LEXMARK INTERNATIONAL GROUP, INC.
STOCK INCENTIVE PLAN
(Amended and Restated Effective April 30, 1998)
SECTION 1.
PURPOSE
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The purpose of the Plan is to foster and promote the long-term financial
success of the Company and materially increase shareholder value by (a)
motivating superior performance by means of performance-related incentives, (b)
encouraging and providing for the acquisition of an ownership interest in the
Company by Employees and (c) enabling the Company to attract and retain the
services of an outstanding management team upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
SECTION 2.
DEFINITIONS
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2.1. Definitions. Whenever used herein, the following terms shall have
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the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Adjustment Event" shall mean any stock dividend, stock split
or share combination of, or extraordinary cash dividend on, the Common
Stock or recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares, warrants or rights
offering to purchase Common Stock at a price substantially below Fair
Market Value, or other similar event affecting the Common Stock of the
Company.
(c) "Award Agreement" means the agreement, certificate or other
instrument evidencing the grant of any Incentive Award under the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause", with respect to any Incentive Award, shall have the
meaning assigned thereto in the Award Agreement evidencing such Incentive
Award or, if there is no such meaning assigned, shall mean (i) the
willful failure by the Participant to perform substantially his duties as
an employee of the Company or any Subsidiary (other than due to physical
or mental illness) after reasonable notice to the Participant of such
failure, (ii) the Participant's engaging in serious misconduct that is
injurious to the Company or any Subsidiary, (iii) the Participant's
having been convicted of, or entered a plea of nolo contendere to, a
crime that constitutes a felony or (iv) the breach by the Participant of
any written covenant or agreement with the Company or any Subsidiary not
to disclose information pertaining to the Company or any Subsidiary or
not to compete or interfere with the Company or any Subsidiary.
(f) "Change in Control" shall mean the occurrence of any of the
following events:
(i) a majority of the members of the Board at any time
cease for any reason other than due to death or disability to be
persons who were members of the Board twenty-four months prior to
such time (the "Incumbent Directors"); provided that any director
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
members of the Board then still in office who are Incumbent
Directors shall be treated as an Incumbent Director;
(ii) any "person," including a "group" (as such terms are
used in Sections 13(d) and 14(d)(2) of the Act, but excluding the
Company, its Subsidiaries, any employee benefit plan of the
Company or any Subsidiary, employees of the Company or any
Subsidiary or any group of which any of the foregoing is a member)
is or becomes the "beneficial owner" (as defined in Rule 13(d)(3)
under the Act), directly or indirectly, including without
limitation, by means of a tender or exchange offer, of securities
of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities; or
(iii) the stockholders of the Company shall approve a
definitive agreement (x) for the merger or other business
combination of the Company with or into another corporation
immediately following which merger or combination (A) the stock of
the surviving entity is not readily tradeable on an established
securities market, (B) a majority of the directors of the
surviving entity are persons who (1) were not directors of the
Company immediately prior to the merger and (2) are not nominees
or representatives of the Company or (C) any "person," including a
"group" (as such terms are used in Sections 13(d) and 14(d)(2) of
the Act, but excluding the Company, its Subsidiaries, any employee
benefit plan of the Company or any Subsidiary, employees of the
Company or any Subsidiary or any group of which any of the
foregoing is a member) is or becomes the "beneficial owner" (as
defined in Rule 13(d)(3) under the Act), directly or indirectly,
of 30% or more of the securities of the surviving entity or (y)
for the direct or indirect sale or other disposition of all or
substantially all of the assets of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
(g) "Change in Control Price" shall mean the highest price per
share of Common Stock paid in conjunction with any transaction resulting
in a Change in Control (as determined in good faith by the Committee if
any part of the offered price is payable other than in cash) or, in the
case of a Change in Control occurring solely by reason of a change in the
composition of the Board, the highest Fair Market Value of the Common
Stock on any of the 30 trading days immediately preceding the date on
which such Change in Control occurs.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means (i) the Compensation and Pension Committee
of the Board, unless under the Act requires the approval of a
committee of the Board that is composed solely of two or more
Non-Employee Directors (as defined in Rule 16b-3(b)(3) as promulgated
under the Act) in which case "Committee" shall mean such committee or
(ii) the Board itself.
(j) "Common Stock" means the Class A common stock of the Company,
par value $0.01 per share, or such other shares or kind of securities as
determined by the Board.
(k) "Company" means Lexmark International Group, Inc., a Delaware
corporation, and any successor thereto.
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(l) "Deferred Stock Unit" means a Participant's right to receive
pursuant to the Plan one share of Common Stock, or, if provided by the
Committee, cash equal to the Fair Market Value of a share of Common
Stock, at the end of a specified period of time.
(m) "Disability", with respect to any Incentive Award, shall have
the meaning assigned thereto in the Award Agreement evidencing such
Incentive Award, or, if there is no such meaning assigned, shall mean a
physical or mental disability or infirmity of a Participant, as defined
in any disability plan sponsored by the Company or any Subsidiary which
employs such Participant, or, if no such plan is sponsored by such
Participant's employer, the Lexmark Medical Disability Income Plan.
(n) "Employee" means any employee of the Company or any of its
Subsidiaries.
(o) "Fair Market Value" means, as of any date of determination,
the closing price of a share of Common Stock on a national securities
exchange on that day, as reported for such day in the Wall Street
Journal, or the last bid price for a share of Common Stock on such
immediately preceding day, as reported on a nationally recognized system
of price quotation. In the event that there are no Common Stock
transactions reported on such exchange or system on such day, Fair Market
Value shall mean the closing price or the last bid price, whichever is
applicable, on the immediately preceding day on which Common Stock
transactions were so reported.
