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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
XEROX CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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PRELIMINARY COPY
THE DOCUMENT COMPANY
XEROX
Xerox Corporation
800 Long Ridge Road
P.O. Box 1600
Stamford, Connecticut 06904
April 4, 1996
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Xerox Corporation to be held Thursday, May 16, 1996 at 10:00 a.m. at the Ritz-
Carlton Buckhead, 3434 Peachtree Road, NE, Atlanta, Georgia. Your Board of
Directors and Management look forward to greeting personally those
shareholders able to attend.
At the Annual Meeting, in addition to the election of 12 directors and the
election of KPMG Peat Marwick LLP as independent auditors for 1996, you are
being asked to consider and approve an increase in the authorized shares of
Common Stock of the Company, to adopt the 1996 Non-Employee Director Stock
Option Plan, and to approve the Restricted Stock Plan For Directors. The Board
of Directors unanimously recommends that you vote in favor of each of these
proposals.
The Company has received one shareholder proposal that your Board believes is
not in the best interest of the Company and its shareholders, and unanimously
recommends a vote against this shareholder proposal.
Not standing for reelection as a director is Mr. Robert A. Beck, who having
attained his 70th birthday since the last annual meeting is retiring from the
Board under the Company's retirement policy. Mr. Beck has served 20 years as a
member of our Board of Directors. We are deeply grateful to him for his many
contributions to the success of our Company.
It is important that your shares be represented and voted at the Annual
Meeting, regardless of whether or not you plan to attend in person. You are
therefore urged to sign, date and mail the accompanying proxy card and return
it promptly in the postage paid envelope provided.
For the Board of Directors,
/s/ Paul A. Allaire
Paul A. Allaire
Chairman and Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL SHAREHOLDERS' MEETING
The Annual Meeting of Shareholders of Xerox Corporation will be held at the
Ritz-Carlton Buckhead, 3434 Peachtree Road, NE, Atlanta, Georgia, on Thursday,
May 16, 1996, at 10:00 a.m. The purposes of the meeting will be to elect
directors, to elect independent auditors for 1996, to approve an increase in
the number of authorized shares of Common Stock of the Company, to adopt the
proposed 1996 Non-Employee Director Stock Option Plan, to approve the
Restricted Stock Plan For Directors, to act on one shareholder proposal
described on pages 30 through 32, and to conduct any other business as may
properly come before the meeting.
The Board of Directors has determined that holders of Common Stock, Class B
Stock and Series B Convertible Preferred Stock of the Company at the close of
business on March 27, 1996 will be entitled to notice of and to vote at the
Annual Meeting.
We urge you to execute your proxy and return it in the enclosed envelope.
By order of the Board of Directors,
/s/ Eunice M. Filter
Eunice M. Filter
Secretary
April 4, 1996
Whether you plan to attend the meeting or not, please fill in, sign, date
and mail the accompanying proxy as soon as possible. An envelope, which
requires no postage if mailed in the United States or Canada, is included
for your convenience.
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PROXY STATEMENT
The Board of Directors of Xerox Corporation (Company or Xerox) is requesting
your proxy for the Annual Meeting of Shareholders on May 16, 1996, and any
adjournments thereof. By executing and returning the enclosed proxy card, you
authorize the three directors whose names are listed on the front of it to
represent you and vote your shares in connection with the purposes set forth
in the Notice of Annual Meeting. The holders of a majority of the shares
entitled to vote at the meeting must be present in person or represented by
proxy in order to constitute a quorum for all matters to come before the
meeting.
If you attend the meeting, you may of course vote by ballot. But if you are
not present, your shares can be voted only when represented by a properly
executed proxy. In this case you have several choices.
. You may vote on each proposal when returning the enclosed proxy card, in
which case your shares will be voted in accordance with your choices.
. You may indicate a preference to abstain on any proposal, in which case no
vote will be recorded.
. You may return a properly executed proxy, without indicating your voting
preferences, in which case the proxies will vote your shares as follows: for
election of the directors nominated by the Board of Directors; for election
of KPMG Peat Marwick LLP as the Company's independent auditors for 1996; for
an increase in the number of authorized shares of Common Stock of the
Company from 350,000,000 to 1,050,000,000 shares; for adoption of the
proposed 1996 Non-Employee Director Stock Option Plan and approval of the
Restricted Stock Plan For Directors; and against the shareholder proposal
regarding MacBride Principles.
You may revoke your proxy at any time, insofar as it has not been voted, by
notifying the Corporate Secretary in writing.
Under the law of New York, the Company's state of incorporation, only votes
cast "for" the election of directors or those cast "for" or "against" any
other proposal will be counted in determining whether a nominee for director
has been elected or whether any of the other proposals at this meeting have
been approved. Abstentions, broker non-votes and votes withheld are not
treated as votes cast at the meeting and will have the effect of a negative
vote on Proposals 3 and 4, where the vote of the majority of outstanding
shares is required. On the other proposals, they will have no effect on the
outcome.
On March 27, 1996 the Company had outstanding xxx,xxx,xxx shares of common
stock, 1,000 shares of Class B Stock, and x,xxx,xxx shares of Series B
Convertible Preferred Stock, each of which is entitled to one vote on each
proposal at the meeting. The Board of Directors has set the close of business
on March 27, 1996 as the record date for determining the shareholders entitled
to notice of and to vote at the meeting.
PROPOSAL 1--ELECTION OF DIRECTORS
Shareholders annually elect directors to serve for one year and until their
successors have been elected and shall have qualified. The 12 persons whose
biographies appear on pages 5 through 11 have been proposed by the Board of
Directors based on a recommendation by the Nominating Committee of the Board
of Directors. The Nominating Committee consists of Robert A. Beck, Vernon E.
Jordan, Jr., Hilmar Kopper, George J. Mitchell, N. J. Nicholas, Jr., and John
E. Pepper, none of whom is an officer or employee of the Company.
Ten of the 12 nominees are neither employees nor former employees of Xerox,
its subsidiaries or associated companies. These Board members bring to the
Company valuable experience from a variety of fields.
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The By-Laws of the Company require that all nominees for director file with the
Secretary, at least 24 hours prior to the Annual Meeting, a statement
indicating consent to being a nominee and, if elected, intention to serve as a
director. Each of the nominees proposed by the Board of Directors has filed
such a statement.
If for any reason, which the Board of Directors does not expect, a nominee is
unable to serve, the proxies may use their discretion to vote for a substitute
proposed by the Board of Directors.
The vote required for election as a director of the Company is a plurality of
the votes cast at the meeting.
COMMITTEE FUNCTIONS, MEMBERSHIP AND MEETINGS
The Company's Board of Directors has several standing committees: the Audit,
Nominating, Executive Compensation and Benefits, Finance and Executive
Committees.
Audit Committee: The Audit Committee is responsible for recommending to the
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Board of Directors the engagement of independent auditors for the Company and
reviewing with the independent auditors the plan and results of the auditing
engagement. The committee reviews summaries of the year-end financial data and
significant changes in accounting policies and financial reporting practices
with management, the Company's Director, Corporate Audit and independent
auditors. In addition, the committee reviews the recommendations contained in
the independent auditors' audit management letter and management's response to
that letter. The Audit Committee also reviews the plan for and results of the
Company's internal audits.
The members of the Audit Committee are all non-employee directors: B. R. Inman,
Ralph S. Larsen, John D. Macomber, Martha R. Seger and Thomas C. Theobald. Mr.
Macomber is the Chairman. Three meetings of the Audit Committee were held
during 1995.
Nominating Committee: The Nominating Committee recommends to the Board of
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Directors nominees for election as directors of the Company. The committee
considers the performance of incumbent directors in determining whether to
recommend that they be nominated to stand for reelection.
The members of the Nominating Committee are Robert A. Beck, Vernon E. Jordan,
Jr., Hilmar Kopper, George J. Mitchell, N. J. Nicholas, Jr., and John E.
Pepper. Mr. Jordan is the Chairman of the Nominating Committee. The committee
held two meetings in 1995.
Shareholders who wish to recommend individuals for consideration by the
Nominating Committee may do so by submitting a written recommendation to the
Secretary of the Company, P.O. Box 1600, Stamford, Connecticut 06904.
Submissions must include sufficient biographical information concerning the
recommended individual, including age, employment and board memberships (if
any), for the committee to consider, as well as a written consent by the
nominee to stand for election if nominated by the Board of Directors and to
serve if elected by the shareholders. Recommendations received by December 31,
1996 will be considered for nomination at the 1997 Annual Meeting of
Shareholders. Recommendations received after December 31, 1996 will be
considered for nomination at the 1998 Annual Meeting of Shareholders.
Executive Compensation and Benefits Committee: The Executive Compensation and
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Benefits Committee is responsible for recommending to the Board of Directors
the remuneration arrangements for senior management of the Company, including
the adoption of compensation plans in which senior management is eligible to
participate and the granting of benefits under any such plans. The committee
also consults with the Chief Executive Officer and advises the Board with
respect to senior management succession planning.
B. R. Inman, Vernon E. Jordan, Jr., Ralph S. Larsen, John D. Macomber and John
E. Pepper are the members of the Executive Compensation and Benefits Committee,
and are all non-employee directors of the Company. Mr. Larsen is the Chairman.
Four meetings of the committee were held in 1995.
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Finance Committee: The Finance Committee oversees the investment management of
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the Company's employee profit sharing and retirement plans. In addition, the
Finance Committee is responsible for reviewing the Company's asset mix, capital
structure and strategies, financing strategies, insurance coverage and dividend
policy.
The members of the Finance Committee, all of whom are non-employee directors,
are Robert A. Beck, Hilmar Kopper, George J. Mitchell, N. J. Nicholas, Jr.,
Martha R. Seger and Thomas C. Theobald. Mr. Nicholas is the Chairman of the
Finance Committee. The Finance Committee held five meetings in 1995.
Executive Committee: The Executive Committee has all the authority of the Board
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of Directors, except with respect to certain matters that by statute may not be
delegated by the Board of Directors. The committee acts only in the intervals
between meetings of the full Board of Directors. It acts usually in those cases
where it is not feasible to convene a special meeting or where the agenda is
the technical completion of undertakings already approved in principle by the
Board. The members of the Executive Committee are Paul A. Allaire, Ralph S.
Larsen and John E. Pepper. Mr. Allaire is the Chairman. The Executive Committee
did not meet in 1995.
ATTENDANCE AND REMUNERATION OF DIRECTORS
Eight meetings of the Board of Directors and 14 meetings of the Board
committees were held in 1995. All incumbent directors other than Hilmar Kopper
attended at least 75 percent of the total number of meetings of the Board of
Directors and Board committees on which they served. The Company believes that
attendance at meetings is only one means by which directors may contribute to
the effective management of the Company and that the contributions of all
directors have been substantial and are highly valued.
Directors who are not employees of the Company receive $44,000 per year for
service as a director, $6,000 per year for service on each committee of the
Board on which they serve (except the Executive Committee), and reimbursement
for out-of-pocket expenses incurred in connection with attendance at meetings
and other services as a director. Directors who are employees of the Company do
not receive any compensation for service as a director.
Pursuant to the Restricted Stock Plan For Directors, $15,000 of the annual
director's fee and $1,000 of each committee fee is paid in the form of
restricted shares of Common Stock of the Company. The shares may not be sold or
transferred except upon death, retirement, disability, change in control or
termination of service as a director with the consent of a majority of the
Board of Directors. If the individual's service as a director is terminated for
any other reason, the shares are forfeited. The holders of restricted shares
are entitled to all distribution and voting rights of the Common Stock. The
directors have the option to receive part or all of their total cash fees for
service on the Board and committees of the Board in the form of shares of
Common Stock, which may be restricted or unrestricted at the election of the
individual. The number of shares issued is based on the market value at the
time the fee is payable. The shares held by directors under this Plan are
included in the Xerox securities owned shown in the biographies of the
directors beginning on page 5.
At its meeting held February 5, 1996, the Board of Directors repealed the
Retirement Plan for non-employee directors effective May 16, 1996. Until May 16
non-employee directors retiring at age 70 with at least five years of service
are eligible for a benefit equal to one-half of the annual retainer in effect
at the time of retirement, including committee fees and the value of restricted
stock, payable quarterly until the director's death. Directors retiring prior
to May 16 due to disability, a conflict of interest arising from an action of
the Company or a change in control are also eligible for the retirement
benefit.
At its meeting held on February 5, 1996, the Board of Directors repealed the
Retirement Income Plan For Directors effective May 16, 1996; approved the 1996
Non-Employee Director Stock Option Plan; increased
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total fees for service on the Board and committees to a single fee of $65,000,
from $44,000 Board fee and $12,000 fee for service on two committees of the
Board, effective July 1, 1996; amended the Restricted Stock Plan For Directors
to increase the portion of such fees payable in the form of Common Stock of
the Company to $25,000, effective July 1, 1996; and amended the 1989 Deferred
Compensation Plan For Directors so that Directors with a vested retirement
benefit under the repealed Retirement Income Plan For Directors are credited
with a deferred account equal to the present value of their accrued retirement
benefit under the repealed Plan. Adoption of such Stock Option Plan and
approval of such Restricted Stock Plan which are to be acted upon at the May
16, 1996 Annual Meeting of Shareholders are described under Proposals 3 and 4
on pages 25 through 29.
TERMS USED IN BIOGRAPHIES
To help you consider the nominees, we use a biographical format that provides
a ready reference on their backgrounds. Certain terms used in the biographies
may be unfamiliar to you, so we are defining them here.
