EXHIBIT 10 (b)
As Amended Through 10/9/00
XEROX CORPORATION
1991 LONG-TERM INCENTIVE PLAN
1. Purpose
The purpose of the Xerox Corporation 1991 Long-Term Incentive Plan (the
"Plan") is to advance the interests of Xerox Corporation (the "Company") and
to increase shareholder value by providing officers and employees with a
proprietary interest in the growth and performance of the Company and with
incentives for continued service with the Company, its subsidiaries and
affiliates.
2. Term
The Plan shall be effective as of May 16, 1991 and shall remain in effect
until May 20, 2004 unless sooner terminated by the Company's Board of
Directors (the "Board"). After termination of the Plan, no future awards may
be granted but previously made awards shall remain outstanding in accordance
with their applicable terms and conditions and the terms and conditions of
the Plan.
3. Plan Administration
The Executive Compensation and Benefits Committee of the Board, or such other
committee as the Board shall determine, comprised of not less than three
members shall be responsible for administering the Plan (the "Compensation
Committee"). To the extent specified by the Compensation Committee it may
delegate its administrative responsibilities to a subcommittee of the
Compensation Committee comprised of not less than three members (the
Compensation Committee and such subcommittee being hereinafter referred to as
the "Committee"). The Compensation Committee or such subcommittee members, as
appropriate, shall be qualified to administer this Plan as contemplated by
(a) Rule 16b-3 under the Securities and Exchange Act of 1934 (the "1934 Act")
or any successor rule and (b) Section 162(m) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder ("Section 162(m)"). The
Committee, and such subcommittee to the extent provided by the Committee,
shall have full and exclusive power to interpret, construe and implement the
Plan and any rules, regulations, guidelines or agreements adopted hereunder
and to adopt such rules, regulations and guidelines for carrying out the Plan
as it may deem necessary or proper. These powers shall include, but not be
limited to, (i) determination of the type or types of awards to be granted
under the Plan; (ii) determination of the terms and conditions of any awards
under the Plan; (iii) determination of whether, to what extent and under what
circumstances awards may be settled, paid or exercised in cash, shares, other
securities, or other awards, or other property, or canceled, forfeited or
suspended; (iv) adoption of such modifications, amendments, procedures,
subplans and the like as are necessary to comply with provisions of the laws
of other countries in which the Company may operate in order to assure the
viability of awards granted under the Plan and to enable participants employed
in such other countries to receive advantages and benefits under the Plan and
such laws; (v) subject to the rights of participants, modification, change,
amendment or cancellation of any award to correct an administrative error and
(vi) taking any other action the Committee deems necessary or desirable for
the administration of the Plan. All determinations, interpretations, and
other decisions under or with respect to the Plan or any award by the
Committee shall be final, conclusive and binding upon the Company, any
participant, any holder or beneficiary of any award under the Plan and any
employee of the Company. Except for the power to amend this Plan as provided
in Section 13 and except for determinations regarding employees who are
subject to Section 16 of the 1934 Act or certain key employees who are or may
become, as determined by the Committee, subject to the Section 162(m)
compensation deductibility limit (the "Covered Employees"), the Committee may
delegate any or all of its duties, powers and authority under the Plan
pursuant to such conditions or limitations as the Committee may establish to
any officer or officers of the Company.
4. Eligibility
Any employee of the Company shall be eligible to receive an award under the
Plan. "Employee" shall also include any former employee of the Company
eligible to receive a replacement award as contemplated in Sections 5 and 7,
and "Company" shall include any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a significant
equity interest, as determined by the Committee.
5. Shares of Stock Subject to the Plan
For each calendar year from and including 1991 to but excluding 1999, a number
of shares of Common Stock, par value $1.00 per share, of the Company ("Common
Stock") equal in an amount of up to one percent (1%) of the adjusted average
shares of Common Stock outstanding used to calculate diluted earnings per
share (previously known as fully diluted earnings per share) as reported in
the annual report to shareholders for the preceding year shall become
available for issuance under the Plan; and for the calendar year 1999, and for
each calendar year thereafter, a number of shares of Common Stock equal in an
amount to two percent (2%) of the adjusted average shares of Common Stock
outstanding used to calculate diluted earnings per share (previously known as
fully diluted earnings per share) as reported in the annual report to
shareholders for the preceding year shall become available for issuance under
the Plan.