(p) "Incentive Award" means any award under the Plan of an Option,
Stock Appreciation Right, Restricted Stock or Deferred Stock Unit. Each
of these awards may be granted alone or together with other awards under
the Plan and/or cash awards outside the Plan.
(q) "Option" means the right to purchase a stated number of shares
of Common Stock at a stated price (as specified in Section 6.2 hereof)
for a specified period of time. For purposes of the Plan, an Option may
be either (i) an "Incentive Stock Option" within the meaning of section
422 of the Code or (ii) an Option which is not an Incentive Stock Option
(a "Non-Qualified Stock Option").
(r) "Participant" means any Employee designated by the Committee
to receive an Incentive Award under the Plan.
(s) "Plan" means the Lexmark International Group, Inc. Stock
Incentive Plan, as set forth herein and as the same may be amended from
time to time.
(t) "Predecessor Plans" means the Lexmark Holding, Inc. Stock
Option Plan for Executives and Senior Officers, the Lexmark Holding,
Inc. Stock Option Plan for Senior Managers, the Lexmark Holding, Inc.
Employee Stock Option Plan and the 1995-1997 Long Term Incentive Plan.
(u) "Qualifying Common Stock" means shares of Common Stock which
(i) are not subject to any loan or other obligation or pledged as
collateral with respect to any loan or other obligation of the
Participant (subject to the consent of the Committee, other than any loan
extended to the Participant by the Company or a Subsidiary) and (ii)
either (A) have been owned by the Participant for at least six months (or
such greater or lesser period as the Committee shall determine) or (B)
were purchased by the Participant on a national securities exchange or
nationally recognized over-the-counter market.
(v) "Restriction Period" means the period during which shares of
Restricted Stock are subject to forfeiture or restrictions on transfer
(if applicable) as described in Section 7 of the Plan and any applicable
Award Agreement, provided that such period shall not be less than three
years.
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(w) "Restricted Stock" means Common Stock or units with respect to
Common Stock awarded to a Participant pursuant to the Plan which is
subject to forfeiture and restrictions on transferability in accordance
with Section 7 of the Plan.
(x) "Retirement", with respect to any Incentive Award, shall have
the meaning assigned thereto in the Award Agreement evidencing such
Incentive Award, or, if there is no such meaning assigned, shall mean a
Participant's retirement at or after normal retirement age under the
terms of the retirement plan sponsored by the Company or any Subsidiary
which employs such Participant.
(y) "Stock Appreciation Right" means the right to receive a
payment from the Company, in cash, Common Stock or a combination thereof,
equal to the excess of the Fair Market Value of a share of Common Stock
at the date of exercise over a specified price fixed by the Committee (as
specified in Section 6.7(c) hereof).
(z) "Subsidiary" means any entity that is directly or indirectly
controlled by the Company or any other entity in which the Company has a
significant equity interest, as determined by the Committee.
2.2. Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
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Participants in the Plan shall be those Employees selected by the
Committee to participate in the Plan.
SECTION 4.
ADMINISTRATION
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4.1. Power to Grant and Establish Terms of Awards. The Committee shall
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have the discretionary authority, subject to the terms of the Plan, to determine
the Employees to whom Incentive Awards shall be granted and the terms and
conditions of such Incentive Awards, including but not limited to the number of
shares of Common Stock to be covered by each Incentive Award; the time or times
at which Incentive Awards may be exercised, paid or transferred, as the case may
be; whether Options shall be designated as Incentive Stock Options or
Non-Qualified Stock Options; the form and manner of payment of any amount due
from a Participant (or his beneficiary or permitted transferee, if applicable)
in connection with any Incentive Award; whether any Reload Option (as defined in
Section 6.6) will be granted to any Participant pursuant to Section 6.6; whether
any restriction (including any provision as to vesting, exercisability, payment
or transferability) shall be modified or waived, in whole or in part, after the
date of grant of the Incentive Award; the rights of a Participant (or his
beneficiary or permitted transferee) with respect to any Incentive Award
following the Participant's termination of employment; whether amounts payable
by the Company in respect of any Incentive Award shall be paid in Common Stock,
cash or any combination thereof; whether and to what extent any Incentive Award
may be transferred by the Participant; and the terms, provisions and conditions
to be included in any Incentive Award Agreement.
The officers of the Company may suggest to the Committee the Participants
who should receive Incentive Awards under the Plan. In accordance with the terms
of the Plan, the terms and conditions of each Incentive Award shall be
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determined by the Committee at the time of grant, and such terms and conditions
may be subsequently changed by the Committee, in its discretion, provided that
no such change may be effected which would adversely affect a Participant's
rights with respect to an Incentive Award then outstanding, without the consent
of such Participant. The Committee may establish different terms and conditions
for different Participants receiving Incentive Awards and for the same
Participant for each Incentive Award such Participant may receive, whether or
not granted at different times. The grant of any Incentive Award to any Employee
shall not entitle such Employee to the grant of any other Incentive Awards.
Notwithstanding anything else contained in the Plan to the contrary, the
Committee may delegate, subject to such terms and conditions as it shall
determine, to any officer of the Company or to a committee of officers of the
Company, the authority to grant Incentive Awards (and to make any and all
determinations related thereto) to Participants who are not, and are not
expected to become, subject to the reporting requirements of Section 16(a) of
the Act and whose compensation will not be subject to the limitations on the
deductibility thereof by the Company or its Subsidiaries pursuant to Section
162(m) of the Code.
