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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File No.1-14050
LEXMARK INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3074422
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Lexmark Centre Drive
740 New Circle Road NW
Lexington, Kentucky 40550
(Address of principal executive offices) (Zip Code)
(606) 232-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Class A common stock, $.01 par value New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
The number of shares outstanding (excluding shares held in treasury) of each of
the issuer's classes of common stock, as of the close of business on July 25,
1997:
Class Number of Shares
------------------------------------ ----------------
Class A common stock; $.01 par value 70,361,805
Class B common stock; $.01 par value 1,140,723
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<PAGE>
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
INDEX
Page of
Form 10-Q
---------
PART I
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited)
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996......2
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (Unaudited)
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996.....................3
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996......................4
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited).....5-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (Unaudited).....................8-11
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................12
1
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues $556.3 $555.3 $1,139.7 $1,143.1
Cost of revenues 362.9 383.1 746.5 788.5
------- ------- -------- --------
Gross profit 193.4 172.2 393.2 354.6
Research and development 31.8 30.5 62.4 63.5
Selling, general and administrative 104.1 88.8 217.6 189.1
Amortization of intangibles - - - 5.1
------- ------- -------- --------
Operating expenses 135.9 119.3 280.0 257.7
------- ------- -------- --------
Operating income 57.5 52.9 113.2 96.9
Interest expense, net 1.4 4.7 6.3 10.5
Amortization of deferred financing
costs and other 2.0 1.6 4.4 3.8
------- ------- -------- --------
Earnings before income
taxes and extraordinary
item 54.1 46.6 102.5 82.6
Provision for income taxes 19.8 15.8 37.5 30.2
------- ------- -------- --------
Earnings before
extraordinary item 34.3 30.8 65.0 52.4
Extraordinary loss on extinguishment
of debt (net of related tax
benefit of $8.4) - - (14.0) -
------- ------- -------- --------
Net earnings $ 34.3 $ 30.8 $ 51.0 $ 52.4
======= ======= ======== ========
Earnings per common and common
equivalent share, primary and
fully diluted:
Before extraordinary item $ 0.45 $ 0.40 $ 0.85 $ 0.69
Extraordinary loss - - (0.18) -
------- ------- -------- --------
Net earnings $ 0.45 $ 0.40 $ 0.67 $ 0.69
======= ======= ======== ========
Shares used in per share
calculation 76.0 75.6 76.6 75.5
======= ======= ======== ========
See notes to consolidated condensed financial statements.
2
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LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(In Millions, Except Share Amounts)
(Unaudited)
June 30 December 31
1997 1996
------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 39.1 $ 119.3
Trade receivables, net of allowance of $18 275.7 304.7
Inventories 313.4 271.0
Prepaid expenses and other current assets 69.0 70.1
-------- --------
Total current assets 697.2 765.1
Property, plant and equipment, net 422.0 434.1
Other assets 19.6 22.3
-------- --------
Total assets $1,138.8 $1,221.5
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 69.5 $ 2.1
Current maturities of long-term debt 12.1 -
Accounts payable 226.8 197.2
Accrued liabilities 179.1 222.0
-------- --------
Total current liabilities 487.5 421.3
Long-term debt 25.4 163.2
Other liabilities 92.5 96.7
-------- --------
Total liabilities 605.4 681.2
Stockholders' equity:
Preferred stock, $.01 par value,
1,600,000 shares authorized,
no shares issued and outstanding
Common stock $.01 par value: - -
Class A, 160,000,000 shares
authorized; 70,108,382 and
70,213,603 outstanding 0.7 0.7
Class B, 10,000,000 share
authorized; 1,307,923 and
2,446,523 outstanding - -
Capital in excess of par 526.8 519.3
Retained earnings 70.8 19.8
Accumulated translation adjustment (15.4) 0.5
Treasury stock, at cost, 2,093,514 shares (49.5) -
-------- --------
Total stockholders' equity 533.4 540.3
-------- --------
Total liabilities and stockholders'
equity $1,138.8 $1,221.5
======== ========
See notes to consolidated condensed financial statements.
3
<PAGE>
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Six Months Ended
June 30
----------------
1997 1996
---- ----
Cash flows from operating activities:
Net earnings $ 51.0 $ 52.4
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities:
Depreciation and amortization 37.2 34.9
Extraordinary loss on extinguishment of debt 22.4 -
Deferred taxes 2.3 (7.8)
Other non-cash charges to operations 9.8 7.1
------ ------
122.7 86.6
Change in assets and liabilities:
Trade receivables 4.4 (28.9)
Trade receivables programs 24.6 (13.9)
Inventories (42.4) (29.3)
Accounts payable 29.6 (1.5)
Accrued liabilities (42.9) (58.6)
Other assets and liabilities (19.8) (12.5)
------ ------
Net cash provided by (used for) operating
activities 76.2 (58.1)
------ ------
Cash flows from investing activities:
Purchases of property, plant and equipment (31.2) (69.5)
Proceeds from sale of property, plant and equipment 0.2 2.6
------ ------
Net cash used for investing activities (31.0) (66.9)
------ ------
Cash flows from financing activities:
Increase in short-term debt 67.4 14.0
Proceeds from long-term debt 0.2 -
Principal payments on long-term debt (125.5) (20.0)
Charges related to extinguishment of debt (22.4) -
Purchase of treasury stock (49.5) -
Exercise of stock options and warrants 6.0 9.7
------ ------
Net cash provided by (used for) financing
activities (123.8) 3.7
------ ------
Effect of exchange rate changes on cash (1.6) ( 0.9)
------ ------
Net decrease in cash and cash equivalents (80.2) (122.2)
Cash and cash equivalents - beginning of period 119.3 150.5
------ ------
Cash and cash equivalents - end of period $ 39.1 $ 28.3
====== ======
See notes to consolidated condensed financial statements.
4
<PAGE>
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying interim financial statements are unaudited; however, in
the opinion of the Company's management, all adjustments (which comprise
only normal and recurring accruals) necessary for a fair presentation of
the interim financial results have been included. The results for the
interim periods are not necessarily indicative of results to be expected
for the entire year. These financial statements and notes should be read
in conjunction with the Company's audited annual consolidated financial
statements for the year ended December 31, 1996.
Net earnings per common and common equivalent share are computed by using
the weighted-average number of common shares and common equivalent shares
outstanding during each period. Common equivalent shares include stock
options, warrants, restricted stock and deferred stock units. Primary and
fully diluted earnings per share do not differ by a material amount.
2. INVENTORIES
(Dollars in millions)
Inventories consist of the following:
June 30 December 31
1997 1996
------- -----------
Work in process $153.6 $144.6
Finished goods 159.8 126.4
------ ------
$313.4 $271.0
====== ======
3. LONG-TERM DEBT
In March 1997, the Company prepaid its $120 million 14.25 percent senior
subordinated notes due in 2001. The prepayment resulted in an
extraordinary charge of $22.4 million ($14.0 million net of tax benefit)
caused by a prepayment premium and other fees.
In March 1997, the Company entered into three-year interest rate swaps
with a total notional amount of $60 million, whereby the Company pays
interest at a fixed rate of approximately 6.5 percent and receives
interest at a floating rate equal to the three-month London Interbank
Offered Rate (LIBOR). The swaps serve as a hedge of financings based on
floating interest rates.
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4. STOCKHOLDERS' EQUITY
In April 1996, the Company's board of directors authorized the repurchase
of up to $50 million of its Class A common stock. In May 1997, the
Company's board of directors authorized the repurchase of an additional
$150 million of its Class A common stock. The repurchase authority allows
the Company at management's discretion to selectively repurchase its
stock from time to time in the open market or in privately negotiated
transactions depending upon market price and other factors. As of June
30, 1997, the Company had repurchased 2,093,514 shares in the open market
at prices ranging from $21.25 to $27.50 for an aggregate cost of
approximately $50 million.
5. DERIVATIVE FINANCIAL INSTRUMENTS
Instruments used as hedges must be effective at reducing the risk
associated with the exposure being hedged and must be designated as a
hedge at the inception of the contract. Accordingly, changes in market
values of hedge instruments must be highly correlated with changes in
market values of underlying hedged items both at inception of the hedge
and over the life of the hedge contract. Any instrument not qualifying as
a hedge or designated but ineffective as a hedge is marked to market and
recognized in earnings immediately. Gains and losses from terminated
forward currency exchange contracts and interest rate swaps are deferred
and recognized consistent with the terms of the underlying transaction.
6. NEW ACCOUNTING STANDARDS
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS
No. 125 provides standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings and
addresses programs such as the Company's trade receivables programs in
the U.S. and Germany. With the adoption of SFAS No. 125, the Company
continues to account for the transfer of receivables under both programs
as sale transactions. In response to SFAS No. 125 for purposes of the
U.S. program, the Company formed and sells its receivables to a wholly
owned subsidiary, Lexmark Receivables Corporation ("LRC"), which then
sells the receivables to an unrelated third party. LRC is a separate
legal entity with its own separate creditors who, in a liquidation of
LRC, would be entitled to be satisfied out of LRC's assets prior to any
value in LRC becoming available for equity claims of an LRC stockholder.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, Earnings per Share. This statement is effective for
the Company's 1997 annual financial statements. Restatement of all prior
period earnings per share ("EPS") data presented is required. This
statement replaces the presentation of primary EPS and fully diluted EPS
with a presentation of basic EPS and diluted EPS, respectively. Basic EPS
were $0.48 for the second quarter of 1997, compared to $0.42 for the
second quarter of 1996. Diluted EPS were $0.45 for the quarter ended June
30, 1997, compared to $0.40 for the quarter ended June 30, 1996. Basic
EPS were $0.71, $0.90 before extraordinary item, for the first six months
of 1997, compared to $0.74 for the first six months of 1996. Diluted EPS
were $0.67, $0.85 before extraordinary item, for the six months ended
June 30, 1997, compared to $0.69 for the six months ended June 30, 1996.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income, effective for fiscal years beginning after December 15, 1997.
This statement requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. This statement does not require
a specific format for that financial statement but requires that an
entity display an amount representing total comprehensive income for the
period in that financial statement. This statement requires that an
entity classify
6
<PAGE>
items of other comprehensive income by their nature in a financial
statement. For example, other comprehensive income may include foreign
currency items, minimum pension liability adjustments, and unrealized
gains and losses on certain investments in debt and equity securities. In
addition, the accumulated balance of other comprehensive income must be
displayed separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.
Reclassification of financial statements for earlier periods, provided
for comparative purposes, is required. The Company has not determined the
impact that the adoption of this new accounting standard will have on its
consolidated financial statements. The Company will adopt this accounting
standard on January 1, 1998, as required.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, effective for fiscal years
beginning after December 15, 1997. This statement establishes standards
for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in
interim financial reports issued to stockholders. It also establishes
standards for related disclosures about products and services, geographic
areas and major customers. Operating segments are defined as components
of an enterprise about which separate financial information is available
that is evaluated regularly by the enterprise's chief operating decision
maker in deciding how to allocate resources and in assessing performance.
This statement requires reporting segment profit or loss, certain
specific revenue and expense items and segment assets. It also requires
reconciliations of total segment revenues, total segment profit or loss,
total segment assets, and other amounts disclosed for segments to
corresponding amounts reported in the consolidated financial statements.
Restatement of comparative information for earlier periods presented is
required in the initial year of application. Interim information is not
required until the second year of application, at which time comparative
information is required. The Company has not determined the impact that
the adoption of this new accounting standard will have on its
consolidated financial statement disclosures. The Company will adopt this
accounting standard on January 1, 1998, as required.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
(Unaudited)
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
Results of Operations
- ---------------------
Consolidated revenues for the three months ended June 30, 1997 were $556
million, a slight increase from the same period of 1996. Printers and associated
supplies revenues were $444 million, an increase of 4 percent. Revenues from
other office imaging products were $112 million, a decrease of 12 percent from
1996. Total U.S. revenues were down $24 million or 8 percent, and international
revenues were up $25 million or 10 percent.
For the six months ended June 30, 1997, consolidated revenues were $1,140
million, a slight decrease from the same period of 1996. Printers and associated
supplies revenues were $900 million, an increase of 6 percent from 1996.
Revenues from other office imaging products were $240 million, a decrease of 9
percent from 1996. Excluding the keyboard business in 1996, revenues for the
first six months of 1997 were up $30 million or 3 percent from 1996. Total U.S.
revenues were down $54 million or 9 percent, and international revenues were up
$51 million or 10 percent.
The Company made two major product announcements during the second quarter of
1997 with the Optra S family of monochrome and color laser printers and the 7000
Color Jetprinter. Even though the product line was in transition, printer
volumes grew at double-digit rates and printer supplies revenues have increased
compared to the second quarter of 1996 due to the continued growth of the
Company's installed printer base. However, revenues, operating income and
earnings were affected by lower prices and price protection to the Company's
product distribution channels on Lexmark's predecessor printers held in their
inventory. In the second quarter, competitors reduced prices up to 20 percent on
their laser printers. Prices were reduced on the Company's predecessor Optra
product line which accounted for the majority of the network laser printers sold
in the second quarter. Revenues were also adversely affected by lower foreign
currency rates. Unfavorable foreign currency translation effects on revenue were
$22 million and $42 million for the quarter and six months ended June 30, 1997,
respectively, due to the strengthening of the U.S. dollar.
Consolidated gross profit was $193 million for the three months ended June 30,
1997, an increase of 12 percent from the same period of 1996. This was mainly
driven by margin improvements in printers and associated supplies. Gross profit
as a percentage of revenues for the second quarter of 1997 increased to 35
percent from 31 percent in 1996. Gross profit attributable to printers and
associated supplies for the second quarter 1997 increased 15 percent over the
second quarter of 1996, principally due to growth in higher margin associated
consumable supplies and reductions in product costs.
For the six months ended June 30, 1997, consolidated gross profit was $393
million, an increase of 11 percent over the corresponding period of 1996. Gross
profit as a percentage of revenues increased to 35 percent from 31 percent in
1996. Gross profit attributable to printers and associated supplies increased 17
percent, primarily due to growth in associated consumable supplies and product
cost reductions.
Total operating expenses increased 14 percent and 9 percent in the second
quarter and first six months of 1997, respectively, compared to the same periods
of 1996. Expenses as a percentage of revenues for the quarter were 24 percent
compared to 22 percent for the corresponding period of 1996. Expenses as a
percentage of revenues for the first six months were 25 percent compared to 23
percent for the same period of 1996. These increases versus 1996 principally
reflect increased marketing and sales efforts in support of new product
announcements and planned marketing investments to drive printer growth.
8
<PAGE>
Consolidated operating income was $58 million for the second quarter of 1997 and
$113 million for the six months ended June 30, 1997, an increase of 9 percent
and 17 percent, respectively, over the corresponding period of 1996. This
increase was due principally to growth in associated consumable supplies,
product cost reductions and the absence of amortization of intangibles, which
were fully amortized in the first quarter of 1996.
Net earnings for the second quarter of 1997 were $34 million, up 11 percent
compared to the second quarter of 1996. This increase was primarily due to the
improved operating performance and lower interest expense resulting from lower
debt outstanding and lower interest rates. The income tax provision was
approximately 37 percent of earnings before tax in the second quarter of 1997 as
compared to 34 percent in the same period of 1996. Net earnings per share were
$0.45 per share for the second quarter of 1997, compared to $0.40 per share for
the second quarter of 1996, an increase of 11 percent.
Earnings before extraordinary item were $65 million for the first six months of
1997, up 24 percent over the corresponding period of 1996, principally due to
the operating performance and lower interest expense as a result of lower debt
levels and lower interest rates. The income tax provision was approximately 37
percent of earnings before tax for the first six months of 1997 and 1996.
Earnings per share before extraordinary item were $0.85 for the six months ended
June 30, 1997, compared to $0.69 for the same period of 1996, an increase of 22
percent.
Net earnings for the first six months of 1997 were $51 million, a decrease of 3
percent compared to the same period of 1996, due to an extraordinary charge of
$22 million ($14 million net of tax benefit) caused by the prepayment premium
and other fees associated with the prepayment of the Company's senior
subordinated notes in the first quarter of 1997. Net earnings per share were
$0.67 for the six months ended June 30, 1997, compared to $0.69 for the same
period of 1996, a decrease of 4 percent.
Looking forward, it is anticipated that operating income margins will be
maintained in the second half of 1997 compared to the first half. The previously
mentioned new product introductions of the Optra S family of monochrome and
color laser printers and the 7000 Color Jetprinter, along with the Company's
3000 Color Jetprinter and the 1000 Color Jetprinter, are expected to contribute
to continued growth in printer unit volumes and drive profit growth from
consumables. It is expected that consumables revenues will also be aided by the
new high-yield Optra S "Prebate" laser cartridge marketing program. The Prebate
cartridge provides Lexmark customers with an up-front discount of about $30
compared to the price of a standard cartridge. The Prebate cartridge is sold
with a license for a one-time use and empty Prebate cartridges can be returned
easily to Lexmark for recycling at no cost to the consumer.
Financial Condition
- -------------------
The Company's financial position remains strong, with lower debt levels than at
December 31, 1996, allowing the prepayment of senior subordinated notes in the
principal amount of $120 million in March 1997. At June 30, 1997, the Company
had outstanding $70 million of short-term debt and $37 million of long-term
debt, $12 million of which is due within the next year. The debt to total
capital ratio was 17 percent at the end of the second quarter of 1997 compared
to 23 percent at December 31, 1996.
In March 1997, the Company entered into three-year interest rate swaps with a
total notional amount of $60 million, whereby the Company pays interest at a
fixed rate of approximately 6.5 percent and receives interest at a floating rate
equal to the three-month London Interbank Offered Rate (LIBOR). The swaps serve
as a hedge of financings based on floating interest rates.
Cash provided by operating activities for the six months ended June 30, 1997 was
$76 million compared to $58 million cash used for operating activities for the
same period of 1996, primarily reflecting the sale of receivables under the
trade accounts receivable programs, stronger earnings before extraordinary loss
and favorable changes in working capital accounts.
9
<PAGE>
Capital expenditures were $31 million for the six months ended June 30, 1997
compared to $70 million for the comparable period of 1996. Capital expenditures
in the first half of 1996 were higher due to the Company's expansion of its
inkjet printer products manufacturing capacity. These projects were
substantially completed by the end of 1996, and it is anticipated that capital
expenditures for 1997 will be less than $80 million and will be funded primarily
through cash from operations.
In April 1996, the Company's board of directors authorized the repurchase of up
to $50 million of its Class A common stock. In May 1997, the Company's board of
directors authorized the repurchase of an additional $150 million of its Class A
common stock. The repurchase authority allows the Company at management's
discretion to selectively repurchase its stock from time to time in the open
market or in privately negotiated transactions depending upon market price and
other factors. As of June 30, 1997, the Company had repurchased 2,093,514 shares
in the open market at prices ranging from $21.25 to $27.50 for an aggregate cost
of approximately $50 million.
New Accounting Standards
- ------------------------
Effective January 1, 1997, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 125, Accounting for the Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. The adoption of this
accounting standard did not have a material impact on the Company's financial
position, results of operations or liquidity.
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, Earnings per Share. This statement establishes standards for computing
and presenting earnings per share ("EPS") and generally applies to all publicly
held companies. This statement replaces the presentation of primary EPS and
fully diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing earnings
available to common stockholders by the weighted average number of common shares
outstanding for the period. Similar to fully diluted EPS, diluted EPS reflects
the potential dilution of securities that could share in the earnings. This
statement is effective for the Company's financial statements for the year ended
December 31, 1997. Restatement of all prior period EPS data presented is
required. EPS calculated under SFAS No. 128 are not expected to be materially
different from EPS calculated under the current method.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
effective for fiscal years beginning after December 15, 1997. This statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. This statement does not require a specific format for that financial
statement but requires that an entity display an amount representing total
comprehensive income for the period in that financial statement. This statement
requires that an entity classify items of other comprehensive income by their
nature in a financial statement. For example, other comprehensive income may
include foreign currency items, minimum pension liability adjustments, and
unrealized gains and losses on certain investments in debt and equity
securities. In addition, the accumulated balance of other comprehensive income
must be displayed separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.
Reclassification of financial statements for earlier periods, provided for
comparative purposes, is required. The Company has not determined the impact
that the adoption of this new accounting standard will have on its consolidated
financial statements. The Company will adopt this accounting standard on January
1, 1998, as required.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, effective for fiscal years beginning after
December 15, 1997. This statement establishes standards for reporting
information about operating segments in annual financial statements and requires
selected information about operating segments in interim financial reports
issued to stockholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. Operating
segments are defined as
10
<PAGE>
components of an enterprise about which separate financial information is
available that is evaluated regularly by the enterprise's chief operating
decision maker in deciding how to allocate resources and in assessing
performance. This statement requires reporting segment profit or loss, certain
specific revenue and expense items and segment assets. It also requires
reconciliations of total segment revenues, total segment profit or loss, total
segment assets, and other amounts disclosed for segments to corresponding
amounts reported in the consolidated financial statements. Restatement of
comparative information for earlier periods presented is required in the initial
year of application. Interim information is not required until the second year
of application, at which time comparative information is required. The Company
has not determined the impact that the adoption of this new accounting standard
will have on its consolidated financial statement disclosures. The Company will
adopt this accounting standard on January 1, 1998, as required.
Factors That May Affect Future Results and Information Concerning Forward -
- ---------------------------------------------------------------------------
Looking Statements
- ------------------
Certain of the statements contained in this Report may be considered
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and a number
of factors, including, without limitation, the factors set forth below, could
adversely affect the Company's future operating results or cause the Company's
actual results to differ materially from those in the forward-looking
statements.
The markets for printers and associated supplies are highly competitive,
especially with respect to pricing and the rapid introduction of new
technologies and products offering improved features and functionality. The
Company's major competitors, all of which have significantly greater financial,
marketing and technological resources than the Company, have regularly lowered
prices on their laser and inkjet printers and may continue to do so. The Company
has also regularly lowered prices on its printers and may continue to do so.
These factors, as well as price protection measures, could result in lower
profitability for the Company and jeopardize the Company's ability to grow or
maintain its market share.
In addition, the life cycles of the Company's products, as well as delays in
product development and manufacturing, variations in the cost of component
parts, delays in customer purchases of existing products in anticipation of new
product introductions by the Company or its competitors and market acceptance of
new products and programs, may cause a build up in the Company's inventories,
make the transition from current products to new products difficult and could
adversely affect the Company's future operating results. Further, some of the
Company's newly developed products replace or compete with some of the Company's
existing products. The competitive pressure to develop technology and products
also could cause significant changes in the level of the Company's operating
expenses.
Revenues derived from international sales, including exports from the United
States, make up about half of the Company's revenues. Accordingly, the Company's
future results could be adversely affected by a variety of factors, including
foreign currency exchange rate fluctuations, trade protection measures, changes
in a specific country's or region's political or economic conditions and
unexpected changes in regulatory requirements. Moreover, margins on
international sales tend to be lower than those on domestic sales.
Factors unrelated to the Company's operating performance, including the
Company's ability to obtain patents, copyrights and trademarks, maintain trade
secret protection and operate without infringing the proprietary rights of
others, as well as expenses incurred by the Company in enforcing its
intellectual property rights; economic and business conditions, both national
and international; the loss of significant customers or suppliers; changes in
and execution of the Company's business strategy, including the impact of
acquisitions; and trading activity in the Company's common stock, particularly
in light of the substantial number of shares owned by the original investor
group that are available for resale, also may affect the Company's results as
well as its common stock price.
11
<PAGE>
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The information required to be reported for the Company's Annual
Meeting of Stockholders held on May 2, 1997, was previously reported by
the Company in its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
A list of exhibits is set forth in the Exhibit Index found on
page 14 of this Report.
(b) Reports on Form 8-K:
There were no Reports on Form 8-K filed during the quarter ended
June 30, 1997.
12
<PAGE>
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, both on behalf of the registrant and in
his capacity as principal accounting officer of the registrant.
Lexmark International Group, Inc.
(Registrant)
Date: August 7, 1997 By: /s/ David L. Goodnight
-------------------------- -----------------------
David L. Goodnight
Corporate Controller
(Principal Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
4.1 Amendment No. 3, dated as of March 14, 1997, to the U.S. Credit
Agreement dated as of April 21, 1995 (the "U.S. Credit Agreement"),
among Lexmark International, Inc. ("International"), the Company, the
Lenders listed therein ("Lenders") and Morgan Guaranty Trust Company
of New York, as agent (the "Agent").
4.2 Amendment No. 4, dated as of May 1, 1997, to the U.S. Credit
Agreement, among International, the Company, the Lenders and the
Agent.
10.1 Purchase Agreement dated as of March 31,1997 between International,
as Originator, and Lexmark Receivables Corporation ("LRC"), as Buyer.
10.2 Receivables Purchase Agreement dated as of March 31,1997 among LRC, as
Seller, International, as Servicer and in its individual capacity,
Delaware Funding Corporation, as Buyer, and Morgan Guaranty Trust
Company of New York, as Administrative Agent.
10.3 Lexmark International Group, Inc. Nonemployee Director Stock Plan,
Amended and Restated Effective May 2, 1997, as amended by Amendment
No. 1 thereto dated as of July 31, 1997. *
10.4 Lexmark International Group, Inc. Stock Incentive Plan, Amended and
Restated Effective May 2, 1997, as amended by Amendment No. 1 thereto
dated as of July 31, 1997.*
27 Financial Data Schedule.
* Indicates management contract or compensatory plan, contract or arrangement.
14
[EXECUTION COPY]
AMENDMENT NO. 3 TO AMENDED AND RESTATED
CREDIT AGREEMENTS
AMENDMENT dated as of March 14, 1997 among LEXMARK INTERNATIONAL, INC.
("Lexmark"), LEXMARK INTERNATIONAL GROUP, INC. ("Holding", formerly known as
Lexmark Holding, Inc.), LEXMARK CANADA INC. ("Lexmark Canada"), LEXMARK
INTERNATIONAL, S.N.C. ("Lexmark France"), LEXMARK DEUTSCHLAND GMBH ("Lexmark
Germany"), LEXMARK INTERNATIONAL B.V. ("Lexmark Netherlands"), the CREDIT
PROVIDERS listed on the signature pages hereof (including BARCLAYS BANK PLC,
BANQUE NATIONALE DE PARIS, CHEMICAL BANK, DEUTSCHE BANK AG, NEW YORK BRANCH, THE
MITSUBISHI BANK, LIMITED, and NATIONSBANK OF TEXAS, N.A., as Co-Agents) and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, Lexmark, Holding, the Lenders listed on the signature pages
thereof and the Agent have heretofore entered into an Amended and Restated
Secured United States Credit Agreement dated as of April 21, 1995 (as amended by
Amendment No. 1 thereto dated as of September 26, 1995; Amendment No. 2 thereto
dated as of April 3, 1996 and the Amended and Restated Consent and Intercreditor
Agreement dated as of December 12, 1996 among Lexmark, Lexmark Canada, Lexmark
France, Lexmark Germany, Lexmark Netherlands, Lexmark Receivables Corporation,
Delaware Funding Corporation, Morgan Guaranty Trust Company of New York, as
Administrative Agent, the Credit Providers, the Agent and the Security Agent
(collectively, the "Amendments") the "U.S. Credit Agreement"); and
WHEREAS, Lexmark, Lexmark Canada, the Lenders listed on the signature pages
thereof and the Agent have heretofore entered into an Amended and Restated
Credit Agreement dated as of April 21, 1995 (as amended by the Amendments, the
"Canadian Credit Agreement"); and
WHEREAS, Lexmark, Lexmark France, the Lenders listed on the signature pages
thereof and the Agent have heretofore entered into an Amended and Restated
Credit Agreement dated as of April 21, 1995 (as amended by the Amendments, the
"French Credit Agreement"); and
<PAGE>
WHEREAS, Lexmark, Lexmark Germany, the Lenders listed on the signature
pages thereof and the Agent have heretofore entered into an Amended and Restated
Credit Agreement dated as of April 21, 1995 (as amended by the Amendments, the
"German Credit Agreement"); and
WHEREAS, Lexmark, Lexmark Netherlands, the Lenders listed on the signature
pages thereof and the Agent have heretofore entered into an Amended and Restated
Credit Agreement dated as of April 21, 1995 (as amended by the Amendments, the
"Netherlands Credit Agreement" and, together with the U.S. Credit Agreement, the
Canadian Credit Agreement, the French Credit Agreement and the German Credit
Agreement, the "Credit Agreements"); and
WHEREAS, the parties hereto desire to amend the Credit Agreements as set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References.
------------------------ Unless otherwise specifically defined
herein, each term used herein which is defined in a Credit Agreement shall have
the meaning assigned to such term therein. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in a
Credit Agreement shall from and after the date hereof refer to such Credit
Agreement as amended hereby.
SECTION 2. Amendment of Definition of "Euro-Dollar Margin".
----------------------------------------------- Section 2.07 of
the U.S. Credit Agreement is hereby amended by deleting the definition of
"Euro-Dollar Margin" and replacing it with the following:
"'Euro-Dollar Margin', means (i) .45% per annum for any day on which Level
I Status exists, (ii) .70% per annum for any day on which Level II Status
exists, (iii) .95% per annum for any day on which Level III Status exists, (iv)
1.2% per annum for any day on which Level IV Status exists and (v) 1.7% per
annum for any day on which Level V Status exists. Changes in the Euro-Dollar
Margin, if any, shall be effective upon delivery of the financial information
required by Section 1(a) or (b) of Schedule III, as applicable."
SECTION 3. Amendment of Definition of "Commitment Fee Rate".
------------------------------------------------ Section 2.09
of the U.S. Credit Agreement is hereby amended by deleting the definition of
"Commitment Fee Rate" and replacing it with the following:
"'Commitment Fee Rate' means (i) .15% per annum for any day on which
Level I Status exists, (ii) .20% per annum for any day on which Level
II Status exists, (iii) .325% per annum for any day on which Level III
2
<PAGE>
Status exists and (iv) .45% per annum for any day on which Level IV or
Level V Status exists. Changes in the Commitment Fee Rate, if any,
shall be effective upon delivery of the financial information required
by Section 1(a) or (b) of Schedule III, as applicable".
SECTION 4. Governing Law.
------------- This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 5. Counterparts; Effectiveness.
--------------------------- This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective as of the date when the Agent shall have
received duly executed counterparts hereof signed by Lexmark, Holding, Lexmark
Canada, Lexmark France, Lexmark Germany, Lexmark Netherlands, all of the Lenders
and the Agent (or, in the case of any party as to which an executed counterpart
shall not have been received, the Agent shall have received telegraphic, telex
or other written confirmation from such party of execution of a counterpart
hereof by such party).
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWER: LEXMARK INTERNATIONAL, INC.
By /s/ Gary E. Morin
--------------------------
Title: VP & CFO
GUARANTOR: LEXMARK INTERNATIONAL GROUP, INC.
By /s/ Gary E. Morin
--------------------------
Title: VP & CFO
LEXMARK CANADA: LEXMARK CANADA INC.
By /s/ Gary E. Morin
--------------------------
Title: VP & CFO
LEXMARK FRANCE: LEXMARK INTERNATIONAL, S.N.C.
By /s/ Gary E. Morin
--------------------------
Title: VP & CFO
LEXMARK GERMANY: LEXMARK DEUTSCHLAND GmbH
By /s/ Gary E. Morin
--------------------------
Title: VP & CFO
LEXMARK NETHERLANDS: LEXMARK INTERNATIONAL B.V.
By /s/ Gary E. Morin
--------------------------
Title: VP & CFO
4
<PAGE>
LENDERS: MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ George J. Stapleton
--------------------------
Title: Vice President
CO-AGENTS
---------
BARCLAYS BANK PLC
By /s/ John C. Livingston
--------------------------
Title: Director
BANQUE NATIONALE DE PARIS
By /s/ Serge Desrayaud
--------------------------
Title: Vice President/Team Leader
By /s/ Pamela Lucash
--------------------------
Title: Assistant Treasurer
THE CHASE MANHATTAN BANK
By /s/ Ann B. Kearns
--------------------------
Title: Vice President
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By /s/ Belinda J. Wheeler
--------------------------
Title: Assistant Vice President
By /s/ Hans-Josef Thiele
--------------------------
Title: Vice President
5
<PAGE>
THE BANK OF TOYKO-MITSUBISHI, LIMITED
Successor to merger to
THE MITSUBISHI BANK, LIMITED
By /s/ Nicholas J. Campbell
--------------------------
Title: Attorney-in-Fact
NATIONSBANK OF
TEXAS, N.A.
By /s/ Brent W. Mellow
--------------------------
Title: Senior Vice President
OTHER LENDERS
-------------
BANK OF AMERICA ILLINOIS
By /s/ Steve A. Aronowitz
--------------------------
Title: Managing Director
THE BANK OF NOVA SCOTIA
By /s/ John Hopmans
--------------------------
Title: Senior Relationship Manager
BANK OF MONTREAL
By /s/ Kanu Modi
--------------------------
Title: Director
ABN AMRO BANK, N.V.
By /s/ Andre Nel
--------------------------
Title: Senior Vice President &
Managing Director - Pittsburgh
By /s/ Kathryn C. Toth
--------------------------
Title: Group Vice President &
Operational Manager
6
<PAGE>
THE BANK OF NEW YORK
By /s/ Edward Dougherty
--------------------------
Title: Vice President
FLEET NATIONAL BANK
Successor by merger to
Fleet Bank of Massachusetts, N.A.
By /s/ Frank H. Banesh
--------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
By /s/ Brennan T. Danile
--------------------------
Title: Corporate Banking Officer
NBD BANK
By /s/ Randall K. Stevens
--------------------------
Title: First Vice President
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By /s/ Seiichiro Ino
--------------------------
Title: Vice President
FIFTH THIRD BANK
By Signature on File
--------------------------
Title: Vice President
7
<PAGE>
WESTPAC BANKING CORPORATION
By /s/ Kate V. Perry
--------------------------
Title: Assistant Vice President
THE YASUDA TRUST AND BANKING
COMPANY, LIMITED
NEW YORK BRANCH
By /s/ Rohn Laudenschlager
--------------------------
Title: Senior Vice President
AGENT: MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ George J. Stapleton
--------------------------
Title: Vice President
8
AMENDMENT NO. 4 TO AMENDED AND RESTATED
CREDIT AGREEMENTS
AMENDMENT dated as of May 1, 1997 among LEXMARK INTERNATIONAL, INC.
("Lexmark"), LEXMARK INTERNATIONAL GROUP, INC. ("Holding", formerly known as
Lexmark Holding, Inc.), LEXMARK CANADA INC. ("Lexmark Canada"), LEXMARK
INTERNATIONAL, S.N.C. ("Lexmark France"), LEXMARK DEUTSCHLAND GMBH ("Lexmark
Germany"), LEXMARK INTERNATIONAL B.V. ("Lexmark Netherlands"), the CREDIT
PROVIDERS listed on the signature pages hereof (including BARCLAYS BANK PLC,
BANQUE NATIONALE DE PARIS, CHEMICAL BANK, DEUTSCHE BANK AG, NEW YORK BRANCH, THE
MITSUBISHI BANK, LIMITED, and NATIONSBANK OF TEXAS, N.A., as Co-Agents) and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, Lexmark, Holding, the Lenders listed on the signature pages
thereof and the Agent have heretofore entered into an Amended and Restated
Secured United States Credit Agreement dated as of April 21, 1995 (as amended,
the "U.S. Credit Agreement"); and
WHEREAS, Lexmark, Lexmark Canada, the Lenders listed on the signature pages
thereof and the Agent have heretofore entered into an Amended and Restated
Credit Agreement dated as of April 21, 1995 (as amended by the Amendments, the
"Canadian Credit Agreement"); and
WHEREAS, Lexmark, Lexmark France, the Lenders listed on the signature pages
thereof and the Agent have heretofore entered into an Amended and Restated
Credit Agreement dated as of April 21, 1995 (as amended, the "French Credit
Agreement"); and
WHEREAS, Lexmark, Lexmark Germany, the Lenders listed on the signature
pages thereof and the Agent have heretofore entered into an Amended and Restated
Credit Agreement dated as of April 21, 1995 (as amended, the "German Credit
Agreement"); and
<PAGE>
WHEREAS, Lexmark, Lexmark Netherlands, the Lenders listed on the signature
pages thereof and the Agent have heretofore entered into an Amended and Restated
Credit Agreement dated as of April 21, 1995 (as amended, the "Netherlands Credit
Agreement" and, together with the U.S. Credit Agreement, the Canadian Credit
Agreement, the French Credit Agreement and the German Credit Agreement, the
"Credit Agreements"); and
WHEREAS, the parties hereto desire to amend the Credit Agreements as set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in a Credit Agreement shall have
the meaning assigned to such term therein. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in a
Credit Agreement shall from and after the date hereof refer to such Credit
Agreement as amended hereby.
SECTION 2. Amendment of Schedule III to each of the Credit Agreements.
Schedule III to each of the Credit Agreements is hereby amended by deleting
paragraph (C) of clause (ii) of Section 13 thereof and replacing it with the
following:
"(C) Holding may (a) repurchase (i) shares of its common stock or (ii)
options to purchase shares of its common stock issued to employees of Holding or
any of its Subsidiaries ("Options") or (b) in connection with a sale of a share
of common stock originally issued upon the exercise of an Option, (i) pay to the
seller of such share an amount equal to the difference between the market value
of such share and the price paid to such seller for such share in the sale or
pay any fees, commissions, discounts or similar payments paid by or on behalf of
such seller in connection with the sale of such share or (ii) pay to the
purchaser any rebate required in order to effectuate the sale of such share or
pay any fees, commissions, discounts or similar payments paid by or on behalf of
such purchaser in connection with the sale of such share; provided that the
amount paid pursuant to clauses (a) and (b) (plus the amount, if any, paid by
Holding in respect of taxes relating to such payments, other than as a
withholding agent) after April 3, 1996 does not exceed $200,000,000 in the
aggregate."
SECTION 3. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
2
<PAGE>
SECTION 4. Counterparts; Effectiveness. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective as of the date when the Agent shall have
received duly executed counterparts hereof signed by Lexmark, Holding, Lexmark
Canada, Lexmark France, Lexmark Germany, Lexmark Netherlands, the Majority
Credit Providers and the Agent (or, in the case of any party as to which an
executed counterpart shall not have been received, the Agent shall have received
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party).
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWER: LEXMARK INTERNATIONAL, INC.
By /s/ Gary E. Morin
-----------------------
Title: VP & CFO
GUARANTOR: LEXMARK INTERNATIONAL
GROUP, INC.
By /s/ Gary E. Morin
-----------------------
Title: VP & CFO
LEXMARK CANADA: LEXMARK CANADA INC.
By /s/ Gary E. Morin
-----------------------
Title: VP & CFO
LEXMARK FRANCE: LEXMARK INTERNATIONAL, S.N.C.
By /s/ Gary E. Morin
-----------------------
Title: VP & CFO
LEXMARK GERMANY: LEXMARK DEUTSCHLAND GmbH
By /s/ Gary E. Morin
-----------------------
Title: VP & CFO
4
<PAGE>
LEXMARK NETHERLANDS: LEXMARK INTERNATIONAL B.V.
By /s/ Gary E. Morin
-----------------------
Title: VP & CFO
LENDERS: MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ George J. Stapleton
-----------------------
Title: Vice President
CO-AGENTS
BARCLAYS BANK PLC
By /s/ John C. Livingston
-----------------------
Title: Director
BANQUE NATIONALE DE PARIS
By /s/ Serge Desrayaud
-----------------------
Title: Vice President and Team Leader
By /s/ Pamela Lucash
-----------------------
Title: Assistant Treasurer
5
<PAGE>
The Chase Manhattan Bank FKA
CHEMICAL BANK
By /s/ Ann B. Kearns
-----------------------
Title: Vice President
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS
By /s/ Belinda J. Wheeler
-----------------------
Title: Vice President
By /s/ Hans-Josef Thiele
-----------------------
Title: Director
THE BANK OF TOKYO-MITSUBISHI, LTD.
as a successor to the merger to
THE MITSUBISHI BANK, LIMITED
By /s/ Nicholas J. Campbell
-----------------------
Title: Attorney-in-Fact
NATIONSBANK OF
TEXAS, N.A.
By /s/ Timothy M. O'Connor
-----------------------
Title: Vice President
OTHER LENDERS
BANK OF AMERICA ILLINOIS
By /s/ Roger J. Fleischmann
-----------------------
Title: Vice President
6
<PAGE>
THE BANK OF NOVA SCOTIA
By /s/ John Hopmans
-----------------------
Title: Senior Relationship Manager
BANK OF MONTREAL
By
-----------------------
Title:
ABN AMRO BANK, N.V.
By /s/ Gregory D. Amoroso
-----------------------
Title: Vice President
By /s/ Andre Nel
-----------------------
Title: Senior Vice President & Managing
Director
THE BANK OF NEW YORK
By /s/ Edward Dougherty
-----------------------
Title: Vice President
FLEET NATIONAL BANK, Formerly known
as
Fleet Bank of Massachusetts, N.A.
By /s/ Frank H. Benesh II
-----------------------
Title: Vice President
7
<PAGE>
PNC BANK, Kentucky, Inc.
By /s/ Brennan T. Danile
-----------------------
Title: Corporate Banking Officer
NBD BANK
By /s/ Randall K. Stephens
-----------------------
Title: First Vice President
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By
-----------------------
Title:
WESTPAC BANKING CORPORATION
By /s/ Kate V. Perry
-----------------------
Title: Assistant Vice President
THE YASUDA TRUST AND BANKING
COMPANY, LIMITED
NEW YORK BRANCH
By /s/ Norio Miyashita
-----------------------
Title: Deputy General Manager
AGENT: MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ George J. Stapleton
-----------------------
Title: Vice President
8
EXECUTION COPY
---------------------------------------------------------------
PURCHASE AGREEMENT
between
LEXMARK INTERNATIONAL, INC.,
as Originator,
and
LEXMARK RECEIVABLES CORPORATION,
as Buyer,
Dated as of March 31, 1997
-----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1
Certain Defined Terms.................................................... 1
SECTION 1.2
Interpretation and Construction ......................................... 11
ARTICLE II
SALES AND TRANSFERS; SETTLEMENTS
SECTION 2.1
General Terms........................................................... 12
SECTION 2.2
Purchase and Sale ..................................................... 12
SECTION 2.3
Transfers and Assignments ............................................. 13
SECTION 2.4
Protection of Ownership of the Buyer ................................... 15
SECTION 2.5
Mandatory Repurchase Under Certain Circumstances ....................... 15
SECTION 2.6
Transfers by Buyer ..................................................... 15
SECTION 2.7
Payment Procedures ................................................... 16
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1
General Representations and Warranties of the Originator ............... 16
SECTION 3.2.
Representations and Warranties
of the Originator With Respect
to Each Sale of Receivables ........................................... 20
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1
Conditions to Closing ................................................ 21
SECTION 4.2
Conditions to Purchases ............................................... 23
i
<PAGE>
SECTION 4.3
Effect of Payment of Purchase Price ................................... 24
ARTICLE V
COVENANTS
SECTION 5.1
Affirmative Covenants of the Originator ............................... 24
SECTION 5.2
Negative Covenants of the Originator ................................. 29
ARTICLE VI
TERMINATION EVENTS
SECTION 6.1
Term .................................................................. 30
SECTION 6.2
Efect of Termination ................................................. 31
ARTICLE VII
MISCELLANEOUS
SECTION 7.1
Expenses .............................................................. 31
SECTION 7.2
Indemnity for Taxes, Reserves and Expenses ........................... 32
SECTION 7.3
Indemnity ............................................................. 33
SECTION 7.4
Holidays ............................................................. 35
SECTION 7.5
Records .............................................................. 35
SECTION 7.6
Amendments and Waivers ............................................... 35
SECTION 7.7
Term of Agreement .................................................... 35
SECTION 7.8
No Implied Waiver; Cumulative Remedies ................................ 35
SECTION 7.9
No Discharge ......................................................... 36
SECTION 7.10
Notices .............................................................. 36
SECTION 7.11
Severability ......................................................... 36
ii
<PAGE>
SECTION 7.12
Governing Law; Submission to Jurisdiction ............................. 36
SECTION 7.13
Prior Understandings ................................................. 37
SECTION 7.14
Survival ............................................................. 37
SECTION 7.15
Counterparts ......................................................... 37
SECTION 7.16
Set-Off .............................................................. 37
SECTION 7.17
Successors and Assigns ............................................... 38
SECTION 7.18
Confidentiality ...................................................... 38
SECTION 7.19
Payments Set Aside ................................................... 38
SECTION 7.20
No Petition .......................................................... 38
SECTION 7.21Third-Party Beneficiary ..................................... 39
Exhibit A [Reserved]
Exhibit B Schedule of Litigation
Exhibit C Schedule of Names and Locations of Offices and Records
Exhibit D Form of Compliance Certificate
Exhibit E [Reserved]
Exhibit F Credit and Collection Policy
Exhibit G Form of Subordinated Note
Exhibit H Material Adverse Changes
Exhibit I Forms of Officers' Certificate
Exhibit J Description of Qualifying Receivables
Exhibit K Officer's Certificate Pursuant to Section 4.1(j)
Schedule 1 Schedule of Receivables
iii
<PAGE>
PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of March 31, 1997 (as amended,
supplemented or otherwise modified and in effect from time to time, this
"Agreement"), made by and between Lexmark International, Inc., a Delaware
corporation, as originator (the "Originator") and Lexmark Receivables
Corporation, a Delaware corporation, as buyer (the "Buyer").
R E C I T A L S:
WHEREAS, subject to the terms and conditions of this Agreement, the
Originator desires to sell from time to time to the Buyer, and the Buyer desires
to purchase from time to time from the Originator, all of Originator's trade
and/or retail or consumer receivables resulting from the sale of goods or
services by the Originator to its customers, subject to the terms and conditions
of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for good and sufficient consideration, the parties hereto,
intending to be legally bound, do hereby agree as follows:
ARTICLE I ARTICLE IARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms1.1. Certain Defined TermsCertain Defined
Terms. As used in this Agreement, the following capitalized terms shall have the
following meanings:
"Administrative Agent"
--------------------- shall mean Morgan Guaranty Trust Company of New
York, a New York banking corporation, and its successors and assigns.
"Affiliate"
--------- shall mean, with respect to a Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with, such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
1
<PAGE>
"Amended and Restated Intercreditor Agreement"
---------------------------------------------- shall mean the Amended and
Restated Consent and Intercreditor Agreement, dated as of December 12, 1996,
among the Seller, the Buyer, Delaware Funding Corporation, a Delaware
corporation, the Administrative Agent, the Credit Providers named therein, the
Credit Provider Agent named therein, and Morgan Guaranty Trust Company of New
York (successor to J.P. Morgan Delaware), as Security Agent for the Credit
Providers, as the same may be amended, supplemented or otherwise modified.
"Business Day"
------------- shall mean any day other than a Saturday, Sunday, public
holiday under the Laws of the State of Delaware or the State of New York or any
other day on which banking institutions are authorized or obligated to close in
the State of Delaware or the State of New York.
"Capitalized Lease"
------------------ of a Person shall mean any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"Chief Executive Office"
------------------------ shall mean, with respect to the Originator, the
place where the Originator is located, within the meaning of Section
9-103(3)(d), or any analogous provision, of the UCC, in effect in the
jurisdiction whose Law governs the perfection of the Buyer's ownership interests
in any Receivables.
"Closing Date"
------------ shall mean April 15, 1997.
"Collections"
----------- shall mean, for any Receivable as of any date, (i) the sum of
all amounts, whether in the form of wire transfer, cash, checks, drafts, or
other instruments, received by the Originator or the Servicer in a Permitted
Lockbox or otherwise in payment of, or applied to, any amount owed by an Obligor
on account of such Receivable on or before such date, including, without
limitation, all amounts received on account of such Receivable, and all other
fees and charges, (ii) cash proceeds of Related Security with respect to such
Receivable and (iii) all amounts deemed to have been received by the Originator
or the Servicer as a Collection.
"Consolidated Subsidiaries"
-------------------------- shall mean with respect to any Person, at any
date, any one or more Subsidiaries of such Person the accounts of which would be
consolidated with those of such Person in its consolidated statements if such
statements were prepared as of such date.
2
<PAGE>
"Contract"
-------- shall mean, with respect to any Receivable, a binding contract
(including a binding invoice) between the Originator and an Obligor which gives
rise to a (i) short-term trade receivable with a maturity of not greater than
one year, (ii) a short-term retail or consumer receivable with a maturity of not
greater than one year, in each case arising from the sale by the Originator of
goods or services in the ordinary course of the Originator's business, or (iii)
a receivable arising in connection with the sale to IBM Credit Corporation or to
another similar institution providing credit to such Obligor (provided such
institution satisfies any of the definitions of Group A Obligor, Group B
Obligor, Group C Obligor or Group D Obligor) of the original indebtedness
incurred by an Obligor to the Originator in connection with such a sale of goods
or the rendering of such services.
"Credit and Collection Policy"
------------------------------- shall mean the Originator's credit,
collection enforcement and other policies and practices relating to Contracts
and Receivables existing on the date hereof and as set forth on Exhibit F
hereto, as the same may be modified from time to time in compliance with Section
5.2(e) hereof.
"Credit Providers"
----------------- shall mean the institutions designated as such on the
signature pages of, and parties to, the Amended and Restated Intercreditor
Agreement.
"Debt"
---- of a Person shall mean such Person's (i) obligations for borrowed
money, (ii) obligations representing the deferred purchase price of property,
(iii) obligations, whether or not assumed, which are secured by liens or payable
out of the proceeds or production from property now or hereafter owned or
acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances or other instruments, (v) Capitalized Lease obligations and (vi)
obligations pursuant to a Guarantee.
"Dilution Factors"
----------------- shall mean credits, cancellations, cash discounts,
warranties, allowances, Disputes, rebates, charge backs, returned or repossessed
goods, and other allowances, adjustments and deductions (including, without
limitation, any special or other discounts or any reconciliations caused by
price protection agreements or otherwise) that are given to an Obligor in
accordance with the Credit and Collection Policy.
"Dispute"
------- shall mean any dispute, deduction, claim, offset, defense,
counterclaim, set-off or obligation of any kind, contingent or otherwise,
relating to a Receivable, including, without limitation, any dispute relating to
goods or services already paid for.
"Dollars"
------- or "$" shall mean the lawful currency of the United States of
America.
3
<PAGE>
"ERISA"
----- shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate"
--------------- shall mean any corporation or person which is a member of
any group of organizations (i) described in Section 414(b) or (c) of the
Internal Revenue Code of which the Originator is a member, or (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Internal Revenue Code and the lien created under Section
302(f) of ERISA and Section 412(n) of the Internal Revenue Code, described in
Section 414(m) or (o) of the Internal Revenue Code of which the Originator is a
member.
"Event of Bankruptcy"
------------------- shall mean, for any Person:
(a) that such Person shall admit in writing its inability to pay its debts
as they become due; or
(b) a proceeding shall have been instituted in a court having jurisdiction
in the premises seeking a decree or order for relief in respect of such Person
in an involuntary case under any applicable bankruptcy, insolvency or other
similar Law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator, conservator (under the
Bank Conservation Act, as amended from time to time, or otherwise) or other
similar official of such Person or for any substantial part of its property, or
for the winding-up or liquidation of its affairs; or
(c) the commencement by such Person of a voluntary case under any
applicable bankruptcy, insolvency or other similar Law now or hereafter in
effect, or such Person's consent to the entry of an order for relief in an
involuntary case under any such Law, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator (under the Bank Conservation Act, as amended from time
to time, or otherwise) or other similar official of such Person or for any
substantial part of its property, or any general assignment for the benefit of
creditors; or
(d) if such Person is a corporation, such Person, or (if such Person is not
an Obligor) any Subsidiary of such Person, shall take any corporate action in
furtherance of any of the actions set forth in the preceding clause (a), (b) or
(c).
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<PAGE>
"Event of Termination"
---------------------- shall mean (i) with respect to any Plan, a
reportable event, as defined in Section 4043(b) of ERISA, as to which the PBGC
has not by regulation waived the requirement of Section 4043(a) of ERISA that it
be notified within 30 days of the occurrence of such event, or (ii) the
withdrawal of the Originator or any ERISA Affiliate from a Plan during a plan
year in which it is a substantial employer, as defined in Section 4001(a)(2) of
ERISA, or (iii) the failure by the Originator or any ERISA Affiliate to meet the
minimum funding standard of Section 412 of the Internal Revenue Code or Section
302 of ERISA with respect to any Plan, or (iv) the distribution under Section
4041 of ERISA of a notice of intent to terminate any Plan or any action taken by
the Originator or any ERISA Affiliate to terminate any Plan, or (v) the adoption
of an amendment to any Plan that pursuant to Section 401(a)(29) of the Internal
Revenue Code or Section 307 of ERISA would result in the loss of tax-exempt
status of the trust of which such Plan is a part if the Originator or an ERISA
Affiliate fails to timely provide security to the Plan in accordance with the
provisions of said Sections, or (vi) the institution by the PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or (vii) the receipt by the Originator or any
ERISA Affiliate of a notice from a Multiemployer Plan that action of the type
described in the previous clause (vi) has been taken by the PBGC with respect to
such Multiemployer Plan, or (viii) the complete or partial withdrawal from a
Multiemployer Plan by the Originator or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default), or (ix) the
receipt by the Originator or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA, or (x) any event or circumstance exists which may reasonably be
expected to constitute grounds for the Originator or any ERISA Affiliate to
incur liability under Section 4069 or Section 4212(c) of ERISA or under Sections
412(c)(11) or 412(n) of the Internal Revenue Code with respect to any Plan.
"Expense and Tax-Sharing Agreement"
------------------------------------ shall mean the Administrative and
Office Support Services, and Tax Allocation Agreement dated as of March 31,
1997, between the Originator and the Buyer.
"Expiration Date"
---------------- shall mean the earlier of (i) the date of termination of
the Receivables Purchase Agreement and (ii) the day on which a Termination Event
occurs.
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<PAGE>
"Facility Documents"
-------------------- shall mean collectively, this Agreement, the
Receivables Purchase Agreement, the Expense and Tax-Sharing Agreement, the
Subordinated Note and such other agreements, documents and instruments delivered
by Originator in connection with the transactions contemplated by this Agreement
and pursuant hereto or in connection therewith.
"GAAP"
---- shall mean generally accepted accounting principles in the United
States of America, applied on a consistent basis and applied to both
classification of items and amounts, and shall include, without limitation, the
official interpretations thereof by the Financial Accounting Standards Board,
its predecessors and successors.
"Government Obligor"
------------------ means an Obligor that is the United States of America,
any State thereof, or an agency, department, instrumentality or political
subdivision of the United States of America or of any State thereof.
"Guarantee"
--------- shall mean, as applied to any Debt, (i) a guarantee (other than
by endorsement for collection in the ordinary course of business), direct or
indirect, in any manner, of any part or all of such Debt or (ii) an agreement,
direct or indirect, contingent or otherwise, providing assurance of the payment
or performance (or payment of damages in the event of non-performance) of any
part or all of such Debt, including, without limiting the foregoing, the payment
of amounts drawn down by letters of credit. The amount of any Guarantee shall be
deemed to be the maximum amount of the Debt guaranteed for which the guarantor
could be held liable under such Guarantee.
"IBM Receivable"
--------------- shall mean any Receivable the Obligor of which is IBM
Credit Corporation or any Subsidiary or Affiliate thereof that maintains a
senior unsecured long-term debt rating from S&P and Moody's which is equal to or
higher than such ratings for IBM.
"Indemnified Parties"
-------------------- shall have the meaning ascribed to such term in
Section 7.2 hereof.
"Initial Purchase"
---------------- shall mean the Purchase made on the date hereof pursuant
to Section 2.1 hereof.
"Initial Purchase Date"
----------------------- shall mean the date the Initial Purchase is made
pursuant to Section 2.1 hereof.
"Internal Revenue Code"
----------------------- shall mean the Internal Revenue code of 1986, as
amended from time to time and any successor thereto, and the regulations
promulgated and rulings issued thereunder.
"Law"
--- shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any Official Body.
6
<PAGE>
"Lien",
---- in respect of the property of any Person, shall mean any ownership
interest of any other Person, any mortgage, deed of trust, hypothecation,
pledge, lien, security interest, grant of a power to confess judgment, filing of
any financing statement, or charge or other encumbrance or security arrangement
of any nature whatsoever, including, without limitation, any conditional sale or
title retention arrangement, and any assignment, deposit arrangement,
consignment or lease intended as, or having the effect of, security; provided,
however, that no offset, counterclaim or other defense to payment of a
Receivable that an Obligor may assert shall be deemed to be a "Lien" on such
Receivable hereunder.
"Lockbox Account"
----------------- shall have the meaning ascribed thereto in the
Receivables Purchase Agreement.
"Lockbox Servicing Instructions"
------------------------------ shall have the meaning ascribed thereto in
the Receivables Purchase Agreement.
"Multiemployer Plan"
------------------- shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding five years contributed to by the Originator or any
ERISA Affiliate on behalf of its employees and which is covered by Title IV of
ERISA.
"Notice of Termination Event"
----------------------------- shall have the meaning set forth in Section
5.1(a) hereof.
"Obligor"
------- shall mean, for any Receivable, (i) each and every Person who
purchased goods or services on credit under a Contract and who is obligated to
make payments to the Originator pursuant to such Contract and (ii) IBM Credit
Corporation.
"Office"
------ shall mean, when used in connection with the Buyer or the
Originator, their respective offices as set forth on the signature pages hereto,
or at such other office or offices of the Buyer or the Originator or branch,
Subsidiary or Affiliate of either thereof as may be designated in writing from
time to time by the Buyer or the Originator to the Buyer or the Originator, as
appropriate.
"Official Body"
-------------- shall mean any government or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Outstanding Balance"
-------------------- of any Receivable shall mean, at any time, the then
outstanding amount thereof.
"PBGC"
---- means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
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<PAGE>
"Permitted Lien"
--------------- shall mean (i) a Lien imposed by any Official Body for
taxes, assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Originator in accordance with GAAP, or (ii) a
carriers', warehousemen's, mechanics' or other like Lien arising in the ordinary
course of business for amounts that are not overdue for a period of more than 30
days or that are being contested in good faith and by appropriate proceedings
and for payment of which the Originator has adequately bonded or provided
adequate reserves on its books in accordance with GAAP or (iii) a Lien arising
out of a judgment or award against the Originator with respect to which a stay
of execution has been obtained pending appeal or other proceeding for review and
for the payment of which the Originator has adequately bonded or provided
adequate reserves in accordance with GAAP or (iv) the second priority Lien
granted to Morgan Guaranty Trust Company of New York, as security agent for the
Credit Providers, under the Amended and Restated Intercreditor Agreement.
"Permitted Lockbox"
------------------ shall have the meaning ascribed thereto in the
Receivables Purchase Agreement.
"Permitted Lockbox Bank"
------------------------ shall have the meaning ascribed thereto in the
Receivables Purchase Agreement.
"Person"
------ shall mean an individual, corporation, partnership (general or
limited), trust, business trust, unincorporated association, joint venture,
joint-stock company, Official Body or any other entity of whatever nature.
"Plan"
---- means any employee benefit or other plan which is or was at any time
during the current year or immediately preceding five years established or
maintained by the Originator or any ERISA Affiliate and which is covered by
Title IV of ERISA, other than a Multiemployer Plan.
"Potential Termination Event"
----------------------------- shall mean an event or condition which with
the giving of notice, the passage of time or any combination of the foregoing,
would constitute a Termination Event.
8
<PAGE>
"Principal Balance"
------------------ of a Receivable, as of the close of business on the
last day of a calendar month, means the original principal amount owed by the
Obligor and financed by the Originator, minus the sum of (i) that portion of all
amounts paid by or on behalf of the related Obligor allocable to principal, (ii)
any payments made by the Originator and allocable to principal pursuant to a
deemed Collection under Section 2.7, and (iii) any payment of the Repurchase
Amount with respect to the Receivable allocable to principal (but only where the
application of such Repurchase Amount does not result in the full repurchase of
such Receivable by the Originator), in each case, prior to such date.
"Proceeds"
-------- shall mean "proceeds" as defined in Section 9-306(1) of the
Uniform Commercial Code as in effect in the State of New York and the
jurisdiction whose Law governs the perfection of the Buyer's ownership interests
therein.
"Purchase"
-------- means a purchase of Receivables, Related Security with respect
to such Receivables, and rights to Collections with respect thereto by the Buyer
from the Originator pursuant to Sections 2.1 and 2.2 hereof.
"Purchase Date"
-------------- means the Initial Purchase Date and thereafter, each
Business Day.
"Purchase Price"
-------------- shall have the meaning specified in Section 2.2(c).
"Purchased Assets"
---------------- shall mean, at any time, the Buyer's undivided ownership
interest in (i) each and every Receivable purchased hereunder, (ii) all Related
Security with respect to each such Receivable, (iii) all Collections, including
all cash collections and other cash proceeds, with respect thereto, and (iv) all
cash and non-cash Proceeds of the foregoing.
"Receivable"
---------- shall mean, all indebtedness owed to the Originator by any
Obligor, (without giving effect to any purchase hereunder by the Buyer at any
time) under a Contract, whether now existing or hereafter arising and wherever
located, arising in connection with
(a) the sale of goods or the rendering of services
in the ordinary course of business by the Originator
or
(b) The sale to IBM Credit Corporation or to another
similar institution providing credit to such
Obligor (provided such institution satisfies any
of the definitions of Group A Obligor, Group B
Obligor or Group D Obligor) of the original
9
<PAGE>
indebtedness incurred by an Obligor to the Originator
in connection with such sale of goods or the
rendering of such services,
and satisfying the description set forth on Exhibit J hereto, and including all
moneys due and to become due under such Contract and other obligations of such
Obligor with respect thereto, but excluding any amount of sales tax, excise tax
or other similar tax or charge incurred in connection with the sale of the goods
or services which gave rise to such indebtedness. Notwithstanding the foregoing,
once a Receivable has been deemed collected pursuant to Section 2.7(b) hereof
and the Originator has complied with its obligations in respect of such deemed
Collection set forth in Section 2.7(c) hereof, it shall no longer constitute a
Receivable hereunder. Any such indebtedness originally incurred by an Obligor to
the Originator that the Originator assigns or sells to IBM Credit Corporation or
another similar institution providing credit to such Obligor simultaneously with
such incurrence shall not be a "Receivable" hereunder and shall not be purchased
by Buyer pursuant to this Agreement; provided, however, in each such case, such
assignment or sale to IBM Credit Corporation or to another similar institution
providing credit to such Obligor (provided such institution satisfies any of the
definitions of Group A Obligor, Group B Obligor, Group C Obligor or Group D
Obligor) of such indebtedness shall give rise to a Receivable hereunder the
Obligor of which is IBM Credit Corporation. Nothing in this Agreement shall be
deemed to prohibit any such simultaneous assignment or sale to IBM Credit
Corporation or another similar institution provided that such assignment or sale
gives rise to a Receivable hereunder the Obligor of which is IBM Credit
Corporation or to such other similar institution.
"Receivables Purchase Agreement"
-------------------------------- shall mean that certain Receivables
Purchase Agreement, dated as of the date hereof, by and among Lexmark
Receivables Corporation, as Seller, Lexmark International, Inc., in its
individual capacity and as Servicer, Delaware Funding Corporation, a Delaware
Corporation, as Buyer, and Morgan Guaranty Trust Company of New York, a trust
company organized under the laws of the State of New York, as Administrative
Agent, as the same may be amended, modified or supplemented and as in effect
from time to time.
"Records"
------- shall mean correspondence, memoranda, computer programs, tapes,
discs, papers, books or other documents or transcribed information of any type
whether expressed in ordinary or machine-readable language.
"Related Security"
---------------- shall mean with respect to any Receivable:
10
<PAGE>
(a) all of the Originator's interest, if any, in the goods, merchandise
(including returned merchandise) or equipment, if any, the sale of which by
Originator gave rise to such Receivable;
(b) all other security interests or liens and property subject thereto from
time to time, if any, purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise, together with
all financing statements signed by an Obligor describing any collateral securing
such Receivable;
(c) all guarantees, insurance or other agreements or arrangements of any
kind from time to time supporting or securing payment of such Receivable whether
pursuant to the Contract related to such Receivable or otherwise;
(d) all Records relating to, and all service contracts and any other
contracts associated with, such Receivable or the Contracts or the Obligors
relating thereto;
(e) all proceeds of the foregoing.
"Relevant UCC"
------------- shall mean the Uniform Commercial Code as in effect from
time to time in Kentucky or any other applicable jurisdictions.
"Repurchase Amount"
------------------ shall mean an amount equal to the aggregate Principal
Balance of the Receivables to be repurchased on the repurchase date.
"Responsible Officer"
-------------------- shall mean, with respect to any Person, the chief
executive officer, chief financial officer, the treasurer, the Treasury
Financial Analyst, the Cash Manager, any vice president or any assistant
treasurer of such Person or controller of such Person.
"Servicer"
-------- shall mean, initially, the Originator, and, upon execution
thereof, the Servicer designated pursuant to the Receivables Purchase Agreement
or any successor Servicer designated pursuant to a Servicing Agreement.
