CHANGE IN CONTROL AGREEMENT
Exhibit 10.4
CHANGE IN CONTROL
AGREEMENT
AGREEMENT by and between Lexmark International, Inc., a Delaware corporation, with its principal place of business in Fayette County, Kentucky (the "Company"), and [NAME] (the "Executive"), dated as of [DATE].
The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits upon a Change in Control which ensures that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of comparable corporations. In consideration of the rights and benefits accruing to each party under this Agreement, the Company and the Executive hereby agree to terminate the Change in Control Agreement entered into by the parties on [DATE], each thereby relinquishing all rights and benefits and terminating the duties and obligations pursuant to such agreement. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this agreement (the "Agreement").
(a) "Act" shall mean the Securities Exchange Act of 1934, as amended.
(b) "Change in Control Period" shall mean the period commencing on the date hereof and ending on the second anniversary of the date hereof; provided, however, that commencing on the first anniversary of the date hereof, and on each annual anniversary thereafter (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change in Control Period shall be automatically extended so as to terminate two years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change in Control Period shall not be so extended.
(c) "Effective Date" shall mean the first date during the Change in Control Period on which a Change in Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if
the Executive's employment with the Company is terminated within 12 months prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of any potential buyer or potential buyer’s representative in contemplation of a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment.
(d) "Proposed Change in Control" means:
(i) the commencement of a tender or exchange offer by any third person (other than a tender or exchange offer which, if consummated, would not result in a Change in Control) for 30% or more of the combined voting power of the Company's then outstanding securities;
(ii) the execution of an agreement by the Company, the consummation of which would result in the occurrence of a Change in Control;
(iii) the public announcement by any person (including the Company) of an intention to take or to consider taking actions which if consummated would constitute a Change in Control; or
(iv) the adoption by the Board, as a result of other circumstances, including circumstances similar or related to the foregoing, of a resolution to the effect that, for purposes of this Agreement, a Proposed Change in Control has occurred.
(e) "Subsidiary" shall mean 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 Board.
(f) For purposes of this Agreement, the terms “terminate,” “terminated” or “termination of employment,” and variations thereof, as used in this Agreement, are intended to mean a separation from service or termination of employment that constitutes a “separation from service” under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
(a) 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;
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(b) 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;
(c) the consummation of a transaction (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" (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 (ii) for the direct or indirect sale or other disposition of all or substantially all of the assets of the Company; or
(d) the consummation of a complete liquidation or dissolution 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.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred as a result of any transaction or series of transactions which the Executive, or any entity in which the Executive is a partner, officer or more than 50% owner, initiates, if immediately following the transaction or series of transactions that would otherwise constitute a Change in Control, the Executive, either alone or together with other individuals who are executive officers of the Company immediately prior thereto, beneficially owns, directly or indirectly, more than 10% of the then outstanding shares of common stock of the Company or the corporation resulting from the transaction or series of transactions, as applicable, or of the combined voting power of the then outstanding voting securities of the Company or such resulting corporation.
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Company or its Subsidiaries, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its Subsidiaries (including, without limitation, the Company's Stock Incentive Plan, Senior Executive Incentive Compensation Plan or Incentive Compensation Plan, as applicable, Savings Plan, and Supplemental Savings and Deferred Compensation Plan, as and to the extent those plans are in effect from time to time), but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, less favorable, in the aggregate, than the most favorable of those provided by the Company and its Subsidiaries for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding a Proposed Change in Control or, if more favorable to the Executive, those provided generally at any time after a Proposed Change in Control to other peer executives of the Company and its Subsidiaries.
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in any year shall not affect the amount of such expenses eligible for reimbursement in any other year.
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shall mean a physical or mental disability that prevents the performance by the Executive of his duties with the Company lasting (or likely to last, based on competent medical evidence presented to the Board) for a continuous period of six months or longer. The reasoned and good faith judgment of the Board as to the Executive's Disability shall be final and shall be based on such competent medical evidence as shall be presented to it by the Executive or by any physician or group of physicians or other competent medical experts employed by the Executive or the Company to advise the Board.
