ADT 2009 Annual Report Download - page 275

TYCO INTERNATIONAL LTD.
NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 25, 2009
(Continued)
4. COMMITMENTS AND CONTINGENCIES
In connection with the separation, the Company 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, the Company, 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 relate to legacy matters that are not specific to the business operations of
any of the companies. The Separation and Distribution Agreement also provides that the Company 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, the Company 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.
The Company has received and responded to various allegations and other information that certain
improper payments were made by the Company’s subsidiaries and agents in recent years. For example,
two subsidiaries in the Company’s Flow Control business in Italy have been charged, along with
numerous other parties, in connection with the Milan public prosecutor’s investigation into allegedly
improper payments made to certain Italian entities, and the Company has reported to German
authorities potentially improper conduct involving agents retained by the Company’s EMEA water
business. The Company has reported to the U.S. Department of Justice (‘‘DOJ’’) and the SEC the
investigative steps and remedial measures that it has taken in response to these allegations and its
internal investigations. The Company also informed the DOJ and the SEC that it retained outside
counsel to perform a Company-wide baseline review of its policies, controls and practices with respect
to compliance with the Foreign Corrupt Practices Act (‘‘FCPA’’), and that it would continue to
investigate and make periodic progress reports to these agencies. The Company has and will continue
to communicate with the DOJ and SEC to provide updates on the baseline review and follow-up
investigations, including, as appropriate, briefings concerning additional instances of potential improper
payments identified by the Company in the course of our ongoing compliance activities. The baseline
review revealed that some business practices may not comply with Tyco and FCPA requirements. At
this time, the Company cannot predict the outcome of these matters and other allegations reported to
regulatory and law enforcement authorities 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.
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