Exhibit 10(r)(1)
THE DOCUMENT COMPANY
XEROX
October 3, 2001
Mr. Barry D. Romeril
17 Thomas Place
Rowayton, CT 06853
Dear Barry,
This agreement sets forth the arrangements for your retirement from Xerox
Corporation (together with its successors, the "Company"). This agreement
supersedes the agreement between you and the Company dated June 13, 2001. This
agreement, and the Company's undertakings and obligations hereunder, have been
approved by the Executive Compensation and Benefits Committee of the Company's
Board (the "ECBC").
Last day of active employment: December 31, 2001
Compensation Continuance: 24 months from the last day of active
employment, subject to earlier expiration
to the extent provided in this agreement
Compensation Continuance Amount: $101,250 per month, paid no less
frequently than monthly
Retirement Date: The day following the day on which your
Compensation Continuance expires
If you commence employment as an employee of, or consultant to, another firm or
corporation (other than the Company or any of its affiliates) that is, as of the
date of such commencement, (a) a direct competitor of the Company in any
material business presently engaged in by Xerox Corporation or in which it is
probable, as of the date of this letter, that Xerox Corporation will materially
engage prior to December 31, 2003 or (b) such a competitor indirectly through a
partnership, joint venture or other material business arrangement with, or as a
material supplier or consultant to, such a direct competitor (any firm or
corporation described in (a) or (b) being a "Competitor"), your Compensation
Continuance will immediately expire. However, if the Company advises you in
writing that in its reasonable
judgment such other firm or corporation is not a Competitor, the remaining
Compensation Continuance will continue to be paid. In this connection, the
Company will (x) advise you, promptly upon your request, whether any prospective
employer you identify is a Competitor and (y) keep your request confidential.
The Company may also terminate the Compensation Continuance in the event that
you (i) willfully violate your obligations under Sections 13, 14, 15 or 16 below
(relating, respectively, to a release of claims, cooperation in litigation,
confidential information and non-disparagement), (ii) willfully fail to resign
as an officer and director of the Company promptly upon request in accordance
with this agreement, (iii) solicit for employment, by any person or entity other
than the Company or any of its affiliates, any individual (other than your
present, or any former, secretary) who you know to be an employee of the Company
or any of its affiliates or (iv) are convicted of, or enter a guilty plea with
respect to, a crime that constitutes a felony, whether or not connected with the
Company. In addition, your Compensation Continuance will automatically terminate
in the event of your death.
If your Compensation Continuance expires early pursuant to either of the two
immediately preceding paragraphs, then: your Retirement Date will (as provided
above) be deemed to have occurred on the day following the day that your
Compensation Continuance expires; certain benefits will accordingly (as provided
in the following Sections of this agreement) either terminate or be reduced; and
in the event that your Compensation Continuance expires early for any reason
other than your death, all your then unvested stock options and unvested
stock-based awards listed in 3A and 3B below will immediately expire and be
forfeited and your benefits (if any) under the SERP (as defined below) will be
determined based solely on compensation you receive through December 31, 2001.
1. CONSULTING ARRANGEMENT
While you are receiving Compensation Continuance, you agree to provide up to 100
days of consulting services to the Company with regard to strategic, business
development and financial matters, including without limitation consummation and
implementation of third party financing arrangements of customer equipment
purchases on a worldwide basis and debt restructuring (the "Services"). The
Services will be provided at such times and places as may from time to time be
reasonably requested by the Company. The Company will reimburse you for your
documented, reasonable, out-of-pocket expenses in connection with the rendering
of the Services, including without limitation reasonable travel expenses. No
additional compensation will be provided to you for the Services.
2. INCENTIVE STOCK RIGHTS AWARD
You have been granted an award of 50,000 Incentive Stock Rights (ISRs) as of
September 26, 2001, as memorialized in a form of award agreement of which you
have received a copy. This ISR award will fully vest no later than January 1,
2004 unless (i) your Compensation Continuance terminates prior to the expiration
of its scheduled two-year period pursuant to the second or third paragraph of
this agreement for a reason other than your death or (ii) you have willfully
breached any material provision of this agreement prior to the vesting date;
provided that, to the extent that the 1991 Long-Term Incentive Plan (the "LTIP")
requires further action by the ECBC to fully implement the foregoing, such full
implementation shall be contingent on the ECBC taking such further action. This
ISR award will settle promptly following vesting.
