<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __________)
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
/X/ Definitive proxy statement Commission Only (as permitted by
/ / Definitive additional materials Rule 14a-6(e)(2))
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
WESTERN DIGITAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
WESTERN DIGITAL CORPORATION
8105 IRVINE CENTER DRIVE
IRVINE, CALIFORNIA 92718
--------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 1, 1995
To the Shareholders of
WESTERN DIGITAL CORPORATION
The Annual Meeting of Shareholders of Western Digital Corporation, a
Delaware corporation (the "Company"), will be held at the Company's principal
executive offices, 8105 Irvine Center Drive, Irvine, California, on Wednesday,
November 1, 1995, at 10:00 a.m. for the following purposes:
1. To elect eight directors to serve until the next annual
meeting of shareholders of the Company and until their successors are
elected and qualified;
2. To approve the amendment and restatement of the Company's
Stock Option Plan for Non-Employee Directors which will effect certain
changes to such plan as described in this Proxy Statement regarding
additional option grants and other matters;
3. To ratify the selection of KPMG Peat Marwick LLP as
independent accountants for the Company for the fiscal year ending June
29, 1996; and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on September 15,
1995 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. YOU ARE
URGED TO SIGN, DATE AND OTHERWISE COMPLETE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
IF YOU ATTEND THE MEETING AND WISH TO DO SO, YOU MAY VOTE YOUR SHARES IN PERSON
EVEN IF YOU HAVE SIGNED AND RETURNED YOUR PROXY CARD.
By Order of the Board of Directors
Michael A. Cornelius
Vice President and Secretary
Irvine, California
October 2, 1995
<PAGE> 3
WESTERN DIGITAL CORPORATION
8105 IRVINE CENTER DRIVE
IRVINE, CALIFORNIA 92718
--------
PROXY STATEMENT
--------
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 1, 1995
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Western Digital Corporation, a Delaware
corporation (the "Company"), for use at the Company's 1995 Annual Meeting of
Shareholders to be held on November 1, 1995 at 10:00 a.m. (the "Meeting") and at
any and all adjournments and postponements of the Meeting. The Meeting will be
held at the Company's principal executive offices, 8105 Irvine Center Drive,
Irvine, California. This Proxy Statement and the accompanying form of proxy will
be first mailed to shareholders on or about October 2, 1995.
The cost of preparing, assembling and mailing the Notice of Annual
Meeting of Shareholders, Proxy Statement and form of proxy and the cost of
soliciting proxies will be paid by the Company. Proxies may be solicited in
person or by telephone, telegraph or cable by personnel of the Company who will
not receive any additional compensation for such solicitation. The Company will
pay brokers or other persons holding stock in their names or the names of their
nominees for the expenses of forwarding soliciting material to their principals.
In addition, the Company has engaged D.F. King & Co., Inc., New York, New York,
to assist in soliciting proxies for a fee of approximately $5,000 plus
reimbursement of reasonable out-of-pocket expenses.
VOTING
The close of business on September 15, 1995 has been fixed as the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting. On that date there were 50,657,588 shares of the Company's
Common Stock outstanding. Each share is entitled to one vote on any matter that
may be presented for consideration and action by the shareholders at the
Meeting. The holders of a majority of the shares of Common Stock outstanding on
the record date and entitled to be voted at the Meeting, present in person or by
proxy, will constitute a quorum for the transaction of business at the Meeting
and any adjournments and postponements thereof. Abstentions and broker non-votes
are counted for the purpose of determining the presence or absence of a quorum
for the transaction of business. Abstentions are counted in tabulations of the
votes cast on proposals presented to shareholders, whereas broker non-votes are
not counted for purposes of determining whether a proposal has been approved.
Each proxy will be voted FOR (i) the election of the eight director
nominees named herein; (ii) approval of the amendment and restatement of the
Company's Stock Option Plan for Non-Employee Directors; and (iii) ratification
of the selection of KPMG Peat Marwick LLP as the Company's independent
accountants for the fiscal year ending June 29, 1996, unless the shareholder
otherwise directs in his or her proxy. Where the
<PAGE> 4
shareholder has appropriately directed how the proxy is to be voted, it will be
voted according to the shareholder's direction. Any shareholder has the power to
revoke his or her proxy at any time before it is voted at the Meeting by
submitting a written notice of revocation to the Secretary of the Company or by
filing a duly executed proxy bearing a later date. A proxy will not be voted if
the shareholder who executed it is present at the Meeting and elects to vote the
shares represented thereby in person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of September 1,
1995, with respect to those known by the Company to be beneficial owners of more
than five percent (5%) of the outstanding shares of the Company's Common Stock.
The information is based on filings made by the respective beneficial owners
with the Securities and Exchange Commission (the "Commission") or information
provided to the Company by such beneficial owners. On September 1, 1995, there
were 50,647,861 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
---------------- -------------------- --------
<S> <C> <C>
FMR Corp. 6,086,700 (1) 12.0%
82 Devonshire Street
Boston, Massachusetts 02109
Wellington Management Company 4,718,804 (2) 9.3%
75 State Street
Boston, Massachusetts 02109
The Capital Group Companies, Inc. 2,878,000 (3) 5.7%
333 South Hope Street
Los Angeles, California 90071
</TABLE>
(1) Based upon information provided by FMR Corp. as of August 31, 1995.
Includes 6,070,000 shares beneficially owned by Fidelity Management &
Research Company and 16,700 shares beneficially owned by Fidelity
Management Trust Company. FMR Corp. has sole voting power with respect
to 16,700 shares and sole dispositive power with respect to 6,086,700
shares.
(2) Based upon information provided by Wellington Management Company as of
September 1, 1995. Wellington Management Company is deemed a beneficial
owner of the shares only by virtue of the direct or indirect investment
discretion they possess pursuant to the provisions of investment
advisory agreements with various investment advisory clients.
(3) Based upon information reported by The Capital Group Companies, Inc. on
Schedule 13F. Capital Guardian Trust Company and Capital Research and
Management Company, operating subsidiaries of The Capital Group
Companies, Inc., exercised as of June 30, 1995, investment discretion
with respect to 1,024,000 and 1,854,000 shares, respectively.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of the Company's
Common Stock beneficially owned as of September 1, 1995 by each of the present
directors, by each of the executive officers named in the Summary Compensation
Table found elsewhere in this Proxy Statement and by all directors and executive
officers as a group. The information was furnished by the respective directors
and officers. On September 1, 1995, there were 50,647,861 shares of Common Stock
outstanding. The number of shares beneficially owned is deemed to include shares
of the Company's Common Stock as to which the directors or officers have or
share either investment or voting power. Unless otherwise stated, and except for
voting and investment powers held jointly
2
<PAGE> 5
with a person's spouse, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
<TABLE>
<CAPTION>
RIGHT TO ACQUIRE
NUMBER OF OWNERSHIP UNDER
SHARES OPTIONS EXERCISABLE PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED WITHIN 60 DAYS (1) CLASS (2)
- ---------------- ------------------ ------------------ ---------
<S> <C> <C> <C>
Charles A. Haggerty 36,498 213,551
I. M. Booth 8,800 30,000
Andre R. Horn 6,000 15,250
Irwin Federman 30,000 6,750
Anne O. Krueger 1,100 30,000
George L. Bragg 133,181 20,000
Thomas E. Pardun 0 5,000
James A. Abrahamson 0 15,000
Peter D. Behrendt 0 15,000
Kathryn A. Braun 0 67,398
D. Scott Mercer 13,859 38,351
Kenneth E. Hendrickson 0 313
Marc H. Nussbaum 11,903 13,153
All Directors and Executive Officers as a group 246,553 (3) 525,267 1.5%
(17 persons including those named above)
</TABLE>
(1) Shares which the party or group has the right to acquire within 60 days
after September 1, 1995 upon the exercise of stock options.
(2) Percentage information is omitted for each of the named individuals
because his or her beneficially owned shares represent less than 1% of
the outstanding shares of the Company's Common Stock.
(3) Includes 4,913 shares allocated to the accounts of such individuals
under the Company's Savings Plan as of July 31, 1995, the latest date
for which information is reasonably available.
ELECTION OF DIRECTORS
The Company's directors are elected at each annual meeting of
shareholders. Currently, the Board of Directors is comprised of nine members.
Mr. George L. Bragg, currently a director, is not standing for re-election.
Accordingly, the Board of Directors has reduced the number of authorized
directors to eight, effective as of the date of the Meeting. At the Meeting,
eight directors, which will make up the entire authorized membership of the
Board of Directors at such time, will be elected to serve until the next annual
meeting of shareholders and until their successors are elected and qualified.
The nominees receiving the greatest number of votes at the Meeting up to the
number of authorized directors will be elected.
NOMINEES FOR ELECTION
The nominees for election as directors at the Meeting set forth in the
table below are all incumbent directors. All the nominees were elected at the
1994 Annual Meeting of Shareholders. Each of the nominees has consented to serve
as a director if elected. Unless authority to vote for any directors is withheld
in a proxy, it is intended that each proxy will be voted FOR such nominees. In
the event that any of the nominees for director should before the Meeting become
unable to serve if elected, it is intended that shares represented by proxies
which are executed and returned will be voted for such substitute nominees as
may be recommended by the Company's existing Board of Directors, unless other
directions are given in the proxies. To the best of the Company's knowledge, all
the nominees will be available to serve.
3
<PAGE> 6
The following biographical information is furnished with respect to
each of the eight nominees for election at the Meeting.
