Document:

ex10-1.htm

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

 

	
NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE 

TRENTON, NEW JERSEY

 

	
Written Agreement by and among

 
	
Docket Nos. 09-095-WA/RB-HC 

09-095-WA/RB-SM

	
STERLING BANKS, INC. 

Mount Laurel, New Jersey

 

	
STERLING BANK 

Mount Laurel, New Jersey

 

	
FEDERAL RESERVE BANK OF PHILADEPHIA 

Philadelphia, Pennsylvania

 

	
and

 

	
NEW JERSEY DEPARTMENT OF BANKING

	
AND INSURANCE 

Trenton, New Jersey

 

WHEREAS, in recognition of their common goal to maintain the financial soundness of Sterling Banks, Inc., Mount Laurel, New Jersey ("Sterling"), a registered bank holding company, and its subsidiary bank, Sterling Bank, Mount Laurel, New Jersey (the "Bank"), a state chartered bank that is a member of the Federal Reserve System, Sterling,
the Bank, the Federal Reserve Bank of Philadelphia (the "Reserve Bank"), and the New Jersey Department of Banking and Insurance (the "Department") have mutually agreed to enter into this Written Agreement (the "Agreement"); and

 

WHEREAS, on July 28, 2009, Sterling's and the Bank's boards of directors, at duly constituted meetings, adopted resolutions authorizing and directing Robert H. King

                              

  

  

  

and __________________________to consent to this Agreement on behalf of Sterling and the Bank, respectively, and consenting to compliance with each and every applicable provision of this Agreement by Sterling, the Bank, and their institution-affiliated
parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the "FDI Act") (12 U.S.C. §§ 1813(u) and 1818(b)(3)).

 

NOW, THEREFORE, Sterling, the Bank, the Reserve Bank, and the Department agree as follows:

 

Board Oversight

 

1.           Within 60 days of this Agreement, the Bank's board of directors shall submit to the Reserve Bank and the Department a written plan to strengthen board oversight of the management and operations of the Bank. The plan shall, at a minimum, address, consider, and include:

 

(a) The actions that the board of directors will take to improve the Bank's condition and maintain effective control over, and supervision of, the Bank's
major operations and activities, including but not limited to, credit risk management, credit administration, processes to mitigate risks associated with credit concentrations, capital, and earnings;

 

(b) the development of a management succession program to promote the retention and continuity of capable management; and

 

(c) a description of the information and reports that will be regularly reviewed by the board of directors in its oversight of the operations and management
of the Bank, including information on the Bank's adversely classified assets, concentrations of credit, allowance for loan and lease losses ("ALLL"), capital, earnings, and liquidity.

 

 

 

 

2

 

 

Management and Staffing Review

 

2.            (a)           Within 30 days of this Agreement, the Bank's board of directors shall retain an independent consultant acceptable to the Reserve Bank and the Department to conduct a review of the qualifications and
performance of all of the Bank's senior executive officers and the staffing needs of the Bank (the "Management Review"), and to prepare a written report of findings and recommendations (the "Report"). The primary purpose of the Management Review shall be to aid in the development of a suitable management structure that is adequately staffed by qualified and trained personnel. The Bank shall submit an engagement letter to the Reserve Bank and the Department as part of the approval of the independent consultant.
The engagement letter shall require the independent consultant to submit the Report within 60 days of the approval of the engagement letter and to provide a copy of the Report to the Reserve Bank and the Department at the same time that it is provided to the Bank. The Management Review shall, at a minimum, address, consider, and include:

 

	 	
(i)
	
the identification of the type and number of senior officers needed to manage and supervise properly the affairs of the Bank; and

 

	 	
(ii)
	
an evaluation of each senior officer to determine whether the individual possesses the ability, experience, and other qualifications required to perform competently present and anticipated duties, including the ability to comply with applicable laws and regulations, adhere to the Bank's established policies and procedures, restore and maintain the Bank to a safe and sound condition, and comply with the requirements
of this Agreement.

                                               

  

3

  

(b)            Within 45 days of the Bank's receipt of the Report, the Bank's board of directors shall submit a written management plan to the Reserve Bank and the Department that fully addresses the findings and recommendations in the Report and describes the specific actions that
the board of directors proposes to take in order to strengthen the Bank's management, including but not limited to plans to hire or appoint additional or replacement personnel. In the event that recommendations made by the independent consultant are not adopted, the board of directors shall provide in writing to the Reserve Bank and the Department the specific reasons why such recommendations were not adopted.

 

Concentrations of Credit

 

3.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department an acceptable written plan to strengthen the Bank's management of commercial real
estate ("CRE") concentrations, including steps to reduce the risk of concentrations. The plan shall, at a minimum, include:

 

(a) Procedures to identify, limit, and manage concentrations of credit that are consistent with the Interagency Guidance on Concentrations in Commercial
Real Estate Lending, Sound Risk Management Practices, dated December 12, 2006 (SR 07- 1); and

 

(b) revised loan policies that establish concentration limits, including but not limited to, by loan type, geographic location, counterparty, and borrower;
and

 

(c) a schedule for reducing the outstanding dollar amount of CRE loans.

 

Lending and Credit Administration

 

4.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department an acceptable enhanced written lending and credit administration program that shall,
at a minimum, address, consider, and include:

 

  

4

  

(a)           Underwriting standards that are appropriate for each type of loan product offered by the Bank that, at a minimum, address, consider, and include:

 

(i)        documented analysis of the borrower's repayment source, creditworthiness, and global cash flow and debt service ability;

        

	 	
    (ii)
	
revised standards and approval requirements for renewing, extending, or modifying existing loans, including procedures for documenting the bases for each renewal, extension, or modification;

 

(iii)     a prohibition on the capitalization of interest; and 

 

(iv)      appropriate controls on loan draws;

 

(b)          procedures that require the periodic review of a borrower's ability to repay the loan according to its terms, including requiring the submission by borrowers of current financial
statements and project status;

 

(c)          enhanced stress testing of loans and portfolio segments;

 

(d)          policies and procedures to ensure that appraisals conform to accepted appraisal standards, as defined in the Uniform Standards of Professional Appraisal Practice,
and comply with the requirements of Subpart G of Regulation Y of the Board of Governors of the Federal Reserve System (the "Board of Governors") (12 C.F.R. Part 225, Subpart G) made applicable to state member banks by section 208.50 of Regulation H of the Board
of Governors (12 C.F.R. § 208.50);

 

(e)           measures to correct all documentation exception deficiencies noted in the report of the examination of the Bank that commenced on January 5, 2009 (the "Report
of Examination");

 

                     

  

5

  

(f)                 procedures or systems to identify, record, and track missing, incomplete or imperfect loan and collateral documentation;
and

 

(g)                measures to improve the administration of other real estate owned;

 

Loan Review

 

5.         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department a revised acceptable written program for the periodic review and grading of the Bank's loan portfolio by a qualified independent party or by qualified staff that is independent of the Bank's
lending function. The program shall, at a minimum, address, consider, and include:

 

(a)                The scope and frequency of the loan review;

(b)                standards and criteria for assessing the credit quality of the loans;

(c)                application of loan grading standards and criteria to the loan portfolio; and

(d)                periodic written reports to the board of directors that identify the status of those loans that are adversely graded and the prospects
for full collection or strengthening of the quality of any such loans.

