STAMFORD, Conn.-July 9, 2001-- The Board of Directors of Xerox Corporation today decided to eliminate the payment of dividends on its common stock. The decision was made in line with the company's turnaround objective to strengthen Xerox's liquidity and to restore long-term value to shareholders and bondholders. Previously the company had paid a quarterly dividend of 5 cents per share. "After serious deliberation, the Board of Directors chose to eliminate the dividend -- a decision that contributes to the progress Xerox is making in restoring its financial strength and helps to provide the flexibility required to build on the effective execution of its turnaround plan,'' said Paul A. Allaire, chairman and chief executive officer. "As Xerox returns to profitability, the Board will consider the reinstatement of dividends.'' Today's announcement will reduce the company's cash requirement by approximately $140 million on an annualized basis. This savings is in addition to the progress Xerox has made in generating cash and strengthening liquidity through cost reductions, improved working capital management and the sale of $2 billion in assets. The company stated that the elimination of the dividend is not the result of any unanticipated second quarter developments. The Xerox Board of Directors today also chose not to declare the dividend on the company's Employee Stock Ownership Program (ESOP) preferred stock, which is used to service the ESOP debt. Instead, Xerox will make an additional contribution to the ESOP trust. Previously the company had paid a quarterly dividend of $1.5625 per share on the preferred stock.