ADT 2009 Annual Report Download - page 232

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Commitments and Contingencies (Continued)
and therefore cannot estimate the range of potential loss or extent of risk, if any, that may result from
an adverse resolution of these matters. However, it is possible that the Company may be required to
pay material fines, consent to injunctions on future conduct, or suffer other criminal or civil penalties
or adverse impacts, each of which could have a material adverse effect on the Company’s financial
position, results of operations or cash flows.
Covidien and Tyco Electronics agreed, in connection with the Separation, to cooperate with the
Company in its responses regarding these matters. Any judgment required to be paid or settlement or
other cost incurred by the Company in connection with the FCPA investigations would be subject to the
liability sharing provisions of the Separation and Distribution Agreement, which assigned liabilities
primarily related to the former Healthcare and Electronics businesses of the Company to Covidien or
Tyco Electronics, respectively, and provides that the Company will retain liabilities primarily related to
its continuing operations. Any liabilities not primarily related to a particular segment will be shared
equally among the Company, Covidien and Tyco Electronics.
The German Federal Cartel Office (‘‘FCO’’) charged in early 2007 that certain German
subsidiaries in the Company’s Flow Control business had engaged in anti-competitive practices, in
particular with regard to its hydrant, valve, street box and fittings business. The Company investigated
this matter and determined that the conduct may have violated German anti-trust law. The Company is
cooperating with the FCO in its investigation of this violation, which is ongoing. The Company cannot
estimate the range of potential loss that may result from this violation. It is possible that the Company
may be subject to civil or criminal proceedings and may be required to pay judgments, suffer penalties
or incur settlements in amounts that may have a material adverse effect on its financial position, results
of operations or cash flows.
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On June 8, 2007, SimplexGrinnell received a notice alleging that it had partially withdrawn from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. The quarterly withdrawal liability payments are $1.1 million, $11 million of which had been
paid to date. While the ultimate outcome is uncertain, 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. The matter is currently in arbitration. The Company has
made no provision for this contingency and believes that its quarterly payments are recoverable.
140 2009 Financials