- --------------------------------------------------------------------------------
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)
For the Quarterly Period Ended March 31, 1999
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 West New Circle Road
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 64,323,601 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, 1999.
- --------------------------------------------------------------------------------
<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, 1999 AND 1998........................2
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (Unaudited)
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998........................3
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED MARCH 31, 1999 AND 1998.......................4
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)...5-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (Unaudited)...................11-15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........15
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................17
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
------------------
1999 1998
---- ----
<S> <C> <C>
Revenues $787.0 $672.1
Cost of revenues 501.8 425.5
------ ------
Gross profit 285.2 246.6
Research and development 45.4 36.6
Selling, general and administrative 136.1 132.1
------ ------
Operating expenses 181.5 168.7
------ ------
Operating income 103.7 77.9
Interest expense 2.2 2.0
Other 1.0 1.5
------ ------
Earnings before income taxes 100.5 74.4
Provision for income taxes 32.7 24.9
------ ------
Net earnings $ 67.8 $ 49.5
====== ======
Basic net earnings per share $ 1.04 $ 0.73
====== ======
Diluted net earnings per share $ 0.96 $ 0.69
====== ======
Shares used in per share calculation:
Basic 65.3 68.1
====== ======
Diluted 70.5 72.2
====== ======
</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
1999 1998
-------- -----------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 81.2 $ 149.0
Trade receivables, net of allowance of $24.1 in 1999 and $24.2 in 1998 423.1 469.4
Inventories 351.2 333.0
Prepaid expenses and other current assets 75.0 68.6
-------- --------
Total current assets 930.5 1,020.0
Property, plant and equipment, net 437.9 430.5
Other assets 32.9 32.9
-------- --------
Total assets $1,401.3 $1,483.4
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 7.9 $ 11.7
Accounts payable 275.1 267.1
Accrued liabilities 320.9 326.9
-------- --------
Total current liabilities 603.9 605.7
Long-term debt 148.7 148.7
Other liabilities 150.9 150.9
-------- --------
Total liabilities 903.5 905.3
-------- --------
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; 64,242,179 and
65,491,131 outstanding in 1999 and 1998, respectively 0.8 0.8
Class B, 10,000,000 shares authorized; no shares outstanding
Capital in excess of par - -
Retained earnings 570.2 564.8
Treasury stock, at cost; 11,660,433 and 10,072,833 shares in 1999 479.6 411.8
and 1998, respectively
Accumulated other comprehensive earnings (loss) (524.9) (370.3)
(27.9) (29.0)
Total stockholders' equity -------- --------
Total liabilities and stockholders' equity 497.8 578.1
-------- --------
$1,401.3 $1,483.4
======== ========
</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
------------------
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 67.8 $49.5
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities:
Depreciation and amortization 19.0 17.5
Deferred taxes (1.2) (1.0)
Other non-cash charges to operations 6.8 4.7
------ -----
92.4 70.7
Change in assets and liabilities:
Trade receivables 46.3 (34.5)
Trade receivables programs - (0.3)
Inventories (18.2) (20.4)
Accounts payable 8.0 (47.3)
Accrued liabilities (6.0) 19.8
Other assets and liabilities (7.0) 10.8
------ -----
Net cash provided by (used for) operating activities 115.5 (1.2)
------ -----
Cash flows from investing activities:
Purchases of property, plant and equipment (30.4) (12.8)
Proceeds from sales of property, plant and equipment 0.1 0.1
------ -----
Net cash used for investing activities (30.3) (12.7)
------ -----
Cash flows from financing activities:
Increase (decrease) in short-term debt (0.5) 12.2
Principal payments on long-term debt - (57.0)
Proceeds from issuance of long-term debt - 125.0
Purchase of treasury stock (154.6) (86.7)
Exercise of stock options and warrants 3.4 2.5
------ -----
Net cash used for financing activities (151.7) (4.0)
------ -----
Effect of exchange rate changes on cash (1.3) (0.2)
------ -----
Net decrease in cash and cash equivalents (67.8) (18.1)
Cash and cash equivalents - beginning of period 149.0 43.0
------ -----
Cash and cash equivalents - end of period $ 81.2 $24.9
====== =====
</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, 1998.
2. INVENTORIES
(Dollars in millions)
Inventories consist of the following:
March 31 December 31
1999 1998
-------- -----------
Work in process $ 132.2 $ 140.3
Finished goods 219.0 192.7
------- -------
$ 351.2 $ 333.0
======= =======
3. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The company adopted Statement of Financial Accounting Standard ("SFAS")
No. 133, Accounting for Derivative Instruments and Hedging Activities, on
January 1, 1999. SFAS No. 133 requires that all derivatives, including
foreign currency exchange contracts, be recognized on the balance sheet
at fair value. Derivatives that are not hedges must be recorded at fair
value through earnings. If a derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of the derivative are
either offset against the change in fair value of underlying assets or
liabilities through earnings or recognized in other comprehensive
earnings until the underlying hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value is to be
immediately recognized in earnings.
The company recorded a net-of-tax cumulative-effect-type loss adjustment
of $0.4 million in accumulated other comprehensive earnings to recognize
at fair value all derivatives that are designated as cash-flow hedging
instruments upon adoption of SFAS No. 133 on January 1, 1999. This loss
adjustment, which the company expects to reclassify to earnings during
the next twelve months ending March 31, 2000, consists of a $0.6 million
loss related to interest rate swaps and a $0.2 million gain related to
foreign currency options.
Derivative Instruments and Hedging Activities
---------------------------------------------
The company's activities expose it to a variety of market risks,
including the effects of changes in foreign currency exchange rates and
interest rates. The financial exposures are monitored and managed by the
5
<PAGE>
company as an integral part of its overall risk management program. The
company's risk management program seeks to reduce the potentially adverse
effects that the volatility of the markets may have on its operating
results.
The company maintains a foreign currency risk management strategy that
uses derivative instruments to protect its interests from unanticipated
fluctuations in earnings and cash flows caused by volatility in currency
exchange rates.
The company maintains an interest rate risk management strategy that uses
derivative instruments to minimize significant, unanticipated earnings
fluctuations caused by interest rate volatility. The company's goal is to
maintain a balance between fixed and floating interest rates on its
financings.
By using derivative financial instruments to hedge exposures to changes
in exchange rates and interest rates the company exposes itself to credit
risk and market risk. The company manages exposure to counterparty credit
risk by entering into derivative financial instruments with highly rated
institutions that can be expected to fully perform under the terms of the
agreement.
Market risk is the adverse effect on the value of a financial instrument
that results from a change in currency exchange rates or interest rates.
The market risk associated with interest rate and foreign exchange
contracts is managed by the establishment and monitoring of parameters
that limit the types and degree of market risk that may be undertaken.
Fair Value Hedges
Fair value hedges are hedges of recognized assets or liabilities. The
company enters into forward exchange contracts to hedge actual purchases
and sales of inventories. The forward contracts used in this program
mature in three months or less, consistent with the related purchase and
sale commitments.
Cash Flow Hedges
Cash flow hedges are hedges of forecasted transactions or of the
variability of cash flows to be received or paid related to a recognized
asset or liability. The company purchases foreign exchange options and
forward exchange contracts expiring within one year as hedges of
anticipated purchases and sales that are denominated in foreign
currencies. These contracts are entered into to protect against the risk
that the eventual cash flows resulting from such transactions will be
adversely affected by changes in exchange rates. The company also uses
interest rate swaps to convert a portion of its variable rate financings
to fixed rates.
As of March 31, 1999, $6.5 million of deferred net gains on derivative
instruments accumulated in other comprehensive earnings are expected to
be reclassified to earnings during the next twelve months.
Accounting for Derivatives and Hedging Activities
-------------------------------------------------
All derivatives are recognized on the balance sheet at their fair value.
On the date the derivative contract is entered into, the company
designates the derivative as either a fair value or cash flow hedge.
Changes in the fair value of a derivative that is highly effective as --
and that
6
<PAGE>
is designated and qualifies as -- a fair value hedge, along with the loss
or gain on the hedged asset or liability are recorded in current period
earnings in cost of revenues. Changes in the fair value of a derivative
that is highly effective as -- and that is designated and qualifies as --
a cash-flow hedge are recorded in other comprehensive earnings, until the
underlying transactions occur.
The company formally documents all relationships between hedging
instruments and hedged items, as well as its risk management objective
and strategy for undertaking various hedge items. This process includes
linking all derivatives that are designated as fair value and cash flow
to specific assets and liabilities on the balance sheet or to forecasted
transactions. The company also formally assesses, both at the hedge's
inception and on an ongoing basis, whether the derivatives that are used
in hedging transactions are highly effective in offsetting changes in
fair value or cash flows of hedged items. When it is determined that a
derivative is not highly effective as a hedge or that it has ceased to be
a highly effective hedge, the company discontinues hedge accounting
prospectively, as discussed below.
The company discontinues hedge accounting prospectively when (1) it is
determined that a derivative is no longer effective in offsetting changes
in the fair value or cash flows of a hedged item; (2) the derivative
expires or is sold, terminated, or exercised or (3) the derivative is
discontinued as a hedge instrument, because it is unlikely that a
forecasted transaction will occur.
When hedge accounting is discontinued because it is determined that the
derivative no longer qualifies as an effective fair value hedge, the
derivative will continue to be carried on the balance sheet at its fair
value. When hedge accounting is discontinued because it is probable that
a forecasted transaction will not occur, the derivative will continue to
be carried on the balance sheet at its fair value, and gains and losses
that were accumulated in other comprehensive earnings will be recognized
immediately in earnings. In all other situations in which hedge
accounting is discontinued, the derivative will be carried at its fair
value on the balance sheet, with changes in its fair value recognized in
current-period earnings.
4. STOCKHOLDERS' EQUITY
As of March 31, 1999, the company had received authorization from the
board of directors to repurchase at management's discretion up to $600
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, 1999, the company had repurchased 11,673,314 shares in the
open market at prices ranging from $21.25 to $111.69 for an aggregate
cost of approximately $525 million. In April 1999, the company's board of
directors increased the repurchase authority by $200 million to a total
authority of $800 million.
7
<PAGE>
5. OTHER COMPREHENSIVE EARNINGS (LOSS)
(Dollars in millions)
Comprehensive earnings consists of the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1999 1998
---- ----
<S> <C> <C>
Net earnings $67.8 $49.5
Other comprehensive earnings (loss):
Foreign currency translation adjustment (5.6) (0.1)
Cash flow hedging (net of related tax liability of $0 in 1999) 6.5 -
Minimum pension liability adjustment (net of related tax benefit
of $0 in 1999 and $0.8 in 1998) 0.2 (1.5)
----- -----
Comprehensive earnings $68.9 $47.9
===== =====
</TABLE>
Accumulated other comprehensive earnings (loss) consists of the
following:
<TABLE>
<CAPTION>
Foreign Minimum Accumulated
Currency Pension Other
Translation Cash Flow Liability Comprehensive
Adjustment Hedging Adjustment Earnings (Loss)
----------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $(23.9) $ - $(5.1) $(29.0)
Transition adjustment - (0.1) - (0.1)
Current period change (5.6) 6.6 0.2 1.2
------ ----- ----- ------
Balance, March 31, 1999 $(29.5) $ 6.5 $(4.9) $(27.9)
====== ===== ===== ======
</TABLE>
8
<PAGE>
6. 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:
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1999 1998
---- ----
<S> <C> <C>
Net earnings $67.8 $49.5
===== =====
Weighted average shares used for basic EPS 65,274,089 68,088,864
Effect of dilutive securities
Long-term incentive plan 52,036 36,198
Stock options 5,137,889 4,047,201
----------- -----------
Weighted average shares used for diluted EPS 70,464,014 72,172,263
========== ==========
Basic net EPS $1.04 $0.73
Diluted net EPS $0.96 $0.69
</TABLE>
Options to purchase an additional 577,727 and 19,337 shares of Class A
common stock were outstanding at March 31, 1999 and 1998, respectively,
but were not included in the computation of diluted earnings per share
because their effect would be antidilutive.
7. 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.
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
-------- -----------
Statement of financial position data:
<S> <C> <C>
Current assets $930.5 $1,020.0
Noncurrent assets 470.8 463.4
Current liabilities 607.8 609.6
Noncurrent liabilities 299.6 299.6
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1999 1998
---- ----
Statement of earnings data:
<S> <C> <C>
Revenues $787.0 $672.1
Gross profit 285.2 246.6
Net earnings 67.8 49.5
</TABLE>
Current liabilities at both March 31, 1999 and December 31, 1998 include
$3.9 million that is owed to Lexmark International Group, Inc.
8. SUBSEQUENT EVENTS
On April 29, 1999, the company announced a two-for-one stock split. The
stock split will be effected in the form of a stock dividend and will
entitle each stockholder of record on May 20, 1999 to receive one share
of Class A common stock for each share of Class A common stock held on
the record date. The stock dividend will be distributed on June 10, 1999.
Earnings per share calculations included in this filing have not been
restated to reflect this stock split.
At the company's annual meeting of stockholders on April 29, 1999, the
stockholders approved an increase in the number of authorized shares of
its Class A common stock from 160 million to 450 million shares.
10
<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, 1999 were $787
million, an increase of 17% over the same period of 1998. The impact of foreign
currency translation during the quarter was minimal. Total U.S. revenues were up
$30 million or 10%, and international revenues were up $84 million or 23%.
Revenues from original equipment manufacturers ("OEM") customers for the first
quarter of 1999 accounted for less than 10% of total revenues with no single OEM
customer accounting for more than 5% of total revenues.
The revenue growth for the quarter ended March 31, 1999 over the same period in
1998 was primarily driven by unit volume increases in printers and associated
consumable supplies.
Consolidated gross profit was $285 million for the three months ended March 31,
1999, an increase of 16% from the same period of 1998 primarily due to the
higher revenues. Gross profit as a percentage of revenues for the first quarter
of 1999 decreased to 36% from 37% in 1998. This decrease was principally due to
a mix shift between products.
Total operating expenses increased 8% in the first quarter of 1999 compared to
the same period of 1998. Expenses as a percentage of revenues were at 23% for
the first quarter of 1999 an improvement of 2 points over the same period last
year, principally reflecting lower selling, general and administrative expenses
as a percentage of sales.
