SENIOR EXECUTIVE
AGREEMENT
Senior
Executive Agreement (the “ Agreement ”) made
this 27th day of September, 2009, among Affiliated Computer
Services, Inc. (the “ Company ”), Xerox
Corporation (“ Parent ”) and John Rexford (the
“ Executive ”).
WHEREAS, the
Executive and the Company are currently parties to that certain
Change of Control Agreement made and effective as of dated as of
June 9, 2008, as amended December 23, 2008 (the “ Prior
Change of Control Agreement ”);
WHEREAS, the
Company, Parent and a subsidiary of Parent (the “ Merger
Sub ”) have, as of the date hereof, entered into an
Agreement and Plan of Merger (the “ Merger Agreement
”) pursuant to which the Company will merge with and into the
Merger Sub, and the stock of the Company will be converted into the
stock of Parent (as well as the right to receive certain cash
consideration) through a merger (the “ Merger
”);
WHEREAS, it is
the intention of the parties that effective upon, and subject to
the occurrence of, the Merger, this Agreement shall exchange and
settle in all respects, the Prior Change of Control Agreement which
shall thereupon cease to be of further force or effect.
NOW, THEREFORE,
in consideration of the foregoing and the respective covenants and
agreements of the parties contained herein, the parties hereto
agree as follows:
From and after
the Effective Time (as defined in the Merger Agreement), reference
to the Company herein shall be deemed to refer to the surviving
entity in connection with the Merger.
The Company has
determined that both the Executive’s performance and the
Company’s ability to retain the Executive as an employee will
be significantly enhanced if the Executive is provided with fair
and reasonable protection and incentives in connection with the
consummation of the Merger. Accordingly, the Company and the
Executive agree as follows:
1.
Defined Terms . Unless otherwise indicated, capitalized
terms used in this Agreement shall have the meanings set forth
herein or in Exhibit A .
2.
Effective Time; Term . This Agreement shall constitute a
binding obligation of the parties as of the date hereof, but the
operative provisions of this Agreement shall only become effective
as of the Effective Time; provided, however, that this Agreement
will be null and void ab initio and of no further force or effect
(and the Prior Change of Control Agreement shall be deemed to
thereupon remain in effect) if the Merger Agreement is terminated
prior to the Effective Time. Upon the effectiveness of
this Agreement upon the occurrence of the Effective Time, the Prior
Change of Control Agreement shall cease to have any further force
or effect and shall be deemed replaced in its entirety by this
Agreement. The parties agree that no payments or
benefits shall be provided pursuant to the Prior Change of Control
Agreement unless and until this Agreement is terminated due to the
termination of the Merger Agreement without the Effective Time
having occurred.
3.
Position; Base Salary; Annual Bonus; Employee Benefits; LTIP
.
(a)
Position . Upon the Effective Time and until the third
anniversary of the Effective Time, the Executive shall have such
title, duties and general responsibilities as are comparable to the
title, duties and general responsibilities of the Executive as of
the date of this Agreement and the Executive’s primary place
of employment will remain within a reasonable commuting distance of
the location of Executive’s primary place of employment as
was applicable to the Executive as of the date of this Agreement,
subject to travel in the course of performing the Executive’s
duties for the Company or any of its subsidiaries.
(b)
Base Salary . Upon the Effective Time and during the
Executive’s employment with the Company or any of its
subsidiaries, the Company shall pay the Executive a base salary at
the annual rate of $515,000 (the “ Base Salary
”), payable in regular installments in accordance with the
Company’s usual payment practices. The
Executive’s Base Salary shall not in any way be reduced below
this rate from the period between the Effective Time and the third
anniversary of the Effective Time.
(c)
Annual Bonus . For the 2009 and 2010 calendar years, the
Executive will:
(i)
on and prior to the Effective Time, remain eligible to receive an
annual cash incentive award under the Company’s annual
incentive plan as in effect as of the date of this Agreement or as
adopted after the date of this Agreement; provided,
that:
(A)
if the Effective Time occurs on or prior to June 30, 2010, the
Executive shall receive an annual cash incentive award that is
pro-rated for the period from July 1, 2009 through the Effective
Time and based on deemed achievement of 75% of target performance,
and
(B)
if the Effective Time occurs after June 30, 2010, (x) the Executive
shall be entitled to the payment of any annual incentive award
payable with respect to the fiscal year ending June 30, 2010 based
on actual performance and in accordance with the terms of the
applicable Company annual incentive plan and (y) the Executive
shall receive an annual cash incentive award for the fiscal year
ending June 30, 2011 based on deemed achievement of 75% of target
performance and pro-rated for the period from July 1, 2010 through
the Effective Time; and
(ii) for the remainder of the
calendar year in which the Effective Time occurs, be eligible for
an annual target cash incentive under the applicable Parent annual
incentive plan equal to no less than 150% of Base Salary (the
“ Target Bonus ”), and an annual maximum cash
incentive equal to two (2) times the Target Bonus (the “
Maximum Bonus ”), pro-rated for the period from the
Effective Time through December 31 of such calendar
year.