4.2. Administration. The Committee shall be responsible for the
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administration of the Plan. Any Incentive Award granted by the Committee may be
subject to such conditions, not inconsistent with the terms of the Plan, as the
Committee shall determine, in its discretion. The Committee, by majority action
thereof, has discretionary authority to prescribe, amend and rescind rules and
regulations relating to the Plan, to interpret and apply the provisions of the
Plan, to provide for conditions deemed necessary or advisable to protect the
interests of the Company or to interpret the Plan and to make all other
determinations necessary or advisable for the administration and interpretation
of the Plan and to carry out its provisions and purposes.
4.3. Discretionary Authority of Committee. All of the powers and
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authority conferred upon the Committee pursuant to any term of the Plan shall be
exercised by the Committee, in its discretion. All determinations,
interpretations or other actions made or taken by the Committee pursuant to the
provisions of the Plan shall be final, binding and conclusive for all purposes
and upon all persons and, in the event of any judicial review thereof, shall be
overturned only if arbitrary and capricious. The Committee may consult with
legal counsel, who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the advice of
counsel.
SECTION 5.
STOCK SUBJECT TO PLAN
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5.1. Number. Subject to the provisions of Section 5.3, the number of
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shares of Common Stock that may be delivered under the Plan may not exceed
7,380,000, plus any shares that become available for grant pursuant to Section
5.2. The shares to be delivered under the Plan may consist, in whole or in part,
of Common Stock held in treasury or authorized but unissued Common Stock, not
reserved for any other purpose, or from Common Stock reacquired by the Company.
5.2. Canceled, Terminated, or Forfeited Awards. Any shares of Common
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Stock subject to any portion of an Incentive Award and any shares of Common
Stock subject to any option or award granted under a Predecessor Plan which, in
any such case and for any reason, expires, or is canceled, terminated or
otherwise settled, without the issuance of such shares of Common Stock,
including shares covered by an Incentive Award used to satisfy tax withholding
requirements on behalf of a Participant as provided for in Section 11.4, shall
again be available for award under the Plan. Shares of Common Stock that are
delivered to the Company, either actually or by attestation, in payment of the
exercise price for any Option granted under the Plan or under a Predecessor Plan
will also be available for future grants under the Plan.
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5.3. Adjustment in Capitalization. The aggregate number of shares of
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Common Stock available for Incentive Awards, under Section 5.1, or subject to
outstanding Incentive Awards, and the respective prices and/or vesting criteria
applicable to outstanding Incentive Awards shall be proportionately adjusted to
reflect, as deemed equitable and appropriate by the Committee, an Adjustment
Event. To the extent deemed equitable and appropriate by the Committee, subject
to any required action by stockholders, in any merger, consolidation,
reorganization, liquidation, dissolution or other similar transaction, any
Incentive Award granted under the Plan shall pertain to the securities and other
property to which a holder of the number of shares of Common Stock covered by
the Incentive Award would have been entitled to receive in connection with such
event.
Any shares of stock (whether Common Stock, shares of stock into which
shares of Common Stock are converted or for which shares of Common Stock are
exchanged or shares of stock distributed with respect to Common Stock) or cash
or other property received with respect to any Incentive Award granted under the
Plan as a result of any Adjustment Event, any distribution of property or any
merger, consolidation, reorganization, liquidation, dissolution or other similar
transaction shall, except as provided in Section 7.4, Section 8.3 or as
otherwise provided by the Committee at or after the date any such award is made,
be subject to the same terms and conditions, including vesting and restrictions
on exercisability or transfer, as are applicable to the Incentive Award with
respect to which such shares, cash or other property is received, and any Award
Agreement and stock certificate(s) representing or evidencing any shares of
stock or other property so received shall so provide and be legended as
appropriate.
SECTION 6.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
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6.1. Grant of Options. Options may be granted to Participants at such
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time or times as shall be determined by the Committee. Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options, except that no Incentive Stock Option may be granted to any
Employee of a Subsidiary which is not a corporation. The date of grant of an
Option under the Plan will be the date on which the Option is awarded by the
Committee or, if so determined by the Committee, the date on which occurs any
event the occurrence of which is an express condition precedent to the grant of
the Option. The Committee shall determine the number of Options, if any, to be
granted to a Participant, provided that, in no event shall the number of shares
of Common Stock subject to all Options granted to any Participant under the Plan
for the five-year period from April 30, 1998 through April 30, 2003 exceed
1,500,000 shares (adjusted pursuant to Section 5.3 if an Adjustment Event shall
occur). Each Option shall be evidenced by an Award Agreement that shall specify
the type of Option granted, the exercise price, the duration of the Option, the
number of shares of Common Stock to which the Option pertains and such other
terms and conditions not inconsistent with the Plan as the Committee shall
determine.
6.2. Option Price. Options granted pursuant to the Plan shall have an
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exercise price which is not less than the Fair Market Value on the date the
Option is granted, except that if a Non-Qualified Stock Option is granted
retroactively in tandem with or in substitution for a Stock Appreciation Rights
grant, the designated Fair Market Value for purposes of establishing the
exercise price for such option may be the Fair Market Value on the date the
Stock Appreciation Rights were granted.
6.3. Exercise of Options. Options awarded to a Participant under the Plan
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shall be exercisable at such time or times and subject to such restrictions or
other conditions, including the performance of a minimum period of service or
the satisfaction of performance goals, as the Committee shall determine either
at or after the date of grant of such Options, subject to the Committee's right
to accelerate or waive any conditions to the exercisability of any Option
granted under the Plan. To the extent not specified otherwise by the Committee,
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Options will become exercisable in three installments as follows, subject to the
Participant's continued employment until the applicable date:
Percentage of Anniversary
Grant Exercisable of Date of Grant
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60%. . . . . . . . . . . . . . . . . . . . . Third anniversary
80%. . . . . . . . . . . . . . . . . . . . . Fourth anniversary
100%. . . . . . . . . . . . . . . . . . . . .Fifth anniversary
Once exercisable, an Option may be exercised from time to time, in whole or in
part, up to the total number of shares of Common Stock with respect to which it
is then exercisable. Notwithstanding the foregoing, except as provided in
Section 6.8, no Option shall be exercisable for more than 10 years after the
date on which it is granted.
