ADT 2008 Annual Report Download - page 129

approximately 6 million square feet, of which 5 million square feet are owned and 1 million square feet
are leased.
Safety Products operates through a network of offices located in North America, South America,
Europe and the Asia-Pacific region. Our Safety Products manufacturing facilities, warehouses and
distribution centers are located in North America, Europe and the Asia-Pacific region. The group
occupies approximately 5 million square feet, of which 2 million square feet are owned and 3 million
square feet are leased.
In the opinion of management, our properties and equipment are in good operating condition and
are adequate for our present needs. We do not anticipate difficulty in renewing existing leases as they
expire or in finding alternative facilities. See Note 16 to Consolidated Financial Statements for a
description of our lease obligations.
Item 3. Legal Proceedings
In the ordinary course of business, we are subject to various legal proceedings and claims, including
product liability matters, environmental matters, patent infringement claims, employment disputes,
disputes on agreements and other commercial disputes.
In connection with the Separation, we entered into a liability sharing agreement regarding certain
legal actions that were pending against Tyco prior to the Separation. Under the Separation and
Distribution Agreement, we, Covidien and Tyco Electronics are jointly and severally liable for the full
amount of any judgments resulting from the actions subject to the agreement, which generally are
legacy matters that are not specific to the business operations of any of the companies (including
ERISA, FCPA and securities claims). The agreement also provides that we will be responsible for 27%,
Covidien 42% and Tyco Electronics 31% of payments to resolve these matters, with costs and expenses
associated with the management of these contingencies being shared equally among the parties. In
addition, under the agreement, we will manage and control all the legal matters related to assumed
contingent liabilities as described in the Separation and Distribution Agreement, including the defense
or settlement thereof, subject to certain limitations.
Class Action Settlement and Legacy Securities Matters
As previously reported, in June 2007 the Company settled 32 purported securities class action
lawsuits arising from actions alleged to have been taken by prior management for $2.975 billion. Of this
amount, the Company contributed $803 million, representing its share under the Separation and
Distribution Agreement to a $2.975 billion escrow account established in connection with the
settlement. All legal contingencies that could have affected the final order approving the settlement
expired on February 21, 2008, and the claims administrator is currently processing claims. The
settlement did not purport to resolve all securities cases, and the outstanding cases are discussed below.
It is not possible to predict the final outcome or to estimate the amount of loss or range of possible
loss, if any, that might result from an adverse resolution of the asserted or unasserted claims from
individuals that have opted-out or from any other legacy securities litigation. Should any of these cases
result in an adverse judgment or be settled for a significant amount, they could have a material adverse
effect on our financial position, results of operations or cash flows.
Pursuant to the terms of the settlement, L. Dennis Kozlowski, Mark H. Swartz and Frank E. Walsh,
Jr., were excluded as settling defendants, and the class agreed to assign to Tyco all of their claims
against these defendants. In exchange, Tyco has agreed to pay the certified class, in addition to the
$2.975 billion described above, 50% of any net recovery against these defendants.
26 2008 Financials