The Target
Bonus and Maximum Bonus will each be based upon the achievement of
performance objectives established by the Board of Directors of
Parent (the “ Parent Board ”) generally within
the first three months of such calendar year, which performance
objectives will be determined by Parent based upon Parent’s
guidelines and ordinary course process for other senior executives
of Parent and its subsidiaries. For any calendar year
following the calendar year in which the Effective Time occurs, the
Executive will be eligible for a Target Bonus and a Maximum Bonus
in accordance with Parent’s annual incentive plan on the same
basis as is generally made available to other senior executives of
Parent and its subsidiaries. The Annual Bonus, if any, shall be
paid to the Executive when annual bonuses are generally paid to
other executives of the Company but in no event later than two and
one-half (2.5) months after the end of the fiscal or calendar year,
as applicable.
(d)
Employee Benefits . Subject to the
Executive’s continued employment with the Company or any of
its subsidiaries, the Executive will be entitled to the
following:
(i)
For the remainder of the 2009 calendar year and during the 2010
calendar year, the Executive’s participation in the existing
Company employee benefit and perquisite programs as of the date of
this Agreement (excluding any programs relating to the
Company’s stock, but including benefits comparable to the
Company’s Executive Benefit Plan) will continue on
substantially comparable terms, but will in no event be less
favorable in the aggregate than those in effect on the date of this
Agreement.
(ii) For the 2011 calendar year,
Executive will be entitled to participate in employee benefit and
perquisite programs (excluding any programs relating to the
Company’s stock) that are no less favorable in the aggregate
than those in effect on the date of this Agreement.
(iii) For the 2012 calendar year,
the Executive will be eligible to participate in the employee
benefit and perquisite programs that are no less favorable in the
aggregate than benefit and perquisite programs generally made
available to similarly situated executives of Parent or its
subsidiaries.
(e)
Equity Awards . Beginning in the 2010 calendar year, the
Executive will become eligible to participate in Parent’s
Long Term Incentive Program (“ LTIP ”) on the
same basis as is generally made available to other senior
executives of the Parent and its subsidiaries. The
Executive will be eligible to receive awards under the LTIP at the
discretion of senior management at Parent based on the
Executive’s performance and contribution in relation to the
Executive’s peers in comparable positions at Parent and its
subsidiaries.
4.
Merger Benefits . Upon the Effective Time, the Executive
shall be entitled to the benefits provided herein.
(a)
Merger Cash Payments . Subject to the Executive’s
continued employment with the Company through the dates set forth
below (each a “ Merger Cash Payment Date ”), the
Company shall pay the Executive an aggregate cash amount equal to
the sum of (i) $2,664,354 plus (ii) $772,500 multiplied by a
fraction, the numerator of which shall be the number of days the
Executive was employed by the Company in the fiscal year of the
Company in which the Effective Time occurs and the denominator of
which shall be 365 (collectively, the “ Merger Cash
Payments ”). The Merger Cash Payments are intended to
correspond to the amounts due under the Prior Change of Control
Agreement.
The Merger Cash
Payments shall be paid to the Executive as set forth
below:
(1) Subject to
the Executive’s continued employment with the Company through
the second anniversary of the Effective Time, fifty percent (50%)
of the Merger Cash Payments shall be payable in a lump sum in cash
as soon as practicable but not later than ten (10) business days
after the second anniversary of the date of the Effective Time;
and
(2) Subject to
the Executive’s continued employment with the Company through
the third anniversary of the Effective Time, fifty percent (50%) of
the Merger Cash Payments shall be payable in a lump sum in cash as
soon as practicable but not later than ten (10) business days after
the third anniversary of the date of the Effective Time.
Notwithstanding
the foregoing, in the event the Executive’s employment with
the Company is terminated by the Company without Cause, by the
Executive for Good Reason or due to death or Disability on or prior
to the third anniversary of the date of the Effective Time, subject
to the Executive’s execution and delivery of a general
release of claims in a customary form (which shall not include any
additional restrictive covenants) reasonably satisfactory to the
Company (and expiration of any applicable revocation periods), the
Executive shall be paid an amount equal to any remaining unpaid
Merger Cash Payments no later than 30 days following such
termination of employment.
(b)
Pre-August 2009 Option Grants . All outstanding
options to purchase Company common stock held by the Executive and
which were granted prior to August of 2009 (the “
Pre-August Options ”) shall be immediately, and fully
vested and exercisable upon the occurrence of the Effective Time
and converted into options to acquire Parent common stock as set
forth in the Merger Agreement and shall remain outstanding and
exercisable in accordance with their terms.