Consolidated operating income was $104 million for the first quarter of 1999, an
increase of 33% over the corresponding period of 1998. This increase was
principally due to improved printer sales volume and the volume increase in
associated consumable supplies.
Net earnings for the first quarter of 1999 were $68 million, an increase of 37%
compared to the same period of 1998. This increase is principally due to the 33%
increase in operating income. The income tax provision was approximately 33% of
earnings before tax for the first quarter of 1999 as compared to approximately
34% in the same period of 1998. The decrease in the income tax rate is primarily
due to the effect of lower tax rates on manufacturing activities in certain
countries.
Basic net earnings per share were $1.04 for the first quarter of 1999 compared
to $0.73 in the first quarter of 1998, an increase of 43%. Diluted net earnings
per share were $0.96 for the first three months of 1999 compared to $0.69 in the
first three months of 1998, an increase of 40%.
Financial Condition
- -------------------
The company's financial position remains strong at March 31, 1999, with working
capital of $327 million compared to $414 million at December 31, 1998. At March
31, 1999, the company had outstanding $8 million of short-term debt and $149
million of long-term debt. The debt to total capital ratio was 24% at the end of
the first quarter of 1999 compared to 22% at December 31, 1998. The increase in
debt to total capital ratio reflects higher cash usage for stock repurchases
discussed further below.
Cash provided by operating activities for the three months ended March 31, 1999
was $116 million compared to $1 million cash used for operating activities for
the same period of 1998. The increase in cash flows from operating
11
<PAGE>
activities in the first quarter of 1999 over the first quarter of 1998 was
primarily attributable to a decrease in trade receivables and an increase in
accounts payable in the period.
Capital expenditures were $30 million in the first quarter 1999 compared to $13
million for the same period in 1998. It is anticipated that total capital
expenditures for 1999 will be in excess of $200 million to fund further
expansion of printer and associated supplies manufacturing capacity, including a
manufacturing facility in the Philippines. The 1999 capital expenditures are
expected to be funded primarily through cash from operations.
In April 1999, the company received authorization from the board of directors to
repurchase an additional $200 million of its Class A common stock for a total
repurchase authority of $800 million. The repurchase authority allows the
company at management's discretion to selectively repurchase its stock from time
to time in the open market or in privately negotiated transactions depending
upon market price and other factors. During the first quarter of 1999, the
company repurchased 1,587,600 shares in the open market at prices ranging from
$85.63 to $111.69 at a cost of approximately $155 million. As of March 31, 1999,
the company had repurchased 11,673,314 shares at prices ranging from $21.25 to
$111.69 for an aggregate cost of approximately $525 million.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computers, software and other equipment
that fail to utilize the full four-digit representation of a year which would
cause date-sensitive software to recognize a date using "00" as the year 1900
rather than the year 2000. This could result in system failures or
miscalculation causing disruption of operations, including, among other things,
a temporary inability to process transactions, send invoices, or engage in
similar normal business activities. In addition, equipment containing embedded
chips could malfunction as a result of this issue. If systems are not modified
to be Year 2000 compliant, such failures could occur and could materially affect
the company's results of operations, liquidity, and financial condition. In
recent years, in order to reduce costs associated with information processing
and to improve access to business information through common, integrated
computing systems, the company converted its major information technology
systems to a network based integrated processing system. This system is Year
2000 compliant.
The company has conducted a comprehensive review of its computer and
manufacturing equipment systems to identify the systems that could be affected
by the Year 2000 Issue and has developed a comprehensive plan to address the
issues. This plan includes analyzing and identifying systems and equipment that
need to be replaced or upgraded as a result of the Year 2000 Issue. This review
was completed during 1998. Required replacements and upgrades of critical
systems and equipment were substantially complete and tested as of December 31,
1998. The Year 2000 Issue has not delayed implementation of any other planned
system projects; however, some planned system projects were accelerated to
replace non-compliant systems.
Almost all of the company's products are Year 2000 compliant. There are some
products that are not Year 2000 compliant but can be upgraded to become
compliant. A few products are not Year 2000 compliant and may never be Year 2000
compliant. The company does not expect costs associated with making its own
products compliant to be material.
The company has established communications with its significant suppliers,
customers and others with which it conducts business to help them identify their
own Year 2000 issues. If necessary modifications and conversions by the company
and those with which it conducts business are not completed timely, the Year
2000 Issue may have a material adverse effect on the company's results of
operations, liquidity, and financial position. The company is currently
evaluating and prioritizing the responses from suppliers to establish
contingency plans. For significant production suppliers, possible contingencies
include securing alternate sources or purchasing additional inventory prior to
January 2000. Services provided by various utility companies are vital to the
company, and the company is communicating with them about their plans and
progress in addressing the Year 2000 Issue. The company is currently
12
<PAGE>
developing contingency plans to address possible interruptions in utility
services. At the same time, the company is actively working with its utility
suppliers to gain assurance of uninterrupted service.
Costs
- -----
The total costs associated with the company's required modifications and
conversions to become Year 2000 compliant and to address Year 2000 non-compliant
products are not currently expected to be material to the company's results of
operations, liquidity and financial position and are being expensed as incurred.
The costs of the company's Year 2000 plan and the date on which the company
expects to complete the Year 2000 Issue modifications are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
the company's current expectations.
Risks
- -----
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially adversely affect the company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers, including
utility companies, and customers, the company is unable to conclude that the
consequences of Year 2000 failures will not have a material impact on the
company's results of operations, liquidity or financial position.
THE DISCUSSION AND ANALYSIS OF THE YEAR 2000 ISSUE INCLUDED HEREIN CONTAINS
FORWARD-LOOKING STATEMENTS AND ARE BASED ON MANAGEMENT'S BEST ESTIMATES OF
FUTURE EVENTS. RISKS RELATED TO COMPLETING THE COMPANY'S YEAR 2000 PLAN INCLUDE
THE AVAILABILITY OF RESOURCES, THE COMPANY'S ABILITY TO TIMELY DISCOVER AND
CORRECT THE POTENTIAL YEAR 2000 SENSITIVE PROBLEMS WHICH COULD HAVE A SERIOUS
IMPACT ON THE COMPANY'S OPERATIONS, THE ABILITY OF SUPPLIERS TO BRING THEIR
SYSTEMS INTO YEAR 2000 COMPLIANCE, AND THE COMPANY'S ABILITY TO IDENTIFY AND
IMPLEMENT EFFECTIVE CONTINGENCY PLANS TO ADDRESS YEAR 2000 FAILURES.
Factors That May Affect Future Results and Information Concerning Forward -
- ---------------------------------------------------------------------------
Looking Statements
- ------------------
Statements contained in this report which are not statements of historical fact
are 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 beliefs 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 company has conducted a comprehensive review of its computer and
manufacturing equipment systems to identify the systems that could be affected
by the Year 2000 Issue and has developed a comprehensive plan to address the
issues. However, the failure to timely discover and correct a material Year 2000
problem could result in an interruption in, or a failure of, normal business
activities or operations. Such failures could materially adversely affect the
company's operating results, liquidity and financial condition.
~ The company's future operating results may be adversely affected if it is
unable to continue to develop, manufacture and market products that meet
customers' needs. The markets for printers and associated supplies are
increasingly
13
<PAGE>
competitive, especially with respect to pricing and the introduction of new
technologies and products offering improved features and functionality. The
company and its major competitors, all of which have significantly greater
financial, marketing and technological resources than the company, have
regularly lowered prices on their printers and are expected 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 and jeopardize
the company's ability to grow or maintain its market share.
~ The company's performance depends in part upon its ability to increase printer
and associated supplies manufacturing capacity in line with growing market
demands and to manage inventory levels to support the demands of new customers
as well as its established customer base. The company's future operating results
and its ability to effectively grow or maintain its market share may be
adversely affected if it is unable to address these issues on a timely basis.
~ The company markets and sells its products through several sales channels. The
company's future results may be adversely affected by any conflicts that might
arise between its various sales channels.
~ 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 buildup 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. 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. Moreover, margins on
international sales tend to be lower than those on domestic sales, and 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.
~ The company's success depends in part on its ability to obtain patents,
copyrights and trademarks, maintain trade secret protection and operate without
infringing the proprietary rights of others. Current or future claims of
intellectual property infringement could prevent the company from obtaining
technology of others and could otherwise adversely affect its operating results,
cash flows, financial position or business, as could expenses incurred by the
company in enforcing its intellectual property rights against others.
~ Factors unrelated to the company's operating performance, including economic
and business conditions, both national and international; the potential impact
of the Year 2000 conversion on customers or suppliers; the loss of significant
customers or suppliers; the outcome of pending and future litigation or
governmental proceedings; changes in and execution of the company's business
strategy; and the ability to retain and attract key personnel, could also
adversely affect the company's operating results. In addition, trading activity
in the company's common stock, particularly the trading of large blocks and
interday trading in the company's common stock, may affect the company's common
stock price.
While the company reassesses material trends and uncertainties affecting the
company's financial condition and results of operations in connection with its
preparation of its quarterly and annual reports, the company does not intend to
review or revise, in light of future events, any particular forward-looking
statement contained in this report.
14
<PAGE>
The information referred to above should be considered by investors when
reviewing any forward-looking statements contained in this report, in any of the
company's public filings or press releases or in any oral statements made by the
company or any of its officers or other persons acting on its behalf. The
important factors that could affect forward-looking statements are subject to
change, and the company does not intend to update the foregoing list of certain
important factors. By means of this cautionary note, the company intends to
avail itself of the safe harbor from liability with respect to forward-looking
statements that is provided by Section 27A and Section 21E referred to above.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The market risk inherent in the company's financial instruments and positions
represents the potential loss arising from adverse changes in interest rates and
foreign currency exchange rates.
Interest Rates
- --------------
At March 31, 1999, the fair value of the company's senior notes is estimated at
$150 million using quoted market prices and yields obtained through independent
pricing sources for the same or similar types of borrowing arrangements, taking
into consideration the underlying terms of the debt. Such fair value exceeded
the carrying value of debt at March 31, 1999 by approximately $1 million. Market
risk is estimated as the potential change in fair value resulting from a
hypothetical 10% adverse change in interest rates and amounts to approximately
$7 million at March 31, 1999.
The company has interest rate swaps that serve as a hedge of financings which
are based on floating interest rates. The fair value at March 31, 1999 was a
liability of $1 million. Market risk is estimated as the potential change in
fair value resulting from a hypothetical 10% adverse change in interest rates
and amounts to less than $1 million at March 31, 1999.
Foreign Currency Exchange Rates
- -------------------------------
The company employs a foreign currency hedging strategy to limit potential
losses in earnings or cash flows from adverse foreign currency exchange rate
movements. Foreign currency exposures arise from transactions denominated in a
currency other than the company's functional currency and from foreign
denominated revenues and profits translated into U.S. dollars. The primary
currencies to which the company is exposed include the Euro and other European
currencies, the Japanese yen and other Asian and South American currencies.
Exposures are hedged with foreign currency forward contracts, put options, and
call options with maturity dates of less than one year. The potential loss in
fair value at March 31, 1999 for such contracts resulting from a hypothetical
10% adverse change in all foreign currency exchange rates is approximately $39
million. This loss would be mitigated by corresponding gains on the underlying
exposures.
15
<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 29,
1999.
(b) At said Annual Meeting, the stockholders voted on the following
five proposals:
(i) The election of three Directors for terms expiring in 2002.
The stockholders elected the Directors by the following votes:
Director Votes For Votes Withheld
-------- --------- --------------
B. Charles Ames 56,107,545 534,892
Ralph E. Gomory 56,127,956 514,481
Marvin L. Mann 56,139,340 503,097
The terms of office of Frank T. Cary, Paul J. Curlander, William
R. Fields, Stephen R. Hardis, James F. Hardymon, Robert Holland,
Jr., Michael J. Maples and Martin D. Walker continued after the
meeting.
(ii) The approval of the 1999 Employee Stock Purchase Plan - The
stockholders approved such plan by the following votes:
Votes For Votes Against Abstentions
--------- ------------- -----------
55,073,678 1,533,010 35,749
(iii) The approval of certain terms and conditions of annual
incentive compensation awards for select executive officers - The
stockholders approved such terms and conditions of annual
incentive compensation awards by the following votes:
Votes For Votes Against Abstentions
--------- ------------- -----------
54,693,631 1,861,134 87,672
(iv) The approval of an amendment to the Third Restated
Certificate of Incorporation increasing the number of authorized
shares of Class A common stock from 160 million shares to 450
million shares - The stockholders approved such amendment by the
following votes:
Votes For Votes Against Abstentions
--------- ------------- -----------
40,241,224 16,349,242 51,971
16
<PAGE>
(v) The approval of an amendment to the Third Restated Certificate
of Incorporation that would fix the size of the Board of Directors
at no more than fourteen - The stockholders approved such
amendment by the following votes:
Votes For Votes Against Abstentions
--------- ------------- -----------
54,252,503 2,342,940 46,994
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 19 of this report.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended
March 31, 1999.
17
<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 12 , 1999 By: /s/ David L. Goodnight
------------------------- -----------------------------------
David L. Goodnight
Vice President and Corporate Controller
(Chief Accounting Officer)
18
<PAGE>
EXHIBIT INDEX
Exhibits:
3 (i) Amendment to Third Restated Certificate of Incorporation of Lexmark
International Group, Inc.
(the "Company").
3 (ii) Company By-Laws as Amended and Restated April 29, 1999.
10.1 1999 Employee Stock Purchase Plan.
10.2 Amendment No. 1 to the Lexmark International Group, Inc. Nonemployee
Director Stock Plan.
10.3 Retirement Agreement by and among the Company, Lexmark International,
Inc. and Marvin L. Mann. +
27 Financial Data Schedule
- ----------------
+ Indicates management contract or compensatory plan, contract or arrangement.
19
<PAGE>
CERTIFICATE OF AMENDMENT
------------------------
OF
--
THIRD RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------
OF
--
LEXMARK INTERNATIONAL GROUP, INC.
---------------------------------
PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
----------------------------
Lexmark International Group, Inc., a corporation organized under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies as follows:
1. The Third Restated Certificate of Incorporation of the Corporation
is hereby amended, as authorized by Section 242 of the General Corporation Law
of the State of Delaware, (i) to increase the number of authorized shares of
Class A Common Stock from 160 million shares to 450 million shares and (ii) to
fix the size of the Board of Directors at no more than fourteen Directors.