 

Asset Improvement

 

6.         (a)           The Bank shall not, directly or indirectly, extend or renew any credit to or for the benefit of any borrower, including any related interest of the borrower, who is obligated to the Bank in any manner on any extension
of credit or portion thereof that has been charged off by the Bank or classified, in whole or in part, "loss" in the Report of Examination or in any subsequent report of examination, as long as such credit remains uncollected.

 

(b)           The Bank shall not, directly or indirectly, extend or renew any credit to or for the benefit of any borrower, including any related interest of the borrower, whose extension

                                                         

  

6

  

of credit has been classified "doubtful" or "substandard" in the Report of Examination or in any subsequent report of examination, without the prior approval of the Bank's board of directors. The board of directors shall document in writing the reasons for the extension of credit or renewal, specifically certifying that: (i) the extension
of credit is necessary to protect the Bank's interest in the ultimate collection of the credit already granted or (ii) the extension of credit is in full compliance with the Bank's written loan policy, is adequately secured, and a thorough credit analysis has been performed indicating that the extension or renewal is reasonable and justified, all necessary loan documentation has been properly and accurately prepared and filed, the extension of credit will not impair the Bank's interest in obtaining repayment
of the already outstanding credit, and the board of directors reasonably believes that the extension of credit or renewal will be repaid according to its terms. The written certification shall be made a part of the minutes of the board of directors meetings, and a copy of the signed certification, together with the credit analysis and related information that was used in the determination, shall be retained by the Bank in the borrower's credit file for subsequent supervisory review. For purposes of this Agreement,
the term "related interest" is defined as set forth in section 215.2(n) of Regulation O of the Board of Governors (12 C.F.R. § 215.2(n)).

 

7.           (a)           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department an acceptable written plan designed to improve the Bank's position through repayment, amortization, liquidation,
additional collateral, or other means on each loan or other asset in excess of $250,000, including OREO, that: (i) is past due as to principal or interest more than 90 days as of the date of this Agreement; (ii) is on the Bank's problem loan list; or (iii) was adversely classified in the Report of Examination. In developing the plan for each loan, the Bank shall, at a minimum, review, analyze, and document the financial position of

                                                        

  

7

  

the borrower, including source of repayment, repayment ability, and alternative repayment sources, as well as the value and accessibility of any pledged or assigned collateral, and any possible actions to improve the Bank's collateral position.

 

(b)           Within 30 days of the date that any additional loan or other asset in excess of $250,000, including OREO, becomes past due as to principal or interest for more than 90
days, is on the Bank's problem loan list, or is adversely classified in any subsequent report of examination of the Bank, the Bank shall submit to the Reserve Bank and the Department an acceptable written plan to improve the Bank's position on such loan or asset.

 

(c)           Within 30 days after the end of each calendar quarter thereafter, the Bank shall submit a written progress report to the Reserve Bank and the Department to update each asset
improvement plan, which shall include, at a minimum, the carrying value of the loan or other asset and changes in the nature and value of supporting collateral, along with a copy of the Bank's current problem loan list, extension report, and past due/non-accrual report. The board of directors
shall review the progress reports before submission to the Reserve Bank and the Department and shall document the review in the minutes of the board of directors' meetings.

 

Audit

 

8.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department an acceptable written enhanced internal audit program that shall, at a minimum, provide
for periodic updates to the audit scope, work programs, and schedules to ensure that all auditable areas are appropriately risk weighted and reviewed.

 

Allowance for Loan and Lease Losses

 

9.           (a)           Within 10 days of this Agreement, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions
of assets classified "loss" in the Report

                                           

  

8

  

of Examination that have not been previously collected in full or charged off. Thereafter the Bank shall, within 30 days from the receipt of any federal or state report of examination, charge off all assets classified "loss" unless otherwise approved in writing by the Reserve Bank and the Department.

 

(b) Within 60 days of this Agreement, the Bank shall review and revise its ALLL methodology consistent with relevant supervisory guidance, including the
Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the ALLL set forth in the Report of Examination, and submit a description
of the revised methodology to the Reserve Bank and the Department. The revised ALLL methodology shall be designed to maintain an adequate ALLL and shall address, consider, and include, at a minimum, the reliability of the Bank's loan grading system, the volume of
criticized loans, concentrations of credit, the current level of past due and nonperforming loans, past loan loss experience, evaluation of probable losses in the Bank's loan portfolio, including adversely classified loans, and the impact of market conditions on
loan and collateral valuations and collectibility.

 

(c) Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department an acceptable written program for the maintenance of
an adequate ALLL. The program shall include policies and procedures to ensure adherence to the revised ALLL methodology and provide for periodic reviews and updates to the ALLL methodology, as appropriate. The program shall also provide for a review of the ALLL
by the Bank's board of directors on at least a quarterly calendar basis. Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the filing of the Consolidated Reports of Condition and Income, by additional provisions. The board
of directors shall maintain written

 

  

9

  

documentation of its review, including the factors considered and conclusions reached by the Bank in determining the adequacy of the ALLL. During the term of this Agreement, the Bank shall submit to the Reserve Bank and the Department within 30 days after the end of each calendar quarter, a written report regarding the board of directors'
quarterly review of the ALLL and a description of any changes to the methodology used in determining the amount of ALLL for that quarter.

 

Capital Plan

 

10.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department an acceptable written plan to maintain sufficient capital at the Bank. The plan shall,
at a minimum, address, consider, and include:

 

(a)  The Bank's current and future capital requirements, including, compliance with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);

 

(b) the adequacy of the Bank's capital, taking into account the volume of adversely classified assets,
concentrations of credit, ALLL, current and projected asset growth, and projected retained earnings; and

 

(c) the source and timing of additional funds to fulfill the Bank's future capital requirements.