6.4. Payment. The Committee shall establish procedures governing the
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exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full at the time of exercise (i) in
cash or cash equivalents, (ii) in the discretion of the Committee, in shares of
Qualifying Common Stock having a Fair Market Value on the date of exercise equal
to such Option price or in a combination of cash and Qualifying Common Stock or
(iii) in accordance with such other procedures or in such other form as the
Committee shall from time to time determine. As soon as practicable after
receipt of a written exercise notice and payment of the exercise price in
accordance with this Section 6.4, the Company shall direct its stock transfer
agent to make (or to cause to be made) an appropriate book entry reflecting the
Participant's ownership of the shares of Common Stock so acquired.
6.5. Incentive Stock Options. Notwithstanding anything in the Plan to the
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contrary, no term of the Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of any Participant affected thereby, to
cause any Incentive Stock Option previously granted to fail to qualify for the
Federal income tax treatment afforded Incentive Stock Options under Section 421
of the Code.
6.6. Reload Options. If provided by the Committee at or after the date of
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grant, a Participant (or, if applicable, his permitted transferee) who delivers
shares of Common Stock that have been owned by such Participant (or permitted
transferee) for any minimum period of time specified by the Committee to
exercise an Option or an option granted under a Predecessor Plan, will
automatically be granted new Options ("Reload Options") for a number of shares
of Common Stock equal to the number of shares so delivered. Unless the Committee
determines otherwise, such Reload Options will be subject to the same terms and
conditions (including the same expiration date) as the related Option except (i)
that the exercise price shall be equal to the Fair Market Value of a share of
Common Stock on the date such Reload Option is granted and (ii) such Reload
Option shall not be exercisable prior to the six month anniversary of the date
of grant and, thereafter, shall be exercisable in full.
6.7. Stock Appreciation Rights.
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(a) Stock Appreciation Rights may be granted to Participants at such time
or times and with respect to such number of shares of Common Stock as shall be
determined by the Committee and shall be subject to such terms and conditions as
the Committee may impose, provided that no Participant may receive Stock
Appreciation Rights under the Plan covering shares of Common Stock in excess of
1,500,000 (adjusted pursuant to Section 5.3 if an Adjustment Event shall occur)
during the five-year period April 30, 1998 through April 30, 2003. Each grant of
an Incentive Award of Stock Appreciation Rights shall be evidenced by an Award
Agreement.
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(b) Stock Appreciation Rights may be exercised at such time or times and
subject to such conditions, including the performance of a minimum period of
service, the satisfaction of performance goals or the occurrence of any event or
events, including a Change in Control, as the Committee shall determine, either
at or after the date of grant. Stock Appreciation Rights which are granted in
tandem with an Option may only be exercised upon the surrender of the right to
exercise such Option for an equivalent number of shares and may be exercised
only with respect to the shares of Common Stock for which the related Option is
then exercisable. Notwithstanding any other provision of the Plan, the Committee
may impose such conditions on the exercise of a Stock Appreciation Right
(including, without limitation, the right of the Committee to limit the time of
exercise to specified periods) as may be required to satisfy the applicable
provisions of Rule 16b-3 as promulgated under the Act or any successor rule.
(c) Subject to the provisions of Section 11.4 of the Plan, upon exercise
of a Stock Appreciation Right, the Participant shall be entitled to receive
payment in cash, Common Stock or in a combination of cash and Common Stock, as
determined by the Committee, of an amount determined by multiplying:
(i) any increase in the Fair Market Value of a share of Common
Stock at the date of exercise over the price fixed by the Committee at
the date of grant of such Right, by
(ii) the number of shares of Common Stock with respect to which
the Stock Appreciation Right is exercised.
6.8. Exercisability Following Termination of Employment. Unless otherwise
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determined by the Committee at or after the date of grant, in the event a
Participant's employment with the Company and the Subsidiaries terminates by
reason of Retirement, Disability, death or special termination with the consent
of the Company, all Options and Stock Appreciation Rights then held by such
Participant that are exercisable at the date of such termination of employment
shall thereafter remain exercisable by the Participant or, if applicable, the
Participant's beneficiary, for a period of one year from the date of
termination, but in no event later than the expiration of the stated term of the
Option or Stock Appreciation Right. Notwithstanding the foregoing, to the extent
provided by the Committee at or after the date of grant, in the event of a
Participant's termination of employment due to death or Disability, all such
Options and Stock Appreciation Rights shall remain exercisable for a minimum
period of one year, without regard to the stated term of the Option or Stock
Appreciation Right. Unless otherwise determined by the Committee at or after the
date of grant, in the event a Participant's employment with the Company and the
Subsidiaries terminates for any reason other than Retirement, Disability, death
or by the Company for Cause, all Options and Stock Appreciation Rights then held
by such Participant that are then exercisable shall remain exercisable for the
90 day period immediately following such termination of employment or until the
expiration of the term of such Option or Stock Appreciation Right, whichever
period is shorter. Unless otherwise determined by the Committee at or after the
date of grant, in the event of a Participant's termination of employment with
the Company and the Subsidiaries by the Company for Cause, all Options and Stock
Appreciation Rights then held by such Participant shall immediately terminate
and be canceled, in full, on the date of such termination of employment. All
Options that are not exercisable following a Participant's termination of
employment shall immediately terminate and be canceled on the date of such
termination of employment and all other Options shall terminate and be canceled
on the date the period for exercise has expired to the extent not exercised
prior to such date.
