2018 - KPB & Co. · supreme court of the state of new york county of new york darwin deason,...

SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK

DARWIN DEASON,

Plaintiff,

- against -

Index No. 650675/2018

FUJIFILM HOLDINGS CORP., XEROX CORP., JEFF

JACOBSON, GREGORY Q. BROWN, JOSEPH J. (Ostrager, J.)

ECHEVARRIA, WILLIAM CURT HUNTER, ROBERTJ. KEEGAN, CHERYL GORDON KRONGARD, Motion Sequence Nos. 001, 002

CHARLES PRINCE, ANN N. REESE, STEPHEN H.

RUSCKOWSKI, SARA MARTINEZ TUCKER, and

URSULA M. BURNS,

Defendants.

XEROX DEFENDANTS' OMNIBUS MEMORANDUM OF LAW IN OPPOSITION

TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION ANDIN FURTHER SUPPORT OF XEROX DEFENDANTS' MOTION TO DIMISS

FILED: NEW YORK COUNTY CLERK 04/19/2018 11:39 AM INDEX NO. 650675/2018

NYSCEF DOC. NO. 341 RECEIVED NYSCEF: 04/19/2018

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TABLE OF CONTENTS

filE£

PRELIMINARY STATEMENT .....................................................................................................1 1

STATEMENT OF FACTS..............................................................................................................8. .8

I. Background of Xerox and Its JV with Fujifilm.......................................................8 .8

II. The Transaction .....................................................................................................12 12

ARGUMENT.................................................................................................................................19

I. Deason's Motion for a Prelinlinary Injunction Should Be Denied........................19

a) New York Law Iniposes a High Standard for the Drastic Relief

Deason Seeks .............................................................................................19 19

b) Deason Cannot Establish a Likelihood of Success on the Merits..............20

c) Deason Cannot Establish In1minent Risk of Irreparable Hann in

the Absence of an Injunction .....................................................................33 33

d) Deason Cannot Establish a Balance of the Equities in His Favor .............36

CONCLUSION..............................................................................................................................38

i



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TABLE OF AUTHORITIES

Page(s)CASES

1234 Broadway LLC v. W Side SRO Law Project,

Goddard Riverside Cmty. Ctr.,

86 A.D.3d 18 (N.Y. 1st Dep't 2011).............................................................................19, 25

ACP Master, Ltd. v. Sprint Corp.,No. CV 8508-VCL, 2017 WL 3421142 (Del. Ch. July 21, 2017)......................................32

Auerbach v. Bennett,

47 N.Y.2d 619 (1979).....................................................................................................3, 37

In re Bear Stearns Litig.,870 N.Y.S.2d 709 (N.Y. Sup. Ct. 2008).............................................................................20

Benihana of Tokyo, Inc. v. Benihana, Inc.,

891 A.2d 150 (Del. Ch. 2005).............................................................................................22

CC Vending, Inc. v. Berkeley Educ. Servs. of N.Y., Inc.,74 A.D.3d 559 (N.Y. 1st Dep't 2010).................................................................................19

Cinerama, Inc. v. Technicolor, Inc.,

663 A.2d 1156 (Del. 1995).............................................................................................5, 23

Cnty. of Suffolk v. Givens,106 A.D.3d 943 (N.Y. 2d Dep't 2013)...............................................................................19.

In re Cogent, Inc. S'holder Litig.,

7 A.3d 487 (Del. Ch. 2010)...........................................................................................35, 36

Hanson Trust PLC v. ML SCM Acquisition Inc.,781 F.2d 264 (2d Cir. 1986)..................................................................................................3

Higgins v. N Y. Stock Exchange,

10 Misc.3d 257 (N.Y. Sup. Ct. 2005).................................................................................25

High Tides, LLC v. DeMichele,

931 N.Y.S.2d 377 (N.Y. App. Div. 2011)..........................................................................37.

Hollinger Int'l v. Black,

844 A.2d 1022 (Del. Ch. 2004)...........................................................................................36

Hyman v. N Y. Stock Exch., Inc.,

46 A.D.3d 335 (N.Y. 1st Dep't 2007).................................................................................20

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Koultukis v. Phillips,

285 A.D.2d 433 (N. Y. 1st Dep't 2001)..............................................................................19

Levy Invs., Ltd. v. USI Holdings Corp.,No. 1011/072007 WL 7321658, (N.Y. Sup. Ct. Mar. 28, 2007)......................28,......................28, 30, 35, 37

Lippe v. Bairnco Corp.,

230 B.R. 906 (S.D.N.Y. 1999)............................................................................................37

Lombard v. Station Sq. Inn Apts. Corp.,94 A.D.3d 717 (N.Y. 2d Dep't 2012).................................................................................37

In re MeadWestvaco Stockholders Litig.,

2017 WL 3526326 (Del. Ch. Aug. 17, 2017).....................................................................21

In re Med. Action Indus., Inc., S'holders Litig.,No. 64930-2014, 2014 WL 4809795 (N.Y. Sup. Ct. Sept. 19, 2014)...........................31, 35

Merrill Lynch Realty Assocs., Inc. v. Burr,

140 A.D.2d 589 (N.Y. 2d Dep't 1988)...............................................................................20.

Mills Acquisition Co. v. Macmillan, Inc.,559 A.2d 1261 (Del. 1989)...........................................................................................26,. 32

In re Netsmart Techs., Inc. S'holders Litig.,

924 A.2d 171 (Del. Ch. 2007).............................................................................................34

Orman v. Cullman,794 A.2d 5 (Del. Ch. 2002)...........................................................................................22, 31

Phillips v. Insituform of N. Am., Inc.,

No. 9173, 1987 WL 16285 (Del. Ch. Aug. 27, 1987) ........................................................35 35

Putter v. City of New York,27 A.D.3d 250 (N.Y. 1st Dep't 2006).................................................................................19

Roberts v. Paterson,

84 A.D.3d 655 (N.Y. 1st Dep't 2011).................................................................................20

Saran v. Chelsea GCA Realty P'ship, L.P.,

148 A.D.3d 1197 (N.Y. 2d Dep't 2017).............................................................................19

State Wis. Inv. Bd. v. Bartlett,

2000 WL 238026 (Del. Ch. 2000)................................................................................30, 35

Sur La Table, Ltd. v. Rosenthal AG,

173 A.D.2d 325 (N.Y. 1st Dep't 1991)...............................................................................20

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Vaccaro v. New Sources Energy Partners L.P.,

No. 15-CV-8954 (KMW), 2016 WL 7373799 (S.D.N.Y. Dec. 19, 2016)...................28,...................28, 34

Vill. of Westhampton Beach v. Cayea,38 A.D.3d 760 (N.Y. 2d Dep't 2007).................................................................................20

Weinberger v. UOP, Inc.,

457 A.2d 701 (Del. 1983)...................................................................................................32

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Fuji"

Brief"

PRELIMINARY STATEMENT

Plaintiff Deason-who is, along with Carl Icahn, one of Xerox's largest

shareholders-seeks to disenfranchise the rest of Xerox's shareholders from voting on a

"Transaction"highly beneficial strategic transaction (the "Transaction") between Xerox, Fujifilm Holdings

Corp. ("Fuji"),("

and their longstanding Joint Venture, Fuji Xerox ("Fuji(" Xerox," "FX"

or the

"JV"). As set forth below, and also set forth in greater detail in the XeroxDefendants'

Memorandum of Law in Opposition toPlaintiffs'

Motion for Preliminary Injunction in In re

Xerox Corporation Consolidated Shareholder Litigation, Index No. 650766/2018 (the "Xerox

Class Brief"), Deason comes up far short on the law and facts and has failed entirely to meet

his burden of clearly showing his entitlement to the injunctive relief he seeks.

Deason originally sought to enjoin the Transaction on the basis of a theory that certain

agreements related to a decades-long joint venture between Xerox and Fuji were not

appropriately disclosed. While he still clings to this meritlesstheory,'

the Class Plaintiffs in

the related shareholder putative class action have rejected it-and rightly so, as the record

provides it no support. The disclosures around the JV were at all times completely

appropriate, and even if they had not been, the complete disclosure of the agreements

underlying the JV in January 2018 wholly moots any complaint about their having been

previously withheld. The shareholders have a complete record on which to vote, and Deason

should let them have their say.

The wholly new allegations in Deason's amended complaint fare no better-like the

Class Plaintiffs, he argues based on a series of excerpts from the evidentiary record to try to

suggest that in the course of discussions with Fuji, Xerox's CEO, Jeff Jacobson, was

1 See Supplemental Memorandum of Law in Support of Plaintiff's Motion for a Preliminary Injunction, Dkt.â€”No. 65 C'Deason I Br.") 34 36.



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"Board"

somehow running amok, and that the Transaction resulted from Jacobson's interest in being

CEO of the combined entity. This nanative bears no more scrutiny than his first. As set forth

below, and in the Xerox Class Brief, and as we will demonstrate at the April 26 hearing, the

Transaction was thoroughly negotiated, fully vetted, and unanimously approved by the Xerox

Board of Directors (the "Board") as the best available alternative to create value for Xerox

shareholders. Jacobson's potential hiring as CEO of the combined entity does not as a matter

of law, or fact, create a conflict of interest-and even if it did, the approval of the deal, after

careful consideration and a robust review, by nine, highly qualified, entirely independent

public directors would nevertheless be entitled to business judgment review, which is easily

satisfied. Indeed, as set forth below, and in the Xerox Class Brief, the transaction process and

the deal terms themselves satisfy even the more searching entire fairness review.

Remarkably, Deason filed his inflammatory claims despite having never reviewed the

disclosures he claims are infirm, or the documents (now disclosed) that he claims should have

been disclosed. He acknowledged in his deposition that his attack on the Transaction is pure

conjecture, as he has no understanding or knowledge of the benefits Xerox enjoys from its

longstanding relationship with Fujifilm and FX, the terms of the JV agreements, the process

of the Board in pursuing alternatives and negotiating the Transaction, or the terms of the

Transaction and its benefits to Xerox and its shareholders.

New York law does not permit Deason to second-guess the Board's business judgment

in this way, much less disenfranchise all other Xerox shareholders from voting on the

Transaction-the only transaction available with any counterparty, notwithstanding the fact

that Xerox unquestionably engaged in a 10-month strategic review, and has been "inplay"

since at least January 2018. The business judgment rule shields the good faith decisions of

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the Board from precisely the type of after-the-fact criticism that Deason advances here.