For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purposes (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in any of subparagraphs (i) through (v) above, and specifying the particulars thereof in detail.
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the event or circumstance set forth in the Notice of Termination and such event or circumstance is not cured by the 30th day.
(i) the Company shall pay the Executive the following amounts in a lump sum in cash as soon as reasonably practicable after the Date of Termination, provided that, with respect to any portion of the payment at such time that is neither a “short-term deferral” for purposes of, nor otherwise exempt from, Code Section 409A, such portion of the payment shall be made on the 60th day after the Date of Termination; provided further that, if the Executive is a “specified employee” under Code Section 409A, such portion of the payment shall be delayed until the earlier to occur of the Executive’s death or the date that is six months and one day following the Executive’s Date of Termination (the “Six-Month Delay”):
(A) (1) the Executive's annual base salary on the Effective Date (the "Annual Base Salary") through the Date of Termination, to the extent not theretofore paid to the Executive, (2) the Annual Bonus Amount (as defined in the Executive’s Employment Agreement) with respect to a completed fiscal year to the extent not theretofore paid to the Executive, and (3) the Pro Rata Share of the Annual Bonus (as defined below) for the fiscal year in which the Date of Termination occurs. "Pro Rata Share of the Annual Bonus" will be equal to the product of (1) the Annual Bonus, calculated assuming the greater of (x) 100% of the Company's incentive compensation financial targets (as defined in such incentive compensation plan) are achieved in such year and (y) the actual attainment of the Company's incentive compensation financial targets as of the Date of Termination are achieved in such year, in each case without regard to personal attainment, and (2) a fraction equal to the number of full and partial months in such year prior to the Date of Termination over 12 (the sum of the amounts described in this clause (A) shall be hereinafter referred to as the "Accrued Obligations"); and
(B) two times the sum of (1) the Annual Base Salary and (2) an amount equal to 100% of the Executive's incentive compensation target (as defined in such incentive compensation plan), calculated as though the Company
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attains its financial targets (without regard to personal attainment) (the sum of clauses (B) (1) and (B) (2) shall be hereinafter referred to as the "Annual Compensation").
(ii) for a period of two years following the Executive's Date of Termination or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and the Executive's eligible dependents at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Subsidiaries, and their eligible dependents, provided, however, that if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. Reimbursement of expenses incurred by Executive pursuant to this Section 5(a)(ii) shall be made promptly as incurred, and in no event later than December 31 of the year following the year in which such expenses were incurred, and the amount of expenses eligible for reimbursement, or in-kind benefits provided, in any year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefits to be provided, in any other year, except for any limit on the amount of expenses that may be reimbursed under an arrangement described in Code Section 105(b). To the extent required to comply with Code Section 409A, the full cost of the continuation or provision of employee benefit plans, programs or arrangements (other than medical or dental benefit plans) under this Section 5(a)(ii) shall be paid by Executive until the later of (A) the 60th day following the Executive’s Date of Termination or (B), if Executive is a “specified employee” under Code Section 409A, the earlier to occur of Executive’s death or the date that is six months and one day following Executive’s termination of employment, and such cost shall be reimbursed by the Company to, or on behalf of, Executive in a lump sum cash payment, in the case of (A), on the 60th day following the Executive’s Date of Termination or, in the case of (B), on the earlier to occur of Executive’s death or the date that is six months and one day following Executive’s termination of employment;
(iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under, and in accordance with the terms of, any plan, program, policy or practice or contract or agreement of the Company and its Subsidiaries (the amounts and types of benefits described in Sections 5(a)(ii) and (iii) of this Agreement, without regard to duration, shall be hereinafter referred to as the "Other Benefits"); and
(iv) to the extent the Executive has unvested benefits under the Lexmark Retirement Growth Account Plan, any Supplemental and/or Excess Benefits Plans and/or the Lexmark Savings Plan, or other unvested benefits under the plans
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practices, policies and programs described in Section 3(a) of this Agreement, the Company shall accelerate the vesting of benefits under any such plan, practice, policy or program or, if such accelerated vesting is prohibited under applicable laws, the Company shall provide and/or pay the Executive outside any such plan, practice, policy or program the benefits that would have become vested if such acceleration of vesting were not prohibited, within 30 days after the Date of Termination; provided that, to the extent required to comply with Code Section 409A, such payment shall be made on the 60th day after the Date of Termination, subject to any required Six-Month Delay.