 

11.           The Bank shall notify the Reserve Bank and the Department, in writing, no more than 30 days after the end of any calendar quarter in which any of the Bank's capital ratios (total
risk-based, Tier 1, or leverage) fall below the approved capital plan's minimum ratios. Together with the notification, the Bank shall submit an acceptable written plan that details the

 

 

  

10

  

steps the Bank will take to increase the Bank's capital ratios to or above the approved capital plan's minimums.

 

Strategic Plan and Budget

 

12.          (a)            Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department a strategic plan to improve
the Bank's earnings and a budget for the remainder of 2009. The written plan and budget shall include, but not be limited to:

 

    (i)            Identification of the major areas where, and means by which, the board of directors will seek to improve the
Bank's operating performance;

 

    (ii)            a realistic and comprehensive budget for the remainder of calendar year 2009, including income statement
and balance sheet projections; and

 

(iii)   a description of the operating assumptions that form the basis for, and adequately support, major projected income, expense, and balance sheet components.

 

(b)            A strategic plan and budget for each calendar year subsequent to 2009 shall be submitted to the Reserve Bank and the Department at least 30 days prior to the beginning of that calendar year.

 

Liquidity/Funds Management

 

13.          Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department an acceptable written contingency funding plan that identifies available sources of
funding and includes adverse scenario planning.

 

 

  

11

  

Dividends

14.      (a) Sterling and the Bank shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director of the Division of Banking Supervision and
Regulation of the Board of Governors (the "Director"), and the Department.

 

(b) Sterling shall not take any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve
Bank and the Department.

(c) Sterling and its nonbank subsidiaries shall not make any distributions of interest, principal,
or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank, the Director, and the Department.

 

(d) All requests for prior approval shall be received at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated
debentures, and required notice of deferral on trust preferred securities. All requests shall contain, at a minimum, current and projected information, as appropriate, on the parent's capital, earnings, and cash flow; the Bank's capital, asset quality, earnings
and ALLL needs; and identification of the sources of funds for the proposed payment or distribution. For requests to declare or pay dividends, Sterling and the Bank, as appropriate, must also demonstrate that the requested declaration or payment of dividends is
consistent with the Board of Governors' Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).

 

Debt and Stock Redemption

 

15.         (a) Sterling and its nonbank subsidiaries shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank and the

 

818487_2                                                              

  

12

  

Department. All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

 

(b)            Sterling shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank and the Department.

 

BSA/AML Compliance

 

16.          Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Department an acceptable written plan to correct the criticisms detailed in the Report of Examination
of the Bank's compliance with all applicable federal laws, rules, and regulations relating to anti-money laundering ("AML"), including the Bank Secrecy Act ("BSA") (31 U.S.C. § 5311 et seq.); the rules and regulations issued thereunder by the U.S. Department of the Treasury
(31 C.F.R. Part 103); and the AML requirements of Regulation H of the Board of Governors (12 C.F.R. § 208.63).

 

Compliance with Laws and Regulations

 

17.          (a)            In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer
so that the officer would assume a different senior executive officer position, Sterling and the Bank shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R.
§§ 225.71 et seq.).

 

(b)            Sterling and the Bank shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the FDIC's
regulations (12 C.F.R. Part 359).

 

 

  

13

  

Compliance with the Agreement

 

18.          (a)            Within 10 days of this Agreement, the boards of directors of Sterling and the Bank shall appoint a joint committee (the
"Compliance Committee") to monitor and coordinate Sterling's and the Bank's compliance with the provisions of this Agreement. The Compliance Committee shall include a majority of outside directors who are not executive officers or principal shareholders of Sterling
and the Bank, as defined in sections 215.2(e)(l) and 215.2(m)(l) of Regulation O of the Board of Governors (12 C.F.R. §§ 215.2(e)(l) and 215.2(m)(l)). At a minimum, the Compliance Committee shall meet at least monthly, keep detailed minutes of each meeting, and report its findings to the boards of directors of Sterling and the Bank. Sterling
and the Bank shall notify the Reserve Bank and the Department in writing of the composition of the Compliance Committee at the time that the members are appointed.

 

(b)            Within 30 days after the end of each calendar quarter following the date of this Agreement, the Bank shall submit to the Reserve Bank and the Department written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement
and the results thereof.

 

Approval and Implementation of Plans and Programs

 

19.          The Bank and, as applicable, Sterling shall submit written plans, programs, and an engagement letter that are acceptable to the Reserve Bank and the Department within the applicable
time periods set forth in paragraphs 2(a), 3, 4, 5, 7(a),7(b), 8, 9(c), 10, 13, and 16 of this Agreement. An independent consultant acceptable to the Reserve Bank and the Department shall be retained by the Bank within the period set forth in paragraph 2(a) of this Agreement.

 

(b)            Within 10 days of approval by the Reserve Bank and the Department, the Bank and, as applicable, Sterling shall adopt the approved plans, programs, and engagement

 

 

  

14

  

letter. Upon adoption, the Bank and, as applicable, Sterling shall promptly implement the approved plans and programs and thereafter fully comply with them.

 

(c)            During the term of this Agreement, the approved plans, programs, and engagement letter shall not be amended or rescinded without the prior written approval of the Reserve Bank and the Department.

 

Communications

 

20. All communications regarding this Agreement shall be sent to:

 

	 	
(a)
	
Ms. Cynthia L. Course
Assistant Vice President

Federal Reserve Bank of Philadelphia

Ten Independence Mall 

Philadelphia, PA 19106

 

	 	
(b)
	
Mr. Terry K. McEwen
Director

New Jersey Department of Banking and Insurance

P.O. Box 040

Trenton, NJ 08625

 

	 	
(c)
	
Mr. Robert King

	 	
  
	
President and CEO

	 	
  
	
Sterling Bank

	 	
  
	
3100 Route 38

	 	
  
	
Mount Laurel, NJ 08054

 

Miscellaneous

 

21. Notwithstanding any provision of this Agreement, the Reserve Bank and the Department may, in their sole discretion, grant written extensions of time
to Sterling and the Bank to comply with any provision of this Agreement.

 

22. The provisions of this Agreement shall be binding upon Sterling, the Bank, and their institution-affiliated parties, in their capacities as such,
and their successors and assigns.

 

 

 

15

 

 

23. Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve
Bank and the Department. 

 

24. The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, the Department, or any other
federal or state agency from taking any other action affecting Sterling, the Bank, or any of their current or former institution-affiliated parties and their successors and assigns.