<TABLE>
<CAPTION>
Nominee Age Principal Occupation Director Since
- ------- --- -------------------- --------------
<S> <C> <C> <C>
Charles A. Haggerty (1) 54 Chairman of the Board, President and Chief 1993
Executive Officer of the Company
I.M. Booth (2) 63 Chairman, President and Chief Executive Officer 1985
of Polaroid Corporation, a manufacturer of
photographic film and equipment
Andre R. Horn (3) 67 Retired; former Chairman of the Board of Joy 1985
Manufacturing Company, a maker of heavy
machinery, and former Chairman of Needham &
Company, Inc., an investment banking firm
Irwin Federman (4) 60 Partner of U.S. Venture Partners, a venture 1986
capital investment firm
Anne O. Krueger (5) 61 Professor of Economics, Stanford University 1989
Thomas E. Pardun (6) 52 President and Chief Executive Officer of U S 1993
WEST Multimedia Communications, Inc., a
subsidiary of U S WEST, Inc., a diversified
communications company
James A. Abrahamson (7) 62 Senior Advisor with Galway Partners, L.L.C., an 1994
investment and merchant bank
Peter D. Behrendt (8) 56 Chairman, President and Chief Executive Officer 1994
of Exabyte Corporation, a manufacturer of
computer tape storage products
</TABLE>
(1) Mr. Haggerty joined the Company as President in June 1992 and has been
a director since January 1993. He assumed the additional positions of
Chairman and Chief Executive Officer on June 30, 1993. Prior to joining
the Company, he spent his 28-year business career in various positions
at IBM. In 1987, he became IBM's Vice President of Worldwide Operations
for the AS/400. He then served as Vice President/General Manager,
Low-End Mass-Storage Products, responsible for operations in the United
States, Japan and the United Kingdom. Immediately prior to joining the
Company, he held the position of Vice President of IBM's worldwide OEM
storage marketing. Mr. Haggerty also serves as a director of Pentair,
Inc., Navistar International Corp. and Sync Research Inc.
(2) Mr. Booth has served in his present position for more than five years.
He also serves as a director of Polaroid Corporation, John Hancock
Mutual Life Insurance Company and State Street Bank & Trust.
(3) Mr. Horn retired in 1991 after having served as Chairman of Needham &
Company, Inc. from 1985 to March 1991. He serves as a director of Varco
International, Inc., Remec and GTI Corporation. Needham & Company,
Inc. has from time to time acted as an investment banker for the
Company.
(4) Mr. Federman has served in his present position for more than five
years. He also serves as a director of Komag, Inc., Electronics for
Imaging, Inc. and Telcom Semiconductor Inc.
(5) Dr. Krueger assumed her present position on July 1, 1993. From January
1987 until that time, she served as Arts and Sciences Professor of
Economics in the Department of Economics at Duke University. She also
serves as a director of Nordson Corporation.
(6) Mr. Pardun assumed his present position in April 1993. From May 1988
until that time, he served in key executive positions with U S WEST
Multimedia Communications, Inc., as Vice President, Marketing and
Planning and as Vice President and General Manager, Business and
Government Services. He also serves as a director of Exabyte
Corporation.
4
<PAGE> 7
(7) Mr. Abrahamson assumed his present position in June 1995. From October
1992 until that time, he served as Chairman of the Board of Oracle
Corporation, an information management software and services company.
From October 1989 to September 1992, Mr. Abrahamson served in key
executive positions with Hughes Aircraft Company, including Executive
Vice President for Corporate Development and President of the
Transportation Sector. Prior to October 1989, Mr. Abrahamson served 33
years in the United States Air Force, rising to the rank of Lieutenant
General.
(8) Mr. Behrendt joined Exabyte Corporation as President and director in
July 1987. In July 1990 he was elected to the additional position of
Chief Executive Officer, and in January 1992 he was appointed Chairman
of the Board of Exabyte.
COMMITTEES AND MEETINGS
The executive committee of the Board of Directors during the Company's
fiscal year ended July 1, 1995 ("fiscal year 1995") consisted of Messrs.
Haggerty, Abrahamson, Bragg, Federman and Horn and Dr. Krueger. Between meetings
of the Board of Directors, the executive committee may exercise all of the
powers of the Board (except those powers expressly reserved by applicable law to
the Board) in the management and direction of the business and conduct of the
affairs of the Company in all cases in which specific directions have not been
given by the Board.
The audit committee of the Board of Directors during fiscal year 1995
consisted of all of the non-employee directors. The audit committee reviews,
acts on and reports to the Board of Directors with respect to various financial
reporting and accounting practices and consults with the Company's independent
accountants and management with respect thereto. The committee (i) reviews,
prior to publication, the Company's annual financial statements; (ii) reviews
the scope of the current annual audit and fees therefor, and the results of the
prior year's audit; (iii) reviews the Company's accounting and financial
reporting principles and practices; (iv) reviews the Company's system of
internal accounting controls; (v) reviews the scope of any other services to be
performed by the independent accountants; (vi) recommends the retention or
replacement of the independent accountants; (vii) reviews the adequacy of the
Company's accounting and financial personnel resources; and (viii) reviews and
considers any other matters relative to the audit of the Company's accounts and
the preparation of its financial statements and reports that the committee deems
appropriate.
The compensation committee of the Board of Directors during fiscal year
1995 consisted of all of the non-employee directors, except Mr. Bragg who did
not become a member of the committee until November 10, 1994. The committee
currently consists of Messrs. Federman, Abrahamson, Behrendt and Booth. The
compensation committee advises the Board of Directors with respect to various
compensation matters and administers the Company's Employee Stock Option Plan
and Employee Stock Purchase Plan.
The Board of Directors acts as a committee of the whole with respect to
nominations for membership on the Board. The nominating committee reviews and
makes recommendations to the Board of Directors regarding nominees for directors
and committee assignments for the Board of Directors. The nominating committee
will consider nominees recommended by shareholders. A shareholder desiring to
make such a recommendation should submit the name, address, telephone number and
qualifications of the proposed nominee in writing to Michael A. Cornelius,
Secretary of the Company, 8105 Irvine Center Drive, Irvine, California 92718.
During fiscal year 1995, there were seven meetings of the Board of
Directors, one meeting of the executive committee, three meetings of the audit
committee, six meetings of the compensation committee and one meeting of the
nominating committee. While a director, each of the current Board members
attended 75% or more of the aggregate of the meetings of the Board of Directors
and the meetings of the committees of the Board on which he or she served during
such period.
5
<PAGE> 8
DIRECTOR COMPENSATION
CASH COMPENSATION
Directors who are not employees of the Company receive an annual
retainer of $22,000, plus compensation of $2,000 for each session (day or
consecutive days) during which they attend a Board meeting or meeting of a
committee of the Board, $500 for each meeting held by telephone conference, and
reimbursement for travel expenses. In addition, the chairman of each committee
of the Board receives an annual retainer of $2,000. Mr. Haggerty, who is an
employee of the Company, does not receive any compensation for his services as a
director.
NON-EMPLOYEE DIRECTORS STOCK-FOR-FEES PLAN
The Non-Employee Directors Stock-for-Fees Plan was approved by a vote
of the shareholders on November 19, 1992 and became effective January 1, 1993.
Under the plan, each non-employee director may elect to receive shares of the
Company's Common Stock in lieu of any or all of the annual retainer fee and
meeting attendance fees otherwise payable in cash to such non-employee director
for that calendar year. Pursuant to the plan, on each date that an electing
director becomes entitled to payment of director fees, the Company shall grant
to the director that number of shares of Common Stock that is determined by
dividing the amount of the cash fee the director would have received but for the
election by the fair market value of the Common Stock on that date. No shares
were issued under the plan in fiscal years 1995, 1994 and 1993.
The maximum aggregate number of shares of Common Stock that may be
issued under the plan is 200,000 shares, subject to antidilution adjustments.
The plan will terminate on December 31, 2002 unless it is terminated by earlier
action of the Board of Directors. The Board of Directors has the power to
suspend, discontinue or amend the plan at any time; provided, however, that no
amendment will be effective without shareholder approval, if such shareholder
approval is required under any law or regulation binding on the Company.
DEFERRED COMPENSATION PLAN
The Company adopted a Deferred Compensation Plan as of May 15, 1994
under which all directors and employees selected for participation by the
compensation committee of the Board are permitted to defer payment of
compensation otherwise payable to them by the Company. Directors who elect to
participate are permitted to defer a minimum of $3,000 per calendar year and up
to 100% of their compensation. Interest was guaranteed to accrue at a rate of
between 3% and 4.5% for calendar year 1994, with future rates determined prior
to the beginning of that year based upon results of the preceding year. The
interest rate for calendar year 1995 was 7.4%.
Pursuant to the terms of the plan, three directors deferred
compensation earned in their role as a director in fiscal year 1995 and 1994,
respectively, as follows: Mr. Behrendt ($30,000 and zero), Mr. Federman ($40,000
and $2,000), and Mr. Pardun ($36,000 and $2,500).
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Company has a Stock Option Plan for Non-Employee Directors (the
"Directors Plan") under which options to purchase the Company's Common Stock are
granted to the Company's non-employee directors. The Directors Plan was adopted
by the Board and approved by the shareholders in 1985. The Board has approved an
amendment and restatement of the Directors Plan, subject to approval by the
Company's shareholders at the Meeting. A description of the Directors Plan is
contained in this Proxy Statement under the heading "Approval of the Amendment
and Restatement of the Stock Option Plan for Non-Employee Directors."
6
<PAGE> 9
From July 1, 1992 through July 1, 1995, options to purchase up to
130,000 shares of Common Stock having a weighted average exercise price per
share of $11.97 were issued to six non-employee directors under the Directors
Plan. A total of 92,900 shares were purchased during that period upon exercise
of options granted under the Directors Plan.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The compensation committee of the Board of Directors has furnished the
following report on executive compensation:
EXECUTIVE OFFICER COMPENSATION
The Company's executive compensation policies and programs are designed
to (i) provide competitive levels of overall compensation that will attract and
retain the best executive talent in the industry, (ii) motivate executive
officers to perform at their highest level, (iii) align executive officer and
shareholder interests to create shareholder value, and (iv) reward executive
officers for achievement of corporate, group and individual objectives.
To achieve these goals, the compensation committee and the Board of
Directors have established an executive compensation program primarily
consisting of three integrated components-base salary, annual incentive awards,
and stock options.
BASE SALARY. Base salaries for executive officers are set by the
compensation committee after considering factors such as the competitive
environment, experience level, position and responsibility and overall
contribution of the executive. The compensation committee considers competitive
data from independent survey sources of peer companies in competition for
similar management talent, which include both direct competitors of the Company
and other companies in the high-technology industry with similar size and
performance characteristics. These survey data are then analyzed by independent
consultants and the Company's Vice President, Human Resources, who then provide
the necessary information to the compensation committee. In making its
decisions, the compensation committee exercises its judgment based on all of the
factors described above. Although the Company generally targets base salary
levels at the 50th percentile of the competitive data, no specific formula is
applied to determine the weight of each of the factors.