"Servicing Agreement"
-------------------- shall mean any agreement between the Buyer and any
Person which contains provisions concerning the servicing of the Receivables
substantially similar to the servicing provisions contained in the Receivables
Purchase Agreement, pursuant to which such Person performs servicing functions
for the Receivables that constitute Purchased Assets, and all agreements,
instruments and documents attached thereto or delivered in connection therewith,
as any of the same may from time to time be amended, supplemented or otherwise
modified.
"Subordinated Loan"
------------------ shall have the meaning specified in Section 2.2(d)
hereof.
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<PAGE>
"Subordinated Note"
------------------ shall have the meaning specified in Section 2.2(d)
hereof.
"Subsidiary"
---------- shall mean any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Originator.
"Termination Date"
---------------- shall have the meaning set forth in Section 6.1 hereof.
"UCC"
--- shall mean, with respect to any jurisdiction, the Uniform Commercial
Code, or any successor statute, or any comparable law, as the same may from time
to time be amended, supplemented or otherwise modified and in effect in such
jurisdiction.
SECTION 1.2. Interpretation and Construction.
------------------------------- Unless the context of this
Agreement otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole. References in this
Agreement to "determination", "determine" and "determined" by the Buyer shall be
conclusive absent manifest error and include good faith estimates by the Buyer
(in the case of quantitative determinations), and the good faith belief of the
Buyer (in the case of qualitative determinations). The words "hereof", "herein",
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." The
section and other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of this Agreement
or the interpretation hereof in any respect. Section, subsection and exhibit
references are to this Agreement unless otherwise specified. As used in this
Agreement, the masculine, feminine or neuter gender shall each be deemed to
include the others whenever the context so indicates. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. Terms
not otherwise defined herein which are defined in the UCC as in effect in the
State of New York on the date hereof shall have the respective meanings ascribed
to such terms therein unless the context otherwise clearly requires.
ARTICLE II
SALES AND TRANSFERS; SETTLEMENTS
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<PAGE>
SECTION 2.1. General Terms.
-------------- On the terms and conditions hereinafter set
forth, on each Purchase Date from the date the conditions precedent to the
Initial Purchase in Section 4.1 are satisfied to the Expiration Date under the
Receivables Purchase Agreement, the Originator shall sell to the Buyer,
without recourse, except as specifically set forth herein, and the Buyer shall
purchase, all right, title and interest of the Originator in, to and under all
of the Receivables owned by the Originator on such date, along with Related
Security with respect to such Receivables and Collections with respect
thereto.
SECTION 2.2 Purchase and Sale.
----------------- (a) The Originator hereby irrevocably sells,
sets over, assigns, transfers and conveys to the Buyer and its successors and
assigns, and the Buyer hereby accepts, purchases and receives, all of the
Originator's right, title, and interest in and to the Purchased Assets,
whether such Purchased Assets are now owned or hereafter created or acquired
by the Originator, along with all monies, instruments, securities, documents
and other property from time to time on deposit in or credited to the
Lockbox Accounts relating to the Purchased Assets.
(b) The consideration to the Originator for the Initial Purchase shall be
the execution and delivery by the Buyer of the Receivables Purchase Agreement on
the date hereof and the making by the Buyer thereunder of the "Initial Purchase"
(as defined thereunder). The Initial Purchase hereunder shall be made subject to
the satisfaction of the conditions to purchase specified in Section 4.2.
(c) The "Purchase Price" for the Purchased Assets which came into existence
on or prior to the Closing Date and which are conveyed to the Buyer under this
Agreement shall be payable on the Closing Date and shall be an amount equal to
100% of the aggregate Outstanding Balance of the Receivables so conveyed,
adjusted to reflect such factors as the Originator and the Buyer mutually agree
will result in a Purchase Price determined to approximate the fair market value
of such Purchased Assets. Such computation of the initial Purchase Price shall
assume no reinvestment in new Purchased Assets. The "Purchase Price" for the
Purchased Assets to be conveyed to the Buyer under this Agreement that come into
existence after the Closing Date shall be payable on the Purchase Date in an
amount equal to 100% of the aggregate Outstanding Balance of the Receivables so
conveyed (the "New Purchased Assets"), adjusted to reflect such factors as the
Originator and the Buyer mutually agree will result in a Purchase Price
determined to approximate the fair market value of such New Purchased Assets.
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<PAGE>
(d) The Purchase Price to be paid by the Buyer on the Closing Date and on
each subsequent Purchase Date shall be paid (i) in cash, (ii) with the consent
of the Originator, by means of capital contributed by the Originator to the
Buyer in the form of a contribution of the Purchased Assets, and/or (iii) if
consented to by the Originator, in its sole discretion, by means of a loan by
the Originator to the Buyer (each a "Subordinated Loan" and collectively, the
"Subordinated Loans") evidenced by the subordinated note (the "Subordinated
Note") in substantially the form attached hereto as Exhibit G. The Subordinated
Loans shall be made on a revolving basis from time to time during the term of
this Agreement as the Buyer may from time to time request and the Originator
shall agree for the sole purpose of purchasing Receivables from the Originator.
Interest on and principal of the Subordinated Note shall be payable in the
amounts and at the times specified in the Subordinated Note. The Originator
shall maintain records of the date and amounts of each Subordinated Loan and
payments thereon on the payment grid attached to the Subordinated Note.
(e) The sale of the Purchased Assets by the Originator hereunder shall be
made without recourse except as specifically provided herein.
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<PAGE>
SECTION 2.3. Transfers and Assignments.
------------------------- (a) It is the intention of the
parties hereto that each Purchase made hereunder shall constitute a sale and
assignment, which sales and assignments are absolute, irrevocable and
without recourse except as specifically provided herein and shall provide
the Buyer with the full benefits of ownership of the Receivables and the other
related Purchased Assets. In the event that a Purchase is deemed to constitute
a pledge rather than a sale and assignment of the aforementioned property,
then (i) this Agreement also shall be deemed to be and hereby is a security
agreement within the meaning of the UCC and (ii) the Originator does
hereby grant to the Buyer a first priority perfected security interest in
and to and lien on all of the Originator's right, title and interest in, to and
under the Purchased Assets. The Originator and the Buyer shall, to the extent
consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest
in the Receivables, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of this Agreement. The possession by the Buyer or
its transferee or agent of notes and such other goods, letters of credit,
advices of credit, money, documents, instruments, chattel paper or
certificated securities related thereto shall be deemed to be "possession by the
secured party" for purposes of perfecting such security interest pursuant to the
Relevant UCC (including, without limitation, Section 9-305 thereof).
Notifications to persons holding such property, and acknowledgments, receipts or
confirmations from persons holding such property, shall be deemed to be
notifications to, or acknowledgments, receipts or confirmations from, bailees or
agents (as applicable) of, the Buyer or its transferee for the purpose of
perfecting such security interest under the Relevant UCC and other applicable
laws. The sale and conveyance hereunder of the Purchased Assets does not
constitute an assumption by the Buyer or its successors and assigns of any
obligations of the Originator to Obligors or to any other Person in connection
with Receivables or under any agreement or instrument relating to the
Receivables.
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<PAGE>
(b) In connection with the sale and transfer under Section 2.2(a), the
Originator agrees to record and file, at its own expense, financing statements,
with respect to the Purchased Assets now existing and hereafter created or
acquired, suitable to reflect the transfer of chattel paper and general
intangibles (each as defined in Article 9 of the Relevant UCC) and meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect the sale, transfer and assignment of the Purchased
Assets to the Buyer, and to deliver a file-stamped copy of such financing
statements or other evidence of such filing satisfactory to the Buyer on or
prior to the applicable Purchase Date. In addition to, and without limiting the
foregoing, the Originator shall, upon the request of the Buyer, in order to
accurately reflect this transaction, execute and file such financing or
continuation statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 7.6 hereof) as may be reasonably requested by the
Buyer.
(c) The Originator shall maintain its books and records so that such
records that refer to a Receivable shall indicate clearly that the Originator's
right, title and interest in such Receivable has been sold to the Buyer and mark
its master data processing records with a notation describing the acquisition
(or assignment) by, the Buyer of the Purchased Assets, as the Buyer may
reasonably request. Indication of the Buyer's interest in a Receivable shall be
deleted from or modified on the Originator's records when, and only when, the
Receivable shall have been paid in full or the Buyer's interest in such
Receivable shall have been repurchased or repaid by the Originator hereunder. In
addition, the Originator shall maintain its computer systems so that the
Originator's master computer records (including any back-up archives) that refer
to a Receivable shall indicate clearly that such Receivable has been sold to the
Buyer pursuant to this Agreement and that an interest in such Receivable has
been transferred and assigned by the Buyer to the Administrative Agent. The
Originator agrees to deliver to the Buyer upon request with respect to each
Purchase Date an updated list, which may be a computer file or microfiche list,
containing a true and complete schedule of all Receivables constituting
Purchased Assets, identified by account number and by Principal Balance as of
the origination date of each such Receivable. When and if delivered, such file
or list shall be marked as the "Receivables Schedule" and as Schedule 1 to this
Agreement, shall be delivered to the Buyer as confidential and proprietary, and
is hereby incorporated into and made a part of this Agreement.
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SECTION 2.4. Protection of Ownership of the Buyer
------------------------------------ The Originator agrees
that from time to time, at its expense, it shall promptly execute and
deliver all additional instruments and documents and take all additional action
that the Buyer may reasonably request in order to perfect the interests of the
Buyer in and to, or to protect, the Purchased Assets or to enable the Buyer to
exercise or enforce any of its rights hereunder. To the fullest extent permitted
by applicable Law, the Buyer shall be permitted to sign and file continuation
statements and amendments thereto and assignments thereof without the
Originator's signature in such cases where the Originator is obligated hereunder
or under the Relevant UCC to sign such statements, amendments or assignments if,
after written notice to the Originator, the Originator shall have failed to sign
such continuation statements, amendments or assignments within ten (10) Business
Days after receipt of such notice from the Buyer. Carbon, photographic or other
reproduction of this Agreement or any financing statement shall be sufficient as
a financing statement.
SECTION 2.5. Mandatory Repurchase Under Certain Circumstances
------------------------------------------------ The
Originator agrees to repurchase from the Buyer or its assignee each
Purchased Asset if at any time the Buyer shall cease to have a perfected
ownership interest, or a first priority perfected security interest, in the
Receivables, free and clear of any Lien (except for (x) any adverse claim
with respect to a Receivable the Obligor of which is a Governmental Obligor, (y)
the Lien arising in connection with this Agreement, and (z) any Permitted Liens
which are in an aggregate dollar amount that is determined by the Administrative
Agent, in its sole discretion, to be de minimis), within five days of notice
thereof by the Buyer. The repurchase price shall be paid by the Originator to
the Buyer on such fifth day in an amount equal to the Repurchase Amount.
SECTION 2.6. Transfers by Buyer.
------------------ The Originator acknowledges and agrees
that (a) the Buyer will, pursuant to the Receivables Purchase Agreement, sell
such of the Purchased Assets as constitute "Receivables" within the meaning
set forth in the Receivables Purchase Agreement and assign its rights under
this Agreement to the Administrative Agent (for the ratable benefit of the
Owners under the Receivables Purchase Agreement), (b) the representations and
warranties contained in this Agreement and the rights of the Buyer under this
Agreement are intended to benefit the "Buyer" and "Owners" under the
Receivables Purchase Agreement and (c) the Buyer shall have the right to
appoint a servicer of the Receivables purchased hereunder, and shall appoint
a Servicer under the Receivables Purchase Agreement. The Originator hereby
consents to all such sales and assignments and to the appointment of a Servicer
under the Receivables Purchase Agreement.
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SECTION 2.7. Payment Procedures.
------------------
(a) If on any day the Outstanding Balance of a Receivable is (w) reduced or
canceled as a result of any defective or rejected goods or services, any cash
discount or any adjustment by the Originator, or (x) reduced or canceled as a
result of a set-off in respect of any claim by any Person (whether such claim
arises out of the same or a related transaction or an unrelated transaction),
including without limitation any set-off against IBM Receivables arising under
the Master Set-Off and Guarantee Agreement dated as of March 27, 1991, among
IBM, Lexington Holding Corporation, the Originator and Lexmark Europe
Corporation, Inc., or (y) reduced or canceled as a result of any forgiveness of
the obligation or of any adjustment by the Originator, or (z) otherwise reduced
or canceled as a result of any Dilution Factor with respect to such Receivable,
the Originator shall be deemed to have received on such day a Collection of such
Receivable in the amount of such reduction or cancellation. If on any day any of
the representations or warranties in Section 3.2 hereof is no longer true or was
not true when made with respect to a Receivable, the Originator shall be deemed
to have received on such day a Collection of such Receivable in full.
(b) Any Collections deemed to be received by the Originator pursuant to
Section 2.7(a) hereof shall be paid by the Originator to the Buyer on the next
Business Day or on such other day as specified by the Buyer and the Servicer
shall hold or distribute all Collections deemed received pursuant to Section
2.7(a) hereof to the same extent as if such Collections had actually been
received. So long as the Originator shall hold any Collections or deemed
Collections required to be paid to the Buyer, it shall hold such Collections in
trust for the Buyer.
(c) Following the date on which the Buyer shall be deemed to have
reconveyed to the Seller any interest it may have in the Receivables (including
the Purchased Assets), together with the Related Security and Collections with
respect thereto, the Originator shall pay to the Buyer any remaining Collections
set aside and held by the Originator pursuant to the first sentence of this
Section 2.7, and the Buyer shall execute and deliver to the Originator, at
Originator's expense, such documents or instruments as are reasonably necessary
to terminate the Buyer's interest in the Receivables, together with the Related
Security and Collections with respect thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. General Representations and Warranties of the Originator.
----------------------------------------------------------
The Originator, in addition to its other representations and warranties
contained herein or made pursuant hereto, hereby represents and warrants to
the Buyer on and as of the Closing Date and on and as of the date of each
Purchase that:
18
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(a) Organization and Qualification.
------------------------------- The Originator is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation. The Originator is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction in which the
ownership of its properties or the nature of its activities (including
transactions giving rise to Receivables), or both, requires it to be so
qualified or, if not so qualified, the failure to so qualify would not have a
material adverse effect on its financial condition or results of operations.
(b) Authorization.
------------- The Originator has the corporate power and authority to
execute and deliver the Facility Documents, to make the sales provided for
herein and to perform its obligations hereunder and thereunder.
(c) Execution and Binding Effect.
------------------------------ Each of this Agreement and the other
Facility Documents has been duly and validly executed and delivered by the
Originator and (assuming the due and valid execution and delivery thereof by the
other party thereto), constitutes a legal, valid and binding obligation of the
Originator enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar Laws of general application relating to or affecting the
enforcement of creditors' rights or by general principles of equity, and will
vest absolutely and unconditionally in the Buyer a valid undivided ownership
interest in the Receivables purported to be assigned hereby or thereby, subject
to no Liens whatsoever (other than (x) the Lien arising in connection with this
Agreement and (y) any Permitted Liens). Upon the filing of the necessary
financing statements under the UCC as in effect in the jurisdiction whose Law
governs the perfection of the Buyer's ownership interests in the Receivables,
the Buyer's ownership interests in the Receivables will be perfected under
Article Nine of such UCC, prior to and enforceable against all creditors of and
purchasers from the Originator and all other Persons whatsoever (other than the
Buyer and its successors and assigns and Government Obligors).
19
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(d) Authorizations and Filings.
---------------------------- No authorization, consent, approval,
license, exemption or other action by, and no registration, qualification,
designation, declaration or filing with, any Official Body is or will be
necessary or, in the opinion of the Originator, advisable in connection with the
execution and delivery by the Originator of the Facility Documents, the
consummation by the Originator of the transactions herein or therein
contemplated or the performance by the Originator of or the compliance by the
Originator with the terms and conditions hereof or thereof, to ensure the
legality, validity or enforceability hereof or thereof, or to ensure that the
Buyer will have an undivided ownership interest in and to the Receivables which
is perfected and prior to all other Liens (including competing ownership
interests but excluding any Permitted Liens), other than the filing of financing
statements under the UCC in the jurisdiction of the Originator's Chief Executive
Office in the Commonwealth of Kentucky and any filing that may be required under
the Receivables Purchase Agreement to implement any transfer to a Buyer, the
Administrative Agent or any Owner thereunder.
(e) Absence of Conflicts.
--------------------- Neither the execution and delivery by the
Originator of the Facility Documents, nor the consummation by the Originator of
the transactions herein or therein contemplated, nor the performance by the
Originator of or the compliance by the Originator with the terms and conditions
hereof or thereof, will (i) violate any Law or (ii) conflict with or result in a
breach of or a default under (A) the Articles of Incorporation or By-laws of the
Originator or (B) any agreement or instrument, including, without limitation,
any and all indentures, debentures, loans or other agreements to which the
Originator is a party or by which it or any of its properties (now owned or
hereafter acquired) may be subject or bound, which would have a material adverse
effect on the financial position or results of operations of the Originator or
result in rendering any Debt evidenced thereby due and payable prior to its
maturity or result in the creation or imposition of any Lien pursuant to the
terms of any such instrument or agreement upon any property (now owned or
hereafter acquired) of the Originator.
(f) Location of Chief Executive Office, etc.
----------------------------------------- As of the Closing Date: (i)
the Originator's Chief Executive Office is located at the address set forth on
Exhibit E hereto; (ii) each domestic Subsidiary of the Originator is listed on
Exhibit C hereto; (iii) the offices where the Originator keeps all of its
Records are listed on Exhibit C hereto; and (iv) the Originator has since the
date of its incorporation, operated only under the trade names identified in
Exhibit C hereto, and, since the date of its incorporation, has not changed its
name, merged or consolidated with any other corporation or been the subject of
any proceeding under Title 11, United States Code (Bankruptcy), except as
disclosed in Exhibit C hereto.
20
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(g) No Termination Event.
--------------------- No event has occurred and is continuing and no
condition exists which constitutes a Termination Event or a Potential
Termination Event.
(h) Accurate and Complete Disclosure.
-------------------------------- No information referred to in any of
the Exhibits and furnished in writing in final form on or prior to the date
hereof by the Originator, nor any information furnished in writing after the
date hereof by the Originator, in each such case to the Buyer or any purchaser
of Receivables from the Buyer, pursuant to or in connection with this Agreement
or any transaction contemplated hereby is false or misleading in any material
respect as of the date as of which such information was furnished (including by
omission of material information necessary to make such information not
misleading).
(i) No Proceedings.
-------------- There are no proceedings or investigations pending, or
to the knowledge of the Originator, threatened, before any Official Body (A)
asserting the invalidity of the Facility Documents, (B) seeking to prevent the
consummation of any of the transactions contemplated by the Facility Documents,
or (C) seeking any determination or ruling that might materially and adversely
affect (i) the performance by the Originator of its obligations under the
Facility Documents or (ii) the validity or enforceability of the Facility
Documents, all of the Contracts taken as a whole or any material amount of the
Receivables.
(j) Bulk Sales Act.
-------------- No transaction contemplated hereby requires compliance
with any bulk sales act or similar law.
(k) Financial Condition.
-------------------- (x) The consolidated balance sheet of the
Originator and its Consolidated Subsidiaries as at December 31, 1996 and the
related statements of income and cash flows of the Originator and its
Consolidated Subsidiaries for the fiscal year then ended, certified by Coopers &
Lybrand, independent accountants, copies of which have been furnished to the
Buyer and to the "Buyer" (as defined in the Receivables Purchase Agreement) and
the Administrative Agent, fairly present the consolidated financial position of
the Originator and its Consolidated Subsidiaries as at such date and the
consolidated results of the operations of and changes in consolidated cash flows
of the Originator and its Consolidated Subsidiaries for the period ended on such
date, all in accordance with GAAP, and (y) since December 31, 1996, there has
been no material adverse change in any such financial condition or results of
operations or in the Originator's ability to perform its obligations under the
Facility Documents, except as set forth on Exhibit H.
21
<PAGE>
(l) Litigation.
---------- No injunction, decree or other decision has been issued or
made by any Official Body that prevents, and to the knowledge of the Originator,
no threat by any Person has been made to attempt to obtain any such decision
that would have a material adverse impact on, the conduct by the Originator of a
significant portion of the Originator's business operations or any portion of
its business operations affecting the Receivables, and no litigation,
investigation or proceeding of the type referred to in Section 5.1(j) hereof
exists except as set forth on Exhibit B.
(m) Margin Regulations.
------------------- The use of all funds acquired by the Originator
under this Agreement will not conflict with or contravene any of Regulations G,
T, U and X of the Board of Governors of the Federal Reserve System, as the same
may from time to time be amended, supplemented or otherwise modified.
(n) ERISA.
----- No event or condition is occurring or exists with respect to
any Plan or Multiemployer Plan concerning which the Originator would be under an
obligation to furnish a report to the Buyer in accordance with Section 5.1(p)
hereof.
(o) Taxes.
----- The Originator and its Consolidated Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Originator or any of
its Consolidated Subsidiaries for taxable periods ending after March 27, 1996
except for (i) taxes or assessments that are not yet delinquent and (ii) taxes
that are being contested by appropriate proceedings conducted in good faith and
with due diligence. The charges, accruals and reserves on the books of the
Originator and its Consolidated Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of the Originator, adequate.
(p) Books and Records.
------------------ The Originator has indicated on its books and
records (including any computer files) that the Purchased Assets are the
property of the Buyer.
(q) Investment Company.
------------------ The Originator is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
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(r) Separate Corporate Existence.
------------------------------- Notwithstanding that Buyer is a
Subsidiary of Originator, the Originator is entering into the transactions
contemplated by this Agreement in reliance on the Buyer's identity as a separate
legal entity from the Originator and each of its Affiliates, and acknowledges
that the Buyer and the other parties to the Facility Documents are similarly
entering into the transactions contemplated by the other Facility Documents in
reliance on the Buyer's identity as a separate legal entity from the Originator
and each such other Affiliate.
SECTION 3.2. Representations and Warranties of the Originator With Respect
-------------------------------------------------------------
to Each Sale of Receivables.
- --------------------------- By selling the Receivables to the Buyer either by
Initial Purchase or subsequent Purchase, the Originator represents and
warrants to the Buyer as of the Closing Date and of the date of each such
subsequent Purchase (in addition to its other representations and warranties
contained herein or made pursuant hereto) that:
(a) Assignment.
---------- This Agreement vests in the Buyer all the right, title and
interest of the Originator in and to the Purchased Assets, and constitutes a
valid sale of the Purchased Assets, enforceable against all creditors of and
purchasers from the Originator.
(b) No Liens.
-------- Each Receivable, together with the related Contract and all
purchase orders and other agreements related to such Receivable, is owned by the
Originator free and clear of any Lien (other than any Permitted Liens), and when
the Buyer makes a purchase of a Purchased Asset it shall have acquired and shall
continue to have maintained an undivided percentage ownership interest in such
Receivable and in the Related Security and the Collections with respect thereto
free and clear of any Lien (other than (x) the Lien arising in connection with
this Agreement and (y) any Permitted Liens). The Originator has not and will not
have sold, pledged, assigned, transferred or subjected to a Lien any of the
Receivables, other than the assignment of the Purchased Assets to the Buyer in
accordance with the terms of this Agreement except for (x) the Lien arising in
connection with this Agreement, and (y) any Permitted Lien.
(c) Filings.
------- On or prior to the date hereof and each Purchase Date, all
financing statements and other documents required to be recorded or filed in
order to perfect and protect the Purchased Assets against all creditors of and
purchasers from the Originator and all other Persons whatsoever other than
Government Obligors will have been duly filed in each filing office necessary
for such purpose and all filing fees and taxes, if any, payable in connection
with such filings will have been paid in full.
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(d) Credit and Collection Policy.
------------------------------ The Originator has complied in all
material respects with the Credit and Collection Policy in regard to each
Receivable and related Contract.
(e) Nature of Receivables.
---------------------- Each Receivable is, or will be, an eligible
asset within the meaning of Rule 3a-7 promulgated under the Investment Company
Act of 1940, as amended from time to time, and, assuming that the Buyer has no
business with the Originator other than the purchase of Receivables from the
Originator from time to time as contemplated by this Agreement, a purchase by
the Buyer of each Receivable with the proceeds of commercial paper issued by the
"Buyer" (as defined in the Receivables Purchase Agreement) would constitute a
"current transaction" of the Buyer within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended from time to time.
(f) No Fraudulent Conveyance.
-------------------------- The transactions contemplated by this
Agreement and by each of the Facility Documents are being consummated by the
Originator in furtherance of the Originator's ordinary business, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. By its receipt of the Purchase Price
hereunder and its ownership of the capital stock of the Buyer, the Originator
shall have received reasonably equivalent value for the Purchased Assets sold or
otherwise conveyed to the Buyer under this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing.
--------------------- On or prior to the Initial Purchase
Date, the Originator shall deliver to the Buyer the following documents and
instruments, all of which shall be in form and substance acceptable to the
Buyer:
(a) A copy of the resolutions of the Board of Directors of the Originator
certified as of the Closing Date by its secretary authorizing the execution,
delivery and performance of this Agreement and the other documents to be
delivered by the Originator hereunder and approving the transactions
contemplated hereby and thereby;
(b) The Articles of Incorporation of the Originator certified as of a date
reasonably near the Closing Date by the Secretary of State or other similar
official of the Originator's jurisdiction or incorporation;
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<PAGE>
(c) A good standing certificate for the Originator issued by the Secretary
of State or other similar official of the Originator's jurisdiction of
incorporation, certificates of qualification as a foreign corporation issued by
the Secretaries of State or other similar officials of each jurisdiction where
such qualification is material to the transactions contemplated by this
Agreement and certificates of the appropriate state official in each
jurisdiction specified by the Buyer as to the absence of any tax Liens against
the Originator under the Laws of such jurisdiction, each such certificate to be
dated a date reasonably near the Closing Date;
(d) A certificate of the secretary of the Originator dated the Closing
Date and certifying (i) the names and signatures of the officers authorized on
its behalf to execute, and the officers and other employees authorized to
perform, this Agreement and any other documents to be delivered by the
Originator hereunder (on which certificate the Buyer may conclusively rely until
such time as the Buyer shall receive from the Originator a revised certificate
meeting the requirements of this clause (d)(i)) and (ii) a copy of the
Originator's By-laws;
(e) (i) Acknowledgment copies of proper financing statements (Form UCC-l)
dated a date reasonably near the Closing Date naming the Originator as the
debtor of Receivables and Buyer, as the secured party or other similar
instruments or documents as may be necessary or, in the opinion of the Buyer,
desirable under the UCC of all appropriate jurisdictions to evidence or perfect
the Buyer's ownership interests in all Receivables and (ii) acknowledgment
copies of proper financing statements (Form UCC-l) dated a date reasonably near
the Closing Date naming the Originator as the debtor of Receivables and Buyer,
as the secured party or other similar instruments or documents as may be
necessary or, in the opinion of the Buyer, desirable under the UCC of all
appropriate jurisdictions to evidence or perfect the Buyer's security interest
in the Receivables;
(f) Acknowledgment copies of proper financing statements (Form UCC-3), if
any, necessary under the laws of all appropriate jurisdictions to release all
security interests and other rights of any Person in Receivables previously
granted by the Originator;
(g) Certified copies of requests for information or copies (Form UCC-11)
(or a similar search report certified by parties acceptable to the Buyer) dated
a date reasonably near the Closing Date listing all effective financing
statements which name the Originator (under its present name and any previous
name) as debtor and which are filed in jurisdictions in which the filings were
made pursuant to item (f) above, together with copies of such financing
statements;
(h) An officer's certificate dated the Closing Date in the form of
Exhibit I hereto executed by a Responsible Officer;
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<PAGE>
(i) A form of Contract or Contracts;
(j) Executed copies of the Subordinated Note and if requested by the
Administrative Agent on or after the Closing Date, the Officer's Certificate
attached hereto as Exhibit K;
(k) An executed copy of the Expense and Tax-Sharing Agreement;
(l) No later than 10 Business Days after the Closing Date, a list of the
Originator's customers in connection with Receivables, such customers identified
by name, address and telephone number;
(m) Such other documents as the Buyer shall reasonably request; and
(n) A duly executed waiver from IBM Credit Corporation waiving all
provisions in the contract between IBM Credit Corporation and the Originator
concerning restrictions on the transfer, sale or assignment of the rights and
duties of the Originator under such contract.
SECTION 4.2. Conditions to Purchases.
----------------------- The Buyer's obligation to make a
Purchase (other than the Initial Purchase) on any Purchase Date shall be subject
to satisfaction of the following applicable conditions precedent:
(a) the truth and correctness of the representations and warranties in
Article III hereof as of the date of such Purchase as though made on and as of
such date;
(b) compliance with the covenants and agreements in Articles II and V
hereof;
(c) the requirement that no Termination Event or Potential Termination
Event shall exist or occur as a result of such Purchase;
(d) the satisfactory completion of any due diligence conducted by the
Buyer with respect to the Receivables and the related Obligors and Contracts
which are the subject of such Purchase; and
(e) the receipt by the Buyer of any approvals, opinions or other
documents as the Buyer shall have reasonably requested.
26
<PAGE>
SECTION 4.3. Effect of Payment of Purchase Price.
------------------------------------ Upon the payment of the
Purchase Price for any Purchase (whether through a capital contribution or a
Subordinated Loan), title to the Receivables and to the other related Purchased
Assets subject to such Purchase shall vest in the Buyer, whether or not the
conditions precedent to such Purchase were in fact satisfied; provided, however,
that if one or more conditions precedent to such Purchase was in fact not
satisfied, the Buyer shall not be deemed to have waived any claim it may have
under this Agreement for the failure by the Originator in fact to satisfy any
such condition precedent.
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants of the Originator.
------------------------------------------- In addition
to its other covenants contained herein or made pursuant hereto, the Originator
covenants to the Buyer as follows:
(a) Notice of Termination Event.
----------------------------- Promptly upon becoming aware of any
Termination Event or Potential Termination Event the Originator shall give the
Buyer and the Administrative Agent notice thereof (a "Notice of Termination
Event"), together with a written statement of a Responsible Officer setting
forth the details thereof and any action with respect thereto taken or
contemplated to be taken by the Originator.
(b) Notice of Material Adverse Change.
----------------------------------- Promptly upon becoming aware
thereof, the Originator shall give the Buyer notice of any material adverse
change in the business, operations or financial condition of the Originator
which reasonably could affect adversely the collectibility of a material part of
the Receivables or the ability to service such Receivables. In order to verify
compliance with this Section 5.1(b) and otherwise verify compliance with this
Agreement, the Originator shall, unless the "Administrative Agent" under the
Receivables Purchase Agreement shall otherwise consent in writing, furnish the
following to the Buyer and the Administrative Agent:
27
<PAGE>
(i) as soon as practicable and in any event within 45 days following
the close of each fiscal quarter, excluding the last fiscal quarter, of
each fiscal year during the term of this Agreement, an unaudited
consolidated balance sheet of the Originator as at the end of such quarter
and unaudited consolidated statements of income and cash flows of the
Originator for such quarter and for the fiscal year through such quarter,
setting forth in comparative form the corresponding figures for the
corresponding quarter of the preceding fiscal year, all in reasonable
detail and certified by the chief financial officer or chief accounting
officer of the Originator, subject to adjustments of the type which would
occur as a result of a year-end audit, as having been prepared in
accordance with GAAP;
(ii) as soon as practicable and in any event within 90 days after
the close of each fiscal year during the term of this Agreement, a
consolidated balance sheet of the Originator as at the close of such fiscal
year and consolidated statements of income and cash flows of the Originator
for such fiscal year, setting forth in comparative form the corresponding
figures for the preceding fiscal year, all in reasonable detail and
certified by Coopers & Lybrand or other independent certified public
accountants of nationally recognized standing, whose certificate or opinion
accompanying such financial statements shall not contain any material
qualification not satisfactory to the Administrative Agent; and
(iii) together with the financial statements required in clauses (i)
and (ii) above, a certificate of the chief financial officer or chief
accounting officer of the Originator in the form of Exhibit D hereto
stating that no Termination Event or Potential Termination Event exists, or
if any Termination Event or Potential Termination Event exists, stating the
nature and status thereof.
(c) Preservation of Corporate Existence.
-------------------------------------- The Originator shall
preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign corporation in each jurisdiction
where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification would materially adversely affect
(i) the interests of the Buyer hereunder or (ii) the ability of the
Originator or the Servicer to perform their respective obligations under
the Facility Documents or under the Servicing Agreement.
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(d) Compliance with Laws.
--------------------- The Originator shall comply in all material
respects with all Laws applicable to the Originator, its business and
properties, and all Receivables related to the Purchased Assets, other than Laws
which would not affect the collectibility of the Receivables and the validity or
applicability of which the Originator is contesting in good faith.
(e) Enforceability of Obligations.
----------------------------- The Originator shall take such actions
as are reasonable and within its power to ensure that, with respect to each
Receivable, the obligation of any related Obligor to pay the unpaid balance of
such Receivable in accordance with the terms of the related Contract remains
legal, valid, binding and enforceable against such Obligor.
(f) Books and Records.
----------------- The Originator shall, to the extent practicable,
maintain and implement administrative and operating procedures (including,
without limitation, the ability to recreate Records evidencing the Receivables
in the event of the destruction of the originals thereof), and keep and maintain
all documents, books, Records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
Records adequate to permit the identification of all Related Security and
Collections and adjustments to each existing Receivable).
(g) Fulfillment of Obligations.
--------------------------- The Originator will duly observe and
perform, or cause to be observed or performed, all material obligations and
undertakings on its part to be observed and performed under or in connection
with the Receivables, including its obligations as initial Servicer, duly
observe and perform all material provisions, covenants and other promises
required to be observed by it under the Contracts related to the Receivables,
will do nothing to impair the rights, title and interest of the Buyer in and to
the Purchased Assets (except pursuant to the Credit and Collection Policy), and
shall pay when due (or contest in good faith) any taxes, including without
limitation any sales tax, excise tax or other similar tax or charge, payable in
connection with the Receivables and their creation and satisfaction.
(h) Customer List.
-------------- The Originator shall at all times maintain (or cause
the Servicer to maintain) current information (which may be stored on magnetic
tapes or disks) listing all Obligors under Contracts related to Receivables,
including the name, address, telephone number and account number of each such
Obligor. The Originator shall deliver or cause to be delivered a copy of such
list to the Buyer as soon as practicable following the Buyer's request.
(i) Copies of Reports, Filings, Opinions, etc.
------------------------------------------- If any of the securities
of the Originator are registered under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, the Originator shall furnish
to the Buyer, as soon as practicable after the filing thereof, copies of all
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proxy statements, financial statements, reports and other communications which
the Originator files with the Securities and Exchange Commission.
(j) Litigation.
---------- As soon as possible, and in any event within 15 days of a
Responsible Officer's knowledge thereof, the Originator shall give the Buyer
notice of the commencement of, or of a material threat of the commencement of,
an action, suit or proceeding against the Originator before any Official Body in
which there is a reasonable possibility of a decision which in the reasonable
judgment of the Originator, could reasonably be expected to have a material
adverse effect on the financial condition or results of operations of the
Originator or impair the ability of the Originator or the Servicer to perform
its obligations under this Agreement.
(k) Notice of Relocation.
--------------------- The Originator shall give the Buyer 45 days'
prior written notice of any relocation of its Chief Executive Office if, as a
result of such relocation, the applicable provisions of the UCC of any
applicable jurisdiction or other applicable Laws would require the filing of any
amendment of any previously filed financing statement or continuation statement
or of any new financing statement. The Originator will at all times maintain its
Chief Executive Office within a jurisdiction in the United States in which
Article Nine of the UCC (1972 or later revision) is in effect as of the Closing
Date or the date of any such relocation.
(l) Further Information.
-------------------- The Originator shall furnish or cause to be
furnished to the Buyer such other information with respect to the financial
position or business of the Originator or with respect to the Credit and
Collection Policy, the Receivables, the Contracts, the Related Security or the
Obligors, all as promptly as practicable and in such form and detail as the
Buyer may reasonably request.
(m) Treatment of Purchase.
--------------------- For accounting purposes, the Originator shall
treat each Purchase as a sale of the Purchased Assets sold on the related
Purchase Date. The Originator shall also maintain its records and books of
account in a manner which clearly reflects each such sale of the Purchased
Assets to the Buyer and the Purchase Price paid therefor.
(n) Fees, Taxes and Expenses.
------------------------ The Originator shall pay all filing fees,
stamp taxes, other taxes (other than taxes imposed directly on the overall net
income of the Buyer) and expenses, including the fees and expenses set forth in
Section 7.1 hereof, if any, which may be incurred on account of or arise out of
this Agreement and the documents and transactions entered into pursuant to this
Agreement.
(o) Administrative and Operating Procedures.
------------------------------------------ The Originator shall
maintain and implement administrative and operating procedures adequate to
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permit the identification of the Receivables and all collections and adjustments
attributable thereto and shall comply in all material respects with the Credit
and Collection Policy in regard to each Receivable and related Contract.
(p) ERISA Events.
------------
(i) Promptly upon becoming aware of the occurrence of any Event of
Termination which together with all other Events of Termination occurring
within the prior 12 months involve a payment of money by or a potential
aggregate liability of the Originator or any ERISA Affiliate or any
combination of such entities in excess of $5,000,000, the Originator shall
give the Buyer a written notice specifying the nature thereof, what action
the Originator or any ERISA Affiliate has taken and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto.
(ii) Promptly upon receipt thereof, the Originator shall furnish to
the Buyer copies of (i) all notices received by the Originator or any ERISA
Affiliate of the PBGC's intent to terminate any Plan or to have a trustee
appointed to administer any Plan; (ii) all notices received by the
Originator or any ERISA Affiliate from the sponsor of a Multiemployer Plan
pursuant to Section 4202 of ERISA involving a withdrawal liability in
excess of $5,000,000; and (iii) all funding waiver requests filed by the
Originator or any ERISA Affiliate with the Internal Revenue Service with
respect to any Plan, the accrued benefits of which exceed the present value
of the plan assets as of the date the waiver request is filed by more than
$5,000,000, and all communications received by the Originator or any ERISA
Affiliate from the Internal Revenue Service with respect to any such
funding waiver request.
(q) Collections.
----------- The Originator shall instruct all Obligors to cause all
Collections to be mailed to a Permitted Lockbox or electronically transferred to
a Lockbox Account.
(r) Notice of Ratings Change.
------------------------ The Originator shall promptly notify the
Buyer if the Originator's commercial paper, long term debt securities or any
other securities become rated by a nationally recognized rating agency or
agencies and, in such event, the Originator shall thereafter give the Buyer
prompt notice of any change in the ratings of the Originator's commercial paper,
long term debt securities or other securities by such rating agency or agencies.
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(s) Insurance.
--------- The Originator shall, and shall cause each of its
Consolidated Subsidiaries to, keep insured by financially sound and reputable
insurers all property of a character usually insured by corporations engaged in
the same or similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against by such corporations and
carry such other insurance as is usually carried by such corporations.
(t) No Other Business.
----------------- The Originator shall engage in no business other
than the business contemplated under its certificate of incorporation in effect
as of the Closing Date.
(u) Separate Identity.
----------------- The Originator shall take all actions required to
maintain the Buyer's status as a separate legal entity, including, without
limitation, (i) not holding the Buyer out to third parties, including in any
written financial statements, as other than an entity with assets and
liabilities distinct from the Originator and the Originator's Affiliates; (ii)
not holding itself out to be responsible for the debts of the Buyer or, other
than by reason of owning capital stock of the Buyer, for any decisions or
actions relating to the Buyer; (iii) prepare separate financial statements for
the Buyer (which shall disclose the effect of the transaction between the
Originator and the Buyer hereunder in accordance with GAAP); (iv) cause any
financial statements consolidated with those of the Buyer to contain language to
the effect that the Buyer is a separate legal entity with its own separate
creditors which, in any liquidation of the Buyer, will be entitled to be
satisfied out of the Buyer's assets prior to any value in the Buyer becoming
available to the Buyer's equity holders; (v) taking such other actions as are
necessary on its part to ensure that all corporate procedures required by its
and the Buyer's respective certificates of incorporation and by-laws are duly
and validly taken; (vi) keeping correct and complete records and books of
account and corporate minutes; and (vii) not acting in any other manner that
could foreseeably mislead others with respect to the Buyer's separate identity.
(v) Subordinated Note.
------------------- The Originator shall not transfer the
Subordinated Note to any Person other than the Security Agent pursuant to the
Amended and Restated Intercreditor Agreement.
SECTION 5.2. Negative Covenants of the Originator.
------------------------------------ During the term
of this Agreement, unless the Buyer shall otherwise consent in writing:
(a) Statement for and Treatment of Sales.
-------------------------------------- The Originator shall not
prepare any financial statements for financial accounting or reporting purposes
which shall account for the transactions contemplated herein in any manner other
than as a sale of the Purchased Assets to the Buyer.
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(b) No Rescissions or Modifications.
------------------------------- The Originator shall not rescind or
cancel any Receivable or related Contract or modify any terms or provisions
thereof or grant any Dilution Factors to an Obligor, except in accordance with
the Credit and Collection Policy or otherwise with the prior written consent of
the Buyer.
(c) No Liens.
-------- The Originator shall not cause any of the Receivables or
related Contracts, or any inventory or goods the sale of which may give rise to
a Receivable, or any Permitted Lockbox or Lockbox Account or any right to
receive any payments received therein or deposited thereto, to be sold, pledged,
assigned or transferred or to be subject to a Lien, other than the sale and
assignment of the Purchased Assets to the Buyer, the Lien created in connection
with the transactions contemplated by this Agreement and any Permitted Lien.
(d) Consolidations, Mergers and Sales of Assets.
-------------------------------------------- The Originator shall
not (i) consolidate or merge with or into any other Person, or (ii) sell, lease
or otherwise transfer all or substantially all of its assets to any other
Person; provided that the Originator may merge with another Person if (A) the
Originator is the corporation surviving such merger, and (B) immediately after
and giving effect to such merger, no Termination Event or Potential Termination
Event shall have occurred and be continuing.
(e) No Changes.
----------- The Originator shall not make any change in the
character of its business or in the Credit and Collection Policy, which change
would, in either case, impair the collectibility of any Receivable, or make any
material change in the Credit and Collection Policy without prior written
notification to, and prior written consent of, the Buyer, or change its name,
identity or corporate structure in any manner which would make any financing
statement or continuation statement filed in connection with this Agreement or
the transactions contemplated hereby seriously misleading within the meaning of
Section 9-402(7) of the UCC of any applicable jurisdiction or other applicable
Laws unless it shall have given the Buyer at least 30 days' prior written notice
thereof and unless prior thereto it shall have caused such financing statement
or continuation statement to be amended or a new financing statement to be filed
such that such financing statement or continuation statement would not be
seriously misleading.
(f) Change in Payments or Deposits of Payments.
------------------------------------------ The Originator shall not
add or terminate any Person as a Permitted Lockbox Bank from those Persons
listed in the Receivables Purchase Agreement, make or permit any change in the
location of any Permitted Lockbox or the location or account number of any
Lockbox Account, or make any change in the instructions to its Obligors
regarding payments to be made to the Originator or payments to be made to any
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Permitted Lockbox, unless the Buyer shall have been given at least 10 Business
Days of prior written notice of such change.
(g) ERISA Matters.
-------------- The Originator shall not permit any event or
condition which is described in any of clauses (i) through (iv), clause (vi) or
clause (viii) of the definition of "Event of Termination" to occur or exist with
respect to any Plan or Multiemployer Plan if such event or condition, together
with all other events or conditions described in the definition of Event of
Termination occurring within the prior 12 months, involve the payment of money
by or an incurrence of liability of the Originator or any ERISA Affiliate in an
amount in excess of $10,000,000.
ARTICLE VI
TERMINATION EVENTS
SECTION 6.1. Term.
---- This Agreement shall commence as of the date of
execution and delivery hereof and shall continue in full force and effect until
the earlier of (a) the termination of the Receivables Purchase Agreement unless
extended by the Seller in its sole discretion and (b) upon the occurrence of any
of the following events: the Buyer or the Originator shall (i) become insolvent,
(ii) experience an Event of Bankruptcy, or (iii) become unable for any reason to
convey or reconvey Receivables in accordance with the provisions of this
Agreement (any such date set forth in clause (a) or (b) hereof being a
"Termination Date"); provided, however, that (i) the termination of this
Agreement pursuant to this Section 6.1 shall not discharge any Person from any
obligations incurred prior to such termination, including, without limitation,
any obligations to repurchase Receivables sold prior to such termination
pursuant to Section 2.5 or 2.7 hereof and (ii) the indemnification and payment
provisions set forth in Article VII hereof and the provisions and agreement set
forth in Section 7.20 hereof shall be continuing and shall survive termination
of this Agreement. Neither the Originator nor the Buyer will extend the term of
this Agreement with an intent to mitigate losses on the Receivables previously
sold by the Originator to the Buyer hereunder.
SECTION 6.2. Effect of Termination.
---------------------- No termination or rejection or
failure to assume the executory obligations of this Agreement in the Event
of Bankruptcy of the Originator or the Buyer shall be deemed to impair or
affect the obligations pertaining to any executed sale or executed obligations,
including, without limitation, pretermination breaches of representations
and warranties by the Originator or the Buyer.
ARTICLE VII
MISCELLANEOUS
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SECTION 7.1. Expenses.
-------- The Originator agrees, upon receipt of a written
invoice, to pay or cause to be paid, and to save the Buyer and each of its
assignees of Purchased Assets harmless against liability for the payment of, all
reasonable out-of-pocket expenses (including, without limitation, attorneys',
accountant's and other third parties' fees and expenses (including the allocated
costs of internal counsel), any filing fees and expenses incurred by officers or
employees of the Buyer but excluding salaries and similar overhead costs of the
Buyer which are incurred notwithstanding the execution and performance of this
Agreement) incurred by or on behalf of the Buyer (i) in connection with the
negotiation, execution, delivery and preparation of the Facility Documents and
the transactions contemplated by or undertaken pursuant to or in connection
herewith or therewith (including, without limitation, the perfection or
protection of the Purchased Assets and (ii) from time to time (a) relating to
any requested amendments, waivers or consents under the Facility Documents, (b)
arising in connection with the Buyer's enforcement or preservation of its rights
(including, without limitation, the perfection and protection of the Purchased
Assets) under the Facility Documents, or (c) arising in connection with any
audit, dispute, disagreement, litigation or preparation for litigation involving
the Facility Documents.
SECTION 7.2. Indemnity for Taxes, Reserves and Expenses.
-------------------------------------------
(a) If after the date hereof, the adoption of any Law or bank regulatory
guideline or any amendment or change in the interpretation of any existing or
future Law or bank regulatory guideline by any Official Body charged with the
administration, interpretation or application thereof, or the compliance with
any directive of any Official Body (in the case of any bank regulatory
guideline, whether or not having the force of Law):
(i) shall subject any Buyer and any of its successors and assigns and
any permitted assigns (collectively, the "Indemnified Parties") to any
cost, liability, tax, duty or other charge with respect to the Facility
Documents, the Purchased Assets, the Receivables or payments of amounts due
thereunder, or shall change the basis of taxation of payments to any
Indemnified Party of amounts payable in respect of the Facility Documents,
the Purchased Assets, the Receivables or payments of amounts due thereunder
or its obligation to advance funds in respect of the Facility Documents,
the Purchased Assets or the Receivables (except for changes in the rate of
general corporate, franchise, net income or other income tax imposed on
such Indemnified Party by the jurisdiction in which such Indemnified
Party's principal executive office is located); or
35
<PAGE>
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System) against assets of, deposits with or for the account of, or credit
extended by, any Indemnified Party or shall impose on any Indemnified Party
or on the United States market for certificates of deposit or the London
interbank market any other condition affecting the Facility Documents, the
Purchased Assets, the Receivables or payments of amounts due thereunder or
its obligation to advance funds in respect of the Facility Documents, the
Purchased Assets or the Receivables; or
(iii) imposes upon any Indemnified Party any other expense
(including, without limitation, reasonable attorneys' fees and expenses,
and expenses of litigation or preparation therefor in contesting any of the
foregoing) with respect to the Facility Documents, the Purchased Assets,
the Receivables or payments of amounts due thereunder or its obligation to
advance funds in respect of the Facility Documents, the Purchased Assets or
the Receivables;
and the result of any of the foregoing is to increase the cost to such
Indemnified Party with respect to the Facility Documents, the Purchased Assets,
the Receivables, the obligations thereunder, or the funding of any purchases
thereunder, by an amount deemed by such Indemnified Party to be material, then,
within 10 days after demand by the Buyer or other Indemnified Party, the
Originator shall pay or cause to be paid to the Buyer or such other Indemnified
Party such additional amount or amounts as will compensate such Indemnified
Party for such increased cost.
(b) If any Indemnified Party shall have determined that, after the date
hereof, the adoption of any applicable Law or bank regulatory guideline
regarding capital adequacy, or any change therein, or any change in the
interpretation thereof by any Official Body, or any directive regarding capital
adequacy (in the case of any bank regulatory guideline, whether or not having
the force of law) of any such Official Body, has or would have the effect of
reducing the rate of return on capital of such Indemnified Party (or its parent)
as a consequence of such Indemnified Party's obligations hereunder or with
respect hereto to a level below that which such Indemnified Party (or its
parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Indemnified Party to be material, then from time to time,
within 10 days after demand by any Indemnified Party the Originator shall pay to
such Indemnified Party such additional amount or amounts as will compensate such
Indemnified Party (or its parent) for such reduction.
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<PAGE>
(c) The Buyer will promptly notify the Originator of any event of which
it has knowledge, occurring after the date hereof, which will entitle an
Indemnified Party to compensation pursuant to this Section 7.2. A notice by the
Buyer on behalf of an Indemnified Party claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In determining such
amount, the Buyer may use any reasonable averaging and attributing methods.
SECTION 7.3. Indemnity
---------
(a) The Originator agrees to indemnify, defend and save harmless the
Buyer and each of its directors, officers, shareholders, employees, agents,
successors and assigns (including any assignees of Purchased Assets) other than
for the indemnitee's own gross negligence or willful misconduct, forthwith on
demand, from and against any and all losses, claims, damages, liabilities, costs
and expenses (including, without limitation, all reasonable attorneys' fees and
expenses (including the allocated costs of internal counsel), expenses incurred
by their respective credit recovery groups (or any successors thereto) and
expenses of settlement, litigation or preparation therefor) which the Buyer may
incur or which may be asserted against the Buyer by any Person (including,
without limitation, any Obligor or any other Person whether on its own behalf or
derivatively on behalf of the Originator) arising from or incurred in connection
with (i) any breach of a representation, warranty or covenant by the Originator
made or deemed made hereunder or under the other Facility Documents or in
connection herewith or therewith or the transactions contemplated hereby or
thereby or any statements made by any Responsible Officer of the Originator in
connection herewith or therewith or the transactions contemplated hereby or
thereby which shall have been incorrect in any material respect when made, (ii)
any action taken or, if the Originator is otherwise obligated to take action,
failed to be taken, by the Originator with respect to the Purchased Assets or
any of its obligations hereunder or under the other Facility Documents (whether
in its capacity as Originator or Servicer), including, without limitation, the
Originator's failure to comply with an applicable law or regulation, (iii) any
failure to vest and maintain vested in the Buyer an undivided ownership interest
in the Receivables included in the Purchased Assets, free and clear of any Lien
(other than (x) the Lien arising in connection with this Agreement and (y) any
Permitted Lien) or other adverse claim, whether existing at the time of Purchase
of such Receivables or at any time thereafter, (iv) any failure to pay when due
any taxes, including without limitation any sales tax, excise tax or other
similar tax or charge payable in connection with the Receivables and their
creation or satisfaction, (v) any products liability claim or claim of
infringement of proprietary rights, in any such case, arising out of or which
relates to the Purchased Assets in the Receivables or the related Contracts,
(vi) any dispute, suit, action, claim, proceeding or governmental investigation,
pending or threatened, whether based on statute, regulation or order, on tort,
on contract or otherwise, before any Official Body which arises out of or
relates to the Facility Documents, the Purchased Assets in the Receivables or
related Contracts, or the use of the proceeds of the sale of the Purchased
Assets in the Receivables pursuant hereto, (vii) any reductions in the amount of
a Purchased Receivable the Obligor of which is a Government Obligor, and the
Related Security and Collections with respect thereto, as the result of
appropriation or other authorized funding by the applicable governmental entity,
or the lack of such appropriation or funding, or the inability to collect any
37
<PAGE>
amount from a Government Obligor due to the operation of any applicable statute
or otherwise, or (viii) the existence of any provision in any Contract that may
(x) require the related Obligor to consent to the transfer, sale or assignment
of the rights of the Originator under such Contracts other than the right of the
Originator to sell, distribute or otherwise provide goods or services to such
Obligor, or (y) restrict the ability of the Buyer to exercise its rights under
this Agreement, including without limitation, its right to review such Contract.
(b) Promptly upon receipt by any indemnified party under this Section
7.3 of notice of the commencement of any suit, action, claim, proceeding or
governmental investigation against such indemnified party, such indemnified
party shall, if a claim in respect thereof is to be made against the Originator
hereunder, notify the Originator in writing of the commencement thereof. The
Originator may participate in and assume the defense of any such suit, action,
claim, proceeding or investigation at its expense, and no settlement thereof
shall be made without the approval of the Originator and the indemnified party.
The approval of the Originator will not be unreasonably withheld or delayed.
After notice from the Originator to the indemnified party of its intention to
assume the defense thereof with counsel reasonably satisfactory to the Buyer,
and so long as the Originator so assumes the defense thereof in a manner
reasonably satisfactory to the Buyer, the Originator shall not be liable for any
legal expenses of counsel unless there shall be a conflict between the interests
of the Originator and the indemnified party.
SECTION 7.4. Holidays.
-------- Except as may be provided in this Agreement to the
contrary, if any payment due hereunder shall be due on a day which is not a
Business Day, such payment shall instead be due the next succeeding
Business Day.
SECTION 7.5. Records.
------- All amounts calculated or due
hereunder shall be determined from the records of the Buyer, which
determinations shall be conclusive absent manifest error.
SECTION 7.6. Amendments and Waivers.
---------------------- No amendment or modification of,
supplement to, or waiver of, the provisions of, or consent to a departure
from the due performance of the obligations of the Originator under, this
Agreement may be made without the prior written consent of the
"Administrative Agent" under the Receivables Purchase Agreement. Any such
agreement, waiver or consent must be in writing and shall be effective only
to the extent specifically set forth in such writing. Any waiver of any
provision hereof, and any consent to a departure by the Originator from
any of the terms of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which given.
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<PAGE>
SECTION 7.7. Term of Agreement.
----------------- This Agreement shall terminate following
the Expiration Date upon the final termination of the Receivables Purchase
Agreement; provided, however, that (i) the rights and remedies of the Buyer
with respect to any representation and warranty made or deemed to be made by
the Originator pursuant to this Agreement, (ii) the indemnification and
payment provisions set forth in Sections 7.1, 7.2 and 7.3 hereof and (iii) the
agreement set forth in Section 7.20 hereof shall be continuing and shall
survive any termination of this Agreement.
SECTION 7.8. No Implied Waiver; Cumulative Remedies.
--------------------------------------- No course of dealing
and no delay or failure of the Buyer in exercising any right, power or
privilege under the Facility Documents shall affect any other or future exercise
thereof or the exercise of any other right, power or privilege; nor shall any
single or partial exercise of any such right, power or privilege or any
abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power or
privilege. The rights and remedies of the Buyer under the Facility Documents are
cumulative and not exclusive of any rights or remedies which the Buyer would
otherwise have.
SECTION 7.9. No Discharge.
------------ The obligations of the Originator under the
Facility Documents shall be absolute and unconditional and shall remain in
full force and effect without regard to, and shall not be released,
discharged or in any way affected by (a) any exercise or nonexercise of any
right, remedy, power or privilege under or in respect of the Facility
Documents or applicable Law, including, without limitation, any failure to
set-off or release in whole or in part by the Buyer of any balance of any
deposit account or credit on its books in favor of the Originator or any waiver,
consent, extension, indulgence or other action or inaction in respect of any
thereof, or (b) any other act or thing or omission or delay to do any other act
or thing which would operate as a discharge of the Originator as a matter of
Law.
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SECTION 7.10. Notices.
------- All notices under Section 6.2 hereof shall be
given to the Originator by telephone or facsimile, confirmed by first-class
mail, first-class express mail or courier, in all cases with charges prepaid.
All other notices, requests, demands, directions and other communications
(collectively "notices") under the provisions of this Agreement shall be in
writing (including telexed or facsimile communication) unless otherwise
expressly permitted hereunder and shall be sent by first-class mail,
first-class express mail, or by telex or facsimile with confirmation in writing
mailed first-class mail, in all cases with charges prepaid. Any such properly
given notice shall be effective when received. All notices shall be sent to the
applicable party at the Office stated on the signature page hereof or in
accordance with the last unrevoked written direction from such party to the
other parties hereto.
SECTION 7.11. Severability.
------------ The provisions of this Agreement are intended
to be severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall,
as to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of such provision in any other jurisdiction or the remaining provisions hereof
in any jurisdiction.
SECTION 7.12. Governing Law; Submission to Jurisdiction.
-------------------------------------------- THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. The Originator hereby submits to the nonexclusive
jurisdiction of the courts of the State of New York and the courts of the
United States located in the State of New York for the purpose of
adjudicating any claim or controversy arising in connection with any of the
Facility Documents or any of the transactions contemplated thereby, and for such
purpose, to the extent it may lawfully do so, waives any objection which it may
now or hereafter have to such jurisdiction or to venue therein and any claim of
inconvenient forum with respect thereto. Nothing in this Section 7.12 shall
affect the right of the Buyer to bring any action or proceeding against the
Originator or its property in the courts of other jurisdictions.
SECTION 7.13. Prior Understandings.
---------------------- This Agreement sets forth the
entire understanding of the parties relating to the subject matter
hereof, and supersedes all prior understandings and agreements, whether
written or oral.
SECTION 7.14. Survival.
-------- All representations and warranties of the
Originator contained herein or made in connection herewith shall survive the
making thereof, and shall not be waived by the execution and delivery of this
Agreement, any investigation by the Buyer, the purchase or payment in
respect of any Purchased Assets, or any other event or condition whatsoever
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<PAGE>
(other than a written waiver complying with Section 7.6 hereof). The covenants
and agreements contained in or given pursuant to this Agreement
(including, without limitation, those contained in Article V hereof) shall
continue in full force and effect until the termination of this Agreement.
SECTION 7.15. Counterparts.
------------ This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
SECTION 7.16. Set-Off.
------- In case a Termination Event shall occur and be
continuing, the Buyer and, to the fullest extent permitted by Law, the holder
of any assignment of the Buyer's rights hereunder pursuant to any security
agreement or assignment agreement, shall each have the right, in addition to
all other rights and remedies available to it, without notice to the Originator,
to set-off against and to appropriate and apply to any amount owing by the
Originator hereunder which has become due and payable, any debt owing to,
and any other funds held in any manner for the account of, the Buyer or any such
holder of any assignment, including, without limitation, all funds in all
deposit accounts (whether time or demand, general or special, provisionally
credited or finally credited, or otherwise) now or hereafter maintained by the
Originator with the Buyer under any such security agreement or assignment
agreement. Such right shall exist whether or not such debt owing to, or funds
held for the account of, the Originator is or are matured other than by
operation of this Section 7.16 and regardless of the existence or adequacy of
any collateral, guaranty or any other security, right or remedy available to the
Buyer or any holder. Nothing in this Agreement shall be deemed a waiver or
prohibition or restriction of the Buyer's or any holder's rights of set-off or
other rights under applicable Law.
SECTION 7.17. Successors and Assigns.
---------------------- This Agreement shall be binding on
the parties hereto and their respective successors and assigns; provided,
however, that the Originator may not assign any of its rights or delegate any
of its duties hereunder without the prior written consent of the
"Administrative Agent" under the Receivables Purchase Agreement. No
provision of this Agreement shall in any manner restrict the ability of the
Buyer to assign, participate, grant security interests in, or otherwise
transfer any portion of the Purchased Assets owned by the Buyer. The
Administrative Agent and the Owners under the Receivables Purchase Agreement
shall be third-party beneficiaries of this Agreement.
SECTION 7.18. Confidentiality.
--------------- The Buyer shall keep confidential any
information provided by the Originator and clearly identified as confidential,
provided that nothing herein shall prevent the Buyer from disclosing such
information (i) to its officers, directors, employees, agents, attorneys
and accountants who have a need to know such information in accordance with
customary banking or financial practices and who receive such information
41
<PAGE>
having been made subject to the restrictions set forth in this Section,(ii)
upon the order of a court or administrative agency, (iii) upon the request or
demand of any regulatory agency or authority having jurisdiction over
such party, (iv) which has become publicly available without breach of any
agreement between the parties hereto, (v) as necessary for the exercise of
any remedy hereunder, (vi) subject to provisions similar to those contained
in this Section, to any Eligible Assignee (as defined in the
Receivables Purchase Agreement), any commercial paper dealer providing funding
to any assignee of the Buyer, any APA Lending Bank (as defined in the
Receivables Purchase Agreement), and any other institution that provides
liquidity or enhancement for any assignee of the Buyer, or (vii) any nationally
recognized rating agency.
SECTION 7.19. Payments Set Aside.
------------------
To the extent that the Originator or any Obligor makes a payment to the Buyer or
the Buyer exercises its rights of set-off and such payment or set-off or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by, or is required to be
refunded, rescinded, returned, repaid or otherwise restored to the Originator,
such Obligor, a trustee, a receiver or any other Person under any Law,
including, without limitation, any bankruptcy law, any state or federal law,
common law or equitable cause, the obligation or part thereof originally
intended to be satisfied shall, to the extent of any such restoration, be
reinstated, revived and continued in full force and effect as if such payment
had not been made or such set-off had not occurred. The provisions of this
Section 7.19 shall survive the termination of this Agreement.
SECTION 7.20. No Petition.
------------ The Originator agrees that, prior to the
date which is one year and five days after the date upon which all
obligations of the Buyer to the Originator hereunder and under the
Subordinated Note are paid in full and all indebtedness relating to the
Purchased Assets of any assignee of the Buyer are paid in full, it will not
institute against, or join any other Person in instituting against, the Buyer
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other similar proceeding under the laws of the United States or
any state of the United States.
SECTION 7.21. Third-Party Beneficiary.
----------------------- The parties hereto acknowledge
that the Administrative Agent, for the benefit of the Owners, is an intended
third-party beneficiary of this Agreement, entitled to enforce the provisions
hereof.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above set forth.
LEXMARK RECEIVABLES CORPORATION
By: /s/ Gary E. Morin
----------------------------
Name: Gary E. Morin
Title: President
Address for Notices:
Lexmark Receivables Corporation
Gary E. Morin /s/
1325 Airmotive Way, Suite 130
Reno, Nevada 89502
Attention: Ms. Janice C. George
Tel. No.: (702) 322-2221
Fax No.: (702) 322-8808
LEXMARK INTERNATIONAL, INC.
By: /s/ Gary E. Morin
----------------------------
Name: Gary E. Morin
Title: Vice President & CFO
Address for Notices:
Lexmark International, Inc.
740 New Circle Road NW
Building 1, Dept. 857
Lexington, KY 40550
Attention: Richard A. Pelini
Tel. No.: (606) 232-7449
Fax No.: (606) 232-5137
With a copy to:
Lexmark International, Inc.
740 New Circle Road NW
Building 4, Dept. 742
Lexington, KY 40550
Attention: Vincent J. Cole, Esq.
Tel. No.: (606) 232-2700
Fax No.: (606) 232-3128
43
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[Purchase Agreement Signature Page]
44
<PAGE>
EXHIBIT A
---------
[RESERVED]
1
<PAGE>
EXHIBIT B
---------
SCHEDULE OF LITIGATION
----------------------
None
1
<PAGE>
EXHIBIT C
---------
SCHEDULE OF NAMES, LOCATIONS OF OFFICES AND RECORDS
---------------------------------------------------
(i) Originator's Chief Executive Office:
-----------------------------------
One Lexmark Centre Drive
740 New Circle Road NW
Lexington, KY 40550
(ii) Domestic Subsidiaries of the Originator:
---------------------------------------
Lexmark Asia Pacific Corporation, Inc. (Delaware)
Lexmark Espana, L.L.C. (Delaware)
Lexmark Europe Holding Company I, L.L.C. (Delaware)
Lexmark Europe Holding Company II, L.L.C. (Delaware)
Lexmark Europe Trading Corporation, Inc. (Delaware)
Lexmark Foreign Sales Corporation (Barbados)
Lexmark International De Argentina, Inc. (Delaware)
Lexmark International De Mexico, Inc. (Delaware)
Lexmark International Trading Corp. (Delaware)
Lexmark Mexico Holding Company, Inc. (Delaware)
Lexmark Nordic, L.L.C. (Delaware)
Lexmark Receivables Corporation (Delaware)
Lexmark Tooling Corporation (Delaware)
Divisions of Originator:
-----------------------
None
(iii) Office where Originator's Records Located:
One Lexmark Centre Drive
740 New Circle Road NW
Lexington, KY 40550
(iv) Originator's Trade Names:
------------------------
None
(v) Other Names and Mergers of Originator:
-------------------------------------
o Incorporated as New York Libra Corporation on 5/25/90.
o Changed name to IBM Information Products Corporation on
12/13/90.
o Changed name to Lexmark International, Inc. on 3/27/91.
o On 10/29/93, Lexmark Europe Corporation, Inc., a wholly-owned
subsidiary of Lexmark International, Inc., was merged with
and into Lexmark International, Inc., with Lexmark
1
<PAGE>
International, Inc. being the surviving entity.
