal by three of the Potential Financing Parties.

The portion of the financing that would have been fully committed, however, was significantly

less than the Citibank proposal and the pricing was meaningfully higher. Upon further

discussion, one of the three Potential Financing Parties also expressed doubts as to whether their

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commitment could be fully approved by the date at which the Debtors were preparing to file for

chapter 11. Id. ¶ 18

30. In the end, the proposal submitted by Citibank Global Markets Inc.

evolved into the Proposed DIP Facility. Id. ¶¶ 19-20.

The Proposed DIP Facility

31. After extended good faith, arm’s-length negotiations, Citicorp North

America, Inc., as syndication agent and administrative agent (the “Administrative Agent”) for

the lenders (the “DIP Lenders”) agreed to provide the DIP Facility. As set forth in the DIP

Agreement, the DIP Lenders have agreed to extend the DIP Facility in an aggregate amount of

$950 million. Entry of the Interim Order will provide the Debtors with a $450 million term loan

to provide working capital and liquidity. The Debtors will also have access to a $225 million

ABL tied to the Debtors’ borrowing base and non-debtor affiliate Kodak Canada shall have

access to up to $25 million tied to its borrowing base.

32. The proceeds of the DIP Facility, which the Debtors estimate will be

sufficient to support them through the pendency of these chapter 11 cases, will be used (a) for

general working capital and other strategic purposes, (b) to fund the costs of administering these

chapter 11 cases, (c) to back to back or cash collateralize certain prepetition obligations that are

remaining outstanding, and (d) to pay all fees and expenses provided under the DIP Agreement

and authorized by the Court. The following summarizes the significant terms of the DIP

Facility and the Interim Order:

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OVERVIEW OF THE POSTPETITION FINANCING

DIP Agreement

Debtor Parties:

Parties

Borrower:

Eastman Kodak Company (the “Company”) Each of the Debtors (collectively, the “Guarantors”)

Guarantors:

Non-Debtor Parties:

Borrower:

Kodak Canada Inc. (collectively with Eastman Kodak

Company, the “Borrowers”)

Bank Parties:

Administrative Agent:

Citicorp North America, Inc. (the “Administrative

Agent”)

Collateral Agent: Citicorp North America, Inc. (the “Collateral Agent”)

Sole Lead Arranger and Bookrunner:

Citigroup Global Markets Inc. (the

Arranger”)

Syndication Agent:

Citicorp North America, Inc.

Lenders:

An affiliate of the Arranger and other financial institutions or

entities identified by the Arranger in consultation with the Company (the “Lenders”)

Maturity

Earliest of (a) 18 months after the Effective Date, (b) 30 days after the entry of the Interim Order if the Final Order has not been entered prior to the expiration of such 30-day period (provided, however, that such date shall be 45 days after the entry of the Interim Order if entry of the Final Order is delayed by any requirements as a result of an evidentiary hearing or similar hearing or process associated with objections being made to entry of the Interim Order or the Final Order), (c) the substantial consummation (as defined in section 1101 of the Bankruptcy Code and which for purposes hereof shall be no later than the “effective date” thereof) of a plan of reorganization filed in the Cases that is confirmed pursuant to an order entered by the Bankruptcy Court and (d) the acceleration of the loans and the termination of the commitment with respect to such DIP Facility in accordance with the Loan Documents.

(DIP Agmt. at definitions of “Maturity Date” and “Termination Date”; DIP Agmt. at § 2.06)

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OVERVIEW OF THE POSTPETITION FINANCING

Purpose

DIP Facility: The proceeds of the Loans and the Letters of Credit shall be available solely for general corporate purposes of the Company and its Subsidiaries (including to refinance obligations outstanding under the Pre- Petition First Lien Credit Agreement) or to otherwise provide for the continuing prepetition obligations as more fully described in the Interim Order. (DIP Agmt. at 2.17)

Cash Collateral: For working capital and general corporate purposes of the Loan Parties and their Subsidiaries. (Interim Order at ¶ 11)

Interest Rates

Interest Rate: Loans will bear interest, at the option of the applicable Borrower, at one of the following rates:

(i) the Applicable Margin (as defined below) plus the Base Rate, payable monthly in arrears; or

(ii) the Applicable Margin plus the current LIBO Rate as quoted by the Administrative Agent, adjusted for reserve requirements, if any, and subject to customary change of circumstance provisions, for interest periods of one, two, three or six months (the “LIBO Rate”), payable at the end of the relevant interest period, but in any event at least quarterly; provided that the LIBO Rate in respect of Term Loans shall be not less than 1.50% (the “LIBOR Floor”). “Applicable Margin” means:

(i) in the case of Revolving Loans, (x) 2.25% per annum, in the case of Base Rate Loans and (y) 3.25% per annum, in the case of LIBO Rate Loans; and

(ii) in the case of Term Loans, (x) 7.50% per annum, in the case of Base Rate Loans and (y) 8.50% per annum, in the case of LIBO Rate Loans “Base Rate” means the highest of (i) Citibank, N.A.’s base rate, (ii) the Federal Funds Effective Rate plus 1/2 of 1% and (iii) the LIBO Rate for an interest period of one month (in the case of Term Loans, giving effect to the LIBOR Floor) plus 1.00%. Interest shall be calculated on the basis of the actual number of days elapsed in a 360-day year (or a 365/366-day year, in the case of Base Rate Loans).

Default Interest Rate: During the continuance of an Event of Default, Loans will bear interest at an additional 2% per annum.

(DIP Agmt., at § 2.07)

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OVERVIEW OF THE POSTPETITION FINANCING

DIP Commitments

DIP Agreement: Total aggregate term loan commitment of $950 million to be disbursed as:

Initial DIP Loan: $450 million of the Term Facility drawn and $225 million of the Revolving Credit Facility made available, with an additional $25 million made available solely to non-debtor affiliate Kodak Canada.

Final DIP Loan: $950 million (less the amount of the initial DIP Loan actually borrowed)

(DIP Agmt, at § 2.01)

Letters of Credit

Existing Letters of Credit: Citibank, N.A. ’s existing letters of credit will be rolled up into the DIP Facility whereas other existing letters of credit will be either cash collateralized or backed by new letters of credit issued under the Revolving Credit Facility.

New Letters of Credit: New letters of credit can be issued under the DIP Agreement as a subfacility under the U.S. Revolving Facility in an aggregate amount of up to $200 million.

(DIP Agmt, at § 2.03)

Funding Conditions

Customary borrowing conditions, including: (i) entry of Interim Order and Final Orders acceptable to the Arranger; (ii) delivery of required guarantees; (iii) evidence of required consents and approvals; (iv) delivery to the Administrative Agent of the Operating Forecast and the initial 13-Week Projection and certain other financial reports and projections; (v) payment of all fees and expenses due and owing pursuant to the DIP Agreement; (vi) hiring of a Chief Restructuring Officer reasonable satisfactory to the Arranger; and (vii) no chapter 7 or chapter 11 trustee or examiner with enlarged powers beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy Code being appointed with respect to the Debtors or their estates.

(DIP Agmt. at §§ 3.01, 3.02)

Borrowing Limits

Limited to borrowing up to $700 million on an interim basis and up to $950 million in the aggregate. In addition, borrowing from the asset-backed Revolving Credit Facility is further limited based upon the size of the Borrowing Base.

(DIP Agmt. at Introductory Statement; definition of “Borrowing Base”; § 2.01)

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OVERVIEW OF THE POSTPETITION FINANCING

Fees

Unused Commitment: Fee of 0.50% per annum will accrue as a percentage of the daily average unused portion of the Revolving Facility.

Letter of Credit Fees: A percentage per annum equal to the Applicable Margin for Revolving Loans that are LIBO Rate Loans, payable to the Revolving Administrative Agent for the account of the Revolving Lenders, and 0.25% per annum, payable to the applicable Issuer, will accrue on the outstanding undrawn amount of any Letter of Credit. In addition, the applicable Borrower will pay to the applicable Issuer standard opening, amendment, presentation, wire and other administration charges applicable to each Letter of Credit. During the continuance of an Event of Default, the Letter of Credit Fees will increase by an additional 2% per annum.

Upfront and other Arrangement Fees: As provided for in the fee letter dated January 17, 2012 between the Company and the Arranger.

(DIP Agmt. at § 2.04)

Liens and Priorities of DIP Obligations

Liens: The obligations under the DIP Facility will have a first priority senior security interest in and lien upon all pre- and post-petition property of the Debtors, whether existing on the Petition Date or thereafter acquired, that, on or as of the Petition Date (or as a result of the refinancing of the Pre-Petition First Lien Debt) is not subject to valid, perfected and non-avoidable liens (including, upon entry of the Final Order, proceeds from Avoidance Actions).

In addition, such obligations will have first priority senior priming security interest in and lien upon all pre- and post-petition property of the Debtors whether now existing or hereafter acquired, that is subject to the existing liens presently held by any of the Existing Second Lien Debt.

Lastly, such obligations will have a security interest in and lien upon all pre- and post-petition property of the Debtors whether now existing or hereafter acquired, that is subject to valid, perfected and unavoidable liens in existence immediately prior to the Petition Date, or to any valid and unavoidable liens in existence immediately prior to the Petition Date that are perfected subsequent to the Petition Date as permitted by section 546(b) of the Bankruptcy Code.

Priorities: The obligations under the DIP Facility will constitute superpriority administrative expenses in the Debtors’ chapter 11 cases.

(DIP Agmt, at § 2.24)

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OVERVIEW OF THE POSTPETITION FINANCING

 

Carve-Out

Carve-Out: The Carve-Out applies to U.S. Trustee fees, professional fees of the Debtors and the official committee of unsecured creditors incurred prior to the occurrence of an Event of Default and professional fees of the Debtors and the official committee of unsecured creditors incurred after an Event of Default up to an additional $10 million. Cash or other amounts on deposit in the L/C Cash Deposit Account shall not be subject to the Carve-Out.

(Interim Order at ¶ 6(b); DIP Agmt. at § 1.01)

 

Adequate Protection

The Existing Second Lien Debt holders whose liens will be primed as described above, and whose cash collateral will be authorized for use by the Loan Parties, will be entitled to receive as adequate protection (i) liens on the Collateral that are junior to the liens securing the DIP Facility, the adequate protection liens, and other liens of the Pre-Petition First Lien Secured Lien Lenders; and (ii) administrative claims as provided for in section 507(b) of the Bankruptcy Code, junior to the DIP Superpriority Claims.

(Interim Order at 13(a) and (b))

 

Payments on Prepetition Debt; Cash Collateralization

All first lien lenders’s Loans will be fully paid with cash proceeds of the DIP Facility. Certain reimbursement obligations in respect of undrawn letters of credit and amounts due under Existing Secured Agreements, together with fees and interest in respect thereof under the Pre-Petition First Lien Credit Agreement will be (i) deemed outstanding under and secured by the DIP Facility, (ii) supported by a back-to-back letter of credit or cash collateral, or, (iii) with respect to any DIP Lender, having such obligations secured by the DIP Collateral. The first lien lenders’ liens will release liens in connection with such repayment.

