NON-QUALIFIED STOCK OPTION AGREEMENT
pursuant to
LEXMARK INTERNATIONAL GROUP, INC.
STOCK INCENTIVE PLAN
This NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement")
between Lexmark International Group, Inc., a Delaware corporation (the
"Company"), and the person specified on the signature page hereof (the
"Optionee") is entered into as of this 12th day of February, 1998 pursuant to
the Lexmark International Group, Inc. Stock Incentive Plan, as the same may be
amended from time to time (the "Plan").
WHEREAS, the Optionee is regarded as a key employee of the
Company or one of the Subsidiaries and the Committee has determined that it
would be to the advantage and in the interest of the Company to grant the option
provided for herein to the Optionee as an inducement to the Optionee to remain
in the service of the Company and the Subsidiaries over the long-term and as an
incentive to the Optionee to devote his best efforts and dedication to the
performance of such services and to maximize shareholder value;
WHEREAS, the Optionee desires to accept from the Company the
grant of the options evidenced hereby on the terms and subject to the conditions
herein;
NOW, THEREFORE, in consideration of the premises and subject
to the terms and conditions set forth herein and in the Plan, the parties hereto
hereby covenant and agree as follows:
1. Grant of Option; Exercise Price.
-------------------------------
(a) Grant of Option; Exercise Price.
-------------------------------- The Company hereby grants to
the Optionee, effective as of February 12, 1998 (the "Grant
Date") and on the terms and conditions herein, an option (the
"Option") to purchase the number of shares (the "Option
Shares") of Class A Common Stock, par value of $.01 per share
(the "Common Stock") set forth on the signature page hereof,
at an exercise price per Option Share equal to the fair market
value on the Grant Date, $40.6875, which was the closing price
of a share of Common Stock on the Grant Date as reported for
such day in The Wall Street Journal. The Option is not
intended to be an incentive stock option under the United
States Internal Revenue Code of 1986, as amended.
(b) Stock Incentive Plan.
---------------------- This Agreement is subject in all
respects to the terms of the Plan, all of which terms are made
a part of and incorporated in this Agreement by reference. In
the event of any conflict or inconsistency between the terms
of this Agreement and the terms of the Plan, the terms of the
Plan shall control. The Optionee hereby acknowledges that a
copy of the Plan may be obtained from the Vice President of
Human Resources and agrees to comply with and be bound by all
of the terms and conditions thereof. Terms used in this
Agreement with initial capital letters, but not defined
herein, shall have the meanings assigned to them under the
Plan.
2. Vesting; Period of Exercise of Option
-------------------------------------
(a) Vesting.
------- Subject to the provisions of Section 4, the Option
shall become vested and exercisable in five equal installments
on each of the first five anniversaries of the Grant Date,
subject in the case of each such installment to the continuous
employment of the Optionee with the Company or a Subsidiary
from the date hereof to the applicable anniversary of the
Grant Date.
(b)Termination of Employment.
------------------------- If the Optionee's employment with
the Company and the Subsidiaries terminates for any reason,
other than a termination by the Company or a Subsidiary for
Cause (as defined below), any portion of the Option which is
not then exercisable shall immediately terminate and be
canceled effective upon such termination of employment and the
remaining portion of the Option, if any, shall thereafter
remain exercisable for the period provided in Section 4. In
the event of the termination of the Optionee's employment by
the Company or a Subsidiary for Cause, the Option shall
immediately terminate and be canceled in full effective upon
the date of such termination of employment.
In accepting this Option, the Optionee acknowledges that the
Option has been granted as an incentive to the Optionee to
remain employed by the Company and to exert his or her best
efforts to enhance the value of the Company over the
long-term. Accordingly, the Optionee agrees that if he or she
(a) within 12 months following termination of employment with
the Company accepts employment with a competitor of the
Company or otherwise engages in competition with the Company,
or (b) within 36 months following termination of employment
with the Company acts against the interests of the Company,
including employing or recruiting any employee of the Company
without the Company's written consent, or (c) discloses or
otherwise misuses confidential Company information or
material, each of these constituting a harmful action, then
(i) any unexercised portion of this Option shall be canceled
immediately (unless canceled earlier by operation of another
term of this Agreement) and (ii) the Optionee shall pay to the
Company an amount equal to the 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 the exercise of all or a
portion of this Option within 18 months preceding and
following the commitment of any such harmful action and
through such period as it takes the Company to discover such
harmful action. The Committee shall have the right, in its
sole discretion, not to enforce the provisions of this
paragraph with respect to the Optionee.