6.9. Committee Discretion. Notwithstanding anything else contained in
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this Section 6 to the contrary, the Committee may, at or after the date of
grant, accelerate or waive any conditions to the exercisability of any Option or
Stock Appreciation Right granted under the Plan and may permit all or any
portion of any such Option or Stock Appreciation Right to be exercised following
a Participant's termination of employment for any reason on such terms and
subject to such conditions as the Committee shall determine for a period up to
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and including, but not beyond, the expiration of the term of such Options
(except as provided in Section 6.8 in the case of termination due to death or
Disability).
SECTION 7.
RESTRICTED STOCK
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7.1. Grant of Restricted Stock. The Committee may grant Incentive Awards
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of Restricted Stock to Participants at such times and in such amounts, and
subject to such other terms and conditions not inconsistent with the Plan, as it
shall determine; provided that in no event shall the number of shares of Common
Stock subject to Incentive Awards of Restricted Stock exceed 500,000 (adjusted
pursuant to Section 5.3 if an Adjustment Event shall occur) in the aggregate for
all Participants during the five-year period from April 30, 1998 through April
30, 2003, and 100,000 (adjusted pursuant to Section 5.3 if an Adjustment Event
shall occur) in the aggregate for any individual Participant during such
five-year period. Unless the Committee provides otherwise at or after the date
of grant, stock certificates evidencing any shares of Restricted Stock so
granted shall be held in the custody of the Secretary of the Company until the
Restriction Period lapses, and, as a condition to the grant of any Incentive
Award of shares of Restricted Stock, the Participant shall have delivered to the
Company a stock power, endorsed in blank, relating to the shares of Common Stock
covered by such Incentive Award. Each grant of Restricted Stock shall be
evidenced by an Incentive Award Agreement.
7.2. Payment. Upon the expiration or termination of the Restriction
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Period and the satisfaction (as determined by the Committee) of any other
conditions determined by the Committee, the restrictions applicable to the
Restricted Stock shall lapse and the Company shall cancel and direct its stock
transfer agent to make (or to cause to be made) an appropriate book entry
reflecting the Participant's ownership of such number of shares of Common Stock
with respect to which the restrictions have lapsed, free of all such
restrictions, other than any imposed by applicable law. Upon request, the
Company shall deliver to the Participant a stock certificate registered in such
Participant's name and representing the number of shares of Common Stock with
respect to which the restrictions have lapsed, free of all such restrictions
except any that may be imposed by law. To the extent provided by the Committee,
in its discretion, in lieu of delivering shares of Common Stock, the Company may
make a cash payment in full or partial satisfaction of any Incentive Award of
Restricted Stock equal to the Fair Market Value, on the date the applicable
restrictions lapse, of the number of shares or units of Restricted Stock with
respect to which such restrictions have lapsed. No payment will be required to
be made by the Participant upon the delivery of such shares of Common Stock
and/or cash, except as otherwise provided in Section 11.4 of the Plan. Subject
to Section 7.6, at or after the date of grant, the Committee may accelerate the
vesting of any award of Restricted Stock or waive any conditions to the vesting
of any such award.
7.3. Restriction Period; Restrictions on Transferability during
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Restriction Period. Unless otherwise determined by the Committee at or after the
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date of grant, the Restriction Period applicable to any award of Restricted
Stock shall lapse, and such shares of Restricted Stock shall become freely
transferable, on the earlier of (i) the Participant's 60th birthday or (ii) the
date of the Participant's termination of employment with the Company and the
Subsidiaries due to Retirement, death or Disability, subject in any such case to
the Participant's continuous employment with the Company or a Subsidiary through
such date. Except as provided in Section 11.1, shares of Restricted Stock may
not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated until such time as the Restriction Period applicable thereto shall
have lapsed upon the satisfaction of such conditions, including without
limitation, the completion of a minimum period of service, the satisfaction of
performance goals or the occurrence of such event or events, as shall be
determined by the Committee either at or after the time of grant.
9
7.4. Rights as a Stockholder. Unless otherwise determined by the
--------------------------
Committee at or after the date of grant, Participants granted shares of
Restricted Stock shall be entitled to receive, either currently or at a future
date, as specified by the Committee, all dividends and other distributions paid
with respect to those shares, provided that if any such dividends or
distributions are paid in shares of Common Stock or other property (other than
cash), such shares and other property shall be subject to the same forfeiture
restrictions and restrictions on transferability as apply to the shares of
Restricted Stock with respect to which they were paid.
7.5. Legend. To the extent any stock certificate is issued to a
------
Participant in respect of shares of Restricted Stock awarded under the Plan
prior to the expiration of the applicable Restriction Period, such certificate
shall be registered in the name of the Participant and shall bear the following
(or similar) legend:
"The shares of stock represented by this certificate are subject
to the terms and conditions contained in the Lexmark International
Group, Inc. Stock Incentive Plan, as amended and restated, and the
Incentive Award Agreement, dated as of , between the Company and
the Participant, and may not be sold, pledged, transferred,
assigned, hypothecated or otherwise encumbered in any manner
(except as provided in Article of the Plan or in such Incentive
Award Agreement) until ."
Upon the lapse of the Restriction Period with respect to any such shares of
Restricted Stock, the Company shall, upon the Participant's request, issue or
have issued new share certificates without the legend described herein in
exchange for those previously issued.