 

25. Pursuant to Section 50 of the FDI Act (12 U.S.C. § 183laa), this Agreement is enforceable by the Board of Governors under Section 8 of the FDI
Act (12 U.S.C. § 1818).

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 28th day of July, 2009.

 

	
STERLING BANKS, INC.
	
 FEDERAL RESERVE BANK OF

	
 
	
 PHILADELPHIA

	  	  
	
By: /s/ Robert H. King
	
 By: /s/ A. Reed Raymond

	
 Robert H. King
	
 A. Reed Raymond

	
 President and CEO
	
 Vice President

	  	  
	
STERLING BANK
	
NEW JERSEY DEPARTMENT OF

	
 
	
BANKING AND INSURANCE

	  	  
	
By: /s/ Robert H. King
	
By:

	
 Robert H. King
	
Terry K. McEwen

	
 President and CEO
	
Director

 

 

 16lxkexhibit101.htm

    Exhibit 10.1

    NON-QUALIFIED
STOCK OPTION AGREEMENT

    

    pursuant
to

    

    LEXMARK
INTERNATIONAL, INC.

    STOCK
INCENTIVE PLAN

    

    This
NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement")
between Lexmark International, Inc., a Delaware corporation (the "Company"),
and [Name of Optionee] (the "Optionee")
is entered into as of [Grant Date] pursuant to the Lexmark International, Inc.
Stock Incentive Plan, as the same may be amended from time to time (the "Plan").

    

    WHEREAS, the Optionee is regarded as a
key employee of the Company or one of the Subsidiaries and the Committee has
determined that it would be to the advantage and in the interest of the Company
to grant the option provided for herein to the Optionee as an inducement to the
Optionee to remain in the service of the Company and the Subsidiaries over the
long-term and as an incentive to the Optionee to devote his or her best efforts
and dedication to the performance of such services and to maximize shareholder
value; and

    

    WHEREAS, the Optionee desires to accept
from the Company the grant of the options evidenced hereby on the terms and
subject to the conditions herein;

    

    NOW, THEREFORE, in consideration of the
premises and subject to the terms and conditions set forth herein and in the
Plan, the parties hereto hereby covenant and agree as follows:

    

    
      	
              1.  

            	
              Grant of Option;
      Exercise Price.

            

    

    

    
      	
              (a)  

            	
              Grant
      of Option; Exercise Price.  The Company hereby grants to the
      Optionee, effective as of [Grant Date] (the "Grant
      Date") and on the terms and conditions herein, an option (the "Option")
      to purchase [Number of Options] shares (the "Option
      Shares") of Class A Common Stock, par value $.01 per share (the
      “Common
      Stock”), at an exercise price per Option Share equal to the Fair
      Market Value on the Grant Date of [Exercise Price]. The Option is not
      intended to be an incentive stock option under the United States Internal
      Revenue Code of 1986, as amended.

            

    

    

    
      	
              (b)  

            	
              Stock
      Incentive Plan.  This Agreement is subject in all respects to
      the terms of the Plan, all of which terms are made a part of and
      incorporated in this Agreement by reference.  In the event of
      any conflict between the terms of this Agreement and the terms of the
      Plan, the terms of the Plan shall control.  The Optionee hereby
      acknowledges that a copy of the Plan may be obtained from the Vice
      President of Human Resources and agrees to comply with and be bound by all
      of the terms and conditions
thereof.

            

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    
      	
                

            	
              Terms
      used in this Agreement with initial capital letters, but not defined
      herein, shall have the meanings assigned to them under the
      Plan.

            

    

    

    
      	
              2.  

            	
              Vesting; Period of
      Exercise of Option.

            

    

    

    
      	
              (a)  

            	
              Vesting.  Subject
      to the provisions of Section 4, the Option shall become vested and
      exercisable in three approximately equal installments on each of the
      second, fourth and sixth anniversaries (34% on the second anniversary and
      33% on each of the fourth and sixth anniversaries, in each case resulting
      in a fractional Option Share, rounded to a whole Option Share, but not
      exceeding the total set forth in Section 1(a) above) of the Grant Date or,
      with respect to each installment, on the date the Performance Condition
      (as defined below) is satisfied, if later, and subject in the case of each
      such installment to the continuous employment of the Optionee with the
      Company or a Subsidiary from the date hereof to the applicable vesting
      date.  For purposes of this Agreement, Performance Condition
      shall mean the attainment by the Company of [Intentionally Omitted] of
      free cash flow, on a rolling four quarter basis, commencing with the first
      quarter of 2009.    If the Performance Condition has
      been satisfied and the Optionee’s employment with the Company and its
      Subsidiaries is terminated due to the Optionee’s death, Disability, or
      Retirement, as such terms are defined in Section 4(k) of this Agreement,
      then any unvested portion of the Option shall become 100% vested and
      exercisable as of the date of termination of employment due to the
      Optionee’s death, Disability, or
Retirement.

            

    

    

    
      	
              (b)  

            	
              Termination
      of Employment.  If the Optionee's employment with the Company
      and its Subsidiaries terminates for any reason, other than a termination
      by the Company or a Subsidiary for Cause (as defined below) or a
      termination of the Optionee’s employment due to death, Disability, or
      Retirement after the Performance Conditions has been satisfied, any
      portion of the Option which is not then exercisable shall immediately
      terminate and be canceled effective upon such termination of employment
      and the remaining portion of the Option, if any, shall thereafter remain
      exercisable for the period provided in Section 4.  In the event
      of the termination of the Optionee's employment by the Company or a
      Subsidiary for Cause, the Option shall immediately terminate and be
      canceled in full effective upon the date of such termination of
      employment.

            

    

    

    In
accepting this Option, the Optionee acknowledges that the Option has been
granted as an incentive to the Optionee to remain employed by the Company or any
Subsidiary and to exert his or her best efforts to enhance the value of the
Company or any Subsidiary over the long-term.  Accordingly, the
Optionee agrees that if he or she (a) within 12 months following termination of
employment with the Company or any

    