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at any time thereafter generally with respect to other peer executives of the Company and its Subsidiaries and their eligible dependents.
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Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. Notwithstanding the foregoing, if the Executive becomes entitled to receive severance pay under Section 5(a) hereof, such severance pay shall be in lieu of any severance pay under other contract or agreement, any severance or separation plan, program or policy of the Company or any of its Subsidiaries to which the Executive would otherwise have been entitled.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a "Payment") would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) be
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subject to the excise tax imposed by Section 4999 of the Code, or any corresponding provision of any subsequent Internal Revenue Code, as the same may be amended from time to time, (the "Excise Tax"), then such Payment shall be reduced to the Reduced Amount (as defined below).
(b) The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, unless otherwise determined by the Company no later than two (2) days prior to the consummation of the Change of Control, the reduction shall occur in the manner that results in the greatest economic benefit to Executive as determined in this paragraph. If more than one method of reduction will result in the same economic benefit, the portions of the Payment shall be reduced pro rata.
(c) All determinations required to be made under this Section 9, including whether a Payment shall be reduced to the Reduced Amount, and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte LLP, or such other certified public accounting firm, law firm or consulting firm (the “Accounting Firm”), as may be designated by the Executive. The Company shall bear all expenses with respect to the determinations by the Accounting Firm required to be made hereunder.
(d) The Accounting Firm shall provide its calculations, together with detailed supporting documentation, to the Company and the Executive within fifteen (15) business days after the date on which the Executive’s right to a Payment is triggered (if requested at that time by the Company or the Executive) or such other time as requested by the Company or the Executive. If the Accounting Firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish the Company and the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the Accounting Firm made hereunder shall be final, binding and conclusive upon the Company and the Executive.
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Officer of the Company, disclose to any person (other than an employee or director of the Company or its affiliates, or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an executive of the Company) any confidential or proprietary information, knowledge or data that is not theretofore publicly known and in the public domain obtained by the Executive while in the employ of the Company and its Subsidiaries with respect to the Company or any of its Subsidiaries or affiliates or with respect to any products, improvements, formulas, recipes, designs, processes, customers, methods of distribution, operation or manufacture, sales, prices, profits, costs, contracts, suppliers, business prospects, business methods, techniques, research, plans, strategies, personnel, organization, trade secrets or know-how of the Company or any of its Subsidiaries or affiliates (collectively, "Proprietary Information"), except as may be required by law or in connection with any judicial or administrative proceedings or inquiry.
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prospective customer of the Company or its Subsidiaries (including a person or entity who or which is a customer or prospective customer either by direct contract or relationship with the Company or its Subsidiaries, or who or which has purchased, leased, or otherwise acquired the Company’s or its Subsidiaries’ products or services from the Company’s or its Subsidiaries’ distributors, parties for whom the Company is an original equipment manufacturer, dealers or resellers), a supplier to the Company or its Subsidiaries, or has, within the previous 36 months, been a customer of or supplier to the Company or its Subsidiaries.
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breaches or threatened breaches of this Agreement and/or to compel specific performance of this Agreement from a court of competent jurisdiction, enjoining any such breach.