ANNUAL INCENTIVE AWARDS. The annual incentive awards for executive
officers are at risk and for fiscal year 1995 were awarded under two separate
but related compensation programs. The Management Incentive Plan measures the
performance of executive officers and other senior executives against specific
objectives and awards incentive bonuses from a bonus pool. The plan is reviewed
and approved annually by the compensation committee and the Board of Directors
early in the fiscal year. The compensation committee establishes the annual
incentive opportunity for each executive officer in relation to his or her base
salary. For fiscal year 1995, awards under the plan were primarily weighted
towards corporate and business unit profitability, thus establishing a direct
link between executive pay and company profitability. Other factors measured in
the plan, but given lesser weight, included achieving linearity of sales and
meeting established quality measures.
The Company also has a Profit Sharing Plan covering all eligible U.S.
based employees. The Company has during each of the past three years authorized
8% of pre-tax profits to be allocated to the participants. For fiscal year 1995,
awards to executive officers and other employees eligible to participate in the
Management Incentive Plan were limited to 10% of their base salary. Effective
with fiscal year 1996, executive officers and other employees eligible to
participate in the Management Incentive Plan will no longer participate in the
Profit Sharing Plan.
STOCK OPTIONS. The third component of the compensation program for
executive officers is in the form of stock option awards. The Company's Employee
Stock Option Plan, adopted in 1978, provides for long-term
7
<PAGE> 10
incentive compensation for employees of the Company, including executive
officers. Stock option awards align the interests of executive officers with
those of shareholders by providing an equity interest in the Company, thereby
providing incentive for such executive officers to maximize shareholder value.
Option awards directly tie executive compensation to the Company's stock.
The compensation committee is responsible for determining, subject to
the terms of the Employee Stock Option Plan, the individuals to whom grants are
made, the timing of grants, and the number of shares per grant. The number of
shares are determined based on the individual's position in the Company,
competitive company practices, and the number of unvested shares already held by
the individual. Stock options are granted with an exercise price equal to the
fair market value of the Company's Common Stock on the day of the grant. The
options vest over a four year period.
LONG-TERM RETENTION AWARDS. For fiscal year 1996 the Company has
adopted a long-term retention program under which the Company will grant cash
awards to key employees whose retention is critical to the Company's future
success. These one-time awards will vest 10% at the end of the second year, 25%
at the end of the third year, and 65% at the end of the fourth year. Until
vested, the value of the awards will vary according to a formula based on the
market price of the Company's Common Stock.
CORPORATE TAX DEDUCTION ON COMPENSATION IN EXCESS OF $1 MILLION A YEAR
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
limits the tax deductibility by public companies of certain executive
compensation to $1 million for the Chief Executive Officer and the four other
most highly compensated executive officers. Based on the proposed regulations,
any taxable compensation derived from the exercise of stock options granted
under the Employee Stock Option Plan described above should be exempt from the
tax deductibility limit. Bonuses under the Company's Management Incentive Plan
do not currently meet all of the requirements of Section 162(m). However, the
Company believes the Management Incentive Plan as currently structured best
serves the interests of the Company and its shareholders by allowing the Company
to recognize an executive officer's contribution as appropriate. For fiscal year
1995, no executive officer's taxable compensation exceeded the $1 million limit
on deductibility.
CHIEF EXECUTIVE OFFICER COMPENSATION
The process of determining the compensation for the Company's Chief
Executive Officer and the factors taken into consideration in such determination
are generally the same as the process and factors used in determining the
compensation of all of the Company's executive officers. The Committee considers
both the Company's overall performance and the Chief Executive Officer's
individual performance.
Mr. Haggerty served as the Company's chief executive officer for the
entire fiscal year 1995. For the fiscal year, he received a base salary of
$600,000 and an incentive compensation bonus of $500,000. Mr. Haggerty's salary
was determined based on an analysis of salaries paid by peer companies,
including the Company's direct competitors, and on Mr. Haggerty's individual
performance. The compensation committee's determination concerning his annual
incentive award and his stock option award were based on its assessment of his
effectiveness in improving the competitive position and financial performance of
the Company, the success of his drive to instill and reinforce within the
Company a culture of quality, integrity and discipline, and his ability to
continue to enhance long-term value for the Company's shareholders.
Respectfully submitted,
Irwin Federman, Chairman
James A. Abrahamson
Peter D. Behrendt
I. M. Booth
8
<PAGE> 11
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Company's
Chief Executive Officer and the four other most highly paid executive officers
for the last three fiscal years. The table includes the dollar value of base
salary, bonus earned, option awards (shown in number of shares) and certain
other compensation, whether paid or deferred.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------- ---------------------
Awards
------
Securities Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($)(1) Options/SARs (#)(2) Compensation($)(3)
- --------------------------- ---- ---------- ------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Charles A. Haggerty 1995 600,000 536,469 120,000 35,406
Chairman, President & 1994 450,000 487,163 50,000 89,229
Chief Executive Officer 1993 300,000 3,460 201,000 111,670
Kathryn A. Braun 1995 303,633 227,116 20,000 15,969
Executive Vice President, 1994 265,750 292,549 20,000 12,972
Personal Storage Products 1993 247,500 2,791 63,750 8,547
D. Scott Mercer 1995 276,667 175,013 17,000 15,479
Executive Vice President, 1994 256,441 180,374 37,000 74,531
Chief Financial & Administrative Officer 1993 222,250 55,035 30,000 139,521
Kenneth E. Hendrickson 1995 240,000 180,779 5,000 21,444
Executive Vice President, 1994 65,461 60,000 155,000(4) 0
Microcomputer Products 1993 N/A N/A N/A N/A
Marc H. Nussbaum 1995 227,856 157,290 25,000 15,243
Senior Vice President, Engineering 1994 186,173 96,604 11,000 10,163
1993 167,666 1,907 15,350 9,272
</TABLE>
(1) The amounts shown in this column include bonuses paid under the
Management Incentive Plan and profit sharing payments under the Profit
Sharing Plan. In addition, Mr. Mercer received a guaranteed bonus of
$52,500 in fiscal year 1993.
(2) The Company does not grant stock appreciation rights.
(3) The amounts disclosed in this column for fiscal year 1995 represent:
(a) matching contributions to the Company's Savings Plan, a
401(k) plan, on behalf of Mr. Haggerty ($4,756), Ms. Braun
($4,917), Mr. Mercer ($4,867), Mr. Hendrickson ($3,163) and
Mr. Nussbaum ($5,095);
(b) profit sharing contributions to the Company's Savings Plan
of $9,000 each on behalf of the named executive officers;
(c) additional contributions on behalf of Mr. Haggerty
($14,531) and Mr. Hendrickson ($3,993) to the Company's
Deferred Compensation Plan to offset a reduction in profit
sharing awards resulting from their deferrals of salary
under the Company's Deferred Compensation Plan;
(d) premiums paid by the Company for term life insurance on
behalf of Ms. Braun ($2,052), Mr. Mercer ($1,612), Mr.
Hendrickson ($5,288) and Mr. Nussbaum ($1,148); and
(e) payment by the Company of $7,119 for relocation expenses on
behalf of Mr. Haggerty.
9
<PAGE> 12
(4) Mr. Hendrickson was granted options to purchase 75,000 shares at
$19.125 per share on March 24, 1994. These were subsequently canceled,
and new options to purchase an equal number of shares at $13.875 were
granted to him on May 19, 1994.
OPTION/SAR* GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options
granted to the named executive officers during the fiscal year ended July 1,
1995.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term (2)
----------------------------------------------------------- ---------------------------
Number % of Total
of Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#)(1) Fiscal Year ($/sh) Date 5% ($) 10% ($)
- ------------------- -------------- ------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Haggerty 120,000 8.4 $14.00 07/21/04 $1,056,543 $2,677,487
Kathryn A. Braun 20,000 1.4 14.00 07/21/04 176,091 446,248
D. Scott Mercer 17,000 1.2 14.00 07/21/04 149,677 379,311
Kenneth E. Hendrickson 5,000 0.3 14.00 07/21/04 44,023 111,562
Marc H. Nussbaum 11,000 0.8 14.00 07/21/04 96,850 245,436
14,000 1.0 15.125 09/08/04 133,168 337,475
</TABLE>
* The Company does not grant Stock Appreciation Rights.
(1) All options were granted under the Company's Employee Stock Option Plan
adopted in 1978. The options described in this column were granted on
July 21, 1994 and September 8, 1994, and vest over a period of four
years according to the following schedule: 25% on the first anniversary
of the grant date and 6.25% at the end of each three month period
thereafter. The options have a term of 10 years unless the optionee
ceases to be employed by the Company, in which case the options will no
longer vest and shall terminate three months after the optionee's last
day of employment with the Company. The Company's Employee Stock Option
Plan is currently administered by the compensation committee, which has
broad discretion and authority to construe and interpret the plan and
to modify outstanding options.
(2) Potential realizable value is based on an assumption that the market
price of the stock appreciates at the stated rate, compounded annually,
from the date of grant to the expiration date. These values are
calculated based on requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price appreciation. Actual gains, if any, are dependent on the
future market price of the Company's Common Stock.
10
<PAGE> 13
AGGREGATED OPTION/SAR* EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth the number of shares acquired on exercise
of stock options and the aggregate gains realized on exercise in fiscal year
1995 by the Company's executive officers named in the Summary Compensation
Table. The table also sets forth the number of shares covered by exercisable and
unexercisable options held by such executives on July 1, 1995, and the aggregate
gains that would have been realized had these options been exercised on July 1,
1995, even though these options were not exercised, and the unexercisable
options could not have been exercised, on July 1, 1995.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs
At Fiscal Year End (#) At Fiscal Year End (2)($)
--------------------------- --------------------------
Shares Acquired
on Value
Name Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Haggerty 46,450 $702,556 154,113 270,437 $1,776,503 $1,936,291
Kathryn A. Braun 50,000 748,587 53,414 66,640 626,889 516,653
D. Scott Mercer 27,500 405,313 38,000 63,500 451,031 554,781
Kenneth E. Hendrickson 20,000 120,000 0 65,000 0 235,000
Marc H. Nussbaum 0 0 15,194 40,902 170,365 196,565
</TABLE>
* The Company does not grant Stock Appreciation Rights.