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    

    Subsidiary
accepts employment with a competitor of the Company or any Subsidiary or
otherwise engages in competition with the Company or any Subsidiary, or (b)
within 36 months following termination of employment with the Company or any
Subsidiary, directly or indirectly, disrupts, damages, interferes or otherwise
acts against the interests of the Company or any Subsidiary, including, but not
limited to, recruiting, soliciting or employing, or encouraging or assisting his
or her new employer or any other person or entity to recruit, solicit or employ,
any employee of the Company or any Subsidiary without the Company’s prior
written consent, which may be withheld in its sole discretion, (c) within 36
months following termination of employment with the Company, or any Subsidiary,
disparages, criticizes, or otherwise makes derogatory statements regarding the
Company or any Subsidiary or their directors, officers or employees, or (d)
discloses or otherwise misuses confidential information or material of the
Company or any Subsidiary, each of these constituting a harmful action, then (i)
any unexercised portion of this Option shall be canceled immediately (unless
canceled earlier by operation of another term of this Agreement) and (ii) the
Optionee shall immediately repay to the Company an amount equal to the Option
gains (represented by the closing market price on the date of exercise over the
exercise price, multiplied by the number of options exercised, without regard to
any subsequent market price decrease or increase) realized by the Optionee from
the exercise of all or a portion of this Option within 18 months preceding the
earlier of (w) the commitment of any such harmful action and (x) the Optionee's
termination of employment with the Company and its Subsidiaries; and through the
later of (y) 18 months following the commitment of any such harmful action and
(z) such period as it takes the Company to discover such harmful
action.  In addition, the Optionee acknowledges that, if he or she is
a “Covered
Employee” subject to the Company’s Executive Compensation Recovery Policy
(the “Recovery
Policy”) and engages in “Prohibited
Activity,” that any unvested and vested Options shall be canceled
immediately and the Optionee shall immediately repay the “Equity
Gains” realized by the Optionee during the “Recovery
Period,” as such terms are defined in the Recovery Policy.  The
Optionee agrees that the Company or any of its Subsidiaries has the right to
deduct from any amounts the Company or any of its Subsidiaries may owe the
Optionee from time to time (including amounts owed to the Optionee as wages or
other compensation, fringe benefits or vacation pay, as well as any other
amounts owed to the Optionee by the Company or any of its Subsidiaries), the
amounts the Optionee owes the Company or any of its Subsidiaries.  The
Committee shall have the right, in its sole discretion, not to enforce the
provisions of this paragraph with respect to the Optionee.

    

    Optionee
agrees to be fully liable for any breach of this above described covenant,
promise and agreement.  Optionee agrees to reimburse the

    

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

    

    Company
for all costs and expenses, including attorneys’ fees, incurred by the Company
in enforcing the obligations of Optionee.  This entire provision shall
survive the termination of the Agreement and, in no manner, shall the remedies
described herein be considered as the Company’s exclusive or entire remedy for
Optionee’s breach, non-compliance or violation of any other agreement that
Optionee may have entered into with the Company.

    

    
      	
              (c)  

            	
              Acceleration.  The
      Committee may, in its discretion, accelerate the date or dates as of which
      all or any portion of the Option shall become vested and exercisable and
      may establish accelerated times for vesting based upon the attainment of
      performance goals or such other factors as the Committee may from time to
      time determine.

            

    

    

    
      	
              (d)  

            	
              Term
      of Option Exercise Period.  Except to the extent that the Option
      or any portion thereof shall sooner terminate in accordance with Section 2
      or 4 hereof, once any portion of the Option has become vested and
      exercisable, such portion shall remain exercisable until the end of the
      day preceding the tenth anniversary of the date hereof (the "Option
      Period").

            

    

    

    
      	
              3.  

            	
              Method of Exercise and
      Payment; Certain Restrictions on
Resale.

            

    

    

    
      	
              (a)  

            	
              Exercise
      and Payment.  Once vested and exercisable, the Option, or any
      vested portion thereof, may be exercised by the Optionee (or his or her
      beneficiary or estate) by delivery to the Company on any business day (the
      "Option
      Exercise Date") written notice (the "Option
      Exercise Notice"), in such manner and form as may be required by
      the Committee, specifying the number of Option Shares the Optionee then
      desires to purchase and the aggregate exercise price for such Option
      Shares (the "Option
      Exercise Price").  The Option Exercise Notice shall be
      accompanied by payment of the Option Exercise Price and any other amounts
      required to be paid pursuant to Section
5.

            

    

    

    The
Optionee may pay the Option Exercise Price by delivering to the Company cash,
shares of Qualifying Common Stock (as defined below) already owned by the
Optionee or a combination of cash and such shares of Qualifying Common Stock
provided that the aggregate Fair Market Value on the Option Exercise Date of the
shares of Qualifying Common Stock delivered in payment of any portion of the
Option Exercise Price shall be equal to the excess of (x) the Option Exercise
Price over (y) the amount of any cash delivered by the Optionee in payment of
the Option Exercise Price.  For purposes of this Agreement, shares of
Common Stock shall constitute Qualifying Common Stock that may be delivered in
payment of the Option Exercise Price if such shares (i) are not subject to any
outstanding loan or other obligation and are not pledged as collateral with
respect to any loan or other obligation, other than any such loan
or

    

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

    

    other
obligation extended to the Optionee by the Company or any Subsidiary provided
the Committee approves the delivery of such shares to pay the Option Exercise
Price, and (ii) either (x) have been owned by the Optionee without certain
restrictions for a continuous period of at least six months (or such greater or
lesser period as the Committee shall determine) or (y) were purchased by the
Optionee on a U.S. national securities exchange.

    

    The
Committee may also permit the Optionee to arrange for the payment of all or any
portion of the Option Exercise Price and other amounts required to be paid
pursuant to Section 5 by directing a securities broker approved for such purpose
by the Committee to deliver to the Company, on behalf of the Optionee, the
proceeds of the sale on the Option Exercise Date of a number of the Option
Shares then being purchased by the Optionee having aggregate sales proceeds on
the Exercise Date equal to the sum of all or the applicable portion of the
Option Exercise Price and the amounts required to be paid pursuant to Section 5
that the Optionee elects to satisfy by using the proceeds of the sale of the
Option Shares (the "Cashless
Exercise Procedure").

    

    Within a
reasonable period of time after the Option Exercise Date, subject to payment of
the Option Exercise Price and any amounts required to be paid by the Optionee
pursuant to Section 5, the Company shall direct its stock transfer agent to make
(or to cause to be made) an appropriate book entry reflecting the Optionee's
ownership of the Option Shares then being purchased by the Optionee. Upon
request, the Company shall deliver to the Optionee a certificate or certificates
for the number of Option Shares (reduced, if applicable, by the number of Option
Shares sold on the Option Exercise Date pursuant to the Cashless Exercise
Procedure) purchased by the Optionee, registered in the name of the
Optionee.  In the event that the Company or the Committee, in its sole
discretion, shall determine that, under applicable U.S. federal or state or
non-U.S. securities laws, the transfer of any Option Shares must be subject to
restriction, any certificates issued under this Section 3(a) shall bear an
appropriate legend restricting the transfer of such Option Shares and
appropriate stop transfer instructions shall be delivered to the Company's stock
transfer agent.

