ADT 2010 Annual Report Download - page 106

costs and expenses associated with the management of these contingent and other corporate liabilities
are generally shared equally among the parties. These contingent and other corporate liabilities
primarily relate to pre-Separation income tax liabilities. Liabilities that are specifically related to one of
the three separated companies are not allocated.
If any party responsible for such liabilities were to default in its payment, when due, of any of
these assumed obligations, each non-defaulting party would be required to pay equally with any other
non-defaulting party the amounts in default. Accordingly, under certain circumstances, we may be
obligated to pay amounts in excess of our agreed-upon share of the assumed obligations related to such
contingent and other corporate liabilities including associated costs and expenses.
We are subject to product liability claims relating to products we manufacture or install, including claims
arising from exposure to asbestos. These claims could result in significant costs and liabilities and
reduce our profitability.
We face exposure to product liability claims in the event that any of our products results in
personal injury or property damage. In addition, if any of our products prove to be defective, we may
be required to recall or redesign such products, which could result in significant unexpected costs. We
have been named in a significant number of lawsuits alleging damages based on claims that individuals
were exposed to asbestos through the past distribution of asbestos-containing industrial products. Any
insurance we maintain may not be available on terms acceptable to us or such coverage may not be
adequate for liabilities actually incurred. Any claim or product recall could result in adverse publicity
against us, which could adversely affect our financial condition, results of operations or cash flows.
In addition, we could face liability for failure to respond adequately to alarm activations or failure
of our fire protection systems to operate as expected. The nature of the services we provide exposes us
to the risks that we may be held liable for employee acts or omissions or system failures. In an attempt
to reduce this risk, our alarm monitoring agreements and other contracts contain provisions limiting
our liability in such circumstances. We cannot assure you, however, that these limitations will be
enforced. Losses from such litigation could be material to our financial condition, results of operations
or cash flows.
Our operations expose us to the risk of material environmental liabilities, litigation and violations.
We are subject to numerous foreign, federal, state and local environmental protection and health
and safety laws governing, among other things:
• the generation, storage, use and transportation of hazardous materials;
• emissions or discharges of substances into the environment; and
• the health and safety of our employees.
We cannot assure you that we have been or will be at all times in compliance with environmental and
health and safety laws. If we violate these laws, we could be fined, criminally charged or otherwise
sanctioned by regulators.
Certain environmental laws assess liability on current or previous owners or operators of real
property for the cost of removal or remediation of hazardous substances at their properties or at
properties at which they have disposed of hazardous substances. In addition to cleanup actions brought
by governmental authorities, private parties could bring personal injury or other claims due to the
presence of, or exposure to, hazardous substances.
We have received notification from the United States Environmental Protection Agency and from
state environmental agencies, that conditions at a number of sites where we and others disposed of
hazardous substances require cleanup and other possible remedial action and may require that we
18 2010 Financials