EXHIBIT 4.1
LEXMARK INTERNATIONAL, INC.
BROAD-BASED EMPLOYEE STOCK INCENTIVE PLAN
(Effective as of December 19, 2000)
SECTION 1.
PURPOSE
The purpose of the Plan is to foster and promote the long-term
financial success of the Company and materially increase shareholder
value by (a) motivating superior performance by means of
performance-related incentives, (b) encouraging and providing for the
acquisition of an ownership interest in the Company by Employees and
(c) enabling the Company to attract and retain the services of an
outstanding team of Employees upon whose judgment, interest and special
effort the successful conduct of its operations is largely dependent.
SECTION 2.
DEFINITIONS
2.1. Definitions. Whenever used herein, the following terms shall
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have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Adjustment Event" shall mean any stock dividend, stock
split or share combination of, or extraordinary cash dividend on,
the Common Stock or recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of
shares, warrants or rights offering to purchase Common Stock at a
price substantially below Fair Market Value, or other similar
event affecting the Common Stock of the Company.
(c) "Award Agreement" means the agreement, certificate or
other instrument evidencing the grant of any Incentive Award
under the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause," with respect to any Incentive Award, shall
have the meaning assigned thereto in the Award Agreement
evidencing such Incentive Award or, if there is no such meaning
assigned, shall mean (i) the willful failure by the Participant
to perform substantially his duties as an employee of the
Company or any Subsidiary (other than due to physical or mental
illness) after reasonable notice to the Participant of such
failure, (ii) the Participant's engaging in serious misconduct
that is injurious to the Company or any Subsidiary, (iii) the
Participant's having been convicted of, or entered a plea of
nolo contendere to, a crime that constitutes a felony or (iv)
the breach by the Participant of any written covenant or
agreement with the Company or any Subsidiary not to disclose
information pertaining to the Company or any Subsidiary or not
to compete or interfere with the Company or any Subsidiary.
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(f) "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.
(g) "Change in Control Price" shall mean the highest
price per share of Common Stock paid in conjunction with any
transaction resulting in a Change in Control (as determined in
good faith by the Committee if any part of the offered price is
payable other than in cash) or, in the case of a Change in
Control occurring solely by reason of a change in the
composition of the Board, the highest Fair Market Value of the
Common Stock on any of the 30 trading days immediately preceding
the date on which such Change in Control occurs.
(h) "Code" means the Internal Revenue Code of 1986, as
amended.
(i) "Committee" means (i) the Compensation and Pension
Committee of the Board, unless ss.16 under the Act requires the
approval of a committee of the Board that is composed solely of
two or more Non-Employee Directors (as defined in Rule
16b-3(b)(3) as promulgated under the Act) in which case
"Committee" shall mean such committee or (ii) the Board itself.
(j) "Common Stock" means the Class A common stock of the
Company, par value $0.01 per share, or such other shares or kind
of securities as determined by the Board.
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(k) "Company" means Lexmark International, Inc., a Delaware
corporation, and any successor thereto.
(l) "Deferred Stock Unit" means a Participant's right to
receive pursuant to the Plan one share of Common Stock, or,
if provided by the Committee, cash equal to the Fair Market
Value of a share of Common Stock, at the end of a specified
period of time.
(m) "Disability," with respect to any Incentive Award,
shall have the meaning assigned thereto in the Award Agreement
evidencing such Incentive Award, or, if there is no such meaning
assigned, shall mean a physical or mental disability or
infirmity of a Participant, as defined in any disability plan
sponsored by the Company or any Subsidiary which employs such
Participant, or, if no such plan is sponsored by such
Participant's employer, the Lexmark Medical Disability Income
Plan.
(n) "Employee" means any employee of the Company or any
of its Subsidiaries who is not a director or an officer (as such
term is defined in Rule 16a-1(f) under the Act) of the Company.
(o) "Fair Market Value" means, as of any date of
determination, the closing price of a share of Common Stock on a
national securities exchange on that day, as reported for such
day in the Wall Street Journal, or the last bid price for a
share of Common Stock on such immediately preceding day, as
reported on a nationally recognized system of price quotation.
In the event that there are no Common Stock transactions
reported on such exchange or system on such day, Fair Market
Value shall mean the closing price or the last bid price,
whichever is applicable, on the immediately preceding day on
which Common Stock transactions were so reported.
(p) "Incentive Award" means any award under the Plan of
an Option, Stock Appreciation Right, Restricted Stock or
Deferred Stock Unit. Each of these awards may be granted alone
or together with other awards under the Plan and/or cash awards
outside the Plan.
(q) "Option" means the right to purchase a stated number of
shares of Common Stock at a stated price (as specified in
Section 6.2 hereof) for a specified period of time. For purposes
of the Plan, an Option may be either (i) an "Incentive Stock
Option" within the meaning of section 422 of the Code or (ii) an
Option which is not an Incentive Stock Option (a "Non-Qualified
Stock Option").
(r) "Participant" means any Employee designated by the
Committee to receive an Incentive Award under the Plan.
(s)"Plan" means the Lexmark International, Inc. Broad-Based
Employee Stock Incentive Plan, as set forth herein and as the
same may be amended from time to time.
(t) "Qualifying Common Stock" means shares of Common
Stock which (i) are not subject to any loan or other obligation
or pledged as collateral with respect to any loan or other
obligation of the Participant (subject to the consent of the
Committee, other than any loan extended to the Participant by
the Company or a Subsidiary) and (ii) either (A) have been owned
by the Participant for at least six months (or such greater or
lesser period as the Committee shall determine) or (B) were
purchased by the Participant on a national securities exchange
or nationally recognized over-the-counter market.
