1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended April 1, 1995.
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______________
to _______________
Commission file number 1-8703
WESTERN DIGITAL CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 95-2647125
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8105 Irvine Center Drive
Irvine, California 92718
------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (714) 932-5000
N/A
------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last
report.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Number of shares outstanding of Common Stock, as of May 1, 1995 is
46,384,564.
2
WESTERN DIGITAL CORPORATION
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations - Three
Months Ended April 1, 1995 and March 26, 1994 . . . . 3
Consolidated Statements of Operations - Nine
Months Ended April 1, 1995 and March 26, 1994 . . . . 4
Consolidated Balance Sheets - April 1, 1995 and
June 30, 1994 . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows - Nine
Months Ended April 1, 1995 and March 26, 1994 . . . . 6
Notes to Consolidated Financial Statements . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . 12
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
WESTERN DIGITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE-MONTH PERIOD ENDED
----------------------------------
APRIL 1, MARCH 26,
1995 1994
-------- ---------
Revenues, net . . . . . . . . . . . . . . . . . . . . . . $529,297 $420,878
Costs and expenses:
Cost of revenues . . . . . . . . . . . . . . . . 440,929 327,116
Research and development . . . . . . . . . . . . 33,500 27,542
Selling, general and administrative . . . . . . 34,204 32,071
-------- --------
Total costs and expenses . . . . . . . . 508,633 386,729
-------- --------
Operating income . . . . . . . . . . . . . . . . . . . . 20,664 34,149
Interest and other income (expense), net . . . . . . . . 2,430 (681)
-------- --------
Income before income taxes . . . . . . . . . . . . . . . 23,094 33,468
Provision for income taxes . . . . . . . . . . . . . . . 3,444 5,020
-------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 19,650 $ 28,448
======== ========
Earnings per common and common
equivalent share (Note 2):
Primary . . . . . . . . . . . . . . . . $ .40 $ .64
======== ========
Fully diluted . . . . . . . . . . . . . $ .40 $ .61
======== ========
Common and common equivalent shares used
in computing per share amounts:
Primary . . . . . . . . . . . . . . . . 48,586 44,480
======== ========
Fully diluted . . . . . . . . . . . . . 51,386 48,863
======== ========
The accompanying notes are an integral part of these financial statements.
3
4
WESTERN DIGITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE-MONTH PERIOD ENDED
-----------------------------------
APRIL 1, MARCH 26,
1995 1994
---------- ----------
Revenues, net . . . . . . . . . . . . . . . . . . . . . . $1,545,831 $1,077,448
Costs and expenses:
Cost of revenues . . . . . . . . . . . . . . . . 1,250,656 864,446
Research and development . . . . . . . . . . . . 93,087 83,967
Selling, general and administrative . . . . . . 96,192 80,589
---------- ----------
Total costs and expenses . . . . . . . . 1,439,935 1,029,002
---------- ----------
Operating income . . . . . . . . . . . . . . . . . . . . 105,896 48,446
Interest and other income (expense), net . . . . . . . . 8,106 (6,285)
---------- ----------
Income before income taxes . . . . . . . . . . . . . . . 114,002 42,161
Provision for income taxes . . . . . . . . . . . . . . . 17,080 6,324
---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 96,922 $ 35,837
========== ==========
Earnings per common and common equivalent
share (Note 2):
Primary . . . . . . . . . . . . . . . . $ 2.03 $ .91
========== ==========
Fully diluted . . . . . . . . . . . . . $ 1.95 $ .88
========== ==========
Common and common equivalent shares used
in computing per share amounts:
Primary . . . . . . . . . . . . . . . . 47,844 39,507
========== ==========
Fully diluted . . . . . . . . . . . . . 51,364 44,917
========== ==========
The accompanying notes are an integral part of these financial statements.
4
5
WESTERN DIGITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
APRIL 1, JUNE 30,
1995 1994
-------- --------
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . $188,717 $243,484
Short-term investments (Note 1) . . . . . . . . . . 91,619 --
Accounts receivable, less allowance for doubtful
accounts of $10,761 and $10,825 . . . . . . . . 255,923 201,512
Inventories (Note 3) . . . . . . . . . . . . . . . 93,742 79,575
Prepaid expenses . . . . . . . . . . . . . . . . . . 26,249 12,917
-------- --------
Total current assets . . . . . . . . . . . . 656,250 537,488
Property and equipment, at cost, less accumulated
depreciation and amortization . . . . . . . . . . . 82,864 73,417
Intangible and other assets, net . . . . . . . . . . . . . . 38,884 29,608
-------- --------
Total assets . . . . . . . . . . . . . . . . $777,998 $640,513
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . $198,201 $172,730
Accrued expenses . . . . . . . . . . . . . . . . . . 114,869 103,014
-------- --------
Total current liabilities . . . . . . . . . 313,070 275,744
Convertible subordinated debentures . . . . . . . . . . . . . 40,464 58,646
Deferred income taxes . . . . . . . . . . . . . . . . . . . . 23,570 17,884
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, $.10 par value;
Authorized: 5,000 shares
Outstanding: None . . . . . . . . . . . . . -- --
Common stock, $.10 par value;
Authorized: 95,000 shares
Outstanding: 46,314 shares at
April 1 and 44,895 shares
at June 30 . . . . . . . . . . . . . . . . . 4,631 4,490
Additional paid-in capital . . . . . . . . . . . . . 299,067 283,475
Retained earnings . . . . . . . . . . . . . . . . . 97,196 274
-------- ---------
Total shareholders' equity . . . . . . . . . 400,894 288,239
-------- --------
Total liabilities and shareholders' equity . $777,998 $640,513
======== ========
The accompanying notes are an integral part of these financial statements.
5
6
WESTERN DIGITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE-MONTH PERIOD ENDED
----------------------------------
APRIL 1, MARCH 26,
1995 1994
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . $ 96,922 $ 35,837
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization . . . . . . . . . 31,914 37,668
Changes in current assets and liabilities:
Accounts receivable . . . . . . . . . . . . (54,411) (26,077)
Inventories . . . . . . . . . . . . . . . . (14,167) 29,903
Prepaid expenses . . . . . . . . . . . . . (13,332) (2,346)
Accounts payable and accrued expenses . . . 37,326 37,244
Intangible and other assets . . . . . . . . . . . . . (11,794) (2,563)
Deferred income taxes . . . . . . . . . . . . . . . . 5,686 (1,287)
--------- ---------
Net cash provided by operating activities . . . . 78,144 108,379
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments . . . . . . . . . (91,619) --
Capital expenditures, net . . . . . . . . . . . . . . (38,843) (13,337)
Proceeds from the sale of facility . . . . . . . . . -- 110,677
--------- ---------
Net cash provided by (used for) investing
activities . . . . . . . . . . . . . . . . (130,462) 97,340
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt . . . . . . . . . . . . . . . . . . -- (146,346)
Proceeds from stock offering, net . . . . . . . . . . -- 73,293
Repurchase of common stock . . . . . . . . . . . . . (10,822) --
Exercise of stock options and warrants . . . . . . . 8,373 6,893
--------- ---------
Net cash used for financing activities . . . . . (2,449) (66,160)
--------- ---------
Net increase (decrease) in cash and cash equivalents (54,767) 139,559
Cash and cash equivalents, beginning of period . . . 243,484 33,837
--------- ---------
Cash and cash equivalents, end of period . . . . . . $ 188,717 $ 173,396
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . $ 2,703 $ 4,889
Income taxes . . . . . . . . . . . . . . . . . . 5,021 1,419
The accompanying notes are an integral part of these financial statements.
