PREM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

 

LOGO

XEROX CORPORATION

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

$861,754

  (2)  

Form, Schedule or Registration Statement No.:

 

333-230342

  (3)  

Filing Party:

 

Xerox Holdings Corporation

  (4)  

Date Filed:

 

March 15, 2019

 

 

 


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The information in this preliminary joint proxy statement/prospectus is not complete and may be changed. These securities may not be issued until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary joint proxy statement/prospectus is not an offer to sell, nor does it seek an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION

DATED MARCH 15, 2019

 

LOGO

Xerox Corporation

JOINT PROXY STATEMENT/PROSPECTUS

YOUR VOTE IS VERY IMPORTANT

Dear Shareholders:

You are cordially invited to attend the 2019 Annual Meeting of Shareholders of Xerox Corporation (Xerox), to be held at 9:00 a.m. on Tuesday, May 21, 2019, at 301 Merritt 7 in Norwalk, Connecticut. We look forward to meeting our shareholders who are able to attend.

 

At the Annual Meeting, you will be asked to consider and vote upon proposals to: (i) adopt the merger agreement pursuant to which we will implement a holding company reorganization; (ii) elect seven directors to our board of directors; (iii) ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2019; (iv) approve, on an advisory basis, the 2018 compensation of our named executive officers; (v) authorize the amendment of the Xerox restated certificate of incorporation to implement a majority voting standard for certain corporate actions; and (vi) authorize the adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the foregoing proposals, in each case as described in the accompanying joint proxy statement/prospectus.

 

This year, we are asking you to approve a proposal to implement a holding company structure for Xerox. We regularly evaluate a range of possible strategic growth opportunities for our company. We believe implementation of a holding company structure will provide us with more flexibility to develop and realize these possibilities. By providing optionality for future innovation, investment and growth opportunities to exist either within or separate from current Xerox businesses, we believe that the holding company reorganization is an important step in reestablishing Xerox as a technology powerhouse with a robust portfolio of hardware, software, solutions and services, while preserving our existing customer, partner, vendor and supplier relationships. The holding company structure is intended to provide us with optionality to potentially acquire and incubate future businesses through subsidiaries that can operate on a global scale, with the flexibility to finance and structure each new opportunity in a manner that we believe will create value, while also maintaining — and continuing investment in — the existing Xerox product and technology platforms. We have carefully considered the holding company reorganization and believe it is advisable, fair to and in the best interests of our shareholders.

 

If the holding company reorganization is completed, your existing shares of Xerox common stock will be automatically converted, on a one-for-one basis, into shares of common stock of Xerox Holdings Corporation (Holdings), the new holding company. As a result, you will hold the same number of shares of Holdings common stock as you held of Xerox common stock immediately before the holding company reorganization. We expect the common stock of Holdings to trade on the New York Stock Exchange under Xerox’s current trading symbol, “XRX.”

 

Additionally, as a result of our shareholder engagement efforts and our commitment to corporate governance, we are asking you to approve a proposal to amend the Xerox restated certificate of incorporation to implement a majority voting standard for certain corporate actions which currently require a supermajority vote. We recognize that many shareholders believe that a majority voting requirement will provide shareholders with a greater voice in expressing their views on matters impacting Xerox.

 

Confident in the future direction and strategy of the Company, directors Greg Brown and Sara Martinez Tucker have decided not to stand for reelection to the Board. We thank them for their many significant contributions over the years.

 

Our Board unanimously recommends that you vote “FOR” the adoption of the merger agreement, “FOR” all nominees for director, “FOR” ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2019, “FOR” the non-binding executive compensation proposal, “FOR” the majority voting standard proposal, and “FOR” the adjournment proposal.

 

Your vote is important — no matter how many or how few shares you may own. Whether or not you plan to attend the Annual Meeting, please vote your shares as soon as possible. You may vote via the Internet, by telephone or by signing, dating and mailing the enclosed proxy card. Specific instructions for shareholders of record who wish to use Internet or telephone voting procedures are included in the enclosed joint proxy statement/prospectus. Any shareholder attending the Annual Meeting may vote in person even if a proxy has been returned.

 

The accompanying notice of meeting and this joint proxy statement/prospectus provide specific information about the Annual Meeting and explain the various proposals. Please read these materials carefully. In particular, you should consider the discussion of risk factors beginning on page [] before voting on the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization.

 

Thank you for your continued support of Xerox.

For the Board of Directors,

 

 
Keith Cozza   Giovanni (“John”) Visentin
Chairman of the Board   Vice Chairman and Chief Executive Officer

 

Neither the Securities and Exchange Commission, or SEC, nor any state securities regulatory agency has approved or disapproved of the securities to be issued under this joint proxy statement/prospectus or passed upon the adequacy or accuracy of the disclosure in this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

The accompanying joint proxy statement/prospectus is dated [], 2019 and is first being mailed to shareholders on or about [], 2019.


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LOGO

Notice of 2019 Annual Meeting of Shareholders

You are cordially invited to attend the 2019 Annual Meeting of Shareholders of Xerox Corporation to be held at 9:00 a.m. on Tuesday, May 21, 2019, at 301 Merritt 7 in Norwalk, Connecticut. Your Board of Directors and management look forward to greeting those shareholders who are able to attend.

Shareholders will be asked to:

 

  1.

Adopt the Agreement and Plan of Merger, dated as of March 15, 2019, by and among Xerox Corporation, Xerox Holdings Corporation and Xerox Merger Sub, Inc.;

 

  2.

Elect each of the seven directors named in this joint proxy statement/prospectus;

 

  3.

Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019;

 

  4.

Approve, on an advisory basis, the 2018 compensation of our named executive officers;

 

  5.

Authorize the amendment of the Xerox restated certificate of incorporation to implement a majority voting standard for certain corporate actions; and

 

  6.

Approve the proposal to authorize the adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the foregoing proposals at the time of the Annual Meeting.

Shareholders will also be asked to consider such other business as may properly come before the Annual Meeting.

Voting:

You are eligible to vote if you were a shareholder of record at the close of business on March 25, 2019.

Ensure that your shares are represented at the meeting by voting in one of several ways:

 

 

LOGO

   Go to the website listed on your proxy card to vote VIA THE INTERNET.

 

LOGO

   Call the telephone number specified on your proxy card to vote BY TELEPHONE.

 

LOGO

  

Sign, date and return the enclosed proxy card in the postage-paid envelope provided to vote BY MAIL.

 

 

LOGO

  

 

Attend the meeting to vote IN PERSON (please see pages [] and [] of the proxy statement for additional information regarding admission to the Annual Meeting and how to vote your shares).

 

Please submit your proxy as soon as possible to ensure that your shares are represented, even if you plan to attend the Annual Meeting. Voting now will not limit your right to change your vote or to attend the Annual Meeting.

If you have any questions or require assistance in voting your shares, you should call Harkins Kovler, LLC, Xerox’s proxy solicitor for the Annual Meeting, toll-free at (844) 218-8384 (from the U.S. and Canada) or at (212) 468-5380) (from other locations) (Banks and Brokerage firms may call collect at (212) 468-5380).

By order of the Board of Directors,

 

Douglas H. Marshall

Corporate Secretary

Norwalk, Connecticut

[], 2019


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ADDITIONAL INFORMATION

This document constitutes a proxy statement of Xerox with respect to the solicitation of proxies for the Annual Meeting described within, and a prospectus of Holdings for the shares of Holdings common stock to be issued pursuant to the merger agreement. As permitted under the rules of the SEC, this joint proxy statement/prospectus incorporates important business and financial information about us that is contained in documents filed with the SEC that are not included in or delivered with this joint proxy statement/prospectus. You may obtain copies of these documents, without charge, from the web site maintained by the SEC at www.sec.gov, as well as other sources. See “Where You Can Find More Information” beginning on page [].

You may also obtain copies of these documents, at no cost, by contacting Xerox at the following address or telephone number:

Xerox Corporation

201 Merritt 7

Norwalk, CT 06851-1056

(203) 968-3000

or Harkins Kovler, LLC (“Harkins Kovler”), our proxy solicitor, at the following address or telephone numbers:

Harkins Kovler

3 Columbus Circle, 15th Floor

New York, NY 10019

(844) 218-8384 or (212) 468-5380

(Banks and Brokerage firms may call collect at (212) 468-5380)

To receive timely delivery of requested documents in advance of the Annual Meeting, we should receive your request no later than [], 2019.

We have not authorized any person to provide any information or to make any representation other than the information contained or incorporated by reference in this joint proxy statement/prospectus, and if any person provides any of this information or makes any representation of this kind, that information or representation must not be relied upon as having been authorized by us. If you receive any other information, you should not rely on it.

This joint proxy statement/prospectus is dated [], 2019. You should not assume the information contained in this joint proxy statement/prospectus is accurate as of any date other than this date, and neither the mailing of this joint proxy statement/prospectus to shareholders nor the issuance of Holdings common stock pursuant to the merger agreement implies that information is accurate as of any other date. Our business, financial condition, results of operations and prospects may have changed since those dates.


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IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING

     1

QUESTIONS AND ANSWERS ABOUT THE HOLDING COMPANY REORGANIZATION PROPOSAL

     7

SUMMARY OF THE HOLDING COMPANY REORGANIZATION PROPOSAL

     11

RISK FACTORS

     18

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     20

PROPOSAL 1 — APPROVAL OF THE HOLDING COMPANY REORGANIZATION

     21

PROPOSAL 2 — ELECTION OF DIRECTORS

     30

CORPORATE GOVERNANCE

     38

BOARD OF DIRECTORS AND BOARD COMMITTEES

     41

SECURITIES OWNERSHIP

     46

EXECUTIVE COMPENSATION

     49

COMPENSATION DISCUSSION AND ANALYSIS

     49

OTHER INFORMATION

     89

PROPOSAL 3 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     90

PROPOSAL 4 — PROPOSAL TO APPROVE, ON AN ADVISORY BASIS, THE 2018 COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

     92

PROPOSAL 5 — PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION TO IMPLEMENT A MAJORITY VOTING STANDARD FOR CERTAIN CORPORATE ACTIONS

     96

PROPOSAL 6 — ADJOURNMENT OF THE MEETING

     97

OTHER MATTERS

     97

DESCRIPTION OF HOLDINGS’ COMMON STOCK

     97

VALIDITY OF SHARES

     99

EXPERTS

     99

WHERE YOU CAN FIND MORE INFORMATION

     99

ANNEX A — AGREEMENT AND PLAN OF MERGER

     A-1

ANNEX B — FORM OF RESTATED CERTIFICATE OF INCORPORATION OF XEROX HOLDINGS CORPORATION

     B-1

ANNEX C — FORM OF RESTATED BY-LAWS OF XEROX HOLDINGS CORPORATION

     C-1

ANNEX D — PROPOSED AMENDMENT TO THE XEROX RESTATED CERTIFICATE OF INCORPORATION

     D-1

 

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IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING

The following are some of the questions that you may have about this joint proxy statement/prospectus and the answers to those questions. The information in this section does not provide all of the information that may be important to you with respect to this joint proxy statement/prospectus. Therefore, we encourage you to read the entire joint proxy statement/prospectus for more information about these topics.

 

 

The Annual Meeting

The 2019 Annual Meeting of Shareholders (“Annual Meeting”) of Xerox Corporation (“Xerox” or the “Company”), will be held beginning at 9:00 a.m. at 301 Merritt 7 in Norwalk, Connecticut, on Tuesday, May 21, 2019.

 

 

What is the purpose of the Annual Meeting?

At the Annual Meeting, shareholders will consider and vote on the following matters:

 

  1.

Adoption of the Agreement and Plan of Merger, dated as of March 15, 2019, by and among Xerox Corporation, Xerox Holdings Corporation and Xerox Merger Sub, Inc.;

 

  2.

Election of each of the seven directors named in this joint proxy statement/prospectus;

 

  3.

Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019;

 

  4.

Approval, on an advisory basis, of the 2018 compensation of our named executive officers;

 

  5.

Authorization of the amendment of the Xerox restated certificate of incorporation to implement a majority voting standard for certain corporate actions; and

 

  6.

Approval of the proposal to authorize the adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the foregoing proposals at the time of the Annual Meeting.

Shareholders will also be asked to consider any other business that may properly come before the Annual Meeting. In addition, our management will report on the holding company reorganization and Xerox’s performance during fiscal 2018 and respond to questions from shareholders.

 

 

Who is entitled to vote?

Owners of our common stock, par value $1.00, as of the close of business on March 25, 2019 (the “Record Date”), are entitled to vote at the Annual Meeting. The shares owned include shares you held on that date (1) directly in your name as the shareholder of record and/or (2) in the name of a broker, bank or other holder of record where the shares were held for you as the beneficial owner. Each share of common stock is entitled to one vote on each matter to be voted on. As of the Record Date, there were [] shares of our common stock outstanding and entitled to vote. There are no other outstanding securities of the Company entitled to vote on the proposals at the Annual Meeting.

 

 

What is the difference between holding shares as a shareholder of record and as a beneficial owner?

If your shares are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares, a “shareholder of record.” In this case, this joint proxy statement/prospectus, the notice of Annual Meeting and the proxy card have been sent directly to you by us.

If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in “street name.” As a result, this joint proxy statement/prospectus, the notice of Annual Meeting and the proxy card have been forwarded to you by your broker, bank or other holder of record who is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting by telephone or on the Internet.

 

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How do I vote?

Registered shareholders can vote in any one of four ways:

 

 

BY INTERNET

 

 

 

BY TELEPHONE

 

If you have Internet access, you may vote your shares by following the “Vote by Internet” instructions included on the enclosed proxy card. If you vote via the Internet, do not return your proxy card.

 

 

If you received written materials, you may vote your shares by following the “Vote by Telephone” instructions on the enclosed proxy card. If you vote by telephone, do not return your proxy card.

 

 

BY MAIL

 

 

 

IN PERSON

 

 

If you received written materials, you may vote by completing and signing the proxy card enclosed with this joint proxy statement/prospectus and promptly mailing it in the enclosed postage-prepaid envelope. The shares you own will be voted according to your instructions on the proxy card you mail. If you sign and return your proxy card but do not indicate your voting instructions on one or more of the matters listed, the shares you own will be voted by the named proxies in accordance with the recommendations of our Board.

 

 

 

We will distribute written ballots to any shareholder of record or authorized representative of a shareholder of record who wants to vote in person at the Annual Meeting instead of by proxy. If you submit a proxy or voting instructions via the Internet, telephone or mail, you do not need to vote at the Annual Meeting. Voting in person will revoke any proxy previously given.

If you use your proxy to vote by Internet, telephone or mail, you authorize each of the three directors, whose names are listed on the proxy card accompanying this joint proxy statement/prospectus, to act as your proxies to represent you and vote your shares as you direct.

Beneficial owners will receive enclosed with this joint proxy statement/prospectus, voting instructions from the bank, broker or other holder of record where the shares are held that must be followed in order for their shares to be voted. Beneficial owners should follow the instructions from their bank, broker or other holder of record in order for their shares to be voted. If you hold your shares through a broker, bank or nominee, you must obtain a “legal proxy” from your broker, bank or nominee to vote in person at the Annual Meeting.

 

 

What is a proxy?

It is your legal designation of another person to vote on matters transacted at the Annual Meeting based upon the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card.

 

 

May I change or revoke my vote after I return my proxy card?

Yes. You may change or revoke your proxy at any time before it is exercised at the Annual Meeting by submitting a later dated proxy card, by a later telephone or online vote, by notifying the Secretary of the Company in writing that you have revoked your proxy or by attending the Annual Meeting and either giving notice of revocation or voting in person.

If your shares are held in “street name” (i.e., held of record by a broker, bank or other holder of record) and you wish to revoke a proxy, you should contact your bank, broker or other holder of record and follow its procedures for changing your voting instructions. You also may vote in person at the Annual Meeting if you obtain a legal proxy from your bank or broker.

 

 

How does the Board recommend that I vote?

The Board recommends that you vote:

 

   

“FOR” the adoption of the Agreement and Plan of Merger, dated as of March 15, 2019, by and among Xerox Corporation, Xerox Holdings Corporation and Xerox Merger Sub, Inc.;

 

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“FOR” the election of each of the seven directors named in this joint proxy statement/prospectus;

 

   

“FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019;

 

   

“FOR” the approval, on an advisory basis, of the 2018 compensation of our named executive officers;

 

   

“FOR” the authorization of the amendment of the Xerox restated certificate of incorporation to implement a majority voting standard for certain corporate actions; and

 

   

“FOR” the approval of the proposal to authorize the adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the foregoing proposals at the time of the Annual Meeting.

 

 

How will my proxy be voted?

If you properly complete, sign and return your proxy card, your shares will be voted as you specify. However, if you are a registered shareholder and you sign and return your proxy card but do not specify a vote with respect to the proposals, your proxy will follow the Board’s recommendations.

 

 

How can I attend the Annual Meeting?

Registered shareholders may be admitted to the Annual Meeting upon providing picture identification. If you own shares in street name, please bring your most recent brokerage statement, along with government-issued picture identification, to the Annual Meeting. We will use your brokerage statement to verify your ownership of common stock and admit you to the Annual Meeting.

All shareholders of record on the Record Date may attend. In order to be admitted to the Annual Meeting, please obtain an admission ticket in advance and bring a form of personal photo identification, such as a driver’s license.

To obtain an admission ticket:

If you are a registered shareholder:

 

   

If you vote via the Internet or by telephone, you will be asked if you would like to receive an admission ticket.

 

   

If you vote by proxy card, please mark the appropriate box on the proxy card and an admission ticket will be sent to you.

If you are a beneficial owner:

 

   

Please request an admission ticket in advance by calling Shareholder Services at (203) 849-2315 or by mailing a written request, along with proof of your ownership of Xerox common stock as of the Record Date, to Xerox Corporation, Shareholder Services, 201 Merritt 7, Norwalk, CT 06851-1056. All calls and written requests for admission tickets must be received no later than the close of business on May 10, 2019.

You can find directions to the meeting online at www.edocumentview.com/XRX. If you have any further questions regarding admission or directions to the Annual Meeting, please call Shareholder Services at (203) 849-2315.

 

 

How many shares are required to be present to hold the Annual Meeting?

A quorum is necessary to hold a valid meeting of shareholders. The presence at the Annual Meeting, in person or by proxy, of holders representing a majority of the shares of our common stock outstanding on the Record Date will constitute a quorum. If a quorum is not present at the Annual Meeting, the shareholders of Xerox will not be able to take action on any of the proposals at the Annual Meeting; provided that the Annual Meeting may be adjourned as described below.

As of the Record Date, there were [] shares of our common stock outstanding. If you vote — including by Internet, telephone or proxy card — your shares will be counted towards the quorum for the Annual Meeting. Broker non-votes and abstentions are counted as present for the purpose of determining a quorum.

 

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If there is no quorum, the shareholders present may adjourn the Annual Meeting to another time and place, and it shall not be necessary to give any notice of such adjourned meeting if the time and place to which the Annual Meeting is adjourned are announced at the Annual Meeting. At the adjourned meeting, any business may be transacted that might have been transacted on the original date of the Annual Meeting. If after the adjournment, the Board fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder on the new record date entitled to notice under the restated by-laws of Xerox. If Proposal 6 is approved, the Annual Meeting may also be adjourned to solicit additional proxies if there are not sufficient votes to approve Proposals 1, 2, 3, 4 or 5 at the Annual Meeting.

 

 

How many votes are required to approve each proposal?

Holding Company Reorganization. Under the Business Corporation Law of the State of New York (the “BCL”), the affirmative vote of at least two-thirds of the outstanding shares entitled to vote thereon will be required for the approval of the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization.

Amendment of the Restated Certificate of Incorporation. Under the BCL, the affirmative vote of at least two-thirds of the outstanding shares entitled to vote thereon will be required for the approval of the amendment of the restated certificate of incorporation to implement a majority voting standard for certain corporate actions.

Election of Directors. Under the restated by-laws of Xerox, directors are elected by majority vote, meaning that in an uncontested director election, the votes cast “for” the nominee’s election must exceed the votes cast “against” the nominee’s election, with abstentions and broker non-votes not counting as votes “for” or “against.” The restated by-laws of Xerox require that any incumbent nominee for director who receives a greater number of votes cast “against” his or her election than “for” his or her election shall tender his or her resignation promptly after such election. The independent directors will then evaluate and determine, based on the relevant facts and circumstances, whether to accept or reject the resignation. The Board’s explanation of its decision will be promptly disclosed on a Form 8-K filed with the Securities and Exchange Commission (the “SEC”).

Other Items. The affirmative vote of a majority of the votes cast in favor of or against such action at the Annual Meeting will be required for approval of the following proposals.

 

   

Ratification of PwC as our independent auditor;

 

   

Approval, on an advisory basis, of the 2018 compensation of our named executive officers; and

 

   

Approval of the adjournment proposal.

Abstentions, failures to vote and broker non-votes are not considered votes cast and therefore have no effect on the outcome of the vote on the proposals (provided that a quorum is present), with the exception of the proposals to approve the holding company reorganization and to approve the amendment of the Xerox restated certificate of incorporation. For these proposals, abstentions will have the effect of a vote “against” a proposal, and broker non-votes will have no effect (provided that a quorum is present).

If you hold your Xerox shares through a bank, broker, or other holder of record, such intermediary may not be able to vote your shares. For additional information, see below under What is a broker non-vote and how will it affect voting?

Although the advisory vote is non-binding, the Board values the opinions of shareholders and will consider the outcome of the vote on this proposal when making future decisions regarding named executive officer compensation.

At present, the Board does not intend to present any other matters at this meeting and knows of no matters other than these to be presented for shareholder action at the Annual Meeting. If any other matters properly come before the Annual Meeting, the persons named in the accompanying proxy card intend to vote the proxies in accordance with their best judgment and in their discretion to the extent permitted by Rule 14a-4(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

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What is a broker non-vote and how will it affect the voting?

A broker non-vote occurs when a broker, bank or other holder of record, in nominee name or otherwise submits a proxy for the Annual Meeting, but does not vote on a particular proposal because it has not received voting instructions from the beneficial owner and it does not otherwise have discretion to vote the uninstructed shares. Under the NYSE rules that govern brokers who are voting with respect to shares held in street name, brokers only have the discretion to vote those shares for which it has not received voting instructions on “routine” matters, but not on “non-routine” matters. Routine matters to be presented at the Annual Meeting include the ratification of the selection of independent public accountants. The non-routine matters to be presented at the Annual Meeting include the approval of the holding company reorganization, the election of directors, the advisory vote on executive compensation, amendment of the Xerox restated certificate of incorporation, and the adjournment proposal.

If you do not instruct your broker on how to vote your shares with respect to these non-routine matters, your broker will not be able to cast a vote on these proposals. Accordingly, we urge you to give instructions to your bank or broker or other holder of record as to how you wish your shares to be voted so you may vote on these important matters.

 

 

Who will count the vote? Is my vote confidential?

A representative of Computershare will act as Inspector of Elections, supervise the voting, decide the validity of proxies and receive and tabulate proxies. As a matter of policy, we keep confidential all shareholder meeting proxies, ballots and voting tabulations that identify individual shareholders. In addition, the vote of any shareholder is not disclosed except as may be necessary to meet legal requirements.

 

 

When will the voting results be disclosed?

We will publicly disclose voting results of the Annual Meeting within four business days after the Annual Meeting in a Current Report on Form 8-K.

 

 

How are proxies solicited?

In addition to the solicitation of proxies by mail, we also request brokerage houses, nominees, custodians and fiduciaries to forward soliciting material to the beneficial owners of stock held of record and reimburse such person for the cost of forwarding the material. We have engaged Harkins Kovler to handle the distribution of soliciting material to, and the collection of proxies from, such entities. We will pay Harkins Kovler a fee of $20,000.00, plus reimbursement of out-of-pocket expenses, for this service. We bear the cost of all proxy solicitation.

 

 

What are the deadlines and requirements for shareholder submission of proposals, director nominations and other business for the 2020 Annual Meeting of Shareholders?

We expect to hold our 2020 Annual Meeting of Shareholders during the second half of May 2020 and to file and mail our Proxy Statement for that meeting during the first half of April 2020. Under SEC proxy rules, if a shareholder wants us to include a proposal in our Proxy Statement and proxy card for the 2020 Annual Meeting of Shareholders, the proposal must be received by us no later than December 13, 2019. All submissions are reviewed by the Corporate Governance Committee.

Any shareholder wishing to make a nomination for director or wishing to introduce any business at the 2020 Annual Meeting of Shareholders (other than a proposal submitted for inclusion in the Company’s proxy materials) must provide the Company advance notice of such nominee or business which must be received by the Company no earlier than November 13, 2019 and no later than December 13, 2019. Any such notice must comply with requirements set forth in the restated by-laws of Xerox. Nominations for director must be accompanied by a written consent of the nominee consenting to being named as a nominee and serving as a director if elected. Proposals and other items of business should be directed to Xerox Corporation, 201 Merritt 7, Norwalk, CT 06851-1056, Attention: Corporate Secretary.

 

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How can I contact the Board?

Under our Corporate Governance Guidelines, shareholders and other interested parties may contact the non-management members of the Board by contacting the Chairman of the Corporate Governance Committee using the “Contact the Board” link posted on our Company’s website at www.xerox.com/governance.

 

 

What if multiple shareholders have the same address?

Where multiple shareholders reside in the same household, we will deliver a single copy of the proxy materials, along with separate proxy cards to multiple shareholders who reside in the same household unless we have received contrary instructions. If you share a household with another registered shareholder and would like to receive separate copies of our proxy materials, you may request a change in delivery preferences. For registered shareholders, you may contact our transfer agent at (800)-828-6396 or write them at Computershare, P.O. Box 30170, College Station, TX 77842-3170. For beneficial owners, you may call the bank, broker or other nominee where your shares are held in street name or call (800) 542-1061.

 

 

How may I get copies of the proxy materials?

Copies of the 2018 Annual Report and 2019 joint proxy statement/prospectus have been distributed to shareholders. Additional paper copies of these documents are available at no cost upon request made to Xerox Corporation, 201 Merritt 7, Norwalk, CT 06851-1056, Attention: Corporate Secretary, or by contacting Harkins Kovler, our proxy solicitor, by mail at 3 Columbus Circle, 15th Floor, New York, NY 10019, or by telephone toll-free at (844) 218-8384 (from the U.S. and Canada) or at (212) 468-5380 (from other locations) (Banks and Brokerage firms may call collect at (212) 468-5380). You may request paper copies of the materials until one year after the date of the Annual Meeting.

The 2018 Annual Report and joint proxy statement/prospectus are also available on the Company’s website at www.xerox.com/investor or www.edocumentview.com/XRX.

Registered shareholders can also elect to receive future distributions of our proxy statements, annual reports to shareholders and proxy cards by electronic delivery at www.computershare.com/investor. Beneficial owners can sign up for electronic delivery at http://enroll.icsdelivery.com/xrx or by checking the information provided in the proxy materials mailed to you by your bank or broker regarding the availability of this service. Opting to receive future proxy materials electronically by email will provide the Company cost savings relating to printing and postage and reduce the environmental impact of delivering documents to you.

 

 

Is there a list of shareholders entitled to vote at the Annual Meeting?

A list of registered shareholders entitled to vote at the Annual Meeting will be available at the Annual Meeting and for ten days prior to the Annual Meeting at our offices located at Xerox Corporation, 201 Merritt 7, Norwalk, CT 06851-1056.

 

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QUESTIONS AND ANSWERS ABOUT THE HOLDING COMPANY REORGANIZATION PROPOSAL

The following questions and answers are intended to address briefly certain questions regarding the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization. These questions and answers do not address all questions that may be important to you as a Xerox shareholder. Please refer to “Proposal 1 — Approval of The Holding Company Reorganization” and the more detailed information contained elsewhere in this joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus, which you should read carefully.

 

 

What is the holding company reorganization proposal?

We are asking you to approve a proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization. If the holding company reorganization is completed, Xerox will become a direct, wholly-owned subsidiary of Holdings, a New York corporation. As a result, current common shareholders of Xerox will become common shareholders of Holdings, and will hold the same number of common shares of Holdings as they held of Xerox immediately prior to the holding company reorganization. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. Upon completion of the holding company reorganization, the forms of restated certificate of incorporation and by-laws of Holdings attached to this joint proxy statement/prospectus as Annex B and Annex C, respectively, will take effect. You are encouraged to read the merger agreement and forms of restated certificate of incorporation and by-laws of Holdings carefully.

 

 

Why is Xerox proposing the holding company reorganization?

