- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
X For the Quarterly Period Ended March 31, 1998
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:
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 registrant had 66,450,977 shares outstanding (excluding shares held in
treasury) of Class A common stock, par value $0.01 per share, as of the close of
business on April 30, 1998.
- --------------------------------------------------------------------------------
<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 ENDED MARCH 31, 1998 AND 1997.........................2
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (Unaudited)
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997.........................3
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997........................4
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited).....5-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (Unaudited).....................9-12
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................13
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)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1998 1997
---- ----
<S> <C> <C>
Revenues $672.1 $583.4
Cost of revenues 425.5 383.6
------ ------
Gross profit 246.6 199.8
Research and development 36.6 30.6
Selling, general and administrative 132.1 113.5
------ ------
Operating expenses 168.7 144.1
------ ------
Operating income 77.9 55.7
Interest expense 2.0 4.9
Amortization of deferred financing costs and other 1.5 2.4
------ ------
Earnings before income taxes and
extraordinary item 74.4 48.4
Provision for income taxes 24.9 17.7
------ ------
Earnings before extraordinary item 49.5 30.7
Extraordinary loss on extinguishment of debt
(net of related tax benefit of $8.4) - (14.0)
------ ------
Net earnings $ 49.5 $ 16.7
====== ======
Basic earnings per share:
Before extraordinary item $ 0.73 $ 0.42
Extraordinary loss - (0.19)
------ ------
Net earnings per share $ 0.73 $ 0.23
====== ======
Diluted earnings per share:
Before extraordinary item $ 0.69 $ 0.40
Extraordinary loss - (0.18)
------ ------
Net earnings per share $ 0.69 $ 0.22
====== ======
Shares used in per share calculation:
Basic 68.1 72.9
====== ======
Diluted 72.2 76.9
====== ======
</TABLE>
See notes to consolidated condensed financial statements.
2
<PAGE>
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(In Millions, Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
-------- -----------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 24.9 $ 43.0
Trade receivables, net of allowance of $17 in
1998 and $19 in 1997 353.7 318.9
Inventories 374.2 353.8
Prepaid expenses and other current assets 50.5 60.4
-------- --------
Total current assets 803.3 776.1
Property, plant and equipment, net 403.7 409.6
Other assets 23.1 22.5
-------- --------
Total assets $1,230.1 $1,208.2
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 30.2 $ 18.0
Accounts payable 254.7 302.0
Accrued liabilities 247.3 227.5
-------- --------
Total current liabilities 532.2 547.5
Long-term debt 125.0 57.0
Other liabilities 106.8 103.0
-------- --------
Total liabilities 764.0 707.5
-------- --------
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;
66,317,240 and 67,539,935 outstandin
in 1998 and 1997, respectively 0.7 0.7
Class B, 10,000,000 shares authorized; 0 and
410,537 outstanding in 1998 and 1997,
respectively - -
Capital in excess of par 541.4 537.2
Retained earnings 218.3 168.8
Accumulated other comprehensive earnings (loss) (25.4) (23.8)
Treasury stock, at cost; 8,438,114 and 6,438,114
shares in 1998 and 1997, respectively (268.9) (182.2)
-------- --------
Total stockholders' equity 466.1 500.7
-------- --------
Total liabilities and stockholders' equity $1,230.1 $1,208.2
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net earnings $49.5 $ 16.7
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities:
Depreciation and amortization 17.5 18.6
Extraordinary loss on extinguishment of debt - 22.4
Deferred taxes (1.0) 1.1
Other non-cash charges to operations 4.7 4.6
----- ------
70.7 63.4
Change in assets and liabilities:
Trade receivables (34.5) (10.0)
Trade receivables programs (0.3) 9.9
Inventories (20.4) 15.0
Accounts payable (47.3) 0.6
Accrued liabilities 19.8 (18.0)
Other assets and liabilities 10.8 (20.3)
----- ------
Net cash provided by (used for) operating
activities (1.2) 40.6
----- ------
Cash flows from investing activities:
Purchases of property, plant and equipment (12.8) (11.7)
Proceeds from sale of property, plant and equipment 0.1 0.2
----- ------
Net cash used for investing activities (12.7) (11.5)
----- ------
Cash flows from financing activities:
Increase in short-term debt 12.2 60.6
Principal payments on long-term debt (57.0) (120.0)
Proceeds from issuance of long-term debt 125.0 -
Charges related to extinguishment of debt - (22.4)
Purchase of treasury stock (86.7) (22.6)
Exercise of stock options and warrants 2.5 4.0
----- ------
Net cash used for financing activities (4.0) (100.4)
----- ------
Effect of exchange rate changes on cash (0.2) (1.4)
----- ------
Net decrease in cash and cash equivalents (18.1) (72.7)
Cash and cash equivalents - beginning of period 43.0 119.3
----- ------
Cash and cash equivalents - end of period $24.9 $ 46.6
===== ======
</TABLE>
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 Lexmark International Group, Inc. (together with its
subsidiaries, the "company") 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, 1997.
2. INVENTORIES
(Dollars in millions)
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
-------- -----------
<S> <C> <C>
Work in process $209.4 $211.2
Finished goods 164.8 142.6
------ ------
$ 374.2 $ 353.8
======= =======
</TABLE>
3. STOCKHOLDERS' EQUITY
As of March 31, 1998, the company had received authorization from the
board of directors to repurchase at management's discretion up to $400
million of its Class A common stock in the open market or in privately
negotiated transactions depending upon market price and other factors. As
of March 31, 1998, the company had repurchased 8,438,114 shares in the
open market at prices ranging from $21.25 to $43.38 for an aggregate cost
of approximately $268.9 million. The company has approximately $131
million of share repurchase authorization remaining.
4. OTHER COMPREHENSIVE EARNINGS (LOSS)
(Dollars in millions)
Effective January 1, 1998 the company adopted Statement of Financial
Accounting Standard ("SFAS") No. 130, Reporting Comprehensive Income.
This statement requires that all items recognized under accounting
standards as components of comprehensive earnings be reported in a
financial statement. This statement also requires that an entity classify
items of other comprehensive earnings by their nature in a financial
statement. For example, other comprehensive earnings may include foreign
currency translation adjustments, minimum pension liability adjustments,
and unrealized gains and losses on certain marketable securities.
Financial statements for prior periods will be reclassified, as required.
5
<PAGE>
Comprehensive earnings consists of the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1998 1997
---- ----
<S> <C> <C>
Net earnings $49.5 $16.7
Other comprehensive earnings (loss):
Foreign currency translation adjustment
(net of related tax benefit of $0 in
1998 and 1997) (0.1) (12.4)
Minimum pension liability adjustment
(net of related tax benefit of $0.8 in 1998) (1.5) -
----- -----
Comprehensive earnings $47.9 $ 4.3
===== =====
</TABLE>
Accumulated other comprehensive earnings (loss) consists of the
following:
<TABLE>
<CAPTION>
Foreign Minimum Accumulated
Currency Pension Other
Translation Liability Comprehensive
Adjustment Adjustment Earnings (Loss)
---------- ---------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1997 $(23.8) $ - $(23.8)
Current period change (0.1) (1.5) (1.6)
------ ------ ------
Balance, March 31, 1998 $(23.9) $ (1.5) $(25.4)
====== ====== ======
</TABLE>
6
<PAGE>
5. EARNINGS PER SHARE (EPS)
(Dollars in millions, except share amounts)
The following is a reconciliation of the weighted average shares used in
the basic and diluted EPS calculations:
Three Months Ended
March 31
------------------
1998 1997
---- ----
Earnings before extraordinary item used
for both basic and dilutive EPS $49.5 $30.7
===== =====
Weighted average shares used for basic EPS 68,088,864 72,931,264
Effect of Dilutive Securities
Warrants - 406,933
Long-term incentive plan 36,198 63,201
Stock options 4,047,201 3,514,667
---------- ----------
Weighted average shares used for diluted EPS 72,172,263 76,916,065
========== ==========
Basic EPS before extraordinary item $0.73 $0.42
Diluted EPS before extraordinary item $0.69 $0.40
Options to purchase an additional 19,337 and 10,808 shares of Class A
common stock were outstanding at March 31, 1998 and 1997, respectively,
but were not included in the computation of diluted earnings per share
because their effect would be antidilutive.
6. SUMMARIZED FINANCIAL INFORMATION
(Dollars in millions)
The following is consolidated summarized financial information of Lexmark
International, Inc., a wholly-owned subsidiary of Lexmark International
Group, Inc.
March 31 December 31
1998 1997
-------- -----------
Statement of Financial Position Data:
Current assets $ 803.3 $ 776.1
Noncurrent assets 426.8 432.1
Current liabilities 536.0 551.4
Noncurrent liabilities 231.8 160.0
7
<PAGE>
Three Months Ended
March 31
------------------
1998 1997
---- ----
Statement of Earnings Data:
Revenues $ 672.1 $ 583.4
Gross profit 246.6 199.8
Earnings before extraordinary item 49.5 30.7
Net earnings 49.5 16.7
Current liabilities at March 31, 1998 and December 31, 1997 include $3.8
million and $3.9 million, respectively, that is owed to Lexmark
International Group, Inc.
7. NEW ACCOUNTING STANDARDS
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits, effective for fiscal
years beginning after December 15, 1997. This statement revises
employer's disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans.
It standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan
assets that will facilitate financial analysis, and eliminates certain
disclosures that are no longer as useful. Restatement of disclosures for
earlier periods provided for comparative purposes is required unless the
information is not readily available. This statement is disclosure
oriented and, therefore, will not have a material impact on the company's
financial position, results of operations or liquidity. This statement is
effective for the company's financial statements for the year ended
December 31, 1998.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Opinion ("SOP") 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. This SOP
provides guidance on accounting for the costs of computer software
developed or obtained for internal use, and requires that entities
capitalize certain internal-use software costs once certain criteria are
met. Currently the company generally expenses the costs of developing or
obtaining internal-use software as incurred. The company is currently
evaluating SOP 98-1, but does not expect it to have a material impact on
its consolidated financial statements. This SOP is effective for
financial statements for fiscal years beginning after December 15, 1998.