6
7
WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accounting policies followed by the Company are set forth in Note
1 of Notes to Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1994.
All highly liquid investments purchased with an original maturity of
three months or less are considered cash equivalents. Similar
investments with original maturities beyond three months and less than
twelve months are considered short-term investments and are carried at
cost, which approximates market.
2. Primary earnings per share amounts are based upon the weighted average
number of shares and dilutive common stock equivalents for each period
presented. Fully diluted earnings per share additionally reflect
dilutive shares assumed to be issued upon conversion of the Company's
convertible subordinated debentures.
3. Inventories comprised the following:
APRIL 1, JUNE 30,
1995 1994
----------- --------
(in thousands)
Finished goods . . . . . . . . . . . . . $28,958 $27,847
Work in process . . . . . . . . . . . . 36,267 32,178
Raw materials and component parts . . . 28,517 19,550
------- -------
$93,742 $79,575
======= =======
4. During the nine months ended April 1, 1995, approximately $18.2
million of the Company's 9% convertible subordinated debentures, due
2014, were converted into 1,258,266 shares of the Company's common
stock.
The Company repurchased 805,000 shares of its common stock in the open
market at a cost of approximately $11 million.
5. On November 8, 1994, the Company entered into a patent cross-license
agreement with International Business Machines Corporation ("IBM").
The license granted from IBM covers the Company's entire product line.
Under the agreement, the Company will make a series of payments to
IBM. The payments are not expected to have a material impact on the
Company.
6. In the opinion of management, all adjustments necessary to fairly
state the results of operations for the three and nine months ended
April 1, 1995 and March 26, 1994 have been made. All such adjustments
are of a normal recurring nature. Certain information and footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1994.
7
8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the personal storage group ("PSG"), the Company's hard drive
business targeted at desktop and portable personal computer applications,
totaled $481.2 million in the third quarter of 1995, a decrease of $18.6
million or 4% from the second quarter of 1995. PSG revenue was impacted in the
third quarter of 1995 by an industry-wide shortage of certain component parts,
which limited the Company's ability to increase unit shipments from the second
quarter. Average selling prices ("ASPs") declined approximately 11% from the
second quarter as the Company shipped a greater proportion of its units to
certain new OEM customers, which resulted in a higher concentration of lower
capacity drives sold during the quarter. Revenue for PSG for the three and
nine months ended April 1, 1995 increased $93.9 million or 24% and $432.4
million or 45%, respectively, over the corresponding periods of the prior year.
These increases were the result of a 33% and 55% increase in the volume of
drives shipped over the corresponding three and nine month periods,
respectively, partially offset by a decline in ASPs.
Revenue for microcomputer products ("MCP") totaled $48.1 million in the third
quarter of 1995, down $4.1 million, or 8% from the second quarter of 1995,
primarily due to a decrease in multimedia product revenue, partially offset by
higher sales of input/output products. Revenue for MCP for the three and nine
months ended April 1, 1995 increased $14.5 million or 43% and $36 million or
31%, respectively, as compared with the corresponding periods of the prior
year, reflecting increased revenue across all products lines.
Gross Profit Margin
----------------------------------- Nine-Month
Three-Month Period Ended Period Ended
----------------------------------- --------------------
4/1/95 12/31/94 3/26/94 4/1/95 3/26/94
------ -------- ------- ------ -------
PSG 14.0% 17.4% 21.2% 16.7% 18.3%
MCP 43.2% 42.0% 34.8% 41.5% 31.1%
Consolidated 16.7% 19.8% 22.3% 19.1% 19.8%
PSG gross margin for the three months ended April 1, 1995 decreased
approximately three and seven percentage points from the second quarter of 1995
and the third quarter of 1994, respectively. PSG gross margin for the nine
months ended April 1, 1995 decreased by approximately two percentage points from
the corresponding period of the prior year. The decreases in gross margin
resulted from the higher concentration of lower capacity drives sold during the
quarter, reflecting the shift in customer mix, a decline in ASPs, which were
not fully offset by reductions in product costs, and component shortages.
MCP gross margin for the third quarter of 1995 increased approximately one
percentage point from the immediately preceding quarter, primarily due to a
change in the mix of products sold. MCP gross margin for the three and nine
month periods of the current fiscal year increased approximately eight and 10
percentage points, respectively, from the corresponding periods of the prior
year. The improvements in MCP gross margins were primarily attributable to the
cost benefits realized from selling the wafer fabrication facility during 1994,
which reduced product costs.
8
9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Research and development expense ("R&D") for the third quarter of 1995
increased approximately $2.6 million or 8% from the second quarter of 1995.
R&D expense for the three and nine months ended April 1, 1995 increased $6
million or 22% and $9.1 million or 11%, respectively, as compared with the
corresponding periods of the prior year. These increases were primarily
attributable to planned expenditures to support new product introductions for
the current fiscal year and to support its high performance storage product
development activities.
Selling, general and administrative ("SG&A") expense for the three months ended
April 1, 1995 increased $3.4 million or 11% from the preceding quarter,
primarily due to higher royalty expense in the current quarter. SG&A expense
for the three and nine month periods of the current year increased $2.1 million
or 7% and $15.6 million or 19%, respectively, as compared with the
corresponding three and nine month periods of 1994. These increases are
primarily the result of increased selling, marketing and other related expenses
in support of higher revenue levels and higher variable compensation plan
accruals.
Interest and other income for the current quarter was $2.4 million, as
compared with $2.7 million in the preceding quarter and net interest expense of
$.7 million in the third quarter of 1994. Interest and other income was $8.1
million for the nine months ended April 1, 1995, an improvement of $14.4
million over net interest expense in the corresponding period of the prior
year. The decrease in interest and other income over the immediately preceding
quarter is primarily due to a reduction in interest expense as a result of the
conversion of $15.6 million of 9% convertible subordinated debentures into
common stock during the current quarter. The improvement over the prior year
is the result of significantly lower levels of debt outstanding and higher
average cash balances.
FINANCIAL CONDITION
Cash and short-term investments totaled $280.3 million at April 1, 1995 as
compared with $243.5 million at June 30, 1994. Cash flows from operations
were $78.1 million, with cash flows from earnings, depreciation, and an
increase in current liabilities being offset by cash used to fund increased
receivables and inventories. Capital additions for the first nine months of
1995 totaled $38.8 million and were incurred primarily for increased disk drive
manufacturing and wafer testing capacity. Approximately $11 million was also
used to repurchase 805,000 shares of the Company's common stock in the open
market.