Xerox securities owned means the Company's Common Stock and Series B
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Convertible Preferred Stock. Series B shares are owned through the
individual's account in the Xerox Employee Stock Ownership Plan. None of the
nominees owns any of the Company's other securities.
Options/Rights/Restricted Shares is the number of the Company's common shares
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held subject to performance-based vesting restrictions and common shares
subject to stock options and incentive stock rights held by a nominee.
Immediate family means the spouse, the minor children and any relatives
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sharing the same home as the nominee.
Unless otherwise noted, all Xerox securities held are owned beneficially by
the nominee. This means he or she has or shares voting power and/or investment
power with respect to the securities, even though another name--that of a
broker, for example--appears in the Company's records. All ownership figures
are as of March 27, 1996.
For information on compensation for officers, see the compensation section
starting on page 14.
[PHOTO] PAUL A. ALLAIRE
Age: 57 Director since: 1986
Xerox securities owned: xx,xxx common shares; xxx Series
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B Convertible Preferred shares
Options/Rights/Restricted Shares: xxx,xxx common shares
--------------------------------
Occupation: Chairman and Chief Executive Officer and
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Chairman of the Executive Committee, Xerox Corporation.
Education: BS, Worcester Polytechnic Institute; MS,
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Carnegie-Mellon University.
Other Directorships: Rank Xerox Limited; Fuji Xerox Co., Ltd.; The New York
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Stock Exchange, Inc.; Sara Lee Corporation; SmithKline Beecham plc; and Xerox
Financial Services, Inc.
Other Background: Joined Xerox in 1966. Member, Board of Trustees, Carnegie-
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Mellon University and Member, Business Advisory Council of the Graduate School
of Industrial Administration, Carnegie-Mellon University. Member, Board of
Trustees, Worcester Polytechnic Institute. Member, The Business Roundtable,
and The Business Council. Member, Board of Directors, the Council on Foreign
Relations, the New York City Ballet, and Catalyst. Chairman, Council on
Competitiveness.
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[PHOTO] B. R. INMAN
Age: 65Director since: 1987
Xerox securities owned: 1,155 common shares
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Occupation: Investor.
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Education: BA, University of Texas.
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Other Directorships: Fluor Corporation; Science
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Applications International Corporation; Southwestern Bell
Corporation; and Temple-Inland Inc.
Other Background: Entered Naval Reserve in 1951, graduated from National War
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College in 1972, promoted to Rear Admiral in 1974, to Vice Admiral in 1976 and
to Admiral in 1981. Retired with permanent rank of Admiral in 1982. Between
1974 and 1982 served as Director of Naval Intelligence, Vice Director of the
Defense Intelligence Agency, Director of the National Security Agency and
Deputy Director of Central Intelligence. Between 1983 and 1986 served as
Chairman and Chief Executive Officer of Microelectronics and Computer
Technology Corporation. Served as Chairman, President and Chief Executive
Officer, Westmark Systems, Inc., 1987 to 1989 and Chairman, Federal Reserve
Bank of Dallas, 1987 to 1990. Member, National Academy of Public
Administration. Trustee, California Institute of Technology and Southwestern
University. Adjunct Professor at the LBJ School of Public Affairs and at the
Graduate School of Business of the University of Texas at Austin. Member of the
Audit and Executive Compensation and Benefits Committees of Xerox.
[PHOTO] VERNON E. JORDAN, JR.
Age: 60 Director since: 1974
Xerox securities owned: 3,613 common shares
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Occupation: Partner, Akin, Gump, Strauss, Hauer & Feld,
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LLP.
Education: BA, DePauw University; JD, Howard University
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Law School.
Other Directorships: American Express Company; Bankers
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Trust Company; Bankers Trust New York Corporation;
Corning Incorporated; Dow Jones & Co.; J.C. Penney
Company, Inc.; Revlon Group; Ryder System, Inc.; Sara Lee
Corporation; and Union Carbide Corporation.
Other Background: Became a partner in the law firm of Akin, Gump, Strauss,
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Hauer & Feld in 1982, following ten years as President of the National Urban
League, Inc. Member of the Bar of Arkansas, Georgia and the District of
Columbia as well as the U.S. Supreme Court Bar. Director of the Brookings
Institution, the LBJ Foundation, Howard University, the Joint Center for
Political and Economic Studies, the NAACP Legal Defense and Education Fund,
Inc. Trustee of the Ford Foundation. Former Member of the National Advisory
Commission on Selective Service, the American Revolution Bicentennial
Commission, the Presidential Clemency Board, the Advisory Council on Social
Security, the Secretary of State's Advisory Committee on South Africa and the
President's Advisory Committee of the Points of Light Foundation. Member of the
Executive Compensation and Benefits Committee and Chairman of the Nominating
Committee of Xerox.
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[PHOTO] YOTARO KOBAYASHI
Age: 62 Director since: 1987
Xerox securities owned: 2,112 common shares
----------------------
Occupation: Chairman and Chief Executive Officer, Fuji
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Xerox Co., Ltd.
Education: BA, Keio University; MBA, Wharton Graduate
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School, University of Pennsylvania.
Other Directorships: Fuji Xerox Co., Ltd.; Iwaki Glass
-------------------
Co., Ltd.; and Japan Research Center Co., Ltd.
Other Background: Joined Fuji Photo Film Co., Ltd in 1958, was assigned to Fuji
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Xerox Co., Ltd. in 1963, named President and Chief Executive Officer in 1978
and Chairman and Chief Executive Officer in 1992. Chairman of the Asian Office
Automation Equipment Council of The Confederation of Asian Chambers of Commerce
and Industry; the Committee on Foreign Relations of The Federation of Economic
Organizations; the Japan-U.S. Business Council. Vice-Chairman, Japan
Association of Corporate Executives. Special Advisor to the Minister of the
Economic Planning Agency. Member of the Trilateral Commission, the Economic
Council of the Economic Planning Agency, the International Council of JP
Morgan, the International Advisory Board of Northern Telecom Limited, the
International Advisory Board of the Council on Foreign Relations, the Board of
Overseers of The Wharton School of the University of Pennsylvania and the
Advisory Council of the Institute for International Studies, Stanford
University. Vice-Chairman, Board of Trustees, International University of Japan
and member of the Board of Trustees, Keio University. Former member of the U.S.
Japan Advisory Commission and The Provisional Council for the Promotion of
Administrative Reform. Past Chairman, Japan Business Machine Makers
Association.
[PHOTO] HILMAR KOPPER
Age: 61 Director since: 1991
Xerox securities owned: 2,033 common shares
----------------------
Occupation: Spokesman of the Board of Managing Directors,
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Deutsche Bank AG.
Education: High school diploma.
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Other Directorships: Akzo NV; Bayer AG; Daimler-Benz AG;
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Linde AG; Deutsche Lufthansa AG; Mannesmann AG; Munchener
Ruckversicherung AG; Pilkington plc; Solvay SA; VEBA AG;
and RWE AG.
Other Background: Apprenticeship with Rheinisch-Westfalischen Bank AG in
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Cologne, 1954. Management trainee at J. Henry Schroder Banking Corporation, New
York. Foreign Department, Deutsche Bank's Central Office in Dusseldorf and
Manager, Leverkusen branch, 1969. Appointed to the Board of Managing Directors
of Deutsche Bank subsidiary European Asian Bank AG in Hamburg, 1972. Executive
Vice President, Deutsche Bank AG, 1975; and Member of the Board of Managing
Directors, Deutsche Bank AG, 1977. Succeeded Alfred Herrhausen as Spokesman of
the Board of Managing Directors, December 1989. Member of the Finance and
Nominating Committees of Xerox.
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[PHOTO] RALPH S. LARSEN
Age: 57 Director since: 1990
Xerox securities owned: 2,871 common shares and an
----------------------
indirect interest in approximately x,xxx common shares
through the Deferred Compensation Plan
Occupation: Chairman and Chief Executive Officer, Johnson
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& Johnson.
Education: BBA, Hofstra University.
---------
Other Directorships: Johnson & Johnson; AT&T, The New
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York Stock Exchange, Inc.
Other Background: Joined Johnson & Johnson in 1962, was named Vice President of
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Marketing, McNeil Consumer Products Company in 1980. President of Becton
Dickinson's Consumer Products Division, 1981 to 1983. Returned to Johnson &
Johnson as President of its Chicopee subsidiary in 1983. Named a company Group
Chairman in 1986, and Chairman of the Board and Chief Executive Officer in
1989. Member, Board of the U.S. Committee for UNICEF and the Tri-State United
Way. Vice Chairman of The Business Council and member of the Policy Committee
of The Business Roundtable. Served two years in the U.S. Navy. Chairman of the
Executive Compensation and Benefits Committee and member of the Audit and
Executive Committees of Xerox.
[PHOTO] JOHN D. MACOMBER
Age: 68 Director since: 1993, and 1987 to 1989
Xerox securities owned: 2,429 common shares
----------------------
Occupation: Principal, JDM Investment Group.
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Education: BA, Yale University; MBA, Harvard University
---------
Graduate School of Business Administration.
Other Directorships: Bristol-Myers Squibb Company; Brown
-------------------
Group Inc; Lehman Brothers; Pilkington plc; and Textron.
Other Background: Principal of JDM Investment Group since 1992. Served as
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Chairman and President, Export-Import Bank of the United States, 1989 to 1992.
Joined Celanese Corporation in 1973 as President and held the positions of
Chairman and Chief Executive Officer from 1980 to 1987. Prior to joining
Celanese, served as Senior Director with McKinsey & Co. Inc. Former Director of
Chase Manhattan Bank, N.A.; Chase Manhattan Corporation; Celgene Corporation;
Florida Power and Light Group; Lasertechnics (where he served as Chairman); and
RJR Nabisco, Inc. Member of the Advisory Board of the Yale School of
Management, the Center for Strategic and International Studies and STRIVE.
Member of the Board of Directors of the Atlantic Council of the United States,
the French-American Foundation and the National Executive Services Corps.
Member of the Council on Foreign Relations and the Bretton Woods Committee.
Trustee of the Carnegie Institution of Washington. Chairman, Council For
Excellence In Government. Served two years in the U.S. Air Force. Chairman of
the Audit Committee and member of the Executive Compensation and Benefits
Committee of Xerox.
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[PHOTO] GEORGE J. MITCHELL
Age: 62 Director since: 1995
Xerox securities owned: 262 common shares
----------------------
Occupation: Special Counsel, Verner, Liipfert, Bernhard,
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McPherson and Hand, Chartered
Education: BA, Bowdoin College; JD, Georgetown
---------
University.
Other Directorships: Federal Express Corporation, The
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Walt Disney Company, UNUM Corporation.
Other Background: Joined the U.S. Department of Justice as a trial lawyer in
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the Antitrust Division in 1960. Served as Executive Assistant to U.S. Senator
Edmund S. Muskie from 1963 to 1965 and then entered private law practice.
Served as Democratic National Committeeman from Maine, 1969 to 1977, as U.S.
Attorney for Maine, 1977 to 1979, and as U.S. District Court Judge, 1979 to
1980. Elected U.S. Senator from the State of Maine in 1980, serving as Majority
Leader of the Senate from 1989 to 1995 when he retired from the Senate and
joined the law firm of Verner, Liipfert, Bernhard, McPherson and Hand. Member
of the Finance Committee and Nominating Committees of Xerox.
[PHOTO] N. J. NICHOLAS, JR.
Age: 56 Director since: 1987
Xerox securities owned: 3,053 common shares and an
----------------------
indirect interest in approximately x,xxx common shares
through the Deferred Compensation Plan.
Occupation: Investor.
----------
Education: BA, Princeton University; MBA, Harvard
---------
University Graduate School of Business Administration.
Other Directorships: Bankers Trust Company; Boston
-------------------
Scientific Corporation.
Other Background: President and Co-Chief Executive Officer, Time-Warner Inc.,
- ----------------
1990 to 1992. Former member of the President's Advisory Committee on Trade
Policy and Negotiations and the President's Commission on Environmental
Quality. Member of the Advisory Board of Columbia University Graduate School of
Journalism. Chairman of the Finance Committee and Member of the Nominating
Committee of Xerox.
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[PHOTO] JOHN E. PEPPER
Age: 56 Director since: 1990
Xerox securities owned: 3,882 common shares; immediate
----------------------
family owns 1,000 shares
Occupation: Chairman of the Board and Chief Executive
----------
Officer, Procter & Gamble Company.
Education: BA, Yale University.
---------
Other Directorships: Motorola, Inc.; Procter & Gamble
-------------------
Company.
Other Background: Joined Procter & Gamble in 1963. Named Executive Vice
- ----------------
President and elected to the Board of Directors in 1984, named President in
1986 and Chairman and Chief Executive Officer in 1995. Member, Advisory
Committee, Yale School of Management and the National Alliance of Business.
Trustee, Christ Church Endowment Fund and the Cincinnati Art Museum. Chairman
of the 1994 Cincinnati United Way Campaign. Co-Chair, Governor's Education
Council of the State of Ohio and Cincinnati Youth Collaborative. Served three
years in the U.S. Navy. Member of the Executive Compensation and Benefits,
Nominating and Executive Committees of Xerox.
[PHOTO] MARTHA R. SEGER
Age: 64 Director since: 1991
Xerox securities owned: 1,042 common shares and an
----------------------
indirect interest in approximately xx common shares
through the Deferred Compensation Plan
Occupation: Financial economist and Former Governor,
----------
Federal Reserve System; currently Distinguished Visiting
Professor of Finance, Central Michigan University.