7.6. Performance Related Awards. Notwithstanding anything else contained
--------------------------
in the Plan to the contrary, unless the Committee otherwise determines at the
time of grant, any award of Restricted Stock, or an award of Common Stock or
Restricted Stock made in conjunction with other incentive plans established by
the Company, to an officer of the Company or a Subsidiary who is subject to the
reporting requirements of Section 16(a) of the Act, other than an award which
will vest solely on the basis of the passage of time, shall, to the extent
required to ensure that an amount with respect to such award is deductible by
the Company or such Subsidiary pursuant to Section 162(m) of the Code, become
vested, if at all, upon the determination by the Committee that performance
objectives established by the Committee have been attained, in whole or in part
(a "Performance Award"); provided that in no event shall the number of shares of
Common Stock subject to Performance Awards exceed 500,000 (adjusted pursuant to
Section 5.3 if an Adjustment Event shall occur) in the aggregate for all
Participants during the five-year period from April 30, 1998 through April 30,
2003, and 100,000 (adjusted pursuant to Section 5.3 if an Adjustment Event shall
occur) in the aggregate for any individual Participant during such five-year
period. Such performance objectives shall be determined over a measurement
period or periods established by the Committee, which period shall not be less
than three years, and related to one or more of the following criteria, which
may be determined solely by reference to the performance of (i) the Company,
(ii) a Subsidiary, (iii) an affiliate of the Company or (iv) a division or unit
of any of the foregoing or based on comparative performance of any of the
foregoing relative to other companies: (A) earnings per share; (B) revenues; (C)
operating cash flow; (D) operating earnings; (E) working capital; (F) inventory
turnover rates; (G) return on capital; (H) return on equity; and (I) shareholder
value add (the "Performance Criteria").
SECTION 8.
DEFERRED STOCK UNITS
--------------------
8.1. Deferred Stock Unit Awards. On fixed dates established by the
----------------------------
Committee and subject to such terms and conditions as the Committee shall
10
determine, a Participant may be permitted to elect to defer receipt of all or a
portion of his annual compensation and/or annual incentive compensation
("Deferred Annual Amount") payable by the Company or a Subsidiary and receive in
lieu thereof an Incentive Award of a number of Deferred Stock Units (the
"Elective Units") equal to the greatest whole number which may be obtained by
dividing (x) the amount of the Deferred Annual Amount, by (y) the Fair Market
Value of a share of Common Stock on the date of grant. No shares of Common Stock
will be issued at the time an award of Deferred Stock Units is made and the
Company shall not be required to set aside a fund for the payment of any such
award. The Company will establish a separate account for the Participant and
will record in such account the number of Deferred Stock Units awarded to the
Participant. Unless the Committee determines otherwise, each Participant who
receives an award of Elective Units shall receive an additional award of
Deferred Stock Units (the "Supplemental Units") equal to the greatest whole
number which may be obtained by dividing (x) 20% (or such other percentage as
may be determined by the Committee at the date of grant) of the Deferred Annual
Amount, by (y) the Fair Market Value of a share of Common Stock on the date of
grant. The Committee may also grant a Participant an Incentive Award of Deferred
Stock Units ("Freestanding Deferred Stock Units") without regard to any election
by the Participant to defer receipt of any compensation or bonus amount payable
to him.
8.2. Dividends with respect to Deferred Stock Units. The Committee will
----------------------------------------------
determine whether and to what extent to credit to the account of, or to pay
currently to, each recipient of a Deferred Stock Unit award, an amount equal to
any dividends paid by the Company during the period of deferral with respect to
the corresponding number of shares of Common Stock ("Dividend Equivalents"). To
the extent provided by the Committee at or after the date of grant, any Dividend
Equivalents with respect to cash dividends on the Common Stock credited to a
Participant's account shall be deemed to have been invested in shares of Common
Stock on the record date established for the related dividend and, accordingly,
a number of Deferred Stock Units shall be credited to such Participant's account
equal to the greatest whole number which may be obtained by dividing (x) the
value of such Dividend Equivalent on the record date, by (y) the Fair Market
Value of a share of Common Stock on such date.
8.3. Vesting of Deferred Stock Unit Awards. The portion of each Deferred
-------------------------------------
Stock Unit award that consists of Elective Units, together with any Dividend
Equivalents credited with respect thereto, shall be fully vested at all times.
Unless the Committee provides otherwise at or after the date of grant, the
portion of each Deferred Stock Unit award that consists of Supplemental Units or
Freestanding Deferred Stock Units, together with any Dividend Equivalents
credited with respect thereto, will become vested in full on the fifth
anniversary of (x) in the case of Supplemental Units, the date the corresponding
Deferred Annual Amount would have been paid absent the Participant's election to
defer and (y) in the case of Freestanding Deferred Stock Units, the fifth
anniversary of the date of grant of such Units, provided the Participant remains
in the continuous employ of the Company or a Subsidiary through such applicable
date. Notwithstanding the foregoing, the Committee may accelerate the vesting of
any Deferred Stock Unit award at or after the date of grant.
8.4. Rights as a Stockholder. A Participant shall not have any right in
-----------------------
respect of Deferred Stock Units awarded pursuant to the Plan to vote on any
matter submitted to the Company's stockholders until such time as the shares of
Common Stock attributable to such Deferred Stock Units have been issued to such
Participant or his beneficiary.
