SEPARATION AGREEMENT
--------------------
This SEPARATION AGREEMENT, dated as of April 30, 1998, is made and
entered into among Lexmark International, Inc., a Delaware corporation ("LII"),
Lexmark International Group, Inc., a Delaware corporation ("Group"), and Xxxx X.
Xxxxxxx (the "Employee").
W I N E S S E T H:
------------------
WHEREAS, LII, Group and Employee desire to enter into a separation
agreement and general release and covenant not to xxx agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the parties hereto hereby agree as follows:
1. Term.
---- This Agreement shall take effect on the Retirement Date (as
defined below) and, except as otherwise provided herein, shall remain in effect
until and including February 12, 2003 (such period being referred to herein as
the "Restricted Period").
2. Retirement.
---------- Employee hereby retires and resigns as Chairman of
Lexmark International, Ltd. and President and Chief Executive of Lexmark Europe,
effective as of April 30, 1998 (the "Retirement Date"), positions Employee has
held pursuant to the Letter of Employment dated October 1, 1995 and subsequently
amended on April 1, 1997 (such Letter of Employment as so amended, the
"Employment Agreement"). Employee also hereby retires and resigns from any other
officer, director or management position held in any of Group's subsidiaries or
affiliates.
3. Termination Payments.
--------------------- In order to satisfy the Company's (as defined
in the Employment Agreement) requirements in, and as a consequence of, the
Employment Agreement, LII hereby agrees to pay to Employee (pound)314,046 in a
single lump sum (less applicable withholding) (the "Payment Date"), pursuant to
the written wire transfer instructions attached hereto as Annex A. Employee
acknowledges and agrees that such amount includes: (i) the greater of (a) the
termination indemnity provided under the laws of the United Kingdom and (b) an
amount equal to one year of Employee's salary as provided in the Employment
Agreement, and, to the extent such payment is not the greater of (a) and (b),
Employee waives such provision in the Employment Agreement and accepts such
amount in full satisfaction of the termination payment; (ii) vacation days
earned by Employee and not taken; (iii) 10% national insurance contribution and
(iv) Employee's Pro-Rata Share of his annual bonus as determined by the
Employment Agreement for a termination prior to the end of the first six months
of the year. Employee hereby waives the provision in the Employment Agreement
requiring such Pro-Rata Share to be paid on the date of termination and
acknowledges and agrees that LII shall be entitled to pay the Pro-Rata Share to
Employee on the Payment Date. Such payment will be subject to regular payroll
deductions and tax withholdings.
4. Options and Other Awards.
------------------------
(a) Stock Options.
------------- On November 15, 1995, Employee was granted
45,000 stock options pursuant to Group's Stock Incentive Plan (the "Plan"), of
which 27,000 remain unvested. On February 12, 1997, Employee was granted 20,000
stock options pursuant to the Plan, of which 16,000 remain unvested. On February
10, 1998, Employee was granted 4,723 stock options pursuant to the Plan ("reload
options"), all of which are vested but will not become exercisable until August
12, 1998. On February 12, 1998, Employee was granted 10,000 stock options
pursuant to the Plan, all of which remain unvested. As part of this Agreement,
all such unvested and unexercisable stock options shall continue to be issued
and outstanding under the Plan and shall continue to vest and become exercisable
by Employee, as per the vesting schedules in the stock option agreements entered
into between Group and Employee representing such stock options, and such reload
options shall continue to be exercisable; provided that, any and all such stock
options not exercised on or before April 30, 2003, shall expire and be canceled
and forfeited by Employee. Notwithstanding the above and the terms of any such
stock option agreement, Employee shall no longer be entitled to receive any
Reload Options (as such term is defined in such stock option agreements).
(b) Restricted Stock Units.