8. SUBSEQUENT EVENT
In May 1998, Lexmark International, Inc. (the "Issuer") completed a
public offering of $150 million principal amount of its 6.75% senior
notes due May 15, 2008. The senior notes were priced at 98.998%, to yield
6.89% to maturity. The senior notes are guaranteed by Lexmark
International Group, Inc. A substantial portion of the net proceeds from
the sale of the senior notes were used to reduce existing debt
outstanding under the company's credit facility. There are no sinking
fund requirements on the senior notes and they may be redeemed at any
time, in whole or in part, at the option of the Issuer.
8
<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 March 31, 1998 were $672
million, an increase of 15% over the same period of 1997. Revenues were
adversely affected by foreign currency exchange rates due to the strengthening
of the U.S. dollar. Without the currency effect, year-to-year revenue growth
would have been 20%. Printers and associated supplies revenues were $557
million, an increase of 22%. Revenues from other office imaging products were
$115 million, a decrease of 9% from 1997. Total U.S. revenues were up $36
million or 12%, and international revenues were up $53 million or 18%.
The revenue growth for the quarter ended March 31, 1998 over the same period in
1997 was driven by unit volume increases in printers and even stronger growth
from associated supplies.
Consolidated gross profit was $247 million for the three months ended March 31,
1998, an increase of 23% from the same period of 1997. This was driven by
improved printer margins and a richer mix of supplies versus printer hardware.
Gross profit as a percentage of revenues for the first quarter of 1998 increased
to 37% from 34% in 1997. Gross profit attributable to printers and associated
supplies increased by 35%, principally due to reductions in product costs and
growth in higher margin associated consumable supplies.
Total operating expenses increased 17% in the first quarter of 1998 compared to
the same period of 1997. Expenses as a percentage of revenues remained at 25%
for both the first quarter of 1998 and the corresponding period of 1997,
principally reflecting in 1998 expense increases in line with revenue growth.
Consolidated operating income was $78 million for the first quarter of 1998, an
increase of 40% over the corresponding period of 1997. This increase was due
principally to improved printer margins and growth in associated consumable
supplies.
Earnings before extraordinary item for the first quarter of 1998 were $50
million, an increase of 61% compared to the same period of 1997. This increase
is principally due to the 40% increase in operating income. The income tax
provision was approximately 34% of earnings before tax for the first quarter of
1998 as compared to approximately 37% in the same period of 1997. The decrease
in the income tax rate is primarily due to the effect of lower tax rates on
manufacturing activities in certain countries.
Net earnings for the first quarter of 1998 were $50 million, an increase of 196%
compared to the same period of 1997. Net earnings for the first quarter of 1997
were affected by an extraordinary charge of $22 million ($14 million net of tax
benefit) caused by a prepayment premium and other fees associated with the
prepayment of the company's senior subordinated notes.
Basic net earnings per share were $0.73 for the first quarter of 1998 compared
to $0.23 in the first quarter of 1997, or $0.42 before extraordinary item, an
increase of 217% and 73%, respectively. Diluted net earnings per share were
$0.69 for the first three months of 1998 compared to $0.22 in the first three
months of 1997, or $0.40 before extraordinary item, an increase of 216% and 72%,
respectively.
Looking forward, it is currently expected that the company will have strong
results in the second quarter of 1998, and management is confident about the
company's prospects for the full year. However, results in the second half of
the year will face a more difficult comparison to last year than the first half
comparison.
9
<PAGE>
Financial Condition
- -------------------
The company's financial position remains strong at March 31, 1998, with working
capital of $271 million compared to $229 million at December 31, 1997. At March
31, 1998, the company had outstanding $30 million of short-term debt and $125
million of long-term debt. The debt to total capital ratio was 25% at the end of
the first quarter of 1998 compared to 13% at December 31, 1997. The increase in
debt reflects higher revolver usage for a stock repurchase mentioned below.
In February 1998, the company's board of directors declared a dividend
distribution of one right (a "Right") for each outstanding share of the
company's Class A common stock and Class B common stock. The distribution is
payable to holders of record on April 3, 1998. Each Right entitles the
registered holder to purchase from the company one one-hundredth of a share of
Series A Junior Participating Preferred Stock at a price of $200 per one
hundredth of a share, subject to adjustment.
In March 1998, the public offering of 7,704,577 shares of the company's Class A
common stock by certain of its stockholders was completed at a public offering
price of $45.00 per share. The company and current members of management chose
not to sell any shares in either offering and, therefore, did not receive any of
the proceeds from the sale of the shares.
In March 1998, the company repurchased an additional 2 million shares (the
"Repurchase Shares") from certain of the stockholders participating in the March
1998 offering at a price of $43.38 per share (which was equal to the net
proceeds per share received by the selling stockholders participating in the
offering) for an aggregate purchase price of approximately $87 million.
Cash used for operating activities for the three months ended March 31, 1998 was
$1 million compared to $41 million cash provided by operating activities for the
same period of 1997. The decrease in cash flows from operating activities in the
first quarter of 1998 was attributable primarily to a decrease in accounts
payable and increases in inventories and trade receivables.
Capital expenditures were $13 million in 1998 compared to $12 million in 1997.
It is anticipated that capital expenditures for 1998 will be $90 million to $100
million and will be funded primarily through cash from operations.
In February 1998, the company's board of directors authorized the repurchase of
up to $200 million of its Class A common stock (which authorization was in
addition to prior board authorizations aggregating $200 million). This
repurchase authority, like the prior authorizations, 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. During the three months ended March 31, 1998, the
company repurchased 2,000,000 shares (which was the Repurchase Shares, at the
price and for the aggregate purchase price, referenced above). As of March 31,
1998, the company had repurchased a total of 8,438,114 shares for an aggregate
cost of approximately $269 million. The company has approximately $131 million
of share repurchase authorization remaining.
In May 1998, Lexmark International, Inc. (the "Issuer") completed a public
offering of $150 million principal amount of its 6.75% senior notes due May 15,
2008. The senior notes were priced at 98.998%, to yield 6.89% to maturity. The
senior notes are guaranteed by Lexmark International Group, Inc. A substantial
portion of the net proceeds from the sale of the senior notes were used to
reduce existing debt outstanding under the company's credit facility. There are
no sinking fund requirements on the senior notes and they may be redeemed at any
time, in whole or in part, at the option of the Issuer.
10
<PAGE>
New Accounting Standards
- ------------------------
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosure about
Pensions and Other Postretirement Benefits, effective for fiscal years beginning
after December 15, 1997. This statement revises employers' disclosures about
pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer as useful.
Restatement of disclosures for earlier periods provided for comparative purposes
is required unless the information is not readily available. This statement is
disclosure oriented and, therefore, will not have a material impact on the
company's financial position, results of operations or liquidity. This statement
is effective for the company's financial statements for the year ended December
31, 1998
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Opinion ("SOP") 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. This SOP provides guidance on accounting
for the costs of computer software developed or obtained for internal use, and
requires that entities capitalize certain internal-use software costs once
certain criteria are met. Currently the company generally expenses the costs of
developing or obtaining internal-use software as incurred. The company in
currently evaluating SOP 98-1, but does not expect it to have a material impact
on its consolidated financial statements. This SOP is effective for financial
statements for fiscal years beginning after December 15, 1998.
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.
Forward-looking statements are made based upon management's current expectations
and belief concerning future developments and their potential effects upon the
company. There can be no assurance that future developments affecting the
company will be those anticipated by management, and there are a number of
factors that could adversely affect the company's future operating results or
cause the company's actual results to differ materially from the estimates or
expectations reflected in such forward-looking statements, including without
limitation, the factors set forth below:
~ The markets for printers and associated supplies are highly competitive,
especially with respect to pricing and the introduction of new technologies and
products offering improved features and functionality. If it is unable to
continue to develop, manufacture and market products that meet customers' needs,
the company's future operating results may be adversely affected. 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 are expected to continue to do so. The
company has also regularly lowered prices on its printers and expects to
continue to do so. In particular, the inkjet printer market has experienced and
is expected to continue to experience significant printer price pressure from
the company's major competitors. Price reductions beyond expectations or the
inability to reduce costs, contain expenses or increase sales as currently
expected, 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.
~ 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
11
<PAGE>
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 over 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. Also, margins on international
sales tend to be lower than those on domestic sales. Moreover, the company
believes that international operations in new geographic markets will be less
profitable than operations in the U.S. and European markets as a result, in
part, of the higher investment levels for marketing, selling and distribution
required to enter these markets.
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 the ability to retain and attract key personnel, also may
affect the company's results as well as its Class A common stock price.
12
<PAGE>
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The company's Annual Meeting of Stockholders was held on April 30,
1998.
(b) At said Annual Meeting, the stockholders voted on the following
two proposals:
(i) The election of three Directors for terms expiring in 2001. The
stockholders elected the Directors by the following votes:
<TABLE>
<CAPTION>
Abstentions and
Director Votes For Votes Withheld Broker Non-Votes
-------- --------- -------------- ----------------
<S> <C> <C> <C>
Frank T. Cary 59,294,201 208,617 0
Paul J. Curlander 59,317,417 185,401 0
Martin D. Walker 59,315,264 187,554 0
</TABLE>
The terms of office of B. Charles Ames, William R. Fields, Ralph E.
Gomory, Stephen R. Hardis, Marvin L. Mann and Michael J. Maples
continued after the meeting.