For purposes of the preceding paragraph, the following shall not be counted
against shares available for issuance under the Plan: (i) settlement of stock
appreciation rights ("SAR") in cash or any form other than shares and (ii)
payment in shares of dividends and dividend equivalents in conjunction with
outstanding awards. Any shares that are issued by the Company, and any awards
that are granted by, or become obligations of, the Company, through the
assumption by the Company or an affiliate of, or in substitution for,
outstanding awards previously granted by an acquired company shall not be
counted against the shares available for issuance under the Plan.
In no event, however, except as subject to adjustment as provided in Section 6
shall more than (a) thirty million (30,000,000) shares of Common Stock be
available for issuance pursuant to the exercise of incentive stock options
("ISOs") awarded under the Plan(1); (b) twenty-three million five hundred
thirty-two thousand three hundred two (23,532,302) shares of Common Stock
shall be available for issuance pursuant to stock awards granted under Section
7(c) of the Plan(1) ;and (c) ten million (10,000,000) shares of Common Stock
shall be made the subject of awards under any combination of awards under
Sections 7(a), 7(b) or 7(c) of the Plan to any single individual(2). SARs
whether settled in cash or shares of Common Stock shall be counted against the
limit set forth in (c).
(1) Effective February 1, 1999
(2) Effective February 1, 1999
Any shares issued under the Plan may consist in whole or in part, of
authorized and unissued shares or of treasury shares, and no fractional shares
shall be issued under the Plan. Cash may be paid in lieu of any fractional
shares in settlements of awards under the Plan.
6. Adjustments and Reorganizations
The Committee may make such adjustments as it deems appropriate to meet the
intent of the Plan in the event of changes that impact the Company's share
price or share status, provided that any such actions are consistently and
equitably applicable to all affected participants.
In the event of any stock dividend, stock split, combination or exchange of
shares, merger, consolidation, spin-off or other distribution (other than
normal cash dividends) of Company assets to shareholders, or any other change
affecting shares, such adjustments, if any, as the Committee in its discretion
may deem appropriate to reflect such change shall be made with respect to (i)
the aggregate number of shares that may be issued under the Plan; (ii) the
number of shares subject to awards of a specified type or to any individual
under the Plan; and/or (iii) the price per share for any outstanding stock
options, SARs and other awards under the Plan.
7. Awards
The Committee shall determine the type or types of award(s) to be made to each
participant under the Plan and shall approve the terms and conditions
governing such awards in accordance with Section 12. Awards may include but
are not limited to those listed in this Section 7. Awards may be granted
singly, in combination or in tandem so that the settlement or payment of one
automatically reduces or cancels the other. Awards may also be made in
combination or in tandem with, in replacement of, as alternatives to, or as
the payment form for, grants or rights under any other employee or
compensation plan of the Company, including the plan of any acquired entity.
However, under no circumstances may stock option awards be made which provide
by their terms for the automatic award of additional stock options upon the
exercise of such awards.
(a) Stock Option is a grant of a right to purchase a specified number of
shares of Common Stock during a specified period. The purchase price of each
option shall be not less than 100% of Fair Market Value (as defined in Section
10) on the effective date of grant, except that, in the case of a stock option
granted retroactively in tandem with or as a substitution for another award,
the exercise or designated price may be no lower than the Fair Market Value of
a share on the date such other award was granted. A stock option may be
exercised in whole or in installments, which may be cumulative. A stock
option may be in the form of an ISO which complies with Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder at
the time of grant. The price at which shares of Common Stock may be purchased
under a stock option shall be paid in full at the time of the exercise in cash
or such other method as provided by the Committee at the time of grant or as
provided in the form of agreement approved in accordance herewith, including
tendering (either actually or by attestation) Common Stock, surrendering a
stock award valued at Fair Market Value on the date of surrender, surrendering
a cash award, or any combination thereof.