3. STOCK AWARDS
Other stock-based grants awarded to you prior to the commencement of
Compensation Continuance and still outstanding will continue to vest and/or
remain exercisable as set forth below and consistent with the terms and
conditions of the LTIP and the relevant award agreement relating to each such
award ("LTIP Terms"); provided, however, that for purposes of the foregoing (x)
you will be treated as having retired with the consent of the ECBC, under the
retirement plans and policies of the Company, on your Retirement Date and (y) in
the event that your Compensation Continuance expires either due to your death,
or by expiration of its scheduled two-year term, you will continue to vest, no
later than the scheduled vesting date(s) set forth below and irrespective of
your date of death, in any stock option or other stock- based award that is not
yet fully vested as of your Retirement Date (including, without limitation, the
02/07/00 and 01/01/01 NQSOs) provided that, to the extent that the LTIP requires
further action by the ECBC to fully implement the provisions of this clause (y)
with respect to any particular stock option or other stock-based award, such
implementation, with respect to such option or award, shall be contingent on the
ECBC taking such further action. Except to the extent otherwise expressly
provided in this agreement and subject to the foregoing sentence: each stock
option that is, or becomes, vested will remain exercisable for the balance of
its maximum stated term; each stock option and other stock-based grant will,
once vested, be wholly non-forfeitable; each stock-based grant, other than stock
options, will settle promptly following vesting; and each unvested stock option
and other unvested stock-based award will become vested on the dates indicated.
You will not be eligible for additional stock-based grants during Compensation
Continuance.
A. Outstanding Stock Options
Award and Grant Price Shares Vesting Expiration
Grant Date (split Remaining Status Date
adjusted) (split
adjusted)
NQSO $36.7032 173,558 fully vested 12/31/05
12/31/97
NQSO $46.875 74,382 fully vested 12/31/08
10/12/98
NQSO $54.8594 104,440 fully vested 12/31/08
12/07/98
NQSO $59.4375 2,852 partially vested; 12/31/06
01/01/99 100% vested on
01/01/02
NQSO $25.8125 21,563 unvested; 100% 12/31/09
11/09/99 vested on 03/01/03
NQSO $21.7812 50,000 unvested; 100% 12/31/09
02/07/00 vested on 01/01/05
NQSO $27.00 100,000 50% vested; 100% 12/31/09
5/18/00 vested on 01/01/02
NQSO $4.75 467,300 unvested; one-third 12/31/10
01/01/01 vesting on each of
01/01/02, 01/01/03
and 01/01/04
B. Other Outstanding Stock-Based Grants
Award and Shares Remaining Vesting Status
Grant Date (split adjusted)
ISR 10,801 4803 shares vested;
06/16/93 100% vested on 09/25/03
ISR 23,652 unvested; 100% vested on
10/
....ISR 25,000 unvested; 100% vested on
10/13/97 03/01/02
ISR 15,000 unvested; 100% vested on
05/18/00 01/01/02
RESO 125,000 unvested; 100% vested on
01/01/01 01/01/02
4. PROFIT SHARING AND SAVINGS ACCOUNT
As you know, under relevant provisions of Xerox's Profit Sharing and Savings
Plan (as from time to time amended in accordance with its terms and together
with any successor plan, the "Savings Plan"), you have choices available
regarding (x) the continued investment of your Savings Plan account balances and
(y) the time and form of distributions from those accounts. Please refer to "You
and Xerox: Wealthwise" for a description. A calculation of your Savings Plan
account balances will be completed at the end of your Compensation Continuance
period, at which time you will have the opportunity to elect how and when the
proceeds will be distributed. The aggregate balance in your Savings Plan
accounts as of September 26, 2001 was $132,957.39.
5. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
You are a participant in Xerox's Employee Stock Ownership Plan (as from time to
time amended in accordance with its terms and together with any successor plan,
the "ESOP"). Upon the expiration of the Compensation Continuance period, your
ESOP account can be taken as cash, in stock, or rolled over to the Savings Plan
in accordance with elections made by you under the ESOP. A determination of your
final ESOP benefit will be made at the end of your Compensation Continuance
period. The aggregate balance in your ESOP accounts as of September 26, 2001 was
277.371647 shares.
