ADT 2006 Annual Report Download - page 124

dates through the year 2013, most of which are renewable and are established primarily within our
international operations.
At September 29, 2006, the Company had a contingent purchase price liability of $80 million
related to the 2001 acquisition of Com-Net by Electronics. This represents the maximum amount
payable to the former shareholders of Com-Net only after the construction and installation of a
communications system for the State of Florida is finished and the State has approved the system based
on the guidelines set forth in the contract. A liability for this contingency has not been recorded in
Tyco’s Consolidated Financial Statements as the outcome of this contingency cannot be reasonably
determined.
In June 2004, TIGSA entered into a $500 million 3-year unsecured letter of credit facility due
June 15, 2007. The facility provides for the issuance of letters of credit, supported by a related line of
credit facility. TIGSA may only borrow under the line of credit agreement to reimburse the bank for
obligations with respect to letters of credit issued under this facility. The covenants under this facility
are substantially similar to TIGSA’s bank credit facilities entered into during December 2003 and the
indenture related to TIGSA’s 6% notes due 2013 issued in November 2003. TIGSA would pay interest
on any outstanding borrowings at a variable interest rate, based on the bank’s base rate or the
Eurodollar rate, as defined. Upon the occurrence of certain credit events, the interest rate on the
outstanding borrowings becomes fixed. The issuance of letters of credit under this credit facility during
2004 enabled the Company to release approximately $480 million of restricted cash and investments. As
of September 29, 2006, letters of credit of $475 million have been issued under the $500 million credit
facility and $25 million remains available for issuance. There were no amounts borrowed under this
credit facility at September 29, 2006.
In the normal course of business, the Company is liable for contract completion and product
performance. In the opinion of management, such obligations will not significantly affect the
Company’s financial position, results of operations or cash flows.
Legal Matters
Class Actions
For a detailed discussion of contingencies related to Tyco’s securities class actions, shareholder
derivative litigation, ERISA litigation and investigation, and litigation against former senior
management, see Item 3. Legal Proceedings. We are generally obligated to indemnify our directors and
officers and our former directors and officers who are named as defendants in some or all of these
matters to the extent required by Bermuda law. In addition, our insurance carriers may decline
coverage, or our coverage may be insufficient to cover our expenses and liability, in some or all of
these matters. While we may from time to time seek to engage plaintiff’s counsel in settlement
discussions, we are unable at this time to estimate what our ultimate liability in these matters may be,
and it is possible that we will be required to pay judgments or settlements and incur expenses, in excess
of any insurance coverage, in aggregate amounts that would have a material adverse effect on our
financial position, results of operations or cash flows. At this time, it is not possible to estimate the
amount of loss or probable losses, if any, that might result from an adverse resolution of these matters.
Investigations
For a detailed discussion of contingencies related to governmental investigations related to Tyco
see Item 3. Legal Proceedings—Subpoenas and Document Requests From Governmental Entities. We
cannot predict when these investigations will be completed, nor can we predict what the results of these
investigations may be. It is possible that we will be required to pay material fines, consent to
injunctions on future conduct, lose the ability to conduct business with government instrumentalities
62 2006 Financials