(b) Stock Appreciation Right is a right to receive a payment, in cash
and/or Common Stock, as determined by the Committee, equal to the excess of
the Fair Market Value of a specified number of shares of Common Stock on the
date the SAR is exercised over the Fair Market Value on the date of grant of
the SAR as set forth in the applicable award agreement, except that, in the
case of a SAR granted retroactively in tandem with or as a substitution for
another award, the exercise or designated price may be no lower than the Fair
Market Value of a share on the date such other award was granted
(c) Stock Award is an award made in stock or denominated in units of
stock. All or part of any stock award may be subject to conditions established
by the Committee, and set forth in the award agreement, which may include, but
are not limited to, continuous service with the Company, achievement of
specific business objectives, and other measurements of individual, business
unit or Company performance.
(d) Cash Award is an award denominated in cash with the eventual
payment amount subject to future service and such other restrictions and
conditions as may be established by the Committee, and as set forth in the
award agreement, including, but not limited to, continuous service with the
Company, achievement of specific business objectives, and other measurement of
individual, business unit or Company performance. Cash Awards to any single
Covered Employee, including dividend equivalents in cash or shares of Common
Stock payable based upon attainment of specific performance goals, may not
exceed in the aggregate $5,000,000 for each performance period established by
the Committee under Section 23 of the Plan.
8. Dividends and Dividend Equivalents
The Committee may provide that awards denominated in stock earn dividends or
dividend equivalents. Such dividend equivalents may be paid currently in cash
or shares of Common Stock or may be credited to an account established by the
Committee under the Plan in the name of the participant. In addition,
dividends or dividend equivalents paid on outstanding awards or issued shares
may be credited to such account rather than paid currently. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions as the Committee may establish, including reinvestment in
additional shares or share equivalents.
9. Deferrals and Settlements
Payment of awards may be in the form of cash, stock, other awards, or in such
combinations thereof as the Committee shall determine at the time of grant,
and with such restrictions as it may impose. The Committee may also require
or permit participants to elect to defer the issuance of shares or the
settlement of awards in cash under such rules and procedures as it may
establish under the Plan. It may also provide that deferred settlements
include the payment or crediting of interest on the deferral amounts or the
payment or crediting of dividend equivalents on deferred settlements
denominated in shares.
10. Fair Market Value
Fair Market Value for all purposes under the Plan shall mean the average of
the high and low prices of Common Stock as reported in The Wall Street Journal
in the New York Stock Exchange composite transactions or similar successor
consolidated transactions reports for the relevant date, or if no sales of
Common Stock were made on said exchange on that date, the average of the high
and low prices of Common Stock as reported in said composite transaction
report for the preceding day on which sales of Common Stock were made on said
Exchange. Under no circumstances shall Fair Market Value be less than the par
value of the Common Stock.
11. Transferability and Exercisability
All awards under the Plan will be nontransferable and shall not be assignable,
alienable, saleable or otherwise transferable by the participant other than by
will or the laws of descent and distribution except pursuant to a domestic
relations order entered by a court of competent jurisdiction or as otherwise
determined by the Committee. In the event that a participant terminates
employment with the Company to assume a position with a governmental,
charitable, educational or similar non-profit institution, the Committee may
authorize a third party, including but not limited to a "blind" trust, to act
on behalf of and for the benefit of the respective participant with respect to
any outstanding awards. Except as otherwise provided in this Section 11,
during the life of the participant, awards under the Plan shall be exercisable
only by him or her except as otherwise determined by the Committee. In
addition, if so permitted by the Committee, a participant may designate a
beneficiary or beneficiaries to exercise the rights of the participant and
receive any distributions under this Plan upon the death of the participant.
12. Award Agreements
Awards under the Plan shall be evidenced by one or more agreements approved by
the Committee that set forth the terms and conditions of and limitations on an
award, except that in no event shall the term of any ISO exceed a period of
ten years from the date of its grant. The Committee need not require the
execution of any such agreement by a participant in which case acceptance of
the award by the respective participant will constitute agreement to the terms
of the award.
