Western Digital 2006 Annual Report Download - page 95

Download and view the complete annual report

Please find page 95 of the 2006 Western Digital annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

Mr. Coyne’s employment by us during the applicable performance period. The Employment Agreement with Mr. Coyne
expires January 1, 2012, subject to certain termination provisions.
Long-Term Retention Agreements
Mr. Massengill and Mr. Shakeel. We entered into Amended and Restated Long-Term Retention Agreements with
each of Mr. Massengill and Mr. Shakeel, effective December 20, 2002, amending and restating prior long-term retention
agreements with each of them. The Long-Term Retention Agreements were intended to add incentives for the executives
to advance our long-term interests. Pursuant to the Long-Term Retention Agreements, our Board of Directors granted
Mr. Massengill and Mr. Shakeel 1.4 million and 1.0 million “share units,” respectively, subject to certain adjustment,
vesting, forfeiture and repayment provisions. The share units vested in three installments: 25% vested on July 1, 2003,
30% vested on July 1, 2004 and 45% vested on July 1, 2005. Within fifteen days of each vesting period, we paid each
executive a cash amount equal to the product of the number of share units that vested and the average closing price of our
common stock for the preceding forty-five day period, but in no event more than $9.22 per share unit. The “share units”
granted to each of the executives have fully vested and, therefore, no further payments will be made to Mr. Massengill or
Mr. Shakeel pursuant to these agreements. We have further detailed the amounts paid to each executive under “Executive
Compensation — Summary Compensation Table” on page 80.
Mr. Coyne and Dr. Moghadam. Effective as of September 21, 2004, we entered into Long-Term Retention
Agreements with each of Mr. Coyne and Dr. Moghadam for the purpose of giving each of them an added incentive to
advance our interests. Pursuant to these agreements, Mr. Coyne received a cash award in the amount of $300,000 and
Dr. Moghadam received a cash award in the amount of $450,000. Each award vested and became payable 25% on
September 1, 2005 and 30% on September 1, 2006 and the remaining 45% will vest and become payable on September 1,
2007, subject to each executive’s continued employment with us. In the event of certain corporate changes (as described
in the agreements and including our liquidation or a merger, reorganization or consolidation with another company in
which we are not the surviving corporation and the surviving corporation does not assume the award or agree to issue a
substitute award in its place) or certain terminations of the executive’s termination of employment upon a change of
control (as defined in the agreement), any unvested portion of the cash award will vest in full and be payable to the
executive. Further, in the event that the executive’s employment with us terminates due to his death, the next installment
of the cash award scheduled to vest will immediately vest and become payable and all other unvested portions of the cash
award will be forfeited.
Executive Severance Plan
On February 16, 2006, our Board of Directors adopted an Executive Severance Plan. Participants in the Executive
Severance Plan include certain of our senior management who are not otherwise currently party to a written employment
agreement (other than an agreement providing for at-will employment and for no specified term) and who our Board of
Directors or Compensation Committee has designated as a Tier 1 Executive, Tier 2 Executive or Tier 3 Executive. The
Compensation Committee has designated each of Mr. Coyne, Mr. Bukaty, Dr. Moghadam and Mr. Milligan as Tier 1
Executives under the Executive Severance Plan. Mr. Massengill and Mr. Shakeel are not eligible to participate in the
Executive Severance Plan.
The Executive Severance Plan provides that a participant will receive the following severance benefits in the event of
termination of employment without cause (as defined in the Executive Severance Plan):
(1) a lump sum severance payment equal to the participant’s monthly base salary minus applicable taxes over a
number of months ranging from 12 months to 24 months depending upon the participant’s status as a Tier 1, Tier 2
or Tier 3 Executive;
(2) a lump sum pro-rata bonus payment minus applicable taxes under our bonus program for the bonus cycle
in which the participant’s termination date occurs (determined based on the number of days in the applicable bonus
cycle during which the participant was employed (not to exceed six months) and assuming we meet 100% of the
performance target(s) subject to the bonus award regardless of actual funding by us);
(3) acceleration of the vesting of the participant’s then outstanding stock options and restricted stock or stock
unit awards that are subject to time-based vesting requirements to the extent such stock options and restricted stock
89