Western Digital 2010 Annual Report Download - page 73

either five or ten years from the date of grant. There are no outstanding restricted stock awards under the Prior Stock
Plans.
The types of awards that may be granted under the 2004 Performance Incentive Plan include stock options, stock
appreciation rights, restricted stock, stock bonuses and other forms of awards granted or denominated in the Company’s
common stock or units of the Company’s common stock, as well as cash bonus awards. Persons eligible to receive awards
under the 2004 Performance Incentive Plan include officers or employees of the Company or any of its subsidiaries,
directors of the Company and certain consultants and advisors to the Company or any of its subsidiaries. The vesting of
awards under the Performance Incentive Plan is determined at the date of grant. Each award expires on a date determined
at the date of grant; however, the maximum term of options and stock appreciation rights under the 2004 Performance
Incentive Plan is ten years after the grant date of the award.
As of July 2, 2010, the maximum number of shares of the Company’s common stock that was authorized for award
grants under the 2004 Performance Incentive Plan was 37.2 million shares. Any shares subject to awards under the Prior
Stock Plans that are canceled, forfeited or otherwise terminate without having vested or been exercised, as applicable, will
become available for other award grants under the 2004 Performance Incentive Plan. The 2004 Performance Incentive
Plan will terminate on September 20, 2014 unless terminated earlier by the Company’s Board of Directors.
Employee Stock Purchase Plan
During 2006, the Company adopted the ESPP whereby eligible employees may authorize payroll deductions of up
to 10% of their eligible compensation to purchase shares of the Company’s common stock at 95% of the fair market value
of common stock on either the date of grant or on the exercise date, whichever is less. The date of grant of each offering
period is June 1st or December 1st, except for the initial offering period, which began on December 15, 2005. Each
offering period is 24 months and consists of four exercise dates. If the fair market value of the common stock is less on a
given exercise date than on the date of grant, employee participation in that offering period is terminated and re-
enrollment in the new offering period occurs automatically. The Company’s ESPP operates in the U.S. in accordance with
Section 423 of the Internal Revenue Code.
Stock-Based Compensation Expense
The Company charged to expense $37 million, $24 million and $18 million for stock-based compensation related
to options issued under stock option plans and the ESPP in 2010, 2009 and 2008, respectively. As of July 2, 2010, total
compensation cost related to unvested stock options and ESPP rights issued to employees but not yet recognized was
$52 million and will be amortized on a straight-line basis over a weighted average service period of approximately
2.1 years.
The Company granted approximately 1.2 million, 0.9 million and 0.9 million restricted stock units during 2010,
2009 and 2008, respectively, which are payable in an equal number of shares of the Company’s common stock at the time
of vesting of the units. Restricted stock unit awards vest over periods ranging from one to five years from the date of
grant. The aggregate market value of the shares underlying the restricted stock awards at the date of grant was
$45 million, $19 million and $23 million in 2010, 2009 and 2008, respectively. These amounts are being recognized to
expense over the corresponding vesting periods. For purposes of valuing these awards, the Company has assumed a
forfeiture rate of 1.55% based on a historical analysis indicating forfeitures for these types of awards. The Company
charged to expense $23 million, $23 million and $19 million related to restricted stock and restricted stock unit awards
that vested during 2010, 2009 and 2008, respectively. As of July 2, 2010, the aggregate unamortized fair value of all
unvested restricted stock unit awards was $51 million, which will be recognized on a straight-line basis over a weighted
average vesting period of approximately 1.6 years.
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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)