ADT 2010 Annual Report Download - page 218

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Commitments and Contingencies (Continued)
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On June 8, 2007, SimplexGrinnell received a notice alleging that it had partially withdrawn from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 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, $14.3 million of which has
been cumulatively paid through September 24, 2010. 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.
Broadview Security Contingency
On May 14, 2010, the Company acquired Broadview Security, which is a business that was formerly
owned by The Brink’s Company. Under the Coal Industry Retiree Health Benefit Act of 1992, as
amended (the ‘‘Coal Act’’), The Brink’s Company and its majority-owned subsidiaries at July 20, 1992
(including certain legal entities acquired in the Broadview Security acquisition) are jointly and severally
liable with certain of The Brink’s Company’s other current and former subsidiaries for health care
coverage obligations provided for by the Coal Act. A Voluntary Employees’ Beneficiary Associate
(‘‘VEBA’’) trust has been established by The Brink’s Company to pay for these liabilities, although the
trust may have insufficient funds to satisfy all future obligations. At the time of its spin-off from The
Brink’s Company, Broadview Security entered into an agreement in which The Brink’s Company agreed
to indemnify Broadview Security for any and all liabilities and expenses related to The Brink’s
Company’s former coal operations, including any health care coverage obligations. The Brink’s
Company has agreed that this indemnification survives the Company’s acquisition of Broadview
Security. The Company has evaluated its potential liability under the Coal Act as a contingency in light
of all known facts, including the funding of the VEBA, and indemnification provided by The Brinks
Company. The Company has concluded that no accrual is necessary due to the existence of the
indemnification and its belief that The Brink’s Company and the VEBA will be able to satisfy all future
obligations under the Coal Act.
130 2010 Financials