Seagate 2013 Annual Report Download - page 108

Table of Contents
SEAGATE TECHNOLOGY PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
period if it is probable that the ROIC goal will be met, and it is to be recorded at the expected level of achievement.
The Company also granted 0.3 million, 0.3 million and 0.6 million performance awards during fiscal years 2014, 2013 and 2012
respectively, to its senior executive officers which are subject to a performance goal related to the Company's adjusted earnings per share (the
"AEPS" awards). These awards have a maximum seven-year vesting period, with 25% annual vesting starting on the first anniversary of the
grant date. If the performance goal is not achieved, vesting is delayed to a following year in which the AEPS goal is achieved. Any unvested
awards from prior years may vest cumulatively in a future year within the seven-year vesting period if the annual AEPS goal is achieved during
a subsequent year. If the AEPS goal has not been met by the end of the seven year period, any unvested shares will be forfeited.
During fiscal year 2014, the Company did not grant any performance-based options and performance based restricted share units to its
CEO. In fiscal year 2013, the Company granted 0.2 million performance-based options and 0.1 million performance-based restricted share units
to its CEO which are based on the attainment of a minimum 40% TSR (the "40% TSR" awards). The 40% TSR awards cliff vest after three
years, contingent upon continued service and the attainment of a minimum 40% TSR, inclusive of dividends and share price appreciation, over a
three-year performance period, which TSR must be sustained for a minimum of 30 consecutive trading days.
Determining Fair Value of Seagate Technology Stock Plans
Valuation and amortization method —The Company estimates the fair value of stock options granted using the Black-Scholes-Merton
valuation model and a single option award approach. This fair value is then amortized on a straight-line basis over the requisite service periods
of the awards, which is generally the vesting period or the remaining service (vesting) period.
Expected Term —Expected term represents the period that the Company's stock-based awards are expected to be outstanding and was
determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting
schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards.
Expected Volatility —The Company uses a combination of the implied volatility of its traded options and historical volatility of its share
price.
Expected Dividend —The Black-Scholes-Merton valuation model calls for a single expected dividend yield as an input. The dividend yield
is determined by dividing the expected per share dividend during the coming year by the grant date share price. The expected dividend
assumption is based on the Company's current expectations about its anticipated dividend policy. Also, because the expected dividend yield
should reflect marketplace participants' expectations, the Company does not incorporate changes in dividends anticipated by management unless
those changes have been communicated to or otherwise are anticipated by marketplace participants.
Risk-Free Interest Rate —The Company bases the risk-free interest rate used in the Black-Scholes-Merton valuation model on the implied
yield currently available on U.S. Treasury zero
-coupon issues with an equivalent remaining term. Where the expected term of the Company's
stock-based awards do not correspond with the terms for which interest rates are quoted, the Company performed a straight-line interpolation to
determine the rate from the available term maturities.
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