ADT 2008 Annual Report Download - page 144

Litigation and recorded a $36 million charge to other expense to write-off unamortized debt issuance
costs.
During the third quarter of 2008, the Company signed a definitive agreement with the plaintiff to
settle the lawsuit entitled New Jersey v. Tyco International Ltd., et al. In connection with the settlement,
the Company made a payment of $73.25 million to the plaintiffs on June 2, 2008. Pursuant to the
Separation and Distribution Agreement, the Company’s share of the settlement amount was
approximately $20 million, with Covidien and Tyco Electronics responsible for approximately
$30 million and $23 million, respectively. The Company recorded the settlement and related receivable
from each of Covidien and Tyco Electronics for their respective shares of the settlement amount in the
second quarter of 2008 resulting in a net charge to selling, general and administrative expenses for its
share of the settlement of approximately $20 million.
Also in the third quarter of 2008, the Company settled the lawsuit entitled Ballard v. Tyco
International Ltd. Pursuant to the settlement, the Company made a payment of $36 million to the
plaintiffs, which was subject to the sharing formula contained in the Separation and Distribution
Agreement and resulted in the Company recording a net charge to selling, general and administrative
expenses of approximately $10 million and recording receivables from Tyco Electronics and Covidien of
approximately $11 million and $15 million, respectively, in the third quarter.
Also in the third quarter of 2008, the Company settled the matter entitled The Bank of New York v.
Tyco International Group S.A., a lawsuit related to the Separation brought by the indenture trustee of
certain of Tyco’s public debt. In connection with the settlement, Tyco exchanged approximately
$422 million principal amount of notes due 2028 and $707 million principal amount of notes due 2029
for an equal principal amount of notes due 2019 and 2021, respectively. The terms of the exchange
notes are substantially the same as the terms of the notes for which they were exchanged. In addition,
each series of notes issued under Tyco’s indentures dated June 9, 1998 and December 31, 2003
(including the exchange notes) were amended to provide noteholders with the right to require Tyco to
repurchase their notes for a purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase, in the event that a ratings downgrade
occurs in connection with certain change of control transactions.
Also in the third quarter of 2008, the Company settled the matter entitled Sensormatic Security
Corp. v. Sensormatic Electronics Corp., ADT Security Services, Inc. and Wallace Computer Services, Inc. in
connection with its purchase of the Sensormatic franchisee’s Maryland, Virginia and District of
Columbia franchise. As part of the settlement and the franchise acquisition, the Company paid a total
of approximately $86 million to the franchisee which includes $20 million for the reacquisition of
franchise rights that were deemed unfavorable to the Company when compared to pricing for current
market transactions for similar arrangements and $6 million related to a legal settlement.
In the second quarter of 2008, the Company settled a contract dispute arising under its former
Infrastructure Services business relating to the City of Phoenix’s 91st Avenue Wastewater Treatment
Plant. The settlement included a general release of all claims by each party to the litigation without any
party making any payment to any other party. In connection with the settlement, the Company assessed
its assets under the original contract with the City of Phoenix and concluded the assets were no longer
recoverable, resulting in a $51 million charge to discontinued operations in the second quarter of 2008.
In 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 several of such cases remain outstanding. In addition, the settlement did not
2008 Financials 41