XEROX CORPORATION (NASDAQ:XRX) Files An 8-K Entry into a Material Definitive Agreement
Item1.01.
| Entry into a Material Definitive Agreement. |
On January29, 2016, Xerox Corporation (Xerox) announced a
plan for the complete legal and structural separation of its
wholly owned subsidiary, Conduent Incorporated (Conduent),
from Xerox (the Spin-Off). On December 30, 2016 in
connection with the Spin-Off (the Spin-Off), Xerox entered
into the agreements described below with Conduent to (1)effect
the legal and structural separation of Xerox and Conduent,
(2)govern the relationship between Xerox and Conduent up to and
after the completion of the Spin-Off and (3)allocate
between Xerox and Conduent various assets, liabilities and
obligations, including, among other things, employee benefits and
tax-related assets and liabilities.
Separation and
Distribution Agreement
Xerox entered into
a Separation and Distribution Agreement (the Separation
Agreement) with Conduent to which Xerox and Conduent will
legally and structurally separate.
Under the terms
of, and subject to the conditions set forth in, the Separation
Agreement (1)Xerox and Conduent agreed to effect all transfers of
assets and assumptions of liabilities such that Xerox and
Conduent retain the assets of, and the liabilities associated
with, their respective businesses and to use reasonable best
efforts to effect any transfer or re-transfer of any asset or
liability that was improperly transferred or retained as promptly
as reasonably practicable, (2)all agreements, arrangements,
commitments and understandings, including most intercompany
accounts payable or accounts receivable between Xerox and
Conduent were terminated at the time of the Spin-Off, except
specified agreements and arrangements that are intended to
survive the Spin-Off, (3)Conduent transferred approximately
$1,541million to Xerox prior to the consummation of the Spin-Off
(which, together with certain amounts previously transferred to
Xerox in connection with the transfer of certain assets to
Conduent, results in a total cash transfer to Xerox of
approximately $1,820 million), (4) so that Conduent will be
capitalized with $225million of cash as of the Spin-Off, to the
extent Conduents actual cash balance as of the Spin-Off is less
than $225million Xerox will make a payment following the Spin-Off
to Conduent equal to that shortfall and to the extent Conduents
actual cash balance as of the Spin-Off exceeds $225million
Conduent will make a payment following the Spin-Off to Xerox
equal to that excess, (5)Xerox will transfer cash to Conduent
following the Spin-Off to the extent Xeroxs cash balance as of
the Spin-Off, subject to certain adjustments, exceeds an agreed
amount and (6)Xerox distributed all the issued and outstanding
shares of common stock, par value $0.01 per share, of Conduent to
all holders of Xerox common stock, par value $1.00 per share, as
a pro rata dividend in the Spin-Off (the
Distribution).
Transition Services
Agreement
Xerox entered into a
Transition Services Agreement (the Transition Services
Agreement) with Conduent to which Xerox will provide
Conduent, and Conduent will provide Xerox, with specified
services for a limited time to help ensure an orderly transition
following the completion of the Spin-Off. The Transition Services
Agreement specifies the calculation of the costs for these
services. The provider or recipient of a particular service will
generally be able to terminate that service prior to the
scheduled expiration date in the event of the other partys
uncured material breach with respect to such service, and the
recipient of a particular service may terminate such service for
convenience, subject to a specified minimum notice period. The
cumulative liability of each party in its capacity as service
provider under the transition services agreement will be limited
to the aggregate amount paid to it for services under the
agreement.
Tax Matters
Agreement
Xerox entered into a Tax
Matters Agreement (the Tax Matters Agreement) with
Conduent that governs Xerox and Conduents rights,
responsibilities and obligations after the Spin-Off with respect
to tax liabilities and benefits, tax attributes, tax contests and
other tax matters regarding income taxes, other taxes and related
tax returns.
With respect to taxes other
than those incurred in connection with the Spin-Off (which are
discussed below), the Tax Matters Agreement provides that
Conduent will generally indemnify Xerox for (1)any taxes of
Conduent and its subsidiaries for all periods after the
Distribution and (2)any taxes of Xerox and its subsidiaries for
periods prior to the Distribution to the extent attributable to
Xeroxs Business Process Outsourcing business (the BPO
Business).
