FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to___________
Commission File Number 1-4471
XEROX CORPORATION
(Exact Name of Registrant as
specified in its charter)
New York 16-0468020 _
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
P.O. Box 1600
Stamford, Connecticut 06904-1600
(Address of principal executive offices)
(Zip Code)
(203) 968-3000 _
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 31,1997
Common Stock 325,888,334 shares
This document consists of 33 pages.
Forward-Looking Statements
From time to time the Registrant and its representatives may
provide information, whether orally or in writing, including
certain statements in this Form 10-Q under "Management's
Discussion and Analysis of Results of Operations and Financial
Condition", which are deemed to be "forward-looking" within the
meaning of the Private Securities Litigation Reform Act of 1995
("Litigation Reform Act"). These forward-looking statements and
other information relating to the Company are based on the
beliefs of management as well as assumptions made by and
information currently available to management.
The words "anticipate", "believe", "estimate", "expect",
"intends", and similar expressions, as they relate to the Company
or the Company's management, are intended to identify forward-
looking statements. Such statements reflect the current views of
the Registrant with respect to future events and are subject to
certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated
or expected. The Registrant does not intend to update these
forward-looking statements.
In accordance with the provisions of the Litigation Reform Act we
are making investors aware that such "forward-looking"
statements, because they relate to future events, are by their
very nature subject to many important factors which could cause
actual results to differ materially from those contained in the
"forward-looking" statements. Such factors include but are not
limited to the following:
Competition - the Registrant operates in an environment of
significant competition, driven by rapid technological advances
and the demands of customers to become more efficient. There are
a number of companies worldwide with significant financial
resources which compete with the Registrant to provide document
processing products and services in each of the markets served by
the Registrant, some of whom operate on a global basis. The
Registrant's success in its future performance is largely
dependent upon its ability to compete successfully in its
currently-served markets and to expand into additional market
segments.
Transition to Digital - presently black and white light lens
copiers represent over half the Registrant's revenues. This
segment of the general office is mature with anticipated
declining industry revenues as the market transitions to digital
technology. Some of the Registrant's new digital products replace
or compete with the Registrant's current light lens equipment.
Changes in the mix of products from light lens to digital, and
the pace of that change as well as competitive developments could
cause actual results to vary from those expected.
Pricing - the Registrant's ability to succeed is dependent upon
its ability to obtain adequate pricing for its products and
services which provide a reasonable return to shareholders.
Depending on competitive market factors, future prices the
Registrant can obtain for its products and services may vary from
historical levels.
Financing Business - a significant portion of the Registrant's
profits arise from the financing of its customers' purchase of
the Registrant's equipment. Presently the Registrant finances
approximately 80% of such equipment purchases in the U.S. and 75%
in Western Europe. The Registrant's ability to provide such
financing at competitive rates and realize profitable spreads is
highly dependent upon its own costs of borrowing which, in turn,
depend upon its credit ratings. Significant changes in such
ratings could reduce the profitability of such financing business
and/or make the Registrant's financing less attractive to
customers thus reducing the volume of financing business done.
The Registrant's present credit ratings permit ready access to
the credit markets and there is no assurance that these credit
ratings can be maintained and/or ready access to the credit
markets can be assured.
Productivity - the Registrant's ability to sustain and improve
its profit margins is largely dependent on its ability to
maintain an efficient, cost-effective operation. Productivity
improvements through process reengineering, design efficiency and
supplier cost improvements are required to offset labor and
materials cost inflation and competitive price pressures.
International Operations - the Registrant derives approximately
half its revenue from operations outside of the United States.
In addition, the Registrant manufactures many of its products
and/or their components outside the United States. The
Registrant's future revenue, cost and profit results could be
adversely affected by a number of factors, including changes in
foreign currency exchange rates, changes in economic conditions
from country to country, changes in a country's political
conditions, trade protection measures, licensing requirements and
local tax issues.
New Products/Research and Development -the process of developing
new high technology products and solutions is inherently complex
and uncertain. It requires accurate anticipation of customers'
changing needs and emerging technological trends. The Registrant
must then make long-term investments and commit significant
resources before knowing whether these investments will
eventually result in products that achieve customer acceptance
and revenues required to provide anticipated returns from these
investments.
Disengagement From Insurance Business - during the process of
disengaging from the insurance segment, the Registrant will
continue to be subject to all the business risks and rewards of
such businesses. Although Registrant believes that the proceeds
received from the disposition of the remaining insurance
businesses will be consistent with the net carrying value of
these businesses, until such remaining insurance companies are
actually sold, no assurances can be given as to the ultimate
impact the remaining insurance companies will have on the
Registrant's total results from operations or whether the
proceeds of sales will equal such carrying value. The insurance
business is subject to cyclical competitive conditions, judicial
decisions affecting insurers' liabilities, and by volatile and
unpredictable developments, including changes in the propensity
of courts to grant large awards, fluctuations in interest rates
and other changes in the investment environment (which affect
market prices of insurance companies' investments, the income
from those investments and inflationary pressures that may tend
to affect the size of losses). In addition, the operating
results of the remaining insurance companies have been
historically influenced by exposure to uncollectible reinsurance,
which had been greater than for most other insurers.
Xerox Corporation
Form 10-Q
September 30, 1997
Table of Contents
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Income 7
Consolidated Balance Sheets 8
Consolidated Statements of Cash Flows 9
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Document Processing 16
Discontinued Operations 23
Capital Resources and Liquidity 26
Hedging Instruments 27
Part II - Other Information
Item 1. Legal Proceedings 29
Item 2. Changes in Securities 29
Item 6. Exhibits and Reports on Form 8-K 29
Signatures 31
Exhibit Index
Computation of Net Income per Common Share 32
Computation of Ratio of Earnings to Fixed Charges 33
By-Laws of Xerox Corporation as amended through June 11, 1997
(filed in electronic form only)
1997 Restatement of Xerox Corporation's Unfunded Retirement
Income Guarantee Plan (filed in electronic form only)
1997 Restatement of Xerox Corporation's Unfunded Supplemental
Retirement Plan (filed in electronic form only)
Table of Contents (Continued)
Xerox Corporation's Deferred Compensation Plan For Directors,
1997 Amendment and Restatement (filed in electronic form only)
Xerox Corporation's Deferred Compensation Plan For Executives,
1997 Amendment and Restatement (filed in electronic form only)
Financial Data Schedule (filed in electronic form only)
For additional information about The Document Company Xerox,
please visit our World-wide Web site at www.xerox.com and select
"Investor Information."
PART I - FINANCIAL INFORMATION
Item I Xerox Corporation
Consolidated Statements of Income
Three months ended Nine months ended
September 30, September 30,
(In millions, except per-share data) 1997 1996 1997 1996
Revenues
Sales $ 2,346 $ 2,165 $ 6,611 $ 6,267
Service and rentals 1,787 1,740 5,394 5,280
Finance income 243 253 749 756
Total Revenues 4,376 4,158 12,754 12,303
Costs and Expenses
Cost of sales 1,281 1,214 3,635 3,496
Cost of service and rentals 929 890 2,740 2,671
Equipment financing interest 128 131 386 386
Research and development expenses 273 261 816 779
Selling, administrative and general
expenses 1,284 1,256 3,752 3,691
Gain on affiliates' sales of stock, net - (11) - (11)
Other, net 31 34 50 65
Total Costs and Expenses 3,926 3,775 11,379 11,077
Income before Income Taxes, Equity Income
and Minorities' Interests 450 383 1,375 1,226
Income taxes 153 138 478 441
Equity in net income of unconsolidated
affiliates 37 30 105 92
Minorities' interests in earnings of
subsidiaries 14 25 75 97
Income from Continuing Operations 320 250 927 780
Discontinued Operations - - - -
Net Income $ 320 $ 250 $ 927 $ 780
Primary Earnings per Share
Continuing Operations $ 0.92 $ 0.71 $ 2.70 $ 2.24
Discontinued Operations - - - -
Primary Earnings per Share $ 0.92 $ 0.71 $ 2.70 $ 2.24
Fully Diluted Earnings per Share
Continuing Operations $ 0.88 $ 0.68 $ 2.57 $ 2.14
Discontinued Operations - - - -
Fully Diluted Earnings per Share $ 0.88 $ 0.68 $ 2.57 $ 2.14
See accompanying notes.
Xerox Corporation
Consolidated Balance Sheets
September 30, December 31,
(In millions, except share data in thousands) 1997 1996
Assets
Cash $ 62 $ 104
Accounts receivable, net 2,129 2,022
Finance receivables, net 4,282 4,386
Inventories 3,092 2,676
Deferred taxes and other current assets 952 964
Total Current Assets 10,517 10,152
Finance receivables due after one year, net 7,096 6,986
Land, buildings and equipment, net 2,287 2,256
Investments in affiliates, at equity 1,434 1,282
Goodwill 1,345 623
Other assets 1,266 1,121
Investment in discontinued operations 3,303 4,398
Total Assets $ 27,248 $ 26,818
Liabilities and Equity
Short-term debt and current portion of
long-term debt $ 3,807 $ 3,536
Accounts payable 476 577
Accrued compensation and benefit costs 717 761
Unearned income 201 208
Other current liabilities 2,103 2,122
Total Current Liabilities 7,304 7,204
Long-term debt 9,015 8,424
Postretirement medical benefits 1,079 1,050
Deferred taxes and other liabilities 2,266 2,429
Discontinued operations liabilities -
policyholders' deposits and other 1,850 2,274
Deferred ESOP benefits (494) (494)
Minorities' interests in equity of subsidiaries 125 843
Company obligated, mandatorily redeemable
preferred securities of subsidiary trust
holding solely subordinated debentures
of the Company 637 -
Preferred stock 709 721
Common shareholders' equity 4,757 4,367
Total Liabilities and Equity $ 27,248 $ 26,818
Shares of common stock issued 325,902 325,902
Shares of common stock outstanding 325,584 323,681
See accompanying notes.
Xerox Corporation
Consolidated Statements of Cash Flows
Nine months ended September 30 (in millions) 1997 1996
Cash Flows from Operating Activities
Income from Continuing Operations $ 927 $ 780
Adjustments required to reconcile income to cash
flows from operating activities:
Depreciation and amortization 517 528
Provisions for doubtful accounts 176 164
Provision for postretirement medical
benefits, net of payments 30 30
Minorities' interests in earnings of subsidiaries 75 97
Undistributed equity in income of affiliated companies(101) (91)
Increase in inventories (723) (747)
Increase in finance receivables (513) (379)
Increase in accounts receivable (166) (242)
Decrease in accounts payable and accrued
compensation and benefit costs (126) (223)
Net change in current and deferred income taxes 108 194
Other, net (183) (434)
Total 21 (323)
Cash Flows from Investing Activities
Cost of additions to land, buildings and equipment (311) (340)
Proceeds from sales of land, buildings and equipment 25 30
Purchase of additional interest in Xerox Limited (812) -
Net change in payables to Discontinued Operations (168) (26)
Total (1,266) (336)
Cash Flows from Financing Activities
Net change in debt 249 1,314
Dividends on common and preferred stock (356) (330)
Proceeds from sale of common stock 130 85
Repurchase of common and preferred stock (116) (257)
Dividends to minority shareholders (5) (1)
Net proceeds from issuance of mandatorily
redeemable preferred stock 637 -
Total 539 811
Effect of Exchange Rate Changes on Cash (7) (2)
Cash Provided (Used) by Continuing Operations (713) 150
Cash Provided (Used) by Discontinued Operations 671 (150)
Decrease in Cash (42) -
Cash at Beginning of Period 104 136
Cash at End of Period $ 62 $ 136
See accompanying notes.
Xerox Corporation
Notes to Consoloidated Financial Statements
1. The consolidated financial statements presented herein have
been prepared by Xerox Corporation ("the Company") in accordance
with the accounting policies described in its 1996 Annual Report
to Shareholders and should be read in conjunction with the notes
thereto.
Effective 1997, Fuji Xerox changed its reporting period from a
fiscal year ending October 20 to a fiscal year ending December
20. The results of operations during the period between the end
of the 1996 fiscal year and the beginning of the new fiscal year
(the stub period) amounted to a gain of $8 million. The gain was
credited to retained earnings.
Effective July 1, 1997, we changed the functional currency for
our Brazilian operation from the U.S. dollar to the Brazilian
Real as we believe that the Brazilian economy is no longer
considered hyperinflationary. The effect of this change is
immaterial to both the Company's results of operations and
financial position in the third quarter.
In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) which are necessary for a fair
statement of operating results for the interim periods presented
have been made. Interim financial data presented herein are
unaudited.
References herein to "we" or "our" refer to Xerox and
consolidated subsidiaries unless the context specifically
requires otherwise.
2. Inventories consist of (in millions):
September 30, December 31,
1997 1996
Finished products $ 1,787 $ 1,570
Work in process 125 80
Raw materials and supplies 446 322
Equipment on operating leases, net 734 704
Total $ 3,092 $ 2,676
3. In June, 1997, we acquired the remaining 20 percent of Xerox
Limited (formerly Rank Xerox Limited) from The Rank Group Plc
(Rank) in a transaction valued at 940 million pounds sterling, or
approximately $1.5 billion. As a result of this transaction, we
now own 100 percent of Xerox Limited. The transaction was funded
entirely by debt consisting of 500 million pounds sterling of
third party debt and 440 million pounds sterling of notes payable
issued to Rank, which will be paid in deferred installments, half
within one year and the other half at the end of two years. An
additional payment of up to 60 million pounds sterling would be
made in 2000 based upon achievement of certain significant Xerox
Limited earnings growth targets by 1999. The purchase price was
allocated such that goodwill increased by $737 million, minority
interest in equity of subsidiaries was reduced by approximately
$720 million, with the balance of $70 million applied to other
assets and liabilities, primarily investment in affiliates, at
equity.
4. In January 1997, a trust sponsored and wholly owned by the
Company issued 650,000 shares of 8% Capital Securities (the
Preferred Securities) with an aggregate liquidation amount of
$650 million to the public for net proceeds, after discount and
fees, of $637 million. The trust also issued 20,103 shares of
common securities to the Company. The proceeds from these
offerings were invested by the trust in $650 million aggregate
principal amount of the Company's newly-issued 8% Junior
Subordinated Debentures due 2027 (the Debentures). The
Debentures represent all of the assets of the trust. The
proceeds from the issuance of the Debentures were used by the
Company for general corporate purposes. The Debentures and
related income statement effects are eliminated in the Company's
consolidated financial statements.
The Preferred Securities accrue and pay cash distributions semi-
annually at a rate of 8% per annum of the stated liquidation
amount of $1,000 per Preferred Security. The Company has
guaranteed, on a subordinated basis, distributions and other
payments due on the Preferred Securities (the Guarantee). The
Guarantee, when taken together with the Company's obligations
under the Debentures and in the indenture pursuant to which the
Debentures were issued and the Company's obligations under the
Amended and Restated Declaration of Trust governing the trust,
provides a full and unconditional guarantee of amounts due on the
Preferred Securities.
The Preferred Securities are mandatorily redeemable upon the
maturity of the Debentures on February 1, 2027, or earlier to the
extent of any redemption by the Company of any Debentures. The
redemption price on February 1, 2027 will be $1,000 per share
plus accrued and unpaid distributions to the date fixed for
redemption.
5. Common shareholders' equity consists of (in millions):
September 30, December 31,
1997 1996
Common stock $ 327 $ 327
Additional paid-in-capital 1,354 1,353
Retained earnings 3,656 3,090
Net unrealized gain (loss) on
investment securities 5 (1)
Translation adjustments (506) (241)
Treasury stock (79) (161)
Total $ 4,757 $ 4,367
6. Interest expense totaled $450 million and $446 million for
the nine months ended September 30, 1997 and 1996, respectively.
7. In 1996, the Board of Directors authorized the Company to
repurchase up to $1 billion of Xerox common stock. The stock
would be purchased from time to time on the open market depending
on market conditions. Through September 30, 1997, 8.5 million
shares had been repurchased for $422 million, some of which had
been reissued to satisfy the exercise of stock options. In the
second quarter of 1997, the repurchase program was suspended in
connection with the acquisition of the remaining interest in
Xerox Limited, as described above.
8. Summarized operating results of Insurance follow (in
millions):
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
Revenues
Insurance premiums earned $ 285 $ 433 $1,090 $1,287
Investment and other income 90 112 313 325
Total Revenues 375 545 1,403 1,612
Costs and Expenses
Insurance losses and loss expenses 252 349 1,173 1,054
Insurance acquisition costs and
other operating expenses 100 178 377 461
Interest expense 40 50 138 153
Administrative and general expenses 45 10 17 19
Total Costs and Expenses 437 587 1,705 1,687
Realized Capital Gains 2 - 9 2
Income (Loss) Before Income Taxes (60) (42) (293) (73)
Income Tax Benefits 14 16 79 31
Income (Loss) From Insurance * $ (46) $ (26) $ (214) $ (42)
* The above operating results exclude the gains and losses related to sales
of the Insurance subsidiaries. All results, including the sale-related
impacts, were charged to reserves established for this purpose and,
therefore, did not impact our earnings.
