Lexmark International DEF 14A Definitive proxy

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

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LEXMARK INTERNATIONAL, INC.

(Name of Registrant as Specified In Its Charter)

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LEXMARK INTERNATIONAL, INC.
One Lexmark Centre Drive
Lexington, Kentucky 40550

March 24, 2008

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of Lexmark International, Inc., which will be held on Thursday, April 24, 2008, at 8:00 a.m., at the Embassy Suites Hotel, 1801 Newtown Pike, Lexington, Kentucky 40511.

The attached notice of meeting and proxy statement describe the matters to be acted upon at the meeting. It is important that your shares be represented and voted at the meeting whether or not you plan to attend. Therefore, we urge you to complete the enclosed proxy and return it in the envelope provided.

I look forward to seeing you on April 24th.

Sincerely,

Paul J. Curlander

Chairman and

Chief Executive Officer

LEXMARK INTERNATIONAL, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

ON THURSDAY, APRIL 24, 2008

March 24, 2008

To the Stockholders:

The Annual Meeting of Stockholders of Lexmark International, Inc. (the “Company”) will be held on Thursday, April 24, 2008, at 8:00 a.m., at the Embassy Suites Hotel, 1801 Newtown Pike, Lexington, Kentucky 40511, for the following purposes:

1. To elect three Directors for terms expiring in 2011;

2. To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm (the “Independent Auditors”) for the Company’s fiscal year ending December 31, 2008;

3. To approve the amendment of certain terms of the Company’s Stock Incentive Plan, as Amended and Restated April 30, 2003;

4. To consider a stockholder proposal if properly presented at the meeting; and

5. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only stockholders of record at the close of business on Friday, February 29, 2008 will be entitled to notice of, and to vote at, the meeting or any adjournment or postponement thereof. A list of stockholders entitled to vote will be kept at the Company’s offices at One Lexmark Centre Drive, Lexington, Kentucky 40550 for a period of ten days prior to the meeting.

Order of the Board of Directors

Vincent J. Cole

Secretary

PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. YOUR VOTE IS IMPORTANT.

Important Notice Regarding the Availability of Proxy Materials for the

Annual Meeting of Stockholders to be held on April 24, 2008:

The Proxy Statement and 2007 Annual Report are

available at http://investor.lexmark.com.

LEXMARK INTERNATIONAL, INC.
One Lexmark Centre Drive
Lexington, Kentucky 40550

PROXY STATEMENT

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Lexmark International, Inc. (the “Company”) to be used at the Annual Meeting of Stockholders of the Company on Thursday, April 24, 2008, to be held at 8:00 a.m., at the Embassy Suites Hotel, 1801 Newtown Pike, Lexington, Kentucky 40511. This Proxy Statement and accompanying form of proxy are being mailed to stockholders beginning on or about March 24, 2008. The Company’s Annual Report for the fiscal year ended December 31, 2007 is enclosed.

Only stockholders of record at the close of business on Friday, February 29, 2008 will be entitled to vote at the meeting. As of such date, there were 95,147,420 shares (excluding shares held in treasury) of the Company’s Class A Common Stock, par value $.01 per share (the “Class A Common Stock”), issued and outstanding. Each share of Class A Common Stock entitles the holder to one vote.

The enclosed proxy, if properly signed and returned, will be voted in accordance with its terms. Any signed proxy returned without specification as to any matter will be voted as to each proposal in accordance with the recommendation of the Board of Directors. You may revoke your proxy at any time before the vote is taken by delivering to the Secretary of the Company written revocation or a proxy bearing a later date, or by attending and voting in person at the Annual Meeting.

Votes cast by proxy or in person at the meeting will be tabulated by the inspector of elections appointed for the meeting and the inspector will determine whether a quorum is present. Votes may be cast “for” or “against” each respective nominee for Director or you may abstain from voting for one or more nominees for Director. The Directors to be elected at the meeting will be elected by a majority of the votes cast by the stockholders present in person or by proxy and entitled to vote. The affirmative vote of a majority of the shares of Class A Common Stock present in person or by proxy is required to approve the Company’s proposals other than the election of directors.

Abstentions may be specified on all proposals submitted to a stockholder vote, including the election of Directors. Abstentions will be counted as present for purposes of determining the existence of a quorum for the meeting. Abstentions will have no effect on the election of Directors because abstentions are not considered a vote cast. Abstentions on proposals other than the election of Directors will have the effect of a vote against such proposals.

A broker non-vote occurs under the rules of the New York Stock Exchange when a broker is not permitted to vote on certain non-routine matters without instructions from the beneficial owner of the shares and no instruction is given. Broker non-votes are counted as present for purposes of determining the existence of a quorum. Broker non-votes will have no effect on the election of Directors because these votes are not cast “for” or “against” a Director. On non-routine proposals that require the approval of a majority of the outstanding shares or the shares present and entitled to vote at the meeting broker non-votes will have the effect of a vote against such proposals.

PROPOSAL 1

ELECTION OF DIRECTORS

Action will be taken at the 2008 Annual Meeting to elect three Class II Directors to serve until the 2011 Annual Meeting of Stockholders. The nominees, as well as the Class I and Class III Directors who are continuing to serve, are listed below together with certain information about each of them. The nominees for election at the 2008 Annual Meeting of Stockholders are Ralph E. Gomory, Marvin L. Mann and Teresa Beck. Each of Messrs. Gomory and Mann have been Directors since March 1991. Ms. Beck has been a Director since April 2000. Mr. Gomory, Mr. Mann and Ms. Beck were elected by the stockholders in April 2005 to serve as Class II Directors with terms expiring at the 2008 Annual Meeting of Stockholders.

Directors are elected by a majority of the votes cast by the shares entitled to vote if a quorum is present at the Annual Meeting. Abstentions and broker non-votes are counted for the purpose of determining whether a quorum exists at the Annual Meeting, but are not counted and have no effect on the determination of whether a majority exists with respect to a given nominee.

Class II (Term Ending 2011)

Mr. Ralph E. Gomory, age 78, has been a Director of the Company since March 1991. Since 2007, Mr. Gomory has served as President Emeritus of the Alfred P. Sloan Foundation. Mr. Gomory served as President of the Alfred P. Sloan Foundation from 1989 through his retirement in 2007. Prior to such time, Mr. Gomory was Senior Vice President for Science and Technology at International Business Machines Corporation (“IBM”).

Mr. Marvin L. Mann, age 74, has been a Director of the Company since March 1991. In April 1999, Mr. Mann was named Chairman Emeritus upon his retirement as Chairman of the Board of the Company, a position he had held since March 1991. From March 1991 through May 1998, Mr. Mann also served as Chief Executive Officer, and from March 1991 through February 1997, he also served as President of the Company. Prior to such time, Mr. Mann was an IBM Vice President.

Ms. Teresa Beck, age 53, has been a Director of the Company since April 2000. Ms. Beck served as President of American Stores Co. from 1998 to 1999 and as Chief Financial Officer from 1993 to 1998. Prior to joining American Stores Co., Ms. Beck served as an audit manager for Ernst & Young LLP. Ms. Beck also serves as a director of Questar Corporation and Amylin Pharmaceuticals, Inc.

The following information regarding Class I and Class III Directors is submitted concerning the other Directors of the Company whose election is not being sought at this meeting. The terms of office for Class I and Class III Directors will continue after the 2008 Annual Meeting of Stockholders.

Class I (Term Ending 2010)

Dr. Paul J. Curlander, age 55, has been a Director of the Company since February 1997. Since April 1999, Dr. Curlander has been Chairman and Chief Executive Officer of the Company. From May 1998 to April 1999, Dr. Curlander served as President and Chief Executive Officer, from February 1997 to May 1998, he served as President and Chief Operating Officer, and from January 1995 to February 1997, he served as Executive Vice President, Operations of the Company. In 1993, Dr. Curlander became a Vice President of the Company, and from 1991 to 1993 he was General Manager of the Company’s printer business. Dr. Curlander currently serves as a director of Trane Inc.

Mr. James F. Hardymon, age 73, has been a Director of the Company since July 1998. From July 1998 until his retirement in January 1999, Mr. Hardymon served as Chairman of Textron, Inc. From January 1993 to July 1998, Mr. Hardymon served as Chairman and Chief Executive Officer, and from January 1992 to January 1993, he served as President and Chief Executive Officer, of Textron, Inc., which he joined in November 1989 as President, Chief Operating Officer and Director. In 1993, he assumed the additional title of Chairman and relinquished the title of President in 1994. Prior to joining Textron, Mr. Hardymon had a28-year career at Emerson Electric Co., where he held a number of positions including Vice Chairman, Chief Operating Officer, Director and President. Mr. Hardymon also serves as Chairman of WABCO Holdings Inc. and as a director of Circuit City Stores, Inc.

Ms. Kathi P. Seifert, age 58, has been a Director of the Company since April 2006. In June 2004, Ms. Seifert retired as Executive Vice President of Kimberly-Clark Corporation, leading the company’s personal care businesses and sales organization. Previously, Ms. Seifert worked in various marketing positions at The Procter & Gamble Company, Beatrice Foods and Fort Howard Paper Company. Ms. Seifert also serves as a director of Appleton Papers, Inc., Eli Lilly & Company, Revlon, Inc. and Supervalu Inc.

Mr. Jean-Paul L. Montupet, age 60, has been a Director of the Company since October 2006. Mr. Montupet is Executive Vice President of Emerson Electric Co. where he has been responsible for the company’s industrial automation business since 2000 and served as President of Emerson Europe since 2002. Mr. Montupet joined Emerson Electric Co. and was named Executive Vice President of its industrial motors and drives business with its acquisition in 1990 of Moteurs Leroy Somer SA, where he had been Chairman and Director of North American Operations. Mr. Montupet also serves as a director of PartnerRe Ltd.

Class III (Term Ending 2009)

Mr. Michael J. Maples, age 65, has been a Director of the Company since February 1996. Until July 1995, Mr. Maples was Executive Vice President of the Worldwide Products Group and a member of the Office of the President of Microsoft Corporation. Mr. Maples, who joined Microsoft in 1988, has over 30 years of experience in the computer industry. Before joining Microsoft, he was Director of Software Strategy for IBM. Mr. Maples also serves as Chairman of the Board of Directors of Multimedia Games, Inc. and as a director of Motive, Inc. and Sonic Corp.

Mr. Stephen R. Hardis, age 72, has been a Director of the Company since November 1996. In July 2000, Mr. Hardis retired as Chairman and Chief Executive Officer of Eaton Corporation, which he joined in 1979 as Executive Vice President — Finance and Administration. He was elected Vice Chairman and designated Chief Financial and Administrative Officer in 1986. He became Chief Executive Officer of Eaton Corporation in September 1995 and Chairman in January 1996. Mr. Hardis also serves as a director of American Greetings Corporation, Axcelis Technologies, Inc., Marsh & McLennan Companies, Inc., Nordson Corporation and The Progressive Corporation.

Mr. William R. Fields, age 58, has been a Director of the Company since December 1996. Mr. Fields is Chairman of Intersource Co. Ltd. Previously, Mr. Fields served as Chairman and Chief Executive Officer of Factory 2-U Stores, Inc. from 2002 to 2003, President and Chief Executive Officer of Hudson’s Bay Company from 1997 to 1999 and as Chairman and Chief Executive Officer of Blockbuster Entertainment Group, a division of Viacom, Inc., from 1996 to 1997. Mr. Fields has also held numerous positions with Wal-Mart Stores, Inc., which he joined in 1971. He left Wal-Mart in March 1996 as President and Chief Executive Officer of Wal-Mart Stores Division, and Executive Vice President of Wal-Mart Stores, Inc. Mr. Fields also serves as a director of Graphic Packaging Corporation and Sharper Image Corporation.

Mr. Robert Holland, Jr., age 67, has been a Director of the Company since December 1998. In October 2007, Mr. Holland retired as a General Partner and Industry Specialist with Cordova, Smart and Williams, a private equity firm. Mr. Holland continues to maintain a consulting practice for strategic development assistance to senior management of Fortune 500 companies. Previously, Mr. Holland served as Chief Executive Officer of WorkPlace Integrators, a company he acquired in June 1997 and sold in April 2001. Prior to that, Mr. Holland was President and Chief Executive Officer of Ben & Jerry’s Homemade, Inc. from February 1995 to December 1996, Chairman and Chief Executive Officer of Rokher-J Inc. from 1991 to 1995 and from 1981 to 1984, Chairman of Gilreath Manufacturing, Inc. from 1987 to 1991 and Chairman and Chief Executive Officer of City Marketing from 1984 to 1987. Mr. Holland is a former partner with McKinsey & Company, Inc. and held various positions at Mobil Oil Corporation from 1962 to 1968. He also serves as a director of Carver Bancorp, Inc., Neptune Orient Lines, LTD and YUM! Brands, Inc.

Composition of Board and Committees

The Company’s Restated Certificate of Incorporation divides the Board of Directors into three classes. Of the eleven members of the Board of Directors, four have been elected as Class II Directors, four have been elected as Class III Directors, and three have been elected as Class I Directors, with terms expiring at the time of the Annual

Meeting of Stockholders to be held in 2008, 2009 and 2010, respectively. At each succeeding Annual Meeting of Stockholders, 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. Directors may only be removed from the Board for cause.

The Board of Directors held seven meetings during 2007. All members of the Board attended at least 75% of the aggregate of the meetings of the Board and committees of the Board on which they served. While the Company does not have a formal policy regarding the attendance of Directors at the Annual Meeting of Stockholders, all Directors are strongly urged to attend. All members of the Board of Directors who were serving as Directors at the time of last year’s Annual Meeting of Stockholders attended the meeting.

The Board of Directors has adopted the stated requirements for independence under Section 10A of the Securities Exchange Act of 1934, the rules of the Securities and Exchange Commission thereunder and the listing standards of the New York Stock Exchange as categorical standards for determining the independence of individual directors in accordance with guidance received from the New York Stock Exchange, and the Board has determined that all of the Board members, with the exception of Dr. Curlander, are independent on the basis of these requirements. Within each of the preceding three years, the Company has not made any charitable contributions that would exceed the greater of $1 million or 2% of a charitable organization’s consolidated gross revenues to any charitable organization for which a member of the Board of Directors served as an executive officer of the charitable organization.

The Board has four standing committees: an Executive Committee, a Finance and Audit Committee, a Compensation and Pension Committee and a Corporate Governance and Public Policy Committee.

The Executive Committee consists of Ms. Beck, and Messrs. Fields, Hardymon, Mann and Dr. Curlander, with Dr. Curlander serving as Chair. The Executive Committee adopted a written charter in April 2000. The Executive Committee is responsible for exercising all of the powers and authority of the Board of Directors during intervals between Board meetings, except for those powers delegated to the other committees of the Board and the powers which pursuant to Delaware law may not be delegated to a committee of the Board. The Committee held one meeting during 2007.

The Finance and Audit Committee consists of Ms. Beck and Messrs. Mann and Maples, with Ms. Beck serving as Chair. Prior to February 22, 2007, the Finance and Audit Committee consisted of Ms. Beck and Messrs. Holland, Mann and Maples, with Ms. Beck serving as Chair. Each member of the Committee is independent as defined under the listing standards of the New York Stock Exchange. The Board of Directors does not limit the number of other public company audit committees on which members of its Finance and Audit Committee may serve. However, no member of the Finance and Audit Committee is currently serving on more than two other public company audit committees. The Finance and Audit Committee adopted a written charter in April 2000 and amended such charter in February of each of the years 2001 through 2006, and in July 2005. The Finance and Audit Committee is responsible for, among other things, assisting the Board of Directors in fulfilling its oversight responsibilities with respect to the systems of internal controls established by management, the integrity and transparency of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the Company’s policies related to risk assessment and risk management, the Independent Auditors’ qualifications and independence, the performance of the Independent Auditors’ and the Company’s internal audit functions, and the Company’s financial strategy and policies, capital structure, share repurchase and dividend policy and capital expenditures. The Committee held eleven meetings during 2007.

The Compensation and Pension Committee consists of Ms. Seifert and Messrs. Fields, Hardis and Montupet, with Mr. Fields serving as Chair. Prior to April 26, 2007, the Compensation and Pension Committee consisted of Ms. Seifert and Messrs. Fields, Hardis, Montupet and Martin D. Walker, who retired from the Board in April 2007. Each member of the Committee is independent as defined under the listing standards of the New York Stock Exchange. The Compensation and Pension Committee adopted a written charter in April 2000 and amended such charter in February 2004. The Compensation and Pension Committee is responsible for assuring that the Company has a competitive executive compensation program in order to attract and retain qualified executives and to provide incentives to management of the Company for the attainment of the Company’s goals and objectives. The Compensation and Pension Committee is also responsible for periodically reviewing and approving the Company’s

pension plan, 401(k) savings plan and employee stock purchase plan. The Committee held seven meetings during 2007.

The Corporate Governance and Public Policy Committee consists of Messrs. Gomory, Hardymon and Holland, with Mr. Hardymon serving as Chair. Prior to February 22, 2007, the Corporate Governance and Public Policy Committee consisted of Messrs. Gomory, Hardymon, and B. Charles Ames, who retired from the Board in April 2007. From February 22, 2007 until April 26, 2007, the Committee consisted of Messrs. Gomory, Hardymon, Holland and Ames. Each member of the Committee is independent as defined under the listing standards of the New York Stock Exchange. The Corporate Governance and Public Policy Committee adopted a written charter in April 2000 and amended such charter in February 2004, July 2005 and February 2008. The Corporate Governance and Public Policy Committee is responsible for providing counsel to the Board with respect to corporate governance issues, including Board and committee organization, membership and function, and acting in an advisory capacity to the Board and the Company’s management on public policy issues. The Corporate Governance and Public Policy Committee is also responsible for the nomination of persons for election to the Board. The Committee held three meetings during 2007.

Nomination of Directors

The Corporate Governance and Public Policy Committee does not set specific, minimum qualifications that nominees must meet in order for the Committee to recommend them to the Board of Directors for election, but rather believes that each nominee should be evaluated based on his or her individual merits, taking into account the needs and composition of the Board at the time. The Corporate Governance and Public Policy Committee considers candidates for election who would bring a wide range of attributes to the Board. Among those attributes are knowledge, experience, expertise and diversity that would strengthen the Board. In the past, the Committee has identified director nominees from various sources, including officers, directors and professional search consultants, but the Committee will also consider nominees recommended by stockholders.

Stockholders wishing to recommend a director candidate for consideration by the Corporate Governance and Public Policy Committee may do so by complying with the procedures and providing the information required by the Company’s By-Laws.

Corporate Governance Matters

The Company has adopted a code of business conduct and ethics for directors, officers (including the Company’s principal executive officer, principal financial officer and controller) and employees, known as the Code of Business Conduct. The Code of Business Conduct, as well as the Company’s Corporate Governance Principles and the charters of each of the committees of the Board of Directors are available on the Corporate Governance section of the Company’s Investor Relations website at http://investor.lexmark.com. The Company also intends to disclose on the Corporate Governance section of the Investor Relations website any amendments to the Code of Business Conduct and any waivers from the provisions of the Code of Business Conduct that apply to the principal executive officer, principal financial officer or controller and that relate to any elements of the code of ethics enumerated by the applicable regulation of the Securities and Exchange Commission (Item 406(b) ofRegulation S-K). Stockholders may request a free copy of the Corporate Governance Principles, the charters of each of the committees of the Board of Directors or the Code of Business Conduct by writing to Lexmark International, Inc., Attention: Investor Relations, One Lexmark Centre Drive, 740 West New Circle Road, Lexington, Kentucky 40550 or calling(859) 232-5568.

Prior to July 2006, the Board of Directors had elected not to select a single Presiding Director for its regularly scheduled executive sessions of non-management Directors, but rather to rotate such responsibility among all non-management members of the Board on an alphabetical rotation basis. In July 2006, the Board determined, based on the recommendation of the Corporate Governance and Public Policy Committee, that in the event the Chairman of the Board and Chief Executive Officer positions are combined, the Board shall elect a single Presiding Director from the current independent Directors with such duties and for such term as the Board may determine from time to time. Mr. Hardymon was elected as the Presiding Director at the July 2006 meeting of the Board of Directors and served until his successor, Mr. Fields, assumed the position at the April 2007 meeting of the Board. Mr. Fields was

elected as the new Presiding Director at the February 2007 meeting of the Board and assumed the position at the April 2007 meeting of the Board. Mr. Hardymon was elected as the new Presiding Director at the February 2008 meeting of the Board and will assume the position at the April 2008 meeting of the Board. Stockholders and other interested parties may communicate directly with the Presiding Director, non-management Directors as a group or any member of the Board of Directors through the Corporate Secretary by writing to him at Lexmark International, Inc., 740 West New Circle Road, Lexington, Kentucky 40550. The Corporate Secretary will review all communications and forward appropriate correspondence to the proper Board member or members.

COMPENSATION DISCUSSION & ANALYSIS

Compensation Governance

The Compensation and Pension Committee is responsible for setting and administering the policies governing base salary, incentive compensation, equity-based compensation and other long-term incentive awards for the Company’s executive officers, including the CEO and other key members of management. The Compensation and Pension Committee determines the type, structure and amount of each compensation component awarded under the Company’s compensation plans. They are responsible for approving payments under the plans and making a recommendation to the Board of Directors to approve base salary increases for Section 16 Officers. The process by which the Committee fulfills these responsibilities is detailed in the discussion that follows.

Executive Compensation Philosophy

The Compensation and Pension Committee has developed a set of principles to guide the design of the compensation plans and programs applicable to the Company’s executive officers, including the Company’s principal executive officer, principal financial officer and the Company’s three most highly compensated executive officers other than the principal executive officer and principal financial officer who were serving as executive officers at the end of 2007 (the “Named Executive Officers”).