2. The holders of a majority of the outstanding stock entitled to vote
voted in favor of said amendments at the Annual Meeting of Stockholders held
April 29, 1999 in accordance with the provisions of Sections 211 and 242 of the
General Corporation Law of the State of Delaware and a notice of the taking of
such action at the meeting was provided in accordance with Section 222 thereof.
3. To effect the first of such amendments increasing the number of
authorized shares of Class A Common Stock from 160 million shares to 450 million
shares, the first paragraph of Article FOURTH of the Third Restated Certificate
of Incorporation of the Corporation is hereby amended to read as follows:
"FOURTH: The total number of shares of all classes of
------
stock which the Corporation shall have authority to issue is Four
Hundred Sixty-one Million Six Hundred Thousand (461,600,000) shares,
consisting of (i) 450,000,000 shares of Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), (ii) 10,000,000 shares of
Class B Common Stock, par value $.01 per share (the "Class B Common
Stock") and (iii) 1,600,000 shares of preferred stock, par value $.01
per share (the "Preferred Stock"). As used in this Third Restated
Certificate of Incorporation, the term "Common Stock" shall include the
Class A Common Stock and the Class B Common Stock."
4. To effect the second of such amendments fixing the size of the Board
of Directors at no more than fourteen, the first sentence of paragraph (b) of
Article FIFTH of the Third Restated Certificate of Incorporation is hereby
amended to read as follows:
<PAGE>
"(b) The number of Directors of the Corporation shall not be
less than one nor more than fourteen and, subject to such limits, shall
be fixed by resolution duly adopted from time to time by the Board of
Directors."
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by Paul J. Curlander, its Chairman, President and Chief Executive
Officer and attested by Vincent J. Cole, its Secretary, this 29th day of April,
1999.
LEXMARK INTERNATIONAL GROUP, INC.
BY: /s/ Paul J. Curlander
---------------------------------
Paul J. Curlander
Chairman, President and Chief
Executive Officer
ATTEST:
BY: /s/ Vincent J. Cole
---------------------------------
Vincent J. Cole
Secretary
2
LEXMARK INTERNATIONAL GROUP, INC.
BY-LAWS
As Amended and Restated April 29, 1999
<PAGE>
LEXMARK INTERNATIONAL GROUP, INC.
BY-LAWS
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
ARTICLE I
STOCKHOLDERS.........................................................1
Section 1.01. Annual Meetings........................................1
Section 1.02. Special Meetings.......................................1
Section 1.03. Notice of Meetings; Waiver.............................2
Section 1.04. Quorum.................................................2
Section 1.05. Voting.................................................2
Section 1.06. Voting by Ballot.......................................3
Section 1.07. Adjournment............................................3
Section 1.08. Proxies................................................3
Section 1.09. Organization; Procedure................................3
Section 1.10. Consent of Stockholders in Lieu of Meeting.............4
Section 1.11. Notice of Nominations and Business.....................4
ARTICLE II
BOARD OF DIRECTORS ................................................. 7
Section 2.01. General Powers.........................................7
Section 2.02. Number and Term of Office..............................7
Section 2.03. Election of Directors..................................7
Section 2.04. Annual and Regular Meetings............................8
Section 2.05. Special Meetings; Notice...............................8
Section 2.06. Quorum; Voting.........................................9
Section 2.07. Adjournment............................................9
Section 2.08. Action Without a Meeting...............................9
Section 2.09. Regulations; Manner of Acting..........................9
Section 2.10. Action by Telephonic Communications....................9
Section 2.11. Resignations...........................................9
Section 2.12. Vacancies and Newly Created Directorships..............9
Section 2.13. Reliance on Accounts and Reports, etc.................10
Section 2.14. Compensation..........................................10
i
<PAGE>
SECTION PAGE
- ------- ----
ARTICLE III
COMMITTEES...........................................................10
Section 3.01. How Constituted........................................10
Section 3.02. Alternates.............................................11
Section 3.03. Executive Committee....................................11
Section 3.04. Finance and Audit Committee............................11
Section 3.05. Compensation and Pension Committee.....................11
Section 3.06. Corporate Governance and Public Policy Committee.......11
Section 3.07. Quorum and Manner of Acting............................12
Section 3.08. Action by Telephonic Communications....................12
Section 3.09. Absent or Disqualified Members.........................12
Section 3.10. Resignations...........................................12
Section 3.11. Removal................................................13
Section 3.12. Vacancies..............................................13
ARTICLE IV
OFFICERS AND AGENTS .................................................13
Section 4.01. Number.................................................13
Section 4.02. Election...............................................13
Section 4.03. Salaries...............................................13
Section 4.04. Removal and Resignation; Vacancies.....................13
Section 4.05. Authority and Duties of Officers.......................14
Section 4.06. The Chairman...........................................14
Section 4.07. The Chief Executive Officer............................14
Section 4.08. The President..........................................15
Section 4.09. The Chief Operating Officer............................15
Section 4.10. The Vice President & Chief Financial Officer...........15
Section 4.11. The Treasurer..........................................16
Section 4.12. The Secretary..........................................16
ARTICLE V
CAPITAL STOCK .......................................................17
Section 5.01. Certificates of Stock, Uncertificated Shares...........17
Section 5.02. Signatures; Facsimile..................................18
Section 5.03. Lost, Stolen or Destroyed Certificates.................18
Section 5.04. Transfer of Stock......................................18
Section 5.05. Record Date............................................18
Section 5.06. Registered Stockholders................................19
Section 5.07. Transfer Agent and Registrar...........................19
ii
<PAGE>
SECTION PAGE
- ------- ----
ARTICLE VI
INDEMNIFICATION .....................................................20
Section 6.01. Nature of Indemnity....................................20
Section 6.02. Successful Defense.....................................21
Section 6.03. Determination That Indemnification Is Proper...........21
Section 6.04. Advance Payment of Expenses............................21
Section 6.05. Procedure for Indemnification of Directors and
Officers.........................................21
Section 6.06. Survival; Preservation of Other Rights.................22
Section 6.07. Insurance..............................................22
Section 6.08. Severability...........................................23
ARTICLE VII
OFFICES..............................................................23
Section 7.01. Registered Office......................................23
Section 7.02 Other Offices...........................................23
ARTICLE VIII
GENERAL PROVISIONS ..................................................23
Section 8.01. Dividends..............................................23
Section 8.02. Reserves...............................................24
Section 8.03. Execution of Instruments...............................24
Section 8.04. Corporate Indebtedness.................................24
Section 8.05. Deposits...............................................25
Section 8.06. Checks.................................................25
Section 8.07. Sale, Transfer, etc. of Securities.....................25
Section 8.08. Voting as Stockholder..................................25
Section 8.09. Fiscal year............................................25
Section 8.10. Seal...................................................25
Section 8.11. Books and Records; Inspection..........................26
ARTICLE IX
AMENDMENT OF BY-LAWS.................................................26
Section 9.01. Amendment..............................................26
ARTICLE X
CONSTRUCTION ........................................................26
iii
<PAGE>
LEXMARK INTERNATIONAL GROUP, INC.
BY-LAWS
-------
As amended and restated as of April 29, 1999
ARTICLE I
---------
STOCKHOLDERS
------------
Section 1.01. Annual Meetings. The annual meeting of the
----------------
stockholders of Lexmark International Group, Inc. (the "Corporation") for the
election of Directors and for the transaction of such other business as properly
may come before such meeting shall be held at such place, either within or
without the State of Delaware, and at 10:00 A.M. local time on the last Thursday
in April (or, if such day is a legal holiday, then on the next succeeding
business day), or at such other date and hour, as may be fixed from time to time
by resolution of the Board of Directors and set forth in the notice or waiver of
notice of the meeting. [Sections 211(a), (b).] *
Section 1.02. Special Meetings. Special meetings of the
-----------------
stockholders may be called at any time by the Chairman or the Chief Executive
Officer (or, in the event of the absence or disability of the Chairman and the
Chief Executive Officer, by the President or, in the event of his absence or
disability, by the Chief Operating Officer or, in the event of his absence or
disability, by the Vice President & Chief Financial Officer or, in the event of
his absence or disability, any Vice President designated by the Chief Executive
Officer to act in the event of his absence or disability), or by the Board of
Directors. Such special meetings of the stockholders shall be held at such
places, within or without the State of Delaware, as shall be specified in the
respective notices or waivers of notice thereof. [Section 211(d).]
- ----------------
* Citations are to the General Corporation Law of the State of Delaware
and are inserted for reference only, and do not constitute a part of
the By-Laws.
<PAGE>
Section 1.03. Notice of Meetings; Waiver. The Secretary or any
--------------------------
Assistant Secretary shall cause written notice of the place, date and hour of
each meeting of the stockholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than ten nor more than 60 days prior to the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the record of stockholder of the Corporation, or, if he
shall have filed with the Secretary of the Corporation a written request that
notices to him be mailed to some other address, then directed to him at such
other address. Such further notice shall be given as may be required by law.
No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in a written
waiver of notice. The attendance of any stockholder at a meeting of stockholders
shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
[Sections 222, 229.]
Section 1.04. Quorum. Except as otherwise required by law or
------
by the Certificate of Incorporation, the presence in person or by proxy of the
holders of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting.
[Section 216.]
Section 1.05. Voting. If, pursuant to Section 5.05 of these
------
By-Laws, a record date has been fixed, every holder of record of shares entitled
to vote at a meeting of stockholders shall be entitled to one vote for each
share outstanding in his name on the books of the Corporation at the close of
business on such record date. If no record date has been fixed, then every
holder of record of shares entitled to vote at a meeting of stockholders shall
be entitled to one vote for each share of stock standing in his name on the
books of the Corporation at the close of business on the day next preceding the
day on which notice of the meeting is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. Except as otherwise required by law or by the Certificate of
Incorporation, the vote of a majority of the shares represented in person or by
proxy at any meeting at which a quorum is present shall be sufficient for the
transaction of any business at such meeting. [Sections 212(a), 216.]
2
<PAGE>
Section 1.06. Voting by Ballot. No vote of the stockholders
----------------
need be taken by written ballot or conducted by inspectors of election, unless
otherwise required by law. Any vote which need not be taken by ballot may be
conducted in any manner approved by the meeting.
Section 1.07. Adjournment. If a quorum is not present at any
-----------
meeting of the stockholders, the stockholders present in person or by proxy
shall have the power to adjourn any such meeting from time to time until a
quorum is present. Notice of any adjourned meeting of the stockholders of the
Corporation need not be given if the place, date and hour thereof are announced
at the meeting at which the adjournment is taken, provided that if the
adjournment is for more than 30 days, or if after the adjournment a new record
date for the adjourned meeting is fixed pursuant to Section 5.05 of these
By-Laws, a notice of the adjourned meeting, conforming to the requirements of
Section 1.03 of these By-Laws, shall be given to each stockholder of record
entitled to vote at such meeting. At any adjourned meeting at which a quorum is
present, any business may be transacted that might have been transacted on the
original date of the meeting. [Section 222(c).]
Section 1.08. Proxies. Any stockholder entitled to vote at any
-------
meeting of the stockholders or to express consent to or dissent from corporate
action without a meeting may, by a written instrument signed by such stockholder
or his attorney-in-fact, authorize another person or persons to vote at any such
meeting and express such consent or dissent for him by proxy. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless such proxy provides for a longer period. Every proxy shall
be revocable at the pleasure of the stockholder executing it, except in those
cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by filing another duly executed proxy bearing a later date with the
Secretary. [Section 212(b), (c).]
Section 1.09. Organization; Procedure. At every meeting of
------------------------
stockholders the presiding officer shall be the Chairman, or in the event of his
absence or disability, the Chief Executive Officer or, in the event of his
absence or disability, a presiding officer chosen by a majority of the
stockholders present in person or by proxy. The Secretary, or in the event of
his absence or disability, the Assistant Secretary, if any, or if there be no
Assistant Secretary, in the absence of the Secretary, an appointee of the
presiding officer, shall act as Secretary of the meeting. The order of business
and all other matters of procedure at every meeting of stockholders may be
determined by such presiding officer.
3
<PAGE>
Section 1.10. Consent of Stockholders in Lieu of Meeting. To
------------------------------------------
the fullest extend permitted by law, whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, such action may be taken without a meeting, without prior
notice and without a vote of stockholders, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Every written consent shall bear the date of signature of each
stockholder or member who signs the consent and no written consent shall be
effective to take the corporate action referred to therein unless, within 60
days of the earliest dated consent delivered in the manner required by law to
the Corporation, written consents signed by a sufficient number of holders or
members to take action are delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. [Section 228.]
Section 1.11. Notice of Nominations and Business.
----------------------------------
(a) Generally. Nominations of persons for election to the
Board of Directors of the Corporation and the proposal of business to be
transacted by the stockholders may be made at an annual meeting of the
stockholders (i) pursuant to the Corporation's notice with respect to such
meeting, (ii) by or at the direction of the Board or (iii) by any stockholder of
record of the Corporation who was a stockholder of record at the time of the
giving of the notice provided for in Section 1.11(b), who is entitled to vote at
the meeting and who has complied with the notice procedures set forth in this
Section 1.11. A stockholder proceeding under this Section 1.11 shall also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules and regulations thereunder with
respect to matters set forth in this Section 1.11. Nothing in this Section 1.11
shall be deemed to affect any rights of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
4
<PAGE>
(b) Procedures.
(i) For nominations or other business to be properly brought
before an annual meeting of the stockholders by a stockholder pursuant
to Section 1.11(a)(iii), (A) the stockholder must have given timely
notice thereof in writing to the Secretary, (B) such business must be a
proper matter for stockholder action under the Delaware Corporation
Law, (C) if the stockholder, or the beneficial owner on whose behalf
any such proposal or nomination is made, has provided the Corporation
with a Solicitation Notice, as that term is defined below, such
stockholder or beneficial owner must, in the case of a proposal, have
delivered a proxy statement and form of proxy to holders of at least
the percentage of the Corporation's voting shares required under
applicable law to carry any such proposal, or, in the case of a
nomination or nominations, have delivered a proxy statement and form of
proxy to holders of a percentage of the Corporation's voting shares
reasonably believed by such stockholder or beneficial holder to be
sufficient to elect the nominee or nominees proposed to be nominated by
such stockholder, and must, in either case, have included in such
materials the Solicitation Notice, and (D) if no Solicitation Notice
relating thereto has been timely provided pursuant to this Section
1.11, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to
have required the delivery of such a Solicitation Notice under this
Section 1.11.