13. Plan Amendment
The Compensation Committee may amend the Plan as it deems necessary or
appropriate, except that no such amendment which would cause the Plan not to
comply with the requirements of (i) Section 162(m) with respect to
performance-based compensation, (ii) the Code with respect to ISOs or (iii)
the New York Business Corporation Law as in effect at the time of such
amendment shall be made without the approval of the Company's shareholders.
No such amendment shall adversely affect any outstanding awards under the Plan
without the consent of all of the holders thereof.
14. Tax Withholding
The Company shall have the right to deduct from any settlement of an award
made under the Plan, including the delivery or vesting of shares, an amount
sufficient to cover withholding required by law for any federal, state or
local taxes or to take such other action as may be necessary to satisfy any
such withholding obligations. The Committee may permit shares to be used to
satisfy required tax withholding and such shares shall be valued at the Fair
Market Value as of the settlement date of the applicable award.
15. Other Company Benefit and Compensation Programs
Unless otherwise determined by the Committee, settlements of awards received
by participants under the Plan shall not be deemed a part of a participant's
regular, recurring compensation for purposes of calculating payments or
benefits from any Company benefit plan, severance program or severance pay law
of any country.
16. Unfunded Plan
Unless otherwise determined by the Committee, the Plan shall be unfunded and
shall not create (or be construed to create) a trust or a separate fund or
funds. The Plan shall not establish any fiduciary relationship between the
Company and any participant or other person. To the extent any person holds
any rights by virtue of a grant awarded under the Plan, such right (unless
otherwise determined by the Committee) shall be no greater than the right of
an unsecured general creditor of the Company.
17. Future Rights
No person shall have any claim or right to be granted an award under the Plan,
and no participant shall have any right by reason of the grant of any award
under the Plan to continued employment by the Company or any subsidiary of the
Company.
18. General Restriction
Each award shall be subject to the requirement that, if at any time the
Committee shall determine, in its sole discretion, that the listing,
registration or qualification of any award under the Plan upon any securities
exchange or under any state or federal law, or the consent or approval of any
government regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such award or the exercise settlement
thereof, such award may not be granted, exercised or settled in whole or in
part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
19. Governing Law
The validity, construction and effect of the Plan and any actions taken or
relating to the Plan shall be determined in accordance with the laws of the
state of New York and applicable Federal law.
20. Successors and Assigns
The Plan shall be binding on all successors and permitted assigns of a
participant, including, without limitation, the estate of such participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of such participant's creditors.
21. Rights as a Shareholder
A participant shall have no rights as a shareholder until he or she becomes
the holder of record of Common Stock.
22. Change in Control
Notwithstanding anything to the contrary in the Plan, the following shall
apply to all awards granted and outstanding under the Plan:
(a) Definitions. The following definitions shall apply to this Section
22:
A "Change in Control," unless otherwise defined by the Compensation
Committee, shall be deemed to have occurred if (a) any "person," as such term
in used in Section 13(d) and 14(d) of the 1934 Act, other than (1) the
Company, (2) any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (3) 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, or (4) any person who
becomes a "beneficial owner" (as defined below) in connection with a
transaction described in clause (1) of subparagraph (c) below, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly from the
Company or its affiliates) representing 20 percent or more of the combined
voting power of the Company's then outstanding voting securities; (b) the
following individuals cease for any reason to constitute a majority of the
directors then serving; individuals who, on October 9, 2000 constitute the
Board and any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election
of directors of the Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was approved or
recommended by a vote of at least two-thirds of the directors then still in
office who were directors on October 9, 2000 or whose appointment, election or
nomination for election was previously so approved or recommended; (c) there
is consummated a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation, other than (1)
a merger or consolidation which results in the directors of the Company
immediately prior to such merger or consolidation continuing to constitute at
least a majority of the board of directors of the Company, the surviving
entity or any parent thereof or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which
no person is or becomes the beneficial owner, directly or indirectly, of
securities of the Company (not including in the securities beneficially owned
by such person any securities acquired directly from the Company or its
affiliates) representing 20% or more of the combined voting power of the
Company's then outstanding securities; or (d) the shareholders of the Company
approve a plan of complete liquidation or dissolution of the Company or there
is consummated an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets, other than a sale or disposition
by the Company of all or substantially all of the Company's assets to an
entity, at least 50% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such sale.
