ADT 2002 Annual Report Download - page 118

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
22. Preference Shares (continued)
preference share in connection with the purchase of CIT in June 2001. This preference share provided
a mechanism by which the holders of outstanding exchangeable shares exercise their voting, dividend
and liquidation rights, which were equivalent to those of Tyco common shareholders, except that each
exchangeable share was equivalent to 0.6907 of a Tyco common share. In connection with the IPO of
CIT, the exchangeable shares were redeemed effective July 5, 2002 through the issuance of 3,243,322
Tyco common shares. As a result, no one is entitled to exercise the rights attaching to the preference
share.
Rights as to dividends, return of capital, redemption, conversion, voting and otherwise with respect
to the preference shares may be determined by Tyco’s Board of Directors on or before the time of
issuance. In the event of the liquidation of the Company, the holders of any preference shares then
outstanding would be entitled to payment to them of the amount for which the preference shares were
subscribed and any unpaid dividends prior to any payment to the common shareholders.
23. Shareholders’ Equity
Shares owned by subsidiaries are treated as treasury shares and are recorded at cost.
Included within Tyco’s outstanding common shares at September 30, 2001 are 4,243,108 common
shares representing the assumed exchange of 6,143,199 exchangeable shares (at 0.6907 of a Tyco
common share per exchangeable share). Exchangeable shares of CIT Exchangeco Inc., a wholly-owned
subsidiary of Tyco Capital Corporation, were issued by CIT prior to CIT’s acquisition by Tyco. In
connection with the acquisition of CIT, each outstanding exchangeable share, which was exchangeable
prior to the merger for one share of CIT common stock, became exchangeable for 0.6907 of a Tyco
common share. The holders of these exchangeable shares had dividend, liquidation and voting rights
equivalent to those of Tyco common shareholders, except that each exchangeable share is equivalent to
0.6907 of a Tyco common share. In connection with the IPO of CIT, the exchangeable shares were
redeemed effective July 5, 2002 through the issuance of 3,243,322 Tyco common shares.
In fiscal 2001, Tyco sold 39 million common shares for approximately $2,198.0 million in an
underwritten public offering. Net proceeds from the offering were $2,196.6 million and were used to
repay debt incurred to finance a portion of the acquisition of CIT.
Per share amounts and share data have been retroactively restated to give effect to the two-for-one
stock split on October 21, 1999, effected in the form of a 100% stock dividend.
The total compensation cost expensed for all stock-based compensation awards discussed below
was $89.9 million, $116.8 million and $137.4 million for fiscal 2002, fiscal 2001 and fiscal 2000,
respectively.
Restricted Shares—The Company maintains a restricted share ownership plan, which provides for
the award of an initial amount of common shares plus an amount equal to one-half of one percent of
the total shares outstanding at the beginning of each fiscal year. At September 30, 2002, there were
49,740,623 shares authorized under the plan, of which 15,339,021 shares had been granted. The number
of shares available for issuance under the 1994 Restricted Stock Plan was reduced to 999,524 in
October 2002. 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 criteria, the fair market value of the
shares at the date of vesting is expensed over the period of performance, once achievement of criteria
is deemed probable. 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
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