We regularly evaluate a range of possible strategic growth opportunities. We believe implementation of a holding company structure will provide us with flexibility to develop and realize these possibilities. By providing optionality for future innovation, investment and growth opportunities to exist either within or separate from current Xerox businesses, we believe that the holding company reorganization is an important step in reestablishing Xerox as a technology powerhouse with a robust portfolio of hardware, software, solutions and services, while preserving our existing customer, partner, vendor and supplier relationships. The holding company structure is intended to provide us with optionality to potentially acquire and incubate future businesses through subsidiaries that can operate on a global scale, with the flexibility to finance and structure each new opportunity in a manner that we believe will create value, while also maintaining — and continuing investment in — the existing Xerox product and technology platforms.

 

 

Will the management or the business of the company change as a result of the holding company reorganization?

No. The management and business of our company will remain the same immediately following the holding company reorganization. We expect that the directors and executive officers of Xerox will also serve in the same capacities for Holdings, including their capacities as members of board committees. Immediately following the holding company reorganization, we expect Holdings to adopt Corporate Governance Guidelines, a Code of Business Conduct, a Code of Business Conduct and Ethics for Members of the Board, and a Finance Code of Conduct substantially the same in all material respects as the corresponding guidelines and codes of Xerox.

 

 

What will happen to my Xerox common stock?

If the holding company reorganization is completed, each share of common stock of Xerox will convert into one share of common stock of Holdings. As a result, you will become a shareholder of Holdings and will hold the same number of shares of Holdings common stock that you hold of Xerox common stock immediately prior to the holding company reorganization. We expect that Holdings common stock will be listed on the New York Stock Exchange under the symbol “XRX,” the same ticker symbol currently used for Xerox common stock. We do not expect to list Holdings common stock on the Chicago Stock Exchange, and, in connection with the holding company reorganization, intend to delist Xerox’s common stock from the Chicago Stock Exchange.

 

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What will happen to the issued and outstanding shares of Xerox Series B Preferred Stock?

If the holding company reorganization is completed, each share of Xerox Series B convertible perpetual preferred stock (“Series B Preferred Stock”) will be exchanged for one share of Holdings Series A convertible perpetual voting preferred stock (“Series A Preferred Stock”). As a result, the holder of the Xerox Series B Preferred Stock will hold the same number of shares of Holdings Series A Preferred Stock that he held of Xerox Series B Preferred Stock immediately prior to the holding company reorganization. Upon completion of the holding company reorganization, all outstanding shares of the Xerox Series B Preferred Stock will be held by Holdings. The holder of the Xerox Series B Preferred Stock has consented to the terms of the holding company reorganization, notwithstanding any provisions of the Xerox restated certificate of incorporation.

Each share of Holdings Series A Preferred Stock will have the same designations, rights, powers and preferences, and the same qualifications, limitations and restrictions as the existing shares of Xerox Series B Preferred Stock, with the addition of certain voting rights to ensure the treatment of the holding company reorganization as a “reorganization” for U.S. federal income tax purposes. The Holdings Series A Preferred Stock will vote together with the Holdings common stock, as a single class, on all matters submitted to the shareholders of Holdings, but the Holdings Series A Preferred Stock will only be entitled to one vote for every ten shares of Holdings common stock into which the Holdings Series A Preferred Stock is convertible. For more information, see “Proposal 1 — Approval of The Holding Company Reorganization — Comparative Rights of Xerox and Holdings Shareholders.”

 

 

Will my rights as a common shareholder of Holdings be different from my rights as a common shareholder of Xerox?

Assuming that the proposed amendment to the Xerox restated certificate of incorporation (Proposal 5) is authorized by shareholders and becomes effective prior to completion of the holding company reorganization, the rights of shareholders of Holdings after giving effect to the holding company reorganization will be substantially similar in all material respects to the current rights of Xerox shareholders, subject to nominal dilution of voting rights as a result of the voting provisions of the Holdings Series A Preferred Stock. The Holdings Series A Preferred Stock will vote together with the Holdings common stock, as a single class, on all matters submitted to the shareholders of Holdings, but the Holdings Series A Preferred Stock will only be entitled to one vote for every ten shares of Holdings common stock into which the Holdings Series A Preferred Stock is convertible. Based on 180,000 shares of Xerox Series B Preferred Stock outstanding, which will be exchanged for 180,000 shares of Holdings Series A Preferred Stock as a result of the merger yielding voting rights of 674,157 votes as of [], 2019, the voting rights of Xerox common shareholders will be diluted by approximately 0.29% upon completion of the holding company reorganization (based on [] shares of Xerox common stock outstanding on the Record Date).

If the proposed amendment to the Xerox restated certificate of incorporation (Proposal 5) is not authorized by shareholders or does not become effective prior to completion of the holding company reorganization, the rights of common shareholders of Holdings after giving effect to the holding company reorganization will be substantially similar in all material respects to the current rights of Xerox common shareholders, subject to nominal dilution of voting rights as described above and except that the voting rights of holders of Holdings common stock will be different from the voting rights of holders of Xerox common stock in that the voting requirement to approve the following corporate actions will be at least a majority of the outstanding shares entitled to vote thereon (as compared to two-thirds of the outstanding shares entitled to vote thereon):

 

   

Adoption of a plan of merger or consolidation;

 

   

Authorization of a sale, lease, exchange or other dispositions of all or substantially all the assets of the corporation;

 

   

Adoption of a plan for the exchange of shares; and

 

   

Authorization of dissolution of the corporation.

The forms of restated certificate of incorporation and by-laws of Holdings that will be effective upon completion of the holding company reorganization are attached to this joint proxy statement/prospectus as Annex B and Annex C, respectively. See “Proposal 1 — Approval of The Holding Company Reorganization — Comparative Rights of Xerox and Holdings Shareholders.”

 

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Will the CUSIP number for my common stock change as a result of the holding company reorganization?

Yes. Following the holding company reorganization, the CUSIP number for your shares of Holdings common stock will be [].

 

 

Will I have to turn in my Xerox common stock certificate(s)?

No. We will not require you to exchange your Xerox common stock certificates as a result of the holding company reorganization. After the holding company reorganization, each certificate currently representing your shares of Xerox common stock will be deemed for all purposes to evidence the same number of shares of Holdings common stock.

 

 

How will the holding company reorganization be treated for accounting purposes?

For accounting purposes, the holding company reorganization will be treated as a transaction between entities under common control, resulting in no change in the carrying amount of Xerox’s existing assets or liabilities. Accordingly, the financial position and results of operations of Xerox will be included in the consolidated financial statements of Holdings on the same basis as currently presented.

 

 

Will the holding company reorganization affect my U.S. federal income taxes?

The holding company reorganization is intended to be a tax-free transaction under U.S. federal income tax laws. We expect that you will not recognize any gain or loss for federal income tax purposes upon your receipt of Holdings common stock in exchange for your shares of Xerox common stock in the holding company reorganization. The tax consequences to you will depend on your own situation. We urge you to consult your own tax advisors concerning the specific tax consequences of the holding company reorganization to you, including any foreign, state, or local tax consequences. For more information, see “Proposal 1 — Approval of The Holding Company Reorganization — Material U.S. Federal Income Tax Consequences.”

 

 

What vote is required to approve the holding company reorganization?

Approval of the holding company reorganization proposal requires the affirmative vote of two-thirds of all outstanding shares of Xerox common stock entitled to vote on the proposal. As a result, abstentions and the failure to submit a proxy vote or to vote in person on this proposal at the Annual Meeting will have the same effect as a vote “Against” the proposal. Broker non-votes will have no effect (provided that a quorum is present).

 

 

If approved by shareholders, when will the holding company reorganization occur?

The holding company reorganization will be completed when we file a certificate of merger with the Department of State of the State of New York. We currently plan to complete the holding company reorganization promptly following satisfaction of conditions to the holding company reorganization, including shareholder approval, or at such later time as the Company determines. However, we may choose not to complete the holding company reorganization, even if the Xerox shareholders approve the holding company reorganization proposal. See “Risk Factors — Even with shareholder approval, the holding company reorganization may not be completed.”

 

 

Do I have dissenters’ (or appraisal) rights in connection with the holding company reorganization?

No. Holders of Xerox common stock do not have dissenters’ rights under New York law as a result of the holding company reorganization even if the holding company reorganization is approved by our shareholders.

 

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Who do I contact if I have questions about the holding company reorganization proposal?

If you have questions about the holding company reorganization, or if you need assistance in submitting your proxy or voting your shares or need additional copies of this joint proxy statement/prospectus or the enclosed proxy card, you should contact Harkins Kovler, our proxy solicitor, by mail at 3 Columbus Circle, 15th Floor, New York, NY 10019, or by telephone toll-free at (844) 218-8384 (from the U.S. and Canada) or at (212) 468-5380 (from other locations) (Banks and Brokerage firms may call collect at (212) 468-5380). If your shares are held in a stock brokerage account or by a bank or other nominee, you should contact your broker, bank or other nominee for additional information.

 

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SUMMARY OF THE HOLDING COMPANY REORGANIZATION PROPOSAL

This section highlights key aspects of the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization, that are described in greater detail elsewhere in this joint proxy statement/prospectus. It does not contain all of the information that may be important to you. To better understand the holding company reorganization proposal, and for a more complete description of the legal terms of the merger agreement, you should read this entire document carefully, including the Annexes, and the additional documents to which we refer you. You can find information with respect to these additional documents in “Where You Can Find More Information.”

 

 

Parties Involved in the Holding Company Reorganization

 

   

Xerox Corporation. Xerox is a print technology and intelligent work solutions leader focused on helping people communicate and work better. We apply our expertise in imaging and printing, data analytics, and the development of secure and automated solutions to help our customers improve productivity and increase client satisfaction. Xerox is a New York corporation and Xerox common stock, par value $1.00, trades on the New York Stock Exchange and the Chicago Stock Exchange under the symbol “XRX.” Additional information about Xerox is contained in our public filings, which are incorporated by reference herein. See “Where You Can Find More Information.

 

   

Xerox Holdings Corporation. Holdings is a New York corporation that is a wholly owned subsidiary of Xerox and was formed in order to effect the holding company reorganization. Prior to the holding company reorganization, Holdings will have no assets or operations other than those incident to its formation. After the holding company reorganization, Xerox will be a wholly owned subsidiary of Holdings, and the current common shareholders of Xerox will become common shareholders of Holdings.

 

   

Xerox Merger Sub, Inc. Merger Sub is a New York corporation that is a wholly owned subsidiary of Holdings and was formed in order to effect the holding company reorganization. Prior to the holding company reorganization, Merger Sub will have no assets or operations other than those incident to its formation. In connection with the holding company reorganization, Merger Sub will merge with and into Xerox and will cease to exist following the merger.

The principal executive offices of Xerox, Holdings and Merger Sub are located at 201 Merritt 7, Norwalk, Connecticut 06851-1056. Their telephone number is (203) 968-3000. The management and business of Xerox will remain the same immediately following the holding company reorganization.

 

 

The Holding Company Reorganization

We are asking you to approve a proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization. If the holding company reorganization is completed, Xerox will become a direct, wholly-owned subsidiary of Holdings, a New York corporation. As a result, current common shareholders of Xerox will become common shareholders of Holdings, and will hold the same number of common shares of Holdings as they held of Xerox immediately prior to the holding company reorganization. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. Upon completion of the holding company reorganization, the forms of restated certificate of incorporation and by-laws of Holdings attached to this joint proxy statement/prospectus as Annex B and Annex C, respectively, will take effect. You are encouraged to read the merger agreement and forms of restated certificate of incorporation and by-laws of Holdings carefully.

 

 

Treatment of Xerox Common Stock in the Holding Company Reorganization

If the holding company reorganization is completed, each share of common stock of Xerox will convert into one share of common stock of Holdings. As a result, you will become a shareholder of Holdings and will hold the same number of shares of Holdings common stock that you hold of Xerox common stock immediately prior to the holding company reorganization. We expect that Holdings common stock will be listed on the NYSE under the symbol “XRX,” the same ticker symbol currently used for Xerox common stock. We do not expect to list Holdings common stock on the Chicago Stock Exchange, and, in connection the holding company reorganization, intend to delist Xerox’s common stock from the Chicago Stock Exchange.



 

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Treatment of Xerox Series B Preferred Stock in the Holding Company Reorganization

If the holding company reorganization is completed, each share of Xerox Series B Preferred Stock will be exchanged for one share of Holdings Series A Preferred Stock. As a result, the holder of the Xerox Series B Preferred Stock will hold the same number of shares of Holdings Series A Preferred Stock that he held of Xerox Series B Preferred Stock immediately prior to the holding company reorganization. Upon completion of the holding company reorganization, all outstanding shares of the Xerox Series B Preferred Stock will be held by Holdings. The holder of the Xerox Series B Preferred Stock has consented to the terms of the holding company reorganization, notwithstanding any provisions of the Xerox restated certificate of incorporation.

Each share of Holdings Series A Preferred Stock will have the same designations, rights, powers and preferences, and the same qualifications, limitations and restrictions as the existing shares of Xerox Series B Preferred Stock, with the addition of certain voting rights to ensure the treatment of the holding company reorganization as a “reorganization” for U.S. federal income tax purposes. The Holdings Series A Preferred Stock will vote together with the Holdings common stock, as a single class, on all matters submitted to the shareholders of Holdings, but the Holdings Series A Preferred Stock will only be entitled to one vote for every ten shares of Holdings common stock into which the Holdings Series A Preferred Stock is convertible. For more information, see “Proposal 1 — Approval of The Holding Company Reorganization — Comparative Rights of Xerox and Holdings Shareholders.”

 

 

Treatment of Xerox Stock Plans and Outstanding Equity Awards

Pursuant to the terms of the merger agreement, at the effective time, Xerox will transfer to Holdings, Holdings will assume sponsorship of, and Holdings will agree to perform all obligations under, the June 30, 2017 Amendment and Restatement of the Xerox Corporation 2004 Performance Incentive Plan (the “Performance Incentive Plan”) and the 2013 Amendment and Restatement of the Xerox Corporation 2004 Equity Compensation Plan for Non-Employee Directors (the “Directors Plan,” and together with the Performance Incentive Plan, the “Xerox Stock Plans”) and each outstanding award granted under the Xerox Stock Plans. Accordingly, Holdings will assume each of the Xerox Stock Plans and all unexercised and unexpired options to purchase Xerox common stock (each, a “Stock Option”) and each right to acquire or vest in a share of Xerox common stock, including restricted stock unit awards, performance share awards and deferred stock units (each, a “Stock Right” and together with the Stock Options, the “Awards”) that are outstanding under the Xerox Stock Plans at the effective time. At the effective time, the reserve of Xerox common stock under each Xerox Stock Plan, whether allocated to outstanding equity awards under such Xerox Stock Plans or unallocated at that time, will automatically be converted on a one-share-for-one-share basis into shares of Holdings common stock, and the terms and conditions that are in effect immediately prior to the effective time under each outstanding Award assumed by Holdings will continue in full force and effect after the effective time, including, without limitation, the vesting schedule and applicable issuance dates, the per share exercise price, the expiration date and other applicable termination provisions, except that the shares of common stock issuable under each such Award will be shares of Holdings common stock.

As of the Record Date, the following Awards were outstanding under the Xerox Stock Plans: [] stock options to purchase [] shares of Xerox common stock, [] performance shares, [] restricted stock units and [] shares of restricted stock.

 

 

Issuances of Holdings Common Stock Under the Xerox Stock Plans

The adoption of the merger agreement by the shareholders of Xerox will also constitute approval, without further shareholder action, of any amendments to the Xerox Stock Plans necessary, appropriate or advisable to authorize (i) the assumption by Holdings of the Xerox Stock Plans (including the existing share reserves), and the outstanding Awards under such plans, (ii) the issuance of existing Awards and future Awards of Holdings common stock in lieu of Xerox common stock under each of the Xerox Stock Plans, and (iii) Holdings’ ability to issue Awards under the Xerox Stock Plans to the eligible employees of Holdings and any of its subsidiaries, including any subsidiary formed or acquired after the effective time.



 

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Recommendation of the Xerox Board of Directors and Reasons for the Holding Company Reorganization

The Xerox Board unanimously recommends that the shareholders of Xerox vote “FOR” the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization. For a description of the reasons considered by the Xerox Board in deciding to recommend the approval of the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization, see “Proposal 1 — Approval of The Holding Company Reorganization — Recommendation of the Xerox Board of Directors and Reasons for the Holding Company Reorganization.”

 

 

Conditions to Completion of the Holding Company Reorganization

We will complete the holding company reorganization only if each of the following conditions is satisfied (or, to the extent not prohibited by law, waived by Xerox):

 

   

adoption of the merger agreement by two-thirds of the votes of all outstanding Xerox shares entitled to vote thereon;

 

   

absence of any law, order or pending legal proceeding that would prevent completion of the holding company reorganization;

 

   

receipt of approval from the United Kingdom Financial Conduct Authority in accordance with Part XII of the United Kingdom Financial Services and Markets Act 2000;

 

   

effectiveness of the registration statement, of which this joint proxy statement/prospectus forms a part, relating to the shares of Holdings common stock to be issued in the holding company reorganization and absence of any stop order suspending such effectiveness; and

 

   

receipt of approval for listing on NYSE of shares of Holdings common stock to be issued in the holding company reorganization, subject to official notice of issuance.

See “Risk Factors — Even with shareholder approval, the holding company reorganization may not be completed.”

 

 

Regulatory Approvals

As noted above, the holding company reorganization is conditioned on, among other things, (i) receipt of approval of the holding company reorganization by the Financial Conduct Authority of the United Kingdom (“FCA”), (ii) the effectiveness of the registration statement, of which this joint proxy statement/prospectus forms a part, and (iii) the receipt of approval for listing on NYSE of shares of Holdings common stock to be issued in the holding company reorganization, subject to official notice of issuance. For more information relating to the required FCA approval, see “Proposal 1 — Approval of The Holding Company Reorganization — Merger Agreement. In addition, to complete the holding company reorganization, we must file a certificate of merger with the New York State Department of State in accordance with the New York Business Corporation Law.

We are not aware of any other federal, state, local or foreign regulatory requirements that must be complied with or approvals that must be obtained in connection with the holding company reorganization.

 

 

Termination of the Holding Company Reorganization

At the discretion of the Xerox Board of Directors, we may determine not to proceed with the holding company reorganization at any time, even after approval by Xerox shareholders. See “Risk Factors — Even with shareholder approval, the holding company reorganization may not be completed.”

 

 

Material U.S. Federal Income Tax Consequences

The holding company reorganization is intended to be a tax-free transaction under U.S. federal income tax laws. We expect that Xerox common shareholders will not recognize any gain or loss for U.S. federal income tax purposes upon receipt of Holdings common stock in exchange for shares of Xerox common stock. However, the tax consequences to you will depend on your own situation. You are urged to consult your own tax advisors concerning the specific tax consequences of the holding company reorganization to you, including any state, local or foreign tax consequences. See “Proposal 1 — Approval of The Holding Company Reorganization — Material U.S. Federal Income Tax Consequences.”



 

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Security Ownership of Directors and Executive Officers

As of March 25, 2019, the Record Date for the Annual Meeting, our directors and executive officers beneficially owned [] shares of Xerox common stock, representing approximately []% of the issued and outstanding shares of common stock as calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended. Each director and executive officer has advised us that they each plan to vote all of their respective shares of common stock in favor of the proposals to be presented at the Annual Meeting, including the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization.

As of the Record Date, Carl C. Icahn beneficially owned [] shares of Xerox common stock, representing approximately []% of the issued and outstanding shares of common stock as calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended, based solely on the Schedule 13D/A filed with the SEC on February 25, 2019. Mr. Icahn has advised us that he intends to vote all of his shares of common stock in favor of the proposals to be presented at the Annual Meeting, including the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization.

As of the Record Date, Darwin A. Deason beneficially owned [] shares of Xerox common stock, representing approximately []% of the issued and outstanding shares of common stock calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended (including 6,741,572 shares of common stock issuable upon the conversion of 180,000 shares of Xerox Series B Preferred Stock), based solely on the Schedule 13D/A filed with the SEC on May 15, 2018. Mr. Deason has advised us that he intends to vote all of his shares of common stock in favor of the proposals to be presented at the Annual Meeting, including the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization.

The affirmative vote of the holders of two-thirds of the outstanding shares of Xerox common stock entitled to vote on the proposal is required to approve the holding company reorganization.

 

 

Risk Factors

Before voting on the holding company reorganization, you should carefully consider all of the information contained in or incorporated by reference into this joint proxy statement/prospectus and especially consider the factors discussed in “Risks Factors” beginning on page [] as well as the additional risk factors incorporated by reference herein that relate to Xerox’s business.

 

 

Dissenters’ Rights

Holders of Xerox common stock do not have dissenters’ rights under New York law as a result of the holding company reorganization even if the holding company reorganization is approved by our shareholders.

 

 

Markets and Market Prices

Holdings common stock is not currently traded on any stock exchange. Following the holding company reorganization, we expect Holdings common stock to trade on the NYSE under Xerox’s current trading symbol, “XRX.” We do not expect to list Holdings common stock on the Chicago Stock Exchange, and, in connection with the holding company reorganization, intend to delist Xerox’s common stock from the Chicago Stock Exchange.

On March 6, 2019, the last trading day before the announcement of the holding company reorganization proposal, the closing price per share of Xerox’s common stock was $30.85. On [], 2019 the most recent trading day for which prices were available prior to the mailing of this joint proxy statement/prospectus, the closing price per share of Xerox’s common stock was $[].



 

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Comparative Rights of Holders of Holdings Common Stock and Xerox Common Stock

Assuming that the proposed amendment to the Xerox restated certificate of incorporation (Proposal 5) is authorized by shareholders and becomes effective prior to completion of the holding company reorganization, the rights of shareholders of Holdings after giving effect to the holding company reorganization will be substantially similar in all material respects to the current rights of Xerox shareholders, subject to nominal dilution of voting rights as a result of the voting provisions of the Holdings Series A Preferred Stock. The Holdings Series A Preferred Stock will vote together with the Holdings common stock, as a single class, on all matters submitted to the shareholders of Holdings, but the Holdings Series A Preferred Stock will only be entitled to one vote for every ten shares of Holdings common stock into which the Holdings Series A Preferred Stock is convertible. Based on 180,000 shares of Xerox Series B Preferred Stock outstanding, which will be exchanged for 180,000 shares of Holdings Series A Preferred Stock as a result of the merger yielding voting rights of 674,157 votes as of the Record Date, the voting rights of Xerox common shareholders will be diluted by approximately 0.29% upon completion of the holding company reorganization (based on [] shares of Xerox common stock outstanding on the Record Date).

If the proposed amendment to the Xerox restated certificate of incorporation (Proposal 5) is not authorized by shareholders or does not become effective prior to completion of the holding company reorganization, the rights of common shareholders of Holdings after giving effect to the holding company reorganization will be substantially similar in all material respects to the current rights of Xerox common shareholders, subject to nominal dilution of voting rights as described above and except that the voting rights of holders of Holdings common stock will be different from the voting rights of holders of Xerox common stock in that the voting requirement to approve the following corporate actions will be at least a majority of the outstanding shares entitled to vote thereon (as compared to two-thirds of the outstanding shares entitled to vote thereon):

 

   

Adoption of a plan of merger or consolidation;

 

   

Authorization of a sale, lease, exchange or other dispositions of all or substantially all the assets of the corporation;

 

   

Adoption of a plan for the exchange of shares; and

 

   

Authorization of dissolution of the corporation.

The forms of restated certificate of incorporation and by-laws of Holdings that will be effective upon completion of the holding company reorganization are attached to this joint proxy statement/prospectus as Annex B and Annex C, respectively. See “Proposal 1 — Approval of The Holding Company Reorganization — Comparative Rights of Xerox and Holdings Shareholders.”



 

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Selected Historical Consolidated Financial Information

 

(in millions, except per-share data)   2018     2017     2016     2015     2014  

Per-Share Data

           

Income from continuing operations

           

Basic

    $1.40       $0.70       $2.36       $3.00       $3.42  

Diluted

    1.38       0.70       2.33       2.97       3.37  

Net Income (Loss) Attributable to Xerox

           

Basic

    1.40       0.71       (1.95     1.59       3.37  

Diluted

    1.38       0.71       (1.93     1.58       3.32  

Common stock dividends declared

    1.00       1.00       1.24       1.12       1.00  

Operations

           

Revenues

    $9,830       $10,265       $10,771       $11,465       $12,679  

Sales

    3,972       4,073       4,319       4,674       5,214  

Services, maintenance and rentals

    5,590       5,898       6,127       6,445       7,078  

Financing

    268       294       325       346       387  

Income from continuing operations

    374       204       633       840       1,034  

Income from continuing operations — Xerox

    361       192       622       822       1,011  

Net income (loss)

    374       207       (460     466       1,018  

Net income (loss) — Xerox

    361       195       (471     448       995  

Financial Position (1)

           

Working capital

    $1,444       $2,489       $2,338       $1,431       $2,798  

Total Assets

    14,874       15,946       18,051       25,442       27,576  

Consolidated Capitalization (1)

           

Short-term debt and current portion of long-term debt

    $961       $282       $1,011       $985       $1,427  

Long-term debt

    4,269       5,235       5,305       6,382       6,314  

Total Debt (2)

    5,230       5,517       6,316       7,367       7,741  

Convertible preferred stock

    214       214       214       349       349  

Xerox shareholders’ equity

    5,005       5,256       4,709       8,975       10,596  

Noncontrolling interests

    34       37       38       43       75  

Total Consolidated Capitalization

    $10,483       $11,024       $11,277       $16,734       $18,761  

Selected Data and Ratios

           

Common shareholders of record at year-end

    26,742       28,752       31,803       33,843       35,307  

Book value per common share (3)

    $21.80       $20.64       $18.57       $35.45       $37.95  

Year-end common stock market price (3)

    $19.76       $29.15       $23.00       $42.52       $55.44  

 

 

(1)

Balance sheet amounts at December 31, 2016 exclude Conduent Incorporated (Conduent) balances as a result of the separation and distribution of Conduent on December 31, 2016 while balance sheet amounts prior to December 31, 2016 include amounts for Conduent. Refer to Note 5 — Divestitures in our Consolidated Financial Statements for additional information in our Annual Report on Form 10-K for the year ended December 31, 2018, which is incorporated by reference herein.

 

(2)

Includes capital lease obligations.

 

(3)

Per share prices and computations for 2015 and 2014 are on a pre-separation basis. Refer to Note 5 —Divestitures in our Consolidated Financial Statements for further information in our Annual Report on Form 10-K for the year ended December 31, 2018, which is incorporated by reference herein.



 

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Prior to the holding company reorganization, Holdings will have no assets, liabilities, or operations other than those incident to its formation. For this reason, we have not provided financial statements of Holdings. In addition, we have not included pro forma financial comparative per share information concerning Xerox that gives effect to the holding company reorganization because, immediately after the completion of the holding company reorganization, the consolidated financial statements of Holdings will be substantially the same as Xerox’s financial statements immediately prior to the holding company reorganization. For more information regarding the documents incorporated by reference into this joint proxy statement/prospectus, including Xerox’s financial information, please see the section entitled “Where You Can Find More Information.”



 

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RISK FACTORS

In considering whether to vote in favor of the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization, you should consider all of the information we have included in this joint proxy statement/prospectus, including its annexes, and all of the information in the documents we have incorporated by reference. Specifically, you should review the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC and incorporated herein by reference. Please see the section entitled “Where You Can Find More Information.”

We may not obtain the expected benefits of the holding company reorganization.

We believe that the holding company reorganization will provide us with future benefits. These expected benefits are not guaranteed and may not be obtained if market conditions or other circumstances prevent us from taking advantage of the investment, financing and structuring flexibility we expect to gain as a result of the holding company reorganization. In other words, we may incur the costs of the holding company reorganization without receiving the benefits. Moreover, the holding company structure resulting from the holding company reorganization may be unsuccessful in insulating the liabilities of our subsidiaries from each other or from Holdings. We, or our future subsidiaries, may be liable for one another’s liabilities, especially if we do not observe the requisite corporate formalities or adequately capitalize Holdings or its subsidiaries.

The holding company reorganization may result in substantial direct and indirect costs whether completed or not.

The holding company reorganization may result in substantial direct costs, which are expected to consist primarily of attorneys’ fees, accountants’ fees, filing fees, financial printing expenses and mailing costs. A significant portion of these costs will be incurred prior to the Annual Meeting. The holding company reorganization may also result in substantial indirect costs by diverting the attention of our management and employees from our business and increasing administrative costs and expenses on a going forward basis. These administrative costs and expenses will include keeping separate records and, in some cases, making separate regulatory filings for each of Xerox and Holdings.

As a holding company, Holdings will be dependent on the operations and funds of its subsidiaries.