6. PENSION BENEFITS
Effective on your Retirement Date, you will become a retiree of the Company. As
a retiree, you will be entitled to receive pension and survivor benefits
determined under Xerox's funded and unfunded Retirement Income Guarantee Plans
(as from time to time amended in accordance with their terms and together with
any successor plans, the "RIGPs") and Xerox's unfunded Supplemental Executive
Retirement Plan (as from time to time amended in accordance with its terms and
together with any successor plan, the "SERP"). These benefits will be
determined, in the case of the unfunded plans, (A) based on (i) crediting you
for service, and participation, for the entire period from the commencement of
your employment with the Company on June 16, 1993 through the Retirement Date,
(ii) treating you as a Grandfathered Mid- Career Officer, and (iii) including,
for purposes of determining your final average pay, any bonus payable pursuant
to Section 8 below, (B) without regard to changes in the plans after the date of
this letter that would reduce your benefits thereunder and (C) otherwise on no
less favorable a basis than applies generally to retired executives of the
Company that are covered by the plans. The foregoing pension and survivor
benefits will
commence on your Retirement Date, and will be paid in monthly installments
reflecting, to the extent applicable, any eligible survivor elections you have
made in accordance with the applicable plans. Except for amounts paid under the
funded RIGP, these pension and survivor benefits are unfunded and are not tax
qualified. This means you will be an unsecured general creditor of the Company
with respect to the unpaid portion of the benefits. A determination of your
benefits will be made at retirement. The Company will, upon your written
request, promptly prepare an estimate of your benefits, with back up, at any
time prior to your Retirement Date. An illustrative calculation of your
benefits, assuming a Retirement Date of January 1, 2004, has recently been
supplied to you.
7. MEDICAL BENEFITS
You will continue to be covered, until the end of the Compensation Continuance
period, under all of the Company's welfare benefit plans applying to employees
of the Company generally. After the end of the Compensation Continuance period,
you and your dependents will receive retiree welfare benefit coverage under
Xerox Retiree Flex and other retiree welfare benefit plans (if any) of the
Company as in effect from time to time, in each case on no less favorable a
basis than other retired senior executives of the Company generally. This
program will include, among other things, coordination of benefits if you are
covered by more than one plan including Medicare. As you get closer to your
Retirement Date, an information package will be sent to you from our medical
insurance partner.
8. BONUS
You are entitled to receive additional cash bonus awards for the year 2001. The
portion of your regular cash bonus for 2001 that has not yet been paid to you
will be paid to you "at target" in two quarterly payments of $135,000 each no
later than the date that corresponding payments are made to other senior
executives of the Company. In addition, provided that applicable EPS targets are
met, your CEO Challenge Bonus amounts for the third and fourth quarters of 2001
($67,500 each) will be paid promptly following the public release of the
pertinent earnings. You will not be eligible for bonus payments for any year
after 2001.
You are also entitled to receive a cash bonus of not less than $500,000 in
connection with the Third Party Financings and FX Sale. Any bonus amount in
excess of $500,000 which is determined to be recommended by management will be
subject to approval by the Executive Compensation and Benefits Committee at its
regularly scheduled meeting in February, 2002. The final bonus will be paid to
you no later than March 1, 2002.
9. LIFE INSURANCE
Your Contributory Life Insurance coverage of $1,500,000 will continue during
your Compensation Continuance period. During this period, both you and the
Company will continue to share in the cost of premiums according to the original
plan agreement. In the event of your death during your Compensation Continuance
period, your beneficiaries will, subject to applicable plan provisions, receive
the proceeds of your life insurance coverage. As of your Retirement Date, if you
agree in writing, the Company will extend the funding of the coverage in
accordance with the Modification of Program Benefits issued in 1999.