    

    
      	
              (b)  

            	
              Restrictions
      on Sale upon Public Offering.  The Optionee hereby agrees that,
      during the 20 day period prior to and the 180 days following the effective
      date of any registration statement filed by the Company under the
      Securities Act of 1933, as amended, with respect to any underwritten
      public offering of any shares of the Company's capital stock, the Optionee
      will not effect any public sale or distribution of shares of Common Stock
      (other than as part of such underwritten public
  offering).

            

    

    

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

     

    
      	
              4.  

            	
              
                Termination.  The
      Option (or the indicated portion
      thereof) shall terminate and be
      canceled immediately upon the first to occur of any of the following
      events:

              

            

    

     

    
      	
              (a)  

            	
              The
      seventh anniversary of the Grant Date, if the Performance Condition has
      not been satisfied as of such date.

            

    

    

    
      	
              (b)  

            	
              If
      the Performance Condition has been satisfied, the date of the expiration
      of the Option Period.

            

    

    

    
      	
              (c)  

            	
              The
      date of the termination of the Optionee's employment with the Company and
      its Subsidiaries for Cause.

            

    

    

    
      	
              (d)  

            	
              The
      date of the termination of the Optionee's employment with the Company and
      its Subsidiaries for any reason, other than for Cause, with respect to any
      portion of the Option which has not become vested and exercisable in
      accordance with Section 2 on or prior to the date of such
      termination.

            

    

    

    
      	
              (e)  

            	
              In
      the case of the Optionee's termination of employment with the Company and
      its Subsidiaries for any reason other than for Cause or other than by
      reason of the Optionee's Retirement, Disability or death, or as a result
      of a reduction in force, cessation of operations, merger, consolidation or
      the sale or other disposition of the Company or a portion thereof (as set
      forth below) with respect to any portion of the Option which has become
      vested and exercisable in accordance with Section 2 on or prior to the
      date of such termination of employment, the last day of the 90 day period
      immediately following the date of such termination of
      employment.

            

    

    

    
      	
              (f)  

            	
              Subject
      to Section 4(j), in the case of the Optionee's termination of employment
      with the Company and its Subsidiaries by reason of the Optionee's
      Retirement, with respect to any portion of the Option which has become
      vested and exercisable on or prior to the date of such termination of
      employment, the last day of the 36 month period immediately following the
      date of such termination of
employment.

            

    

    

    
      	
              (g)  

            	
              Subject
      to Section 4(j), in the case of the Optionee's termination of employment
      with the Company and its Subsidiaries as a result of a reduction in force,
      cessation of operations, merger, consolidation or the sale or other
      disposition of the stock or all or substantially all of the assets of the
      Company, a Subsidiary, or any division, business or other unit or function
      of the Company or any Subsidiary (which is designated as such by the Vice
      President of Human Resources), with respect to any portion of the Option
      which has become vested and exercisable in accordance with Section 2 on or
      prior to the date of such termination of employment, (i) the last day of
      the 24 month period immediately following the date of
  such

            

    

    

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    

    
      	
                

            	
              termination
      of employment, provided that the Optionee has completed five or more years
      of continuous service with the Company or any of its Subsidiaries or (ii)
      the last day of the 12 month period immediately following the date of such
      termination of employment, if the Optionee has completed less than five
      years of continuous service with the Company or any of its
      Subsidiaries.

            

    

    

    
      	
              (h)  

            	
              Subject
      to Section 4(j), in the case of the Optionee's termination of employment
      with the Company and its Subsidiaries by reason of the Optionee's
      Disability, with respect to any portion of the Option which has become
      vested and exercisable in accordance with Section 2 on or prior to the
      date of such termination of employment, the last day of the 12 month
      period immediately following the date of such termination of
      employment.

            

    

    

    
      	
              (i)  

            	
              In
      the case of the Optionee's termination of employment with the Company and
      its Subsidiaries by reason of the Optionee's death, with respect to the
      portion of the Option which has become vested and exercisable in
      accordance with Section 2 on or prior to the date of the Optionee’s death,
      the last day of the 12 month period immediately following the date of such
      death.

            

    

    

    
      	
              (j)  

            	
              The
      last day of the 12 month period immediately following the date of the
      Optionee's death during any period in which the Optionee was entitled to
      exercise any portion of the Option pursuant to Section 4(f), 4(g) or 4(h),
      or, if later, the last day of the period in which the Option would be
      exercisable by the Optionee under Section 4(f) or
  4(g).

            

    

    

    
      	
              (k)  

            	
              For
      purposes of this Agreement, the following terms shall have the following
      meanings:

            

    

    

    "Cause"
shall mean (A) the willful failure by the Optionee to perform substantially his
or her duties as an employee of the Company or any Subsidiary (other than due to
physical or mental illness) after reasonable notice to the Optionee of such
failure, (B) the Optionee's engaging in serious misconduct that is injurious to
the Company or any Subsidiary, (C) the Optionee's having been convicted of, or
entered a plea of nolo contendere to, a crime that constitutes a felony or (D)
the breach by the Optionee 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.

    

    "Disability"
shall mean a physical or mental disability or infirmity of the Optionee as
defined in any disability plan sponsored by the Company or any Subsidiary which
employs the Optionee or, if no such plan is

    

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

    

    sponsored
by the Optionee's employer at the relevant time, the Lexmark Long-Term
Disability Plan.

    

    "Retirement"
shall mean the Optionee's retirement (x) at or after reaching age 58 and the
completion of ten years continuous service with the Company or any of its
Subsidiaries, (y) at or after the completion of 30 years of continuous service
regardless of age, or (z) at or after reaching age 65 (other than any such
termination with the Company or any Subsidiary in connection with the
contemporaneous reemployment by another Subsidiary or the Company).

    

    
      	
              5.  

            	
              Tax
      Withholding.  The
      delivery of any directions to the Company's stock transfer agent or any
      certificates for shares of Common Stock pursuant to Section 3 shall not be
      made until the Optionee, or, if applicable, the Optionee's beneficiary or
      estate, has made appropriate arrangements for the payment to the Company
      of an amount sufficient to satisfy any applicable U.S. federal, state and
      local and non-U.S. tax withholding or other tax requirements, as
      determined by the Company.  To satisfy the Optionee's applicable
      withholding and other tax requirements, the Company shall be entitled, in
      its sole discretion, to withhold Option Shares having a Fair Market Value
      on the Option Exercise Date equal to the applicable amount of such
      withholding and other tax requirements, subject to any rules adopted by
      the Committee or required to ensure compliance with applicable law,
      including, but not limited to, Section 16(b) of the Securities Exchange
      Act of 1934, as amended.  Any cash payment made pursuant to a
      Change in Control shall be made net of any amounts required to be withheld
      or paid with respect thereto (and with respect to any shares of Common
      Stock delivered contemporaneously therewith) under any applicable U.S.
      federal, state and local and non-U.S. tax withholding and other tax
      requirements.

