ADT 2006 Annual Report Download - page 210

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. Share Plans (Continued)
Such employees also have the opportunity to forego a portion of their basic salary to purchase
additional shares. As of September 29, 2006, there were 1 million shares available for future issuance
under this plan.
Under the second plan, the Save-As-You-Earn (‘‘SAYE’’) Plan, eligible employees in the United
Kingdom 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. Options under the SAYE Plan are generally exercisable after a
period of three years and expire six months after the date of vesting. The SAYE Plan provides for a
maximum of 10 million common shares to be issued; as of September 29, 2006, there were 7 million
shares available for future issuance. All of the shares purchased under both the SAYE Plan and the
Irish Bonus Plan are purchased on the open market.
A summary of option activity under the SAYE Plan as of September 29, 2006 and changes during
the year then ended is presented below:
Weighted-
Average Aggregate
Weighted- Remaining Intrinsic
Average Contractual Term Value
Shares Exercise Price (in years) (in millions)
Outstanding at October 1, 2005 ........... 2,486,634 $16.56
Granted ............................ 733,347 21.46
Exercised ........................... (1,669,530) 12.79
Expired ............................. (104,412) 23.82
Forfeited ............................ (84,299) 20.96
Outstanding at September 29, 2006 ......... 1,361,740 22.99 2.2 $ 7
Vested and unvested expected to vest at
September 29, 2006 .................. 1,166,517 22.92 2.2 6
Exercisable at September 29, 2006 ......... 60,252 12.75 0.1 1
The grant-date-fair value of each option grant is estimated using the Black-Scholes option pricing
model. Assumptions for expected volatility, the average expected life, and the risk-free rate were made
using the same methodology as previously described under Share Options.
The weighted-average grant-date fair values of options granted under the SAYE Plan during 2006,
2005 and 2004 was $8.80, $12.65, and $12.09, respectively. The total intrinsic value of options exercised
during 2006, 2005 and 2004 was $24 million, $3 million and $0, respectively. The related excess cash tax
benefit classified as a financing cash inflow for 2006 was not significant.
As of September 29, 2006, there was $7 million in total unrecognized compensation cost related to
non-vested options granted under the SAYE Plan. The cost is expected to be recognized over a period
of 2.0 fiscal years.
Restricted Share Awards—Restricted share awards are granted subject to certain restrictions.
Conditions of vesting are determined at the time of grant under the 2004 Plan. All restrictions on the
award will lapse upon normal retirement, death or disability of the employee.
For grants which vest based on certain specified performance criteria, the fair market value of the
shares or units 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 award at the time
of the grant is amortized to expense over the period of vesting. The fair value of restricted share
148 2006 Financials