The Tax Matters Agreement
generally provides that Conduent will indemnify Xerox for any
taxes resulting from the failure of certain steps of the Spin-Off
to qualify for their intended tax treatment under U.S. federal
income tax laws, where such taxes result from (1)untrue
representations and breaches of covenants that Conduent
makes
and agrees to in connection
with the Spin-Off (including representations Conduent made in
connection with a tax opinion received by Xerox and covenants
containing the restrictions described below that are designed to
preserve the tax-free nature of the Distribution), (2) the
application of certain provisions of U.S. federal income tax law
to the Spin-Off or
(3)any other actions that Conduent knows or reasonably should
expect would give rise to such taxes. Conduent is also required
to indemnify Xerox for any taxes in excess of certain threshold
amounts relating to certain steps of the Internal Transactions
and resulting from breaches of covenants that Conduent makes and
agrees to in connection with the Spin-Off. Conduent and Xerox
generally have joint control over any audit or other proceeding
relating to the Spin-Off.
The Tax Matters Agreement
imposes certain restrictions on Conduent and its subsidiaries
(including restrictions on share issuances, business
combinations, sales of assets and similar transactions) that are
designed to preserve the tax-free nature of the Distribution.
These restrictions apply for the two-year period after the
Distribution. Conduent is able to engage in an otherwise
restricted action if Conduent obtains appropriate advice from
counsel (or a ruling from the IRS).
Employee Matters
Agreement
Xerox entered into an Employee
Matters Agreement (the Employee Matters Agreement) with
Conduent that addresses certain employment, compensation and
benefits matters, including the allocation and treatment of
certain assets and liabilities relating to Conduents employees
and the compensation and benefit plans and programs in which
Conduents employees participated prior to the Spin-Off, as well
as certain other human resources, employment and employee benefit
matters.
The Employee Matters Agreement
provides that, following the Spin-Off, Conduent generally remains
responsible for any employment-related liabilities that relate to
individuals who were employed by Conduent at the time the event
giving rise to the liability arose (whether before or after the
Spin-Off), and Xerox generally remains responsible for any
employment-related liabilities that relate to individuals who
were employed by Xerox at the time the event giving rise to the
liability arose (whether before or after the
Spin-Off).
The Employee Matters Agreement
further provides that, following the Spin-Off, with certain
exceptions relating to plans maintained outside the United
States, Conduents employees participate under Conduents benefit
plans, and Conduent remains responsible for all liabilities
incurred under Conduents benefit plans prior to the Spin-Off.
Xerox generally remains responsible for all liabilities incurred
under its benefit plans prior to the Spin-Off, including any that
relate to Conduents employees.
Intellectual Property
Agreement
Xerox entered into an
Intellectual Property Agreement (the Intellectual Property
Agreement) with Conduent to which all of the intellectual
property rights of the BPO Business and the liabilities relating
to, arising out of or resulting therefrom not already owned by
Conduent and owned by Xerox prior to the Spin-Off were
transferred to Conduent.
Xerox also granted Conduent
certain irrevocable, non-exclusive, worldwide,
sublicensable (only in specified circumstances) and royalty-free
licenses to certain of Xeroxs intellectual property used in the
BPO Business for use in Conduents field. The license to Conduent
is transferable generally with any sale or transfer of a Conduent
business that utilizes Xeroxs intellectual
property.
Conduent also granted back to
Xerox certain irrevocable, non-exclusive, worldwide,
sublicensable (only in specified circumstances) and royalty-free
licenses to certain of Conduents intellectual property for use in
Xeroxs field. The license to Xerox is transferable generally with
any sale or transfer of a Xerox business that utilizes Conduents
intellectual property.
Trademark License
Agreement
Xerox entered into a Trademark
License Agreement (the Trademark License Agreement) with
Conduent to which Xerox granted Conduent a fully paid-up, royalty
free, non-sublicenseable, non-exclusive license to use certain of
Xeroxs trademarks, trade names and service marks in connection
with the sale, provision, marketing, performance and promotion of
the products, services and offerings of the BPO Business as it
existed immediately prior to the Distribution. The term of the
license is 12 months following the Spin-Off, which may be
extended to 18 months if requested by Conduent and approved by
Xerox (in its sole discretion). Conduent is not permitted to
assign its rights to the licensed marks, except with the prior
written consent of
Xerox.
