ADT 2007 Annual Report Download - page 234

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Commitments and Contingencies (Continued)
If we did not have liquidity available to repay the outstanding debt under the 1998 and 2003
indentures under our 364-day bridge facility, such an acceleration of the outstanding notes would have
permitted a majority of the lenders under each of our bank and letter of credit facilities to demand
repayment of amounts outstanding under those facilities, and to terminate their commitments to extend
additional credit thereunder. As a result, on November 27, 2007, the Company secured additional firm
commitments from certain of its lenders under the bridge facility, providing the Company with
additional borrowings of up to $4.0 billion to repay such notes. The additional commitments expire on,
and any borrowings under the facility would mature on, November 25, 2008. The facility may only be
used to repay, settle or otherwise extinguish the amounts required to be paid in connection with the
litigation with BONY.
ERISA Partial Withdrawal Liability Assessment and Demand
On June 8, 2007, SimplexGrinnell received a notice alleging that it had partially withdrawn from
the National Automatic Sprinkler Industry Pension Fund (the ‘‘Fund’’). Under Title IV of ERISA, if
the fund can prove that an employer completely or partially withdraws from a multi-employer pension
plan such as the Fund, the employer is liable for withdrawal liability equal to its proportionate share of
the plan’s unfunded vested benefits. The alleged withdrawal results from a 1994 labor dispute between
Grinnell Fire Protection Systems, SimplexGrinnell’s predecessor, and Road Sprinkler Fitters Local
Union No. 669.
ERISA requires that payment of withdrawal liability be made in full or in quarterly installments
commencing upon receipt of a liability assessment from the plan. A plan’s assessment of withdrawal
liability generally may be challenged only in arbitration, and ERISA requires that quarterly payments
must continue to be made during the pendency of the arbitration. If the employer prevails in
arbitration (and any subsequent court appeals), its quarterly withdrawal liability payments are refunded
with interest. The Fund’s total withdrawal liability assessment against SimplexGrinnell is approximately
$25 million, and the quarterly withdrawal liability payments are $1.1 million commencing on August 1,
2007. SimplexGrinnell believes that it has strong arguments that no withdrawal liability is owed to the
Fund, and it plans to vigorously defend against the Fund’s withdrawal liability assessment by timely
filing for arbitration. Accordingly, the Company has made no provision for this contingency in its
Consolidated Financial Statements.
Other Matters
Earth Tech v. City of Phoenix is a contract dispute arising from Earth Tech’s contract with the City
of Phoenix, Arizona for expansion of the City’s 91st Avenue Waste Water Treatment Plant. On
December 21, 2005, Earth Tech filed a lawsuit against the City of Phoenix in the Maricopa County
Superior Court alleging $3 million in damages plus interest for the City’s failure to pay dewatering and
computer systems costs related to the 91st Avenue project. After the City rejected Earth Tech’s
administrative claim against the City, Earth Tech filed and served a First Amended Complaint upon the
City of Phoenix. In its First Amended Complaint, Earth Tech alleged eighteen causes of action and
requested the following: (i) a recovery of at least $73 million for the value of the services performed by
Earth Tech in connection with the contract; (ii) a rescission of the contract; (iii) an equitable
adjustment of the Contract price for additional dewatering services and the Computer Control System;
and (iv) costs for demobilization and termination of the contract. The City of Phoenix filed a Motion to
142 2007 Financials