ADT 2007 Annual Report Download - page 134
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this action will have a material adverse effect on its financial position, results of operations or cash
flows.
Sensormatic Security Corp. v. Sensormatic Electronics Corp., ADT Security Services, Inc. and Wallace
Computer Services, Inc. In April 2002, litigation was commenced in the United States District Court for
the District of Maryland by a Sensormatic franchisee, Sensormatic Security Corp. (‘‘SSC’’), alleging
breach of contract against Sensormatic and tortuous interference with contract against ADT and
Wallace Computer Services, Inc., a party unrelated to Tyco. The litigation was based on allegedly
unpaid commissions under a franchise agreement. The lawsuit also alleges that Sensormatic improperly
authorized third parties (including ADT and Wallace) to sell in SSC’s exclusive territory of Maryland,
Virginia and the District of Columbia. Sensormatic has agreed to indemnify Wallace. SSC seeks an
accounting, monetary damages (including punitive damages against ADT and Wallace), and injunctive
relief. Sensormatic and ADT have denied SSC’s allegations and asserted affirmative defenses.
Sensormatic also filed a counterclaim seeking recovery of overpayments made to SSC. On September 7,
2006, the trial court denied in part and granted in part the parties’ cross motions for summary
judgment. Among other things, the Court ruled that SSC has the right to commissions on all
Sensormatic CCTV products (not just SensorVision systems) if sold for automatic theft detection in the
franchise territory and SSC has the right to commissions on CCTV indirect sales if sold for automatic
theft detection in the franchise territory. Sensormatic and ADT intend to appeal those rulings.
Sensormatic and ADT will continue to vigorously defend the litigation. While it is not possible at this
time to predict the final outcome of this dispute, Tyco does not believe this action will have a material
adverse effect on its financial position, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
None.
42 2007 Financials