---------------------- On February 12, 1998, Employee was
granted 2,250 restricted stock units pursuant to the Plan, all of which remain
unvested. As part of this Agreement, all such restricted stock units shall
continue to be issued and outstanding under the Plan and shall continue to vest
as per the vesting schedule in, and be subject to, the restricted stock award
agreement to be entered into between Group and Employee representing such
restricted stock units.
(c) Performance Award.
----------------- On July 31, 1997, Employee was granted
performance units under Group's Stock Incentive Plan. Pursuant to this
Agreement, Employee shall continue to be entitled to hold a pro rata portion of
his original grant of performance units equal to 1/3 of the amount previously
granted and in connection therewith to receive a certain number of shares of
Group's Class A Common Stock and a cash payment upon expiration of the
performance period (January 1, 1997 through December 31, 2000) and achievement
of certain performance goals and subject to and in accordance with the terms of
the long term incentive award agreement to be entered into between Group and
Employee representing the grant of such performance units.
Notwithstanding any provision of this Agreement, Employee shall
continue to be subject to the prohibition against "short swing profits"
applicable to insiders of Group for a period of six (6) months following
February 11, 1998. In order to facilitate compliance with this laws, Employee
agrees not to engage in any transaction involving Group's Class A Common Stock
until August 12, 1998, without first obtaining the approval of the General
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Counsel of Group. After receiving such approval and during such period, Employee
agrees to report the details of all transactions, as soon as consummated, to the
General Counsel of Group.
5. Other Payments and Benefits.
--------------------------- Employee acknowledges and agrees that
no other payments or benefits are owing or are to be paid or given to Employee
by the Company, LII or Group pursuant to the Employment Agreement or otherwise,
other than (i) as specifically set forth herein and (ii) such benefits, and
payments under pension plans, as Employee in the ordinary course as a retiree of
the Company would be entitled to receive.
6. Consulting Appointment.
----------------------
(a) Appointment.
----------- Employee hereby agrees, upon the
effectiveness of his retirement as specified above, to provide up to 60 days per
year of consulting services to LII and Group and their subsidiaries, and LII and
Group hereby retains Employee (in such capacity, "Consultant") to provide such
services, as may be specified by LII or Group from time to time, during the term
of this Agreement, as an independent contractor.
(b) Services.
-------- Consultant hereby accepts said appointment and
agrees to make available to LII, Group and their subsidiaries, on request of
LII, Consultant's advice, expertise and experience for purposes of aiding the
conduct of the business of Employer, Group and their subsidiaries.
(c) Independent Contractor.
----------------------- It is expressly understood and
agreed that in performing his obligations under this Agreement, Consultant shall
act solely as an independent contractor and not as an employee of the Company
and is not entitled to any employee benefits from the Company. Consultant is not
and shall not hold himself out to be an agent of the Company for any purpose
whatsoever, and Consultant shall not create any obligations for the Company or
bind or attempt to bind the Company in any manner whatsoever.
(d) Remuneration.
------------ As compensation for the consulting services
and other covenants and agreements hereunder, LII shall pay to Consultant
consulting fees in the amount of $1,500 per day for each day Consultant provides
consulting services upon the request of LII.
(e) Expenses.
-------- LII shall reimburse the Consultant for
reasonable travel, lodging and meal expenses incurred by him in connection with
his performance of consulting services hereunder at the request of LII, upon
submission of evidence satisfactory to LII of the incurrence and purpose of each
such expenses.
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7. Unauthorized Disclosure.
------------------------ During the Restricted Period, Employee
shall not, without the written consent of LII's Board, the General Counsel of
LII, or the Chief Executive Officer of LII, disclosure to any person (other than
an employee or director of LII or Group or any of their subsidiaries) any
confidential or proprietary information, knowledge or data that is not
theretofore publicly known and in the public domain, or obtained by him while in
the employ of the Company, LII or Group or any of their subsidiaries or
affiliates, or as a consultant for LII, Group and any of their subsidiaries,
with respect to LII or Group or any of its subsidiaries or affiliates or with
respect to any products, improvements, formulas, recipes, designs, processes,
customers, methods of sales, distribution, operation or manufacture, sales,
prices, profits, costs, contracts, suppliers, business prospects, business
methods, techniques, research, plans, strategies, personnel, organization, trade
secrets or know-how of LII or Group or any of their subsidiaries or affiliates
(collectively, "Proprietary Information"), except as may be required by law or
in connection with any judicial or administrative proceedings or inquiry.