Provided the actions of the Board are taken "in good faith and in the exercise of honest

judgment in the lawful and legitimate furtherance of corporatepurposes,"

the business

judgment rule "bars judicialinquiry"

into "[q]uestions of policy, of management, expediency

of contracts or action, [or] adequacy ofconsideration"

determined by the Board. Auerbach v.

Bennett, 47 N.Y.2d 619, 629 (1979). In New York, the business judgment rule's presumption

of propriety applies even in circumstances of a potential change of control. Hanson Trust

PLC v. ML SCM Acquisition Inc., 781 F.2d 264, 273 (2d Cir. 1986).

The Board's year-long consideration of the best strategic options for Xerox was

supportedI Jt' by eminent advisors, including a leading investment banking finn that rendered a

fairness opinion on the Transaction. The Transaction is subject to a shareholder vote expected

to take place no earlier than June 2018. Deason seeks to disenfranchise all other Xerox

shareholders and enjoin a vote on the Transaction simply because Deason, now working in

concert with Icahn, does not share the Board's assessment of the deal and believes that the

Board should have adopted a different strategy.

To avoid the deference clearly afforded the Board under the business judgment rule,

Deason has concocted an utterly fictional story, stringing together sound bites from out of

context documents and testimony, to claim that this model Board (with nine out of ten

independent directors, including two sitting CEOs of public companies, two former CEOs of

public companies, the former CEO of a top 4 accounting firm, and the former CFO of a public

company), violated their fiduciary duties of loyalty and care in approving the Transaction.

Deason urges the demonstrably false narrative that these nine independent directors blindly

delegated the entire negotiation to the one internal director, Xerox's CEO Jacobson, who

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â€”

allegedly suffered from a conflict of interest due to the fact that Icahn was lobbying for his

ouster and the Board was interviewing replacement candidates and allegedly had detennined

to replace him. According to Deason (but, again, contrary to the record evidence), Jacobson

switched allegiances and single-handedly steered negotiations to vastly favor Fujifilm because

Fujifilm, in return, agreed to Jacobson's employment in the post-transaction company.

Deason contends (again contrary to the record evidence and, indeed, all logic) that the nine

independent board members rushed to support this unfair deal because they were under the

complete control of the self-interested Jacobson-despite the fact that the Board was engaged

in an effort to find a potential replacement CEO. This fabricated narrative is preposterous.

In the end, Deason's"conflict"

argument rests almost entirely on the assertion that

Jacobson, who played an integral role in the negotiation of the Transaction, was conflicted by

virtue of Icahn's threat to seek his ouster, Jacobson's knowledge that the Board was

interviewing potential replacement candidates, and Fujifilm's promise of future employment

in connection with the Transaction. But the"conflict"

argument with respect to Jacobson is

also factually unsupported and legally irrelevant, despite the vigor of the ad hominem attack

Deason has mounted.

First, it is crystal clear that even if Jacobson (the only inside director on the Board)

were conflicted-and he was not-any such conflict did not infect the decision of the nine

outside directors who approved the Transaction. Deason does not provide any support for his

allegation that Jacobson dominated or controlled the independent directors-indeed, he

cannot even come up with a theory, resorting to a conclusory accusation that "Whether

through incompetence, self-interest, or passivity, the Board's will was effectively supplanted

by Jacobson'sself-dealing."

Unlike Deason's wild theories, the Board's competence,

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independence, and active engagement in considering the Transaction is proven in the record.

Deason's argument that Jacobson controlled the independent Board members is not credible

given, as Deason himself repeatedly emphasizes, the Board was seriously considering

replacing Jacobson as CEO and interviewing candidates for that purpose.

Second, the Board was at all times aware of Jacobson's purported "conflicts": the

Board was aware of Icahn's threats to replace Jacobson, it was aware of its own activity in

searching for a potential replacement (and understood that, after November 10, 2017,

Jacobson knew of this search), and the Board was aware-in real time, from Jacobson (as

well as the Board's financial advisor)-of Fujifilm's regard for Jacobson and that Fujifilm

would want Jacobson to lead the post-transaction company. Jacobson's disclosure to the

Board moots any claims of impropriety or taint with respect to the considered judgments the

Board made in negotiating and unanimously approving theTransaction.2

In fact, the Board

appropriately viewed the high regard in which Fujifilm held Jacobson as a benefit in

negotiating a value-maximizing deal for Xerox shareholders.

Third, it was the Board, informed by preeminent advisors, that directed the

exploration of Xerox's strategic alternatives and the negotiation of the Transaction terms with

Fujifilm; the Board did not blindly delegate this task to Jacobson and then rubber stamp his

recommendation. Instead, the Board received voluminous analyses and searchingly inquired

into available strategic alternatives and the merits of the Transaction over a 10-month period.

And it was the Board, supported by its investment banking advisor, who crafted the precise

terms that Xerox offered over the course of the negotiation with Fujifilm. Deason's favorite

2See, e.g., Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156, 1168 (Del. 1995) (holding that the businessjudgment rule is rebutted only "if the plaintiff proved that . . . the interested director fail[ed] to disclose hisinterest in the transaction to the board and a reasonable board meniber would have regarded the existenceof the niaterial interest as a significant fact in the evaluation of the proposed transaction") (eniphasis added).

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quotations from the Xerox document production (which are taken completely out of context),

attest to the lively and vigorous review, discussion and debate that the Board undertook with

respect to the Transaction. Moreover, the precise actions (and inaction) that Deason claims

Jacobson took as a result of his alleged conflict of interest, were in fact fully vetted and

endorsed by the independent members of the Board, including: the decision not to conduct an

auction; the negotiation of a "structuredacquisition"

with Fujifilm once a 100% cash

acquisition was no longer a possibility in the foreseeable future; and playing the "Icahn

card"is, emphasizing Icahn's threat to launch a proxy contest, and replace Jacobson as

CEO, if Xerox was not quickly sold-to exert pressure and bring Fujifilm to the table.

While it is true that, over the course of 2017, the Board gave serious consideration to

replacing Jacobson as CEO, the evidence is undisputed that the entire Board endorsed the

Transaction, with Jacobson leading the post-transaction company because the success of the

combined entity is tied to realizing $1.7 billion in annual cost synergies and Jacobson-

whatever questions the Board may have had about aspects of his performance-has proven

himself to be particularly adept at cutting such costs at Xerox.

Deason's grab bag of other arguments amounts to no more than Monday morning

quarterbacking: contending that the Board should have negotiated the transaction differently,

insisted on a different transaction, or pursued other buyers before agreeing to the current deal.

But such arguments have no basis in New York law, which does not require that directors

approve any particular fonn of transaction, follow any prescribed process in pursuing a

transaction, or hold out for a hypothetical"best"

deal. Rather, New York courts recognize

that the business judgment rule properly reserves those decisions to a company's management

and board of directors, who are best positioned and have the greatest expertise to make

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them. What the record shows here is that the Board gave consideration to a broad array of

strategic alternatives, reaching the conclusion that the value-maximizing strategy would likely

be a transaction with Fujifilm, its long standing joint venture partner, because combining

Xerox and FX into one global document technology company would give both the economies

of scale and global reach to maximize revenues and profits. Although Deason nitpicks the

path of the negotiations, those complaints are irrelevant as a matter of law and in any case at

odds with the facts. What the record shows is that Board pursued an all cash, 100%

acquisition until it reached the grounded conclusion that Fujifilm was not prepared to do such

a deal in the foreseeable future. Xerox spoke with the other most logical strategic partner,

which declined to pursue a transaction. The Board's advisors canvassed likely private equity

candidates, who declined any interest. And ultimately the proof is in the pudding: despite a

customary "fiduciaryout"

that would allow the Board to abandon the Transaction in favor of

a superior competing proposal, not a single alternative buyer has emerged, giving market

proof to the Board's judgment that the Transaction maximizes value for Xerox shareholders.

Deason also takes the timeworn tack of attacking the economics of the Transaction,

claiming that the transaction value is lower than Xerox has claimed. That is not so. As the

considerable work done by the Board and its expert advisor demonstrates, the relative value of

the combination of the two companies (factoring in the cash dividend to Xerox shareholders)

would result in Xerox shareholders receiving less than the 49.9% ownership of the combined

entity provided in the Transaction, resulting in an implied day-one premium for Xerox's

shareholders of approximately 15% above the unaffected share price. The same analyses

show that the achievable cost synergies presented by this transaction should result in an even

higher share price for Xerox's shareholders. Thus, even if the "entirefaimess"

standard

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other'

applied in this case, and it does not, the Transaction would satisfy the standard.

Deason seeks to disenfranchise all other Xerox shareholders and enjoin a vote on the

Transaction simply because Deason, now working in concert with Icahn, does not share the

Board's assessment of the deal and believes that the Board should have adopted a different

strategy. This Court should reject his efforts.

STATEMENT OF FACTS

A more complete recitation of the facts is included in the Xerox Class Brief, pp. 7-32,

which the Xerox Defendants incorporate by reference. Xerox Defendants set forth here only

certain supplemental facts that are particularly relevant to Plaintiff Deason and his claim for

preliminary injunctive relief.

L Background of Xerox and Its JV with Fujifilm

A. Xerox and the JV

Xerox is a leading global provider of digital print technology and relatedsolutions.3

For the past fifty-six years, Xerox has principally accessed the Asia-Pacific market through

the JV with Fujifilm. The IV "develops, manufactures and distributes document processing

products"in the Asia-Pacific region and provides the JV partners with access to "each other's

portfolio of patents, technology andproducts."4

Investment in research and development

("R&D") is critically important to Xerox's competitiveness, and "one of the ways that [the

Company] maintain[s] [its] market leadership is through strategic coordination of [its] R&D

with FujiXerox."5

In 2017, Xerox's research, development and engineering expenses

3 See Ex. 182 (Xerox Corp., Annual Report (Forrn 10-K) at 23 (Feb. 23, 2018) (the "2017 10-K"); Ex. 131Xerox Corp., Annual Report (Fonn 10-K) at 19 (Feb. 27, 2017) (the "2016 10-K")). Citations in the flu of"Ex. " refer to exhibits attached to the Affinnation of Jay Cohen submitted herewith.

