SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
May 8, 2001
XEROX CORPORATION
(Exact name of registrant as specified in its charter)
New York 1-4471 16-0468020
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) No.)
800 Long Ridge Road
P. O. Box 1600
Stamford, Connecticut 06904-1600
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:
(203) 968-3000
Item 5. Other Events
The following is a brief description of material pending legal proceedings to
which Registrant or any of its subsidiaries is a party or of which any of their
property is the subject. This description is an update of the disclosure
regarding material pending legal proceedings contained in Registrant's annual
report on Form 10-K for the fiscal year ended December 31, 1999, and is
consistent with the requirements of "Item 3--Legal Proceedings" of Form 10-K.
On March 10, 1994, a lawsuit was filed in the United States District Court
for the District of Kansas by an independent service organization claiming
damages predominately resulting from the Registrant's alleged refusal to sell
parts for high-volume copiers and printers to CSU L.L.C. (CSU) prior to 1994.
Registrant asserted counterclaims against CSU alleging patent and copyright
infringement relating to the copying of diagnostic software and service
manuals. On January 8, 1999, the court dismissed with prejudice all of CSU's
antitrust claims. The District Court also granted summary judgment in favor
of Registrant on its patent infringement claim, leaving open with respect to
patent infringement only the issues of willfulness and the amount of damages,
and granted partial summary judgment in favor of Registrant with respect to
some of its claims of copyright infringement. A judgment in the amount of
$1.1 million was entered in favor of Registrant on the copyright infringement
counterclaim. On February 16, 2000, the United States Court of Appeals for
the Federal Circuit affirmed the judgment of the District Court dismissing
CSU's antitrust claims. The Supreme Court denied a writ of certiorari on
February 20, 2001.
On April 11, 1996, an action was commenced by Accuscan Corp. (Accuscan), in
the United States District Court for the Southern District of New York,
against Registrant seeking unspecified damages for infringement of a patent
of Accuscan which expired in 1993. The suit, as amended, was directed to
facsimile and certain other products containing scanning functions and sought
damages for sales between 1990 and 1993. On April 1, 1998, the jury entered
a verdict in favor of Accuscan for $40 million. However, on September 14,
1998, the court granted Registrant's motion for a new trial on damages. The
trial ended on October 25, 1999 with a jury verdict of $10 million.
Registrant's motion to set aside the verdict or, in the alternative, to grant
a new trial was denied by the court. Registrant is appealing to the Court of
Appeals for the Federal Circuit. Accuscan is appealing the new trial grant
which reduced the verdict from $40 million and seeking a reversal of the
jury's finding of no willful infringement. Briefing at the Court of Appeals
for the Federal circuit is complete and May 9, 2001 has been set as the date
for oral argument.
In October 2000, in a consolidated purported class action case claiming that
the withdrawal of Crum & Forster Holdings, Inc. (C&F) (a former subsidiary of
Registrant) from the Xerox Corporation Employee Stock Ownership Plan (ESOP)
constituted a wrongful termination under the Employee Retirement Income
Security Act (ERISA), the court granted Registrant's motion for summary
judgment and dismissed the case in its entirety. Plaintiffs have failed to
appeal the dismissal in a timely manner and the case is now closed.
On June 24, 1999, Registrant was served with a summons and complaint filed in
the Superior Court of the State of California for the County of Los Angeles.
The complaint was filed on behalf of 681 individual plaintiffs claiming
damages as a result of Registrant's alleged disposal and/or release of
hazardous substances into the soil, air and groundwater. On July 22, 1999,
April 12, 2000, and November 30, 2000, respectively, three additional
complaints were filed in the same court on behalf of an additional 79, 141,
and 76 plaintiffs, respectively, with the same claims for damages as the June
1999 action. Two of the three additional cases have been served on
Registrant.
Plaintiffs in all four cases further allege that they have been exposed to
such hazardous substances by inhalation, ingestion and dermal contact,
including but not limited to hazardous substances contained within the
municipal drinking water supplied by the City of Pomona and the Southern
California Water Company. Plaintiffs' claims against Registrant include
personal injury, wrongful death, property damage, negligence, trespass,
nuisance, fraudulent concealment, absolute liability for ultra-hazardous
activities, civil conspiracy, battery and violation of the California Unfair
Trade Practices Act. Damages are unspecified.