(ii) The approval of the Stock Incentive Plan, as amended and
restated. The stockholders approved such plan by the following
votes:
<TABLE>
<CAPTION>
Abstentions and
Votes For Votes Against Broker Non-Votes
--------- ------------- ----------------
<S> <C> <C> <C>
38,316,593 21,110,626 75,599
</TABLE>
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 15 of this report.
(b) Reports on Form 8-K:
A Current Report on Form 8-K dated February 18, 1998 with respect
to the company's board of directors adopting a Rights Agreement
and declaring a dividend distribution of one Right for each
outstanding share of Class A common stock and Class B common
stock of the company was filed with the Securities and Exchange
Commission by the company.
13
<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: May 13, 1998 By: /s/ David L. Goodnight
------------- -----------------------
David L. Goodnight
Corporate Controller
(Principal Accounting Officer)
14
<PAGE>
EXHIBIT INDEX
Exhibits:
4.1 Rights Agreement, dated as of February 18, 1998, between Lexmark
International Group, Inc. and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent (Incorporated by reference to Exhibit 4.1 of the
registrant's Current Report on Form 8-K dated February 27, 1998).
10.1 Amended and Restated Purchase Agreement, dated as of March 31, 1998,
between Lexmark International, Inc. ("International"), as Originator,
and Lexmark Receivables Corporation ("LRC"), as Buyer.
10.2 Amended and Restated Receivables Purchase Agreement, dated as of March
31, 1998, among International, as Servicer, LRC, as Seller, Delaware
Funding Corporation, as Buyer, and Morgan Guaranty Trust Company of New
York, as Administrative Agent.
10.3 Lexmark International Group, Inc. Stock Incentive Plan, Amended and
Restated effective April 30, 1998. +
27 Financial Data Schedule
- ----------------
+ Indicates management contract or compensatory plan, contract or arrangement.
15
EXECUTION COPY
-----------------------------------------------------------------
AMENDED AND RESTATED
PURCHASE AGREEMENT
between
LEXMARK INTERNATIONAL, INC.,
as Originator,
and
LEXMARK RECEIVABLES CORPORATION,
as Buyer,
Dated as of March 31, 1998
-----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms .......................................... 1
SECTION 1.2. Interpretation and Construction ................................ 12
ARTICLE II
SALES AND TRANSFERS; SETTLEMENTS
SECTION 2.1. General Terms .................................................. 13
SECTION 2.2. Purchase and Sale .............................................. 13
SECTION 2.3. Transfers and Assignments ...................................... 14
SECTION 2.4. Protection of Ownership of the Buyer ........................... 16
SECTION 2.5. Mandatory Repurchase Under Certain Circumstances ............... 16
SECTION 2.6. Transfers by Buyer ............................................. 16
SECTION 2.7. Payment Procedures ............................................. 17
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. General Representations and Warranties of the Originator ....... 18
SECTION 3.2. Representations and Warranties of the Originator With Respect to
Each Sale of Receivables ...................................... 22
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing ......................................... 23
SECTION 4.2. Conditions to Purchases ....................................... 25
SECTION 4.3. Effect of Payment of Purchase Price ........................... 25
SECTION 4.4. Condition to Effectiveness .................................... 25
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants of the Originator ........................ 26
SECTION 5.2. Negative Covenants of the Originator ........................... 31
i
<PAGE>
ARTICLE VI
TERMINATION EVENTS
SECTION 6.1. Term .......................................................... 32
SECTION 6.2. Effect of Termination .......................................... 33
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Expenses ....................................................... 33
SECTION 7.2. Indemnity for Taxes, Reserves and Expenses ..................... 33
SECTION 7.3. Indemnity ...................................................... 35
SECTION 7.4. Holidays ....................................................... 37
SECTION 7.5. Records ........................................................ 37
SECTION 7.6. Amendments and Waivers ......................................... 37
SECTION 7.7. Term of Agreement .............................................. 37
SECTION 7.8. No Implied Waiver; Cumulative Remedies ......................... 37
SECTION 7.9. No Discharge ................................................... 37
SECTION 7.10. Notices ....................................................... 38
SECTION 7.11. Severability .................................................. 38
SECTION 7.12. Governing Law; Submission to Jurisdiction ..................... 38
SECTION 7.13. Prior Understandings .......................................... 38
SECTION 7.14. Survival ...................................................... 38
SECTION 7.15. Counterparts .................................................. 39
SECTION 7.16. Set-Off ....................................................... 39
SECTION 7.17. Successors and Assigns ........................................ 39
SECTION 7.18. Confidentiality ............................................... 39
SECTION 7.19. Payments Set Aside ............................................ 40
SECTION 7.20. No Petition ................................................... 40
SECTION 7.21. Third-Party Beneficiary ....................................... 40
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
ii
<PAGE>
AMENDED AND RESTATED
PURCHASE AGREEMENT
This AMENDED AND RESTATED PURCHASE AGREEMENT, dated as of
March 31, 1998 (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, on April 15, 1997, the Originator and the Buyer
entered into a Purchase Agreement dated as of March 31, 1997 (as amended by
First Amendment dated as of March 5, 1998, the "Original Purchase Agreement")
providing for the sale from time to time by the Originator to the Buyer of 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.
WHEREAS, the originator and the Buyer desire to amend the
Original Purchase Agreement in order to reflect certain terms of a Credit
Agreement (hereinafter defined) entered into by the Originator as of January 27,
1998 and to contain certain provisions necessitated by changes in financial
accounting standards.
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
DEFINITIONS
SECTION 1.1. Certain 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.
<PAGE>
"Attributable Debt"
------------------ shall mean, for any Person, in respect of
a Sale/Leaseback Transaction, as at the time of determination, the present value
(discounted at the interest rate assumed in making calculations in accordance
with FAS 13) of the total obligations of such Person, as seller/lessee, for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"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.
"Capital Lease Obligations"
--------------------------- of any Person shall mean the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined 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.
"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
2
<PAGE>
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 Agreement"
----------------- shall mean the Credit Agreement, dated as
of January 27, 1998, among Lexmark International Group, Inc., as Parent
Guarantor, Lexmark International, Inc., as Borrower, the Lenders party thereto,
Fleet National Bank, as Documentation Agent, Morgan Guaranty Trust Company of
New York, as Syndication Agent and The Chase Manhattan Bank, as Administrative
Agent.
"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.
"Debt"
---- of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (d) all obligations of such Person in respect of the
deferred purchase price of property or services, (e) all Debt of others secured
by (or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Debt secured thereby has been assumed, (f) all
Guarantees by such Person of Debt of others, (g) all Capital Lease Obligations
and Attributable Debt of such Person and (h) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit or
similar instruments; provided that (a)neither trade accounts payable or accrued
--------
liabilities in respect of accrued expenses, in either case arising in the
ordinary course of business, nor obligations in respect of insurance policies or
performance or surety bonds which are not themselves Guarantees of Debt (nor
bills of exchange, drafts, acceptances or similar instruments evidencing the
same nor reimbursement obligations that are contingent or that have been fixed
for not more than three Business Days in respect of letters of credit or other
similar undertakings supporting the payment of the same) shall constitute Debt,
(b) any cash advances pursuant to any Permitted Receivables Financing shall not
constitute Debt, (c) any sale, transfer or other disposition of accounts
receivable that, under GAAP as in effect on the date of such sale, transfer or
3
<PAGE>
disposition, is or shall be treated as a sale of such accounts receivable, shall
not constitute Debt and (d) in determining the amount of any Debt, Guarantees of
such Debt shall not be taken into account to the extent the Debt Guaranteed is
itself taken into account. References in this Agreement to the amount of any
Debt shall not include accrued interest or fees in respect of such Debt, except
to the extent that such interest or fees has been capitalized.
"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, but excluding any deductions for
reasons of the financial condition of an Obligor) 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.
"Effectiveness Date"
------------------ shall mean April 14, 1998.
"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 shall generally be unable 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
4
<PAGE>
receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator 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, liquidation, 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 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).
"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
5
<PAGE>
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.
"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.
"Governmental Authority"
------------------------ 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.
"Government Obligor"
------------------- shall mean 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"
--------- of or by any Person (the "guarantor")
--------- shall mean
any obligation, contingent or otherwise, of the guarantor guaranteeing any Debt
or other obligation of any other Person (the "primary obligor") in any manner,
----------------
whether directly or indirectly, and including any obligation of the guarantor,
direct or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation or to purchase (or to
advance or supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Debt or other obligation of the payment
thereof, (c) to maintain working capital, equity capital or any other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Debt or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
6
<PAGE>
Debt or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"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 Governmental Authority.
"Lien"
---- shall mean, with respect to any asset of any Person,
(a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance,
charge or security interest in, on or of such asset, (b) the interest of a
vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same
economic effect as any of the foregoing, but excluding operating leases)
relating to such asset, (c) in the case of securities, any purchase option, call
or similar right of a third party with respect to such securities and (d) any
comparable or equivalent rights or encumbrances under the laws of foreign
jurisdictions; provided, that neither the licensing of any intellectual property
right nor the holding of any such right subject to any retained right of any
licensor or transferor thereof to use or license the same shall, alone,
constitute a Lien on any such right.
"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
7
<PAGE>
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.
"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.
"Permitted Lien"
--------------- shall mean (i) a Lien imposed by any
Governmental Authority 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.
"Permitted Receivables Financing"
-------------------------------- shall mean, for any Person,
any program for the transfer without recourse (other than customary limited
recourse) by such Person or any of its Subsidiaries to any buyer, purchaser or
lender of interests in accounts receivable, so long as (a) such program is
intended by the parties thereto to be treated (whether or not such treatment is
ultimately disallowed) as an "off balance sheet" transaction and (b) the
aggregate outstanding amount of receivables transferred by such Person and its
Subsidiaries pursuant to such program shall not exceed $250,000,000 at any time.