4 Ex. 182 (2017 10-K at 7).5 Ex. 131 (2016 10-K at 4).

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patents.'

agreements.'

â€”

â€”

("RD&E") totaled $446 million and Xerox was awarded 544 utility patents; that year the Joint

Venture's total RD&E was $536 million and it was awarded 572patents.6

In addition to this access to the JV's RD&E investment and its patents, Xerox receives

a number of important benefits from the JV and Xerox's associated relationship with FX,

including:

• access to the JV's research investment and patents, including the $536 million the JV

invested in 2017 in research, development and engineering expenses and the 572

patents the JV obtained in 2017;• a dividend from the JV, which amounted to approximately $46 million in 2017;• royalty payments from FX, which were approximately $103 million in 2017;• profits on inventory sales from Xerox to the JV, of about $58 million in 2017; and

• governance rights over the JV that a minority shareholder would not ordinarily have

under Japanese law, including approval rights over the JV's major decisions and three

guaranteed seats on the 12-member JVboard.'

B. The JV Agreements

Three important agreements govern the JV and Xerox's relationship with FX:

1. The JEC. The Joint Enterprise Contract dated March 30, 2001 (the "JEC") between

Xerox and Fujifilm operates as a shareholder agreement, guaranteeing dividend and

governance rights to Xerox as a shareholder in the JV, without establishing tenns or

requirements for any sales or purchases or other payments between the parties to the JEC3

In

addition, the JEC contains a "change ofcontrol"

provision that permits Fujifilm to terminate

the JEC if 30% of Xerox's shares are purchased by a"Competitor"

as that term is defined in

theJEC.9

Such provisions are typical in joint ventureagreements.¹°

The JEC is governed by

6 Ex. 182 (2017 10-K at 4, 6).Id. at 91 -92).92).

' Id. at 7.9 Ex. 152 (JEC § 9.1(a)(v)).10 Ex. 177 (Expert Report of Donna Hitscherich, dated Apr. 17, 2018 ("Hitscherich Report") ¶ 71); Ex. 172

(American Bar Association, Model Joint Venture Agreement with Conunentary 114-15 (2006)).

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parties."

Japanese law and is subject to arbitration inJapan."

2. The TA. Xerox and FX share certain intellectual property rights according to

the tenns of a Technology Agreement, dated April 1, 2006 (the"TA").¹²

The TA provides

Xerox and FX with access to each other's intellectual property portfolios, with Xerox

receiving royalty payments from FX based on FX's adjustedrevenue.13

The TA provides FX

with an exclusive intellectual property ("IP") license to manufacture and sell xerographic

technology using Xerox IP in the Asia-Pacific region (excluding U.S. territories), while Xerox

has the exclusive IP license to manufacture and sell xerographic technology using FX IP in

the rest of theworld.14

3. The MPA. A Master Program Agreement (the "MPA") sets forth certain standard

terms that govern the numerous separately negotiated purchase and supply agreements entered

into by theparties."

Today, Xerox purchases more than two-thirds of its inventory from

FX.'6

C. Xerox's Disclosures Regarding the JEC and the TA

Xerox disclosed the existence of the JV, along with various elements of Xerox's rights

and agreements in connection with the JV, in various public filings dating back to 2001.

With respect to the JEC, Xerox disclosed (a) Xerox's equity ownership under theJV,"

(b) Xerox's status as a minority shareholder with certain special governancerights,18

and (c)

llId. §§ 10.1 and 10.2.

12 Ex. 168 (2006 Fonn 8-K at Item 1.01).Id.

14 Ex. 153 (TA Pait D).15 Ex. 154 (MPA, XEROX_FX-00118903).16 Ex. 141 (Xerox Corp., Schedule 14A (Fonn DFAN14A) (Mar. 7, 2018) ("Mar. 7, 2018 Fonn DFAN14A").17 Ex. 168 (2006 Fonn 8-K).

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contracts."

Xerox's dividend right in theJV.'9

At no time prior to announcing the Transaction did Xerox

have any obligation to disclose more detail from the IEC. In December 2002, the year after

Xerox disclosed its equity ownership and governance rights under the JEC in its 2001 Fonn 8-

K, the U.S. Securities and Exchange Commission ("SEC") issued a Comment Letter to Xerox

requesting that Xerox "[e]xplain . . . the nature of the significant rights [Xerox] retained as a

minorityshareholder"

in theJV.²°

Xerox responded that it had disclosed the relevant

infonnation regarding its transactions with the JV, and that the JV agreements did not require

disclosure because Xerox's business was not substantially dependent on thecontracts.21

The

SEC did not request any additional information or disclosures.

With respect to the TA, in 2006 Xerox disclosed a redacted version of the contract

revealing many key terms, including the duration of the TA; Xerox's IP rights and licenses

and trademark rights; Xerox's royalty payments under the TA; Xerox's access to technical

infonnation of FX; and Xerox's ability to terminate the TA for materialbreach.22

Beyond the tenns of the JEC and the TA, Xerox made additional disclosures regarding

its relationship with FX. For example, Xerox disclosed details of its agreements with FX that

govern the product and supply chain between the twoentities.23

These disclosures collectively infonned the market about Xerox's relationship with

FX and the terms of the agreements underlying the JV. As Deason himself stated in a letter to

the Board dated May 22, 2017, Xerox's disclosures had created "the perception by the market

19 Ex. 182 (2017 Fonn 10-K).20 Ex. 186 (SEC Comment Letter_12_24_2002).21 Exs. 150 - 151 (XEROX_FX-00146698, XEROX_FX-00146700).22 Ex. 168 (the 2006 Fonn 8-K at Itein 1.01).23 Ex. 131 (2016 10-K at 45, 83).

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â€”

â€”

t1 at Xerox is inextricably intertwined withFuji."24

D. The Board

The Board is composed of the ten DirectorDefendants.25

With the exception of

Jacobson, all of the Director Defendants are independent directors. The Board members are

exceptionally qualified and experienced, including the sitting chairs and CEOs of Quest

Diagnostics and Motorola Solutions, the fomier chairs and CEOs of Goodyear Tire & Rubber

and Citigroup, the retired CEO of Deloitte, a former CEO of Rothschild Asset Management, a

former CFO of ITT Corporation, a former Under Secretary of Education and the Dean

Emeritus of the University of Iowa College of Business. Collectively, they have served on the

board of directors of more than a dozen public companies other thanXerox.26

As Icalm's

representative Christodoro testified,

27

II. The Transaction

A. Background and Chronology Leading to the Transaction

A thorough overview of the background of the Transaction is detailed in the Xerox

Class Brief and incorporated by reference here. See Xerox Class Br. 9-30.

On May 15, 2017, Icahn, an activist shareholder owning approximately 9% of Xerox's

stock, hosted Xerox's CEO Jeff Jacobson for dinner at Icahn's apartment to discuss Icalm's

views on the Company and itsindustry.23

Icahn told Jacobson that the printing industry "was

24 Ex. 187 (Jan 17, 2018 Letter from D. Deason to Xerox Board of Directors).25 Defendant Ursula M. Bunis, the former CEO and Chainnan of Xerox, resigned as CEO in May 2016 and

has not served on the Board since May 2017.26 Ex. 132 (Xerox Corp., Schedule 14A (Fonn DFAN14A) (Apr. 10, 2017)).27 Ex. 130 (Christodoro Tr. 221:3-222:19; 223:22-224:7).28 Ex. 12 (XEROX_FX-00081353, at -54).

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acquirers.'

Id.â€”

a piece ofsh**,"

stated his wish that he had "never investedin"

Xerox and his desire to see

Xerox sold, and threatened that if Xerox were not sold, Icahn "would push for [Jacobson's]

removal asCEO."29

Icahn encouraged Jacobson to use Icahn's name and status as leverage in

negotiations with potentialacquirers.3°

Jacobson promptly reported this conversation to

Xerox ChairmanKeegan.³¹Keegan.

One week later, on May 22, 2017, Deason wrote Jacobson to express his "firm[]

support"for the Board's

"explor[ation]"of "Xerox's relationship and contractual

arrangements with Fuji and FujiXerox."³²

Deason discussed his concerns relating to "[t]he

recent accounting scandal at FujiXerox"

and his belief that "it [was] urgent for Xerox to

explore its strategic alternatives regarding Fuji, including exercising Xerox's rights under its

agreements to market check the overall relationship and itsterms."33

He stated that the

market perceived Xerox to be "inextricably intertwined withFuji,"

creating "a potentially

major loss in value for Xerox in any change in control of thecompany."34

Deason added: "I

also want to caution you and the board that time is not our friend and that this matter should

be concluded with all haste as the window of opportunity to optimize Xerox's relationship, to

the extent it continues, with Fuji isnow."35

Deason did not make his May 22, 2017 letter to

Jacobson public until January2018.36

* * *

30 Ex. 127 (Jacobson Tr. 108:17-22).31 Ex. 73 (XEROX_FX-00144155, at -58).32 Ex. 187 (Jan. 17, 2018 Letter from D. Deason to Xerox Board of Directors).33 Id.³* Id.35 Id. (emphasis added).

ld.

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The process leading up to the Board's approval and announcement of the Transaction

began in earnest on March 8, 2017, when Fujifilm delivered an unsolicited letter of interest to

Xerox. Over the ten month period from receiving Fujifilm's March 8, 2017 letter reflecting

its unsolicited expression of interest, to approving the Transaction on January 31, 2018, the

Board held nine meetings where the Transaction wasdiscussed,37

with the Transaction

Committee meeting an additional seven times in weekly discussions following Fujifilm's

submission of the final termsheet.33

Jacobson, Centerview (a leading investment banking

finn and advisor to the Board in connection with the Transaction), and other members of

Xerox management held six in-person negotiations withFujifilm.39

And Centerview prepared

and delivered eighteen presentations evaluating the Transaction for the Board and Transaction

Conunittee.4°Cominittee. Only after this rigorous process spanning ten months did the Board approve the

Transaction. As Ann Reese, the former Lead Independent Director of the Board, testified:

"There was a hugely robust discussion during the whole series of considerations of this deal

. . . and yet in the end we all came to the sameplace."41 '

B. Terms of the Transaction

A description of the key terms of the Transaction is detailed in the Xerox Class Brief

37See Ex. 4 (XEROX_FX-00000033); Ex. 21 (XEROX_FX-00000051); Ex. 14 (XEROX_FX-00000053); Ex.74 (XEROX_FX-00146011); Ex. 99 (XEROX_FX-00145523); Ex. 109 (XEROX_FX-00145527); Ex. 115

(XEROX_FX-00145531); Ex. 117 (XEROX_FX-00145535); Ex. 83 (XEROX_FX-00145518).38

See Ex. 87 (XEROX_FX-00145537); Ex. 89 (XEROX_FX-00145539); Ex. 92 (XEROX_FX-00145541);Ex. 94 (XEROX_FX-00145543); Ex. 100 (XEROX_FX-00145545); Ex. 104 (XEROX_FX-00145547); Ex.110 (XEROX_FX-00145549).

