ADT 2008 Annual Report Download - page 234

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 2008 and
2007, the maximum amount outstanding under these programs was $24 million and $52 million,
respectively. Loans receivable under these programs, as well as other unsecured advances outstanding,
were $24 million at both September 26, 2008 and September 28, 2007. 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
$27 million and $26 million at September 26, 2008 and September 28, 2007, respectively, and the rate
of interest charged on such loans was 3.0% and 5.4% for 2008 and 2007, respectively. Interest income
on these interest bearing loans totaled $1 million, $1 million and $2 million in 2008, 2007 and 2006,
respectively. Certain of the above loans totaling $4 million both at September 26, 2008 and
September 28, 2007, 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 2008, 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. Purchases from
these companies during 2008 aggregated less than 1 percent of consolidated net revenue.
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, was an executive officer of VF Corporation during 2007. Rajiv L. Gupta, a Director,
was an executive officer of Rohm and Haas Company during 2007. Purchases from these companies
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, was an executive officer of VF Corporation during 2006. Rajiv L. Gupta, a Director, was an
executive officer of Rohm and Haas Company during 2006. Purchases from the 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.
In 2001, Tyco authorized compensation arrangements to L. Dennis Kozlowski and Mark H. Swartz,
the Company’s Chief Financial Officer and Director until August 2002. In connection with such
2008 Financials 131