(c)
August 2009 Option Grants . With respect to all
outstanding options to purchase Company common stock held by the
Executive and which were granted in, or after, August of 2009 (the
“ August Options ”), upon the Effective Time all
such August Options shall be converted into options to acquire
Parent common stock as set forth in the Merger Agreement, except
that the Executive hereby waives any accelerated vesting of the
August Options in connection with the Merger or the transactions
contemplated thereby. Following the Effective Time, the
August Options will continue to vest according to the vesting
schedule set forth in the Option Agreement applicable to the August
Options (the “ Option Agreement ”), provided
that (A) if the performance goals associated with
“target” level performance under the PSs described in
Section 3(d) below are cumulatively achieved, any remaining
unvested August Options that the Executive holds will become vested
on the third anniversary of the Effective Time and (B) if the
Executive’s employment is terminated by the Company without
Cause, by the Executive for Good Reason or due to death or
Disability, all outstanding August Options, whether or not vested,
shall become immediately vested and exercisable. The
August Options shall be deemed to be amended hereby to incorporate
the terms of this Section 3(c) . All terms and
conditions with respect to the August Options shall be governed by
the Company’s Amended and Restated 2007 Equity Incentive Plan
and the Option Agreement, including any amendments thereto and as
amended hereby.
(d)
Performance Share Grant . On the Effective Time,
the Executive will be entitled to a special one-time grant of
performance shares (“ PSs ”) pursuant to the
Parent’s December 2007 Amendment and Restatement of the 2004
Performance Incentive Plan (the “ PIP ”)
pursuant to which the Executive will be eligible to receive a
number of shares of Parent common stock (each, a “ Parent
Share ”), subject to, and based upon, the achievement of
the relevant performance goals which shall be established on an
annual basis for each of the three years in the applicable vesting
period, and which shall be set forth on the Grant Date (as defined
below) in an award agreement. The aggregate number of
Parent Shares deliverable upon achievement of threshold, target and
maximum performance shall be determined as of the Grant Date and
shall have an aggregate value on such date equal to:
(i)
Threshold Value : 50% of Base Salary;
(ii) Target Value : 100% of
Base Salary;
(iii) Maximum Value : 200% of
Base Salary plus 50% of the value of the August Options
(determined by multiplying the number of shares of Company Class A
common stock subject to such Options immediately prior to the
conversion pursuant to the Merger Agreement by the excess of the
Option Value (as defined below) over the exercise price per share
of such Options (immediately prior to the conversion pursuant to
the Merger Agreement)). For the purposes of this
Agreement, the “Option Value” shall mean the
“Class A Merger Consideration” with the “Class A
Stock Consideration” (each as defined in the Merger
Agreement) deemed to equal the product of the “Class A
Exchange Ratio” (as defined in the Merger Agreement) times
the closing price per Parent Share as reported in The Wall Street
Journal in the New York Stock Exchange Composite Transactions as of
immediately prior to the Effective Time.
For purposes of
the foregoing, the fair market value of a Parent Share shall be
deemed to be the closing price as reported in The Wall Street
Journal in the New York Stock Exchange Composite Transactions on
the date that the PSs are granted (such date, the “ Grant
Date ”). Such award of PSs shall constitute a
promise to deliver (or cause to be delivered) to the Executive,
subject to the terms of this Agreement, the PIP and the PS award
agreement pursuant to which it is granted, a number of Parent
Shares based on the foregoing schedule as soon as reasonably
practicable following vesting (the date of vesting, the “
Vesting Date ”).
The Vesting
Date will be the third anniversary of the Effective Time, subject
to achievement of the relevant performance goals set forth in the
PS award agreement. All terms and conditions with
respect to the PSs shall be governed by the PIP and the PS award
agreement pursuant to which such PSs are granted, which shall be
consistent in all respects with this Section 3(d)
. Such award agreement shall be substantially in the
form attached as Exhibit B hereto.
(e)
Effect on Existing Plans . All change of control provisions
applicable to the Executive and contained in any plan, program,
agreement or arrangement maintained on or after the date hereof by
the Company (including, but not limited to, any stock option,
restricted stock or pension plan) shall remain in effect for such
period after the date of the Merger as is necessary to carry out
such provisions and provide the benefits payable thereunder, and
may not be altered in a manner which adversely affects the
Executive without the Executive’s prior written approval
(except as modified hereby). The compensation payable to
Executive hereunder shall not be considered part of the
Executive’s earnings for purposes of calculating current or
future benefits under any compensation or benefit programs
maintained or sponsored by the Company or any of its affiliates,
including retirement plans, 401(k) plans and other benefit
plans.
5.
Mitigation . The Executive shall not be required to seek
other employment after the Merger and any compensation earned from
other employment shall not reduce the amounts otherwise payable
under this Agreement.
6.
Gross-up .
(a)
In the event it shall be determined that any payment, benefit or
distribution (or combination thereof) by the Company or Parent, or
any trust established by the Company, Parent or any other person or
entity for the benefit of its employees, to or for the benefit of
the Executive whether payable pursuant to the terms of this
Agreement (excluding any LTIP grants made to Executive following
the date hereof, but including