The net assets at September 30, 1997 and December 31, 1996 of the
Insurance businesses included in our consolidated balance sheets
as discontinued operations are as follows (in millions):
September 30, December 31,
1997 1996
Insurance Assets
Investments $ 5,850 $ 7,889
Reinsurance recoverable 1,974 2,458
Premiums and other receivables 646 1,082
Deferred taxes and other assets 806 1,201
Total Insurance Assets $ 9,276 $12,630
Insurance Liabilities
Unpaid losses and loss expenses $ 6,453 $ 8,572
Unearned income 565 812
Notes payable 200 215
Other liabilities 882 1,185
Total Insurance Liabilities $ 8,100 $10,784
Investment in Insurance, net $ 1,176 $ 1,846
9. Litigation
Continuing Operations
On March 10, 1994, a lawsuit was filed in the United States
District Court for the District of Kansas by two independent
service organizations (ISOs) in Kansas City and St. Louis and
their parent company. Plaintiffs claim damages predominately
resulting from the Company's alleged refusal to sell parts for
high volume copiers and printers to plaintiffs prior to 1994. The
Company's policies and practices with respect to the sale of
parts to ISOs were at issue in an antitrust class action in
Texas, which was settled by the Company during 1994. Claims for
individual lost profits of ISOs who were not named parties, such
as the plaintiffs in the Kansas action, were not included in that
class action. In their complaint plaintiffs allege monetary
damages in the form of lost profits in excess of $10 million (to
be trebled) and injunctive relief. In a report prepared,
pursuant to Rule 26(a)2)B)of the Federal Rules of Civil
Procedure, an accountant retained by plaintiffs as an expert has
indicated that he plans to testify at trial that, allegedly as a
result of Xerox' conduct, plaintiffs have lost profits of
approximately $75 million. The Company has asserted counterclaims
against the plaintiffs alleging patent and copyright
infringement, misappropriation of Xerox trade secrets and
conversion. On December 11, 1995, the District Court issued a
preliminary injunction against the parent company for copyright
infringement. On April 8, 1997, the District Court granted
partial summary judgment in favor of the Company on plaintiffs'
antitrust claims, ruling that the Company's unilateral refusal to
sell or license its patented parts cannot give rise to antitrust
liability. The Court's ruling did not preclude a finding of
antitrust liability based upon other allegations of exclusionary
conduct, including the refusal to sell unpatented parts. The
District Court also granted summary judgment in favor of the
Company on its patent infringement claim, leaving open with
respect to patent infringement only the issues of willfulness and
the amount of damages, and granted partial summary judgment in
favor of the Company with respect to some of its claims of
copyright infringement. On July 17, 1997 the District Court,
pursuant to 28 U.S.C. Section 1292(b), certified its April 8,
1997 Order for interlocutory appeal to the United States Court of
Appeals for the Federal Circuit and stayed trial of the matter
pending remand.
On January 3, 1996, an action was commenced by Barneyscan
Corporation against Registrant, Pixelcraft, Inc., a wholly
owned subsidiary of Registrant, and three individuals, seeking
damages "in excess of $10 million" for breach of contract and
fraud, punitive damages, attorneys' fees and an accounting.
Plaintiff claimed it was entitled to royalties on certain
machines and software sold by Pixelcraft between July 1, 1992
and June 30, 1996. In August 1997, in an amended letter to a
court-appointed mediator, plaintiff expanded its damage claim
by alleging that it was also entitled to royalties in excess of
$400 million for use of Barneyscan technology in conjunction with
Xerox color copiers and printers during that time period.
Pixelcraft admits that Barneyscan is entitled to royalties of
approximately $750,000 from Pixelcraft alone, minus certain
offsets, and no more. Registrant (I) denies any liability to
plaintiff, (ii) denies the use of Barneyscan technology as
alleged by plaintiff, and (iii) asserts that the royalty
calculation used by plaintiff is inconsistent with the facts in
numerous respects. Defendants intend to vigorously defend the
action. There is no trial date.
Discontinued Operations
Farm & Home Savings Association, now part of Mercantile Bank,
(Farm & Home) and certain Talegen Holdings, Inc. insurance
companies (Insurance Companies) entered into an agreement
(Indemnification Agreement) under which the Insurance Companies
are required to defend and indemnify Farm & Home from certain
actual and punitive damage claims being made against Farm & Home
relating to the Brio superfund site (Brio). A number of lawsuits
were filed against Farm & Home in the District Courts of Harris
County, Texas, by several hundred plaintiffs, former residents
of, or students attending school within, a residential
subdivision known as Southbend, seeking both actual and punitive
damages allegedly relating to injuries arising out of the
hazardous substances at Brio. The Insurance Companies have been
defending these cases under a reservation of rights because it is
unclear whether certain of the claims fall under the coverage of
either the policies or the Indemnification Agreement. On August
29, 1997 the trial court granted motions for summary judgment
filed on behalf of Farm & Home dismissing the claims of
approximately 640 plaintiffs, finding that Farm & Home owed no
duty to the plaintiffs as a matter of law. As a result of that
ruling, the parties consummated a previously agreed settlement,
under which all but approximately 50 of the pending bodily injury
claims have been settled, and no appeal will be taken from the
trial court's ruling. The final group of 50 plaintiffs have also
agreed to a settlement which is to be submitted for court
approval in November 1997. After all of the properties within
Southbend were acquired by the Insurance Companies, all of the
structures were demolished. Ownership of the land has been
transferred to an unrelated third party, which has agreed to
indemnify the Insurance Companies for any liability arising after
the conveyance.
Item II Xerox Corporation
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Document Processing
Summary
Income from continuing operations increased 28 percent to $320
million in the 1997 third quarter from $250 million in the 1996
third quarter. For the first nine months, income from continuing
operations increased 19 percent to $927 million.
Revenues of $4.4 billion in the quarter represented 9 percent
growth on a pre-currency basis. After the adverse effect of
currency, revenue growth was 5 percent. The pre-currency revenue
growth was driven by 21 percent growth in equipment sales
(excluding OEM sales) and 31 percent growth in document
outsourcing. For the first nine months, revenues of $12.8
billion represented 6 percent growth on a pre-currency basis or 4
percent after the adverse effect of currency.
Fully diluted earnings per share increased 29 percent to $0.88 in
the third quarter. For the first nine months of 1997, fully
diluted earnings per share increased 20 percent to $2.57.
Pre-Currency Growth
To understand the trends in the business, we believe that it is
helpful to adjust revenue and expense growth (except for ratios)
to exclude the impact of changes in the translation of foreign
currencies into U.S. dollars. We refer to this adjusted growth
as "pre-currency growth."
A substantial portion of our consolidated revenues is derived
from operations outside of the United States where the U.S.
dollar is not the functional currency, primarily in Europe. When
compared with the average of the major European currencies on a
revenue weighted basis, the U.S. dollar was approximately 11
percent stronger in the 1997 third quarter than in the 1996 third
quarter; only the pound sterling was stronger. As a result,
currency translation had an unfavorable impact of approximately 4
percentage points on total revenues in the 1997 third quarter.
Revenues denominated in currencies where the local currency is
the functional currency are not hedged for purposes of
translation into U.S. dollars.
Revenues
For the major product categories, the pre-currency revenue growth
rates are as follows:
1996 1997 _
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3
Total Revenues 4% 6% 5% 8% 6% 5% 6% 9%
Digital Products 19 21 23 26 23 18 24 26
Light Lens Copiers - - (4) - (1) (2) (3) 1
Digital product revenues grew 26 percent in the 1997 third
quarter following 24 percent growth in the second quarter and 18
percent growth in the first quarter. These revenues represent 35
percent of total revenues in the 1997 third quarter compared with
30 percent in the 1996 third quarter. Color copying and printing
grew 48 percent with continued excellent growth in the DocuColor
40, the Company's 40 page-per-minute color document production
system. Orders and installations of the new black and white
Document Centre digital copiers introduced in April continue to
exceed our expectations, and these copiers were supply
constrained in the third quarter. Production publishing grew 19
percent in the 1997 third quarter compared with 9 percent growth
in the 1997 second quarter, primarily as a result of excellent
customer demand for the new 180 page-per-minute DocuTech
Production Publisher. Computer printing grew 4 percent in the
1997 third quarter following two quarters of unusually strong
growth.
Despite continuing pricing pressures, black-and-white light lens
copier revenues grew 1 percent in the 1997 third quarter compared
with a weak 1996 third quarter, and follows declines of 3 percent
in the second quarter and 2 percent in the first quarter. These
revenues were 51 percent of total revenues in the 1997 third
quarter compared with 55 percent in the 1996 third quarter.
Geographically, the pre-currency revenue growth rates are as
follows:
1996 1997 _
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3
Total Revenues 4% 6% 5% 8% 6% 5% 6% 9%
United States 5 6 5 9 6 6 3 7
Xerox Limited (2) 2 2 2 1 3 6 11
Other Areas 11 10 6 14 10 3 11 11
Memo: Fuji Xerox 13 15 11 11 12 11 4 4
Revenues from the U.S. sales and service operations grew 11
percent in the third quarter driven by excellent digital
equipment sales and strong black and white light lens copier
sales. Lower OEM sales in the 1997 third quarter compared with a
year ago reduced total U.S. revenue growth to 7 percent.
Xerox Limited (formerly Rank Xerox Limited) and related companies
manufacture and market Xerox products principally in Europe.
Overall, the European economies remain soft. However, Holland and
Italy had strong revenue growth in the third quarter and growth
in France and Germany was good. The U.K. had modest growth.
Other Areas include operations principally in Latin America,
Canada and China. Brazil had strong revenue growth in the 1997
third quarter reflecting excellent growth in equipment sales and
document outsourcing. Revenue growth was also excellent in
Mexico, but smaller Latin American countries such as Chile and
Venezuela continue to be impacted by difficult economic
conditions. Revenues in Canada and China were essentially flat
in the third quarter.
Fuji Xerox Co., Ltd., an unconsolidated entity, jointly owned by
Xerox Limited and Fuji Photo Film Company Limited, develops,
manufactures and distributes document processing products in
Japan, Australia, New Zealand, and other areas of the Pacific
Rim. The 1997 third quarter reflects modest growth in Japan, due
to difficult economic conditions, and excellent growth in Fuji
Xerox' other Asian territories.
The pre-currency growth rates by type of revenue are as follows:
1996 1997 _
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3
Total Revenues 4% 6% 5% 8% 6% 5% 6% 9%
Sales 3 6 7 12 7 5 6 12
Equipment(1) 7 9 6 14 10 10 11 21
Supplies 1 8 11 11 8 1 2 2
Paper (2) (7) (12) (7) (7) (9) (1) 8
Service/Rentals/
Outsourcing/Other 5 4 4 4 4 4 5 6
Service 1 (2) (3) (1) (1) (2) 1 2
Rentals 2 2 1 (4) - (11) (8) (10)
Doc. Outsourcing(2) 48 51 51 41 47 41 36 31
Finance Income 1 - 4 1 1 2 5 -
Memo:
Revenues Excluding
Equipment Sales 3 4 2 3 3 2 3 5
(1) Excluding OEM
(2) Excludes equipment in outsourcing contracts that are
accounted for as sales.
Equipment sales in the 1997 third quarter grew 21 percent
reflecting excellent growth in digital products, particularly
color copying and printing, the recently introduced Document
Centre black and white digital copiers, and production
publishing.
Supplies sales: The decline in growth in the first three quarters
of 1997 from the 1996 third and fourth quarters is due
principally to a reduction in sales of OEM printer cartridges
following the buildup of inventory for new products at OEM
customers.
Paper sales: Our strategy is to charge a spread over mill
wholesale prices to cover our costs and value added as a
distributor. Good revenue growth in the 1997 third quarter
reflects volume increases partially offset by moderating
industry-wide domestic price declines.
Combined service, rental, document outsourcing and other revenue
growth improved to 6 percent in the 1997 third quarter. The 31
percent growth in document outsourcing (excluding equipment in
outsourcing contracts accounted for as sales) continued to divert
revenues from service, rentals, finance income and supplies.
Service revenues grew 2 percent as the impact of higher machine
populations resulting from recent higher equipment sales was
partially offset by competitive price pressures. Rental revenues
continued to decline, due primarily to Latin American customers'
preference for purchase or document outsourcing rather than
rental.
Document Outsourcing revenues are included in Equipment Sales as
well as in Service/Rental/Document Outsourcing/Other. Where
document outsourcing contracts include revenue accounted for as
equipment sales, this revenue is included as Equipment Sales on
the income statement. All other document outsourcing revenue,
including service, equipment rental, supplies, paper, and labor,
are included in Service/Rentals/Outsourcing/Other on the income
statement. Growth in total document outsourcing revenue is
higher than the growth included in
Service/Rentals/Outsourcing/Other, reflecting an increase in the
proportion of equipment in outsourcing contracts accounted for as
sales.
Finance income: Our strategy for financing equipment sales in the
industrialized economies is to charge a spread over our cost of
borrowing and to lock in that spread by match funding the finance
receivables with borrowings of similar maturities. Good growth in
the financing of equipment sales in the U.S. and Latin America
has been partially offset by lower average interest rates.
Gross Profit and Expenses
The gross margins by revenue stream were as follows:
1996 1997 _
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3
Total Gross
Margin 46.0% 47.9% 46.2% 47.1% 46.9% 46.5% 47.8% 46.6%
Sales 42.9 45.7 43.9 45.4 44.6 43.2 46.2 45.4
Service/Rent/
DocOut 49.0 50.4 48.8 49.3 49.4 49.9 49.7 48.0
Financing 49.0 49.5 48.3 51.0 49.5 48.9 49.2 47.3
The total gross margin increased by 0.4 percentage points in the
1997 third quarter from the 1996 third quarter.
The sales gross margin improved by 1.5 percentage points from the
1996 third quarter principally due to product mix and
productivity, partially offset by competitive pricing pressures.
The service, rentals and document outsourcing gross margin
declined by 0.8 percentage points from the 1996 third quarter due
primarily to continued pricing pressures and adverse currency
partially offset by productivity.
Research and development (R&D) expense increased 4 percent in the
1997 third quarter as we continue to invest in technological
development to maintain our premier position in the rapidly
changing document processing market. Xerox R&D is strategically
coordinated with that of Fuji Xerox which invested $537 million
in R&D in the 1996 full year, for a combined total of $1.6
billion.
Selling, administrative and general expenses (SAG) increased 5
percent in the 1997 third quarter. SAG was 29.4 percent of
revenue in the 1997 third quarter, a decrease of 0.8 percentage
points from the 1996 third quarter, primarily due to productivity
initiatives and expense controls.
Worldwide employment increased by 1,000 in the 1997 third quarter
to 90,100, primarily as a result of the net hiring of 500
employees for the company's fast-growing document outsourcing
business, 200 for increased sales coverage, and 200 for volume
related manufacturing.
The $3 million decrease in other expenses, net, from the 1996
third quarter was due to the non-recurrence of several one-time
charges in 1996 partially offset by increased non-financing
interest expense associated with our June 1997 acquisition of the
Rank Group's remaining interest in Xerox Limited. Also, we
reduced debt with the proceeds from $650 million of mandatorily
redeemable preferred stock issued through a trust in January
1997. This partially offset the increase in non-financing
interest expense because the after-tax impact of the dividend on
these securities is included in the income statement in
Minorities' Interests in the Earnings of Subsidiaries.
Income Taxes, Equity in Net Income of Unconsolidated Affiliates
and Minorities' Interests in the Earnings of Subsidiaries
Income before income taxes increased 18 percent to $450 million
in the 1997 third quarter from $383 million in the 1996 third
quarter.
The effective tax rate was 34.2 percent in the 1997 third quarter
compared with 36.0 percent in the 1996 third quarter. The
effective tax rate for the 1997 first nine months is 34.8 percent
and we expect the 1997 full-year tax rate to be in line with the
first nine months.
Equity in the net income of unconsolidated affiliates is
principally the Xerox Limited share of Fuji Xerox income. Total
equity in net income increased in the 1997 third quarter as the
underlying growth in Fuji Xerox was partially offset by the
adverse impact of currency translation.
Minorities' interests reduction in the 1997 third quarter was due
to our acquisition of the remaining interest in Xerox Limited,
effective in June, partially offset by the after tax impact of
the dividend on the mandatorily redeemable preferred stock
discussed above.
Effective July 1, 1997, we changed the functional currency for
our Brazilian operation from the U.S. dollar to the Brazilian
Real because we believe the Brazilian economy is no longer
considered hyperinflationary. The effect of this change on our
reported results is immaterial to both the Company's results of
operations and financial position in the 1997 third quarter.
In June 1997, the Company completed the acquisition of The Rank
Group's remaining 20 percent financial interest in Xerox Limited
and related companies for 940 million pounds sterling, or
approximately $1.5 billion. The transaction was funded entirely
by debt consisting of 500 million pounds sterling of third party
debt and 440 million pounds sterling of notes payable issued to
The Rank Group.