8.5. Settlement of Deferred Stock Units. Unless the Committee determines
----------------------------------
otherwise at or after the date of grant, a Participant shall receive one share
of Common Stock for each Elective Unit (and related Dividend Equivalents) as of
the earlier of (x) the fifth anniversary of the date of grant and (y) the date
of such Participant's termination of employment due to Retirement, death or
Disability (or such later date as may be elected by the Participant in
accordance with the rules and procedures of the Committee). Unless the Committee
determines otherwise at or after the date of grant, a Participant shall receive
one share of Common Stock for each Supplemental Unit and/or Freestanding
Deferred Stock Unit (and related Dividend Equivalents) that shall have become
vested on or prior to the date of such Participant's termination of employment
11
with the Company and the Subsidiaries, other than any such termination for
Cause, on (x) in the case of the Participant's termination of employment due to
Retirement, death or Disability, the date of such termination of employment and
(y) in the case of any other termination of the Participant's employment, on the
later of (i) the Participant's 60th birthday and (ii) the date of such
termination of employment (or, in any such case, on such earlier date as the
Committee shall permit or such later date as may be elected by the Participant
in accordance with the rules and procedures of the Committee). In the event of
the termination of a Participant's employment with the Company and the
Subsidiaries for Cause, the Participant shall immediately forfeit all rights
with respect to any Supplemental Units and Freestanding Deferred Stock Units
(and Related Dividend Equivalents) credited to his account. The Committee may
provide in the Award Agreement applicable to any Incentive Award of Deferred
Stock Units that, in lieu of issuing shares of Common Stock in settlement of the
vested portion of such Deferred Stock Unit, the Committee may direct the Company
to pay to the Participant the cash balance of such Deferred Stock Units.
SECTION 9.
CHANGE IN CONTROL
-----------------
9.1. Accelerated Vesting and Payment. Subject to the provisions of
----------------------------------
Section 9.2 below, in the event of a Change in Control, (i) each Option and
Stock Appreciation Right shall promptly be canceled in exchange for a payment in
cash of an amount equal to the excess of the Change in Control Price over the
exercise price for such Option or the base price for such Stock Appreciation
Right, whichever is applicable (except that the Change in Control Price shall
not apply to Stock Appreciation Rights granted in tandem with Incentive Stock
Options), (ii) the Restriction Period applicable to all shares of Restricted
Stock shall expire and all such shares shall become nonforfeitable and
immediately transferable and (iii) all Deferred Stock Units shall become fully
vested and the shares of Common Stock with respect thereto shall be immediately
payable.
9.2. Alternative Awards. Notwithstanding Section 9.1, no cancellation,
------------------
acceleration of exercisability, vesting, cash settlement or other payment shall
occur with respect to any Incentive Award or any class of Incentive Awards if
the Committee reasonably determines in good faith prior to the occurrence of a
Change in Control that such Incentive Award or class of Incentive Awards shall
be honored or assumed, or new rights substituted therefor (such honored, assumed
or substituted award hereinafter called an "Alternative Award") by a
Participant's employer (or the parent or a subsidiary of such employer)
immediately following the Change in Control, provided that any such Alternative
Award must:
(i) be based on stock which is traded on an established securities
market, or which will be so traded within 60 days following the Change in
Control;
(ii) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to or
better than the rights and entitlements applicable under such Incentive
Award, including, but not limited to, an identical or better exercise or
vesting schedule and identical or better timing and methods of payment;
(iii) have substantially equivalent economic value to such
Incentive Award (determined by the Committee as constituted immediately
prior to the Change in Control, in its sole discretion, promptly after
the Change in Control); and
(iv) have terms and conditions which provide that in the event
that the Participant's employment is involuntarily terminated or
constructively terminated (other than for Cause) upon or following such
Change in Control, any conditions on a Participant's rights under, or any
restrictions on transfer or exercisability applicable to, each such
12
Alternative Award shall be waived or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a termination by a
Participant following a material reduction in the Participant's compensation, a
material reduction in the Participant's responsibilities or the relocation of
the Participant's principal place of employment to another location a material
distance farther away from the Participant's home, in each case, without the
Participant's prior written consent.
SECTION 10.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
------------------------------------------------
The Board may at any time terminate or suspend the Plan, and from time to
time may amend or modify the Plan, provided, however, that any amendment which
would (i) increase the number of shares available for issuance under Sections
5.1, 6.1, 6.7, 7.1 and 7.6, (ii) lower the minimum exercise price for Options
and Stock Appreciation Rights or (iii) materially modify the requirements for
eligibility to participate in the Plan, shall be subject to the approval of the
Company's stockholders. No action of the Board may, without the consent of a
Participant, alter or impair such Participant's rights under any previously
granted Incentive Award.
SECTION 11.
MISCELLANEOUS PROVISIONS
------------------------
11.1. Nontransferability of Awards. Unless the Board, the Committee or
-----------------------------
the Company's Vice President, Human Resources and Vice President and General
Counsel shall permit an Incentive Award to be transferred by a Participant to a
Participant's family member for estate planning purposes or to a trust,
partnership, corporation or other entity established by the Participant for
estate planning purposes, on such terms and conditions as the Board, the
Committee or such officers may specify, no Incentive Award granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution. All
rights with respect to any Incentive Award granted to a Participant under the
Plan shall be exercisable by the tranferee only for as long as they could have
been exercisable by such Participant. If any Incentive Award is transferred to a
family member, trust, partnership, corporation or other entity as contemplated
by the first sentence hereof, all references herein and in the applicable Award
Agreement to the Participant shall be deemed to refer to such permitted
transfereee, other than any such references with respect to the personal status
of the Participant.
11.2. Beneficiary Designation. Each Participant under the Plan may from
------------------------
time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee and will be effective only when
filed by the Participant in writing with the Committee during his lifetime. In
the absence of any such designation, benefits remaining unpaid or Incentive
Awards outstanding at the Participant's death shall be paid to or exercised by
the Participant's surviving spouse, if any, or otherwise to or by his estate.
