Exhibit 10.27
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT, dated as of July 1, 2001, between Lexmark
International, Inc., a Delaware corporation (the "Employer"), and Xxxx X.
Xxxxxxxxx (the "Employee").
W I T N E S S E T H:
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WHEREAS, Employer and Employee desire to enter into an employment
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; POSITION AND RESPONSIBILITIES.
(a) TERM OF EMPLOYMENT. Unless the Employee's employment shall
sooner terminate pursuant to Section 6, the Employer shall employ the Employee
for a term commencing on the day hereof and ending on June 30, 2003 (the
"Initial Term"); provided, however, that commencing on the date two years after
the date hereof, and on each bi-annual anniversary (such date and each bi-annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Initial Term shall be automatically extended
so as to terminate two years from such Renewal Date, unless prior to the Renewal
Date the Employer or Employee shall give notice to the other that the Initial
Term shall not be so extended; and the Employee's employment shall continue
thereafter at will.
(b) POSITION AND RESPONSIBILITIES. The Employee will serve as
Chairman and Chief Executive Officer and in such other executive capacity or
capacities as may be determined from time to time by or under the authority of
the Board of Directors of the Employer ("Employer's Board"), and the Employee
will devote all of his skill, knowledge and working time (except for reasonable
vacation time and absence for sickness or similar disability) to the
conscientious performance of his duties. The Employee represents that he is
entering into this Agreement voluntarily and that his employment hereunder and
compliance by him with the terms and conditions of this Agreement will not
conflict with or result in the breach of any agreement to which he is a party or
by which he may be bound.
2. BASE SALARY. As compensation for the services to be performed by the
Employee hereunder, the Employer will pay the Employee an annual base salary of
$800,000 during the term of his employment hereunder. The Employer will review
the Employee's base salary from time to time during the period of his employment
hereunder and, in the discretion of the Employer, may increase such base salary
from time to time based upon the performance of the Employee, the financial
condition of the Employer, prevailing industry salary scales and such other
factors as the Employer shall consider relevant. (The annual base salary payable
to the Employee under this Section 2, as the same may be increased from time to
time, shall hereinafter be referred to as
the "Base Salary".) The Base Salary payable under this Section 2 shall be
reduced to the extent that the Employee elects to defer such Base Salary under
the terms of any deferred compensation or savings plan maintained or established
by the Employer, provided that any such reduction of the Base Salary shall not
be taken into account for purposes of calculating the Base Amount (as defined in
Section 3). The Employer shall pay the Employee the Base Salary in biweekly
installments, or in such other installments as may be mutually agreed upon by
the Employer and the Employee.
3. SHORT-TERM INCENTIVE COMPENSATION. The Employee shall receive an
annual incentive bonus award (the "Annual Bonus") for each calendar year ending
during the term of the Employee's employment hereunder equal to:
(a) if the Operating Result (as defined below) for such year is
equal to or greater than the Maximum Operating Target (as defined
below) for such year, 200% of the amount of the Employee's Base Salary
paid to the Employee during the calendar year for which such bonus is
payable (such amount is hereinafter referred to as the "Base Amount");
(b) if the Operating Result for such year is greater than the
Operating Target but less than the Maximum Operating Target for such
year, 100% of the Base Amount plus, for each increase of 1/25th of the
difference between the Operating Target and the Maximum Operating
Target, an additional 4.00% of the Base Amount;
(c) if the Operating Result for such year is equal to 100% of the
Operating Target for such year, 100% of the Base Amount;
(d) if the Operating Result for such year is greater than the
Minimum Operating Target (as defined below) but less than the
Operating Target for such year, 30% of the Base Amount plus, for each
increase of 1/20th of the difference between the Minimum Operating
Target and the Operating Target (100%), an additional 3.50% of the
Base Amount; and
(e) if the Operating Result for such year is equal to the Minimum
Operating Target for such year, 30% of the Base Amount.
(f) if the Operating Result for such year is greater than the
Threshold Operating Target (as defined below) but less than the
Minimum Operating Target for such year, 20% of the Base Amount plus,
for each increase of 1/10th of the difference between the Threshold
Operating Target and the Minimum Operating Target, an additional 1.0%
of the Base Amount; and
(g) if the Operating Result for such year is equal to the
Threshold Operating Target for such year, 20% of the Base Amount.