To be timely, a stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the Corporation in the
City of Lexington, State of Kentucky, not less than 60 days nor more
than 120 days prior to the first anniversary (the "Anniversary") of the
date on which the Corporation first mailed its proxy materials for the
preceding year's annual meeting of the stockholders; provided, however,
that if the date of the annual meeting is advanced more than 30 days
prior to or delayed by more than 30 days after the Anniversary of the
preceding year's annual meeting, notice by the stockholder to be timely
must be so delivered not later than the close of business on the later
of (i) the 90th day prior to such annual meeting or (ii) the 10th day
following the day on which public announcement of the date of such
meeting is first made.
Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or
reelection as Director all information relating to such person as would
be required to be disclosed in solicitations of proxies for the
election of such nominees as Directors pursuant to Regulation 14A of
the Exchange Act, and such person's written consent to serve as
Director if elected; (b) as to any other business that the stockholder
proposes to bring before the annual meeting of the stockholders, a
brief description of such business, the reasons for conducting such
business at the annual meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; (c) as to the stockholder giving the
5
<PAGE>
notice and the beneficial owner, if any, on whose behalf the nomination
or proposal is made, (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner,
(ii) the class and number of shares of the Corporation that are owned
beneficially and of record by such stockholder and such beneficial
owner, and (iii) whether either such stockholder or beneficial owner
intends to deliver a proxy statement and form of proxy to holders of,
in the case of a proposal, at least the percentage of the Corporation's
voting shares required under applicable law to carry the proposal or,
in the case of a nomination or nominations, a sufficient number of
holders of the Corporation's voting shares to elect such nominee or
nominees (an affirmative statement of such intent, a "Solicitation
Notice").
(ii) If the number of Directors to be elected to the Board of
Directors is increased and there is no public announcement naming all
of the nominees for Director or specifying the size of the increased
Board made by the Corporation at least 70 days prior to the
Anniversary, this Section 1.11(b)(ii) shall govern. In this case a
stockholder's notice required by these By-Laws shall also be considered
timely, but only with respect to nominees for any new positions created
by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation in the City of
Lexington, State of Kentucky not later than the close of business on
the 10th day following the day on which such public announcement is
first made by the Corporation.
(iii) Only such business shall be conducted at a special
meeting of the stockholders as shall have been brought before the
special meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board may be made at a
special meeting of the stockholders at which Directors are to be
elected pursuant to the Corporation's notice of meeting (A) by or at
the direction of the Board or (B) by any stockholder of record at the
time of giving of notice provided for in this paragraph, who shall be
entitled to vote at the special meeting and who complies with the
notice procedures set forth in this Section 1.11. Nominations by
stockholders of persons for election to the Board may be made at such a
special meeting of the stockholders if the stockholders' notice
required by Section 1.11(b)(i) shall be delivered to the Secretary at
the general offices of the Corporation in the City of Lexington, State
of Kentucky not later than the close of business on the later of the
90th day prior to such special meeting or the 10th day following the
day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board to be elected
at such special meeting.
(iv) Only persons nominated in accordance with the procedures
set forth in this Section 1.11 shall be eligible to serve as Directors
and only such business shall be conducted at an annual or special
meeting of the stockholders as shall have been brought before the
annual or special meeting in accordance with the procedures set forth
in this Section. The Chairman of the meeting shall have the power and
6
<PAGE>
the duty to determine whether a nomination or any business proposed to
be brought before the annual or special meeting has been made in
accordance with the procedures set forth in these By-Laws and, if any
proposed nomination or business is not in compliance with these
By-Laws, to declare that such defective proposed business or nomination
shall not be presented for stockholder action at the annual or special
meeting and shall be disregarded.
(c) For purposes of this Section, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
Section 2.01. General Powers. Except as may otherwise be
--------------
provided by law, by the Certificate of Incorporation or by these By-Laws, the
property, affairs and business of the Corporation shall be managed by or under
the direction of the Board of Directors and the Board of Directors may exercise
all the powers of the Corporation. [Section 141(a).]
Section 2.02. Number and Term of Office. The number of
----------------------------
Directors constituting the entire Board of Directors shall be determined in
accordance with the Certificate of Incorporation. Each Director (whenever
elected) shall hold office until his successor has been duly elected and
qualified, or until his earlier death, resignation or removal. [Section 141(b).]
Section 2.03. Election of Directors. The Board of Directors
----------------------
shall be divided into three classes, designated Classes I, II and III, which
shall, from and after the annual meeting of stockholders to be held in 1996, be
as nearly equal in number as possible. Directors of Class I shall be elected at
any time on and after the date of filing of the Third Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware to hold
office for an initial term expiring at the annual meeting of stockholders to be
held in 1998. Directors of Class II shall be elected at any time on and after
the date of filing of the Third Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware to hold office for an initial term
expiring at the annual meeting of stockholders to be held in 1999. Directors of
Class III shall be elected at the annual meeting of stockholders to be held in
1996 for an initial term of office expiring at the annual meeting of
stockholders to be held in 1997; provided that, prior to the annual meeting of
--------
stockholders to be held in 1996, the Board of Directors may, by resolution duly
adopted, create and appoint one or more persons to fill one or more Class III
Directorships up to a number not to exceed the number of Directors in Class I
7
<PAGE>
for an interim term expiring at the annual meeting of stockholders to be held in
1996. At each annual meeting of stockholders following the annual meeting of
stockholders to be held in 1996, the respective successors of the Directors
whose terms are expiring shall be elected for terms expiring at the annual
meeting of stockholders held in the third succeeding year. The holders of a
majority of the shares then entitled to vote at an election of Directors may
remove any Director or the entire Board of Directors, but only for cause.
Section 2.04. Annual and Regular Meetings. The annual meeting
---------------------------
of the Board of Directors for the purpose of electing officers and for the
transaction of such other business as may come before the meeting shall be held
as soon as possible following adjournment of the annual meeting of the
stockholders at the place of such annual meeting of the stockholders. Notice of
such annual meeting of the Board of Directors need not be given. The Board of
Directors from time to time may be resolution provide for the holding of regular
meetings (in addition to such annual meeting) and fix the place (which may be
within or without the State of Delaware) and the date and hour of such meetings.
Notice of regular meetings need not be given, provided, however, that if the
Board of Directors shall fix or change the time or place of any regular meeting,
notice of such action shall be mailed promptly, or sent by telecopier, telegram,
radio or cable, to each Director who shall not have been present at the meeting
at which such action was taken, addressed to him at his usual place of business,
or shall be delivered to him personally, provided further, however, that the
Chairman shall have the authority to change the time or place of any regular
meeting fixed by the Board of Directors by providing notice to each Director in
the manner specified for calling a special meeting pursuant to Section 2.05 of
these By-Laws. Notice of such action need not be given to any Director who
attends the first regular meeting after such action is taken without protesting
the lack of notice to him, prior to or at the commencement of such meeting, or
to any Director who submits a signed waiver of notice, whether before or after
such meeting. [Section 141(g).]
Section 2.05. Special Meetings; Notice. Special meetings of
-------------------------
the Board of Directors shall be held whenever called by the Chairman or the
Chief Executive Officer or, in the event of the absence or disability of the
Chairman and the Chief Executive Officer, by the President or, in the event of
his absence or disability, by the Chief Operating Officer or, in the event of
his absence or disability, by the Vice President & Chief Financial Officer or,
in the event of his absence or disability, any other Vice President who has been
designated by the Chief Executive Officer to act in the event of his absence or
disability, at such place (within or without the State of Delaware), date and
hour as may be specified in the respective notices or waivers of notice of such
meetings. Special meetings of the Board of Directors may be called on 24 hours'
notice, if notice is given to each Director personally or by telephone, telecopy
or telegram, or on five days' notice, if notice is mailed to each Director,
addressed to him at his usual place of business. Notice of any special meeting
need not be given to any Director who attends such meeting without protesting
the lack of notice to him, prior to or at the commencement of such meeting, or
to any Director who submits a signed waiver of notice, whether before or after
8
<PAGE>
such meeting, and any business may be transacted thereat. [Sections 141(g),
229.]
Section 2.06. Quorum; Voting. At all meetings of the Board
--------------
of Directors, the presence of a majority of the total number of Directors shall
constitute a quorum for the transaction of business. Except as otherwise
required by law, the vote of a majority of the Directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors.
[Section 141(b).]
Section 2.07. Adjournment. A majority of the Directors
-----------
present, whether or not a quorum is present, may adjourn any meeting of the
Board of Directors to another time or place. No notice need be given of any
adjourned meeting unless the time and place of the adjourned meeting are not
announced at the time of adjournment, in which case notice conforming to the
requirements of Section 2.05 of these By-Laws shall be given to each Director.
Section 2.08. Action Without a Meeting. Any action required
------------------------
or permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors. [Section 141(f).]
Section 2.09. Regulations; Manner of Acting. To the extent
------------------------------
consistent with applicable law, the Certificate of Incorporation and these
By-Laws, the Board of Directors may adopt such rules and regulations for the
conduct of meetings of the Board of Directors and for the management of the
property, affairs and business of the Corporation as the Board of Directors may
deem appropriate. The Directors shall act only as a Board, and the individual
Directors shall have no power as such.
Section 2.10. Action by Telephonic Communications. Members of
-----------------------------------
the Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall constitute presence
in person at such meeting. [Section 141(i).]
Section 2.11. Resignations. Any Director may resign at any
------------
time by delivering a written notice of resignation, signed by such Director, to
the Chief Executive Officer or the Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery. [Section 141(b).]
Section 2.12. Vacancies and Newly Created Directorships. If
------------------------------------------
any vacancies shall occur in the Board of Directors, by reason of death,
resignation, removal or otherwise, or if the authorized number of Directors
shall be increased, the Directors then in office shall continue to act, and such
vacancies and newly created Directorships may be filled by a majority of the
9
<PAGE>
Directors then in office, although less than a quorum. A Director elected to
fill a vacancy or a newly created Directorship shall hold office until the next
election of the class for which such Director shall have been chosen, and until
his successor has been elected and qualified or until his earlier death,
resignation or removal. Any such vacancy or newly created Directorship may also
be filled at any time by vote of the stockholders. [Section 223.]
Section 2.13. Reliance on Accounts and Reports, etc. A
------------------------------------------
Director, or a member of any Committee designated by the Board of Directors
shall, in the performance of his duties, be fully protected in relying in good
faith upon the records of the Corporation and upon information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
officers or employees, or Committees designated by the Board of Directors, or by
any other person as to the matters the member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation. [Section 141(e).]
Section 2.14. Compensation. The amount, if any, which each
------------
Director shall be entitled to receive as compensation for his services as a
Director shall be fixed from time to time by resolution of the Board of
Directors, provided that no Director who is an officer or employee of the
Corporation shall be entitled to receive any compensation for his services as a
Director (although he shall be entitled to be reimbursed for any reasonable
out-of-pocket expenses incurred in connection with his service as a Director).
[Section 141(h).]
ARTICLE III
-----------
COMMITTEES
----------
Section 3.01. How Constituted. The Board of Directors may, by
---------------
resolution adopted by a majority of the whole Board, designate one or more
committees, including an Executive Committee, a Finance and Audit Committee, a
Compensation and Pension Committee and a Corporate Governance and Public Policy
Committee. The Board of Directors may designate such other committees as it may
from time to time determine. Each such committee shall serve for such term,
consist of such number of Directors and have and may exercise, during intervals
between meetings of the Board of Directors, such duties, functions and powers,
as the Board of Directors may from time to time lawfully prescribe. Each
committee shall fix its own rules of procedure and shall meet at such times and
places and upon such call or notice as shall be provided by such rules. Each
committee shall keep a record of its acts and proceedings, and all action of the
committee shall be reported to the Board of Directors at the next meeting of the
Board. [Section 141(c).]
10
<PAGE>
Section 3.02. Alternates. Alternate members of the committees
----------
prescribed by this Article may be designated by the Board of Directors from
among the Directors to serve as occasion may require. Whenever a quorum cannot
be secured for any meeting of any such committee from among the regular members
thereof and designated alternatives, the member or members of such committee
present at such meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of such absent or disqualified member.
Section 3.03. Executive Committee. During the intervals
--------------------
between the meetings of the Board of Directors, the Executive Committee shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the property, affairs and business of the Corporation. Each
other committee of the Board of Directors, except as otherwise provided in this
Article III, shall have and may exercise such powers of the Board of Directors
as may be provided by resolution or resolutions of the Board of Directors. The
Executive Committee shall have and may exercise such other powers and authority
as designated and modified by the Board of Directors from time to time.
Section 3.04. Finance and Audit Committee. The Finance and
----------------------------
Audit Committee shall be comprised of Directors who are independent of
management and the Corporation and who are financially literate. The Finance
and Audit Committee shall assist the Board of Directors in fulfilling its
oversight and monitoring responsibilities in matters relating to corporate
accounting and reporting practices, financial controls, capital structure,
the borrowing and repayment of funds by the Corporation, and other matters
relating to the preparation of audited financial statements of the
Corporation. The Finance and Audit Committee shall maintain effective working
relationships with the Board of Directors, the independent accountants, the
internal auditors, and the financial management of the Corporation. The
Finance and Audit Committee shall have and may exercise such other powers
and authority as designated and modified by the Board of Directors from
time to time.
Section 3.05. Compensation and Pension Committee. The
--------------------------------------
Compensation and Pension Committee shall review and recommend to the Board of
Directors actions and policies relating to executive compensation and other
compensation, incentive, pension plan and employee benefits matters and shall
administer the Corporation's stock option plans (as provided in such plans). The
Compensation and Pension Committee shall have and may exercise such other powers
and authority as designated and modified by the Board of Directors from time to
time.
