ADT 2002 Annual Report Download - page 119

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
23. Shareholders’ Equity (continued)
unamortized portion of deferred compensation expense is recorded as a reduction of shareholders’
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 vesting 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 Plans—Substantially all full-time employees of the Company’s U.S.
subsidiaries and employees of certain qualified non-U.S. subsidiaries are eligible to participate in an
employee share purchase plan. Eligible employees authorize payroll deductions to be made for the
purchase of shares. The Company matches a portion of the employee contribution 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.
The Company also maintains two other employee stock purchase plans for the benefit of
employees of certain qualified non-U.S. subsidiaries. Under one plan eligible employees are granted
options to purchase shares at the end of three years of service at 85% of the market price at the time
of grant. As of September 30, 2002, there were approximately 764,000 options outstanding and
9.2 million shares available for future issuance under this plan. All shares purchased under the other
plan are purchased on the open market.
Share Options—Tyco has granted employee share options which were issued under two fixed share
option plans which reserve common shares for issuance to Tyco’s directors, executives and managers.
The majority of options have been granted under the Tyco International Ltd. 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 independent directors of the
Company. Options are 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. 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. Tyco has reserved 140.0 million common shares for issuance
under the Incentive Plan. Awards which Tyco becomes obligated to make through the assumption of, or
in substitution for, outstanding awards previously granted by an acquired company are assumed and
administered under the Incentive Plan but do not count against this limit. At September 30, 2002, there
were approximately 18.6 million shares available for future grant under the Incentive 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. Tyco has reserved 100.0 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, 2002, there were approximately 14.6 million shares available for
future grant under the LTIP II.
Options assumed as part of business combination transactions are administered under the
Incentive Plan but retain all the rights, terms and conditions of the respective plans under which they
were originally granted.
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