(c) Acceleration.
------------ The Committee may, in its discretion, accelerate
the date or dates as of which all or any portion of the Option
shall become vested and exercisable and may establish
accelerated times for vesting based upon the attainment of
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performance goals or such other factors as the Committee may
from time to time determine.
(d) Term of Option Exercise Period.
------------------------------ Except to the extent that the
Option or any portion thereof shall sooner terminate in
accordance with Section 2 or 4 hereof, once any portion of the
Option has become vested and exercisable, such portion shall
remain exercisable until the end of the day preceding the
tenth anniversary of the date hereof (the "Option Period").
3. Method of Exercise and Payment; Reload Option; Certain
-------------------------------------------------------
Restrictions on Resale.
----------------------
(a) Exercise and Payment.
-------------------- Once vested and exercisable, the Option,
or any vested portion thereof, may be exercised by the
Optionee (or his beneficiary or estate) by delivery to the
Company on any business day (the "Option Exercise Date")
written notice (the "Option Exercise Notice"), in such manner
and form as may be required by the Committee, specifying the
number of Option Shares the Optionee then desires to purchase
and the aggregate exercise price for such Option Shares (the
"Option Exercise Price"). The Option Exercise Notice shall be
accompanied by payment of the Option Exercise Price and any
other amounts required to be paid pursuant to Section 5.
The Optionee may pay the Option Exercise Price by delivering
to the Company cash, shares of Qualifying Common Stock (as
defined below) already owned by the Optionee or a combination
of cash and such shares of Qualifying Common Stock provided
that the aggregate Fair Market Value on the Option Exercise
Date of the shares of Qualifying Common Stock delivered in
payment of any portion of the Option Exercise Price shall be
equal to the excess of (x) the Option Exercise Price over (y)
the amount of any cash delivered by the Optionee in payment of
the Option Exercise Price. For purposes of this Agreement,
shares of Common Stock shall constitute Qualifying Common
Stock that may be delivered in payment of the Option Exercise
Price if such shares (i) are not subject to any outstanding
loan or other obligation and are not pledged as collateral
with respect to any loan or other obligation, other than any
such loan or other obligation extended to the Optionee by the
Company or any Subsidiary provided the Committee approves the
delivery of such shares to pay the Option Exercise Price, and
(ii) either (x) have been owned by the Optionee without
certain restrictions for a continuous period of at least six
months (or such greater or lesser period as the Committee
shall determine) or (y) were purchased by the Optionee on a
U.S. national securities exchange or under the Lexmark
Employee Share Purchase Program.
The Committee may also permit the Optionee to arrange for the
payment of all or any portion of the Option Exercise Price and
other amounts required to be paid pursuant to Section 5 by
directing a securities broker approved for such purpose by the
Committee to deliver to the Company, on behalf of the
Optionee, the proceeds of the sale on the Option Exercise Date
of a number of the Option Shares then being purchased by the
Optionee having aggregate sales proceeds on the Exercise Date
equal to the sum of all or the applicable portion of the
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Option Exercise Price and the amounts required to be paid
pursuant to Section 5 that the Optionee elects to satisfy by
using the proceeds of the sale of the Option Shares (the
"Cashless Exercise Procedure").
Within a reasonable period of time after the Option Exercise
Date, subject to payment of the Option Exercise Price and any
amounts required to be paid by the Optionee pursuant to
Section 5, the Company shall direct its stock transfer agent
to make (or to cause to be made) an appropriate book entry
reflecting the Optionee's ownership of the Option Shares then
being purchased by the Optionee. Upon request, the Company
shall deliver to the Optionee a certificate or certificates
for the number of Option Shares (reduced, if applicable, by
the number of Option Shares sold on the Option Exercise Date
pursuant to the Cashless Exercise Procedure) purchased by the
Optionee, registered in the name of the Optionee. In the event
that the Company or the Committee, in its sole discretion,
shall determine that, under applicable U.S. federal or state
or non-U.S. securities laws, the transfer of any Option Shares
must be subject to restriction, any certificates issued under
this Section 3(a) shall bear an appropriate legend restricting
the transfer of such Option Shares and appropriate stop
transfer instructions shall be delivered to the Company's
stock transfer agent.