Registrant denies any liability for the plaintiffs' alleged damages and
intends to vigorously defend these actions. Registrant has not answered or
appeared in any of the cases because of an agreement among the parties and
the court to stay these cases pending resolution of several similar cases
currently pending before the California Supreme Court. However, the court
recently directed that the four cases against Registrant be coordinated with
a number of other unrelated groundwater cases pending in Southern California.
A consolidated securities law action entitled In re Xerox Corporation
Securities Litigation is pending in the United States District Court for the
District of Connecticut. Defendants are Registrant, Barry Romeril, Paul
Allaire and G. Richard Thoman, former Chief Executive Officer, and purports
to be a class action on behalf of the named plaintiffs and all other
purchasers of Common Stock of Registrant during the period between October
22, 1998 through October 7, 1999 (Class Period). The amended consolidated
complaint in the action alleges that in violation of Section 10(b) and/or
20(a) of the Securities Exchange Act of 1934, as amended (34 Act), and
Securities and Exchange Commission 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 Registrant's
Common Stock during the Class Period by disseminating materially false and
misleading statements and/or concealing material facts. The amended
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 Registrant's Common Stock; (ii)
allowed several corporate insiders, such as the named individual defendants,
to sell shares of privately held Common Stock of Registrant 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 Registrant at inflated prices. The amended
consolidated 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. The defendants' motion for dismissal of the complaint is
pending. The named individual defendants and Registrant deny any wrongdoing
and intend to vigorously defend the action.
Two putative shareholder derivative actions are pending in the Supreme Court
of the State of New York, County of New York on behalf of Registrant against
all current members of the Board of Directors (with the exception of Anne M.
Mulcahy) and G. Richard Thoman (in one of the actions) and Registrant, as a
nominal defendant. Another, now dismissed, putative shareholder derivative
action was pending in the United States District Court for the District of
Connecticut. Plaintiffs claim breach of fiduciary duties and/or gross
mismanagement related to certain of the alleged accounting practices of
Registrant's operations in Mexico. The complaints in all three actions
alleged that the individual named defendants breached their fiduciary duties
and/or mismanaged Registrant by, among other things, permitting wrongful
business/accounting practices to occur and inadequately supervising and failing
to instruct employees and managers of Registrant. In one of the New York
actions it is claimed that the individual defendants disseminated or
permitted the dissemination of misleading information. In the other New York
action it is also alleged that the individual defendants failed to vigorously
investigate potential and known problems relating to accounting, auditing and
financial functions and to take affirmative steps in good faith to remediate
the alleged problems. In the federal action in Connecticut it was also
alleged that the individual defendants failed to take steps to institute
appropriate legal action against those responsible for unspecified wrongful
conduct. Plaintiffs claim that Registrant has suffered unspecified damages.
Among other things, the pending complaints seek unspecified monetary damages,
removal and replacement of the individuals as directors of Registrant and/or
institution and enforcement of appropriate procedural safeguards to prevent
the alleged wrongdoing. Defendants filed a motion to dismiss in one of the
New York actions. Subsequently, the parties to the federal action in
Connecticut agreed to dismiss that action without prejudice in favor of the
earlier-filed New York action. The parties have also agreed, subject to
court approval, to seek consolidation of the New York actions and a
withdrawal, without prejudice, of the motion to dismiss. The individual
defendants deny the wrongdoing alleged in the complaints and intend to
vigorously defend the actions.
Twelve purported class actions had been pending in the United States District
Court for the District of Connecticut against Registrant, KPMG, LLP (KPMG),
and Paul A. Allaire, G. Richard Thoman, Anne M. Mulcahy and Barry D. Romeril.
A court order consolidated these twelve actions and established a procedure
for consolidating any subsequently filed related actions. The consolidated
action purports to be a class action on behalf of the named plaintiffs and
all purchasers of securities of, and bonds issued by, Registrant during the
period between February 15, 1998 through February 6, 2001 (Class). Among
other things, the consolidated complaint generally alleges that each of
Registrant, KPMG, the individuals and additional defendants Philip Fishbach
and Gregory Tayler violated Sections 10(b) and/or 20(a) of the 34 Act and
Securities and Exchange Commission Rule 10b-5 thereunder, by participating in
a fraudulent scheme that operated as a fraud and deceit on purchasers of
Registrant's Common Stock by disseminating materially false and misleading
statements and/or concealing material adverse facts relating to Registrant's
Mexican operations and other matters relating to Registrant's financial
condition beyond Registrant's Mexican operations. The amended complaint
generally alleges that this scheme deceived the investing public regarding
the true state of Registrant's financial condition and caused the named
plaintiff and other members of the alleged Class to purchase Registrant's
Common Stock and Bonds at artificially inflated prices. The amended
complaint seeks unspecified compensatory damages in favor of the named
plaintiff and the other members of the alleged Class against Registrant, KPMG
and the individual defendants, jointly and severally, including interest
thereon, together with reasonable costs and expenses, including counsel fees
and expert fees. Following the entry of the order of consolidation, at least
five additional related class action complaints were filed in the same Court.