(1) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(2) These amounts represent the difference between the exercise price of the
in-the-money options and the market price of the Company's Common Stock
on July 1, 1995. The closing price of the Company's Common Stock on that
day on the New York Stock Exchange was $17.50. Options are in-the-money
if the market value of the shares covered thereby is greater than the
option exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the Company's Board of Directors currently
consists of Messrs. Federman, Abrahamson, Behrendt and Booth. No current member
of the compensation committee is a current or former officer or employee of the
Company. During fiscal year 1995, the compensation committee consisted of all of
the non-employee directors, except Mr. Bragg, who did not become a member of the
compensation committee until November 10, 1994. Mr. Bragg was an officer of the
Company from July 1991 to March 1993 serving in various positions including Vice
Chairman of the Board, Vice President of Human Resources and Chief Financial
Officer. There are no compensation committee interlocks between the Company and
other entities involving the Company's executive officers and Board members who
serve as executive officers or Board members of such other entities.
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return of
the Company's Common Stock with the cumulative total return of the S&P 500 Index
and the Hambrecht & Quist Hardware Index for the five years ended July 1, 1995.
The graph assumes that $100 was invested on June 30, 1990 in the Company's
Common Stock and each index and that all dividends were reinvested. No cash
dividends have been declared on the Company's Common Stock. Shareholder returns
over the indicated period should not be considered indicative of future
shareholder returns.
WESTERN DIGITAL CORPORATION
STOCK PERFORMANCE GRAPH
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) WESTERN DIGITAL H&Q HARDWARE S&P 500 INDEX
<S> <C> <C> <C> <C> <C> <C>
Jun-90 13.250 100 105.06 100 358.02 100
Jun-91 4.000 30 88.88 85 371.16 104
Jun-92 4.875 37 94.35 90 408.14 114
Jun-93 4.125 31 75.21 72 450.53 126
Jun-94 12.750 96 73.83 70 444.27 124
Jun-95 17.500 132 129.69 123 544.75 152
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the securities laws of the United States, the directors and
executive officers of the Company and persons who own more than ten percent of
the Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Commission and the New York Stock Exchange. Specific due dates for these reports
have been established, and the Company is required to disclose in this proxy
statement any late filings during fiscal year 1995. To the Company's knowledge,
based solely on its review of the copies of such reports required to be
furnished to the Company during fiscal year 1995, all of these reports were
timely filed.
CHANGE OF CONTROL
Effective January 18, 1990, the Board of Directors of the Company
adopted an Extended Severance Plan pursuant to which eligible employees of the
Company may receive severance benefits in the event of termination of employment
under certain circumstances involving a change of control of the Company. For
this purpose, a change of control is defined generally as the acquisition by any
person of beneficial ownership of 33-1/3% or more of the voting stock of the
Company, certain mergers or other business combinations involving the Company,
sale of substantially all the assets of the Company, liquidation of the Company
or change in a majority of the incumbent members of the Board of Directors
(except for changes in Board composition approved by a majority of incumbent
directors). Subject to certain terms and conditions set forth in the plan, the
extended severance benefits become payable in the event that, within two years
following a change of control, an eligible employee is terminated by the Company
without cause, or resigns following a reduction in such employee's compensation
or responsibility level.
12
<PAGE> 15
In such event, the eligible employee is entitled to receive a lump sum
cash payment equal to the present value of a multiple of such employee's monthly
compensation (salary plus average bonus or commissions, as applicable). The
multiple applied to such monthly compensation is equal to the number of months
in the applicable severance period to which such employee has become entitled by
virtue of his or her position with the Company and number of months employed
prior to termination. The severance period for officers of the Company is equal
to twelve months plus one additional month for each full two-month period of
service in excess of one year up to a maximum severance period of thirty-six
months. Other participants are entitled to a severance period ranging from two
months to twenty-four months depending on employment level and length of
service. If any part of the amount payable under the plan to any employee is
determined by the Company's accountants to be nondeductible by the Company under
Section 280G of the Internal Revenue Code, the payment will be subject to
reduction to the minimum extent necessary to make the entire payment deductible;
provided, however, that amounts payable under the plan to elected officers will
not be so reduced unless the amount of the reduction is less than the lesser of
(i) $100,000 or (ii) 10% of the total amount (before any reduction) payable
under the plan. An employee entitled to receive such a severance payment will
also be entitled to continued coverage under the Company's benefit programs.
All domestic employees with an average of at least twenty hours per week
of service, and such key foreign employees as are designated as participants by
the compensation committee of the Board, are covered by the plan. The plan shall
terminate on January 17, 2000, unless it is earlier terminated or extended by
the Board subject to certain conditions set forth in the plan.
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
GENERAL
The Company maintains its Stock Option Plan for Non-Employee
Directors (as amended to date, the "Current Plan"), pursuant to which
non-employee directors of the Company receive grants of options to purchase
Common Stock of the Company. The Company's Board of Directors has unanimously
approved an amendment and restatement of the Current Plan in the form attached
as Exhibit A to this proxy statement (the "Amended Plan"), subject to approval
by the Company's shareholders. The Current Plan is scheduled to expire on May
15, 2005 and authorizes a total of 800,000 shares of the Company's Common Stock
for issuance upon the exercise of options granted thereunder; the Amended Plan
will not extend the expiration date or increase the number of shares authorized.
The Amended Plan changes the provisions of the Current Plan
related to grants of additional options. Under the Current Plan, six months
after any exercise or expiration of an option, the optionee automatically
receives a replacement option to purchase the number of shares underlying the
exercised or expired option ("Replacement Option"). The Company believes this
feature may encourage non-employee directors to exercise their options and sell
the underlying shares, and also unfairly favors non-employee directors whose
initial options are granted at times when the Company's Common Stock price is
relatively low. Replacement Options are not granted under the Amended Plan;
instead all non-employee directors will automatically receive additional options
to purchase up to 5,000 shares annually at the time of their re-election to the
Company's Board of Directors ("Additional Options"). Notwithstanding the
foregoing, however, Replacement Options will continue to be granted as under the
Current Plan in respect of options that are exercised or expire on or before
December 31, 1995, but such Replacement Options will be treated for all purposes
like Additional Options granted under the Amended Plan. No Replacement Options
will be granted in respect of exercises or terminations after December 31, 1995.
The Amended Plan also changes the provisions of the Current Plan
related to vesting of all options. Under the Current Plan, initial options to
purchase 20,000 shares granted when a person becomes a non-employee director
("Initial Options") vest 10,000 shares six months after grant, 5,000 shares on
the first anniversary of the grant date, and 5,000 shares on the second
anniversary of the grant date. Replacement Options under the Current Plan vest
20% six months after grant and an additional 5% at the end of each of the next
16 three-month periods thereafter. Under the Amended Plan, Initial Options vest
5,000 shares on the first anniversary
13
<PAGE> 16
of the grant date and 1,250 shares at the end of each of the next 12 three-month
periods thereafter, and Additional Options vest 1,250 shares on the first
anniversary of the date of grant and 312.5 shares at the end of each of the next
12 three-month periods thereafter.
In addition, the Amended Plan modifies the Current Plan in
certain other respects, including to (i) eliminate the 30,000 share cap on
grants of Replacement Options under the Current Plan (Additional Options under
the Amended Plan); (ii) make stock options granted under the Current Plan
governed by the Amended Plan, subject to the consent of the holders of such
stock options; (iii) give Additional Options a term of ten years, instead of
five and one-half years for Replacement Options under the Current Plan; (iv)
make Additional Options (like Initial Options) exercisable for a period of one
year after the date a recipient ceases to be a director for any reason, rather
than one year for Replacement Options if cessation is due to death or permanent
disability and three months if cessation is due to any other reason as under the
Current Plan; (v) allow the Company in its discretion to accept consideration
other than cash or Company stock in payment of the exercise price of options,
allow exercise in a broker-assisted transaction in which the exercise price is
not received until promptly after exercise, and allow the loan of the exercise
price to the optionee subject to prompt repayment; (vi) provide that if the
Company consummates any reorganization or merger or consolidation, each option
will thereafter be exercisable only for the securities and/or other
consideration that a holder of the same number of shares as are subject to that
option would have been entitled to receive in such reorganization or merger or
consolidation (as opposed to the Current Plan, which provides for such a change
only if the Company is the surviving entity in a merger or consolidation); and
(vii) provide that if a change in control (as defined in the Amended Plan)
occurs and in connection therewith an optionee ceases to be a director of the
Company, then such optionee's options will automatically vest and remain
exercisable for a period of one year (or, if shorter, until the expiration date
of the option) (as opposed to the Current Plan, which provides that in case of a
dissolution or liquidation, or a merger or consolidation in which the Company is
not the surviving entity, each outstanding option will automatically vest and
become exercisable prior to such event, and then will terminate, unless the
agreement of merger or consolidation provides otherwise).
The following is a summary of the principal features of the
Amended Plan, and is qualified in its entirety by and subject to the actual
provisions of the Amended Plan, a copy of which is attached to this proxy
statement as Exhibit A.
PURPOSE AND ELIGIBILITY
The basic purpose of the Amended Plan (like the Current Plan) is
to attract and retain qualified non-employee directors and align their interests
with the Company's shareholders by offering them an opportunity and incentive to
acquire the Company's Common Stock. The Amended Plan is structured to enable
non-employee directors to serve as disinterested administrators of employee
stock incentive plans of the Company under Rule 16b-3 ("Rule 16b-3") promulgated
by the Securities and Exchange Commission (the "Commission") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Directors are eligible to receive grants of options under the
Amended Plan if they have not been employees of the Company or any of its
affiliates or otherwise eligible to receive any equity securities of the Company
pursuant to any plan of the Company or any of its affiliates (other than the
Amended Plan or a similar plan for directors of the Company) since the beginning
of the Company's most recently completed fiscal year ("Eligible Directors").