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(u) "Restriction Period" means the period during which
shares of Restricted Stock are subject to forfeiture or
restrictions on transfer (if applicable) as described in Section
7 of the Plan and any applicable Award Agreement, provided that
such period shall not be less than three years.
(v) "Restricted Stock" means Common Stock or units with
respect to Common Stock awarded to a Participant pursuant to the
Plan which is subject to forfeiture and restrictions on
transferability in accordance with Section 7 of the Plan.
(w) "Retirement," with respect to any Incentive Award,
shall have the meaning assigned thereto in the Award Agreement
evidencing such Incentive Award, or, if there is no such meaning
assigned, shall mean a Participant's retirement at or after
normal retirement age under the terms of the retirement plan
sponsored by the Company or any Subsidiary which employs such
Participant.
(x) "Stock Appreciation Right" means the right to receive
a payment from the Company, in cash, Common Stock or a
combination thereof, equal to the excess of the Fair Market
Value of a share of Common Stock at the date of exercise over a
specified price fixed by the Committee (as specified in Section
6.7(c) hereof).
(y) "Subsidiary" means any entity that is directly or
indirectly controlled by the Company or any other entity in
which the Company has a significant equity interest, as
determined by the Committee.
2.2. Gender and Number. Except when otherwise indicated by the
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context, words in the masculine gender used in the Plan shall include
the feminine gender, the singular shall include the plural, and the
plural shall include the singular.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
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Participants in the Plan shall be those Employees selected by the
Committee to participate in the Plan.
SECTION 4.
ADMINISTRATION
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4.1. Power to Grant and Establish Terms of Awards. The Committee
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shall have the discretionary authority, subject to the terms of the
Plan, to determine the Employees to whom Incentive Awards shall be
granted and the terms and conditions of such Incentive Awards,
including but not limited to the number of shares of Common Stock to be
covered by each Incentive Award; the time or times at which Incentive
Awards may be exercised, paid or transferred, as the case may be;
whether Options shall be designated as Incentive Stock Options or
Non-Qualified Stock Options; the form and manner of payment of any
amount due from a Participant (or his beneficiary or permitted
transferee, if applicable) in connection with any Incentive Award;
whether any Reload Option (as defined in Section 6.6) will be granted
to any Participant pursuant to Section 6.6; whether any restriction
(including any provision as to vesting, exercisability, payment or
transferability) shall be modified or waived, in whole or in part,
after the date of grant of the Incentive Award; the rights of a
Participant (or his beneficiary or permitted transferee) with respect
<PAGE>
to any Incentive Award following the Participant's termination of
employment; whether amounts payable by the Company in respect of any
Incentive Award shall be paid in Common Stock, cash or any combination
thereof; whether and to what extent any Incentive Award may be
transferred by the Participant; and the terms, provisions and
conditions to be included in any Incentive Award Agreement.
The officers of the Company may suggest to the Committee the
Participants who should receive Incentive Awards under the Plan. In
accordance with the terms of the Plan, the terms and conditions of each
Incentive Award shall be determined by the Committee at the time of
grant, and such terms and conditions may be subsequently changed by the
Committee, in its discretion, provided that no such change may be
effected which would adversely affect a Participant's rights with
respect to an Incentive Award then outstanding, without the consent of
such Participant. The Committee may establish different terms and
conditions for different Participants receiving Incentive Awards and
for the same Participant for each Incentive Award such Participant may
receive, whether or not granted at different times. The grant of any
Incentive Award to any Employee shall not entitle such Employee to the
grant of any other Incentive Awards. Notwithstanding anything else
contained in the Plan to the contrary, the Committee may delegate,
subject to such terms and conditions as it shall determine, to any
officer of the Company or to a committee of officers of the Company,
the authority to grant Incentive Awards (and to make any and all
determinations related thereto) to Participants who are not, and are
not expected to become, subject to the reporting requirements of
Section 16(a) of the Act and whose compensation will not be subject to
the limitations on the deductibility thereof by the Company or its
Subsidiaries pursuant to Section 162(m) of the Code.
4.2. Administration. The Committee shall be responsible for the
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administration of the Plan. Any Incentive Award granted by the
Committee may be subject to such conditions, not inconsistent with the
terms of the Plan, as the Committee shall determine, in its discretion.
The Committee, by majority action thereof, has discretionary authority
to prescribe, amend and rescind rules and regulations relating to the
Plan, to interpret and apply the provisions of the Plan, to provide for
conditions deemed necessary or advisable to protect the interests of
the Company or to interpret the Plan and to make all other
determinations necessary or advisable for the administration and
interpretation of the Plan and to carry out its provisions and
purposes.
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4.3. Discretionary Authority of Committee. All of the powers and
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authority conferred upon the Committee pursuant to any term of the Plan
shall be exercised by the Committee, in its discretion. All
determinations, interpretations or other actions made or taken by the
Committee pursuant to the provisions of the Plan shall be final,
binding and conclusive for all purposes and upon all persons and, in
the event of any judicial review thereof, shall be overturned only if
arbitrary and capricious. The Committee may consult with legal counsel,
who may be counsel to the Company, and shall not incur any liability
for any action taken in good faith in reliance upon the advice of
counsel.
SECTION 5.