	•	Pay for performance where performance criteria are aligned with shareholder interests. The performance of the Company and individual levels of performance determine the amount of compensation realized by the executive officers. The objectives of the Company’s compensation plans are intended to focus each executive officer on the achievement of key performance goals and the execution of the strategic plan that will promote the long-term success of the Company and maximize shareholder returns.

	•	Put pay significantly “at risk” and subject to the achievement of strategic business objectives. The executive officers have roles and responsibilities that directly influence the achievement of the Company’s performance objectives. Therefore, the Compensation and Pension Committee believes that they should have a significant portion of their compensation dependent on whether those objectives are achieved. Base salary is the only component of an executive officer’s direct compensation that is fixed. Other components, including annual incentive compensation and long-term incentive compensation, are subject to the achievement of strategic business objectives.

	•	Balance short-term and long-term objectives. The Company’s compensation programs are balanced between short-term and long-term objectives to ensure that executive officers focus on short-term performance that supports and ensures long-term success and profitability. Performance objectives include financial measures such as total revenue, branded hardware and services revenue, gross profit, operating income, and cash cycle and non-financial measures such as market share. The Company’s compensation programs also include personal objectives relating to key focus areas and strategic performance objectives.

	•	Provide total compensation opportunities that are market competitive and supportive of the Company’s strategy to attract, develop and retain outstanding talent. The Company benchmarks the components of executive compensation to ensure that they are competitive to the marketplace. The target compensation for each executive officer is compared to market data to ensure that it is comparable to targeted pay levels established by the Compensation and Pension Committee.


		However, the Compensation and Pension Committee may use discretion to vary executive officer pay from the targeted levels based on factors such as an executive officer’s performance, responsibilities, experience, or length of time in the position.

Compensation Components

Total compensation for each of the Named Executive Officers consists of the following components:


	•	Base salary

	•	Annual incentive compensation

	•	Cash-denominated long-term incentive compensation

	•	Equity-based long-term incentive compensation (primarily stock options and restricted stock units)

	•	Retirement plans and other benefits

	•	Perquisites

Determining Executive Compensation

Annually, the Compensation and Pension Committee considers adjustments to the base salary of each of the Named Executive Officers and approves equity-based grants. The Compensation and Pension Committee also establishes the target compensation opportunity for each of the Named Executive Officers under the annual incentive compensation plan and the long-term incentive compensation plan. In order to evaluate each Named Executive Officer’s compensation, the Compensation and Pension Committee utilizes market benchmarks. Comparative compensation data is collected from four primary market surveys conducted by third parties. For 2007, the Company utilized survey data from Pearl Meyer & Partners, Radford Consulting, Towers Perrin HR Services and ICR Limited. For 2008, the Company utilized composite data from survey sources reflecting a broad group of technology firms provided by Pearl Meyer & Partners. In addition to the third-party survey data, the Company also analyzes data available through annual proxy statement disclosures released by a specific group of technology-based peer companies. In 2007, this proxy statement disclosure data was provided to the Company by Frederic W. Cook & Co., Inc. In 2008, this proxy statement disclosure data was provided to the Company by Pearl Meyer & Partners. Periodically the Compensation and Pension Committee reviews and updates the group of peer companies to ensure that each company continues to meet the selection criteria. The peer companies were selected based on similarity to the Company as measured by revenue, market capitalization and line of business. In 2007, proxy statement disclosure data was based on the peer group of companies listed below which was revised in 2006 based upon a review performed by Frederic W. Cook & Co., Inc.


Advanced Micro Devices, Inc.		NCR Corporation
Agilent Technologies, Inc.		QUALCOMM Incorporated
Analog Devices, Inc.		Sanmina-SCI Corporation
Apple Computer, Inc.		Seagate Technology
Applied Materials, Inc.		Solectron Corporation
Avaya, Inc.		Sun Microsystems, Inc.
Computer Sciences Corporation		Tektronix, Inc.
EMC Corporation		Western Digital Corporation
KLA-Tencor Corporation		Xerox Corporation
LSI Logic Corporation		Xilinx, Inc.
National Semiconductor Corporation

The peer group of companies was last revised in February 2008 based upon a review performed by Pearl Meyer & Partners. In 2008, proxy statement disclosure data was based on the peer group of companies listed below.


Advanced Micro Devices, Inc.		National Semiconductor Corporation
Agilent Technologies, Inc.		NCR Corporation
Analog Devices, Inc.		QUALCOMM Incorporated
Applied Materials, Inc.		SanDisk Corporation
Diebold, Incorporated		Sanmina-SCI Corporation
Eastman Kodak Company		Seagate Technology
EMC Corporation		Sun Microsystems, Inc.
KLA-Tencor Corporation		Western Digital Corporation
LAM Research Corporation		Xerox Corporation
LSI Logic Corporation		Xilinx, Inc.
Micron Technology, Inc.

Fourteen peer group companies are included in the S&P 500 Information Technology Index and 18 are included in the Dow Jones U.S. Technology Index.

In order to determine the amount of compensation opportunity to award, the Compensation and Pension Committee considers the comparative market data and other factors detailed in the discussion that follows. The Compensation and Pension Committee has not established a specific target allocation for each compensation element.

Except for Pearl Meyer & Partners, each of the compensation consultants referred to above was engaged by the Company to serve in limited roles. Other than providing the Company with the published compensation surveys, Radford Consulting, Towers Perrin HR Services, and ICR Limited did not provide any executive compensation consulting services to management in 2007. In 2007, Frederic W. Cook & Co. provided the peer company proxy statement disclosure data and conducted a review of the employment agreements and change in control agreements provided to each of the Named Executive Officers.

At its meeting on October 24, 2007, the Compensation and Pension Committee retained Pearl Meyer & Partners to provide compensation consulting services to the Compensation and Pension Committee. Pearl Meyer & Partners will assist the Compensation and Pension Committee in assessing the competitiveness of executive compensation and provide other consulting services as requested by the Compensation and Pension Committee. In 2007, Pearl Meyer & Partners performed a review of the peer group of companies and a review of the competitiveness of the employment agreements and change in control agreements provided to the Named Executive Officers relative to the peer group of companies. In 2008, Pearl Meyer & Partners provided composite data from survey sources and proxy statement disclosure data from the peer group of companies. In addition, Pearl Meyer & Partners conducted a review of executive compensation in the first quarter of 2008. This review and the recommendations for executive compensation provided by Pearl Meyer & Partners were utilized by the Compensation and Pension Committee in determining executive compensation for 2008.

Setting Performance Objectives

The Compensation and Pension Committee believes that the Company’s strategic plan appropriately reflects the level of performance required for the Company to be successful in a highly competitive market. Generally, the target attainment goal for a performance objective is directly aligned with the corresponding measure in the Company’s strategic plan for the corresponding performance period. The Compensation and Pension Committee believes that minimum attainment goals are achievable with some level of success, while target attainment goals are set at a moderate to difficult level and maximum attainment goals are set at a difficult level. Over the past five years, the Company has achieved performance in excess of the target level for annual incentive compensation two times and for long-term incentive compensation one time.

Tax Deductibility of Pay

Section 162(m) of the Internal Revenue Code generally disallows the deductibility of compensation paid to each of the Named Executive Officers in amounts in excess of $1 million unless the compensation is paid pursuant to pre-determined performance objectives within the meaning of Section 162(m). To ensure deductibility of non-discretionary annual incentive awards, the Lexmark International, Inc. Senior Executive Incentive Compensation Plan, which was presented to and approved by the Company’s stockholders at the 2004 Annual Meeting of Stockholders, sets forth a maximum annual incentive award to each participant equal to six-tenths of one percent of Operating Income, as defined in the plan. The Compensation and Pension Committee and the Board of Directors believe that it is essential to retain the ability to reward and motivate executives based on the assessment of an individual’s performance, even though some or all of any such discretionary payments may not be deductible due to the requirements of Section 162(m). Accordingly, the Compensation and Pension Committee reserves the right to award discretionary incentive awards to executive officers and adopt other compensation plans and arrangements which may not be deductible under Section 162(m). Any such incentive payments would be based on the Compensation and Pension Committee’s qualitative assessment of the applicable executive’s individual performance and contribution.

COMPENSATION COMPONENTS

Total Direct Compensation

The Compensation and Pension Committee has established a principle of providing total compensation opportunities that are market competitive and supportive of the Company’s strategy to attract, develop and retain outstanding talent. In order to fulfill this principle, the Compensation and Pension Committee determines the form and level of compensation opportunity to award by applying the same principles, policies, and methodologies to each of the Named Executive Officers, including the CEO. The principles, policies and methodologies relating to the decision to utilize each component of compensation, the level of each component, and how one component may influence the Compensation and Pension Committee’s decisions with respect to other components is detailed in the discussion that follows.

Annually, the Compensation and Pension Committee approves or recommends that the Board of Directors approve for each Named Executive Officer (i) an adjustment to base salary, (ii) the annual incentive compensation opportunity, (iii) a cash-denominated award under the Long-Term Incentive Plan, and (iv) an equity-based compensation award. First, the Compensation and Pension Committee determines the form and level of each compensation component to award by performing a separate and distinct analysis of base salary, annual incentive compensation and total long-term incentive compensation utilizing the principles, policies and methodologies described in the discussion below applicable to each component. Next, the Compensation and Pension Committee reviews the total direct compensation opportunity of each of the Named Executive Officers by a comparison to the total direct compensation of named executive officers of peer companies obtained through proxy statement disclosure described in the section entitled “Determining Executive Compensation.” Total direct compensation includes base salary, annual incentive compensation opportunity, cash-denominated long-term incentive compensation opportunity, and equity-based long-term incentive compensation opportunity (other than individual equity-based compensation awards made by the Compensation and Pension Committee with the sole intention of retaining the Named Executive Officer). The Compensation and Pension Committee has determined that the appropriate level of total direct compensation opportunity is targeted at the 65th percentile to balance the level of reward with the risk of achieving the performance objectives of the various components of compensation. However, it should be noted that total direct compensation opportunity for each individual may range slightly above and below the 65th percentile based on a variety of factors, including the executive officer’s skills and experience, the importance of the position to the Company, past and expected future performance, the difficulty of replacement, and time in the position. If after considering these qualitative factors, the Compensation and Pension Committee determines that the variance of total direct compensation opportunity from the targeted percentile is greater than desired on a subjective basis, the Compensation and Pension Committee will individually reassess the level of compensation opportunity awarded for each component utilizing the principles, policies, and methodologies applicable to each component and determine if the level of one or more components should be adjusted in order to achieve the appropriate level of total direct opportunity. For 2007, the variance of total direct compensation

opportunity from the targeted percentile did not exceed the targeted level in any material respect for any Named Executive Officer.

Base Salary

The base salary of each Named Executive Officer is intended to be a compensation component that supports the Company’s principle of providing total compensation opportunities that are market competitive and supportive of the Company’s strategy to attract, develop and retain outstanding talent. The base salary for each of the Named Executive Officers is determined by the responsibilities of the position held, the experience of the individual, the individual’s length of time in the position, and by reference to the information compiled from compensation surveys regarding the competitive marketplace for executive talent, including a comparison to base salaries for comparable marketplace positions as discussed above in the section entitled “Determining Executive Compensation.” The Compensation and Pension Committee has targeted base salary at the 50th percentile because it believes that the market median is the appropriate level for the fixed compensation component to ensure that the Company remains competitive in attracting and retaining executive officers. However, actual salaries may range above and below the market median based on a variety of factors, including the executive officer’s skills and experience, the importance of the position to the Company, past and expected future performance, the difficulty of replacement and length of time in the position.

Salary adjustments for each of the Named Executive Officers are based on an evaluation of the performance of the Company and of each of the Named Executive Officers. New responsibilities as well as changes in the competitive marketplace are also taken into account when considering an adjustment to base salary. The CEO makes a recommendation to the Compensation and Pension Committee for each of the Named Executive Officers other than himself for a base salary increase, if any, based on the factors discussed above. For the CEO, the Vice President of Human Resources presents the competitive market data to the Compensation and Pension Committee and makes a recommendation for the CEO’s base salary. The Compensation and Pension Committee determines the amount of the base salary increase to recommend to the Board of Directors for approval. The Board of Directors is ultimately responsible for approving a base salary increase for each of the Named Executive Officers.

At its meeting on February 21, 2007, the Compensation and Pension Committee reviewed the data from the peer group companies and the data from the compensation surveys, and also gave consideration to the responsibilities of the Named Executive Officer’s position, experience of the individual, and length of time in position. Based on the recommendation of the Compensation and Pension Committee, the Board of Directors approved an adjustment to the base salary of four of the Named Executive Officers. Mr. Gamble’s base salary was increased by $45,000 to $495,000; Mr. Bahous’ base salary was increased by $35,000 to $475,000; Mr. Rooke’s base salary was increased by $40,000 to $570,000 and Mr. Cole’s base salary was increased by $30,000 to $420,000 in 2007; and, Mr. Canning’s base salary was increased $25,000 to $400,000. On July 27, 2007, the Compensation and Pension Committee approved a base salary increase for Mr. Canning of $50,000 to $450,000 upon his appointment to the role of Vice President and President of PS&SD. Effective October 1, 2007, Mr. Bahous’ annual salary became 580,000 Swiss Francs upon his appointment to the role of Vice President and General Manager, Europe, Middle East and Africa.

At its meeting on February 20, 2008, the Compensation and Pension Committee reviewed the peer group company data and the composite survey data provided by Pearl Meyer & Partners, and also gave consideration to the responsibilities of the Named Executive Officer’s position, experience of the individual, and length of time in position. Since the survey data did not show a significant movement in the benchmark data for the base salary of each of the Named Executive Officers, the Compensation and Pension Committee did not recommend an adjustment to the base salary of any Named Executive Officer.

Annual Incentive Compensation

The annual incentive compensation opportunity awarded is utilized to fulfill the Company’s principles of paying for performance where performance criteria are aligned with shareholder interests, putting pay significantly “at risk” and subject to the achievement of strategic business objectives, and balancing short-term and long-term objectives. The annual incentive compensation opportunity awarded is also intended to be a compensation

component that supports the Company’s principle of providing total compensation opportunities that are market competitive and supportive of the Company’s strategy to attract, develop and retain outstanding talent. The annual incentive compensation opportunity awarded for each of the Named Executive Officers are made under the Lexmark International, Inc. Senior Executive Incentive Compensation Plan, which was approved by the Company’s stockholders in 2004. Under the terms of this plan, the maximum award for each executive officer participating in the plan is six-tenths of one percent of Operating Income, as defined in the plan. The Compensation and Pension Committee administers the plan and may reduce, but not increase, the maximum award made to a participant based on any factors it may deem appropriate. The factors considered for 2007 are set forth below.

The annual incentive compensation opportunity awarded is structured to become payable to each of the Named Executive Officers upon the attainment of annual financial objectives pre-established by the Compensation and Pension Committee and individual performance objectives.

For 2007, the strategic performance objectives for each of the Named Executive Officers included the following:


	•	*Corporate Objectives*— measured with reference to the annual operating plan goals for branded hardware and services revenue, gross profit metric and cash cycle. The cash cycle objective measures the number of days it takes for the Company to convert its cash into product, sell the product to the end customer, and collect the accounts receivable for the product.

	•	*Worldwide Business Unit Objectives*— measured with reference to the annual operating plan goals for the applicable worldwide business unit branded hardware and services revenue, gross profit metric and cash cycle.

	•	*Personal Objectives*— established based on key focus areas and strategic performance objectives specific to each individual. The CEO’s personal objective is based on an assessment of his general management of the Company.

The weighting for each objective for the fiscal year ending December 31, 2007 for each of the Named Executive Officers, except Mr. Bahous, is shown in the table below.


				Worldwide
	Corporate			Business			Personal
Name	Objective			Unit Objective			Objective

P.J. Curlander		80	%		0	%		20	%
J.W. Gamble, Jr.		80			0			20
P.A. Rooke		30			50			20
V.J. Cole		80			0			20
M.S. Canning		30			50			20

For the fiscal year ending December 31, 2007 for Mr. Bahous, the weighting for each objective during his tenure as Vice President and President of the Consumer Printer Division through September 30, 2007 was 30% for the Corporate Objective, 50% for the Worldwide Business Unit Objective and 20% for the Personal Objective. The weighting for each objective during his tenure as Vice President and General Manager, Europe, Middle East & Africa, effective October 1, 2007, was 20% for the Corporate Objective, 60% for the EMEA Business Objective and 20% for the Personal Objective.

The Compensation and Pension Committee determines the annual incentive compensation opportunity for each of the Named Executive Officers. The annual incentive opportunity is based on the peer group company data and the survey data for annual incentive awards and total compensation referenced above in the section entitled “Determining Executive Compensation.” Consistent with the Company’spay-for-performance philosophy, an executive officer’s total cash compensation opportunity is highly leveraged. The Compensation and Pension Committee establishes annual incentive compensation targets that it believes put annual incentive compensation significantly “at risk” because payments are dependent upon the achievement of strategic performance objectives. Annual target cash compensation (i.e. base salary plus bonus opportunity) is benchmarked at a level higher than base compensation, the 65th percentile of the survey data, to balance the level of reward with the risk of achieving

the performance objectives. However, target annual incentive compensation opportunity for each individual may range above and below the 65th percentile based on a variety of factors, including the executive officer’s skills and experience, the importance of the position to the Company, past and expected future performance, the difficulty of replacement, and time in the position. At its meeting on February 21, 2007, the Compensation and Pension Committee reviewed the information from the peer group company data and the compensation surveys, and also gave consideration to the qualitative factors listed above. Based on this review, the Compensation and Pension Committee approved the annual incentive award opportunity for each of the Named Executive Officers with the exception of Mr. Bahous and Mr. Canning, for the fiscal year ending December 31, 2007 is shown in the table below.


Name	Threshold		Target		Maximum

P.J. Curlander	$	300,000	$	1,200,000	$	2,400,000
J.W. Gamble, Jr.		148,500		371,250		742,500
P.A. Rooke		171,000		570,000		997,500
V.J. Cole		126,000		294,000		588,000

The annual incentive award opportunity for the fiscal year ending December 31, 2007 for Mr. Bahous was based on an annual award opportunity of $142,500 at threshold attainment, $332,500 at target attainment and $665,000 at maximum attainment prorated as of September 30, 2007 and an annual award opportunity of 174,000 Swiss Francs at threshold attainment, 348,000 Swiss Francs at target attainment and 551,000 Swiss Francs at maximum attainment prorated for the period from October 1, 2007 through December 31, 2007.

The annual incentive award opportunity for the fiscal year ending December 31, 2007 for Mr. Canning was based on an annual award opportunity of $120,000 at threshold attainment, $240,000 at target attainment and $380,000 at maximum attainment prorated as of September 30, 2007 and an annual award opportunity of $135,000 at threshold attainment, $315,000 at target attainment and $630,000 at maximum attainment prorated for the period from October 1, 2007 through December 31, 2007.

The Compensation and Pension Committee must review and approve the business results and the incentive compensation plan attainments before a payment can be made. This review is generally performed in the first quarter of each year and the payout typically occurs shortly thereafter. The amount payable is based upon the achievement of performance objectives that vary based upon the executive officer’s position, level of responsibility and particular business unit. Failure to meet the threshold of all of the pre-established objectives for both the Company and the business unit results in no annual incentive award being paid. However, if the Company or business unit results fail to achieve the minimum level of attainment, growth of market share of one-half point or more in laser and inkjet printers may result in a payout at the minimum level. The CEO and the Compensation and Pension Committee retain the ability to eliminate or reduce amounts paid under the market share measure for any business unit that fails to meet their business unit performance targets.

An annual incentive compensation award for each of the Named Executive Officers other than the CEO is recommended by the CEO and is reviewed and approved by the Compensation and Pension Committee. The award may be increased or decreased based on the judgment of the CEO and the Compensation and Pension Committee of the individual’s overall contribution to Lexmark’s business results. The Compensation and Pension Committee determines and approves the annual incentive compensation award for the CEO. In addition, the Compensation and Pension Committee must verify the attainment of Company and business unit objectives and may modify or eliminate the overall funding based on a variety of business needs. For 2007, each of the Named Executive Officers received the following payment of annual incentive compensation for the fiscal year ending December 31, 2007.


	2007 Annual Incentive
Name	Compensation Award

P.J. Curlander	$	0
J.W. Gamble, Jr.		50,337
N. Bahous		0
P.A. Rooke		186,321
V.J. Cole		42,252
M.S. Canning		97,315

At its meeting on February 20, 2008, the Compensation and Pension Committee approved no 2007 annual incentive payment for Dr. Curlander or Mr. Bahous based on the business performance of the Consumer Printer Division.

Total Long-Term Incentive Compensation

The Compensation and Pension Committee determines the appropriate level of each Named Executive Officer’s total long-term incentive compensation opportunity by aggregating the cash-denominated long-term incentive compensation opportunity with the equity-based long-term incentive compensation opportunity, each of which is described below. For each of the Named Executive Officers, the value of total long-term incentive compensation opportunity is targeted at the 65th percentile of the market data to reflect the Compensation and Pension Committee’s philosophy of putting pay significantly “at risk.” The Compensation and Pension Committee reviews the total long-term incentive compensation opportunity of each of the Named Executive Officers by a comparison to the total long-term incentive compensation of named executive officers of peer companies obtained through proxy statement disclosure described in the section entitled “Determining Executive Compensation.” The total long-term incentive compensation opportunity for each individual may range slightly above and below the 65th percentile based on a variety of qualitative factors, including the executive officer’s skills and experience, the importance of the position to the Company, past and expected future performance, the difficulty of replacement, and time in the position. If, after considering these qualitative factors, the Compensation and Pension Committee determines that the variance of total long-term incentive compensation opportunity from the targeted percentile is greater than desired on a subjective basis, the Compensation and Pension Committee will individually reassess the target value of the cash-denominated compensation opportunity awarded. The Compensation and Pension Committee may adjust up or down the target cash-denominated compensation opportunity awarded to achieve the appropriate level of total long-term incentive compensation opportunity determined on a subjective basis.

