Subsequent Event

9 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

Subsequent Event

Subsequent Event

On November 5, 2019, Xerox Holdings Corporation (the “Company”) announced that it had restructured its relationship with FUJIFILM Holdings Corporation (“FH”) through a series of agreements intended to simplify and set a new course for the companies’ strategic sourcing relationship going forward. As further described below, the Company entered into definitive agreements relating, among other things, to: sales to indirect subsidiaries of FH of the Company’s indirect 25% equity interest in Fuji Xerox Co., Ltd., a Japanese company (“FX”), and of the Company’s indirect 51% partnership interest in Xerox International Partners (“XIP”); modified sourcing terms for future product programs; the grant of a trademark license to enable FX to transition to a new brand while compensating the Company for continued use of its name; the grant of an IP license to allow FX to provide certain OEM products to certain named parties on a worldwide basis in exchange for a fixed royalty; and dismissal of a pending lawsuit FH filed against Xerox Corporation (“XC”).

Total proceeds to Xerox from the transactions will include accrued but unpaid dividends through the date of the closings and are expected to be approximately $2.3 billion (approximately $2.2 billion for our 25% share in FX and $100 for the sale of XIP and the OEM license). Xerox expects to use the proceeds opportunistically to pursue accretive M&A in core and adjacent industries, return of capital to shareholders and pay down its $554 Senior Notes due December 2019.

Sale of FX Interest

Pursuant to the Stock Purchase Agreement, dated as of November 5, 2019 (the “Stock Purchase Agreement”), among XC, Xerox Limited (“XL”), FH, FUJIFILM Asia Pacific Pte. Ltd. (“FFAP”) and FX, among other things, FX will conduct a buyback of its shares from both FH and XL on a pro rata basis, pursuant to which XL will receive $770 (the “Share Buyback”). Following the Share Buyback, FFAP will purchase all of the outstanding equity interests of FX owned by XL (the “FFAP Purchase” and, together with the Share Buyback, the “FX Sale Transaction”), for a purchase price of $1,430 (the “FFAP Purchase Price”), which amount shall be increased by the amount of the dividends attributable to the period from October 1, 2019 to the date on which the FFAP Purchase occurs, calculated in accordance with the terms of the Stock Purchase Agreement.

Subject to the satisfaction or waiver of the conditions set forth in the Stock Purchase Agreement and on the terms set forth therein, the closing of the FX Sale Transaction will occur on November 8, 2019; provided, however, that if FH has not received early termination of the waiting period of the pre-transaction notification (jizen-todokede) required under the Foreign Exchange and Foreign Trade Act of Japan (the “FEFTA Approval”) on or before November 5, 2019, then the Share Buyback will occur on November 8, 2019 and the FFAP Purchase will occur within three (3) business days following receipt of the FEFTA Approval. If the FEFTA Approval has not been received by March 24, 2020, then FH will consummate the FFAP Purchase on March 30, 2020, by either (i) replacing FFAP with another entity as the purchaser in the FFAP Purchase so the FEFTA Approval is no longer required in connection with the FFAP Purchase or (ii)

implementing another transaction structure that allows XL to sell all of its remaining equity interest in FX and receive the FFAP Purchase Price.

The closing of the FX Sale Transaction is conditioned upon the absence of any legal requirement or order preventing or making unlawful the transactions contemplated thereby, other than the FEFTA Approval. Moreover, each party’s obligation to consummate such closing is conditioned upon the accuracy of the other party’s representations and warranties (generally subject to a Material Adverse Effect (as defined in the Stock Purchase Agreement) qualifier). The Stock Purchase Agreement contains customary representations and warranties regarding the parties thereto, customary covenants, indemnification provisions and other provisions customary for transactions of this nature.

The foregoing description of the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Stock Purchase Agreement.

Amendment No. 1 to Technology Agreement

In connection with the FX Sale Transaction and concurrently with the execution and delivery of the Stock Purchase Agreement, FX and XC entered into Amendment 1, dated as of November 5, 2019 (the “TA Amendment”), to that certain Technology Agreement (the “TA”), dated as of April 1, 2006, by and between FX and XC, relating to licenses granted to FX by XC for XC’s trademarks and certain non-marking Document Processing Activities. The TA Amendment, among other things, (i) extends to two (2) years following the expiration of the TA (the “Transition Period”) the time period by which FX is required to transition away from the use of Xerox trademarks upon expiration of the TA, (ii) grants FX limited licenses to use Xerox trademarks for the Transition Period, subject to certain quality control standards and for a royalty in the amount of $100, payable to XC within three (3) business days from the first date of the Transition Period, and (iii) amends FX’s licenses for certain non-marking Document Processing Activities to become worldwide, royalty-free, and non-exclusive upon the expiration of the TA.

The TA Amendment will become effective concurrently with the FFAP Purchase unless the Share Buyback has occurred but the FEFTA Approval has not been received by November 24, 2019, in which case the TA Amendment will become effective as of the later of (i) November 27, 2019 or (ii) if such effectiveness is prohibited by any legal requirement or order, three (3) business days following the elimination of any such prohibition (such time, as to any Ancillary Agreement (as defined below), the “Ancillary Agreements Effectiveness”).

The foregoing description of the TA Amendment does not purport to be complete and is qualified in its entirety by reference to the TA Amendment.

Amendment No. 1 to Master Program Agreement

In connection with the FX Sale Transaction and concurrently with the execution and delivery of the Stock Purchase Agreement, FX and XC entered into Amendment No. 1, dated as of November 5, 2019 (the “MPA Amendment”), to that certain Master Program Agreement (the “MPA”), dated as of September 9, 2013, relating to the supply arrangement from FX to XC for xerographic document products. The MPA Amendment removes from the MPA termination provisions that are triggered by (i) a change in the composition of the board of directors of XC, (ii) a sale of substantially all assets of XC or (iii) any other change-in-control type scenario related to XC, and extends the effective term of certain product specific supply agreements governing existing product programs.

In addition, the MPA Amendment provides, among other things, that if the TA expires on March 31, 2021 solely due to non-renewal by FX or XC, then FX will be restricted for an agreed period from selling, licensing, leasing, or distributing Graphic Communications Products in certain jurisdictions (collectively, the “Limited Exclusive Territory”), except through XC, (ii) XC and its subsidiaries will be restricted from manufacturing, purchasing, or procuring Graphic Communications Products that are being sold or distributed in the Limited Exclusive Territory, unless procured through FX (excluding Graphic Communications Products that are not substantially similar in terms of specifications and availability, taken as a whole, as Graphic Communications Products designed and manufactured by FX) and (iii) XC will be appointed as FX’s nonexclusive reseller and distributor of its Graphic Communications Products outside the Limited Exclusive Territory. The MPA Amendment also includes provisions governing the entry into and/or termination of certain future documents relating to the MPA.

The MPA Amendment will become effective at the time of the Ancillary Agreements Effectiveness.

The foregoing description of the MPA Amendment does not purport to be complete and is qualified in its entirety by reference to the MPA Amendment.