10. DEFERRED COMPENSATION PLAN
Your deferred compensation accounts under Xerox's Deferred Compensation Plan for
Executives (as from time to time amended in accordance with its terms and
together with any successor plan, the "Deferred Compensation Plan") will be paid
out following your Retirement Date in the manner, and at the time(s), provided
under the Deferred Compensation Plan and your applicable elections (if any). The
balance in your Deferred Compensation Plan accounts as of September 26, 2001 was
$2,548,509.21, which balance is subject to fluctuation based upon your deferral
of additional amounts (if any) into the accounts prior to the Retirement Date
and upon hypothetical investment results through the date(s) of distribution.
The benefits under the Deferred Compensation Plan are unfunded and are not tax
qualified. This means you will be an unsecured general creditor of the Company
with respect to the unpaid portion of the benefits.
11. OTHER ARRANGEMENTS
You will relinquish your position as a Director and Officer of Xerox Corporation
and as a director and officer of any of its subsidiaries, effective on December
31, 2001.
You will be paid for any accrued and unused vacation upon commencement of
Compensation Continuance. You will not accrue any further vacation during
Compensation Continuance or thereafter.
Your company financial counseling and tax preparation programs will be continued
through the end of the year 2003 (and will include tax preparation services in
2004 for year 2003).
You will not be entitled to any future Executive Expenses Allowance payments
during Compensation Continuance or thereafter.
You will, during Compensation Continuance, be entitled to appropriate office
space, and appropriate secretarial assistance, provided at the Company's sole
expense at a location reasonably convenient to your current residence in
Rowayton.
You will not be eligible to receive additional long-term incentive awards from
the Company during Compensation Continuance.
You will be entitled to your physical under the Company's Executive Physical
program for the year 2001, but not thereafter.
You will be treated, during the Compensation Continuance period and through your
Retirement Date, as an employee of the Company for purposes of (x) Sections 2
through 7, 9 and 10, and (y) the plans, programs and arrangements referred to
therein.
Your entitlements under the Savings Plan, the ESOP and the Deferred Compensation
Plan are, and will continue to be, fully vested and not subject to forfeiture in
any circumstance (except to the extent, if any, that they are subject to the
claims of the Company's creditors). You will remain a participant in the Savings
Plan, the ESOP and the Deferred Compensation Plan from the date hereof through
the expiration of the Compensation Continuance period, to the same extent as if
you had remained an officer and active employee of the Company.
You will also receive, to the extent not inconsistent with this agreement, any
other or additional benefits to which you are entitled in accordance with
applicable plans, programs and arrangements of the Company or any of its
affiliates, including without limitation: reimbursement, in accordance with
Company policy, of business expenses incurred while an active employee of the
Company; dividends, and/or dividend equivalents, on outstanding stock-based
awards and option surrender rights on outstanding options; and benefits in
accordance with any agreement or arrangement you may currently have with the
Company, or any insurer, relating to indemnification or advancement of legal
expenses (including, without limitation, the understanding concerning the
Company's payment of the fees and expenses of Wilmer Cutler & Pickering that is
set forth in that firm's September 28, 2001 letter to you).
You will be under no obligation to seek other employment, or to become self-
employed, following the expiration of your active employment with the Company
and there will be no offset against amounts due you, under this agreement or
otherwise, on account of any remuneration you may subsequently receive, or on
account of any claim that the Company or any of its affiliates may have against
you (other than as expressly provided in this agreement).
The Company and its affiliates may withhold from any amounts or benefits payable
under this agreement, or otherwise, taxes that are required to be withheld
pursuant to any applicable law or regulation.
The provisions of Sections 1, 12, 15 and 16 of this agreement supersede any term
in any plan, policy, agreement, award or other arrangement of the
Company or any of its affiliates relating to non-competition, non- solicitation,
non-hire, indemnification, confidentiality, disparagement or other restrictions
on conduct following the termination of your active employment with the Company
to the extent that such provisions are more favorable to you than such term.
