Xerox 2011 Annual Report Download - page 98

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with respect to the motion is complete. The Court has not yet rendered
a decision. The parties also filed motions to exclude the testimony of
certain expert witnesses. On April 22, 2009, the Court denied plaintiffs’
motions to exclude the testimony of two of defendants’ expert witnesses.
On September 30, 2010, the Court denied plaintiffs’ motion to exclude
the testimony of another of defendants’ expert witnesses. The Court also
granted defendants’ motion to exclude the testimony of one of plaintiffs’
expert witnesses, and granted in part and denied in part defendants’
motion to exclude the testimony of plaintiffs’ two remaining expert
witnesses. The individual defendants and we deny any wrongdoing and
are vigorously defending the action. At this time, we do not believe it is
reasonably possible that we will incur additional material losses in excess
of the amount we have already accrued for this matter. 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.
Guarantees,Indemnications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, 2011, we have accrued our estimate of liability incurred under our
indemnification arrangements and guarantees.
Indemnications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.
Litigation Against the Company
In re Xerox Corporation Securities Litigation: A consolidated securities
law action (consisting of 17 cases) is pending in the United States District
Court for the District of Connecticut. Defendants are the Company, Barry
Romeril, Paul Allaire and G. Richard Thoman. The consolidated action is
a class action on behalf of all persons and entities who purchased Xerox
Corporation common stock during the period October 22, 1998 through
October 7, 1999 inclusive (“Class Period”) and who suffered a loss as a
result of misrepresentations or omissions by Defendants as alleged by
Plaintiffs (the “Class”). The Class alleges that in violation of Section 10(b)
and/or 20(a) of the Securities Exchange Act of 1934, as amended (“1934
Act”), and SEC Rule 10b-5 thereunder, each of the defendants is liable as
a participant in a fraudulent scheme and course of business that operated
as a fraud or deceit on purchasers of the Company’s common stock
during the Class Period by disseminating materially false and misleading
statements and/or concealing material facts relating to the defendants’
alleged failure to disclose the material negative impact that the April
1998 restructuring had on the Company’s operations and revenues.
The complaint further alleges that the alleged scheme: (i) deceived the
investing public regarding the economic capabilities, sales proficiencies,
growth, operations and the intrinsic value of the Company’s common
stock; (ii) allowed several corporate insiders, such as the named 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. On November 6,
2008, the defendants filed a motion for summary judgment. Briefing
Notes to the Consolidated
Financial Statements
(in millions, except per-share data and where otherwise noted)