This Purchase Agreement shall constitute a Permitted Receivables Financing of
8
<PAGE>
the Originator.
"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, Governmental Authority 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.
"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 on which a Purchase is made.
"Purchase Price"
-------------- shall have the meaning specified in Section
2.2(c).
9
<PAGE>
"Purchased Assets"
----------------- shall mean, at any time, the Originator'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 or not constituting an account,
a general intangible, chattel paper or an instrument, 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,
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 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. Nothing in this Agreement shall be deemed to prohibit any
such simultaneous assignment or sale to IBM Credit Corporation or 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) 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
Amended and Restated Receivables Purchase Agreement, dated as of the date
hereof, by and among Lexmark Receivables Corporation, as Seller, Lexmark
10
<PAGE>
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 banking corporation 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:
(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.
"Sale/Leaseback Transaction"
--------------------------- shall mean any arrangement with
any other Person (the "buyer/lessor") providing for the leasing by the
11
<PAGE>
seller/lessee of real or personal property which has been or is to be sold or
transferred by the seller/lessee to the buyer/lessor or to any other Person to
whom funds have been or are to be advanced by the buyer/lessor on the security
of such property or rental obligations of the seller/lessee.
"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.
"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
12
<PAGE>
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
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, without recourse, except as specifically set forth herein, 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
13
<PAGE>
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.
(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 and the Buyer, by means of capital contributed by
the Originator to the Buyer in the form of a contribution to the capital of the
Buyer 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 Originator shall be under no obligation to
make any Subordinated Loans to the Buyer. 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.
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
14
<PAGE>
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 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, advises 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.
(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 accounts, 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. Without limiting the foregoing, the
Originator shall, upon the request of the Buyer, in order to accurately reflect
this transaction, execute and file such additional 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
15
<PAGE>
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.
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
16
<PAGE>
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.
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), 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, in each of the foregoing cases, for reasons other than the
financial condition of the Obligor, 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
17
<PAGE>
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, represented and warranted
to the Buyer on and as of the Closing Date and the date of each Purchase prior
to the Effectiveness Date, and hereby represents and warrants to the Buyer as of
the Effectiveness Date and the date of each subsequent Purchase that:
(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
18
<PAGE>
purchasers from the Originator and all other Persons whatsoever (other than the
Buyer and its 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 Governmental
Authority 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 acquire the 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
19
<PAGE>
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.
(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
Governmental Authority (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.
20
<PAGE>
(l) Litigation.
---------- No injunction, decree or other decision has
been issued or made by any Governmental Authority 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 effect 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.
(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.
21
<PAGE>
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
represented and warranted to the Buyer as of the Closing Date, the Effectiveness
Date and the date of each such Purchase occurring prior to the Effectiveness
Date and represents and warrants as of the date of each such Purchase occurring
after the Effectiveness Date (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 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 on 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.
(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
22
<PAGE>
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;
(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
23
<PAGE>
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;
(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
24
<PAGE>
(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.
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 or otherwise), 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.
SECTION 4.4. Condition to Effectiveness.
--------------------------- On or prior to the
Effectiveness 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) An Officer's certificate dated the Effectiveness Date, to
the affect that (i) the representations and warranties of the Originator in
Article III hereof are true and correct as of the Effectiveness Date, and (ii)
the Originator is in compliance with the covenants and agreements contained in
Articles II and V hereof; and
25
<PAGE>
(b) An opinion of counsel to the Originator dated the
Effectiveness Date, to the effect that this Amended and Restated Purchase
Agreement has been duly authorized, executed and delivered and is an enforceable
obligation of the Originator, subject to standard bankruptcy exceptions.
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 Effect.
--------------------------------- Promptly upon becoming
aware thereof, the Originator shall give the Buyer notice of any material
adverse effect on 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:
(i) as soon as practicable and in any event within 60 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 105 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
26
<PAGE>
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.
(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
assist the Buyer in all such ways as are reasonable and within its power to
bring about the repayment of each Receivable in accordance with the terms of the
related Contract.
(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).
27
<PAGE>
(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 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
Governmental Authority 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
28
<PAGE>
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
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
$10,000,000, 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
29
<PAGE>
involving a withdrawal liability in excess of $10,000,000; 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
$10,000,000, 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) 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, provided that nothing in the clause(s) shall be read to require
that the Originator or any of its Consolidated Subsidiaries maintain insurance
relating to credit loss on its receivables (including the Receivables sold
hereunder).
(s) 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.
(t) 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, 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
30
<PAGE>
with respect to the Buyer's separate identity.
(u) 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.
(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
31
<PAGE>
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 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
32
<PAGE>
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
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 Governmental
Authority charged with the administration, interpretation or application
thereof, or the compliance with any directive of any Governmental Authority (in
the case of any bank regulatory guideline, whether or not having the force of
Law):
33
<PAGE>
(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
(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 Governmental Authority, or any directive
34
<PAGE>
regarding capital adequacy (in the case of any bank regulatory guideline,
whether or not having the force of law) of any such Governmental Authority, 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.
(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 hereunder or in connection herewith or the
transactions contemplated hereby or thereby or any statements made by any
Responsible Officer of the Originator in connection herewith or the transactions
contemplated hereby 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
35
<PAGE>
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 asserted against the Originator or its assets
(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 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 Governmental Authority which arises out of or relates
to this Agreement, 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, or (vii) 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; provided that nothing in this Section 7.3 shall
be deemed to provide indemnity to the Buyer or any of its directors, officers,
shareholders, employees, agents, successors or assigns for credit losses on the
Receivables.
(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.
36
<PAGE>
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.
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,
37
<PAGE>
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.
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
38
<PAGE>
Agreement, any investigation by the Buyer, the purchase or payment in respect of
any Purchased Assets, or any other event or condition whatsoever (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
--------
39
<PAGE>
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 (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 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, 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.
40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Purchase 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
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 and
Chief Financial Officer
Address for Notices:
Lexmark International, Inc.
740 New Circle Road NW
Building 1, Dept. 857
Lexington, KY 40550
Attention: Bruce J. Frost
Tel. No.: (606) 232-3645
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
41
<PAGE>
EXHIBIT A
---------
[RESERVED]
<PAGE>
EXHIBIT B
---------
SCHEDULE OF LITIGATION
----------------------
None
<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 International,
Inc. being the surviving entity.
<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:
<PAGE>
EXHIBIT E
---------
[RESERVED]
<PAGE>
EXHIBIT F
---------
CREDIT AND COLLECTION POLICY
----------------------------
[Included as Exhibit A in Receivables Purchase Agreement]
<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
Purchase Agreement and (b) used or retained by the Issuer as capital to carry
<PAGE>
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 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
G-2
<PAGE>
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).
G-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]
G-4
<PAGE>
ATTACHMENT A
To Subordinated Note
Dated April 15, 1997
--------------------
Date Principal Principal Amount Balance
Amount Paid Outstanding
Advanced
1. 4/15/97 $49,595,718.96 $ $
-------- ------------- --------------- ----------
2.
-------- ------------- --------------- ----------
3.
-------- ------------- --------------- ----------
4.
-------- ------------- --------------- ----------
5.
-------- ------------- --------------- ----------
6.
-------- ------------- --------------- ----------
7.
-------- ------------- --------------- ----------
8.
-------- ------------- --------------- ----------
9.
-------- ------------- --------------- ----------
10.
-------- ------------- --------------- ----------
G-5
<PAGE>
EXHIBIT H
---------
MATERIAL ADVERSE CHANGES
------------------------
None
<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:
149. Attached hereto as Annex A is a true and complete copy of
the By-laws of Lexmark as in effect on the date hereof.
150. 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.
151. 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 --------------------------
- ------------------ 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, , 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:
-----------------------
Treasurer
I-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 --------------------------
- ------------------ Treasurer --------------------------
David L. Goodnight Controller --------------------------
Richard A. Pelini Assistant Treasurer --------------------------
Michelle R. Cabbage Treasury Financial
Analyst --------------------------
Katherine C. Winebrenner Cash Manager --------------------------
I-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, , 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:
-----------------------
Treasurer
I-4
<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.
<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.
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
<PAGE>
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.
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.
K-2
<PAGE>
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.
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.
K-3
<PAGE>
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.
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
K-4
<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)
K-5
<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.
K-6
<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.
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.