(DIP Agmt. at § 3.01)

 

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OVERVIEW OF THE POSTPETITION FINANCING

Financial Covenants: Among other things, (i) provide unaudited “carve-out” financial statements for each of the “Consumer” and “Commercial” business units; (ii) maintain minimum global operating EBITDA (to be defined to exclude restructuring charges and the impact of IP dispositions and settlements); and (iii) maintain minimum US liquidity at all times.

Affirmative Covenants: Among other things, (i) deliver financial statements; (ii) deliver periodic updates of the cash flow forecast; (iii) deposit proceeds of Digital Imaging Patent Portfolio Dispositions or IP Settlement Agreements, subject to certain provisos; (iv) provide documents and instruments required to create and perfect the Administrative Agent’s first priority security interest in the Collateral in certain jurisdictions outside the U.S. and Canada; (v) maintain all material properties necessary in the operation of the Debtors’ business; (vi) maintain insurance as to each of the Debtors; and (vii) employ and maintain a Chief Restructuring Officer.

Negative Covenants: Among other things, the Debtors shall not incur any debt or liens, subject to exceptions set forth in the DIP Agreement. The Debtors also are limited in effecting mergers or transactions with affiliates, sales and sale leaseback transactions, payments to subsidiaries, and making certain investments, including investing in Subsidiaries that are not Loan Parties in an amount exceeding $100 million at any time outstanding (determined net of any cash repayments in respect of such investments), provided that (a) the aggregate amount of such investments made during any fiscal quarter (net of cash repayments in respect of such investments) cannot exceed $25 million and (b) no such investments is permitted to be made if at the time of its making any default under the DIP Facility exists or would result therefrom.

(DIP Agmt. at Introductory Statement; definitions of “Permitted Debt” and “Permitted Liens”; §§ 5.01-5.03)

Covenants

Events of Default

The DIP Agreement contains certain customary Events of Default, including the following: (a) failure to pay principal, interest or any other amount when due under the DIP Facility, (b) postpetition judgments, subject to certain provisos, in excess of $25 million, (c) certain changes to the ownership or control of the Company, (d) the entry of an order appointing a chapter 7 or chapter 11 trustee, (e) reversing, staying for a period of five days or more, vacating or otherwise amending the Interim Order or the Final Order, and (f) the occurrence of certain actions or events in respect of UK pension-related proceedings that would reasonably be expected to have a Material Adverse Effect; (g) when any Loan Party or any Subsidiary thereof shall take any action in support of any matter set forth in clauses (a) to (g) above.

(DIP Agmt. at § 6.01)

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OVERVIEW OF THE POSTPETITION FINANCING

Change of Control

The occurrence of certain changes to the ownership or control of the Company constitutes an Event of Default under the DIP Agreement.

(DIP Agmt. at § 6.01(g))

Milestones

Compliance with restructuring milestones related to the Debtors’ chapter 11 cases within the time periods set forth in DIP Agreement, as follows:

Filing of Bid Procedures: On or prior to June 30, 2012, file a motion with the Bankruptcy Court to approve bid procedures relating to a sale of all or substantially all of the Digital Imaging Patent Portfolio, which bid procedures shall contemplate a time frame that is reasonably satisfactory to the Administrative Agent.

Draft of Plan and Disclosure Statement: On or prior to January 15, 2013, deliver to the Agent drafts of an Acceptable Reorganization Plan and a disclosure statement with respect thereto.

Filing of Plan and Disclosure Statement: On or prior to February 15, 2013, file with the Bankruptcy Court an Acceptable Reorganization Plan and a disclosure statement with respect thereto, and at all times thereafter diligently pursue the receipt of orders of the Bankruptcy Court approving such disclosure statement and confirming such Acceptable Reorganization Plan.

(DIP Agmt. at § 5.01(s))

Repayment

Optional termination or reduction of the Commitments by the Debtors is permitted. All commitment fees accrued shall be paid on the Termination Date. In addition, Mandatory prepayments of the Loans (and cash collateralization of outstanding Letters of Credit) shall be required with 100% of the Net Cash Proceeds from sales (including from licenses of Intellectual Property effected in connection with IP Settlement Agreements or Other Proceeds from such IP Settlement Agreements), or Casualty Events of any Collateral (excluding sales of inventory in the ordinary course of business and other exceptions to be agreed); provided, that prior to the Term Facility Termination Date, the applicable percentage of Net Cash Process required to be applied to the Loans as a prepayment with respect to IP Settlement Proceeds and Other Proceeds is 75% and in all other cases, such prepayment is 100% of Net Cash Proceeds; provided that if a percentage of Net Cash Proceeds is not required to be applied as a prepayment per the above, the aggregate dollar amount of such Net Cash Proceeds that has not been applied as a result may not exceed $150 million.

(DIP Agmt. at Introductory Statement; definition of “Applicable Prepayment Percentage”; §§ 2.04; 2.05; 2.10; 5.01(o))

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OVERVIEW OF THE POSTPETITION FINANCING

Joint Liability

Each of the Company and each US Subsidiary Guarantor, jointly and severally, absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all obligations of each other Loan Party and each other Subsidiary of the Company now or hereafter existing under or in respect of the DIP Loan Documents or any Secured Agreement.

(DIP Agmt. at § 7.01)

Non-Debtor Affiliates

Investments made by Loan Parties in Subsidiaries of the Company that are not Loan Parties are not to exceed $100 million at any time outstanding (determined net of any repayments in respect of such Investments received in Cash Equivalents by any Loan Party); provided that (x) no Default can exist at the time such Investment is made or would result therefrom and (y) the aggregate amount of such Investments made during any fiscal quarter (net of any repayments in respect of such Investments received in Cash Equivalents by any Loan Party during such fiscal quarter) cannot exceed $25 million.

(DIP Agmt. at § 5.02(i))

Automatic Stay

It is an Event of Default under the DIP Facility if the Bankruptcy Court enters an order or orders granting relief from the automatic stay applicable under section 362 of the Bankruptcy Code to the holder or holders of any security interest to permit foreclosure (or the granting of a deed in lieu of foreclosure or the like) on any assets of any of the Debtors that have a value in excess of $10 million in the aggregate or permit other actions that would have a Material Adverse Effect on the Debtors or their estates (taken as a whole).

(Interim Order at ¶ 8(b); DIP Agmt. at § 6.01(m))

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OVERVIEW OF THE POSTPETITION FINANCING

Waivers and Consents

Non-Bankruptcy Law: Under the terms of the DIP Agreement, each Guarantor waives any requirement that the Administrative Agent or any DIP Lender protect, secure, perfect or insure any Lien or any property subject thereto. (DIP Agmt. at § 7.03)

Estate Claims: Debtors stipulate as to the validity of the Pre-Petition First Lien Debt and release all claims, defenses or causes of action pertaining to it,

including any right to seek avoidance of the debt.

(Interim Order at ¶ 3(a))

Indemnification: The Company agrees to indemnify and hold harmless the Administrative Agent, the Collateral Agent, each Issuing Bank and each Lender and each of their Related Parties (each, an “Indemnified Party”) in connection with or as a result of the DIP Agreement (as more fully described in the DIP Agreement). (DIP Agmt. at § 9.04)

Section 506(c): Upon entry of the Final Order, subject to the Carve-Out, no expenses of administration of the Debtors’ cases or any future proceedings shall be recovered from the Collateral pursuant to section 506(c) without prior written consent of the Administrative Agent. (Interim Order at ¶ 9)

Granting Liens on Certain Causes of Action

The Debtors’ claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, and 550 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code are excluded from the DIP Liens, however, upon entry of the Final Order, the proceeds or property recovered by final judgment, settlement or otherwise is included in the unencumbered property lien granted to the Administrative Agent for its own benefit and the benefit of the DIP Lenders.

(Interim Order at ¶ 7(a); DIP Agmt. at § 2.24(a))

Purpose of Use of Cash Collateral

Cash Collateral is to be used to provide working capital for, and for other general corporate purposes of, the Debtors. As of the Petition Date, Cash Collateral totaled approximately $56.7 million.

(Interim Order at ¶ 11)

Terms of Use of Cash Collateral

The Debtors are seeking to use Cash Collateral of the Prepetition Secured Lenders, subject to the terms of the DIP Agreement and Interim Order.

(Interim Order at ¶ 11)

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OVERVIEW OF THE POSTPETITION FINANCING

Other than the Continuing Pre-Petition First Lien Obligations (as defined in the Interim Order) the Pre-Petition First Lien Debt (as defined in the Interim Order) is being repaid, and upon repayment, the existing liens on the Pre- Petition First Lien Collateral (as defined in the Interim Order) will be released and terminated. With respect to Continuing Pre-Petition First Lien Obligations, certain outstanding letters of credit under the Pre-Petition First Lien Credit Agreement will be deemed to be issued pursuant to, and secured under, the DIP Agreement, or backstopped by new letters of credit issued under the DIP Agreement. Outstanding obligations with respect to secured agreements under the Pre-Petition First Lien Credit Agreement will be adequately protected through the issuance of letters of credit, the provision of cash collateral or other arrangements satisfactory to the holders of such secured agreements (the “Adequate Protection Liens”).

(Interim Order at ¶ 12)

Adequate Protection of Pre-Petition First Lien Secured Lenders

Adequate Protection of Pre-Petition Second Lien Noteholders

The Pre-Petition Second Lien Noteholders will receive adequate protection in the form of administrative claims and adequate protection liens (the “Junior Adequate Protection Liens”).

(Interim Order at ¶ 13, 13(a), 13(b); DIP Agmt. at § 2.24)

Basis for Relief

33. The Debtors’ ability to preserve the value of their estates depends on

immediate access to the DIP Facility. Absent access to the DIP Facility, the Debtors will not be

able to pay suppliers and customers, pay the costs of administering these chapter 11 cases,

retain critical employees, make necessary capital and other investment in their valuable

businesses and provide liquidity for continuing operations, among other things. At this time,

the Debtors’ request authorization to use Cash Collateral and borrow up an aggregate of $950

million with $700 million available on an interim basis, comprised of up to a $450 million term

loan, with $450 million available on an interim basis, and up to a $250 million asset-based

lending Revolving Credit Facility with a subfacility for letters of credit in the aggregate amount

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of $200 million, with $25 million available solely for the use of non-debtor affiliate Kodak

Canada.