Once the holding company reorganization is complete, Holdings will be a holding company with no business operations of its own. Upon completion, its only significant assets will be the outstanding stock in Xerox. As a result, Holdings will rely on payments from its subsidiaries to meet its obligations.

We currently expect that a significant portion of the cash flows of Xerox, which will become a wholly owned subsidiary of Holdings upon the completion of the holding company reorganization, will be used by it in its operations, including to service Xerox’s current as well as any future debt obligations. In addition, in the future, subsidiaries may be restricted in their ability to pay cash dividends or to make other distributions to Holdings, which may limit the payment of cash dividends or other distributions, if any, to the holders of Holdings stock. Future debt obligations of Holdings, in addition to statutory restrictions, may limit the ability of Holdings and its subsidiaries to pay dividends.

Our business relationships may be subject to disruption due to uncertainty resulting from the holding company reorganization, which could have a material adverse effect on our business, financial condition and operating results.

Customers, distributors, suppliers, vendors and other parties with whom we do business may perceive uncertainty and may attempt to negotiate changes in existing business relationships in relation to the holding company reorganization. This could disrupt our business and could have an adverse effect on our financial condition and operating results, including an adverse effect on our ability to realize the expected benefits of the holding company reorganization.

 

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Even with shareholder approval, the holding company reorganization may not be completed.

The merger agreement may be terminated, or the completion of the holding company reorganization may be deferred, at any time prior to its completion (even after approval by our shareholders) by the Board of Xerox. In addition, the holding company reorganization will only be completed if the conditions set forth in the merger agreement are satisfied or waived. See “Proposal 1 — Approval of The Holding Company Reorganization —Conditions to the Holding Company Reorganization.” Accordingly, there is a chance that, even with shareholder approval, the holding company reorganization will not be completed. This could result in substantial costs for Xerox.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this joint proxy statement/prospectus and statements in other reports or information filed or to be filed with the SEC and incorporated by reference herein or therein (as well as information included in oral statements or other written statements made or to be made by us), are, or will be, “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. Such factors include, but are not limited to:

 

   

we may not obtain the expected benefits of the holding company reorganization;

 

   

the holding company reorganization may result in substantial costs whether completed or not;

 

   

as a holding company, Holdings will be dependent on the operations and funds of its subsidiaries;

 

   

our business relationships may be subject to disruption;

 

   

even with shareholder approval, the holding company reorganization may not be completed;

 

   

and other factors that are set forth in the “Risk Factors” section, and the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC on February 25, 2019, and incorporated herein by reference.

Neither Holdings nor Xerox assumes any obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.

All forward-looking statements are qualified by, and should be read in conjunction with, these Risk Factors, and you should review the information under the section entitled “Risk Factors” in this joint proxy statement/prospectus.

 

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PROPOSAL 1 — APPROVAL OF THE HOLDING COMPANY REORGANIZATION

This section of the joint proxy statement/prospectus describes the proposal to adopt the merger agreement pursuant to which we will implement the holding company reorganization. The summary of the material provisions of the merger agreement provided below is qualified in its entirety by reference to the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus and incorporated by reference herein. You should carefully read the entire joint proxy statement/prospectus and the merger agreement for a more complete understanding of the holding company reorganization proposal. Your approval of the holding company reorganization proposal includes adoption of the merger agreement.

Parties Involved in the Holding Company Reorganization

 

   

Xerox Corporation. Xerox is a print technology and intelligent work solutions leader focused on helping people communicate and work better. We apply our expertise in imaging and printing, data analytics, and the development of secure and automated solutions to help our customers improve productivity and increase client satisfaction. Xerox is a New York corporation and Xerox common stock, par value $1.00, trades on the New York Stock Exchange and the Chicago Stock Exchange under the symbol “XRX.” Additional information about Xerox is contained in our public filings, which are incorporated by reference herein. See “Where You Can Find More Information.

 

   

Xerox Holdings Corporation. Holdings is a New York corporation that is a wholly owned subsidiary of Xerox and was formed in order to effect the holding company reorganization. Prior to the holding company reorganization, Holdings will have no assets or operations other than those incident to its formation. After the holding company reorganization, Xerox will be a wholly owned subsidiary of Holdings, and the current common shareholders of Xerox will become common shareholders of Holdings.

 

   

Xerox Merger Sub. Merger Sub is a New York corporation that is a wholly owned subsidiary of Holdings and was formed in order to effect the holding company reorganization. Prior to the holding company reorganization, Merger Sub will have no assets or operations other than those incident to its formation. In connection with the holding company reorganization, Merger Sub will merge with and into Xerox and will cease to exist following the holding company reorganization.

Description of the Holding Company Reorganization

Xerox currently owns all of the issued and outstanding common stock of Holdings, and Holdings currently owns all of the common stock of Merger Sub, which was formed for purposes of completing the proposed holding company reorganization. If, following the approval of the holding company reorganization by the requisite Xerox shareholders and the satisfaction or waiver of the other conditions specified in the merger agreement (described below), the holding company reorganization is completed, Merger Sub will merge with and into Xerox, with Xerox continuing as the surviving corporation of the merger and a direct, wholly-owned subsidiary of Holdings.

Corporate Structure

If the merger agreement is adopted by Xerox’s shareholders and certain other conditions to the closing of the holding company reorganization are either satisfied or waived, Merger Sub will be merged with and into Xerox, with Xerox continuing as the surviving corporation in the merger. As a result, Holdings will own 100% of the common stock of Xerox. For a diagram of how the holding company reorganization will affect the corporate structure of Xerox, see “Proposal 1 — Approval of the Holding Company Reorganization — Structure of the Holding Company Reorganization.

Common Stock

Each holder of Xerox common stock at the time the merger is effective will become a holder of Holdings common stock. Each share of Xerox common stock will convert into one share of Holdings common stock. You will hold the same number of shares of Holdings common stock as you held of Xerox common stock immediately prior to the completion of the holding company reorganization. Following the completion of the holding company reorganization, the certificates representing your shares of Xerox common stock will represent the same number of shares of Holdings common stock. You will not be required to exchange your stock certificates as a result of the holding company reorganization.

 

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Preferred Stock

On the Record Date, 180,000 shares of Xerox Series B Preferred Stock were outstanding. At the time the merger is effective, each share of Xerox Series B Preferred Stock will be exchanged for one share of Holdings Series A Preferred Stock. Darwin A. Deason, the holder of all outstanding shares of Xerox Series B Preferred Stock, will hold the same number of shares of Holdings Series A Preferred Stock as he held of Xerox Series B Preferred Stock immediately prior to the completion of the holding company reorganization. Upon completion of the holding company reorganization, all outstanding shares of the Xerox Series B Preferred Stock will be held by Holdings. The holder of the Xerox Series B Preferred Stock has consented to the terms of the holding company reorganization, notwithstanding any provisions of the Xerox restated certificate of incorporation.

Each share of Holdings Series A Preferred Stock will have the same designations, rights, powers and preferences, and the same qualifications, limitations and restrictions as the existing shares of Xerox Series B Preferred Stock, with the addition of certain voting rights to ensure the treatment of the holding company reorganization as a “reorganization” for U.S. federal income tax purposes. The Holdings Series A Preferred Stock will vote together with the Holdings common stock, as a single class, on all matters submitted to the shareholders of Holdings, but the Holdings Series A Preferred Stock will only be entitled to one vote for every ten shares of Holdings common stock into which the Holdings Series A Preferred Stock is convertible. For more information, see “Proposal 1 — Approval of The Holding Company Reorganization — Comparative Rights of Xerox and Holdings Shareholders.”

Treatment of Xerox Stock Plans and Outstanding Equity Awards

Pursuant to the terms of the merger agreement, at the effective time, Xerox will transfer to Holdings, Holdings will assume sponsorship of, and Holdings will agree to perform all obligations under, the June 30, 2017 Amendment and Restatement of the Xerox Corporation 2004 Performance Incentive Plan (the “Performance Incentive Plan”) and the 2013 Amendment and Restatement of the Xerox Corporation 2004 Equity Compensation Plan for Non-Employee Directors (the “Directors Plan,” and together with the Performance Incentive Plan, the “Xerox Stock Plans”) and each outstanding award granted under the Xerox Stock Plans. Accordingly, Holdings will assume each of the Xerox Stock Plans and all unexercised and unexpired options to purchase Xerox common stock (each, a “Stock Option”) and each right to acquire or vest in a share of Xerox common stock, including restricted stock unit awards, performance share awards and deferred stock units (each, a “Stock Right” and together with the Stock Options, the “Awards”) that are outstanding under the Xerox Stock Plans at the effective time. At the effective time, the reserve of Xerox common stock under each Xerox Stock Plan, whether allocated to outstanding equity awards under such Xerox Stock Plans or unallocated at that time, will automatically be converted on a one-share-for-one-share basis into shares of Holdings common stock, and the terms and conditions that are in effect immediately prior to the effective time under each outstanding Award assumed by Holdings will continue in full force and effect after the effective time, including, without limitation, the vesting schedule and applicable issuance dates, the per share exercise price, the expiration date and other applicable termination provisions, except that the shares of common stock issuable under each such Award will be shares of Holdings common stock.

Issuances of Holdings Common Stock Under the Xerox Stock Plans

The adoption of the merger agreement by the shareholders of Xerox will also constitute approval, without further shareholder action, of any amendments to the Xerox Stock Plans necessary, appropriate or advisable to authorize (i) the assumption by Holdings of the Xerox Stock Plans (including the existing share reserves), and the outstanding Awards under such plans, (ii) the issuance of existing Awards and future Awards of Holdings common stock in lieu of Xerox common stock under each of the Xerox Stock Plans, and (iii) Holdings’ ability to issue Awards under the Xerox Stock Plans to the eligible employees of Holdings and any of its subsidiaries, including any subsidiary formed or acquired after the effective time.

Charter and Bylaws

Copies of the Holdings restated certificate of incorporation and the Holdings restated by-laws that will be in effect upon completion of the holding company reorganization are included as Annex B and Annex C, respectively, to this joint proxy statement/prospectus. For more information regarding your rights as a shareholder before and after the holding company reorganization, see “Proposal 1 — Approval of The Holding Company Reorganization — Comparative Rights of Xerox and Holdings Shareholders.”

 

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Other Effects

In all other respects, the management and business of our company will remain the same immediately following the holding company reorganization. We expect that the directors and executive officers of Xerox will also serve in the same capacities for Holdings, including their capacities as members of board committees.

Upon completion of the holding company reorganization, it is anticipated that Holdings will become a guarantor under the Xerox revolving credit agreement, dated as of August 9, 2017, among Xerox and the lenders and other parties named therein, as amended, as well as certain future senior note issuances by Xerox. In connection with the holding company reorganization, we received a waiver from required lenders under the revolving credit agreement.

Structure of the Holding Company Reorganization

 

 

LOGO

Background of the Holding Company Reorganization

As part of its ongoing evaluation of Xerox’s business, the Xerox Board, together with senior management, regularly evaluates a range of possible strategic growth opportunities. In December 2018, Xerox began to explore the holding company reorganization as a way to provide more flexibility to develop and realize those possible strategic growth opportunities. Throughout December 2018 and early 2019, Xerox consulted with external advisors to discuss the implications of effecting the holding company reorganization.

In December 2018 and February 2019, at regularly scheduled meetings of the Board, members of senior management and King & Spalding LLP, the company’s legal counsel, discussed the benefits and risks of a holding company reorganization. The Board discussed the company’s interest in evaluating a range of possible strategic growth opportunities and authorized management to explore a potential holding company reorganization.

On March 6, 2019, the Xerox Board held a telephonic meeting to consider, among other topics, the terms of the holding company reorganization. Mr. Letier, who serves as Managing Director of Deason Capital Services, LLC, recused himself from the portion of the discussion relating to the treatment of the Xerox Series B Preferred Stock held by Mr. Deason. After discussing the proposed transaction, the Xerox Board resolved to authorize, approve and adopt the holding company reorganization. Xerox announced the holding company reorganization by filing a Current Report on Form 8-K on March 7, 2019.

 

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Following announcement of the transaction, the Board reviewed the proposed final terms relating to the holding company reorganization, including the merger agreement. On March 14, 2019, the Xerox Board determined the merger agreement and the holding company reorganization to be advisable, fair to and in the best interests of Xerox and its shareholders, adopted the merger agreement, and resolved to recommend approval of the holding company reorganization (including adoption of the merger agreement) by Xerox’s shareholders.

Reasons for the Holding Company Reorganization

During the course of its deliberations, the Xerox Board consulted with management and outside legal counsel and considered a number of positive factors, including the following:

 

   

Implementation of a holding company structure will provide Xerox with flexibility to develop and realize a range of strategic growth opportunities.

 

   

By providing optionality for future innovation, investment and growth opportunities to exist either within or separate from current Xerox businesses, the holding company reorganization will be an important step in reestablishing Xerox as a technology powerhouse with a robust portfolio of hardware, software, solutions and services, while preserving existing customer, partner, vendor and supplier relationships.

 

   

The holding company structure will provide Xerox with optionality to acquire and incubate future businesses through subsidiaries that can operate on a global scale, with the flexibility to finance and structure each new opportunity in a manner that we believe will create value, while also maintaining — and continuing investment in — the existing Xerox product and technology platforms.

The Xerox Board also considered uncertainties and risks concerning the holding company reorganization, including the following:

 

   

We will incur direct costs as a result of the holding company reorganization, including attorney’s fees, accountants’ fees, filing fees, financial printing expenses and mailing costs. A substantial portion of these costs will be incurred prior to the vote of our shareholders.

 

   

The reorganization may also result in indirect costs by diverting the attention of our management from our business and increasing administrative costs and expenses. Increased administrative costs and expenses include those associated with maintaining separate records for each of Holdings and Xerox.

The foregoing discussion is not meant to be exhaustive, but summarizes the material factors considered by the Xerox Board in its consideration of the holding company reorganization. After considering these and other factors, the Xerox Board concluded that the potential benefits of the holding company reorganization outweighed the uncertainties and risks. In view of the variety of factors considered by the Xerox Board and the complexity of these factors, the Xerox Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its determination and recommendations. Moreover, each member of the Xerox Board applied his or her own personal business judgement to the process and may have assigned different weights to different factors. Based upon the totality of the information presented to and considered by the Xerox Board, the Xerox Board unanimously adopted the merger agreement pursuant to which we will implement the holding company reorganization and recommends that the Xerox shareholders adopt the merger agreement pursuant to which we will implement the holding company reorganization.

Material U.S. Federal Income Tax Consequences

The following discussion summarizes the material U.S. federal income tax consequences of the holding company reorganization to U.S. holders (as defined below). This discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), current and proposed Treasury Regulations, and judicial and administrative decisions and rulings as of the date of this joint proxy statement/prospectus, all of which are subject to change (possibly with retroactive effect) and all of which are subject to differing interpretation. This discussion does not address all aspects of taxation that may be relevant to you in light of your personal investment or tax circumstances, and does not address persons that are subject to special treatment under the U.S. federal income tax laws. In particular, this discussion deals only with shareholders that hold Xerox common stock as a capital asset within the meaning of the Code. In addition, this discussion does not address the tax treatment of special classes of shareholders, such as banks, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, persons holding Xerox common stock as part of

 

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a hedging or conversion transaction or as part of a “straddle,” U.S. expatriates, persons subject to the alternative minimum tax, persons who actually or constructively own five percent or more of the outstanding shares of Xerox common stock, foreign corporations, foreign partnerships, foreign estates or trusts, and persons who are not citizens or residents of the United States. This discussion may not be applicable to holders who acquired Xerox common stock pursuant to the exercise of options or warrants or otherwise as compensation. Furthermore, this discussion does not address any state, local or foreign tax considerations, any non-income tax (such as estate or gift tax) considerations or the Medicare tax on net investment income. We have not and will not seek any rulings from the Internal Revenue Service (the “IRS”), regarding the holding company reorganization. Accordingly, there can be no assurance that the IRS will not take positions concerning the tax consequences of the holding company reorganization that are different from those described below.

Each shareholder is urged to consult its own tax advisor with respect to the U.S. federal, state and local and foreign tax consequences of the holding company reorganization.

For purposes of this discussion, a “U.S. holder” is a beneficial owner of Xerox common stock that is for U.S. federal income tax purposes:

 

   

a citizen or individual resident of the United States;

 

   

a corporation (including an entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

   

an estate, the income of which is subject to United States federal income tax regardless of the source; or

 

   

a trust, if a court within the United States is able to exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all its substantial decisions, or if the trust was in existence on August 20, 1996 and has properly elected to continue to be treated as a U.S. person.

If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Xerox common stock, the tax treatment of a partner in the partnership will depend upon the status of that partner and the activities of the partnership. If you are a partner in a partnership that holds Xerox common stock, you are urged to consult with your own tax advisor regarding the tax consequences of the holding company reorganization.

Our counsel, King & Spalding LLP, is providing an opinion to us, which we refer to as the tax opinion, in connection with the filing of this joint proxy statement/prospectus to the effect that the holding company reorganization will qualify as a “reorganization” within the meaning of Section 368(a) of the Code as well as a transaction described in Section 351(a) of the Code. The tax opinion will be subject to customary assumptions, qualifications and limitations, and will be based on representations made by us regarding factual matters, and covenants undertaken by Xerox and Holdings. If any assumption or representation is inaccurate, or any covenant is not complied with, the tax consequences of the holding company reorganization could differ from those described below and in the tax opinion. The tax opinion is not binding on the IRS or the courts and there can be no assurance that the IRS would not assert, or that a court would not sustain, a position contrary to the conclusions set forth in the tax opinion.

As noted and subject to the qualifications above, in the opinion of King & Spalding LLP, the holding company reorganization will qualify as a “reorganization” within the meaning of Section 368(a) of the Code as well as a transaction described in Section 351(a) of the Code.

Accordingly, for U.S. federal income tax purposes:

 

   

U.S. holders will not recognize any gain or loss on the receipt of Holdings common stock in exchange for Xerox common stock pursuant to the holding company reorganization;

 

   

the aggregate tax basis of the Holdings common stock received in the holding company reorganization by a U.S. holder will be the same as such holder’s aggregate tax basis in the Xerox common stock surrendered in exchange therefor; and

 

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the holding period of the Holdings common stock received by a U.S. holder in connection with the holding company reorganization will include the holding period of the Xerox common stock surrendered in exchange therefor.

Anticipated Accounting Treatment

For accounting purposes, our reorganization into a holding company structure will be treated as a transaction between entities under common control, resulting in no change in the carrying amount of Xerox’s existing assets or liabilities. Accordingly, the financial position and results of operations of Xerox will be included in the consolidated financial statements of Holdings on the same basis as currently presented.

Listing of Holdings Common Stock on NYSE; Delisting and Deregistration of Xerox Common Stock

A condition to completion of the holding company reorganization is the approval for listing on NYSE of shares of Holdings common stock. This includes both shares issuable in the holding company reorganization and any other shares to be reserved for issuance in connection with the holding company reorganization. We expect that the Holdings common stock will trade under the ticker symbol “XRX.” In addition, Holdings will become a reporting company under the Exchange Act.

Following the holding company reorganization, Xerox common stock will no longer be listed on NYSE and will no longer be registered under the Exchange Act.

We do not expect to list Holdings common stock on the Chicago Stock Exchange, and, in connection the holding company reorganization, intend to delist Xerox’s common stock from the Chicago Stock Exchange.

Interests of Certain Directors and Officers

Our directors and executive officers and certain of their associates own Xerox common stock, stock options, deferred stock units, performance share units and/or restricted stock units that entitle them to acquire Xerox common stock, and, to that extent, their interest in the holding company reorganization is the same as the interest in the holding company reorganization of our shareholders generally. In addition, Mr. Letier serves as Managing Director of Deason Capital Services, LLC, the family office for Darwin A. Deason. As holder of the Xerox Series B Preferred Stock, Mr. Deason will receive Holdings Series A Preferred Stock upon completion of the holding company reorganization. Each share of Holdings Series A Preferred Stock will have the same designations, rights, powers and preferences, and the same qualifications, limitations and restrictions as the existing shares of Xerox Series B Preferred Stock, with the addition of certain voting rights to ensure the treatment of the holding company reorganization as a “reorganization” for U.S. federal income tax purposes.

Required Vote

Approval of the holding company reorganization proposal requires the affirmative vote of two-thirds of all outstanding shares of Xerox common stock entitled to vote on the proposal. As a result, abstentions and the failure to submit a proxy vote or to vote in person on this proposal at the Annual Meeting will have the same effect as a vote “against” the proposal, and broker non-votes will have no effect (provided that a quorum is present).

Statutory Appraisal Rights

Holders of Xerox common stock do not have dissenters’ rights under New York law as a result of the holding company reorganization even if the holding company reorganization is approved by our shareholders.

 

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The Merger Agreement

Below is a summary of the material provisions of the merger agreement, a copy of which is attached to this joint proxy statement/prospectus as Annex A and which is incorporated by reference into this joint proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read carefully the merger agreement in its entirety, as the rights and obligations of the parties thereto are governed by the express terms of the merger agreement and not by this summary or any other information contained in this joint proxy statement/prospectus.

Structure of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers

At the effective time of the merger, Merger Sub will merge with and into Xerox and the separate corporate existence of Merger Sub will cease. Xerox will be the surviving corporation in the merger and will continue its corporate existence as a direct, wholly owned subsidiary of Holdings.

Copies of the Holdings restated certificate of incorporation and the Holdings restated by-laws that will be in effect upon completion of the holding company reorganization are included as Annex B and Annex C, respectively, to this joint proxy statement/prospectus. For more information regarding your rights as a shareholder before and after the holding company reorganization, see “Proposal 1 — Approval of The Holding Company Reorganization — Comparative Rights of Xerox and Holdings Shareholders.”

Subject to applicable law, the directors of Xerox immediately prior to the effective time shall be the initial directors of Holdings and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal, and the officers of the Xerox in office immediately prior to the effective time shall be the officers of Holdings and will continue to hold office until the earlier of their resignation or removal or until their successors are duly elected or appointed and qualified.

When the Merger Becomes Effective

The holding company reorganization will be completed when we file a certificate of merger with the Department of State of the State of New York. We currently plan to complete the merger once our shareholders approve the merger and all other conditions to completion of the merger have been satisfied, or at such later time as the Company determines. Nonetheless, at the discretion of the Xerox Board of Directors, we may determine not to proceed with the holding company reorganization at any time, even after approval by Xerox shareholders. See “Risk Factors — Even with shareholder approval, the holding company reorganization may not be completed.”

Required Approvals and Conditions

The obligation of each party to complete the merger is subject to the satisfaction (or waiver by Xerox) of the following conditions:

 

   

adoption of the holding company reorganization (including the merger agreement) by two-thirds of the votes of all outstanding Xerox common stock entitled to vote thereon;

 

   

absence of any law, order or pending legal proceeding that would prevent completion of the holding company reorganization;

 

   

receipt of approval from the United Kingdom Financial Conduct Authority in accordance with Part XII of the United Kingdom Financial Services and Markets Act 2000;

 

   

effectiveness of the registration statement, of which this joint proxy statement/prospectus forms a part, relating to the shares of Holdings common stock to be issued in the holding company reorganization and absence of any stop order suspending such effectiveness; and

 

   

receipt of approval for listing on NYSE of shares of Holdings common stock to be issued in the holding company reorganization, subject to official notice of issuance.

To obtain the FCA approval, pursuant to the UK Financial Services and Markets Act 2000, as amended, Holdings must submit a change of control notice to the FCA. The FCA approval will either take the form of a written notice in which the FCA approves (with or without conditions) the holding company reorganization or will be deemed to have been provided if 60 working days elapse after the FCA acknowledges receipt of a completed change of control notice and the FCA has not advised Holdings that (i) the change of control

 

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notice is incomplete or further information is required to complete the assessment, (ii) it proposes to approve the holding company reorganization subject to conditions or (iii) it proposes to object to the holding company reorganization, though the FCA may interrupt the review period for an additional 30 working days as it is completing its assessment.

See “Risk Factors — Even with shareholder approval, the holding company reorganization may not be completed.”

Termination

The merger agreement may be terminated and the holding company reorganization may be abandoned at any time prior to the effective time of the merger by action of the Board of Xerox. In the event of termination, the merger agreement will become void and have no effect, and neither Xerox, Holdings, Merger Sub nor their respective shareholders, directors or officers shall have any liability with respect to such termination or abandonment.

Amendments

At any time prior to the effective time of the merger, the merger agreement may be supplemented, amended or modified, by the mutual written consent of the parties’ respective boards of directors; provided, however, that, no amendment shall be effected subsequent to the adoption of the merger agreement by the shareholders of Xerox without further approval or authorization by the shareholders of Xerox, if required.

Comparative rights of Xerox and Holdings shareholders

General

Xerox and Holdings are each incorporated under the laws of the State of New York. As a result of the holding company reorganization, Xerox shareholders will become shareholders of Holdings. Thus, following the holding company reorganization, the rights of Xerox shareholders who become Holdings shareholders in the merger will continue to be governed by the laws of the State of New York and will also then be governed by the restated certificate of incorporation of Holdings and the restated by-laws of Holdings. The forms of restated certificate of incorporation and by-laws of Holdings that will be effective upon completion of the holding company reorganization are attached to this joint proxy statement/prospectus as Annex B and Annex C, respectively.

Comparison of Shareholders’ Rights

Set forth below is a summary comparison of material differences between the rights of a Holdings shareholder under the Holdings restated certificate of incorporation, Holdings restated by-laws and the New York Business Corporation Law (right column), and the rights of a shareholder under the Xerox restated certificate of incorporation (including if the proposed amendment to the Xerox restated certificate of incorporation (Proposal 5) is authorized by shareholders and becomes effective prior to completion of the holding company reorganization), the Xerox restated by-laws and the New York Business Corporation Law (left column). The summary set forth below is not intended to provide a comprehensive summary of the New York Business Corporation law or of each company’s governing documents. This summary is qualified in its entirety by reference to the full text of the forms of restated certificate of incorporation and by-laws of Holdings that will be effective upon completion of the holding company reorganization, attached to this joint proxy statement/

 

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prospectus as Annex B and Annex C, respectively, the Xerox restated certificate of incorporation and by-laws, and the proposed amendment to the Xerox restated certificate of incorporation (Proposal 5).

 

XEROX

 

 

HOLDINGS

 

 

CAPITAL STOCK

 

Authorized Capital. 437,500,000 shares of common stock, par value $1.00 per share, 600,000 shares of Class B Stock, par value $1.00 per share and 22,043,067 shares of Cumulative Preferred Stock, par value of $1.00. As of [], 2019 there were [] shares of common stock issued and outstanding, [] shares of Class B Stock issued and outstanding, and 180,000 shares of Series B Preferred Stock outstanding.   Authorized Capital. 437,500,000 shares of common stock, par value $1.00 per share and 22,043,067 shares of Preferred Stock, par value of $1.00. The number of shares of Holdings common stock that will be issued and outstanding upon completion of the merger will equal the number of shares of Xerox common stock outstanding immediately prior to the merger. Effective upon completion of the merger, there will be 180,000 shares of Series A Preferred Stock outstanding.
Cumulative Preferred Stock. All authorized shares of preferred stock are entitled to cumulative dividend rights.   Preferred Stock. Holdings is authorized to issue preferred stock with or without cumulative dividend rights, at the discretion of the board. The Series A Preferred Stock has cumulative dividend rights.

 

VOTING RIGHTS

 

   

Approval of Significant Transactions. The approval of two-thirds of the outstanding shares entitled to vote thereon is needed to approve the following actions: (i) adoption of a plan or merger or consolidation; (ii) authorization of a sale, lease, exchange or other disposition of all or substantially all the assets of Xerox; (iii) adoption of a plan for the exchange of shares; and (iv) authorization of the dissolution of Xerox.

 

If the proposed amendment to the Xerox restated certificate of incorporation (Proposal 5) is authorized by shareholders and becomes effective prior to completion of the holding company reorganization, the foregoing actions will require the approval of a majority of the outstanding shares entitled to vote thereon.

  Approval of Significant Transactions. Approval of a majority of the outstanding shares entitled to vote thereon is needed to approve the following actions: (i) adoption of a plan or merger or consolidation; (ii) authorization of a sale, lease, exchange or other disposition of all or substantially all the assets of Holdings; (iii) adoption of a plan for the exchange of shares; and (iv) authorization of the dissolution of Holdings.
Series B Preferred Stock Voting Rights. Holders of Series B Preferred Stock are not entitled to vote on matters with holders of common stock.  

Series A Preferred Stock Voting Rights. The Holdings Series A Preferred Stock will vote together with the Holdings common stock, as a single class, on all matters submitted to the shareholders of Holdings, but the Holdings Series A Voting Preferred Stock will only be entitled to one vote for every ten shares of Holdings common stock into which the Holdings Series A Preferred Stock is convertible.