            

    

    

    
      	
              6.  

            	
              Assignability.  Unless
      otherwise provided in accordance with the provisions of the Plan, this
      Option may not be sold, transferred, pledged, assigned or otherwise
      alienated or hypothecated by the Optionee otherwise than by will or the
      laws of descent and distribution.  The term "Optionee"
      as used in this Agreement shall include any permitted transferee of the
      Option.

            

    

    

    
      	
              7.  

            	
              Adjustment in
      Capitalization.

            

    

    

    
      	
              (a)  

            	
              The
      aggregate number of shares of Common Stock subject to the Option and the
      option exercise price and/or exercisability criteria applicable to the
      Option 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, the
      Option shall pertain to the securities and other property to which a
      holder

            

    

    

    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

    

    
      	
                

            	
              of
      the number of shares of Common Stock then covered by the Option would have
      been entitled to receive in connection with such
  event.

            

    

    

    
      	
              (b)  

            	
              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 the Option 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 otherwise provided by the Committee, be
      subject to the same terms and conditions, including restrictions on
      exercisability or transfer, as are applicable to the Option with respect
      to which such shares, cash or other property is received and stock
      certificate(s) representing or evidencing any shares of stock or other
      property so received shall be legended as
  appropriate.

            

    

    

    
      	
              8.  

            	
              Preemption
      by Applicable Laws and Regulations. Notwithstanding
      anything in the Plan or this Agreement to the contrary, the issuance of
      shares of Common Stock hereunder shall be subject to compliance with all
      applicable U.S. federal, state and non-U.S. securities
      laws.  Without limiting the foregoing, if any law, regulation or
      requirement of any governmental authority having jurisdiction shall
      require either the Company or the Optionee (or the Optionee's beneficiary
      or estate) to take any action in connection with the issuance of any
      shares of Common Stock hereunder, the issuance of such shares shall be
      deferred until such action shall have been taken to the satisfaction of
      the Company.

            

    

    

    
      	
              9.  

            	
              Interpretation;
      Construction.  All of the
      powers and authority conferred upon the Committee pursuant to any term of
      the Plan or the Agreement shall be exercised by the Committee, in its sole
      discretion.  All determinations, interpretations or other
      actions made or taken by the Committee pursuant to the provisions of the
      Plan or the Agreement 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 or any Subsidiary, and shall not incur any
      liability for any action taken in good faith in reliance upon the advice
      of counsel.

            

    

    

    
      	
              10.  

            	
              Amendment.  The
      Committee shall have the right, in its sole discretion, to alter or amend
      this Agreement, from time to time, as provided in the Plan in any manner
      for the purpose of promoting the objectives of the Plan, provided that no
      such amendment shall impair the Optionee's rights under this Agreement
      without the Optionee's consent.  Subject to the preceding
      sentence, any alteration or amendment of this Agreement by the Committee
      shall, upon adoption thereof by the Committee, become and be binding and
      conclusive on all persons affected thereby without requirement for consent
      or other action with respect thereto by any such
      person.  Notwithstanding any other provision of this Agreement
      or the

            

    

    

    
      
        
           

        

        
          9

          
            

          

        

        
           

        

      

    

    

    
      	
                

            	
              Plan
      to the contrary, the Committee may, in its sole and absolute discretion
      and without the consent of the Optionee, amend this Agreement, to take
      effect retroactively or otherwise, as it may deem necessary or advisable
      for the purpose of conforming the Agreement to any present or future law,
      regulation or rule applicable to this Agreement or the
      Plan.  The Company shall give written notice to the Optionee of
      any such alteration or amendment of this Agreement as promptly as
      practicable after the adoption thereof.  This Agreement may also
      be amended by a writing signed by both the Company and the
      Optionee.

            

    

    

    
      	
              11.  

            	
              No
      Rights as a Stockholder.  The
      Optionee shall have no voting or other rights as a stockholder of the
      Company with respect to any Option Shares until the exercise of the Option
      and the recording of the Optionee's ownership of the Option Shares on the
      stock transfer records for the Common Stock.  No adjustment
      shall be made for dividends or other rights issued with respect to the
      Common Stock for which the record date is prior to the recording of such
      ownership of the Option Shares.

            

    

    

    
      	
              12.  

            	
              No
      Guarantee of Employment or Future Incentive Awards.  Nothing in
      the Plan or this Agreement shall be deemed
to:

            

    

    

    
      	
              (a)  

            	
              interfere
      with or limit in any way the right of the Company or any Subsidiary to
      terminate Optionee’s employment at any time and for any reason with or
      without cause;

            

    

    

    
      	
              (b)  

            	
              confer
      upon Optionee any right to continue in the employ of the Company or any
      Subsidiary; and

            

    

    

    
      	
              (c)  

            	
              provide
      Optionee the right to receive any Incentive Awards under the Plan in the
      future or any other benefits the Company may provide to some or all of its
      employees.

            

    

    

    
      	
              13.  

            	
              Miscellaneous.

            

    

    

    
      	
              (a)  

            	
              Notices.  All
      notices and other communications required or permitted to be given under
      this Agreement shall be in writing and shall be deemed to have been given
      if delivered personally or sent by certified or express mail, return
      receipt requested, postage prepaid, or by any recognized international
      equivalent of such delivery, to the Company or the Optionee, as the case
      may be, at the following addresses or to such other address as the Company
      or the Optionee, as the case may be, shall specify by notice to the others
      delivered in accordance with this Section
13(a):

            

    

    

    
      	
              (i)  

            	
              if
      to the Company, to it at:

            

    

    

    One Lexmark Centre Drive

    740 West New Circle Road

    

    
      
        
           

        

        
          10

          
            

          

        

        
           

        

      

    

    

    Lexington, Kentucky 40550

    Attention:  Secretary

    

    
      	
              (ii)  

            	
              if
      to the Optionee, to the Optionee at the address set forth on the signature
      page hereof.

            

    

    

    All such
notices and communications shall be deemed to have been received on the date of
delivery or on the third business day after the mailing thereof.