34. As set forth above and in the DIP Declarations and the First Day

Declaration filed in support of the Motion, the Debtors believe that DIP Facility is the best

financing available to the Debtors at this time. The Debtors have been unable to procure

sufficient financing (a) in the form of unsecured credit allowable under section 503(b)(l) of the

Bankruptcy Code, or (b) solely as an administrative expense under section 364(a)-(b) of the

Bankruptcy Code. See Hart Decl. ¶ 14. Moreover, the other financing alternatives considered

had either more onerous terms, less certainty, or both. Therefore, for the reasons stated herein,

the Debtors submit that they have satisfied the requirements to access postpetition financing on

a superpriority, secured basis pursuant to section 364 of the Bankruptcy Code. Importantly, the

Pre-Petition First Lien Secured Lenders have consented to the terms of the DIP Facility.

Moreover, the Pre-Petition Second Lien Noteholders are deemed to have consented pursuant to

Sections 5.02 and 5.04 of the Existing Intercreditor Agreement.

35. Section 364 of the Bankruptcy Code distinguishes among (a) obtaining

unsecured credit in the ordinary course of business, (b) obtaining unsecured credit out of the

ordinary course of business and (c) obtaining credit with specialized priority or with security. If

a debtor in possession cannot obtain sufficient postpetition credit on an unsecured basis, section

364(c) of the Bankruptcy Code permits a bankruptcy court to authorize a debtor to obtain credit

or incur debt, repayment of which is (x) entitled to superpriority administrative expense status

or (y) is secured by a senior lien on unencumbered property or a junior lien on encumbered

property, or both. Furthermore, section 364(d) of the Bankruptcy Code permits a bankruptcy

court to authorize a debtor to obtain postpetition credit secured by a senior or equal lien on

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encumbered property (i.e., a priming lien) when a debtor is unable to obtain credit elsewhere

and the interests of existing lienholders are adequately protected. 11 U.S.C. §§ 364(c), (d).

36. As discussed, the DIP Facility is secured by substantially all of the assets

of the Debtors’ estates through superpriority claims, security interests, and secured liens

pursuant to section 364, causing the Court to examine both sections 364(c) and 364(d) of the

Bankruptcy Code.

A. Financing Under Section 364(c) of the Bankruptcy Code

37. Section 364(c) of the Bankruptcy Code provides that if a debtor is unable

to obtain unsecured credit allowable as an administrative expense, the court may authorize the

debtor to obtain credit or incur debt (a) on a superpriority administrative basis, (b) secured by a

lien on the debtor’s unencumbered assets, or (c) secured by a junior lien on the debtor’s already

encumbered assets. 11 U.S.C. § 364(c).

38. Courts consider various factors in determining whether obtaining

postpetition financing pursuant to section 364(c) is appropriate, including whether (i) a debtor is

unable to obtain unsecured credit under section 364(b), (ii) the transaction is necessary to

preserve the assets of the debtor’s estate, and (iii) the terms of the transaction are fair,

reasonable and adequate under the circumstances. See In re Los Angeles Dodgers LLC, 457

B.R. 308, 312-13 (Bankr. D. Del. 2011) (noting these three factors in considering proposed

postpetition financing) (citations omitted); see also In re Ames Dep’t Stores, Inc., 115 B.R. 34,

37 (Bankr. S.D.N.Y. 1990) (noting that a court “may not approve any credit transaction under

subsection (c) unless the debtor demonstrates that it has reasonably attempted, but failed, to

obtain unsecured credit under sections 364(a) or (b)”) (citations omitted); In re Farmland

Indus., Inc., 294 B.R. 855, 879 (Bankr. W.D. Mo. 2003) (noting that courts look to various

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factors including whether “the proposed financing is an exercise of sound and reasonable

business judgment”).

i. The Debtors Could Not Obtain Unsecured Financing

39. As set forth above and in the Hart Declaration, the Debtors could not

obtain postpetition financing of the type and magnitude required for these chapter 11 cases on

an unsecured or on a junior secured basis. Hart Decl. ¶ 14. Despite their best efforts and

discussions with eleven potential lenders, the Debtors were simply unable to obtain unsecured

or junior secured financing. Id. ¶¶ 12-19.

ii. Entry Into the DIP Facility Is Necessary to Preserve Assets of the Estates and Is In the Best Interests of Creditors.

40. The Debtors’ decision to enter into the DIP Agreement is the culmination

of an extensive process whose goal was to procure the best available financing under the

circumstances. Ultimately, the Debtors’ decision to enter into the DIP Agreement was no

decision at all: borrowing under the terms of the DIP Facility is clearly the best option available

to the Debtors and entry of the DIP Orders is in the best interests of the Debtors, their estates

and their stakeholders.

41. The DIP Facility will provide immediate access to capital to pay vendors

and employees, establish the prudent cash balances for a business of the Debtors’ size and

stabilize operations. McCorvey Decl. ¶ 7. Moreover, certain of the Debtors’ businesses require

net investment in 2012 in order to preserve their current and future value. Id. ¶ 6. A portion of

the proceeds from the DIP Facility will be used to refinance a portion of the existing Pre-

Petition First Lien Obligations (except for certain letters of credit and existing secured

agreements), satisfy working capital requirements, and fund restructuring costs and capital

expenditures. Id. ¶ 8.

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42. As reflected in the 13-Week Projections, the Debtors will emerge from

their seasonal need for liquidity with a prudent cash balance. See McCorvey Decl. ¶ 7 and

Ex. A. The Debtors currently project that the consolidated global business will be cash flow

positive by next year on an operational basis (before financing, restructuring costs and pension

and post-employment benefit obligations), and that they will remain in compliance with the

financial covenants contained in the DIP Agreement. McCorvey Decl. ¶¶ 11-12. The DIP

Facility permits the Debtors to stabilize and preserve the value of their existing businesses. The

cash position of the Debtors after the period identified in the 13-Week Projections will depend a

number of factors, such as operational performance, asset dispositions, intellectual property

licensing, the pace of business restructurings, and global liquidity needs. Id. ¶ 13.

43. Failure to obtain this DIP Facility would gravely harm the Debtors and

their stakeholders. Immediately prior to the Petition Date, the Debtors had been operating on

approximately $56.7 million in cash in the United States. Without access to the DIP Facility,

the Debtors could potentially be forced to liquidate their businesses to the detriment of all

parties in interest. See In re Farmland, 294 B.R. at 885 (approving postpetition financing that

“gives the Debtors sufficient time to market and sell several of their major assets so as to pay

down the debt to the DIP Lenders and then reorganize around their remaining core assets.

Without the continued financing, the Debtors would likely be forced into a Chapter 7 or 11

liquidation, to the detriment of all creditors”).

44. Under the circumstances, the Debtors’ decision to enter into the DIP

Facility is a reasonable exercise of their business judgment, and the DIP Orders accordingly

should be entered. See, e.g., In re Ames, 115 B.R. at 38 (noting that courts permit debtors to

“exercise their basic business judgment” when obtaining debtor-in-possession financing under

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section 364 of the Bankruptcy Code); Trans World Airlines, Inc. v. Travelers Int’l AG (In re

Trans World Airlines, Inc.), 163 B.R. 964, 974 (Bankr. D. Del. 1994) (approving postpetition

loan and receivables facility because the facility “reflect[ed] sound and prudent business

judgment”); see also In re Simasko Prod. Co., 47 B.R. 444, 449 (Bankr. D. Colo. 1985)

(“[D]iscretion to act with regard to business planning activities is at the heart of the debtor’s

power.”) (citation omitted).

iii. The Terms of the DIP Facility Are Fair and Reasonable Under the Circumstances.

45. In determining whether the terms of postpetition financing are fair and

reasonable, courts consider the relative circumstances of both the debtor and the potential

lender. In re Farmland, 294 B.R. at 886-89; see also Unsecured Creditors’ Comm. Mobil Oil

Corp. v. First Nat’l Bank & Trust Co. (In re Ellingsen MacLean Oil Co., Inc.), 65 B.R. 358,

364-65 n.7 (W.D. Mich. 1986) (recognizing a debtor may have to enter into “hard” bargains to

acquire funds for its reorganization). Judged from that perspective, the terms of the DIP

Facility are fair and reasonable. The DIP Facility provides the Debtors the liquidity they need

to operate their business during these chapter 11 cases, thus permitting the Debtors to

effectively restructure, while establishing an appropriate cash balance for a company of Kodak’s

size. McCorvey Decl. ¶ 7. After thorough analysis by the Debtors and their advisors, they have

concluded that the terms of the DIP Facility are reasonable and appropriate under the

circumstances. Id. ¶¶ 14-15; Hart Decl. ¶ 20.

46. The DIP Facility was expressly structured to comply with the terms of the

Existing Intercreditor Agreement and adequately protect the Pre-Petition Secured Creditors.

Furthermore, numerous provisions of the DIP Agreement facilitate the preservation of value for

creditors and other stakeholders. For example, the mandatory prepayment provisions permit the

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Debtors to retain reinvestment rights with respect to 25% of net cash proceeds received from

sales or settlements involving assets of Term Priority Collateral, other than from the sale of

assets included in the digital imaging patent portfolio (which are subject to a 100% prepayment

obligation), up to $125 million. DIP Agmt. §§2.04; 2.05; 2.10.

47. Furthermore, the DIP Facility subjects the security interests and

administrative expense claims granted to the DIP Lenders to the Carve Out for certain

administrative and professional fees, including (i) fees required to be paid to the Court and to

the United States Trustee, (ii) reasonable fees and expenses incurred by a trustee up to

$100,000, any allowed unpaid fees of the Debtors or the statutory committee of unsecured

creditors appointed in these chapter 11 cases prior to a default and up to $10 million more

following default. DIP Agmt. § 2.24 and Definitions. Carve-outs for professional fees have

been found to be reasonable and necessary to ensure that statutory creditors’ committees and

debtors’ estates are adequately assisted by counsel and other professionals. See In re Ames, 115

B.R. at 38.

48. The various fees and charges associated with obtaining the DIP Facility

are within the range of reasonableness under the circumstances. Courts recognize that lender

fees often are the only way to obtain financing, and routinely approve them. See, e.g.,

Resolution Trust Corp. v. Official Unsecured Creditors’ Comm. (In re Defender Drug Stores,

Inc.), 145 B.R. 312, 316-19 (B.A.P. 9th Cir. 1992) (approving financing facility pursuant to

section 364 of the Bankruptcy Code that included a lender “enhancement fee”). 4

4 In accordance with the terms of the DIP Loan Documents, upon request from the Court the Debtors will file a motion seeking to file the complete Fee Letter under seal.

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B. Financing Under Section 364(d) of the Bankruptcy Code

49. Section 364(d)(1) of the Bankruptcy Code provides that a court may

authorize a debtor to incur postpetition debt on a senior or “priming” basis if (a) the debtor is

unable to obtain credit otherwise and (b) there is “adequate protection of the interest of the

holder of the lien on the property of the estate on which such senior or equal lien is proposed to

be granted.” See 11 U.S.C. § 364(d)(1); In re YL West 87th Holdings I LLC, 423 B.R. 421, 441

(Bankr. S.D.N.Y. 2010).

i. Any Available Financing Requires Priming Pursuant to Section 364(d)(1).

