ADT 2007 Annual Report Download - page 227

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Commitments and Contingencies (Continued)
disclosed securities class action settlement. All costs and expenses that Tyco incurs in connection with
the defense of such litigation, other than the amount of any judgment or settlement, which will be
allocated in the manner described above, will be borne equally by Covidien, Tyco Electronics and Tyco.
Class Actions and Class Action Settlement
As a result of actions taken by certain of the Company’s former senior corporate management,
Tyco, some members of the Company’s former senior corporate management, including former
members of its Board of Directors and former General Counsel are named defendants in a number of
purported class actions alleging violations of the disclosure provisions of the federal securities laws. In
addition, Tyco, certain of its 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.
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.
On May 14, 2007, Tyco entered into a Memorandum of Understanding with plaintiffs’ counsel in
connection with the settlement of 32 purported securities class action lawsuits. The Memorandum of
Understanding does not resolve all securities cases, and several remain outstanding. In addition, the
proposed settlement does not release claims arising under ERISA and the lawsuits arising thereunder.
Under the terms of the Memorandum of Understanding, the plaintiffs agreed to release all claims
against Tyco, the other settling defendants and ten other individuals in consideration for the payment of
$2.975 billion from Tyco to the certified class. The parties to the Memorandum of Understanding have
applied to the court for approval of the settlement agreement. On July 13, 2007, the U. S. District
Court in Concord, New Hampshire granted preliminary approval of the settlement. On November 2,
2007, the final fairness hearing for the class settlement was held. The Court indicated it would approve
the settlement and stated a formal ruling would be issued in a few weeks. If the settlement agreement
does not receive final court approval, the Memorandum of Understanding will be null and void. By
December 28, 2007, class participants must file their proofs of claim demonstrating their right to
recovery under the class settlement.
The deadline for deciding not to participate in the class settlement was September 28, 2007. As of
such date, Tyco had received opt-out notices from individuals and entities totaling approximately 4% of the
shares owned by class members. These individuals and entities may pursue their claims separately against
Tyco and any judgments resulting from such claims would not reduce the settlement amount. One entity,
Franklin Mutual Advisers, LLC, has filed a complaint against Tyco on September 24, 2007 in an action
styled Franklin Mutual Advisers, LLC v. Tyco International Ltd. in the United States District Court for the
District of New Jersey alleging violations of Section 11 of the Securities Act of 1933, 15 U.S.C. Sec. 77(b),
Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. Sec. 78(b), and Rule 10b-5
promulgated thereunder and Section 18 of the Securities and Exchange Act of 1934, 15 U.S.C. Sec. 78(k)
in connection with the plaintiffs’ purchases and sales of Tyco securities between June 4, 2001 and April 30,
2002. The plaintiffs seek unspecified compensatory damages and reasonable attorneys’ fees and costs. Tyco
has requested that this action be transferred to the United States District Court for the District of New
Hampshire. Tyco intends to vigorously defend the litigation. It is not possible at this time to predict the
2007 Financials 135