Notwithstanding the significant improvements in financial position realized
over the past nine months, the ability of the Company to sustain its improved
working capital management and to continue operating profitably is dependent
upon a number of factors including competitive conditions in the marketplace,
general economic conditions, the efficiency of the Company's manufacturing
operations and the timely development and introduction of new products which
address market needs.
9
10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K.
(a) Exhibits:
10.1.1 The Western Digital Corporation Amended and Restated
Employee Stock Option Plan.
10.2.1 The Western Digital Corporation Stock Option Plan for
Non-Employee Directors.
11 Computation of Per Share Earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
10
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTERN DIGITAL CORPORATION
Registrant
/s/ Scott Mercer
-------------------------------
D. Scott Mercer
Executive Vice President,
Chief Financial and Administrative Officer
Date: May 15, 1995
11
12
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ------------
10.1.1 The Western Digital Corporation Amended and Restated
Employee Stock Option Plan . . . . . . . . . . . . . . . . . . . .
10.2.1 The Western Digital Corporation Stock Option Plan for
Non-Employee Directors . . . . . . . . . . . . . . . . . . . . . .
11 Computation of Per Share Earnings . . . . . . . . . . . . . . . .
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . .
12
1
Exhibit 10.1.1
WESTERN DIGITAL CORPORATION
AMENDED AND RESTATED
EMPLOYEE STOCK OPTION PLAN
1. Purpose. The purpose of this Western Digital Corporation Employee
Stock Option Plan (the "Plan") is to further the growth and development of
Western Digital Corporation (the "Company") and its subsidiaries by providing,
through ownership of stock of the Company, an incentive to officers and other
key employees who are in a position to contribute materially to the prosperity
of the Company, to increase such persons' interest in the Company's welfare, to
encourage them to continue their services to the Company or its subsidiaries,
and to attract individuals of outstanding ability to enter the employment of the
Company or its subsidiaries.
2. Incentive and Non-Qualified Stock Options. Two types of options
(referred to herein as "options" without distinction between such two types) may
be granted under the Plan: options intended to qualify as incentive stock
options ("Incentive Stock Options") under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"); and other options not specifically
authorized or qualified for favorable income tax treatment by the Code
("Non-Qualified Stock Options").
3. Administration.
3.1 Administration by Board. Subject to Section 3.2, the Plan shall be
administered by the Board of Directors of the Company (the "Board"). Subject to
the provisions of the Plan, the Board shall have authority to construe and
interpret the Plan, to promulgate, amend, and rescind rules and regulations
relating to its administration, from time to time to select from among the
eligible employees (as determined pursuant to Section 4) of the Company and its
subsidiaries those employees to whom options will be granted, to determine the
timing and manner of the grant of the options, to determine the exercise price,
the number of shares covered by and all of the terms of the options, to
determine the duration and purpose of leaves of absence which may be granted to
optionees without constituting termination of their employment for purposes of
the Plan, and to make all of the determinations necessary or advisable for
administration of the Plan. The interpretation and construction by the Board of
any provision of the Plan, or of any grant or agreement issued and executed
under the Plan, shall be final and binding upon all parties. No member of the
Board shall be liable for any action or determination undertaken or made in good
faith with respect to the Plan or any agreement executed pursuant to the Plan.
3.2 Administration by Committee. The Board may, in its sole discretion,
delegate any or all of its administrative duties to a committee appointed by the
Board (the "Committee") consisting of three Board members, each of whom, during
such time as one or more persons eligible to receive options under the Plan is
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") shall be disinterested within the meaning of Rule 16b-3 under
the Exchange Act (or any successor rule, "Rule 16b-3"), provided, however, that
the Board may from time to time increase the size of the Committee, and add
additional members to, or remove members from, the Committee. The Committee
shall act pursuant to a majority vote, or the written consent of a majority of
its members, and minutes shall be kept of all of its meetings and copies thereof
shall be provided to the Board. Subject to the provisions of the Plan and the
directions of the Board, the Committee may establish and follow such rules and
regulations for the conduct of its business as it may deem advisable. No member
of the Committee shall be liable for any action or determination undertaken or
made in good faith with respect to the Plan or any agreement executed pursuant
to the Plan. The Board or the Committee, as the case may be, is sometimes
referred to herein as the "Administrator."
4. Eligibility. Any employee (including any officer who is an employee)
of the Company or any of its subsidiaries who does not own stock possessing more
than 10% of the total combined voting power of all outstanding shares of all
classes of stock of the Company or any of its parent or subsidiary corporations
shall be eligible to receive a grant or grants of such options under the Plan;
provided, however, that notwithstanding the foregoing, any employee of the
Company who owns stock possessing more than 10% of the total combined voting
power of all outstanding shares of all classes of stock of the Company or any of
its parent or subsidiary corporations shall be eligible to receive a grant or
grants of such options under the Plan if at the time such options
1
2
are granted the option exercise price therefor is at least 110% of the Fair
Market Value (as defined below) of the shares subject to the option and such
option by its terms is not exercisable after the expiration of five years from
the date such option is granted. An employee may receive more than one option
under the Plan. Notwithstanding the foregoing, no person who is a director of
the Company shall be eligible to receive an option under the Plan unless the
granting of such option shall be effected in such a manner as not to impair the
Plan's qualification under Rule 16b-3.
5. Shares Subject to Options. The stock available for issuance upon
exercise of stock options granted under the Plan shall be shares of the
Company's authorized but unissued, or reacquired, Common Stock. The aggregate
number of shares that may be issued after September 5, 1985, pursuant to
exercise of options granted under the Plan shall not exceed 11,450,000 shares of
Common Stock (subject to adjustment as provided herein). In the event that any
outstanding option under the Plan for any reason expires or is terminated, the
shares of Common Stock allocable to the unexercised portion of the option shall
not count against the share limit set forth herein and shall again be available
for issuance upon exercise of stock options granted under the Plan as if no
option had been granted with respect to such shares.
6. Terms and Conditions of Options.
6.1 Grants of Options. Subject to the express provisions of the Plan,
the Administrator shall from time to time in its discretion select those
individuals to whom options shall be granted, and shall determine the terms of
such options (which need not be identical) and the number of shares of Common
Stock for which each may be exercised. Notwithstanding anything to the contrary
herein, the number of shares of Common Stock with respect to which an option or
options may be granted to any optionee in any one taxable year of the Company
shall not exceed 400,000, subject to adjustment as provided herein (the "Maximum
Annual Employee Grant"). Each option shall be subject to the terms and
conditions of the Plan and such other terms and conditions established by the
Administrator as are not inconsistent with the purpose and provisions of the
Plan.