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Notwithstanding the foregoing, the Employer may increase or decrease the amount
of the Annual Bonus based upon the Employer's judgment of Employee's overall
contribution to the Employer's business results.
No Annual Bonus shall be paid if the Operating Result is less than the Threshold
Operating Target for such year. The "Operating Target", the "Maximum Operating
Target", the "Minimum Operating Target" and the "Threshold Operating Target" in
any year shall be jointly established by the Chief Executive Officer of the
Employer and the Compensation and Pension Committee of Employer's Board (the
"Committee"). The "Operating Result" for any year shall be equal to the annual
financial results for the components that make up the Operating Target as of
December 31 in such year, using United States generally accepted accounting
principles consistently applied and taking into account such other factors as
may be approved by the Committee. Notwithstanding anything else in this
Agreement to the contrary, if the Employer does not meet its Threshold Operating
Target, there shall be no annual bonus regardless of business unit, personal or
other objectives that constitute individual incentive objectives. Funding for
the Annual Bonus shall be based on the Employer's annual financial results. In
the event that the funds available to pay the Employer's aggregate Annual
Bonuses are less than the amount required to pay such Annual Bonuses, the Annual
Bonus shall be reduced in a manner deemed appropriate by the Committee, in its
sole discretion. The Annual Bonus, if any, shall be paid as soon as practicable
after the close of the year for which the Annual Bonus is payable, unless the
Employee elects to defer such amounts under the terms of any deferred
compensation or savings plan maintained or established by the Employer.
4. EMPLOYEE BENEFITS. During the term of the Employee's employment
hereunder, employee benefits, including, but not limited to, life, medical,
dental and disability insurance, will be provided to the Employee in accordance
with programs at the Employer then available to executive employees. The
Employee shall also be entitled to participate in all of Employer's profit
sharing, pension, retirement, deferred compensation and savings plans, as the
same may be amended and in effect from time to time, at levels and having
interests commensurate with the Employee's then current period of service,
compensation and position.
5. PERQUISITES AND EXPENSES.
(a) GENERAL. During the term of the Employee's employment hereunder,
the Employee shall be entitled to participate in any special benefit or
perquisite program available from time to time to executive employees of the
Employer on the terms and conditions then prevailing under such program.
(b) BUSINESS TRAVEL, LODGING, ETC. The Employer shall reimburse the
Employee for reasonable travel, lodging and meal expenses incurred by him in
connection with his performance of services hereunder upon submission of
evidence, satisfactory to the Employer, of the incurrence and purpose of each
such expense.
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6. TERMINATION OF EMPLOYMENT.
(a) TERMINATION DUE TO DEATH OR DISABILITY. In the event that the
Employee's employment hereunder terminates due to death or is terminated by the
Employer due to the Employee's Disability (as defined below), no termination
benefits shall be payable to or in respect of the Employee except as provided in
Section 6(f)(ii). For purposes of this Agreement, "Disability" shall mean a
physical or mental disability that prevents the performance by the Employee of
his duties hereunder lasting (or likely to last, based on competent medical
evidence presented to Employer's Board) for a continuous period of six months or
longer. The reasoned and good faith judgment of Employer's Board as to the
Employee's Disability shall be final and shall be based on such competent
medical evidence as shall be presented to it by the Employee or by any physician
or group of physicians or other competent medical experts employed by the
Employee or the Employer to advise Employer's Board.
(b) TERMINATION BY THE EMPLOYER FOR CAUSE. The Employee may be
terminated for Cause by the Employer. "Cause" shall mean (i) the willful failure
of the Employee substantially to perform his duties hereunder (other than any
such failure due to physical or mental illness) after a demand for substantial
performance is delivered to the Employee by the executive to which the Employee
reports or by Employer's Board, which notice identifies the manner in which such
executive or Employer's Board, as the case may be, believes that the Employee
has not substantially performed his duties, (ii) the Employee's engaging in
willful and serious misconduct that is injurious to Employer or any of its
subsidiaries, (iii) the Employee's regularly making a substantial, abusive use
of alcohol, drug, or similar substances, and such abuse in the Employer's
judgment has affected his ability to conduct the business of the Employer in a
proper and prudent manner, (iv) the Employee's conviction of, or entering a plea
of nolo contendere to, a crime that constitutes a felony, or (v) the willful and
material breach by the Employee of any of his obligations hereunder, or the
willful and material breach by the Employee of any written covenant or agreement
with the Employer or any of its affiliates not to disclose any information
pertaining to the Employer or any of its affiliates or not to compete or
interfere with the Employer or any of its affiliates.