K-7
<PAGE>
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
K-8
<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)
K-9
<PAGE>
Schedule 1
----------
SCHEDULE OF RECEIVABLES
[On file with Administrative Agent]
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
dated as of March 31, 1998
Among
LEXMARK INTERNATIONAL, INC.,
as Servicer,
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 ....................................... 27
1.03. Obligor Classification ............................................... 27
ARTICLE II
PURCHASES AND SETTLEMENT
2.01. General Assignment and Conveyance .................................... 27
2.02. Incremental Purchase Limits ........................................... 28
2.03. Incremental Purchase Price ............................................ 28
2.04. Deferred Purchase Price ............................................... 29
2.05. Reinvestment Purchases ................................................ 29
2.06. Funding of the Net Investment ......................................... 29
2.07. Discount .............................................................. 30
2.08. Non-Liquidation Settlements and Other Payment Procedures .............. 31
2.09. Liquidation Settlement Procedures ..................................... 32
2.10. Fees .................................................................. 33
2.11. Optional Reduction of Maximum Net Investment; Optional Reduction of
Net Investment ........................................................ 33
2.12. Mandatory Repurchase Under Certain Circumstances ...................... 34
2.13. Payments and Computations, Etc.; Allocation of Collections ............ 34
2.14. Reports ............................................................... 35
2.15. Initial Purchase ...................................................... 35
ARTICLE III
CLOSING PROCEDURES
3.01. Purchase and Sale Procedures .......................................... 36
3.02. Conditions to Funding ................................................. 37
3.03. Conditions to Initial, Reinvestment and Incremental Purchases ......... 39
3.04. Conditions to Effectiveness ........................................... 39
ARTICLE IV
PROTECTION OF THE OWNERS;
ADMINISTRATION AND COLLECTIONS
4.01. Acceptance of Appointment and Other Matters Relating to the Servicer... 40
4.02. Maintenance of Information and Computer Records; Protection of Owners'
Interests ............................................................ 41
i
<PAGE>
4.03. Maintenance of Writings and Records .................................. 42
4.04. Information ........................................................... 43
4.05. Performance of Undertakings Under the Receivables ..................... 43
4.06. Administration and Collections ........................................ 43
4.07. Servicer Default ...................................................... 45
4.08. Complete Servicing Transfer ........................................... 46
4.09. Lockboxes ............................................................. 49
4.10. Servicer Indemnification of Affected Parties .......................... 50
4.11. Servicer Not to Resign ................................................ 51
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. General Representations and Warranties of the Seller .................. 51
5.02. Representations and Warranties of the Seller With Respect to Each Sale
of Receivables ........................................................ 54
5.03. Representations and Warranties of the Servicer ........................ 56
ARTICLE VI
COVENANTS
6.01. Affirmative Covenants of the Seller and Servicer ..................... 58
6.02. Negative Covenants of the Seller and the Servicer ..................... 64
ARTICLE VII
TERMINATION
7.01. Termination Events .................................................... 66
7.02. Consequences of a Termination Event ................................... 69
ARTICLE VIII
THE ADMINISTRATIVE AGENT
8.01. Authorization and Action ............................................. 69
8.02. UCC Filings ........................................................... 70
8.03. Administrative Agent's Reliance, Etc. ................................. 70
8.04. Administrative Agent and Affiliates ................................... 71
8.05. Indemnification ....................................................... 71
8.06. Successor Administrative Agent ........................................ 72
ARTICLE IX
MISCELLANEOUS
9.01. Expenses .............................................................. 72
9.02. Indemnity for Taxes, Reserves and Expenses ............................ 73
9.03. Indemnity ............................................................. 75
9.04. Holidays .............................................................. 76
9.05. Records ............................................................... 76
ii
<PAGE>
9.06. Amendments and Waivers ................................................ 76
9.07. Term of Agreement ..................................................... 77
9.08. No Implied Waiver; Cumulative Remedies ................................ 77
9.09. No Discharge .......................................................... 78
9.10. Notices ............................................................... 78
9.11. Severability .......................................................... 78
9.12. Governing Law; Submission to Jurisdiction ............................. 78
9.13. Prior Understandings .................................................. 79
9.14. Survival .............................................................. 79
9.15. Counterparts .......................................................... 79
9.16. Set-Off ............................................................... 79
9.17. Successors and Assigns ................................................ 80
9.18. Confidentiality ....................................................... 80
9.19. Payments Set Aside .................................................... 80
9.20. No Petition ........................................................... 81
9.21. No Recourse ........................................................... 81
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
iii
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT,
dated as of March 31, 1998, 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 (the "Servicer"
--------
or "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, on April 15, 1997, the Seller, Lexmark, the Buyer and
the Administrative Agent entered into a Receivables Purchase Agreement dated as
of March 31, 1997, (as amended by First Amendment dated as of March 5, 1998, the
"Original Receivables Purchase Agreement"), which provides for the sale by the
----------------------------------------
Seller to the Administrative Agent (on behalf of the Buyer and/or other owners),
from time to time, of undivided percentage ownership interests in trade and/or
retail or consumer receivables;
WHEREAS, such receivables were and are generated by Lexmark,
in the ordinary course of its business, through the sale of goods or services to
its customers and were and are purchased by the Seller for the purpose of
reselling them;
WHEREAS, Lexmark agreed in the Original Receivables Purchase
Agreement to service and administer the receivables in accordance with the terms
hereof and to perform its other obligations thereunder;
WHEREAS, at the time of execution of the Original Receivables
Purchase Agreement, the Administrative Agent entered into the Asset Purchase
Agreement 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 parties of the Original Receivables Purchase
Agreement desire to amend such Agreement in order to reflect certain terms of a
Credit Agreement (hereinafter defined) entered into by Lexmark as of January 27,
1998 and to contain certain provisions necessitated by changes in financial
accounting standards.
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:
"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 any Person, any other
Person which directly or indirectly through one or more intermediaries,
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.
"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.
2
<PAGE>
"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 dated as of March 31, 1997, as amended by First Amendment thereto
dated as of March 31, 1998, 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.
"Attributable Debt"
------------------ shall mean, for any Person, in respect of
a Sale/Leaseback Transaction, as at the time of determination, the present value
(discounted at the interest rate assumed in making calculations in accordance
with FAS 13) of the total obligations of such Person, as seller/lessee, for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"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%).
"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
3
<PAGE>
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. 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
4
<PAGE>
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.
"Capital Lease Obligations"
--------------------------- of any Person shall mean the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined 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.
"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
5
<PAGE>
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 EBITDA"
------------------- shall mean, for any period, Consolidated
Net Income for such period, plus, without duplication and to the extent
----
reflected as a charge in the statement of such Consolidated Net Income for such
period, the sum of (a) income tax expense, (b) Consolidated Interest Expense,
amortization or writeoff of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Debt
(including, in the case of LI Group, the loans made pursuant to the Credit
Agreement), (c) depreciation and amortization expense, (d) amortization of
intangibles (including, but not limited to, goodwill) and organization costs and
(e) any other non-cash charges (not including accrual of charges which will be
discharged in a following accounting period in cash in the ordinary course of
business), and minus, without duplication, to the extent included in the
-----
statement of such Consolidated Net Income for such period, the sum of (a)
interest income and (b) any other non-cash income (not including accruals of
income which will be received in a following accounting period in cash in the
ordinary course of business), all as determined on a consolidated basis.
6
<PAGE>
"Consolidated Interest Coverage Ratio"
--------------------------------------- shall mean, for any
period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period.
"Consolidated Interest Expense"
----------------------------- of any Person, shall mean, for
any period, total interest expense (including that attributable to Capital Lease
Obligations) of such Person and for such period with respect to all outstanding
Debt of such Person (including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under interest rate hedging agreements or
foreign currency exchange agreements to the extent such net costs are allocable
to such period in accordance with GAAP).
"Consolidated Leverage Ratio"
----------------------------- shall mean, at any date, the
ratio of (a) Consolidated Total Debt on such date to (b) Consolidated EBITDA for
the period of four consecutive fiscal quarters ending with the most recent
fiscal quarter for which the relevant financial information is available.
"Consolidated Net Income"
------------------------ of any Person, shall mean, for any
period, the consolidated net income (or loss) of such Person and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"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 Total Debt"
------------------------ shall mean, for any Person at any
date, the aggregate principal amount of all Debt of such Person and its
Subsidiaries, at such date, determined on a consolidated basis in accordance
with GAAP.
"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.
"Contractual Obligation"
----------------------- shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
7
<PAGE>
or other undertaking to which such Person is a party or by which it or any of
its property is bound.
"Credit Agreement"
----------------- shall mean the Credit Agreement, dated as
of January 27, 1998, among Lexmark International Group, Inc., as Parent
Guarantor, Lexmark International, Inc., as Borrower, the Lenders party thereto,
Fleet National Bank, as Documentation Agent, Morgan Guaranty Trust Company of
New York, as Syndication Agent and The Chase Manhattan Bank, as Administrative
Agent.
"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.
"Debt"
---- of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (d) all obligations of such Person in respect of the
deferred purchase price of property or services, (e) all Debt of others secured
by (or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Debt secured thereby has been assumed, (f) all
Guarantees by such Person of Debt of others, (g) all Capital Lease Obligations
and Attributable Debt of such Person and (h) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit or
similar instruments; provided that (a)neither trade accounts payable or accrued
--------
liabilities in respect of accrued expenses, in either case arising in the
ordinary course of business, nor obligations in respect of insurance policies or
performance or surety bonds which are not themselves Guarantees of Debt (nor
bills of exchange, drafts, acceptances or similar instruments evidencing the
same nor reimbursement obligations that are contingent or that have been fixed
for not more than three Business Days in respect of letters of credit or other
similar undertakings supporting the payment of the same) shall constitute Debt,
(b) any cash advances pursuant to any Permitted Receivables Financing shall not
constitute Debt, (c) any sale, transfer or other disposition of accounts
receivable that, under GAAP as in effect on the date of such sale, transfer or
disposition, is or shall be treated as a sale of such accounts receivable, shall
not constitute Debt and (d) in determining the amount of any Debt, Guarantees of
such Debt shall not be taken into account to the extent the Debt Guaranteed is
itself taken into account. References in this Agreement to the amount of any
Debt shall not include accrued interest or fees in respect of such Debt, except
to the extent that such interest or fees has been capitalized.
8
<PAGE>
"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
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.
9
<PAGE>
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 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;
10
<PAGE>
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:
(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.
"Effectiveness Date" shall mean April 14, 1998.
------------------
"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 "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'
11
<PAGE>
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
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;
12
<PAGE>
(k) which is owned solely by the Seller free and clear of all
Liens, except for (y) the Liens arising in connection with this Agreement and
the Security 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;
(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
13
<PAGE>
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate"
---------------- shall mean, for any Person, any other
corporation or other 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 such
Person 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 such Person 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 generally fails 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 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 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).
"Event of Termination"
--------------------- shall mean, for any Person (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 such Person or any ERISA Affiliate of such
Person 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 such Person or
14
<PAGE>
any ERISA Affiliate of such Person 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 such Person or any ERISA
Affiliate of such Person 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 such Person or an ERISA
Affiliate of such Person 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 such
Person or any ERISA Affiliate of such Person 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 such Person or any
ERISA Affiliate of such Person 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 such Person or any ERISA
Affiliate of such Person 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 such Person or any ERISA Affiliate of such Person 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 13,
1999 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, as amended as of March 31, 1998, 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.