In February 1996, the board of directors authorized the
repurchase of up to $1 billion of Xerox common stock. Through the
1997 second quarter, the company had repurchased 8.5 million
shares for $422 million. As a result of the Xerox Limited
transaction, the repurchase program was suspended during the
second quarter as use of the company's financial resources to
fund the $1.5 billion acquisition of The Rank Group's remaining
interest in Xerox Limited produces greater value for Xerox
shareholders.
Effective 1997, Fuji Xerox changed its reporting period from a
fiscal year ending October 20 to a fiscal year ending December
20. The results of operations during the period between the end
of the 1996 fiscal year and the beginning of the new fiscal year
(the stub period) amounted to a gain of $8 million. The gain was
credited directly to retained earnings.
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings Per Share." Commencing with our fourth quarter
reporting, SFAS No. 128 will require us to present basic and
diluted earnings per share (EPS) on the face of the income
statement. The computation of basic EPS replaces primary EPS.
If we had implemented SFAS No. 128 during the third quarter, we
would have reported basic EPS of $0.94 and $2.74 for the quarter
and year to date, respectively, and diluted EPS of $0.89 and
$2.58 for the quarter and year to date, respectively.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" and No. 131, "Disclosures about Segments of
an Enterprise and Related Information." Commencing in 1998, SFAS
No. 130 will require companies to report comprehensive income and
SFAS No. 131 will require companies to report segment performance
as it is used internally to evaluate segment performance. These
statements merely add additional disclosure requirements.
Discontinued Operations
The net investment in the discontinued financial services
businesses which includes Insurance, Other Financial Services and
Third-Party Financing and Real Estate totaled $1,453 million at
September 30, 1997 compared with $2,124 million at December 31,
1996. The decrease primarily reflects the sales of Coregis
Group, Inc. (Coregis) and Industrial Indemnity Holdings, Inc.
(II), somewhat offset by scheduled funding of reinsurance
coverage to the Talegen Holdings, Inc. (Talegen) companies and
The Resolution Group, Inc. (TRG) by Ridge Reinsurance Limited
(Ridge Re) and interest for the period on the assigned debt. A
discussion of the discontinued businesses follows.
Insurance
In 1995, we recorded a $1,546 million after-tax charge in
connection with agreements to sell all of our "Remaining"
insurance companies, which included Coregis, Crum & Forster
Holdings, Inc. (CFI), II, Westchester Specialty Group, Inc.
(WSG), TRG and three insurance-related service companies.
On September 11, 1996, those transactions were terminated. No
additional charges are considered necessary as a result of the
termination. In September 1996, the Board of Directors of Xerox
formally approved a plan of disposal under which we have retained
investment bankers to assist us in the simultaneous disposition
of each of the Remaining insurance and service companies.
During 1997, we made significant progress in the disposition of
these companies, including the completion of the sales of three
of the five Remaining insurance companies as well as the
announced sale agreement for a fourth, and the completed
disposition of one service company. We expect to make an
announcement related to the disposition of the one remaining
insurance company, CFI, within the coming months. Specifically,
during 1997 the following has occurred:
- - In the first quarter, we sold certain assets of Apprise Corp.,
one of Talegen's insurance-related service companies. The
financial terms of this transaction were not material.
- - In the second quarter, we completed the sale of Coregis for
$375 million in cash and the assumption of $75 million in debt.
- - In the third quarter, we completed the sale of II for $365
million in cash, plus the assumption of $79 million in debt.
- - On September 18, 1997, we announced an agreement to sell WSG
for $333 million in cash, less transaction related costs
estimated to be $60 million. This transaction is subject to
customary closing conditions and regulatory approvals and is
expected to close before the end of January 1998.
- - On October 15, 1997 we completed the sale of TRG for $150
million in cash and $462 million in performance-based instruments
to an investor group led by the Chief Executive Officer of TRG.
The selling prices of the disposed companies were consistent with
the estimated values of the units when we discontinued the
insurance operations in 1995. During the disposal process, we
will continue to be subject to all business risks and rewards of
the remaining units. Until the remaining units are actually
sold, no assurances can be given as to the ultimate impact on our
total results from operations or whether the proceeds of sales
will equal their carrying value.
Xerox Financial Services, Inc. (XFSI) continues to provide
aggregate excess of loss reinsurance coverage to the current and
former Talegen/TRG units through Ridge Reinsurance Limited (Ridge
Re), a wholly owned subsidiary. As of October 1997, XFSI is
obligated to pay five remaining annual premium installments of
$45 million, plus finance charges for coverage totaling $1,109
million (which is net of 15 percent coinsurance). At September
30, 1997, Ridge Re had recognized approximately $632 million of
the available coverage.
The net investment in Insurance at September 30, 1997 totaled
$1,176 million compared with a balance of $1,846 million at
December 31, 1996. The decrease primarily reflects the sales of
Coregis and II, somewhat offset by contractual payments to Ridge
Re for annual premium installments and associated finance charges
and interest on the assigned insurance debt.
Property and Casualty Operating Trends
The industry's profitability can be significantly affected by
cyclical competitive conditions, judicial decisions affecting
insurers' liabilities, and by volatile and unpredictable
developments, including changes in the propensity of courts to
grant large awards, fluctuations in interest rates and other
changes in the investment environment (which affect market prices
of insurance companies' investments, the income from those
investments and inflationary pressures that may tend to affect
the size of losses). WSG and CFI's operating results have
historically been influenced by these industry trends, as well as
by their exposure to uncollectible reinsurance, which had been
greater than most other insurers.
Other Financial Services
The net investment in Other Financial Services (OFS) at September
30, 1997 was $124 million compared with $101 million at December
31, 1996. The increase in the investment primarily reflects the
effect of a transfer from Insurance which had no effect on the
total net investment in the discontinued financial services
businesses.
On June 1, 1995, XFSI completed the sale of Xerox Financial
Services Life Insurance Company and related companies (Xerox
Life). In connection with the transaction, OakRe Life Insurance
Company (OakRe), a wholly-owned XFSI subsidiary, assumed
responsibility, via Coinsurance Agreements, for existing Single
Premium Deferred Annuity (SPDA) policies issued by Xerox Life.
The Coinsurance Agreements include a provision for the assumption
(at their election) by the purchaser's companies, of all of the
SPDA policies at the end of their current rate reset periods. A
Novation Agreement with an affiliate of the new owner provides
for the assumption of the liability under the Coinsurance
Agreements for any SPDA policies not so assumed. Other policies
(of Immediate, Whole Life, and Variable annuities as well as a
minor amount of SPDAs) were sold and are now the responsibility
of the purchaser's companies.
As a result of the Coinsurance Agreements, at September 30, 1997,
OakRe retained approximately $1.7 billion of investment portfolio
assets (transferred from Xerox Life) and liabilities related to
the reinsured SPDA policies. Interest rates on these policies
are fixed and were established upon issuance of the respective
policies. Substantially all of these policies will reach their
rate reset periods through the year 2000 and will be assumed
under the Agreements as described above. Xerox Life's portfolio
was designed to recognize that policy renewals extended liability
"maturities," thereby permitting investments with average
duration somewhat beyond the rate reset periods. OakRe's
practice is to selectively improve this match over time as market
conditions allow.
In connection with the aforementioned sale, XFSI established a
$500 million letter of credit and line of credit with a group of
banks to support OakRe's coinsurance obligations. The term of
this letter of credit is five years and it is unused and
available at September 30, 1997. Upon a drawing under the letter
of credit, XFSI has the option to cover the drawing in cash or to
draw upon the credit line.
Third-Party Financing and Real Estate
Third-Party Financing and Real Estate assets at September 30,
1997 totaled $337 million, a $113 million reduction from the
December 31, 1996 level due primarily to the continued run-off
and sales of third-party assets. The proceeds were used to
reduce assigned debt to $134 million at September 30, 1997, a $89
million decrease from the year-end 1996 level.
Capital Resources and Liquidity
Total debt, including ESOP and discontinued operations debt not
shown separately in our consolidated balance sheets, was $13,206
million at September 30, 1997 or $758 million more than at
December 31, 1996. The changes in consolidated indebtedness
since year-end and versus the first nine months of 1996 are
summarized as follows:
(In millions) 1997 1996
Total Debt as of January 1 $12,448 $11,794
Non-Financing Businesses
Document Processing operations 173 553
Discontinued Businesses (506) 132
Total Non-Financing (333) 685
Financing Businesses (106) (15)
Total Operations (439) 670
Shareholder dividends 356 330
Acquisition of Additional Interest in RX 1,534 -
Mandatorily redeemable preferred stock (637) -
Equity redemption and other changes (56) 165
Total Debt as of September 30 $13,206 $12,959
The following table summarizes the changes in total equity during
the first nine months of 1997 and 1996:
(In millions) 1997 1996
Total equity as of January 1 $5,931 $5,396
Income from Continuing Operations 927 780
Shareholder dividends paid (356) (330)
Proceeds from Sale of Common Stock 130 85
Repurchase of common and preferred stock (116) (257)
Purchase of Minority Interest (723) -
Net proceeds from issuance of mandatorily
redeemable preferred stock 637 -
All other, net (202) (15)
Balance as of September 30 $6,228 $5,659
Non-Financing Operations
Operational cash flows are highly seasonal. Due primarily to
profit sharing payments and inventory build up, historically our
operations have used cash in the first half and generated cash
later in the year.
The following table summarizes Document Processing non-financing
operations cash generation and borrowing for the nine months
ended September 30, 1997 and 1996:
Cash Generated/(Borrowed)
Nine Months Ended September 30
(In millions) 1997 1996
Document Processing
Non-Financing:
Income $ 763 $ 663
Depreciation and amortization 517 528
Capital expenditures, net (286) (310)
Working capital/other (1,167) (1,434)
Total $ (173) $ (553)
Nine-month cash usage of $173 million was $380 million less than
in the first nine months of 1996 due primarily to higher net
income, and lower restructuring payments.
Financing Businesses
Financing businesses debt was reduced by $106 million and $15
million during the first nine months of 1997 and 1996,
respectively. This larger decline in 1997 reflects currency
translation effects related to the strength of the U.S. dollar
compared with the major European currencies largely offset by
volume growth.
Hedging Instruments
We have entered into certain financial instruments to manage
interest rate and foreign currency exposures. These instruments
are held solely for hedging purposes and include interest rate
swap agreements, forward exchange contracts and foreign currency
swap agreements. We do not enter into derivative instrument
transactions for trading purposes and we employ long-standing
policies prescribing that derivative instruments only be used to
achieve a set of very limited objectives.
Currency derivatives are primarily arranged in conjunction with
underlying transactions that give rise to foreign currency-
denominated payables and receivables; for example, an option to
buy foreign currency to settle the importation of goods from
suppliers, or a forward exchange contract to fix the U.S. dollar
value of a foreign currency-denominated loan. In addition, when
cost-effective, currency derivatives may be used to hedge balance
sheet exposures.
Revenues denominated in currencies where the local currency is
the functional currency are not hedged.
With regard to interest rate hedging, virtually all customer
financing assets earn fixed rates of interest. We "lock in" an
interest rate spread by arranging fixed-rate liabilities with
similar maturities as the underlying assets. Additionally,
customer financing assets in one currency are consistently funded
with liabilities in the same currency. We refer to the effect of
these conservative practices as "match funding" customer
financing assets. This practice effectively eliminates both the
risk of a major compression in interest margins if interest rates
increase and the opportunity for margin expansion if interest
rates decline.
More specifically, pay fixed-rate and receive variable-rate swaps
are typically used in place of more expensive fixed-rate debt.
Pay variable-rate and receive variable-rate swaps are used to
transform variable-rate medium-term debt into commercial paper or
LIBOR obligations. Additionally, pay variable-rate and receive
fixed-rate swaps are used from time to time to transform longer-
term fixed-rate debt into commercial paper or LIBOR-rate
obligations. The transactions performed within each of these
three categories enable cost-effective management of interest
rate exposures. The potential risk attendant to this strategy is
non-performance of a swap counterparty. We address this risk by
arranging swaps exclusively with a diverse group of strong-credit
counterparties, regularly monitoring their credit ratings,
determining the replacement cost, if any, of existing
transactions, and internally capping related exposures.
Our currency and interest rate hedging is typically unaffected by
changes in market conditions as forward contracts, options and
swaps are normally held to maturity consistent with our objective
to lock in currency rates and interest rate spreads on the
underlying transactions.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The information set forth under Note 9 contained in the "Notes to
Consolidated Financial Statements" on pages 13-15 of this
Quarterly Report, on Form 10-Q, is incorporated by reference in
answer to this item.
Item 2. Changes in Securities
During the quarter ended September 30, 1997, Registrant issued
the following securities in transactions which were not
registered under the Securities Act of 1933, as amended (the
Act):
(a) Securities Sold: on July 1, 1997, Registrant issued 1,393
shares of Common stock, par value $1 per share.
(b) No underwriters participated. The shares were issued to
each of the non-employee Directors of Registrant: B.R.
Inman, A.A.Johnson, V.E. Jordan, Jr., Y. Kobayashi,
H. Kopper, R.S. Larsen, J.D. Macomber, G.J. Mitchell,
N.J. Nicholas, Jr., J.E. Pepper, M.R. Seger and T.C.
Theobald.
(c) The shares were issued at a deemed purchase price of $78.875
per share (aggregate price $109,125), based upon the
market value on the date of issuance, in payment of the
quarterly Directors' fees pursuant to Registrant's
Restricted Stock Plan for Directors.
(d) Exemption from registration under the Act was claimed based
upon Section 4(2) as a sale by an issuer not involving a
public offering.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3(a)(1) Restated Certificate of Incorporation of
Registrant filed by the Department of State of the State of
New York on October 29, 1996. Incorporated by reference to
Exhibit 3(a)(1) to Registrant's Quarterly Report on Form
10-Q for the Quarter Ended September 30, 1996.
Exhibit 3(b) By-Laws of Registrant, as amended through
June 11, 1997 (in electronic form only).
Exhibit 10(e) 1997 Restatement of Registrant's Unfunded
Retirement Income Guarantee Plan (in electronic form only).
Exhibit 10(f) 1997 Restatement of Registrant's Unfunded
Supplemental Retirement Plan (in electronic form only).
Exhibit 10(k) Registrant's Deferred Compensation Plan For
Directors, 1997 Amendment and Restatement (in electronic
form only).
Exhibit 10(l) Registrant's Deferred Compensation Plan For
Executives, 1997 Amendment and Restatement (in electronic
form only).
Exhibit 11 Computation of Net Income per Common Share.
Exhibit 12 Computation of Ratio of Earnings to Fixed
Charges.
Exhibit 27 Financial Data Schedule (in electronic form
only).
(b) A current report on Form 8-K dated June 30, 1997, August 1,
1997 and September 18, 1997 reporting Item 5 "Other Events" was
filed during the quarter for which this Quarterly Report is
filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
XEROX CORPORATION
(Registrant)
_____________________________
Date: November 12, 1997 By Philip D. Fishbach
Vice President and Controller
(Principal Accounting Officer)
Exhibit 11
Xerox Corporation
Computation of Net Income Per Common Share
(Dollars in millions, except per-share data; shares in thousands)
Three months Nine months
ended September 30, ended September 30,
1997 1996 1997 1996
I. Primary Net Income Per Common Share
Income from continuing operations $ 320 $ 250 $ 927 $ 780
Accrued dividends on ESOP preferred
stock, net (11) (11) (33) (32)
Accrued dividends on redeemable
preferred stock - - - (1)
Adjusted income from
continuing operations 309 239 894 747
Discontinued operations - - - -
Adjusted net income $ 309 $ 239 $ 894 $ 747
Average common shares outstanding
during the period 325,237 324,524 324,430 324,578
Common shares issuable with respect
to common stock equivalents for
stock options, incentive and
exchangeable shares 6,520 9,049 6,520 9,049
Adjusted average shares outstanding
for the period 331,757 333,573 330,950 333,627
Primary earnings per share:
Continuing operations $ 0.92 $ 0.71 $ 2.70 $ 2.24
Discontinued operations - - - -
Primary earnings per share $ 0.92 $ 0.71 $ 2.70 $ 2.24
II. Fully Diluted Net Income Per Common Share
Income from continuing operations $ 320 $ 250 $ 927 $ 780
Accrued dividends on redeemable
preferred stock - - - (1)
ESOP expense adjustment, net of tax - - - (1)
Interest on convertible debt,
net of tax 1 - 2 1
Adjusted income from
continuing operations 321 250 929 779
Discontinued operations - - - -
Adjusted net income $ 321 $ 250 $ 929 $ 779
Average common shares outstanding
during the period 325,237 324,524 324,430 324,578
Stock options, incentive and
exchangeable shares 6,760 9,050 6,760 9,050
Convertible debt 2,644 2,644 2,644 2,644
ESOP preferred stock 27,418 28,063 27,418 28,063
Adjusted average shares outstanding
for the period 362,059 364,281 361,252 364,335
Fully diluted earnings per share:
Continuing operations $ 0.88 $ 0.68 $ 2.57 $ 2.14
Discontinued operations - - - -
Fully diluted earnings per share $ 0.88 $ 0.68 $ 2.57 $ 2.14
Exhibit 12
Xerox Corporation
Computation of Ratio of Earnings to Fixed Charges
Nine months ended Year ended
September 30, December 31,
(In millions) 1997 1996 1996 1995 1994 1993* 1992
Fixed charges:
Interest expense $ 450 $ 446 $ 592 $ 603 $ 520 $ 540 $ 627
Rental expense 92 110 140 142 170 180 187
Preferred stock divi-
dend of subsidiary 37 - - - - - -
Total fixed charges
before capitalized
interest 579 556 732 745 690 720 814
Capitalized interest - - - - 2 5 17
Total fixed charges $ 579 $ 556 $ 732 $ 745 $ 692 $ 725 $ 831
Earnings available for
fixed charges:
Earnings** $ 1,480 $1,318 $2,067 $1,980 $1,602 $ (193)$1,183
Less undistributed
income in minority
owned companies (101) (91) (84) (90) (54) (51) (52)
Add fixed charges
before capitalized
interest and
preferred stock
dividend of
subsidiary 542 556 732 745 690 720 814
Total earnings
available for
fixed charges $ 1,921 $1,783 $2,715 $2,635 $2,238 $ 476 $1,945
Ratio of earnings to
fixed charges (1)(2) 3.32 3.21 3.71 3.54 3.23 0.66 2.34
(1) The ratio of earnings to fixed charges has been computed based on the
Company's continuing operations by dividing total earnings available for
fixed charges, excluding capitalized interest, by total fixed charges.