(c) TERMINATION BY THE EMPLOYER WITHOUT CAUSE. The Employee may be
terminated Without Cause by the Employer. A termination "Without Cause" shall
mean a termination of employment by the Employer other than due to death or
Disability as defined in Section 6(a) or Cause as defined in Section 6(b).
(d) TERMINATION BY THE EMPLOYEE. The Employee may terminate his
employment for "Good Reason". "Good Reason" shall mean a termination of
employment by the Employee within 30 days following (i) any assignment to the
Employee of any duties, functions or responsibilities that are significantly
different from, and result in a substantial diminution of, the duties, functions
or responsibilities that the Employee has on the date hereof or (ii) the failure
of the Employer to obtain the assumption of this Agreement by any successor as
contemplated by Section 12.
(e) NOTICE OF TERMINATION. Any termination by the Employer pursuant
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to Section 6(a), 6(b) or 6(c), or by the Employee pursuant to Section 6(d),
shall be communicated by a written "Notice of Termination" addressed to the
other parties to this Agreement. A "Notice of Termination" shall mean a notice
stating that the Employee's employment hereunder has been or will be terminated,
indicating the specific termination provisions in this Agreement relied upon and
setting forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination of employment.
(f) PAYMENTS UPON CERTAIN TERMINATIONS.
(i) In the event of a termination of the Employee's employment
Without Cause or a termination by the Employee of his employment for Good
Reason, the Employer shall pay to the Employee (A) (1) the greater of (x) his
Base Salary, if any, for the period from the Date of Termination (as defined
below) through the last day of the Initial Term and (y) an amount equal to one
year's Base Salary; provided that Employer may, at any time, pay to the Employee
in a single lump sum an amount equal to the Base Salary remaining to be paid to
the Employee as of the date of such lump sum payment, less (2) any amounts paid
or to be paid to the Employee under the terms of any severance plan or program
of Employer, if any, as in effect on the Date of Termination, (B) the Annual
Bonus with respect to a completed fiscal year to the extent not theretofore paid
to the Employee and (C) a Pro Rata Share of the Annual Bonus (as defined below)
for the fiscal year in which the Date of Termination occurred.
In the event of the Employee's termination of employment pursuant to Section
6(c) or 6(d), the Employer shall also provide the Employee with a leave of
absence from the date of termination of employment until June 17, 2004 for
purposes of determining eligibility (but not the amount of, or time of
commencement of, benefits) of the Employee for retiree benefits pursuant to any
retiree benefit plan, practice and policy applicable to the Employee at the Date
of Termination. Notwithstanding anything to the contrary in any document or
statement, including but not limited to this Agreement, the Employer reserves
the right to change without notice any benefit plan, practice or policy at its
sole discretion. Changes may include reduction or termination of any benefit
plan, practice or policy.
(ii) If the Employee's employment shall terminate upon his
death or Disability or if Employer shall terminate the Employee's employment for
Cause, Employer shall pay the Employee his full Base Salary through the Date of
Termination, plus, in the case of termination upon the Employee's death or
Disability, a Pro Rata Share of the Annual Bonus. Any benefits payable to or in
respect of the Employee under any otherwise applicable plans, policies and
practices of the Employer shall not be limited by this provision.
(iii) For purposes of this Section 6, the "Pro Rata Share of
the Annual Bonus" shall be calculated and paid as follows. If the Employee is
terminated prior to July 1 of any year, the Pro Rata Share of the Annual Bonus
(A) will be equal to the product of (1) the Annual Bonus, calculated assuming
that 100% of the
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Operating Target is achieved in such year, and (2) a fraction equal to the
number of full months in such year prior to the Date of Termination over 12, and
(B) will be paid to the Employee within 30 days after the Date of Termination.
If the Employee is terminated on or after July 1 of any year, the Pro Rata Share
of the Annual Bonus (A) will be equal to the product of (1) the Annual Bonus,
calculated based on the actual Operating Result for such year, and (2) a
fraction equal to the number of full months in such year prior to the Date of
Termination over 12, and (B) will be paid to the Employee within 90 days after
the close of the year in respect of which the Pro Rata Share of the Annual Bonus
is payable.
