ADT 2008 Annual Report Download - page 261

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Share Plans (Continued)
A summary of option activity under the SAYE Plan as of September 26, 2008 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 September 28, 2007 .......... 734,860 $23.30
Granted .............................. 254,467 37.23
Exercised ............................. (194,726) 26.31
Expired .............................. (56,719) 27.45
Forfeited ............................. (125,563) 23.77
Outstanding at September 26, 2008 .......... 612,319 27.65 1.5 $ 6
Vested and unvested expected to vest at
September 26, 2008 .................... 577,493 27.35 1.5 5
Exercisable at September 26, 2008 ........... 22,397 28.98 — —
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, the risk-free rate, as well as the
expected annual dividend per share 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 2008
and 2006 was $14.18, and $8.80, respectively. There were no options granted under the SAYE Plan
during 2007. The total intrinsic value of options exercised during 2008, 2007 and 2006 was $3 million,
$5 million and $24 million, respectively. The related excess cash tax benefit classified as a financing
cash inflow for 2008, 2007 and 2006 was not significant.
As of September 26, 2008, there was $4 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 1.2 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
awards is determined based on the market value of the Company’s shares on the grant date. Restricted
share awards generally vest after a period of three or four years, as determined by the Compensation
Committee, upon attainment of various levels of performance that equal or exceed targeted levels, if
applicable. The compensation expense recognized for restricted share awards is net of estimated
forfeitures.
Recipients of restricted shares have the right to vote such shares and receive dividends, whereas
recipients of restricted units have no voting rights and receive dividend equivalents.
158 2008 Financials