Xerox 2007 Annual Report Download - page 128

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
have told the MCA that Xerox’s conduct in voluntarily
disclosing the initial information and readily and willingly
submitting to investigation, coupled with the
non-availability of earlier records, warrants complete
closure and early settlement. In January 2006, we learned
that the MCA has issued a “Show Cause Notice” to certain
former executives of Xerox India Ltd. seeking a response
to allegations of potential violations of the Indian
Companies Act. We also learned that Xerox India Ltd. has
received a formal Notice of Enquiry from the Indian
Monopolies & Restrictive Trade Practices Commission
(“MRTP Commission”) alleging that Xerox India Ltd.
committed unfair trading practices arising from the
events described in the DCA investigator’s Report.
Following a hearing on August 29, 2006, the MRTP
Commission ordered a process with deadlines between
Xerox India Ltd. and the investigating officer for provision
of relevant documents to Xerox India Ltd., after which
Xerox India Ltd. will have four weeks to file its reply. The
MRTP Commission scheduled a hearing for framing of the
issues on January 9, 2007, but this hearing was delayed. A
new hearing was scheduled for January 29, 2007 for
consideration of Xerox India Ltd.’s motion for the MRTP
Commission to direct the investigating officer to supply us
the relevant documents. At the hearing on January 29th,
no additional documents were supplied to us. The MRTP
Commission directed us to file our reply to the original
Notice of Enquiry within four weeks. At a hearing on
April 2, 2007, the investigating officer requested another
copy of our reply for the purpose of filing a response. An
additional period of four weeks to file this response was
granted, and the next hearing date was set for May 15,
2007 for further consideration and framing of issues. The
matter was heard on May 15, 2007, but the investigating
officer sought additional time to file his response, which in
fact was filed on June 27, 2007. The Commission
rescheduled the matter for August 17, 2007 for further
proceedings. At the hearing on August 17, 2007, counsel
for Xerox India Ltd. argued that the Enquiry is not
properly maintainable under the Commission’s
jurisdiction. The issue of maintainability of the Notice of
Enquiry has been framed as the preliminary issue and the
Commission will decide this at the next hearing date,
which has been rescheduled for March 2008. Our Indian
subsidiary plans to contest the Notice of Enquiry and has
been fully cooperating with the authorities.
Other contingencies
Guarantees, Indemnifications and Warranty
Liabilities: Guarantees and claims arise during the
ordinary course of business from relationships with
suppliers, customers and nonconsolidated affiliates when
the Company undertakes an obligation to guarantee the
performance of others if specified triggering events occur.
Nonperformance under a contract could trigger an
obligation of the Company. These potential claims include
actions based upon alleged exposures to products, real
estate, intellectual property such as patents,
environmental matters, and other indemnifications. The
ultimate effect on future financial results is not subject to
reasonable estimation because considerable uncertainty
exists as to the final outcome of these claims. However,
while the ultimate liabilities resulting from such claims
may be significant to results of operations in the period
recognized, management does not anticipate they will
have a material adverse effect on the Company’s
consolidated financial position or liquidity. As of
December 31, 2007, we have accrued our estimate of
liability incurred under our indemnification arrangements
and guarantees.
Indemnifications provided as part of contracts and
agreements: We are a party to the following types of
agreements pursuant to which we may be obligated to
indemnify the other party with respect to certain matters:
• Contracts that we entered into for the sale or purchase
of businesses or real estate assets, under which we
customarily agree to hold the other party harmless
against losses arising from a breach of representations
and covenants, including obligations to pay rent.
Typically, these relate to such matters as adequate
title to assets sold, intellectual property rights,
specified environmental matters and certain income
taxes arising prior to the date of acquisition.
• Guarantees on behalf of our subsidiaries with respect
to real estate leases. These lease guarantees may
remain in effect subsequent to the sale of the
subsidiary.
• Agreements to indemnify various service providers,
trustees and bank agents from any third party claims
related to their performance on our behalf, with the
exception of claims that result from third-party’s own
willful misconduct or gross negligence.
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