 

The Board recommends a vote

FOR

the adoption of the merger agreement

pursuant to which we will implement the holding company reorganization

 

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PROPOSAL 2 — ELECTION OF DIRECTORS

Shareholders annually elect directors to serve for one year and until their successors have been elected and have been qualified. Based on the director nomination process described below, the seven persons whose biographies appear below have been nominated by the Board to serve as directors based on the recommendation of the Corporate Governance Committee.

Each of the director nominees currently serves on the Board. Each nominee brings to us valuable experience from a variety of fields. The biographical information presented regarding each nominee’s specific experience, qualifications, attributes and skills led our Board to the conclusion that he or she should serve as a director. Each of the nominees has demonstrated business acumen and an ability to exercise independent and sound judgment, as well as an understanding of the Company’s business environment and a commitment to serve the Company and our Board. We also value their significant experience on other public company boards of directors and board committees.

In May 2018, we entered into an agreement with Carl Icahn and certain of his affiliates and Darwin Deason pursuant to which, among other things, five new Board members joined Xerox’s Board of Directors. Under the agreement, current nominees Jonathan Christodoro, Scott Letier, Keith Cozza, Nicholas Graziano, and John Visentin were appointed to the Board on May 13, 2018. At our Annual Meeting of Shareholders held on July 31, 2018, our shareholders voted to elect each of these individuals, plus Gregory Q. Brown, Joseph J. Echevarria, Cheryl Gordon Krongard and Sara Martinez Tucker, to the Board. Mr. Brown and Ms. Tucker will not be standing for re-election at the 2019 Annual Meeting.

The Board has determined that each of the nominees (other than John Visentin, Vice Chairman and Chief Executive Officer of the Company) is independent under the NYSE Corporate Governance Rules and the Company’s more stringent independence standards.

It is expected that all nominees proposed by our Board will be able to serve on the Board if elected. Although not anticipated, if for any reason, a nominee is unable to serve, the proxies may use their discretion to vote for a substitute nominated by the Board.

Biographies

The Board is continuously seeking highly-qualified, diverse candidates to add to the range of skills and experiences represented on our Board. The seven individuals nominated for election at our 2019 Annual Meeting bring valuable diversity to the Board. One of these seven director nominees is a woman. One of our nominees is Hispanic. These seven director nominees range in age from 40 to 63. In addition, each Director nominee contributes to the Board’s overall diversity by providing a variety of perspectives, personal and professional experiences and backgrounds. In light of board developments this past year, the tenure of the current directors averages two years. We believe our director nominees bring a well-rounded variety of skills, qualifications, experience and diversity as well as fresh perspectives.

 

LOGO    LOGO

 

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The table below summarizes the key qualifications, skills and attributes that each of our directors possesses that were most relevant to the decision to nominate him or her to serve on the Board. The lack of a mark does not mean the director does not possess that qualification or skill or that other qualities were not also considered; rather, a mark indicates a specific area of focus or expertise on which the Board relied most heavily. Each director’s biography below describes his or her qualifications and relevant experience in more detail.

Skills and Qualifications of our Board of Directors

 

 

Experience,

expertise or

attribute

 

 

  Christodoro     Cozza     Echevarria     Graziano     Krongard     Letier     Visentin  

 

Technology

 

 

 

 

 

 

 

 

 

 

 

 

         

 

 

 

 

 

         

 

 

 

 

 

 

 

 

 

 

 

 

Leadership

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public Company Boards & Governance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Operations

                 

 

 

 

 

 

         

 

 

 

 

 

         

 

 

 

 

 

 

Research & Academic

                                                       

 

Diversity

                 

 

 

 

 

 

         

 

 

 

 

 

               

In addition to the qualifications and skills referenced above, we have provided below the principal occupation and other information about the relevant experience, qualifications, attributes or skills that the Board has concluded qualify each of the nominees to serve as a director of the Company. Each Director nominee has consented to being named in this joint proxy statement/prospectus and has agreed to serve if elected.

Certain terms used in the biographies may be unfamiliar to you, so we are defining them here.

Xerox securities owned means the Company’s common stock, including Deferred Stock Units (“DSUs”) issued under the 2004 Equity Compensation Plan for Non-Employee Directors, as amended.

Options/Rights means unvested restricted stock units (“RSUs”), earned performance share units (“PSUs”) and stock options awarded under the 2016 Amendment and Restatement of the Xerox Corporation 2004 Performance Incentive Plan, as amended.

Immediate family means the spouse, the minor children and any relatives sharing the same home as the nominee.

Unless otherwise noted, all Xerox securities held are owned beneficially by the nominee. Beneficial ownership means he or she has or shares voting power and/or investment power with respect to the securities, even though another name (that of a broker, for example) may appear in the Company’s records. All ownership figures are as of February 28, 2019.

 

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Photo Not
Available

    

Jonathan Christodoro

Age: 43       Director since: 2018

Xerox securities owned: 13,949 DSUs

Options/Rights: None

Occupation: Partner, Patriot Global Management LP

Education: BS, Cornell University; MBA, University of Pennsylvania Wharton School of Business

Board Committees: Audit, Compensation, Finance

Key Skills:

• Technology

• Leadership

• Global Business

• Financial

• Public and Private Company Boards & Governance

Other Directorships (past 5 years): Enzon Pharmaceuticals, Inc. (Chairman since 2013); Herbalife Ltd. (since 2013); Lyft, Inc. (private company) (since 2015); PayPal Holdings, Inc. (since 2015); Sandridge Energy, Inc. (since 2018); Xerox Corporation (2016-2017); American Railcar Industries, Inc. (2015-2017); Cheniere Energy, Inc. (2015-2017); eBay, Inc. (March 2015-July 2015); Hologic Inc. (2013-2016); Talisman Energy Inc. (2013-2015). Mr. Icahn has or previously had non-controlling interests in each of Cheniere Energy, Inc., PayPal Holdings, Inc., eBay, Inc., Lyft, Inc., Hologic Inc., Sandridge Energy, Inc., Talisman Energy Inc., Enzon Pharmaceuticals, Inc. and Herbalife Ltd. through the ownership of securities. American Railcar Industries, Inc. was previously indirectly controlled by Mr. Icahn.

Other Background: Mr. Christodoro is a Partner at Patriot Global Management LP, an investment manager. From July 2012 — February 2017, Mr. Christodoro served as a Managing Director of Icahn Capital LP, the entity through which Carl C. Icahn manages investment funds. Prior to joining Icahn Capital, Mr. Christodoro held various investment and research roles at P2 Capital Partners, Prentice Capital Management, LP and S.A.C. Capital Advisors, LP. Mr. Christodoro began his career as an investment banking analyst at Morgan Stanley.

From his broad investment background and service on other public company boards and committees, Mr. Christodoro brings to the Board expertise relevant to Xerox, including the experience of identifying investment and portfolio opportunities, strategic planning, company transformation, and financial expertise.

 

 

LOGO

    

Keith Cozza

Age: 40       Director since: 2018

Xerox securities owned: 50,000 shares of Common Stock; 4,842 DSUs

Options/Rights: None

Occupation: President and Chief Executive Officer, Icahn Enterprises L.P.

Education: BS, University of Dayton

Board Committees: Chairman of the Board; Corporate Governance (Chair)

Key Skills:

• Technology

• Leadership

• Global Business

• Financial

• Public and Private Company Boards & Governance

Other Directorships (past 5 years): Caesars Entertainment Corporation (since 2019); Tenneco Inc. (since 2018) Tropicana Entertainment Inc. (2014-2018); Icahn Enterprises L.P. (since 2012); Herbalife Ltd. (2013-2018).

Other Background: Mr. Cozza has been the President and Chief Executive Officer of Icahn Enterprises L.P., a diversified holding company engaged in a variety of businesses, including investment, automotive, energy, food packaging, metals, mining, real estate and home fashion, since February 2014. In addition, Mr. Cozza has

 

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served as Chief Operating Officer of Icahn Capital LP, the subsidiary of Icahn Enterprises through which Carl C. Icahn manages investment funds, since February 2013. From February 2013 to February 2014, Mr. Cozza served as Executive Vice President of Icahn Enterprises. Mr. Cozza is also the Chief Financial Officer of Icahn Associates Holding LLC, a position he has held since 2006. Mr. Cozza has been: a director of Tenneco Inc., manufacturers of Ride Performance, Clean Air products and technology solutions for automotive and commercial vehicles, since October 2018; a director at Caesers Entertainment Corporation, a casino-entertainment and hospitality services provider, since March 2019; and a director of Icahn Enterprises L.P., since September 2012. In addition, Mr. Cozza serves as a director of certain wholly-owned subsidiaries of Icahn Enterprises L.P., including: Icahn Automotive Group LLC, an automotive parts installer, retailer and distributor; and PSC Metals LLC, a metal recycling company. Mr. Cozza was previously: a director of Federal-Mogul Holdings LLC (formerly known as Federal-Mogul Holdings Corporation), a supplier of automotive powertrain and safety components until October 2018; a director of Tropicana Entertainment Inc., a company that is primarily engaged in the business of owning and operating casinos and resorts, from February 2014 until October 2018; a director of Herbalife Ltd., a nutrition company, from April 2013 to April 2018; a member of the Executive Committee of American Railcar Leasing LLC, a lessor and seller of specialized railroad tank and covered hopper railcars, from June 2014 to June 2017; a director of CVR Refining, LP, an independent downstream energy limited partnership, from January 2013 to February 2014; and a director of MGM Holdings Inc., an entertainment company focused on the production and distribution of film and television content, from April 2012 to August 2012. Icahn Automotive, CVR Refining, Icahn Enterprises and PSC Metals are each indirectly controlled by Carl C. Icahn, and each of Federal-Mogul, Tropicana and American Railcar Leasing was previously indirectly controlled by Mr. Icahn. Mr. Icahn also has or previously had non-controlling interests in Caesars, Tenneco, Xerox, Herbalife and MGM Holdings through the ownership of securities. Mr. Cozza holds a B.S. in Accounting from the University of Dayton.

From his extensive finance and investment background and significant Board service, Mr. Cozza brings to the Board expertise relevant to being Chairman of the Board at Xerox, including his service on several other boards and committees as well as his significant corporate, finance, accounting and investment experience.

 

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LOGO

    

Joseph J. Echevarria

Age: 62       Director since: 2017

Xerox securities owned: 13,232 DSUs

Options/Rights: None

Occupation: Former Chief Executive Officer of Deloitte LLP

Education: BBA, University of Miami

Board Committees: Audit (Chair), Finance

Key Skills:

• Leadership

• Global Business

• Financial

• Public Company Boards & Governance

• Business Operations

• Diversity

Other Directorships (past 5 years): The Bank of New York Mellon Corporation (since 2015); Pfizer Inc. (since 2015); Unum Group (since 2016).

Other Background: Mr. Echevarria served as Chief Executive Officer of Deloitte LLP, a global provider of professional services, from 2011 until his retirement in August 2014. He joined the Deloitte U.S. Firms in 1978. During his tenure with Deloitte he held increasingly senior leadership positions prior to being named CEO, including U.S. Managing Partner and Chief Operating Officer, Deputy Managing Partner, and Southeast Region Audit Managing Partner. His leadership responsibilities extended to approximately 70,000 professionals in nearly 90 U.S. cities and India. In addition he oversaw the US owned consulting businesses in Germany, Mexico, China, and Brazil. He also served on key boards and committees within Deloitte and its member firm network, including chair of the U.S. Executive and Americas Executive committees and memberships on the U.S. and global boards. In addition to the public company board service noted above, Mr. Echevarria currently serves as a Trustee of the University of Miami; and he has been appointed by the President to be a member of the Presidents Private Export Council and the Presidents Commission on Election Administration; he was formerly a member of President Obama’s Export Council, the principal national advisory committee on international trade. He also serves as the Chair Emeritus of former President Obama’s My Brother’s Keeper Alliance.

Mr. Echevarria brings to the Board significant experience in finance, accounting, international business, leadership and risk management skills relevant to Xerox acquired through his leadership at Deloitte. Mr. Echevarria’s financial acumen, including his significant previous audit experience, expertise in accounting issues and service on the audit committee on the boards of other publicly traded companies is an asset to the Board and the Audit Committee. He also brings public policy perspectives from his government service, which includes his public service on the President’s Export Council.

 

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LOGO

    

Nicholas Graziano

Age: 47       Director since: 2018

Xerox securities owned: 4,780 shares of Common Stock and 4,842 DSUs

Options/Rights: None

Occupation: Portfolio Manager of Icahn Capital

Education: BA/MBA program at Duke University; BA in Economics; MBA from Fuqua School of Business

Board Committees: Finance (Chair), Audit

Key Skills:

• Technology

• Leadership

• Global Business

• Financial

• Public and Private Company Boards & Governance

Other Directorships (past 5 years): Conduent Incorporated (since 2018); Herc Holdings, Inc. (since 2018); Herbalife Ltd. (since 2018).

Other Background: Mr. Graziano has served as Portfolio Manager of Icahn Capital, the entity through which Carl C. Icahn manages investment funds, since February 2018. Mr. Graziano was previously the Founding Partner and Chief Investment Officer of the hedge fund Venetus Partners LP, where he was responsible for portfolio and risk management, along with day-to-day firm management, from June 2015 to August 2017. Prior to founding Venetus, Mr. Graziano was a Partner and Senior Managing Director at the hedge fund Corvex Management LP from December 2010 to March 2015. At Corvex, Mr. Graziano played a key role in investment management and analysis, hiring and training of analysts and risk management. Prior to Corvex, Mr. Graziano was a Portfolio Manager at the hedge fund Omega Advisors, Inc., where he managed a proprietary equity portfolio and made investment recommendations, from September 2009 until December 2010. Before Omega, Mr. Graziano served as a Managing Director and Head of Special Situations Equity at the hedge fund Sandell Asset Management, where he helped build and lead the special situations team responsible for managing a portfolio of concentrated equity and activist investments, from July 2006 to July 2009. Mr. Graziano has been a director of: Conduent Incorporated, a provider of business process outsourcing services, since May 2018; Herc Holdings Inc., an international provider of equipment rental and services, since May 2018; and Herbalife Ltd., a nutrition company, since April 2018. Carl C. Icahn has non-controlling interests in each of Conduent, Herc, Xerox and Herbalife through the ownership of securities. Mr. Graziano previously served on the Board of Directors of each of: Fair Isaac Corporation (FICO) from February 2008 to May 2013; WCI Communities Inc. from August 2007 to August 2009; and InfoSpace Inc. from May 2007 to October 2008. Sandell Asset Management had non-controlling interests in FICO and InfoSpace through the ownership of securities. Mr. Graziano completed a five-year undergraduate/MBA program at Duke University earning a BA in Economics and an MBA from The Fuqua School of Business.

From his broad investment background and service on other public company boards and committees, Mr. Graziano brings to the Board expertise relevant to Xerox, including his significant risk management, investment experience and financial expertise.

 

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LOGO

    

Cheryl Gordon Krongard

Age: 63       Director since: 2017

Xerox securities owned: 13,232 DSUs

Options/Rights: None

Occupation: Private investor; Former CEO Rothschild Asset Management

Education: BS, Iowa State University

Board Committees: Compensation (Chair), Corporate Governance

Key Skills:

• Leadership

• Global Business

• Financial

• Public Company Boards & Governance

• Business Operations

• Diversity

Other Directorships (past 5 years): Air Lease Corporation (since 2013); Federal-Mogul Holdings LLC (formerly known as Federal-Mogul Holdings Corporation) (private company) (2016-2018); Legg Mason, Inc. (2006-2017); US Airways Group Inc. (2003-2013).

Other Background: Ms. Krongard was a senior partner of Apollo Management, L.P., a private investment company, from January 2002 to December 2004. From 1994 to 2000, she served as the Chief Executive Officer of Rothschild Asset Management and as Senior Managing Director for Rothschild North America. Additionally, she served as a director of Rothschild North America, Rothschild Asset Management, Rothschild Asset Management BV, and Rothschild Realty Inc. and as Managing Member of Rothschild Recovery Fund. Ms. Krongard was also elected a lifetime governor of the Iowa State University Foundation in 1997 and has served as Chairperson of its Investment Committee.

Ms. Krongard brings to the Board expertise relevant to Xerox, including her substantial asset management expertise and her operational and leadership experience serving as a senior executive at large, complex asset management organizations. Ms. Krongard brings extensive investment, strategic planning and financial expertise gained as a director of other public companies. Ms. Krongard also has significant compensation, finance, audit and corporate governance experience acquired through her service on the boards and committees of other publicly traded companies.

 

LOGO

    

Scott Letier

Age: 58       Director since: 2018

Xerox securities owned: 4,842 DSUs

Options/Rights: None

Occupation: Managing Director of Deason Capital Services, LLC

Education: BBA with a concentration in accounting, Southern Methodist University — Cox School of Business

Board Committees: Compensation, Corporate Governance

Key Skills:

• Technology

• Leadership

• Global Business

• Financial

• Public and Private Company Boards & Governance

Other Directorships (past 5 years): Conduent Incorporated (since 2018); Serves on various private company boards, including MV Transportation; Stellar Global, LLC; Colvin Resources Group; Grow 52, LLC (dba, Gardenuity); fund advisory board of Griffis Residential.

Other Background: Scott Letier has been Managing Director of Deason Capital Services, LLC (“DCS”), the family office for Darwin Deason, since July 2014. Prior to joining DCS, Mr. Letier was the Managing Director of JFO Group, LLC, the family office for the Jensen family, from September 2006 to July 2014. Mr. Letier has over

 

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20 years of prior leadership roles serving as a private equity investment professional and chief financial officer, and began his career in the audit group at Ernst & Whinney (now Ernst & Young). Mr. Letier has served on numerous boards in the past, and currently serves on the Board of Directors of Conduent Incorporated, and several private companies, including MV Transportation, Inc., the leading provider of para-transit services and the largest privately owned passenger transportation contracting firm in the United States, Stellar Global, LLC, an Australian and US based BPO/CRM call center company, Colvin Resources Group, a Dallas based search and staffing firm, Grow 52, LLC (dba, Gardenuity), a tech enabled retailer, and serves on the fund advisory board of Griffis Residential, a Denver based multi-family real estate management and investment firm. Mr. Letier also serves as Treasurer, board member, executive committee member, and is Chairman of the audit and finance committees of the Dallas County Community College District Foundation. Mr. Letier is a Certified Public Accountant and has a BBA with a concentration in accounting from the Southern Methodist University — Cox School of Business.

With his over 20 years of prior leadership roles and service on other company boards and committees, Mr. Letier brings to the Board expertise relevant to Xerox, including his significant audit experience, investment and financial expertise serving as a private equity investment professional and chief financial officer.

 

 

LOGO

    

Giovanni (“John”) Visentin

Age: 56       Director since: 2018

Xerox securities owned: 350,755 shares of restricted stock

Options/Rights: 269,314 stock options; 267,062 RSUs

Occupation: Vice Chairman and Chief Executive Officer of Xerox Corporation

Education: Bachelor of Commerce, Concordia University (Montreal, Canada)

Board Committees: None — Chief Executive Officer

Key Skills:

• Technology

• Leadership

• Global Business

• Financial

• Business Operations

• Public Company Boards & Governance

Other Directorships (past 5 years): Presidio, Chairman of the Board of Directors (February 2015 to November 2017).

Other Background: Mr. Visentin joined Xerox as Vice Chairman and CEO in May 2018. Prior to joining Xerox, Mr. Visentin served as a senior advisor to the chairman of Exela Technologies from August 2017 to May 2018, an operating partner for Advent International from September 2017 to May 2018 and a consultant to Icahn Capital in connection with a proxy contest at Xerox from March 2018 to May 2018. From 2013 to 2017, he served as the executive chairman and chief executive officer of Novitex Enterprise Solutions and as an advisor with Apollo Global Management. Mr. Visentin was also a director and chairman of the board of Presidio, Inc. from 2015 to 2017. From 2011 to 2012, he served as executive vice president and general manager of Hewlett Packard Company’s enterprise services business. From 2007 to 2011, Mr. Visentin served as general manager of integrated technology services for IBM. Mr. Visentin graduated from Concordia University in Montreal, Canada, with a Bachelor of Commerce.

With his significant experience in leading and transforming multibillion dollar business units in the IT services industry during his time at both Hewlett-Packard and IBM, Mr. Visentin brings to the Board expertise relevant to Xerox. Mr. Visentin also brings to the Board significant strategic planning, company transformation, and financial expertise gained through his experience serving as chairman and chief executive officer at other companies.

The Board recommends a vote

FOR

the election of the seven directors nominated by the Board

 

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CORPORATE GOVERNANCE

Xerox is committed to the highest standards of business integrity and corporate governance. All of our directors, executives and employees must act ethically. In addition, our directors must act in accordance with our Code of Business Conduct and Ethics for Members of the Board; our principal executive officer, principal financial officer and principal accounting officer, among others, must act in accordance with our Finance Code of Conduct; and all of our executives and employees must act in accordance with our Code of Business Conduct. Each of these codes of conduct, as well as our Corporate Governance Guidelines and the charters of our Audit, Compensation, Corporate Governance and Finance Committees can be accessed through our website at www.xerox.com/governance. They are also available to any shareholder who requests them in writing addressed to Xerox Corporation, 201 Merritt 7, Norwalk, CT 06851-1056, Attention: Corporate Secretary. We will disclose any future amendments to, or waivers from, provisions of our Code of Business Conduct and Ethics for members of the Board and our Code of Business Conduct and our Finance Code of Conduct for our officers on our website as promptly as practicable, as may be required under applicable SEC and NYSE rules. The Corporate Governance Committee of the Board periodically reviews and reassesses the adequacy of our overall corporate governance, Corporate Governance Guidelines and committee charters.

Director Nomination Process

The Corporate Governance Committee considers candidates for Board membership recommended by Board members, management, shareholders and others (see below). The Corporate Governance Guidelines require that a substantial majority of the Board consist of independent directors and that management representation on the Board should be limited to Company senior management. There are no specific minimum qualifications that the Corporate Governance Committee believes must be met by prospective candidates; however, the Corporate Governance Committee applies the criteria set forth in our Corporate Governance Guidelines. These criteria include, among other things, the candidate’s broad perspective, integrity, independence of judgment, experience, expertise, diversity, ability to make independent analytical inquiries, understanding of the Company’s business environment and willingness to devote adequate time and effort to Board responsibilities. The Corporate Governance Committee does not assign specific weight to particular criteria and no particular criterion is necessarily applicable to all prospective nominees.

Our Corporate Governance Guidelines dictate that diversity should be considered by the Corporate Governance Committee in the director identification and nomination process. Although the Board does not establish specific goals with respect to diversity, the Board’s overall diversity is a significant consideration in the director nomination process. This means that the Corporate Governance Committee seeks nominees who bring a variety of business backgrounds, experiences and perspectives to the Board. We believe that the backgrounds and qualifications of the directors, considered as a group, should provide a broad diversity of experience, professions, skills, geographic representations, knowledge and abilities that will allow the Board to fulfill its responsibilities. Shareholders who wish to recommend individuals for consideration by the Corporate Governance Committee may do so by submitting a written recommendation to the Secretary of the Company at Xerox Corporation, 201 Merritt 7, Norwalk, CT 06851-1056. Submissions must include sufficient biographical information concerning the recommended individual, including age, employment and current board memberships (if any), for the Corporate Governance Committee to consider. The submission must be accompanied by the written consent of the nominee to stand for election if nominated by the Board and to serve if elected by the shareholders. Recommendations received no earlier than November 13, 2019 and no later than December 13, 2019 will be considered for nomination at the 2020 Annual Meeting of Shareholders.

Board Leadership Structure

The Board’s goal is to achieve the best board leadership structure for effective oversight and management of the Company’s affairs. The Board believes that there is no single, generally accepted approach to providing board leadership, and that each possible leadership structure must be considered in the context of the individuals involved and the specific circumstances facing a company. Accordingly, what the Board believes is the right board leadership structure may vary as circumstances warrant.

The Company’s governance documents provide the Board with flexibility to select the appropriate leadership structure for the Company. Our policies do not preclude the Chief Executive Officer (CEO) from also serving as Chairman of the Board. This flexibility has allowed the Board to utilize its experience and knowledge to appoint

 

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the most qualified director as Chairman of the Board, while maintaining the ability to separate the Chairman of the Board and CEO roles when desirable.

During the Board’s evaluation of its leadership structure, the Board took into account many factors, including the specific needs of the Board and the business, our Corporate Governance Guidelines and the best interests of our shareholders. Upon recommendation of the Corporate Governance Committee, the non-employee directors of the Board concluded that the current leadership structure continues to be the right leadership structure for the Company at this time and that it is in the best interests of the shareholders to maintain the separate Chairman and CEO role currently in place. This structure allows our Chief Executive Officer, who also serves as our Vice Chairman, to focus on the operations of our business while the independent Chairman focuses on leading the Board in its responsibilities. The Board deems this overall board governance structure appropriate as it benefits from the CEO’s knowledge of the Company operations and substantial board experience, while maintaining Board independence in the Chairman role. Our independent Chairman leads the Board in its responsibilities by performing the following duties: presiding at executive sessions of the independent directors; calling special meetings of the independent directors, as needed; addressing individual Board member performance matters, as needed; and serving as liaison on Board-wide issues between the independent directors and the CEO.

Under our Corporate Governance Guidelines, each regularly scheduled Board meeting must include an executive session of all directors and the CEO and a separate executive session attended only by the independent directors. Following our 2019 Annual Meeting, we expect that our Board will be 86 percent comprised of directors who qualify as independent directors. We will have an independent Chairman and each of our standing Board committees will be comprised solely of independent directors, including our Corporate Governance Committee, which establishes our corporate governance policy and monitors the effectiveness of this policy at the Board level.

Risk Oversight

Our Board has ultimate oversight responsibility for our Enterprise Risk Management (ERM) process. The Board oversees our ERM process through the Audit Committee of the Board, which previews the ERM assessment and process for subsequent review by the Board. Our ERM process is designed to strengthen our risk-management capability and to assess, monitor, and manage all categories of business risk, including strategic, operational, compliance and financial reporting. The Company’s Chief Financial Officer is responsible for the Company’s ERM function through the Enterprise Risk Steering Committee, which includes the majority of the direct reports to the CEO, as well as our Chief Information Officer, our Controller, and our Chief Audit Executive. The Enterprise Risk Steering Committee inspects risk mitigation plans and progress, identifies and addresses emerging risks, and shares mitigation best practices across the Company. Additionally, to ensure that ERM is integrated with our business management, the Company’s Management Committee, the Business Ethics and Compliance Office, and various internal control committees monitor risk exposure and the effectiveness of how we manage these risks.

While the Board has ultimate oversight responsibility for the risk management process, various committees of the Board have been delegated responsibility for certain aspects of risk management. In addition to the Audit Committee’s responsibility to oversee the overall ERM process, the Audit Committee focuses on financial risk, including risks associated with internal control, audit, financial reporting and disclosure matters, and also on our Ethics, Litigation, Information and Cyber Security risk mitigation plans and progress. In addition, the Compensation Committee seeks to incent executive employees in a manner that discourages unnecessary or inappropriate risk-taking, while encouraging a level of risk-taking behavior consistent with the Company’s business strategy. In parallel, the Board’s Finance Committee oversees aspects of our Global Economy risk, and on an as needed basis, special sub-Committees are established to focus on specific business risks.

We believe that our leadership structure supports the risk oversight function of the Board. Our CEO serves on the Board and is able to promote open communication between management and directors relating to risk. Additionally, each Board committee is comprised solely of independent directors, and all directors are actively involved in the risk oversight function.

 

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Director Independence

A director is not considered independent unless the Board determines that he or she has no material relationship with the Company. The Board has adopted categorical standards to assist in both its determination and the Corporate Governance Committee’s recommendation as to each director’s independence. Under these categorical standards, a director will be presumed not to have a material relationship with the Company if:

 

  (1)

he or she satisfies the bright-line independence and other applicable requirements under the listing standards of the NYSE and all other applicable laws, rules and regulations regarding director independence, in each case from time to time in effect;

 

  (2)

he or she is not a current employee (and none of his or her “immediate family members” is employed as an “executive officer,” each as defined by the NYSE Corporate Governance Rules) of a company that has made payments to, or received payments from, the Company or any of its consolidated subsidiaries for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or one percent of such other company’s consolidated gross revenues; and

 

  (3)

in the event that he or she serves as an executive officer or director of a charitable organization, the Company and its consolidated subsidiaries donated less than five percent of that organization’s charitable receipts (provided that if within the preceding three years the Company and its consolidated subsidiaries donated annual aggregate contributions in excess of $1 million or two percent of the annual consolidated gross revenue of the charitable organization, such contributions must be disclosed in the Company’s Proxy Statement).