6.2 Agreements or Confirming Memos. Options granted under the Plan may
but need not be evidenced by agreements (which need not be identical) in such
form and containing such provisions consistent with the Plan as the
Administrator shall from time to time approve. Options not documented by written
agreement shall be memorialized by a written confirming memorandum stating the
material terms of the option and provided to the option recipient. Each
agreement or confirming memorandum shall specify whether the subject option is
an Incentive Stock Option or a Non-Qualified Stock Option.
6.3 Optionee's Employment. Each optionee shall agree to remain in the
employ of, and to render services to, the Company or its subsidiaries for a
period of one year from the date the option is granted, but neither the Company
nor any of its subsidiaries shall be obligated to continue to employ the
optionee for any period.
6.4 Option Exercise Price. The purchase price for the shares subject to
any option shall be determined by the Administrator but shall not be less than
100% of the Fair Market Value of the shares of Common Stock of the Company on
the date the option is granted. For purposes of the Plan, the "Fair Market
Value" of any share of Common Stock of the Company at any date shall be (a) if
the Common Stock is listed on an established stock exchange or exchanges, the
last reported sale price per share 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, at the closing reported bid price on such date on such exchange, or
(b) if the Common Stock is not then listed on an exchange, the average of the
closing bid and asked prices per share for the Common Stock in the
over-the-counter market as quoted on NASDAQ on such date, or (c) if the Common
Stock is not then listed on an exchange or quoted on NASDAQ, an amount
determined in good faith by the Administrator. The Administrator may, with the
consent of an optionee, amend the terms of any option to provide that the
exercise price of the shares remaining subject to the option shall be
reestablished at a price not less than 100% of the Fair Market Value of the
Company's Common Stock on the effective date of the amendment; provided,
however, that the number of shares of Common Stock subject to options which may
be amended to reduce the exercise price to the Fair Market Value as of the date
of such amendment (pursuant to this Section 6.4 or any other provision of this
Plan) shall not exceed 5% of the sum of (i) the number of shares which are added
to the shares authorized for issuance under
2
3
the Plan after September 1, 1994; (ii) the number of shares subject to options
which were outstanding (i.e., granted but unexercised) as of September 1, 1994
under the Plan; and (iii) the number of shares available for future grant under
the Plan as of September 1, 1994. No modification of any other term or provision
of any option that is amended in accordance with the foregoing shall be
required.
6.5 Medium and Time of Payment. The purchase price for any shares
purchased pursuant to exercise of an option granted under the Plan shall be paid
in full upon exercise of the option in cash or such other consideration as the
Administrator may deem acceptable, including without limitation securities of
the Company (delivered by or on behalf of the person exercising the option or
retained by the Company from the stock otherwise issuable upon exercise and
valued at Fair Market Value as of the exercise date), provided, however, that
the Administrator may, in the exercise of its discretion, 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. Shares of Common
Stock transferred to the Company upon exercise of an option shall not increase
the number of shares available for issuance upon exercise of options granted
under the Plan. Notwithstanding the foregoing, the Company may extend and
maintain, or arrange for the extension and maintenance of, credit to any
optionee to finance the optionee's purchase of shares pursuant to exercise of
any option, on such terms as may be approved by the Administrator, subject to
applicable regulations of the Federal Reserve Board and any other laws or
regulations in effect at the time such credit is extended.
6.6 Option Period and Vesting. Subject to Section 6.14, options granted
under the Plan shall vest and may be exercised as determined by the
Administrator, except that no option may vest and become exercisable at any time
prior to six months from the date the option is granted. Exercise of options
after termination of the optionee's employment shall be subject to Sections 6.13
and 6.14. Each option granted hereunder and all rights or obligations under such
option shall expire on such date as shall be determined by the Administrator,
but not later than ten years after the date the option is granted, or five years
after the date of grant in the case of an option recipient who at the time of
grant owns more than 10% of the total combined voting power of all outstanding
shares of all classes of stock of the Company or any of its parent or subsidiary
corporations, and shall be subject to earlier termination as herein provided.
6.7 Exercise of Options. To the extent that an optionee has the right
to exercise an option, the option may be exercised from time to time by written
notice to the Company stating the number of shares being purchased and
accompanied by payment in full of the purchase price for such shares, except
that in no event shall the Company be required to issue fractional shares upon
the exercise of an option, and the Administrator may, in its discretion, require
that any exercise of an option be for at least 100 shares or, if less, the total
number of shares for which the option is then exercisable. Any certificate(s)
for outstanding securities of the Company used to pay the purchase price shall
be accompanied by stock power(s) duly endorsed in blank by the registered holder
of the certificate(s). In the event the certificate(s) tendered by the optionee
in such payment cover more shares than are required for such payment, the
certificate(s) shall also be accompanied by instructions from the optionee to
the Company's transfer agent with respect to disposition of the balance of the
securities covered thereby. Notwithstanding any other provision of this Plan,
the Administrator may impose such conditions upon the exercise of options
(including, without limitation, conditions limiting the time of exercise to
specified periods) as may be required to satisfy applicable regulatory
requirements, including without limitation Rule 16b-3, other relevant securities
laws and rules, and any applicable section of or rule under the Code. Whenever
shares of stock are to be issued upon exercise of an option granted under the
Plan or subsequently transferred, the Administrator shall have the right to
require the optionee or transferor to remit to the Company an amount sufficient
to satisfy any federal, state and local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares. The
Administrator may, in the exercise of its discretion, allow satisfaction of tax
withholding requirements by accepting delivery of securities of the Company or
by withholding a portion of the stock otherwise issuable upon exercise of an
option.
6.8 No Transfer of Option. No option granted under the Plan shall be
assignable or transferable except (i) by will or by the laws of descent and
distribution, or (ii) subject to the final sentence of this Section 6.8, upon
dissolution of marriage 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, pursuant to a nominal transfer
that does not result in a change in beneficial ownership. During the lifetime of
an optionee,
3
4
an option granted to him or her shall be exercisable only by the optionee (or
the optionee's permitted transferee) or his or her guardian or legal
representative. Notwithstanding the foregoing, (i) no options owned by an
optionee subject to Section 16 of the Exchange Act may be assigned or
transferred in any manner inconsistent with Rule 16b-3, and (ii) Incentive Stock
Options may not be assigned or transferred in violation of Section 422(b)(5) of
the code (or any successor provision) or the Treasury Regulations thereunder,
and nothing herein is intended to allow such assignment or transfer.
6.9 Limit on Incentive Stock Options. Subject to Section 12.1, the
aggregate Fair Market Value (determined as of the time the option is granted) of
the stock for which Incentive Stock Options granted to any one employee under
all stock option plans of the Company and its parent and subsidiary corporations
first become exercisable during any calendar year after December 31, 1986 shall
not exceed $100,000.
6.10 Restriction on Issuance of Shares. The issuance of options and
shares shall be subject to compliance with all of the applicable requirements of
law with respect to the issuance and sale of securities, including, without
limitation, any required qualification under the California Corporate Securities
Law of 1968, as amended.