"CIC Price" shall mean the higher of (a) the highest price paid for a
share of the Company's Common Stock in the transaction or series of
transactions pursuant to which a Change in Control of the Company shall have
occurred, or (b) the highest price paid for a share of the Company's Common
Stock during the 60 day period immediately preceding the date upon which the
event constituting a Change in Control shall have occurred as reported in The
Wall Street Journal in the New York Stock Exchange Composite Transactions or
similar successor consolidated transactions reports.
(b) Acceleration of Vesting and Payment of SARs, Stock Awards, Cash
Awards, and Dividends and Dividend Equivalents.
(1) Upon the occurrence of an event constituting a Change in
Control, all SARs, stock awards, cash awards, dividends and dividend
equivalents outstanding on such date shall become 100% vested and shall be
paid in cash as soon as may be practicable. Upon such payment, such awards
and any related stock options shall be cancelled.
(2) The amount of cash to be paid shall be determined by
multiplying the number of such awards, as the case may be, by: (i) in the case
of stock awards, the CIC Price; (ii) in the case of SARs, the difference
between the exercise price of the related option per share and the CIC Price;
(iii) in the case of cash awards where the award period, if any, has not been
completed upon the occurrence of a Change in Control, the maximum value of
such awards as determined by the Committee at the time of grant, without
regard to the performance criteria, if any, applicable to such award; and (iv)
in the case of cash awards where the award period, if any, has been completed
on or prior to the occurrence of a Change in Control: (aa) where the cash
award is payable in cash, the value of such award as determined in accordance
with the award agreement, and (bb) where the cash award is payable in shares
of Common Stock, the CIC Price.
(c) Option Surrender Rights.
(1) All stock options granted under the Plan shall be accompanied
by option surrender rights ("OSRs"). OSRs shall be evidenced by OSR
agreements in such form and not inconsistent with the Plan as the Committee
shall approve from time to time. Upon the occurrence of an event constituting
a Change in Control, all OSRs, to the extent that the CIC Price exceeds the
exercise price of the related stock options, shall be paid in cash as soon as
may be practicable. Upon such payment, such rights and any related stock
options shall be cancelled.
(2) The amount of cash payable in respect of an OSR shall be
determined by multiplying the number of unexercised shares as to which the
right then relates by the difference between the option price of such shares
and the CIC Price.
(3) Upon the grant of SARs, with respect to the same shares covered
by then outstanding OSRs the OSRs relating to such shares shall be
automatically cancelled.
(d) Notwithstanding the foregoing subsections (a), (b) and (c), SARs,
OSRs and any stock-based award held by an officer or director subject to
Section 16 of the 1934 Act which have been outstanding less than six months
(or such other period as may be required by the 1934 Act) upon the occurrence
of an event constituting a Change in Control shall not be paid in cash until
the expiration of such period, if any, as shall be required pursuant to such
Section, and the amount to be paid shall be determined by multiplying the
number of SARs, OSRs or stock awards by the CIC Price determined as though the
event constituting the Change in Control had occurred on the first day
following the end of such period.
23. Certain Provisions Applicable to Awards to Covered Employees
Performance-based awards made to Covered Employees shall be made by the
Committee within the time period required under Section 162(m) for the
establishment of performance goals and shall specify, among other things, the
performance period(s) for such award (which shall be not less than one year),
the performance criteria and the performance targets. The performance
criteria shall be any one or more of the following as determined by the
Committee and may differ as to type of award and from one performance period
to another: earnings per share, total shareholder return, return on
shareholders' equity, economic value added measures, return on assets,
revenue, profit before tax, profit after tax, stock price and return on sales.
Payment or vesting of awards to Covered Employees shall be contingent upon
satisfaction of the performance criteria and targets as certified by the
Committee by resolution of the Committee. To the extent provided at the time
of an award, the Committee may in its sole discretion reduce any award to any
Covered Employee to any amount, including zero.