Our Board has determined that all of the nominees for election as directors are independent under the NYSE Corporate Governance Rules and our Corporate Governance Guidelines, with the exception of John Visentin, our Chief Executive Officer.

In addition, the Corporate Governance Committee reviews relationships involving members of the Board, their immediate family members and affiliates, and transactions in which members of the Board, their immediate family members and their affiliates have a direct or indirect interest in which the Company is a participant, to determine whether such relationship or transaction is material and could impair a director’s independence. In making independence determinations, the Board considers all relevant facts and circumstances from the point of view of both the director and the persons or organizations with which the director has relationships. See Certain Relationships and Related Person Transactions.

Based on the results of the aforementioned review, 86% of our nominees for election as directors are deemed to be independent.

Certain Relationships and Related Person Transactions

Related Person Transactions Policy

The Board has adopted a policy addressing the Company’s procedures with respect to the review, approval and ratification of “related person transactions” that are required to be disclosed pursuant to Item 404(a) of Regulation S-K of the U.S. Securities Act of 1933, as amended (Regulation S-K). The policy provides that any transaction, arrangement or relationship, or series of similar transactions, in which the Company will participate or has participated and a “related person” (as defined in Item 404(a) of Regulation S-K) has or will have a direct or indirect material interest, and which exceeds $120,000 in the aggregate, is subject to review (each such transaction, a Related Person Transaction). In its review of Related Person Transactions, the Corporate Governance Committee reviews the material facts and circumstances of the transaction and takes into account certain factors, where appropriate, based on the particular facts and circumstances, including: (i) the nature of the “related person’s” interest in the transaction; (ii) the significance of the transaction to the Company and to the “related person”; and (iii) whether the transaction is likely to impair the judgment of the “related person” to act in the best interest of the Company.

No member of the Corporate Governance Committee may participate in the review, approval or ratification of a transaction with respect to which he or she is a “related person.”

Certain Employment Arrangements

We actively recruit qualified candidates for our employment needs. Relatives of our executive officers and other employees are eligible for hire. In 2018, we had one non-executive employee who is a family member of a

 

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current executive officer, is employed by Xerox and received more than $120,000 in annual compensation (salary, incentive cash awards, equity awards and commissions). This is a routine employment arrangement entered into in the ordinary course of business with compensation commensurate with that of the employee’s peers, and the terms of employment are consistent with the Company’s human resources policies. For 2018, the compensation of Kimberly Finley, spouse of Joseph H. Mancini Jr., our Chief Accounting Officer, was $432,191. Ms. Finley is Director, Tax Accounting at Xerox and has been with Xerox for over 25 years.

BOARD OF DIRECTORS AND BOARD COMMITTEES

Committee Functions, Membership and Meetings

Our Board has four standing committees: Audit, Compensation, Corporate Governance and Finance. Set forth below is a list of the committees of our Board, a summary of the responsibilities of each committee, the number of committee meetings held during 2018 for each committee and a list of the members of each committee.

Audit Committee (15 meetings)

A copy of the charter of the Audit Committee is posted on the Company’s website at www.xerox.com/governance.

The responsibilities of the Audit Committee include:

 

   

oversee the integrity of the Company’s financial statements;

 

   

oversee the Company’s compliance with legal and regulatory requirements;

 

   

oversee the Company’s risk assessment policies and practices, including the ERM process, and preview the ERM assessment and process for subsequent review by the Board;

 

   

assess independent auditors’ qualifications and independence;

 

   

assess performance of the Company’s independent auditors and the internal audit function;

 

   

review the Company’s audited financial statements, including the Company’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and recommend to the Board their inclusion in the Company’s Annual Report on Form 10-K;

 

   

review changes in working capital policies and procedures with management; and

 

   

review and approve the Company’s Code of Business Conduct and Ethics.

The Audit Committee is also responsible for the preparation of the Audit Committee Report that is included below in this joint proxy statement/prospectus beginning on page [].

Members: Jonathan Christodoro; Joseph J. Echevarria; and Nicholas Graziano.

Chairman: Mr. Echevarria

The Board has determined that all of the members of the Audit Committee are (1) independent under the Company’s Corporate Governance Guidelines and under the applicable SEC and NYSE Corporate Governance Rules and (2) “audit committee financial experts,” as defined in the applicable SEC rules, and are financially literate. William Curt Hunter and Ann N. Reese, who each served on the Audit Committee until they each resigned on May 13, 2018, satisfied the foregoing independence standards during their time as a member of the Audit Committee. Sara Martinez Tucker, who served on the Audit Committee until May 21, 2019, satisfied the foregoing independence standards during her time as a member of the Audit Committee. Designation or identification of a person as an audit committee financial expert does not impose any duties, obligations or liabilities that are greater than the duties, obligations and liabilities imposed on such person as a member of the Audit Committee and the Board in the absence of such designation or identification.

Compensation Committee (8 meetings)

A copy of the charter of the Compensation Committee is posted on the Company’s website at www.xerox.com/governance.

The responsibilities of the Compensation Committee include:

 

   

oversee development and administration of the Company’s executive compensation plans;

 

   

set the compensation of the CEO and other executive officers;

 

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review and approve the performance goals and objectives with respect to the compensation of the CEO and other executive officers;

 

   

oversee the evaluation of the CEO and other executive officers;

 

   

have sole authority to retain and terminate the consulting firms engaged to assist the Compensation Committee in the evaluation of the compensation of the CEO and other executive officers;

 

   

be directly responsible for oversight of the work of the compensation consultants, including determination of compensation to be paid to any such consultant by the Company;

 

   

conduct an independence assessment of any compensation consultants to the Compensation Committee, including consideration of the six independence factors required under SEC rules and NYSE listing standards; and

 

   

review and approve employment, severance, change-in-control, termination and retirement arrangements for executive officers.

The Compensation Committee is also responsible for reviewing and discussing the Compensation Discussion and Analysis (CD&A) with management, and has recommended to the Board that the CD&A be included in the Company’s joint proxy statement/prospectus (beginning on page []) and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The CD&A discusses the material aspects of the Company’s compensation objectives, policies and practices. The Compensation Committee’s report appears on page [] of this joint proxy statement/prospectus.

The Compensation Committee has not delegated its authority for compensation for executive officers. The Compensation Committee has, however, delegated to the CEO authority under the Company’s equity plan to grant equity awards to employees who are not executive officers or officers directly reporting to the CEO. The CEO is also responsible for setting the compensation of, reviewing performance goals and objectives for, and evaluating officers who are not executive officers.

Executive officer compensation decisions are made by the Compensation Committee after discussing recommendations with the CEO and the Chief Human Resources Officer. The Chief Financial Officer confirms the Company’s financial results used by the Compensation Committee to make compensation decisions. The Chief Financial Officer attends Compensation Committee meetings to discuss financial targets and results for the Annual Performance Incentive Plan and the Executive Long-Term Incentive Program as described in the CD&A. The Compensation Committee meets in executive session to review and approve compensation actions for the CEO.

The Compensation Committee has retained Frederic W. Cook & Co., Inc. (FW Cook) as an independent consultant to the Compensation Committee. FW Cook provides no services to management and provides an annual letter to the Compensation Committee regarding its independence, which the Compensation Committee reviews and determines whether there is any conflict of interest. Based on its review for 2018, the Compensation Committee determined that FW Cook’s work has not raised any conflict of interest and that such firm is independent. The consultant’s responsibilities are discussed on page [] of this joint proxy statement/prospectus.

Members: Jonathan Christodoro; Cheryl Gordon Krongard; and Scott Letier.

Chair: Mrs. Krongard

The Board has determined that all of the members of the Compensation Committee are independent under the Company’s Corporate Governance Guidelines and NYSE Corporate Governance Rules. Gregory Q. Brown, who served on the Compensation Committee until May 21, 2019, satisfied the foregoing independence standards during his time as a member of the Compensation Committee. In addition, each Committee member is a “non-employee director” as defined in Rule 16b-3 under the Exchange Act.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee was or is an officer or employee of the Company or any of its subsidiaries. In addition, during the last fiscal year, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on our Board or Compensation Committee.

 

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Corporate Governance Committee (8 meetings)

A copy of the charter of the Corporate Governance Committee is posted on the Company’s website at www.xerox.com/governance.

The responsibilities of the Corporate Governance Committee include:

 

   

identify and recommend to the Board individuals to serve as directors of the Company and on Board committees;

 

   

advise the Board regarding Board composition, procedures and committees;

 

   

develop, recommend to the Board and annually review the Corporate Governance Guidelines applicable to the Company;

 

   

review significant environmental and corporate social responsibility matters;

 

   

administer the Company’s Related Person Transactions Policy;

 

   

evaluate and recommend director compensation to the Board; and

 

   

oversee the annual Board and committee evaluation processes.

The Corporate Governance Committee recommends to the Board nominees for election as directors of the Company and considers the performance of incumbent directors in determining whether to recommend their nomination.

Members: Keith Cozza; Cheryl Gordon Krongard; and Scott Letier.

Chairman: Mr. Cozza

The Board has determined that all of the members of the Corporate Governance Committee are independent under the Company’s Corporate Governance Guidelines and the NYSE Corporate Governance Rules. Sara Martinez Tucker, who served on the Corporate Governance Committee until May 21, 2019, satisfied the foregoing independence standards during her time as a member of the Corporate Governance Committee.

Finance Committee (5 meetings)

A copy of the charter of the Finance Committee is posted on the Company’s website at www.xerox.com/governance.

The responsibilities of the Finance Committee include:

 

   

review the Company’s cash position, capital structure and strategies, financing strategies, insurance coverage and dividend policy;

 

   

review the adequacy of funding of the Company’s funded retirement plans and welfare benefit plans in terms of the Company’s purposes; and

 

   

review the Company’s policy on derivatives and annually determine whether the Company and its subsidiaries shall enter into swap and security-based swap transactions that are not cleared with a Commodity Exchange Act registered clearing organization.

Members: Jonathan Christodoro; Joseph J. Echevarria; and Nicholas Graziano.

Chairman: Mr. Nicholas Graziano

The Board has determined that all of the members of the Finance Committee are independent under the Company’s Corporate Governance Guidelines and the NYSE Corporate Governance Rules. Gregory Q. Brown, who served on the Finance Committee until May 21, 2019, satisfied the foregoing independence standards during his time as a member of the Finance Committee.

Attendance and Compensation of Directors

Attendance: 29 meetings of the Board and 36 meetings of the Board committees were held in 2018. All incumbent directors attended at least 75 percent of the total number of meetings of the Board, and Board committees on which they served, during the period in which they served as a Xerox director. The Company’s policy generally is for all members of the Board to attend the Annual Meeting of Shareholders. All nominees who were serving as directors at the time attended the 2018 Annual Meeting of Shareholders. We believe that attendance at meetings is only one means by which directors may contribute to the effective management of the Company and that the contributions of all directors have been substantial and are highly valued.

 

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Summary of Annual Director Compensation

Compensation for our directors is determined by the Corporate Governance Committee and approved by the full Board. Directors who are our employees receive no additional compensation for serving as a director. Accordingly, Mr. Jacobson did not receive any additional compensation for his service on the Board during 2018. Mr. Visentin, who was appointed Chief Executive Officer on May 14, 2018, did not receive any additional compensation for his service on the Board.

During 2018, the annual cash retainer for directors was $80,000; the value of the annual equity retainer for directors was $180,000; the chairman of the Audit Committee received an additional $30,000; Audit Committee members each received an additional $15,000; the chairman of the Compensation Committee received an additional $20,000; Compensation Committee members each received an additional $12,500; the chairmen of the Corporate Governance and Finance Committees each received an additional $15,000; and the Corporate Governance and Finance Committee members each received an additional $10,000. The additional fee for the independent Chairman of the Board was $175,000 per year. Mr. Keegan received an additional $87,500 for his service as independent Chairman of the Board during 2018 until he resigned on May 13, 2018. Mr. Cozza was named independent Chairman of the Board on May 14, 2018 and received $116,667 for his service as independent Chairman of the Board during the remainder of 2018. Because we have an independent Chairman of the Board, we do not have a Lead Independent Director. Directors do not have an option to receive additional equity in lieu of cash. Directors also receive reimbursement for out-of-pocket expenses incurred in connection with their service on the Board.

Acting upon advice from an outside consultant, the Corporate Governance Committee has revised, and the full Board has approved, the annual director fees in order to provide director compensation that is competitive with that of the Company’s peers. Beginning in 2019, the annual cash retainer for directors is $85,000; the value of the annual equity retainer for directors is $200,000; the chairman of the Audit Committee receives an additional $30,000; Audit Committee members each receive an additional $15,000; the chairman of the Compensation Committee receives an additional $25,000; Compensation Committee members each receive an additional $12,500; the chairman of the Corporate Governance Committee receives an additional $20,000; the chairman of the Finance Committee receives an additional $15,000; and the Corporate Governance and Finance Committee members each receive an additional $10,000. The additional fee for the independent Chairman of the Board is $100,000 per year. In addition, there is an annual total compensation cap of $750,000 for each non-employee director.

Prior to 2019, each non-employee director was required to establish a meaningful equity ownership interest in the Company. This equity ownership interest was achieved by paying the director’s annual equity retainer in DSUs (“old DSUs”) (described below). By serving on the Board for a period of approximately one and a half years, a director would hold old DSUs equivalent in value (as of date of grant) to at least three times a director’s current annual cash retainer. The longer a director served on the Board and was paid an equity retainer in the form of old DSUs, the larger his or her equity ownership interest in the Company would become because, by their terms, all old DSUs are required to be held by directors until the earlier of one year after the termination date of Board service or the date of death. If there is a change in control of the Company, the terms of the 2004 Directors Plan provide that DSUs (old and new) be paid out in cash as soon as practicable.

Beginning in 2019, directors will receive their annual equity retainer in the form of RSUs unless they elect to receive DSUs, (“new DSUs”), instead of RSUs, such election to be made prior to the year in which the new DSUs are awarded. RSUs will vest one year following the date of grant and become freely transferable. New DSUs vest one year following the date of grant but are not paid out until 30 days following the termination of Board service.

Beginning in 2019, all non-employee Directors are expected to establish a meaningful equity ownership requirement in the Company, which shall be equal in value to five times the annual Board cash retainer. This requirement shall be achieved within five years of the later of (i) December 12, 2018 and (ii) the initial date of election as Director and may be achieved by a director holding RSUs, DSUs (old or new) or a combination of both.

Each director is also prohibited from engaging in short-swing trading and trading in puts and calls with respect to Xerox stock and is prohibited from using any strategies or products to hedge against potential changes in the value of Xerox stock (collectively, “hedging”). “Short sales” are also prohibited. Under the Company’s insider

 

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trading policy, directors are permitted to buy or sell Xerox securities only during a “window period,” which is the period commencing on the day that is one full trading day following announcement of quarterly earnings and ending on (and including) the fifteenth day of the last month of the quarter during which the earnings announcement is made. The only exception to this restriction is for directors who have entered into trading plans pursuant to SEC Rule 10b5-1. In addition, under the Company’s insider trading policy, directors are prohibited from pledging Xerox stock, including depositing Xerox securities in margin accounts at brokerage firms, or using Xerox stock as collateral.

DSUs are a bookkeeping entry that represent the right to receive one share of common stock at a future date. DSUs include the right to receive dividend equivalents, which are credited in the form of additional DSUs, at the same time and in approximately the same amounts that the holder of an equivalent number of shares of common stock would be entitled to receive in dividends. The DSUs are issued under the 2004 Directors Plan, which was approved by Xerox shareholders at the 2004 Annual Meeting of Shareholders and amended and restated, with shareholder approval, in 2013. Individually, the compensation for each non-employee director during fiscal year 2018 was as follows:

 

Name of Director (1)

 

 

Fees

earned

or paid in

cash

$

 

   

Stock

Awards
$ (2)

 

   

Option       

Awards       

$

 

 

Non-Equity       

Incentive Plan       

Compensation       

$

 

 

 

Change in       

Pension       

Value and       

Non-Qualified       

Deferred       

$

 

 

All Other       

Compensation       
$ (3)       

 

  

Total

$

 

 

 

Gregory Q. Brown

 

 

 

 

 

 

$99,167   

 

 

 

 

 

 

 

 

 

$180,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$279,167

 

 

 

 

 

Jonathan Christodoro

 

 

 

 

 

 

$78,333   

 

 

 

 

 

 

 

 

 

$120,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$198,333

 

 

 

 

 

Keith Cozza

 

 

 

 

 

 

$180,000   

 

 

 

 

 

 

 

 

 

$120,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$300,000

 

 

 

 

 

Joseph J. Echevarria

 

 

 

 

 

 

$118,750   

 

 

 

 

 

 

 

 

 

$180,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$298,750

 

 

 

 

 

Nicholas Graziano

 

 

 

 

 

 

$73,333   

 

 

 

 

 

 

 

 

 

$120,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$193,333

 

 

 

 

 

William Curt Hunter

 

 

 

 

 

 

$52,500   

 

 

 

 

 

 

 

 

 

$90,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$142,500

 

 

 

 

 

Robert J. Keegan

 

 

 

 

 

 

$127,500   

 

 

 

 

 

 

 

 

 

$90,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$217,500

 

 

 

 

 

Cheryl Gordon Krongard

 

 

 

 

 

 

$104,167   

 

 

 

 

 

 

 

 

 

$180,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$284,167

 

 

 

 

 

Scott Letier

 

 

 

 

 

 

$68,333   

 

 

 

 

 

 

 

 

 

$120,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$188,333

 

 

 

 

 

Charles Prince

 

 

 

 

 

 

$53,750   

 

 

 

 

 

 

 

 

 

$90,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$143,750

 

 

 

 

 

Ann N. Reese

 

 

 

 

 

 

$60,000   

 

 

 

 

 

 

 

 

 

$90,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$150,000

 

 

 

 

 

Stephen H. Rusckowski

 

 

 

 

 

 

$50,000   

 

 

 

 

 

 

 

 

 

$90,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$140,000

 

 

 

 

 

Sara Martinez Tucker

 

 

 

 

 

 

$112,500   

 

 

 

 

 

 

 

 

 

$180,000

 

 

 

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

 

 

-     

 

  

 

 

 

 

$292,500

 

 

 

 

 

 

(1)

Mr. Christodoro, Mr. Cozza, Mr. Graziano, and Mr. Letier were each appointed to the Board effective May 13, 2018. William Curt Hunter, Robert J. Keegan, Charles Prince, Ann N. Reese, and Stephen H. Rusckowski each resigned from the Board effective May 13, 2018. Mr. Brown and Ms. Tucker did not stand for re-election at the 2019 Annual Meeting.

 

(2)

The cash value of compensation awarded in the form of DSUs is reflected in this column. The amount presented in this column reflects the aggregate grant date fair value of the DSUs awarded during 2018 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 718, Compensation — Stock Compensation.

The total number and value of all DSUs (including dividend equivalents) as of the end of 2018 (based on the December 31, 2018 closing market price of our common stock of $19.76) and DSUs held by each director is as follows: Mr. Brown, 12,860 ($254,114); Mr. Christodoro, 13,772 ($272,135); Mr. Cozza, 4,780 ($94,453); Mr. Echevarria, 13,064 ($258,145); Mr. Graziano, 4,780 ($94,453); Mr. Hunter, 68,803 ($1,359,547); Mr. Keegan, 40,147 ($793,305); Ms. Krongard, 13,064 ($258,145); Mr. Letier, 4,780 ($94,453); Mr. Prince, 49,307 ($974,306); Ms. Reese, 63,968 ($1,264,008); Mr. Rusckowski, 18,601 ($367,556); and Ms. Tucker, 40,601 ($802,276).

 

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(3)

In accordance with applicable SEC rules, dividend equivalents paid in 2018 on DSUs are not included in “All Other Compensation” because those amounts were factored into the grant date fair values of the DSUs.

For information on compensation for Mr. Visentin, a director and the Chief Executive Officer of Xerox, and Jeffrey Jacobson, a former director who was also the Chief Executive Officer of Xerox for a portion of 2018, see the executive compensation tables beginning on page [].

SECURITIES OWNERSHIP

Ownership of Company Securities

We are not aware of any person who, or group that, owns beneficially more than 5% of any class of the Company’s voting securities as of December 31, 2018, except as otherwise set forth below(1).

 

Title of Class*

 

 

  Name and Address of Beneficial Owner

 

    

Amount and

Nature of

Beneficial

Ownership

 

  

Percent

of Class

(1)

 

 

 

Common Stock

 

 

 

  Mr. Carl C. Icahn

  c/o Icahn Capital LP

  767 Fifth Ave, Suite 4700

  New York, NY 10153

 

    

 

23,456,087 (2)

 

  

 

 

 

 

10.21%

 

 

 

 

 

Common Stock

 

 

 

  The Vanguard Group, Inc.

  100 Vanguard Blvd.

  Malvern, PA 19355

 

    

 

23,024,451 (3)

 

  

 

 

 

 

9.6%

 

 

 

 

 

Common Stock

 

 

 

  BlackRock, Inc.

  55 East 52nd Street

  New York, NY 10055

 

    

 

15,816,977 (4)

 

  

 

 

 

 

6.7%

 

 

 

 

 

Common Stock

 

 

 

  Darwin Deason

  5956 Sherry Ln., Suite 800

  Dallas, TX 75225

 

    

 

15,322,341 (5)

 

  

 

 

 

 

6.7%

 

 

 

 

 

 

(1)

The words “group” and “beneficial” are as defined in regulations issued by the SEC. Beneficial ownership under such definition means possession of sole voting power, shared voting power, sole dispositive power or shared dispositive power. The information provided in this table is based solely upon the information contained in the most recent Schedule 13G or 13G/A (or in the case of Mr. Icahn and Mr. Deason, the most recent Schedule 13D/A) filed by the named entity with the SEC. BlackRock, Inc. is a registered investment adviser under the Investment Advisers Act of 1940, as amended, and has subsidiaries that are also investment advisers under the Investment Advisers Act with beneficial ownership of the reported shares.

 

(2)

Based on the Schedule 13D/A filed on February 25, 2019, represents shares of common stock held by the following group of entities associated with Carl C. Icahn: High River Limited Partnership (“High River”), Hopper Investments LLC (“Hopper”), Barberry Corp. (“Barberry”), Icahn Partners Master Fund LP (“Icahn Master”), Icahn Offshore LP (“Icahn Offshore”), Icahn Partners LP (“Icahn Partners”), Icahn Onshore LP (“Icahn Onshore”), Icahn Capital LP (“Icahn Capital”), IPH GP LLC (“IPH”), Icahn Enterprises Holdings L.P. (“Icahn Enterprises Holdings”), Icahn Enterprises G.P. Inc. (“Icahn Enterprises GP”) and Beckton Corp. (“Beckton”) (collectively, the “Reporting Persons”). The principal business address of (i) each of High River, Hopper, Barberry, Icahn Offshore, Icahn Partners, Icahn Master, Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP and Beckton is White Plains Plaza, 445 Hamilton Avenue — Suite 1210, White Plains, NY 10601, and (ii) Mr. Icahn, Barberry and Hopper is c/o Icahn Capital LP, 767 Fifth Avenue, 47th Floor, New York, NY 10153.

Icahn Partners, Icahn Master and High River (collectively, the “Icahn Parties”) are entities controlled by Carl C. Icahn. Barberry is the sole member of Hopper, which is the general partner of High River. Icahn Offshore is the general partner of Icahn Master. Icahn Onshore is the general partner of Icahn Partners.

 

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Icahn Capital is the general partner of each of Icahn Offshore and Icahn Onshore. Icahn Enterprises Holdings is the sole member of IPH, which is the general partner of Icahn Capital. Beckton is the sole stockholder of Icahn Enterprises GP, which is the general partner of Icahn Enterprises Holdings. Carl C. Icahn is the sole stockholder of each of Barberry and Beckton. As such, Mr. Icahn is in a position indirectly to determine the investment and voting decisions made by each of the Icahn Parties. In addition, Mr. Icahn is the indirect holder of approximately 91.0% of the outstanding depositary units representing limited partnership interests in Icahn Enterprises L.P. (“Icahn Enterprises”). Icahn Enterprises GP is the general partner of Icahn Enterprises, which is the sole limited partner of Icahn Enterprises Holdings.

The Reporting Persons may be deemed to beneficially own, in the aggregate, 23,456,087 shares of common stock. Calculation of the percent of class is based upon the 229,726,488 shares of common stock stated to be outstanding as of January 31, 2019 by the Company in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 25, 2019.

High River has sole voting power and sole dispositive power with regard to 4,691,218 shares of common stock. Each of Hopper, Barberry and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares. Icahn Partners has sole voting power and sole dispositive power with regard to 11,130,555 shares of common stock. Each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of common stock. Icahn Master has sole voting power and sole dispositive power with regard to 7,634,314 shares of common stock. Each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of common stock.

Each of Hopper, Barberry and Mr. Icahn, by virtue of their relationships to High River, may be deemed to indirectly beneficially own the shares of common stock that High River directly beneficially owns. Each of Hopper, Barberry and Mr. Icahn disclaims beneficial ownership of such shares of common stock for all other purposes. Each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn, by virtue of their relationships to Icahn Master, may be deemed to indirectly beneficially own the shares of common stock which Icahn Master directly beneficially owns. Each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn disclaims beneficial ownership of such shares of common stock for all other purposes. Each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn, by virtue of their relationships to Icahn Partners, may be deemed to indirectly beneficially own the shares of common stock which Icahn Partners directly beneficially owns. Each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn disclaims beneficial ownership of such shares of common stock for all other purposes.

 

(3)

Based on the Schedule 13G/A filed on March 11, 2019, the Vanguard Group, Inc. and its subsidiary companies have sole voting power for 256,417 shares of common stock, sole dispositive power for 22,745,582 shares of common stock, shared dispositive power for 278,869 shares of common stock and shared voting power for 40,659 shares of common stock.

 

(4)

BlackRock, Inc. and its subsidiary companies have sole voting power for 13,827,430 shares of common stock and sole dispositive power for 15,816,977 shares of common stock, and have no shared voting power or shared dispositive power for any of the shares.

 

(5)

Based solely on the Schedule 13D/A filed on May 15, 2018, Darwin Deason has sole voting power and sole dispositive power for 15,322,341 shares of common stock, and has no shared dispositive or shared voting power for any of the shares. Mr. Deason may be deemed to beneficially own, in the aggregate, 15,322,341 shares, including 6,741,572 shares issuable upon the conversion of 180,000 shares of Xerox Series B Convertible Perpetual Preferred Stock, par value $1.00 per share. In this Schedule 13D/A, the percentage of class was based upon the 229,623,000 shares of common stock stated to be outstanding as of March 31, 2018 by the Company in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018, filed with the SEC on May 10, 2018). Recalculation of percent of class is based upon the 254,679,473 shares of Company common stock outstanding as of December 31, 2018.

 

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Shares of common stock of the Company owned beneficially by the directors and nominees for director, each of the executive officers named in the Summary Compensation Table and all directors and current executive officers as a group, as of February 28, 2019, were as follows.

 

Name of Beneficial Owner

 

  Amount  

  Beneficially  

  Owned  

 

 

Steven J. Bandrowczak

 

 

 

 

 

0

 

 

 

 

 

Gregory Q. Brown

 

 

 

 

 

13,026

 

 

 

 

 

Keith Cozza

 

 

 

 

 

54,842

 

 

 

 

 

Jonathan Christodoro

 

 

 

 

 

13,949

 

 

 

 

 

Joseph J. Echevarria

 

 

 

 

 

13,232

 

 

 

 

 

Michael D. Feldman

 

 

 

 

 

39,441

 

 

 

 

 

Nicholas Graziano

 

 

 

 

 

9,622

 

 

 

 

 

Jeffrey Jacobson

 

 

 

 

 

31,601

 

 

1

 

 

 

Cheryl Gordon Krongard

 

 

 

 

 

13,232

 

 

 

 

 

A. Scott Letier

 

 

 

 

 

4,842

 

 

 

 

 

William F. Osbourn, Jr.

 

 

 

 

 

20,462

 

 

 

 

 

Hervé N. Tessler

 

 

 

 

 

60,187

 

 

 

 

 

Sara Martinez Tucker

 

 

 

 

 

41,123

 

 

 

 

 

Giovanni (John) Visentin

 

 

 

 

 

350,755

 

 

 

 

 

All directors and executive officers as a group (13)2

 

 

 

 

 

634,713

 

 

 

 

 

1

Information from most recently filed Form 4 Report reporting common stock ownership, filed August 2, 2017.

 

2

Excludes Mr. Jacobson, who is no longer a director or executive officer of the Company.

Percent Owned by Directors and Executive Officers: Each director and executive officer beneficially owns less than 1% of the aggregate number of shares of common stock outstanding at February 28, 2019. The amount beneficially owned by all directors and executive officers as a group also amounted to less than 1%.