Education: BBA, MBA, PhD, University of Michigan.
---------
Other Directorships: Fluor Corporation; Michigan Mutual
-------------------
and the Amerisure Companies; Amoco Corporation; Johnson
Controls; Providian Corporation; The Kroger Co.; and
Tucson Electric Power Co.
Other Background: Financial Economist, Federal Reserve Board, 1964 to 1967.
- ----------------
Chief Economist, Detroit Bank & Trust, 1967 to 1974, elected Vice President in
1971. Vice President, Economics and Investments, Bank of the Commonwealth
(Detroit), 1974 to 1976. Adjunct Associate Professor, University of Michigan,
1976 to 1979. Associate Professor of Economics and Finance, Oakland University,
1980. Commissioner of Financial Institutions, State of Michigan, 1981 to 1982.
Professor of Finance, Central Michigan University, 1983 to 1984. Governor,
Federal Reserve System, 1984 to 1991. Member of the Audit and Finance
Committees of Xerox.
10
<PAGE>
[PHOTO] THOMAS C. THEOBALD
Age: 58 Director since: 1983
Xerox securities owned: 1,355 common shares and an
----------------------
indirect interest in approximately xxx common shares
through the Deferred Compensation Plan
Occupation: Partner, William Blair Capital Management.
----------
Education: AB, College of the Holy Cross; MBA, Harvard
---------
University Graduate School of Business Administration.
Other Directorships: Enron Global Power & Pipelines;
-------------------
Mutual of New York.
Other Background: Began career with Citibank in 1960, appointed Vice Chairman
- ----------------
and elected a Director of Citicorp in 1982. Chairman, Continental Bank
Corporation, 1987 to 1994. Director of the Associates of the Harvard Business
School and the Chicago Council on Foreign Relations. Trustee, National Lekotek
Center and Northwestern University. Member of the Committee on Architecture of
the Art Institute of Chicago, the Civic Committee of The Commercial Club of
Chicago, the Chicago Urban League's Business Advisory Council and the Illinois
Business Roundtable. Member of the Finance Committee and the Executive
Compensation and Benefits Committee of Xerox.
11
<PAGE>
OWNERSHIP OF COMPANY SECURITIES
The Company knows of no person who, or group which, owns beneficially more than
5% of any class of its equity securities as of December 31, 1995, except as set
forth below (1).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT
TITLE OF CLASS NAME OF ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Series B Convertible Preferred State Street Bank and Trust Company, 9,435,464 100%
Stock(2) as Trustee,
225 Franklin Street, Boston, MA(3)
Common Stock State Street Bank and Trust Company, 1,976,179(4) 9.7%(5)
as Trustee under other plans and
accounts
225 Franklin Street, Boston, MA
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) The words "group" and "beneficial" are as defined in regulations issued by
the Securities and Exchange Commission (SEC). Beneficial ownership under
such definition means possession of sole voting power, shared voting power,
sole dispositive power or shared dispositive power. The information
provided in this table is based solely upon the information contained in
the Form 13G filed by the named entity with the SEC. One present employee
owns 100% of the 1,000 shares of Class B Stock which has equal voting
rights with the Common Stock, representing less than one-one hundredth of
1% of the voting power of the Company.
(2) These shares have equal voting rights with the Common Stock and Class B
Stock.
(3) Held as Trustee under the Xerox Employee Stock Ownership Plan. Each
participant may direct the Trustee as to the manner in which shares
allocated to his or her account shall be voted. The Trust Agreement
provides that the Trustee shall vote any shares allocated to participants
accounts as to which it has not received voting instructions and any shares
which have not been so allocated, in the same proportions as shares in
participants' accounts as to which voting instructions are received. The
power to dispose of shares is governed by the terms of the Plan and
elections made by participants.
(4) Within this total as to certain of the shares, State Street Bank and Trust
Company has sole voting power 834,077 shares, shared voting power 1,043,666
shares, sole dispositive power 925,978 shares and shared dispositive power
1,050,201 shares.
(5) Percentage based upon assumption that all Series B Convertible Preferred
Stock were converted into Common Stock.
12
<PAGE>
Shares of Common Stock and Series B Convertible Preferred Stock of the Company
owned beneficially by its directors and nominees for director, each of the
executive officers named in the Summary Compensation Table below and directors
and all officers as a group, as of March 27, 1996, were as follows:
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Amount Total
Name of Beneficially Stock
Beneficial Owner Owned Interest
- --------------------------------------------------------------------------------
<S> <C> <C>
Paul A. Allaire..................................... xxx,xxx xxx,xxx
Robert A. Beck...................................... 4,326 4,326
William F. Buehler.................................. xx,xxx xx,xxx
Allan E. Dugan...................................... xx,xxx xx,xxx
B.R. Inman.......................................... 1,155 1,155
Vernon E. Jordan, Jr................................ 3,613 3,613
Yotaro Kobayashi.................................... 2,112 2,112
Hilmar Kopper....................................... 2,033 2,033
Ralph S. Larsen..................................... 2,871 x,xxx
John D. Macomber.................................... 2,429 2,429
George J. Mitchell.................................. 262 262
N.J. Nicholas, Jr. ................................. 3,053 x,xxx
John E. Pepper...................................... 3,882 3,882
Addison B. Rand..................................... xx,xxx xx,xxx
Barry D. Romeril.................................... xx,xxx xx,xxx
Martha R. Seger..................................... 1,042 x,xxx
Thomas C. Theobold.................................. 1,355 x,xxx
Peter van Cuylenburg................................ x,xxx x,xxx
Directors and All Officers as a group............... xxx,xxx xxx,xxx
- --------------------------------------------------------------------------------
</TABLE>
The shares of Common Stock, and Series B Stock owned by each director and
officer named and by all directors and officers as a group represent less than
1% of the aggregate number of shares of Common Stock and Series B Stock
outstanding at March 27, 1996. The numbers shown in the Amount Beneficially
Owned column are the shares of Common Stock considered owned by the directors
and officers in accordance with SEC rules, including shares of Common Stock
which officers and directors had a right, within 60 days, to acquire upon the
exercise of options or rights, all of which shares were deemed outstanding for
purposes of computing the percentage of Common Stock and Series B Stock
outstanding and beneficially owned. The numbers shown in the Total Stock
Interest column include the amount shown in the Amount Beneficially Owned
column plus options held by officers not exercisable within 60 days, incentive
stock units and restricted shares, as well as the interests of officers and
directors in the Xerox Stock Fund under the Profit Sharing and Savings Plan and
the Deferred Compensation Plans.
13
<PAGE>
EXECUTIVE COMPENSATION
Report of the Executive Compensation and Benefits
Committee of the Board of Directors
Executive Officer Compensation
The compensation paid to the Company's executive officers is determined by the
Executive Compensation and Benefits Committee (Committee) of the Board of
Directors. The Committee's members are each independent, non-employee directors
of the Company who establish the policies that govern the compensation paid to
Xerox executive officers, determine overall and individual compensation goals
and objectives, grant awards and certify achievement of performance under the
Company's various annual and long-term incentive plans and approve actual
compensation payments. Although Vernon E. Jordan, Jr., a member of the
Committee, is a partner in the law firm of Akin, Gump, Strauss, Hauer and Feld,
which rendered services to the Company during 1995, the Company and its
Directors do not believe that this relationship affects his independence.
The compensation policy established by the Committee provides that target
levels of compensation and benefits for executive officers are intended to be
equal to or better than the compensation paid by other companies in the
marketplace in which Xerox operates and competes for equivalent skills and
competencies for positions of similar responsibilities and desired levels of
performance. The Company's executive compensation policies, plans and programs
are designed to provide competitive levels of compensation that align pay with
the Company's annual and long-term performance objectives, recognize corporate
and individual achievement and support the Company in attracting, motivating
and retaining high performing executives. In order to determine appropriately
competitive levels of compensation, the Committee annually reviews, evaluates
and compares Xerox executive officer compensation to relevant external,
competitive compensation data. At its meeting on December 4, 1995, the
Committee reviewed the reported compensation data of firms which were part of
the Business Week Computers and Peripherals Industry Group (which are included
in the data shown on the performance graph on page 24 below), as well as a
broader group of organizations with which the Company is likely to compete for
executive expertise and which are of similar size and scope. The latter group
includes large capitalization, multinational companies in technology, office
equipment and other industries.
Base salaries are determined by the Committee, in its judgment, taking into
account the competitive data referenced above; a substantial portion, generally
two-thirds or more of targeted total compensation, of each executive officer's
total compensation is variable and tied to specific performance measures of the
business.
The three principal variable pay programs that were utilized in 1995 to align
executive officer pay reported in this Proxy Statement are briefly described
below:
Executive Performance Incentive Plan (EPIP): This plan, which was
approved by Shareholders at the Company's Annual Meeting on May 18, 1995,
provides the Committee with an incentive vehicle to compensate eligible
executives for significant contributions to the performance of the Company
while preserving the tax deductibility of payments made under the Plan even
if an executive's compensation exceeds $1,000,000 in any year as described
in Section 162(m) of the Internal Revenue Code of 1986, as amended. Awards
under the Plan are made from incentive payment pools created by applying
pre-determined percentages to appropriately relevant performance measures
as described in the Plan. These measures and percentages for awards made by
the Committee during 1995 were 2% of the Company's Document Processing
profit before tax (PBT) for the 1995 one-year performance period, 1 1/2% of
14
<PAGE>
cumulative PBT for the three-year performance period commencing in 1995, 3%
of reduction in Financial Services debt for 1995 one-year performance
period and 2.5% of such reduction for the three-year performance period
commencing in 1995. Ten percent (10%) of the resulting incentive payment
PBT pool is payable to the Chief Executive Officer of the Company and five
percent (5%) of the pool is payable to every other participant in the Plan.
Five percent (5%) of the Financial Service debt reduction pool is payable
to Stuart B. Ross, its chief executive officer. The Plan provides the
Committee with discretion to reduce the amount otherwise payable under an
award to any participant to any amount, including zero, except in the case
of a change in control as defined. The amount cannot be increased.
For 1995 the PBT pool amounted to $39,600,000 and the Committee exercised
its discretion by reducing total payments to the executive officers from
the pool of $21,780,000 to $3,729,035.
Annual Performance Incentive Plan (APIP): Under the APIP, executive
officers of the Company may be entitled to receive performance related cash
payments provided that annual, Committee-established performance objectives
are met. At its February 4, 1995 meeting, the Committee approved for each
officer not participating in EPIP, an annual incentive target and maximum
opportunity expressed as a percentage of their March 1, 1995 base salary.
The Committee also established overall Document Processing threshold,
target and maximum measures of performance and associated payment
schedules. The 1995 performance measures were profit before tax (30%),
return on assets (20%), cash generation (20%) and customer and employee
satisfaction (30%). Additional goals were subsequently established for each
officer that included business unit specific and/or individual performance
goals and objectives. The weights associated with each business unit
specific or individual performance goal and objective used vary and range
from 10 percent to 55 percent of the total.
For 1995, the performance against the established measures was mixed. High
level of financial performance was achieved against profit before tax and
return on assets goals. The cash objective and customer and employee
satisfaction were maintained at prior year levels. Overall, executive
officers received payments ranging from 25% to 257% of target bonus
opportunity based on the above Document Processing performance and their
unit specific and/or individual contributions.
Leveraged Executive Equity Plan (LEEP): Under the terms of the 1991 Long-
Term Incentive Plan, the Committee has implemented a three-year plan
beginning in 1995 for key management executives, including most executive
officers, that focuses on the achievement of performance objectives of the
Document Processing business of the Company. When the objectives of the
plan are achieved, shareholder value is enhanced and the plan provides the
management team with an opportunity to realize long-term financial rewards.
LEEP requires that each executive participant must directly or indirectly
maintain an investment in shares of Common Stock of the Company having a
value as of March 1, 1995 of either 100%, 200% or 300% of a participant's
annual base salary. A 1995 award was made under LEEP to approximately 50
key executives that provided for non-qualified stock options for shares of
Common Stock and restricted shares of Common Stock or incentive stock
units, based upon the ratio of five option shares and two restricted shares
of Common Stock or incentive stock units for each share of Common Stock in
which the executive had invested, as described above. The options become
exercisable in three annual cumulative installments beginning in the year
following the award. The incentive stock rights are payable in shares of
Common Stock and the restricted shares become unrestricted in three annual
installments beginning in the year following the award, provided specific
Document Processing earnings per share goals are achieved for each
preceding year. One-third of the non-qualified stock options granted under
the 1995 cycle became exercisable on January 1, 1996.
15
<PAGE>
For 1995 the earnings per share goal was achieved and one-third of the
restricted shares and restricted dividends thereon became non-forfeitable
and one-third of the incentive stock units became vested.
With respect to the previous 1992 LEEP awards, the 1994 Document Processing
return on assets goals were achieved and one-half of the incentive stock
units applicable to 1993 which were carried forward to 1994 and the full
amount of incentive stock units applicable to 1994 vested and became
payable on March 1, 1995. The result was that sixty two and one half
percent of the total 1992 award became payable on that date.
Chief Executive Officer Compensation
The compensation paid to Paul A. Allaire, Chairman of the Board of Directors
and Chief Executive Officer for the performance year 1995 was established by
the Committee at its February 6, 1995 and February 5, 1996 meetings. The
Committee's actions are described below as they relate to each component of Mr.
Allaire's 1995 compensation as reported in the charts and tables that accompany
this report.