STOCK SUBJECT TO PLAN
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5.1. Number. Subject to the provisions of Section 5.3, the
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number of shares of Common Stock that may be delivered under the Plan
may not exceed 1,600,000, plus any shares that become available for
grant pursuant to Section 5.2. The shares to be delivered under the
Plan may consist, in whole or in part, of Common Stock held in treasury
or authorized but unissued Common Stock, not reserved for any other
purpose, or from Common Stock reacquired by the Company.
5.2. Canceled, Terminated, or Forfeited Awards. Any shares of
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Common Stock subject to any portion of an Incentive Award which, in any
such case and for any reason, expires, or is canceled, terminated or
otherwise settled, without the issuance of such shares of Common Stock,
including shares covered by an Incentive Award used to satisfy tax
withholding requirements on behalf of a Participant as provided for in
Section 11.4, shall again be available for award under the Plan. Shares
of Common Stock that are delivered to the Company, either actually or
by attestation, in payment of the exercise price for any Option granted
under the Plan will also be available for future grants under the Plan.
5.3. Adjustment in Capitalization. The aggregate number of
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shares of Common Stock available for Incentive Awards under Section
5.1, or subject to outstanding Incentive Awards, and the respective
prices and/or vesting criteria applicable to outstanding Incentive
Awards shall be proportionately adjusted to reflect, as deemed
equitable and appropriate by the Committee, an Adjustment Event. To the
extent deemed equitable and appropriate by the Committee, subject to
any required action by stockholders, in any merger, consolidation,
reorganization, liquidation, dissolution or other similar transaction,
any Incentive Award granted under the Plan shall pertain to the
securities and other property to which a holder of the number of shares
of Common Stock covered by the Incentive Award would have been entitled
to receive in connection with such event.
Any shares of stock (whether Common Stock, shares of stock into
which shares of Common Stock are converted or for which shares of
Common Stock are exchanged or shares of stock distributed with respect
to Common Stock) or cash or other property received with respect to any
Incentive Award granted under the Plan as a result of any Adjustment
Event, any distribution of property or any merger, consolidation,
<PAGE>
reorganization, liquidation, dissolution or other similar transaction
shall, except as provided in Section 7.4, Section 8.3 or as otherwise
provided by the Committee at or after the date any such award is made,
be subject to the same terms and conditions, including vesting and
restrictions on exercisability or transfer, as are applicable to the
Incentive Award with respect to which such shares, cash or other
property is received, and any Award Agreement and stock certificate(s)
representing or evidencing any shares of stock or other property so
received shall so provide and be legended as appropriate.
SECTION 6.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
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6.1. Grant of Options. Options may be granted to Participants at
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such time or times as shall be determined by the Committee. Options
granted under the Plan may be of two types: (i) Incentive Stock Options
and (ii) Non-Qualified Stock Options, except that no Incentive Stock
Option may be granted to any Employee of a Subsidiary which is not a
corporation. The date of grant of an Option under the Plan will be the
date on which the Option is awarded by the Committee or, if so
determined by the Committee, the date on which occurs any event the
occurrence of which is an express condition precedent to the grant of
the Option. The Committee shall determine the number of Options, if
any, to be granted to a Participant. Each Option shall be evidenced by
an Award Agreement that shall specify the type of Option granted, the
exercise price, the duration of the Option, the number of shares of
Common Stock to which the Option pertains and such other terms and
conditions not inconsistent with the Plan as the Committee shall
determine.
6.2. Option Price. Options granted pursuant to the Plan shall
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have an exercise price which is not less than the Fair Market Value on
the date the Option is granted, except that if a Non-Qualified Stock
Option is granted retroactively in tandem with or in substitution for a
Stock Appreciation Rights grant, the designated Fair Market Value for
purposes of establishing the exercise price for such option may be the
Fair Market Value on the date the Stock Appreciation Rights were
granted.
6.3. Exercise of Options. Options awarded to a Participant under
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the Plan shall be exercisable at such time or times and subject to such
restrictions or other conditions, including the performance of a
minimum period of service or the satisfaction of performance goals, as
the Committee shall determine either at or after the date of grant of
such Options, subject to the Committee's right to accelerate or waive
<PAGE>
any conditions to the exercisability of any Option granted under the
Plan. To the extent not specified otherwise by the Committee, Options
will become exercisable in three installments as follows, subject to
the Participant's continued employment until the applicable date:
Percentage of Anniversary of
Grant Exercisable Date of Grant
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60%.. . . . . . . . . . . . . . . .Third anniversary
80%.. . . . . . . . . . . . . . . .Fourth anniversary
100%. . . . . . . . . . . . . . . .Fifth anniversary
Once exercisable, an Option may be exercised from time to time, in
whole or in part, up to the total number of shares of Common Stock with
respect to which it is then exercisable. Notwithstanding the foregoing,
except as provided in Section 6.8, no Option shall be exercisable for
more than 10 years after the date on which it is granted.
6.4. Payment. The Committee shall establish procedures governing
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the exercise of Options, which shall require that written notice of
exercise be given and that the Option price be paid in full at the time
of exercise (i) in cash or cash equivalents, (ii) in the discretion of
the Committee, in shares of Qualifying Common Stock having a Fair
Market Value on the date of exercise equal to such Option price or in a
combination of cash and Qualifying Common Stock or (iii) in accordance
with such other procedures or in such other form as the Committee shall
from time to time determine. As soon as practicable after receipt of a
written exercise notice and payment of the exercise price in accordance
with this Section 6.4, the Company shall direct its stock transfer
agent to make (or to cause to be made) an appropriate book entry
reflecting the Participant's ownership of the shares of Common Stock so
acquired.