Section 3.06. Corporate Governance and Public Policy
--------------------------------------------
Committee. The Corporate Governance and Public Policy Committee (a) recommends
- ---------
qualified candidates to the Board of Directors for election as Directors of the
11
<PAGE>
Corporation, including the slate of Directors that the Board proposes for
election by stockholders at the annual meeting of stockholders, (b) advises and
makes recommendations to the Board on all matters concerning directorship
practices, including compensation for non-employee Directors, continuing
qualification criteria and the functions and duties of the committees of the
Board, (c) reviews and evaluates the Corporation's position and practices on
significant issues of corporate public responsibility, such as equal employment
opportunity, protection of the environment, and philanthropic contributions and
(d) reviews and makes recommendations to the Board concerning stockholder
proposals dealing with issues of public or social interest. The Corporate
Governance and Public Policy Committee shall have and may exercise such other
powers and authority as designated and modified by the Board of Directors from
time to time.
Section 3.07. Quorum and Manner of Acting. Except as may be
---------------------------
otherwise provided in the resolution creating any committee of the Board of
Directors, at all meetings of such committee the presence of members (or
alternate members) constituting a majority of the total authorized membership of
such committee shall constitute a quorum for the transaction of business. The
act of the majority of the members present at any meeting at which a quorum is
present shall be the act of such committee. Any action required or permitted to
be taken at any meeting of any such committee may be taken without a meeting, if
all members of such committee shall consent to such action in writing and such
writing or writings are filed with the minutes of the proceedings of such
committee. The members of any such committee shall act only as a committee, and
the individual members of such committee shall have no power as such. [Section
141(c).]
Section 3.08. Action by Telephonic Communications. Members of
-----------------------------------
any committee of the Board of Directors may participate in a meeting of such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting.
[Section 141(i).]
Section 3.09. Absent or Disqualified Members. In the absence
-------------------------------
or disqualification of a member of any committee of the Board of Directors, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. [Section 141(c).]
Section 3.10. Resignations. Any member (and any alternate
------------
member) of any committee of the Board of Directors may resign at any time by
delivering a written notice of resignation, signed by such member, to the
Chairman or the Chief Executive Officer. Unless otherwise specified therein,
such resignation shall take effect upon delivery.
12
<PAGE>
Section 3.11. Removal. Any member (and any alternate member)
-------
of any committee of the Board of Directors may be removed at any time, either
for or without cause, by resolution adopted by a majority of the whole Board of
Directors.
Section 3.12. Vacancies. If any vacancy shall occur in any
---------
committee of the Board of Directors, by reason of disqualification, death,
resignation, removal or otherwise, the remaining members (and any alternate
members) shall continue to act, and any such vacancy may be filled by the Board
of Directors.
ARTICLE IV
----------
OFFICERS AND AGENTS
-------------------
Section 4.01. Number. The officers of the Corporation shall be
------
elected by the Board of Directors and shall consist of a Chairman, a Chief
Executive Officer, a President, a Chief Operating Officer, one or more Executive
Vice Presidents, Vice Presidents, a Secretary, and a Treasurer. The Board of
Directors also may elect one or more additional officers and one or more
Assistant Secretaries and Assistant Treasurers in such numbers as the Board of
Directors may determine. The Board of Directors may appoint such other officers
and agents as it may deem appropriate, and such other officers and agents shall
hold their offices for such terms and shall exercise such powers and perform
such duties as may be determined from time to time by the Board of Directors.
The Board of Directors from time to time may delegate to any officer or agent
the power to appoint subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties. Any such officer or
agent may remove any such subordinate officer or agent appointed by him, for or
without cause. Any number of offices may be held by the same person. No officer
need be a Director of the Corporation. [Section 142(a), (b).]
Section 4.02. Election. Unless otherwise determined by the
--------
Board of Directors, the officers of the Corporation shall be elected by the
Board of Directors at the annual meeting of the Board of Directors, and shall be
elected to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual meeting,
officers may be elected at any regular or special meeting of the Board of
Directors. Each officer shall hold office until his successor has been elected
and qualified, or until his earlier death, resignation or removal. [Section
142(b).]
Section 4.03. Salaries. The salaries of all officers of the
--------
Corporation shall be fixed by the Board of Directors and the salaries of all
corporate agents shall be fixed by the Chief Executive Officer.
Section 4.04. Removal and Resignation; Vacancies. Any officer
-----------------------------------
may be removed for or without cause at any time by the Board of Directors. Any
13
<PAGE>
corporate agent may be removed for or without cause at any time by the Chief
Executive Officer or the Board of Directors. Any officer or corporate agent may
resign at any time by delivering a written notice of resignation, signed by such
officer, to the Board of Directors or the Chief Executive Officer. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors. [Section
142(b), (e).]
Section 4.05. Authority and Duties of Officers. The officers
--------------------------------
of the Corporation shall have such authority and shall exercise such powers and
perform such duties as may be specified in these By-Laws, except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law. [Section 142(a).]
Section 4.06. The Chairman. The Chairman will have general
-------------
supervision and control of the policies, business and affairs of the
Corporation, subject to the control and authority of the Board of Directors. The
Chairman shall develop the agenda for and preside at all meetings of the
stockholders, the Board of Directors and the Executive Committee at which he is
present. The Chairman shall have the authority to change existing officers'
titles and to appoint additional officers of the Corporation as he shall
determine in his sole and absolute discretion.
Section 4.07. The Chief Executive Officer. The Chief Executive
---------------------------
Officer shall preside, in the event of the absence or disability of the
Chairman, at all meetings of the stockholders and Directors at which he is
present, shall be the chief executive officer of the Corporation, shall have
general control and supervision of the policies and long-term strategies of the
Corporation (subject to the authority of the Board of Directors), shall see that
all orders and resolutions of the Board of Directors are carried into effect and
shall work with Board of Directors to ensure their consent with matters relating
to the Corporation's governance. The Chief Executive Officer shall be
responsible for the financial success of the Corporation and shall assure the
development of long-term strategic plans and objectives with respect to the
Corporation. He shall manage and administer the Corporation's business and
affairs and shall also perform all duties and exercise all powers usually
pertaining to the office of a chief executive officer of a corporation. The
Chief Executive Officer shall have the authority to sign, in the name and on
behalf of the Corporation, checks, orders, contracts, leases, notes, drafts and
other documents and instruments in connection with the business of the
Corporation, and together with the Secretary or an Assistant Secretary,
conveyances of real estate and other documents and instruments to which the seal
of the Corporation is affixed. The Chief Executive Officer shall have the
authority and responsibility to develop management and to cause the employment
or appointment of such employees and agents of the Corporation to support the
strategies and operating plans of the Corporation, as the conduct of the
business of the Corporation may require, to fix their compensation, and to
remove or suspend any employee or agent elected or appointed by the Chief
Executive Officer or the Board of Directors. The Chief Executive Officer shall
build and maintain relationships with outside investors and customers and
14
<PAGE>
reflect the Corporation's values through public relations. The Chief Executive
Officer shall perform the duties and have the powers of the President if there
is a vacancy in that office, and shall perform such other duties and have such
other powers as the Board of Directors or the Chairman may from time to time
prescribe.
Section 4.08. The President. The President shall, in the event
-------------
of the absence of disability of the Chief Executive Officer, perform the duties
of the Chief Executive Officer (subject to the authority of the Board of
Directors to designate some other person as temporary Chief Executive Officer),
shall manage and administer the Corporation's business and affairs and shall
also perform all duties and exercise all powers usually pertaining to the office
of the President. The President shall have the authority to sign, in the name
and on behalf of the Corporation, checks, orders, contracts, leases, notes and
drafts and other documents and instruments in connection with the business of
the Corporation, and together with the Secretary or an Assistant Secretary,
conveyances of real estate and other documents and instruments to which the seal
of the Corporation is affixed. The President shall perform the duties and have
the powers of the Chief Operating Officer if there is a vacancy in that office,
and shall perform such other duties and have such other powers as the Board of
Directors, the Chairman or the Chief Executive Officer shall from time to time
prescribe.
Section 4.09. The Chief Operating Officer. The Chief Operating
---------------------------
Officer shall, in the event of the absence or disability of the President,
perform the duties of the President (subject to the authority of the Board of
Directors to designate some other person as temporary President), and shall have
general control and supervision of the divisions of the Corporation and shall
also perform all duties and exercise all powers usually pertaining to the office
of the Chief Operating Officer. The Chief Operating Officer shall have the
authority to sign in the name and on behalf of the Corporation, checks, orders,
contracts, leases, notes, drafts, and other documents and instruments in
connection with the business of the Corporation. The Chief Operating Officer
shall perform such other duties and have such other powers as the Board of
Directors, the Chairman, or the Chief Executive Officer shall from time to time
prescribe.
Section 4.10. The Vice President & Chief Financial Officer.
----------------------------------------------
The Vice President & Chief Financial Officer shall be the chief financial
officer of the Corporation. He shall report to the Chief Executive Officer and
shall be responsible for reviewing and recommending financial policy to the
Board of Directors, and for analysis and reporting of the financial results of
the Corporation to the Board of Directors. He shall supervise all tax and
internal audit functions of the Corporation. He will also be responsible for
review, coordination and general supervision of all of the foregoing functions
for subsidiaries of the Corporation. He shall perform such other duties and
exercise such other powers as may be assigned or delegated to him by the Chief
Executive Officer or the Board of Directors.
15
<PAGE>
Section 4.11. The Treasurer. The Treasurer shall report to
-------------
the Vice President & Chief Financial Officer, and shall have the following
powers and duties:
(a) He shall have charge and supervision over and be
responsible for the moneys, securities, receipts and disbursements of
the Corporation, and shall keep or cause to be kept full and accurate
records of all receipts of the Corporation.
(b) He shall cause the moneys and other valuable effects of
the Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or
other depositaries as shall be selected in accordance with Section 8.05
of these By-Laws.
(c) He shall cause the moneys of the Corporation to be
disbursed by checks or drafts (signed as provided in Section 8.06 of
these By-Laws) upon the authorized depositaries of the Corporation and
cause to be taken and preserved proper vouchers for all moneys
disbursed.
(d) He may sign (unless an Assistant Treasurer or the
Secretary or an Assistant Secretary shall have signed) certificates
representing stock of the Corporation the issuance of which shall have
been authorized by the Board of Directors.
(e) He shall be responsible for and supervise the
Corporation's insurance program.
(f) He shall perform such other duties as may be assigned to
him by the Vice President & Chief Financial Officer.
Section 4.12. The Secretary. The Secretary shall have the
-------------
following powers and duties:
(g) He shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose.
(h) He shall cause all notices to be duly given in accordance
with the provisions of these By-Laws and as required by law.
(i) Whenever any committee of the Board of Directors shall be
appointed pursuant to a resolution of the Board of Directors, he shall
furnish a copy of such resolution to the members of such committee.
(j) He shall be the custodian of the records and of the seal
of the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the Corporation
prior to the issuance thereof and to all instruments the execution of
16
<PAGE>
which on behalf of the Corporation under its seal shall have been duly
authorized in accordance with these By-Laws, and when so affixed he may
attest the same.
(k) He shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required
by law, the Certificate of Incorporation or these By-Laws.
(l) He shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in
such manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names
(alphabetically arranged) and the addresses of the holders of record of
such shares, the number of shared held by each holder and the date as
of which each became such holder of record.
(m) He shall sign (unless the Treasurer, an Assistant
Treasurer or Assistant Secretary shall have signed) certificates
representing shares of the Corporation the issuance of which shall have
been authorized by the Board of Directors.
(n) He shall perform, in general, all duties incident to the
office of secretary and such other duties as may be specified in these
By-Laws or as may be assigned to him from time to time by the Board of
Directors or the Chief Executive Officer.
ARTICLE V
---------
CAPITAL STOCK
-------------
Section 5.01. Certificates of Stock, Uncertificated Shares.
----------------------------------------------
The shares of the Corporation shall be represented by certificates, provided
--------
that the Board of Directors may provide by resolution or resolutions that some
or all of any or all classes or series of the stock the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until each certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock in the Corporation represented by certificates and upon
request every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of the Corporation, by the Chief Executive
Officer or a Vice President, and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. Such certificate shall be in such form as the
Board of Directors may determine, to the extent consistent with applicable law,
the Certificate of Incorporation and these By-Laws. [Section 158.]
17
<PAGE>
Section 5.02. Signatures; Facsimile. Any or all of the
----------------------
signatures on the certificate referred to in Section 5.01 of these By-Laws may
be a facsimile, engraved or printed, to the extent permitted by law. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue. [Section 158.]
Section 5.03. Lost, Stolen or Destroyed Certificates. The
----------------------------------------
Board of Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate. [Section 167.]
Section 5.04. Transfer of Stock. Upon surrender to the
-------------------
Corporation or the transfer agent of the Corporation of a certificate for
shares, duly endorsed or accompanied by appropriate evidence of succession,
assignment or authority to transfer, the Corporation shall issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books. Within a reasonable time after the
transfer of uncertificated stock, the Corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a)
of the General Corporation Law of the State of Delaware. Subject to the
provisions of the Certificate of Incorporation and these By-Laws, the Board of
Directors may prescribe such additional rules and regulations as it may deem
appropriate relating to the issue, transfer and registration of shares of the
Corporation. [Section 151.]
Section 5.05. Record Date. In order to determine the
------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date on which the resolution fixing the record
date is adopted by the Board of Directors, and which shall not be more than 60
nor less than ten days before the date of such meeting. If no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting, provided, however, that the Board of Directors may
--------
fix a new record date for the adjourned meeting.
18
<PAGE>
In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are record.
Delivery made to the Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If not record date has
been fixed by the Board of Directors and prior action by the Board of Directors
is required by law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action.
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights of the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. [Section 213.]
Section 5.06. Registered Stockholders. Prior to due surrender
-----------------------
of a certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so. [Section 159.]
Section 5.07. Transfer Agent and Registrar. The Board of
-------------------------------
Directors may appoint one or more transfer agents and one or more registrars,
and may require all certificates representing shares to bear the signature of
any such transfer agents or registrars.
19
<PAGE>
ARTICLE VI
----------
INDEMNIFICATION
---------------
Section 6.01. Nature of Indemnity. The Corporation shall
--------------------
indemnify and hold harmless, to the full extent authorized by the Delaware
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment), or by other applicable law
as then in effect, any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was or has agreed to become a Director, officer or corporate agent
of the Corporation, or is or was serving or has agreed to serve at the request
of the Corporation as a Director, officer or corporate agent, of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of any action alleged to have been taken or omitted in
such capacity, and may indemnify any person who was or is a party or is
threatened to be made a party to such an action, suit or proceeding by reason of
the fact that he is or was or has agreed to become an employee or agent of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (a) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (b) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment,
order settlement, conviction, or upon a plea of nolo contendere or its
---- ----------
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. [Sections 145(a), (b).]