Cash-Denominated Long-Term Incentive Compensation

The cash-denominated long-term incentive compensation opportunity awarded is utilized to fulfill the Company’s principles of paying for performance where performance criteria are aligned with shareholder interests, putting pay significantly “at risk” and subject to the achievement of strategic business objectives, and balancing short-term and long-term objectives. The cash-denominated long-term incentive compensation opportunity awarded is also intended to be a compensation component that supports the Company’s principle of providing total compensation opportunities that are market competitive and supportive of the Company’s strategy to attract, develop and retain outstanding talent. In order to determine the appropriate level of each Named Executive Officer’s target cash-denominated compensation opportunity awarded under the Long-Term Incentive Plan, the value of the equity-based compensation opportunity awarded, as discussed below, is aggregated with the target value of the cash-denominated compensation opportunity awarded to arrive at the value of the total long-term incentive compensation opportunity awarded to each Named Executive Officer. The Compensation and Pension Committee is ultimately responsible for determining the target amount of cash-denominated long-term incentive compensation opportunity to award for each of the Named Executive Officers as previously described.

The purpose of the Long-Term Incentive Plan is to reward the achievement of specific performance objectives over a three-year performance cycle. The Compensation and Pension Committee believes that the focus on objectives over a three-year horizon is important in the establishment of a long-term view and alignment of management’s interests with the long-term interests of shareholders. The Long-Term Incentive Plan awards are denominated in cash but may be paid in cash, stock or a combination of cash and stock at the Compensation and Pension Committee’s discretion. The Compensation and Pension Committee also may use negative discretion in determining any payment to participants. The payment of each executive’s long-term incentive award is conditioned on continued employment and eligibility. In the case of death, long-term disability or retirement during the third year of the performance period, a prorated payout, if any, will be based on actual financial performance over the entire performance period. Death, disability or retirement during the first two years of the performance period will result in the forfeiture of the award.

Certain executives, including each of the Named Executive Officers, will be eligible for a cash award at the end of each three-year cycle based on the achievement of the objectives that were established by the Compensation and

Pension Committee. Long-Term Incentive Plans outstanding at the end of 2007 were for performance cycles2005-2007,2006-2008, and2007-2009. The structure of each plan is as follows:


	•	*2005-2007 Long-Term Incentive Plan.* The award was earned for achieving cumulative revenue and operating income and three-year average cash cycle objectives for the period beginning January 1, 2005 and ending December 31, 2007. For any payout to have occurred, minimum objectives must have been met for (a) both revenue and operating income; (b) cash cycle; or (c) financial peer review. The financial peer review is performed at the end of the three-year performance period and compares the return on invested capital and compound annual growth rate in earnings per share for the Company with that of its peer companies over the same three-year period. If the Company’s return on invested capital (calculated by dividing net income before extraordinary items and discontinued operations by average invested capital) and earnings per share growth both had been at or above each of the median averages of the peer companies included in three market indices (the S&P Technology Index, the S&P 500 Index and the Russell 1000 Index), the2005-2007 Long-Term Incentive Plan would have been funded at the minimum level regardless of any below-minimum attainment for the three financial performance measures of revenue, operating income and cash cycle.

The revenue portion of the award calculation was 35%, 70% and 105% of the target opportunity awarded for each of the threshold, target and maximum business objectives. The operating income portion acted as a multiplier of the revenue award percentage at 50%, 100% and 150% for threshold, target and maximum, respectively. The cash cycle portion of the opportunity awarded was 15%, 30% or 45% of the target opportunity awarded if the threshold, target or maximum cash cycle objective, respectively, was achieved.


	•	*2006-2008 Long-Term Incentive Plan.* In 2006, the Compensation and Pension Committee reviewed the objectives of the Long-Term Incentive Plan and determined that it is not only imperative to focus on strategic financial metrics, but it is also important to foster long-term growth by focusing on objectives that support the execution of other key strategic initiatives. The Company’s ability to maintain favorable operating results depends on its ability to improve market penetration. Therefore, for any payout to occur, minimum objectives must be met for (a) 2008 operating income; (b) market share or (c) financial peer review. The financial peer review is performed at the end of the three-year performance period and compares return on invested capital for the Company with that of its peer companies over the same three-year period. If the attainment based upon the two performance measures is below the minimum level, the2006-2008 Long-Term Incentive Plan will be funded at the minimum level if the Company’s return on invested capital is at or above the median of the three-year average of the return on invested capital of the peer companies included in the S&P Technology Index (or, if such index is no longer available, another appropriate index as determined by the Compensation and Pension Committee).

The operating income portion of the award will be 15%, 50% and 100% of the target opportunity awarded for each of the threshold, target and maximum business objectives. The market share portion of the opportunity awarded will be 15%, 50% and 150% of the target award for each of the threshold, target or maximum market share objectives.


	•	*2007-2009 Long-Term Incentive Plan.* The2007-2009 Long-Term Incentive Plan is structured the same as the2006-2008 Long-Term Incentive Plan. For any payout to occur, minimum objectives must be met for (a) 2009 operating income; (b) market share or (c) financial peer review.

At its meeting on February 21, 2007, the Compensation and Pension Committee reviewed the data from peer companies obtained through proxy statement disclosure, and also gave consideration to the qualitative factors listed above. Based on this review, the Compensation and Pension Committee approved a2007-2009 Long-Term Incentive Plan award opportunity for each of the Named Executive Officers. The following table shows this award

opportunity and all other Long-Term Incentive Plan award opportunities outstanding at the end of 2007 for each of the Named Executive Officers.


Name	Performance Period	Threshold ($)		Target ($)		Maximum ($)

P.J. Curlander	1/1/2007 - 12/31/2009		510,000		1,700,000		4,250,000
	1/1/2006 - 12/31/2008		472,500		1,575,000		3,937,500
	1/1/2005 - 12/31/2007		511,875		1,575,000		3,189,375

J.W. Gamble, Jr.	1/1/2007 - 12/31/2009		210,000		700,000		1,750,000
	1/1/2006 - 12/31/2008		172,500		575,000		1,437,500
	1/1/2005 - 12/31/2007		186,875		575,000		1,164,375

N. Bahous	1/1/2007 - 12/31/2009		180,000		600,000		1,500,000
	1/1/2006 - 12/31/2008		165,000		550,000		1,375,000
	1/1/2005 - 12/31/2007		178,750		550,000		1,113,750

P. A. Rooke	1/1/2007 - 12/31/2009		285,000		950,000		2,375,000
	1/1/2006 - 12/31/2008		195,000		650,000		1,625,000
	1/1/2005 - 12/31/2007		211,250		650,000		1,316,250

V.J. Cole	1/1/2007 - 12/31/2009		135,000		450,000		1,125,000
	1/1/2006 - 12/31/2008		120,000		400,000		1,000,000
	1/1/2005 - 12/31/2007		130,000		400,000		810,000

M.S. Canning	1/1/2007 - 12/31/2009		112,500		375,000		937,500
	1/1/2006 - 12/31/2008		105,000		350,000		875,000
	1/1/2005 - 12/31/2007		97,500		300,000		607,500

The2005-2007 Long-Term Incentive Plan was paid in the first quarter of 2008. The Company achieved below minimum attainment for revenue objective, below the minimum attainment for operating income, and 125% of the cash cycle objective, resulting in an overall payout of 37.5% of each Named Executive Officer’s target award. The financial peer review was not conducted since the Company achieved an overall attainment above the minimum level. Payments to each of the Named Executive Officers were as follows, Dr. Curlander, $590,625; Mr. Gamble, $215,625; Mr. Bahous, $206,250; Mr. Rooke, $243,750, Mr. Cole, $150,000, and Mr. Canning, $112,500.

Equity-Based Long-Term Incentive Compensation

The equity-based long-term incentive compensation opportunities awarded fulfill the Company’s principle of paying for performance where the performance criteria are aligned with shareholder interests. The equity-based long-term incentive compensation opportunity awarded is also intended to be a compensation component that supports the Company’s principle of providing total compensation opportunities that are market competitive and supportive of the Company’s strategy to attract, develop and retain outstanding talent upon which the successful conduct of its operations is largely dependent. The Company utilizes equity-based compensation to foster and promote the long-term financial success of the Company and to materially increase shareholder value by motivating superior performance by employees. By providing employees with an ownership interest, their interests are aligned with those of the Company’s stockholders. Generally, the Company utilizes stock options annually as a component of each Named Executive Officer’s long-term compensation opportunity and grants restricted stock units to certain of the Named Executive Officers in select instances.


	•	*Stock Options.* The Compensation and Pension Committee primarily grants stock options to each of the Named Executive Officers because they believe that stock options are the form of equity-based compensation that most closely aligns the interests of senior management with that of stockholders. Stock option grant levels are determined based upon an evaluation of the peer group company data and the market survey


		data as discussed above in the section entitled “Determining Executive Compensation,” values of prior option grants made to each Named Executive Officer, and an evaluation of the Named Executive Officer’s expected future contribution to business results.

During the first quarter of each year, the Company performs an analysis using the Black-Scholes option pricing model to determine the number of options to grant to each of the Named Executive Officers that is market competitive, taking into consideration the value of the option grants that the individual has received in prior years. The CEO then makes a grant recommendation for each of the Named Executive Officers other than himself to the Compensation and Pension Committee based on this analysis and the individual’s expected future contribution to the business results. The Vice President of Human Resources makes a recommendation to the Compensation and Pension Committee for the CEO based on competitive market data. The Compensation and Pension Committee is ultimately responsible for determining the number of options to be awarded and approving the grant.

At its meeting on February 21, 2007, the Compensation and Pension Committee reviewed the recommendations of the Company based on the analysis described above for each of the Named Executive Officers. Based on this review, the Compensation and Pension Committee approved a grant of stock options for each of the Named Executive Officers, except for Mr. Canning. The following table shows the number of stock options awarded during the annual grant process and the Black-Scholes value of grants made to each of the Named Executive Officers since 2005.


Name	Year		Options Granted (#)		Black-Scholes Value ($)

P.J. Curlander		2007		175,000	$	3,407,169
		2006		225,000		3,125,498
		2005		150,000		2,636,985
J.W. Gamble, Jr.		2007		45,000		876,129
		2006		60,000		833,466
N. Bahous		2007		45,000		876,129
		2006		60,000		833,466
		2005		47,000		826,255
P.A. Rooke		2007		45,000		876,129
		2006		60,000		833,466
		2005		47,000		826,255
V.J. Cole		2007		31,000		603,556
		2006		42,000		583,426
		2005		33,000		580,137

Mr. Canning did not receive a grant of stock options on February 21, 2007. Prior to his appointment as Vice President and President of PS&SD effective October 1, 2007, Mr. Canning received annual equity awards consistent with the type of equity award provided to other senior managers of the Company. At its meeting on February 21, 2007, the Compensation and Pension Committee approved a grant of 4,500 restricted stock units for Mr. Canning.

At its meeting on July 26, 2007, the Compensation and Pension Committee approved a grant of 25,000 stock options with a Black-Scholes value of $319,750 to Messers. Rooke and Canning. The primary purpose of the grant was in recognition of their new management appointments. In determining the value of the grant, the Compensation and Pension Committee solely considered the additional responsibilities of Messers. Rooke and Canning.

Stock options are generally granted at not less than the closing market price of the Company’s Class A Common Stock on the grant date, vest ratably over a period of three years and expire after ten years. Options granted to each of the Named Executive Officers since July 1999 contain a preferential vesting provision that provides for options to continue to vest for 24 months following retirement if at the time of the Named Executive Officer’s retirement the optionee has met certain ageand/or service requirements and the optionee agrees to the cancellation of any option grant awarded within the 12 months prior to the retirement date. Stock options granted prior to February 2004 to certain executives and senior managers, including each

of the Named Executive Officers, contain a feature that automatically awards a replacement (reload) option upon the exercise of options paid for with previously owned shares of Lexmark Class A Common Stock.


	•	*Restricted Stock Units.* The Compensation and Pension Committee believes that restricted stock units are an effective long-term incentive to retain employees. In addition, restricted stock units serve to align the interests of employees with the interests of stockholders by providing a means to acquire an equity ownership in the Company. The Compensation and Pension Committee has periodically awarded restricted stock units to select Company executives, including certain of the Named Executive Officers, at a grant value that the Compensation and Pension Committee believes is an appropriate and useful complement to other long-term awards to provide an incentive to remain with the Company.

On December 17, 2007, when the closing price of Common Stock was $32.85, the Compensation and Pension Committee approved a grant of 28,500 restricted stock units for Messrs. Gamble, Rooke, and Canning. The purpose of the grant was to provide an incentive to remain with the Company. In determining the value of the grant, the Compensation and Pension Committee weighed heavily the value of the prior unvested restricted stock unit grants awarded to Messrs. Gamble, Rooke and Canning and considered the additional value required to serve as an effective retention tool. Approximately one-third of these restricted stock units vest on each of the second through fourth anniversaries of the date of grant.

On February 22, 2006 when the closing price of Common Stock was $48.05, the Compensation and Pension Committee approved a grant of 50,000 restricted stock units for Dr. Curlander. The primary purpose for the grant was to ensure that Dr. Curlander would continue his employment with the Company given that a prior restricted stock unit grant made to him in 2001 would be fully vested in 2007 and that he is currently eligible for retirement under the Company’s retirement plan. In determining the value of the grant, the Compensation and Pension Committee weighed heavily the value of the prior restricted stock unit grant awarded to Dr. Curlander for retention purposes. The award is scheduled to vest in approximately equal installments upon the later of the achievement of a specified stock price for ten consecutive trading days or a vesting date applicable to each installment, as described in the following table. The award will expire seven years after the grant date if the specified Common Stock price targets have not been achieved.


			Approximate Stock
	Specified Common		Price Appreciation
Installment	Stock Price Target		from Grant Date			Vesting Date

1	$	60.00		25	%		February 22, 2008
2		65.00		35			February 22, 2009
3		70.00		45			February 22, 2010

The $60.00 price target was achieved on October 20, 2006; the $65.00 price target was achieved on November 21, 2006; and the $70.00 price target was achieved on December 14, 2006. As a result, Dr. Curlander received 17,000 shares of Common Stock on February 22, 2008; and will receive 16,500 shares of Common Stock on February 22, 2009 and 16,500 shares of Common Stock on February 22, 2010, subject to his continued employment with the Company.

Also on February 22, 2006, the Compensation and Pension Committee approved the grant of restricted stock units to Messrs. Bahous and Rooke. The purpose of these grants was also to provide an incentive to remain with the Company. In determining the value of the grants, the Compensation and Pension Committee weighed heavily the value of the prior unvested restricted stock unit grants awarded to Messrs. Bahous and Rooke and considered the additional value required to serve as an effective retention tool. Approximately one-fifth of these restricted stock units vest on each of the second through sixth anniversaries of the date of grant. Messrs. Bahous and Rooke also received a grant of restricted stock units in 2004, of which one-third vested in each of 2006 and 2008 (as described in the section entitled “Option Exercises and Stock Vested”) and one-third will vest in 2010.


	•	*Grant Practice of Equity-Based Awards.* Equity-based awards are granted under the Lexmark International, Inc. Stock Incentive Plan, as Amended and Restated, and must be approved by the Compensation and Pension Committee. Grants of equity-based awards are generally effective on the date that the Compensation and Pension Committee approves the award. The Compensation and Pension Committee has


		delegated authority to approve awards to the CEO or the Vice President of Human Resources, excluding grants made to Section 16 Officers. Pursuant to this delegation, the authority to approve awards is limited and the Company must present a report of the equity-based awards that have been granted at each Compensation and Pension Committee meeting. No more than 60,000 shares may be granted between Compensation and Pension Committee meetings and no more than 15,000 shares may be granted to an individual pursuant to an equity-based award. Restricted stock grants are limited to a maximum value of $350,000 per individual and a vesting schedule of not less than three years. Stock option awards must vest over a period of not less than three years, must not have a term that exceeds ten years, and must not have an exercise price lower than the closing price of the Company’s stock on the grant date. Awards are granted on the first business day of the month following approval by the CEO or the Vice President of Human Resources.

Retirement Plans and Other Benefits

The Company provides retirement and other benefit plans in which qualified employees, including each of the Named Executive Officers, are eligible to participate. Mr. Bahous ceased to contribute to the US based plans October 1, 2007, upon his employment with Lexmark International Technology, S.A. (“LITSA”). Each plan is designed to offer competitive benefits in order to attract and retain talent and is described in detail as follows:


	•	*Defined Benefit Retirement Plans.* All employees in the United States, including each of the Named Executive Officers, were eligible to participate in the Lexmark Retirement Growth Account Plan. The plan is a cash balance defined benefit plan under which benefit accruals were frozen effective April 3, 2006. To the extent that a participant’s eligible compensation is not considered under the Lexmark Retirement Growth Account Plan due to the IRC Section 401(a)(17) limit ($225,000 in 2007), the Company maintains a non-qualified, unfunded, noncontributory plan known as the Lexmark Nonqualified Supplemental Retirement Plan. This plan provides for the same benefits that would have been provided under the cash balance defined benefit plan without such limitation. A description of the Lexmark Retirement Growth Account Plan and the Lexmark Nonqualified Supplemental Retirement Plan follows the “Pension Benefits” table.

	•	*Defined Contribution Plans.* The Lexmark Savings Plan is a tax-favored 401(k) plan that allows eligible employees, including each of the Named Executive Officers, to contribute on a pre-tax basis up to 50% of eligible compensation, as defined in the plan, subject to IRS limitations ($15,000 for pre-tax contributions and $5,000 forcatch-up contributions in 2006; $15,500 for pre-tax contributions and $5,000 forcatch-up contributions in 2007). For the first quarter of 2006, the Company matched each employee’s contribution at a rate of 50% up to 6% of the employee’s eligible compensation. Effective April 3, 2006, the Company changed to an automatic Company contribution of 1% of each employee’s eligible compensation and a Company matching contribution up to 5% of the employee’s eligible compensation.

Mr. Bahous participates in the Lexmark International Technology, S.A. Pension Fund, a Swiss tax-favored defined contribution plan. Under the plan, Mr. Bahous is required to contribute 6.5% of his insured salary on a pre-tax basis and LITSA contributes 8.5% of his insured salary. Insured salary is defined as annual base salary plus 10% less an amount equal to 7/8th of the maximum AVS (social security) retirement pension. Interest is credited to personal savings accounts at a minimum rate established by the Swiss government. The interest rate for 2007 was 2.50%.


	•	*Supplemental Deferred Compensation Plan.* In 2006, the Compensation and Pension Committee approved the Lexmark Supplemental Savings and Deferred Compensation Plan to allow eligible employees, including each of the Named Executive Officers, to defer up to 100% of eligible compensation in excess of the IRC Section 401(a)(17) limit ($225,000 in 2007) beginning in 2007 and to receive a Company matching contribution of up to 6% of the employee’s eligible excess compensation. A description of the Lexmark Supplemental Savings and Deferred Compensation Plan follows the “Non-Qualified Deferred Compensation” table.

	•	*Deferred Stock Units.* The Lexmark International, Inc. Stock Incentive Plan entitles a participant, including each of the Named Executive Officers, to elect to defer receipt of all or a portion of his or her annual compensationand/or annual incentive compensation, and receive an award of deferred stock


		units. These deferred stock units are fully vested at all times and settle on the earlier of the fifth anniversary of the grant date or the termination date due to retirement, death or disability. The participant also receives an additional award of deferred stock units upon deferral with a value equal to 20% of the compensation deferred. These supplemental deferred stock units vest and settle on the fifth anniversary of the date that the compensation deferred would otherwise have been paid, subject to continued employment. Supplemental units will vest and settle in full upon termination of employment due to death or disability.


	•	*Employee Stock Purchase Plan.* Eligible employees, including each of the Named Executive Officers, may participate in the Lexmark Employee Stock Purchase Plan. Under the plan, an employee may elect to purchase Company Stock at a 15% discount, with a maximum of $25,000 annually purchased based on the fair market value on the first day of an offering period. The Company discontinued the Employee Stock Purchase Plan as of December 31, 2007.

	•	*Health and Welfare Benefits.* Each of the Named Executive Officers, with the exception of Mr. Bahous, are eligible to participate in the same health and welfare benefit plans that are available to all eligible employees of the Company. Mr. Bahous is eligible to participate in the same health and welfare benefit plans that are available to all eligible employees of LITSA.

Perquisites

The Company provides each of the Named Executive Officers with perquisites that the Company and the Compensation and Pension Committee believe are reasonable and consistent with its overall compensation philosophy.

Each of the Named Executive Officers is entitled to financial planning assistance and can receive up to $5,000 ($10,000 for Dr. Curlander) annually in reimbursement for qualified payments towards financial planning. Amounts not used in previous years can be carried forward, up to a maximum of $15,000, for use in subsequent years. Reimbursements for financial planning are reported on a cash basis and are eligible for a taxgross-up payment.

During 2006, at the suggestion of the Company’s Director of Global Security, several of the Company’s executives, including each of the Named Executive Officers, were offered the opportunity to have a security assessment of their personal residences performed at a cost to the Company of approximately $500 per assessment.