50. Courts require that a debtor have made a reasonable effort to seek credit

from other sources available under section 364(a) and (b), but section 364(d) does not require an

exhaustive search. In re Snowshoe Co., 789 F.2d 1085, 1088 (4th Cir. 1986); see also In re 495

Central Park Ave. Corp., 136 B.R. 626, 630-31 (Bankr. S.D.N.Y. 1992) (“Section 364(d)(1)

does not require the debtor to seek alternate financing from every possible lender. However, the

debtor must make an effort to obtain credit without priming a senior lien.”); In re Reading Tube

Indus., 72 B.R. 329, 332 (Bankr. E.D. Pa. 1987) (“Courts have found 20 attempts [to secure

funding] and 2 attempts [to secure funding] to be sufficient under the particular circumstances

of each case but

one attempt is not sufficient.”).

51. The Debtors contacted eleven potential lenders regarding debtor-in-

possession financing. Hart Decl. ¶ 12. As detailed in the Hart Declaration, the Debtors and

Lazard engaged in vigorous arm’s length negotiations that produced the best available financing

option under the circumstances. Id. ¶¶ 12-20. Nevertheless, none of the potential lenders was

willing to commit to postpetition financing on an unsecured or junior secured basis. Id. ¶ 14.

Indeed, the DIP Lenders have insisted upon secured liens pursuant to section 364(d)(1).

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52. The Debtors have succeeded in securing both a fully committed term

financing and ABL revolver that meet their needs to continue their operations and preserve and

maximize the value of their estates. The DIP Facility also is essential to provide the Debtors’

various stakeholders, including global customers, employees, vendors, service providers and

other key constituencies, with confidence in the Debtors’ ability to successfully reorganize. See

McCorvey Decl. ¶ 15. Accordingly, the Debtors submit that the priming liens contained in the

DIP Facility are appropriate under the circumstances here.

ii. The Debtors’ Proposed Grant of Adequate Protection is Appropriate.

53. Adequate protection is decided on a case-by-case basis and can be

provided in various forms, including granting of replacement liens and administrative claims.

In re Mosello, 195 B.R. 277, 289 (Bankr. S.D.N.Y. 1996) (“[T]he determination of adequate

protection is a fact-specific inquiry

left to the vagaries of each case.”); see also In re Realty

Sw. Assocs., 140 B.R. 360 (Bankr. S.D.N.Y. 1992); In re Beker Indus. Corp., 58 B.R. 725, 736

(Bankr. S.D.N.Y. 1986) (the application of adequate protection “is left to the vagaries of each

case, but its focus is protection of the secured creditor from diminution in the value of its

collateral during the reorganization process”) (citation omitted), rev’d on other grounds, 89

B.R. 336 (S.D.N.Y. 1988). “A finding of adequate protection should be premised on facts, or

on projections grounded on a firm evidentiary basis.” In re Mosello, 195 B.R. 277, 292 (Bankr.

S.D.N.Y. 1996).

54. In accordance with the Existing Intercreditor Agreement, the Pre-Petition

Secured First Lien Lenders have consented to being primed, while the Pre-Petition Second Lien

Noteholders are, under the Existing Intercreditor Agreement, deemed to have consented to

being primed based on the terms of the DIP Facility, and subject to the adequate protection

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provided for therein and which is provided for under the proposed Interim Order. See Existing

Intercreditor Agreement §§ 5.02, 5.04; see also Anchor Savs. Bank v. Sky Valley, Inc., 99 B.R.

117, 122 (N.D. Ga. 1989) (consenting to imposition of a priming lien “relieved the debtor of

having to demonstrate that [the lienholders] were adequately protected”).

55. The Existing Intercreditor Agreement precludes the Pre-Petition Second

Lien Noteholders from challenging the DIP Facility or seeking adequate protection beyond what

is provided for in the Existing Intercreditor Agreement. Id. § 5.02. The Existing Intercreditor

Agreement was negotiated by sophisticated parties and should be interpreted based on its plain

language. When interpreting contracts, New York courts apply the “familiar and eminently

sensible proposition of law that, when parties set down their agreement in a clear, complete

document, their writing should

be enforced according to its terms.” Vt. Teddy Bear Co., Inc.

v. 538 Madison Realty Co., 807 N.E.2d 876, 879 (N.Y. 2004) (citations omitted). This rule

applies with particular force to intercreditor agreements among sophisticated parties. See In re

Ion Media Networks, Inc., 419 B.R. 585, 594-98 (Bankr. S.D.N.Y. 2009) (“Giving effect to the

plain language of the Intercreditor Agreement also reinforces general principles of public policy

[by] lead[ing] to more predictable and efficient commercial outcomes and minimiz[ing] the

potential for wasteful and vexatious litigation.”). Here, the DIP Agreement and Interim Order

provide for the contractually required adequate protection.

56. The DIP Facility provides that the Debtors will immediately repay Loans

constituting Pre-Petition First Lien Secured Obligations, while certain letters of credit and

existing secured agreements will remain outstanding and supported under the DIP Documents,

and the Pre-Petition First Lien Secured Lenders will release their prepetition liens. The Debtors

propose to provide adequate protection to the Pre-Petition First Lien Secured Lenders with the

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Adequate Protection Liens until Continuing Pre-Petition First Lien Obligations are satisfied.

The Debtors further propose to provide adequate protection to the Pre-Petition Second Lien

Noteholders in accordance with the terms of the Existing Intercreditor Agreement. Interim

Order ¶ 13. The Debtors will provide the Pre-Petition Second Lien Noteholders a replacement

security interest in and lien upon all of the Collateral, subordinate to the DIP Liens, the

Adequate Protection Liens and the Carve-Out. Id.

iii. The Debtors Will Provide Further Adequate Protection Through an Equity Cushion.

57. In addition to the adequate protection package provided and the deemed

consent to the DIP Facility resulting therefrom under the Existing Intercreditor Agreement, the

Pre-Petition Second Lien Secured Noteholders are further adequately protected through the

existence of a substantial equity cushion in their collateral. See In re YL West 87th Holdings I

LLC, 423 B.R. at 441 (noting that “the existence of an equity cushion seems to be the preferred

test in determining whether priming of a senior lien is appropriate under section 364”)

(quotation omitted).

58. As explained in the Hart Declaration, Lazard estimates that a portion of

the Pre-Petition Secured Creditors’ collateral is valued at a range of $3.4 to $4.3 billion. Hart

Decl. ¶ 23. These amounts are comprised of (a) 284 Partners, LLC’s estimated value range for

the digital imaging patent portfolio of $2.2 to $2.6 billion; (b) the Debtors’ estimated pro forma

domestic cash and equivalents of $820 million; (c) U.S. accounts receivable valued at an

estimated $142 to $257 million; (d) U.S. inventory valued at an estimated $149 to $369 million;

and (e) U.S. machinery & equipment valued at an estimated $32 to 294 million . Id. Kodak’s

Digital Camera and Kodak Imaging Systems and Services patent portfolios were independently

valued and determined to have a net present value of $2.2 to $2.6 billion. Id. & n.5; see also

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Lasinski Decl. ¶¶ 29-30. As set forth in detail in the Lasinski Declaration, 284 Partners, LLC

projected the pre-tax cash flows from these patent portfolios to be $3.07 billion during the

period 2012-2020, which is consistent with Kodak’s historical licensing revenues over a similar

period. Id. ¶ 29. The realized value through additional licensing or an asset sale is likely to be

substantially higher. See id. ¶ 18, 29. The analysis submitted does not give any credit to other

prepetition collateral to the valuation, such as the Debtors’ globally-recognized and highly

reputable brand, the stock of certain foreign subsidiaries, or the Debtors’ more than 9,000 other

patents beyond the digital imaging patent portfolio, all of which have substantial value. Id.

¶ 22. The valued assets alone provide more than enough of an equity cushion to support the

DIP Facility along with the remaining outstanding Pre-Petition Secured Debt. See id. ¶ 23.

59. The proceeds from the DIP Facility will themselves create additional value

for these estates by helping to stabilize operations and permit the Debtors to make investments

in businesses requiring net investment in 2012 in order to preserve annuities on consumables

and services in the future. McCorvey Decl. ¶¶ 6-7; see also In re 495 Central Park, 136 B.R. at

631-32 (finding that adequate protection existed based on evidence of current market value of

collateral and projections of future performance after investment of debtor-in-possession

funding). The Debtors’ ample equity cushion further supports a finding that the Pre-Petition

Secured Parties are adequately protected. See In re Franklin Equip. Co., 416 B.R. 483, 528

(Bankr. E.D. Va. 2009) (“Whether an equity cushion provides adequate protection

is

determined on a “case-by-case basis rather than by mechanical application of a formula.”).

60. Finally, in cases where the adequate protection is an equity cushion, courts

have held that debtors may use cash collateral for operating expenses without diminishing the

adequate protection where the continued operation of the debtor’s business preserves the equity

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cushion. See In re Salem Plaza Assocs., 135 B.R. 753, 758 (Bankr. S.D.N.Y. 1992) (holding

that a debtor may use postpetition financing for operating expenses without diminishing the

adequate protection where the continued operation of the debtor’s business preserves the equity

cushion). Here, the liquidity provided by the DIP Facility will provide immediate access to

capital to pay employees and vendors while minimizing disruptions of day-to-day operations,

thereby stabilizing global operations. McCorvey Decl. ¶ 7. This will prevent harm to the

Kodak brand and its valuable assets and enable the Debtors to generate cash from their existing

businesses. Accordingly, the Debtors believe that the adequate protection proposed herein and

in the DIP Orders is fair and reasonable and is sufficient to satisfy the requirements of sections

363(c) and 364(d) of the Bankruptcy Code.

C. The DIP Facility was Negotiated in Good Faith and Should be Afforded the Protection of Section 364(e) of the Bankruptcy Code.

61. Pursuant to section 364(e) of the Bankruptcy Code, any reversal or

modification on appeal of an authorization to obtain credit or incur debt or a grant of priority or

a lien under section 364 of the Bankruptcy Code shall not affect the validity of that debt

incurred or priority or lien granted as long as the entity that extended credit “extended such

credit in good faith.” See 11 U.S.C. § 364(e).

62. Courts generally hold that “good faith” in the context of postpetition

financing means, consistent with the Uniform Commercial Code, honesty in fact in the conduct

or transaction concerned. See Unsecured Creditors’ Comm. v. First Nat’l Bank & Trust Co. (In

re Ellingsen MacLean Oil Co.), 834 F.2d 599, 605 (6th Cir. 1987) (citing U.C.C. § 1-201(19)).