6.5. Incentive Stock Options. Notwithstanding anything in the
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Plan to the contrary, no term of the Plan relating to Incentive Stock
Options shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as
to disqualify the Plan under Section 422 of the Code, or, without the
consent of any Participant affected thereby, to cause any Incentive
Stock Option previously granted to fail to qualify for the Federal
income tax treatment afforded Incentive Stock Options under Section 421
of the Code.
6.6. Reload Options. If provided by the Committee at or after
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the date of grant, a Participant (or, if applicable, his permitted
transferee) who delivers shares of Common Stock that have been owned by
such Participant (or permitted transferee) for any minimum period of
time specified by the Committee to exercise an Option or an option
granted under a Predecessor Plan, will automatically be granted new
Options ("Reload Options") for a number of shares of Common Stock equal
to the number of shares so delivered. Unless the Committee determines
otherwise, such Reload Options will be subject to the same terms and
conditions (including the same expiration date) as the related Option
<PAGE>
except (i) that the exercise price shall be equal to the Fair Market
Value of a share of Common Stock on the date such Reload Option is
granted and (ii) such Reload Option shall not be exercisable prior to
the six month anniversary of the date of grant and, thereafter, shall
be exercisable in full.
6.7. Stock Appreciation Rights.
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(a) Stock Appreciation Rights may be granted to Participants at
such time or times and with respect to such number of shares of Common
Stock as shall be determined by the Committee and shall be subject to
such terms and conditions as the Committee may impose. Each grant of an
Incentive Award of Stock Appreciation Rights shall be evidenced by an
Award Agreement.
(b) Stock Appreciation Rights may be exercised at such time or
times and subject to such conditions, including the performance of a
minimum period of service, the satisfaction of performance goals or the
occurrence of any event or events, including a Change in Control, as
the Committee shall determine, either at or after the date of grant.
Stock Appreciation Rights which are granted in tandem with an Option
may only be exercised upon the surrender of the right to exercise such
Option for an equivalent number of shares and may be exercised only
with respect to the shares of Common Stock for which the related Option
is then exercisable. Notwithstanding any other provision of the Plan,
the Committee may impose such conditions on the exercise of a Stock
Appreciation Right (including, without limitation, the right of the
Committee to limit the time of exercise to specified periods) as may be
required to satisfy the applicable provisions of Rule 16b-3 as
promulgated under the Act or any successor rule.
(c) Subject to the provisions of Section 11.4 of the Plan, upon
exercise of a Stock Appreciation Right, the Participant shall be
entitled to receive payment in cash, Common Stock or in a combination
of cash and Common Stock, as determined by the Committee, of an amount
determined by multiplying:
(i) any increase in the Fair Market Value of a share of
Common Stock at the date of exercise over the price fixed by the
Committee at the date of grant of such Right, by
(ii) the number of shares of Common Stock with respect to
which the Stock Appreciation Right is exercised.
6.8. Exercisability Following Termination of Employment. Unless
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otherwise determined by the Committee at or after the date of grant, in
the event a Participant's employment with the Company and the
Subsidiaries terminates by reason of Retirement, Disability, death or
special termination with the consent of the Company, all Options and
Stock Appreciation Rights then held by such Participant that are
exercisable at the date of such termination of employment shall
thereafter remain exercisable by the Participant or, if applicable, the
Participant's beneficiary, for a period of one year from the date of
termination, but in no event later than the expiration of the stated
term of the Option or Stock Appreciation Right. Notwithstanding the
foregoing, to the extent provided by the Committee at or after the date
of grant, in the event of a Participant's termination of employment due
to death or Disability, all such Options and Stock Appreciation Rights
shall remain exercisable for a minimum period of one year, without
regard to the stated term of the Option or Stock Appreciation Right.
Unless otherwise determined by the Committee at or after the date of
grant, in the event a Participant's employment with the Company and the
<PAGE>
Subsidiaries terminates for any reason other than Retirement,
Disability, death or by the Company for Cause, all Options and Stock
Appreciation Rights then held by such Participant that are then
exercisable shall remain exercisable for the 90 day period immediately
following such termination of employment or until the expiration of the
term of such Option or Stock Appreciation Right, whichever period is
shorter. Unless otherwise determined by the Committee at or after the
date of grant, in the event of a Participant's termination of
employment with the Company and the Subsidiaries by the Company for
Cause, all Options and Stock Appreciation Rights then held by such
Participant shall immediately terminate and be canceled, in full, on
the date of such termination of employment. All Options that are not
exercisable following a Participant's termination of employment shall
immediately terminate and be canceled on the date of such termination
of employment and all other Options shall terminate and be canceled on
the date the period for exercise has expired to the extent not
exercised prior to such date.
6.9. Committee Discretion. Notwithstanding anything else
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contained in this Section 6 to the contrary, the Committee may, at or
after the date of grant, accelerate or waive any conditions to the
exercisability of any Option or Stock Appreciation Right granted under
the Plan and may permit all or any portion of any such Option or Stock
Appreciation Right to be exercised following a Participant's
termination of employment for any reason on such terms and subject to
such conditions as the Committee shall determine for a period up to and
including, but not beyond, the expiration of the term of such Options
(except as provided in Section 6.8 in the case of termination due to
death or Disability).
SECTION 7.