(g) DATE OF TERMINATION. As used in this Agreement, the term "Date
of Termination" shall mean (i) if the Employee's employment is terminated by his
death, the date of his death, (ii) if the Employee's employment is terminated
for Cause, the date on which Notice of Termination is given as contemplated by
Section 6(e), and (iii) if the Employee's employment is terminated Without
Cause, due to the Employee's Disability or by the Employee for Good Reason, 30
days after the date on which Notice of Termination is given as contemplated by
Section 6(d) or, if no such Notice is given, 30 days after the date of
termination of employment.
(h) CONDITION TO PAYMENTS. The Employer's obligation to make any
payments hereunder shall be conditioned upon the Employer's receipt of an
appropriately signed "General Release and Covenant Not to Xxx" in form and
substance satisfactory to the Employer.
7. UNAUTHORIZED DISCLOSURE. During and after the term of his employment
hereunder, the Employee shall not, without the written consent of Employer's
Board, the General Counsel of the Employer, or the Chief Executive Officer of
the Employer, disclose to any person (other than an employee or director of the
Employer or its affiliates, or a person to whom disclosure is reasonably
necessary or appropriate in connection with the performance by the Employee of
his duties as an executive of the Employer) any confidential or proprietary
information, knowledge or data that is not theretofore publicly known and in the
public domain obtained by him while in the employ of the Employer with respect
to the Employer 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 the Employer or any of its 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. During the period of the Employee's employment and
thereafter for a period equal to the number of months providing the basis for
calculating any termination payments to the Employee under Section 6, if any
such payments are required, but in any event for at least 12 months, the
Employee shall not engage directly or indirectly in, become employed by, serve
as an agent or consultant to, or become a
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partner, principal or stockholder of, any partnership, corporation or other
entity which competes with a business (including any product or service offering
of such business) that represents 5% or more of the aggregate gross revenues of
the Employer and its subsidiaries, or competes with the Employer's Lexmark
Solution Services business, and which is then engaged in such competition in any
geographical area in which the Employer or any of its subsidiaries is then
engaged in such business without first obtaining written approval from the
Employer, PROVIDED that the Employee's ownership of 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 the Employer. The
Employer may grant or deny such approval in its sole discretion.
9. NON-INTERFERENCE. During the period of the Employee's employment and
thereafter for a period equal to the number of months providing the basis for
calculating any termination payments to the Employee under Section 6, if any
such payments are required, but in any event for at least 36 months, the
Employee will not, directly or indirectly, for his own account or the account of
any other person or entity, (a) employ, solicit or endeavor to entice away from
the Employer, or otherwise intentionally interfere with the Employer's
relationship with, any person or entity who or which is at the time, OR WITHIN 6
MONTHS OF THAT TIME HAS BEEN, employed by or otherwise engaged to perform
services for the Employer or (b) intentionally interfere with the Employer'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 the Employer.
10. RETURN OF DOCUMENTS. In the event of the termination of the
Employee's employment for any reason, the Employee will deliver to the Employer
all non-personal documents and data of any nature pertaining to his work with
the Employer, and he will not take with him any documents or data of any nature
or any reproduction thereof, or any documents containing or pertaining to any
Proprietary Information.
11. FORFEITURE OF REALIZED AND UNREALIZED GAINS ON INCENTIVE AWARDS FOR
BREACH OF THIS AGREEMENT. If the Employee violates any provision of Sections 7,
8, 9 or 10 of this Agreement, and the Employee is no longer employed by the
Employer, whether or not the termination of employment occurs prior to or
subsequent to such violation, then (1) all stock incentive awards, including but
not limited to stock options, restricted stock awards and any deferred stock
units, held by the Employee shall terminate effective the date on which Employee
violates this Agreement, unless terminated sooner by operation of another term
or condition of the Employee's stock incentive award agreement or the plan
pursuant to which such award has been issued, and (2) any gain realized by
Employee on the vesting of restricted stock or deferred stock units, and option
gains (represented by the closing market price on the date of exercise over the
exercise price, multiplied by the number of options exercised without regard to
any subsequent market price decrease or increase) realized by Employee from
exercising all or a portion of the Employee's options, within 18 months prior to
termination of employment with Employer and until such time as the violation of
Section 7, 8, 9, or 10 is discovered by Employer, shall be paid by the Employee
to the Employer. The Employee agrees that the Employer has the right to withhold
the amount owed to it from any amounts that Employer may owe the Employee from
time to
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time (including, but not limited to, wages or other compensation, fringe
benefits, or vacation pay).