Fixed charges consist of interest, including capitalized interest,
one-third of rent expense as representative of the interest portion of
rentals, and preferred stock dividend requirements of subsidiaries.
Debt has been assigned to discontinued operations based on historical
levels assigned to the businesses when they were continuing operations,
adjusted for subsequent paydowns. Discontinued operations consist of
the Company's Insurance and Other Financial Services businesses and its
real-estate development and third-party financing businesses.
(2) The Company's ratio of earnings to fixed charges includes the effect of
the Company's finance subsidiaries, which primarily finance Xerox
equipment. Financing businesses are more highly leveraged and,
therefore, tend to operate at lower earnings to fixed charges ratio
levels than do non-financial businesses.
* 1993 earnings were inadequate to cover fixed charges. The coverage
deficiency was $249 million.
** Sum of "Income before Income Taxes, Equity Income and Minorities'
Interests" and "Equity in Net Income of Unconsolidated Affiliates."
EXHIBIT 3(B)
BY-LAWS
of
XEROX CORPORATION
June 11, 1997
---------------------
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS: A meeting of shareholders entitled to
vote shall be held for the election of Directors and the transaction of other
business in May of each year on any day (except a Saturday, Sunday, or
holiday) in that month as determined by the Board of Directors.
SECTION 2. SPECIAL MEETINGS: Special Meetings of the shareholders may
be called at any time by the Chairman of the Board, the President or the
Board of Directors.
SECTION 3. PLACE OF MEETINGS: Meetings of shareholders shall be held
at the principal office of the Company or at such other place, within or
without the State of New York, as may be fixed by the Board of Directors.
SECTION 4. NOTICE OF MEETINGS:
(a) Notice of each meeting of shareholders shall be in writing and shall
state the place, date and hour of the meeting. Notice of a Special Meeting
shall state the purpose or purposes for which it is being called and shall
also indicate that it is being issued by or at the direction of the person or
persons calling the meeting. If, at any meeting, action is proposed to be
taken which would, if taken, entitle shareholders, fulfilling the requirements
of Section 623 of the Business Corporation Law to receive payment for their
shares, the notice of such meeting shall include a statement of that purpose
and to that effect.
(b) A copy of the notice of any meeting shall be given, personally or by
mail, not less than ten nor more than fifty days before the date of the
meeting, to each shareholder entitled to vote at such meeting. If mailed,
such notice is given when deposited in the United States mail, with postage
thereon prepaid, directed to the shareholder at his address as it appears on
the record of shareholders, or, if he shall have filed with the Secretary a
written request that notices to him be mailed to some other address, then
directed to him at such other address.
(c) Notice of meeting need not be given to any shareholder who submits a
signed waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of any shareholder at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
SECTION 5. QUORUM AND ADJOURNED MEETINGS:
(a) At any Annual or Special Meeting the holders of a majority of the
shares of stock entitled to vote thereat, present in person or by proxy, shall
constitute a quorum for the transaction of any business, provided that when a
specified item of business is required to be voted on by a class or series,
voting as a class, the holders of a majority of the shares of stock of such
class or series shall constitute a quorum for the transaction of such
specified item of business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any shareholders.
(b) Despite the absence of a quorum, the shareholders present may
adjourn the meeting to another time and place, and it shall not be necessary
to give any notice of the adjourned meeting if the time and place to which the
meeting is adjourned are announced at the meeting at which the adjournment is
taken. At the adjourned meeting any business may be transacted that might
have been transacted on the original date of the meeting. If after the
adjournment, however, the Board of Directors fixes a new record date for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder on the new record date entitled to notice under Section 4 of this
Article I of the By-Laws.
SECTION 6. ORGANIZATION: At every meeting of the shareholders, the
Chairman of the Board, or in his absence, the President, or in his absence, an
Executive Vice President designated by the Chairman of the Board, or in the
absence of such officers, a person selected by the meeting, shall act as
chairman of the meeting. The Secretary or, in his absence, an Assistant
Secretary shall act as secretary of the meeting, and in the absence of both
the Secretary and an Assistant Secretary, a person selected by the meeting
shall act as secretary of the meeting.
SECTION 7. VOTING:
(a) Whenever any corporate action, other than the election of Directors,
is to be taken by vote of the shareholders, it shall, except as otherwise
required by law or by the Certificate of Incorporation be authorized by a
majority of the votes cast at a meeting of shareholders by the holders of
shares entitled to vote thereon.
(b) Directors shall, except as otherwise required by law, be elected by
a plurality of the votes cast at a meeting of shareholders by holders of
shares entitled to vote in the election; provided, however, a nomination shall
be accepted, and votes cast for a nominee shall be counted by the inspectors
of election, only if the Secretary of the Company has received at least
twenty-four hours prior to the meeting a statement over the signature of the
nominee that he consents to being a nominee and, if elected, intends to serve
as a Director.
SECTION 8. QUALIFICATION OF VOTERS:
(a) Every shareholder of record of Common Stock and Series B Convertible
Preferred Stock of the Company shall be entitled at every meeting of such
shareholders to one vote for every share of Common Stock and Series B
Convertible Preferred Stock, respectively, standing in his name on the record
of shareholders.
(b) Shares of stock belonging to the Company and shares held by another
domestic or foreign corporation of any type or kind, if a majority of the
shares entitled to vote in the election of directors of such other corporation
is held by the Company, shall not be shares entitled to vote or to be counted
in determining the total number of outstanding shares.
(c) Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either
in person or by proxy, without transfer of such shares into his name. Shares
held by a trustee may be voted by him, either in person or by proxy, only
after the shares have been transferred into his name as trustee or into the
name of his nominee.
(d) Shares standing in the name of another domestic or foreign
corporation of any type or kind may be voted by such officer, agent or proxy
as the By-Laws of such corporation may provide, or in the absence of such
provision, as the Board of Directors of such corporation may provide.
SECTION 9. PROXIES:
(a) Every shareholder entitled to vote at a meeting of shareholders or
to express consent or dissent without a meeting may authorize another person
or persons to act for him by proxy.
(b) Every proxy must be signed by the shareholder or his attorney-in-
fact. No proxy shall be valid after the expiration of eleven months from the
date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the shareholder executing it, except as otherwise
provided by law.
(c) The authority of the holder of a proxy to act shall not be revoked
by the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or an Assistant
Secretary.
SECTION 10. INSPECTORS OF ELECTION:
(a) The Board of Directors, in advance of any shareholders' meeting,
may appoint one or more inspectors to act at the meeting or any adjournment
thereof. If inspectors are not so appointed, the person presiding at a
shareholders' meeting may, and on the request of any shareholder entitled to
vote thereat, shall, appoint one or more inspectors. In case any person
appointed fails to appear or act, the vacancy may be filled by appointment
made by the Board of Directors in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability.
(b) The inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
SECTION 11. LIST OF SHAREHOLDERS AT MEETINGS: A list of share-holders
as of the record date, certified by the Secretary or by the transfer agent,
shall be produced at any meeting of shareholders upon the request thereat or
prior thereto of any shareholder. If the right to vote at any meeting is
challenged, the inspectors of election, or person presiding thereat shall
require such list of shareholders to be produced as evidence of the right of
the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. POWER OF BOARD AND QUALIFICATION OF DIRECTORS: The
business of the Company shall be managed under the direction of the Board of
Directors, each of whom shall be at least eighteen years of age.
SECTION 2. NUMBER, TERM OF OFFICE AND CLASSIFICATION:
(a) The Board of Directors shall consist of not less than five nor more
than twenty-one members. The number of Directors shall be determined from
time to time by resolution of a majority of the entire Board of Directors then
in office, provided that no decrease in the number of Directors shall shorten
the term of any incumbent Director. At each Annual Meeting of shareholders
Directors shall be elected to hold office until the next annual meeting.
(b) If and whenever six full quarter-yearly dividends (whether or not
consecutive) payable on the Cumulative Preferred Stock of any series shall be
in arrears, in whole or in part, the number of Directors then constituting the
Board of Directors shall be increased by two and the holders of the Cumulative
Preferred Stock, voting separately as a class, regardless of series, shall be
entitled to elect the two additional Directors at any annual meeting of
shareholders or special meeting held in place thereof, or at a special meeting
of the holders of the Cumulative Preferred Stock called as hereinafter
provided. Whenever all arrears in dividends on the Cumulative Preferred Stock
then outstanding shall have been paid and dividends thereon for the current
quarter-yearly dividend period shall have been paid or declared and set apart
for payment, then the right of the holders of the Cumulative Preferred Stock
to elect such additional two Directors shall cease (but subject always to the
same provisions for the vesting of such voting rights in the case of any
similar future arrearages in dividends), and the terms of office of all
persons elected as Directors by the holders of the Cumulative Preferred Stock
shall forthwith terminate and the number of the Board of Directors shall be
reduced accordingly. At any time after such voting power shall have been so
vested in the Cumulative Preferred Stock, the Secretary of the Company may,
and upon the written request of any holder of the Cumulative Preferred Stock
(addressed to the Secretary at the principal office of the Company) shall,
call a special meeting of the holders of the Cumulative Preferred Stock for
the election of the two Directors to be elected by them as herein provided,
such call to be made by notice similar to that provided in the By-Laws for a
special meeting of the shareholders or as required by law. If any such
special meeting required to be called as above provided shall not be called by
the Secretary within twenty days after receipt of any such request, then any
holder of Cumulative Preferred Stock may call such meeting, upon the notice
above provided, and for that purpose shall have access to the stock books of
the Company. The Directors elected at any such special meeting shall hold
office until the next annual meeting of the shareholders or special meeting
held in place thereof. In case any vacancy shall occur among the Directors
elected by the holders of the Cumulative Preferred Stock, a successor shall be
elected to serve until the next annual meeting of the shareholders or special
meeting held in place thereof by the then remaining Director elected by the
holders of the Cumulative Preferred Stock or the successor of such remaining
Director.
(c) All Directors shall have equal voting power.
SECTION 3. ORGANIZATION: At each meeting of the Board of Directors,
the Chairman of the Board, or in his absence, the President, or in his
absence, a chairman chosen by a majority of the Directors present shall
preside. The Secretary shall act as secretary of the Board of Directors. In
the event the Secretary shall be absent from any meeting of the Board of
Directors, the meeting shall select its secretary.
SECTION 4. RESIGNATIONS: Any Director of the Company may resign at
any time by giving written notice to the Chairman of the Board, the President
or to the Secretary of the Company. Such resignation shall take effect at the
time specified therein or, if no time be specified, then on delivery.
SECTION 5. VACANCIES: Newly created directorships resulting from an
increase in the number of Directors and vacancies occurring in the Board of
Directors for any reason may be filled by vote of a majority of the Directors
then in office, although less than a quorum exists. A Director elected to
fill a vacancy shall hold office until the next annual meeting.
SECTION 6. PLACE OF MEETING: The Board of Directors may hold its
meetings at such place or places within or without the State of New York as
the Board of Directors may from time to time by resolution determine.
SECTION 7. FIRST MEETING: On the day of each annual election of
Directors, the Board of Directors shall meet for the purpose of organization
and the transaction of other business. Notice of such meeting need not be
given. Such first meeting may be held at any other time which shall be
specified in a notice given as hereinafter provided for special meetings of
the Board of Directors.
SECTION 8. REGULAR MEETINGS: Regular meetings of the Board of
Directors may be held at such times as may be fixed from time to time by
resolution of the Board of Directors without notice.
SECTION 9. SPECIAL MEETINGS: Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, the
President, or by any two of the Directors. Oral, telegraphic or written
notice shall be given, sent or mailed not less than one day before the meeting
and shall state, in addition to the purposes, the date, place and hour of such
meeting.
SECTION 10. WAIVERS OF NOTICE: Notice of a meeting need not be given
to any Director who submits a signed waiver of notice whether before or after
the meeting, or who attends the meeting without protesting, prior thereto or
at its commencement, the lack of notice to him.
SECTION 11. QUORUM AND MANNER OF ACTING:
(a) If the number of Directors is twelve or more, seven Directors shall
constitute a quorum for the transaction of business or any specified item of
business. If the number of Directors is less than twelve, a majority of the
entire Board of Directors shall constitute a quorum.
(b) A majority of the Directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place without notice to
any Director.
SECTION 12. WRITTEN CONSENTS: Any action required or permitted to be
taken by the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or the committee consent in writing to
the adoption of a resolution authorizing the action. The resolution and the
written consents thereto by the members of the Board or committee shall be
filed with the minutes of the proceedings of the Board or committee.
SECTION 13. PARTICIPATION AT MEETINGS BY TELEPHONE: Any one or more
members of the Board of Directors or any committee thereof may participate in
a meeting of such Board or committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
SECTION 14. COMPENSATION: The Board of Directors shall have authority
to fix the compensation of Directors for services in any capacity.
SECTION 15. INTERESTED DIRECTORS:
(a) No contract or other transaction between the Company and one or more
of its Directors, or between the Company and any other corporation, firm,
association or other entity in which one or more of its Directors are
directors or officers, or are financially interested, shall be either void or
voidable for this reason alone or by reason alone that such Director or
Directors are present at the meeting of the Board of Directors, or of a
committee thereof, which approves such contract or transaction, or that his or
their votes are counted for such purpose, provided that the parties to the
contract or transaction establish affirmatively that it was fair and
reasonable as to the Company at the time it was approved by the Board, a
committee, or the shareholders.
(b) Any such contract or transaction may not be avoided by the Company
for the reasons set forth in (a) if
(1) the material facts as to such Director's interest in such contract
or transaction and as to any such common directorship, officership or
financial interest are disclosed in good faith or known to the Board or
committee, and the Board or committee approves such contract or transaction by
a vote sufficient for such purpose without counting the vote of such
interested Director or, if the votes of the disinterested Directors are
insufficient for such purpose, by unanimous vote of the disinterested
Directors (although common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board or of a
committee which approves such contract or transactions), or
(2) the material facts as to such Director's interest in such contract
or transaction and as to any such common directorship, officership or
financial interest are disclosed in good faith or known to the shareholders
entitled to vote thereon, and such contract or transaction is approved by vote
of such shareholders.
SECTION 16. LOANS TO DIRECTORS: A loan shall not be made by the
Company to any Director unless it is authorized by vote of the shareholders
(the shares of the Director who would be the borrower shall not be shares
entitled to vote); except that for purposes of loans made to any Directors
under the Restricted Stock Purchase Plan, adopted by the shareholders of the
Company on May 15, 1969, such adoption shall constitute full and complete
authorization for any such loan made thereunder.
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1. HOW CONSTITUTED AND POWERS: There shall be an Executive
Committee, consisting of not less than three nor more than nine Directors,
including the Chairman of the Board and the Chairman of the Executive
Committee, elected by a majority of the entire Board of Directors, who shall
serve at the pleasure of the Board. The Executive Committee shall have all
the authority of the Board, except it shall have no authority as to the
following matters:
(a) The submission to shareholders of any action that needs
shareholders' authorization.
(b) The filling of vacancies in the Board or in any committee.
(c) The fixing of compensation of the Directors for serving on the Board
or on any committee.
(d) The amendment or repeal of the By-Laws, or the adoption of new By-
Laws.
(e) The amendment or repeal of any resolution of the Board which, by its
terms, shall not be so amendable or repealable.
(f) The declaration of dividends.
SECTION 2. MEETINGS: Meetings of the Executive Committee, of which no
notice shall be necessary, shall be held on such days and at such place as
shall be fixed, either by the Chairman of the Board, the Chairman of the
Executive Committee, or by a vote of the majority of the whole Committee.