The descriptions of the
Separation and Distribution Agreement, Transition Services
Agreement, Tax Matters Agreement, Employee Matters Agreement,
Intellectual Property Agreement and Trademark License Agreement
are qualified in their entirety by reference to the full text of
the Separation and Distribution Agreement, Transition Services
Agreement, Tax Matters Agreement, Employee Matters Agreement ,
Intellectual Property Agreement and Trademark License Agreement,
which are attached as Exhibits 2.1, 10.1, 10.2, 10.3, 10.4 and
10.5, respectively, to this Current Report on Form 8-K and incorporated herein by
reference.
| Item2.01. |
Completion of Acquisition or Disposition of Assets. |
On December31, 2016, Xerox
completed the Spin-Off and distributed, on a pro rata basis, all
of the shares of Conduent common stock to Xeroxs stockholders of
record as of December15, 2016. Immediately following the
completion of the Spin-Off, Xeroxs stockholders owned 50% of the
outstanding shares of common stock of Conduent. Following the
Spin-Off, Conduent operates as an independent publicly-traded
company.
| Item3.02. | Unregistered Sales of Equity Securities. |
Exchange of
Preferred
Stock
to the Exchange Agreement (the
Exchange Agreement), dated October27, 2016, by and among
Xerox, Conduent and Darwin A. Deason, immediately following the
completion of the Spin-Off, Mr.Deason transferred to Xerox
300,000 shares of Xerox Series A Convertible Perpetual Preferred
Stock, par value $1.00 per share, which represented all of the
issued and outstanding shares of Xerox Series A Convertible
Perpetual Preferred Stock, in exchange for 180,000 newly issued
shares of Xerox Series B Convertible Perpetual Preferred Stock,
par value $1.00 per share, and for 120,000 newly issued shares of
Conduent Series A Convertible Perpetual Preferred Stock, par
value $0.01 per
share.
The disclosures above are
qualified in their entirety by, and are subject to, the full text
of the Exchange Agreement, which was filed as Exhibit 10(u) to
Xeroxs Current Report on Form 8-K, filed with the Securities and
Exchange Commission on October28, 2016, and is incorporated
herein by reference. The rights, preferences and privileges of
the Xerox Series B Convertible Perpetual Preferred Stock are
described in Xeroxs Restated Certificate of Incorporation (the
Restated Certificate), as amended through December21,
2016, including by the Certificate of Amendment establishing the
terms of the Xerox Series B Convertible Perpetual Preferred
Stock. A copy of Xeroxs Restated Certificate was filed as Exhibit
3.1 to Xeroxs Current Report on Form 8-K, filed with the
Securities and Exchange Commission on December22, 2016, and is
incorporated herein by
reference.
The foregoing does not purport
to be a complete description of the terms of the Xerox Series B
Convertible Perpetual Preferred Stock, and is qualified in its
entirety by reference to the Restated
Certificate.
| Item8.01. | Other Events. |
Xerox issued a press release
on January 3, 2017, announcing the completion of the Spin-Off, a
copy of which is filed as Exhibit 99.1 to this Current Report on
Form 8-K and is incorporated herein by
reference.
| Item9.01. | Financial Statements and Exhibits. |
(d)
Exhibits.
|
Exhibit No. |
Description |
|
| 2.1 |
Separation and Distribution Agreement, dated as of December 30, 2016, by and between Xerox Corporation and Conduent Incorporated* |
|
| 10.1 |
Transition Services Agreement, dated as of December 30, 2016, by and between Xerox Corporation and Conduent Incorporated* |
|
| 10.2 |
Tax Matters Agreement, dated as of December 30, 2016, by and between Xerox Corporation and Conduent Incorporated |
|
| 10.3 |
Employee Matters Agreement, dated as of December 30, 2016, by and between Xerox Corporation and Conduent Incorporated* |
|
| 10.4 |
Intellectual Property Agreement, dated as of December 30, 2016, by and between Xerox Corporation and Conduent Incorporated* |
|
| 10.5 |
Trademark License Agreement, dated as of December30, 2016, by and between Xerox Corporation and Conduent Incorporated* |
|
| 99.1 | Press Release of Xerox Corporation, dated January 3, 2017 |
| * |
Xerox hereby undertakes to furnish supplementally a copy of any omitted schedule or exhibit to such agreement to the U.S. Securities and Exchange Commission upon request. |