RESTRICTED STOCK
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7.1. Grant of Restricted Stock. The Committee may grant
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Incentive Awards of Restricted Stock to Participants at such times and
in such amounts, and subject to such other terms and conditions not
inconsistent with the Plan, as it shall determine; provided that in no
event shall the number of shares of Common Stock subject to Incentive
Awards of Restricted Stock exceed 50,000 (adjusted pursuant to Section
5.3 if an Adjustment Event shall occur) in the aggregate for all
Participants. Unless the Committee provides otherwise at or after the
date of grant, stock certificates evidencing any shares of Restricted
Stock so granted shall be held in the custody of the Secretary of the
Company until the Restriction Period lapses, and, as a condition to the
grant of any Incentive Award of shares of Restricted Stock, the
<PAGE>
Participant shall have delivered to the Company a stock power, endorsed
in blank, relating to the shares of Common Stock covered by such
Incentive Award. Each grant of Restricted Stock shall be evidenced by
an Incentive Award Agreement.
7.2. Payment. Upon the expiration or termination of the
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Restriction Period and the satisfaction (as determined by the
Committee) of any other conditions determined by the Committee, the
restrictions applicable to the Restricted Stock shall lapse and the
Company shall cancel and direct its stock transfer agent to make (or to
cause to be made) an appropriate book entry reflecting the
Participant's ownership of such number of shares of Common Stock with
respect to which the restrictions have lapsed, free of all such
restrictions, other than any imposed by applicable law. Upon request,
the Company shall deliver to the Participant a stock certificate
registered in such Participant's name and representing the number of
shares of Common Stock with respect to which the restrictions have
lapsed, free of all such restrictions except any that may be imposed by
law. To the extent provided by the Committee, in its discretion, in
lieu of delivering shares of Common Stock, the Company may make a cash
payment in full or partial satisfaction of any Incentive Award of
Restricted Stock equal to the Fair Market Value, on the date the
applicable restrictions lapse, of the number of shares or units of
Restricted Stock with respect to which such restrictions have lapsed.
No payment will be required to be made by the Participant upon the
delivery of such shares of Common Stock and/or cash, except as
otherwise provided in Section 11.4 of the Plan. Subject to Section 7.6,
at or after the date of grant, the Committee may accelerate the vesting
of any award of Restricted Stock or waive any conditions to the vesting
of any such award.
7.3. Restriction Period; Restrictions on Transferability during
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Restriction Period. Unless otherwise determined by the Committee at or
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after the date of grant, the Restriction Period applicable to any award
of Restricted Stock shall lapse, and such shares of Restricted Stock
shall become freely transferable, on the earlier of (i) the
Participant's 60th birthday or (ii) the date of the Participant's
termination of employment with the Company and the Subsidiaries due to
Retirement, death or Disability, subject in any such case to the
Participant's continuous employment with the Company or a Subsidiary
through such date. Except as provided in Section 11.1, shares of
Restricted Stock may not be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated until such time as the Restriction
Period applicable thereto shall have lapsed upon the satisfaction of
such conditions, including without limitation, the completion of a
minimum period of service, the satisfaction of performance goals or the
<PAGE>
occurrence of such event or events, as shall be determined by the
Committee either at or after the time of grant.
7.4. Rights as a Stockholder. Unless otherwise determined by the
-----------------------
Committee at or after the date of grant, Participants granted shares of
Restricted Stock shall be entitled to receive, either currently or at a
future date, as specified by the Committee, all dividends and other
distributions paid with respect to those shares, provided that if any
such dividends or distributions are paid in shares of Common Stock or
other property (other than cash), such shares and other property shall
be subject to the same forfeiture restrictions and restrictions on
transferability as apply to the shares of Restricted Stock with respect
to which they were paid.
7.5. Legend. To the extent any stock certificate is issued to a
------
Participant in respect of shares of Restricted Stock awarded under the
Plan prior to the expiration of the applicable Restriction Period, such
certificate shall be registered in the name of the Participant and
shall bear the following (or similar) legend:
"The shares of stock represented by this certificate are
subject to the terms and conditions contained in the Lexmark
International, Inc. Broad-Based Employee Stock Incentive Plan,
as amended from time to time, and the Incentive Award
Agreement, dated as of ----------, between the Company and
the Participant, and may not be sold, pledged, transferred,
assigned, hypothecated or otherwise encumbered in any manner
(except as provided in Article ------------ of the Plan or in
such Incentive Award Agreement) until ---------------."
Upon the lapse of the Restriction Period with respect to any such
shares of Restricted Stock, the Company shall, upon the Participant's
request, issue or have issued new share certificates without the legend
described herein in exchange for those previously issued.
7.6. Performance Related Awards. Notwithstanding anything else
--------------------------
contained in the Plan to the contrary, unless the Committee otherwise
determines at the time of grant, any award of Restricted Stock, or an
award of Common Stock or Restricted Stock made in conjunction with
other incentive plans established by the Company, to an officer of the
Company or a Subsidiary who is subject to the reporting requirements of
Section 16(a) of the Act, other than an award which will vest solely on
the basis of the passage of time, shall, to the extent required to
ensure that an amount with respect to such award is deductible by the
Company or such Subsidiary pursuant to Section 162(m) of the Code,
become vested, if at all, upon the determination by the Committee that
performance objectives established by the Committee have been attained,
in whole or in part (a "Performance Award"). Such performance
objectives shall be determined over a measurement period or periods
established by the Committee, which period shall not be less than three
years, and related to one or more of the following criteria, which may
be determined solely by reference to the performance of (i) the
Company, (ii) a Subsidiary, (iii) an affiliate of the Company or (iv) a
division or unit of any of the foregoing or based on comparative
performance of any of the foregoing relative to other companies: (A)
<PAGE>
earnings per share; (B) revenues; (C) operating cash flow; (D)
operating earnings; (E) working capital; (F) inventory turnover rates;
(G) return on capital; (H) return on equity; and (I) shareholder value
add (the "Performance Criteria").