The Company represents and warrants that: it is fully authorized by action of
the ECBC (and of any other person or body whose action is required) to enter
into this agreement and to perform its obligations under it (including without
limitation obligations relating to plans for which the ECBC is the
administrator); the execution, delivery and performance of this agreement by it
does not violate any applicable law, regulation, order, judgment or decree or
any agreement, plan or corporate governance document to which it is a party or
by which it is bound; and upon the execution and delivery of this agreement by
you, this agreement will be a valid and binding obligation of the Company,
enforceable against it in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
No provision in this agreement may be amended unless such amendment is set forth
in a writing that expressly refers to this agreement and that is signed by you
and by an authorized (or apparently authorized) officer of the Company. No
waiver by any person of any breach of any condition or provision contained in
this agreement will be deemed a waiver of any similar or dissimilar condition or
provision at the same or any prior or subsequent time. To be effective, any
waiver must be set forth in a writing signed by the waiving person and must
specifically refer to the condition(s) or provision(s) of this agreement being
waived.
Other than the LTIP Terms, in the event of any inconsistency between this
agreement and the terms of any plan, program, arrangement, agreement or other
document of the Company or any of its affiliates, the terms of this agreement
will govern and control.
The headings of the Sections and sub-sections contained in this agreement are
for convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this agreement.
This agreement will be governed, construed and enforced in accordance with its
express terms, and otherwise in accordance with the laws of the State of New
York, without regard to conflict of laws principles.
12. INDEMNITY, ETC.
You will be entitled to prompt indemnification, and prompt advancement of legal
and other expenses, with respect to any proceeding or claim (including,
without limitation, discovery requests, requests for information, and
proceedings and claims that are threatened or reasonably anticipated, whether
civil, criminal, administrative, investigative or otherwise) arising out of or
relating to your service or status as a director, officer, employee, consultant,
trustee, representative, or agent of the Company or any of its affiliates
(including, without limitation, joint ventures and employee benefit plans) or
any position or services undertaken on behalf of, or at the request of, any of
the foregoing (collectively, "Covered Proceedings and Claims"), to the fullest
extent permitted under the provisions of (i) Sections 721 through 725 of the
Business Corporation Law of the State of New York (or any successor thereto), or
(ii) Section 2 of Article VIII of the By- laws of the Company as amended through
August 1, 2001 (or any successor thereto). The foregoing indemnification shall
include (without limitation) indemnification, to the extent permitted, against
any and all costs, expenses, liabilities and losses (including, without
limitation, attorneys' fees reasonably incurred, judgments, fines, ERISA excise
taxes or penalties, amounts paid or to be paid in settlement, and any costs and
fees reasonably incurred in enforcing your rights to indemnification or
contribution) incurred or suffered by you in connection with a Covered
Proceeding or Claim, and such indemnification will continue as to you even
though you have ceased to be a director, officer, employee, consultant, trustee,
representative or agent of the Company or other entity. The foregoing
advancement shall include (without limitation) reimbursement, to the extent
permitted, for any and all costs and expenses (including, without limitation,
attorneys' fees) incurred by you in connection with any Covered Proceeding or
Claim within a reasonable time after receipt by the Company of a written request
for such reimbursement and appropriate documentation associated with these costs
and expenses. In addition, you will in all cases remain entitled to
indemnification, and contribution, to the extent provided by applicable law.
The Company agrees to continue and maintain a directors' and officers' liability
insurance policy (or policies) covering you at a level, and on terms and
conditions, no less favorable to you than the coverage then provided to the
Company's directors and/or senior-level officers generally, until such time as
suits against you are no longer permitted by law. Such coverage will include
coverage under the Company's directors' and officers' liability insurance
policies with Federal Insurance Company, National Union Fire Insurance Company
of Pittsburgh P.A., Reliance Insurance Company, Chubb Atlantic Ltd., Gulf
Insurance Company and A.C.E. Insurance, Ltd., and any replacement or substitute
therefor and any addition thereto.
13. RELEASE
Prior to your last day of active employment, the Company will provide you with a
release in the form attached (the "Release") that has been executed by an
authorized officer of the Company. Within seven days thereafter, you will
execute and return to the Company such Release and, if you fail to do so, the
Compensation Continuance provided for in this agreement will not commence. The
Release, once executed and delivered by you, will be deemed a part of this
agreement for all purposes. The execution of the Release on behalf of the
Company is subject to prior approval by the Board of Directors.