Amount Beneficially Owned: The numbers shown are the shares of common stock considered beneficially owned by the directors and executive officers in accordance with SEC rules. Shares of common stock which executive officers and directors had a right, within 60 days of February 28, 2019, to acquire upon the exercise of options or rights or upon vesting of performance share units, DSUs or RSUs are included. Shares held in a grantor retained annuity trust or by family members and vested shares, the receipt of which have been deferred under one or more equity compensation programs, are also included. All of these are counted as outstanding for purposes of computing the percentage of common stock outstanding and beneficially owned by such person.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act (Section 16) requires the Company’s directors, executive officers and persons who own more than ten percent of the common stock of the Company, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of common stock of the Company. Directors, executive officers and greater than ten percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) reports they file. Based solely on review of the copies of such reports furnished to the Company or written representations that no other reports were required to be filed with the SEC, the Company believes that all reports for the Company’s directors and executive officers that were required to be filed under Section 16 during the fiscal year ended December 31, 2018 were timely filed.

 

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

Delivering on 2018 Commitments

On May 15, 2018, Mr. Visentin was appointed Vice Chairman and Chief Executive Officer. Mr. Visentin, in collaboration with the executive team, established four strategic initiatives to position Xerox for success and to transform Xerox into a technology powerhouse. Our success will be driven by the following priorities:

 

 

LOGO

The focus this year has been on creating a simpler, more agile and effective organization by enhancing Xerox’s focus on customers and partners and instilling a culture of continuous improvement, leading to improved financial results. One aspect of our strategic initiatives is to drive end-to-end transformation of our systems and processes to create greater focus, speed, accountability and effectiveness. This will enable Xerox to be more competitive and ultimately invest in growth and maximize shareholder returns.

In 2018, we made significant progress as a result of Project Own It, an enterprise-wide initiative launched in mid-2018, to simplify and streamline our operations and instill a culture of continuous improvement while driving sustainable, lower costs. We exceeded our Annual Performance Incentive Program (APIP) Free Cash Flow (1) metric but did not meet our Revenue Growth at constant currency (1) or Adjusted (1) Pre-Tax Income

 

(1)

The above non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results, in the Company’s 2018 Annual Report on Form 10-K, prepared in accordance with Generally Accepted Accounting Principles (GAAP). Free cash flow is GAAP net cash provided by operating activities, less capital expenditures (inclusive of internal use software). Management believes this measure gives investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment. It provides a measure of our ability to fund acquisitions, dividends and share repurchase. Revenue growth at constant currency is GAAP revenue growth adjusted to exclude the impact of changes in the translation of foreign currencies into U.S. dollars. Management believes the constant currency measure provides investors an additional perspective on revenue trends. Adjusted Pre-Tax Income is GAAP pre-tax income adjusted to exclude certain items pre-approved by the Compensation Committee. Management believes the exclusion of these items allows investors to better understand and analyze the results for the period as compared to prior periods and expected future trends in our business.

 

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metrics. We delivered operating cash flow of $1.14 billion, exceeding our full-year guidance, and generated $1.05 billion of free cash flow (operating cash flow less capital expenditures of $90 million) for full-year 2018. We also returned $969 million to our shareholders in the form of dividends ($269 million) and share repurchases ($700 million). This was more than 92% of our free cash flow — exceeding our commitment to return at least 50% of free cash flow to shareholders.

Named Executive Officers

Our executive compensation strategy plays an important role in attracting, retaining and rewarding individuals with the ability, drive and vision to lead our business, support our long-term success and deliver shareholder value. Our named executive officers for fiscal year 2018 were:

 

 

Giovanni (John) Visentin

 

 

 

Vice Chairman and Chief Executive Officer

 

 

Jeffrey Jacobson

 

 

 

Former Chief Executive Officer

 

 

Steven J. Bandrowczak

 

 

 

President and Chief Operations Officer

 

 

William F. Osbourn, Jr.

 

 

 

Executive Vice President and Chief Financial Officer

 

 

Michael D. Feldman

 

 

 

Executive Vice President and President, North America Operations

 

 

Hervé N. Tessler

 

 

 

Executive Vice President and President, International Operations

 

Mr. Visentin was appointed CEO on May 15, 2018. Mr. Jacobson resigned as CEO on May 13, 2018. Mr. Bandrowczak joined Xerox on June 25, 2018.

Mr. Visentin received one-time equity grants upon hire to provide an incentive to join Xerox and to provide appropriate rewards, aligned with shareholder interests, should his efforts generate successful results. These one-time awards increased his annual expected compensation considerably for 2018. Similar levels of compensation are not expected in the future. In addition, Mr. Visentin negotiated special equity vesting which provides for accelerated vesting of his outstanding stock awards in the event of a change in control without termination of employment. The Board believed that the employment of Mr. Visentin was essential to the success of the Company’s turn-around and negotiated Mr. Visentin’s offer terms with the dual purpose of retaining Mr. Visentin and incenting his performance. See Named Executive Officers with Unique Compensation Arrangements for further information.

Linking Pay to Performance

We structure our compensation to attract and retain first-class executive talent, reward past performance and motivate future performance. Our executive compensation program is designed to pay for performance, create long-term shareholder value, and align executive compensation with our business strategy. By making performance a substantial element of executive compensation, we link our executives’ interests to the interests of our shareholders. Accordingly, we reward named executive officers when the Company achieves short- and long-term performance objectives and scale down or eliminate compensation when the Company does not achieve those objectives.

Our actual 2018 payouts under the short-term and long-term incentive programs demonstrate alignment of our pay with our performance against the targets set by the Compensation Committee as well as individual contributions.

 

   

In February 2019, the Compensation Committee reviewed the performance of the Company and approved a calculated payout factor under our 2018 annual short-term incentive program of 66.7% of target. Following a review of overall Company results, business unit results and individual contributions, the Compensation Committee approved named executive officer payouts within a range of 50% to 100% of target.

 

   

In July 2018, our 2015 performance stock unit (PSUs) awards (2015-2017 performance cycle) vested at 33.34% of target. The 33.34% payout was based on two-year cumulative performance from 2015 through 2016 and target performance for 2017. As a result of the separation of Xerox into two independent companies effective December 31, 2016 (Separation), the 2017 performance goals,

 

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which were based on the combined company, were no longer applicable and performance for that year was deemed to be achieved at target.

Shareholder Outreach and Engagement

Xerox is committed to fostering strong ongoing communications and engagement with our shareholder base. We regularly communicate with our shareholders and discuss our strategy, corporate governance and executive compensation principles. In these communications, we learn about the individual perspectives of these investors and consider any changes they may recommend. We value the insight gained from these communications and consider the feedback received when reviewing our business, corporate governance and executive compensation practices. During 2018, we conducted shareholder outreach and held multiple conversations with key shareholders. The results of those conversations helped inform the Compensation Committee with its deliberations with regard to 2019 compensation.

OUR EXECUTIVE COMPENSATION PRINCIPLES

The following core principles reflect our philosophy with respect to compensation of the named executive officers. These principles, established and refined from time to time by the Compensation Committee, are intended to:

 

   

promote improved financial performance;

 

   

hold our senior executives personally accountable for the performance of the business units, divisions or functions for which they are responsible; and

 

   

motivate our senior executives to collectively make decisions about the Company that will deliver enhanced value to our shareholders over the long term.

 

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LOGO

 

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SUMMARY OF 2018 COMPENSATION ACTIONS

The primary elements of our executive compensation program for the named executive officers are:

 

   

base salary

 

   

short-term incentives

 

   

long-term incentives

 

   

pension and savings plans

 

   

perquisites

 

   

change in control benefits

The Compensation Committee made several decisions regarding the compensation of named executive officers in 2018, as summarized below.

Base Salaries

The salaries for Mr. Visentin and Mr. Bandrowczak were determined as part of their new hire negotiations and reflect peer group compensation data and the level of complexity of their roles. See Named Executive Officers with Unique Compensation Arrangements for further information. During 2018, the salaries for Messrs. Jacobson, Osbourn, Feldman and Tessler did not change from 2017 levels.

For further information on base salaries, see 2018 Compensation for the Named Executive Officers — Base Salary.

Short-Term Incentives

The 2018 performance measures and weightings for our Annual Performance Incentive Program (APIP) were: Revenue Growth at constant currency (33.3%), Adjusted Pre-Tax Income (33.3%) and Free Cash Flow (33.3%). Free Cash Flow replaced Operating Cash Flow from Continuing Operations. This change was made to better reflect the broader impact of a Free Cash Flow metric.

The target award opportunities for Mr. Visentin and Mr. Bandrowczak under the APIP were approved as part of their new hire negotiations and reflect peer group compensation data and the level of complexity of their roles. See Named Executive Officers with Unique Compensation Arrangements for further information. The 2018 target award opportunities remained the same as in 2017 for Messrs. Jacobson, Osbourn, Feldman and Tessler.

For 2018, results were achieved below threshold for the Revenue Growth at constant currency and Adjusted Pre-Tax Income measures, and above maximum for the Free Cash Flow measure. Based on these results, the Compensation Committee approved the short-term incentive calculated payout factor of 66.7% of target. A summary of performance results relative to predetermined performance levels is shown below:

 

Metric  

Actual 2018

Performance

Results

 

Revenue Growth at constant currency (1)

    Below Threshold  

Adjusted Pre-Tax Income (2)

    Below Threshold  

Free Cash Flow (3)

    Above Maximum  

 

 

(1)

Generally Accepted Accounting Principles (GAAP) revenue growth adjusted to exclude the impact of changes in the translation of foreign currencies into U.S. dollars.

 

(2)

GAAP Pre-Tax Income, as reported in the Company’s 2018 Annual Report on Form 10-K, adjusted to reflect the approved adjustment categories: addition of equity income, and excluding the impact of restructuring costs, amortization of intangibles, transaction and related costs, net, non-service retirement-related costs, and other items outside the ordinary course of business.

 

(3)

GAAP Net Cash provided by Operating Activities less capital expenditures (inclusive of internal use software).

 

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Following a review of overall Company results, business unit results and individual contributions, the Compensation Committee approved named executive officer payouts within a range of 50% to 100% of target. For more information on short-term incentives, see 2018 Compensation for the Named Executive Officers — Short-Term Incentives.

Long-Term Incentives

Our 2018 Executive Long-Term Incentive Program (E-LTIP) included awards granted in the form of PSUs (50%), RSUs (25%) and stock options (25%). Stock options were added to our E-LTIP awards in 2018 to provide greater alignment with shareholders and increased focus on improving stock price performance.

The grant dates for these awards were May 15, 2018 for Mr. Visentin, July 1, 2018 for Mr. Bandrowczak, and April 6, 2018 for the other named executive officers. All earned PSUs will vest three years from the grant date. RSUs and stock options will vest 25% on the first anniversary of grant, 25% on the second anniversary of grant and 50% on the third anniversary of grant.

PSUs are earned based on achieving pre-established performance goals. The 2018 performance measures and weightings for the portion of the award granted as PSUs were: Revenue Growth at constant currency (33.3%) measured based on a compound annual growth rate and Free Cash Flow (33.3%), both based on fiscal performance for January through December 2018, and relative Total Shareholder Return (rTSR) (33.3%). RTSR is measured by stock appreciation plus reinvested dividends paid from April 3, 2018 through April 2, 2019 relative to that of the 2018 Xerox peer group companies.

At the time that the April 6, 2018 E-LTIP grant was made, the Company was in negotiations with Fuji Xerox regarding a potential combination. Given the uncertainty on future strategy, the Compensation Committee determined that goals for the second and third years of the PSUs would be set by the end of 2018. At its December 2018 meeting, the Compensation Committee determined that it would set the payout for 2019 and 2020 at target levels of performance, in effect making the awards service-based, in order to encourage retention of recipients and provide focus on short-term and long-term metrics for the 2019 APIP and E-LTIP.

The 2018 E-LTIP award values for Mr. Visentin and Mr. Bandrowczak were approved as part of their new hire negotiations and reflect peer group compensation data and the level of complexity of their roles. See Named Executive Officers with Unique Compensation Arrangements for further information. The award values for Messrs. Jacobson, Osbourn, Feldman and Tessler remained the same as in 2017.

For more information on long-term incentives, see 2018 Compensation for the Named Executive Officers — Long-Term Incentives.

Total Target Compensation

Complete compensation information for our named executive officers appears in the Summary Compensation Table on page []. The following table shows annualized base salary, target and actual short-term incentive (APIP), and annual target long-term incentive (E-LTIP) (annualized for Mr. Bandrowczak) compensation for 2018:

 

Executive

 

Annual
Base Salary ($)

 

Target
Short-Term
Incentive
(% of Salary)

 

Actual
Short-Term
Incentive Paid
(% of Target)

 

Target
Long-Term
Incentive
(Grant Date
Value) ($)

 

 

Total Target
Compensation
(Base +
Target

Short-Term +
Target

Long-Term

Incentives) ($)

 

           

Giovanni (John) Visentin (1)

1,200,000 150% 100% 10,000,000 13,000,000
           

Jeffrey Jacobson

1,000,000 150%     0%   6,500,000    9,000,000
           

Steven J. Bandrowczak (1)

   525,000 100% 100%   1,750,000    2,800,000
           

William F. Osbourn, Jr.

   625,000 100% 85%   2,250,000    3,500,000
           

Michael D. Feldman

   575,000 100% 67%   2,500,000    3,650,000
           

Hervé N. Tessler (2)

   573,273 100% 50%   2,000,000    3,146,546

 

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(1)

Excludes Mr. Visentin’s and Mr. Bandrowczak’s new hire negotiated sign-on cash, restricted stock and RSU awards as described under Named Executive Officers with Unique Compensation Arrangements.

 

(2)

Mr. Tessler’s base salary of 501,270 is denominated and paid in euros (EUR) and is unchanged from 2017 to 2018. The salary shown in this table and throughout the proxy statement is Mr. Tessler’s annual base salary converted to U.S. dollars (USD) at an exchange rate of 1.1436 USD per EUR, consistent with the exchange rate used in the Company’s 2018 Annual Report on Form 10-K for the year ended December 31, 2018.

Looking Ahead to 2019

The Compensation Committee took the following actions for 2019:

 

   

Increased focus on financial performance by establishing three short-term corporate financial incentive metrics:

 

   

25% Absolute Revenue (GAAP revenue unadjusted for currency fluctuation) focuses on improving the current top line and is aligned with management strategy and the long-term plan

 

   

25% Adjusted Operating Margin focuses on profitability of the business over the short-term

 

   

25% Free Cash Flow focuses on reducing costs, improving productivity and profitable revenue for the current year and is aligned with the long-term plan

In addition to the three corporate financial metrics, the Compensation Committee increased line of sight by adding an individual, corporate or group strategic metric for each named executive officer, weighted at 25%.

 

   

Established a new long-term incentive program that is structured as follows: 60% in the form of PSUs and 40% in the form of restricted stock units (RSUs). With the emphasis on share price within the PSU metrics, we did not grant stock options as part of the 2019 annual grant process. The measures for the PSU portion of this award are:

 

   

50% Absolute Share Price including accumulated dividends over the performance period — focuses on stock price appreciation and achieving goals to maximize shareholder returns

 

   

25% Absolute Revenue (GAAP revenue unadjusted for currency fluctuation) pursuant to the Company’s business plan — focuses on improving the top line and is aligned with management strategy

 

   

25% Free Cash Flow — focuses on reducing costs, improving productivity and profitable revenue

These metrics were chosen because of their close alignment to shareholder interests and business success.

GOVERNANCE OF THE EXECUTIVE COMPENSATION PROGRAM

Oversight

The Compensation Committee administers the executive compensation program on behalf of the Board and our shareholders. The members of the Compensation Committee are Gregory Q. Brown; Jonathan Christodoro and Scott Letier, who were each appointed to the Compensation Committee on May 14, 2018; and Cheryl Gordon Krongard, who became the Committee Chair on May 14, 2018. Charles Prince and Stephen H. Rusckowski, former Chair, served on the Compensation Committee until they each resigned on May 13, 2018. Mr. Brown will step down from the Compensation Committee as of the date of the 2019 Annual Meeting because he is not standing for re-election as a director.

All directors who serve on the Compensation Committee are independent directors in accordance with applicable NYSE standards, including heightened independence requirements for Compensation Committee members. Their biographies appear beginning on page [] of this Proxy Statement.

The Compensation Committee’s responsibilities are discussed beginning on page [] of this Proxy Statement. A complete description of the Compensation Committee’s responsibilities and functions appears in its charter, which can be found on our website at www.xerox.com/governance.

Independent Consultant

The Compensation Committee has retained the services of an independent compensation consulting firm, FW Cook, to assist with its responsibilities. FW Cook reports only to the Compensation Committee and has not

 

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performed any other work for the Company since being retained as an independent consultant to the Compensation Committee. As provided in its charter, the Compensation Committee has the authority to determine the scope of FW Cook’s services and may terminate their engagement at any time. The Compensation Committee reviewed FW Cook’s independence under SEC and NYSE rules and determined there was no conflict of interest.

During fiscal 2018, FW Cook provided the following services:

 

   

regularly updated the Compensation Committee on trends in executive compensation and proactively advised on emerging trends and best practices;

 

   

reviewed officer compensation levels and the Company’s overall performance compared to a peer group made up of organizations with which the Company is likely to compete for executive expertise and/or share with the Company a similar business model in one or more areas;

 

   

reviewed incentive compensation designs for short-term and long-term programs;

 

   

advised the Compensation Committee on peer group companies for pay and performance comparisons;

 

   

reviewed the Compensation Discussion and Analysis and related compensation tables for this Proxy Statement;

 

   

reviewed Compensation Committee meeting materials with management and the Committee Chair before distribution;

 

   

attended Compensation Committee meetings and, as requested, meetings in executive session;

 

   

offered independent analysis and input on CEO compensation; and

 

   

advised on other compensation matters as requested.

 

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Best Practices

The Compensation Committee regularly reviews executive compensation best practices and makes changes to the Company’s programs as appropriate.

 

    

 

Our program reflects best practices as follows:

 

What We Do:

 

 

Emphasize pay for performance to align executive compensation with our business strategy and promote creation of long-term shareholder value.

 

 

 

Use peer group pay as a reference point to determine total target compensation.

 

 

  Maintain equity plans with double trigger vesting upon a change in control, except for Mr. Visentin, who is provided with vesting upon a change in control without termination of employment, per his new hire negotiation.

 

 

 

Have clawback provisions to recover short- and long-term incentive compensation, non-qualified pension benefits and severance provided under the officer severance program.

 

 

 

Maintain stock ownership and post-retirement stock holding requirements for executive officers.

 

 

 

Have non-compete and non-solicitation agreements that apply during employment and after leaving the Company, as permissible under local law.

 

 

 

Provide minimal executive perquisites.

 

 

 

Design compensation programs with controls to mitigate risk.

 

 

 

Compensation Committee uses an independent compensation consultant that performs no other services for Xerox.

 

What We Don’t Do:

 

 

 

NO payment of dividends or dividend equivalents on unearned RSUs and PSUs, and stock options.

 

 

 

NO accrual of additional benefits under our non-qualified pension plans, which were frozen in 2012.

 

 

 

NO payment of tax gross-ups on perquisites.

 

 

 

NO excessive change in control severance arrangements for executive officers or excise tax gross-ups in such arrangements.

 

 

 

NO hedging or pledging of Xerox stock by executive officers.

 

 

 

NO employment agreements (unless customary under local law or in connection with new hire arrangements).

 

Risk Assessment

The Compensation Committee believes that our programs encourage positive behavior while balancing risk and reward, consistent with the interests of our shareholders. Management conducts risk assessments each year and presents the findings to the Compensation Committee. Based on the assessment of programs covering our employees and executives for 2018, the Compensation Committee determined that our compensation plans, programs and practices do not motivate behavior that is reasonably likely to have a material adverse impact on the Company. Our assessment included reviews of our internal controls, clawback provisions (including those for engaging in detrimental activity), ownership requirements, overlapping performance periods and vesting schedules, the balance of short- and long-term incentives, and performance goals that are tied to multiple financial metrics.

PROCESS FOR SETTING COMPENSATION

Competitive Market Information

Each year, the Compensation Committee receives a report comparing the compensation of our named executive officers with the compensation of the named executive officers of the companies in our peer group. This comparison includes peer group compensation data from the most recent proxy statements for these elements of pay:

 

   

base salary

 

   

short-term incentives

 

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total cash compensation (base salary plus short-term incentives)

 

   

long-term incentives

 

   

total compensation (total cash compensation plus long-term incentives)

The Compensation Committee reviews the peer group total target compensation (including the individual elements noted above) for each named executive officer, with the median as the primary competitive reference point, but does not use that data as a specific benchmark or to match a specific percentile of the market. The competitive peer group market data is prepared, analyzed and presented to the Compensation Committee by FW Cook, the Committee’s independent compensation consultant. FW Cook also presents a broader set of survey data.

When setting compensation, the Compensation Committee also reviews the Company’s performance in relation to the peer group.

Peer Group

The Compensation Committee regularly reviews the composition of the peer group and makes modifications as appropriate. A revised peer group was established for 2017 to reflect the new size and business of Xerox post-Separation. This peer group was reviewed and confirmed by the Compensation Committee for 2018. We believe these peer group companies on the whole are:

 

   

appropriate in size (considering revenue, market capitalization, EBIT, enterprise value and assets);

 

   

companies with which we are likely to compete for executive talent; and/or

 

   

companies that share a similar business model or similar business content in one or more areas.

The 2018 peer group consisted of the following companies:

 

 

Applied Materials, Inc.

 

 

 

DXC Technology Company

 

 

 

NCR Corporation

 

 

Arrow Electronics, Inc.

 

 

 

First Data Corporation

 

 

 

NetApp, Inc.

 

 

Avnet, Inc.

 

 

 

Flex Ltd.

 

 

 

Pitney Bowes Inc.

 

 

CA, Inc.*

 

 

 

Jabil Circuit, Inc.

 

 

 

Seagate Technology plc

 

 

CDW Corporation

 

 

 

Micron Technology, Inc.

 

 

 

SYNNEX Corporation

 

 

CGI Group, Inc.

 

 

 

Motorola Solutions, Inc.

 

 

 

Western Digital Corporation

 

 

 

*

CA, Inc. was acquired by Broadcom on 11/5/18 and is currently known as CA Technologies.

When the Compensation Committee reviewed the peer group data in July 2018, the median annual revenue of the peer group was approximately $16.0 billion compared to Xerox revenue of $10.2 billion (for the last four consecutive quarters ending June 30, 2018). The 25th percentile for the peer group revenue data was $7.0 billion and the 75th percentile was $20.4 billion.

Performance Objectives

Following a thorough review of the external market, business outlook, business plan and budgets, the Compensation Committee sets performance objectives for the CEO. The CEO in turn sets performance objectives, aligned with his objectives, for the other named executive officers. For 2018, Mr. Visentin’s performance objectives were to take appropriate actions for the Company to meet its financial goals related to Revenue Growth at constant currency, Adjusted Pre-Tax Income, and Free Cash Flow.

 

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2018 COMPENSATION FOR THE NAMED EXECUTIVE OFFICERS

Overview

As shown in the chart below, the Compensation Committee follows a thorough and multi-faceted process to establish compensation for our named executive officers.

 

Compensation
Committee Assessment
       Compensation Committee
Considerations
       Final Steps

•  overall Company performance

 

•  past contributions

 

•  expected future contributions

 

•  succession planning objectives

 

•  retention objectives

 

•  internal pay equity

 

•  peer group data

 

  

 

•  evaluation of CEO performance relative to specified performance objectives

 

•  CEO’s evaluation of the management team, their contributions and performance

 

•  CEO’s recommendations for compensation actions for other named executive officers

 

•  competitive executive pay practices

 

•  financial feasibility

 

•  CEO’s self-assessment

 

  

 

•  input from the Committee’s consultant

 

•  review of evolving market practices, regulatory developments, the market for executive talent and compensation philosophy

After receiving input from the CEO, the Compensation Committee makes its own assessments and formulates compensation amounts. Once all components of compensation are established, the Compensation Committee verifies that the total compensation for each named executive officer is appropriate and competitive.

The Compensation Committee expects a high level of individual and collaborative performance and contributions, consistent with our named executive officers’ level of responsibility, and, when setting compensation, seeks to appropriately motivate our named executive officers to achieve a high level of performance.

Named executive officers generally earn short- and long-term incentive payments as a team based on achievement of pre-established objective performance goals of the Company. Named executive officers are not compensated primarily based on individual performance objectives. Base salary increases and short-term and long-term incentive target award opportunities are determined by taking into consideration the individual’s performance, peer group data and internal comparisons to ensure that pay is competitive and consistent with Company succession planning objectives and that differences in pay among the officers are appropriate.

Mr. Visentin’s compensation opportunity was higher than that of our other named executive officers due to his greater scope of responsibility and was at the approximate median of our peer group companies. His compensation was determined under the same compensation programs and policies pursuant to which the compensation of other Xerox named executive officers are determined, except as otherwise provided under the terms of his negotiated offer letter. Mr. Visentin (and Mr. Jacobson) were not present when the Compensation Committee discussed and established their respective annual compensation.

2018 Total Target Compensation

Total target compensation includes base salary, target annual short-term cash incentive and target annual long-term equity incentive awards, which includes the 2018 annual E-LTIP grants. For purposes of market comparisons, total target compensation within the range of plus or minus 15% of the peer group median typically is considered as a competitive reference point.

Overall, the aggregate total target compensation of our named executive officers is within the competitive range of peer group and survey medians. In addition, the mix of pay elements as a percent of total target compensation is similar to that of our peers.

 

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We show the 2018 total target compensation, including annual base salary, target and actual short-term incentive compensation, as a percentage of base salary, and target long-term incentive compensation as described above under Executive Summary — Summary of 2018 Compensation Actions. More complete compensation information appears in the Summary Compensation Table on page [].

Fixed Versus Variable Pay

The charts below show the 2018 pay mix for our named executive officers (NEO) as well as the portion of their total target compensation that is in the form of variable pay. The target pay presented in the charts represent annualized base salary, target short-term incentive APIP awards and annual target long-term incentive E-LTIP awards and exclude one-time new hire awards.

 

 

LOGO

Base Salary

Base salary is the fixed pay element of our compensation program. The Compensation Committee reviews and approves base salaries annually, typically in February. The Compensation Committee also reviews named executive officer salaries when there is a specific event, such as a new hire, promotion or achievement of an extraordinary level of performance. Base salaries for Mr. Visentin and Mr. Bandrowczak were approved as part of their new hire negotiations. There were no base salary increases during 2018 for Messrs. Jacobson, Osbourn, Feldman and Tessler.

Short-Term Incentives

The Company’s APIP provides for short-term incentive awards paid in the form of cash for our named executive officers and other eligible employees. Each year, the Compensation Committee determines the target short-term incentive award opportunity under the APIP, stated as a percentage of base salary, for each named executive officer.

 

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The following chart shows our process for setting short-term incentive awards. This process typically takes place in the first quarter of the year.

 

 

LOGO

Short-term incentives, if earned based on the previous fiscal year’s performance, generally have been paid in the April time frame.

Short-Term Incentive Target Award Opportunity for the Individual Named Executive Officers

The short-term incentive target award opportunity for each named executive officer takes into account many factors, including scope of responsibility and comparable targets for named executive officers in the peer group. If an executive’s responsibilities change after February, when the terms of the short-term incentive awards are generally approved, the Compensation Committee may adjust the short-term incentive target award opportunity for that executive. The target award opportunities for Mr. Visentin and Mr. Bandrowczak were approved as part of their new hire negotiations and reflect peer group compensation data and the level of complexity of their roles. No changes were made to target award opportunities for the other named executive officers from their 2017 levels.

Determining Short-Term Incentive Award Payouts

After the end of each fiscal year, the CFO confirms the financial results and communicates the results to the Compensation Committee. Subject to the Committee’s review and approval, any material unusual or infrequent charges or gains/(losses) may be excluded from the APIP short-term incentive calculations in order to obtain normalized operational results of the business.

Each performance measure is assessed and calculated independently. The weighted results of each measure are added together to determine overall performance results. Even if pre-established performance measures are achieved, the Compensation Committee retains the discretion to grant a lower or higher short-term incentive than the calculated incentive payout or no short-term incentive at all, as it deems appropriate, based on overall Xerox performance. The Committee also may use its discretion to increase or decrease an APIP award based on individual performance provided that an individual executive’s award never exceeds two times the executive’s target award opportunity.

Under extraordinary circumstances, if the Compensation Committee believes an additional incentive is appropriate to reward and motivate executives, it has authority to pay discretionary cash awards outside of the APIP that are separate and independent of any calculated APIP incentive payout.