2
<PAGE>
EXHIBIT D
---------
FORM OF COMPLIANCE CERTIFICATE
------------------------------
Certificate of
[Responsible Officer]
I, the undersigned [Responsible Officer] of __________ (the "Originator")
do hereby CERTIFY pursuant to Section 5.1(b)(iii) of the Purchase Agreement,
dated as of March 31, 1997 (as amended, supplemented or otherwise modified and
in effect, the "Purchase Agreement"), by and between the Originator and the
Buyer, that on and as of the date hereof, there exists no Termination Event or
Potential Termination Event.
Capitalized terms not otherwise defined herein have the
meanings assigned to them in the Purchase Agreement.
Date: ------------- ------------------------------
Name:
Title:
1
<PAGE>
EXHIBIT E
---------
[RESERVED]
1
<PAGE>
EXHIBIT F
---------
CREDIT AND COLLECTION POLICY
----------------------------
[Included as Exhibit A in Receivables Purchase Agreement]
1
<PAGE>
EXHIBIT G
---------
[FORM OF SUBORDINATED NOTE]
LEXMARK RECEIVABLES CORPORATION
SUBORDINATED NOTE
LEXMARK RECEIVABLES CORPORATION, a Delaware corporation (the "Issuer"), for
value received, hereby promises to pay to Lexmark International, Inc., a
Delaware corporation and the sole shareholder of the Issuer (the "Holder"), or
its registered assigns, the aggregate amount of all principal sums of the
Subordinated Loans which shall have been made from time to time under the
Agreement (as defined below), upon the earlier to occur of (i) April 14, 1998,
or (ii) the date upon which all Receivables (as defined in the Agreement) have
been collected or charged off as uncollectible (the "Stated Maturity") and to
pay interest (computed on the basis of a 360-day year and the actual number of
days elapsed) on the outstanding amount of each Subordinated Loan, such interest
being payable on May 20, 1997 and the fourteenth Business day of each month
thereafter and on the Stated Maturity (each, a "Payment Date") until the Stated
Maturity, at a rate per annum equal to then-current LIBOR (as defined below)
plus .45%. For purposes of this Subordinated Note (the "Note"), "LIBOR" shall
mean, for each Payment Date, a rate per annum equal to (i) the rate for
Eurodollar deposits having a one-month maturity that appears on Telerate Page
3750 as of 11:00 a.m. (London time) on the second Business Day before the
immediately preceding Payment Date (or in the case of the first Payment Date, on
the date hereof) or (ii) if such rate does not appear on Telerate Page 3750 as
of 11:00 a.m. (London time) on the second LIBOR Business Day before any Payment
Date, LIBOR will be the arithmetic mean (if necessary rounded upwards to the
nearest whole multiple of .00001%) of the rates (expressed as percentages per
annum) for Eurodollar deposits having a one-month maturity that appear on
Reuters Monitor Money Rates Page LIBO ("Reuters Page LIBO") as of 11:00 a.m.
(London time) on such second LIBOR Business Day. A "LIBOR Business Day" shall
mean any business day on which commercial banks are open for business in Dollar
deposits in London.
Principal of this Note shall be payable on each Payment Date
to the extent of the difference between (i) amounts received or allocated to the
Issuer upon the sale of an interest in additional Receivables pursuant to the
Receivables Purchase Agreement (as defined below) and Collections received by
the Issuer pursuant to the Receivables Purchase Agreement on the Issuer's
retained interest in the Receivables and (ii) the amount required to be (a)
applied to pay the Purchase Price of additional Purchased Assets pursuant to the
1
<PAGE>
Purchase Agreement and (b) used or retained by the Issuer as capital to carry
out its other obligations and satisfy its covenants under the Receivables
Purchase Agreement and the Purchase Agreement. In addition, the principal amount
of this Note is subject to prepayment in full or in part at the option of the
Issuer at any time without a premium.
This Note is issued under the Purchase Agreement dated as of March 31,
1997, between the Issuer and the Holder (as amended, restated, supplemented or
otherwise modified from time to time, the "Agreement") and evidences the
Subordinated Loans made from time to time by the Holder, in its sole discretion,
pursuant to Section 2.2(d) of the Agreement. This Note represents all or a
portion of the Purchase Price for Receivables purchased by the Issuer pursuant
to the terms of the Agreement. This Subordinated Note is included as a "Purchase
Document" under the Receivables Purchase Agreement dated as of March 31, 1997
(the Receivables Purchase Agreement") by and among the Issuer, as seller, the
Holder, as servicer and in its individual capacity, Delaware Funding Corporation
and MGT, as administrative agent. This Note is a revolving note. The Issuer
hereof may, at any time, repay principal in whole or in part and the Holder, at
its option, may advance additional amounts hereon from time to time as
additional Subordinated Loans in accordance with the terms of the Purchase
Agreement. Each capitalized term used herein which is defined in the Agreement
shall have the meaning ascribed to it in the Agreement.
Payments of the principal of and interest on this Subordinated Note (the
"Note") will be made in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts
by check mailed to, or wire transfer in federal funds to the account of, the
Holder as directed by the Holder. If any payment on this Note shall remain
unpaid on the due date thereof, the same shall thereafter be payable with
interest thereon (to the extent permitted by law) at a rate equal to
then-current LIBOR plus 2.45% (the "Default Rate") from such due date to the
date of payment thereof. The Holder shall enter on the grid attached hereto, as
Attachment A, information reflecting the date and the amount of each
Subordinated Loan made under the Agreement and the date and amount of each
principal payment made hereon.
The Issuer shall be in "default" under this Note if (i) Issuer shall fail
to pay when due any interest or principal under this Note and such failure shall
continue for seven (7) Business Days or (ii) The Issuer shall be the subject of
an Event of Bankruptcy. If the Issuer is in "default" hereunder, the Holder
shall make no further Subordinated Loans to the Issuer and all principal and
accrued but unpaid interest on this Note shall become immediately due and
payable.
Payments of principal and interest by the Issuer shall be made only from
assets of the Issuer, including Collections received by the Issuer, and not
2
<PAGE>
required to be applied to the Purchase Price of additional Receivables or to be
used or retained to satisfy the Issuer's obligations and covenants under the
Receivables Purchase Agreement (such available funds, collectively, "Funds"). To
the extent Funds are not available, payments of interest or principal shall not
be considered due until Funds become available. In such event, interest shall
continue to accrue on the unpaid principal sums of this Note until payment is
made at the "Default Rate" provided above.
The Holder of this Note, by its acceptance hereof, hereby covenants and
agrees that it will not at any time institute against the Issuer any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law.
This Note shall be governed by, and construed in accordance with, the laws
and decisions of the State of New York (including, without limitation, Section
5-1401 of the General Obligations Law of New York but otherwise without regard
to conflicts of laws principles).
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed manually by its undersigned officer duly authorized thereunto.
Dated: April 15, 1997
LEXMARK RECEIVABLES CORPORATION
By: ----------------------------
Name:
Title:
[Subordinated Note Signature Page]
4
<PAGE>
ATTACHMENT A
To Subordinated Note
Dated April 15, 1997
--------------------
Date Principal Principal Balance
Amount Amount Outstanding
Advanced Paid
1. 4/15/97 $49,595,718.96 $ ----------- $ -------------
2. ------- ------------- ----------- -------------
3. ------- ------------- ----------- -------------
4. ------- ------------- ----------- -------------
5. ------- ------------- ----------- -------------
6. ------- ------------- ----------- -------------
7. ------- ------------- ----------- -------------
8. ------- ------------- ----------- -------------
9. ------- ------------- ----------- -------------
10.------- ------------- ----------- -------------
5
<PAGE>
EXHIBIT H
---------
MATERIAL ADVERSE CHANGES
------------------------
None
1
<PAGE>
EXHIBIT I
---------
to
Purchase Agreement
LEXMARK INTERNATIONAL, INC.
OFFICERS' CERTIFICATE
I, Vincent J. Cole, the undersigned Vice President and Secretary of Lexmark
International, Inc., a Delaware corporation ("Lexmark"), DO HEREBY CERTIFY that:
11. Attached hereto as Annex A is a true and complete copy of the By-laws
of Lexmark as in effect on the date hereof.
12. Attached hereto as Annex B is a true and complete copy of the
resolutions duly adopted by the Board of Directors of Lexmark on February 13,
1997, authorizing the execution, delivery and performance of the Purchase
Agreement, dated as of March 31, 1997 (the "Purchase Agreement"), by and between
Lexmark, as Originator, and Lexmark Receivables Corporation ("LRC"), as Buyer,
and the Receivables Purchase Agreement, dated as of March 31, 1997 (the "RPA"),
by and among LRC, as Seller (the "Seller"), Morgan Guaranty Trust Company of New
York, as Administrative Agent for the Owners, Lexmark, as Servicer and in its
individual capacity, and Delaware Funding Corporation, as Buyer, and each of the
other documents mentioned therein and approving the transactions contemplated
thereunder, which resolutions have not been revoked, modified, amended or
rescinded and are still in full force and effect as of the date hereof.
13. The below-named persons are, on and as of the date hereof, officers or
employees of LRC holding the respective offices or positions below set opposite
their names, and the below-named officers are authorized to execute the Purchase
Agreement and the RPA and any other documents to be delivered by Lexmark
thereunder, and the signatures below set opposite their names are their genuine
signatures:
Name Office Signature
Gary E. Morin Vice President & ---------------------
Chief Financial ---------------------
Officer ---------------------
Terence P. Chin Treasurer ---------------------
David L. Goodnight Controller ---------------------
Richard A. Pelini Assistant Treasurer ---------------------
Michelle R. Cabbage Treasury Financial Analyst---------------------
Katherine C. Winebrenner Cash Manager ---------------------
1
<PAGE>
WITNESS my hand and seal of Lexmark as of this ____ day of April, 1997.
By:___________________________
Vincent J. Cole
Vice President and Secretary
I, Terence P. Chin, the undersigned Treasurer of Lexmark, DO HEREBY CERTIFY
that:
1. Vincent J. Cole is the duly elected and qualified Vice President and
Secretary of Lexmark and the signature above is his genuine signature.
2. All of the terms, covenants, agreements and conditions of the Purchase
Agreement and the RPA to be complied with and performed by Lexmark at or before
the date hereof have been complied with and performed.
3. The representations and warranties of Lexmark, in whatever capacity,
contained in the Purchase Agreement and the RPA are true and correct as if made
on and as of the date hereof.
4. Lexmark has not filed or consented to the filing of any UCC-1 Financing
Statement relating to the Receivables sold and to be sold pursuant to the
Purchase Agreement and the RPA and, to the best of Lexmark's knowledge, no such
Financing Statements have been filed other than Financing Statements naming (i)
Lexmark as "debtor" and LRC as "secured party", (ii) LRC as "debtor" and Morgan
Guaranty Trust Company of New York, as Administrative Agent, as "secured party",
(iii) Lexmark as "debtor" and Morgan Guaranty Trust Company of New York, as
Security Agent, as "secured party" and (iv) LRC as "debtor" and Morgan Guaranty
Trust Company of New York, as Security Agent, as "secured party."
5. No Termination Event and no event which with the giving of notice or
passage of time or both would constitute a Termination Event has occurred or is
continuing.
Capitalized terms used herein and not otherwise defined shall have the
meanings specified in the RPA.
WITNESS my hand this ____ day of April, 1997.
By:---------------------
Terence P. Chin
Treasurer
2
<PAGE>
LEXMARK RECEIVABLES CORPORATION
OFFICERS' CERTIFICATE
---------------------
I, Vincent J. Cole, the undersigned Vice President and Secretary of Lexmark
Receivables Corporation, a Delaware corporation ("LRC"), DO HEREBY CERTIFY that:
6. Attached hereto as Annex A is a true and complete copy of the By-laws
of LRC as in effect on the date hereof.
7. Attached hereto as Annex B is a true and complete copy of the
resolutions duly adopted by the Board of Directors of LRC on March 24, 1997,
authorizing the execution, delivery and performance of the Purchase Agreement,
dated as of March 31, 1997 (the "Purchase Agreement"), by and between Lexmark
International, Inc. ("Lexmark"), as Originator, and LRC, as Buyer, and the
Receivables Purchase Agreement, dated as of March 31, 1997 (the "RPA"), by and
among LRC, as Seller (the "Seller"), Morgan Guaranty Trust Company of New York,
as Administrative Agent for the Owners, Lexmark, as Servicer and in its
individual capacity, and Delaware Funding Corporation, as Buyer, and each of the
other documents mentioned therein and approving the transactions contemplated
thereunder, which resolutions have not been revoked, modified, amended or
rescinded and are still in full force and effect as of the date hereof.
8. The below-named persons are, on and as of the date hereof, officers or
employees of LRC holding the respective offices or positions below set opposite
their names, and the below-named officers are authorized to execute the Purchase
Agreement and the RPA and any other documents to be delivered by LRC thereunder,
and the signatures below set opposite their names are their genuine signatures:
Name Office Signature
Gary E. Morin Vice President & ---------------------
Chief Financial ---------------------
Officer ---------------------
Terence P. Chin Treasurer ---------------------
David L. Goodnight Controller ---------------------
Richard A. Pelini Assistant Treasurer ---------------------
Michelle R. Cabbage Treasury Financial Analyst---------------------
Katherine C. Winebrenner Cash Manager ---------------------
1
<PAGE>
WITNESS my hand and seal of LRC as of this ____ day of April, 1997.
By:---------------------
Vincent J. Cole
Vice President and Secretary
I, Terence P. Chin, the undersigned Treasurer of LRC, DO HEREBY CERTIFY
that:
1. Vincent J. Cole is the duly elected and qualified Vice President and
Secretary of LRC, and the signature above is his genuine signature.
2. All of the terms, covenants, agreements and conditions of the Purchase
Agreement and the RPA to be complied with and performed by LRC at or before the
date hereof have been complied with and performed.
3. The representations and warranties of LRC, in whatever capacity,
contained in the Purchase Agreement and the RPA are true and correct as if made
on and as of the date hereof.
4. LRC has not filed or consented to the filing of any UCC-1 Financing
Statement relating to the Receivables sold and to be sold pursuant to the
Purchase Agreement and the RPA and, to the best of LRC's knowledge, no such
Financing Statements have been filed other than Financing Statements naming (i)
Lexmark as "debtor" and LRC as "secured party", (ii) LRC as "debtor" and Morgan
Guaranty Trust Company of New York, as Morgan Guaranty Trust Company of New
York, as "secured party", (iii) Lexmark as "debtor" and Morgan Guaranty Trust
Company of New York, as Security Agent, as "secured party" and (iv) LRC as
"debtor" and Morgan Guaranty Trust Company of New York, as Security Agent, as
"secured party."
5. No Termination Event and no event which with the giving of notice or
passage of time or both would constitute a Termination Event has occurred or is
continuing.
Capitalized terms used herein and not otherwise defined shall have the
meanings specified in the RPA.
WITNESS my hand this ____ day of April, 1997.
By:---------------------
Terence P. Chin
Treasurer
2
<PAGE>
EXHIBIT J
---------
to
Purchase Agreement
DESCRIPTION OF QUALIFYING RECEIVABLES
-------------------------------------
Each and every Receivable (as that term is defined in the Purchase
Agreement to which this exhibit is attached), whether now existing or hereafter
arising and wherever located, (a) arising in connection with the sale of goods
or the rendering of services in the ordinary course of business by Lexmark
International, Inc., or (b) arising in connection with the sale to IBM Credit
Corporation or another similar institution providing credit to an Obligor
(provided such institution, as an Obligor, satisfies any of the definitions of
Group A Obligor, Group B Obligor, Group C Obligor or Group D Obligor) of the
original indebtedness incurred by an Obligor to Lexmark International, Inc. in
connection with such a sale of goods or the rendering of such services, the
Obligor of which is either (i) a Person organized under the laws of the United
States or any state thereof that maintains its principal place of business in
the United States or (ii) a Government Obligor.
1
<PAGE>
EXHIBIT K
---------
OFFICER'S CERTIFICATE
OF LEXMARK INTERNATIONAL, INC.
-----------------------------
The undersigned, Gary E. Morin, does hereby certify on behalf of Lexmark
International, Inc. (the "Company") in connection with the Receivables Purchase
Agreement, dated as of March 31, 1997 (the "LRC Agreement"), among Lexmark
Receivables Corporation ("LRC"), as Seller, the Company, as Servicer and in its
individual capacity, Delaware Funding Corporation ("DFC"), and Morgan Guaranty
Trust Company of New York, as administrative agent (the "Administrative Agent"),
pursuant to which LRC transfers to the Administrative Agent (for the benefit of
DFC and the other Owners under the LRC Agreement) all of its right, title and
interest in the Purchased Interest (as defined in LRC Agreement) in the
Receivables. LRC acquired the Receivables from the Company pursuant to the
Purchase Agreement, dated as of March 31, 1997 (the "Purchase Agreement"; with
the LRC Agreement, the "Documents") between the Company and LRC; that s/he is
the duly elected, qualified, and acting Vice President and Chief Financial
Officer of the Company, and further that:
1. S/he has made such investigation, including discussions with
responsible officers of the Company and its certified public accountants, as is
necessary to enable him/her to deliver this Officer's Certificate.
2. Immediately prior to the transfer of the Receivables to LRC pursuant to
the Purchase Agreement, the Company had good title and was the sole owner and
holder of such Receivables, free and clear of any and all adverse claims, liens,
pledges, offsets, defenses, counterclaims, charges, or security interests, of
any nature, and had the full right and authority, subject to no interest or
participation of, or agreement with, any other person, to transfer and assign
the same.
1
<PAGE>
3. On the date hereof, the Receivables are sold by the Company to LRC
pursuant to the Purchase Agreement in exchange for cash and a capital
contribution by the Company to LRC, which consideration has a fair market value
equal to the fair market value of such Receivables. Certain of the cash was
loaned by the Company to LRC pursuant to the Purchase Agreement, as evidenced by
the Subordinated Note executed by LRC for the benefit of the Company. Subsequent
to the date hereof, the Company is obligated to sell additional Receivables to
LRC in certain circumstances, but LRC is required to pay cash for such
additional Receivables, unless the Company agrees to make a loan to LRC, or
agrees to contribute such additional Receivables to LRC as a capital
contribution. The consideration received by the Company in return for such
additional Receivables shall have a fair market value equal to the fair market
value of such additional Receivables. Such additional Receivables are not sold
by the Company to LRC with the intent (on the part of either the Company or LRC)
to mitigate losses on the Receivables previously sold by the Company to LRC. The
proceeds of the Company's sale of such Receivables to LRC accrue strictly to the
Company, and the Company's use of the proceeds is not restricted by LRC, the
Administrative Agent or DFC.
4. The Company may cease selling Receivables to LRC on and after April 14,
1998, unless extended by the Company in its sole discretion, without incurring
any penalty or loss. Neither the Company nor LRC will extend the term of the
Purchase Agreement with the intent (on the part of either the Company or LRC) to
mitigate losses on the Receivables previously sold by the Company to LRC.
5. The Company marks its records to indicate that the Receivables have
been sold to LRC and that such Receivables have been transferred by LRC to the
Administrative Agent (for the benefit of DFC and the other Owners under the LRC
Agreement). The Company properly treats the transfer of Receivables to LRC as a
sale for accounting purposes, and the independent certified public accountants
for the Company concur in such treatment. For tax reporting purposes, and any
applicable regulatory purposes, the Company properly treats such transfer in a
manner consistent with the treatment for accounting purposes. The Obligors on
the Receivables are not notified of the transfer of such Receivables to LRC or
LRC's transfer to the Administrative Agent (for the benefit of DFC and the other
Owners under the LRC Agreement). Any such notification would be time-consuming
and expensive, would be confusing to Obligors, and would impair customer
relations with Obligors. In transactions similar to those contemplated by the
Documents involving the transfer of large numbers of receivables arising under
short-term trade receivable contracts (including binding invoices), it is
standard industry practice not to notify the Obligors of the transfer.
2
<PAGE>
6. The obligation of the Company under the Purchase Agreement to
repurchase certain Receivables as to which there exists a breach of its
representations and warranties, or which the Company, in breach of its duties,
impairs or adversely affects, is of a type commonly found in comparable asset
sale transactions. The repurchase price to be paid by the Company represents the
return of the consideration LRC paid for the repurchased Receivable.
7. The obligation of the Company to indemnify LRC for the imposition of
any transfer taxes arising upon the sale or contribution of the Receivables to
LRC is of a type commonly found in comparable asset sale transactions. The
Company does not expect that any transfer taxes will be imposed with respect to
the sale or contribution of such Receivables. The obligation of the Company to
indemnify the Buyer, the Administrative Agent, DFC and the other Owners under
the LRC Agreement with respect to any claim asserted by an Obligor with respect
to the Company's obligations under the Contracts are also of a type commonly
found in comparable asset sale transactions.
8. The Company acts as servicer of the Receivables under the LRC
Agreement. The terms of this servicing arrangement are of a type commonly found
in servicing arrangements in other comparable asset sale transactions. The fees
paid to the Servicer under the LRC Agreement constitute a fair and reasonable
price for the obligations to be performed by the Servicer under the LRC
Agreement. Payment of the Servicer's Compensation is not subordinate to amounts
due DFC, the Administrative Agent or otherwise, and the Company is paid the full
amount of the Servicer's Compensation and reimbursed for all of its
out-of-pocket expenses.
9. The Company, as Servicer, is obligated under the LRC Agreement to
service and administer the Receivables and to collect all payments due under the
Receivables in accordance with (i) its customary and usual servicing procedures
for servicing trade receivables comparable to the Receivables and (ii) its
Credit and Collection Policy. Such a provision is commonly found in comparable
asset sale transactions involving a third-party servicer.
3
<PAGE>
10. LRC may borrow money from the Company pursuant to the Purchase
Agreement from time to time to purchase Receivables from the Company. These
loans are made on arm's-length terms that could be obtained from an unrelated
third-party lender. These loans can be repaid from any funds available to LRC
other than funds required to be used to make payments on the Purchased
Interests, and funds required to be used to purchase additional Receivables. Any
such loans will be fully repaid on a timely basis from funds other than funds
received from the Company. To assure that LRC has adequate capital to meet such
obligations on the date hereof, the Company has contributed cash and other
assets in the amount of $9 million which is in excess of the amount determined
to be adequate for such purposes using the factors set forth in Schedule A to
this Certificate.
11. The Company is not obligated to pay, nor does it pay, any insurance
premiums in connection with any Receivable or Contract, and the Company is not
obligated to, and does not, reimburse any insurer for any losses such insurer
suffers in connection with a Receivable or a Contract.
12. There are no other agreements to which LRC is a party relating to the
Receivables, other than the Documents and the documents referred to therein.
13. The Company does not make any payments to LRC, the Administrative Agent
or DFC in connection with the Receivables, except pursuant to the Documents.
14. The Company does not receive any payments with respect to the
Receivables or the Contracts, except pursuant to the Documents.
15. The Company does not own or hold any Purchased Interest in the
Receivables.
16. The Company does not control, is not controlled by, and is not under
common control with, DFC or the Administrative Agent.
17. The formulae for calculating the yields on the Purchased Interest in
the Receivables were agreed upon by the Company, the Administrative Agent and
DFC based upon the then-current market rates for comparable interests in the
Receivables. Neither the yields nor the rates of return on the Purchased
Interest in the Receivables is based on the rate at which the Company could
obtain a secured loan.
18. The Receivables are not interest-bearing.
19. The Company and LRC each intend the transfer of the Receivables by the
Company to LRC pursuant to the Purchase Agreement, to be an absolute assignment,
or a contribution to capital, as applicable, rather than a secured borrowing.
4
<PAGE>
20. The Company does not transfer any Receivables with the intent to
hinder, delay, or defraud any person or entity. The Company receives reasonably
equivalent value in exchange for its transfer of Receivables.
21. As of the date hereof, (i) the Company is not insolvent nor does the
Company expect to become insolvent, (ii) the Company does not engage in nor does
it expect to engage in a business for which its remaining property represents an
unreasonably small capitalization, (iii) the capitalization of the Company is
adequate in light of its proposed business and purpose, and (iv) the Company is
able to pay its debts as they mature, and does not intend to incur, or believe
that it will incur, indebtedness that it will not be able to repay at its
maturity.
All capitalized terms used herein and not otherwise defined herein shall
have the same meaning herein as in the Opinion.
IN WITNESS WHEREOF, I have hereunto signed my name this ____th day of
April, 1997.
LEXMARK INTERNATIONAL, INC.
By: ---------------------------
Name: Gary E. Morin
Title: Vice President and Chief
Financial Officer
5
<PAGE>
SCHEDULE A
NET PURCHASE PRICE OF RECEIVABLES
A. Face amount of new Receivables
B. A x (12 month average Charge-off Ratio x 2.1)
C. A - B
D. A x Yield Rate x 60 days
--------------------
360
Yield Rate = LIBOR + .50%
E. C - D
F. A x 1.00% x 60 days
---------------
360
G. E - F (Purchase Price of new Receivables)
6
<PAGE>
OFFICER'S CERTIFICATE
OF LEXMARK RECEIVABLES CORPORATION
----------------------------------
The undersigned, Gary E. Morin, does hereby certify on behalf of Lexmark
Receivables Corporation (the "Company") in connection with the Receivables
Purchase Agreement, dated as of March 31, 1997 (the "LRC Agreement"), among the
Company, as Seller, Lexmark International, Inc. ("LII"), as Servicer and in its
individual capacity, Delaware Funding Corporation ("DFC"), and Morgan Guaranty
Trust Company of New York, as administrative agent (the "Administrative Agent"),
pursuant to which the Company transfers to the Administrative Agent, for the
benefit of DFC and the other Owners under the LRC Agreement, all of its right,
title and interest in the Purchased Interest (as defined in the LRC Agreement)
in the Receivables. The Company acquired the Receivables from LII pursuant to
the Purchase Agreement dated as of March 31, 1997 (the "Purchase Agreement")
between LII and the Company; that s/he is the duly elected, qualified, and
acting President of the Company, and further that:
1. S/he has made such investigation, including discussions with
responsible officers of the Company and its certified public accountants, as is
necessary to enable him/her to deliver this Officer's Certificate.
2. On the date hereof, the Receivables are sold by LII to the Company in
exchange for cash and capital contributions by LII to the Company, which
consideration has a fair market value equal to the fair market value of such
Receivables. Certain of the cash was loaned by LII to the Company pursuant to
the Purchase Agreement, as evidenced by the Subordinated Note executed by the
Company. Subsequent to the date hereof, LII is obligated to sell additional
Receivables to the Company in certain circumstances, but the Company is required
to pay cash for such additional Receivables, unless LII agrees to make loans to
the Company, or agrees to contribute such additional Receivables to the Company
as capital contributions. The consideration received by LII in return for such
additional Receivables shall have a fair market value equal to the fair market
value of such additional Receivables. Such additional Receivables are not sold
by LII to the Company with the intent (on the part of LII or the Company) to
mitigate losses on the Receivables previously sold by LII to the Company. The
proceeds of LII's sale of such Receivables to the Company accrue strictly to
LII, and LII's use of the proceeds is not restricted by the Company, the
Administrative Agent or DFC.
3. LII may cease selling Receivables to the Company on and after April 14,
1998, unless such date is extended by LII in its sole discretion, without
incurring any penalty or loss. Neither LII nor the Company will extend the term
of the Purchase Agreement with the intent (on the part of either LII or the
Company) to mitigate losses on the Receivables previously sold by LII to the
Company.
1
<PAGE>
4. On the date hereof, the Company sells the Purchased Interest in the
Receivables to the Administrative Agent, for the benefit of DFC and the other
Owners under the LRC Agreement, in return for cash in an aggregate amount equal
to the fair market value of such Purchased Interest. The aggregate amount of
such cash received by the Company, together with the undivided interest in
Receivables retained by the Company, has a fair market value equal to the fair
market value of the Receivables as of the date hereof.
5. The Company marks its records to indicate that the Receivables have been
sold to the Company by LII and that the Purchased Interest has been transferred
by the Company to the Administrative Agent, for the benefit of DFC and the other
Owners under the LRC Agreement. The Company properly treats the transfer of
Receivables to it as a sale for accounting purposes, and the independent
certified public accountants for the Company concur in such treatment. For tax
reporting purposes, and any applicable regulatory purposes, the Company properly
treats such transfer in a manner consistent with the treatment for accounting
purposes. The Obligors on the Receivables are not notified of the transfer of
such Receivables to the Company or the Company's transfer to the Administrative
Agent, for the benefit of DFC and the other Owners under the LRC Agreement. Any
such notification would be time-consuming and expensive, would be confusing to
Obligors, and would impair customer relations with Obligors. In transactions
similar to those contemplated by the Documents involving the transfer of large
numbers of receivables arising under trade receivable contracts (including
binding invoices), it is standard industry practice not to notify the Obligors
of the transfer.
6. The Company may borrow money from LII pursuant to the Purchase
Agreement from time to time to purchase Receivables from LII. These loans are
made on arm's-length terms that could be obtained from an unrelated third-party
lender. These loans can be repaid from any funds available to the Company other
than funds required to be used to make payments on the Purchased Interests, and
funds required to be used to purchase additional Receivables. Any such loans
will be fully repaid on a timely basis from funds other than funds received from
LII. To assure that the Company has adequate capital to meet such obligations on
the date hereof, LII has contributed cash and other assets in the amount of $9
million which is in excess of the amount determined to be adequate for such
purposes using the factors set forth in Schedule A to this Certificate.
7. There are no other agreements to which the Company is a party relating
to the Receivables, other than the Documents and the documents referred to
therein.
2
<PAGE>
8. The Company intends the transfers of the Receivables by LII to the
Company pursuant to the Purchase Agreement, to be an absolute assignment, or a
contribution to capital, as applicable, rather than a secured borrowing.
9. The Company does not transfer any Receivables with the intent to
hinder, delay, or defraud any person or entity. The Company receives reasonably
equivalent value in exchange for its transfer of Receivables.
10. The formulae for calculating the yields on the Purchased Interest in
the Receivables were agreed upon by the Company, the Administrative Agent and
DFC based upon the then-current market rates for comparable interests in the
Receivables. Neither the yields nor the rates of return on the Purchased
Interest in the Receivables is based on the rate at which the Company could
obtain a secured loan.
11. As of the date hereof, (i) the Company is not insolvent nor does the
Company expect to become insolvent, (ii) the Company does not engage in nor does
it expect to engage in a business for which its remaining property represents an
unreasonably small capitalization, (iii) the capitalization of the Company is
adequate in light of its proposed business and purpose, and (iv) the Company is
able to pay its debts as they mature, and does not intend to incur, or believe
that it will incur, indebtedness that it will not be able to repay at its
maturity.
All capitalized terms used herein and not otherwise defined herein shall
have the same meaning herein as in the Opinion.
IN WITNESS WHEREOF, I have hereunto signed my name this ____th day of
April, 1997.
LEXMARK RECEIVABLES CORPORATION
By: ------------------------
Name: Gary E. Morin
Title: President
3
<PAGE>
SCHEDULE A
NET PURCHASE PRICE OF RECEIVABLES
---------------------------------
A. Face amount of new Receivables
B. A x (12 month average Charge-off Ratio x 2.1)
C. A - B
D. A x Yield Rate x 60 days
--------------------
360
Yield Rate = LIBOR + .50%
E. C - D
F. A x 1.00% x 60 days
---------------
360
G. E - F (Purchase Price of new Receivables)
4
<PAGE>
Schedule 1
SCHEDULE OF RECEIVABLES
[On file with Administrative Agent]
1
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT
dated as of March 31, 1997
Among
LEXMARK INTERNATIONAL, INC.,
as Servicer and in its individual capacity,
LEXMARK RECEIVABLES CORPORATION,
as Seller,
DELAWARE FUNDING CORPORATION,
as Buyer
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent
<PAGE>
Table of Contents
-----------------
Page
ARTICLE I
DEFINITIONS; CONSTRUCTION
-------------------------
1.01...................................................Certain Definitions 2
1.02.......................................Interpretation and Construction 25
1.03................................................Obligor Classification 25
ARTICLE II
PURCHASES AND SETTLEMENTS
-------------------------
2.01.......................................General Assignment and Conveyance 26
2.02.............................................Incremental Purchase Limits 26
2.03..............................................Incremental Purchase Price 26
2.04.................................................Deferred Purchase Price 27
2.05..................................................Reinvestment Purchases 27
2.06...........................................Funding of the Net Investment 27
2.07........................ ......................................Discount 29
2.08................Non-Liquidation Settlements and Other Payment Procedures 29
2.09.......................................Liquidation Settlement Procedures 31
2.10....................................................................Fees 32
2.11 Optional Reduction of Maximum Net Investment; Optional Reduction of Net
Investment 32
2.12........................Mandatory Repurchase Under Certain Circumstances 32
2.13..............Payments and Computations, Etc.; Allocation of Collections 33
2.14.. ..............................................................Reports 34
2.15........................................................Initial Purchase 34
ARTICLE III
CLOSING PROCEDURES
------------------
3.01............................................Purchase and Sale Procedures 34
3.02...................................................Conditions to Funding 35
3.03...........Conditions to Initial, Reinvestment and Incremental Purchases 37
ARTICLE IV
PROTECTION OF THE OWNERS;
ADMINISTRATION AND COLLECTIONS
------------------------------
4.01....Acceptance of Appointment and Other Matters Relating to the Servicer 38
4.02..........Maintenance of Information and Computer Records; Protection of
Owners' Interests 39
4.03.....................................Maintenance of Writings and Records 40
4.04.............................................................Information 41
4.05.......................Performance of Undertakings Under the Receivables 41
4.06..........................................Administration and Collections 41
4.07........................................................Servicer Default 43
4.08.............................................Complete Servicing Transfer 44
4.09...............................................................Lockboxes 46
i
<PAGE>
4.10............................Servicer Indemnification of Affected Parties 48
4.11..................................................Servicer Not to Resign 48
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
5.01....................General Representations and Warranties of the Seller 49
5.02..Representations and Warranties of the Seller With Respect to Each Sale
of Receivables 52
5.03...............................Representations and Warranties of Lexmark 54
ARTICLE VI
COVENANTS
---------
6.01.........................Affirmative Covenants of the Seller and Lexmark 55
6.02............................Negative Covenants of the Seller and Lexmark 62
6.03.......................................Covenants of a Successor Servicer 64
ARTICLE VII
TERMINATION
-----------
7.01......................................................Termination Events 64
7.02.....................................Consequences of a Termination Event 67
ARTICLE VIII
THE ADMINISTRATIVE AGENT
------------------------
8.01................................................Authorization and Action 68
8.02.............................................................UCC Filings 69
8.03...................................Administrative Agent's Reliance, Etc. 69
8.04.....................................Administrative Agent and Affiliates 70
8.05.........................................................Indemnification 70
8.06..........................................Successor Administrative Agent 70
ARTICLE IX
MISCELLANEOUS
-------------
9.01................................................................Expenses 71
9.02..............................Indemnity for Taxes, Reserves and Expenses 72
9.03...............................................................Indemnity 73
9.04................................................................Holidays 75
9.05.................................................................Records 75
9.06..................................................Amendments and Waivers 75
9.07.......................................................Term of Agreement 76
9.08..................................No Implied Waiver; Cumulative Remedies 76
9.09............................................................No Discharge 76
9.10.................................................................Notices 77
9.11............................................................Severability 77
9.12...............................Governing Law; Submission to Jurisdiction 77
9.13....................................................Prior Understandings 77
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<PAGE>
9.14................................................................Survival 78
9.15............................................................Counterparts 78
9.16.................................................................Set-Off 78
9.17..................................................Successors and Assigns 78
9.18.........................................................Confidentiality 79
9.19......................................................Payments Set Aside 79
9.20.............................................................No Petition 79
9.21.............................................................No Recourse 80
EXHIBITS
Exhibit A Credit and Collection Policy
Exhibit B Description of Qualifying Receivables
Exhibit C Form of Purchase Notice for Incremental Purchase
Exhibit D Form of Tranche Selection Notice
Exhibit E Form of Report Showing Discount
Exhibit F List of Special Obligors
Exhibit G Form of Monthly Report
Exhibit H Form of Lockbox Account Transfer Letter
Exhibit I Form of Opinions of Counsel to the Seller
Exhibit J Forms of Officers' Certificate
Exhibit K Schedule of Names and Locations of Offices and Records
Exhibit L [Reserved]
Exhibit M Information regarding Litigation, Etc. pursuant to
Section 5.01(k)
Exhibit N Permitted Lockbox Banks, Lockbox Account Numbers
and Permitted Lockboxes
Exhibit O Form of Asset Purchase Agreement
iii
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This RECEIVABLES PURCHASE AGREEMENT, dated as of March 31, 1997, among
LEXMARK RECEIVABLES CORPORATION, a Delaware corporation (the "Seller"), LEXMARK
INTERNATIONAL, INC., a Delaware corporation and the 100% direct corporate parent
of the Seller, as Servicer (in such capacity, the "Servicer") and in its
individual capacity (in such capacity, "Lexmark"), DELAWARE FUNDING CORPORATION,
(the "Buyer") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a trust company
organized under the laws of the State of New York, as administrative agent (the
"Administrative Agent") for each of the Owners (as defined below).
RECITALS
WHEREAS, Lexmark, in the ordinary course of its business, generates trade
and/or retail or consumer receivables resulting from the sale of goods or
services to its customers;
WHEREAS, the Seller is authorized to purchase retail and consumer
receivables from the Originator for the purpose of reselling them;
WHEREAS, the Buyer shall cause the Administrative Agent, on behalf of the
Buyer and/or other Owners, to purchase from the Seller undivided percentage
ownership interests in such receivables pursuant to and in accordance with the
terms hereof;
WHEREAS, Lexmark has agreed to service and administer the receivables in
accordance with the terms hereof and to perform its other obligations hereunder;
WHEREAS, the Administrative Agent will enter into the Asset Purchase
Agreement dated the date hereof pursuant to which it may from time to time cause
the "Purchasers" under the Asset Purchase Agreement to purchase undivided
interests in the Purchased Interest (as defined below) or to accept assignments
of the Buyer's obligation to purchase receivables, all pursuant to and in
accordance with the terms of the Asset Purchase Agreement; and
WHEREAS, the Administrative Agent will act on behalf of the Owners of
interests in receivables hereunder.
NOW, THEREFORE, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS; CONSTRUCTION
-------------------------
1.01. Certain Definitions.
------------------- As used in this Agreement, the following terms
shall have the following meanings:
"Adjusted Fixed Charge Coverage Ratio"
--------------------------------------- shall have the meaning ascribed to
it in the Lexmark Credit Agreement and such term is hereby incorporated herein
by reference together with all related definitions applicable to or utilized in
connection with such term in the Lexmark Credit Agreement, except to the extent
such term is deleted or the Lexmark Credit Agreement is terminated, in which
event "Adjusted Fixed Charge Coverage Ratio" shall have the last meaning
ascribed to it before such term was deleted or the Lexmark Credit Agreement was
terminated.
"Administrative Agent"
----------------------- shall mean Morgan Guaranty Trust Company of New
York, together with its successors and assigns, or such other Person as provided
in this Agreement, in the capacity of administrative agent for the Owners.
"Affected Party"
----------------- shall mean each of the Owners, any assignee of an Owner,
the Collateral Agent, the Program LOC Bank, the APA Lending Banks, any assignee
of any of the Buyer's obligations to the APA Lending Banks or the Program LOC
Bank under the APA Credit Agreement or the Program Letter of Credit
Reimbursement Agreement, respectively, the APA Agent and the Administrative
Agent.
"Affiliate"
----------- shall mean, with respect to a Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with, such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Aggregate Unpaids"
-------------------- shall mean, at any time, an amount equal to the sum of
(i) the aggregate accrued and unpaid Discount with respect to all Tranche
Periods for all Tranches at such time, (ii) all fees accrued and unpaid
hereunder or under the Fee Letter at such time and (iii) all other amounts owed
(whether due or accrued) hereunder by the Seller to the Owners at such time.
"Agreement"
----------- shall mean this Receivables Purchase Agreement, as the same may
from time to time be amended, supplemented or otherwise modified.
"Allowance for Collection Delays"
--------------------------------- shall mean 10 days.
"Amended and Restated Intercreditor Agreement"
------------------------------------------------ shall mean the Amended and
Restated Consent and Intercreditor Agreement, dated as of December 12, 1996,
2
<PAGE>
among the Seller, Lexmark, the Buyer, the Administrative Agent, the Credit
Providers named therein, the Credit Provider Agent named therein, and Morgan
Guaranty Trust Company of New York (successor to J.P. Morgan Delaware), as
Security Agent for the Credit Providers, as the same may be amended,
supplemented or otherwise modified.
"APA Agent"
----------- shall mean Morgan Guaranty Trust Company of New York, together
with its successors and assigns, in its capacity as agent under the APA Credit
Agreement.
"APA Lending Banks"
------------------- shall mean the lenders party, from time to time, to the
APA Credit Agreement.
"APA Credit Agreement"
------------------------ shall mean the Amended and Restated APA Credit
Agreement dated as of December 6, 1995, among the Buyer, the APA Agent and the
APA Lending Banks party thereto, as the same may from time to time be amended,
supplemented or otherwise modified.
"APA Purchaser"
--------------- shall mean a purchaser (or assignee thereof) of all or any
part of the Purchased Interest, at any time, pursuant to the Asset Purchase
Agreement or an assignee of the Buyer's obligations to purchase from the Seller
undivided percentage ownership interests in Receivables.
"Asset Purchase Agreement"
---------------------------- shall mean an asset purchase agreement in
substantially the form of Exhibit O hereto among the Seller, the Buyer, the
Administrative Agent and each of the Purchasers signatory thereto, as the same
may from time to time be amended, supplemented or otherwise modified.
"Average Collection Period"
--------------------------- shall mean, at any time, a period of days equal
to the product of (i) a fraction the numerator of which shall be the amount set
forth in the most recent Monthly Report under the caption "Receivables,
beginning of month" and the denominator of which shall be the "Collections" as
set forth in the most recent Monthly Report and (ii) 30.
"Base Rate"
------------ shall mean, for any day, the higher of (i) the prime rate
announced from time to time by Morgan Guaranty Trust Company of New York in
effect on such day, and (ii) (x) the rate equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day for such
transactions received by Morgan Guaranty Trust Company of New York from three
Federal funds brokers of recognized standing selected by it, plus (y) one-half
of one percent (1/2%).
3
<PAGE>
"Business Day"
--------------- shall mean any day other than a Saturday, Sunday, public
holiday under the Laws of the State of Delaware or the State of New York or any
other day on which banking institutions are authorized or obligated to close in
the State of Delaware or the State of New York.
"Buyer's Discount"
------------------- shall mean, at any time, an amount equal to the
following:
NI x [((TR + PF) x RV) + SC] x (CP + CD)
----------------------------------------
360
Where:
NI = the Net Investment at such time;
TR = the highest Tranche Rate applicable to any outstanding Tranche at such
time;
PF = the Program Fee;
RV = the Rate Variance Factor;
SC = O, unless a Servicer Default, Potential Termination Event or
Termination Event shall have occurred, in which case SC shall equal the
percentage set forth in clause (A)(1) of Section 4.06(e) hereof;
CP = the Average Collection Period; and
CD = the Allowance for Collection Delays.
"Buyer's Percentage Interest"
------------------------------ shall mean, at any time of determination, a
percentage equal to the following:
NI + DPP + BD
-------------
NRB
Where:
NI = the Net Investment at the time of such determination;
DPP = the Deferred Purchase Price at the time of such determination;
BD = the Buyer's Discount at the time of such determination; and
NRB = the Net Receivables Balance at the time of such determination.
Notwithstanding the foregoing computation, the Buyer's Percentage Interest
shall not exceed 100%. The Buyer's Percentage Interest shall be calculated by
the Servicer on the closing date of the initial Incremental Purchase hereunder.
4
<PAGE>
Thereafter, until the Expiration Date, the Buyer's Percentage Interest shall be
recomputed in Monthly Reports delivered pursuant to Section 2.14 hereof, in
Purchase Notices delivered pursuant to Section 2.03 hereof and otherwise in
writing upon request of the Buyer or the Administrative Agent made to the
Servicer. Absent any error in calculation, the Buyer's Percentage Interest shall
remain constant from the time as of which any such computation or recomputation
is made until the time as of which the next such recomputation shall be made,
notwithstanding any additional Receivables arising or any reinvestment Purchase
made pursuant to Section 2.05 hereof and 2.08(a) hereof during any period
between computations of the Buyer's Percentage Interest; provided, however, that
on and after the Expiration Date, the Buyer's Percentage Interest shall be equal
to the greater of (i) the Buyer's Percentage Interest on the first Business Day
preceding the occurrence of the Expiration Date, and (ii) the Buyer's Percentage
Interest on each Business Day after the occurrence of the Expiration Date. If
the Servicer shall fail to promptly calculate the Buyer's Percentage Interest as
required herein, the Buyer or the Administrative Agent may compute the Buyer's
Percentage Interest, which computation shall be conclusive absent manifest
error.
"Capitalized Lease"
-------------------- of a Person shall mean any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"Charge-Off"
------------ shall mean a Receivable (or any portion thereof): (i) which
has been identified by the Seller or the Servicer as uncollectible, or (ii)
which, in accordance with the Credit and Collection Policy, should be written
off the Seller's or the Servicer's books as uncollectible.
"Charge-Off Ratio"
------------------- shall mean, for any period of determination, the ratio
(expressed as a percentage) of (i) the aggregate Outstanding Balance of all
Receivables which became Charge-Offs during such period (without giving effect
to any recoveries during such period), to (ii) the aggregate amount of
Collections during such period for which such ratio is being determined.
"Chief Executive Office"
----------------------- shall mean, with respect to the Seller, the place
where the Seller is located, within the meaning of Section 9-103(3)(d), or any
analogous provision, of the UCC, in effect in the jurisdiction whose Law governs
the perfection of the Administrative Agent's (for the benefit of the Owners)
ownership interests in any Receivables.
"Closing Date"
-------------- shall mean April 15, 1997.
"Collateral Agent"
------------------- shall mean Morgan Guaranty Trust Company of New York,
together with its successors and assigns, as collateral agent under the Security
Agreement.
5
<PAGE>
"Collections"
------------- shall mean, for any Receivable as of any date, (i) the sum of
all amounts, whether in the form of wire transfer, cash, checks, drafts, or
other instruments, received by the Seller or the Servicer in a Permitted Lockbox
or otherwise in payment of, or applied to, any amount owed by an Obligor on
account of such Receivable (including but not limited to all amounts received on
account of any Defaulted Receivable) on or before such date, including, without
limitation, all amounts received on account of such Receivable, and other fees
and charges, (ii) cash proceeds of Related Security with respect to such
Receivable and (iii) all amounts deemed to have been received by the Seller or
the Servicer as a Collection pursuant to Section 2.08(c) hereof.
"Commercial Paper"
------------------- shall mean promissory notes of the Buyer issued by the
Buyer in the commercial paper market.
"Complete Servicing Transfer"
------------------------------ shall have the meaning ascribed to such term
in Section 4.08 hereof.
"Concentration Factor"
---------------------- shall mean (i) for any Group A Obligor and its
Subsidiaries, 10% of an amount equal to the Outstanding Balances of all Eligible
Receivables, (ii) for any Group B Obligor and its Subsidiaries, 5% of an amount
equal to the Outstanding Balances of all Eligible Receivables, (iii) for any
Group C Obligor and its Subsidiaries, 3.33% of an amount equal to the
Outstanding Balance of all Eligible Receivables, (iv) for any Group D Obligor
and its Subsidiaries, 2.5% of an amount equal to the Outstanding Balances of all
Eligible Receivables and (v) for any Obligor and its Subsidiaries and Affiliates
listed on Exhibit F hereto, the percentage set forth opposite such Obligor's
name on Exhibit F hereto of an amount equal to the Outstanding Balances of all
Eligible Receivables.
"Concentration Percentage"
-------------------------- shall mean for any Obligor a fraction, expressed
as a percentage, the numerator of which is an amount equal to the aggregate
Outstanding Balances of the Eligible Receivables of the related Obligor and its
Subsidiaries and the denominator of which is an amount equal to the Outstanding
Balances of all Eligible Receivables less Dilution Factors.
"Consolidated Subsidiary"
-------------------------- shall mean with respect to any Person, at any
date, any Subsidiary of such Person the accounts of which would be consolidated
with those of such Person in its consolidated financial statements if such
statements were prepared as of such date.
"Consolidated Tangible Net Worth"
---------------------------------- shall have the meaning ascribed to it in
the Lexmark Credit Agreement and such term is hereby incorporated herein by
reference together with all related definitions applicable to or utilized in
connection with such term in the Lexmark Credit Agreement, except to the extent
6
<PAGE>
such term is deleted or the Lexmark Credit Agreement is terminated, in which
event "Consolidated Tangible Net Worth" shall have the last meaning ascribed to
it before such term was deleted or the Lexmark Credit Agreement was terminated.
"Contract"
---------- shall mean a binding contract (including a binding invoice)
between the Originator and an Obligor which gives rise to a (i) short-term trade
receivable with a maturity of not greater than one year, (ii) a short-term
retail or consumer receivable with a maturity of not greater than one year, in
each case arising from the sale by the Originator of goods or services in the
ordinary course of the Originator's business, or (iii) a receivable arising in
connection with the sale to IBM Credit Corporation or to another similar
institution providing credit to such Obligor (provided such institution, as an
Obligor, satisfies any of the definitions of Group A Obligor, Group B Obligor,
Group C Obligor or Group D Obligor) of the original indebtedness incurred by an
Obligor to the Originator in connection with such a sale of goods or the
rendering of such services.
"Credit and Collection Policy"
--------------------------------- shall mean the Originator's credit,
collection, enforcement and other policies and practices relating to Contracts
and Receivables existing on the date hereof and as set forth on Exhibit A
hereto, as the same may be modified from time to time in compliance with Section
6.02(e) hereof.
"Credit Providers"
------------------- shall mean the institutions designated as such on the
signature pages of, and parties to, the Amended and Restated Intercreditor
Agreement.
"Debt"
------ of a Person shall mean such Person's (i) obligations for borrowed
money, (ii) obligations representing the deferred purchase price of property,
(iii) obligations, whether or not assumed, which are secured by liens or payable
out of the proceeds or production from property now or hereafter owned or
acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances or other instruments, (v) Capitalized Lease obligations and (vi)
obligations pursuant to a Guarantee.
"Default Ratio"
---------------- shall mean, for any period of determination, the ratio
(expressed as a percentage) of (i) the aggregate Outstanding Balance of all
Receivables which were Defaulted Receivables that were past due 61 to 90 days as
of the last day of such period of determination plus the aggregate Outstanding
Balance of all Receivables that became Charge-Offs during such period of
determination and within the first 60 days after such Receivables became due to
(ii) the aggregate amount payable pursuant to Contracts in respect of
Receivables generated during the calendar month that occurred a "specified
number" of calendar months prior to such period of determination. The "specified
number" to be used in the calculation required by clause (ii) of the previous
sentence shall be equal to the sum of (x) a fraction, rounded up or down to the
7
<PAGE>
nearest integer, having (i) a numerator equal to the then current weighted
average maximum payment terms under the applicable Contracts for the Receivables
as of the last day of such calendar month of determination and (ii) a
denominator equal to 30 and (y) 2.
"Default Reserve"
---------------- shall be determined at the end of each calendar month for
the immediately succeeding calendar month and shall be a percentage equal to the
following:
DR = 2.00 x a x b
where:
DR = Default Reserve;
a = The highest average of the Default Ratios for any three consecutive
calendar months that occurred during the period of twelve consecutive
calendar months ending on the last day of such calendar month of
determination; and
b = The sum of (x) a fraction, rounded up or down to the nearest integer,
having (i) a numerator equal to the then current weighted average
maximum payment terms under the applicable Contracts for the
Receivables as of the last day of such calendar month of determination
and (ii) a denominator equal to 30 and (y) 2.
"Defaulted Receivable"
----------------------- shall mean a Receivable (i) in respect of which the
Obligor is not entitled to any further extensions of credit, by reason of any
default or nonperformance by such Obligor, under the terms of the Credit and
Collection Policy, (ii) which has become uncollectible by reason of such
Obligor's inability to pay, as determined by the Servicer, in either case in
accordance with the Credit and Collection Policy, (iii) in respect of which an
Event of Bankruptcy has occurred with respect to the related Obligor, (iv) as to
which the Obligor thereof is deceased or (v) in respect of which the Obligor is
more than 60 days past due, except that portion of the Outstanding Balance of
the Receivables of such Obligor which is 60 days or less past due or is the
subject of a good faith Dispute between the Originator and the Obligor.
Notwithstanding the foregoing, any Receivable that has been written off by the
Seller or the Servicer in accordance with the Credit and Collection Policy shall
cease to be a "Defaulted Receivable" hereunder.
"Deferred Purchase Price"
--------------------------- shall mean, at any time, the Loss Percentage at
such time multiplied by the Investment at such time.
"Delinquency Ratio"
------------------- shall mean, for any period of determination, the ratio
(expressed as a percentage) of (i) the aggregate Outstanding Balance of all
8
<PAGE>
Receivables which are greater than 31 but less than 61 days past due as of the
last day of the period of determination to (ii) the Outstanding Balance of all
Receivables.
"Designated Contract"
--------------------- shall mean (i) a Contract which provides
exclusively for the sale of computer keyboards and related parts to an Obligor
which is an original equipment manufacturer, (ii) a Contract which provides
exclusively for the sale of notebook computers and related parts to an Obligor
which is an original equipment manufacturer, or (iii) a Contract which provides
exclusively for the sale of goods of the type, or substantially similar to the
type, produced by the Originator on or before the date hereof in one of its
primary lines of business to an Obligor which is a special bid end user.
"Dilution Factors"
------------------- shall mean credits, cancellations, cash discounts,
warranties, allowances, Disputes, rebates, charge backs, returned or repossessed
goods, and other allowances, adjustments and deductions (including, without
limitation, any special or other discounts or any reconciliations caused by
price protection agreements or otherwise) that are given to an Obligor in
accordance with the Credit and Collection Policy.
"Dilution Ratio"
----------------- shall mean, for any period of determination, the ratio
(expressed as a percentage) of (i) the aggregate Dilution Factors of all
Receivables arising during such period of determination to (ii) the aggregate
amount of Collections during the period for which such ratio is being
determined.
"Discount"
---------- shall mean with respect to any Tranche Period for any Tranche:
(TR + PF) x TNI x AD
--------------------
360
Where:
TR = the Tranche Rate applicable to such Tranche Period for such Tranche;
PF = the Program Fee;
TNI = the amount of such Tranche; and
AD = the actual number of days (including the first but excluding the last
day) during such Tranche Period.
Notwithstanding the foregoing, upon the occurrence of a Potential
Termination Event or a Termination Event or a Servicer Default, "Discount" shall
mean, at any time of determination, the following:
9
<PAGE>
(TR + PF) x TNI x AD + OR x SC x AD
-------------------- ------------
360 360
Where:
OR = the Outstanding Balance of all Receivables; and
SC = the percentage set forth in clause (A)(1) of Section 4.06(e) hereof;
provided, however, that no provision of this Agreement shall require the payment
or permit the collection of Discount in excess of the maximum permitted by
applicable Law; and provided, further, that Discount shall not be considered
paid by any distribution if at any time such distribution is rescinded or must
be returned for any reason.
"Dispute"
--------- shall mean any dispute, deduction, claim, offset, defense,
counterclaim, set-off or obligation of any kind, contingent or otherwise,
relating to a Receivable, including, without limitation, any dispute relating to
goods or services already paid for.
"Dollar" and "$"
-------- --- shall mean lawful currency of the United States of
America.
"Eligible Assignee"
-------------------- shall have the meaning ascribed to such term in the
Asset Purchase Agreement.
"Eligible Receivable"
--------------------- shall mean, at the time, any Receivable:
(a) which complies with all applicable Laws and other legal requirements,
whether Federal, state or local, including, without limitation, to the extent
applicable, usury laws, the Federal Consumer Credit Protection Act, the Fair
Credit Billing Act, the Federal Truth in Lending Act, and Regulation Z of the
Board of Governors of the Federal Reserve System;
(b) which constitutes an "account" or a "general intangible" or is
evidenced by "chattel paper", in each case as defined in the UCC as in effect in
the State of New York and the jurisdiction whose Law governs the perfection of
the Owners' ownership interests therein, or is evidenced by an "instrument", as
defined in the UCC as so in effect, which is in the possession of the
Administrative Agent;
(c) which was originated in connection with a sale of goods or the
provision of services by the Originator in the ordinary course of the
Originator's business to an Obligor who was approved by the Originator in
accordance with the Credit and Collection Policy, and which Obligor is not an
10
<PAGE>
Affiliate of the Originator, and which was purchased by the Seller from the
Originator pursuant to the Purchase Agreement;
(d) which (i) arises from a Contract and has been billed, or will be billed
to the related Obligor, or in respect of which the related Obligor is otherwise
liable, in accordance with the terms of such Contract and (ii) with respect to
Contracts entered into, renewed, amended or otherwise modified after the date
hereof, arises from a Contract that (A) does not require the Obligor under such
Contract to consent to the transfer, sale or assignment of the rights of the
Originator, or the Seller as its assignee, under such Contract, other than the
right of the Originator to sell, distribute or otherwise provide goods or
services to such Obligor, and (B) does not, in the case of a Contract other than
a Designated Contract, contain any provision that restricts the ability of the
Administrative Agent or an Owner to exercise its rights under this Agreement,
including, without limitation, its right to review the Contract;
(e) which constitutes a legal, valid, binding and irrevocable payment
obligation of the related Obligor, enforceable in accordance with its terms,
subject, in the case of a Receivable other than an IBM Receivable, to no offset,
counterclaim or other defense (other than any offset, counterclaim or other
defense constituting a Dilution Factor);
(f) which provides for payment in Dollars by the related Obligor;
(g) which directs payment thereof to be sent to a Permitted Lockbox;
(h) which has not been repurchased by the Seller pursuant to the repurchase
provisions of this Agreement;
(i) which is not a Defaulted Receivable or a Receivable that has become a
Charge-Off;
(j) which was not originated in or subject to the Laws of a jurisdiction
whose Laws would make such Receivable, the related Contract or the sale of the
Purchased Interest to the Buyer hereunder unlawful, invalid or unenforceable and
is not subject to any legal limitation on transfer;
(k) which is owned solely by the Seller free and clear of all Liens, except
for (x) the Liens arising in connection with this Agreement and the Security
Agreement, (y) the second priority Lien in favor of Morgan Guaranty Trust
Company of New York, as security agent for the Credit Providers, described in
the Amended and Restated Intercreditor Agreement and (z) any Permitted Liens;
(l) for which there has been no rejection or return of, or warranty claim
or other Dispute having risen with respect to, the goods or services which gave
rise to such Receivable and all goods and services in connection therewith have
been finally performed or delivered to and accepted by the Obligor without
Dispute;
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<PAGE>
(m) which does not provide the Obligor with the right to obtain any cash
advance thereunder;
(n) which is not a Receivable as to which the Buyer has notified the Seller
prior to or at the time of the sale of such Receivable that the Buyer has
determined in good faith that such Receivable or class of Receivables is not
acceptable for purchase hereunder because of the nature of the business of the
Obligor or otherwise;
(o) which, if such Receivable is not interest bearing, by its terms
requires the first payment in respect thereof to be made no later than 90 days
after the date of the original invoice with respect thereto;
(p) which is owed by an Obligor not more than 25% of whose aggregate
Outstanding Balances of Receivables are more than 60 days past due, except that
portion of such Obligor's Outstanding Balances that constitute Dilution Factors;
(q) which is an eligible asset within the meaning of Rule 3a-7 promulgated
under the Investment Company Act of 1940, as amended from time to time;
(r) if purchased with the proceeds of Commercial Paper would constitute a
"current transaction" of the Buyer within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended from time to time, if at such time the Buyer
had no business with the Seller other than the purchase of Receivables from the
Seller from time to time as contemplated by this Agreement;
(s) which has not been extended or rewritten by the Servicer or the Seller;
and
(t) which is not subject to any Dilution Factor; provided, however, that if
any separately identifiable portion of such Receivable is not subject to any
Dilution Factor and would otherwise constitute an Eligible Receivable hereunder,
such portion may be considered an Eligible Receivable hereunder.
"ERISA"
------- shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor thereto, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate"
----------------- shall mean any corporation or person which is a member of
any group of organizations (i) described in Section 414(b) or (c) of the
Internal Revenue Code of which Lexmark is a member, or (ii) solely for purposes
12
<PAGE>
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Internal Revenue Code and the lien created under Section 302(f) of ERISA
and Section 412(n) of the Internal Revenue Code, described in Section 414(m) or
(o) of the Internal Revenue Code of which Lexmark is a member.
"Event of Bankruptcy"
--------------------- shall mean, for any Person:
(u) that such Person shall admit in writing its inability to pay its debts
as they become due; or
(v) a proceeding shall have been instituted in a court having jurisdiction
in the premises seeking a decree or order for relief in respect of such Person
in an involuntary case under any applicable bankruptcy, insolvency or other
similar Law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator, conservator (under the
Bank Conservation Act, as amended from time to time, or otherwise) or other
similar official of such Person or for any substantial part of its property, or
for the winding-up or liquidation of its affairs; or
(w) the commencement by such Person of a voluntary case under any
applicable bankruptcy, insolvency or other similar Law now or hereafter in
effect, or such Person's consent to the entry of an order for relief in an
involuntary case under any such Law, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator (under the Bank Conservation Act, as amended from time
to time, or otherwise) or other similar official of such Person or for any
substantial part of its property, or any general assignment for the benefit of
creditors; or
(x) if such Person is a corporation, such Person, or (if such Person is not
an Obligor) any Subsidiary of such Person, shall take any corporate action in
furtherance of any of the actions set forth in the preceding clause (a), (b) or
(c).
"Event of Termination"
------------------------ shall mean (i) with respect to any Plan, a
reportable event, as defined in Section 4043(b) of ERISA, as to which the PBGC
has not by regulation waived the requirement of Section 4043(a) of ERISA that it
be notified within 30 days of the occurrence of such event, or (ii) the
withdrawal of Lexmark or any ERISA Affiliate from a Plan during a plan year in
which it is a substantial employer, as defined in Section 4001(a)(2) of ERISA,
or (iii) the failure by Lexmark or any ERISA Affiliate to meet the minimum
funding standard of Section 412 of the Internal Revenue Code or Section 302 of
ERISA with respect to any Plan, or (iv) the distribution under Section 4041 of
ERISA of a notice of intent to terminate any Plan or any action taken by Lexmark
or any ERISA Affiliate to terminate any Plan, or (v) the adoption of an
amendment to any Plan that pursuant to Section 401(a)(29) of the Internal
13
<PAGE>
Revenue Code or Section 307 of ERISA would result in the loss of tax-exempt
status of the trust of which such Plan is a part if Lexmark or an ERISA
Affiliate fails to timely provide security to the Plan in accordance with the
provisions of said Sections, or (vi) the institution by the PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or (vii) the receipt by Lexmark or any ERISA
Affiliate of a notice from a Multiemployer Plan that action of the type
described in the previous clause (vi) has been taken by the PBGC with respect to
such Multiemployer Plan, or (viii) the complete or partial withdrawal from a
Multiemployer Plan by Lexmark or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default), or (ix) the receipt by
Lexmark or any ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that
it intends to terminate or has terminated under Section 4041A of ERISA, or (x)
any event or circumstance exists which may reasonably be expected to constitute
grounds for Lexmark or any ERISA Affiliate to incur liability under Section 4069
on Section 4212(c) of ERISA or under Sections 412(c)(11) or 412(n) of the
Internal Revenue Code with respect to any Plan.
"Expiration Date"
------------------ shall mean the earliest of (i) April 14, 1998 as such
date may be extended in the sole discretion of the Buyer pursuant to the terms
hereof, (ii) the date of termination of the commitment of the Program LOC Bank
under the Program Letter of Credit Reimbursement Agreement, (iii) the date of
termination of the commitment of the APA Lending Banks under the APA Credit
Agreement, (iv) the date of termination of the commitment of any APA Purchaser
under the Asset Purchase Agreement (unless other APA Purchaser(s) or a
replacement APA Purchaser accepts such terminating APA Purchaser's commitment or
unless the Maximum Purchase Commitment and the Net Investment (if necessary) are
reduced in an amount equal to the terminated commitment), and (v) the day on
which the Buyer delivers a Notice of Termination pursuant to Section 7.02 hereof
or a Termination Event described in Section 7.01(j) hereof occurs.
"Fee Letter"
------------ shall mean the agreement dated as of March 31, 1997 between
the Seller and the Buyer setting forth the fees payable to the Owners and the
Referral Agent by the Seller in connection with the Owners' investment in the
Seller's Receivables.
"Fiscal Year"
------------- shall mean, for each of the Seller and Lexmark, the calendar
year ending December 31, which is the fiscal year of the Seller and Lexmark for
accounting purposes.
"GAAP"
------ shall mean generally accepted accounting principles in the United
States of America, applied on a consistent basis and applied to both
classification of items and amounts, and shall include, without limitation, the
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<PAGE>
official interpretations thereof by the Financial Accounting Standards Board,
its predecessors and successors.
"Goldman"
--------- shall mean Goldman Sachs Money Markets L.P.