14. COOPERATION IN LITIGATION
You will, at the Company's reasonable request and sole expense, cooperate fully
with the Company and its counsel in any litigation that arises out of or is
related to your service with the Company or any of its subsidiaries, or in which
you are named as a party. That cooperation will include making yourself
available for reasonable periods of time upon reasonable notice for consultation
with the Company's counsel in any such litigation and to testify in such
litigation. The Company will promptly reimburse you for, or promptly advance to
you, all costs and expenses reasonably incurred by you in connection with
rendering assistance to the Company under this Section 14, including without
limitation fees and disbursements of separate counsel for you if you reasonably
determine, on advice of counsel, that you should have separate representation.
Such expenses will be reimbursed or advanced promptly after your submission to
the Company of statements in such reasonable detail as the Company may
reasonably require.
15. CONFIDENTIAL INFORMATION
You will not at any time disclose confidential or proprietary information of the
Company or any of its affiliates ("Confidential Information"). The foregoing
prohibition will not apply (a) to any disclosure of Confidential Information in
connection with providing services or assistance to or for the benefit of, or at
the request of any agent, attorney or other apparently authorized representative
of, the Company or any of its affiliates, under Section 1, Section 14 or
otherwise, (b) to disclosure required by law or by any court, arbitrator,
agency, administrative or legislative body (including any committee thereof), or
other person or body with apparent jurisdiction to order you to disclose or make
accessible any information, (c) in connection with enforcing this agreement, (d)
as to Confidential Information that becomes generally known to the public or
within the relevant trade or industry other than through a violation by you of
this Section 15, or (e) to disclosure in confidence to an attorney or other
professional for the purpose of securing professional advice.
16. NON-DISPARAGEMENT
You will not intentionally make any public statement to third parties, the
public, the press, the media, or any administrative agency that disparages, or
is likely to cause injury to, the Company. The Company will use its best
reasonable efforts to cause its directors, officers, senior executives and other
employees, agents and representatives not to intentionally make any
public statement to third parties, the public, the press, the media, or any
administrative agency that disparages, or is likely to cause injury to, you.
Notwithstanding the foregoing, nothing in this Section 16 shall prevent any
person from making truthful public statements (a) in response to incorrect,
disparaging or derogatory public statements or (b) to the extent (i) necessary
to enforce this agreement or (ii) required by law or by any court, arbitrator,
administrative or legislative body (including without limitation any committee
thereof), or other person or entity with apparent jurisdiction to order such
person to disclose information.
You will be entitled to review and approve any internal announcement, and any
press release or other public statement, made in connection with the execution
of this agreement, the termination of your active employment, the termination of
your service as a director of the Company or your retirement (which approval
shall not be unreasonably delayed or withheld).
17. DISPUTE RESOLUTION
Any claim or dispute arising out of or relating to this agreement or your
employment with (or retirement from) the Company will be resolved by
confidential arbitration, in New York City, in accordance with the Commercial
Arbitration Rules (and not the National Rules for the Resolution of Employment
Disputes) of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered and enforced in any court of
competent jurisdiction.
18. SUCCESSORS
You may not transfer any of your rights or obligations under this agreement
other than your rights to compensation and benefits, which may be transferred
only by will or by operation of law, or as provided under applicable plans,
programs or arrangements of the Company or its affiliates.
In the event of your death or a judicial determination of your incompetence,
references in this agreement to you shall be deemed, where appropriate, to refer
to your beneficiary, estate or other legal representative.
Neither the Company nor any of its affiliates (a "Company Transferor") may
assign or transfer any of its rights or obligations under this agreement except
that such rights or obligations may be assigned or transferred pursuant to a
merger, consolidation or other combination in which the Company Transferor is
not the continuing entity, or a sale or liquidation of all or substantially all
of the business and assets of the Company Transferor, provided that the assignee
or transferee is the successor to all or substantially all of the business and
assets of the Company Transferor and such assignee or transferee assumes the
liabilities, obligations and duties
of the Company Transferor under this agreement, either expressly or by operation
of law.
At the appropriate time, a representative of the Company will contact you
regarding your resignation as a Corporate Officer and as a member of the
Company's Board.
Sincerely,
/s/ Paul A. Allaire
Paul A. Allaire
PAA/rls
AGREED AND ACCEPTED
/s/ Barry D. Romeril
Barry D. Romeril
Date: 3 Oct. 2001