Base Salary: Mr. Allaire's base salary was recommended for increase by
the full Board of Directors by the Committee to $875,000 from $775,000
effective March 1, 1995. This action was based on the Committee's review of
competitive data which indicated his base salary was below that reported as
paid to his peers in companies of similar size, scope and complexity.
1995 Bonus: The Committee authorized a payment under the EPIP program,
described above, in the amount of $1,200,000. The amount of bonus
determined utilizing the formula of the EPIP was reduced at the Committee's
discretion to align the payment with the same Company, organizational and
individual performance unit performance measures utilized by the Committee
in determining the payments to other Company executives paid under the
Company's APIP also described above. A portion of the bonus awarded was
approved by the Committee based on its subjective assessment that Mr.
Allaire had performed extremely well against organizational development and
Financial Services divestiture goals which the Committee had established
for Mr. Allaire early in 1995.
Long-Term Incentive: Under the provisions of the LEEP formula described
above, Mr. Allaire vested in the right to exercise an additional one-third
of the non-qualified stock options granted in 1992. Sixty two and one-half
percent of the incentive stock rights also granted in 1992 did vest on
March 1, 1995 because the Company exceeded the return on asset goal for the
performance year 1994. Additionally, one-third of the restricted shares and
dividends thereon awarded under the LEEP with respect to the 1995
performance year became non-forfeitable on March 1, 1996 resulting from the
achievement of EPS goals previously established being achieved.
Detailed information concerning Mr. Allaire's compensation as well as that of
other highly compensated executives is displayed on the accompanying charts and
tables.
Ralph S. Larsen, Chairman
B. R. Inman
Vernon E. Jordan, Jr.
John D. Macomber
John E. Pepper
February 5, 1996
16
<PAGE>
Summary Compensation Table
The Summary Compensation Table below provides certain compensation information
for the Chief Executive Officer and the four most highly compensated key
executive officers (Names Officers) serving at the end of the fiscal year ended
December 31, 1995 for services rendered in all capacities during the fiscal
year ended December 31, 1995, 1994 and 1993. Also included as a Named Officer
is one former key executive officer who would have been one of the four most
highly compensated key executives had he been employed at the end of the fiscal
year. The table includes the dollar value of base salary, bonus earned, option
awards (shown in number of shares) and certain other compensation, whether paid
or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
----------------------------------- -----------------------
Securities
Name and Other Annual Restricted Underlying All Other
Principal Compensation Stock Options/SARs Compensation
Position Year Salary($) Bonus($) (A) ($) (B) ($) (C) (#) (D) ($) (E)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Allaire......... 1995 858,333 3,208,499 184,606 0 119,655 244,678
Chief Executive Officer 1994 775,000 2,519,284 98,000 1,898,750 100,000 154,800
1993 763,330 500,000 53,090 0 50,000 35,461
Addison B. Rand......... 1995 413,333 998,019 111,154 0 37,920 101,315
Executive Vice President 1994 400,000 1,139,055 51,800 0 0 57,476
1993 395,830 80,255 51,890 0 0 12,824
Barry D. Romeril........ 1995 413,341 1,005,080 44,600 0 37,920 130,395
Executive Vice President 1994 400,000 1,520,904 37,100 266,406 0 59,507
1993 216,671 272,500 16,150 373,138 25,995 38,278
Peter van Cuylenburg.... 1995 378,674 860,485 26,000 0 37,920 141,372
Executive Vice President 1994 400,000 1,002,498 26,000 0 0 44,936
1993 200,000 515,000 13,000 0 17,415 25,806
William F. Buehler...... 1995 350,833 920,436 44,500 0 35,600 100,466
Executive Vice President 1994 315,000 1,139,063 38,500 426,250 0 65,466
1993 312,500 102,544 43,750 0 0 26,758
Allan E. Dugan.......... 1995 332,500 835,982 44,500 0 30,540 87,673
Senior Vice President 1994 320,000 953,371 44,500 0 0 53,972
1993 316,670 112,428 34,000 252,875 0 12,892
- -------------------------------------------------------------------------------------------------------
</TABLE>
(A) This column includes bonuses under EPIP and amounts earned under the
Company's 1991 Long-Term Incentive Plan (1991 Plan). The Company and the
Executive Compensation and Benefits Committee view these latter amounts as
long-term incentive compensation, but based upon an interpretation by the
Staff of the SEC to the contrary, the Company is required to reflect these
amounts under this bonus column. The amounts reflected in the bonus column
accrued under the 1991 Plan for 1995, 1994 and 1993, respectively, were as
follows: P.A. Allaire -- $2,108,499, $1,244,284, $0; A.B. Rand -- $668,168,
$661,825, $0; B.D. Romeril -- $668,168, $870,563, $0; P. van Cuylenburg --
$668,168, $583,241, $0; W.F. Buehler -- $625,359, $727,937, $0 and A.E.
Dugan -- $538,139, $529,437, $0. For 1995, this includes the value of the
Restricted Stock and the restricted dividends thereon which became non-
forfeitable as described in note (C) below.
17
<PAGE>
(B) Other Annual Compensation includes executive expense allowance, perquisite
income and dividend equivalents paid on outstanding incentive stock rights.
The amount of perquisite income for Mr. Allaire includes $55,256 for
personal use of Company aircraft and $8,500 for personal financial
planning.
(C) This column reflects incentive stock unit rights awarded under the 1991
Plan or a predecessor plan where each unit represents one share of stock to
be issued upon vesting at attainment of age 60. Each unit is entitled to
the payment of dividend equivalents at the same time and in the same amount
declared on one share of the Company's Common Stock. The number of units
held by the Named Officers and their value as of December 31, 1995 (based
upon the closing market price on that date of $136.50) was as follows: P.A.
Allaire -- 27,000 ($3,685,500), A.B. Rand -- 8,600 ($1,173,900), B.D.
Romeril -- 5,700 ($778,050), W.F. Buehler -- 14,240 ($1,943,760) and A.E.
Dugan -- 8,500 ($1,160,250). Under the 1991 Plan awards of Restricted Stock
were made in 1995 to each of the Named Officers which become non-
forfeitable as to one-third of the total if the Company's Document
Processing earnings per share reach a specified level in each of the years
1995, 1996 and 1997. The 1995 level was reached and one-third of the
shares, together with the restricted dividends thereon, became non-
forfeitable. In view of the SEC Staff position that awards under the 1991
Plan do not constitute long-term compensation, these Restricted Stock
awards are not deemed to be long-term incentive compensation but rather are
bonuses. Accordingly, these shares of Restricted Stock are not reflected in
the Restricted Stock column above. The value of one-third of the shares of
Restricted Stock, and the amount of the restricted dividends thereon, is
reported in the Bonus column above for the year in which the earnings per
share objective is reached. See note (A) above.
(D) The Company no longer issues stock appreciation rights (SARs) in tandem
with options. All of the options granted were awarded under LEEP. As
discussed under the Report of the Executive Compensation and Benefits
Committee above, LEEP is a three-year program.
(E) The total amounts shown in this column for the last fiscal year consist of
the Company's profit sharing contribution, whether under the Profit Sharing
and Savings Plan or its policy of paying directly to the officer the amount
which cannot be made to the Plan under the Employee Retirement Income
Security Act of 1974, and the estimated dollar value of the benefit to the
officer from the Company's portion of insurance premium payments under the
Company's Contributory Life Insurance Plan on an actuarial basis. The
Company will recover all of its premium payments at the end of the term of
the policy, generally at age 65. The amounts were: (a) Mr. Allaire:
$213,333 profit sharing; $31,345 life insurance; (b) Mr. Rand: $89,056
profit sharing; $12,259 life insurance; (c) Mr. Romeril: $93,868 profit
sharing; $36,527 life insurance; (d) Mr. van Cuylenburg: $83,260 profit
sharing; $23,445 life insurance; (e) Mr. Buehler: $76,196 profit sharing;
$24,270 life insurance and (e) Mr. Dugan: $75,643 profit sharing; $12,030
life insurance. In addition, the amount for Mr. van Cuylenburg includes
$34,667 salary continuance during 1995 paid to him in connection with his
termination of employment.
18
<PAGE>
Option Grants
The following table sets forth information concerning awards of stock options
to the Named Officers under the Company's 1991 Plan during the fiscal year
ended December 31, 1995. The amounts shown for potential realizable values are
based upon arbitrarily assumed annualized rates of stock price appreciation of
five and ten percent over the full eight-year term of the options, pursuant to
SEC regulations. Based upon an eight-year option term, this would result in
stock prices of $162.06 and $235.12, respectively. The amounts shown as
potential realizable values for all shareholders represent the corresponding
increases in the market value of 108,343,339 shares outstanding held by all
shareholders as of December 31, 1995. Any gains to the Named Officers and the
shareholders will depend upon future performance of the common stock of the
Company as well as overall market conditions.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term
------------------------------------------------- ------------------------------
Number of
Securities % of Total Exercise
Underlying Options Granted or Base
Options/SARs to Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date 5%($) 10%($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Allaire......... 119,655 6.47% $109.6875 12/31/02 $ 6,266,631 $ 15,008,626
Addison B. Rand......... 37,920 2.05% $109.6875 12/31/02 $ 1,985,965 $ 4,756,400
Barry D. Romeril........ 37,920 2.05% $109.6875 12/31/02 $ 1,985,965 $ 4,756,400
Peter van Cuylenburg.... 37,920 2.05% $109.6875 12/31/02 $ 1,985,965 $ 4,756,400
William F. Buehler...... 30,990 1.68% $109.6875 12/31/02 $ 1,623,784 $ 3,887,153
4,610 0.25% $139.5000 12/31/02 $ 307,049 $ 735,438
Allan E. Dugan.......... 30,540 1.65% $109.6875 12/31/02 $ 1,599,456 $ 3,830,709
- ---------------------------------------------------------------------------------------------------------
All Shareholders........ N/A N/A N/A N/A $5,674,211,522 $13,589,775,869
- ---------------------------------------------------------------------------------------------------------
</TABLE>
1. All options are exercisable 33% on January 1, 1996, 33% on January 1, 1997
and 34% on January 1, 1998.
2. Exercise price is based upon fair market value on the effective date of the
award.
3. Options/SARs may be accelerated as a result of a change in control as
described below.
19
<PAGE>
Option Exercises/Year-End Values
The following table sets forth for each of the Named Officers the number of
shares underlying options and SARs exercised during the fiscal year ended
December 31, 1995, the value realized upon exercise, the number of options/SARs
unexercised at year-end and the value of unexercised in-the-money options/SARs
at year-end.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR AND
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Number Underlying Unexercised In-the-Money
of Shares Options/SARs at Options/SARs at
Underlying FY-End(#) (B) FY-End($) (C)
Options/SARs Value ------------------------- -------------------------
Name Exercised(#) Realized($) (A) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Allaire......... 25,000 $1,795,300 119,585 219,655 $7,524,923 $6,202,000
Addison B. Rand......... 7,000 $ 364,879 7,715 37,920 $ 443,134 $1,016,730
Barry D. Romeril........ 21,995 $1,006,295 0 37,920 $ 0 $1,016,730
Peter van Cuylenburg.... 17,415 $ 567,215 0 37,920 $ 0 $1,016,730
William F. Buehler...... 5,970 $ 179,476 6,000 35,600 $ 344,628 $ 830,919
Allan E. Dugan.......... 7,000 $ 330,689 15,970 30,540 $ 917,285 $ 818,854
- ---------------------------------------------------------------------------------------------------------
</TABLE>
FISCAL YEAR-END OPTION/SAR VALUES
(A) The value realized is based upon the difference between the exercise price
and the average of the high and low prices on the date of exercise.
(B) The value of unexercised options/SARs is based upon the difference between
the exercise price and the average of the high and low prices on December
31, 1995 of $136.50.
(C) Options/SARs may be accelerated as a result of a change in control as
described below.
20
<PAGE>
Retirement Plans
Retirement benefits are provided to the executive officers of the Company
including the Named Officers under both a funded company-wide plan and unfunded
executive supplemental plans. The table below shows, under the plans, the
approximate annual retirement benefit commencing at age 55 or 60, depending
upon employment level at the time one of the supplemental plans was
implemented, which would accrue for the number of years of participation at the
respective salary rates. In the event of a change in control (as defined in the
plans) there is no age requirement for eligibility. For certain key executives
a full benefit is payable at 15 years of participation rather than 30. No
additional benefits are payable for participation in excess of 30 years.
<TABLE>
<CAPTION>
Annual benefits for years of participation indicated
-------------------------------------------------------
Average annual
compensation for five
highest years 15 years 20 years 25 years 30 years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
500,000............... 121,000 162,000 202,000 243,000
600,000............... 146,000 195,000 244,000 293,000
700,000............... 171,000 229,000 286,000 343,000
800,000............... 196,000 262,000 327,000 393,000
900,000............... 221,000 295,000 369,000 443,000
1,000,000............... 246,000 329,000 411,000 493,000
1,100,000............... 271,000 362,000 452,000 543,000
1,200,000............... 296,000 395,000 494,000 593,000
1,300,000............... 321,000 429,000 536,000 643,000
1,400,000............... 346,000 462,000 577,000 693,000
1,500,000............... 371,000 495,000 619,000 743,000
1,600,000............... 396,000 529,000 661,000 793,000
1,700,000............... 421,000 562,000 702,000 843,000
1,800,000............... 446,000 595,000 744,000 893,000
1,900,000............... 471,000 629,000 786,000 943,000
2,000,000............... 496,000 662,000 827,000 993,000
2,100,000............... 521,000 695,000 869,000 1,043,000
2,200,000............... 546,000 729,000 911,000 1,093,000
2,300,000............... 571,000 762,000 952,000 1,143,000
2,400,000............... 596,000 795,000 994,000 1,193,000
2,500,000............... 621,000 829,000 1,036,000 1,243,000
- --------------------------------------------------------------------------------
</TABLE>
The maximum benefit is 50% of the five highest years' annual compensation
reduced by 50% of the primary social security benefit payable at age 65. The
benefits shown are payable on the basis of a straight life annuity and a 50%
survivor annuity for a surviving spouse. The plans provide a minimum benefit of
25% of defined compensation reduced by such social security benefit.