SECTION 3. QUORUM AND MANNER OF ACTING: Unless otherwise provided by
resolution of the Board of Directors, a majority of the Executive Committee
shall constitute a quorum for the transaction of business and the act of a
majority of all of the members of the Committee, whether present or not, shall
be the act of the Executive Committee. The members of the Executive Committee
shall act only as a Committee. The procedure of the Committee and its manner
of acting shall be subject at all times to the directions of the Board of
Directors.
SECTION 4. ADDITIONAL COMMITTEES: The Board of Directors by
resolution adopted by a majority of the entire Board may designate from among
its members additional committees, each of which shall consist of three or
more Directors and shall have such authority as provided in the resolution
designating the committee, except such authority shall not exceed the
authority conferred on the Executive Committee by Section 1 of this Article.
SECTION 5. ALTERNATE MEMBERS: The Board of Directors may designate
one or more eligible Directors as alternate members of the Executive
Committee, or of any other committee of the Board, who may replace any absent
member or members at any meeting of any such committee.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER: The officers of the Company shall be a Chairman of
the Board, a President, a Chairman of the Executive Committee, one or more
Vice Presidents, a Treasurer, a Secretary, a Controller, and such other
officers as the Board of Directors may in its discretion elect. Any two or
more offices may be held by the same person, except the offices of Chairman of
the Board and Secretary, and President and Secretary.
SECTION 2. TERM OF OFFICES AND QUALIFICATIONS: Those officers whose
titles are specifically mentioned in Section 1 of this Article IV shall be
chosen by the Board of Directors on the day of the Annual Meeting. Unless a
shorter term is provided in the resolution of the Board electing such officer,
the term of office of such officer shall extend to and expire at the meeting
of the Board held on the day of the next Annual Meeting. The Chairman of the
Board, the President and the Chairman of the Executive Committee shall be
chosen from among the Directors.
SECTION 3. ADDITIONAL OFFICERS: Additional officers other than those
whose titles are specifically mentioned in Section 1 of this Article IV shall
be elected for such period, have such authority and perform such duties,
either in an administrative or subordinate capacity, as the Board of Directors
may from time to time determine.
SECTION 4. REMOVAL OF OFFICERS: Any officer may be removed by the
Board of Directors with or without cause, at any time. Removal of an officer
without cause shall be without prejudice to his contract rights, if any, but
his election as an officer shall not of itself create contract rights.
SECTION 5. RESIGNATION: Any officer may resign at any time by giving
written notice to the Board of Directors, or to the Chairman of the Board, or
to the Secretary. Any such resignation shall take effect at the time
specified therein, or if no time be specified, then upon delivery.
SECTION 6. VACANCIES: A vacancy in any office shall be filled by the
Board of Directors.
SECTION 7. CHAIRMAN OF THE BOARD: The Chairman of the Board shall
preside at all meetings of the shareholders at which he is present, unless at
such meetings the shareholders shall appoint a chairman other than the
Chairman of the Board. The Chairman of the Board shall preside at all meetings
of the Directors at which he is present. The Chairman of the Board shall act
as the Chief Executive Officer of the Company and it shall be his duty to
supervise generally the management of the business of the Company with
responsibility direct to the Board and subject to the control of the Board.
The Chairman of the Board shall have such powers and perform such other duties
as may be assigned to him by the Board.
SECTION 8. PRESIDENT: The President shall have such powers and perform
such duties as may be assigned to him by the Board and the Chairman of the
Board. The President shall, in the absence of the Chairman of the Board,
preside at all meetings of the shareholders and Directors at which he is
present. In the absence or inability to act of the Chairman of the Board, or
if the Office of Chairman of the Board be vacant, the President, subject to
the right of the Board from time to time to extend or confine such powers and
duties or to assign them to others, shall perform all the duties and may
exercise all the powers of the Chairman of the Board.
SECTION 9. CHAIRMAN OF THE EXECUTIVE COMMITTEE: The Chairman of the
Executive Committee shall have such powers and perform such duties as may be
assigned to him by the Board. The Chairman of the Executive Committee shall
preside at meetings of the Executive Committee of the Board of Directors.
SECTION 10. THE VICE PRESIDENTS: Each Vice President shall have such
powers and shall perform such duties as may be assigned to him by the Board of
Directors, the Chairman of the Board or the President.
SECTION 11. THE TREASURER: The Treasurer shall, if required by the
Board of Directors, give a bond for the faithful discharge of his duties, in
such sum and with such sureties as the Board of Directors shall require. He
shall have charge and custody of, and be responsible for, all funds and
securities of the Company, and deposit all such funds in the name of and to
the credit of the Company in such banks, trust companies, or other
depositories as shall be selected by the Board of Directors. The Treasurer
may sign certificates for stock of the Company authorized by the Board of
Directors. He shall also perform all other duties customarily incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the Board of Directors.
SECTION 12. THE CONTROLLER: The Controller shall keep and maintain the
books of account for internal and external reporting purposes. He shall also
perform all other duties customarily incident to the office of Controller and
such other duties as may be assigned to him from time to time by the Board of
Directors.
SECTION 13. THE SECRETARY: It shall be the duty of the Secretary to
act as secretary of all meetings of the Board of Directors, and of the
shareholders, and to keep the minutes of all such meetings at which he shall
so act in a proper book or books to be provided for that purpose; he shall see
that all notices required to be given by the Company are duly given and
served; he may sign and execute in the name of the Company certificates for
the stock of the Company, deeds, mortgages, bonds, contracts or other
instruments authorized by the Board of Directors; he shall prepare, or cause
to be prepared, for use at meetings of shareholders the list of shareholders
as of the record date referred to in Article I, Section 11 of these By-Laws
and shall certify, or cause the transfer agent to certify, such list; he shall
keep a current list of the Company's Directors and officers and their
residence addresses; he shall be custodian of the seal of the Company and
shall affix the seal, or cause it to be affixed, to all agreements, documents
and other papers requiring the same. The Secretary shall have custody of the
Minute Book containing the minutes of all meetings of shareholders, Directors,
the Executive Committee, and any other committees which may keep minutes, and
of all other contracts and documents which are not in the custody of the
Treasurer or the Controller of the Company, or in the custody of some other
person authorized by the Board of Directors to have such custody.
SECTION 14. APPOINTED OFFICERS: The Board of Directors may delegate
to any officer or committee the power to appoint and to remove any subordinate
officer, agent or employee.
SECTION 15. ASSIGNMENT AND TRANSFER OF STOCKS, BONDS, AND OTHER
SECURITIES: The Chairman of the Board, the Treasurer, the Secretary, any
Assistant Secretary, any Assistant Treasurer, and each of them, shall have
power to assign, or to endorse for transfer, under the corporate seal, and to
deliver, any stock, bonds, subscription rights, or other securities, or any
beneficial interest therein, held or owned by the Company.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS AND BANK ACCOUNTS
SECTION 1. EXECUTION OF CONTRACTS: The Board of Directors, except as
in these By-Laws otherwise provided, may authorize any officer or officers,
agent, or agents, in the name of and on behalf of the Company to enter into
any contract or execute and deliver any instrument, and such authority may be
general or confined to specific instances; but, unless so authorized by the
Board of Directors, or expressly authorized by these By-Laws, no officer,
agent or employee shall have any power or authority to bind the Company by any
contract or engagement or to pledge its credit or to render it liable
pecuniarily in any amount for any purpose.
SECTION 2. LOANS: No loans shall be contracted on behalf of the
Company, and no negotiable paper shall be issued in its name unless
specifically authorized by the Board of Directors.
SECTION 3. CHECKS, DRAFTS, ETC.: All checks, drafts, and other orders
for the payment of money out of the funds of the Company, and all notes or
other evidences of indebtedness of the Company, shall be signed on behalf of
the Company in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 4. DEPOSITS: All funds of the Company not otherwise employed
shall be deposited from time to time to the credit of the Company in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VI
STOCKS AND DIVIDENDS
SECTION 1. CERTIFICATES OF STOCK: Certificates for stock of the
Company shall be in such form as shall be approved by the Board of Directors.
The certificates of stock shall be numbered in order of their issue, shall be
signed by the Chairman of the Board, the President or a Vice President, and
the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer. The signature of the officers upon a certificate may be facsimiles
if the certificate is countersigned by a transfer agent or registered by a
registrar other than the Company itself or its employee. In case any officer
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Company with the same effect as if he were an officer at the
date of issue.
SECTION 2. TRANSFER OF STOCK: Transfers of stock of the Company shall
be made only on the books of the Company by the holder thereof, or by his duly
authorized attorney, on surrender of the certificate or certificates for such
stock, properly endorsed. Every certificate surrendered to the Company shall
be marked "Canceled", with the date of cancellation, and no new certificate
shall be issued in exchange therefor until the old certificate has been
surrendered and canceled. A person in whose name stock of the Company stands
on the books of the Company shall be deemed the owner thereof as regards the
Company; provided that, whenever any transfer of stock shall be made for
collateral security, and not absolutely, such fact, if known to the Secretary
of the Company, or to its transfer agent shall be so expressed in the entry of
the transfer. No transfer of stock shall be valid as against the Company, or
its shareholders for any purpose, until it shall have been entered in the
stock records of the Company as specified in these By-Laws by an entry showing
from and to whom transferred.
SECTION 3. TRANSFER AND REGISTRY AGENTS: The Company may, from time
to time, maintain one or more transfer offices or agencies and/or registry
offices at such place or places as may be determined from time to time by the
Board of Directors; and the Board of Directors may, from time to time, define
the duties of such transfer agents and registrars and make such rules and
regulations as it may deem expedient, not inconsistent with these By-Laws,
concerning the issue, transfer and registration of certificates for stock of
the Company.
SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES: The holder of
any stock of the Company shall immediately notify the Company of any loss,
destruction or mutilation of the certificate therefor. The Company may issue
a new certificate in place of the lost or destroyed certificate, but as a
condition to such issue, the holder of such certificate must make satisfactory
proof of the loss or destruction thereof, and must give to the Company a bond
of indemnity in form and amount and with one or more sureties satisfactory to
the Treasurer, the Secretary or any Assistant Treasurer or Assistant
Secretary. Such bond of indemnity shall also name as obligee each of the
transfer agents and registrars for the stock the certificate for which has
been lost or destroyed.
SECTION 5. RECORD DATES FOR CERTAIN PURPOSES: The Board of Directors
of the Company shall fix a day and hour not more than fifty days preceding the
date of any meeting of shareholders, or the date for payment of any cash or
stock dividend, or the date for the allotment of any rights of subscription,
or the date when any change or conversion or exchange of capital stock shall
go into effect, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, any such meeting and any adjournment
thereof, or entitled to receive payment of any such dividend, or entitled to
receive any such allotment of rights of subscription, or entitled to exercise
rights in respect of any such change, conversion or exchange of capital stock,
and in such case, such shareholders and only such shareholders as shall be
shareholders of record on the day and hour so fixed shall be entitled to such
notice of, and to vote at, such meeting or any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights of
subscription, or to exercise rights in connection with such change or
conversion or exchange of capital stock, as the case may be, notwithstanding
any transfer of any stock on the books of the Company after such day and hour
fixed as aforesaid.
SECTION 6. DIVIDENDS AND SURPLUS: Subject to the limitations
prescribed by law, the Board of Directors (1) may declare dividends on the
stock of the Company whenever and in such amounts as, in its opinion, the
condition of the affairs of the Company shall render it advisable, (2) may use
and apply, in its discretion, any part or all of the surplus of the Company in
purchasing or acquiring any of the shares of stock of the Company, and (3) may
set aside from time to time out of such surplus or net profits such sum or
sums as it in its absolute discretion, may think proper as a reserve fund to
meet contingencies or for equalizing dividends, or for the purpose of
maintaining or increasing the property or business of the Company, or for any
other purpose it may think conducive to the best interest of the Company.
ARTICLE VII
OFFICES AND BOOKS
SECTION 1. OFFICES: The Company shall maintain an office at such
place in the County of Monroe, State of New York, as the Board of Directors
may determine. The Board of Directors may from time to time and at any time
establish other offices of the Company or branches of its business at whatever
place or places seem to it expedient.
SECTION 2. BOOKS AND RECORDS:
(a) There shall be kept at one or more offices of the Company (1)
correct and complete books and records of account, (2) minutes of the
proceedings of the shareholders, Board of Directors and the Executive
Committee, (3) a current list of the Directors and officers of the Company and
their residence addresses, and (4) a copy of these By-Laws.
(b) The stock records may be kept either at the office of the Company or
at the office of its transfer agent or registrar in the State of New York, if
any, and shall contain the names and addresses of all shareholders, the number
and class of shares held by each and the dates when they respectively became
the owners of record thereof.
ARTICLE VIII
GENERAL
SECTION 1. SEAL: The corporate seal shall be in the form of a circle
and shall bear the full name of the Company and the words and figures
"Incorporated 1906, Rochester, N. Y.".
SECTION 2. INDEMNIFICATION OF DIRECTORS AND OFFICERS: Except to the
extent expressly prohibited by law, the Company shall indemnify any person,
made or threatened to be made, a party in any civil or criminal action or
proceeding, including an action or proceeding by or in the right of the
Company to procure a judgment in its favor or by or in the right of any other
corporation of any type or kind, domestic or foreign, or any partnership,
joint venture, trust, employee benefit plan or other enterprise, which any
Director or officer of the Company served in any capacity at the request of
the Company, by reason of the fact that he, his testator or intestate is or
was a Director or officer of the Company or serves or served such other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, in any capacity, against judgments, fines, penalties, amounts paid
in settlement and reasonable expenses, including attorneys' fees, incurred in
connection with such action or proceeding, or any appeal therein, provided
that no such indemnification shall be required with respect to any settlement
unless the Company shall have given its prior approval thereto. Such
indemnification shall include the right to be paid advances of any expenses
incurred by such person in connection with such action, suit or proceeding,
consistent with the provisions of applicable law. In addition to the
foregoing, the Company is authorized to extend rights to indemnification and
advancement of expenses to such persons by i) resolution of the shareholders,
ii) resolution of the Directors or iii) an agreement, to the extent not
expressly prohibited by law.
ARTICLE IX
FISCAL YEAR
SECTION 1. FISCAL YEAR: The fiscal year of the Company shall end on
the 31st day of December in each year.
ARTICLE X
AMENDMENTS
SECTION 1. AMENDMENTS: By-Laws of the Company may be amended,
repealed or adopted by vote of the holders of the shares at the time entitled
to vote in the election of any Directors. If, at any meeting of shareholders,
action is proposed to be taken to amend, repeal or adopt By-Laws, the notice
of such meeting shall include a brief statement or summary of the proposed
action. The By-Laws may also be amended, repealed or adopted by the Board of
Directors, but any By-Law adopted by the Board may be amended or repealed by
shareholders entitled to vote thereon as hereinabove provided. If any By-Law
regulating an impending election of Directors is adopted, amended or repealed
by the Board of Directors, there shall be set forth in the notice of the next
meeting of shareholders for the election of Directors the By-Law so adopted,
amended or repealed, together with a concise statement of the changes made.
EXHIBIT 10(e)
Restatement
of
XEROX CORPORATION
UNFUNDED RETIREMENT INCOME GUARANTEE PLAN
XEROX CORPORATION, a New York corporation having its principal executive
office in the City of Stamford, County of Fairfield and State of Connecticut,
hereby adopts the XEROX CORPORATION UNFUNDED RETIREMENT INCOME GUARANTEE PLAN
effective on the Effective Date as follows:
Restatement October 13, 1997
-1-
INDEX
No. Page
- --- ----
ARTICLE 1 Definitions.............................................. 3
ARTICLE 2 Purpose of Plan.......................................... 4
ARTICLE 3 Eligibility.............................................. 4
ARTICLE 4 Benefits................................................. 4
ARTICLE 5 Change in Control........................................ 6
ARTICLE 6 Administration........................................... 7
ARTICLE 7 Amendment and Termination................................ 7
ARTICLE 8 Miscellaneous............................................ 8
-2-
XEROX CORPORATION
UNFUNDED RETIREMENT INCOME GUARANTEE PLAN
ARTICLE 1
---------
Definitions
-----------
When used herein, the words and phrases defined hereinafter shall have
the following meaning unless a different meaning is clearly required by the
context of the Plan. Terms used herein which are defined in Article 1 of the
Funded Plan shall have the meanings assigned to them in the Funded Plan.
Section 1.1. Administrator. The Administrator appointed by the Vice
President, Human Resources of the Company
Section 1.2. Average Monthly Compensation. Shall be determined under
Article 1 of the Funded Plan, without regard to the dollar limitation
contained therein.
Section 1.3. Board. The Board of Directors of the Company.
Section 1.4. Code. The Internal Revenue Code of 1986 as amended, or
as it may be amended from time to time.
Section 1.5. Company. Xerox Corporation.
Section 1.6. Effective Date. The original effective date of the Plan
was July 1, 1977. This Restatement is effective as of October 13, 1997.
Section 1.7. Employee. A Member in the Funded Plan.
Section 1.8. Funded Plan. The Xerox Corporation Retirement Income
Guarantee Plan.
Section 1.9. Plan. The "Xerox Corporation Unfunded Retirement Income
Guarantee Plan", as set forth herein or in any amendment hereto.