39See Ex. 20 (XEROX_FX-00072961); Ex. 39 (XEROX_FX-00053762); Ex. 43 (XEROX_FX-00113217);Ex. 101 (XEROX_FX-00064606); Ex. 127 (Jacobson Tr. 141:19-20).

40 See Ex. 5 (XEROX_FX-00000402); Ex. 13 (XEROX_FX-00000443); Ex. 22 (XEROX_FX-00000506); Ex.29 (XEROX_FX-00000238); Ex. 30 (XEROX_FX-00000270); Ex. 72 (XEROX_FX-00000306); Ex. 84

(XEROX_FX-00000339); Ex. 97 (XEROX_FX-00000057); Ex. 107 (XEROX_FX-00000116); Ex. 114



(XEROX_FX-00007430); Ex. 102 (XEROX_FX-00007491); Ex. 103 (XEROX_FX-00007450).41 Ex. 122 (Reese Tr. 252:3-7).

14



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â€”

Brief' â€”

and incorporated by reference here. See Xerox Class Br. pp. 30-32.

C. Deason and Icahn React to the Announcement of the Transaction

Deason and Icahn have made clear their opposition to Xerox's leadership and to the

Transaction. In December 2017, Icahn launched a proxy contest to replace the four longest

serving members of the Board, and expressed his intention of replacingJacobson.42Jacobson. Deason

and Icahn have worked together publicly to oppose the Transaction since January 22, 2018,

when they filed a joint statement seeking to persuade Xerox shareholders to reject the

Transaction.43Transaction.

In response, the Board publicly explained the rationale of the Transaction and its

significant value proposition for Xerox shareholders. Based on Centerview's relative value

analysis, the Transaction delivers an implied day-one premium to Xerox shareholders of 15%

above the unaffected price. In addition, Centerview has shown that crediting only 50% of the

cost synergies that are anticipated (and ignoring the anticipated revenue synergies

completely), Xerox shareholders could receive value in the Transaction amounting to a 50%

premium.44prenuuni. Indeed, as explained by Professor Daniel Fischel, former Dean and Emeritus

Professor of Law and Business at the University of Chicago, market response to the

transaction has been positive, as evidenced by analyst conunentary, increased analyst

valuations, and Xerox's price movements when the deal leaked on January 10 and when the

42Ex. 133 (Carl Icahn et al., Antendtnent to a SC 13D Filing (Fonn SC 13D/A) Exhibit 99.1 (Dec. 12, 2017)("Dec. 12, 2017 Fonn SC 13D/A").

43Ex. 135 (Carl Icahn et al., Atnendanent to a SC 13D Filing (Fonn SC 13D/A) (Jan. 22. 2018)). Long beforetheir public collaboration, Deason and Icahn were in contact to gather infonnation on Xerox and itsrelationships with Fujifihn and FX. Deason and Icahn also coordinated on supporting a dissident directorslate nominated by Icahn in advance of the 2018 annual meeting of Xerox shareholders. See XeroxDefendants' Menioranduni of Law in Opposition to Plaintiff Deason's Motion for Prelianinary Injunction inDeason v. Xerox Corp., et al., Index No. 650988/2018 (the "Xerox Deason II Brief"), pp. 13-14. TheXerox Deason IIBrief is fully incorporated by reference herein.

44 Ex. 141 (Mar. 7, 2018 Forrn DFAN14A).

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comttany.

Report" â€”

â€”

deal was announced on January31.®31.

The Board also explained why Deason and Icahn's preferred course of tenninating the

JV was not a viable or advisable business strategy: "Walking away from the joint venture

would require Xerox to completely rebuild its supply chain and nunufacturing infrastructure,

which would be extremely expensive, result in significant disruptions to [Xerox's] business

and customer relationships and take years to implement. Ultimately, this would be highly

destructive to Xerox's competitive positioning and shareholdervalue.""

As part of their proxy fight, Deason and Icalm have also enlisted Jonatlmn

Christodoro, who served as an observer of the Board from January 2016 until Jime 2016, and

a member of the Board from Jime 2016 until he resigned in December 2017 to be named as

one of the director nominees on Icalm's dissident slate Prior to joining the Board, and for

some time thereafter, Christodoro was the Managing Director of Icalm Capital LP, Icalm's

holdingcompany." '

Deason and Icalm have also engaged a consultant, John Visentin, ~, for the

of assisting Deason and Icalm in their efforts to disrupt the shareholder vote on the

Transaction.®Transaction.

Renurkably, given his well-financed, and highly publicized assault on the proposed

Transaction, the Board and Xerox's CEO, Deason testified timt he did not review the terms of

the JEC and TA timt Xerox made public going as far back as 2001, nor did he review the full

Ex. 176 (Expert Report of Daniel R. Fischel, dated Apr. 17, 2018 ("Fischel Report") ¶¶ 35-38)).46

Ex. 137 (Xerox Colp., Schedule 14A (Fonn DFAN14A) at 2 (Feb. 13, 2018)). As Professor Daniel Fischel

explains, the alternatives suggested by Deason and the shareholder plaintiffs are speculative and

implausible, and risk losing the valuable Transaction already proposed. (Ex. 176 (Fischel Report ¶¶42-

48)).47 Ex. 188 (Xerox Colp., Cunent Report (Fonn 8-K) at Exhibit 10-S (Jan. 29, 2016)); Ex. 189 (Xerox Colp.,

Cunent Report at (Fonn 8-K) at Exhibit 10-B (June 27, 2016)).48 Ex. 130 (Christodoro Tr. 12:23-24).49 Ex. 155 (Icahn-Chris03511).

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acquisition.'

â€”â€”

JEC and TA disclosed by Xerox on January 31,2018.5°

He admitted that he based his attack

on the Transaction on pure conjecture, without an understanding of the benefits Xerox enjoys

from the JV, the tenns of the JV agreements, the process of the Board in pursuing alternatives

and negotiating the Transaction, or the tenns of the Transaction and its benefits to Xerox and

itsshareholders.51

The Court should reject Deason's effort to disenfranchise his fellow shareholders from

voting on the Transaction. Indeed, the remaining shareholders are well-positioned to cast a

well-informed vote on the Transaction. Approximately 80% of them, excluding Deason and

Icahn, are sophisticated institutional investors. There is also a wealth of available infonnation

concenung the transaction, including SEC filings, analyst commentary, financial press, and

letters and decks from Xerox itself, to say nothing of materials disseminated by Deason and

Icahn.52

D. The JV Agreements Did Not Create a"Lock-Up"

Deason maintains, along with one of his three experts, Professor Guhan Subramanian,

that the JV agreements constituted a "crown jewellock-up"

that prohibited Xerox from

engaging in a deal with any party other thanFujifilm.53 h is absurd. FM the substantive

terms about which Deason complains have been in place since 2001 and 2006 respectively, it

is simply not credible to suggest that they were entered into as "dealprotection"

provisions

meant to prevent third partyacquisition.54

50 Ex. 157 (Deason Tr. 22:16-23:13 ("I have not, to date, seen any of these contracts or anything between --

myself, between Fuji and Xerox.")).51 M. at 22: 16-23:7.52 Ex. 176 (Fischel Report W 29-33).53 Deason I Br. 5-6; Ex. 173 (Expert Report of Professor Guhan Subramanian, dated Apr. 10, 2018).54 Exs. 152-53 (TA; JEC).

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â€”

Deason also places himself in obvious disagreement with the Class Plaintiffs, who

recognize that the JV agreements did not preclude an alternative buyer, and instead claim that

Xerox is misleading shareholders as to the value of the Fujifilm deal by pointing out that the

JV agreements place certain limits on strategicoptions.55options. As a practical matter, the JV

agreements do place certain limits on strategictransactions,56

but the Board well understood

that there were mechanisms by which such third party deals could be structured to avoid

triggering the termination of theJV,57

and that a motivated buyer may well wish to pud

even in the absence of theIV.53

At the end of the day, the truth is far simpler, and based more on history than contract

terms: as a result of the JV, which has spanned decades, Fujifilm and Xerox have developed

their businesses in such a way that a merger between the two is the most natural and obvious

combination.'strategic

combination.59Indeed, Xerox has considered different transactions with Fujifilm for

years, and this Transaction is the cuhnination of both prior strategic evaluations and the last

year's intensely focuseddeliberations.6°deliberations.

See Class Plaintiffs' Supplemental Meniorandum of Law, In re Xerox Corporation Consolidated S'holder

Litig., No. 650766/2018 at 25, 30.56 Ex. 136 (Xerox Colp. Schedule 14A (January 31, 2018)).

Ex. 122 (Reese Tr. 291:20-292:13; XEROX_FX-00000238, at -240 ("RMT structure may mitigate certainlinlitations of Fruit X JV agreenients.") (Ex. 176 (Fischel Report ¶¶ 50-52, 55).

8Ex. 122 (Reese Dep. Tr. 283:22-284:12; 290:10-15); (Ex. 176 (Fischel Report $¶ 50-52, 55).

'9Ex. 177 (Hitscherich Report) ¶ 15; Ex. 122 (Reese Tr. 129:12-15 (noting that "Fuji has been and continuesto be an important partner," and that the companies "have jointly seen opportunities in working more

closely together over time"); Ex. 29 (XEROX_FX-00000238, at -240). Deason places great weight on acasual email between Director Defendant Charles Prince and a fonner colleague stating that the JV "enteredinto 55 years ago(!), which made it practically impossible for Xerox to sell to anyone else." Deason I Br. 6.