6.11 Investment Representation. Any optionee may be required, as a
condition of issuance of shares covered by his or her option, to represent that
the shares to be acquired pursuant to exercise of the option will be acquired
for investment and without a view to distribution thereof; and in such case, the
Company may place a legend on the certificate evidencing the shares reflecting
the fact that they were acquired for investment and cannot be sold or
transferred unless registered under the Securities Act of 1933, as amended, or
unless counsel for the Company is satisfied that the circumstances of the
proposed transfer do not require such registration, and in addition, the Company
may issue stop transfer instructions to the transfer agent of the Company's
securities restricting the transfer of such shares.
6.12 Rights as a Shareholder or Employee. An optionee or transferee of
an option shall have no rights as a shareholder of the Company with respect to
any shares covered by any option until (i) the Company has received all amounts
payable in connection with the exercise of the option, including the exercise
price and any amounts required by the Company to satisfy tax withholding
requirements, and (ii) a share certificate for such shares has been issued. No
adjustment shall be made for dividends (ordinary or extraordinary, whether cash,
securities, or other property) or distributions or other rights for which the
record date is prior to the date such share certificate is issued, except as
provided in Section 6.15. Nothing in the Plan or in any grant or option
agreement shall confer upon any employee any right to continue in the employ of
the Company or any of its subsidiaries or interfere in any way with any right of
the Company or any subsidiary to terminate the optionee's employment at any
time.
6.13 Termination of Employment, Disability, or Death. In general,
subject to Section 6.14, options shall be exercisable by an optionee (or his or
her permitted successor in interest) following such optionee's termination of
employment only to the extent that such options had become exercisable on or
prior to the date of such termination. In the event an optionee ceases to be an
employee of the Company and its subsidiaries for any reason (other than cause)
while still living, any option or unexercised portion thereof granted to the
optionee may, to the extent such option was exercisable by the optionee on or
prior to the date he or she ceased to be an employee (or is accelerated pursuant
to Section 6.14 to a date within three months of termination of employment), be
exercised by the optionee within three months of the date on which he or she
ceased to be an employee, but in any event not later than the date of expiration
of the option. In the event of the death or disability (as defined in Section
105(d)(4) of the Code) of the optionee while he or she is an employee of the
Company or any of its subsidiaries or within not more than three months of the
date on which he or she ceased to be an employee for any reason other than
cause, any option or unexercised portion thereof granted to the optionee may, to
the extent such option was exercisable by the optionee on or prior to the date
of death or disability (or is accelerated pursuant to Section 6.14 to a date
within the period during which such option may be exercised as set forth below),
be exercised by the optionee or, if the optionee is then deceased or
incapacitated, by the optionee's personal representatives, heirs, or legatees at
any time prior to the later of (i) one year from the date on which the optionee
ceased to be an employee or (ii) the latest date the option could have been
exercised by the optionee if not disabled or dead, but in any event, not later
than the date of expiration of the option. Notwithstanding the
4
5
foregoing, however, if an optionee's employment with the Company and its
subsidiaries is terminated for cause, as determined by the Administrator in its
sole discretion, all options held by such optionee shall expire on the date of
termination of employment and thereafter shall not be exercisable in whole or in
part.
6.14 Modification, Extension, and Renewal of Options; Alteration of
Vesting and Exercise Periods. Subject to the terms and conditions and within the
specific limitations of the Plan, the Administrator may modify, extend, or renew
outstanding options granted under the Plan, accept the surrender of outstanding
options (to the extent not theretofore exercised), and authorize the granting of
new options in substitution therefor (to the extent not theretofore exercised).
Without limitation of the foregoing and notwithstanding anything in this Plan to
the contrary, the Administrator may at any time and from time to time in its
discretion (i) designate shorter or longer periods than specified herein or in
any particular option grant or agreement following the termination of an
optionee's employment with the Company or any of its subsidiaries or the
optionee's death or disability during which the optionee may exercise options,
provided, however, that any shorter periods determined by the Administrator
shall be effective only if determined at the time of the grant of the affected
option or if such shorter period is agreed to in writing by the optionee, and
any longer periods may not extend beyond the original termination date of the
affected option; (ii) subject to the six-month minimum vesting period described
in Section 6.6, accelerate vesting of an option in whole or part by increasing
the number of shares purchasable at any particular time, provided that no such
acceleration shall increase the total number of shares for which the option may
be exercised; and (iii) extend the period after death or disability or
termination of employment during which vesting of all or any portion of any
options that had not become exercisable on or prior to the date thereof may
occur. Notwithstanding the foregoing, no option shall be modified in such a
manner as to impair any rights of the optionee under the option, or to cause an
Incentive Stock Option to cease to qualify as such, without the consent of the
optionee.
6.15 Recapitalization or Reorganization of the Company. Except as
otherwise provided herein, appropriate and proportionate adjustments shall be
made in the number and class of shares subject to the Plan, the Maximum Annual
Employee Grant, the option rights granted under the Plan, and the exercise price
of such option rights, in the event of a stock dividend (but only on Common
Stock), stock split, reverse stock split, recapitalization, reorganization,
merger, consolidation, separation, or like change in the capital structure of
the Company affecting the Common Stock of the Company. In the event of a
liquidation of the Company, or a merger, reorganization, or consolidation of the
Company with any other corporation in which the Company is not the surviving
corporation or the Company becomes a wholly-owned subsidiary of another
corporation, any unexercised options theretofore granted under the Plan shall be
deemed canceled unless the surviving corporation in any such merger,
reorganization, or consolidation elects to assume the options under the Plan or
to issue substitute options in place thereof; provided, however, that,
notwithstanding the foregoing, if such options would otherwise be canceled in
accordance with the foregoing, the optionee shall have the right, exercisable
during a ten-day period ending on the fifth day prior to such liquidation,
merger, reorganization, or consolidation, to exercise the optionee's option in
whole or in part without regard to any installment exercise provisions in the
optionee's option agreement. To the extent that the foregoing adjustments relate
to stock or securities of the Company, such adjustments shall be made by the
Administrator, the determination of which in that respect shall be final,
binding, and conclusive, provided that an Incentive Stock Option shall not
without the consent of the optionee be adjusted in a manner that causes the
option to fail to continue to qualify as an Incentive Stock Option.
7. Termination or Amendment of Plan. The Board or the Committee may at
any time or from time to time suspend, terminate or amend the Plan; provided
that, without approval of the shareholders of the Company, there shall be,
except as specifically permitted by the Plan, no increase in the total number of
shares issuable upon exercise of options granted under the Plan, no change in
the class of persons eligible to receive options granted under the Plan, and no
extension of the latest date upon which options may be granted under the Plan;
and provided further that, without the consent of the optionee, no amendment may
adversely affect any then outstanding option or any unexercised portion thereof
without the consent of the holder of such option.
