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Xerox Provisions
Practical Law Glossary Item 3-518-8849 (Approx. 3 pages)
Glossary
Xerox Provisions
Business jargon for certain provisions in acquisition agreements that are included specifically to benefit the lenders in an acquisition financing. Named for their introduction in the 2009 agreement for the acquisition of Affiliated Computer Services, Inc. by Xerox Corporation, these provisions make clear that the buyer's payment of the reverse break-up fee not only limits any further remedies of the seller against the buyer and its affiliates but against the lenders as well. The "Xerox" provision refers collectively to:
- Sole and exclusive remedy. The reverse break-up fee, when paid, is the seller's sole and exclusive remedy against the buyer and its affiliates and the lenders.
- No recourse to lenders. The buyer, through its privity of contract with the lenders, can sue the lenders to perform under their debt-financing commitment. Although the seller does not have privity with the lenders, it can negotiate for a right to force the buyer to pursue this litigation. However, the lenders often want the acquisition agreement to be clear that the seller itself cannot directly enforce the lenders' obligations against them just because it is party to the acquisition agreement.
- Exclusive venue. Lenders want any litigation relating to the debt financing to be brought in New York and not in other, typically plaintiff-friendly jurisdictions.
- Waiver of jury trial. Similar to their motivation for exclusive-venue provisions, lenders want to avoid the unpredictability of having litigation against them decided by a jury. Therefore, lenders want the jury-waiver provision (already common in almost all acquisition agreements) to include a waiver of jury trial for litigation relating to the debt financing.
For these provisions to be effective, the lenders also want the acquisition agreement to include these protections:
- Amendment. The parties to the acquisition agreement should be expressly forbidden from amending the above provisions in a manner adverse to the lenders without the lenders' prior written consent.
- Third-party beneficiaries. Although acquisition agreements typically include a "No Third-Party Beneficiaries" section, an agreement with Xerox provisions specifies that the lenders are in fact third-party beneficiaries of the remedy, recourse, venue, jury-waiver and amendment sections described above.
For drafting suggestions for Xerox provisions, see Practice Note, Drafting and Negotiating Reverse Break-Up Fee and Specific Performance Provisions.