ADT 2007 Annual Report Download - page 216

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Related Party Transactions
The Company has amounts due related to loans and advances issued to employees in prior years
under the Company’s Key Employee Loan Program, relocation programs and other advances made to
executives. Loans were provided to employees under the Company’s Key Employee Loan Program,
which is now discontinued, except for outstanding loans for the payment of taxes upon the vesting of
shares granted under our Restricted Share Ownership Plans. No loans are outstanding to any of our
current executives. The loans are not collateralized and bear interest, payable annually, at a rate based
on the six-month LIBOR, calculated annually as the average of the rates in effect on the first day of
each of the preceding 12 months. Loans are generally repayable in ten years; however, earlier payments
are required under certain circumstances, such as when an employee is terminated. In addition, the
Company made mortgage loans to certain employees under employee relocation programs. These loans
are generally payable in 15 years and are collateralized by the underlying property. During 2007 and
2006, the maximum amount outstanding under these programs was $52 million and $69 million,
respectively. Loans receivable under these programs, as well as other unsecured advances outstanding,
were $24 million and $52 million at September 28, 2007 and September 29, 2006. The total outstanding
loans receivable includes loans to L. Dennis Kozlowski, the Company’s former Chairman and Chief
Executive Officer (until June 2002). The amount outstanding under these loans, plus accrued interest,
was $26 million and $52 million at both September 28, 2007 and September 29, 2006, respectively, and
the rate of interest charged on such loans was 5.4% and 5.0% for 2007 and 2006, respectively. Interest
income on these interest bearing loans totaled $1 million, $2 million, and $2 million in 2007, 2006 and
2005, respectively. Certain of the above loans totaling $4 million and $30 million at September 28, 2007
and September 29, 2006, respectively, are non-interest bearing.
During the fourth quarter of 2002, the Board of Directors and new senior management adopted a
policy under which no new loans are allowed to be granted to any officers of the Company and existing
loans are not allowed to be extended or modified.
During 2007, the Company engaged in commercial transactions in the normal course of business
with companies where the Company’s Directors were employed and served as officers, including VF
Corporation and Rohm and Haas Company. Mackey J. McDonald, a Director who retired effective
March 7, 2007, is an executive officer of VF Corporation. Rajiv L. Gupta, a Director, is an executive
officer of Rohm and Haas Company. Purchases from other companies noted above during 2007
aggregated less than 1 percent of consolidated net revenue.
During 2006, the Company engaged in commercial transactions in the normal course of business
with companies where the Company’s Directors were employed and served as officers, including
Marsh & McLennan Companies, Inc., VF Corporation and Rohm and Haas Company. Sandra S.
Wijnberg, a Director, was an executive officer of Marsh & McLennan Companies, Inc. prior to her
resignation from that company on March 31, 2006. Mackey J. McDonald, a Director during such
period, is an executive officer of VF Corporation. Rajiv L. Gupta, a Director, is an executive officer of
Rohm and Haas Company. Purchases from Marsh & McLennan Companies, Inc. during 2006 were
approximately $16 million. Purchases from other companies noted above during 2006 aggregated less
than 1 percent of consolidated net revenue.
During 2005, the Company engaged in commercial transactions in the normal course of business
with companies where the Company’s Directors were employed and served as officers, including
Marsh & McLennan Companies, Inc., Brunswick Corporation, VF Corporation and Rohm and Haas
Company. Sandra S. Wijnberg, a Director during such period, was an executive officer of Marsh &
124 2007 Financials