Additionally, “[g]ood faith is measured with respect to the good faith of the lender as contrasted

to that of the borrower.” Transcript of Record (Court Decision) at 736:24-25, In re Lyondell

Chem. Co., No. 09-10023 (Bankr. S.D.N.Y. Mar. 5, 2009). Moreover, a lender’s desire to

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ensure that it is repaid, to make money on interest and fees and to protect prepetition positions

are understandable and acceptable motivations for a postpetition lender in negotiating a deal.

Id. at 737:6-14.

63. As explained in detail herein, the terms of the DIP Facility were

extensively negotiated at arm’s length and reflect the most advantageous terms (including

availability, pricing, fees and covenant flexibility) available to the Debtors in light of their

financial circumstances and the current volatile credit market. See McCorvey Decl. ¶ 14; Hart

Decl. ¶¶ 12-20. Ultimately, after difficult arm’s length negotiations, the Debtors succeeded in

obtaining the DIP Facility in an amount sufficient for the Debtors’ working capital needs.

McCorvey Decl. ¶¶ 7, 14-15; Hart Decl. ¶ 19.

64. All of the DIP Facility obligations will be extended by the DIP Lenders in

good faith (as such term is used in section 364(e) of the Bankruptcy Code). No consideration is

being provided to any party to, or guarantor of, obligations arising under the DIP Facility, other

than as set forth herein and in the Interim Order. Moreover, the DIP Facility has been extended

in express reliance upon the protections offered by section 364(e) of the Bankruptcy Code, and

each DIP Lender should be entitled to the full protection of section 364(e) of the Bankruptcy

Code in the event that the Interim Order or any provision thereof is vacated, reversed, or

modified on appeal or otherwise.

D. Approval of the DIP Facility on an Interim Basis is Necessary to Prevent Immediate and Irreparable Harm.

65. Bankruptcy Rule 4001(c)(2) governs the procedures for obtaining

authorization to obtain postpetition financing and provides, in relevant part:

The court may commence a final hearing on a motion for authority to obtain credit no earlier than 14 days after service of the motion. If the motion so requests, the court may conduct a hearing before

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such 14 day period expires, but the court may authorize the obtaining of credit only to the extent necessary to avoid immediate and irreparable harm to the estate pending a final hearing.

FED. R. BANKR. P. 4001(c)(2).

66. Similarly, to the extent the Debtors are seeking authority to sell, use or

otherwise incur an obligation regarding property of their estates, Bankruptcy Rule 6003

provides that the Court may only grant such relief to the extent it is necessary to avoid

immediate and irreparable harm. FED. R. BANKR. P. 6003(b).

67. Generally, courts find “immediate and irreparable harm” exists where loss

of the business threatens ability to reorganize. See In re Ames Dep’t Stores, Inc., 115 B.R. 34,

36 n.2 (Bankr. S.D.N.Y. 1990). Approval of a DIP facility on an interim basis under Rule

4001(c)(2) is left to the discretion of the court as informed by the facts of each case. See In re

Pan Am Corp., No. 91-8319, 1992 WL 154200, at *6 (S.D.N.Y. June 18, 1992). There is no

limit to the amount of funding that the court can approve on an interim basis. Id. After the 14-

day period, the request for financing is not limited to those amounts necessary to prevent the

destruction of the debtor’s business, and the debtor is entitled to borrow those amounts that it

believes are prudent to the operation of its business. Ames Dept. Stores, 115 B.R. at 36.

68. Immediate and irreparable harm would result if the relief requested herein

is not granted on an interim basis. As described in the McCorvey Declaration, the Debtors need

to obtain immediate access to liquidity under the DIP Facility in order to, among other things,

continue the operation of their businesses, maintain business relationships with vendors and

customers, make payroll and capital expenditures, and satisfy other working capital and

operational needs. McCorvey Decl. ¶¶ 7-8. Without immediate financing, stakeholders will

lose confidence in the Debtors, thereby causing irreparable harm to the Kodak brand. Id. ¶ 15.

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Indeed, the Debtors have already begun to suffer disruptions in its supply chain due to its lack

of liquidity in the U.S., a problem that will be exacerbated without immediate access to the DIP

Facility. Id. ¶ 16. Funding each of these expenditures is necessary to the Debtors’ ability to

preserve and maintain their going-concern values for the benefit of all parties in interest.

69. The crucial importance of a debtor’s ability to secure postpetition

financing to prevent immediate and irreparable harm to its estate has been repeatedly recognized

in this district in similar circumstances. See, e.g., In re Hostess Brands, No. 12-22052 (Bankr.

S.D.N.Y. Jan. 12, 2012) (order approving postpetition financing on an interim basis); In re

Chemtura Corp., No. 09-11233 (Bankr. S.D.N.Y. March 20, 2009) (same); In re Tronox Inc.,

No. 09-10156 (Bankr. S.D.N.Y. Jan. 13, 2009) (same); In re Lyondell Chem. Co., No. 09-10023

(Bankr. S.D.N.Y. Jan. 8, 2009) (same); In re Lenox Sales, Inc., No. 08-14679 (Bankr. S.D.N.Y.

Nov. 25, 2008) (same); In re Wellman, Inc., No. 08-10595 (Bankr. S.D.N.Y. Feb. 27, 2008)

(same).

70. Accordingly, the Debtors believe that, under the circumstances, entry of

the Interim Order is necessary to prevent immediate and irreparable harm to the estates and

therefore is warranted under the requirements of Bankruptcy Rule 4001(c)(2).

E. Modification of the Automatic Stay Provided Under Section 362 of the Bankruptcy Code is Appropriate Under the Circumstances.

71. Paragraph 8(b) of the proposed Interim Order provides that the automatic

stay imposed under section 362(a) of the Bankruptcy Code is hereby lifted to the extent

contemplated by the provisions of the DIP Agreement as described above. Stay modification

provisions of this sort are ordinary and usual features of debtor-in-possession financing facilities

and are reasonable under the present circumstances. Accordingly, the Court should modify the

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automatic stay to the extent contemplated under the DIP Agreement and the proposed DIP

Orders.

Request for a Final Hearing

72. Pursuant to Bankruptcy Rules 4001(b)(2) and 4001(c)(2), the Debtors

request that the Court set a date, which is no sooner than 14 days after the date of this Motion

and no later than 30 days after the entry of the Interim Order, to hold a hearing to consider entry

of the Final Order and the permanent approval of the relief requested in this Motion. 5 The

Debtors also request authority to serve a copy of the signed Interim Order, which fixes the time

and date for the filing of objections, if any, to entry of the Final Order, by first class mail upon

the notice parties listed below, and further request that the Court deem service thereof sufficient

notice of the hearing on the Final Order under Bankruptcy Rule 4001(c)(2).

Bankruptcy Rule 6003 Is Satisfied

73. The Debtors have demonstrated that they will suffer “immediate and

irreparable harm” if the Interim Order is not entered and the Debtors are not provided

immediate access to the DIP Facility. See In re Ames Dep’t Stores, Inc., 115 B.R. 34, 36 n.2

(Bankr. S.D.N.Y. 1990) (finding that “immediate and irreparable harm” exists where loss of the

business threatens ability to reorganize). Accordingly, the Debtors respectfully submit that they

have satisfied Bankruptcy Rule 6003 as it relates to the relief requested herein.

Waiver of Bankruptcy Rules 6004(a) and 6004(h)

74. Given the nature of the relief requested herein, the Debtors respectfully

request a waiver of (a) the notice requirements under Bankruptcy Rule 6004(a), and (b) the 14-

5 The DIP Agreement requires that the Final Order be entered no later than 30 days after entry of the Interim Order, which is extended to 45 days if entry of the Final Order is delayed by objections interposed. (DIP Agmt. § 2.06.)

SC1:3173818.8

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day stay under Bankruptcy Rule 6004(h). As set forth above, the DIP Facility is essential to

prevent irreparable damage to the Debtors’ operations, value and ability to reorganize.

Accordingly, the Debtors submit that ample cause exists to justify a waiver of the requirements

under Bankruptcy Rule 6004(a) and 14-day stay imposed by Bankruptcy Rule 6004(h), to the

extent they apply.

Debtors’ Reservation of Rights

75. Nothing contained herein is intended or should be construed as an

admission as to the validity of any claim against the Debtors, a waiver of the Debtors’ rights to

dispute any claim, or an approval or assumption of any agreement, contract or lease under

section 365 of the Bankruptcy Code. The Debtors expressly reserve their rights to contest any

claims related to any obligations that are the subject of this Motion under applicable non-

bankruptcy law. Likewise, if the Court grants the relief sought herein, any payment made

pursuant to the Court’s order is not intended to be, and should not be construed as, an admission

as to the validity of any claim or a waiver of the Debtors’ rights to dispute such claim

subsequently.

Notice

76. Notice of this Motion has been provided to: (a) the U.S. Trustee; (b) the

entities listed on the Consolidated List of Creditors Holding the 50 Largest Unsecured Claims;

(c) the agent under the prepetition revolving credit facility; (d) the indenture trustee for the

prepetition 9.2% Senior Notes due June 1, 2021; (e) the indenture trustee for the prepetition

10.625% Senior Secured Notes due March 15, 2019; (f) the indenture trustee for the prepetition

9.95% Senior Notes due July 1, 2018; (g) the indenture trustee for the prepetition 9.75% Senior

Secured Notes due March 1, 2018; (h) the indenture trustee for the prepetition 7.00%

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Convertible Senior Notes due April 1, 2017; (i) the Securities and Exchange Commission; (j)

the United States Attorney for the Southern District of New York; (k) the Internal Revenue

Service; (l) the Environmental Protection Agency; (m) the Pension Benefit Guaranty

Corporation; (n) counsel to KPP Trustees Limited, the trustee of the Kodak Pension Plan; (o)

counsel to the Ad Hoc Committee of Holders of Senior Secured Notes; and (p) counsel to the

agent under the proposed Debtor-In-Possession Credit Agreement. Due to the urgency of the

circumstances surrounding this Motion and the nature of the relief requested herein, the Debtors

respectfully submit that further notice of this Motion is neither required nor necessary.

No Prior Request

77. The Debtors have not previously sought the relief requested herein from

this or any other court.

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WHEREFORE, the Debtors respectfully request that the Court enter the DIP

Orders and grant such other and further relief to the Debtors as is appropriate.

Dated:

January 19, 2012 New York, New York

SC1:3173818.8

/s/ Andrew G. Dietderich

Andrew G. Dietderich John J. Jerome Michael H. Torkin Mark U. Schneiderman SULLIVAN & CROMWELL LLP 125 Broad Street

New York, New York 10004

Telephone:

(212) 558-4000

Facsimile:

(212) 558-3588

- and –

Pauline K. Morgan Joseph M. Barry YOUNG CONAWAY STARGATT & TAYLOR, LLP

1270 Avenue of the Americas Suite 2210 New York 10020

Telephone:

(212) 332-8840

Facsimile:

(212) 332-8855

Proposed Counsel to the Debtors and Debtors in Possession

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UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re

Eastman Kodak Company, et al., 1

Debtors.