In each of these cases, the plaintiffs defined a class consisting of persons
who purchased the Common Stock of Registrant during the period February 15,
1998 through and including February 6, 2001. Some of these plaintiffs filed
objections to the consolidation order, challenging the appointment of lead
plaintiffs and lead and liaison counsel and have separately moved for the
appointment of lead plaintiff and lead counsel. The court has not rendered a
decision with regard to the objections. The individual defendants and
Registrant deny any wrongdoing alleged in the complaints and intend to
vigorously defend the actions.
A lawsuit has been instituted in the Superior Court, Judicial District of
Stamford/Norwalk, Connecticut, by James F. Bingham, a former employee of
Registrant against Registrant, Barry D. Romeril, Eunice M. Filter and Paul
Allaire. The complaint alleges that he was wrongfully terminated in
violation of public policy because he attempted to disclose to senior
management and to remedy alleged accounting fraud and reporting
irregularities. He further claims that Registrant and the individual
defendants violated Registrant's policies/commitments to refrain from
retaliating against employees who report ethics issues. The plaintiff also
asserts claims of defamation and tortious interference with a contract. He
seeks: (a) unspecified compensatory damages in excess of $15,000, (b)
punitive damages, and (c) the cost of bringing the action and other relief as
deemed appropriate by the court. The defendants have not yet formally
responded to the complaint. The individuals and Registrant deny any
wrongdoing alleged in the complaints and intend to vigorously defend the
actions.
A putative shareholder derivative action is pending in the Supreme Court of
the State of New York, Monroe County against certain current and former
members of the Board of Directors, namely G. Richard Thoman, Paul A. Allaire,
B. R. Inman, Antonia Ax:son Johnson, Vernon E. Jordan Jr., Yotaro Kobayashi,
Ralph S. Larsen, Hilmar Kopper, John D. Macomber, George J. Mitchell, N. J.
Nicholas, Jr., John E. Pepper, Patricia L. Russo, Martha R. Seger and Thomas
C. Theobald (collectively, the "Individual Defendants"), and Registrant, as a
nominal defendant. Plaintiff claims the Individual Defendants breached their
fiduciary duties of care and loyalty to Registrant and engaged in gross
mismanagement by allegedly awarding former CEO, G. Richard Thoman,
compensation including elements that were unrelated in any reasonable way to
his tenure with Registrant, his job performance, or Registrant's financial
performance. The complaint further specifically alleges that the Individual
Defendants failed to exercise business judgment in granting Thoman lifetime
compensation, a special bonus award, termination payments, early vesting of
stock compensation, and certain transportation perquisites, all which
allegedly constituted gross, wanton and reckless waste of corporate assets of
Registrant and its shareholders. Plaintiff claims that Registrant has
suffered damages and seeks judgment against the Individual Defendants in an
amount equal to the sum of the special bonus, the present value of the
$800,000 per year lifetime compensation, the valuation of all options
unexercised upon termination, the cost of transportation to and from France,
and/or an amount equal to costs already incurred under the various
compensation programs, cancellation of unpaid balances of these obligations,
and/or cancellation of unexercised options and other deferred compensation at
the time of his resignation, plus the cost and expenses of the litigation,
including reasonable attorneys', accountants' and experts' fees and other
costs and disbursements. The Individual Defendants deny the wrongdoing
alleged in the complaint and intend to vigorously defend the action.
_____________________________________________________________________________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly authorized this report to be signed on its behalf by the
undersigned duly authorized.
XEROX CORPORATION
/s/ MARTIN S. WAGNER
----------------------------
By: MARTIN S. WAGNER
Assistant Secretary
Date: May 8, 2001