8. Indemnification. In addition to such other rights of indemnification
as they may have as members of the Board or the Committee, the members of the
Board or the Committee administering the Plan shall be indemnified by the
Company against reasonable expenses, including attorney's fees, actually and
necessarily incurred in connection with the defense of any action, suit, or
proceeding, or in connection with any appeal
5
6
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any action, suit,
or proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit, or proceeding that such member is liable for negligence or
misconduct in the performance of his or her duties, provided that within 60 days
after institution of any such action, suit, or proceeding, the member shall in
writing offer the Company the opportunity, at its own expense, to handle and
defend the same.
9. 1978 Non-Qualified Stock Option Plan. The Plan as set forth herein
constitutes an amendment and restatement of the Company's 1978 Non-Qualified
Stock Option Plan which was adopted in 1978. The Administrator may, in its
discretion, authorize the conversion, to the fullest extent permitted by law, of
Non-Qualified Stock Options granted under the 1978 Non-Qualified Stock Option
Plan prior to such amendment to Incentive Stock Options under this Plan, as so
amended. Any such options converted to Incentive Stock Options shall be treated
as Incentive Stock Options for all purposes under the Plan; provided, however,
that none of the terms or conditions of any of such options, including, but not
limited to, the exercise price, the term of the option, and the time(s) within
which the option may be exercised, shall be altered or amended by reason of such
conversion.
10. Options Granted Prior to Amendment and Restatement. The Plan, as
amended and restated from time to time, shall, in the discretion of the
Administrator, apply to and govern options granted under the Plan prior to the
date of any such amendment or restatement, subject to the consent of any holder
of an option who would be disadvantaged by application to such option of the
Plan as amended and restated after the grant of such option.
11. Term of Plan. Unless sooner terminated by the Board or the
Committee in its sole discretion, the Plan will expire on November 10, 2004 (the
"Termination Date"). Options may be granted under the Plan until midnight on the
Termination Date, whereupon the Plan shall terminate. No options may be granted
during any suspension of the Plan or after its termination. 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.
12. Miscellaneous.
12.1 Plan Provisions Regarding Incentive Stock Options. Options
originally granted as Incentive Stock Options but that subsequently become
Non-Qualified Stock Options need not satisfy any requirements of the Plan
applicable to Incentive Stock Options.
12.2 Other Compensation Plans. The adoption of this Plan shall not
affect any other stock option, incentive, or compensation plans in effect for
the Company or any of its subsidiaries, and the Plan shall not preclude the
Company or any of its subsidiaries from establishing any other forms of
incentive compensation for employees, directors, or advisors of the Company or
any of its subsidiaries.
# # #
As approved by the Company's stockholders at its 1994 annual meeting.
Subsequent Amendments Incorporated Above:
6.8 No Transfer of Option. To clarify the Company's intention as to the
transferability of incentive stock options and to make the permissive transfer
provisions subject to the requirements of Section 422. 3/23/95
6
1
Exhibit 10.2.1
WESTERN DIGITAL CORPORATION
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
GENERAL
1. ADOPTION AND AMENDMENTS. This Western Digital Corporation Stock
Option Plan for Non-Employee Directors (the "Plan") was adopted by the Board of
Directors of Western Digital Corporation (the "Company") as of May 15, 1985, the
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 of Directors 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 (the "1987 Annual Meeting"). Amendment No. 3 to the Plan was
approved by the Board of Directors without shareholder approval on November 19,
1987. Amendment No. 4 to the Plan was adopted by the Board of Directors 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 of Directors 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
of Directors 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 of the Plan was approved by the Board of Directors without
shareholder approval on May 23, 1991.
2. PURPOSE. This Plan is designed to promote the interests of the
Company and its shareholders by attracting and retaining highly qualified
independent directors through investment interests in the Company's future
success.
3. ADMINISTRATION. The Plan shall be administered by the Company, which
shall have the power to construe the Plan, to determine all questions arising
thereunder, to adopt and amend such rules and regulations for the administration
of the Plan as it may deem desirable, and to otherwise carry out the terms of
the Plan. The interpretation and construction by the Company of any provisions
of the Plan or of any option granted under it shall be final. Notwithstanding
the foregoing, the Company shall have no authority or discretion as to the
persons eligible to receive options granted under the Plan, or the number of
shares covered by options granted under the Plan, which matters are specifically
governed by the provisions of the Plan.
4. ELIGIBLE DIRECTORS. A person shall be an "Eligible Director" with
respect to any option to be granted to him under the Plan if, at the time
provided for the option's grant, he is a duly elected or appointed member of the
Company's Board of Directors, but is not then otherwise an employee of the
Company or any of its subsidiaries and has not been an employee of the Company
or any subsidiary since the beginning of the Company's preceding fiscal year.
5. GRANTS OF INITIAL OPTIONS. Each Eligible Director on the effective
date of the Plan, as of that date, and each Eligible Director who is not a
director on the Plan's effective date, as of the effective date of his first
appointment to the Board of Directors or first election as a director by the
shareholders, whichever is earlier, shall receive a one-time option to purchase
20,000 shares of the Company's Common Stock under the Plan (an "Initial
Option"), subject to adjustment as provided in Article III hereof. Pursuant to
the terms of Amendment No. 1 to the Plan, certain holders of Initial Options to
purchase 20,000 shares of Common Stock exchanged such Initial Options for
Initial Options to purchase 14,150 shares of Common Stock having lower exercise
prices (the "Exchanged Initial Options").
6. (a) GRANTS OF ADDITIONAL OPTIONS. Six months after any exercise or
termination, following the 1987 Annual Meeting, of an Initial Option (other than
an Exchanged Initial Option) or an option granted under this paragraph (an
"Additional Option") held by an Eligible Director, such Eligible Director shall
automatically be granted an Additional Option to purchase a number of shares
equal to the number of shares purchased upon such
1
2
option exercise or the number of shares subject to the unexercised portion of
the terminated option, as the case may be. Six months after any exercise or
termination, following the 1987 Annual Meeting, of an Exchanged Initial Option
held by an Eligible Director, such Eligible Director shall automatically be
granted an Additional Option to purchase a number of shares which represents the
same proportion of 20,000 shares as the proportion determined by dividing the
number of shares purchased upon such exercise, or the number of shares subject
to the unexercised portion of the terminated option, as the case may be, by the
total number of shares subject to purchase at any time before or after the 1987
Annual Meeting upon exercises of that Exchanged Initial Option. For each
exercise of an Initial Option or an Exchanged Initial Option before the date of
the 1987 Annual Meeting by an Eligible Director who is reelected at the 1987
Annual Meeting, an Additional Option shall be granted to such director on the
date of the 1987 Annual Meeting, or six months after the date of such exercise,
whichever is later, entitling him to purchase a number of shares which
represents the same proportion of 20,000 shares as the proportion determined by
dividing the number of shares purchased upon such exercise by the total number
of shares subject to purchase at any time before or after the 1987 Annual
Meeting upon exercises of that Initial Option or Exchanged Initial Option. Any
Eligible Director who has not been granted an Initial Option because of current
or prior employment with the Company or its subsidiaries shall, six months after
he first becomes an Eligible Director, be granted an Additional Option to
purchase up to 20,000 shares of Common Stock. Notwithstanding any other
provisions of the Plan to the contrary, the maximum number of shares of the
Company's Common Stock which may be issued upon the exercise of all Additional
Options granted to any director (excluding any option granted pursuant to the
preceding sentence of this paragraph) shall not exceed 30,000 shares.