)

)

)

)

)

)

)

)

Chapter 11

Case No. 12-

(

)

(Jointly Administered)

INTERIM ORDER (I) AUTHORIZING DEBTORS (A) TO OBTAIN POST- PETITION FINANCING PURSUANT TO 11 U.S.C. §§ 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) AND 364(e) AND (B) TO UTILIZE CASH COLLATERAL PURSUANT TO 11 U.S.C. § 363, (II) GRANTING ADEQUATE PROTECTION TO PRE-PETITION SECURED PARTIES PURSUANT TO 11 U.S.C. §§ 361, 362, 363 AND 364 AND (III) SCHEDULING FINAL HEARING PURSUANT TO BANKRUPTCY RULES 4001(b) AND (c)

Upon the motion (the “Motion”), dated January 19, 2012, of Eastman Kodak

Company (the “Borrower”) and its affiliated debtors, each as debtor and debtor-in-

possession (collectively, the “Debtors”), in the above-captioned cases (the “Cases”)

pursuant to sections 105, 361, 362, 363(c)(2), 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1)

and 364(e) of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the

Bankruptcy Code”), and rules 2002, 4001 and 9014 of the Federal Rules of Bankruptcy

Procedure (the “Bankruptcy Rules”), and the Local Bankruptcy Rules for the Southern

District of New York, including rule 4001-2 (the “SDNY Local Rules”), seeking, among

other things:

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: Eastman Kodak Company (7150); Creo Manufacturing America LLC (4412); Eastman Kodak International Capital Company, Inc. (2341); Far East Development Ltd. (2300); FPC Inc. (9183); Kodak (Near East), Inc. (7936); Kodak Americas, Ltd. (6256); Kodak Aviation Leasing LLC (5224); Kodak Imaging Network, Inc. (4107); Kodak Philippines, Ltd. (7862); Kodak Portuguesa Limited (9171); Kodak Realty, Inc. (2045); Laser-Pacific Media Corporation (4617); NPEC Inc. (5677); Pakon, Inc. (3462); and Qualex Inc. (6019). The location of the Debtors’ corporate headquarters is: 343 State Street, Rochester, NY 14650.

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(1) authorization for the Borrower to obtain post-petition

financing up to the aggregate principal amount of $925,000,000 (the “U.S.

Debtor Borrowings”), in connection with which Kodak Canada, Inc.

(“Kodak Canada”), a non-Debtor affiliate of the Borrower shall be

permitted to obtain additional financing (which additional financing will

be guaranteed by the Debtors) up to the aggregate principal amount of

$25,000,000 (the “Canadian Borrowings,” and together with the U.S.

Debtor Borrowings, the “Financing”), and for all of the other Debtors

and, with respect to the obligations of Kodak Canada only, the Canadian

Subsidiary Guarantors and the Borrower (as defined in the DIP Credit

Agreement (as defined below)) (together, the “Guarantors”) to guaranty

the obligations of the Borrower and Kodak Canada (as applicable) in

connection with the Financing, up to the aggregate principal amount of

$950,000,000 (the actual available principal amount at any time being

subject to those conditions set forth in the DIP Documents (as defined

below)), from Citicorp North America, Inc. (“CNAI”), acting as Agent

and Collateral Agent (in such capacities, the “DIP Agent”), for itself and a

syndicate of financial institutions (together with CNAI and including the

fronting and issuing banks for the letters of credit, the “DIP Lenders”) to

be arranged by Citigroup Global Markets Inc. (the “Lead Arranger”);

(2) authorization for the Debtors to execute and enter into the DIP

Documents and to perform such other and further acts as may be required

in connection with the DIP Documents;

2

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(3) authorization for the Debtors to immediately use proceeds of

the Financing to, simultaneously with the initial draw under the Financing,

refinance the Pre-Petition First Lien Debt (as defined below) (other than

certain letters of credit and Existing Secured Agreements (as defined in

the DIP Credit Agreement) that shall remain outstanding (the

Continuing Pre-Petition First Lien Obligations”)) including interest

through the date of repayment;

(4) authorizing, until the satisfaction, or termination of the

Continuing Pre-Petition First Lien Obligations, the granting of adequate

protection, including with respect to the Non-Assumed Pre-Petition First

Lien Obligations (as defined below), until the refinancing thereof as

hereinafter provided, the granting of adequate protection to the lenders

(the “Pre-Petition First Lien Secured Lenders”) under or in connection

with that certain Second Amended and Restated Credit Agreement, dated

as of April 26, 2011 (as heretofore amended, supplemented or otherwise

modified, the “Pre-Petition First Lien Credit Agreement”), among the

Borrower, Kodak Canada, the other subsidiaries of the Borrower party

thereto, the lenders listed therein, the letter of credit issuing banks named

therein (the “Issuing Banks”), and Bank of America, N.A. (“BofA”), as

administrative agent for the Pre-Petition First Lien Secured Lenders (in

such capacity, the “Pre-Petition First Lien Agent”) and that certain

Second Amended and Restated US Security Agreement, dated as of April

26, 2011, among the Borrower, the Subsidiaries of the Borrower party

3

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thereto, and BofA and Citicorp USA, Inc., each as Co-Collateral Agent

thereunder (the “Pre-Petition First Lien Co-Collateral Agents”) (as

heretofore amended, supplemented or otherwise modified, the “US

Security Agreement” and, collectively with the Pre-Petition First Lien

Credit Agreement, and the mortgages (if any) and all other documentation

executed in connection therewith, (including, for the avoidance of doubt,

any “Secured Agreements” as defined in the Pre-Petition First Lien Credit

Agreement), the “First Lien Existing Agreements”);

(5) the granting of adequate protection to the holders (the “Pre-

Petition Second Lien Noteholders” and together with the Pre-Petition

First Lien Secured Lenders, the “Pre-Petition Secured Creditors”) of the

Borrower’s (i) 10.625% Senior Secured Notes due March 15, 2019 issued

under or in connection with that certain Indenture dated as of March 15,

2011

and (ii) the Borrower’s 9.75% Senior Secured Notes due March 1,

2018

issued under or in connection with that certain Indenture dated as of

March 15, 2011 (together, the “Pre-Petition Second Lien Indentures”,

and with and all other documentation executed in connection therewith,

the “Second Lien Existing Agreements” and together with the First Lien

Existing Agreements, the “Existing Documents”), each among the

Borrower, each of the guarantors party thereto and the Bank of New York

Mellon, as trustee (in such capacity under the Pre-Petition Second Lien

Indentures, the “Pre-Petition Second Lien Notes Trustee”), whose liens

4

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and security interests shall be junior to the DIP Liens and the Adequate

Protection Liens (each as defined below);

(6) authorization for the Debtors to use Cash Collateral (as defined

below) and all other collateral in which any of the Pre-Petition Secured

Creditors have an interest, and the granting of adequate protection to any

of the Pre-Petition Secured Creditors with respect to, inter alia, such use

of their Cash Collateral and all use and diminution in the value of the

Pre-Petition Collateral (as defined below);

(7) approval of certain stipulations by the Debtors with respect to

the First Lien Existing Agreements and the liens and security interests

arising therefrom;

(8) the granting of superpriority claims to the DIP Lenders

payable from, and having recourse to, all pre-petition and post-petition

property of the Debtors’ estates and all proceeds thereof (including any

Avoidance Proceeds (as defined below)), subject to the Carve Out (as

defined below);

(9) subject only to and effective upon entry of a final order

granting such relief and such other relief as provided herein and in such

final order (the “Final Order”), the limitation of the Debtors’ right to

surcharge against collateral pursuant to section 506(c) of the Bankruptcy

Code;

(10) pursuant to Bankruptcy Rule 4001, that an interim hearing

(the “Interim Hearing”) on the Motion be held before this Court to

5

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consider entry of the proposed interim order annexed to the Motion (a)

authorizing the Borrower, on an interim basis, to forthwith borrow or

obtain letters of credit from the DIP Lenders under the DIP Documents up

to an aggregate principal or face amount not to exceed $450,000,000

under the Term Facility (as defined in the DIP Credit Agreement) and

$225,000,000 under the Revolving Credit Facility (as defined in the DIP

Credit Agreement), with up to an additional $25,000,000 under the

Revolving Credit Facility to be made available for borrowing by Kodak

Canada (each such borrowing subject to any limitations under the DIP

Documents) to (i) refinance the borrowings and other extensions of credit

under the Pre-Petition First Lien Credit Agreement (other than the

Continuing Pre-Petition First Lien Obligations) simultaneously with the

initial borrowing under the Financing, (ii) with respect to the Continuing

Pre-Petition First Lien Obligations, deem certain letters of credit under the

Pre-Petition First Lien Credit Agreement to be issued pursuant to, and

secured under, the DIP Credit Agreement and backstop certain outstanding

obligations under the Pre-Petition First Lien Credit Agreement through the

issuance of letters of credit, providing of cash collateral or making of other

arrangements satisfactory to the holders thereof with respect to the

obligations under certain Existing Secured Agreements that remain

outstanding (including, with respect to any DIP Lender, having such

obligations designated as “Obligations” under the DIP Credit Agreement

and secured by the DIP Collateral) (such obligations deemed issued

6

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pursuant to or designated as “Obligations” under the DIP Credit

Agreement, the “Assumed Pre-Petition First Lien Obligations” and

such other obligations, the “Non-Assumed Pre-Petition First Lien

Obligations”), and (iii) provide working capital to the Debtors and their

subsidiaries (including payment of fees and expenses in connections with

the transactions contemplated by the DIP Credit Agreement), (b)

authorizing the Debtors’ use of Cash Collateral and all other collateral,

and (c) granting the adequate protection described herein; and

(11) that this Court schedule a final hearing (the “Final Hearing”)

to be held within 30 days of the entry of this Interim Order (the “Interim

Order”) to consider entry of a final order (the “Final Order”) authorizing

the balance of the borrowings and letter of credit issuances under the DIP

Documents on a final basis, as set forth in the Motion and the DIP

Documents filed with this Court.

Due and appropriate notice of the Motion, the relief requested therein and the

Interim Hearing having been served by the Debtors on: (a) the United States Trustee; (b)

the entities listed on the Consolidated List of Creditors Holding the 50 Largest Unsecured

Claims; (c) the agent under the Pre-Petition First Lien Credit Agreement; (d) the

indenture trustee for the prepetition 9.2% Senior Notes due June 1, 2021; (e) the

indenture trustee for the prepetition 10.625% Senior Secured Notes due March 15, 2019;

(f) the indenture trustee for the prepetition 9.95% Senior Notes due July 1, 2018; (g) the

indenture trustee for the prepetition 9.75% Senior Secured Notes due March 1, 2018; (h)

the indenture trustee for the prepetition 7.00% Convertible Senior Notes due April 1,

7

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2017; (i) the United States Attorney for the Southern District of New York; (j) the

Internal Revenue Service; (k) the DIP Agent; (l) the Environmental Protection Agency;

(m) the Pension Benefit Guaranty Corporation; and (n) counsel to the Trustees of the

Kodak Pension Plan.