 

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2018 Short-Term Incentive Award Performance Measures and Payouts

The performance measures set by the Compensation Committee for 2018 were Revenue Growth at constant currency, Adjusted Pre-Tax Income and Free Cash Flow. The payout for achieving target performance goals is 100% of target and the payout for achieving maximum performance goals is 200% of target, with payout at 200% representing attainment of outstanding performance results. The payout for achieving threshold performance goals is 50% of target. There is no payout for results below the threshold levels established by the Compensation Committee. Payouts are made proportionately for achievement at levels between threshold and maximum goals.

The weightings, target and maximum goals, payout ranges and performance results against the established performance measures follow:

 

Performance Measure

 

 

  Weighting  

 

 

 

Target
(100% payout)

 

 

 

Maximum

(200% payout)

 

 

 

Actual 2018
Performance
Results

 

 

Revenue Growth at constant currency (1)

 

  33.3%

 

  (2.80)%

 

  (0.80)%

 

  (4.90)%

 

 

Adjusted Pre-Tax Income (2)

 

  33.3%

 

  $1,240 million

 

  $1,340 million

 

  $1,193 million

 

 

Free Cash Flow (3)

 

  33.3%

 

  $850 million

 

  $1,000 million

 

  $1,050 million

 

 

 

(1)

Generally Accepted Accounting Principles (GAAP) revenue growth adjusted to exclude the impact of changes in the translation of foreign currencies into U.S. dollars. GAAP revenue decreased 4.2%, excluding the impact of currency fluctuation (0.7% favorable), revenue decreased 4.9% at constant currency.

 

(2)

GAAP Pre-Tax Income of $598 million, as reported in the Company’s 2018 Annual Report on Form 10-K, adjusted to reflect the approved adjustment categories: addition of equity income ($33 million), and excluding the impact of restructuring costs ($253 million) of which $95 million related to Fuji Xerox, amortization of intangibles ($48 million), transaction and related costs, net ($68 million), non-service retirement-related costs ($150 million), and other items outside the ordinary course of business ($43 million).

 

(3)

GAAP net cash provided by operating activities of $1,140 million, less capital expenditures (inclusive of internal use software) of $90 million.

The short-term plan contains specific metrics, but also permits the Compensation Committee some limited discretion as described above under Determining Short-Term Incentive Award Payouts.

Although we consider historical performance when setting future performance goals, these goals were aligned with our 2018 operating plan at the time they were established and designed to be challenging, yet achievable.

Performance results with respect to the APIP goals established by the Compensation Committee for Revenue Growth at constant currency and Adjusted Pre-Tax Income were below threshold and for Free Cash Flow, was above maximum. The Compensation Committee approved the calculated payout factor of 66.7% of target, reflecting performance results for all three measures, determined in accordance with the process and applicable goals and weightings described above. After reviewing overall Company, business unit and individual results, the Compensation Committee approved named executive officer payouts. The CEO received a payout of 100% of target at the discretion of the Compensation Committee. The Compensation Committee determined Mr. Visentin’s award based on the progress made on our four strategic initiatives: to optimize our operations for greater simplicity, drive revenue, re-energize our innovation engine and focus on cash flow to drive increasing shareholder returns. Over the last two quarters, under Mr. Visentin’s strong leadership and direction, Xerox focused on creating a simpler more agile and effective organization to enhance our focus on our customers and our partners, instill a culture of continuous improvement and improve our financial results. See Named Executive Officers with Unique Compensation Arrangements for further information on Mr. Visentin’s 2018 short-term incentive award. The other named executive officers received payouts within a

 

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range of 50% to 100% of target, at the discretion of the Compensation Committee. For more information on short-term incentive payouts, see the Total Target Compensation section on page [].

 

 

LOGO

The Compensation Committee believes that the fiscal 2018 short-term incentive payments are consistent with our strategy of compensating named executive officers for achieving important business goals. In view of the Company’s 2018 results, the Compensation Committee believes that the annual short-term incentive payments resulted in reasonable and appropriate performance-related incentive payments to the named executive officers.

The annual incentives paid to the named executive officers in March 2019 for fiscal year 2018 are shown in the Summary Compensation Table. Additional information about the short-term incentive opportunities is shown in the Grants of Plan-Based Awards table.

Long-Term Incentives

We provide long-term incentives to reward named executive officers for sustained performance, as a retention incentive and to align executives’ interests with the interests of our shareholders.

Executive Long-Term Incentive Program

Our Executive Long-Term Incentive Program (E-LTIP) awards are made annually or off-cycle for special purposes, such as new hire, promotion and recognition, pursuant to the 2004 Performance Incentive Plan. Awards may be cash or equity-based, including PSUs, time-based RSUs and stock options. The greatest portion of E-LTIP awards are granted in the form of PSUs.

PSUs are typically based on achievement of goals over a performance period covering three fiscal years. The service period for these PSUs is three years from the date of grant. Earned PSUs vest after the Compensation Committee certifies the results for the performance period. RSUs and stock options are subject to time-based vesting requirements and are scheduled to vest 25% on the first anniversary of the grant date, 25% on the second anniversary of the grant date and 50% on the third anniversary of the grant date. Stock options expire on the 10th anniversary of the grant date.

Once vested, E-LTIP PSUs and RSUs are paid out in the form of shares of Xerox Common Stock. Proceeds from exercising vested stock options may be received in the form of shares of Xerox Common Stock or cash. The purchase price of stock options is equal to the closing price of Xerox Common Stock on the date of grant. In connection with certain termination events, outstanding PSUs, RSUs and stock options vest as follows:

 

   

Named executive officers who retire or are involuntarily terminated other than for cause before the end of the vesting period will vest in earned PSUs, RSUs and stock options based on a pro-rata vesting formula. Vesting will occur on the original vesting date and will not be accelerated. Vested options will expire on the earlier of the expiration date of the award or three months following the date of termination of employment.

 

   

Named executive officers who voluntarily terminate employment (other than for retirement) before the vesting date forfeit unvested awards. Vested options will expire on the earlier of the expiration date of the award or three months following the date of termination of employment.

 

   

Named executive officers who are terminated for cause before the vesting date forfeit unvested PSUs and RSUs. Outstanding vested and unvested options are cancelled upon termination.

 

   

PSUs (at target), RSUs and stock options fully vest upon death. Vested options expire on the earlier of the expiration date of the award or one year following the date of death.

Mr. Visentin’s negotiated offer letter provides for certain vesting provisions in the event of his termination. Any vesting provisions would be governed by that arrangement. See Named Executive Officers with Unique Compensation Arrangements for further information.

Upon vesting of PSUs and RSUs, dividend equivalents are paid in cash on vested shares in an amount equal to the dividends the executive would have earned from owning the same amount of Xerox Common Stock (up to the target number of PSUs) throughout the vesting period. Dividend equivalents are not paid with respect to stock options.

 

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Compensation Committee Actions Relating to E-LTIP Awards

E-LTIP awards are based on a review of both peer group and market data, operating results and each executive’s historical and expected future contributions.

 

 

LOGO

Stock options were added to our E-LTIP awards in 2018 to provide greater alignment with the interests of our shareholders and increased focus on improving stock price performance. Consistent with market and peer group data, the Compensation Committee also approved ratable vesting for RSUs and stock options as described above. Delivering three different forms of equity provides a means of balancing objectives to reward stock price appreciation and promote longer-term financial and strategic performance, while also serving as a retention vehicle.

The payout for achieving target performance goals is 100% of target, the payout for achieving threshold performance goals is 50% of target (35% for rTSR), and the payout for achieving maximum performance goals is 200% of target, with payout at 200% representing attainment of outstanding performance results. Payouts are made proportionately for achievement at levels between these goals. There is no payout if performance falls below each of the threshold goals established by the Committee. Payout of PSUs is conditioned on actual achievement of the pre-established performance measures, and any earned shares will be paid on the vesting date.

 

The 2018 E-LTIP award was granted in the form of 50% PSUs, 25% RSUs and 25% stock options.

In February of 2018, the Compensation Committee established performance goals for the 2018 E-LTIP awards. At the time that the 2018 E-LTIP grant was made, the Company was in negotiations with Fuji Xerox regarding a potential combination. Given the uncertainty about future strategy, the Compensation Committee determined that goals for the second and third years of the PSUs would be set by the end of 2018. At its December 2018 meeting, the Compensation Committee determined that it would set the payout for 2019 and 2020 at target levels of performance, in effect making the awards service-based, in order to encourage retention of prior recipients and provide focus on short-term and long-term metrics for the 2019 APIP and E-LTIP.

 

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The 2018 E-LTIP target award opportunities for Mr. Visentin and Mr. Bandrowczak were approved as part of their new hire negotiation. The target 2018 E-LTIP award opportunities for Messrs. Jacobson, Osbourn, Feldman and Tessler remained the same as in 2017.

The target numbers of PSUs, RSUs and stock options granted to our named executive officers were determined by dividing the approved E-LTIP target awards (dollar value) by the fair value of Xerox Common Stock on the respective grant dates (or last trading day prior to the grant date if the market was closed on the grant date). The fair value used to determine the number of RSUs granted was the closing price of Xerox Common Stock on the date of grant. The fair value used to determine the number of stock options granted was based on a modified Black-Scholes model. The fair value used to determine the number of PSUs granted was determined as follows: two-thirds based on the closing price of Xerox Common Stock on the grant date (for the revenue and free cash flow (1) measures) and one-third based on a Monte Carlo valuation (for the rTSR measure).

See Named Executive Officers with Unique Compensation Arrangements for additional information on certain stock awards.

 

 

(1)

Free cash flow is GAAP net cash provided by operating activities, less capital expenditures (inclusive of internal use software).

Metrics for the 2018 Performance Cycle (2018 E-LTIP)

The 2018 E-LTIP performance measures, weightings, target to maximum goals and payout ranges set by the Compensation Committee for the portion of the award granted as PSUs are as follows: Revenue Growth at constant currency (33.3%) measured based on a compound annual growth rate (CAGR), Free Cash Flow (33.3%) and relative Total Shareholder Return (rTSR) (33.3%). CAGR Revenue Growth at constant currency and Free Cash Flow are both based on fiscal year performance from January through December 2018, and rTSR is measured by stock appreciation plus reinvested dividends paid from April 3, 2018 through April 2, 2019, relative to that of the Xerox peer group companies.

The performance measures, weightings and goals for 2018 were as follows:

 

Performance Measure

 

 

Weighting

 

  

Target

(100% payout)

 

  

Maximum

(200% payout)

 

 

CAGR Revenue growth at constant currency (1)

 

  33.3%

 

   (2.80)%

 

   (0.80)%

 

 

Free Cash Flow (2)

 

  33.3%

 

   $850 million

 

   $1,000 million

 

 

Relative Total Shareholder Return (3)

 

  33.3%

 

   50th  percentile

 

   80th percentile

 

 

 

(1)

Generally Accepted Accounting Principles (GAAP) revenue growth adjusted to exclude the impact of changes in the translation of foreign currencies into U.S. dollars and based on a compound annual growth rate.

 

(2)

GAAP net cash provided by operating activities, less capital expenditures (inclusive of internal use software).

 

(3)

Measured by Xerox stock price appreciation plus reinvested dividends compared to the Xerox peer group companies approved by the Compensation Committee.

RTSR was adopted as a performance measure in 2018, replacing Earnings Per Share, to more directly align payouts with shareholder gains/(losses). Free Cash Flow was adopted in 2018, replacing Adjusted Operating Cash Flow. This measure provides shareholders and investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment. It provides a measure of our ability to fund acquisitions, dividends and share repurchases. Performance goals were aligned with our 2018 financial model at the time the goals were established and are disclosed solely in the context of our 2018 E-LTIP performance cycle. Target performance goals are reasonably achievable with a level of performance that is in line with the Company’s Board-approved operating plan, whereas maximum performance levels represent stretch goals which can only be achieved with outstanding performance. These goals should not be used or relied upon as estimates of results or applied to other contexts.

 

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To ensure that the value delivered based on rTSR is aligned with performance:

 

   

If Xerox rTSR performance is negative, even if it is at or above the maximum performance level, no more than target will be paid for this performance measure.

 

   

There is a cap on the overall payout where the maximum rTSR payout will not be more than four times (considering the number of shares issued and stock price) the original value at grant, in all cases subject to a maximum payout of 200% of target per the terms of the PSU awards. For example, if maximum performance (equal to 200% of target) is achieved and the stock price doubles, payout would be reduced to cap the payout at no more than four times the original grant value (solely for the rTSR portion of the award).

Under the 2018 E-LTIP, actual Company results for the performance measures will be adjusted for the impacts of certain pre-established items, subject to thresholds, such as: acquisitions, separations or divestitures, effects of changes in accounting principles, certain items identified in other expenses, net, gains/(losses) from the settlement of tax audits or changes in tax laws, gains/(losses) from war, terrorism or natural disasters, cash payments for restructuring, pension contributions, changes in receivables factoring programs, and other types of unusual or infrequent items. Revenue Growth is adjusted to exclude the impact of changes in the translation of foreign currencies into USD.

Because we believe Revenue Growth at constant currency and Free Cash Flow to be two of the fundamental financial metrics that drive shareholder value, we used those financial metrics for both our short- and long-term incentive programs.

 

   

Performance measures for our short-term incentive awards, as previously described, are set on an annual basis and are paid in cash following the end of the annual performance period, based on achievement of annual performance goals.

 

   

Performance measures for our long-term incentive awards are typically set at the beginning of the first year. Earned long-term incentive performance based awards vest and pay out three years from the date of grant. The actual value realized by our named executive officers with respect to these awards is based on achievement of performance goals and stock price at the time of vesting.

Additional information on the 2018 E-LTIP awards can be found in the Summary Compensation Table and the Grants of Plan-Based Awards table.

Performance and Payouts under Prior E-LTIP Awards

2015 PSUs

The 2015 E-LTIP was based on two-year cumulative performance from 2015 through 2016 and 2017 performance at target. 2017 performance was deemed to be achieved at target as a result of the Separation because the 2017 goals were no longer applicable since they had applied to the combined company prior to the Separation. Performance results against the pre-established performance measures and definitions for this award follows. For additional information on the performance measures and definitions, see Exhibit 10(e)(21) of the Annual Report on Form 10-K for the 2014 fiscal year filed on February 24, 2015.

 

Performance Measure

 

 

Weighting        

 

 

Two-Year Cumulative Performance   

 

 

 

Performance       
Shares       
Earned       

 

 

PSUs Earned Based on 2015 and 2016 Performance:

 

 

Revenue Growth at constant currency (1)

 

  30%

 

  (7.4)% — below threshold

 

  0%     

 

 

Adjusted Earnings Per Share (EPS) (2)

 

  50%

 

  $1.68 — below threshold

 

  0%     

 

 

Adjusted Operating Cash Flow (3)

 

  20%

 

  $3.093 billion — below threshold

 

  0%     

 

 

Total PSUs earned as a percentage of shares granted for 2015 and 2016

 

  0%     

 

 

Total PSUs earned for 2017 (PSUs earned at target) (4)

 

  33.34%     

 

 

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(1)

Generally Accepted Accounting Principles (GAAP) revenue growth adjusted to exclude the impact of changes in the translation of foreign currencies into U.S. dollars.

 

(2)

EPS from continuing operations, as reported in the Company’s audited consolidated financial statements, adjusted to reflect the pre-approved adjustment categories.

 

(3)

Net Cash provided by Operating Activities, as reported in the Company’s audited consolidated financial statements, adjusted to reflect the pre-approved adjustment categories.

 

(4)

The actual payout for the 2015 E-LTIP as a percent of grant date value on July 1, 2015, was 24.5% due to actual performance results (33.34% of target) and the difference in the fair market value per share on the July 1, 2015 grant date as compared to the July 1, 2018 vesting date.

Based on the above, the Compensation Committee determined a payout level for the 2015 PSUs of 33.34% of target. This award vested on July 1, 2018. See the Option Exercises and Stock Vested in 2018 table for additional information.

 

Payout for the 2015 E-LTIP as a percent of grant date value was 24.5% due to performance results of 33.34% of target and the difference in stock price at vesting compared to the grant date.

SAY-ON-PAY VOTES AND SHAREHOLDER ENGAGEMENT

At our annual meeting of shareholders held on July 31, 2018, 64.28% of the votes cast on our annual say-on-pay proposal were voted in favor of our named executive officer compensation as disclosed in our 2018 proxy statement. Management and the Compensation Committee conducted shareholder outreach to understand the reasoning underlying say-on-pay voting decisions. Concern was indicated over single trigger vesting in the event of a change in control provided to Mr. Visentin as part of his new hire negotiation. The Board believed that the employment of Mr. Visentin was essential to the success of the Company’s turn-around strategy, and this vesting provision was a key term of negotiation for Mr. Visentin. The Board negotiated Mr. Visentin’s offer terms with the dual purpose of retaining Mr. Visentin and incenting his performance, which is critical to our success. The Compensation Committee believes the passing vote supports the Company’s approach to executive compensation. Further information on Mr. Visentin’s new hire arrangement can be found below in the section on Named Executive Officers with Unique Compensation Arrangements.

As described under Shareholder Outreach and Engagement, we regularly meet with investors, both individually and in group forums, to provide them with the opportunity to engage directly with Company representatives to address their questions and to provide feedback to us on topics of importance to them. The Board and management team carefully consider the feedback from our engagements (which historically has been favorable) when reviewing our business, corporate governance and executive compensation program.

As a result of our ongoing engagement and communication with shareholders, for 2018 and 2019, we:

 

   

continued to maintain short- and long-term performance measures that have some overlap but are not identical;

 

   

maintained a heavier weighting on PSUs than other stock award vehicles;

 

   

eliminated EPS as a measure and added rTSR to our 2018 E-LTIP goals.

We will continue to reach out to investors and to consider the outcome of say-on-pay votes when making future compensation decisions for our named executive officers.

NAMED EXECUTIVE OFFICERS WITH UNIQUE COMPENSATION ARRANGEMENTS

Giovanni (John) Visentin

On May 14, 2018, Mr. Visentin and Xerox executed an offer letter that provided that Mr. Visentin would become Vice Chairman and Chief Executive Officer, effective May 15, 2018. The Board believed that the employment of Mr. Visentin was essential to the success of the Company’s turn-around strategy and negotiated Mr. Visentin’s offer terms with the dual purpose of retaining Mr. Visentin and incenting his performance.

 

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At the time that Mr. Visentin was hired, several former directors had resigned and other directors had joined the Board. The New York State Supreme Court had enjoined the pending combination with Fujifilm, the Company’s former CEO had resigned, and the Board needed to hire a new CEO. The Company’s independent directors had determined that Mr. Visentin was particularly well suited to the Company, and several of the Company’s largest shareholders had communicated similar views publicly. Further, the independent directors also recognized that recruiting any CEO candidate, particularly someone of Mr. Visentin’s caliber, into an organization facing many challenges — including an active sales process in which no one knew what the outcome would be (particularly in the short-term) — would be difficult. Therefore, the independent directors concluded that the Company needed to hire Mr. Visentin, and, in order to do so, certain exceptions to the Compensation Committee’s standard pay practices were deemed appropriate under the circumstances.

Under the terms of his negotiated letter agreement, Mr. Visentin received (a) an annual base salary of $1,200,000, (b) eligibility for an annual short-term incentive with a target award equal to 150% of base salary, and a maximum award equal to 200% of target, not prorated for 2018 employment (with a maximum payout of $2,400,000), subject to achievement of performance goals; (c) eligibility for annual long-term incentive award grants with a grant date value of at least $10,000,000, and (d) participation in the Company’s retirement, health and welfare, vacation and other benefit programs.

The negotiated offer letter also provided that Mr. Visentin would receive (a) a cash sign-on bonus payment of $1,500,000, and (b) an initial equity award of restricted stock, with a grant date value equal to $10,000,000 based on the closing price of the Xerox Common Stock on May 15, 2018.

The one-time compensation grants at hire were designed to provide significant incentives to lead a turn around. They increased Mr. Visentin’s compensation above the expected future annual rate going forward. A comparison of 2018 compensation, as reported in the Summary Compensation Table, and prospective 2019 compensation at target follows:

 

 

Year

 

 

 

Vice
Chairman
and CEO

 

 

 

Base Salary
($)

 

 

 

Bonus and
Non-Equity
Incentive
Awards ($)

 

 

 

Stock and
Option
Awards ($)

 

 

 

Other
Compensation
($)

 

 

 

Total ($)

 

             

2018

 

  G. Visentin

 

  756,522

 

  3,300,000

 

  19,072,839

 

  329,642

 

  23,459,003

 

             

2019

 

  G. Visentin

 

  1,200,000

 

  1,800,000

 

  10,000,000

 

  TBD

 

  13,000,000

 

In the event of Mr. Visentin’s voluntary termination for Good Reason or termination without Cause (both as defined in the offer letter) prior to a Change in Control (as defined in the offer letter), or voluntary termination without Good Reason within 90 days following a Change in Control, Mr. Visentin would be entitled to, among other things, (a) cash payments in the aggregate equal to twice the sum of his base salary and his target short-term incentive; (b) a prorated annual short-term incentive for year of termination based on actual results; and (c) accelerated vesting of all outstanding long-term incentive awards that would have otherwise become vested during the Severance Period (as defined in the offer letter), including PSUs at target.

Following a Change in Control, in the event of Mr. Visentin’s voluntary termination for Good Reason or termination without Cause, under the terms of the offer letter, Mr. Visentin would be entitled to, among other things, (a) a lump sum cash payment equal to 2.99 times the sum of his base salary and his target short-term incentive and (b) his annual short-term incentive for the year of termination based on actual results. In the event of a Change in Control, Mr. Visentin’s outstanding long-term incentive awards will become fully vested, with PSUs vesting at target.

Steven J. Bandrowczak

On June 21, 2018, Mr. Bandrowczak and Xerox entered into an offer letter that provided that Mr. Bandrowczak would become President and Chief Operations Officer effective June 25, 2018. Under the terms of his new hire offer letter, Mr. Bandrowczak received (a) an annual base salary of $525,000, (b) eligibility for an annual short-term incentive with a target award equal to 100% of base salary, prorated for 2018 employment, (c) eligibility for a prorated annual long-term incentive award for 2018, with a grant value of $1,312,500, and (d) participation in the Company’s retirement, health and welfare, vacation and other benefit programs. Mr. Bandrowczak’s offer letter also provided for a 2019 long-term incentive award with a target grant value of $1,750,000.

 

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In order to compensate him for compensation that he would forego from his prior employer, the offer letter also provided that Mr. Bandrowczak would receive (a) a cash sign-on bonus payment of $300,000 and (b) an equity award of RSUs, granted on July 1, 2018, with a grant value of $2,200,000 with the number of RSUs to be determined based on the closing price of the Xerox Common Stock on July 1, 2018. The RSUs will fully vest on the second anniversary of the grant.

PENSION AND SAVINGS PLANS

Pension Plans

The only named executive officer who participates in a pension benefit is Mr. Tessler as provided under the Retirement Indemnities Plan for France. For information on the actuarial present value of the accumulated pension benefits for Mr. Tessler, see the Pension Benefits table.

French Pension Plan — Retirement Indemnities Plan

Mr. Tessler is a French citizen, working in the United Kingdom. He is not covered by qualified or non-qualified plans in the U.S. nor any retirement plans in the UK where he is currently on assignment, but is covered under French social security and other mandatory French pension plans. In addition to government sponsored pension programs, during 2018, Mr. Tessler participated in the defined contribution pension plan for directors of Xerox SAS, France. Contributions to the plan are based on Mr. Tessler’s earnings up to a cap of currently 202,620. The benefits under the Retirement Indemnities Plan are only payable upon retirement which can be as early as age 62. Since Mr. Tessler is not yet age 62, he would not be eligible for any benefits under this plan should he leave Xerox before attaining age 62.

Savings Plans and Deferred Compensation Plan

During 2018, we provided our named executive officers with the opportunity to defer receipt of compensation on a pre-tax basis under the following defined contribution plans:

 

   

Xerox Corporation Savings Plan (tax qualified 401(k) Savings Plan)

 

   

Xerox Corporation Supplemental Savings Plan

Mr. Tessler, a citizen of France, is not eligible to participate in these U.S. Plans.

Xerox Corporation Savings Plan (401(k) Savings Plan)

Mr. Visentin, Mr. Jacobson, Mr. Bandrowczak, Mr. Osbourn and Mr. Feldman were eligible to participate in the 401(k) Savings Plan in the same manner as all other U.S. employees covered by the plan. Each of these named executive officers participated in the 401(k) Savings Plan in 2018. These named executive officers were eligible for a 100% Company match, applied quarterly, on 3% of eligible pay saved on a before-tax basis, subject to IRS qualified plan compensation limits and highly compensated threshold limits. Named executive officers may not receive 401(k) Savings Plan benefits in excess of these limits. For 2019, the Company match changed and provides a 50% match on 6% of eligible pay saved on a before-tax basis, up to IRS limits. Also effective in 2019, the match will be applied at year end and is forfeited in full should the participant leave Xerox prior to year end.

Xerox Corporation Supplemental Savings Plan

When future accruals under U.S pension plans were frozen, the Company introduced the Xerox Corporation Supplemental Savings Plan (SSP), a non-qualified supplemental savings plan for eligible U.S. employees. In 2018, all U.S. named executive officers were eligible to participate. Under the SSP, participants could defer 3% of eligible compensation in excess of the IRS limit for that plan year. The SSP provided for a 100% Company match equal to the amount deferred. Messrs. Visentin, Jacobson, Osbourn and Feldman deferred compensation into the SSP in 2018. This program was closed to new contributions after 2018.

PERQUISITES AND PERSONAL BENEFITS

General Benefits

The Company generally maintains medical and dental coverage, life insurance, accidental death insurance and disability benefits programs or plans for all of its employees, as well as customary vacation, leave of absence

 

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and other similar policies. Named executive officers are eligible to participate in these programs and plans on the same basis as all other salaried employees, except as otherwise disclosed.

Life Insurance

During 2018, the Company provided the Xerox Universal Life Plan to eligible U.S. executives, including the named executive officers. All of the named executive officers participated in this program, except for Mr. Tessler who is not a U.S. employee. Participants could elect to receive Company-paid life insurance equal to three times their base salary. U.S. executives are the sole owners of their policies and are responsible for any taxes due as a result of Company contributions. Company premium payments for this program have been discontinued beginning in 2019.

Perquisites

We periodically review the perquisites that named executive officers receive. The Compensation Committee believes its policies regarding perquisites are conservative compared to other companies. The Company does not pay tax gross-ups in connection with perquisites.

All named executive officers are eligible to receive Company-paid financial planning assistance. Solid financial planning by experts reduces the amount of time and attention that named executive officers devote to their finances and maximizes the value of their compensation. Home security is also provided to Mr. Visentin.

In addition, for purposes of productivity, security and efficiency, the Board of Directors requires Mr. Visentin to use chartered aircraft for business travel when practicable. Mr. Visentin may also use the Company chartered aircraft for personal travel. Employees are permitted to accompany Mr. Visentin on the Company chartered aircraft solely for business purposes with prior authorization by Mr. Visentin. In addition, family members and guests may accompany Mr. Visentin on the Company chartered aircraft. Mr. Visentin is wholly responsible for the tax consequences related to his personal use of Company chartered aircraft. The Company does not provide gross-ups or other tax protection related to his use of chartered aircraft. While he was CEO, Mr. Jacobson also used chartered aircraft for personal reasons.

Mr. Tessler is a citizen of France on international assignment and received an international assignment allowance in 2017, which is customary for Xerox employees on international assignment. The Compensation Committee approved a modification to Mr. Tessler’s relocation agreement as reimbursement for additional transition expenses incurred in connection with his relocation based on a change in his assignment resulting from the Separation. Under his modified relocation agreement, Mr. Tessler received a reimbursement of $19,000 per month for a maximum of twelve months (October 2017 through September 2018). In light of significant business demands, Mr. Osbourn received extended time of ten months for home sale related reimbursements. The cost to the Company for the extended time is the same as if Mr. Osbourn had moved within the original time frame. Mr. Osbourn’s former home was sold during 2018.

For additional information and the total costs to the Company for providing perquisites and personal benefits to the named executive officers during fiscal 2018, see the “All Other Compensation” column of the Summary Compensation Table.

CHANGE IN CONTROL BENEFITS

All named executive officers have change in control severance agreements. We consider these agreements to be in the best interests of our shareholders because they foster the continuous employment and dedication of key management without potential distraction or personal concern if Xerox were to be acquired by another company. These agreements create appropriate incentives for the named executive officers to facilitate a smooth transition in the best interests of the Company and shareholders by continuing to perform in their roles pending a potential change in control. The Compensation Committee periodically reviews change in control severance payment amounts against benchmark data to ensure that amounts are generally consistent with market practices.

