ADT 2009 Annual Report Download - page 80

The Company made an annual grant of equity in fiscal 2009. The award for Senior Officers
consisted of stock options and performance share units.
When the Company grants stock options, the exercise price equals the fair market value of our
common stock on the date of grant. Stock options generally vest in equal installments over a period of
four years, beginning on the first anniversary of the grant date. Each option holder has 10 years to
exercise his or her stock option from the date of grant, unless forfeited earlier.
Performance share units generally vest in full at the end of the performance period. The number
of shares that are actually earned depends on whether, and at what level, the performance criteria have
been met. Performance share units do not accrue dividends prior to vesting and do not have any voting
rights. For performance share units granted in connection with the fiscal 2009 equity award, the
relevant metric is Tyco’s three-year total shareholder return between September 27, 2008 and
September 30, 2011. That return is to be compared with the total shareholder return of all the
companies in the S&P 500 Industrials Index for the same period. The total shareholder return measure
is based on the average of the closing stock price for the 20 trading days preceding, and the last 20
trading days of, the performance period, plus a total return factor to reflect the reinvestment of
dividends during the three-year period. If the minimum performance measure is not met (i.e., Tyco’s
total shareholder return over the performance period is not equal to or better than the total
shareholder return of the top 65% of the companies constituting the S&P 500 Industrials Index), no
shares will be earned. In addition, if Tyco’s total shareholder return is negative at the end of the
performance period, the maximum payout is capped at 125% of target.
Forfeiture provisions related to involuntary termination are described above under the heading
‘‘Change in Control and Severance Benefits.’’ Except in the case of retirement, unvested equity is
forfeited upon a voluntary termination. As described above under ‘‘Elements of Compensation—
Long-Term Incentive Awards,’’ certain equity awards held by Mr. Coughlin have vesting and forfeiture
provisions that differ from the standard terms.
60 2010 Proxy Statement