(b) Reload Option.
-------------- Effective on the date of the exercise by the
Optionee of any portion of the Option (the "Reload Grant
Date"), if any portion of the Option Exercise Price in respect
thereof is satisfied by the Optionee by delivery to the
Company of Qualifying Common Stock, subject to the consent of
the Committee, the Optionee shall automatically be granted a
new option (the "Reload Option") to purchase a number of
shares of Common Stock equal to the number of shares of
Qualifying Common Stock so delivered, at an exercise price per
share equal to the Fair Market Value of a share of Common
Stock on the Reload Grant Date. The Reload Option shall be
fully vested upon grant and shall become exercisable on the
six month anniversary of the Reload Grant Date unless the
Optionee's employment with the Company and the Subsidiaries is
terminated due to the Optionee's death, Disability or
Retirement, then such Reload Option shall become immediately
exercisable and shall thereafter remain exercisable for the
applicable period provided in Section 4. In all other
respects, such Reload Option shall be subject to the same
terms and conditions (including the same Option Period) as the
Option and all references herein to the "Option" shall be
deemed to include the Reload Option.
(c) Restrictions on Sale upon Public Offering.
-------------------------------------------------------------
The Optionee hereby agrees that, during the 20 day period
prior to and the 180 days following the effective date of any
registration statement filed by the Company under the
Securities Act of 1933, as amended, with respect to any
underwritten public offering of any shares of the Company's
capital stock, the Optionee will not effect any public sale
or distribution of shares of Common Stock (other than as part
of such underwritten public offering).
4. Termination.
----------- The Option (or the indicated portion thereof) shall
terminate and be canceled immediately upon the first to occur of
any of the following events:
4
(a) The date of the expiration of the Option Period.
(b) The date of the termination of the Optionee's employment with
the Company or a Subsidiary for Cause.
(c) The date of the termination of the Optionee's employment with
the Company and the Subsidiaries for any reason, other than
for Cause, with respect to any portion of the Option which has
not become vested and exercisable in accordance with Section 2
on or prior to such date of such termination.
(d) In the case of the Optionee's termination of employment with
the Company and the Subsidiaries for any reason other than for
Cause or by reason of the Optionee's Retirement, Disability or
death (as each such term is defined below), with respect to
any portion of the Option which has become vested and
exercisable in accordance with Section 2 on or prior to the
date of such termination of employment, the last day of the 90
day period immediately following the date of such termination
of employment.
(e) Subject to Section 4(h), in the case of the Optionee's
termination of employment with the Company and the
Subsidiaries by reason of the Optionee's Retirement, with
respect to any portion of the Option which has become vested
and exercisable in accordance with Section 2 on or prior to
the date of such termination of employment, the last day of
the 36 month period immediately following the date of such
termination of employment.
(f) Subject to Section 4(h), in the case of the Optionee's
termination of employment with the Company and the
Subsidiaries by reason of the Optionee's Disability, with
respect to any portion of the Option which has become vested
and exercisable in accordance with Section 2 on or prior to
the date of such termination of employment, the last day of
the 12 month period immediately following the date of such
termination of employment.
(g) In the case of the Optionee's termination of employment with
the Company and the Subsidiaries by reason of the Optionee's
death, with respect to the portion of the Option which has
become vested and exercisable in accordance with Section 2 on
or prior to the date of such termination of employment, the
last day of the 12 month period immediately following the date
of such termination of employment.
(h) The last day of the 12 month period immediately following the
date of the Optionee's death during any period during which
the Optionee was entitled to exercise any portion of the
Option pursuant to Section 4(e) or 4(f).
(i) For purposes of this Agreement, the following terms shall have
the following meanings:
"Cause" shall mean (A) the willful failure by the Optionee
to perform substantially his duties as an employee of the
5
Company or any Subsidiary (other than due to physical or
mental illness) after reasonable notice to the Optionee of
such failure, (B) the Optionee's engaging in serious
misconduct that is injurious to the Company or any
Subsidiary, (C) the Optionee's having been convicted of,
or entered a plea of nolo contendere to, a crime that
---- ----------
constitutes a felony or (D) the breach by the Optionee 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.