(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(a) Governing Law and Venue. If a dispute arises between the parties including disputes that may arise out of or relates to this Agreement or the breach, termination, or validity thereof (hereinafter “Dispute”), and if a Dispute cannot be settled through direct discussions, the parties agree that a federal or state court located in Fayette County, in the Commonwealth Kentucky, is an appropriate forum and the parties hereby consent to the jurisdiction of such courts. AS SUCH, ANY AND ALL ACTIONS, SUITS, OR OTHER LEGAL PROCEEDINGS ARISING FROM OR
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REGARDING THIS AGREEMENT AND ANY DISPUTE BETWEEN THE PARTIES (INCLUDING ANY ACTION BY EXECUTIVE AGAINST ANOTHER COMPANY EMPLOYEE(S) OR AGENT(S)) SHALL BE BROUGHT EXCLUSIVELY IN A STATE OR FEDERAL COURT SITUATED WITHIN FAYETTE COUNTY IN THE COMMONWEALTH OF KENTUCKY. THE PARTIES WAIVE ANY OBJECTION A PARTY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH PROCEEDING IN FAYETTE COUNTY THE LOCATION OF THE PRINCIPAL OFFICE OF THE COMPANY; provided, however, that an action or ancillary proceeding to enforce injunctive relief or a judgment obtained by a party in said Fayette County court may be in any appropriate forum. This Agreement shall be deemed to have been entered into in the Commonwealth of Kentucky; this Agreement is a contract performable wholly or partly within the Commonwealth of Kentucky; and this Agreement as well as any Dispute shall be governed by, enforced and interpreted in accordance with the laws of the Commonwealth of Kentucky notwithstanding its conflict of law provisions. In any action by Company against Executive in any forum, Executive waives personal service of any summons, complaint or other process and agrees that the service thereof may be made personally or by registered or certified mail directed to the Executive at his/her home address. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR OTHER LEGAL PROCEEDING.
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third business day after the mailing thereof, and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):
If to the Executive:
to the Executive at the last known address
retained in the Company’s records
If to the Company:
Lexmark International, Inc.
One Lexmark Centre Drive
000 Xxxx Xxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: General Counsel
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agreement among the parties hereto with respect to the subject matter hereof, and all promises, representations, understandings, arrangements and prior agreements relating to such subject matter (including those made to or with the Executive by any other person or entity) are merged herein, in the Employment Agreement and in the Indemnification Agreement and superseded hereby and thereby. To the extent that the amount and timing of payments required to be made under this Agreement are inconsistent with or different from the amount and timing of payments required to be made pursuant to the Employment Agreement and/or the Indemnification Agreement, the Executive shall be entitled to the most favorable benefits provided to the Executive under the provisions of any such agreements. In the avoidance of any doubt, this Agreement does not alter, modify or otherwise amend or supersede any agreement or understandings between the Company and Executive as to the Lexmark Agreement Regarding Confidential Information and Intellectual Property, any stock option plan/agreements, sales commission plans/agreements, bonus plans/agreements, incentive compensation plans/agreements or restricted stock unit plans/agreements that may be offered to Executive by the Company, from time to time.
(n) Termination of Existing Agreement. Upon the execution of this Agreement by a representative of the Company and the Executive, the Change in Control Agreement entered into by the parties on [DATE], is hereby terminated, and each party to this Agreement hereby relinquishes all rights and benefits and terminates all duties and obligations pursuant to such agreement.
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prior to executing this Agreement, has thoroughly discussed all aspects of this Agreement with such advisors as Executive has determined appropriate, has carefully read and fully understands all of the provisions of this Agreement, is not relying on any statements made by any representative, attorney, employee, officer or member of the Board of Directors of the Company, is voluntarily entering into this Agreement, and has had a reasonable period of time to consider this Agreement.
{Signature Page Follows}
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LEXMARK INTERNATIONAL, INC.
By: __________________________________
EXECUTIVE: [NAME]
___________________________________
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