ADT 2006 Annual Report Download - page 81

Our reputation and our ability to do business may be impaired by improper conduct by any of our
employees or agents or those of our subsidiaries.
Tyco and its subsidiaries operate in many parts of the world that have experienced governmental
corruption to some degree, including, but not limited to, Asia, India, Latin America and Europe. Tyco’s
policy mandates strict compliance with the United States Foreign Corrupt Practices Act, as amended,
and local laws prohibiting corrupt payments to government officials. Nonetheless, we cannot provide
assurance that our internal control policies and procedures will always protect us from reckless or
criminal acts committed by our employees that would violate U.S. and/or foreign laws, including the
laws governing payments to government officials. Such improper actions could subject the Company to
civil or criminal penalties, including substantial monetary fines, as well as disgorgement of profits or
other monies, against us or our subsidiaries and could damage our reputation and, therefore, our ability
to do business.
From time to time Tyco obtains or receives information alleging improper conduct of Tyco
employees, agents, and/or distributors, including conduct involving potentially improper payments to
foreign government officials. Tyco’s policy is to investigate that information and respond appropriately,
including, if warranted, taking remedial control measures and reporting its findings to relevant law
enforcement authorities.
Covenants in our debt instruments may adversely affect us.
Our bank credit agreements contain financial and other covenants, such as a limit on the ratio of
debt to earnings before interest, taxes, depreciation and amortization, minimum levels of net worth,
and limits on incurrence of liens. Our outstanding indentures contain customary covenants including
limits on negative pledges, subsidiary debt and sale/leaseback transactions.
Although we believe none of these covenants are presently restrictive to our operations, our ability
to meet the financial covenants can be affected by events beyond our control, and we cannot provide
assurance that we will meet those tests. A breach of any of these covenants could result in a default
under our credit agreements or indentures. Upon the occurrence of an event of default under any of
our credit facilities or indentures, the lenders or trustees could elect to declare all amounts outstanding
thereunder to be immediately due and payable and terminate all commitments to extend further credit.
If the lenders or trustees accelerate the repayment of borrowings, we cannot provide assurance that we
will have sufficient assets to repay our credit facilities and our other indebtedness. Acceleration of any
obligation under any of our material debt instruments will permit the holders of our other material
debt to accelerate their obligations. See ‘‘Liquidity and Capital Resources—Capitalization’’.
Downgrades of our debt ratings would adversely affect us.
Certain downgrades by Moody’s and S&P may increase our cost of capital and make it more
difficult for us to obtain new financing.
2006 Financials 19