There are currently seven non-employee directors who would be eligible to
participate in the Amended Plan; future non-employee directors would also be
eligible. If the Plan had been in effect for the fiscal year ended July 1, 1995,
options to purchase a total of 45,000 shares would have been granted to
non-employee directors thereunder, all as Additional Options.
ADMINISTRATION AND AMENDMENT
The Amended Plan will be administered by the Company, which,
subject to the express provisions of the Amended Plan, will have the power to
interpret the Amended Plan and the rights and obligations of the Company and
option recipients and to adopt and amend such rules and regulations for the
administration thereof as it may deem desirable. However, the Company has no
authority or discretion with respect to recipients,
14
<PAGE> 17
timing, vesting, underlying shares or exercise price of options granted under
the Amended Plan, which matters are specifically governed by the provisions of
the Amended Plan.
The Company's Board of Directors may, insofar as permitted by
law, from time to time suspend or discontinue the Amended Plan or revise or
amend it in any respect whatsoever, subject to shareholder approval to the
extent required by Rule 16b-3 if the amendment would increase the number of
shares subject to the Amended Plan, increase the number of shares for which an
option or options may be granted to any optionee, change the class of persons
eligible to receive options, provide for the grant of options having an exercise
price per option share less than the exercise price specified in the Amended
Plan, extend the final date upon which options may be granted, or otherwise
materially increase the benefits accruing to participants in a manner not
specifically contemplated by the Amended Plan or affect the Amended Plan's
compliance with Rule 16b-3.
TERMINATION OF THE AMENDED PLAN
Options may not be granted under the Amended Plan after the
earlier to occur of May 15, 2005 (the termination date of the Current Plan) or
the date of a Change in Control (as defined in the Amended Plan), but each
option properly granted under the Amended Plan will remain in effect until such
option has been exercised or terminated in accordance with its terms and the
terms of the Amended Plan.
OPTION GRANTS
As under the Current Plan, each Eligible Director will, upon
first becoming an Eligible Director, receive a one-time grant of an option (an
"Initial Option") to purchase up to 20,000 shares of the Company's Common Stock
at an exercise price per share equal to the fair market value of the Company's
Common Stock on the date of grant. (The market price of the Company's Common
Stock on September 1, 1995 was $20.125.) The Company's current non-employee
directors have previously received initial non-employee directors options under
the Current Plan, and are therefore not eligible to receive such Initial
Options.
Immediately following each annual meeting of shareholders of the
Company after an Eligible Director joins the Company's Board, if the Eligible
Director has served as a director since his or her election or appointment and
has been re-elected as a director at such annual meeting, such Eligible Director
will automatically receive an Additional Option to purchase up to 5,000 shares
of the Company's Common Stock at an exercise price per share equal to the fair
market value of the Company's Common Stock on the date of grant. Each of the
Company's current non-employee directors who are standing for reelection
would receive Additional Options immediately after the Company's 1996 annual
meeting of shareholders and subsequent annual meetings, if re-elected to
the board at such meetings.
VESTING AND EXERCISE OF OPTIONS
Initial Options will vest and become exercisable in installments
of 5,000 shares on the first anniversary of the date of grant and 1,250 shares
at the end of each of the next 12 three-month periods thereafter. Additional
Options will vest and become exercisable in installments of 1,250 shares on the
first anniversary of the date of grant and 312.5 shares at the end of each of
the next 12 three-month periods thereafter. Notwithstanding the foregoing,
however, (i) Initial Options and Additional Options will vest and become
exercisable only if the optionee has remained an Eligible Director for the
entire period from the date of grant to the vesting date and (ii) Initial
Options and Additional Options that have not vested and become exercisable at
the time the optionee ceases to be a director will terminate.
The option exercise price will be payable upon exercise in cash
or Company stock delivered by the optionee or retained by the Company from the
stock otherwise issuable upon exercise (in either case valued at fair market
value as of the exercise date), or such other consideration as the Company may
deem acceptable. The Company may allow exercise of an option in a
broker-assisted or similar transaction in which the exercise price is not
received by the Company until promptly after exercise, and/or allow the Company
to loan the exercise price to the person entitled to exercise the option, if the
exercise will be followed by a prompt sale of some or all of the
15
<PAGE> 18
underlying shares and a portion of the sales proceeds is dedicated to full
payment of the exercise price and any applicable tax withholding.
TERMINATION OF OPTIONS
No option granted under the Amended Plan will be exercisable
later than ten years after its grant. If an optionee ceases to be a director of
the Company for any reason, all Initial Options and Additional Options granted
to such optionee will be exercisable, to the extent already exercisable at the
date such optionee ceases to be a director, for a period of 365 days after that
date (or, if sooner, until the expiration of the option according to its terms),
and will then terminate.
SECURITIES SUBJECT TO THE AMENDED PLAN
The 800,000 shares of Common Stock that may be issued upon
exercise of options granted under the Current Plan are being carried over to the
Amended Plan, so that the Amended Plan does not represent any increase in
authorized shares. In the event that any outstanding option under the Amended
Plan expires by reason of lapse of time or is otherwise terminated without
exercise for any reason, then the shares of Common Stock subject to any such
option that have not been issued upon exercise of the option shall again become
available in the pool of shares of Common Stock for which options may be granted
under the Amended Plan.
CORPORATE TRANSACTIONS; CHANGES IN CONTROL
The number of shares of Common Stock available for issuance upon
exercise of options granted under the Amended Plan, the number of shares for
which each outstanding option can be exercised, and the exercise price per share
of options will be appropriately and proportionately adjusted in connection with
a subdivision or consolidation of shares or the payment of a stock dividend or
any other increase or decrease in the number of issued and outstanding shares of
capital stock of the Company effected without receipt of consideration by the
Company.
If the Company consummates any reorganization or merger or
consolidation, each option outstanding under the Amended Plan will thereafter be
exercisable only for the securities and/or other consideration that a holder of
the same number of shares of Common Stock as are subject to that option would
have been entitled to receive in such reorganization or merger or consolidation.
If a Change in Control of the Company (as defined in the Amended Plan) occurs
and in connection with such change in control any optionee ceases to be a
director of the Company, then such optionee's options granted under the Amended
Plan will automatically accelerate and become immediately exercisable. Without
limitation, a director will be deemed to have ceased to be a director of the
Company in connection with a Change in Control if such director (i) is removed
by or resigns upon request of a person exercising practical voting control over
the Company following the Change in Control, or (ii) is willing and able to
continue as a director of the Company but is not re-elected to or retained on
the Company's Board of Directors by the Company's shareholders through the
shareholder vote or consent action for election of directors that precedes and
is taken in connection with, or next follows, the change in control.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax
treatment that will generally apply to options granted under the Amended Plan,
based on federal income tax laws in effect on the date of this Proxy Statement.
The exact federal income tax treatment of options will depend on the specific
circumstances of the recipient. No information is provided herein with respect
to estate, inheritance, gift, state or local tax laws, although there may be
certain tax consequences upon the receipt or exercise of an option or other
award or the disposition of any acquired shares under those laws. RECIPIENTS OF
OPTIONS ARE ADVISED TO CONSULT THEIR PERSONAL TAX ADVISORS WITH REGARD TO ALL
CONSEQUENCES ARISING FROM THE GRANT OR EXERCISE OF OPTIONS, AND THE DISPOSITION
OF ANY ACQUIRED SHARES.
16
<PAGE> 19
Options granted under the Amended Plan are non-qualified options
for purposes of the Internal Revenue Code (the "Code"). The grant of a
non-qualified option is generally not a taxable event for the optionee and does
not entitle the Company to any deduction. Upon exercise of the option, the
optionee will generally recognize ordinary income in an amount equal to the
excess of the fair market value of the stock acquired upon exercise of the
option ("Option Shares") (determined as of the date of the exercise) over the
exercise price of such option, and the Company will be entitled to a deduction
equal to such amount. The amount included in the optionee's taxable income on
the exercise of the option will be added to the exercise price in determining
the optionee's basis in the acquired shares. A subsequent sale of the Option
Shares generally will give rise to capital gain or loss equal to the difference
between the sales price and the Optionee's basis in the shares sold. Such gain
or loss will be treated as short-term or long-term depending on the optionee's
holding period for the shares involved in the disposition.
With certain exceptions, an individual may not deduct
investment-related interest to the extent such interest exceeds the individual's
net investment income for the year. Investment interest generally includes
interest paid on indebtedness incurred to purchase Common Stock. Interest
disallowed under this rule may be carried forward to and deducted in later
years, subject to the same limitations.
Special rules will apply in cases where an optionee pays the
exercise or purchase price of the option or applicable withholding tax
obligations under the Amended Plan by delivering previously owned Common Stock
or by reducing the amount of Common Stock otherwise issuable pursuant to the
option. The surrender or withholding of such shares will in certain
circumstances result in the recognition of income with respect to such shares.
The Amended Plan provides that, in the event of certain changes
in ownership or control of the Company, the right to exercise options otherwise
subject to a vesting schedule may be accelerated. In that event and depending
upon the individual circumstances of the recipient, an amount with respect to
such award may constitute an "excess parachute payment" under the "golden
parachute" provisions of the Code. Pursuant to these provisions, a recipient
will be subject to a 20% excise tax (in addition to Federal income tax) on any
"excess parachute payment," and the Company will be denied a deduction with
respect to such payment. Recipients of awards should consult their tax advisors
as to whether accelerated vesting of an award in connection with a change of
ownership or control of the Company would give rise to an "excess parachute
payment."
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the meeting and entitled to vote is
required for approval of the Amended Plan. Abstentions and broker non-votes will
each be counted present for purposes of determining the presence of a quorum.
Abstentions will have the same effect as a negative vote. Broker non-votes, on
the other hand, will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE AMENDED AND RESTATED STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
By selection of the Company's Board of Directors, the international
accounting firm of KPMG Peat Marwick LLP, certified public accountants, has
served the Company as its auditors since its incorporation in 1970. The Board of
Directors has again selected KPMG Peat Marwick LLP to serve as the Company's
independent accountants for the fiscal year ending June 29, 1996. The matter is
not required to be submitted for shareholder approval, but the Board of
Directors has elected to seek ratification of its selection of the independent
accountants by the affirmative vote of a majority of the shares represented and
voted at the Meeting. If the shareholders do not ratify this selection, the
Board of Directors will reconsider its selection of KPMG Peat Marwick LLP and
will either continue to retain this firm or appoint new auditors upon
recommendation of the Audit Committee.
