Adaptec 2009 Annual Report Download - page 69

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Annual Report
The Company received cash of $28.3 million from the exercise of stock-based awards during 2009. The
total intrinsic value of stock awards exercised during 2009 was $20.4 million.
As of December 27, 2009, there was $18.2 million of total unrecognized compensation cost related to
nonvested stock options granted under the Company’s stock option plans, which is expected to be recognized
over a period of 2.6 years. As of December 27, 2009, there was $10.1 million of total unrecognized compensation
cost related to nonvested Restricted Stock Units (“RSUs”) awarded under the Company’s stock option plans,
which is expected to be recognized over a period of 2.8 years.
The fair value of the Company’s stock option awards granted to employees during 2008 was estimated using
a lattice-binomial valuation model. Prior to the second quarter of 2005, the fair value of the Company’s stock
option awards to employees was estimated, for disclosure purposes using a Black-Scholes option pricing model
which was developed for use in estimating the fair value of traded options that have no vesting restrictions and
are fully transferable. The Company believes that the lattice-binomial model provides a better estimate of the fair
value of stock option awards because it considers the contractual term of the option, the probability that the
option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of
the option holder in computing the value of the option. Both models require the input of highly subjective
assumptions including the expected stock price volatility and expected life.
The Company’s estimates of expected volatilities are based on a weighted historical and market-based
implied volatility. The Company uses historical data to estimate option exercises and employee terminations
within the valuation model. Separate groups of employees that have similar historical exercise behavior are
considered separately for valuation purposes. The expected term of options granted is derived from the output of
the stock option valuation model and represents the period of time that granted options are expected to be
outstanding. The risk-free rate for periods within the contractual life of the stock option is based on the U.S.
Treasury yield curve in effect at the time of the grant.
The fair values of the Company’s stock option and Employee Stock Purchase Plan, (“ESPP”) awards were
estimated using the following weighted average assumptions:
Stock Options:
December 27,
2009
December 28,
2008
December 30,
2007
Expected life (years) ..................... 4.4 4.5 4.1
Expected volatility ....................... 66% 57% 61%
Risk-free interest rate .................... 1.8% 2.6% 4.5%
Employee Share Purchase Plan:
December 27,
2009
December 28,
2008
December 30,
2007
Expected life (years) ..................... 1.3 1.3 1.3
Expected volatility ....................... 59% 49% 50%
Risk-free interest rate .................... 0.7% 2.1% 4.7%
Stock Option Plans
The Company issues its common stock under the provisions of the 2008 Equity Plan (the “2008 Plan”).
Stock option awards are granted with an exercise price equal to the closing market price of the Company’s
common stock at the grant date. The options generally expire within 10 years and vest over four years.
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