ADT 2009 Annual Report Download - page 214

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Goodwill and Intangible Assets (Continued)
See Note 1 for discussion regarding changes in the estimated lives of dealer intangibles.
11. 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. 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. There have been no loans made to any of our current executives. The outstanding 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 2009 and 2008, the
maximum amount outstanding under these programs was $22 million and $24 million, respectively.
Loans receivable under these programs, as well as other unsecured advances outstanding, were
$22 million and $24 million as of September 25, 2009 and September 26, 2008, respectively. 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 $27 million as of September 25, 2009 and September 26, 2008,
respectively, and the rate of interest charged on such loans was 1.9% and 3.0% for 2009 and 2008,
respectively. Interest income on these interest bearing loans totaled nil, $1 million and $1 million in
2009, 2008 and 2007, respectively. Certain of the above loans totaling $1 million and $4 million as of
September 25, 2009 and September 26, 2008, respectively, are non-interest bearing.
During 2009, 2008 and 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. Purchases from these companies during each year aggregated less than 1 percent of
consolidated net revenue.
The Company filed civil complaints against Messrs. Kozlowski and Swartz for breach of fiduciary
duty and other wrongful conduct relating to alleged abuses of our Key Employee Loan Program and
relocation program, unauthorized bonuses, unauthorized payments, self-dealing transactions and other
improper conduct.
In June 2002, the Company filed a civil complaint against Frank E. Walsh, Jr., a former director,
for breach of fiduciary duty, inducing breaches of fiduciary duty and related wrongful conduct involving
a $20 million payment by Tyco, $10 million of which was paid to Mr. Walsh with the balance paid to a
charity of which Mr. Walsh is trustee. The payment was purportedly made for Mr. Walsh’s assistance in
arranging our acquisition of The CIT Group, Inc. On December 17, 2002, Mr. Walsh pleaded guilty to
a felony violation of New York law in the Supreme Court of the State of New York, (New York
County) and settled a civil action for violation of federal securities laws brought by the SEC in United
122 2009 Financials