20
<PAGE>
Section 6.02. Successful Defense. To the extent that a
-------------------
Director, officer, employee or agent of the Corporation has been successful
on the merits or otherwise in defense of any action, suit or proceeding
referred to in Section 6.01 of these By-Laws or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. [Section 145(c).]
Section 6.03. Determination That Indemnification Is Proper.
----------------------------------------------
Any indemnification of a Director or officer of the Corporation under Section
6.01 of these By-Laws (unless ordered by a court) shall be made by the
Corporation unless a determination is made that indemnification of the Director
or officer is not proper in the circumstances because he has not met the
applicable standard of conduct set forth in Section 6.01 of these By-Laws. Any
indemnification of an employee or agent of the Corporation under Section 6.01 of
these By-Laws (unless ordered by a court) may be made by the Corporation upon a
determination that indemnification of the employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 6.01 of these By-Laws. Any such determination shall be made (a) by the
Board of Directors by a majority vote of a quorum consisting of Directors who
were not parties to such action, suit or proceeding, or (b) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders. [Section 145(d).]
Section 6.04. Advance Payment of Expenses. Expenses (including
---------------------------
attorneys' fees) incurred by a Director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article VI.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate. The Board of Directors may authorize the Corporation's
counsel to represent such Director, officer, employee or agent in any action,
suit or proceeding, whether or not the Corporation is a party to such action,
suit or proceeding. [Section 145(e).]
Section 6.05. Procedure for Indemnification of Directors and
-----------------------------------------------
Officers. Any indemnification of a Director or officer of the Corporation under
- --------
Sections 6.01 and 6.02 of these By-Laws, or advance of costs, charges and
expenses to a Director or officer under Section 6.04 of these By-Laws, shall be
made promptly, and in any event within 30 days, upon the written request of the
Director or officer. If a determination by the Corporation that the Director or
officer is entitled to indemnification pursuant to this Article VI is required,
and the Corporation fails to respond within 60 days to a written request for
indemnity, the Corporation shall be deemed to have approved such request. If the
Corporation denies a written request for indemnity or advance of expenses, in
whole or in part, or if payment in full pursuant to such request is not made
21
<PAGE>
within 30 days, the right to indemnification or advances as granted by this
Article VI shall be enforceable by the Director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action (other than an action brought to enforce a claim
for the advance of costs, charges and expenses under Section 6.04 of these
By-Laws where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Section 6.01 of these By-Laws, but the burden of proving such defense shall be
on the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Section 6.01 of these By-Laws, nor the fact that there has been an
actual determination by the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The
-----------------------------------------
foregoing indemnification provisions shall be deemed to be a contract between
the Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a "contract right" may not be modified
retroactively without the consent of such Director, officer, employee or agent.
The indemnification provided by this Article VI shall not be
--------
deemed exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
[Section 145(f), (j).]
Section 6.07. Insurance. The Corporation shall purchase and
---------
maintain insurance on behalf of any person who is or was or has agreed to become
a Director or officer of the Corporation, or is or was serving at the request of
the Corporation as a Director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VI,
22
<PAGE>
provided that such insurance is available on acceptable terms, which
- --------
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 6.08. Severability. If this Article VI or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each Director or
officer and may indemnify each employee or agent of the Corporation as to costs,
charges and expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action by or in
the right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article VI that shall not have been invalidated and to the
fullest extent permitted by applicable law.
ARTICLE VII
-----------
OFFICES
-------
Section 7.01. Registered Office. The registered office of the
-----------------
Corporation in the State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
Section 7.02. Other Offices. The Corporation may maintain
--------------
offices or places of business at such other locations within or without the
State of Delaware as the Board of Directors may from time to time determine or
as the business of the Corporation may require.
ARTICLE VIII
------------
GENERAL PROVISIONS
------------------
Section 8.01. Dividends. Subject to any applicable provisions
---------
of law and the Certificate of Incorporation, dividends upon the shares of the
Corporation may be declared by the Board of Directors at any regular or special
meeting of the Board of Directors and any such dividend may be paid in cash,
property or shares of the Corporation's Capital Stock.
A member of the Board of Directors, or a member of any
Committee designated by the Board of Directors shall be fully protected in
relying in good faith upon the records of the Corporation and upon such
information, opinions, reports or statements presented to the Corporation by any
of its officers or employees, or Committees of the Board of Directors, or by any
other person as to matters the Director reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation, as to the value and amount
23
<PAGE>
of the assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from which
dividends might properly be declared and paid. [Sections 172, 173.]
Section 8.02. Reserves. There may be set aside out of any
--------
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may similarly modify or abolish any such
reserves. [Section 171.]
Section 8.03. Execution of Instruments. The Chairman, the
-------------------------
Chief Executive Officer, the President, the Chief Operating Officer, any Vice
President, the Secretary or the Treasurer may enter into any contract or execute
and deliver any instrument in the name and on behalf of the Corporation. The
Board of Directors or the Chairman, the Chief Executive Officer, the President,
the Chief Operating Officer or the Vice President & Chief Financial Officer may
authorize any other officer or agent to enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation. Any such
authorization may be general or limited to specific contracts or instruments.
Section 8.04. Corporate Indebtedness. No loan shall be
-----------------------
contracted on behalf of the Corporation, and no evidence of indebtedness shall
be issued in its name, unless authorized by the Board of Directors, the
Chairman, the Chief Executive Officer, the President, the Chief Operating
Officer or the Vice President & Chief Financial Officer. Such authorized may be
general or confined to specific instances. Loans so authorized may be effected
at any time for the Corporation from any bank, trust company or other
institution, or from any firm, corporation or individual. All bonds, debentures,
notes and other obligations or evidences of indebtedness of the Corporation
issued for such loans shall be made, executed and delivered as the Board of
Directors or the Chairman, the Chief Executive Officer, the President, the Chief
Operating Officer or the Vice President & Chief Financial Officer shall
authorize. When so authorized by the Board of Directors or the Chairman, the
Chief Executive Officer, the President, the Chief Operating Officer or the Vice
President & Chief Financial Officer, any part of or all the properties,
including contract rights, assets, business or good will of the Corporation,
whether then owned or thereafter acquired, may be mortgaged, pledged,
hypothecated or conveyed or assigned in trust as security for the payment of
such bonds, debentures, notes and other obligations or evidences of indebtedness
of the Corporation, and of the interest thereon, by instruments executed and
delivered in the name of the Corporation.
24
<PAGE>
Section 8.05. Deposits. Any funds of the Corporation may be
--------
deposited from time to time in such banks, trust companies or other depositaries
as may be determined by the Board of Directors, the Chairman, the Chief
Executive Officer, the President, the Chief Operating Officer, the Vice
President & Chief Financial Officer, or by such officers or agents as may be
authorized by the Board of Directors or the Chairman, the Chief Executive
Officer, the President, the Chief Operating Officer, or the Vice President &
Chief Financial Officer to make such determination.
Section 8.06. Checks. All checks or demands for money and
------
notes of the Corporation shall be signed by such officer or officers or such
agent or agents of the Corporation, and in such manner, as the Board of
Directors, the Chairman, the Chief Executive Officer or the President from time
to time may determine.
Section 8.07. Sale, Transfer, etc. of Securities. To the
-------------------------------------
extent authorized by the Board of Directors or by the Chairman, Chief Executive
Officer, the President, the Chief Operating Officer, the Vice President & Chief
Financial Officer, any other Vice President, the Secretary or the Treasurer or
any other officers designated by the Board of Directors or the Chairman or the
Chief Executive Officer, may sell, transfer, endorse and assign any shares of
stock, bonds or other securities owned by or held in the name of the
Corporation, and may make, execute and deliver in the name of the Corporation,
under its corporate seal, any instruments that may be appropriate to effect any
such sale, transfer, endorsement or assignment.
Section 8.08. Voting as Stockholder. Unless otherwise
-----------------------
determined by resolution of the Board of Directors, each of the Chairman, the
Chief Executive Officer, the President, and the Vice President & Chief Financial
Officer shall have full power and authority on behalf of the Corporation to
attend any meeting of stockholders of any corporation in which the Corporation
may hold stock, and to act, vote (or execute proxies to vote) and exercise in
person or by proxy all other rights, powers and privileges incident to the
ownership of such stock. Such officers acting on behalf of the Corporation shall
have full power and authority to execute any instrument expressing consent to or
dissent from any action of any such corporation without a meeting. The Board of
Directors may be resolution from time to time confer such power and authority
upon any other person or persons.
Section 8.09. Fiscal Year. The fiscal year of the Corporation
-----------
shall commence on the first day of January of each year (except for the
Corporation's first fiscal year which shall commence on the date of
incorporation) and shall terminate in each case on December 31.
Section 8.10. Seal. The seal of the Corporation shall be
----
circular in form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
25
<PAGE>
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
Section 8.11. Books and Records; Inspection. Except to the
------------------------------
extent otherwise required by law, the books and records of the Corporation shall
be kept at such place or places within or without the State of Delaware as may
be determined from time to time by the Board of Directors.
ARTICLE IX
----------
AMENDMENT OF BY-LAWS
--------------------
Section 9.01. Amendment. These By-Laws may be amended,
---------
altered or repealed.
(a) by resolution adopted by a majority of the Board of
Directors at any special or regular meeting of the Board if, in the
case of such special meeting only, notice of such amendment, alteration
or repeal is contained in the notice or waiver of notice of such
meeting; or
(b) at any regular or special meeting of the stockholders if,
in the case of such special meeting only, notice of such amendment,
alteration or repeal is contained in the notice or waiver of notice of
such meeting. [Section 109(a).]
ARTICLE X
---------
CONSTRUCTION
------------
Section 10.01. Construction. In the event of any conflict
------------
between the provisions of these By-Laws as in effect from time to time and
provisions of the Certificate of Incorporation of the Corporation as in effect
from time to time, the provisions of such Certificate of Incorporation shall be
controlling.
Lexmark International Group, Inc.
1999 Employee Stock Purchase Plan
1. Purpose
The Lexmark International Group, Inc. (the "Company") 1999 Employee Stock
Purchase Plan (the "Plan") is intended to provide Eligible Employees who wish to
become stockholders (or increase their stockholdings) in the Company with a
convenient method of doing so. It is believed that employee participation in
ownership of the equity of the Company will be to the mutual benefit of the
employees and the Company.
The Company intends to have the Plan qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code").
The Administrator may, from time to time, approve participation in the Plan
by employees of any subsidiary corporation of the Company (as defined in Section
424(f) of the Code).
2. Definitions
2.1 "Account" shall mean the funds accumulated with respect to a
Participant as a result of payroll deductions for the purpose of purchasing
stock under the Plan. The funds allocated to a Participant's account shall
remain the property of the Participant at all times but may be commingled with
the general funds of the Company.
2.2 "Act" means the Securities Exchange Act of 1934, as amended.
2.3 "Adjustment Event" shall mean any stock dividend, stock split or share
combination of, or extraordinary cash dividend on, the Company Stock or
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Company
Stock at a price substantially below Fair Market Value, or other similar event
affecting the Company Stock.
2.4 "Administrator" shall mean a committee comprised of the Chief Financial
Officer, Vice President of Human Resources, and Vice President, General Counsel
and Secretary of the Company or other such person(s) or entity delegated the
responsibility of administering the Plan by the Compensation and Pension
Committee of the Board.
2.5 "Board" shall mean the Board of Directors of the Company.
1
<PAGE>
2.6 "Change in Control" shall mean the occurrence of any of the following
events:
(i) a majority of the members of the Board at any
time cease for any reason other than due to death or
disability to be persons who were members of the Board
twenty-four months prior to such time (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.
2.7 "Company" means Lexmark International Group, Inc., a Delaware
corporation, and any successor thereto.
2.8 "Company 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
2
<PAGE>
by the Board. For purposes of this Plan, Company Stock includes shares traded on
a national securities exchange, authorized but unissued shares, and shares
reacquired by the Company and held as an asset.
2.9 "Compensation" shall mean, subject to the discretion of the
Administrator, salary, bonuses, commissions, overtime, shift premiums, holiday
pay, vacation pay, and regular Sickness and Accident Income plan payments prior
to any payroll deductions.
2.10 "Designated Subsidiaries" shall mean Lexmark International, Inc., and
all other Company subsidiaries, as defined in Section 424(f) of the Code, whose
employees have been approved by the Administrator, in its sole discretion, as
eligible to participate in the Plan.
2.11 "Disability" shall mean a physical or mental disability or infirmity
of a Participant, as defined in any long-term disability plan sponsored by the
Company or any Designated Subsidiary which employs such Participant, or, if no
such plan is sponsored by such Participant's employer, the Lexmark Medical
Disability Income Plan.
2.12 "Eligible Employee" shall mean any employee of the Employer who is
eligible to participate in the Plan under Section 3 hereof.
2.13 "Employer" means, individually and collectively, the Company and the
Designated Subsidiaries.
2.14 "Enrollment Period" shall mean the time preceding an Offering Period
during which Eligible Employees may elect to participate in the Plan, as
determined by the Administrator.
2.15 "Exercise Date" shall mean the last day of every pay period during an
Offering Period, the earliest date thereafter as is administratively feasible,
or such other date or dates set forth by the Administrator.
2.16 "Fair Market Value" means, as of any date of determination, the
closing price of a share of Company 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 Company Stock on such day, as reported on a nationally
recognized system of price quotation, each with respect to whole shares, and the
prorata percentage thereof with respect to fractional shares. In the event that
there are no Company 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 Company Stock
transactions were so reported.
2.17 "Grant Date" shall mean the first day of an Offering Period or the
earliest date thereafter as is administratively feasible.
2.18 "Offering Period" shall mean each of the consecutive six calendar
month periods during which Participants in the Plan authorize payroll deductions
to fund the purchase of shares on their behalf under the Plan. The initial
3
<PAGE>
Offering Period shall commence January 1, 2000 and subsequent Offering Periods
shall commence each January 1 and July 1 thereafter during the term of the Plan.
2.19 "Participant" shall mean an Eligible Employee who is enrolled and
participating in the Plan.
2.20 "Plan Broker" shall mean the stock brokerage or other financial
services firm designated by the Administrator to account for and/or hold each
Participant's shares, dividends, and distributions.