21
<PAGE>
The following individuals have the indicated years of participation in the
plans:
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Years of
Name Participation
----------------------------------------------------------------------------
<S> <C>
Paul A. Allaire ............................................. 29
Addison B. Rand.............................................. 27
Barry D. Romeril............................................. 2
Peter van Cuylenburg......................................... 2
William F. Buehler........................................... 4
Allan E. Dugan............................................... 5
</TABLE>
-----------------------------------------------------------------
Compensation under the plans includes the amounts shown in the salary and bonus
columns under the Summary Compensation Table other than payments under the 1991
Plan to the extent included in the bonus column. The current compensation
covered by the plans for the Named Officers is as follows:
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Covered
Name Current Compensation
----------------------------------------------------------------------------
<S> <C>
Paul A. Allaire....................................... $1,958,333
Addison B. Rand....................................... $ 743,184
Barry D. Romeril...................................... $ 750,253
Peter van Cuylenburg.................................. $ 605,658
William F. Buehler.................................... $ 645,910
Allan E. Dugan........................................ $ 630,343
</TABLE>
-----------------------------------------------------------------
Certain Transactions
There are agreements between the Company and six of its present executive
officers, including Paul A. Allaire and Addision B. Rand, which provide
severance benefits in the event of termination of employment under certain
circumstances following a change in control of the Company (as defined). The
circumstances are termination of the Company other than because of death or
disability commencing prior to a potential change in control (as defined), or
for cause (as defined), or by the officers for good reason (as defined).
Following any such termination, in addition to compensation and benefits
already earned, the officer will be entitled to receive a lump sum severance
payment equal to three times the sum of (A) the greater of (1) the officer's
annual rate of base salary on the date notice of termination is given and (2)
his/her annual rate of base salary in effect immediately prior to the change in
control and (B) the greater of (1) the annual target bonus applicable to such
officer for the year in which such notice is given and (2) the annual target
bonus applicable to such officer for the year in which the change in control
occurs.
Cause for termination by the Company is the: (i) willful and continued failure
of the officer to substantially perform his/her duties, (ii) willful engagement
by the officer in materially injurious conduct to the Company, or (iii)
conviction of any crime which constitutes a felony. Good reason for termination
by the officer includes, among other things: (i) the assignment of duties
inconsistent with the individual's status as an officer or a substantial
alteration in responsibilities, (ii) a reduction in base salary and/or annual
bonus, (iii) the relocation of the officer's principal place of business, (iv)
the failure of the Company to maintain compensation plans in which the officer
participates or to continue providing certain other existing employment
benefits, or (v) disability commencing after a potential change in control. The
agreements also provide that in the event of a potential change in control (as
defined) each officer, subject to the terms of the agreements, will remain in
the
22
<PAGE>
employ of the Company for nine months following the occurrence of any such
potential change in control. The agreements are automatically renewed annually
unless the Company gives notice that it does not wish to extend them. In
addition, the agreements will continue in effect for three years after a change
in control of the Company.
All non-qualified options under the 1991 Plan are accompanied by option
surrender rights, and certain options outstanding under a prior plan are
accompanied by stock appreciation rights. Upon the occurrence of an event
constituting a change in control, as defined in the plan, all such rights
become payable in cash based upon a change in control price as defined in the
plan. The 1991 Plan also provides that upon the occurrence of such an event,
all incentive stock rights and performance unit rights become payable in cash.
In the case of rights payable in shares, the amount of cash is based upon such
change in control price and in the case of rights payable in cash, the cash
value of such rights. Rights payable in cash but which have not been valued at
the time of such an event are payable at the maximum value as determined by the
Executive Compensation and Benefits Committee at the time of the award. Upon
accelerated payment, such rights and any related non-qualified stock options
will be canceled.
From time to time when the Company hires senior experienced executives, special
short-term severance arrangements may be made. Typically, these arrangements
provide for severance pay equal to compensation, for a one- to three-year
period, in the event of involuntary termination during the first two or three
years of employment. At present, Peter van Cuylenburg has such an arrangement.
The Company has established grantor trusts with a bank for the purpose of
paying amounts due under the deferred compensation plan and the agreements with
six executive officers described above, and the unfunded supplemental
retirement plans described above.
23
<PAGE>
Five-Year Performance Comparison
The graph below provides a comparison of Xerox cumulative total shareholder
return with the Standard & Poor's 500 Composite Stock Index and the Business
Week Computers and Peripherals Industry Group, excluding Xerox (Peer Group).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG XEROX, S&P INDEX AND SELECTED PEER GROUP INDEX
<CAPTION>
MEASUREMENT PERIOD S&P SELECTED PEER
(FISCAL YEAR COVERED) XEROX INDEX GROUP INDEX
- --------------------- --------- --------- -------------
<S> <C> <C> <C>
Measurement PT -
1990 $ 100 $ 100 $ 100
FYE 1991 $ 203 $ 130 $ 97
FYE 1992 $ 245 $ 140 $ 83
FYE 1993 $ 286 $ 154 $ 92
FYE 1994 $ 327 $ 156 $ 115
$ 390 $ 172 $ 125
$ 407 $ 194 $ 160
$ 452 $ 203 $ 157
FYE 1995 $ 464 $ 215 $ 165
</TABLE>
This graph assumes the investment of $100 on December 31, 1990 in Xerox common
stock, the S&P 500 Index and the Peer Group common stock, and reinvestment of
quarterly dividends at the monthly closing stock prices. The returns of each
company have been weighted annually for their respective stock market
capitalizations in computing the S&P 500 and Peer Group indices.
24
<PAGE>
DIRECTORS AND OFFICERS LIABILITY INSURANCE AND INDEMNITY
In June 1995 the Company renewed its four existing policies for directors and
officers liability insurance covering all directors and officers of the Company
and its subsidiaries. The policies were issued by Federal Insurance Company,
X.L. Insurance Company, Ltd., A.C.E. Insurance Company, Ltd., and Chubb
Atlantic Ltd., have a term extending from June 11, 1995 to June 11, 1996 and a
total premium of $1,044,000. No claims have been paid under these policies.
SEC REPORTS
There was a failure to file one Form 4, Beneficial Ownership Report, on a
timely basis with the Securities and Exchange Commission as required under
Section 16(a) of the Securities Exchange Act of 1934 on behalf of Mr. Richard
S. Paul, Senior Vice President and General Counsel. The failure was the result
of miscommunication within the Company.
PROPOSAL 2--ELECTION OF INDEPENDENT AUDITORS
The Board of Directors recommends that KPMG Peat Marwick LLP, independent
certified public accountants, be elected independent auditors of the Company
for 1996. The recommendation is made on the advice of the Audit Committee,
composed of B.R. Inman, Ralph S. Larsen, John D. Macomber, Martha R. Seger and
Thomas C. Theobald, all directors but not officers of the Company. KPMG Peat
Marwick LLP is a member of the SEC Practice Section of the American Institute
of Certified Public Accountants. Total fees for services rendered in 1995 by
KPMG Peat Marwick LLP to the Company and its subsidiaries worldwide and certain
of their employee benefit plans were approximately $13.3 million.
Representatives of the firm are expected to be at the meeting to respond to
appropriate questions and to make a statement, if they wish.
PROPOSAL 3--SHAREHOLDER APPROVAL OF INCREASE IN AUTHORIZED SHARES OF COMMON
STOCK OF THE COMPANY
On January 23, 1996 the Board of Directors authorized a three for one Common
Stock split subject to shareholder approval of an increase in the number of
authorized shares of Common Stock. Without an increase, there would be an
insufficient number of shares to effect the stock split. Accordingly, the Board
of Directors has recommended that action be taken by shareholders to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock, $1 par value, from 350,000,000 to 1,050,000,000 shares.
As of March 27, 1996 there were [108,529,664] issued and outstanding, and
[19,362,693] were reserved for issuance in connection with (i) exchange of
Class B shares, (ii) conversion of notes due in 2014, (iii) employees' stock
option and similar plans, (iv) exchange of non-voting exchangeable Class B
shares of Xerox of Canada, Inc. (XCI), (v) upon exercise of Rights under XCI's
Executive Rights Plan and (vi) conversion of Series B Convertible Preferred
Stock held by the Xerox Employee Stock Ownership Plan. Thus, as of March 27,
1996 the maximum number of unreserved shares which may be issued was
[227,444,097] which is insufficient to effect the three for one stock split.
Adoption of the proposed amendment and after effecting the stock split would
provide [682,332,291] shares for future issuance. This is, proportionately, the
same number of shares as was available for future issuance as of March 27, 1996
(i.e., before the stock split). Although these additional unreserved shares
would provide future flexibility, there are no present plans for their use.
25
<PAGE>
The holders of the Company's Common Stock have no preemptive rights as to
additional issues of Common Stock or securities convertible into or entitling
the holder to purchase Common Stock.
The additional shares of Common Stock sought by the amendment will be available
for issuance without further action by shareholders, unless such action is
required by applicable law or the rules of any stock exchange on which the
Company's securities may then be listed. The New York Stock Exchange currently
requires specific shareholder approval as a prerequisite to listing shares in
several instances, including an acquisition transaction where the present or
potential issuance of shares could result in an increase of 18.5% or more in
the number of shares of Common Stock outstanding.
The Board of Directors is of the opinion that the proposed increase in the
number of authorized shares of Common Stock is in the best interest of the
Company and its shareholders. The Board of Directors believes that the Company
should have sufficient authorized but unissued shares for issuance in
connection with stock splits and stock dividends, implementation of employee
benefit plans, offer of shares for cash, mergers and acquisitions, and other
proper business purposes. In many such situations prompt action may be required
which would not permit seeking shareholder approval to authorize additional
shares for the specific transaction on a timely basis. The Board of Directors
believes that it is important to have the flexibility to act promptly in the
best interests of shareholders.
Although the purpose of seeking an increase in the number of authorized shares
of Common Stock is not intended for anti-takeover purposes. SEC rules require
disclosure of charter and by-law provisions that could have an anti-takeover
effect. These include: (i) Board authority under its Certificate of
Incorporation to issue one or more series of preferred stock up to a maximum of
approximately [11] million shares presently available; (ii) under the By-Laws a
special meeting of shareholders may only be called by the Chairman of the Board
or the Board of Directors; (iii) the Series B Convertible Preferred Stock,
which votes with the Common Stock and represents approximately 10% of the
entire voting stock of the Company, is held by the Xerox Employee Stock
Ownership Plan and the trustee for said Plan votes all such shares in all
matters as directed by the employees of the Company on whose behalf such shares
are held by the trustee; and (iv) a shareholder rights plan under the Amended
and Restated Rights Agreement, dated as of February 6, 1989, between Xerox and
Chase Bank, N.A. (rights agreement) which could have a deterrent effect against
a takeover of the Company.
Each new share of Common Stock authorized under the proposal will represent
one-third of a purchase right under the rights agreement which will trade
automatically with the Common Stock and become exercisable only upon the
occurrence of certain events which are fully described in the rights agreement.
In connection with the stock split, and in accordance with the rights
agreement, each outstanding share of Common Stock will represent one-third of a
purchase right instead of one full purchase right prior to the split. Other
adjustments will be made in the purchase rights, including the number of shares
of Common Stock that can be obtained upon exercise under certain circumstances,
the dividend rate on the Series A Cumulative Preferred Stock and its
liquidation value, in order to reflect the three for one stock split.
Increasing the authorized shares is necessary in order to effectuate the three
for one stock split and in the opinion of the Board of Directors is in the best
interest of shareholders.
It is proposed to amend the lead-in paragraph of Article FOURTH of the
Certificate of Incorporation of the Company to read as follows to effect the
increase in authorized shares of Common Stock:
26
<PAGE>
"FOURTH: The aggregate number of shares which the Corporation shall have the
authority to issue is 1,050,000,000 shares of Common Stock, of the par value of
$1.00 each (hereinafter referred to as "Common Stock"), 600,000 shares of Class
B Stock of the par value of $1.00 each (hereinafter referred to as "Class B
Stock"), and 22,543,067 shares of Cumulative Preferred Stock, of the par value
of $1.00 each (hereinafter referred to as "Cumulative Preferred Stock")."
To be adopted, the amendment to the Certificate of Incorporation to increase
the number of authorized shares of Common Stock must be approved by the holders
of a majority of all shares of Common Stock, Class B Stock and Series B
Convertible Preferred Stock outstanding on March 27, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE AMENDMENT.
PROPOSAL 4--SHAREHOLDER APPROVAL OF 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION
PLAN
At its meeting held on February 5, 1996 the Board of Directors approved the
1996 Non-Employee Director Stock Option Plan (option plan) and approved a
revised plan at its meeting held on April 1, 1996. The Board has recommended
that the shareholders adopt the option plan at this meeting. The option plan
was approved by the Board of Directors at the same time that it made a number
of changes in directors' compensation to more closely align directors'
compensation with shareholder value. In addition to approval of the stock
option plan, it repealed the Retirement Income Plan For Directors effective on
May 16, 1996; increased the total fees for service on the Board and committees
of the Board to a single fee of $65,000 from $44,000 Board fee plus $12,000 fee
for service on two committees of the Board; amended the Restricted Stock Plan
For Directors to increase the portion of such fees payable in the form of
common stock of the Company to $25,000 and amended the 1989 Deferred
Compensation Plan For Directors so that Directors with a vested retirement
benefit under the repealed Retirement Income Plan For Directors are credited
with a deferred account equal to the present value of their accrued retirement
benefit under the repealed Plan.