(b) GRANTS OF "1989 OPTIONS". In addition to his Initial Options and
Additional Options, each Eligible Director elected at the 1989 Annual Meeting
shall be granted, effective the date of the 1989 Annual Meeting, a one-time
option to purchase 10,000 shares of the Company's Common Stock under the Plan,
subject to adjustment as provided in Article III hereof.
7. SHARES OF COMMON STOCK SUBJECT TO THE PLAN. The shares that may be
issued under the Plan shall be authorized and unissued shares of the Company's
Common Stock. The aggregate number of shares which may be issued under the Plan
shall not exceed 800,000 shares of Common Stock, unless an adjustment is
required in accordance with Article III.
8. AMENDMENT OF THE PLAN. The Board of Directors 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, without further shareholder approval the Plan may not be
amended so as to 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
designation in Section 4 of Article I of the class of persons eligible to
receive options under the Plan, provide for the grant of options having an
option price per share less than the fair market value (as defined in Section 13
of this Article I) on the date of grant, or extend the final date upon which
options may be granted under the Plan.
9. TERM OF PLAN. Options may be granted under the Plan until May 15,
2005, the date of termination of the Plan. Notwithstanding the foregoing, each
option 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.
10. 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
regulatory body, 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.
2
3
11. 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. During the lifetime of the optionee, the option shall
be exercisable only by the optionee, and no other person shall acquire any
rights therein.
12. WITHHOLDING TAXES. Whenever shares of Common Stock are to be issued
under the Plan, the Company shall have the right to require the optionee to
remit to the Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such shares.
13. DEFINITION OF "FAIR MARKET VALUE". For purposes of the Plan, the
term "fair market value," when used in reference to the value of a share of the
Company's Common Stock on the date an option is granted under the Plan, shall
be: (a) if the Common Stock is listed on an established stock exchange or
exchanges, the mean between the highest and lowest sale prices of the Common
Stock quoted in the Transactions Index of each such exchange as averaged with
such mean price as reported on any and all other exchanges, as published in "The
Wall Street Journal" and determined by the Company, or, if no sale price was
quoted in any such Index for such date, then as of the next preceding date on
which such a sale price was quoted, provided that the mean on such preceding
date is not less than 100% of the fair market value of the Common Stock on the
date the option is granted; or, (b) if the Common Stock is not then listed on an
exchange, the average of the closing bid and asked prices per share for the
Common Stock in the over-the-counter market as quoted on NASDAQ on such date;
or, (c) if the Common Stock is not then listed on an exchange or quoted on
NASDAQ, an amount determined in good faith by the Company.
ARTICLE II
STOCK OPTIONS
1. GRANT OF STOCK OPTIONS. Grants of stock options shall be made under
the Plan in accordance with all the terms and conditions contained herein. Each
option granted under the Plan shall be evidenced by an option agreement duly
executed on behalf of the Company and by the director to whom such option is
granted, which option agreements may but need not be identical and shall comply
with and be subject to the terms and conditions of the Plan. Any option
agreement may contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Company.
2. TERM OF OPTIONS AND EFFECT OF TERMINATION. Notwithstanding any other
provision of the Plan, no options 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 otherwise terminated without exercise for any reason, then the shares
of Common Stock subject to any such option which have not been issued pursuant
to the 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.
3. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the
Plan shall be evidenced by agreements in such forms as the Company shall from
time to time determine, which agreements shall comply with the following terms
and conditions:
(a) Each option agreement shall state the number of shares to which the
option pertains.
(b) Each option agreement shall state the option price per share (or
the method by which such price shall be computed) which shall be equal to 100%
of the fair market value (as determined under Section 13 of Article I) of a
share of the Common Stock on the date such option is granted.
(c) The option price shall be payable upon the exercise of an option in
the legal tender of the United States or by transferring to the Company for
redemption shares of Common Stock of the Company (either previously owned shares
or option shares currently exercisable) at their fair market value (determined
in the manner provided in Section 13 of Article I as of the date provided in
Section 3(d) of this Article II). Shares of Common Stock transferred to the
Company upon exercise of an option shall not increase the number of shares
3
4
available for issuance under the Plan. Upon receipt of payment, the Company
shall deliver to the optionee (or person entitled to exercise the option) a
certificate or certificates for the shares of Common Stock to which the option
pertains.
(d) To the extent that an optionee has the right to exercise an option
and purchase shares pursuant thereto, the option may be exercised from time to
time by written notice to the Company, stating the number of shares being
purchased and accompanied by payment in full of the purchase price for such
shares. If shares of Common Stock of the Company are used in part or full
payment for the shares to be acquired upon exercise of the option, such shares
shall be valued for the purpose of such exchange as of the date of exercise of
the option in accordance with the provisions of Section 3(c) of this Article II.
Any certificate(s) for shares of outstanding Common Stock of the Company used to
pay the purchase price shall be accompanied by stock power(s) duly endorsed in
blank by the registered holder of the certificate(s) (with the signature thereon
guaranteed). In the event the certificate(s) tendered by the optionee in such
payment cover more shares than are required for such payment, the certificate(s)
shall also be accompanied by instructions from the optionee to the Company's
transfer agent with respect to disposition of the balance of the shares covered
thereby.
(e) Initial Options granted under the Plan as of the effective date of
the Plan became exercisable with respect to 10,000 shares on November 16, 1985;
5,000 shares on May 16, 1986; and 5,000 shares on May 16, 1987. Subject to
Section 5 of Article I, Initial Options granted on the effective date of a
director's appointment to the Board shall become exercisable in installments of
10,000 shares on the later of (i) the date of such director's election by the
shareholders or (ii) the date six months after the date of such grant (the
"Initial Exercise Date"); 5,000 shares on the date six months after the Initial
Exercise Date; and 5,000 shares on the date 18 months after the Initial Exercise
Date. Each Exchanged Initial Option became exercisable with respect to 7,075
shares of Common Stock on November 13, 1986 and 3,538 shares on December 6,
1986, and shall become exercisable with respect to 3,537 shares on December 6,
1987. All other Initial Options granted under the Plan shall become exercisable
in installments of 10,000 shares on the date six months after the date of such
grant; 5,000 shares on the date of the first anniversary of such grant; and
5,000 shares on the date of the second anniversary of such grant. To the extent
an Initial Option or Exchanged Initial Option is so exercisable, and is not
earlier terminated, it may generally be exercised in whole or in part at any
time or from time to time until it expires ten years after the date of its
grant. If an option is exercised in part, the unexercised portion of the option
shall continue to be held by the optionee and may thereafter be exercised as
herein provided. In the event that a holder of an Initial Option shall cease to
be a director of the Company for any reason, any options held by such director
shall be exercisable, to the extent they were exercisable at the date he ceased
to be a director, for a period of one year after such date, and shall then
terminate.