2.21 "Purchase Price" shall mean, for each whole or fractional share
purchased in accordance with Section 5 hereof, an amount equal to 85%, or such
greater percentage as determined by the Administrator in its sole discretion, of
the Fair Market Value of Company Stock on the applicable Exercise Date.
2.22 "Retirement" shall mean a Participant's retirement at "Normal
Retirement Age" according to the terms of the Lexmark Retirement Growth Account
Plan, as amended from time to time.
2.23 "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 Administrator.
2.24 "Trading Day" shall mean a day on which the New York Stock Exchange is
open for trading.
3. Participation
3.1 Employees of the Company or its Designated Subsidiaries shall be
eligible to participate in the Plan following three full months of employment
with the Company in accordance with such rules as may be prescribed by the
Administrator from time to time. Such rules, however, shall neither permit nor
deny participation in the Plan contrary to the requirements of the Code
(including, but not limited to, Section 423 (b)(3), (4), (5), and (8) thereof)
and to regulations promulgated thereunder.
3.2 Subject to rules established by the Administrator from time to time, an
Eligible Employee may elect to participate in the Plan by entering into a
written subscription agreement with an Employer during an Enrollment Period.
This agreement shall authorize payroll deductions, as a whole percentage of the
Eligible Employee's Compensation up to a maximum of 10% of Compensation per pay
period while the Eligible Employee participates in the Plan.
3.3 All payroll deductions made for a Participant shall be credited to the
Participant's Account and will not be credited with any interest at any time. A
Participant may not make any separate cash payment into such account. Payment
for shares must be made by payroll deduction.
4
<PAGE>
3.4 Once an Eligible Employee has elected to participate in the Plan, a
completed, written subscription agreement shall remain in effect, including with
respect to subsequent Offering Periods, unless and until the Participant ceases
to be an Eligible Employee, withdraws from participation in the Plan or modifies
said written subscription agreement. A Participant may authorize an increase or
decrease in the amount of payroll deduction up to two times during an Offering
Period, but not to exceed two times in any calendar year, by submitting a new
subscription agreement. The amount of payroll deduction may also be modified for
future Offering Periods by submitting a new subscription agreement during the
Enrollment Period for the relevant Offering Period, in accordance with rules and
procedure established by the Administrator.
4. Granting of Option
4.1 On each Grant Date, a Participant shall be granted an option to
purchase during the relevant Offering Period, the number of whole shares, or
whole and fractional shares, subject to the discretion of the Administrator,
that the Participant may elect to purchase at the applicable Purchase Prices on
each Exercise Date during an Offering Period with up to 10% of the Compensation
received by the Participant during the Offering Period (or such portion of an
Offering Period during which the Eligible Employee participates in the Plan.)
5. Exercise of Option
5.1 On each Exercise Date, a Participant who continues to be an Eligible
Employee shall be deemed to have exercised an option on such date and to have
purchased from the Company the greatest number of whole shares as is equal to or
less than, or whole and fractional shares as is equal to, the quotient of the
cash amount in the Participant's Account at the end of the relevant pay period
divided by the Purchase Price for the relevant pay period. Additional shares
covered by the Participant's option shall be purchased in the same manner as of
each subsequent Exercise Date during the Offering Period. Any cash amount
remaining in a Participant's Account after the purchase of shares shall remain
in the Participant's Account for the subsequent purchases, unless the
Participant has withdrawn from the Plan pursuant to Section 8.
5.2 Promptly following each Exercise Date, the shares purchased by a
Participant shall be deposited into an account established in the Participant's
name at the Plan Broker ("Broker Account").
6. Limitations on Rights
6.1 No employee may be granted an option to purchase shares under this Plan
if such employee, immediately after the option is granted, owns 5% or more of
the total combined voting power or value of all of the classes of stock of the
Company or any subsidiary. For purposes of the preceding sentence, the
attribution rules of Section 424 (d) of the Code shall apply in determining the
stock ownership of an employee, and stock that the employee may purchase under
outstanding options shall be treated as stock owned by the employee.
5
<PAGE>
6.2 A Participant shall not be entitled to receive an option or the portion
of an option which if received by the Participant would cause him or her to have
rights to purchase Company Stock having a value in excess of $25,000 under the
Plan (and under all employee stock purchase plans of the Company which qualify
for treatment under Section 423 of the Code) for any calendar year in which such
rights are outstanding (based on the Fair Market Value of such shares as of the
Grant Date of the option exercised to purchase the shares).
7. Number of Shares to be Offered
7.1 The aggregate number of shares of Company Stock which may be issued
under the Plan is 1,500,000.
7.2 In the event the number of shares to be purchased by Participants
during any Offering Period exceeds the number of shares then available for sale
under the Plan, the Administrator shall make a pro rata allocation of the shares
remaining available in such uniform manner as it shall determine to be
equitable. Any excess cash amounts remaining in Participants' Accounts then
shall be returned to the Participants as soon as is administratively feasible.
8. Withdrawal
8.1 A Participant may withdraw from the Plan at any time by giving written
notice, or such other form of notice as then required, to the Administrator.
8.2 Separation from employment for any reason, including death, disability,
termination or retirement, shall be treated as a withdrawal from the Plan.
8.3 A Participant who ceases to be an Eligible Employee shall be deemed to
have withdrawn from the Plan at such time as he ceases to be an Eligible
Employee.
8.4 At the time of withdrawal, any amount in the Participant's Account
which has not previously been used to purchase shares will be refunded to the
Participant as soon as practicable thereafter.
8.5 To re-enter the Plan, an Eligible Employee who has previously withdrawn
must submit a new written subscription agreement pursuant to Section 3 above.
8.6 Participants shall be deemed to have withdrawn from the Plan when the
Plan is terminated.
9. Rights not Transferable
9.1 Neither payroll deductions made by a Participant, nor any rights with
regard to the exercise of an option or to receive stock, nor any rights to a
return of payroll deductions under the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way by the Participant other than
pursuant to a will or the laws of descent and distribution. Any such attempted
assignment, transfer, pledge or other disposition shall be without effect.
6
<PAGE>
10. Changes Affecting Lexmark Stock
10.1 Upon the occurrence of an Adjustment Event, the Board may make such
adjustment, if any, as it may deem appropriate, and in accordance with Section
424 of the Code, in the number, kind, and the price of shares available for
purchase under the Plan, and in the number of shares which a Participant is
entitled to purchase.
11. Transferring Shares
11.1 Subject to 11.2 below, a Participant shall be free to undertake a
disposition (as that term is defined in Section 424(c) of the Code) of the
shares in his Broker Account at any time subsequent to 12 months after the
applicable Exercise Date with respect to said shares. This restriction on
disposition of shares shall expire in the event of the death, Disability,
Retirement of a Participant, or a Change in Control of the Company, or may be
waived at such other times as determined by the Administrator in its sole
discretion. In the absence of a disposition of the shares, the shares must
remain in the Participant's Broker Account until the holding period set forth in
Section 423(a) of the Code has been satisfied. With respect to shares for which
the Section 423(a) holding period has been satisfied, the participant may move
those shares to another brokerage account of the Participant's choosing, or
request that a stock certificate be issued.
11.2 The Plan is intended to provide Company Stock for investment and not
for resale. The Company does not, however, intend to restrict or influence any
employee in the conduct of his own affairs. An employee, therefore, may sell
stock purchased under the Plan subject to compliance with the terms of this
Plan, rules established by the Administrator, and any applicable Federal or
state securities laws. The employee assumes the risk of any market fluctuations
in the price of Company Stock.
12. Administration
12.1 The Administrator is vested with full authority to make, administer,
and interpret such rules and regulations as it deems necessary to administer the
Plan, and any determination, decision, or action of the Administrator in
connection with the construction, interpretation, administration, or application
of the Plan shall be final, conclusive, and binding upon all Participants and
any and all persons claiming under or through any Participant.
13. Term of Plan
13.1 The Plan will become effective as of January 1, 2000, or as soon as
administratively practicable thereafter, subject, however, to approval by the
holders of at least a majority of the Company Stock present or represented, and
entitled to vote, at the annual meeting of the stockholders to be held April 29,
l999. If the Plan is not so approved, the Plan shall not become effective.
7
<PAGE>
13.2 The Board shall have the right to amend, modify, or terminate the Plan
at any time without notice, provided that no employee's existing rights with
respect to any then current Offering Period may be adversely affected thereby,
and provided further that (i) no such amendment of the Plan shall, except as
provided in Section 10, increase the total number of shares to be offered under
the Plan unless stockholder approval is obtained therefor, and (ii) no amendment
may cause an option issued under it to fail to meet the requirements of Section
423 of the Code.
13.3 This Plan shall terminate at the earliest of
(i) December 31, 2009;
(ii) the date the Board acts to terminate the Plan in
accordance with Section 13.2; and
(iii) the date when the total number of shares to be offered
under this Plan, as set forth in Section 7, have been
purchased.
14. Rights as a Stockholder
14.1 A Participant shall have no interest or voting right in any shares
until such shares have been actually purchased in accordance with Section 5.
15. Government Regulations
15.1 The Company's obligation to sell and deliver shares under this Plan is
subject to the approval of any governmental authority required in connection
with the authorization, issuance, or sale of such shares.
16. Miscellaneous
16.1 The provisions of the Plan shall, in accordance with its terms, be
binding upon, and inure to the benefit of, all successors of each Participant,
including, without limitation, such Participant's estate and the executors,
administrator or trustees thereof, heirs and legatees, and any receiver, trustee
in bankruptcy or representative of creditors of such employee.
16.2 Delaware law shall govern all matters relating to this Plan except to
the extent it is superseded by federal law.
16.3 The Administrator is authorized to make such amendments to the Plan as
may be necessary or desirable to facilitate obtaining an effective registration
statement with any applicable government agency that regulates securities.
8
As Approved by the Board
of Directors on February 11, 1999
AMENDMENT NO. 1
TO THE
LEXMARK INTERNATIONAL GROUP, INC.
NONEMPLOYEE DIRECTOR STOCK PLAN
(Amended and Restated Effective April 30, 1998)
This is Amendment No. 1 to the Lexmark International Group, Inc.
Nonemployee Director Stock Plan (Amended and Restated Effective April 30, 1998)
(the "Plan", capitalized terms used herein and not defined have the meaning
ascribed to such terms in the Plan).
WHEREAS, pursuant to Section 13 of the Plan, the Board of Directors of
Lexmark International Group, Inc. (the "Board") is authorized to amend the Plan
from time to time;
WHEREAS, Section 5(a) of the Plan currently provides that the number of
shares of Class A Common Stock subject to award under the Plan may not exceed
147,000 shares, plus the number of shares not issued by virtue of any cancelled,
terminated or forfeited awards; and
WHEREAS, the Board has determined it to be in the best interests of the
Company to increase the number of shares available for award under the Plan.
NOW, THEREFORE, the Plan is hereby amended, effective as of February
11, 1999, as follows:
Section 5(a) of the Plan is amended in its entirety to read as follows:
"(a) Shares Available. Subject to the provisions of Section 5(d), the
number of shares of Common Stock subject to Awards under the Plan may not exceed
300,000, plus any shares that become available for grant pursuant to Section
5(b). The shares to be delivered under the Plan may consist, in whole or 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."
In all other respects, the Plan is hereby ratified and confirmed.
RETIREMENT AGREEMENT
--------------------
This RETIREMENT AGREEMENT, dated as of April 29, 1999 (this
"Agreement"), is made and entered into among Lexmark International, Inc., a
Delaware corporation ("LII"), Lexmark International Group, Inc., a Delaware
corporation ("Group"), and Marvin L. Mann (the "Retiree").
W I T N E S S E T H:
- --------------------
WHEREAS, Retiree desires to retire from the employ of LII and Group,
and LII, Group and Retiree desire to enter into a retirement 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 April 29, 2009, except as extended with respect to any
particular benefit or service pursuant to the terms hereof (such period being
referred to herein as the "Restricted Period").
2. Retirement.
----------
Retiree hereby retires and resigns as employee, Chairman of
LII and Chairman of Group, effective as of April 29, 1999 (the "Retirement
Date").
3. Payments.
--------
Pursuant to Retiree's previously submitted Deferral Election
Form, LII hereby agrees to pay to Retiree $190,684.93, which is a pro rata
portion of Retiree's annual incentive award for 1999 assuming that 100% of the
Operating Target (as defined in Retiree's Employment Agreement among Group, LII
and Retiree dated as of March 18, 1997 (the "Employment Agreement")) is met for
1999, in Deferred Stock Units and provide the Retiree with the Supplemental
Units in accordance with Group's Stock Incentive Plan, as amended and restated
effective April 30, 1998 (the "Plan").
4. Options and Other Awards.
------------------------
(a) Stock Options.
-------------
On August 28, 1991, Retiree was granted 420,000 stock options
pursuant to the Lexmark Holding, Inc. Stock Option Plan for Executives and
Senior Officers (the "Option Plan"), all of which have vested and 84,000 remain
exercisable.
1
<PAGE>
On May 26, 1992, Retiree was granted 420,000 stock options
pursuant to the Option Plan, all of which have vested, 197,946 remain
exercisable by Retiree and 32,214 remain exercisable by a trust established by
Retiree.
On November 15, 1995, Retiree was granted 112,500 stock
options pursuant to the Plan, 67,500 of which have become vested and exercisable
and 45,000 remain unvested and unexercisable.
On November 15, 1995, Retiree was granted 112,056 stock
options pursuant to the Plan, all of which have become vested and exercisable.
On November 15, 1995, Retiree was granted 52,944 stock options
pursuant to the Plan, all of which have become vested and exercisable.
On February 13, 1997, Retiree was granted 90,000 stock options
pursuant to the Plan, 36,000 of which have become vested and exercisable, and
54,000 remain unvested and unexercisable.
On February 12, 1998, Retiree was granted 125,000 stock
options pursuant to the Plan, 25,000 of which have become vested and
exercisable, and 100,000 remain unvested and unexercisable.
On February 11, 1999, Retiree was granted 35,438 stock options
pursuant to the Plan, none of which have become vested and exercisable.
