ADT 2006 Annual Report Download - page 193

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Commitments and Contingencies (Continued)
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 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.
Class Actions
As a result of actions taken by the Company’s former senior corporate management, Tyco, some
members of the Company’s former senior corporate management, former members of our Board of
Directors and the Company’s current Chief Executive Officer and General Counsel and former Chief
Financial Officer are named defendants in a number of purported class actions alleging violations of
the disclosure provisions of the federal securities laws. Tyco, certain of the Company’s current and
former employees, some members of the Company’s former senior corporate management and some
former members of the Company’s Board of Directors also are named as defendants in several
Employee Retirement Income Security Act (‘‘ERISA’’) class actions. In addition, some members of the
Company’s former senior corporate management are subject to a SEC inquiry. The findings and
outcomes of the SEC inquiry may affect the course of the purported securities class actions and ERISA
class actions pending against Tyco. The Company is generally obligated to indemnify its directors and
officers and its 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, the Company’s insurance carriers may
decline coverage, or the Company’s coverage may be insufficient to cover its expenses and liability, in
some or all of these matters. While the Company may from time to time seek to engage plaintiff’s
counsel in settlement discussions, the Company is unable at this time to estimate what its ultimate
liability in these matters may be, and it is possible that the Company 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 its 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
The Company and others have received various subpoenas and requests from the SEC’s Division
of Enforcement, the United States Department of Labor, the General Service Administration and
others seeking the production of voluminous documents in connection with various investigations into
the Company’s governance, management, operations, accounting and related controls. The Department
of Labor is investigating Tyco and the administrators of certain of its benefit plans. The Company
cannot predict when these investigations will be completed, nor can the Company predict what the
results of these investigations may be. It is possible that the Company will be required to pay material
fines, consent to injunctions on future conduct, lose the ability to conduct business with government
instrumentalities (which in turn could negatively impact the Company’s business with non-governmental
customers) or suffer other penalties, each of which could have a material adverse effect on the
Company’s business. It is not possible to estimate the amount of loss, or range of possible loss, if any,
that might result from an adverse resolution of these matters.
2006 Financials 131