Notably, Deason declined to depose Prince, and asked no other directors their views of the email (eventhough Deason's counsel took the time to read it aloud to Director Defendant Krongard at her deposition).Ex. 123 (Krongard Tr. 99:21-101:7). In any event, the entail is not a legal analysis of the JV agreenients,but merely an acknowledgment of the history of how Xerox and Fuji developed together in ways no onewould have foreseen half-a-century ago, and that the Transaction announced is in niany ways the obviousresult of that long collaboration. Ex. 156 (XEROX_FX-00007806).

® Ex. 122 (Reese Tr. 47:5 - 56:24; 66:19-73:3); Ex. 11 (XEROX_FX-00126880, at -00126900 (describing adecade of conversations with Fujifilm exploring potential combinations)); Xerox Class Br. p. 9.

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ARGUMENT

L Deason's Motion for a Preliminary Injunction Should Be Denied

a) New York Law Imposes a High Standard for the Drastic Relief Deason

Seeks

Deason cannot remotely meet the heavy burden required for the drastic remedy he

seeks. Under New York law, "[p]reliminary injunctive relief is a drastic remedy and will only

be granted if the movant establishes a clear right to it under the law and the undisputed facts

found in the movingpapers."

Koultukis v. Phillips, 285 A.D.2d 433, 435 (N. Y. 1st Dep't

2001) (emphases added). "[T]he burden of showing an undisputedright"

to prelinlinary

injunctive relief "rests upon themovant."

Saran v. Chelsea GCA Realty P'ship, L.P., 148

A.D.3d 1197, 1199 (N.Y. 2d Dep't 2017). For these reasons, preliminary injunctions "should

be issuedcautiously."

Putter v. City of New York, 27 A.D.3d 250, 253 (N.Y. 1st Dep't 2006).

A motion for a preliminary injunction will be granted only if the movant establishes

each of (a) a likelihood of ultimate success on the merits, (b) imminent danger of irreparable

harm in the absence of an injunction, and (c) a balancing of the equities in its favor. See CC

Vending, Inc. v. Berkeley Educ. Servs. of N.Y., Inc., 74 A.D.3d 559, 560 (N.Y. 1st Dep't

2010). The movant must establish each of these three elements by "clear and convincing

evidence."See, e.g., Cntv. of Suffolk v. Givens, 106 A.D.3d 943, 944 (N.Y. 2d Dep't 2013).

Critically, a movant may not rely on conclusory statements to establish a basis for

preliminary injunctive relief. See 1234 Broadway LLC v. W. Side SRO Law Project, Goddard

Riverside Cmty. Ctr., 86 A.D.3d 18, 23 (N.Y. 1st Dep't 2011) ("Conclusory("

statements

lacking factual evidentiary detail warrant denial of a motion seeking a preliminary

injunction."). And preliminary injtmetive relief should be denied if the facts are in dispute:

"[A] party is not entitled to a preliminary injunction unless the right is plain from the

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undisputed facts. If the right depends upon an issue which can only be decided upon a trial,

the injunction should not begranted."

Merrill Lynch Realty Assocs., Inc. v. Burr, 140 A.D.2d

â€”589, 592-93 (N.Y. 2d Dep't 1988); see also Sur La Table, Ltd. v. Rosenthal AG, 173 A.D.2d

â€”325, 325-6 (N.Y. 1st Dep't 1991) ("Where,("

as in the case at bar, there exist sharp factual

disputes . . . injunctive relief should be denied.").

Further, because Deason seeks mandatory injtmetive relief to compel specific conduct

from the Xerox Defendants, he faces an even higher standard, which requires that he clearly

establish "extraordinarycircumstances"

entitling him to relief. Vill. of Westhampton Beach v.

Cayea, 38 A.D.3d 760, 762 (N.Y. 2d Dep't 2007); see also Roberts v. Paterson, 84 A.D.3d

655 (N.Y. 1st Dep't 2011) (noting the "'heightenedstandard'

goveming [plaintiffs']

application for a mandatory preliminary injunction").

b) Deason Cannot Establish a Likelihood of Success on the Merits

The business judgment rule "operates to preclude a court from imposing itself

unreasonably on the business and affairs of acorporation,"

In re Bear Stearns Litig., 870

N.Y.S.2d 709, 728 (N.Y. Sup. Ct. 2008), since the decisions reached by a corporation's board

should "not be disturbed if they can be attributed to any rational businesspurpose,"

id.

(quoting Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971)).

Deason tries to avoid the business judgment rule by arguing bad faith and self-dealing

byJacobson.61

But Deason's theories of bad faith and self-dealing are not supported by the

factual record or applicable law. To sustain a claim of bad faith, Deason must show, by clear

" It is unclear whether Deason intends to assert claims for preliminary injunctive relief against DefendantXerox. To the extent Deason pursues such claims, they would fail as a matter of law because Xerox doesnot owe fiduciary duties to its shareholders. Hyman v. N Y Stock Exch., Inc., 46 A.D.3d 335, 337 (N.Y. 1stDep't 2007) ("[A] corporation does not owe fiduciary duties to its members or shareholders. . . . [T]orecognize a fiduciary relationship between the co1poration and its shareholders would lead to the

confounding possibility that a shareholder of a corporation could bring a derivative action on behalf of thecorporation against the corporation itself.").

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duties...."

and convincing evidence, either "an extreme set of facts to establish that disinterested

directors were intentionally disregarding their duties . . .."

or a decision that "is so far beyond

the bounds of reasonable judgment that it seems essentially inexplicable on any ground other

than badfaith."

In re MeadWestvaco Stockholders Litig., 2017 WL 3526326, at *684 (Del.

Ch. Aug. 17, 2017). Even a single "'plausible and legitimate explanation for the board's

decision'will defeat a claim of bad

faith."Id. (quoting In re Alloy, Inc., No. 5626-VCP, 2011

WL 4863716 at *12 (Del. Ch. Oct. 13, 2011)). It is not enough for Deason to allege that one

director, Jacobson, was conflicted; Deason must also demonstrate that the entire Board was

coerced or controlled by Jacobson as well.

Deason fails to put forth any credible evidence or argument either that Jacobson was

self-interested or acting in bad faith in negotiating the Transaction, or that the Board was

coerced or controlled by Jacobson in unanimously approving the Transaction.

(1) Jacobson Was Disinterested and Acted in Good Faith While Supervised bythe Board

Deason's"conflict"

argument rests on his theory that Jacobson thought the only way

to keep his job was to consummate the Transaction. See Deason IBr. 11 ("Jacobson's days as

CEO were numbered unless he could somehow pull off a deal with Fuji that was conditioned

on his remaining CEO."); id. 14 ("Jacobson set off on a course of action that showed he

believed . . . he could essentially switch teams to save his job."); id. 16 ("Jacobson's plan

[was] to close a deal with Fuji and preserve his own position."); id. 28 ("Jacobson was in a

rush to complete the transaction to secure his job safety."). According to Deason, this

improper motive led Jacobson to abandon his duties to Xerox's shareholders and "switch

teams"to represent Fujifilm's interests while hiding his activities from the Board. Id. 14.

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â€”

â€”

Deason's argument is insufficient as a matter of law. It is not unusual, much less

improper, for a CEO to negotiate a corporatetransaction.62transaction.

'Nor is there anything untoward

about Jacobson being selected to become the CEO of the combined entity. Indeed, courts

consistently hold that a conflict does not arise by virtue of the prospect that a director-even a

CEO-may maintain the position in the combined company. See, e.g., Orman v. Culhnan,

â€”794 A.2d 5, 28-29 (Del. Ch. 2002) (applying business judgment rule where pre-merger

chairman of the board and CEO would maintain those positions in the new company);

Benihana of Tokyo, Inc. v. Benihana, Inc., 891 A.2d 150, 175 (Del. Ch. 2005) (Delaware

courts "routinely reject[] the notion that a director's interest in maintaining his office, by

itself, is a debilitating factor.").

Deason's theory also fails on the facts. Far from "negotiating behind "[the Board's]

back"(Deason I Br. 30), or "work[ing] behind the

scenes"(id. 4, 20, 29), or "[keeping] the

Board in thedark,"

(id. 4), as Deason falsely describes it, Jacobson was in fact at all times

properly reporting to, and directed by, the Board, primarily through Board Chair Keegan and

former Lead Independent Director Reese. See Xerox Class Br. pp. 12-26. Deason suggests

that because the Board was not copied on every communication or made aware of every text

Jacobson had with Takashi Kawamura, Jacobson's counterpart at Fujifilm in the Transaction

negotiations, that somehow that meant Jacobson was proceeding in an unauthorized manner-nianner

to the contrary, the Board recognized, endorsed and took full advantage of Jacobson's

relationship with Fujifilm to push the deal through toclose.63

Moreover, the Board was at all times aware of Jacobson's purported "conflicts": they

62 Ex. 177(HitscherichReport¶45).63 Ex. 124 (Keegan Dep. Tr. 131:17-19 ("[Jacobson] sees - he plays a key role in the opportunity with

Fujifihn,becausetheytrustedhim.")).

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â€”

were aware of Icahn's threats to replace Jacobson, they were aware of their own activity in

searching for a potential replacement (and understood that, after Noveniber 10, 2017,

Jacobson knew of their search), and they were aware-in real time, front Jacobson (as well as

Centerview)-of Fujifiln1's regard for Jacobson and that Fujifilm was interested in having

Jacobson lead the post-transaction company. Jacobson's disclosure to the Board nloots any

claims of inipropriety or taint with respect to the considered judgments the Board made in

negotiating and unanimously approving the Transaction. See, e.g., Cinerama, Inc. v.

Technicolor, Inc., 663 A.2d 1156, 1168 (Del. 1995) (holding that the business judgment rule

is rebutted only "if the plaintiff proved that . . . the interested director fail[ed] to disclose his

interest in the transaction to the board and a reasonable board member would have regarded

the existence of the material interest as a significant fact in the evaluation of the proposed

transaction") (eniphasis added).