ARTICLE 2
---------
Purpose of Plan
---------------
Section 2.1. Purpose. The Plan is designed to provide retirement
benefits payable out of the general assets of the Company as provided in
Section 4.1.
-3-
ARTICLE 3
---------
Eligibility
-----------
Section 3.1. Eligibility. All Employees and beneficiaries of
Employees eligible to receive benefits from the Funded Plan shall be eligible
to receive benefits under this Plan in accordance with Section 4.1 regardless
of when the Employees may have retired.
ARTICLE 4
---------
Benefits
--------
Section 4.1. Amount of Benefits. The amount of the benefit payable
under the Plan shall be equal to the monthly benefit which would be payable to
or on behalf of an Employee under the Funded Plan as a Life Annuity if Section
9.5 of the Funded Plan were inapplicable and if the amount of any
compensation deferred by the Employee was included in the calculation of
Average Monthly Compensation (except the increase in compensation which became
payable under the Company's policy of increasing compensation by the amount
which cannot be added to an Employee's accounts under the Profit Sharing Plan
by reason of the limitation contained in Section 415 of the Code), less the
following:
(a) The monthly benefit actually payable as a Life Annuity to or on
behalf of the Employee under the Funded Plan.
(b) The monthly benefit which could be purchased as a Life Annuity with
the balance, if any, in the Employee's deferred compensation account under the
Xerox Corporation Deferred Compensation Plan For Executives arising from the
Retirement Account portion of the Profit Sharing Adjustment under Section 4
thereof.
(c) Any amount paid to the Employee from which FICA taxes are withheld
related to nonqualified retirement benefits from a plan sponsored by the
Company which have not been previously withheld (or deemed to be withheld
because the maximum tax had already been paid) and are payable upon retirement
but cannot be withheld from any single sum payment of compensation or other
nonqualified plan benefits translated to an annuity (single life or joint and
survivor as appropriate) payable commencing on the date of retirement.
(d) The amount of that certain provisional supplement provided to
certain high-paid Employees in RIGP effective in 1989 when the RIGP benefit
was modified payable to Employees in a lump sum translated to an annuity
(single life or joint and survivor as appropriate) payable commencing on the
date of retirement.
-4-
Section 4.2. Form of Benefit Payments. The forms of benefit
available under the Plan shall be for single Employees a 10-Year certain and
life annuity or a life annuity and for married Employees a 50% or 100% joint
and survivor annuity option, all as shall have been elected by Employee on
forms provided by the Administrator. The benefit payable to a single Employee
who has failed to make such an election shall be a life annuity and for any
such married Employee a 50% joint and survivor annuity. The 10 year certain
and life annuity is the actuarial equivalent of the life annuity and the 100%
joint and survivor annuity is the actuarial equivalent of the 50% joint and
survivor annuity. Except as otherwise provided in Section 5.1 in no event is
the benefit payable in a lump sum.
Notwithstanding the above, the lump sum actuarial equivalent of any benefit
otherwise payable as a monthly amount of one hundred dollars ($100.00) or
less, shall be distributed in accordance with Section 4.3. The interest rate
used in computing the lump sum actuarial equivalent amount shall be the
interest rate described in the section entitled "Optional Forms of Benefit
Payment" of the Funded Plan.
Section 4.3 Death Prior to Benefit Commencement. The spouse of a
Participant who dies before commencement of benefits under the Plan shall be
entitled to a survivor benefit calculated in accordance with Article 7 of the
Funded Plan in an amount equal to the amount determined under (a) or (b)
below.
(a) In the case of a Participant who is eligible to retire under the
Funded Plan on the date of his or her death, one-half of the retirement
benefit to which the Participant would have been entitled under the Plan if
he or she had retired on the last day of the month coincident with or next
following the date of the Participant's death; or
(b) In the case of a Participant who is not eligible to retire under the
Funded Plan on the date of his or her death, one-half of the retirement
benefit to which the Participant would have been entitled under the Plan if
he or she had terminated on his or her date of death and survived to the date
of payment of benefits as determined under Section 4.4 below.
Section 4.4. Time of Benefit Payments. Benefits due under the Plan
shall be paid coincident with the payment date of benefits under the Funded
Plan or at such other time or times as the Administrator in his discretion
determines.
Section 4.5. Employee's Rights Unsecured. The benefits payable under
this Plan shall be unfunded. Consequently, no assets shall be segregated for
purposes of this Plan and placed beyond the reach of the Company's general
creditors. The right of any Employee to receive benefits under the provisions
of the Plan shall be an unsecured claim against the general assets of the
Company.
-5-
ARTICLE 5
---------
Change in Control
-----------------
Section 5.1 Change In Control. Notwithstanding anything to the
contrary in this Plan, in the event of a change in control of the Company, as
hereinafter defined, each Employee, including retired Employees, shall be
entitled to a benefit hereunder without regard to his or her age or Years of
Service at the time of such change in control. Upon the occurrence of a
change in control of the Company, the benefit of each Employee shall be
payable in a lump sum within 30 days of such change in control equal in
amount to the then present value of a benefit expressed in the form provided
in Section 4.1 hereof, commencing on the later of (i) the date of such change
in control and (ii) the date the Employee would be eligible for a benefit
under the Funded Plan, and based upon such Employee's Average Monthly
Compensation and Years of Participation as of the date of such change in
control. A "change in control of the Company" 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.
Section 5.2. Termination of Employment Following Change in Control.
Upon the termination of employment of a Employee following a change in
control of the Company, such Employee, if he or she has otherwise satisfied
the requirements of the Funded Plan for a benefit, shall be entitled to a
benefit equal to the benefit to which he or she would have been entitled
without application of Section 5.1, reduced (but not below zero) to reflect
the value of the benefit he or she received pursuant to Section 5.1.
Section 5.3. Calculation of Present Value. For purposes of Section
5.1 hereof, the present value of a benefit shall be calculated based upon the
interest rate which would be used by the Pension Benefit Guaranty Corporation
for purposes of determining lump sums for benefits payable as immediate
annuities with respect
-6-
to plans terminating on the date on which the change in control of the
Company occurs and the 1983 GAM mortality table, provided, however, that
effective upon the date that the applicable interest rate as specified in
Section 417(e)(3)(A) of the Code is adopted for use in the Funded Plan, the
present value hereunder shall thereafter be determined under such applicable
interest rate and the applicable mortality table as defined in Section
417(e)(3)(A)(ii)(l) of the Code. For purposes of the Funded Plan, each
Employee shall be treated as if they terminated employment upon the change in
control and had their benefits determined as if they were to begin receiving
benefits on the commencement date used in developing the present value of the
benefit in Section 5.1.
ARTICLE 6
---------
Administration
--------------
Section 6.1. Duties of Administrator. The Plan shall be administered
by the Administrator in accordance with its terms and purposes. The
Administrator shall determine the amount and manner of payment of the
benefits due to or on behalf of each Employee from the Plan and shall cause
them to be paid by the Company accordingly.
Section 6.2. Finality of Decisions. The decisions made by and the
actions taken by the Administrator in the administration of the Plan shall be
final and conclusive on all persons, and the Administrator shall not be
subject to individual liability with respect to the Plan.
ARTICLE 7
---------
Amendment and Termination
-------------------------
Section 7.1. Amendment and Termination. It is the intention of the
Company to continue the Plan indefinitely. The Company expressly reserves the
right to amend the Plan at any time and in any particular manner, provided
that any such amendment shall be made in accordance with ERISA. Such
amendments, other than amendments relating to termination of the Plan or
relating to benefit levels under Section 4.1 of the Plan, may be effected by
(i) the Board of Directors, (ii) a duly constituted committee of the Board of
Directors, or (iii) the Vice President of the Company responsible for human
resources or a representative thereof. In the event such office is vacant at
the time the amendment is to be made, the Chief Executive Officer of the
Company shall approve such amendment or appoint a representative. Amendments
relating to termination of the Plan or relating to benefit levels under
Section 4.1 of the Plan shall be effected pursuant to a resolution duly
adopted by the Board of Directors of the Company, or a duly constituted
committee of the Board of Directors of the Company, in accordance with the
Business Corporation Law of the State of New York.
-7-
Any amendment, alteration, modification or suspension under subsection (iii)
of the preceding paragraph shall be set forth in a written instrument executed
by any Vice President of the Company and by the Secretary or an Assistant
Secretary of the Company
Section 7.2. Contractual Obligation. Notwithstanding Section 7.1, the
Company hereby makes a contractual commitment to pay the benefits accrued
under the Plan to the extent it is financially capable of meeting such
obligations.
ARTICLE 8
---------
Miscellaneous
-------------
Section 8.1. No Employment Rights. Nothing contained in the Plan
shall be construed as a contract of employment between the Company and an
Employee, or as a right of any Employee to be continued in the employment of
the Company, or as a limitation of the right of the Company to discharge any
of its Employees, with or without cause.
Section 8.2. Assignment. The benefits payable under this Plan may
not be assigned or alienated except as may otherwise be required by law or
pursuant to the terms of a domestic relations order that has been approved by
the Plan Administrator.
Section 8.3. Law Applicable. This Plan shall be governed by the laws
of the State of New York.
EXHIBIT 10(f)
Restatement
of
XEROX CORPORATION
UNFUNDED SUPPLEMENTAL RETIREMENT PLAN
XEROX CORPORATION, a New York corporation having its principal executive
office in the City of Stamford, County of Fairfield and State of Connecticut,
hereby adopts the XEROX CORPORATION UNFUNDED SUPPLEMENTAL RETIREMENT PLAN
effective on the Effective Date as follows:
Restatement October 13, 1997
-1-
UNFUNDED SUPPLEMENTAL RETIREMENT PLAN
Section 1. Plan Name
The plan name is the Xerox Corporation Unfunded Supplemental Retirement
Plan (the "Plan").
Section 2. Effective Date
The original effective date of the Plan is June 30, 1982. The Plan was
restated on three previous occasions, effective February 4, 1985, January 1,
1990, December 6, 1993 and December 9, 1996. This Restatement is effective as
of October 13, 1997.
Section 3. Purpose of the Plan
The Plan is designed to address special circumstances involved in the
retirement of executives.
Section 4. Covered Employees
The following employees of Xerox Corporation (the "Company") are covered
by the Plan:
A. All employees who were corporate officers of the Company at grade
level 25 and above on the original effective date of the Plan (the
"Grandfathered Officers").
B. All employees who were corporate officers at grades 23 or 24 on the
original effective date of the Plan or who first become corporate officers of
the Company at grade level 23 and above after the original effective date of
the Plan and do not fall within categories D through G below (the "Officers").
C. Certain employees who received a letter dated September 2, 1982 from
David T. Kearns regarding Executive Retirement Guidelines (the "Guideline
Employees").
D. All employees who are corporate officers of the Company on the date
of this 1996 Restatement who first commenced employment with the Company on or
after attainment of age 40 and whose names appear on Schedule A ("Schedule A")
presented at the meeting of the Executive Compensation and Benefits Committee
held December 9, 1996 and made part of the records of that
-2-
meeting which Schedule is incorporated herein by reference and made a part of
the Plan ("Grandfathered Mid-Career Officers").
E. All employees who after the date of the 1996 Restatement first
commence employment with the Company on or after attainment of age 40 who are
elected corporate officers and whose names are added to Schedule A upon
selection by the Chief Executive Officer of the Company as maintained with
records of the Executive Compensation department of the Company which Schedule
as so modified from time to time is incorporated herein by reference and made
a part hereof ("Mid-Career Officer Hires").
F. All employees who are in payroll Band A of the Company on the date of
the 1996 Restatement who first commenced employment with the Company on or
after attainment of age 40 and whose names are set forth on Schedule B
("Schedule B") which has been approved by the Vice President responsible for
Human Resources and placed with the records of the Executive Compensation
department of the Company which Schedule is incorporated herein by reference
and made a part of the Plan ("Grandfathered Mid-Career Band A Employees").
G. All employees who after the date of the 1996 Restatement first
commence employment with the Company on or after attainment of age 40 who are
hired into payroll Band A selected by the Vice President of the Company
responsible for Human Resources, or his or her designee, such selection to be
evidenced by the placement of the employee's name on Schedule C to be
maintained from time to time by such Vice President or his or her designee,
which Schedule is incorporated herein by reference and made a part of the Plan
("Mid-Career Band A Hires")
H. Grandfathered Mid-Career Officers, Mid-Career Officer Hires,
Grandfathered Mid-Career Band A Employees and Mid-Career Band A Hires are
sometimes together referred to as "Mid-Career Executives".
I. The employees referred to in paragraphs A through G above are
together referred to herein as "Participants".
Section 5. Eligibility for Benefits
Participants must have attained the following age and completed the
following Years of Service to be eligible for benefits under the Plan:
A. Grandfathered Officers and Guideline Employees -- age 55, Years of
Service -- 5.
B. Officers -- age 60, Years of Service -- 10.
-3-
C. Grandfathered Mid-Career Officers -- the age set forth opposite their
respective names on Schedule A, Years of Service -- 5.
D. Mid-Career Officer Hires -- the age determined by the Chief Executive
Officer of the Company as reflected in Schedule A, Years of Service -- 5.
E. Grandfathered Mid-Career Band A Employees -- the age set forth
opposite their respective names on the Schedule B, Years of Service -- 5.
F. Mid-Career Band A Hires -- the age determined by the Vice President
responsible for Human Resources or his or her delegate as set forth on
Schedule C referred to above, Years of Service 5.
Section 6. Supplemental Retirement Benefit
A. The benefit payable under the Plan shall be a monthly retirement
benefit equal to:
One and two-thirds percent of Average Monthly Compensation of the
Participant multiplied by the number of full and fractional Years of
Participation up to thirty less
a) One and two-thirds percent of the Social Security Benefit
multiplied by the number of full and fractional Years of Participation up to
thirty; and
b) The monthly retirement benefit payable under the Company's
Retirement Income Guarantee Plan ("RIGP") (stated as a Life Annuity)* as it
is in effect as of and from time to time after January 1, 1990;
subject to the "Adjustments" set forth in subsections B through F below.
"Average Monthly Compensation" shall be determined under RIGP without
regard to the dollar limitation contained in the Plan as required by Section
401(a)(17) of the Internal Revenue Code of 1986, as amended, or any successor
thereto.
_____________________________________________________________________________
* Defined terms in RIGP shall have the same meanings in the Plan, except as
otherwise noted herein.
"Social Security Benefit" shall mean the monthly benefit which a retired
Participant or a terminated Participant receives or would be entitled to
receive at the age at which unreduced retirement benefits are then paid under
the US Social Security Act (or at his sixty- second birthday, in the case of a
retired
-4-
Participant who has at least thirty Years of Service or who, on such
Participant's retirement, is the pilot of an airplane operated by the
Company), as a primary insurance amount under the U. S. Social Security Act,
as amended, whether he or she applies for such benefit or not, and even
though he or she may lose part or all of such benefit for any reason.
The amount of such Social Security Benefit to which the retired or
terminated Participant is or would be entitled shall be computed by the
Administrator for the purposes of the Plan as of the January 1 of the
calendar year of retirement or termination. In computing such amount, the
Administrator shall use estimated benefit tables developed by the Plan's
actuary, the five-year average compensation of the Participant and the
assumption that the Participant's compensation prior to the fifth year
preceding the year of termination grew in accordance with average national
wages.
B. Grandfathered Officers -- Adjustments shall be
1. The monthly benefit and the Social Security Benefit shall be
calculated at the rate of 3 1/3% of Average Monthly Compensation and of the
Social Security Benefit, respectively, for each full or fractional Year of
Participation up to a maximum of 15 Years of Participation.
2. There shall be no reduction in the benefit payable upon
retirement on or after attainment of age 55 on account of payment commencing
prior to attainment of age 65.
3. Amounts included in the Participant's Executive Expense Allowance
shall be included in determining Average Monthly Compensation.
C. Officers -- Adjustments shall be that there shall be no reduction in
the benefit payable upon retirement on or after attainment of age 60 on
account of payment commencing prior to attainment of age 65 and no part of
the Executive Expense Allowance shall be included in determining Average
Monthly Compensation.
D. Guideline Employees -- An adjustment shall be that there shall be no
reduction in the benefit payable upon retirement on or after attainment of
age 55.
E. Mid-Career Executives -- Adjustments shall be
1. The monthly benefit and the Social Security Benefit shall be
calculated at the rate of 2.5% of the Average Monthly Compensation and of the
Social Security Benefit, respectively, for each full or fractional Year of
Participation up to a maximum of 20 Years of Participation.
-5-
2. There shall be no reduction in the benefit payable upon
retirement on or after attainment of age 60 on account of payment commencing
prior to attainment of age 65 and no part of the Executive Expense Allowance,
if any, shall be included in determining Average Monthly Compensation.
F. All Participants -- Adjustments shall be
1. Average Monthly Compensation shall be calculated including any
compensation deferred by the Participant during the period used in calculating
Average Monthly Compensation (except that there shall not be included any
increase in Participant's compensation which became payable under the
Company's policy of increasing compensation by the amount which cannot be
added to the Participant's accounts under the Company's Profit Sharing and
Savings Plan ("Profit Sharing Plan") by reason of the limitation contained in
Section 415 of the Internal Revenue Code of 1986, as amended, hereinafter the
"Code").