15
<PAGE>
"Fiscal Year"
------------ shall mean, (i) 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 and (ii) for any other Person, the
fiscal year of such Person 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
official interpretations thereof by the Financial Accounting Standards Board,
its predecessors and successors.
"Goldman"
------- shall mean Goldman Sachs Money Markets L.P.
"Governmental Authority"
------------------------ 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.
"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"
--------- of or by any Person (the "guarantor") means any
---------
obligation, contingent or otherwise, of the guarantor guaranteeing any Debt or
other obligation of any other Person (the "primary obligor") in any manner,
----------------
whether directly or indirectly, and including any obligation of the guarantor,
direct or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation or to purchase (or to
advance or supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Debt or other obligation of the payment
thereof, (c) to maintain working capital, equity capital or any other financial
16
<PAGE>
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Debt or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Debt or obligation; provided, that the term Guarantee shall not include
--------
endorsements for collection or deposit in the ordinary course of business.
"IBM"
--- shall mean International Business Machines Corporation,
a New York corporation, and its successors and assigns.
"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.
"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.
"JPM"
--- shall have the meaning ascribed to such term in Section
7.01(l) hereof.
17
<PAGE>
"Law"
--- shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Governmental Authority.
"Lexmark"
------- shall mean Lexmark International, Inc., a Delaware
corporation, and its successors.
"LI Group"
-------- shall mean Lexmark International Group, Inc., a
Delaware corporation, and its successors.
"Lien"
---- means, with respect to any asset of any Person, (a) any
mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or
security interest in, on or of such asset, (b) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect
as any of the foregoing, but excluding operating leases) relating to such asset,
(c) in the case of securities (other than securities issued by LI Group), any
purchase option, call or similar right of a third party with respect to such
securities and (d) any comparable or equivalent rights or encumbrances under the
laws of foreign jurisdictions; provided, that neither the licensing of any
intellectual property right nor the holding of any such right subject to any
retained right of any licensor or transferor thereof to use or license the same
shall, alone, constitute a Lien on any such right.
"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.
"Loss Percentage"
--------------- shall mean, at any time, the greater of:
(i) 10% and
(ii) the Default Reserve.
18
<PAGE>
"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, for any Person, 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 such Person or any ERISA Affiliate of such Person 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.
"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).
19
<PAGE>
"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.
"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
Governmental Authority 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 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.
20
<PAGE>
"Permitted Receivables Financing"
-------------------------------- shall mean, for any Person,
any program for the transfer without recourse (other than customary limited
recourse) by such Person or any of its Subsidiaries to any buyer, purchaser or
lender of interests in accounts receivable, so long as (a) such program is
intended by the parties thereto to be treated (whether or not such treatment is
ultimately disallowed) as an "off balance sheet" transaction and (b) the
aggregate outstanding amount of receivables transferred by such Person and its
Subsidiaries pursuant to such program shall not exceed $250,000,000 at any time.
This Receivable Purchase Agreement shall constitute a Permitted Receivables
Financing of the Seller, Lexmark and LI Group.
"Person"
------ shall mean an individual, corporation, partnership
(general or limited), trust, business trust, unincorporated association, joint
venture, joint-stock company, Governmental Authority 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.
"Purchase"
-------- shall mean a purchase by the Administrative Agent,
on behalf of the applicable Owners, from time to time of an undivided percentage
21
<PAGE>
ownership interest (equal to the Buyer's Percentage Interest from time to time)
in Receivables hereunder, together with the Related Security and Collections
with respect thereto.
"Purchase Agreement"
------------------- shall mean that certain Amended and
Restated Purchase Agreement, dated as of the date hereof, 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 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
22
<PAGE>
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, a general intangible,
chattel paper or an instrument, 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, 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 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
23
<PAGE>
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:
(a) 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;
(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, the Receivables, the Contracts or the Obligors;
and
(e) 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.
"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.
24
<PAGE>
"Sale/Leaseback Transaction"
--------------------------- shall mean, with respect to any
Person (the "seller/lessee"), any arrangement with any other Person (the
"buyer/lessor") providing for the leasing by the seller/lessee of real or
personal property which has been or is to be sold or transferred by the
seller/lessee to the buyer/lessor or to any other Person to whom funds have been
or are to be advanced by the buyer/lessor on the security of such property or
rental obligations of the seller/lessee.
"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.
25
<PAGE>
"Tranche"
------- shall have the meaning ascribed to such term in
Section 2.06(b) hereof.
"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.
26
<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.
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
27
<PAGE>
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 (equal to the
Buyer's Percentage Interest from time to time) 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 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
28
<PAGE>
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 (equal to the Buyer's
Percentage Interest from time to time) 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 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
29
<PAGE>
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).
(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
30
<PAGE>
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
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
31
<PAGE>
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), (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.
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
32
<PAGE>
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, fifth, if a Servicer Default has occurred 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 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
33
<PAGE>
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 use
Collections not applied to reinvestment Purchases to pay to the Administrative
Agent for distribution to the Owners in accordance with the Agreement and 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.
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, and (y) 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
34
<PAGE>
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.
(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, the Seller
sold, and the Administrative Agent, as agent for the applicable Owner or Owners,
35
<PAGE>
purchased 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 on behalf of the Seller provided the Administrative Agent
with a Purchase Notice dated the Closing Date in respect of the Initial
Purchase. The Purchase Price of the Initial Purchase was equal to the Owners'
initial Net Investment.
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 (equal to the Buyer's Percentage Interest from time to time) 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
36
<PAGE>
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 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;
37
<PAGE>
(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 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 ownership 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;
38
<PAGE>
(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;
(p) The Amended and Restated Intercreditor Agreement between
Lexmark and its bank creditors 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.
3.04. Conditions to Effectiveness.
----------------------------- On or prior to the
Effectiveness Date, the Seller shall have delivered to the Administrative Agent
39
<PAGE>
the following documents and instruments, all of which shall be in form and
substance acceptable to the Administrative Agent.
(a) An officer's certificate for each of the Seller and Servicer dated
the Effectiveness Date, to the effect that (i) the representations and
warranties of the Seller and the Servicer, as the case may be, in Article V
hereof are true and correct as of the Effectiveness Date, (ii) the Seller and
the Servicer, as the case may be, are in compliance with the covenants and
agreements contained herein and (iii) no Termination Event, Potential
Termination Event or Servicer Default exists on the Effectiveness Date; and
(b) An opinion of counsel to the Seller and the Servicer dated the
Effectiveness Date, to the effect that this Amended and Restated Receivables
Purchase Agreement has been duly authorized, executed and delivered and is an
enforceable obligation of the Seller and the Servicer, subject to standard
bankruptcy exceptions.
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
40
<PAGE>
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.
4.02. 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
41
<PAGE>
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.
(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
42
<PAGE>
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
-------- -------
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
43
<PAGE>
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
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 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 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 Servicer Default shall have occurred and be continuing
44
<PAGE>
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 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;
45
<PAGE>
(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 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;
(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;
(j) If Lexmark or any of its Affiliates is the Servicer, the
Consolidated Leverage Ratio of LI Group shall, at any time, be greater than 2.50
to 1.0; or
(k) If Lexmark or any of its Affiliates is the Servicer, the
Consolidated Interest Coverage Ratio of LI Group shall be for any period of four
consecutive fiscal quarters of the LI Group, less than 6.00 to 1.0.
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
46
<PAGE>
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 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
47
<PAGE>
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.
(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.
48
<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
49
<PAGE>
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
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.
50
<PAGE>
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, represented and warranted to each Owner and the
Administrative Agent on and as of the Closing Date and as of the date of each
Incremental Purchase and reinvestment Purchase prior to the Effectiveness Date,
and hereby represents and warrants to each Owner and the Administrative Agent as
of the Effectiveness Date and the date of each subsequent 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.
(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
51
<PAGE>
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, and (y) 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 Governmental
Authority 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 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
52
<PAGE>
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 Governmental Authority (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 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 Governmental Authority 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 effect on, the
conduct by the Seller of a significant portion of the Seller's business
53
<PAGE>
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 Purchase, the Seller represented and warranted to each Owner and
the Administrative Agent as of the date of each such Purchase occurring prior to
the Effectiveness Date and represents and warrants as of the date of each such
Purchase occurring after the Effectiveness Date (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.
54
<PAGE>
(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, and (y) 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, and (y) 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.
(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
55
<PAGE>
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 the Servicer .
------------------------------------------------- The
Servicer, and any successor Servicer by its appointment hereunder, represented
and warranted to each Owner and the Administrative Agent on and as of the
Closing Date and the date of each Purchase prior to the Effectiveness Date, and
represents and warrants to each Owner and the Administrative Agent as of the
Effectiveness Date and the date of each Purchase occurring after the
Effectiveness Date, 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 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
56
<PAGE>
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 financial condition or
results of operation of the Servicer, any Owner, or the Administrative Agent or
on the collectibility of the Receivables 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 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 on the financial condition or results of operation of
the Servicer.
(j) Stock Ownership.
--------------- Lexmark and any wholly-owned Subsidiary
of Lexmark are the only Persons that have an ownership interest in the Seller.
57
<PAGE>
ARTICLE VI
COVENANTS
6.01. Affirmative Covenants of the Seller and Servicer .
-------------------------------------------------- In
addition to its other covenants contained herein or made pursuant hereto, each
of the Seller and the Servicer, severally and not jointly 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 the Servicer 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 the Servicer.
(b) Notice of Material Adverse Effect.