    

    
      	
              (b)  

            	
              Binding
      Effect; Benefits.  This Agreement shall be binding upon and
      inure to the benefit of the parties to this Agreement and their respective
      successors and assigns.  Nothing in this Agreement, express or
      implied, is intended or shall be construed to give any person other than
      the parties to this Agreement or their respective successors or assigns
      any legal or equitable right, remedy or claim under or in respect of any
      agreement or any provision contained
herein.

            

    

    

    
      	
              (c)  

            	
              Waiver.  Any
      party hereto may by written notice to the other party (i) extend the time
      for the performance of any of the obligations or other actions of the
      other party under this Agreement, (ii) waive compliance with any of the
      conditions or covenants of the other party contained in this Agreement and
      (iii) waive or modify performance of any of the obligations of the other
      party under this Agreement.  Except as provided in the preceding
      sentence, no action taken pursuant to this Agreement, including, without
      limitation, any investigation by or on behalf of any party, shall be
      deemed to constitute a waiver by the party taking such action of
      compliance with any representations, warranties, covenants or agreements
      contained herein.  The waiver by any party hereto of a breach of
      any provision of this Agreement shall not operate or be construed as a
      waiver of any preceding or succeeding breach and no failure by a party to
      exercise any right or privilege hereunder shall be deemed a waiver of such
      party's rights or privileges hereunder or shall be deemed a waiver of such
      party's rights to exercise the same at any subsequent time or times
      hereunder.

            

    

    

    
      	
              (d)  

            	
              Assignability.  Neither
      this Agreement nor any right, remedy, obligation or liability arising
      hereunder or by reason hereof shall be assignable by the Company or the
      Optionee without the prior written consent of the other
    party.

            

    

    

    
      	
              (e)  

            	
              Applicable
      Law.  This Agreement shall be governed by and construed
      in accordance with the laws of the State of Delaware, regardless of the
      law that might be applied under principles of conflict of laws and
      excluding any conflict or choice of law rule or principle that may
      otherwise refer

            

    

    

    
      
        
           

        

        
          11

          
            

          

        

        
           

        

      

    

    

    
      	
                

            	
              construction
      or interpretation of the Plan or this Agreement to the substantive law of
      another jurisdiction.

            

    

    

    
      	
              (f)  

            	
              Jurisdiction.  The
      Optionee hereby irrevocably and unconditionally submits to the
      jurisdiction and venue of the state courts of the Commonwealth of Kentucky
      and of the United States District Court of the Eastern District of
      Kentucky located in Fayette County, Kentucky, and any appellate court from
      any thereof, in any action or proceeding arising out of or relating to
      this Agreement, or for recognition or enforcement of any judgment, and
      each of the parties hereby irrevocably agree that all claims in respect of
      any such action or proceeding may be heard and determined in such Kentucky
      state or United States federal courts located in such
      jurisdiction.  Each of the parties hereto agrees that a final
      judgment in any such action or proceeding shall be conclusive and may be
      enforced in other jurisdictions by suit on the judgment or in any other
      manner provided by law.  The parties hereby irrevocably waive,
      to the fullest extent permitted by applicable law, any objection which
      they may now or hereafter have to the laying of venue of any such
      proceeding brought in such a court and any claim that any such proceeding
      brought in such a court has been brought in an inconvenient
      forum.  Optionee further agrees that any action related to, or
      arising out of, this Agreement shall only be brought by Optionee
      exclusively in the federal and state courts located in Fayette County,
      Kentucky.  Nothing in this Agreement shall affect any right that
      the Company may otherwise have to bring any action or proceeding relating
      to this Agreement in the courts of any
  jurisdiction.

            

    

    

    
      	
              (g)  

            	
              Severability.  If
      any provision of this Agreement or the Plan shall be held invalid or
      unenforceable, such invalidity or unenforceability shall not affect any
      other provisions of this Agreement or the Plan, and the Agreement and the
      Plan shall be construed and enforced as if such provision had not been
      included.

            

    

    

    
      	
              (h)  

            	
              Survival.  Any
      provision of this Agreement which contemplates performance or observance
      subsequent to any termination or expiration of this Agreement shall
      survive any termination or expiration of this Agreement and continue in
      full force and effect.

            

    

    

    
      	
              (i)  

            	
              Internal Revenue Code
      Section 409A.  It is intended that the Option shall not
      constitute a deferral of compensation subject to Section 409A of the Code
      pursuant to the exception for nonstatutory stock options set forth in
      Section 1.409A-1(b)(5) of the Treasury Regulations, and this Agreement
      shall be interpreted and construed in compliance with such
      intent.   In the event that the Company determines that the
      Option may be subject to Section 409A of the Code, the Company may,
      without the consent of the Optionee, amend this Agreement or adopt other
      policies and procedures

            

    

    

    
      
        
           

        

        
          12

          
            

          

        

        
           

        

      

    

    

    
      	
                

            	
              (including
      amendments, policies and procedures with retroactive effect), or take any
      other actions, that the Company determines are necessary or appropriate to
      (i) exempt the Option from Section 409A of the Code or (ii) comply with
      the requirements of Section 409A of the Code and Treasury Department
      regulations and other interpretive guidance issued
    thereunder.

            

    

    

    
      	
              (j)  

            	
              Section and Other
      Headings, Etc.  The section and other headings contained
      in this Agreement are for reference purposes only and shall not affect the
      meaning or interpretation of this Agreement.  In this Agreement
      all references to "dollars"
      or "$"
      are to United States dollars.

            

    

    

    
      	
              (k)  

            	
              Counterparts.  This
      Agreement may be executed in any number of counterparts, each of which
      shall be deemed to be an original and all of which together shall
      constitute one and the same
instrument.

            

    

    

    *           *           *           *           *

    

    
      
        
           

        

        
          13

          
            

          

        

        
           

        

      

    

    

    IN WITNESS WHEREOF, the
Company and the Optionee have executed this Agreement as of the date first above
written.

    

    LEXMARK INTERNATIONAL,
INC.

    

    

    

    By: ______________________________________                                                               

    
 

    

    

    

    OPTIONEE:

    

    

    

    

    By: ______________________________________                                                               

    (Sign Here and Date)

    

    

    

    Name:

    ID#:

    

    

    Address of the Optionee:

    

    

    
 

    

    

    

    _______________________________

    Beneficiary Name

    

    Number of
shares of Common Stock subject to the Option: [Number of Options] shares @
[Exercise Price] granted on [Grant Date].

     

     

     

                                                                                              

     

     

     

     

     

     

     

                                                                                                                  
14

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