EXHIBIT 10(u)
 
The Document Company
XEROX
 
Anne M. Mulcahy
Chairman and Chief Executive Officer
 
May 20, 2002
 
Mr. Lawrence A. Zimmerman
6320 Sunshine Canyon Drive
Boulder, CO 80302
 
Dear Larry:
 
I am pleased to offer you the position of Senior Vice President and Chief
Financial Officer of Xerox Corporation, reporting to me in Stamford, CT. Your
starting salary for this position will be paid monthly at the annualized rate of
$450,000.
 
You will also be eligible to participate in our annual bonus plan at a target
level of 70% of salary. We will agree on your personal objectives shortly after
you join the Company. More information on the bonus plan will be provided at the
start of your employment. If earned, any 2002 bonus will be paid in February
2003.
 
You will participate in the Leveraged Executive Equity Program (LEEP). Your
initial LEEP award will be effective on a date to be determined by the Executive
Compensation and Benefits Committee of the Board of Directors (ECBC) within 60
days following the first day of your employment. Your award will consist of
121,500 options with a strike price based on the fair market value of Xerox
Corporation common stock on the grant’s effective date. These options will vest
one-third in each of the next three years, commencing with January 1, 2003. In
addition to the stock options, you will be granted 32,500 restricted (full
value) shares. These restricted shares will vest on January 1, 2003. A future
award with terms similar to this award is planned for January 1, 2003.
 
You will also be awarded 150,000 stock options as a signing bonus. These options
will vest on January 1, 2005. The exercise price of the options will be the fair
market value of Xerox common stock on the effective date of the grant as noted
above.
 
Xerox Corporation
800 Long Ridge Road
Stamford, Connecticut 06904
Telephone 203.968.3553
Facsimile 203.968.3563

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You will participate in the Mid Career Executive Hire program effective with the
commencement of employment. This program provides for special retirement income
that recognizes that you are joining Xerox as an experienced executive. Under
the Supplemental Executive Retirement Plan (SERP), following five (5) continuous
years of employment and upon retirement from the Company at age 60 or later, a
calculation will be made to determine the percent of your five highest years of
eligible compensation (five-high) that will be paid to you in monthly SERP
benefits based on 2.5% of five-high per completed years of service with the
Company. This plan results in a minimum retirement benefit of 12.5% of the
high-five once an employee has completed five years of service and reached age
60. After five years of service, the retirement benefit increases 2.5% per year,
e.g., at ten years of service, the benefit is 25%. The maximum retirement amount
is 50% after 20 years of service. You will be granted two years of service
credit for each year of actual service with Xerox Corporation, enabling you to
vest in SERP after 2.5 years of service. Eligible compensation includes base
salary and annual incentive bonus payments. This benefit is reduced by benefits
payable from other Xerox retirement plans, including the Xerox Retirement Income
Guarantee Plan and the Unfunded Retirement Income Guarantee Plan and by a
portion of estimated social security benefits.
 
You will be eligible for modified benefits under the Company’s “Transferred
Employee Relocation Program (HR 207.2)”. You will receive a lump sum payment of
$90,000, less applicable withholding taxes. The lump sum payment will be in lieu
of a cost of moving allowance, expenses relating to the sale of your current
residence and expenses relating to movement of your household effects. The lump
sum will also cover any expenses you may incur related to interim living and/or
home finding trips.
 
The Company will provide you with a Severance Agreement, in the Company’s
customary form, to become operative in the event that your employment is
terminated in connection with a Change in Control, as defined. The agreement
provides severance payments of two times cash compensation (base pay plus target
bonus) and welfare benefits continuation for two years should both events occur
(i.e. change in control and termination). Payment will include gross-up for
excise tax liability.
 
Upon termination of your employment by the Company for any reason, other than
for cause, during the first 24 months of employment, you will be eligible for 12
months of salary continuance, a pro-rata bonus for the year in which the
termination occurs for the period of time actively employed during such year as
well as a continuation of health care benefits. These termination benefits are
contingent upon your signing a release of claims as determined by the Company
upon your termination.
 
You will also be eligible for the following programs:
 

 
•
 
An annual executive expense allowance of $19,000,

 

 
•
 
An annual allowance for financial planning and tax preparation assistance of
$12,500,

 

 
•
 
Purchase of additional group term life insurance up to a maximum of $4 million,

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•
 
The annual Executive Physical and Health Program, and

 

 
•
 
Vacation totaling four weeks per year to be earned in accordance with the Xerox
vacation policy.

 
Limousine service and the corporate aircraft will be available to you when
traveling on Company business in accordance with Company policy. The policy
relative to “Tax Law Changes Affecting Taxability of Spousal Travel on Corporate
Aircraft” will be sent to you.
 
As you know, as an “executive officer” as defined, you will be subject to
Securities and Exchange Commission (SEC) reporting requirements, and to the
SEC’s rules related to the valuation and disclosure of executive compensation
perquisites. You will receive communications on these topics directly from
Leslie F. Varon, Vice President and Secretary of the Company.
 
The Xerox Total Pay philosophy recognizes pay is more than just your salary. On
your start date, you will be eligible to participate in a comprehensive benefits
package that includes medical, dental, vision care, life and accident insurance.
In addition, you will be able to purchase subsidized disability income
protection prior to meeting the eligibility criteria for regular coverage (12
months of active service).
 
To help you make your benefits decisions, we offer an online web tool that
compares benefit plan offerings and costs. You can also use this tool to
pre-enroll in the various Xerox health and welfare benefit programs and the
401(k) savings plan. Any benefit elections you indicate online will not take
effect until a job position has been accepted and all Company requirements have
been met. We encourage you to log on to your benefits resources site at
http://resources.hewitt.com/xerox, create your password and enroll in the
benefits programs through this online process as soon as the above requirements
have been met.
 
This offer will remain in effect through June 1, 2002, and is contingent upon
your election as a Corporate Officer by the Xerox Board of Directors and
approval of all of the foregoing compensation arrangements, awards and grants by
the ECBC, your signing of a release for pre-employment background checks
(criminal, credit, etc.), your signing of a Proprietary Information and Conflict
of Interest Agreement, your successfully passing a pre-employment drug-screening
test and the effective completion of appropriate reference checks. Of course,
the foregoing description of awards, plan benefits and Severance Agreement is
subject to the terms of the respective awards, plans and Agreement.

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Please notify me of your acceptance and ensure that all requirements in the
Addendum are met before we agree on a mutually acceptable start date. All
originals, including those noted on the Addendum, should be returned me. I look
forward to your acceptance of the offer. I know you will make significant
contributions to Xerox Corporation and will be a great addition to my senior
team.
 
If you have any questions, please feel free to contact me or Hector Motroni at
203-968-4051.
 
Sincerely,
 
/s/    ANNE
 
AMM/rls
 
cc:
 
HJMotroni

PMNazemetz
 
I   X     Accept         Decline this offer:
 

   
/s/    L. A. ZIMMERMAN

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5/21/02

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Signature
         
Date

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