Xerox 2009 Annual Report Download - page 83

81Xerox 2009 Annual Report
Notes to the Consolidated
Financial Statements
Dollars in millions, except per-share data and unless otherwise indicated.
which subsequently were consolidated into one action. Seven actions
were filed in state courts in Texas, which subsequently were consolidated
into one action in the Dallas County Court at Law No. 3. The operative
complaints in the Delaware and Texas actions name as defendants
ACS and/or the members of ACS’s board of directors (the “Individual
Defendants”) and Xerox Corporation and/or Boulder Acquisition Corp.,
a wholly-owned subsidiary of Xerox (the “Xerox Defendants”). On
October 22, 2009, a class of ACS shareholders was certified in the
Delaware action. Pursuant to a stipulation entered into by all parties
in the Delaware and Texas actions on November 20, 2009, the Texas
plaintiffs agreed to stay prosecution of the Texas action until agreed
otherwise by the defendants and ordered by the Texas court, and all
plaintiffs agreed that any further prosecution of the Delaware and Texas
actions, or any claims that could have been brought in those actions,
would proceed in the Delaware action. The Texas court has calendared
a trial date of November 29, 2010, for administrative purposes in the
event that all issues are not resolved in the Delaware proceedings.
On December 11, 2009, plaintiffs in the Delaware action filed an
amended complaint alleging, among other things, that (i) the Individual
Defendants breached their fiduciary duties to ACS and its shareholders
by authorizing the sale of ACS to Xerox for what plaintiffs deem
inadequate consideration and pursuant to inadequate process, and the
Xerox Defendants aided and abetted these alleged breaches; (ii) the
Individual Defendants breached their fiduciary duties to ACS and its
shareholders by agreeing to the provisions of the merger agreement
relating to the consideration to be paid to the holders of Class B shares
which the Delaware plaintiffs allege violates the ACS certificate of
incorporation and is, therefore, void, and the Xerox Defendants aided
and abetted these alleged breaches; and (iii) the Individual Defendants
breached their fiduciary duties by failing to disclose material facts in
the October 23, 2009 Form S-4 filed with the SEC in connection with the
merger. The amended complaint seeks, among other things, to enjoin
the defendants from consummating the merger on the agreed-upon
terms, and unspecified compensatory damages, together with the costs
and disbursements of the action.
On December 16, 2009, the Delaware court so ordered a stipulation
between Xerox, ACS and certain Individual Defendants and the
plaintiffs in the Delaware action providing, among other things, that
in exchange for modifying certain provisions of the merger agreement
and other consideration, the plaintiffs would not seek to enjoin any
shareholder vote on the closing of the merger, nor take any action for
the purpose of preventing or delaying the closing of the merger. On
January 20, 2010, the Delaware court so ordered a stipulation by all
parties in the Delaware action providing, among other things, for a trial
to take place May 10–14, 2010 on the claims for damages asserted
in the action. On January 29, 2010, defendants moved to dismiss the
amended complaint and on February 8, 2010, plaintiffs moved for
partial summary judgment.
The merger between ACS and Xerox closed on February 5, 2010.
We deny any wrongdoing and are vigorously defending the actions.
individual defendants, to sell shares of privately held common stock
of the Company while in possession of materially adverse, non-
public information; and (iii) caused the individual plaintiffs and the
other members of the purported class to purchase common stock
of the Company at inflated prices. The complaint seeks unspecified
compensatory damages in favor of the plaintiffs and the other members
of the purported class against all defendants, jointly and severally,
for all damages sustained as a result of defendants’ alleged wrongdoing,
including interest thereon, together with reasonable costs and expenses
incurred in the action, including counsel fees and expert fees. In 2001,
the Court denied the defendants’ motion for dismissal of the complaint.
The plaintiffs’ motion for class certification was denied by the Court
in 2006, without prejudice to refiling. In February 2007, the Court
granted the motion of the International Brotherhood of Electrical
Workers Welfare Fund of Local Union No. 164, Robert W. Roten, Robert
Agius (“Agius”) and Georgia Stanley to appoint them as additional lead
plaintiffs. In July 2007, the Court denied plaintiffs’ renewed motion
for class certification, without prejudice to renewal after the Court holds
a pre-filing conference to identify factual disputes the Court will be
required to resolve in ruling on the motion. After that conference and
Agius’s withdrawal as lead plaintiff and proposed class representative,
in February 2008 plaintiffs filed a second renewed motion for class
certification. In April 2008, defendants filed their response and motion
to disqualify Milberg LLP as a lead counsel. On September 30, 2008, the
Court entered an order certifying the class and denying the appointment
of Milberg LLP as class counsel. Subsequently, on April 9, 2009, the
Court denied defendants’ motion to disqualify Milberg LLP. The parties
have filed motions to exclude certain expert testimony. On November
6, 2008, the defendants filed a motion for summary judgment. Briefing
with respect to each of these motions is complete. On April 22, 2009,
the Court denied plaintiffs’ motions to exclude the testimony of two of
defendants’ experts. The Court has not yet rendered decisions regarding
the other pending motions. The individual defendants and we deny any
wrongdoing and are vigorously defending the action. In the course of
litigation, we periodically engage in discussions with plaintiffs’ counsel
for possible resolution of this matter. Should developments cause a
change in our determination as to an unfavorable outcome, or result
in a final adverse judgment or a settlement for a significant amount,
there could be a material adverse effect on our results of operations,
cash flows and financial position in the period in which such change in
determination, judgment or settlement occurs.
Merger Agreement Between Xerox and Affiliated Computer Services,
Inc.: In late September and early October 2009, nine purported class
action complaints were filed by Affiliated Computer Services, Inc. (“ACS”)
shareholders challenging ACS’s proposed merger with Xerox. (See Note 3
– Acquisitions.) Two actions were filed in the Delaware Court of Chancery