 

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If employment is terminated involuntarily (other than for cause, death or disability) or voluntarily for good reason following a change in control (within two years of the change in control for Messrs. Bandrowczak, Osbourn, Feldman and Tessler), our change in control severance agreements with the named executive officers provide:

 

   

A lump sum cash payment equal to 2.99 for Mr. Visentin and twice the sum for all other named executive officers of the executive’s then-current annual base salary and short-term incentive award target.

 

   

Continuation of specified welfare benefits at active employee rates for a period of 24 months.

Severance payments following a change in control are generally not conditioned on non-compete or non-solicitation obligations or other negative covenants.

Other change in control benefit plan provisions include:

 

   

Accelerated vesting of stock awards only upon an involuntary termination of employment (other than a termination for cause) or a voluntary termination for good reason (commonly described as “double-trigger” vesting). Mr. Visentin, as part of his new hire negotiation, would be provided with accelerated vesting of his outstanding stock awards in the event of a change in control without termination of employment. For additional information, please see Named Executive Officers with Unique Compensation Arrangements.

 

   

Immediate vesting in the present value of the accrued non-qualified U.S. pension plan benefits, if any, as of the date of the change in control. Participants are entitled to receive these benefits without regard to the plan’s normal requirements for remaining employed by Xerox until a stated age and number of years of service. If the change in control conforms with applicable tax regulations regarding deferred compensation, participants are entitled to an immediate single-sum payment of the benefit. If the change in control does not conform with applicable tax regulations, participants are entitled to payments in accordance with the schedule normally provided by the plan. The Committee views this accelerated vesting upon a change in control, and accelerated payment upon a conforming change in control, as appropriate to protect the pension benefit, if any, earned by the named executive officer at Xerox. None of the named executive officers are participants in non-qualified U.S. pension benefits.

In addition, if Mr. Visentin voluntarily terminates his employment without Good Reason within 90 days following a change in control, he would receive: (i) cash payments equal to twice the sum of his base salary and target short-term incentive award paid over 24 months (the “Severance Period”), (ii) his annual short-term incentive award for 2018 (Non-Equity Incentive Award) prorated based on actual performance results, (iii) accelerated vesting of all outstanding equity awards (including PSUs at target) that would have otherwise become vested during the Severance Period, and (iv) continuation of welfare benefits at active employee rates during the Severance Period. These payments are subject to execution of a release of claims against the Company and a two-year non-compete/non-solicitation agreement.

We do not provide named executive officers with excise tax reimbursement on severance payments.

Additional information and the amount of the estimated payments and benefits payable to the named executive officers assuming a change in control of Xerox and a qualifying termination of employment is presented under the Potential Payments Upon Termination or Change in Control table.

EMPLOYMENT AND SEPARATION

Named executive officers serve at the will of the Board. This enables the Board to remove a named executive officer whenever it is in the best interests of the Company, with discretion of the Compensation Committee to decide on an appropriate severance package (except for benefits that have vested or in the case of a change in control). When a named executive officer is removed from his or her position, the Compensation Committee has exercised its business judgment in determining whether any special severance arrangement is appropriate in light of all relevant circumstances, including how long the officer was with the Company, past accomplishments, the reasons for separation and requirements under local law.

The Compensation Committee approved an officer severance program in 2017 and revised the program in 2018. Under the officer severance program, an officer who is designated to participate in the plan will be entitled to receive one year (two years for the CEO) of salary continuance and benefits, including pro-rata

 

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vesting of equity grants (if determined by the Compensation Committee) and a pro-rata annual short-term incentive award. The officer severance program includes, and officer separation agreements typically include, a covenant not to engage in activity that is detrimental to the Company. All named executive officers have been approved as participants in the officer severance program. Officers with a written agreement providing for severance benefits upon separation are not eligible for the officer severance program. Mr. Visentin’s negotiated offer letter provides for severance benefits and, in the event of severance, his benefits would be governed by that arrangement. See Named Executive Officers with Unique Compensation Arrangements for further information.

If the Compensation Committee does not approve a severance arrangement under the officer severance program for other named executive officers whose employment is terminated, that officer would be covered under the Company’s regular U.S. severance policy, as applicable at the time of the separation.

Mr. Jacobson’s termination during 2018 was voluntary and he did not receive a severance arrangement. He was no longer eligible for a 2018 short-term incentive award and his unvested long-term incentive awards were cancelled at the time his employment terminated. Mr. Jacobson received earned salary and vacation pay, and vested deferred compensation upon termination.

OTHER FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM

Stock Ownership Requirements

We require each named executive officer to build and maintain a meaningful level of stock ownership.

 

 

Role

 

 

 

Ownership Requirement

 

   

CEO

 

  5 times base salary

 

   

Other named executive officers

 

  3 times base salary

 

To that end, the annual E-LTIP PSU and RSU awards are subject to a mandatory holding requirement. Named executive officers must retain at least 50% of the shares acquired through the vesting of these E-LTIP awards, net of taxes, until they achieve their required level of ownership. Once achieved, named executive officers must continue to hold that amount of stock as long as they remain with the Company. They also remain subject to a holding requirement following separation from employment (including retirement) for six months for the CEO and three months for other named executive officers. The holding requirement essentially restricts the CEO from selling these shares prior to two earnings announcements following separation from employment and prior to one earnings announcement for other named executive officers. For six months following separation, named executive officers may only sell shares during a “window period” (as defined below under Trading, Hedging and Pledging). The CEO has the authority to permit discretionary hardship exceptions (other than for himself) from the ownership and holding requirements to enable participants with financial need to access their vested shares, but no such exceptions have ever been requested.

Shares that count towards ownership requirements include shares owned outright (whether or not held in street name), outstanding unvested restricted stock and RSUs and outstanding earned but unvested PSUs. Outstanding unearned PSUs and stock options do not count towards ownership requirements.

Trading, Hedging and Pledging

Executive officers are prohibited from engaging in short-swing trading and trading in options (including puts, calls and straddles) with respect to Xerox securities. “Short sales” are also prohibited.Under the Company’s insider trading policy, executive officers are permitted to buy or sell Xerox securities only during a “window period,” which is the period commencing on the day that is one full trading day following announcement of quarterly earnings and ending on (and including) the fifteenth day of the last month of the quarter during which the earnings announcement is made. The only exception to this restriction is for executive officers who have entered into trading plans pursuant to SEC Rule 10b5-1.

Executive officers are expected to obtain approval by the CEO prior to selling Xerox securities. In addition, executive officers are prohibited from pledging Xerox securities, including depositing Xerox securities in margin accounts at brokerage firms, and from using Xerox securities as collateral.

 

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Compensation Recovery Policy (Clawbacks)

Typically, separation arrangements with our named executive officers include a provision that rescinds severance payments if an executive engages in activity that is detrimental to the Company. Clawback arrangements may also be included in letter agreements with executives. In addition, the following plans provide for compensation recovery.

Under the 2004 Performance Incentive Plan, if the Compensation Committee deems a named executive officer to have engaged in activity that is detrimental to the Company, it may cancel any awards granted to that individual. In addition, if such a determination is made before any change in control of Xerox, the Compensation Committee may rescind any payment or delivery of an equity or annual cash incentive award that occurred from six months before the detrimental activity. For this purpose, detrimental activity may include a violation of a non-compete agreement with the Company, disclosing confidential information (except for reporting and other communications protected by “whistleblower” provisions of Dodd Frank), soliciting an employee to terminate employment with the Company, or soliciting a customer to reduce its level of business with the Company. If a payment or award is rescinded, the named executive officer will be expected to pay the Company the amount of any gain realized or payment received in a manner the Compensation Committee or its delegate requires.

Our E-LTIP equity award agreements, under the 2004 Performance Incentive Plan, include a clawback provision that applies if an accounting restatement is required to correct any material non-compliance with financial reporting requirements as required under Dodd Frank. Under this provision, the Company can recover, for the three prior years, any excess incentive-based compensation (the excess over what would have been paid under the accounting restatement) from executive officers or former executive officers. Short-term incentive awards are also subject to clawback provisions.

Under the Xerox Corporation Supplemental Savings Plan, if a participant, including a named executive officer, is found to have engaged in detrimental activity, the Plan Administrator may reduce or delete the matching contribution account balance and not pay such amounts to that individual.

CERTAIN TAX IMPLICATIONS OF EXECUTIVE COMPENSATION

Section 162(m) of the Internal Revenue Code of 1986, as amended (Section 162(m)), limits to $1 million per year the federal income tax deduction available to public corporations for compensation paid for any fiscal year to the corporation’s CEO and certain other named executive officers included in the Summary Compensation Table in the Company’s proxy statement. Prior to 2018, this limitation on deductibility did not apply to qualifying “performance-based compensation” and did not apply to our CFO. In December 2017, the Tax Cuts and Jobs Act (Tax Act) was signed into law. Under the Tax Act, the exemption from Section 162(m)’s deduction limit for “performance-based compensation” was repealed, effective for taxable years beginning after December 31, 2017, and extended the limitation to compensation paid to CFOs and certain former named executive officers. As a result, all compensation in excess of $1 million paid to each of our named executive officers will not be deductible unless the compensation qualifies for certain transition relief applicable to certain arrangements in place as of November 2, 2017. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exception to the deduction limit for performance-based compensation, no assurance can be given that compensation which had been intended to satisfy the requirements for exception from the Section 162(m) deduction limit will, in fact, satisfy the exception.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Xerox management. Based upon its review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and be included in the Proxy Statement for the 2019 Annual Meeting of Shareholders.

Cheryl Gordon Krongard, Chair

Gregory Q. Brown

Jonathan Christodoro

A. Scott Letier

 

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SUMMARY COMPENSATION TABLE

The Summary Compensation Table below provides compensation information for the CEO and former CEO, the CFO and the next three most highly compensated executive officers who served during the fiscal year ended December 31, 2018 (collectively referred to as named executive officers). The table includes the dollar value of base salary earned, bonus, stock and option awards, non-equity incentive plan compensation earned, change in pension value, if any, above-market non-qualified deferred compensation earnings, if any, and all other compensation, whether paid or deferred.

For a summary of the Compensation Committee’s decisions on the compensation awarded to our named executive officers for fiscal 2018, please refer to the CD&A beginning on page [].

 

Name &

Principal

Position

  Year    

Salary

($) (A)

   

Bonus

($) (B)

   

Stock
Awards

($) (C)

    Option
Awards
($) (D)
    Non-Equity
Incentive Plan
Compensation
($) (E)
   

 

Change in
Pension
Value and
NQDC
Earnings
($) (F)

  All Other
Compensation
($) (G)
   

Total

($)

 
                   

Giovanni (John) Visentin Vice Chairman and Chief Executive Officer

 

    2018       756,522       1,500,000       17,500,045       1,572,794       1,800,000     -     329,642       23,459,003  
                   
Jeffrey Jacobson
Former Chief
Executive Officer
    2018       365,942       500,000       4,875,033       1,022,060       -     -     95,678       6,858,713  
    2017       1,000,000       -       6,500,047       -       1,935,000     -     78,138       9,513,185  
   

 

2016

 

 

 

   

 

812,500

 

 

 

   

 

-

 

 

 

   

 

3,500,005

 

 

 

   

 

-

 

 

 

   

 

964,875

 

 

 

  -

 

   

 

69,219

 

 

 

   

 

5,346,599

 

 

 

                   

Steven J. Bandrowczak President and Chief Operations Officer

 

    2018       272,917       300,000       3,184,407       206,591       273,000     -     2,981       4,239,896  
                   

William F. Osbourn, Jr. Executive Vice
President and
Chief Financial Officer

 

    2018       625,000       -       1,687,531       353,793       531,250     -     168,280       3,365,854  
   

 

2017

 

 

 

   

 

625,000

 

 

 

   

 

-

 

 

 

   

 

3,375,018

 

 

 

     

 

825,000

 

 

 

  -

 

   

 

200,945

 

 

 

   

 

5,025,963

 

 

 

                                                                   
                   

Michael D. Feldman
Executive Vice
President and
President, North
America Operations

 

    2018       575,000       300,000       1,875,030       393,107       385,250     -     42,876       3,571,261  
   

 

2017

 

 

 

   

 

575,000

 

 

 

   

 

-

 

 

 

   

 

2,500,027

 

 

 

   

 

-

 

 

 

   

 

725,000

 

 

 

  -

 

   

 

30,371

 

 

 

   

 

3,830,398

 

 

 

                                                                   
                   

Hervé N. Tessler
Executive Vice
President and
President, International
Operations

 

    2018       573,273       238,488       1,500,031       314,485       286,637     210,661     546,981       3,670,556  
   

 

2017

 

 

 

   

 

598,567

 

 

 

   

 

-

 

 

 

   

 

2,000,039

 

 

 

   

 

-

 

 

 

   

 

796,094

 

 

 

  285,861

 

   

 

847,188

 

 

 

   

 

4,527,749

 

 

 

                                                                   

Compensation reported in this table is in U.S. dollars and rounded to the nearest dollar. Mr. Tessler is paid in euros. For purposes of his compensation reported in this table, the conversion from euros to U.S. dollars is based on the exchange rate of 1.1436 USD per EUR, consistent with the exchange rate used in the Company’s 2018 Annual Report on Form 10-K for the year ended December 31, 2018.

 

(A)

Amounts shown represent base salary earned in 2018. For Messrs. Visentin and Bandrowczak, the value represents base salary earned from their hire dates (May 15, 2018 and June 25, 2018 respectively). For Mr. Jacobson, the value represents base salary earned through his voluntary termination of employment with the Company on May 13, 2018.

 

(B)

The awards shown in column (B) for Mr. Visentin and Mr. Bandrowczak reflect their lump sum cash sign-on award approved as part of their negotiated offer letters. For more information on these awards, see the Named Executive Officers with Unique Compensation Arrangements section in the CD&A. Also included are cash incentive awards for Mr. Jacobson, Mr. Feldman and Mr. Tessler. These awards were approved by the Compensation Committee in 2016, payable on the one-year anniversary of the

 

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  Separation to recognize the work required to accomplish the Separation and to further retain these executives beyond the Separation.

The Annual APIP awards appear as “Non-Equity Incentive Plan Compensation” in column (E).

 

(C)

The amounts shown in this column represent the aggregate grant date fair values of equity awards in the form of PSUs and RSUs granted to our named executive officers in 2018, computed in accordance with FASB ASC Topic 718, Compensation—Stock Compensation. As a result of Mr. Jacobson’s voluntary termination of employment with the Company on May 13, 2018, his PSUs and RSUs were cancelled.

PSU awards under 2018 E-LTIP were granted on May 15, 2018 for Mr. Visentin, July 1, 2018 for Mr. Bandrowczak and April 6, 2018 for Messrs. Jacobson, Osbourn, Feldman and Tessler. The grant date fair value of these awards at maximum performance is as follows: Mr. Visentin — $10,000,014; Mr. Jacobson — $6,500,022; Mr. Bandrowczak — $1,312,542; Mr. Osbourn — $2,250,042; Mr. Feldman — $2,500,026; and Mr. Tessler — $2,000,056.

This column also includes the grant date fair value of the new hire restricted stock award granted to Mr. Visentin on May 15, 2018 ($10,000,025) and the new hire RSU award granted to Mr. Bandrowczak on July 1, 2018 ($2,200,008) as described in the CD&A under Compensation Committee Actions Relating to E-LTIP Awards and Named Executive Officers with Unique Compensation Arrangements.

 

(D)

The amounts shown in this column represent the grant date fair values of equity awards in the form of stock options granted to our named executive officers in fiscal year 2018, computed based on a Black-Scholes value in accordance with FASB ASC Topic 718, Compensation — Stock Compensation, which varies from the modified Black-Scholes value used to calculate the number of stock options granted, as explained in footnote “F” of the “Grants of Plan Based Awards” table. As a result of Mr. Jacobson’s voluntary termination of employment with the Company on May 13, 2018, his stock options were cancelled.

 

(E)

The Non-Equity Incentive Plan payments under the 2018 APIP, based on 2018 performance, were approved by the Compensation Committee in February 2019. Actual 2018 full year payments as a percentage of target were as follows: Mr. Visentin, 100% (paid on his annualized base salary); Mr. Bandrowczak, 100%; Mr. Osbourn, 85%; Mr. Feldman, 67%; and Mr. Tessler, 50%. Mr. Jacobson did not receive an APIP payment as a result of his voluntary termination of employment with the Company on May 13, 2018. For more information, see the 2018 Performance for Short-Term Incentive Award Performance Measures and Payouts section in the CD&A.

 

(F)

Mr. Tessler participates in the Retirement Indemnities Plan, our French pension plan which we are required to maintain under a certain collective agreement with our employees in France. Mr. Tessler is the only named executive officer who participates in a pension plan. The increase in pension value shown in this column is calculated by determining the increase in the present value of the benefits from December 31, 2017 to December 31, 2018. The change in the present value of the accrued pension benefits is impacted by an additional year of age and by changes in the discount rate used in the present value calculation. The present value is computed using the FASB ASC Topic 715 assumptions in effect on December 31, 2018 and assuming the benefit commences at the earliest retirement date at which unreduced benefits are payable (age 62). These assumptions include a discount rate of 1.45% for the Retirement Indemnities Plan and an exchange rate of 1.1436 USD per EUR, consistent with the rates used in the Company’s 2018 Annual Report on Form 10-K for the year ended December 31, 2018. The primary driver of the increase in his pension value is due to the amount of the short-term incentive paid in 2018 compared to the short-term incentive paid in 2017. As of December 31, 2017, the assumptions used for Mr. Tessler’s pension value included a discount rate of 1.25% and a December 31, 2017 exchange rate of 1 euro to 1.1941 U.S. dollars. For more information, see the Pension Benefits For the 2018 Fiscal Year table and footnotes.

Messrs. Visentin, Jacobson, Osbourn and Mr. Feldman participated in the supplemental savings plan in 2018. No above-market earnings are credited under this plan. See the Non-Qualified Deferred Compensation for the 2018 Fiscal Year table for additional information.

 

(G)

The table below provides additional data on the amounts included under the “All Other Compensation” column.

 

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All Other Compensation Table

 

 

                   

Name

 

 

Year

 

    Personal
Use of
Aircraft
($) (1)
   

 International 
Assignment
Allowances
($) (2)

 

 

Life
Insurance
Paid by
Registrant

($) (3)

    Relocation
Expenses
($) (4)
   

Tax Related

Reimbursements
($) (5)

   

401(k) and
SSP
Company
Match

($) (6)

   

Miscellaneous

($) (7)

    Total All Other
Compensation
($)
 

G. Visentin

 

   

 

2018

 

 

 

   

 

275,715

 

 

 

  -

 

   

 

3,194

 

 

 

   

 

-

 

 

 

   

 

-

 

 

 

   

 

13,696

 

 

 

   

 

37,037

 

 

 

   

 

329,642

 

 

 

J. Jacobson

    2018       75,903     -     4,775       -       -       15,000       -       95,678  
      2017       1,142     -     11,511       -       -       58,946       6,539       78,138  
     

 

2016

 

 

 

   

 

105

 

 

 

  -

 

   

 

8,220

 

 

 

   

 

-

 

 

 

   

 

-

 

 

 

   

 

31,935

 

 

 

   

 

28,959

 

 

 

   

 

69,219

 

 

 

S. J. Bandrowczak    

 

2018

 

 

 

   

 

-

 

 

 

  -

 

   

 

1,509

 

 

 

                   

 

1,313

 

 

 

   

 

159

 

 

 

   

 

2,981

 

 

 

W. F. Osbourn, Jr.     2018       -     -     4,354       63,835       55,119       38,813       6,159       168,280  
     

 

2017

 

 

 

   

 

-

 

 

 

  -

 

   

 

4,035

 

 

 

   

 

133,542

 

 

 

   

 

55,109

 

 

 

   

 

8,100

 

 

 

   

 

159

 

 

 

   

 

200,945

 

 

 

M. D. Feldman

    2018       -     -     3,389       -       -       39,000       487       42,876  
   

 

2017

 

 

 

   

 

 

-

 

 

 

 

 

  -

 

   

 

3,166

 

 

 

   

 

-

 

 

 

   

 

-

 

 

 

   

 

27,046

 

 

 

   

 

159

 

 

 

   

 

30,371

 

 

 

H. N. Tessler

    2018       -     173,367     -       135,354       238,260       -       -       546,981  
     

 

2017

 

 

 

   

 

-

 

 

 

  319,412

 

   

 

-

 

 

 

   

 

55,178

 

 

 

   

 

472,598

 

 

 

   

 

-

 

 

 

   

 

-

 

 

 

   

 

847,188

 

 

 

 

 

 

(1)

For reasons of productivity, security and efficiency, the Company requires Mr. Visentin to use Company chartered aircraft for business travel. Mr. Visentin may also use the Company chartered aircraft for personal travel. The compensation value of personal usage of Company chartered aircraft is calculated based on the aggregate incremental cost to the Company, using the incremental aircraft operating rate based on the number of flight hours used, and primarily includes the cost of fuel, maintenance and other variable costs (such as the cost of landing fees, crew on the road expenses, trip related service and maintenance, airport taxes and fees). Mr. Visentin is also allowed to bring guests, such as family members, on the Company chartered aircraft. The Company does not provide gross-ups or other tax protection related to his personal use of Company chartered aircraft.

 

  

While Mr. Jacobson was CEO, he also used Company chartered aircraft for personal air travel. The compensation value of Company chartered aircraft for personal usage for Mr. Jacobson is calculated in the same manner as described above for Mr. Visentin.

 

(2)

Mr. Tessler, who is a citizen of France, received certain benefits in connection with his international assignment in the U.S. and thereafter in the U.K. Included in this column are Mr. Tessler’s assignment allowance ($5,128), automobile allowance ($12,675), and the cost of his incremental U.K. housing allowance ($155,564).

 

(3)

Amounts in this column include the imputed income for Company-paid life insurance under the Xerox Universal Life Plan.

 

(4)

In light of significant business demands, Mr. Osbourn received extended time of ten months for home sale related reimbursements. Mr. Osbourn’s former home was sold during 2018 and this column reflects payment of certain closing costs in connection with that sale. The cost to the Company for the extended time is the same as if Mr. Osbourn had moved within the original time frame.

Prior to the announcement of the Separation, the intent was that Mr. Tessler would be localized in the U.S. As a result, he made significant commitments including the purchase of a home in the U.S. As part of the new leadership team, Mr. Tessler was asked in late 2016 to relocate to the U.K. to lead our International Operations. To offset the additional carrying charges on his home in the U.S. while it was being marketed for sale, in 2017 the Compensation Committee approved a modification to his relocation agreement to provide for additional benefits through September 2018 which totaled $129,052. This column also includes other incidental benefits such as dependent travel and tax preparation services.

 

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(5)

For Mr. Osbourn, the amount in this column, represents gross-up payments related to reimbursement of expenses in connection with relocation. Mr. Tessler’s tax related reimbursements are covered under the Xerox international assignment policy and relate to relocation expenses, expatriate tax assistance and equalization in the U.S. and U.K.

 

(6)

In addition to the Company match under the 401(k) savings plans, this column also includes the Company match under the Xerox non-qualified supplemental savings plan (SSP) for Messrs: Visentin, Jacobson, Osbourn ($30,563) and Feldman ($30,750). See the Non-Qualified Deferred Compensation for the 2018 Fiscal Year Table for additional information.

 

(7)

Amounts in this column for 2018 include identity theft protection, financial planning assistance and other incidental benefits of de minimis value. Mr. Visentin’s amount for 2018 includes initial home security installation and maintenance which totaled $28,810.

 

(8)

In accordance with applicable SEC rules, dividend equivalents paid in 2018 on PSUs and RSUs are not included in “All Other Compensation” because those amounts were factored into the grant date fair values of the PSUs and RSUs.

For further information on the components of the executive compensation program, see the CD&A.

GRANTS OF PLAN-BASED AWARDS IN 2018

The following table provides additional detail for each of the named executive officers on potential amounts payable under APIP and E-LTIP and Mr. Visentin’s restricted stock award as presented in the Summary Compensation Table. Threshold, target and maximum award opportunities are provided, as applicable.

 

Name

 

      Grant     Date of     Estimated Future Payout
Under Non-Equity Incentive
Awards (B)
  Estimated Future Payout
Under Equity Incentive
Awards (C)
  All
Other
Stock
Awards:
Number
of
Shares
or
Stock
 

All Other
Option
Awards:
Number

of
Securities
Underlying

   

Grant
Date

Fair

Value

of Stock

and
Option

 
 

Award

 

 

Date
(A)

 

   

Action
(A)

 

   

Threshold
($)

 

 

Target
($)

 

 

Maximum
($)

 

 

Threshold
(#)

 

 

Target
(#)

 

 

Maximum
(#)

 

 

Units
(#) (D)

 

 

Options
(#) (E)

 

   

Awards
($) (F)

 

 
                         
G. Visentin   2018

APIP

 

   

 

-

 

 

 

   

 

-

 

 

 

  299,700

 

  1,800,000

 

  2,400,000

 

  -

 

  -

 

  -

 

  -

 

   

 

-

 

 

 

   

 

-

 

 

 

                         
    2018
E-LTIP

 

   

 

5/15/18

 

 

 

   

 

5/14/18

 

 

 

  -

 

  -

 

  -

 

  19,483

 

  167,164

 

  334,328

 

  -

 

   

 

-

 

 

 

   

 

5,000,007

 

 

 

                         
    2018
E-LTIP

 

   

 

5/15/18

 

 

 

   

 

5/14/18

 

 

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

  87,689

 

   

 

-

 

 

 

   

 

2,500,013

 

 

 

                         
    2018
E-LTIP

 

   

 

5/15/18

 

 

 

   

 

5/14/18

 

 

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

   

 

269,314

 

 

 

   

 

1,572,794

 

 

 

    Restricted
Stock

 

   

 

5/15/18

 

 

 

   

 

5/14/18

 

 

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

  350,755

 

   

 

-

 

 

 

   

 

10,000,025

 

 

 

                         

J. Jacobson

 

  2018

APIP

   

 

-

 

 

 

   

 

-

 

 

 

  249,750

 

  1,500,000

 

  3,000,000

 

  -

 

  -

 

  -

 

  -

 

   

 

-

 

 

 

   

 

-

 

 

 

    2018
E-LTIP

 

   

 

4/6/18

 

 

 

   

 

2/21/18

 

 

 

  -

 

  -

 

  -

 

  12,904

 

  110,715

 

  221,430

 

  -

 

   

 

-

 

 

 

   

 

3,250,011

 

 

 

    2018
E-LTIP

 

   

 

4/6/18

 

 

 

   

 

2/21/18

 

 

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

  58,078

 

   

 

-

 

 

 

   

 

1,625,022

 

 

 

    2018
E-LTIP

 

   

 

4/6/18

 

 

 

   

 

2/21/18

 

 

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

   

 

178,370

 

 

 

   

 

 

1,022,060

 

 

 

 

 

 

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Table of Contents

Name

 

      Grant     Date of     Estimated Future Payout
Under Non-Equity Incentive
Awards (B)
  Estimated Future Payout
Under Equity Incentive
Awards (C)
  All
Other
Stock
Awards:
Number
of
Shares
or
Stock
 

All Other
Option
Awards:
Number

of
Securities
Underlying

   

Grant
Date

Fair

Value

of Stock

and
Option

 
 

Award

 

 

Date
(A)

 

   

Action
(A)

 

   

Threshold
($)

 

 

Target
($)

 

 

Maximum
($)

 

 

Threshold
(#)

 

 

Target
(#)

 

 

Maximum
(#)

 

 

Units
(#) (D)

 

 

Options
(#) (E)

 

   

Awards
($) (F)

 

 
                         

S. J. Bandrowczak

 

  2018

APIP

 

   

 

-

 

 

 

   

 

-

 

 

 

  45,455

 

  273,000

 

  546,000

 

  -

 

  -

 

  -

 

  -

 

   

 

-

 

 

 

   

 

-

 

 

 

                         
    2018
E-LTIP

 

   

 

7/1/18

 

 

 

   

 

6/8/18

 

 

 

  -

 

  -

 

  -

 

  3,038

 

  26,064

 

  52,128

 

  -

 

   

 

-

 

 

 

   

 

656,271

 

 

 

                         
    2018
E-LTIP

 

   

 

7/1/18

 

 

 

   

 

6/8/18

 

 

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

  13,672

 

   

 

-

 

 

 

   

 

328,128

 

 

 

                         
    2018
E-LTIP

 

   

 

7/1/18

 

 

 

   

 

6/8/18

 

 

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

  -

 

   

 

41,990

 

 

 

   

 

206,591

 

 

 

    RSU

 

   

 

7/1/18