The Interim Hearing having been held by this Court on January 19, 2012.

Upon the record made by the Debtors at the Interim Hearing and after due

deliberation and consideration and sufficient cause appearing therefor;

IT IS FOUND, DETERMINED, ORDERED AND ADJUDGED, that:

1. Jurisdiction. This Court has core jurisdiction over the Cases, this Motion,

and the parties and property affected hereby pursuant to 28 U.S.C. §§ 157(b) and 1334.

Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

2. Notice.

Notice of the Motion, the relief requested therein and the Interim

Hearing was served by the Debtors on each of their fifty (50) largest unsecured creditors,

the DIP Lenders, the DIP Agent, the Pre-Petition First Lien Agent, the Pre-Petition

Second Lien Notes Trustee and the Office of the United States Trustee for the Southern

District of New York. The interim relief granted herein is necessary to avoid immediate

and irreparable harm to the Debtors and their estates pending the Final Hearing. Under

the circumstances, the notice given by the Debtors of the Motion and the Interim Hearing

(i) was, in the Debtors’ belief, the best available under the circumstances, (ii) constitutes

due and sufficient notice thereof and (iii) complies with Bankruptcy Rules 4001(b) and

(c). No further notice of the relief sought at the Interim Hearing is necessary or required.

8

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3. Debtors’ Stipulations. Without prejudice to the rights of any other party

(but subject to the limitations thereon contained in paragraphs 18 and 19 below), the

Debtors admit, stipulate and agree that:

(a) (i) as of the filing of the Debtors’ chapter 11 petitions (the

Petition Date”), the Borrower was indebted and liable to the Pre-Petition First Lien

Secured Lenders, without defense, counterclaim or offset of any kind, in the aggregate

principal amount of approximately $100,000,000 in respect of loans made, in the

aggregate principal amount of approximately $96,000,000 in respect of letters of credit

issued, and in the maximum secured amount of approximately $40,000,000 in respect of

Existing Secured Agreements, in each case, by the Pre-Petition First Lien Secured

Lenders pursuant to, and in accordance with the terms of, the First Lien Existing

Agreements, plus, in each case, interest thereon and fees, expenses (including any

attorneys’, accountants’, appraisers’ and financial advisors’ fees that are chargeable or

reimbursable under the First Lien Existing Agreements), charges and other obligations

incurred in connection therewith as provided in the First Lien Existing Agreements

(collectively, the “Pre-Petition First Lien Debt”), (ii) the Pre-Petition First Lien Debt

constitutes the legal, valid and binding obligation of the Debtors, enforceable in

accordance with its terms (other than in respect of the stay of enforcement arising from

section 362 of the Bankruptcy Code), (iii) no portion of the Pre-Petition First Lien Debt is

subject to avoidance, recharacterization, recovery or subordination pursuant to the

Bankruptcy Code or applicable nonbankruptcy law and (iv) the Debtors do not have,

hereby forever release, and are forever barred from bringing, any claims, counterclaims,

causes of action, defenses or setoff rights, whether arising under the Bankruptcy Code or

9

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otherwise, against the Pre-Petition First Lien Secured Lenders, the Pre-Petition First Lien

Agent and their respective affiliates, agents, officers, directors, employees and attorneys;

and

(b) the liens and security interests granted to the Pre-Petition First Lien

Agent pursuant to and in connection with the First Lien Existing Agreements (including,

without limitation, all security agreements, pledge agreements, mortgages, deeds of trust

and other security documents executed by any of the Debtors in favor of the Pre-Petition

First Lien Agent, for its benefit and for the benefit of the Pre-Petition First Lien Secured

Lenders) in connection with the First Lien Existing Agreements, (i) are valid, binding,

perfected, enforceable, first-priority liens and security interests in the personal and real

property described in the First Lien Existing Agreements (the “Pre-Petition First Lien

Collateral”), (ii) are not subject to avoidance, recharacterization or subordination

pursuant to the Bankruptcy Code or applicable nonbankruptcy law, and (iii) are senior to

the Pre-Petition Second Lien Notes Trustee’s liens;

(c) the aggregate value of the Pre-Petition First Lien Collateral

substantially exceeds the aggregate amount of the Pre-Petition First Lien Debt; and

(d) a portion of the Debtors’ initial borrowings under the DIP Credit

Agreement will be used to (i) refinance the Pre-Petition First Lien Debt (other than

Continuing Pre-Petition First Lien Obligations) owing to the Pre-Petition First Lien

Secured Lenders, and (ii) with respect to certain of the Continuing Pre-Petition First Lien

Obligations, deposit cash collateral, issue back-to-back letters of credit or make other

arrangements satisfactory to the holders or issuers of the Non-Assumed Pre-Petition First

Lien Obligations, in each case in accordance with the terms and conditions set forth in

10

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this Interim Order, subject to the terms and conditions contained herein (including,

without limitation, the priming liens granted hereunder and the Carve Out), any and all

pre-petition or post-petition liens and security interests (including, without limitation, any

adequate protection replacement liens at any time granted to the Pre-Petition First Lien

Secured Lenders by this Court) that the Pre-Petition First Lien Secured Lenders have or

may have in the Pre-Petition First Lien Collateral or any other assets and properties of the

Debtors and their estates shall (i) unless otherwise ordered by the Court, continue to

secure the unpaid portion of any Pre-Petition First Lien Debt (including, without

limitation, any Pre-Petition First Lien Debt subsequently reinstated after the repayment

thereof because such payment (or any portion thereof) is required to be returned or repaid

to the Debtors or the DIP Lenders and the liens securing the Pre-Petition First Lien Debt

shall have not been avoided) and (ii) except with respect to any additional cash collateral

posted or letters of credit provided, be junior and subordinate in all respects to the DIP

Lenders’ liens on and security interests in the Collateral (including, without limitation,

the DIP Liens) granted under this Interim Order and the DIP Documents (such junior

liens and security interests of the Pre-Petition First Lien Secured Lenders are hereinafter

referred to as the “Contingent Adequate Protection Liens”), and any such reinstated

Pre-Petition First Lien Debt described in clause (i) of this sentence is hereinafter referred

to as the “Contingent Pre-Petition First Lien Debt”).

4. Findings Regarding the Financing.

(a)

Good cause has been shown for the entry of this Interim Order.

(b)

The Debtors have an immediate need to obtain the Financing and

use Cash Collateral in order to permit, among other things, the orderly continuation of the

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operation of their businesses, to maintain business relationships with vendors, suppliers

and customers, to make payroll, to make capital expenditures, to repay the Pre-Petition

First Lien Debt (other than Continuing Pre-Petition First Lien Obligations), to (i) deem

the Assumed Pre-Petition First Lien Obligations to be issued pursuant to, and secured

under, the DIP Credit Agreement or designated as “Obligations” under the DIP Credit

Agreement and secured by the DIP Collateral, as the case may be, (ii) deposit cash

collateral, issue back-to-back letters of credit or make other arrangements satisfactory to

the holders or issuers of the Non-Assumed Pre-Petition First Lien Obligations, and,

subject to the terms and conditions contained herein, and (iii) satisfy other working

capital and operational needs. The access of the Debtors to sufficient working capital and

liquidity through the use of Cash Collateral, incurrence of new indebtedness for borrowed

money and other financial accommodations is vital to the preservation and maintenance

of the going concern values of the Debtors and to a successful reorganization of the

Debtors.

(c) The Debtors are unable to obtain financing on more favorable

terms from sources other than the DIP Lenders under the DIP Documents, and are unable

to obtain adequate unsecured credit allowable under section 503(b)(1) of the Bankruptcy

Code as an administrative expense. The Debtors are also unable to obtain secured credit

allowable under sections 364(c)(1), 364(c)(2) and 364(c)(3) of the Bankruptcy Code

without the Debtors (i) granting to the DIP Agent and the DIP Lenders, subject to the

Carve Out as provided for herein, the DIP Liens and the Superpriority Claims (each as

defined below) under the terms and conditions set forth in this Interim Order and in the

DIP Documents and (ii) repaying the Pre-Petition First Lien Debt in full (other than the

12

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Continuing Pre-Petition First Lien Obligations) upon entry of this Interim Order, such

repayment being a requirement by the DIP Agent for the Financing.

(d) The terms of the Financing and the use of Cash Collateral are fair

and reasonable, reflect the Debtors’ exercise of prudent business judgment consistent

with their fiduciary duties and constitute reasonably equivalent value and fair

consideration.

(e) The Financing has been negotiated in good faith and at arm’s

length among the Debtors, the DIP Agent and the DIP Lenders, and all of the Debtors’

obligations and indebtedness arising under, in respect of or in connection with the

Financing and the DIP Documents, including without limitation, (i) all loans made to, and

all letters of credit issued for the account of, the Debtors pursuant to the Debtor-in-

Possession Credit Agreement substantially in the form attached as Exhibit A to the

Motion (the “DIP Credit Agreement”), and (ii) any “Obligations” (as defined in the DIP

Credit Agreement) of the Debtors, including, but not limited to, credit extended in respect

of overdrafts and related liabilities and other depository, treasury, and cash management

services and other clearing services provided by CNAI, any DIP Lender or any of their

respective affiliates and any hedging obligations of the Debtors permitted under the DIP

Credit Agreement in each case owing to CNAI, any DIP Lender or any of their respective

affiliates, in accordance with the terms of the DIP Documents (all of the foregoing in

clauses (i) and (ii) collectively, the “DIP Obligations”), shall be deemed to have been

extended by the DIP Agent and the DIP Lenders and their affiliates in good faith, as that

term is used in section 364(e) of the Bankruptcy Code and in express reliance upon the

protections offered by section 364(e) of the Bankruptcy Code, and the DIP Agent and the

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DIP Lenders (and the successors and assigns of each) shall be entitled to the full

protection of section 364(e) of the Bankruptcy Code in the event that this Interim Order

or any provision hereof is vacated, reversed or modified, on appeal or otherwise.

(f) The Debtors have requested entry of this Interim Order pursuant to

Bankruptcy Rules 4001(b)(2) and 4001(c)(2) and SDNY Local Rule 4001-2. Absent

granting the relief set forth in this Interim Order, the Debtors’ estates will be immediately

and irreparably harmed. Consummation of the Financing and the use of Cash Collateral

in accordance with this Interim Order and the DIP Documents are therefore in the best

interests of the Debtors’ estates.