"Disability" shall mean a physical or mental disability or
infirmity of the Optionee as defined in any disability
plan sponsored by the Company or any Subsidiary which
employs the Optionee or, if no such plan is sponsored by
the Optionee's employer, the Lexmark Long-Term Disability
Plan.
"Retirement" shall mean the Optionee's retirement (x) at
or after age 65 or (y) at or after any earlier retirement
age agreed to, in writing, by the Company after the date
hereof and prior to the Optionee's termination of
employment with the Company or any Subsidiary (other than
any such termination with the Company or a Subsidiary in
connection with a contemporaneous reemployment by another
Subsidiary or the Company).
5. Tax Withholding.
--------------- The delivery of any directions to the Company's
stock transfer agent or any certificates for shares of Common
Stock pursuant to Section 3 shall not be made until the Optionee,
or, if applicable, the Optionee's beneficiary or estate, has made
appropriate arrangements for the payment to the Company of an
amount sufficient to satisfy any applicable U.S.federal, state and
local and non-U.S. tax withholding or other tax requirements, as
determined by the Company. To satisfy the Optionee's applicable
withholding and other tax requirements, the Company shall be
entitled, in its sole discretion, to withhold Option Shares having
a Fair Market Value on the Option Exercise Date equal to the
applicable amount of such withholding and other tax requirements,
subject to any rules adopted by the Committee or required to
ensure compliance with applicable law, including, but not limited
to, Section 16(b)of the Securities Exchange Act of 1934, as
amended. Any cash payment made pursuant to Section 11 shall be
made net of any amounts required to be withheld or paid with
respect thereto (and with respect to any shares of Common Stock
delivered contemporaneously therewith) under any applicable U.S.
federal, state and local and non-U.S. tax withholding and other
tax requirements.
6. Assignability.
------------- This Option may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated by the Optionee
otherwise than by will or the laws of descent and distribution and
is exercisable during Optionee's lifetime only by the Optionee.
7. Adjustment in Capitalization.
----------------------------
(a) The aggregate number of shares of Common Stock subject to the
Option and the option exercise price and/or exercisability
criteria applicable to the Option shall be proportionately
6
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, the Option shall pertain to the securities and
other property to which a holder of the number of shares of
Common Stock then covered by the Option would have been
entitled to receive in connection with such event.
(b) 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 the Option 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
otherwise provided by the Committee, be subject to the same
terms and conditions, including restrictions on exercisability
or transfer, as are applicable to the Option with respect to
which such shares, cash or other property is received and
stock certificate(s) representing or evidencing any shares of
stock or other property so received shall be legended as
appropriate.
8. Preemption by Applicable Laws and Regulations.
------------------------------------------------- Notwithstanding
anything in the Plan or this
Agreement to the contrary, the issuance of shares of Common Stock
hereunder shall be subject to compliance with all applicable U.S.
federal, state and non-U.S. securities laws. Without limiting the
foregoing, if any law, regulation or requirement of any
governmental authority having jurisdiction shall require either
the Company or the Optionee (or the Optionee's beneficiary or
estate) to take any action in connection with the issuance of any
shares of Common Stock hereunder, the issuance of such shares
shall be deferred until such action shall have been taken to the
satisfaction of the Company.
9. Interpretation; Construction.
----------------------------
All of the powers and authority
conferred upon the Committee pursuant to any term of the Plan
or the Agreement 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 or the Agreement 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.
10. Amendment.
--------- The Committee shall have the right, in its sole
discretion, to alter or amend this Agreement, from time to time,
as provided in the Plan in any manner for the purpose of
promoting the objectives of the Plan, provided that no such
amendment shall impair the Optionee's rights under this Agreement
without the Optionee's consent. Subject to the preceding
sentence, any alteration or amendment of this
Agreement by the Committee shall, upon adoption thereof by the
Committee, become and be binding and conclusive on all persons
affected thereby without requirement for consent or other action
with respect thereto by any such person. The Company shall give
written notice to the Optionee of any such alteration or amendment
of this Agreement as promptly as practicable after the adoption
thereof. This Agreement may also be amended by a writing signed by
both the Company and the Optionee.