In addition, Dr. Curlander’s spouse may accompany him on the Company aircraft when he is traveling for business and there is no incremental cost to the Company.

Stock Ownership

The Compensation and Pension Committee believes in aligning the interests of executive officers with the long-term interests of stockholders. Consistent with this philosophy, the Compensation and Pension Committee recommended, and the Board approved, stock ownership guidelines for each of the Named Executive Officers. These guidelines require that until the ownership goal is reached, each of the Named Executive Officers must retain a percentage of after tax net shares on the exercise of any stock options and the vesting of restricted stock units. That percentage is 100% for Dr. Curlander and 50% for each of the other Named Executive Officers. The guideline requires Dr. Curlander to hold a minimum of five times base salary and each of the other Named Executive Officers to hold a minimum of three times base salary in value of the Company’s Class A Common Stock. The Compensation and Pension Committee annually reviews the actual stock ownership of each Section 16 Officer compared to his or her stock ownership guideline. Information on the number of stock options and vested deferred stock units is also presented to the Compensation and Pension Committee during the review of stock ownership.

Tally Sheets

The Compensation and Pension Committee annually reviews tally sheets that set forth the total annual compensation for each of the Named Executive Officers and certain other executive officers. The Compensation and Pension Committee believes that tally sheets are important to maintain visibility to amounts payable to each of the Named Executive Officers under various termination scenarios. The tally sheets include the dollar amount that would be realized by the executive officer under four termination scenarios. These scenarios include voluntary

termination, involuntary termination for cause, involuntary termination without cause or voluntary termination by the employee for good reason and termination following a change in control.

COMPENSATION COMMITTEE REPORT

The Compensation and Pension Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on the review and discussions with management, the Compensation and Pension Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2007.

William R. Fields, Chair
Stephen R. Hardis
Jean-Paul L. Montupet
Kathi P. Seifert

EXECUTIVE COMPENSATION

The information set forth below describes the components of the total compensation of each of the Named Executive Officers. The Named Executive Officers are determined based on 2007 total compensation excluding the change in pension value and nonqualified deferred compensation earnings, as disclosed in the Summary Compensation Table. Also described below are the contracts, plans, and arrangements providing for payments to each of the Named Executive Officers in connection with a termination of the Named Executive Officer, a change in control of the Company or certain changes in the Named Executive Officer’s responsibilities.

The following table sets forth the compensation earned by each of the Named Executive Officers for all services rendered to the Company and its subsidiaries during the year ended December 31, 2007.

SUMMARY COMPENSATION TABLE


														Change in
														Pension
														Value and
												Non-Equity		Nonqualified
												Incentive		Deferred
								Stock		Option		Plan		Compensation		All
Name and Principal			Salary			Bonus		Awards ($)		Awards ($)		Compensation ($)		Earnings		Other		Total
Position	Year		($)			($)		(1)		(2)		(3)		($)(4)		Compensation ($)(5)		($)
(a)	(b)		(c)			(d)		(e)		(f)		(g)		(h)		(i)		(j)

P.J. Curlander		2007	$	1,003,846		$	0	$	826,196	$	5,581,173	$	590,625	$	0	$	180,561	$	8,182,401
Chairman and Chief Executive Officer		2006		1,000,000			0		1,064,050		6,321,152		1,646,820		0		23,992		10,056,014
J.W. Gamble, Jr.		2007		489,115			0		90,862		733,585		265,962		2,074		61,345		1,642,943
Executive Vice President and Chief Financial Officer		2006		450,000			0		81,256		390,831		343,575		5,508		119,010		1,390,180
N. Bahous		2007		492,696	(6)		0		296,681		1,533,641		206,250		58,079		73,107		2,660,454
Vice President and Division President		2006		440,000			0		279,023		1,900,581		509,884		59,638		32,854		3,221,980
P.A. Rooke		2007		565,269			0		292,055		1,286,724		430,071		14,446		79,583		2,668,148
Executive Vice President and Division President		2006		530,000			0		264,791		1,360,837		633,833		9,262		9,154		2,807,877
V.J. Cole		2007		416,423			0		0		818,884		192,252		45,763		61,053		1,534,375
Vice President, General Counsel and Secretary		2006		390,000			0		0		897,348		424,914		19,807		17,061		1,749,130
M.S. Canning		2007		404,135			0		390,616		135,131		209,815		26,101		45,202		1,211,000
Vice President and Division President		2006		366,539			0		216,649		309,152		305,027		6,486		9,274		1,213,127


(1)		For 2007, consists of the dollar amount recognized with respect to restricted stock units for financial statement reporting purposes during fiscal years ending December 31, 2007 in accordance with FAS 123R. For 2006, consists of the dollar amount recognized with respect to restricted stock units for financial statement reporting purposes during fiscal years ending December 31, 2006 in accordance with FAS 123R. Except for the grant made to Dr. Curlander on February 22, 2006, restricted stock units are valued by multiplying the number of units granted by the closing price of a share of Class A Common Stock on the grant date. The restricted stock units granted to Dr. Curlander on February 22, 2006 were valued by Mercer Human Resource Consulting using the binomial valuation model. The binomial model relies on the term structure of forward risk-free interest rates. This input is based on the yield of U.S. Treasury STRIPS on the valuation date. An annual volatility estimate of 30% was used in the calculation. The expense for all restricted stock unit awards is amortized over the vesting period. For 2007, the values in the table reflect restricted stock units granted between February 21, 2001 and December 17, 2007 at a stock price that ranged from $32.85 to $88.16, and have vesting periods that range from three to six years. For 2006, the values in the table reflect restricted stock units granted between February 21, 2001 and February 22, 2006 at a stock price that ranged from $40.94 to $88.16, and have vesting periods that range from three to six years.

(2)		For 2007, consists of the dollar amount recognized with respect to stock options for financial statement reporting purposes during fiscal year ending December 31, 2007 in accordance with FAS 123R. The values in the table reflect stock options granted between February 20, 2002 and July 26, 2007. For 2006, consists of the dollar amount recognized with respect to stock options for financial statement reporting purposes during fiscal


		year ending December 31, 2006 in accordance with FAS 123R. The values in the table reflect stock options granted between February 21, 2001 and November 30, 2006. Assumptions used in the calculation of these awards are disclosed in the Company’s audited financial statements included in the Company’s Annual Report onForm 10-K filed with the Securities and Exchange Commission as detailed in the table that follows.


	Fiscal Year			Note to
	End of Audited			Consolidated		Filing Date of
	Financial			Financial		Annual Report on
Year of Grant	Statements			Statements		Form 10-K

2001		December 31, 2001			13	March 19, 2002
2002		December 31, 2002			12	March 14, 2003
2003		December 31, 2003			12	March 12, 2004
2004		December 31, 2004			12	March 9, 2005
2005		December 31, 2005	��		12	March 8, 2006
2006		December 31, 2006			3	February 28, 2007
2007		December 31, 2007			4	February 27, 2008


(3)		For 2007, consists of annual incentive compensation for the fiscal year ending December 31, 2007 and the payment under the2005-2007 Long-Term Incentive Plan as detailed in the table that follows.


	2007		2005-2007		Total Non-Equity
	Annual Incentive		Long-Term		Incentive Plan
Name	Compensation		Incentive Plan		Compensation

P.J. Curlander	$	0	$	590,625	$	590,625
J.W. Gamble, Jr.		50,337		215,625		265,962
N. Bahous		0		206,250		206,250
P.A. Rooke		186,321		243,750		430,071
V.J. Cole		42,252		150,000		192,252
M.S. Canning		97,315		112,500		209,815


		For 2006, consists of annual incentive compensation for the fiscal year ending December 31, 2006 and the payment under the2004-2006 Long-Term Incentive Plan as detailed in the table that follows.


	2006		2004-2006		Total Non-Equity
	Annual Incentive		Long-Term		Incentive Plan
Name	Compensation		Incentive Plan		Compensation

P.J. Curlander	$	1,048,320	$	598,500	$	1,646,820
J.W. Gamble, Jr.		343,575		0		343,575
N. Bahous		304,084		205,800		509,884
P.A. Rooke		381,833		252,000		633,833
V.J. Cole		277,914		147,000		424,914
M.S. Canning		200,027		105,000		305,027


(4)		Consists of the change in pension value during 2007 and 2006, respectively, under the Lexmark Retirement Growth Account Plan and the Lexmark Nonqualified Supplemental Retirement Plan. For Mr. Bahous, the amount also includes the change in pension value during 2007 and 2006, respectively, under the ARRCO and AGIRC. See the section entitled “Pension Benefits” for a description of these plans.

(5)		For 2007, the following table contains a breakdown of the value of compensation and benefits included in the column entitled “All Other Compensation.”


							Matching		Matching
							Contribution		Contribution
							under 2006		under 2007
					Matching		Supplemental		Supplemental
	Financial		Tax Gross-Up		Contribution under		Deferred		Deferred
	Planning		for Financial		the Lexmark		Compensation		Compensation
Name	Reimbursement		Planning		Savings Plan		Plan(a)		Plan		Other			Total

P.J. Curlander	$	10,411	$	5,655	$	11,250	$	43,846	$	109,399	$	0	(b)	$	180,561
J.W. Gamble, Jr.		0		0		11,250		13,800		36,295		0			61,345
N. Bahous		0		0		11,250		17,055		26,264		18,538	(c)		73,107
P.A. Rooke		1,515		805		11,250		22,865		43,148		0			79,583
V.J. Cole		5,000		3,532		11,250		13,242		28,029		0			61,053
M.S. Canning		0		0		11,250		11,093		22,859		0			45,202


(a)		Reflects a transitional contribution made in 2007 equal to 6% of 2006 compensation in excess of limits defined by IRC Section 401(a)(17) ($220,000 in 2006) less the amount of any deemed contribution credit to the Lexmark Nonqualified Supplemental Retirement Plan for the 2006 Plan Year.

(b)		During 2007, Dr. Curlander’s spouse accompanied him on five business trips on the corporate aircraft at no incremental cost to the Company. Dr. Curlander is taxed on the imputed income attributable to such personal use ($3,172, as calculated using the Standard Industry Fare Level (SIFL) rates) and does not receive tax assistance from the Company with respect to this amount.

(c)		Consists of payments related to immigration ($1,186), tax consulting ($4,083), and payments made to the social security and unemployment coverage systems in France ($6,627) under the terms of Mr. Bahous’ employment agreement. See the section entitled “Employment Agreements” following the Grants of Plan-Based Awards table. Also includes expenses related to Mr. Bahous’ relocation in the amount of $6,642.

For 2006, the following table contains a breakdown of the value of compensation and benefits included in the column entitled “All Other Compensation.”


					Matching
	Financial		Tax Gross-Up		Contribution under
	Planning		for Financial		the Lexmark
Name	Reimbursement		Planning		Savings Plan		Other			Total

P.J. Curlander	$	10,946	$	5,946	$	6,600	$	500	(a)(b)	$	23,992
J.W. Gamble, Jr.		0		0		8,354		110,656	(c)		119,010
N. Bahous		0		0		5,854		27,000	(a)(d)		32,854
P.A. Rooke		1,749		929		6,476		0			9,154
V.J. Cole		5,000		3,532		8,529		0			17,061
M.S. Canning		0		0		9,274		0			9,274


(a)		Includes the fee in the amount of $500 paid by the Company for a security assessment of the personal residence of Dr. Curlander and Mr. Bahous.

(b)		During 2006, Dr. Curlander’s spouse accompanied him on one business trip on the corporate aircraft at no incremental cost to the Company. Dr. Curlander is taxed on the imputed income attributable to such personal use ($837.33, as calculated using the Standard Industry Fare Level (SIFL) rates) and does not receive tax assistance from the Company with respect to this amount.

(c)		Consists of expenses related to Mr. Gamble’s relocation in the amount of $83,894 and a taxgross-up of $26,762.

(d)		Consists of payments related to immigration ($7,174), tax consulting ($9,909), and payments made to the social security and unemployment coverage systems in France ($7,417) under the terms of Mr. Bahous’ employment agreement. See the section entitled “Employment Agreements” following the Grants of Plan-Based Awards table. Also includes an Invention Award in the amount of $2,000 related to Mr. Bahous’ contribution to the development of a printing system submitted for a patent with the United States Patent and Trademark Office.

(6)		Consists of $364,808 earned from January 1, 2007 through September 30, 2007 and 145,000 Swiss Francs (“CHF”) earned from October 1, 2007 through December 31, 2007 converted at the December 31, 2007 Bloomberg Finance L.P. end of day spot rate of .8820 USD per CHF.

GRANTS OF PLAN-BASED AWARDS


															All Other		All Other
															Stock		Option
															Awards:		Awards:				Grant Date
															Number of		Number of		Exercise or		Fair Value
			Estimated Future Payouts Under									Estimated Future Payouts Under			Shares of		Securities		Base Price		of Stock
			Non-Equity Incentive Plan Awards(1)									Equity Incentive Plan Awards			Stock or		Underlying		of Option		and Option
			Threshold			Target			Maximum			Threshold	Target	Maximum	Units (#)		Options (#)		Awards		Awards ($)
Name	Grant Date		($)			($)			($)			(#)	(#)	(#)	(2)		(3)		($/Sh)		(4)
(a)	(b)		(c)			(d)			(e)			(f)	(g)	(h)	(i)		(j)		(k)		(l)


P.J. Curlander		—	$	300,000		$	1,200,000		$	2,400,000

		—		510,000			1,700,000			4,250,000

		02/21/2007																175,000	$	63.11	$	3,407,169

J.W. Gamble, Jr.		—		148,500			371,250			742,500

		—		210,000			700,000			1,750,000

		02/21/2007																45,000	$	63.11	$	876,129

		12/17/2007														28,500						936,225

N. Bahous		—		106,582(5	)		248,692(5	)		497,384(5	)

		—		43,858CHF(5	)		87,715 CHF(5	)		138,882CHF(5	)

		—		180,000			600,000			1,500,000

		02/21/2007																45,000	$	63.11	$	876,129

P.A. Rooke		—		171,000			570,000			997,500

		—		285,000			950,000			2,375,000

		02/21/2007																45,000	$	63.11	$	876,129

		07/26/2007																25,000		42.21		319,750

		12/17/2007														28,500						936,225

V.J. Cole		—		126,000			294,000			588,000

		—		135,000			450,000			1,125,000

		02/21/2007																31,000	$	63.11	$	603,556

M.S. Canning		—		128,507			282,534			521,781

		—		112,500			375,000			937,500

		02/21/2007														4,500					$	283,995

		07/26/2007																25,000		42.21		319,750

		12/17/2007														28,500						936,225


(1)		The first row for each Named Executive Officer in this column entitled “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” consists of potential future payments of annual incentive compensation with respect to fiscal year 2007 under the Lexmark International, Inc. Senior Executive Incentive Compensation Plan. The second row consists of potential future payments under the2007-2009 Long-Term Incentive Plan.

(2)		Restricted stock unit awards in 2007 are granted under the Lexmark International, Inc. Stock Incentive Plan, as Amended and Restated, effective April 30, 2003. The material terms and vesting schedule of restricted stock units granted in 2007 are as follows:


Grant Type	Grant Date	Vesting Schedule

Restricted Stock Unit	2/21/2007	Vest and become exercisable in two equal installments (50% each) on the second and third anniversaries of the grant date, commencing on 2/21/2009
Restricted Stock Unit	12/17/2007	Vest and become exercisable in three approximately equal installments (34%, 33%, 33%) on the second through fourth anniversaries of the grant date, commencing on 12/17/2009.


(3)		Stock option awards in 2007 are granted under the Lexmark International, Inc. Stock Incentive Plan, as Amended and Restated, effective April 30, 2003. Each option permits the optionee to (i) pay for the exercise price with previously owned shares of Class A Common Stock and (ii) satisfy tax-withholding obligations with shares acquired upon exercise. With respect to options granted prior to February 2004, unless the Compensation and Pension Committee determines otherwise prior to the grant of such replacement (reload) options, replacement (reload) options are automatically granted upon exercise of options paid for with previously owned shares of Class A Common Stock. The number of reload options granted is equal to the number of shares


		used to satisfy the option exercise cost. The material terms and vesting schedule of stock options granted in 2007 are as follows:

Grant Type

Grant Date

Vesting Schedule

Term

Exercise Price

Stock Option

2/21/2007

Vest and become

10 years

Closing stock price of a share of

exercisable in

Class A Common Stock on the

three approximately

grant date

equal installments

(34%, 33%, 33%),

commencing on 2/21/2008

Stock Option

7/26/2007

Vest and become

10 years

Closing stock price of a share of Class

exercisable in

A Common Stock on

three approximately

the grant date

equal installments

(34%, 33%, 33%),

commencing on 7/26/2008


(4)		Unless otherwise noted, the value for restricted stock units was determined by multiplying the number of units granted by the closing price of a share of Class A Common Stock on the grant date.

		The grant date fair value for stock options was established using the Black-Scholes stock option valuation model. Assumptions used to calculate the grant date fair value of options granted during 2007 were in accordance with SFAS 123R, as follows:


	a.	Expected Volatility — The standard deviation of the weekly closing stock price over a 4.0 year period immediately preceding the grant date. The volatility used in the calculations ranged from 29% to 30%.

	b.	Risk-Free Interest Rate — The rate available at the time the grant was made on zero-coupon U.S. Government issues with a remaining term equal to the expected life. The risk-free interest rates used in the calculations ranged from 4.71% to 4.82%.


	c.	Dividend Yield — The expected dividend yield was 0% based on the historical dividend yield.

d. Expected Life — The expected life of grants was 4.0 years.


(5)		Effective October 1, 2007, Mr. Bahous relinquished his role as Vice President and President of the Consumer Printer Division and became the Vice President and General Manager, Europe, Middle East and Africa. Through September 30, 2007, Mr. Bahous was entitled to an annual incentive award determined by full year actual performance and prorated as of September 30, 2007 based on $142,500 at Threshold attainment, $332,500 at Target attainment, and $665,000 at Maximum attainment. Mr. Bahous’ annual award opportunity after October 1, 2007 was determined by full year actual performance and was prorated as of October 1, 2007 based on 174,000 Swiss Francs at Threshold attainment, 348,000 Swiss Francs at Target attainment and 551,000 Swiss Francs at Maximum attainment. The table above reflects the prorated estimated future payouts under each of Mr. Bahous’ annual incentive awards.

Employment Agreements

The Company is party to employment agreements with each of Dr. Curlander and Messrs. Gamble, Rooke, Cole and Canning with employment terms expiring June 30, 2009. The employment agreements will automatically renew for an additional two-year employment term, unless notice is given by the Company or the employee of an intention not to renew the agreement prior to the expiration date of the current term.

In July 2004, the employment agreement entered into by Lexmark SARL with Mr. Bahous on April 1, 1991 was suspended by endorsement and supplemented by an employment agreement entered into with the Company during his stay in the United States. The employment agreement between the Company and Mr. Bahous was terminated on October 1, 2007. At that time, Mr. Bahous entered into an employment agreement with LITSA and a new endorsement to continue the suspension of his employment agreement with Lexmark SARL. The employment agreement may be terminated by either party with three months notice.

A description of the material terms and the payments provided under the employment agreements for each of the Named Executive Officers is detailed in the section entitled “Termination and Change in Control Payments.”