As part of this Agreement, all such unvested and unexercisable
stock options shall continue to be issued and outstanding, shall continue to
vest and become exercisable by Retiree in accordance with the vesting schedules
in the stock option agreements entered into between Group and Retiree
representing such stock options and shall expire in accordance with the
expiration dates set forth in such option agreements; provided, that,
notwithstanding the above and the terms of any such stock option agreement,
Retiree shall no longer be entitled to receive any Reload Options (as such term
is defined in such stock option agreements).
(b) Deferred Stock Units.
--------------------
On February 27, 1997, Retiree deferred his annual incentive
bonus into 10,714 Elective Deferred Stock Units and received 2,143 Supplemental
Deferred Stock Units.
On February 25, 1999, Retiree deferred his annual incentive
bonus into 12,650 Elective Deferred Stock Units and received 2,530 Supplemental
Deferred Stock Units.
All such Elective Deferred Stock Units are entitled to be
settled through the issuance of Group's Class A Common Stock on the Retirement
Date, or such later date as the Retiree shall elect pursuant to the terms and
conditions of the Plan. Retiree has elected to defer the settlement of the
February 27, 1997 deferral of 10,714 Elective Deferred Stock Units until April
29, 2002, the settlement of the February 25, 1999 deferral of 12,650 Elective
Deferred Stock Units until April 29, 2003, and the settlement of the Elective
2
<PAGE>
Deferred Stock Units to be received in lieu of Retiree's annual incentive award
for 1999 pursuant to Section 3 above until April 29, 2004.
All such Supplemental Deferred Stock Units shall continue to
be issued and outstanding under the Plan and shall vest on the fifth anniversary
of the respective dates of grant. Supplemental Deferred Stock Units will be
settled through the issuance of Group's Class A Common Stock on each vesting
date, or such later date as the Retiree shall elect pursuant to the terms and
conditions of the Plan.
(c) Restricted Stock Units.
----------------------
On February 12, 1998, Retiree was granted 6,750 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 in accordance with the
vesting schedule in, and be subject to, the restricted stock award agreement
between Group and Retiree representing such restricted stock units.
(d) Performance Award.
-----------------
On July 31, 1997, Retiree was granted performance units
pursuant to the Plan. Pursuant to this Agreement, Retiree shall continue to be
entitled to receive up to 7,875 performance units, the actual number dependent
upon the achievement of certain performance goals of Group in accordance with
the amended award agreement between Group and Retiree with respect to the grant
of the performance units. In connection therewith, Retiree shall receive shares
of Group's Class A Common Stock and a cash payment upon completion of the
performance period (January 1, 1997 through December 31, 2000).
Notwithstanding any provision of this Agreement, Retiree shall
continue to be subject to the prohibition under the Securities Exchange Act of
1934, as amended, against "short swing profits" applicable to insiders of Group
for a period of six (6) months following April 29, 1999. In order to facilitate
compliance with this law, Retiree agrees not to engage, or to permit any entity
over which he exercises control to engage, in any transaction involving Group's
Class A Common Stock until October 29, 1999, without first obtaining the
approval of the General Counsel of Group. After receiving such approval and
during such period, Retiree agrees to report the details of all transactions, as
soon as consummated, to the General Counsel of Group.
5. Consulting Appointment.
----------------------
(a) Appointment.
-----------
Retiree hereby agrees, upon the Retirement Date, to provide
consulting services to LII, Group and/or their subsidiaries for a period of five
years from the date of this Agreement. LII and Group hereby retain Retiree as an
independent contractor (in such capacity, "Consultant") to provide such services
as may be specified by LII, Group and/or their subsidiaries from time to time
during such five-year term. LII and Group may, at their option, retain
Consultant for an additional five-year period on the same terms as those
3
<PAGE>
outlined in this Section or upon any other terms mutually agreed upon by LII,
Group and Consultant.
(b) Services.
--------
Consultant hereby accepts said appointment and agrees to make
available to LII, Group and/or any of their subsidiaries, on request of the
Chief Executive Officer and/or the Board of Directors of LII or Group,
Consultant's advice, expertise and experience for purposes of aiding the conduct
of the business of, or acting as a company representative or spokesman on behalf
of, LII, Group and/or any of their subsidiaries. These consulting services shall
be in addition to Consultant's service on the Board of Directors of LII and
Group. LII, Group and Consultant agree that Consultant shall provide a minimum
of twenty (20) days and a maximum of thirty (30) days of consulting services per
year. The maximum number of days per year that such services shall be provided
may be increased by mutual consent of the parties to this Agreement.
(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 LII, Group and/or any of their subsidiaries
and is not entitled to any employee benefits from such entities for so acting as
Consultant.
(d) Remuneration.
------------
As compensation for the consulting services hereunder, LII
shall pay to Consultant consulting fees for a minimum of twenty (20) days per
year in the amount of $3,000 per day, regardless of whether Consultant is
requested by the Chief Executive Officer and/or the Board of Directors of LII or
Group to perform any consulting services. The payment of such $60,000 annual
retainer fee shall be paid in a lump sum by LII to the Consultant on or before
March 31 of each year for services rendered in that year. Compensation for
services above the twenty (20) day minimum shall be made reasonably promptly
after receipt of Consultant's invoice.
(e) Expenses.
--------
LII shall reimburse the Consultant for reasonable travel,
lodging and meal and other out-of-pocket expenses incurred by him in connection
with his performance of consulting services hereunder, upon submission of
evidence satisfactory to LII of the incurrence and purpose of each such
expenses.
(f) Financial Advisory Services.
---------------------------
During the term of this Agreement, LII shall reimburse Retiree
for the fees and expenses of a financial advisor, in an aggregate amount up to
$8,000 in each year, which amount may be increased from time to time in the
discretion of LII's Board of Directors.
4
<PAGE>
6. Directorships.
-------------
Subject to the nomination of the Board of Directors of LII
and/or Group and the vote of the stockholders of LII and/or Group, Retiree shall
continue in his role as a director of LII and/or Group. On and after April 29,
1999, Retiree shall be compensated as a nonemployee director in accordance with
the policies of LII and Group. In the event that Retiree does not seek
reelection, or is not reelected to the Board of Directors of LII and/or Group,
Retiree agrees, at the request of LII, to be elected to the board of directors
of one of the subsidiaries of LII for the remaining term of this Agreement.
7. Office and Support Staff.
------------------------
During the term of this Agreement, Retiree shall be entitled
to the use of an office, secretarial support, and systems support at Group's
headquarters office in Lexington, Kentucky. In addition, LII shall arrange and
pay for Retiree's use of reasonable office, secretarial and systems support at
two other locations of Retiree's choice outside Lexington, Kentucky.
8. Unauthorized Disclosure.
-----------------------
During the Restricted Period, Retiree shall not, without the
written consent of LII's Board, the General Counsel of LII, or the Chief
Executive Officer of LII, disclose 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 whether obtained by him while in the
employ of the LII, Group and/or any of their subsidiaries or affiliates, as a
consultant or board member of LII, Group and/or any of their subsidiaries or
otherwise, that is not theretofore publicly known and in the public domain, with
respect to LII, Group and/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, Group and/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 proceeding or inquiry.
9. Non-Competition.
---------------
(a) During the Restricted Period, Retiree 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, Group or any of their subsidiaries
and which is then engaged in such competition in any geographical area in which
Group, LII and/or any of their subsidiaries or affiliates is then engaged in
such business, without first obtaining written approval from LII. Provided,
however, Retiree'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 LII, Group and/or any of their
subsidiaries or affiliates. LII may grant or deny its approval in its sole
discretion.
5
<PAGE>
(b) During the Restricted Period, Retiree will not serve as a
director of any corporation without first obtaining written approval from LII,
except that Retiree shall be entitled to continue to serve as a director of the
M.A. Hanna Company, Imation Corporation and Dynatech Corporation and as a
trustee of Fidelity Investments. The Chief Executive Officer of LII may grant or
deny such approval in his sole discretion.
10. Non-Interference.
----------------
During the Restricted Period, Retiree 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, Group and/or any of their
subsidiaries or affiliates is engaged, or solicit or endeavor to entice away
from LII, Group and/or any of their subsidiaries or affiliates, or otherwise
intentionally interfere with LII's, Group's or any of their subsidiaries' or
affiliates' relationship with, any person or entity who or which is at the time
employed by or otherwise engaged to perform services for LII, Group and/or any
of their subsidiaries or affiliates 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, Group and/or any of
their subsidiaries or affiliates.
11. Return of Documents.
-------------------
Retiree has or promptly will deliver to Group, LII and/or any
of their subsidiaries or affiliates all non-personal documents and data of any
nature pertaining to his work with LII, Group and/or any of their subsidiaries
or affiliates and Retiree 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, other than those documents necessary
for Retiree to continue in his role as a director of LII and/or Group or to
perform the consulting services described in Section 5 of this Agreement. The
parties to this Agreement acknowledge that Retiree will have continuing access
to LII's systems and that such access shall not be deemed to violate the terms
of this provision as long as the confidentiality of all Proprietary Information
is maintained by Retiree.
12. Forfeiture of Options and Other Awards and Option and Share Gain
------------------------------------------------------------------
for Breach of this Agreement.
- ----------------------------
If Retiree violates any material provision of this Agreement
after written notice of violation by LII or Group and a thirty (30) day
opportunity to cure, if such violation is curable, with the determination of
whether such a violation occurred being made by a resolution of the Board of
Directors of Group, or if a Change in Control (as defined in the CIC Agreement
(as defined below)) has occurred, by the members of the Board of Directors of
Group immediately prior to such Change in Control, then: (1) all unexercised
options, deferred stock units, restricted stock units and performance units (and
the right to receive cash compensation in connection with such performance
units) (collectively, "Incentive Awards") held by Retiree shall terminate and be
forfeited by Retiree, effective the date on which Retiree violates this
Agreement, unless terminated sooner by operation of another term or condition of
the Option Plan, the Plan, award agreement or this Agreement; and (2) any gain
realized upon receipt of an Incentive Award, or exercise of an Incentive Award
6
<PAGE>
that does not require the payment of an exercise price, which gain shall be
represented by the closing market price on the date of receipt of such Incentive
Award, or in the case of an Incentive Award that requires the payment of an
exercise price, the gain represented by the closing market price on the date of
exercise over the exercise price multiplied by the number of Incentive Awards,
without regard to any subsequent market price decrease or increase; in each case
within 18 months prior to Retiree's violation of this Agreement, shall be
forfeited and paid by Retiree to LII.
13. Other Payments and Benefits.
---------------------------
Retiree acknowledges and agrees that no other payments or
benefits are owing or are to be paid or given to Retiree by LII, Group and/or
any of their subsidiaries or affiliates, other than (i) as specifically set
forth herein, (ii) as specifically set forth in the Employment Agreement as
extending beyond the term of employment, (iii) as specifically set forth in the
Change in Control Agreement among Group, LII and Retiree dated as of April 30,
1998 (the "CIC Agreement") as extending beyond the term of employment, (iv) as
specifically set forth in the Indemnification Agreement among Group, LII and
Retiree dated as of April 30, 1998 (the "Indemnification Agreement") as
extending beyond the term of employment and (v) such benefits, and payments
under pension and benefits plans as Retiree in the ordinary course as a retiree
of LII would be entitled to receive.
14. Assumption of Agreement.
-----------------------
LII and Group will require any successor (by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of LII or Group, by agreement in form and substance reasonably
satisfactory to the Retiree, to expressly assume and agree to perform this
Agreement, the Employment Agreement, the CIC Agreement and the Indemnification
Agreement in the same manner and to the same extent that LII and Group would be
required to perform it if no such succession had taken place. Failure of LII and
Group to obtain such agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Retiree to payment in
the form of a lump sum equal to the full value of all future payments due under
this Agreement, and all other benefits to which he otherwise would have been
entitled under this Agreement, the Employment Agreement, the CIC Agreement and
the Indemnification Agreement as if no succession had taken place; provided,
however, that Retiree shall not be required to perform any services after such
breach. With respect to the Incentive Awards, the Change of Control provisions
set forth in Section 9 of the Plan shall continue to be effective
notwithstanding Retiree's retirement. LII and Group hereby agree that Retiree
shall continue at all times to be entitled to the benefits provided by Sections
9(a), (b), (c) and (d) and 12 (a) of the CIC Agreement, and that those
provisions may not be amended to affect the Retiree without the prior written
consent of the Retiree.
15. Entire Agreement.
----------------
Except as otherwise expressly provided herein, this Agreement,
the Employment Agreement, the Incentive Award agreements, the CIC Agreement and
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
7
<PAGE>
such subject matter (including those made to or with Retiree by any other person
or entity) are superseded hereby.
16. Miscellaneous.
-------------
(a) Binding Effect.
--------------
This Agreement shall be binding on and inure to the benefit of
LII, Group and their successors and assigns, subject to Section 14 above. This
Agreement shall also be binding on and inure to the benefit of Retiree 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 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
and Group's Board and/or Chief Executive Officer and is agreed to in writing by
the Retiree. 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) 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,
8
<PAGE>
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
740 West New Circle Road
Lexington, Kentucky 40550
Attention: General Counsel
(B) if to the Retiree, to him at the address listed on the
signature page hereof.
(g) 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.
(h) 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.
9
<PAGE>
IN WITNESS WHEREOF, LII and Group have duly executed this Agreement by
their authorized representatives and the Retiree has hereunto set his hand, in
each case effective as of the date first above written.
LEXMARK INTERNATIONAL, INC.
By: /s/ Paul J. Curlander
----------------------------
Paul J. Curlander
President and Chief Executive Officer
LEXMARK INTERNATIONAL GROUP, INC.
By: /s/ Paul J. Curlander
----------------------------
Paul J. Curlander
President and Chief Executive Officer
RETIREE
/s/ Marvin L. Mann
----------------------------
Marvin L. Mann
Address:
10
<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, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 81
<SECURITIES> 0
<RECEIVABLES> 447
<ALLOWANCES> 24
<INVENTORY> 351
<CURRENT-ASSETS> 931
<PP&E> 438
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,401
<CURRENT-LIABILITIES> 604
<BONDS> 149
0
0
<COMMON> 1
<OTHER-SE> 497
<TOTAL-LIABILITY-AND-EQUITY> 1,401
<SALES> 787
<TOTAL-REVENUES> 787
<CGS> 502
<TOTAL-COSTS> 502
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 101
<INCOME-TAX> 33
<INCOME-CONTINUING> 68
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 0.96
</TABLE>