8. Non-Competition.
---------------
(a) During the Restricted Period, Employee shall not, engage
directly or indirectly in, become employed by, serve as an agent or consultant
to, or become a partner, principal or stockholder of, any partnership,
corporation or other entity which competes with a business that represents 5% or
more of the aggregate gross revenues of LII and its subsidiaries and which is
then engaged in such competition in any geographical area in which LII or any of
its subsidiaries is then engaged in such business, without first obtaining
written approval from LII, provided that the Employee's ownership is less than
--------
1% of the issued and outstanding stock of any corporation whose stock is traded
on an established securities market shall not constitute competition with LII.
LII may grant or deny such approval in its sole discretion.
(b) During the Restricted Period, Employee will not serve as a
director of any corporation without first obtaining written approval from LII,
except that Employee shall be entitled to continue to serve as a director of
Complete Business Solutions Inc. and Kew Place. LII may grant or deny such
approval in its sole discretion.
9. Non-Interference.
---------------- During the Restricted Period, Employee will not,
directly or indirectly, for his own account or the account of any other person
or entity, (a) employ in a business of the kind in which LII is engaged, or
solicit or endeavor to entice away from LII, or otherwise intentionally
interfere with LII's relationship with, any person or entity who or which is at
the time employed by or otherwise engaged to perform services for LII or (b)
intentionally interfere with LII's relationship with any person or entity who or
which is, or has been within the previous 36 months, a customer, client or
supplier of LII.
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10. Return of Documents.
-------------------- Employee has or promptly will deliver to the
Company or LII all non-personal documents and data of any nature pertaining to
his work with the Company, LII or Group (or any of their subsidiaries), and
Employee will not take with him any documents or data of any description or any
reproduction thereof, or any documents containing or pertaining to any
Proprietary Information. Consultant will promptly, after the expiration of the
Restricted Period or upon violation of this Agreement, whichever is earlier,
again comply with this Section 10.
11. Forfeiture of Options and Other Awards and Option and Share Gain
------------------------------------------------------------------
for Breach of this Agreement.
------------------------------ If Employee violates any provision of this
Agreement, then: (1) all unexercised options and all restricted stock units and
performance units (and the right to receive cash compensation in connection with
such performance units) held by Employee shall terminate and be forfeited by
Employee, effective the date on which Employee violates this Agreement, unless
terminated sooner by operation of this Agreement; (2) any option gain (such gain
represented by the closing market price on the date of exercise over the
exercise price, multiplied by the number of options exercised ("option gain"),
without regard to any subsequent market price decrease or increase) realized by
Employee from exercising all or a portion of Employee's options within 18 months
prior to Employee's violation of this Agreement; (3) any shares of Class A
Common Stock received by Employee upon the vesting of restricted stock units or
payout of performance units (the "Employee Shares") and cash compensation in
connection with such performance units received by Employee within 18 months
prior to Employee's violation of this Agreement shall be forfeited and paid by
Employee to LII; and (4) if Employee sells any of the Employee Shares, any gain
(such gain represented by the difference between the closing market price on the
date Employee became entitled (i.e., vesting or end of the performance period)
to receive the Employee Shares and the date on which Employee sold such Shares)
realized by Employee within 18 months prior to Employee's violation of this
Agreement shall be paid by Employee to LII.
