ADT 2002 Annual Report Download - page 4

Recent Developments
Tyco’s wholly-owned subsidiary, Tyco International Group, S.A. (‘‘TIG’’), repurchased all of its
6.25% Dealer Remarketable Securities (‘‘Drs.’’) due 2013 on June 16, 2003. The total Dollar Price paid
was $902 million based upon the $750 million par value of the Drs. plus the difference between a Base
Rate of 5.55% and the then current ten-year United States Treasury yield-to-maturity. The payment
was made from available cash. The portion of the payment in excess of par ($152 million) is recorded
as an expense in the third fiscal quarter of 2003, which reduces earnings per share by 7 cents in the
quarter.
A class action complaint was filed in the United States District Court for the Southern District of
Florida, Ezra Charitable Trust v. Tyco International Ltd. & E. Breen on May 28, 2003, purporting to
represent a class of purchasers of Tyco securities between December 30, 2002 to March 12, 2003.
Plaintiffs name as defendants Tyco and Edward D. Breen, Tyco’s Chairman and Chief Executive
Officer. The complaint asserts a cause of action under Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder against both defendants. As against defendant Breen, the
complaint asserts a cause of action under Section 20(a) of the Securities Exchange Act of 1934. The
complaint alleges that defendants violated the securities laws by making materially false and misleading
statements and omissions concerning, among other things, Tyco’s financial and operating condition and
financial prospects for Tyco and its ADT business segment and the results of its investigation of its
former management.
Three plaintiffs filed a civil complaint in the Superior Court of the State of California (Los
Angeles County) in Hess v. Tyco International, Ltd., et al. on June 2, 2003. Plaintiffs name as defendants
Tyco and twelve of our former officers and directors. The complaint asserts four causes of action under
the California Corporate Securities Laws of 1968. The complaint alleges that plaintiffs purchased, in
exchange for releases of claims against Tyco, Tyco common shares based on Tyco’s materially false and
misleading statements and omissions about the company’s finances, business operations and share
value.
Four plaintiffs filed a civil complaint in the United States District Court for the Eastern District of
Michigan in Wilson v. Tyco International Ltd. et al on June 3, 2003. Plaintiffs name as defendants Tyco
International Ltd., Tyco International (US), Tyco Acquisition Corp. VII and Earth Tech EMS
Holdings Inc., d/b/a Earth Tech. The complaint asserts causes of action for breach of contract, negligent
misrepresentation, fraudulent misrepresentation and exemplary damages. Plaintiffs allege that during
the course of negotiations for the acquisition of two companies by Earth Tech, a division of Tyco,
defendants made material misrepresentations to plaintiffs and that after the contracts of sale had been
finalized, breached material terms of the contracts. Plaintiffs also allege that defendants engaged in
accounting manipulations that caused significant harm to the two companies and that, as a result,
plaintiffs were denied fair payment for their companies, which lost fair market value.
Plaintiffs in the pending District of New Hampshire consolidated multidistrict shareholder
derivative litigation filed a Verified Stockholders’ Second Consolidated and Amended Derivative
Complaint, Evans v. Kozlowski et al. on June 12, 2003. This second amended complaint drops as
defendants Tyco’s auditors, and adds as defendants each of the members of the current Board of
Directors of Tyco. The second amended complaint alleges against all defendants causes of action for
breach of fiduciary duty and equitable fraud, and for waste of corporate assets and equitable fraud. The
second amended complaint alleges that the defendants who are former directors and officers of Tyco
engaged in, permitted and/or acquiesced in the following alleged improper conduct: using Tyco funds
for personal benefit, including misappropriation of funds from our Key Employee Loan Program and
relocation programs; engaging in improper self-dealing real estate transactions; entering into improper
undisclosed retention agreements; and filing false and misleading financial statements with the SEC
that were based on improper accounting methods. The second amended complaint alleges that the
defendants who are current directors of Tyco engaged in, permitted and/or acquiesced in the following
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