The purpose of the option plan is to increase the ownership interest in the
Company of non-employee directors whose services are considered essential to
the Company's continued progress, to align such interests with those of the
shareholders of the Company and to provide a further incentive to serve as a
Director of the Company. A summary description of the option plan follows. This
description is qualified in its entirety by reference to the full text of the
option plan which is attached to this proxy statement as Exhibit A.
The option plan provides for an automatic annual award of options for 2,500
shares of Common Stock to each person who is a non-employee director following
the annual meeting of shareholders in each year, commencing with the May 16,
1996 annual meeting. The option exercise price is 100% of the fair market value
per share of Common Stock on the date of grant, as defined in the option plan.
Persons elected to the Board between annual meetings are awarded a pro rata
portion of the 2,500 annual option share award for the first year of service.
The option plan covers "non-employee directors" which means a director of the
Company who is neither an employee of the Company nor any subsidiary of the
Company (non-employee director). The option plan authorizes for issuance upon
exercise of options up to 1,000,000 shares of the Company's Common Stock, par
value $1 per share, after giving effect to the stock split authorized by the
Board of Directors at its meeting on January 23, 1996 (Common Stock). To the
extent an outstanding option expires or terminates unexercised or is canceled
or forfeited, the shares subject to the expired, unexercised, canceled or
forfeited portion of such option are available again for grants of options
under the option plan.
27
<PAGE>
Options become cumulatively exercisable as to 33% of the shares subject to the
option commencing at the end of a waiting period, 33% on the first day of the
second year following the waiting period and 34% on the first day of the third
year following the waiting period. The waiting period for this purpose is the
January 1st next following the annual meeting of shareholders. Options remain
exercisable for a period of 10 years (exercise period). Upon the occurrence of
a change in control, as defined, the waiting period terminates and all
outstanding options become fully exercisable in accordance with the other terms
and conditions of the option plan.
Upon exercise the holder of the option must pay the full purchase price under
the option in cash as well as the withholding taxes with respect to such
exercise.
The Board of Directors is authorized to amend the option plan from time to time
provided that such amendment may not adversely change the terms and conditions
of an outstanding option without the optionee's consent; the number of shares
subject to an option granted under the option plan, the purchase price
therefor, the date of grant and the termination provisions relating to an
option cannot be amended more than once every six months, with certain
exceptions.
Options awarded under the option plan are not transferable other than by will
or the laws of descent and distribution except pursuant to a domestic relations
order. During the life of the optionee, options under the option plan are
exercisable only by him or her.
If an optionee ceases to be a director of the Company other than by reason of
disability, retirement or death, outstanding options can be exercised only to
the extent that they were exercisable on the date of termination and expire on
the earlier of three months from the date of termination or the expiration of
the exercise period. If an optionee ceases to be a director by reason of
disability or retirement, each option continues to be exercisable in accordance
with its terms. If an optionee dies following termination as a director by
reason of disability or retirement, the option continues to be exercisable
until the earlier of one year following death or expiration of the exercise
period. If the optionee ceases to be a director as a result of death after the
expiration of the waiting period, the option becomes immediately vested and
exercisable at any time within one year of the optionee's death but in no event
after the expiration of the exercise period.
The Company believes that under the present law, the following are the federal
tax consequences generally arising with respect to option grants under the
option plan. The grant of an option will create no tax consequences for an
optionee or the Company. Upon exercising an option, the optionee must recognize
ordinary income equal to the difference between the exercise price and the fair
market value of the stock on the date of exercise. The Company will be entitled
to a deduction for the same amount. The treatment of an optionee on a
disposition of shares acquired through the exercise of an option depends on how
long the shares have been held. Any gain or loss on a later disposition of
shares acquired through the exercise of an option will constitute capital gain
or loss to the optionee equivalent to the difference between the share proceeds
and the aforementioned fair market value. The applicable holding period to
determine whether such gain is long- or short-term is measured from the date of
the option exercise. There will be no tax consequences to the Company in
connection with a disposition of shares acquired under an option.
In the event of any change in the number of issued shares of Common Stock, such
as stock dividend, stock split, recapitalization, reorganization, exchange of
shares, liquidation, combination or other change in corporate structure
affecting the shares of Common Stock, the total number of shares reserved for
issuance under the
28
<PAGE>
option plan will be appropriately adjusted and the number of shares covered by
each outstanding option and the purchase price per share will be appropriately
adjusted. The option plan will be administered by the Company's Office of
Corporate Secretary.
On March 27, 1996 the average between the highest and lowest sale prices per
share of pre-stock split Common Stock on the New York Stock Exchange Composite
Transaction Tape was $xx.xx.
To be adopted, the option plan must be approved by the holders of a majority of
all shares of Common Stock, Class B Stock and Series B Convertible Preferred
Stock outstanding on March 27, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE PLAN.
PROPOSAL 5--SHAREHOLDER APPROVAL OF THE RESTRICTED STOCK PLAN FOR DIRECTORS
As noted above, at its meeting held on February 5, 1996 the Board of Directors
amended the Restricted Stock Plan For Directors to increase the portion of fees
for service on the Board payable in the form of shares of Common Stock to
$25,000, in addition to making a technical amendment with respect to fractions
of shares. At its meeting on April 1, 1996 the Board adopted the 1996 Amended
and Restated Restricted Stock Plan For Directors (restated restricted plan)
which incorporated the amendment adopted at the February 5, 1996 meeting and
made additional amendments, primarily for the purpose of insuring that the
restated restricted plan complies with the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended. The amendments are effective May
16, 1996. The restated restricted plan was originally adopted by the Board in
1988 but has not previously been approved by shareholders. The Board has
determined that it would be desirable to seek shareholder approval of the
restated restricted plan as amended to date.
The purpose of the restated restricted plan is to increase non-employee
director ownership interest in the Company by providing compensation for
service on the Board in the form of shares of Common Stock thus further
aligning the interests of the members of the Board with those of the
shareholders of the Company. A summary description of the restated restricted
plan follows. This description is qualified in its entirety by reference to the
full text of the restated restricted plan which is attached to this proxy
statement as Exhibit B.
Eligible participants under the restated restricted plan are members of the
Board who are not full time employees of the Company or any of its subsidiaries
(participants). The restated restricted plan provides for issuance of shares of
Common Stock at the annual rate of $25,000 automatically in payment of a
portion of the fees for services on the Board (automatic shares) and issuance
of additional shares of stock at the election of the participant with respect
to 100 percent of their annual cash fees for services on the Board (elective
shares). The number of shares issuable are determined by dividing the dollar
amount to be distributed in the form of shares by the fair market value of a
share of the Common Stock on the date the fee is payable. For this purpose fair
market value means the closing price of the Common Stock in consolidated
trading on the last trading day preceding the relevant payment date as reported
in the Wall Street Journal.
Automatic shares are subject to restrictions and the elective shares are
subject to the same restrictions provided that the participant elects to make
such elective shares subject to restrictions (restricted shares). The election
to receive elective shares and to make them restricted must be made prior to
the calendar year the fees for which are to be paid in shares. Shares that are
restricted may not be sold, hypothecated or transferred until the
29
<PAGE>
restrictions lapse. Restrictions lapse upon (a) death, (b) disability, (c)
retirement in accordance with the policy on retirement of non-employee
directors, (d) termination of service with the consent of a majority of the
members of the Board, other than the participant, or (d) a change in control,
as defined. If a participant ceases to be a director for any other reason, the
restricted shares are forfeited and revert to the Company. The certificates
representing restricted shares are held by the Company until lapse of
restrictions but the participant is entitled to all voting, dividend and
distribution rights for such shares.
Whenever shares are to be issued under the restated restricted plan, the
Company has the right to require the recipient to remit to the Company an
amount sufficient to satisfy withholding tax requirements prior to the issuance
or delivery of any certificate for shares.
On March 27, 1996 the closing price per share of the stock on the New York
Stock Exchange Composite Transaction Tape was $xx.xx.
To be approved, the restated restricted plan must be approved by a majority of
the votes cast at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE RESTRICTED STOCK
PLAN.
PROPOSAL 6--SHAREHOLDER PROPOSAL ON MACBRIDE PRINCIPLES
The New York City Police Pension Fund and the New York City Fire Department
Pension Fund, Municipal Building, 1 Centre Street, New York, New York 10007,
which state that they own an aggregate of 97,488 shares of Common Stock of the
Company, have indicated that they will cause a resolution to be introduced from
the floor. Co-sponsoring the resolution, and stating that they own an aggregate
of more than 982,966 additional shares, are the New York State Common
Retirement Fund, the Minnesota State Board of Investment, the Sinsinawa
Dominicans, Inc., the Sisters of the Cross and Passion, the Sisters of Charity
of the Incarnate Word, and Christian Brothers Investment Services, Inc. The
addresses of these co-sponsors are available from the Secretary of the Company
and the SEC upon receipt of any written or oral request. The text of the
resolution and the supporting statement submitted by the co-sponsors is as
follows:
WHEREAS, Xerox Corporation operates a wholly-owned subsidiary in Northern
Ireland, Rank Xerox (UK) Ltd.;
WHEREAS, the ongoing peace process in Northern Ireland encourages us to search
for non-violent means for establishing justice and equality;
WHEREAS, employment discrimination in Northern Ireland has been cited by the
International Commission of Jurists as being one of the major causes of the
conflict in that country;
WHEREAS, Dr. Sean MacBride, founder of Amnesty International and Nobel Peace
laureate, has proposed several equal opportunity employment principles to serve
as guidelines for corporations in Northern Ireland. These include:
1. Increasing the representation of individuals from underrepresented religious
groups in the workforce including managerial, supervisory, administrative,
clerical and technical jobs.
2. Adequate security for the protection of minority employees both at the
workplace and while traveling to and from work.
30
<PAGE>
3. The banning of provocative religious or political emblems from the
workplace.
4. All job openings should be publicly advertised and special recruitment
efforts should be made to attract applicants from underrepresented religious
groups.
5. Layoff, recall, and termination procedures should not in practice, favor
particular religious groupings.
6. The abolition of job reservations, apprenticeship restrictions, and
differential employment criteria, which discriminate on the basis of
religion or ethnic origin.
7. The development of training programs that will prepare substantial numbers
of current minority employees for skilled jobs, including the expansion of
existing programs and the creation of new programs to train, upgrade, and
improve the skills of minority employees.
8. The establishment of procedures to assess, identify and actively recruit
minority employees with potential for further advancement.
9. The appointment of a senior management staff member to oversee the company's
affirmative action efforts and the setting up of timetables to carry out
affirmative action principles.
RESOLVED, Shareholders request the Board of Directors to:
1. Make all possible lawful efforts to implement and/or increase activity on
each of the nine MacBride Principles.
SUPPORTING STATEMENT
- --We believe that our company benefits by hiring from the widest available
talent pool. An employee's ability to do the job should be the primary
consideration in hiring and promotion decisions.
- --Continued discrimination and worsening employment opportunities have been
cited as contributing to support for a violent solution to Northern Ireland's
problems.
- --Implementation of the MacBride Principles by Xerox will demonstrate its
concern for human rights and equality of opportunity in its international
operations.
Please vote your proxy FOR these concerns.
BOARD OF DIRECTORS RECOMMENDATION
Xerox Corporation's policy and practice worldwide are to provide equal
opportunity employment in all locations without regard to race, color,
religious belief, sex, age, national origin, citizenship status, marital
status, sexual orientation or disability.
Northern Ireland is no exception. Through its established equal employment
opportunity program, the Northern Ireland operation essentially complies with
the practices outlined in the MacBride Principles. The Company is an equal
opportunity employer in all job advertisements, and hiring procedures are based
on the experience and
31
<PAGE>
qualifications needed to satisfy individual job requirements. Equal opportunity
is observed for all employees in training, advancement, layoff and recall
procedures. The display of potentially offensive or intimidating religious or
political emblems at the Company's facilities is not permitted. The Company
provides security for all employees at work.
Your Board of Directors believes that adoption of this proposal is not in the
best interest of shareholders. The Company has already taken the steps
necessary to provide equal employment opportunity in Northern Ireland,
regardless of religious affiliation. The Company adheres to both the letter and
the spirit of the "Fair Employment (Northern Ireland) Act of 1989" as well as
the "Code of Practice" promulgated by the Act. The Company is also registered
with the Fair Employment Commission.
In summary, we do not believe that the proposition is warranted, and its
adoption could adversely impact the Company's business in the United Kingdom.
To be adopted, the proposal must be approved by a majority of the votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors does not intend
to present, and has not been informed that any other person intends to present,
any other matter for action at this meeting. If any other matters properly come
before the meeting, it is intended that the holders of the proxies will act in
accordance with their best judgment.
In addition to the solicitation of proxies by mail, certain employees of the
Company, without extra remuneration, may solicit proxies. The Company also will
request brokerage houses, nominees, custodians and fiduciaries to forward
soliciting material to the beneficial owners of stock held of record and will
reimburse such person for the cost of forwarding the material. The Company has
engaged D.F. King & Co., Inc. to handle the distribution of soliciting material
to, and the collection of proxies from, such entities and will pay D.F. King &
Co. a fee of $21,000 plus reimbursement of out-of-pocket expenses. The cost of
all proxy solicitation will be borne by the Company.