"Government Obligor"
-------------------- means an Obligor that is the United States of
America, any State thereof, or an agency, department, instrumentality
or political subdivision of the United States of America or of any State
thereof.
"Group A Obligor"
----------------- shall mean any Obligor whose unsecured short-term debt
is rated at least "A-1" by S&P and at least "P-1" by Moody's.
"Group B Obligor"
----------------- shall mean any Obligor (i) who is not a Group A Obligor
and (ii) whose unsecured short-term debt is rated at least "A-2" by S&P and at
least "P-2" by Moody's.
"Group C Obligor"
----------------- shall mean any Obligor (i) who is not a Group A Obligor
or a Group B Obligor and (ii) whose unsecured short-term debt is rated at least
"A-3" by S&P and at least "P-3" by Moody's.
"Group D Obligor"
----------------- shall mean any Obligor (i) who is not a Group A Obligor,
a Group B Obligor or a Group C Obligor and (ii) who is not listed on Exhibit F
hereto.
"Guarantee"
----------- shall mean, as applied to any Debt, (i) a guarantee (other
than by endorsement for collection in the ordinary course of business),
direct or indirect, in any manner, of any part or all of such Debt or (ii)
an agreement, direct or indirect, contingent or otherwise, providing assurance
of the payment or performance (or payment of damages in the event of
non-performance) of any part or all of such Debt, including, without limiting
the foregoing, the payment of amounts drawn down by letters of credit. The
amount of any Guarantee shall be deemed to be the maximum amount of the Debt
guaranteed for which the guarantor could be held liable under such Guarantee.
"IBM"
----- shall mean International Business Machines Corporation, a New
York corporation, and its successors and assigns.
"IBM Covered Amount"
-------------------- shall mean $25,000,000 until an IBM Termination
Date shall have occurred, and thereafter, $0.
"IBM Receivable"
----------------- shall mean any Receivable the Obligor of which is IBM or
any Subsidiary or Affiliate thereof that maintains a senior unsecured long-term
debt rating from S&P and Moody's which is equal to or higher than such ratings
for IBM.
"IBM Termination Date"
------------------------ shall mean the date on which any one of the
following events shall occur:
15
<PAGE>
(i) the aggregate Outstanding Balance of IBM
Receivables which have become Defaulted Receivables as a
result of remaining unpaid more than 60 days past due equals
or exceeds five percent (5%) of the aggregate Outstanding
Balance of all Eligible Receivables and, within 10 days
following the occurrence of such event, the Administrative
Agent has not agreed that such event occurred for
administrative rather than credit reasons;
(ii) the senior unsecured long-term debt rating of
International Business Machine Corporation, a New York
corporation, is downgraded to BBB- or lower by S&P or to Baa3
or lower by Moody's; or
(iii) the Expiration Date shall occur under this
Agreement.
"Incremental Purchase"
----------------------- shall have the meaning ascribed to such term in
Section 2.02 hereof.
"Indemnified Parties"
---------------------- shall have the meaning ascribed to such term in
Section 9.02(a) hereof.
"Initial Purchase"
------------------ shall have the meaning set forth in Section 2.15 hereof.
"Initial Receivables"
--------------------- shall mean all of the Receivables owned by the Seller
and purchased by the Buyer on the date hereof.
"Internal Revenue Code"
------------------------ shall mean the Internal Revenue Code of 1986, as
amended from time to time and any successor thereto, and the regulations
promulgated and rulings issued thereunder.
"Investment"
------------ shall mean, at any time, the sum of the Net Investment plus
the Deferred Purchase Price, which amount can also be computed as follows:
I = NI
------
1 - LP
Where:
NI = the Net Investment at such time; and
LP = the Loss Percentage at such time.
"Investment Percentage"
------------------------ shall mean, at any time, the Investment at such
time divided by the Net Receivables Balance at such time.
16
<PAGE>
"JPM"
----- shall have the meaning ascribed to such term in Section 7.01(l)
hereof.
"Law"
----- shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any Official Body.
"Lexmark"
--------- shall mean Lexmark International, Inc., a Delaware corporation,
and its successors.
"Lexmark Credit Agreement"
---------------------------- shall mean the Amended and Restated Secured
United States Credit Agreement, dated as of April 21, 1995, among Lexmark,
Lexmark Holding, the Lenders listed therein and Morgan Guaranty Trust Company of
New York, as Agent (the "Agent") amending and restating the Secured United
States Credit Agreement, dated as of March 27, 1991, as the same may be amended
from time to time.
"Lexmark Holding"
----------------- shall mean Lexmark Holding, Inc., a Delaware corporation,
and its successors.
"Lien"
------, in respect of the property of any Person, shall mean any ownership
interest of any other Person, any mortgage, deed of trust, hypothecation,
pledge, lien, security interest, grant of a power to confess judgment, filing of
any financing statement, charge or other encumbrance or security arrangement of
any nature whatsoever, including, without limitation, any conditional sale or
title retention arrangement, and any assignment, deposit arrangement,
consignment or lease intended as, or having the effect of, security, provided,
however, that no offset, counterclaim or other defense to payment of a
Receivable that an Obligor may assert shall be deemed to be a "Lien" on such
Receivable hereunder.
"Lockbox Account"
------------------ shall mean a demand deposit account or other collection
account identified on Exhibit N hereto maintained with a Permitted Lockbox Bank
pursuant to the Lockbox Servicing Instructions for the purpose of depositing
payments made by the Obligors, or such other account or accounts as the Servicer
and the Administrative Agent may agree upon from time to time.
"Lockbox Account Transfer Letter"
----------------------------------- shall have the meaning ascribed to such
term in Section 3.02(i) hereof.
"Lockbox Servicing Instructions"
--------------------------------- shall mean the instructions relating to
lockbox services in connection with a Permitted Lockbox and related Lockbox
Account which are in compliance with Section 4.09 hereof and otherwise in form
and substance reasonably satisfactory to the Administrative Agent, which have
been executed and delivered by the Servicer to a Permitted Lockbox Bank.
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<PAGE>
"Loss Percentage"
----------------- shall mean, at any time, the greater of:
(i) 10% and
(ii) the Default Reserve.
"Majority Owners"
----------------- shall mean, at any time, those Owners owning in aggregate
in excess of 66-2/3% of the Purchased Interest at such time.
"Maximum Net Investment"
-------------------------- shall mean $100,000,000, unless otherwise
increased with the consent of the Buyer or reduced as provided in Section
2.11(a) hereof; provided, however, that at all times on and after the Expiration
Date, the "Maximum Net Investment" shall mean the Net Investment.
"Merrill"
--------- shall mean Merrill Lynch Money Markets Inc.
"Monthly Report"
----------------- shall have the meaning ascribed to such term in Section
2.14 hereof.
"Moody's"
--------- shall mean Moody's Investors Service, Inc., together with its
successors.
"Multiemployer Plan"
--------------------- shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding five years contributed to by Lexmark or any ERISA
Affiliate on behalf of its employees and which is covered by Title IV of ERISA.
"Net Investment"
----------------- shall mean, at any time, the sum of the amounts of
Purchase Price paid to the Seller for each Incremental Purchase less (i) the
aggregate amount of Collections received and applied by the Servicer or the
Administrative Agent to reduce such Net Investment pursuant to Sections 2.08(b)
and 2.09 hereof, provided that the Net Investment shall be increased by the
amount of any Collections so received and applied if at any time the
distribution of such Collections is rescinded or must otherwise be returned or
restored for any reason; and (ii) the aggregate amount paid by the Seller or the
Servicer to the Administrative Agent as contemplated by Sections 2.11(b) and
2.11(c) hereof.
"Net Receivables Balance"
------------------------- shall mean, at any time, the Outstanding Balances
of the Eligible Receivables at such time reduced by the aggregate amount by
which the Outstanding Balances of all Receivables of each Obligor at such time
exceeds the Concentration Factor for such Obligor at such time.
"Notice of Termination"
------------------------ shall have the meaning ascribed to such term in
Section 7.02 hereof.
18
<PAGE>
"Obligor"
--------- shall mean, for any Receivable, (i) each and every Person who
purchased goods or services on credit under a Contract and who is obligated to
make payments to the Originator, or the Seller as assignee thereof, pursuant to
such Contract and (ii) IBM Credit Corporation or to another similar institution
providing credit to such Obligor (provided such institution, as an Obligor,
satisfies any of the definitions of Group A Obligor, Group B Obligor, Group C
Obligor or Group D Obligor).
"Office"
-------- shall mean, when used in connection with the Administrative Agent,
the Buyer, the Servicer, Lexmark or the Seller, their respective offices as set
forth on the signature pages hereto, or at such other office or offices of the
Administrative Agent, the Buyer, the Servicer, Lexmark or the Seller or branch,
Subsidiary or Affiliate of either thereof as may be designated in writing from
time to time by the Administrative Agent, the Buyer, the Servicer, Lexmark or
the Seller to the Administrative Agent, the Buyer, the Servicer, Lexmark or the
Seller, as appropriate.
"Official Body"
---------------- shall mean any government or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Originator"
------------ shall mean Lexmark.
"Outstanding Balance"
---------------------- of any Receivable shall mean, at any time, the then
outstanding amount thereof.
"Owner"
------- shall mean, at any time, the Buyer, each APA Purchaser, if any, and
all other owners by assignment or otherwise of the Purchased Interest at such
time.
"PBGC"
------ shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Lien"
----------------- shall mean (i) a Lien imposed by any Official Body for
taxes, assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Seller or the Servicer in accordance with
GAAP, (ii) a carriers', warehousemen's, mechanics' or other like Lien arising in
the ordinary course of business for amounts that are not overdue for a period of
more than 30 days or that are being contested in good faith and by appropriate
proceedings and for payment of which the Seller or the Servicer has adequately
bonded or provided adequate reserves on its books in accordance with GAAP or
(iii) a Lien arising out of a judgment or award against the Seller or the
Servicer with respect to which a stay of execution has been obtained pending
appeal or other proceeding for review and for the payment of which the Seller or
19
<PAGE>
the Servicer has adequately bonded or provided adequate reserves in accordance
with GAAP.
"Permitted Lockbox"
-------------------- shall mean a post office box or other mailing location
identified on Exhibit N hereto maintained by a Permitted Lockbox Bank pursuant
to the Lockbox Servicing Instructions for the purpose of receiving payments made
by the Obligors for subsequent deposit into a related Lockbox Account, or such
other post office box or mailing location as the Administrative Agent and the
Servicer may agree upon from time to time.
"Permitted Lockbox Bank"
-------------------------- shall mean a bank or credit union identified on
Exhibit N hereto, or such other bank or financial institution or entity as the
Servicer and the Administrative Agent may agree upon from time to time.
"Person"
-------- shall mean an individual, corporation, partnership (general or
limited), trust, business trust, unincorporated association, joint venture,
joint-stock company, Official Body or any other entity of whatever nature.
"Plan"
------ shall mean any employee benefit or other plan which is or was at any
time during the current year or immediately preceding five years established or
maintained by Lexmark or any ERISA Affiliate and which is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"Potential Termination Event"
------------------------------- shall mean an event or condition which with
the giving of notice, the passage of time or any combination of the foregoing,
would constitute a Termination Event.
"Proceeds"
---------- shall mean "proceeds" as defined in Section 9-306(1) of the
Uniform Commercial Code as in effect in the State of New York and the
jurisdiction whose Law governs the perfection of the Owners' ownership interests
therein.
"Program Fee"
------------- shall have the meaning set forth in the Fee Letter.
"Program Letter of Credit"
--------------------------- shall mean the letter of credit issued by the
Program LOC Bank under the Program Letter of Credit Reimbursement Agreement.
"Program Letter of Credit Reimbursement Agreement"
---------------------------------------------------- shall mean the Amended
and Restated Program Letter of Credit Reimbursement Agreement dated as of
December 6, 1995 between the Buyer and the Program LOC Bank, as the same may
from time to time be amended, supplemented or otherwise modified.
"Program LOC Bank"
------------------ shall mean Morgan Guaranty Trust Company of New York or
such other Person, together with its successors or assigns, as the party to the
Program Letter of Credit Reimbursement Agreement issuing the Program Letter of
Credit.
20
<PAGE>
"Purchase"
---------- shall mean a purchase by the Administrative Agent, on behalf of
the applicable Owners, from time to time of an undivided percentage ownership
interest in Receivables hereunder, together with the Related Security and
Collections with respect thereto.
"Purchase Agreement"
--------------------- shall mean that certain Purchase Agreement, dated as
of March 31, 1997, by and between Lexmark, as originator, and the Seller, as
buyer thereunder.
"Purchase Availability Amount"
------------------------------- shall mean, as of any date, an amount equal
to the excess, if any, of (i) the Maximum Net Investment as of such date over
(ii) the Net Investment as of such date.
"Purchase Availability Fee"
----------------------------- shall have the meaning set forth in the Fee
Letter.
"Purchase Documents"
-------------------- shall mean this Agreement, the Purchase Agreement, the
Lockbox Servicing Instructions, the Lockbox Account Transfer Letters and such
other agreements, documents and instruments entered into and delivered by Seller
in connection with the transactions contemplated by this Agreement.
"Purchase Notice"
------------------ shall have the meaning ascribed to such term in Section
2.03 hereof.
"Purchase Price"
---------------- shall mean with respect to any Incremental Purchase, the
amount agreed to by the Seller and the Administrative Agent and paid to the
Seller by the Administrative Agent on behalf of the Owners as set forth in the
Purchase Notice related to such Incremental Purchase. Purchase Price refers to
an amount actually paid and does not include any amount of Deferred Purchase
Price.
"Purchased Interest"
--------------------- shall mean, at any time, an undivided percentage
ownership interest in (i) each and every then outstanding Receivable, (ii) all
Related Security with respect to each such Receivable, (iii) all Collections
with respect thereto, (iv) all moneys from time to time on deposit in any
Permitted Lockbox or Lockbox Account or otherwise in the possession of Seller or
Servicer in connection with the Receivables, and (v) other Proceeds of the
foregoing, equal to the Buyer's Percentage Interest at such time, and only at
such time (without regard to prior calculations). The Purchased Interest in each
Receivable, together with Related Security and Collections with respect thereto,
shall at all times be equal to the Purchased Interest in each other Receivable,
together with Related Security and Collections. To the extent that the Purchased
Interest shall decrease as a result of a recalculation of the Buyer's Percentage
Interest, each Owner, ratably in accordance with the percentage of the Purchased
21
<PAGE>
Interest owned by it, shall be deemed to have reconveyed to the Seller an
undivided percentage ownership interest in each Receivable, together with
Related Security and Collections, in an amount equal to such decrease such that
in each case the Purchased Interest in each Receivable shall be equal to the
Purchased Interest in each other Receivable.
"Rate Variance Factor"
---------------------- shall mean 1.2.
"Receivable"
------------ shall mean, all indebtedness owed to the Seller, as assignee
of the Originator, by any Obligor, other than an Affiliate of the Seller, which
is either
(i) a Person organized under the laws of the United States or any
State thereof that maintains its principal place of business in the United
States
or
(ii) a Government Obligor
(without giving effect to any purchase hereunder by the Buyer at any time) under
a Contract, whether or not constituting an account or a general intangible and
whether or not evidenced by chattel paper or an instrument, whether now existing
or hereafter arising and wherever located, arising in connection with
(y) the sale of goods or the rendering of services in the ordinary
course of business by the Originator
or
(z) the sale to IBM Credit Corporation or to another similar
institution providing credit to such Obligor (provided such institution, as
an Obligor, satisfies any of the definitions of Group A Obligor, Group B
Obligor, Group C Obligor or Group D Obligor) of the original indebtedness
incurred by an Obligor to the Originator in connection with such sale of
goods or the rendering of such services,
and satisfying the description set forth on Exhibit B hereto, and including
other obligations of such Obligor with respect thereto, but excluding any amount
of sales tax, excise tax or other similar tax or charge incurred in connection
with the sale of the goods or services which gave rise to such indebtedness.
Notwithstanding the foregoing, once a Receivable has been deemed collected
pursuant to Section 2.08(c) hereof and the Seller has complied with its
22
<PAGE>
obligations in respect of such deemed Collection set forth in Section 2.08(d)
hereof, it shall no longer constitute a Receivable hereunder. Nothing in this
Agreement shall be deemed to prohibit any assignment or sale to IBM Credit
Corporation or to another similar institution providing credit to such Obligor
(provided such institution, as an Obligor, satisfies any of the definitions of
Group A Obligor, Group B Obligor, Group C Obligor or Group D Obligor) of any
indebtedness simultaneous with its purchase by the Seller under the Purchase
Agreement provided that such assignment or sale gives rise to a Receivable
hereunder the Obligor of which is IBM Credit Corporation or such similar
institution.
"Records"
--------- shall mean correspondence, memoranda, computer
programs, tapes, discs, papers, books or other documents or transcribed
information of any type whether expressed in ordinary or machine readable
language.
"Referral Agent"
----------------- shall mean Morgan Guaranty Trust Company of New York,
together with its successors or assigns, in its capacity as referral agent for
the Buyer under the Amended and Restated Referral Agreement dated as of December
6, 1995 between the Buyer and the Referral Agent, as the same may from time to
time be amended, supplemented or otherwise modified.
"Related Security"
------------------ shall mean with respect to any Receivable:
(aa) all of the Seller's interest (as assignee of the Originator), if any,
in the goods, merchandise (including returned merchandise) or equipment, if any,
the sale of which by Originator gave rise to such Receivable;
(bb) all other security interests or liens and property subject thereto
from time to time, if any, purporting to secure payment of such Receivable,
whether pursuant to the Contract related to such Receivable or otherwise,
together with all financing statements signed by an Obligor describing any
collateral securing such Receivable;
(cc) all guarantees, insurance or other agreements or arrangements of any
kind from time to time supporting or securing payment of such Receivable whether
pursuant to the Contract related to such Receivable or otherwise;
(dd) all Records relating to, and all service contracts and any other
contracts associated with, the Receivables, the Contracts or the Obligors; and
(ee) all of the Seller's right, title and interest in, to and under the
Purchase Agreement.
"Remainder"
----------- shall have the meaning ascribed to such term in Section 2.08(a)
hereof.
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<PAGE>
"Responsible Officer"
---------------------- shall mean, with respect to the Seller, the Servicer
or Lexmark, the chief executive officer, chief financial officer, any vice
president, the controller, the treasurer, the Cash Manager, the Treasury
Financial Analyst or any assistant treasurer thereof.
"Security Agreement"
-------------------- shall mean the Amended and Restated Security Agreement
dated as of December 6, 1995 made by the Buyer and Morgan Guaranty Trust Company
of New York, as collateral agent, for the benefit of, among other parties, the
Purchasers, the Program LOC Bank and the holders from time to time of the
Commercial Paper, as the same may from time to time be amended, supplemented or
otherwise modified.
"Servicer"
---------- shall mean Lexmark, or any Person other than Lexmark or any of
its Affiliates, which upon the termination of Lexmark as the Servicer succeeds
to the functions performed by Lexmark as the Servicer of the Receivables
pursuant to a Complete Servicing Transfer and a Servicing Agreement.
"Servicer Default"
------------------- shall have the meaning ascribed thereto in Section 4.07
hereof.
"Servicer's Compensation"
-------------------------- shall have the meaning ascribed to such term in
Section 4.06(e) hereof.
"Servicing Agreement"
---------------------- shall mean any agreement between the Administrative
Agent, the Buyer and any Person, other than Lexmark or any of its Affiliates,
which contains provisions concerning the servicing of the Receivables
substantially similar to the provisions contained herein, including Sections
2.04, 2.08, 2.09, 4.01, 4.02, 4.04, 4.06 and 4.08 hereof, pursuant to which such
Person performs servicing functions for the Receivables, and all agreements,
instruments and documents attached thereto or delivered in connection therewith,
as any of the same may from time to time be amended, supplemented or otherwise
modified.
"Subsidiary"
------------ shall mean, with respect to a Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person,
and in the case of Lexmark, shall include the Seller.
"S&P"
----- shall mean Standard & Poor's Rating Group, together with its
successors.
"Termination Event"
------------------- shall have the meaning ascribed to such term in Section
7.01 hereof.
"Tranche"
--------- shall have the meaning ascribed to such term in Section 2.06(b)
hereof.
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<PAGE>
"Tranche Period"
----------------- shall mean, with respect to any Tranche, prior to the
Expiration Date, a period of up to 90 days requested by the Seller and
determined by the Administrative Agent in consultation with each Owner
commencing on the Business Day requested by the Seller and determined by the
Administrative Agent in consultation with each Owner, and after the Expiration
Date, a period of one day (unless the Administrative Agent, in any case other
than the occurrence of the Expiration Date due to a Termination Event described
in Section 7.01(f), (i), (j) or (k) hereof, after consultation with each Owner,
agrees at such time to a longer period). If such Tranche Period would end on a
day which is not a Business Day, such Tranche Period shall end on the next
succeeding Business Day (provided, that for any Tranche funded by reference to
the Eurodollar Rate (as defined in the Asset Purchase Agreement), if the next
succeeding Business Day is in the next calendar month, such Tranche Period shall
end on the next preceding Business Day).
"Tranche Rate"
-------------- shall mean, for any Tranche Period for any Tranche, a rate
per annum (expressed as a percentage and an interest yield equivalent and
calculated on the basis of a 360-day year and the actual days elapsed) equal to
the rate of interest (or if more than one rate, the weighted average of the
rates) at which funds are borrowed, drawn down or otherwise obtained during such
Tranche Period, in connection with the issuance of Commercial Paper, the
provision of loans under the APA Credit Agreement, the sale of Receivables by
the Buyer pursuant to the Asset Purchase Agreement, drawing under the Program
Letter of Credit or otherwise, by an Owner for the purpose of making or
maintaining its investment in such Tranche, excluding from the computation of
such rates any dealer's discount or fees and excluding any and all other fees
directly attributable to such funding. In the case of the issuance of Commercial
Paper, such rate of interest shall equal the rate of interest (computed as
described in the preceding sentence) of Commercial Paper issued by the Buyer. In
the case of borrowings under the APA Credit Agreement or drawings under the
Program Letter of Credit, such rate of interest, at the option of the Buyer, may
be determined by the weighted average of such interest rates as applicable to
all sellers of receivables to the Buyer.
"Tranche Selection Notice"
--------------------------- shall have the meaning ascribed to such term in
Section 2.06(b) hereof.
"Transaction Costs"
------------------- shall have the meaning ascribed to such term in Section
9.01 hereof.
"UCC"
----- shall mean, with respect to any jurisdiction, the Uniform Commercial
Code, or any successor statute, or any comparable law, as the same may from time
to time be amended, supplemented or otherwise modified and in effect in such
jurisdiction.
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<PAGE>
1.02. Interpretation and Construction.
---------------------------------
Unless the context of this Agreement otherwise clearly requires, references to
the plural include the singular, the singular the plural and the part the whole.
References in this Agreement to "determination" by the Buyer or the
Administrative Agent shall be conclusive absent manifest error and include good
faith estimates by the Buyer or the Administrative Agent, as the case may be (in
the case of quantitative determinations), and good faith beliefs by the Buyer or
the Administrative Agent, as the case may be (in the case of qualitative
determinations). The words "hereof", "herein", "hereunder" and similar terms in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise stated in this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding." The section and other headings contained in this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation hereof in any respect.
Section, subsection and exhibit references are to this Agreement unless
otherwise specified. As used in this Agreement, the masculine, feminine or
neuter gender shall each be deemed to include the others whenever the context so
indicates. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. Terms not otherwise defined herein which are
defined in the UCC as in effect in the State of New York on the date hereof
shall have the respective meanings ascribed to such terms therein unless the
context otherwise clearly requires.
1.03. Obligor Classification.
---------------------- In determining whether an Obligor is a Group
A Obligor, a Group B Obligor, a Group C Obligor or a Group D Obligor:
(i) any debt rating of an Obligor which is based upon credit enhancement
provided by a third party or based upon collateral shall be disregarded; and
(ii) ( if more than one rating agency provides a rating of any type of the
Obligor's debt, the lowest rating for such type of debt shall be utilized.
26
<PAGE>
ARTICLE II
PURCHASES AND SETTLEMENTS
-------------------------
2.01. General Assignment and Conveyance.
----------------------------------
At the time of the Initial Purchase and of each Incremental Purchase pursuant to
Sections 2.02 and 2.03 hereof and of each reinvestment Purchase pursuant to
Section 2.05 hereof, the Seller hereby bargains, grants, assigns, transfers and
conveys to the Administrative Agent (as agent for the applicable Owner or
Owners), without recourse, except as specifically set forth herein, and the
applicable Owner or Owners hereby agree to cause the Administrative Agent, on
behalf of the applicable Owner or Owners, to purchase and accept assignment and
transfer from the Seller of, all of the Seller's right, title and interest in
and to the Purchased Interest in the Receivables then existing as well as any
additional Receivables thereafter arising.
2.02. Incremental Purchase Limits.
--------------------------- Subject to Section 2.15 and to the other
terms and conditions hereof, the Seller may at any time and from time to time at
its option sell to the Administrative Agent, for the benefit of the applicable
Owner or Owners, without recourse, except as specifically set forth herein, and
the applicable Owner or Owners agree to cause the Administrative Agent, on
behalf of the applicable Owner or Owners to purchase from the Seller, undivided
percentage ownership interests in each and every Receivable (including any
additional Receivables thereafter arising), together with the Related Security
and Collections with respect thereto (each an "Incremental Purchase").
--------------------- The
Administrative Agent shall have no obligation to make an Incremental Purchase on
any day, to the extent that the amount of such purchase shall exceed the
Purchase Availability Amount, or shall cause the Investment Percentage (after
giving effect to such purchase) to exceed 100%. The Owners shall not be
obligated to increase the Maximum Net Investment. The Buyer shall have no
obligation to make an Incremental Purchase if the Buyer determines that it is
not practicable to issue Commercial Paper and no Owner shall have an obligation
to make any such purchase at or after the earlier to occur of (i) the Expiration
Date and (ii) the reduction of the Maximum Net Investment to zero pursuant to
Section 2.11(a) hereof. Each Incremental Purchase shall be in an amount of
$5,000,000 or any higher multiple of $1,000,000.
2.03. Incremental Purchase Price.
-------------------------- A Responsible Officer shall on behalf of
the Seller provide the Administrative Agent with a notice in substantially the
form of Exhibit C hereto (a "Purchase Notice")
--------------- at least five Business Days prior
to each Incremental Purchase. On the closing date for each Incremental Purchase,
the Administrative Agent, on behalf of the applicable Owner or Owners, shall
deposit to the Seller's account at the location indicated on the signature page
hereof, in immediately available funds, an amount equal to the Purchase Price
27
<PAGE>
for such Incremental Purchase. Each Purchase Notice shall be irrevocable and
binding on the Seller and the Seller shall indemnify the applicable Owner or
Owners against any loss or expense incurred by the applicable Owner or Owners,
either directly or indirectly, as a result of any failure by the Seller to
complete such Incremental Purchase (other than as a result of failure by the
Buyer or the Administrative Agent on behalf of the Owners to accept an
Incremental Purchase that satisfies the applicable conditions and requirements
of this Agreement) including, without limitation, any loss (including loss of
anticipated profits) or expense incurred by the applicable Owner or Owners,
either directly or indirectly, by reason of the liquidation or reemployment of
funds acquired by the applicable Owner or Owners (including, without limitation,
funds obtained by issuing commercial paper or promissory notes or obtaining
deposits as loans from third parties) for the applicable Owner or Owners to fund
such Incremental Purchase. The Administrative Agent shall notify the Seller of
the amount determined by the applicable Owner or Owners to be necessary to
compensate such Owner or Owners for such loss or expense. Such amount shall be
due and payable by the Seller to the Administrative Agent for distribution to
the applicable Owner or Owners ten Business Days after such notice is given.
2.04. Deferred Purchase Price.
----------------------- The applicable Owner or Owners shall
defer from paying to the Seller with respect to their purchases of ownership
interests in the Receivables an amount equal to the Deferred Purchase
Price. The Seller shall calculate the Deferred Purchase Price as of the
closing date for each Incremental Purchase and the Servicer shall calculate the
Deferred Purchase Price as of the date of each Monthly Report and at such other
times as the Administrative Agent shall request in writing.
2.05. Reinvestment Purchases.
----------------------- On each Business Day occurring after the
Initial Purchase hereunder and prior to the Expiration Date, the Seller hereby
bargains, grants, sells, assigns, transfers and conveys to the Administrative
Agent, for the benefit of the applicable Owner or Owners, and, subject to
Section 3.03 hereof, such Owner or Owners hereby agree to cause the
Administrative Agent, on behalf of the applicable Owner or Owners, to purchase
from the Seller undivided percentage ownership interests in each and every
Receivable (including any additional Receivables arising), together with Related
Security and Collections with respect thereto, to the extent that Collections
are available for such Purchase in accordance with Section 2.08(a) hereof.
2.06. Funding of the Net Investment.
-----------------------------
(a) At all times hereafter, but prior to the Expiration Date, the Buyer
shall utilize its best efforts to issue Commercial Paper prior to selling any
Purchased Interest to the APA Purchasers under the Asset Purchase Agreement to
28
<PAGE>
fund the Net Investment; provided, however, that nothing herein shall require
the Buyer to issue Commercial Paper or limit the rights of the Buyer to sell any
Purchased Interest to the APA Purchasers or obtain a drawing under the Program
Letter of Credit to fund the Net Investment; provided, further, if any Purchased
Interest has been purchased by an APA Purchaser, such Purchased Interest shall
be funded using the Rates (as defined in the Asset Purchase Agreement) for such
APA Purchaser set forth in the Asset Purchase Agreement.
(b) At all times hereafter, but prior to the occurrence of the Expiration
Date, the Seller shall, subject to the Buyer's approval and, in the case of any
Tranche being funded in the manner contemplated by the Asset Purchase Agreement,
the approval of the APA Purchaser or APA Purchasers under the Asset Purchase
Agreement, and the limitations described below, request Tranche Periods and
allocate a portion of the Net Investment to each selected Tranche Period (each
such portion so allocated being herein called a "Tranche"),
------- so that the
aggregate amount of all Tranches shall at all times equal the Net Investment.
The Tranche Period corresponds to the funding term for each Tranche and the
Seller shall not request a Tranche Period whose final day would be a day on or
after the third Business Day prior to the Expiration Date. A Responsible Officer
shall on behalf of the Seller give the Administrative Agent notice of a
requested initial Tranche Period or Periods for each Incremental Purchase at
least three Business Days prior to each Incremental Purchase and notice of each
new requested Tranche Period for any Tranche at least three Business Days prior
to the expiration of any then existing Tranche Period for such Tranche (each
such notice shall be irrevocable, shall be in the form of Exhibit D hereto and
shall be referred to as a "Tranche Selection Notice");
------------------------ provided, however, that
the Buyer and, if applicable, each APA Purchaser, may select, in its sole
discretion, any such Tranche Period if (i) the Seller fails to provide such
notice on a timely basis or (ii) the Buyer determines, in its sole discretion,
that the Tranche Period requested by the Seller is unavailable or for any reason
undesirable. The Buyer and each APA Purchaser may, with respect to any Tranche
being funded other than by Commercial Paper, in its sole discretion, at any time
or from time to time, by written notice to the Seller, declare the Tranche
Period for such Tranche to be terminated and allocate the amount of Net
Investment allocated to such Tranche for such Tranche Period to one or more
other Tranches and Tranche Periods as the Buyer or such APA Purchaser, as the
case may be, shall select. In the case of any Tranche Period ending after the
Expiration Date, such Tranche Period shall end on the Expiration Date and
thereafter, all such Tranche Periods shall be a period of one day (unless the
Administrative Agent, in any case other than the occurrence of the Expiration
Date due to a Termination Event described in Section 7.01(f), (i), (j), or (k)
hereof, after consultation with each Owner agrees at such time to a longer
period).
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<PAGE>
(c) At all times on and after the Expiration Date occurring for the reason
set forth in clause (v) of the definition of such term (other than due to a
Termination Event described in Section 7.01(l) hereof), the Administrative
Agent, after consultation with each Owner, may declare the Tranche Rates
applicable to the Net Investment or the Tranche Rate applicable to any Tranche
Period to be equal to the Base Rate plus 1%.
2.07. Discount.
-------- The Administrative Agent will provide the Seller and the
Servicer (if not Lexmark) with a report in substantially the form of Exhibit E
hereto showing the Discount attributable to each Tranche for its then current
Tranche Period prior to the third Business Day of each month and otherwise upon
the reasonable request of the Seller and setting forth the Rate Variance Factor
then in effect. The Tranche Rate and the Program Fee with respect to each
Tranche shall accrue on each day occurring during the Tranche Period related
thereto and the related Discount shall be payable by the Seller to the
Administrative Agent on the last day of the applicable Tranche Period. If any
amount hereunder shall be payable by the Seller to the Administrative Agent on a
day which is not a Business Day, such amount shall be payable on the next
succeeding Business Day (unless the amount is payable in respect of a Tranche,
the Tranche Rate of which is determined by reference to the Eurodollar Rate (as
defined in the Asset Purchase Agreement), and the next succeeding Business Day
is in the next calendar month, in which event the amount shall be payable on the
next preceding Business Day). Discount payable hereunder shall be calculated for
the actual days elapsed on the basis of a 360-day year. Nothing in this
Agreement shall limit in any way the obligations of Seller to pay the amounts
set forth in this Section 2.07.
2.08. Non-Liquidation Settlements and Other Payment Procedures.
--------------------------------------------------------
(a) On each day after the day of the Initial Purchase but prior to the
Expiration Date the Servicer shall allocate to the Owners an amount of
Collections equal to the product of (i) the Buyer's Percentage Interest,
expressed as a decimal and (ii) Collections, if any, received on or prior to
such day and on or after the date of the Initial Purchase hereunder and not
previously applied or accounted for. The Servicer shall hold in trust for the
benefit of the Owners out of such amount in respect of the Buyer's Percentage
Interest an amount equal to all Discount accrued through such day and not
previously so held or paid. If a Potential Termination Event or a Termination
Event has occurred, the Seller or, if Lexmark is no longer acting as Servicer of
the Receivables, the Servicer shall, subject in the case of the Seller to the
proviso in the second sentence of Section 4.06(e) hereof, following such
allocation, hold for its own account out of the Buyer's Percentage Interest in
the remaining Collections an amount, if available, equal to the Servicer's
Compensation accrued through such day and not previously so held. The remainder
of such amount (the "Remainder") in respect of such Buyer's Percentage Interest
30
<PAGE>
shall, subject to the terms and conditions of this Agreement, be utilized by the
Servicer to make for the benefit of the Owners a reinvestment Purchase of
additional undivided percentage interests in each Receivable pursuant to Section
2.05 hereof. On the last day of each Tranche Period, from the amounts held in
trust, the Servicer shall deposit to the Administrative Agent's account, for
distribution to the Owners in accordance with the provisions hereof or the Asset
Purchase Agreement, an amount equal to the accrued and unpaid Discount for such
Tranche Period.
(b) If and for so long as any of the Remainder cannot be reinvested in
additional undivided percentage interests in Receivables pursuant to Sections
2.05 and 2.08(a) hereof, the Servicer shall hold in trust for the Owners such
Collections and shall remit to the Administrative Agent for distribution to the
Owners any such Collections not reinvested and not set aside to pay Discount
pursuant to Section 2.08(a) hereof on the next date on which Discount is payable
or on such other date as specified by the Administrative Agent or the Majority
Owners. The receipt of such payment by the Administrative Agent shall result in
a reduction of the Net Investment.
(c) If on any day the Outstanding Balance of a Receivable is (w) reduced
or canceled as a result of any defective or rejected goods or services, any cash
discount or any adjustment by the Servicer, or (x) reduced or canceled as a
result of a set-off in respect of any claim by any Person (whether such claim
arises out of the same or a related transaction or an unrelated transaction),
including without limitation any set-off against IBM Receivables arising under
the Master Set-Off and Guarantee Agreement dated as of March 27, 1991 among IBM,
Lexington Holding Corporation, Lexmark and Lexmark Europe Corporation, Inc., (y)
reduced or canceled as a result of any forgiveness of the obligation or of any
adjustment by the Servicer, or (z) otherwise reduced or canceled as a result of
any Dilution Factor with respect to such Receivable, the Servicer shall be
deemed to have received on such day a Collection of such Receivable in the
amount of such reduction or cancellation. If on any day any of the
representations or warranties in Section 5.02 hereof is no longer true or was
not true when made with respect to a Receivable, the Seller shall be deemed to
have received on such day a Collection of such Receivable in full.
(d) Any Collections deemed to be received by the Seller or the Servicer
pursuant to Section 2.08(c) hereof shall be paid by the Seller to the Servicer
on the next date on which Discount is payable or on such other day as specified
by the Administrative Agent and the Servicer shall hold or distribute all
Collections deemed received pursuant to Section 2.08(c) hereof to the same
extent as if such Collections had actually been received. So long as the
Servicer shall hold any Collections or deemed Collections required to be paid to
an Owner, it shall hold such Collections in trust for such Owner.
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<PAGE>
2.09. Liquidation Settlement Procedures.
---------------------------------- On the Expiration Date and on
each day thereafter, the Servicer shall hold in trust for the Owners,
an amount equal to the product of (i) the Buyer's Percentage Interest,
expressed as a decimal and (ii) Collections, if any, received on such day.
If the Expiration Date occurred because of the occurrence of any Termination
Event described in Section 7.01(l) hereof or for any reason set forth in
clause (i), (ii), (iii) or (iv) of the definition of "Expiration Date"
herein, on the Expiration Date and on each day thereafter the Servicer
shall deposit into the Seller's account the portion, if any, of any Collections
received on such day that is not required to be held in trust for the Owners
pursuant to the preceding sentence. On the last day of the Tranche Period for
each Tranche to occur on or after the Expiration Date, the Servicer shall
deposit into the Administrative Agent's account for distribution to the Owners
in accordance with the provisions hereof or the Asset Purchase Agreement, the
amounts held in trust pursuant to the first sentence of this Section 2.09,
together with any remaining amounts set aside pursuant to Section 2.08(a) hereof
prior to the Expiration Date. If the Expiration Date occurred because of a
Termination Event described in any of Sections 7.01(a) through 7.01(k) hereof,
on the last day of the Tranche Period for each Tranche to occur on or after the
Expiration Date, the Servicer shall deposit into the Seller's account the
portion, if any, of any Collections received during such Tranche Period that is
not required to be held in trust for the Owners pursuant to the first sentence
of this Section 2.09. If there shall be insufficient funds on deposit for the
Administrative Agent to distribute funds in payment in full of the
aforementioned amounts to an Owner, the Administrative Agent shall distribute
funds first, in payment of all fees and expenses payable to the Buyer, second,
in payment of the Discount due, third, in reduction of such Owner's percentage
of the Net Investment allocated to such Tranche Period, and fourth, in payment
of all other Aggregate Unpaids (whether due or accrued) and, if a Potential
Termination Event or a Termination Event has occurred, fifth, if Lexmark or any
Affiliate thereof is not the Servicer, in payment of the Servicer's Compensation
due. Following the date on which the Net Investment has been reduced to zero and
all Discount due and all other Aggregate Unpaids have been paid in full, (i) the
Deferred Purchase Price shall be deemed to have been paid in full, (ii) the
Servicer shall recompute the Buyer's Percentage Interest, (iii) the
Administrative Agent, on behalf of the applicable Owners, shall be deemed to
have reconveyed to the Seller any interest they may have in the Receivables
(including the Purchased Interest), together with the Related Security and
Collections with respect thereto, (iv) the Servicer shall pay to the Seller any
remaining Collections set aside and held by the Servicer pursuant to the first
sentence of this Section 2.09, (v) the Administrative Agent shall pay to the
Seller any remaining Collections held in the Administrative Agent's account and
(vi) the Administrative Agent and the Owners shall execute and deliver to the
Seller, at Seller's expense, such documents or instruments as are reasonably
32
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necessary to terminate the Owners' interest in the Receivables, together with
the Related Security and Collections with respect thereto.
2.10. Fees.
---- Notwithstanding any limitation on recourse contained in
this Agreement, the Seller shall pay the non-refundable fees set forth in the
Fee Letter. Any of the fees described in the Fee Letter which are accrued but
unpaid on the Expiration Date shall be paid in full by the Seller on the
Expiration Date.
2.11. Optional Reduction of Maximum Net Investment; Optional Reduction
------------------------------------------------------------------
of Net Investment.
- -----------------
(a) The Seller may reduce in whole or in part the Maximum Net Investment
(but not below the Net Investment) by giving the Administrative Agent written
notice thereof at least five Business Days before such reduction is to take
place; provided, however, that any partial reduction shall be in an amount of
$5,000,000 or any higher multiple of $1,000,000. The Seller shall pay the Buyer
any accrued and unpaid Purchase Availability Fee on the date of such reduction
with respect to the reduction amount.
(b) The Seller may reduce the Net Investment in whole or in part with
respect to any Tranche on the last day of the related Tranche Period by giving
the Administrative Agent at least five Business Days' written notice. If the
Seller delivers such a notice of reduction, the Seller shall pay to the
Administrative Agent for distribution to the Owners in accordance with the Asset
Purchase Agreement (or cause the Servicer to pay to the Administrative Agent) on
the last day of such Tranche Period an amount equal to (i) the amount of the
proposed reduction, (ii) any Discount otherwise payable on such date and (iii)
if such reduction reduces the Net Investment to zero, all other Aggregate
Unpaids; provided, however, that any partial reduction shall be in an amount of
$5,000,000 or any higher multiple of $1,000,000. Such reduction shall become
effective upon payment of the amounts in the preceding clauses (i), (ii) and, if
applicable, (iii).
(c) If any Monthly Report would show that, as of the close of business on
the last day of the month to which such Monthly Report relates, the Buyer's
Percentage Interest exceeded 100%, or if at any time the Seller, the Servicer,
the Administrative Agent or the Buyer becomes aware that the Buyer's Percentage
Interest exceeds 100%, the Seller may reduce the Net Investment by an amount
sufficient to reduce the Buyer's Percentage Interest to less than or equal to
100% by making a payment in such amount to the Administrative Agent's account
(for the benefit of the Buyer), in immediately available funds.
33
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2.12. Mandatory Repurchase Under Certain Circumstances.
------------------------------------------------ The Seller agrees to
repurchase from the Administrative Agent (as agent for the Owners) the Purchased
Interest if at any time the Administrative Agent, on behalf of the Owners, shall
cease to have a perfected ownership interest, or a first priority perfected
security interest, in the Receivables, free and clear of any Lien (except for
(w) any adverse claim with respect to a Receivable the Obligor of which is a
Governmental Obligor, (x) the Lien arising in connection with this Agreement,
(y) the second priority Lien in favor of Morgan Guaranty Trust Company of New
York, as security agent for the Credit Providers, described in the Amended and
Restated Intercreditor Agreement and (z) any Permitted Liens which are in an
aggregate dollar amount that is determined by the Administrative Agent, in its
sole discretion, to be de minimis), within five days of notice thereof by the
Administrative Agent. The repurchase price shall be paid by the Seller to the
Administrative Agent for distribution to the Owners on such fifth day in an
amount equal to the Net Investment and the Aggregate Unpaids.
2.13. Payments and Computations, Etc.; Allocation of Collections
------------------------------------------------------------
(a) All per annum fees payable under this Agreement shall be calculated
for the actual days elapsed on the basis of a 360-day year. All amounts to be
paid or deposited by the Seller or the Servicer hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 a.m. (New York
City time) on the day when due in immediately available funds; if such amounts
are payable to an Owner or Owners they shall be paid or deposited in the
Administrative Agent's account indicated on the signature page hereof, until
otherwise notified by such Owner. The Seller shall, to the extent permitted by
Law, pay to the Administrative Agent for the account of each Owner upon demand,
interest on all amounts not paid or deposited when due to the Administrative
Agent for the account of each Owner hereunder at a rate equal to 2% per annum
plus the Base Rate. All computations of interest hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
but excluding the last day) elapsed. Any computations of amounts payable by the
Seller hereunder made by the Buyer, the Administrative Agent or the Program LOC
Bank shall be binding absent manifest error.
34
<PAGE>
(b) Any payment by an Obligor in respect of any indebtedness owed by it to
the Seller shall, except as otherwise specified by such Obligor or otherwise
required by Contract or Law and unless otherwise instructed by the
Administrative Agent, be applied as a Collection of any Receivable of such
Obligor included in the Purchased Interest (starting with the oldest such
Receivable) to the extent of any amounts then due and payable thereunder before
being applied to any other receivable or other indebtedness of such Obligor;
provided, however, that in regard to any payments made by IBM or any Subsidiary
or Affiliate of IBM, only payments made in respect of Receivables shall be so
applied.
2.14. Reports.
-------
(a) Prior to the fourteenth Business Day of each month, the Servicer shall
prepare and forward to the Administrative Agent (i) a monthly report,
substantially in the form of Exhibit G (a "Monthly Report"), as of the close of
business of the Servicer on the last day of the immediately preceding month and
(ii) if requested by the Administrative Agent, a listing by Obligor of all
Receivables together with an aging of such Receivables and such other
information concerning actual and historical collections experience and other
matters as the Administrative Agent may reasonably request.
(b) The Seller shall, or shall cause the Servicer to, furnish to the
Administrative Agent at any time and from time to time, such other or further
information in respect of the Receivables, the Seller and the Obligors as the
Administrative Agent may reasonably request.
2.15. Initial Purchase.
---------------- In consideration of the execution and delivery
by the Seller and Lexmark of the Purchase Agreement and the other
Purchase Documents, and subject to the terms and conditions hereof, on the date
hereof the Seller shall sell, and the Administrative Agent, as agent for the
applicable Owner or Owners, shall purchase on the Closing Date from the Seller,
undivided percentage ownership interests in each and every Initial Receivable,
together with the Related Security and Collections with respect thereto (the
"Initial Purchase"). A Responsible Officer shall on behalf of the Seller provide
the Administrative Agent with a Purchase Notice dated the date hereof in respect
of the Initial Purchase. The Purchase Price of the Initial Purchase shall equal
the Owners' initial Net Investment.
35
<PAGE>
ARTICLE III
CLOSING PROCEDURES
------------------
3.01. Purchase and Sale Procedures.
----------------------------
(a) General.
------- Each Purchase hereunder shall constitute a purchase of, and
shall transfer ownership to the Administrative Agent, for the benefit of the
applicable Owner or Owners, of, undivided percentage ownership interests in each
and every Receivable, together with Related Security and Collections with
respect thereto, then existing as well as each and every Receivable, together
with Related Security and Collections, which may arise at any time after the
date of such Purchase.
(b) Maximum Net Investment.
----------------------- If, on any closing date for an Incremental
Purchase, the Purchase Price to be paid on such date for such Incremental
Purchase would cause the Net Investment to exceed the Maximum Net Investment,
the Owners may, at their option, either refuse to make such Incremental Purchase
or make a smaller Incremental Purchase such that, immediately after the payment
of the smaller Purchase Price, the Net Investment would not exceed the Maximum
Net Investment.
(c) Sale Without Recourse.
----------------------- The sale of the Purchased Interest by the
Seller hereunder shall be made without recourse except as specifically provided
herein.
(d) Grant of Security Interest.
-------------------------- This Agreement also constitutes a security
agreement under the UCC. The Seller hereby grants to the Administrative Agent
(for the benefit of each Owner) a first priority perfected security interest in
and against all of the Seller's right, title and interest in and to each and
every Receivable (together with Related Security, Collections and other
Proceeds), whether now existing or hereafter arising, for the purpose of
securing the rights of the Owners under this Agreement.
(e) Non-Assumption by the Owners of Obligations.
------------------------------------------------ No obligation or
liability of the Seller, as assignee of the Originator, to any Obligor or any
third party under any Receivable or Contract which is part of the Receivables in
which an Owner has a Purchased Interest shall be assumed by any Owner, and any
such assumption is hereby expressly disclaimed. Each Owner and the
Administrative Agent shall be indemnified by the Seller in accordance with
Section 9.03 hereof in respect of any losses, claims, damages, liabilities,
costs or expenses arising out of or incurred in connection with any Obligor's
assertion of such obligation or liability against the Owners or the
Administrative Agent.
3.02. Conditions to Funding.
--------------------- On or prior to the date of the Initial
Purchase, the Seller shall have delivered to the Administrative
36
<PAGE>
Agent the following documents and instruments, all of which shall be in a form
and substance acceptable to the Administrative Agent (with such additional
copies thereof as the Administrative Agent may request) and the following fee:
(a) A copy of the resolutions of the Board of Directors of each of the
Seller and Lexmark certified as of the Closing Date by its secretary authorizing
the execution, delivery and performance of this Agreement and the other
documents to be delivered by the Seller or Lexmark, as applicable, hereunder and
approving the transactions contemplated hereby and thereby;
(b) The Certificates of Incorporation of each of the Seller and Lexmark
certified as of a date reasonably near the Closing Date by the Secretary of
State or other similar official of the Seller's or Lexmark's, as applicable,
jurisdiction of incorporation;
(c) A good standing certificate for each of the Seller and Lexmark issued
by the Secretary of State or other similar official of the Seller's or
Lexmark's, as applicable, jurisdiction of incorporation, certificates of
qualification as a foreign corporation issued by the Secretaries of State or
other similar officials of each jurisdiction where such qualification is
material to the transactions contemplated by this Agreement and certificates of
the appropriate state official in each appropriate jurisdiction as to the
absence of any tax Liens against the Seller or Lexmark, as applicable, under the
Laws of such jurisdiction, each such certificate to be dated a date reasonably
near the Closing Date;
(d) A certificate of the secretary of each of the Seller and Lexmark
dated the Closing Date and certifying (i) the names and signatures of the
officers authorized on its behalf to execute, and the officers and other
employees authorized to perform, this Agreement and any other documents to be
delivered by the Seller and Lexmark, respectively, hereunder (on which
certificate the Administrative Agent and each Owner may conclusively rely until
such time as the Administrative Agent shall receive from the Seller or Lexmark,
as applicable, a revised certificate meeting the requirements of this clause
(d)(i)) and (ii) a copy of each of the Seller's and Lexmark's By-laws;
(e) (i) Acknowledgment copies of proper financing statements (Form UCC-l)
dated a date reasonably near the Closing Date naming the Seller as the debtor of
Receivables and Morgan Guaranty Trust Company of New York, as Administrative
Agent (for the benefit of the Owners), as the secured party or other similar
instruments or documents as may be necessary or, in the opinion of the
Administrative Agent, desirable under the UCC of all appropriate jurisdictions
to evidence or perfect the Owners' ownership interests in all Receivables and
(ii) acknowledgment copies of proper financing statements (Form UCC-l) dated a
37
<PAGE>
date reasonably near the Closing Date naming Lexmark as the debtor of
Receivables and the Seller as the secured party or other similar instruments or
documents as may be necessary or, in the opinion of the Administrative Agent,
desirable under the UCC of all appropriate jurisdictions to evidence or perfect
the Seller's security interest in the Receivables;
(f) Acknowledgment copies of proper financing statements (Form UCC-3), if
any, necessary under the laws of all appropriate jurisdictions to release all
security interests and other rights of any Person in Receivables previously
granted by the Seller or Lexmark;
(g) Certified copies of requests for information or copies (Form UCC-11)
(or a similar search report certified by parties acceptable to the
Administrative Agent) dated a date reasonably near the Closing Date listing all
effective financing statements which name the Seller or Lexmark (under either of
their present names and any previous names) as debtor and which are filed in
jurisdictions in which the filings were made pursuant to item (e) above,
together with copies of such financing statements;
(h) Copies of Lockbox Servicing Instructions and all other agreements
previously given or entered into with each of the Permitted Lockbox Banks;
(i) Within a reasonable time after the Closing Date, undated duly
executed letters (a "Lockbox Account Transfer Letter") addressed to each
Permitted Lockbox Bank substantially in the form of Exhibit H hereto;
(j) Favorable opinions of Vincent J. Cole, Esq., Vice President and
Secretary of the Seller and Vice President, General Counsel and Secretary of
Lexmark, dated the Closing Date in substantially the form of Exhibit I hereto
and as to such other matters as the Administrative Agent may reasonably request;
(k) An officer's certificate for each of the Seller and Lexmark dated the
Closing Date in the form of Exhibit J hereto executed by a Responsible Officer;
(l) A Monthly Report for the immediately preceding month;
(m) The Purchase Notice and the Tranche Selection Notice for the Initial
Purchase hereunder;
(n) A form of Contract or Contracts;
(o) If there is a Servicer other than Lexmark or the Administrative
Agent, a copy of the Servicing Agreement together with an acknowledgment from
the Servicer affirming that the Servicing Agreement is in full force and effect;
38
<PAGE>
(p) The Amended and Restated Intercreditor Agreement and an amendment
thereto;
(q) No later than 10 Business Days after the Closing Date, a list of
Lexmark's customers in connection with the Receivables, such customers
identified by name, address and telephone number;
(r) Such other documents as the Administrative Agent shall reasonably
request; and
(s) A duly executed waiver from IBM Credit Corporation waiving all
provisions in the Contract between IBM Credit Corporation or other similar
institution providing credit to an Obligor and meeting the other requirements
set forth in the definition of "Contract" hereunder, and Lexmark concerning
restrictions on the transfer, sale or assignment of the rights and duties of
Lexmark under such Contract.
3.03. Conditions to Initial, Reinvestment and Incremental Purchases.
------------------------------------------------------------- The
truth and correctness in the case of the Initial Purchase and each Incremental
Purchase of the representations and warranties in Article V hereof, or
the truth and correctness in the case of a reinvestment Purchase of the
representations and warranties in Section 5.02 hereof, as of the date of
such Initial Purchase or such Incremental Purchase or such reinvestment
Purchase as though made on and as of such date, compliance with the covenants
and agreements in Articles II, IV and VI hereof, the requirement that
no Termination Event or Potential Termination Event or Servicer Default
shall occur as a result of such Incremental Purchase, such Incremental
Purchase or reinvestment Purchase, in the case of the Initial Purchase and of
an Incremental Purchase, the satisfactory completion of any due diligence
conducted by the Buyer with respect to the Receivables and the related
Obligors and Contracts which are the subject of such Purchase, and the receipt
by the Owners or the Administrative Agent of any approvals, opinions or
other documents as the Administrative Agent shall have reasonably requested,
shall be conditions precedent to the Initial Purchase under Section 2.15
hereof, to any Incremental Purchase under Sections 2.02 and 2.03 hereof and
to any reinvestment Purchase under Section 2.05 hereof.
39
<PAGE>
ARTICLE IV
PROTECTION OF THE OWNERS;
ADMINISTRATION AND COLLECTIONS
------------------------------
4.01. Acceptance of Appointment and Other Matters Relating to the Servicer.
--------------------------------------------------------------------
(a) Lexmark agrees to act, and is hereby appointed by the Administrative
Agent to act, subject to the terms hereof, as the Servicer under this Agreement,
and all Owners are deemed to have consented to Lexmark acting as Servicer. The
Servicer shall collect payments due under the Receivables in accordance with its
customary and usual servicing procedures for servicing receivables owned by it
and comparable to the Receivables in which a Purchased Interest is acquired
hereunder and in accordance with its Credit and Collection Policy and shall have
full power and authority, acting alone or through any party properly designated
by it hereunder, to do any and all things in connection with such servicing and
administration which it may deem necessary or desirable; provided, however, that
if any Person succeeds Lexmark as the Servicer, such Servicer shall service the
Receivables in which a Purchased Interest is acquired hereunder in accordance
with the standards that would be employed by a prudent institution in servicing
comparable receivables for its own account. Without limiting the generality of
the foregoing and subject to Sections 4.08 and 4.09 hereof, the Servicer is
hereby authorized and empowered (i) to receive and hold in trust for the Owners
Collections received from Receivables in which a Purchased Interest is acquired
hereunder as set forth in Article II and elsewhere in this Agreement and (ii) to
execute and deliver, on behalf of the Administrative Agent (for the benefit of
the Owners), any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments, with
respect to the Receivables in which a Purchased Interest is acquired hereunder
permitted under and in compliance with applicable Law and regulations.
(b) Subject to the rights retained by the Administrative Agent pursuant
to Section 4.08 hereof, each of the Seller, the Owners and the Administrative
Agent hereby appoint the Servicer to enforce its respective rights and interests
in and to the Purchased Interest. If any Person succeeds Lexmark as the
Servicer, Lexmark shall promptly deliver to such Successor Servicer, and the
Servicer shall hold in trust for the Administrative Agent, the Owners and the
Seller, in accordance with their respective interests, all documents instruments
and records (including computer tapes or disks) that are reasonably necessary to
service or collect the Purchased Interest.
40
<PAGE>
Maintenance of Information and Computer Records; Protection of Owners'
----------------------------------------------------------------------
Interests.
--------- (a) The Seller and the Servicer will hold in trust and keep
safely for the Owners all evidence of the Administrative Agent's (for the
benefit of the Owners) right, title and interest in and to the Purchased
Interest in the Receivables. The Seller will, or will cause the Servicer to, on
or prior to the Initial Purchase and each Incremental Purchase, and with respect
to all Receivables that are added to the pool of Receivables in which the Owners
have a Purchased Interest after the Initial Purchase, on each respective date
such Receivables are added, place an appropriate code or notation in its Records
to indicate that the Owners have a Purchased Interest in each and every
Receivable.
(b) The Seller and the Servicer will from time to time and at Seller's
sole expense do and perform any and all acts and execute any and all documents
(including, without limitation, (i) the obtaining of a waiver of any provision
of any Contract that requires the related Obligor to consent to the transfer,
sale or assignment of the rights of the Seller as assignee of the Originator or
of the Originator, as necessary, under such Contract, other than the right of
the Originator to sell, distribute or otherwise provide goods or services to
such Obligor, (ii) the obtaining of a waiver of any provision of any Contract
that restricts the ability of the Administrative Agent or an Owner to exercise
its rights under this Agreement, including, without limitation, the right to
review such Contract, (iii) the obtaining of additional search reports, (iv) the
delivery of further opinions of counsel, (v) the execution, amendment or
supplementation of any financing statements, continuation statements and other
instruments and documents for filing under the provisions of the UCC of any
applicable jurisdiction, (vi) the execution, amendment or supplementation of any
instrument of transfer and (vii) the making of notations on the Records of the
Seller and the Originator) as may be requested by the Administrative Agent in
order to effect the purposes of this Agreement and the sale of the Purchased
Interest hereunder, to protect or perfect the Owners' right, title and interest
in the Purchased Interest in the Receivables, together with Related Security and
all Collections with respect thereto, against all Persons whomsoever or to
enable the Owners or the Administrative Agent to exercise or enforce any of
their respective rights hereunder.
(c) To the fullest extent permitted by applicable Law, the Seller hereby
irrevocably grants to the Administrative Agent an irrevocable power of attorney,
with full power of substitution, coupled with an interest, to sign and file in
the name of the Seller, on the Seller's own behalf or as assignee of the
Originator, as the case may be, or in its own name, such financing statements
and continuation statements and amendments thereto or assignments thereof as the
Administrative Agent deems necessary to protect or perfect the Purchased
Interest.
41
<PAGE>
(d) At any reasonable time and from time to time at the Administrative
Agent's reasonable request upon notice to the Seller or the Servicer, the Seller
or the Servicer, as the case may be, shall permit such Person as the
Administrative Agent may designate to conduct audits or visit and inspect any of
the properties of the Seller or the Servicer, as the case may be, to examine the
Records, internal controls and procedures maintained by the Seller or Servicer,
as the case may be, and take copies and extracts therefrom, and to discuss the
Seller's, or the Servicer's, as the case may be, affairs with its officers,
employees and independent accountants. The Seller or the Servicer, as the case
may be, hereby authorizes such officers, employees and independent accountants
to discuss with the Administrative Agent the affairs of the Seller or the
Servicer, as the case may be. The Seller shall reimburse the Owners and the
Administrative Agent for all reasonable fees, costs and expenses incurred by or
on behalf of the Owners or the Administrative Agent in connection with the
foregoing actions promptly upon receipt of a written invoice therefor.
(e) The Administrative Agent shall have the right to do all such
reasonable acts and things as it may deem necessary to protect the interests of
the Owners, including, without limitation, confirmation and verification of the
existence, amount and status of the Receivables.
4.03. Maintenance of Writings and Records.
------------------------------------- The Servicer will at all times
until completion of a Complete Servicing Transfer keep or cause to be kept at
its office in Lexington, Kentucky, at its Chief Executive Office or at an
office of the Servicer designated in advance to the Administrative Agent,
each writing or Record which evidences, and which is necessary or desirable to
establish or protect, including such books of account and other Records as
will enable the Administrative Agent or its designee to determine at any
time the status of, the Purchased Interest of the Owners in each Receivable.
The Servicer shall at its own expense prepare and maintain machine-readable
magnetic tapes in such format as the Servicer customarily maintains its
records; provided, however, that upon a Complete Servicing Transfer, the
Servicer shall within 15 days of such Complete Servicing Transfer prepare such
Records in such format as may be required to permit or facilitate the transfer
of such Records to the successor Servicer.
4.04. Information.
----------- The Seller and Servicer will each furnish to
the Administrative Agent such additional information with respect to the
Receivables (including but not limited to the Seller's or the Originator's
procedures for selecting Receivables for sale, the Originator's standards and
procedures for selling goods or services on credit, copies of Contracts, and
information with respect to servicing) as the Administrative Agent may
reasonably request. The Seller and the Servicer will also furnish to the
Administrative Agent, S&P and Moody's all modifications, adjustments or
supplements to the Credit and Collection Policy; provided, however, that the
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<PAGE>
Seller shall not consent to the Originator's altering the Credit and Collection
Policy unless such alteration is in compliance with Section 6.02(e) hereof.
4.05. Performance of Undertakings Under the Receivables.
-------------------------------------------------- The Servicer
will at all times observe and perform, or cause to be observed and performed,
all material obligations and undertakings to the Obligors arising in
connection with each Receivable or related Contract and will not take any
action or cause any action to be taken to impair the rights of the
Administrative Agent or any Owner to its Purchased Interest in the Receivables.
4.06. Administration and Collections.
------------------------------
(a) General.
------- Until a Complete Servicing Transfer shall have occurred, the
Servicer will be responsible for the administration, servicing and collection of
the Receivables; provided, however, that upon written approval by the
Administrative Agent such duties may be delegated by the Servicer to any of the
Servicer's Affiliates or a third party (without impairment of the Servicer's
obligations as Servicer). The Servicer agrees to exercise or cause such
Affiliate or third party to exercise the same degree of skill and care and apply
the same standards, policies, procedures and diligence that it applies to the
performance of the same functions with respect to accounts owned by the
Servicer.
(b) Administration.
-------------- The Servicer shall, to the full extent permitted by
Law, have the power and authority, on behalf of each Owner, to take such action
in respect of any Receivable as the Servicer may deem advisable, including the
resale of any repossessed, returned or rejected goods; provided, however, that
the Servicer may not under any circumstances compromise, rescind, cancel, adjust
or modify (including by extension of time for payment or granting any discounts,
allowances or credits) the Outstanding Balance of the related Contract for any
Receivable, except in accordance with the Credit and Collection Policy or
otherwise with the prior written consent of the Administrative Agent.
(c) Enforcement Proceedings.
------------------------ In the event of a default under any
Receivable before a Termination Event, the Servicer shall, at the Seller's sole
expense, to the full extent permitted by Law, have the power and authority, on
behalf of each Owner, to take any action in respect of any such Receivable as
the Servicer may deem advisable; provided, however, that the Servicer or the
Seller, as the case may be, shall take no enforcement action (judicial or
otherwise) with respect to such Receivable, except in material accordance with
the Credit and Collection Policy or otherwise with the written consent of the
Administrative Agent. The Servicer or the Seller, as the case may be, will apply
or will cause to be applied at all times before a Termination Event the same
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standards and follow the same procedures with respect to deciding to commence,
and in prosecuting, litigation on such Receivable as is applied and followed
with respect to like accounts not owned by the Owners. In no event shall the
Servicer or the Seller, as the case may be, be entitled to make or authorize any
Person to make any Owner a party to any litigation without such Owner's express
prior written consent.
(d) Obligations of the Administrative Agent and the Owners.
------------------------------------------------------- At any time
after a Termination Event or a Potential Termination Event (other than a
Termination Event or Potential Termination Event referred to in Section 7.01(l)
hereof) or a Servicer Default shall have occurred and be continuing, the Owners
may, but shall have no obligation to, take any action or commence any proceeding
to realize upon any Receivable, any such action or commencement of proceeding to
be at the sole expense of the Seller. At such time as the Servicer or the
Seller, as the case may be, has any obligation to pursue the collection of
Receivables and the Administrative Agent or an Owner possesses any documents
necessary therefor, the Administrative Agent or such Owner, as the case may be,
agrees to furnish such documents to the Servicer or the Seller, as the case may
be, to the extent and for the period necessary for the Servicer or the Seller,
as the case may be, to comply with its obligations hereunder.
(e) Servicer's Compensation.