11.3. No Guarantee of Employment or Participation. Nothing in the Plan
---------------------------------------------
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time and for any
reason, nor confer upon any Participant any right to continue in the employ of
the Company or any Subsidiary. No Employee shall have a right to be selected as
13
a Participant, or, having been so selected, to receive any Incentive Awards
under the Plan.
11.4. Tax Withholding. The Company shall have the power to withhold, or
---------------
require a Participant to remit to the Company promptly upon notification of the
amount due, an amount determined by the Company, in its discretion, to be
sufficient to satisfy all Federal, state and local withholding tax requirements
in respect of any Incentive Award, and the Company may defer payment of cash or
issuance or delivery of Common Stock until such requirements are satisfied. The
Committee may permit or require a Participant to satisfy his tax withholding
obligation hereunder in such other manner, subject to such conditions, as the
Committee shall determine, including, without limitation, (i) to have Common
Stock otherwise issuable or deliverable under the Plan withheld by the Company
or (ii) to deliver to the Company previously acquired shares of Common Stock
that have been owned by the Participant for at least six months, in each case,
having a Fair Market Value sufficient to satisfy all or part of the
Participant's Federal, state and local withholding tax obligation.
11.5. Indemnification. Each person who is or shall have been a member of
---------------
the Committee or the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability or expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any claim,
action, suit or proceeding to which he may be made a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with the
Company's approval, or paid by him in satisfaction of any judgment in any such
action, suit or proceeding against him, provided that he shall give the Company
an opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights of indemnification to which such persons may be entitled under the
Company's articles of incorporation or by-laws, by contract, as a matter of law
or otherwise.
11.6. No Limitation on Compensation. Nothing in the Plan shall be
--------------------------------
construed to limit the right of the Company to establish other plans or to pay
compensation to its employees in cash or property, in a manner which is not
expressly authorized under the Plan.
11.7. Requirements of Law. The granting of Incentive Awards and the
--------------------
issuance of shares of Common Stock shall be subject to all applicable laws,
rules and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be appropriate or required, as determined
by the Committee.
11.8. Governing Law. The Plan, and all agreements hereunder, shall be
-------------
construed in accordance with and governed by the laws of the State of Delaware,
without regard to principles of conflicts of laws.
11.9. No Impact On Benefits. Incentive Awards granted under the Plan are
---------------------
not compensation for purposes of calculating an Employee's rights under any
employee benefit plan, except to the extent provided in any such plan.
11.10. Securities Law Compliance. Instruments evidencing Incentive Awards
-------------------------
may contain such other provisions, not inconsistent with the Plan, as the
Committee deems advisable, including a requirement that the Participant
represent to the Company in writing, when an Incentive Award is granted or when
he receives shares with respect to such Award (or at such other times as the
Committee deems appropriate) that he is accepting such Incentive Award, or
receiving or acquiring such shares (unless they are then covered by a Securities
Act of 1933 registration statement), for his own account for investment only and
with no present intention to transfer, sell or otherwise dispose of such shares
except such disposition by a legal representative as shall be required by will
or the laws of any jurisdiction in winding up the estate of the Participant or
pursuant to a transfer permitted by Section 11.1. Such shares shall be
transferable only if the proposed transfer shall be permissible pursuant to the
Plan and if, in the opinion of counsel satisfactory to the Company, such
transfer at such time will be in compliance with applicable securities laws.
14
11.11. No Right to Particular Assets. Nothing contained in this Plan and
------------------------------
no action taken pursuant to this Plan shall create or be construed to create a
trust of any kind or any fiduciary relationship between the Company and any
Participant, the executor, administrator or other personal representative or
designated beneficiary of such Participant, or any other persons. Any reserves
that may be established by the Company in connection with this Plan shall
continue to be held as part of the general funds of the Company, and no
individual or entity other than the Company shall have any interest in such
funds until paid to a Participant. To the extent that any Participant or his
executor, administrator or other personal representative, as the case may be,
acquires a right to receive any payment from the Company pursuant to this Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company.
11.12. Notices. Each Participant shall be responsible for furnishing the
-------
Committee with the current and proper address for the mailing of notices and
delivery of agreements and shares of Common Stock. Any notices required or
permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any item mailed to such address is returned as undeliverable to
the addressee, mailing will be suspended until the Participant furnishes the
proper address.
11.13. Severability of Provisions. If any provision of this Plan shall be
--------------------------
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provision had not been included.
11.14. Incapacity. Any benefit payable to or for the benefit of a minor,
----------
an incompetent person or other person incapable of receiving such benefit shall
be deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Committee, the Company and other parties with respect
thereto.
11.15. Headings and Captions. The headings and captions herein are
-----------------------
provided for reference and convenience only, shall not be considered part of
this Plan and shall not be employed in the construction of this Plan.
11.16. Deferral of Awards. Notwithstanding any provision contained herein
------------------
to the contrary, the transfer of earned Incentive Awards and Performance Awards
to a Participant may be deferred by a Participant in accordance with such
procedures and upon such terms and conditions as may be established by the
Committee.
11.17. Compliance with Section 162(m). Notwithstanding anything else
--------------------------------
contained in the Plan to the contrary, unless the Committee otherwise determines
at the time of grant, any Incentive Award made hereunder to an officer who is
subject to the reporting requirements of Section 16(a) of the Act is intended to
qualify as other performance based compensation within the meaning of Section
162(m)(4)(C) of the Code, and the Committee shall not be entitled to exercise
any discretion otherwise authorized under the Plan with respect to such award
if, and to the extent that, the ability to exercise such discretion (as opposed
to the exercise of such discretion) would cause such award to fail to qualify as
other performance based compensation.
15