2. The following additional amounts shall be deducted from the
hypothetical monthly benefit:
(a) The value of the portion of the Participant's Account under
the Company's Deferred Compensation Plan For Executives, if any,
resulting from the Retirement Account portion of the Profit
Sharing Adjustment (as defined in such Deferred Compensation
Plan) translated into an annuity (single life or joint and
survivor, as appropriate) payable commencing on the date of
retirement; and
(b) The benefit payable under the Company's Unfunded Retirement
Income Guarantee Plan ("Unfunded RIGP").
(c) Any amount paid to the participant from which FICA taxes
are withheld related to nonqualified retirement benefits from a
plan sponsored by the Company which have not been previously
withheld (or deemed to have been withheld because the maximum tax
had already been paid) and are payable upon retirement but cannot
be withheld from any single sum payment of compensation or other
nonqualified plan benefits translated to an annuity (single or
joint and survivor as appropriate) payable commencing on the date
of retirement.
(d) The amount of that certain supplement provided to certain
high -paid participants in RIGP effective in 1989 when the RIGP
benefit was modified payable to the Participant in a lump sum
translated to an
-6-
annuity (single life or joint and survivor as appropriate)
payable commencing on the date of retirement.
(e) The amount of any pension, retirement or other post-
retirement income benefits paid or payable to a Participant under
plans or arrangements provided by the Company or any subsidiary
of the Company, whether incorporated or organized in the United
States or in any other country of the world.
Section 7. Change In Control. A. Notwithstanding anything to the
contrary in this Plan, in the event of a change in control of the Company, as
hereinafter defined, each Participant, including retired Participants, shall
be entitled to a benefit hereunder without regard to his or her age or Years
of Service at the time of such change in control (including, without
limitation, the benefit provided under Section 8 hereof, if applicable).
Upon the occurrence of a change in control of the Company, the benefit of
each Participant shall be payable in a lump sum within five days of such
change in control equal in amount to the then present value of a benefit
expressed in the form provided in Section 10 hereof, commencing on the later
of (i) the date of such change in control, (ii) the date Guideline Employee
or Grandfathered Officer attains age 55, (iii) the date the Officers attain
age 60 or (iv) in the case of a Mid-Career Executive, the date such
Participant attains the age specified in Schedule A, B or C, and based upon
such Participant's Average Monthly Compensation and Years of Participation as
of the date of such change in control. A "change in control of the Company"
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. Upon the termination of employment of a Participant following a
change in control of the Company, such Participant, if he or she has
otherwise satisfied
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the requirements of Section 5 hereof, shall be entitled to a benefit equal to
the benefit to which he or she would have been entitled without application
of Section 7A, reduced (but not below zero) to reflect the value of the
benefit he or she received pursuant to Section 7A.
C. For purposes of Section 7A hereof, the present value of a benefit
shall be calculated based upon the interest rate which would be used by the
Pension Benefit Guaranty Corporation for purposes of determining lump sums for
benefits payable as immediate annuities with respect to plans terminating on
the date on which the change in control of the Company occurs and the 1983
GAM mortality table, provided, however, that effective upon the date that the
applicable interest rate as specified in Section 417(e)(3)(A) of the Code is
adopted for use in RIGP, the present value hereunder shall thereafter be
determined under the applicable interest rate and mortality table as defined
in Section 417(e)(3)(A)(ii)(l) of the Code. For purposes of RIGP, each
Participant shall be treated as if he or she terminated employment upon the
change in control and had his or her benefits determined as if he or she were
to begin receiving benefits on the commencement date used in developing the
present value of the benefit in Section 7.A.
Section 8. Minimum Benefit
In no event shall the monthly retirement benefit payable to any
Participant other than Mid-Career Executives under the Plan be less than an
amount which, when added to the benefits payable under RIGP, 25% of the
amount of the Social Security Benefit and the amounts described in Section
6F2 above, is equal to 25% of such Participant's Average Monthly Compensation
as adjusted in Section 6F1 for Participants and Section 6B3 for Grandfathered
Officers.
Section 9. Pre-Retirement Spouse's Benefit
The spouse of a Participant who dies after completing the appropriate
age and number of Years of Service pursuant to Section 5 (but in no case less
than 10) while still employed by the Company shall be entitled to a survivor
benefit, commencing on the death of the Participant, in an amount equal to
one- half of the retirement benefit to which the Participant would have been
entitled under the Plan if the Participant had retired on the last day of the
month coincident with or next following the date of the Participant's death.
Section 10. Form of Benefit
The forms of benefit available under the Plan shall be for single
Participants a 10-Year certain and life annuity or life annuity and for
married Participants a 50% or 100% joint and survivor annuity option, all as
shall have been elected by Participant on forms provided by the Administrator.
The benefit payable to
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single Participant who has failed to make such an election shall be a life
annuity and for a married Participant a 50% joint and survivor annuity. The 10
year certain and life annuity is the actuarial equivalent of the life annuity
and the 100% joint and survivor annuity is the actuarial equivalent of the
50% joint and survivor annuity. Except as otherwise provided in Section 7A in
no event is the benefit payable in a lump sum.
Section 11. Participant's Rights Unsecured
The benefits payable under this Plan shall be unfunded. Consequently,
no assets shall be segregated for purposes of the Plan and placed beyond the
reach of the Company's general creditors. The right of any Participant to
receive benefits under the provisions of the Plan shall be an unsecured claim
against the general assets of the Company.
Section 12. Other Plan Provisions
Other Plan provisions necessary to determine any benefit under the Plan
shall be the same as those described in RIGP.
Section 13. Duties of Administrator
The Plan shall be administered by the Administrator in accordance with
its terms and purposes. The Administrator shall determine the amount and
manner of payment of the benefits due to or on behalf of each Participant
from the Plan and shall cause them to be paid by the Company accordingly.
The Administrator shall be appointed by the Vice President, Human Resources
of the Company.
Section 14. Finality of Decisions
The decisions made by and the actions taken by the Administrator in the
administration of the Plan shall be final and conclusive on all persons, and
the Administrator shall not be subject to individual liability with respect
to the Plan.
Section 15. Amendment and Termination
It is the intention of the Company to continue the Plan indefinitely.
The Company expressly reserves the right to amend the Plan at any time and in
any particular manner, provided that any such amendment shall be made in
accordance with ERISA. Such amendments, other than amendments relating to
termination of the Plan or relating to benefit levels under Section 6 of the
Plan, may be effected by (i) the Board of Directors, (ii) a duly constituted
committee of the Board of Directors, or (iii) the Vice President of the
Company responsible for Human Resources or a representative thereof. In the
event such office is vacant at
-9-
the time the amendment is to be made, the Chief Executive Officer of the
Company shall approve such amendment or appoint a representative. Amendments
relating to termination of the Plan or relating to benefit levels under
Section 6 of the Plan shall be effected pursuant to a resolution duly adopted
by the Board of Directors of the Company, or a duly constituted committee of
the Board of Directors of the Company, in accordance with the Business
Corporation Law of the State of New York.
Any amendment, alteration, modification or suspension under subsection (iii)
of the preceding paragraph shall be set forth in a written instrument executed
by any Vice President of the Company and by the Secretary or an Assistant
Secretary of the Company.
Section 16. No Employment Rights
Nothing contained in the Plan shall be construed as a contract of
employment between the Company and a Participant, or as a right of any
Participant to be continued in the employment of the Company, or as a
limitation of the right of the Company to discharge any of its employees,
with or without cause.
Section 17. Assignment
The benefits payable under this Plan may not be assigned or alienated
except as may otherwise be required by law or pursuant to the terms of a
domestic relations order that has been approved by the Plan Administrator.
Section 18. Law Applicable
This Plan shall be governed by the laws of the State of New York.
Restatement adopted and approved as of October 13, 1997.
EXHIBIT 10(k)
As amended through
October 13, 1997
XEROX CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
(Formerly 1989 Deferred Compensation Plan For Directors)
AMENDMENT AND RESTATEMENT
Preamble. This Plan is a private unfunded nonqualified deferred
compensation arrangement for Directors and all rights shall be governed by and
construed in accordance with the laws of New York, except where preempted by
federal law. It is intended to provide a vehicle for setting aside funds for
retirement.
Section 1. Effective Date. The original effective date of the Plan
is January 1, 1989. The effective date of this amendment and restatement is
October 13, 1997.
Section 2. Eligibility. Any Director of Xerox Corporation (the
"Company") who is not an officer or employee of the Company or a subsidiary of
the Company is eligible to participate in the Plan (a Director who has so
elected to participate is hereinafter referred to as a "Participant"). A
Participant who terminates an election to defer receipt of compensation is not
eligible to participate again in the Plan until twelve months after the
effective date of such termination.
Section 3. Deferred Compensation Accounts. There shall be
established for each Participant one or more deferred compensation Accounts
(as hereinafter defined).
Section 4. Amount of Deferral.
(a) A Participant may elect to defer receipt of all or a specified
part, expressed as a percentage of the cash compensation otherwise payable to
the Participant for serving on the Company's Board of Directors or committees
of the Board of Directors. Any amount deferred is credited to the
Participant's Accounts on the date such amount is otherwise payable.
(b) In addition to the foregoing, there shall be credited to the
deferred compensation accounts of each person who is serving as a Director on
May 17, 1996 a sum computed by the Company as the present value of his or her
accrued benefit under the Company's Retirement Income Plan For Directors, if
any, as of such date and each such Director shall be given notice of such
amount. The amount so computed shall be final and binding on the Company and
each such Director. Within 30 days of the giving of such notice, each such
Director shall make an election on a form provided
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by the Company as to the hypothetical investment of such amount and the
payment methods as permitted under Sections 6 and 8 hereof as in effect on
such date under the administrative rules adopted by the Administrator.
Section 5. Time of Election to Defer. The election to defer will be
made prior to the individual's commencement of services as a Director for
amounts to be earned for the remainder of the calendar year. In the case of
an individual currently serving as a Director, the election to defer must be
made prior to December 31, of any year for amounts to be earned in a
subsequent calendar year or years. An election to totally terminate deferrals
may be made at any time prior to the relevant payment date.
Section 6. Hypothetical Investment. Deferred compensation is assumed
to be invested, without charge, in the (a) Balanced Fund, Income Fund, U.S.
Stock Fund, International Stock Fund, Small Company Stock Fund or Xerox Stock
Fund (or the successors thereto) (the "Funds") established from time to time
under the Xerox Corporation Profit Sharing and Savings Plan (the "Profit
Sharing Plan") (b) a fund with a variable fixed rate of return based upon the
prime or base rate charged by one or more banks ("Prime Rate Investment") and
(c) such other fixed income return investments ("Fixed Return Investment"),
all as shall be made available from time to time by the Administrator in his
or her administrative discretion ("Investments") as elected by the participant
It is anticipated that the Administrator will substitute the Prime Rate
Investment for the Income Fund effective January 1, 1998. Amounts deferred
prior to January 1, 1998 shall have a rate of return at the Income Fund or
the Prime Rate Investment as elected by Participants on forms provided by the
Administrator in connection with the implementation of the Prime Investment
Rate.
Elections to make hypothetical investments in any one or more of the
Investments shall be subject to administrative rules adopted by the
Administrator from time to time.
No shares of Xerox stock will ever actually be issued to a Participant under
the Plan.
Section 7. Value of Deferred Compensation Accounts and Installment
Payments. The value of each Participant's Accounts shall reflect all amounts
deferred, gains , losses and rates of return from the Investments, and shall
be determined at the close of business on each day on which securities are
traded on the New York Stock Exchange. Hypothetical investments in the Profit
Sharing Plan shall be valued on each business day based upon the value of such
hypothetical investment as determined under such Plan on the valuation date
under such Plan coincident with or last preceding such business day. The
value of Investments not made under the Profit Sharing Plan shall be
determined from such available source or sources as the Administrator in his
or her sole discretion shall from time to time determine. The date as of which
investments are valued pursuant to the foregoing sentences are referred to
herein as a Valuation Date.
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Section 8. Manner of Electing Deferral. A Participant may elect to
defer compensation by giving written notice to the Administrator on a form
provided by the Company, which notice shall include (1) the percentage to be
deferred; (2) if more than one is offered under the Plan, the hypothetical
investment applicable to the amount deferred; and (3) the payment method that
will apply to the deferred compensation. A Participant may elect to a maximum
of four separate payment methods during his or her participation in the Plan
("Accounts"). Such payment methods once made may never be changed. Each
election to defer compensation under the Plan shall specify an Account from
which payment will be made. The Accounts available under the Plan shall be:
ACCOUNT 1 which shall be payable beginning the July 15 of a calendar year that
follows the calendar year of retirement by the number of years elected by the
Participant (0, 1, 2, 3, 4, or 5 years). The last payment shall be on the
July 15 of the year in which the Participant attains a certain age elected by
the Participant.
ACCOUNT 2 which shall be payable beginning the July 15 of a calendar year that
follows the calendar year of retirement by the number of years elected by the
Participant (0, 1, 2, 3, 4, or 5 years) and is payable on each subsequent
July 15 until the number of payments elected by the Participant have been
made.
ACCOUNT 3 which shall be payable on the July 15 of a calendar year that
follows the calendar year of retirement by the number of years elected by the
Participant (0, 1, 2, 3, 4, or 5 years) and is payable as a single sum.
ACCOUNT 4 shall be available with respect to amounts deferred during 1998 and
later years. This account is payable beginning on the July 15 of a specified
year whether before or after retirement. In addition to this payment date, the
Participant must elect the number of payments that are to commence on this
date. The payment(s) from this account can be as a single sum or payable in up
to four annual installments. Once Account 4 is established (an election is
made to defer and the payment date is defined), deferrals to Account 4 shall
cease for any calendar year in which a payment is scheduled to be made from
this Account. The full account balance shall be distributed by the end of the
installment period. Once the final payment is made from this Account, the
Participant may elect to create a new Account 4. The initial election or any
subsequent election to use this Account must be made by December 31 of the
year preceding the calendar year in which deferrals will be allocated to this
Account. The first payment date that can be elected is the July 15 of the
calendar year that follows the calendar year of election (calendar year
containing the December 31 due date for election) by three years.
Not later than December 31, 1997, Participants who are currently serving as
Directors of the Company may change their payment elections previously made
under the Plan which specified payment dates relating to termination,
retirement, death, or disability, by selecting payments pursuant to the
methods described in Accounts 1 through 3
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above. Such change shall be effected by the Participant filing with the
Administrator a change of election on a form or forms established by the
Administrator for such purpose. Such change shall be effective only with
respect to payments in 1999 or later for Participants who are serving on the
Company's Board of Directors as of December 31, 1998.
The Administrator may adopt rules of general applicability for administration
of payments under the Plan which may be elected by Participants, including
without limitation, fixing the maximum age selected for payments to terminate
and the maximum number of payments.
Section 9. Payment of Deferred Compensation.
(a) No withdrawal may be made from the Participant's Account, except
as provided under this Section and Sections 10 and 11.
(b) Payments from a Participant's Account are made in cash in
accordance with the elections made under Section 8 of the Plan based on the
value of the Participant's deferred compensation Accounts as of the Valuation
Date immediately preceding the date of payment.
(c) Unless otherwise elected by a Participant with the written
approval of the Administrator, payments of deferred compensation shall be made
pursuant to the following formula: the amount of the first payment shall be a
fraction of the value of the Participant's deferred compensation account on
the preceding Valuation Date, the numerator of which is one and the
denominator of which is the total number of installments elected, and the
amount of each subsequent payment shall be a fraction of the value on the
Valuation Date preceding each subsequent payment date, the numerator of which
is one and the denominator of which is the total number of installments
elected minus the number of installments previously paid. Any other payment
method selected with the written approval of the Administrator must in all
events provide for payments in substantially equal installments.
(d) Upon termination of service on the Board of Directors, including
termination resulting from death, prior to retirement, the total value of the
Participants Accounts under the Plan shall be paid to the Participant, or his
or her estate, as the case may be, as soon as administratively possible after
his or her date of termination.
(e) Upon the death of a Participant following retirement the total
value of the Participant's Accounts under the Plan shall be paid in accordance
with a onetime, irrevocable election made by such Participant as follows:
1. The total value shall be paid to the Participant's estate as soon as
administratively possible after the death of a Participant, or
-4-
2. Payments shall continue under the election made by the Participant to the
Participant's surviving spouse until the surviving spouse's death. Any
remaining payments shall be paid as a single sum to the surviving spouse's
estate.
(f) If a Participant dies after retirement without having made such
irrevocable election, the total value of his or her Accounts under the Plan
shall be paid in a single payment to the Participant's estate as soon as
administratively possible after notice of his or her date of death has been
received by the Administrator.
Section 10. Acceleration of Payment for Hardship.