------------------------- The servicer's compensation (the
"Servicer's Compensation")
------------------------ for performing its responsibility as the servicer
with respect to any Receivable on any day shall be equal to the quotient of (A)
the product of (1) 1%, expressed as a decimal, and (2) the Outstanding Balances
of all Receivables on such day, divided by (B) 360. Subject to Section 4.08(a)
hereof, (i) prior to a Potential Termination Event, a Termination Event or a
Servicer Default, the Servicer's Compensation shall be paid to the Servicer in
arrears on the last Business Day of each month and (ii) following the occurrence
of a Potential Termination Event, a Termination Event or a Servicer Default, the
Servicer's Compensation shall be retained by the Servicer in accordance with
Section 2.08(a) or 2.09 hereof, as the case may be; provided, however, that if
Lexmark or any Affiliate thereof is the Servicer, the Servicer's Compensation
shall not be paid on or after any day on which a Termination Event or a Servicer
Default shall have occurred and be continuing for any reason other than due to
Section 7.01(l) hereof.
4.07. Servicer Default.
---------------- A "Servicer Default"
----------------- shall mean the occurrence
and continuance of one or more of the following events or conditions:
(a) the Servicer shall fail to remit or fail to cause to be remitted to
the Administrative Agent or any Owner on any day any Collections (other than
deemed Collections described in Section 2.08(c) hereof) or Discount required to
be remitted to the Administrative Agent or such Owner on such day and, with
44
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respect to failure to pay Discount, such failure shall continue for two (2)
Business Days after the date when such Discount became due; or
(b) the Servicer shall fail to deposit, or pay or fail to cause to be
deposited or paid when due any other amount due hereunder (including, without
limitation, deemed Collections described in Section 2.08(c) hereof), and such
failure shall continue for five (5) Business Days after the date when such
amount came due; or
(c) any representation, warranty, certification or statement made by the
Servicer under this Agreement or in any agreement, certificate, report,
appendix, schedule or document furnished by the Servicer to any Owner or the
Administrative Agent pursuant to or in connection with this Agreement shall
prove to have been false or misleading in any respect material to this Agreement
or the transactions contemplated hereby as of the time made; or
(d) the Servicer (if not an Owner or the Administrative Agent) shall
fail in the performance or observance of any other covenant, agreement or duty
applicable to it contained herein (other than under Section 4.08 hereof) and
such failure shall continue for twenty days after either (i) any Responsible
Officer of the Servicer becomes aware thereof or (ii) notice thereof to the
Servicer by the Administrative Agent or any Owner; or
(e) there shall be pending any litigation, arbitration, investigation or
proceeding, or any material adverse development in any such litigation shall
have occurred, which is likely to materially adversely impair the ability of the
Servicer to collect Receivables or perform its obligations under this Agreement;
or
(f) there shall have occurred any event which materially adversely
affects the ability of the Servicer to collect Receivables or the ability of the
Servicer to perform hereunder; or
(g) an Event of Bankruptcy shall occur with respect to Servicer; or
(h) Servicer shall fail to pay any Debt in excess of $25,000,000 of the
Servicer or any interest or premium on such Debt, in either case, when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such Debt; or any
other default under any agreement or instrument relating to any such Debt or any
other event, shall occur and shall continue after the applicable grace period,
if any, specified in such agreement or instrument if the effect of such default
45
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or event is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and payable or required
to be prepaid (other than by a scheduled or required prepayment unrelated to the
occurrence of a default under the agreement or instrument relating to such Debt)
prior to the stated maturity thereof; or
(i) Servicer shall default or fail in the performance or observance of
any covenant, agreement or duty set forth in Section 4.08 hereof and such
default or failure shall continue for two Business Days after notice thereof to
such Permitted Lockbox Bank and within such period another Permitted Lockbox
with another Permitted Lockbox Bank is not established by the Seller or
Servicer, if so requested by the Administrative Agent.
4.08. Complete Servicing Transfer.
---------------------------
(a) General.
------- If at any time a Termination Event or a Potential
Termination Event (other than a Termination Event or a Potential Termination
Event referred to in Section 7.01(l) hereof) or a Servicer Default shall have
occurred and be continuing, the Administrative Agent may by notice in writing to
Lexmark, terminate Lexmark's capacity as Servicer in respect of the Receivables
(such termination referred to herein as a "Complete Servicing Transfer").
--------------------------- After
a Complete Servicing Transfer, the Administrative Agent (or its designee
approved by the Majority Owners) may administer, service and collect the
Receivables itself, and in such event, may retain the Servicer's Compensation
for its own account, in any manner it sees fit, including, without limitation,
by compromise, extension or settlement of such Receivables. Alternatively, the
Majority Owners may engage affiliated or unaffiliated contractors to perform all
or any part of the administration, servicing and collection of the Receivables
and require the Seller to pay to such contractors in consideration thereof all
or a portion of any Servicer's Compensation actually paid to Lexmark, as
Servicer, in respect of periods after the date when such contractors began such
performance. The Administrative Agent shall give S&P and Moody's prompt notice
of the occurrence of a Complete Servicing Transfer; provided, however, that
failure to give such notice shall not affect the effectiveness of the notice
delivered with respect to, or the rights of the Owners resulting from, such
Complete Servicing Transfer. No Servicer appointed pursuant to this Section
4.08(a) may resign from its position as Servicer hereunder until a successor
Servicer shall have been duly appointed and such new Servicer shall have
accepted such appointment.
(b) Transition.
---------- Each of the Seller and the terminated Servicer, within
ten Business Days after receiving a notice pursuant to Section 4.08(a) hereof,
shall, at the Seller's sole expense, (x) deliver to the Administrative Agent or
its designated agent (i) a schedule of the Receivables in which the Owners have
46
<PAGE>
a Purchased Interest indicating as to each such Receivable information as to the
related Obligor, the Outstanding Balance as of such date of the related Contract
and the location of the evidences of such Receivable and related Contract,
together with such other information as the Administrative Agent may reasonably
request and (ii) all evidence of such Receivables and related Contracts and such
other Records related thereto (including, without limitation, true copies of any
computer tapes and data in computer memories), and (y) permit the Administrative
Agent access to the premises, equipment and files and other Records of the
Seller and the terminated Servicer, in each case as the Administrative Agent may
reasonably deem necessary to enable it to protect and enforce its rights and the
rights of the Owners to the Purchased Interest therein. After any such delivery,
neither the Seller nor the terminated Servicer will hold or retain any executed
counterpart or any document evidencing such Receivables or related Contracts
without clearly marking the same to indicate conspicuously that the same is not
the original and that transfer thereof does not transfer any rights against the
related Obligor or any other Person.
(c) Collections.
----------- If at any time there shall be a Complete Servicing
Transfer, the terminated Servicer will cause to be transmitted and delivered
directly to the Administrative Agent or its designated agent, for the account of
the Owners, forthwith upon receipt and in the exact form received, all
Collections (properly endorsed, where required, so that such items may be
collected by the Administrative Agent on behalf of the Owners) on account of
their Purchased Interest in any Receivables. All such Collections consisting of
cash shall not be commingled with other items or monies of the terminated
Servicer for a period longer than two Business Days. If the Administrative Agent
or its designated agent receives items or monies that are not payments on
account of the Owners' interest in any Receivables, such items or monies shall
be delivered promptly to the Seller after being so identified by the
Administrative Agent or its designated agent. Each of the Seller and the
terminated Servicer hereby irrevocably grants the Administrative Agent or its
designated agent, if any, an irrevocable power of attorney, with full power of
substitution, coupled with an interest, effective upon the occurrence of a
Termination Event or Servicer Default, to take in the name of the Seller or
terminated Servicer all steps with respect to any Receivable which the
Administrative Agent, in its sole discretion, may deem necessary or advisable to
negotiate or otherwise realize on any right of any kind held or owned by the
Seller or transmitted to or received by the Administrative Agent or its
designated agent (whether or not from the Seller or any Obligor) in connection
with the Owners' Purchased Interest in any Receivable. The Administrative Agent
will provide such periodic accountings and other information related to the
disposition of funds so collected as the Seller and the terminated Servicer may
reasonably request.
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(d) Collection and Administration at Expense of the Seller.
------------------------------------------------------- The Seller
and the terminated Servicer agree in the event of a Complete Servicing Transfer,
to reimburse the Administrative Agent and each Owner for all reasonable
out-of-pocket expenses (including, without limitation, attorneys' and
accountants' and other third parties' fees and expenses, expenses incurred by
the Administrative Agent or such Owner, as the case may be, credit recovery
group (or any successor), expenses of litigation or preparation therefor, and
expenses of audits and visits to the offices of the Seller and the terminated
Servicer) incurred by the Administrative Agent or such Owner in connection with
and following the transfer of functions following a Complete Servicing Transfer.
(e) Payments by Obligors.
-------------------- At any time, and from time to time following a
Complete Servicing Transfer, or if a Termination Event or Servicer Default shall
have occurred and be continuing, the Seller and the terminated Servicer shall
permit such Persons as the Administrative Agent may designate to open and
inspect all mail received by the Seller and the terminated Servicer at its
Accounts Receivable Department, Collections Department or any other department
of the Seller or the terminated Servicer performing the services of managing,
administering or collecting the Receivables, and to remove therefrom any and all
Collections or other correspondence from Obligors in respect of Receivables. All
Collections received by the Administrative Agent shall be applied in accordance
with Section 2.13(b) hereof. The Administrative Agent shall be entitled to
notify the Obligors of Receivables to make payments directly to the
Administrative Agent of amounts due thereunder at any time and from time to time
following the occurrence of (i) a Termination Event, (ii) a Complete Servicing
Transfer or (iii) a violation by the Seller or the terminated Servicer of the
provisions of Section 4.09 hereof.
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<PAGE>
4.09. Lockboxes.
---------
The Seller and the Servicer hereby agree (i) to instruct all Obligors to
cause all Collections on account of Receivables to be mailed directly to a
Permitted Lockbox or electronically transferred into a Lockbox Account; (ii) not
to suffer or permit any funds other than such Collections to be mailed to
Permitted Lockboxes or deposited or electronically transferred into related
Lockbox Accounts; (iii) to make or cause the Servicer to make the necessary
bookkeeping entries to reflect such Collections on the Records pertaining to
such Receivables; (iv) to apply or cause the Servicer to apply all such
Collections as provided in this Agreement; (v) not to amend or modify any term
of any Lockbox Servicing Instructions without the prior written consent of the
Administrative Agent to such amendment or modification; and (vi) not to amend or
modify any term, with respect to the disposition of such Collections or any
other amounts received by the Seller or the Servicer or any Permitted Lockbox
Bank, of this Agreement or any other agreement relating to Permitted Lockboxes
or Lockbox Accounts (other than Lockbox Servicing Instructions) without the
prior written consent of the Administrative Agent to such amendment or
modification, provided, however, that the consent of the Administrative Agent is
not required to amend or modify any term of any agreement other than this
Agreement which term does not affect the collectibility of any Receivable. The
Seller and the Servicer further represent, warrant, covenant and agree as
follows: each Lockbox Account shall be maintained with a Permitted Lockbox Bank;
each Lockbox Account shall be a segregated account and the funds deposited in or
electronically transferred into such Lockbox Account from time to time shall not
be commingled with any other funds of the Seller or the Servicer; the location
of each Permitted Lockbox and each related Lockbox Account shall not be changed
without the consent of the Administrative Agent; funds deposited in or
electronically transferred into each Lockbox Account shall be transferred to the
Servicer not later than the next Business Day after such funds are deposited or
electronically transferred and available in each such Lockbox Account; each
Lockbox Account shall be insured by the Federal Deposit Insurance Corporation or
the National Credit Union Association, as the case may be, to the full extent
permitted by law; the Administrative Agent or the Collateral Agent shall have
the right to obtain control over each Permitted Lockbox and each related Lockbox
Account, or appoint a successor servicer, and, in either case, direct the
Permitted Lockbox Bank not to transfer funds in such Lockbox Account to the
Seller or the Servicer, and direct the Permitted Lockbox Bank to transfer the
funds in such Lockbox Account to an account designated by the Administrative
Agent or the Collateral Agent, as the case may be, if an event or circumstance
arises which would constitute a Complete Servicing Transfer under this Agreement
by dating and delivering the Lockbox Account Transfer Letter with respect to
such Permitted Lockbox, and the Seller and the Servicer hereby irrevocably
authorize the Administrative Agent to date and deliver a Lockbox Account
Transfer Letter to each Permitted Lockbox Bank; neither the Seller nor the
Servicer has given or shall give any instructions to any Permitted Lockbox Bank
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<PAGE>
inconsistent with the Lockbox Account Transfer Letter; and the Seller and the
Servicer shall cooperate fully with the Administrative Agent in effecting any
such transfer of control. The Servicer shall not enter into any Lockbox
Servicing Instructions or other lockbox servicing agreement which does not
contain the foregoing provisions and terms, unless such deviation is consented
to by the Administrative Agent.
4.10. Servicer Indemnification of Affected Parties.
--------------------------------------------
(a) The Servicer agrees to indemnify and hold harmless the Affected
Parties and their assigns (and their respective directors, officers, employees
and agents), from and against any loss (other than any losses relating to the
defaults or collectibility of the Purchased Interest in the Receivables),
liability, expense, damage or injury suffered or sustained by reason of any
material breach by the Servicer of any of its representations, warranties or
covenants contained in this Agreement, including any judgment, award,
settlement, reasonable attorneys fees and other costs or expenses incurred in
connection with the defense of any actual action, proceeding or claim; provided,
however, that the Servicer shall not indemnify the Affected Parties and their
assigns if such acts or omissions were attributable to fraud, negligence, breach
of fiduciary duty or willful misconduct by any such Affected Party.
(b) Promptly upon receipt by any Affected Party under this Section 4.10
of notice of the commencement of any suit, action, claim, proceeding or
governmental investigation against such Affected Party, such Affected Party
shall, if a claim in respect thereof is to be made against the Servicer
hereunder, notify the Servicer in writing of the commencement thereof. The
Servicer may participate in and assume the defense of any such suit, action,
claim, proceeding or investigation at its expense, and no settlement thereof
shall be made without the approval of the Servicer and the Affected Party. The
approval of the Servicer and the Affected Party will not be unreasonably
withheld or delayed. After notice from the Servicer to the Affected Party of its
intention to assume the defense thereof with counsel reasonably satisfactory to
the Administrative Agent and the Affected Party, and so long as the Servicer so
assumes the defense thereof in a manner reasonably satisfactory to the
Administrative Agent and the Affected Party, the Servicer shall not be liable
for any legal expenses of counsel unless there shall be a conflict between the
interests of the Servicer and the Affected Party.
(c) Any indemnification pursuant to this Section 4.10 shall be had only
from the assets of the Servicer. The provisions of such indemnity shall run
directly to and be enforceable by an injured party subject to the limitations
hereof. The provisions of this Section 4.10 shall survive the termination of
this Agreement.
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4.11. Servicer Not to Resign.
---------------------- The Servicer shall not resign from the
obligations and duties hereby imposed on it except upon determination
that (i) the performance of its duties hereunder is no longer permissible
under applicable law, regulation or order and (ii) there is no
reasonable action which the Servicer could take to make the performance of its
duties hereunder permissible under applicable Law. Any such determination
permitting the resignation of the Servicer shall be evidenced by an opinion of
counsel to such effect reasonably acceptable and delivered to the Administrative
Agent. No such resignation shall become effective until the Administrative Agent
or a Successor Servicer shall have assumed the responsibilities and obligations
of the Servicer in accordance with Section 4.08 hereof. The Administrative Agent
shall promptly notify S&P and Moody's of receipt of the Servicer's notice of
resignation and of the appointment of a Successor Servicer.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
5.01. General Representations and Warranties of the Seller.
------------------------------------------------------ The Seller,
in addition to its other representations and warranties contained herein or
made pursuant hereto, hereby represents and warrants to each Owner and the
Administrative Agent on and as of the Closing Date and on and as of the date of
each Incremental Purchase or reinvestment Purchase that:
(a) Organization and Qualification.
-------------------------------- The Seller is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation. The Seller is duly qualified to do business as a
foreign corporation in good standing in each jurisdiction in which the ownership
of its properties or the nature of its activities (including transactions giving
rise to Receivables), or both, requires it to be so qualified or, if not so
qualified, the failure to so qualify would not have a material adverse effect on
its financial condition or results of operations.
(b) Authorization.
------------- The Seller has the corporate power and authority to
execute and deliver the Purchase Documents, to make the sales provided for
herein and to perform its obligations hereunder and thereunder.
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(c) Execution and Binding Effect.
----------------------------- Each of the Purchase Documents has
been duly and validly executed and delivered by the Seller and (assuming the due
and valid execution and delivery thereof by the other parties thereto),
constitutes a legal, valid and binding obligation of the Seller enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or other similar Laws of general
application relating to or affecting the enforcement of creditors' rights or by
general principles of equity, and will vest absolutely and unconditionally in
the applicable Owner or Owners a valid undivided ownership interest in the
Receivables purported to be assigned thereby, subject to no Liens whatsoever
(other than (x) the Lien arising in connection with this Agreement, (y) the
second priority Lien in favor of Morgan Guaranty Trust Company of New York, as
security agent for the Credit Providers, described in the Amended and Restated
Intercreditor Agreement and (z) any Permitted Liens), provided, however, that
the Seller makes no representation or warranty as to any Lien that may be
created by action of any Owner. Upon the filing of the necessary financing
statements under the UCC as in effect in the jurisdiction whose Law governs the
perfection of the Administrative Agent's and the Owners' ownership interests in
the Receivables, the Administrative Agent's and the Owners' ownership interests
in the Receivables will be perfected under Article Nine of such UCC, prior to
and enforceable against all creditors of and purchasers from the Seller and all
other Persons whatsoever (other than the Administrative Agent and the Owners and
their successors and assigns and Government Obligors).
(d) Authorizations and Filings.
-------------------------- No authorization, consent, approval,
license, exemption or other action by, and no registration, qualification,
designation, declaration or filing with, any Official Body or other Person is or
will be necessary or, in the opinion of the Seller, advisable in connection with
the execution and delivery by the Seller of the Purchase Documents, the
consummation by the Seller of the transactions herein or therein contemplated or
the performance by the Seller of or the compliance by the Seller with the terms
and conditions hereof or thereof, to ensure the legality, validity or
enforceability hereof or thereof, or to ensure that the Administrative Agent
will have an undivided ownership interest in and to the Receivables which is
perfected and prior to all other Liens (including competing ownership interests
but excluding any Permitted Liens), other than the filing of financing
statements under the UCC in the jurisdiction of the Seller's Chief Executive
Office and in the Commonwealth of Kentucky and any filing that may be required
under Section 2(f) of the Asset Purchase Agreement to implement any transfer to
an APA Purchaser thereunder.
(e) Absence of Conflicts.
--------------------- Neither the execution and delivery by the
Seller of the Purchase Documents, nor the consummation by the Seller of the
transactions herein or therein contemplated, nor the performance by the Seller
of or the compliance by the Seller with the terms and conditions hereof or
52
<PAGE>
thereof, will (i) violate any Law or (ii) conflict with or result in a breach of
or a default under (A) the Articles of Incorporation or By-laws of the Seller or
(B) any agreement or instrument, including, without limitation, any and all
indentures, debentures, loans or other agreements to which the Seller is a party
or by which it or any of its properties (now owned or hereafter acquired) may be
subject or bound, which would have a material adverse effect on the financial
position or results of operations of the Seller or result in rendering any Debt
evidenced thereby due and payable prior to its maturity or result in the
creation or imposition of any Lien pursuant to the terms of any such instrument
or agreement upon any property (now owned or hereafter acquired) of the Seller.
(f) Location of Chief Executive Office, etc.
---------------------------------------- As of the Closing Date: (i)
the Seller's Chief Executive Office is located at the address set forth on
Exhibit K hereto; (ii) each domestic Subsidiary and division of the Seller is
listed on Exhibit K hereto; (iii) the offices where the Seller keeps all of its
Records are listed on Exhibit K hereto; and (iv) the Seller has since the date
of its incorporation, operated only under the trade names identified in Exhibit
K hereto, and, since the date of its incorporation, has not changed its name,
merged or consolidated with any other corporation or been the subject of any
proceeding under Title 11, United States Code (Bankruptcy), except as disclosed
in Exhibit K hereto.
(g) No Termination Event.
--------------------- No event has occurred and is continuing and
no condition exists which constitutes a Termination Event or a Potential
Termination Event.
(h) Accurate and Complete Disclosure.
---------------------------------- No information furnished in
writing in final form on or prior to the date hereof by the Seller, nor any
information furnished in writing after the date hereof by the Seller, in each
such case to the Buyer, any APA Purchaser or the Administrative Agent pursuant
to or in connection with this Agreement or any transaction contemplated hereby
is false or misleading in any material respect as of the date as of which such
information was furnished (including by omission of material information
necessary to make such information not misleading).
(i) No Proceedings.
-------------- There are no proceedings or investigations pending,
or to the knowledge of the Seller, threatened, before any Official Body (A)
asserting the invalidity of the Purchase Documents, (B) seeking to prevent the
consummation of any of the transactions contemplated by the Purchase Documents,
or (C) seeking any determination or ruling that might materially and adversely
affect (i) the performance by the Seller or the Servicer of its obligations
under the Purchase Documents or (ii) the validity or enforceability of the
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Purchase Documents, all of the Contracts taken as a whole or any material amount
of the Receivables.
(j) Bulk Sales Act.
---------------- No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(k) Litigation.
---------- No injunction, decree or other decision has been issued
or made by any Official Body that prevents, and to the knowledge of the Seller,
no threat by any Person has been made to attempt to obtain any such decision
that would have a material adverse impact on, the conduct by the Seller of a
significant portion of the Seller's business operations or any portion of its
business operations affecting the Receivables, and no litigation, investigation
or proceeding of the type referred to in Section 6.01(j) hereof exists except as
set forth on Exhibit M.
(l) Margin Regulations.
------------------- The use of all funds acquired by the Seller
under this Agreement will not conflict with or contravene any of Regulations G,
T, U and X of the Board of Governors of the Federal Reserve System, as the same
may from time to time be amended, supplemented or otherwise modified.
(m) Taxes.
----- The Seller has filed all United States Federal income tax
returns and all other material tax returns which are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Seller except for (i) taxes or assessments that are
not yet delinquent and (ii) taxes that are being contested by appropriate
proceedings conducted in good faith and with due diligence. The charges,
accruals and reserves on the books of the Seller in respect of taxes and other
governmental charges are, in the opinion of the Seller, adequate.
(n) Separate Corporate Existence.
------------------------------ Notwithstanding that Seller is a
Subsidiary of Lexmark, the Seller is a legal entity separate from Lexmark and
each of Lexmark's other Affiliates and the Seller acknowledges that the Buyer
and the other parties hereto and thereto are entering into the transactions
contemplated by this Agreement and the other Purchase Documents in reliance on
the Seller's identity as a separate legal entity from Lexmark and each of
Lexmark's other Affiliates.
(o) Financial Condition.
------------------- The Seller is not insolvent or the subject of
any Event of Bankruptcy and the sale of the Purchased Interest in the
Receivables on such day will not be made in contemplation of the occurrence
thereof.
5.02. Representations and Warranties of the Seller With Respect to Each
--------------------------------------------------------------------
Sale of Receivables.
- ------------------- By selling undivided ownership interests in
Receivables to the Administrative Agent, for the benefit of the applicable Owner
or Owners, either by Initial Purchase, Incremental Purchase or reinvestment
54
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Purchase, the Seller represents and warrants to each Owner and the
Administrative Agent as of the date of such sale of the Initial Purchase, an
Incremental Purchase or reinvestment Purchase (in addition to its other
representations and warranties contained herein or made pursuant hereto) that:
(a) Purchase Notice.
--------------- If such sale is a sale of the Initial Purchase or
an Incremental Purchase, all information set forth on the related Purchase
Notice is true and correct as of the date of the Initial Purchase or such
Incremental Purchase, as the case may be.
(b) Assignment.
---------- This Agreement vests in each Owner all the right, title
and interest of the Seller in and to the Purchased Interest in the Receivables,
and the Related Security and Collections with respect thereto, and constitutes a
valid sale of the Purchased Interest, enforceable against all creditors of and
purchasers from the Seller.
(c) No Liens.
-------- Each Receivable, together with the related Contract and
all purchase orders and other agreements related to such Receivable, is owned by
the Seller free and clear of any Lien (other than any Permitted Liens), and when
each Owner makes a purchase of a Purchased Interest in such Receivable it shall
have acquired and shall continue to have maintained an undivided percentage
ownership interest to the extent of its percentage of the Purchased Interest in
such Receivable and in the Related Security and the Collections with respect
thereto free and clear of any Lien (other than (x) the Lien arising in
connection with this Agreement, (y) the second priority Lien in favor of Morgan
Guaranty Trust Company of New York, as security agent for the Credit Providers,
described in the Amended and Restated Intercreditor Agreement and (z) any
Permitted Liens). The Seller has not and will not have sold, pledged, assigned,
transferred or subjected to a Lien any of the Receivables, other than the
assignment of Purchased Interests therein to the Administrative Agent, for the
benefit of the Owners, in accordance with the terms of this Agreement except for
(x) the Lien arising in connection with this Agreement, (y) the second priority
Lien in favor of Morgan Guaranty Trust Company of New York, as security agent
for the Credit Providers, described in the Amended and Restated Intercreditor
Agreement and (z) any Permitted Lien.
(d) Filings.
------- On or prior to each Purchase and each recomputation of the
Purchased Interest, all financing statements and other documents required to be
recorded or filed in order to perfect and protect the Purchased Interest against
all creditors of and purchasers from the Seller and all other Persons whatsoever
other than Government Obligors will have been duly filed in each filing office
necessary for such purpose and all filing fees and taxes, if any, payable in
connection with such filings shall have been paid in full.
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(e) Credit and Collection Policy.
------------------------------ The Seller has complied in all
material respects with the Credit and Collection Policy in regard to each
Receivable and related Contract.
(f) Permitted Lockbox Banks and Lockbox Accounts.
------------------------------------------------- The names and
addresses of all Permitted Lockbox Banks, together with the numbers of all
Lockbox Accounts at such Permitted Lockbox Banks and the addresses of any
related Permitted Lockboxes, are specified in Exhibit N (or such other Permitted
Lockbox Banks, Lockbox Accounts and/or Permitted Lockboxes as have been notified
by the Seller to the Administrative Agent and have been consented to by the
Administrative Agent in accordance with Section 6.02(f) hereof).
(g) Nature of Receivables.
--------------------- Each Receivable is, or will be, an eligible
asset within the meaning of Rule 3a-7 promulgated under the Investment Company
Act of 1940, as amended from time to time, and, assuming that the Buyer has no
business with the Seller other than the purchase of Receivables from the Seller
from time to time as contemplated by this Agreement, a purchase by the Buyer of
each Receivable with the proceeds of Commercial Paper would constitute a
"current transaction" of the Buyer within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended from time to time.
5.03. Representations and Warranties of Lexmark.
------------------------------------------ Lexmark, as initial
Servicer, and any successor Servicer by its appointment hereunder,
represents and warrants to each Owner and the Administrative Agent on and
as of the Closing Date and as of the date of each Incremental Purchase and
each reinvestment Purchase, that:
(a) Corporate Existence and Power.
------------------------------ The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has all corporate power and all governmental licenses,
authorizations, consents and approvals required to carry on its business in each
jurisdiction in which its business is now conducted.
(b) Due Qualification.
------------------ The Servicer shall be duly qualified to do
business as a foreign corporation in good standing, and shall have obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(c) Corporate and Governmental Authorization; Contravention.
------------------------------------------------------------ The
execution, delivery and performance by the Servicer of this Agreement is within
the Servicer's corporate powers, has been duly authorized by all necessary
corporate action, requires no action by or in respect of, or filing with, any
governmental body, agency or official, and does not contravene or violate, or
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constitute a default under, any provision of applicable law or to the best of
Servicer's knowledge any order, rule, or regulation applicable to the Servicer
or of the Articles of Incorporation or Bylaws of the Servicer or of any
agreement of a material nature, judgment, injunction, order, decree or other
instrument binding upon the Servicer, or result in the creation or imposition of
any lien on assets of the Servicer or any of its Subsidiaries.
(d) Binding Effect.
--------------- This Agreement constitutes the legal, valid and
binding obligations of the Servicer, enforceable against the Servicer in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally.
(e) Accuracy of Information.
------------------------- The information with respect to the
Receivables heretofore furnished by the Servicer to any Owner or the
Administrative Agent for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter furnished
by the Servicer to each Owner or the Administrative Agent will be, true and
accurate in every material respect, on the date such information is stated or
certified.
(f) Actions, Suits.
-------------- Except as set forth in Schedule M hereto, there are
no actions, suits or proceedings pending, or to the knowledge of the Servicer
threatened, against or affecting the Servicer or its Subsidiaries or their
respective properties, in or before any court, arbitrator or other body, which
(i) may have a material adverse effect on the Servicer, any Owner, the
Administrative Agent or any Receivable or the servicing thereof or (ii) asserts
the invalidity of this Agreement or seeks to prevent the consummation of the
transactions contemplated hereby.
(g) Credit and Collection Policy.
------------------------------ The Servicer has complied in all
material respects with the Credit and Collection Policy in regard to each
Receivable and Related Security. The Servicer has not extended or modified the
terms of any Receivable or the Related Security except in accordance with the
Credit and Collection Policy.
(h) No Servicer Default.
------------------- No Servicer Default has occurred on or before
the date of the Initial Purchase.
(i) ERISA.
----- If Lexmark is the Servicer, with respect to the Servicer and
its ERISA Affiliates, there is: (i) no accumulated funding deficiency (within
the meaning of ERISA and the Internal Revenue Code) with respect to any plan
under Title IV of ERISA; (ii) no termination of any plan or trust which could
result in any material liability to the PBGC; (iii) no "reportable event" (as
that term is defined in ERISA, but excluding events as to which the provision of
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30-day notice has been waived by the PBGC under Section 4043(a) of ERISA) which
could reasonably be expected to constitute grounds for termination of any plan
or trust by the PBGC; and (iv) no "prohibited transaction" (as that term is
defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code)
which could reasonably be expected to result in any material liability to the
Servicer, but in the case of a Multiemployer Plan or a plan subject to Section
4063 of ERISA only in the event that the existence thereof in the aggregate
could not reasonably be expected to result in a Material Adverse Effect.
(j) Stock Ownership.
--------------- Lexmark and any wholly-owned Subsidiary of Lexmark
are the only Persons that have an ownership interest in the Seller.
ARTICLE VI
COVENANTS
---------
6.01. Affirmative Covenants of the Seller and Lexmark.
------------------------------------------------ In addition to its
other covenants contained herein or made pursuant hereto, each of the Seller and
Lexmark (both as Servicer and in its individual capacity) covenants and agrees
to each Owner and the Administrative Agent as follows:
(a) Notice of Termination Event.
---------------------------- Promptly upon becoming aware of any
Termination Event, Potential Termination Event or Servicer Default, the Seller
and Lexmark shall give the Administrative Agent notice thereof, together with a
written statement of a Responsible Officer setting forth the details thereof and
any action with respect thereto taken or contemplated to be taken by the Seller
or Lexmark.
(b) Notice of Material Adverse Change.
----------------------------------- Promptly upon becoming aware
thereof, the Seller and Lexmark shall give the Administrative Agent notice of
any material adverse change in the business, operations or financial condition
of the Seller or Lexmark which reasonably could affect adversely the
collectibility of a material part of the Receivables or the ability of Lexmark
to service such Receivables. In order to verify compliance with this Section
6.01(b) and otherwise verify compliance with this Agreement, each of the Seller
and Lexmark shall, unless the Administrative Agent shall otherwise consent in
writing, furnish the following to the Administrative Agent:
(i) as soon as practicable and in any event within 45 days following
the close of each fiscal quarter, excluding the last fiscal quarter, of
each Fiscal Year during the term of this Agreement, an unaudited
consolidated balance sheet of the Seller or Lexmark, as the case may be, as
at the end of such quarter and unaudited consolidated statements of income
and cash flows of the Seller or Lexmark, as the case may be, for such
quarter and for the Fiscal Year through such quarter, setting forth in
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comparative form the corresponding figures for the corresponding quarter of
the preceding Fiscal Year, all in reasonable detail and certified by the
chief financial officer or chief accounting officer of the Seller or
Lexmark, as the case may be, subject to adjustments of the type which would
occur as a result of a year-end audit, as having been prepared in
accordance with GAAP;
(ii) as soon as practicable and in any event within 90 days after
the close of each Fiscal Year during the term of this Agreement, a
consolidated balance sheet of the Seller or Lexmark, as the case may be, as
at the close of such fiscal year and consolidated statements of income and
cash flows of the Seller or Lexmark, as the case may be, for such Fiscal
Year, setting forth in comparative form the corresponding figures for the
preceding Fiscal Year, all in reasonable detail and certified by Coopers &
Lybrand or other independent certified public accountants of nationally
recognized standing, whose certificate or opinion accompanying such
financial statements shall not contain any material qualification not
satisfactory to the Administrative Agent; and
(iii) together with the financial statements required in clauses (i)
and (ii) above, a certificate of the chief financial officer or chief
accounting officer of the Seller or Lexmark, as the case may be, stating
that no Termination Event or Potential Termination Event exists, or if any
Termination Event or Potential Termination Event exists, stating the nature
and status thereof.
(c) Preservation of Corporate Existence.
-------------------------------------- Each of the Seller and
Lexmark shall preserve and maintain its corporate existence, rights, franchises
and privileges in the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign corporation in each jurisdiction where
the failure to preserve and maintain such existence, rights, franchises,
privileges and qualification would materially adversely affect (i) the interests
of the Administrative Agent or any Owner hereunder or (ii) the ability of the
Seller or the Servicer to perform their respective obligations under the
Purchase Documents or under the Servicing Agreement.
(d) Compliance with Laws.
-------------------- Each of the Seller and Lexmark shall comply
in all material respects with all Laws applicable to the Seller and Lexmark,
their respective businesses and properties, and all Receivables related to the
Purchased Interest, other than Laws which would not affect the collectibility of
the Receivables and the validity or applicability of which the Seller, the
Servicer or Lexmark is contesting in good faith.
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(e) Enforceability of Obligations.
------------------------------- Each of the Seller and Lexmark
shall take such actions as are reasonable and within its power to ensure that,
with respect to each Receivable, the obligation of any related Obligor to pay
the unpaid balance of such Receivable in accordance with the terms of the
related Contract remains legal, valid, binding and enforceable against such
Obligor except as otherwise permitted by Section 4.06(b) hereof.
(f) Books and Records.
----------------- Each of the Seller and Lexmark shall, to the
extent practicable, maintain and implement administrative and operating
procedures (including, without limitation, the ability to recreate Records
evidencing the Receivables in the event of the destruction of the originals
thereof), and keep and maintain all documents, books, Records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, Records adequate to permit the
identification of all Related Security and Collections and adjustments to each
existing Receivable).
(g) Fulfillment of Obligations.
--------------------------- Each of the Seller and Lexmark will
duly observe and perform, or cause to be observed or performed, all material
obligations and undertakings on its part to be observed and performed under or
in connection with the Receivables, will duly observe and perform all material
provisions, covenants and other promises required to be observed by it or by the
Originator under the Contracts related to the Receivables, will do nothing to
impair the rights, title and interest of the Administrative Agent or any Owner
in and to the Purchased Interest (except pursuant to the Credit and Collection
Policy) and will pay when due any taxes, including without limitation any sales
tax, excise tax or other similar tax or charge, payable in connection with the
Receivables and their creation and satisfaction.
(h) Customer List.
------------- Each of the Seller and Lexmark shall at all times
maintain current information (which may be stored on magnetic tapes or disks)
listing all Obligors under Contracts related to Receivables, including the name,
address, telephone number and account number of each such Obligor. The Seller
and Lexmark shall deliver or cause to be delivered a copy of such list to the
Administrative Agent as soon as practicable following the Administrative Agent's
request.
(i) Copies of Reports, Filings, Opinions, etc.
----------------------------------------------- If any of the
securities of the Seller or Lexmark are registered under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, the Seller
and Lexmark, as the case may be, shall furnish to the Administrative Agent, as
soon as practicable after the filing thereof, copies of all proxy statements,
financial statements, reports and other communications which the Seller files
with the Securities and Exchange Commission.
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(j) Litigation.
---------- As soon as possible, and in any event within 15 days
of a Responsible Officer's knowledge thereof, each of the Seller and Lexmark
shall give the Administrative Agent notice of the commencement of, or of a
material threat of the commencement of, an action, suit or proceeding against
the Seller or Lexmark before any Official Body in which there is a reasonable
possibility of a decision which in the reasonable judgment of the Seller or
Lexmark, as the case may be, could reasonably be expected to have a material
adverse effect on the financial condition or results of operations of the Seller
or Lexmark or impair the ability of the Seller or the Servicer to perform their
respective obligations under this Agreement or under the Purchase Agreement.
(k) Total Systems Failure.
------------------------ Lexmark shall promptly notify the
Administrative Agent, S&P and Moody's of any total systems failure and shall
advise the Administrative Agent, S&P and Moody's of the estimated time required
to remedy such total systems failure and of the estimated date on which a
Monthly Report can be delivered. Until a total systems failure is remedied,
Lexmark (i) will furnish to the Administrative Agent such periodic status
reports and other information relating to such total systems failure as the
Administrative Agent may reasonably request and (ii) will promptly notify the
Administrative Agent if Lexmark believes that such total systems failure cannot
be remedied by the estimated date, which notice shall include a description of
the circumstances which gave rise to such delay, the action proposed to be taken
in response thereto, and a revised estimate of the date on which a Monthly
Report can be delivered. Lexmark shall promptly notify the Administrative Agent,
S&P and Moody's when a total systems failure has been remedied.
(l) Notice of Relocation.
--------------------- The Seller shall give the Administrative
Agent 45 days' prior written notice of any relocation of its Chief Executive
Office if, as a result of such relocation, the applicable provisions of the UCC
of any applicable jurisdiction or other applicable Laws would require the filing
of any amendment of any previously filed financing statement or continuation
statement or of any new financing statement. The Seller will at all times
maintain its Chief Executive Office within a jurisdiction in the United States
in which Article Nine of the UCC (1972 or later revision) is in effect as of the
date hereof or the date of any such relocation.
(m) Further Information.
------------------- Each of the Seller and Lexmark shall furnish
or cause to be furnished to the Administrative Agent such other information with
respect to the financial position or business of the Seller or Lexmark, as the
case may be, or with respect to the Credit and Collection Policy, the
Receivables, the Contracts, the Related Security or the Obligors, all as
promptly as practicable and in such form and detail as the Administrative Agent
may reasonably request.
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(n) Treatment of Purchase.
--------------------- For accounting purposes, the Seller shall
treat the Initial Purchase, each Incremental Purchase and each reinvestment
Purchase made hereunder as a sale of a Purchased Interest in the underlying
Receivables. The Seller shall also maintain its records and books of account in
a manner which clearly reflects each such sale of a Purchased Interest to the
Administrative Agent, for the benefit of the Owners, and the Owners' Investment
therein.
(o) Fees, Taxes and Expenses.
------------------------ Each of the Seller and Lexmark shall pay
all filing fees, stamp taxes, other taxes (other than taxes imposed directly on
the overall net income of the Owners) and expenses, including the fees and
expenses set forth in Section 9.01 hereof, if any, which may be incurred on
account of or arise out of this Agreement and the documents and transactions
entered into pursuant to this Agreement.
(p) Administrative and Operating Procedures.
---------------------------------------- Each of the Seller and
Lexmark shall maintain and implement administrative and operating procedures
adequate to permit the identification of the Receivables and all collections and
adjustments attributable thereto and shall comply in all material respects with
the Credit and Collection Policy in regard to each Receivable and related
Contract.
(q) ERISA Events.
------------
(i) Promptly upon becoming aware of the occurrence of any Event of
Termination which together with all other Events of Termination occurring
within the prior 12 months involve a payment of money by or a potential
aggregate liability of Lexmark or any ERISA Affiliate or any combination of
such entities in excess of $5,000,000, Lexmark shall give the
Administrative Agent, S&P and Moody's a written notice specifying the
nature thereof, what action the Seller, Lexmark or any ERISA Affiliate has
taken and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto.
(ii) Promptly upon receipt thereof, Lexmark shall furnish to the
Administrative Agent copies of (i) all notices received by Lexmark or any
ERISA Affiliate of the PBGC's intent to terminate any Plan or to have a
trustee appointed to administer any Plan; (ii) all notices received by
Lexmark or any ERISA Affiliate from the sponsor of a Multiemployer Plan
pursuant to Section 4202 of ERISA involving a withdrawal liability in
excess of $5,000,000; and (iii) all funding waiver requests filed by
Lexmark or any ERISA Affiliate with the Internal Revenue Service with
respect to any Plan, the accrued benefits of which exceed the present value
of the plan assets as of the date the waiver request is filed by more than
$5,000,000, and all communications received by Lexmark or any ERISA
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Affiliate from the Internal Revenue Service with respect to any such
funding waiver request.
(r) Collections.
----------- Each of the Seller and Lexmark shall instruct
all Obligors to cause all Collections to be mailed to a Permitted Lockbox
or electronically transferred to a Lockbox Account.
(s) Notice of Ratings Change.
------------------------- Lexmark shall promptly notify the
Administrative Agent if Lexmark's commercial paper, long term debt
securities or any other securities become rated by a nationally
recognized rating agency or agencies and, in such event, Lexmark shall
thereafter give the Administrative Agent prompt notice of any change in the
ratings of Lexmark's commercial paper, long term debt securities or other
securities by such rating agency or agencies.
(t) Insurance.
--------- Each of the Seller and Lexmark shall keep insured by
financially sound and reputable insurers all property of a character usually
insured by corporations engaged in the same or similar business similarly
situated against loss or damage of the kinds and in the amounts customarily
insured against by such corporations and carry such other insurance as is
usually carried by such corporations.
(u) Support of Obligations.
---------------------- Lexmark shall take whatever actions are
necessary to cause the Seller to fulfill all of its obligations to the
Administrative Agent and the Owners hereunder.
(v) Separate Corporate Existence.
------------------------------ Notwithstanding that Seller is a
Subsidiary of Lexmark, each of the Seller and Lexmark shall:
(i) Maintain in full effect its existence, rights and franchises
as a corporation under the laws of the state of its incorporation and
will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement and the
Purchase Agreement and each other instrument or agreement necessary or
appropriate to proper administration hereof and permit and effectuate
the transactions contemplated hereby.
(ii) Maintain its own deposit account or accounts, separate from
those of any of its Affiliates, with commercial banking institutions.
The funds of the Seller will not be diverted to any other Person or
for other than the corporate use of the Seller and, except as may be
expressly permitted by this Agreement, the funds of the Seller shall
not be commingled with those of any of its Affiliates.
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(iii) To the extent that the Seller contracts or does business
with vendors or service providers where the goods and services
provided are partially for the benefit of any other Person, the costs
incurred in so doing shall be fairly allocated to or among the Seller
and such entities for whose benefit the goods and services are
provided, and the Seller and each such entity shall bear its fair
share of such costs. All material transactions between the Seller and
any of its Affiliates shall be only on an arm's-length basis.
(iv) Maintain a principal executive and administrative office
through which its business is conducted and a telephone number separate
from those of its stockholders and Affiliates.
(v) Conduct its affairs strictly in accordance with its
Certificate of Incorporation and observe all necessary, appropriate and
customary corporate formalities, including, but not limited to, holding
all regular and special stockholders' and directors' meetings
appropriate to authorize all corporate action, keeping separate and
accurate minutes of such meetings, passing all resolutions or consents
necessary to authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts, including, but not
limited to, intercompany transaction accounts. Regular stockholders'
and directors' meetings shall be held at least annually.
(vi) Ensure that decisions with respect to its business and
daily operations shall be independently made by the Seller (although
the officer making any particular decision may also be an employee,
officer or director of an Affiliate of the Seller) and shall not be
dictated by an Affiliate of the Seller.
(vii) Act solely in its own corporate name and through its own
authorized officers and agents, and no Affiliate of the Seller shall be
appointed to act as its agent, except as expressly contemplated by this
Agreement. The Seller shall at all times use its own stationery.
(viii) Ensure that no Affiliate of the Seller shall advance
funds to the Seller, other than (i) capital contributions from Lexmark,
made, in Lexmark's sole discretion, to enable the Seller to pay the
purchase price of Receivables or (ii) as is otherwise provided herein
or in the Purchase Agreement, and no Affiliate of the Seller will
otherwise supply funds to, or guaranty debts of, the Seller; provided,
however, that an Affiliate of the Seller may provide funds to the
Seller in connection with the capitalization of the Seller, including
the provision of capital necessary to assure that the Seller has
"substantial assets" as described in Treasury Regulation Section
301.7701-2(d)(2).
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(ix) Other than organizational expenses and as expressly
provided herein, pay all expenses, indebtedness and other obligations
incurred by it.
(x) With respect to Lexmark, not enter into any guaranty, or
otherwise become liable, with respect to any obligation of the Seller.
(xi) Ensure that any financial reports required of the Seller
shall comply with generally accepted accounting principles and shall be
prepared separately from, but may be consolidated with, any reports
prepared for any of its Affiliates.
(xii) Ensure that at all times it is adequately capitalized to
engage in the transactions contemplated in its Certificate of
Incorporation, the Purchase Documents and in the Seller's Officer's
Certificate attached as Exhibit K to the Purchase Agreement.
6.02. Negative Covenants of the Seller and Lexmark.
--------------------------------------------- Each of the Seller
and Lexmark (both as Servicer and in its individual capacity) covenants that
it will not, without the prior written consent of the Administrative Agent
(or the Majority Owners as may be specifically noted below):
(a) Statement for and Treatment of the Sales.
----------------------------------------- Prepare any financial
statements for financial accounting or reporting purposes which shall account
for the transactions contemplated hereby in any manner other than as a sale of
the Purchased Interest to the Administrative Agent, for the benefit of the
Owners.
(b) No Rescissions or Modifications.
------------------------------- Rescind or cancel any Receivable
or related Contract or modify any terms or provisions thereof or grant any
Dilution Factors to an Obligor, except in accordance with the Credit and
Collection Policy or otherwise with the prior written consent of the
Administrative Agent.
(c) No Liens.
-------- Cause any of the Receivables or related Contracts, or
any inventory or goods the sale of which may give rise to a Receivable, or any
Permitted Lockbox or Lockbox Account or any right to receive any payments
received therein or deposited thereto, to be sold, pledged, assigned or
transferred or to be subject to a Lien, other than the sale and assignment of
the Purchased Interest therein to the Administrative Agent, for the benefit of
the Owners, the second priority Lien in favor of Morgan Guaranty Trust Company
of New York, as security agent for the Credit Providers, described in the
Amended and Restated Intercreditor Agreement, the Lien created in connection
with the transactions contemplated by this Agreement and any Permitted Lien,
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without the prior written consent of the Majority Owners.
(d) Consolidations, Mergers and Sales of Assets.
-------------------------------------------- (i) Consolidate or
merge with or into any other Person or (ii) sell, lease or otherwise transfer
all or substantially all of its assets to any other Person; provided that the
Seller or Lexmark, as the case may be, may merge with another Person if (A)
Lexmark, as the case may be, is the corporation surviving such merger and (B)
immediately after and giving effect to such merger, no Termination Event or
Potential Termination Event or Servicer Default shall have occurred and be
continuing.
(e) No Changes.
---------- Make or consent to any change in the character of its
business or in the Credit and Collection Policy, which change would, in either
case, impair the collectibility of any Receivable, or make any material change
in the Credit and Collection Policy without prior written consent of the
Administrative Agent, or change its name, identity or corporate structure in any
manner which would make any financing statement or continuation statement filed
in connection with this Agreement or the transactions contemplated hereby
seriously misleading within the meaning of Section 9-402(7) of the UCC of any
applicable jurisdiction or other applicable Laws unless it shall have given the
Administrative Agent at least 30 days' prior written notice thereof and unless
prior thereto it shall have caused such financing statement or continuation
statement to be amended or a new financing statement to be filed such that such
financing statement or continuation statement would not be seriously misleading.
(f) Change in Payments or Deposits of Payments.
------------------------------------------ Add or terminate any
Person as a Permitted Lockbox Bank from those Persons listed in Exhibit N
hereto, make or permit any change in the location of any Permitted Lockbox or
the location or account number of any Lockbox Account, or make any change in the
instructions to its Obligors regarding payments to be made to the Seller or
Servicer or payments to be made to any Permitted Lockbox.
(g) ERISA Matters.
-------------- In the case of Lexmark, permit any event or
condition which is described in any of clauses (i) through (iv), clause (vi) or
clause (viii) of the definition of Event of Termination to occur or exist with
respect to any Plan or Multiemployer Plan if such event or condition, together
with all other events or conditions described in the definition of Event of
Termination occurring within the prior 12 months involve the payment of money by
or an incurrence of liability of Lexmark or any ERISA Affiliate in an amount in
excess of $10,000,000.
(h) No Guarantees.
------------- In the case of the Seller, except as provided in
the Lexmark Credit Agreement, the Amended and Restated Intercreditor Agreement
or that certain Note and Stock Purchase Agreement dated as of March 27, 1991
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among Holdings, Lexmark and the Purchasers named therein, enter into any
Guarantees, or otherwise become liable, with respect to any obligation of any of
its Affiliates.
6.03 Covenants of a Successor Servicer.
---------------------------------- Each Person who succeeds Lexmark
(or a successor Servicer) as Servicer shall be deemed to make the covenants
contained in Sections 6.01(a), (c)-(g), (j) and (k) and 6.02(b), (e) and (f).
ARTICLE VII
TERMINATION
-----------
7.01. Termination Events.
------------------- A "Termination Event" shall mean the
occurrence and continuance of one or more of the following events or
conditions:
(a) either the Seller shall fail to remit or fail to cause to be
remitted to the Administrative Agent or any Owner on any day any Collections
(other than deemed Collections described in Section 2.08(c) hereof) or Discount
required to be remitted to the Administrative Agent or such Owner on such day
and, with respect to failure to remit Discount, such failure shall continue for
two Business Days after the date when such Discount became due; or
(b) the Seller shall fail to deposit, or pay or fail to cause to be
deposited or paid, when due any other amount due hereunder (including, without
limitation, deemed Collections described in Section 2.08(c) hereof) and such
failure shall continue for five Business Days after the date when such amount
became due; or
(c) any representation, warranty, certification or statement made by
the Seller or Lexmark under this Agreement or in any agreement, certificate,
report, appendix, schedule or document furnished by the Seller or Lexmark to any
Owner or the Administrative Agent pursuant to or in connection with this
Agreement shall prove to have been false or misleading in any respect material
to this Agreement or the transactions contemplated hereby as of the time made or
deemed made; or
(d) the Seller or Lexmark shall fail to obtain the prior consent of
the Buyer, the Majority Owners, each of the Owners or the Administrative Agent,
as the case may be, to any action or provision as to which such consent is
required by the terms of this Agreement and such failure shall continue for ten
days after either (i) any Responsible Officer of the Seller or Lexmark, as the
case may be, becomes aware thereof or (ii) notice thereof to such Person by the
Administrative Agent or any Owner; provided, however, that for prior consent to
such an action or provision not related to the Receivables, the Credit and
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Collection Policy, the Collections or the Related Security, a Termination Event
will not occur unless such consent shall not have been obtained twenty days
after such consent was required to have been obtained by the terms of this
Agreement; or
(e) the Seller or Lexmark shall default or fail in the performance or
observance of any other covenant, agreement or duty applicable to it contained
herein and such default or failure shall continue for twenty days after either
(i) any Responsible Officer of the Seller, the Servicer or Lexmark becomes aware
thereof or (ii) notice thereof to such Person by the Administrative Agent or any
Owner; or
(f) the Seller or Lexmark, as the case may be, shall fail to pay any
Debt in excess of $25,000,000 of the Seller or Lexmark, as the case may be, or
any interest or premium on such Debt, in either case, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; or any other default under
any agreement or instrument relating to any such Debt or any other event, shall
occur and shall continue after the applicable grace period, if any, specified in
such agreement or instrument if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable or required to be prepaid
(other than by a scheduled or required prepayment unrelated to the occurrence of
a default under the agreement or instrument relating to such Debt) prior to the
stated maturity thereof; or
(g) the Default Ratio, computed for the immediately preceding month,
shall exceed 6.0%; or the average of the Default Ratios for each of the three
immediately preceding months, shall exceed 5.0%; or the Charge-Off Ratio,
computed for the immediately preceding month, shall exceed 1.5%; or the sum of
the Charge-Off Ratios, computed for each of the three immediately preceding
months, shall exceed 2.0%; or the Dilution Ratio, computed for the immediately
preceding month, shall exceed 25.0%; or the sum of the Dilution Ratios, computed
for each of the three immediately preceding months shall exceed 40.0%; or the
Delinquency Ratio, computed for the immediately preceding month, shall exceed
7.5%; or the sum of the Delinquency Ratios, computed for each of the three
immediately preceding months shall exceed 15.0%; or
(h) a Permitted Lockbox Bank shall default or fail in the performance
or observance of any agreement or duty applicable to it in respect of the
Permitted Lockbox or the Lockbox Servicing Instructions executed by the Seller
or Servicer or the Seller shall default or fail in the performance or observance
of any covenant, agreement or duty set forth in Section 4.08 hereof and such
default or failure shall continue for two Business Days after notice thereof to
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such Permitted Lockbox Bank and within such period another Permitted Lockbox
with another Permitted Lockbox Bank is not established by the Seller or
Servicer, if so requested by the Administrative Agent; or
(i) there shall have occurred any event which materially adversely
affects the collectibility of a material amount of the Receivables; or
(j) an Event of Bankruptcy shall occur with respect to the Seller or
Lexmark; or
(k) if the Buyer's Percentage Interest shall exceed 100%
(notwithstanding the limitation set forth in the first sentence of the second
paragraph of the definition of such term) and within five days thereafter the
Seller has not made a repayment of Net Investment pursuant to Section 2.11(c)
hereof sufficient to reduce the Buyer's Percentage Interest to less than or
equal to 100%; or
(l) 60 days following the date on which (i) the Securities and
Exchange Commission, any banking regulatory authority or any other Official Body
having jurisdiction over J.P. Morgan & Co. Incorporated ("JPM") or any of its
subsidiaries, shall require the consolidation of the assets and liabilities of
the Buyer on the balance sheet of JPM or any of its subsidiaries (including,
without limitation, Morgan Guaranty Trust Company of New York) or shall require
that capital be maintained with respect thereto under any capital requirements
as if such assets were owned by JPM or any of its subsidiaries, (ii) the
independent auditors for JPM shall have advised JPM or any of its subsidiaries
in writing that in their opinion such consolidation is required by GAAP or
applicable Law, rule or regulations, (iii) any Owner or JPM or any of its
Subsidiaries or Affiliates shall determine that any arrangement or transaction
contemplated by this Agreement, the Security Agreement or the Program Letter of
Credit Reimbursement Agreement will impose a material adverse regulatory impact
on such Person, including without limitation, any Transaction Cost described in
Section 9.02 hereof; or (iv) the Buyer shall determine that the Buyer is
reasonably likely to be required to register as an investment company under the
Investment Company Act of 1940, as amended.
(m) Consolidated Tangible Net Worth of Lexmark Holding shall be less
than (i) $180,000,000 from the date of this Amendment until December 31, 1995
and (ii) $180,000,000 plus 80% of the net income (if positive) reported in the
audited annual consolidated financial statements of Lexmark Holding and its
Consolidated Subsidiaries for the year ended December 31, 1995 and every year
thereafter.
(n) Adjusted Fixed Charge Coverage Ratio for each period of four
consecutive fiscal quarters of Lexmark Holding ending (i) during the period from
the Amendment Effective Date to and including December 30, 1995 shall be less
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than 1.60 to 1 and (ii) during any period set forth below (should the Expiration
Date of this Amendment be changed to include such period) shall be less than the
amount set forth below opposite such period:
========================== ---------------------------- ========================
From and including To and including Minimum Ratio
December 31 December 30
------------------ -------------
========================== ============================ ========================
1995 1996 1.60 to 1
1996 1997 1.70 to 1
and thereafter 2.30 to 1
========================== ============================ =======================
(o) A "Termination Event" under the Purchase Agreement shall occur
and be continuing.
(p) A Servicer Default shall occur and be continuing.
7.02. Consequences of a Termination Event.
-----------------------------------
(a) If a Termination Event specified in Section 7.01 hereof shall
occur and be continuing, the Administrative Agent shall, at the request, or may
with the consent of the Majority Owners, by notice to the Seller (a "Notice of
---------
Termination"), terminate the obligation of the Owners to purchase any interest
- -----------
in any Receivables (including by reinvestment) hereunder and declare all
outstanding Tranche Periods to be ended; provided that, in the case of a
Termination Event under Section 7.01(j) hereof, such obligation of the Owners
hereunder shall be automatically terminated without any action on the part of
the Administrative Agent and all outstanding Tranche Periods shall be ended. Any
such termination shall reduce the Maximum Net Investment in effect from time to
time thereafter to the amount of the aggregate Net Investment at such time and
the Administrative Agent, after consultation with each of the Owners may,
pursuant to Section 2.06(c) hereof and in any case other than a termination due
to a Termination Event described in Section 7.01(l) hereof, declare the Tranche
Rates applicable to the Net Investment to be the Base Rate plus 1% per annum.
The Administrative Agent shall give S&P, Moody's and each Owner prompt notice of
the Administrative Agent's delivery of a Notice of Termination to the Seller;
provided, however, that failure to give such notice shall not affect the
effectiveness of, or the rights of the Owners resulting from the delivery of,
such Notice of Termination.
(b) Upon any termination of the Owners' obligations pursuant to this
Section 7.02, the Owners and the Administrative Agent shall have, in addition to
all rights and remedies under this Agreement or otherwise, all other rights and
remedies provided under the UCC of the applicable jurisdiction and under other
applicable Laws, which rights shall be cumulative.
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(c) The parties hereto acknowledge that this Agreement is, and is
intended to be, a contract to extend financial accommodations to the Seller
within the meaning of Section 365(e)(2)(B) of the Federal Bankruptcy Code (11
U.S.C. ss. 365(e)(2)(B)) (or any amended or successor provision thereof or any
amended or successor code).
ARTICLE VIII
THE ADMINISTRATIVE AGENT
------------------------
8.01. Authorization and Action.
------------------------ Each Owner hereby accepts the appointment
of and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. When requested to do so by the Majority Owners, the
Administrative Agent shall take such action or refrain from taking such
action as the Majority Owners direct under or in connection with or on any
matter relating to the Seller, the Servicer, Lexmark, this Agreement or any of
the other Purchase Documents. In the event of a conflict between a determination
or calculation made by the Administrative Agent and a determination or
calculation made by the Buyer or the Majority Owners, the determination or
calculation of the Majority Owners shall control. Except for actions which the
Administrative Agent is expressly required to take pursuant to this Agreement or
the Asset Purchase Agreement, the Administrative Agent shall not be required to
take any action which exposes the Administrative Agent to personal liability or
which is contrary to applicable law unless the Administrative Agent shall
receive further assurances to its satisfaction from the Owners of the
indemnification obligations under Section 8.05 hereof against any and all
liability and expense which may be incurred in taking or continuing to take such
action. The Administrative Agent agrees to give to each Owner prompt notice of
each notice and determination given to it by the Seller, the Servicer or
Lexmark, or by it to the Seller, the Servicer or Lexmark, pursuant to the terms
of this Agreement. Subject to Section 8.06 hereof, the appointment and authority
of the Administrative Agent hereunder shall terminate at the later to occur of
(i) the payment to (a) each Owner of all amounts owing to such Owner hereunder
and (b) the Administrative Agent of all amounts due hereunder and (ii) the
Expiration Date.
8.02. UCC Filings.
------------ The Owners, the Seller and the Servicer
expressly recognize and agree that the Administrative Agent may be listed as the
assignee or secured party of record on, and the Owners expressly authorize the
Administrative Agent to execute on their behalf as their agent, the various UCC
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filings required to be made hereunder in order to perfect the sale of the
Purchased Interest from the Seller to, the Administrative Agent, for the benefit
of the Owners, that such listing and/or execution shall be for administrative
convenience only in creating a record or nominee owner to take certain actions
hereunder on behalf of the Owners or to execute UCC filings on behalf of the
Owners and that such listing and/or execution will not affect in any way the
status of the Owners as the beneficial owners of the Purchased Interest. In
addition, such listing or execution shall impose no duties on the Administrative
Agent other than those expressly and specifically undertaken in accordance with
this Article VIII. In furtherance of the foregoing, the Buyer and each APA
Purchaser shall be entitled to enforce their respective rights created under
this Agreement without the need to conduct such enforcement through the
Administrative Agent except as provided herein.
8.03. Administrative Agent's Reliance, Etc.
-------------------------------------- Neither the Administrative
Agent nor any of its directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them as Administrative
Agent under or in connection with the Purchase Documents (including, without
limitation, the Administrative Agent's servicing, administering or
collecting Receivables as Servicer pursuant to Section 4.02 hereof),
except for its or their own gross negligence or willful misconduct. Without
limiting the foregoing, the Administrative Agent: (i) may consult with legal
counsel, independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (ii) makes no warranty or representation to any Owner and shall not
be responsible to any Owner for any statements, warranties or
representations made by the Seller or Lexmark in connection with the Purchase
Documents; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of the
Purchase Documents on the part of the Seller or Lexmark or to inspect the
property (including the books and records) of the Seller or Lexmark; (iv) shall
not be responsible to any Owner for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Purchase Documents or
any other instrument or document furnished pursuant thereto; and (v) shall incur
no liability under or in respect of the Purchase Documents by acting upon any
notice (including notice by telephone), consent, certificate or other instrument
or writing (which may be by telex) believed by it in good faith to be genuine
and signed or sent by the proper party or parties.
8.04. Administrative Agent and Affiliates.
------------------------------------- Morgan Guaranty Trust
Company of New York and its Affiliates may generally engage in any kind of
business with the Seller, the Servicer, Lexmark or any Obligor, any of their
respective Affiliates and any Person who may do business with or own
securities of the Seller, the Servicer, Lexmark or any Obligor or any of
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their respective Affiliates, all as if Morgan Guaranty Trust Company of New
York were not the Administrative Agent and without any duty to account
therefor to the Owners.
8.05. Indemnification.
--------------- Subject in the case of the Buyer to Section 9.21
hereof, each Owner severally agrees to indemnify the Administrative Agent (to
the extent not reimbursed by the Seller or the Servicer), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of the Purchase
Documents or any action taken or omitted by the Administrative Agent under the
Purchase Documents; provided, that (i) an Owner shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting or arising from the
Administrative Agent's gross negligence or willful misconduct and (ii) an Owner
shall not be liable for any amount in respect of any compromise or settlement or
any of the foregoing unless such compromise or settlement is approved by the
Majority Owners. Without limitation of the generality of the foregoing, each
Owner agrees to reimburse the Administrative Agent, promptly upon demand (to the
extent not reimbursed by the Seller or the Servicer), for any reasonable
out-of-pocket expenses (including reasonable counsel fees) incurred by the
Administrative Agent in connection with the administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
the Purchase Documents, provided, that an Owner shall not be responsible for the
costs and expenses of the Administrative Agent in defending itself against any
claim alleging the gross negligence or willful misconduct of the Administrative
Agent to the extent such gross negligence or willful misconduct is determined by
a court of competent jurisdiction in a final and non-appealable decision.
8.06. Successor Administrative Agent.
-------------------------------- (a) The Administrative Agent may
resign at any time by giving sixty days' written notice thereof to the Owners,
the Seller, the Servicer and Lexmark; provided that no such resignation
shall be effective until the acceptance of a qualified successor
Administrative Agent as provided in this Section 8.06. Upon any such
resignation, the Majority Owners shall have the right to appoint a successor
Administrative Agent approved by the Seller (which approval will not be
unreasonably withheld or delayed). If no successor Administrative Agent shall
have been so appointed by the Majority Owners, and shall have accepted such
appointment, within sixty days after the retiring Administrative Agent's giving
of notice or resignation, then the retiring Administrative Agent may, on behalf
of the Owners, appoint a successor Administrative Agent approved by the Seller
and Lexmark (which approval will not be unreasonably withheld or delayed), which
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successor Administrative Agent shall be (a) either (i) a commercial bank having
a combined capital and surplus of at least $250,000,000, (ii) an Affiliate of
such bank, or (iii) an Affiliate of JPM and (b) experienced in the types of
transactions contemplated by this Agreement. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under the Purchase Documents. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
ARTICLE IX
MISCELLANEOUS
-------------
9.01. Expenses.
-------- Each of Lexmark and the Seller agrees, jointly and
severally upon receipt of a written invoice, to pay or cause to be paid, and to
save each Owner, the Administrative Agent and the Referral Agent harmless
against liability for the payment of, all reasonable out-of-pocket expenses
(including, without limitation, attorneys', accountant's and other third
parties' fees and expenses (including the allocated costs of internal counsel),
any filing fees and expenses incurred by officers or employees of each Owner,
the Administrative Agent and the Referral Agent, but excluding salaries and
similar overhead costs of each Owner, the Administrative Agent and the Referral
Agent which are incurred notwithstanding the execution and performance of this
Agreement) incurred by or on behalf of any Owner, the Administrative Agent and
the Referral Agent (i) in connection with the negotiation, execution, delivery
and preparation of the Purchase Documents and the transactions contemplated by
or undertaken pursuant to or in connection herewith or therewith (including,
without limitation, the perfection or protection of the Purchased Interest in
the Receivables) and (ii) from time to time (a) relating to any requested
amendments, waivers or consents under the Purchase Documents, (b) arising in
connection with the Owners' or the Administrative Agent's or their enforcement
or preservation of their respective rights (including, without limitation, the
perfection and protection of the Purchased Interest in the Receivables) under
the Purchase Documents, or (c) arising in connection with any audit, dispute,
disagreement, litigation or preparation for litigation involving the Purchase
Documents, which, including all amounts payable under Section 9.02 hereof, shall
be referred to in this Agreement as "Transaction Costs".