SECTION 8.
DEFERRED STOCK UNITS
--------------------
8.1. Deferred Stock Unit Awards. On fixed dates established by
--------------------------
the Committee and subject to such terms and conditions as the Committee
shall determine, a Participant may be permitted to elect to defer
receipt of all or a portion of his annual compensation and/or annual
incentive compensation ("Deferred Annual Amount") payable by the
Company or a Subsidiary and receive in lieu thereof an Incentive Award
of a number of Deferred Stock Units (the "Elective Units") equal to the
greatest whole number which may be obtained by dividing (x) the amount
of the Deferred Annual Amount, by (y) the Fair Market Value of a share
of Common Stock on the date of grant. No shares of Common Stock will be
issued at the time an award of Deferred Stock Units is made and the
Company shall not be required to set aside a fund for the payment of
any such award. The Company will establish a separate account for the
Participant and will record in such account the number of Deferred
Stock Units awarded to the Participant. Unless the Committee determines
otherwise, each Participant who receives an award of Elective Units
shall receive an additional award of Deferred Stock Units (the
"Supplemental Units") equal to the greatest whole number which may be
obtained by dividing (x) 20% (or such other percentage as may be
determined by the Committee at the date of grant) of the Deferred
Annual Amount, by (y) the Fair Market Value of a share of Common Stock
on the date of grant. The Committee may also grant a Participant an
Incentive Award of Deferred Stock Units ("Freestanding Deferred Stock
Units") without regard to any election by the Participant to defer
receipt of any compensation or bonus amount payable to him.
8.2. Dividends with respect to Deferred Stock Units. The
----------------------------------------------------
Committee will determine whether and to what extent to credit to the
account of, or to pay currently to, each recipient of a Deferred Stock
Unit award, an amount equal to any dividends paid by the Company during
the period of deferral with respect to the corresponding number of
shares of Common Stock ("Dividend Equivalents"). To the extent provided
by the Committee at or after the date of grant, any Dividend
Equivalents with respect to cash dividends on the Common Stock credited
to a Participant's account shall be deemed to have been invested in
shares of Common Stock on the record date established for the related
dividend and, accordingly, a number of Deferred Stock Units shall be
credited to such Participant's account equal to the greatest whole
number which may be obtained by dividing (x) the value of such Dividend
Equivalent on the record date, by (y) the Fair Market Value of a share
of Common Stock on such date.
8.3. Vesting of Deferred Stock Unit Awards. The portion of each
-------------------------------------
Deferred Stock Unit award that consists of Elective Units, together
with any Dividend Equivalents credited with respect thereto, shall be
fully vested at all times. Unless the Committee provides otherwise at
or after the date of grant, the portion of each Deferred Stock Unit
award that consists of Supplemental Units or Freestanding Deferred
Stock Units, together with any Dividend Equivalents credited with
respect thereto, will become vested in full on the fifth anniversary of
(x) in the case of Supplemental Units, the date the corresponding
<PAGE>
Deferred Annual Amount would have been paid absent the Participant's
election to defer and (y) in the case of Freestanding Deferred Stock
Units, the fifth anniversary of the date of grant of such Units,
provided the Participant remains in the continuous employ of the
Company or a Subsidiary through such applicable date. Notwithstanding
the foregoing, the Committee may accelerate the vesting of any Deferred
Stock Unit award at or after the date of grant.
8.4. Rights as a Stockholder. A Participant shall not have any
-----------------------
right in respect of Deferred Stock Units awarded pursuant to the Plan
to vote on any matter submitted to the Company's stockholders until
such time as the shares of Common Stock attributable to such Deferred
Stock Units have been issued to such Participant or his beneficiary.
8.5. Settlement of Deferred Stock Units. Unless the Committee
-----------------------------------
determines otherwise at or after the date of grant, a Participant shall
receive one share of Common Stock for each Elective Unit (and related
Dividend Equivalents) as of the earlier of (x) the fifth anniversary of
the date of grant and (y) the date of such Participant's termination of
employment due to Retirement, death or Disability (or such later date
as may be elected by the Participant in accordance with the rules and
procedures of the Committee). Unless the Committee determines otherwise
at or after the date of grant, a Participant shall receive one share of
Common Stock for each Supplemental Unit and/or Freestanding Deferred
Stock Unit (and related Dividend Equivalents) that shall have become
vested on or prior to the date of such Participant's termination of
employment with the Company and the Subsidiaries, other than any such
termination for Cause, on (x) in the case of the Participant's
termination of employment due to Retirement, death or Disability, the
date of such termination of employment and (y) in the case of any other
termination of the Participant's employment, on the later of (i) the
Participant's 60th birthday and (ii) the date of such termination of
employment (or, in any such case, on such earlier date as the Committee
shall permit or such later date as may be elected by the Participant in
accordance with the rules and procedures of the Committee). In the
event of the termination of a Participant's employment with the Company
and the Subsidiaries for Cause, the Participant shall immediately
forfeit all rights with respect to any Supplemental Units and
Freestanding Deferred Stock Units (and Related Dividend Equivalents)
credited to his account. The Committee may provide in the Award
Agreement applicable to any Incentive Award of Deferred Stock Units
that, in lieu of issuing shares of Common Stock in settlement of the
vested portion of such Deferred Stock Unit, the Committee may direct
the Company to pay to the Participant the cash balance of such Deferred
Stock Units.
SECTION 9.
