

10.	Share Plans

Total share-based compensation cost was $4.6 million and $2.6 million for the three months ended June 28, 2013 and June 29, 2012, respectively, and was $11.4 million and $8.3 million for the nine months ended June 28, 2013 and June 29, 2012, respectively. These amounts are generally included within selling, general and administrative expenses in the unaudited condensed combined statements of income; however, the incremental fair value associated with the conversion of Covidien equity awards into Mallinckrodt equity awards discussed below is included in separation costs.

Conversion of Covidien Equity Awards

Prior to the Separation, all employee incentive equity awards were granted by Covidien. At the time of Separation, the restricted share units and share options granted to Mallinckrodt employees prior to June 28, 2013 were converted into restricted share units and share options, respectively, of Mallinckrodt, and all of the performance share awards granted to Mallinckrodt employees were converted into restricted share units of Mallinckrodt (collectively, "the Conversion"). Mallinckrodt incentive equity awards issued upon completion of the Conversion and the related weighted-average grant date fair value is presented below:

Share Options

A summary of the status of the Company's share option awards upon completion of the Conversion on June 28, 2013 is presented below:



	Shares Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at June 28, 2013	2,399,822	$	35.94	3.8	$	22.9
Exercisable at June 28, 2013	550,097	30.94		2.4	8.0

The Conversion resulted in a modification of the previously issued share option awards. The Company compared the aggregate fair value of the awards immediately before and immediately after the Separation. Generally, the fair value of the awards immediately after the Separation was higher than the awards immediately before, primarily due to the elimination of Covidien's dividend yield assumption and the Company's higher volatility as compared to Covidien. The incremental fair value for vested awards was recognized immediately within separation costs, as the incremental fair value is directly attributable to the Separation, and the fair value for unvested awards will be recognized on a straight-line basis over the remaining vesting period of the applicable awards, also within separation costs.

The weighted-average assumptions used in the Black-Scholes pricing model for determining the fair value of the share option awards immediately before and immediately after the Separation were as follows:



	Pre- Separation			Post- Separation
Expected share price volatility	26		%	32		%
Risk-free interest rate	0.99		%	0.99		%
Expected annual dividend per share	1.65		%	—
Expected life of options (in years)	3.8			3.8
Fair value per option	$	18.04		$	16.51
Share option awards	1,745,258			2,399,822

Restricted Share Unit Awards

The Conversion resulted in a modification of the previously issued restricted share unit awards. The Company compared the aggregate fair value of the awards immediately before and immediately after the Separation. The Conversion did not result in incremental fair value.

Performance Share Unit Awards

The Conversion resulted in a modification of the previously issued performance share unit awards. The Company compared the aggregate fair value of the awards immediately before and immediately after the Separation. The fair value of the awards was higher after the Conversion as the performance factor utilized to convert the award was higher than what had previously been estimated. The incremental fair value was recognized immediately within separation costs for the service period to date and the remaining incremental fair value will be recognized over the remaining vesting period, also within separation costs.

Weighted-Average
Grant-Date
Fair Value

Share options

Restricted share units