ADT 2015 Annual Report Download - page 166

FORM 10-K
The purchase obligations in the table above primarily relate to an agreement with one of the Company’s
suppliers for the purchase of certain security system equipment and components. The agreement, which was
amended during the third quarter of fiscal year 2015, provides that the Company meet minimum purchase
requirements, which are subject to adjustments based on certain performance conditions for each of the calendar
years 2015, 2016, and 2017. The agreement expires on December 31, 2017.
Legal Proceedings
The Company is subject to various claims and lawsuits in the ordinary course of business, including from
time to time, contractual disputes, employment matters, product and general liability claims, claims that the
Company has infringed on the intellectual property rights of others, claims related to alleged security system
failures, and consumer and employment class actions. In the ordinary course of business, the Company is also
subject to regulatory and governmental examinations, information requests and subpoenas, inquiries,
investigations and threatened legal actions and proceedings. In connection with such formal and informal
inquiries, the Company receives numerous requests, subpoenas and orders for documents, testimony and
information in connection with various aspects of its activities. The Company has recorded accruals for losses
that it believes are probable to occur and are reasonably estimable. While the ultimate outcome of these matters
cannot be predicted with certainty, the Company believes that the resolution of any such proceedings (other than
matters specifically identified below), will not have a material effect on its financial position, results of
operations or cash flows.
Environmental Matter
On October 25, 2013, the Company was notified by subpoena that the Office of the Attorney General of
California, in conjunction with the Alameda County District Attorney, is investigating whether certain of the
Company’s waste disposal policies, procedures and practices are in violation of the California Business and
Professions Code and the California Health and Safety Code. The Company is cooperating fully with the
respective authorities. The Company is currently unable to predict the outcome of this investigation or reasonably
estimate a range of possible loss.
Securities Litigation
On April 28, 2014, the Company and certain of its current and former officers and directors were named as
defendants in a lawsuit filed in the United States District Court for the Southern District of Florida. The plaintiff
alleges violations of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and seeks monetary damages,
including interest, and class action status on behalf of all plaintiffs who purchased the Company’s common stock
during the period between November 27, 2012 and January 29, 2014, inclusive. The claims focus primarily on
the Company’s statements concerning its financial condition and future business prospects for fiscal 2013 and the
first quarter of fiscal 2014, its stock repurchase program in 2012 and 2013 and the buyback of stock from Corvex
Management LP (“Corvex”) in November 2013. On June 27, 2014, another plaintiff filed a similar action in the
same court. On July 14, 2014, the Court entered an order consolidating the two actions under the caption
Henningsen v. The ADT Corporation, Case No. 14-80566-CIV-DIMITROULEAS, and appointing IBEW Local
595 Pension and Money Purchase Pension Plans, Macomb County Employees’ Retirement System and KBC
Asset Management NV as Lead Plaintiffs in the consolidated action. In addition to the Company, the defendants
named in the action are Naren Gursahaney, Kathryn A. Mikells, Michael S. Geltzeiler, Keith A. Meister and
Corvex. On September 25, 2014, defendants moved to dismiss this action. On November 13, 2014, Mr. Geltzeiler
was dismissed as a defendant without prejudice from this action. On June 4, 2015, the Court entered an order
granting the motions to dismiss and dismissed plaintiffs’ complaint in its entirety. The Court granted plaintiffs
leave to file an amended complaint on or before July 1, 2015. That deadline passed, and the Court dismissed the
action with prejudice on July 8, 2015. Plaintiffs filed a notice of appeal on August 7, 2015. On August 21, 2015,
defendants filed a motion to dismiss the appeal as untimely. The appeal and the motion to dismiss the appeal are
pending before the United States Court of Appeals for the Eleventh Circuit.
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