--------------------------------- Promptly upon becoming
aware thereof, the Seller and the Servicer shall give the Administrative Agent
notice of any material adverse effect on the business, operations or financial
condition of the Seller or the Servicer which reasonably could affect adversely
the collectibility of a material part of the Receivables or the ability of the
Servicer 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 the Servicer 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 60 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 the Servicer, 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 the Servicer, as the case may be, 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 Seller or the Servicer, 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 105 days
after the close of each Fiscal Year during the term of this Agreement, a
consolidated balance sheet of the Seller or the Servicer, 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 the Servicer, 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
58
<PAGE>
& 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 Servicer, 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 the Servicer 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; provided that the
Seller or the Servicer, as the case may be, may merge with another Person if (A)
the Servicer is the corporation surviving such merger and (B) immidiately after
and giving effect to such merger, no Termination Event or Potential Termination
Event or Servicer Default shall have occurred and be continuing.
(d) Compliance with Laws.
-------------------- Each of the Seller and the Servicer
shall comply in all material respects with all Laws applicable to the Seller and
the Servicer, 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 or the Servicer is contesting in good faith.
(e) Enforceability of Obligations.
----------------------------- Each of the Seller and the
Servicer 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 the Servicer
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
59
<PAGE>
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 the
Servicer 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 the Servicer 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 the Servicer 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 the Servicer are registered under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the
Seller and the Servicer, 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.
(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 the
Servicer 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 the Servicer before any Governmental Authority in which
there is a reasonable possibility of a decision which in the reasonable judgment
of the Seller or the Servicer, 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 the Servicer or impair the ability of the Seller or
the Servicer to perform their respective obligations under this Agreement or
under the Purchase Agreement.
60
<PAGE>
(k) Total Systems Failure.
--------------------- The Servicer shall promptly notify
the Administrative Agent of any total systems failure and shall advise the
Administrative Agent 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, the Servicer (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 the Servicer 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. The Servicer
shall promptly notify the Administrative Agent 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 the Servicer
shall furnish or cause to be furnished to the Administrative Agent such other
information 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.
(n) Treatment of Purchase.
---------------------- For accounting purposes, the
Seller shall treat the Purchases, made hereunder as sales of Purchased Interests
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.
------------------------ The Seller 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.
61
<PAGE>
(p) Administrative and Operating Procedures.
------------------------------------------ Each of the
Seller and the Servicer 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 the Servicer or any ERISA Affiliate or any
combination of such entities in excess of $10,000,000, the Servicer shall give
the Administrative Agent a written notice specifying the nature thereof, what
action the Servicer 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 Servicer shall furnish
to the Administrative Agent copies of (i) all notices received by the Servicer
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
Servicer or any ERISA Affiliate from the sponsor of a Multiemployer Plan
pursuant to Section 4202 of ERISA involving a withdrawal liability in excess of
$10,000,000; and (iii) all funding waiver requests filed by the Servicer 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 $10,000,000, and all
communications received by the Servicer or any ERISA Affiliate from the Internal
Revenue Service with respect to any such funding waiver request.
(r) Collections.
----------- Each of the Seller and the Servicer shall
instruct all Obligors to cause all Collections to be mailed to a Permitted
Lockbox or electronically transferred to a Lockbox Account.
(s) Insurance.
--------- Each of the Seller and the Servicer 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.
(t) Support of Obligations.
---------------------- The Servicer shall take whatever
62
<PAGE>
actions are necessary to cause the Seller to fulfill all of its obligations to
the Administrative Agent and the Owners hereunder.
(u) Separate Corporate Existence.
---------------------------- Notwithstanding that Seller
is a Subsidiary of the Servicer, the Seller 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.
(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
63
<PAGE>
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 capital contributions from Lexmark, made, in
Lexmark's sole discretion, to enable the Seller to pay the purchase price of
Receivables, 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).
(ix) Other than organizational expenses and as expressly
provided herein, pay all expenses, indebtedness and other obligations incurred
by it.
(x) Not enter into any guaranty, or otherwise become
liable, with respect to any obligation of the Servicer.
(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 the Servicer .
------------------------------------------------- Each
of the Seller and the Servicer, severally and not jointly 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.
64
<PAGE>
(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 or Purchased Assets.
--------------------------------- 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 Lien created in connection with the
transactions contemplated by this Agreement and any Permitted Lien, 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 the Servicer, as the case may be, may merge with
- --------
another Person if (A) the Servicer, 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 the Servicer or payments to be made to any Permitted Lockbox.
65
<PAGE>
(g) ERISA Matters.
------------- In the case of the Servicer, 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 Servicer or any ERISA Affiliate in
an amount in excess of $10,000,000.
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 under this Agreement or in any agreement, certificate,
report, appendix, schedule or document furnished by the Seller 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 the Servicer 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
the Servicer, 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 Collection Policy, the Collections or the Related Security, a
66
<PAGE>
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 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 thirty days after written
notice thereof to such Person by the Administrative Agent or any Owner; or
(f) the Seller shall fail to pay any Debt in excess of
$500,000 of the Seller 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 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
67
<PAGE>
(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
Governmental Authority 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) A "Termination Event" under the Purchase Agreement shall
occur and be continuing.
(n) A Servicer Default shall occur and be continuing.
68
<PAGE>
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.
(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
69
<PAGE>
action as the Majority Owners direct under or in connection with or on any
matter relating to the Seller or the Servicer, 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 or the Servicer, or by it to the
Seller or the Servicer, 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
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.
70
<PAGE>
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 the Servicer 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 the Servicer or to inspect the property
(including the books and records) of the Seller or the Servicer; (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 or any Obligor, any of their respective
Affiliates and any Person who may do business with or own securities of the
Seller, the Servicer or any Obligor or any of 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
71
<PAGE>
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 and the Servicer; 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 (which approval will not be
unreasonably withheld or delayed), which 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 .
-------- The Seller agrees, 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',
72
<PAGE>
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".
-----------------
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 Governmental
Authority charged with the administration, interpretation or application
thereof, or the compliance with any directive of any Governmental Authority (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)
73
<PAGE>
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 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 hereby agrees 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 Governmental Authority, 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 Governmental Authority, 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 hereby agrees to pay to such Indemnified
Party such additional amount or amounts as will compensate such Indemnified
Party (or its parent) for such reduction.
74
<PAGE>
(c) Each Owner and the Administrative Agent will promptly
notify the Seller 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.
9.03. Indemnity .
---------
(a) The Seller agrees 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 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 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 is
otherwise obligated to take action, failed to be taken, by the Seller with
respect to the Purchased Interest or any of its obligations hereunder or under
the other Purchase Documents, including, without limitation, the Seller'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
75
<PAGE>
included in the Purchased Interest, 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 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 Governmental Authority 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
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 hereunder, notify the Seller in writing of the commencement thereof. The
Seller 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 the indemnified party. The
approval of the Seller will not be unreasonably withheld or delayed. After
notice from the Seller 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 so assumes the defense
thereof in a manner reasonably satisfactory to the Administrative Agent and the
Majority Owners, the Seller shall not be liable for any legal expenses of
counsel unless there shall be a conflict between the interests of the Seller 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 and the Servicer may from time to time, with the consent, if
required pursuant to this Agreement or the Asset Purchase Agreement, of the APA
76
<PAGE>
Purchasers, enter into agreements amending, modifying or supplementing this
Agreement, and the Buyer, with the consent, if 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 or the Servicer 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 or the Servicer 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 the Servicer 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.
77
<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 and the Servicer 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 or the Servicer 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 or the Servicer as a matter of Law.
9.10. Notices .
------- All notices under Section 7.02 hereof shall be
given to the Seller and the Servicer 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 and the Servicer 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 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
78
<PAGE>
proceeding against the Seller or the Servicer 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 and the Servicer 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 to set-off against and to
appropriate and apply to any amount owing by the Seller 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 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 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,
is or are matured other than by operation of this Section 9.16 and 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.
79
<PAGE>
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 nor the Servicer 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 and the Servicer 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 or the Servicer 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, 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 aside,
recovered from, disgorged by, or is required to be refunded, rescinded,
returned, repaid or otherwise restored to the Seller, the Servicer, 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
80
<PAGE>
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 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.
81
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their duly
authorized signatories, have executed and delivered this Amended and Restated
Receivables Purchase 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
by: /s/ Robert S. Jones
--------------------------
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
[Amended and Restated Receivables Purchase Agreement Signature Page]
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Administrative Agent
by: /s/ Robert S. Jones
--------------------------
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
by: /s/ Gary E. Morin
--------------------------
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 NW
Building 1, Dept. 857
Lexington, Kentucky 40550
Attention: Bruce J. Frost
Tel. No.: (606) 232-3645
FAX: (606) 232-5137
[Amended and Restated Receivables Purchase Agreement Signature Page]
<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.
by: /s/ Gary E. Morin
-------------------------
Authorized Signatory
Vice President, Chief Financial
Officer
-----------------------------
Title
Address for Notices: Lexmark International, Inc.
740 New Circle Road NW
Building 1, Dept. 857
Lexington, KY 40550
Attention: Bruce J. Frost
Tel. No.: (606) 232-3645
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
[Amended and Restated Receivables Purchase Agreement Signature Page]
<PAGE>
EXHIBIT B
to
Amended and Restated
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 D
to
Amended and Restated
Receivables Purchase
Agreement
Form of Tranche Selection Notice
This notice is delivered pursuant to Section 2.06 of the
Amended and Restated Receivables Purchase Agreement dated as of March 31, 1998
among Lexmark Receivables Corporation, as Seller, Lexmark International, Inc. as
Servicer and in its individual capacity, Delaware Funding Corporation, as Buyer,
and Morgan Guaranty Trust Company of New York, as Administrative Agent.