Indemnification Agreements

The Company has entered into indemnification agreements with Dr. Curlander, and each of Messrs. Gamble, Rooke, Cole and Canning, which require the Company to indemnify them against certain liabilities that may arise as a result of their status or service as directorsand/or officers of the Company and its subsidiaries.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END


										Stock Awards
																		Equity
																		Incentive
	Option Awards																Equity	Plan Awards:
							Equity										Incentive	Market or
							Incentive										Plan	Payout
	Number						Plan Awards:								Market		Awards:	Value of
	of			Number of			Number of					Number of			Value of		Number of	Unearned
	Securities			Securities			Securities					Shares or			Shares or		Unearned	Shares,
	Underlying			Underlying			Underlying					Units of			Units of		Shares, Units or	Units or Other
	Unexercised			Unexercised			Unexercised	Option				Stock That			Stock That		Other Rights	Rights That
	Options			Options			Unearned	Exercise		Option		Have Not			Have Not		That Have Not	Have
	(#)			(#)			Options	Price		Expiration		Vested			Vested (1)		Vested	Not Vested
Name	Exercisable			Unexercisable			(#)	($)		Date		(#)			($)		(#)	($)
(a)	(b)			(c)			(d)	(e)		(f)		(g)			(h)		(i)	(j)

P. J. Curlander		94,500	(2)		—			$	52.3438		02/11/2009		50,000	(3)	$	1,743,000
		120,000	(4)		—				52.3438		02/11/2009
		—			110,000	(5)			109.4375		02/07/2010
		110,000	(6)		—				109.4375		02/07/2010
		150,000	(7)		—				50.0800		02/21/2011
		150,000	(8)		—				50.4800		02/20/2012
		120,000	(9)		30,000	(9)			58.4200		02/11/2013
		150,000	(10)		—				81.0400		02/25/2014
		100,500	(11)		49,500	(11)			84.8000		02/09/2015
		8,417	(12)(48)		—				65.2600		02/12/2008
		15,451	(13)(48)		—				63.2000		02/12/2008
		76,500	(14)		148,500	(14)			48.0500		02/22/2016
		20,756	(15)(48)		—				53.9100		02/12/2008
		22,135	(16)		—				65.5800		04/30/2008
		—			175,000	(17)			63.1100		02/21/2017
J.W. Gamble, Jr.		33,500	(18)		16,500	(18)			40.9400		10/26/2015		3,970	(19)		138,394
		20,400	(14)		39,600	(14)			48.0500		02/22/2016		28,500	(20)		993,510
		—			45,000	(17)			63.1100		2/21/2017


										Stock Awards
																		Equity
																		Incentive
	Option Awards																Equity	Plan Awards:
							Equity										Incentive	Market or
							Incentive										Plan	Payout
	Number						Plan Awards:								Market		Awards:	Value of
	of			Number of			Number of					Number of			Value of		Number of	Unearned
	Securities			Securities			Securities					Shares or			Shares or		Unearned	Shares,
	Underlying			Underlying			Underlying					Units of			Units of		Shares, Units or	Units or Other
	Unexercised			Unexercised			Unexercised	Option				Stock That			Stock That		Other Rights	Rights That
	Options			Options			Unearned	Exercise		Option		Have Not			Have Not		That Have Not	Have
	(#)			(#)			Options	Price		Expiration		Vested			Vested (1)		Vested	Not Vested
Name	Exercisable			Unexercisable			(#)	($)		Date		(#)			($)		(#)	($)
(a)	(b)			(c)			(d)	(e)		(f)		(g)			(h)		(i)	(j)

N. Bahous		7,000	(6)		—			$	109.4375		02/07/2010		7,920	(21)		276,091
		25,000	(8)		—				50.4800		02/20/2012		15,000	(22)		522,900
		37,600	(9)		9,400	(9)			58.4200		02/11/2013
		47,000	(10)		—				81.0400		02/25/2014
		1,927	(23)(48)		—				95.0600		02/12/2008
		31,490	(11)		15,510	(11)			84.8000		02/09/2015
		20,400	(14)		39,600	(14)			48.0500		02/22/2016
		996	(24)(48)		—				63.3600		02/12/2008
		8,409	(25)		—				67.0500		07/25/2011
		6,644	(25)		—				67.0500		02/21/2011
		—			45,000	(17)			63.1100		02/21/2017
P.A. Rooke		—			25,000	(5)			109.4375		02/07/2010		7,920	(26)		276,091
		25,000	(6)		—				109.4375		02/07/2010		15,000	(22)		522,900
		18,800	(7)		—				50.0800		02/21/2011		28,500	(20)		993,510
		39,700	(8)		—				50.4800		02/20/2012
		12,000	(27)		—				59.4200		10/31/2012
		28,200	(9)		9,400	(9)			58.4200		02/11/2013
		1,614	(28)(48)		—				75.6400		02/12/2008
		12,180	(28)		—				75.6400		02/11/2009
		4,842	(28)(48)		—				75.6400		02/12/2008
		19,804	(29)		—				80.8800		02/11/2009
		47,000	(10)		—				81.0400		02/25/2014
		2,483	(30)		—				92.7600		02/11/2009
		1,318	(30)(48)		—				92.7600		02/12/2008
		678	(30)		—				92.7600		02/11/2013
		7,512	(31)		—				80.0100		02/21/2011
		2,228	(31)		—				80.0100		10/31/2012
		6,079	(31)		—				80.0100		02/11/2013
		9,734	(32)		—				83.3500		02/21/2011
		4,422	(32)		—				83.3500		02/20/2012
		31,490	(11)		15,510	(11)			84.8000		02/09/2015
		20,400	(14)		39,600	(14)			48.0500		02/22/2016
		—			45,000	(17)			63.1100		02/21/2017
		—			25,000	(33)			42.2100		07/26/2017
V. J. Cole		1,876	(34)(48)		—				75.9375		02/12/2008
		—			17,500	(5)			109.4375		02/07/2010
		17,500	(6)		—				109.4375		02/07/2010
		13,200	(7)		—				50.0800		02/21/2011
		19,800	(8)		—				50.4800		02/20/2012
		19,800	(9)		6,600	(9)			58.4200		02/11/2013
		19,366	(35)		—				72.9800		02/11/2009
		4,566	(35)		—				72.9800		02/20/2012
		2,324	(36)		—				81.1000		02/11/2009


										Stock Awards
																		Equity
																		Incentive
	Option Awards																Equity	Plan Awards:
							Equity										Incentive	Market or
							Incentive										Plan	Payout
	Number						Plan Awards:								Market		Awards:	Value of
	of			Number of			Number of					Number of			Value of		Number of	Unearned
	Securities			Securities			Securities					Shares or			Shares or		Unearned	Shares,
	Underlying			Underlying			Underlying					Units of			Units of		Shares, Units or	Units or Other
	Unexercised			Unexercised			Unexercised	Option				Stock That			Stock That		Other Rights	Rights That
	Options			Options			Unearned	Exercise		Option		Have Not			Have Not		That Have Not	Have
	(#)			(#)			Options	Price		Expiration		Vested			Vested (1)		Vested	Not Vested
Name	Exercisable			Unexercisable			(#)	($)		Date		(#)			($)		(#)	($)
(a)	(b)			(c)			(d)	(e)		(f)		(g)			(h)		(i)	(j)

		4,076	(36)		—			$	81.1000		02/21/2011
		4,109	(36)		—				81.1000		02/20/2012
		33,000	(10)		—				81.0400		02/25/2014
		4,203	(37)		—				91.7500		02/11/2013
		6,209	(37)(48)		—				91.7500		02/12/2008
		8,216	(37)		—				91.7500		02/11/2009
		7,205	(37)		—				91.7500		02/21/2011
		22,110	(11)		10,890	(11)			84.8000		02/09/2015
		14,280	(14)		27,720	(14)			48.0500		02/22/2016
		—			31,000	(17)			63.1100		02/21/2017
M.S. Canning		8,000	(6)		—				109.4375		02/07/2010		1,250	(38)		43,575
		—			8,000	(39)			111.5000		04/26/2010		8,000	(40)		278,880
		3,000	(8)		—				50.4800		02/20/2012		3,000	(41)		104,580
		9,000	(9)		3,000	(9)			58.4200		02/11/2013		4,500	(42)		156,870
		8,086	(43)		—				77.5000		02/08/2009		28,500	(20)		993,510
		3,556	(44)		—				84.5000		02/21/2011
		1,793	(44)		—				84.5000		02/20/2012
		1,937	(29)		—				80.8800		02/08/2009
		1,858	(29)		—				80.8800		02/21/2011
		1,873	(29)		—				80.8800		02/20/2012
		2,167	(29)		—				80.8800		02/11/2013
		18,000	(45)		—				81.0400		02/25/2014
		18,000	(46)		—				84.8000		02/09/2015
		4,572	(47)		—				65.7300		02/21/2011
		4,608	(47)		—				65.7300		02/20/2012
		—			25,000	(33)			42.2100		07/26/2017


(1)		Based on the closing price of Lexmark Class A Common Stock on December 31, 2007 ($34.86).
(2)		Consists of stock options granted February 11, 1999 in connection with the1997-2000 Long-Term Incentive Plan. Maximum performance objectives were attained; therefore, the options vested on February 11, 2000 and became exercisable on February 11, 2002.
(3)		Consists of restricted stock units granted February 22, 2006. The award is scheduled to vest and settle in three approximately equal installments (34%, 33%, 33%) on the later of the achievement of a specified stock price for ten consecutive trading days or a vesting date applicable to each installment. Since each stock price target has been achieved, the units are scheduled to vest and settle in three approximately equal installments (34%, 33%, 33%) on February 22, 2008, February 22, 2009 and February 22, 2010, respectively. Refer to the Compensation Discussion and Analysis section entitled “Equity-Based Long-Term Incentive Compensation” for a further description of this award.
(4)		Consists of stock options granted February 11, 1999. The options vested and became exercisable in five equal annual installments (20% of grant per year), commencing February 11, 2000.
(5)		Consists of stock options granted February 7, 2000 in connection with the2000-2003 Long-Term Incentive Plan. The stock options cliff vest on August 7, 2009.
(6)		Consists of stock options granted February 7, 2000. The options vested and became exercisable in five equal annual installments (20% of grant per year), commencing February 7, 2001.


(7)		Consists of stock options granted February 21, 2001. The options vested and became exercisable in five equal annual installments (20% of grant per year), commencing February 21, 2002.

(8)		Consists of stock options granted February 20, 2002. The options vested and became exercisable in five equal annual installments (20% of grant per year), commencing February 20, 2003.

(9)		Consists of stock options granted February 11, 2003. The options vest and become exercisable in five equal annual installments (20% of grant per year), commencing February 11, 2004.


(10)		Consists of stock options granted February 25, 2004. The options vest and become exercisable in three approximately equal annual installments (34%, 33%, 33%), commencing February 25, 2005.

(11)		Consists of stock options granted February 9, 2005. The options vest and become exercisable in three approximately equal annual installments (34%, 33%, 33%), commencing February 9, 2006.

(12)		Consists of reload stock options granted May 13, 2005. The options vested in whole at the grant date and became exercisable six months after the grant date.

(13)		Consists of reload stock options granted July 29, 2005. The options vested in whole at the grant date and became exercisable six months after the grant date.

(14)		Consists of stock options granted February 22, 2006. The options vest and become exercisable in three approximately equal annual installments (34%, 33%, 33%), commencing February 22, 2007.

(15)		Consists of reload stock options granted August 7, 2006. The options vested in whole at the grant date and became exercisable six months after the grant date.

(16)		Consists of reload stock options granted November 9, 2006. The options vested in whole at the grant date, but are not exercisable until six months after the grant date.

(17)		Consists of stock options granted February 21, 2007. The options vest and become exercisable in three approximately equal annual installments (34%, 33%, 33%), commencing February 21, 2008.

(18)		Consists of stock options granted October 26, 2005. The options vest and become exercisable in three approximately equal annual installments (34%, 33%, 33%), commencing October 26, 2006.

(19)		Consists of restricted stock units from the October 26, 2005 grant of 7,939 restricted stock units. 1,984 of the restricted stock units vested and settled on each of October 26, 2006 and 2007 and 1,985 of the restricted stock units will vest on each of October 26, 2008 and 2009.

(20)		Consists of restricted stock units from the December 17, 2007 grant of 28,500 restricted stock units. The restricted stock units vest and settle in three approximately equal installments (34%, 33% and 33%, respectively) on the second through the fourth anniversaries of the grant date, commencing on December 17, 2009.

(21)		Consists of restricted stock units from the August 20, 2004 grant of 12,000 restricted stock units. 4,080 of the restricted stock units vested and settled on August 20, 2006 and 3,960 of the restricted stock units will vest and settle on each of August 20, 2008 and 2010.

(22)		Consists of restricted stock units from the February 22, 2006 grant of 15,000 restricted stock units. The restricted stock units vest and settle in five equal installments (20% each) on the second through sixth anniversaries of the grant date.

(23)		Consists of reload stock options granted May 26, 2004. The options vested in whole at the grant date and became exercisable six months after the grant date.

(24)		Consists of reload stock options granted November 3, 2006. The options vested in whole at the grant date and became exercisable six months after the grant date.

(25)		Consists of reload stock options granted November 21, 2006. The options vested in whole at the grant date and became exercisable six months after the grant date.

(26)		Consists of restricted stock units from the February 25, 2004 grant of 12,000 restricted stock units. 4,080 of the restricted stock units vested and settled on February 25, 2006 and 3,960 of the restricted stock units will vest and settle on each of February 25, 2008 and 2010.

(27)		Consists of stock options granted October 31, 2002. The options vest and become exercisable in five equal annual installments (20% of grant per year), commencing October 31, 2003.


(28)		Consists of reload stock options granted November 18, 2003. The options vested in whole at the grant date and became exercisable six months after the grant date.

(29)		Consists of reload stock options granted February 25, 2004. The options vested in whole at the grant date and became exercisable six months after the grant date.

(30)		Consists of reload stock options granted May 24, 2004. The options vested in whole at the grant date and became exercisable six months after the grant date.

(31)		Consists of reload stock options granted October 27, 2004. The options vested in whole at the grant date and became exercisable six months after the grant date.

(32)		Consists of reload stock options granted February 1, 2005. The options vested in whole at the grant date and became exercisable six months after the grant date.

(33)		Consists of stock options granted July 26, 2007. The options vest and become exercisable in three approximately equal annual installments (34%, 33%, 33%), commencing July 26, 2008.

(34)		Consists of reload stock options granted August 24, 1999. The options vested in whole at the grant date and became exercisable six months after the grant date.

(35)		Consists of reload stock options granted November 12, 2003. The options vested in whole at the grant date and became exercisable six months after the grant date.

(36)		Consists of reload stock options granted February 24, 2004. The options vested in whole at the grant date and became exercisable six months after the grant date.

(37)		Consists of reload stock options granted May 19, 2004. The options vested in whole at the grant date and became exercisable six months after the grant date.

(38)		Consists of restricted stock units from the February 25, 2004 grant of 5,000 restricted stock units. 1,250 of the restricted stock units vested and settled on each of February 25, 2005, 2006 and 2007 and the remaining 1,250 restricted stock units will vest and settle on February 25, 2008.

(39)		Consists of stock options granted April 26, 2000 in connection with the2000-2003 Long-Term Incentive Plan. The stock options cliff vest on October 26, 2009.

(40)		Consists of restricted stock units from the February 22, 2006 grant of 8,000 restricted stock units. The restricted stock units vest and settle in two equal installments (50% each) on the second and third anniversaries of the grant date.

(41)		Consists of restricted stock units from the December 1, 2006 grant of 4,000 restricted stock units. 1,000 of the restricted stock units vested and settled on December 1, 2007 and 1,000 restricted stock units will vest and settle on each of December 1, 2008, 2009 and 2010.

(42)		Consists of restricted stock units from the February 21, 2007 grant of 4,500 restricted stock units. The restricted stock units vest and settle in two equal installments (50% each) on the second and third anniversaries of the grant date.

(43)		Consists of reload stock options granted November 14, 2003. The options vested in whole at the grant date and became exercisable six months after the grant date.

(44)		Consists of reload stock options granted January 27, 2004. The options vested in whole at the grant date and became exercisable six months after the grant date.

(45)		Consists of stock options granted February 25, 2004. The options originally vested and became exercisable in three approximately equal annual installments (34%, 33%, 33%), commencing February 25, 2005. Future vesting was accelerated on December 31, 2005, at which time all outstanding stock options were 100% vested.

(46)		Consists of stock options granted February 9, 2005. The options originally vested and became exercisable in three approximately equal annual installments (34%, 33%, 33%), commencing February 9, 2006. Future vesting was accelerated on December 31, 2005, at which time all outstanding stock options were 100% vested.

(47)		Consists of reload stock options granted November 10, 2006. The options vested in whole at the grant date and became exercisable six months after the grant date.

(48)		These options expired unexercised on February 12, 2008.

OPTION EXERCISES AND STOCK VESTED


	Option Awards				Stock Awards
	Number of				Number of
	Shares				Shares
	Acquired		Value Realized		Acquired			Value Realized
	on Exercise		on Exercise		on Vesting			on Vesting
Name	(#)		($)		(#)			($)
(a)	(b)		(c)		(d)			(e)

P.J. Curlander		0	$	0		16,667	(1)	$	1,050,021	(1)
J.W. Gamble, Jr.		0		0		1,985	(2)		84,045	(2)
N. Bahous		0		0		0			0
P.A. Rooke		0		0		0			0
V.J. Cole		0		0		0			0
M.S. Canning		0		0		2,250	(3)		114,305	(3)


(1)		Consists of restricted stock units that vested in 2007. This was the third tranche of the 50,000 restricted stock units granted on February 21, 2001. The units are scheduled to vest in three approximately equal installments on the second, fourth and sixth anniversaries of the grant date. The units that vested on second anniversary (February 21, 2003) were deferred until February 21, 2005.

(2)		Consists of restricted stock units that vested in 2007. This was the second tranche of the 7,939 restricted stock units granted on October 26, 2005. The units are scheduled to vest in four approximately equal installments on the first through the fourth anniversaries of the grant date.

(3)		Consists of restricted stock units that vested in 2007. This was the third tranche of the 5,000 restricted stock units granted on February 25, 2004 and the first tranche of the 4,000 restricted stock units granted on December 1, 2006. Both of these restricted stock unit grants are scheduled to vest in four approximately equal installments on the first through the fourth anniversaries of the grant dates.

PENSION BENEFITS


				Present
				Value of
		Number of Years		Accumulated		Payments During
		Credited Service		Benefit ($)		Last Fiscal Year
Name	Plan Name (1)	(#) (2)		(3)		($)
(a)	(b)	(c)		(d)		(e)

P.J. Curlander	Tax-qualified plan		31.8	$	804,179	$	0
	Non-qualified plan		31.8		3,296,729		0
J.W. Gamble, Jr.	Tax-qualified plan		0.7		14,213		0
	Non-qualified plan		0.7		0		0
N. Bahous	Tax-qualified plan		1.8		34,796		0
	Non-qualified plan		1.8		41,433		0
	ARRCO		30.3		65,545		0
	AGIRC		30.3		479,433		0
P.A. Rooke	Tax-qualified plan		25.9		505,934		0
	Non-qualified plan		25.9		112,737		0
V.J. Cole	Tax-qualified plan		14.9		210,898		0
	Non-qualified plan		14.9		225,038		0
M. Canning	Tax-qualified plan		7.2		91,036		0
	Non-qualified plan		7.2		83,000		0


(1)		The tax-qualified plan refers to the Lexmark Retirement Growth Account Plan (RGA). The non-qualified plan refers to the Lexmark Nonqualified Supplemental Retirement Plan (SERP). The ARRCO and AGIRC refer to Mr. Bahous’ French mandatory benefits described below under “French Retirement Plans”.

(2)		Reflects credited service frozen as of April 3, 2006 for benefit accrual purposes for RGA and SERP Plans. Mr. Bahous became eligible for the RGA and SERP upon the termination of his international assignment from France to the United States effective July 1, 2004. Actual years of service through December 31, 2007 are 33.5 for Dr. Curlander, 2.4 for Mr. Gamble, 33.8 for Mr. Bahous, 27.6 for Mr. Rooke, 16.6 for Mr. Cole and 8.9 for Mr. Canning.

(3)		The values are based on benefits accrued as of December 31, 2007. Key assumptions used in valuing the benefits are as follows:


	•	Discount rates were 6.4% for the RGA, ARRCO and AGIRC Plans, and 6.25% for the SERP.

	•	Post-retirement mortality rates were based on the mortality tables used for 2007 current liability purposes, as prescribed by the IRS. No pre-retirement mortality rates were assumed.

	•	The interest crediting rate on a participant’s cash balance account was assumed to be 5.5% in 2008 and later years.

	•	Retirement is assumed to occur at the age the participant is first eligible for unreduced benefits.

	•	Benefits were assumed to be paid as a lump sum to participants eligible only for cash balance benefits. Other participants are assumed to elect the payment form (lump sum or annuity) which produces the higher value.

Lexmark Retirement Growth Account Plan

The Lexmark Retirement Plan was amended and restated as the Lexmark Retirement Growth Account Plan effective January 1, 1998. The plan is a defined benefit pension plan that provides all vested eligible employees with retirement income. An initial Retirement Growth Account balance was established for each Lexmark Retirement Plan participant as of January 1, 1998. The cash balance benefit is based on the opening account balance and annual contribution credits of 6% of eligible earnings for up to 35 years of service. Cash balance benefits also include an interest component that is based on the1-year Constant Treasury Maturity rates plus 1%, subject to a minimum of 4%. Eligible earnings include salary, commission payments and recurring payments under any form of variable compensation plan, short-term incentive pay and exclude compensation deferred under any other nonqualified deferred compensation plan, special awards, long-term incentive compensation, and gains on stock option exercises. Includable earnings are limited by the amount under IRC Section 401(a)(17) ($225,000 in 2007).

Effective April 3, 2006, annual contribution credits were discontinued and the Retirement Growth Account Plan was frozen. Interest will continue to accrue on individual Retirement Growth Account balances until the participant begins receiving a benefit under the plan. Upon leaving the Company after the participant has become vested, the participant may elect an annuity funded by the Retirement Growth Account balance or a lump sum of the Retirement Growth Account balance. Vesting occurs after 5 years of continuous service through December 31, 2007 and after 3 years of continuous service effective January 1, 2008. The full annuity benefit is payable in the form of a life annuity. Alternative annuity payment forms, such as joint and survivor annuities and Social Security leveling options, are available on an actuarially equivalent basis. Lump sum amounts are equal to the better of the value of the cash balance account under the Retirement Growth Account Plan or the present value of annuity benefits accrued as of December 31, 1999 under the Lexmark Retirement Plan, with such present value determined using a discount rate based on30-year Treasury rates, an IRS-prescribed mortality table and an assumed retirement age of 65.

The Lexmark Retirement Plan was designed to provide a monthly retirement income based on service and earnings. Benefits under this plan were frozen on December 31, 1999. The retirement benefit under the Lexmark Retirement Plan is calculated as the sum of a Core Retirement Benefit (for employees hired before January 1, 1993), a career average formula based upon an employee’s credited service and earnings (frozen on December 31, 1999), and a Personal Retirement Provision, which provided annual allocations based upon an employee’s earnings and guaranteed interest credits. Upon retirement, benefits for employees hired before January 1, 1993 are calculated

under the prior plan provisions and under the provisions effective January 1, 1998. Participants receive benefits equal to the greater of the two calculations. The prior plan formula generally provided an annuity benefit equal to 1.35% of5-year average earnings through 1996 times service through 1996 plus 1.35% of pay earned in years 1997 through 1999. In addition, the prior plan provided a cash balance benefit based on contribution credits of 5% of pay in 1991 up to $7,500, 1% of pay in 1992, 2% of pay in 1993 and 3% of pay in 1994 through 1999 plus interest credits based on1-year Treasury Bill rates plus 1.5%, subject to a minimum of 4%. Participants hired between January 1, 1993 and January 1, 1998 only received the cash balance benefit under the prior plan.