CHANGE IN CONTROL
-----------------
9.1. Accelerated Vesting and Payment. Subject to the provisions
-------------------------------
of Section 9.2 below, in the event of a Change in Control, (i) each
Option and Stock Appreciation Right shall promptly be canceled in
exchange for a payment in cash of an amount equal to the excess of the
Change in Control Price over the exercise price for such Option or the
base price for such Stock Appreciation Right, whichever is applicable
(except that the Change in Control Price shall not apply to Stock
Appreciation Rights granted in tandem with Incentive Stock Options),
<PAGE>
(ii) the Restriction Period applicable to all shares of Restricted
Stock shall expire and all such shares shall become nonforfeitable and
immediately transferable and (iii) all Deferred Stock Units shall
become fully vested and the shares of Common Stock with respect thereto
shall be immediately payable.
9.2. Alternative Awards. Notwithstanding Section 9.1, no
-------------------
cancellation, acceleration of exercisability, vesting, cash settlement
or other payment shall occur with respect to any Incentive Award or any
class of Incentive Awards if the Committee reasonably determines in
good faith prior to the occurrence of a Change in Control that such
Incentive Award or class of Incentive Awards shall be honored or
assumed, or new rights substituted therefor (such honored, assumed or
substituted award hereinafter called an "Alternative Award") by a
Participant's employer (or the parent or a subsidiary of such employer)
immediately following the Change in Control, provided that any such
Alternative Award must:
(i) be based on stock which is traded on an established
securities market, or which will be so traded within 60 days
following the Change in Control;
(ii) provide such Participant (or each Participant in a
class of Participants) with rights and entitlements
substantially equivalent to or better than the rights and
entitlements applicable under such Incentive Award, including,
but not limited to, an identical or better exercise or vesting
schedule and identical or better timing and methods of payment;
(iii) have substantially equivalent economic value to
such Incentive Award (determined by the Committee as constituted
immediately prior to the Change in Control, in its sole
discretion, promptly after the Change in Control); and
(iv) have terms and conditions which provide that in the
event that the Participant's employment is involuntarily
terminated or constructively terminated (other than for Cause)
upon or following such Change in Control, any conditions on a
Participant's rights under, or any restrictions on transfer or
exercisability applicable to, each such Alternative Award shall
be waived or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a termination
by a Participant following a material reduction in the Participant's
compensation, a material reduction in the Participant's
responsibilities or the relocation of the Participant's principal place
of employment to another location a material distance farther away from
the Participant's home, in each case, without the Participant's prior
written consent.
SECTION 10.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
------------------------------------------------
The Board may at any time terminate or suspend the Plan, and
from time to time may amend or modify the Plan, provided, however, that
any amendment which would (i) lower the minimum exercise price for
Options and Stock Appreciation Rights or (ii) materially modify the
requirements for eligibility to participate in the Plan, shall be
subject to the approval of the Company's stockholders. No action of the
Board may, without the consent of a Participant, alter or impair such
Participant's rights under any previously granted Incentive Award.
<PAGE>
SECTION 11.
MISCELLANEOUS PROVISIONS
------------------------
11.1. Nontransferability of Awards. Unless the Board, the
------------------------------
Committee or the Company's Vice President, Human Resources and Vice
President and General Counsel shall permit an Incentive Award to be
transferred by a Participant to a Participant's family member for
estate planning purposes or to a trust, partnership, corporation or
other entity established by the Participant for estate planning
purposes, on such terms and conditions as the Board, the Committee or
such officers may specify, no Incentive Award granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. All rights with respect to any Incentive Award granted to
a Participant under the Plan shall be exercisable by the transferee
only for as long as they could have been exercisable by such
Participant. If any Incentive Award is transferred to a family member,
trust, partnership, corporation or other entity as contemplated by the
first sentence hereof, all references herein and in the applicable
Award Agreement to the Participant shall be deemed to refer to such
permitted transferees, other than any such references with respect to
the personal status of the Participant.
11.2. Beneficiary Designation. Each Participant under the Plan
------------------------
may from time to time name any beneficiary or beneficiaries (who may be
named contingently or successively) to whom any benefit under the Plan
is to be paid or by whom any right under the Plan is to be exercised in
case of his death. Each designation will revoke all prior designations
by the same Participant, shall be in a form prescribed by the Committee
and will be effective only when filed by the Participant in writing
with the Committee during his lifetime. In the absence of any such
designation, benefits remaining unpaid or Incentive Awards outstanding
at the Participant's death shall be paid to or exercised by the
Participant's surviving spouse, if any, or otherwise to or by his
estate.
11.3. No Guarantee of Employment or Participation. Nothing in
---------------------------------------------
the Plan shall interfere with or limit in any way the right of the
Company or any Subsidiary to terminate any Participant's employment at
any time and for any reason, nor confer upon any Participant any right
to continue in the employ of the Company or any Subsidiary. No Employee
shall have a right to be selected as a Participant, or, having been so
selected, to receive any Incentive Awards under the Plan.
11.4. Tax Withholding. The Company shall have the power to
----------------
withhold, or require a Participant to remit to the Company promptly
upon notification of the amount due, an amount determined by the
Company, in its discretion, to be sufficient to satisfy all Federal,
state and local withholding tax requirements in respect of any
Incentive Award, and the Company may defer payment of cash or issuance
or delivery of Common Stock until such requirements are satisfied. The
Committee may permit or require a Participant to satisfy his tax
withholding obligation hereunder in such other manner, subject to such
conditions, as the Committee shall determine, including, without
limitation, (i) to have Common Stock otherwise issuable or deliverable
under the Plan withheld by the Company or (ii) to deliver to the
Company previously acquired shares of Common Stock that have been owned
by the Participant for at least six months, in each case, having a Fair
Market Value sufficient to satisfy all or part of the Participant's
Federal, state and local withholding tax obligation.