-----------------
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9.02. Indemnity for Taxes, Reserves and Expenses.
------------------------------------------
(a) If after the date hereof, the adoption of any Law or bank
regulatory guideline or any amendment or change in the interpretation of any
existing or future Law or bank regulatory guideline by any Official Body charged
with the administration, interpretation or application thereof, or the
compliance with any directive of any Official Body (in the case of any bank
regulatory guideline, whether or not having the force of Law):
(i) shall subject any Affected Party and any permitted assigns
(collectively, the "Indemnified Parties") to any cost, liability, tax, duty
or other charge with respect to the Purchase Documents, the Purchased
Interest, the Receivables or payments of amounts due thereunder, or shall
change the basis of taxation of payments to any Indemnified Party of
amounts payable in respect of the Purchase Documents, the Purchased
Interest, the Receivables or payments of amounts due thereunder or its
obligation to advance funds in respect of the Purchase Documents, the
Purchased Interest or the Receivables (except for changes in the rate of
general corporate, franchise, net income or other income tax imposed on
such Indemnified Party by the jurisdiction in which such Indemnified
Party's principal executive office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System) against assets of, deposits with or for the account of, or credit
extended by, any Indemnified Party or shall impose on any Indemnified Party
or on the United States market for certificates of deposit or the London
interbank market any other condition affecting the Purchase Documents, the
Purchased Interest, the Receivables or payments of amounts due thereunder
or its obligation to advance funds in respect of the Purchase Documents,
the Purchased Interest or the Receivables; or
(iii) imposes upon any Indemnified Party any other expense
(including, without limitation, reasonable attorneys' fees and expenses,
and expenses of litigation or preparation therefor in contesting any of the
foregoing) with respect to the Purchase Documents, the Purchased Interest,
the Receivables or payments of amounts due thereunder or its obligation to
advance funds in respect of the Purchase Documents, the Purchased Interest
or the Receivables;
and the result of any of the foregoing is to increase the cost to such
Indemnified Party with respect to the Purchase Documents, the Purchased
Interest, the Receivables, the obligations thereunder, the funding of any
purchases thereunder, under the Asset Purchase Agreement, the APA Credit
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Agreement or the Program Letter of Credit Reimbursement Agreement, by an amount
deemed by such Indemnified Party to be material, then, within 10 days after
demand by any Owner, the Administrative Agent or other Indemnified Party, the
Seller and Lexmark hereby jointly and severally agree to pay or cause to be paid
to such Owner, the Administrative Agent or such other Indemnified Party such
additional amount or amounts as will compensate such Indemnified Party for such
increased cost.
(b) If any Indemnified Party shall have determined that, after the
date hereof, the adoption of any applicable Law or bank regulatory guideline
regarding capital adequacy, or any change therein, or any change in the
interpretation thereof by any Official Body, or any directive regarding capital
adequacy (in the case of any bank regulatory guideline, whether or not having
the force of law) of any such Official Body, has or would have the effect of
reducing the rate of return on capital of such Indemnified Party (or its parent)
as a consequence of such Indemnified Party's obligations hereunder or with
respect hereto to a level below that which such Indemnified Party (or its
parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Indemnified Party to be material, then from time to time,
within 10 days after demand by any Owner or the Administrative Agent, the Seller
and Lexmark hereby jointly and severally agree to pay to such Indemnified Party
such additional amount or amounts as will compensate such Indemnified Party (or
its parent) for such reduction.
(c) Each Owner and the Administrative Agent will promptly notify the
Seller and Lexmark of any event of which it has knowledge, occurring after the
date hereof, which will entitle an Indemnified Party to compensation pursuant to
this Section 9.02. A notice by any Owner, or the Administrative Agent on behalf
of an Owner, claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, any Owner may use any
reasonable averaging and attributing methods.
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9.03. Indemnity.
---------
(a) The Seller and Lexmark, jointly and severally, agree to
indemnify, defend and save harmless each Owner, the Administrative Agent, their
directors, officers, shareholders, employees, agents and each legal entity, if
any, who controls any Owner or the Administrative Agent, other than for the
indemnitee's own gross negligence or willful misconduct, forthwith on demand,
from and against any and all losses, claims, damages, liabilities, costs and
expenses (including, without limitation, all reasonable attorneys' fees and
expenses (including the allocated costs of internal counsel), expenses incurred
by their respective credit recovery groups (or any successors thereto) and
expenses of settlement, litigation or preparation therefor) which any Owner or
the Administrative Agent may incur or which may be asserted against any Owner or
the Administrative Agent by any Person (including, without limitation, any
Obligor or any other Person whether on its own behalf or derivatively on behalf
of the Seller or the Originator) arising from or incurred in connection with (i)
any breach of a representation, warranty or covenant by the Seller or Lexmark
made or deemed made hereunder or under the other Purchase Documents or in
connection herewith or therewith or the transactions contemplated hereby or
thereby or any statements made by any Responsible Officer of the Seller or
Lexmark in connection herewith or therewith or the transactions contemplated
hereby or thereby which shall have been incorrect in any material respect when
made, (ii) any action taken or, if the Seller or Lexmark is otherwise obligated
to take action, failed to be taken, by the Seller or Lexmark with respect to the
Purchased Interest or any of its obligations hereunder or under the other
Purchase Documents, including, without limitation, the Seller's or Lexmark's
failure, as the case may be, to comply with an applicable Law or regulation,
(iii) any failure to vest and maintain vested in the Administrative Agent, for
the benefit of the Owners, an undivided ownership interest in the Receivables
included in the Purchased Interest, free and clear of any Lien (other than (x)
the Lien arising in connection with this Agreement, (y) the second priority Lien
in favor of Morgan Guaranty Trust Company of New York, as security agent for the
Credit Providers, described in the Amended and Restated Intercreditor Agreement
and (z) any Permitted Lien) or other adverse claim, whether existing at the time
of Purchase of such Receivables or at any time thereafter, (iv) any failure to
pay when due any taxes, including without limitation any sales tax, excise tax
or other similar tax or charge payable in connection with the Receivables and
their creation or satisfaction, (v) any products liability claim or claim of
infringement of proprietary rights, in any such case, arising out of or which
relates to the Purchased Interest in the Receivables or the related Contracts,
(vi) any dispute, suit, action, claim, proceeding or governmental investigation,
pending or threatened, whether based on statute, regulation or order, on tort,
on contract or otherwise, before any Official Body which arises out of or
relates to the obligations of such Person under or with respect to the
Contracts, (vii) any reductions in the amount of a Purchased Receivable the
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Obligor of which is a Government Obligor, and the Related Security and
Collections with respect thereto, as the result of appropriation or other
authorized funding by the applicable governmental entity, or the lack of such
appropriation or funding, or the inability to collect any amount from a
Government Obligor due to the operation of any applicable statute or otherwise,
or (viii) the existence of any provision in any Contract that may (x) require
the related Obligor to consent to the transfer, sale or assignment of the rights
of the Seller or the Originator under such Contracts other than the right of the
Originator to sell, distribute or otherwise provide goods or services to such
Obligor, or (y) restrict the ability of the Administrative Agent or an Owner to
exercise its rights under this Agreement, including without limitation, its
right to review such Contract.
(b) Promptly upon receipt by any indemnified party under this
Section 9.03 of notice of the commencement of any suit, action, claim,
proceeding or governmental investigation against such indemnified party, such
indemnified party shall, if a claim in respect thereof is to be made against the
Seller and Lexmark hereunder, notify the Seller and Lexmark in writing of the
commencement thereof. The Seller and Lexmark may participate in and assume the
defense of any such suit, action, claim, proceeding or investigation at its
expense, and no settlement thereof shall be made without the approval of the
Seller and Lexmark and the indemnified party. The approval of the Seller and
Lexmark will not be unreasonably withheld or delayed. After notice from the
Seller or Lexmark to the indemnified party of its intention to assume the
defense thereof with counsel reasonably satisfactory to the Administrative Agent
and the Majority Owners, and so long as the Seller or Lexmark so assumes the
defense thereof in a manner reasonably satisfactory to the Administrative Agent
and the Majority Owners, the Seller and Lexmark shall not be liable for any
legal expenses of counsel unless there shall be a conflict between the interests
of the Seller or Lexmark and the indemnified party.
9.04. Holidays.
-------- Except as may be provided in this Agreement to the
contrary, if any payment due hereunder shall be due on a day which is not a
Business Day, such payment shall instead be due the next succeeding Business
Day.
9.05. Records.
------- All amounts calculated or due hereunder shall be
determined from the records of the Administrative Agent, which determinations
shall be conclusive absent manifest error.
9.06. Amendments and Waivers.
------------------------ The Buyer, the Administrative Agent,
the Seller, the Servicer and Lexmark may from time to time, with the
consent, if required pursuant to this Agreement or the Asset Purchase
Agreement, of the APA Purchasers, enter into agreements amending,
modifying or supplementing this Agreement, and the Buyer, with the consent, if
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required pursuant to this Agreement or the Asset Purchase Agreement, of the
Majority Owners, in its or their sole discretion, may from time to time grant
waivers of the provisions of this Agreement or consents to a departure from the
due performance of the obligations of the Seller, the Servicer or Lexmark under
this Agreement. Any such agreement, waiver or consent must be in writing and
shall be effective only to the extent specifically set forth in such writing.
Any waiver of any provision hereof, and any consent to a departure by the
Seller, the Servicer or Lexmark from any of the terms of this Agreement, shall
be effective only in the specific instance and for the specific purpose for
which given and if such amendment, waiver or departure would have a material
adverse effect on the rights or obligations of the APA Agent, the Collateral
Agent or the Program LOC Bank, such amendment, departure or waiver shall not be
effective until consented to by the Affected Party, provided, that, if any such
amendment would have a material effect on the rights or obligations of the
parties hereto (including without limitation an amendment that increases the
Maximum Net Investment, but excluding an amendment which extends the Expiration
Date), such amendment shall not be effective without prior written confirmation
from S&P and Moody's that such amendment would not result in the reduction or
withdrawal of its then current rating of the Commercial Paper. The
Administrative Agent shall give S&P and Moody's prompt notice of any such waiver
and of the occurrence of any of the events described in Sections 2.11, 4.07,
4.08(a), 6.02(c), 6.02(d), 6.02(e) and 7.01 hereof.
9.07. Term of Agreement.
----------------- This Agreement shall terminate following the
Expiration Date when the Net Investment has been reduced to zero and all
Discount and all other Aggregate Unpaids have been paid in full;
provided, however, that (i) the rights and remedies of the Owners and the
Administrative Agent with respect to any representation and warranty made or
deemed to be made by the Seller or Lexmark pursuant to this Agreement, (ii) the
indemnification and payment provisions set forth in Sections 9.01, 9.02 and 9.03
hereof and (iii) the agreement set forth in Section 9.20 hereof shall be
continuing and shall survive any termination of this Agreement.
9.08. No Implied Waiver; Cumulative Remedies.
-------------------------------------- No course of dealing and
no delay or failure of any Owner or the Administrative Agent in exercising
any right, power or privilege under the Purchase Documents shall affect
any other or future exercise thereof or the exercise of any other right,
power or privilege; nor shall any single or partial exercise of any such
right, power or privilege or any abandonment or discontinuance of steps
to enforce such a right, power or privilege preclude any further exercise
thereof or of any other right, power or privilege. The rights and remedies of
the Owners under the Purchase Documents are cumulative and not exclusive of
any rights or remedies which any Owner would otherwise have.
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<PAGE>
9.09. No Discharge.
------------ Except as otherwise specified in this Agreement with
respect to Servicer in connection with a Complete Servicing Transfer, the
obligations of the Seller, the Servicer and Lexmark under the Purchase Documents
shall be absolute and unconditional and shall remain in full force and effect
without regard to, and shall not be released, discharged or in any way affected
by (a) any exercise or nonexercise of any right, remedy, power or privilege
under or in respect of the Purchase Documents or applicable Law, including,
without limitation, any failure to set-off or release in whole or in part by any
Owner of any balance of any deposit account or credit on its books in favor of
the Seller, the Servicer or Lexmark or any waiver, consent, extension,
indulgence or other action or inaction in respect of any thereof, or (b) any
other act or thing or omission or delay to do any other act or thing which would
operate as a discharge of the Seller, the Servicer or Lexmark as a matter of
Law.
9.10. Notices.
------- All notices under Section 7.02 hereof shall be given
to the Seller, the Servicer and Lexmark by telephone or facsimile, confirmed by
first-class mail, first-class express mail or courier, in all cases with charges
prepaid. All other notices, requests, demands, directions and other
communications (collectively "notices") under the provisions of this Agreement
shall be in writing (including telexed or facsimile communication) unless
otherwise expressly permitted hereunder and shall be sent by first-class mail,
first-class express mail, or by telex or facsimile with confirmation in writing
mailed first-class mail, in all cases with charges prepaid. Any such properly
given notice shall be effective when received. All notices shall be sent to the
applicable party at the Office stated on the signature page hereof or in
accordance with the last unrevoked written direction from such party to the
other parties hereto.
9.11. Severability.
------------ The provisions of this Agreement are intended to
be severable. If any provision of this Agreement shall be held invalid
or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability of such provision in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
9.12. Governing Law; Submission to Jurisdiction.
----------------------------------------- THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Each of the Seller, the Servicer and Lexmark hereby submits to the
nonexclusive jurisdiction of the courts of the State of New York and the
courts of the United States located in the State of New York for the purpose
of adjudicating any claim or controversy arising in connection with any
of the Purchase Documents or any of the transactions contemplated thereby,
and for such purpose, to the extent it may lawfully do so, waives any objection
80
<PAGE>
which it may now or hereafter have to such jurisdiction or to venue therein
and any claim of inconvenient forum with respect thereto. Nothing in this
Section 9.12 shall affect the right of any Owner or the Administrative
Agent to bring any action or proceeding against the Seller, the Servicer or
Lexmark or its property in the courts of other jurisdictions.
9.13. Prior Understandings.
-------------------- This Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof, and
supersedes all prior understandings and agreements, whether written or oral.
9.14. Survival.
-------- All representations and warranties of the Seller, the
Servicer and Lexmark contained herein or made in connection herewith shall
survive the making thereof, and shall not be waived by the execution and
delivery of this Agreement, any investigation by the Buyer, any APA Purchaser or
the Administrative Agent, the purchase, repurchase or payment of any Purchased
Interest in any Receivable, or any other event or condition whatsoever (other
than a written waiver complying with Section 9.06 hereof). The covenants and
agreements contained in or given pursuant to this Agreement (including, without
limitation, those contained in Articles IV and VI hereof) shall continue in full
force and effect until the termination of the obligation to make Purchases
hereunder, the reduction of the Net Investment to zero and the payment in full
of all Discount and all other Aggregate Unpaids.
9.15. Counterparts.
------------ This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
9.16. Set-Off.
------- In case a Termination Event shall occur and be
continuing, each Owner and, to the fullest extent permitted by Law, the holder
of any assignment of the Buyer's rights hereunder pursuant to the Security
Agreement, shall each have the right, in addition to all other rights and
remedies available to it, without notice to the Seller or Lexmark, as the case
may be, to set-off against and to appropriate and apply to any amount owing by
the Seller or Lexmark, as the case may be, hereunder which has become due and
payable, any debt owing to, and any other funds held in any manner for the
account of, the Seller or Lexmark, as the case may be, by an Owner or by any
holder of any assignment, including, without limitation, all funds in all
deposit accounts (whether time or demand, general or special, provisionally
credited or finally credited, or otherwise) now or hereafter maintained by the
Seller or Lexmark, as the case may be, with an Owner or the Collateral Agent
under the Security Agreement. Such right shall exist whether or not such debt
owing to, or funds held for the account of, the Seller or Lexmark, as the case
may be, is or are matured other than by operation of this Section 9.16 and
81
<PAGE>
regardless of the existence or adequacy of any collateral, guaranty or any other
security, right or remedy available to any Owner or any holder. Nothing in this
Agreement shall be deemed a waiver or prohibition or restriction of any Owner's
or any holder's rights of set-off or other rights under applicable Law.
9.17. Successors and Assigns.
---------------------- This Agreement shall be binding on the
parties hereto and their respective successors and assigns; provided,
however, that neither the Seller, the Servicer nor Lexmark may assign any of its
rights or delegate any of its duties hereunder without the prior written
consent of the Majority Owners (except, in the case of Servicer,
pursuant to a Complete Servicing Transfer). No provision of this Agreement shall
in any manner restrict the ability of an Owner to assign, participate, grant
security interests in, or otherwise transfer any portion of the Purchased
Interest owned by such Owner; provided, however, that no such assignment may be
made to any Person that is not an Eligible Assignee. Notwithstanding the
foregoing, the Asset Purchase Agreement shall govern the ability of an APA
Purchaser to assign, participate, or otherwise transfer any portion of the
Purchased Interest owned by such APA Purchaser. Each of the Seller, the Servicer
and Lexmark hereby agrees and consents to the complete assignment by the Owners
of all of their respective rights under, interest in, title to and obligations
under the Purchase Documents to the Collateral Agent.
9.18. Confidentiality.
--------------- The Buyer, the Administrative Agent, each Owner
and each APA Purchaser shall keep confidential any information provided
by the Seller, Servicer or Lexmark and clearly identified as
confidential, provided that nothing herein shall prevent the Buyer, the
Administrative Agent, each Owner and each APA Purchaser from disclosing such
information (i) to its officers, directors, employees, agents, attorneys and
accountants who have a need to know such information in accordance with
customary banking or financial practices and who receive such information having
been made subject to the restrictions set forth in this Section, (ii) upon the
order of a court or administrative agency, (iii) upon the request or demand of
any regulatory agency or authority having jurisdiction over such party, (iv)
which has become publicly available without breach of any agreement between the
parties hereto, (v) as necessary for the exercise of any remedy hereunder, "(vi)
subject to provisions similar to those contained in this Section, to any
Eligible Assignee, any commercial paper dealer providing funding to the Buyer,
any APA Lending Bank, and any other institution that provides liquidity or
enhancement for the Buyer or", (vii) any nationally recognized rating agency.
9.19. Payments Set Aside.
------------------ To the extent that the Seller, the Servicer,
Lexmark or any Obligor makes a payment to an Owner or an Owner exercises
its rights of set-off and such payment or set-off or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set
82
<PAGE>
aside, recovered from, disgorged by, or is required to be refunded, rescinded,
returned, repaid or otherwise restored to the Seller, the Servicer, Lexmark,
such Obligor, a trustee, a receiver or any other Person under any Law,
including, without limitation, any bankruptcy law, any state or federal law,
common law or equitable cause, the obligation or part thereof originally
intended to be satisfied shall, to the extent of any such restoration, be
reinstated, revived and continued in full force and effect as if such payment
had not been made or such set-off had not occurred. The provisions of this
Section 9.19 shall survive the termination of this Agreement.
9.20. No Petition.
----------- Each of Lexmark, the Seller and the Servicer agrees
that, prior to the date which is one year and five days after the date upon
which all obligations of the Seller to the Buyer hereunder are paid in full
and all outstanding Commercial Paper and other indebtedness of the Buyer are
paid in full, it will not institute against, or join any other Person in
instituting against, the Buyer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other similar proceeding under the laws
of the United States or any state of the United States.
9.21. No Recourse.
------------ The obligations of the Buyer under this Agreement
are solely the corporate obligations of the Buyer. Notwithstanding anything
to the contrary contained herein, all obligations of the Buyer shall be payable
by the Buyer only to the extent of assets available therefore and, to
the extent assets are not available or are insufficient for the payment thereof,
shall not constitute a claim against the Buyer. No recourse shall be had for the
payment of any amount owing in respect of this Agreement or for the payment of
any fee hereunder or for any other obligation or claim arising out of or based
upon this Agreement against Merrill, Goldman, any Affected Party, the Referral
Agent or the Administrative Agent, any Affiliate of any of the foregoing, or any
stockholder, employee, officer, director, incorporator or beneficial owner of
any of the foregoing. For purposes of this paragraph, the term "Merrill" shall
mean and include Merrill and all Affiliates thereof and any stockholder,
employee, officer, director, incorporator or beneficial owner of any of them
and, the term "Goldman" shall mean and include Goldman and all Affiliates
thereof and any stockholder, employee, officer, director, incorporator or
beneficial owner of any of them; provided, however, that the Buyer shall not be
considered to be an Affiliate of Merrill, Goldman, the Referral Agent, any
Affected Party or the Administrative Agent for the purposes of this Section.
83
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their duly
authorized signatories, have executed and delivered this Agreement as of the
date first above written.
DELAWARE FUNDING CORPORATION
by: Morgan Guaranty Trust Company of
New York, as attorney-in-fact for
Delaware Funding Corporation
Robert S. Jones
by: ------------------------------
Authorized Signatory
Vice President
------------------------------
Title
Address for Notices: Delaware Funding Corporation
c/o J H Holdings Corporation
Ropes & Gray
One International Place
Boston, MA 02110-2464
Attention: David Donaldson
Tel. No.: (617) 951-7000
FAX: (617) 951-7050
With a copy to
the Referral Agent: Morgan Guaranty Trust Company of
New York
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Attention: Asset Finance
Group
Tel. No.: (302) 634-5492
FAX: (302) 634-5490
Address for Funds Transfer: Morgan Guaranty Trust Company
of New York
ABA No. 021-000-238
for further credit to:
Delaware Funding Corporation
(DFC)
Account #600-28-005
Reference: Lexmark Receivables
Corporation
[Receivables Purchase Agreement Signature Page]
84
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Administrative Agent
Robert S. Jones
by: ---------------------------
Authorized Signatory
Vice President
---------------------------
Title
Address for Notices: Morgan Guaranty Trust Company
of New York
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Attention: Asset Finance
Group
Tel. No.: (302) 634-5492
FAX: (302) 634-5490
Address for Funds Transfer: Morgan Guaranty Trust Company
of New York
ABA No. 021 11 00 238
for further credit to:
Delaware Funding Corporation (DFC)
Account #600-28-005
Reference: Lexmark Receivables
Corporation
LEXMARK RECEIVABLES CORPORATION
Gary E. Morin
by: -----------------------------
Authorized Signatory
President
-----------------------------
Title
Address for Notices: Lexmark Receivables Corporation
1325 Airmotive Way, Suite 130
Reno, Nevada 89502
Attention: Ms. Janice C. George
Tel. No.: (702) 322-2221
FAX: (702) 322-8808
With a copy to: Lexmark International, Inc.
740 New Circle Road, Building 1
Dept. 857
Lexington, Kentucky 40550
Attention: Richard A. Pelini
Tel. No.: (606) 232-7449
FAX: (606) 232-5137
[Receivables Purchase Agreement Signature Page]
85
<PAGE>
Address for Funds Transfer: Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, NY 10260
ABN No. 021 11 00 238
for credit to: Lexmark
International, Inc.,
Account No. 001 23 842
LEXMARK INTERNATIONAL, INC.
Gary E. Morin
by: ----------------------------
Authorized Signatory
Vice President & CFO
-----------------------------
Title
Address for Notices: Lexmark International, Inc.
740 New Circle Road NW
Building 1, Dept. 857
Lexington, KY 40550
Attention: Richard A. Pelini
Tel. No.: (606) 232-7449
FAX: (606) 232-5137
With a copy to: Vincent J. Cole, Esq.
Lexmark International, Inc.
740 New Circle Road NW
Building 4, Dept. 742
Lexington, KY 40550
Bank of America
300 South Fourth Street
Suite 500
Las Vegas, NV 89193-8600
ABN No. 122400724
for credit to: Lexmark Receivables
Corporation
Account No. 990117772
[Receivables Purchase Agreement Signature Page]
86
<PAGE>
EXHIBIT A
to
Receivables Purchase
Agreement
Credit and Collection Policy
[On file with Buyer]
<PAGE>
EXHIBIT B
to
Receivables Purchase
Agreement
Description of Qualifying Receivables
Each and every Receivable (as that term is defined in the Receivables
Purchase Agreement to which this exhibit is attached), whether now existing or
hereafter arising and wherever located, (a) arising in connection with the sale
of goods or the rendering of services in the ordinary course of business by
Lexmark International, Inc., or (b) arising in connection with the sale to IBM
Credit Corporation or another similar institution providing credit to an Obligor
(provided such institution, as an Obligor, satisfies any of the definitions of
Group A Obligor, Group B Obligor, Group C Obligor or Group D Obligor) of the
original indebtedness incurred by an Obligor to Lexmark International, Inc. in
connection with such a sale of goods or the rendering of such services, the
Obligor of which is either (i) a Person organized under the laws of the United
States or any state thereof that maintains its principal place of business in
the United States or (ii) a Government Obligor.
<PAGE>
EXHIBIT C
to
Receivables Purchase
Agreement
Lexmark Receivables Corporation
1325 Airmotive Way, Suite 130
Reno, Nevada 89502
(702) 322-2221
Fax: (702) 322-8808
Purchase Notice for Incremental Purchase
Proposed Closing Date for Inc 08/09/97
A. Net Investment prior to Purchase Notice $0
B. Purchase Price (Net Investment)
of Incremental Purchase $0
C. Net Investment after giving effect
to Item B (Item A + Item B) $0 (1)
D. Deferred Purchase Price after giving effect
to Item B (Schedule II, Item E) $0
E. Investment (Item C + Item D) $0
F. Investment Percentage ((Item E) divided by
(Schedule 1, Item E)) 0.00% (2)
G. Net Investment Percentage ((Item C) divided by
(Schedule 1, Item E)) 0.00%
The above information and calculations and the information and c forth on the
attached Schedules are true and accurate pursuant t Receivables Purchase
Agreement dated as of March 31, 1997 among Receivables Corporation., as Seller,
Delaware Funding Corporation Morgan Guaranty Trust Company of New York, as
Administrative Age
LEXMARK RECEIVABLES CORP.
as Seller
By -----------------------
Responsible Officer
Date of Notice
(1) The Net Investment cannot exceed the Maximum Net Investment (2) The
Investment Percentage cannot exceed 100%.
(2) The Investment Percentage cannot exceed 100%
<PAGE>
Schedule I
Calculation of Net Receivables Balance
A. Outstanding Balances of Receivables (without deduction $0
for sales and other taxes) as of the date of the Purchase
Notice
B. Deductions: Outstanding Balances of
Defaulted Receivables (including Receivables more than 60 days past
due, except for those portions of such Receivable that are the subject of a
good faith Dispute with the Oblig as to the amount due on the related
Contract) $0
Receivables of Affiliates of the Seller $0
(Receivables of Excluded Obligors $0
(Receivables owed by an Obligor more than 25% of whose Outstanding Balances
are more than 60 days past due, except that portion of such Obligor's
Outstanding Balances that constitute Dilution Factors $0
Sales taxes or other similar taxes or charges owing
in respect of Receivables $0
(Receivables which otherwise are not Eligible
Receivables $0
Total Deductions $0
C. Outstanding Balances of Eligible Receivables
(Item A - Item B) $0
<PAGE>
D. Other Deductions
Outstanding Balances of Receivables of A-1/P-1 Rated Obligors, and A-1/P-1
Rated Obligors and their Affiliates in excess of 10% of Item C $0
(Outstanding Balances of Receivables of A-2/P-2 Rated Obligors, and A-2/P-2
Rated Obligors and their Affiliates in excess of 5.0% of Item C $0
(Outstanding Balances of Receivables of A-3/P-3 Rated Obligors, and A-3/P-3
Rated Obligors and their Affiliates in excess of 3.33% of Item C $0
(Outstanding Balances of Receivables of Non-Rated
Obligors, and Non-Rated Obligors and their Affiliates
in excess of 2.5% of Item C $0
E. Net Receivables Balance
(Item C - Item D(I) - Item D(II) - Item D(III $0
<PAGE>
Schedule II
Calculation of Deferred Purchase Price
A. Loss Percentage
Minimum Loss Percentage 0.00%
Default Reserve = 2.00 x a x b 0.00%
a= The highest average of the Default Ratios for any
three consecutive months that occurred during the prior
twelve consecutive calendar months. 0.00%
b= The sum of (x) weighted average maximum payment
terms in months and (y) 2. (Rounded to nearest 0
Loss Percentage = greater of (I) or (II) 0.00%
B. Net Investment (Item C of Purchase Notice) $0
C. 1.0 minus Item A 1.000
D. Investment (Item B divided by Item C) $0
E. Deferred Purchase Price (Item A x Item D) $0
<PAGE>
Schedule III
Calculation of Buyer's Percentage Interest
A. Net Investment (Item C of Purchase Notice) $0
B. Buyer's Discount:
Net Investment (Item A) $0
Highest Tranche Rate applicable to any
Outstanding Tranche 0.0000000%
(Program Fee 0.00%
(Rate Variance Factor 0
Average Collection Period (from Schedule 1 to
Part II of the most recent Monthly Report) 0.00
(Allowance for Collection Days 0
(v(Item B(ii) + Item B(iii)) x Item B(iv) 0.00%
(viServicer's Compensation 0.00%
(Item B(vii) + Item B(viii) 0.00%
Item B(v) + Item B(vi) 0
(Item B(i) x Item B(ix) x Item B(x) $0
(xItem B(xi) divided by 360 $0
C. Deferred Purchase Price (Schedule II, Item E) $0
D. Net Receivables Balance (Schedule I, Item E) $0
E. Buyer's Percentage Interest (((Item A + Item B(xii)
+ Item C) divided by (Item D)) 0.00%
<PAGE>
EXHIBIT D
to
Receivables Purchase
Agreement
Tranche Selection Notice
------------------------
This notice is delivered pursuant to Section 2.06 of the Receivables Purchase
Agreement dated as of April 15, 1997 among Lexmark Receivables Corporation, as
seller, Delaware Funding Corporation, as Buyer, and Morgan Guaranty Trust
Company of New York, as Administrative Agent.
Reference is made to the Purchase Notice dated XX/XX/XX relating to the
Incremental Purchase of $XXXX.XX on XX/XX/XX. We hereby request that the
Incremental Purchase be divided into the following Tranches, with the Tranche
Periods being the periods indicated opposite each such Tranche:
Amount of Tranche Tranche Period
----------------- --------------
$XXXX.XX XX days
We hereby confirm that, after giving effect to this Tranche Section Notice,
the aggregate amount of all Tranches will equal the Net Investment.
LEXMARK RECEIVABLES CORP.
as Seller
By ----------------------
Responsible Officer
Date of Notice: XX/XX/XX
--------
<PAGE>
EXHIBIT E
to
Receivables Purchase
Agreement
Form of Report Showing Discount
ISSUE DATE:
MATURITY DATE:
A. Discount
(i) Tranche Rate
(ii) Program Fee
(iii) Item A(i) + Item A(ii)
(iv) Amount of this Tranche
(v) Actual number of days during
this Tranche Period
(vi) Discount for this Tranche Period
Item A(iii) x Item A(iv) x Item A(v)
divided by 360
The foregoing information is being delivered pursuant to the terms of
the Receivables Purchase Agreement, dated as of April 15, 1997, among
Lexmark Receivables Corporation, as Seller, and Delaware Funding
Corporation as Buyer.
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust, as
attorney-in-fact for Delaware
Funding Corporation
Authorized Signature
------------------------------
<PAGE>
EXHIBIT F
to
Receivables Purchase
Agreement
List of Special Obligors
================================================================================
Obligor Concentration
- ------- Factor
--------------
================================================================================
Obligors of The percentage set forth in clause (i) or clause
IBM Receivables (ii) of the term "Concentration Factor" then
applicable to such Obligor plus the percentage equal
to a fraction, the numerator of which is an amount
equal to the IBM Covered Amount in effect at the
time of determination and the denominator of which
is an amount equal to the Outstanding Balances of all
Eligible Receivables at such time of determination
================================================================================
All Government Obligors, 3%
in the aggregate
================================================================================
<PAGE>
EXHIBIT G
Monthly Report
Today's Date 0
Monthly Period Ended
Part I
A. Portfolio Information
1. Receivables - Beginning of Month
Monthly Receivables Generated during the month
Collections
Charge-offs
Dilution Factors
Other Adjustments
Receivables - End of Month
2. Charged-Off Accounts
Individual accounts over $50,000:
Subtotal:
- Receivables less than 61 days past due
All others
Total:
B. Aging Profile
Account Aging Amount Percentage
Current 0.00%
1 to 30 Days Past Due 0.00%
31 to 60 Days Past Due 0.00%
61 to 90 Days Past Due 0.00%
Over 90 Days Past Due 0.00%
Total 0 0.00%
C. Other Information
1. Net Investment
2. Highest Tranche Rate applicable to any out 0.00%
3. Weighted Average Payment Terms
4. Ineligible Receivables
Ineligible Receivables Amount
1.Defaulted Receivables (including
Receivables more than 60 days past due)
2.Receivables owed by an Obligor which is not
entitled to credit or is bankrupt or otherwise
uncollectible
3.Receivables of Affiliates of the Seller
4.Receivables of excluded Obligors
5.Receivables owed by an Obligor 25% or
more of whose Outstanding Balance is more
than 60 days past due
6.Sales taxes or other similar taxes or
charges owing in respect of Receivables
7.Receivables which otherwise are not
Eligible Receivables
<PAGE>
Part II
A. Obligor Information
Number of Obligors at the end of the month
Median Obligor balance at end of month
Summary of Large Obligors
Special Obligor - Government
(R $0 A-1/P-1 Rated & Affiliates)
(R $0 A-2/P-2 Rated & Affiliates)
(R $0 A-3/P-3 Rated & Affiliates)
(R $0 Special Obligor - Government)
(R $0 Non A-Rated)
A-1/P-1 Rated & Affiliates (Group A)
Total Excess
Name Balance Concentration
1 $0
2 $0
3 $0
4 $0
5 $0
$0
A-2/P-2 Rated & Affiliates (Group B)
Total Excess
Name Balance Concentration
1 $0
2 $0
3 $0
4 $0
5 $0
$0
A-3/P-3 Rated & Affiliates (Group C)
Total Excess
Name Balance Concentration
1 $0
2 $0
3 $0
4 $0
5 $0
$0
Nonrated & Affiliates (Group D)
Total Excess
Name Balance Concentration
1 $0
2 $0
3 $0
4 $0
5 $0
6 $0
7 $0
8 $0
9 $0
10 $0
11 $0
$0
Special Affiliates
Total Excess
Name Balance Concentration
1 $0
$0
<PAGE>
Part III
A. Calculation of Buyer's Discount
1. Net Investment $0
2. Highest Tranche Rate applicable to any o 0.00%
3. Program Fee 0.00%
4. Rate Variance Factor 0.00
5. Average Collection Period 0.00
(Beginning Balance of Receivables/Collections X 30)
6. Servicer's Compensation 0.00%
(0, Unless Potential Termination, (0.02 * Outstanding Balance of all
Receivables) / 360)
7. Allowance for Collection Delays 0
Buyer's Discount $0.00
B. Calculation of Deferred Purchase Price
1. Loss Percentage
The Greater of:
a. Minimum Loss Percentage 0.00%
b. Default Reserve = a x b x c 0.00%
a= The highest average of the Default Ratios for any three
consecutive months that occurred during the prior twelve
consecutive calen 0.00%
b= The sum of (x) weighted average maximum payment
terms in months and (y) 2. (Ro 0
c= Stress Factor of 2.00 0.00
Loss Percentage 0.00%
2. Net Investment $0
3. Investment (Net Investment/(1- Loss Per $0
Deferred Purchase Price $0
C. Calculation of Buyer's Percentage Interest
1. Net Investment $0
2. Buyer's Discount $0.00
3. Deferred Purchase Price $0
4. Net Receivables Balance $0
Buyer's Percentage Interest (1 + 2 + 3)/ 0.00%
<PAGE>
Part IV
Calculation of Net Receivables Balance
A. Receivables - End of Month $0
Deductions to Receivables - Ineligible Receivables
1.Defaulted Receivables (including
Receivables more than 60 days past due) $0
2.Receivables owed by an Obligor which is not
entitled to credit or is bankrupt or otherwise
uncollectible $0
3.Receivables of Affiliates of the Seller $0
4.Receivables of excluded Obligors $0
5.Receivables owed by an Obligor 25% or
more of whose Outstanding Balance is more
than 60 days past due $0
6.Sales taxes or other similar taxes or
charges owing in respect of Receivables $0
7.Receivables which otherwise are not
Eligible Receivables $0
B. Total Deductions $0
--------------
C. Eligible Receivables $0
D. Concentration Deductions
1. Outstanding Balance of Receivables of A-1/P-1 Rated Obligors, and
A-1/P-1 Rated Obligors and their Affiliates in excess of 10% of
Eligible Receivables $0
2. Outstanding Balance of Receivables of A-2/P-2 Rated Obligors, and
A-2/P-2 Rated Obligors and their Affiliates in excess of 5.0% of
Eligible Receivables $0
3. Outstanding Balance of Receivables of A-3/P-3 Rated Obligors, and
A-3/P-3 Rated Obligors and their Affiliates in excess of 3.33% of
Eligible Receivables $0
4. Outstanding Balance of Receivables of Non-Rated Obligors, and
Non-Rated Obligors and their Affiliates in $0
Eligible Receivables
5. Outstanding Balance of Receivables of Special Obligors and
Affiliates (listed on Exhibit F to the Receivables Purchase Agreement)
in excess of the percentage listed opposit $0
6. Outstanding Balance of IBM Receivables in excess of 10% of
Eligible Receivables plus $25 million IBM $0
Net Receivables Balance $0
<PAGE>
Part V
Calculation of Ratios
A. Default Ratio [1/2] 0.00%(Max = 6.0%)
1. Outstanding Balance of Defaulted Receivables 61-90 days of the
monthly period, plus charge-offs of receivables less than
61 days past due $0
2. Aggregate amount of Receivables generated
during the fourth calendar month preceding such
Settlement Date $0
3-Month Average Default Ratio [(1+2+3)/3] 0.00%(Max = 5.0%)
1.Current Month's Default Ratio 0.00%
2.Last Month's Default Ratio 0.00%
3.Two-month Previous Default Ratio 0.00%
B. Charge-Off Ratio [1/2] 0.00%(Max = 1.5%)
1. Amount of Charge-Offs during this repor $0
2. Aggregate amount of Collections during $0
Sum of Charge-Off Ratio for Preceding Three M 0.00%(Max = 2%)
1.Current Month's Charge-Off Ratio 0.00%
2.Last Month's Charge-Off Ratio 0.00%
3.Two-month Previous Charge-Off Ratio 0.00%
C. Dilution Ratio [1/2] 0.00%(Max = 25%)
1.Aggregate reduction in the original balance of all Receivables
which have been reduced by Dilution Factors
during the reporting calendar month $0
2.Previous one month Collections $0
Sum of Dilution Ratio for Preceding Three Mon 0.00%(Max = 40%)
1.Current Month's Dilution Ratio 0.00%
2.Last Month's Dilution Ratio 0.00%
3.Two-month Previous Dilution Ratio 0.00%
D. Delinquency Ratio [1/2] 0.00%(Max = 7.5%)
1.Outstanding Balance of all Receivables greater than 31 days
but less than 60 days past due as of the last day of the
monthly period $0
2.Outstanding Balance of all Receivables as of the last
day of the monthly period $0
Sum of Delinquency Ratio for Preceding Three 0.00%(Max = 15%)
1.Current Month's Delinquency Ratio 0.00%
2.Last Month's Delinquency Ratio 0.00%
3.Two-month Previous Delinquency Ratio 0.00%
E. Investment Percentage [1/2] 0.00%
1.Investment $0
2.Net Receivables Balance $0
F. Net Investment Percentage [1/2] 0.00%
1.Net Investment (Part II, Item A) $0
2.Net Receivables Balance $0
IBM Receivables Information
1. IBM Receivables, beginning of month
2. New IBM Receivables generated during month
3. Collections of IBM Receivables
4. Charge-offs of IBM Receivables
5. Dilution of IBM Receivables
6. Other Adjustments
7. IBM Receivables, end of month
(Item 1 + Item 2 - Item 3 - Item 4 - Item 5 - Item 6)
AGING PROFILE FOR IBM RECEIVABLES
Account Aging Amount Percentage
Current 0.00%
01 to 30 0.00%
31 to 60 0.00%
61 to 90 0.00%
Over 90 0.00%
Total $0 0.00%
(A) IBM Covered Amount $0
(B) Outstanding Balance of All IBM Receivables $0
(C) Allowable Concentration Amount (10% of Eligib $0
(D) Overage of B over C $0
(E) Excess Concentration $0
<PAGE>
The information and calculations set forth above and the information and
calculations set forth on the attached parts and schedules are true and accurate
pursuant to the terms of the Receivables Purchase Agreement dated as of March
31, 1997 among Lexmark Receivables Corporation, as Seller, Delaware Funding
Corporation, as Buyer, and Morgan Guaranty Trust Company of New York, as
Administrative Agent.
Lexmark Receivables Corporation
as Seller
By ------------------------
Date of Report: __________________
June 1997
CATEGORY TRTYPE AMOUNT
SYSTEM REPORTS DOM 0100 ITECH IBM - OEM CIBS IBM ICC
Dilution CM BD
AdjustmentCM MS
AdjustmentCM NS
AdjustmentCM RF
AdjustmentCM RM
Dilution CM SB
Dilution CR
Dilution CR DC
CollectionDD
AdjustmentDN & CMNS
Revenue DR
Dilution DR BD
Dilution DR DC
AdjustmentDR RF
AdjustmentDR RM
Dilution DR SB/dc
Dilution DR SC
Revenue IN
Revenue IN 01
CollectionOA 01
CollectionOA 02
CollectionOR/nb/rb
CollectionPP
CollectionRC/nb/rb
CollectionRM/nb/rb
Dilution TP
Dilution T1
Dilution T2
Dilution WC
Dilution WC BC
AdjustmentWC CP
Dilution WC DC
Dilution WC MS/sb
AdjustmentWC RF
AdjustmentWC ZB
Dilution WD
Dilution WD AE
Dilution WD BD
Dilution WD DC
Dilution WDMS/MI/NC/DS/NP
Dilution WD OX/mw
Dilution WD SC/SB
AdjustmentWD ZB
Dilution W1
Dilution W2
Report Total
CHECK (=0)
<PAGE>
MISCELLANEOUS ADJUSTMENTS TO REPORTS
Revenue
Collections
Dilution
Adjustments
TOTALS Revenue
Collections
Dilution
Adjustments
CHECK (=0)
Account Aging
Current
01 to 30
31 to 60
61 to 90
Over 90
Total 0.00 (from DSO ledger total page)
<PAGE>
EXHIBIT H
to
Receivables Purchase
Agreement
[LETTERHEAD OF
LEXMARK INTERNATIONAL, INC.]
March __, 1997
Corporate Treasury Management
Department Manager
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
RE: Lockbox Transfer Letter
Ladies and Gentlemen:
We hereby notify you that, in accordance with the provisions of a certain
Receivables Purchase Agreement dated as of March 31, 1997 (as amended from time
to time, the "Agreement"), by and among Lexmark Receivables Corporation, as
Seller (the "Seller"), Lexmark International, Inc., as Servicer and in its
individual capacity, Delaware Funding Corporation and Morgan Guaranty Trust
Company of New York, as Administrative Agent (the "Agent"), we are acting as
Servicer of certain Receivables and certain Related Security (including
Collections received in our post office box or other mailing location located at
- -------------------------------------------- (the "Lockbox") and the related
lock-box account No. ____ maintained with you (the "Lockbox Account")) sold and
transferred by the Seller to the Agent, 500 Stanton Christiana Road, Newark,
Delaware 19713-2107. Capitalized terms used in this Letter and not defined have
the meanings set forth in the Agreement.
Upon receipt of written notice from the Agent, you agree to make all
payments out of or in connection with the Lockbox Account directly to Morgan
Guaranty Trust Company of New York, for the account of the Agent, to such
account as directed by the Agent or otherwise in accordance with the
instructions of the Agent.
Upon receipt of written notice from the Agent, you agree to disregard any
and all previous instructions or agreements, if any, given or made by us which
are or may be inconsistent with this letter, all of which are hereby superseded
by this letter.
H-1
<PAGE>
We also hereby notify you that the Agent shall be irrevocably entitled to
exercise any and all rights in respect of or in connection with the Lockbox
Account, including, without limitation, the right to specify when payments are
to be made out of or in connection with the Lockbox Account. The funds deposited
into the Lockbox Account will not be subject to deduction, set-off, banker's
lien or any other right in favor of any person other than the Agent.
Please agree to the terms of, and acknowledge receipt of, this notice by
signing in the space provided below on two copies hereof sent herewith and send
one signed copy to the Agent, at its address referred to in the first paragraph
hereof, Attention of Structured Finance Group, and send the other signed copy to
the undersigned at its address indicated above, Attention Treasury Department.
Very truly yours,
LEXMARK INTERNATIONAL, INC.
By: ---------------------------
Name:
Title:
Agreed and acknowledged:
[NAME OF LOCKBOX BANK]
By: -------------------
Authorized Officer
H-2
<PAGE>
EXHIBIT I
to Receivables
Purchase Agreement
Delaware Funding Corporation
Morgan Guaranty Trust Company of New York
- -----------, 1997
--------, 1997
Delaware Funding Corporation
c/o JH Holdings Corporation
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Morgan Guaranty Trust Company of New York, as Administrative Agent
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Gentlemen:
This opinion is furnished to you pursuant to Section 3.02(j) of the
Receivables Purchase Agreement, dated as of March 31, 1997 (the "Agreement"),
among Lexmark International, Inc., as Servicer and in its individual capacity
("Lexmark"), Lexmark Receivables Corporation, as Seller (the "Seller"), Delaware
Funding Corporation, as Buyer (the "Buyer"), and Morgan Guaranty Trust Company
of New York, as Administrative Agent (the "Administrative Agent"). Capitalized
terms used in this opinion and not otherwise defined herein shall have the
meanings specified in the Agreement.
I am Vice President, General Counsel and Secretary of Lexmark. The
Seller is a wholly-owned subsidiary of Lexmark. In connection with delivering
this opinion, I have examined:
(i) the Agreement;
(ii) the Purchase Agreement;
(iii) the Asset Purchase Agreement;
(iv) the Amended and Restated Intercreditor Agreement, as amended
by the First Amendment thereto, dated as of April 15, 1997
(the "Intercreditor Agreement"); and
(v) copies of the financing statements on Form UCC-1 described on
Schedule I attached hereto as Exhibit A-1 (the "Financing
Statements"), and copies of the financing statements on Form
UCC-3 described on Schedule I and attached hereto as Exhibit
A-2 (the "Termination Statements").
<PAGE>
Delaware Funding Corporation
Morgan Guaranty Trust Company of New York
- ---------, 1997
Page 2
I have relied upon the representations and warranties as to factual
matters contained in and made pursuant to the Agreement, the Purchase Agreement,
the Asset Purchase Agreement and the Intercreditor Agreement (collectively, the
"Transaction Agreements") and have also examined and relied upon the originals,
or copies certified or otherwise identified to my satisfaction, of such records
of Lexmark and the Seller, certificates of public officials, and agreements,
instruments and documents, as I have deemed necessary as a basis for this
opinion.
I have also relied solely upon the reports of CorpAssist and CT
Corporation System, dated variously and attached hereto as Exhibit B, with
respect to (i) financing statements on file in the filing offices in the
Commonwealth of Kentucky and the State of Nevada as described on Schedule II and
(ii) federal tax liens and liens of the PBGC as further described on Schedule
II, in each case, to the extent of record in such filing offices. In my reliance
on such reports, I have assumed that all of such financing statements on file
have been properly filed and indexed in the appropriate offices and that such
reports are accurate and complete. In addition, I have assumed that the
Financing Statements and the Termination Statements have been properly filed and
indexed in the appropriate filing offices listed on Schedule III and that the
Financing Statements and the Termination Statements have been filed earlier
today or prior to the date hereof in such offices in the order indicated on
Schedule III.
I have assumed for the purposes of this opinion: (i) the due execution
and delivery, pursuant to due authorization, of the Transaction Agreements by
the parties thereto other than Lexmark and the Seller; (ii) the genuineness of
the signatures of all persons signing the documents with respect to which this
opinion is rendered, other than the signatures of persons acting on behalf of
Lexmark and the Seller; (iii) the authenticity of all documents submitted to me
as originals; (iv) the conformity to authentic original documents of all
documents submitted to me as certified, conformed or photostatic copies; and (v)
that each of Lexmark and the Seller has sufficient right, title and interest in
the Receivables in order to grant the security interest therein contemplated by
the Transaction Agreements. Insofar as my opinion involves conclusions with
respect to the filing of financing statements and the perfection of ownership or
security interests under the laws of the Commonwealth of Kentucky or the State
of Nevada, my investigation of such laws has been limited to an examination of
the Uniform Commercial Code as in effect in such jurisdictions as reported in
standard compilations customarily relied upon in this connection by attorneys.
Based upon and subject to the foregoing and the qualifications
hereinafter set forth, I am of the opinion that:
1. Each of Lexmark and the Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware and has the corporate power and authority to own
its properties and to carry on its business as now being conducted.
Each of Lexmark and the Seller is duly qualified and in good standing
2
<PAGE>
Delaware Funding Corporation
Morgan Guaranty Trust Company of New York
- ----------, 1997
Page 3
as a foreign corporation and is authorized to do business in each
jurisdiction in which the character of its properties or the nature of
its business requires such qualification or authorization, except for
any qualification and authorization the lack of which has not had and
will not have a materially adverse effect upon its business or
properties or its ability to perform its obligations under the
Transaction Agreements.
2. Each of Lexmark and the Seller has the corporate power and
has taken all necessary corporate action to execute, deliver and
perform each Transaction Agreement to which it is a party in accordance
with its terms, and to consummate the transactions contemplated
thereby. Each Transaction Agreement to which Lexmark or the Seller is a
party has been duly executed and delivered by such party and
constitutes a legal, valid and binding obligation of such party,
enforceable against such party in accordance with its terms.
3. With respect to each of Lexmark and the Seller, the
execution, delivery and performance by such party of each Transaction
Agreement to which it is a party in accordance with its terms, and the
consummation of the transactions contemplated thereby, do not and will
not (a) require (i) any governmental approval or (ii) any consent or
approval of any stockholder of such party or any other Person that has
not been obtained, (b) violate or conflict with, result in a breach of,
or constitute a default under (i) the Certificate of Incorporation or
the By-Laws of such party (ii) to the best of my knowledge after due
inquiry, any agreement to which such party is a party or by which such
party or any of its properties may be bound or (iii) any applicable
law, or any order, rule, or regulation applicable to such party or any
decree or order of any Official Body having jurisdiction over such
party or any of its properties or (c) result in or require the creation
or imposition of any Lien upon any of the assets, property or revenue
of such party other than as contemplated by the Transaction Agreements.
4. There are no legal or arbitral proceedings, and no
proceedings by or before any Official Body, pending or, to the best of
my knowledge, threatened (a) against Lexmark or the Seller or the
business or any property of Lexmark or the Seller that, if adversely
determined, would, singly or in the aggregate, have a materially
adverse effect on Lexmark or the Seller or on the ability of Lexmark or
the Seller to perform its obligations under the Transaction Agreements
or (b) involving Lexmark or the Seller and relating to the Transaction
Agreements.
5. If the initial Incremental Purchase constitutes a sale of
the Purchased Interest in the Receivables:
(a) with respect to Receivables in existence on the
date hereof, such sale transfers to the Administrative Agent
all of the right, title and interest of the Seller in and to
such Purchased Interest in the Receivables to the extent
3
<PAGE>
Delaware Funding Corporation
Morgan Guaranty Trust Company of New York
- ----------, 1997
Page 4
provided in the Agreement and (i) with respect to those
Receivables for which Financing Statements were filed in the
Commonwealth of Kentucky, under the Uniform Commercial Code of
the Commonwealth of Kentucky (the "Kentucky UCC") and (ii)
with respect to those Receivables for which Financing
Statements were filed in the State of Nevada, under the
Uniform Commercial Code of the State of Nevada (the "Nevada
UCC" and, together with the Kentucky UCC, the "UCC"); and
(b) with respect to the Receivables that come into
existence after the date hereof, upon the creation of such
Receivables, the Agreement will transfer to the Administrative
Agent all of the right, title and interest of the Seller in
and to such Purchased Interest in the Receivables under the
UCC to the extent provided in the Agreement.
6. Even if the initial Incremental Purchase does not, for
whatever reason, constitute a sale of the Purchased Interest in the
Receivables, the Agreement creates a valid security interest under the
UCC in favor of the Administrative Agent in all of the right, title and
interest of the Seller in and to the Purchased Interest in the
Receivables.
7. Assuming that the Financing Statements have been properly
filed in the filing offices located in the Commonwealth of Kentucky and
the State of Nevada listed in Schedule III (the "Filing Offices"), the
Filing Offices are all of the offices located in the Commonwealth of
Kentucky and the State of Nevada in which filings are required to
perfect the ownership interest or security interest of the
Administrative Agent in the Purchased Interest in the Receivables
(collectively, the "Security Interest") to the extent that the Security
Interest may be perfected by filing under the UCC, and the Security
Interest is on the date hereof, and at all times thereafter will be,
perfected under Article 9 of the UCC to the extent that the Security
Interest may be perfected by filing under the UCC, except that (a)
perfection of the Security Interest in proceeds will be limited to the
extent provided in Section 9-306 of the UCC; (b) continuation
statements with respect to each Financing Statement must be filed
within the applicable time periods, (c) additional filings may be
necessary if the Seller changes its name, identity or corporate
structure or the location of its places of business or its chief
executive office; and (d) perfection of the Security Interest may be
limited by Section 552 of the Federal Bankruptcy Code to the extent to
which property acquired by the debtor after commencement of a case
under the Federal Bankruptcy Code may be subject to a security interest
arising from a security agreement entered into by the debtor before the
commencement of such case.
8. Based on my review of the written results of searches of
the filing offices in the Commonwealth of Kentucky and the State of
Nevada as described on Schedule II, and assuming that there have
been no filings of financing statements with respect to Lexmark or the
Seller in such offices since the dates as of which such searches were
4
<PAGE>
Delaware Funding Corporation
Morgan Guaranty Trust Company of New York
- ----------, 1997
Page 5
made and that the Termination Statements have been properly filed in
the Filing Offices, I conclude that as of the date and time of such
searches, there were no (a) UCC financing statements naming Lexmark or
the Seller as debtor or seller and covering any Receivables or
interest therein on file in such jurisdictions or (b) notices of the
filing of any Federal tax lien (filed pursuant to Section 6323 of the
Internal Revenue Code) or lien of the PBGC (filed pursuant to Section
4068 of ERISA) covering any Receivables or interest therein in either
of such jurisdictions, except, in the case of either (a) or (b) as set
forth on Schedule II, with respect to which Termination Statements
have been filed on the date hereof, and, accordingly, the Security
Interest is not subject to any prior security interest in such
jurisdictions created by a filing under the UCC.
The opinion as to enforceability expressed in paragraph number 2 is
subject to all applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and is subject to general principles of equity
(including, without limitation, the availability of specific performance,
injunctive relief and other equitable remedies), regardless of whether
enforcement is sought in a proceeding in equity or at law. In addition, the
enforceability of certain provisions of the Transaction Agreements may be
limited by applicable law, which limitations, however, in my judgment do not
make the remedies provided for therein (taken as a whole) inadequate for the
practical realization of the benefits afforded thereby.
With respect to paragraphs numbered 5, 6, 7 and 8, I express no opinion
as to the perfection or priority of the Security Interest with respect to
Receivables generated by registered copyrights or Receivables constituting
instruments.
I express no opinion as to the applicability of Section 548 of the
Federal Bankruptcy Code or of any provisions of any state fraudulent conveyance
statute to the transactions contemplated by the Transaction Agreements.
This opinion is given only in respect of the laws of the State of New
York, the Federal laws of the United States of America, the corporate law of the
State of Delaware and, to the limited extent set forth in the last sentence of
the fifth paragraph hereof, the laws of the Commonwealth of Kentucky and the
State of Nevada.
This opinion has been delivered at your request for the purposes
contemplated by the Agreement. Without my prior written consent, this opinion is
not to be utilized or quoted for any other purpose and no one other than you is
entitled to rely thereon.
Very truly yours,
5
<PAGE>
EXHIBIT J
to
Receivables Purchase
Agreement
LEXMARK INTERNATIONAL, INC.
OFFICERS' CERTIFICATE
---------------------
I, Vincent J. Cole, the undersigned Vice President and Secretary of Lexmark
International, Inc., a Delaware corporation ("Lexmark"), DO HEREBY CERTIFY that:
2. Attached hereto as Annex A is a true and complete copy of the By-laws of
Lexmark as in effect on the date hereof.
3. Attached hereto as Annex B is a true and complete copy of the
resolutions duly adopted by the Board of Directors of Lexmark on February 13,
1997, authorizing the execution, delivery and performance of the Purchase
Agreement, dated as of March 31, 1997 (the "Purchase Agreement"), by and between
Lexmark, as Originator, and Lexmark Receivables Corporation ("LRC"), as Buyer,
and the Receivables Purchase Agreement, dated as of March 31, 1997 (the "RPA"),
by and among LRC, as Seller (the "Seller"), Morgan Guaranty Trust Company of New
York, as Administrative Agent for the Owners, Lexmark, as Servicer and in its
individual capacity, and Delaware Funding Corporation, as Buyer, and each of the
other documents mentioned therein and approving the transactions contemplated
thereunder, which resolutions have not been revoked, modified, amended or
rescinded and are still in full force and effect as of the date hereof.
4. The below-named persons are, on and as of the date hereof, officers or
employees of LRC holding the respective offices or positions below set opposite
their names, and the below-named officers are authorized to execute the Purchase
Agreement and the RPA and any other documents to be delivered by Lexmark
thereunder, and the signatures below set opposite their names are their genuine
signatures:
Name Office Signature
Gary E. Morin Vice President & -------------------
Chief Financial Officer
Terence P. Chin Treasurer -------------------
David L. Goodnight Controller -------------------
Richard A. Pelini Assistant Treasurer -------------------
Michelle R. Cabbage Treasury Financial Analyst -------------------
Katherine C. Winebrenner Cash Manager -------------------
<PAGE>
WITNESS my hand and seal of Lexmark as of this ____ day of April, 1997.
By: -------------------
Vincent J. Cole
Vice President and Secretary
I, Terence P. Chin, the undersigned Treasurer of Lexmark, DO HEREBY CERTIFY
that:
5. Vincent J. Cole is the duly elected and qualified Vice President and
Secretary of Lexmark and the signature above is his genuine signature.
6. All of the terms, covenants, agreements and conditions of the Purchase
Agreement and the RPA to be complied with and performed by Lexmark at or before
the date hereof have been complied with and performed.
7. The representations and warranties of Lexmark, in whatever capacity,
contained in the Purchase Agreement and the RPA are true and correct as if made
on and as of the date hereof.
8. Lexmark has not filed or consented to the filing of any UCC-1 Financing
Statement relating to the Receivables sold and to be sold pursuant to the
Purchase Agreement and the RPA and, to the best of Lexmark's knowledge, no such
Financing Statements have been filed other than Financing Statements naming (i)
Lexmark as "debtor" and LRC as "secured party", (ii) LRC as "debtor" and Morgan
Guaranty Trust Company of New York, as Administrative Agent, as "secured party",
(iii) Lexmark as "debtor" and Morgan Guaranty Trust Company of New York, as
Security Agent, as "secured party" and (iv) LRC as "debtor" and Morgan Guaranty
Trust Company of New York, as Security Agent, as "secured party."
9. No Termination Event and no event which with the giving of notice or
passage of time or both would constitute a Termination Event has occurred or is
continuing.
Capitalized terms used herein and not otherwise defined shall have the
meanings specified in the RPA.
WITNESS my hand this ____ day of April, 1997.
By:-------------------
Terence P. Chin
Treasurer
J-2
<PAGE>
LEXMARK RECEIVABLES CORPORATION
OFFICERS' CERTIFICATE
---------------------
I, Vincent J. Cole, the undersigned Vice President and Secretary of Lexmark
Receivables Corporation, a Delaware corporation ("LRC"), DO HEREBY CERTIFY that:
10. Attached hereto as Annex A is a true and complete copy of the By-laws
of LRC as in effect on the date hereof.
11. Attached hereto as Annex B is a true and complete copy of the
resolutions duly adopted by the Board of Directors of LRC on March 24, 1997,
authorizing the execution, delivery and performance of the Purchase Agreement,
dated as of March 31, 1997 (the "Purchase Agreement"), by and between Lexmark
International, Inc. ("Lexmark"), as Originator, and LRC, as Buyer, and the
Receivables Purchase Agreement, dated as of March 31, 1997 (the "RPA"), by and
among LRC, as Seller (the "Seller"), Morgan Guaranty Trust Company of New York,
as Administrative Agent for the Owners, Lexmark, as Servicer and in its
individual capacity, and Delaware Funding Corporation, as Buyer, and each of the
other documents mentioned therein and approving the transactions contemplated
thereunder, which resolutions have not been revoked, modified, amended or
rescinded and are still in full force and effect as of the date hereof.
12. The below-named persons are, on and as of the date hereof, officers or
employees of LRC holding the respective offices or positions below set opposite
their names, and the below-named officers are authorized to execute the Purchase
Agreement and the RPA and any other documents to be delivered by LRC thereunder,
and the signatures below set opposite their names are their genuine signatures:
Name Office Signature
Gary E. Morin Vice President & -------------------
Chief Financial Officer
Terence P. Chin Treasurer -------------------
David L. Goodnight Controller -------------------
Richard A. Pelini Assistant Treasurer -------------------
Michelle R. Cabbage Treasury Financial Analyst -------------------
Katherine C. Winebrenner Cash Manager -------------------
J-3
<PAGE>
WITNESS my hand and seal of LRC as of this ____ day of April, 1997.
By: -------------------
Vincent J. Cole
Vice President and Secretary
I, Terence P. Chin, the undersigned Treasurer of LRC, DO HEREBY CERTIFY
that:
13. Vincent J. Cole is the duly elected and qualified Vice President and
Secretary of LRC, and the signature above is his genuine signature.
14. All of the terms, covenants, agreements and conditions of the Purchase
Agreement and the RPA to be complied with and performed by LRC at or before the
date hereof have been complied with and performed.
15. The representations and warranties of LRC, in whatever capacity,
contained in the Purchase Agreement and the RPA are true and correct as if made
on and as of the date hereof.
16. LRC has not filed or consented to the filing of any UCC-1 Financing
Statement relating to the Receivables sold and to be sold pursuant to the
Purchase Agreement and the RPA and, to the best of LRC's knowledge, no such
Financing Statements have been filed other than Financing Statements naming (i)
Lexmark as "debtor" and LRC as "secured party", (ii) LRC as "debtor" and Morgan
Guaranty Trust Company of New York, as Morgan Guaranty Trust Company of New
York, as "secured party", (iii) Lexmark as "debtor" and Morgan Guaranty Trust
Company of New York, as Security Agent, as "secured party" and (iv) LRC as
"debtor" and Morgan Guaranty Trust Company of New York, as Security Agent, as
"secured party."
17. No Termination Event and no event which with the giving of notice or
passage of time or both would constitute a Termination Event has occurred or is
continuing.
Capitalized terms used herein and not otherwise defined shall have the
meanings specified in the RPA.
WITNESS my hand this ____ day of April, 1997.
By:-------------------
Terence P. Chin
Treasurer
J-4
<PAGE>
EXHIBIT K
to
Receivables Purchase
Agreement
SCHEDULE OF NAMES AND LOCATIONS OF
OFFICES AND RECORDS
(i) Seller's Chief Executive Office:
---------------------------------
1325 Airmotive Way, Suite 130 Reno,
Nevada 89502
(ii) Domestic Subsidiaries of the Seller:
-----------------------------------
None
Divisions of Seller:
-------------------
None
(iii) Offices where Seller's Records Located:
--------------------------------------
(A) 1325 Airmotive Way, Suite 130
Reno, Nevada 89502
(B) c/o Lexmark International, Inc.
One Lexmark Centre Drive
740 New Circle Road NW
Lexington, Kentucky 40550
(iv) Seller's Trade Names:
--------------------
None
(v) Other Names and Mergers of Seller:
---------------------------------
None
<PAGE>
EXHIBIT L
to
Receivables Purchase
Agreement
[RESERVED]
<PAGE>
EXHIBIT M
to
Receivables Purchase
Agreement
Information regarding Litigation
NONE
<PAGE>
EXHIBIT N
to
Receivables Purchase
Agreement
Permitted Lockbox Banks,
Lockbox Account Numbers and Permitted Lockboxes
-----------------------------------------------
Lockbox Bank Lockbox Account Permitted Lockbox
- ------------ --------------- -----------------
Citibank Delaware 38800003 Lexmark International
P.O. Box 7247-8248
Philadelphia, PA 19170-8248
Members Heritage 0211078 Members Heritage Federal
Federal Credit Credit Union
Union 440 Park Place
Lexington, KY 40511
Fifth Third Bank 727-90654 Lexmark International, Inc.