5. Authorization of the Financing, the DIP Documents and the Refinancing

of the Pre-Petition First Lien Debt.

(a) The Debtors are hereby authorized to enter into the DIP

Documents. The Borrower is hereby authorized to borrow money and obtain letters of

credit pursuant to the DIP Credit Agreement, and the Guarantors are hereby authorized to

guaranty (i) such borrowings and the Borrower’s obligations with respect to such letters

of credit and (ii) the Canadian borrowings of Kodak Canada, up to an aggregate principal

or face amount of $700,000,000 (plus interest, fees and other expenses and amounts

provided for in the DIP Documents), consisting of borrowings of up to an aggregate

principal or face amount of $450,000,000 under the Term Facility (as defined in the DIP

Credit Agreement) and $225,000,000 under the Revolving Credit Facility (as defined in

the DIP Credit Agreement), with up to an additional $25,000,000 under the Revolving

Credit Facility to be made available for borrowing by Kodak Canada, in accordance with

the terms of this Interim Order and the DIP Documents, which borrowings shall be used

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for all purposes permitted under the DIP Documents, including, without limitation, to

refinance the Pre-Petition First Lien Debt to the extent provided herein, to deposit cash

collateral, issue back-to-back letters of credit or make other arrangements satisfactory to

the holders or issuers of the Non-Assumed Pre-Petition First Lien Obligations, and,

subject to the terms and conditions contained herein, to provide working capital for the

Borrower and the Guarantors and to pay interest, fees and expenses in accordance with

this Interim Order and the DIP Documents. In addition to such loans and obligations, the

Debtors are authorized to incur overdrafts and related liabilities arising from treasury,

depository and cash management services, including any automated clearing house fund

transfers provided to or for the benefit of the Debtors by CNAI, any DIP Lender or any of

their affiliates; provided, however, that nothing herein shall require CNAI or any other

party to incur overdrafts or to provide any such services or functions to the Debtors. The

Assumed Pre-Petition First Lien Obligations shall be deemed to be issued pursuant to,

and secured under, the DIP Credit Agreement or designated as “Obligations” under the

DIP Credit Agreement and secured by the DIP Collateral, as the case may be.

(b) In furtherance of the foregoing and without further approval of this

Court, each Debtor is authorized and directed to perform all acts, to make, execute and

deliver all instruments and documents (including, without limitation, the execution or

recordation of security agreements, mortgages and financing statements), and to pay all

fees, that may be reasonably required or necessary for the Debtors’ performance of their

obligations under the Financing, including, without limitation:

(i) the execution, delivery and performance of the Loan

Documents (as defined in the DIP Credit Agreement) and any exhibits attached thereto,

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including, without limitation, the DIP Credit Agreement, the Security Agreements, the

Intercreditor Agreement (each as defined in the DIP Credit Agreement), all related

documents and any mortgages contemplated thereby (collectively, and together with the

letter agreements referred to in clause (iii) below, the “DIP Documents”);

(ii) the execution, delivery and performance of one or more

amendments to or waivers of the requirements of the DIP Documents, including the DIP

Credit Agreement for, among other things, the purpose of adding additional financial

institutions as DIP Lenders, reallocating the commitments for the Financing among the

DIP Lenders and the conversion of the Canadian Revolving Credit Facility (as defined in

the DIP Credit Agreement) into commitments or loans under a facility that provides post-

petition protections in the case of a bankruptcy filing or the commencement of a similar

proceeding with respect to a Canadian Loan Party (as defined in the DIP Credit

Agreement), in each case in such form as the Debtors, the DIP Agent and the DIP

Lenders may agree (it being understood that no further approval of the Court shall be

required for amendments to the DIP Credit Agreement (and any fees paid in connection

therewith) that do not shorten the maturity of the extensions of credit thereunder or

increase the commitments, the rate of interest or the letter of credit fees payable

thereunder). Notwithstanding any other provision hereof, without further approval of this

Court, certain amendments to the DIP Documents may be made at any time on or prior to

the 90th day after the Effective Date (as defined in the DIP Credit Agreement), if and to

the extent the DIP Agent, Lead Arranger and/or any of their affiliates as may be

appropriate to consummate the transactions contemplated, after consultation with the

Borrower, reasonably determines that such changes would be necessary in order to ensure

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a “Successful Syndication,” as contemplated by the separate letter agreements entered

into in connection with the Financing;

(iii) the non-refundable payment to the DIP Agent, the Lead

Arranger and/or the DIP Lenders, as the case may be, of the fees and any amounts due in

respect of indemnification obligations referred to in the DIP Credit Agreement (and in the

separate letter agreements between them in connection with the Financing) and

reasonable costs and expenses as may be due from time to time, including, without

limitation, fees and expenses of the professionals retained as provided for in the DIP

Documents, without the need to file retention motions or fee applications; and

(iv) the performance of all other acts required under or in

connection with the DIP Documents.

(c) Upon execution and delivery of the DIP Documents, the DIP

Documents shall constitute valid and binding obligations of the Debtors, enforceable

against each Debtor party thereto in accordance with the terms of the DIP Documents and

this Interim Order. No obligation, payment, transfer or grant of security under the DIP

Documents or this Interim Order shall be stayed, restrained, voidable, or recoverable

under the Bankruptcy Code or under any applicable law (including without limitation,

under section 502(d) of the Bankruptcy Code), or subject to any defense, reduction,

setoff, recoupment or counterclaim; provided, however, that, in the event that there is a

timely successful challenge, pursuant and subject to the limitations contained in

paragraph 18 hereof, to the validity, enforceability, extent, perfection or priority of the

Pre-Petition First Lien Debt, the Court shall have the power to unwind or otherwise

modify, after notice and hearing, the repayment of the Pre-Petition First Lien Debt or a

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portion thereof (which might include the disgorgement or re-allocation of interest, fees,

principal or other incremental consideration paid in respect of the Pre-Petition First Lien

Debt or the avoidance of liens and/or guarantees with respect to one or more of the

Debtors), as the Court shall determine.

(d) Pursuant to the terms of the Existing Intercreditor Agreement (as

defined in the DIP Credit Agreement), including sections 5.02 and 5.04 thereof, the Pre-

Petition Second Lien Noteholders and the Pre-Petition Second Lien Notes Trustee are

deemed to have consented to entry of this Interim Order, the DIP Facility, the sufficiency

of the adequate protection provided herein, and the use of Cash Collateral.

6. Superpriority Claims.

(a) Pursuant to section 364(c)(1) of the Bankruptcy Code, all of the

DIP Obligations shall constitute allowed claims against the Debtors (without the need to

file any proof of claim) with priority over any and all administrative expenses, diminution

claims (including all Adequate Protection Obligations and Junior Adequate Protection

Obligations (as defined below)) and all other claims against the Debtors, now existing or

hereafter arising, of any kind whatsoever, including, without limitation, all administrative

expenses of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code, and

over any and all administrative expenses or other claims arising under sections 105, 326,

328, 330, 331, 503(b), 506(c) (subject only to and effective upon entry of the Final

Interim Order), 507(a), 507(b), 726, 1113 or 1114 of the Bankruptcy Code, whether or

not such expenses or claims may become secured by a judgment lien or other non-

consensual lien, levy or attachment, which allowed claims shall be payable from and

have recourse to all pre- and post-petition property of the Debtors and all proceeds

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thereof, subject only to the payment of the Carve Out to the extent specifically provided

for herein (collectively, the “Superpriority Claims”). The Superpriority Claims in

respect of the DIP Obligations shall rank pari passu with each other; provided however

that the DIP Liens securing the obligations under the Revolving Credit Facility and under

the Secured Agreements (hereinafter as defined in the DIP Credit Agreement) shall have

priority with respect to the Revolving Credit Facility Collateral over the DIP Liens

securing the obligations under the Term Facility and the DIP Liens securing the

obligations under the Term Facility shall have priority with respect to the Term Facility

Collateral over the DIP Liens securing the obligations under the Revolving Credit

Facility and under the Secured Agreements, as more fully described in the DIP

Documents.

(b) For purposes hereof, the “Carve Out” means (i) all fees required

to be paid to the Clerk of the Bankruptcy Court and to the Office of the United States

Trustee pursuant to section 1930(a) of title 28 of the United States Code, (ii) all

reasonable fees and expenses incurred by a trustee under section 726(b) of the

Bankruptcy Code in an amount not exceeding $100,000 and (iii) any and all allowed and

unpaid claims of any professional of the Debtors or the statutory committee of unsecured

creditors appointed in these Cases (the “Creditors’ Committee”) whose retention is

approved by the Bankruptcy Court during the Cases pursuant to sections 327 and 1103 of

the Bankruptcy Code for unpaid fees and expenses (and the reimbursement of out-of-

pocket expenses allowed by the Bankruptcy Court incurred by any members of the

Creditors’ Committee (but excluding fees and expenses of third party professionals

employed by such Creditors’ Committee members)) incurred, subject to the terms of this

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Interim Order and the Final Order, (A) prior to the occurrence of an Event of Default (as

defined in the DIP Credit Agreement) and (B) at any time after the occurrence and during

the continuance of an Event of Default in an aggregate amount not exceeding

$10,000,000, provided that (x) the dollar limitation in this clause (iii) on fees and

expenses shall neither be reduced nor increased by the amount of any compensation or

reimbursement of expenses incurred, awarded or paid prior to the occurrence of an Event

of Default in respect of which the Carve Out is invoked or by any fees, expenses,

indemnities or other amounts paid to the DIP Agent or any DIP Lender or any of the

foregoing’s respective attorneys, advisors and agents, (y) nothing herein shall be

construed to impair the ability of any party to object to any of the fees, expenses,

reimbursement or compensation described in clauses (A) and (B) above and (z) cash or

other amounts on deposit in the L/C Cash Deposit Account (as defined in the DIP Credit

Agreement) shall not be subject to the Carve Out.

7. DIP Liens.

As security for the DIP Obligations, effective and perfected upon the date of this

Interim Order and without the necessity of the execution, recordation of filings by the

Debtors of mortgages, security agreements, control agreements, pledge agreements,

financing statements or other similar documents, or the possession or control by the DIP

Agent of, or over, any Collateral (as defined below), the following security interests and

liens are hereby granted to the DIP Agent for its own benefit and the benefit of the DIP

Lenders and the other Secured Parties (as defined in the DIP Credit Agreement) (all

property identified in clauses (a), (b) and (c) below being collectively referred to as the

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Collateral”), 2 subject, only in the event of the occurrence and during the continuance of

an Event of Default, to the payment of the Carve Out (all such liens and security interests

granted to the DIP Agent, for its benefit and for the benefit of the DIP Lenders and the

other Secured Parties, pursuant to this Interim Order and the DIP Documents, the “DIP

Liens”):

(a)