(f) Each Additional Option granted under the Plan shall first become
exercisable with respect to 20% of the underlying shares at the end of six
months after the date of its grant, or one year after the date of the 1987
Annual Meeting in the case of an Additional Option granted under Section 6 of
Article I as a result of the exercise of an Initial Option or an Exchanged
Initial Option before that meeting, and with respect to an additional 5% of the
underlying shares at the end of each of the next 16 three-month periods
thereafter. To the extent an Additional Option is so exercisable and it is not
earlier terminated, it may generally be exercised in whole or in part at any
time or from time to time until it expires 5-1/2 years after the date of grant,
or six years after the date of the 1987 Annual Meeting in the case of an
Additional Option granted as a result of the exercise of an Initial option or an
Exchanged Initial Option before the date of the 1987 Annual Meeting. If the
holder of an Additional Option shall cease to be a director of the Company, his
option shall be exercisable, to the extent it is exercisable at the date he
ceases to be a director, for a period of one year after that date if he ceases
to be a director because of death or permanent disability, or for a period of
three months after that date if he ceases to be a director for any other reason.
(g) Each 1989 Option granted under the Plan shall first become
exercisable on a cumulative basis with respect to 25% of the total number of
shares covered thereby at any time after one year from the date the option is
granted and with respect to an additional 6.25% of such total number of shares
at any time after the end of each of the next 12 three-month periods thereafter.
To the extent that a 1989 Option is so exercisable and is not earlier
terminated, it may generally be exercised in whole or in part at any time or
from time to time until it expires ten
4
5
years after the date of its grant. If the holder of a 1989 Option ceases to be a
director of the Company, the 1989 Option shall be exercisable, to the extent it
is exercisable on the date such person ceases to be a director, for a period of
one year after that date if such person ceases to be a director because of death
or permanent disability, or for a period of six months after that date if such
person ceases to be a director for any other reason.
(h) Subject to Subsections 3(e), 3(f), and 3(g) of this Article II, 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 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 Company 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 will or the applicable law of descent
and distribution.
ARTICLE III
RECAPITALIZATIONS AND REORGANIZATIONS
1. ANTI-DILUTION ADJUSTMENTS. The number of shares of Common Stock
covered by the Plan, the number of shares and price per share of each
outstanding option, and the number of shares subject to each grant provided for
in Article II, Section 3 hereof shall be 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 Common Stock effected without receipt of consideration by
the Company.
2. CORPORATE TRANSACTIONS. If the Company shall be the surviving
corporation in any merger or consolidation, each outstanding option shall
pertain to and apply to the securities to which a holder of the same number of
shares of Common Stock that are subject to that option would have been entitled.
A dissolution or liquidation of the Company, or a merger or consolidation in
which the Company is not the surviving corporation, shall cause each outstanding
option to terminate, unless the agreement of merger or consolidation shall
otherwise provide; provided that, in the event such dissolution, liquidation,
merger or consolidation will cause outstanding options to terminate, each
optionee shall have the right immediately prior to such dissolution,
liquidation, merger or consolidation to exercise his option or options in whole
or in part without regard to any limitations on the exercisability of such
option or options contained in Sections (e), (f), and (g) of Section 3 of
Article II, other than the expiration dates of the options, provided that no
Additional Options shall be granted upon the exercise of an option pursuant to
this sentence.
3. 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 Company, 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 or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
ARTICLE IV
MISCELLANEOUS PROVISIONS
1. RIGHTS AS A SHAREHOLDER. An optionee or a transferee of an option
shall have no rights as a shareholder with respect to any shares covered by the
option until the date of the receipt of payment (including any amounts required
by the Company pursuant to Section 12 of Article I) by the Company. No
adjustment shall be made as to any option for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to such date, except as
provided in Article III.
2. PURCHASE FOR INVESTMENT. Unless the shares of Common Stock to be
issued upon exercise of an option granted under the Plan have been effectively
registered under the Securities Act of 1933 as now in force or hereafter
amended, the Company shall be under no obligation to issue any shares of Common
Stock covered
5
6
by an option unless the person who exercises such option, in whole or in part,
shall give a written representation and undertaking to the Company which is
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 is acquiring
the shares of Common Stock issued to him pursuant to such exercise of the option
for his own account as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares of Common Stock, and that
he 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 of
1933, or any other applicable law, and that if shares of Common Stock are issued
without such registration, a legend to this effect may be endorsed upon the
securities so issued.
3. OTHER PROVISIONS. The option agreements authorized under the Plan
shall contain such other provisions, including, without limitation, restrictions
upon the exercise of the option or restrictions required by any applicable
securities laws, as the Company shall deem advisable.
# # #
Restated 8/92
Amended 11/10/94 - Article 9, Term of Plan
6
1
EXHIBIT 11
WESTERN DIGITAL CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
APRIL 1, MARCH 26, APRIL 1, MARCH 26,
1995 1994 1995 1994
-------- --------- -------- ---------
PRIMARY
Net income . . . . . . . . . . . . . . $19,650 $28,448 $96,922 $35,837
======= ======= ======= =======
Weighted average number of common
shares outstanding during the period . . 46,716 41,575 45,765 37,525
Common stock equivalents related to
dilutive options and warrants . . . . . 1,870 2,905 2,079 1,982
------- ------- ------- -------
Total shares . . . . . . . . . . . 48,586 44,480 47,844 39,507
======= ======= ======= =======
Net income per share . . . . . . . . . $ .40 $ .64 $ 2.03 $ .91
======= ======= ======= =======
FULLY DILUTED
Net income . . . . . . . . . . . . . . $19,650 $28,448 $96,922 $35,837
Add back: interest expense, net of
income tax effect, applicable to
convertible subordinated debentures . . 813 1,168 3,036 3,504
------- ------- ------- -------
$20,463 $29,616 $99,958 $39,341
======= ======= ======= =======
Weighed average number of common
shares outstanding during the period . . 46,716 41,575 45,765 37,525
Common stock equivalents related to
dilutive options and warrants . . . . . 1,870 3,214 2,080 3,318
Shares issued upon proforma
conversion of convertible subordinated
debentures . . . . . . . . . . . . . . 2,800 4,074 3,519 4,074
------- ------- ------- -------
Total shares . . . . . . . . . . . 51,386 48,863 51,364 44,917
======= ======= ======= =======
Net income per share . . . . . . . . . $ .40 $ .61 $ 1.95 $ .88
======= ======= ======= =======
5
1,000
U.S. DOLLARS
9-MOS
JUL-01-1995
JUL-01-1994
APR-01-1995
1
188,717
91,619
255,923
10,761
93,742
656,250
203,292
120,428
777,998
313,070
40,464
4,631
0
0
396,263
777,998
1,545,831
1,545,831
1,250,656
1,250,656
189,279
0
(8,106)
114,002
17,080
96,922
0
0
0
96,922
2.03
1.95