It is true that, on December 7, Xerox director Chetyl Krongard sent Keegan a letter in

which, based on her understanding of the facts at the time she drafted the letter, she expressed

her view that Jacobson had continued negotiations with Fujifiln1 without Board authorization,

to him as a "rogueexecutive."64 hW testified, however, that after sending this

letter, she became aware that Jacobson had received Keegan's express permission to negotiate

withFujifilm.65

Negotiating with Fujifilm with the permission of Keegan (and knowledge of Reese)

was consistent with Xerox's govemance principles, which expressly direct the Independent

Lead Director (or here, the non-Executive Chainnan) to "serv[e] as the liaison on Board-wide

64 Ex. 77 (XEROX_FX-00144181).65 Ex. 123 (Krongard Tr. 57:16-58:4, 172:15-171:3).â€”

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â€”

consuminated."

â€”

issues between the independent Directors and the Chief Executive Officer"66

(2) The Independent Director Defendants Were Not Controlled by Jacobson

Even if Jacobson's opportunity to become CEO of the combined company gave rise to

a conflict (which it did not), the record makes crystal clear that any such conflict did not

infect the decisions of the nine outside directors who approved the transaction: It was the

Board, not Jacobson, that formulated the tenns of the Transaction with Fujifilm (see Xerox

Class Br. p. 23). The Board's advisor rendered a fairness opinion on theTransaction.67

When Fujifilm made its first concrete proposal on November 30, the Board held a special

meeting on December 4 to discuss its merits in consultation with its outside advisers (see id.).

It was the Board, supported principally by Centerview, who crafted the precise tenns of

Xerox's response to that initial concrete offer as well as the subsequent offers that led to the

agreement on terms of the Transaction at the end of January (see id pp. 23-28). It was Board

Chair Keegan who had the pivotal discussion with Fujifilm Chair Komori on January 24, and

Keegan who sent the January letter to Fujifilm that set out Xerox's final demands that had to

be met for the Transaction to beconsummated.63

In the end, Deason's complaint appears to

boil down to the trivial argument that members of the Board did not fly to Japan to negotiate

directly with Fujifilm and were not included on every text or email exchange between

Jacobson and individuals at Fujifilm.

Deason utterly fails to explain-as he must, with clear and convincing evidence and

not on the basis of conclusory allegations-how Jacobson dominated or controlled the

66 Ex. 190 (https://www.xerox.com/en-us/about/corporate-citizenship/guidelines).67 Deason also suggests, based on emails questioning the transaction value in late January, that niore

consideration should have been obtained, Deason I. Br. 33, but, as set forth in the Xerox Class Brief, theconcents about value were relieved when a math error was caught. See Xerox Class Br. pp. 27-28 & n. 139.

68 Ex. 119 (XEROX_FX-00144902); Ex. 108 (XEROX_FX-00055666).

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("

â€”

independent directors. Higgins v. N.Y Stock Exchange, 10 Misc.3d 257, 278 (N.Y. Sup. Ct.

2005) ("A director is considered to have lost his/her independence where she/he is dominated

or otherwise controlled by an individual or entity interested in the transaction at issue.").

Indeed, Deason is unable even to come up with a theory of his own as to how such an

incredulous scenario might have come to pass. See Deason I Br. 31 ("Whether through

incompetence, self-interest or passivity, the Board's will was effectively supplanted by

Jacobson's self-dealing."). This type of guessing game is not a sufficient basis for the

extraordinary relief of a preliminary injunction. See 1234 Broadway LLC, 86 A.D.3d at 23

("("Conclusory statements lacking factual evidentiary detail warrant denial of a motion seeking

a preliminary injunction."). Even Christodoro, who is currently working with Icahn and

Deason, testified that

69

Deason also argues that the Board violated its duties by allowing Jacobson to negotiate

the Transaction, Deason I Br. 27-31, but this assertion is also unfounded as a matter of fact

and law. It is entirely appropriate for a CEO to conduct merger negotiations, and because of

his relationship with Fujifilm, due to his time spent working with FX, Jacobson was

particularly well-suited to progress the negotiations withFujifilm."

That said, Deason's

suggestion that the Board blindly delegated such negotiation to Jacobson alone, and failed

adequately to oversee and direct his activity is patently false. In fact, the Board was kept

apprised, in real time, of the progress of discussions with Fujifilm, and it was the Board,

supported by its investment banking advisor, who crafted the precise tenns that Xerox offered

® Ex. 130 (Christodoro Tr. 221:3-222:19; 223:22-224:7).Ex. 47 (XEROX_FX-00145059).

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â€”

â€”

â€”

over the course of the negotiation. See Xerox Class Br. pp.23-28.'23 28.

'

(3) The Director Defendants Did Not"Rush"

Into the Transaction, and There

Were No "RedFlags"Flags That the Director Defendants Failed to Resolve

Deason accuses the Director Defendants of "rushing to approve the extremely

unfavorable Transaction when there was no exigency other than the rush to defeat a proxy

battle or litigation with Xerox's largest shareholder, CarlIcahn."

Deason IBr. 2; see also id.

19 ("[T]he("

Director Defendants rushed to approve the Transaction.'); id. 32 ("The("

Director

Defendants were rushing to complete the deal to avoid a proxy battle."); id. 40 ("[T]he("

Director Defendants unnecessarily rushed their evaluation and approval of the deal despite no

apparent urgency."). No matter how many times Deason says it, it is simply untrue.

The Board spent ten months considering, negotiating, reviewing, and deliberating over

the Transaction, and that was after years of discussions Xerox conducted with Fujifilm and

FX about a potential combination with its fifty-six year joint venture partner. Xerox Class Br.

pp. 9,10-30.7210 Professor Donna Hitscherich, a former investment banker who culTently

serves as the Senior Lecturer in the Discipline of Business in the Finance Division, as well as

the Director of the Private Equity Program, at Columbia Business School, has opined that

Xerox and Centerview behaved consistently with her professional expectations-considering

the full range of alternatives and conducting appropriate duediligence.73

Indeed, given how

The one case cited by Deason in support of this claim, Mills Acquisition Co. v. Macmillan, Inc., 559 A.2d1261 (Del. 1989), could not be more dissimilar. In Mills, the board completely abrogated every aspect of anauction to its self-interested CEO, his hand-selected special committee, his chosen legal adviser, and hischosen fmancial adviser with only

"to1pid" and "supine" board oversight, resulting in manipulation of theauction to improperly favor the CEO's preferred acquirer, who had promised significant ownership in therestructured company to the CEO and management. Mills, 559 A.2d at 1281.

72 If the threat of a proxy battle from Icabn were a motive for rushing to complete the Transaction, the XeroxDefendants did a very poor job of rushing: Icahn's timely nominated slate will be voted on at the 2018annual meeting of Xerox shareholders, potentially ousting four Director Defendants from the Board,regardless of whether shareholders approve or reject the Transaction. Ex. 176 (Fischel Report ¶¶ 19, 47).

73 M ¶¶ 41-44.â€”

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were.were.

â€”â€”

auction'auction'

â€”â€”

well the parties knew each other, it would have been wholly reasonable for the negotiations to

have been completed more quickly than theywere."

Deason suggests that the Board was in a hurry to "avoid[] or defeat[]activisim"

from

Icahn, see Deason I Br. 4, but the truth, as Deason himself acknowledges, id. 10, 32, is that

Jacobson and the Board used the specter of Icahn's activism as leverage to make progress on

terms and timing with Fujifilm in talks regarding theTransaction."

Xerox agreed to

Fujifilm's request that the announcement be made on January 31, 2018, and used the

announcement date asleverage."

Fujifilm, and FX mutually agreed to an anticipated

announcement date of January 31, 2018 in order to move the deal along.

Deason argues that the Board's"rush"

to approveI-r- the Transaction caused the Board to

"hastily approve[] the Transaction despite recognizing that there were significant material

issues that had not yet beenresolved."

Deason I Br. 33. Among what Deason terms "red

flags"was the Board's failure, in Januarv 2018, to demand that the Transaction be structured

as an all cash 100% buyout of Xerox by Fujifilm-a proposal that had not been discussed by

either party since Fujifilm took it off the table in Jzdy 2017. See Xerox Class Br 13-14.

Deason's redflags"flags are red herrings.

Notably, Deason does not cite a single case in support of his claim that the Board's

process in negotiating, reviewing, and approving the Transaction was in any way deficient. It

was not. Moreover, New York law does not require the Board to pursue any prescribed

process (such as an auction"), contact some minimum number of potential counterparties, or

74 M. W 38-40.75 Ex. 15 (XEROX_FX-00053739).

Ex. 108 (XEROX_Fx-00055666); Ex. 113(XEROX_FX.-00144899); Ex. 105 (XEROX_FX.-00064851)While negotiations of the Transaction were ongoing, the Board discussed and "explicitly decided not to . . .canvass the market"market*' or "run an auction" because "broadcast[ing]" the auction to potential acquirers "would

2727



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â€”

seeks.

â€”

â€”

hold out for the best hypothetical deal. The Board's decisions are presumed proper under the

business judgment rule so long as there is any rational basis for those decisions. Under New

York law, "the applicable standard, as to the merit of the underlying transaction, is not

whether the directors came to a perfect decision, but whether they came to a reasonableone."

Levy Invs., Ltd. v. USI Holdings Corp., No. 1011/072007 WL 7321658, at *14 (N.Y. Sup. Ct.

Mar. 28, 2007). Deason, of course, cites no law suggesting that the Board's engaging in a 10-

month deliberative process before approving the Transaction amounts to a breach of the

Board's fiduciary duties.

(4) The Director Defendants Have Not Breached Their Duty of Candor, and

Any Allegations that They Have Are Moot

Deason claims that Xerox and the Director Defendants have violated their fiduciary

duty of candor by making materially false and misleading public statements about the IV and

the Transaction. See Deason I Br. 36--38. He is wrong, and even were he right, he would not

be entitled to the relief that heseeks." '

One aspect of Deason's duty of candor claims does warrant specific discussion:

Deason claims that "Director Defendants have attempted to minimize the 'crownjewel' lock-

up by falsely stating that it only 'Limit[s] Xerox's StrategicFlexibility,'

when they know full

well it'restrict[s]'

Xerox's ability to enter into a transaction with anyone other thanFuji."