Normal retirement age is the later of age 65 or the completion of 5 years of continuous service (3 years of continuous service effective January 1, 2008), as defined in the plan. Under the prior plan provisions applicable to employees hired before January 1, 1993, early retirement eligibility occurs at the earliest of 30 years of continuous service, age 55 with 15 years of continuous service or age 62 with 5 years of continuous service. There is no early retirement reduction after 30 years of continuous service or attainment of age 60. Prior to 30 years of continuous service or attainment of age 60, the early retirement reduction is 2% per year of early commencement. The only Named Executive Officer currently eligible for early retirement benefits under the prior plan provision is Dr. Curlander.

Lexmark Nonqualified Supplemental Retirement Plan

The Company has adopted a Supplemental Retirement Plan to pay retirement benefits which would have been paid under the Lexmark Retirement Growth Account Plan if not for the eligible compensation limits as defined in IRC Section 401(a)(17) ($225,000 in 2007). These benefits are paid out of the general funds of the Company. Annual contribution credits were discontinued as of April 3, 2006 when the Retirement Growth Account Plan was frozen.

French Retirement Plans

Prior to July 2004, Mr. Bahous was assigned from Lexmark Europe SARL (“Lexmark SARL”), a subsidiary of the Company located in France, to the Company’s headquarters in Lexington, Kentucky. Pursuant to his employment contract, Mr. Bahous was maintained on the Lexmark SARL payroll, and Lexmark SARL and Mr. Bahous contributed to the normal French benefits, including the mandatory French pension plans. On July 1, 2004, Mr. Bahous moved to the Company’s U.S. payroll and became eligible to participate in the Lexmark Retirement Growth Account Plan. At that time, the Company suspended contributions to the French pension plans for Mr. Bahous. Effective October 1, 2007, Mr. Bahous was assigned to LITSA and became eligible to participate in the Lexmark International Technology, S.A. Pension Fund, a defined contribution pension fund. The contributions to the French pension plans continue to be suspended during Mr. Bahous’ employment with LITSA.

For French employees, retirement benefits consist of mandatory benefits and a complementary plan that was transferred from IBM when the Company was formed, and was converted into a Company plan in 2002. The complementary plan transferred by IBM is a defined contribution plan managed by AXA, a French insurance company.

The mandatory benefits are divided into Social Security, the mandatory plan (“ARRCO”) and the mandatory plan for executives, professionals and managers (“AGIRC”). The benefit from Social Security is a maximum of 50% of the25-year average of the Social Security ceiling. With respect to the ARRCO and AGIRC plans, the contributions secure pension points. Pension points are a measurement unit similar to units purchased in a mutual fund or unit trust. The total number of accumulated points at retirement is multiplied by the point value at the date of retirement to determine the ARRCO and AGIRC pension benefit.

NONQUALIFIED DEFERRED COMPENSATION


									Aggregate
	Executive		Registrant		Aggregate		Aggregate		Balance
	Contributions		Contributions in		Earnings in Last		Withdrawals/		at Last
	in Last FY		Last FY		FY		Distributions		FYE
Name	($)		($) (1)		($)		($)		($)
(a)	(b)		(c)		(d)		(e)		(f)

P.J. Curlander	$	109,399	$	109,399	$	9,538		0	$	272,183
J.W. Gamble, Jr.		36,295		36,295		2,759		0		89,150
N. Bahous		26,264		26,264		2,411		0		71,995
P.A. Rooke		215,742		43,148		8,705		0		290,461
V.J. Cole		400,843		28,029		12,930		0		455,043
M. Canning		22,859		22,859		1,561		0		58,373


(1)		Company contributions differ from the Summary Compensation Table due to a transitional contribution equal to 6% of 2006 compensation in excess of limits defined by IRC Section 401(a)(17) ($220,000 in 2006) less the amount of any deemed contribution credit to the Lexmark Nonqualified Supplemental Retirement Plan for the 2006 Plan Year. The amount of the transitional credit included in the Summary Compensation Table is $43,846 for Dr. Curlander, $13,800 for Mr. Gamble, $17,055 for Mr. Bahous, $22,865 for Mr. Rooke, $13,242 for Mr. Cole and $11,093 for Mr. Canning.

Deferred Stock Units

The Lexmark International, Inc. Stock Incentive Plan entitles a participant, including each of the Named Executive Officers, to elect to defer receipt of all or a portion of his or her annual compensationand/or annual incentive compensation, and receive an award of deferred stock units. These deferred stock units are fully vested at all times and settle on the earlier of the fifth anniversary of the grant date or the termination date due to retirement, death or disability. The participant also receives an additional award of deferred stock units upon deferral with a value equal to 20% of the compensation deferred. These supplemental deferred stock units vest and settle on the fifth anniversary of the date the compensation deferred would otherwise have been paid, subject to continued employment. Supplemental units will vest and settle in full upon termination of employment due to death or disability. None of the Named Executive Officers has deferred stock units outstanding.

Lexmark Supplemental Savings and Deferred Compensation Plan

The Lexmark Supplemental Savings and Deferred Compensation Plan was established in 2006 to allow eligible employees to defer up to 100% of eligible compensation in excess of the IRC Section 401(a)(17) limit ($225,000 in 2007) beginning in 2007 and to receive a Company matching contribution of up to 6% of the amount of compensation deferred by the participant. Eligible employees are a select group of employees whose annualized target compensation exceeds the limit on compensation as defined under IRC Section 401 (a)(17). Each of the Named Executive Officers are eligible for the plan with the exception of Mr. Bahous who became ineligible for the plan October 1, 2007 upon his assignment to LITSA. Eligible compensation includes salary, commission payments, recurring payments under any form of variable compensation plan, short-term incentive pay and excludes compensation deferred under any other nonqualified deferred compensation plan, special awards, long-term incentive compensation and gains on stock option exercises. Participants may elect to receive distributions while in-serviceand/or at separation of service in either a lump sum or annual installments. Participants may also receive a distribution in the event of an unforeseeable emergency as defined under IRS regulations. Account balances are distributed lump sum in the event of death, disability or a change in control. Deferred account balances are credited with an annual rate of return that is calculated using the Merrill Lynch 7-10 year A-rated corporate bond index, subject to a maximum of 120% of the applicable federal long-term rate as determined under IRC Section 1274(d) or any other rate above which such earnings would be considered “above-market” or “preferential” pursuant to the rules and regulations of the Securities and Exchange Commission. The rate for 2007 was 5.388%.

TERMINATION AND CHANGE IN CONTROL PAYMENTS

The Company has entered into certain arrangements and maintains certain plans that will require the Company to provide compensation to Named Executive Officers in the event of a termination of employment or a change in control of the Company. The Compensation and Pension Committee considers the termination and change in control arrangements to be in the best interest of shareholders to ensure that the Company is able to attract outstanding talent to serve in key management positions and to ensure the retention and focus of key management in the event of a change in control of the Company. The table below reflects the estimated amount of compensation payable to each Named Executive Officer in the event of termination of employment under various scenarios. The amount of compensation payable assumes that termination was effective as of December 31, 2007 and includes amounts earned through such time.


	Potential Payments Upon Termination and Change in Control (1)
			Termination by					Termination upon a
			Employer Without					Change in Control
			Cause or					by Employer
			Termination by					Without Cause or
			Employee for			Change in		by Employee for
	Retirement		Good Reason			Control		Good Reason

P.J. Curlander
Cash Severance Payment	$	—	$	1,617,000		$	—	$	7,800,000
Long-Term Incentive Compensation		2,207,292		590,625			4,850,000		4,850,000
Equity-Based Incentive Compensation		—		—			1,743,000		1,743,000
Benefits and Perquisites		—		—			—		25,102
Excise TaxGross-Up		—		—			—		—

TOTAL	$	2,207,292	$	2,207,625		$	6,593,000	$	14,418,102

J.W. Gamble, Jr.
Cash Severance Payment	$	—	$	792,837		$	—	$	2,970,000
Long-Term Incentive Compensation		215,625		215,625			1,850,000		1,850,000
Equity-Based Incentive Compensation		—		—			1,131,904		1,131,904
Benefits and Perquisites		—		—			—		34,416
Excise TaxGross-Up		—		—			—		2,223,743

TOTAL	$	215,625	$	1,008,462		$	2,981,904	$	8,210,063

N. Bahous
Cash Severance Payment	$	—	$	684,810	(2)	$	—	$	684,810	(2)
Long-Term Incentive Compensation		772,917		206,250			1,700,000		1,700,000
Equity-Based Incentive Compensation		—		—			798,991		798,991
Benefits and Perquisites		—		—			—		—
Excise TaxGross-Up		—		—			—		—

TOTAL	$	772,917	$	891,060		$	2,498,991	$	3,183,801

P.A. Rooke
Cash Severance Payment	$	—	$	1,041,321		$	—		3,990,000
Long-Term Incentive Compensation		243,750		243,750			2,250,000		2,250,000
Equity-Based Incentive Compensation		—		—			1,792,501		1,792,501
Benefits and Perquisites		—		—			—		34,513
Excise TaxGross-Up		—		—			—		2,594,330

TOTAL	$	243,750	$	1,285,071		$	4,042,501	$	10,661,344

V.J. Cole
Cash Severance Payment	$	—	$	672,252		$	—	$	1,722,000
Long-Term Incentive Compensation		150,000		150,000			1,250,000		1,250,000
Equity-Based Incentive Compensation		—		—			—		—
Benefits and Perquisites		��		—			—		21,839
Excise TaxGross-Up		—		—			—		—

TOTAL	$	150,000	$	822,252		$	1,250,000	$	2,993,839


	Potential Payments Upon Termination and Change in Control (1)
			Termination by				Termination upon a
			Employer Without				Change in Control
			Cause or				by Employer
			Termination by				Without Cause or
			Employee for		Change in		by Employee for
	Retirement		Good Reason		Control		Good Reason

M.S. Canning
Cash Severance Payment	$	—	$	772,315	$	—	$	1,747,602
Long-Term Incentive Compensation		112,500		112,500		1,025,000		1,025,000
Equity-Based Incentive Compensation		—		—		1,577,415		1,577,415
Benefits and Perquisites		—		—		—		19,979
Excise TaxGross-Up		—		—		—		1,356,539

TOTAL	$	112,500	$	884,815	$	2,602,415	$	5,726,535


(1)		Amounts reflected in the table assume payments were triggered on December 31, 2007 and are based on the closing stock price of Lexmark Class A Common Stock on that day ($34.86).

(2)		Consists of amounts payable to Mr. Bahous in Euro converted at the December 31, 2007 Bloomberg Finance L.P. end of day spot rate of 1.4588 USD per Euro.

Accrued Payments and Retirement Benefits

Potential payments in the table above do not include payments and benefits payable to each Named Executive Officer upon termination or a change in control that are provided on a non-discriminatory basis to employees, including the following:


	•	Accrued salary and vacation pay,

	•	Regular pension benefits (see the section entitled “Pension Benefits” for details on these plans), and

	•	Distributions of balances under the Lexmark Savings Plan, a tax-qualified 401(k) plan,

	•	Distributions for Mr. Bahous under the Lexmark International Technology SA Pension Fund, a Swiss tax-qualified defined contribution plan.

	•	Distributions of balances under the Lexmark Supplemental Savings and Deferred Compensation Plan (see the section entitled “Nonqualified Deferred Compensation” for details on this plan).

Retirement

In the event of retirement, an executive will be entitled to a pro rata portion of the cash-based long-term incentive compensation plans in which the executive participates. Payments will be based on the actual attainment of the Company for the performance period. See the section entitled “Cash-Denominated Long-Term Incentive Compensation” in the Compensation Discussion and Analysis for details of the plans outstanding for each Named Executive Officer on December 31, 2007. In addition, certain executives, including each Named Executive Officer, received stock option grants containing a preferential vesting provision that provides for stock options to continue to vest for 24 months following retirement if at the time of retirement the executive has 30 years of continuous service, is 58 years of age or older and has ten years of continuous service, or is 65 years of age or older, and the executive agrees to the cancellation of any option grant awarded within 12 months prior to the executive’s retirement date. Only Dr. Curlander and Mr. Bahous met the ageand/or service requirements of preferential vesting on December 31, 2007.

The amount payable to each executive at retirement in the table above reflects the actual cash-denominated long-term incentive compensation payment for the 2005 — 2007 performance period and assumes that the Company achieved target attainment for the 2006 — 2008 and 2007 — 2009 performance periods. The amount in the table above for equity-based long-term incentive compensation reflects the in-the-money portion of stock options, calculated using the closing price of Lexmark Class A Common Stock on December 31, 2007 ($34.86), that would vest during the preferential vesting period without regard for the cancellation of any stock option awarded within 12 months prior to the executive’s retirement date.

Termination by Employer Without Cause or Termination by Employee for Good Reason

The Company is party to an employment agreement with certain executives, including Dr. Curlander and Messers. Gamble, Rooke, Cole and Canning. The employment agreement determines the potential payments due to each executive in the event of involuntary termination by the Company Without Cause and termination by the executive for Good Reason, as defined in the employment agreement. Under the terms of the employment agreement, the executive will continue to receive payments of base salary for a period equal to the greater of one year or the remaining term of the employment agreement. The executive will also be entitled to a pro rata portion of annual incentive compensation for the year of termination. If termination occurs before July 1, the annual incentive compensation payment is calculated using the target payout prorated for the number of months in the performance period prior to termination. If the termination occurs on or after July 1, the annual incentive compensation payment is calculated using the actual payout prorated for the number of months in the performance period prior to termination. The obligation of the Company to make any payments to the executive is conditioned upon the receipt of an approved general release and covenant not to sue.

Mr. Bahous is party to an employment contract with LITSA. Mr. Bahous also has a suspended contract with Lexmark SARL. In the event of Mr. Bahous’ involuntary termination or termination for good reason, his termination benefits will be governed by the Lexmark SARL contract. Under the terms of the SARL contract, Mr. Bahous will receive a termination indemnity equal to eighteen months of his total gross compensation (including gross salary and bonus) corresponding to his total gross annual compensation calculated on the 12 months preceding his initial assignment in the United States in 2001, 259,000 Euros. Mr. Bahous is also entitled to a six-month notification period. The amount payable in the table above reflects a cash payment for the six-month notification period.

Change in Control

The Company entered into a Change in Control Agreement with several executives on April 30, 1998, including Dr. Curlander and Messrs. Rooke and Cole. The Company entered into a Change in Control Agreement with Mr. Gamble on September 6, 2005. The Company entered into a Change in Control Agreement with Mr. Canning effective July 26, 2007. The Company and Mr. Bahous terminated the Change in Control Agreement entered into by the Company and Mr. Bahous on July 1, 2004 effective October 1, 2007. The Change in Control Agreement and the Lexmark International, Inc. Stock Incentive Plan, as Amended and Restated, determine the potential payments due to each executive in the event of a Change in Control of the Company and the subsequent termination of the executive following a Change in Control. Generally, a Change in Control is deemed to occur in any of the following events:


	(1)	A majority of 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;

	(2)	Any “person,” including a “group” is or becomes the “beneficial owner,” 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;

	(3)	The stockholders of the Company shall approve a definitive agreement (i) 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 tradable on an established securities market, (B) a majority of the directors of the surviving entity are persons who (x) were not directors of the Company immediately prior to the merger and (y) are not nominees or representatives of the Company or (C) any “person,” including a “group” is or becomes the “beneficial owner,” directly or indirectly, of 30% or more of the securities of the surviving entity or (ii) for the direct or indirect sale or other disposition of all or substantially all of the assets of the Company; or

	(4)	Approval of the shareholders of the Company of a complete liquidation or dissolution of the Company.

A Change in Control will not be deemed to occur in the event the Company files for bankruptcy, liquidation or reorganization under the United States Bankruptcy Code, or if any executive, or any entity in which the executive is a partner, officer or more than 50% owner, initiates what would otherwise constitute a Change in Control and directly or indirectly owns more than 10% of the then outstanding shares of common stock of the Company resulting from such action.

Cash Severance Payments. Under the terms of the Change in Control Agreement, the executive will be entitled to receive as a lump sum following involuntary termination by the Company or termination by the executive for Good Reason (a) his base salary and a pro rata portion of annual incentive compensation for the year of termination, and (b) two times (three times in the case of Dr. Curlander and Messrs. Gamble and Rooke) the sum of his annual base salary and incentive compensation, calculated assuming the Company attained its financial targets and disregarding personal attainment goals. Mr. Bahous’ contract with LITSA does not provide for additional payments upon a Change in Control. The amount reflected in the table is calculated in the same manner as a payment for involuntary termination.

Cash-Denominated Long-Term Incentive Compensation. Under the terms of the Lexmark International, Inc. Stock Incentive Plan, the amount of the Performance Awards payable to the executive will be calculated using the greater of the target performance level or actual attainment of the Company from the beginning of the performance period through the Change in Control. The table above assumes that the Company achieved target attainment for each performance period. See the section entitled “Cash-Denominated Long-Term Incentive Compensation” in the Compensation Discussion and Analysis for details of the plans outstanding for each Named Executive Officer on December 31, 2007.

Equity-Based Long-Term Incentive Compensation. Under the terms of the Lexmark International, Inc. Stock Incentive Plan, any Stock Incentive Awards, vested and unvested, will be cancelled promptly and a payment in cash for the difference in the exercise price and the Change in Control price will be made to the executive. The Compensation and Pension Committee may, with the consent of the executive, substitute an Alternative Award, as defined in the plan, instead of making a cash payment.

Benefits and Perquisites. Under the terms of the Change in Control Agreement, for a period of two years (three years in the case of Dr. Curlander, and Messrs. Gamble and Rooke) following the executive’s termination, the Company will be obligated to continue to provide at least the same level of benefits (including medical, dental, disability, and insurance plans and programs) that were provided during the executive’s employment, or if more favorable to the executive, as in effect thereafter.

Excise TaxGross-Up. To the extent that any benefits to the executive under the Change in Control Agreement trigger an excise tax to the executive, he or she will receive agrossed-up payment to negate the effects of such tax. Excise tax is only payable if there is a Change in Control and the present value of parachute payments exceeds the safe harbor limitation under Internal Revenue Code Section 280G. For 2007, only Messrs. Gamble, Rooke and Canning would be expected to exceed their safe harbor limitation and would incur this payment.

Death or Disability

In the event of termination due to death or disability, the executive will be entitled to a pro rata portion of annual incentive compensation for the year of termination. The amount of the annual incentive compensation payment is calculated in the same manner as described under the section entitled “Involuntary Termination and Termination for Good Reason” above. The executive will also be entitled to a pro rata portion of the cash-based long-term incentive compensation plans in which he or she participates. Payments will be based on the actual attainment of the Company for the performance period. The amount payable to each Named Executive Officer at termination due to death or disability reflected in the table above assumes that the Company achieved target attainment for each performance period. See the section entitled “Cash-Denominated Long-Term Incentive Compensation” in the Compensation Discussion and Analysis for details of the plans outstanding for each Named Executive Officer on December 31, 2007. The vested portion of any stock options outstanding at the time of an executive’s termination due to death or disability will be exercisable for 12 months following termination and the unvested portion will be forfeited. However, for stock options subject to preferential vesting, the vested portion of

any stock options outstanding at the end of the preferential vesting period will be exercisable for 12 months following the preferential vesting period. All unvested restricted stock units will be forfeited upon termination due to death or disability.

Material Terms Affecting Payments

The executive is subject to forfeiture of realized and unrealized gains on Stock Incentive Awards for violating certain provisions of the employment agreement, including:


	(1)	Unauthorized disclosure of any confidential or proprietary non-public information obtained by the executive while employed by the Company;

	(2)	Becoming employed by, serving as an agent for, or consulting with an entity that competes with the Company within a 12 month period following termination; and

	(3)	Within 36 months from termination, soliciting any person or entity who or which is employed by the Company or intentionally interfering with the Company’s relationship with any person or entity who or which has been a customer, client or supplier of the Company within the previous 36 months.

If the executive violates any of these restrictions then all stock incentive awards held by the executive terminate upon the date of the violation, all gains realized on the vesting of restricted stock, deferred stock units and stock option gains within 18 months preceding the earlier of the violation or the date of termination through the later of 18 months following the violation and such time of the discovery of the violation, shall be paid to the Company. Similar provisions are included in each executive’s Stock Incentive Award agreements, Long-Term Incentive Plan agreements, and Change in Control Agreement.

DIRECTOR COMPENSATION

The Company’s policy is to pay compensation only to those Directors who are not also employees of the Company or any of its subsidiaries or affiliated with any principal stockholder of the Company (each, an “Eligible Director”). All Directors are, however, reimbursed for expenses incurred in attending Board and committee meetings.

In 2007, each Eligible Director of the Company received an annual retainer of $50,000, a daily attendance fee of $2,500 for attendance at Boardand/or committee meetings held on the same day, a daily attendance fee of $2,000 ($2,500 for Finance and Audit Committee members) for attendance at committee meetings which were held the evening before a Board meeting and $750 per meeting for participation in telephonic meetings. Any such Eligible Director who served as the chair of a committee also received an annual retainer of $10,000 ($15,000 for the Finance and Audit Committee Chair). The Presiding Director received an annual retainer of $10,000. Cash payments are made to each eligible Director on a quarterly basis on the last day of each calendar quarter. In 2008, the cash compensation paid to each Eligible Director of the Company will remain the same as in 2007.