As a matter of policy, proxies, ballots and voting tabulations that identify
individual shareholders are kept confidential by the Company. Such documents
are available for examination only by the inspectors of election and certain
employees of the Company and the Company's transfer agent who are associated
with processing proxy cards and tabulating the vote. The vote of any
shareholder is not disclosed except in a contested proxy solicitation or as may
be necessary to meet legal requirements.
Copies of the 1995 annual report of the Company have been mailed to
shareholders. Additional copies and additional information, including the
annual report (Form 10-K) filed with the SEC and the consolidated statistical
data contained in the EEO-1 annual report to the U.S. Equal Employment
Opportunity Commission are available without charge from Investor Relations,
Xerox Corporation, P.O. Box 1600, Stamford, Connecticut 06904.
32
<PAGE>
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
In order for shareholder proposals to be included in the proxy statement and
form of proxy for the 1997 Annual Meeting of Shareholders, such proposals must
be received by the Company at its offices at P.O. Box 1600, Stamford,
Connecticut 06904, Attention: Secretary--no later than December 5, 1996.
By Order of the Board of Directors,
/s/ Eunice M. Filter
Eunice M. Filter
Secretary
April 4, 1996
33
<PAGE>
EXHIBIT A
XEROX CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE I--PURPOSE OF THE PLAN
The purpose of the Xerox Corporation 1996 Non-Employee Director Stock Option
Plan ("Plan") is to increase the ownership interest in the Company of non-
employee directors whose services are considered essential to the Company's
continued progress, to align such interests with those of the shareholders of
the Company and to provide a further incentive to serve as a director of the
Company.
ARTICLE II--DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
2.1 "1996 Annual Meeting" means the annual meeting of shareholders of the
Company scheduled to be held on May 16, 1996, or any adjournment thereof.
2.2 "Award Summary" means the award summary delivered by the Administrator to
each Non-Employee Director upon grant of an Option under the Plan.
2.3 "Board" means the Board of Directors of Xerox Corporation.
2.4 "Change in Control" shall be deemed to have occurred if (A) any "person",
as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by the shareholders of
the Company in substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20 percent or more of the combined voting power of the Company's
then outstanding securities; or (B) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board, including
for this purpose any new director (other than a director designated by a person
who has entered into an agreement with the Company to effect a transaction
described in this Section) whose election or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof.
2.5 "Company" means Xerox Corporation.
2.6 "Exercise Period" means the date which is ten years after the Option
Grant Date of such Option.
2.7 "Fair Market Value" means, with respect to any date, the average between
the highest and lowest sale prices per Share on the New York Stock Exchange
Composite Transactions Tape on such date, provided that if there should be no
sale of Shares reported on such date, the Fair Market Value of a Share on such
date shall be deemed equal to the average between the highest and lowest sale
prices per Share on such Composite Tape for the last preceding date on which
sales of Shares were reported.
A-1
<PAGE>
2.8 "Option" means an option to purchase Shares awarded under Article VIII
which does not meet the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended, or any successor law.
2.9 "Option Grant Date" means the date upon which an Option is granted to a
Non-Employee Director except that for purposes of the Option granted as of the
1996 Annual Meeting, the Option Grant Date shall be on the effective date of
the Stock Split.
2.10 "Optionee" means a Non-Employee Director of the Company to whom an
Option has been granted.
2.11 "Non-Employee Director" means a director of the Company who is neither
an employee of the Company nor any subsidiary of the Company.
2.12 "Plan" means the Xerox Corporation 1996 Non-Employee Director Stock
Option Plan, as amended and restated from time to time.
2.13 "Shares" means shares of the Common Stock, par value $1.00 per share, of
the Company after giving effect to the three for one stock split declared by
the Board of Directors on January 23, 1996 subject to shareholder approval of
an increase in the number of authorized shares of stock at the 1996 Annual
Meeting (the "Stock Split").
ARTICLE III--ADMINISTRATION OF THE PLAN
3.1 ADMINISTRATOR OF PLAN. The Plan shall be administered by the Office of
Corporate Secretary ("Administrator").
3.2 AUTHORITY OF THE ADMINISTRATOR. Except as otherwise provided herein, the
Administrator shall have full power and authority to (i) interpret and construe
the Plan and to adopt such rules and regulations it shall deem necessary and
advisable to implement and administer the Plan and (ii) designate persons to
carry out his or her responsibilities, subject to such limitations,
restrictions and conditions as he or she may prescribe, such determinations to
be made in accordance with the Administrator's best business judgment as to the
best interests of the Company and its shareholders and in accordance with the
purposes of the Plan subject to applicable conditions of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3"). The Administrator
may delegate administrative duties under the Plan to one or more agents as he
or she shall deem necessary or advisable.
ARTICLE IV--AWARDS UNDER THE PLAN
Awards in the form of Options shall be granted to Non-Employee Directors in
accordance with Article VIII. Each Option granted under the Plan shall be
evidenced by an Award Summary.
ARTICLE V--ELIGIBILITY
Non-Employee Directors of the Company shall be eligible to participate in the
Plan in accordance with Article VIII.
ARTICLE VI--SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Article XI, the aggregate number of
Shares which may be issued upon the exercise of Options shall not exceed
1,000,000 Shares. To the extent an outstanding Option expires or terminates
unexercised or is canceled or forfeited, the Shares subject to the expired,
unexercised, canceled or forfeited portion of such Option shall again be
available for grants of Options under the Plan.
A-2
<PAGE>
ARTICLE VII--NON-TRANSFERABILITY OF OPTIONS
All Options under the Plan will be nontransferable and shall not be
assignable, alienable, salable or otherwise transferable by the Optionee other
than by will or the laws of descent and distribution except pursuant to a
domestic relations order entered by a court of competent jurisdiction or as
otherwise determined by the Administrator. During the life of the Optionee,
Options under the Plan shall be exercisable only by him or her.
If so permitted by the Administrator, an Optionee may designate a beneficiary
or beneficiaries to exercise the rights of the Optionee under this Plan upon
the death of the Optionee. However, any contrary requirement of Rule 16b-3
under the 1934 Act or any successor rule shall prevail over the provisions of
this section.
ARTICLE VIII--OPTIONS
Each Non-Employee Director shall be granted Options, subject to the following
terms and conditions:
8.1 TIME OF GRANT. On the date of the 1996 Annual Meeting of shareholders of
the Company and, thereafter, on the date of each annual meeting of shareholders
of the Company, each person who is a Non-Employee Director immediately after
such meeting of shareholders shall be granted an Option to purchase 2,500
Shares. Any person elected to the Board subsequent to the 1996 Annual Meeting
at a time other than at any other annual meeting of shareholders who becomes a
Non-Employee Director, upon the date of such election, shall be granted an
Option to purchase a number of Shares determined by multiplying the number set
forth in the preceding sentence by a fraction, the numerator of which shall be
the number of days between the date of such election and the date which is the
first anniversary of the date of the last preceding annual meeting of
shareholders and the denominator of which shall be 365.
8.2 PURCHASE PRICE. The purchase price per Share under each Option granted
pursuant to this Article shall be 100% of the Fair Market Value per Share on
the Option Grant Date.
8.3 OPTION WAITING PERIOD AND EXERCISE DATES. The Shares subject to an Option
may be purchased commencing on the January 1 next following the annual meeting
of shareholders (the "Waiting Period") as follows:
33% of such Shares commencing at the end of the Waiting Period;
33% of such Shares commencing on the first day of the second year following
the Waiting Period; and
34% of such Shares commencing on the first day of the third year following
the Waiting Period.
Subject to Article IX, an Option may be exercised until the end of the
Exercise Period. An Option, or portion thereof, may be exercised in whole or in
part only with respect to whole Shares.
To the extent that an Option is not exercised when it becomes initially
exercisable, it shall not expire but shall be carried forward and shall be
exercisable until the expiration of the Exercise Period. Partial exercise will
be permitted from time to time within the percentage limitation described above
provided that no partial exercise may be for less than twenty Shares.
Upon the occurrence of a Change in Control, the Waiting Period shall
terminate and all outstanding Options shall become immediately fully
exercisable pursuant to the other terms and conditions of the Option until the
expiration of the Exercise Period.
A-3
<PAGE>
8.4 METHOD OF EXERCISING OPTION. The Options may be exercised from time to
time by written notice to the Company, which shall state the election to
exercise the Options and the number of shares with respect to which the Options
are being exercised, and shall be signed by the person exercising the Options.
Such notice must be accompanied by a check payable to the Company in payment of
the full purchase price. After receipt of such notice, the Company will advise
the person exercising the option of the amount of withholding tax which must be
paid under U.S. Federal, and where applicable, U.S., state and local law
resulting from such exercise. Upon receipt of payment of the purchase price and
the withholding tax the Company shall, without transfer or issue tax to the
person exercising the Options, issue a certificate or certificates for the
number of shares covered by such notice of exercise.
ARTICLE IX--TERMINATION OF DIRECTORSHIP
9.1 TERMINATION OF SERVICE. If an Optionee ceases to be a director of the
Company other than by reason of disability, retirement from service on the
Board, or death, each Option held by such Optionee may thereafter be exercised
by such Optionee (or such Optionee's executor, administrator, guardian, legal
representative, beneficiary or similar person) solely to the extent that they
were exercisable on the date of such termination and shall expire on the
earlier of: (i) three months from the date of such termination or (ii)
expiration of the Exercise Period. Options which are not exercisable on the
date the Optionee ceases to be a director of the Company shall terminate.
9.2 DISABILITY, RETIREMENT OR DEATH. If an Optionee ceases to be a director
of the Company by reason of disability or retirement from service on the Board,
each Option held by such Optionee may thereafter be exercised by such Optionee
in accordance with the provisions of Article VIII. If the Optionee dies
following termination of service from the Board by reason of retirement or
disability, outstanding Options shall be exercisable to the extent that they
were exercisable on the date of death by such Optionee's executor,
administrator, guardian, legal representative, beneficiary or similar person
and shall expire on the earlier of: one year following the date of death or
expiration of the Exercise Period. If the Optionee ceases to be a director as a
result of death after the expiration of the Waiting Period for an Option award,
such Option shall be immediately vested and exercisable by the Optionee's legal
representative at any time within one year of the Optionee's death but in no
event after the expiration of the Exercise Period. Options which are not
exercisable on the date the Optionee ceases to be a director of the Company in
accordance with the foregoing shall terminate.
ARTICLE X--AMENDMENT AND TERMINATION
The Board may amend the Plan from time to time or terminate the Plan at any
time; provided, however, that no action authorized by this Article shall
adversely change the terms and conditions of an outstanding Option without the
Optionee's consent and, subject to Article XI, the number of Shares subject to
an Option granted under Article VIII, the purchase price therefor, the date of
grant of any such Option and the termination provisions relating to such
Option, shall not be amended more than once every six months, other than to
comply with changes in the Internal Revenue Code of 1986, as amended, or any
successor law, or the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, or the rules and regulations thereunder.
A-4
<PAGE>
ARTICLE XI--ADJUSTMENT PROVISIONS
11.1 If the Company shall at any time change the number of issued Shares
without new consideration to the Company (such as by stock dividend, stock
split, recapitalization, reorganization, exchange of shares, liquidation,
combination or other change in corporate structure affecting the Shares) or
make a distribution of cash or property which has a substantial impact on the
value of issued Shares, the total number of Shares reserved for issuance under
the Plan shall be appropriately adjusted and the number of Shares covered by
each outstanding Option and the purchase price per Share under each outstanding
Option shall be adjusted so that the aggregate consideration payable to the
Company and the value of each such Option shall not be changed, provided,
however, the Stock Split shall be disregarded for this purpose.
11.2 Notwithstanding any other provision of the Plan, and without affecting
the number of Shares reserved or available hereunder, the Administrator shall
authorize the issuance, continuation or assumption of outstanding Options or
provide for other equitable adjustments after changes in the Shares resulting
from any merger, consolidation, sale of assets, acquisition of property or
stock, recapitalization, reorganization or similar occurrence in which the
Company is the continuing or surviving corporation, upon such terms and
conditions as it may deem necessary to preserve their rights under the Plan.
11.3 In the case of any sale of assets, merger, consolidation or combination
of the Corporation with or into another corporation other than a transaction in
which the Company is the continuing or surviving corporation and which does not
result in the outstanding Shares being converted into or exchanged for
different securities, cash or other property, or any combination thereof (an
"Acquisition"), any Non-Employee Director who holds an outstanding Option shall
have the right (subject to the provisions of the Plan and any limitation
applicable to the Option) thereafter and during the term of the Option, to
receive upon exercise thereof the Acquisition Consideration (as defined below)
receivable upon the Acquisition by a holder of the number of Shares which would
have been obtained upon exercise of the Option or portion thereof, as the case
may be, immediately prior to the Acquisition. The term "Acquisition
Consideration" shall mean the kind and amount of shares of the surviving or new
corporation, cash, securities, evidence of indebtedness, other property or any
combination thereof receivable in respect of one Share of the Company upon
consummation of an Acquisition.
ARTICLE XII--EFFECTIVE DATE
The Plan shall be submitted to the shareholders of the Company for adoption
in accordance with the provisions of Section 505 of the Business Corporation
Law of the State of New York and, if adopted by a majority of all outstanding
shares entitled to vote thereon at the 1996 annual meeting of shareholders,
shall become effective as of the date of adoption by shareholders.