Deason I Br. 36. Deason thus takes a diametrically opposite position to the Class Plaintiffs,

not enhance [Xerox's] ability to get the best deal." Ex. 122 (Reese Tr. 119:2-120:5). The Board hadlearned from Lexmark's experience, which saw its sales drop and stmggled to obtain new contracts after itspotential sale became public. Ex. 127 (Jacobson Tr. 268:18-269:22).

Indeed, courts do not require such disclosures. See Vaccaro v. New Sources Energy Partners LP., No. 15-

CV-8954 (KMW), 2016 WL 7373799 (S.D.N.Y. Dec. 19, 2016) (quoting Singh v. Schikan, 106 F. Supp.3d.

439, 448 (S.D.N.Y. 2015)) ("Nor were defendants' disclosures deficient because they failed to characterize[the facts] in a certain way . . . . [T]he law is clear that compames need not depict facts in a negative orpejorative light or draw negative inferences to have made adequate disclosures."). In any event, Deason'sAmended Complaint in this action has now been filed publicly (in redacted form), thus alerting Xeroxshareholders to Deason's allegations regarding the Board's approval of the Transaction.

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proceed." â€”

â€”

â€”

("

â€”â€” â€”

â€”

who argue in their lawsuit that the same statement is misleading for the opposite reason,

because the JV agreements do not preclude a sale to third parties, and such a sale is feasible"

Astonishingly, Deason has incorporated the ClassPlaintiffs'

arguments in hisbrief,8°

thus

speaking out of both sides of his mouth.

Moreover, Deason's Talmudic reading of the various statements around the JV distort

reality and parse difference where there is none: As the various Xerox witnesses all

explained, the JV does, in some ways, restrict or limit, the ways in which certain transactions

couldproceed.81

But it does not-as Deason implies-constitute a "lockup"

that somehow

prevents any transaction other than the one withFujifilm.82

Instead, it is the simple truth that

the nature of the extensive business relationship between Fujifilm and Xerox has developed

over the last fifty-plus years in such a way that Fujifilm is a natural candidate to combine with

Xerox.

Deason claims that Xerox's failure to disclose its JV agreements in their entirety prior

to January 31, 2018 entitles him to an injunction barring the Transaction from proceeding to a

vote or, if approved, being consummated. Deason I Br. 34-36. This argument makes no

sense, and is unsupported by law. As explained above (see supra pp.10-11),8310 the Xerox

Defendants were under no obligation to disclose the entirety of the JV agreements-a fact that

Christodoro

.84Even if Xerox had been under some obligation to disclose, which it was not, any

failure to disclose would be cured, and Deason's claims mooted, upon Xerox's

See Class Pls.' Br. at 25.°° Deason I Br. 24 n.2 ("Plaintiff incorporates by reference any additional arguments in Class Plaintiffs

Supplemental Memorandum of Law.").81 Ex. 122 (Reese Tr. 289:6-9); Ex. 124 (Keegan Tr. 43:21-44:13).82 Ex. 122 (Reese Tr. 283:22-284:12); see also Ex. 176 (Fischel Report ¶¶ 41, 47-50).'³ See also Xerox Deason II Brief pp. 6-9.84 Ex. 147 (Icahn-Chris02930-3023); Ex. 130 (Christodoro Tr. 135:10-25, 136:11-14).

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â€”

option

â€”

disclosure of the JV agreements on January 31, 2018. See Levy Invs., Ltd., 2007 WL

7321658, at *15 ("[T]he("

filing of the 8-K form is a supplemental public disclosure that

substantially mitigate[s] any real risk of irreparable injury."); see also State Wis. Inv. Bd. v.

Bartlett, 2000 WL 238026, at *10 (no itTeparable harm where board "presented the

shareholders with an adequate supplementary disclosure").disclosure"

To the extent Deason continues to

argue this theory of irreparable hami, it fails as a matter of law.

Deason also enumerates a remaining grab bag of disclosures which he believes should

be made (Deason IBr. 36), including that: "The Company did not engage in a comprehensive

review of its strategic options and financialalternatives."

(id.); "The Company did not fully

explore various other deal structures with Fuji nor did Xerox actively pursue other companies

to see if they would consider a superioratTangement."

(id. 39); and "Contrary to the advice of

its own financial advisor, the Director Defendants neglected (i) to consider a RMT transaction

with HP, (ii) to pursue the possibility of a Fuji all-cash purchase with private equity funding

as Fuji had recommended as its second-best option, and (iii) to contact other competitors,

Asian counterparties or financial sponsors about possible alternativedeals"

(id. 37). Each of

Deason's conclusory criticisms about the Board is contradicted by the voluminous record

detailing the Board's thorough process in pursuing, evaluating, and approving the

Transaction. As described fully in the Xerox Class Brief, see pp. 14-16:

• Jacobson met with an HP representative in August 2017 to gauge interest in a

possible transaction, and had further calls with HP (including the CEO) in

January 2018 on the samesubject;ss

• Xerox pursued an all-cash deal until Fujifilm made it clear that it was not a

viableoption;86

85 Ex. 127 (Jacobson Tr. 274:24-277:17); Ex. 107 (XEROX_FX-00000116, at -122); Ex. 125 (Hess Tr.

252:17-253:8); Ex. 114 (XEROX_FX-00000160, at -170).86 Ex. 6 (XEROX_FX-00100922) Ex. 26 (FUJI_XRX_00010714); Ex. 127 (Jacobson Tr. 308:22-309:11); Ex.

125 (Hess Tr. 138:2-21); Ex. 121 (XEROX_FX-00146015, at -134); Ex. 127 (Jacobson Tr. 401:13-404:21).

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â€”

• Xerox reached out to two private equity firms to gauge their interest in buyingXerox.37Xerox.

But even assuming Deason's gripes had any merit-which they do not-his claim that

the Board failed to disclose his allegations against it would not entitle him to the extraordinary

relief of enjoining the transaction. Xerox has not yet published a final proxy, or even

scheduled a shareholder vote on the Transaction; thus any alleged misstatement or omission

could be remedied by supplemental disclosures. See, e.g., In re Med. Action Indus., Inc.,

S'holders Litig., No. 64930-2014, 2014 WL 4809795, at *9 (N.Y. Sup. Ct. Sept. 19, 2014)

(finding supplemental proxy detailing all information necessary toshareholders'

vote

corrected any prior disclosureissues).83

Even had Deason and Icahn's public battle not

already aired every imagined grievance with the Transaction, there is still ample time to

disclose any conceivable fact to the shareholders before the Transaction is put to a vote.

(5) The Entire Fairness Standard Does Not Apply, But the Transaction

Satisf es the Fair Process and Fair Price Prongs of That Analysis

The entire fairness standard does not apply in evaluating the Transaction because, as

discussed above, Deason cannot show that a majority of the Board was interested or otherwise

lacked independence. Orman v. Cullman, 794 A.2d 5, 23 (Del. Ch. 2002) (where plaintiff "is

unable to plead facts demonstrating that a majority of a board that approved the transaction in

dispute was interested and/or lacked independence, the entire fairness standard of review is

not applied and the Court respects the business judgment of the board"). But even if the

entire fairness standard (rather than the business judgment rule) did apply, the Transaction

would satisfy it.

87 Ex. 124 (Hess Tr. 131:4-14; 240:19-241:7; 276:24-277:5); Ex. 125 (Keegan Tr. 73:2-75:10).'8

Again, Deason has put all Xerox shareholders on notice of his allegations by publicly filing a redactedversion of his Amended Con1plaint in this action, so even if Deason's allegations were true there is nothingleft for the Board to disclose.

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merger"

â€”

The entire fairness standard has two parts-fair dealing and fair price. Weinberger v.

UOP, Inc., 457 A.2d 701, 711 (Del. 1983) (noting that, in a non-fraudulent transaction, "price

may be the preponderant consideration outweighing other features of the merger"). The fair

dealing prong considers issues such as the timing of the transaction, the deal structure, the

matters disclosed to the directors, and how the transaction was negotiated. M The fair price

aspect relates to economic and financial considerations of the proposed merger, "including all

relevant factors: assets, market value, eamings, future prospects, and any other elements that

affect the intrinsic or inherent value of a company'sstock." ACP Master, Ltd. v. Sprint

Corp., No. CV 8508-VCL, 2017 WL 3421142, at *18 (Del. Ch. July 21, 2017) (quoting

Weinberger, 457 A.2d at 711).

Deason's argument that the Transaction was not the product of fair dealing simply

rehashes Deason's unfounded arguments (discussed above) with respect to alleged breaches

of the Board's duty of loyalty and duty of care and they fail for the same reasons. Indeed, the

only case that Deason cites to support his argument of unfair dealing is Mills Acquisition Co.

v. Macmillan, Inc., 559 A.2d 1261 (1989), an egregious case involving the outright

manipulation of an auction by an interested CEO and his hand-picked special conunittee that

bears no resemblance to process at issue here89

Deason's argument that the Transaction fails to deliver a fair price is based on

misleading and cropped quotations to the record (see supra p. 6 & Xerox Class Br. pp. 43-47)

as well as an unfounded critique of Centerview's valuation. Notably, Deason fails to cite a

single case in support of his fair price argument. The Transaction is highly beneficial to

shareholders, as set forth in greater detail in the Xerox Class Brief (see pp. 30-32).

See supran.72.

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price.'

prenuuni.'

â€”â€” â€”

Shareholders receive a $2.5 billion dividend (approximately $9.80 per share), which

represents approximately 33% of Xerox's unaffected share price9°

Shareholders also receive

a 49.9% stake in a "larger, more competitive company with a more attractive financial

profile."Xerox shareholders receive an implied day-one premium of 15% above the

unaffected price and, once synergies are take into effect (even at a conservative estimation),

Xerox shareholders receive value in the Transaction amounting to a 50% premium. And even

this ignores the full "value creation or multiple expansion opportunity over time resulting

from the combined company's enhanced revenue profile, global reach, scale and greater

competiveness."91 '

Deason's fair price arguments boil down to essentially two, entirely speculative

claims-that Xerox should have somehow obtained an all-cash, 30% premium offer from

Fujifilm, despite a thorough record that no such offer was available; or that some other,

hypothetical superior transaction maymaterialize.92materialize. First, there is no typical control

premium, much less 30%, and there is no reason to conclude that Xerox shareholders could

ever obtain such apremium.93prenuuni.