1[Reference is made to the Purchase Notice dated ,
-----------
199 relating to an Incremental Purchase of $ . We hereby request
-- -------------
that the Incremental Purchase be divided into the following Tranches, with the
Tranche Period[s] being the periods indicated opposite each such Tranche:
Amount of Tranche Tranche Period]
2 We hereby request, with respect to the Tranche Period ending
on , 199 , pertaining to a Tranche in the amount of $ ,
----------- -- ------------
3[that the new Tranche Period be days.] 4[that the Net Investment in such
-----
Tranche be divided into the following new Tranches, with the Tranche Periods
being the periods indicated opposite each such new Tranche:
Amount of Tranche Tranche Period]
- ----------------
1/ Insert if the Tranche Selection Notice is being delivered in connection
with an Incremental Purchase.
2/ Insert if the Tranche Selection Notice is being delivered in connection
with the expiration of an existing Tranche Period.
3/ Insert if only one Tranche Period is being requested.
4/ Insert if more than one Tranche Period is being requested.
<PAGE>
We hereby confirm that, after giving effect to this Tranche Selection Notice,
the aggregate amount of all Tranches will equal the Net Investment.
LEXMARK RECEIVABLES CORPORATION,
as Seller
By:
----------------------------
Responsible Officer
Date of Notice:
-------------
D-2
<PAGE>
EXHIBIT F
to
Amended and Restated
Receivables Purchase
Agreement
List of Special Obligors
Obligor Concentration Factor
- ------- --------------------
All Government Obligors, in the aggregate 3%
<PAGE>
EXHIBIT H
to
Amended and Restated
Receivables Purchase
Agreement
[LETTERHEAD OF
LEXMARK INTERNATIONAL, INC.]
March , 1998
----
[Address]
RE: Lockbox Transfer Letter
-----------------------
Ladies and Gentlemen:
We hereby notify you that, in accordance with the provisions
of a certain Amended and Restated Receivables Purchase Agreement dated as of
March 31, 1998 (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 P.O. Box 63, Cincinnati,
Ohio 45263- (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
<PAGE>
by us which are or may be inconsistent with this letter, all of which are hereby
superseded by this letter.
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 BANK]
By:
--------------------
Authorized Officer
H-2
<PAGE>
EXHIBIT J
to
Amended and Restated
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:
1. Attached hereto as Annex A is a true and complete copy of
the By-laws of Lexmark as in effect on the date hereof.
2. 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.
3. 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 --------------------------
- ------------------ 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, , 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:
------------------------
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:
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 --------------------------
- ------------------ 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, , 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:
-----------------------
Treasurer
J-4
<PAGE>
EXHIBIT K
to
Amended and Restated
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 Merges of Seller:
--------------------------------
None
<PAGE>
EXHIBIT L
to
Amended and Restated
Receivables Purchase
Agreement
[RESERVED]
<PAGE>
EXHIBIT M
to
Amended and Restated
Receivables Purchase
Agreement
Information regarding Litigation
NONE
LEXMARK INTERNATIONAL GROUP, INC.
STOCK INCENTIVE PLAN
(Amended and Restated Effective April 30, 1998)
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.
(c) "Award Agreement" means the agreement, certificate or other
instrument evidencing the grant of any Incentive Award under the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "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.
(f) "Change in Control" shall mean the occurrence of any of the
<PAGE>
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 (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;
(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
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 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.
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.
(g) "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.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means (i) the Compensation and Pension Committee
of the Board, unless 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.
(j) "Common Stock" means the Class A common stock of the Company,
par value $0.01 per share, or such other shares or kind of securities as
determined by the Board.
(k) "Company" means Lexmark International Group, Inc., a Delaware
corporation, and any successor thereto.
2
<PAGE>
(l) "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.
(m) "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 Medical Disability Income Plan.
(n) "Employee" means any employee of the Company or any of its
Subsidiaries.
(o) "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.
(p) "Incentive Award" means any award under 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.
(q) "Option" means the right to purchase a stated number of shares
of Common Stock at a stated price (as specified in Section 6.2 hereof)
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").
(r) "Participant" means any Employee designated by the Committee
to receive an Incentive Award under the Plan.
(s) "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.
(t) "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, the Lexmark Holding, Inc.
Employee Stock Option Plan and the 1995-1997 Long Term Incentive Plan.
(u) "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
nationally recognized over-the-counter market.
(v) "Restriction Period" means the period during which shares of
Restricted Stock are subject to forfeiture or restrictions on transfer
(if applicable) as described in Section 7 of the Plan and any applicable
Award Agreement, provided that such period shall not be less than three
years.
3
<PAGE>
(w) "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.
(x) "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.
(y) "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 (as
specified in Section 6.7(c) hereof).
(z) "Subsidiary" means any entity that is directly or indirectly
controlled by the Company or any other entity in which the Company has a
significant equity interest, as determined by the Committee.
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 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 Reload Option (as defined in
Section 6.6) will be granted to any Participant pursuant to Section 6.6; 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.
The 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
4
<PAGE>
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. 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.
4.3. 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.
SECTION 5.
STOCK SUBJECT TO PLAN
---------------------
5.1. Number. Subject to the provisions of Section 5.3, the number of
------
shares of Common Stock that may be delivered under the Plan may not exceed
7,380,000, 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 or award 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,
including shares covered by an Incentive Award used to satisfy tax withholding
requirements on behalf of a Participant as provided for in Section 11.4, 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
<PAGE>
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
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 granted to any Participant under the Plan
for the five-year period from April 30, 1998 through April 30, 2003 exceed
1,500,000 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, except that if a Non-Qualified Stock Option is granted
retroactively in tandem with or in substitution for a Stock Appreciation Rights
grant, the designated Fair Market Value for purposes of establishing the
exercise price for such option may be the Fair Market Value on the date the
Stock Appreciation Rights were granted.
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,
6
<PAGE>
Options will become exercisable in three installments as follows, subject to the
Participant's continued employment until the applicable date:
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.
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 Stock
Appreciation Rights under the Plan covering shares of Common Stock in excess of
1,500,000 (adjusted pursuant to Section 5.3 if an Adjustment Event shall occur)
during the five-year period April 30, 1998 through April 30, 2003. Each grant of
an Incentive Award of Stock Appreciation Rights shall be evidenced by an Award
Agreement.
7
<PAGE>
(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 Common
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
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
8
<PAGE>
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; provided that in no event shall the number of shares of Common
Stock subject to Incentive Awards of Restricted Stock exceed 500,000 (adjusted
pursuant to Section 5.3 if an Adjustment Event shall occur) in the aggregate for
all Participants during the five-year period from April 30, 1998 through April
30, 2003, and 100,000 (adjusted pursuant to Section 5.3 if an Adjustment Event
shall occur) in the aggregate for any individual Participant during such
five-year period. Unless the Committee provides otherwise at or after the date
of 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.
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 (i) the 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.
9
<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, as amended and restated, 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"); provided that in no event shall the number of shares of
Common Stock subject to Performance Awards exceed 500,000 (adjusted pursuant to
Section 5.3 if an Adjustment Event shall occur) in the aggregate for all
Participants during the five-year period from April 30, 1998 through April 30,
2003, and 100,000 (adjusted pursuant to Section 5.3 if an Adjustment Event shall
occur) in the aggregate for any individual Participant during such five-year
period. Such performance objectives shall be determined over a measurement
period or periods established by the Committee, which period shall not be less
than three years, 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) return on capital; (H) return on equity; and (I) shareholder
value add (the "Performance Criteria").
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
10
<PAGE>
determine, a Participant may be permitted to elect to defer receipt of all or a
portion of his annual compensation and/or annual incentive compensation
("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.
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
11
<PAGE>
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.
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, (i) each Option and
Stock Appreciation Right shall promptly be canceled 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), (ii) the Restriction Period applicable to all shares of Restricted
Stock shall expire and all such shares shall become nonforfeitable and
immediately transferable and (iii) 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;
(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
12
<PAGE>
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 Sections
5.1, 6.1, 6.7, 7.1 and 7.6, (ii) lower the minimum exercise price for Options
and Stock Appreciation Rights or (iii) materially modify the requirements for
eligibility to participate in the Plan, shall be subject to the approval of the
Company's stockholders. 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 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 tranferee 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
transfereee, 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
13
<PAGE>
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
Company's approval, or paid by him in satisfaction of any judgment in any such
action, suit or proceeding against him, provided that 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,
without regard to principles of conflicts of laws.
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 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
pursuant to a transfer permitted by 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.
14
<PAGE>
11.11. 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.
11.12. 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.
11.13. 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.
11.14. 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.
11.15. 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.
11.16. 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.
11.17. Compliance with Section 162(m). Notwithstanding anything else
--------------------------------
contained in the Plan to the contrary, unless the Committee otherwise determines
at the time of grant, any Incentive Award made hereunder to an officer who is
subject to the reporting requirements of Section 16(a) of the Act is intended to
qualify as other performance based compensation within the meaning of Section
162(m)(4)(C) of the Code, and the Committee shall not be entitled to exercise
any discretion otherwise authorized under the Plan with respect to such award
if, and to the extent that, the ability to exercise such discretion (as opposed
to the exercise of such discretion) would cause such award to fail to qualify as
other performance based compensation.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LEXMARK INTERNATIONAL GROUP, INC. FOR THE THREE
MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 371
<ALLOWANCES> 17
<INVENTORY> 374
<CURRENT-ASSETS> 803
<PP&E> 404
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,230
<CURRENT-LIABILITIES> 532
<BONDS> 125
0
0
<COMMON> 1
<OTHER-SE> 465
<TOTAL-LIABILITY-AND-EQUITY> 1,230
<SALES> 672
<TOTAL-REVENUES> 672
<CGS> 426
<TOTAL-COSTS> 426
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 75
<INCOME-TAX> 25
<INCOME-CONTINUING> 50
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.69
</TABLE>