In addition, each Eligible Director has the opportunity to participate in the Company’s 2005 Nonemployee Director Stock Plan (the “Director Plan”) described below. In April 2007, all Eligible Directors received an Annual Award (as defined in the Director Plan) of options to purchase 4,800 shares. The total exercise price of the grant per Director was approximately $350,000 ($79,700 Black-Scholes value) based on the closing price of the Class A Common Stock on the last day of the prior fiscal year ($350,000¸ $73.20, rounded up to the nearest 100 shares). The Board of Directors has determined that the amount of the Annual Award should remain the same in 2008. Options granted to each Eligible Director typically provide for the vesting of the options over a three-year period based on continued Board service. However, vesting and exercisability of the options continues for a period of three years following the termination of Board service if the Eligible Director has completed more than three years of service as a Director of the Company at the time of departing from the Board. It is currently anticipated that Annual Awards will continue to be made in order to attract, retain and motivate the best qualified Directors and to enhance a long-term mutuality of interest between the Company’s Directors and stockholders. The number of options granted in an Annual Award is reviewed annually by the Board of Directors.

Under the Director Plan, upon election to the Board, each Eligible Director of the Company receives a one-time grant of restricted stock units as the Initial Award (as defined in the Director Plan). The number of restricted stock units granted in the Initial Award for an Eligible Director elected in any calendar year is reviewed annually by the Board of Directors. In 2007, the face value of the restricted stock unit award was approximately $150,000 based on the closing price of the Class A Common Stock on the last day of the prior fiscal year. The Initial Award of restricted stock units vests in whole on the sixth anniversary of the Eligible Director joining the Board and settles upon termination ofhis/her status as a Board member. The Board of Directors has determined that the amount of the Initial Award should remain the same in 2008.

In addition, each Eligible Director may elect to defer payment of all or a portion of the annual retainer, attendance and meeting fees (the “Annual Fees”) and to receive in lieu thereof a grant of deferred stock units equal to the amount of Annual Fees so deferred, divided by the fair market value of a share of Class A Common Stock on the date of grant of the deferred stock units. Deferred stock units are granted to each Eligible Director electing annually to defer retainerand/or attendance fees, with such deferred stock units being granted at the end of each calendar quarter when cash payments would otherwise be made and at the price of the Class A Common Stock at such time.

The Board has implemented stock ownership guidelines encouraging Directors to own at least that number of shares of Class A Common Stock having a value of five times the annual retainer payable to a nonemployee Board member. Each Eligible Director is encouraged to reach this guideline ownership level within two to four years of becoming a member of the Board.

The Company has entered into an indemnification agreement with each of its Directors, which requires the Company to indemnify them against certain liabilities that may arise as a result of their status or service as Directors of the Company. The Company also pays the premiums on the directors’ and officers’ liability insurance policies.

Directors are also eligible to participate in the Lexmark Employee Purchase Program, which provides certain discounts for the purchase of Lexmark printers and printer supplies, and certain matching gifts programs that employees of the Company are also eligible to participate in.

2007 DIRECTOR COMPENSATION


												Change in
												Pension Value
												and
												Nonqualified
	Fees Earned									Non-Equity		Deferred
	or			Stock						Incentive Plan		Compensation		All Other
	Paid in Cash			Awards			Option Awards			Compensation		Earnings($)		Compensation			Total
Name	($)			($)			($)			($)		(1)		($)			($)
(a)	(b)			(c)			(d)			(e)		(f)		(g)			(h)

B. C. Ames(2)	$	15,575	(3)	$	0		$	51,248	(4)	$	0	$	0	$	0		$	66,823
T. Beck		94,750	(3)		0			131,022	(5)		0		0		5,000	(6)		230,772
W. R. Fields		92,625	(3)		0			131,022	(5)		0		0		0			223,647
R. E. Gomory		71,750			0			137,721	(7)		0		0		0			209,471
S. R. Hardis		76,000	(3)		0			131,022	(5)		0		0		35,000	(6)		242,022
J. F. Hardymon		91,625			0			131,022	(5)		0		0		5,000	(6)		227,647
R. Holland, Jr.		72,250	(3)		0			131,022	(5)		0		0		5,000	(6)		208,272
M. L. Mann		81,000			0			131,022	(5)		0		0		35,000	(8)		247,022
M. J. Maples		80,250			0			131,022	(5)		0		0		0			211,272
J. L. Montupet		74,000	(3)		34,952	(9)		21,817	(10)		0		0		0			130,769
K. P. Seifert		75,250	(11)		27,364	(9)		27,264	(10)		0		0		10,000	(6)		139,878
M. D. Walker(2)		15,250	(12)		0			51,248	(4)		0		0		18,000	(6)		84,498


(1)	The Company’s directors do not participate in any pension plans or deferred compensation plans where above-market or preferential earnings have been earned.


(2)	Mr. Ames and Mr. Walker each retired from the Board of Directors in April 2007.

(3)	All of this amount was deferred by the respective director into deferred stock units during 2007 pursuant to the 2005 Nonemployee Director Stock Plan, resulting in the following deferred stock units being held by each director at December 31, 2007 based on each director’s service during 2007: Mr. Ames, 279 units; Ms. Beck, 2,205 units; Mr. Fields, 2,166 units; Mr. Hardis, 1,769 units; Mr. Holland, 1,677 units; and Mr. Montupet, 1,711 units.
(4)	Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 in accordance with FAS 123(R) for the vesting of each of the stock option grants made to the respective directors on each of 4/30/02, 4/30/03, 4/22/04, 4/28/05 and 4/27/06 which vested during 2007. As of December 31, 2007, each director had the following aggregate number of stock option awards outstanding: Mr. Ames, 28,400, and Mr. Walker, 24,400. Assumptions used in the calculation of these awards are disclosed in the Company’s audited financial statements included in the Company’s Annual Report onForm 10-K filed with the Securities and Exchange Commission as detailed in the table that follows:


			Note to
	Fiscal Year End of		Consolidated		Filing Date of
	Audited Financial		Financial		Annual Report on
Year of Grant	Statements		Statements		Form 10-K

2002		December 31, 2002		12	March 14, 2003
2003		December 31, 2003		12	March 12, 2004
2004		December 31, 2004		12	March 9, 2005
2005		December 31, 2005		12	March 8, 2006
2006		December 31, 2006		3	February 28, 2007


(5)		Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 in accordance with FAS 123(R) for the vesting of each of the stock option grants made to the respective directors on each of 4/30/02, 4/30/03, 4/22/04, 4/28/05 and 4/27/06 which vested during 2007. Also includes the FAS 123(R) grant date fair value of the stock option grant made to each of the respective directors on 4/26/07 ($79,774). As of December 31, 2007, each director had the following aggregate number of stock option awards outstanding: Ms. Beck, 28,500; Mr. Fields, 24,148; Mr. Hardis, 33,200; Mr. Hardymon, 33,735; Mr. Holland, 35,800; Mr. Mann, 172,676 (includes 145,876 employee stock option awards received during 1999 and prior years and held in a family limited partnership — see footnote 3 to the table entitled “Security Ownership by Management and Principal Stockholders” for further information); Mr. Maples, 31,087; Mr. Montupet, 4,800, and Ms. Seifert, 4,800. Assumptions used in the calculation of these awards are disclosed in the Company’s audited financial statements included in the Company’s Annual Report onForm 10-K filed with the Securities and Exchange Commission as detailed in the table that follows:


			Note to
	Fiscal Year End of		Consolidated		Filing Date of
	Audited Financial		Financial		Annual Report on
Year of Grant	Statements		Statements		Form 10-K

2002		December 31, 2002		12	March 14, 2003
2003		December 31, 2003		12	March 12, 2004
2004		December 31, 2004		12	March 9, 2005
2005		December 31, 2005		12	March 8, 2006
2006		December 31, 2006		3	February 28, 2007
2007		December 31, 2007		4	February 27, 2008


(6)		Reflects matching gifts disbursed by the Company during 2007 in the respective director’s name under the Company’s Matching Gifts Program. This program provides for matching gifts of up to $10,000 annually for each employee or director and his or her spouse. Certain of the amounts disbursed during 2007 may reflect matching gifts for prior calendar years. The program is offered on the same terms to all employees and directors.

(7)		Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 in accordance with FAS 123(R) for the vesting of each of the stock option grants made to


		Mr. Gomory on each of 4/30/02, 4/30/03, 4/22/04, 4/28/05 and 4/27/06 which vested during 2007. Also includes the FAS 123(R) grant date fair value of the stock option grant made on 4/26/07 ($79,774) and the FAS 123(R) grant date fair value of the reload stock option grant made on 11/27/07 ($6,699). As of December 31, 2007, Mr. Gomory had 32,476 stock option awards outstanding in the aggregate. Assumptions used in the calculation of these awards are referred to in footnote (5) above.

(8)		Reflects matching gifts disbursed by the Company during 2007 in Mr. Mann’s name under the Company’s Matching Gifts Program in the amount of $10,000 and a one-time memorial gift by the Company in memory of Mr. Mann’s spouse, who passed away during 2007, in the amount of $25,000.

(9)		Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 in accordance with FAS 123(R) for an Initial Award of restricted stock units granted to each of Mr. Montupet and Ms. Seifert upon their election to the Board in 2006. As of December 31, 2007, each of Mr. Montupet and Ms. Seifert had 3,350 restricted stock units.

(10)		Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 in accordance with FAS 123(R) for the prorata vesting of the stock option grant made to the respective director on 4/26/07 which was deemed to have vested during 2007. As of December 31, 2007, each of Mr. Montupet and Ms. Seifert had 4,800 stock option awards outstanding. Assumptions used in the calculation of these awards are referred to in footnote (5) above.

(11)		Half of this amount was deferred by Ms. Seifert into deferred stock units during 2007 pursuant to the 2005 Nonemployee Director Stock Plan, resulting in 875 units being held by her at December 31, 2007 based on her service as a director during 2007.

(12)		Attendance Fees only were deferred by Mr. Walker into deferred stock units during 2007 pursuant to the 2005 Nonemployee Director Stock Plan, resulting in 90 units being held by him at December 31, 2007 based on his service as a director during 2007.

SECURITY OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS

The following table furnishes certain information, to the best knowledge of the Company, as of February 29, 2008, as to the shares of Class A Common Stock beneficially owned by (i) each Director of the Company, (ii) each person serving as the principal executive officer or principal financial officer of the Company during 2007 and the three other most highly compensated executive officers of the Company who were serving as executive officers at the end of 2007, (iii) other former executive officers who were among the three other most highly compensated executive officers during 2007, but who were not serving as executive officers at the end of 2007, (iv) all Directors and executive officers of the Company as a group and (v) each person owning beneficially more than 5% of the outstanding shares of Class A Common Stock. Except as otherwise indicated, the address of each person listed below is the address of the Company.


	Amount and
	Nature
	of Beneficial			Percentage
Beneficial Owner	Ownership			of Class

UBS AG		6,954,597	(1)		7.30	%(1)
Bahnhofstrasse 45 P.O. Box CH-8021 Zurich, Switzerland
Teresa Beck		32,839	(2)			*
William R. Fields		30,449	(2)			*
Ralph E. Gomory		42,488	(2)			*
Stephen R. Hardis		93,609	(2)			*
James F. Hardymon		35,588	(2)			*
Robert Holland, Jr.		39,418	(2)			*
Marvin L. Mann		502,114	(2)(3)			*
Michael J. Maples		32,362	(2)			*
Jean-Paul L. Montupet		3,522	(2)			*
Kathi P. Seifert		7,510	(2)			*
Paul J. Curlander		1,574,557	(2)		1.61
John W. Gamble, Jr.		91,569	(2)			*
Najib Bahous		266,003	(2)			*
Paul A. Rooke		397,367	(2)(4)			*
Vincent J. Cole		270,733	(2)			*
Martin S. Canning		105,693	(2)			*
All directors and executive officers as a group (18 persons)		3,777,097	(2)		3.86


*		Less than 1% of class.

(1)		Based on a Schedule 13G filed with the Securities and Exchange Commission on February 14, 2008. UBS Global Asset Management, a registered investment advisor and business group of UBS AG, is the beneficial owner of 6,954,597 shares over which it has shared dispositive power and 6,535,209 shares over which it has sole voting power. UBS AG disclaims beneficial ownership of all such shares

(2)		Shares beneficially owned include shares that may be acquired pursuant to the exercise of options that are exercisable within 60 days following February 29, 2008 by the following persons and groups in the following amounts: Teresa Beck, 22,984 shares; William R. Fields, 18,632 shares; Ralph E. Gomory, 26,960 shares; Stephen R. Hardis, 27,684 shares; James F. Hardymon, 28,219 shares; Robert Holland, Jr., 30,284 shares; Marvin L. Mann, 92,160 shares; Michael J. Maples, 25,571 shares; Jean-Paul L. Montupet, 1,632 shares; Kathi P. Seifert, 1,632 shares; Paul J. Curlander, 1,306,885 shares; John W. Gamble, Jr., 89,000 shares; Najib Bahous, 243,553 shares; Paul A. Rooke, 347,720 shares; Vincent J. Cole, 235,645 shares; Martin S. Canning, 89,450 shares; and all Directors and executive officers as a group (18 persons), 2,809,332 shares. Included


		in these shares are Deferred Stock Units that Directors were granted as a result of their election to defer all or a portion of their annual retainer and attendance fees under the Nonemployee Director Stock Plan and the 2005 Nonemployee Director Plan. These shares also include shares allocated to the employee through participation in the Lexmark Savings Plan. The shares held in the Lexmark Savings Plan can be voted by each employee, and each employee has investment authority over the shares held in his or her account in the plan. In the case of a tender offer, the trustee shall tender or not tender shares as directed by each participant in the plan. These shares also include shares allocated to the employee through participation in the Employee Stock Purchase Plan. The shares held in the Employee Stock Purchase Plan can be voted by each employee, and each employee has investment authority over the shares held in his or her account in the plan. In the case of a tender offer, each participant would have the right to tender or not tender his or her shares.

(3)		Mr. Mann’s shares do not include 18,000 shares that are held by an irrevocable trust established by Mr. Mann for the benefit of certain relatives. Mr. Mann’s shares include 52,269 shares and options to purchase 70,876 shares that are owned by two family limited partnerships. The general partner of each family limited partnership is a corporation, of which Mr. Mann is the controlling stockholder. Mr. Mann’s shares also include 162,423 shares held in a revocable trust in his name and 154,923 shares held in a revocable trust in the name of his deceased spouse, of which Mr. Mann is the successor trustee. Mr. Mann’s shares also include 1,002 shares owned by the estate of Mr. Mann’s spouse, of which he is the executor. Mr. Mann disclaims beneficial ownership of all such shares.

(4)		Mr. Rooke’s shares include 47,012 shares owned by a revocable trust established by Mr. Rooke for his own benefit and 597 shares owned by a member of his immediate family.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about the Company’s equity compensation plans as of December 31, 2007.


						Number of Securities
	Number of Securities to be					Remaining Available
	Issued upon Exercise of			Weighted Average Exercise		for Future Issuance
	Outstanding Options,			Price of Outstanding		under Equity
Plan Category	Warrants and Rights			Options, Warrants and Rights(1)		Compensation Plans
	(Number of securities in millions)

Equity compensation plans approved by stockholders		11.8	(2)	$	68.99		6.5	(3)
Equity compensation plans not approved by stockholders(4)		0.6		$	47.64		0.3

Total		12.4		$	67.82		6.8


(1)		The numbers in this column represent the weighted average exercise price of stock options only.

(2)		As of December 31, 2007, of the approximately 11.8 million awards outstanding under the equity compensation plans approved by stockholders, there were approximately 10.6 million stock options (of which 10,266,000 are employee stock options and 327,000 are nonemployee director stock options), 1.1 million restricted stock units (“RSUs”) and supplemental deferred stock units (“DSUs”) (of which 1,134,000 are employee RSUs and supplemental DSUs and 7,000 are nonemployee director RSUs), and 82,000 elective DSUs (of which 35,000 are employee elective DSUs and 47,000 are nonemployee director elective DSUs) that pertain to voluntary elections by certain members of management to defer all or a portion of their annual incentive compensation and by certain nonemployee directors to defer all or a portion of their annual retainer, chair retainer and/or meeting fees, that would have otherwise been paid in cash.

(3)		Of the 6.5 million shares available, 4.1 million relate to employee plans (of which 2.1 million may be granted as full-value awards), 0.5 million relate to the nonemployee director plan and 1.9 million relate to the employee stock purchase plan.

(4)		Lexmark has only one equity compensation plan which has not been approved by its stockholders, the Lexmark International, Inc. Broad-Based Employee Stock Incentive Plan (the “Broad-Based Plan”). The Broad-Based


		Plan, which was established on December 19, 2000, provides for the issuance of up to 1.6 million shares of the Company’s common stock pursuant to stock incentive awards (including stock options, stock appreciation rights, performance awards, RSUs and DSUs) granted to the Company’s employees, other than its directors and executive officers. The Broad-Based Plan expressly provides that the Company’s directors and executive officers are not eligible to participate in the Plan. The Broad-Based Plan limits the number of shares subject to full-value awards (e.g., restricted stock units and performance awards) to 50,000 shares. The Company’s Board of Directors may at any time terminate or suspend the Broad-Based Plan, and from time to time, amend or modify the Broad-Based Plan, but any amendment which would lower the minimum exercise price for options and stock appreciation rights or materially modify the requirements for eligibility to participate in the Broad-Based Plan, requires the approval of the Company’s stockholders. In January 2001, all employees other than the Company’s directors, executive officers and senior managers, were awarded stock options under the Broad-Based Plan. All 0.6 million awards outstanding under the equity compensation plan not approved by stockholders are in the form of stock options.

REPORT OF THE FINANCE AND AUDIT COMMITTEE

Through February 22, 2007, the Finance and Audit Committee (the “Committee”) was comprised of four nonemployee directors, Ms. Beck, Mr. Holland, Mr. Mann and Mr. Maples. On February 22, 2007, Mr. Holland moved from the Finance and Audit Committee to the Corporate Governance and Public Policy Committee.

The Committee operates pursuant to a written charter which can be found on the Company’s Investor Relations website at http://investor.lexmark.com. After reviewing the qualifications of the Committee members, and any relationships that they may have with the Company that might affect their independence from the Company, the Board of Directors has determined that (i) all Committee members are “independent” as that term is defined by Section 10A of the Securities Exchange Act of 1934, the rules of the Securities and Exchange Commission thereunder and the listing standards of the New York Stock Exchange, (ii) all Committee members are “financially literate” as that term is defined by the listing standards of the New York Stock Exchange and (iii) each of Ms. Beck, Mr. Mann and Mr. Maples is an “audit committee financial expert” as that term is defined by the applicable rules established by the Securities and Exchange Commission.

Company management has primary responsibility for preparing the Company’s financial statements and the financial reporting process, including establishing and maintaining adequate internal control over financial reporting and evaluating the effectiveness of internal control over financial reporting. PricewaterhouseCoopers LLP (“PwC”), the Company’s independent registered public accounting firm (the “Independent Auditors”), is responsible for performing an audit and expressing an opinion on the conformity of the Company’s audited financial statements to generally accepted accounting principles in the United States of America and performing an audit and expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. The Committee’s responsibility is to monitor and review these processes, acting in an oversight capacity. In this context, during 2007 the Committee met eleven times and held separate discussions with management, the Company’s internal auditors and the Independent Auditors. The Committee discussed with the Company’s internal auditors and the Independent Auditors the overall scope and plans for their respective audits. The Committee met regularly with the internal auditors and the Independent Auditors, with and without management present, to discuss the results of their respective examinations, their evaluation of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Committee discussed the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication With Audit Committees) with the Independent Auditors. The Committee received and reviewed a report prepared by PwC describing the firm’s internal quality control procedures and any material issues raised by the firm’s most recent internal quality-control review and peer review of the firm. The Committee received and reviewed the written disclosures from the Independent Auditors required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and discussed with the Independent Auditors their independence from the Company and its management. The Committee also considered whether the provision of the non-audit services provided by the Independent Auditors is compatible with the Independent Auditors’ independence.

In discharging its duties, the Committee met with management of the Company and PwC and reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 2007. The Committee also discussed with PwC the critical accounting policies and practices used in the preparation of the Company’s audited financial statements. Management and PwC have represented to the Committee that the audited financial statements for the year ended December 31, 2007 were prepared in accordance with generally accepted accounting principles.

Based on the review and discussions with management, the internal auditors and the Independent Auditors referred to above, and subject to the limitations on the role and responsibilities of the Committee referred to above and in the Committee Charter, the Committee has recommended to the Board of Directors, and the Board has approved, the inclusion of the audited financial statements of the Company in the Company’s Annual Report onForm 10-K for the year ended December 31, 2007.

The Finance and Audit Committee

of the Board of Directors

Teresa Beck, Chair

Marvin L. Mann

Michael J. Maples

PROPOSAL 2

RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS

Vote Required

Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s Independent Auditors for the fiscal year ending December 31, 2008 will require the affirmative vote of the holders of a majority of the shares of Class A Common Stock represented and voting on this proposal at the Annual Meeting.

The Board of Directors recommends a vote “FOR” this proposal. Signed proxies will be voted for this proposal, unless stockholders specify a different choice in their proxies.

Summary

The Finance and Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP as the Company’s Independent Auditors to audit its consolidated financial statements and the effectiveness of the Company’s internal control over financial reporting and express an opinion thereon for the 2008 fiscal year. During the 2007 fiscal year, PricewaterhouseCoopers LLP served as the Company’s Independent Auditors and also provided certain tax services. The aggregate fees billed or to be billed to the Company by PricewaterhouseCoopers LLP for services performed during the fiscal years ended December 31, 2007 and 2006 are as follows:


	2007		2006

Audit Fees(1)	$	4,253,000	$	4,827,000
Audit-Related Fees(2)		12,000		171,000
Tax Fees(3)		16,000		43,000
All Other Fees(4)		0		7,000


(1)		Audit Fees consist of fees for professional services rendered for the audit of the Company’s consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements.