P.O. Box 740108
Cincinnati, OH 45274-0108
<PAGE>
EXHIBIT O
to Receivables
Purchase Agreement
ASSET PURCHASE AGREEMENT
Dated as of ------------, 1997
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as administrative
agent (the "Agent"), LEXMARK RECEIVABLES CORPORATION, as Seller under the
Receivables Purchase Agreement referred to below (the "Seller"), and each of the
parties (each an "APA Purchaser") who has executed a signature page to this
Asset Purchase Agreement or an Assignment of Purchase Commitment in the form of
Exhibit A hereto agree as follows:
RECITALS
WHEREAS the Seller, LEXMARK INTERNATIONAL, INC. ("Lexmark"),
DELAWARE FUNDING CORPORATION ("DFC") and the Agent have entered into a
Receivables Purchase Agreement dated as of March 31, 1997 (the "Receivables
Purchase Agreement");
WHEREAS DFC has purchased, and may from time to time in the
future purchase, from the Seller undivided percentage ownership interests in
Receivables (including any additional Receivables arising after the initial
purchase of interests in Receivables), together with the Related Security and
Collections with respect thereto (collectively, the "Purchased Interest");
WHEREAS DFC may in the future determine from time to time to
sell undivided interests in the Purchased Interest ("Percentage Interests") to
the APA Purchasers or to assign to the APA Purchasers its obligations to
purchase from the Seller undivided percentage ownership interests in Receivables
(including any additional Receivables arising after the initial purchase of
interests in Receivables), together with the Related Security and Collections
with respect thereto (collectively, a "Purchase Assignment"); and
WHEREAS each APA Purchaser has agreed to purchase Percentage
Interests that from time to time may be offered for sale by DFC during the term
of its Purchase Commitment (as defined below) under this Asset Purchase
Agreement or to accept Purchase Assignments.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
----------- Unless otherwise defined herein or in
Schedule A hereto, the terms defined in the Receivables Purchase Agreement are
used herein as therein defined.
2. Purchase of Percentage Interests and Purchase Assignments.
---------------------------------------------------------
(a) An APA Purchaser shall become a party hereto (i) by executing and delivering
to the Agent a counterpart of the signature page to this Asset Purchase
Agreement or (ii) in accordance with the procedures set forth in Section 9
<PAGE>
hereof. Thereupon, upon acceptance and recording by the Agent in the Register
(defined below) and subject to any necessary approval of such APA Purchaser by
the Seller, such APA Purchaser shall become a party to this Asset Purchase
Agreement from and after the effective date set forth on such signature page.
APA Purchasers may become parties hereto at different times and from time to
time in accordance with the foregoing procedure. The signature page shall set
forth the undivided percentage (the "Percentage") interest in the Purchased
Interest that an APA Purchaser has agreed to purchase hereunder, the maximum
amount of the Net Investment for such APA Purchaser that an APA Purchaser is
obligated to purchase hereunder plus accrued and unpaid interest at the
applicable Tranche Rate (the "Maximum Purchase"), the effective date of the
purchase commitment and the expiration date of the purchase commitment (the
"Purchase Termination Date"). No Downgraded Purchaser (as defined below) shall
be permitted to extend its Purchase Termination Date. In the event that any APA
Purchaser desires to extend its Purchase Termination Date for a Purchase
Commitment (as defined below) amount that is less than the amount of its Maximum
Purchase prior to DFC's request for an extension of the Purchase Termination
Date, DFC, in its sole and absolute discretion, may accept such extension;
provided, however, that such APA Purchaser shall be deemed to be a Reducing
Purchaser (as defined below) for purposes of Section 13(f) hereof to the extent
of such APA Purchaser's Reduced Amount (as defined below).
For the purposes of this Asset Purchase Agreement, "Downgraded
Purchaser" means any APA Purchaser that has its commercial paper or short-term
deposit rating lowered below (a) P-1 by Moody's or (b) A-1+ by S&P and
"Non-Extending Purchaser" shall mean an APA Purchaser that has not consented to
the extension of its Purchase Termination Date pursuant to this Section 2(a).
(b) (i) From time to time upon notice from the Agent to each
APA Purchaser, each of the APA Purchasers severally and not jointly shall
purchase, on the terms and conditions herein set forth, in accordance with their
respective Percentages, Percentage Interests that the Agent, as agent for DFC,
offers for sale, up to such APA Purchaser's Maximum Purchase. Each such notice
of purchase shall be given no later than 11:00 a.m. (New York City time) on the
Business Day of such purchase, shall be sent by telecopier, telex or cable to
all APA Purchasers concurrently, and shall specify the date of such purchase
(which date of purchase shall be, unless otherwise approved by S&P and Moody's,
the last day of a Tranche Period) and the Tranche in which interests are to be
purchased (identified by the Tranche Period related to such Tranche and the
amount of Net Investment to be allocated to such Tranche). The Agent shall
request a Tranche Rate for each Tranche or portion thereof to be purchased by an
APA Purchaser, which Tranche Rate shall be calculated based on the Eurodollar
Rate, Fixed CD Rate or Base Rate (collectively, the "Rate") for such APA
Purchaser, as set forth on Schedule A hereto. If the Agent has requested a
2
<PAGE>
Tranche Rate for any Tranche to be calculated based on the Eurodollar Rate, the
Tranche Period for such Tranche shall commence three Business Days after notice
of such requested Tranche Rate (and prior to such commencement, shall be set at
the applicable Tranche Rate for the prior Tranche Period, if applicable, or
otherwise shall be calculated based on the Base Rate). Each APA Purchaser will
use its best efforts to calculate the Tranche Rate based on the Rate requested
by the Agent; provided, however, that nothing herein shall require an APA
Purchaser to calculate the Tranche Rate based on the Rate requested by the
Agent; and provided further, that for any Tranche Period commencing on and after
the occurrence of a Termination Event (other than the Termination Event
specified in Section 7.01(i) of the Receivables Purchase Agreement), the Tranche
Rate shall equal the Base Rate plus one (1) percent per annum. Prior to 2:00
p.m. (New York City time) on the date of each purchase, each APA Purchaser shall
pay the Agent for the account of DFC in immediately available funds in United
States dollars, by depositing to an account designated by the Agent in New York
City, an amount (such APA Purchaser's "Purchase Price") equal to such APA
Purchaser's Percentage of the lesser of (a) the then unpaid Net Investment
related to the Percentage Interest offered for sale by the Agent plus accrued
and unpaid interest at the Tranche Rate applicable to such amount of Net
Investment or (b) the following amount computed for such Percentage Interest:
BPI x ORB + PRF
---------
LRA
Where:
BPI = The Buyer's Percentage Interest.
ORB = Net Receivables Balance as of the date of the most recent
Monthly Report on which the Buyer's Percentage Interest was
less than or equal to 100% (the "Report Date"), minus, the
Outstanding Balance of all Eligible Receivables that are
no longer Eligible Receivables (other than IBM Receivables
that were included in the NRB on the Report Date because of
the enhancement provided by the IBM Covered Amount on such
Report Date) for a reason set forth in clause (i) of the
definition of "Eligible Receivables" in Section 1.01 of the
Receivables Purchase Agreement since the Report Date.
LRA = A loss reserve adjustment, computed by adding to the number
1 an amount (expressed as a fraction) equal to 50% of the
fixed percentage that is used in determining Loss Percentage
4
<PAGE>
in clause (i) of the definition thereof in Section 1.01 of
the Receivables Purchase Agreement.
PRF = An amount equal to the Preference Payment or Preference
Payments, if any, made by DFC.
For purposes of the foregoing computations, BPI shall be calculated after
giving effect to the corresponding Purchase by DFC under the Receivables
Purchase Agreement and BPI, ORB, LRA, the Outstanding Balance of Eligible
Receivables and PRF shall be calculated on the date the Purchased Interest
was last computed or deemed computed.
(ii) Notwithstanding any provision of this Agreement to the contrary,
not later than one Business Day following notice to the Agent from the Seller
that a DFC Sale Event has occurred, the Agent shall give notice to each APA
Purchaser of such DFC Sale Event and the APA Purchasers, severally and not
jointly, shall purchase Percentage Interests as provided in paragraph (i) of
this Section 2(b).
(c) From time to time upon notice from the Agent to each APA
Purchaser, each APA Purchaser shall accept Purchase Assignments. From and after
the date of a Purchase Assignment and prior to the date, if any, of any
reassignment pursuant to Section 10(b) hereof, each APA Purchaser shall assume
all of the obligations of DFC under the Receivables Purchase Agreement (and
agrees to be bound by the Receivables Purchase Agreement) to the extent of such
APA Purchaser's Percentage of the percentage of Maximum Net Investment assigned
by DFC (the "APA Purchaser's Purchase Percentage"); provided, however, that the
maximum amount of such APA Purchaser's obligations shall not exceed such APA
Purchaser's Maximum Purchase. Upon any such Purchase Assignment, each APA
Purchaser shall succeed to the rights and be obligated to perform the
obligations of DFC under the Receivables Purchase Agreement to the extent of the
APA Purchaser's Purchased Percentage (including without limitation, the
obligation to make Incremental Purchases pursuant to Sections 2.01, 2.02 and
2.03 of the Receivables Purchase Agreement).
(d) Notwithstanding Sections 2(b) and 2(c), an APA Purchaser
shall not be obligated to make purchases under such Sections at any time in an
amount which would exceed such APA Purchaser's Maximum Purchase. Each APA
Purchaser's obligation shall be several, such that the failure of any APA
Purchaser to make payment to the Agent in connection with any purchase hereunder
shall not relieve any other APA Purchaser of its obligation hereunder to make
payment for the purchase by such other APA Purchaser up to such APA Purchaser's
Maximum Purchase. If the Agent shall have been notified by any APA Purchaser
that such APA Purchaser will not make available the amount which would represent
such APA Purchaser's Percentage of any purchase (other than a Non-Pro Rata
4
<PAGE>
Purchase (as defined below)) requested by DFC or the Seller, as the case may be,
each APA Purchaser agrees, subject to the first sentence of this Section 2(d),
to make available to the Agent a ratable share of such amount (calculated on the
basis of the Percentages of the APA Purchasers that the Agent has determined
will make such purchase). The defaulting APA Purchaser agrees to promptly
purchase from each APA Purchaser that shall have purchased a portion of such
defaulting APA Purchaser's Percentage (each such portion, a "Defaulted
Portion"), forthwith upon demand, the Defaulted Portion so purchased, together
with interest at the applicable Tranche Rate for each day that an APA Purchaser
is required to fund a portion of the defaulting APA Purchaser's Percentage;
provided if such defaulting APA Purchaser has not purchased such Defaulted
Portion within three Business Days following such demand, such defaulting APA
Purchaser shall thereafter be required to pay interest with respect to such
Defaulted Portion at the applicable Tranche Rate plus two (2)% per annum.
(e) Each APA Purchaser shall be obligated to purchase
Percentage Interests or accept Purchase Assignments under this Asset Purchase
Agreement (its "Purchase Commitment") until the earliest of (i) the Purchase
Termination Date of such APA Purchaser's Purchase Commitment, (ii) the date on
which the Agent notifies the APA Purchaser that the Receivables Purchase
Agreement has been terminated (which shall be no later than the Business Day
following the date on which the Agent receives written notice of such
termination) and the Net Investment and Aggregate Unpaids for the Purchased
Interest have been paid in full and (iii) (A) the date DFC voluntarily commences
any proceeding or files any petition under any bankruptcy, insolvency or similar
law seeking the dissolution, liquidation or reorganization of DFC or (B) if
involuntary proceedings or any involuntary petition shall have been commenced or
filed against DFC by any Person under any bankruptcy, insolvency of similar law
seeking the dissolution, liquidation or reorganization of DFC, the earlier of
(y) the date 60 days following the commencement or filing of such proceeding or
petition, if such proceeding or petition has not been dismissed on or before
such date and (z) the date on which an order of relief has been entered against
DFC; provided that if an APA Purchaser's Purchase Commitment has not previously
terminated pursuant to this Section 2(e), such APA Purchaser's obligation to
accept Purchase Assignments shall terminate on the Expiration Date.
(f) Within 10 Business Days of each purchase pursuant to
Section 2(b) hereof, or assignment pursuant to Section 2(c), the Agent will
deliver to each APA Purchaser a certificate in the form of Exhibit B or Exhibit
A, respectively, attached hereto reflecting each APA Purchaser's ownership of
the Percentage Interest so purchased or the APA Purchaser's Purchase Percentage
so assigned and will arrange for any filings necessary to implement such
purchase or perfect the APA Purchaser's security interest in the Receivables.
5
<PAGE>
(g) Notwithstanding that APA Purchasers may have purchased
Percentage Interests hereunder and may have received payments from Collections
of Receivables (which have not been reinvested pursuant to Section 4(a) hereof)
sufficient to repay such Percentage Interests in whole or in part, each APA
Purchaser may be called upon to purchase additional Percentage Interests or
accept additional Purchase Assignments (not to exceed the Maximum Purchase for
each such APA Purchaser) until the expiration of such APA Purchaser's Purchase
Commitment pursuant to Section 2(e) hereof.
(h) In the event DFC assigns any portion of the Purchased
Interest to another Person (which is managed by the Agent and which in the
ordinary course of its business issues commercial paper or other securities to
fund its acquisition and maintenance of receivables or interests therein), sales
of the Purchased Interest or Purchase Assignments by such other Person may be
made under this Asset Purchase Agreement on the same terms and conditions as
sales or assignments by DFC. DFC shall or shall cause the Agent to provide the
APA Purchasers, S&P and Moody's with notice of any such assignment.
3. Register.
-------- The Agent shall maintain at its address, 500
Stanton Christiana Road, Newark, Delaware 19713-2107 Attention: Asset Finance
Group, a copy of this Asset Purchase Agreement and each signature page hereto
and each Assignment of Purchase Commitment delivered to and accepted by it and a
register for the recordation of the names and addresses of the APA Purchasers,
their Percentage Interests, Purchase Assignments, effective dates and Purchase
Termination Dates, aggregate outstanding Net Investment relating to the portion
of the Purchased Interest owned by each APA Purchaser from time to time and the
Purchase Price relating thereto (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Seller, Lexmark, the Agent and the APA Purchasers may treat each Person whose
name is recorded in the Register as an APA Purchaser hereunder for all purposes
of this Asset Purchase Agreement. The Register shall be available for inspection
by the Seller, Lexmark or any APA Purchaser at any reasonable time and from time
to time upon reasonable prior notice.
4. Distribution of Payments.
------------------------
(n) Prior to the earlier of the Expiration Date or the
Purchase Termination Date for an APA Purchaser, whenever any amount of
Collections is paid in respect of the Purchased Interest and such APA Purchaser
has purchased a Percentage Interest or has purchased an undivided ownership
interest in Receivables pursuant to a Purchase Assignment and such Percentage
Interest or Purchase Assignment, as applicable, has not been repurchased by DFC
pursuant to Section 10 hereof (collectively, a "Purchaser Interest"), the
Servicer will, on behalf of such APA Purchaser, reinvest such Collections,
pursuant to Section 2.05 of the Receivables Purchase Agreement, in additional
6
<PAGE>
undivided interests in Receivables. The Percentage of an APA Purchaser in
additional Receivables included in such APA Purchaser's Purchaser Interest shall
at all times be equal to the Percentage in each other Receivable included or to
be included in such APA Purchaser's Purchaser Interest. Notwithstanding the
foregoing, an APA Purchaser shall not be obligated to make a purchase under this
Section 4(a) at any time in an amount which would exceed such APA Purchaser's
Maximum Purchase. Prior to the earlier of the Expiration Date or the Purchase
Termination Date for an APA Purchaser, whenever any amount of Discount is paid
in respect of such APA Purchaser's Purchaser Interest, the Agent will promptly
pay, or cause to be paid, out of funds received by it, to such APA Purchaser, by
wire transfer in available funds in United States dollars, its Percentage of
such amount (adjusted for differences in the Tranche Rates to which such APA
Purchaser and DFC are entitled and further adjusted to reflect the fact that
such APA Purchaser is only entitled to the applicable Tranche Rate on its
Purchase Price) accrued from and after the last date on which Discount was paid
in respect of such Purchaser Interest prior to the acquisition of such Purchaser
Interest by the APA Purchaser.
(b) Following the earlier of the Expiration Date or the
Purchase Termination Date for an APA Purchaser, whenever any amount of Net
Investment or Discount is paid in respect of the Purchaser Interest and such APA
Purchaser has purchased a Purchaser Interest that has not been repurchased
pursuant to Section 10 hereof, the Agent will promptly pay, or cause to be paid,
out of such funds received by it, to each APA Purchaser, by wire transfer in
available funds in United States dollars, its Percentage of such amount
(adjusted for differences in the Tranche Rates to which such APA Purchaser and
DFC are entitled and further adjusted to reflect the fact that such APA
Purchaser is only entitled to the applicable Tranche Rate on its Purchase Price)
accrued from and after the last date on which Discount was paid in respect of
such Purchaser Interest prior to the acquisition of such Purchaser Interest by
the APA Purchaser.
(c) If, after the Agent has paid an APA Purchaser its
Percentage of any amount received by an APA Purchaser pursuant to paragraphs (a)
or (b) above, such amount must be returned for any reason (including
bankruptcy), without waiving or limiting any rights for payment of such amount
such APA Purchaser will repay to the Agent promptly the amount the Agent paid to
such APA Purchaser, whereupon such APA Purchaser's Purchaser Interest, together
with accrued Discount thereon, shall be deemed increased or reinstated, as
applicable, as if such amounts had been received by such APA Purchaser. After an
APA Purchaser has been paid (excluding any repayment referred to in the
immediately preceding sentence) its Net Investment and its Percentage of accrued
Discount on the Purchased Interest (based on the Tranche Rate to which such APA
Purchaser is entitled and further adjusted to reflect the fact that the APA
Purchaser is only entitled to the applicable Tranche Rate on its Purchase Price)
7
<PAGE>
and any other amounts due such APA Purchaser hereunder or under the Receivables
Purchase Agreement, such APA Purchaser acknowledges that any remaining amounts
of Net Investment or Discount paid in connection with the Purchased Interest to
which such APA Purchaser would otherwise be entitled by reason of its Purchaser
Interest shall be paid to DFC for its own account.
(d) Each APA Purchaser's rights as a purchaser of Purchaser
Interests shall be as set forth in the Receivables Purchase Agreement, but shall
not extend to any of the fees set forth or referred to in Section 2.10 of the
Receivables Purchase Agreement except as agreed in the separate letters between
the Agent and each APA Purchaser dated the effective date of such APA
Purchaser's signature page.
5. Representations and Warranties.
------------------------------ (a) Neither the Agent nor
DFC makes any representation or warranty or assumes any responsibility with
respect to (i) any statements, warranties or representations made in or in
connection with the Receivables Purchase Agreement, any related guarantee or
other agreement, or the execution, legality, validity, enforceability,
genuineness or sufficiency of the Receivables Purchase Agreement, any related
guarantee or other agreement, or any instrument or document furnished pursuant
thereto or in connection therewith, (ii) the value or collectibility of any
Receivable or the Purchased Interest, or (iii) the financial condition of the
Seller, the Servicer, Lexmark or any Affiliate thereof or the performance or
observance by the Seller, the Servicer, Lexmark or any Affiliate thereof, as the
case may be, of any of its obligations under the Receivables Purchase Agreement,
any related guarantee or other agreement, or any instrument or document
furnished pursuant thereto or in connection therewith. The Agent does represent
and warrant to each APA Purchaser, however, that the portion of the Purchased
Interest which is sold to each APA Purchaser hereunder pursuant to Section 2(b)
is, at the time of sale, free and clear of any adverse claims created by or
arising as a result of claims against the Agent or DFC.
(b) Each APA Purchaser represents that this Asset Purchase
Agreement has been duly authorized, executed and delivered by such APA Purchaser
pursuant to its corporate powers and constitutes the legal, valid and binding
obligation of such APA Purchaser enforceable against such APA Purchaser in
accordance with its terms except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(c) Each APA Purchaser confirms that such APA Purchaser has
received such documents and information as such APA Purchaser has deemed
appropriate to make its own credit analysis and decision, independently and
without reliance on the Agent or DFC to enter into this Asset Purchase Agreement
and will, independently and without reliance on the Agent or DFC and based on
8
<PAGE>
such documents and information as such APA Purchaser shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action hereunder. The Agent will furnish to each APA Purchaser copies of any
financial or other documents and notices that the Agent receives from time to
time under the Receivables Purchase Agreement or this Agreement, but the Agent
assumes no responsibility for the authenticity, validity, accuracy or
completeness thereof.
6. Liability of the Agent, etc.
--------------------------- None of the Agent, DFC or the
Referral Agent shall be liable to any APA Purchaser in connection with (i) the
administration of the Receivables Purchase Agreement or the Purchase Agreement
or (ii) this Asset Purchase Agreement or any purchases hereunder (except
pursuant to the Agent's representation in Section 5(a) hereof), in either case
except for its own gross negligence or willful misconduct. Without limiting the
foregoing, the Agent, DFC and the Referral Agent (i) may consult with legal
counsel (including counsel for the Seller), independent public accountants or
other experts and shall not be liable for any action taken or omitted to be
taken in good faith in accordance with the advice of such counsel, accountants
or other experts, (ii) shall not be responsible for the performance or
observance by the Seller, the Servicer, Lexmark or any Affiliate thereof of any
of the terms, covenants or conditions of the Receivables Purchase Agreement, any
related guarantee or other agreement, or any instrument or document furnished
pursuant thereto or in connection therewith, (iii) shall incur no liability by
acting upon any notice, consent, certificate or other instrument or writing
believed to be genuine and signed or sent by the proper party, and (iv) shall
not be deemed to be acting as any APA Purchaser's trustee or otherwise in a
fiduciary capacity hereunder or under or in connection with the Receivables
Purchase Agreement or the Purchased Interest.
7. Rights of the Agent.
------------------- The Agent reserves the right, in its
sole discretion (subject to the next sentence), to exercise any rights and
remedies available under the Receivables Purchase Agreement, any related
guarantee or other agreement or pursuant to applicable law, and also to agree to
any amendment, modification or waiver of the Receivables Purchase Agreement, any
related guarantee or other agreement, or any instrument or document delivered
pursuant thereto or in connection therewith. Notwithstanding the foregoing, the
Agent agrees that it shall not
(a without the prior written consent of each APA Purchaser
(or, in the case of clause (iii), each affected APA Purchaser),
(i amend the definitions of "Eligible Receivable," "Defaulted
Receivable" or "Concentration Factor" contained in the Receivables
Purchase Agreement or
(ii) amend, modify or waive any provision of the Receivables
Purchase Agreement in any way which would
9
<PAGE>
(A) reduce the amount of Net Investment or Discount that is
payable on account of the Purchased Interest or delay any
scheduled date for payment thereof or
(B) impair any rights expressly granted to an assignee or
participant under the Receivables Purchase Agreement or
(C) reduce fees payable by the Seller to the Agent or DFC
which relate to payments to APA Purchasers or delay the dates on
which such fees are payable or
(D) modify any provisions relating to recourse for deemed
Collections or recourse for Discount or
(E) modify any provision of any guarantee delivered in
connection with the Receivables Purchase Agreement or
(iii) agree to a different Rate from that set forth on Schedule A
hereto or
(iv) amend or waive the Termination Event relating to the bankruptcy
of the Seller or Lexmark, or
(b) without the prior written consent of the "Majority Purchasers" (defined
below),
(i) amend the definitions of "Default Ratio," "Charge-Off Ratio,"
"Dilution Ratio," "Delinquency Ratio," "Average Collection Period,"
"Buyer's Percentage Interest" or "Net Receivables Balance" or
(ii) amend the Termination Events to increase the maximum permitted
Default Ratio, Charge-Off Ratio, Dilution Ratio or Delinquency Ratio, or
increase the maximum Buyer's Percentage Interest or
(iii) (A) waive violations of the Default Ratio, Charge-Off Ratio,
Delinquency Ratio or Dilution Ratio that deviate by more than 10% from the
required levels of such ratios for more than two consecutive months or
(B) waive a violation of the maximum Buyer's Percentage Interest
that deviates from the required level for more than one month unless
the Seller has cured or has agreed to cure such violation within 30
days after notice from the Agent.
10
<PAGE>
"Majority Purchasers"
-------------------- shall mean at any time Persons owning undivided
interests in the Purchased Interest that aggregate more than 66-2/3% of the
total outstanding Net Investment in the Purchased Interest; provided that
solely for purposes of such computation, (1) APA Purchasers shall be deemed
(whether or not they shall have made purchases or accepted assignments
hereunder) to own undivided interests equal to their respective Percentages
of Net Investment, (2) the Net Investment in the portion of the Purchased
Interest owned by DFC shall be deemed to be reduced by the amounts set
forth in clause (1) and also by the amount of any undivided interests in
the Purchased Interest owned by Persons other than APA Purchasers and (3)
defaulting APA Purchasers shall be deemed not to own any portion of the
Purchased Interest.
(c) increase the Maximum Net Investment except in accordance with
Section 12 hereof.
Notwithstanding anything to the contrary contained in this Section 7,
nothing herein shall affect any obligation, if any, DFC may have pursuant to the
Receivables Purchase Agreement to give notice to, or seek the consent of,
Moody's and S&P to any amendment or waiver of any provision of the Receivables
Purchase Agreement.
8. Obligations of the APA Purchaser, Including Confidentiality.
------------------------------------------------------------- Each APA
Purchaser agrees to abide by any obligations set forth in the Receivables
Purchase Agreement on the part of an owner of a portion of the Purchased
Interest, including without limitation any obligations to maintain
confidentiality and not to institute bankruptcy proceedings. Furthermore, each
APA Purchaser understands that the Receivables Purchase Agreement itself is a
confidential document and no APA Purchaser will disclose it to any other Person
except with the Agent's prior written consent or to APA Purchaser's legal
counsel if such counsel agrees to hold it confidential, or as required by law,
regulation or Official Body. Notwithstanding the foregoing, any APA Purchaser
may, in connection with any assignment or participation or proposed assignment
or participation pursuant to Section 9 or 10 hereof, disclose to the assignee or
participant or proposed assignee or participant any information relating to the
Seller or Lexmark furnished to such APA Purchaser by or on behalf of the Seller,
Lexmark or by the Agent; provided that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant agrees to preserve
the confidentiality of any confidential information relating to the Seller or
Lexmark received by it from any of the foregoing entities.
9. Assignability.
------------- (a) Each APA Purchaser may assign to any Eligible
Assignee (defined below) or to any other APA Purchaser all or a portion of its
rights and obligations under this Asset Purchase Agreement (including, without
limitation, all or a portion of its Purchase Commitment and any Percentage
Interests owned by it); provided, however, that
11
<PAGE>
(i) each such assignment shall be of a constant, and not a
varying, percentage of all rights and obligations under this Asset
Purchase Agreement,
(ii) the amount being assigned pursuant to each assignment is at
least $5,000,000 or any integral multiple of $1,000,000 in excess
thereof (or such lesser amount as shall equal all of such APA
Purchaser's Percentage Interests or such APA Purchaser's Maximum
Purchase at such time), and
(iii) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register,
an Assignment of Purchase Commitment in the form of Exhibit A attached
hereto, together with a processing and recordation fee of $2,500, such
fee to be paid by or on behalf of the assignee.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in the Assignment of Purchase Commitment, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to this Asset Purchase
Agreement, have the rights and obligations of an APA Purchaser hereunder and (y)
the assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to this Asset Purchase Agreement,
relinquish its rights and be released from its obligations under this Asset
Purchase Agreement (and, in the case of an assignment covering all or the
remaining portion of an assigning APA Purchaser's rights and obligations under
this Asset Purchase Agreement, such APA Purchaser shall cease to be a party
hereto). Notwithstanding the foregoing, no assignment hereunder shall be
effective unless (i) the documents evidencing such assignment are satisfactory
to Moody's and S&P and (ii) the assignee has delivered to Moody's and S&P an
opinion of counsel to the assignee satisfactory to each of Moody's and S&P
stating that the obligations of the assignee under this Asset Purchase Agreement
are the legal, valid and binding obligations of the assignee, enforceable
against the assignee in accordance with their terms.
(b) For purposes of this Asset Purchase Agreement, (i) the term "APA
---
Purchaser" shall mean a party executing a counterpart of a signature page hereto
- ---------
and each Eligible Assignee that shall become a party to this Asset Purchase
Agreement pursuant to this Section 9, and (ii) the term "Eligible Assignee"
------------------
shall mean any Person which (A) is reasonably acceptable to the Agent, (B) is
approved by the Seller, which approval shall not be unreasonably withheld,
denied or delayed, and (C) either (x) has short-term debt rated at least "P-1"
by Moody's and "A-1+" by S&P or (y) is acceptable to Moody's and S&P.
(c) Upon its receipt of an Assignment of Purchase Commitment executed by an
assigning APA Purchaser and by an assignee who is an Eligible Assignee or who is
an existing APA Purchaser, the Agent shall (i) accept such Assignment of
Purchase Commitment, (ii) record the information contained therein in the
12
<PAGE>
Register and (iii) give prompt notice thereof to the Seller.
10. Repurchase by DFC.
----------------- (a) Provided that no Termination Event has occurred
and is continuing, DFC may, upon one Business Day's prior written notice to the
Agent (which shall notify the APA Purchasers on the day that it receives such
notice), repurchase Percentage Interests and any purchases made pursuant to a
Purchase Assignment (collectively "Repurchased Interests") from an APA Purchaser
at a repurchase price equal to such APA Purchaser's unpaid Net Investment
related to such Repurchased Interest plus accrued and unpaid interest, if any,
at the applicable Tranche Rate for such Repurchased Interest (the "Repurchase
Amount"); provided that the repurchase of any Repurchased Interest shall only
occur at the end of the Tranche Period related to such Repurchased Interest.
Prior to 2:00 p.m. (New York City time) on the date of such repurchase, DFC
shall pay the Agent for the account of each applicable APA Purchaser in
immediately available funds in United States dollars, by depositing to an
account designated by the Agent in New York City, the Repurchase Amount for each
Repurchased Interest.
(b) Provided that no Termination Event has occurred and is
continuing, DFC may, at any time, upon written notice to the Agent, require an
APA Purchaser to reassign all or any portion of such APA Purchaser's Purchase
Assignments. From and after the date of a reassignment of a Purchase Assignment
the applicable APA Purchaser shall have no obligations under the Receivables
Purchase Agreement with respect to such Purchase Assignment.
(c) Within 10 Business Days of each repurchase pursuant to
Section 10(a) hereof, or reassignment pursuant to Section 10(b) hereof, the
Agent will deliver to DFC a certificate in the form of Exhibit B or Exhibit A,
respectively, hereto reflecting DFC's ownership of the Repurchased Interest
repurchased or the Purchased Interest so reassigned and will arrange for any
filings necessary to implement such repurchase.
11. Participations.
-------------- Each APA Purchaser may sell participations
to one or more banks or other entities in or to all or a portion of its rights
and obligations under this Asset Purchase Agreement (including, without
limitation, all or a portion of its Purchase Commitment and the Percentage
Interests owned by it); provided, however, that (i) such APA Purchaser's
obligations under this Asset Purchase Agreement (including, without limitation,
its Purchase Commitment hereunder) shall remain unchanged, (ii) the Agent shall
continue to deal solely and directly with such APA Purchaser in connection with
such APA Purchaser's rights and obligations under this Asset Purchase Agreement
and (iii) such APA Purchaser shall remain solely responsible to the other
parties hereto for the performance of such obligations. The Seller, Lexmark, the
Agent and the other APA Purchasers shall continue to deal solely and directly
13
<PAGE>
with such APA Purchaser in connection with such APA Purchaser's rights and
obligations under this Asset Purchase Agreement.
12. Change in Maximum Net Investment.
-------------------------------- (--) If the Receivables
Purchase Agreement shall be amended to increase the Maximum Net Investment, then
the Agent shall promptly notify each APA Purchaser of (i) such amendment, and
(ii) the effect of such amendment on such APA Purchaser's Percentage and Maximum
Purchase. Neither DFC nor the Administrative Agent shall agree to execute any
amendment to the Receivables Purchase Agreement which would increase any APA
Purchaser's Maximum Purchase or Percentage without the prior written consent of
each such APA Purchaser and without receipt by the Agent of a new signature page
to this Asset Purchase Agreement from each such APA Purchaser and each
additional APA Purchaser evidencing its increased or new Maximum Purchase and
Percentage, as the case may be, on the effective date of such amendment. On the
effective date of any such amendment, the Percentage of each APA Purchaser whose
Maximum Purchase and Percentage shall not have been increased shall be
automatically and proportionately reduced and each APA Purchaser's Maximum
Purchase amount shall remain the same. The Agent shall promptly modify the
Register to reflect all changes in the APA Purchasers' Percentages and Maximum
Purchases as a result of such amendment.
(b) If, pursuant to Section 2.11 of the Receivables Purchase
Agreement, the Maximum Net Investment shall be reduced, each APA Purchaser's
Percentage under its Purchase Commitment shall remain the same and each APA
Purchaser's Maximum Purchase amount shall be proportionately reduced.
13. Miscellaneous.
------------- (a) Each APA Purchaser will on demand
reimburse the Agent its Percentage share of any and all reasonable costs and
expenses (including, without limitation, reasonable fees and disbursements of
counsel), which may be incurred in connection with collecting any portion of the
Purchased Interest in which an APA Purchaser purchases a Purchaser Interest
hereunder, for which the Agent is not promptly reimbursed by the Seller or any
other Person.
(b) The Agent, any APA Purchaser and any Affiliates of any of
them may accept deposits from, lend money or otherwise extend credit to, act as
trustee under indentures of, and generally engage in any kind of business with,
the Seller, Lexmark and any of its Affiliates and any Person who may do business
with or own securities of the Seller or any Affiliate, all as though this Asset
Purchase Agreement had not been entered into and without any duty to account
therefor to any APA Purchaser.
(c) Any taxes due and payable on any payments to be made to
any APA Purchaser hereunder shall be such APA Purchaser's sole responsibility.
Each APA Purchaser warrants that it is not subject to any taxes, charges, levies
or withholdings with respect to payments under the Asset Purchase Agreement that
14
<PAGE>
are imposed by means of withholding by any applicable taxing authority
("Withholding Tax"). Each APA Purchaser agrees to provide the Agent, from time
to time upon the Agent's request, completed and signed copies of any documents
that may be required by an applicable taxing authority to certify such APA
Purchaser's exemption from Withholding Tax with respect to payments to be made
to such APA Purchaser under this Asset Purchase Agreement; and each APA
Purchaser agrees to hold the Agent harmless from any Withholding Tax imposed due
to such APA Purchaser's failure to establish that it is not subject to
Withholding Tax.
(d) The Agent shall furnish to each APA Purchaser, until
the later of (i) such APA Purchaser's Purchase Termination Date and (ii) the
date on which such APA Purchaser's portion of the Net Investment and all other
amounts payable to such APA Purchaser hereunder have been paid in full, (x) a
copy of the annual audited financial statements of DFC, promptly upon the same
becoming available, if requested by an APA Purchaser and (y) such other
documents furnished to the Agent by the Seller or Lexmark pursuant to the
Receivables Purchase Agreement as an APA Purchaser may reasonably request.
(e) Each APA Purchaser shall promptly notify the Agent of
any downgrading in the short-term unsecured debt securities of such APA
Purchaser by Moody's or S&P. The Agent shall have the right, in its sole
discretion, to terminate the right and obligation of any APA Purchaser to
purchase a portion of the Purchased Interest and accept Purchase Assignments
hereunder in the event that the unsecured short-term debt securities of such APA
Purchaser shall cease to be rated at least A-1+/P-1 (or the equivalent thereof)
by S&P and Moody's; provided that the Agent shall not terminate the right and
obligation of any APA Purchaser hereunder unless either (i) one or more Eligible
Assignees or other APA Purchasers have agreed to accept, in the aggregate,
effective as of the date of termination, such terminated APA Purchaser's Maximum
Purchase, (ii) the Maximum Net Investment has been reduced by an amount equal to
the terminated APA Purchaser's Maximum Purchase and each non-terminated APA
Purchaser has agreed, notwithstanding Section 12(b) hereof, to increase its APA
Purchaser's Percentage and maintain its Maximum Purchase at the same amount as
was in effect immediately prior to the reduction in the Maximum Net Investment
or (iii) DFC obtains liquidity support satisfactory to Moody's and S&P in an
amount not less than such terminated APA Purchaser's Maximum Purchase. Such
termination shall be effective upon written notice to such effect delivered by
the Agent to such APA Purchaser, whereupon the Purchase Termination Date of such
APA Purchaser shall be deemed to have occurred. Upon such termination, the APA
Purchaser shall cease to have any rights or obligations with respect to future
purchases of interests in receivables under this Asset Purchase Agreement but
shall continue to have the rights and obligations of an APA Purchaser with
respect to the portion of the Purchased Interest purchased by it pursuant to the
terms of this Asset Purchase Agreement prior to such termination. DFC agrees to
use commercially reasonably efforts (without being required to incur liabilities
15
<PAGE>
or expend moneys in connection therewith) to replace any Downgraded Purchaser
within 30 days of such APA Purchaser's becoming a Downgraded Purchaser. In the
event of a replacement of a Downgraded Purchaser, such Downgraded Purchaser
agrees to assign its rights and obligations under its Asset Purchase Agreement
to such replacement APA Purchaser selected by DFC that meets the requirements of
Section 9(b) hereof upon the purchase by the replacement APA Purchaser from such
Downgraded Purchaser of such Downgraded Purchaser's Percentage Interests and any
purchases made pursuant to such Downgraded Purchaser's Asset Purchase Agreement
at a purchase price computed in the same manner as a Repurchase Amount is
computed pursuant to Section 10(a) hereof and to execute and deliver such
documents evidencing such assignment as shall be necessary or reasonably
requested by the Agent.
(f) On the fifth Business Day prior to any Non-Extending
Purchaser's Purchase Termination Date (as defined below), such Non-Extending
Purchaser shall (unless prior to the fifth Business Day prior to such
Non-Extending Purchaser's Purchase Termination Date, DFC shall have located one
or more APA Purchasers that meet the requirements of Section 9(b) hereof who
have agreed to accept, in the aggregate, effective as of such Purchase
Termination Date, such Non-Extending Purchaser's Maximum Purchase or, if such
Non-Extending Purchaser has extended its Purchase Termination Date for a
Purchase Commitment that is less than the amount of its Maximum Purchase prior
to such extension (a "Reducing Purchaser"),
------------------- an amount of Purchase Commitment
equal to the difference between such Reducing Purchaser's Maximum Purchase prior
to such extension and such Reducing Purchaser's Purchase Commitment amount as
extended (hereinafter the "Reduced Amount")),
-------------- upon the request of the Agent, and
subject to the limitations imposed by Section 2(c) hereof, make a Non-Pro Rata
Purchase (as defined below). The amount of such Non-Pro Rata Purchase to be made
by a Non-Extending Purchaser or Reducing Purchaser shall be an amount equal to
the product of (i) the difference between (A) the Maximum Net Investment minus
the aggregate outstanding Purchaser Interests (excluding such Non-Pro Rata
Purchase) and (B) an amount equal to the difference between (x) the aggregate of
the Maximum Purchase of the APA Purchasers whose obligations to purchase
Purchased Interests and accept Purchase Assignments hereunder do not expire on
such Purchase Termination Date (including the reduced Maximum Purchase of the
Reducing Purchaser) and (y) the aggregate outstanding Purchaser Interests of all
APA Purchasers whose obligations to purchase Purchased Interests and accept
Purchase Assignments hereunder do not expire on such Purchase Termination Date
(including the Purchased Interests and Purchase Assignments of a Reducing
Purchaser that do not constitute the Reduced Amount for such APA Purchaser) and
(ii) a fraction the numerator of which is such Non-Extending Purchaser's Maximum
Purchase, or Reduced Amount, as the case may be, and the denominator of which is
the aggregate of the Maximum Purchases or Reduced Amounts of all of the
Non-Extending Purchasers whose obligations to purchase Purchased Interests and
accept Purchase Assignments hereunder expire on such Purchase Termination Date;
16
<PAGE>
provided, however, that if DFC shall have requested at least 15 Business Days
prior to such Purchase Termination Date from each of Moody's and S&P written
confirmation that the failure to request such a purchase or assignment will not
result in the reduction or withdrawal of its then current rating, if any, of the
Commercial Paper, and if such written confirmation is received by DFC prior to
the fifth Business Day immediately preceding such Purchase Termination Date, DFC
shall not request, and such Non-Extending Purchaser or Reducing Purchaser, as
the case may be, shall not make, such purchase or accept such assignment. The
Non-Pro Rata Purchase amount shall be held in the Non-Pro Rata Funding Account
as provided in Section 13(h) hereof and shall be returned to the Non-Extending
Purchaser or Reducing Purchaser, as the case may be, on such APA Purchaser's
Purchase Termination Date if and to the extent that the aggregate of the Maximum
Purchase of all APA Purchasers whose obligations to purchase Purchased Interests
and accept Purchase Assignments do not expire on such Purchase Termination Date
is at least equal to the greater of (A) the Net Investment on such Purchase
Termination Date and (B) the Maximum Net Investment (after giving effect to the
reduction thereof pursuant to Section 2.11 of the Receivables Purchase
Agreement) on such Purchase Termination Date. Notwithstanding any provision in
the Receivables Purchase Agreement to the contrary, following the Purchase
Termination Date of any Non-Extending Purchase and the related Non-Pro Rata
Purchase, if any, such Non-Extending Purchaser shall have no further obligation
to purchase Purchased Interests or accept Purchase Assignments under this Asset
Purchase Agreement or to make any Purchase under the Receivables Purchase
Agreement. A Non-Extending Purchaser's Non-Pro Rata Purchase shall be deemed to
constitute such APA Purchaser's Purchaser Interest hereunder on and after such
APA Purchaser's Purchase Termination Date. DFC agrees to use commercially
reasonable efforts (without being required to incur liabilities or expend moneys
in connection therewith) to replace any Non-Extending Purchaser with one or more
APA Purchasers that meet the requirements of Section 9(b) hereof prior to the
fifth Business Day prior to such Non-Extending Purchaser's Purchase Termination
Date.
(g) On the 30th day (or if such day is not a Business Day, the
next succeeding Business Day) after any APA Purchaser becomes a Downgraded
Purchaser, unless DFC shall have replaced such Downgraded Purchaser pursuant to
Section 13(e) hereof, DFC shall request such Downgraded Purchaser to make, and
if such request is made such Downgraded Purchaser shall make in accordance with
the provisions hereof, subject to the limitations imposed by Section 2(c)
hereof, a Non-Pro Rata Purchase in an amount equal to the Maximum Purchase minus
the outstanding Purchaser Interests of such APA Purchaser; provided, however,
that if DFC shall have requested at least 15 Business Days prior to such 30th
day from each of Moody's and S&P written confirmation that the failure to
request such a purchase or assignment will not result in the reduction or
withdrawal of its then current rating, if any, of the Commercial Paper, and if
17
<PAGE>
such written confirmation is received by DFC prior to such 30th day, DFC shall
not request, and such Downgraded Purchaser shall not make, such purchase or
accept such assignment. The Non-Pro Rata Purchase amount shall be deposited in
the Non-Pro Rata Funding Account as provided in Section 13(h) hereof. A
Downgraded Purchaser's Non-Pro Rata Purchase shall be the functional equivalent
of such APA Purchaser's Maximum Purchase and if and to the extent the Agent
notifies such Downgraded Purchaser of its obligation to purchase a Percentage
Interest or accept a Purchase Assignment, moneys in the Non-Pro Rata Funding
Account shall be used to fund such Downgraded Purchaser's Percentage of the
Percentage Interest or Purchase Assignment, and shall thereafter constitute such
APA Purchaser's Purchaser Interest.
(h) The Agent will promptly give each Non-Extending Purchaser
or Downgraded Purchaser, unless DFC shall have replaced such Non-Extending
Purchaser pursuant to Section 13(f) or Section 13(g) hereof, telephonic notice
(confirmed in writing promptly thereafter) of the aggregate principal amount of
the Non-Pro Rata Purchases required pursuant to Section 13(f) or Section 13(g)
hereof or this Section 13(h). If such telephonic notice is received by an APA
Purchaser prior to 12:00 noon (New York City time) on any such Business Day, the
requested Non-Pro Rata Purchase shall be made by the Non-Extending Purchaser or
Downgraded Purchaser, as applicable, by 2:00 p.m. (New York City time) on such
Business Day. If such telephonic notice is not received prior to 12:00 noon (New
York City time) on such Business Day, the requested Non-Pro Rata Purchase shall
be made by the Non-Extending Purchaser or Downgraded Purchaser, as applicable,
by 2:00 p.m. (New York City time) on the Business Day next succeeding the
Business Day on which such telephonic notice is given. A Non-Pro Rata Purchase
shall be made by the Non-Extending Purchaser or Downgraded Purchaser, as
applicable, by a payment to the Agent of the amount of such Non-Pro Rata
Purchase. Such amount shall be deposited by the Agent into a Non-Pro Rata
Funding Account established by the Agent in connection with each Non-Pro Rata
Purchase (each, a "Non-Pro Rata Funding Account").
------------------------------ Moneys in a Non-Pro Rata
Funding Account shall be invested by the Agent in obligations that are rated
A-1+ by S&P and P-1 by Moody's. Earnings on such investments (after deducting
any losses), if any, shall be paid by the Agent to the Downgraded Purchaser or
Non-Extending Purchaser, as the case may be, whose deposit funded such Non-Pro
Rata Funding Account.
For purposes of this Asset Purchase Agreement, "Non-Pro Rata Purchase"
-----------------------
shall mean a purchase of Percentage Interests or acceptance of a Purchase
Assignment pursuant to Section 13(f) or 13(g) hereof or this Section 13(h).
(i) THIS ASSET PURCHASE AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(j) This Asset Purchase Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
18
<PAGE>
original and all of which when taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this Asset
Purchase Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Asset Purchase Agreement.
(k) The APA Purchasers, the Agent, the Seller and DFC may,
from time to time, enter into agreements amending, modifying or supplementing
this Asset Purchase Agreement. Any such agreement and consent must be in writing
and shall be effective only to the extent specifically set forth in such
writing; provided, that DFC shall not amend any material provision of this Asset
Purchase Agreement without having given prior notice thereof to Moody's and S&P
and without the prior written confirmation from each of Moody's and S&P that
such amendment would not result in the reduction or withdrawal of the then
current rating, if any, of the Commercial Paper; provided, however, extension of
the "Purchase Termination Date" as set forth on the signature page of the Asset
Purchase Agreement shall not be considered the amendment of a material provision
of the Asset Purchase Agreement.
14. Bankruptcy Petition Against DFC.
-------------------------------- Each APA Purchaser and
the Agent hereby covenant and agree that, prior to the date which is one year
and one day after the later of (i) the payment in full of all outstanding
Commercial Paper and (ii) the payment in full of all outstanding commercial
paper of any subsidiary of DFC, it will not institute against, or join any other
Person in instituting against DFC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other similar proceeding under the laws
of the United States or any state of the United States.
15. Limited Recourse to DFC.
----------------------- Notwithstanding anything to the
contrary contained herein, all obligations of DFC shall be payable by DFC only
to the extent of assets available therefore and, to the extent assets are not
available or are insufficient for the payment thereof, shall not constitute a
claim against DFC.
16. Liquidity Fee.
-------------- DFC shall pay to each APA Purchaser a
liquidity fee (the "Liquidity Fee"), payable quarterly in arrears, on the last
day of each calendar quarter during the period such APA Purchaser has a Purchase
Commitment under this Asset Purchase Agreement and on the earlier of the
Expiration Date or such APA Purchaser's Purchase Termination Date, as the same
may be extended from time to time. The Liquidity Fee for each APA Purchaser
shall be a per annum fee equal to such APA Purchaser's average daily available
Maximum Purchase multiplied by .15% per annum.
19
<PAGE>
The undersigned hereby consents to the sale from time to time by Morgan Guaranty
Trust Company of New York, as Agent for the undersigned, of undivided interests
in the Purchased Interest owned by the undersigned, pursuant to the Asset
Purchase Agreement to which this is attached.
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York,
as attorney-in-fact for
Delaware Funding Corporation
By: ---------------------
Authorized Signatory
----------------------
Title
[ASSET PURCHASE AGREEMENT SIGNATURE PAGE]
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Agent
By: ----------------------
Authorized Signatory
-----------------------
Title
LEXMARK RECEIVABLES CORPORATION
By: ------------------------
Authorized Signatory
-----------------------
Title
[Asset Purchase Agreement Signature Page]
<PAGE>
Signature Page
with respect to
Lexmark Receivables Corporation
Asset Purchase Agreement
Dated as of March 31, 1997
Section 1.
- ---------
Percentage: %
Section 2.
- ---------
Maximum Purchase: $
Section 3.
- ---------
Effective Date of Purchase Commitment:
Purchase Termination Date:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: -------------------------
Title: Vice President
Morgan Guaranty Trust Company
of New York
500 Stanton Christiana Road
Newark, DE 19713-2107
<PAGE>
SCHEDULE A
SELECTED DEFINITIONS
"Adjusted CD Rate"
---------------- applicable to any Tranche Period shall mean
a rate per annum equal to the following:
CDR* + AR
----
1.00 - DRP
Where:
CDR = the CD Rate,
DRP = the Domestic Reserve Percentage, and
AR = the Assessment Rate.
--------------------
* The quotient being rounded upward, if necessary, to the next higher
1/100 of 1%
"Adjusted LIBO Rate"
------------------- applicable to any Tranche Period shall
mean a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Eurodollar Reserve Percentage.
"Applicable Margin"
------------------ shall mean 75 basis points (0.75%) per
annum in the case of a Rate based on a Eurodollar Rate and 87.5 basis points
(0.875%) per annum in the case of a Rate based on a Fixed CD Rate.
"Assessment Rate"
--------------- shall mean, for any Tranche Period, the net
annual assessment rate (rounded upward, if necessary, to the next higher 1/100
of 1%) actually incurred by Morgan Guaranty Trust Company of New York to the
Federal Deposit Insurance Corporation (or any successor) for such Corporation's
(or such successor's) insuring time deposits at offices of Morgan Guaranty Trust
Company of New York in the United States during the most recent period for which
such rate has been determined prior to the commencement of such Tranche Period.
"Base Rate"
---------- shall mean, for any day, the higher of (x) the
prime rate announced from time to time by Morgan Guaranty Trust Company of New
York in effect on such day, and (y) (i) the rate equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day for such
transactions received by Morgan Guaranty Trust Company of New York from three
Federal funds brokers of recognized standing selected by it, plus (ii) one-half
of one percent (1/2%).
<PAGE>
"CD Rate"
------- applicable to any Tranche Period shall mean the rate
of interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Tranche Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from the CD
Reference Bank of its certificates of deposit in an amount approximately equal
to the Tranche to which such Rate is to apply and for a period of time
comparable to such Tranche Period.
"CD Reference Bank"
----------------- shall mean Morgan Guaranty Trust Company
of New York.
"DFC Sale Event"
---------------- shall mean (i) the occurrence of a
Termination Event described in Sections 7.01(f), (g), (i), (j), (m) or (n) of
the Receivables Purchase Agreement, (ii) the Termination Event described in
Section 7.01(k) shall occur and shall continue for five Business Days or (iii)
any other Termination Event upon the occurrence of which the Administrative
Agent and the Majority Owners determine to terminate the Owners' obligations
under the Receivables Purchase Agreement.
"Domestic Reserve Percentage"
----------------------------- shall mean, for any day, the
percentage (expressed by a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves) for a member bank of
the Federal Reserve System in New York City with deposits exceeding five billion
dollars in respect of new non-personal time deposits in dollars in New York City
having a maturity comparable to the related Tranche Period and in an amount of
$100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Domestic Reserve Percentage.
"Eurodollar Rate"
---------------- shall mean the Adjusted LIBO Rate plus the
Applicable Margin.
"Eurodollar Reference Bank"
------------------------- shall mean the principal London
offices of Morgan Guaranty Trust Company of New York.
"Eurodollar Reserve Percentage"
------------------------------- shall mean, for any day, the
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor), for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in New York City with deposits exceeding five billion
dollars in respect of "Eurocurrency liabilities" (or in respect of any other
category of liabilities which includes deposits by reference to which the
interest rate on euro-dollar loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
a bank to United States residents). The Adjusted LIBO Rate shall be adjusted
2
<PAGE>
automatically on and as of the effective date of any change in the Eurodollar
Reserve Percentage.
"Fixed CD Rate"
-------------- shall mean the Adjusted CD Rate plus the
Applicable Margin.
"London Interbank Offered Rate" or "LIBOR"
------------------------------- ----- shall mean, with
respect to any Tranche Period, the average (rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum at which deposits in
Dollars are offered to the Eurodollar Reference Bank in the London interbank
market at approximately 11:00 a.m. (London time) two Eurodollar Business Days
prior to the first day of such Tranche Period in an amount approximately equal
to the Tranche to which such Rate is to apply and for a period of time
comparable to such Tranche Period.
"Preference Payment"
------------------- shall mean the property (or the value of
the property) that DFC is required to return to the Seller or the Seller's
estate pursuant to a final and nonappealable order issued by a court exercising
jurisdiction in a bankruptcy, insolvency, readjustment of debt, reorganization
or similar proceeding in respect of the Seller or Lexmark, which order requires
such return as a result of the avoidance or similar action by such court
pursuant to applicable law of a transfer of an interest in property (including a
payment) by the Seller made to DFC pursuant to the Receivables Purchase
Agreement in respect of the Purchased Interest.
3
<PAGE>
Exhibit A
to
Asset Purchase
Agreement
Assignment of Purchase Commitment
with respect to
Lexmark Receivables Corporation
Asset Purchase Agreement
Dated March 31, 1997
Section 1.
Purchase Commitment Percentage Assigned: ________%
Assignor's remaining Purchase Commitment
Percentage: ________%
Portion of Net Investment of Percentage
Interests Assigned: $________
Portion of Net Investment of Assignor's
remaining Percentage Interests: $________
Section 2.
Assignee's Maximum Purchase: $________
Assignor's remaining Maximum Purchase: $________
Section 3.
Effective Date of this Assignment: _________, 19__
Purchase Termination Date of assigned
Purchase Commitment: _________, 19__
[NAME OF ASSIGNOR]
By: -----------------------
Title:
[NAME OF ASSIGNEE]
By: -----------------------
Title:
[Address]
Accepted this ____ day of
___________, 199_
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Agent
By: -------------------------
Authorized Signatory
-------------------------
Title
<PAGE>
Exhibit B
to
Asset Purchase
Agreement
PURCHASE CERTIFICATE
---------------, 19 --
[Date of Purchase]
[Name and Address of APA Purchaser]1
[Delaware Funding Corporation
c/o Ropes & Gray
1 International Place
Boston, Massachusetts 02110]2
Re: Lexmark Receivables Corporation (the "Seller")
----------------------------------------------
Gentlemen:
This certificate confirms that on the date set forth above
(the "Purchase Date") you have [purchased]1 [repurchased]2 for your account and
risk, upon the terms and conditions of the Asset Purchase Agreement dated as of
March 31, 1997, among you, the Seller, the undersigned and certain other
parties, an undivided interest (your "Percentage Interest") to the extent of
___% in and to the Purchased Interest more fully identified in Annex 1 hereto
and owned by [DFC]1 [Name of APA Purchaser from whom interest is being
repurchased]2 [pursuant to the Receivables Purchase Agreement dated as of March
31, 1997 among the Seller, Lexmark International, Inc., DFC and the undersigned,
as agent].1
We acknowledge receipt from you of the sum of $_________ in
payment of the Purchase Price for your Percentage Interest in the Purchased
Interest.
Very truly yours,
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Agent
By: ----------------------
Authorized Signatory
----------------------
Title:
1 To be inserted if certificate is being delivered in
connection with a purchase by an APA Purchaser.
2 To be inserted if certificate is being delivered in
connection with a repurchase by DFC.
<PAGE>
Annex 1 to Purchase Certificate
List of Tranches in which a
Percentage Interest is Purchased
--------------------------------
(Calculated as of the Purchase Date)
Outstanding
Portion of
Start of Original Net Investment
Current Tranche Portion of Net of Receivable End of Current
Period relating Investment of Interest as of Tranche Period
to Receivable Receivable Date of for Receivable
Interest Interest Purchase Interest
- --------------- -------------- -------------- --------------
1.
2.
3.
4.
As Approved by the Board of
Directors on May 2, 1997
LEXMARK INTERNATIONAL GROUP, INC.
NONEMPLOYEE DIRECTOR STOCK PLAN
(Amended and Restated Effective May 2, 1997)
Section 1. Purposes
-------------------
The purposes of the Plan are to enable the Company to attract, retain and
motivate the best qualified directors and to enhance a long-term mutuality of
interest between the directors and stockholders of the Company by granting
eligible directors an equity interest in the Company.
Section 2. Definitions
----------------------
Unless the context requires otherwise, the following words as used in the
Plan shall have the meanings ascribed to each below, it being understood that
masculine, feminine and neuter pronouns are used interchangeably, and that each
comprehends the others.
(a) "Act" shall mean the Securities Exchange Act of 1934, as amended.
(b) "Adjustment Event" shall mean any stock dividend, stock split or share
combination of, or extraordinary cash dividend on, the Common Stock or
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below Fair Market Value, or other similar event
affecting the Common Stock of the Company, other than the stock split effected
immediately prior to the Initial Public Offering.
(c) "Annual Fees" shall mean the amounts payable by the Company to an
Eligible Director for services to be rendered as a member of the Board during
any calendar year commencing after 1995, including retainers, meeting and
attendance fees (including any per diem attendance fee for international
directors), committee chair fees and fees otherwise payable for acting on or as
a member of the Board or any committee thereof, but not including reimbursement
of expenses.
(d) "Award" shall mean any Option or Deferred Stock Unit awarded under the
Plan.
<PAGE>
(e) "Board" shall mean the Board of Directors of the Company.
(f) C&D Fund IV" shall mean the Clayton & Dubilier Private Equity Fund IV
Limited Partnership, a Connecticut limited partnership, and any successor
investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(g) "Change in Control" shall mean the occurrence, after the Initial Public
Offering has become effective (and the initial issuance of Common Stock by the
Company directly related thereto has been completed), of any of the following
events:
(i) a majority of the members of the Board at any time cease for
any reason other than due to death or disability to be persons who
were members of the Board twenty-four months prior to such time (or,
if at the relevant time less than twenty-four months has elapsed since
the effective date of such Initial Public Offering, since such
effective date) (the "Incumbent Directors"); provided that any
director whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
members of the Board then still in office who are Incumbent Directors
shall be treated as an Incumbent Director; or
(ii) any "person," including a "group" (as such terms are used in
Sections 13(d) and 14(d)(2) of the Act, but excluding the C&D Fund IV,
the Company, its Subsidiaries, any employee benefit plan of the
Company or any Subsidiary, employees of the Company or any Subsidiary
or any group of which any of the foregoing is a member) is or becomes
the "beneficial owner" (as defined in Rule 13(d)(3) under the Act),
directly or indirectly, including without limitation, by means of a
tender or exchange offer, of securities of the Company representing
30% or more of the combined voting power of the Company's then
outstanding securities; or
(iii) the stockholders of the Company shall approve a definitive
agreement (x) for the merger or other business combination of the
Company with or into another corporation immediately following which
merger or combination (A) the stock of the surviving entity is not
readily tradeable on an established securities market, (B) a majority
of the directors of the surviving entity are persons who (1) were not
directors of the Company immediately prior to the merger and (2) are
not nominees or representatives of the Company or (C) any "person,"
including a "group" (as such terms are used in Sections 13(d) and
14(d)(2) of the Act, but excluding the C&D Fund IV, the Company, its
Subsidiaries, any employee benefit plan of the Company or any
Subsidiary, employees of the Company or any Subsidiary or any group of
which any of the foregoing is a member) is or becomes the "beneficial
owner" (as defined in Rule 13(d)(3) under the Act), directly or
indirectly, of 30% or more of the securities of the surviving entity
or (y) for the direct or indirect sale or other disposition of all or
substantially all of the assets of the Company.
2
<PAGE>
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(i) "Company" shall mean Lexmark International Group, Inc., a Delaware
corporation, and any successor thereto.
(j) "Common Stock" shall mean the Class A common stock of the Company, par
value $0.01 per share.
(k) "Deferred Stock Unit" shall mean an Eligible Director's right to
receive pursuant to the Plan one Share at the end of a specified period of time.
(l) "Eligible Director" shall mean a director of the Company who is not, at
the relevant time, an officer or employee of the Company or any of its
Subsidiaries or affiliated with the C&D Fund or any other stockholder of the
Company holding 5% or more of the Company's equity securities.
(m) "Equity Fee Election" shall mean an Eligible Director's election to
receive all or a portion of his Annual Fees in the form of Deferred Stock Units
in lieu of cash that shall be irrevocable for the calendar year to which it
applies.
(n) "Fair Market Value" shall mean, as of any date of determination, the
closing price of a share of Common Stock on a national securities exchange on
the date of determination, as reported for such day in the Wall Street Journal,
or the last bid price for a share of Common Stock on such date, as reported on a
nationally recognized system of price quotation. In the event that there are no
Common Stock transactions reported on such exchange or system on such date, Fair
Market Value shall mean the closing price or the last bid price, whichever is
applicable, on the immediately preceding day on which Common Stock transactions
were so reported. Notwithstanding the foregoing, with respect to any grant which
becomes effective upon the closing of the Initial Public Offering, Fair Market
Value shall mean the initial price at which the Common Stock is offered to the
public pursuant to the Initial Public Offering.
(o) "Grant Date" shall mean, with respect to the grant of Deferred Stock
Units under the Plan, each date on which Annual Fees become payable to members
of the Board, beginning with December 12, 1996.
(p) "Option Award" shall mean an Initial Award, Annual Award and/or Reload
Option Award (as such terms are defined in Section 6) to purchase Shares, at an
exercise price per Share equal to the Fair Market Value of a Share on the date
of grant of such Award.
3
<PAGE>
(q) "Initial Public Offering" shall mean the first Public Offering of the
Common Stock.
(r) "Option" shall mean the right to purchase Shares at a stated price for
a specified period of time. Options under the Plan are nonstatutory stock
options not intended to qualify under section 422 of the Code.
(s) "Plan" shall mean the Lexmark International Group, Inc. Nonemployee
Director Stock Plan, originally adopted effective as of the closing of the
Initial Public Offering, amended and restated, effective May 2, 1997, as set
forth herein and as the same may be further amended from time to time.
(t) "Public Offering" shall mean any offering of the Common Stock to the
general public pursuant to an underwritten public offering led by one or more
underwriters at least one of which is of nationally recognized standing.
(u) "Share" shall mean a share of Common Stock.
(v) "Subsidiary" shall mean any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total combined voting
power of all classes of stock of such corporation or of the capital interest or
profits interest of such partnership.
(w) "Year of Board Service" shall mean any 12 consecutive month period
during which an Eligible Director serves as a member of the Board. In the event
an Eligible Director is reinstated as a member of the Board after he ceases to
serve as a member of the Board, a new Year of Board Service shall commence on
the date he recommences service as a member of the Board.
Section 3. Effective Date
-------------------------
The Plan shall be effective upon the latest of (a) its adoption by the
Board, (b) its approval by the holders of Common Stock and (c) the closing of
the Initial Public Offering.
4
<PAGE>
Section 4. Administration
-------------------------
(a) Powers of the Board.
------------------- The Plan shall be administered by the Board. The
Board may delegate its powers and functions hereunder to a duly appointed
committee of the Board. The Board shall have full authority to interpret the
Plan; to establish, amend and rescind rules for carrying out the Plan; to
administer the Plan; to incorporate in any option agreement such terms and
conditions, not inconsistent with the Plan, as it deems appropriate; to construe
the respective option agreements and the Plan; and to make all other
determinations and to take such steps in connection with the Plan as the Board,
in its discretion, deems necessary or desirable for administering the Plan.
(b) Delegation.
---------- The Board may appoint the Secretary of the Company, other
officers or employees of the Company or competent professional advisors to
assist the Board in the administration of the Plan, and may grant authority to
such persons to execute agreements or other documents on its behalf.
(c) Agents.
------ The Board may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan, and may rely upon
any opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Board in
the engagement of any such counsel, consultant or agent shall be paid by the
Company.
(d) Indemnification.
--------------- Each person who is or shall have been a member of the
Board or any committee thereof or any person designated pursuant to Section 4(c)
above shall be indemnified and held harmless by the Company against and from any
loss, cost, liability or expense that may be imposed upon or reasonably incurred
by him in connection with or resulting from any claim, action, suit or
proceeding to which he may be made a party or in which he may be involved by
reason of any action taken or failure to act under the Plan and against and from
any and all amounts paid by him in settlement thereof, with the Company's
approval, or paid by him in satisfaction of any judgment in any such action,
suit or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or By-laws, by contract, as a matter of law
or otherwise.
Section 5. Shares; Adjustment Upon Certain Events
-------------------------------------------------
(a) Shares Available.
---------------- Subject to the provisions of Section 5(d), the
number of shares of Common Stock subject to Awards under the Plan may not
exceed 147,000, plus any shares that become available for grant pursuant to
Section 5(b). The shares to be delivered under the Plan may consist, in whole or
5
<PAGE>
in part, of Common Stock held in treasury or authorized but unissued Common
Stock, not reserved for any other purpose, or from Common Stock reacquired by
the Company.
(b) Cancelled, Terminated or Forfeited Awards.