93Nor is there any reason to assume that an all-cash offer is

inherently superior to a structured transaction, particularly where, as here, no such all-cash

offer was forthcoming, much less one with a 30%premium.94

c) Deason Cannot Establish Imminent Risk of Irreparable Harm in the

Absence of an Injunction

Deason takes three swings at irreparable harm, but each fails.

First, Deason contends that he and other Xerox shareholders face a risk of irreparable

90 Ex. 141 (Mar. 7, 2018 Forrn DFAN14A).91 Id.9² See Deason I Br. 40-42.93 Ex. 176 (Fischel Report) ¶¶ 56-58. Deason's niinority discount argument is sinlilarly flawed. Id. ¶¶ 59-60.94 Ex. 177 (Hitscherich Report) ¶¶ 47-49, 51-61, 62-69,

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â€”

harm if the Transaction is pennitted to proceed, because they will "ilTevocably lose the

opportunity 'to receive a superior controlpremium,"

citing QVC Network, Inc. v. Paramount

Conunc'ns Inc., 635 A.2d at 1273 n.50. Deason I Br. 42-43. But Paramount does not apply

where, as here, there is no rival bidder on the scene:

In cases where the refusal to grant an injunction presents the possibility that a

higher, pending, rival offer might go away forever, our courts have found a

possibility of irreparable hami. See, e.g. , [Paramount]. In other cases when

. . . no rival bid is on the table, the denial of injunctive relief is often premised

on the imprudence of having the court enjoin the only deal on the table, when

the stockholders can make that decision for themselves. See, e.g., In re Tovs'R'

Us, Inc. S'holder Litig., 877 A.2d 975, 1023 (Del. Ch. 2005) ("[T]he("

bottom line is that the public shareholders will have an opportunity [] to reject

the merger if they do not think the price is high enough in light of the

Company's stand-alone value and other options.").

In re Netsmart Techs., Inc. S'holders Litig., 924 A.2d 171, 208 & nn.116-17 (Del. Ch. 2007).

Second, Deason argues that permitting a shareholder vote on the Transaction

necessarily will cause ilTeparable harm because Xerox shareholders have been misled about

the tenns of the Transaction, the negotiation process, and what Deason terms the "highly

disturbing and bad faith conduct and conflicts ofinterest"

of the Board. Deason I Br. 43.

Deason's complaint is that, in its solicitation materials, Xerox should have added superfluous

detail or characterized certain facts in a pejorative (and incorrect) fashion. Again, courts do

not require such disclosures. See Vaccaro, 2016 WL 7373799, at *1. In any event, this claim

is premature, and does not support the relief Deason seeks: Xerox has not yet published a

final proxy, or even scheduled a shareholder vote on the Transaction, and any alleged

misstatement or omission could be remedied by a supplemental disclosure. See, e.g., In re

Med. Action Indus., Inc. S'holders Litig., 2014 WL 4809795, at *9 (finding supplemental

proxy detailing all information necessary to informshareholders'

vote corrected any prior

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â€”

disclosure issues); see also State Wis. Inv. Bd. v. Bartlett, 2000 WL 238026, at *10 (Del. Ch.

2000) (no irreparable harm where board "presented the shareholders with an adequate

supplementarydisclosure").95

).

Third, Deason argues that there is a risk of irreparable harm if shareholders "are forced

to vote on a Transaction that has been deprived of a full and fair shopping of an

unencumbered Xerox to the openmarket"

and "will not get a second chance at a change of

controltransaction."

Deason I Br. 43. As explained above (see supra pp. 7, 30), a "full and

fairshopping"

did occur here. Courts reject such claims of ilTeparable harm by shareholders

when the record does not support speculation of a hypothetical better offer. See, e.g., State of

Wisconsin, 2000 WL 238026, at *10. The authorities Deason cites do not support his

argument-in fact, one squarely contradicts it. Deason cites In re Cogent, Inc. S'holder

Litig., 7 A.3d 487 (Del. Ch. 2010) for the proposition that "Courts have consistently found

that a failure to realistically consider strategic alternatives or 'shop thedeal'

can pose a threat

of ilTeparablehann."

Deason I Br. 43-44. But the court in In re Cogent denied a motion for

injunctive relief brought by a shareholder where the company "thoroughly explor[ed] strategic

transactions"and had, at best, only one potential alternative (but less definite) offer. In re

In Phillips v. Insituform of N Am., Inc., No. 9173, 1987 WL 16285 (Del. Ch. Aug. 27, 1987), the courtrefused to grant an injunction barring a shareholder vote though plaintiffs had established a clear probabilityof likelihood of success on the basis of undisputed facts showing that the board had issued new shares forthe pulpose of diluting an adverse shareholder's voting power. Even under that extreme set ofcircumstances (none of which are present here), the court saw "no reason why the meeting itself should notgo ahead for the lianited purpose of taking the vote, so that a record of that vote can be made." Id. at *11.

Deason seems to have abandoned his earlier theory of ineparable harm, that Xerox shareholders will beif forced to vote on the Transaction when Xerox did not disclose the JEC and TA until January 31,

2018. As the Xerox Defendants pointed out in the motion to dismiss Deason's complaint, this arguinent ismoot. See Levy Invs., Ltd., 2007 WL 7321658, at *15 ("[T]he("

filing of the 8-K form is a supplementalpublic disclosure that substantially mitigate[s] any real risk of ineparable injury."); see also State Wis. Inv.

Bd., 2000 WL 238026, at *10 (no irreparable harm where board "presented the shareholders with anadequate supplementary disclosure").disclosure" To the extent Deason continues to argue this theory of irreparable

hann, it fails as a matter of law.

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â€”Cogent, 7 A.3d at 515-16. Here, Xerox engaged in a diligent and thorough exploration for

potential offers, and none materialized. And no other bidder has emerged following the

of the Transaction, despite the existence of a customary "fiduciaryout."96 ' h

Hollinger Int 7 v. Black, 844 A.2d 1022 (Del. Ch. 2004), the Court found that the corporation,

Hollinger International, Inc., suffered irreparable harm when its Chainnan, Conrad Black,

sought to consummate a transaction after "diverting to himself a valuable opporttmity

presented to [thecorporation]."

Hollinger, 844 A.2d at 1029. The holding in Ho//inger has

no bearing here.

d) Deason Cannot Establish a Balance of the Equities in His Favor

In his 44-page brief, Deason devotes a single footnote on the very last page to the third

element he must prove by clear and convincing evidence in order to satisfy the high standard

for injunctive relief: that a balancing of the equities tips in his favor. Deason I Br. 44 n.18.

Deason provides no argument, and no evidence; he simply reiterates the legal standard and

cites an inapplicable case concerning a company's hami in losing key employees. See id.

(citing CanWest Glob. Conunc'ns Corp. v. Mirkaei Tikshoret Ltd., 9 Misc. 3d 845, 872 (N.Y.

Sup. Ct. 2005)). This does not remotely satisfy Deason's burden. As a matter of law, Deason

cannot show that the equities weigh in his favor because Deason has failed to prove that he

will suffer irreparable injury in the absence of an injunction. Lombard v. Station Sq. Inn Apts.

Corp., 94 A.D.3d 717, 722 (N.Y. 2d Dep't 2012) ("Given("

that the plaintiff . . . will not suffer

any irreparable harm, . . . the equities do not weigh in his favor."). Indeed, the balance of

equities is decidedly in the XeroxDefendants'

favor, as granting the injunction risks the loss

96 Nor is there any merit to Deason's claim that the tennination fee the Board approved is in any wayimproper. See Deason I Br. 24. As discussed in the Xerox Class Brief, a termination fees are customary,and the fee the Board approved is reasonable. See Xerox Class Br. 40 & n.171.

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â€”

fi

of opporttmity to consummate the Transaction-the only deal on the table for Xerox-and

would deny the Transaction's benefits to Xerox shareholders, in addition to disenfranchising

them by prohibiting them from voting on the Transaction. See, e.g., Levy Invs., 2007 WL

7321658, *16-17 (finding balance of equities in defendant-corporation's favor where

disruption of shareholder vote would risk consummation of "the only availableoffer"

and

recognizing, in balancing equities and denying plaintiff's request to enjoin shareholder vote,

potential hann to third partyshareholders)."shareholders).

For all the reasons stated above, and because Deason cannot allege, let alone prove, facts sufficient toovercome the presumption of good faith afforded to directors by the business judgment rule Under NewYork law, disnñssal is appropriate here under the business judgment rule, which "bars judicial inquiry intoactions of corporate directors taken in good faith and in the exercise of honest judgment in the lawful andlegitimate furtherance of co1porate pulposes." Auerbach v. Bennett, 47 N.Y.2d 619, 629 (1979); Lippe v.Bairnco Corp., 230 B.R. 906, 917 n.6 (S.D.N.Y. 1999) (applying New York law and disnússing breach of

fiduciary duty claims for failure to rebut the business judgment rule). The Court also should dismiss anyclaims Deason pmports to assert against Defendant Bunis, who was not even on the Board during theapproval of the Transaction about which Deason complains. Moreover, Deason has not sufficiently alleged

any facts to support his fraud claims with the specificity required to survive a motion to disnñss under NewYork law, and those claims should be dismissed as well. See High Tides, LLC v. DeMichele, 931 N.Y.S.2d

377, 382 (N.Y. App. Div. 2011) (affirming disnússal of fraud claim where plaintiff made only "conclusoryallegations of fraud," void of "specific misrepresentations or omissions").

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CONCLUSION

For the reasons set forth above, the Xerox Defendants respectfully request that the

Court deny Deason's motion for a preliminary injunction and grant the XeroxDefendants'

motion to dismiss all claims asserted by Deason against the Xerox Defendants.

Dated: New York, New York

April 17, 2018

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP

By: /s/ Jav Cohen

Jay Cohen

Claudia Hammennan

Daniel J. Toal

Jaren Janghorbani

1285 Avenue of the Americas

New York, NY 10019-6064

Telephone: (212) 373-3000

Fax: (212) 797-3990

[email protected]

[email protected]

[email protected]

[email protected]

Attorneys for Xerox Defendants

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2018 - KPB & Co. · supreme court of the state of new york county of new york darwin deason,...

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