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Kodak Adopts Plan to Preserve Valuable Net Operating Losses

Tuesday, August 02, 2011

Press release from the issuing company

ROCHESTER, N.Y., – Eastman Kodak Company today announced that its Board of Directors has adopted a Net Operating Loss (NOL) Shareholder Rights Agreement designed to preserve its substantial tax assets.

As of December 31, 2010, Kodak had tax attributes, including net operating losses and tax credit carry-forwards, of approximately $2.9 billion pre-tax. Unless otherwise restricted, Kodak can utilize these tax attributes in certain circumstances to offset future U.S. taxable income, including in connection with gains that may be generated from the process the company announced on July 20, 2011, of exploring strategic alternatives with respect to its digital imaging patent portfolios. The company noted that the NOL Shareholder Rights Agreement serves the interests of all stockholders as it is designed to protect the use of its substantial deferred tax assets to offset future tax liabilities, and to maximize the company's ability to explore strategic alternatives related to its digital imaging patent portfolios.

Kodak's ability to use the tax attributes would be substantially limited if there were an "ownership change" as defined under Section 382 of the U.S. Internal Revenue Code and related U.S. Treasury regulations. In general, an ownership change would occur if Kodak's "5-percent shareholders," as defined under Section 382, collectively increase their ownership in Kodak by more than 50 percentage points over a rolling three-year period. Accordingly, the NOL Rights Agreement has a three-year term, although the Kodak Board of Directors has determined to review the plan periodically in light of developments at the company, including in connection with the use and value of the NOLs and the status of the patent portfolio strategic initiative.

The Kodak Board of Directors declared a non-taxable dividend of one preferred share purchase right for each outstanding share of its common stock. The preferred share purchase rights will be distributed to stockholders of record as of August 11, 2011, but would only be activated if triggered by the Rights Agreement. Effective today, if any person or group acquires 4.9 percent or more of the outstanding shares of common stock, there would be a triggering event under the Rights Agreement resulting in significant dilution in the ownership interest of such person or group in Kodak stock. Stockholders who currently beneficially own 4.9 percent or more of the outstanding shares of common stock will not trigger the preferred share purchase rights unless they acquire additional shares.

The issuance of the preferred share purchase rights will not affect Kodak's reported earnings per share and is not taxable to Kodak or its stockholders.

Wachtell, Lipton, Rosen & Katz is acting as Kodak's legal counsel and Lazard LLC is acting as financial advisor.

Additional information regarding the Rights Agreement will be contained in a Form 8-K and in aRegistration Statement on Form 8-A that Kodak is filing with the Securities and Exchange Commission.

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