ARTICLE XIII--MISCELLANEOUS PROVISIONS
13.1 GOVERNING LAW. The validity, construction and effect of the Plan and any
actions taken or relating to the Plan shall be determined in accordance with
the laws of the State of New York and applicable Federal law.
A-5
<PAGE>
13.2 SUCCESSORS AND ASSIGNS. The Plan shall be binding on all successors and
permitted assigns of a Non-Employee Director, including, without limitation,
the estate of such Non-Employee Director and the executor, administrator or
trustee of such estate, or any receiver or trustee in bankruptcy or
representative of the Non-Employee Director's creditors.
13.3 GENERAL RESTRICTION. Each Option shall be subject to the requirement
that, if at any time the Administrator shall determine, in its sole discretion,
that the listing, registration or qualification of any Option under the Plan
upon any securities exchange or under any state or federal law, or the consent
or approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Options or the grant
or settlement thereof, such Option may not be exercised or settled in whole or
in part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Administrator.
13.4 FUTURE RIGHTS. No Non-Employee Director shall have any claim or rights
to be granted an Option under the Plan, and no Non-Employee Director shall have
any rights by reason of the grant of any Options under the Plan to continue as
a Director for any period of time, or at any particular rate of compensation.
13.5 RIGHTS AS A SHAREHOLDER. A Non-Employee Director shall have no rights as
a shareholder with respect to shares covered by Options granted hereunder until
the date of issuance of a stock certificate therefor, and no adjustment will be
made for dividends or other rights for which the record date is prior to the
date such certificate is issued.
13.6 FRACTIONS OF SHARES. The Company shall not be required to issue
fractions of shares. Whenever under the terms of the Plan a fractional share
would be required to be issued the Optionee shall be paid in cash for such
fractional share based upon Fair Market Value at the time of exercise of the
Option.
A-6
<PAGE>
EXHIBIT B
XEROX CORPORATION
RESTRICTED STOCK PLAN FOR DIRECTORS
1996 AMENDMENT AND RESTATEMENT
1. NAME OF PLAN. This plan shall be known as the "Xerox Corporation
------------
Restricted Stock Plan For Directors" and is hereinafter referred to as the
"Plan".
2. EFFECTIVE DATE AND TERM. The Plan was originally effective as of January
-----------------------
1, 1988. This amendment and restatement is effective July 1, 1996. The Plan
shall remain in effect until amended or terminated by action of the Board of
Directors (the "Board") of Xerox Corporation, a New York corporation (the
"Company").
3. ELIGIBLE PARTICIPANTS. Each member of the Board from time to time who is
---------------------
not a full time employee of the Company or any of its subsidiaries shall be
eligible participants in the Plan ( the "Participants").
4. Automatic Receipt of Restricted Shares. In accordance with Section 14 of
--------------------------------------
Article II of the By-Laws of the Company, until further action by the Board
commencing with the calendar quarter beginning on July 1, 1996 in addition to
any cash compensation established by the Board of Directors, each Participant
shall be paid annual fees at the rate of $25,000 for service on the Board
payable in shares of Common Stock, par value $1 per share, of the Company (the
"Common Stock") subject to the restrictions set forth in Section 6 hereof. Such
fee shall be payable in equal quarterly installments on the first day of the
month next following the end of each calendar quarter for services on the Board
and any Committee(s) thereof in such calendar quarter. The number of shares of
Common Stock to be issued to each Participant on each payment date shall be
determined by dividing such quarterly installment by the Fair Market Value of
such shares as hereinafter defined. The Board shall have the authority to
change the amount of annual fees for service on the Board payable in shares of
Common Stock under this Section 4 not more frequently than annually.
5. ELECTION TO RECEIVE ADDITIONAL RESTRICTED SHARES. Each Participant shall
------------------------------------------------
have the right to elect, on forms provided by the Company, to receive up to one
hundred percent of their annual fee for services on the Board which would
otherwise be payable in cash (other than fees which have been deferred under
the Company's 1981 Deferred Compensation Plan For Directors), in the form of
shares of Common Stock. Any part of the fee elected to be paid in shares shall
be payable in equal quarterly installments on the first day of the month next
following the end of each calendar quarter for services on the Board in such
calendar quarter. The number of shares to be issued at the time of payment
shall be determined by dividing the amount elected to be taken in the form of
shares by the Fair Market Value of such shares. Such election must be made
prior to the calendar year the fees for which are to be paid in shares but not
less than six months prior to the date any shares are to be distributed in
accordance with such election. The shares receivable under this Section may be
made subject to the restrictions set forth in Section 6 at the election of the
Participant made at the same time the Participant elects to receive shares
under this Section. Elections under this Section shall remain in effect from
year to year until changed by the Participant. No change shall be effective
until the next calendar year and no change shall be effective any earlier than
six months after the date of making such election to change.
B-1
<PAGE>
6. RESTRICTIONS ON SHARES. The shares issued under Section 4, and those
----------------------
issued under Section 5 which are elected to be covered by this Section, shall
be restricted and may not be sold, hypothecated or transferred (including,
without limitation, transfer by gift or donation) except that such
restrictions shall lapse upon:
(a) Death of the Participant;
(b) Disability of the Participant preventing continued service on the
Board;
(c) Retirement of the Participant from service as a Director of the
Company in accordance with the policy on retirement of non-employee
Directors then in effect;
(d) Termination of service as a Director with the consent of a majority
of the members of the Board other than the Participant; or
(e) A Change in Control as hereinafter defined.
If a Participant ceases to be a Director of the Company for any other
reason, the shares issued to such Director subject to this Section shall be
forfeited and revert to the Company.
The certificates for shares which are subject to this Section shall be held
by the Company until lapse of restrictions as provided in this Section,
provided, however, the Participant shall be entitled to all voting, dividend
and distribution rights for such shares.
Participants shall have the right to direct in writing, on forms provided by
the Company, that upon lapse of restrictions in accordance with subsections
(a) through (e) above, the shares held by such Participant under the Plan
shall be transferred and delivered by the Company to the individuals or
entities as specified by the Participant in such form.
7. FAIR MARKET VALUE. The term "Fair Market Value" shall mean the closing
-----------------
price of the Common Stock in consolidated trading on the last trading day
preceding the relevant payment date as reported in the Wall Street Journal.
8. FRACTIONS OF SHARES. Whenever under the terms of the Plan a fractional
-------------------
share would be required to be issued, the number of shares shall be rounded up
to the next highest whole number of shares.
9. CHANGE IN CONTROL. "Change in Control" shall be deemed to have occurred
-----------------
if (A) any "person", as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") other than
the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 20 percent or more of
the combined voting power of the Company's then outstanding securities; or (B)
during any period of two consecutive years, individuals who at the beginning
of such period constitute the Board, including for this purpose any new
director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in this Section)
whose election or nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof.
B-2
<PAGE>
10. WITHHOLDING TAXES. Whenever under the Plan shares are to be issued, the
-----------------
Company shall have the right to require the recipient to remit to the Company
an amount sufficient to satisfy federal, state and local withholding tax
requirements prior to the issuance or delivery of any certificate or
certificates for such shares.
11. GENERAL RESTRICTION. The issuance of shares or the delivery of
-------------------
certificates for such shares to recipients hereunder shall be subject to the
requirement that, if at any time the Chief Financial Officer of the Company
shall reasonably determine, in his discretion, that the listing, registration
or qualification of such shares upon any securities exchange or under any state
or federal law, or the consent or approval of any government regulatory body,
is necessary or desirable as a condition of, or in connection with, such
issuance or delivery thereunder, such issuance or delivery shall not take place
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not reasonably acceptable
to the Chief Financial Officer.
12. AUTHORIZED OR TREASURY SHARES. Shares issuable under the Plan may be
-----------------------------
authorized but unissued shares or may be treasury shares as shall be determined
from time to time by the Chief Financial Officer of the Company.
13. RULE 16B-3. It is the intention that the Plan and the operation thereof
----------
qualify for the exemption provisions contained in Rule 16b-3 adopted by the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended, as in effect from time to time or any successor rule ("Rule"). To
the extent that the implementation or operation of any provision hereof does
not comply with the requirements of the Rule as applicable to the Plan, such
provision shall be inoperative or shall be interpreted, to the extent
practicable, to apply in a manner not inconsistent with the requirements of the
Rule.
B-3
<PAGE>
Notce of
Annual Meeting of Shareholders
and Proxy Statement
1996
[LOGO OF XEROX]
Xerox Corporation
800 Long Ridge Road THE DOCUMENT COMPANY
P.O. Box 1600 XEROX
Stamford, Connecticut 06904
<PAGE>
PRELIMINARY COPY
XEROX CORPORATION
P
R ANNUAL MEETING OF SHAREHOLDERS
O 10:00 A.M. THURSDAY, MAY 16, 1996
X RITZ CARLTON BUCKHEAD, 3434 PEACHTREE ROAD, N.E.
Y ATLANTA, GEORGIA
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints PAUL A. ALLAIRE, RALPH S. LARSEN, JOHN E. PEPPER and
each of them (or, if more than one are present, a majority of those present),
his proxies, with full power of substitution, to represent the undersigned and
to vote the shares of Common Stock of the company which the undersigned is
entitled to vote at the above annual meeting and at all adjournments thereof,
(a) in accordance with the following ballot, and (b) in accordance with their
best judgment in connection with such other business as may come before the
meeting.
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
[X] Please mark
votes as in
this example.
Unless marked otherwise, this proxy will be voted FOR the election of Directors,
FOR election of Auditors, FOR approval of increase in authorized shares of
Common Stock, FOR the 1996 Non-Employee Director Stock Option Plan, FOR approval
of the Restricted Stock Plan For Directors, and AGAINST proposal 6.
1. ELECTION OF DIRECTORS NOMINATED BY THE BOARD (Pages ___ to ___)
Nominees: Paul A. Allaire, B.R. Inman, Vernon E. Jordan Jr.,
Yotaro Kobayashi, Hilmar Kopper, Ralph S. Larsen, John D. Macomber,
George J. Mitchell, N.J. Nicholas, Jr., John E. Pepper, Martha R.
Seger and Thomas C. Theobald.
FOR [_] WITHHELD [_]
ALL FROM ALL
NOMINEES NOMINEES
[_]______________________________________ MARK HERE [_]
For all nominees except as noted above FOR ADDRESS
CHANGE AND
NOTE BELOW
2. ELECTION OF INDEPENDENT AUDITORS (Page ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
3. APPROVAL OF INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
(Pages ___ to ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
4. APPROVAL OF 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Pages ___ to ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
5. APPROVAL OF RESTRICTED STOCK PLAN FOR DIRECTORS
(Pages ___ to ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
- ------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 6.
- ------------------------------------------------------------
6. MACBRIDE PRINCIPLES (Pages ___ to ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
PLEASE SIGN AS IMPRINTED HEREON AND RETURN PROMPTLY.
Signature:__________________________________________ Date:____________________
Signature:__________________________________________ Date:____________________
<PAGE>
PRELIMINARY COPY
VOTING INSTRUCTION
XEROX CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
10:00 A.M. THURSDAY, MAY 16, 1996
RITZ CARLTON BUCKHEAD, 3434 PEACHTREE ROAD, N.E.
ATLANTA, GEORGIA
To State Street Bank & Trust Company, Trustee:
As a participant in the Xerox Corporation Employee Stock Ownership Plan, I
hereby instruct the Trustee to vote the shares of Stock allocated to my Stock
Account and a proportion of the shares held in the Trust which have not yet been
allocated as well as shares for which no instructions have been received (a) in
accordance with the following direction and (b) to grant a proxy to the proxies
nominated by the Board of Directors of the Company giving them discretion in
connection with such other business as may come before the meeting.
-----------
SEE REVERSE
SIDE
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<PAGE>
[X] Please mark
votes as in
this example.
Unless marked otherwise, this voting instruction will be voted FOR the election
of Directors, FOR election of Auditors, FOR approval of increase in authorized
shares of Common Stock, FOR the 1996 Non-Employee Director Stock Option Plan,
FOR approval of the Restricted Stock Plan For Directors, and AGAINST proposal 6.
1. ELECTION OF DIRECTORS NOMINATED BY THE BOARD (Pages ___ to ___)
Nominees: Paul A. Allaire, B.R. Inman, Vernon E. Jordan Jr.,
Yotaro Kobayashi, Hilmar Kopper, Ralph S. Larsen, John D. Macomber,
George J. Mitchell, N.J. Nicholas, Jr., John E. Pepper, Martha R.
Seger and Thomas C. Theobald.
FOR [_] WITHHELD [_]
ALL FROM ALL
NOMINEES NOMINEES
[_]______________________________________ MARK HERE [_]
For all nominees except as noted above FOR ADDRESS
CHANGE AND
NOTE BELOW
2. ELECTION OF INDEPENDENT AUDITORS (Page ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
3. APPROVAL OF INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
(Pages ___ to ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
4. APPROVAL OF 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Pages ___ to ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
5. APPROVAL OF RESTRICTED STOCK PLAN FOR DIRECTORS
(Pages ___ to ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
- ------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 6.
- ------------------------------------------------------------
6. MACBRIDE PRINCIPLES (Pages ___ to ___)
FOR AGAINST ABSTAIN
[_] [_] [_]
PLEASE SIGN AS IMPRINTED HEREON AND RETURN PROMPTLY.
Signature:__________________________________________ Date:____________________
Signature:__________________________________________ Date:____________________
