Western Digital 2012 Annual Report Download - page 76

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In addition to the awards assumed in connection with the HGST acquisition, the Company maintains four stock-
based incentive plans (collectively, including the assumed HGST awards, referred to as the “Stock Plans”): the
amended and restated 2004 Performance Incentive Plan, the Employee Stock Option Plan, the Broad-Based Stock
Incentive Plan and the Stock Option Plan for Non-Employee Directors. No new awards may be granted under the
Employee Stock Option Plan, the Broad-Based Stock Incentive Plan or the Stock Option Plan for Non-Employee
Directors (collectively referred to as the “Prior Stock Plans”). As of June 29, 2012, options to purchase 0.8 million
shares of the Company’s common stock remained outstanding and exercisable under the Prior Stock Plans. Other than
for such options, no restricted stock or other awards were outstanding under the Prior Stock Plans as of June 29, 2012.
Options granted under the Prior Stock Plans expire either five or ten years from the date of grant.
The types of awards that may be granted under the 2004 Performance Incentive Plan include stock options,
SARs, restricted stock units, 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 and employees of the Company or any of its sub-
sidiaries, 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. RSUs granted under the 2004
Performance Incentive Plan typically vest over periods ranging from one to five years from the date of grant.
As of June 29, 2012, 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. Shares issued in
respect of stock options and stock appreciation rights granted under the 2004 Performance Incentive Plan count
against the plan’s share limit on a one-for-one basis, whereas shares issued in respect of any other type of award
granted under the plan count against the plan’s share limit as 1.35 shares for every one share actually issued in con-
nection with such award. The 2004 Performance Incentive Plan will terminate on September 20, 2014 unless termi-
nated earlier by the Company’s Board of Directors.
Employee Stock Purchase Plan
The Company maintains an ESPP. Under the ESPP, eligible employees may authorize payroll deductions of up
to 10% of their eligible compensation during prescribed offering periods to purchase shares of the Company’s com-
mon stock at 95% of the fair market value of common stock on either the first day of that offering period or on the
applicable exercise date, whichever is less. A participant may participate in only one offering period at a time, and a
new offering period generally begins each June 1st and December 1st. Each offering period is generally 24 months and
consists of four exercise dates (each, generally six months following the start of the offering period or the preceding
exercise date, as the case may be). If the fair market value of the Company’s common stock is less on a given exercise
date than on the date of grant, employee participation in that offering period ends and participants are automatically
re-enrolled in the next new offering period.
Stock-based Compensation Expense
The Company recognized in expense $57 million, $37 million and $37 million for stock-based compensation
related to the vesting of options granted or assumed by the Company under the Stock Plans and the ESPP in 2012,
2011 and 2010, respectively. As of June 29, 2012, total compensation cost related to unvested stock options granted
under the Stock Plans and ESPP rights issued to employees but not yet recognized was $143 million and will be
amortized on a straight-line basis over a weighted average service period of approximately 2.3 years.
The Company recognized a benefit of $7 million related to SARs assumed under the Stock Plans. The assumed
SARs will be settled in cash upon exercise. As a result, the Company had a total of $22 million related to SARs
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