ADT 1999 Annual Report Download - page 54

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The total compensation cost expensed for all stock-based com-
pensation awards discussed below was $96.9 million, $37.1 million
and $59.9 million for Fiscal 1999, Fiscal 1998 and Fiscal 1997, respec-
tively.
Restricted Stock
The Company maintains a restricted stock ownership plan, which pro-
vides for the award of an initial amount of common shares plus an
amount equal to one-half of one percent of the total shares outstand-
ing at the beginning of each fiscal year. At September 30, 1999, there
were 22,946,562 shares authorized under the plan, of which
8,191,800 shares had been granted. Common shares are awarded
subject to certain restrictions with vesting varying over periods of up
to ten years.
For grants which vest based on certain specified performance cri-
teria, the fair market value of the shares at the date of vesting is
expensed over the period the performance criteria are measured. For
grants that vest through passage of time, the fair market value of the
shares at the time of the grant is amortized (net of tax benefit) to
expense over the period of vesting. The unamortized portion of
deferred compensation expense is recorded as a reduction of share-
holders’ equity. Recipients of all restricted shares have the right to vote
such shares and receive dividends. Income tax benefits resulting from
the vesting of restricted shares, including a deduction for the excess,
if any, of the fair market value of restricted shares at the time of vest-
ing over their fair market value at the time of the grants and from the
payment of dividends on unvested shares, are credited to contributed
surplus.
Employee Stock Purchase Plan
Substantially all full-time employees of the Company’s U.S. sub-
sidiaries and employees of certain qualified non-U.S. subsidiaries are
eligible to participate in an employee stock purchase plan. Eligible
employees authorize payroll deductions to be made for the purchase
of shares. The Company matches a portion of the employee contribu-
tion by contributing an additional 15% of the employee’s payroll
deduction. All shares purchased under the plan are purchased on the
open market by a designated broker.
Stock Options
The Company has granted employee share options which were issued
under five fixed share option plans and schemes which reserve com-
mon shares for issuance to the Company’s directors, executives and
managers. The majority of options have been granted under the Tyco
International Ltd. Long Term Incentive Plan (formerly known as the
ADT 1993 Long-Term Incentive Plan
— the “Incentive Plan”). The
Incentive Plan is administered by the Compensation Committee of the
Board of Directors of the Company, which consists exclusively of inde-
pendent directors of the Company. Options are generally granted to
purchase common shares at prices which are equal to or greater than
the market price of the common shares on the date the option is
granted. Conditions of vesting are determined at the time of grant.
Certain options have been granted in prior years in which participants
were required to pay a subscription price as a condition of vesting.
Options which have been granted under the Incentive Plan to date
have generally vested and become exercisable over periods of up to
five years from the date of grant and have a maximum term of ten
years. The Company has reserved 140.0 million common shares for
issuance under the Incentive Plan. Awards which the Company
becomes obligated to make through the assumption of, or in substitu-
tion for, outstanding awards previously granted by an acquired com-
pany are assumed and administered under the Incentive Plan but do
not count against this limit. At September 30, 1999, there were approx-
imately 46.2 million shares available for future grant under the Incen-
tive Plan. During October 1998, a broad-based option plan for
non-officer employees, the Tyco Long-Term Incentive Plan II (“LTIP
II”), was approved by the Board of Directors. The Company has
reserved 50.0 million common shares for issuance under the LTIP II.
The terms and conditions of this plan are similar to the Incentive Plan.
At September 30, 1999, there were approximately 35.9 million shares
available for future grant under the LTIP II.
In connection with the acquisitions of Raychem in Fiscal 1999
and CIPE S.A. and Holmes Protection in Fiscal 1998, options out-
standing under the respective stock option plans of these companies
were assumed under the Incentive Plan. In connection with the merg-
ers occurring in Fiscal 1999 and Fiscal 1997 (see Note 2), all of the
options outstanding under the Former Tyco, Keystone, Inbrand, USSC
and AMP stock option plans were assumed under the Incentive Plan.
These options are administered under the Incentive Plan but retain all
of the rights, terms and conditions of the respective plans under which
they were originally granted.
Share option activity for all plans since January 1, 1997 has been
as follows:
Weighted
Average
Exercise
Outstanding Price
At January 1, 1997, as restated 83,752,604 $15.03
Assumed from acquisition 175,600 10.19
Granted 36,196,594 22.07
Exercised (7,264,707) 9.73
Canceled (5,599,019) 27.29
At September 30, 1997 107,261,072 17.03
Assumed from acquisition 87,232 10.23
Granted 32,011,414 23.51
Exercised (37,626,616) 9.20
Canceled (7,281,946) 27.48
At September 30, 1998 94,451,156 24.83
Assumed from acquisitions 8,883,160 37.44
Granted 30,313,362 38.44
Exercised (43,180,390) 22.79
Canceled (4,476,021) 47.83
At September 30, 1999 85,991,267 27.91