(a) For Hardship. Upon written approval from the Board of Directors
(with the Participant requesting the withdrawal not participating) a
Participant may be permitted to receive all or part of his accumulated
benefits if, in the discretion of such Board of Directors, it is determined
that an emergency event beyond the Participant's control exists and which
would cause such Participant severe financial hardship if the payment of his
benefits were not approved. Any such distribution for hardship shall be
limited to the amount needed to meet such emergency. A Participant who makes
a hardship withdrawal cannot reenter the Plan for twelve months after the date
of withdrawal.
(b) Upon a Change in Control. Within 5 days following the occurrence
of a change in control of the Company (as hereinafter defined), each
Participant shall receive a lump sum payment equal to the value of his or her
Account. For purposes hereof, a "change in control of the Company" 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.
Section 11. Other Penalized Withdrawals. Notwithstanding the
provisions of Sections 9 and 10, a Participant may be permitted to receive all
or part of his accumulated benefits at any time provided that (A) the
Administrator approves such distribution in his or her sole discretion, and
(B) the Participant forfeits a portion of his account balance equal to a
percentage of the amount distributed. The percentage reduction shall
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be the greater of (A) six percent, or (B) a percentage equal to one-half of
the prime interest rate, as determined by the Administrator.
Section 12. Time Of Investment. Amounts deferred under the Plan
shall begin to be credited with gains, losses and rates of return from
Investments commencing on the date credited to the Participant's Accounts.
Section 13. Participant's Rights Unsecured. The benefits payable
under this Plan shall be unfunded. Consequently, no assets shall be
segregated for purposes of this Plan and placed beyond the reach of the
Company's general creditors. The right of any Participant to receive future
installments under the provisions of the Plan shall be an unsecured claim
against the general assets of the Company.
Section 14. Statement of Account. Statements will be sent to each
Participant by February and August and more frequently if the Administrator
so determines as to the value of their deferred compensation accounts as of
the end of December and June, respectively.
Section 15. Assignability. No right to receive payments hereunder
shall be transferable or assignable by a Participant, except by will or by the
laws of descent and distribution or except as provided under Section 9.
Section 16. Business Days. In the event any date specified herein
falls on a Saturday, Sunday or legal holiday, such date shall be deemed to
refer to the next business day thereafter.
Section 17. Administration. The Plan shall be administered by the
Vice President of the Company having responsibility for human resources (the
"Administrator"). The Administrator shall have the authority to adopt rules
and regulations for carrying out the plan, and interpret, construe and
implement the provisions of the Plan.
Section 18. Amendment. The Company expressly reserves the right to
amend the Plan at any time and in any particular manner. Such amendments,
other than amendments relating to termination of the Plan or relating to
Investments under Section 6 of the Plan, may be effected by (i) the Board of
Directors, (ii) a duly constituted committee of the Board of Directors
("Committee"), or (iii) the Vice President of the Company responsible for
human resources or a representative thereof. In the event such office is
vacant at the time the amendment is to be made, the Chief Executive Officer of
the Company shall approve such amendment or appoint a representative.
Amendments relating to termination of the Plan or relating to Investments
under Section 6 of the Plan shall be effected pursuant to a resolution duly
adopted by the Board of Directors of the Company, or a duly constituted
committee of the Board of Directors of the Company, in accordance with the
Business Corporation Law of the State of New York.
-6-
Any amendment, alteration, modification or suspension under subsection (iii)
of the preceding paragraph shall be set forth in a written instrument executed
by any Vice President of the Company and by the Secretary or an Assistant
Secretary of the Company.
Upon termination the Administrator in his or her sole discretion may pay out
account balances to participants. No amendment, modification or termination
shall, without the consent of a Participant, adversely affect such
Participant's accruals in his/her Accounts.
EXHIBIT 10(l)
(As amended through 10/13/97)
XEROX CORPORATION
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
(Formerly 1989 Deferred Compensation Plan For Executives)
AMENDMENT AND RESTATEMENT
Preamble. This Deferred Compensation Plan For Executives, 1997 Amendment
and Restatement (the "Plan") is a private unfunded nonqualified deferred
compensation arrangement for executives and all rights shall be governed by
and construed in accordance with the laws of New York, except where preempted
by federal law. It is intended to provide a vehicle for setting aside funds
for retirement.
Section 1. Effective Date. The original effective date of the Plan is
January 1, 1989. The effective date of this amendment and restatement is
October 13, 1997.
Section 2. Eligibility. Any employee of Xerox Corporation (the
"Company"), and any employee of a wholly owned subsidiary of the Company
which has adopted this Plan with the approval of the Company's Board of
Directors or the Committee (as hereinafter defined) ("Participating
Subsidiary"), who is in Corporate B and A (or its equivalent) or above, and
such additional group or groups of employees of the Company or of a
Participating Subsidiary as designated from time to time by the
Administrator, are eligible to participate in the Plan (an individual who has
so elected to participate is hereinafter referred to as a "Participant"). A
Participant who terminates an election to defer receipt of compensation is
not eligible to make deferrals again in the Plan until twelve months after
the effective date of such termination.
Section 3. Deferred Compensation Account. There shall be established
for each Participant one or more deferred compensation Accounts (as
hereinafter defined).
Section 4. Amount of Deferral. A Participant may elect to defer
receipt of compensation for services (up to 50% in the case of base salary and
up to 100% in the case of any other long or short term compensation that is
eligible for deferral) as an employee of the Company or a Participating
Subsidiary otherwise payable to the Participant in the form of cash. Any
amount deferred is credited to the Participant's Accounts on the date such
amount is otherwise payable.
Section 5. Time of Election of Deferral. An election to defer
compensation must be made by a Participant prior to the year in which the
Participant would
-1-
otherwise have an unrestricted right to such compensation. When an employee
first becomes eligible to participate in the Plan, he or she may elect to
defer any compensation to which he or she has yet to have an unrestricted
right to payment. An election to totally terminate future deferrals may be
made at any time prior to the relevant payment date.
Section 6. Hypothetical Investment. Deferred compensation is assumed to
be invested, without charge, in (a) the Balanced Fund, Income Fund, U. S.
Stock Fund, International Stock Fund, Small Company Stock Fund or Xerox Stock
Fund (or the successors thereto) established from time to time under the
Profit Sharing Plan, (b) a fund with a variable fixed rate of return based
upon the prime or base rate charged by one or more banks ("Prime Rate
Investment") and (c) such other fixed income return investments ("Fixed
Return Investment"), all as shall be made available from time by the
Administrator in his or her administrative discretion ("Investments"), as
elected by the Participant.
It is anticipated that the Administrator will substitute the Prime Rate
Investment for the Income Fund effective January 1, 1998. Amounts deferred
prior to January 1, 1998 shall have a rate of return at the Income Fund or
the Prime Rate Investment as elected by Participants on forms provided by the
Administrator in connection with the implementation of the Prime Investment
Rate.
Elections to make hypothetical investments in any one or more of the
Investments shall be subject to administrative rules adopted by the
Administrator from time to time.
No shares of Xerox stock will ever actually be issued to a Participant under
the Plan.
Section 7. Value of Deferred Compensation Accounts and Installment
Payments. The value of each Participant's Accounts shall reflect all amounts
deferred, gains, losses and rates of return from the Investments, and shall be
determined at the close of business on each day on which securities are traded
on the New York Stock Exchange. Hypothetical investments in the Profit
Sharing Plan shall be valued on each business day based upon the value of such
hypothetical investment as determined under such Plan on the valuation date
under such Plan coincident with or last preceding such business day. The
value of Investments not made under the Profit Sharing Plan shall be
determined from such available source or sources as the Administrator in his
or her sole discretion shall from time to time determine. The date as of which
investments are valued pursuant to the foregoing sentences are referred to
herein as a Valuation Date.
-2-
Section 8. Manner of Electing Deferral. A Participant may elect to defer
compensation by giving written notice to the Administrator on a form provided
by the Company, which notice shall include (1) the percentage to be deferred;
(2) if more than one is offered under the Plan, the Investment applicable to
the amount deferred; and (3) the payment method that will apply to the
deferred compensation. A Participant may elect up to a maximum of four
separate payment methods during his or her participation in the Plan
("Accounts"). Such payment methods once made may never be changed. Each
election to defer compensation under the Plan shall specify an Account from
which payment will be made. The Accounts available under the Plan shall be:
ACCOUNT 1 which shall be payable beginning the July 15 of a calendar year that
follows the calendar year of retirement by the number of years elected by the
Participant (0, 1, 2, 3, 4, or 5 years). The last payment shall be on the
July 15 of the year in which the Participant attains a certain age elected by
the Participant.
ACCOUNT 2 which shall be payable beginning the July 15 of a calendar year that
follows the calendar year of retirement by the number of years elected by the
Participant (0, 1, 2, 3, 4, or 5 years) and is payable on each subsequent
July 15 until the number of payments elected by the Participant have been
made.
ACCOUNT 3 which shall be payable on the July 15 of a calendar year that
follows the calendar year of retirement by the number of years elected by the
Participant (0, 1, 2, 3, 4, or 5 years) and is payable as a single sum.
ACCOUNT 4 shall be available with respect to amounts deferred during 1998 and
later years. This account is payable beginning on the July 15 of a specified
year whether before or after retirement. In addition to this payment date, the
Participant must elect the number of payments that are to commence on this
date. The payment(s) from this account can be as a single sum or payable in up
to four annual installments. Once Account 4 is established (an election is
made to defer and the payment date is defined), deferrals to Account 4 shall
cease for any calendar year in which a payment is scheduled to be made from
this Account. The full account balance shall be distributed by the end of the
installment period. Once the final payment is made from this Account, the
Participant may elect to create a new Account 4. The initial election or any
subsequent election to use this Account must be made by December 31 of the
year preceding the calendar year in which deferrals will be allocated to this
Account. The first payment date that can be elected is the July 15 of the
calendar year that follows the calendar year of election (calendar year
containing the December 31 due date for election) by three years.
Not later than December 31, 1997, participants who are currently employed by
the Company may change their payment elections previously made under the Plan
which specified payment dates relating to termination, retirement, death, or
-3-
disability, by selecting payments pursuant to the methods described in
Accounts 1 through 3 above. Such change shall be effected by the Participant
filing with the Administrator a change of election on a form or forms
established by the Administrator for such purpose. Such change shall be
effective only with respect to payments in 1999 or later for participants who
are employed by Xerox as of December 31, 1998.
The Administrator may adopt rules of general applicability for administration
of payments under the Plan which may be elected by participants, including
without limitation, fixing the maximum age selected for payments to terminate
and the maximum number of payments.
Section 9. Payment of Deferred Compensation.
(a) No withdrawal may be made from the Participant's Account, except as
provided under this Section and Sections 10 and 11.
(b) Payments from a Participant's Account are made in cash in accordance
with the elections made under Section 8 of the Plan based on the value of the
Participant's deferred compensation Accounts as of the Valuation Date
immediately preceding the date of payment.
(c) Unless otherwise elected by a Participant with the written approval
of the Administrator, payments of deferred compensation shall be made
pursuant to the following formula: the amount of the first payment shall be
a fraction of the value of the Participant's deferred compensation account on
the preceding Valuation Date, the numerator of which is one and the
denominator of which is the total number of installments elected, and the
amount of each subsequent payment shall be a fraction of the value on the
Valuation Date preceding each subsequent payment date, the numerator of which
is one and the denominator of which is the total number of installments
elected minus the number of installments previously paid. Any other payment
method selected with the written approval of the Administrator must in all
events provide for payments in substantially equal installments.
(d) Upon termination of employment, including termination resulting from
death, prior to retirement, the total value of the participants Accounts
under the Plan shall be paid to the Participant, or his or her estate, as the
case may be, as soon as administratively possible after his or her date of
termination.
(e) Upon the death of a Participant following retirement the total value
of the Participant's Accounts under the Plan shall be paid in accordance with
a one-time, irrevocable election made by such Participant as follows:
1. The total value shall be paid to the Participant's estate as soon as
administratively possible after the death of a Participant, or
-4-
2. Payments shall continue under the election made by the Participant to the
Participant's surviving spouse until the surviving spouse's death. Any
remaining payments shall be paid as a single sum to the surviving spouse's
estate.
(f) If a Participant dies after retirement without having made such
irrevocable election, the total value of his or her Accounts under the Plan
shall be paid in a single payment to the participant's estate as soon as
administratively possible after notice of his or her date of death has been
received by the Administrator.
Section 10. Acceleration of Payment.
(a) For Hardship. Upon written approval from the Company's Chief
Executive Officer (the Company's Board of Directors, in the case of a request
from the Chief Executive Officer), a Participant may be permitted to receive
all or part of his accumulated benefits if, in the discretion of the Chief
Executive Officer (or the Board, if applicable), it is determined that an
emergency event beyond the Participant's control exists and which would cause
such Participant severe financial hardship if the payment of his benefits
were not approved. Any such distribution for hardship shall be limited to
the amount needed to meet such emergency. A Participant who makes a hardship
withdrawal cannot reenter the Plan for twelve months after the date of
withdrawal.
(b) Upon a Change in Control. Within 5 days following the occurrence
of a change in control of the Company (as hereinafter defined), each
Participant shall receive a lump sum payment equal to the value of his
Account.
For purposes hereof, a "change in control of the Company" 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
-5-
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof.
Section 11. Other Penalized Withdrawals. Notwithstanding the provisions
of Sections 9 and 10, a Participant may be permitted to receive all or part
of his accumulated benefits at any time provided that (A) the Administrator
approves such distribution in his or her sole discretion, and (B) the
Participant forfeits a portion of his account balance equal to a percentage
of the amount distributed. The percentage reduction shall be the greater of
(A) six percent, or (B) a percentage equal to one-half of the prime interest
rate, as determined by the Administrator.
Section 12. Time Of Investment. Amounts deferred under the Plan shall
begin to be credited with gains, losses and rates of return from Investments
commencing on the date credited to the Participant's Accounts.
Section 13. Participant's Rights Unsecured. The benefits payable under
this Plan shall be unfunded. Consequently, no assets shall be segregated for
purposes of this Plan and placed beyond the reach of the Company's general
creditors. The right of any Participant to receive future installments under
the provisions of the Plan shall be an unsecured claim against the general
assets of the Company.
Section 14. Statement of Account. Statements will be sent to each
Participant by February and August and more frequently if the Administrator
so determines as to the value of their deferred compensation accounts as of
the end of December and June, respectively.
Section 15. Assignability. No right to receive payments hereunder shall
be transferable or assignable by a Participant, except by will or by the laws
of descent and distribution or except as provided under Section 9.
Section 16. Business Days. In the event any date specified herein falls
on a Saturday, Sunday or legal holiday, such date shall be deemed to refer to
the next business day thereafter.
Section 17. Administration. The Plan shall be administered by the Vice
President of the Company having responsibility for human resources (the
"Administrator"). The Administrator shall have the authority to adopt rules
and regulations for carrying out the plan, and interpret, construe and
implement the provisions of the Plan.
Section 18. Amendment. The Company expressly reserves the right to amend
the Plan at any time and in any particular manner. Such amendments, other
than amendments relating to termination of the Plan or relating to Investments
-6-
under Section 6 of the Plan, may be effected by (i) the Board of Directors,
(ii) a duly constituted committee of the Board of Directors ("Committee"), or
(iii) the Vice President of the Company responsible for human resources or a
representative thereof. In the event such office is vacant at the time the
amendment is to be made, the Chief Executive Officer of the Company shall
approve such amendment or appoint a representative. Amendments relating to
termination of the Plan or relating to Investments under Section 6 of the Plan
shall be effected pursuant to a resolution duly adopted by the Board of
Directors of the Company, or a duly constituted committee of the Board of
Directors of the Company, in accordance with the Business Corporation Law of
the State of New York.
Any amendment, alteration, modification or suspension under subsection (iii)
of the preceding paragraph shall be set forth in a written instrument executed
by any Vice President of the Company and by the Secretary or an Assistant
Secretary of the Company.
Upon termination the Administrator in his or her sole discretion may pay out
account balances to participants. No amendment, modification or termination
shall, without the consent of a Participant, adversely affect such
Participant's accruals in his/her Accounts.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From Xerox
Corporation's September 30, 1997 Financial Statements And Is Qualified In Its
Its Entirety By Reference To Such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 62
<SECURITIES> 0
<RECEIVABLES> 13,931
<ALLOWANCES> 424
<INVENTORY> 3,092
<CURRENT-ASSETS> 10,517
<PP&E> 5,106
<DEPRECIATION> 2,819
<TOTAL-ASSETS> 27,248
<CURRENT-LIABILITIES> 7,304
<BONDS> 13,006
637
709
<COMMON> 327
<OTHER-SE> 4,430
<TOTAL-LIABILITY-AND-EQUITY> 27,248
<SALES> 6,611
<TOTAL-REVENUES> 12,754
<CGS> 3,635
<TOTAL-COSTS> 6,761
<OTHER-EXPENSES> 4,618
<LOSS-PROVISION> 176
<INTEREST-EXPENSE> 450
<INCOME-PRETAX> 1,375
<INCOME-TAX> 478
<INCOME-CONTINUING> 927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 927
<EPS-PRIMARY> 2.70
<EPS-DILUTED> 2.57
</TABLE>