(2)		Audit-Related Fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” These services include employee benefit plan audits, certain attest audits and accounting consultations concerning financial accounting and reporting standards.

(3)		Tax Fees consist of fees for federal, state and international tax compliance, tax consulting and expatriate tax services.

(4)		All Other Fees for 2006 consist of a licensing fee for audit software licensed by PricewaterhouseCoopers LLP to the Company.

All fees for services incurred in 2007 were approved by the Finance and Audit Committee. The Finance and Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the Independent Auditors’ independence. A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting of Stockholders and will have an opportunity to make a statement and to respond to appropriate questions. Although the Company is not required to seek stockholder approval of this appointment, the Board believes it to be sound corporate governance to do so. If the appointment is not ratified, the Finance and Audit Committee will reconsider the appointment.

Policy Regarding Finance and Audit Committee Preapproval of Audit and Permissible Non-Audit Services

In April 2003, the Finance and Audit Committee adopted a policy regarding the preapproval of all audit and permissible non-audit services to be provided to the Company by the Independent Auditors. The Finance and Audit Committee amended such policy in February 2006. On an annual basis, the Finance and Audit Committee is

required to review and consider for approval the annual audit engagement terms and fees for the coming year, which includes the audit of the Company’s annual financial statements (including required quarterly reviews) and required subsidiary audits. At the same time, the Committee also reviews and considers for approval annually recurring and planned audit-related and tax services to be provided to the Company in the coming year. All of the services reviewed and approved on an annual basis are approved at an estimated fee and require additional preapproval by the Committee during the year if the estimated fee is expected to be exceeded. The authority to preapprove any services exceeding previously approved budgeted amounts by $50,000 or less is delegated to the Chair of the Finance and Audit Committee, provided that such preapprovals are reported to the full Committee at its next regularly scheduled meeting. All other permissible services to be provided by the Independent Auditors at a fee not to exceed $50,000 may be specifically preapproved by the Chair of the Finance and Audit Committee, and reported to the full Committee at its next regularly scheduled meeting.

In considering the preapproval of services to be provided by the Independent Auditors, the Finance and Audit Committee is mindful of the relationship between fees for audit and non-audit services, and may determine for each fiscal year the appropriate ratio between the total amount of fees for audit, audit-related and tax services and the total amount of fees for certain permissible non-audit services classified as all other services.

PROPOSAL 3

APPROVAL OF THE AMENDMENT OF CERTAIN TERMS OF THE COMPANY’S

STOCK INCENTIVE PLAN

Vote Required

Approval of the amendment of certain terms of the Company’s Stock Incentive Plan, as Amended and Restated April 30, 2003 (the “Stock Incentive Plan” or the “Plan”) will require the affirmative vote of the holders of a majority of the shares of Class A Common Stock represented and voting on this proposal at the Annual Meeting.

The Board of Directors recommends a vote “FOR” this proposal. Signed proxies will be voted for this proposal, unless stockholders specify a different choice in their proxies.

Summary

In 2003, the Company’s stockholders approved the terms of the Company’s Stock Incentive Plan, as Amended and Restated April 30, 2003, pursuant to which Incentive Awards (as defined in the Plan) may be made to the Company’s employees. The Stock Incentive Plan provides for performance incentives to its employees through the granting of performance-based awards in a manner that preserves, for federal tax purposes, the Company’s ability to deduct the compensation received by certain of its employees through awards received under the Plan. The Plan is structured to satisfy the requirements for performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code and related IRS regulations to preserve the deductibility of the compensation under the Plan. Pursuant to the Plan, the Compensation and Pension Committee is authorized to grant stock-based or cash-based Incentive Awards that are performance based in nature and are based on the attainment of objectives specified in the Plan and approved by the Compensation and Pension Committee.

Approval of Performance Measures

The Board of Directors, upon the recommendation of the Compensation and Pension Committee, has, subject to stockholder approval, approved an amendment to the Stock Incentive Plan which incorporates four additional performance measures for use in establishing performance targets under the Plan — customer satisfaction, customer service, product quality and product awards. In addition to the current performance measures included in the Stock Incentive Plan, the Compensation and Pension Committee believes that these measures may be key performance objectives for the Company to strive to achieve in the future.

The Compensation and Pension Committee administers the Stock Incentive Plan and is responsible for establishing specific targets for each participant in the Plan that will, if achieved, allow for deductibility. Concurrently with the selection of these targets, the Committee must establish an objective formula or standard for calculating the payout to each participant. The targets may be based on one or more of the following business

criteria (which are set forth in the Plan), or on any combination of them. Performance goals may be measured on a corporate, subsidiary, affiliate, division or business unit basis, or a combination thereof. Performance goals may be established in either absolute terms or relative to the performance of one or more comparable companies or an index covering multiple companies. The following list of business criteria includes those approved as part of the Stock Incentive Plan by stockholders in 2003, as well as the four additional performance measures recommended to be added to the Plan by the Company’s Compensation and Pension Committee and approved, subject to stockholder approval, by the Company’s Board of Directors.


•	Revenue	•	Earnings Per Share
•	Unit Growth	•	Working Capital
•	Operating Cash Flow	•	Inventory Turnover Rates
•	Earnings Before Interest and Taxes	•	Days of Inventory
•	Earnings Before Interest, Taxes,	•	Market Share
	Depreciation and Amortization	•	Return on Investment
•	Net Working Funds	•	Return on Capital
•	Cash Conversion Cycle	•	Return on Equity
•	Days Sales Outstanding	•	Return on Assets
•	Days Payables Outstanding	•	Profit Margin
•	Accounts Receivable Delinquency	•	Stock Price Appreciation
•	Operating Earnings	•	Total Shareholder Return
•	Net Income	•	Shareholder Value Add
•	Customer Satisfaction	•	Product Quality
•	Customer Service	•	Product Awards

Determination of Company Performance Attainment Against Performance Objectives

The Board of Directors has approved, and recommends to stockholders that stockholders approve, an amendment to the Stock Incentive Plan to allow the Compensation and Pension Committee the flexibility when measuring the Company’s performance against its established performance objectives to, in its sole discretion at the time of establishing the performance measures, include or exclude the impact of charges for restructurings, discontinued operations, extraordinary items, and any other unusual or nonrecurring items, and the cumulative effects of accounting changes, each as defined by generally accepted accounting principles and as identified in the Company’s financial statements, notes to the financial statements or management’s discussion and analysis.

The Stock Incentive Plan currently requires the Compensation and Pension Committee to exclude such items when determining the Company’s performance attainment as measured against established performance objectives.

Administration

The targets must be established while the Company’s performance relative to the targets remains substantially uncertain within the meaning of Section 162(m). The measurement periods may vary depending on the type of Performance Award granted under the Plan, but historically have ranged from one to three years. In certain instances, the Committee may provide that in addition to any other restrictions imposed on Performance Awards (as defined in the Plan), Performance Awards shall become vested, if at all, upon the determination by the Committee that performance objectives established by the Committee have been attained or deemed attained, in whole or in part.

The Compensation and Pension Committee may also adjust downwards, but not upwards, the number of shares of the Company’s Class A Common Stock to be granted to a participant under the Planand/or the amount payable pursuant to a Performance Award under the Plan.

Maximum Award

An individual may not receive more than 200,000 shares of Class A Common Stock for any performance period of three years pursuant to a stock-based Performance Award (subject to adjustments permitted under the Plan) and more than $10,000,000 in value under any Performance Award valued with reference to any property other than shares of Class A Common Stock, including cash, with proportionate adjustments for shorter or longer performance periods. Awards may be paid in cash, shares of Class A Common Stock, other property, or any combination thereof, as determined by the Compensation and Pension Committee at the time of payment.

Amendment and Termination of Plan

The Board may amend the Plan as it deems advisable, except that any amendment that (i) increases the number of shares that may be delivered under the Plan, or increases the limit on the number of shares or award value that may be delivered to a participant per type of award, (ii) lowers the exercise price for options or SARs, or (iii) materially modifies the requirements for eligibility to participate in the Plan, shall be subject to stockholder approval. The Board may terminate or suspend the Plan at any time, but such termination or suspension will not affect any stock option, SAR, restricted stock, Performance Award or deferred stock unit then outstanding under the Plan.

Nondeductible Compensation

The Compensation and Pension Committee and the Board of Directors believe that it is essential to retain the ability to reward and motivate executives based on the assessment of an individual’s performance, even though some or all of any such discretionary payments may not be deductible due to the requirements of Section 162(m). Accordingly, the Compensation and Pension Committee reserves the right to award discretionary incentive awards to executive officers and adopt other compensation plans and arrangements which may not be deductible under Section 162(m). Any such incentive payments would be based on the Compensation and Pension Committee’s qualitative assessment of the applicable executive’s individual performance and contribution.

The description of the Stock Incentive Plan included above is only a summary of the Plan as it relates to performance-based awards under the Plan, and is qualified in its entirety by the full text of the Plan. The full text of the Plan is attached as Exhibit B to the Company’s proxy statement dated March 21, 2003.

PROPOSAL 4

STOCKHOLDER PROPOSAL

Amalgamated Bank LongView Collective Investment Fund, 275 Seventh Avenue, New York, New York 10001, a beneficial owner of 25,722 shares of Lexmark International, Inc. Class A Common Stock as of the date of the proposal, has notified the Company that it intends to present the following proposal at the Annual Meeting of Stockholders.

Vote Required

If the proponent appears and the following stockholder proposal is presented at the Annual Meeting of Stockholders, approval of the proposal will require the affirmative vote of the holders of a majority of the shares of Class A Common Stock represented and voting on this proposal at the Annual Meeting.

RESOLVED, that the shareholders of Lexmark International, Inc. (“Lexmark” or the “Company”) urge the board of directors to adopt a policy under which shareholders could vote at each annual meeting on an advisory resolution, to be proposed by Lexmark’s management, to ratify the compensation of the named executive officers (“NEOs”) set forth in the proxy statement’s Summary Compensation Table (the “SCT”) and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis). The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO.

SUPPORTING STATEMENT

Investors are increasingly concerned about mushrooming executive compensation that sometimes appears to be insufficiently aligned with the creation of shareholder value. Recent media attention on questionable dating of stock options grants by companies has also raised investor concerns.

A new SEC rule, which received record support from investors, requires companies to disclose additional information about compensation and perquisites for top executives. In adopting this rule, the SEC made it clear that market forces, not the SEC, should provide checks and balances on compensation practices.

We believe that existing U.S. corporate governance arrangements, including SEC rules and stock exchange listing standards, do not give shareholders enough mechanisms to provide input to boards on senior executive compensation. By contrast, public companies in the United Kingdom allow shareholders to cast an advisory vote on the “directors’ remuneration report,” which discloses executive compensation. Such a vote is not binding, but gives shareholders a clear voice that could help shape senior executive compensation.

U.S. stock exchange listing standards require shareholder approval of equity-based compensation plans, but those plans set only general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year. Shareholders do not have a means to provide ongoing feedback on the application of those general standards to individual pay packages. (See Lucian Bebchuk & Jesse Fried, PAY WITHOUT PERFORMANCE 49 (2004).

Similarly, performance criteria submitted for shareholder approval that would allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in setting performance targets for particular senior executives. Withholding votes from compensation committee members who are standing for reelection is a blunt and inadequate instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.

Accordingly, we urge Lexmark’s board to let shareholders express their opinion about senior executive compensation by establishing an annual referendum process. The results of such a vote would, we think, provide Lexmark with useful information about whether shareholders view the company’s senior executive compensation, as reported each year, to be in shareholders’ best interests.

We urge shareholders to voteforthis proposal.

FOR THE REASONS STATED BELOW, THE BOARD OF DIRECTORS
RECOMMENDS A VOTE “AGAINST” PROPOSAL 4.

The Board of Directors recommends a vote “AGAINST” the above proposal as not in the best interests of the Company’s stockholders and opposes the proposal for the following reasons. Signed proxies will be voted against this proposal, unless stockholders specify a different choice in their proxies.

Adoption of the proposal could put our Company at a competitive disadvantage and negatively impact shareholder value by impeding our ability to recruit and retain critical personnel. Our Company operates in an intensely competitive environment and our success is closely correlated with the recruitment and retention of talented employees and a strong management team. A competitive compensation program is therefore essential to the Company’s long-term performance. Importantly, the advisory vote process in the United Kingdom is mandated by law applying to all public companies in that jurisdiction and, therefore, gives no company a competitive advantage over another. Our adoption of an advisory vote could lead to a perception among our talent and the talent for which we compete that compensation opportunities at our Company may be limited, especially as compared with opportunities at companies that have not adopted this practice, and may impede our ability to recruit and retain critical personnel. We currently are not aware of any competitor of ours that has adopted this practice.

An advisory vote is not an effective mechanism for conveying meaningful shareholder opinions regarding our executive compensation. The proposed advisory vote would benefit neither the Company nor its shareholders because it would not provide the Compensation and Pension Committee with any clear indication of the meaning of the vote. An advisory vote would not communicate shareholder views of the merits, limitations or

preferred enhancements of our executive compensation. Instead, an advisory vote would require the Committee to speculate about the meaning of shareholder approval or disapproval. For example, a negative vote could signify that shareholders do not approve of the amount or type of compensation awarded or, alternatively, that shareholders do not approve of the format or level of disclosure in the summary compensation table and accompanying narrative disclosure.

Shareholders already have an effective mechanism for expressing their views about our executive compensation. An advisory vote is not necessary because our shareholders already have an efficient and effective method of communicating with our Board. Shareholders may contact directly any of our Company’s directors, the Presiding Director, a committee of the Board (including the Compensation and Pension Committee), the Board’s nonemployee directors as a group or the Board generally, by writing to them through the process described under the heading “Corporate Governance Matters” in this proxy statement. Direct communications between shareholders and the Board allow shareholders to voice specific observations or concerns and to communicate clearly and effectively with the Board. An advisory vote does not provide that communication.

Our compensation practices and programs serve the interests of our shareholders. Our Board believes that our compensation practices and programs serve the interests of shareholders by resulting in compensation that is performance-based (as discussed under the heading “Compensation Discussion & Analysis” in this proxy statement) and by enabling the Company to hire and retain the best executives and motivate those executives to drive the long term success of the company and create shareholder value. The Company’s Compensation and Pension Committee operates under a written charter adopted by the Board. It is the responsibility of this Committee, which is comprised entirely of active, engaged, independent directors to establish and maintain these practices and programs and to approve compensation awarded to the Company’s executive officers, including the Chief Executive Officer and the other Named Executive Officers. To assist in this process, the Compensation and Pension Committee has engaged a compensation consultant, Pearl Meyer & Partners, which is completely independent of Company management and reports directly to the Committee.

FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” PROPOSAL 4.

SUBMISSION OF STOCKHOLDER PROPOSALS

If a holder of the Company’s Class A Common Stock wishes to present a proposal for consideration at next year’s Annual Meeting, any such proposal must be received at the Company’s offices at One Lexmark Centre Drive, Lexington, Kentucky 40550, Attention: Corporate Secretary, on or before November 23, 2008. In addition, the Company’s By-Laws provide that in order for any stockholder to nominate a Director or propose to transact any corporate business at an Annual Meeting of Stockholders, the stockholder must have given written notice, by certified mail, to the Secretary of the Company, which must be received by the Secretary of the Company not less than 60 nor more than 120 days prior to the first anniversary of the date on which the Company first mailed its proxy materials for the preceding year’s Annual Meeting of Stockholders. If the date of the Annual Meeting is advanced more than 30 days prior to or delayed by more than 30 days after the first anniversary of the preceding year’s Annual Meeting, the notice must be received by the Secretary not later than the close of business on the later of the 90th day prior to the Annual Meeting or the 10th day following the day on which public announcement of the date of such meeting is first made.

PROXY SOLICITATION

The Company is making this proxy solicitation and will bear the cost of the solicitation. In addition to the solicitation of proxies by use of the mail, proxies may be solicited by Directors, officers and regularly engaged employees or agents of the Company. The Company has also retained Georgeson Inc., 199 Water Street, 26th Floor, New York, NY 10038, to assist in the solicitation for an estimated fee of $10,000 plus reasonable expenses. Brokers, nominees and other similar record holders will be requested to forward solicitation material and will be reimbursed by the Company upon request for their out-of-pocket expenses.

ATTENDANCE AT ANNUAL MEETING

The 2008 Annual Meeting of Stockholders will be held at 8:00 a.m. on Thursday, April 24, 2008, at the Embassy Suites Hotel, 1801 Newtown Pike, Lexington, Kentucky 40511.

Admission to the meeting is limited to stockholders of the Company or their designated representatives. One admission ticket to the meeting is attached to each proxy used. If you intend to attend the meeting, please detach and retain the admission ticket and check the “I plan to attend the meeting” box on the form of proxy itself to validate the admission ticket. Only ticket-holders will be admitted to the Annual Meeting.

OTHER MATTERS

The management knows of no other matters which are likely to be brought before the meeting, but if any such matters properly come before the meeting, the persons named in the enclosed proxy, or their substitutes, will vote the proxy in accordance with their best judgment.

The Securities and Exchange Commission rules allow for the delivery of a single Annual Report and Proxy Statement to households at which two or more stockholders reside with the proper consent of the stockholders. Accordingly, beneficial owners sharing an address who have been previously notified by their broker or its intermediary will receive only one copy of the Annual Report and Proxy Statement, unless the beneficial owner has provided contrary instructions. Individual proxy cards or voting instruction forms (or telephonic or electronic voting facilities) will, however, continue to be provided for each beneficial owner account. In addition, upon the written or oral request of a beneficial owner residing at a shared address to which a single copy of the Company’s Annual Report and Proxy Statement are delivered, the Company will deliver an additional copy of such documents at its own cost.

The Company will furnish to each person whose proxy is being solicited, upon written request, copies of any exhibits to its Annual Report onForm 10-K for the fiscal year ended December 31, 2007, as filed with the Securities and Exchange Commission. Requests in writing for copies of any such materials should be directed to Investor Relations, Lexmark International, Inc., One Lexmark Centre Drive, Lexington, Kentucky 40550.

Vincent J. Cole

Secretary

March 24, 2008

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE WITH RESPECT TO A PROPOSAL, THIS Ple ase PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR PROPOSALS 2 AND 3, AGAINST PROPOSAL 4, AND OTHERWISE IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY HOLDER. Mark Here for Address Change or Comments SEE REVERSE SIDE x Votes must be indicated (x) in Black or Blue ink. FOR AGAINST ABSTAIN 1. ELECTION OF DIRECTORS — TERMS TO EXPIRE IN 2011 2. RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE Nomin ees: FOR AGAINST ABSTAIN COMPANY’S FISCAL YEAR ENDING DECEMBER 31, 2008. FOR AGAINST ABSTAIN 3. AMENDMENT OF CERTAIN TERMS OF THE COMPANY’S STOCK 0 1 Ralph E. Gomory INCENTIVE PLAN, AS AMENDED AND RESTATED APRIL 30, 2003. FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN 4. STOCKHOLDER PROPOSAL REGARDING AN ADVISORY VOTE ON 0 2 Marvin L. Mann EXECUTIVE COMPENSATION FOR AGAINST ABSTAIN 5. IN THEIR DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE 0 3 Teresa Beck MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF. Signature Signature Date NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. FOLD AND DETACH HERE WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING, BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK. Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to Annual Meeting day. Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. INTERNET TELEPHONE http://www.eproxy.com/lxk 1-866-580-9477 Use the Internet to vote your proxy. OR Use any touch-tone telephone to Have your proxy card in hand vote your proxy. Have your proxy when you access the web site. card in hand when you call. If you vote your proxy by Internet or by tele phone, you do NOT need to mail back your proxy card. To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. Choose MLinkSM for fast, easy and secure 24/7 onlin e access to your future proxy materia ls, n i vestment plan statements, tax documents and more. Simply log on to Investor ServiceDirect^® at www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF LEXMARK INTERNATIONAL, INC. The undersigned hereby appoints Paul J. Curlander, John W. Gamble, Jr. and Vincent J. Cole attorneys and proxies, each with power to act without the other and with power of substitution, and hereby authorizes them to represent and vote all of the shares of stock of Lexmark International, Inc. standing in the name of the undersigned with all powers which the undersigned would possess if present at the Annual Meeting of Stockholders of the Company to be held April 24, 2008 or any adjournment or postponement thereof. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH NOMINEE TO SERVE AS A DIRECTOR, “FOR” PROPOSALS 2 AND 3 AND “AGAINST” PROPOSAL 4. IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED ON THE REVERSE SIDE, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF DIRECTORS, “FOR” PROPOSALS 2 AND 3 AND “AGAINST” PROPOSAL 4. IF ANY OTHER BUSINESS SHOULD COME BEFORE THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY HOLDER. (Continued and to be marked, dated and signed, on the other side) Address Change/Comments (Mark the corresponding box on the reverse side) FOLD AND DETACH HERE Annual Meeting of Stockholders Lexmark International, Inc. April 24, 2008 8:00 a.m. Embassy Suites Hotel 1801 Newtown Pike Lexington, Kentucky 40511 ADMISSION TICKET If you intend to attend the Annual Meeting, please be sure to check the “I plan to attend the meeting” box on the reverse side of the Proxy.

Lexmark International Inactive DEF 14ADefinitive proxy