17
<PAGE> 20
One or more representatives of KPMG Peat Marwick LLP are expected to be
present at the Meeting and will have an opportunity to make a statement if they
so desire and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 29, 1996.
SHAREHOLDER PROPOSALS
Shareholders who wish to include proposals for action at the Company's
1996 Annual Meeting of Shareholders in next year's proxy statement and proxy
card must cause their proposals to be received in writing by the Company at its
address set forth on the first page of this Proxy Statement no later than June
4, 1996. Such proposals should be addressed to the Company's Secretary, and may
be included in next year's proxy statement if they comply with certain rules and
regulations promulgated by the Commission.
Shareholders who do not present proposals for inclusion in the Proxy
Statement but who still intend to submit a proposal at the 1996 Annual Meeting
must, in accordance with the Company's bylaws, provide timely written notice of
the matter to the Secretary of the Company. To be timely, a shareholder's
written notice must be delivered to or mailed and received at the principal
executive offices of the Company not less than 60 days nor more than 120 days
prior to the Annual Meeting as originally scheduled. If less than 70 days notice
or prior public disclosure of the date of the scheduled Annual Meeting is given,
then notice of the proposed business matter must be received by the Secretary
not later than the close of business on the tenth day following the day on which
such notice of the date of the scheduled Annual Meeting was mailed or the day on
which such public disclosure was made, whichever first occurs. Any notice to the
Secretary must include as to each matter the shareholder proposes to bring
before the meeting: (i) a brief description of the proposal desired to be
brought before the Annual Meeting and the reasons for conducting such business
at the Annual Meeting; (ii) the name and record address of the shareholder
proposing such business and any other shareholders known by such shareholder to
be supporting such proposal; (iii) the class and number of shares of the
Company's stock which are beneficially owned by the shareholder and any other
shareholders known by such shareholder to be supporting such proposal; and (iv)
any financial interest of the shareholder in such proposal.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
that are to be presented for action at the Meeting. Should any other matters
come before the Meeting or any adjournments and postponements thereof, the
persons named in the enclosed proxy will have the discretionary authority to
vote all proxies received with respect to such matters in accordance with their
judgments.
ANNUAL REPORTS
The Company's 1995 Annual Report to Shareholders has been mailed to
shareholders concurrently with this Proxy Statement, but such report is not
incorporated herein and is not deemed to be a part of this proxy solicitation
material.
Irvine, California
October 2, 1995
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES ON, DATE, SIGN
AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE
IS HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED.
18
<PAGE> 21
EXHIBIT A
WESTERN DIGITAL CORPORATION
AMENDED AND RESTATED
STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
ARTICLE I
GENERAL
1.01 ADOPTION AND AMENDMENT. This Western Digital Corporation
Amended and Restated Stock Option Plan for Non- Employee Directors (the "PLAN")
was initially adopted by the Board of Directors (the "BOARD") of Western Digital
Corporation (the "COMPANY") as of May 15, 1985 (the initial effective date of
the Plan) subject to approval of the Company's shareholders, which was obtained
at the Annual Meeting of Shareholders held on November 15, 1985. Amendment No. 1
to the Plan was adopted by the Board as of December 6, 1985, subject to
shareholder approval, which was obtained at the Annual Meeting of Shareholders
held on November 13, 1986. Amendment No. 2 to the Plan was adopted by the Board
as of September 22, 1987, subject to shareholder approval, which was obtained at
the Annual Meeting of Shareholders held on November 19, 1987. Amendment No. 3 to
the Plan was approved by the Board without shareholder approval on November 19,
1987. Amendment No. 4 to the Plan was adopted by the Board as of September 22,
1988, subject to shareholder approval, which was obtained at the Annual Meeting
of Shareholders held on November 17, 1988. Amendment No. 5 to the Plan was
adopted by the Board as of July 27, 1989, subject to shareholder approval, which
was obtained at the Annual Meeting of Shareholders held on November 16, 1989.
Amendment No. 6 to the Plan was adopted by the Board as of July 26, 1990,
subject to shareholder approval, which was obtained at the Annual Meeting of
Shareholders held on November 15, 1990. Amendment No. 7 to the Plan was approved
by the Board without shareholder approval on May 23, 1991. Amendment No. 8 to
the Plan was approved by the Board as of July 21, 1994, subject to shareholder
approval, which was obtained at the Annual Meeting of Shareholders held on
November 10, 1994. This Amendment and Restatement of the Plan was approved by
the Board on September 7, 1995, subject to shareholder approval, which was
obtained at the Annual Meeting of Shareholders held on November 1, 1995, and is
effective as of that date, provided that holders of options shall receive
Additional Options pursuant to Section 6(a) of the Plan as amended through
Amendment No. 8 thereto in respect of exercises or terminations of Initial
Options or Additional Options until December 31, 1995. This Amendment and
Restatement of the Plan shall govern all options granted under the Plan after
the date of approval hereof by the Company's shareholders (including Additional
Options granted pursuant to the preceding sentence) and all options granted
under the Plan prior to that date, subject to any required consents of the
holders of such options; prior to or in the absence of any such consent, options
granted under the Plan as amended through Amendment No. 8 thereto will be
governed by that version of the Plan.
1.02 ADMINISTRATION. The Plan shall be administered by the
Company, which, subject to the express provisions of the Plan, shall have the
power to construe the Plan and any agreements or memoranda defining the rights
and obligations of the Company and option recipients, to determine all questions
arising thereunder, to adopt and amend such rules and regulations for the
administration thereof as it may deem desirable, and otherwise to carry out the
terms of the Plan and such agreements or memoranda. The interpretation and
construction by the administrator of any provisions of the Plan or of any option
granted under the Plan shall be final. Notwithstanding the foregoing, the
administrator shall have no authority or discretion as to the selection of
persons eligible to receive options granted under the Plan, the number of shares
covered by options granted under the Plan, the timing of such grants, or the
exercise price of options granted under the Plan, which matters are specifically
governed by the provisions of the Plan.
1.03 ELIGIBLE DIRECTORS. A person shall be eligible to receive
grants of options under the Plan (an "ELIGIBLE DIRECTOR") if, at the time of the
option's grant, he or she is a duly elected or appointed member of the Board,
but is not and has not since the beginning of the Company's most recently
completed fiscal year been (a) granted or awarded any equity securities of the
Company (including, without limitation, stock options and stock appreciation
rights) except pursuant to the Plan or a similar plan for directors of the
Company, or (b) an employee of the Company or any of its affiliates or otherwise
eligible for selection as a person to whom equity
A-1
<PAGE> 22
securities of the Company (including, without limitation, stock options and
stock appreciation rights) may be allocated or granted pursuant to any plan of
the Company or any of its affiliates (other than the Plan or a similar plan for
directors of the Company) entitling participants therein to acquire stock, stock
options, or stock appreciation rights of the Company or any of its affiliates.
1.04 SHARES OF COMMON STOCK SUBJECT TO THE PLAN AND GRANT LIMIT.
The shares that may be issued upon exercise of options granted under the Plan
shall be authorized and unissued shares of the Company's Common Stock or
previously issued shares of the Company's Common Stock reacquired by the Company
and unused option shares pursuant to Section 2.06. The aggregate number of
shares that may be issued upon exercise of options granted under the Plan shall
not exceed 800,000 shares of Common Stock, subject to adjustment in accordance
with Article III.
1.05 AMENDMENT OF THE PLAN. The Board may, insofar as permitted
by law, from time to time suspend or discontinue the Plan or revise or amend it
in any respect whatsoever, except that no such amendment shall alter or impair
or diminish any rights or obligations under any option theretofore granted under
the Plan without the consent of the person to whom such option was granted. In
addition, if an amendment to the Plan would increase the number of shares
subject to the Plan (as adjusted under Article III), increase the number of
shares for which an option or options may be granted to any optionee (as
adjusted under Article III), change the class of persons eligible to receive
options under the Plan, provide for the grant of options having an exercise
price per option share less than the exercise price specified in the Plan,
extend the final date upon which options may be granted under the Plan, or
otherwise materially increase the benefits accruing to participants in a manner
not specifically contemplated herein or affect the Plan's compliance with Rule
16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), the amendment shall be approved by the Company's
shareholders to the extent required to comply with Rule 16b-3 under the Exchange
Act ("RULE 16B-3"). Under no circumstances may the provisions of the Plan that
provide for the amounts, price, and timing of option grants be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules thereunder. The Plan is intended to qualify as a formula
plan under Rule 16b-3, but not to impose restrictions included in the Plan for
purposes of compliance with Rule 16b-3 if those restrictions become unnecessary
to compliance with Rule 16b-3. Accordingly, notwithstanding the foregoing, the
administrator may administer and amend the Plan to comply with or take advantage
of changes in the rules (or interpretations thereof) promulgated by the
Securities and Exchange Commission or its staff under Section 16 of the Exchange
Act, subject to the shareholder approval requirement described above.
1.06 TERM OF PLAN. Options may be granted under the Plan until
the earlier to occur of May 15, 2005 or the date of a Change in Control, as
defined in Section 3.02. In addition, no options may be granted during any
suspension of the Plan or after its termination for any reason. Notwithstanding
the foregoing, each option properly granted under the Plan shall remain in
effect until such option has been exercised or terminated in accordance with its
terms and the terms of the Plan.