12. ASSUMPTION OF AGREEMENT. The Employer will require any successor
(by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Employer, by agreement in form and substance
reasonably satisfactory to the Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Employer would be required to perform it if no such succession had taken place.
Failure of the Employer to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Employee to the greater of (x) compensation from the Employer in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employer terminated his employment Without Cause as contemplated by Section 6
and (y) amounts required to be paid to the Employee pursuant to the Change of
Control Agreement by and among Lexmark International Group, Inc. ("Group", which
was subsequently merged with and into Employer), Employer and Employee dated as
of April 30, 1998 (the "CIC Agreement"). For purposes of implementing the
foregoing clause (x), the date on which any such succession becomes effective
shall be deemed to be the Date of Termination, and for purposes of implementing
clause (y), the timing and amount of any payments required pursuant to the CIC
Agreement shall be determined in accordance with the CIC Agreement.
13. ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement, the CIC Agreement and the Indemnification Agreement made and
entered into as of the 30th day of April, 1998 by and among Employer, Group and
Employee (the "Indemnification Agreement") 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 the Employee by any other
person or entity) are merged herein, in the CIC Agreement and in the
Indemnification Agreement and superseded hereby and thereby. To the extent that
the amount and timing of payments required to be made under this Agreement are
inconsistent with or different from the amount and timing of payments required
to be made pursuant to the CIC Agreement and/or the Indemnification Agreement,
the Employee shall be entitled to the most favorable benefits provided to the
Employee under the provisions of any such agreements.
14. INDEMNIFICATION. The Employer agrees that it shall indemnify and
hold harmless the Employee to the fullest extent (a) permitted by Delaware law
from and against any and all liabilities, costs, claims and expenses arising out
of the employment of the Employee hereunder, except to the extent arising out of
or based upon the gross negligence or willful misconduct of the Employee and (b)
provided by the Indemnification Agreement.
15. NO MITIGATION. The Employee shall not be required to mitigate the
amount of any payment that the Employer becomes obligated to make in connection
with this
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Agreement, the CIC Agreement or the Indemnification Agreement, by seeking other
employment or otherwise.
16. MISCELLANEOUS.
(a) BINDING EFFECT. This Agreement shall be binding on and inure to
the benefit of the Employer and its successors and permitted assigns. This
Agreement shall also be binding on and inure to the benefit of the 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. The Employer may withhold from any payments made under
the Agreement all federal, state, city or other applicable taxes or social
security 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 Employer's Board or General Counsel of the Employer and is agreed to in
writing by the Employee and General Counsel of the Employer. 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) REFORMATION; SEVERABILITY. If any provision of this Agreement is
held by a court or arbitrator to be unreasonable in scope or duration or
otherwise, the court or arbitrator shall, to the extent permitted by law, reform
such provision so that it is enforceable, and enforce the applicable provision
as so reformed. Reformation of any provision of this Agreement pursuant to this
subsection (e) shall not affect any other provision of this Agreement or render
this Agreement unenforceable or void.
(f) NOTICES. Any notice or other communication required or permitted
to be delivered under this Agreement shall be (i) in writing, (ii) 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 the Employer, to it at:
One Lexmark Centre Drive
000 Xxxx Xxx Xxxxxx Xxxx
0
Xxxxxxxxx, Xxxxxxxx 00000
ATTENTION: General Counsel
(B) if to the Employee, to him at the address
listed on the signature page hereof.
(h) SURVIVAL. Sections 7, 8, 9,10 and 11 and, if the Employee's
employment terminates in a manner giving rise to a payment under Section 6(f),
Section 6(f) shall survive the termination of the employment of the Employee
hereunder.
(i) 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.
(j) 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, the Employer has duly executed this Agreement by
its 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/ Xxxxxxxx X. Xxxxxxx
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Xxxxxxxx X. Xxxxxxx
Vice President, Human Resources
THE EMPLOYEE:
/s/ Xxxx X. Xxxxxxxxx
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