ADT 2010 Annual Report Download - page 76

The Company made an annual grant of equity in fiscal 2010. The award for Senior Officers,
including all of the named executive officers, consisted of stock options and performance share units. In
addition, as discussed in the footnotes to the table above, certain stock options previously awarded to
Mr. Coughlin were modified in connection with his fiscal 2010 annual equity grant.
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 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 granted in fiscal 2010 do not accrue dividends prior to vesting and
do not have any voting rights. For performance share units granted in connection with the fiscal 2010
equity award, the relevant metric is Tyco’s three-year total shareholder return between September 26,
2009 and September 30, 2012. 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 Tyco’s total shareholder return is not equal to or better than
the total shareholder return for 35% of the companies constituting the S&P 500 Industrials Index, no
shares will be delivered. The maximum number of shares each named executive officer can receive,
which will be delivered if the Company’s performance relative to the total shareholder return among
the companies included in the S&P 500 Industrial Index is equal to or better than the total shareholder
return for 75% of the companies constituting the S&P 500 Industrials Index, is two times the target
number of shares granted. In addition, if the Company’s total shareholder return is negative at the end
of the performance period, the maximum payout is capped at 125% of the target number of shares.
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 in the footnote to the table above, certain equity
awards held by Mr. Coughlin have vesting and forfeiture provisions that differ from the standard terms.
68 2011 Proxy Statement