1.07 RESTRICTIONS. All options granted under the Plan shall be
subject to the requirement that, if at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of the shares
subject to options granted under the Plan upon any securities exchange or under
any state or federal law, or the consent or approval of any government or
regulatory body or authority, is necessary or desirable as a condition of, or in
connection with, the granting of such an option or the issuance, if any, or
purchase of shares in connection therewith, such option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company. Unless the shares of stock to be issued upon exercise
of an option granted under the Plan have been effectively registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT") as now in force or
hereafter amended, the Company shall be under no obligation to issue any shares
of stock covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company satisfactory in form and scope to counsel to the Company and upon which,
in the opinion of such counsel, the Company may reasonably rely, that he or she
is acquiring the shares of stock issued to him or her pursuant to such exercise
of the option for his or her own account as an investment and not with a
A-2
<PAGE> 23
view to, or for sale in connection with, the distribution of any such shares of
stock, and that he or she will make no transfer of the same except in compliance
with any rules and regulations in force at the time of such transfer under the
Securities Act, or any other applicable law or regulation, and that if shares of
stock are issued without such registration, a legend to this effect may be
endorsed upon the securities so issued and the Company may order its transfer
agent to stop transfer of such shares.
1.08 NONASSIGNABILITY. No option granted under the Plan shall
be assignable or transferable by the grantee except by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order or,
in the discretion of the administrator and under circumstances that would not
adversely affect the interests of the Company, as otherwise permitted by rule or
interpretation of the Securities and Exchange Commission or its staff as an
exception to the general proscription on transfer of derivative securities set
forth in Rule 16b-3 (or any successor rule) or applicable interpretations
thereof. During the lifetime of the optionee, the option shall be exercisable
only by the optionee (or the optionee's permitted transferee) or his or her
guardian or legal representative.
1.09 WITHHOLDING TAXES. Whenever shares of stock are to be
issued upon exercise of an option granted under the Plan, the administrator
shall have the right to require the optionee to remit to the Company an amount
sufficient to satisfy any federal, state and local withholding tax requirements
prior to such issuance. The administrator may, in the exercise of its
discretion, allow satisfaction of tax withholding requirements by accepting
delivery of stock of the Company or by withholding a portion of the stock
otherwise issuable upon exercise of an option.
1.10 DEFINITION OF "FAIR MARKET VALUE." For purposes of the
Plan, the "FAIR MARKET VALUE" of a share of stock as of a particular date shall
be: (a) if the stock is listed on an established stock exchange or exchanges
(including, for this purpose, The Nasdaq Stock Market), the last reported sale
price per share of the stock on such date on the principal exchange on which it
is traded or, if no sale was made on such date on such principal exchange, then
as of the next preceding date on which such a sale was made; or (b) if the stock
is not then listed on an exchange, the average of the closing bid and asked
prices per share for the stock in the over-the-counter market as quoted on the
NASDAQ system on such date (in the case of (a) or (b), subject to adjustment as
and if necessary and appropriate to set an exercise price not less than 100% of
the fair market value of the stock on the date an option is granted); or (c) if
the stock is not then listed on an exchange or quoted in the over-the-counter
market, an amount determined in good faith by the administrator. The fair market
value of rights or property other than stock shall be determined by the
administrator on the basis of such factors as it may deem appropriate.
1.11 RIGHTS AS A SHAREHOLDER. An optionee or a permitted
transferee of an option shall have no rights as a shareholder with respect to
any shares issuable or issued upon exercise of the option until the date of the
receipt by the Company of all amounts payable in connection with exercise of the
option, including the exercise price and any amounts required pursuant to
Section 1.09.
ARTICLE II
STOCK OPTIONS
2.01 GRANTS OF INITIAL OPTIONS. Each Eligible Director shall,
upon first becoming an Eligible Director, receive a one-time grant of an option
to purchase up to 20,000 shares of the Company's Common Stock at an exercise
price per share equal to the fair market value of the Company's Common Stock on
the date of grant, subject to (a) vesting as set forth in Section 2.03, and (b)
adjustment as set forth in Article III. Options granted under this Section 2.01
are "INITIAL OPTIONS" for purposes hereof. An Eligible Director who has received
an initial grant of stock options under the Plan or pursuant to a prior option
plan for the Company's directors shall not be eligible to receive an Initial
Option.
2.02 GRANTS OF ADDITIONAL OPTIONS. Immediately following the
annual meeting of shareholders of the Company next following an Eligible
Director's becoming an Eligible Director and immediately following each
subsequent annual meeting of shareholders of the Company, in each case if the
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<PAGE> 24
Eligible Director has served as a director since his or her election or
appointment and has been re-elected as a director at such annual meeting, such
Eligible Director shall automatically receive an option to purchase up to 5,000
shares of the Company's Common Stock (an "ADDITIONAL OPTION"). In addition to
the Additional Options described above, an individual who was previously an
Eligible Director and received an initial grant of stock options under the Plan
or pursuant to a prior option plan for the Company's directors, who then ceased
to be a director for any reason, and who then again becomes an Eligible
Director, shall upon again becoming an Eligible Director automatically receive
an Additional Option. The exercise price per share for all Additional Options
shall be equal to the fair market value of the Company's Common Stock on the
date of grant, subject to (a) vesting as set forth in Section 2.03, and (b)
adjustment as set forth in Article III.
2.03 VESTING. Initial Options shall vest and become exercisable
in installments of 5,000 shares on the first anniversary of the date of grant
and 1,250 shares at the end of each of the next 12 three-month periods
thereafter. Additional Options shall vest and become exercisable in installments
of 1,250 shares on the first anniversary of the date of grant and 312.5 shares
at the end of each of the next 12 three-month periods thereafter.
Notwithstanding the foregoing, however, but subject to Section 3.02, (i) Initial
Options and Additional Options will vest and become exercisable as set forth
herein only if the optionee has remained a director for the entire period from
the date of grant to the date specified herein for vesting, and (ii) Initial
Options and Additional Options that have not vested and become exercisable at
the time the optionee ceases to be a director shall terminate.
2.04 EXERCISE. No option shall be exercisable except in respect
of whole shares, and fractional share interests shall be disregarded. Not less
than 100 shares of stock (or such other amount as is set forth in the applicable
option agreement or confirming memorandum) may be purchased at one time unless
the number purchased is the total number at the time available for purchase
under the terms of the option. An option shall be deemed to be exercised when
the Secretary or other designated official of the Company receives written
notice of such exercise from or on behalf of the optionee, together with payment
of the exercise price and any amounts required under Section 1.09. The option
exercise price shall be payable upon the exercise of an option in legal tender
of the United States or capital stock of the Company delivered in transfer to
the Company by or on behalf of the person exercising the option (duly endorsed
in blank or accompanied by stock powers duly endorsed in blank, with signatures
guaranteed in accordance with the Exchange Act if required by the administrator)
or retained by the Company from the stock otherwise issuable upon exercise or
surrender of vested and exercisable options granted to the recipient and being
exercised (in either case valued at fair market value as of the exercise date),
or such other consideration as the administrator may from time to time in the
exercise of its discretion deem acceptable in any particular instance, provided,
however, that the administrator may, in the exercise of its discretion, (a)
allow exercise of an option in a broker-assisted or similar transaction in which
the exercise price is not received by the Company until promptly after exercise,
and/or (b) allow the Company to loan the exercise price to the person entitled
to exercise the option, if the exercise will be followed by a prompt sale of
some or all of the underlying shares and a portion of the sales proceeds is
dedicated to full payment of the exercise price and amounts required pursuant to
Section 1.09.
2.05 OPTION AGREEMENTS OR MEMORANDA. Each option granted under
the Plan shall be evidenced by an option agreement duly executed on behalf of
the Company and by the Eligible Director to whom such option is granted or, in
the administrator's discretion, a confirming memorandum issued by the Company to
the recipient, stating the number of shares of stock issuable upon exercise of
the option and the exercise price, and setting forth explicitly or by reference
to the Plan the time during which the option is exercisable and the times at
which the options vest and become exercisable. Such option agreements or
confirming memoranda may but need not be identical and shall comply with and be
subject to the terms and conditions of the Plan, a copy of which shall be
provided to each option recipient and incorporated by reference into each option
agreement or confirming memorandum. Any option agreement or confirming
memorandum may contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the administrator.
2.06 TERM OF OPTIONS AND EFFECT OF TERMINATION. Notwithstanding
any other provision of the Plan, no option granted under the Plan shall be
exercisable after the expiration of ten years from the effective date of its
grant. In the event that any outstanding option under the Plan expires by reason
of lapse of time or is
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<PAGE> 25
otherwise terminated without exercise for any reason, then the shares of Common
Stock subject to such option that have not been issued upon exercise of the
option shall again become available in the pool of shares of Common Stock for
which options may be granted under the Plan. In the event that the recipient of
any options granted under the Plan shall cease to be a director of the Company
for any reason, and subject to Section 3.02, all Initial Options and Additional
Options granted under the plan to such recipient shall be exercisable, to the
extent they are already exercisable at the date such recipient ceases to be a
director, for a period of 365 days after that date (or, if sooner, until the
expiration of the option according to its terms), and shall then terminate. In
the event of the death of an optionee while such optionee is a director of the
Company or within the period after termination of such status during which he or
she is permitted to exercise an option, such option may be exercised by any
person or persons designated by the optionee on a beneficiary designation form
adopted by the administrator for such purpose or, if there is no effective
beneficiary designation form on file with the Company, by the executors or
administrators of the optionee's estate or by any person or persons who shall
have acquired the option directly from the optionee by his or her will or the
applicable laws of descent and distribution.
ARTICLE III
CORPORATE TRANSACTIONS
3.01 ANTI-DILUTION ADJUSTMENTS. The number of shares of Common
Stock available for issuance upon exercise of options granted under the Plan,
the number of shares for which each outstanding option can be exercised, and the
exercise price per share of options shall be appropriately and proportionately
adjusted for any increase or decrease in the number of issued and outstanding
shares of Common Stock resulting from a subdivision or consolidation of shares
or the payment of a stock dividend or any other increase or decrease in the
number of issued and outstanding shares of capital stock of the Company effected
without receipt of consideration by the Company. No fractional interests will be
issued under the Plan resulting from any such adjustments.