11.5. Indemnification. Each person who is or shall have been a
---------------
member of the Committee or the Board shall be indemnified and held
harmless by the Company against and from any loss, cost, liability or
expense that may be imposed upon or reasonably incurred by him in
<PAGE>
connection with or resulting from any claim, action, suit or proceeding
to which he may be made a party or in which he may be involved by
reason of any action taken or failure to act under the Plan and against
and from any and all amounts paid by him in settlement thereof, with
the Company's approval, or paid by him in satisfaction of any judgment
in any such action, suit or proceeding against him, provided that he
shall give the Company an opportunity, at its own expense, to handle
and defend the same before he undertakes to handle and defend it on his
own behalf. The foregoing right of indemnification shall not be
exclusive and shall be independent of any other rights of
indemnification to which such persons may be entitled under the
Company's articles of incorporation or by-laws, by contract, as a
matter of law or otherwise.
11.6. No Limitation on Compensation. Nothing in the Plan
-----------------------------
shallbe construed to limit the right of the Company to establish other
plans or to pay compensation to its employees in cash or property, in a
manner which is not expressly authorized under the Plan.
11.7. Requirements of Law. The granting of Incentive Awards and
-------------------
the issuance of shares of Common Stock shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be
appropriate or required, as determined by the Committee.
11.8. Governing Law. The Plan, and all agreements hereunder,
-------------
shall be construed in accordance with and governed by the laws of the
State of Delaware, without regard to principles of conflicts of laws.
11.9. No Impact On Benefits. Incentive Awards granted under the
---------------------
Plan are not compensation for purposes of calculating an Employee's
rights under any employee benefit plan, except to the extent provided
in any such plan.
11.10. Securities Law Compliance. Instruments evidencing
---------------------------
Incentive Awards may contain such other provisions, not inconsistent
with the Plan, as the Committee deems advisable, including a
requirement that the Participant represent to the Company in writing,
when an Incentive Award is granted or when he receives shares with
respect to such Award (or at such other times as the Committee deems
appropriate) that he is accepting such Incentive Award, or receiving or
acquiring such shares (unless they are then covered by a Securities Act
of 1933 registration statement), for his own account for investment
only and with no present intention to transfer, sell or otherwise
dispose of such shares except such disposition by a legal
representative as shall be required by will or the laws of any
jurisdiction in winding up the estate of the Participant or pursuant to
a transfer permitted by Section 11.1. Such shares shall be transferable
only if the proposed transfer shall be permissible pursuant to the Plan
and if, in the opinion of counsel satisfactory to the Company, such
transfer at such time will be in compliance with applicable securities
laws.
11.11. No Right to Particular Assets. Nothing contained in this
-----------------------------
Plan and no action taken pursuant to this Plan shall create or be
construed to create a trust of any kind or any fiduciary relationship
between the Company and any Participant, the executor, administrator or
other personal representative or designated beneficiary of such
<PAGE>
Participant, or any other persons. Any reserves that may be established
by the Company in connection with this Plan shall continue to be held
as part of the general funds of the Company, and no individual or
entity other than the Company shall have any interest in such funds
until paid to a Participant. To the extent that any Participant or his
executor, administrator or other personal representative, as the case
may be, acquires a right to receive any payment from the Company
pursuant to this Plan, such right shall be no greater than the right of
an unsecured general creditor of the Company.
11.12. Notices. Each Participant shall be responsible for
-------
furnishing the Committee with the current and proper address for the
mailing of notices and delivery of agreements and shares of Common
Stock. Any notices required or permitted to be given shall be deemed
given if directed to the person to whom addressed at such address and
mailed by regular United States mail, first-class and prepaid. If any
item mailed to such address is returned as undeliverable to the
addressee, mailing will be suspended until the Participant furnishes
the proper address.
11.13. Severability of Provisions. If any provision of this Plan
--------------------------
shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof, and this
Plan shall be construed and enforced as if such provision had not been
included.
11.14. Incapacity. Any benefit payable to or for the benefit of
----------
a minor, an incompetent person or other person incapable of receiving
such benefit shall be deemed paid when paid to such person's guardian
or to the party providing or reasonably appearing to provide for the
care of such person, and such payment shall fully discharge the
Committee, the Company and other parties with respect thereto.
11.15. Headings and Captions. The headings and captions herein
-----------------------
are provided for reference and convenience only, shall not be
considered part of this Plan and shall not be employed in the
construction of this Plan.
11.16. Deferral of Awards. Notwithstanding any provision
--------------------
contained herein to the contrary, the transfer of earned Incentive
Awards and Performance Awards to a Participant may be deferred by a
Participant in accordance with such procedures and upon such terms and
conditions as may be established by the Committee.
11.17. Compliance with Section 162(m). Notwithstanding anything
------------------------------
else contained in the Plan to the contrary, unless the Committee
otherwise determines at the time of grant, any Incentive Award made
hereunder to an officer who is subject to the reporting requirements of
Section 16(a) of the Act is intended to qualify as other performance
based compensation within the meaning of Section 162(m)(4)(C) of the
Code, and the Committee shall not be entitled to exercise any
discretion otherwise authorized under the Plan with respect to such
award if, and to the extent that, the ability to exercise such
discretion (as opposed to the exercise of such discretion) would cause
such award to fail to qualify as other performance based compensation.
<PAGE>
