ADT 2012 Annual Report Download - page 124

We might not be able to engage in desirable strategic transactions and equity issuances because of
restrictions relating to U.S. federal income tax requirements for tax-free distributions.
Our ability to engage in significant equity transactions could be limited or restricted in order to preserve, for
U.S. federal income tax purposes, the tax-free nature of the Distribution. Even if the Distribution otherwise
qualifies for tax-free treatment under Section 355 of the Code, it may result in corporate-level taxable gain to
Tyco and certain of its affiliates under Section 355(e) of the Code if 50% or more, by vote or value, of our shares
or Tyco’s shares are acquired or issued as part of a plan or series of related transactions that includes the
Distribution. Any acquisitions or issuances of our shares or Tyco’s shares within two years after the Distribution
will generally be presumed to be part of such a plan, although we or Tyco may be able to rebut that presumption.
To preserve the tax-free treatment to Tyco of the Distribution, under the 2012 Tax Sharing Agreement, we are
prohibited from taking or failing to take any action that prevents the Distribution and related transactions from
being tax-free. Further, for the two-year period following the Distribution, without obtaining the consent of Tyco
and Pentair, a private letter ruling from the IRS or an unqualified opinion of a nationally recognized law firm, we
may be prohibited from:
• approving or allowing any transaction that results in a change in ownership of more than 35% of our
common shares when combined with any other changes in ownership of our shares,
• redeeming equity securities,
• selling or otherwise disposing of more than 35% of ADT’s assets, or
• engaging in certain internal transactions.
These restrictions may limit our ability to pursue strategic transactions or engage in new business or other
transactions that may maximize the value of our business. Moreover, the 2012 Tax Sharing Agreement provides
that we will be responsible for any taxes imposed on Tyco or any of its affiliates or on Pentair or any of its
affiliates as a result of the failure of the Distribution or the internal transactions to qualify for favorable treatment
under the Code if such failure is attributable to certain actions taken after the Distribution by or in respect of us,
any of our affiliates or our shareholders.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We operate through a network of approximately 200 sales and service offices, six monitoring facilities, four
customer and field support locations and two national sales call centers, located throughout the United States and
Canada. These properties total approximately three million square feet, the majority of which is leased. We lease
approximately 4,000 vehicles which are used in the installation and service activities of our business.
Our corporate headquarters is located in Boca Raton, FL. We are currently co-located in the same facility as
Tyco. We have entered into a Separation and Distribution Agreement with Tyco, pursuant to which, we have
agreed to share the facility with Tyco for up to two years after the Separation. We have agreed to lease this space
directly from the third-party building owner at market rates for a 12-year period from the distribution date. We
also maintain certain transition arrangements with Tyco related to our monitoring, information technology and
branch operations.
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