12. Condition to Payments and Continued Vesting.
--------------------------------------------- LII's obligations
hereunder to make any payments and to permit the continued vesting of Employee's
stock options and restricted stock units shall be conditioned upon LII's receipt
of an appropriately signed and not revoked "General Release and Covenant Not to
Xxx" in form and substance satisfactory to LII, an executed, final copy of which
is to be attached hereto as Exhibit A.
13. Assumption of Agreement.
------------------------- LII will request any successor (by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of LII, by agreement in form and substance reasonably
satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that LII would be required
to perform it if no such succession had taken place; provided, however, that the
-------- -------
Employee shall only be bound to any successor to LII by the terms of this
Agreement or any subsequent agreement contemplated by this
5
Section 13 for as long as Xx. Xxxx X. Xxxxxxxxx, Xxxxxxxx X. Xxxxxxx or
Xxxxxxx X. Xxxx are responsible for the interpretation and enforcement of this
Agreement for such successor entity.
14. Entire Agreement.
---------------- Except as otherwise expressly provided herein,
this Agreement and the General Release and Covenant Not to Xxx constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof, and all promises, representations, understandings, arrangements and
prior agreements relating to such subject matter (including those made to or
with Employee by any other person or entity) are superseded hereby.
15. Miscellaneous.
-------------
(a) Binding Effect.
--------------- This Agreement shall be binding on and
inure to the benefit of LII and its successors and assigns, subject to Section
13 above. This Agreement shall also be binding on and inure to the benefit of
Employee and his heirs, executors, administrators and legal representatives.
(b) Governing Law.
-------------- This Agreement shall be governed by and
constructed in accordance with the laws of the State of Delaware without
reference to principles of conflict of laws.
(c) Taxes.
----- LII may, in its discretion, withhold monies from
any payments made under the Agreement for purposes of U.S. federal, state, city,
United Kingdom or other applicable taxes or social security, insurance or
governmental regulation or ruling.
(d) Amendments.
---------- No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by LII's Board or Chief Executive Officer and is agreed to in writing
by the Employee and Chief Executive Officer of LII. No waiver by any party
hereto at any time of any breach by any other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No waiver of any provision of
this Agreement shall be implied from any course of dealing between or among the
parties hereto or from any failure by any party hereto to assert its rights
hereunder on any occasion or series of occasions.
(e) Severability.
------------ In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
(f) Notices.
------- Any notice or other communication required or
permitted to be delivered under this Agreement shall be (i) in writing, (ii)
6
delivered personally, by courier service or by certified or registered mail,
first-class postage prepaid and return receipt requested, (iii) deemed to have
been received on the date of delivery or on the third business day after the
mailing thereof, and (iv) addressed as follows (or to such other address as the
party entitled to notice shall hereafter designate in accordance with the terms
hereof):
(A) if to LII or Group, to it at:
One Lexmark Centre Drive
000 Xxx Xxxxxx Xxxx X.X.
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
---------
(B) if to the Employee, to him at the address listed
on the signature page hereof.
(g) Survival. Sections 7 and 11 of this Agreement
--------
shall survive the expiration of the Restricted Period.
(h) Counterparts.
------------ This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(i) Headings.
-------- The section and other headings contained in
this Agreement are for the convenience of the parties only and are not intended
to be a part hereof or to affect the meaning or interpretation hereof.
IN WITNESS WHEREOF, LII and Group have duly executed this Agreement by
their authorized representatives and the Employee has hereunto set his hand, in
each case effective as of the date first above written.
LEXMARK INTERNATIONAL, INC.
By: /s/ Xxxx X. Xxxxxxxxx
--------------------------------
Xxxx X. Xxxxxxxxx
President and Chief Executive Officer
LEXMARK INTERNATIONAL GROUP, INC.
By: /s/ Xxxx X. Xxxxxxxxx
--------------------------------
Xxxx X. Xxxxxxxxx
President and Chief Executive Officer
EMPLOYEE
/s/ Xxxx X. Xxxxxxx
---------------------------------
Xxxx X. Xxxxxxx