7
11. Change of Control.
-----------------
(a) Subject to Section 11(b), in the event of a Change in Control,
the Option shall promptly be canceled in exchange for a
payment in cash of an amount equal to the product of (i) the
excess of the Change in Control Price over the per share
option exercise price for such Option and (ii) the number of
Option Shares then subject to such Option.
(b) Notwithstanding the foregoing, no cancellation, acceleration
of exercisability, vesting, cash settlement or other payment
shall occur with respect to the Option if the Committee
reasonably determines in good faith prior to the occurrence of
a Change in Control that such Option shall be honored or
assumed, or new rights substituted therefor (such honored,
assumed or substituted award hereinafter called an
"Alternative Award"), by the Optionee'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 the Optionee with rights and entitlements
substantially equivalent to or better than the rights and
entitlements applicable under the Option, including, but
not limited to, an identical or better exercise and
vesting schedule and identical or better timing and
methods of payment;
(iii) have substantially equivalent economic value to the
Option (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
the Optionee's employment is involuntarily terminated or
constructively terminated (other than for Cause) upon or
following the Change in Control, any conditions on the
Optionee's rights under, or any restrictions on the
exercisability applicable to, the Alternative Award shall
be waived or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a
termination of the Optionee's employment upon or following
a Change in Control by the Optionee following a material
reduction in the Optionee's compensation, a material
reduction in the Optionee's responsibilities or the
relocation of the Optionee's principal place of employment
to another location a material distance farther away from
the Optionee's home, in each case, without the Optionee's
prior written consent.
12. No Rights as a Stockholder.
--------------------------- The Optionee shall have no voting or
other rights as a stockholder of the Company with respect to any
8
Option Shares until the exercise of the Option and the recording
of the Optionee's ownership of the Option Shares on the stock
transfer records for the Common Stock. No adjustment shall be made
for dividends or other rights issued with respect to the Common
Stock for which the record date is prior to the recording of such
ownership of the Option Shares.
13. Miscellaneous.
-------------
(a) Notices.
------- All notices and other communications required or
permitted to be given under this Agreement shall be in writing
and shall be deemed to have been given if delivered personally
or sent by certified or express mail, return receipt
requested, postage prepaid, or by any recognized international
equivalent of such delivery, to the Company or the Optionee,
as the case may be, at the following addresses or to such
other address as the Company or the Optionee, as the case may
be, shall specify by notice to the others delivered in
accordance with this Section 13(a):
(i) if to the Company, to it at:
000 Xxx Xxxxxx Xx. XX
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Secretary
---------
(ii)if to the Optionee, to the Optionee at the address set
forth on the signature page hereof.
All such notices and communications shall be deemed to have
been received on the date of delivery or on the third business
day after the mailing thereof.
(b) Binding Effect; Benefits.
------------------------ This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and
their respective successors and assigns. Nothing in this
Agreement, express or implied, is intended or shall be
construed to give any person other than the parties to this
Agreement or their respective successors or assigns any legal
or equitable right, remedy or claim under or in respect of any
agreement or any provision contained herein.
(c) Waiver.
------ Any party hereto may by written notice to the other
party (i) extend the time for the performance of any of the
obligations or other actions of the other party under this
Agreement, (ii) waive compliance with any of the conditions or
covenants of the other party contained in this Agreement and
(iii) waive or modify performance of any of the obligations of
the other party under this Agreement. Except as provided in
the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained
herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed
as a waiver of any preceding or succeeding breach and no
failure by a party to exercise any right or privilege
9
hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or
times hereunder.
(d) Assignability.
------------- Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof
shall be assignable by the Company or the Optionee without the
prior written consent of the other party.
(e) Applicable Law.
--------------- This Agreement shall be governed by and
construed in accordance with the laws of the State of
Delaware, regardless of the law that might be applied under
principles of conflict of laws.
(f) Section and Other Headings, Etc.
----------------------------------- The section and other
headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or
interpretation of this Agreement. In this Agreement all
references to "dollars" or "$" are to United States dollars.
(g) Counterparts.
------------ This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
and all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the Company and the Optionee have executed
this Agreement as of the date first above written.
LEXMARK INTERNATIONAL GROUP, INC.
By:
------------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President of Human Resources
OPTIONEE:
By:
------------------------------------
Name:
Title:
Address of the Optionee:
--------------------------------
Beneficiary Name
Number of shares of Common Stock
subject to the Option:
11