3.02 REORGANIZATIONS; MERGERS; CHANGES IN CONTROL. Subject to
the other provisions of this Section 3.02, if the Company shall consummate any
reorganization or merger or consolidation in which holders of shares of the
Company's Common Stock are entitled to receive in respect of such shares any
other consideration (including, without limitation, a different number of such
shares), each option outstanding under the Plan shall thereafter be exercisable,
in accordance with the Plan, only for the kind and amount of securities, cash
and/or other property receivable upon such reorganization or merger or
consolidation by a holder of the same number of shares of Common Stock as are
subject to that option immediately prior to such reorganization or merger or
consolidation, and any appropriate adjustments will be made to the exercise
price thereof. In addition, if a Change in Control occurs and in connection with
such Change in Control any recipient of an option granted under the Plan ceases
to be a director of the Company, then such recipient shall have the right to
exercise his or her options granted under the Plan in whole or in part during
the applicable time period provided in Section 2.06 without regard to any
vesting requirements. For purposes hereof, but without limitation, a director
will be deemed to have ceased to be a director of the Company in connection with
a Change in Control if such director (i) is removed by or resigns upon request
of a Person (as defined in paragraph (a) below) exercising practical voting
control over the Company following the Change in Control or a person acting upon
authority or at the instruction of such Person, or (ii) is willing and able to
continue as a director of the Company but is not re-elected to or retained on
the Board by the Company's shareholders through the shareholder vote or consent
action for election of directors that precedes and is taken in connection with,
or next follows, the Change in Control. For purposes hereof, a "CHANGE IN
CONTROL" means the following and shall be deemed to occur if any of the
following events occurs:
(a) Any person, entity or group, within the meaning of Section
13(d) or 14(d) of the Exchange Act, but excluding the
Company and its subsidiaries and any employee benefit or
stock ownership plan of the Company or its subsidiaries and
also excluding an underwriter or underwriting syndicate
that has acquired the Company's securities solely in
connection with a public offering thereof (such person,
entity or group being referred to herein as a "PERSON"),
becomes the beneficial owner (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50% or more of
either the then
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<PAGE> 26
outstanding shares of Common Stock or the combined voting
power of the Company's then outstanding securities entitled
to vote generally in the election of directors; or
(b) Individuals who, as of the effective date hereof,
constitute the Board cease for any reason to constitute at
least a majority of the Board, provided that any individual
who becomes a director after the effective date hereof
whose election, or nomination for election by the Company's
shareholders, is approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall
be considered to be a member of the Incumbent Board unless
that individual was nominated or elected by any Person
having the power to exercise, through beneficial ownership,
voting agreement and/or proxy, 20% or more of either the
then outstanding shares of Common Stock or the combined
voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of
directors, in which case that individual shall not be
considered to be a member of the Incumbent Board unless
such individual's election or nomination for election by
the Company's shareholders is approved by a vote of at
least two-thirds of the directors then comprising the
Incumbent Board; or
(c) Consummation by the Company of the sale or other
disposition by the Company of all or substantially all of
the Company's assets or a reorganization or merger or
consolidation of the Company with any other person, entity
or corporation, other than
(i) a reorganization or merger or consolidation that would
result in the voting securities of the Company
outstanding immediately prior thereto (or, in the case
of a reorganization or merger or consolidation that is
preceded or accomplished by an acquisition or series
of related acquisitions by any Person, by tender or
exchange offer or otherwise, of voting securities
representing 5% or more of the combined voting power
of all securities of the Company, immediately prior to
such acquisition or the first acquisition in such
series of acquisitions) continuing to represent,
either by remaining outstanding or by being converted
into voting securities of another entity, more than
50% of the combined voting power of the voting
securities of the Company or such other entity
outstanding immediately after such reorganization or
merger or consolidation (or series of related
transactions involving such a reorganization or merger
or consolidation), or
(ii) a reorganization or merger or consolidation effected
to implement a recapitalization or reincorporation of
the Company (or similar transaction) that does not
result in a material change in beneficial ownership of
the voting securities of the Company or its successor;
or
(d) Approval by the shareholders of the Company or an order by
a court of competent jurisdiction of a plan of liquidation
of the Company.
3.03 DETERMINATION BY THE COMPANY. To the extent that the
foregoing adjustments relate to stock or securities of the Company, such
adjustments shall be made by the administrator, whose determination in that
respect shall be final, binding and conclusive. The grant of an option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, consolidate, dissolve, or liquidate or to
sell or transfer all or any part of its business or assets.
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PROXY
WESTERN DIGITAL CORPORATION
8105 IRVINE CENTER DRIVE
IRVINE, CA 92718
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS CHARLES A. HAGGERTY AND MICHAEL A. CORNELIUS,
AND EACH OF THEM, AS PROXIES, EACH WITH THE POWER TO APPOINT HIS SUBSTITUTE, AND
HEREBY AUTHORIZES THEM TO REPRESENT AND TO VOTE AS DESIGNATED BELOW ALL THE
SHARES OF COMMON STOCK OF WESTERN DIGITAL CORPORATION HELD OF RECORD BY THE
UNDERSIGNED ON SEPTEMBER 15, 1995 AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE
HELD ON NOVEMBER 1, 1995, AND AT ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF. THE
PROPOSALS REFERRED TO BELOW ARE DESCRIBED IN THE PROXY STATEMENT FOR THE ANNUAL
MEETING OF SHAREHOLDERS DATED OCTOBER 2, 1995.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS / / FOR ALL NOMINEES LISTED BELOW
(except as marked to the contrary below)
/ / WITHHOLD AUTHORITY
to vote for all nominees listed below
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, LINE
THROUGH OR OTHERWISE STRIKE OUT THE NOMINEE'S NAME BELOW)
<TABLE>
<S> <C> <C>
CHARLES A. HAGGERTY I.M. BOOTH ANDRE R. HORN
ANNE O. KRUEGER THOMAS E. PARDUN JAMES A. ABRAHAMSON
IRWIN FEDERMAN
PETER D. BEHRENDT
</TABLE>
2. APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS WHICH WILL EFFECT CERTAIN CHANGES TO SUCH PLAN AS
DESCRIBED IN THE PROXY STATEMENT REGARDING ADDITIONAL OPTION GRANTS AND OTHER
MATTERS.
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
3. RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
ACCOUNTANTS FOR THE COMPANY.
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
(IMPORTANT -- PLEASE SIGN ON OTHER SIDE)
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
DATED: ,
1995
-------------------------------
(Signature)
-------------------------------
(Signature)
Please sign your name exactly
as it appears hereon. When
shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in full partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 28
TO: T. ROWE PRICE TRUST COMPANY
TRUSTEE OF THE WESTERN DIGITAL CORPORATION SAVINGS AND PROFIT SHARING PLAN
WITH RESPECT TO SHARES OF COMMON STOCK OF WESTERN DIGITAL CORPORATION
INCLUDED IN THE SAVINGS AND PROFIT SHARING PLAN, YOU ARE HEREBY INSTRUCTED TO
VOTE IN ACCORDANCE WITH THE FOLLOWING ALL SHARES ALLOCATED TO MY ACCOUNT IN THE
PLAN:
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS / / FOR ALL NOMINEES LISTED BELOW
(except as marked to the contrary below)
/ / WITHHOLD AUTHORITY
to vote for all nominees listed below
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, LINE
THROUGH OR
OTHERWISE STRIKE OUT THE NOMINEE'S NAME BELOW)
<TABLE>
<S> <C> <C>
CHARLES A. HAGGERTY I.M. BOOTH ANDRE R. HORN
ANNE O. KRUEGER THOMAS E. PARDUN JAMES A. ABRAHAMSON
IRWIN FEDERMAN
PETER D. BEHRENDT
</TABLE>
2. APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS WHICH WILL EFFECT CERTAIN CHANGES TO SUCH PLAN AS
DESCRIBED IN THE PROXY STATEMENT REGARDING ADDITIONAL OPTION GRANTS AND OTHER
MATTERS.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
3. RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
ACCOUNTANTS FOR THE COMPANY.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
4. IN THEIR DISCRETION, CHARLES A. HAGGERTY AND MICHAEL A. CORNELIUS ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
(IMPORTANT -- PLEASE SIGN ON OTHER SIDE)
(CONTINUED FROM OTHER SIDE)
TO PARTICIPANTS IN THE WESTERN DIGITAL CORPORATION SAVINGS AND PROFIT SHARING
PLAN
AS A PARTICIPANT IN THE SAVINGS AND PROFIT SHARING PLAN, WITH RESPECT TO
SHARES OF WESTERN DITIGAL CORPORATION COMMON STOCK INCLUDED IN THE PLAN AT
SEPTEMBER 15, 1995, YOU HAVE THE RIGHT TO INSTRUCT T. ROWE PRICE TRUST COMPANY,
THE TRUSTEE, HOW TO VOTE SHARES ALLOCATED TO YOUR ACCOUNTS IN THE PLAN. FOR YOUR
INFORMATION, A COPY OF THE PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON NOVEMBER 1, 1995, IS FORWARDED HEREWITH.
MY SHARES SHALL BE VOTED IN THE
MANNER DIRECTED ABOVE. IF THIS
FORM IS PROPERLY EXECUTED BUT
NO DIRECTION IS MADE ABOVE, THE
SHARES SHALL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1
AND FOR PROPOSALS 2 AND 3.
DATED: ,
1995
-------------------------------
(Signature)
PLEASE MARK, SIGN, DATE AND
RETURN THIS INSTRUCTION CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 29
[WESTERN DIGITAL LETTERHEAD]
October 2, 1995
TO: Participants in the Western Digital Corporation
Savings and Profit Sharing Plan
As a participant in the Western Digital Corporation Savings and Profit Sharing
Plan, you have the right to vote the shares of Western Digital common stock
allocated to your account.
To allow you to do this, we are enclosing a voting instruction card, which when
completed will give instructions to the trustee of the plan, T. Rowe Price
Trust Company, on how you wish your shares to be voted. Also enclosed is an
annual report and a proxy statement which explains the issues being presented
for shareholder approval at the annual meeting to be held on November 1, 1995.
As a stock owner in Western Digital, ONLY YOU (through the trustee) CAN VOTE
YOUR SHARES. No one else has that right. If you do not provide the trustee with
voting instructions, your shares will not be voted. Therefore, it is important
that your shares, no matter how large or small the amount, be represented at
the annual meeting of shareholders.
Please take the time to complete the enclosed card and return it in the
enclosed, pre-addressed envelope as soon as possible.
Thank you for your cooperation.
Very truly yours,
[SIG]
Michael A. Cornelius