------------------------------------------ Any shares of Common Stock
subject to any portion of an Award which, in any such case and for any reason,
expires, or is cancelled, terminated or otherwise settled, without the issuance
of such shares of Common Stock shall again be available for award under the
Plan. Shares of Common Stock that are delivered to the Company in payment of the
exercise price for any Option granted under the Plan will also be available for
future grants under the Plan.
(c) No Limit on Corporate Action.
------------------------------ The existence of this Plan and Shares
granted hereunder shall not affect in any way the right or power of the Board or
the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issuance of bonds, debentures, preferred or prior preference stocks ahead of or
affecting Common Stock, the dissolution or liquidation of the Company or any
sale or transfer of all or part of its assets or business, or any other
corporate act or proceeding.
(d) Adjustments Upon Certain Events.
--------------------------------- The aggregate number of shares of
Common Stock available for Awards under Section 5(a) or subject to outstanding
Awards and the respective prices and/or vesting criteria applicable to
outstanding Awards shall be proportionately adjusted to reflect, as deemed
equitable and appropriate by the Board, an Adjustment Event. To the extent
deemed equitable and appropriate by the Board, subject to any required action by
stockholders, in any merger, consolidation, reorganization, liquidation,
dissolution or other similar transaction, other than any such transaction that
constitutes a Change in Control, any Award granted under the Plan shall pertain
to the securities and other property to which a holder of the number of shares
of Common Stock covered by the Award would have been entitled to receive in
connection with such event.
Any shares of stock (whether Common Stock, shares of stock into which
shares of Common Stock are converted or for which shares of Common Stock are
exchanged or shares of stock distributed with respect to Common Stock) or cash
or other property received with respect to any Award granted under the Plan as a
result of any Adjustment Event, any distribution of property or any merger,
consolidation, reorganization, liquidation, dissolution or other similar
transaction shall, except as provided in Section 11, be subject to the same
terms and conditions, including vesting and restrictions on exercisability or
transfer, as are applicable to the Award with respect to which such shares, cash
or other property is received and any agreement with respect to the Award shall
so provide.
6
<PAGE>
Section 6. Option Awards
------------------------
(a) (i) Initial Awards.
--------------- Each person who is an Eligible Director on the
effective date of the Initial Public Offering shall receive an Option Award to
purchase 10,000 Shares on such date. Commencing in calendar year 1996, during
the term of the Plan, each Eligible Director shall receive an Option Award to
purchase 10,000 Shares (unless another number is determined by the Board at the
time of such grant) (the "Initial Award") on the date of the meeting of the
Board or the annual meeting of the shareholders of the Company, whichever is
applicable, at which such Eligible Director is first elected to serve as a
member of the Board.
(ii) Annual Awards.
-------------- Each Eligible Director may, at the discretion of the
Board, also be granted one or more Option Awards after the Initial Award (each,
an "Annual Award"), at such time or times and in such amount as shall be
determined by the Board.
(b) Reload Option Awards.
---------------------- Effective upon the exercise by an Eligible
Director of an Option and the payment of any portion of the exercise price in
respect thereof by delivery to the Company of Shares, such Eligible Director
shall automatically be granted a Reload Option Award for a number of Shares
equal to the number of Shares so delivered. Such Reload Option Award shall be
subject to the same terms and conditions (including the same expiration date) as
the related Option except that the exercise price shall be equal to the Fair
Market Value of a Share on the date such Reload Option is granted.
(c) Option Term.
----------- If not previously exercised, each Option shall expire on
the tenth anniversary of the date of the grant thereof or, upon the earlier
termination of the Eligible Director's status as a director of the Company (or,
if applicable, on the day following the last day on which such Option is
exercisable under Section 8 below).
(d) Exercisability.
-------------- Except as otherwise provided hereunder, each Initial
Award granted under this Plan shall become exercisable on a cumulative basis in
five equal annual installments commencing on the first anniversary of the date
of grant, subject to the acceleration provisions of Section 9 hereof. Once
exercisable, an Option may be exercised from time to time, in whole or in part,
up to the total number of Shares with respect to which it is then exercisable.
(e) Procedure for Exercise.
---------------------- An Eligible Director electing to exercise one
or more Options shall give written notice to the Secretary of the Company or its
designee of such election and of the number of Shares he has elected to
purchase. Shares purchased pursuant to the exercise of Options shall be paid for
at the time of exercise (i) in cash or cash equivalents, or (ii) by delivery to
the Company of Shares having a Fair Market Value on the date of exercise equal
to the exercise price, or in a combination of cash and Shares. As soon as
practicable after receipt of a written exercise notice and payment of the
exercise price in accordance with this Section 6(e), the Company shall direct
its stock transfer agent to make (or to cause to be made) an appropriate book
entry reflecting the Eligible Director's ownership of the shares of Common Stock
7
<PAGE>
so acquired. Upon the Eligible Director's request, the Company shall deliver to
the Eligible Director a certificate or certificates representing the acquired
Shares.
(f) Option Agreement.
----------------- Options shall be evidenced by a written option
agreement embodying the terms of this Section 6.
Section 7. Deferred Stock Unit Awards
-------------------------------------
(a) Equity Fee Election.
------------------- An Eligible Director shall have the right to make
an Equity Fee Election no later than December 31 of each calendar year with
respect to Annual Fees to be earned for services rendered in one or more
succeeding calendar years. Notwithstanding the foregoing, an Eligible Director
may make an Equity Fee Election at any time during the 30 day period following
the first date as of which such Eligible Director is eligible to participate in
the Plan with respect to Annual Fees to be earned for services rendered after
such 30 day period. All Equity Fee Elections must set forth a percentage, up to
100%, of the Annual Fees payable to the Eligible Director that will be paid in
the form of Deferred Stock Units in lieu of cash. In the event the Annual Fees
of an Eligible Director are increased subsequent to the making of an Equity Fee
Election, such election shall apply to the percentage of such Annual Fees
elected by the Eligible Director, as so increased.
(b) Deferred Stock Units.
--------------------- Effective on December 12, 1996, each Eligible
Director who has made an Equity Fee Election with respect to Annual Fees payable
for services as an Eligible Director rendered during the 1996 calendar year
shall receive an award of Deferred Stock Units. With respect to Annual Fees
payable for services rendered from on or after January 1, 1997, effective on
each Grant Date, each Eligible Director who has made an Equity Fee Election
shall receive an award of Deferred Stock Units. No Shares shall be issued at the
time an award of Deferred Stock Units is made and the Company shall not be
required to set aside a fund for the payment of such award. Upon the effective
date of the Initial Deferred Stock Unit award granted to an Eligible Director,
the Company will establish a separate account for such Eligible Director and
will record in such account the number of Deferred Stock Units awarded to such
Eligible Director from time to time under the Plan. The number of Deferred Stock
Units awarded to an Eligible Director on December 12, 1996 with respect to
Annual Fees payable for services rendered during the 1996 calendar year shall be
equal to the number of shares (including fractional shares) obtained by dividing
(i) the amount of the Annual Fees deferred by such Eligible Director pursuant to
the Equity Fee Election of such Eligible Director in effect with respect to such
period by, (ii) the Fair Market Value of one Share on December 12, 1996.
Thereafter, the number of Deferred Stock Units awarded to an Eligible Director
on each Grant Date shall be equal to the number of shares (including fractional
shares) obtained by dividing (i) the amount of the Annual Fees deferred by such
Eligible Director pursuant to the Equity Fee Election of such Eligible Director
then in effect with respect to the applicable period since the most recent Grant
Date, by (ii) the Fair Market Value of one Share on such Grant Date. To the
8
<PAGE>
extent that any portion of an Eligible Director's Annual Fees are paid on an
annual basis, a pro rata share of the annual amount thereof shall be taken into
account on each scheduled Board meeting date (or such other dates as the Company
shall pay such Annual Fees (i.e., a Grant Date)) for purposes of determining the
number of Deferred Stock Units awarded to such Eligible Director on such Grant
Date.
(c) Dividends.
--------- The Company will credit to the account of each recipient of
a Deferred Stock Unit award an amount equal to any dividends paid by the Company
during the period of deferral with respect to the corresponding number of Shares
credited to such Eligible Director's Deferred Stock Unit account ("Dividend
Equivalents"). Any Dividend Equivalents with respect to cash dividends on the
Common Stock credited to an Eligible Director's account shall be deemed to have
been invested in shares of Common Stock on the record date established for the
related dividend and, accordingly, a number of Deferred Stock Units shall be
credited to such Eligible Director's account equal to the greatest whole number
which may be obtained by dividing (x) the value of such Dividend Equivalent on
the record date, by (y) the Fair Market Value of a Share on such date.
(d) Vesting of Deferred Stock Units.
------------------------------- Deferred Stock Units, together with
any Dividend Equivalents credited with respect thereto, shall be fully vested at
all times.
(e) Settlement of Deferred Stock Units.
----------------------------------- On the fifth anniversary of the
date of grant of an award of Deferred Stock Units, an Eligible Director will be
entitled to receive one Share for each Deferred Stock Unit (and related Dividend
Equivalents) subject to such award. Notwithstanding the foregoing, an Eligible
Director may elect to further defer receipt of the Shares issuable with respect
to such Deferred Stock Units pursuant to such election procedures as may be
specified by the Board.
Section 8. Termination of Director Status
-----------------------------------------
In the event an Eligible Director ceases to serve as a member of the Board
for any reason,
(i) if such Eligible Director has completed three Years of Board Service or
less as of the date of such termination, any Option granted to such Eligible
Director (x) which is then outstanding and exercisable on the date of
termination may be exercised by the Eligible Director or, if applicable, his
beneficiary for a period of 90 days following the date of the Eligible
Director's termination of service, but in no event later than the expiration
date of the term of the Option, and (y) which is not exercisable on the date of
termination shall be cancelled, in full, on the date of such termination;
9
<PAGE>
(ii) if such Eligible Director has completed more than three Years of Board
Service as of the date of such termination, any Option granted to such Eligible
Director (x) which is then outstanding and exercisable on the date of
termination may be exercised by the Eligible Director or, if applicable, his
beneficiary for a period of three years following the date of the Eligible
Director's termination of service, but in no event later than the expiration
date of the term of the Option, and (y) which is then outstanding and not
exercisable on the date of termination shall thereafter become exercisable by
the Eligible Director or, if applicable, his beneficiary at the time or times
indicated in Section 6(d) and, once exercisable, will remain exercisable for a
period of three years following the date of the Eligible Director's termination
of service, but in no event later than the expiration date of the term of the
Option.
Section 9. Change in Control
----------------------------
In the event of a Change in Control, (i) each Option shall become fully
vested and exercisable and (ii) any outstanding Deferred Stock Unit Awards shall
become immediately payable in full.
Section 10. Nontransferability of Awards
----------------------------------------
No Award shall be transferable by the Eligible Director otherwise than by
will or under the applicable laws of descent and distribution. In addition, no
Award shall be assigned, negotiated, pledged or hypothecated in any way (whether
by operation of law or otherwise) and no Award shall be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, negotiate,
pledge or hypothecate any Award, or in the event of any levy upon any Award by
reason of any attachment or similar process, in either case contrary to the
provisions hereof, such Award shall immediately become null and void.
Section 11. Rights as a Stockholder
-----------------------------------
An Eligible Director shall not have any right in respect of Deferred Stock
Units or Options awarded pursuant to the Plan to vote on any matter submitted to
the Company's stockholders until such time as the Shares attributable to such
Deferred Stock Units or Options, as applicable, have been issued to such
Eligible Director or his beneficiary.
10
<PAGE>
Section 12. Determinations
--------------------------
Each determination, interpretation or other action made or taken pursuant
to the provisions of this Plan by the Board shall be final and binding for all
purposes and upon all persons, including, without limitation, the Company, the
directors, officers and other employees of the Company, the Eligible Director
and their respective heirs, executors, administrators, personal representatives
and other successors in interest.
Section 13. Termination, Amendment and Modification
---------------------------------------------------
(a) Termination and Amendment. This Plan shall expire on the tenth
anniversary of the date on which it is adopted by the Board (except as to Awards
outstanding on that date), unless sooner terminated pursuant to paragraph (b)
below or by action of the stockholders of the Company, and no Awards shall be
granted under this Plan thereafter. The Board at any time or from time to time
may amend the Plan to effect (i) amendments necessary or desirable for the Plan
and Awards to conform to all applicable laws and regulations and (ii) any other
amendments deemed appropriate. Notwithstanding the foregoing, the Board may not
effect any amendment that would require the approval of the stockholders of the
Company under Rule 16b-3 or any other requirement of applicable law or
regulation unless such approval is obtained.
(b) No Effect on Existing Rights. Except as otherwise required by law, no
termination, amendment or modification of this Plan may, without the consent of
an Eligible Director of an Award, alter or impair the rights and obligations of
such Eligible Director under any then outstanding Award.
Section 14. Non-Exclusivity
---------------------------
Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other
compensatory arrangements as it may deem desirable, including, without
limitation, payments of cash amounts related to the tax liabilities arising
directly or indirectly from the issuance of Shares in respect of an Eligible
Director hereunder.
Section 15. General Provisions
------------------------------
(a) No Right to Serve as a Director.
--------------------------------- This Plan shall not impose any
obligations on the Company to retain any Eligible Director as a director nor
shall it impose any obligation on the part of any Eligible Director to remain as
a director of the Company, provided that each Eligible Director by accepting
each Award shall represent to the Company that it is his good faith intention to
11
<PAGE>
continue to serve as a director of the Company until the next annual meeting of
stockholders and that he agrees to do so unless a change in circumstances
arises.
(b) No Right to Particular Assets.
------------------------------ Nothing contained in this Plan and no
action taken pursuant to this Plan shall create or be construed to create a
trust of any kind or any fiduciary relationship between the Company and any
Eligible Director, the executor, administrator or other personal representative
or designated beneficiary of such Eligible Director, or any other persons. Any
reserves that may be established by the Company in connection with this Plan
shall continue to be held as part of the general funds of the Company, and no
individual or entity other than the Company shall have any interest in such
funds until paid to an Eligible Director or his beneficiary. To the extent that
any Eligible Director or his executor, administrator or other personal
representative, as the case may be, acquires a right to receive any payment from
the Company pursuant to this Plan, such right shall be no greater than the right
of an unsecured general creditor of the Company.
(c) Beneficiary Designation.
----------------------- Each Eligible Director under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named
contingeintly or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Eligible
Director, shall be in a form prescribed by the Company, and will be effective
only when filed by the Eligible Director in writing with the Company during his
lifetime. In the absence of any such designation, benefits remaining unpaid or
Awards outstanding at the Eligible Director's death shall be paid to or
exercised by the Eligible Director's surviving spouse, if any, or otherwise to
or by his estate.
(d) Listing of Shares and Related Matters.
-------------------------------------- If at any time the Board shall
determine in its discretion that the listing, registration or qualification of
the Shares covered by this Plan upon any national securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the delivery of Shares under this Plan, no Shares will be delivered unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.
(e) Notices.
------- Each Eligible Director shall be responsible for furnishing the
Board with the current and proper address for the mailing of notices and
delivery of agreements and Shares. Any notices required or permitted to be given
shall be deemed given if directed to the person to whom addressed at such
address and mailed by regular United States mail, first-class and prepaid. If
any item mailed to such address is returned as undeliverable to the addressee,
mailing will be suspended until the Eligible Director furnishes the proper
address.
12
<PAGE>
(f) Severability of Provisions.
-------------------------- If any provision of this Plan shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions hereof, and this Plan shall be construed and enforced as if
such provision had not been included.
(g) Incapacity.
---------- Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receiving such benefit shall be
deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Board, the Company and other parties with respect
thereto.
(h) Headings and Captions.
---------------------- The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan
and shall not be employed in the construction of this Plan.
(i) Governing Law.
-------------- This Plan shall be construed and enforced according to
the laws of the State of Delaware.
13
<PAGE>
As Approved by the Board of
Directors on July 31, 1997
AMENDMENT NO. 1
TO THE
LEXMARK INTERNATIONAL GROUP, INC.
NONEMPLOYEE DIRECTOR STOCK PLAN
(Amended and Restated Effective May 2, 1997)
This is Amendment No. 1 to the Lexmark International Group, Inc.
Nonemployee Director Stock Plan (Amended and Restated Effective May 2, 1997)
(the "Plan"; capitalized terms used herein and not defined have the meanings
ascribed to such terms in the Plan).
WHEREAS, pursuant to Section 13 of the Plan, the Board is authorized to
amend the Plan from time to time as it deems appropriate;
WHEREAS, the Board has determined to permit certain transfers by an
Eligible Director of Awards granted to such Director pursuant to the Plan for
estate planning purposes, subject to certain approvals; and
WHEREAS, the Board has determined that this amendment to the Plan does
not require the approval of stockholders of the Company.
NOW, THEREFORE, the Plan is hereby amended, effective as of July 31,
1997, as follows:
1. Section 10 of the Plan is amended in its entirety to read as
follows:
"Section 10. Non Transferability of Awards
-----------------------------------------
Unless the Board, the Committee or the Company's Vice President, Human
Resources and Vice President and General Counsel shall permit an Award to be
transferred by an Eligible Director to such Director's family member for estate
planning purposes or to a trust, partnership, corporation or other entity
established by the Eligible Director for estate planning purposes, no Award
granted under the Plan shall be transferable by the Eligible Director other than
by will or under the applicable laws of descent and distribution. In addition,
no Award shall be assigned, negotiated, pledged or hypothecated in any way
(whether by operation of law or otherwise) and no Award shall be subject to
execution, attachment or similar process. Upon any attempt to transfer, assign,
negotiate, pledge or hypothecate any Award, or in the event of any levy upon any
Award by reason of any attachment or similar process, in either case contrary to
the provisions hereof, such Award shall immediately become null and void. All
rights with respect to any Award granted to an Eligible Director under the Plan
shall be exercisable by the transferee only for so long as they could have been
exercisable by the Eligible Director. If any Award is transferred to a family
member, trust, partnership, corporation or other entity as contemplated by the
first sentence hereof, all references herein and in the applicable Option
Agreement to the Eligible Director shall be deemed to refer to such permitted
transferee, other than any such references with respect to the personal status
of the Eligible Director."
In all other respects, the Plan is hereby ratified and confirmed.
As Approved By the Board of
Directors on May 2, 1997
LEXMARK INTERNATIONAL GROUP, INC.
STOCK INCENTIVE PLAN
(Amended and Restated Effective May 2, 1997)
SECTION 1.
PURPOSE
-------
The purpose of the Plan is to foster and promote the long-term financial
success of the Company and materially increase shareholder value by (a)
motivating superior performance by means of performance-related incentives, (b)
encouraging and providing for the acquisition of an ownership interest in the
Company by Employees and (c) enabling the Company to attract and retain the
services of an outstanding management team upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
SECTION 2.
DEFINITIONS
-----------
2.1. Definitions.
----------- Whenever used herein, the following terms shall have
the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Adjustment Event" shall mean any stock dividend, stock split or
share combination of, or extraordinary cash dividend on, the Common Stock
or recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, warrants or rights offering to
purchase Common Stock at a price substantially below Fair Market Value, or
other similar event affecting the Common Stock of the Company, other than
the stock split effected immediately prior to the Initial Public Offering.
(c) "Award Agreement" means the agreement, certificate or other
instrument evidencing the grant of any Incentive Award under the Plan.
<PAGE>
(d) "Board" means the Board of Directors of the Company.
(e) "C&D Fund IV" means the Clayton & Dubilier Private Equity Fund IV
Limited Partnership, a Connecticut limited partnership, and any successor
investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(f) "Cause", with respect to any Incentive Award, shall have the
meaning assigned thereto in the Award Agreement evidencing such Incentive
Award or, if there is no such meaning assigned, shall mean (i) the willful
failure by the Participant to perform substantially his duties as an
employee of the Company or any Subsidiary (other than due to physical or
mental illness) after reasonable notice to the Participant of such failure,
(ii) the Participant's engaging in serious misconduct that is injurious to
the Company or any Subsidiary, (iii) the Participant's having been
convicted of, or entered a plea of nolo contendere to, a crime that
constitutes a felony or (iv) the breach by the Participant of any written
covenant or agreement with the Company or any Subsidiary not to disclose
information pertaining to the Company or any Subsidiary or not to compete
or interfere with the Company or any Subsidiary.
(g) "Change in Control" shall mean the occurrence, after the Initial
Public Offering has become effective (and the initial issuance of Common
Stock by the Company directly related thereto has been completed), of any
of the following events:
(i) a majority of the members of the Board at any time cease for
any reason other than due to death or disability to be persons who
were members of the Board twenty-four months prior to such time (or,
if at the relevant time less than twenty-four months has elapsed since
the effective date of such Initial Public Offering, since such
effective date) (the "Incumbent Directors"); provided that any
director whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
members of the Board then still in office who are Incumbent Directors
shall be treated as an Incumbent Director; or
(ii) any "person," including a "group" (as such terms are used in
Sections 13(d) and 14(d)(2) of the Act, but excluding the C&D Fund IV,
the Company, its Subsidiaries, any employee benefit plan of the
Company or any Subsidiary, employees of the Company or any Subsidiary
or any group of which any of the foregoing is a member) is or becomes
the "beneficial owner" (as defined in Rule 13(d)(3) under the Act),
directly or indirectly, including without limitation, by means of a
tender or exchange offer, of securities of the Company representing
30% or more of the combined voting power of the Company's then
outstanding securities; or
2
<PAGE>
(iii) the stockholders of the Company shall approve a definitive
agreement (x) for the merger or other business combination of the
Company with or into another corporation immediately following which
merger or combination (A) the stock of the surviving entity is not
readily tradeable on an established securities market, (B) a majority
of the directors of the surviving entity are persons who (1) were not
directors of the Company immediately prior to the merger and (2) are
not nominees or representatives of the Company or (C) any "person,"
including a "group" (as such terms are used in Sections 13(d) and
14(d)(2) of the Act, but excluding the C&D Fund IV, the Company, its
Subsidiaries, any employee benefit plan of the Company or any
Subsidiary, employees of the Company or any Subsidiary or any group of
which any of the foregoing is a member) is or becomes the "beneficial
owner" (as defined in Rule 13(d)(3) under the Act), directly or
indirectly, of 30% or more of the securities of the surviving entity
or (y) for the direct or indirect sale or other disposition of all or
substantially all of the assets of the Company, or (iv) any other
event or transaction that is declared by resolution of the Board to
constitute a Change in Control for purposes of the Plan.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
(h) "Change in Control Price" shall mean the highest price per
share of Common Stock paid in conjunction with any transaction
resulting in a Change in Control (as determined in good faith by the
Committee if any part of the offered price is payable other than in
cash) or, in the case of a Change in Control occurring solely by
reason of a change in the composition of the Board, the highest Fair
Market Value of the Common Stock on any of the 30 trading days
immediately preceding the date on which such Change in Control occurs.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Committee" means (i) the Compensation and Pension Committee
of the Board, unless ss.16 under the Act requires the approval of a
committee of the Board that is composed solely of two or more
Non-Employee Directors (as defined in Rule 16b-3(b)(3) as promulgated
under the Act) in which case "Committee" shall mean such committee or
(ii) the Board itself.
(k) "Common Stock" means the Class A common stock of the Company,
par value $0.01 per share.
(l) "Company" means Lexmark International Group, Inc., a Delaware
corporation, and any successor thereto.
3
<PAGE>
(m) "Deferred Stock Unit" means a Participant's right to receive
pursuant to the Plan one share of Common Stock, or, if provided by the
Committee, cash equal to the Fair Market Value of a share of Common
Stock, at the end of a specified period of time.
(n) "Disability", with respect to any Incentive Award, shall have
the meaning assigned thereto in the Award Agreement evidencing such
Incentive Award, or, if there is no such meaning assigned, shall mean
a physical or mental disability or infirmity of a Participant, as
defined in any disability plan sponsored by the Company or any
Subsidiary which employs such Participant, or, if no such plan is
sponsored by such Participant's employer, the Lexmark Long-Term
Disability Plan.
(o) "Employee" means any employee of the Company or any of its
Subsidiaries.
(p) "Fair Market Value" means, as of any date of determination,
the closing price of a share of Common Stock on a national securities
exchange on that day, as reported for such day in the Wall Street
Journal, or the last bid price for a share of Common Stock on such
immediately preceding day, as reported on a nationally recognized
system of price quotation. In the event that there are no Common Stock
transactions reported on such exchange or system on such day, Fair
Market Value shall mean the closing price or the last bid price,
whichever is applicable, on the immediately preceding day on which
Common Stock transactions were so reported. Notwithstanding the
foregoing, to the extent determined by the Committee, with respect to
any grant which becomes effective upon the closing of the Initial
Public Offering, Fair Market Value shall mean the initial price at
which Common Stock is offered to the public pursuant to the Initial
Public Offering.
(q) "Incentive Award" means any award of the Plan of an Option,
Stock Appreciation Right, Restricted Stock or Deferred Stock Unit.
Each of these awards may be granted alone or together with other
awards under the Plan and/or cash awards outside the Plan.
(r) "Initial Public Offering" means the first Public Offering of
the Common Stock.
(s) "Option" means the right to purchase a stated number of
shares of Common Stock at a stated price for a specified period of
time. For purposes of the Plan, an Option may be either (i) an
"Incentive Stock Option" within the meaning of section 422 of the Code
or (ii) an Option which is not an Incentive Stock Option (a
"Non-Qualified Stock Option").
4
<PAGE>
(t) "Participant" means any Employee designated by the Committee
to receive an Incentive Award under the Plan.
(u) "Plan" means the Lexmark International Group, Inc. Stock
Incentive Plan, as set forth herein and as the same may be amended
from time to time.
(v) "Predecessor Plans" means the Lexmark Holding, Inc. Stock
Option Plan for Executives and Senior Officers, the Lexmark Holding,
Inc. Stock Option Plan for Senior Managers and the Lexmark Holding,
Inc. Employee Stock Option Plan.
(w) "Public Offering" means any offering of the Common Stock to
the general public pursuant to an underwritten public offering lead by
one or more underwriters at least one of which is of nationally
recognized standing.
(x) "Qualifying Common Stock" means shares of Common Stock which
(i) are not subject to any loan or other obligation or pledged as
collateral with respect to any loan or other obligation of the
Participant (subject to the consent of the Committee, other than any
loan extended to the Participant by the Company or a Subsidiary) and
(ii) either (A) have been owned by the Participant for at least six
months (or such greater or lesser period as the Committee shall
determine) or (B) were purchased by the Participant on a national
securities exchange or recognized over-the-counter market.
(y) "Restriction Period" means the period during which shares of
Restricted Stock are subject to forfeiture or restrictions on transfer
(if applicable) as described to Section 7 of the Plan and any
applicable Award Agreement.
(z) "Restricted Stock" means Common Stock or units with respect
to Common Stock awarded to a Participant pursuant to the Plan which is
subject to forfeiture and restrictions on transferability in
accordance with Section 7 of the Plan.
(aa) "Retirement", with respect to any Incentive Award, shall
have the meaning assigned thereto in the Award Agreement evidencing
such Incentive Award, or, if there is no such meaning assigned, shall
mean a Participant's retirement at or after normal retirement age
under the terms of the retirement plan sponsored by the Company or any
Subsidiary which employs such Participant.
(bb) "Stock Appreciation Right" means the right to receive a
payment from the Company, in cash, Common Stock or a combination
thereof, equal to the excess of the Fair Market Value of a share of
Common Stock at the date of exercise over a specified price fixed by
the Committee.
5
<PAGE>
(cc) "Subsidiary" means any corporation or partnership in which
the Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock of such corporation or
of the capital interest or profits interest of such partnership.
2.2. Gender and Number.
------------------- Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural
shall include the singular.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
-----------------------------
Participants in the Plan shall be those Employees selected by the
Committee to participate in the Plan.
SECTION 4.
ADMINISTRATION
--------------
4.1. Power to Grant and Establish Terms of Awards.
-------------------------------------------- The Committee shall
have the discretionary authority, subject to the terms of the Plan, to
determine the Employees to whom Incentive Awards shall be granted and the
terms and conditions of such Incentive Awards, including but not limited to
the number of shares of Common Stock to be covered by each Incentive Award;
the time or times at which Incentive Awards may be exercised, paid or
transferred, as the case may be; whether Options shall be designated as
Incentive Stock Options or Non-Qualified Stock Options; the exercise price
applicable to any Option or the base price applicable to any Stock
Appreciation Right; the form and manner of payment of any amount due from a
Participant (or his beneficiary or permitted transferee, if applicable) in
connection with any Incentive Award; whether any substitute or reload
Option will be granted to any Participant pursuant to Section 4.2 or 6.6,
respectively; whether any restriction (including any provision as to
vesting, exercisability, payment or transferability) shall be modified or
waived, in whole or in part, after the date of grant of the Incentive
Award; the rights of a Participant (or his beneficiary or permitted
transferee) with respect to any Incentive Award following the Participant's
termination of employment; whether amounts payable by the Company in
respect of any Incentive Award shall be paid in Common Stock, cash or any
combination thereof; whether and to what extent any Incentive Award may be
transferred by the Participant; and the terms, provisions and conditions to
be included in any Incentive Award Agreement.
6
<PAGE>
The proper officers of the Company may suggest to the Committee the
Participants who should receive Incentive Awards under the Plan. In
accordance with the terms of the Plan, the terms and conditions of each
Incentive Award shall be determined by the Committee at the time of grant,
and such terms and conditions may be subsequently changed by the Committee,
in its discretion, provided that no such change may be effected which would
adversely affect a Participant's rights with respect to an Incentive Award
then outstanding, without the consent of such Participant. The Committee
may establish different terms and conditions for different Participants
receiving Incentive Awards and for the same Participant for each Incentive
Award such Participant may receive, whether or not granted at different
times. The grant of any Incentive Award to any Employee shall not entitle
such Employee to the grant of any other Incentive Awards. Notwithstanding
anything else contained in the Plan to the contrary, the Committee may
delegate, subject to such terms and conditions as it shall determine, to
any officer of the Company or to a committee of officers of the Company the
authority to grant Incentive Awards (and to make any and all determinations
related thereto) to Participants who are not, and are not expected to
become, subject to the reporting requirements of Section 16(a) of the Act
and whose compensation will not be subject to the limitations on the
deductibility thereof by the Company or its Subsidiaries pursuant to
section 162(m) of the Code.
4.2. Substitute Options.
------------------ The Committee shall have the right, subject to
the consent of the Participant to whom Options and/or Stock Appreciation
Rights have been granted, to grant in substitution for and in cancellation
of such outstanding Options or Stock Appreciation Rights, replacement
Options or Stock Appreciation Rights which may contain terms more favorable
to the Participant than the Options or Stock Appreciation Rights they
replace, including, without limitation, a lower exercise price (subject to
Section 6.2) or base price.
4.3. Administration.
-------------- The Committee shall be responsible for the
administration of the Plan. Any Incentive Award granted by the Committee
may be subject to such conditions, not inconsistent with the terms of the
Plan, as the Committee shall determine, in its discretion. The Committee,
by majority action thereof, has discretionary authority to prescribe, amend
and rescind rules and regulations relating to the Plan, to interpret and
apply the provisions of the Plan, to provide for conditions deemed
necessary or advisable to protect the interests of the Company or to
interpret the Plan and to make all other determinations necessary or
advisable for the administration and interpretation of the Plan and to
carry out its provisions and purposes.
4.4. Discretionary Authority of Committee.
--------------------------------------- All of the powers and
authority conferred upon the Committee pursuant to any term of the Plan
shall be exercised by the Committee, in its discretion. All determinations,
interpretations or other actions made or taken by the Committee pursuant to
the provisions of the Plan shall be final, binding and conclusive for all
purposes and upon all persons and, in the event of any judicial review
thereof, shall be overturned only if arbitrary and capricious. The
Committee may consult with legal counsel, who may be counsel to the
Company, and shall not incur any liability for any action taken in good
faith in reliance upon the advice of counsel.
7
<PAGE>
SECTION 5.
STOCK SUBJECT TO PLAN
---------------------
5.1. Number.
------ Subject to the provisions of Section 5.3, the number of
shares of Common Stock subject to Incentive Awards under the Plan may not
exceed 4,380,000, plus any shares that become available for grant pursuant
to Section 5.2. The shares to be delivered under the Plan may consist, in
whole or in part, of Common Stock held in treasury or authorized but
unissued Common Stock, not reserved for any other purpose, or from Common
Stock reacquired by the Company.
5.2. Canceled, Terminated, or Forfeited Awards.
------------------------------------------- Any shares of Common
Stock subject to any portion of an Incentive Award and any shares of Common
Stock subject to any option granted under a Predecessor Plan which, in any
such case and for any reason, expires, or is canceled, terminated or
otherwise settled, without the issuance of such shares of Common Stock
shall again be available for award under the Plan. Shares of Common Stock
that are delivered to the Company, either actually or by attestation, in
payment of the exercise price for any Option granted under the Plan or
under a Predecessor Plan will also be available for future grants under the
Plan.
5.3. Adjustment in Capitalization.
---------------------------- The aggregate number of shares of
Common Stock available for Incentive Awards under Section 5.1 or subject to
outstanding Incentive Awards and the respective prices and/or vesting
criteria applicable to outstanding Incentive Awards shall be
proportionately adjusted to reflect, as deemed equitable and appropriate by
the Committee, an Adjustment Event. To the extent deemed equitable and
appropriate by the Committee, subject to any required action by
stockholders, in any merger, consolidation, reorganization, liquidation,
dissolution or other similar transaction, any Incentive Award granted under
the Plan shall pertain to the securities and other property to which a
holder of the number of shares of Common Stock covered by the Incentive
Award would have been entitled to receive in connection with such event.
Any shares of stock (whether Common Stock, shares of stock into which
shares of Common Stock are converted or for which shares of Common Stock
are exchanged or shares of stock distributed with respect to Common Stock)
or cash or other property received with respect to any Incentive Award
granted under the Plan as a result of any Adjustment Event, any
distribution of property or any merger, consolidation, reorganization,
liquidation, dissolution or other similar transaction shall, except as
provided in Section 7.4, Section 8.3 or as otherwise provided by the
Committee at or after the date any such award is made, be subject to the
same terms and conditions, including vesting and restrictions on
exercisability or transfer, as are applicable to the Incentive Award with
8
<PAGE>
respect to which such shares, cash or other property is received and any
Award Agreement and stock certificate(s) representing or evidencing any
shares of stock or other property so received shall so provide and be
legended as appropriate.
SECTION 6.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
-------------------------------------------
6.1. Grant of Options.
---------------- Options may be granted to Participants at such
time or times as shall be determined by the Committee. Options granted
under the Plan may be of two types: (i) Incentive Stock Options and (ii)
Non-Qualified Stock Options, except that no Incentive Stock Option may be
granted to any Employee of a Subsidiary which is not a corporation. The
date of grant of an Option under the Plan will be the date on which the
Option is awarded by the Committee or, if so determined by the Committee,
the date on which occurs any event the occurrence of which is an express
condition precedent to the grant of the Option. The Committee shall
determine the number of Options, if any, to be granted to a Participant,
provided that, in no event shall the number of shares of Common Stock
subject to all Options and related Stock Appreciation Rights granted to any
Participant during any 12 month period exceed 250,000 shares (adjusted
pursuant to Section 5.3 if an Adjustment Event shall occur). Each Option
shall be evidenced by an Award Agreement that shall specify the type of
Option granted, the exercise price, the duration of the Option, the number
of shares of Common Stock to which the Option pertains and such other terms
and conditions not inconsistent with the Plan as the Committee shall
determine.
6.2. Option Price.
------------ Options granted pursuant to the Plan shall have an
exercise price which is not less than the Fair Market Value on the date the
Option is granted, unless otherwise determined by the Committee.
6.3. Exercise of Options.
------------------- Options awarded to a Participant under the
Plan shall be exercisable at such time or times and subject to such
restrictions or other conditions, including the performance of a minimum
period of service or the satisfaction of performance goals, as the
Committee shall determine either at or after the date of grant of such
Options, subject to the Committee's right to accelerate or waive any
conditions to the exercisability of any Option granted under the Plan. To
the extent not specified otherwise by the Committee, Options will become
exercisable in three installments as follows, subject to the Participant's
continued employment until the applicable date:
9
<PAGE>
Percentage of Anniversary
Grant Exercisable of Date of Grant
60% Third anniversary
80% Fourth anniversary
100% Fifth anniversary
Once exercisable, an Option may be exercised from time to time, in whole or in
part, up to the total number of shares of Common Stock with respect to which it
is then exercisable. Notwithstanding the foregoing, except as provided in
Section 6.8, no Option shall be exercisable for more than 10 years after the
date on which it is granted.
6.4. Payment.
------- The Committee shall establish procedures governing the
exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full at the time of exercise (i)
in cash or cash equivalents, (ii) in the discretion of the Committee, in
shares of Qualifying Common Stock having a Fair Market Value on the date of
exercise equal to such Option price or in a combination of cash and
Qualifying Common Stock or (iii) in accordance with such other procedures
or in such other form as the Committee shall from time to time determine.
As soon as practicable after receipt of a written exercise notice and
payment of the exercise price in accordance with this Section 6.4, the
Company shall direct its stock transfer agent to make (or to cause to be
made) an appropriate book entry reflecting the Participant's ownership of
the shares of Common Stock so acquired.
6.5. Incentive Stock Options.
----------------------- Notwithstanding anything in the Plan to
the contrary, no term of the Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
section 422 of the Code, or, without the consent of any Participant
affected thereby, to cause any Incentive Stock Option previously granted to
fail to qualify for the Federal income tax treatment afforded Incentive
Stock Options under section 421 of the Code.
6.6. Reload Options.
-------------- If provided by the Committee at or after the date
of grant, a Participant (or, if applicable, his permitted transferee) who
delivers shares of Common Stock that have been owned by such Participant
(or permitted transferee) for any minimum period of time specified by the
Committee to exercise an Option or an option granted under a Predecessor
Plan, will automatically be granted new Options ("Reload Options") for a
number of shares of Common Stock equal to the number of shares so
delivered. Unless the Committee determines otherwise, such Reload Options
will be subject to the same terms and conditions (including the same
expiration date) as the related Option except (i) that the exercise price
shall be equal to the Fair Market Value of a share of Common Stock on the
date such Reload Option is granted and (ii) such Reload Option shall not be
exercisable prior to the six month anniversary of the date of grant and,
thereafter, shall be exercisable in full.
10
<PAGE>
6.7. Stock Appreciation Rights.
-------------------------
(a) Stock Appreciation Rights may be granted to Participants at such
time or times and with respect to such number of shares of Common Stock as
shall be determined by the Committee and shall be subject to such terms and
conditions as the Committee may impose, provided that no Participant may
receive one or more grants of Options and/or Stock Appreciation Rights
during any twelve month period with respect to more than 250,000 shares of
Common Stock (adjusted pursuant to Section 5.3 if an Adjustment Event shall
occur) in the aggregate. Each grant of an Incentive Award of Stock
Appreciation Rights shall be evidenced by an Award Agreement.
(b) Stock Appreciation Rights may be exercised at such time or times
and subject to such conditions, including the performance of a minimum
period of service, the satisfaction of performance goals or the occurrence
of any event or events, including a Change in Control, as the Committee
shall determine, either at or after the date of grant. Stock Appreciation
Rights which are granted in tandem with an Option may only be exercised
upon the surrender of the right to exercise such Option for an equivalent
number of shares and may be exercised only with respect to the shares of
Common Stock for which the related Option is then exercisable.
Notwithstanding any other provision of the Plan, the Committee may impose
such conditions on the exercise of a Stock Appreciation Right (including,
without limitation, the right of the Committee to limit the time of
exercise to specified periods) as may be required to satisfy the applicable
provisions of Rule 16b-3 as promulgated under the Act or any successor
rule.
(c) Subject to the provisions of Section 11.4 of the Plan, upon
exercise of a Stock Appreciation Right, the Participant shall be entitled
to receive payment in cash, Common Stock or in a combination of cash and
Common Stock, as determined by the Committee, of an amount determined by
multiplying:
(i) any increase in the Fair Market Value of a share of Stock at
the date of exercise over the price fixed by the Committee at the
date of grant of such Right, by
(ii) the number of shares of Common Stock with respect to which
the Stock Appreciation Right is exercised.
6.8. Exercisability Following Termination of Employment.
--------------------------------------------------- Unless otherwise
determined by the Committee at or after the date of grant, in the event a
Participant's employment with the Company and the Subsidiaries terminates by
reason of Retirement, Disability, death or special termination with the consent
of the Company, all Options and Stock Appreciation Rights then held by such
11
<PAGE>
Participant that are exercisable at the date of such termination of employment
shall thereafter remain exercisable by the Participant or, if applicable, the
Participant's beneficiary, for a period of one year from the date of
termination, but in no event later than the expiration of the stated term of the
Option or Stock Appreciation Right. Notwithstanding the foregoing, to the extent
provided by the Committee at or after the date of grant, in the event of a
Participant's termination of employment due to death or Disability, all such
Options and Stock Appreciation Rights shall remain exercisable for a minimum
period of one year, without regard to the stated term of the Option or Stock
Appreciation Right. Unless otherwise determined by the Committee at or after the
date of grant, in the event a Participant's employment with the Company and the
Subsidiaries terminates for any reason other than Retirement, Disability, death
or by the Company for Cause, all Options and Stock Appreciation Rights then held
by such Participant that are then exercisable shall remain exercisable for the
90 day period immediately following such termination of employment or until the
expiration of the term of such Option or Stock Appreciation Right, whichever
period is shorter. Unless otherwise determined by the Committee at or after the
date of grant, in the event of a Participant's termination of employment with
the Company and the Subsidiaries by the Company for Cause, all Options and Stock
Appreciation Rights then held by such Participant shall immediately terminate
and be canceled, in full, on the date of such termination of employment. All
Options that are not exercisable following a Participant's termination of
employment shall immediately terminate and be canceled on the date of such
termination of employment and all other Options shall terminate and be canceled
on the date the period for exercise has expired to the extent not exercised
prior to such date.
6.9. Committee Discretion.
-------------------- Notwithstanding anything else contained in this
Section 6 to the contrary, the Committee may, at or after the date of grant,
accelerate or waive any conditions to the exercisability of any Option or Stock
Appreciation Right granted under the Plan and may permit all or any portion of
any such Option or Stock Appreciation Right to be exercised following a
Participant's termination of employment for any reason on such terms and subject
to such conditions as the Committee shall determine for a period up to and
including, but not beyond, the expiration of the term of such Options (except as
provided in Section 6.8 in the case of termination due to death or Disability).
SECTION 7.
RESTRICTED STOCK
----------------
7.1. Grant of Restricted Stock.
------------------------- The Committee may grant Incentive Awards of
Restricted Stock to Participants at such times and in such amounts, and subject
to such other terms and conditions not inconsistent with the Plan, as it shall
determine. Unless the Committee provides otherwise at or after the date of
12
<PAGE>
grant, stock certificates evidencing any shares of Restricted Stock so granted
shall be held in the custody of the Secretary of the Company until the
Restriction Period lapses, and, as a condition to the grant of any Incentive
Award of shares of Restricted Stock, the Participant shall have delivered to the
Company a stock power, endorsed in blank, relating to the shares of Common Stock
covered by such Incentive Award. Each grant of Restricted Stock shall be
evidenced by an Incentive Award Agreement.
7.2. Payment.
------- Upon the expiration or termination of the Restriction Period
and the satisfaction (as determined by the Committee) of any other conditions
determined by the Committee, the restrictions applicable to the Restricted Stock
shall lapse and the Company shall cancel and direct its stock transfer agent to
make (or to cause to be made) an appropriate book entry reflecting the
Participant's ownership of such number of shares of Common Stock with respect to
which the restrictions have lapsed, free of all such restrictions, other than
any imposed by applicable law. Upon request, the Company shall deliver to the
Participant a stock certificate registered in such Participant's name and
representing the number of shares of Common Stock with respect to which the
restrictions have lapsed, free of all such restrictions except any that may be
imposed by law. To the extent provided by the Committee, in its discretion, in
lieu of delivering shares of Common Stock, the Company may make a cash payment
in full or partial satisfaction of any Incentive Award of Restricted Stock equal
to the Fair Market Value, on the date the applicable restrictions lapse, of the
number of shares or units of Restricted Stock with respect to which such
restrictions have lapsed. No payment will be required to be made by the
Participant upon the delivery of such shares of Common Stock and/or cash, except
as otherwise provided in Section 11.4 of the Plan. Subject to Section 7.6, at or
after the date of grant, the Committee may accelerate the vesting of any award
of Restricted Stock or waive any conditions to the vesting of any such award,
except to the extent any such acceleration or waiver would cause an amount with
respect to such grant to fail to be deductible by the Company pursuant to
section 162(m) of the Code.
7.3. Restriction Period; Restrictions on Transferability during Restriction
----------------------------------------------------------------------
Period.
- ------
Unless otherwise determined by the Committee at or after the date of grant,
the Restriction Period applicable to any award of Restricted Stock shall lapse,
and such shares of Restricted Stock shall become freely transferable, on the
earlier of the (i) Participant's 60th birthday or (ii) the date of the
Participant's termination of employment with the Company and the Subsidiaries
due to Retirement, death or Disability, subject in any such case to the
Participant's continuous employment with the Company or a Subsidiary through
such date. Except as provided in Section 11.1, shares of Restricted Stock may
not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated until such time as the Restriction Period applicable thereto shall
have lapsed upon the satisfaction of such conditions, including without
limitation, the completion of a minimum period of service, the satisfaction of
performance goals or the occurrence of such event or events, as shall be
determined by the Committee either at or after the time of grant.
13
<PAGE>
7.4. Rights as a Stockholder.
----------------------- Unless otherwise determined by the Committee
at or after the date of grant, Participants granted shares of Restricted Stock
shall be entitled to receive, either currently or at a future date, as specified
by the Committee, all dividends and other distributions paid with respect to
those shares, provided that if any such dividends or distributions are paid in
shares of Common Stock or other property (other than cash), such shares and
other property shall be subject to the same forfeiture restrictions and
restrictions on transferability as apply to the shares of Restricted Stock with
respect to which they were paid.
7.5. Legend.
------ To the extent any stock certificate is issued to a Participant
in respect of shares of Restricted Stock awarded under the Plan prior to the
expiration of the applicable Restriction Period, such certificate shall be
registered in the name of the Participant and shall bear the following (or
similar) legend:
"The shares of stock represented by this certificate are subject to
the terms and conditions contained in the Lexmark International Group, Inc.
Stock Incentive Plan and the Incentive Award Agreement, dated as of _____,
between the Company and the Participant, and may not be sold, pledged,
transferred, assigned, hypothecated or otherwise encumbered in any manner
(except as provided in Article ___ of the Plan or in such Incentive Award
Agreement) until _______________."
Upon the lapse of the Restriction Period with respect to any such shares of
Restricted Stock, the Company shall, upon the Participant's request, issue or
have issued new share certificates without the legend described herein in
exchange for those previously issued.
7.6. Performance Related Awards.
---------------------------- Notwithstanding anything else
contained in the Plan to the contrary, unless the Committee otherwise
determines at the time of grant, any award of Restricted Stock, or an award
of Common Stock or Restricted Stock made in conjunction with other
incentive plans established by the Company, to an officer of the Company or
a Subsidiary who is subject to the reporting requirements of Section 16(a)
of the Act, other than an award which will vest solely on the basis of the
passage of time, shall, to the extent required to ensure that an amount
with respect to such award is deductible by the Company or such Subsidiary
pursuant to section 162(m) of the Code, become vested, if at all, upon the
determination by the Committee that performance objectives established by
the Committee have been attained, in whole or in part (a "Performance
Award"). Such performance objectives shall be determined over a measurement
period or periods established by the Committee and related to one or more
of the following criteria, which may be determined solely by reference to
the performance of (i) the Company, (ii) a Subsidiary, (iii) an affiliate
of the Company or (iv) a division or unit of any of the foregoing or based
on comparative performance of any of the foregoing relative to other
companies: (A) earnings per share; (B) revenues; (C) operating cash flow;
(D) operating earnings; (E) working capital; (F) inventory turnover rates;
(G) earnings to sales ratio; (H) return on capital; (I) return on equity;
(J) shareholder value add; and (K) such other performance criteria as may
14
<PAGE>
be determined, from time to time, by the Committee (the "Performance
Criteria"). The maximum number of shares of Common Stock that may be
subject to all such Performance Awards granted to a Participant in any 12
month period shall not exceed 50,000 shares, in the aggregate, as such
number may be adjusted pursuant to Section 5.3.
SECTION 8.
DEFERRED STOCK UNITS
--------------------
8.1. Deferred Stock Unit Awards.
--------------------------- On fixed dates established by the
Committee and subject to such terms and conditions as the Committee shall
determine, a Participant may be permitted to elect to defer receipt of all
or a portion of his annual compensation and/or annual incentive bonus
("Deferred Annual Amount") payable by the Company or a Subsidiary and
receive in lieu thereof an Incentive Award of a number of Deferred Stock
Units (the "Elective Units") equal to the greatest whole number which may
be obtained by dividing (x) the amount of the Deferred Annual Amount, by
(y) the Fair Market Value of a share of Common Stock on the date of grant.
No shares of Common Stock will be issued at the time an award of Deferred
Stock Units is made and the Company shall not be required to set aside a
fund for the payment of any such award. The Company will establish a
separate account for the Participant and will record in such account the
number of Deferred Stock Units awarded to the Participant. Unless the
Committee determines otherwise, each Participant who receives an award of
Elective Units shall receive an additional award of Deferred Stock Units
(the "Supplemental Units") equal to the greatest whole number which may be
obtained by dividing (x) 20% (or such other percentage as may be determined
by the Committee at the date of grant) of the Deferred Annual Amount, by
(y) the Fair Market Value of a share of Common Stock on the date of grant.
The Committee may also grant a Participant an Incentive Award of Deferred
Stock Units ("Freestanding Deferred Stock Units") without regard to any
election by the Participant to defer receipt of any compensation or bonus
amount payable to him.
8.2. Dividends with respect to Deferred Stock Units.
------------------------------------------------ The Committee
will determine whether and to what extent to credit to the account of, or
to pay currently to, each recipient of a Deferred Stock Unit award, an
amount equal to any dividends paid by the Company during the period of
deferral with respect to the corresponding number of shares of Common Stock
("Dividend Equivalents"). To the extent provided by the Committee at or
after the date of grant, any Dividend Equivalents with respect to cash
dividends on the Common Stock credited to a Participant's account shall be
deemed to have been invested in shares of Common Stock on the record date
established for the related dividend and, accordingly, a number of Deferred
Stock Units shall be credited to such Participant's account equal to the
greatest whole number which may be obtained by dividing (x) the value of
such Dividend Equivalent on the record date, by (y) the Fair Market Value
of a share of Common Stock on such date.
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<PAGE>
8.3. Vesting of Deferred Stock Unit Awards.
----------------------------------------- The portion of each
Deferred Stock Unit award that consists of Elective Units, together with
any Dividend Equivalents credited with respect thereto, shall be fully
vested at all times. Unless the Committee provides otherwise at or after
the date of grant, the portion of each Deferred Stock Unit award that
consists of Supplemental Units or Freestanding Deferred Stock Units,
together with any Dividend Equivalents credited with respect thereto, will
become vested in full on the fifth anniversary of (x) in the case of
Supplemental Units, the date the corresponding Deferred Annual Amount would
have been paid absent the Participant's election to defer and (y) in the
case of Freestanding Deferred Stock Units, the fifth anniversary of the
date of grant of such Units, provided the Participant remains in the
continuous employ of the Company or a Subsidiary through such applicable
date. Notwithstanding the foregoing, the Committee may accelerate the
vesting of any Deferred Stock Unit award at or after the date of grant.
8.4. Rights as a Stockholder.
----------------------- A Participant shall not have any right in
respect of Deferred Stock Units awarded pursuant to the Plan to vote on any
matter submitted to the Company's stockholders until such time as the
shares of Common Stock attributable to such Deferred Stock Units have been
issued to such Participant or his beneficiary.
8.5. Settlement of Deferred Stock Units.
-------------------------------------- Unless the Committee
determines otherwise at or after the date of grant, a Participant shall
receive one share of Common Stock for each Elective Unit (and related
Dividend Equivalents) as of the earlier of (x) the fifth anniversary of the
date of grant and (y) the date of such Participant's termination of
employment due to Retirement, death or Disability (or such later date as
may be elected by the Participant in accordance with the rules and
procedures of the Committee). Unless the Committee determines otherwise at
or after the date of grant, a Participant shall receive one share of Common
Stock for each Supplemental Unit and/or Freestanding Deferred Stock Unit
(and related Dividend Equivalents) that shall have become vested on or
prior to the date of such Participant's termination of employment with the
Company and the Subsidiaries, other than any such termination for Cause, on
(x) in the case of the Participant's termination of employment due to
Retirement, death or Disability, the date of such termination of employment
and (y) in the case of any other termination of the Participant's
employment, on the later of (i) the Participant's 60th birthday and (ii)
the date of such termination of employment (or, in any such case, on such
earlier date as the Committee shall permit or such later date as may be
elected by the Participant in accordance with the rules and procedures of
the Committee). In the event of the termination of a Participant's
employment with the Company and the Subsidiaries for Cause, the Participant
shall immediately forfeit all rights with respect to any Supplemental Units
and Freestanding Deferred Stock Units (and Related Dividend Equivalents)
credited to his account. The Committee may provide in the Award Agreement
applicable to any Incentive Award of Deferred Stock Units that, in lieu of
issuing shares of Common Stock in settlement of the vested portion of such
Deferred Stock Unit, the Committee may direct the Company to pay to the
Participant the cash balance of such Deferred Stock Units.
16
<PAGE>
SECTION 9.
CHANGE IN CONTROL
-----------------
9.1. Accelerated Vesting and Payment.
-------------------------------- Subject to the provisions of
Section 9.2 below, in the event of a Change in Control, each Option and
Stock Appreciation Right shall promptly be cancelled in exchange for a
payment in cash of an amount equal to the excess of the Change in Control
Price over the exercise price for such Option or the base price for such
Stock Appreciation Right, whichever is applicable (except that the Change
in Control Price shall not apply to Stock Appreciation Rights granted in
tandem with Incentive Stock Options), the Restriction Period applicable to
all shares of Restricted Stock shall expire and all such shares shall
become nonforfeitable and immediately transferable and all Deferred Stock
Units shall become fully vested and the shares of Common Stock with respect
thereto shall be immediately payable.
9.2. Alternative Awards.
------------------ Notwithstanding Section 9.1, no cancellation,
acceleration of exercisability, vesting, cash settlement or other payment
shall occur with respect to any Incentive Award or any class of Incentive
Awards if the Committee reasonably determines in good faith prior to the
occurrence of a Change in Control that such Incentive Award or class of
Incentive Awards shall be honored or assumed, or new rights substituted
therefor (such honored, assumed or substituted award hereinafter called an
"Alternative Award") by a Participant's employer (or the parent or a
subsidiary of such employer) immediately following the Change in Control,
provided that any such Alternative Award must:
(i) be based on stock which is traded on an established
securities market, or which will be so traded within 60 days following
the Change in Control;
(ii) provide such Participant (or each Participant in a class
of Participants) with rights and entitlements substantially equivalent
to or better than the rights and entitlements applicable under such
Incentive Award, including, but not limited to, an identical or better
exercise or vesting schedule and identical or better timing and methods
of payment;
17
<PAGE>
(iii) have substantially equivalent economic value to such
Incentive Award (determined by the Committee as constituted immediately
prior to the Change in Control, in its sole discretion, promptly after
the Change in Control); and
(iv) have terms and conditions which provide that in the event
that the Participant's employment is involuntarily terminated or
constructively terminated (other than for Cause) upon or following such
Change in Control, any conditions on a Participant's rights under, or
any restrictions on transfer or exercisability applicable to, each such
Alternative Award shall be waived or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a termination by a
Participant following a material reduction in the Participant's compensation, a
material reduction in the Participant's responsibilities or the relocation of
the Participant's principal place of employment to another location a material
distance farther away from the Participant's home, in each case, without the
Participant's prior written consent.
SECTION 10.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
------------------------------------------------
The Board may at any time terminate or suspend the Plan, and from time to
time may amend or modify the Plan, provided, however, that any amendment which
would (i) increase the number of shares available for issuance under the Plan,
(ii) lower the minimum exercise price at which an Award may be granted, (iii)
extend the term of the Plan or the maximum term for Awards granted hereunder or
(iv) materially modify the requirements for eligibility to participate in the
Plan shall be subject to the approval of the Company's shareholders. No action
of the Board may, without the consent of a Participant, alter or impair such
Participant's rights under any previously granted Incentive Award.
SECTION 11.
MISCELLANEOUS PROVISIONS
------------------------
11.1. Nontransferability of Awards.
----------------------------- Unless the Committee shall permit an
Incentive Award to be transferred to a trust or partnership established by the
Participant for estate planning purposes on such terms and conditions as it may
specify, no Incentive Award granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. All rights with
18
<PAGE>
respect to any Incentive Award granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant. If any Incentive Award
is transferred to a trust or partnership as contemplated by the previous
sentence, all references herein and in the applicable Award Agreement to the
Participant shall be deemed to refer to such permitted transferee, other than
any such references with respect to the personal status of the Participant.
11.2. Beneficiary Designation.
------------------------ Each Participant under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee and will be effective only when
filed by the Participant in writing with the Committee during his lifetime. In
the absence of any such designation, benefits remaining unpaid or Incentive
Awards outstanding at the Participant's death shall be paid to or exercised by
the Participant's surviving spouse, if any, or otherwise to or by his estate.
11.3. No Guarantee of Employment or Participation.
---------------------------------------------- Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time and for any
reason, nor confer upon any Participant any right to continue in the employ of
the Company or any Subsidiary. No Employee shall have a right to be selected as
a Participant, or, having been so selected, to receive any Incentive Awards
under the Plan.
11.4. Tax Withholding.
---------------- The Company shall have the power to withhold, or
require a Participant to remit to the Company promptly upon notification of the
amount due, an amount determined by the Company, in its discretion, to be
sufficient to satisfy all Federal, state and local withholding tax requirements
in respect of any Incentive Award and the Company may defer payment of cash or
issuance or delivery of Common Stock until such requirements are satisfied. The
Committee may permit or require a Participant to satisfy his tax withholding
obligation hereunder in such other manner, subject to such conditions, as the
Committee shall determine, including, without limitation, (i) to have Common
Stock otherwise issuable or deliverable under the Plan withheld by the Company
or (ii) to deliver to the Company previously acquired shares of Common Stock
that have been owned by the Participant for at least six months, in each case,
having a Fair Market Value sufficient to satisfy all or part of the
Participant's Federal, state and local withholding tax obligation.
11.5. Indemnification.
--------------- Each person who is or shall have been a member of
the Committee or the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability or expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any claim,
action, suit or proceeding to which he may be made a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with the
19
<PAGE>
Company's approval, or paid by him in satisfaction of any judgment in any such
action, suit or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or By-laws, by contract, as a matter of law
or otherwise.
11.6. No Limitation on Compensation.
----------------------------- Nothing in the Plan shall be construed
to limit the right of the Company to establish other plans or to pay
compensation to its employees in cash or property, in a manner which is not
expressly authorized under the Plan.
11.7. Requirements of Law.
-------------------- The granting of Incentive Awards and the
issuance of shares of Common Stock shall be subject to all applicable laws,
rules and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be appropriate or required, as determined
by the Committee.
11.8. Governing Law.
-------------- The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware.
11.9. No Impact On Benefits.
--------------------- Incentive Awards granted under the Plan are not
compensation for purposes of calculating an Employee's rights under any employee
benefit plan, except to the extent provided in any such plan.
11.10 Securities Law Compliance.
------------------------- Instruments evidencing Incentive Awards may
contain such other provisions, not inconsistent with the Plan, as the Committee
deems advisable, including (i) a provision limiting the period during which
Stock Appreciation Rights may be exercised to the extent required to avoid the
application of Section 16(b) of the Act to transactions effected by certain
officers of the Company and (ii) a requirement that the Participant represent to
the Company in writing, when an Incentive Award is granted or when he receives
shares with respect to such Award (or at such other times as the Committee deems
appropriate) that he is accepting such Incentive Award, or receiving or
acquiring such shares (unless they are then covered by a Securities Act of 1933
registration statement), for his own account for investment only and with no
present intention to transfer, sell or otherwise dispose of such shares except
such disposition by a legal representative as shall be required by will or the
laws of any jurisdiction in winding up the estate of the Participant or a
disposition to a trust or partnership expressly permitted by the Committee as
provided in Section 11.1. Such shares shall be transferable only if the proposed
transfer shall be permissible pursuant to the Plan and if, in the opinion of
counsel satisfactory to the Company, such transfer at such time will be in
compliance with applicable securities laws.
20
<PAGE>
11.11 Term of Plan.
------------ The Plan shall be effective upon its adoption by the
Board and approval by the holders of the Common Stock, provided, however, that
in no event shall the Plan become effective until immediately prior to the
occurrence of the Initial Public Offering. The Plan shall expire on the tenth
anniversary of the date on which it is adopted by the Board, (except as to
Incentive Awards outstanding on that date), unless sooner terminated pursuant to
Section 9.
11.12 No Right to Particular Assets.
----------------------------- Nothing contained in this Plan and no
action taken pursuant to this Plan shall create or be construed to create a
trust of any kind or any fiduciary relationship between the Company and any
Participant, the executor, administrator or other personal representative or
designated beneficiary of such Participant, or any other persons. Any reserves
that may be established by the Company in connection with this Plan shall
continue to be held as part of the general funds of the Company, and no
individual or entity other than the Company shall have any interest in such
funds until paid to a Participant. To the extent that any Participant or his
executor, administrator or other personal representative, as the case may be,
acquires a right to receive any payment from the Company pursuant to this Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company.
11.13 Notices.
------- Each Participant shall be responsible for furnishing the
Committee with the current and proper address for the mailing of notices and
delivery of agreements and shares of Common Stock. Any notices required or
permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any item mailed to such address is returned as undeliverable to
the addressee, mailing will be suspended until the Participant furnishes the
proper address.
11.14 Severability of Provisions.
--------------------------- If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provision had not been included.
11.15 Incapacity.
---------- Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receiving such benefit shall be
deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Committee, the Company and other parties with respect
thereto.
11.16 Headings and Captions.
--------------------- The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan
and shall not be employed in the construction of this Plan.
21
<PAGE>
11.17 Deferral of Awards.
------------------ Notwithstanding any provision contained herein to
the contrary, the transfer of earned Incentive Awards and Performance Awards to
a Participant may be deferred by a Participant in accordance with such
procedures and upon such terms and conditions as may be established by the
Committee.
22
<PAGE>
As Approved by the Board
of Directors on July 31, 1997
AMENDMENT NO. 1
TO THE
LEXMARK INTERNATIONAL GROUP, INC.
STOCK INCENTIVE PLAN
(Amended and Restated Effective May 2, 1997)
This is Amendment No. 1 to the Lexmark International Group, Inc. Stock
Incentive Plan (Amended and Restated Effective May 2, 1997) (the "Plan",
capitalized terms used herein and not defined have the meaning ascribed to
such terms in the Plan).
WHEREAS, pursuant to Section 10 of the Plan, the Board is authorized to
amend the Plan from time to time;
WHEREAS, the Plan currently provides for the transferability of
Incentive Awards by a Participant under certain circumstances for estate
planning purposes; and
WHEREAS, the Board has determined to expand the transferability
provisions of the Plan to include certain other circumstances, subject to
certain approvals.
NOW, THEREFORE, the Plan is hereby amended, effective as of July 31,
1997, as follows:
1. Section 11.1 of the Plan is amended in its entirety to read
as follows:
"11.1. Nontransferability of Awards.
----------------------------- Unless the Board, the
Committee or the Company's Vice President, Human Resources and Vice President
and General Counsel shall permit an Incentive Award to be transferred by a
Participant to a Participant's family member for estate planning purposes or to
a trust, partnership, corporation or other entity established by the Participant
for estate planning purposes, on such terms and conditions as the Board, the
Committee or such officers may specify, no Incentive Award granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution. All
rights with respect to any Incentive Award granted to a Participant under the
Plan shall be exercisable by the transferee only for as long as they could have
been exercisable by such Participant. If any Incentive Award is transferred to a
family member, trust, partnership, corporation or other entity as contemplated
by the first sentence hereof, all references herein and in the applicable Award
Agreement to the Participant shall be deemed to refer to such permitted
transferee, other than any such references with respect to the personal status
of the Participant."
In all other respects, the Plan is hereby ratified and confirmed.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LEXMARK INTERNATIONAL GROUP, INC. FOR THE SIX
MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 39
<SECURITIES> 0
<RECEIVABLES> 294
<ALLOWANCES> 18
<INVENTORY> 313
<CURRENT-ASSETS> 697
<PP&E> 422
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,139
<CURRENT-LIABILITIES> 488
<BONDS> 25
0
0
<COMMON> 1
<OTHER-SE> 532
<TOTAL-LIABILITY-AND-EQUITY> 1,139
<SALES> 1,140
<TOTAL-REVENUES> 1,140
<CGS> 747
<TOTAL-COSTS> 747
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 103
<INCOME-TAX> 38
<INCOME-CONTINUING> 65
<DISCONTINUED> 0
<EXTRAORDINARY> (14)
<CHANGES> 0
<NET-INCOME> 51
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.67
</TABLE>
